1. Explanation of January 23, 2012 “Hybrid” Recommendation to NJ SREC Working Group Stephen Wemple on behalf of Con Edison Development, Con Edison Energy & Con Edison Solutions February 16, 2012 1

2. Current SREC Dynamics Current law [section 38 d. (3)] exempts existing BGS contracts “effective prior to any future increase in the solar renewable portfolio standard” – All increases are born by retail suppliers (and their customers) and “new” BGS contracts. EY 11 SREC obligation was 37% higher for retail suppliers –.417% versus.305% for “exempt” load – Incremental cost of $34 Million at $600/SREC. The disparity will increase to ~40% in EY 12 – Estimated at.55% versus.39% for “exempt” load – Incremental cost of $28 Million at $250/SREC. 2

3. Current SREC Dynamics (continued) Market is behaving as expected – BGS auction has reinvigorated the bilateral market Contracts can be executed for three years (EY 13 – EY 15) at prices of about $200/SREC. SREC requirement is scheduled to more than double in three years: – 442 GWH EY 12 – 596 GWHEY 13 – 772 GWHEY 14 – 965 GHWEY 15. Three year shelf life gives producers the option to sell now or bank SRECs for sale in subsequent energy years. 3

4. “Hybrid” Recommendation Continuation of the EDC SREC programs is a separate issue, and should be considered on its own merits. If the EDC programs are extended, SREC requirements should be adjusted; just not right away – Maintains supply-demand “balance” over a three year period. Implement increases in SREC requirements on a three year forward basis for EY 16 (which starts June 2015) – Balances stakeholder interests Avoids disrupting existing supply contracts Producers can “bank” SRECs for sale in future energy years. – Increases likelihood of attracting new projects when equilibrium is achieved In contrast, a near term increase in the requirement only benefits existing solar projects, increasing ratepayer costs without attracting new investment. – Avoids existing “exemption” language in SEAFCA legislation from perpetuating the disparity between BGS and other suppliers’ obligations. 4

5. Illustrative Example 1 Assumption: BPU approval in 2012, one time solicitation of 20 GWH in EY 14* EY 13EY 14EY 15EY 16EY 17 6/12 - 5/136/13 - 5/146/14 - 5/156/15 - 5/166/16 - 5/17 EDC Expansion (Cumulative GWH)020 Current GWH Requirement4425967729651150 Proposed GWH Expansion0006020 "New" GWH Requirement44259677210251170 5 * This is not a recommendation to expand the EDC program, just an illustration of how to address resulting SRECs

6. Illustrative Example 2 Assumption: BPU approval in 2012, annual solicitations of 20 GWH/yr beginning EY 14 * EY 13EY 14EY 15EY 16EY 17 6/12 - 5/136/13 - 5/146/14 - 5/156/15 - 5/166/16 - 5/17 EDC Expansion (Cumulative GWH)020406080 Current GWH Requirement4425967729651150 Proposed GWH Expansion00012080 "New" GWH Requirement44259677210851230 6 * This is not a recommendation to expand the EDC program, just an illustration of how to address resulting SRECs