Electricity Restructuring Roundtable Retail Rate Options for Large Customers in CT Commissioner Anne C. George Connecticut Department of Public Utility Control Raab Associates/ Foley Hoag, Boston – October 28, 2005

Locational Marginal Pricing Fuel Prices $$ Enviro Concerns $$ LMP $$ FERC CT Electric Consumers $$ Two Price Zones FERC Locational Marginal Pricing $$ RMR Regional $$ LICAP FERC Locational Installed Capacity Reliability-Must-Run generators

Post Hurricanes Katrina, Rita, Wilma Energy $$$ Impact Pre-hurricane, global energy prices had already escalated to historic highs Preliminary estimates vary as to cost & extent of damage & recovery time for Gulf area energy facilities Consumers nationwide, this winter, are expected to spend*: 32 % more for heating oil ($/gal) 48 % more for natural gas ($/md) 6 % more for electricity ($/kWh) Energy costs will vary based upon actual conditions: weather, global economic activity, & gulf recovery efforts $$$ *Source: EIA- STEO (10/12/05) - based on U.S. Average for typical per-household consumption Connecticut Department of Public Utility Control

Steps to Addressing CT Electric System Needs CT has to: 1) Ensure adequate resources are in place to provide system reliability 2) Mitigate adverse $$$ monetary impacts from various price pressures (LMP & LICAP, CT 2 Zones) Action plan outlined in Public Act 05-1: An Act Concerning Energy Independence (Public Act 05-1/June Special Session) Connecticut Department of Public Utility Control

CT Strategies to Meet Electric System Challenges On-going Strategies Energy Efficiency Conservation Demand/Load Response Distributed Generation Transmission Generation Connecticut Department of Public Utility Control

CT Policy Approach to Improve Electric System AAC Energy Independence Basic concept – unique hybrid approach… state is catalyst for market to respond directly to identified needs Four basic strategies promoted: 1) Customer-side; Grid-side distributed generation- CHP 2) Incentives for other new generation (capacity contracts) 3) Demand side resources – demand response & EE 4) Rate changes Connecticut Department of Public Utility Control

Rate Initiatives for Large Customers TOU Rates DPUC decision on process for exemption (until 1/1/ 2010) from mandatory TOU rates (Jan. 1, 2006) Optional TOU - for all customers (June 1, 2006) Mandatory peak, shoulder & off-peak TOU rates - 350 kW or greater max. demand (Jan. 1, 2007) Seasonal Rates Optional seasonal rates - for all customers (June 1, 2006) Interruptible & Load Response Rates 350 kW or greater max. demand (June 1, 2006) Connecticut Department of Public Utility Control

Rate Initiatives for Large Customers April 1, 2006 to March 31, 2007 EDCs issue comparative analyses to all customers on mandatory seasonal rates EDCs assist customers in managing loads & reducing peak consumption Exemption from Back-up Power Charge For new customer-side distributed resources if its capacity is less than peak load and the resources are available to the system during peak periods Connecticut Department of Public Utility Control

DPUC Core Implementation Dockets Measures to Reduce FMCCs (Short Term Measures) effective by 1/1/06 Measures to Reduce FMCCs (Long Term Measures) RFP conducted on 2/1/06 Development of Various Incentives for Customer Side Distributed Generation (gas rebate; back-up rates) Development of a Program for Monetary Grants for Capital Costs of Customer Side Distributed Generation (capital grants) Development of Long Term Financing for Customer Side Distributed Generation Development of New Class III Renewable Program (CHP/C&I EE) Development of a Process & Standards for RFP for Long-Term Measures to Reduce FMCCs Financial Impact of Long-Term Contracts on Electric Distribution Companies Connecticut Department of Public Utility Control *Participants in Phase I of this proceeding will have the same status in Phase II.

CT DPUC Decoupling Docket Docket 05-05-09 PA 05-1, Section 21: DPUC Decoupling Investigation The law requires the DPUC to investigate how best to decouple earnings of gas and electric utilities from their sales in order to promote the state's energy policy DPUC must report its findings and recommendations to the Legislatures Energy & Technology Committee by January 1, 2006 Connecticut Department of Public Utility Control

Areas To Be Considered Ratcheted demand charges Decoupling – fixed distribution revenue recovery Exemption from back-up and stand-by rates kVa rates Residential demand based rates (high demand customers) Connecticut Department of Public Utility Control

CEAB’s Role in DPUC Implementation Process REPORT First Report (Sept. 2005) – DPUC will use CEAB Needs Assessment to make determination on near-term FMCC reduction measures (1/1/06) Recommendations on Actions: Mitigate CT’s peak demand Preserve CT’s local generation & encourage new generation resources Improve CT’s transmission Second Report (Nov./Dec. 2005) – DPUC will use CEAB Needs Assessment to make determination on longer-term FMCC reduction measures (Feb. 2006 RFP). AAC Energy Independence – carved out projects awarded under DPUC Feb. 2006 RFP from CEAB RFP process Connecticut Department of Public Utility Control

Benefits of Implementation of CT Strategies New & upgraded facilities will result in improvements to system reliability & efficiency Load management and reduction will: reduce customer & system costs operate to cut $$$ for LMP, LICAP Connecticut Department of Public Utility Control