Exelon CEO Warns Of Risks In Push To Reshape Energy Policy
17:27 EST Saturday, February 21, 2009
WASHINGTON -(Dow Jones)- Exelon Corp. (EXC) Chief Executive John Rowe warned that government efforts to wean the U.S. economy from carbon-based energy could wind up wasting money and creating a political backlash if plans aren't fully thought through.
His comments, made on Saturday before a speech to the National Governor's Association, come as the U.S. Congress presses forward with a series of programs that aim to reduce demand for fossil fuels, either through conservation and efficiency or setting nationwide emissions limits or by promoting greater use of wind, solar and other renewable energy.
"You need a comprehensive policy that tries to inch forward on all of these things while not placing too big bets on any of them," Rowe said in an interview. "You can waste hundreds of billions of dollars in energy really fast. You can't afford that in this economy. That's my real message."
In addressing the governors in the nation's capital and holding a series of press interviews, Rowe is positioning himself to be a part of an energy-policy debate that is at the forefront of the national agenda.
Senate Majority Leader Harry Reid, D-Nev., said last week that the Senate could be debating within weeks a bill that would mandate that a larger percentage of electricity come from renewable sources. He said that by the summer, he aimed to start debate on legislation to impose mandatory reductions in greenhouse-gas emissions. The U.S. House of Representatives is working on parallel legislation, and the Obama administration is figuring out how to dole out billions of dollars appropriated for energy projects in the economic stimulus package.
"Because of the recession, it's even more important that we deal with the climate issue [in] the lowest cost way, and the lowest cost way requires either a cap and trade system or a carbon tax," Rowe said. "In a recession environment it is ever more tempting to do it all with piecemeal solutions, and that's ever more the wrong decision."
Rowe projected that public support for a carbon tax - regarded by economists as the most efficient method of controlling greenhouse-gas emissions - could grow if the U.S. deficit keeps rising as a result of the recession. The implication is that a tax on carbon would create a pool of money that could be used to pay off debt.
"With the pressures that will be on the government two or three years down the road to start repaying some of these borrowings ,it's conceivable to me that a carbon tax might be more politically tolerable in the future," Rowe said. "We're borrowing an immense amount of money for the war in Iraq, for the TARP program, for the stimulus package, and this is going to place huge demands on the government to balance the budget down the road."
As for Exelon, the company has applied for loan guarantees first established by law several years ago to build more nuclear power, but Rowe said he doesn't anticipate that the U.S. Energy Department will award such guarantees to Exelon initially. Energy Secretary Steven Chu has talked about speeding up the award of loan guarantees, a process that was bogged down in the Bush administration.
"I think it's more likely that they would be sped up for the companies whose designs are a bit further along than ours," Rowe said. He projects that the $ 18.5 billion in loan guarantees for nuclear reactors would be enough for "maybe four or five units." While he said he supports more nuclear-energy loan guarantees, "I suppose I would mostly recommend it when they get some of the existing loan guarantee money paid back. I don't really want to use up my few chips in this world pleading for more loan guarantees when there are so many out there already. That's a company position, not an industry position."
The economic stimulus package includes $6 billion of loan guarantees for renewable energy and transmission projects, money that would back up an estimated $60 billion worth of loans. DOE has said that it aims to begin offering the guarantees by early summer, but Rowe raised the prospect of unintended consequences.
"I haven't fully understood how this works in the stimulus package yet," Rowe said. "The reason we're careful about how much we build is: How much does it cost? How much burden does it put on the rates?"
He added that "to the extent the stimulus package deals with transmission, they're mostly looking at how to get transmission built from areas where wind is a little less expensive to the big cities. That's fine, but the wind is already pretty expensive and if you add the cost of that transmission it gets more expensive.
"There is no magic pill."
--By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; Siobhan.Hughes@ dowjones.com
(END) Dow Jones Newswires
02-21-09 1726ET
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