Regional Greenhouse Gas Initiative (RGGI)

1. Regional Greenhouse Gas Initiative(RGGI) Electricity Restructuring Roundtable June 17, 2005

2. Dominion Exploration and Production ~6 trillion cubic feet equivalent of provedgas and oil reserves Approximately 1.2 billion cubic feet equivalent of daily production 1.2 million unregulatedretail energy customersin 8 states Plus ~ 28,100 Mw of electric generation Dominion Generation Dominion Energy 7,900 miles of naturalgas pipeline 6,000 miles of electric transmission Nearly 1 trillion cubic feetof natural gas storage Cove Point LNG Facility Dominion Delivery 4million franchise gas and electric delivery customers in 5 states Dominion Footprint

3. Dominion Generation - Virginia Power Portfolio(as of January 27, 2005) Current - 18,400 MW NEPOOL MAIN NYPP PJM Existing Generation Mt Storm ECAR Remington Coal Possum Point Natural Gas North Anna Gordonsville Nuclear Bath Ladysmith Hydro Yorktown Bremo Surry Oil - Gas Capacity at plant Clover Elizabeth River Chesapeake Pittsylvania Gaston Other Entergy TVA Chesterfield VACAR Roanoke Rapids

4. Dominion Generation - Merchant Portfolio(as of January 27, 2005) Current - 9,700 MW Kewaunee - 545 MW* NEPOOL Kewaunee Salem Harbor MAIN NYPP Manchester Street Brayton Point Millstone Elwood State Line Troy PJM Armstrong Existing Generation ECAR Fairless Works Kincaid Morgantown Coal Natural Gas Pleasants Nuclear Growth Generation Nuclear Entergy TVA VACAR *Pending

5. Dominion New England Generation Assets : 4,643 MW Salem Harbor 312 MW Coal (3 Units) 431 MW Oil (1 Unit) Brayton Pt. 1,078 MW Coal (3 Units) 435 MW Oil*(1 Units) Manchester Street 426 MW Gas CC (3 Units) Millstone 1,953 MW Nuclear (2 Units) * Excludes 8 MW of diesel capacity Source: Dominion Internal Database

6. Dominion New EnglandGeneration Diversity Dominion New England Generation Portfolio 4,643 MW Fuel Diversity Dispatch Diversity Source: Dominion Internal Database

7. Multi-sector, long-term environmental, economic and energy issue Global issue - will not be resolved by an individual state or region Technology-based solution Burden should not fall upon a single sector Climate Change

8. Power Plant CO2 Emissions • Power plants in the RGGI region generate only 5% of the national power plant emissions of CO2 • They generate ~9% of the national megawatt hours • Emissions in RGGI region (2003) were 3% below 1990 levels; average emission rate is about 900 lbs/mwh. • National emissions (2003) were 24% above 1990 levels; average emission rate is 1400 lb/mwh.

9. Power Plant CO2 (million tons)

10. Power Plant CO2 (lb/mwh)

11. Compliance Options • Robust offsets program essential for flexible, low-cost compliance options • Lack of commercially available end-of-pipe controls limits reduction opportunities for fossil-fuel plants • Fuel switching • Efficiency improvements • Unit shutdowns • More costly - reliability, fuel diversity issues

12. Offsets - Least Cost Compliance Options Are Critical to Success of Program • RGGI currently focused on limited “short list” • Needs to focus on process and development of criteria for identifying and evaluating offset projects to expand list of low-cost opportunities • Allow case-by-case projects/demonstrations • Avoid/limit geographic constraints • Include all greenhouse gases • Evaluate price/stabilizer cap (“circuit breaker”) “From viewpoint of system operations and reliability: compliance flexibility is key for assuring reliability” (ISO-NE - Nov 2004)

13. Modeling Is Key Component • Cost-benefit analysis essential to process • RGGI needs to address issues raised by stakeholders regarding unrealistic sector modeling (IPM) reference case assumptions • Stakeholders should have access to all detailed modeling outputs/results for sector and macroeconomic analysis in a timely manner • Given funding/resource constraints, RGGI must focus on modeling runs that will provide decision makers with meaningful information from which to formulate well-informed policy decisions

14. How Will RGGI Affect Region? • Electricity prices • Jobs • Local tax revenues • Additional reliability on natural gas as a source of fuel for electric production • Fuel diversity erosion and grid reliability • Additional reliance on electricity imports • Impact of leakage What are the benefits …. At what cost?

15. What Makes Sense for a Region Where ……. • CO2 emissions are a small portion of national total • Average source emission rates are much below U.S. average • A relatively large portion of electric generation (~40%) is from non-emitting nuclear and hydro • Electricity prices are already among nation’s highest.

16. What Makes Sense ! • To extent a regional cap is imposed: • Stabilize cap at current levels • Design program that provides reasonable, flexible compliance mechanisms that minimize the cost • Establish a “minimum” state adoption requirement for implementation • Provide mechanism to interface/transition to a national program • Provide means to interface with any existing state programs

17. Benefits • Captures RGGI region emission reductions, actions since 1990 • Hedges economic risk for Northeast • Maintains electric system reliability, fuel diversity, energy affordability • Allows time to evaluate RPS impact • Creates more workable format that other regions may be willing to consider/adopt • Allows time for national program to emerge