Shaping Our Energy Destiny

EnergyBiz Magazine - September 13, 2010 (News Release)

Utility CEOs Peer into the Future

Published In: EnergyBiz Magazine September/October 2010

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THE ENERGY INDUSTRY FACES UNPRECEDENTED challenges as it transforms its business to accommodate a growing portfolio of renewable generation and erects a smart grid that will tell it more about its business and customers than it ever has dreamed of knowing. As these and other profound challenges mount, utilities have had to deal with slack demand and falling revenues, the fallout of a grueling recession. These matters were top of mind when EnergyBiz recently conducted its annual roundtable discussion with a select group of chief executive officers of investor-owned utilities. After our gathering, we asked the participants to reflect on where the industry is headed and produce a brief position paper. Guiding their reflections was the following question: “The electric utility industry must make long-term, large investments in coming years. Congress is not expected to send a clear signal on future carbon prices any time soon. Revenue for most power companies is down because of the lingering recession. How do you plan not only to survive but to thrive in this environment?”

Their responses follow.

Kevin Burke

EVERYONE WANTS BRIGHT lights, homes that are cool in the summer and warm in the winter, and electronics that keep us in touch and in the know. Energy efficiency is about maintaining our customers’ lifestyle needs with less energy.

Our near-team goal is to lower electric demand in our service area by 550 megawatts over the next five years – enough to power more than a half-million homes.

Just as our customers are investing in making their own energy systems efficient, we too must invest in our energy systems to keep them safe, reliable and up-to-date. Most of our capital spending, which totals about $2 billion a year, pays for upgrades and maintenance. As a result, the company is able to maintain a stellar reliability record.

Probably the most interesting element in our modernization efforts is the smart grid. A smart grid improves the flow of information between us, the utility, and our customers. One pilot project is under way in Queens, where we're installing 1,500 smart meters that will allow customers to monitor and control their energy use. Other smart grid projects under way in Rockland County and New Jersey are also making systems more reliable.

To further our smart-grid efforts, Con Edison is receiving nearly $200 million in federal stimulus grants. Three-quarters of the funds will be used to improve system performance. The remainder of the stimulus money will go to a control system that integrates renewable energy, including solar arrays, and smart grid technologies, such as electric car charging stations and in-home energy monitors.

We are also committed to a clean, sustainable future, evidenced by our having reduced our carbon footprint by 36 percent during the past five years.

Our sustainability efforts extend into the communities and neighborhoods we serve. We have forged hundreds of relationships with local organizations, schools and nonprofits, with a focus on environmental education, green spaces and preservation. Thus, 5,000 new trees were planted in New York City in the past year, a result of our relationship with the New York Restoration Project.

Kevin Burke is chairman, president and chief executive officer of Con Edison.

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Pat Vincent-Collawn

THE ELECTRIC UTILITY industry faces some of the toughest challenges in its history, and the decisions made in response to these challenges will shape the economic and environmental profile of the United States in this century.

To successfully address these challenges, our approach at PNM Resources has three main components.

First, focus on the fundamentals while offering innovative options to customers. All customers want reliable, affordable electricity, but beyond that common denominator, customers have different expectations. For example, many want help with energy efficiency or want more renewable energy. Our programs reflect the needs of different segments, with expanded energy efficiency, and solar and wind options.

Second, stay financially sound while keeping energy affordable. We recently proposed a rate increase in New Mexico. Although a rate case is not popular, it is realistic. As with many utilities, our rising costs and needed investments in infrastructure aren't reflected in current rates. To help customers through this transition, we are providing resources to lower their bills. Even with the proposed increase, our bills will remain among the lowest in the nation.

Third, help to develop solutions. We believe it is our responsibility to educate our state, local and federal legislators and regulators on our business and to participate wherever appropriate in shaping solutions. We have been active in federal carbon policy and we also are working with the U.S. Environmental Protection Agency on fossil emissions programs.

From a technology perspective, we are working with the U.S. Department of Energy on a pilot to explore smart grid innovations and we have proposed a unique smart meter product for all of our Texas customers.

Evolving from a commodity model to one that's value-based is a key driver for our approach. Done thoughtfully and with customer input, I'm confident we can be successful in creating that value.

Pat Vincent-Collawn is president and chief executive officer of PNM Resource

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William Downey

FOR KCP&L, FUTURE success involves a recommitment to the fundamentals of our strategy. We have built a reputation for commitment to our communities and to our customers through reliable service, low cost and a focus on the well being of the communities we serve.

At our company, we tend to discuss this strategy in terms of a higher purpose. A strong focus on our core obligations as a utility plus an obvious commitment to the quality of life for all citizens in the communities we serve establishes the best possible framework for positive outcomes in our business.

In our generation strategy, our plans involve outfitting our low-cost coal fleet with state-of-the-art environmental controls, improving the efficiency of our units, building wind and other renewable energy sources and demonstrating other distributed resources such as solar.

Our delivery organization is tasked with maintaining the already high reliability of our T&D system while introducing selected smart grid strategies to create a more flexible system that recognizes the new realities of supply. And our customer organizations must work to understand and respond to real customer needs and wants for control, low cost and convenience. Technology and service tempered by a strong cost focus will be key to satisfied customers and our company's success.

William Downey is president and chief operating officer of Kansas City Power & Light.


Richard Kelly

I'VE BEEN IN THE ENERGY business for more than 40 years, and the past few years have been as interesting and challenging as I can remember. As chairman of the Edison Electric Institute, I feel privileged to be part of important conversations and decisions as we work together toward a clean, reliable and cost-effective energy future.

Ours is a complicated business that is enormously important to the nation. It's also very much a long-term business. The decisions we make today will affect our customers for years to come. That means we have to be careful about the consequences of our actions, but I also strongly believe that we need to move forward on issues such as climate change. More than anything, the energy industry would benefit from legislative and regulatory certainty coming from Washington.

Diversity is another characteristic of the energy industry. Xcel Energy operates in eight Western and Midwestern states. We are fortunate to do business in parts of the country that have abundant renewable resources such as wind, solar, biomass and hydro. That, of course, puts us in a strong position to be an environmental leader. We also use all of the resources at our disposal: renewable sources as well as conservation, efficient fossil generation and new technologies. It's a balancing act whether we're talking about our energy portfolio or balancing our responsibilities to customers and shareholders.

Finally, Americans are interested in energy independence – today more than ever. From my perspective, the biggest barrier in reaching energy independence is the fact that technology has yet to bridge the gap between energy independence and affordability. There are a lot of promising technologies from smart grid to energy storage to carbon sequestration. But cost and commercial viability remain enormous barriers.

So we have plenty of challenges but the work couldn't be more exciting or important.

Richard Kelly is the chairman and chief executive officer of Xcel Energy


David M. Ratcliffe

THE ECONOMY IN THE Southeast, long driven by a vibrant, growing industrial base that encourages strong migration to the region, has resulted in a good balance of residential, commercial and industrial customers. Though our service territory hasn't been immune to the recent economic slowdown, all indications are that we are seeing some stabilization. Moreover, long-term demand is expected to grow, and at a faster rate in the Southeast than in the rest of the country. For example, the Energy Information Administration projects that the growth in Southern Company's service territory—Alabama, Florida, Georgia and Mississippi - will result in a need for significant new generating capacity by 2025.

Meeting the increasing demands for electricity while reducing greenhouse gas emissions requires a multifaceted approach that includes investments in new technologies across the spectrum. Although uncertainty about energy legislation remains, Southern Company is taking the necessary steps to ensure that we continue to provide our customers with reliable, affordable electricity.

During the next three years, we plan to invest $16.4 billion in new technologies to achieve cleaner generation at our existing plants, add more than 4,000 megawatts of new generation with a lower carbon footprint and make our electric grid smarter and more efficient.

Helping customers make smarter energy choices, using more renewable resources, expanding the use of nuclear power – the only carbon-free baseload generation resource – and developing advanced, clean coal technologies each will play a key role in meeting increasing energy needs.

These initiatives, and the ability to operate within a transparent, constructive regulatory framework, are the foundation for long-term success. While there is no single solution, there is a singular commitment on Southern Company's part to play a leadership role in addressing these challenges for the nation and the world.

David M. Ratcliffe is chairman, president and chief executive officer of Southern Company.


Michael W. Yackira

NV ENERGY WILL THRIVE by staying focused on our three-part energy strategy, which calls for making investments that enable our customers to reduce energy usage; expanding renewable energy initiatives; and adding clean, efficient traditional and related transmission infrastructure.

Although the United States lacks an integrated, comprehensive energy policy, the trend is definitely moving toward lower carbon-based energy, and I believe the industry will take action with or without any climate legislation. Nevada is blessed with abundant geothermal and solar resources, which gives NV Energy the opportunity to lead the nation in the development and integration of renewable energy. Transmission infrastructure is essential to bring these renewable resources to market and we recently signed a memorandum of understanding with Great Basin Transmission, an affiliate of LS Power, to construct a jointly owned 500-kilovolt transmission line. With the enormous amount of geothermal and wind energy potential that we have in the northern part of the state, a transmission line connecting the northern and southern portions of NV Energy's electric system will make the opportunity for additional renewable development for the benefit of our entire state a reality.

In keeping with our three-part energy strategy, another key component to our future success is advanced service delivery (ASD), what we call our smart grid/smart meter program. As devices like smart phones, plasma TVs and computers that rely on electricity to function define our lifestyle, ASD provides the key to transforming our relationship with our customers. It will provide them with the tools, information and programs they need to take control of their energy usage in a way that fulfills their lifestyle goals.

Another key for NV Energy is that we have more than doubled our owned generating capacity since the beginning of 2006, making us less dependent on energy markets to supply our customers’needs. That, coupled with the economic slowdown, suggests that we do not need to build new fossil-fueled generation until late in this decade. We are convinced that our three-part strategy along with a slow-growth economy will provide ample time for Congress and the Environmental Protection Agency to address climate issues before we have to make decisions on our next traditional generating plants.

Additionally, the investment in ASD creates long-term cost benefits to our company and our customers, including energy efficiency along with lower operating costs. As we reduce usage we are eliminating the need for additional power plants, helping improve the environment and lowering customers’ bills. All of these are positive steps, especially if the economic recovery is slower than all of us hope it will be.

Michael W. Yackira is president and chief executive officer of NV Energy

 


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