Nathan A. Skop, Esq.Nathan A. Skop, Esq.CommissionerCommissioner

Florida Public Service CommissionFlorida Public Service Commission

Challenges of Financing EnergyInfrastructure Development:

Current Regulatory Policies and Trends

DisclaimerDisclaimer

The views and opinions presented herein are strictly those of the presenter and have not been

reviewed, endorsed, or approved by the Florida Public Service Commission.

OverviewOverview

Florida Energy PolicyFlorida Energy Policy

Leading the Nuclear RenaissanceLeading the Nuclear Renaissance

Near Term ChallengesNear Term Challenges

Financing Energy Infrastructure under Financing Energy Infrastructure under Adverse Market ConditionsAdverse Market Conditions

Favorable Cost RecoveryFavorable Cost Recovery

Key TakeawaysKey Takeaways

Florida Energy PolicyFlorida Energy Policy

Leadership of Governor Charlie CristLeadership of Governor Charlie Crist

Executive OrdersExecutive Orders

Comprehensive Energy Policy Comprehensive Energy Policy Legislation (HB 7135)Legislation (HB 7135)

Promotes Clean Energy OptionsPromotes Clean Energy Options

Strong Emphasis on Renewable and Strong Emphasis on Renewable and Alternative Energy SourcesAlternative Energy Sources

Leading the Nuclear Leading the Nuclear RenaissanceRenaissance

Florida PSC granted need determination Florida PSC granted need determination for four new nuclear generating units.for four new nuclear generating units.

Represented the first regulatory Represented the first regulatory approval action within the United States approval action within the United States in over 30 years.in over 30 years.

Florida PSC granted need determination Florida PSC granted need determination for uprates associated with five existing for uprates associated with five existing nuclear reactors.nuclear reactors.

Near Term ChallengesNear Term Challenges

Threat of Global RecessionThreat of Global Recession

Unprecedented Market Decline and Unprecedented Market Decline and VolatilityVolatility

Restricted Access to CreditRestricted Access to Credit

Ability to Raise CapitalAbility to Raise Capital

Market Capitalization in Relation to Market Capitalization in Relation to Required Infrastructure InvestmentRequired Infrastructure Investment

Inability of Consumers to Absorb Rate Inability of Consumers to Absorb Rate HikesHikes

Financing Energy Financing Energy Infrastructure in a Tight Infrastructure in a Tight Credit MarketCredit Market Strong Balance SheetStrong Balance Sheet

Stable Regulatory EnvironmentStable Regulatory Environment

Favorable Cost Recovery ProvisionsFavorable Cost Recovery Provisions

Stranded Cost AvoidanceStranded Cost Avoidance

Risk Adverse and Fiscally Disciplined Risk Adverse and Fiscally Disciplined Management TeamManagement Team

Favorable Cost Recovery Favorable Cost Recovery ProvisionsProvisions

NuclearNuclear

TransmissionTransmission

Renewable EnergyRenewable Energy

Other ClausesOther Clauses

Nuclear Cost RecoveryNuclear Cost Recovery

Florida law provides for favorable cost Florida law provides for favorable cost recovery pursuant to section 366.93, Fla. recovery pursuant to section 366.93, Fla. Stat.Stat.

Florida law provides for recovery of Florida law provides for recovery of prudently incurred costs irrespective of prudently incurred costs irrespective of plant completion.plant completion.

Pre-construction costs can be expensed.Pre-construction costs can be expensed.

Frontloading of costs on case-by-case basis Frontloading of costs on case-by-case basis would provide substantial cost savings.would provide substantial cost savings.

Nuclear cost recovery will be an exercise in Nuclear cost recovery will be an exercise in risk management for utilities.risk management for utilities.

Transmission Cost RecoveryTransmission Cost Recovery

Comprehensive Energy Policy Legislation Comprehensive Energy Policy Legislation (HB 7135)(HB 7135)

Florida law provides for favorable cost Florida law provides for favorable cost recovery for nuclear related transmission recovery for nuclear related transmission pursuant to section 366.93, Fla. Stat.pursuant to section 366.93, Fla. Stat.

Expedited Siting Review for New Expedited Siting Review for New TransmissionTransmission

Florida Electric Transmission Line Siting Florida Electric Transmission Line Siting Act Act (ss. 403.52 - 403.5365, Fla. Stat.)(ss. 403.52 - 403.5365, Fla. Stat.)

Constraint to Large Baseload GenerationConstraint to Large Baseload Generation

Key TakeawaysKey Takeaways

Significant Energy Infrastructure Build Cycle Significant Energy Infrastructure Build Cycle Underway in FloridaUnderway in Florida

Stable Regulatory EnvironmentStable Regulatory Environment

Favorable Cost Recovery ProvisionsFavorable Cost Recovery Provisions

Florida Investor Owned Utilities (IOUs) are Well Florida Investor Owned Utilities (IOUs) are Well Managed and CapitalizedManaged and Capitalized

Well Positioned to Obtain Financing under Well Positioned to Obtain Financing under Difficult Market ConditionsDifficult Market Conditions

Will Further Market Decline Impact New Will Further Market Decline Impact New Nuclear Construction?Nuclear Construction?

ReferencesReferences

1.1. U.S. Gives Nuclear Power a Second LookU.S. Gives Nuclear Power a Second Look, , NPR Morning Edition, March 28, 2008. NPR Morning Edition, March 28, 2008.

http://www.npr.org/templates/story/story.php?storyId=89169837

““Simply put, nuclear power is a strategic Simply put, nuclear power is a strategic investment for the state of Florida and our investment for the state of Florida and our national security - to reduce our national security - to reduce our dependence on foreign oil and to protect dependence on foreign oil and to protect our environment”.our environment”.

(Commissioner Nathan (Commissioner Nathan A. Skop)A. Skop)

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