1 BGE Smart Energy Pricing Program: Update to Maryland Public Service Commission April 23, 2008 Wayne Harbaugh VP – Pricing & Regulatory Services

2 The Trend Continues – BGE Relies Heavily on Imported Supply

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4 Overview Smart Energy Pricing Program u BGE Smart Energy Savers Program originally filed January 23, 2007 –Elements include »PeakRewards (formerly Demand Response Infrastructure orDRI) »Energy Efficiency & Conservation (EE&C) »Advanced Metering Infrastructure (AMI) and »Smart Energy Pricing (formerly Critical Peak Pricing or Dynamic Pricing) –Endorsed by ACEEE, NRDC, Chesapeake Bay Foundation, United Way, and Baltimore Community Foundation u BGE’s AMI and Smart Energy Pricing Programs were reviewed by the Maryland Public Service Commission (PSC) and approved April 13, 2007 –Discussed during Administrative Meetings March 21 and 28, 2007 –BGE sponsored Dr. Ahmad Faruqui, Principal of The Brattle Group to discuss its pilot which he helped design –PSC directed BGE to develop and propose a “comprehensive pilot, inclusive of a viable critical peak pricing pilot component to gather statistically significant, measurable, and meaningful information as to the potential positive effect of AMI on reducing peak system demand”

5 BGE’s Smart Energy Pricing = Demand Response “ Price-based demand response such as real-time pricing (RTP) and critical- peak pricing (CPP) and time-of-use tariffs, give customers time-varying rates that reflect the value and cost of electricity in different time periods. Armed with this information, customers tend to use less electricity at times when electricity prices are high.” A Report to the United States Congress Pursuant to Section 1252 of the Energy Policy Act of 2005 U.S. Department of Energy

6 Smart Energy Pricing Pilot Overview u Base-lined customer consumption Summer 2007 u Pilot of approximately 1,300 residential customers Summer 2008 u Pilot to include: –Dynamic Peak Pricing (often called Critical Peak Pricing) –Peak Time Rebate u Customers will have day ahead notification of critical peak day – , telephone call, text message (up to 5 of each) –A sample of customers will have the Ambient Energy Orb u Sample of customers will have enabling technology (smart A/C switch) u Will determine customer acceptance/behavior u Survey meters for pilot; AMI meters required for full deployment

7 Smart Energy Pricing Pilot Design (current) BGE’s SEP Pilot: 1,300 accounts, a statistically significant sample Note: BGE has increased its control group from 150 to 300.

8 Smart Energy Pricing Pilot Status u Randomly selected residential customers were sent fliers describing the program, together with reply card and BGE’s Hotline and address –Customers were then contacted by phone to ensure an understanding of the program and gain their acceptance –Treatment group totals 1,049 randomly selected accounts to date –Extra accounts were selected to offset any attrition u Survey meters have been installed for over 1,160 accounts to date –Approximately 860 meters for treatment accounts –Approximately 300 meters for control group

9 Dynamic Peak Pricing - Overview –Hourly electric consumption data via AMI meters enables new rate structures –Variations of time-of-use rates coupled with peak load reductions –Dynamic Peak Pricing (DPP) and Peak Time Rebate (PTR) being considered for residential customers Pilot Pricing All – in Rate* Critical $ Peak $ Off-Peak $ * Includes transmission and delivery $1.30 $0.14 $0.09

10 DPP - Distribution of Summer Hours Distribution of Critical Peak, Peak and Off-Peak Hours June - September Off-Peak Period 2,503 Hours (85%) Peak Period 365 Hours (13%) Critical Peak Period 60 Hours (2%)

11 PTR - Peak Time Rebate Rate Option u Peak Time Rebate (PTR) »Provides a rebate to customers who use less electricity during designated periods of peak demand »Customers who do not reduce load, simply pay the current rate u How PTR Works »Schedule R summer all-in rate is approximately $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: u $1.75/kWh u $1.16/kWh »kWh saved = Baseline kWh – Actual kWh on critical peak day »Baseline method: u Find kWh for the period of 2 – 7 p.m. for the 10 most recent weekdays (excluding holidays and critical days) u Baseline kWh is the average of the 3 highest kWh values over these 10 days PTR is a Mirror Image of the DPP Rate

12 Energy Orb Device for Signaling CP Event Frosted glass ball with wireless chipset, microcontroller, 18 bright LEDs Plugs into an AC outlet When a CP event is declared the Orb will begin to pulse , voic , and text messages will be sent For PTR the Orb is green off-peak red during critical peak events For DPP the Orb is green off-peak yellow during peak periods red during critical peak events

13 AMI and Smart Energy Pricing Provide Key Benefits u AMI provides –Two-way communication between BGE and the customer through the customer’s meter –More efficient management of customer outages –More accurate meter reading –More timely collection efforts –Improved efficiency in handling service orders –More detailed, timely information about energy use to help customers make informed energy decisions –More innovative rate options and tools for customers to manage their bills –Ability to reduce peak demand u Smart Energy Pricing provides –Incentives to customers to shift energy away from critical peak periods –The ability to for customers to save on their electricity bills –Lower wholesale prices for capacity and transmission – in the longer term –Improved electric system reliability, as demand is moderated –Potential to defer new transmission and generation