Making the Wholesale Market Work for Retail Customers: Connecticut Municipal System Experiences November 11, 2007 Anaheim, California Presented by: Brian E. Forshaw Connecticut Municipal Electric Energy Cooperative Bozrah Light and Power Groton Utilities Jewett City

2 CMEEC Operating Joint Action Agency since 1979 Supplies full power requirements of all 6 Municipal Utilities in Connecticut and 2 additional participants Mission: To meet the electric needs of customers at lowest possible cost Authorized to own generation, transmission and energy efficiency investments CMEEC is a Market Participant in ISO-NE 2007 peak electric load 413 MW representing 5.8% of State of Connecticut

3 CMEEC and Municipal Demand Response Programs Connecticut Municipals offer two basic types of Demand Response Programs: oPeak Demand Reduction - 66 MW (16% of Peak)  Includes both ISO-NE programs and CMEEC only sponsored programs oMarket based pricing – 55 MW (13 % of peak)  Program only offered through CMEEC  Treats customer as if they were purchasing directly from wholesale market  May overlap with Peak Demand Reduction CMEEC/Municipal role as administrator and/or “honest broker for customer Full benefits passed along to customer

4 CMEEC Demand Response Experiences CMEEC represents 1.4% of total New England peak load During last “reliability event” (Aug ), CMEEC performance represented 12% of documented ISO- NE load relief

5 Forward Capacity Market and Demand Resources New England is implementing Forward Capacity Market (FCM) First auction in Feb 2008 for delivery in June 2010 ISO-NE procures sufficient resources to meet Installed Capacity requirements for a future year (2-4 years out) Capacity price for all resources is set by the bid price of new resources needed to meet Installed Capacity requirement Existing resources allowed to “delist” if price gets too low FCM explicitly incorporates Demand Resources as resources to meet Installed Capacity requirements ISO “qualifies” Demand Resource capacity based on documented marketing and M&V plans

6 Resources Qualified for First Forward Capacity Auction (FCA) 2010 Installed Capacity requirement is 33,705 MW Existing Resources total 33,053 MW oExisting supply resources – 32,112 MW oExisting Demand Resources – 941 MW Qualified New Resources total 6,102 MW oQualified New Supply Resources – 3,619 MW oQualified New Demand Resources – 2,483 MW

7 CMEEC Experience with First FCA Currently CMEEC has 31 customers representing 59 MW participating in ISO-NE Demand Response programs After consultation with customers, only 3 customers representing about 3 MW were willing to participate in the first Forward Capacity Market These customers won’t go away oCMEEC will continue to offer similar, shorter-term programs that maximize value to customers outside of formal ISO markets

8 Why were customers reluctant to participate? We make money selling (air products, pharmaceuticals, drawn steel, etc) not electricity… This is all way too complicated… We have enough trouble operating our plant, it’s not worth taking on this additional burden… We can’t take that kind of risk that far out into the future… We’d rather just have you do what you can for us…

9 Takeaways from CMEEC Experiences in New England Customers view electricity as a cost of doing business, not as a profit center Customers want to keep it as simple as possible New Demand Resources “qualified” for the FCA are still subject to marketing efforts of Energy Service Companies Given where electricity costs are going in New England, just because demand response programs are not directly “in the market” doesn’t mean that they aren’t going to continue