AMI/Smart Energy Pricing (SEP) Update Mark Case - SVP Strategy & Regulatory Affairs Mike Butts – Director Business Transformation Wayne Harbaugh – VP Pricing & Regulatory Services October 15, 2008

Agenda Regulatory Background AMI Pilot Update Smart Energy Pricing (SEP) Overview of Dynamic Peak Pricing (also known as Critical Peak Pricing) and Peak Time Rebate Initial Impact Analysis Timeline and next steps DSM/AMI

AMI/SEP Program Regulatory History On January 23, 2007, BGE first filed a proposal for AMI programs with the Maryland Public Service Commission On April 13, 2007, the Commission conditionally accepted BGE’s proposed AMI pilot. The Commission’s approval was contingent upon “BGE developing and proposing 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.” On March 31, 2008, BGE filed with the Commission its Smart Energy Pricing pilot proposal pursuant to the April 13, 2007 order The Commission approved the Smart Energy Pricing pilot on April 23, 2008 DSM/AMI

AMI Pilot Vendors BGE initiated a competitive bid process and contracted with the following vendors to execute the AMI pilot project: AMI Technology Sensus Aclara Meter Data Management (MDM) System – Oracle (Lodestar) Field Installation – VSI Program Support Services – Accenture Systems Integration – Accenture DSM/AMI

AMI Pilot Technology Aclara Advantages The AMI team selected Sensus and Aclara to participate in a dual vendor competition: Aclara RF 450 MHz Band Licensed Pole Mounted Collector to Multiple Meters ~1,500 Collectors Advantages Battery in every meter Best outage reporting Licensed frequency 450 MHz band provides best penetration ~1500 Collectors 450 MHz (LAN) Wireless (WAN) Head-End DSM/AMI

AMI Pilot Technology Sensus Advantages RF 900 MHz Band Licensed Tower to Multiple Meters ~90 Collectors (Towers) Advantages Few pole attachments Good outage reporting Good coverage footprint Licensed frequency Few takeout points (~90) ~90 Collectors 900 MHz (LAN) Wireless (WAN) Head-End Single Hop Meter Small Percentage DSM/AMI

AMI Pilot Design 21157 21202 The AMI team designed the pilot to test the most varied and extreme conditions Roughly 5,300 electric meters and gas modules 2 zip codes 2 vendors Indoor and outdoor Suburban and urban Large buildings and high terrain Basements DSM/AMI

AMI Pilot Design The scope of the AMI pilot includes: Installation of meters, collectors, head-end computers, meter data management system and integration to CIS test region for bill comparison Testing of RFP requirements Vendor evaluations Business case development The scope of the AMI pilot does not include: Integration with production IT systems Testing of ZigBee and HAN capability (vendor technology in this area will not be available until 2009) DSM/AMI

AMI Pilot Current Status The AMI Team has completed the following work to date: Meter installations Communications infrastructure installs Head-End system installs Meter Data Management System install Integrations to transfer data from meter to MDM to CIS test region Meter and Modules Installation Detail Environment Aclara Sensus Gas Inside 624 619 Gas Outside 590 664 Electric Inside 540 525 Electric Outside 657 1055 Total 2411 2863 Note: Fewer Aclara meters were installed than Sensus meters due to a late delivery of Aclara material. However, the Aclara sample population is still statistically valid. DSM/AMI

AMI Pilot Current Status By the end of the pilot, the AMI team will also achieve the following: Performance testing to verify the dozens of RFP requirements. Key examples include: Routinely receive 99.5% of interval reads within 3 days Operate electric meter connect/disconnect switches Perform on-demand reads Monitor voltage Remotely update firmware Validated outage detection signals Verification that AMI reads match meter register values Verification that AMI bills match CIS production bills Evaluation of network capability and reliability Evaluation of vendors Business case development Final report to the PSC DSM/AMI

Smart Energy Pricing (SEP) Pilot Overview Obtained pre-pilot customer consumption Summer 2007 Pilot of over 1,300 residential customers in Summer 2008 Pilot included: Dynamic Peak Pricing (often called Critical Peak Pricing) Peak Time Rebate Customers had day ahead notification of critical peak day E-mail, telephone call, text message (up to 5 of each) A sample of customers had the Ambient Energy Orb that signals relative prices through the use of varying colors Sample of customers had enabling technology (smart A/C switch and Orb) Survey of customer acceptance/behavior now in progress Load research survey meters for pilot; AMI meters required for full deployment DSM/AMI

Controlling loads for just 60 hours per year can have a dramatic impact on capacity needs and prices… DSM/AMI

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%) DSM/AMI

Dynamic Peak Pricing - Overview $1.30 Pilot Pricing All – in Rate* Critical $1.30425 Peak $0.14425 Off-Peak $0.09425 * Includes generation, transmission and delivery $0.14 $0.09 $0.09 DSM/AMI

Peak Time Rebate - Overview A Mirror Image of the 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 DSM/AMI

Smart Energy Pricing Pilot Design BGE’s SEP Pilot: 1,300 accounts, a statistically significant sample DSM/AMI

Energy Orb Device for Signaling CP Event Frosted glass ball with wireless chipset, microcontroller, LED lights Plugs into an AC outlet When a CP event is declared the Orb will begin to pulse slowly email, voicemail, and text messages are sent For DPP the Orb is green off-peak yellow during peak periods red during critical peak events For PTR the Orb is green off-peak red during critical peak events DSM/AMI 17

Smart Energy Pricing 2008 Critical Events Sun 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 June 2008 Sun 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 July 2008 High Temp 96 90 92 92 92 89 91 Sun 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 31 25 26 27 28 29 30 August 2008 Sun 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 September 2008 92 92 92 73 72 DSM/AMI DSM/AMI 18

Smart Energy Pricing - Summary of Savings DSM/AMI DSM/AMI 19

Distribution of DPP Customer Savings in Summer 2008 DSM/AMI

Distribution of PTR Customer Savings in Summer 2008 DSM/AMI

Average Customer Usage during a Critical Peak Event in June… DSM/AMI

SEP – Preliminary Analysis of Average Load Reductions Over 5 hour Critical Period for First 7 of 12 Events DPP = Dynamic Peak Pricing, PTRL = Peak Time Rebate Low ($1.16), PTRH = Peak Time Rebate High ($1.75), ORB = Customer Group that had an Orb only, ET_ORB = Customer Group that had Orb and Smart Switch DSM/AMI

SEP – Preliminary Data Analysis Changes in Critical Peak Demand DSM/AMI

SEP – Preliminary Data Analysis Changes in Total Consumption during Summer DSM/AMI

PTR Has Several Advantages vs. DPP PTR is sometimes described as the “All Winners Rate Structure” -- rates are no higher than standard tariff prices even during peak periods Avoids the “Opt-in” vs “Opt-out” debate – all customers are automatically eligible for bill rebates DPP cannot be monetized in the PJM energy market DPP can encourage customers to increase their overall consumption, even while reducing peak demand Almost identical peak load reductions were achieved in the two different pricing structures DSM/AMI

Value of Demand Response in PJM BGE will monetize the energy reductions and the peak load reductions in the PJM markets Value of energy reductions will be realized in the day-ahead and/or real-time energy market Value of peak load reductions will be realized in the Reliability Pricing Model (RPM) Energy value will be based on Locational Marginal Price (LMP) during the critical events Peak load value will be based on the cleared unforced capacity price in the Base Residual Auctions and the Incremental Auctions DSM/AMI

AMI/Smart Grid Technology is Evolving New vendors are entering the field and existing vendors are upgrading their offerings Vendors are working on both hardware and software upgrades to increase meter reading efficiency Home Area Network (HAN) communication protocol is shaking out (e.g. Zigbee, Bluetooth, WiFi) New in-home energy monitors are coming to market Plug-in electric vehicles (PHEVs) coming to market starting in 2010 will offer new challenges. We believe that hourly metering, dynamic pricing and load control to give customers an incentive for off-peak charging will be critical to accommodating this new transportation technology. DSM/AMI

Next Steps for AMI/SEP 2008 Wrapping up Sensus and Aclara AMI pilots 2009 Create BGE’s Smart Grid and HAN Strategies Work with EPRI on their PHEV and Smart Grid initiatives Monitor new AMI/Smart Grid technology, and other installations Continue SEP pilot for second summer to help ensure sustainability of load reductions Work with PJM to validate PTR results and plan for monetization of energy and demand response value Update AMI RFP and select vendor Present AMI business case to PSC for approval DSM/AMI

Next Steps for AMI/SEP 2010 Continue system development and IT integration work Pre-deploy several thousand AMI meters for operational testing 2011 Start full deployment of AMI meters and related infrastructure 2012 (Summer) Begin Peak Time Rebate program for all AMI enabled customers 2014 Finish full deployment of AMI meters and related infrastructure DSM/AMI

BGE’s Estimated Peak Load Reductions (MW) DSM/AMI