Raising prices behind closed doors

Exelon’s basic argument is that the Production Tax Credit often causes electricity prices to “go negative,” meaning that operators of more expensive power production (like Exelon) must pay for electricity instead of selling it. When this “negative pricing” happens, the argument goes, utilities like Exelon lose money.

Unfortunately just about every aspect of this argument is false. Exelon’s priority is to force consumer prices to rise, and eliminating the PTC is key to achieving that priority in a world where cheap natural gas is out-competing nuclear power.

Here’s why: 

First, as the Center for American Progress pointed out in a recent analysis, wind never set the “day-ahead” market price for energy in 2012 according to the pricing data from the electricity market where Exelon operates. In the “real-time” market, wind energy set the market price for electricity in Exelon’s service area only 0.5 percent of the time while natural gas and coal set the price 89.2 percent of the time. Exelon’s most basic claim that wind power is causing the electricity market to “go negative” is simply false.

Unhelpfully for Exelon, an executive from its subsidiary Constellation Energy admitted this reality, when he told an audience at the Chicago Council on Global Affairs in June that Exelon’s stock price falling by two-thirds is directly related to the 50 percent drop in natural gas prices in recent years. As the Constellation executive explained, “nuclear generation was looking phenomenal,” but now it struggles because of cheap natural gas. He made no mention of wind or the PTC, and with good reason.

Second, and perhaps most galling, Exelon has come right out and said that higher consumer electricity prices are desirable because they’ll help raise the company’s profit margins. Specifically, in May, Exelon told investors and released a statement that company was “positioned for unparalleled upside from improving (i.e., more expensive) power markets, coal plant retirements and other factors.” That’s because nuclear generators are not flexible and their costs are too high to be profitable as long as gas is cheap. Weakening a cheaper rival like wind makes it that much easier for Exelon to get back in the black.

It gets even worse for customers if Exelon succeeds in rolling back the PTC, because wind energy is set to save customers billions of dollars. A recent report from Synapse Energy Economics found that, if wind energy doubled in the PJM market (which includes Kentucky, Ohio, Pennsylvania, Virginia, North Carolina, West Virginia, Illinois, Maryland, New Jersey and Washington, DC) over the next few years, it would produce a net benefit of about $1 billion in 2021 and $6.9 billion in 2026 by driving down PJM energy customer costs by $1.74 per megawatt-hour. Increased wind energy would put billions of dollars back in ratepayers’ pockets, but would cost inflexible power producers like Exelon significantly. [IndianaDG notes that the I&M service territory in Indiana is also part of PJM.]

Perhaps this is why Exelon is going so far as to collaborate with fossil fuel-funded anti-clean energy groups like the American Energy Alliance (AEA). AEA’s President Thomas Pyle is a former Koch Industries lobbyist and the group’s parent organization has received funding from ExxonMobil and foundations run by the fossil fuel billionaire Koch brothers. In a recent Bloomberg story, an AEA spokesman explained that Exelon is communicating with the group on a weekly basis “about how best to fight another extension of the tax credit.” Clearly, Exelon is abandoning its earlier claims to be a “green” utility and opting for the bottom line by backing political attacks on wind.
Exelon’s customers recognize what the company is doing, and they oppose it. The Checks & Balances Project commissioned a poll last December showing high levels of support for wind energy and ratepayer antipathy toward Exelon’s anti-PTC campaign. In that poll, 54 percent of Exelon customers opposed ending the PTC, and that opposition rose to 70 percent if ratepayer dollars were being used to fund anti-PTC lobbying.

In the months since, Exelon’s agenda – to end the PTC and profit from higher consumer prices as a result – has become even more explicit. One wonders how strongly residents in the states noted above would react if they knew more about what was happening behind closed doors on Capitol Hill.

Whether your priority is low energy prices or expanded clean energy – or both – it is essential to recognize Exelon’s efforts for precisely what they are: profit-driven misrepresentations designed to squeeze out a cheaper competitor  - wind. That’s worse than hypocritical. That’s manipulating the political system for Exelon’s economic gain at the expense of the company’s own customers.

Elsner is the director of The Checks & Balances Project, a pro-clean energy watchdog group focused on holding government officials, lobbyists, and corporations accountable for their actions related to energy, government spending, public health and the environment.