Good morning. I’d like to thank Commissioner Ervin for inviting me here today and also thank NARUC for its leadership and hard work over the years in the area of used nuclear fuel management.

Under the leadership of the Nuclear Issues Subcommittee . . . as well as the dedicated leadership of Jimmy Ervin, LeRoy Koppendrayer, Jim Sullivan and others, NARUC has served as a faithful guardian of the consumer’s interest and the billions of dollars paid into the Nuclear Waste Fund.

Thirty years ago, America was in the grip of an energy crisis. The price of crude oil was at an all-time high. Supplies of natural gas appeared to be running short because 20 years of federal price controls on the interstate natural gas market was stifling production. We addressed these price and supply risks by investing in new technology and building significant new coal-fired and nuclear capacity.

Today in 2004, the energy landscape is much the same. The price of crude oil is at, or near, an all-time high. We’re placing pressure on natural gas supply, and experiencing extreme price volatility and the prospect of sustained elevated prices. We are meeting new demand in the power sector through what’s called “demand destruction” among industries that use natural gas as a feedstock.

It is imperative that we must address today’s energy challenges just as we managed the crisis of 30 years ago – by investing in our electricity infrastructure.

Ladies and gentlemen, you have a key role to play in this enterprise owing to your special expertise in ensuring native load and preserving energy diversity.

Here’s our situation today.

The Department of Energy forecasts that America will need between 393,000 megawatts and 564,000 megawatts of new generating capacity within 20 years. At the high end, that’s a 50% increase from today.

We know our country faces a critical need for investment in energy infrastructure, including advanced nuclear and coal-fired power plants that represent the backbone of the U.S. electricity supply system.

These two technologies represent approximately 70 percent of U.S. electricity supply, but investment in new nuclear and coal-fired power plants has virtually disappeared in the last 12 years.

Since Congress enacted the Energy Policy Act of 1992, the United States has built approximately 271,000 megawatts of new gas-fired generating capacity. By contrast, we’ve added some 4,300 megawatts of new nuclear capacity and 9,500 megawatts of new coal-fired capacity.

The question before us now is how to tackle this challenging situation.

The nuclear energy industry is committed to building new nuclear plants, and we’ve been working on regulatory, legislative and financial policy initiatives that will allow us to invest in new plants. In addition, public support for nuclear energy is at an all-time high – and majorities of those citizens in NEI’s survey support building new nuclear plants.

In the Energy Policy Act of 1992, we completely overhauled the licensing process, allowing industry to obtain all regulatory approvals before significant capital investment is made.

We’re confident that the new process addresses the difficulties and risks we encountered during construction of today’s nuclear plants – the costly delays and design changes, the long construction periods, the cost overruns. Also, we don’t expect to be facing the double-digit inflation we did before.

Three companies — Dominion Resources, Entergy and Exelon — have applied for early site permits. Three industry consortia, representing 19 companies, are participating in a cost-shared program with the Department of Energy to obtain combined construction/operating licenses.

We’re refining and improving the light water reactor designs in use today across the country and around the world. The advanced-generation designs are simpler, safer, and more efficient to build and operate.

The industry’s objective is to ensure new nuclear plants can begin meeting growing energy demand early in the next decade. We still have work to complete before companies can place orders and invest in construction – most of that work is focused on bringing more certainty to the costs and quantifying the risks associated with new build. But we think the nuclear industry can start building the next generation of plants later this decade.

No matter what we do to reduce capital costs, however, new nuclear plants and, new clean coal plants — share one common challenge. They are capital-intensive technologies with long lead times. Combined-cycle gas plants cost $600 to $700 per kilowatt and take two to three years to build.

We expect coal and nuclear plants to cost $1,000 to $1,400 per kilowatt and take four to five years to build.

Of course, as you know, the gas-fired plants have little forward price stability, and the nuclear and coal-fired technologies provide significant price stability, but that does not make financing any easier.

But there are ways to manage these challenges.

The federal government can, and should, share the cost of the first-of-a-kind design and engineering work for new nuclear reactor designs and clean coal technologies.

The federal government must fulfill its statutory and contractual obligation to accept spent nuclear fuel and safely dispose of it at Yucca Mountain beginning in 2010, as agreed by Congress in 2002.

The federal government also plays a crucial role in providing financial incentives to stimulate investment in new baseload generating technology, including new nuclear plants.

The conference report on national energy policy legislation – known as H.R.6 — passed last year by the House of Representatives and still awaiting action in the U.S. Senate, provided many of the policies I believe are necessary.

We know, however, that industry and the federal government cannot rebuild our electricity infrastructure alone – we need the states and state regulators as well.

So what is your role?

You can help facilitate billions of dollars in private sector investment by providing assurance of investment recovery for projects prudently managed and completed.

You can help support the creditworthiness of well-planned, well-managed projects by authorizing long-term power purchases that preserve the consumer’s interest in power supplies at stable prices.

You can work with the private sector to define and develop innovative approaches to project structure . . . approaches that apportion risks and rewards equitably between companies and consumers.

A number of states have already developed approaches that deserve attention. Alabama, Mississippi and Indiana permit various ways of recovering approved environmental costs. Iowa has legislation in place that permits pre-approval of recoverable construction costs. Wisconsin has enacted new legislation designed to balance the needs of the private sector and consumers, which may serve as a useful model.

Wisconsin Energy is building two new 615-megawatt coal-fired power plants under its “Power the Future” program backed by the investment protection afforded by the Wisconsin legislation and subsequent PSC orders. The new capacity is built and operated by a non-regulated subsidiary, and leased back to its utility affiliate, We Energies.

During construction, the unregulated company receives a return on capital invested in the project equivalent to the weighted cost of capital, with lease payments recovered by We Energies through the ratemaking process.

Once the Wisconsin PSC agrees to a lease payment, the payment cannot change for the life of the lease -- and the lease payments are fully recoverable through rates. Further, because the PSC has responsibility for reviewing capital costs, ratepayers are protected from cost overruns.

I am hopeful that other states can work with the industry to develop similar approaches suited to their particular needs.

(PAUSE)

As we look out over the next two decades, it’s clear that America must take decisive action now in order to secure its energy future.

Demand for affordable, reliable and clean electricity will only increase. In fact, over the next two decades, it’s going to take a concerted effort to make sure that America has the electricity it needs to support a growing economy and meet our environmental goals.

From the nuclear energy sector, we have a strong foundation on which to build. Our 103 nuclear power plants supply electricity to 1 in every 5 U.S. homes and businesses. These plants are a strategic national asset.

Our nuclear plants are operating well, with industry-wide annual capacity factors in the 90-percent range. We are low-cost producers, running on average between $20 and $25 a megawatt-hour.

Nuclear power plants contribute to the fuel and technology diversity that is the core strength of the U.S. electric supply system.

Nuclear power plants provide price stability that is not available from other power plants.

Emission-free nuclear power plants also play a vital role in meeting our clean air targets and the President’s goal of reducing the greenhouse gas intensity of the U.S. economy.

The reasons that make nuclear power plants a strategic national asset also justify a systematic, disciplined program to build new nuclear power plants in the years ahead.

I look forward to working together to realize this enormous promise and potential, for the greater good of our country and for consumers.

Jimmy...thanks again for having me here today. I look forward to our discussion.