Committee of Chief Risk Officers 8000 Research Forest Dr. info@ccro.org STE 115 #278 http://ccro.org The Woodlands, TX 77380 7 Advancing Our Energy Industry’s Risk &Compliance Best Practices I never thought I'd say that about the US power environment. I've worked all over the world, and that kind of environment was what we saw in China 20 years ago. So it's kind of scary. What kind of risk am I really taking when I buy this or that type of energy? What's my residual exposure? CCRO Member: From a utility I worked at for twenty years, I saw over the last five years the growth of these boutique energy companies that would come in and build the on-premise generators for C&I type companies. They were really eating into the utilities business, and the utility was trying to figure out how do I combat that? We couldn't. I think we’re going to see more of that under this bill. Andy Roehr: Yes, I think we will. I think Enchanted Rock's a good example, The guys at Bloom are kind of coming into their own now, or even Generac. I think for folks who have generation, I think there'll be some interesting market models out there. The VPPP folks are basically turning demand response into megawatts. There's an entire industrial policy around de-industrialization, and then there's an entire policy around managed power consumption by the end consumer. In the end that's really where they're going. Consider what California's model is, and some of the east coast. Their model is “we're going to admit we can't get you what you want when you want in the way you want it. Therefore, what we're going to do is control what you get and tell you when.” That's probably, probably a bit heavy handed as an interpretation, but I'm just looking at some of the EV work going on right now in California. CCRO Member: Just a quick question. There are still power markets in the US that are highly regulated, right? For example, Georgia Power, Southern Company in their territories, others similar. How does this play out in those regulated regions? Chris Dann: So, all the power markets are in the US are sort of a mix. ERCOT is probably the purest, but still even in ERCOT, 13% is vertically integrated, regulated generation. But if you go to other markets like MISO or SPP, there's 70% regulated generation. The thing about this from a risk professional standpoint, is that the volatility that is going to be caused by this inflation reduction act is a great opportunity from a regulated utility standpoint. You couldn't ask for a better opportunity. This is a gift because as a regulated utility, you get to put a whole bunch of capital into rate base and earn nine, nine and a half, even 10% rate of return on it, while your customer bills go down. I mean, you can't get anything better. The answer to your question is that wherever there is a regulated utility, in every integrated resource planning (IRP) process that they go through, they together with their regulators are just going to max this out as much as they can. This is because it's free federal money, right?