1. The Innovators Dilemma Or “what do you do when energy is free?”

2. 2 Direct Energy, LP 5 million customer relationships (largest non-regulated in North America) S&P “A” credit rating (via parent company, Centrica plc) Approximately 4,700 employees 1260 MW of power generation in Texas, 88 mmcfe/day production and P&P reserves of 320 bcfe in Alberta Large Home Services operations in North America

3. 3 Disconnected Consumer and Utility Perspectives Consumer PerspectiveTraditional Utility Perspective Weather Family Activities Medical Work Tasks School Friends Pets Home Maintenance Energy Bill Dinner Elderly Parents Groceries Traffic Reliability Doctor appt. Car Payment Vacation Demand Response Career Retirement Credit Card Bill Mortgage kWh Base Load CAPEX/OPEX Rate Base Net Generation Load Peaking To raise energy usage awareness a consumer service must acknowledge the noise level and fit into consumers’ lifestyle not simply show up and expect attention. $$ Standalone energy displays or applications will fail. Regulatory

4. 4 The Abyss UtilityInfrastructureConsumer Power Layer Communications Layer Smart Grid Applications Layer Control System AMI, MDM GenerationTransmissionSubstationDistributionHome Distributed Generation and Storage Corporate Network LAN/HAN/ Device Energy Company Energy Cost Consumer Info Consumers Data Layer Device Layer T-Stat, Appliances Corp DataConsumer Data Smart Grid A Chasm is being created between Energy Companies and Consumers by the Smart Grid

5. 5 Communications Networks Data Networks Cable TV Networks NG Networks: From multiple legacy networks, communications and entertainment services are migrating to one unified IP-based network Consumer usage information in near-real- time for savings decision making Utilities can leverage network investments made by communications and data service providers End-to-end network connectivity capable of new levels of efficiency and dependability Enabling converged services & offerings (e.g., IPTV with on-screen energy usage information) Improving customer service (e.g., more opportunities for extended relationship) Decreasing CAPEX and OPEX (compared to legacy technologies) Fastening time to market of new services & products Leverage IP-based Next Generation (NG) Networks Implications FuturePast/Current Utility Infrastructure Communications Networks Data Networks “Disconnected vertical silo” Application & service layers Data Link & Physical layers All-IP network “Interface to horizontal layers” Cable TV Networks AMR DR Utility Infrastructure AMI HEMS

6. 6 Emerging Energy Service Value Chain ChipsAppliances Home System Energy Installation ElectronicsHVAC User Interface Billing Boards Gateway Back Office Repair RadiosSensors Diagnostics Communications /Network Support FirmwareMonitors Remote Access TBD Add-on Svcs ComponentsDevicesSoftware Service Providers Customer Services –Direct Energy –Duke Power –AT&T –Comcast –RSG –Geek Squad –Svc Providers –GoodCents –Open Peak –Tendril –Google –SmartSync –Motorola –TI –Echelon –Ember –GE –Lennox –Scientific Atlanta –ecobee Challenges face each segment of the value chain and include customer retention, cost effective services, and compelling consumer value propositions - All of these are addressed by working collaboratively to deliver new consumer services

7. 7 New Business Models - NOT Most current energy markets do not support innovation in business models due to regulated financial structures that preclude new paths to the customer.

8. 8 Sailing the sea of customer desires….in search of relevance