Environmental Initiative Policy Forum Natural Gas and Minnesota’s Energy Future –

The Gas Utility Perspective

Jeff Daugherty Director of Regulatory Affairs

CenterPoint Energy

September 21, 2012

Impact on Gas Utility Planning and Investment

•  Gas utilities are different than electric utilities in that we don’t need to plan for and build the production and transmission components, i.e., gas production wells and interstate pipelines

•  Gas utilities typically build out their distribution systems based on current customer needs and shorter-term projections

•  Thus, inexpensive natural gas does not significantly change how we plan and invest in our distribution system.

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Inexpensive Gas does change our future growth potential

•  Abundant, affordable natural gas makes it more likely that customers will choose natural gas for their space heating, water heating, and other applications

•  The direct use of natural gas produces significant environmental benefits, which is driving growth in new natural gas applications

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Benefits of Natural Gas

Natural gas provides a number of benefits to U.S. consumers:

Comfortable

Better for the Environment

Affordable

Abundant

Domestic

Economic Development/

Energy Security

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Key Benefits of Gas

Recent developments in the Natural Gas industry have created compelling benefits compared to other forms of energy

Clean-burning natural gas costs less to use than any other energy source - about half the cost of other fuels, including electricity.

There is more than a 100-year supply of natural gas in the United States.

98 percent of the natural gas used in the U.S. comes from North America.

Affordable

Abundant

Domestic

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Key Benefits of Gas

Recent developments in the Natural Gas industry have created compelling benefits compared to other forms of energy

The natural gas industry currently employs nearly three million Americans and provides a huge boost to the American economy.

A home that uses natural gas for heating, water heating, cooking and clothes drying leaves about half the carbon footprint of an all-electric home.

Natural gas water heaters recover twice as fast and natural gas furnaces deliver air at a much warmer temperature compared to electric models.

Comfortable

Better for the Environment

Economic Development/

Energy Security

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Growth areas due to abundant and affordable natural gas Electric Generation •  Significant switching from older coal-fired generation to newer

combined-cycle gas generation

•  Natural gas generation is much cleaner than coal: 50% lower CO2; 72% less NOx; 99% less SO2; 100% less Mercury

•  Note – in a recent EIA report, US CO2 emissions for the 1st quarter of 2012 were at their lowest levels since 1992, with coal to gas switching for EG being a key reason.

•  Also, while lower gas costs are driving more gas generation now, much of the future growth in gas generation will be driven by more stringent environmental standards (e.g., MATS, NAAQS, Regional Haze, GHGs) 7

Growth areas due to abundant and affordable natural gas

Combined Heat & Power (CHP) •  An efficient way for customers to produce both electricity and useful

thermal energy (up to 80% efficiency); also significantly reduces environmental emissions

•  Examples: Engine-driven systems; combustion turbines; micro-

turbines; fuel cells •  According to a recent study, MN is currently using only 30% of its

CHP technical potential •  On August 30, President Obama issued an Executive Order setting a

national goal of a 50% increase in new CHP capacity by 2020

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Growth areas due to abundant and affordable natural gas

Natural Gas Vehicles (NGVs) •  Natural gas vehicles – using natural gas in the transportation sector

instead of petroleum •  Growing customer interest in NGVs due to cost savings and

environmental benefits •  CNG retails for ~$2 gasoline gallon equivalent (~50% less) •  CNG much cleaner than gasoline or diesel (20-30% less GHGs; 85% less NOx and CO)

•  Primary initial market – fleet vehicles that operate a lot of hours (e.g., garbage trucks, buses, delivery trucks)

•  Current barriers – lack of refueling infrastructure and higher initial vehicle cost

•  However, we have seen 15 new CNG stations in the last year, with 2 new stations in MN and more expected next year

•  An industry expert predicts that the NGV industry will grow 25% per year (i.e., will quadruple in next 6 years!)

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CIP Spending Since 1992 (in millions)

Background on Energy Efficiency in MN

Actual Spending

Budget

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Background on Energy Efficiency in MN

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Historical CIP Energy Savings (MCF)

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Summary

Ø  Natural gas provides a lot of benefits to US consumers (affordable, abundant, domestic, and clean)

Ø  The strong value of natural gas is driving rapid growth in new markets, such as Electric Generation, CHP, and NGVs

Ø  The expanded use of natural gas produces significant environmental benefits

Ø  Even at today’s prices, natural gas energy efficiency

programs remain cost-effective and, with prices likely to increase in the future, should be retained

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