Transcript CEO Forum - Downey, William

Finding a Reasoned Path Forward in an
Uncertain Environment
William H. Downey, President & COO
June 2010
The intersection of policy and technology…
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March 2010
Goal line: maintaining reliable service and competitive rates
Business Week (July 2008)
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March 2010
Missouri’s electricity generation portfolio
78% Coal fired power plants
11% Nuclear power plants
(Callaway & Wolf Creek)
4% Natural gas fired power plants
7% Renewable power plants
(primarily hydro-electric and wind)
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March 2010
The evolution of climate change legislation…
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Waxman-Markey
17 % reduction by 2020
83 % reduction by 2050
Cap-and-trade mechanism
Allowances in early years that
decline over time for electric
utilities
No cost collar on prices for
carbon offsets
Renewable energy portfolio
standard
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Kerry-Lieberman
17 % reduction by 2020
83 % reduction by 2050
Cap-and-trade mechanism
Same as Waxman-Markey but
utilities get 2.2 billion more
allowances
Price collar with floor of
$12/ton rising at CPI+3%/yr.
and ceiling of $25/ton rising at
CPI+5%/yr.
Unclear if a RPS will be
included
March 2010
Train Wreck: It’s not all about climate change
Possible Timeline for Environmental Regulatory Requirements for the Utility Industry
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March 2010
Midwest: Greater risk and uncertainty with existing
environmental regulations
Most will need
environmental
retrofits to
continue
operation under
existing EPA
regulations
Source: MEDA Presentation to Joint Committee on Missouri’s Energy Future
7
March 2010
Existing environmental regulations will cause plant retirements…
Source: MEDA Presentation to Joint Committee on Missouri’s Energy Future
8
March 2010
Finding a reasoned path forward…
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March 2010
The importance of Prop C and energy efficiency
Proposition C
Energy Efficiency
 Recover costs related to approved
 2% by 2011 to 15% by 2021
 Value the same as traditional
 2% must come from solar and
energy efficiency programs
provides for solar rebates
supply investments
 Opt-out provision for industrial
 A maximum average retail rate
customers
increase of one percent
“To save power is the
equivalent of making
power.”
– Governor Jay Nixon
(Signing the Missouri Energy
Efficiency Act into law)
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March 2010
Conclusion: small proactive steps and flexibility are key…
 Missouri’s next major baseload generation will come in the next
10-20 years, what it will be remains uncertain
 Uncertainty leads to increased cost—need ground rules
 No one right answer, need a portfolio of solutions
 Need to rationalize national energy and environmental policy
with commercial availability of technology
 Government policy and regulatory policy needs to be aligned
 Must continue to work with customers to mitigate cost-impacts
and understand their changing needs
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March 2010