Regional Greenhouse Regional Greenhouse Gas InitiativeGas Initiative

(RGGI)(RGGI)

Electricity Restructuring Electricity Restructuring RoundtableRoundtable

June 17, 2005June 17, 2005

Dominion DeliveryDominion Delivery

Plus 1.2 million unregulatedretail energy customersin 8 states

4 million franchise gas and electric delivery customers in 5 states

Dominion Exploration and Production

Dominion Exploration and Production

~6 trillion cubic feet equivalent of provedgas and oil reservesApproximately 1.2 billion

cubic feet equivalent of

daily production

~ 28,100 Mw of electric generation

Dominion GenerationDominion Generation

Dominion EnergyDominion Energy

7,900 miles of naturalgas pipeline

Nearly 1 trillion cubic feetof natural gas storageCove Point LNG Facility

6,000 miles of electric transmission

Dominion FootprintDominion Footprint

Existing Generation

Surry

Gaston

Bath

Clover

Chesapeake

Possum Point

Yorktown

Chesterfield

Mt Storm

North Anna

Coal

Natural Gas

Nuclear

HydroBremo

Remington

Oil - Gas Capacityat plant

Ladysmith

NEPOOL

MAIN

ECAR

VACAR

PJM

NYPP

Roanoke RapidsTVA

Entergy

Gordonsville

OtherPittsylvania

Elizabeth River

Dominion Generation - Dominion Generation - Virginia Power PortfolioVirginia Power Portfolio

(as of January 27, 2005)(as of January 27, 2005)Current - 18,400 MWCurrent - 18,400 MW

Existing Generation

Elwood

KincaidMorgantown Coal

Natural Gas

Nuclear

Millstone

Pleasants

Armstrong

Troy

NEPOOL

MAIN

ECAR

VACAR

PJM

NYPP

State Line

TVAEntergy

Kewaunee

Fairless Works

Brayton Point

Salem Harbor

Manchester Street

Dominion Generation - Merchant Dominion Generation - Merchant

PortfolioPortfolio (as of January 27, 2005)(as of January 27, 2005)

Current - 9,700 MWKewaunee - 545 MW*

Current - 9,700 MWKewaunee - 545 MW*

Growth Generation

Nuclear

*Pending

Dominion New EnglandGeneration Assets : 4,643 MW

Salem Harbor312 MW Coal (3 Units)

431 MW Oil (1 Unit)

Manchester Street426 MW Gas CC (3 Units)

Brayton Pt.1,078 MW Coal (3 Units)

435 MW Oil * (1 Units)

Millstone1,953 MW Nuclear (2 Units)

Source: Dominion Internal Database

* Excludes 8 MW of diesel capacity

Dominion New EnglandDominion New England Generation DiversityGeneration Diversity

Source: Dominion Internal Database

Peaking9.0%

Intermediate19.0%

Base72%

Coal30%

Oil19%Gas

9%

Nuclear42%

Dominion New England Generation Portfolio4,643 MW

Fuel Diversity Dispatch Diversity

Climate ChangeClimate Change

Multi-sector, long-term environmental, Multi-sector, long-term environmental, economic and energy issue economic and energy issue

Global issue - will not be resolved by an Global issue - will not be resolved by an individual state or region individual state or region

Technology-based solution Technology-based solution Burden should not fall upon a single sector Burden should not fall upon a single sector

Power Plant COPower Plant CO22 Emissions Emissions

Power plants in the RGGI Power plants in the RGGI region generate only 5% of region generate only 5% of the national power plant the national power plant emissions of CO2emissions of CO2

They generate ~9% of the They generate ~9% of the national megawatt hoursnational megawatt hours

Emissions in RGGI region Emissions in RGGI region (2003) were 3% below 1990 (2003) were 3% below 1990 levels; average emission rate levels; average emission rate is about 900 lbs/mwh.is about 900 lbs/mwh.

National emissions (2003) National emissions (2003) were 24% above 1990 levels; were 24% above 1990 levels; average emission rate is average emission rate is 1400 lb/mwh. 1400 lb/mwh.

2043

145

2550

136

0

500

1000

1500

2000

2500

3000

U.S. RGGI

1990

2002

Power Plant CO2 (million Power Plant CO2 (million tons)tons)

Power Plant CO2 (lb/mwh)Power Plant CO2 (lb/mwh)

0

200

400

600

800

1000

1200

1400

1600

1800

2000

U.S. RGGI

All Generation

Fossil Generation

Compliance OptionsCompliance Options

Robust offsets program essential for Robust offsets program essential for flexible, low-cost compliance optionsflexible, low-cost compliance options

Lack of commercially available end-of-Lack of commercially available end-of-pipe controls limits reduction pipe controls limits reduction opportunities for fossil-fuel plantsopportunities for fossil-fuel plants Fuel switchingFuel switching Efficiency improvementsEfficiency improvements Unit shutdowns Unit shutdowns More costly - reliability, fuel diversity issuesMore costly - reliability, fuel diversity issues

Offsets - Least Cost Compliance Offsets - Least Cost Compliance Options Are Critical to Success of Options Are Critical to Success of

ProgramProgram

RGGI currently focused on limited “short list”RGGI currently focused on limited “short list” Needs to focus on process and development of criteria for Needs to focus on process and development of criteria for

identifying and evaluating offset projects to expand list of identifying and evaluating offset projects to expand list of low-cost opportunitieslow-cost opportunities

Allow case-by-case projects/demonstrationsAllow case-by-case projects/demonstrations Avoid/limit geographic constraintsAvoid/limit geographic constraints Include all greenhouse gasesInclude all greenhouse gases Evaluate price/stabilizer cap (“circuit breaker”)Evaluate price/stabilizer cap (“circuit breaker”)

““From viewpoint of system operations and reliability: From viewpoint of system operations and reliability: compliance flexibility is key for assuring reliability” (ISO-NE compliance flexibility is key for assuring reliability” (ISO-NE - Nov 2004)- Nov 2004)

Modeling Is Key ComponentModeling Is Key Component

Cost-benefit analysis essential to processCost-benefit analysis essential to process RGGI needs to address issues raised by RGGI needs to address issues raised by

stakeholders regarding unrealistic sector stakeholders regarding unrealistic sector modeling (IPM) reference case assumptionsmodeling (IPM) reference case assumptions

Stakeholders should have access to all detailed Stakeholders should have access to all detailed modeling outputs/results for sector and modeling outputs/results for sector and macroeconomic analysis in a timely mannermacroeconomic analysis in a timely manner

Given funding/resource constraints, RGGI must Given funding/resource constraints, RGGI must focus on modeling runs that will provide focus on modeling runs that will provide decision makers with meaningful information decision makers with meaningful information from which to formulate well-informed policy from which to formulate well-informed policy decisionsdecisions

How Will RGGI Affect Region?How Will RGGI Affect Region?

Electricity pricesElectricity prices JobsJobs Local tax revenuesLocal tax revenues Additional reliability on natural gas as a Additional reliability on natural gas as a

source of fuel for electric productionsource of fuel for electric production Fuel diversity erosion and grid reliability Fuel diversity erosion and grid reliability Additional reliance on electricity importsAdditional reliance on electricity imports Impact of leakageImpact of leakage

What are the benefits …. At what cost?What are the benefits …. At what cost?

What Makes Sense for a What Makes Sense for a Region Where …….Region Where …….

COCO22 emissions are a small portion of national emissions are a small portion of national totaltotal

Average source emission rates are much below Average source emission rates are much below U.S. averageU.S. average

A relatively large portion of electric generation A relatively large portion of electric generation (~40%) is from non-emitting nuclear and hydro(~40%) is from non-emitting nuclear and hydro

Electricity prices are already among nation’s Electricity prices are already among nation’s highest.highest.

What Makes Sense !What Makes Sense !

To extent a regional cap is imposed:To extent a regional cap is imposed:

Stabilize cap at current levels Stabilize cap at current levels Design program that provides reasonable, flexible Design program that provides reasonable, flexible

compliance mechanisms that minimize the costcompliance mechanisms that minimize the cost Establish a “minimum” state adoption Establish a “minimum” state adoption

requirement for implementation requirement for implementation Provide mechanism to interface/transition to a Provide mechanism to interface/transition to a

national programnational program Provide means to interface with any existing Provide means to interface with any existing

state programs state programs

BenefitsBenefits

Captures RGGI region emission reductions, Captures RGGI region emission reductions, actions since 1990actions since 1990

Hedges economic risk for NortheastHedges economic risk for Northeast Maintains electric system reliability, fuel Maintains electric system reliability, fuel

diversity, energy affordabilitydiversity, energy affordability Allows time to evaluate RPS impactAllows time to evaluate RPS impact Creates more workable format that other Creates more workable format that other

regions may be willing to consider/adoptregions may be willing to consider/adopt Allows time for national program to emergeAllows time for national program to emerge