1. KMSA Spring Meeting Covington, KY April 24, 2008 Energy Efficiency From A G&T Coop Perspective Jim Lamb East Kentucky Power

2. 2 Which Word Is More Important – “Energy” Or “Efficiency”? The definition of efficiency is as follows – accomplishment of or ability to accomplish a job with a minimum expenditure of time and effort: The Button Up program increases homeowner efficiency. Or the ratio of the work done or energy developed by a machine, engine, etc., to the energy supplied to it, usually expressed as a percentage.

3. 3 Air Conditioning Is Increasing Its Efficiency

4. 4 But Efficiency Isn’t Limited To Retail Use The concept of efficiency can be applied to the other side of the meter. More efficient, generation, for example, means the same MW output but at a lower cost

5. 5 The Concept Of Efficiency – Type of Generation Technology Heat Rate Production (Btu/kWh) Efficiency Cost GAS@ $10/mmBtu GE LMS100 8,500 40% 85 $/kWh GE 7EA 10,600 32% 106 $/kWh ABB 11N2 11,500 30% 115 $/kWh * Combined Cycle 6,000 57% 60 $/kWh COAL@ $2/mmBtu CFB 9,600 36% 19 $/kWh PC 9,800 35% 20 $/kWh * SCPC 8,600 39% 17 $/kWh * Not in EKPC Fleet

6. 6 Efficient Pricing The idea of efficiency very much extends to how electricity is priced –EKPC’s price to its 16 distribution members –Distribution coop’s price to its retail members Traditionally, prices have been set by taking total cost and dividing by total kWh sales – this is what is called “average cost” pricing Fuel Adjustment Clause (FAC) is used like a broom, to sweep up anything that average cost pricing doesn’t cover All fuel markets are in turmoil today, resulting in an EKPC FAC that is both high and volatile –Coal –Natural Gas –Wholesale Power Market

7. 7 What Does Efficient Pricing Mean? Here’s an example of good intentions yet a bad outcome – extreme energy conservation Why is the outcome bad? Because of the way that prices are structured Efficient pricing is the idea that extreme energy conservation can have good intentions and a good outcome Efficient pricing also is the idea that the FAC has very little to sweep up

8. 8 Hourly Market Power Prices

9. 9 So What Are EK And Its Members Doing Futurely? Retail Efficiency –Envision –Contemplating An RFP For Energy Efficiency Generation Efficiency –Direct Load Control –GE LMS 100 Combustion Turbines Price Efficiency –RTP Pilot –Rate Design Task Force –Have Filed New (Higher) Cogen Tariff Not Yet Approved

10. 10 One Thing Is Unequivocally True About Energy Efficiency – EKPC (the G&T) Cannot Embrace The Concept Alone, Nor Can Its Members Embrace The Concept Alone. We Affect Each Other.