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2007 CEO Forum: Greenhouse Gauntlet

Tackling climate change is a monumental challenge. Power-company CEOs discuss long-range plans for a climate-friendly energy economy.

Fortnightly Magazine - June 2007

in our business, and a carbon-constrained world translates into huge investment opportunities. We have to upgrade our grid, to go from analog to digital, and to change out meters and transformers. We will have to totally modernize our fleet; nuclear and advanced coal will replace old coal. And if we do it right, we can have higher customer satisfaction, because there is value in helping customers control their bills.

We are on the road to a carbon-constrained world. To be prepared rather than debilitated in that world, we need to modify the DNA of our company, so we are taking into account the reality of carbon constraints in every decision we make. Our planning scenarios need to include carbon prices.

Lew Hay, FPL Group: We consider the threat of major, long-term environmental and economic damage from climate change to be real. Although many uncertainties remain, there is sufficient evidence today to warrant taking action.

We have been taking steps to reduce our GHG emissions rates and we will continue to do so. For decades, we have been executing a clean-energy strategy. As a result, more than 75 percent of FPL Group’s 128 million MWh of electricity is generated by clean fuels. This has allowed FPL Group to have one of the lowest CO 2 emissions rates of all generators in the United States, a particularly remarkable achievement considering the significant growth experienced by Florida Power & Light and FPL Energy.

David Saggau, Great River Energy: We were one of the first utilities to start [to inventory] our GHG emissions in 1995. In 2006 we established a very lofty goal of reducing our GHG emissions to 2000 levels by the year 2020.

GHG regulation will drive conservation, which is important to Great River Energy. Like any other resource, conservation gets weighed against other resources. If generation is cheaper, we build generation. When we have some real numbers to plug into our assessment of what future generation costs are going to be, we will be able to cost-justify more conservation efforts going forward.

In a sense it is easier for public-power companies to address this issue, because we look at pure cost, and don’t worry about cost recovery. From a pure cost standpoint, if conservation is cheaper, that’s the way we will go. For IOUs, their shareholders can get penalized for conserving. The IOUs will have to fight that battle to figure out how to be incented to do the right thing—and certainly not get penalized.

Courage to Act

Fortnightly: What are your company’s biggest risks and uncertainties associated with climate change?

Hay, FPL: Clearly, there will be a cost to taking action. It is critical that the right policies be put in place that will be effective in reducing emissions without imposing unacceptable costs or needlessly shocking the global economy to address this long-term issue. Bad policy can be just as damaging as no policy at all.

Some of the proposals now pending before the Congress—those that would require that every company simply reduce their historical level of emissions, without regard for their

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