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President's Message by Yates Adcock


The ElectraLite


September 2013


We Remain Committed to a Strong Future


The electric utility industry is undergo- ing unprecedented changes in the operational standards produced by regulatory changes at the federal and regional levels of government. Additionally, the electric utility operating environment is being driven by the increas- ing expectations of consumers at all levels. Changing technology makes things not imag- ined thirty years ago commonplace today. Applications of many new technologies are almost obsolete before fully utilized. Keep- ing up is an everyday effort and is required. Being the first to adopt a new technology is often too costly, but being last can be even more expensive. As a friend said, “It is the second rat that gets the cheese.” This is often the case with new technology too. It is said that half the people in the world now have not only a cell phone but a “smart’ phone. New things to do with these “smart” phones are being developed every day, including keeping up with where 812080101 we are all the time. If that is a good thing? Thirty years ago the electric utility indus- try was “flush” with new state of the art elec- tric generating facilities capable of producing electricity in amounts that far exceeded the needs of the people, businesses and industry. In fact electric utility customer’s monthly bills were burdened by the cost of all of this new electric generating capacity. Electric utilities did not decide collectively to build all of this new capacity just to raise customers' bills and make more money. Federal laws mandated that electric utilities stop burning natural gas to make electricity because the conventional wisdom at the time was that we as a nation were running out of natural


gas and it should be conserved for other uses when electricity could be made using coal or nuclear power. So our elected officials, with the leadership of the President at the time, passed laws telling the electric utility industry they could no longer build electric generating plants that used natural gas for fuel. In fact, the law went further to require that by the 1990s the existing natural gas-fired electric generating plants be shut down. The electric utility industry turned to coal and nuclear power to meet the electricity needs of their customers for the future. Building in regions of the country where natural gas was the pri- mary source of electricity generation began at a fast and furious pace.


In Oklahoma in the 1970s most of the electricity for the state’s economy was gener- ated by burning natural gas. This law hit our state as well as other states in our region particularly hard. All of the electric utility generating companies in Oklahoma began the process of replacing nearly all of their natural gas-fired generating plants to comply with the law and to meet the electrical needs of Okla- homans. Numerous coal fired generating plants were built across the state at costs that far exceeded the cost of the natural gas plants these coal plants were built to replace. Even a nuclear plant was planned in Oklahoma and construction began before it failed under the weight of cost overruns, difficulty getting permits and the nuclear problem at Three- mile Island. By the mid 1980s in Oklahoma, utilities all had a fleet of coal-fired generating to replace their “outlawed” natural gas plants. Then we as a nation discovered that maybe we were not running out of natural gas and by the 1990s the law requiring natural gas plants to shut down was repealed. Result, we in Oklahoma and other states in similar circum- stances had much more electric generating capacity on the ground and in service than was needed. This excess generating capac- ity was reflected in consumers' electric bills. Today, twenty years later we are utilizing most of that generating capacity, natural gas and coal as well as substantial wind-powered electric generating resources that have been added.


Today coal provides about one-half of


our nation’s electricity needs. Federal regula- tors have decided these coal fired generat- ing plants are just too “dirty” to use and are issuing mandates to utilities which, for the most part, are just too costly to justify spend- ing more money on a 30-year-old generat- ing plant to meet these new, more stringent requirements, when in the next year or the next year more regulation may still make it uneconomical to run. Many electric utilities are opting to shut down many of their coal plants rather than make the risky investments in these older plants. Less supply usually means higher prices. We really are not a nation that accepts shortages very well. But being more conservative and efficient are the only plans some have to offer for the future. While these are desirable, it is not likely that conservation and efficiency alone can meet the expectations and requirements of a growing economy without greatly affecting our standard of living. Today replacement capacity is not under construction to meet these planned reductions in coal fired electric generating capacity. Most people in the busi- ness believe this loss in available generating capacity will be made up by new natural gas- fired generating plants using natural gas that someone will build. Natural gas is now said to be so abundant we are “flaring” (wasting) it in some areas of the country and planning to export it to other countries. These natural gas plants that hopefully will be built to re- place the coal-fired generating plants that are being shut down will cost more to build than those coal plants being shut down originally cost. However, some are already “attacking” natural gas as not an acceptable source for future electric generating capacity. We are not discounting the promise and possibilities that wind and solar power offer. Today, both are heavily subsidized through the tax structure for investors. Regulators can make these sources price competitive by driving up the cost of fossil-fueled generation through more and more stringent regula- tions and replace those tax subsidies through


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