The December Michigan Energy Forum is themed "The 2011 Year In Review and 2012 Look Forward for Michigan Based Energy Businesses." As an introduction to the evening, we are looking to celebrate the wins and accomplishments made by energy companies in Michigan.

1. Michigan’s Energy Future: Long-
Term Good News for Michigan
Business
Valerie Brader
Chief Energy Policy Officer

2. Strength Now: Energy Reliability
Sustained Outages (2010)
0.4
0.3
0.2
0.1
0
Nat. Avg. Top Quartile Western LP Eastern LP

3. Business Rates at National Average
2010 Average Business Rate – (¢/kWh)
18
16
14
12
10
US weighted average* 8.8
8
6
4
2
0
WY WA ID KY UT AR IA OK ND WV OR NE MO IN SD LA MT SC KS MN VA NC NM MS AL IL TX OH GA TN CO WI NV AZ MI PA FL DE ME MD VT RI CA NJ NH DC AK MA NY CT
* Weighted by total sales volume (MWh) excluding Hawaii.
Source: Energy Information Administration 3

4. But -- Regional Energy Prices
Regional Comparison (May 2011)
State Commercial (c/kWh) Industrial (c/kWh)
Illinois 8.77 6.10
Indiana 8.81 6.23
Michigan 10.61 7.73
Ohio 9.57 5.87
Wisconsin 10.12 7.22
Source: U.S. Energy Information Administration

5. But Will Costs Stay That Way??
• Simple answer: It’s unlikely.
• Major driver of power cost is fuel cost.
– Generation is about 2/3rds of the average bill in
the US, and fuel cost is the biggest single portion
of that impact.
– Other things (transmission, distribution) matter
too, but don’t as a rule drive cost.
• Michigan’s natural advantages position us
better for the future than they did in the past.

6. What Fuels MI’s Power Now?
2010 Generation Capacity 2010 Actual Generation
Expressed as % by Type Expressed as % by Type
0.0%
-0.9% 0.3%
0.5%
0.0% 0.8%
0.8% 0.6%
6.2% Coal
2.3% 0.2% 0.7%
Hydro
39.2%
13.1% Natural Gas 27.4%
Nuclear
60.8%
Oil
Other
Pumped Storage
Solar
Wind 10.8%
1.1%
36.1% Wood Waste
0.0%
Source: Ventyx

7. Michigan’s Coal Use vs. Others’ Use

8. Average Cost of Coal by State
Average Cost of Coal Delivered for Electricity Generation by
State, June 2011 and 2010 (Dollars per million BTU)
Census Division/ State Electric Utilities
Jun-11 Jun-10
East North Central 2.46 2.12
Illinois 2.03 1.91
Indiana 2.5 2.17
Michigan 2.63 2.07
Ohio 2.31 2.11
Source: U.S. Energy Information Administration

9. Coal in the Future…

10. MI’s Natural Advantage in Natural Gas
• Michigan has more natural gas reserves than
any other state in the Great Lakes region.
• The Antrim natural gas fields, in the northern
Lower Peninsula, are among the largest in the
nation.
• Michigan has the most underground natural
gas storage capacity of any state and supplies
natural gas to neighboring states during high-
demand winter months.
Source: U.S. Energy Information Administration

11. Why Haven’t We Used
More Natural Gas in the Past?
Historic Natural Gas Spot and Forward Prices ($/MMBtu)
$15
$10
$5
$0
2000 2001 2003 2004 2006 2007 2009 2010 2012 2013
Henry Hub Nymex 12/31/07 Nymex 12/31/09 Nymex 03/07/11 Nymex 07/29/11

12. Renewables
• 2008 law requires electric providers to meet a 10
percent renewable energy standard (based on
retail sales) by the end of 2015.
• Michigan’s 2009 estimated renewable energy
percentage of 3.6% (3/4ths of which is hydro and
wood) is expected to increase significantly during
the next two years as approximately 700 MW of
new renewable energy will become commercially
operational by the end of 2012.
Source: Michigan Public Utilities Commission (Feb. 2011)

13. Michigan’s Renewables
Source: Michigan Public Utilities Commission (Feb. 2011)

14. Nation’s Predicted Energy Mix
2000 OTHER RENEWABLE
76 (TWh), 2.0%
OTHER NON- WIND
RENEWABLE 6 (TWh), 0.0%
5 (TWh), 0.0%
HYDRO
270 (TWh), 7.0%
NUCLEAR
764 (TWh), 20.0%
COAL
1966 (TWh), 52.0% 2020 OTHER RENEWABLE
142 (TWh), 3.0%
OTHER NON-
WIND
OIL RENEWABLE
208 (TWh), 5.0%
111 (TWh), 3.0% 21 (TWh), 0.0%
HYDRO
267 (TWh), 6.0%
GAS
615 (TWh), 16.0%
COAL NUCLEAR
1949 (TWh), 42.0% 814 (TWh), 17.0%
GAS
A terawatt-hour per year is 114 megawatts 1276 (TWh), 27.0%
Sources: Wall Street Journal 3/7/11; EIA, Wood Mackenzie International Power Service

15. Energy Predictions Point to Good
Things for Michigan
• Gas prices are pushing down toward
competitiveness with coal
• Michigan, which has no coal, has lots of gas
and better storage capability for gas than any
other state.
• Michigan is well positioned to compete in the
future on energy.

16. What Energy Issues Will I Hear About?
• Federal regulation, and timing.
• Reliability – Key Issue for Industrial Customers
(and others too!)
• What should replace Michigan’s aging (coal)
plants?
• Production Issues (Fracking, Enhanced
Recovery with CO2)
• 2008 Energy Legislation Reviewed
(renewables/customer choice/etc.)