Our Energy, Our Future:A Dialogue with America

Mobilizing 40 million electric cooperative consumers to ask their elected representatives tough questions about the future of energy.

Types of Utilities• The REC’s are member-owned. Many of our members are

Farm Bureau members. We serve primarily in the rural areas and our density (number of services per mile of line) is only 2.7. Avg. Iowa REC has over $17,000 invested per mile of line.

• One member, one vote – members elect the directors

• Assign margins to the members in the form of patronage

• As we discuss the positions we are advocating today, we want to stress that we are looking out for the interests of our member-owners. We have no other priority. Providing an adequate, reliable, safe & environmentally responsible source of power at the lowest possible cost, is our primary objective.

Types of Utilities• Municipals are public power

systems that many of the smaller communities in Iowa own and operate

• Density of municipals is typically much higher than the REC’s

• Investor Owned – (IOU’s)

• Owned by the shareholders

• Much larger systems than REC’s and municipals

• Significantly higher density than the REC’s – often over 30 services per mile of line

• One of the IAEC’s 37 member RECs

• Consolidated organization

• O’Brien County REC and Sioux Electric Cooperative consolidated operations in 1993 to form North West REC

• January, 1998 – Plymouth Electric Cooperative, Ida County REC and North West REC consolidated

Power Supply Update• Power supply costs account

for 65 percent of the typical REC’s total operating expenses.

• Hydro – a valuable renewable and no carbon resource – accounts for approximately 25 percent of NWREC’s power supply.

• Nuclear is another no carbon resource that some of the state’s RECs have in their power supply portfolio mix.

Power Suppliers SupportingWind Energy Development

•Wind energy also is an important renewable and no carbon resource that has been used by the RECs and will play an even bigger role in the future (Example – Iowa Lakes wind project).

•Important to be aware that wind needs to be backed up with another resource such as coal or natural gas.

Green Pricing Programs• All of the generation and

transmission electric cooperatives and their member RECs offer green pricing programs.

• Our program is called Prairie Winds.

• The cost is ½ cent per KWh and was 3 cents when the program began in 2001.

• Have promoted the program for seven years, but get little participation from the members – less than 1 percent.

Coal is still the predominant resource for us.

Importance of Coal Generation• Coal is most abundant nonforeign source of fuel for making

electricity.

• It is becoming more challenging to get new coal plants approved (Example – Sutherland plant near Marshalltown).

• Technology continues to improve.

• We need to continue to build new coal plants to ensure a reliable and affordable source of electricity so the nation can compete in the global marketplace.

• Federal leadership is needed – Congress and the next President need to adequately fund research and development of new technology that will enable the capture and sequestration of C02.

Projected Wholesale Costs for New Coal Plant

0123456789

Coal New Coalw/ o C02

Capture &Storage

New Coalwith C02Capture &Storage

Cents per KWh

3

6.0

9 - 10Cents per KWh

Our Current Energy Situation

•The atmosphere around energy policy is politically charged as polarized positions dominate the debate.

•Today, Americans are sensitive to global climate issues.

•The availability of affordable, reliable power has never been more in doubt.

•There is a leadership vacuum in the energy debate—finding a balance in meeting energy needs and climate goals must be a priority.

The Current Political Landscape

•The presidential election is setting the agenda with climate change issues.

•Special interest groups are continually lobbying Congress on energy and climate change issues.

•We are concerned that the voice of the consumer is not being heard.

Challenges Ahead

•Address the issue of greenhouse gases.

•Increase generating capacity by 30 percent to keep up with projected demand over the next 20 years.

•Prevent the possibility of an electricity shortage, which could be here as soon as 2011 in some parts of America.

•Keep electricity affordable.

16.6%

15.6%

14.6%14.1%

13.4%12.6%

11.6%10.8%

9.9%9.4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: NERC 2007 Long-Term Reliability Assessment (ES&D database)

Capacity Margins include planned resources (summer) and demand-side management (but not uncommitted resources)

U.S Capacity Margins Decline…

Load/Resource Balance

Existing Resources

SurplusDeficit

Load

200

4

201

0

202

0

Can We Act Fast Enough?

“We’re very close to the edge. We operate under tight conditions more often than ever. We need action in the next year or two to start on the path to having enough electricity 10 years from now.”

--Rick Sergel, CEO of NERC, LA Times Jan. 18, 2008

• What is NERC?

The North American Electric Reliability Corporation is a non-profit, self-regulatory organization whose mission is to ensure that the bulk power system in North America is reliable. It is subject to direct oversight by the U.S. Federal Energy Regulatory Commission.

Some Would Argue That We Don’t Need To Build Anymore New Baseload Generation

•They believe through energy efficiency/conservation and by building more renewable energy, that new baseload generation won’t be needed.

•We strongly support an increased emphasis on energy efficiency and renewables, but we don’t believe it’s realistic that we won’t have to build new generation.

•How would this adversely impact the continued growth of Value Added Agriculture if we didn’t have an adequate supply of electric power?

NWREC’s Sales Are Increasing Significantly – Primarily Due to Value Added Ag Loads

0

100000000

200000000

300000000

400000000

500000000

600000000

1999 2001 2003 2005 2007 2009

Historical

Projected

Ethanol

Projects Like Bison Renewable Energy

Dairy Expansion

Poultry, Cattle and Pork Production

To Be Successful We Need to Do It AllTo meet future demand we must:

• Restrain the rate of demand growth through energy efficiency,

• Increase energy generation from renewable energy sources,

• Increase our reliance on nuclear energy,

• Make our current coal-fired plants more efficient,

• Figure out how to capture and store carbon dioxide from power plants,

• Bring plug-in hybrid electric vehicles to market, and

• Improve the viability of consumer-generated energy.

Each of Us Has a Role to Play In…

•Influencing this debate – U.S. climate change policy may be voted on or even passed soon after the new administration and new Congress begin their work in 2009. The Lieberman-Warner bill, which would have caused significant electric rate increases, did not pass – but it’s likely new legislation will be proposed early next year.

•Making sure elected representatives remember their obligations to protect the public’s interest in maintaining affordable, reliable electricity.

What We Need…

•Leadership and sustained commitment by Congress

•Public-private partnerships

•Partnerships with groups like Farm Bureau

•Our 40 million members/consumers in one unified voice demanding legislators strike a balance between our electricity needs and climate change goals

We Need True Leadership• The New Deal

o President Roosevelt set the goal of electrifying rural America, bringing the benefit of electric light and modern conveniences to the entire nation.

• The Apollo Program

o To ensure U.S. supremacy in space, President Kennedy committed all necessary U.S. talent and resources to putting a man on the moon.

• Climate Change Policy

o If addressing climate change becomes the great mission of our generation, then lawmakers must do more than issue arbitrary emissions reduction targets for some future date—they must address the tough questions and build consensus.

Overview

Divider Slide

Our Energy, Our Future: A Dialogue with America

www.ourenergy.coop

Our Energy Our Future – Campaign Perspective

• Electric Cooperatives have a direct stake in the outcome.

• Electric Cooperatives are well positioned to lead the debate about our energy needs and influence opinion.

• Electric Cooperatives are community leaders serving 40 million member/consumers, and that engenders credibility and political clout.

• The time is right and the time is now for this campaign to educate consumers and get them involved, talking to their elected representatives – later will be too late.

Core of the Campaign

•Our campaign is about keeping the lights on and electricity affordable.

•We are facilitating a consumer movement for a balanced responsible energy future as Congress sets climate change goals.

•We are speaking for consumers not special interests.

Objective

•Bring co-op members/owners and their elected officials together to talk about what needs to be done to ensure a reliable and affordable supply of electricity

Join the CampaignKey Questions for Elected Officials

•Ask your elected officials the following questions:

o Experts say that our nation’s growing electricity needs will soon go well beyond what renewables, conservation and efficiency can provide. What is your plan to make sure we have the electricity we’ll need in the future?

o What are you doing to fully fund the research required to make emissions-free electric plants an affordable reality?

o Balancing electricity needs and environmental goals will be difficult. How much is all this going to increase my electric bill and what will you do to make it affordable?

We would appreciate your support

• We believe it’s important for Farm Bureau to be aware of the seriousness of this issue.

• We have many of the same members and it would be good for the members of both organizations to hear a similar message.

• Any support Farm Bureau could give us through your Resolutions process and in communicating with our legislators, would be appreciated.

• As an example - is this a topic that could be highlighted in your Iowa Minute program?

To Be Successful & To Keep Electric Rates Affordable, We Need to Do It All• Restrain the rate of demand growth through energy

efficiency.

• Increase energy generation from renewable energy sources.

• Increase our reliance on nuclear energy.

• Make our current coal-fired plants more efficient.

• Figure out how to capture and store carbon dioxide from power plants so we can continue to build new coal generation.

• Bring plug-in hybrid electric vehicles to market.

• Improve the viability of consumer-generated energy.

The Bottom Line

•To effectively address the nation’s energy issues and to keep electricity affordable, we need a balanced approach that includes diverse fuel sources – including renewables - for generating electricity plus energy efficiency and research to develop new carbon free energy technologies.

For additional information on this issue . . .

•Basin Electric has a website – www.findabettersolution.com

•NRECA’s web site – www.ourenergy.coop

www.ourenergy.coop

We Are Asking our Members to Join the Campaign

We would like to Partner with you in the energy debate

•Many of your members also are our members.

•The outcome of the energy debate will be very important to all of our members.

•We believe we can both be more effective in participating in this debate and having an impact on the outcome, if we coordinate our messages as much as possible.

Thank you for the Opportunity to present this information to your Committee•Please contact us if you have any questions or are interested in receiving additional information

•Tim Coonan, IAEC tcoonan@iowarec.org

800-798-7037

•Brian Kading, IAEC bkading@iowarec.org

800-798-7037

•Lyle Korver, North West REC lkorver@nwrec.coop

800-383-0476

Questions?