Utility Payment Conference BGE Customer Payment Channels – Current State, Conversion Lessons Learned, and Future Opportunities Barry DeBald Senior Information Management Analyst Baltimore Gas and Electric Company Utility Payment Conference September 26, 2012

Will it be smooth sailing for your payment systems as you implement your new core billing system?

Contents BGE History Current Payment Channels at BGE System Conversion Challenges Enhancement Opportunities Next Steps

BGE History Founded in 1816, BGE is the nation's first gas utility and one of the earliest electric utilities 1.2 Million customers Combined Gas and Electric Distribution Company Exelon is our parent company Electric Customer Choice (Deregulation) in 2000 Retired Customer One DB2 environment in January 2012 Oracle Customer Care and Billing (CC&B) implementation in Jan. 2012

Speaker’s Subject Matter Experience 35 Years of utility experience Customer One implementation (CIS) Oracle Customer Care and Billing (CC&B) implementation Customer Self Service (CSS) implementation System Upgrades and Maintenance Customer Choice implementation Automated deposit implementation Outsourcing of remittance processing Electronic Bill Payment and Presentment

“ Because we’ve always done it this way…..”

Elimination of BGE tellers Teller functionality is not a BGE Core Competency. Company payment locations are costly. All other Maryland Utilities discontinued company tellers. With rates capped at this time, cost savings were critical to BGE’s bottom line. This became an important BGE Achieving Operational Excellence (AOE) initiative. On July 1, 2003 we successfully completed the BGE AOE goal of closing all of our BGE teller operations. The lack of resistance for this closing underscores the success of our alternative payment methods.

Current Payment Channels at BGE

Location / Customer Access Payment Channel Description Location / Customer Access Annual Volumes BGE Drop Box / Field Payments / Internally Processed Payments Physical payments accepted and processed on an exception basis G&E Building / Customer premises 9,000 8,800 374,000 Walk In Payment Centers America’s Cash Express – 35 locations; Global Express – 355 locations Several Hundred Throughout Service Territory 850,000 Mail Payments Lockbox Physical checks processed at CITI Bank lockbox processing center P.O. Box Philadelphia, PA 5,200,000 Speedpay Telephone and Web Payments IVR – Automated Phone Payments 1,400,000 Online Banking EBPP / Checkfree Internet 2,200,000 BGE.com EBPP 1,350,000 BGEasy Electronic ACH payments from customers One-time paper application 880,000 Electronic ACH Payments Payment consolidators / Corp to Corp Wires 960,000

Electronic Bill Payment and Presentment (EBPP) BGE.com / EBPP payments accounts for approximately 50% of customer initiated electronic payments. First EBPP offering was implemented in 2000, Second EBPP offering was implemented in 2006, Current offering in 2012. Enhanced EBPP offering increased number of customers viewing and paying BGE bills online EBPP is a green solution. BGE has a 20% customer penetration rate which is attractive within the utility space. Paper and postage savings have been significant; BGE has saved costs associated with processing / mailing of approximately 2,640,000 bills and envelopes annually plus the return envelopes and informational inserts.

Bill Payment Consolidators How Payment Consolidators work Consumer selects biller to pay, enters payment amount and schedules payment for today or any future date Consumer logs into their bank’s website and selects the online bill payment option Consumer information is verified against current BGE business rules Available funds and consumer information are validated on scheduled payment date Consolidator delivers payment information to biller on scheduled payment date Funds are deposited into the biller’s bank account

History – Credit Cards Early 1990’s, BGE became a credit card “merchant” accepting Visa, MasterCard, American Express and Discover for final utility bills We later began accepting credit cards for active accounts pending termination, current active accounts on Management appeal. Growth led to budget for discount/interchange fees to approach $1 million per year. In 2001, we moved to the “convenience fee” model. The convenience fee model originally included Visa, MasterCard, Discover and American Express. Visa and American Express started enforcing “discrimination” clauses in contract not allowing different pricing for different payment channels at merchant locations. Many merchants had to drop Visa/American Express to keep a credit card offering or greatly increase price to customers.

Challenges to BGE Processing Credit Card In-House Privileged and Confidential Challenges to BGE Processing Credit Card In-House Fees Interchange fees Discount fees Third-party application service provider (ASP) fees Bank Fees Fully loaded costs of accepting Credit Card is ~3.00% of transaction Data Breaches Payment Card Industry (PCI) Compliance Monetary damages due to data breaches Sourcing to ASP transfers liability Combating Credit Card Challenges The high cost of accepting cards & potential for data breaches are challenging companies, but can be addressed through outsourcing card acceptance. The City of Scottsdale, Arizona, pays over $350,000 per year to accept credit cards and based on PCI requirements has estimated that the city's risks exposure is $70 million in potential fines and fees if the city has a major credit card data breach. In response to these challenges, the city has decided to stop accepting web and phone card payments. Rather than increasing their days sales outstanding and upsetting the 20% of their utility customers that pay with credit cards the city has other options. By outsourcing card acceptance, the city could eliminate their $350,000 in card processing fees and reduce their data breach exposure while continuing to reap all of the benefits of accepting cards. Hundreds of utilities don't have to worry about the cost of card payments because they have contracted with a third party to accept payments on their behalf and charge the end-customer a fee to cover the transaction costs. These utilities also reduce their risk of data breach because the third party is handling the payment card data.

Telephone and Web payments – Western Union/Speedpay Speedpay is the vendor which processes all checks and credit cards by phone. Customers can make payments through Speedpay via: Phone / IVR 1-888-232-0088 Intranet with BGE customer service representative Internet – customer initiated payment Customer contact center processes payments online when customers call in to make payment; Many of these payments are customers in arrears and are often seeking a payment plan which is processed by BGE call center representatives. Field payments are also processed by Speedpay with the aide of collections department representatives. Initiative is under way to have field representatives process payments through IVR with out the aide of collections department $1.65 nominal fee compared to other utilities and other lines of business; Commercial payments cost customers 3.2% of transaction.

Conversion Lessons Learned Retention of existing customer account numbers is the optimal solution. Effectively communicating new account numbers to customers is a challenging process. Never underestimate the power of a check – digit routine. Check digit routines virtually eliminate the possibility of a payment going to the wrong account number because of transposed digits. Without a check – digit routine, even one account number digit off can cause the payment to be placed on another customer’s account. This one action impacts two customers and causes back office manual correction.

Checklists build understanding of conversion activities Issue Proposed resolution Owner/ Status Action date Bill ready e-mail text appended to advise of upcoming changes and need to re-enter banking information Facilitate changes through Biller Console Rhea Lewis In progress 11/28/11 Afternoon change for e-mails starting 11/29/11 Updated file from Payment Vendor containing customers who received bills in the last 30 days. Payment Vendor to provide Barry / Payment Vendor Complete 12/2/11 Mailing to Payment Vendor) customers who consolidate and thus will not get e-bill content Rhea Lewis working on mailing to describe customers alternatives to going back to paper bills 12/15/11 Future scheduled payments – preferred solution Block scheduling of any payments beyond 12/27/11 Investigating 12/6/11 Future scheduled payments – backup solution Block scheduling of any future payments effective 12/6/11 Last Bill Delivery e-mails sent December 29 (from the 12/28 evening last bill run of CIS 12/29/11

Continuity The nature of projects carries with them an inherent fluidity of personnel. As you learn of the roll-off of a project resource, formalize transition plans as soon as possible. Transitioning activities to one person carries a risk of losing items in translation, particularly if the second party departs (It happened to us). Contractors are a great resource; planning their knowledge transfer to company employees should begin early and be an on-going process.

Testing Test thoroughly, resist the temptation to test ‘Vanilla‘ accounts and / or ‘Vanilla’ conditions. Test with a reasonable number of accounts. Volume testing is critical. Regression test any time you make a change. Don’t forget to ‘Live’ test when the system goes live. Test small payments of a dollar or so to select accounts to verify all the payment methods are operating smoothly across all channels. Don’t assume that if the IVR is processing ACH payments correctly, the in-house EBPP ACH is processing payments correctly.

Enhancement Opportunities

Current Payment Channel Initiatives Add Visa and MasterCard to our credit card offerings. Implement a custom payment IVR exclusively for the use of our Field Collection Representatives. Obtain Public Service Commission approval to stop accepting field payments from commercial customers. We anticipate completing the first two initiatives in Fall 2012.

Future Payment Channel Strategies Plan now for Generation Y payment preferences Generation Y is considered the 18 – 25 yr old customer segment Members of Generation Y prefer less costly self-service channels like online banking, ATMs and mobile banking 2 in 5 Generation Y consumers have already tried mobile banking Mobile banking security less of a concern to them More likely to carry unlimited wireless phone plans More likely to own a smart-phone (smart-phone owners are the most loyal mobile bankers)

Enhancement Opportunities – Future Social Networking sites Add “How to Pay” info to BGE’s Facebook page, directing consumers to the IVR and/or internet site to make payments. Advertise with a BGE logo and link to a payment option web page. This would come up on other profile pages so the user wouldn't have to come directly to the BGE profile page.

Future Initiatives Monitor electronic payment options, social media sites and mobile banking to ensure BGE is a leading edge utility. Mobile Payments – Enable phone applications and text payments. Continue to listen to our customers requests for new payment options.

Contact Information Barry DeBald 110 West Fayette Street Baltimore, MD 21201 Telephone: 410-470-1035 E-mail: barry.j.debald@bge.com