CEO Blog: Energy Policy Should, Above All, Do No Harm

Recent events in Japan have reminded us that there is no free lunch when it comes to energy. Once again, we are engaged in a great debate about energy sources and how we can get to a safer and cleaner energy future.

We have not had an energy policy in the United States in the nearly three decades I have been in the utility business. What we have is a strange mix of mandates and markets that we sometimes call energy policy.

Electricity—like horseracing, gambling and prostitution in Nevada—is too much fun for politicians to leave to the market.

For most of a decade I supported cap and trade legislation because a price on carbon would be the most efficient way to encourage clean energy generation. Exelon remains committed to our goal of reducing, offsetting or displacing our entire carbon footprint by 2020, and we are halfway to our goal. Now, with carbon legislation off the table, I am asking that Congress do nothing. Thankfully this is an area where a divided Congress may excel. New natural gas finds and competitive energy markets, guided by EPA regulation under existing statutes, have already begun to lead the United States to a clean energy future.

The reason that Congress can do nothing is that technology and nature have coincided to provide abundant natural gas—a genuine elixir that will deliver the cleaner energy we need to compete in the world. The U.S. is now the third largest producer of natural gas after the Middle East and Russia. The Colorado School of Mines estimates that the total potential of U.S. gas supply increased by 61 percent from 2000 to 2008. Natural gas enhances our energy security. Unlike oil, nearly all of our natural gas supply is produced here, and we can reduce our dependence on oil if we fuel vehicles with natural gas.

Natural gas is also the cleanest fossil fuel and is good for the economy. It emits approximately 80 percent less sulfur dioxide and nitrogen dioxide, no mercury or particulates, and 55 percent less carbon dioxide than coal. In addition, the natural gas industry creates jobs. According to an IHS Global Insight study on the natural gas industry, 100,000 direct jobs were created from 2006 to 2008. Gas usage in the utility sector was up an average of 6 percent year over year for the first half of 2010 compared to 2009. So you can see that increased natural gas supply has already jumpstarted the transition to a clean energy generation.

Congress should step back and let natural gas do to the energy market what they have been trying unsuccessfully to accomplish with mandates and subsidies in a constant urge to pick winners and losers. Neither new nuclear, coal with carbon capture and sequestration, wind nor solar are economic because of energy prices, an excess of generating capacity and very low load growth. When these energy sources are forced into the market through mandates they create an unfair playing field. These mandates not only cost electric customers more, but also taxpayers, as it adds to the federal debt. In a free market, wind and solar will become more economic with time. Natural gas will provide a bridge from dirtier forms of energy toward cleaner energy through market forces.

Another way our nation can clean up the electric power fleet is for Congress to let the U.S. Environmental Protection Agency (EPA) enforce the Clean Air Act. You may not believe that the science of climate change is settled, but you cannot argue against the fact that sulfur dioxide, particulates, mercury, arsenic, lead, hydrochloric acid and other acid gases, dioxins and the other toxins are harmful to human health. Total damages in the U.S. from these pollutants are $62 billion annually. Allowing the EPA to enforce Clean Air Act rules will curb the costs incurred from these pollutants.

The Clean Air Act just celebrated its 40th anniversary last year, and the last major amendments to it are now over 20 years old. The rules the EPA is proposing are neither new, nor unexpected. Enforcement of the Clean Air Act will not cause the negative impacts on our economy that some are describing. Clean Air Act regulations will not kill coal. In fact, 66 percent of the coal fleet has already installed or is in the process of installing the controls necessary for compliance. The rules will affect only the smallest, oldest and most inefficient coal plants because they will no longer be able to compete with today’s newer, cleaner electricity generation.

Finally, enforcement of these rules will have a positive impact on job creation. A recent University of Massachusetts study found that between 2010 and 2015, capital investments in pollution controls would create nearly 300,000 year-round jobs on average for each of those five years. EPA’s rules will level the playing field by putting a price on the cost of air pollution. By reflecting these costs, the market will pick the most inexpensive technologies, including natural gas, to clean up the stack.

My message to Congress is simple: No more please.

Cheap and abundant natural gas will allow the energy markets to work and energy technologies to compete without introducing new market distortions. EPA enforcement of the forty-year-old Clean Air Act will level the playing field—putting those companies that have not modernized their plants on par with those that have. So Congress need not do anything to drive the transition to an economic clean energy future. The transition has already begun.

John W. Rowe is the chairman and chief executive officer of Chicago-based Exelon Corporation, one of the nation’s largest electric utilities. Its retail affiliates serve 5.4 million customers in Illinois and Pennsylvania, and its generation affiliate operates the largest fleet of nuclear power plants in the nation.