Thomas P. Meissner Jr. Senior Vice President, Chief Operating Officer Unitil Corporation

1. What Utilities Can Do With Renewable Energy Thomas P. Meissner Jr. Senior Vice President, Chief Operating Officer Unitil Corporation NARUC Committee on Energy Resources and the Environment New York City ~ July 17, 2007

2. About Unitil • Small, investor-owned utility • Three territories – NH and MA • Gas and electric operations • Fully restructured • “Distribution only” Not allowed to own or invest in generation of any kind, except through unregulated affiliate.

3. Renewable Generation Distributed Generation • Small wind turbines • Photovoltaics • Fuel cells • Net metered installations • Etc. Centralized Generation • Hydroelectric • Wind farms • Biomass • Solar concentrators • Landfill gas • Etc. Load serving resources Displacement resources More closely aligned with distribution/delivery Competitive markets

4. Displacement Resources Technology Options • Energy Efficiency • Fuel substitution • Demand Response • Energy Storage • Distributed Generation Displacement Options • Eliminate unnecessary consumption; remove load from the system • Better manage load between time periods • Produce electricity directly at the point of utilization Distributed Energy Resources = Displacement Resources

5. Small Renewable Generators • Typically do not have the ability to vary output in response to electric demand. • Need the ability to disassociate generation from consumption. • A connection to the utility grid provides this functionality without the need for energy storage or other expensive alternatives. • Best example – net metering. Connection to the utility grid provides the functional equivalent of energy storage, supplemental service, and back up and standby.

6. 21st Century Grid Grid Modernization Characteristics* • Self-healing. • Motivates and includes the consumer. • Resists attack. • Provides power quality for 21st century needs. • Accommodates a wide variety of generation options. • Enables markets. • Optimizes assets and operates efficiently. * U.S. National Energy Technology Laboratory • Will no longer be planned exclusively around centralized generation. • Will no longer be a strictly radial load-serving system. • A hybrid system will emerge in which load is served from a combination of centralized and distributed resources • Integrates load, generation and displacement resources. • Two-way power flow at the local network. • Will evolve to a network topology with more sophisticated protection, com-munication, metering, and intelligence. • Utilities will provide energy services and grid integration; not just delivery.

7. Role of Distribution Utilities ENABLER: Provide the services to help consumers reduce energy consumption and shift to renewable energy alternatives. Grid Integration Services • Painless interconnection • Energy storage functionality • Supplemental service • Backup & standby • Integration of load and displacement resources • Time differentiated pricing Energy Services • Subsidies/grants • Tax credits • Financing • REC’s • Forward Capacity Markets • Value streams

8. Conceptual Regulatory Framework • Achieve environmental/energy policy objectives • More efficient use of system • Potential for lower unit costs The Evolving Utility Distribution Grid • Enable displacement resources • Empower & incorporate consumers • Enable competitive markets • Enhance reliability, power quality • Optimize assets • Modernize the grid • DER/DG/renewable energy • Proper price signals • Demand Response • Energy Efficiency • Lower customer bills • Environmental objectives Customer Behavior Infrastructure Investment • Decline in use per customer • Increased use of renewable DER • Increased capital requirements Pricing of Energy Services • Migrate away from volumetric pricing of delivery • Remove utility disincentives to energy displacement • Align incentives to achieve desired outcomes • Pricing: energy services vs. energy delivery

9. What Are We Doing? • Completing Advanced Metering Infrastructure (AMI) installation for all customers. • Evaluating new regulatory models and ratemaking methods to achieve desired energy policy objectives. • Experimenting with small renewable technologies. • Seeking legislative authority to invest directly in small renewable generation. It is our belief that rapid adoption and penetration of renewable DER technologies will not occur without the direct, active involvement of the local distribution utilities as determined and motivated partners.

10. Thank You

11. Utility Ownership of Renewable Energy Facilities Brent E. Gale Sr. Vice President, Regulation and Legislation MidAmerican Energy Holdings Company July 2007

12. PacifiCorp Net Plant Capability Capacity Mix

13. PacifiCorp Net Energy Mix (GWh)

14. MidAmerican Energy Company Net Capacity Mix

15. MidAmerican Energy Company Net Energy Mix (GWh)

16. Why develop a renewable energy portfolio? • Diversify fuel risk • Diversify environmental risk • Utilize available tax benefits • Positive customer response • Economic benefits

17. Why should utilities consider owning renewables? • Right to assets and production after typical PPA contract term • Terminal value • Control over maintenance • Ownership of renewable energy credits and any associated revenues • Ability to pass tax credit saving to customers • Near zero dispatch cost • Revenues from incremental wholesale energy sales • Gain expertise and reliable cost information regarding the technology

18. Issues to Consider for the Wind Energy Power Purchase Alternative • Debt leverage risk • Developer business risk • Operational risk • Terminal value • Managing unneeded deliveries during minimum load • Class cost allocation • Ownership of renewable and environmental credits • Contract renewal or replacement at end of PPA term will likely be more expensive

19. Issues for Wind Energy Ownership or Purchase • Transmission Availability and Cost • Our Iowa projects provide an instructive example. The first 460 MW required about $7 million in transmission upgrades or about $15.25/kW installed. The next 75 MW will require about $12 to $14 million in upgrades or about $160 or more/kW. • Tower & Turbine Availability and Cost • 2004 - $1050/kW total project cost • 2005 - $1250/kW total project cost • 2006 - $1800/kW total project cost • 2007 - $2000/kW total project cost • Tower & turbine cost is roughly 75% of total project cost • Each $100/kW change in cost equates to about 0.3 cents/kWh change in all-in cost at 40% capacity factor and 0.4 cents/kWh at a 30% capacity factor.

20. Issues for Wind Energy Ownership or Purchase • Locational Economics • Annual Capacity Factors • Oregon/Washington – 30 to 34% • Iowa – 34 to 40% • Wyoming & Dakotas – 38 to >40% • Each 1 percentage point change in capacity factor equates to roughly 0.2 cents/kWh change in all-in cost. • Peak Availability • Impact on Planning Reserves • Non-dispatchability & low summer peak availability of wind facilities will require greater nameplate capacity reserves • 12% to 20% summer peak availability if multiple sites; individual sites are often much less • Geographic diversity can mitigate but will not eliminate.

21. What Is Needed to Spur Development of Renewables? • Reconciliation of state least cost standards with renewable energy costs • Flexible and expedited federal and state permitting processes • Matching of benefits and cost recovery • Continuation of the federal production tax credit at some level until the credit trading market is robust • A national renewable credit trading program

22. State Renewable Production Standard mandates are NOT required and can be counterproductive • Inconsistent definitions of qualified renewables • Lack of sound economic basis for targets • Limits on qualified renewables (e.g., must be in state) • Limits on use of renewable energy credits

23. Integrating Renewable Energy NARUC July 17, 2007 David M. Sparby

24. Xcel Energy Service Territory Northern States Power Company- Minnesota Northern States Power Company- Wisconsin Public Service Company of Colorado 3.3 Million Combined Electric and Gas Customers in 8 States Southwestern Public Service Largest provider of retail wind energy in U.S.

25. Context: Strong Commitment to DSM and Renewables (NSPMN) • Peak Load (without CL): 10,000 MWs • Wind: 800 MWs • Biomass: 150 MWs • Controllable Load: 932 MWs • Electric Conservation: 256 GWh • Gas Conservation: 900,000 MCF • Renewable Development Fund: $20M/Year Average

26. Wind and Xcel Energy

27. Biomass and Northern States Power Co.

28. 2007 Minnesota Legislative Session • Renewable Portfolio Standard (MN and ND) • Community Based Wind Development • Carbon Emissions Reduction Objective • DSM and Conservation Goals

29. NSP 2020Energy Mix

30. NSP Load Duration Curve in 2020

31. Midwest Transmission Effort North Dakota Minnesota Wisconsin South Dakota Group I – four projects • 600 + miles oftransmission lines • $700 million over 7 years Iowa Group I Post- Group I projects

32. Other Wind Integration Issues • Reliability • Operations • Costs • Wind Assisting Assets and Practices

33. MN Summer System Peak Day

34. Conclusion: Opportunities and Challenges • 2007 legislative goals set a high benchmark • The necessary technology and delivery mechanisms are available to meet these objectives • Constructive regulation will be required to insure successfully adding these resources

36. Ralph LaRossaPresident and Chief Operating Officer PSEG What Utilities Can Do With Renewable Energy NARUC Committee on Energy Resources and the Environment New York City – July 17, 2007

37. . o C x . e o s C s u c i S a s s a P . o C n N e g r e B . o W C E n e r r a W . o C s i r r o M S . o C x e s . s o E C n o s d u H . . o o C C n o n i o n d U r e t n u H STATEN ISLAND . o C t e s r e m o S . o C x e s e l d d i M . o C r e c r e M . o KEY: C h t u o m n o M COMBINED ELECTRIC & GAS TERRITORIES ELECTRIC TERRITORY GAS TERRITORY 0 10 ml 1 2 3 4 5 6 7 8 9 . o C n . a o e C c n O o t g n i l r u B . o . o C C r e n t s e e d c m u o a l C G PSE&G • 6,400 employees • 2.1 M electric customers • 1.7 M gas customers • 24/7 operation • 2,600 sq miles service territory • Serving 6 major cities and 300 communities • 150,000 miles of wire • 15,000 miles of pipe

38. PSE&G • Named the America’s Most Reliable Electric Utility for the last two years • Awarded the Mid-Atlantic reliability award for the past five years

39. PSEG Family of Companies Regional Wholesale Energy Traditional T&D Domestic/Int’l Energy Leveraged Leases Electric Customers: 2.1M Gas Customers: 1.7M Nuclear Capacity: 3,500 MW Total Capacity: 15,000 MW* * 13,000MW in NJ, NY, CT and PA. 2,000MW in Texas

40. Convergence of Energy and the Environment • Convergence of energy and the environment creates the need to address: • Critical infrastructure requirements • Environmental requirements • Capacity requirements in constrained markets

41. CO2 Reductions – Multiple Strategies Required

42. PSEG’s Multi-Pronged Approach • Conservation through energy efficiency improvements • Development of renewable energy resources • Clean, zero- and low-carbon central station electric generating capacity.

43. NJ’s Energy Master Plan & Global Climate Change Legislation • PSE&G is a strong supporter of global climate change legislation and NJ’s Energy Master Plan. • Global climate change legislation is a blueprint for other states to follow in reducing carbon emissions and promoting sustainable energy systems. • Legislation and Master Plan’s goals: • Reduce projected energy use by 20% by 2020 and meet 20% of the State’s electricity needs with renewable energy sources by 2020.

44. Solar and Wind in New Jersey • Renewables can contribute to our total energy mix, but won’t meet our total energy needs: • Intermittent generation for solar -12%; Wind - 30%. • Land availability and weather are key considerations for both sources. • Estimated 12,820 wind turbines would be necessary to replace electric power input of all NJ’s nuclear power plants. • Solar energy holds greater promise than wind energy for New Jersey. • Economics of solar energy require participation from both the public and private sectors – along with significant financial incentives through regulated incentive rates of return, rebates and federal investment tax credits. • PSE&G supports extension of the Solar ITC to allow direct utility investment in solar. • PSE&G currently has a solar proposal designed to maximize ratepayer benefits while leveraging the long-term support of the utility.

45. Creating Solutions with Solar Power • PSE&G proposed in April 2007 to invest $100 million in a solar energy initiative. • Program will help meet the aggressive goals of the Energy Master Plan and the NJ Board of Public Utilities’ renewable portfolio standards (RPS) requirements. • The utility will provide financing to solar photovoltaic developers or end-use customers over a 15-year period, covering about 40-50 percent of a project’s cost. • Program will fund installation of 30 megawatts of solar power; about one half of the RPS requirements in PSE&G’s service territory in the years 2008 through 2010. • If successful, the program may be expanded to support additional solar development.

46. Energy efficiency and conservation is another key component to combating climate change...

47. Conservation through Energy Efficiency Improvements Energy Efficiency Investments in our Plant and Systems: • Usage of more energy efficient primary and secondary wires for new overhead installations. • Installation of energy efficient transformers. • Replacement of aging transformer banks with state-of-the-art units. The Bottom “Green” Line: • Cumulative impact through 2020: • Reduction of approximately 100 million kilowatt hours and approximately 60,000 tons of CO2. • Carbon reduction equivalent to removing the emissions of 14,000 cars

48. Conservation through Energy Efficiency Improvements Investments in Hybrid Vehicles: • PSE&G currently replacing 1,300 vehicles with hybrid cars, light trucks and hybrid bucket truck prototypes. • PSE&G will become the first utility in the nation to use hybrid aerial lifts on bucket trucks. • Since 2003, PSE&G has used bio-diesel as fuel for its diesel-powered vehicles. The Bottom “Green” Line: • Cumulative impact through 2020: • 8,500 tons of CO2 and 850,000 gallons of gasoline • Bio-Diesel contributions since 2003: • 7,700 tons of CO2

49. Next Steps for PSE&G • Examine regulatory reform options to give utilities incentives to invest in efficiency: • Take away disincentives • Provide utilities with direct incentives to invest in energy efficiency • With systems in place, new investments can be made in efficient lighting, heating or cooling for residential and commercial and industrial customers. • With proper incentives, utilities can be the catalysts for large scale efficiency gains.

50. Working together for a green and bright future • Working with our government and regulators, environmental groups, academic institutions and industry we can: • Apply our experience • Leverage our customer relationships • Utilize our resources • Dramatic actions to make renewable and conservation work as part of the solution.