Women In Energy Conference Kingston, Jamaica March 10, 2016

In The Beginning… Began as an IPP project financed model 130 Years Ago – One off thermal/electrical load host – Grew organically to serve surrounding loads Grew through Aggregation of Assets through early 20 th Century – Regulated monopoly business model from early 1900’s – Revenue requirements rate making protected Consumers and Owners Technological innovations fueled growth Until 1970’s – Massive Electrification of work – Higher T&D voltages – Supercritical generation units – Steady predictable load growth Massive CapEx fueled by ability to securitize investments – Reliable, predictable and stable forward Cash Flows – Return On and Of Investment over Asset Life 2

Traditional Utility Model Power Plant Factory Substation City Town Rural Power Plant 3

Return to IPP Generation Model Driven by high cost of New Generation Nukes with CapEx equal to total company capitalization Failure of Revenue Requirements Rate Making due to price shock for new generation Overcapacity in the Generation Market created by low energy consumption growth post oil embargo Emergence of NUG take or pay contracts New Generation development stalled through late 90’s into 2000’s – Economics – Environmental policy uncertainty Renewable Portfolio Standards Emerge in era of Restructuring 4

Return to IPP Generation Model NUG Factory Substation City Town Rural Commercial Solar IPP Wind IPP Solar IPP NUG 5

Back To The Future Distributed Generation Resources – MUST BE RENEWABLE to be accepted in “my backyard” – Growth Fueled initially by Policy – Now Fueled by Cost Competitiveness – Necessary But Not Sufficient to create Grid of the Future Resilient/self healing grid Essential Platform for the deployment of Energy Storage Technologies Promise for customers – CHOICE – Pricing Certainty – Control Promise For Utilities – Reduced Costs – Enhanced reliability and resiliency in T&D grid – Survival albeit with a revised business model Promise for Regulators/Policy Makers – Price Stability – Economic Development and growth – Environmental Attributes 6

Distributed Energy Resources NUG Factory Substation City Town Solar Homes Solar/Wind Energy Storage Rural Commercial Solar/Wind Energy Storage NUG 7

Value Drivers of DER Energy Savings – Reduced energy production costs – Reduced system losses Generation Capacity elimination/deferral – Eliminate high marginal cost generation from the dispatch order – Defer/delay generation additions due to end of life or load growth T&D Capacity addition deferral – Eliminate or defer T&D CapEx necessary to support peak load – Reduced O&M for peak operations – Reduced O&M for outage restoration Grid Support Services – Reactive Supply – Voltage Control/Regulation – Frequency Control/Regulation Financial – Fuel Price Hedge – Long term price certainty/stability Environmental – Reduced air pollution – Reduced water consumption/pollution – Reduced land use effects – Reduced carbon cycle Social – Economic Development and growth – Jobs /Revenues 8 Consumer Benefits Utility Benefits Societal Benefits

Adverse Implications of DER Potential Cost Shifting to other customer classes – High upfront costs exclude many would be participants – Non-participants left to bear higher fixed costs Harm to Universal Service/Societal Benefits – System extension costs need to be recovered up front not over life – Economically disadvantaged supported by smaller base of paying customers Utility Revenue Erosion – Higher cost of Debt Capital – Potential loss of Equity Capital Potential degradation of Reliability – Lack of uniform standards for interconnected equipment – Loss of coordinated system control and dispatch Potential for Safety Hazards to Utility and Public – Generation and storage in parallel with systems unknown to utility – Long lived DER systems require long term maintenance and care STILL NO FOCUS ON Energy Efficiency 9

SAFE RELIABLE REASONABLE COST CUSTOMER EMPOWERMENT NEW PARADIGM OLD PARADIGM Business Transformation THE FUTURE IS HERE: The New Utility Business Model 10