Yellowstone Valley Electric Cooperative, Inc'

1
Yellowstone Valley Electric Cooperative, Inc.

• 2009 ANNUAL MEETING REPORT
• Presented by Terry M. Holzer
• General Manager
• March 17, 2009

2
Previous Years in Review
3
(No Transcript)
4
(No Transcript)
5
Long Term Debt Comparison2003-2008
6
(No Transcript)
7
(No Transcript)
8
YVEC RATESPer 1,000 KWH Sold
9
(No Transcript)
10
(No Transcript)
11
2008 MILESTONES

• Slow Down of New Services More Maintenance
• New Distribution Lines Upgraded
• Pole Change Out Program 1,000 Poles
• Blue Creek Substation Will Be Built This Year
  1.8M Project
• All Part Of A Just Completed 12M Work Plan
• 2009 Loan Application for 13M
• Fortunate to Have Employees Who Are Capable Of
  Doing Most Of This Work

12
What Is Impacting Rates?

• Three Major Cost Drivers
• Power Supply Related Expenses
• Utility Plant Growth
• Increased Debt

13
Cost reduction actions

• Improving Load Factor Marketing Programs
• Streamlining Work Process Improve Efficiencies
• Line Vehicle GPS System
• Utilizing Our Own Work Crews
• Improved Inventory Management System
• Pole Consignment
• SBR Program
• Challenging SMEGT To Control Costs

14
SMEGT ISSUES

• Why Highwood Generating Project Was Not
  Successful
• Project Cost Escalation
• Financing Difficulties
• Environmental Challenges Regulatory
• Litigation (not ours) Public Outcry
• YVEC Expressed Concerns For Two Years
• This Unsuccessful Attempt Has Cost The Member
  Systems Of SMEGT A Considerable Sum Of Money

15
Switch to a gas plant

• SMEGT Publically Announced Its New Plan Now
  Wants To Build A 120 MW Natural Gas Plant With
  Wind
• Challenges And Risk Still Remains
• If Built, Not Enough Power To Supply Current
  Power Needs Of SMEGT Members
• Financing Uncertainty
• Volatile Fuel Price
• SME Co-ops Having Financial Difficulty In Paying
  On-Going Project Costs

16
Switch to a gas plant

• EES Study
• YVEC Commissioned Cost Study
• Using 2012 Dollars, 30Year Net Present Value Of
  The Plant Is 1.2 Billion
• 120 MW CCCT Gas Plant With 6 MWs Of Wind, Price
  Of Power Would Be 11.7 Cents Per kWh At A
  Levelized Gas Price of 7.38 Per MMBtu
• 2008 SMEGT Wholesale Power Rate To Its Member
  Co-ops Was Around 4.5 Cents Per kWh.
• Price Of Power From The Gas Plant Would Be 2.5
  Times Higher Than Their Current Power Cost Per
  kWh.
• Web Posting http//www.yvec.com

17
YVEC Lawsuit

• On December 12, 2008 YVEC Filed A Lawsuit Against
  SMEGT And Its Member Systems
• Reasons For The Lawsuit
• When YVEC Began Questioning The Viability of HGS,
  SMEGT Took Steps To Eliminate YVECs Voice In
• The Cost Of The Power It Would Purchase
• The Source Of The Power
• The Disposition Of YVECs Investment In The HGS
  Property
• In Addition, SMEGT Has Given Substantial Cost
  Breaks To The City Of Great Falls, At The Expense
  Of The Members of YVEC And The SMEGT Co-ops.
  This Has Cost The Member Co-ops Millions of
  Dollars.

18
YVEC Lawsuit

• What YVEC Hopes To Accomplish
• End Our Membership In SMEGT
• Terminate The Current Power Supply Contract
• Get Back Our WAPA Allocation
• Recover Our Investment In The GT

19
YVEC Lawsuit

• YVEC Sees A Much More Secure Future Away From
  SMEGT Because
• Lower Risk Related To Future Power Supply Access
• Future Costs Mitigated, Relative To Climate
  Change Regulations
• Greater Stability And Predictability Regarding
  Future Power Supply Costs And Related Utility
  Issues.

20
POWER SUPPLY CHALLENGES

• Many Of The Power Plants That Are The Backbone Of
  Our Power Supply Need To Be Replaced
• New Base-Load Generation Must Be Built To Power
  Our Nations Economy In The Future
• Electricity Demand Is Up 25 Since 1995
• Power Demand Is Expected To Increase Another 30
  By 2030

21
POWER SUPPLY CHALLENGES

• Where Will The New Generation Come From?
• Much Of The Same Resources We Use Now Coal,
  Natural Gas, Nuclear, Hydro, Geothermal
• Coal And Nuclear Power Plants Provide 70 Of Our
  Nations Power Supply
• Renewable Resources, Such As Wind And Solar Will
  Contribute
• Conservation And Energy Efficiency Will Be
  Important
• Renewable Resources, Conservation, And Energy
  Efficiencies While Important They Will Not
  Provide Our Base-Load Power Needs.

22
Transmission needs

• Currently Have 160,000 Miles of Transmission
  Lines
• Need An Additional 30,000 Miles Of Transmission
  Lines To Support The Transportation Of Wind
  Energy To Urban Area.
• 1.5 Trillion Investment In New And Upgraded
  Transmission Lines Needed Over The Next 20 Years.

23
CARBON TAX CAP AND TRADE

• The Cost Of Building New Generation Will Be
  Significant
• The Financial Impacts Of A Carbon Tax Or Cap And
  Trade Program Will Be Huge!!
• President Obamas 3.6 Trillion Budget Calls For
  A Tax On Carbon
• Starting Price Of 20/ton
• 80 Billion Per Year, Beginning in 2012
• Total Carbon Tax On Americas Electric Bills From
  2012-2019645 Billion
• 525 Billion To Be Return To You In The Form Of
  Tax Cuts
• 120 Billion To Go Toward Low Carbon Technologies
  i.e., Renewables
• Objective IS To Reduce CO2 Emissions 80 Below
  2005 Levels By 2050.

24
CARBON TAX CAP AND TRADE

• Carbon Tax Will Have Serious And Significant
  Financial Consequences
• A Large Regional Generation Cooperative Recently
  Stated A 20/ton Carbon Tax Would Increase Their
  Rates 0.032 Or 76
• YVEC Power Supply Costs Would Increase About 65

25
(No Transcript)
26
What should we do?

• Back Off On Any CO2 Taxes And Regulations
• Give Our Nation Time To Heal And Recover
• Lets Build Something That Makes Sense More
  Nuclear And Hydro
• Accelerate Development Of Carbon Capture /
  Sequestration Cant Shut Down All 616 Coal
  Plants That Produce 50 Of Our Electricity
• Be Sensible And Realistic About Renewable
  Energys Opportunities And Pitfalls
• Improve Building Standards For Added Energy
  Efficiency
• Install More Geothermal Heating And Cooling
  Systems
• Advance Hydrogen Technologies Transportation /
  Power Production
• Invent Something Or Create Some Form Of Energy
  That Will Solve Our Energy Problems