Exelon-ConEd Deal Shows Hunger for Hedging as Plants Struggle

  • Company will expand energy retail business with ConEd unit
  • Exelon is shutting money-losing nuclear generators in Illinois

Exelon Corp. is buying more protection against the worst wholesale power prices in over a decade.

On Wednesday, the power generator and biggest nuclear plant operator in the U.S. said it’s purchasing a Consolidated Edison Inc. unit that markets electricity to retail customers, without disclosing deal terms. The move gives Exelon another way of hedging against losses from plants grappling with the surge in solar and wind resources, cheap natural gas and weak demand.

“It’s one way of stabilizing the prices that you get for” power sold directly into wholesale markets, said Kit Konolige, a utility analyst for Bloomberg Intelligence.

The purchase comes as Exelon prepares to shut two money-losing nuclear power plants in Illinois. Its reactors in New York may need state subsidies to stay open. Generators including Calpine Corp. and NRG Energy Inc. have also announced deals in recent years to buy retail businesses less exposed to the volatility of wholesale power markets.

Expanding Retail

Exelon said Wednesday that purchasing ConEdison Solutions will expand its retail power business by more than 560,000 residential, commercial and business customers, primarily in the U.S. Northeast and Mid-Atlantic regions where it also owns plants.

For its part, ConEd said the sale will allow it to focus on energy services and renewable energy offerings. The owner of New York City’s electric utility had said last June that it wanted to leave retail. Its competitive energy business that includes retail saw operating revenues fall $64 million to $310 million in the first quarter from a year earlier. The company said the drop was primarily due to lower retail electricity sales.

“We’ve seen a trend of some generators acquiring these retail businesses and it wouldn’t surprise me if it continues,” said Paul Patterson, a New York-based analyst at Glenrock Associates LLC.

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