Illinois governor wants clean energy legislation, could push state out of PJM power grid

(Reuters) – Illinois Governor J.B. Pritzker called on the state legislature to pass clean energy legislation in his State of the State address, providing a boost to advocates of the Clean Energy Jobs Act, which could push the state out of the PJM power grid.

PJM Interconnection operates the power system in 13 states from Illinois to New Jersey.

Analysts at Height Capital Markets in Washington said in a report on Thursday that they expect lawmakers will pass the bill this spring.

PJM uses the capacity market to pay generators to be available for service to ensure the grid has enough resources to meet peak demand. That is different than the grid’s energy market, which pays generators for the power they produce.

PJM’s capacity market has come under fire in several states after the U.S. Federal Energy Regulatory Commission (FERC), which regulates PJM, said in December the capacity market must do a better job of treating all generation sources equally.

That means the PJM capacity market may have to back out some state subsidies – like Illinois’ payments to Exelon Corp’s (EXC.O) nuclear plants – that encourage construction and operation of non-carbon-emitting energy resources like nuclear power and renewables.

If PJM, which is seeking a rehearing from the FERC, is forced to change its rules, fossil-fired coal and natural gas plants that do not receive state subsidies should become more competitive in the capacity market and make more money.

The Democratic governor said in his speech on Wednesday that his clean energy priorities include reducing carbon emissions, promoting renewable energy and electrifying the transportation sector, which are all key parts of the Clean Enegy Jobs Act (CEJA).

Exelon, the state’s biggest electric company and operator of the nation’s biggest group of nuclear power reactors, has said it was opposed to both the current version of the proposed CEJA and FERC’s decision on PJM’s capacity market.

Analysts at Height Capital Markets, however, said Exelon would likely fare better under the capacity market proposed in the CEJA, which would remove the ComEd Zone from PJM’s capacity market and prioritize zero-carbon resources. The ComEd zone in northern Illinois is where Exelon’s Commonwealth Edison (ComEd) utility operates.

Height Capital Markets said the legislature would likely begin holding hearings on CEJA in February before voting on the bill in May.