(Bloomberg) -- Purging fossil fuels from the US grid is expensive, and pushback over rising customer utility bills risks slowing the transition toward renewable power, according to the head of one the largest US power companies.  

“To clean the grid is going to cost money,” Exelon Corp. Chief Executive Officer Calvin Butler said in an interview Friday at Bloomberg’s headquarters in New York. “You’re going to have to build, strengthen and make the system more resilient because of climate change.” 

Exelon ran into that conflict head-on in December when Illinois regulators rejected the company’s ambitious grid plans, saying the utility wasn’t doing enough to keep customer bills low. The unexpected setback sent the shares plunging 16% over a three-day period. 

The tension between clean energy and cost is emerging across the US, with regulators and consumer advocates pushing back against rising power bills. Butler stressed that the energy transition doesn’t happen without infrastructure, as new transmission lines are needed to carry power from solar and wind farms to the cities and neighboring states.

A decarbonized grid is expensive and has to be funded by customers and institutional investors, said Shahriar Pourreza, an analyst for Guggenheim Securities. 

“Investors are not going to deploy capital where the rates are below average,” he said, noting that US utilities on average earn a rate of return on their capital spending of about 9.8%, but the rate is lower in Illinois. “This is of course going to slow the energy transition.”

When regulators rejected Exelon’s plan, they accomplished the opposite of what the Illinois clean energy law of 2021 requires the company to do, Butler said. He said the path forward needs a shared vision and balanced approach.

“When you don’t have alignment of policy and practice, you end up where we are,” said Butler. “And that’s why we have to go back to the drawing board and do it again. And that’s the frustration.”

There’s a disconnect between how some politicians talk about the energy transition making electricity cheaper and the expensive reality, said Paul Patterson, a utility analyst for Glenrock Associates LLC. “Politicians and policymakers are happy to order the meal, but it seems that it’s the utility that is going to be sending the bill,” Patterson said. He added that the regulatory challenges Exelon faces in Illinois could be a harbinger of things to come for the utility industry.

Exelon serves more than 10 million customers with six different utilities in areas including Illinois, Maryland and Pennsylvania. Since spinning off its nuclear plants and other generation in 2021, the company no longer owns any power plants and instead buys energy from independent generators on behalf of its customers. 

As a result of the December rejection, Exelon reduced about $1.4 billion in capital in Illinois and laid off about 900 direct contractors with roughly another 2,000 indirect jobs impacted, Butler said in a Bloomberg Radio interview Friday. “Illinois is a difficult jurisdiction for us right now,” he added.

Asked whether the US had a chance to meet President Joe Biden’s target of a carbon-free electric grid by 2035, Butler said at the current rate, no. 

“We’re trying to move to a 21st century grid with 19th century rules,” he said. “You cannot build a grid of the future playing the same old playbook.”

(Updates with analyst quote in ninth paragraph.)

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