Energy Efficiency and Conservation Direct Use Program Proposal Washington Gas Light Co. For Discussion with EmPOWER Maryland Stakeholders January 27, 2012

Key Message The direct use of natural gas at the retail level:  Facilitates achieving EmPOWER MD electricity reduction goals  Encourages wiser, more efficient energy use  Delivers environmental benefits to the region and the State of Maryland  Realizes the objective driving DOE to adopt improved methods for measuring energy efficiency and GHG emissions 2

Natural Gas Direct Use is More Efficient 3

Direct Use of Natural Gas Replaces Less Efficient Electrical Appliances  Reducing the population of electrical appliances delivers definitive energy savings –Replacement of Average Heat Pump Annual Savings: 5,806 kWh –Replacement of Average Hot Water Heater Annual Savings: 3,713 kWh Peak Demand Savings: 339 kW Natural Gas Conversions will help the state reach its EmPOWER Maryland goals 4

Cost Effects of End-Use of Natural Gas  Decoupling creates necessary regulatory environment –Neither utility is unduly harmed or advantaged  Usage of natural gas for electric generation creates upward pressure on natural gas prices –Carbon constraining regulations and abundant natural gas reserves likely to drive expansion of gas-fired generation  Current incentives may further increase demand for electricity  Available supplies of natural gas have dramatically increased due to shale E&P efforts in recent years 5

Space Heating 6

End-use of Natural Gas Delivers Environmental Benefits Pennsylvania Public Utilities Commission En Banc Hearing Presentation – Paul Raab, EnergyTools LLC 7

Program Features  Convert estimated 800 homes annually to natural gas space and water heating  Utility paid incentives cover –High efficiency appliances –Customer contribution for average line extension  Administered as part of Washington Gas’s existing on-main conversion program  Rapid implementation  Report to MD PSC on program results 8

Example Incentives and Expected Results PartyContribution Utility Incentive$5,400 Customer$4,700 (est.) Estimated Participants800 Expected Annual Savings 7,615 MWh Expected Demand Savings 339 kW Est. Annual CO 2 Elimination 2,468 tons TRC Test B/C Ratio 1.07

Proposed Program Lifecycle Costs $5,308 5,806 kWh * 18 yrs + 3,713 kWh * 10yrs Cost Effective Results = 3.7¢ / kWh 10