Exelon: "Hyper" Competition Depressing Retail Energy Margins

Exelon reported during its earnings call yesterday that "hyper-competition" in the retail energy space depressed margins below forecast levels in the fourth quarter of 2012.

"With heightened competition and the impact of low prices and volatility, we observed retail margins right around the bottom of our prior expectation of $2 to $4 per megawatt-hour for the full-year 2012, and below the low-end of the range in the fourth quarter of 2012," said Jonathan Thayer, Executive Vice President and Chief Financial Officer for Exelon.

Kenneth Cornew, Chief Commercial Officer of Exelon and President and CEO of Constellation, added:

"We have seen margins get to that low end of the $2 to $4 range we talked about. It is a hyper-competitive market right now. There is a lot of activity to grab market share in both [the] mass markets and commercial-industrial space. We remained disciplined. Our plan and our hedge disclosure projects that we'll be in this environment for some time and slowly creep back up to the middle of that range."

Given current power market conditions, Exelon also said that merchant projects are not a priority.

Instead, Exelon CEO Chris Crane said that the "big opportunity" for growth is investment in Exelon's regulated utilities, with additional opportunities in contracted generation assets and/or renewables that are contracted. "I would not rule out a merchant opportunity if it was the right opportunity, but that would not be our priority at this point," Crane said.