1. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-1 PART TWO Marketplace Characteristics Market Horizons™ Report Real-time Automation & Controls (RTAC) in the North American Electric Utilities Marketplace (2003-2007)

2. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-2 About This Report InfoNetrix LLC, an independent technical research and consulting firm specialized in utility automation and information technology (Utility Automation/IT) markets conducted the research for this report. InfoNetrix reports are available for subscription by any and all interested parties, foreign and domestic (except as prohibited by law), in accordance with the pricing and terms set forth in the prospectus, provided separately. This report addresses Real-time Automation & Controls (RTAC) in the North American Electric Utilities Marketplace. Other reports in the Market Horizons™ Series provide similar analyses of Real-time Automation & Controls (RTAC) in the North American Water/Wastewater Utilities Marketplace and of Geospatial and Mobile Computing Solutions (GMCS) in the North American Utilities Marketplace. Please visit www.InfoNetrix.com for more information about these and other InfoNetrix Advisory Services.www.InfoNetrix.com InfoNetrix LLC, an independent technical research and consulting firm specialized in utility automation and information technology (Utility Automation/IT) markets conducted the research for this report. InfoNetrix reports are available for subscription by any and all interested parties, foreign and domestic (except as prohibited by law), in accordance with the pricing and terms set forth in the prospectus, provided separately. This report addresses Real-time Automation & Controls (RTAC) in the North American Electric Utilities Marketplace. Other reports in the Market Horizons™ Series provide similar analyses of Real-time Automation & Controls (RTAC) in the North American Water/Wastewater Utilities Marketplace and of Geospatial and Mobile Computing Solutions (GMCS) in the North American Utilities Marketplace. Please visit www.InfoNetrix.com for more information about these and other InfoNetrix Advisory Services.www.InfoNetrix.com

3. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-3 General Information & Notifications PURPOSE The information contained in this document is for the sole use of InfoNetrix clients and is not to be distributed outside client organizations. No part of this publication may be reproduced, transcribed, or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any electronic storage and retrieval system, without permission in writing from the copyright owner. DISCLAIMER This publication has been prepared with care, however, no guarantee of accuracy, completeness, or warranty of any kind is expressed or implied, nor shall InfoNetrix be liable to any user of the publication or any portion(s) hereof for any direct or indirect damages, expenses, costs or losses of any kind resulting from its use. COUNTRY OF ORIGIN United States of America PURPOSE The information contained in this document is for the sole use of InfoNetrix clients and is not to be distributed outside client organizations. No part of this publication may be reproduced, transcribed, or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any electronic storage and retrieval system, without permission in writing from the copyright owner. DISCLAIMER This publication has been prepared with care, however, no guarantee of accuracy, completeness, or warranty of any kind is expressed or implied, nor shall InfoNetrix be liable to any user of the publication or any portion(s) hereof for any direct or indirect damages, expenses, costs or losses of any kind resulting from its use. COUNTRY OF ORIGIN United States of America

4. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-4 Research Standards & Methodology The preparation of this report follows generally accepted standards of market research practice and is based on principles of truthfulness and professionalism. A reasonable and prudent effort has been made to ensure that factors and circumstances having a material impact on any decision-making process derived from, or impacted by, this report are included in the analyses and recommendations. The representations of industry and market data and portrayals of the business environment are based on market research conducted by experienced professionals with broad knowledge and experience in the markets addressed. The information upon which the findings and analyses contained in this report are based was obtained through a combination of telephone interviews with key suppliers and consultants and other individuals with extensive market knowledge and experience, augmented by survey with a cross section of utility managers and ongoing interactive research with over 1,000 utilities annually. Each telephone interview/survey was guided by a specially designed questionnaire to obtain pertinent data, insights and market perspectives. These interviews were augmented by secondary research across a wide range of reliable public and proprietary information sources pertinent to the study. The preparation of this report follows generally accepted standards of market research practice and is based on principles of truthfulness and professionalism. A reasonable and prudent effort has been made to ensure that factors and circumstances having a material impact on any decision-making process derived from, or impacted by, this report are included in the analyses and recommendations. The representations of industry and market data and portrayals of the business environment are based on market research conducted by experienced professionals with broad knowledge and experience in the markets addressed. The information upon which the findings and analyses contained in this report are based was obtained through a combination of telephone interviews with key suppliers and consultants and other individuals with extensive market knowledge and experience, augmented by survey with a cross section of utility managers and ongoing interactive research with over 1,000 utilities annually. Each telephone interview/survey was guided by a specially designed questionnaire to obtain pertinent data, insights and market perspectives. These interviews were augmented by secondary research across a wide range of reliable public and proprietary information sources pertinent to the study.

5. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-5 Research Reliability & Acceptance The information presented in this report was gathered, recorded and analyzed with care and precision. However, there will undoubtedly be differences between the findings presented and actual results for various reasons and, because future events and circumstances frequently do not occur as expected, those differences may be material. For these and other reasons (including, but not necessarily limited to human error, misinterpretations, misunderstandings and information sensitivities among respondents), the resulting data will most likely not be completely accurate in all respects. Moreover, the forecasts presented herein reflect judgments made as of the period during which this report was prepared. As such, some aspects can be expected to change as a result of numerous direct and indirect factors, which are beyond the scope of this report to accurately predict. For example, it assumes that current events will continue to have the same effect on the marketplace in the future and that the conventional wisdom of today will continue to be completely applicable to future market conditions, which is at best, unlikely. By accepting and using the information contained in this report, the user assumes all responsibility for its use for any and all purposes as user may deem appropriate and agrees to hold InfoNetrix, its principals and its staff harmless from any direct, indirect or consequential damages resulting from, or in any way related to, such use(s). However, InfoNetrix actively solicits and welcomes inquiries or other input regarding any errors, omissions or inconsistencies discovered during the course of using this report. Please direct any such correspondence to InfoNetrix Client Services. (Detailed company contact information is provided on the web at: www.InfoNetrix.com.) The information presented in this report was gathered, recorded and analyzed with care and precision. However, there will undoubtedly be differences between the findings presented and actual results for various reasons and, because future events and circumstances frequently do not occur as expected, those differences may be material. For these and other reasons (including, but not necessarily limited to human error, misinterpretations, misunderstandings and information sensitivities among respondents), the resulting data will most likely not be completely accurate in all respects. Moreover, the forecasts presented herein reflect judgments made as of the period during which this report was prepared. As such, some aspects can be expected to change as a result of numerous direct and indirect factors, which are beyond the scope of this report to accurately predict. For example, it assumes that current events will continue to have the same effect on the marketplace in the future and that the conventional wisdom of today will continue to be completely applicable to future market conditions, which is at best, unlikely. By accepting and using the information contained in this report, the user assumes all responsibility for its use for any and all purposes as user may deem appropriate and agrees to hold InfoNetrix, its principals and its staff harmless from any direct, indirect or consequential damages resulting from, or in any way related to, such use(s). However, InfoNetrix actively solicits and welcomes inquiries or other input regarding any errors, omissions or inconsistencies discovered during the course of using this report. Please direct any such correspondence to InfoNetrix Client Services. (Detailed company contact information is provided on the web at: www.InfoNetrix.com.)

6. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-6 Market Horizons™ Report Contents 1.Executive Market Summary 2.Marketplace Characteristics 3.Market Drivers, Issues & Trends 4.Market Analysis & Future Outlook 5.Supplier Environment

7. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-7 2. Marketplace Characteristics Marketplace Overview Marketplace Structure & Composition Segments/Applications/Configurations Geographical Market Distribution

8. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-8 Marketplace Overview Utility Marketplace Dynamics (Pre-2003) Pre-2003Pre-2003: Period of frenzied utility excursions into non-regulated businesses; energy trading desks; merchant power plants & distributed generation projects; international M&A activity; and various other non-core ventures causing…  Loss of investor/stakeholder confidence  Downgraded stock values leading to liquidity crisis  Lack of focus on core business values  Distracted management and dilution of resources  Cash drain from core operations

9. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-9 Marketplace Overview Utility Marketplace Dynamics (2003-2007) 2003-20072003-2007: Gradual return to traditional utility focus, operations and values as utilities…  Divest and/or redirect resources away from non-core activities  Refocus time, money and resources on traditional priorities  Respond to the spectacle of the 8-14-03 blackout, which… Clearly framed the need for investments in Power Delivery Underlined grid security and other vulnerability issues Made power reliability a national/regional priority Elevated customer service improvement as a utility priority Brought the critical role of RTAC to the public forum  Accept and adopt these new realities: Restructuring IS happening and will continue T&D investments are necessary; more generation won’t fix it! FERC ISO/RTO plans are going forward Market stability is returning; prudent investments will be recouped

10. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-10 Over 3,500 electric utilities in US & Canada Less than 10% of total control 75-80% of RTAC spending No major composition changes expected 2003-07  A few IOU mergers per year  Some REC consolidation  General trend toward fewer Regulatory policy is set at federal level in US; mainly at provincial level in Canada Marketplace Structure & Composition Electric Utilities by Ownership Class

11. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-11 Marketplace Structure & Composition NERC Council Regions SOURCE: NERC

12. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-12 Marketplace Structure & Composition Typical Electric Utility Market Environment Diagram courtesy of UtiliPoint International Inc. (www.UtiliPoint.com)

13. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-13 There are more than 70,000 T&D substations in North America with approximately 500-600 (net) added each year, after decommissioned stations are taken into account. The total includes another 5,000 that are owned/operated by non-utility enterprises, mainly large commercial and industrial power users. SOURCE: US DOE-EIA Marketplace Structure & Composition T&D Substation Infrastructure

14. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-14 Investor-owned utilities currently hold the majority of the high-voltage transmission line capacity in the United States. (Only limited new transmission capacity has been added since restructuring began in 1994.) However, the control and operation of transmission will likely be transferred to Independent Transmission Companies (ITCs) as restructuring continues and the ISO/RTO model is fully implemented over the next several years. It remains unclear exactly when this transition will be completed, mainly due to the failure of the US Congress to pass the an Energy Bill with a specific timetable before the end of the 2003 session. SOURCE: US DOE-EIA (1994) Marketplace Structure & Composition Transmission Infrastructure

15. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-15 Real-time Automation and Controls (RTAC) for the Electric Utility Marketplace GMSGMS EMSEMS RTAC FIELD DEVICES RTAC SYSTEMS DISTRIBUTION SYSTEMS TRANSMISSION SYSTEMS SSA RTAC MARKET DMS XMN RTUs EMS/GMS RTUs DIST RTUs TMS T&D Remote Terminal Units (RTUs) TMS RTUs T&D Substation Controllers (SSCs) & Gateways Traditional Substation RTUs being displaced by SSCs networked to IEDs Marketplace Structure & Composition TDMS- RTAC Market Composition

16. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-16 Energy Management Systems* (EMS) Segment  Advanced power system applications for network security functions  Network modeling and system-wide optimization of electric power generation utilization. Generation Management Systems (GMS) Segment  Similar to EMS, except that the transmission functionality normally associated with EMS for vertically integrated (G&T) utilities is generally omitted for the owners/operators of the merchant power plants that comprise the majority of this segment. Transmission Management Systems (TMS) Segment  SCADA and SCADA/AGC systems for transmission and sub- transmission applications as well as transmission substation automation applications. Distribution Management Systems (DMS) Segment  SCADA systems for distribution applications as well as distribution substation automation applications. (*Please note that for the purposes of this report, market/trading and commercial settlement software are excluded from EMS procurement values and market forecasts.) Segments/Applications/Configurations Principal TDMS-RTAC Market Segments

17. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-17 Segments/Applications/Configurations Typical TDMS-RTAC Configurations USES OF SUPERVISORY SYSTEMS SCADA TMS (SCADA/AGC) EMS DADMS Supervisory Control and Data Acquisition SCADA/Automatic Generation Control Energy Management System Distribution Automation System Distribution Management System Basic diagram courtesy of KEMA Inc. (www.KEMA.com)

18. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-18 SCADA (Supervisory Control and Data Acquisition)  Data Acquisition  Remote Control  User Interface  Areas of Responsibility  Historical Data Analysis  Report Writer Segments/Applications/Configurations TDMS-RTAC Configurations: SCADA Content definitions courtesy of KEMA Inc. (www.KEMA.com)

19. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-19 SCADA/AGC  Automatic Generation Control  Economic Dispatch Calculation/Hydro Allocator  Interchange Transaction Scheduling  Transaction Evaluation (Economy A and B)  Unit Commitment  Short-term Load Forecasting Segments/Applications/Configurations TDMS-RTAC Configurations: SCADA/AGC Content definitions courtesy of KEMA Inc. (www.KEMA.com)

20. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-20 EMS (Energy Management Systems)  Network Configuration/Topology Processor  State Estimation  Contingency Analysis  Three-phase Balanced Operator Power Flow  Optimal Power Flow  Dispatcher Training Simulator (DTS) Segments/Applications/Configurations TDMS-RTAC Configurations: EMS Content definitions courtesy of KEMA Inc. (www.KEMA.com)

21. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-21 DA (Distribution Automation)  Voltage Reduction  Load Management  Power Factor Control  Two-Way Distribution Communications  Short-Term Load Forecasting  Fault ID/Fault Isolation/Service Restoration  Interface to Intelligent Electronic Devices (IEDs) Segments/Applications/Configurations TDMS-RTAC Configurations: DA Content definitions courtesy of KEMA Inc. (www.KEMA.com)

22. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-22 DMS  Three-phase Unbalanced Operator Power Flow  Interface To/Integration With Automated Mapping/Facilities Management (AM/FM)  Interface To Customer Information System (CIS)  Map Series Graphics  Trouble Call/Outage Management Segments/Applications/Configurations TDMS-RTAC Configurations: DMS Content definitions courtesy of KEMA Inc. (www.KEMA.com)

23. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-23 RTUs & RTU-like Devices  Traditional data acquisition and control hardware/software Custom hardware running COTS and/or custom software Standard COTS hardware (e.g., PLCs, microcomputers, etc.) running COTS and/or custom software  Most microprocessor-/microcomputer-based  Variable communications media (wired, wireless, fiber, etc.)  Single-board & multi-module units  ASPs from ≤$1,000 to $20K+  G,T&D applications inside & outside substations  Wide range of designs/configurations Segments/Applications/Configurations TDMS-RTAC Configurations: RTUs

24. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-24 G&T RTUs  Hundreds to thousands of I/O points  Communications: Prevalent use of leased/dedicated 1200-9600 BPS circuits Some microwave & other wireless Extensive & growing fiber-optic LANs in substations  Protocols/Standards DNP is dominant Multiple protocols per RTU commonplace IEC/UCA standards utilization increasing  Relatively few qualified suppliers (6-8 primary) Segments/Applications/Configurations TDMS-RTAC Configurations: GT&D RTUs

25. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-25 Distribution RTUs  Tens to hundreds of I/O points  Communications: Broad use of leased/dedicated 1200-9600 BPS circuits Extensive use of wireless media –Mainly spread-spectrum at substations –Extensive/growing use of cellular on distribution circuits Extensive & growing fiber-optic LANs in substations  Protocols/Standards DNP is dominant Multiple protocols per RTU commonplace IEC/UCA standards utilization increasing  Broad range of suppliers (20+) Segments/Applications/Configurations TDMS-RTAC Configurations: GT&D RTUs…

26. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-26 Substation Controllers/Gateways  Communicate with IEDs at GT&D substations in standard and/or native IED protocols  Limited I/O points, if any  Communications: Primarily cable or fiber-optic LANs in substations Extensive copper to/from IEDs 4-16 communications channels per SSC  Protocols/Standards DNP is dominant Multiple native protocol emulations in each unit IEC/UCA standards utilization increasing  Three basic types of suppliers Modified RTUs (some I/O displaced by added comms channels) Custom hardware/software designed specifically for SSC use Specialized SSC software running on PC or other COTS hardware Segments/Applications/Configurations TDMS-RTAC Configurations: SSCs

27. ©2004 InfoNetrix LLC All Rights Reserved Worldwide 2-27 Geographical Market Distribution US-Canada RTAC Spending Ratio US-Canada Annual RTAC Expenditures Ratio (2003-2007) RTAC expenditure ratios have remained between 90/10 & 85/15 for several decades 2003-2007 ratio expected to remain at 85/15 (i.e., after currency normalization) Prior to deregulation, Canadian utilities tended to be early adopters of advanced technologies; post- deregulation environment has significantly slowed adoption rates due to new budgetary limitations