Decisions on what to build: Thoughts from one who has worked on both sides Sarena D. Burch Sr. VP – Fuel Procurement and Asset Mgmt SCANA Corporation October 3, 2007

Whether it is a large baseload plant or coal unloading facility, the issues are the same How to make long term decisions when all the pressure is to look at short term

First – why nuclear? Need large baseload plant in next ten years Clean burning Great success with current nuclear plant Location next to current plant Most economical over long term 2005 Energy Bill incentives Advances fuel diversity Willing in state partner Public support in South Carolina

Uncertainties of costs of carbon tax or cap and trade Why not coal? Uncertainties of costs of carbon tax or cap and trade Uncertainties as to clean coal technology Rail Problems - What happens in a cold winter? Rail congestion High rates Service Problems

However, even with a nuclear plant, coal would still be the biggest part of our generation mix Several factors led us to the decision to build an unloading facility

COAL No Fuel Like an Old Fuel

Future of eastern U.S. Rail Coal Increased coal demand Longer and more circuitous routing Slow decline of Central Appalachian coal production Limestone rail hauls being added to existing coal routes

DIVERSIFY ! Fuel types, Quality, Supply Origins, and Transportation Sea-borne coal logistics are one piece of the diversity puzzle, if available

South American Coal to Williams

SCE&G’s Williams Station lies on navigable water and was originally barge supplied (#6 Oil)

Ocean Vessel Mid-Stream Berth + 42 feet draft (allows up to Panamax size vessels) Adjacent to existing industrial berth (i.e.-no neighbors) Barges are loaded from ocean vessel and towed to station for direct unloading at the power plant

Ocean vessel and loaded barge at mid-stream berth

Current Operations Unloading approximately 550,000 tons of coal annually (about 7% of SCE&G’s annual coal requirement) Infrastructure capability approximately 3,000,000 tons annually Each ocean vessel equals approximately five 100 car unit trains of coal (+ 50,000 tons)

Barge Unloading Dock at Williams Station Barge Unloading Dock at William Station

Same dock plus partial belt infrastructure/daytime

How do we pay for the choices we make for infrastructure? Particularly the large baseload plants The SC Legislature with the support of the Commission, Office of Regulatory Staff and utilities passed the Base Load Review Act.

Base Load Review Act Reduce risk for utility while increasing regulatory oversight of construction Older statutes and regulations are still in place but this Act puts all together clearly and adds three new areas of authority for the Public Service Commission Three new orders are: A Project Development Order (Nuclear Only): 58-33-225 A Base Load Review Order; 58-33-270 and A Revised Rates Order. 58-33-280 (F)

Base Load Review Act (cont’d.) The Commission could issue a Project Development Order before construction begins on a nuclear plant. That order would establish that the decision to spend money on the design and permitting of a nuclear plant was reasonable and prudent. No change in rates would result from a Project Development Order. The Commission could issue a Base Load Review Order at the time construction on a base load nuclear or coal plant begins, or during construction. That order would establish that the costs, schedule and construction plans and contracts for the plant were prudent and that the plant would be added to rate base (for coal plants only upon completion of construction) if built according to those plans and schedules.

Base Load Review Act (cont’d.) The Commission could issue Revised Rates Orders during construction for nuclear plants only. Rates could be adjusted every 12 months to reflect the cost of capital (financing costs) of the current construction, so long as the plans and schedules approved in the Base Load Review Order were being met. The final Revised Rates Order issued upon completion of the coal or nuclear plant would allow the utility to adjust rates for the cost of the completed plant.

Base Load Review Act (cont’d.) Before final orders issued, Office of Regulatory Staff, the utility and customers have fully contested case rights as in general electric rate cases Except for Revised Rate Orders – accounting calculation – if any party objects – PSC will have full hearing www.scstatehouse.net – enter S431

In conclusion, whether your infrastructure needs are a baseload plant or a smaller facility a long term view is needed I have worked at a state commission for seven years and a utility for sixteen years and know what it takes to get a project completed Takes courage and trust of regulator and utility to spend more money for long term benefit when it is easier and cheaper to do short term fix