1. Rate Policy Discussion Presentation to Review Panel November 1, 2013

2. Rate Policy: Role of Review Panel ORD 123256, Section 4: c) Assess the adequacy of City Light’s financial policies d) Review changes to City Light's rates e) Assess City Light's rate design to ensure that rates send the appropriate signals to customers to use electricity efficiently f) Assess City Light's implementation of marginal cost allocation among customer classes 2

3. Rate Policy Review: Goals  Predictability: rates/bills should be predictable.  Simplicity/transparency: Rates are understandable and changes are implemented in an orderly way. 3 Predictability Financial Stability Price Signal Equity Transparency  Price signals: rates should provide meaningful price signals that ratepayers can observe and act on, to encourage consumption awareness and conservation.  Equity: Everyone should pay their true cost of service.  Financial Stability: Rates should collect the full revenue requirement with a reasonable level of certainty.

4. Rate Class Current Structure Proposed New Structure Predictability Transparency Price Signal for Efficiency Equity Financial Stability Residential 2 blocks with seasonal first block (300 kWh summer, 480 kWh/mo winter) 2 blocks with year-round 300 kWh/mo first block BSC at 50% Customer MC ($4.71/month) BSC at 75% Customer MC ($7.07/month) and retain price signal of second block. Low Income60% Subsidy 50% subsidy, and expand the program to reach more qualified residents. Medium Network Flat kWh and kW rates TOU kWh and kW rates Policy Issues Matrix 1 4 Rationale For Change

5. Rate Class Current Structure Proposed New Structure Predictability Transparency Price Signal for Efficiency Equity Financial Stability Small, Medium, Large, HD Minimum charge at 100% Customer MC Base Service Charge recovers 100% Customer MC. Small GS Distribution MC collected 100% via energy charge Flat Infrastructure Charge recovers 50% of Distribution MC ($42/mo) Medium, Large, HD Demand charge recovers ~16% Distribution MC Demand charge per kW recovers 50% of Distribution MC AllNo decouplingDecoupling Policy Issues Matrix 2 5 Rationale For Change

6. Fixed and Variable Components of Costs and Revenues Fixed Energy Demand $0 $100 $200 $300 $400 Distribution and Other Fixed Costs 46% Energy Costs 54% Energy BSC & Infrastructure 79% 8% Revenue Proposal Revenue Current BSC 3% 93% Demand 4% Energy Demand 13% Fixed costs still recovered by energy charges Costs 54% Energy 46% Distribution & Other 6 $100 $200 $300 $400 $500 $600 $ million $500 $600 $700 $800