The Electricity Evolution (and the Case for Reform) Patrick Currier Partner S2C Pacific LLC TAPS 2016 Fall Conference Duluth, Minnesota September 11-13, 2016

“The (energy) Times They Are A Changin’” In terms of energy, more has changed in the past five years than in the past fifty– U.S. is the world’s #1 oil and gas producer By 2020, U.S. will lose 25% of coal-fired fleet Natural gas is #1 U.S. electricity source for first time since 1973 175 countries sign international climate agreement Technological advancements (e.g., fracking, rooftop PV, energy storage, driverless EVs)

The current model works well … The Electricity Evolution The current model works well … … but the future may look like this.

Electricity Evolution Drivers 1. Natural gas, renewables, and environmental regulations 2. Shift in climate and clean energy politics (and money) 3. Technology From taxis to television, every sector is ripe for disruption; the electricity sector is not immune from this new reality Silicon Valley mentality to energy Disrupt first; deal with consequences later Technology can solve most problems “Make the world a better place” New entrants with new technologies in search of market share Costs of new technologies are decreasing significantly 4. Changing consumer expectations Freedom of choice: multiple, on demand choices Power to the people: rooftop PV, storage, microgrids, community solar, smart appliances

The Case for Reform: 5 Truths Climate and clean energy politics (and money) are here to stay. Electricity restructuring has had “mixed” results. DER, storage, DSM, etc. are going to improve, get cheaper, and witness greater deployment. Litigation over the scope and reach of the Federal Power Act is going to increase. Congress – not the courts – is better-suited to make decisions about the future of the electricity system.

Will Congress Act? Can It? Any reforms will take significant educational effort More than a decade since major FPA reform EPA has been major focus of last 5 years; not FERC Policymakers playing catch up on a complicated subject matter Diverse stakeholders and regional differences complicate things What to Expect for Fall 2016/Lame Duck/2017 House/Senate Energy Conference E&C Letter to FERC (June 2016) and FPA hearings (e.g., Sept. 6th hearing) 2017 ... New president, new congress, new chairmen

Final Thoughts Access to affordable, reliable energy will always matter more than how energy is produced or delivered. The utility industry is better equipped than Silicon Valley and Congress to find technical and policy solutions to these issues. But everyone can learn new things. Build alliances with new and unusual partners willing to legitimize and defend industry positions (e.g., reliability, affordability, security). Be the disrupter. Lead rather than wait for industry consensus, group action, or a government mandate.

Technology is supposed to simplify things, right?