Crane has said the tax credit keeps turbines spinning even when there is no demand for power, driving down the price Exelon receives for power from its nuclear plants. In wind-rich areas like Illinois, that means there are instances when Exelon pays customers to take their power rather than the other way around. The phenomenon is referred to as negative electricity pricing. For instance, the company's Byron nuclear plant in Illinois, Crane said, is in a negative pricing scenario 16 percent of the time.
Exelon Corp. Chief Executive Christopher Crane said Thursday that the rapid pace of subsidized wind-generated electric power could ultimately force it to shutter nuclear plants.
“What worries me is if we continue to build an excessive amount of wind and subsidize wind, the unintended consequence could be that it leads to shutting down plants,” Crane said in an interview.
Crane said states that have helped to subsidize wind development in order to create jobs might find themselves losing jobs if nuclear plants shut down.
The Chicago-based company doesn’t have any immediate plans to mothball nuclear plants, although at least one analyst has predicted that could occur as soon as 2015.
“We continue to believe that our assets are some of the lowest-cost, most-dispatchable baseload assets and don’t have any plans at this point of early shutdown on them,” Crane said.
Exelon’s stance against the extension this year of the wind-production tax credit resulted in the company being ousted from the American Wind Energy Association, a lobbying group. Exelon owns a large number of wind turbines but they comprise only a fraction of the company’s overall power-generating portfolio.
Crane has said the tax credit keeps turbines spinning even when there is no demand for power, driving down the price Exelon receives for power from its nuclear plants.
In wind-rich areas like Illinois, that means there are instances when Exelon pays customers to take their power rather than the other way around. The phenomenon is referred to as negative electricity pricing. For instance, the company’s Byron nuclear plant in Illinois, Crane said, is in a negative pricing scenario 16 percent of the time.
Wind advocates contend Exelon’s arguments are hypocritical, adding that for years the company has touted its impact in lowering electricity rates to communities served by its power plants.
“Exelon made a bet on the electricity spot market just like California did 10 years ago. When prices went down, they lost their bet and they’re looking for a scapegoat,” said Rob Gramlich, the wind energy group’s interim chief executive. “The good news is the same low prices that hurt Exelon benefit homes and businesses. Negative prices are a red herring. Exelon does not want low prices or any resources like wind that bring prices down.”
Exelon slashed its dividend by 41 percent Thursday, saying the move would free up more than $700 million per year to invest in projects that can provide quick returns while the company waits for power prices to recover. A glut of low-priced natural gas is also contributing to cheaper power prices.
Beginning in the second quarter, Exelon’s dividend will drop to $1.24 per share on an annualized basis from $2.10 per share. The previous dividend, among the highest of U.S. utilities, had been maintained since late 2008.
Exelon’s stock has dropped by nearly two-thirds since its high in 2008. It closed Thursday at $31.37, up 1.26 percent after also reporting a 51.6 percent decrease in fourth-quarter net income to 44 cents a share, from the year-earlier period.
The dividend reduction, the company said, will help it maintain its investment-grade status and provide opportunities for “growth.”
Crane said the company would look to invest in its utilities in Illinois, Pennsylvania and Baltimore where its returns on investments are regulated. It would also seek customers interested in contracting with Exelon for wind and solar power. Such power purchase agreements would guarantee steady and predictable returns without cutting into the margins the company receives for nuclear-generated power.
“We believe that our dividend should be sized to reflect our business model and keep our balance sheet strong,” Crane said. “We also think that the dividend must be sized to allow us capacity and flexibility to pursue growth that will enhance the company’s long-term value.”
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