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Exelon's Rowe Says Gas Prices May Slow New Reactors (Update1)
2010-09-09 18:56:24.642 GMT
(Adds share price in seventh paragraph.)
By Noah Buhayar and Jack Kaskey
Sept. 9 (Bloomberg) -- Exelon Corp. Chief Executive Officer
John Rowe said he expects natural-gas prices to remain low,
pushing back the construction of new U.S. nuclear power plants
by a "decade, maybe two."
"We think natural gas will stay cheap for a very long
time," Rowe said in an interview today at Bloomberg's
headquarters in New York. "As long as natural gas is anywhere
near current price forecasts, you can't economically build a
merchant nuclear plant."
Rowe said that the price of natural gas would have to rise
to $8 per million British thermal units and permits for emitting
a ton of carbon dioxide would have to be $25 to make the power
prices from new merchant reactors competitive with gas-fueled
plants. Merchant plants sell their power on wholesale markets
without the income assurance that utilities with regulated
electricity rates get.
Natural gas for October delivery fell 4 cents, or 1
percent, to $3.774 at 2:36 p.m. on the New York Mercantile
Exchange. Prices have fallen 33 percent this year and are down
76 percent from the 2005 high of 15.378.
Gas was used to generate 21 percent of U.S. electricity in
2008, according to the Energy Information Administration. It's
the second-biggest fuel source for U.S. power generation behind
coal and drives electricity prices in parts of the country such
as Texas.
Shale Gas
Rising production of shale gas in the U.S. is keeping
prices low, John Palms, an Exelon board member, said today in a
telephone interview from Charleston, South Carolina. That,
paired with a weak economy and the lack of enough federal loan
guarantees, removes much of the incentive to build new reactors,
which can cost $10 billion, he said.
Absent a price on carbon dioxide emissions, gas would have
to rise to $9 or $9.50 to make the reactors economically
attractive, Rowe said. Exelon rose 47 cents, or 1.1 percent, to
$42.42 in composite trading at 2:22 p.m. on the New York Stock
Exchange.
Southern Co., based in Atlanta, has begun work on what may
be the first new reactors to come online in the U.S. since 1996.
For that Georgia project, due to start producing power as early
as 2016, Southern received state regulatory approval to recover
costs from its customers as it builds.
Exelon, the largest U.S. producer of nuclear power, on June
11 asked to withdraw its application with the U.S. Nuclear
Regulatory Commission to build and run two reactors in Victoria
County, Texas.
"We haven't totally abandoned it, but we've turned it into
an early site permit and it's very unlikely we would do it for a
long time," Rowe said. An early site permit means a location
has met some safety and environmental requirements.
For Related News and Information:
Financial history: EXC US <Equity> CH1 <GO>
Power markets: VOLT <GO>
Top energy news: ETOP <GO>
--Editors: Tina Davis, Charles Siler
To contact the reporters on this story:
Noah Buhayar in New York at 212-318-2000 or
nbuhayar@bloomberg.net;
Jack Kaskey in New York at +1-212-617-8786 or
jkaskey@bloomberg.net
To contact the editor responsible for this story:
Susan Warren at +1-214-954-9455 or susanwarren@bloomberg.net.
