January 16, 1998

Nation's Biggest Atomic Utility to Shut 2 Units

By BARNABY J. FEDER

HICAGO -- In the biggest retreat from nuclear power to date, Commonwealth Edison said Thursday it would close 2 of its 12 nuclear generators because they were too expensive to operate now that the industry was being deregulated.

Commonwealth Edison, the nation's largest private operator of nuclear plants, said closing the two plants, which sit side by side on Lake Michigan in Zion, Ill., 40 miles north of Chicago, was purely economic.

But anti-nuclear activists noted that Zion's woes had been compounded by a long history of labor and safety problems. Last fall, the nuclear industry's own watchdog organization issued a scathing review of operations at Zion and other Commonwealth Edison plants.

The case for closing Zion rather than trying to upgrade it and return it to service was "overwhelming," said James J. O'Connor, chairman and chief executive of Commonwealth Edison's parent, Unicom Corp. of Chicago.

Nuclear power accounted for about 20 percent of the nation's electricity output last year, down slightly from 21.9 percent 1996.

Although some states, including Illinois, will remain highly reliant on nuclear power for years, analysts expect the overall share to decline steadily in the next two decades because no new plants are under construction in the United States.

The decision to close Zion came just one day after Northeast Utilities, the owner of the three Millstone nuclear plants at Waterford, Conn., said it had indefinitely suspended efforts to reopen Millstone 1, the smallest and oldest of the units. Many utilities are also shutting down aging or heavily polluting coal-fired plants to prepare for stiffer price competition.

The Zion generators, each capable of producing 1,000 megawatts, were the largest nuclear plants in the nation when they came on line in 1973 and 1974. Safety and maintenance problems had led the Nuclear Regulatory Commission to put them on its watch list of troubled plants. One has been idle since September of 1996 and the other since February 1997.

The enormous cost of closing Zion will be reflected in an accounting charge of $515 million, or $2.38 a share, against Unicom's fourth-quarter earnings. But Wall Street, which had been anticipating and urging the Zion closing, was undisturbed. Unicom's shares dipped 25 cents to close at $30.6875.

"It shows they are evaluating all their resources in the context of a competitive market, which is what we expect," said Samuel Brothwell, who follows the company for Merrill Lynch in New York.

The closing is not expected to affect the reliability of service in northern Illinois, where Commonwealth Edison serves 3.4 million customers. The generators at Zion will be replaced with equipment to help Commonwealth Edison manage its network more efficiently. The utility is also investing in transmission lines and energy efficiency programs to adjust its capacity and the demand. Spent fuel will be stored on site until 2014, the year final decommissioning is scheduled to begin.

O'Connor, Unicom's chairman, insisted that the closing did not mean that Commonwealth Edison could not safely manage its 12 nuclear properties.

Critics were skeptical.

"They've done the right thing but they didn't have any choice," said Howard Learner, executive director of the Environmental Law and Policy Center, a Chicago research group.

Learner said the Zion closing was only the first step needed to convince federal regulators that the company could break away from its long, dismal track record of having new problems crop up in its nuclear portfolio just as it was attacking old ones. In addition to Zion, 4 other Commonwealth Edison plants are on the nuclear commission's watch list, and only 4 of the 12 are now generating electricity.

Learner predicted that at least two of the other troubled units, those near LaSalle, Ill., would also have to be closed in the next year or two to allow Commonwealth Edison to better focus its oversight efforts. He cited reports this week that poor management of the Quad Cities nuclear plant near Moline, which was shut down late last year after violating safety procedures, could land it on the commission's watch list just as the two improving Dresden units near Morris, Ill., come off the list.

Commonwealth Edison admitted at a meeting with regional commission officials Wednesday that it had lost its focus on safety at Quad Cities.