The ScottMadden Energy Industry Updategy y p
Highlights of Recent Significant Events and Emerging Trends
February 2011
Cop...
Table of Contents
E ti S /Vi f th E ti S it 2Executive Summary/View from the Executive Suite 2
Executive Summary
Economic ...
Executive Summary/View from the Executive Suite
2 Copyright © 2011 by ScottMadden, Inc. All rights reserved.
Executive Summary
Enhancing Value  The economy is brightening, as the world continues to dig out of the “Great Recession....
Economic Outlook: Turning the Corner
E i G th I Pi ki g U U S E i G th A l t I t 2011Economic Growth Is Picking Up
 Econo...
Energy Industry Stock Prices—
Electrics, Diversifieds Continue to Languish
Small Diversified Gas Companies Ahead of the Do...
Trends in Dividends, Earnings, and Valuations
Among Selected Energy Sectors
S ll Di ifi d B ki g E i g G th D liP i t B k ...
Mergers and Acquisitions—Speeding Up?
 The first half of 2010 saw continued merger activity with large transactions like ...
Behind-the-Meter Products and Services:
New Opportunity or Dot-Com Redux?
Relative Technology Maturity of Behind the Meter...
Residential Utility Customer Satisfaction:
A Mixed Bag
W t d S th L d R id ti l El t i Utilit S ti f ti Customer Communica...
Energy Supply, Demand, and Markets
Copyright © 2011 by ScottMadden, Inc. All rights reserved.10
Natural Gas:
A New Normal or About to Make the Turn?
“D ill B b D ill” P d i C i G G P i P j t d t R i i th Mid $4 t Mid $...
Two Views of the Impact of EPA Regulations
on Power System Reliability in the U.S.
Much attention has been paid to the pot...
Infrastructure
Copyright © 2011 by ScottMadden, Inc. All rights reserved.13
Ad d E C bili i E bl d b S G id  Industry leaders believe smart grid and the advanced
Smart Grid 2.0: Integrating Smart G...
NERC Reliability Standards
and Compliance Violations: A Roundup
C iti l I f t t P t tiTh W t U S L d Oth R gi i C li P lti...
Rates and Regulatory Issues
Copyright © 2011 by ScottMadden, Inc. All rights reserved.16
Electricity Cost Trends, Fuel Mix,
and Regulatory and Market Models
C d A l G th R t i T t l R t il R kWh (1994 2009)
10
1...
Energy Costs and “Share of Wallet”:
A Pushback Coming?
E C t P t f I A Ri i NTh T t Y T d f H h ld E
Share of Wallet: Medi...
Climate Change, Environment, and Sustainability
Copyright © 2011 by ScottMadden, Inc. All rights reserved.19
Renewable Portfolio Standards:
Comparing Resources with Goals
50%
60%
Renewable Portfolio Standards for 2012 and 2020 (% o...
Energy and Environmental Policy:
A Grand Bargain or Guerilla War on the Piece Parts?
Anticipated
White House/
Agency
Appro...
Solar Development Remains on a Roll,
But It Still Requires Subsidies
 Solar development continued to grow in 2010 I ti d ...
Energy industry landscape:  sharpening contrasts and accelerating change  
Every  day  in  this  challenging  and  excitin...
Recent ScottMadden Insights—Available at ScottMadden.com
Fossil
Generation
Coal Combustion Residuals, by J. Jacobi,
http:/...
Energy Practice
The energy industry landscape is one of sharpening
Research
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The Energy Industry Update – February 2011

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This semi-annual publication features our view of recent significant events and emerging trends in the energy industry. In the wake of a slowly improving economy, a change of political control of the U.S. House of Representatives, and tightening environmental requirements, the energy industry is looking at ways to expand business opportunities while keeping a rein on escalating costs. In this issue, we reflect upon the aspirations of energy and utility companies for growth in a “New Normal” economic environment.

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The Energy Industry Update – February 2011

  1. 1. The ScottMadden Energy Industry Updategy y p Highlights of Recent Significant Events and Emerging Trends February 2011 Copyright © 2011 by ScottMadden, Inc. All rights reserved. Vol. 12, Issue 1
  2. 2. Table of Contents E ti S /Vi f th E ti S it 2Executive Summary/View from the Executive Suite 2 Executive Summary Economic Outlook: Turning the Corner Energy Industry Stock Prices—Electrics, Diversifieds Continue to Languish Trends in Dividends, Earnings, and Valuations Among Selected Energy Sectors Mergers and Acquisitions—Speeding Up? Behind-the-Meter Products and Services: New Opportunity or Dot-Com Redux? Residential Utility Customer Satisfaction: A Mixed Bag Energy Supply, Demand, and Markets 10gy pp y, , Natural Gas: A New Normal or About to Make the Turn? Two Views of the Impact of EPA Regulations on Power System Reliability in the U.S. Infrastructure 13 Smart Grid 2.0: Integrating Smart Grid Into Utility System-Wide Business Planning NERC Reliability Standards and Compliance Violations: A Roundup Rates and Regulatory Issues 16 Electricity Cost Trends, Fuel Mix, and Regulatory and Market Models Energy Costs and “Share of Wallet”: A Pushback Coming? Climate Change, Environment, and Sustainability 19 Renewable Portfolio Standards: Comparing Resources with Goals Energy and Environmental Policy: A Grand Bargain or Guerilla War on the Piece Parts? Solar Development Remains on a Roll, But It Still Requires Subsidies Copyright © 2011 by ScottMadden, Inc. All rights reserved.1
  3. 3. Executive Summary/View from the Executive Suite 2 Copyright © 2011 by ScottMadden, Inc. All rights reserved.
  4. 4. Executive Summary Enhancing Value  The economy is brightening, as the world continues to dig out of the “Great Recession.” Energy consumption has begun to recover, but only modestly  Electric utility valuations have lagged the broader indexes; for some companies, this presents t ti l t iti f bl i d i itipotential opportunities for reasonably priced acquisitions  In this slow-growth environment, utility companies are looking for growth opportunities. Some options include both corporate mergers and acquisitions or asset acquisitions. Also, utilities are pondering behind-the-meter products and services opportunities as growth vehicles, enhanced by smart grid capabilities (if and when those capabilities come to fruition) Diverging Trends in Costs  Natural gas continues to be cheap and plentiful, with continued modest demand combined with plentiful resources, including shale gas  These plentiful supplies, and the slow economic rebound, helped keep end-user gas and power costs tame in 2010. However, the broader trend is that energy is taking a largerp , gy g g proportion of the consumer “wallet”  In the renewables sector, solar photovoltaic module costs continue to fall, little by little. However, the overall installed cost of solar remains high. Solar development, which had a strong 2010, continues to require significant subsidies to achieve grid parity The Beat Goes On...in Regulation  Regulatory activity continues in both the environmental and energy arenas  The U.S. EPA continues to push tightening emissions requirements for power generators, with unknown impacts on reliability and price of energy. The Administration’s rapprochement with business and concern about economic growth might lead EPA to delay implementation. However various interest groups may use the courts to keep the regulatory “train” goingHowever, various interest groups may use the courts to keep the regulatory “train” going  FERC is engaged as well, focusing on more aggressive enforcement of reliability standards and also trying to resolve years-old issues regarding transmission cost allocation Copyright © 2011 by ScottMadden, Inc. All rights reserved.3
  5. 5. Economic Outlook: Turning the Corner E i G th I Pi ki g U U S E i G th A l t I t 2011Economic Growth Is Picking Up  Economic growth is expected to continue into 2011, aided by compromise over extension of tax credits and extended unemployment insurance benefits  While some forecasts are quite bullish (4% to 5%), the median among economists is 3% for 2011 U.S. Economic Growth Accelerates Into 2011 2% 4% Year Rate U.S. Real GDP Growth – Actual and Selected Forecasts (%) median among economists is 3% for 2011 CFOs Are Optimistic but Cautious  CFOs expect increased growth in both revenues and profits, but have a slightly negative view of business conditions  Biggest concerns: healthcare costs revenue growth cash -4% -2% 0% 2007 2008 2009 2010 2011 2012 Year-Over-Y GrowthR Actual OECD Conference Board Wells Fargo BofAML WSJ Median  Biggest concerns: healthcare costs, revenue growth, cash flow, consumer confidence, and corporate taxes  There are fewer downside risks in the near term, as most believe a “double dip” has been avoided  A key near-term risk to the world economy: a significant economic deceleration in China Interest Rates May Increase Sooner Than Expected Ten-Year Treasury Yield (2000–Early 2011) (%) 8 2011 Forecast Blackstone ~5% BofAML 4% Capital Spending Expected to Increase  Continued growth in capital investment is expected as credit loosened, especially for large firms, as well as tax incentives. This may bring forward some capex from 2012 into 2011 - 2 4 6 Yield(%) o % Northern Trust 3.7% Wells Fargo 2.98% into 2011  M&A activity is expected to continue as well Interest Rates Are a Worry, Inflation Less So  Increasingly, analysts are expecting interest rates to increase especially as 60% of U S federal debt matures in Commodity Prices Are on the Rise Iron and Steel Scrap and Copper Prices (Jan. 2009–Aug. 2010) 2000 2002 2004 2006 2008 2010 increase, especially as 60% of U.S. federal debt matures in the next three years and must be rolled over  Rising rates are expected longer term: By 2020, OECD expects a large gap between savings and investment needs, especially as investment in developing countries accelerates $0 $100 $200 $300 $400 $0 $1 $2 $3 $4 $/Ton $/Pound Copper (COMEX) ($/lb.) Steel Scrap (Am. Metal Mkt.) ($/ton) Copyright © 2011 by ScottMadden, Inc. All rights reserved.4  Core inflation has faded as a concern, but some key raw materials and food prices are rising, as developing countries post strong economic growth $0$0 Sources: OECD; IMF; Kiplinger’s; Wall Street Journal; Wells Fargo; The Blackstone Group; Bloomberg; Northern Trust; Bank of America Merrill Lynch; The Conference Board; U.S. Geological Survey
  6. 6. Energy Industry Stock Prices— Electrics, Diversifieds Continue to Languish Small Diversified Gas Companies Ahead of the Dow Since CrashDiversified and Electric Utilities Tracking The Dow Since 2005 3-Year Sector Performance Normalized Daily Index Values (Dec. 2007–Dec. 2010) 175% 200% Peaked at 206% 5-Year Sector Performance Normalized Daily Index Values (Dec. 2005–Dec. 2010) 175% 200% DJ Industrial Avg. SNL Energy Large Diversified SNL Energy Small Diversified S&P Gas Utilities Small Diversified, Gas Companies Ahead of the Dow Since CrashDiversified and Electric Utilities Tracking The Dow Since 2005 100% 125% 150% 175% Peaked at 206%  In May 2007 100% 125% 150% SNL Merchant Generator S&P Electric Utilities DJ Utility Index Citigroup MLP 0% 25% 50% 75% DJ Industrial Avg. SNL Energy Large Diversified SNL Energy Small Diversified S&P Gas Utilities SNL Merchant Generator S&P Electric Utilities DJ Utility Index 0% 25% 50% 75% 18-Month Sector Performance Normalized Daily Index Values (Jun. 2009–Dec. 2010) Ending Index Value (Start of Period = 100%) Since  Mid‐2009 Since  End‐2007 Since  End‐2005 SNL Energy Large Diversified 116% 75% 95% 0% Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Gas Upstream and LDCs Continue to Outpace DJIA, Electrics Trail gy g SNL Energy Small Diversified 132% 103% 115% S&P Gas Utilities 142% 95% 134% S&P Electric Utilities 105% 68% 95% SNL Merchant Generator 88% 40% 70% Citigroup MLP 161% 117% *125% 150% 175% 200% DJ Industrial Avg. 134% 86% 105% DJ Utility Index 114% 74% 96% Despite low natural gas prices, gas LDC and gas MLP stocks have done well. Moreover, electric and 50% 75% 100% DJ Industrial Avg. SNL Energy Large Diversified SNL Energy Small Diversified S&P Gas Utilities S&P Electric Utilities SNLM h G Copyright © 2011 by ScottMadden, Inc. All rights reserved.5 Note: All index values are 100% at beginning of relevant period. * means not available. Sources: SNL Financial; ScottMadden analysis diversified utility stock prices continue to lag the Dow, despite improving economic numbers.0% 25% Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 SNL Merchant Generator Citigroup MLP DJ Utility Index
  7. 7. Trends in Dividends, Earnings, and Valuations Among Selected Energy Sectors S ll Di ifi d B ki g E i g G th D liP i t B k V l ti E ilib ti g P t R i 600% Year-End* Price-to-Book Value (Capitalization-Weighted) (%) Large Diversified S ll Di ifi d 250% Year-over-Year Net Income Growth Rate (Capitalization-Weighted) (%) Large Diversified Small Diversifieds Bucking Earnings Growth DeclinePrice-to-Book Valuations Equilibrating Post-Recession 200% 300% 400% 500% Small Diversified Electric Merchant Gas Utility 50% 100% 150% 200% Small Diversified Electric Merchant Gas Utility 0% 100% 200% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 3Q 2010 -100% -50% 0% 50% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year-over-Year* Dividend Growth (Capitalization-Weighted) (%) Dividend Growth Down but Still Positive  Utility valuations, as measured by multiples of book value, are down from the mid-2000s — A key question is whether these valuations are a return to normal or some inflection point that signals a bottom or b i t it 5% 10% 15% 20% Large Diversified Small Diversified Electric Gas Utility buying opportunity  Dividend growth declined in response to the “Great Recession” — Another driver is the desire to retain funds for the next wave of capital investment  As one might expect, net income growth has trended downward -15% -10% -5% 0% g p , g — While slightly negative for most sectors in 2009, it was not as negative as many had feared — Early returns for 2010 show improved sales, especially among industrial classes — Small diversified utilities, however, seem to have been able i i i i h d i h d Copyright © 2011 by ScottMadden, Inc. All rights reserved.6 % 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 3Q 2010 Notes: *3Q 2010 is for quarter end. Sectors are derived by SNL Financial: SNL Large Diversified (electric & gas utilities > $4 billion capitalization); SNL Small Diversified (< $4 billion); SNL Electric (electric only); SNL Merchant; and gas utility components of the SNL Energy index. Sources: SNL Financial; KeyBanc Capital Markets; ScottMadden analysis to sustain positive earnings growth during the downturn
  8. 8. Mergers and Acquisitions—Speeding Up?  The first half of 2010 saw continued merger activity with large transactions like A t D l C i g B k Sl l F b t L g The first half of 2010 saw continued merger activity with large transactions like PPL/E.ON, FirstEnergy/Allegheny, and Exxon/XTO. The second half continued this trend, with both asset and corporate acquisition activity continuing  Some large transactions were announced at valuations that, for the most part, represented very modest premiums. This could reduce the need for huge synergies and perhaps lessen the risk of regulatory “claw back” 147 143 117 140 160$25 ons) Power Generation Asset Deals (Announced and Pending 2008–2010) Asset Deals Coming Back Slowly: Fewer but Larger  Deal drivers were often related to scale: — Increase balance sheet size to support infrastructure investment (NU/NSTAR, for example, expect $6 billion in combined spending over the next several years) — Acquire assets or reserves in pursuit of growth (renewables, shale gas) or while valuations are depressed (merchant generation) $21.8 $9 5 117 60 80 100 120 140 $10 $15 $20 No. of Deals on Value ($ Billio shale gas) or while valuations are depressed (merchant generation) — Expand base across which to spread fixed and corporate costs  The weak economy requires savings without layoffs and could pressure public service commissions — Despite synergy potential, many acquirers are relying on attrition, not politically unpalatable layoffs With ratepayers strapped for cash regulators may require compelling savings $8.5 $9.5 0 20 40 $0 $5 2008 2009 2010 s Transactio Major Corporate Merger & Acquisition Announcements—Energy Companies Share Deal — With ratepayers strapped for cash, regulators may require compelling savings passed along in rates, even absent large synergies Total Transaction Value No. of Transactions M&A Announced Transactions (Corporate) Companies Deal Value Price Premium Announced Sector Size Value/ Book Value Exelon Corp./ John Deere  Renewables $0.9B NA Aug. 2010 Renewable generation 1.5 GW in various  development stages NA 34 37 23 26 11 2005 2004 2003 2002 2001 Northeast Utilities/ NSTAR $4.2B (plus $3.4B in debt) ~1.9% Oct. 2010 Electric utilities 3.5 million  customers combined NM Chevron Corp./ Atlas Energy $3.2B  (plus $1.1B in debt) 37% Nov. 2010 Upstream gas 9 TCF (incl.  shale gas reserves) 2.2x AGL Resources/ Nicor Inc $2.4B (plus $0 7B in debt) 13% Dec. 2010 Gas  utilities 4.5 million customers combined 2.22X 33 36 69 37 34 2010 2009 2008 2007 2006 2005 Copyright © 2011 by ScottMadden, Inc. All rights reserved.7 Nicor, Inc. (plus $0.7B in debt) utilities customers combined Duke Energy/ Progress Energy $13.6B (plus $12.1B in debt) 3.9% Jan. 2011 Electric  utilities 7 million customers combined 1.36x Sources: SNL Financial; The Wall Street Journal; Bloomberg.com; company websites; ScottMadden analysis 47 0 50 100 2010
  9. 9. Behind-the-Meter Products and Services: New Opportunity or Dot-Com Redux? Relative Technology Maturity of Behind the Meter Products Companies in our sector and outside it are trying to determine whether the smartRelative Technology Maturity of Behind-the-Meter Products Adoption Demand response aggregation Distributed resources (traditional) Distributed Energy monitoring/ d ESCO services Companies, in our sector and outside it, are trying to determine whether the smart grid will create a new era of business opportunity for behind-the-meter (BTM) products and services. Some questions they have:  When will smart grid be capable of creating BTM opportunities?  What is different now from prior retail “waves” in energy?  How much integration is needed across value chain stages? Maturity Growthin Distributed resources (emerging) meter data managementSmart appliances  How will the revenue and profits of this BTM “renaissance” be divided among segments and players? What operating and business models will emerge?  How will customers respond? Which segments can, or will, participate?  What are the scale and scope requirements to profitably offer BTM products? Segment Description Example Players Some Drivers/Issues Demand response aggregation Intermediators between customers and utilities/regional ISOs to pool demand response capabilities and provide peak load management and curtailment services, capacity bidding, and other services to reduce firm energy costs  EnerNOC  cPower  Comverge  Energy market expansion, restructuring; ISO roles  Transparent price signals; supportive rate structures  Public policy other services to reduce firm energy costs p y Distributed resources (incl. renewables) Distributed generation and storage for primary and stand-by power, heating and cooling applications, and grid ancillary services/renewables support  Capstone Turbine  Caterpillar  Siemens  GE Energy  FuelCell Energy  SunEdison  Installed cost (improving)  Resistance to net metering buybacks and FIT structures  Grid-parity costs (esp. renewables) Energy monitoring Software, hardware, analytics, and customer  OPower  eMeter  Improved technologygy g and management/ meter data management y interfaces that provide signals, information on real- time consumption  GridPoint  Smart Synch  Google  EnerNOC  Comverge  Tendril  Itron  Clear interoperability standards  Privacy concerns  “Performance contractor” stigma; customer investment required (also applies to ESCOs below) ESCO services Energy audits and consulting; energy equipment  Utility affiliates  National ESCO  Subsidies and financinggy g gy q p and installation, including energy efficiency retrofits, controls, HVAC, and building automation  Global equipment providers ESCOs  Local HVAC, electric cos.  Agency issues  Pricing of efficiency  Payback time, return Smart appliances/ hardware (incl facility/ Facility appliances and devices with modernized electricity usage systems that monitor, protect, and automatically adjust operations to the needs of its  Whirlpool  Honeywell  Carrier/ I E  Johnson Controls  General Electric  Clear interoperability standards  Technology maturity/lifecycles  Customer and equipment service Copyright © 2011 by ScottMadden, Inc. All rights reserved.8 (incl. facility/ premise area networking) y j p owner, including in response to price, utility signals, and emergency power situations Ice Energy  Microsoft Electric  “New normal” frugality  Transparent price signals; supportive rate structures Sources: Company websites; investment analyst reports; industry news; Cleantech Group, 2010 U.S. Smart Grid Vendor Ecosystem (Sept. 2010); DOE Berkeley National Laboratory; ScottMadden analysis
  10. 10. Residential Utility Customer Satisfaction: A Mixed Bag W t d S th L d R id ti l El t i Utilit S ti f ti Customer Communication Helps ElectricsWest and South Lead Residential Electric Utility Satisfaction 750 king Residential Electric Utility Average J.D. Power Rating* by Region and Utility Size (2010) Median Score High Low Customer Communication Helps Electrics  According to J.D. Power, satisfaction levels have increased year-over-year as customer bills have decreased and reliability has improved  J.D. Power also found that managing customer expectations around outages and restoration mitigates 550 600 650 700 rSat.IndexRank expectations around outages and restoration mitigates declines in or even improves satisfaction  To improve satisfaction, a mix of proactive and event communiqués is required. For example: ─ More scheduled outage notifications with the rising number and frequency of grid upgrade projects 500 West: Midsize West: Large South: Midsize South: Large Midwest: Midsize Midwest: Large East: Midsize East: Large Customer number and frequency of grid upgrade projects ─ Announcements of reliability and operational response investments and their results (benefits) ─ More frequent status updates, even with limited information, during storm outages (e.g., radio or mobile devices—texting, Facebook, Twitter, etc.) Residential Gas Utility Average J.D. Power Rating* by Region and Utility Size (2010) Gas Utility Satisfaction Has a Narrower Range Than for Electrics  Helping customers with their overdue bills, as one might expect, substantially improves customer satisfaction; utility education and energy efficiency/management programs are additional, helpful high bill resolution options  Customer awareness of their local utility’s implementation of smart grid and smart meter technology remains low 600 650 700 750 ndexRanking Median Score High Low of smart grid and smart meter technology remains low Satisfaction Improves for Gas Utilities  Lower bills, more frequent communication, and improved perceptions of corporate citizenship have led to higher satisfaction levels 500 550 600 West: Large West: Midsize South: Large South: Midsize Midwest: Midsize East: Midsize Midwest: Large East: Large CustomerSat.In satisfaction levels  Gas customers are also more familiar with energy savings programs and want more communication on how to reduce bills and conserve energy  J.D. Power opines that emphasizing the value of service provided by gas utilities lifts overall satisfaction Copyright © 2011 by ScottMadden, Inc. All rights reserved.9 g g g g Notes: *Scores are out of a possible 1,000 points Source: J.D. Power and Associates, 2010 Gas Utility Residential Customer Satisfaction Survey (Sept. 22, 2010) and 2010 Electric Utility Residential Customer Satisfaction Survey (July 14, 2010); ScottMadden analysis provided by gas utilities lifts overall satisfaction
  11. 11. Energy Supply, Demand, and Markets Copyright © 2011 by ScottMadden, Inc. All rights reserved.10
  12. 12. Natural Gas: A New Normal or About to Make the Turn? “D ill B b D ill” P d i C i G G P i P j t d t R i i th Mid $4 t Mid $5 Th gh 2013“Drill, Baby, Drill”: Production Continues to Grow  Onshore gas production continues to grow despite low gas prices and regulatory setbacks in Marcellus  Rig count is expected by some to level off and ltimatel decline to a tipping point of abo t 800 $8 $10 Natural Gas Week Scoreboard (Median) Actual Wellhead Gas Prices vs. Henry Hub Price Projections by Selected Analysts (in $/MMBTU) Gas Prices Projected to Remain in the Mid-$4s to Mid-$5s Through 2013 ultimately decline to a tipping point of about 800 rigs (U.S.) to stabilize gas prices  However, horizontal gas drilling operations are more efficient and productive, yielding more gas per rig, so supply should be plentiful through 2012 $4.36 $4.45 $4.45 $4.72 $5.35 $5.35 $2 $4 $6 $8 $/MMBTU NGW Scoreboard (High Forecast) Wellhead actual prices (average) EIA Forecast: 2011: $4.02 For Producers, First the Bad News, Then…?  Enhanced revenues from rising natural gas liquids prices have lowered the breakeven dry gas production cost in some plays  Some producers looking to migrate from dry gas- $0 2005 2006 2007 2008 2009 Jan.-Oct. 2010 (Avg.) 2010 2011 2012 2011:  $4.02 2012:  $4.50  Some producers looking to migrate from dry gas only plays like Haynesville and Barnett to places like Eagle Ford and Marcellus  Some analysts project that gas prices will firm after 2012, buoyed by: — Coal power plant retirements 100%1,200 Horizontal Rigs in January 2011 at 967, Up from Under 400 in Spring 2009 North American Rig Count by Type vs. U.S. Gas Rigs as % of Total Rigs — Carbon constraints — Step-down in drilling activity as wells mature — Hedges (i.e., forward sales) roll off — Possible export (LNG) demand 20% 40% 60% 80% 200 400 600 800 1,000 U.S.GasRigs as%ofTotalRig NorthAmerican RigCount Demand and New Large Players  Demand remains suppressed, but is expected to begin to firm with continued economic growth  Oil and gas majors are entering the market, acquiring shale players who need a larger balance 0% 20% 0 200 2006 2007 2008 2009 2010 2011 s gs N % Gas Rigs Directional Horizontal Vertical Rig Count% of Total Rigs Copyright © 2011 by ScottMadden, Inc. All rights reserved.11 acquiring shale players who need a larger balance sheet and gaining experience to apply in shale fields inside and outside North America Sources: Energy Intelligence Natural Gas Week; Energy Information Administration; SNL Financial; Baker Hughes; Deutsche Bank; American Gas Association; industry publications; ScottMadden analysis Rig Count% of Total Rigs
  13. 13. Two Views of the Impact of EPA Regulations on Power System Reliability in the U.S. Much attention has been paid to the potential retirement of power generation in the U S as a result of various pendingMuch attention has been paid to the potential retirement of power generation in the U.S. as a result of various pending EPA regulations covering air, water, and ash. Two recent studies looked at possible consequences for reliability. A Comparison of Two Analyses of EPA Regulation NERC (Oct. 2010) Charles River Associates (Dec. 2010)( ) ( ) Key Points of Alignment  A significant portion of coal-fired generation is currently slated for retirement, even without tighter environmental regulations  Certain reliability sub-regions will be affected much more than others  The impact of greenhouse gas regulation is not included  Assessments did not project expected power cost, only retrofit vs. retire economics Key Differences in  Looks at all EPA regulations – MACT, coal combustion  Looks only at MACT and CATR Key Differences in Assumptions and Approach residuals, cooling water (thermal) constraints, and Clean Air Transport Rule (CATR)  Analysis was national in scope  Limited its analysis to the Eastern Interconnection  Regulations impact 33 GW to 70 GW (retire or retrofit)  MACT alone could trigger retirement of 2 GW to 15 GW  Cooling water intake has the greatest impact on reserve  Under an aggressive MACT policy, CRA projects 35 GW of coal capacity in the Eastern Interconnection to be retired by 2015 — Retirements are small compared with historical net Conclusions  Cooling water intake has the greatest impact on reserve margins, as it impacts nuclear and could force derates  By 2015, combined EPA regulations could cause 32+ GWs in retirements and derates (over 77 GWs under a strict case with no compliance extensions)  Under a moderate case and assuming only deliverable (i.e., existing plus planned) capacity: Retirements are small compared with historical net capacity additions — Average age of those units is 55 years  With retirements, 2015 reserve margins fall below required margins in some sub-regions, but are adequate on a regional level — Permitted projects development can reduce the shortfall — ERCOT, ReliabilityFirst, and SERC-Delta, are most affected by retirements (in total GWs) — ERCOT, the Midwest, New England, and many of the Southeastern subregions fall below target reserve margins — New gas-fired capacity, above that currently permitted, can “easily address” the shortfall (about 11.5 GWs)  Other methods can be used to manage shortfall, including: — Load management — Coal-to-gas conversion Key issues and uncertainties:  How long cheap gas will last  Impact of better than expected electric demand  Availability and cost of gas pipeline extensions, expansions to support new or repowered generation R i d t d ti i f t i i h t Leadership in the Republican-controlled 112th Congress has announced strategies (or intent) to slow or moderate EPA regulation via:  Appropriations: Limiting EPA funding on selected initiatives  Oversight: Conducting hearings on EPA activities before Energy & Environment other Congressional committees Copyright © 2011 by ScottMadden, Inc. All rights reserved.12  Required cost and timing of transmission enhancements  Realistic timing of new capacity resources “in the wings”  Cost of power with shift in resource mix Sources: NERC, 2010 Special Reliability Scenario Assessment: Resource Adequacy Impacts of Potential U.S. Environmental Regulations (Oct. 2010); Charles River Associates, A Reliability Assessment of EPA’s Proposed Transport Rule and Forthcoming Utility MACT (Dec. 16, 2010) Energy & Environment, other Congressional committees  Legislation: Mandating delay on some EPA actions (esp. greenhouse gas regulation)
  14. 14. Infrastructure Copyright © 2011 by ScottMadden, Inc. All rights reserved.13
  15. 15. Ad d E C bili i E bl d b S G id  Industry leaders believe smart grid and the advanced Smart Grid 2.0: Integrating Smart Grid Into Utility System-Wide Business Planning  Utility scale renewables  Extended storage  Customer energy efficiency/management Current Applications Value – Process / workforce efficiencies – Operating savings – Targeted event response f ( Grid Reliability Smart Energy Applications Advanced Energy Capabilities Enabled by Smart Grid  Industry leaders believe smart grid and the advanced energy capabilities it enables can significantly benefit core utility value—reliability, efficiency/cost savings, compliance, and customer service  Many utilities have developed business cases valuing individual smart grid-enabled technologies (e.g., AMI, Utility Value  Billing accuracy  Faster issue resolution  Substation and DAI  GIS management  Advanced sensors and system monitoring  Advanced conductors  Event detection and response  Demand response  Ancillary services  Voltage mgt.  Condition-based maintenance  Fast response storage for regulation efficiency/management  Dynamic rates  “Load as Capacity”  Distributed energy (DER) and CHP  Small-scale renewables  Smart appliances and EVs Future Application Value – Reduced field service trips (truck rolls) – Higher customer satisfaction – Improved issues resolution – Improved load planning Customer Services Grid Management g g ( g demand response, etc.)  To date, this narrow scope has limited utility planning, acceptance, and investment in smart grid capability  Focus has been on engineering “proof of concept” pilots. However, pilots do not clearly demonstrate the value of Smart Grid Functionality  SCADA  AMR  Mobile dispatch  AMI (2-way)  Remote operations (connect/disconnect)  OMS / system restoration  Faster issue resolution  Energy information, IHDs, web analysis portals  Power quality services  Load profiling and forecasting Future Application Value – Higher reliability – Operate grid closer to “true” limits – Early event detection and condition- based response – Grid congestion management – T&D planning and IRP optimization – Renewables integration – Digital power quality – Distributed resources/micro-grids – Reduced cost/carbon footprint Distribution Operations Event Management p y larger (full) system deployments to the market  Utilities are now seeking a broader, comprehensive value framework and planning approach to cohesively guide this multi-year, multi-billion dollar, industry-wide system capability investment, both on the utility and customer sides of the meterSmart Grid Functionality Advanced System Capabilities Enabled by Key Utility System Business Models Smart Enterprise “Value” Framework and Planning Approach sides of the meter Aligning Smart Grid Functionality With System Business Needs in the Context of a Utility’s Market and Operations Key QuestionsEnabled by Smart Grid Market Model Operating Model Customer Model Regulatory Model Distribution Operations y e Smart Grid Functionality Distribution Operations Event Management Customer Services Grid Management Grid Reliability  SCADA  AMR  Mobile dispatch  AMI (2-way)  Remoteoperations (connect/disconnect)  OMS / system restoration  Billingaccuracy  Faster issue resolution  Energy information, IHDs, web analysis portals  Power qualityservices  Loadprofilingand forecasting  Substation and DAI  GIS management  Advanced sensors and system monitoring  Advanced conductors  Event detectionand management  Demand response andancillary services  Voltagemanagement  Condition-based maint.  Fast response storage forregulation Smart Energy Applications  Utility scalerenewables  Extended storage  Customer energy efficiency/management  Dynamic rates  “Load as Capacity”  Distributedenergy/CHP  Small-scalerenewables  Smart appliances FutureApplication Value – Higher reliability – Operategridcloser to “true” limits – Early event detectionand condition- based response – Gridcongestionmanagement – T&Dplanning and IRP optimization – Renewablesintegration – Digital power quality – Reduced cost/carbonfootprint for supply Current Applications Value – Process/ workforce efficiencies – Operating savings – Targetedevent response – Reducedfield servicetrips(truck rolls) – Higher customersatisfaction – Improvedissuesresolution – Improvedload planning Related Regulatory Key Questions  What are key market, operating, and customer value drivers or “sign posts” to monitor?  How do drivers impact a utility’s key business models and metrics (e.g., market, operating, customer, regulatory)? Event Management Customer Services Grid Management G id Reliability Compliance Costs Identify • Business model impacts? • “Core” value benefits? g y Compact Impacts • ”Used and useful” criteria • Ratebase requirements • Ratemaking and cost-of- service methodologies • New rate  What are achievable opportunities to “operationalize” smart grid’s value today and in the future?  Are clear, long-term system core values demonstrated to ratepayers, regulators, and stakeholders?  What are our business plans—market, operating, customer, and Copyright © 2011 by ScottMadden, Inc. All rights reserved.14 Grid Reliability Smart Energy Customer Service mechanisms • Regulatory engagement • Other p , p g, , regulatory—and supporting smart grid strategy/infrastructure “roadmap” for moving ahead, managing related enterprise risk, and gaining regulatory, community, and stakeholder support? Source: ScottMadden analysis
  16. 16. NERC Reliability Standards and Compliance Violations: A Roundup C iti l I f t t P t tiTh W t U S L d Oth R gi i C li P lti Cumulative NERC Compliance Penalties (No. of Assessments)* by Topic Area (June 2008–December 2010) Cumulative NERC Violations and Monetary Penalties* by NERC Region (June 2008–December 2010) Critical Infrastructure Protection Has Been Oft-Cited The Western U.S. Leads Other Regions in Compliance Penalties in Part Due to the Number of Registered Entities 104 107 107 267 381 428 Transmission Planning Transmission Operations Emergency Preparedness and Ops. Facilities Design, Connections, and Maint. Critical Infrastructure Protection Protection and Control 600 700 800 900 1000 $1 500 000 $2,000,000 $2,500,000 No.ofAssessm nalties($) Penalties ($) Penalties (No. of Assessments) 15 34 41 44 99 104 Communications Resource and Demand Balancing Interconn. Reliability Ops. and Coord. Personnel Perf., Training, and Quals. Voltage and Reactive Transmission Planning 200 300 400 500 600 $500 000 $1,000,000 $1,500,000 ments(vs.Requirem TotalMonetaryPen 11 12 15 0 100 200 300 400 500 Interchange Scheduling and Coord. Modeling, Data, and Analysis 0 100 200 $0 $500,000 WECC SERC RFC NPCC FRCC MRO TRE SPP ments) T Note: Includes violations that did not  include financial penalties  NERC and FERC have been trying to address friction as FERC seeks more timely standards development and aggressive enforcement (i.e., more significant penalties) of key focus areas like critical infrastructure protection  FERC, in reviewing NERC’s self-assessment of performance, had specific concerns about NERC’s reliability standards development process, specifically improving certain standards and their pace of development  A FERC’ i i NERC h d f h d d d l At FERC’s insistence, NERC has now proposed a revamp of the standards development process  Only time will tell how these changes will affect registered entities and the regional reliability organizations  In addition to evolving standards, the industry is contending with alerts from NERC that may require swift and costly modifications to equipment and operating processes Copyright © 2011 by ScottMadden, Inc. All rights reserved.15 Notes: *Excludes FP&L’s $25 million settlement in October 2009. NERC violation count based upon each requirement violation. Sources: NERC (as of Jan. 15, 2011); SNL Financial; ScottMadden analysis
  17. 17. Rates and Regulatory Issues Copyright © 2011 by ScottMadden, Inc. All rights reserved.16
  18. 18. Electricity Cost Trends, Fuel Mix, and Regulatory and Market Models C d A l G th R t i T t l R t il R kWh (1994 2009) 10 15 20 25 2% 3% 4% 5% Avg.Revenue hRate(%) Chart Title Growth Rate Median Growth Rate 2009 Avg. Revenue (¢/kWh) Compound Annual Growth Rate in Total Retail Revenues per kWh (1994–2009) and 2009 Average Revenues per kWh 0 5 10 0% 1% 2% AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY (Cents/kWh) Growth AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MNMO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY                                                    Part  of RTO 100% pe                                                                                                                        of RTO Restructured  Retail RRA PUC  Ranking 25% 50% 75% enerationbyFuelTyp 0% 25% NetGe Coal Hydro Natural Gas Nuclear Renewable Other  The link between growth in revenues per kWh of electricity and Legend Part of RTO: Full or most  | Part  | None or insubstantial  Restructured Retail:  Full choice | Partial choice  RRA PUC Ranking: Above average (constructive) | Average | Below Average  The link between growth in revenues per kWh of electricity and regulatory model is uncertain at best  Fuel mix has a bearing, especially where coal (historically cheaper) or gas (historically more expensive) is a significant part of the mix  Interestingly, while revenues per kWh (rates) predominantly coal- fired jurisdictions remain relatively low for many their growth hasS E I f ti Ad i i t ti ISO/RTO C il C t C liti Copyright © 2011 by ScottMadden, Inc. All rights reserved.17 fired jurisdictions remain relatively low, for many their growth has been above median  Some lower cost jurisdictions—Alabama, Tennessee, Oregon, and Washington—have increased the most over the past 15 years Sources: Energy Information Administration; ISO/RTO Council; Compete Coalition; SNL Financial/Regulatory Research Associates; Distributed Energy Financial Group, Annual Baseline Assessment of Choice in Canada and the United States: An Assessment of Restructured Electricity Markets (Dec. 2010); ScottMadden analysis
  19. 19. Energy Costs and “Share of Wallet”: A Pushback Coming? E C t P t f I A Ri i NTh T t Y T d f H h ld E Share of Wallet: Median Energy Costs as a % of Median Household Income (Nominal $)* 4%500 ( ) Average Annual Electricity Rates vs. Other Cost Measures (1990–2009) (Index: 1990=100) Energy Costs as a Percentage of Income Are Rising Now, a Trend Exacerbated by a Decline in Household Income in 2009 The Twenty-Year Trend for Household Energy Is in Keeping With Key Price Indexes .0% % % % % 2.3% 2.6% % % % % .0% % 2.1% 2.2% 2.6% 3.1% 3.2% 2%300 400 xValue Electric Rates (All Classes Avg.) Natural Gas Prices (Henry Hub Avg.) Producer Price Index (Less Food and Energy) Consumer Price Index 2. 1.8 1.7% 1.7% 1.7% 1.3% 1.2% 1.6% 1.4% 1.7% 1.6% 1.8 2 1.7% 2 2 0% 1997 1999 2001 2003 2005 2007 2009 Electricity Piped Gas Fuel Oil 0 100 200 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 Inde y p Energy Costs Take a Larger Bite Out of Households  While household energy costs have kept pace with 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Share of Wallet: 2009 Median Energy Costs as a % of Regional Variations for Energy Costs In Comparison with Median Income Levels Can Be Significant gy p p key inflation indices over the last two decades, “share of wallet” is increasing now — Piped natural gas expenses, as a percent of income, have increased since the late 1990s — Electricity costs, which fell in the early 2000s, have increased rapidly since mid decade rising Median Household Income (Nominal $)* 3.6% 3.5% % 4% have increased rapidly since mid-decade, rising from 1.7% of income to 2.6% in four years  There are differences by region in household energy “share of wallet”  A tipping point is possible as stagnant incomes, coupled with increasing costs squeeze households 2.1% 2.3% 1.9% 2.4% 2.2% 1.8% 1.2% 2.5% 2.6% 2.2% 0% 2% Copyright © 2011 by ScottMadden, Inc. All rights reserved.18 Notes: *Energy costs are for those households consuming this fuel type; median income is for all households Sources: U.S. Census Bureau, Annual Household Survey; U.S. Bureau of Labor Statistics; Energy Information Administration; ScottMadden analysis coupled with increasing costs, squeeze households  This could mean lower consumption, fewer rate case filings and less favorable ratemaking mechanisms Northeast Midwest South West Electricity Piped Gas Fuel Oil
  20. 20. Climate Change, Environment, and Sustainability Copyright © 2011 by ScottMadden, Inc. All rights reserved.19
  21. 21. Renewable Portfolio Standards: Comparing Resources with Goals 50% 60% Renewable Portfolio Standards for 2012 and 2020 (% of MWhs) vs. 2008 Renewable Generation as % of Total Generation (% of MWhs) by State ID: 84.5% OR: 63.4% WA: 74.5%Renewable Generation as %  of Total Net Generation 40% 50% TX Renewable Target: • 2013: 5,256 MW • 2025:  10,000 MW • 2008 (Actual): 8,380 MW 2020 RPS target  (small square indicates no 2012 target) 2012 RPS target 20% 30% 0% 10% AL AK AZ AR CA CO CT DC DE FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY  As the first target dates under various state renewable portfolio standards approach, states are positioned differently  States with a large portion of their energy mix from large hydro (e.g., the Pacific Northwest, New York, Maine, Vermont) are well positioned However dependence upon these resources make hydrologic conditions a crucial variable in whether the standardspositioned. However, dependence upon these resources make hydrologic conditions a crucial variable in whether the standards can be consistently met  Some states—Delaware, DC, Illinois, and Pennsylvania, for example—have a significant gap to overcome to achieve their 2012 renewable generation targets  Others with 2020 time frame targets have a similar gap but some time to put resources into place Copyright © 2011 by ScottMadden, Inc. All rights reserved.20 Sources: U.S. Energy Information Administration (EIA), State Renewable Electricity Profiles 2008 (Aug. 2010), at http://www.eia.gov/cneaf/solar.renewables/page/state_profiles/r_profiles_sum.html; EIA, State Electricity Profiles 2008 (Mar. 2010), accessed at http://www.eia.doe.gov/cneaf/electricity/st_profiles/e_profiles_sum.html; Database of State Incentives for Renewable Energy
  22. 22. Energy and Environmental Policy: A Grand Bargain or Guerilla War on the Piece Parts? Anticipated White House/ Agency Approach New Congressional Environment Possible Wild Cards The Bottom Line  Proposed boiler MACT  House oversight hearings  Results of and reactions to  Compliance may EPA Conventional Emissions p rules in Q1 2011, finalize by Mar. 2012  Final Transport rule in 2011  Some delays requested (e g biomass MACT) g g likely  Potential limitation on EPA spending “listening” meetings  Obama regulatory review  Judicial action in response to EPA-sought delays and environmental organization challenges thereto p y be deferred out of concerns on impact on U.S. economy  But environmental intervenors may force continued Regulations (e.g., biomass MACT) challenges thereto EPA action  No reversal of standards in next two years  “Clean” energy standard expanded to include some  Some bipartisan support in Senate for clean energy  Deficit concerns on additional funding  Some R&D funding Clean Energy expanded to include some types of non-renewable generation  Continued investment in R&D  Government-driven green t Senate for clean energy standard (with nuclear)  No strong advocate in House additional funding  Clean or renewable energy standard less likely given opposition to nuclear by the environmental lobbyenergy procurement lobby Regulation Of G h  No cap-and-trade legislation pushed  EPA pushing tighter standards on new sources and implementation plans,  No cap-and-trade legislation  House oversight hearings, potential limitation on EPA spending on GHG  Carbon tax may be viable with deficit hawks, but industry will oppose increased customer cost  Supreme Court decision  No legislative approach, but EPA pushes on (inventory baseline)  Possible House Greenhouse Gas Emissions and implementation plans, BACT on existing generators spending on GHG regulation  Supreme Court decision on GHG emissions tort vs. EPA regulatory pre- emption  Outcome of state lawsuits challenging GHG BACT  Possible House inquiry into climate science  U.N. non-binding targets  I d th it f  C ll t f t  D fi it i  A h ll t t Copyright © 2011 by ScottMadden, Inc. All rights reserved.21 Nuclear Development  Increased authority for guarantees for new plants  Call to reform guarantee program, reduce role of OMB  Deficit concerns: increase may not be budget-neutral  A challenge to get additional funding, guarantees Sources: Van Ness Feldman; K&L Gates; Alston & Bird; SNL Financial; industry news; Senate, House committee websites; ScottMadden analysis
  23. 23. Solar Development Remains on a Roll, But It Still Requires Subsidies  Solar development continued to grow in 2010 I ti d T C dit C t N t I t ll d C i l PV C t i H lf Installed Cost of Commercial PV (>10 kW / All Technologies) Over Time ($/WattDC)  Solar development continued to grow in 2010, well above the 2009 pace — Solar PV installations totaled 525 MWs through 3rd Quarter 2010, up 1/5 vs. 2009 — One projection has U S solar capacity Incentives and Tax Credits Cut Net Installed Commercial PV Costs in Half $12.00 $10.59 $9 59 $9 89$12 $16 d DC) — One projection has U.S. solar capacity reaching 44 GWs by 2020, requiring $100 billion in investment  Solar costs have been decreasing with scale economies and expanded manufacturing capacity $ $8.93 $9.59 $9.89 $8.83 $8.45 $8.02 $7.81 $8.10 $7.95 $7.95 $0 $4 $8 $12 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Installed Cost($/WD — Global PV panel capacity is projected to grow to 30 GWs by 2013 from 10.1 GWs in 2009 — Producers are mobilizing—e.g., GE is prioritizing solar business growth 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Net Installed Cost with ITC State/Utility Cash Incentive (After‐Tax) ITC (State and/or Federal) U.S. Utility-Scale ( 100 kW) Solar Projects (in MWs) by Operating Date — European manufacturers are expected to look abroad as European subsidies (especially feed-in tariffs) are reduced amidst fiscal austerity  The U.S. market is still dependent upon favorable state policy and development is 400 s Solar PV Installations Helped by Grants and Reduced Equipment (Module) Cost favorable state policy and development is concentrated in a handful of states — The top five states—CA, FL, NJ, AZ, and PA—account for 76% of large (>100 kW) solar PV installations since 2000 0 100 200 300 InstalledMWs — Policy support is still necessary: CA, for example, allows up to 5% aggregate net metering and providing $3 billion for “Go Solar” subsidies  Asian growth will fuel increased activity and 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Solar PV Concentrating Solar Copyright © 2011 by ScottMadden, Inc. All rights reserved.22 Sources: Solar Industry magazine; Renew Grid magazine; SNL Financial; The New York Times; The Wall Street Journal; Bloomberg New Energy Finance; Energy Acuity; G. Barbose, N. Darghouth & R. Wiser, Lawrence Berkeley National Laboratory, Tracking the Sun III: The Installed Cost of Photovoltaics in the U.S. from 1998-2009 (Dec. 2010); Greentech Media, U.S. Solar Energy Trade Assessment 2010 (Nov. 2010), prepared for Solar Energy Industries Association pull equipment abroad: China is targeting 20 GWs of installed solar by 2020; India’s goal is 1 GW by 2013
  24. 24. Energy industry landscape:  sharpening contrasts and accelerating change   Every  day  in  this  challenging  and  exciting  environment,  experienced  ScottMadden  consultants  offer  our  clients  deep  energy  knowledge  and  practical  business  acumen,  collaborate with them, and help them succeed.  We  have done  this  for  more  than 25 years,  served more  than  200  energy  organizations— including 90% of  the  top 20—and completed  thousands of  projects. We have  worked  with  the best in the industry and can help you succeed Meet with us for industry leading practicesthe best in the industry and can help you succeed. Meet with us for industry‐leading practices  and management insights.    Generation • Transmission • Delivery • Smart Grid • Markets • Utilities • Regulation • Gas  “They are practical; AN EXCEPTIONAL CONSULTING EXPERIENCE y p ; we can put their recommendations into play right away.” Industry Executive   AN EXCEPTIONAL CONSULTING EXPERIENCE  scottmadden.com  Copyright © 2011 by ScottMadden, Inc. All rights reserved.
  25. 25. Recent ScottMadden Insights—Available at ScottMadden.com Fossil Generation Coal Combustion Residuals, by J. Jacobi, http://www.scottmadden.com/insight/410/Coal-Combustion-Residuals.html Coal Plant Shutdown—A Case Study: Why? How?, by S. Pearman & G. Robinson, http://www.scottmadden.com/insight/409/Coal-Plant-Shutdown-A-Case-Study-Why-How.html Natural Gas Infrastructure Investment in the Gas Industry, by E. Baker & J. Davis, http://www.scottmadden.com/insight/354/Infrastructure-Investment-in-the-Gas-Industry.html Renewables Biomass: Electricity Generation and Transportation Fuel, by J. Jacobi, http://www.scottmadden.com/insight/408/Biomass-Electricity-Generation-and-Transportation-Fuel.html Solar Photovoltaic Plant Operating and Maintenance Costs, by J. Jacobi & R. Starkweather, http://www.scottmadden.com/insight/407/Solar-Photovoltaic-Plant-Operating-and-Maintenance-Costs.html Resource and Supply Planning Resource Planning—Confronting Challenges and Managing Uncertainties, by R. McAdams & J. Davis, http://www.scottmadden.com/insight/405/Resource-Planning-Confronting-Challenges-and-Managing- Uncertainties htmlUncertainties.html Energy Efficiency Improvements in Data Center Management, by J. Jacobi, J. Kerner, & Scott Wilson, http://www.scottmadden.com/insight/412/Improvements-in-Data-Center-Management.html Energy T h l i Storage Applications: Where Is the Value—Now and in the Future?, by J. Jacobi,& Scott Wilson, http://www scottmadden com/insight/403/Storage Applications Where Is the Value Now and in the Future htmlTechnologies http://www.scottmadden.com/insight/403/Storage-Applications-Where-Is-the-Value-Now-and-in-the-Future.html Nuclear Generation Improving Nuclear Maintenance Productivity—Insights from ANS, by C. Vlahoplus, published in Nuclear News, http://www.scottmadden.com/insight/424/Improving-Nuclear-Maintenance-Productivity-Insights-from-ANS.html Nuclear New Build, by E. Baker, http://www.scottmadden.com/insight/411/Nuclear-New-Build.html Using Benchmarks in Gap-Based Business Planning, by J. Sequeira, I. Falk, & C. Carmichael, published in Nuclear Power International, http://www.scottmadden.com/insight/425/Using-Benchmarks-in-Gapbased-Business-Planning.html Financial Shared Services ScottMadden and APQC Article Series: Financial Shared Services, by B. DeMent & J. Davis, http://www.scottmadden.com/insight/423/ScottMadden-and-APQC-Article-Series-Financial-Shared-Services.html Copyright © 2011 by ScottMadden, Inc. All rights reserved.
  26. 26. Energy Practice The energy industry landscape is one of sharpening Research ScottMadden Research provides clients with valuablegy y p p g contrasts and accelerating change. The shelf life for conventional wisdom seems to grow shorter with each headline. Every day in this challenging and exciting environment, experienced ScottMadden consultants offer our clients deep energy knowledge and practical business p insight on developments, trends, and practices in energy and sustainability. Through its semi-annual Energy Industry Update and other occasional publications, our research team helps clients discern and analyze critical issues and inform their business decisions. acumen, collaborate with them, and help them succeed. We have done this for more than 25 years, served more than 150 energy organizations, and completed thousands of successful projects. We have helped some of the best in the business in nuclear and fossil generation We also provide customized, project-based research and analytical support on matters of interest to our clients. For more information about our research capabilities or content see the Insights section of our website orin the business in nuclear and fossil generation, renewables, transmission, distribution, gas, regulatory, and a host of other areas. For more information about our Energy Practice, contact: content, see the Insights section of our website or contact: Brad Kitchens President sbkitchens@scottmadden.com Stu Pearman Partner and Energy Practice Leader spearman@scottmadden.com 919.781.4191 sbkitchens@scottmadden.com 404.814.0020 Stu Pearman Partner and Energy Practice Leader spearman@scottmadden.com 919.781.4191 Jere “Jake” Jacobi Partner and Sustainability Practice Leader jjacobi@scottmadden.com 404 814 0020404.814.0020 Greg Litra Director of Research glitra@scottmadden.com 919 781 4191 scottmadden.com 919.781.4191 Copyright © 2011 by ScottMadden, Inc. All rights reserved.

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