NEW NUCLEAR POWER

1. NEW NUCLEAR POWER Ed Cummins Westinghouse Electric Company June 29, 2006

2. A Nuclear Renaissance is Beginning Major Driving Factor - Price of natural gas more than doubled. - Volatility of natural gas prices - High long-term projections for natural gas prices Additional Considerations Energy security Uncertainty in the future emissions regulations (monetization of airborne pollutants such as carbon and mercury) Availability of advanced nuclear plant designs Relative stability of regulatory environment Public policy (political) support (Energy Legislation in the U.S.) Challenges Spent fuel disposal Resource availability (human and supply chain) Project Management

3. New Plant Licensing Process New NRC Licensing Process

4. AP1000 Design Certification Received From NRC 12/30/05

5. U.S. Government Support �To build a secure energy future, we need to expand production of safe, clean nuclear power.� President George W. Bush

6. New Plant Licensing Process Early Site Permit - ESP is a partial construction permit . - ESP addresses site safety issues, environmental protection issues and plans for coping with emergencies. - Independent of the review of a specific nuclear plant design - Three ESP applications submitted in 2003 (Dominion, Exelon and Entergy). - Southern Company has scheduled an ESP application in August 2006.

7. New Plant Licensing Process Cont�d. Combined License (COL) - COL authorizes construction and conditional operation of a nuclear power plant. - COL application should include information required for a construction permit and operating license. - Must include the proposed inspections, tests and analyses which the licensee shall perform and associated acceptance criteria (ITAAC) . - The NRC must also find that the ITAAC have been met before granting authorization to operate.

8. Nuclear Power 2010 Dominion pursuing COL for ESBWR at North Anna. NuStart Project Status - Two sites selected for COL Application - Bellefonte (TVA) for AP1000 and Grand Gulf (Entergy) for ESBWR. - GE filed an application for design certification of ESBWR in August 25, 2005. - Design certification of AP1000 was issued in December 2005 . - Engineering work needed for COL applications under way. Submit COLs in the fourth quarter 2007. Obtain COL license in 2010. Plant operation 2015.

9. United States New Plant Market Status Commitments for COL License AP1000 NuStart (TVA) 2 units Duke 2 units Progress 2 units North Carolina Progress 2 units Florida SCANA 2 units Southern 2 units 12 units ESBWR Dominion 2 units Entergy 2 units 4 units EPR Constellation 1-2 units ABWR South Texas 2 units Power Companies Evaluating Technology Florida Power and Light AMEREN UE Texas Utilities Strong preference for passive plants Preference for design and licensing maturity of AP1000

10. 2005 Energy Policy Act President Bush signed the comprehensive energy bill into law, called 2005 Energy Policy Act. on August 8, 2005. Nuclear Related Provisions - Federal risk insurance that would pay up to $2B if there are delays in full power operations of the first six advanced power reactors receiving NRC�s new combined construction and operating licenses. This covers 100% of the cost of delay for the first two new plants, up to $500M each, and 50% of the delay costs up to $250M each for plants three to six.

11. 2005 Energy Policy Act Cont�d. Nuclear Related Provisions (continued) - Federal loan guarantee of up to 80% of the project cost. - Production tax credit for new reactors of 1.8 cents per kilowatts-hour for nuclear generated electricity over eight years. Implementing rules share benefits among qualifying new plant projects. - All decommissioning funds are taxed at 20% rate (reduced from the current rate). - Extension of Price-Anderson Act through 2025 (accident insurance).

12. AP1000 Schedule to Commercial Operation COL engineering and detailed engineering will be completed under the DOE 2010 program. Westinghouse cost sharing 50/50 for work we are performing; we are continuing to invest in the technology. Utilities should be able to obtain a COL in parallel with the NuStart COL process, utilizing all of the information developed under the NuStart program and supplementing as necessary with site-specific information. The site-specific work will have to be done outside of the NuStart program. Shop loading in forging and manufacturing shops may require early placement of orders for some long-lead material. Could be as early as two years (or more) prior to contract signing. Past practice for multiple unit sites has been to bring a new unit on line every year. This could possibly be shortened slightly. For China we looked at a delta of 8 months and decided we could do it.COL engineering and detailed engineering will be completed under the DOE 2010 program. Westinghouse cost sharing 50/50 for work we are performing; we are continuing to invest in the technology. Utilities should be able to obtain a COL in parallel with the NuStart COL process, utilizing all of the information developed under the NuStart program and supplementing as necessary with site-specific information. The site-specific work will have to be done outside of the NuStart program. Shop loading in forging and manufacturing shops may require early placement of orders for some long-lead material. Could be as early as two years (or more) prior to contract signing. Past practice for multiple unit sites has been to bring a new unit on line every year. This could possibly be shortened slightly. For China we looked at a delta of 8 months and decided we could do it.

13. Westinghouse developed AP600, its first passive safety reactor system in the early 1990s (1,300 man-years of design and testing). NRC issued AP600 design certification in 1999 following extensive licensing review of more than 130 man-years and independent confirmatory testing of critical systems. Westinghouse embarked on AP1000 development to improve cost competitiveness. Half billion dollars and over 15 years invested in the development of passive technology.

14. AP1000: No Technology Risk AP1000 power generation systems (fuel, NSSS, turbine generator, support systems) are of �traditional design� and involve no new or novel technology. Operating experience is directly applicable. �Passive� safety systems are, in general, very simple consisting largely of tanks, pipes and a few air or DC operated valves. Expected performance under accident conditions validated by extensive testing (>$40 MUSD) and regulatory review. Modular construction techniques well proven in non-nuclear applications (ship building, off-shore drilling platforms) Mature in design and licensing � 60% complete

15. AP1000 Design Features

16. The Westinghouse AP1000

17. AP1000/AP600Reactor Coolant System

19. AP1000 Provides Safety and Investment Protection

20. AP1000 Simplifications Safety Use of passive safety systems Design Reduced number of components and bulk commodities Procurement Standardization of components Construction Extensive use of modules reduces on-site construction Multiplexed I&C communication reduces cables Operation and Maintenance Use of proven systems and components Man-machine interface advancements

21. Passive Safety � What is it all about? Passive Safety Systems utilizes naturally occurring physical phenomena such as natural circulation of air, water and steam. Gravity and gas pressure drive the flow of cooling water. Natural heat transfer occurs through conduction, convection and evaporation. Flow and cooling occur in accordance with nature�s laws � There are no pumps and motor-operated valves. A few valves align the passive safety systems upon actuation signals. Greatly reduced operator dependency AC electrical power is not required for plant safety.

22. The AP1000 is Smaller and Dramatically Simpler than Evolutionary Plants Many Evolutionary plants improve PRA and safety by adding equipment thereby adding redundancy (4 train) and diversity. Passive safety presents an alternative approach to improved safety which simplifies the plant. Sizewell B is a 1250MW 4-loop PWR in England. AP1000 net electrical output is 1117MW. The comparison is to scale. The AP1000 is much smaller and simpler than Sizewell B. The four colors represent the Safety related Electrical Divisions for AP1000 and Sizewell.Many Evolutionary plants improve PRA and safety by adding equipment thereby adding redundancy (4 train) and diversity. Passive safety presents an alternative approach to improved safety which simplifies the plant. Sizewell B is a 1250MW 4-loop PWR in England. AP1000 net electrical output is 1117MW. The comparison is to scale. The AP1000 is much smaller and simpler than Sizewell B. The four colors represent the Safety related Electrical Divisions for AP1000 and Sizewell.

23. Standardization Standardization has been a key element of New Plant Commercialization for 20 years � NPOC Strategic Plan. The Utility Requirements Document standardized the Power Company requirements for New Plants. Design Certification commits the Plant Supplier and the Nuclear Regulatory Commission to a �Standard Plant�. NRC approach to Design Centered Combined Construction and Operating License (COL) enhances standardization. NRC will �punish� departure from Design Centered review with �extended� licensing schedule. Economics provide incentives for Standardization Beyond Design: Operations - Supply Chain Engineering - Maintenance

24. Standard Plant Design Scope Since the start of the AP600 program, Westinghouse has maximized the scope of the Standard Plant: Forced Draft Cooling Tower for non-safety related Essential Service Water System Spring Mounted Turbine Table Top is not sensitive to Site Soil Conditions. Use of Broad Set of Environmental interface criteria established by the URD (snow, rain, temperatures, wind, soil conditions)� Standard Plant is described in AP1000 Design Control Document, Chapter 1.2. The Scope of Standardization includes the entire plant. Passive Plant Standardization is enhanced by: No need for Safety Related AC Power No need for Safety Related Ultimate Heat Sink (Intake Structure)

25. Standard Plant Market Approach Reduced risk to both buyers and sellers Lower power generation cost Shorter construction schedules Enhanced public confidence Smoother regulatory review Improved perception/ acceptance of financial markets

26. Impact of New Nuclear Plants on Wholesale Electricity Costs

31. Electricity Regulatory Environment Nuclear plants can be implemented in either regulated or unregulated electricity markets. All power companies committed to obtaining AP1000 COL licenses operate in regulated markets (Southern, Duke, Progress, SCANA). In regulated markets, the plant owner obtains a predetermined regulated return on investment. The price of electricity is set by the regulator to achieve this return. Regulators evaluate and approve generating capacity additions based on consideration of (cost, fuel diversity, fuel volatility and security of supply).

32. Electricity Regulatory Environment-Cont�d. New nuclear plants have been proposed in unregulated markets (Dominion and Constellation). Market based owners of nuclear plants sell electricity at the �market price� and obtain a return on investment based on the difference between market price and the production costs. Uncertainty in market price leads unregulated power companies to seek long-term power purchase contracts.

33. Electricity pricing under regulation is based on recovering utility revenue requirements. Revenue requirements are intended to recover all costs for the utility and provide an allowed return on investment.Electricity pricing under regulation is based on recovering utility revenue requirements. Revenue requirements are intended to recover all costs for the utility and provide an allowed return on investment.

34. Deregulated Market Pricing Example A hypothetical 10,000 Mwe system with ten 1,000 Mwe power plants will be discussed. Plants are dispatched into opreration in the order of the price bid into the market. The bid price is assumed to equal the plant energy cost. The energy cost is equal to the fuel + variable O&M costs.Deregulated Market Pricing Example A hypothetical 10,000 Mwe system with ten 1,000 Mwe power plants will be discussed. Plants are dispatched into opreration in the order of the price bid into the market. The bid price is assumed to equal the plant energy cost. The energy cost is equal to the fuel + variable O&M costs.

35. Deregulated Market Pricing Example (cont.) All plants dispatched to operate at any moment, are assumed to receive the same price. The price is set by the bid price of the last (most expensive) plant dispatched. At a 5,000 Mwe demand level, all plants operating will receive $15/mwh. The delta between market clearing price and bid price contributes toward fixed costs & profit margin. If the minimum system load is 5,000 Mwe, the first 4 base load units never establish the market clearing price.Deregulated Market Pricing Example (cont.) All plants dispatched to operate at any moment, are assumed to receive the same price. The price is set by the bid price of the last (most expensive) plant dispatched. At a 5,000 Mwe demand level, all plants operating will receive $15/mwh. The delta between market clearing price and bid price contributes toward fixed costs & profit margin. If the minimum system load is 5,000 Mwe, the first 4 base load units never establish the market clearing price.

36. The demand for electricity is driven by the shape of the load duration curve for each of the regions. This curve identifies the demand level over the course of the year relative to the peak load. The extreme left of the curve indicates the portion of the peak load that must be met throughout the entire year. The load duration curves for the regions indicated bracket the curves for the other regions. The demand for electricity is driven by the shape of the load duration curve for each of the regions. This curve identifies the demand level over the course of the year relative to the peak load. The extreme left of the curve indicates the portion of the peak load that must be met throughout the entire year. The load duration curves for the regions indicated bracket the curves for the other regions.

37. Analyzing 2006 Wholesale Electricity Costs in New England 2006 Regional System Plan (RSP06) estimated how certain actions can affect costs RSP06 will model a number of scenarios to determine their effect on prices, including: Addition of a 1,000 MW base load resource Addition of a 1,000 MW clean-coal generator 5% load growth without generation addition Nuclear base loads impact is similar to coal. A low cost generator is added to the generation mix. Owners return is based on integrated difference in market price and generating cost.

39. Market Based Nuclear GenerationDispatching Resources ISO uses least expensive mix of resources to meet minute-to-minute power needs of the region. Impact of additional units depends on size of ISO and characteristics of electric load. Most expensive needed resource sets market clearing price for all (Uniform Clearing Price Auction). Sends a clear signal to investors and the region on what resources should be developed. Responds immediately to changed market conditions. Encourages marginal-cost based offers so that the most efficient units are dispatched. Marginal cost for nuclear fuel cost $5.0/MWK O&M costs are treated as fixed at about $10.0 MWH. Return on capital is dependent on cost of plant and capacity factor.

40. Summary The current resurgence of interest in nuclear power in the U.S. is based on several factors: Need for additional base load generation in the 2010-2015 period High price of natural gas makes nuclear plants the lowest cost generation source. Uncertainty in Environmental Legislation (carbon, mercury, other pollutants) results in reluctance to build coal plants. Concern about carbon emissions is expected to result in carbon taxes or emission free incentives.

41. Summary � Cont�d. The Energy Act of 2005 provides very attractive incentives for the first few nuclear plants. The AP1000 is attractive as the only advanced plant that has completed Design Certification. Prediction: There will be AP1000 plants operating in the U.S. by 2015.