1. 1 April 29, 2008 Pepco and May 2, 2008 Delmarva Power Comprehensive Energy Efficiency and Conservation Programs Filing Case No. 9111 Technical Advisory Group June 4, 2008

2. 2 Overview of Filings Blueprint for the Future Filings -- March 21, 2007 for both DPL and Pepco Includes Energy Efficiency, Conservation, Demand Response, AMI, and support for Bill Stabilization Adjustment Mechanism Commission Orders Approving Bill Stabilization Adjustment Mechanism – July 19, 2008 Pepco Case No. 9092, Order No. 81517 DPL Case No. 9093, Order No. 81518 Quick Start Residential PHI Collaborative Filings – July 19, 2008 Order 81618, Case 9111 (Fast Track) issued September 19, 2007 Approved Residential CFL Program, Customer Awareness Campaign, and DSM Surcharge Energy Efficiency Conservation and Demand Response Plans October 26, 2007 for both DPL and Pepco EmPOWER MD Goal Achievement Filing on Energy Efficiency, Conservation, Demand Response, Dynamic Pricing, AMI, and Solar Initiative – Pepco and DPL Demand Response Filings -- February 15, 2008 Commission issues Letter Orders approving DPL and Pepco Demand Response Service Program on April 18, 2008 Comprehensive Energy Efficiency/Conservation Programs in Response to Commission Data Request – Pepco filed on April 29, 2008 and Delmarva Power on May 2, 2008

3. 3 Order of Today’s Presentation Working Group meetings held at PHI Office located at PHI's Baltimore offices (10 East Baltimore Street, 12th Floor - office door faces the elevators). Start time 9:30 AM, end time 5:00 PM. 6/13, and 6/19 open too for subsequent meetings if necessary. A. Overview B. Cost Effectiveness C. Benefits D. Penetration Rates E. Costs F. Benchmarking G. Rate and Bill Impact H. Measurement and Valuation I.Miscellaneous

4. 4 Combined Presentation of Pepco and Delmarva Power Response to Data Request Program Structure is similar for both Companies. Specifics of role out for each program is dependent on characteristics of each service territory.

5. 5 A.Overview 1. Description of Proposed DSM Programs 2015 Year End Peak Demand Reduction (KW) Annual Energy Reduction (MWh) Cost Pepco171,875923,448$110 million Delmarva Power 77,088301,546$55 million Total248,9631,224,994$165 million The DSM programs provide cost-effective energy and peak demand savings. The program helps to achieve EmPOWER Maryland goals.

6. 6 2015 Pepco Maryland DSM Achievements (Table 1)

7. 7 2015 Delmarva Power Maryland DSM Achievements (Table 1)

8. 8 How did we select the DSM programs? (1. Cont.) DSM measures must generally pass a hurdle benchmark of 1.0 in the Total Resource Cost Test ratio. Recommended measures presently commercially available. Service territory building characteristics; Service territory weather; Customer annual electricity consumption and Current best practices in the design of DSM programs. Savings opportunities for all customers. Additional programs are expected over time if demonstrated to be cost-effective over time.

9. 9 2009, 2011, 2013, and 2015 Pepco Maryland DSM Program Energy and Demand Savings (Table 2)

10. 10 2009, 2011, 2013, and 2015 Delmarva Power Maryland DSM Program Energy and Demand Savings (Table 2)

11. 11 Pepco’s Projected DSM Total Program Costs 2008 – 2015 (Table 3)

12. 12 Delmarva Power’s Projected DSM Total Program Costs 2008 – 2015 (Table 3)

13. 13 Pepco’s Projected Annual DSM Program Expenditures 2008 – 2015 (Table 4)

14. 14 Delmarva Power’s Projected Annual DSM Program Expenditures 2008 – 2015 (Table 4)

15. 15 Pepco DSM Program Cost-Effectiveness Results (Table 5)

16. 16 Delmarva Power DSM Program Cost-Effectiveness Results Table 5

17. 17 How we are going to get customers to participate? (1. Cont.) General Energy Awareness Campaign Educate customers on energy efficiency, conservation and demand response opportunities. Coordinate with other Maryland utilities, the MEA and electricity stakeholders to maximize the effectiveness. The strategy: Reach the maximum number of customers at least cost. Special focus on reaching hard to reach customers due to either language and or social-economic barriers. Radio and print to create awareness by reaching large numbers of customers.

18. 18 Annual Media Budget (1. Cont.) How we will get the word out to customers. PepcoDelmarva Power Spot Radio$580,000$425,000 Print (newspapers)$180,000$130,000 Cable TV$170,000$125,000 Internet$185,000$135,000 Print Collateral$35,000$25,000 Special Events$15,000$10,000 Production/Acct. Mgt$135,000$100,000 Total$1,300,000$950,000

19. 19 Building Commissioning and O&M Program (1. Cont.) Program Description: Improve the way customers commission, operate and maintain their facilities. Target Market: Commercial, governmental, and institutional customers who operate large facilities are expected to be receptive to and benefit from commissioning services. Emphasis on existing construction versus new. Eligible Measures: Consulting and low-cost/no-cost system adjustments and control system modifications. Capital improvements will be supported through other Company DSM programs. Trainings and scholarship opportunities will be available to improve energy awareness of facility personnel. Top Measures: 1.Split Heat Pump 2.Centrifugal Chiller 3.Package Terminal AC 4.Split AC Delivery Strategy: Third-party vendor selected through request for proposal (“RFP”). Vendor will recruit participants, reviewing commissioning proposals, measurement and verification plans, and processing incentives. Marketing and Communications: General Awareness Campaign and specific marketing efforts to target market segments.

20. 20 Non-Residential HVAC Efficiency Program (1. Cont.) Program Description: Motivate non-residential customers to select high efficiency options when making HVAC purchasing decisions by providing incentives for high efficiency unitary air conditioning and heat pump equipment. Target Market: Commercial, governmental, institutional, and industrial customers of all sizes and HVAC designers, contractors and installers. Eligible Measures: High efficiency air conditioning and heat pump equipment up to approximately 30 tons, using the ENERGY STAR© certification where appropriate and measures such as dual-enthalpy economizer controls and carbon-dioxide sensors for demand controlled ventilation. Pepco Delmarva Power 1.Package AC split Heat Pump 2.Split AC Package AC 3.Package Heat Pump Split AC Delivery Strategy: Third-party vendor selected through RFP. Vendor will recruit participants, reviewing commissioning proposals, measurement and verification plans, and processing incentives. Marketing and Communications: General Awareness Campaign and specific marketing efforts to target market segments.

21. 21 Non-Residential Prescriptive Rebate Program (1. Cont.) Program Description: Providing incentives for selected common, cost-effective energy efficiency measures. Target Market: Commercial, government, institutional, and industrial customers. Eligible Measures: Measures must have predictable energy savings and a uniform incentive structure must be backed by energy a savings estimate. measures Include: Premium Efficiency Motors, HVAC Variable Frequency Drives, T8 & T5 Lighting Conversions, LED traffic signals Delivery Strategy: Third-party vendor selected through RFP. Vendor will recruit participants, reviewing commissioning proposals, measurement and verification plans, and processing incentives. Trade allies and energy services providers will be an integral this program. Marketing and Communications: General Awareness Campaign and specific marketing efforts to target market segments.

22. 22 Custom Incentive Program (1. Cont.) Program Description: Any cost-effective non-lighting energy efficiency improvements that are not eligible for rebates through the Company’s other non-residential DSM programs. Target Market: Commercial, government, institutional, and industrial customers of all sizes. Eligible Measures: Any cost-effective non-lighting energy efficiency improvements that are not eligible for rebates through the Company’s other non-residential DSM programs. These measures will typically have energy savings and incremental costs that are site specific and not applicable across a broad range of customers. Measures are expected to include large air conditioning equipment and chillers, industrial process improvements, energy management systems, and efficiency improvements of energy consuming system rather than a single piece of equipment. Delivery Strategy: Third-party vendor selected through RFP. Vendor will recruit participants, reviewing commissioning proposals, measurement and verification plans, and processing incentives. Trade allies and energy services providers will be an integral this program. Marketing and Communications: General Awareness Campaign and specific marketing efforts to target market segments.

23. 23 Non-Residential Internet Platform for Load Curtailments (1. Cont.) Program Description: Customers who participate will receive hourly customer energy data, hourly Zonal Locational Marginal Prices (LMPs) for energy, and load reduction calculations (hourly energy savings) presented through the Internet platform. Target Market: Commercial, government, institutional, and industrial customers capable of reducing their demands by at least 100 kW during summer weekday afternoons. Eligible Measures: Participants will reduce demand and energy consumption when LMPs are high enough for them to justify doing so, or when PJM calls for an emergency load reduction. Reducing customer demands by at least 100 kW during summer weekday afternoons. Delivery Strategy: Platform to be selected through a competitive RFP process and will be linked to the company’s internet home page. Program capital costs will be reduced due to a sharing of costs across jurisdictions. Marketing and Communications: General Awareness Campaign and specific marketing efforts to target eligible customers and load serving entities. Customer marketing will entail targeted direct marketing, direct contact by Company Account Managers, trade shows and trade association outreach.

24. 24 Residential HVAC Efficiency Program (1. Cont.) Program Description: Motivate customers to select to high efficiency unitary air conditioning and heat pump equipment when making HVAC purchase decisions. A secondary objective is to educate the marketplace about the increased efficiency and improved comfort resulting from proper HVAC system installation. Target Market: Residential customers who are purchasing central air conditioning and heat pump systems and HVAC designers, contractors and installers. Eligible Measures: High efficiency central air conditioning equipment with a SEER rating of 15 or higher and heat pump equipment with a 14 SEER and 8.5 HSPF or higher and measures which support confirming the quality of an HVAC system installation, such as the verification of proper refrigerant charge and air-flow. Delivery Strategy: Third-party vendor selected through RFP. Vendor will recruit participants, reviewing commissioning proposals, measurement and verification plans, and processing incentives. Trade allies and energy services providers will be an integral this program. Marketing and Communications: General Awareness Campaign and specific marketing efforts to target market segments in the HVAC industry.

25. 25 Residential Lighting and Appliance Program(1. Cont.) Description Program: Increase ENERGY STAR© lighting and window air conditioning products, using rebates and or middle-market buy-downs. Target Market: All residential customers. Eligible Measures: Applies to the following ENERGY Star qualified products: ENERGY STAR CFL (18 W), Programmable Thermostat, High Efficiency Electric Domestic Hot Water Heater, ENERGY STAR Window AC (10.8 EER) Delivery Strategy: Third-party vendor selected through RFP. The vendor will be responsible for program implementation, retailer interactions, processing incentives and spot audit verification. Marketing and Communications: General Awareness Campaign and specific marketing efforts to target market segments. Program specific marketing efforts will target retailers to increase the availability of ENERGY STAR© lighting and window air conditioning products in the marketplace.

26. 26 Home Performance with ENERGY STAR Program (1. Cont.) Program Description: Improve the overall performance of the home when improvements are being considered, by taking a whole house approach to reducing energy. Benefits of the program include: Up to 30% Savings on Energy Bills, a quieter, more comfortable living environment with lower maintenance costs. Target Market: Residential customers in existing homes who are considering upgrades and improvements to their home. Eligible Measures: Include air sealing, adding insulation, duct sealing, recommending new high energy efficiency HVAC equipment, lighting and appliances. Blower door, infrared cameras and other measures will be used. Contractor training to support quality certification will also be offered. Delivery Strategy: Program implementation will be provided by third-party vendors who are certified by the Company. Marketing and Communications: General Awareness Campaign and specific marketing efforts to target market segments.

27. 27 What does one look like? HOME PERFORMANCE WITH ENERGY STAR® Example (1. Cont.)

28. 28 Home Performance with ENERGY STAR Program Provides the Following (1. Cont.) Additionally- Energy efficiency improvement incentives and loans. Interest rate subsidized by the program. Software programs evaluate customer’s homes. Upload data to a central database to acquire the savings information.

29. 29 Pepco and Delmarva Power Maryland Facility Solar Installations (1. Cont.) Program Description: Provide a distributed generation asset that is coincident with peak activity on Company owned sites, offsetting utility load, reducing congestion in the transmission market, and generating clean energy for Maryland customers. Electricity generated and SRECS will be used to offset program costs. Target Market: Company owned installations on utility owned substations and utility owned and leased facilities. Eligible Measures: Photovoltaic arrays. Delivery Strategy: Vendor will be selected through a competitive RFP process. The selected vendor will be responsible for system installation. Marketing and Communications: The Company will provide information to customers regarding the installed photovoltaic systems.

30. 30 Photovoltaic Customer Installation Program (1. Cont.) Program Description: Providing turnkey photovoltaic installation service by certified contractors, a 15 year discounted (by 2 percent) fixed interest loan included on the customers bill, and a maintenance program. Customers would own the installations and receive any available state and federal incentives. Target Market: All customers. Eligible Measures: Turnkey installation of photovoltaic arrays by certified contractors, a 15 year discounted loan, and a maintenance program. Delivery Strategy: Program implementation will be provided by third-party vendors who are certified by the Company. Program participants will be free to select any certified vendor and negotiate installed photovoltaic prices. Marketing and Communications: The General Awareness Campaign will be the primary customer communications medium for the program. The solar industry will be marketed to using targeted direct marketing, direct contact by the program vendor personnel, trade shows, trade association and trade ally outreach marketing efforts.

31. 31 B. Cost Effectiveness 2. What tests were used? 1.Societal Test, 2.Total Resource Cost Test, 3.Participant Test, 4.Rate Impact Measure Test. Cost-effectiveness analysis based on the California Standard Practice Manual. The Company relied on the results of the Total Resource Cost Test for recommended programs. TRC values were calculated for individual programs using the energy and demand impact estimates, regionally specific avoided energy, capacity, and discount rates. These key economic parameters are listed in Exhibit 2.1

32. 32 TRC Defined (2. Cont.) Where: Life is the life of the measure in years UACt is the utility avoided cost from electricity (kWh), electric demand (kW), and natural gas (Therms) savings in year t UICt is the utility increased cost from electricity (kWh), electric demand (kW), and natural gas (Therms) increases in year t ICt is the incremental cost for installed measures in year t PRCt is the program administrator cost in year t d is the discount rate

33. 33 3. How Did Cost Effectiveness Tests Address Free Riders, Spillover, and Market Transformation? Free Rider Assumptions of 20%. Net-to-gross ratio of 0.80 calculation of program benefits. Referenced the Energy Efficiency Policy Manual v2, Prepared by the California Public Utilities Commission, Energy Division, shown in Table 3-1. The net-to-gross ratio was applied using the following formula: Net Energy = Gross Estimated Energy Savings X Energy-Unit Benefit X 0.80 Benefit Net-to-Gross ratios ranged from 0.72 for residential audits to 0.96 for non- residential rebates. Since the proposed programs are not identical in nature to the specific California programs, the “other programs” value of 0.80 was selected for use for all programs in the Company’s benefits/costs analysis.

34. 34 Net-to-Gross Tables (3. Cont.)

35. 35 4. How Did You Treat Revenue Decoupling in the Tests? Rates were decoupled by the Commission during 2007. Each cost-effectiveness test assumed no programmatic impact on distribution system revenues. Avoided transmission and distribution expense of $5 per kW was assumed to reflect avoided new transmission and distribution expenditures. Full recovery of DSM program costs was assumed.

36. 36 5. Discussion of Assumptions for all Externality Values Examples of externalities may include air emissions costs, health benefits, other environmental impacts, reliability improvements and economic development. SCT Attempts to weigh the total cost to the total benefits. benefits adder of $0.0115 per kWh reduced. $0.01/kWh assumed for economic benefits. $0.0015/kWh additional was assumed for all other benefits, based in part upon an Oak Ridge National Laboratory summary of externalities for coal generation.

37. 37 C. Benefits 6. Assumptions Behind the Values used for Avoided Costs The Rate Impact Measure Test compares DSM impacts on electricity rates due to changes in utility revenue and program costs to the costs that are avoided. The results of this test are less meaningful in Maryland because 75% of a customer bill is provided competitively. TRC and SCT account for regionally specific avoided energy and capacity costs. Avoided energy costs were developed by removing an assumed 30% retail mark- up from the SOS rate. Assumed T&D costs at $5/KW. Participant Test and Rate Impact Measure Test accounts for reduction in utility bills from KWh, KW and Therm reductions.

38. 38 Avoided Costs (6. Cont.)

39. 39 Avoided Costs (6. Cont.)

40. 40 7. What “Granularity” Did You Use in Calculations? Avoided energy costs were developed for on-peak, off-peak, and All-hours energy using the ICF Integrated Planning Model. Each avoided cost benefit for each measure was then individually calculated using the appropriate avoided cost value.

41. 41 8. Provide Details and Values for all Measure Calculations Refer to electronic file Delmarva Power Worksheet 2.xls and Pepco Worksheet 2.xls.

42. 42 9. Details and Values for Energy and Capacity Savings The avoided cost values for all energy and capacity savings used in the various cost-effectiveness tests are provided in the response to Question 2. The methodology for determining the value of avoided energy and demand costs is described in the response to Question 10 on page 68.

43. 43 10. How are Futures Prices and Congestion Modeled in Energy Rate? The energy, capacity, and natural gas prices were developed using the latest forecast from ICF’s Integrated Planning Model (IPM®) for the PJM Pepco and Delmarva Power region as described in the response to Question 12. IPM is a linear optimization model. Least cost means of meeting electric generation energy and capacity requirements Complies with specified constraints: air pollution regulations, transmission constraints, and plant specific operational constraints.

44. 44 11. What Customer Usage Profiles Used to Define Costs? DOE2.1E energy simulation model. Provides coincident peak demand values and energy usage in the peak-hours and all-hours energy classes. Nationally-recognized standard, used for almost 20 years. For measures that were not modeled with DOE2.1E, other sources as indicated in the Measure Details worksheet in the electronic file Pepco Worksheet2.xls and Delmarva Power Worksheet 2.xls

45. 45 12. Assumptions and Values used in the Calculation of Avoided Costs Utilized latest forecast from IPM® for valuation studies for: generation and transmission assets; regional forward energy and capacity price forecasts; air emissions compliance strategies; assessing the impact of changes in fuel pricing; assessing the impact of unexpected changes in economic or electricity demand growth; determining optimal timing decisions for environmental compliance decisions; pricing impact of demand responsiveness; pollution allowance prices. The IPM forecast used in this study incorporates the impact of emissions allowance prices (CO2, SOx, NOx, and Hg) Forecast does not reflect losses, reserves, T&D costs, or the externalities required for the test. Therefore, the values utilized are IPM’s forecast, plus the addition of 7% for losses, 15% for reserves, a $5 addition for T&D.

46. 46 13. Measure Peak Coincident Assumptions for Avoided Cost Calculations Pepco Worksheet 2.xls and Delmarva Power Worksheet 2.xls. For weather dependent measures, DOE2.1E modeled peak demand.

47. 47 14. Describe, Support, and List All Measure Usage Persistence and Life Assumptions Measure Details worksheet in the electronic file Pepco Worksheet 2.xls and Delmarva Power Worksheet 2.xls

48. 48 15. Are Transmission and Distribution Avoided Costs included in Avoided Cost Calculations? The IPM forecast used in this study does not include losses, reserves or T&D costs. Due to the difficulty of estimating T&D avoided costs because of the “step-wise” nature of T&D investments, an assumption of $5 per avoided kW was assumed. Transmission and distribution avoided costs are included in the avoided costs used in the cost effectiveness calculations. The values used are IPM’s forecast, plus the addition of 7% for line losses, 15% for reserves, and a $5 adder for T&D.

49. 49 16. Were Wholesale or Retail Level Costs used in Avoided Cost Calculations? The avoided costs used for this analysis are at the wholesale level.

50. 50 17. Were any Relevant Avoided Costs for Other Fuels Included in Overall Avoided Cost Calculations? Yes, for natural gas, see response to Question 2 on pages 44 to 50. The TRC values were calculated for individual programs using the energy and demand impacts, regional specific avoided, capacity, and discount rates.

51. 51 18. What is the Discount Rate for Avoided Costs? Why? 5.5 percent used for the Total Resource Cost Test, the Participant Test, and the Rate Impact Measure Test. This is based upon the Company’s cost of capital net of inflation, which was assumed to be equal to 3 percent. A real societal discount rate of 3 percent was used for the Societal Cost Test based upon U.S. Long Term Treasury bond rates. A lower discount rate will increase a program’s benefits compared with program costs.

52. 52 19. Discuss Appropriateness for each Cost Effectiveness Test for each Discount Rate Used Maryland has historically relied upon the utility cost of capital to determine appropriate discount rates used for DSM cost-effectiveness tests other than the societal test. Discount rates used for the Societal Test are typically based upon the long-term cost of U.S. Treasury debt.

53. 53 D. Penetration 20. What Market Penetration Rates were Used? First the maximum annual installations achievable was derived. Secondly, technology adoption rate was factored to estimate max install rate. The following factors include: 1.Total Sector Units 2.Relevance 3.Technology Units Per Sector Unit 4.Technical Applicability Rate 5.Not Yet Adopted Rate 6.Stock Turnover Rate 7.Payback Acceptance Rate 8.Market Applicability Rate Technology Adoption Rates based on a S Curve: The initial stage of growth is approximately exponential; then, as competition arises, the growth slows, and at maturity, growth stops. Customer ClassPepcoDelmarva MD Residential467,491169,993 All Commercial46,59325,223

54. 54 21. Are Penetration Rate Assumptions based on Utility, Maryland Specific, or Outside Sources? First choice- Utility specific information when available. Example: Customer counts The second choice- Maryland or other local region information sources Examples: Maryland residential new construction rates, commercial end-use data from the U. S. DOE Commercial Building Energy Consumption Survey (CBECS) and measure lifetime data from the 1995 Delmarva Power Measurement and Evaluation Report. If the above was not available other sources such as the California Database for Energy Efficient Resources (DEER) were utilized. A listing of data sources is provided in the References in Pepco Worksheet s.xls and Delmarva Power Worksheet 2.xls.

55. 55 22. Describe and Provide all Incremental Customer Cost Assumptions Incremental cost assumptions for each measure shown in Measure Details worksheets in the electronic files Pepco Worksheet 2.xls and Delmarva Worksheet 2.xls. Example: Home Performance with ENERGY STAR (Existing) Heat Pump, both Pepco and Delmarva Power have same assumed incremental cost. Incremental Equipment Cost $2,382.6 Incremental Installation Cost NA (There is no additional installation cost)

56. 56 23. Describe and Provide all Utility, Program Administrator, or Contractor Costs Assumptions Pepco personnel to provide strategic direction, vendor contract performance management and daily program implementation decision making. Program implementation work to be performed by outside contractors. All outside contractors to be selected through competitive RFP and bidding process. Utility, program administrator, and contractor costs assumptions provided in Pepco Tables 1-5.xls and Delmarva Tables 1-5.xls. Program costs are summarized in Table 3.

57. 57 24. Were service territory or Maryland specific values the basis for incremental customer and program administration and implementation costs? High quality estimates from other studies were validated and adjusted for Maryland-specific factors. Existing Company filings, research, and additional sources, primarily the DEER database, were reviewed. If these preferred sources of measure costs were not available for particular technologies, other DSM program filings, vendor quotes, monitoring and evaluation reports, or professional judgment as necessary were used.

58. 58 25. Provide a Rationale and Listing for all Customer Incentive Payments and Total Incentive Payment Cost Projections Incentives were developed individually for each measure. Payback to two years or less for end-user. Bounded at a minimum of 25 percent and a maximum of 75 percent of the total incremental cost for the measure. The initial estimate of these incentives is in the Measure Details worksheet in the electronic file Pepco Worksheet 2.xls and Delmarva Power Worksheet 2.xls. Program level aggregation of incentive costs were provided in the individual program worksheets in the electronic file Pepco Tables 1-5.xls and Delmarva Power Tables 1-5.xls. Incentive amounts will be refined over time.

59. 59 26. Describe the Marketing Campaign for the marketing Budget Program specific marketing materials are included within each program and are included in the cost-effectiveness calculation for each program. Marketing budgets are provided in Table 3 of Pepco and Delmarva Power Tables 1-5 Worksheet. Individual program marketing efforts describe on pages 22 to 38. Example: Home Performance with ENERGY STAR Program The General Awareness Campaign is the primary communications medium. Target contractors and trade allies in the HVAC and home improvement industries. Direct marketing, direct contact by the program vendor personnel, trade shows and trade association outreach. Trade ally marketing to their customers.

60. 60 27. How Will the Company Competitively Procure Valuation and Auditing Services? Response The Company plans to competitively select program vendors by issuing Requests for Proposals. The Company will seek to identify opportunities for minority owned businesses throughout the selection process.

61. 61 28. Please describe in detail any program involving pick up, disposal, or bounty for any appliance. None currently proposed involving the pick up, disposal, or bounty for any appliance. The Company is continuing to examine potential future additional DSM programs that may include an early refrigerator retirement program. This program would entail the pick-up and recycling of older refrigerators. The Company will only propose additional DSM programs if they are projected to be cost-effective.

62. 62 F. Benchmarking 29. Discussion and Source Material of Analysis Compared the proposed portfolios to the reported energy efficiency spending and savings results of other utilities. Analyzed spending and energy efficiency savings for other utilities reported by the Energy Information Administration (EIA). The primary comparison to evaluate the cost-effectiveness of the proposed Pepco efficiency portfolio is the cost per kWh of energy savings.

63. 63 DSM Cost Comparison (29. Cont.)

64. 64 Spend levels and the customers reached reported by ENERGY STAR (29. Cont.)

65. 65 PEPCO (29.Cont.) Table 29.3 Comparison of Residential Energy Efficiency Savings (MWh) by National Utilities First Year Annualized UTILITY NAMEResidential Energy Efficiency Savings (MWh) Pacific Gas & Electric Co378,907 Southern California Edison Co 367,856 Pepco115,000 Massachusetts Electric Co100,512 Florida Power & Light Co 99,172 TXU Electric Delivery Company 87,279

66. 66 PEPCO (29.Cont.) Table 29.4 Comparison of Commercial Energy Efficiency Savings (MWh) by National Utilities First Year Annualized UTILITYNAMECommercial Energy Efficiency Savings (MWh) Avista Corp28,073 Long Island Power Authority27,042 Pepco26,050 Jersey Central Power & Lt Co22,727 Great River Energy21,280

67. 67 DELMARVA POWER (29.) Table 29.3 Comparison of Residential Energy Efficiency Savings (MWh) by National Utilities First Year Annualized UTILITY NAME Residential Energy Efficiency Savings (MWh) Western Massachusetts Electric Co. 8,937 Wisconsin Electric Power Co. 8,541 Delmarva Power8,400 Tampa Electric Co.8,192 City of Seattle 8,173 Avista Corporation 7,999

68. 68 DELMARVA POWER (29.Cont.) Table 29.4 Comparison of Commercial Energy Efficiency Savings (MWh) by National Utilities First Year Annualized UTILITYNAMECommercial Energy Efficiency Savings (MWh) Western Massachusetts Elec Co17,329 NorthWestern Energy LLC17,103 Delmarva Power15,025 Minnesota Power Inc11,737 Interstate Power and Light Co10,937

69. 69 30. What other state or utility programs did you use in your benchmarking analysis? The Company used the 2006 EIA Form 861 data to perform a macro-level benchmarking of the proposed energy efficiency portfolio. ICF assisted in the design of its proposed DSM programs. Publicly available sources: 1. California Energy Commission 2. Connecticut Light and Power Company 3. United Illuminating Company 4. We Energies efficiency programs These are the primary efficiency programs that make detailed budget and achievement information publicly available.

70. 70 31. Please provide benchmarking results separated by customer segments, for example, residential, small commercial or low income In addition to the 2006 EIA Form 861 data use for macro-level benchmarking, the Company retained ICF to assist it in the design of its proposed DSM programs. As part of this design assistance, ICF analyzed publicly available information on the California Energy Commission, Connecticut Light and Power Company, United Illuminating Company, And We Energies efficiency programs. These are the primary efficiency programs that make detailed budget and achievement information publicly available.

71. 71 32. Explain which Programs Yield Largest Amounts of Energy and Demand Saved Program Cost = Total Program Budget / 2015 Peak Demand Reduction. Portfolio results will not substantially change by shifting budget dollars between programs. Balance between energy efficiency potential and spending to maximize program results.

72. 72 G. Rate and Bill Impacts 33. Provide Analysis for Estimated Impacts Pepco Residential DSM Surcharge $.29/month (2009), increases to $2.28 (2015) based on 1,000 KWh in annual sales). Delmarva Power Residential DSM Surcharge $.27/month (2009), increases to $2.31 (2015) based on 1,000 KWh in annual sales). Pepco Non-residential DSM Surcharge $.18/month (2009), increases to $1.59 (2015) based on 2,400 KWh in annual sales. Delmarva Power Non-residential DSM Surcharge $.54/month (2009), increases to $5.33 (2015) based on 2,400 KWh in annual sales. Bill Impact scalable to participation level. DSM Surcharge applies to all residential and non-residential rate classes. Non-participants benefits include price mitigation and improved reliability of the Pepco electrical system: Pepco peak demand reduction est. is 669 MW and 221 MW for Delmarva Power.

73. 73 Pepco Table 33.4 (33. Cont.)

74. 74 Delmarva Power Table 33.4 (33. Cont.)

75. 75 Pepco Table 33.5 (33. Cont.)

76. 76 Delmarva Power Table 33.5 (33. Cont.)

77. 77 34. Pepco Sensitivity Analysis of Monthly Bill Impact Pepco Scenario 1 – Net surcharge monthly bill impact of a positive $0.06. Customer installs six CFL 18 W Bulbs purchased through the mass market discount programs offered at selected stores. Approximate energy savings of 37.56 KWh per CFL is estimated. Pepco Scenario 2 – Net surcharge monthly bill impact of a negative $5.04. Assumes a ENERGY STAR Central Heat Pump (14 SEER/8.5 HSPF) (Existing) tune up saving 718 KWh/year plus the savings from 12 CFLS that are also installed. Pepco Scenario 3 – Net surcharge monthly bill impact of a negative $14.64. Home Performance with Energy Star High Efficiency Central Air Conditioner annual estimated to save 1,227 KWh per year plus the savings from 18 CFLs. Pepco Scenario 4 - Net surcharge monthly bill impact of a negative $62.23. Residential customer undergoes a Home Performance ENERGY STAR Audit of a household with a heat pump tune up and 18 CFLs. Annual estimated energy savings of 5,668 KWh is a class average of a participant taking advantage of all the recommended conservation measures that on average would be applicable. The general objective of the program is to bring the old house technology and energy footprint up to a new house energy efficiency standard.

78. 78 (34. Cont.)

79. 79 Delmarva Power Sensitivity Analysis of Monthly Bill Impact (34. Cont.) Delmarva Power Scenario 1 – Net surcharge monthly bill impact of a positive $0.21. Customer installs six CFL 18 W Bulbs purchased through the mass market discount programs offered at selected stores. Approximate energy savings of 37.56 KWh per CFL is estimated. Delmarva Power Scenario 2 – Net surcharge monthly bill impact of a negative $8.08. Assumes a ENERGY STAR Central Heat Pump (14 SEER/8.5 HSPF) (Existing) tune up saving 718 KWh/year plus the savings from 12 CFLS that are also installed. Delmarva Power Scenario 3 – Net surcharge monthly bill impact of a negative $13.89. Home Performance with Energy Star High Efficiency Central Air Conditioner annual estimated to save 1,312 KWh per year plus the savings from 18 CFLs. Delmarva Power Scenario 4 - Net surcharge monthly bill impact of a negative $60.93. Residential customer undergoes a Home Performance ENERGY STAR Audit of a household with a heat pump tune up and 18 CFLs. Annual estimated energy savings of 5,544 KWh is a class average of a participant taking advantage of all the recommended conservation measures that on average would be applicable. The general objective of the program is to bring the old house technology and energy footprint up to a new house energy efficiency standard.

80. 80 (34. Cont.)

81. 81 H. Measurement and Verification 35. Describe Proposed M&V Program Conduct formal program evaluations during the third and sixth year of program implementation to confirm program impacts and serve as a basis for recommended future program changes. Process evaluations Impact evaluations Perform both monitoring and evaluation as part of the ongoing implementation of each program so that any program problems can be identified and corrected expeditiously. Evaluate DSM programs after the final year of program implementation to confirm final program impacts. Delmarva Power and Pepco Blueprint filings included: “Measurement & Verification Strategy and Program Evaluation” overview within each provided program description. Proposed budgets for this work within their overall DSM budget estimates.

82. 82 Describe Proposed M&V Program (35. Cont.)

83. 83 Describe Proposed M&V Program (35. Cont.)

84. 84 Describe Proposed M&V Program (35. Cont.)

85. 85 Describe Proposed M&V Program (35. Cont.) Table G-1 Pepco’s Projected MD DSM Total Program Costs for 2008 – 2015

86. 86 Describe Proposed M&V Program (35. Cont.) The current projected estimated costs for evaluation, by MD DSM program, as a percent of the total program costs during 2008 through 2015: –Delmarva Power: Proposed total evaluation budget of approximately 1.3 % of the total program cost is reasonable when compared with CEE’s national estimate of evaluation. –Pepco: Proposed total evaluation budget of approximately 1.2 % of the total program cost is reasonable when compared with CEE’s national estimate of evaluation. Benchmark analysis of the Consortium for Energy Efficiency (CEE) provides support for Delmarva Power’s and Pepco’s proposed EM&V costs. –“CEE is a nonprofit organization that works with its members in the U.S. and Canada to promote energy efficient products, technologies, and services.” CEE’s “Estimated 2007 EM&V Budgets for Electric Programs, by State” reports an EM&V cost estimate of 2.7% of the total program cost. The Companies’ plan to deploy an AMI System helps to lower M&V expense: –By providing valuable interval data to all customers—eliminating over time the need for load research meters. –PHI anticipates the M&V expense for DSM programs will be shared by both Pepco and Delmarva Power, thereby, effectively lowering each individual utility’s M&V expense.

87. 87 36. List Data and Technology Necessary for M&V Requirements for a successful measurement, evaluation and verification program include, but are not limited to: Customer energy consumption data. Customer demographic data. Load Research interval meters or meters deployed as a result of Delmarva Power’s and Pepco’s planned deployment of an AMI system. (Meters installed through AMI are expected to support the daily collection of hourly data.) End-Use customer baseline data. Building characteristics. Site specific customer surveys. Pre and post installation site inspections. Engineering based savings calculations. Building performance energy simulation modeling. Lighting loggers to measure the on/off cycle of commercial lighting. Regional weather data.

88. 88 I. Miscellaneous 37. Describe Statewide Similarities. How? Pepco Holdings, Inc. has made similar DSM program proposals for its Maryland Delmarva Power and Pepco service territories. The Company has met with Allegheny Power, BGE, SMECO, and the Maryland Energy Administration as it has developed various elements of its DSM program plans. The Company anticipates that such discussions will continue and be beneficial for all Maryland electricity consumers. For example, the Company implemented the residential Efficient Lighting Program featuring CFLs across both its Pepco and Delmarva jurisdictions with the same buy down price points. The Company worked with the same retailers in both jurisdictions to make this program available to residential customers. BGE and Virginia Power adopted the same mid-market buy-down strategies in their markets.

89. 89 38. What other conservation and energy efficiency programs were considered? Residential and commercial new construction programs were considered, but not included due to marginal cost-effectiveness under TRC test. Four measures with TRC ratio of.9 or higher were included due to equity considerations. Early refrigerator retirement was considered, but not selected.

90. 90 39. Describe programs with a TRC close to one Programs with TRCs close to one are residential and non-residential HVAC programs. These were included as HVAC is the most significant end-use related to summer energy use and peak demand.

91. 91 40. Discuss why the utility considers the selection to be “aggressive” Significant portions of the EmPOWER MD goals are met through the proposed portfolio. Pepco and Delmarva Power are continuing to examine and identify new program opportunities.

92. 92 41. Opportunities for Gas Utility Participation Sharing program expenses based upon the relative BTU savings of each impacted fuel source assigns program costs to Maryland electricity and natural gas consumers. Inequitable for Maryland electricity consumers to pay all DSM program costs One opportunity is the Home Performance Residential Audit Program. Residential building envelope improvements that are made will save both electricity and natural gas heating costs. Additional gas savings opportunities could be included within other proposed DSM programs. Additional cost-effective gas savings opportunities are identified, these savings could improve a DSM program’s cost effectiveness. Residential HVAC program to promote “add on heat pump” to supplement the heat provided by residential gas furnaces.

93. 93 42. Discuss all Fuel Switching No assumptions have been made for fuel switching. The Company has recommended no program that recommend fuel switching for its customers. Company believes the choice is best left to a customer to select their fuel preferences. Each customer should make a purchasing decision based on their own needs.

94. 94 43. Programs that Create Barriers to Other Programs The programs filed do not conflict with one another and support the activities of other recommended programs. There are potential minor interactions. For example, the residential Efficient Lighting Program with CFLs will slightly reduce the heat gain in a home resulting in the need for further heating during the winter months. These issues have already been considered by the Company and have been accounted for in the filed proposals.

95. 95 44. Describe How Programs Offer Participation for all Affected Customer Segments Pepco has proposed DSM programs for all customer segments to achieve EmPOWER Maryland goals. Residential programs include The Home Performance Energy With ENERGY STAR Program The HVAC Efficiency Program, and The Lighting and Appliance Program Programs for non-residential customers include The Building Commissioning and Operations & Maintenance Program The Non-Residential HVAC Efficiency Program The Non-Residential Prescriptive Rebate Program The Custom Incentive Program, and The Non-Residential Internet Platform for Load Curtailments

96. 96 45. Discuss Joint Gas/Electric Utility Programs Pepco and Delmarva Power deliver only electricity in Maryland.