Energy Sustainability in a Carbon Constrained World

George A. WilliamsSenior Vice President and

Chief Operating Officer

2

A federal bill to reduce greenhouse gas emissions is unlikely to pass Congress this year (2010).

There is no agreement on the details of a cap-and-trade system.

If Congress doesn't move forward, emission reductions will be forced by federal regulators (EPA), ultimately driving up utility rates.

Climate Change Legislation

Since December, little has happened on Capitol Hill regarding climate change and energy policy.

3

Climate Change Legislation

Cap and Trade is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants.

A governmental body sets a limit or cap on the amount of a pollutant that can be emitted.

Companies are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level.

Companies that need to increase their emission allowance must buy credits from those who pollute less. The transfer of allowances is referred to as a trade.

4

Climate Change Legislation

WORLDWIDE10.4 billion metric tonsannual CO2 emissions

UNITED STATES2.5 billion metric tons annual CO2 emissions;0.62 tons per MWh

CHINA2.8 billion metric tons annual CO2

Emissions;0.86 tons per MWh

THE RESTIndia, Russia and

Germany round out the top 5

5

Climate Change Legislation

UNITED STATES2.5 billion metric tons annual CO2 emissions

EE2.2 million metric tons annual CO2 Emissions

6

Climate Change Legislation

Report No. DOE/EIA-0226 (2009/12); Released December 16, 2009*Other is petroleum

7

Report No. DOE/EIA-0226 (2009/12); Released December 16, 2009*Other is petroleum

Climate Change Legislation

8

Climate Change Legislation

The U.S. can reduce its CO2 emissions by approximately 500 million metric tons per year by moving to an approximate energy mix of:

30% coal (19% decrease from current)30% nuclear (10% increase)25% natural gas (4% increase)10% renewable (7% increase) 5% hydro (no change)

This reduction would effectively move the U.S. intensity from 0.62 to 0.45 metric tons per MWh generated (20% reduction).

9

EE’s Carbon Footprint

EE 0.31APS 0.48SPS 0.92PNM 0.94National average 0.67Austin Energy 0.49

tons of CO2 per MWh generated (short-tons)

2008 data, Source – Carbon Monitoring for Action - CARMA

10

Nuclear 4,693 GWh 42%

Natural Gas 2,682 24% Coal 671 6% Renewable 1

<1%Purchases 3,152 28% TOTAL 11,175 GWh

100%

2008 data

EE’s Energy Sales

11

Industry Data by Resource Type

Costs are in 2009$

Capacity/ Availability

Factor*Installed

$/kW*Total

¢/KWh*

Wind 20% 1,825 12.3Solar (thermal) 20% 6,150 32.9Solar (photovoltaic) 20% 6,150 28.5Biomass (landfill) 90% 1,350 5.9

Nuclear (advanced) 90% 4,100 7.9Coal (scrubbed) 85% 2,975 7.2Natural Gas CC 85% 1,250 10.0

*EPRI 2009 Technical Summary Reports (some va lue rounded).

Cos ts s hown are "at the busbar" - no del i very costs included.

COST OF ENERGY BY RESOURCE TYPE

12

Climate Change Legislation

Climate change legislation may require building of more Renewable Energy Projects

This will increase cost of electricity for El Paso Electric’s customers since renewable energy is more expensive than traditional sources of power