Exelon is considering new strategies to manage the costs associated with large electricity customers, such as data centers. One approach involves agreements that require these new customers to cover their share of transmission system expenses over time. This is intended to prevent existing customers from absorbing the costs if a planned data center does not move forward.
However, Kent Chandler, resident senior fellow for electricity policy at the R Street Institute and a former utility regulator in Kentucky, expressed concerns about this approach. “Those security agreements don’t provide [other] customers complete protection from higher rates or cross-subsidies,” Chandler said. He also questioned how these agreements would function if Exelon moves ahead with plans to operate power plants.
Exelon’s interest in returning to power production comes at a time when electricity prices are high. As a regulated utility, Exelon could negotiate long-term price adjustments with regulators if it builds new power plants. Chandler noted that this could offer short-term benefits for consumers due to current supply shortages. However, he warned that the strategy depends on continued growth in demand from data centers; if that demand fails to materialize, regular customers may end up paying for unnecessary infrastructure.
Chandler further commented on Exelon’s risk management approach: companies like Exelon are prepared to take bigger risks because they can pass costs onto consumers regardless of outcomes. While Exelon could establish an unregulated subsidiary similar to Constellation to compete in standard power generation markets, Chandler said, “they only want regulated investments and corresponding high risk-adjusted regulated returns.”
