1. The Road Ahead for Public Power Pennsylvania Municipal Electric Association Annual Conference October 15, 2015 Jeff Haas Vice President of Membership & IT American Public Power Association (APPA)

2. What We’ll Cover APPA overview Major challenges confronting Public Power Where the opportunities lie Resources available through APPA

3. About APPA 1408 regular utility members Very large members (LADWP – 1.5 million meters) and very small members (Orlando, OK – 90 meters) > 50% serve less than 5,000 meters APPA members serve more than 40 million customers 32 members in Pennsylvania

4. How Pennsylvania compares… Nationally - # of customers served by public power utilities Mean: 11,339 Median: 1,898 Pennsylvania - # of customers served by public power utilities Mean: 2,436 Median: 1,812 m

5. Changes on the Horizon Drivers for change in the electric utility industry include: – Increased regulations – Rapidly advancing technologies – Evolving customer expectations To help our members address these changes, APPA developed a Strategic Plan that was approved by its Board in June 2015Strategic Plan

6. Changes on the Horizon “Almost no other industry is currently undergoing such dynamic change as the energy sector…The success of this transformation of the energy industry will be decided at the local level.” Peter Terium, CEO, RWE (one of Europe’s largest utilities)

7. Industry Challenges Increased regulations Rapid technology advancements Evolving customer expectations Workforce challenges 7

8. Increased Regulations The electric utility industry is facing stiff environmental regulations, including regulations to address CO 2 emissions from new and existing power plants under the Clean Air Act Final rule regulating CO 2 emissions for existing power plants under section 111 (d) of the CAA was issued on August 3, 2015 Calls for 32% reductions in CO 2 emissions from 2005 levels by 2030 8

9. Increased Regulations 9

10. 10 Source: NERC study of Clean Power Plan reliability impacts.

11. Rapid Technology Advancements Increased Distributed Generation Potential for energy storage Behind-the-meter technologies Distribution system automation 11

12. Rapid Technology Advancements 12

13. Rapid Technology Advancements 13

14. Rapid Technology Advancements Energy storage 14

15. Rapid Technology Advancements Increased Distributed Generation/Energy Efficiency 15

16. Rapid Technology Advancements 16

17. Evolving Customer Expectations Electric utility customers will want… to be informed options assistance from trusted source 17

18. Evolving Customer Expectations 18

19. Work Force Issues Retirements Generational differences Diversity Talent gap Compensation 19

20. Work Force Issues 20

21. 21 Assessing the Sustainability of Public Power’s Business Model

22. IOUs = Shareholder Value 22 Value Proposition Share price appreciation Return on equity Customer Service

23. Public Power = Ownership Value 23 Value Proposition Price / CostReliability Service Convenience Local Ownership Local Control

24. Public Power’s Advantages 1.Public ownership – value to citizen-owners 2.Local control – local regulation 3.Low-cost structure – tax-exempt financing, strong credit ratings, lower-cost operations 4.Non-profit motive – no distribution of dividends, conflict between shareholders and customers 5.Primary focus on customers – meet customer needs; deliver customer value 24

25. Communicate the Value of Public Power Be proactive in your communications Maintain good relationships with local elected officials Build goodwill and engage stakeholders Educate employees about the value of public power Emphasize long-term benefits of ownership 25

26. APPA Member Resources Advocacy at the federal level APPA Academy Information resources – PublicPower.org – Public Power magazine, Public Power Daily & Weekly – More than two dozen active discussion forums – APPA Product Store Utility programs (RP3, DEED, eReliability Tracker) 26

27. Public power has a great opportunity if we stay true to our ideals and roots while adapting our mindsets and services to this new era

29. Thank You Contact: Jeff Haas Vice President of Membership & IT jhaas@publicpower.org jhaas@publicpower.org 202/467-2953 29