John Rowe discusses how cap-and-trade legislation works to limit costs

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11/15/2009 7:00 PM

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CHICAGO (Nov. 16, 2009) -Exelon Chairman and CEO John W. Rowe said today that current legislative proposals on climate will minimize costs to consumers while addressing the imminent threat of global warming. In a keynote speech at the National Association of Regulatory Utility Commissioners annual convention, Rowe said a cap-and-trade system is cheaper than any of the alternatives and current proposals include protections to avoid sharp price increases for consumers.

"I believe the Senate can pass bipartisan climate legislation this Congress," said Rowe. "The support of wavering senators will turn on whether they are reassured on the issue of costs, and I am confident they will be."

Rowe pointed to three ways that the current climate proposals will work to limit consumer costs. First, he said that cap-and-trade is a market mechanism that is less expensive per ton of carbon removed than direct government requirements to purchase wind and solar. Second, Rowe cited the free emissions permits that would be given to local delivery companies to benefit their customers. Utilities would be required to use the proceeds from these permits to help customers affected by higher energy prices through rebates, low-income assistance, energy-efficiency programs and other measures. Finally, he voiced support for the development of a "price collar" that puts a minimum and maximum on permit prices, ensuring that the cost increases in the early years are modest.

"Make no mistake: we are acting in one way or another to address climate change," said Rowe. "As we act, the key consideration needs to be whether we are doing the cheapest things first."

Rowe also refuted the idea that cap-and-trade would transfer wealth from the Midwest to the coasts. Exelon's modeling indicates that electricity rates would not go up dramatically as a result of a climate bill. In fact, the modeling shows rates in Illinois, Minnesota and Ohio would remain lower than rates in California and Massachusetts.

Exelon is not waiting for legislation to undertake its own effort to address climate change through Exelon 2020, an environmental and business strategy to reduce, offset or displace more than 15 million metric tons of greenhouse gas emissions per year by 2020. In April 2009, Exelon announced that it had reduced its greenhouse gas emissions by more than 35 percent from 2001 to 2008.

Rowe is the electricity industry's longest-serving chief executive, with nearly 26 years as a utility CEO. Rowe was among the first CEOs in the industry to focus on climate change, first testifying before Congress on the potential effects of carbon emissions in 1992. He currently serves as co-chair of the bipartisan National Commission on Energy Policy, and previously chaired the Edison Electric Institute and the Nuclear Energy Institute.