Rowe suggests gas prices could remain cheap for 10-to-20 years

Just-retired Exelon (NYSE: EXC) Chairman and CEO John Rowe would not be shocked to see natural gas prices remain relatively cheap for the next 10-to-20 years, he told the EnergyBiz Leadership Forum March 21.

The abundance of cheap natural gas is not merely a one-or-two year event, Rowe told the conference near Washington, D.C. The event was sponsored by the EnergyBiz Magazine, which is part of Energy Central.

Rowe, who has been a utility executive since the 1980s, just retired following the March 12 completion of Exelon’s merger with Constellation Energy.

“I think we are looking at a 20-year change,” Rowe said. The advanced production and recovery of natural gas, along with combined-cycle power generation technology, have been the most “disruptive” changes Rowe has seen in the power business. He stressed this was a good thing.

“It’s an immense boon for this nation,” Rowe said. “We should take this blessing very seriously,” Rowe said.

The retiring Exelon official, like others who spoke at the conference, suggested that cheap natural gas is probably doing more to push early retirement of coal units than rules coming out of EPA.

Rowe talks consolidation, nuclear power

Likewise, Rowe said the cheap gas phenomenon together with last year’s Fukushima meltdown accident in Japan, has probably set back the U.S. nuclear energy revival by a decade or two. Exelon runs the nation’s largest nuclear fleet and Rowe calls himself as a nuclear power fan.

“For the first time in my life, I’m genuinely uncertain” about the future of nuclear power more than 20 years from now, Rowe said.

As a nuclear supporter, Rowe said he is glad to see a group led by Southern Co. (NYSE: SO) winning NRC approval for a new nuclear plant in Georgia. At the same time, however, Rowe suspects it might be decades before Georgia Power does more than break even on the plant. Southern is making a big bet on a very long-term investment, Rowe said.

On the subject of industry consolidation, Rowe expects one day there will be fewer than 10 major U.S. power companies but that situation is still years away.

Unless a the local power company has really screwed up, state officials are usually hesitant to embrace out-of-state ownership, Rowe said. Consolidation involves politics on many levels, starting with the boardroom, Rowe said.

Electric utilities are not high-return investments so finding ways to cut costs are important, he said. It’s also important for the larger utility not to overpay. During his career, Rowed noted he was successful in some merger attempts but not others. Constellation was one of Rowe’s successfully-completed mergers. On the other hand, Exelon failed in a hostile takeover bid for NRG Energy (NYSE: NRG) a few years ago.

While power company executives must do several things, from understanding markets to coping with regulatory and political issues, one thing remains paramount, Rowe said. “You simply must keep the lights on,” Rowe said. “Nothing else works,” if you can’t do that, he added.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.