Black & Veatch Identifies 'Big Ten' Challenges to Electric Industry; Announces Upcoming Industry Survey and Report.

HAUPPAUGE, N.Y. -- The electric industry and its regulators -- after years of restructuring -- now face an unprecedented set of 10 challenges which, if not adequately addressed, could threaten power system integrity and lead to significant rate increases, according to Black & Veatch.

"The Enterprise Management Solutions (EMS) division of Black & Veatch will, shortly, begin a survey to explore these big challenges and to analyze them in depth," said Richard J. Rudden, Senior Vice President. "We would greatly appreciate the cooperation of those contacted by our survey firm over the next few months. We expect to publish the results in the fall and will be happy to make the more detailed study results available to all survey participants."

These are the 10 big challenges:

--1. Aging infrastructure - To maintain adequate levels of reliability and security, the industry has to replace the larger part of plant installed in the 1960s and 1970s, now fully depreciated and technologically obsolescent, and figure out how to get paid for the replacements.

--2. Aging workforce - With half the workforce likely to retire within a decade, companies must develop the means to preserve the knowledge that will walk out the door and find skilled replacements for the retiring staff.

--3. Security - As if protecting electric plant from the threat of terrorism were not enough of a challenge, the industry must also prepare to protect itself against disruptions within the fuel supply chain caused by stoppages at the suppliers or by international difficulties.

--4. Reliability - Complying with newly mandated grid management rules will, no doubt, constitute a challenge, but not as much as efficiently providing the levels of reliability required by individual customers in a digital environment.

--5. Environment - Although electric generators have reduced polluting emissions substantially, they will have to do more and do it more efficiently, as additional coal generation comes on line, and as attempts to mitigate global climate change and water shortages will affect plant siting, fuel choice, competitiveness of particular power stations and cost of doing business.

--6. Investment - The old regulatory rules attracted long-term investment; the new market-driven rules seem unable to do so. It appears that the regulators and the industry will have to come up with another model to bring in the capital needed to expand and repair the electricity supply industry.

--7. Technology - Although technology exists that could improve industry reliability and reduce costs, policymakers must find ways to lift barriers to implementation and put in place incentives that would make the industry a technical leader again.

-- 8. Fuel policy - As a result of volatile prices, insecure supplies, environmental mandates and market design, developing a conscious fuel policy that takes new risks into account has become a major challenge for power producers and their customers.

-- 9. Market structure - Between repeal of the Public Utility Holding Company Act and the creation of new types of companies in restructured markets, the energy supplier now has choices of how to configure for the marketplace, and must plan the right corporate structure and also consider how the restructuring of other firms might affect its future.

--10. Regulation - Even after a decade of trying, regulators still need to develop firm borders between regulated and unregulated pricing, incentives that would cause electricity suppliers to act efficiently and on behalf of consumers, and signals that bring in needed investment capital.

"Successful planning requires a careful analysis of potential roadblocks, opportunities and the requirements of doing business," said Rudden. "We believe that energy firms, whether investor or publicly owned, whether vertically integrated or a specialty firm, will have to deal with all these challenges because of the inter-related nature of the industry."

For a current detailed discussion of the issues behind the "Big Ten" challenges, and of subsidiary challenges to the generation, transmission and distribution sectors of the industry, please contact Richard J. Rudden, Senior Vice President, Black & Veatch at 631-348-4090, or [e-mail].

About Black & Veatch

Black & Veatch Corporation is a leading global engineering, consulting and construction company specializing in infrastructure development in energy, water, information and government markets. Founded in 1915, Black & Veatch develops tailored infrastructure solutions that meet clients' needs and provide sustainable benefits. Solutions include conceptual and preliminary engineering services, engineering design, procurement, construction, financial management, asset management, information technology, environmental, security design and consulting, and management consulting services. The employee-owned company has more than 90 offices worldwide. Black & Veatch is ranked on the Forbes "500 Largest Private Companies in the United States" listing. The company's Web site address is www.bv.com.

Enterprise Management Solutions (EMS) is the management consulting division of Black & Veatch. EMS provides tailored strategic, process and technology solutions to deliver improved operations, cost savings, new revenue streams and greater customer loyalty. For more information on EMS, visit www.bv.com/consult.