Committee of Chief Risk Officers 8000 Research Forest Dr. info@ccro.org STE 115 #278 http://ccro.org The Woodlands, TX 77380 3 Advancing Our Energy Industry’s Risk &Compliance Best Practices These renewables are all going to be backstopped with gas. Considering our prior CCRO discussion, if you factor-in a third or more of the gas being exported for LNG, you set yourself up for potentially more volatility. Still more volatility impacts from the bill arise from new demands in electrification and in hydrogen. So, not only do you get significant periods of negative pricing when there's a surplus of renewables, but then there’s a rollercoaster in pricing when they're not there. So those are three dimensions that we've been focusing on. Andy? Andy Roehr: We're seeing much the same. Perhaps not quite the same perspective on the regulated versus unregulated. One of the regulated entities was on a phone call with me this morning and basically told me no unregulated entities will be able to build in their territory. That territory belongs to them from a rate of return standpoint. Thank you very much. So we'll see if they can actually pull that off. I do think the IRA has sort of screwed up in a couple of areas: There's a huge amount of ambiguity in what these credits are going to be worth. So yes, they are uncapped to Chris's point. But nobody really knows whether they're getting 6%, 30%, 50%, right? The rules are still sort of hanging out there. Plus, we're going to have labor law written by Treasury. Stay tuned on that one! So, as you're looking at what's actually going to come online in the future, a large number of these projects are penciled-out based on an assumption about value of credits. But those credits may or may not actually show up based on availability of labor and a whole bunch of factors that are outside of people’s control. I do think the labor piece is where the regulated utilities have a real edge. This is because they're not going to have to go out and request apprentices, et cetera. Many utilities are already kind of roped up with the unions. So, there is a reason that in the bill they don't just say, we want to create jobs for Americans. They literally say, we want to create good paying union jobs. Which, which I think had got everybody's attention. So I definitely agree on a regulated utility advantage in regards to labor. The bill pays very little attention to the realities of grid reliability. I think the other area not well thought out is while the bill focuses a lot on renewables generation, it pays very little attention to the realities of reliability. First, on the demand side. The bill does a lot of things on the demand side that are sort of distorting. Electric vehicles, for example. I've got some numbers from PJM. If you would, imagine PJM was an all- electric world. Well, if they hit the 2019 polar vortex there are some estimates that their actual peak load at night in that world would be about six times the load they actually experienced in that disaster! They just don't have the capacity.