Donald W. DownesChairman, CT Department of Public Utility Control

Chairman, CT Energy Advisory Board

CONNECTICUT’S ENERGY FUTURELegislative Office Building

December 2, 2004

MEETING CT ENERGY CHALLENGES

THE CONNECTICUT ENERGY ADVISORY BOARD

LICAP

$$ Two Price ZonesLMP $$

$$LICAP

Fuel Prices

$$

EnviroConcerns

$$

$$RMR

(Locational Marginal Pricing)

(Locational Installed CAPacity) (Reliability-Must-Run generators)

Feeling theFederal/Regional

Energy Price

SqueezeSqueeze

VT

HQ

SEMA

RI

NOR

SWCT

CT

WMANY

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

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

CONNECTICUT ENERGY ADVISORY BOARD

lNov04

Crude Oil and Natural Gas Wellhead Price 1995-2004

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Wel

lhea

d P

rice

($/

Mcf

)

0.00

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arre

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Source: EIA

CT Strategies to MeetElectric System Challenges

GenerationTransmission

On-goingStrategiesEnergy Efficiency

ConservationDemand/Load ResponseDistributed Generation

CONNECTICUT ENERGY ADVISORY BOARD

Getting from Here to There

Restraining DemandEnergy Efficiency/Conservation

Distributed GenerationDemand/ Load Management Response

Now FutureInfrastructure Building Phase

Cost $$Reliability Problems

On-going Strategies

CEAB Process

• 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

CONNECTICUT ENERGY ADVISORY BOARD

•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

CONNECTICUT ENERGY ADVISORY BOARD

• 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

CONNECTICUT ENERGY ADVISORY BOARD

Realizing the Cost Benefits

$

TIME

Adequate Transmission

Adequate GenerationReal CostsLICAP

So. Maine SE MASS

Gen. $$

Real CostsLMP