The company dismantling the closed Zion nuclear plant on Lake Michigan is running out of money to finish the job, according to the site’s owner, Chicago-based Exelon.
The project, paid for with $800 million collected from state electric ratepayers over decades, is being closely watched by nuclear plant owners around the country who hope to replicate the arrangement. It was the first time regulators allowed a nuclear power plant owner to transfer a plant’s operating license and liabilities to a third-party decommissioner.
Utah-based EnergySolutions, the company dismantling Zion, wants to become the go-to decommissioner around the world. In the U.S., about 6 percent of nuclear plants face possible closing, according to the U.S. Environmental Protection Agency.
In Illinois, the Zion dismantling has taken on added significance as Exelon, the parent company of Commonwealth Edison, has said three of its six nuclear plants in the state could be closed. As reported last week, state governmental agencies filed a report suggesting ways to keep those plants operating, including taxing electric generators that , unlike nuclear plants, produce greenhouse gases.
EnergySolutions said that while a shortfall is projected at this stage of the Zion project, the company says the project will be in the black when completed in 2018.
“Yes, the project will be profitable,” said Mark Walker, a spokesman for EnergySolutions. “That’s why we will be pursuing other decommissioning projects.”
At the end of last year, EnergySolutions told Exelon the Zion fund is projected to run out before the company can remove all the buildings at the site. According to the company’s agreement with Exelon, that would automatically trigger a requirement that EnergySolutions would cover the projected shortfall.
“(EnergySolutions) notified us about the shortfall and the plans to address it,” Krista Lopykinski, a spokeswoman for Exelon, said last week.
Residents in Zion who learned of the shortfall from EnergySolutions at a December community meeting were alarmed about the possibility of getting stuck with a scarred lakefront.
“That lakefront is key to any future development,” said Christopher Fischer, who is running for Zion city commissioner. “We want the lakefront to be a point of attraction, to bring visitors, to try as much as possible to make it a showpiece for the area. Having a bunch of empty buildings and the storage pad there is a hindrance.”
The EnergySolutions spokesman said the company will finish the project early and as promised. Its contract with Exelon requires that all buildings be removed.
This weekend, EnergySolutions is expected to finish the most crucial part of its 10-year dismantling of Zion: moving the plant’s radioactive fuel rods from cooling pools into 61 bunkerlike casks that will remain indefinitely along Lake Michigan.
Charles Fitzgerald, a candidate for mayor in Zion, doesn’t like that prospect. “We should be compensated for having to store this stuff. I would utilize those dollars for economic redevelopment in Zion.”
Since the Zion plant was deactivated in 1998, the town has struggled to make up for taxes that were lost. Zion’s mayor has said the plant paid millions in taxes annually while it operated but now pays virtually nothing.
The future of the site also hasn’t been determined. “Greenfield” status — when land is restored to its former state — is not required by the Nuclear Regulatory Commission, only that the site is radiologically remediated, “meaning it is safe for use by the public from a nuclear perspective,” said Viktoria Mitlyng, an NRC senior public affairs officer.
After decommissioning, control of the fuel-filled casks and the plant land, 257 acres sandwiched between the northern and southern stretches of Illinois Beach State Park, would revert to Exelon. The company hasn’t said what its plans are for the site.
The dismantling of nuclear plants poses huge liabilities for nuclear plant owners. About 40 percent of the costs are in shipping and disposing of low level radioactive waste such as the reactor core that houses the fuel and the inner shell of the reactor building. Nuclear plant owners have calculated that decommissioning funds aren’t always adequate to cover such costs.
As a result, there is little incentive for power plant owners to do that work, and that has left communities waiting dozens of years for closed plants to be decommissioned.
Zion is illustrative of the situation. The plant’s 1,500 tons of nuclear waste have sat for a quarter-century on what otherwise would be prime real estate on Lake Michigan.
About a decade ago, EnergySolutions approached Exelon with a possible solution. Because EnergySolutions owns a disposal facility in Clive, Utah, it proposed using funds in a trust to pay for dismantling the plant and removing the low-level radioactive waste while turning a profit.
As part of the agreement, EnergySolutions backed the project with a $200 million letter of credit. That amount would roll over to Exelon if EnergySolutions is unable to cover cost overruns.
To get the job done, the U.S. Nuclear Regulatory Commission made the unprecedented decision to allow Exelon to temporarily transfer the facility’s license and liabilities to EnergySolutions. Energy Solutions is only required to report to the NRC on the status of the decommissioning fund once a year, and the NRC doesn’t scrutinize how the money is spent, as long as the site is decommissioned safely. As of the most recent report March 27, the company did not report any shortfalls.
The lack of governmental or public oversight over how the money is being spent triggered a lawsuit against EnergySolutions subsidiary ZionSolutions. The lawsuit was rejected by a federal appellate court early last year.
By law, ratepayers who paid into the Zion fund before Illinois deregulated its electricity market are entitled to any money left after the project is completed. But experts say the company will likely take for itself any leftover money, if there is any, as profit.
EnergySolutions declined to provide current cost projections for the project as well as the status of the decommissioning fund. A company spokesman said that information was confidential because the firm is privately held.
In 2011 the company told investors it expected to earn about $200 million from the Zion project at profit margins of 15 to 20 percent. In 2012, it twice lowered profit projections, first from 10 to 15 percent, then to 5 to 10 percent in June, in part because the company said it overestimated how much money the trust fund would earn.
A month later, CEO David Lockwood told investors the project wasn’t about profit but advertising for bigger fish.
“We undertook Zion for strategic, not financial, reasons,” Lockwood said at the time.
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