GOVERNOR’S ENERGY - Delaware



GOVERNOR’S ENERGY ADVISORY COUNCIL

MEETING MINUTES OF MAY 25, 2006

PRESENT: Anderson, Jan DNREC/Delaware Energy Office

Baron, Dominique (for Seth Ross) Delaware Nature Society

Bonar, David Delaware Public Service Commission

Burton, Sandra DNREC/Delaware Energy Office

Buttner, Sarah DOS, Public Advocate

Furman, Bob OMB/Facilities Management

Gausman, Bill (Speaker) Pepco Holdings, Inc. (PHI)

Hodas, David R., Chair Widener University School of Law

McCullar, Patrick DEMEC (DE Municipal Electric Corp.)

Nielson, Mark Delaware Electric Cooperative

Padmore, Arthur DOS, Public Advocate

Smisson, Jr., Charlie T. DNREC/Delaware Energy Office

Smith, Gary Delaware Economic Development Office

Thompson, Steve Chesapeake Utilities Corporation

Walling, Lee Ann Governor’s Office

Wong, Huei Delaware State Senate

I. CALL TO ORDER AND WELCOME - Chair David R. Hodas:

The Governor’s Energy Advisory Council Meeting was brought to order at 9:40 a.m. by Chair David R. Hodas on May 25, 2006, in the Farmington Conference Room of the DELDOT Administration Building on U.S. Route 113 in Dover, Delaware. Handouts were made available for everyone including copies of the April 27, 2006 G.E.A.C. Meeting Minutes.

II. OPENING COMMENTS - Chair David R. Hodas:

Chair Hodas welcomed everyone. The minutes of the April 27, 2006 meeting were accepted, approved, and adopted by the Council, as transcribed. Chair Hodas pointed out that the Transcriber did an exceptional job each month. All Council members agreed.

III. REVIEW OF LAST MEETING ACCOMPLISHMENTS AND OTHER

COMMENTS – Chair David R. Hodas:

Before the meeting got started, Chair Hodas asked Charlie Smisson to introduce Sandra Burton, the newest member of DNREC’s Delaware Energy Office. Charlie explained that Sandra came from the U.S. Department of Energy’s Regional Office in Philadelphia, PA, which is being closed down as of June 30, 2006. Charlie stated that Sandra has been hired to develop the new energy efficiency programs for which we receive funding under Senate Bill 281 – the $8,000,000 program. She will be working hard in the next two months to try and get some residential, industrial, and commercial programs on the energy efficiency side up and able to be run by the Energy Office. We are looking forward to working with Sandra.

Governor’s Energy Advisory Council

Meeting Minutes of May 25, 2006

Page 2

Charlie also brought attention to the letter-handout he distributed. He said this letter, dated May 23, 2006 and signed by thirty-four State Governors, was sent to the U.S. House of Representatives urging them to restore funding for the State Energy Program – which is the Federal program that gives funding to State Energy Offices throughout the United States. The House Appropriations Subcommittee on Energy and Water zeroed out the program. The President had requested $49,500,000 for it and they zeroed it out. After the letter of support was sent, it looked like it may have helped in the House. There was a floor amendment offered in the House last evening and it DID PASS. We think that the House has got that $49,500,000 back again for our program. It funds things like positions for most energy offices. About 50% of most energy office positions are funded by this grant. It also helps us fund our day-to-day activities. This will come up in the Senate in the week of June 5th, and we are hoping to get support from both Senator Biden and Senator Carper to keep that $49,500.00.

Lee Ann Walling mentioned that many Bills have been coming out of the General Assembly regarding deregulation. One was a resolution calling for an Energy Summit for Businesses (program handout distributed). She said this summit is scheduled for June 20, 2006 at the Dover Downs Conference Center, and very practical ideas for small and medium businesses should come from it. Lee Ann asked for potential exhibitors - or if anyone knows someone who would be interested in exhibiting – there are a few spots remaining. Registration is online at the Delaware Energy Office website (delaware-) as of May 26, 2006. A mail out is going to be made to at least 5,000 people.

Before the guest presenter was introduced, Chair Hodas suggested that, if possible, a webpage might be created for the Governor’s Energy Advisory Council. And if presentations were placed on it, then they could be viewed again, if desired.

IV: GUEST PRESENTATION: DELMARVA POWER’S TRANSMISSION ISSUES AND PLANS, Bill Gausman, Vice President Asset Management, Pepco/Delmarva:

Chair Hodas, in response to several requests that the Council look into information on transmission lines, introduced the guest presenter, Bill Gausman. Mr. Gausman is from Pepco Holdings, Inc. He gave a detailed and exceptional Power Point presentation entitled “Delmarva Power Update – Rising Cost of Energy and the Need for New Transmission” and “PHI Mid-Atlantic Power Pathway”.

Mr. Gausman began his presentation by saying that the issues that Delaware is facing now are huge – changes that have occurred over a period of time but they are being faced now. He said he would like to go through some slides just to give a little background as to why we believe one of many solutions is to build additional transmission into the Delmarva zone.

Governor’s Energy Advisory Council

Meeting Minutes of May 25, 2006

Page 3

Mr. Gausman proceeded to go through his Power Point presentation. The highlighted points that Mr. Gausman expanded on are as follows:

►Energy Cost Increases

►State-by-State History

►Delmarva Power

►Transmission Outlook

►2006 Transmission Outlook - Load Growth

►2006 Transmission Outlook – Delmarva Transmission

Upgrades 1999 – 2006

►2006 Transmission Outlook – Delmarva Transmission

Upgrades 2007 - 2010

Chair Hodas asked if there were any maps of the transmission lines. Mr. Gausman said he did not have any maps with him. He said perhaps Gary Stockbridge could bring some to the next Governor’s Energy Advisory Council meeting. Mr. Gausman went on to discuss what PHI is proposing from a transmission standpoint. He said when we look at all this and projects that were being proposed by other organizations, it became very clear to PHI that the Delmarva Peninsula, although many of the projects that were being proposed would benefit the customers on the peninsula from an economic standpoint, from a reliability standpoint they really did not do anything. We looked at it, and basically wanted to develop a transmission recommendation that met several objectives. Clearly, we needed a project that would benefit the customers throughout the entire PHI territory with the Delmarva Peninsula especially being one of the major focuses on the transmission. The goals there: we want to reduce the cost of getting energy into this area, and increase the reliability of the entire transmission system. From a PJM standpoint, any project that we propose, they have to evaluate it and determine that it is in the best interests to PJM to recommend the project. So, we need PJM’s support. PJM is very much aware of the congestion and the high cost of energy within the peninsula.

Sandra Burton, of the Delaware Energy Office, mentioned she had a U.S. Department of Energy contact name – Ellen Lutz – whose information Sandra said she would forward to the group.

Pat McCullar suggested to Chair Hodas that PHI make a Transmission Presentation and invite the PJM folks to come and talk about it from their level; possibly in connection with that, the U.S.D.O.E. representative could be invited to talk about how the national quarter process is actually going to work. Chair Hodas said it was a good idea.

Governor’s Energy Advisory Council

Meeting Minutes of May 25, 2006

Page 4

Mr. Gausman went on to conclude his presentation by answering various questions that were posed by Council members. In closing, Mr. Gausman stated that the way the current configuration is, if PJM were to experience a wide-scale blackout, the Delmarva Peninsula, from their standpoint, offers no transmission opportunities for them to restore the system. The Delmarva Peninsula, to PJM, is just a big load pocket. As a result, it does not get restored until late in the process. By having a major transmission line as we are proposing coming through the peninsula – it then becomes a key factor in the PJM restoration process which will help in a large-scale blackout to be able to restore the peninsula faster than it would have been done under previous conditions.

Chair Hodas asked if anyone had any other comments. Pat McCullar thanked Mr. Gausman for his presentation on this very important issue. Pat recommended that the Council STRONGLY SUPPORT this new transmission facility. He said that $1.2 Billion sounds like a lot of money – but over a 30-year amortization period – with a generous rate of return at 15% - which is much higher than what Delmarva gives now – this costs $4.6 Million a year compared to $450 Million a year that customers are paying right now for congestion costs. This new facility will pay for itself in three years – maybe faster. Pat reiterated that we need to get this done just as quickly as possible. We have no assurance that any generation projects we build will be economical. AND the second delivery point on the Delmarva Peninsula is CRUCIAL from a reliability standpoint. We only have one feed north to south – if the transmission system goes black, we go on the very bottom of the restoration list because there is no way to get it done – there is not sufficient local generation – and we are load-pocket. With the second delivery source from the Dominion region, which has huge generation resources, our reliability goes up multiples. Pat again encouraged the Council to support this project in any way it can, and to see it get built just as quickly as possible.

Chair Hodas asked what the PJM decision time-line was. Mr. Gausman answered - the next PJM RTER (Regional Transmission Expansion Report) report is coming out in June 2006. We do not think that PJM is going to be in a position to make a definite recommendation on this line by June. It is our understanding that PJM wants to hold meetings to review these options, and possibly by the September 2006 timeframe, have another recommendation out. Mr. Gausman said any opportunity for anyone to attend the stakeholder meetings that are revealing these projects to express your support would be of great benefit to help this project go through. This report is issued twice a year. It identifies all the projects that they are recommending to be built to meet the liability criteria. This report is posted on the PJM website.

Charlie Smisson, of the Delaware Energy Office, mentioned something that this Council may consider down the line. It is one of the recommendations to be done by the Council. It involves the transportation sector. We have just been recently made aware of the

Governor’s Energy Advisory Council

Meeting Minutes of May 25, 2006

Page 5

Legislative initiative that involves the use of ethanol in Delaware. House Concurrent Resolution 66 is making its way through the Legislature now. It has been passed by the

House. This would establish a blue ribbon panel to investigate and get going the potential to build an ethanol production facility in Delaware, and also to establish the use of E-85 as a primary transportation fuel in the state. Chair Hodas asked is this was “switch grass ethanol”? Charlie said it remains to be seen. Charlie mentioned there are going to be a series of public hearings to be held this summer on this. Charlie said he could provide a copy of this House Concurrent Resolution 66 by the next Council meeting.

Chair Hodas thanked Bill Gausman for coming to give his presentation to the Council.

V. MISCELLANEOUS COMMENTS - : Chair Hodas said we need to figure out how the Council could take some formal position on transmission, and how we could communicate that to PJM. Lee Ann Walling said the Council can recommend that the Governor support it.

VI. OLD BUSINESS: There was no old business discussed.

VII. NEW BUSINESS – FOR NEXT MONTH’S AGENDA:

►Review of Open Task Force Recommendations

►A Copy for Council Members of House Concurrent Resolution 66

►Possible Arrangements for Future PHI Presentation with PJM and USDOE

Attending

►Possible G.E.A.C. Webpage Creation

►Coordination of an upcoming meeting/field trip in the fall at the

NRG facility in Indian River.

VIII. NEXT MEETING:

The next meeting will be held as follows:

June 22, 2006 – 9:30 a.m. to 11:30 a.m.

Farmington Conference Room – DELDOT Administration Building

U.S. Route 113, Dover, Delaware

IX. ADJOURNMENT: Today’s meeting was adjourned at 11:40 a.m.

____________________________________________

Jan Anderson, DEO, Recorder/Transcriber

(f:\Energy\Gov’s Energy Advis. Council\5-25-06-2 Meeting Minutes)

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