1. Donald W. Downes Chairman, CT Department of Public Utility Control Chairman, CT Energy Advisory Board C ONNECTICUT’S E NERGY F UTURE Legislative Office Building December 2, 2004 M EETING CT E NERGY C HALLENGES T HE C ONNECTICUT E NERGY A DVISORY B OARD

2. LICAP $$ Two Price Zones LMP $$ $$ LICAP Fuel Prices $$ Enviro Concerns $$ RMR (Locational Marginal Pricing) (Locational Installed CAPacity)(Reliability-Must-Run generators) Feeling the Federal/Regional Energy PriceSqueeze

3. VT HQ SEMA RI NOR SWCT CT WMA NY BHE ME NB BOST NH SME CMA/ NEMA Adequate Locked In Generation Marginal Deficient CT Transmission Problem Impact of Deficiency $$ - Locational Marginal Pricing $$ - Hidden Costs Weakened Reliability Map Source: CL&P

4. CT Generation Problem $$ - LICAP (Locational Installed CAPacity) Hidden Costs - $$ Weakened Reliability Old Generation Impact of Problem Older generation units are: –near end of service life (many will be 40 yrs old or older by 2013) –inefficient – avg. efficiency is about 30% –expensive to operate –mismatched to load: baseload plants being used for Spinning Reserve Combined Cycle Gas Turbine plants – can be up to 2X as efficient C ONNECTICUT E NERGY A DVISORY B OARD

5. l Nov 04 Source: EIA

6. CT Strategies to Meet Electric System Challenges Generation Transmission On-going Strategies Energy Efficiency Conservation Demand/Load Response Distributed Generation C ONNECTICUT E NERGY A DVISORY B OARD

7. Getting from Here to There Restraining Demand Energy Efficiency/Conservation Distributed Generation Demand/ Load Management Response Now Future Infrastructure Building Phase Cost $$ Reliability Problems On-going Strategies CEAB Process

9. Integrated Resource Planning and Adequacy function -has been shifted from regulators/monopolistic structure to competitive market forces New Role for CEAB – to review/ evaluate proposed energy solutions Existing Challenges CEAB Process C ONNECTICUT E NERGY A DVISORY B OARD

10. Primary goals for new entity – encourage competing energy solutions/provide opportunity to review multiple energy solutions simultaneously New restructured environment requires new approach Goals for New Entity CEAB Process C ONNECTICUT E NERGY A DVISORY B OARD

11. CEAB Preferential Criteria – Energy – Economics – Energy Efficiency/Conservation/Demand & Load Management Response – Environmental – Quality of Life/ Community Interests Energy Project Solicitation Process (RFP) – Reactive Solicitation – Proactive Solicitation CT Energy Plan CEAB Process 3 Implementation Tools C ONNECTICUT E NERGY A DVISORY B OARD

12. Realizing the Cost Benefits $ T IME Adequate Transmission Adequate Generation Real Costs LICAP So. Maine SE MASS Gen. $$ Real Costs LMP