Exelon 2005 Annual Report Download - page 10

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Yet larger, regional companies are an inevitable consequence of industry
restructuring and expanding wholesale competition. New Jersey sits at the
center of PJM, the largest competitive wholesale market of its kind in the
world. As markets grow, so must the companies that compete in those markets.
Scope and scale are also required to address the pressing need for new infra-
structure. In a time of rising worldwide prices, increasing uncertainty about
the security of our energy supply, and an increasingly urgent need to address
global climate and other environmental issues, we need utility companies
with the financial strength to develop and deploy new and innovative forms
of generation and transmission. The new company, Exelon Electric & Gas,
will be such a company.
In our view, the ultimate benefit of a larger, more financially able company
vastly outweighs any perceived disadvantage. Synergy savings alone are
estimated at $400 million pre tax in year one and $500 million in year two,
excluding costs to achieve. Savings passed through to consumers through
lower prices in the BGS auction are estimated at between $500 million and
$1.5 billion over the next decade, largely from improved nuclear operations
at Salem and Hope Creek. The success of these units is critically important
for a state and a region where generating capacity is increasingly tight, and
the alternative is increased dependence on natural gas.
In spite of these benefits, I expect that we will be asked to make concessions
greater than we have offered to date.
My sincere thanks to Jim Ferland and his management team at PSEG for
their continuing courage as we pursue a regulatory solution in New Jersey.
I have every confidence that we will resolve the remaining regulatory issues
and that we will be ready to close the deal, and begin operations as a com-
bined company, as soon as we receive the final approvals.
Tritium
Of course, we create some of our own challenges. Eight years ago at the
Braidwood Generating Station, water containing low levels of tritium, a low-
level radioactive substance, was spilled on the ground near the plant boundary.
Our plant management did not adequately contain the spill at the time,
leaving it to evaporate or soak into the ground. In November 2005, a site envi-
ronmental monitoring program found higher than expected concentrations
of tritium in the area of the spill, and subsequent investigation found evidence
that the tritium had entered the groundwater and migrated offsite. We now
have found problems with tritium leaks at other plants, although in these
cases the tritium does not appear to have spread beyond plant boundaries.
Sir Winston Churchill
said it best: "Difficulties
mastered are opportu-
nities won."