1. Public Policy Drivers and Other Trends in Renewable Energy IPED Managing Your Energy Portfolio in a Greener World Presented by:Mon-Fen Hong La Capra Associates, Inc. Presented to: January 19, 2007

2. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 2 Renewable Energy Portfolio Requirements Emerging Emissions Considerations Increasing Renewable Resources in Utility Resource Portfolios Utility Ownership of Renewable Projects Conclusions Conclusions Todays Discussion

3. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 3 State Renewable Energy Requirements are Increasing

4. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 4 RPS Key Points Every state RPS is different Rising energy costs and available local resources motivate RPS Map is already out-of-date (Washington state just passed RPS by vote) Many states exempt or limit applicability for municipalities, co-ops and public power agencies Growing push for federal RPS

5. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 5 Greater Attention to Emissions: Some Examples Rating agencies looking at company carbon risk California: reduce CO 2 25% by 2020 RGGI (seven northeast states): reduce CO 2 10% by 2019 Increasing expectation of federal action Seven Participating States of RGGI: (Regional Greenhouse Gas Initiative) Maine Delaware Connecticut New Hampshire Vermont New Jersey New York

6. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 6 Until Recently: Until Recently: Utilities Hesitant with Renewable Energy Before 2005, very few large non-hydro renewable energy projects owned by utilities Mid-American Energy: 360 MW of wind-power projects in Iowa 50 MW wood plant in Vermont 2 geothermal plants (Utah and CA) outside mainstream Utilities regarded renewables as outside mainstream and perhaps not a reliable resource

7. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 7 Now: Now: Renewables Significant Part of Resource Plans Integrated resource plans find renewables are cost effective option Lawrence Berkeley National Lab: Western utility plans show 8,000 MW of new renewable energy projects by 2014 See http://eetd.lbl.gov/ea/ems/re-pubs.html Very high percentage from wind

8. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 8 Utility Ownership of Wind Projects: Utility Ownership of Wind Projects: A New Trend? Last 18 months have seen a dramatic shift Utilities complete or announce start of over 600 MW of wind projects Puget Sound Energy Oklahoma Gas & Electric Kansas City Power & Light Capital cost of almost $1 billion Also note: PSNH * has converted 50 MW coal plant to biomass * Public Service of New Hampshire

9. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 9 Accelerating? Is the Trend Accelerating? Utilities announce acquisition of development rights to over 1,100 MW of wind projects having a capital cost of almost $2 billion Wisconsin Power & Light Wisconsin Electric Portland General Electric Mid-American

10. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 10 Issues Issues for Customers Potentially big rate base addition More than 50% of wind project cash-flow value derives from tax benefits How best to structure transaction for non-taxable utilities? CREBs financing for smaller projects? Utilities have little experience with renewables

11. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 11 Opportunities Opportunities for Customers Utilities involvement may be a significant step to development of relatively new but promising resource Long-term value of no fuel-cost resource Price suppression Emission-free or reduced emissions risk

12. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 12 So... QUESTION: Ownership vs. PPA What is best for customers? ANSWER: As always, it depends! Details count.

13. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 13 A Representative Cost Profile

14. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 14 Development and Operating Risks of Ownership Development risk Construction cost overruns (capital at risk) Actual wind performance Cost of capital and other costs can increase over time Ability to use taxes/AMT issues (if applicable) Unscheduled maintenance/longevity of equipment Incentive to run efficiently

15. Public Policy Drivers and Other Trends in Renewable Energy IPED Conference January 2007 15 Conclusions Some Conclusions Growing national trend in RPS and other emissions-related policies Utilities seeing that addition of wind and other renewables to the resource mix can be beneficial Whether such additions should be by means of power purchase agreement (PPA) or ownership must be carefully considered PPA

16. Utility Ownership for Renewable Energy Projects NASUCA Mid-Year Meeting 2006 16 Thanks! End of Presentation End of Presentation Mon-Fen Hong La Capra Associates Twenty Winthrop Square Boston, MA 02110 617-557-9100, ext. 22 mhong@lacapra.com Contact Information: