Economic Development Rate (EDR) Overview

1. Economic Development Rate (EDR) Overview OCBC Economic Development Committee March 28, 2011

2. EDR Regulatory Framework • The Commission has authorized SCE to offer standard EDR contracts for a number of years in an effort to promote economic development in California • SCE’s EDR program has helped retain, expand, and attract businesses, resulting in jobs and economic growth for the benefit of all customers • SCE’s EDR program provides benefits to other ratepayers • It puts downward pressure on all customers' rates by spreading fixed costs over a larger base of sales

3. The New Five-Year EDR Program • The California Public Utilities Commission approved SCE’s Economic Development Rate (EDR) discount program until 12/31/2012 • Applies to retention, expansion, and attraction projects • Applies to bundled service, direct access and CCA customers • Direct Access and CCA customers will receive the EDR discount on their delivery costs, but will not receive a discount on their generation costs because SCE does not provide generation services to these customers • Subject to calculations specified in the applicable EDR tariff, qualified businesses may receive up to a 12% discount on their electricity rate for a five-year period • The EDR program features a 200 MW program cap

4. Qualification – Eligibility Criteria • Customers must have service accounts with demands of at least 200 kW to qualify, and must maintain that demand for the term of the agreement • Residential customers and state and local governments are not eligible • Customers must also receive an energy efficiency audit in order to qualify for the rate • Electricity must account for 5% of the customer’s operating costs, less the cost of raw materials • If a customer verifies that electricity accounts for over 15% of operating costs, that customer will receive expedited processing • Signed affidavit required stating “but for” the receipt of the applicable discounted economic development rate, either on its own or in combination with other incentives, the applicant’s load would not be retained, located in, or attracted to California

5. Qualification – Rigorous Analysis • Customer must present a business case stating that but forthe rate discount, on its own or in combination with other incentives, the load would not have been located to, expanded in, or retained in California • With the exception of a retention project, the subject load cannot currently exist in California • Determination of eligibility is required by SCE and the California State Office of Business Investment Services (CalBIS)

6. Guidelines for the Business Case • Comparison of Attributes of Current Versus Alternative Out-of-State Location • Cost, sufficiency of capacity, and reliability of electricity • Own, lease property • Corporate management structure • Cost and availability of labor, materials, real estate, insurance, and other costs of doing business • Proximity to target markets, supply chain logistics, and transportation costs • Required capital investment • Key Decision Criteria • Financial considerations • Cost drivers • Profitability drivers • Current and target financial performance • Strategic considerations • Competitive situation and pressures • Analysis of EDR Savings • Compare financial metrics such as: NPV, ROI, sales, cost per unit, profit per unit, and/or other key measures of financial performance for current and alternative location, with and without the EDR-R incentives • Describe how the impact of the EDR, and other incentives, would keep your company from otherwise relocating or closing its SCE-served business operations.

7. Privacy of Business Case Information • SCE will protect the information provided in customer business cases, and will only use it to determine a company’s eligibility for the EDR discount • SCE’s EDR discount program could be subject to review by the California Public Utilities Commission • If such a review occurs, information relevant to the screening and enrollment of each EDR customer may be subject to discovery under Commission rules pursuant to protections that ensure confidentiality of proprietary and market-sensitive information

8. First Steps – Who To Call • Riverside County Janel HuffOffice: 626-633-3304 Cell: 951-505-6667 • San Bernardino County Stephanie YoungOffice: 909-357-6536 Cell: 909-238-8076 • Orange County, Tod Sword Office: 310-608-5215South Bay and Westside Cell: 310-508-2166 • Northern Region Laurel ShockleyOffice: 661-257-8217 Cell: 213-479-8857 • San Gabriel Valley/ Georgina Escamilla Office: 626-633-3308Gateway Cities Cell: 562-618-8392

9. BACK-UP SLIDES

10. Existing EDR Customers How will the new EDR decision affect existing EDR customers? • Existing EDR customers will not be affected by the EDR decision • Existing EDR customers may not renew their EDR contracts • Existing customers will only be eligible for the revised EDR if applied to 200 kW of new load not covered under their existing EDR

11. Liquidated Damages In the case of misrepresentation or fraud, the customer's agreement shall be terminated • Damages will be 200% of the cumulative differences between (i) the bills calculated under the EDR tariff to the date of termination and (ii) bills calculated under the OAT • If the customer terminates the agreement, if SCE terminates for non-payment, or if the business relocates to a different location, the company will pay liquidated damages equal to (i) the amount billed under the EDR agreement minus (ii) a “proxy” bill calculation based on a declining discount starting at 20% of the customer’s OAT bill in Year One with that annual discount reduced by 4% each year thereafter. Liquidated damages do not apply when a contract is terminated because of business closure or reduction in load without relocation