Is the Energy We Provide Reliable?

The next question we ask in meeting our mission is: Will the investments we make deliver reliable energy? Reliability depends on how electricity is delivered. Modernizing our transmission and distribution grid is key to improving reliability. That’s why we plan to invest up to $1 billion over five years to begin the conversion of our power delivery system into an advanced, state-of-the-art “smart grid.”

Smart grid benefits

A smarter grid will create a digital, two-way information exchange between us and our customers. It will transform today’s century-old power delivery system into an advanced energy network that delivers electricity and energy usage information.

Today’s analog meters give us just 12 data points per year — the after-the-fact monthly usage, which generates the monthly bill. Smart meters will provide us and our customers more than 9,000 data points every year. Armed with this new information, we will be able to make more accurate load forecasts and reduce our costs by better balancing supply and demand. But that’s only the beginning of the story.

Because smart meters will send information back to us, we’ll know sooner when and where power outages occur. We’ll be able to remotely identify trouble spots and restore service faster. In some cases, power outages will be avoided altogether due to the smart grid’s “self healing” capability. Intelligent sensors and switches will automatically identify, isolate and “cure” power line problems. Today, we know that service is disrupted only when a customer calls to report the outage.

Our smart grid is also critical for meeting the power needs of plug-in hybrid electric and all-electric vehicles. To better understand these game-changing technologies, we are joining FPL Group to invest a combined $600 million with the goal that 100 percent of all new fleet vehicles purchased will be plug-in electric vehicles or plug-in hybrid electric vehicles by 2020. We also foresee great potential for job creation, as our nation builds the new recharging infrastructure for these vehicles.

Through the end of 2009, we had invested approximately $90 million to deploy limited-scale smart grid projects. We continue to pursue smart grid deployments in North Carolina, South Carolina, Kentucky and Indiana. In December 2008, we received approval from the Public Utilities Commission of Ohio to move forward with full-scale deployment. After conducting successful pilot programs in 2009, we expect to install 140,000 smart electric and gas meters and other associated technologies in 2010. Our Ohio deployment will grow to more than 1 million smart meters and other components installed over the next five years. We are recovering these investments through an annual rate tracker in Ohio.

In 2009, the U.S. Department of Energy (DOE) awarded us $200 million under the American Recovery and Reinvestment Act to support our smart grid projects in the Midwest, and another $4 million toward our smart grid efforts in the Carolinas. We continue to work with the DOE on finalizing the terms of the grant contract.

Energy efficiency: A business model for the 21st century

The smart grid will become an important enabler for more efficient energy use. It complements our goal to level the playing field between incentives in place to promote new plants and incentives needed to promote energy efficiency investments. Most utilities today continue to operate under regulatory frameworks created decades ago that reward them for building new power plants and distribution systems. They lack incentives to invest in end-use energy efficiency.

Our energy efficiency plan takes steps toward creating a framework that will allow us to earn a return on the costs of new construction that we avoid due to the expansion of end-use efficiency innovations. Over time, the growth in energy efficiency programs is expected to smooth out the demand for energy, making our demand less “peaky” (less generation needed to meet peak loads). As a result, customers’ overall energy costs would be reduced. The cost of these programs will be recovered through a nominal energy efficiency rate rider included in the monthly energy bill.

First approved in Ohio in December 2008, our energy efficiency framework was approved last year in North Carolina, and in early 2010 in South Carolina and Indiana. In Kentucky, we are evaluating a filing in late 2010.