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2008 CEO Forum: Conservation Compact

Utilities test new models to encourage investments in efficiency and conservation.

Fortnightly Magazine - June 2008

up where McGehee left off—even if he could never really prepare for such a transition.

Fortnightly: You took the reins of Progress Energy under tragic circumstances. What have been your biggest challenges since then, and what are your biggest opportunities?

Johnson: We lost a great friend and great leader in Bob McGehee. It was a shock for the entire company and frankly we’re not over it yet. It happened at a difficult time, a time of rising costs in the industry, and the climate-change debate. But I can’t say enough about how the people at Progress Energy have stepped up to the challenge. I’m really pleased with that. We’ve continued to do our strategic planning and thinking.

We see our basic job as securing the energy future for our customers. But the expectations are changing, and we see our challenge as doing that in an affordable and secure way. That’s our biggest opportunity as well.

Fortnightly: Progress Energy’s customer base is growing. What’s your resource planning strategy? How do various energy sources fit into these plans?

Johnson: We’re pursuing a balanced approach that includes a strong emphasis on energy efficiency, investments in renewable energy and state-of-the-art power plants. We have a mix of generation resources that includes nuclear, coal, natural gas, oil and hydroelectric power. We’ll continue to leverage all these fuel sources in meeting growing needs, and we’ll incorporate cost-effective renewable energy into the mix as well.

Fortnightly: What do you mean by “state-of-the-art” power plants?

Johnson: In general we mean when we’re in a position to build new plants, we’ll apply state-of-the-art, advanced technology that’s available at the time, the most efficient and environmentally sound technology. At the moment that essentially means new nuclear or natural gas.

In our state, building new coal is really not an option, and there isn’t advanced state-of-the-art technology in coal at the moment. For the near term, we’re investing in incremental intermediate and peaking generation fueled primarily by natural gas. Our longer-term need includes base load generation, and we’re taking steps to ensure that nuclear remains viable and available. We’re also investing more than $2.5 billion in emission retrofits on our existing coal-fired fleet, and we’re looking at options for repowering some older fossil-fueled units.

Fortnightly: You mentioned renewables. Few utilities see it as a primary resource, but instead as a sort of green cover. What about Progress Energy? Will renewables be only the icing, or is it a real part of the cake?

Johnson: It’s a little too soon to give a definitive answer on the ultimate role of renewables. We have a requirement in North Carolina to have 12.5 percent of our energy be renewables and efficiency by 2021. We intend to meet that legislative standard.

We recently went into the market to see what’s available in the Carolinas and Florida, and in our first solicitation in the Carolinas we got a little more than 700 MW. A lot of that is intermittent, with the exception of some biomass, and some of the biomass projects are counting the same fuel source. So