Demand Side Management The Natural Purview of Utilities The Customer Viewpoint Rates on the Rise in a Rough Economy - Responding to New Realities Marketing Executives’ Conference Coeur d’Alene Resort October 13, 2008 Rates on the Rise in a Rough Economy - Responding to New Realities Marketing Executives’ Conference Coeur d’Alene Resort October 13, 2008 Presented by Thomas Philbin, President NXEGEN LLC An EnergySolve Company

The Customer Viewpoint  INTRODUCTION 1. Define the “Customer” 2. Define Demand Side Management 3. The Customer “Point of View” -- Concerns and Participation Drivers 4. DSM Programs That Save Money And Encourage Customer Participation 5. Conclusions  INTRODUCTION 1. Define the “Customer” 2. Define Demand Side Management 3. The Customer “Point of View” -- Concerns and Participation Drivers 4. DSM Programs That Save Money And Encourage Customer Participation 5. Conclusions

The Customer Viewpoint  1. DEFINITION OF THE CUSTOMER - Large Commercial/Industrial (C/I) Single Facility Or Facilities With >350 Kw Demand Usually Knowledgeable About DSM Most Likely Have Energy Management Staff & EMS - Small C/I kW Demand Large Retail Chains, School Systems, Campus Complexes That Can Aggregate Over 350 Kw - Residential Ranging from high End Single Family Down To Small Apartments

The Customer Viewpoint  2. DEFINITION OF DSM Demand Side Management (DSM) is a year round activity where consumption is controlled in a minimally intrusive way to reduce energy and demand and consumption. Demand Response (DR) is an action taken to reduce electric demand in response to price, monetary incentives, or utility directives so as to maintain reliable electric service or avoid high electric prices. (FERC Definition)  2. DEFINITION OF DSM Demand Side Management (DSM) is a year round activity where consumption is controlled in a minimally intrusive way to reduce energy and demand and consumption. Demand Response (DR) is an action taken to reduce electric demand in response to price, monetary incentives, or utility directives so as to maintain reliable electric service or avoid high electric prices. (FERC Definition)

The Customer Viewpoint  DEFINITION OF DSM (Cont.) - DR Can Be “Stand Alone” or A Part Of A More Comprehensive DSM Program - DSM And DR Require Some Sort Of EMS Or Smart Meter Capability To Be Effective - DR Needs To Be Automated To Be Effective - Both DSM And DR Can Be Built Into A Facility As Part Of An Energy Efficiency Program - DSM Can Be Year Round. DR Is A Short Term Response To A Specific Need  DEFINITION OF DSM (Cont.) - DR Can Be “Stand Alone” or A Part Of A More Comprehensive DSM Program - DSM And DR Require Some Sort Of EMS Or Smart Meter Capability To Be Effective - DR Needs To Be Automated To Be Effective - Both DSM And DR Can Be Built Into A Facility As Part Of An Energy Efficiency Program - DSM Can Be Year Round. DR Is A Short Term Response To A Specific Need

The Customer Viewpoint  3. POINT OF VIEW OF CUSTOMER General Customer Concerns: Mandatory vs. Voluntary Participation What Would Trigger A Need For DR How Long Will Any DR Cutback Run How Often Will There Be A Need For DR Will There Be Any Advance Notice How Long A Commitment Is Required

The Customer Viewpoint  POINT OF VIEW OF CUSTOMER (Cont.) General Customer Concerns (Cont.): - How Will The Customer Be Compensated – Is It Worth The Possible Disruption - Who Will Provide The Technical Savvy That Is Needed To Implement And Maintain The System - Who Will Do The DR – The Customer Or The Utility - Can a DR System Be Used On A Year-Round Basis To Reduce Demand And Consumption - How Will Payments Be Made – Bill Offset, Cash, Other?

The Customer Viewpoint  POINT OF VIEW OF CUSTOMER (Cont.) General Customer Drivers: - Economics: How Much Will My Energy Bill Be Reduced - Social: Will My Actions Help Reduce Green House Gases And Reduce Global Warming - DR And DSM Make For Good Public Relations - Technical: Participation DSM And DR Programs Allow Optimization Of Resources (Related To Economics)

The Customer Viewpoint  POINT OF VIEW OF CUSTOMER (Cont.) General Customer Drivers (Cont.): - Over 80% Of All Customers Say That Economics (Monetary Considerations) Drive Participation Summary: If It Doesn’t Pay, Most Customers Will Not Do It. Obvious Conclusion: For a DSM or DR program to succeed, it must be worthwhile for the customer. This conclusion is slightly more or less true of all customer segments. Also, it must be worthwhile for the utility as well.

The Customer Viewpoint  4. PROGRAMS THAT SAVE MONEY - Build In DSM/DR Capability As A Part Of Energy Efficiency (EE) Projects; Give Added Incentives To EE Projects That Build In DSM/DR Capability - Develop “Smart Metering” Or Similar Capability That Allows Customer Initiated 2-way Communication & Control - Promote 365 Day/Yr Energy Management & Control - Allow Customer Smart Meter Use For Load Aggregation Of Multiple Facilities - Allow Customer Use Of Smart Meter Data To Minimize Impact Of TOU Or Critical Peak Pricing Programs

The Customer Viewpoint  Programs That Save Money: (Cont.) - Use DSM To Minimize Cost Impacts Of Un-Hedged Energy Charges - Automate DSM/DR By Use Of Pre-agreed Scripts To Curtail Consumption - Use Smart Metering For M&V Purposes As The Basis For Payments on Performance Contracts - Make Consumption Information Useful For Facility And Institutional Budgeting - Allow Smart Meter System To Monitor Other Utilities i.e. Gas & Water

The Customer Viewpoint  Programs That Save Money: (Cont.) - Customer Should Be Able To Access and Download Energy Demand And Consumption Data For His/Her own Use - Data Should Be Able To Be Used To Determine Carbon Footprint And Carbon Reductions For Possible Trading - Allow Possible Automatic Input Of Smart Meter Data Into Programs Like EPA Energy Star Portfolio Manager - Allow Data To Be Used For Bill Analysis And Verification

The Customer Viewpoint  Programs That Save Money: (Cont.) - Allow Interaction Between Smart Metering Platform And Building Automation Systems To Optimize EE - Make Power Quality Information Available Through Smart Meter System Where It Impacts Manufacturing Or Other Customer Processes. - Use of Smart Meter For Sub-Metering In Facilities - Use Smart Meter For Equipment Sub-Metering

5. Conclusions  Economics Is The Primary Driver To Customer Participation  Customers Prefer Voluntary Participation  DR Needs To Be Automated To Work Well  It Is Difficult To Make DR Alone Cost Effective-Need 365 day DSM  Technology Is Not Quite There Yet

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