Engaging Customers in Challenging Times Greg Dudkin, PPL Electric Utilities MEC Conference Los Angeles, CA October 3, 2011

Background: PPL’s Challenge of Deregulation  PA deregulated electricity marketplace effective 1999 Settlement kept PPL’s generation rates stable until Jan  Smart meters deployed for all 1.4 million customers since 2004  Expiration of PPL EU’s generation rate cap in 2010 drove customer bills 30% higher, and gave competitive suppliers an opportunity  Generation shopping is very active: 39% Residential customers (44% of sales) 45% Small C&I customers (82% of sales) 90% Large C&I customers (99% of sales) 40% of all customers (>560,000 customers, 73% of sales) 2

Background: PPL’s Challenge of Aging Infrastructure  Now PPL’s aging infrastructure is driving need for major system investment of $3.5 billion over next 5 years Multiple rate increases needed Stable return to investors expected  So how do we accomplish this? 3

4 Background: PPL’s Challenge on Wall Street The need to stabilize future return on equity is imperative to our credibility with investors ROE HISTORIC FUTURE Allowed ROE

We need to gain the trust of the all stakeholders  Customers, Regulators, Legislature, and Wall Street  All have a hand in the rate making process in PA  To move forward with these stakeholders, we need to gain/maintain their trust…but how?  Past performance is huge  Position service enhancements from Smart Grid and other infrastructure improvements as beneficial to all parties 5

Improving quality of service, while keeping bills manageable -- has a distinct payoff 6 Quality Service, Price (No outages, manageable bills; utility can spend more on maintenance) Happy Customers (have a relationship with their utility) Happy Regulators (Grant higher returns) Poor Service/ Rising Prices (Frequent outages, high bills; utility has less to spend on maintenance) Unhappy Customers (Complain about bills and service quality) Unhappy Regulators (Grant lower returns) Virtuous Circle Vicious Cycle

Build the business around the customer experience! Deliver on commitments Deliver value to customers Understand customer needs Convenience counts Communication is critical Make it easy for them Meeting deadlines – for new service installations restoration times Exceed quality standards for reliability New service features Multi-channel, self-service New communication options Customized information that can help them regain control of energy use 7 Earning Trust with customers

8 The Energy Analyzer worked  The Energy Analyzer leveraged the technology (AMI) giving customers information that put them back in control…. On-line energy audit Daily usage info Home profile and energy-saving tips Pie charts of home energy use Bill comparison charts

9 Daily and hourly energy use charts gave them customized information With PPL EU offering Time-of-Use rates to customers in 2011, the hourly charts became more important to customers Daily charts have become a major draw to bring customers back to the PPL Electric website

What we believe  Technology is not the total answer, but an enabler… Customers want control of their energy use Information is a key deliverable Customers want communication that fits their needs, delivered how they want it, when they want it 10  Smart Grid needs to be positioned not as a utility driven technology but as a service enhancement that meets the customers’ needs…. shorter/fewer outages, save energy and save money.

11 PPL’s high customer satisfaction and efforts to reduce customer bills helped weather the rate cap challenge Spring 2007, first announcement of ~35% increase to hit Jan (semi- annual updates followed) Redesigned web site featuring Energy Analyzer deployed in June 2007 PPL EU adds daily & hourly usage data to web site; launches efficiency programs to help customer save and to position as “trusted energy advisor” Fall 2009, PPL EU launches comprehensive EE&C plan that significantly augments programs for customers; media campaign to promote “shopping” Jan , rate caps expire - overall bill increases 30%

Storms – It is not just about getting them back in service quickly – it is communicating with them Biggest issue from Irene and Lee, some utilities failed to communicate effectively Customers want information (ERT, cause, when to call back, extent of the outage, time outage started, crews dispatched?) PPL used public media, , text messages, social media Communicate often and honestly…but you must communicate! 12 High Performance means….be there when they need you the most

 Perform at a high level – it helps to be a leader Understand that high performance is earned over years, and lost in days!  Communicate with them regularly– they don’t want to be surprised either! Share your plans and direction Seek their support Help them and assist them where possible Educate them about your business 13 Building Trust through Relationships with Legislators and Regulators

Communicate effectively with stakeholders via all communication channels Building trust with stakeholders Becomes part of the normal process of doing business Yielding more favorable treatment when seeking recovery of expenses 14 The successful utility will ….

Questions? 15 Greg Dudkin Sr. VP Operations PPL Electric Utilities