ICF Consulting NO_x Study Predicts Increases in Eastern Wholesale Electric Prices and Volatile NO_x Markets

FAIRFAX, VA, May 16, 2001 - ICF Consulting's NO_x Market Outlook 2001 concludes that new summer NO_x regulations, scheduled to enter into full force on May 31, 2004, will cause widespread increases in electricity prices throughout Eastern markets. The new rules reduce emissions by establishing a market for emission permits, effectively turning emissions into a valued commodity input for generating electricity.

"The good news is that these new regulations will lower NO_x allowance prices for summer 2001, helping to soften electric price pressure in the Northeast," says John Blaney, managing director of ICF Consulting's energy industry environmental practice. "However, as the new NO_x regulations are implemented, they will tighten electric markets and drive up prices. Many electric generation companies will invest several hundred million dollars in pollution control equipment over the next three years. No previous environmental rule has required such a large investment in pollution control equipment in such a short time frame. The resulting impact on electric markets will be substantial from 2003-2005. We see this correlated NO_x and electric market price volatility as an opportunity to improve earnings by integrating wholesale electric market, fuel market, and NO_x compliance planning into one unified strategy."

The NO_x study, which ICF Consulting publishes annually, projects allowance prices and market dynamics for the existing Northeast NO_x market, the upcoming SIP Call market, and potential national NO_x trading programs. "We see a NO_x market that is highly overvalued in the near-term and we expect Northeast NO_x prices to collapse by the end of 2001," asserts Blaney. "However, with the tighter, larger-scope of the SIP Call arriving in 2003-2004, we predict a dramatic run-up in NO_x allowance prices and correspondingly high electric prices. The apparent disconnect between the near-term NO_x supply glut and the mid-term shortage is primarily a function of the regulatory restrictions on banking between the two separate trading programs."

The highly contested SIP Call (call for State Implementation Plans) effectively establishes a new allowance market aimed at reducing NO_x emissions from electric and industrial sources in the east. By targeting interstate transport of NO_x, the U.S. Environmental Protection Agency (EPA) hopes to help local non-attainment areas come into compliance with National Ambient Air Quality Standards for Ozone (smog). The new program expands the geographic scope of the existing Northeast NO_x market to cover large fossil-fired facilities throughout a 19-state Midwest, Northeast, and Southeast region. Under the rules of the trading system, every ton of NO_x emitted between May-September (the "ozone season") requires a NO_x allowance to be retired. EPA and the affected states allocate the NO_x allowances ahead of time and companies are able to buy and sell allowances to achieve compliance with the emission standard at the lowest cost to industry.

The NO_x SIP Call will have broad impacts on the power industry and electric markets. Companies with proactive compliance and market strategies can take advantage of higher NO_x allowance and electric prices to deliver value to shareholders. Understanding the market dynamics and timing of price impacts is key to creating a winning strategy.

ICF International (Nasdaq: ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, environment, transportation, social programs, defense, and homeland security markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 1,800 employees serve these clients worldwide. ICF’s Web site is http://www.icfi.com.

For Immediate Release Contact: Douglas Beck 1.703.934.3820