French Broad Electric Membership Corporation

General Manager's Report Jeff Loven

Drought Could Affect Power Production
March, 2008

We all know about the drought that continues to plague us in the southeastern United States. Many cities across the region have taken steps to reduce the amount of water consumed by residents and businesses by placing restrictions on its use and encouraging conservation. Some areas have less than one hundred days of water supply remaining and will face some difficult circumstances if they do not soon receive more rainfall.

The drought has also brought havoc on the region’s economy. Agriculture, lawn care businesses, and anyone else with the need for a large volume of water are suffering.

To no one’s surprise, the lack of water has affected electricity generation. For months now hydroelectric power plant generation has been a fraction of normal output due to the lack of water flowing in streams and rivers. Even at French Broad EMC, our own hydroelectric plant produced about 75% of its usual output and we only received 65% of our normal Southeastern Power Administration (SEPA) allocation in 2007. (SEPA is a regional federal agency marketing electricity primarily generated from federal dams.) The loss of this electricity has to be replaced by higher cost fossil fuel generation.

To make matters worse, there is deep concern that many of the Southeast’s nuclear power plants will have to limit their generation output or shut down all together if water levels do not increase. The water levels at Lake Norman, which supplies Duke Power’s McGuire Plant, and Harris Lake, which supplies Progress Energy’s Shearon-Harris Plant, are already at critical levels. Millions of gallons of water from these lakes are used daily to cool and condense steam to operate the enormous generators inside these facilities.

The biggest concern is that the water level will drop below the intake pipes which are used to move the water into the power plants. Another concern is that when summer arrives the water temperature will rise to a point that it can no longer cool effectively. Although coal-fired plants do not need as much water as nuclear plants, they still require a significant amount and could face similar circumstances if lake levels continue to drop.

The utilities that own and operate these power plants do not think that shutting these plants down will dictate electrical blackouts. However, it will require them to purchase expensive replacement energy from other utilities and to operate their high cost combined cycle gas units.

Currently, nuclear power costs about five to seven cents per kilowatt hour to generate. Power on the open market to replace the lost nuclear generation could easily be ten times that amount. Consumers would certainly notice these substantial increases on their monthly bills. Coal and nuclear plants produce the vast majority of the electricity we use. It will be very costly to all of us if utilities cannot run these power plants due to low water levels.

Thank You,
Jeff Loven
Email: jeff.loven@frenchbroademc.com

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