1. Should Utilities Own Generation in New England?
Restructuring Roundtable
December 8, 2006
Douglas Horan
SVP – Strategy, Law and Policy
NSTAR

2. Utility Ownership of All Generation Is the Wrong Model
Not Feasible
Utility generation assets, business structures and management would need to be rebuilt
Not Desirable
Market is powerful efficiency driver
“Balkanization” of generation loses benefits of scale

3. Utility Ownership of Some Generation Probably Makes Sense
Customer outcomes could be improved by utility generation ownership in the following instances:
Optimizing Basic Service
Replacing Long Term Contracts
Supporting the Distribution System

4. Optimizing Basic Service
Active utility management of an energy portfolio will create better results for Basic Service customers than passive RFP procurement
Portfolio should be optimized
Likely to be primarily contract based
But for some portfolio elements (eg, peakers), ownership may offer more benefits for customers than contract purchases

5. Replacing Long Term Contracts
Whether long term commitments will be needed to “make generation happen” in New England is still uncertain
If needed, utility contracts may be seen as the likely vehicle
Long term contracts pose substantial risks to customers (recall the IPPs); utility ownership may provide a better risk/value balance for customers

6. Supporting the Distribution System
Some areas of a distribution system pose unique service challenges (eg, Martha’s Vineyard)
Generation may be a least cost alternative to expensive T&D expansion
Utility ownership provides needed control and reliability

7. Concluding Thoughts
“Utility Ownership” and “Market Competition” are not goals; they are tools.
Apply them where they produce the result you need.
In the near term, utility generation ownership is likely to remain a targeted solution.
If we are still having this discussion in five years, the reverse will likely be true.