2010 UEDA Summer Forum Economic Development in Regulated and Deregulated Environments Kevin Wright President Illinois Competitive Energy Association July 20, 2010

Illinois Competitive Energy Association  WHO WE ARE: Illinois-based trade association of competitive energy suppliers—alternative retail electric suppliers and alternative gas suppliers—and others that came together to preserve and enhance customer choice and the competitive electric and natural gas industries.  WHAT WE DO: Members provide electricity, green power options, natural gas, and other related services to a wide array of energy consumers, including residential, small business, commercial, retail, the State of Illinois and other units of government, park districts, schools, cultural institutions, sporting facilities, hospitals, hotels, restaurants, industrial, and manufacturers, ranging from Main Street to the Fortune 500.  HOW WE HELP BUSINESSES and the ILLINOIS ECONOMY: Competitive energy suppliers help commercial and industrial customers manage their energy costs, save money and stay in business through a range of pricing options, clean energy products, innovative technological solutions, and customization. 2

ICEA Members Alternative Retail Electric Suppliers (ARES)  ICEA members are some of the most active competitive energy suppliers in the Illinois retail electric market.  Ameren Energy Marketing  Champion Energy Services  Constellation New Energy  Direct Energy Services  Exelon Energy Company  Integrys Energy Services  MC Squared Energy Services  Nordic Energy Services 3

Competition in Illinois: A Strong History  The Illinois General Assembly enacted legislation to enable competition in the Telecommunications, Natural Gas, and Electric Industries.  The Legislature restructured the Illinois electric industry and embraced competition over traditional rate regulation by enacting the Electric Service Customer Choice and Rate Relief Law of 1997 (“Customer Choice Law”).  The Legislature declared that the Illinois Commerce Commission should act to promote the development of an effectively competitive electricity market equitable to all consumers. 4

Illinois Moves to Retail Electric Choice and Competition Traditional Rate Regulation and the Vertically Integrated Utility Model comes under fire. – Illinois rates were significantly above the national average with frequent double-digit rate increases – Imprudent investments in generation plants and capital cost overruns – Poorly run generation plants and service reliability issues – Increased rates caused by above-market long-term PURPA contracts Frustrated by the situation and an inability to choose a provider other than the utility, large industrial customers led the push to restructure the electric industry and introduce competition. Legislature enacts Electric Service Customer Choice and Rate Relief Law of 1987, a transition to competitive retail electric markets. 5

Illinois Retail Electric Market  The Customer Choice Law allows consumers to choose an alternative to the incumbent utility to provide electricity. Electric Utilities Unbundle electricity service, creating a competitive generation market Encouraged to restructure and divest from generating assets Maintain the Transmission and Distribution system Utilities become distribution companies, “wires” companies, delivery only companies; they acquire electricity from the wholesale market. Alternative Retail Electric Suppliers (ARES) Compete with each other and the incumbent utility to supply customers with commodity of electricity Ameren Illinois Utilities Central Illinois Public Service Company (“CIPS”) merges with Union Electric, a MO utility, creating the holding company Ameren IP. UE’s IL service territory is incorporated into CIPS service territory. Ameren purchases Central Illinois Light Company (“CILCO”) Ameren purchases Illinois Power (“IP”) CILCO and CIPS generating plants owned by an Ameren affiliate 6

Illinois Retail Electric Market: Utilities ComEd and AIU service territories comprise approximately 98% of the State’s retail customers. AIU serves 2/3’s of the State with over 1.2M electric customers. Utilities purchase electricity from the wholesale market through the Illinois Power Agency, who procures power and renewable energy resources for their residential and small commercial customers and others, in a sealed-bid, pay as bid RFP process. Utility distribution/delivery service rates, reliability and service requirements regulated by ICC; have POLR obligation; operate in either PJM or MISO RTOs. 7

Illinois Retail Electric Market: Competitive Suppliers (ARES)  34 retail electric suppliers actively selling service.  12 retail electric suppliers actively selling in Ameren territory and 22 actively selling in ComEd service territory.  More than half of the total electric consumption of ComEd’s and Ameren’s customers is provided by retail electric suppliers.  83% of all non-residential load in AmerenIP, 81% of all non-residential load in AmerenCILCO, about 69% of all non-residential load in AmerenCIPS is provided by ARES. 8

Businesses Choose Retail Electric Suppliers: Ameren Market Ameren IP Service Territory – 63.5% of total electric usage provided by ARES – 38% of the electric usage of small commercial customers; 69% of medium C&I customers; 81% of large C&I customers; about 99% of very large C&I customers provided by ARES. AmerenCILCO Service Territory – 59.5% of the total electric usage of customers provided by ARES – 39% of the electric usage of small commercial customers; 71% of medium C&I customers; 86% of large C&I customers; 92% of very large C&I customers were served by ARES. AmerenCIPS Service Territory – 52.4% of total electric usage was provided by ARES – About 35% of the electric usage of small commercial customers; about 60% of medium C&I customers, 73% of large C&I customers; 89% of very large customers served by ARES. 9

Electric Choice Is Economic Development Policy “Illinois businesses have saved more than $1 billion versus the in-place utility rates and the IMA Energy Program has helped keep our manufacturers’ doors open and operations running.” – Greg Baise, President of the Illinois Manufacturers’ Association: Keeping the Doors Open for Illinois Manufacturers. “Utilities were going in for more rate increases and business were just not going to take it anymore. The century old regulatory bargain, to keep politics out and allow utilities to get a fair rate of return, was collapsing.” -- David Vite, President, Illinois Retail Merchants Association “Before restructuring, there was a collective feeling among my members that the utilities were poorly run, the service was terrible and there was no constraints on the utilities to go to the ICC. Today, costs are no longer a central issue facing businesses in Illinois. Restructuring has been the most extraordinary economic development ever undertaken by the State of Illinois.” -- Greg Baise, President, IMA 10

Electric Choice Is Economic Development Policy  Choice of who supplies the goods and services they require.  Choice of the electric supply products tailored to meet their specific usage and pricing needs.  Competition and choice provide transparent price signals and downward pressure on prices.  With competition and electric choice, consumers have saved on their energy costs and improved their bottom line. 11

Challenges to Economic Development Energy Policy Legislative and Executive Office Energy Policy creates substantial increases the cost of doing business for ARES customers and the cost of living to utility ratepayers. One has to look at the total costs over time.  Renewable Portfolio Standards  In-State Renewable Preferences  On-Bill Financing for Energy Efficiency Products  Clean Coal Plants Subsidized by Customers Keeping the playing field level and fair; allowing competition to work and avoiding knee-jerk reactions or quick fixes that harm the marketplace. 12

ICEA Mantra: Where We Go From Here  Continue to support competition and customer choice in Illinois.  Support policies that encourage and expand the development of competition or all customers.  Ensure competitive neutrality between competitive supply customers and utility customers.  Count on ICEA as a resource that is available at your disposal. 13

ICEA Contact Information Kevin Wright -- President Illinois Competitive Energy Association