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EEI to Wall Street: The Future is Here
NEW YORK (February 11, 2015) — Edison Electric Institute (EEI) President Tom Kuhn and four other EEI officers today briefed Wall Street analysts, bankers, and investors on the state of the U.S. electric power industry. The presenters shared their vision for the rapidly unfolding future of the industry that is focused on technology, innovation, and customer choice.

“Not only is electricity essential to the everyday lives of more than 300 million Americans, but our industry is an integral and robust component of our nation’s economy,” said Kuhn. “We are investing more than $90 billion each year, on average, to transition to a cleaner generating fleet and to enhance the electric grid. The grid itself is an amazing technology that drives innovation—and powers possibilities.”

Kuhn also highlighted the industry’s substantial efforts to improve reliability and to better protect the grid from physical and cyber security threats. “Mitigating today’s threats requires a risk-based, multi-pronged industry approach, as well as close coordination and collaboration with the government to prepare for, prevent, respond to, and recover from national-level incidents or threats to critical infrastructure,” he said. “Over the past 18 months, EEI members, along with municipal utilities and electric cooperatives, have dedicated a tremendous amount of time and resources to develop and enhance the Electricity Subsector Coordinating Council, which is now recognized as the model for industry-government partnerships.”

Regulatory Outlook/Evolving Distribution System

EEI Executive Vice President, Business Operations Group and Regulatory Affairs, David Owens discussed the regulatory outlook facing utilities in Washington and at the state level, as well as the future of the electric grid, noting, “A number of pending and proposed regulations will transform the way that electricity is generated, delivered, and consumed.”

Owens discussed how many of the important policy debates about the future of the grid are occurring at the state level, particularly surrounding the issue of distributed generation. He highlighted how the industry is leading the charge when it comes to investing in renewable sources. “In fact, around 50 percent of the new generation capacity added over the past few years uses renewable energy sources. And, preliminary numbers show that a record-breaking 3.5 gigawatts of utility-scale solar capacity, including community solar, were installed last year alone,” he said.

Owens also addressed the evolution of the grid and how customers’ expectations for choice and the integration of new technologies, such as rooftop solar, will only continue to grow. “The bottom line: Customers expect us to develop and sustain a grid that supports all of these needs, while giving them flexibility and choice in how they use energy. As the grid continues to transform, we need to make sure that it is managed with expertise and system know-how,” he said. 

Transportation Electrification

EEI Executive Vice President, Public Policy and External Affairs, Brian Wolff highlighted EEI’s work in advancing transportation electrification. “EEI released a report last June showing that electrification of the transportation sector is a potential ‘quadruple win’ for electric utilities and consumers,” said Wolff. “It enables utilities to support environmental goals, builds customer satisfaction, reduces operating costs, and enhances national security by using more of our national energy resources.” 

Wolff pointed to the electric vehicle (EV) market as an area for significant growth. “EV sales finished strong in 2014, totaling nearly 120,000—an increase of about 23 percent over 2013 sales. The total number of EVs on the road—plug-in electric and pure electric vehicles—is now more than 290,000,” he said.

Financial and Energy Supply Outlook

EEI Vice President, Energy Supply and Finance, Richard McMahon recapped the 2014 financial results, highlighting that the EEI Index posted a higher average return than the Dow Jones Industrial Average and the S&P 500 last year. “Over the longer term, electric utilities’ total returns have continued to reward investors more handsomely than the broader market,” McMahon said.

McMahon also discussed the industry’s significant infrastructure investment. “In 2014, our industry was projected to spend $103.3 billion in total capital expenditures, which would set another record,” he said. “With renewed focus on infrastructure, it is not surprising that transmission and distribution are incrementally more important to overall investment.”

Additionally, McMahon emphasized the importance of fuel diversity. “As energy markets change, and with them our generation fleet, maintaining fuel diversity and flexibility remains at the forefront of our industry’s priorities,” he added. “This is the only way to preserve the reliable and affordable electricity that our customers expect.”

Environmental Outlook 

EEI Vice President, Environment, Quin Shea outlined the regulatory challenges facing the industry. Shea highlighted the tremendous progress the industry has made in reducing emissions. “Nitrogen oxides and sulfur dioxide emissions from power plants have been reduced by around 75 percent from 1990 levels, during a period when electricity use grew by 35 percent. Additionally, utilities have reduced carbon dioxide emissions by 15 percent below 2005 levels as of the end of 2013,” Shea said.

Shea noted that the Environmental Protection Agency’s (EPA’s) proposed guidelines to regulate greenhouse gas emissions from existing electric generation units under section 111(d) of the Clean Air Act, “are, without a doubt, the most significant environmental rulemaking ever to impact our industry.” “Of greatest concern is the fact that EPA has not taken into account the amount of time, infrastructure development, and planning that the transition to a cleaner generating fleet will require,” said Shea. 

“In fact, by setting stringent interim goals, EPA effectively has turned the proposed rule’s 2030 goal into a 2020 goal. Eighty percent of the states would have to achieve more than half of their final 2030 goals by 2020. Eleven of those states would be required to achieve 75 percent or more of their 2030 goals by 2020,” Shea said. “The 2020 interim goal must be substantially revised or eliminated, and the Agency must provide states the compliance flexibility to choose the most cost-effective reductions in order to ensure the overall reliability of the electric system and to minimize costs for electricity customers.”

Shea also addressed additional EPA rulemakings impacting the industry including the final 316(b) cooling water intake structures rule, the final coal ash rule, proposed ozone standards, and the proposed Waters of the U.S. rule, among others. “Clearly, 2015 will be a critical year for environmental regulations. Ultimately, EEI and our member companies continue to support achieving the nation’s environmental goals in a manner that preserves fuel diversity, ensures electric reliability, and minimizes costs to customers,” he said.

View the full briefing here​

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