FDU – Reinventing Energy in the 21 st Century Alfredo Z. Matos Vice President Renewables & Energy Solutions November 21, 2008 PSE&G’s Renewables and Energy Efficiency Initiatives

1 PSE&G is committed to providing energy efficiency services and renewable energy. We believe that society must begin to decarbonize the electric system and, as it continuously cleans up energy, it should electrify the transportation sector. We believe that global climate change represents a real environmental threat and significant business challenge, as well as the opportunity for visionary companies. San Rafael Glacier, southern Chile PSE&G’s Commitment

2 NJ Energy Master Plan and RGGI Law Meaningful Opportunities for Green Value

3 Energy EfficiencyRenewables 20% reduction in energy consumption by 2020 By % of energy supply will come from renewable sources Demand Response Reduce Peak demand by 5,700 MW by 2020 To achieve success we must move from pilots to aggressive initiatives and invest in facilities and systems in ways that demonstrate our commitment to a sustainable future. It will take a paradigm shift! State: 20,000 Gwhr by 2020 PSE&G: 12,000 Gwhr by 2020 State: 1,040 million therms by 2020 PSE&G: 676 million therms by 2020 State: 5,700 MW by 2020 PSE&G: 3,420 MW by 2020 State: 5,900 MW by 2020 PSE&G Load: 3,175 MW by 2020 Solar Carve Out: State: 1,800 MW (2120Gwh) PSE&G: 950 MW NJ Energy Master Plan and RGGI Law Meaningful Opportunities for Green Value

4 PSE&G’s Carbon Abatement Filing ($46MM) Residential customers in Urban Enterprise Zones – Tune-Up Program in targeted neighborhoods:  Energy audit, thermostat, weather stripping, CFLs  Attic insulation, duct sealing and/or insulation – Install programmable thermostats and provide CFLs as part of routine utility-related gas service calls Small business customers in UEZs – audit and direct installation of energy efficiency measures Large Customer Technology Demonstration Hospital Efficiency – audit and financial incentives Expected lifetime energy saving: 76.4M Therms & 458M kWh Targets underserved urban areas Energy Efficiency 20% reduction in energy consumption by 2020

5 PSE&G’s Demand Response Filing ($93MM) Residential Customers – Central Air Conditioner Cycling Replace existing equipment Increase program enrollment – Pool Pump Load Control Small Commercial A/C Cycling C&I Curtailment Services – investments in installation of infrastructure to enable demand response Load Shifting Demonstrations Expected demand saving by 2014 is 392MW Reduces peak demand Demand Response Reduce Peak demand by 5,700 MW by 2020

6 Two-year pilot program limited to 30MW PSE&G will provide ~ $105MM in secured loans to qualified borrowers Program provides universal access to capital to invest in solar systems Pilot Solar Loan Program PSE&G provides 40-60% of total capital for system Borrower can pay back in SRECs with secured SREC pricing Call option price is 75% of then current market value of SRECs if loan is prepaid Since mid-April, received applications totaling 45% of available non-residential solar capacity (24MW) Program opened to residential applications - July (6MW) Renewables By % of energy supply will come from renewable sources

7 Renewables By % of energy supply will come from renewable sources An aggressive schedule of solar build out is required NJ Solar RPS: 1800 MW Total PV Capacity Identified in PSE&G Service Area to Meet 1800MW State Goal Actual Solar capacity installed = 29MW in PSE&G area, 59.6MW in NJ.

8 The structure and incentives provides a basis for making a solar installation, thus creating jobs and reducing carbon generating capacity I&C Example: Pilot Solar Loan Program Solar Installation Assumptions: 20KW system $6.50/watt installed cost 13% Capacity Factor 13 cents/kWh electricity savings escalating at 3% per year $475 per SREC floor price 11.11% interest rate on loan—15 Year term Financial Results: $130,000 total investment by solar owner $75,393 total loan (58% of total investment) – Repaid over 15-years by SRECs generated $54,607 of C&I customer’s equity capital required – Payback in less than 2 years – Payback is via: 30% ITC ($39,000) Tax Savings driven by accelerated tax depreciation ($16,705 in the first 2 years alone) Operating cost savings from reduced electricity off-set by O&M on system ($4,626 in the first 2 years alone) Renewables By % of energy supply will come from renewable sources

9 PSE&G’s Growing Hybrid Fleet Replacing 1,300 cars and trucks Reduction of 8,500 tons of CO2 and 850,000 gallons of gasoline over the next 10 years Installing 450 hybrid aerial lifts Reduction of and 73,000 tons of CO2 and 6.5 million gallons of fuel over the next 10 years

10 Investing in Green Requires Timely Action $290MM Carbon Abatement Phase II – Complements OCE & provides for NJ Economic Stimulus and jobs Solar Loan Program Phase II – Expand existing program Solar Infrastructure Investment – Pole-attached solar generation – Centralized solar generation – Distributed solar generation on government roofs & brownfields Longer Term Urban wind turbines Biomass AMI enabled PHEV Fuel cells Initiatives PSE&G is investigating:

11 Clean energy policies will generate a significant number of new green jobs. Efficiency upgrades on 3.7 million existing buildings -1,800 MW solar (~60,000 installations) MW offshore wind -200 MW onshore wind -900 MW Biomass -~2,500 construction jobs -~500 operations jobs Energy Efficiency New Nuclear RenewablesNew Nuclear Investing in Green Drives Demand For Skilled Workers in NJ

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