Exelon's Rowe says gas prices may slow new reactors

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.

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 53 cents, or 1.3 percent, to $42.48 in composite trading at 4:09 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 and the parent company of Illinois' ComEd, 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.