For Exelon, Carbon Reductions Solve a Problem, Make Money

By REBECCA SMITH
John Rowe, the 64-year-old chief executive of Exelon Corp., has pledged that his utility will drastically reduce its "carbon footprint," including emissions from power plants, vehicles and other sources. Recently, the company retrofitted the 10 stories it occupies in a high-rise Chicago office building, cutting its energy use there in half.
His support of carbon-emission reductions recently led him to clash with the U.S. Chamber of Commerce, and he pulled Exelon out of the group last month. That won him praise from some and enmity from others.
Certainly, as the country's largest operator of nuclear power plants, which don't spew carbon dioxide, Exelon could potentially emerge as a winner if Congress passes legislation to reduce carbon emissions.
John Rowe, CEO of Exelon Corp., discusses managing time horizons, his biggest mistakes and corporate responsibility.
However, his company has hit some bumps recently as it attempted to expand. Industry pundits say the best way for utilities to achieve growth is through consolidation, but Exelon has failed in its attempts to acquire Illinois Power Co., Public Service Enterprise Group Inc. of New Jersey and most recently NRG Energy Inc.
In a recent interview, Mr. Rowe discussed nuclear power, the likelihood of future acquisitions, and leaving smart-grid inventions to tech companies.
Excerpts:
WSJ: You're outspoken about the need for carbon-emission reductions. You dropped out of the U.S. Chamber of Commerce because it opposed legislation. But you own 17 nuclear reactors that would benefit.
Mr. Rowe: We don't flinch from the charge that, yes, some of our motivation and enthusiasm comes from the fact that we should make money on it if it happens. I started dealing with this problem more than a decade ago, long before I had a sense of how much money I could make for Exelon. A good solution to a societal problem is one where the winners help solve the problem.
WSJ: Years ago you were skeptical about the prospects for new nuclear reactors. Now you've proposed a big project for Texas, and you're looking at small reactor technology. What changed your mind?
Mr. Rowe: You're now talking 11 years ago. Well, first, we went from being a company with a bad record to one with a superb record, arguably the best nuclear operator in the country. [Exelon greatly increased the productivity of plants it inherited and ones it bought at distressed prices so they run more than 95% of the time now.]
As of three to four years ago, I had both officers and board members saying, 'We've got to try to do this.' I said, 'Look, give it a try, but we can't do it without the federal loan guarantee money, and we can't do it unless we think gas prices are going to stay up.'

WSJ: What are your biggest challenges right now?
Mr. Rowe: Cutting costs to try to make up for some of the drop in power prices [in the wholesale electricty market, where lower gas prices have put pressure on overall pricing]. Finding some new kinds of businesses that may give us a little growth until power prices recover. And trying to make certain our investors understand how much upside there is when power prices do recover.
Exelon is doing fine right now because our power sales were largely hedged [presold] into next year. But with low power prices and low natural gas prices, the longer the economy stays down, the more we will hurt
WSJ: Would you try again to acquire another utility?
Mr. Rowe: Our investors are sending us a very clear message: Don't try again unless you have a really high probability of succeeding. And don't abandon your financial discipline. We don't have investors who want growth at the price of near-term profits. Our investors want us to pay attention to earnings first.
And so, at the present time, we'll keep our eyes open, but I don't expect to move on another acquisition unless I think I have an extraordinarily high chance of getting it done.
WSJ:Have you considered acquiring a non-utility business?
Mr. Rowe: Well, we don't know how to do anything except generating, transmitting and delivering electricity. You know, we did, 10 years ago, make acquisitions in service companies and things like that. We didn't prove very good at it. Now we'll stick to our knitting.
WSJ: How about acquiring something in the smart grid?
Mr. Rowe: We would look, but we tend to think the people most likely to do that are the Apples and the Microsofts.
To us, the more interesting question is whether there is a way utilities could get together and joint venture with an Apple or a Microsoft?
No one really knows what they want to do with a smart grid. One of my executives calls it "a scratch for whatever itch you happen to have."
We all know it will be able to do a number of things. It can help replace meter readers and shift electricity demand from day to night. It can help restore service more rapidly. It can give you interesting marketing information on what a customer wants. It can help the customer reduce energy consumption.
Somebody's going to come along and invent the toy that's going to revolutionize how you manage stuff in your house. Steve Jobs is going to be a lot better at that than I am.
WSJ: The Egyptian mummy case you donated to the Field Museum is back in your office.
Mr. Rowe: It's on indefinite loan to me. My attorney asked how we could be sure it was on indefinite loan. They said, 'First, your company is very generous to the Field. Second, John is a director and very generous to the Field. And third, we don't want it.' It wasn't for a pharaoh. It was for a minor official—the equivalent of a utility executive.