Differences Between "Mr. Nuke" – John Rowe – and "Atomic Rod" Adams
John Rowe, the man that Fortune Magazine once called “Mr. Nuke” in a May 15, 2006 article titled Meet Mr. Nuke and I have a few things in common. We were both given a copy of Richard Halliburton’s Book of Marvels, a two volume set of travel books that divided the world into two areas, the Occident and the Orient. We both keep the books in our libraries. We each had two parents who were influenced by the Great Depression, though my parents were children in the 1930s while his were adults trying to make their way. We also both believe in hard work and early hours. The similarities pretty much stop there.
Rowe grew up on a Wisconsin dairy farm, attended a one room school house, went to the University of Wisconsin and became a lawyer. Here is a quote from the lede of the Fortune story mentioned above: “he’s no stolid ex-seafaring engineer–he’s a brainy, maverick, Midwestern lawyer.” In contrast, I grew up in the South Florida suburbs, attended large public schools, went to the Naval Academy and became a “stolid ex-seafaring engineer”. I have never even considered the possibility of working as a lawyer.
Aside: I was the Engineer Officer on a submarine, made 11 deployments during two sea tours and several ocean sailing trips. I have a BS in English and an MS in Systems Technology; I do not claim to hold an accredited degree in engineering. End Aside.
Unlike Rowe, I do not go to work in a three room suite on the 54th floor overlooking the Chicago skyline. I usually spend a few hours working each morning in my home office and then drive to my day job where I arrive before 7:00. My currently assigned space is a relatively small cubicle on the sixth floor of a building that looks over a residential area of Arlington, VA, just south of the Pentagon.
I call myself “Atomic Rod”. I am spending my free time spreading the word that nuclear energy can be the life-altering resource that makes the world a better place for everyone. Fortune Magazine calls John Rowe “Mr. Nuke”, but he spends much of his time persuading recipients of political contributions in the government to establish a “cap and trade” system so that his investments in nuclear facilities that someone else built will bring in more cash.
Here is an excerpt from a December 31, 2009 article in Forbes titled Exelon’s Carbon Advantage, by Jonathan Fahey.
Rowe hasn’t been able to grow by acquisition, either. Three times since 2003 Exelon has tried to acquire a smaller rival, and three times Rowe has been unable to close the deal. “The conundrums are real,” Rowe acknowledges. “There’s nothing that’s going to drive Exelon’s profit in the next couple of years wildly. It just isn’t going to happen.”
Except, of course, carbon legislation. And because of that, the company views spending on lobbying for legislation almost like a capital expense. William Von Hoene, a cowboy-boot-wearing former criminal defender who heads the finance and legal departments for Exelon and is a possible successor to Rowe, thinks of carbon legislation as Exelon’s big growth opportunity. “It’s an investment we are making that will result in substantial shareholder value,” he says.
So lately Rowe spends more time wearing out shoe leather in Washington than he does gazing at the sparkling lights of downtown Chicago. He has emerged as a lobbyist for cap and trade, a scheme that would limit carbon emissions to the amount spelled out in tradable carbon permits. If such a scheme is enacted, utilities without the need to buy permits will be at a competitive advantage to utilities that need to have them.
Plenty of people have been taught that it is the company CEO’s job to maximize near-term profits for his company – even if those profits come from a scheme that raises costs for everyone else. I find that kind of business/political activity to be highly distasteful; perhaps that is one of the reasons that my endeavor as a private businessman resulted in frustration and eventually led me to go back into the service.
I spent a few years running a small manufacturing business and clearly remember times when I had to explain to people who worked for me why their paychecks had so many deductions taken out. I do not like to see tax money directed to benefit people who gaze down on the rest of us from office suites lined with books, antiques and other treasures picked up during international travel expeditions. (Since Rowe is the CEO of a regional midwestern US utility, there is very little likelihood that he was traveling for business reasons.)
It is frustrating that Rowe is a rich Republican who is frequently quoted by people on the left who are opposed to new nuclear power plants because he has claimed that the plants are too expensive and he has made it clear that his company has no interest in building any new plants. As the leader of a utility that owns 17 operating and two shutdown but intact nuclear power plants, he is seen by many as someone with a strong vested interest in nuclear technology.
For people who have a shallow understanding of how commodity businesses work, his public reluctance to build new plants provides evidence that no one should be interested in new plants. Here is a quote from a 2008 document published by Amory Lovins, the long time anti-nuclear activist and two-time college dropout, titled The Nuclear Illusion:
In 2005, the Chairman of Dominion, an applicant for early nuclear site approval, told The New York Times, “We aren’t going to build a nuclear plant any- time soon. Stanford [sic] & Poor’s and Moody’s would have a heart attack. And my chief financial officer would, too.” Chairman John Rowe at Exelon, the nation’s largest nuclear operator, ex-pressed similar skepticism.
Note: It should be Standard and Poor’s, but I copied and pasted right out of the Lovins authored document.
That last sentence was footnoted with the following comment:
Exelon is still often claimed to be about to order a new nuclear plant, and has also sought an advance site license (a relatively cheap way of keeping options open), but in a panel at the ACEE Energy Efficiency Finance Forum, 12 Apr 2007, Chairman Rowe confirmed that within his firm, “nobody I would trust with a capital budget” could give him a plausible case that a new nuclear plant would be economically competitive.
That statement should be understood to be coming from a particular market perspective. It would not make sense for a company that sells 130 billion kilowatt hours per year of emission-free electricity to encourage the construction of additional capacity to produce more of that same relatively scarce commodity. Here is a quote from the Forbes article that might make it easier to understand why:
But Exelon is a commodity company: Its profits depend on power prices. Prices are set at the margin, and in this industry the marginal energy comes from natural gas, which is cheap now. When gas prices were at $14 per million Btu Exelon’s shares traded at $92. Now, with prices at $5, Exelon trades at $50.
Gas prices may stay low for a while. Imaginative drilling techniques have recently created a bountiful supply of gas from U.S. shale formations. Subsidized wind energy could put another competitor at Exelon’s doorstep. No one really needs that extra capacity now, but many states and perhaps soon the federal government are mandating greater use of renewable power. Wind power has its weak point (a tendency to be more plentiful at night), but that weakness is counteracted by pairing it with quick-start gas plants, not with sluggish nukes.
That segment has to be read carefully and critically – what if there was additional nuclear capacity added instead of new gas or intermittent wind? How would prices move for the 130 billion kilowatt hours that Exelon is selling? At 10 cents per kilowatt hour, the company would bring in $13 billion in revenue; at 8 cents, the revenue would fall to $10.4 billion, but the cost to produce that 130 billion kilowatt hours would not change. All of the difference would come out of the profit number.
Every penny that comes off of the price of electricity reduces Exelon’s annual profits by $1.3 billion. Notice the difference in stock price between summer 2008, when natural gas was expensive, and now when it is not as expensive. Exelon has about 660 million shares outstanding. The company was valued at $92 x 660 million = $60.7 billion. Now it is $50 x 660 million = $33 billion but it has the same assets and is producing roughly the same amount of its commodity product. Mr. Rowe’s personal wealth also suffered with the drop in natural gas prices.
The people that I serve and care about are not the same people that Rowe serves. I like nuclear technology because it offers human society the opportunity to break our addiction to fossil fuels. I care about carbon dioxide and other polluting emissions because they have a widespread, negative impact on the ability of the earth’s atmosphere to support our current standard of living, not because I think I can collect more money for the same effort if someone puts a price on carbon dioxide emissions.
I have a self-assigned task (mission?) of spreading information about nuclear technology. I believe that it is an incredible gift to humanity. According to the May 2006 Fortune article titled Meet Mr. Nuke Rowe’s attitude is completely different. “Nuclear is not a cause; it is a business,” he told shareholders recently.”
One of my major regrets for the first decade of the 21st century is that Corbin McNeill, a fellow “ex-seafaring engineer”, accepted a buyout from Exelon due to family health issues. For the first 18 months that Exelon existed after the merger of Unicom (Rowe) and PECO (McNeill), McNeill and Rowe shared the CEO position. Exelon was improving Unicom’s nuclear operations in an effort led by the team that McNeill had built at PECO, but it was also looking forward to additional growth opportunities. It was investing in the PBMR project and establishing the groundwork for building new nuclear plants. While he was the Exelon CEO, McNeill was a true leader who wanted to make the world a better place; I still have a hard time understanding why he would turn his company over to a lawyer focused on short term profits.
“Mr. Nuke” and “Atomic Rod” look at the world through different lenses. My guess is that Mr. Nuke’s view is a rarified one that only a very few people share. However, it is a common enough perspective in the business world that the Forbes article titled Exelon’s Carbon Advantage is featured in a special issue titled “America’s Best Companies”. Maybe I really should give up on my goal of building a business – I cannot seem to adjust myself to that view of the world.
http://djysrv.blogspot.com/2009/11/exelon-exits-growth-through-acquisition.html
In my review of Exelon’s business strategy 11/03/09 (URL above) I pointed out Exelon’s reasons for exiting its growth by acquisition strategy was based, in part, on the drive for quarterly profits and shareholder returns in the form of an increasing stock price. Also, both Exelon and Entergy, two of the nation’s largest nuclear utilities, have adopted a growth strategy based on uprates to existing plants. These business plans will lead to near term achievement of the goals of increased profitability and increased value for stock holders.
What’s missing from this picture is a government strategy to leverage the carbon emission free value of nuclear energy as a means to reduce the growth of greenhouse gases. A blind market-driven philosophy cannot deliver this kind of intervention. The business world has its own logic. Therefore, there are some things government must do, and one of them is to create regualtory and economic incentives that will encourage business to invest in the longer term time frame for nuclear energy.
That’s why the loan guarantee program in the Energy Policy Act of 2005, which has been incompetently managed by the Department of Energy, is so important. Despite repeated promises by two administrations, no loan guarantees have been awarded to any nuclear utility. This must change. In the new year write to your representatives in Congress and urge them to pressure the government to get moving on loan guarantees.
Most of what I read on Corbin MacNeill said he was retired because his board was more risk averse (and not just over PBMR…). If it is worth anything, the Chinese, Indians, UAE, and the Koreans all seem to think that nuclear is a good way to generate baseload electricity. Maybe you (and a few fellow pro-nukes) are not so avant-garde as we think. 😉
Nice post Rod. I agree with you. I worked for a nuclear generating company, taken over by Exelon in the 1999 – 2001 time frame. This occurred around the same time as utility deregulation. To sum up, it became such an unpleasant place to work that I left the (power) industry completely. Whether Rowe / the Exelon management model get the credit for that or the brain trust who agreed to the deregulation; the combination cost that particular plant a significant number of highly qualified and experienced staff. Furthermore, if anyone cares about the human impact, the secondary effects such as divorces and serious health problems also sharply rose.
I’m still a nuke and am considering a return to the power industry in the coming months. But never again for Exelon and never again within deregulated utility.
Rod’s excellent review here points to something Marxists have noted for decades: the tendency of finance capital to “triumph” over manufacturing capital. Put another way, it’s the organization of large industrial concerns soly for the point of profit rather than the entrepreneurial mix of innovation, making life better and growing wealthy based on changing the way people relate to the product in question. Two different branches, almost dialectically opposed, from same capitalist tree.
Exelon is exactly what is wrong with capitalism in the U.S. The whole political economy of the U.S. is subordinated to making profit. Thus ‘cap and trade’. It’s speculative and produces ‘nothing’ but more money. Other capitalist countries control this by funneling national will into large, but entrepreneurial endeavors around consensus directions for the economy, while still based on profit: it’s not profit for profit’s sake. Thus S. Korea’s, Japan and China’s thriving energy sectors.
In the US some companies, for non-ideological reasons, have pulled back some from the speculative Finance Capital perspective loved by Exelon: Boeing Aircraft, for example, which has shed some of it’s inane capital sucking ‘spin offs’ and re-focused back on something the U.S. does do well against all others: aerospace. The recent Boeing announcements around the Dreamliner (sp?) is one example of this. Of course over half the planes components are made in other countries but that’s globalization for you, the subject of another topic. But their focus is correct.
The role of the U.S. Govt IS regulation. but not as we commonly refer to it as roadblocks, increased expenses and innovation killing laws. It should be like when the US gov’t “fomented” the Eire Canal, the Boulder & Grand Coulee Dams, the TVA, Niagara Falls hydro electric, etc, going to the moon, whatever. The American people used to think, and was shown that the gov’t can play a progressive long term role if capital is channeled not by some mystical religion, a-historical belief of the ‘free market’ but of national will that points a nation in a particular direction.
This is what is wrong with groups like the CATO institute and the Heritage Foundation (see Rods other blog today where they do make some good points) who see only the “free market” are the arbiter of all that is progressive in terms of infrastructure. This was *never* the case in the US and runs against all that is true about U.S. history.
DW
The best job I every had was at a nuke plant that was a top performer. Every year it makes lot of electricity for the community. Having pride as being part of team is really great.
I have also worked at 5 nuke plants (including 2 COMED plats ) that were not very good at making electricity. Lots of people thought a job at a power plant was a birth right. Being accountable to the public for safe and economical operation were foreign concepts.
Among the reasons we are building new nukes is because the top performers with pride in their power plant won out over business as usual crowd. For those who advocate making electricity with nukes, advocated top performance.
With 30+ nuke plants in planning, Rod should be able to find great stores about the top performance rather than denigrating a CEO focused on keeping 17 nukes on line making lots of electricity.
Kit – I am pretty sure that my post does not denigrate Rowe. The only name calling in the post was when I mentioned that he is a lawyer. (grin) My point is that he could very well be a CEO focused on keeping 19 nukes on line making lots of electricity while also constructing new facilities that would not only replace those machines as they wear out but also replace the aging fossil fuel plants that currently provide 50% of the electricity in the grids where Exelon generates.
Rowe’s strategy is not a bad one for a narrowly focused group of stockholders. In fact, I long ago gave my mom a recommendation to invest in that company.
My point was that what was good for Exelon today is not necessarily good for the United States now or in the long term. Avoiding the hard work of building plants that will be generating clean electricity for people long after he is dead is a reasonable, short term self focused plan. It is not the strategy a LEADER like McNeill would be pursuing.
Kit – one more question. What do you think of the following quote from the Forbes article about Rowe?
“He has emerged as a lobbyist for cap and trade, a scheme that would limit carbon emissions to the amount spelled out in tradable carbon permits. If such a scheme is enacted, utilities without the need to buy permits will be at a competitive advantage to utilities that need to have them.”
Based on numerous comments that you have provided on Atomic Insights, I cannot imagine that you can be consistent with your values and still think this is an admirable way for him to spend his time and political capital.
Some of the differences include:
– Rowe is the highly paid head of a profitable public corporation; Rod is not
– Rowe’s public statements are consistent with his responsibility as the head of a major public corporation; Rod’s statements are his own
– Rowe has the power to make $billion+ commitments to the industry (or not); Rod does not
– Rowe has a fiduciary responsibility to Exelon shareholders to make decisions (to do things and to not do things) that are prudent; Rod has no shareholders
– Rowe must consider capital investment decisions with a view toward profitability and risk in the real world, Rod’s views are not so constrained
The nuclear industry has real issues with respect to nuclear power plant economics. If these issues are to be resolved, companies like Exelon will have a role.
Industry observer – you are correct. Rod is not the highly paid head of a profitable public corporation. He is a generously paid public servant. My current assignment is to provide financial and engineering analysis to ensure that taxpayers interests are protected in the large and complex business of maintaining ships and submarines. Like Rowe, you can find my pay scale on the web. Look for O-5 over 22 in the US Navy.
http://www.dfas.mil/militarypay/militarypaytables/2009MilitaryPayTables.pdf
This blog, of course, has no relationship at all to my day job employer. However, the skills, sense of responsibility, and technical knowledge that I have gained in my day job do not disappear as I leave the office each evening.
There was a day when a CEO was accountable to more than just his shareholders. Of course, this day is long gone by, as we move ever closer and closer to perfect competition.
Most CEOs of large publicly traded companies – and I do not speak of Mr. Rowe in any way, shape, or form, but in general, about CEOs of large publicly traded companies as a discernible group of individuals – they don’t care about maximizing shareholder value, they care about maximizing the perception of shareholder value.
Why? These days, CEOs are hired to act as amoral bastards and loot the company on behalf of shareholders. Therefore, why should shareholders be surprised when they find out their hired looter is looting the company for his or her own personal gain rather than their collective gain?
I’ve said in other forums the following:
1. One time charges are ANYTHING BUT one time charges. Any kind of complex accounting is far more likely to conceal fraud than it is to accurately represent the company’s earnings.
2. The future is often being mortgaged for the sake of the next quarter.
3. The present is often a lie, created by CEOs trying to maximize perceptions of profit rather than realities of profit.
4. Shareholders who hire people to get more profits out of the company by employing questionable ethical means are likely being played by a con-man trying to get the maximum amount of money OUT OF THEM. A person who is hired to be evil is not selective in who they are evil to, but instead screws everyone. This is a universal law.
5. I suspect that the sheer level and number of confidence schemes and fraud on Wall Street is incredible and breathtaking to behold and nearly incomprehensible in its scope and complexity.
6. Derivatives are a scam. They should be banned outright. Glass-Steagall must be reintroduced.
7. The greatest market failures are caused by misrepresentation, fraud, and deceit. Without expecting basic character and morality from market participants, there is no free market, just a conclave of conmen and marks (and conmen who are marks, and marks who are conmen). Markets require as a fundamental, bedrock condition honest, moral, ethical, and loyal participants so as to function, but in their functioning encourage and incite amoral behavior. How can the fittest survive if no one knows who is really more fit than the other? This is the paradox of capitalism, and it is one that is nearly impossible to solve.
Until business in the United States is brought back to basics: delivering a product or service of reasonable quality at a reasonable price – being reasonably accountable to all stakeholders, not just stockholders, but managers, employees, their industry, and the communities they serve – making a reasonable profit and paying reasonable taxes on that reasonable profit – and generating reasonable returns for reasonable shareholders – the US will not thrive again. Instead, we will have endless cycles of boom, bust, and bailout while the rich get richer and the poor get poorer.
You’re not taking in the point of the article, Kit P. The point is that the way the industry is structured in the US at the moment, it can be advantageous even to corporations in the nuclear industry itself (from a profit-making viewpoint) to oppose the public interest on the matter of increasing nuclear power generation. If it hadn’t been Rowe, it would likely be another executive acting according to the dictates of corporate vectors of responsibility. Rod is correct to point the situation out, and to give some background on the guy who opted for that strategy. In fact, this is going to be a crucial point for US citizens to grasp in order to understand the causes and symptoms of American decline. Evolution by natural selection is alive and well, and it culls unadaptive organisms and nation-states alike.
Sorry Finrod I do not think America is in decline. Furthermore 30+ nuke reactors are in various stages of planning. There are several interesting business models for the development of nukes. Some are based on the public interest and some are based on profit.
However, there many options for the electricity generating industry. Every designer of nuke plants in the US also designs and manufactures other equipment for the industry.
Rod has a very shallow of the commercial power industry which can be expected for his occupation. I want Rod to explain why he has not been able to convince his organization does not use nukes for bases and surface ships. I could call the navy brass a bunch of scum bags who do not care about air quality. I would not do that because because I ma not ignorant of the reasons.
So the point of the article is that Rod is short slighted and does not make an effort to understand the complex issues. If you look at the reasons that building nukes, you will understand the reason for not building nukes.
I think that one of the targets of Rowe expansion would have bought a place in the front of line at the NRC. He did not call an consult with me but that is only because I do not have a law degree.
Kit P wrote:
“I want Rod to explain why he has not been able to convince his organization does not use nukes for bases and surface ships.”
That is a reasonable question.
There are many reasons for the historical shift away from nuclear power on surface ships. One source of hope is that the current law of the land requires the use of nuclear power for all major combatants and large amphibious ships. We have not designed a new class of ships since that law was passed.
http://www.fas.org/sgp/crs/weapons/RL33946.pdf
There are only so many ways for an O-5 to influence his bosses. Big organizations have many sources of inertia but little pushes from below can have an impact.
Thanks for the link. I stepped off my second CGN as an O-3 with 10 years in the Navy including being on a commissioning crew of one. Got to meet Admiral Rickover again. They were great ships. I was asked what duty would keep in the navy and it was being home ported over seas. I was offered Idaho Falls. My dream was subs. I have even been out on a diesel boat. However, my visions was very bad and laser surgery had not been invented.
Now Rod you would not want me to be an advocate for new CGNs, not because I because an anti-nuke but because of the USS Belknap and HMS Sheffield.
What the paper Rod links is that complex consideration are required for making a decision on different alternatives based on projections of 40-60 years of future energy costs. It is most likely that Rod would make the same decision that Rowe made if he had the same facts.
Rod often makes comments that demonstrates he is not knowledgeable of commercial nuclear power but are based on experience with navy sub. I think there is a compelling reasons for aircraft carriers to be nuclear powered. Me having experience on a CGN is a not compelling reason.
Yeah? Which CGNs, Lt. P? What was your experience on the CGNs? I don’t see how you can step off a CGN (or CVN or SSB/GN or SSN) having qualified on any of those ships for whatever engineering (outside A-gang/Hull Tech) watchstation and not be pro nuclear power.
If Belknap had been built with a steel superstructure, you wouldn’t have had that sort of a fire. Besides, Kit, if you were a naval officer, you would know about the backup aux feedwater system that I assume and conjecture is located in every Navy ship and boat. It’s very expensive to activate, and it makes the reactor compartment a little raw, but it’s absolutely guaranteed to work, if my assumptions are correct.
The most unsafe thing aboard a nuclear submarine is probably the Otto fuel II located in the 48s. Really nasty stuff, it produces HCN as a combustion product. The reactor doesn’t even come close to that shiz in terms of hazards to life and health.
Well, I wonder why we haven’t (recently) been able to use reactors on the smaller surface combatants. Is it a matter of initial cost, political considerations, size/weight considerations, redundancy considerations (1 reactor vs 2 gas turbines?), or considerations of a more classified nature?
If I could, I’d use reactors on everything of FFG size or larger, for the simple reason that these platforms are going to be around for many years, and the higher initial cost will easily be repaid by the lower operating cost on a 30-40 year lifecycle basis. Plus, technology is headed in the direction of consuming ever more electricity, with the near-term arrival of railguns on the surface warfare scene, and the longer-term arrival of lasers (at least as point defense). Thus, large quantities of electricity will be needed, and thus new generating plants and more generating capacity will also be needed. Not having to haul around POL also significantly lessens the logistics train required to support a fleet. And the Russians, I know, use reactors on their Kirov-class (very heavy) cruisers as well as their smaller icebreakers.
Personally, I’m guessing that it’s:
1. Higher initial cost?
2. Possibly that the PWR doesn’t give as good of a complexity to performance and price to performance ratio when it gets smaller than certain sizes? (because of the steam turbine energy conversion system, which is complex compared to a gas-turbine based system?)
3. That highly simplified reactors, perhaps of the gas-cooled type or other types (lead-bismuth eutectic, or molten salt) might be a better choice for smaller ships; however Naval Reactors doesn’t have enough experience in these and the financial resources aren’t there for NR to gain the experience necessary?
4. Higher personnel requirements?
5. Naval shipyards do not have facilities for construction of smaller nuclear powered surface combatants?
Any answers to these speculations, Rod?
BTW, Kit, can you tell us what kind of complex considerations Rowe uses in his choices of energy sources? Initial cost? Levelized cost of electricity? Something else?
It will be great to watch The Addams Family, i have bought tickets from
http://ticketfront.com/event/The_Addams_Family-tickets looking forward to it.