Fourth National Green Power Marketing Conference Clean Energy and Electricity Restructuring: A Federal Overlay Steven L. Kline Vice President, Federal Governmental and Regulatory Relations

PG&E Corporation

Working to promote clean energy markets –Pacific Gas and Electric Company: an environmental leader over the past decade. –US Generating Company: new gas-fired plants, wind energy, and emission reductions at existing plants. –PG&E Energy Services: providing energy efficiency services to customers and Clean Choice product in California.

Environmental Issues Will Influence Energy Policy and Market Development Environmental issues will have sharp and near-term implications for energy policy and the development of a competitive market.

Environmental Impacts on Restructuring

Goal of Electric Industry Restructuring To achieve a viable competitive generation market that provides customers with lower costs, more choices, better service, and a cleaner environment.

A Competitive Market with Environmental Improvement Customer Choice Consumer Information and Protection Market Power Incentives for Renewables Incentives for Clean-up of Existing Plants Incentives for Energy Efficiency

Getting to Customer Choice Dismantle Barriers to Market Entry Create a Fair and Level Playing Field Provide Market Opportunities to Spark Innovation Develop a Consistent and Equitable Set of Rules and Standards Competitive Market

Interplay of State and Federal Activities There is a “push-pull” that occurs between state and Federal activities -- momentum in one arena creates momentum in the other. The policies and activities that occur at the state level have influence over the direction of Federal activities -- the same holds true between Federal activities and state actions.

State Restructuring Activities Many states have begun the evolution to a competitive market –Approximately 20 states are in the process of implementing changes to their existing electric marketplace, with four states (California, Massachusetts, Pennsylvania, and Rhode Island) currently open and two more (Illinois and New Jersey) expected later this year. States have taken different tacks toward deregulation and the introduction of competition due to physical, economic, and political realities that exist within states. Some have focused more on developing wholesale markets while others have focused more on developing the retail side of the equation.

State Action and the Environment Virtually all of the states that have acted have included provisions in their legislation to support the environment, encourage development of the green market, and continue ongoing DSM and energy conservation programs Some states have focused more on renewables development, while others have focused on reducing air emissions, introducing a cleaner fleet of generating resources, and reducing energy consumption

State Action and the Environment Renewable Portfolio Standards: Require that a percentage of the energy being sold by a supplier in the state be generated from renewable resources Generation Performance Standards: Generation standards that allocate emission rights on the basis of output (usually pounds/ MWh) rather than on heat input Environmental Disclosure: Require that suppliers provide a label that discloses the fuel source and emissions characteristics of the electricity being purchased by a consumer Support for Energy Efficiency and Renewables Development: Provide funding through a non-bypassable public benefits charge to support energy efficiency-related activities and renewable resource development. Money is disbursed using a variety of methods

Clean Energy Federal Legislative Activities Administration Bill: Includes a renewable portfolio standard that can be met through purchasing credits. The bill also provides authority to the EPA to implement an interstate NOx trading system. Public benefits fund for energy efficiency, consumer education and low-income programs. Wind Energy Tax Credit: Legislation is pending to extend the wind energy tax credit, set to expire this year. Energy Efficiency Tax Credit: Legislation to provide tax credits for energy efficient equipment installed in existing and new residences is pending. In the last Congress legislation was introduced that would provide credits to both business and residences (it will possibly be re-introduced in this Congress).

Clean Energy Federal Legislative Activities Generation Performance Standards: Rep. Pallone introduced legislation last Congress to set generation performance standards; he is likely to reintroduce the legislation in the next several weeks. Climate Change: Sen. Chafee introduced legislation to establish credit for early action for voluntary reductions of CO 2. Sen. Murkowski also has introduced legislation that seeks to cut greenhouse gas emissions through voluntary means.

Federal Regulatory Activities Impacting Clean Energy EPA “call-in” of the state implementation plans: The EPA has ordered 22 eastern states to develop plans for reducing summertime emissions of NOx. National Acid Precipitation Assessment Program (NAPAP): NAPAP recently concluded that emissions reductions resulting from the 1990 federal acid rain legislation will be insufficient to protect sensitive ecosystems. DOE Insurance Project: An effort is underway to establish federal funding, to be matched by state funding, to seed an insurance program for marketers of renewable energy.

Some NGO Clean Energy Activities NAAG Green Guides: NAAG is working with interested parties to develop green marketing guidelines for electricity sales. NRDC: Legislative consensus group Efforts to certify and/or define green power –Green - e –low-impact hydro certification

A Competitive Market with Environmental Improvement Customer Choice Consumer Information and Protection Market Power Incentives for Renewables Incentives for Clean-up of Existing Plants Incentives for Energy Efficiency