AEP’s “gridSMART” Project

Ohio Roll Out Strategy

PUCO Staff Workshop

December 13, 2007

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Agenda

● gridSMART Capabilities and Requirements Recap● AEP Ohio’s Proposed Deployment Strategy● Cost/Benefit Analysis

AEP Ohio AMI Summary● AEP Ohio Distribution Grid Management Overview● gridSMART Next Steps

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Distribution Operations of the Future

AEP Ohio believes that utilities must begin preparing their businesses for a future state that integrates many technologies not present today, and requires a more advanced state of monitoring, communications & control.

Adapted from EPRI source image

DistributedGeneration& Storage

PHEV

DistributionOperations

• Dynamic Systems Control• Outage Management• Remote Monitoring & Control

of Distribution Assets• Data Management

CustomerPortal/Meter

EnergyStorage

Advanced Monitoring, Communications & Control

Utility Operations Customer Premise

Smart End-Use Devices

• In-home monitoring• “Smart” Thermostats• Pool Pumps• HVAC Systems

AdvancedMonitoring,

Communications& Control

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gridSMART Capabilities & Requirements

● Advanced Meter Infrastructure (AMI) Network Two way communications network with sufficient bandwidth to support AMI

and future gridSMART applications Remote connect/disconnect on all residential meters Downloadable firmware in each meter ANSI standard data tables Revenue protection advanced reporting Communication path to a Home Area Network (HAN) Standard protocols used and supported Minimum of 128-bit AES encryption Radio must have upgradeable firmware All meter tables are extractable

● Distribution Operations Monitor and control of AEP’s distribution equipment such as switches,

reclosers, faulted circuit indicators, capacitor banks, etc. Outage and restoration reporting Momentary outages on all meters Circuit reporting on exceptions Voltage sag monitoring and steady state voltage alerts on all feeders

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gridSMART Capabilities & Requirements

● Distribution Automation Interface with SCADA systems Automated circuit reconfiguration Distributed and central control automation schemes

● Information Technology Systems Service Oriented Architecture Compatible with AEP’s legacy systems Expandable and scalable Customer Web Portal Meter Data Management System Distribution Management System

● Telecommunications Network Supports IP, SCADA, and meter-based protocols Common communications infrastructure for both AMI and DA Capable of prioritizing data transmissions

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gridSMART-enabled Customer Service Offerings

Customer Choice, Customer Control, and Customer Service● Time of use rates● Real time pricing/critical peak pricing● Direct load control● New and improved self service options

Account maintenance Start/Stop service Remittance date selection with electronic bill presentment

and payment Outage reporting and restoration notification Prepay metering Energy usage analysis

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AEP Ohio

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AEP Ohio

● AEP Ohio is comprised of three legal entities Columbus Southern Power Ohio Power Wheeling Power (WV)

● AEP Ohio operations are managed by seven district offices Columbus Canton Newark Chillicothe Athens Ohio Valley Western Ohio

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AEP Ohio - Proposed Deployment Strategy

● Overall Plan District by district roll out over a seven year period

Capability for 100% remote reconnect/disconnect on all residential meters (200 amp and below)

Capability for 100% interval data recording

Deployment of Web Portal

Deployment of Distribution Management System

Deployment of Meter Data Management System

Distribution automation projects to follow the same district deployment path

SCADA at all distribution stations Automated switches and reclosers for Urban, Large Rural and Medium Rural

circuits Small Rural circuits would not be automated at this time Automated capacitor banks for monitoring and control

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AEP Ohio - Proposed Deployment Strategy

● Post-deployment Areas of Focus Home Area Network Equipment

Smart thermostats Load controllers In-home displays

Customer Information System Replacement/Augmentation AEP’s core CIS to be extended by the addition of integrated components Future pricing models will require new billing capabilities

● Effective Financial Modeling Will Require New Thinking McKinsey Model will be used to assist the PUCO for cost/benefit order of

magnitude and utility comparison purposes Results will be based on 20 YR net present value, which may not be

appropriate for all investments More appropriate models should be used for regulatory recovery

Need to determine how to value the benefits yet to be uncovered Distribution grid management and analytics Reliability improvements T&D efficiency gains

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AEP Ohio Proposed Deployment Strategy

● District Plans Columbus District – 583,160 customers over the first three years Canton District – 189,957 customers in Year 4 Newark District – 150,318 customers in Year 5 Chillicothe District – 120,786 customers in Year 5 Athens District – 143,403 customers in Year 6 Ohio Valley District – 129,350 customers in Year 6 Western Ohio District – 185,836 customers in Year 7

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AEP Ohio AMI Summary

● Estimated Initial Costs Based on RF Deployment Meters – 1,505,414 Capital - $472 million O&M - $4 million

● Estimated Deployment Costs Year 1 - Columbus - $61M Capital, $500K O&M Year 2 – Columbus - $61M Capital, $500K O&M Year 3 – Columbus - $61M Capital, $500K O&M Year 4 – Canton - $60M Capital, $500K O&M Year 5 – Newark & Chillicothe - $85M Capital, $750K O&M Year 6 – Athens & Ohio Valley - $84M Capital, $750K O&M Year 7 – Western Ohio - $60M Capital, $500K O&M

District capital investment per meter cost ranges from $299 - $348

Note: Costs are indicative based on vendor estimates

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AEP Ohio – AMI Initial Investment

$373

$39$33

$18 $5$4

Meters Install

Telecom IT Labor Other

Capital Investment ($472M) O&M ($4M)

$4

O&M

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AEP Ohio AMI Benefits

Benefit Area based on 100% Deployment Annual Benefits ($ Million)

Safety $0.6

Reduce Manual Meter Reading Cost $11.0

Reduce Disconnect/Reconnect Field Orders $5.6

Eliminate Field Check Read Orders $1.4

Reduce Energy Theft Losses $4.8

Reduce Meter Replacement and Testing Avoidance $3.3

Reduce Bill Exception Processing $0.7

Reduce Usage on Inactive Accounts $0.9

Reduce Power Quality Investigation Costs $0.2

Reliability Improvements $0.1

Reduce Non-interruption Service Calls $1.0

Total $29.6

Note: Benefits are based on current activity levels and best estimates at this time

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AEP Ohio – AMI - McKinsey Model

Capital Expenditures Electric Capital ($M) Per Meter

Meters 275.7 183.15

Network 23.5 15.63

Installation 34.8 23.09

IT Integration and Software 9.9 6.55

Total Capital $ 343.9 $ 228.42

Annual O&M $ 6.8 $ 4.50

Annual Benefits Customer Service 15.2 10.07

Distribution Operations 1.8 1.20

Revenue Enhancement 7.3 4.86

Avoided Capital 1.4 0.95

Total Benefits $ 25.7 $ 17.09

Seven Year Deployment Period, Meters – 1,505,414

Results: 20 YR NPV – ($153.5M)Benefits Cover ~ 55% of Investment

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AEP Ohio – Columbus District – AMI - McKinsey Model

Capital Expenditures Electric Capital ($M) Per Meter

Meters 159.6 260.13

Network 13.6 22.14

Installation 20.1 32.81

IT Integration and Software 4 6.55

Total Capital $ 197.3 $ 321.64

Annual O&M $ 2.3 $ 3.75

Annual Benefits Customer Service 8.3 13.58

Distribution Operations 1.0 1.60

Revenue Enhancement 4.7 7.64

Avoided Capital 0.8 1.29

Total Benefits $ 14.8 $ 24.11

Three Year Deployment Period, Meters – 613,385

Results: 20 YR NPV – ($61.1M)Benefits Cover ~ 69% of Investment

CustomerDensity

Matters !!!

CustomerDensity

Matters !!!

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AEP Ohio Distribution Grid Management Overview

● Estimated Initial Costs SCADA Installations and Upgrades – $78 million Switches and Reclosers - $100 - 200 million Capacitors - $9 million Engineering - $3 million O&M - $3 million

Columbus District would be the recommended area to begin deployment

Note: Costs are indicative based on vendor estimates

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AEP Ohio – Distribution Grid Management Overview

● Benefits Operating Cost Benefits

Improved safety Less field trips Reduced fuel and vehicle expenses Reduced restoration expenses Capital avoidance due to proactive maintenance

Reliability Improvements Reduced customer outage minutes - What is the value? Varying levels of automated system reconfiguration during

disruptions Real time knowledge of system performance

T&D System Efficiency Improved volt/var management Reduced losses on the distribution system caused by our design

practices and how we operate the system Improved capital investment decisions based on system

intelligence

Distribution technology system design, costs and benefits are still being refined; we don’t know what we don’t know

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AMI’s Initial Capital Outlay Is A Foundation for the Future

● Incremental investments Communications bandwidth Business development capital

● Incremental utility-side capital Programmatic, customer-facing

and physical device management systems

● Incremental field capital and knowledge-based applications Sensors & device controllers Distribution operations and

automation Information management

● Initial capital outlay Meter functionality Communications infrastructure Head-end and legacy systems

modifications

Capital Build-Up

Ex

pe

cte

d V

alu

e

Incremental Capital Commitment

Distribution Grid Management

Demand Response

Extended Utility Roles

Incremental Value Capture

AMI

Illustra

tive

ScenarioIllustra

tive

Scenario

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gridSMART Recommended Next Steps

• City Scale gridSMART Initial Phase• AEP Ohio will continue technology evaluations, make initial

selection(s), and secure pricing in 2008• AEP Ohio recommends continued dialogue followed by

filings that will lead to regulatory approval to install both AMI and distribution automation technology with implementation beginning by early 2009

• Evaluate results and determine appropriate pace of future deployments

• PUCO approves cost recovery for AMI implementation for all of AEP Ohio which will result in all meters being converted to AMI by 2015

• Development and regulatory approval of new demand response and tariff offerings in conjunction with the AMI deployment

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gridSMART Implementation Will Be Determined By Regulators

Return of and on all investmentAppropriate depreciation schedules for technology investmentsRecovery of costs, net of utility benefits realizedCustomer and Societal Benefits provide additional value that are not

captured by the utility

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