Duke Energy
Legislative Update
October 2007
FEDERAL GOVERNMENT AFFAIRS
ENERGY LEGISLATION
House Speaker Nancy Pelosi met with senior House Democrats to determine the
procedural route to finalizing energy legislation. The Democratic leadership decided to
informally negotiate a compromise bill without convening a House-Senate conference
committee. In June, the Senate passed the “Creating Long-Term Energy Alternatives for
the Nation Act of 2007” (H.R. 7), and on August 4, the House passed the “New Direction
for Energy Independence, National Security and Consumer Protection Act,” (H.R.
3221). One of the chambers had to take up the bill that passed in the other body and
substitute its own energy bill to allow a conference committee to meet to reconcile the
two different versions. The House Democrats asserted that a threatened Republican
filibuster of a Senate motion to appoint conferees necessitated their decision to avoid a
conference. Senate Energy and Natural Resources Committee Chairman Pete
Domenici (R-NM) expressed his opposition to circumventing a formal conference
committee. In a statement released on Thursday, Domenici said: “This strategic
decision by Speaker Pelosi and House Democrats has prevented the Senate from even
appointing conferees. . . I believe that the only way to pass an energy bill that will have
a chance at final passage is through a bipartisan conference committee.” It isn't clear
what the final version will include or how Majority Leader Reid thinks he can get 60
votes in the Senate to pass the conference report. Also, the Administration's position
seems to shifting a bit, particularly as it relates to a renewable portfolio standard, so
things remain fluid.
CLIMATE CHANGE
The Democrats have made climate change and reduction of greenhouse gas (GHG)
emissions a high priority since taking over Congress. While legislative activity on the
topic will continue into next year, Congress is unlikely to produce a bill that will be
signed into law before President Bush leaves office. Senate Environment and Public
Works Committee Chair Barbara Boxer (D-CA) made global warming one of her panel’s
top priorities for 2007. Introduction of legislation by Subcommittee Chairman Joseph
Lieberman (ID-CT), possibly in October, will be the starting point for action in the
Environment and Public Works Committee. In the House, Energy and Commerce
Committee Chairman John Dingell (D-MI) is outlining his plans for legislation through a
series of white papers. The first of these, released on October 3, anticipates legislation
that would reduce GHG emissions between 60 and 80 percent by 2050. With key
Democrats coalescing around a cap-and-trade system, Congress will be faced with a
host of choices on how to establish such a regulatory regime. Defining the scope of
carbon dioxide sources subject to regulation will be a key decision. A greenhouse gas
regime would potentially cover utilities, refineries, automobiles and industrial sources.
The questions raised in drafting legislation will be far-reaching and complex, which will
pose a significant obstacle to conclusive action in the 110th Congress.
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Status and Outlook of Legislative Efforts
Overview:
� There will be a concerted to begin the legislative process in the House and Senate,
with action in committees possible before the end of 2007.
� A consensus among key Democrats has emerged for aggressive, economy-wide,
mandatory reductions in GHG emissions.
� Legislation is unlikely to be enacted in the 110th Congress. However, proposals
debated in 2007 and 2008 will likely serves as a baseline in 2009, especially if
Democrats control both the White House and Congress after the 2008 elections.
STATE GOVERNMENT AFFAIRS
City of Cincinnati
All eyes are now on the November elections, when all of Council will be up. Given ViceMayor Jim Tarbell's resignation and the assumption of his spot on Council by newlyminted Charterite Roxanne Qualls, all nine members of the present council will be
standing for re-election. Former Council members and candidates Charlie Winburn and
Minette Cooper appear to be the most likely non-incumbent winners -- which would then
mean ouster of one or two present members. Mayor Mark Mallory does not stand for
re-election until 2009. All nine Cincinnati City Council members are elected at-large
(there are no districts or wards within the City).
On Wednesday, October 17, the Cincinnati Chamber of Commerce and its various
downtown business members are conducting a Council Candidates' fair on Fountain
Square. An announcement flyer is attached, and we certainly hope many of our
downtown employees can put in an appearance. This replaces the candidates' fair
done in past years in the lobby of the company's 4th and Main building in Cincinnati,
and hopefully will provide an opportunity for even more people who work downtown to
meet the candidates individually.
Indiana
Indiana’s state legislature will re-convene in January 2008, but much work has been/is
being done by your Government Affairs team to prepare for what is expected to be a
fairly active “short session” of the General Assembly. The primary focus of the
upcoming legislative session will be on a major overhaul of the state’s property tax
system – an issue that could have a profound impact on our company. We are also
working on our own legislative agenda that may include a bill containing provisions
relative to Renewable Portfolio Standards, Energy Efficiency and Cost Recovery for the
installation of certain air pollution equipment, e.g., carbon, fine particulates, etc.
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Kentucky
Members are now back home in their districts after the completion of the second special
(or "extraordinary") session, when they passed legislation creating a variety of tax
incentives intended to attract coal-to-natural gas manufacturers to the Commonwealth.
Now, all eyes are on the impending state-wide constitutional officer elections, headlined
by the Governor's race. With less than a month to go to the election, Democrat Steve
Beshear holds double-digit leads over incumbent Republican Governor Ernie Fletcher in
each of Kentucky's major media markets -- including Republican stronghold Northern
Kentucky. Also on the November ballot are races for state Attorney General, Secretary
of State, State Auditor, State Treasurer, and Secretary of Agriculture. When the
General Assembly convenes in regular session in January, one major item of business
will be passage of a new biennial budget. The regulated utility industry in the
Commonwealth (investor-owned and rural electric cooperative utilities) fully expects that
the legislature will deal with a bill having to do with accelerated cost recovery of new,
state-of-the-art coal-burning electric generation plants. There may also be companion
legislation that creates more incentive to invest in energy efficiency. Then, following the
session in April, members will begin planning for the November 2008 election when all
of the House seats will be up, and half the Senate.
Ohio
Electric Industry Restructuring in Ohio is arguably the most important issue facing the
company at this time. It will reset the framework for how the industry owns and operates
generation for the foreseeable future. In addition to affecting the financial health of
utilities and our ability to invest and grow, it is also seen as the linchpin for economic
development in the state. Gov. Strickland recently requested a bill be introduced in the
Senate, specifically 127-SB221 (Schuler, by request) STATEWIDE ENERGY POLICY,
which: 1) determines the structure for long-term rate plans called Electricity Security
Plans; 2) defines a market option for utilities; 3) sets an Advanced Energy Portfolio
Standard w/ an RPS component; 4) encourages energy efficiency and new technology
investments; and, 5) defines authorities and responsibilities for other related issues with
regards to the Air Quality Development Authority and PUCO. DE-Ohio interests in
SB221 are aligned with the other investor-owned utilities and all have voiced the same
or similar concerns over several provisions of the bill. As such, together with the other
companies DE-Ohio will propose changes that balance stakeholder needs while
maintaining customer choice. The bill is expected to move through the Senate by the
end of October. The process in the House is less clear as of now, and will depend
heavily on the content of the bill when it reaches that chamber.
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North Carolina
The North Carolina legislature is not currently in session, but the work has not slowed.
Overwhelming support for Cliffside’s Unit 6 was voiced by local residents and elected
officials including local legislators at the plant’s air permit hearing on Tuesday, Sept.
18. We hope to have the final permit in late November or early December. Efforts
continue to gather letters and comments to the USEPA Administrator on the agency’s
proposed change to the National Ambient Air Quality Standard for ozone. The North
Carolina Chamber has sent an alert to members as a result of our coordinated effort
and written letters. Also responding has been the NC Manufacturers and Chemical
Industries Council as well as elected officials and economic development leaders. The
last meeting of the NC Climate Action Plan Advisory Group (CAPAG) is scheduled for
Oct. 16. The CAPAG has developed approximately 50 recommendations to reduce
greenhouse gas emissions in NC. This meeting will finalize the NC CAPAG report. The
final report will be forwarded to the Legislative Study Commission on Climate Change.
On the economic development front, legislators and NC Gov. Mike Easley avoided a
showdown over the governor's veto of a bill designed to help Goodyear Tire & Rubber
Co. modernize its Fayetteville plant. Instead, they reached a deal in a special legislative
session in early September on an expanded package of incentives aimed at helping
Goodyear and rival Bridgestone Corp., which is already upgrading its tire plant in
Wilson.
South Carolina
The South Carolina legislature is not currently in session. The South Carolina
Governor’s Climate Change Committee continues to meet on a regular basis. Jim
Rogers is a member of the committee and Mark Hollis of our Carolinas Regulatory and
Government Affairs group is providing technical support and manages our attendance
at the Energy Supply Technical Working Group as part of the Committee’s
activities. The Committee’s recommendations are due in 2008. Efforts also continue in
South Carolina to gather letters and comments to the USEPA Administrator on the
agency’s proposed change to the National Ambient Air Quality Standard for ozone. The
SC Chambers has written a letter demonstrating their concerns with the change. Also
responding with concerns have been the SC Manufacturers Association, elected
officials and economic development leaders from across the state. The SC Department
of Revenue has reported to Governor Sanford that actual revenue collections in 2007
have failed to meet projections. The revenue growth rate, which started the year at 8.6
percent, is now down to 3 to 4 percent. Sanford has directed Cabinet agency directors
to prepare for “serious belt tightening” in crafting budget recommendations for 2008.
Finally, Energy Solutions (Chem-Nuclear) has abandoned its plans to pursue new
legislation in 2008 in South Carolina to extend the life of the Barnwell facility to nonAtlantic Compact states beyond July 2008. Similar legislation in 2007 died in a House
committee by a 16-0 vote. Therefore, only low-level waste generators in the Atlantic
Compact states of South Carolina, Connecticut and New Jersey will be allowed to
dispose of low-level nuclear waste at Barnwell after July 2008.
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