Smart Grid Tariff Changes Jason Manuel Director – Pricing & Tariffs August 12, 2009

Agenda Smart Energy Pricing Why SEP? Peak Time Rebates R-SEP rate schedule components Electric and Gas trackers Smart Grid Charge components Allocations

Why SEP? Note: The first block contains 110 hours with an average LMP of $200 and a range of $84 to $1,046

Peak Time Rebates The primary benefits of Smart Energy Pricing relate to wholesale capacity and energy revenues BGE is able to monetize peak load reductions in the PJM Capacity and Load Markets and pass these direct revenues to customers in the form of Peak Time Rebates (PTRs) All customers benefit from lower overall capacity and energy prices going forward, along with avoided transmission and distribution capital expenditures Participants can earn PTRs during company-declared “critical days” and PJM- declared emergencies For non-emergency events customers will be notified by 6pm the prior day through various media forms PTRs estimated at $1.25/kWh, based on the value of capacity as represented by Net CONE in the PJM RPM applicable to SWMAAC

Peak Time Rebates Calculation

R-SEP Residential Electric Rate Schedule Effective in 2012, once underlying communications and billing systems in place Will combine existing residential rate schedules (R, ES, RL-1, and RL-2) into one rate schedule (R-SEP) Existing rate schedules will phase out once AMI is implemented in customer’s geographical area Consists of the following rates: Peak Time Rebate during summer “critical days” and PJM emergencies Time-of-Use generation rates for 2 time periods On-peak: Non-holiday weekdays, June – September, 2 – 7 p.m. Off-peak: All other times Customer Charge Delivery Service Charge Transmission Charge (incorporated in generation rate)

Smart Grid Charge Separate riders for both electric and gas lines of business Prospective rate with annual true-up, effective January 1, 2010 Rider includes the following components: Program costs Depreciation and amortization of assets over 6 – 22 years Pilot program costs amortized over 5 years Return on net investment Ongoing costs (O&M, PTRs, property taxes, etc.) Program benefits - serve to reduce the charge Wholesale capacity revenues Wholesale energy revenues Meter reading savings Program incentives Based on existing Rider 15 structure

Allocations within Smart Grid Charge Allocations between electric and gas Direct assignment of meter costs to electric and gas trackers Direct assignment of PTRs, wholesale capacity and energy revenues to electric tracker All common costs allocated using BGE’s long-standing Modified Massachusetts Methodology Allocations between customer classes All electric costs allocated based on the relative proportions of capacity Peak Load Contribution (PLC), excluding PTRs and the capacity and energy revenues monetized in the PJM markets (100% to residential) All gas costs allocated based on number of meters

Questions?