Kay Fuhrman Director, Business Development Alliance Data Systems The Benefits of Business Process Outsourcing

Reasons Utilities Outsource 2% 5% 6% 13% 32% 35% 0%5%10%15%20%25%30%35%40% Foster Innovation Grow Revenue Improve Quality Conserve Capital Increase Speed to Market Create a Viable Cost Structure Focus on Core of the Business Reduce Operating Costs Source: Navigant Consulting, “How to Outsource Business Process for Competitive Advantage,” April 2003

Partnership Service Offerings Outsourced Billing and Customer Care Outsourced Billing and Customer Care Infrastructure Hosting Services Application Hosting Disaster Recovery & Mirroring, High Availability Network Connectivity Network Monitoring & Management System Monitoring & Management Application Management Services Implementation Services Administration and Support Functional & Technical Upgrades Business Process Management Services Bill Processing Bill Print/Mail Call Center/Customer Care Remittance Processing Credit & Collections Electronic Business Transactions Online Customer Care Electronic Bill Presentment & Payment Event-Based Notification

CIS Implementation Risk Exposure High Implementation Risk Implementation for license acceptance versus implement to operate solution. Total cost of ownership assumptions likely erode. High Organizational Risk Organizational biases result in accommodation of existing business processes. This often leads to stranded license versioning. High Operational Risk CIS operations are not utility core competence. Internal staff drive to functional solutions versus re-engineering. Staff is typically not rewarded based on performance or cost savings. Extremely High Financial Risk If implementation, organizational and operational risks are high, capital expense risk increases. In-house Implementation: Utility Shoulders 100% of CIS Risk

Outsource Provider Shoulders 100% of Implementation Risk Moderate Implementation Risk Implement to optimize versus license acceptance only. Financial rewards and penalties guarantee performance. Moderate Organizational Risk Standardization of business processes manages conflicting objectives and customization risk. Low Operational Risk Business continuity ensured through standard releases, disaster recovery, little customization, new versioning, and on-going support. Low Financial Risk By having a predictable and sustainable CIS, financial risk is reduced. Outsourcing Transfers CIS Risk

Improving Value By Reducing Risk  Reduce Business Risk Outsourcing performance is measured by delivering business results – not just software Contract SLAs mandate quality & reliability in the operating environment The right partner supports time sensitive changes to the billing & customer care environment in response to business and market events  Real-world examples A Southeast utility reduced billing errors – 92% decline in 4 months In August 2003 North American blackout, clients of a leading outsourcer did not experience any downtime Major deregulated energy providers leverage a uniform billing environment achieved through outsourcing as crucial to M&A activities

Improving Value By Reducing Cost  Decrease operating costs Technology refresh and built-in CIS upgrades offer savings and budget predictability Service delivery across a broad client base yields best practices and economies of scale Robust business continuity (DR, mirroring) at a level that few utilities could independently afford  Real-world examples A major Northwest utility states that they continue to save millions in annual CIS operating costs A reputable Midwest utility saved $700,000 in service order costs in a single year A stable water utility estimates savings of million of dollars over contract life for outsourced meter-to-cash services as compared to insourcing

Improving Value Through Higher Customer Satisfaction  Improve Customer Satisfaction Improved processes reduce call center demand Consistent best practices, backed by SLAs, reduce variances in service delivery Automated processes promote immediate corrective action in response to critical situations  Real-world examples More accurate bills have allowed a major deregulated energy provider to reduce PSC complaints by 72% Service order accuracy is 100% for a reputable Midwest utility through automated processes A stable water utility reduced billing errors and eliminated a potential call center demand spike

Improving Value Through Increased Agility  Gain competitive agility Harness partnership programs crafted to produce specific business results Gain access to strategic technologies Respond quickly to market changes and requirements  Real-world examples Gainsharing helped a reputable Midwest utility exceed its Debt Recovery goals by 50% Deregulated transaction management services ensure fast, accurate enrollments for a major Texas energy provider A large Northeast utility affiliate capitalized on a changing market requirement and launched new enrollment capabilities within one week

Managing the Revenue Lifecycle Revenue Lifecycle: Each function that touches the customer from meter to cash. Revenue Lifecycle Management : Streamlining and automating the business processes throughout the revenue lifecycle to reduce cost-producing work. Each revenue lifecycle component is interdependent and many are human capital intensive.

Optimizing Operational Performance Performance Optimization: A “Best Practices” Toolset for ever-improving business performance that includes: Quality Methodologies that ensure consistent performance Demand & Variance techniques that manage work volume and variation Continuous Improvement tools that enhance the effectiveness and efficiency of business processes

Driving Additional Value through Customer Insight Customer Relationship Management: Improve customer satisfaction and loyalty through: Enhance Customer Data Management through real-time access and tools Provide Customer Analytics to validate business intelligence and improve decision making Leverage appropriate Loyalty Marketing tools to reward customer behavior with compelling incentives