The Texas Smart Meter Revolution

How Can Your Company Benefit?

Opportunities to Take Advantage Of Right Now!

May 25, 2010

2

Agenda

· Introduction· Latest Progress On Smart Meter Texas Initiatives· Market Opportunities

3

Mark Burlingame, CPASenior Director, UtiliPoint Analytics,UtiliPoint International, Inc.

Mr. Burlingame is an international utility expert with 19 years in the utility industry including research and development, business case modeling, financial resource budgeting, business planning, system development, pricing administration, market forecasting and marketing. Prior to entering the utility industry, he was a Senior Management Consultant with Coopers & Lybrand. Mr. Burlingame's hands-on experience in several jurisdictions and markets includes the UK, Massachusetts, Pennsylvania, California, Washington, Florida, Texas and Oklahoma.

Turning Knowledge into Action4

Agenda

· Introduction· Latest Progress On Smart Meter Texas Initiatives· Market Opportunities

5

The Texas Market

• Deregulated January 1, 2002• The Electric Reliability Council of Texas

(ERCOT) operates the electric grid and manages the deregulated market for 75 percent of the state.

• 6.5 million customers have choice of electric suppliers

• 1,130 kWh/mo. average residential usage

6

Texas and ERCOT

· Generating units: 566

· Installed capacity: 80,076 megawatts

· High-voltage transmission monitored: 40,327 miles

· 828 entities generate, move, buy, or sell electricity

7

Some Texas Terms

There are 4 Transmission and Distribution Service Providers (TDSPs)

There are over 40 Retail Electric Providers (REPs)

QSE is a Qualified Scheduling Entity responsible for submitting REPs’ next day’s schedule of expected power requirements.

Load Serving Entity (LSE) is an organization serving end-use customers. For our purposes today, this is usually a REP.

8

Source: http://www.puc.state.tx.us/electric/projects/34610/AMITMtg0909/AMITBoardMtg0909.pdf

Texas Meter Conversion

9

Almost 3 Petabytes of Storage Needed by 2014

0.76 2.21 3.68 5.16 6.30

303

884

1,474

2,063

2,520

-

500

1,000

1,500

2,000

2,500

3,000

-

1.000

2.000

3.000

4.000

5.000

6.000

7.000

2010 2011 2012 2013 2014

TB o

f Sto

rage

Met

er C

ount

s (m

illio

n)

Texas Electric "Smart Meter" Forecast and Corresponding Data Growth

Cumulative Smart Electric Meters Installed (million) Estimated TB Storage

Source: UtiliPoint proprietary database

10

www.SmartMeterTexas.com· Website launched on March 23, 2010 that gives Texas LSEs & electric

customers (with smart meters) online access to the information.

· 1,034,711 AMS meters

· 1,985 residential users have created accounts

· 31 REP entities created and registered successfully on SMT portal3

TDSP entities created and registered successfully on SMT portal

· 61 TDSP users created

· 71 HAN devices successfully provisioned Source: http://www.puc.state.tx.us/electric/projects/34610/AMITMtg022410/SMT-AMIT-Status-FTPS-Integration_022410.pdf

Smart Meter Texas (SMT) Facts

11

Retailer

Enrollment

Enrollment

Customer

Meter Read

Invoicing

Remittance

Historical Consumption

Wire Charges / Payments

Meter Reads

QSE

TDSP

Settlement Transactions

Texas Meter Data Flow

12

TDSP

Retailer

Customer

QSE

Enrollment

Invoicing

Remittance

Pricing

Enrollment

Historical Consumption

Wire Charges / Payments

Meter Reads

Settlement Transactions

Fuel Cells

PHEV

Solar / Dist. Gen

HAN

Load Control

HAN ServicesCustomer Account Data

15 min Interval Meter Reads

Texas Portal & Data Repository

HAN Events

Account Data

Texas Smart Meter Data Flow

13

The Value Chain

Supply Manufacturing Distribution Retail

TransportFuel Generation TransmissionDistribution(DISCO or

LDC)

ConsumersIndustrial

CommercialResidential

© 2010 Pariveda Solutions, Inc.

14

The Retail Challenges

• Customer Adoption and Education• Consumer Behavior• Disruptive Technology• New Competition• Systems Portfolio and Integration

Turning Knowledge into Action15

Agenda

· Housekeeping· Introductions· Latest Progress On Smart Meter Texas Initiatives· Market Opportunities· Systems Impact

questions@utilipoint.com

16

Current Retail Market• Month to month• Term –plus 6, 12, 18, 24

month• Signing Incentives• Single price ($/kWh) with or

without monthly base charge• Seasonal• Price guarantee • Limited Prepay and TOU Plans• MCPE plus mark up• Heat Rate plus NYMEX gas• Indexed plans

After Smart Meters

All Current Products and:• More robust Prepay and

TOU plans• Contract-for-differences

(RTP using MCPE and prearranged block or load shape

• Creative “Fixed Bill” plans• Interruptible/curtailable

plans

Pricing Product Differentiation

17

Fixed Bill -simple and secure - a fixed monthly billFixed price – secure and simple TOU - secure, some choice and control, and customized bundled service optionsCFD - control and access to wholesale prices

CFD TOU Fixed & IndexedFixed Bill

Price Risk

Price Security

Choice (Value Added)

Simple

Size of Subscriber Load

# Subscribers

Point of Sale Support

Value of Branding

Pricing Plan Value Positioning

18

Pri

ce V

aria

bil

ity

Low High

Low

HighCFD

FixedPlans

TOUSeasonBlocks

Lower risks on high volumes, hedging value

Sales volume certainty

High margin potential

Degree of Involvement

Access to a big, but reluctant to change, market share

Match Product to Value

19

Low HighLow

High

CFD

FixedPlans

TOUSeasonBlocks

I don’t like the current market price

outlook

Some years are easier to predict than others

I’d like to give load management a try

Customer Portfolio of Choices

20

TOU Pricing Plans

21

• Why Offer TOU?– Commodity costs vary with time of day and season– Consumers will change behavior if properly incented– Consumer response to prices offers an offset to

expanded usage by other customers on other programs

– Improve earnings by better managing risk

TOU Benefits

22

• Selling program based on peak load reduction or bill savings alone

• Many programs aren’t “marketed” to customers

• Poor design (ratio of on/off-peak price, length of on-peak window)

Solutions:

1. Achieve success by selling TOU to customers premised on access to lower prices during low cost times.

2. Design product with customer behavior in mind

TOU Failures

23

Features that Improve Customer Acceptance– Shorter Peak Period– Limited Peak Season– Better Prices

• High Peak to Off-Peak Price Ratio (Shifters)• Lower relative Off-Peak Prices (Growers)

– Demonstrable Savings– Term Flexibility– Choice and Control

A Better TOU Product

24

• Fixed TOU Plan – prices and time periods fixed for term

• Flex TOU plan – a platform of plans with varying price levels and peak period duration

• Variable Peak Period Price – would use Nodal Day ahead market MCPE to establish next day peak price level

• TOU combined with price overcall plan – TOU and Critical Peak Price

Type of TOU Plans

25

Flex Choice TOU Service Plans

Peak 3:00 - 7:00

PricesPeak $.34Off $.11

Peak 3:00 - 7:00

PricesPeak $.36 Off $. 10

Peak 1:00 - 9:00

PricesPeak $.34Off $.095

PricesPeak $.36 Off $.09

Choices

Peak 1:00 - 9:00

26

• Fixed off peak price• On peak price based on Day Ahead Market

MCPE averaged for the peak duration• Fixed On Peak duration (2 PM – 7 PM)

Variable Peak Price TOU

27

• A high fixed price used in place of the standard TOU peak period price

• Limited number of days and hours CPP events can be called

• Day ahead or 4 hour advance notice of CPP event• CPP event can be called for any day of the week • An option to allow customers to participate if CPP

events are called in the off peak season• Incentive For Participation – either a reduced peak

period price or in the form of a payment for performance

Critical Peak Pricing Features

28

Prepaid Plans

29

• Term – month to month but may require activation fee that requires 6 month service

• No credit check• No deposit• No I.D. check• Monthly Service charge

plus high fixed rate • Problems determining

when prepaid limit reached – turn off complaints

• Term – month to month and may include discount for staying longer than one month

• No deposit, credit check or I.D.• Might include a monthly service

charge and a fixed rate• Smart Meter can provide daily

usage, turnoff meter when prepaid limit reached

• Greater customer satisfaction as they have greater control over managing usage –daily info provided by email or phone

• An in-house monitor might be installed to provide near real time usage and bill amount to date

Current Retail Market After Smart Meters

Prepaid Plans

30

Contract for Differences Plans

31

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 240

2

4

6

8

10

12

14

16

18 Contract for Differences

Profile

LoadLOAD

Charged at MCPE Plus

Credited at MCPE

Contract for Differences

32

Fixed Bill Plans

33

· To differentiate yourself in the market place

· To increase Brand presence – even customers that do not sign up will talk to others about your offering

· To increase profits from the residential and small commercial customer markets - Customers are willing to pay a premium for convenience and stability

Why offer Fixed Bill?

34

“Make me an offer.”

MAYBILL

Adjust for Price Response

Weather Adjustment Historical kWh

ESTIMATED kWh

JUN 1,007JUL 1,234AUG 1,333SEP 999OCT 888NOV 650

DEC

ADJUSTED kWh

JUN 1,177JUL 1,345AUG 1,444SEP 1,100OCT 959NOV 770

DEC

ApplyForward Price Curve

Add Risk Premium

$%

Fixed BILLMake Offer

Target Market

YES

Calculate monthly FB amount

Add Base

Charge

Fixed Bill Process

35

Remember: Smart Meters should unlock access to niche

markets that increase your bottom line!

Pricing Plans After Smart Meters

36

· Launch something - don’t stand on the sideline

· Market, Market, Market! Promotion is key!

· Allow for process improvement– Don’t expect to get it perfect the first time – Don’t quit on the concept if there are problems

· Address back office requirements – IT needs for billing, risk management, price development, sales and recruitment

· Rewards: properly designed programs can– Increase earnings and market share– Reduce costs– Mitigate risks

· Smart Meters should allow for opening niche market segments

Points to Consider

37 37

· Achieving Program Success – What to do with what the Pricing guys gave you…?

· Metering, Billing, Risk Management, Customer Accounting, and Product Accounting are all necessary for program success.

Offers

Risk Management

CISReports

Sales

Prices

Subscription

Billing

Pricing Plans System Interface

38

Contact Information

6000 Uptown Blvd. NESuite 314Albuquerque, NM 87110

 Direct:214.821.8099Cell:214.684.6888

mburlingame@utilipoint.com

www.utilipoint.com

Mark Burlingame, CPASenior Director, UtiliPoint Analytics