Progress Energy CEO Johnson Urges Flexibility and Customer Protection in Implementing EPA Rules

WASHINGTON, Feb. 14, 2011 /PRNewswire/ -- The U.S. electric utility industry faces an "unprecedented convergence of new federal environmental rules – unprecedented in scope of change and compression of deadlines," Progress Energy Chairman, President and CEO Bill Johnson told utility regulators Monday in Washington. And the "current fragmented approach, coupled with rapid-compliance deadlines, is a recipe for inefficiency, system reliability challenges and unnecessarily high cost."

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Johnson urged the stakeholders to build on substantial agreement about their objectives while constructively addressing legitimate concerns about timing and approach. His remarks were given to state utility regulators from around the country at a meeting of the National Association of Regulatory Utility Commissioners (NARUC). His speech was part of a session titled "Up in the Air: What Utility and Air Regulators Need to Know about new EPA Rules."

Johnson pointed to the "daunting convergence of new federal rules and aggressive deadlines coming at us on multiple fronts" – pending changes on air, water and land rules under the Environmental Protection Agency (EPA), changing rules on nuclear safety from the Nuclear Regulatory Commission (NRC) and the new grid reliability rules from the North American Electric Reliability Corporation (NERC).

He said the collective impact will be significant, particularly for low-income customers and those most affected by the slow economy.

"It's not hard to imagine the customer pushback that will occur because of the resulting increase in the price of electricity. This pushback will come from industrial customers struggling to be competitive, and from residential customers and small businesses struggling to make ends meet.  I'm especially sensitive to the households of modest means, where energy represents a disproportionately large share of disposable income."

The Edison Electric Institute and its shareholder-owned electric utility members recently worked with consulting firm ICF International to model the prospective EPA rules for air quality, coal combustion products and cooling water intakes. The EPA also has used ICF and its model.

The modeling revealed three main conclusions:

• The impending regulations will cause a significant number of coal-fired units to retire earlier than otherwise planned; up to one-fourth of the entire U.S. coal fleet faces early retirement in only four years.
• The coal retirements are heavily concentrated in the eastern half of the U.S., creating added financial impact for consumers in the Southeast, Mid-Atlantic and Midwest.
• The incremental total capital expenditures by 2020 on both retrofits and new builds range from $114 billion to $247 billion, in addition to capital expenditures already planned.

Progress Energy, which serves customers in the Carolinas and Florida, has invested more than $2 billion in retrofitting its largest coal-fired power plants with advanced emission controls. The company has repowered an oil-burning plant on Tampa Bay to burn cleaner natural gas, and has announced that it will retire 30 percent of its North Carolina coal-fired fleet within the next four years.

"I'm one who thinks we should do something about carbon in this country," Johnson said. "It's not an issue that's going away; nor should it.  But I can't divorce this or any other issue from the impact on customers, and that's a point that hasn't been central enough to the discussion. ..."

"My central point today is that all of us should work together in a collaborative way to manage a cost-effective, orderly transformation of the electric power system – and that we should adopt a flexible, balanced approach that keeps the customer and economy squarely in mind while protecting public health and safety."

The full text of Johnson's remarks can be viewed at http://progress-energy.com/02.14.2011.pdf.

Progress Energy (NYSE: PGN), headquartered in Raleigh, N.C., is a Fortune 500 energy company with more than 22,000 megawatts of generation capacity and approximately $10 billion in annual revenues. Progress Energy includes two major electric utilities that serve about 3.1 million customers in the Carolinas and Florida. The company has earned the Edison Electric Institute's Edison Award, the industry's highest honor, in recognition of its operational excellence, and was the first utility to receive the prestigious J.D. Power and Associates Founder's Award for customer service. The company is pursuing a balanced strategy for a secure energy future, which includes aggressive energy-efficiency programs, investments in renewable energy technologies and a state-of-the-art electricity system. Progress Energy celebrated a century of service in 2008. Visit the company's website at www.progress-energy.com.

SOURCE Progress Energy