We Energies Pandemic Planning
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Transcript We Energies Pandemic Planning
We Energies Update
Walter Kunicki, Sr. Vice President
State Public Affairs
&
Roman Draba, Vice President
Regulatory Affairs & Policy
Agenda
Power the Future update
Proposed sale of Point Beach
Summer power supply outlook
2008 - 2009 rate filing
2
Power the Future
Proposed September 2000
Constructing new generation to meet
growing demand
Upgrading existing power plants
Increasing renewable energy resources
Improving distribution system
3
Port Washington Generating Station
Two 545 MW natural
gas-fueled combustion
turbines
Replaces 320 MW
of coal generation
Unit 1 began
operating July 2005
Unit 2 scheduled to be
online in 2008
4
Pleasant Prairie Power Plant
Air Quality Control System installed to reduce
site emissions of nitrogen oxide (NOx) by 85%
to 90% and sulfur dioxide (SO2) by 90% to 95%
$325 million investment
Construction began in 2003
First generating unit began operating with new
system in November 2006
Second in service March 2007
5
Blue Sky Green Field Wind Project
145 MW generating capacity
88 turbine sites
Approved by PSCW in
January 2007
On-line in 2008 or 2009
6
Oak Creek Expansion
PSCW approved Nov. 2003:
2 X 615 MW supercritical
pulverized coal units
$2.15B total (~ $1.8B for us)
Largest construction project
in state history
Started June 29, 2005
Units to come online in
2009 and 2010
Site emissions will be
reduced by more than 60%
7
Permit Challenged in Dane County
We have all required permits to build facilities at Oak Creek.
Permit to operate water intake and discharge system is
being challenged by an environmental group.
In March, a Dane County Circuit Court reaffirmed – in
several important respects – decision by Wisconsin DNR to
issue our water permit.
However, court remanded certain elements of the permit for
further review and consideration with all aspects of a recent
N.Y. Circuit Court decision on the Federal Clean Water rules
(Riverkeeper II).
Riverkeeper II involves U.S. EPA and could affect power
plants nationwide.
We’ll work with DNR on additional review of the permit. In
the meantime, construction continues at Oak Creek.
8
Prior to Start of Construction
9
Photo Rendering After Completion
10
April 27, 2006
5.5 Million Cubic Yards Excavated
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12
13
Oak Creek Expansion Project
Power Block
14
Steam Turbine Generator
15
Boilers
16
Air Quality Control System
Selective
Catalytic
Reduction NOx control
Flue Gas
Desulfurization
(scrubbers)
Baghouse filters
remove particulate
Wet Electrostatic
Precipitators
17
Water Intake System
19
Construction Barge
1.5 Miles Off Shore
20
Lake Bottom Intake Equipment
Side view
21
1 of 24 Wedge-Wire
Water Intake Screens
34 Ft in Length, 8 Ft in Diameter
22
Lowering Equipment
into Construction Shaft
23
27 Ft Diameter Tunnel Boring Machine
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Tailend of Tunnel Boring Machine
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Intake Tunnel
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Photo Rendering After Completion
Coal Handling
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Coal Storage Shed with 3 Day Capacity
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270 W x 115 H x 715 L
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Don Hutson Center
270 W x 90 H x 450 L
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Coal Crusher House
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Transfer Tower
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17 Miles of New Rail Track
35
Point Beach Nuclear Plant
36
Two Rivers, Wisconsin
Total capacity = 1,033 MW
Two units
Pressurized Water Reactor
In service 1970/1973
License expiration 2030 &
2033
Operated by NMC since
August 2000; NMC holds NRC
operating license
Point Beach Nuclear Plant
Factors leading to Strategic Assessment
Nuclear industry consolidation
Reduction of NMC Fleet
- Kewaunee, Duane Arnold, Palisades
High risk profile
- Challenges of owning a single nuclear plant
- Regulatory, operational and financial risk
High market interest
- No other announced sales
- Improving regulatory and operational performance
- High demand for nuclear assets
37
Point Beach Nuclear Plant
Market Test Objectives
Continued commitment to nuclear safety, operational
excellence, environmental protection and employee
development
Better manage exposure to nuclear operating,
decommissioning risks
Continued access to power at or below cost of
continuing operations
Ensure employment continuity for existing work force
Timely regulatory treatment
38
Point Beach Nuclear Plant
Market Test Proposals Requested
Incentivized operating agreement
Partial sale
100% sale
Tolling
Other Requested Provisions
Power Purchase Agreement (PPA)
Generation development option
Release of excess decommissioning trust investments
Conformity of terms to address key PSCW issues in Kewaunee sale
Participation in “future attributes”
Transitional support
Interim operating agreement
39
Market Test Update & Conclusion
Bid Process – multiple bidders performed due diligence
over summer/fall 2006. Submitted bids early December.
Bid options thoroughly evaluated
- Economic and Risk assessment
- Transaction terms
Highest value for customers and company
- Best option: 100% sale of Point Beach with long-term PPA
Best alternative: FPL Energy bid to acquire 100% of
Point Beach with life of current license PPA
40
Transaction Highlights
Cash purchase price = $998 million
Highest $/kw price ever achieved in U.S.
Adjustments for variation in nuclear fuel and materials and
supplies
Long-term Purchase Power Agreement (PPA)
Option for 16/17 year term or remaining life of license term
Longest term ever achieved, best protection on summer energy
delivery
Keeps nuclear energy in our portfolio
Only nuclear transaction with choice of PPA terms and flexibility
in setting decommissioning fund transfer target
41
Transaction Highlights
Generation Development Option
Option to purchase up to 40% share in any future generation
developed at the site
Real estate option available 12 years after closing
Decommissioning Trusts and Liability
Non-Qualified Trust retained by company - $303 million
Disposition of Qualified Trust subject to IRS Private Letter Ruling
Buyer assumes full liability for decommissioning
Most comprehensive transfer of environmental liability risk of
any nuclear transaction
Wind Options
Turn-key installation at BSGF
Separate permitted site w/o equipment
42
Preliminary Timeline
Dec. 19, 2006
Agreements executed
Feb. 2007
Filed for required regulatory approvals
April/May 2007 Dept. of Justice clearance and receipt
of FERC approvals
June/July 2007 Anticipated receipt of NRC approvals
Aug. 2007
Anticipated receipt of PSCW approvals
Aug. 31, 2007
Target closing date
June 2008
Termination date (subject to 6 month
extension for receipt of required
regulatory approvals)
43
Summer Power Supply
We expect all plants to be operational
Planning reserve meets 18 percent
PSCW requirement
Adequate energy supply to meet peak
demand in June, July and August
Voluntary Load Reduction programs
44
2008-2009 Electric Rate Filing - Drivers
Reliability – Generation (including Power the
Future) and Distribution ($180 million)
Upgrades to state's transmission grid by
American Transmission Company ($110 million)
Clean Air – environmental improvements
($66 million)
Renewables/EE – Wind Farm & Act 141
($56 million)
Balance sheet amortization ($107+ million)
45
2008-2009 Rate Filing - Request
2008 and 2009 = 7.5 percent each year
This is an average. Actual increase could be more or
less depending on pattern of usage.
Anticipates customer credits from pending sale
of Point Beach Nuclear Plant.
46
2008-2009 Rate Filing - Uses
Improve Wisconsin’s air quality
Add renewable energy sources in the state
Promote effective energy efficiency programs
Ensure a reliable energy supply
Return approximately $660 million of proceeds
from proposed sale of Point Beach Nuclear
Plant to We Energies retail customers in
Wisconsin
47
Rate Impacts - 2008
Final Rate with
Credits Applied
Residential
9.2%
Secondary
7.7%
General Primary
4.9%
Street Lighting & Other
4.2%
48
Rate Impacts - 2009
2009 Rates
with Credits Applied
Residential
5.7%
Secondary
7.4%
General Primary
11.0%
Street Lighting & Other
4.8%
49
Cost Drivers
Electric Rate Increases (2001 - 2009)
before Point Beach sale bill credits applied
60%
Act 141 - Conservation/Low Income
Programs / Non-Inc Taxes 3.8%
BEFORE Point Beach Sale Proceeds Applied
62.6% Cumulative 9-year Rate Increase
5.5% Average Annual Rate Increase
Blue Sky Green Field / Other
Renewables & Efficiency 2.6%
50%
Power the Future 15.9%
Percent Increase
40%
Transmission 11.3%
30%
Fuel 20.1%
20%
10%
Reliability/Air Quality Control 4.7%
Infrastructure Improvements 2.3%
0%
Day To Day Operations 2.0%
-10%
2001
2002
2003
2004
2005
2006
2007
2008
(p)
2009
(p)
* 2008 and 2009 increases are projected per the rate case filing currently before the Public Service Commission of Wisconsin
Cost Drivers
Electric Rate Increases (2001 - 2009)
after Point Beach sale bill credits applied
70.0%
60.0%
AFTER Point Beach Sale Proceeds
Applied 48.9% Cumulative 9-year Rate
Increase
Percent Increase
50.0%
Point Beach
Bill Credits
40.0%
30.0%
20.0%
4.5% Average Annual Rate
Increase (including Fuel)
10.0%
0.0%
2001
2002
2003
2004
2005
2006
2007
* 2008 and 2009 increases are projected per the rate case filing currently before the Public Service Commission of
Wisconsin
51
2008
(p)
2009
(p)
Cost Drivers
Non-Fuel Electric Rate Increases (2001 - 2009)
after Point Beach sale bill credits applied
50.0%
Percent Increase
40.0%
Point Beach
Bill Credits
AFTER Point Beach Sale Proceeds
Applied 28.8% Cumulative 9-year Rate
Increase
30.0%
20.0%
10.0%
2.9% Average Annual Rate Increase
0.0%
2001
2002
2003
2004
2005
2006
2007
* 2008 and 2009 increases are projected per the rate case filing currently before the Public Service Commission of
Wisconsin
52
2008
(p)
2009
(p)
53
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Questions?
55