Illinois can subsidize nuclear power if it wants: U.S. FERC brief

[May 31, 2018]    (Reuters) - U.S. energy regulators said federal rules do not preempt Illinois' program to provide money to nuclear reactors that provide carbon-free energy to help prevent the units from shutting early, according to a filing with a federal appeals court.

The U.S. Department of Justice and Federal Energy Regulatory Commission (FERC) made their comments in a brief on Tuesday in an appeal of a case brought by power generators opposed to Illinois' Zero Emission Credit (ZEC) program.

Several nuclear reactors in the United States are in danger of shutting for economic reasons because cheap and abundant natural gas from shale formations and subsidies paid to renewable energy projects have reduced power prices to their lowest levels on record in several parts of the country.

Illinois adopted the ZEC program in 2016 to keep some nuclear power plants in service to help meet the state's greenhouse gas reduction goals after Illinois power company Exelon Corp said it would shut its Clinton and Quad Cities nuclear plants because they were losing money.

In most states, the bulk of carbon-free energy comes from nuclear power plants.

Power generators, like NRG Energy Inc and Vistra Energy Inc, challenged the Illinois law in federal court, arguing it favors nuclear power over other energy resources, like gas, and boosts consumers' costs, among other things.

That legal challenge continues in the U.S. Court of Appeals for the Seventh Circuit.

The U.S. Justice Department and FERC submitted their brief after the court invited the United States to file its opinion of the case. That brief is not a decision in the case.

"We remain confident that the courts will uphold the view of policymakers and regulators who support the continued operation of Illinois' nuclear plants and the environmental benefits they provide for consumers," Exelon said in a statement.

In addition to Illinois, New York, Connecticut and New Jersey have also adopted rules to subsidize nuclear power plants. Power generators opposed to the New York rule are challenging it in the U.S. Court of Appeals for the Second Circuit.

Pennsylvania and Ohio are considering similar legislation to keep reactors in their states in service, but analysts have said it is less likely those states will adopt nuclear subsidy rules because the states are major gas producers.

(Reporting by Scott DiSavino; Editing by Susan Thomas)

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