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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

also interested in responsibility. You have to be responsible in this business, investing in assets that have a 40- or 50-year lifespan. But the ability to finance those investments requires adequate returns, so we have to find a regulatory mechanism that works. That means companies in a monopoly position will earn returns commensurate with the risk they are taking, and can recover their cost of capital.

I can see a situation where National Grid becomes more of a total provider of energy services to our customers, a holistic manager of energy demand. We will get paid for investing in the right technology at the right time, and providing the right advice to help businesses and homeowners conserve energy, and for all the activity of getting a better handle on the overall supply-and-demand balance.

That has the potential to evolve into a new business model that is more than simply the wire and gas pipe into your home. We have the technology, expertise and professionalism to do it. We need to develop a trust with our customers and regulators that we are genuinely part of the solution, and we need the political desire to change the way we encourage conservation.

Competition can help eventually. As we are moving into people’s homes and helping them manage their energy use, there’s no reason we can’t have competitive businesses competing against us. But the business of conservation needs support to get it going before you can introduce the competitive element. From a standing start, this is something that companies that have the expertise should begin. Then you introduce competition, and let it occur naturally.

Crane, NRG Energy: At this time more than ever, we need the benefits of competition in terms of innovation and efficiency. Put this challenge into the competitive market, and see what ideas you get.

If you put it into the rate base, then utilities will figure out the most expensive way to do it. The public-relations budget of an independent power company pales in comparison to the budget of a utility, so the utility can give the appearance of being more civic minded and doing things out of the goodness of its heart.

But at the end of the day the free market will figure out the best technology to address global warming. You have to put a price on carbon, because no one will spend billions to take carbon out of the atmosphere unless someone puts a price on it.

Rowe, Exelon: We think if you give it a full chance to work, the competitive market will produce a cleaner generation base at a lower cost over time. If you set up a cap-and-trade system with a safety valve and you enforce it rigorously, the competitive market will respond with the most efficient solutions. But if you want to build nuclear plants fast, and build coal plants with carbon capture and sequestration, you can do that in a fully regulated, IRP regime. But you have to understand you are betting the customer’s money to subsidize the solution. That’s not necessarily a