Mgerken Eblf Presentation 2009

7/31/2019 Mgerken Eblf Presentation 2009

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Marc S. Gerken, P.E.Marc S. Gerken, P.E.

President/CEO, AMPPresident/CEO, AMP--OhioOhio


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The Power RenaissanceThe Power Renaissance

Whats happening at groundWhats happening at groundzerozero

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-- American Municipal PowerAmerican Municipal Power--Ohio is theOhio is the

wholesale power supplier and serviceswholesale power supplier and servicesprovider for municipal electric systems in 6provider for municipal electric systems in 6s a ess a es MemberMember--owned/governed nonowned/governed non--profit corporation formed inprofit corporation formed in

19711971,,

hydro, wind, distributed generation)hydro, wind, distributed generation) Develops, manages and coordinates wholesale powerDevelops, manages and coordinates wholesale power

supply and interconnection agreements for memberssupply and interconnection agreements for members 126 Members in Ohio, Pennsylvania, Michigan, Virginia,126 Members in Ohio, Pennsylvania, Michigan, Virginia,

West Virginia, KentuckyWest Virginia, Kentucky Members serve more than 570,000 customers/metersMembers serve more than 570,000 customers/meters

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organizationsorganizations


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-- Members serve approximately 542,000Members serve approximately 542,000

customers/meters in six state footprintcustomers/meters in six state footprint Board consists of member communit cit mana ersBoard consists of member communit cit mana ers

public service and utility directorspublic service and utility directors

Members in footprints of both MISO and PJMMembers in footprints of both MISO and PJM

Active member of the American Public PowerActive member of the American Public PowerAssociation (APPA)Association (APPA)

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AMPAMP--Ohios Pow er SupplyOhio s Pow er Supp ly

Prof i leProf i le

Generation mix of primarily coal (66%)Generation mix of primarily coal (66%)and renewables (34%)and renewables (34%) Doesnt include market purchasesDoesnt include market purchases

Peak load of 3,000 MWPeak load of 3,000 MW AMPAMP--Ohio currently relies on the marketOhio currently relies on the market

for approximately:for approximately: 62% of baseload needs62% of baseload needs

95% of intermediate needs95% of intermediate needs

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20% peaking needs20% peaking needs


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Decreasing supplyDecreasing supply

Little incentive to build new generationLittle incentive to build new generation

Increasing demandIncreasing demand

Higher fuel costsHigher fuel costs Increasing environmental costsIncreasing environmental costs

Increasing construction costsIncreasing construction costs

Impending carbon regulationImpending carbon regulation

Dysfunctional wholesale marketsDysfunctional wholesale markets

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Utilities, especially transmissionUtilities, especially transmissionde endent utilities will have to bede endent utilities will have to beincreasingly creative and strategic inincreasingly creative and strategic in

rm f w r lrm f w r l

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Inc reas ing dem and forInc reas ing dem and for

renew able generat ionrenew able generat ion RPS/AEPS legislation passed in many statesRPS/AEPS legislation passed in many states

and under consideration in Congress will putand under consideration in Congress will put

Need to be prepared for coming carbonNeed to be prepared for coming carbonre ulator re imere ulator re ime

Need to balance portfolios while controllingNeed to balance portfolios while controllingcosts for endcosts for end--use customersuse customers

Interconnection and siting issues related toInterconnection and siting issues related torenewable generation projects need to berenewable generation projects need to be

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Current ec onom y is hav ingCurrent ec onom y is hav ing

an im pac tan im pac t Cost to endCost to end--use customers a big factor,use customers a big factor,

especially in terms of industrial and commercialespecially in terms of industrial and commercial

Current conditions are impacting the ability toCurrent conditions are impacting the ability tofinance eneration ro ectsfinance eneration ro ects

Softening of the commodities markets maySoftening of the commodities markets mayactually help in terms of controlling the cost ofactually help in terms of controlling the cost ofpro ec spro ec s

Stimulus money may help get some projectsStimulus money may help get some projects

99 Will depend on program structureWill depend on program structure


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Cl im at e ChangeCl im at e Change

Considerat ionsConsiderat ions Policy decision that will have a profoundPolicy decision that will have a profound

impact on our nations economyimpact on our nations economy

Disproportionate regional impactsDisproportionate regional impacts

depending on program structuredepending on program structure Need for regulatory certaintyNeed for regulatory certainty butbut

careful, thoughtful policy makingcareful, thoughtful policy making

Need for consumers to understandNeed for consumers to understandeconomic implicationseconomic implications

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Considerat ionsConsiderat ions

A capA cap--andand--trade regime must:trade regime must: Allow for broad availability of GHG offsetsAllow for broad availability of GHG offsets

for projects that achieve emission reductionsfor projects that achieve emission reductions

Be the product of Congressional actionBe the product of Congressional action Achieve the goals established by CongressAchieve the goals established by Congress

with the least possible economic impact onwith the least possible economic impact onenergy consumersenergy consumers

Be designed from the outset to slow, stopBe designed from the outset to slow, stop

1111t en reverse em ss ons over at en reverse em ss ons over areasonable period of timereasonable period of time


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Considerat ionsConsiderat ions A capA cap--andand--trade regime must:trade regime must:

Be realistic about the status of technologyBe realistic about the status of technologyeve opmeneve opmen

Minimize initial auction amount to no moreMinimize initial auction amount to no more

markets to develop and protect consumersmarkets to develop and protect consumers

Include allocation of a substantial amount ofInclude allocation of a substantial amount ofallowances without cost to entities withallowances without cost to entities withemissionemission--related compliance obligationsrelated compliance obligations

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rov e a equate protect on rom mar etrov e a equate protect on rom mar et

manipulationmanipulation


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What p r im ary r i sk s do w eWhat p r im ary r i sk s do w e

fac e go ing forw ard?fac e go ing forw ard? How to balance our members futureHow to balance our members future

electricity needs with realities of:electricity needs with realities of:

A carbonA carbon--constrained economyconstrained economy

IncreasingIncreasing--cost industrycost industry Organized marketsOrganized markets

In our case this balance must beIn our case this balance must beachieved from a starting point of beingachieved from a starting point of beingasset oorasset oor

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Ut i l i t i es m ust m anage andUt i l i t i es m ust m anage and

planplan

sustainabilitysustainabilityas aas a businessbusinesspract cepract ce

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How shou ld one def ineHow shou ld one def ine

sus ta inab i l i t y ?sus ta inab i l i t y ?

Corporate sustainabilityCorporate sustainabilityfor AMPfor AMP--Ohio isOhio is

--termterm membermember value by embracingvalue by embracing

from economic, environmental, andfrom economic, environmental, and

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What s t eps have w e em bark ed uponWhat s t eps have w e em bark ed upon

s t ra tegy?s t ra tegy?

R.W. Beck developed an optimized supply resourceR.W. Beck developed an optimized supply resourceplan for each member covering a 20plan for each member covering a 20--year periodyear period

Identified a need for 2000+MW additional base loadIdentified a need for 2000+MW additional base load

capacity by 2012capacity by 2012--20132013 Aggressively developing our own assetsAggressively developing our own assets

Modern coal facilitiesModern coal facilities 1,368 MW new generation1,368 MW new generation ore t an 300 o new runore t an 300 o new run--oo --t et e--r ver y ror ver y ro Reviewing feasibility of approximately100MW newReviewing feasibility of approximately100MW new

wind and landfill gaswind and landfill gas

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Considering new solarConsidering new solar


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Considering financial hedges to offsetConsidering financial hedges to offset

Trading carbon allowances on theTrading carbon allowances on the

A member of the Midwest RegionalA member of the Midwest Regional

Pursuing a portfolio of carbon offsetPursuing a portfolio of carbon offset

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Pursuing energy efficiencyPursuing energy efficiency

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u w yu w y

demanddemand whether from rising population or thewhether from rising population or the

Helps a utility manage increasing energy costsHelps a utility manage increasing energy costsn x r v l il wh l l n rn x r v l il wh l l n r

marketsmarkets

Reduces the im act of electricit eneration onReduces the im act of electricit eneration onthe environment and demonstratesthe environment and demonstratesstewardshipstewardship

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Improves a utilitys ability to economicallyImproves a utilitys ability to economicallyrespond to climate changerespond to climate change


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Provides customers with tools to control andProvides customers with tools to control andlower their bills via reduced consumptionlower their bills via reduced consumption

Societal and political leaders are looking toSocietal and political leaders are looking to

EE as critical component of future energyEE as critical component of future energy

Is viewed favorably by customers,Is viewed favorably by customers,

olic makers and Wall Streetolic makers and Wall Street

2020


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n r vi h i n n rn r vi h i n n r

savingssavings ,,

receive capacity credits in PJMs RPMreceive capacity credits in PJMs RPM

market in the futuremarket in the future

Energy efficiency is no longer viewed asEnergy efficiency is no longer viewed as

a social ro ram but as a resource toa social ro ram but as a resource tobe incorporated into utility planningbe incorporated into utility planning

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produce themproduce them


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What Energy Ef f ic ienc yWhat Energy Ef f ic ienc y

Has Ac h ieved Elsew hereHas Ac h ieved Elsew here

JurisdictionJurisdiction Efficiency $/yrEfficiency $/yrSpending asSpending as

% of Revenue% of RevenueEnergyEnergy

Savings/YrSavings/Yr

Savings asSavings as

% of Sales% of Sales(MWh Sales)(MWh Sales)

PG&EPG&E $220 million$220 million 2.78%2.78% 1,166 GWh/yr1,166 GWh/yr 1.6%1.6%

(73 million)(73 million)

.. ..

(41.4 million)(41.4 million)

ConnecticutConnecticut $80 million$80 million 2.02%2.02% 318 GWh/yr318 GWh/yr 0.98%0.98%

32.4 million32.4 million

VermontVermont

(Projected)(Projected)

$31 million$31 million 5.07%5.07% 124 GWh/yr124 GWh/yr 2.25%2.25%

(5.5 million)(5.5 million)

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Levelized cost ranges from $0.027 per kWh (PG&E) to$0.039 per kWh (MA). Figures based on 2004-2006experiences. Source: VEIC


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AMPAMP--Ohio and EEOhio and EE

Room in Por t fo l ioRoom in Por t fo l io

AMP-Ohio Member Energy Supply

3,500,000

4,000,000

2,000,000

2,500,000

3,000,000

MWh

500,000

1,000,000

1,500,000

-

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

NYPA JV 5 RHGS J Aron LT 7x24 5 Year 7x24 Landfill 3 Year 7x24

4 Year 5x16 2 Year 5x16 AMP Hydro Prairie State AMPGS Shortfall Annual Energy

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--

In August 2007, the AMPIn August 2007, the AMP--Ohio Board approvedOhio Board approvedretaining the Vermont Energy Investment Corporationretaining the Vermont Energy Investment Corporationy yy y

efficiency program for AMPefficiency program for AMP--Ohios membershipOhios membership

In February 2008, the AMPIn February 2008, the AMP--Ohio Board approvedOhio Board approvedpursuing an energy efficiency program designed topursuing an energy efficiency program designed toplace AMPplace AMP--Ohio in the topOhio in the top--tier nationally in terms oftier nationally in terms of

energy savingsenergy savings To be a national leader, AMPTo be a national leader, AMP--Ohio would seek toOhio would seek to

achieve a goal of 1% annual energy savings for itsachieve a goal of 1% annual energy savings for itsm m r in h 2 1m m r in h 2 1 --17 im fr m17 im fr m

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--

Achieving a goal of 1% annual energyAchieving a goal of 1% annual energysavings would mean AMPsavings would mean AMP--OhiosOhiosmembers current energy growth ratemembers current energy growth rate

would be cut in half (on average)would be cut in half (on average) Accumulated energy savings would beAccumulated energy savings would be

a roximatel 6.3% of AMPa roximatel 6.3% of AMP--OhiosOhiosforecasted member load through 2017forecasted member load through 2017

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approximately 272 MW through 2017approximately 272 MW through 2017


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Industry has changed and utilities need new strategiesIndustry has changed and utilities need new strategies

Government cant stop at regulation; must be partners in findingGovernment cant stop at regulation; must be partners in findingsolutions from both a financial and technology standpointsolutions from both a financial and technology standpoint Workable incentive programsWorkable incentive programs Research and development programsResearch and development programs RegionalizationRegionalization

Must set the blueprintMust set the blueprint Government must resolve business modelGovernment must resolve business model Transmission must be part of the solutionTransmission must be part of the solution

Industry must continue to develop new generation technologiesIndustry must continue to develop new generation technologiesa ea o a ance por o os a nc u e s a ea ea o a ance por o os a nc u e s a e--oo -- ee--ar ossar ossfuel, a range of renewable technologies and energy efficiency,fuel, a range of renewable technologies and energy efficiency,cannot anoint one technology as the answercannot anoint one technology as the answer

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Publ ic Pow er is pos i t ionedPubl ic Pow er is pos i t ioned

w e l lw e l l

LongLong--term business planterm business plan

ConservativeConservative

InnovativeInnovative

--

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Mgerken Eblf Presentation 2009

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