Rate Policy Discussion

1. Rate Policy Discussion Presentation to Review Panel November 1, 2013

2. Rate Policy: Role of Review Panel ORD 123256, Section 4: • Assess the adequacy of City Light’s financial policies • Review changes to City Light's rates • Assess City Light's rate design to ensure that rates send the appropriate signals to customers to use electricity efficiently • Assess City Light's implementation of marginal cost allocation among customer classes

3. Rate Policy Review: Goals Transparency Predictability • Predictability: rates/bills should be predictable. • Simplicity/transparency: Rates are understandable and changes are implemented in an orderly way. Financial Equity Stability Price Signal • Price signals: rates should provide meaningful price signals that ratepayers can observe and act on, to encourage consumption awareness and conservation. • Equity: Everyone should pay their true cost of service. • Financial Stability: Rates should collect the full revenue requirement with a reasonable level of certainty.

4. Policy Issues Matrix 1 Rationale For Change

5. Policy Issues Matrix 2 Rationale For Change

6. Fixed Energy Demand Fixed and Variable Components of Costs and Revenues Revenue Current $ 800 Revenue Proposal Costs $ 700 Energy Energy Energy $ 600 Energy Costs $600 79% 93% 54% 54 % $ 500 $500 $ 400 $400 $ million Fixed costs still recovered by energy charges $ 300 Distribution $300 Distribution & Other and Other $ 200 Fixed Costs $200 46% 46 % Demand 13% $ 100 Demand 4% $100 BSC & Infrastructure 8% $ 0 BSC 3%