The Growing Use of Technology in the

Utility Sector

©IBERDROLA

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Agenda• Introduction/Overview of Iberdrola USA

• Increasing need for capital investment

• Advanced metering infrastructure (AMI, also called smart meters)

• Network automation

• Other considerations

• Conclusion

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About Us: Iberdrola Group• Headquartered in Spain• 109-year history• 32,809 employees in 40 countries

• Strategic focus on U.S., U.K., Spain and Latin America• Leading wind producer with 6% of world’s installed capacity

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2011 EBITDA* ≈ $10 billion

• Over 50% of Group EBITDA in 2011

• U.S. (regulated and renewables) contributes about 13%

Regulated networks is a key focus

About Us: Iberdrola Group

Regulated – Spain 20%

Regulated –

U.K. 11%

Regulated – U.S.7%

Regulated – Brazil

12%

Renewables19%

Liberalized – Spain 21%

Liberalized – U.K. 4%

Liberalized – Mexico 5%

Corporate and Other

1%

* Earnings before interest, taxes, depreciation and amortization

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About Us: Iberdrola USA

• Customers served: 2.4 million• Service area (square miles): 34,000• Employees: 4,000• EBITDA: $800 million• Net Profit: $280 million• Investment: $950 million

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How did we get here?• Cost pressure from rising commodity prices curbs spending on operations

and maintenance, capital investment• Risk of long-term investment decisions• Uncertainty of regulatory treatment

The result:• Aging plant:

• Transformers – 30 years• Poles – 40 years• Overhead conductor – 40 years

• Behind other developed countries in use of automation and technology

Aging Utility Infrastructure

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Electric Transmission and Distribution Spending – U.S. Utilities

Source: Edison Electric Institute (EEI) Financial Department

$ Billion

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 E 2013 E 2014 E

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Electric Transmission and Distribution Spending – Iberdrola USA

Source: Iberdrola USA

$ Million

0

100

200

300

400

500

600

700

800

900

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 E 2013 E 2014 E

Maine Power Reliability Project (MPRP)

Iberdrola USA

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•More automated 32-kilovolt and distribution lines with self-healing capabilities

•Monitored and controlled line transformersInformation technology-supported monitoring process

•Renewable energy, distributed generation, electric vehicles, electricity storage and aggregation

•Management of end-use energy efficiency, aggregation, retail

• Customers aware and actively participating

Level 2: Smart Network and Processes

Level 3: Smart Integration

Level 4: Smart Energy Management

SM

AR

T G

RID

SF

un

ctio

nal

lev

el

Level 1: Smart Transmission Network

Level 0: New Generation Technologies (Distributed Generation)

Level 5: Smart Customers

• Innovative transmission grid architectures•State-of-the-art transmission/power technologies•Novel monitoring, control and storage methodologies•Shared electricity market simulators

Customers

DistributionNetworkOperator

TransmissionNetworkOperator

Electricity

generation

Distributors and Energy Service Companies

The Concept of Smart Grid in Iberdrola Group

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AMI “Smart Meter” Investment

• $192 million project (50% Department of Energy funded)

• Major milestones:• Meter installation complete

• Full meter-to-bill process implemented

• Enabled remote disconnect/

reconnect capabilities

• Current status:• Completing final network installation

• Controlled rollout of remote service orders

• Customer web portal in place (second quarter 2012)

0

100

200

300

400

500

600

Apr-11

May-11

Jun-11

Jul -11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Installs Reads

Our AMI project in Maine is on time and budget

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Energy Manager

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• Department of Energy collaboration – study impact of energy information on customer use

• Opportunity to leverage customer research to further our progress on several Iberdrola USA customer service initiatives:

• Improve collections

• Migrate customers to self-service options

• Achieve best-in-class customer satisfaction

• Development of dynamic pricing

Energy Information Pilot – Phase II

13Source: 2012 J.D. Power Electric Utility Business Press Release. National sample. N = 24,385

Smart Meters and Satisfaction: U.S.

Note: Satisfaction is measured on a 1,000 point scale.

734

649

709

630

Have smartmeter installed

Do not havesmart meter

installed

Aware of smartmeter efforts

Not aware ofsmart meter

efforts

Sat

isfa

ctio

n

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Customer Expectations

Source: JD Power Smart Energy Study, July/August 2011 Central Maine Power residential customers N=333

“It would save money for the power company, and hopefully reduce

costs across the board”

“It can tell you when you use the most electricity”

“It should be more accurate”

“Fewer drivers have to come out to read my meter so I have fewer

estimated reads”

Question: What benefits, if any, do you see with a smart meter?

18%

11%

15%

7%7%

22%

41% Price and Value

Energy Management

Meter AccuracyCustomer Service

None

Don't Know

Other

15Source: J.D. Power Smart Energy Study, July/August 2011 Central Maine Power residential customers N=575

Customer Interest in Energy Use InformationPercent Agree with Statement

74%

68%

0% 20% 40% 60% 80%

Want utility tosuggest ways

to lower bill

Would like tomonitor usage

at any pointso I can

control my bill

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Benefits of AMI on Outage Management

Enables our customers to know their real-time outage status

Pinpoint the "start here" point for our restoration through AMI data

Able to verify areas are cleared before leaving them during day-to-day outages

Automate outage reporting by leveraging AMI data

GOAL ACTUAL RESULTS 5YR AVG

CAIDI 2.18 1.97 Meet Goal 2.00

SAIFI 0.57 0.49 Meet Goal 0.55

SAIDI* NA 0.97 NA 1.10

* CAIDI: Customer average interruption duration index SAIFI System average interruption frequency index SAIDI: system average interruption duration index

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Network Intelligence – Beyond Smart Meters

• Network modernization, automation, remote control and supervision

• New substation projects as well as substation modernization projects include remote control and supervision

• Supported by a state-of-the-art control center which completes intelligence

• Improved telecommunications to support automation and supervision

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• IEC 61850 – Communication language for building advanced integrated substation systems

• Substation Automation – System to automate the monitoring and control of critical power grid assets

• Maintenance Automation – System to automate the retrieval of routine maintenance data to define conditional and preventative based maintenance plans

MPRP Smart Grid Example:

• Automates retrieval of event records from all affected devices throughout the system with uploads to corporate servers for analysis and diagnostics

MPRP Smart Grid Technologies

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NY Energy Control Center Project

Single, integrated Iberdrola USA control center platform

• $25 million project• Full integration of energy management system, SCADA, outage

management and Geographic Information System (GIS) • Unified trouble and outage distribution control center• Real time transmission, substation and distribution system

information – issue detection before power interruptions• Online customer outage information• Improved crew mobility and dispatch

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• Workforce implications

• Age demographics – 40% retirement eligible in five years

• “Skills Gap”

• Cyber-security

• Distributed generation/storage

• Regulatory issues

• Value/cost propositions

• Differing state policies

Other Considerations

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• Technology is here

• Utilities must develop a service mentality

• Utilities must demonstrate the economic and societal benefits of “Smart Grid”

• Partnering with government, educational institutions, vendors, etc. critical to success

Conclusions

Smart Grid will improve the quality of life for consumers

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