“National Model” for Mandated Fuel Switching? Patrick J. McCormick III Hunton & Williams LLP Washington, D.C. January 26, 2011 Views expressed here are personal and not the views of APPA, Hunton & Williams LLP or any client.

Points of Departure America has a richly-varied electric industry with complementary generation offerings Fuel diversity and fuel neutrality have served our nation well Flexibility works –Utilities should have as much discretion as possible to make their own resource choices Trends in one state or sector often affect others Emerging issues require attention

A national model? “Gov. Bill Ritter today signed into law the historic Colorado Clean Air-Clean Jobs Act, landmark legislation that gives other states and the entire nation a new roadmap...” Governor’s Press Release April 19, 2010

A national strategy? “Design a program to displace the oldest coal-fired generation with natural gas and renewables.... –Prepare ‘how to’ template for rulemaking, legislative and [PUC] change” Natural Gas in the Nation’s Energy Future: A Program of Action Source: COGA Meeting 2010

Colorado Act Although applies to IOU generation only, implicates – Policy of fuel neutrality and diversity Scope and controversy of resource decisions Reliability and price of electric and natural gas supply

Challenges Mandatory Fuel Switching – –Substitutes for regular order decision making –Presents implementation hurdles –Overlooks key facts –Challenges reliability and cost stability –Imposes costs

Challenges If case for fuel switching were self evident, it wouldn’t require new law or regulation The business facts must be established and understood Public power-owned coal plants deserve the opportunity to meet stated environmental goals

Challenges Existing plants can be a first installment on a greener future – Enabling comparable emission reductions at lower cost –Providing greater flexibility over the longer term to meet CAA and CO 2 requirements –Promoting development of new, cleaner technology –Protecting customers from future cost increases or supply disruptions –Preserving the reliability of electric and natural gas service –Promoting economic and job growth

Outlook “Identify 5-7 target states based on political and technical ease of switching”* Texas and Michigan may be key states to watch –Action in other states possible State legislatures, PUCs, and policy debates are key venues * Source: Natural Gas in the Nation’s Energy Future: A Program of Action