Dominion Retail Default Service for Smaller Customers Post Standard Offer Massachusetts Electric Restructuring Roundtable by Rich Zelenko January 28, 2005

Dominion Retail Profile Dominion Retail is an affiliate of Dominion Resources headquartered in Richmond, VA. Serve 1.2 million customer accounts in 8 states Primary focus is the residential and small commercial market: Electricity and natural gas Warranty products and services Dominion Retail is anxious to expand our market in Massachusetts

Dominion Retail Markets Ohio Gas 185,048 Electric 86,957 Services 288,250 Customers: 395K Gas 250K Electric 512K Services 1.2 Million Total Massachusetts Electric 10,888 Connecticut Electric 20,839 Pennsylvania Gas 120,246 Electric 131,048 Services 145,960 Illinois Gas 90,184 Virginia Services 68,831 West Virginia Services 11,415 North Carolina Services 165

What Makes a Competitive Retail Electric Market? A desire by the Commonwealth is to establish a true retail market that benefits consumers consistently over time. A robust wholesale supply market The price-to-compare is representative of retail market pricing. Incumbent utility/PUC retail rules that are not overly burdensome and costly.

Why Limited Retail Competition in Massachusetts? The “Playing Field is Not Level” Price-To-Compare (PTC) is not reflective of Retail Offers – retail suppliers must include additional costs in their offer that are not included in the PTC. Some Examples: Bad debt EDI data exchange- set-up/daily transactions/maintenance Compliance w/consumer protections and notifications Database capital investment and management Attrition- auto replenishment of moves/relocations for default supplier (i.e. churn) Supplier license, other misc. Marketing costs/Customer Service costs

Why Limited Retail Competition in Massachusetts? Other Retail HURDLES: Acquisition Costs Particularly residential and small commercial customers (acquisition costs range from $20 to $250 per customer) Retailers must provide long term rate stability or a meaningful discount to get customers to act Acquisition costs are the single largest retail hurdle for mass market customers Customer List & Information Unique identifier or account number Significant acquisition cost reduction- increased sales rate of 20% if account no. not required from customers, more accurate enrollments Processes for consumer protection have been implemented in other states that allow distribution of account numbers

“The Mastermind of New England”

Default Service – The “Ultimate” Game Plan The default price needs to be exactly reflective of the market The default price provides the lowest price possible to consumers The default service has the lowest price volatility on the planet Default supply needs to be derived from 100% renewables The default service RFP always attracts several wholesalers with plenty of “extra” supply that provides market liquidity The default service allows retail competition to flourish with lots of new products & services introduced and record setting switching The default service and pricing decisions allow all politicians to win their election of choice

What is Needed Next in Massachusetts for Default Service Dominion’s Recommendation- A Balanced Approach: 1. Define, bid and publish Default pricing for a one year term Tweak current term to a one year fixed price- will allow consumers to make easier price comparisons and match their 1 yr term preference Provides reasonable price stability 2. Begin appropriate rate unbundling - from distribution portion of rate. 3. Transition to a competitively bid Retail Auction Start with one utility Implement new programs/incentives to promote retail options- (ex. NIMO in NY) Develop customer volunteer list for participation in a Retail Auction Implement statewide Retail Auction with legislation – (i.e. Bosley/Morrissey proposal)

Summary – LT Benefits of Retail Competition 1. Better electric offers for varying consumer needs/segments fixed long-term, fixed medium-term, variable, variable w/Cap, DSM, aggregation, renewables, switching incentives, fixed bill w/no true-up, etc. New product & service innovations home warranty products, metering technologies, DSM, distributed generation, etc. Long-term competitive forces to keep prices in check retailers will compete every day for customer’s business, looking at longer-term “life time” value of electricity and other products & services New Generation investment tied to Retail load growth Economic development- tailored/lower rates/incentives to site business, use of local contractors for ancillary products & services Retail competition improves service customers reward good service (and punish bad service) quickly and efficiently