1. Reshaping Utility/ Consumer Relationships MEC October 5, 2010 Pinehurst, NC Penni McLean-Conner

2. 2 Agenda 1. Game Changers 2. NSTAR Pilot – Poor Man’s AMI 3. Learnings To Date 4. Going Forward Implications

3. Customer expectations are evolving, and framed by media experience Consumer Development Media WorldUtility World Passive Happy with 3 channels (1970’s) Passive receipt of power Active Broader choices – 100’s of channels Consumer interest in more choices – DG, energy management, Participatory Consumer determines content – netflix Dynamic value-based pricing of power and interactive services

4. Consumer Motivation for Smart Grid Conserve Energy Save Money Help The Environment

5. Reality is that this motivates only a small customer segment* *”Plugging into the Consumer”. IBM Global Business Services, 2007 Smart Grid Tolerators – 25%Smart Grid Enthusiasts – 18% Young and old Lower use of technology Lower income Younger High use of technology Higher Income Smart Grid Resistors – 21%Smart Grid Truth Seekers – 37% Older Middle income Younger Lower use of technology Lower income Technology Appeal High Low Smart Grid Appeal

6. 6 Agenda 1. Game Changers 2. NSTAR Pilot – Poor Man’s AMI 3. Learnings To Date 4. Going Forward Implications

7. Massachusetts's Smart Grid Pilot Project Objectives Cover at least 0.25% of customers Integrated two way communications Smart meters Real time measurements and communications Embedded Automated Load Management Remote monitoring & operation of distribution system Time of Use or Hourly Pricing Rate treatment of Incremental Program Costs Minimum 5 % load reduction (Peak and Average)

8. Massachusetts Utilities Are Piloting Several Smart Grid Approaches NSTAR Pilot $1,481 per point Optional (3190 customers) Leverages existing infrastructure Does not provide additional AMI benefits (i.e. automatic shut-offs) National Grid Pilot $3,796 per point Negative opt out (15,000 customers) Mesh communications infrastructure AMI benefits

9. broadband NSTAR Approach – Poor Man’s AMI Uses installed AMR meter infrastructure Uses Customer’s broadband NSTAR Back Office MDM Billing CIS Data Collection, Verification

10. NSTAR Smart Grid Billing Options Period Illustrative Supplier Charges ($/kWh) Total Electricity Price ($/kWh) Ratio to be Applied to Basic Service rate Critical Peak $1.35$1.42 10.62 On-peak $0.28 $0.352.23 Off-peak $0.08$0.15 0.60 Time of Use – 3 Periods, peak, off-peak and critical peak Rebate Option – Requires central air; $5.00 rebate

11. In-Home Technologies Associated with the Pilot 11 All Participant GroupsLoad Control In Home Display Access to Web Portal Internet Gateway / HAN Programmable Thermostat Zigbee device Real-time power demand Billing period electricity consumption & cost Price of electricity View and manage household energy consumption online Receive messages from NSTAR Electric Analyze historical usage patterns Home Area Network (HAN) to enable two- way communication between the customer and NSTAR Up to 4 programmable set points per day Controllable over the Internet via the Web Portal Critical Event management and control

12. NSTAR Target Market for Pilot NSTAR Electric 900K Newton, Hopkinton 40,365 A/C 30K Non A/C 735 2,135 Pilot 2,870 Need 2% enrollment for non A/C customers Need 7%enrollment for A/C customers

13. NSTAR’s Marketing Approach Digital campaign E-Bill/email/ online outreach Objectives Secure sufficient pilot participants Complete non-participant and participant research Traditional marketing techniques Appeal to mainstream audiences Test/monitor receptivity Phase I: General Marketing Campaign -Newton/Hopkinton Phase II: Targeted Marketing Community Newspapers Media Placements Bill Messaging Direct Mail Telemarketing

14. 14 Agenda 1. Game Changers 2. NSTAR Pilot – Poor Man’s AMI 3. Learnings To Date 4. Going Forward Implications

15. Employee Pilot/Soft Launch Preliminary Findings Employee Pilot Information Only, interesting but challenging to sustain interest long term Soft Launch Initial response strong/email campaign Challenging to convert to enrollment Technology/thermostats installations haven’t proceeded as smoothly as possible

16. 5,603 Emails Sent 527 Enrolled 392 Accepted 248 Sign Agreements 159 successfully installed Soft Launch Results Only 41% of those accepted had equipment installed.

17. Reasons for Degradation in Customer Counts Never responded to the customer agreement after initially enrolling Difficulty scheduling summer installations Opted not to enroll after reading the customer agreement

18. 18 Agenda 1. Game Changers 2. NSTAR Pilot – Poor Man’s AMI 3. Learnings To Date 4. Going Forward Implications

19. Smart Grid Invites New Product And Service Offerings Pricing structures Monitoring and control services Notification services Outage management services (distr. Smart grid) Distributed generation services

20. On the Horizon – Processes, Functions, Technology Linkage to smart grid (HAN) technology Linkage to customer billing Customized customer messaging Supports comparison to other customers Community challenges Transparency with usage Linkage to behavioral based programs

21. The Questions Remain Will consumers sustain behavioral changes? Will consumers adopt in large numbers?