1. Allegheny Power Residential Demand Response Program
Demand Side Stakeholders Review
February 26, 2008

2. Agenda RDR Program Summary Q&A Description Benefits Costs
Benefit/Cost Ratio
Sensitivity Analysis
Conclusions
Q&A

3. Program Description Voluntary residential A/C control program
Device Options (one-way communication)
Smart thermostat (indoor)
Smart switch (outdoor)
Available cycling options
100% during PJM declared (emergency) events
50% during PJM (emergency) or AP (economic) declared events
Incentive Payments
100% cycling = $50/yr
50% cycling = $25/yr
Credited equally to first four bills rendered from June through September
Interruption quantity and duration
Up to 10 events per year (June-May)
Up to 6 hours duration per interruption
Opting out of an event
Participants would receive day-ahead notification of an event (delivery method is technology dependent)
Participants may opt out of one event per year without penalty
Participants that insist on more than one opt-out will be removed from the program and forfeit any remaining incentive payments

4. General Assumptions/Statistics
Potential universe of participants
220,000 residential customers (2007)
A/C saturation = 51%
Electric heat pump saturation = 13%
Eligible participants = 148,800 by 2011
Assumed participation rate = 10%
Assumed participant cycling option selection
100% cycling = 10%
50% cycling = 90%
Assumed device selection
Smart thermostat = 50%
Smart switch = 50%
Weighted-average participant load reduction = kW

5. Program Benefits Benefits were identified in four areas:
Direct benefits are savings derived from a customer participating in the program
Direct Capacity
Direct Energy
Indirect benefits are savings that result from greater demand elasticity and more efficient market operation
Indirect (Mitigation) Capacity
Indirect (Mitigation Energy

6. Direct Benefits Direct capacity benefits Available ILR or DR resources
Capacity value

7. Direct Benefits (Cont.)
Direct capacity benefits (Cont.)
Bid Strategy
Resources available in February each year would be offered into the ILR program for the upcoming delivery year
Resources available in February each year would also be offered into the RPM BRA for the delivery year 3 years in the future
NPV = $6,522,068
Direct energy benefits
Assumes full 60 hrs per year
Energy price = $195.89MWh
2005, 2006, 2007 PJM LMP for AP Zone
Ten highest priced events, 6 contiguous hours
NPV = $426,037

8. Indirect Benefits Indirect capacity benefits Indirect energy benefits
Offering DR resources in the RPM BRA reduces the amount of more expensive capacity that must be cleared to meet PJM’s IRM
Constrained LDA vs RTO
AP Zone and SW MACC have different VRR curves
Value of reducing 1 MW in SW MAAC is approximately 5 times greater than in AP Zone
AP Maryland residual residential load is approximately 5 times smaller than BGE
NPV = $643,062
Indirect energy benefits
Relied on Brattle Group Study
Net benefits to AP Zone = $400,000/yr
Maryland residential allocation = $36,662/yr
NPV = $303,814

9. T&D Benefits
AP did not project any T&D benefits resulting from the RDR program
AP is dual-peaking
Since 2002, AP has set its annual peak during the winter season 3 times
Over the same period, the winter peak has averaged 98.4% of the summer peak
A summer demand response program may not alter the need for system upgrades or reinforcements

10. Program Costs Program costs are not vendor specific and include:
Cost of, installation and on-going maintenance of field devices
Cost of, integration and on-going maintenance for back-office IT hardware and software
Operating costs, including program administration, contractor costs, M&V and customer incentives
Since AP does not have the necessary communications infrastructure, communication is via 3rd party service estimated at $60/point/yr

11. Program Costs (Cont.) Utility Incentive
Tiered shared-benefit structure calculated as a percentage of the sum of the direct and indirect capacity benefit and the direct energy benefit

12. Benefit/Cost Ratio NPV Benefits = $7,895,000 NPV Costs = $18,990,000
BCR = 0.39

13. Sensitivity Analysis

14. Conclusions
AP does not recommend implementation of an air conditioner cycling program at this time
AP will continue to explore ways to lower implementation costs, such as the Advanced Utility Infrastructure Pilot
AP will also continue to evaluate and recommend cost effective DSM programs for implementation, such as the those included in this filing
Energy Conservation Kits for Residential Customers
LED Traffic Signals
LED Exit Signs