Smart Grid: What’s In It for the Customer? Wharton Energy Conference 2010

1. Smart Grid: What’s In It for the Customer?Wharton Energy Conference 2010 Wayne Harbaugh , Vice President, Pricing & Regulatory Services

2. Key Challenges and Opportunities Confronting Our Industry • Increasing demand and rising energy costs in the long term • Significant investments needed in new and replacement infrastructure • Resource adequacy and transmission congestion • Tougher environmental regulations • Ability to accommodate growing levels of intermittent, renewable energy • Emergence of plug-in electric vehicles (EVs) • Emergence of Smart Appliances that move energy use from one period to another Smart Grid addresses each of these challenges …

3. BGE Load and Energy Costs Vary Dramatically by Hour

4. BGE PeakRewardsSM Program • Customers allow “smart cycling” of their air conditioning in exchange for annual bill credits • Choice of “smart” thermostat or outdoor switch • Choice of three levels of cycling – 50%, 75%, or 100% -- and up to two over-rides per summer • Ability to remotely adjust temperature settings • Over 306,000 residential customers enrolled • Produces the equivalent capacity of building a large new power plant at a fraction of the cost • Will move to two-way communications via Smart Grid Cost Comparison - PeakRewardsSM: $165 per kW - New Peaking Plant: ~$1,000 per kW

5. Energy Efficiency & Conservation Initiatives A portfolio of initiatives to lower energy bills and increase efficiency: • Efficient lighting and appliances • Heating and cooling • Home energy audits and retrofits • New construction • Targeted low-income programs • Custom solutions for large commercial accounts • Significant opportunities to reduce energy waste Cost Comparison: - Cost to reduce consumption: 2-3 cents per kwh - Cost to supply more power: 9-10 cents per kwh

6. Smart Grid: A Transformational Initiative Driving improvements in utility operations and energy delivery

7. Smart Grid: A Transformational Initiative Supporting new consumer products and pricing structures to enable energy reductions and cost savings

8. 2008 - 2010 Smart Energy Pricing Pilot: Measuring Customer Response to Price Signals • 1,000 customers randomly selected • Day-ahead notification of a peak event • Rebates offered for energy reductions during peak periods (2 p.m. to 7 p.m.) • Test groups included: • Price incentive only • Price incentive with in-home display (Orb) • Price incentive with Smart Thermostat and Orb • Advanced meters installed to record customers’ usage on an hourly basis to calculate bill rebates Ambient Orb

9. Dynamic Peak Pricing (aka DPP) Weekdays (excluding Holidays) Pilot Pricing All – in Rate* Critical- $1.30425 Peak $0.14425- Off-Peak- $0.09425 * Includes generation, transmission and delivery $1.30 $0.14 $0.09

10. Peak Time Rebate: Weekdays (excluding Holidays) A Mirror Image of DPP Rate • Schedule R summer rates are $0.14 / kWh for all summer hours • Up to 12 critical peak days will be called by 6 p.m. the prior day • Customers who use less during the critical period (2–7 p.m.) on any critical peak day will receive a rebate. Two levels being tested: • $1.75/kWh • $1.16/kWh

11. The SEP Pilot Demonstrated Significant Consumer Interest and Willingness to Adjust Consumption • Customers respond emphatically to pricing signals, reducing consumption by approximately one-quarter to one-third • Average customer savings was $115 • More than 98% reduced their bills

12. SEP Customer Survey Results On a scale of 1 to 5, where 1 is "Very Dissatisfied" and 5 is "Very Satisfied", please rate your overall satisfaction with the pilot program. (Select one option) Over 93% of customers were satisfied with Smart Energy Pricing; 98% - 99% wished to continue participation

13. Smart Grid Benefits in Multiple Dimensions • Lower customer bills • Bill credits through Smart Energy Pricing • Empowered consumers managing energy use • Improved reliability • Automated outage reporting / faster restoration • Improved customer service • Virtually eliminates estimated bills • On-demand meter reads • Support for In-Home Networking / Displays • Web Portal • In-Home Displays • Reduced peak load • 500MW through Smart Energy Pricing • 1,700 MW total (~25%) • Reduced O&M • Eliminates manual meter reading • Reduces truck rolls for turn on/off of service • Enhanced storm operations • Better capital planning through improved gas and electric system models • Avoided Cap-Ex A communications network that can be used to provide future smart grid functions such as: • Automated, self-healing network • Remote fault indication • 2-way capacitor control • Reduction of system line losses • Voltage optimization and efficiency gains • Reduced carbon emissions • Lower energy consumption • Reduced need for power plants • Peak load reductions • Infrastructure that can support renewable generation • Wind • Solar • Infrastructure than can support smart charging of Plug-in Hybrid Electric Vehicles

14. Smart Grid: Over $2.6 Billion in Consumer Savings Life-cycle savings projected to exceed $2.6 billion – several times greater than deployment cost of $500 million! Additional downstream savings likely from reduced line losses and voltage optimization, reduced carbon emissions, and integration with PeakRewardssm!

15. Full Case Filing History • More info on MD PSC Case 9208 (BGE’s Smart Grid Case) available on PSC’s website • http://webapp.psc.state.md.us/Intranet/Casenum/CaseAction_new.cfm?RequestTimeout=500?

16. Q&A