April 23, 2013 NATIONAL COAL CONFERENCE Chairman Robert F. Powelson Pennsylvania Public Utility Commission

PA PUBLIC UTILITY COMMISSION  Created in 1937  5 commissioners  500 employees  $65 million budget Regulates around 8,000 utilities in the following sectors: Electricity Natural Gas Water Telecommunications Transportation

THE NEW ENERGY REALITY  World energy consumption predicted to grow by 53% from 2008 to 2035  Fossil fuels will continue to supply much of the energy used worldwide  Renewable share of total energy use is predicted to increase from 10% in 2008 to 14% in 2035  There are 1.6 billion people without electricity worldwide Source: EIA’ s International Energy Outlook 2011

U.S. ELECTRICITY CONSUMPTION EXPECTED TO GROW 30% BY 2035 Projected KWH (Billions) Source: Energy Information Administration 4

U.S. COAL PRODUCTION The U.S. holds the worlds largest estimated recoverable reserves of coal In 2011, approximately 72% of coal production originated in 5 states: PA WY WV KY TX

 PA is the 4 th largest coal producing state in the U.S.  Coal production is vital to PA’s economy  In 2011, PA’s coal industry: Contributed $3.2 billion in economic output Supplied well-paying jobs for 41,500 Pennsylvania residents Provided more than $750 million in federal, state, and local personal income and payroll tax revenue PENNSYLVANIA + COAL

 Over 90% of U.S. coal consumption is in the electric power sector Coal-fired generation still holds the largest share among all sources of electricity In March 2012, coal's share of total U.S. generation was 34%  However, coal’s use has declined since 2007 due to: Slow growth in electricity demand Strong price competition with natural gas Increased used of renewables COAL + ELECTRICITY

2013 PJM GENERATION BY FUEL TYPE Source: PJM Environmental Information Services

2013 PENNSYLVANIA GENERATION BY FUEL TYPE Sources: U.S. Energy Information Administration

THE FUTURE OF ELECTRIC GENERATION

 Coal is the most important commodity carried by America’s railroads Coal accounts for 43 percent of all tonnage shipped Coal generates over 24 percent of all gross rail revenues  The business of coal, rail, and power generation are inextricably linked 70 percent of all call delivered to U.S. power plants is delivered by rail Coal industry accounts for 1 in 5 railroad jobs COAL AND RAIL

FUTURE OF COAL Unknown impact of environmental regulations creates tremendous uncertainty for the coal industry.

Dominion Resources Inc.: Completed construction of new coal plant in One of the last new coal plants? Brandon Shores, Crane & Wagner Generating Stations: Scrubbed for billions, but sold for only $400 million REAL WORLD EXAMPLES PJM Plant Retirements: Almost 9,000 MW did not clear in PJM’s Capacity Auction for FUTURE OF COAL Homer City Generating Station: Edison & GE Capital planning to invest $700 million in scrubbing this plant

 With the rising demand for electricity, we need to rely on all sources of generation, from wind to coal  A diverse mix, or portfolio, approach is the answer  For coal plants to compete in the future, clean coal technology is a must  Coal will be a major player in the future of electric generation CONCLUSION

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