Regional Greenhouse Gas Initiative (RGGI) Electricity Restructuring Roundtable June 17, 2005

Dominion Exploration and Production Dominion Footprint Dominion Delivery Plus 1.2 million unregulated retail energy customers in 8 states 4 million franchise gas and electric delivery customers in 5 states Dominion Exploration and Production ~6 trillion cubic feet equivalent of proved gas and oil reserves Approximately 1.2 billion cubic feet equivalent of daily production ~ 28,100 Mw of electric generation Dominion Generation Dominion Energy 7,900 miles of natural gas pipeline Nearly 1 trillion cubic feet of natural gas storage Cove Point LNG Facility 6,000 miles of electric transmission Dominion’s assets are located in North America. UK and Latin American assets were disposed of in the late 1990s, prior to the CNG acquisition. MAIN-to-Maine focused What’s new: Acquisition of almost 2,700 MW of fossil generation facilities in Massachusetts and Rhode Island that we now refer to as Dominion New England Acquisition of the 181 MW Panda Non-utility generation facility in NC Disposition of 308 Bcfe of natural gas reserves in British Columbia Hopeful to acquire the 545 MW Kewaunee nuclear power station by the end of first quarter 2005.

Dominion Generation - Virginia Power Portfolio (as of January 27, 2005) Current - 18,400 MW NEPOOL MAIN NYPP PJM Existing Generation Mt Storm ECAR Remington Coal Possum Point Natural Gas North Anna Gordonsville Nuclear Bath Ladysmith Bremo Yorktown Hydro Clover Surry Oil - Gas Capacity at plant Elizabeth River Pittsylvania Chesapeake Entergy Gaston Other TVA Chesterfield VACAR Roanoke Rapids

Dominion Generation - Merchant Portfolio (as of January 27, 2005) Current - 9,700 MW Kewaunee - 545 MW* NEPOOL Kewaunee Salem Harbor MAIN NYPP Manchester Street Brayton Point Elwood Millstone State Line Troy PJM Armstrong Existing Generation Kincaid ECAR Fairless Works Morgantown Coal Pleasants Natural Gas Nuclear Growth Generation Nuclear Entergy TVA VACAR *Pending

Dominion New England Generation Assets : 4,643 MW Salem Harbor 312 MW Coal (3 Units) 431 MW Oil (1 Unit) Brayton Pt. 1,078 MW Coal (3 Units) 435 MW Oil * (1 Units) Manchester Street 426 MW Gas CC (3 Units) Millstone 1,953 MW Nuclear (2 Units) * Excludes 8 MW of diesel capacity Source: Dominion Internal Database

Dominion New England Generation Diversity Dominion New England Generation Portfolio 4,643 MW Fuel Diversity Dispatch Diversity Source: Dominion Internal Database

Climate Change Multi-sector, long-term environmental, economic and energy issue Global issue - will not be resolved by an individual state or region Technology-based solution Burden should not fall upon a single sector

Power Plant CO2 Emissions Power plants in the RGGI region generate only 5% of the national power plant emissions of CO2 They generate ~9% of the national megawatt hours Emissions in RGGI region (2003) were 3% below 1990 levels; average emission rate is about 900 lbs/mwh. National emissions (2003) were 24% above 1990 levels; average emission rate is 1400 lb/mwh. Momentum is building such that mandatory federal requirements are inevitable for the control of CO2 emissions from fossil-fired power plants Individual State Initiatives – As you are aware, several states have passed regulations/standards for “Renewable Portfolio Standards” most recently PA and CO, and some states like MA, have passed specific regulations on CO2. RI and MA have CO2 mitigation initiatives. NJ Hearing on CO2 - On November 22, 2004 New Jersey held a public meeting on its proposal to regulate CO2 as a pollutant, the only opposition that showed up was a representative from New Jersey’s Business and Industry Association. WA CO2 Offset Regulation – New or expanding fossil fuel facilities between 25-350 MW to mitigate 20 percent of their emissions over a thirty year period. RGGI – The map on the right shows the current RGGI states comprised of NE/NY/NJ/DE 9 states; MD, DC, PA and Eastern Canadian Provinces and New Brunswick are observers. Staff Working Group – State Agency reps Technical Advisory Group – Regional ISO’s Stakeholders – Trade group reps.(like The New England Council)/Companies/NGO’s/New England Council Observers – AIM Draft Model Rule was originally to be developed by April 2005, more likely summer or fall 2005 CARB - In September 2004, CARB approved GHG regulations affecting cars, SUVs, and pick-up trucks in response to passage of the “Pavley Bill”. West Coast Governors Global Warming Initiative – Made up of CA/WA/OR launched this initiative in September 2003, most recently on November 18th came out with 36 recommendations, including becoming official observers of the RGGI process, collaborating more extensively with RGGI. As of May 17, 2005, Mayors across 134 cities in 35 states have pledged to cut greenhouse gases 7% by 2010. As of May 20, 2005, New York has started a rulemaking process to adopt California regulations limiting greenhouse gas emissions from vehicles sold in the state, starting with the 2009 model year.

Power Plant CO2 (million tons)

Power Plant CO2 (lb/mwh)

Compliance Options Robust offsets program essential for flexible, low-cost compliance options Lack of commercially available end-of-pipe controls limits reduction opportunities for fossil-fuel plants Fuel switching Efficiency improvements Unit shutdowns More costly - reliability, fuel diversity issues

Offsets - Least Cost Compliance Options Are Critical to Success of Program RGGI currently focused on limited “short list” Needs to focus on process and development of criteria for identifying and evaluating offset projects to expand list of low-cost opportunities Allow case-by-case projects/demonstrations Avoid/limit geographic constraints Include all greenhouse gases Evaluate price/stabilizer cap (“circuit breaker”) “From viewpoint of system operations and reliability: compliance flexibility is key for assuring reliability” (ISO-NE - Nov 2004)

Modeling Is Key Component Cost-benefit analysis essential to process RGGI needs to address issues raised by stakeholders regarding unrealistic sector modeling (IPM) reference case assumptions Stakeholders should have access to all detailed modeling outputs/results for sector and macroeconomic analysis in a timely manner Given funding/resource constraints, RGGI must focus on modeling runs that will provide decision makers with meaningful information from which to formulate well-informed policy decisions

How Will RGGI Affect Region? Electricity prices Jobs Local tax revenues Additional reliability on natural gas as a source of fuel for electric production Fuel diversity erosion and grid reliability Additional reliance on electricity imports Impact of leakage What are the benefits …. At what cost?

What Makes Sense for a Region Where ……. CO2 emissions are a small portion of national total Average source emission rates are much below U.S. average A relatively large portion of electric generation (~40%) is from non-emitting nuclear and hydro Electricity prices are already among nation’s highest.

What Makes Sense ! To extent a regional cap is imposed: Stabilize cap at current levels Design program that provides reasonable, flexible compliance mechanisms that minimize the cost Establish a “minimum” state adoption requirement for implementation Provide mechanism to interface/transition to a national program Provide means to interface with any existing state programs

Benefits Captures RGGI region emission reductions, actions since 1990 Hedges economic risk for Northeast Maintains electric system reliability, fuel diversity, energy affordability Allows time to evaluate RPS impact Creates more workable format that other regions may be willing to consider/adopt Allows time for national program to emerge