1. Distributed Energy Resources The Energy Challenge of the 21 st Century

2. 2 Vision Of The Future

3. 3 Changing Policy Environment  Energy Efficiency – our First priority  Renewable / Sustainable Resource incentives  Climate Change initiatives  The Smart Grid challenge The bottom line - new priorities for public utilities  Distribution utilities as enablers  Need to align utility ratemaking policy with energy policy priorities

4. 4 Provide painless hook-up to grid Provide distribution system energy storage and standby/back-up services Provide smart meter data and pricing information Provide investment capital for renewable energy and other DER in New Hampshire based on monetizing of utility system and other benefits Provide technical, program/project management and financial resources in the early stages of the energy transformation Distribution Utility as DER Enabler

5. 5 Policy Alignment  When distribution utility revenues are directly linked to sales – energy conservation and DER imposes financial penalties  Solution – revenue decoupling OR more rate cases  Distribution utility resources are allocated based on opportunities  Return on investments  Incentives for performance 5

6. 6 The SB451 Model  DER regulatory framework set in SB451  Cost Recovery & Return on utility ownership investment and contributions to customer owned DER  DER is an alternative investment that can displace traditional utility distribution investments  Requires PUC approval based on a finding of “public interest”  Economic cost/benefit  Environmental impact  Economic development  System reliability & security 6

7. 7 What Are Distributed Energy Resources? 1.) Distributed Generation  Solar  Small scale wind  Biomass  Clean cogeneration 2.) Non-Generation  Energy efficiency  Demand response  Energy storage   Located on or near customer premises.   Connected to the local distribution grid.   Displaces bulk, central station energy supply.

8. 8 What Are The benefits Of DER?  DER increases overall energy efficiency and energy diversity by eliminating or displacing energy deliveries from the bulk power system.  Lower regional dependence on fossil fuels.  Stabilize and reduce future energy costs.  Keep energy and investment dollars in-state.  Reduce greenhouse gases and other emissions.

9. 9 Benefit Screening Model Distr. Line Losses Trans.Energy Gen. Capacity Energy Divers. Environ.Econ Dev DER Investment displaces energy and peak demand Delays need for investment to meet peak Reduces line losses Reduces transmission charges Displaces fossil-fueled generation Reduces need for additional generation Increases fuel diversity Reduces emissions Dollars kept locally rather than exported Value of Benefits $500 to $1,500 investment per peak KW 0-20% of energy produced Up to $4 per KW per month Average ISO ECP - up to 10cts/kWh FCM prices @ $4.50 per KW per mo. RPS ACP values: 5.7 to 15.0 cts/kWh Incr. RGGI savings Multiplier on retained $ Customer Owned Project with Utility Investment Recovered in Rates Project owner Compensated for benefit Retains energy savings Compensated for benefit Compensated for project RECs No direct benefit Utility Avoided cost monetized No benefit Utility aggregates and monetizes No direct benefit Other customers Rates < or = avoided costs Market price moderation Rates < or = avoided costs Default Service customers pay for RECs. Free benefit to society

10. 10 Where are we?  Unitil has hired a consultant and is working towards an initial DER filing  The initial filing will provide a detailed roadmap for the SB451 process including the ratemaking mechanism and an evaluative screening tool  Several specific projects will be included in the initial filing – the list is still being finalized  In 2009 we will continue prospecting for customer projects and programs that can meet the screening requirements and provide cost effective solutions to NH’s future energy needs