1. Smart Grid: What’s In It for the Customer? Wharton Energy Conference 2010 Wayne Harbaugh, Vice President, Pricing & Regulatory Services

2.  Increasing demand and rising energy costs in the long term  Significant investments needed in new and replacement infrastructure  Resource adequacy and transmission congestion  Tougher environmental regulations  Ability to accommodate growing levels of intermittent, renewable energy  Emergence of plug-in electric vehicles (EVs)  Emergence of Smart Appliances that move energy use from one period to another Key Challenges and Opportunities Confronting Our Industry 2 Smart Grid addresses each of these challenges …

3. BGE Load and Energy Costs Vary Dramatically by Hour 3

4.  Customers allow “smart cycling” of their air conditioning in exchange for annual bill credits  Choice of “smart” thermostat or outdoor switch  Choice of three levels of cycling – 50%, 75%, or 100% -- and up to two over-rides per summer  Ability to remotely adjust temperature settings  Over 306,000 residential customers enrolled  Produces the equivalent capacity of building a large new power plant at a fraction of the cost  Will move to two-way communications via Smart Grid BGE PeakRewards SM Program 4 Cost Comparison - PeakRewards SM : $165 per kW - New Peaking Plant: ~$1,000 per kW

5. A portfolio of initiatives to lower energy bills and increase efficiency:  Efficient lighting and appliances  Heating and cooling  Home energy audits and retrofits  New construction  Targeted low-income programs  Custom solutions for large commercial accounts  Significant opportunities to reduce energy waste Energy Efficiency & Conservation Initiatives 5 Cost Comparison: - Cost to reduce consumption: 2-3 cents per kwh - Cost to supply more power: 9-10 cents per kwh

6. Driving improvements in utility operations and energy delivery Smart Grid: A Transformational Initiative 6 Automation Distribution Substation Autorestoration Capacitor Control Fault Locating Remote Indication OMS Integration Outage Management Outage Notification Restoration Notification Efficient Delivery Reduced line losses through volt / VAR management Voltage Conservation Management (VCM) Equipment Monitoring Temperature Load Voltage Communications Robust 2-way communications network throughout the grid and to every customer’s meter

7. Supporting new consumer products and pricing structures to enable energy reductions and cost savings Smart Grid: A Transformational Initiative 7 Renewable Energy & Dist. Gen. Solar Wind Micro-Turbines Electric Vehicles Smart Charging PHEV EV V2G AMI & Smart Energy Pricing Rebates earned for reducing peak demand Improved price signals and energy conservation Energy Storage Batteries Flywheels Ice Demand Response Smart Thermostats Load Control Switches for HVAC, hot water heaters Home Area Network ZigBee Network Smart Meters communicate to Smart Thermostats & Appliances In-Home Displays and Internet Portals track usage

8.  1,000 customers randomly selected  Day-ahead notification of a peak event  Rebates offered for energy reductions during peak periods (2 p.m. to 7 p.m.)  Test groups included: − Price incentive only − Price incentive with in-home display (Orb) − Price incentive with Smart Thermostat and Orb  Advanced meters installed to record customers’ usage on an hourly basis to calculate bill rebates 2008 - 2010 Smart Energy Pricing Pilot: Measuring Customer Response to Price Signals 8 Ambient Orb

9. Dynamic Peak Pricing (aka DPP) Weekdays (excluding Holidays) 9 Pilot Pricing All – in Rate* Critical- $1.30425 Peak $0.14425- Off-Peak- $0.09425 * Includes generation, transmission and delivery $1.30 $0.14 $0.09

10. A Mirror Image of DPP Rate − Schedule R summer rates are $0.14 / kWh for all summer hours − Up to 12 critical peak days will be called by 6 p.m. the prior day − Customers who use less during the critical period (2–7 p.m.) on any critical peak day will receive a rebate. Two levels being tested:  $1.75/kWh  $1.16/kWh Peak Time Rebate: Weekdays (excluding Holidays) 10

11.  Customers respond emphatically to pricing signals, reducing consumption by approximately one-quarter to one-third  Average customer savings was $115  More than 98% reduced their bills The SEP Pilot Demonstrated Significant Consumer Interest and Willingness to Adjust Consumption 11

12. SEP Customer Survey Results 12 On a scale of 1 to 5, where 1 is "Very Dissatisfied" and 5 is "Very Satisfied", please rate your overall satisfaction with the pilot program. (Select one option) Over 93% of customers were satisfied with Smart Energy Pricing; 98% - 99% wished to continue participation

13. Smart Grid Benefits in Multiple Dimensions 13 A communications network that can be used to provide future smart grid functions such as: Automated, self-healing network Remote fault indication 2-way capacitor control Reduction of system line losses Voltage optimization and efficiency gains Reduced carbon emissions –Lower energy consumption Reduced need for power plants –Peak load reductions Infrastructure that can support renewable generation –Wind –Solar Infrastructure than can support smart charging of Plug-in Hybrid Electric Vehicles Reduced peak load –500MW through Smart Energy Pricing –1,700 MW total (~25%) Reduced O&M – Eliminates manual meter reading –Reduces truck rolls for turn on/off of service –Enhanced storm operations Better capital planning through improved gas and electric system models Avoided Cap-Ex Lower customer bills –Bill credits through Smart Energy Pricing –Empowered consumers managing energy use Improved reliability –Automated outage reporting / faster restoration Improved customer service –Virtually eliminates estimated bills –On-demand meter reads Support for In-Home Networking / Displays –Web Portal –In-Home Displays Customer Benefits Operational Benefits Societal Benefits Grid Benefits

14. Smart Grid: Over $2.6 Billion in Consumer Savings 14 Life-cycle savings projected to exceed $2.6 billion – several times greater than deployment cost of $500 million! Additional downstream savings likely from reduced line losses and voltage optimization, reduced carbon emissions, and integration with PeakRewards sm !

15.  More info on MD PSC Case 9208 (BGE’s Smart Grid Case) available on PSC’s website  http://webapp.psc.state.md.us/Intranet/Casenum/CaseAction_new. cfm?RequestTimeout=500? http://webapp.psc.state.md.us/Intranet/Casenum/CaseAction_new. cfm?RequestTimeout=500 Full Case Filing History 15

16. Q&A 16