The many challenges facing the electric power industry, including climate change, modernizing and safeguarding the electric grid and financial issues, represent “opportunities in work clothes” for investor-owned utilities, Edison Electric Institute President Tom Kuhn said Wednesday.
Addressing the financial community in his annual “state of the industry” speech, Kuhn said he remains optimistic about investor-owned electric utilities’ prospects as they tackle a complex and thorny agenda of public policy issues while also seeking to contribute to the nation’s economic revival.
“Electricity will be a strong component of our economic recovery,” Kuhn said. “In what is likely to be an increasingly carbon-constrained future, electricity will be the fuel of choice, powering computers and other electric appliances as well as electro-technologies such as electric vehicles and the smart grid. Clean energy jobs will also be a cornerstone of our recovery, with most of them associated with electricity in some form.”
Pursuing economy-wide federal legislation to address climate change will remain an EEI priority for 2010, said Kuhn, who declared that the cornerstone of smart climate policy is reducing carbon emissions while protecting customers and ensuring economic growth.
“We want legislation that will achieve the twin goals of reducing U.S. carbon emissions by 80 percent by 2050 and mitigating price increases for our customers,” Kuhn said. “In fact, strong consumer protections are crucial to building the public support necessary to sustain U.S. climate policy over the long haul, particularly with so many Americans and businesses focused on a still-struggling economy.”
Another looming environmental issue is the regulation of coal ash from power plants, which “is of great and immediate concern” because of the potential job losses and costs to electricity customers if it is designated a hazardous waste by federal regulators, Kuhn said. “We have joined with a broad group of stakeholders — including governors, mayors, state environmental regulatory agencies, and ash end-users and recyclers — to add their voices to our support for federal regulation of coal combustion products as non-hazardous waste and maintaining beneficial uses,” he said.
The U.S. Environmental Protection Agency soon is expected to unveil its proposed rule on coal ash, said Kuhn, adding that the agency also is expected to act on a number of other key issues including rules governing emissions of mercury, sulfur dioxide and nitrogen oxide. “We are working on all of these issues and making the case at EPA,” he said.
Other regulatory issues at hand include working with the Federal Energy Regulatory Commission on a number of key proceedings involving the expansion of the nation’s electric transmission networks, in part to relieve congestion and also to bring plentiful wind, solar and other renewable resources to market.
Turning to the financial picture, Kuhn said the nation’s investor-owned electric utilities remain financially healthy in spite of the economic downturn of 2009 that was reflected in a 3.7-percent dip in U.S. electricity output. Electric company stock performance was far less volatile than the broader market indices during the past 16 months, he said, and utilities maintained strong access to capital, continuing issuance of long-term debt and historically high levels of capital investment.
EEI Executive Vice President David Owens joined Kuhn during the annual address, and he discussed some of the industry’s other major financial and regulatory agenda items, chief among them efforts by the industry to help preserve utility companies’ use of over-the-counter (OTC) derivatives for energy end-users. Electric companies “rely on these products and markets to manage price risk and help keep rates stable and affordable for retail consumers,” Owens said. “It is essential that policymakers preserve the ability of end-users like electric utilities to access critical OTC energy derivatives products and markets.”
Still another major financial priority for EEI in 2010 is pursuing federal tax policy that will allow utility investors to preserve their dividend income, said Owens, noting that the current 15-percent federal levy on qualified dividends will expire on Dec. 31 if Congress does not act. Observing that President Obama last week in his budget blueprint called for retaining the 15-percent level for all U.S. households with incomes under $250,000, Owens said the industry will be closely engaged as the congressional debate unfolds.
Providing assistance to at-risk and low-income families is another major regulatory objective, said Owens, who pointed to strong industry support for efforts in Congress to maintain full funding for the federal Low-Income Home Energy Assistance Program (LIHEAP) in 2011. In December, Congress passed a continuing appropriations resolution allocating $5.1 billion for LIHEAP, the highest funding level in the 28-year history of the program, and it marks only the second time that it will be fully funded.
Meanwhile, the continuing evolution of the smart grid and overall aggressive capital investment -- in electricity infrastructure in general and advancing technology in particular -- will continue in 2010, Owens said. An influx of stimulus funding will help propel smart grid development, and overall industry capital investment is expected to be $80 billion in 2010, double what it was in 2004.
The increasingly automated grid also will contribute to the growth of energy efficiency programs, and these programs will continue to emerge both as a way of helping customers manage their bills as well as helping utilities better manage their generation resources, Owens explained.
While the smart grid is expected to make electricity transmission and distribution systems run more efficiently, electric companies’ increasing use of automation also will heighten the need for keeping the grid secure from outside threats. Owens said utilities are up to the task and presently are working with government and private-sector partners to build security into any new additions to the system as well as vigilantly responding to all new threats.
Along with an automated grid, the electric industry will continue to pursue advanced generating technologies as well – including carbon capture and storage demonstration projects, new nuclear generation, wind, solar, hydro, energy storage and electric and plug-in hybrid vehicles.
Written remarks as prepared for delivery can be found here: