Four years after separating from Constellation Energy, Exelon is expanding its transmission business and pressing for a greater role in power generation. Executive Vice President Carim Khouzami explains why rising data center demand, tightening capacity reserves, and shortcomings in PJM’s wholesale markets are changing the utility company’s strategy.
When Exelon completed its separation from Constellation Energy on Feb. 1, 2022, it emerged as a fully regulated transmission and distribution utility holding company, leaving its former generation business—including one of the nation’s largest nuclear fleets—to operate independently. The restructuring established Exelon as a utility focused on delivering electricity and natural gas, maintaining grid infrastructure, and earning regulated returns on capital investment. But four years later, mounting electricity demand, tightening generation reserves, and rising customer bills are prompting the company to advocate for a larger role in securing the power supply its customers need.
Today, Exelon operates six utilities—Commonwealth Edison (ComEd), PECO, Baltimore Gas and Electric (BGE), Pepco, Delmarva Power, and Atlantic City Electric—which serve approximately 10.9 million electric and gas customers across seven regulatory jurisdictions in Illinois, Pennsylvania, Maryland, Delaware, New Jersey, and Washington, D.C. All six utilities operate within PJM Interconnection, where rapid data center development, generation retirements, and concerns about resource adequacy have intensified scrutiny of wholesale electricity markets and state energy policies. Although Exelon does not own generation, its utilities arrange electricity supply for customers who do not choose competitive suppliers, passing those supply costs through to customers at cost, without markup. The company earns its regulated returns primarily from investments in transmission and distribution infrastructure.
Since separating from Constellation Energy, Exelon has substantially expanded its capital investment program, particularly in transmission, as it seeks to meet growing customer demand and strengthen its position in the competitive transmission market. The company’s latest investor presentation projects $41.7 billion in capital expenditures from 2026 through 2029, up from $31.3 billion in its earlier 2023–2026 plan. Transmission’s share of that spending has risen from 21% to 39%, representing $16.3 billion in the current plan. Exelon also identifies another $12 billion to $17 billion in potential transmission opportunities beyond its existing capital program, including competitive projects outside its traditional service territories.
And that expansion is already yielding notable projects. In PJM’s 2025 Regional Transmission Expansion Plan competitive window, Exelon secured approval for $700 million in independently submitted projects and participated in another $1.7 billion in projects jointly developed with NextEra Energy Transmission. Exelon, one of only four U.S. operators of 765-kV transmission facilities, is also pursuing opportunities in the Midcontinent Independent System Operator’s long-range transmission program.
Overseeing much of this expansion is Carim Khouzami, Exelon’s executive vice president of transmission and development. A roughly 20-year company veteran and former president and CEO of BGE, Khouzami assumed the newly created position in May 2025 as Exelon began pursuing opportunities beyond its traditional transmission business and seeking ways to bring additional generation capacity into its service regions. In an Oct. 14 interview with POWER, he explained that the pace and scale of anticipated electricity demand have fundamentally changed how the company approaches grid investment, resource adequacy, and long-term planning.
Exelon now identifies approximately 11 GW of high-probability large load across its service territories, including 9 GW in ComEd’s northern Illinois territory and 2 GW in the Mid-Atlantic. Another 25 GW of potential demand is undergoing or awaiting study. Khouzami noted that ComEd’s high-probability demand and prospective projects together exceed the utility’s all-time peak load of 23,753 MW, set on July 20, 2011. To distinguish firm development commitments from speculative requests, Exelon has introduced transmission security agreements that require large customers to make financial commitments tied to their requested load, protecting existing ratepayers if projects fail to materialize.
Still, expanding transmission capacity cannot resolve the region’s growing shortage of generation, Khouzami said. Exelon estimates that electricity supply costs account for roughly 75% of the increase in its customers’ average electric bills since 2021. He argues that PJM’s capacity market has struggled to attract new generation because its short-term price signals provide insufficient revenue certainty for projects that take years to develop and build.
“Over the past two years, PJM customers have paid $32 billion in capacity pricing, and they’ve gotten 1.2 GW less of generation,” Khouzami told POWER. “What other market do you see where you pay a lot more and you get a lot less, and people say that is the right way for us to be operating? It’s not.” Exelon said those figures were calculated from PJM’s 2026/2027 and 2027/2028 capacity auction results relative to the 2025/2026 auction. Exelon is consequently advocating for greater state involvement in resource planning and legislation that would allow regulated utilities to propose, build, and own generation alongside independent power producers. It is also pursuing utility-owned battery storage, including a proposed 500-MW project in southern New Jersey, to help manage peak demand and wholesale electricity costs.
Exelon groups those efforts under what it calls the Exelon Promise, an affordability initiative it describes as an “all-of-the-above approach” designed to protect customers “now and over the long term.” The program pairs a $60 million Customer Relief Fund, which Exelon says has supported more than 100,000 customers across five states and the District of Columbia, and contract protections requiring financial commitments from data centers and other large power users, plus longer-term advocacy for utility-generated power and battery storage.
In his interview with POWER, Khouzami discussed how rising electricity demand, tightening generation reserves, and changing regulatory priorities are reshaping Exelon’s strategy—and why he believes the company will own regulated generation again within five years.
The following Q&A has been edited for clarity and length.
POWER: You’ve been at Exelon for about two decades and ran BGE before taking on this role. How did you come into it, why did Exelon create it, and what has changed for the company over the past two or three years?
Khouzami: My official title is executive vice president of transmission and development for Exelon. I’ve been in this role for about a year and a half, and I’ll talk about why we created this role and why I moved into it. Prior to that, for about six years, I ran one of our regulated utilities, Baltimore Gas and Electric, here in Maryland. And prior to that, I had a host of different financial, strategy, and operational roles. I’ve been with the company for about 20 years.
About a year and a half ago, we created this position to really start to focus on some growth opportunities in some areas that we knew the company needed to move into. Maybe I’ll step back for a second. Exelon operates in Illinois, Pennsylvania, Delaware, New Jersey, Maryland, and the District of Columbia. We operate in those states, and that’s all in PJM. All of our utilities are located in the PJM RTO [regional transmission organization]. As we were starting to look at this, we started to see a tremendous demand and need for both transmission solutions and for solutions that will bring more capacity to our region.
One of the things that I know we’ll probably talk about, and this is definitely prevalent in our states as well as throughout the country, is there just isn’t enough supply to meet the demand that’s coming. Couple that with the fact that our customers are facing an affordability crisis right now in trying to afford their energy bills. And so what we decided is that Exelon, based on our experience, our knowledge, and our capabilities, needs to get back into competitive transmission. What I mean by that is we’ve always been in competitive transmission, but primarily in the zones where our utilities operate. More and more, we were seeing the need for more solutions, cross-regional solutions that would be able to bring that necessary generation to the areas where they needed the power. So one of the things that we want to do is leverage our experience, and part of that is the fact that we are one of very few operators today that own and operate high-voltage 765-kV equipment. That is more and more becoming the norm in terms of the solutions that are being asked for, and the reason is it brings more capacity with fewer lines. That’s why we thought this is the right time for us to expand our offerings and start to do more in that space.
At the same time, really two years ago, we talked a lot about AI and the data centers and the large growth that’s coming. That has really been around for two, two and a half years. Over the last two, two and a half years, we also saw the need to start to do what we could to advocate for and bring more generation, more capacity to our regions. Reason being, demand was far outpacing supply, and we’re seeing that continue to get worse and worse. And what we’ve seen is the competitive markets do not have the economic incentives; they are not building in our zones. And there’s a host of reasons for that.
But right now our customers need more supply. You need more supply because, one, demand is going up, so you have a reliability issue that we’re trying to not get to, but two, you have an affordability issue as well. When you look at affordability and when you look at the price of customer bills over the last few years, what you see is that the vast majority, 75% or so, of the increases are from the supply portion of the bill. That supply portion is a pass-through for the utilities. We do not profit off that. We do not control any of that. But those costs are going up and up, and are driving our customer bills higher and higher.
So we thought it was literally our responsibility as the utility in the region to start to advocate and try to find ways to get generation built in this region. We’ve been trying for the last few years, as well as other utilities, to bring more capacity to the region, and we just aren’t seeing that come. We are at a point now where we’re saying, listen, we need to have generation built. We need to have more capacity. And so what we have to do at Exelon is really take an all-of-the-above approach. We need to basically have all options on the table.
In some states, you’ve seen Exelon going in and making filings for large transmission-level battery storage solutions, which will bring some much-needed capacity to our region and really help the issue that we have today, which is to try to reduce the peak power times so that we can avoid rolling brownouts and other reliability issues. But we’re also advocating for other fixes to basically allow baseload generation like gas and others to be built in our regions, and that’s why we’re advocating for allowing the utilities to once again propose and build and own generation, all of that with state approval.
But the important thing, and what we always tell everyone, is right now we are facing an affordability challenge. When you’re facing a challenge, you want to have all of your options on the table. We are not trying to re-regulate our market. We’re saying allow the utilities to be yet another option that our commissions can pick from when they’re trying to say, how do we bring more capacity to the region? So from our perspective, why wouldn’t you want all options on the table today in our states for baseload generation?
POWER: That speaks to what Exelon does in the market today. How would you sum up the company’s priorities?
Khouzami: I think the best way to summarize Exelon’s priority is it’s all around the Exelon Promise, which is really a customer-first initiative that is designed to provide immediate relief, strong protections, and long-term solutions to help our customers get the reliable energy they need and manage rising energy costs. So when you think about what our priority is, that’s probably the best umbrella that captures all of it, and then everything under it is subsets. So advocating for regulated generation to be permitted again in our states, proposing battery storage solutions, suggesting and building new transmission lines to bring more capacity into those zones: All of that falls under that umbrella, which we call the Exelon Promise.
POWER: Data centers account for much of that growth. Exelon put its high-probability data center load at 18 GW at the end of 2025, before screening projects through transmission security agreements brought that figure down to about 11 GW in the second quarter of 2026. How is Exelon looking at large load? What is the forecast, and what are the key steps the company is taking to address it?
Khouzami: One of the biggest challenges facing us, as well as anyone else, is to try to determine what of this large load is actually going to be built. And so when you look at that, we put in place what’s called a transmission security agreement, and that is basically an agreement that we have with the customers after we’ve studied them and we’ve said, this is the timeline, this is the [commitment that’s required] for you to come online and interconnect to our grid. They then have 30 days to agree to sign this agreement, and if they do, they are on the hook to pay for 10 years’ worth of [transmission bills that align with their requested load].
Why is that important? It’s important for two reasons. One, it protects our customers, so that if they say they need 1 GW and then only 800 show up, or, let’s take an extreme, it doesn’t show up at all, then we don’t want to have our other customers paying for the upgrades that were built because of this one customer. So they’re on the hook to make sure they’re paying their fair share.
The other piece is, you can imagine when you talk to a developer, free options are very valuable. And so by actually signing, you’re putting real skin in the game, and now you have a financial commitment that if you don’t actually come through with a customer, you’re still paying money. That becomes real for them, and then all of a sudden, if they don’t have a real project with a real customer tied to it, they’ll drop out. So that allows us to really suss through what is real load and what is just developers testing the market and keeping their options open. And so that allows us to plan and build and upgrade the grid where we need to, while also protecting and making sure our customers don’t get left holding the bag because they don’t show up.
In terms of that, we have basically two buckets. We have high-probability load, and those are the loads that could be in construction, or they signed the TSAs [and posted the required collateral]. They really put that skin in the game, and we have high certainty on them. In our states, that’s 11 GW today: about 9 GW in the ComEd zone, which is Illinois, and 2 GW in the Mid-Atlantic, the five utilities we have. When you look at our future pipeline, these are the other developers that are either currently being studied or have filed applications to be studied. When you look at that, that’s another 25 GW on top of that 11. In ComEd, it’s 17 GW, and in the Mid-Atlantic, it’s 8 GW.
To put that in perspective, when you think of ComEd, which is the country’s fourth-largest utility, their all-time peak load was in [July 2011], and it was [nearly 24 GW]. That was their peak load at that moment, the most they’d ever used. And if you think about high probability, you’ve got basically 9. So 9 is getting built in the next few years, and then you’ve got another 17 waiting to be studied. So between the two, that’s 26. So when you think about applications that we’re reviewing or things that have already started being built, it more than doubles the peak load of ComEd, the highest they’ve ever had. That’s an incredible amount of growth. Our industry and our company have never seen that pace of growth, and that’s what the industry and Exelon are dealing with. That’s why these TSAs, transmission security agreements, are so important, because we have to really understand what’s real, where is it going to be, and make sure we build out the grid with the protections for our other customers in place.
POWER: Exelon doesn’t own generation, but its customers pay for capacity through PJM’s capacity market, and both market rules and state and federal policy are in flux. PJM’s most recent capacity auction, for the 2028/2029 delivery year, cleared 6,831 MW short of the grid operator’s reliability requirement. How are you looking at PJM’s auctions and its recent efforts, and where do you see the bottlenecks for new supply?
Khouzami: Where do I see new supply? I don’t see a lot of it. That’s the problem. What we have in PJM, you have 13 states, and roughly half of them still allow utilities to build and own generation, and the other half don’t. All of our states are in that latter category. What I would tell you is, when you look at PJM, the little amount of generation that is being built is being built by the utilities in those states, and the reason for that is quite simple. Right now, the capacity market offers generators one year of capacity pricing three years out. These plants take five to seven-plus years to build, and then it’s also only one year. So it’s difficult for them to finance a project without that price certainty, which is part of the problem of why they’re not building. The economics just don’t work for them. And so that’s why we keep going back to the idea that the states can take control of this and basically order or have the utilities build. At a minimum, let the utilities propose projects and be the price to beat. You can have that, and then select what is the lowest-cost solution for our customers.
We didn’t start off by saying we want to get back into generation. This is the urgency of the situation over two, three years, not seeing anything get built when we’ve needed the capacity to be built. We’d be very happy if someone else built this. But there is a need to have this built, and, as I’m sure you understand, the analogy I always use is our industry is more like a battleship, not a motorboat. For us to build something, it takes years to do that. So when we look at our plan, we see the demand coming in, we see what the needs are going to be, and so the need to build is tremendously important.
I get this question sometimes: Well, what if the load doesn’t show up? Even if it’s high probability, what if what you say is going to show up comes in at half or a quarter or less? What I tell a lot of stakeholders and others is, listen, right now there’s a no-regrets move to building more generation in our zones, and here’s why: The load will either be coming, and then you need it to meet reliability and avoid brownouts, or maybe the load is less than what we expect, in which case you have more supply, which brings down prices for customers on that 80% of the bill or 75% of the bill that’s higher. It brings those prices down and helps you deal with your affordability crisis. So in both cases, the need for more supply is tremendously important.
And so we commend PJM. We like to see them trying to find ways to bring more generation, more capacity to our region, but I think it can’t be PJM alone. The states also have an opportunity to take advantage of changing some rules in their own states to allow utilities to start proposing.
One of the nice things with the utilities is, if we propose a project, you get what we call the three C’s: You get control, you get certainty, and you get customer benefits. Control is basically that you, as the commission, the state, can then order the utilities: Here’s what I want, here’s the type of generation I want, here’s the fuel type. Certainty: The utilities can’t all of a sudden say market forces, market prices have changed, so I’m going to stop a project or pause a project. And then customer benefits: We show this in our battery proposals. We’re able to flow a lot of the market revenues back to customers to allow them to benefit.
If I can touch on that for a second, the battery storage that we proposed in New Jersey is an excellent example of how we flow customer benefits back to customers that the competitive markets wouldn’t otherwise do. In that case, we proposed a 500-MW battery. That battery will be put into rate base like our other investments. It’ll go through a [six-month] process at the commission to be reviewed. Stakeholders can intervene; it’s an extremely transparent process. And then we will earn our return on that asset, and that’s what our company will receive, and that will help finance the project. What the customers get is certainty that we’ll build it, so it’ll actually come to fruition. The other piece is all of the wholesale market revenues and other capacity pricing will be returned back to them. What that does is it allows us to have no bill increase through at least 2035 for this asset. So they’re going to get 500 MW of capacity and pay nothing more on their bill for it. After that, they will be paying a small amount, but net benefits to customers, when you take the cost of the project plus the benefits they get from the wholesale revenue, are $761 million over the life of the asset. That’s something that the utilities can bring, and I don’t think the competitive market has matched that.
POWER: Transmission development has historically moved in fits and starts. Beyond its current capital plan, Exelon has identified $12 billion to $17 billion in potential transmission projects. What needs to happen for those projects to move forward, and which could advance soonest? What has historically delayed energization, and has that changed?
Khouzami: I would say one of the biggest challenges that you have with transmission, and really any large infrastructure project, is you need to get community buy-in. You need to work with the communities, with the customers, to help them understand, one, what is being done; two, why is it being done; and three, how will this benefit them, in terms of what happens if we don’t move forward with a project like this. And so what we have found is that when we have the time to do that really good, really thorough community engagement, it makes the project much smoother as you move forward. It allows you to have real discussions, and it allows you to get real customer feedback to help influence how we build a project, the route we take, and things like that.
One of the biggest challenges we have right now is in PJM, for example, the window is five years. So they’ll put out a window soliciting projects for needs five years out. These projects can take five, six, seven years, especially as you start building high-voltage transmission lines, which are much more challenging to build for a host of reasons. So what we really need to do, and I think one of the things that PJM is looking at and exploring, is how do we get a longer window? In other words, how do we determine what we need seven, eight, nine years out, so that we have more time to do that upfront work to make the project smoother and progress faster, and not hit roadblocks along the way? So I think that will be a huge help if we can have that solution or have a longer window, so that we have more time to do the upfront work, which always makes a project smoother.
POWER: You mentioned Exelon’s push into competitive transmission across regions, beyond the zones its utilities serve. How does that differ from how transmission development has worked so far, and where do you see bottlenecks or opportunities?
Khouzami: Historically, what’s happened is typically the incumbent utility has been awarded, even when it was an open process. And the main reason was they would leverage their existing rights of way, and they could say, “Listen, I’m not going to be building new greenfield projects.” That’s always easier to do.
There are a couple of challenges that are facing us now. Number one, we’re running out of rights-of-way as we build more transmission. There’s only so much right of way. There’s only so much you can put in an area, so you’re starting to run out of right-of-way. Number two, affordability is a critical concern. So again, can someone do this less expensively, bring more innovation, and provide a solution that provides customers with a lower cost? And number three is, when you build on an existing right of way, you have to take outages. For some of these high-voltage lines, even 500-kV lines, as you think about the projects, one of the things that the transmission operators have to start to think about is: All right, this proposal here is leveraging rights-of-way, but all of a sudden I have to take these three or four outages. Can I really do that?
One of the things that we’re seeing more and more is some of these maximum generation alerts across PJM. For example, we actually have one today, and that is basically: Hey, we are near capacity, so we have to put everyone on alert. We may have to [shed some load], which could cause rolling brownouts. They haven’t had to do that yet, thankfully. What they did today is cancel some planned outages, because we can’t have anything down, because we need the full capacity on the grid, because demand is where it is.
Well, when you start to cancel planned outages, it’s not like you just say, “All right, if I’m building a house and it rains one day, we’ll move that work to next week. We’ll build the roof next week.” No, the planned outage is planned. It takes a lot of coordination, and there are only so many windows. As you can imagine, in a year, you don’t have planned outages in July, because, again, you need all the capacity you can have. It’s typically these shoulder months. Well, as that supply and demand balance is getting tighter and tighter, the ability to be flexible and have certainty around outages is getting more challenging, too. So it’s just another thing that’s complicating things that we have to manage through. And again, not to sound like a broken record, but it always comes back to: We need more supply in our region, and that’s the answer.
POWER: As you noted, Exelon does not profit from supply, but it earns regulated returns on the rest of the bill, and a lot of infrastructure still needs to be built. Affordability has many dimensions. How is the company approaching its commitment to affordability, and what is it doing specifically?
Khouzami: It does. This goes back to that Exelon Promise, that we take a near-term, medium-term, long-term approach to really provide our customers with solutions. Near term, I think we’re the only utilities that have voluntarily offered customer relief funds, and we did that earlier this year. We offered about $50 million to customers to provide them rate credits, for those that are in need, and they could apply for them and get those rate credits. That was a near-term, quick Band-Aid fix meant to say, how do we give you some relief? But we know that’s not the full solution. We have to do other things.
That’s where the intermediate and longer-term solutions come into play. The intermediate solution is some of these things like the battery storage solutions that we propose. So we have the one in New Jersey that I just mentioned. That’s really: How do we bring more capacity to the region, but also how do we shave some of those peaks? I’ll give you a good example. In July, July 2 to July 5, there was a heat wave, one of those max generation alerts. All the generation had to be running, even those that had been planned to be out. When PJM does that, they pay and compensate those generators a premium. During that period, had our battery been running in southern New Jersey, those customers in southern New Jersey would have paid $8 million less than what they were charged by PJM. So that’s real savings that we can deliver to our customers and real, tangible benefits for our customers.
And then longer term is the advocacy we’re doing around legislation to allow utilities to get back into generation, so that we can build real long-term baseload generation that can really start to fix the problem and get ahead of what’s coming, which is that when demand comes, we’re not going to have enough electrons to serve it if we don’t start to build more generation in our region.
One of the other things that I probably should mention also, in the near term: Another thing that we’ve done is we’ve partnered with many organizations, and we’ve connected customers with literally hundreds of millions of dollars of customer relief dollars from other organizations, and state and federal agencies, too. So we have a lot of focus on trying to help our customers manage their bill, and then also obviously trying to find longer-term fixes.
POWER: Two recent Federal Energy Regulatory Commission (FERC) orders bear directly on PJM’s supply gap. On Sept. 29, FERC accepted PJM’s Reliability Backstop Procurement, a one-time procurement of new capacity aimed at the 2028/2029 shortfall, but suspended it until Feb. 28, 2027, pending further proceedings. On Oct. 9, FERC rejected PJM’s proposed Interim Resource Adequacy Service (IRAS), which would have allowed new large loads to connect without bringing new capacity if they agreed to be curtailed under certain emergency conditions. What do those orders mean for Exelon, its utilities, and their customers?
Khouzami: I think when you look at those, especially the backstop, for example, we applaud PJM’s efforts to try to bring the capacity to our region. But let’s be clear about what that’s doing. The backstop provision is a response to this last auction, the last couple of auctions. PJM has fallen short. They put a bid out for supply, and they fell short of what they thought their needed demand was, and their estimate was about 6.8 GW. That shortfall, they said they want to try to solve with a one-time backstop procurement. So we applaud them for that effort. But let’s be clear about what that does. That doesn’t solve our affordability crisis for our customers. That just allows us to tread water and not make the problem worse. So while we applaud them, that can’t be all that gets done. We still need more legislative fixes, and we still need more solutions put on the table to be able to really add more true net new supply to try to bring our prices down, and then obviously, as more load comes in, meet that as well.
On the other docket, that goes back to our larger customers, these data centers, trying to find a way that they can interconnect to the grid in a more timely manner without impacting any other customers. So I think we look forward, and we are very engaged in the process. We want to see solutions that will be beneficial to our customers and ensure that they’re not harmed by anything that moves forward from a large-load perspective. But again, I think more needs to be done beyond just these two. But I think PJM is making the right steps in trying to push these forward.
POWER: Many stakeholders have raised concerns about PJM’s governance. In January, the White House National Energy Dominance Council and the governors of all 13 PJM states released a statement of principles. It urged PJM to hold a backstop auction for new capacity and to assign its costs to utilities serving data centers that have not secured their own new capacity or agreed to be curtailed. As a major participant in PJM, how does Exelon view state influence over PJM? Should states have a formal role in its decisions?
Khouzami: What’s interesting is the states have the ability to take control of this issue. They can bring this back in. They can do their own procurements. They can do their own integrated resource planning. And some of our states, like Illinois, have started to do that. PJM isn’t fighting them on that. In fact, PJM will say our role is to be the operator, and their auction is a residual auction. So that was intended to fill in the small gaps, not try to drive large amounts of capacity to be brought to your region. PJM will tell you: States, that’s your responsibility. You should be doing that.
So for our governors, for our states, they have the ability to bring this back in house and to manage this themselves, and we would be very supportive of that. And again, one of the steps they can take is this idea around allowing utilities to participate, and getting a real long-range energy plan in place. Many states around the country do that. It’s an integrated resource plan, and what that does is it gives the state and the commission the ability to say: Here’s where we’re going, here are the inputs, here’s what we have today or what we will have, and here’s where our gaps are. So let’s start to put a real, tangible plan together about how we’re going to fill those gaps in, whether it’s from the regulated utilities or the competitive markets. They can figure that out.
But before you can even solve the problem, you have to know what the problem is. And again, it’s easy to say we have a resource adequacy problem, but you need more details to be able to solve the problem. And so we are highly supportive of the states doing so. And again, we will engage with them, and with PJM. We engage with everyone. But again, it’s all about: Can we develop a longer-range plan at the state level and really identify where the gaps are, and how do we help fill those gaps?
POWER: Equipment and labor constraints came up repeatedly at POWER’s recent Data Center POWER eXchange. How is Exelon securing the equipment and workforce it will need for new infrastructure? Is it facing the same constraints as others, and how should the industry approach supply chain for new infrastructure?
Khouzami: It’s a real risk, and it’s a real focus for us as well as everyone else in our industry. And it’s important because the equipment we source, the labor we source, all of that plays into what you just mentioned. One of the things that we do is we have a longer-range plan that we look at, so we understand what projects we’re going to be building in the future. So what we try to do early on is to procure, or at least secure, the slots or the equipment or the labor that we need to be able to do that work. By doing that early in the process, we can have certainty around the pricing, and we can have more confidence in what it’s going to cost us down the road. So we try to lock that in, so that we know, when we talk about a project, here’s what it’s going to cost. We can have certainty around that.
One of the things that we’ve done at Exelon is we benefit from scale, in terms of we have six utilities, and so we try to standardize our materials as much as possible so that we can share the material between our utilities. So if one has a need and another has a delay in a project, we can move that material over to try to lessen the impact if there’s a shortage in some specific type of equipment.
The other thing that we do is we are literally looking everywhere and qualifying as many vendors as possible to ensure that we can have different vendors that can provide us the materials that we need, so we don’t have all of our transformers coming from one equipment supplier. We’ll have multiple ones qualified, so that if one of them does have a supply issue or has some other issue that impacts their ability to deliver us the materials we need, we have other options at the ready. I think most people in the industry are doing the same thing. But it is a watch area that we watch very, very closely. But again, I think we try to manage as much as we can.
POWER: What do you think is truly underreported in the power sector, and where would you like to see trade media focus? And if you had a wish list for policy, markets, supply chain and equipment, or state priorities, what would you change?
Khouzami: I think from the reporting standpoint, and again, I think we’ve been doing it, and you’re seeing this more and more, is how can we help our customers really understand what the issue at hand is here? It is hard if you’re not in our industry. It’s not an easy industry to understand. There’s a lot of different players in the chain, if you will, and so it’s really difficult when you get a bill from BGE, for example, not to say BGE is raising my costs. Well, BGE might not be driving it. It’s the supply side. And so how do we explain that and help people better understand? Because I think until they do, it’s difficult to solve the problem. You can tweak recoveries of executive comp and all that. Those are not even rounding errors on a person’s bill. The real driver is this lack of supply.
And so what has happened over the last couple of years is I think elected officials, commissioners, have started to understand this, and that’s helpful, because now we’re starting to get some real solutions, and that’s why you’re seeing some of the activities out of PJM. That’s why you’re seeing states like Illinois say, “I need an integrated resource plan to really drive and fix this problem.” So I think that’s helpful, and more reporting around that would be helpful.
In terms of my wish list, I have a lot of things I wish for. One thing, and again, I’m going to state the obvious first, is that states allow the utilities to once again own and operate generation. We’re not going to re-regulate our states. That’s a false narrative. What we’re trying to do is say, let us be another option. When you have a crisis, why would you take any tool out of your toolbox to try to deal with that crisis? Just let us be an option that the commission can review, with stakeholder input, and say: What is the cheapest, most reliable, most dependable way that we can solve this problem for our customers?
From a transmission perspective, and I touched on it earlier, I would love to see longer windows. So start to say, hey, instead of a window for five years, put it out for seven or 10 years even, so that we have more time to really construct these projects correctly and really engage the customers and the communities to ensure that what we’re building is well understood and as least disruptive as possible to their lives.
And then on the supply chain, obviously, I would love seven more vendors to do transformers and breakers and all that. From my perspective, I think we’re managing that well on the supply chain side. But again, I would love to see more capacity in the supply chain as well. And I think we’ll get that, especially on the transmission side. As we have longer windows, we can have more certainty of projects. We can go to the large vendors and say, “Hey, here are the products I have coming up.” And in some cases, we’ve seen that they’ve started to build new factories, because there’s enough demand for their product that they say, “All right, I can justify economically building another factory or expanding an existing one to do more volume, because there’s enough coming through.” So those are the things that I would say are on my wish list.
POWER: Exelon spun off its power plants in 2022 and has operated as a wires-only company since. Five years from now, do you think Exelon will own generation again? What do you expect the company to look like?
Khouzami: Five years from now, I do think we will own generation again, and the reason is the need is just so great. I don’t see how utility generation can’t be part of the solution. The market forces do not incent and are not driving any competitive developers to build in PJM. And let’s be clear: The generation we own will be fully regulated, so full oversight from the commission, and will not be a merchant plant. It’ll be in the regulated model, and I think that’ll be great.
And I think what you’ll see is our states will be bifurcated states. You’ll have competition alongside regulated solutions. And what’s interesting is that with regulated solutions, regulated generation, a lot of people think that means you’ve re-regulated the market. It’s just another ownership model, another option that’s competing alongside the competitive solutions, if there are any, and today there aren’t.
And so I do believe that we’re going to get to a point where the economics aren’t going to incent the IPPs [independent power producers] to build. The needs are going to be great enough that we have to see new capacity come into our region. PJM is already warning that there’s a potential for rolling brownouts as early as next summer in Central Maryland. When that happens, if that happens, that is going to really cause some problems, and it’s going to really wake people up that we need to fix this problem as soon as possible. And so I just don’t see another solution. I would love to tell you that I think there’s going to be some magic bullet that’s going to create market forces that have all the IPPs vying and tripping over each other to build more and more in PJM. I just don’t foresee that happening in the near term. And really, I think we’re two years later than we need to be in terms of starting this construction, because it does take years to build.
—Sonal Patel is senior editor at POWER magazine (@sonalcpatel, @POWERmagazine).
