EnergyBiz - November/December 2007 - (Page 26)

simply cannot make major investment decisions in new technologies or new supply without knowing the rules. that customers see a price point, but then assert that markets are not an acceptable way to regulate the underlying commodity. energy efficiency We also need to be smarter about how we use energy. Energy efficiency technology and conservation initiatives offer enormous opportunities. Efficiency is a proven strategy for reducing society’s energy needs, reducing costs and reducing emissions. I’ve seen the power of energy efficiency up close. Exelon’s newly renovated headquarters in Chicago is the largest office renovation in the world awarded LEED platinum by the U.S. Green Building Council. We use 43 percent less electricity than our prior space through state-of-the-art energy efficient lighting systems, advanced controls on HvAC, and Energy Star rated equipment and appliances. And the total cost was only 5 percent more than a more typical renovation. We need more stringent building standards for future construction. We also need to build our cars with lighter materials, and our electronic devices so they require less juice. There is a valuable role for the utility industry to play in this effort. No one is better positioned to counsel consumers about the simple steps that can make a big difference. Utilities are answering this call with countless programs and initiatives that do what is unheard of in any other industry: Help customers find ways to use less of its product. regulatory certainty In my 23 years as a utility chief executive, I have guided companies under traditional rate base regulation and under integrated resource management, and most recently I have guided Exelon through the transition to competition in Illinois. In each case, I’ve dealt with the reality that policy makers consistently change the rules whenever prices go up. In Maine, I had to negotiate the write-off of hundreds of millions of dollars in nuclear investment in the wake of the last energy crisis, investment that regulators had expressly approved. In Massachusetts, I had to battle to ensure that utilities were allowed to recover their investments in uneconomic long-term contracts mandated by state regulators. And in Illinois, we just wrapped up long negotiations with state legislators as we transitioned out of a rate reduction and rate freeze in accordance with both a state restructuring statute and a process expressly approved and supervised by the Illinois Commerce Commission. clean fuels But as important as efficiency is, we won’t be able to conserve our way to a solution. We also need to expand the use of lowcarbon fuels. Renewables are unquestionably part of our energy future and should be aggressively pursued. But renewable sources like wind and solar energy have limited capacity and are expensive. If we face the clean-fuel facts honestly, and wish not to pin our future on unrealistic expectations, we realize that no roadmap exists without an expanded nuclear energy portfolio. Existing nuclear plants are safe and efficient, and will be essential to meeting future eco-friendly energy needs. We will need to build at least 25 new nuclear reactors by 2030 to reduce carbon emissions and keep retail electric rates affordable. But first, the federal government must make good on its 30-year commitment to find a repository for used nuclear fuel. Markets The oxygen for innovation is competition. We must expand the use of markets in this country for both investment and environmental reasons. fundamentally, competition works better in the energy business for the same reason it works better in virtually every other sector of the economy. Markets demand efficiency and place the risks associated with capital infrastructure on investors instead of consumers. Since Congress first allowed for the restructuring of electric markets in 1992, wholesale competition has resulted in an impressive record of new, environmentally preferred investment, improved operational performance from existing plants, and savings to customers. Competition also provides an economic framework to address climate change by developing low-carbon technology. Ironically, the very market price necessary to advance energy efficiency and the development of alternative low carbon generation sources is being threatened. Many regulators recognize that markets are an effective way to address greenhouse gas emission so John W. rowe PhOTO by Fr ancOis rOberT If we are to successfully address climate change, the utility industry will need to invest many billions of dollars in new sources of low carbon generation. The U.S. Energy Information Administration estimates that utilities will have to invest $400 billion in new electric generation by 2030 to address climate change – and $400 billion is almost as much as today’s market cap for the entire investor owned utility industry. That will not and cannot occur if we are regulated in a “heads we win, tails you lose” manner. The policy debate over climate change and the best way to structure needed investment in our energy system will continue. But we can’t wait too long. With inaction, the situation merely worsens. John W. Rowe is Exelon chairman, president and chief executive officer. 26 E n E rgyB i z November/December 2007

Table of Contents Feed for the Digital Edition of EnergyBiz - November/December 2007

EnergyBiz - November/December 2007 Contents Continental Grid Vision Needed Readers’ Views and Opinions Next for National Grid Clearing the Air The Need for Nuclear Energy Trade Status Report The Innovators California On The Leading Edge FERC Sparks Change Getting Coal Right Leadership in Times of Turmoil Innovation Delivers Return A Tale of Two IPOs LNGs Bright Prospects Generation Techologies The Age of Superconductors Leaders with Vision Get Ready for Plug-in Hybrids Betting on Batteries Cost of Decarbonizing Nuclear Helmsman – A chat with Dale Klein, Chairman of the U.S. Nuclear Regulatory Commission Global Energy Snapshot; Low-Income Energy Help; IT Spending Robust; The Greening of State Regulators; Generating Support Simplifying Offshore Wind Regs Chasing Construction Costs Energy Agency Sets New Course Deregulation Means Higher Rates Go-To Staffer Nightmare in Manhatten

EnergyBiz - November/December 2007

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