1

Public Power Looking to Participate in New Coal Generation

• Public power communities are very concerned about affordable electricity and– Coal is the source of low cost power

• Low cost financing tends to lower ownership cost by $5 – 10/MWh versus an investor owned utility

• Much of the public power community lived on excess baseload in the late 1980’s and 1990’s

• Excess baseload nuclear and coal being used up• Natural gas prices very volatile and will be tied to oil

prices due to increased use of LNG

2Source: Energy Information Administration, February 2005.

8.1¢

31%

6.1¢

64%

5.8¢

94%

5.6¢

10%

5.7¢

69%

5.0¢

96%

7.0¢

78%

6.1¢

9%

6.5¢

75%

7.2¢

88%

8.6¢

51%11.3¢

1%

5.8¢

94%

6.6¢

44%

7.8¢

39%

6.5¢

85%

6.3¢

65%

6.6¢

61%

6.1¢

85%

6.9¢

47%

7.6¢

42%

6.9¢

70%

5.8¢

50%

7.1¢

26%

7.0¢

61%

5.6¢

94%

6.8¢

92%

9.4¢

3%

12.0¢

17%

7.0¢

44%

6.1¢

56%

6.7¢

63%

6.2¢

40%

4.6¢ 92%

6.5¢

50%

8.1¢

55%

5.1¢

98%

7.0¢

58%6.1¢ 60%

5.0¢

1%

10.8¢

8%

15.6¢

15%

NH 11.4¢ 22%VT 11.1¢ 0% MA 10.8¢ 23% RI 10.8¢ 0%CT 10.4¢ 13%NJ 10.2¢ 16%DE 7.3¢ 54%MD 7.2¢ 56%

¢ = average price per kilowatt hour YTD 11/04

% = percent of total generation from coal for 2003

< 6.0¢

6.0¢ - 7.0¢

< 7.0¢ - 8.5¢

>8.5¢

Hydro

Cost Per kWh & Percent of Coal Generation

Low-Cost Electricity From CoalOver 50% of the Electricity is from Coal

3

Basic Electricity and Energy Infrastructure Needed

• Load growth of more than 60% in last 20 years– Little new baseload resources added– Little new transmission added– Real electricity prices starting to rise

• Nuclear generation capacity reaching output limit at 91% capacity factor in 2004

• Coal generation capacity becoming fully utilized at 74% capacity factor in 2004

• Load expected to grow another 20% over next 10 years• Clean Air Interstate Rules (CAIR) proposed by the EPA in December

2003 likely to close 5 - 10% of existing coal capacity – small, older, higher cost plants by 2010

• Existing coal fleet has an average age of 35 years• 7 – 8 year lead time for new coal generation

4

-100%

-50%

0%

50%

100%

150%

200%

1970 1975 1980 1985 1990 1995 2000 2003E

Perc

en

t In

cre

ase S

ince 1

970

Coal Use Grows While Emissions Decline

+177%

0%

-35%

-87%

Electricity from Coal

NOx

SO2

PM10

Source: EPA National Air Pollutant Emission Trends, EIA Annual Energy Review 2002 (October 2003).

Coal used for electricity has tripled since 1970 while Coal used for electricity has tripled since 1970 while emissions have been significantly improvedemissions have been significantly improved