Presentation to 2005 Western Conference of Public Service Commissioners: Creating a WinWinWin for th

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Presentation to2005 Western Conference of Public
Service CommissionersCreating a Win-Win-Win
for the Consumer, Utility and Regulator with
Virtual Peaking Capacity

• June 22, 2005
• Robert M. Chiste
• President Chief Executive Officer

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Wholesale Power Costs and Retail Prices
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Old-Think
Supply constraints PEAK LOAD CHALLENGES
Unhedgeable Transmission congestion
bottlenecks

• ADD DISTRIBUTION
• Build more lines

• ADD SUPPLY
• Build more infrastructure
• Buy wholesale

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What are the experts saying?

• Simply by using electricity efficiently,
  especially at periods of peak demand, the U.S.
  can save eight trillion cubic feet of gas a
  year.
• Fortune Magazine, October 2004
• A 1998 study says that had expenditures tied to
  utility demand response programs remained at
  their 1993 peak, utilities would have then
  avoided releasing 11 million tons of greenhouse
  gases and 79,000 tons of other pollutants that
  are regulated under the Clean Air Act. Meanwhile,
  it says that consumers would have saved 1
  billion.
• Ken Silverstein, Jaguar Media
• Utah Powers VPC CoolKeeper Program had a RIM
  test benefit / cost ratio of 1.71 documented in
  the April 2003 economic analysis report prepared
  by Quantec, LLC in support of Utah Powers Tariff
  Filing which was approved by the PSCU on May 14,
  2003.
• Shifting 2.5 of the peak load, results in 25
  reduction of cost of producing peak power. EPRI

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New-Think Portfolio Approach to Include DR

• PROACTIVE DEMAND MANAGEMENT
• Cost effective
• Advanced technology and
• business models

• Cleaner than renewables
• No line loss or degradation

• ADD SUPPLY
• Build more infrastructure
• Buy wholesale

• ADD DISTRIBUTION
• Build more lines

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Residential Small Commercial Load Management
Programs Myths Exposed

• Cannot provide enough load response to make
  a difference

Significant realizable results being achieved
today

Demand response is not quick, reliable, and
verifiable like supply
Utah Power 50 MW in under 50 seconds

Residential Small Commercial ratepayers
dont respond to price signals
More than 400,000 residential users on price
response in Florida and Arizona

The technology only exists in pilot stage and
is too expensive to reasonably deploy
Orders for over 100,000 price responsive
thermostats booked
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Comverge Large Scale Programs

• Programs Greater than 100 MW
• Western Region
• SCE SMUD
• Southeastern Region
• FPL FPC Oglethorpe Duke
• Northeastern Region
• PEPCO BGE PSEG JCPL
• Midwestern Region
• ComEd Buckeye NSP DTE
• Comverge is the supplier to over 90 of these
  Programs
• Six Gigawatts

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Comverge Large Scale Programs

• Major Virtual Peaking Capacity (VPC) and Turnkey
  Programs
• Utah Power, SDGE, ISO-NE I, ISO-NE II, Gulf
  Power, BPA
• Comverge is the owner/operator of 100 of these
  Programs
• - 340 Megawatts

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Virtual Peaking Capacity VPC Contract Structure

• Outsourced demand management program think IPP
• Comverge owns, operates, and maintains load
  control system
• Contract structured similar to Power Purchase
  Agreement (PPA)
• Easy to Understand Comverge delivers peaking
  capacity from deployment of load control system
• Pay for performance based on capacity available
  for delivery
• Comverge paid capacity payment based on /kW/year
  price capacity measured at end of each control
  season
• Utility dispatches system
• Program is executed under utility brand
• Contract structure has been approved by various
  PUCs and FERC

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VPC Project Components
Program Management
Software
Hardware
Marketing



Measurement Verification
Installation
Call Center



Same Contractual Verification Standards as
Supply
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Virtual Peaking Capacity a Win-Win-Win

• Utility
• Verifiable demand reduction
• Scalable capacity available quickly
• Target TD constrained areas
• Reliability or emergency capacity

• Consumer
• Economically Efficient
• Benefit/Cost ratio gt 1.5
• No line losses
• No volatile fuel costs
• Competitive in all source RFPs
• No siting issues

• Regulator
• PPA contract structure simplicity
• Capacity comparable to avoided cost
• Easy migration to price response
• Import option in IRP process
• Support of Consumer and Environmental groups

• Provides all up-front capital
• Assumes Risks
• Installation
• Marketing
• Operational Maintenance
• Provides all necessary personnel

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Comverge VPC/Turn-Key Projects
70 MW
60 MW (acquisition)
120 MW
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Utah Power Sheds Load 50 MW in 50 Seconds

• 100 cycling test
• Control Strategy was 100 shed held for ½ hour.
• ADI Strategy gives graceful return to normal
  operations
• Note payback period at end of event

Note Event was from 1430 to 1500. Results
based on Wasatch front in Salt Lake system load
3,645 to 3,599 at 97 degrees. Load represents
drop of 1-2 of entire total load
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What is awakening the Industry?

• US Energy Bill
• Increasing understanding by regulators and policy
  makers
• Major AMI and DR initiatives throughout U.S.
• Acceptance growing of price responsive rate
  structures Florida, New Jersey, California
• Broadening environmental awareness
• Supply and TD Constraints
• Improving and more cost effective technology

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The US Energy Bill

• We must find smarter ways to meet our energy
  needs, and we must encourage Americans to make
  better choices about energy consumption. We must
  also continue to invest in research, so we will
  develop the technologies that would allow us to
  conserve more and be better stewards of the
  environment."
• President George W. Bush
• April 18, 2005

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So why are we here?

• Industry drivers create opportunity for change
• Change can be fostered by technological
  advancement and regulatory initiatives
• But change only occurs when there is a change
  agent
• Participants at this Public Service Commissioner
  Conference you, Comverge, and other industry
  participants ARE those change agents

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2005 Western Conference of Public Service
CommissionersCreating a Win-Win-Win for the
Consumer, Utility and Regulator with Virtual
Peaking Capacity June 21, 2005

• Thank you. Questions?