The secret to Exelon's rising profit

August 15, 2018

Turns out there's a way to make more money in an era of low electricity prices: Persuade lawmakers to provide subsidies paid by customers.

Exelon's albatross has finally taken flight: The Chicago-based energy company's latest financial report shows that its electricity generating unit is driving profit growth this year. Exelon Generation accounted for 41 cents of the company's 45-cent increase in adjusted operating earnings per share for the first half of 2018. Most of the rest came from regulated utilities in the Midwest and Mid-Atlantic regions, including Chicago's Commonwealth Edison.

The numbers reflect a renaissance of sorts at Exelon Generation, which operates the largest fleet of nuclear power plants in the country. Generation profits suffered for years as abundant low-cost natural gas enabled rivals with gas-fired plants to sell electricity at lower prices in the unregulated wholesale power markets where Exelon Generation competes. Some nuclear plants couldn't operate profitably at those free-market prices.

What's changed? Have wholesale power prices suddenly soared? Nope. Exelon reported that low prices hurt generation profits again in the second quarter. Has Exelon CEO Chris Crane found a way to make nuclear power more attractive than electricity from gas-fired plants? Nope. In a commodity market, price still rules. A new savvy marketplace strategy isn't driving the upturn at Exelon Generation, either. The primary engine of improvement is a familiar utility industry tactic—government intervention.

In the past couple of years, Crane and his crack lobbying squad have convinced legislators in Illinois, New York and most recently New Jersey to tack a new fee onto customers' bills. Called zero emission credits, these customer-funded, government-imposed subsidies reward nuclear plants for not emitting greenhouse gases.

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Read the entire article at Crain's Chicago Business

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