1. March 30, 2004 CONFIDENTIAL AMR Benefits and Costs – Benchmarks and Examples Presentation at CB Associates Seminar Sanjoy Chatterjee schatterjee5@nyc.rr.com (646) 732-2493

2. 2 Confidential –- March 30 th, 2004 Today’s Discussion Types of business cases Operational Demand Response (e.g., CA) Benefits – Industry Experience and Benchmarks Cost Categories

3. 3 Confidential –- March 30 th, 2004 Operational Business Case Utility Operational Savings $ per meter per month AMI Capital Investment AMI Operations & Maintenance NET SHAREHOLDER BENEFITS Costs Benefits

4. 4 Confidential –- March 30 th, 2004 Demand Response Business Case Utility Operational Savings $ per customer per month Demand Response Savings AMI Capital Investment AMI Operations & Maintenance NET RATEPAYER BENEFITS Costs Benefits

5. 5 Confidential –- March 30 th, 2004 Operational Benefits Beyond On-Cycle Meter Reading

6. 6 Confidential –- March 30 th, 2004 Daily Usage Screen: Off-Cycle Reads and Customer Service

7. 7 Confidential –- March 30 th, 2004 Revenue Mgmt: Unauthorized Usage Screens

8. 8 Confidential –- March 30 th, 2004 Revenue Mgmt: Diversion Detection at KCPL

9. 9 Confidential –- March 30 th, 2004 Other Revenue Management and Meter Operations Discovery of electrical problems in field: UI found significant increased revenue during the installation phase Improved meter accuracy leads to revenue recovery UE estimated meter accuracy improvement of 0.7% - older meter population than average KC Retrofit center tested 5000 random meters before and after retrofit process and found an average improvement in accuracy of 0.25% 3-digit demand registration improvement Identification of dead meters earlier leads to revenue recovery KCPL has ~0.1% of its meters die in field every year & it takes 4 months to identify and replace Reduce number of meters in inventory Reduction in inventory costs Less training Reduction in meter repairs, manpower, and parts

10. 10 Confidential –- March 30 th, 2004 T&D Operations: Real Time Read Screen

11. 11 Confidential –- March 30 th, 2004 1 - Lights Out Call 2 - Query Meter 3 - Meter reports ON 4 - Assisted to check breakers Customer CSR Meter Outage Management: Instrumenting the Distribution Network

12. 12 Confidential –- March 30 th, 2004 Outage Restoration Outage Flag Outage Information System WMS Dispatch Trouble Crew Meter Restoration Flag NO YES Auto-dialer Outage Event

13. 13 Confidential –- March 30 th, 2004 Transformer Load Monitoring Transformer Load Duration Curve + +

14. 14 Confidential –- March 30 th, 2004 Industry Benchmarks Meter Reading Labor Supervision Vehicles Injuries Equip and new meters Utility Operational Savings Billing & Customer Service Call center Re-reads Cash flow Revenue Protection $0.70 $0.26 $0.29 $2.87 Source: North American Advanced Metering AMR, Frost & Sullivan Off-Cycle Reads Move-in/ move-out Re-reads Meter Operations Avoided testing Avoided replacement Accuracy $0.56 $0.60 Outage Mgmt Singe No- Lights Trips Restoration $0.36 Gross savings in $ per meter per month

15. 15 Confidential –- March 30 th, 2004 Demand Response Benefits

16. 16 Confidential –- March 30 th, 2004 The Goal of Dynamic Pricing Avoid the need to construct additional peaking power plants or to make expensive wholesale power purchases during price spikes Top 1% of the hours in PJM Top 10% of demand Top 90% of prices

17. 17 Confidential –- March 30 th, 2004 California Statewide Pricing Pilot – Background California joint agencies demand response proceeding –PUC, Energy Commission, and Power Authority –Rulemaking 02-06-001, begun June 2002 –Establishing state policies for advanced metering and demand response Goal: avoid a repeat of the 2001 Energy Crisis Source: Mike Messenger, California Energy Commission Projected Reserve Margins Rolling Blackouts

18. 18 Confidential –- March 30 th, 2004 California Rulemaking Progress Three subgroups –WG1: Policy –WG2: Large customer programs (>200 kW) –WG3: Small commercial and residential programs Decisions to date –Mar 2003: Adopted statewide goal of meeting 5% of peak demand via dynamic pricing by 2007 –Jun 2003: Established regular dynamic pricing tariffs for large customers –Jun 2003: Ordered implementation of Statewide Pricing Pilot –Nov 2003:Ordered development of business case methodology, including utility filings due March 31 regarding 2004 activities to meet 2007 goal

19. 19 Confidential –- March 30 th, 2004 Statewide Pricing Pilot Overview Statewide –Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison –Sample of 2,500 customers statistically representative of the entire state –Residential and small commercial customers Goals –Measure peak demand reductions –Measure total consumption reductions –Assess customer preferences via participant experiences and market surveys Customers put in three primary treatment groups –Time-of-Use (TOU) Peak (2-7 pm weekdays) and off-peak Peak to off-peak price ratio about 2:1 –Critical Peak Pricing-Fixed (CPP-F) Peak (2-7 pm weekdays) and off-peak Much higher price – about 5x higher – during critical peak period (2-7 pm) on up to 15 days a year, with day-ahead notification –Critical Peak Pricing-Variable (CPP-V) Three differences from CPP-F – Critical peak period varies from 1 to 5 hours from 2-7 pm – Notification varies from day ahead to 4 hours ahead – All customers have smart thermostat programmed for automated response

20. 20 Confidential –- March 30 th, 2004 Residential Dynamic Pricing Results: Price Elasticity –Fifty-six analyses and projects in the past 25 years –Average of -0.30 own-price elasticity Equals 30% usage reduction for 100% price increase (off-peak to peak) –California’s pilot providing one more data point Residential Own-Price Elasticities Recorded in Experiments/Programs More peak demand reduction -0.9 -0.8 -0.7 -0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0 1975198019851990199520002005 Average result =-0.30 California data U.S./international data Source: King and Chatterjee, Public Utilities Fortnightly, July 1, 2003

21. 21 Confidential –- March 30 th, 2004 Residential Dynamic Pricing Results: Peak Demand Reduction –Results of 30 residential time-of-use and critical peak pricing programs –Results expressed as a percentage of customer’s total demand under non- time-based pricing Average reduction 24% More peak demand reduction

22. 22 Confidential –- March 30 th, 2004 Statewide Pricing Pilot Results - Residential Rates went into effect July 1, 2003 12 events called during summer 2003 Analysis by Charles River Associates (contractor to joint utilities) completed January 16, 2004 (draft report; final data may differ) Performance MeasureAverage from the Literature California SPP Result Price elasticity (mean own price)-0.30CPP-F: -0.27 CPP-V: -0.53 TOU: -0.24 Peak demand reduction – TOU20%24% Peak demand reduction – CPP without automated response 24%20% Peak demand reduction – CPP with automated response 44%49% Total usage reduction (conservation effect)4%CPP-F: 6% CPP-V: 28% TOU: 9%

23. 23 Confidential –- March 30 th, 2004 Meters/Modules Field Logistics Network Equipment Network Installation IT Interface Design Total Upfront Capital System Operations 3 rd Party Comm Network Ops Network Maintenance Endpoint Replacement Other Utility Costs TCO Meters and modules based on retrofit capabilities Installation, retrofit, cross-dock Network equipment and field installation, including site preparation (where needed) Utility IT team to build interfaces to different deployment systems Operating data collection systems, data management, process management, manual reads (where needed) Leased lines, wireless, telco, other backhaul Engineers, Technicians, Site leases, energy costs Maintenance, repairs and upgrades Replacement of failed meters and modules in the field Utility in-house project team, overhead, facilities, vehicles, G&A *Sales taxes and property and use taxes ignored Total Cost of Ownership (TCO) Categories*