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More Nukes in Sight, but Gas 'Still Queen,' Says Exelon CEO

Exelon Corp. has long supported the move to combat greenhouse gas emissions (GHG), and it remains committed to building more nuclear power projects in the United States. The buildup of nuclear power, however, won't dampen the use of natural gas as a generation fuel, said CEO John Rowe Wednesday. "Natural gas has become something of a bitch goddess. She's still queen."

Rowe was a keynote speaker at Cambridge Energy Research Associates' (CERA) CERAWeek 2007 in Houston. He said the costs of building new generation plants have become more difficult to predict, but he expects a build-out to begin in the near term for both rate-based and regulated units. Exelon has the largest nuclear fleet in the United States and the third-largest commercial fleet in the world. The diversified energy company's 10 nuclear stations have 17 reactors, which represent 20% of the U.S. nuclear industry's power capacity.

The CEO predicted that new nuclear projects in the United States would begin to materialize in the next two to three years. However, he said key members of Congress still have to be persuaded.

"A number of the nuclear projects...will depend on the new Democratic majority's willingness to embrace the technology as an arrow in its quiver to address climate change," Rowe said.

House Speaker Nancy Pelosi (D-CA) believes nuclear power "needs to be considered," but other legislators are more resistant. He said Rep. Ed Markey (D-MA) heads a key committee to address nuclear power issues, and "I will be a very old man by the time I convince Mr. Markey on [supporting] nuclear energy."

Rowe also suggested that to reduce GHG, a carbon tax would be "vastly superior" to a cap-and-trade program. A carbon tax might not be politically viable, he said, but a tax would provide companies with more of a guarantee about the cost of carbon. A tax system also would provide regulators with revenue that could be used for social projects.

"I think a carbon tax is a vastly superior system to all other methods of dealing with the issue," said Rowe. In any case, he said regulating carbon dioxide CO2 and other GHG emissions will benefit Exelon and other large nuclear plant owners. Rowe said the company has long supported a curb on GHG, which is why the company decided to sell off some of its fossil fuel plants and move toward more nuclear generation. But he said gas still holds the biggest draw for customers and utilities because of its clean-burning attributes. The Chicago-based utility, which serves about 5.2 million customers in Illinois and Pennsylvania, also distributes natural gas to more than 470,000 customers in southeastern Pennsylvania.

In the end, Rowe said he thinks Congress will enact a cap-and-trade system for CO2 within the next two years.

More nuclear plants are definitely on the horizon, including in Texas, he said. Subsidiary Exelon Generation last year notified the Nuclear Regulatory Commission (NRC) that it had begun the process to obtain a combined construction and operating license (COL) to build a nuclear plant in Texas at an as-yet unnamed location (see Daily GPI, Oct. 2, 2006).

Exelon has still not disclosed the capacity for the proposed plant, and Rowe offered no details Wednesday. However, Exelon expects to submit an application to the NRC in 2008. Texas was picked for a new site partly because Exelon already has gas generating plants in the state and Texas is expected to have an increase in electricity demand over the next 20 years. Plus, Texas has to reduce its GHG emissions, he noted.

In a Securities and Exchange Commission filing on Wednesday, Exelon revealed that Rowe received total compensation, including salary, pension value and stock-based compensation, of $16.427 million last year. Rowe could have received an additional 143,000 stock options worth an estimated $1.859 million, but the Exelon board and Rowe agreed to donate that amount to the Illinois Institute of Technology, a fund run by the Archdiocese of Chicago to support inner-city schools, and the Chicago Field Museum of Natural History.

Executive compensation at Exelon is based on a "pay for performance" model and is benchmarked against other energy companies, according to company executives. Exelon has performed at nearly twice the rate of the Standard & Poor's Utility Index in the past five years.

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