Dominion East Ohio Energy Choice Update/ Merchant Function Issues

1. Dominion East Ohio Energy Choice Update/ Merchant Function Issues March 4, 2004

2. Energy Choice Enrollment Participation Rates Residential 56% Nonresidential 55%

3. 1/04 Energy Choice Market Shares (*) Other 11 D A C B The largest Choice pool is 39% as big as DEO’s remaining GCR customer base (*) Includes supplier’s aggregation customers

4. FRPS Pool 2003 Market Shares A Other 35 B C D D

5. Merchant Function Exit Discussions Goal • Develop detailed transition plan under which DEO could exit merchant function • Does not have to include proposed date certain by which DEO exits Process • Hold several (2-4) meetings at which stakeholders could voice opinions on key issues • Assume that DEO exits merchant function (i.e., do not debate merits up front) • DEO develops comprehensive plan for further review or filing (with or without timetable)

6. Fundamental Objectives • Adequate Reliability • System must remain reliable for default service and Energy Choice customers • Acceptable Pricing • Prices for default commodity and related services must be properly set • Appropriate Oversight • Commission must retain sufficient oversight to avoid unacceptable outcomes Any exit of the merchant function must be METHODICAL

7. Perceived Stakeholder Interests

8. Provider-of-Last-Resort Timeline Hourly Daily <1 Cycle Monthly >1 Cycle Seasonal (1 Cycle) • Intra-Day Balancing • Daily Balancing • Single-Day Underdelivery • Multi-Day Underdelivery • Supplier Default • Monthly Balancing • Standard Offer Service

9. Potential Discussion Topics • General Issues • Operational Issues • Customer Issues • Process Issues Should we move forward and, if so, when?

10. General Issues • What other models are worth reviewing? • What exactly does default service entail? • What are the default supplier’s responsibilities? • What is DEO’s role after exiting the merchant function? • What oversight does the Commission have of the default supplier? • What steps do we take to minimize the possibility of default by a default supplier?

11. Operational Issues • How do we maintain system reliability with DEO no longer in the GCR business? • What capacity does DEO need to retain in its role as system operator? • Is a reserve margin needed? • How do we deal with buying/selling storage in place and cash-out gas? • How do we respond to end use market changes (i.e., declining baseload usage)? • Does anything change in Energy Choice?

12. Customer Issues • Who “provides” the default service from the customer’s perspective? • How is the price for default service set and how frequently does it change? • How is the hand-off from GCR to default service handled? • Who is eligible for “standard” default service? • How do we inform customers? • How do we deal with credit and collections?

13. Process Issues • What is the optimal time of year to make the transition? • Should default service be subjected to an RFP process and, if so, who makes the final selection? • How is default service billed to customers and how does the supplier get paid? • How does DEO recover the costs it incurs as system operator? • Operational balancing capacity, Storage inventory, UFG, Unrecovered gas costs

14. Suggestions?