The largest nuclear power company in the country is ready to cash out. Exelon Corp. owns 23 operating reactors across five states, as well as five closed reactors. It is also the largest utility company in the nation, with over 10 million customers across 6 states and Washington, DC. But in February, Exelon announced that it wants to split itself into two completely separate companies.
What Exelon is proposing is much more than just another self-serving corporate business deal: it is a statement of no confidence in nuclear power by the most powerful company in the business.
Here’s what the company wants to do:
- Create an entirely new, completely separate company that does not exist yet, currently called “SpinCo.”
- Transfer all of Exelon’s nuclear power plants and “power marketing” businesses to SpinCo.
- The existing company (“Exelon”) keeps its conglomerate of very profitable electric and gas utilities.
In reality, around 90% of SpinCo will be made up of Exelon’s nuclear power reactors and the $14 billion in trust funds set aside to pay for decommissioning the reactors.
What is really going on here? And what does it mean for nuclear energy in the US?
In the bigger picture, the answer is simple. Exelon is saying it does not see a future in nuclear energy. It does not see a way to make enough money to justify the financial risks of continuing to own and operate an aging fleet of nuclear reactors, despite all of the market power and political power it has enjoyed by doing so.
Running electric utilities with guaranteed, state-mandated profits is where the money is. That’s why Exelon is keeping the utilities, and “SpinCo” gets all of the nuclear reactors that Exelon has spent the last seven years telling the world can’t make a profit without massive public subsidies.
For over two decades, Exelon has used its size, scale, and political capital to cut costs, maximize revenue, and win subsidies as much as it can. And if the largest and most powerful company in the industry can’t make it work, then it’s a sure bet no one else can.
That is also why Exelon decided to spin off its nuclear business: there is no company that would be willing to buy its reactors, or even just take them over. Exelon knows this first-hand because it has been on the receiving end of just such a deal: in 2016, when New York Governor Andrew Cuomo was pushing for a state bailout for four reactors.
Initial projections pegged the cost of a nuclear subsidy at anywhere from $277 million to $4.8 billion by 2030. But negotiations reached an impasse. Exelon owned three of the four reactors. The other reactor, FitzPatrick, was owned by Entergy, which wanted to close FitzPatrick because it was reportedly losing $60-$100 million/year. Gov. Cuomo had to get Exelon to take over a massively unprofitable nuke which had not performed well for years—a massive financial risk. In order to make it worth Exelon’s while, the cost of the bailout ballooned dramatically: a total of $7.6 billion in subsidies over 12 years, plus $1.5 billion in decommissioning funds from the state. Gov. Cuomo was able to stick New York consumers with the subsidy bill, but Exelon does not have that option now.