investing in america’s electric future morry markowitz group director, external affairs new mexico...

Investing in America’s Electric Future

Morry MarkowitzGroup Director, External Affairs

New Mexico Utility Shareholders AllianceOctober 7, 2009

Demand for Electricity Is Projected to Increase 27% by 2030

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Annual Electricity Use in the Typical U.S.

Home Has Increased 60% Since 1970Average Annual Kilowatt-hour Sold Per Residential Customer

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Electricity Growth Is LinkedTo U.S. Economic Growth

The Costs of Meeting Future Demand

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Investments in Generation

Inefficient, older power plants will be retired; new plants built.

240 gigawatts (GW) of new capacity will be needed by 2030.*

New capacity costs likely will be in excess of $400 billion.

*Source: Energy Information Administration

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Transmission Investments

Nearly $75 billion will have been invested between 2000 and 2010.

Customers will benefit from newer technologies and reliability.

Transmission InvestmentsBy Shareholder-Owned Electric Utilities

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Environmental Compliance Costs

From 2002-2005, the electric power industry spent at least $21 billion on compliance with federal environmental laws; state and local rules drive costs even higher.

EPA estimates that two rulemakings—the Clean Air Interstate Rule and the Clean Air Mercury Rule—will cost electric utilities and their customers almost $50 billion from 2007 to 2025.*

The research, design, development and deployment of new technologies needed to reduce greenhouse gas (GHG) emissions will require additional investments.

* CAMR is currently being resolved in the courts; compliance costs could rise under alternative regulatory regimes

The Role of Energy Efficiency

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Energy-Efficiency and DSM Programs

Are Making a Difference Between 1989 and 2007,

electric company demand-side management (DSM) programs saved 929 billion kilowatthours (kWh) of electricity—enough to power 83 million average U.S. homes for one year.

These savings are equal to the annual electricity output of 147 baseload power plants [rated at 800 megawatts (MW) each and operating at a 90% capacity factor].

Electric utilities have spent nearly $35 billion on DSM programs from 1989-2007.

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The Role of Renewables

Benefits and Challenges

Benefits of Renewables

Help promote fuel diversity

Produce minimal environmental impact Largely free of carbon dioxide emissions

Low or no fuel costs

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Challenges Facing Renewables

High initial capital costs

Geographic limitations

Variable nature

Transmission availability and cost

Frequent expiration of production tax credit

Environmental and aesthetic challenges (NIMBY)

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What AboutClimate Change?

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EEI supports legislative proposals in Congress to reduce GHG emissions that: Sets targets and timetables for greenhouse gas emissions

reductions that are reasonable and achievable to help prevent sharp increases in electricity prices;

Allocates emissions allowances to the electricity sector for a transitional period;

Includes a “price collar,” or upper and lower limits on the price of emissions allowances; and

Promotes energy efficiency, renewable energy, new nuclear generation, and new advanced coal generation technologies with carbon capture and storage.

* The full text of the EEI climate change principles is available at www.eei.org.

Industry Climate Change Principles

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Addressing climate change requires an aggressive and sustained commitment to a full set of technologies, including: Efficiency Renewables Clean coal technologies Carbon capture and storage Nuclear Plug-in hybrid electric vehicles

What Will It Take?

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EIA Base Case 2008

Technology EIA 2008 Reference Target

Efficiency Load Growth ~ +1.05%/yr Load Growth ~ +0.75%/yr

Renewables 55 GWe by 2030 100 GWe by 2030

Nuclear Generation 15 GWe by 2030 64 GWe by 2030

Advanced Coal Generation

No Heat Rate Improvement for Existing Plants

40% New Plant Efficiency by 2020–2030

1-3% Heat Rate Improvement for 130 GWe Existing Plants

46% New Plant Efficiency by 2020; 49% in 2030

CCS None Widely Deployed After 2020

PHEV None10% of New Light-Duty Vehicle

Sales by 2017; 33% by 2030

DER < 0.1% of Base Load in 2030 5% of Base Load in 2030

EIA Base Case 2007

CO2 Reductions…What’s Technically Feasible?*

*Achieving all *Achieving all targets is very targets is very aggressive, but aggressive, but potentially feasiblepotentially feasible

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Auctioning Allowances Would Sharply Increase Costs to Customers

The Dividend Tax Rate Reduction

Dividend Tax Rate Reduction

Currently at 15%, set to expire at the end of 2010.

Vital to shareholders and the industry.

Proposals by President Obama and Senator Max Baucus (D-MT) would cap rate at 20%. ($200K for individuals, $250K for families)

Majority of shareholders would remain at 15%.

EEI and AGA coalition to support keeping dividend tax rate low. Visit www.defendmydividend.org .

Sign up today!

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