Why Nuclear Matters

Chris Crane

President & Chief Executive Officer, Exelon Corp

1

Nuclear Plays a Key Role in a Diversified U.S. Power Mix

• Diversification of generation

resources and fuel type in the

grid is essential

• Reliable, consistent generation

output maintains system

reliability, balances demand and

supply, supports stable market

pricing

Capacity Factor by Fuel Type - 2013

2

Nuclear’s Benefits

Nuclear energy provides unmatched

benefits to the U.S. energy grid:

• 24/7 generation

• Resilient in extreme cold and

heat conditions

• Firm fuel supply

• Low operating cost

• Fuel provides protection from

price volatility

• Supports grid stability

Nuclear energy national average fuel costs were

2.4 cents per kilowatt-hour in 2012, significantly

lower than coal at 3.27 cents and natural gas at

3.4 cents. Source: NEI Knowledge Center

3

Nuclear Power is Uniquely Reliable – the January 2014 Polar Vortex is just an example

During the Polar Vortex, coal, natural gas and oil generator outages were

high due to lack of fuel and plant outages. Nuclear units have consistent

availability and secure fuel supply.

• Severe winter weather with

prolonged cold adversely

impacted PJM in January,

in particular on January 7th

• All-time high winter peak

demand of 141,312 MW

• During these peak load

conditions, PJM experienced

22% forced outages

Forbes, January 12, 2014:

“Polar Vortex – Nuclear Saves the Day”

Coal 13,700 MW

Nuclear 1,400 MW

Gas Plant Outages 9,700 MW

Natural Gas

Interruptions 9,300 MW

Other 6,100 MW

Total Forced Outages

40,200 MW

22% of PJM Capacity

4

Wind Power Cannot Match Reliability Demands on Hot Days

0

2000

4000

6000

8000

10000

12000

PJM MISO ERCOT

Megawatts

Wind Output (MW) Installed Wind Capacity (MW)

In PJM 86% of wind doesnot operate

In MISO 82% of wind does not operate

In ERCOT 84% of wind does not operate

Median Wind Output Relative to Capacity during On-Peak Hours

of the Top 10 Demand Days of 2009 - 2012

5

Effective Industry Response to Fukushima

• Improved ability to cope with extended loss of AC power

• Additional spent fuel storage pool instrumentation

• Reliable containment venting

• External hazard (seismic and flooding) re-evaluations

• Enhanced emergency planning for multi-reactor events

• Industry FLEX strategy enhances safety

o FLEX will handle those

extreme, unexpected

scenarios that are beyond the

plants’ design basis

o Focus on maintaining key

safety functions

o Each nuclear plant site

maintains backup portable

safety equipment

o Two national response centers

- Phoenix & Memphis

6

We Cannot Meet Emissions Reduction Goals without Nuclear

7 Confidential And Proprietary. For Exelon Internal Discussion Purposes Only.

• Employ ~100,000 full-time workers1

• Hire U.S. vendors for on-going capital expenditures.

Over 30 million man-hours are worked by

supplemental craft labor each year at the nation’s

100 reactors, translating to over 14,000 FTE1

• Spend over $14 billion annually on direct purchases

from over 22,500 domestic vendors in all 50 states1

• Pay on average $16 million per plant in local property

taxes annually1

• Pay on average $67 million per plant in Federal taxes

annually1

• Provide more than 2,100 GWh electricity per day2 –

enough to power 20 percent of the country

1 NEI “Nuclear Energy’s Economic Benefits – Current and Future” April 2014, and NEI 6/24/2014.

2 EIA Electric Power Monthly (May 2014) Net Generation by Nuclear

3 Davis and Hausman (2014) , Energy Institute at Haas

4 Lesser, Continental Economics and Manhattan Institute, 2012

U.S. nuclear plants support jobs and economic growth

Nuclear plants inject nearly $14 billion directly into the U.S. economy each year

8

Nuclear Plants Drive the Local Economy

Technology Average Plant

Size MW

Direct Local

Jobs

Workforce Income

$million/year

Nuclear 1,000 504 $32.49

Coal 1,000 187 $10.99

Large Hydro 1,375 156 $10.79

Concentrating

Solar

100 47 $2.62

Gas Combined

Cycle

630 34 $2.02

Solar

Photovoltaic

10 11 $0.33

Wind 75 4 $0.29

No other energy source can compete with nuclear for

contribution to local economy and prosperity

9 Confidential And Proprietary. For Exelon Internal Discussion Purposes Only.

California’s Experience

Closure of San Onofre:

• Cut California's low carbon electricity

production by 25%

• Resulted in a 28% increase in CO2

emissions in 2014

• 1500 local jobs were lost

• $400 million lost revenues and

increased costs

• 15% increase in electricity generation

costs in 2013

In Germany, the nuclear phase-out policy

and 80% renewables target resulted in:

• Subsidy charges equal 15% of total

electric bill for homeowners

• Increasing CO2 emissions

• 37 cents/kwh in Germany vs 10

cents/kwh in U.S.

Public Policy Too Often Has Unintended Consequences

10 Confidential And Proprietary. For Exelon Internal Discussion Purposes Only.

Today’s Challenge

Certain Nuclear plants are operating at large losses and are at risk of early retirement due to a variety of factors that will jeopardize our ability to reduce carbon emissions

• Natural gas production has exploded, its cost as a fuel has

declined dramatically, suppressing prices across the market.

• Lack of a coherent federal energy policy and market rules to

compensate nuclear energy for its carbon-free output and its

unrivaled 24/7 reliability.

• Billions of dollars in Federal Policies and Mandates that subsidize

certain clean electricity sources, severely distorting energy

markets.

• Load growth is down or flat since the recession. Without load

growth, mandated/subsidized renewables are taking the place of

existing nuclear energy.

Exelon is committed to doing everything possible to maintain our nuclear operations,

but we are prepared to make tough decisions if the outlook does not improve.

11

Why the Economic Challenges?

All electricity is not the same, but the market hasn’t figured that out

Different forms of electricity have different attributes

• For example, reliability, zero emissions, cost, security, even political popularity

• These attributes should have varying degrees of value to the consumer

Market Issues:

• Price signals are inadequate to support some current plants, uprates to existing

plants, or investment in new capacity except gas

• Prices are suppressed by certain RTO policies and actions, and by state & federal

mandates and subsidies

• Current markets do not recognize – or price – the valuable attributes of nuclear

power

- Zero carbon emissions

- 24/7/365 reliability and grid support

- Fuel security

Failure to address these issues will compromise resource

adequacy and reliability, expose consumers to increasing price

volatility, and frustrate efforts to reduce carbon emissions

12

Needed reforms include:

o EPA regulations that require meaningful and verifiable greenhouse gas emission

reductions

o EPA’s draft Clean Power Plan recognizes nuclear’s zero-emissions value, but

not yet effectively enough

o Market reforms that reduce speculation and that compensate baseload physical

resources that keep the lights on

o Mechanisms to attract fuel diversity and to reward firm fuel needed for reliability, at

the most reasonable cost

o PJM’s capacity performance proposal

o Elimination of federal and state policies that distort energy markets by subsidizing

less reliable energy sources, such as wind, at the expense of otherwise profitable

clean generation

Reforms are needed to assure adequate clean generation resources in the future

Solutions are needed to ensure energy policies and market design that preserve, and do not

diminish, resources needed for reliable and carbon-free generation.