Speakers
Lawrence J. Makovich Vice President and Senior Advisor IHS CERA (Chair)	David Ratcliffe Chairman, President, and Chief Executive Officer Southern Company
Theodore Craver Jr. Chairman, President, and Chief Executive Officer Edison International	Peter Darbee Chairman, President, and Chief Executive Officer PG&E Corporation
Michael Morris Chairman, President, and Chief Executive Officer American Electric Power Company, Inc.

In Thursday's North American CEO Power Plenary, Lawrence J. Makovich, IHS CERA Vice President and Senior Advisor, chaired a panel of power company executives on current developments and the outlook for the industry: Theodore F. Craver Jr., Chairman, President, and CEO, Edison International; Peter Darbee, Chairman, CEO, and President, PG&E Corporation; Michael Morris, Chairman, President, and CEO, American Electric Power Company; and David Ratcliffe, Chairman, President, and CEO, Southern Company.

Dr. Makovich started with "the big picture: the economy" and its effect on power demand. Mr. Craver said that Edison International's Southern California retail sales have declined 10 percent since 2008; he foresees stabilization this year and a start to recovery in 2012. Industrial load has declined, replaced by commercial load; residential demand remains about one third of sales. Mr. Ratcliffe said that sales, especially to industrial customers, were down about 6 percent last year, perhaps the bottom. "The temptation is to think that we don't have to plan for the future"; but "given the long-term nature of the industry, we have to keep planning ahead" to provide future capacity. Mr. Morris said that for American Electric Power Company, recent sales declines are starting to turn around. Export demand is increasing, especially to China. He urged industry analysts to recognize that "the message for 2010 is not growth, but recovery."

Dr. Makovich, moving to supply, questioned Mr. Darbee on wind and solar capacity additions. Mr. Darbee noted that distributed generation occurred first in California and first in PG&E Corporation's territory. Solar rooftops have had increasing penetration, whether an opportunity or a threat; Mr. Darbee suggested asking what the customer wants; that's solar, and regulators are open to it. PG&E wants to understand solar's impact and to be on "both sides of the market." Dr. Makovich noted that Governor Arnold Schwartzenegger, favors solar and supports a goal of 33 percent solar in the electricity mix. Mr. Morris considered this overly ambitious: solar already meets 17 percent of California's customer load (compared with 3 to 4 percent nationally); the current transmission system could not handle doubling the amount and tapping remote resources. He noted that California's decades-long promotion of energy efficiency is flattening the demand curve and fostering renewables.

On renewables Dr. Makovich asked Mr. Ratcliffe about prospects for the US Southeast. Although it is difficult to achieve scale for wind, Southern Company is "focusing on biomass and watching solar get better" but can never achieve California's goals, Mr. Ratcliffe said. On federal climate change legislation Mr. Morris said that he liked the Waxman-Markey bill but opposes a utility-only or a cap-and-dividend approach; if nothing is passed by election time, this could be a couple of cycles away. He also stressed that climate change mitigation has to be a global effort. Dr. Makovich noted that in government people with different needs and positions can't seem to function together, but the energy industry has acted differently. Mr. Darbee said energy executives have had constructive discussions for the past five years and reached a "grand compromise" on some solutions, including fair allocation of allowances in cap-and-trade; this might serve as a model for policymakers.

On the industry's goals and outlook, Mr. Ratcliffe stressed customers: make energy affordable, provide cost mitigation for end users, and make realistic timetables based on technological capabilities. Dr. Makovich asked about strategic development, considering both environmental protection and energy security. Mr. Morris said that the "confluence of policy shifts and technology development will change the industry more in the next 10 years than in the past 100 years." California's push on policy, efficiency, and renewables creates momentum in other parts of the country, affecting not just forms of generation--"it will affect the business model itself."

Dr. Makovich brought up coal's long-run viability. Given growing demand, Mr. Ratcliffe said, we don't have the option to choose one or two technologies. "We need everything--efficiency, conservation, natural gas, renewables, nuclear, and coal," with the next generation of clean coal technology as part of the solution. Mr. Morris added that carbon capture and storage is essential. "We can't do without coal," he said; "we need to do it better." He is optimistic about renewables but said coal will be with us for at least the next four decades.

On nuclear, Mr. Darbee noted that California prohibits new nuclear construction until permanent waste disposal facilities are built there but agreed that to meet the climate change challenge, we need all resources, including clean coal and nuclear. Mr. Ratcliffe said the licensing process slows nuclear construction; in Georgia two units are expected to start up in 2016 and 2017. Mr. Morris commented that beyond the financial challenge, enabling state legislation is most needed--and even then nuclear is a daunting decision.

On the smart grid, Mr. Morris suggested there are as many definitions for it as people in the room. He sees it as providing end-to-end delivery of energy, offering more efficiency and greater throughput, and helping meet environmental objectives. Getting standards in place that the energy industry can work with is critical. Work is needed now for final development, not research, and policies should support more pilot programs. On "how to fit the pieces together," Mr. Darbee said customers want to manage their bills and energy use but without reduced service quality and with minimum effort; policymakers and utilities benefit from reduced frequency and duration of outages and better overall management through the smart grid. Mr. Ratcliffe added that the emphasis has been on end use, yet the deployment of "smart" technology at the front end is vital. Mr. Morris said customers must be educated about the technology to manage their energy use. Mr. Darbee called the smart grid "the enabler of the electric car," which emits far less carbon than conventional engines; is a far more effective motor at different speeds; and eases energy security concerns by reducing dependence on foreign oil. Mr. Craver estimated that 100,000 electric or hybrid cars will be driven in Southern California by 2015 and perhaps 450,000 to 500,000 or more by 2020; but "we want to make sure that the customer experience is positive on day one."

The panelists agreed that more transmission is needed; but fixing the patchwork system becomes a "federal versus states' rights issue." Mr. Morris added that a wide-open grid would enable fewer power plants to supply more capacity, and Mr. Darbee called for expediting the transmission permitting process.

On power costs and rising prices, Mr. Morris stressed that "the value of electricity is a multiple of its cost;" Fuel prices may drop; yet the power sector must build new plants and transmission, with the carbon price added. Nor do economies of scale that formerly kept prices down work at these cost levels, Mr. Craver said. Industry must open a dialogue with state financial regulators and with customers about costs and prices. Agreeing on fostering a more transparent dialogue, Mr. Ratcliffe urged a debate on "how to strike a balance between price, reliability, and cleaner energy." Mr. Darbee agreed that "electricity is one of the best buys around; its cost has increased less than the rate of inflation." Mr. Craver said that the pace of industry changes has a huge impact on costs to customers. Getting rid of a useful asset before it has run its course adds a cost to the new technology.

On the outlook for mergers, acquisitions, and consolidation, the panelists differed. Mr. Darbee called these moves advantageous for companies looking to take on large projects, but current regulatory hang-ups discourage activity. Mr. Craver said joint ventures and partnerships more effectively diversify risk.

In conclusion Dr. Makovich asked the panelists what will be the big topic for CERAWeek 2011. Mr. Craver cited the thoughtful integration of innovation in the power system. Mr. Darbee said it would be whether the US energy infrastructure is ready to meet the needs of the future. Mr. Ratcliffe named infrastructure and climate change. Mr. Morris said the discussion would concern disappointment after the International Energy Congress in Mexico City, which might be just another "transfer of wealth."