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Matters

Exelon Seeing Strong Retail Margins, Well Within Benchmarked Range

April 30, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Exelon's Constellation retail business is seeing strong margins, well within its benchmarked range, executives said yesterday in reporting earnings.

"During the first quarter, despite experiencing lower power prices than during the same period in 2014, we benefited from a lower cost to serve customers," said Exelon CFO Jack Thayer

"We are realizing strong margins in our load business from contracts we executed last year after the Polar Vortex. In addition, our gas business performed above our expectations during the quarter due to favorable weather," Thayer said.

The lower cost to serve customers results from Exelon's strategy to match owned generation to retail load.

"[O]nce again we realized the benefits of our generation to load matching strategy. Quarter after quarter this strategy has paid dividends in a broad array of market conditions," Thayer said.

This load-matching strategy is why Exelon's previously reported construction of 2,000 MW of new CCGTs in ERCOT remains, "a very good investment," executives said. (click here for prior story on CCGTs)

"Constellation had a good quarter and executed $200 million in power new business and $100 million in non-power new business," Thayer said.

"In addition, we’ve raised our power new business target by $100 million because we have line of sight for continued success in the balance of the year," Thayer said.

"I think in general, our load business has done very well, whether we’re talking about our retail book of business on the commercial and industrial side, or our POLR procurement business on the wholesale side. After the polar vortex last year, we saw, I would say, folks maybe pricing the risk more prudently from our perspective as it relates to managing a retail contract," said Joseph Nigro, CEO of Constellation

"And then from the margin perspective, using that $2 to $4 benchmark ... we’re well in-line in the range of that $2 to $4, whereas we were sitting here a year and a half ago, we were struggling to be even at the low end of that range. So we’ve seen improvement across the board both from a risk pricing perspective and a margin improvement perspective in our load business from both wholesale and retail," Nigro said.

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