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Sticking his neck out

The energy executive who runs Peco's parent, is applauded by environmentalists for bucking his industry on reducing emissions

John Rowe, CEO of Exelon Inc., the parent company of Peco Energy at the PECO office at 2301 Market in Philadelphia. (John Costello / Staff Photographer)
John Rowe, CEO of Exelon Inc., the parent company of Peco Energy at the PECO office at 2301 Market in Philadelphia. (John Costello / Staff Photographer)Read more

John W. Rowe, who heads Exelon Corp., parent of Philadelphia's Peco Energy, is considered an industry leader on reducing carbon emissions.

One of his priorities - spelled out again recently during a visit in Philadelphia - is mandatory climate legislation including a cap-and-trade system, under which nationwide carbon emissions could be limited and eventually rolled back. Companies would trade credits and essentially put a price on the right to burn fossil fuels.

Rowe readily admits he has more latitude on this issue than many of his counterparts. Exelon operates the nation's largest fleet of nuclear power plants, which don't emit carbon dioxide. Still, environmentalists credit Rowe for sticking his neck out on an issue of great controversy within his industry.

: Do you see a consensus emerging within the business community on the need for federal action to limit global warming?

: I don't think there is a consensus at all. There are a great many companies who take the public position that something should be done. There are still a lot of companies who don't. And of course, as is always the case, there are people who say, "Something should be done," but don't want very much done. . . . And people who are willing to take bolder measures.

We have been working on climate, at Exelon, in one way or another, since the founding of the company back in 2000. And I've been working on the climate issue fairly intensely since I became one of the three co-chairs of the National Commission on Energy Policy. . . . And that report is now three years old, so it must have been in 2003 when I became a co-chair of that effort. And that effort was formed with money from the Hewlett Foundation to try to get a group of business people, academics, environmentalists, to basically work on the climate issue.

So this has been a big thing for Exelon - it's important to us. First, because we think it's a problem that has to be dealt with. Second, if it's dealt with in the wrong way, it costs our customers much more money than it needs to cost them. So we're very concerned about getting something done, but doing it in an efficient way. And that's really what my speech is mostly about. We have very strong opinions on what works efficiently, and what is less efficient. And we believe you need a whole package of remedies to deal with it. And that's why we take the stand we do.

: How do you bring the the coal-fired generation companies along in this issue?

: I don't have that capability. Only the Congress has that capability. But I think now, in the utility industry, most companies recognize that something needs to be done. . . . There's just a fairly wide gap as to how far people are willing to go in the way of supporting action.

: What are business leaders who agree with you doing to help break the deadlock in Congress?

: Congress will break its own deadlocks without too much help from us. I suspect Congress would say, "If business were not in the way, that would be a help." . . . In the utility industry, the people who are actively supporting climate legislation are Exelon - I think we were close to the very first; Edison International; Pacific Gas & Electric; [and] the National Grid companies in New England. And all of these have been working for several years, with Congress, to do something. And now I think it's fair to say that a fair number of the coal-burning companies are there, too. But they would generally want less-extensive legislation than we could support.

: There are some people who despair on making any dent in global climate change because of the possibility that China and India will offset anything we do. Do you share that concern?

: Well, I fear they're right. But I don't think that's an excuse for us to do nothing. I think we should start acting, in a measured way. Because, after all, we still are the richest, or one of the richest, countries in the world, and one of the major sources of greenhouse gases. And I think we need to take a leadership role in trying to cope with the problem. If you go down the road 20 years, and we and Western Europe have done something, but the more developing countries have not, then what we have done will probably be irrelevant. But in that case, you stop. But it's no excuse not to start.

: What about the recent financial turmoil and sharp reductions in oil prices? Could that halt or impede the momentum for developing alternative-energy technologies and kill off interest in energy efficiency?

: There's very real risk that it does that. Another risk is that it will impede climate legislation. Both of those are risks. And it would be a sad thing if either of those risks comes true, because this recession, too, will pass. And the fundamental issues of a constrained world oil supply, and climate, and conflict between us and the people who have the oil, aren't going to go away easily.. . .

So the need to keep tightening [auto fuel-efficiency] standards, the need to have legislation that includes the cost of carbon in the marketplace, are very important. Because that's what keeps people from thinking that the largest-possible SUV is a sign of freedom. . . .

: When you estimate the costs of a new generation of nuclear plants, which you believe may be worth building, are you factoring in all the costs that haven't been fully faced with the first generation of nuclear plants, such as decommissioning?

: It does include those costs. We've faced those costs - we've put money away for those things. And we put money away for spent-fuel disposal, too. . . . But it's very clear that one of the major stumbling blocks to nuclear playing the role that I think it should play in a carbon-constrained world is that we need a publicly accepted solution to the spent-fuel problem, both a short-term solution and a long term-solution. . . .

: What is going on with Yucca Mountain the long-planned federal disposal site in Nevada for spent nuclear fuel?

: Yucca Mountain is going nowhere in the foreseeable future. The Senate majority leader Nevada Democrat Harry Reid doesn't want it to go anywhere. The President-elect has committed himself to support the Senate majority leader. And between the two of them, they have the power to make what they believe come true.

: So is there an alternative other than storing it on-site?

: Not at the moment. But I think there will be work done on some federal regional disposal sites. There's also negotiations going on with some of the states for regional sites.

: I'd like to ask you about the future of electricity competition. Come 2011, Peco customers are facing what some expect will be significant increases in the cost of electricity, correct?

: It's a fact. It's not as big a fact today as it was six months ago when it looked like prices would be higher. But yes, prices will go up. Peco customers have benefited from a rate freeze that's now 10, 11 years old. And you don't get that in a marketplace or even in a cost-based regulated world.

Now, people should remember that the reason many states - including Pennsylvania, and Illinois, and all of New England, and New York, California, and Texas - went to competition is that those states had become very high-cost states, under what was then cost-based regulation. And when people switched to competition, you created a whole set of new legal rights in the hands of owners of the power plants. And those, you can't reverse. You can create altogether new structures. But, what's happening now, is you get a lot of commotion, when states go off these interim rate freezes, that were part of the deal. But I think that if you watch what's happening in the regulated states, you now see consistent, large increases in cost in the regulated states. So . . . It's my belief that we had a period of eight or 10 years when the market-based states were clearly showing the best cost improvement - partly because of the terms of the initial competition deals. Then you had a period of three or four years when it looked like the market-based states had higher increases. I think you're going to see that pendulum go the other way over the next few years.