EAP Consumer Services Conference – CAP & Shopping PECO Experience

1. EAP Consumer Services Conference – CAP & Shopping PECO Experience

2. EAP Consumer Services Conference – CAP Shopping • PECO has been evaluating different CAP Discount plans to improve affordability • In that evaluation, we have been looking at how different discount plans work with CAP shopping • Key elements to address in CAP design, with CAP shopping • Design must promote shopping • Shopping decisions must impact the individual choosing the offer, not impact the non-CAP funding (Shortfall) • CAP discounts are funded by non-CAP residential customers • Design must promote energy efficiency

3. EAP Consumer Services Conference – CAP Shopping • PECO currently uses a Percentage discount plan • Depending on federal poverty levels and their energy burdens, a CAP customer receives a percentage discount off their total bill to achieve affordability • That discount would be applied to their total bill, including supplier charges with 2 options to structure that portion of the discount • Apply the percentage discount to the supplier charges. For example, if the Supplier charges would be higher than PECO’s Price to Compare (PTC), that CAP customer would get a larger discount (% * higher bill). • That would result in a Shortfall increase • Apply the percentage discount on kWh used and PECO’s PTC • This would fix the discount to not vary based on Supplier rates and impact the CAP customer rather than the shortfall • For example, if a CAP customer received a lower Supplier rate than the PECO PTC, that customer would benefit from their shopping decision

4. EAP Consumer Services Conference – CAP Shopping • PECO also evaluated a Percentage of Income Payment Plan (PIPP) • Depending on federal poverty levels and their energy burdens, a CAP customer receives a fixed bill designed to meet affordability • Our opinion is that a PIPP does not promote shopping as well as other designs • If a customer is receiving a fixed bill, the impact of their shopping decision is not immediately felt. And if they don’t immediately see the savings, the incentive to shop is not strong • Also in a PIPP fixed bill environment, changes between the PTC and the shopping rate would impact the shortfall, not the customer

5. EAP Consumer Services Conference – CAP Shopping • PECO also evaluated a Fixed Credit Option (FCO) • Depending on federal poverty levels and their energy burdens, a CAP customer receives a fixed credit designed to meet affordability • In an FCO, you look at the previous 12 months of undiscounted bills, calculate what they can afford to pay, and the difference is set as their Fixed Credit • In an FCO, the fixed credit doesn’t change. Therefore differences between the PTC and the shopping rate would impact the CAP customer, not the shortfall • Also we believe this plan continues to provide incentives for energy efficiency and conservation

6. PPL Electric UtilitiesOnTrack (CAP) ProgramShopping Trends Wednesday September 17, 2014Energy Association of Pennsylvania (EAP) Conference

7. OnTrack Bill Sample Recently Added Shopping Information On Bill… New for 2014 New for 2014

8. Active Members in Program Active Program Members & Number of Shoppers

9. Shopping Decisions & PTC Trend OnTrack Customers with an Alternate Supplier

10. What Did Our Shoppers Pay? Average Price Paid Over 18 Month Period

11. What Did Our Shoppers Pay? Average Price Paid Over 18 Month Period (shown as % above or below the PTC)

12. What Did Our Shoppers Use? Average Monthly Usage for the 2 Groups, Over The 18 Month Period

13. Can We Estimate The Impact? Decisions Translated To Dollars… Estimate the impact, based on averages & 18 months of data… Average number of customers each month where the price paid was above the PTC = 10,449. For those customers above the PTC, average price paid = $0.11351. Average usage per month for customers above PTC was 1,338 KWH. The average PTC across this timeline was $0.08298. Average monthly bill you could have paid if on PTC = $111 (1,338 x $0.08298) Average monthly bill you did pay = $152(1,338 x $0.11351) Difference (each month) = $41 The (monthly) difference for all customers above the PTC = $426,731 The impact over 12 months = $5,120,775 The impact over 18 months = $7,681,162

14. CommentsQuestions

15. OnTrackRemoval (2 main ways to get removed) Customers Being Removed

16. OnTrack Shopping Decisions Data Table

17. Universal Service Rider

18. Universal Service Rider

19. 2014 OnTrack Focus • Sustainable Growth • Last year (2013) we targeted and achieved a substantial growth rate of 10%. • The 2014 enrollment target represents a 5% increase, compared to last year. • Recent PUC report showing percent change in members (2012 vs. 2013). • Improve Retention • It’s not as simple as enroll more people. Have to…enroll, retain, train/educate. • Implement New Three Year Plan • Five IT projects will need to be completed in 2014. • Communication/training for PPL reps, caseworkers, managers.

20. How Did We Do? Finding People (Referrals)

21. How Did We Do? Active Members in OnTrack

22. OnTrack: How Do We Affect Revenue Operations?(very high level look) Taking a customer out of “normal collections” and into OnTrack… • Collection activity costs are avoided • Letters we send, calls we make, field trips for cuts, etc. are not undertaken for an OnTrack customer….but those are partially offset by the cost to enroll the customer in OnTrack plus other things we send to the customer while in the program. • Can we affect the reserve requirement? (for overdue accounts receivable) • Reserve requirement = overdue AR / write offs • Different amounts (%) for each “aged bucket”… • Financial benefit of getting a customer into OnTrack… • Normal collections could lead to write-offs OnTrack = recovery of overdue money • More people in OnTrack Lowers the reserve requirement • High confidence: The overdue dollars associated with OnTrack accounts will go down in timely fashion…due to the debt forgiveness design of the program.

23. CAP Aggregation Columbia Gas of Pennsylvania

24. Customer Assistance Program • Open enrollment since 1996 • AFFORDABLE payment plan based on ability to pay • Arrearage forgiveness

25. Aggregation Defined • CAP customers are grouped together, for the purpose of obtaining lower cost gas from a marketer/supplier who is contracted to deliver agreed upon volumes to the aggregate. Columbia serves as the appointed agent for CAP customers, acting in their best interest. • Began in 1997

26. Process • Each CAP customer agrees that Columbia will purchase gas on their behalf as part of the CAP intake application • An RFP is sent out quarterly if a current supplier does not exist • Bids can be a flat discount or a percentage discount off the actual PTC • Bids are evaluated by a team and selected based on the lowest projected cost

27. Suppliers • Benefits • Guaranteed payment – purchase receivables at 100% • No customer solicitation required • No Billing fees • No customer interaction • Daily delivery is a fixed number for a calendar year • Drawbacks • RFP requires supplier to bid against an unknown future PTC that changes quarterly.

28. CAP customers • Benefits • AFFORDABLE payment plan • No shopping required • No risk of higher bill (if poor shopper) • Seamless after intake acceptance • No interaction with supplier • Drawbacks • No reduction in bill if aggregation creates savings

29. Rate Payers • Benefits • Reduced CAP shortfall which reduces rate payer costs • From July, 2011 thru August 2014, Rate payers have saved $6,220,023 • Historically better savings than individual CHOICE participants • Low Administrative costs • Drawbacks • ?????

30. CAP Customer Survey 1998 • “ [customers] Resoundingly indicated that they want to continue to deal with Columbia Gas. No one objects to the concept of Columbia purchasing gas from a marketer and most feel that if Columbia can save some money by doing so, that it is only right since Columbia is helping them out. Customers are not interested in choosing their own provider, whether or not, CAP benefits continue.” – Deb Steckel

31. CAP Impact Assessment- 1999 • “Columbia’s Gas Transportation component is a timely innovation that should, if possible, be continued in further program cycles. [It] takes advantage of the operation of both a particular tax situation, and of the competitive market for transportation supply. It does not entail any new risks, has no downside, and provides a way for low income payment troubled customers to participate in modalities of current reform. In particular, it provides a means of market participation for customers who cannot take on additional financial risk.” - Gil Peach

32. USECP Evaluation - 2004 • “The Columbia CAP aggregation model proves to be a successful alternative to traditional CHOICE. CAP customers benefited from the economies of scale gained through the aggregation of their volumes into the larger CAP group by $1,695,108 over the last five years. The company and customers benefit from the CAP aggregation since it serves to reduce customer shortfall and write-off costs” -Melanie Popovich