1. SmartMeter Program Update - Operational Benefits Realization - Jim Meadows, Program Director August 2007

2. 2 2 About Pacific Gas and Electric Company ► Energy Services to about 15 M People ► 5.0 M Electric Customer Accounts ► 4.1 M Natural Gas Customer Accts ► 70,000 Square Miles ► ~20,000 Employees ► Regulated by the California Public Utilities Commission (CPUC). ► Incorporated in 1905

3. 3 3 The PG&E SmartMeter program: ► will deploy a system for automated meter reading – hourly meter reads for electric, and daily meter reads for gas ► includes two separate systems: a power line carrier system for electric and a radio frequency system for gas ► involves an upgrade to both gas and electric meters – approximately 10 Million meters will be upgraded ► will be deployed over a five year period. An initial, paced deployment began in Bakersfield in November, 2006. Deployment efforts are scheduled to conclude in late 2011 ► will introduce additional capabilities over time, including outage management and remote connect/disconnect ► will enable the introduction of demand-response rates for residential and small business customers

4. 4 4  Customers ► Receive usage information to better understand and manage their bills, and be able to participate in future energy efficiency and demand response programs ► Experience less inconvenience and intrusion by no longer needing to unlock gates and tie up dogs for monthly meter reads ► Reduction in the causes of delayed, inaccurate and estimated bills ► Experience faster outage detection and restoration times ► Opportunity to turn service on and off remotely Smartmeter Program Has A Range Of Benefits ► Reduced operating costs ► Reduced peak loads when customers shift to non-peak energy use and when they conserve (demand response) ► Lower procurement costs resulting from reduced peak load and enhanced load modeling ► Improved customer satisfaction stemming from enhanced customer service capability ► Improved billing efficiency ► Improved outage management ► Reduced energy theft  PG&E ► Supports the CPUC’s price-responsive tariff requirements  CPUC/State

5. 5 5 ISTS O&M $191M Field Deployment $1,299M ISTS Deployment $189M Meter Reading Operations Costs* Meters Networks Installations IT Systems System Integration Project Management O&M Demand Response Benefits* Smartmeter Program Will Pay For Itself Remote turn on / off Outage detection Service restoration Avoided dispatches / truck rolls Call volume reductions Records exception reductions Complex billing Capacity planning Costs < Benefits 90% of costs ► The SmartMeter program has a positive business case: Projected benefits exceed projected costs over a 20 year program life ► Operational efficiencies (including meter reading savings) cover 90% of program costs ► Demand response benefits (i.e. procurement cost savings) cover approximately 10% of program costs and promise to provide additional benefits in excess of costs * 20 year Present Value of Revenue Requirement

6. 6 6 90% Of Smartmeter Program Costs Covered By Operational Benefits Total annual benefit from operations (at full deployment) = $160.5 Million Breakdown of Operational Benefits By Benefit Area

7. 7 7 Activated Meter Commitment to CPUC Savings Per Activated MeterElectric $Gas $ Meter Reader $ (0.8235) $ (0.8223) severance - - Other Employee Related Costs $ (0.1706) $ (0.1705) Remote Electric Shut-off Benefits $ (0.1429) $ - Avoided TOU Meter Maintenance $ (0.1155) $ - Cash Flow on Summary Bills $ (0.0927) $ (0.0225) Exceptions Processing $ (0.0809) $ - Avoided Dispatch Where Power is On $ (0.0794) $ - Significant Outage Restoration-Capital $ (0.0764) $ - Significant Outage Restoration-Expense $ (0.0578) $ - Lower customer Call Volumes $ (0.0515) $ - Deferred Meter Testing $ (0.0445) $ - Improved TOU Rate Changes $ (0.0190) $ - Momentary Outage Detection $ (0.0106) $ - Load Research Capital Savings $ (0.0069) $ (0.0071) T&D Capital Savings (gas) $ - $ (0.0143) TOTAL Savings/Meter/Month: $ (1.7722) $ (1.0366)  Once meters are activated, we pay either $1.77 or $1.04 to the SM balancing account each month.

8. 8 8 An “Activated” Meter Has Several Characteristics ► Installed: the endpoint equipment (meter for electric, module for gas) has been placed on customer premises ► Readable: the SmartMeter system communicates with the endpoint equipment ► Billable: the billing system can use interval data collected through SmartMeter to bill the customer ► Part of a virtual meter reader route string: the meter reader can be re-deployed when the virtual route string is removed from the manual meter reading workload Meters are activated in batches, by virtual route string Once a meter is activated, actual meter reading benefits begin to accrue

9. 9 9 Activated Meters Lifecycle  Updates to billing system  Customer account changed to “SM enabled”  Meters become searched in SM system  Billing system performs validation  Electric meters take longer to search in than gas meters  Customer account c hanges to “SM read”  Last manual meter read  Visual inspection to QA SM installs  Customer billed on manually collected anchor reads  Service plan transition from manual meter reading route to SM route  Consists of manual meter reading routes with zero meters (i.e. completed routes)  One completed route for each serial  Captured in reports  Meters are activated  Network installed with serial diversification  Endpoints installed with serial diversification  Committed to the CPUC for benefits associated with activated meters, by writing monthly checks utilizing SM balancing account ($1.77 each electric meter, $1.04 each gas meter)  Release meter readers Meter/Network Installed SM Enabled SM Read QA / Anchor Billed Meters Eligible For Activation Completed Routes Virtual Route String Benefits Realizations  Customer accounts on a SM route are part of a pool of meters eligible for activation  A “complete” route is an manual meter reading route with zero meters  Can create a completed route with limited number of meters (Excludables, UTCs, other meters out of scope) via either “closed routes” benefits functionality or manual re- routing

10. 10 Meter Routes Progress

11. 11 Benefits Realization For Meter Reading ► Meter reading benefits account for the bulk for program benefits - 53% of SmartMeter operational (i.e. non demand response) benefits; 46% of total benefits ► Benefits are booked in a balancing account as soon as the meter is “activated” – PG&E cuts a check to the balancing account ► Meter reading benefits can only be realized once a meters on a virtual route string are activated or transferred to a different route ► Virtual route string = routes with different serials ► Meters are activated only after they are: installed, readable, billed, part of a completed virtual route string ► PG&E fine tunes installation activity to complete virtual route strings as soon as possible

12. 12 In The Future, The Smartmeter Program Could Enable The Following Potential Capabilities  Real time energy usage data to premise from meter  Building automation  Home energy/bill management tools and systems  Smart thermostat (programmable communicating thermostat – PCT)  Appliance control and monitoring  In-home displays  Customers  Direct load control (air conditioner, water heater, pool pump, etc.)  CPP and other demand response programs and rates  Targeted regional/area TOU programs  Smart thermostat control (programmable communicating thermostat – PCT)  Distribution planning  Distribution voltage management  Gas system planning  Pre-pay metering  Distribution fault detectors  Capacitor bank controls  Transformer load monitoring  Meter health monitoring  Preventive line maintenance data (momentary)  Identification of facility performance or customer usage anomalies  System load forecasting and settlement  Enhanced outage data management  Energy load research program flexibility  Gas distribution maintenance (e.g. cathodic protection monitoring)  PG&E  Energy resource planning  Data for ISO system control  Load control programs  Demand response programs  CPUC/State