MD-DC: Consumer Expectations for the Home of the Future Rick Counihan Head of Energy Regulatory Affairs rcounihan@nestlabs.com

Our conversation today Building the Connected Home Case Study - Insurance Beyond the Meter Matters! But, that's not all to Nest. We want to bring the conscious home to life. And we can't do that alone. Nest isn’t going to build everything in the home. We need to partner with the best in each category.

Building the Connected Home

Our homes don’t work as well as they should And one big problem we both deal with is that our homes don’t work as well as they should. We’ve got these amazing computers in our pockets, but a lot of the devices in our homes look and function the same way they did 30 years ago. And these devices are too important to ignore. Too important to ignore

IoT appears to have hit a tipping point Whatever you call it, analysts are predicting that the number of connected devices in the home will skyrocket in the next decade - growing faster than smartphones, tablets, and computers.

Two visions for the connected home Platform First 1. Buy a hub (or an iPhone) 2. Buy a “kit” of products to connect to that hub 3. Tell those products what to do and when to do it Product First 1. Buy a product you love 2. Use that product. Watch it automatically solve problems 3. Buy other products that work with that product

Not all customer experiences are created equal You do all the work Turn it on and off with your phone Products think for themselves Happens automatically, behind the scenes

Case Study: How an Insurance Provider is Leveraging the Connected Home for Customer and Business Value

Insurance providers: a customer engagement challenge So fire is is really frightening (click) Each year fire is responsible for incredible amounts of damage Fire of course affect not just homes but also businesses And sadly smoke and fire cause injuries and loss of life

Americans live in homes without smoke alarms And yet, almost 5 million Americans live in homes without any smoke alarms. In Europe, the numbers are even higher. Until last year, 98% of homes in my home country of France did not have any smoke alarms Americans live in homes without smoke alarms

60% 60% of fire deaths in the US happen in homes without working smoke alarms

$49 $103 89M 26M $4.3B $2.7B 77% 23% Value of a Working Smoke Detector Annualized damage cost per home $49 $103 US homes** 89M 26M $4.3B $2.7B Fire-related property damage* 77% 23% % US homes* Working Not Working *Marty Ahrens. Smoke Alarms in U.S. Home Fires, National Fire Protection Association Fire Analysis and Research Division, 2014. **2010 US Census - 115,000 US Households

The risk matters … to customers and providers Homes and businesses Injuries and loss of life So fire is is really frightening (click) Each year fire is responsible for incredible amounts of damage Fire of course affect not just homes but also businesses And sadly smoke and fire cause injuries and loss of life

Insurers should be aware if a home is protected with working smoke detectors (or not)… And they would like to have more positive customer interactions (customer satisfaction is critical to business longevity).

Happier, informed customers - and insurance providers Protect At Nest we create a monthly report for each Protect customer with their safety information. Nest Safety Rewards is for customers who want to send their safety report to their insurance company as proof of how safe they are. Batteries Sensors

Consider: are some of your challenges similar?

Beyond the Meter Matters!

Today Utilities are considering a range of strategies As a home services company Scope of connected home limited only by: business aspirations customer interest Scope of connected home limited by: regulations fit with capabilities alignment with current strategy degree of brand flexibility As an Energy Company

Why should utilities care now? Because… Other service providers are acting - and playing in the energy realm

Why should utilities do now? Other service providers are acting - and playing in the energy realm Get started with connected device programs - and think big! “Beyond the meter” devices deliver customer engagement value (to customers and utilities) Develop a program to engage your customer vis-a-vis something that delivers benefit to BOTH you and them! These devices offer option value for the future: new services and revenue Lay the foundation… and develop your strategy

Getting started with connected device programs Wifi/Smart thermostat programs available in 2016 They’re already here!

Develop an offering to engage customers… Energy Efficiency Demand Response Dynamic Pricing Dozen+ of programs launched(ing) ~1kW reduction/device* Happy customers* Algorithms to boost savings – and satisfaction ~4% additional HVAC runtime savings* Georgia Power using as enabling tech. TOU w/ California IOUs launching in 2017 And this is just the beginning… *Nest results

Crystal Ball

Customer Expectations in 5 to 10 Years Customers are not all alike. Segmentation matters. 1 That said, more & more will expect an “instant” experience: no appt. for turn-on, rapid outage recovery, bill alerts & pay by phone 2 Many customers will welcome choices: providers, price plans, TOU, EV charging, etc. 3 Customers will still not want to spend precious personal time on utilities. Will want tools and companies to do it for them. 4

Thank you!