Jennifer Janelle, RI Governor Donald L. Carcieri, Sandi Hennequinn (L to R)

Dinner Keynote

Dominion Resources' Chairman, President and CEO, Thomas F. Farrell II kicked off the 15th Annual New England Energy Conference and Exposition in Newport, RI on May 13th with the keynote address. Dominion is one of the nation's largest producers of energy and is the largest wholesale generator in New England. Mr. Farrell called for a rational and comprehensive approach for a national energy policy to address the increase in demand for energy across the country. Challenges faced by energy suppliers include difficulties encountered in the approval process to build new generation facilities along with political and environmental opposition. Dominion is attuned to climate and environmental issues and prides itself on providing a diverse energy portfolio, including renewable alternatives. As various states work toward the creation of regional regulatory programs, there must be coordination with national policy to develop consistency. A proponent of a federal cap-and-trade program, Farrell encourages a policy that promotes new development and realistic expectations. Our country is facing major energy challenges that need to be openly debated with the industry itself in the forefront. Farrell emphasizes the need for leadership who will elevate energy security to a top national priority. According to Farrell, the "goal of achieving environmental integrity without compromising economic growth will take a national commitment on an historic scale but it can be done."

General/Plenary Session

Gordon van Welie, President and CEO of ISO New England

Gordon van Welie, the President and CEO of ISO New England, kicked off our second day of the NECA/CPES conference with introductory remarks. These remarks highlighted the ISO's strategy for the long-term development of transmission for the region and the possibility of creating stronger coordination with the Eastern Canadian provinces. After setting the stage for the plenary panel -- and many of the issues discussed throughout the day - Mr. van Welie moderated the plenary panel, entitled "New England States: Framing the Policies." This kick-off panel represented a cross-section of New England state energy and utility commissioners, including:

- the Honorable Andy Dzykewicz, Commissioner, Rhode Island Office of Energy Resources
- the Honorable Anne George, Commissioner, Connecticut Department of Public Utility Control
- the Honorable Philip Guidice, Commissioner, Massachusetts Department of Energy Resources
- Meredith Hatfield, New Hampshire Consumer Advocate
- the Honorable John Kerry, Director, Maine Governor's Energy Office
- the Honorable David O'Brien, Commissioner, Vermont Department of Public Service

Mr. van Welie and the panelists were challenged to answer the question, "How will the region address environmental and economic goals?"

Mr. van Welie's regional focus on the challenges for achieving environmental and economic goals was a perfect segue for the panelists to discuss individual state challenges. Panelists cited legislation being proposed in their states to stimulate the renewable energy sector and promote long-term contracts with renewable energy developers. This panel was well received by conference attendees and nicely framed many of the issues that were discussed throughout the day.

Session 1A - Greenhouse Gas Policy Initiatives

The first breakout session of the conference looked at issues related to the Regional Greenhouse Gas Initiative (RGGI) and carbon regulation generally from the perspective of four distinct industry participants. Jon Creyts, Principal of McKinsey & Company, discussed a paper he and others had authored on the costs of reducing greenhouse gas emissions. Sandy Taft, Director of US Climate Change Policy for National Grid, presented his company's efforts to reduce greenhouse gas emissions, including adopting carbon budgets and influencing carbon legislation and regulation. Seth Kaplan, Vice President for Climate Advocacy for Conservation Law Foundation, described the future with and without changes to our approaches to greenhouse gases. Finally, Christopher Sherman, General Counsel for the New England Power Generators Association explained the concerns that generators have with RGGI.

Session 1B - Fuel Diversity and Reliability in Light of FCM & RGGI

This Panel was created to address electric reliability in light of the impacts of RGGI and forward capacity markets. The panel made three excellent presentations. Bob Grace, President of Sustainable Energy Advantage, discussed the burgeoning $8 Billion renewable energy industry, its benefits in bringing additional diversity to the generation mix, and the barriers being faced, in spite of the great strides being made. Steve Cowell, Chairman and CEO of Conservation Services Group, addressed demand side resources incorporation into the forward capacity market, the huge success in expanding the market for demand side resources, and the challenges still being faced. Jeffrey Perry, Vice President, Mirant discussed the role of fossil fuels and the continuing need for new fossil generation, in spite of the successes of both renewable and demand resources, declining electrical reserve margins, lead times to construct new generation, regulatory uncertainties and their respective impacts upon maintaining reliable power in the region.

Luncheon Keynote

Our keynote speaker for the conference luncheon was Arnold MacBurnie, Senior Vice President of Shell Energy North America (Canada), Inc. Shell Energy is the energy marketing arm of Royal Dutch Shell located in Canada. Mr. MacBurnie addressed how a large multinational energy company like Shell is responding to the push to reduce carbon emissions and develop renewable resources. In particular, he highlighted Shell's efforts to develop alternative fuels such as biofuels, hydrogen and gas to liquids technologies. He also mentioned Shell's investments in wind resources and carbon emission sequestration projects. Shell views the path to energy independence coming from a variety of sources and Mr. MacBurnie demonstrated Shell's extensive commitment to delivering new energy resources that will help meet consumers' energy needs all over the world.

Session 2A - The Private Sector Response to the Dual Challenges

One of the afternoon panels addressed the challenges and opportunities that the private sector sees in response to policy calls for fuel diversity and reductions in carbon emissions. Experts from companies attempting to develop nuclear, renewables, demand response and clean coal projects discussed the progress that they were making and challenges they were facing. It is clear that renewable technologies have great acceptance but the ability to site projects and move through the interconnection queues continues to be a challenge. The demand response markets have tremendous potential but work still needs to be done on market rules to develop more, including allowing demand response resources to be capacity resources. The economics of nuclear plants are becoming more compelling in light of fossil fuel prices and efforts to bring updated technology to the United States; efforts like the UniStar joint venture will help advance development. However, much work needs to be done in developing new regulations and permitting new nuclear facilities. Finally, we heard that clean coal projects in the northeast have been proposed and received varying degrees of acceptance from government officials.

Session 2B - Regulatory Solutions: Beyond Market Mechanisms

Are market interventions by state regulators inappropriate or vital? Do the consumer benefits achieved by interventions such as power authorities, long-term contracts, RPS programs and socializing the cost of transmission lines to support remote renewable projects outweigh their adverse impacts on competitive markets? This panel featured a spirited discussion of these questions among Ann Berwick, Massachusetts Undersecretary for Energy, Janet Besser, VP of Regulatory Strategy for National Grid and Tom Bessette, VP for Energy Policy, New England for Constellation Energy. Mr. Bessette favored minimal interventions, urging continued reliance on market mechanisms. Ms. Besser and Ms. Berwick debated the circumstances under which electric customers throughout New England should be charged for construction of transmission capacity for remote renewables. Ms. Berwick emphasized that the benefits to MA customers would have to be clear before MA would support having such costs imposed on their consumers. The panel was organized by its moderator, Mary Beth Gentleman, Partner, Foley Hoag LLP, and Tim Roughan, Director of Distributed Resources, National Grid.

Session 3

The three panelists, Marian Chertow of Yale, Mary Sharpe Hayes, former Board member of ISO-New England and Ken Payne of the University of Rhode Island, led a robust discussion of conclusions drawn from the keynote speakers and the preceding panels at the conference. Some common themes and questions that were the subject of the debate among the panelists and the audience were: Are we too late to address global warming; if natural gas is going to be on the margin in New England for the foreseeable future how do we deal with the effects of such a scenario; is the growth in demand side and conservation resources sustainable or has New England only scratched the surface; how do we get the real time price signals for electricity out to the end use consumers; how much will RGGI cost -in the short term /in the long term; and are the coal and nuclear options for generating electricity "off the Table" for New England- irretrievably, or only until coal gasification and carbon sequestration become commercially viable and when the estimated costs of new Nuclear plants are reduced. Peter Brown was the moderator of this panel.

Some of you at our Annual New England Energy Conference may have noticed the construction at the Hyatt. We received a fair amount of feedback on the high quality of the conference but the poor quality of the hotel. We have negotiated with the hotel and have agreed upon a letter of apology to the board of directors and a 20% discount off our bill to compensate us for our inconvenience.