Exelon Corp. senior executives on Nov. 1 touted a trio of state-based subsidy programs that compensate nuclear plants, expressing confidence that federal regulators will soon finalize rules that affirm state efforts to reward utilities for carbon-free power generation.
"We're gaining momentum," Exelon President and CEO Chris Crane told investors and analysts during a third-quarter earnings call, responding to a volley of questions about the future of zero-emission credit programs in three states.
Crane noted that a pair of recent federal appeals court rulings upheld state-based subsidy programs for nuclear assets in Illinois and New York. A similar program in New Jersey is on track for implementation around the end of the first quarter of 2019, he said. Exelon specified in its earnings presentation that it expects the New Jersey program to produce $50 million in additional revenue in 2019 and 2020.
State subsidy programs have been a hot topic at the Federal Energy Regulatory Commission, which is expected to produce an order in early January 2019 that governs how resources receiving out-of-market support can participate in the PJM Interconnection capacity market.
Exelon in late September joined renewable energy groups, the Sierra Club and PJM market participants including Talen Energy Corp. and Public Service Electric and Gas Co. to create a set of principles for FERC and PJM to apply in developing the new market design. The principles included allowing any resource excluded from PJM's capacity auction under the new proposal to be eligible for an alternative fixed resource requirement, or FRR, that would allow subsidized resources to remove their capacity and associated load from the auction and sell it outside PJM, including to the states forming the subsidy programs.
Analysts on the earnings call homed in on what an FRR model could mean for Exelon.
"Implementation details certainly matter, but we think this is an extremely constructive approach to allowing states to choose the clean resources that they need to continue to keep running to achieve their goals of reducing carbon and air pollution for their citizens," said Kathleen Barron, Exelon's senior vice president of competitive market policy.
Barron added that Exelon is looking at existing legislative authority in all the states in which it operates to potentially capitalize on a FERC order that includes an FRR provision.
"I think it's going to differ depending on the state, but we're currently evaluating the best path forward in each of the states that have clean energy targets that we think this order will help them meet," Barron said.
Results
Overall, Exelon matched analysts' estimates for the third quarter, with adjusted operating earnings of $856 million, or 88 cents per share, improving from $820 million, or 85 cents per share, a year ago. The utility posted GAAP earnings net income attributable to common shareholders of $733 million, or 76 cents per share, down from $823 million, or 85 cents per share, in the year-ago quarter. The company revised its full-year guidance range, raising the lower end from $2.90 to $3.05 and keeping the high end of $3.20, CFO Joseph Nigro said.
Exelon invested $1.4 billion on capital projects at its utilities during the third quarter, bringing the company's total to $3.9 billion year-to-date. Nigro said the company is confident it will meet its $5.5 billion capital budget for 2018.
Exelon could make additional investments in solar and storage in New Jersey in the wake of ambitious renewable energy legislation, said Anne Pramaggiore, senior executive vice president and CEO of Exelon Utilities. But those opportunities are still subject to regulatory proceedings, she noted, adding, "We think there's tremendous opportunity there."
