1. The Competitive Environment APPA Management and Leadership Workshop October 2, 2006 Larry Koshire Rochester Public Utilities

2. Today’s World “We Live In Interesting Times” (Old Chinese Proverb) Is “Competition” Today’s Model for the Electric Industry?

3. Where has the Industry Been? Energy Policy Act of 1992 FERC Order 888 (non-discriminatory Access) FERC Order 2000 (Advocate Creation of RTO’s) EPACT 2005 (PURPA revisions, Reliability) How do we define “Competition”?

4. Today’s Electric Market Wholesale experiences Retail Choice (a few states, Municipals can opt in) The re-regulation of the Industry and impacts on “non-regulated” entities such as Coops and Munis

5. Have You Been Audited Lately? Y2K Compliance and DOE oversight New York and 9/11 impacts on Utilities TSA/NERC terrorist alerts Reliability Legislation and EPACT 2005 State Energy legislation and Reliability Rules Now “NIMS” !

6. Impacts of Retail Competition on Munis Some States Allowed Retail Choice. If not choice, new regulations applied to Municipals. Minnesota debate included reliability, REO, and customer rules. RPU’s customers and established IOU relationships. California 2000-2001- Do we prepare for Choice?

7. One Utility’s Approach to Electric Competition Survey of Utility’s identity. Media Market domination by IOU’s and Coops. IOU’s servicing Retail Customers. Needed a decision and actions to face coming retail choice.

8. Energy mega brands are using service, pricing, and sophisticated advertising and marketing campaigns to change consumer expectations of the utility industry. As a result, consumers are demanding more from their utilities…better service, quality, innovation and price. The Challenge

9. Leverage the creativity and strength of a branded utility partnership to communicate the benefits of public power to the community (legislature), and provide partners “best-of-breed” service models, resources and marketing tools to equip utilities for effectively servicing their consumers. The Solution

10. Introducing Enfinity Energy ® is an organization that enables public utilities to partner to promote the benefits of public power through locally-owned servant- based utilities, and leverage shared experience and resources. Our Approach

11. Enfinity Energy ® Partnership

12. Touchstone Membership Growth 600 cooperatives. 45 states. Collectively deliver power and energy solutions to more than 22 million customers. Touchstone Brand Strength – “highest customer satisfaction score in the electric utility industry” (American Customer Satisfaction Index, 2006 ). The Model: Touchstone Energy ®

13. Energy cooperatives faced the same challenge years ago and partnered to form the successful Touchstone Energy Cooperatives. The Model: Touchstone Energy ®

14. Branding and a Municipal Identity…Future Plan? Customers Get it…..Fellow Municipals Don’t. What do you think?

15. The Future of Competition In the Electric Industry Are politicians done tinkering with the rules? Back to the Future the 70’s and 80’s return –New generation and transmission –Requirement for renewables –New technologies and the new wave of employees –Rate pressure and environmental issues.

16. Facing the Future Challenge Continued emphasis on the customer. Organizational culture change.

17. Recommendations 1.Provide superior customer service. 2.Deliver value through power supply service. 3.Focus on distribution performance and opportunity. 4.Put communities first. 5.Optimize community infrastructure.

18. Recommendations (cont.) 6.Lead in environmental stewardship. 7.Build consensus through democratic governance. 8.Promote human resource excellence. 9.Engage policymakers through legislative advocacy. 10.Invest in your technology future.

19. Thank You! Questions???