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Exelon, NARUC panelists debate state, federal roles in energy markets

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Exelon, NARUC panelists debate state, federal roles in energy markets

Exelon Corp.President and CEO Chris Crane said separate national energy and environmentalpolicies contributed to losses in his company's competitive businesses, leadingExelon to look to individual states for solutions.

Crane, in a dialogue with Montana Public Service Commissionmember Travis Kavulla, opened the general session of the National Associationof Regulatory Utility Commissioners' summer meeting July 25 in Nashville, Tenn.Kavulla is NARUC's president.

Exelon's challenges, particularly those facing its nuclearplants, have been well-publicized. The company has announced plans to closeunits in Illinois and is emphasizing a state effort in New York to prop upnuclear resources there. The cause of this split, Crane said, is energy andenvironmental policies have been developed in separate "swim lanes"that favor specific technologies over outcomes.

Having been unable to secure legislative help in Illinois,Exelon is now emphasizing the costs of closingits Clinton andQuad Citiesplants in terms of jobs and local tax revenues. Illinois will also likely seeits greenhouse gas emissions increase as other sources of electricitygeneration are sought.

"We're going backwards," Crane said, adding thatthe company's mission is to supply "clean, affordable, reliable energy."

Crane's comments preceded a broader discussion, led byKavulla, on the sometimes conflicting roles that individual states andorganized markets have in procuring generation supplies.

Allison Clements, director of the Natural Resources DefenseCouncil's Sustainable FERC Project, said three recent U.S. Supreme Courtdecisions havemuddied what was a bright line separating state and federal jurisdiction inelectricity markets.

Echoing a point Crane had raised earlier, William Hogan, aprofessor at Harvard University's John F. Kennedy School of Government, saidenergy and environmental policy planners need to take a bigger picture in theirdecision-making, with a carbon market as the end goal. That, he said, wouldmake state-specific programs unnecessary.

Panelists were generally supportive of wholesale markets.Sarah Novosel, senior vice president for government affairs at , said competitivemarkets have helped reduce emissions levels in New England and New York, thoughshe said a Massachusetts proposal to contract for hydro and offshore windresources and New York's zero-emissions credits effort would undermine thebroader wholesale markets.

In Ohio, "the markets are allowing new generation to bebuilt, new jobs to be created," Michael Haugh, assistant director ofanalytics at the Ohio Consumers' Counsel, said.

The objective of the market should be to attract asufficient amount of resources at the lowest cost, but current constructs havelimitations. Jay Morrison, vice president of regulatory issues at the NationalRural Electric Cooperative Association, said market signals might not attract aspecific state's preferred resources. Clements wondered whether the cost ofcarbon could be incorporated into "just and reasonable" rates. Otherpanelists said some market constructs allow certain products to work betterthan others or do not fully capture costs.

Panelists also identified some limitations of markets. Hoganasked whether it is appropriate for regulators to consider job gains or joblosses that might occur from a resource decision and asked whether it is moreappropriate to send market signals to generators or load.