State of the Electric Industry Update: Keeping Missouri’s Electricity Reliable & Affordable

1. State of the Electric Industry Update:Keeping Missouri’s Electricity Reliable & Affordable Warren Wood, PE President, Missouri Energy Development Association (MEDA) June 6, 2008 Warren@missourienergy.org 326 East Capitol Ave Jefferson City, MO 65101 573 634 8678 2008 Spring Conference

2. Who is MEDA? The Missouri Energy Development Association is comprised of Missouri investor-owned natural gas, electric and water utilities. Its purpose is to develop, organize and promote measures that will advance the ability of investor-owned utilities to build, maintain, protect and provide the utility infrastructure and services that are critical to the economic well being of Missouri business and the health and safety of Missouri citizens.

3. Members ELECTRIC COMPANIES GAS COMPANIES WATER COMPANY

4. Electric Rates in Missouri are Low – Good for Everyone Missouri’s Electric Rates Are Well Below the National Average Missouri Ranking:Residential – 7thCommercial – 6thIndustrial – 10th

5. Source: DOE – EIA Electric Energy Sector Fuel Source Reports By State (All Sectors)

6. Utility Megatrends & Factors Causing Electric Rate Increases:Demand Growth  New PlantsEnvironmental Regulations  New Emissions Equipment & Some Plant RetirementsCosts of Materials, Equipment & Fuel Costs of NewPlants & Emissions EquipmentGreen House Gas Regulations Will Cause Significant Additional Rate Increases We Need to Address Demand Growth – It Relates to Several of the Factors Causing Rate Increases

7. Missouri Electric Utility Annual Load Growth Forecast: • Missouri’s electricity needs are currently served by power plants that have a combined capacity of about 23,000 MW. With an annual growth rate of only 1.4%, it will still be necessary to add over 320 MW of capacity each year to match load growth. • Two and one-half new power plants the size of Callaway 1 would be required in the next ten years to match this growth rate (without any retirements).

8. Building New Power Plants: The Options are Limited • Hydroelectric – clean and renewable but extremely difficult, if not impossible, to license • Wind & Solar – clean and renewable but does not provide continuous power and solar is currently very expensive • Natural Gas – cleaner than coal, cheaper to build, more expensive to operate, some carbon risk, and increased use for electricity will put additional pressure on imports • Coal – critical from an energy independence standpoint and a low-cost resource but environmental concerns, expensive to build, and future carbon risk to operating expense • Nuclear – no carbon risk, virtually no emissions, a long-term low-cost resource but expensive to build, long license period, and long-term waste concerns • Uniquely suited to meet future baseload electricity needs in a carbon-constrained world.

9. Utility Specific Generation Plans • Missouri Investor-Owned Electric Utilities Investing Over $7 Billion in the Next Decade To Meet the Growing Energy Needs of Missourians (forecasted late ’06 numbers): • AmerenUE – Recently Purchased 1,490 MW of Gas-Fired Generation, Considering New 1,600 MW Nuclear Unit (~$5 billion) & Rebuilding Taum Sauk (~$450 million) • KCP&L - Iatan II (55%) 468 MW (~$878 million) & Wind Power Additions (~$164 million) • Aquila - Iatan II (18%) 153 MW (~$293 million) & Constructing Another Gas-Fired Plant (~$186 million) • Empire – Iatan II (12%) 100 MW (~$195 million), Plum Point 50 MW (~$ 103 million) and 50 MW Purchase Contract & Recently Constructed Gas-Fired 155 MW Gas-Fired Plant (~$60 million)

10. Coal Plant Cancellations / Closings2006 - 2007 Source: NRDC: The Growing Trend Against Coal-Fired Power Plants; other publications

11. Coal Remains A Dominant Part of Tomorrow’s Energy Mix 2030 2006

12. Generation Options – Public Policy Drives Resource Mix • 70,000 Uranium Coal Renewables Hydro • 60,000 Credit Crash 2001 Fuel Oil Natural Gas • 50,000 The Oil Embargo 1973-1974 RTO NOPR 1999 CAA 1970 • 40,000 Capacity Installations (MW) PURPA 1978 CAAAmendments 1990 • 30,000 • 20,000 EPACT 1992 Rise of the Merchant • 10,000 EWGs PURPA QF Era • 0 Vertically Integrated Utilities • 1950 • 1958 • 1966 • 1974 • 1982 • 1990 • 1998 • 2006 New Generation Capacity By Fuel Since 1950 Source: Henwood Energy Consulting

13. Increasing Demand for Natural Gas for Electricity Generation Status of Domestic Natural Gas Supply Source: EIA Annual Energy Outlook 2007 Small but Increasing Percentage of Natural Gas Being Imported from Other Countries Higher Prices Impacting Electric Rates & Home Heating Bills Source: NYMEX

14. Futures Through January ‘09

15. Flue Gas Desulphurization Equipment Source: Denali Inc. Selective Catalytic Reduction (SCR) Equipment Source: Denali Inc. Source: Hamon Research-Cottrell Fabric Filter (Baghouse) Equipment

16. Utility Specific Environmental Plans • Missouri Investor-Owned Electric Utilities Investing Over $3 Billion in the Next Decade to Meet Mandated Environmental Regulations (forecasted late ’06 numbers): • AmerenUE – Spending Approximately $ 2 Billion to Comply with Environmental Requirements • KCP&L – Environmental Work in Compliance with Comprehensive Energy Plan and Environmental Requirements Expected to Cost Over $ 1 Billion • Aquila – Spending Approximately $215 Million to Comply with Environmental Requirements • Empire – Iatan I Work (~$ 49 million) & Environmental Work at Other Plants Expected to Cost ~$ 130 Million

17. Materials, Equipment & Fuel Increases Copper Prices Increased 400% From 2003 to 2006 - Steel & Aluminum Prices Have Also Increased Sharply Major Equipment Prices Have Increased Significantly Since 2002 – Lead Times Have Also Increased Source:U.S. DOE/Energy Information (January 2006) Fuel Prices Have Also Increased Sharply Since 1999 193% 220% 43%

18. “Is Global Warming Really Happening?”Consumer Survey Source: EEI’s National Public Opinion Monitor Q2 2006 Results

19. CO2 Reductions – What’s Technically Feasible? • Higher fuel prices • Lower GDP, load growth rate • More renewables, nuclear EIA Base Case 2008 EIA Base Case 2007 Achieving all targets is very aggressive, but potentially feasible (EPRI Prism – With EIA Update)

20. Range of Potential Impacts From Climate Legislation? • Cost per household $446 - $2927 in 2020 / year • Electricity prices 21% - 35% in 2020 • Natural gas prices 20% - 39% in 2020 • GDP 0.7% - 1.74% (~ $336B out of $~19.2T GDP) • Employment 1.1 - 2.78 million in 2020 • Coal consumption 42% - 66% in 2020 • Permit prices ($ / ton CO2 equivalent) $18 - $48 / ton in 2020 • Total US GHG emission (mmtCO2-equivalent) 4887 – 6654 in 2030 (“Business As Usual” 9672 in 2030)

21. Regional Differences in Cost per Home of Lieberman-Warner (2020) Northeast -384,000 Mid-Atlantic -374,000 Northeast $1,397 Mid-Atlantic $1,637 Great Plains -178,000 Great Plains $2,027 West (includes Alaska) -594,000 West (includes Alaska) $1,399 Midwest -595,000 Midwest $2,021 California -508,000 California $1,110 Southeast -972,000 Southeast $1,581 Oklahoma/Texas -671,000 Oklahoma/Texas $3,298 Mississippi Valley $1,815 Mississippi Valley -614,000 !!! The national average cost per household in 2020 is $1,740.

22. Do the utility industry folks have enough to keep them busy? Let’s just say we are considering new office furniture…

23. Can the US Bring Down Worldwide CO2 Emissions By Itself? ….Growth In Other Countries • China and India are currently in an unprecedented energy infrastructure build-up. • In the June 2007 Boone Electric Cooperative Extra, it was noted that “China is building 562 coal-fired power plants over the next eight years and India could add as many as 213. Every week to 10 days, China will be adding another coal-fired power plant.”

24. Worldwide Electricity Demand Growth Net Electricity Consumption 7,000 6,000 5,000 4,000 (Billion kiloWatthours) 3,000 2,000 1,000 0 2003 2015 2030 U.S. China OECD Europe India USA CHINA Source: Energy Information Administration, International Energy Outlook 2006

25. China’s CO2 Emissions Surpass U.S. in 2007* * Based on projected data from the International Energy Agency, November 2007.

26. Current Status of Nuclear Energy in the US Meeting Almost 20% of Our Energy Needs Courtesy: NRC 104 Commercial Nuclear Power Plants in the US Sources: EIA, Form EIA-906, "Power Plant Report;" and Form EIA-920 "Combined Heat and Power Plant Report."

28. Next Nuclear Power Plant in Missouri?Callaway II Courtesy: AmerenUE

29. Location of New Plant & Cooling Towers Courtesy: AmerenUE

30. Summary – Nuclear Energy IS • Cost Competitive With Other Sources of Electricity • Uniquely Situated to Meet Growing Demand for Baseload Power Without Contributing to Green House Gas Emissions • Supportive of US Energy Independence • Supportive of Long-Term Energy Sustainability in the US • Already Booming in China, India, Russia & Japan

32. For more information on these topics: • January 2008 POWER Magazine • One-size RPS does not fit all (pg 26) • Regulatory risks paralyzing power industry while demand grows (pg 28) • U.S. Nuclear power’s time has come – again (pg 72) • February 2008 POWER Magazine • U.S. a paper tiger in nuclear power (pg 4) • What Congress can learn from Google (pg 64) • April 2008 POWER Magazine • Super Tuesday, Super Bowl XLII, and the Nukes (pg 28) • Developing the Next Generation of Reactors (pg 44) • February 2008 Public Utilities Fortnightly Magazine • The Big Build (pg 36) • GHG Compliance Complexities (pg 48) • February 21, 2008 USA Today Newspaper • Profit-minded companies get inventive to fix greenhouse gas problem (page 2B)

33. Questions ? Contact Information: Warren Wood, PE MEDA 326 East Capitol Avenue Jefferson City, MO 65101 Phone (573) 634-8678 E-Mail: Warren@missourienergy.org