Investing in Americas Electric Future

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Investing in Americas Electric Future

• Morry Markowitz
• Group Director, External Affairs
• New Mexico Utility Shareholders Alliance
• October 7, 2009

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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 1970
Average Annual Kilowatt-hour Sold Per Residential
Customer
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Electricity Growth Is LinkedTo U.S. Economic
Growth
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• 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
Transmission Investments By Shareholder-Owned
Electric Utilities

• Nearly 75 billion will have been invested
  between 2000 and 2010.
• Customers will benefit from newer technologies
  and reliability.

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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 rulemakingsthe Clean Air
  Interstate Rule and the Clean Air Mercury
  Rulewill 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

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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 electricityenough
  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

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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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Industry Climate Change Principles

• 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.

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What Will It Take?

• 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

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CO2 ReductionsWhats Technically Feasible?
EIA Base Case 2008
EIA Base Case 2007
Achieving all targets is very aggressive, but
potentially feasible
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Auctioning Allowances Would Sharply Increase
Costs to Customers
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The Dividend Tax Rate Reduction
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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!