1. Utility Owned Generation? (UOG)
Electric Restructuring Roundtable
December 8,2006

2. The Energy Consortium
Nonprofit Association of commercial, industrial, institutional and governmental large energy users
Sponsors joint actions to promote fair cost based energy rates, diversified supplies and reliable service for its members
Harvard, Acushnet, MIT, Tufts, Fidelity, Procter & Gamble, Wyeth, etc.

3. Relieve capacity shortages
Why would utilities in re-regulated (Competitive Supply) states install generation?
Relieve capacity shortages
Reliability
Customer cost management
Increase revenue
Avoids interconnection hassles
Distribution issues

4. Why do utilities think this is the answer?
Traditional solution
They have the obligation to serve; customers hold them accountable
They know the business
Cost recovered through rate base

5. Questions? Is this the best solution?
What is the environmental impact?
Is this economically efficient?
Does current regulation support this?
Does UOG support the continued evolution of restructured electric markets and competitive supply?

6. Not really!
UOG fails to acknowledge new methods for supplying energy that go beyond traditional solutions
UOG may be in competition with local merchant generation
Now I will address some solutions that I believe need to be considered

7. New Energy Solutions Non-traditional Proposals
ISO-NE
Demand Resources qualify as capacity
Energy efficiency, load management, Distributed Generation
Driven by issues with new capacity–
Siting is difficult
Environmental hurdles of traditional generation
Interconnection issues
Time
Commend ISO-NE for some out-of-the- box thinking

8. Other Non-traditional Solutions
Energy Policy Act of 2005
Includes funding to study the benefits of Distributed Generation
MA Long-term Energy Plan – 2006
Encourages innovative energy policy including energy efficiency, conservation and on-site generation
Conn. Legislation
Supports DG development
Massachusetts Climate Action Plan
Conn. Incentives for location of DG in load pockets, incentives for utilities that loose load.

9. Large Customer View Energy is a big ticket item - Needs -
Dramatic price increases during the past 2 years
Major cost of doing business
Increased management scrutiny
Needs -
Reliability
Power Quality
Reasonable costs
Environmental concerns
Supportive local utilities

10. Large Customer Role in New Energy Dynamics
Distributed Generation –
A natural solution for TEC members
Relieves congestion on the Grid
Meets reliability needs
Lower cost than stand alone generation
Quickly deployed
Reduces losses
Environmental benefits
Significantly reduces emissions
Less fuel use – 80% efficient vs. 30% for stand alone gen.
Economic
Fuel efficiency
Electric cost savings
DG is not a new solution. Traditionally it has been discouraged by utilities. Today’s circumstances make it an important part of the solution

11. 2004 USAEE/IAEE Study Results
Tom Casten conducted study re: Optimum future Generation
Modeled 8 scenarios to meet EIA projected load growth through 2020 (43%)
Determined capital cost, performance, emissions for each technology in each year
Added T&D, 100% for Central generation, 10% for DG
Projected retail price needed to support technology in each year

12. Results, CG versus DG Dollars (Dollars in Billions)
Item
All CG
All DG
Savings
% Saved
Capacity + T&D
$831
$504
$326
39%
Power Cost
$145
$92
$53
36%
Tons NOx
288
122
166
58%
Tons SO2
333 19
314
94%
MM Tonnes CO2
776
394
381
49%
US load growth will be met with some combination of central and decentralized generation. To provide the bookends – the costs in the extreme cases, this table calculates relevant data with all central generation and with all decentralized generation, then shows the savings and percentages possible. This addresses questions re: economics and efficiency

13. Does current regulation support UOG?
Electric Restructuring Act 1997 required divestiture of fossil fueled generation by utilities.
Is a change of the law necessary to have UOG?
If so, that will take time $$

14. UOG is not promoted in local, state or national plans.
Does UOG support the continued evolution of restructured electric markets and competitive supply?
UOG is not promoted in local, state or national plans.
UOG - a traditional solution
Let’s push the envelope!
This addresses most of my original questions. Other more efficient and economic sol’ns exist, it most likely will require law changes and does not appear to support the evolution of a restructured electric market.

15. Paradigm Shift
Customers and energy providers partner to develop the most economic and environmentally efficient electric system
Demand Resources = capacity
Review all alternatives DG
Energy efficiency and load management
Renewables
Look for a win-win situation for all
Review societal benefits of all possible solutions.

16. Should Utilities Own Generation?
Not if a more efficient alternative can be utilized to do the same thing
Not until all alternatives have been exhausted
All alternatives should include things utilities should and can do such as good distribution planning and investment.