Exelon stands to benefit from cap-and-trade

NIPSCO has launched a campaign against such legislation
2009-11-15T00:05:00Z Exelon stands to benefit from cap-and-tradeBy Emma Jackson - Medill News Service nwitimes.com
November 15, 2009 12:05 am  • 

Exelon Corp., owner of ComEd in Illinois, stands to be one of the primary beneficiaries of the pending cap-and-trade legislation. 

Having invested early in nuclear power and then, more recently, sold its fossil-fuel plants, the Chicago-based holding company stands as the largest producer of low carbon-emitting electricity. Its power-generation portfolio is 68 percent in nuclear, as measured in megawatts. Another subsidiary, Exelon Generation LLC, owns 17 nuclear power plants, which include six in Illinois, not counting a co-owned Quad Cities site. 

"If there is cap-and-trade system, it directly improves the price of power in our market," CEO John Rowe said in a Nov. 3 teleconference.

Exelon could see its operating income jump by 36 percent to $1.7 billion, according to a Point Carbon study.

Angie Storozynski, an analyst at Macquarie Capital Inc., said the company stands to profit if cap-and-trade passes because of the company's low-emission portfolio, but the stock will continue to underperform if it doesn't pass.

Carbon dioxide, or, greenhouse-gas, emissions have been identified by scientists as a key contributor to global warming. 

A cap-and-trade system would set an annual, declining cap for greenhouse-gas emissions. Each year, the government would issue allowances for such emissions equivalent to the annual targets.

At first, most of the allowances would be free, but in time companies that exceeded their greenhouse-gas limits would have to "buy" them from utilities or other industries operating under their limits. This would increase the operating costs of coal and gas-fired generators.

NIPSCO, Indiana's largest utility, has launched a campaign against such climate-change legislation, telling customers if it becomes law electric rates could soar up to 130 percent over the next 25 years.

Recent bill inserts going out to NIPSCO customers warned they could face "additional costs of more than $100 million in 2012" if the Waxman-Markey American Clean Energy & Security Act, passed by the House, becomes law.

NIPSCO's stance is in marked contrast to some other utilities, including Exelon and Duke Energy, which maintain the House bill provides a "glide path" to limiting carbon dioxide emissions while keeping costs to customers under control.

Estimates of how much electric prices would increase under Waxman-Markey vary widely. A U.S. Energy Information Agency report prepared for Congress said electricity prices nationwide will be only 3 percent to 4 percent higher by 2020 if the bill is made law, although by 2030 they could be 19 percent higher.

Times Business writer Keith Benman contributed to this report.

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