wieg annual meeting june 19, 2008 gale klappa chairman and chief executive
Post on 01-Jan-2016
215 Views
Preview:
TRANSCRIPT
WIEG Annual MeetingJune 19, 2008
Gale Klappa
Chairman and Chief Executive
2
2007 Highlights
Named the most reliable utility in the Midwest (fifth time in the past six years)
Produced a record amount of electricity at the Presque Isle Power Plant – more than any other year in the 50+ years of operation at the site
Completed a $257 million environmental upgrade at our Pleasant Prairie Power Plant
On time
Below the $278 million budget approved by the Wisconsin Commission
2
3
2007 Highlights
Made solid progress on our Power the Future construction projects
Improved employee safety
22% reduction in lost-time accidents in 2007
5.7% reduction in OSHA recordables in 2007
Improvement of more than 40% in lost-time accidents and OSHA recordables since 2003
3
4
2007 Highlights
For the twelfth consecutive time, rated a perfect ‘10’ by GovernanceMetrics International for excellence in corporate governance One of only three US companies to
consistently earn this distinction
Completed 2007 with our retail electric rates below the national average
4
5
Meeting the State’s Energy Needs
Wisconsin has been short power
Over the past three years, we’ve imported approximately 15 percent of the electricity we’ve supplied to our customers
In most cases, imported power has been expensive power
5
6
Meeting the State’s Energy Needs
We must expand our energy infrastructure: To remain price competitive
To support
– jobs and economic growth
– population growth
6
7
A Focus on Self Sufficiency
Meeting the State’s Energy Needs
The expansion of our energy infrastructure is well under way
A comprehensive plan called ‘Power the Future’ The largest construction program in state
history
Four new generating units planned by 2010...plus
A major investment in wind energy
A demand reduction program
7
8
Power the Future Plan
Status Approved by PSCW in 2002
Capacity 1,090 MW
Investment $669 million
In Service Dates Unit 1 – 2005 Unit 2 – May 23, 2008
Cost Per Unit of Capacity $614/Kw
Natural Gas
8
9
Power the Future Plan
Status Approved by PSCW in 20031
Capacity 1,030 MW2
Investment $1.8 billion
In Service Dates Unit 1 - 2009 Unit 2 – 2010
Cost Per Unit Approximatelyof Capacity $1,850/Kw
1. Environmental permits are subject to legal challenges.
2. Approximately $350 million will be invested in the coal units by MG&E/WPPI for 200 MW of capacity.
Coal
9
10
Power the Future Plan
One legal challenge still pending on Oak Creek expansion
Two environmental groups are seeking to overturn our permit to operate the water intake system
In November, an administrative law judge ruled that the expansion units at Oak Creek must be treated as a new facility for purposes of this permit
10
11
Appeal of Water Intake Permit
So...the state Department of Natural Resources (DNR) must decide if the water intake system we’ve built is the best technology available – for a new facility
We believe it is clearly the best environmental solution
We received a draft, modified permit from the DNR in May
We expect a final permit from the DNR in July
11
12
Power the Future Plan (all dollars in millions)
Investment
Port Washington Unit 1 $ 333
Port Washington Unit 2 $ 336
Oak Creek Unit 1 1,2 $1,229
Oak Creek Unit 2 1,2 $ 605
$2,503
1. Environmental permits are subject to legal challenges.
2. Approximately $350 million will be invested in the coal units by MG&E/WPPI for 200 MW of capacity.
12
13
Under Wisconsin Law
More Renewable Energy Required
Legislation enacted in 2006 calls for 10 percent of the state’s electricity to be supplied by ‘renewable sources’ by 2015
Given the scale we need, wind is the most cost-effective renewable source for Wisconsin
13
14
Blue Sky Green Field
New Wind Project Complete
Location: Fond du Lac County
Capacity: - 145 MW
- 88 turbines spread
across 10,600 acres
Projected Cost: Approximately $300 million
Approval by the Wisconsin Public Service Commission: February 1, 2007
Completed: May, 2008
14
15
We EnergiesRecent History of Industrial Electric Rates
Excluding Fuel
Industrial Average – cents per kWh
Year 2000 2.92¢
Year 2008 3.75¢
Compound Annual Growth Rate since 2000
3.2%
15
16
We EnergiesRecent History of Industrial Electric Rates
Including Fuel
Industrial Average – cents per kWh
Year 2000 4.28¢
Year 2008 6.74¢
Compound Annual Growth Rate since 2000
5.8%
16
17
Our Competitive Position
A Look Inside the Numbers
17
18
December 2007
Average Retail Electric Prices
We Energies US WE Compared to US
Residential 10.88¢ 10.64¢ 2.3%
Commercial 9.20¢ 9.67¢ (4.9%)
Industrial 6.02¢ 6.36¢ (5.3%)
Source: U.S. Energy Information Administration
Numbers expressed in cents per kilowatthour18
19
A Top 50 Industrial Customer of We Energies
Manufacturing Sites
Georgia* 6.15¢
Missouri 6.40¢
Wisconsin** 6.60¢
Alabama 6.70¢
Kentucky 6.90¢
New York 9.00¢
* Adjusted for 2008 rate increase of 4.2% ** Reflects first quarter billings under new rate
Numbers expressed in cents per kilowatthour 19
20
Observations from the company’s President:
“We Energies pricing has kept our Wisconsin plant competitive as compared to our Ohio operations”
“Our electric rates are essentially the same in Wisconsin and Ohio”
“We’re at no disadvantage in Wisconsin”
20
A Top 10 Industrial Customer of We Energies
21
We Energies should become more competitive as we bring new, cost effective base load units into service
2009 and 2010
New coal units will reduce our dependence on expensive gas-fired power from other states
21
The Pricing Outlook
22
Driven by the price of steel, copper, and other commodities, power plant construction costs have risen dramatically
More than doubled since the year 2000 Most of the increase has taken place since
2005
Cost of We Energies’ Power the Future plants will be a true bargain compared to the cost of plants on the drawing board today
22
Inflation Returns to the Construction Site
23
Issues for Concern Spiraling cost of fuel
Diesel surcharge World market for natural gas Coal exports driving domestic pricing higher
Fuel recovery case pending before Wisconsin Public Service Commission Even if new rates take effect in July, We Energies
projects that it will under recover its actual fuel costs by some $40 million this year
Challenge of ‘Climate Change’ Cost of meeting the Wisconsin mandate for
renewables Potential impact of cap and trade system for CO223
24
Focus on Customer Satisfaction
Our long-term goal: To be the industry leader in customer
satisfaction
Recent customer satisfaction survey of the nation’s 28 largest utilities Ranked We Energies first in the Midwest Tied for sixth in the nation
24
top related