LRIS Settlement Example April 20 th, 2011

© CONSTELLATION ENERGY GROUP, INC. THE OFFERING DESCRIBED IN THIS PRESENTATION IS SOLD AND CONTRACTED BY CONSTELLATION NEWENERGY, INC., A SUBSIDIARY OF CONSTELLATION ENERGY GROUP, INC. BRAND NAMES AND PRODUCT NAMES ARE TRADEMARKS OR SERVICE MARKS OF THEIR RESPECTIVE HOLDERS. ALL RIGHTS RESERVED. ERRORS AND OMISSIONS EXCEPTED. 2 Current Proposed Settlement REPCustomer 4 MWs Retail $ Wholesale Counterparty Wholesale $ Normal electricity structure REP has locked in profit of Retail Price – Wholesale Price 4 MWs

© CONSTELLATION ENERGY GROUP, INC. THE OFFERING DESCRIBED IN THIS PRESENTATION IS SOLD AND CONTRACTED BY CONSTELLATION NEWENERGY, INC., A SUBSIDIARY OF CONSTELLATION ENERGY GROUP, INC. BRAND NAMES AND PRODUCT NAMES ARE TRADEMARKS OR SERVICE MARKS OF THEIR RESPECTIVE HOLDERS. ALL RIGHTS RESERVED. ERRORS AND OMISSIONS EXCEPTED. 3 Current Proposed Settlement (continued) CustomerDR Provider 4 MWs DR $ ERCOT 4 LMP – LMPz Customer signs with DR Provider for 4 MWs 4 MWs

© CONSTELLATION ENERGY GROUP, INC. THE OFFERING DESCRIBED IN THIS PRESENTATION IS SOLD AND CONTRACTED BY CONSTELLATION NEWENERGY, INC., A SUBSIDIARY OF CONSTELLATION ENERGY GROUP, INC. BRAND NAMES AND PRODUCT NAMES ARE TRADEMARKS OR SERVICE MARKS OF THEIR RESPECTIVE HOLDERS. ALL RIGHTS RESERVED. ERRORS AND OMISSIONS EXCEPTED. 4 Current Proposed Settlement (continued) CustomerDR Provider 4 MWs DR $ ERCOT 4 LMP – LMPz 4 MWs REP 4 MWs Wholesale Counterparty Wholesale $4 MWs 4 LMPz All REPs’ Settlement 4 MWs4 LMPz 4 LMP – LMPz Retail $

© CONSTELLATION ENERGY GROUP, INC. THE OFFERING DESCRIBED IN THIS PRESENTATION IS SOLD AND CONTRACTED BY CONSTELLATION NEWENERGY, INC., A SUBSIDIARY OF CONSTELLATION ENERGY GROUP, INC. BRAND NAMES AND PRODUCT NAMES ARE TRADEMARKS OR SERVICE MARKS OF THEIR RESPECTIVE HOLDERS. ALL RIGHTS RESERVED. ERRORS AND OMISSIONS EXCEPTED. 5 Current Proposed Settlement Issues Focus has been what to pay the DR Provider Will the risk of LMPz being higher than LMP suppress DR? What should ERCOT pay original REP to keep ERCOT indifferent? REP now has price risk = 8 MWs LMPz – 4 MWs LMP – 4 MWs Wholesale $

© CONSTELLATION ENERGY GROUP, INC. THE OFFERING DESCRIBED IN THIS PRESENTATION IS SOLD AND CONTRACTED BY CONSTELLATION NEWENERGY, INC., A SUBSIDIARY OF CONSTELLATION ENERGY GROUP, INC. BRAND NAMES AND PRODUCT NAMES ARE TRADEMARKS OR SERVICE MARKS OF THEIR RESPECTIVE HOLDERS. ALL RIGHTS RESERVED. ERRORS AND OMISSIONS EXCEPTED. 6 Remedy CustomerDR Provider 4 MWs DR $ ERCOT 4 LMPz – Retail $ 4 MWs REP 4 MWs Wholesale Counterparty Wholesale $4 MWs 4 Retail $ All REPs’ Settlement 4 MWs4 LMPz Retail $

© CONSTELLATION ENERGY GROUP, INC. THE OFFERING DESCRIBED IN THIS PRESENTATION IS SOLD AND CONTRACTED BY CONSTELLATION NEWENERGY, INC., A SUBSIDIARY OF CONSTELLATION ENERGY GROUP, INC. BRAND NAMES AND PRODUCT NAMES ARE TRADEMARKS OR SERVICE MARKS OF THEIR RESPECTIVE HOLDERS. ALL RIGHTS RESERVED. ERRORS AND OMISSIONS EXCEPTED. 7 Remedy Issues Keeps REP and ERCOT indifferent In line with other ISOs (pre-FERC Order re: Net Benefits) Requires ERCOT to collect Retail Rate Part of registration process with DR Provider Does not further incent high priced LMP