1. 1 Case 9154: Overview of BGE’s Energy Efficiency Program September 29 Filing Presented to Stakeholders October 22, 2008 With October 29, 2008 Revisions

2. 2 BGE Addresses Commission Concerns u Filing proposes significantly enhanced programs and energy impacts at lower costs and improves on explanations of costs and delivered value u Contribution to EmPOWER Maryland Targets –An almost 200% increase in projected 2009 – 2011 energy impacts (greater impacts for residential customers and addition of I&C programs) –2.6 million MWh reduction by 2015 which represents an 8% reduction from 2007 –478 MW reduction by 2015 providing for 1700 MW or greater reduction for EE&C, Demand Response and AMI/dynamic pricing – 24% reduction from 2007

3. 3 BGE Addresses Commission Concerns: Improved Cost Effectiveness u Refinements made due to completion of RFP process and modifying program designs including increasing customer incentives and minimizing administrative costs –BGE administration reduced 35% and outside services by 43% –Increased incentives by 27% - 62% of all program costs are for incentives (’09-’11) –11% are for customer education and awareness u Aggregate TRC is 2.24 u Life cycle cost of 2.3 cents per avoided kWh u Benefits do not include price mitigation, bidding EE&C into PJM, impacts due to general awareness program, energy efficient transformers, programmable thermostats in PeakRewards SM Program

4. 4 Addressing Commission Concerns: Broad, Innovative Programs, Increased Focus on Education u BGE expanded low income program, increasing projected number of participants by 52% - an average of 1525/year vs ~400 for the gas Conservation Home Improvement Program (CHIP) u Multifamily Program added which can address low and moderate income customers u Revised Retrofit to focus on Home Performance with ENERGY STAR –Reduced budget by 50% while increasing impacts (2009-2011) u Added Advanced lighting Package for new construction u Addition of General Awareness Program to supplement program-specific marketing u Commitment to coordinate with other utilities, MEA, OPC to ensure State consistency where appropriate and complementary programs u Commitment to modify, refine programs and have them evolve over time

5. 5 Other Changes from January 30 th Proposal u Eliminated some less cost effective measures including ENERGY STAR® dishwashers, ENERGY STAR freezers, ENERGY STAR dehumidifiers, convection ovens, gas boilers and ground source heat pumps –BGE will promote these ENERGY STAR qualified products under the General Awareness program u BGE proposes a more aggressive ENERGY STAR qualified CFL plan using a flexible incentive strategy and promotion of specialty bulbs –Goal is to promote less frequently purchased CFLs and help reduce free ridership –BGE has CFLs through 2015 with the understanding that as technologies are phased out they will be replaced with more efficient lighting technologies (LED, etc.) u Became more conservative with assumptions –Net to Gross Ratio (NTGR) lowered from 1.0 »ENERGY STAR Products and HVAC - 0.8 »Home Performance with ENERGY STAR, Retrofit, New Construction, Small Commercial and Multifamily - 0.9 –CFL impacts adjusted from 71 kWh/CFL/year to 45 kWh/CFL/year

6. 6 BGE EE&C Program Summaries

7. 7 Residential Lighting & Appliance Program u Goals: Increase awareness and sales of ENERGY STAR qualified lighting and appliances u Incentives: markdowns (discounts via manufacturers), buydowns (discount via retailers), and coupons offered so all retailers, customers can participate –Innovations include negotiating incentives on a SKU-by- SKU basis and in-store instant rebate coupons u Sample incentives –ENERGY STAR Fixtures - Hardwired and Portables - $10.00 –ENERGY STAR Clothes Washer (MEF up to & including 2.0) - $50.00 –ENERGY STAR Refrigerator - $50.00 –ENERGY STAR Room AC (at least 10.8 EER) - $25.00 –2nd Refrigerator/Freezer Turn-In - $50.00

8. 8 Residential Gas and Electric HVAC Program u Goals: Increase the sales of high efficiency HVAC equipment and improve the operating efficiency of HVAC equipment through quality installation verification (QIV), proper tune-up and duct sealing services u Implementation via –QIV trained HVAC contractors –Broader group of contractors who promote program –Promotion and rebates direct to customers u Measures include gas furnaces

9. 9 Residential Gas and Electric HVAC Program - Incentives MeasureIncentive Gas Furnace Tier 1: >92% AFUE$300 Gas Furnace Tier 2: >92% AFUE Electronically Commutated Motor (ECM) or equivalent $400 Central A/C Tier 1: 14.5 SEER, 12 EER$175 Central A/C Tier 2: 15 SEER, 12.5 EER$350 Air Source Heat Pump Tier 1: 14 SEER, 11.5 EER, 8.5 HSPF$200 Air Source Heat Pump Tier 2: 15 SEER, 12.5 EER, 8.5 HSPF$400 Quality Installation Verification$200 HVAC Repair & Diagnostics$75 Duct Sealing$200

10. 10 Residential New Construction Program u Goal: Accelerate the market penetration of ENERGY STAR qualified homes in BGE’s service territory u Implementation via homebuilders, HERS raters and homebuyers u Incentives –Innovation with Advanced Lighting Package (ALP) »Minimum of 60% ENERGY STAR qualified hard-wired fixtures and 100% ENERGY STAR qualified ceiling fans installed »$325 per ALP in attached homes, $525 per ALP in detached homes –Higher incentives for higher efficiencies »$400 for HERS Index 85 »$800 for HERS Index 80 »$1000 for HERS Index 75 –Incentives for ENERGY STAR qualified model home –Cooperative advertising opportunities

11. 11 Home Performance with ENERGY STAR Program u Goal: Motivate residential customers to use a comprehensive, whole-house approach to reducing energy consumption when considering home improvements u Residential Retrofit program revamped to focus on Home Performance with ENERGY STAR (HPwES) –The audit report will provide the customer with recommendations for upgrades and information about available financing and cash incentives –Initial strategy is to target high energy use customers and homes built pre-1980

12. 12 Home Performance with ENERGY STAR Program u Quick Home Energy Check-Up –Promoted for those unable or unwilling to invest in a full HPwES audit –Positioned as an economy audit that can provide very helpful information for a nominal $40 fee »Fee is waived if customer agrees to have measures installed by the auditor during the audit - up to six CFLs, faucet aerators, efficient flow showerheads, pipe insulation, and water heater blankets on electric water heaters –Unlike HPwES, this Check-Up is projected to not include assessment of infiltration and heat loss –On-Line Audit Service also available at a much lower cost than previously estimated

13. 13 Home Performance with ENERGY STAR Program u Incentives –Contractors »Reimbursement for up to 75% of the cost of BPI certification and accreditation »An incentive for production based on the value of the jobs provided, typically 5% of the total job value up to a maximum of $300 »Advertising Partnership with participating contractors through matching funds for cooperative advertising and coordinating direct mail campaigns –Customers »A direct incentive of 15% of the cost of eligible measures installed in a pre- approved home performance project, up to a limit of $1300 or, »BGE will consider offering low-interest rate financing, third party reduced interest loans to finance eligible measures u Future potential enhancement to address low and moderate income customers: Assisted Home Performance with ENERGY STAR –Customers who qualify under this program would have access to special incentives that could provide up to 50% of the costs of pre-approved cost effective home performance improvements

14. 14 Multifamily Program - Summary u Goal: Jointly target landlords and renters to address the issue of how to motivate landlords to make changes for their renters and for renters to make improvements to homes they do not own u Applicable property types: –Publicly owned and operated (Baltimore City Department of Housing & Community Development and other public agencies) –Privately owned, but publicly assisted (state and federal) –Privately owned and operated without government assistance u The Multifamily Program will target property owners and managers of multifamily residential facilities with four or more dwellings per building u Some cross over with the Low Income and Small Commercial Programs –The same trade allies/contractors working in small commercial businesses will also work in multifamily properties

15. 15 Multifamily Program u Energy Audits –Property owners and managers will receive an initial visit from the implementation contractor who will perform a free basic energy audit –Common areas will be inspected as will be, if possible, at least one unit within the building to identify potential for prescriptive measures u Incentives for common area measures will be set consistent with the Small Commercial Program –Incentives will generally be based on 50 -75% of the incremental costs of the energy-efficient equipment with the following initial incentive levels: »T12 upgrade to HP-T8 lamps and electronic ballast - $10/fixture »Hard-wired compact fluorescent fixture, new or retrofit kit - $10/fixture »New compact fluorescent fixture with dimmable ballast - $40/fixture »Occupancy sensors: wall mount - $25/sensor and remote mount - $75/sensor »LED Exit signs - $25/sign

16. 16 Multifamily Program – Implementation Strategies u Coordination with the Maryland Department of Housing and Community Development, the local BOMA chapter, the Maryland Multi-Housing Association, the Institute of Real Estate Management, and the Mid-Atlantic chapter of the Affordable Housing Management Association, among others u Future enhancement may offer additional assistance for low and moderate income households –This enhancement may be targeted toward customers that are up to a set percent of the poverty line such as 250%

17. 17 Residential Low Income Program u BGE increased the aggressiveness of the Commission’s approved BGE low income program as directed in the August 18 Order u Participation is projected to rise by 50% to 4,574 customers over three years, compared to what was previously proposed –This provides an annual average of 1,525 low income participants and shows a significant increase from the current gas only Conservation Home Improvement Program (CHIP) which is averaging 300-400 program participants annually

18. 18 Small Commercial Program u Goal: Address energy efficiency opportunities in both the retrofit and time dependent markets for nonresidential customers with a billing demand of less than 60 kW monthly u Direct install track –Features an 80% incentive level (based on total job cost) –Designed to attract customers who have existing functioning equipment that is inefficient –This incentive level is necessary as these customers would not otherwise replace their functioning equipment u Prescriptive Track –The second track features a prescriptive incremental cost contribution of 50% to 75%

19. 19 Small Commercial Program – Prescriptive Incentives u T12 upgrade to HP-T8 lamps and electronic ballast - $10/fixture u New High efficiency troffer fixture with HP-T8/T5 - $20/fixture u New High efficiency low glare troffer fixture with HP-T8/T5 - $25/fixture u New indirect low glare troffer fixture with HP-T8/T5 - $35/fixture u New 4’ strip fixture with reflector with HP-T8/T5 - $20/fixture u New 8’ strip fixture with reflector with HP-T8/T5 - $20/fixture u Hard-wired compact fluorescent fixture, new or retrofit kit - $10/fixture u New compact fluorescent fixture with dimmable ballast - $40/fixture u Occupancy sensor: wall mount - $25/sensor and remote mount - $75/sensor u Daylight dimming - $40/ballast u LED Exit signs - $25/sign u Premium efficiency 1 – 50 HP motors - $45 – $220 depending on motor size u Vending machine occupancy controls –Refrigerated beverage machine - $75/control –Snack machine - $30/control

20. 20 General Awareness and Customer Education u General awareness communication efforts will complement BGE program-specific marketing u The communication and customer education will reach broadly with messages about the importance of energy efficiency, the no-cost and low-cost ways to be energy efficient at home and at work, and the informational and other resources available to them u The general awareness effort will leverage resources such as ENERGY STAR® –ENERGY STAR tools and resources include the Do-It-Yourself (DIY) Guide to ENERGY STAR Home Sealing, the ENERGY STAR Activity Book, ENERGY STAR fact sheets and co-brandable advertisements and materials –BGE also will consider other resources including videos and podcasts such as the ENERGY STAR Office Educational Video, the ENERGY STAR qualified programmable thermostat podcast and the "At Home with ENERGY STAR" podcast u BGE will coordinate with MEA and other Maryland utilities to further leverage dollars spent on awareness u BGE projects spending $7.5 million during 2009 – 2011 and $13.5 million by 2015

21. 21 Efficiency Charge Covered By Purchase Of 6 CFLs All Electric Customer Monthly Bill - 2015 Impacts Net of Efficiency Charge 6 CFLs 12 CFLs Energy Star Clothes Washer Energy Star Refrigerator 12 CFLs Energy Star Clothes Washer Energy Star Refrigerator 18 CFLs Energy Star Clothes Washer Energy Star Refrigerator HVAC Tune-Up Duct Sealing 18 CFLs Energy Star Clothes Washer Energy Star Refrigerator HVAC Tune-Up Duct Sealing 18 CFLs Energy Star Clothes Washer Energy Star Refrigerator 14 SEER Heat Pump with QIV Home Performance w/ ENERGY STAR 18 CFLs Energy Star Clothes Washer Energy Star Refrigerator 14 SEER Heat Pump with QIV Home Performance w/ ENERGY STAR Note: 2015 is the peak efficiency charge.

22. 22 Gas/Electric Customer Monthly Bill Impacts in 2015 Net of Efficiency Charge 7 CFLs 12 CFLs Energy Star Clothes Washer Energy Star Refrigerator 12 CFLs Energy Star Clothes Washer Energy Star Refrigerator 18 CFLs Energy Star Clothes Washer Energy Star Refrigerator HVAC Tune-Up Duct Sealing 18 CFLs Energy Star Clothes Washer Energy Star Refrigerator HVAC Tune-Up Duct Sealing 18 CFLs Energy Star CW Energy Star Refrigerator 92% AFUE Furance with QIV Home Performance w/ ENERGY STAR 18 CFLs Energy Star CW Energy Star Refrigerator 92% AFUE Furance with QIV Home Performance w/ ENERGY STAR Note: 2015 is the peak efficiency charge.

23. 23 Residential New Construction Program Impact On Electric Customer Monthly Bill Impacts in 2015 Net of Efficiency Charge Residential New Construction Program - features effective insulation, high- performance windows, tight construction and ducts, efficient HVAC, efficient lighting and appliances and third-party verification. Note: 2015 is the peak efficiency charge.

24. 24 Multifamily Program Impact On Electric Customer Monthly Bill Impacts in 2015 Net of Efficiency Charge Residential Multifamily - Assumes tenant installs 2 compact fluorescent light bulbs, faucet aerator, low-flow shower head and a water heater blanket. Note: 2015 is the peak efficiency charge.

25. 25 Large I&C Prescriptive Program u Offers a simplified method to make efficient choices on pre-defined energy efficiency measures without requiring complex analysis or participation rules u Provides incentives to help improve the efficiency of existing facilities as well as to increase efficiency at the time of new equipment purchases, facility modernization, and new construction u Also provides technical services to help conduct the analysis and other project development work needed to justify your investment decision

26. 26 Large I&C Prescriptive Program u BGE will work with key trade allies such as design professionals, distributors, installation contractors, and Energy Service Companies (ESCO’s), etc. to help educate and promote participation u Incentives vary for measures listed to the right and typically are 50% - 75% of incremental costs e.g. $10 per T-8 fixture and $45 to $220 for motors T-8 and T-5 lamps with electronic ballast replacing T-12 lamps Hard-wired compact fluorescent fixtures Occupancy controls LED exit signs Metal halide fixtures Day lighting dimmers Vending machine controls High efficiency ice makers Freezer anti sweat controls Motors (1-200HP) Unitary HVAC equipment Variable frequency drives on HVAC applications T-8 and T-5 lamps with electronic ballast replacing T-12 lamps Hard-wired compact fluorescent fixtures Occupancy controls LED exit signs Metal halide fixtures Day lighting dimmers Vending machine controls High efficiency ice makers Freezer anti sweat controls Motors (1-200HP) Unitary HVAC equipment Variable frequency drives on HVAC applications

27. 27 Large I&C Custom Program u Offers incentives for more complex and site-specific measures and projects for energy efficiency technologies, or multi-measure projects, that do not fall under the Prescriptive Program, ranging from complex commercial HVAC projects to industrial process improvements u Custom projects must be able to show specific and verifiable energy savings and costs, typically developed by a third-party firm u Any measure that would improve electric energy efficiency will be eligible provided that it is cost effective –Incentive levels will be project specific based on prescribed calculations u BGE anticipates co-funding a limited number of studies –Feasibility studies, investment-grade energy audits and design studies –Anticipate co-funding 50% of pre-approved study cost with a maximum co-funding amount of $15,000 per study

28. 28 Large I&C Retro Commissioning Program (RCx) u Helps identify and implement low cost tune-ups and adjustments that improve the efficiency of existing buildings’ operating systems by returning them to intended operation or design specifications –Focus is on building controls and HVAC systems –RCx involves the assessment of building performance and improvements through better use of energy systems controls, cleaning and calibration of equipment, and installation of low-cost measures such as ventilation and lighting controls u RCx services will be delivered through a network of commissioning providers trained in program protocols and participation processes –For smaller facilities, RCx providers will conduct a targeted assessment of areas with substantial energy savings opportunities such as packaged HVAC units –Larger facilities will be eligible to receive a more comprehensive assessment of building systems and controls u BGE will provide cost sharing for the RCx assessment and study, and up to a per-project cap of $10,000 –Implementation incentives will be offered on a dollars per kWh basis covering some of the incremental cost of implementing recommended energy efficiency measures

29. 29 BGE’s EmPower MD 2011 Energy & Demand Achievements

30. 30 BGE’s EmPower MD 2015 Energy & Demand Achievements

31. 31 Additional Impacts on EmPOWER MD Goals (Includes 2008 Impacts) Program / Impact 2011 Goal (GWh) 2015 Goal (GWh) General Awareness5494 PeakRewards Thermostats91177 EE TransformersNA Fast Track Programs99 Total Additional Impacts244369 Total + Line Losses (6.7%)260394 Original Energy Impacts1,0592,654 Revised Energy Impact Total1,3193,048 Revised % of EmPOWER MD Goals64%71% Note: Analysis for illustrative purposes only

32. 32 Program Costs 2009 - 2011

33. 33 Program Cost Breakdown Mass Market & Large I&C

34. 34 Comparison of Mass Market Program Cost Breakdown 2009-2011)

35. 35 Projected Annual Costs 2009 - 2015

36. 36 Separation of Gas and Electric Cost Methodology u Only developed gas costs for the Home Performance, New Home, Low Income and HVAC programs (Gas Furnaces) u Gas Cost only included EM&V, Outside Services and direct gas furnace incentives –Utility Administration, Marketing and General Awareness were excluded because these would be required anyway for the electric programs u Estimated EM&V and Outside Services gas costs were based on an equivalent gas and electric BTU savings u Electric program costs were total program costs minus the gas program costs

37. 37 Mass Market EE Charges

38. 38 Residential Gas EE Charges

39. 39 Revenues Offsetting EE&C Costs u Estimating RPM price mitigation value –Used same approach used for calculating demand response data –$169.2 million for 2012 – 2015 (nominal dollars) »$701.3 million for 2012 – 2022 u Estimate revenue from RPM –This is pending calculation – delayed due to some new information from PJM u Estimating energy price mitigation –Used ACEEE Energy Efficiency 2/08 report which has energy mitigation sat 2 mils/kWh for a given year (The First Fuel For A Clean Energy Future. Resources for Meeting Maryland’s Electricity Needs) and 2007 energy usage of 33 million MWh –In 2015, energy price mitigation estimated at $66.2 million Note: Analysis for illustrative purposes only

40. 40 Cost Effectiveness Tests - Wholesale

41. 41 Lifecycle Costs per kWh / kW

42. 42 BGE Avoided Cost Methodology u Future prices were used in calculating BGE’s avoided cost numbers and did not include T&D –Energy »NYMEX on-peak and off-peak forwards for PJM Western Hub, through 2013, were as of July 28, 2008 »2014 - 2022 pricing was increased for inflation by 2.5% annually »Forwards were adjusted for premise-level pricing by adding congestion, load shaping, ancillary services and line loss costs –Capacity »RPM results are through 2011/2012 »2012/2013 prices assumes net cost of new entry (net CONE) »2014/2015 – 2022/2023 pricing was increased for inflation by 2.5% annually »RPM results (actual and projected) were adjusted for premise-level pricing by adding line loss and PJM’s Forecast Pool Requirement costs u The data included values for summer and non-summer on-peak and off- peak periods. Since BGE used PJM data, the time periods were per PJM’s definitions.

43. 43 BGE Avoided Cost Assumptions

44. 44 Large I&C Penetration Assumptions

45. 45 Mass Market Penetration Assumptions (Revised)

46. 46 Benchmarking: BGE First Year Cost per kWh vs. 2006 National Results (Mass Market & Large I&C)

47. 47 Benchmarking: 2009 BGE Residential Energy Savings Compared to 2006 National Residential Energy Savings

48. 48 Benchmarking: 2009 BGE Non-Residential Energy Savings Compared to 2006 National Non-Residential Energy Savings

49. 49 A Coordinated / Harmonized Effort u BGE recognizes the need to ensure a complementary strategy exists across all programs to maximize participation and minimize stakeholder confusion –For example, the Residential HVAC program will also interact with the New Construction, Home Performance with ENERGY STAR and Low Income programs u BGE supports statewide coordination, harmonized and having complementary programs with MEA whenever possible u Programs will be refined and evolve as program results and market/customer information are gathered –BGE supports a separate proceeding to consider fuel switching u BGE encourages focus on getting core set of programs approved by the Commission and ensuring implementation latitude