Four Seasons, Landisville, PA Introductions Sponsors REAP - PowerPoint PPT Presentation

Richards Energy’s REAP model: Going to Market for you Getting the best solution customized for you Solution/Price A Solution/Price B Richards Energy Solution/Price C Your Single Channel Solution/Price D Solution/Price E Solution/Price F

Why a single channel makes sense Broker Power Watts Work Left 207 Consultant Energy Energy Energy Energy 167 Hertz Your Potential Faraday Energy Energy Energy Energy Consultant Supplier 167 20 Overall Franklin Volta Current Broker Broker Consultant Energy Energy 207 Energy Energy 207 167 Joules Shop Edison Ability Energy Energy Energy Energy Consultant Supplier 167 5 Multiple channels do not bring you more options Multiple channels LIMIT your options

Channel Conflict Can’t have multiple channels when shopping for electric 25-30 retail suppliers will not bid against themselves There are consequences to you entertaining an offer or two Limits your own competitive process! When Richards Energy gets locked out from a supplier, we can't do our best job for you Checking a price quote here or there seems innocuous, but really you're preventing a full analysis of the total market offers available to you Single channel is the best way to access all market options and optimize your electric buying experience

You’re getting better offers ? The price you’re paying right now was competitively shopped and evaluated carefully when the deal was secured There are no better offers Just different prices on different days – reflecting mkt movements Richards Energy does not even have offers Shop around, buy the cheapest TV… two months later retailer drops the price… If I only waited two months (and not watched TV) then I could get today’s lower price for TVs Market moves everyday. No one can control that, but Richards Energy offers solutions that address this reality. Electricity is a volatile commodity (moves like stock market) How do you pick the best day to buy? Maybe a layering product is appropriate for your needs.

Part II Energy Market Update

PPL Shopping Environment – Q4 2009 2010 PPL tariff rate for GS accounts: 10.402 c/kWh  based purely on market purchases made by PPL 2010 PPL tariff rate for LP accounts: 9.3 – 9.7c/kWh  determined by PPL’s October 2009 market Supplier Options were limited in Fall of 2009 Yet average savings of 1 penny per kWh or greater were available based on market conditions in Q4 2009 Small Meters (GS Accounts) Large Meters (LP Accounts) Direct Energy (Pool) Direct Energy Dominion (brief period) Constellation Constellation Sempra (Noble Americas) PPL Energy Plus Hess GDF Suez

Energy Prices - 10 year snapshot Hurricanes Katrina & Rita Oil $147/Barrel PPL under “rate Trader Speculation caps” REAP PPL Pool Launched

Forward Wholesale Energy Prices On-Peak Power (PPL Zone) Term Oct 6, 2009 May 6, 2010 Sept 12, 2012 CY 2010 6.638 N/A N/A CY 2011 7.338 N/A 5.765 CY 2012 7.567 6.172 N/A 6.458 N/A CY 2013 7.805 N/A CY 2014 N/A 4.570 N/A CY 2015 N/A 4.720 N/A 4.942 CY 2016 N/A “Pool 1” was initiated “Pool 2” was initiated (Jan 2010 – May 2012) (May 2012-May 2014)

Energy past 5 years

Energy past 12 months

Forward Energy Market – PPL Zone (ATC)

Forward Market Price Trend Analysis Outer Year Prices currently trading in 6-8% percentile 92-94% of the time, prices have traded higher A buyer’s perfect scenario!

Energy Markets: Forward Market vs. Index Market 1. Forward Market (Wholesale, Fixed, Term) A price that a generator quotes (for a specific term) for a “block” of power Priced in On-peak and Off-peak blocks Generators charge a premium for setting a block price for a specific term (12, 24, 36 months, etc.) Prices are driven by Geopolitical turmoil, oil, long term weather forecasts, long term hurricane forecasts, nat gas storage, long term supply and demand forecasts, global economic conditions 2. Index Market (Real time, Day-Ahead, Spot) Over time there is a discount to the Wholesale market Prices are volatile relative to the wholesale market Driven by immediate supply and demand (e.g., current weather conditions)

Forward Market vs. Index Market (cents/kWh) Calendar Year On Peak Off Peak 60/40 Split of Price Price On-Pk/Off-Pk Use 2014 4.611 3.196 4.045 2015 4.762 3.420 4.225 2016 4.986 3.624 4.441 Index Market Jan 2012 - Aug 3.753 2.903 3.413 2012

Utility Price To Compare: Independent of market conditions! Time Period PPL GS1/GS3 PPL LP (cents/kWh) (cents/kWh) 2010 10.402 9.5 (+/-) Jan 2011 – May 2011 9.77 Hourly June 2011 – Aug 2011 13.028 Hourly Sept 2011 – Nov 2011 10.184 Hourly Dec 2011 – Feb 2012 6.775 Hourly Mar 2012 – May 2012 6.387 Hourly June 2012 – Aug 2012 9.154 Hourly Sept 2012 – Nov 2012 10.346 Hourly Tariff rates are not solely reflective of market conditions

Part III Market Outlook

Electric Supply Price Components Energy/Commodity: Can be purchased from the forward market or the index Energy market. What each account pays for energy depends on market conditions and your specific load shape and time of use. GRT Supplier Fees Regulatory Charges: Largest regulatory Transmission component is Capacity Ancillaries and is determined by annual RTO (PJM) Capacity auctions and your PLC kW demand value Distribution

Market Outlook – Many variables Bullish Factors  Energy/Commodity Coal to gas fuel switching (tightening environmental standards & plentiful inexpensive gas supply available) Long term - Potential US LNG exports in the future? Marcellus Shale drilling slowing due to fall in gas prices Potential Mideast turmoil: Israel/Iran conflict? Hurricane season is here… potential for natural gas supply disruptions?  Regulatory Charges: Capacity auctions in future years are at risk for high prices. ATSI zone in Ohio increased by 120%! Most recent auction for future capacity in this zone cleared at $ 294/MWday… up from $130)

Market Outlook – Many variables Bearish Factors  Weak economic fundamentals… Jobless economic growth  Marcellus shale natural gas production  Natural Gas glut due to mild 2011-12 winter  Drilling does not slow substantially due to lease arrangements and other by-products of drilling  Markets continue to soften in the outer years  Hurricane season is here… new Marcellus gas supply makes the northeast US less vulnerable to hurricane activity in the Gulf of Mexico

Buying Opportunity?  No crystal ball, but…  Now appears to be great time to strike  Current offers are very low…  Harder to imagine prices going lower from here, but easy to imagine prices going higher  There is a floor… energy prices will not go to $0  But there is no ceiling for energy prices… Sky is the limit Rates are no longer regulated Market rates will be driven by supply/demand fundamentals

Part IV Procurement Solutions

Procurement Options Today Products: 1. Block & Index 2. Fixed Price (via layering) 3. Fixed Price (via single purchase on one day) 4. 100% Index Richards Energy will explain the subtle differences  No right or wrong way to purchase power  Different tools available to fit your buying strategy  Richards Energy offers you all buying options  Considerations: Risk Profile Impact of energy on overall profitability Overall business plan

Procurement Options Today 1.) Block & Index (e.g., “The Pool”)  Leverage both markets (forward market & spot market) Block = Layer forward mkt purchases over time (dollar cost averaging strategy) Index = Blend in spot mkt purchases as well  Strategy used by large C&I users to manage risk and volatility over time  Layering purchases since Jan 2010 has performed well in a falling market  Very popular (one of only a few options for GS accounts in ‘09)  Pool 3 is open now for May 2014 to Dec 2016 to begin taking some positions at current historic lows!  Available to all size customers Richards Energy will make sure there is no negative contract language based on a particular REAP Member’s situation

Block & Index Illustration: layering and blending On-peak Usage #6 Buy # 5 Buy # 4 Hedges are purchased in Purchase # 3 wholesale Supplier A blocks in a dollar cost Purchase # 2 wholesale Supplier B Purchase # 1 wholesale supplier A averaging fashion Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Month Remaining power is Off-peak purchased from the index Usage Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Month Forward or Day-Ahead Purchase Balancing or Day-Ahead Purchase

Procurement Options Today 2.) Fixed Price (via layering)  Layer forward purchases via dollar cost averaging strategy (same as B&I above)  However, no index would be used  Features: Budget Certainty Easier bill  However, less flexible and no opportunity for real time mkts to blend down costs  Not available to smaller users (midsize users and above only) Richards Energy will make sure there is no negative contract language based on a particular REAP Member’s situation

Layer To Fixed Illustration: (layering, but no blending) Dollar cost Averaging but 100% from forward market (i.e. No Real time Purchases) Usage (Kwh) Layer 4 – any % of load Layer 1 – any % of load Time – TERM of Contract – e.g., May 2014 to May 2015

Procurement Options Today 3.) Fixed Price (via single purchase on one day)  Richards Energy brings you the broadest array of fixed price options available from any consultant in the Eastern USA  Features: Budget certainty Simplest bill  However, least flexible product No opportunity for real time markets to blend down costs Forfeit your ability to reduce risk by staggering multiple purchases across different days  Reverse auction available at customer’s preference Although we know not all suppliers participate in this platform And we have evidence that this does NOT necessarily yield best price  Available to all size customers Richards Energy will make sure there is no negative contract language based on a particular REAP Member’s situation

Procurement Options Today 4.) 100% Index  Features: No price premiums For aggressive risk appetite customers  Concerns: No price protection (potential for large price volatility) No budget certainty Potentially complex bill  Available to all size customers Richards Energy will make sure there is no negative contract language based on a particular REAP Member’s situation

Next Steps Richards Energy will continue working to secure deal extensions at historic low prices If this makes sense to you:  We encourage you to sign a reaffirmation of our POA so we can act more quickly on your behalf while prices remain so low If this does not make sense to you:  Just let us know. Don’t want unhappy REAP Members. We will not shop your accounts.

 PA PUC Commissioner Pam Witmer

 Visit Sponsor Tables  Complete Referral Sheets  Complete POA Reaffirmation

 Pete Richards

 Status update on current ACT 129 incentives  Current ACT 129 nuances  Lighting market updates  Case study

 Act 129 Utility Rebate Programs  In 2008, Pennsylvania passed Act 129 which required all major electric utility (distribution) companies to design and implement Energy Efficiency & Conservation Programs to reduce peak electric usage on the grid  Utilities collect money to fund these programs through line item charges on every customers’ electric bill  Funds are redistributed in the form of rebates to customers who install energy efficient equipment  Programs for most PA utilities run from 6/1/2009 until 5/31/2013  PA PUC currently evaluating extension of this program for 3 years

PPL Electric Utilities Large businesses  Rate classes: LP4, LP5 and up  Status: prescriptive program is exhausted…applications are waitlisted in  case more funds become available Small & Medium sized businesses  Rate classes: GS1, GS3, and similar  Status: prescriptive program pays a fixed “per fixture” rebate…funds are  currently available, though always subject to change Small businesses  Rate classes: GS1 & GS3 with annual usage below 400,000 kWh annually  Direct Discount program pays $0.17/kWh reduced  (higher rebate than prescriptive program) www.pplelectric.com/rebates

FirstEnergy (Met-Ed, Penelec, PennPower, West PennPower) Large Commercial & Industrial  Rate classes: GP*** and other large/primary services  Status : prescriptive program is exhausted…applications are waitlisted in  case more funds become available Small & Medium Commercial & Industrial  Rate classes: GS-Large, GS-Medium and GS-Small, etc.  Status: “Non - Standard Lighting” program pays $0.05/kWh reduced  Small Commercial & Industrial  Rate classes: GS-Small, GS-Medium only  Status: $0.03/kwh reduced BONUS rebate ($0.08 total) was available  through 6/15/12, then reduced back to the standard $0.05/kWh reduced www.energysavepa-business.com 

PECO All rate classes are wait-listed until new  funds become available https://www.peco.com/Savings/Progra  msandRebates/Business/Pages/default.a spx

 Other rebates, grants, federal/state/local incentives:  Database of State Incentives for Renewables & Efficiency (DSIRE) http://www.dsireusa.org (select PA) TAKE NOTE: Most rebates and incentives are being offered to  help make the overall transition to newer, more efficient lighting technologies. Once the newer technologies become the “norm”, the rebates WILL GO AWAY. Current Program expires 5/31/2013 You pay for Act 129 on your electric bill!  You will have to do it at some point…why not get paid for it? 

 Bonus incentives  Off and On for several utilities  Demand Response  Double Dip with PJM  Anti- Competitive Service Provider Limitation . Customer agrees not to contract with any other demand response service provider for the Term of this Agreement.

 Customer’s Case  18 Electric Accounts  Estimated 4 year Act 129 Rider Payments $116,286  11 Energy Efficiency Projects $134,594 in rebate checks Net Positive $18,308  Unfortunately – Not the case for most Accounts

 3 year term – 6/1/2013-5/31/2016  No Demand reduction component  Direct Load Control Canceled  Demand Response Canceled  Why?  Not retroactive  Approved for “Rebate Ranges”  Harder for budgeting  CSP selection  Turn Key CSP’s  Program Managing CSP’s

 Government Regulations have / are changing and will force you to become more efficient  Soon you won’t be able to find the most common lamps on the market  You are paying your utility for a rebate that you may not have taken advantage of – get it back before its too late!  No money in the budget for the upgrades

 What is it?  Federal legislation that outlines “technology neutral” efficiency standards for screw-in lighting technologies  Designed to eliminate outdated, inefficient technology  Does not “ban” specific technologies  Effective January 2012 – January 2014

Effects of the Act Existing Wattage New Wattage Effective Date 100 watt < 72 watts January 1, 2012 75 watt < 53 watts January 1, 2013 60 watt < 43 watts January 1, 2014 40 watt < 29 watts January 1, 2014 Replacement Options: • Compact fluorescent (CFL) • LED (light-emitting diode) • Halogen Incandescent

Where are we at with it now?  Many manufacturers retooled their equipment  U.S. Congress “Defunded” enforcement of the EISA as part of the 2012 budget  Some manufacturers now selling 100 Watt Heaters

What are the options now to replace 100 Watt Incandescent A Bulb (1700 Lumens)?  72 Watt Incandescent  23 Watt Compact fluorescent  LED? Not quite… 1000 Lumens

T12 Fluorescent Phase- out 2009 Department of Energy Lumens Per Watt (LPW) Regulations What is it? Federal legislation that outlines specific efficiency  standards (lumens per watt) for fluorescent lighting technologies Designed to eliminate outdated, inefficient technology  Effective July 14, 2012  Manufacturing of lamps that do not meet these minimum  efficiency requirements is prohibited past July 14, 2012 Does not prohibit the sale or use of existing inventory 

T12 Fluorescent Phase- out 2009 Department of Energy Lumens Per Watt (LPW) Regulations What is eliminated?  T12 Lamps Most standard and High Output 8’ T12 lamps All standard and High Output 4’ T12 lamps All U-shaped T12 lamps  T8 Lamps  Older generation and standard efficiency 4’ T8 lamps (700 series, “non - XP” series)  “800 series”, “XP”, & other “super T8” lamps ARE NOT affected

T12 Fluorescent Phase- out 2009 Department of Energy Lumens Per Watt (LPW) Regulations  Standard PAR Halogen lamps are also eliminated  EXCEPTIONS exist for:  Cold Temperature lamps  Odd length lamps (2 ft., 3 ft., & 5 ft. lamps)  Plant growth, Colored, Impact Resistant, High CRI, etc.

 Manufacturers have already ceased production of these obsolete lamps and ballasts  Basic supply and demand  As inventories decrease, prices increase and replacement parts become harder to find

 If your facility still utilizes outdated lighting technologies such as…  T12 Fluorescent  HIDs (metal halide, high pressure sodium, etc.), or  Incandescent …you are paying to operate inefficient technology and it is going to become difficult to keep your lighting system in working order.

Solution = Retrofit Your Lighting! 2F96T12 High 2F32T8 High Ballast Output Factor 240 watts 74 watts THE POWER OF TOGETHER

Lighting retrofits are almost always cost-  effective due to energy savings alone With the elimination of traditional  lighting technology and rebates to help fund your upgrade, there’s no reason not to! Additional benefits of a lighting retrofit  include: Reduced lamp inventory & maintenance  Improved light quality & working conditions  Improved employee morale  Increased flexibility in controlling your  lighting How can my business afford a lighting retrofit?

 LED – Getting Better all the time  Wall-packs  Accent lighting  Spot/Flood lights (interior and exterior) PAR30, PAR38, MR16, etc.  Tube Replacements  Parking lot lighting  DOE CALiPER program  Prices are coming down  Color is getting better  T5 versus T8 Fluorescent  Occupancy Sensors and Controls

Existing Proposed # of Annual Annual Annual Existing Fixture fixtures: Annual Savings Operating Reduction in Operating HID Pole Light - 1000W Metal Halide 16 Costs kWh Costs HID Pole Light - 1000W Metal Halide 20 HID Pole Light - 1000W Metal Halide 2 HID Pole Light - 1000W Metal Halide 6 $20,346.88 144,294 $5,996.24 $14,350.64 HID Pole Light - 250W Metal Halide 6 HID Pole Light - 1000W Metal Halide 10 HID Canopy Light - 400W Metal Halide (to LED) 16 Initial Investment - TURNKEY Payback HID Wallpack - 150W High Pressure Sodium Current rates (to LED) 10 Labor and Materials $ 64,137.99 HID Wallpack - 175W Metal Halide (to LED) 4 Recycling $ 2,280.00 HID Wallpack - 250W Metal Halide (to LED) 12 3.8 Years HID Flag Pole Light - 250W Metal Halide (to Total $ 66,417.99 LED) 4 HID Floodlight - 250W Metal Halide (to LED) 3 <Valid through HID Pole Light - 1000W Metal Halide 2 4.6 Without Rebates Act 129 Rebate* $ (11,581.30) 3/1/2013 HID Pole Light - 400W Metal Halide 3

 Capital improvement Project  Time  Approval by management  Red Tape  May make the 2013 or 2014 budget  Often cut by production needs  Change them when bulbs or ballasts fail  Little immediate savings  Time consuming  Rebate paper work nightmare

 You already have budget approval  Electricity Bills  Take your Budget for electricity and finance a low interest loan to create a Positive Cash Flow  Most Lighting Retrofits are 3 years or less payback  Financed on 48 or 60 months, this leaves cash in the troffer to help with other expenses

 You Are Paying for the system - Upgraded or not  Creative financial tools  Low interest loan  Capital Lease  Line of Credit  Sustainable Energy Fund (www.thesef.org)  Financing for up to 60 months for energy efficiency projects of all sizes  How does it work? Monthly payments structured to be less than the projected monthly energy savings from the lighting retrofit Difference between your monthly payments and energy savings results in a net positive cash flow for your business!

Quantity Old Configuration Retrofitted with 12 HID - 250W Pulse Start Metal Halide (2x4 Ceiling) → HBF - 4F32T8841XPHBF (Troffer - New Fixture) 5 Incandescent A-Bulb 100W (Non-Dimming) → CFL - 23 Watt → 167 Incandescent A-Bulb 25W (Non-Dimming) CFL - 9 Watt 140 Incandescent A-Bulb 40W (Non-Dimming) → LED - 3W Candelabra 4 INDUSTRIAL 4' - 2F34T12CW ES → INDUSTRIAL 4' - 1F32T8841XPHBF 8 STRIP 4' - 1F34T12CW STD → STRIP 4' - 1F32T8841XPLBF → 3 STRIP 4' - 2F34T12CW ES (1 lamp kit) STRIP 4' - 1F32T8841XPHBF (1 lamp kit) 1 STRIP 4' - 2F40T12CW ES → NEW STRIP 4' - 1F32T8841XPHBF 2 STRIP 8' - 1F96T12CW → STRIP 8' - 2F32T8841XPLBF 51 STRIP 8' - 2F96T12CWES → STRIP 8' - 2F32T8841XPHBF → 7 TROFFER 2'U - 2FB34T12CWES UTUBE TROFFER 2' - 2F17T8841XPNBF 19 TROFFER 4' - 2F34T12CW ES (1'x4' Kit) → TROFFER 4' - 1F32T8841XPHBF (1'x4' Kit) 39 TROFFER 4' - 4F34T12CWES → TROFFER 4' - 2F32T8841XPHBF 4 TROFFER 4' - 4F34T12CWES → TROFFER 4' - 4F32T8841XPLBF → 16 WRAP 4' - 2F34T12CW ES WRAP 4' - 2F32T8841XPLBF 8 WRAP 4' - 4F34T12CWES → WRAP 4' - 4F32T8841XPLBF

Annual Annual Savings Existing Annual Reduction in Proposed Annual Operating Costs kWh Operating Costs $19,137.54 90,032 $8,920.81 $10,216.73 Initial Job Cost - TURNKEY Payback Current rates Labor and Materials $ 21,512.29 Recycling $ 1,115.56 2.3 Years PA Sales Tax $ 1,357.67 Total $ 23,985.53 1.9 With Rebates Act 129 Rebate* $ (4,417.50) Gallons of Annual Environmental Impact Tons of CO2 Cars off the gasoline reduced road saved 70 13 8,535

Positive Cash Flow Option (SEF) 24 Months 36 Months 48 Months 60 Months Projected Monthly Energy $851.39 $851.39 $851.39 $851.39 Savings $396.67 Monthly Payment $893.85 $617.16 $479.17 Estimated Monthly Cash $454.73 x $234.24 $372.22 Flow

 Your competitors may have already retrofit  Stocking up on old inefficient over-priced lamps will leave you in the dark  Your old lights may have been good to you, but not as good as new lights will be!  Positive Cash Flow opens up money to be spend on other upgrades.

On-site renewable projects and how they can impact power purchasing Julia Smith Richards Energy Group, Inc. 9.27.2012 2012 Annual REAP Meeting

Main purpose of today’s presentation Renewable energy projects can have substantial and lasting impacts to your current AND future power purchasing deals… therefore it is IMPERATIVE that you consider how a renewable project may impact power purchasing BEFORE you commit to a project.