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GENERATION SUMMIT 2013 “Power Generation and Public Policy: What Might The Future Hold?” John E. Shelk, EPSA President & CEO Monday, February 25, 2013. Title Page. OVERVIEW. Who does EPSA represent? What market fundamentals and business trends are key to power sector public policy issues?

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  1. GENERATION SUMMIT 2013 “Power Generation and Public Policy: What Might The Future Hold?” John E. Shelk, EPSA President & CEO Monday, February 25, 2013 Title Page

  2. OVERVIEW • Who does EPSA represent? • What market fundamentals and business trends are key to power sector public policy issues? • What might the future hold for public policy issues that impact the power generation sector? 2

  3. Who does EPSA represent? Leading Independent Power Producers Calpine GDF SUEZ Energy N.A. Capital Power Northern Star Generation Dynegy NRG Energy Edison Mission Energy Tenaska EquiPower Resources US Power Generating Co. 3

  4. Competitive Supply Affiliates of Major Utility Companies Exelon Corp. PPL Corp. PSEG Power Sempra U.S. Gas & Power Power Marketing BP Energy Co. Shell Energy North America 4

  5. Key Characteristics About EPSA Membership • CEO and Senior Executive Driven on Policy Priorities • Nationwide with emphasis on organized wholesale markets • Primary suppliers in key metro areas coast-to-coast • All fuels and technologies to generate electricity • Largest natural gas, nuclear and solar electricity suppliers • Leaders on controlling emissions from coal-fired plants • Largest retail competitive suppliers in addition to wholesale • EPSA works with State and Regional Partner trade groups • EPSA focuses on federal legislation and regulation 5

  6. EPSA Strategic Direction 2013 Onward (Summary) Mission: Promote well-functioning, fair, robust and competitive wholesale markets Priorities: Improve wholesale market rules; oppose utility self- build; influence Demand Response policies; promote non-discrimination as to existing/new sources, technologies and fuels Actively Monitor: Retail market issues, technology developments, and environmental matters as to impacts on wholesale markets 6

  7. What market fundamentals and business trends are key to power sector public policy issues? • Lowest wholesale prices in organized market history • Low natural gas prices, natural gas often at the margin • Excess power supply in most if not all wholesale markets • Weak demand growth – temporary or structural? • Growth in footprint/customers of organized markets • Significant political intervention in electricity markets • Extensive regulation of all aspects of the power business • The “ribbon cutting syndrome” and “anvils” on the scales 7

  8. What might the future hold for key public policy issues? • Themes • Electricity is transformational and foundational • Everyone says “all of the above” but what does it mean? • Everyone says “fuel diversity” but what does it mean? • Competitive market forces should work here as elsewhere • For competition to work, must let “markets be markets” • Regulation should produce well-functioning markets • Political pressures in cost-of-service and competitive states 8

  9. “Lightning Round on Key Public Policy Issues” • Congress: More of the Same Dysfunction? • Climate Change • Clean Energy Standard • Cyber Security • Energy Efficiency • Natural Gas Exports • Senate “advise and consent” on nominations • Congressional oversight 9

  10. Regulation: Where The Action Is and Will Be! • EPA • GHG New Source Performance Standards-New Plants • GHG New Source Performance Standards-Existing Plants • Further Action on Mercury and Cross-State Rules • Once Through Cooling (“316(b)” Water Issue) • Coal Ash Combustion Waste • Regulation of “Demand Response” Back Up Generators 10

  11. Regulation: Where The Action Is and Will Be! • Federal Energy Regulatory Commission • Capacity Markets and Resource Adequacy Generally • Gas/Electric Coordination • NERC Reliability Standards and Cyber Security • Demand Response Compensation • Market Mitigation (Over-Mitigation) • Order 1000 transmission planning (displace generation?) • Enforcement Actions and Theories on Market Manipulation • FERC and State Actions that Distort Wholesale Markets 11

  12. States as Laboratories of Democracy In Electricity, Too! • Utility Self-Build – Case Study of Virginia • Compare and Contrast – IL/PA/OH versus Michigan • Are we repeating the 1970s/1980s in cost-of-service states? 12

  13. Rumsfeld’s Rules: Watch Out for Unknown, Unknowns! • What is the next game changing, disruptive development? • Policies on climate change and renewable energy? • Technological developments bring down costs of solar? • Electric vehicles? • Distributed Generation/Demand Response/Efficiency? • Energy storage? • Greater retail competition? • Key – will still need conventional generation and it must be fairly compensated, whether market-based or cost-of-service, as nature of demands for it may change over time 13

  14. John E. Shelk President & CEO Electric Power Supply Association 1401 New York Ave., NW Suite 1230 Washington, DC 20005 Telephone: (202) 628-8200 Fax: (202) 628-8260 E-mail: jshelk@epsa.org Website: www.epsa.org 14

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