LICAP Settlement: Demand Resources Opportunities and Challenges Presented by: Stephen Cowell, CEO Conservation Services Group April 26, 2006

CSG Founded in 1984 Nonprofit corporation More than 250 staff 12 offices nationwide Over 1 million homes and facilities served Design, develop, and deliver energy efficiency and renewable energy programs and projects

Alternative Resource Sector of NEPOOL Demand Response Energy Efficiency Renewable Energy Distributed Generation

CSG Participation NEPOOL member since 1999 Owns Solar Generation power plants Delivers Energy Efficiency for program sponsors and merchant services Sells efficiency resources to ISO under the SW Connecticut GAP RFP Member of AR sector Synapse Energy Economics provides representation and consulting services

Alternative Resources in NE EE - 120 MW per year, currently 1,000 MW in place: 25%+ of annual load growth Real Time Demand Response - 476 MW DG - 75-100 MW (?) 5%+ of total ISO peak needs, and growing

Advantages of Alternative Resources Avoid Reserve Requirements - 15% Avoid T and D losses 6-12% Clean (efficiency, renewables, DR) or cleaner (CHP) than traditional fossil fuel generation Reduce market clearing prices for energy Local resource - higher employment and economic multiplier benefits Quicker deployment as a rule Less price volatility of fuel source

Settlement: Agreement to incorporate Demand Resources into market Committees charged with writing the rules to: -Qualify Demand Resources for transitional payments -Qualify and incorporate Demand Resources into FCM auctions

Challenges Short window to agree on and write rules First time regional electricity markets have been truly open to all resources Changing the regional mix may require looking at rate structures to insure equity among all players and encourage involvement of all parties

Opportunities Region will have tools available to meet regional power needs using a common market platform Northeast Energy Efficiency Partnerships (NEEP) has estimated that it is possible to meet all annual capacity growth through Energy Efficiency Economic Development and environmental value of Demand Resources is greater than any other alternative