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
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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
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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
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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%
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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.
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Prior to Start of Construction
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Photo Rendering After Completion
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April 27, 2006
5.5 Million Cubic Yards Excavated
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12
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Oak Creek Expansion Project
Power Block
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Steam Turbine Generator
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Boilers
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Air Quality Control System
Selective
Catalytic
Reduction NOx control
Flue Gas
Desulfurization
(scrubbers)
Baghouse filters
remove particulate
Wet Electrostatic
Precipitators
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Water Intake System
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Construction Barge
1.5 Miles Off Shore
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Lake Bottom Intake Equipment
Side view
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1 of 24 Wedge-Wire
Water Intake Screens
34 Ft in Length, 8 Ft in Diameter
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Lowering Equipment
into Construction Shaft
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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
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Point Beach Nuclear Plant
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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

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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
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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
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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
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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
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Transaction Highlights

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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
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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)
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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
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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)
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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.
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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
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Rate Impacts - 2008
Final Rate with
Credits Applied
Residential
9.2%
Secondary
7.7%
General Primary
4.9%
Street Lighting & Other
4.2%
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Rate Impacts - 2009
2009 Rates
with Credits Applied
Residential
5.7%
Secondary
7.4%
General Primary
11.0%
Street Lighting & Other
4.8%
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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
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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
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2008
(p)
2009
(p)
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Questions?
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