Eric M. Markell Sr. Vice President Energy Resources Puget Sound Energy Planning to Transacting: The Road to Getting Renewables Done National Association.

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Presentation transcript:

Eric M. Markell Sr. Vice President Energy Resources Puget Sound Energy Planning to Transacting: The Road to Getting Renewables Done National Association of Regulatory Utility Commissioners August 1, 2006

Disclaimer

Presentation Outline Intro to PSE & Its Resource Needs Intro to PSE & Its Resource Needs Value Renewables Bring to Portfolio Value Renewables Bring to Portfolio Challenges to Acquiring Renewables Challenges to Acquiring Renewables How Government/Regulators Can Help How Government/Regulators Can Help

PSE Overview

PSE’s Resource Need

Estimated Cost to Fill Need 3.7 Billion Dollars by 2015

Value Renewables Bring to Portfolio Diversity-- Mitigate fuel price risk Mitigate fuel price risk Mitigate hydro risk Mitigate hydro risk Reduce risk to the environment Reduce risk to the environment Mitigate future environmental regulation risk Mitigate future environmental regulation risk

Challenges to Acquiring Renewable Resources Global Competition for Technology/Talent Global Competition for Technology/Talent Costs Up - A Lot Costs Up - A Lot Census of doable deals appears thin Census of doable deals appears thin Ample capital but few quality development teams Ample capital but few quality development teams Good development teams are not scalable Good development teams are not scalable Small projects unattractive to capital/talent Small projects unattractive to capital/talent Transmission Transmission Intermittency Intermittency Permitting Permitting

Levelized Costs Are Up - A Lot $2006 $2004 Natural Gas (44-62) (60-85) (45-65) (42-74) (64-67) (76-106) (70-129) (71-125) (59-100) (61-101) Wind Coal Hydro PPAs 20-year levelized cost - $/MWh Notes: 1) This chart compares the 20-year levelized costs each individual resource bid; 2) 2004 levelized costs do not include transmission from Mid-C to PSE’s system; 3) PPA costs represent fixed price offers and include imputed debt; 4) Impacts to the Company’s credit costs are not reflected in analysis.

Transmission

How Regulators Can Help Encourage Integrated Resource Planning and Acquisition. Encourage Integrated Resource Planning and Acquisition. Encourage active utility engagement with developers and the development process. Encourage active utility engagement with developers and the development process. Encourage and reward renewable and environmental initiatives. Encourage and reward renewable and environmental initiatives. Understand the deal making value chain. Understand the deal making value chain. Provide strong capital structure, fair returns, and realistic opportunities to earn such return. Provide strong capital structure, fair returns, and realistic opportunities to earn such return.

Conclusion Renewable targets in WECC are aggressive. Renewable targets in WECC are aggressive. Alignment of all interests will be essential if success is to be had. Alignment of all interests will be essential if success is to be had. It’s going to be a bumpy ride! It’s going to be a bumpy ride!