Energy Intensive Industrial Customer Work Group March 24, 2014

A. Cost Allocation using 100% Demand DescriptionWho benefitsWho pays more Modifies the allocation of production capacity costs from the current weighting of 4 CP 50/25/25 (50% demand, 25% on-peak energy, 25% total energy using 4 coincident peaks) to 4 CP 100% demand. The emphasis on summer months’ demands results in the allocation of a higher portion of the total cost for seasonal air conditioning use to residential customers and lowers the cost burden for industrial customers who use energy more consistently from month-to-month. Primary Customers (both commercial and industrial), including large and mid-sized industrial customers, Primary Municipal (water & sewage pumping) customers, some large Primary Hospitals and medical centers, Big-box store retailers, universities, hotels and casinos Mostly residential and to some extent secondary customers

Annual Electric Load Profile by Class JanFebMar AprMayJun JulAug Sep Oct NovDec 1/6 2/9 4/8 3/4 5/26 6/22 7/7 8/31 9/1 10/20 11/30 12/9 12CP is the average of the 12 monthly coincident peaks (dates noted above) 4CP is the average of the 4 summer monthly coincident peaks (6/22, 7/7, 8/31 and 9/1)

B. Large High Load Factor DescriptionWho benefitsWho pays more Establishes a new cost-based rate for Primary customers, greater than 2.5 MW load with a load factor of at least 70%. Separating high load factor customers in the Cost Study results in lower costs on a per kWh basis. This is a cost shift within the Primary class and does not impact Residential or other Secondary customers. High Load Factor Primary Customers (both commercial and industrial), including large and mid-sized industrial customers, Primary Municipal (water & sewage pumping) customers, large Primary Hospitals and medical centers, Big- box store retailers, universities, hotels and casinos Primary customers with less than 2.5 MW load and/or with load factors less than 70%

C. Expiration of Rate E-1 DescriptionWho benefitsWho pays more Elimination of $64.5 million subsidy when Large Industrial Economic Development Primary Rate E-1 expires in November 2015 All residential, secondary, and primary customers not on the E-1 rate Assumes E-1 load goes on standard tariff rates

Regulatory Options Rate Design Action Total Annual Revenue Impact Residential IndustrialCommercial Total Primary Total Secondary Other Large High Load Factor Primary Other Industrial Primary Industrial Secondary Total IndustrialPrimary Secondary A. Cost Allocation Based on 100% Demand $53 million Cost Shift +3% + $51 mils (5%) +0.2%(3%)(5%)+0.2%(4%) ($50 mils) +0.2% +$2 mils (9%) ($3 mils) B. Large Industrial Tariff High Load Factor 2.5 MW Load and 70% Load Factor $9 million Cost Shift No Change(4%) ($7 mils) +1% $ 2 mils No change(1)%+1% $2 mils No change (0.3)% ($3 Mils) No change C. Potential Incremental Impacts post Rate E-1 $64.5 million savings (1.7%) ($30 mils) (1.7%) ($3 mils) (1.7%) ($6 mils) (1.7%) ($2 mils) (1.7%) ($11 mils) (1.7%) ($8 mils) (1.7%) ($15 mils) (1.7%) ($18 mils) (1.7%) ($17 mils) No change Total Impact (A+B+C) + 1.3%(10.7%)(5.7%(1.5%)(5.7%) (1.5%)(6%)(1.5%)(9%)