Utility Capital Expenditures

Transcription

1 Utility Capital Expenditures Jean Reaves Rollins UPMG--Atlanta October 2007

2 Your Boss Is Wrong You Are In Fact Doing Twice the Work 750,000 Total Investor-Owned Utility Employment (C Three Analysis) 700, , , ,000 Source: C Three Analysis 500,

3 Residential, Commercial and Industrial Customers of Investor Owned Energy Utilities Millions Many More Customers To Take Care Of: Ammunition For a Raise Source: C Three Analysis 3

4 But You Might Want To Keep This From Your Boss 300 Customers Per Employee (C Three Analysis) Source: C Three Analysis

5 Spending by the Industry Is Rapidly Approaching 2000 Levels Total Investor-Owned Energy Utility Capital Expenditures $ s Billions Source: C Three Analysis 5

6 Anecdotal Evidence Suggests A More Rational Approach Than in 2000 NOW Fact based decision making--for the most part The kind of projects we see in our consulting practice, exhaustive analysis of current and future market conditions The markets that are open are much more transparent RTO s and ISO s Sarbanes Oxley has had an impact Rules are clearer THEN Non-regulated We don t care how much capacity is already in the area We are visionaries taking calculated risks Please do not cloud the decision making with FACTS Regulated Rules were poorly designed and the near term future was very unclear in many states--so we will stick our heads in the sand 6

7 Who Is Spending the Money? 7

8 20 Companies Out of 120 Accounted for 59% of All 2006 Capital Expenditures Source: C Three Analysis Total 2006 Capital Company Expenditures 1 American Electric Power $3,528,000,000 2 Duke Energy $3,381,000,000 3 Southern Company $2,994,000,000 4 Edison International $2,536,000,000 5 Williams Companies $2,509,200,000 6 Exelon $2,418,000,000 7 PG&E $2,402,000,000 8 TXU $2,180,000,000 9 El Paso Energy Corporation $2,164,000, Dominion Resources $1,995,000, Sempra Energy $1,907,000, Consolidated Edison $1,847,000, FPL Group, Inc. $1,763,000, MidAmerican Energy $1,684,300, Xcel Energy Inc. $1,626,000, Entergy Corporation $1,586,016, Kinder Morgan Inc $1,583,100, AES Corporation $1,460,000, Progress Energy $1,423,000, DTE Energy Company $1,403,000,000 8

9 Where are the dollars being be spent? 9

10 New Generation--29 States Now Have Renewable Energy Targets Montana 15% 2015 Arizona 15% 2025 New Hampshire 16% 2025 California 20% 2010 New Jersey 22.50% 2021 Colorado 20% 2020 New Mexico 20% 2020 Connecticut 23% 2020 Nevada 20% 2015 District of Columbia 11% 2022 New York 24% 2013 Delaware 20% 2019 North Carolina 12.50% 2021 Hawaii 20% 2020 Oregon 25% 2025 Iowa 105 MW Pennsylvania 18% 2020 Illinois 25% 2025 Rhode Island 15% 2020 Massachusetts 4% 2009 Texas 5,880 MW 2015 Maryland 9.50% 2022 Vermont* 10% 2013 Maine 10% 2017 Virginia* 12% 2022 Minnesota 25% 2025 Washington 15% 2020 Missouri* 11% 2020 Wisconsin 10% 2015 Coupled with federal tax incentives, Has made finding a wind turbine in the next year very difficult Source: 10

11 New Generation Nameplate Capacity MW s Coal Wind Gas Other Total ,054 4,337 6, ,520 4,063 1,232 9, , , , ,505 4,590 13,009 7,641 46, Source: C Three Analysis 37,517 3, ,555 47,533 11

12 Who Is Building This Capacity? Competitive Power Ventures NRG Invenergy Southern Company Berkshire Hathaway Xcel Energy AEP FPL Calpine Duke Energy Energias De Portugal Edison International Dynegy Source: C Three Analysis 12

13 Not To Mention Potential Nuclear Alternate Energy Holdings Amarillo Power AmerenUE Constellation (UniStar) Detroit Edison Dominion Duke Duke Duke Entergy Entergy (NuStart ) Exelon Exelon Florida Power & Light NRG Energy / STPNOC PPL Corp. Progress Energy South Carolina Electric & Gas Southern Company Texas Utilities TVA (NuStart ) Bruneau, ID Vicinity of Amarillo, TX Callaway, MO Calvert Cliffs, MD plus two other sites Fermi, MI North Anna, VA William States Lee, Cherokee County, SC Davie County, NC Oconee County, SC River Bend, LA Grand Gulf, MS Clinton, IL Matagorda and Victoria County, TX Turkey Point, FL Bay City, TX Susquehanna, PA Harris, NC; Levy County, FL Summer, SC Vogtle, GA Comanche Peak, TX Bellefonte, AL 13

14 Existing Generation Environmental compliance and cleaning up the older generation is certainly expensive. We randomly (or not so randomly) pulled five companies planned environmental capital expenditures from our database for 2007 through Allete Alliant Energy AES Southern Company Xcel Energy $10,196,000,000 For the most part, these numbers reflect current regulations. It is becoming increasingly clear that the US position on many of the related issues will not continue to hold. Costs will go up. Source: C Three Analysis 14

15 Transmission--Barriers and Bottlenecks All this new generation is driving demand for new transmission lines but barriers to construction are very high 7,000 miles of new interstate gas transmission lines in the past five years, but under 1,000 miles of new electric transmission C Three in the process of developing a database of proposed and planned transmission lines In Southern California alone there are four major proposed extensions and new lines including: Sunrise Powerlink Devers Palo Verde Tehachapi Renewable Transmission Projects Green Path Estimated Total Costs: $4.4 Billion Source: CEC 15

16 Distribution--The Link to the End-Use Customer Source: EIA Annual US Residential Per Customer Use 1,000 s KWH s 16

17 Commercial Demand is Paralleling Residential Source: EIA Annual Commercial Per Customer Use 1,000 s KWH s 17

18 Natural Gas Industry Has Seen Usage Per Customer Decrease and The Trend is Predicted to Continue Source: EIA Decatherm s per Residential Customer 18

19 Convergence of Issues Natural Gas Price Sensitivities Finite Amount of Renewable Resources Clean Air Issues Climate Change Water Issues Aging Infrastructure Generation and Transmission Potential Change of Administrations Increasing Demand Transmission Siting Under Investment Environmental Issues Related to Mining New Capacity Is Not A Given. Permitting Both Generation and Transmission Is Becoming Increasingly Difficult And In Some Cases, Impossible 19

20 Renewed Focus on End-Use and Getting to the End-User Price is the most effective dampener of demand--however, it may not be the most politically palatable. We need to be preparing our customers for higher prices. Unless there is a major technological break-through, prices increases are a given. Reliability needs will only increase with the increasing sophistication of the end-uses. Smart Metering Already Old Technology? Movement Toward a Comprehensive Solution Smart Grids Provide customers the tools to make rational price decisions with a high degree of reliability. However, regulated entities should not be expected to eat the cost 20

21 Costs will go up More Than a Matter of Spin and It Is Not Just Being Green Thus, prices will have to go up New electric capacity will need to built, no matter how effective conservation measures are, but not on the scale we are currently predicting New transmission will also have to be built Reliability expectations will increase and distribution and transmission will remain regulated Coal will not the be answer and a chunk of what has been announced will not get built There must be incentives for moderation of demand for both the end-use customers and for the utilities that are responsible for keeping the lights on 21

22 Final Note: Ambiguity All industries hate ambiguity, and this industry is no exception The past seven years of denial and ambiguity has hurt the industry: Lack of investment Lack of focus on new technologies Playing catch-up with other countries and with our selves Behind the curve on the implementation of energy-efficiency technologies and measures Will condense the time-frame for when the money will have to be spent--may lead to consumer shock Now we have to move faster and smarter Good for the vendors in the audience Even more work for those of you who work in purchasing 22

23 Jean Reaves Rollins The C Three Group,, LLC 7 Piedmont Center, Suite 300 Atlanta, Georgia