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Demand Side Management Programs Energy Efficiency/Conservation Demand Response Advanced Metering Infrastructure Stakeholders Meeting February 7, 2007
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BGE®, A Constellation Energy Company DSM/AMI 2 Agenda The “Call to Action” Demand Side Management Programs –Demand Response Infrastructure –Energy Efficiency/Conservation Advanced Metering Infrastructure DSM and AMI Timeline DSM and AMI Cost Recovery Summary Appendix
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BGE®, A Constellation Energy Company DSM/AMI 3 The Trend Continues – BGE Relies Heavily on Imported Supply
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BGE®, A Constellation Energy Company DSM/AMI 4 A Renewed Interest in Energy Efficiency/Conservation and Demand Response Infrastructure Transition to higher, market-based generation costs has renewed the interest in conservation and energy efficiency enable customers to use energy wisely and efficiently – Technology improvements now available that achieve even greater savings minimize impacts of higher energy costs on customers’ bills adopt “best practices” for achieving energy savings Customers expect BGE to promote efficiency BGE viewed as the “energy expert” Positive program Benefit/Cost ratios from higher generation costs programs previously determined as not cost-effective now passing Benefit/Cost tests National Action Plan for Energy Efficiency regulatory, utility, industry and other stakeholder groups to convene in a particular state or region to make commitments to energy efficiency North American Electric Reliability Council (NERC) Reliability Assessment report identifies residential and commercial demand-side measures as a means to insure adequacy of North America’s electric system Demand-Side Management (DSM) programs regaining momentum $1.9 billion spent in 2005 (Source: EIA Form EIA-861, Annual Electric Power Industry Report) –23% increase over 2004
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BGE®, A Constellation Energy Company DSM/AMI 5 Build TransmissionObtain Generation Supply Reduce Consumption Part of a Balanced Approach for Energy Supply
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BGE®, A Constellation Energy Company DSM/AMI 6
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BGE®, A Constellation Energy Company DSM/AMI 7
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BGE®, A Constellation Energy Company DSM/AMI 8 NARUC’s Proposed Resolution Supporting the National Action Plan on Energy Efficiency NARUC’s resolution recognizes that: “The United States is in an increasing energy cost environment, both for the cost of energy commodities and new energy infrastructure…concerted efforts and attention must be focused on ways to conserve energy and utilize it more efficiently in order to reduce the corresponding cost to both consumers and our economy…” The key elements of the July 31, 2006 National Action Plan on Energy Efficiency are: –Recognize energy efficiency as a high priority energy resource –Make a strong long-term commitment to cost-effective energy efficiency as a resource –Broadly communicate the benefits of and opportunities for energy efficiency –Promote sufficient, timely, and stable program funding to deliver energy efficiency where cost-effective –Modify policies to align utility incentives with the delivery of cost- effective energy efficiency and modify ratemaking practices to promote energy efficiency investments
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BGE®, A Constellation Energy Company DSM/AMI 9 Agenda The “Call to Action” Demand Side Management Programs –Demand Response Infrastructure –Energy Efficiency/Conservation Advanced Metering Infrastructure DSM and AMI Timeline DSM and AMI Cost Recovery Summary Appendix
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BGE®, A Constellation Energy Company DSM/AMI 10 Demand Response Infrastructure (DRI) Description Technology deployment to achieve customer benefits attendant to the reduction of electric demand during periods of tight supply Technology: 1.Programmable Communicating Thermostat 2.Advanced Air Conditioning Control Switch Either technology will allow BGE to regulate the operation of customer’s central air conditioning during periods of very high electricity use Target Market : Residential Phased Deployment Schedule: Phase I – Pilot program during summer 2007 Phase II – Full deployment from late 2007 to mid 2011
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BGE®, A Constellation Energy Company DSM/AMI 11 Customer Benefits of DRI Provides Wholesale Market Value Energy and capacity reductions can be monetized in the wholesale market, reducing the customers’ cost of service Latest Brattle Group study “Quantifying Demand Response Benefits in PJM” estimates a 3% reduction in peak load equates to $138 - $281 million of energy savings plus an additional $73 million of capacity savings Improves System Reliability Lowering system energy use during peak times reduces the need for additional transmission import capability and generation internal to the BGE service territory, reducing the customers’ cost of service Provides Distribution Infrastructure Value Ability to localize a load reduction at specific feeders or substations will help reduce the need for additional distribution infrastructure, reducing the customers’ cost of service
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BGE®, A Constellation Energy Company DSM/AMI 12 Customer Benefits of DRI (continued) Reduces the Wholesale Market Price of Electricity Additional demand response competing against supply resources will mitigate scarcity pricing and transmission congestion costs, reducing the customers’ cost of service Provides Gas Operations Value Ability to moderate gas consumption with programmable communicating thermostats during system or localized critical supply/distribution events will improve operating effectiveness, reducing the customers’ cost of service Provides Environmental Benefits Lower energy use leads to reduced power plant emissions and a more efficient allocation of our natural resources, reducing the customers’ cost of service
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BGE®, A Constellation Energy Company DSM/AMI 13 Customer Benefits of DRI (continued) Does Not Interfere with Customer’s Choice of Supplier DRI is structured to be competitively neutral Any residential customer, regardless of the customer’s electricity supplier, can participate in BGE’s DRI service As is done today, retail suppliers will continue to be made whole by BGE for their foregone retail revenue, and incur the wholesale cost (LMP) of the load charged by PJM.
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BGE®, A Constellation Energy Company DSM/AMI 14 Example of Retail Supplier Settlement PJM Retail Supplier Customer PJM BGE Without Curtailment With Curtailment Retail Price = $100/MWh LMP = $250/MWh Retail Supplier 1 MW $250 1 MW $100 Net ($150) (1 MW) $250 1 MW $250 Net ($150) $100 Net $150
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BGE®, A Constellation Energy Company DSM/AMI 15 Preliminary DRI Business Case Economics
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BGE®, A Constellation Energy Company DSM/AMI 16 Technology of DRI Programmable Communicating Thermostat State-of-the-art features Remotely programmable over the internet Ability to receive and send communications (from and to BGE) Display screen for receiving communications Adaptive algorithms for more effective cycling Individually addressable Facilitator of critical peak pricing
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BGE®, A Constellation Energy Company DSM/AMI 17 Technology of DRI (continued) Advanced Air Conditioning Control Switch Ability to receive and send communications (from and to BGE) Adaptive algorithms for more effective cycling Individually addressable
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BGE®, A Constellation Energy Company DSM/AMI 18 Example of DRI Communication Path – Phase I
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BGE®, A Constellation Energy Company DSM/AMI 19 Example of DRI Communication Path – Phase II
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BGE®, A Constellation Energy Company DSM/AMI 20 Phase I DRI Pilot Deployment Purpose: Test various cycling strategies Determine load impacts under various conditions Assess customers’ receptiveness of the technologies Finalize design of the service Refine systems integration Improve estimates of resource requirements
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BGE®, A Constellation Energy Company DSM/AMI 21 Phase I DRI Pilot Deployment (continued) Service Design Limited to the time from Commission approval to September 30, 2007 Limited to about 1,000 eligible customers chosen randomly Targeting about 400-600 customers for each technology Eligible customers are those that: Own and live in a single-family residence or detached condo with central air conditioning Plan to live in the residence and use your air conditioning through the summer cooling months – June through September 2007 Have only one air conditioning unit on your home Are the payor of the electric utility bill (no payment through a third party) Are willing to complete a brief survey at the conclusion of the pilot program No cost to the customer for equipment or installation Annual $50 incentive payment for participating with either technology $12.50 per month from June to September
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BGE®, A Constellation Energy Company DSM/AMI 22 Phase I Pilot Deliverables for June 1, 2007 Marketing Develop a strategy to perform marketing and call center operations using 130,000 randomly selected “eligible” residential customers with central air conditioning to obtain the 1000 sample participants Develop marketing literature to be used for the recruitment process and manage customer interest Pilot composition – About 500 existing Rider 5 accounts – About 500 Non-participating Rider 5 accounts – 200 Sampled Metered accounts Oversee installation process –Equipment- Thermostat (500 sites), switch ( 500 sites), metering (200 sites) and internal temperature data logger (100 sites)
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BGE®, A Constellation Energy Company DSM/AMI 23 Phase I Pilot Deliverables for June 1, 2007 (continued) Load Research Coordinate the installation of load research metering, and data collection process for the purpose of assessing the load impacts. System & Telecommunication Enhancements CIS –Define new riders for switches and thermostats, and explain all interfaces such that the Customer Call Center (CCC) can identify these pilot accounts, and credits can be paid Secure file transfer protocol to facilitate daily receipt of marketing and installation statistics leading up to the 1,000 pilot participants. Develop new process to capture customer interest beyond the 1000 endpoint limit Configure Load Management System (LMS) to include data requirements and transfer, as well as web portal design and functionality
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BGE®, A Constellation Energy Company DSM/AMI 24 Phase I DRI Pilot Timeline 2007 Schedule JanFile for PSC approval FebPSC decision If approved: Mar-MayRecruit participants and install equipment Jun-AugConduct demand response operations SepConduct participant surveys, assess results and finalize service design OctIf deemed appropriate, file full deployment plan with PSC NovPSC decision
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BGE®, A Constellation Energy Company DSM/AMI 25 Phase II Full Deployment Preliminary Targets Begin deploying endpoints early-2008 Reach market saturation by mid-2011 At full saturation, and depending on the cycling strategy: Total DRI Capability: 450MW - 870MW (50% to 100% cycling) 6% - 12% of 2006 unrestricted peak load Incremental DRI Capability: 230MW - 650MW (50% to 100% cycling) 3% - 9% of 2006 unrestricted peak load (50% to 100% cycling) 48% share of residential central air conditioning market Incremental DRI Capital Cost: $100 million $435/kW - $154/kW (50% to 100% cycling)
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BGE®, A Constellation Energy Company DSM/AMI 26 Energy Efficiency/Conservation Customer/Environmental Benefits Reduces consumption of natural gas and electricity during the heating and cooling season and throughout the year During the first ten years of the program electric consumption will be about 10% lower and total gas consumption will be about 8% lower than they otherwise would have been Over a twenty year time horizon, the electric programs will reduce greenhouse gas emissions by an average of 2.0 billion pounds of CO 2 per year Equates to removing 230,000 cars from the road in each year
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BGE®, A Constellation Energy Company DSM/AMI 27 Energy Efficiency/Conservation Proposed Program Measures Energy Star ® products Residential heating and cooling Energy Star ® New Homes Energy Star ® Home Performance Platforms Home retrofits – both Low-Income and non-Low-Income – CHIP (Conservation Home Improvement Program) Home Energy Audits Expanded information services on the web and other media Small Commercial facility and equipment upgrades???
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BGE®, A Constellation Energy Company DSM/AMI 28 Energy Efficiency/Conservation Program Descriptions Energy Star ® Products Promote clothes washers, dishwashers, refrigerators, freezers, room air conditioners, home electronics, lighting, and windows Work closely with major retailers Coordinate with manufacturers receiving federal tax credits for refrigerators, washers, dishwashers Focus on promotion, sales training, and instant-rebate pricing
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BGE®, A Constellation Energy Company DSM/AMI 29 Energy Efficiency/Conservation Program Descriptions (cont’d) Residential Heating and Cooling Focus on installed performance for heat pumps, CACs, gas furnaces Use EPA’s new Energy Star installation criteria, including sizing Work closely with contractors to promote the program and train crews for installation quality Leverage and coordinate with federal credits for furnaces, ACs, HPs, and water heaters Modest rebates to offset a portion of the incremental cost of higher efficiency equipment
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BGE®, A Constellation Energy Company DSM/AMI 30 Energy Efficiency/Conservation Program Descriptions (cont’d) Energy Star ® New Homes Work with home builders/associations Focus on technical assistance, training, co-op advertising Pay for energy ratings Limit direct capital cost rebates Coordinate with federal home builder tax credits
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BGE®, A Constellation Energy Company DSM/AMI 31 Energy Efficiency/Conservation Program Descriptions (cont’d) Energy Star ® Home Performance Platforms Focus on whole-house, performance-based projects Use the Home Performance with Energy Star ® platform Leverage federal tax credits for insulation and windows Low-Income – a critical customer segment experiencing high energy prices Resume the electric low-income CHIP –dovetail with Electric Universal Service Program (EUSP) Complement EUSP with HVAC performance Home Energy Audits
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BGE®, A Constellation Energy Company DSM/AMI 32 Estimated Costs for Energy Efficiency/Conservation Program $60 million Expended evenly from July 2007 to June 2012 ($10 - $12 million annually)
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BGE®, A Constellation Energy Company DSM/AMI 33 Agenda The “Call to Action” Demand Side Management Programs –Demand Response Infrastructure –Energy Efficiency/Conservation Advanced Metering Infrastructure DSM and AMI Timeline DSM and AMI Cost Recovery Summary Appendix
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BGE®, A Constellation Energy Company DSM/AMI 34 Advanced Metering Infrastructure (AMI) AMI, which provides two-way communication between BGE and the customer, will revolutionize the way we serve customers. BGE will be able to better manage customer outages, meter reading, collections, and service order processes. AMI will allow BGE to provide more innovative rate schedules to customers. It will revolutionize the way we interact with customers by providing detailed and timely information about energy use – empowering customers to make informed energy decisions and having the tools to better manage their bills. AMI provides the foundation for Demand Response and other new technologies that will allow customers to gain control of their energy consumption.
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BGE®, A Constellation Energy Company DSM/AMI 35 AMI Overview
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BGE®, A Constellation Energy Company DSM/AMI 36 AMI Fulfills Customer Needs and Transforms Customer Service Capabilities BGE routinely solicits customer feedback to improve our customer services. We learn from this type of research that customers expect the utility to: promote conservation and offer information for customers to manage their energy use be aware of when customers are without power and when power is restored and promptly restore service provide reliable electric distribution service provide accurate bills provide hassle-free service to customers
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BGE®, A Constellation Energy Company DSM/AMI 37 Advanced Metering Infrastructure Benefits Revolutionizes Meter Reading Capabilities Improves meter reading accuracy –Virtually eliminates estimated bills, pro-rations, etc. –Improves month-end settlements with suppliers Enhances customer service –Eliminates customer-provided reads –Eliminates need for BGE to intrude on customer property to read meters Read and control meters at any time to rapidly support customers that: –Request a change in suppliers –Want to switch to a different rate (e.g., TOU) –Request a final bill or request to initiate service –Inquire about a possible high-bill –Want to participate in pre-paid services, load-limiting programs Foundation to enable flexible bill dates, summary billing, etc.
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BGE®, A Constellation Energy Company DSM/AMI 38 Advanced Metering Infrastructure Benefits Improves System Reliability Real time outage information –Outage detection - no need to wait for customer to call –Extent of outage evaluation –Positive verification that service is restored – no need to call customer Electric voltage and momentary outage data can be utilized to target more focused maintenance efforts to improve reliability and prevent customer outages Allows for a smarter grid –Gas and electric distribution system planning and capital investment decisions can be optimized by using real data versus system-wide averages –Asset loading can be verified (e.g., transformers) to allow BGE to take action to prevent outages
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BGE®, A Constellation Energy Company DSM/AMI 39 Advanced Metering Infrastructure Benefits Encourages Efficient Energy Use Enables dynamic pricing options such as Critical Peak Pricing and other time-based rates, which facilitate customer understanding of the true marginal cost of electricity and helps to reduce wholesale prices Helps customers to first understand their electricity usage behavior and then to alter their usage patterns to save on their electricity bill Provides for a significant reduction in the time between customers’ electricity consumption and the awareness of their usage, e.g., customers can access previous day’s detailed consumption and adjust their energy habits without waiting one month for the next bill Is foundational for more effective, two-way demand response infrastructure Should lead to more efficient use of electricity and result in less need for new power plants, helping the environment
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BGE®, A Constellation Energy Company DSM/AMI 40 Advanced Metering Infrastructure Benefits Revolutionizes collections capabilities Automates remote turn-on and turn-off of electric meters May enable BGE to offer, and customers to choose, pre-paid service Enables BGE to offer, and customers to elect, a load-limiting service Allows change in customers’ bill dates to better align with customer’s cash flows Reduces uncollectibles which will benefit all customers Detects and helps prevent energy theft and consumption on inactive meters
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BGE®, A Constellation Energy Company DSM/AMI 41 A Sea of Change in Regulatory and Industry Activity Energy Policy Act of 2005 promotes time-based rate schedules where consumers manage energy use through advanced metering and communications technology. AMI is consistent with the Energy Policy Act. FERC Demand Response & Advanced Metering Staff Report – FERC Staff concluded “demand response has an important role to play in both wholesale and retail markets” and noted that enabling technologies have little market penetration at this point. California and Ontario AMI mandates- California regulators agreed on a customer- oriented energy vision that includes advanced metering for all customers, providing hourly consumption data, and critical peak pricing as the default tariff for all customers with ability to “opt-out.” Ontario mandated AMI for all customers by 2010. First generation AMI technology has been deployed by PP&L, PECO, Duquesne Light, Kansas City Power & Light, Xcel Energy, Ameren, United Illuminating, Puget Sound Energy, Indianapolis Power & Light, Wisconsin Public Service, WE Energies, and JEA. Second generation projects include PG&E, TXU, CenterPoint Energy, Salt River Project, and numerous pilots (PEPCO, SDG&E, HydroOne).
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BGE®, A Constellation Energy Company DSM/AMI 42 Phased-In Approach to Mitigate Risk Phase I Phase begins late 2007 About 9,000 meters deployed to 5,000 customers in Q1 and Q2, 2008 Checkpoint – mid 2008 Purpose: (1) test field technology and limited system integration, assess deployment processes, evaluate vendor performance, (2) confirm resource requirements, (3) validate business case Phase II – Full Deployment 3 years starting in late 2008 to 2011 2 million gas and electric meters, residential and I&C IT integration activities will occur during the same timeframe
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BGE®, A Constellation Energy Company DSM/AMI 43 AMI Business Case Benefits Operational savings will be seen across BGE –Meter reading –Meter maintenance –Service orders and collections –T&D planning, outage response –Demand Response program improvements –Other (reduction in UFE, load research, IT support, etc.) Customers can also realize savings from AMI-enabled time-based rates Cost of Phase I: nearly $10 million in capital Cost of Phase II - Full Deployment: $350 - $450 million – primarily capital (costs to be refined after RFPs and pilot results) Benefits to customers will exceed the costs to deploy
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BGE®, A Constellation Energy Company DSM/AMI 44 Pilot Area Selection Piloting AMI to selected meters within zip codes 21157 and 21202 allows BGE to validate required AMI functionality in technologically-challenging areas and to confirm the expected benefits can be achieved, while balancing cost, schedule, and resource requirements 21157 21202 Attributes Satisfied 2115721202 RF Interference/Topology/Terrain/Density Commodity Type Meter types/form factors Overhead/underground Indoor Meters High customer turnover Aggressive disconnects/reconnects Reliability/outage Existing DRI customers Customer Type, Rate Class (TOU, interval)
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BGE®, A Constellation Energy Company DSM/AMI 45 AMI Technology Overview Two key types of scalable AMI technologies: Radio Frequency –Mesh –Fixed –Point-to-Point Powerline Carrier –PLC –BPL BGE is considering all AMI technologies at this time
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BGE®, A Constellation Energy Company DSM/AMI 46 AMI Technology Features In the meter: Solid state electric meters, gas modules Two-way communications to the meter Remote, under-glass turn-on/off device (and load limiting) for electric Memory in the meter Hourly or 15-minute interval data recording Bi-directional and net metering Time-stamped outage and tamper event reporting Power quality reporting HAN and DRI communication using non-proprietary protocols (Zigbee) Remote programmability and upgradeability Universal time synchronization Backhaul communication over BGE’s private cellular network
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BGE®, A Constellation Energy Company DSM/AMI 47 AMI Technology Features In the back office (Meter Data Management System): Commercial off-the-shelf application Data collection on a daily basis On-demand reads Aggregate data in configurable periods to support new time-based rates Remote diagnostics, such as meter failure and revenue integrity issues Asset tracking Programmatic data validation Issue curtailment signals and monitor customer response Support Sarbanes-Oxley compliance Interfaces from MDMS to existing BGE applications provides all other key functionality, such as billing, outage detection, on-line customer presentment, pre-paid services, asset optimization, distribution planning, load research…
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BGE®, A Constellation Energy Company DSM/AMI 48 Agenda The “Call to Action” Demand Side Management Programs –Demand Response –Energy Efficiency/Conservation Advanced Metering Infrastructure DSM and AMI Timeline DSM and AMI Cost Recovery Summary Appendix
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BGE®, A Constellation Energy Company DSM/AMI 49 Timeline January 2007 – File with the PSC for approval of: –Phase I AMI/DRI –Regulatory Asset for Phase I AMI/DRI –New DRI Tariff & close Electric Rider 5 to new customers –Energy Efficiency/Conservation Tariff – New for Electric & modified for Gas –Request Collaborative process to develop program details February 2007 – PSC reviews and rules on: –Phase I DRI and Regulatory Asset approval –Demand Response Infrastructure Tariff January - March 2007 – PSC reviews and rules on: –Phase I AMI Program - Regulatory Asset approval –Energy Efficiency/Conservation Collaborative process begins –Energy Efficiency/Conservation Surcharge
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BGE®, A Constellation Energy Company DSM/AMI 50 Timeline Summer 2007 –Phase I deployment for DRI –File for approval of DRI Surcharge mechanism Mid 2007 – Energy Efficiency/Conservation –Begin implementation of programs Late 2007 – Mid 2008 – Begin Phase I deployment for AMI Late 2007 – DRI –Checkpoints for Phase I DRI –Final internal decision on implementing DRI Phase II – Full Deployment –File with the PSC for approval of implementing Phase II with cost recovery via Surcharge mechanism –Full Deployment, if approved by PSC
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BGE®, A Constellation Energy Company DSM/AMI 51 Timeline Late 2007 – Early 2008 –Begin Phase II – Full Deployment for DRI –3-4 years for DRI –File for approval of AMI Tracker mechanism Mid-2008 - AMI –Checkpoints for Phase I AMI –Final internal decision on implementing AMI Phase II – Full Deployment –File with the PSC for approval of implementing Phase II with cost recovery via Tracker mechanism –Full Deployment, if approved by PSC Late 2008 - Begin Phase II – Full Deployment for AMI –2–3 years for AMI
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BGE®, A Constellation Energy Company DSM/AMI 52 Agenda The “Call to Action” Demand Side Management Programs –Demand Response Infrastructure –Energy Efficiency/Conservation Advanced Metering Infrastructure DSM and AMI Timeline DSM and AMI Cost Recovery Summary Appendix
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BGE®, A Constellation Energy Company DSM/AMI 53 Need for Timely Cost Recovery Timely cost recovery avoids abrupt rate increases that can occur when recovery of significant costs are delayed until a base rate case and is good public policy Assured timely recovery of these costs may limit the uncertainty in cost recovery – helping to maintain reasonable financing costs BGE’s bond rating has recently been reduced due to uncertainty in recovering standard offer service costs in a timely manner - lower bond ratings typically result in higher interest rates
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BGE®, A Constellation Energy Company DSM/AMI 54 Proposed Regulatory Treatment Demand Side Management Programs Establish Electric and Gas DSM Surcharges Timely cost recovery is an integral component of the DSM Programs Energy Efficiency/Conservation Demand Response Infrastructure Prospective rates with annual true-up Surcharge to be included in the volumetric delivery rate – not a separate line item on the customer’s bill Earnings based on 8.49% ROR applied to expenditure balance
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BGE®, A Constellation Energy Company DSM/AMI 55 Proposed Regulatory Treatment Demand Side Management Programs Energy Efficiency/Conservation Programs Electric Revenue Decoupling - BGE made whole for any distribution revenue loss between rate cases attributable to Company-sponsored energy efficiency/conservations programs Gas and Electric Program Incentives - based on net savings from programs Program Costs amortized over 5 years – including program administration, rebates, monitoring and evaluation, etc Demand Response Infrastructure Program Costs amortized over 10-15 years – including procurement and installation of devices and other capital expenditures, program administration, credits, monitoring and evaluation, etc
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BGE®, A Constellation Energy Company DSM/AMI 56 Proposed Regulatory Treatment Advanced Metering Infrastructure New cost recovery approach is necessary to implement new utility technologies Create a Regulatory Asset for all costs associated with Phase I AMI –Earnings from the regulatory asset based on 8.49% ROR applied to expenditure balance Phase II AMI – Full Deployment is contingent on approval of a Surcharge –After review of Phase I – if full deployment is appropriate – Surcharge to recover cost less savings for full AMI programs plus deferred Phase I costs –After review of Phase I – if full deployment is not recommended at this time –Amortize regulatory asset over 5 years and recover via Surcharge –Surcharge to be included in the volumetric delivery rate
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BGE®, A Constellation Energy Company DSM/AMI 57 Description of AMI Surcharge Full Tracker New Rate Base, less Retirements, plus a Return, plus Operating Costs, less Related Savings Below are examples of what would be incorporated into the Surcharge – it is not all inclusive AMI Rate BaseAMI Operating Costs + Capital Investment+ O&M + Cash Working Capital+ Depreciation + Prepaid Taxes+ Other Taxes - Depreciation Reserve+ Income Taxes +/- Deferred Taxes+/- Deferred Income Taxes Related Retirements and SavingsRelated Savings - Current Meter Investment- O&M - Cash Working Capital- Depreciation - Prepaid Taxes- Other Taxes + Depreciation Reserve- Income Taxes +/- Deferred Income Taxes Return in Investment + Net AMI Investment x Required Return / Conversion Factor
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BGE®, A Constellation Energy Company DSM/AMI 58 Agenda The “Call to Action” Demand Side Management Programs –Demand Response –Energy Efficiency/Conservation Advanced Metering Infrastructure DSM and AMI Timeline DSM and AMI Cost Recovery Summary Appendix
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BGE®, A Constellation Energy Company DSM/AMI 59 Need for DSM Programs and AMI “State PUC’s have an important job to do under new federal legislation. With energy prices rising, advanced metering could provide consumers with options to save money by shifting or reduction their electricity consumption…” Commissioner Richard E. Morgan of the District of Columbia Public Service Commission “Demand response is very important to well-functioning electric markets and to grid reliability, and more deployment of advanced meters will enable customer to benefit from actions that have value in the wholesale electric market.” Susan T. Covino, Manager of Demand Side Response at the PJM Interconnection “Many of the benefits of the installation that was approved for PG&E come in improvements to the core operations of the utility. The new metering system will allow new capabilities in the area of outage management and restoration, customer service and data management among others.” Dan Delurey, Demand Response and Advanced Metering Coalition Executive Director
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BGE®, A Constellation Energy Company DSM/AMI 60 Need for DSM Programs and AMI Encourages efficient energy usage Allows customers to better manage energy costs and enhances perceived value Fosters wholesale electric market efficiencies through reduction of scarcity pricing and congestion costs Enhances electric system reliability while reducing the need for additional transmission and generation investment Reduces distribution capital investment and improves capital decisions and asset management practices Provides for more efficient operations to serve customers in a more timely fashion Transforms electric outage management service to customers Improves gas operating effectiveness during critical supply/distribution events Improves the environment Contributes to improved employee and public safety performance Lays foundation for enabling new opportunities Provides cost reduction opportunities
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BGE®, A Constellation Energy Company DSM/AMI 61 Agenda The “Call to Action” Demand Side Management Programs –Demand Response –Energy Efficiency/Conservation Advanced Metering Infrastructure DSM and AMI Timeline DSM and AMI Cost Recovery Summary Appendix
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BGE®, A Constellation Energy Company DSM/AMI 62 Aligning Utility Interests with Energy Efficiency Objectives: A Review of Recent Efforts at Decoupling and Performance Initiatives Report by the American Council for and Energy Efficient Economy – October 2006 “Soaring fuel prices, growing concerns about utility system reliability needs, and increasing awareness of future environmental risks have all reinvigorated interest in the use of energy efficiency as a serious utility system resource. With this renewed interest, there is increasing recognition that in order to expect utilities to embrace the aggressive deployment of energy efficiency programs, something must be done to address the financial concerns utilities have regarding energy efficiency. As a result, a growing number of states are re-examining utility regulations and policies that affect utility planning, decision-making, and operations to ensure that such policies and regulations are supportive of energy efficiency objectives.”
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BGE®, A Constellation Energy Company DSM/AMI 63 Public Utility Commission of Ohio “The combination of the requisite time of day tariff revisions in conjunction with the cost effective deployment of smart metering and communications service packages will incent customers to shift usage patterns thereby reducing generation charges, which will result in an overall reduction of peak generation load.” Case 05-1500-EL-COI, Staff report issued on August 28, 2006 by staff of Public Utilities Commission of Ohio
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BGE®, A Constellation Energy Company DSM/AMI 64 Massachusetts Department of Telecommunications and Energy In restructured markets, price-responsive behavior can provide additional benefits in that it can “discipline” the market: Protect against market power behavior Mitigate price volatility in energy markets Allow for relaxation price caps in energy markets Reduce need for capacity market Remarks by Paul Afonso, Chairman on MA Dept. of Telecommunications and Energy, 11/22/2005
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BGE®, A Constellation Energy Company DSM/AMI 65 Washington State Utilities and Transportation Commission “As context for its Inquiry, the Commission will consider its prior policy and experience regarding time-of-use rates and metering as well as the purposes of PURPA standards to encourage: Conservation of energy supplied by electric utilities. Optimal efficiency of electric utility facilities and resources. Equitable rates for electric consumers.” Docket UE-060649, Washington Utilities and Transportation Commission, June 9, 2006.
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BGE®, A Constellation Energy Company DSM/AMI 66 Pennsylvania “The Pennsylvania Energy Independence Strategy will save customers $10 billion in energy costs over the next decade. It calls for the expanded use of “smart meters’ that conserve energy, greater use of solar energy, product rebates to swap old air conditioners and refrigerators for new, more energy-efficient replacements, helping industrial businesses statewide purchase cheaper energy and lock in more stable energy prices and finding new ways to reduce energy consumption during peak periods.”
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