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Investing in America’s Electric Future

Investing in America’s Electric Future. Morry Markowitz Group Director, External Affairs New Mexico Utility Shareholders Alliance October 7, 2009. Demand for Electricity Is Projected to Increase 27% by 2030. Annual Electricity Use in the Typical U.S. Home Has Increased 60% Since 1970.

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Investing in America’s Electric Future

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  1. Investing in America’s Electric Future Morry Markowitz Group Director, External Affairs New Mexico Utility Shareholders Alliance October 7, 2009

  2. Demand for Electricity Is Projected to Increase 27% by 2030

  3. Annual Electricity Use in the Typical U.S. Home Has Increased 60% Since 1970 Average Annual Kilowatt-hour Sold Per Residential Customer

  4. Electricity Growth Is LinkedTo U.S. Economic Growth

  5. The Costs of Meeting Future Demand

  6. 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

  7. 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.

  8. 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 rulemakings—the Clean Air Interstate Rule and the Clean Air Mercury Rule—will 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

  9. The Role of Energy Efficiency

  10. 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 electricity—enough 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.

  11. The Role of Renewables Benefits and Challenges

  12. Benefits of Renewables • Help promote fuel diversity • Produce minimal environmental impact • Largely free of carbon dioxide emissions • Low or no fuel costs

  13. 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)

  14. What AboutClimate Change?

  15. 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.

  16. 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 What Will It Take?

  17. CO2 Reductions…What’s Technically Feasible?* EIA Base Case 2008 EIA Base Case 2007 *Achieving all targets is very aggressive, but potentially feasible

  18. Auctioning Allowances Would Sharply Increase Costs to Customers

  19. The Dividend Tax Rate Reduction

  20. 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!

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