Officials at Exelon Corp. in Chicago and Dynegy Inc. in Houston say they have entered into exclusive discussions about the sale of Illinois Power Co.

Illinois Power serves 590,000 electric customers and 415,000 natural gas customers in downstate Illinois, including most residents of Champaign and Vermilion counties.

Exelon, one of the nation's largest electric utilities with some 5 million customers and more than $15 billion in annual revenue, already serves the Chicago area through its Commonwealth Edison subsidiary. It also has 440,000 customers in the Philadelphia area.

Exelon also owns about a dozen nuclear power plants, including the Clinton nuclear generating station, 40 miles west of Champaign. It, ironically, was built by Illinois Power in the 1970s and '80s.

If Exelon were to purchase Illinois Power, and a proposed merger of St. Louis-based Ameren and Central Illinois Light Co. were to be completed, the vast majority of Illinois homes would get their electricity from one of the two companies.

"Exelon is exploring this transaction because it believes the combination of Illinois Power with Exelon's president subsidiary, Commonwealth Edison Co., would provide a unique opportunity to improve service to customers, and address the issues involving the supply and price of electricity throughout much of the state through the end of the decade and beyond," Exelon said in a prepared statement issued Friday afternoon. "We would expect that an approved transaction would lead to contracts for guaranteed supply at predictable prices for Illinois consumers, particularly residential and small commercial."

A number of newspapers reported last month that Dynegy was looking for a buyer for Illinois Power because it believed the company offered little opportunity for significant revenue growth.

It's unclear what effect Friday's announcement will have on a plan raised by local officials to purchase Illinois Power's distribution system in Champaign and Urbana.

"As to whether or not this would have any effect on the possibility of us purchasing the local distribution system, I don't know," Champaign City Manager Steve Carter said. "That would probably be a long, perhaps five- to eight-year process, anyway."

"But we probably should plan to continue to discuss this, if only to find out what the plans of the new owner would be."

He added that the announcement raises some doubt about the value of a local advisory council that Illinois Power appointed last month in the aftermath of complaints about the reliability of IP's service in the Champaign-Urbana area.

Illinois Power has been owned by Dynegy since February 2000. Before that time, it had been an independent, Decatur-based electric and natural gas company that had been founded in 1923, spun off from the Illinois Traction System, a network of interurban railroad lines and power plants in downstate Illinois, founded by William McKinley of Champaign.