National Governors Association April 5, 2001

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National Governors AssociationApril 5, 2001
Bringing New Generation To Market

• James Mahoney

PGE National Energy Group and any other company
referenced herein which uses the PGE name or
logo are not the same company as Pacific Gas and
Electric Company, the California utility. These
companies are not regulated by the California
Public Utilities Commission, and customers do not
have to buy products from these companies in
order to continue to receive quality regulated
services from the utility.
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Understanding the Industrys Value
Chain (Approximate , 1998)
Fuel
Production
Transmission
Distribution/Sales
Annual Revenues 218 Billion
51 Billion 97 Billion
19 Billion 41 Billion

COAL 944 MM Short Tons 90 of US Market (24
Billion)

469 GW Fossil Fuel Steam Turbines 66
GW Combined-cycle/ Combustion Turbine 98
GW Nuclear 92 GW Hydro and Other 725 GW Total
Customers (millions) 110 Residential14
Commercial and Industrial1 Other 3,220,000 G
igawatt-hours
714, 500 Circuit Miles of 22 kV and Above
NATURAL GAS 4,610 Bcf 22 of US Market (10
Billion)
60 Cycle 3 Phase

OIL 186 Million Barrels 3 of US Market (3
Billion)
Net Book Value 461 Billion

OTHER (14 Billion)
10 Billion 245 Billion
57 Billion 149 Billion
Source Cambridge Energy Research Associates
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Consumer Price Distribution(Approximate)
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Estimated Capital Needs for Electric
Reliability (2000 - 2020)
Product Amount
__Cost___ Gen Plants 1,300 Plants
520 Billion Interstate Pipelines 38,000
Miles 35 Billion Distribution
Pipe 255,000 Miles 100
Billion Transmission 8,800 Miles
5 Billion (est)
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What Attracts Investment Capital?

• Stable Policies That Can Be Evaluated
• Need to Moderate Parochial Influence
• Synchronization Between State and National
  Policies
• Integrated Energy and Environmental Policies
• Regional or Multi-Regional Approach and
  Consistency
• Bi-Lateral Contracting Opportunities
• Provide Consumers the Chance To Say NO!

CERTAINTY
COMMITTMENT
RIGHTOUSNESS
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What Attracts Investment Capital?

• Stable Policies That Can Be Evaluated
• Transmission Interconnect Conditions
• State/Regional Price Caps
• Value of Capacity
• Need to Moderate Parochial Influence
• Market Participants
• Regulators/legislators
• Single State markets
• Synchronization Between State and National
  Policies
• Integrated Energy and Environmental Policies
• Multi-Pollutant Program
• Clear Targets
• Established Weighting Near/Long Term Goals
• Regional or Multi-Regional Approach and
  Consistency
• Bi-Lateral Contracting Opportunities
• Provide Consumers the Chance To Say NO!

CERTAINTY
COMMITTMENT
Opportunity
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State Government Can Lead
Governor The statements you make and the
people you choose.

• Align Agency Policies and Objectives
  DEP/PUC/Energy Office/Consumer Advocate/Tax
• Promote Inter-Regional Consistency
• Create Inter-Agency Task Force
• Strong Statement (Programs) Promoting
  Conservation
• Streamlined Permitting and Licensing
• Affirmative Statement for Merchant Plant
  Development
• One Stop Shopping
• Finite Deadlines
• Concrete Definitions
• Eliminate Statement of Need

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State Government Can Lead

• Set Performance Targets and Provide Market with
  Flexibilityin Meeting Goal
• Trading
• Banking
• Portfolio Averaging
• Support Multi-Region RTO
• Set Goals for Fuel Diversity

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Fuel Type of Proposed New Generation(2009
Estimate)
Gas 93
Coal
Other
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Electric Price Volatility Example
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Qualitative Ranking of Gas Pipeline Customer
Types and Their Required Degree of Pipeline
Reliability
Electric
Degree of Pipeline
System
Reliability Required
Grid
Reliability
Electric CC
without
Dual Fuel
Electric CC
with Dual
Fuel
Residential
Commercial
with Limited
Industrial
Alternatives
Load
Pipeline Customer Types
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Compressor Failure Scenario
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STATE GOVERNMENT CAN TAKE THE LEAD