Introducing Smart Energy Pricing Cheryl Hindes Director of Load Analysis and Settlement August 12, 2009

BGE’s 2008 Smart Energy Pricing (SEP) Pilot featured Peak Time Rebate and Critical Peak Pricing Pilot of 1,375 residential customers in Summer 2008: 1,021 participants, 354 control group Pilot included Dynamic Peak Pricing (DPP or CPP) and Peak Time Rebate (PTR) Customers were given day ahead notification of critical peak event by their choice of methods E-mail, telephone call, text message (up to 5 of each) Certain had the Ambient Energy Orb, signaling prices by color code and pulsing light Sample of customers had ‘enabling technology’ (ET = smart A/C switch) Very favorable customer satisfaction results confirm customers’ interest Key findings of impact assessment conducted by The Brattle Group: Price elasticities for DPP and PTR were not statistically different On average customers saved 22 – 37% at peak conditions* (*PJM definition: hour ending 17:00 with WTHI of 83.1) 18 – 33% during 50 critical hours

Dynamic Peak Pricing: Weekdays (excluding Holidays) $1.30 Pilot Pricing All – in Rate* Critical $1.30425 Peak $0.14425 Off-Peak $0.09425 * Includes generation, transmission and delivery $0.14 $0.09

Peak Time Rebate: Weekdays (excluding Holidays) A Mirror Image of the DPP Rate Schedule R summer rates are $0.14 / kWh for all summer hours Up to 12 critical peak days will be called by 6 p.m. the prior day Customers who use less during the critical period (2 – 7 p.m.) on any critical peak day will receive a rebate. Two levels being tested: $1.75/kWh $1.16/kWh

Smart Energy Pricing Pilot Design BGE’s SEP Pilot: 1,300 accounts, a statistically significant sample

Despite Unseasonably Mild Weather, BGE called 12 Smart Energy Pricing Events in 2008 Sun 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 June 2008 Sun 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 July 2008 High Temp 96 90 92 92 92 89 91 Sun 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 31 25 26 27 28 29 30 August 2008 Sun 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 September 2008 92 92 92 73 72 6

Summer 2008 Pilot Smart Energy Pricing - Peak Demand Reductions * DPP Tariff No Tech Orb & Switch No Tech Orb Only Orb & Switch No Tech Orb Only Orb & Switch Orb & Switch No Tech Orb Only Orb & Switch Low Rebate $1.16 / kWh High Rebate $1.75 / kWh *Peak demand reductions are defined for HE 17:00 for THI of 83.1 degrees

Summer 2008 Pilot Summary of The Brattle Group Analysis

Pilot Participants Response was Very Favorable A post-pilot “experience” survey was conducted during November with the population of just over 1,000 Smart Energy Pricing (SEP) Pilot participants. Participants were asked about their overall experience with the SEP pilot program, which ran from June 1 to Sept. 30, 2008 Both on-line and mail survey methods were used to gather data. A total of 785 surveys were completed, including 279 on-line and 506 by mail, producing a response rate of 78%.

Customers Were Satisfied with Smart Energy Pricing! On a scale of 1 to 5, where 1 is "Very Dissatisfied" and 5 is "Very Satisfied", please rate your overall satisfaction with the pilot program. (77% response rate) 93% Were Satisfied Over 60% Were Very Satisfied

PTR More Favorable than DPP, Overall 93% Satisfied On a scale of 1 to 5, where 1 is "Very Dissatisfied" and 5 is "Very Satisfied", please rate your overall satisfaction with the pilot program. (77% response rate) 2/3 of PTR Customers Were Very Satisfied About Half of DPP Customers Were Very Satisfied

think smart energy pricing should be standard for all BGE customers Customers Think Smart Energy Pricing Should be the Standard During your pilot participation, you experienced a variable rate program where energy used during critical peak periods cost more than energy use during other times. Customers saved money by using energy during non-critical peak periods. Do you think this pricing format should be standard for all BGE customers? (Select one option) 4/5 of PTR participants think smart energy pricing should be standard for all BGE customers 97% would like to return to the same pricing structure in 2009

Welcome Packages were Found to be Useful Q11. Did you find the welcome package that you received useful? (Select one option)

Saving Money Motivates Participants Q1. What was the most important reason for your participation in the program? (Select one option)

Bill Savings Exceeded Expectations Q19. Did you EXPECT to achieve bill savings when you enrolled in the program? Q20. Over the duration of the program, did you ACHIEVE bill savings as a result of your participation in the program? (Sele

Proposed TOU Rates Are Revenue Neutral Control Group Bill Impacts Summer Generation Impact = Proposed TOU Rate – Current Rate* Most customers save a modest amount under the proposed TOU rates On Peak: $0.16582 / kWh (Summer Non-holiday Weekdays 2-7 pm) Off Peak: $0.10690 / kWh (All other times) Average savings: $2 or 0.4% Largest increase: $32 or 3.7% Largest decrease: $58 or 5.2% * Summer Generation rates are compared Proposed TOU Rates Are Revenue Neutral

Peak Time Rebate Customers See Modest Saving Even without Rebates Most customs see modest savings under the proposed TOU rates On Peak: $0.16582 / kWh (Summer Non-holiday Weekdays 2-7 pm) Off Peak: $0.10690 / kWh (All other times) Average savings: $5 or 0.8% Largest increase: $32 or 4.3% Largest decrease: $54 or 6.1% Proposed TOU Rates Are Revenue Neutral

With Earned Rebates Added All PTR Customers are Winners Once rebates have been added, all Peak Time Rebate customers would save money under the proposed TOU rates. On Peak: $0.16582 / kWh (Summer Non-holiday Weekdays 2-7 pm) Off Peak: $0.10690 / kWh (All other times) Average summer savings: $131 Decreases range from $1.44 to $681 PTR Customers All Save Under TOU with Rebates

Some Customers Reported Incomes and Household Sizes That Qualify for MEAP Some Customers Chose Not to Report Income (7.6%) Average summer savings: $2 Largest increase: $32 Largest decrease: $31 TOU Rates: Revenue Neutral for MEAP Eligible -- without Rebates

When Earned Rebates Are Added All MEAP Eligible Households Save Summer savings range from $10 to $263 and average $98 TOU Rates: Revenue Neutral for MEAP Eligible -- without Rebates

Certain Households Include Senior Citizens Who are Age 65 or Older Households with seniors tend to see modest savings under proposed TOU rates even before rebates are applied Average summer savings: $2 Largest increase: $32 Largest decrease: $38 TOU: Revenue Neutral for Senior Households-- without Rebates

When Rebates Are Applied All Households with Seniors Save Summer savings range from $1.44 to $681 and average $119 TOU Rates: Revenue Neutral for MEAP Eligible -- without Rebates

In Certain Households All Residents Are Senior Citizens Age 65 or Older Households composed entirely of seniors tend to see modest savings under proposed TOU rates even before rebates are applied Average summer savings: $1 Largest increase: $32 Largest decrease: $38 TOU: Revenue Neutral for Senior Only Households without Rebates

When Rebates Are Applied All Senior-Only Households Save Summer savings average $98 And range from $1.44 to $310 TOU Rates + Rebates = SAVINGS

Certain Low Income Households include Seniors There were 16 households with seniors who reported incomes that make them eligible for MEAP. Prior to rebates, 10 would save money and 6 would not. $ (14.56) $ (7.23) $ (5.29) $ (2.92) $ (2.69) $ (2.18) $ (1.68) $ (1.21) $ (0.79) $ (0.20) $ 0.45 $ 0.93 $ 1.69 $ 9.12 $ 9.27 $ 31.73 TOU: Revenue Neutral for Senior Only Households without Rebates

When Rebates Are Applied All MEAP Eligible Households with Seniors Save $ (262.54) $ (254.98) $ (157.13) $ (123.44) $ (85.52) $ (83.93) $ (78.36) $ (70.31) $ (63.79) $ (59.79) $ (43.95) $ (39.71) $ (33.69) $ (19.95) $ (13.42) $ (10.30) Summer savings average $88 and range from $10 to $263 Proposed TOU Rates + Rebates = SAVINGS

Peak Time Rebate was Widely Favored BGE Proposes to Offer Peak Time Rebate to all Residential Customers under AMI BGE held 6 focus groups in 2007 focused on CPP Our customers said they need help in understanding their usage and how they could save Our customers said CPP could not be a mandatory rate More SEP participants were very satisfied with PTR (66%) than with CPP (48%) Office of People’s Counsel and others questioned the appropriateness of CPP as default and favored PTR instead Most (81%) PTR participants think PTR should be standard (default) pricing Peak Time Rebate was Widely Favored

FERC Chairman Supports DR “…The potential for demand response and energy efficiency to reduce or reshape our nation’s need for energy is enormous. …Our Assessment finds peak electricity demand reductions across the country are already 38 gigawatts. But the potential for demand reductions goes as high as 188 gigawatts, or 20 percent of our peak load, with no demand response. In other words, the nation could see almost five times as much demand response as it has today and reduce our peak load and the need for expensive carbon and heat emitting peaking plants significantly. Let me emphasize that this number is not a recommendation or prediction by the Commission, but the findings of a staff-led study of what’s achievable. “ From FERC Chairman Wellinghoff's statement ,NARUC summer meetings presentation on “A Shared Energy Vision for North America: Regulations, Markets, and the Environment”

Questions?