1. Investing in America’s Electric Future Morry Markowitz Group Director, External Affairs New Mexico Utility Shareholders Alliance October 7, 2009

2. Demand for Electricity Is Projected to Increase 27% by 2030 2

3. 3 Annual Electricity Use in the Typical U.S. Home Has Increased 60% Since 1970 Average Annual Kilowatt-hour Sold Per Residential Customer

4. 4 Electricity Growth Is Linked To U.S. Economic Growth

5. The Costs of Meeting Future Demand

6. 6 Investments in Generation  Inefficient, older power plants will be retired; new plants built.  240 gigawatts (GW) of new capacity will be needed by 2030.*  New capacity costs likely will be in excess of $400 billion. *Source: Energy Information Administration

7. 7 Transmission Investments  Nearly $75 billion will have been invested between 2000 and 2010.  Customers will benefit from newer technologies and reliability. Transmission Investments By Shareholder-Owned Electric Utilities

8. 8 Environmental Compliance Costs  From 2002-2005, the electric power industry spent at least $21 billion on compliance with federal environmental laws; state and local rules drive costs even higher.  EPA estimates that two rulemakings—the Clean Air Interstate Rule and the Clean Air Mercury Rule—will cost electric utilities and their customers almost $50 billion from 2007 to 2025.*  The research, design, development and deployment of new technologies needed to reduce greenhouse gas (GHG) emissions will require additional investments. * CAMR is currently being resolved in the courts; compliance costs could rise under alternative regulatory regimes

9. The Role of Energy Efficiency

10. 10 Energy-Efficiency and DSM Programs Are Making a Difference  Between 1989 and 2007, electric company demand-side management (DSM) programs saved 929 billion kilowatthours (kWh) of electricity—enough to power 83 million average U.S. homes for one year.  These savings are equal to the annual electricity output of 147 baseload power plants [rated at 800 megawatts (MW) each and operating at a 90% capacity factor].  Electric utilities have spent nearly $35 billion on DSM programs from 1989-2007.

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12. The Role of Renewables Benefits and Challenges

13. Benefits of Renewables  Help promote fuel diversity  Produce minimal environmental impact  Largely free of carbon dioxide emissions  Low or no fuel costs 13

14. Challenges Facing Renewables  High initial capital costs  Geographic limitations  Variable nature  Transmission availability and cost  Frequent expiration of production tax credit  Environmental and aesthetic challenges (NIMBY) 14

15. What About Climate Change?

16. 16  EEI supports legislative proposals in Congress to reduce GHG emissions that:  Sets targets and timetables for greenhouse gas emissions reductions that are reasonable and achievable to help prevent sharp increases in electricity prices;  Allocates emissions allowances to the electricity sector for a transitional period;  Includes a “price collar,” or upper and lower limits on the price of emissions allowances; and  Promotes energy efficiency, renewable energy, new nuclear generation, and new advanced coal generation technologies with carbon capture and storage. * The full text of the EEI climate change principles is available at www.eei.org.www.eei.org Industry Climate Change Principles

17. 17  Addressing climate change requires an aggressive and sustained commitment to a full set of technologies, including:  Efficiency  Renewables  Clean coal technologies  Carbon capture and storage  Nuclear  Plug-in hybrid electric vehicles What Will It Take?

18. EIA Base Case 2008 TechnologyEIA 2008 ReferenceTarget EfficiencyLoad Growth ~ +1.05%/yrLoad Growth ~ +0.75%/yr Renewables55 GWe by 2030100 GWe by 2030 Nuclear Generation15 GWe by 203064 GWe by 2030 Advanced Coal Generation No Heat Rate Improvement for Existing Plants 40% New Plant Efficiency by 2020–2030 1-3% Heat Rate Improvement for 130 GWe Existing Plants 46% New Plant Efficiency by 2020; 49% in 2030 CCSNoneWidely Deployed After 2020 PHEVNone 10% of New Light-Duty Vehicle Sales by 2017; 33% by 2030 DER< 0.1% of Base Load in 20305% of Base Load in 2030 EIA Base Case 2007 CO 2 Reductions… What’s Technically Feasible? * *Achieving all targets is very aggressive, but potentially feasible

19. 19 Auctioning Allowances Would Sharply Increase Costs to Customers

20. The Dividend Tax Rate Reduction

21. Dividend Tax Rate Reduction  Currently at 15%, set to expire at the end of 2010.  Vital to shareholders and the industry.  Proposals by President Obama and Senator Max Baucus (D-MT) would cap rate at 20%. ($200K for individuals, $250K for families)  Majority of shareholders would remain at 15%.  EEI and AGA coalition to support keeping dividend tax rate low. Visit www.defendmydividend.org.www.defendmydividend.org  Sign up today! 21