Combined Exelon/Constellation still needs to divest coal plants

Chicago-based Exelon Corp. (NYSE:EXC) and Baltimore-based Constellation Energy Group (NYSE:CEG) announced March 12 that they have completed their merger, creating the leading U.S. competitive energy provider with one of the industry’s cleanest and lowest-cost power generation fleets.

Upon the closing of the merger, Christopher Crane became President and CEO of the combined company, and Mayo Shattuck III became Executive Chairman. The new company retains the Exelon name and remains headquartered in Chicago, with significant operations in Maryland, Illinois and Pennsylvania. It will trade on the New York Stock Exchange under the symbol EXC.

The merged company is now one of the nation’s largest competitive energy products and services suppliers by load (about 164 terawatt-hours per year) and customers (approximately 100,000 business and public sector and about 1 million residential), serving more than two-thirds of America’s Fortune 100 companies. Exelon will have a coast-to-coast presence with operations and business activities in 47 states, the District of Columbia and Canada. The company also has one of the nation’s largest and cleanest power generation fleets, with approximately 35,000 MW of owned power generation, including more than 19,000 MW of nuclear power.

Exelon was already the nation’s largest operator of nuclear power plants. Constellation has major interests in several nuclear reactors in Maryland and New York.

The three utilities within Exelon – Baltimore Gas and Electric, Commonwealth Edison and PECO Energy – remain headquartered in Baltimore, Chicago and Philadelphia, respectively. Together, they make Exelon one of the nation’s largest residential electricity and natural gas distribution companies, serving 6.6 million gas and electric customers across three states.

“Exelon is now uniquely positioned in the industry to advance customer choice and clean energy,” said Shattuck. “We also are unique in our presence across the energy value chain—from generation to power sales to transmission to delivery and development of an array of innovative energy products and services that help our customers succeed. This gives us unmatched perspective on today’s energy challenges, and the ability to address them.”

The transaction has been approved by shareholders of Exelon and Constellation. Required regulatory approvals or reviews have been completed by the Federal Energy Regulatory Commission, Maryland Public Service Commission, New York Public Service Commission, the Public Utility Commission of Texas, the Department of Justice, and the Nuclear Regulatory Commission.

Three coal plants targeted for sale

The companies did not offer an update on a commitment they made to sell Constellation’s three coal-fired plants in the Baltimore area – Brandon Shores, C.P. Crane and H.A. Wagner – within six months of the merger. The sale is to ease power market dominance concerns in the region.

To comply with Maryland Healthy Air Act (HAA) requirements, Constellation is planning to burn domestic and/or imported compliance coals (1.2 lb/mmbtu SO2 or less) at the H.A. Wagner plant, said Constellation in its Feb. 29 annual Form 10-K report. The company’s C.P. Crane plant, also in Maryland, was converted in June 2010 to burn up to 100% low-sulfur sub-bituminous coal. In March 2010, Constellation completed installation of flue gas desulfurization (FGD) equipment on both Brandon Shores coal units. With the FGD installation, Brandon Shores is able to burn higher sulfur coals (up to 6 lbs/MMbtu  or about 3.5% sulfur). The blend of coals actually procured for Brandon Shores will be optimized to achieve the lowest delivered cost while complying with HAA limitations.

These plants, particularly H.A. Wagner, were very lightly used in 2011, the Constellation Form 10-K showed. The plants, total generating capacity figures, fuel(s) and capacity factor percentages in 2011 were: H.A. Wagner, 976 MW, coal/oil/gas, 18%: Brandon Shores, 1,273 MW, coal, 52.6%; and C.P. Crane, 399 MW, oil/coal, 27.8%. These are the only coal plants that the Form 10-K said that Constellation has committed to sell as part of the Exelon merger.

Constellation, now Exelon, also owns undivided minority interests in the coal-fired Keystone and Conemaugh plants in western Pennsylvania, each of which has a total of 1,711 MW of capacity. These ownership interests are 20.99% in Keystone and 10.56% in Conemaugh. All of the Conemaugh and Keystone plants’ annual coal requirements are purchased from regional suppliers on the open market. FGD equipment was installed on both of the Keystone units in 2009 and has been installed on both Conemaugh units since the mid 1990s. The FGD SO2 restrictions on coal are 6 lbs/MMbtu (or approximately 3.7% sulfur) for the Keystone plant and about 4.9 lbs/mmbtu (or 3% sulfur) for the Conemaugh plant.

The annual coal requirements for the ACE, Jasmin, and Poso plants, which are located in California, are supplied under contracts with mining operators. These plants are restricted to coal with sulfur content less than 4%, Constellation noted. Constellation owned 31.1% of the 102-MW ACE plant, 50% of the 35-MW Jasmin plant, and 50% of the 35-MW Poso plant.

The primary fuel source for the Panther Creek and Colver generating facilities in Pennsylvania is waste coal. These facilities meet their annual requirements through existing reserves of mined and processed waste coal and through supply agreements with various terms. Constellation owned 50% of Panther Creek, which has 80 MW of capacity in total, and 25% of Colver, which has total capacity of 102 MW. Constellation also owns 50% of the 51-MW Sunnyside plant in Utah, which is also fired by nearby waste coal supplies.

Exelon shuts coal-fired capacity in Pennsylvania

As for Exelon, it noted in its Feb. 9 Form 10-K report: “On May 31, 2011, Cromby Generating Station (Cromby) Unit 1 and Eddystone Generating Station (Eddystone) Unit 1 were retired; on December 31, 2011, Cromby Unit 2 was retired and Eddystone Unit 2 will retire on May 31, 2012.” The Form 10-K noted that Eddystone Unit 2 is operating under a reliability-must-run (RMR) agreement with PJM through May 31, 2012, and that it will cease operations upon the end of the RMR period.

The fuels and net ratings of these units are: Cromby Unit 1, coal, 144 MW; Cromby Unit 2, oil/gas, 201 MW; and Eddystone Units 1-2, coal, 588 MW total.

Exelon even before the merger with Constellation held separate stakes in the Keystone (20.99%, 357 MW) and Conemaugh (20.72%, 352 MW) coal plants. The merger now gives the combined Exelon even bigger stakes in those fully-scrubbed plants. “Exelon, along with the other co-owners of Conemaugh Generating Station are moving forward with plans to improve the existing scrubbers and install Selective Catalytic Reduction (SCR) controls to meet the mercury removal requirements of [the Mercury and Air Toxics Standards] by January 1, 2015,” the Exelon Form 10-K noted.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.