FILE PHOTO: Electric power transmission pylon miniatures and Exelon Corporation logo are seen in this illustration taken, December 9, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Laila Kearney

NEW YORK (Reuters) -Major U.S. electric utility Exelon plans to step up its push to own power plants in its Mid-Atlantic service area next year, where electricity bills are spiking in the face of rising demand and new supplies are slow to be added, CEO Calvin Butler told Reuters this week.

Exelon's effort comes as PJM Interconnection, the country's largest grid providing electricity to over 65 million people in the Midwest to the Mid-Atlantic, faces supply shortfalls amid surging demand from data centers and the electrification of industries like transportation.

Chicago-based Exelon said in July that it was considering its options for building and owning regulated power generation, which electric utilities are legally barred from in about half of U.S. states.

In those states, regulated utilities generally own power lines, while independent power producers own and operate power plants to diversify market power, which can help prevent anti-competitive behavior.

Butler said allowing electric utilities like Exelon to build new regulated power supplies, which is currently barred by state laws in much of PJM's territory, would ease the grid's power crunch and bring down prices.

Regulated power generation in the region where Exelon operates would require a series of changes to state law, which Butler said his company is laying the groundwork for by talking to lawmakers and governors ahead of next year's lawmaking meetings.

"I believe the 2026 legislative sessions are going to be an opportunity for us," Butler told Reuters at a meeting in New York on Monday. "We're going to be advocating for it."

About half of U.S. states are considered deregulated, generally, meaning that electric utilities that own transmission and distribution lines cannot also own regulated power generation. The deregulation effort began in the 1990s in response to rising electricity costs.

As power bills rise again, some of the 13 states in PJM, like Maryland and New Jersey, have considered amending their laws to allow regulated power generation.

"I'm one of the staunchest supporters for competitive markets when they work, but we are seeing that the competitive marketplace in PJM is not working," Butler said.

U.S. power demand is forecast to hit record highs this year and next, according to the U.S. Energy Information Administration.

FIGHTING RISING BILLS

If allowed by the states, Butler said he would seek to build community solar in low-to-moderate income neighborhoods, which he said would reduce power bills.

Some 80% of recent household electricity bill increases are power supply costs, Butler said, as opposed to utility charges.

With nearly 11 million customers, Exelon is one of the biggest power utilities in the country and covers some of the most impoverished urban communities, including those in Philadelphia, Baltimore and Atlantic City. Some of those cities have also seen the biggest power bill increases over the summer.

Independent power companies have argued against the idea of regulated power generation in deregulated states, saying utilities would pass the cost down to customers and further raise bills.

Butler said regulated utilities can often build power supplies with a lower impact on bills. They have lower borrowing costs and cost of capital and a speedier permitting process because utilities like Exelon already own substantial land and easements to develop new power generation, he said.

Exelon's overall return on its assets is about 9.5%, or roughly half of what he said independent power producers earn.

(Reporting by Laila Kearney in New York;Editing by Marguerita Choy)