NY and IL adopted rules in 2016 to provide payments to nuclear reactors to keep the units in service to help meet state carbon reduction goals and keep the jobs, taxes and fuel diversification the plants provide.
In 1979, the plant experienced the partial meltdown of one of its two reactors.
Nuclear power plants have been hammered by the natural gas boom, which has slashed electricity prices, flooding the market from the north-east's Marcellus Shale reservoir, the nation's most prolific gas field.
The closure will affect the station's 675 employees and 1,500 union workers on contract.
The plant, along with other nuclear power installations around the USA, has struggled to compete in an electricity market booming with affordable gas.
Since 2013, the nuclear industry has shut six reactors for economic reasons before their licenses expired in California, Florida, Nebraska, Vermont and Wisconsin, and plan to shut at least six more over the next five years.
To many Americans, Memorial Day has lost its meaning
And not knowing anyone who died in action doesn't mean any of us shouldn't mourn and honor those who gave their lives. It's not the same as Veterans Day , which honors the service of people who have worn the uniform.
As a result, the construction of new plants declined in the 1980s and 1990s, according to the World Nuclear Association, an worldwide group that promotes the use of nuclear power. The company says that while 16 clean power sources including solar, wind and hydro-energy are supported by this state energy policy, nuclear is not. PSEG of New Jersey, which owns all or parts of four nuclear plants, has said it won't operate ones that are long-term money losers.
Regardless, the accident badly undermined support for nuclear power.
Exelon Corporation today said it will prematurely retire its Three Mile Island Generating Station on or about September 30, 2019, absent needed policy reforms.
The damaged reactor has been mothballed, but the other reactor is still in use.
"Today is a hard day, not just for the 675 talented men and women who have dedicated themselves to operating Three Mile Island safely and reliably every day, but also for their families, the communities and customers who depend on this plant to produce clean energy and support local jobs", Chris Crane, Exelon president and CEO, said in a statement.
Closing Three Mile Island would have little or no effect on electricity bills, analysts say. An increase in fracking has spurred the production of cheap natural gas, providing utilities with an attractive and readily available alternative to both nuclear and coal power. But it may be replaced by carbon-emitting power sources such as coal or natural gas.
The plant near Harrisburg, Pa., hasn't been profitable for the past five years, according to owner Exelon Corp. Meanwhile, electricity consumption hit a wall after the recession, while states have emphasized renewable energies and efficiency.