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Executive Speech

Remarks of T. F. Farrell II
President & COO
CAIR/CAMR News Conference

November 22, 2005

Thank you, Bill, and good morning.

I want to echo what Bill said and thank you for making the trip to Chesterfield. We chose this location to illustrate an important point: energy production and the environment are interdependent and can co-exist successfully — with proper stewardship and enlightened laws and regulation.

Virginians are reaping the benefits of cleaner air as a result of reductions in our power station emissions, even as we have increased electric generation to meet new demand. And thanks to the vision of the General Assembly and the Virginia Electric Utility Restructuring Act of 1999, these air quality improvements have been achieved with virtually no change in base electric rates.

That’s a remarkable accomplishment — and a real positive for the Commonwealth’s environment and its economy.

Responsible stewardship of the environment is an important part of Dominion’s business. It is a responsibility we take very seriously. We operate in full compliance with environmental laws and regulations. And we often exceed legal requirements when it makes scientific and economic sense to do so.

A brief review of our record shows that Dominion has been in the vanguard when it comes to “clearing the air.”

  • As the first utility to publicly support passage of the Clean Air Act Amendments of 1990 — the first major legislation to address acid rain — Dominion helped break a longstanding deadlock in Congress.
  • Dominion also was the first company to test the Clean Air law’s innovative “cap and trade” provision, which gave utilities more flexibility in meeting required emissions limits.
  • In 1994 and again in 2002, Dominion installed environmental controls at its Mount Storm coal station in West Virginia — well ahead of compliance deadlines — bringing air quality improvements to the Shenandoah National Park and other wilderness areas.
  • In 2003, we converted two units at the Possum Point Power Station in Northern Virginia from coal to natural gas and built a gas-fired combined-cycle unit. That $400-million project grew out of a collaborative effort with the Virginia Department of Environmental Quality to help Northern Virginia reduce its ozone levels and help meet federal air quality standards.
  • Also in 2003, we signed a landmark agreement with the U.S. Environmental Protection Agency — a comprehensive emissions control program for our Virginia and West Virginia coal units. That $1.2-billion investment by Dominion is the most ambitious environmental commitment ever made by a Virginia corporation. And, I might add, it will be achieved without raising our customers’ base electric rates, which are capped through 2010.

Those and other steps Dominion has taken to help improve air quality in Virginia are having the intended effect.

A report issued in 2004 by a task force of the Virginia State Advisory Board showed significant improvements in the Commonwealth’s air quality over the past decade. These improvements resulted from a noticeable drop in sulfur dioxide, nitrogen oxide and particulate matter concentrations.

And that’s not all: more improvements are on the way.

In March of this year, the U.S. EPA issued two new rules — the Clean Air Interstate Rule and the Clean Air Mercury Rule. The Clean Air rule applies to 28 states, most of which are east of the Mississippi River, plus the District of Columbia. The Mercury rule is national in scope.

Here in Virginia, the new Clean Air rule calls for a 79 percent reduction in sulfur dioxide and a 57 percent reduction in nitrogen oxide below 2003 levels. EPA studies show that implementation of this rule will bring all regions of the Commonwealth into compliance with federal ozone standards by 2015.

In addition, the Clean Air rule will enhance air quality and visibility in Virginia’s state and national parks. It will also bring about significantly lower pollutant levels in the Chesapeake Bay.

The federal mercury rule calls for a 70 percent reduction in mercury emissions from power stations. It is the first federal rule to regulate mercury.

Some are gearing up to fight these new regulations. Dominion is not among them.

We support the EPA’s new rules and are taking aggressive steps to comply with them. We believe their reliance on market mechanisms to leverage emissions reductions is the most cost-effective approach. And the new rules provide a degree of regulatory certainty that helps business planning.

To achieve these emission reductions, Dominion plans to install scrubbers on Units 3-6 here at Chesterfield… on Units 1-4 at the Chesapeake Energy Center… and on Unit 1 at the Yorktown Power Station — all by 2011. We are also planning to install a scrubber on Yorktown Unit 2 by 2015.

Scrubbers remove more than 90 percent of the sulfur dioxide contained in the exhaust before it leaves the stack.

We also have already installed selective catalytic reduction equipment, or SCRs, on various coal units in our system and are evaluating other SCR installations by 2015. SCRs help convert nitrogen oxides into nitrogen and water. The technology is similar to the catalytic converter used to cut automobile emissions.

A list of Dominion’s previous and current environmental upgrades is shown on one of the charts you see next to me. You also have a copy of this and other charts in your press kit.

To comply with these new rules, Dominion will invest $500 million more in state-of-the-art pollution control equipment to reduce emissions from its Virginia generating units.

This major investment in clean air follows more than $2 billion that Dominion has already spent or committed to spend since the 1990s. The vast majority of these expenses have been borne by the company, not customers, thanks to capped electric rates.

I call your attention to the chart with the multi-colored lines. It shows the dramatic decline in smokestack emissions we have achieved since 1998 and expect to achieve — even as the demand for power — the green line — grows by more than 30 percent.

That downward trend in emissions will continue under the new clean air and mercury rules.

Once we have completed all of the environmental construction, Dominion will have cut sulfur dioxide emissions by an average of more than 80 percent at its coal stations serving Virginia. Nitrogen oxide emissions will decrease by 70 percent. And mercury emissions will drop by about 87 percent below 2000 levels.

Dominion is proud of its long history of environmental stewardship. The construction projects we are announcing today set a new standard in our pledge to be a national leader in the effort to improve air quality.

Coal is and will remain an important part of Dominion’s energy mix. It is a vital resource for fueling the Commonwealth’s future growth.

This new capital investment will infuse significant dollars into Virginia’s economy over the coming decade, ensuring that coal will continue to help meet Virginia’s growing electricity needs — and do so in a way that safeguards public health and the environment.

We see this as another major step forward in “clearing the air” for the benefit of all Virginians.

On behalf of Dominion, I again want to thank you for joining us for this important announcement.

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