### Item #140153 July 17, 2014 GRU EveningAgenda
GRU/City ofGainesville DraftTestimonyon the Proposed Clean Power Plan Rule July 30, 2014, 9:55a.m. Atlanta, Georgia

Gainesville Regional Utilities (GRU) is a multi-service utilityowned by the City ofGainesville, Florida. GRUis the 5th largest municipal electric utility in Florida. Ourcombined services make us the most comprehensive utilityservice provider in the state. We serve approximately 90,000 retail and wholesale customers in Gainesville and surrounding areas, offering Electric, Natural Gas, Water, Wastewater, and Telecommunication Services.

Over the last decade, the City ofGainesville/GRU has done exactly what we believe the EPA's Clean Power Rule intendsto accomplish- greatly reduce carbon dioxide emissions. We set agoal ofreducing C02 

### emissions to seven percent below 1990values by the end of2013 and, with a concerted effort, exceeded this goal with athirteen percent reduction by the end of2012. We accomplished these reductions through avariety ofmeasures, including adding renewable energy to our generation mix, burning more natural gas and implementing aggressive energy conservation programs since 2005. Our energy conservation programs alone have resulted in the reduction of26 megawatts (MW) ofdemand and 131,000 MW hours ofenergy annually. In fact, electricity consumption by GRU's customers was the same in 2013 as itwas in 2000. While some ofthis can be attributed to factors such as a sluggish economy, newfederal appliance standards and updated building codes, our efforts, combined with our customers' efforts, have helped us make huge reductions in energy use. This has not been without a costto our customers. GRU currently has the highest electric rates in the state of Florida, in part due to ouractions taken to reduce C02• 

### With these factors in mind, there are two primary points we would like to offerforconsideration in proposed C02 

### rulemaking.

First, the proposed rule does not give credit forthe significant investments made by utilities for renewable energy and energy efficiency programs to reduce greenhouse gas C02 

### priorto 2012. We believe that EPA should allow states to incorporate emission reductions made by electric systems prior tothe effective baseline of2012. As noted above, GRU has implemented significant renewable energy projects and invested $28 million in energyefficiency. We were the first utility in the United States to offera European style solar feed-in tariffwhich dramaticallystimulated the construction ofsolar energy in our community. We created conservation programs which include residential ductsealing and attic insulation rebate programs. We incorporated landfill gas-to-energy projects into ourgeneration portfolio. We were the first utilityeast ofthe Mississippi River to build and operate a natural gas-fired combined heat and powerfacilitywith athermal efficiency greaterthan 70%.

In prioryears, GRU's electric generation was primarilyfossil fuel-based with non-fossil generation representing less than five percent ofour energysupply. However, in late 2013 we added 100 megawatts (MW) of biomass energy to our electric generating system. This addition, along with an aggressive solar energy program that has added approximately 16 MWofphotovoltaic solar capacity to oursystem, will allow us to meet nearly 34 percent ofour customer energy needs with renewableItem #140153 July 17, 2014 GRU Evening Agenda
generation. As proposed, the Existing Source Performance Standard (ESPS) penalizes GRU and other Florida Utilities by not providing credit forearly actions taken to reduce C02

. The proposed ESPS emission reduction goals depend on 4 compliance building blocks (BBs). EPA's compliance BB#3 assumes that aboutten percent of Florida's generation could come from renewable energy by 2030. Since GRU already has roughly 34% ofits energy coming from renewable energy, additional renewable energy is notaviable option for us. It should be noted thatthe proposed ESPS fails to recognize GRU's early actionto adopt renewable energy.

EPA's compliance BB#4 assumes that demand side management can reduce electric demand by ten percent by 2030. However, Florida and Gainesville are estimated to continue to experience significant population growth. EPA's ESPS does not appearto consider astate ora locality's future growth. Additionally, GRU's aggressive historical conservation programs, along with providing natural gas service to end use customers, have helped us attain the lowest per capita electricity use in the state of Florida.

Failure to recognize earlier reductions sends the wrong public policy message. Early, voluntary actions must be considered forcompliance purposes in EPA's ESPS guidelines tothe states and to individual utilities such as GRU.

A second primary concern relates to the potential forstranded costs from early investments our community made to comply with EPA's Clean Air Interstate Rule (CAIR) and Clean Air Mercury Rule (CAMR). The ESPS, as proposed, depends primarily on load shifting from coal to gas-fired generation (BB#2) for compliance with Florida's C02 reduction goals. The shiftto natural gas would likely result in the premature closing ofouronly coal unit, Deerhaven Unit 2. While EPA recognizes the increased costs tothe consumers with load shiftingto natural gas, it does notconsider the stranded costs forthose unitsthat still carryconsiderable debt.

GRU, along with many other Florida municipal utilities, built coal units in the 1980s due tothe Electric Power Industrial Fuel Use Act of 1977 that disallowed the use ofnatural gas and oil forany new electric generating units. The Fuel Use Act was passed while GRU was still in the process of building DH2 as a unit capable of burning both natural gas and oil. As a result ofthe Act, GRU was required to redesign DH2 as a coal-fired generator. GRU invested millions ofdollars in redesigning and building a coal-fired generator, not because we wanted acoal-fired generating unit but because the federal law provided no other choice for new generation otherthan cost-prohibitive nucleargeneration. Then, in 2009, GRU spent $149 million on state-of-the-art air pollution control systems to comply with EPA's Clean Air Interstate Rule and Clean Air Mercury Rule. Creating existing source C02 standards that would force GRUto retire DH2 prematurelywill leave our ratepayers with millions ofdollars in stranded costs. Also, the proposed ESPS emission reduction goals were developed considering national and regional assumptions that may nottranslate to astate and its utilities. This is especiallythe case regarding EPA's assumed coal unit efficiency improvements (BB #1), since relatively recent investments in Florida's coalfired generatingfleet, including our Deerhaven Unit2, already employ most ofthose improvements.

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Item #140153 July 17, 2014 GRU Evening Agenda

The concept ofstranded costs is an even more significant concern for those utilities and communities that have made the investmentto comply with existing EPA rules, and the extraordinary investments required to voluntarily reduce C02 in the recent past. Underthe proposed rules, our customers would paytwice as much as those who have yet to invest in C02 reduction strategies. Effectively, our customers' bills are already higherthan other utilities in the state, in part because ofthe investments we made in renewable energy and energy efficiency, and would go even higher underthe EPA's rule as proposed.

Each electric utilitygenerating system in the state of Florida is unique,justas each state's electric generating system is unique. It is critical that EPA's ESPS rule for C02 takes into account consideration of each state's unique energyand economic situation as well as the technological feasibility of EPA's compliance building blocks for each state. We would urge the EPA to fully consider Florida's unique situation with respect to fuel diversity, system reliability, economic growth, technological feasibility, and especiallythe investments and additional costs ourcustomers already bearand anyadditional costs that will be forced upon them in the future.

Thank you forthe opportunityto comment on the proposed ESPS rule.