Constructing the Future of Energy

Jamie Brennan

Director, Demonstration Projects

Distributed Resource Integration

2

Agenda

• Con Edison Overview

• Changes in New York Utility Regulation

• Reforming the Energy Vision (REV) Policy

• REV in Action

– BQDM

– REV Demonstration Projects

3

Business Model Focused on Energy Delivery &

Infrastructure Development

EPS $4.07* Consolidated Edison, Inc. Market Cap $20.6 billion

Con Edison Company of New York

(CECONY)

Orange and Rockland

(O&R)

Con Edison

Development

Con Edison

Energy

Con Edison

Solutions

Con Edison

Transmission

CET

Electric

CET

Gas

EPS $3.70

EPS $0.19

EPS $0.08EPS $0.03EPS $0.09

Regulated Businesses

Competitive Energy Businesses

*GAAP earnings include after-tax impairment of

assets held for sale of $(0.01)

Regulated

Transmission

Regulated Utility

Regulated Utility

4

Non-Utility Businesses Focus on Energy Infrastructure

Development

• $465 million in capital investment over

the next three years

• Electric & gas transmission– 45.7% ownership interest in NY Transco

– Additional $1 billion proposed NY Transco

project

– 12.5% ownership interest in proposed

Mountain Valley Pipeline

Con Edison Solutions (CES)

• 6th largest owner of solar generation in

North America (IHS EER as of year-end

2014)

• Growing renewable energy production• 1 GW in service or in various stages of

development

• $1.7 billion in capital investment over the

next three years

Renewables Transmission

Regulated Businesses Dominate Earnings and $11 Billion

Capital Investment Over the Next Three Years

($ millions)

5

$2,001 $1,889 $2,046

$2,270 $2,274

$2,595

$3,053 $3,184 $3,175

$28$114

$492

$378 $447

$823

$985

$360 $360

$115

$171 $179

CECONY & O&R Competitive Energy Businesses Con Edison Transmission

2015 Earnings per Share

CECONY & O&R 96%

Competitive Businesses 5%

Parent (<1%)

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Constructive Regulatory Environment in New York

Where Reform is Underway

CECONY

• 3.4 million electric customers

• 1.1 million gas customers

• 1,700 steam customers

• 724 MW of regulated generation

O&R

• 0.3 million electric customers

• 0.1 million gas customers

• October 2015 agreement reached to sell Pike

County Light & Power to Corning Natural Gas

Features of NY regulation

• Reduced regulatory lag

– Forward-looking test years

– Timely recovery of most fuel and

commodity costs

– Revenue decoupling mechanism in NY

(electric and gas)

– Adjustment mechanisms for several major

uncontrollable expenses (e.g. pension)

• Ability to capture value in evolving industry for

customer & shareholder benefit

– Majority of investment is replacement and

upgrade of existing assets

– Accelerated gas main replacement

– Growth from natural-gas conversions

• Reforming the Energy Vision proceeding is at

the forefront of the evolving industry

NY

NJ

PA

Con Edison - A Vertical Landscape

• We serve more than 3 million electric customers

and 1.1 million gas customers

• The NYC metro area creates about 9% of the U.S.

GDP – home to 10% of the Fortune 500

• Peak demand of 13,320 MW – 215 MW per

square mile in Manhattan

• Average monthly residential electricity use in our

service territory is a third of the national average

(at 300 kWh/month)

• New York State spends less on energy and

generates fewer greenhouse gases per capita

than any state in the nation (EIA)

7

Electric Consumption by

Customer Class

United States

Con Edison

41%

34%

25%

Residential Commercial

Industrial

50%50%

<1%

Implications of Density

8

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Reforming the Energy Vision (REV) Stated Objectives

• Enhanced customer knowledge and tools that will support

effective management of the total energy bill

• Market animation and leverage of customer contributions

• System wide efficiency

• Fuel and resource diversity

• System reliability and resiliency

• Reduction of carbon emissions

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Reforming the Energy Vision (REV) Put in Practice

Generation

becomes

more flexible

Grid becomes smarter

all the way up to and

including the meter

Power Flow

Empowered

customers

become energy

producers

Loads become

more interactive

and dynamic

Greater

penetration of

distributed

energy resources

0

20

40

60

80

100

120

140

160

180

200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Proj.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Proj.

0

2000

4000

6000

8000

10000

12000

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Distributed Generation

Adoption Trends in Service Area

Total Installations Total Installed Capacity

CHP

CHP

PV

PV

Source: Consolidated Edison Company of New York.

CECONY

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Track One: Implementation

• Initial Order issued February 26, 2015; Utilities’ Distribution System

Provider Implementation Plans due June 30, 2016

• Key decisions made on structural issues such as distribution-level market

design, technical platform, integration system planning & operation

Track Two: Regulatory & Ratemaking

• Staff straw proposal issued July 28, 2015

• Rate design, rate plan duration, performance-based ratemaking

opportunities

Track Three: Large Scale Renewables

• NYSDPS Staff issued an white paper on January 25, 2016

• In concert with NYS CES Mandate of 50% renewables by 2030

REV Presents Opportunities as Industry Evolves

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• Meets capacity shortfall through a $200

million program

– Non-traditional customer-sided 41 MW

($150 m)

– Utility-sided solutions 11 MW ($50 m)

• 78 responses to RFI

• Expenditures treated as 10 year capital

assets with regulated return

• Includes 100 basis points bonus incentive

for 3 performance metrics

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Brooklyn-Queens Demand Management Program (BQDM)

Deferral of $1.2 billion in traditional network upgrades with distributed solutions

Targeted area

(4 networks)

Brooklyn-Queens Demand Management

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750

760

770

780

790

800

810

820

830

840

850

11 12 13 14 15 16 17 18 19 20 21 22 23 24

MW

Hour

Sample network 2016 peak day load curve

1 Hour

12 Hour

8 Hour

1 Hour

6 Hour4 Hour

2 Hour

2 Hour4 Hour

1 Hour

1 Hour

1 Hour

• $1.2 billion substation deferral using portfolio of alternative

investments in Brownsville network

• Earn rate-of-return plus incentive based on implementation

Des

crip

tio

n

Sample Network Peak Day Load Curve

Virtual Power Plant Marketing Materials

Building Efficiency Marketplace

Customer

Portal

Marketing

Campaigns

Project

Marketplace

Customer friendly

Web portal with

specific opportunities

that drive action

Multi-channel

engagement with

messages that match

customer need

Marketplace to

facilitate transactions

between contractors

and businesses

Analytics-Enabled Software Program Delivery Process

Project

Identification

Holistic

Customer

Enablement

for DER

Project

Definition

Savings

Validation

Project

Connection

Customer

Portal

Customers will receive access to a portal containing building-specific insights

» These analytics-based

insights and

recommendations customized

for each customer can boost

engagement by 4X

» With the industry’s most

advanced scalable analytics

engine, the portal will provide

accurate savings estimates at

the first login, with no

additional information needed

from the customer

- Sign in

» In the Usage section of the

portal, customers can access

a unique and accurate

disaggregation of their

building's energy by end

use, such as lighting, plug

loads, HVAC and baseloads

Customer

Portal

Customers will understand how their building is using energy today

Customer

Portal

The portal will drive customers to specific recommendations and actions

» Personalized

recommendations for savings

are generated on the portal

automatically and can be

further refined by users if

needed

» Precise percent savings, cost

savings, payback period

guidance and other

information will motivate

customers to initiate action

plans for implementing

efficiency projects

MarketplaceCustomers and contractors will connect

through an online marketplace

» This model will reduce

transaction costs for

contractors and improve the

customer experience,

streamlining energy

efficiency projects between

customers and trade allies

CUSTOMER’S BID MANAGEMENT WORKFLOW

Build bid forms from scratch or use a template.

Invite vendors from within the platform.

Get email notifications when bids are submitted.

Communicate with everyone at once.

MARKET PARTNER WORKFLOW

Receives invitation to bid via email.

Accesses files, messages and project schedule from home page.

Completes bid form and submits documents online.

Can’t see other bidders or budgets.

Connected Homes: Program Overview

Personalized Energy Reports

(with Targeted Offerings)

High Bill Alert

Communications

Web Resources

(with Marketplace)

Available to 270k customers in Westchester and Brooklyn as a pilot program

New York State Clean Energy Standard

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Clean Energy Standard’s 50% Renewable Goal by 2030

Requires Substantial Additional Resources

36k GWhs of Energy Efficiency

AND

27 GWs of Solar17 GWs of Wind

5 GWs of Hydro

Or some combination thereof

11 GWs Offshore WindOR

OR OR

Bundled PPAs are not a good solution

• Not a market solution – artificially shifts risk from private developers to utility customers

• Customers pay more• Residual value. NYS needs renewable energy for more than

20 years, but developer keeps value of asset years 21-30+ -with UOG, customers retain value. None of NYS’s analysis has incorporated this critical fact

• Utility credit impact. Raises borrowing costs because rating agencies impute debt from PPAs

Substantial ramp in energy efficiency is critical to

achieving the Clean Energy Standard

0

10

20

30

40

50

60

70

80

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

GW

hs

50x30 Targets

Energy Efficiency

Renewable Energy

GWhs incremental to CES base demand forecast

Source: CES whitepaper; Con Edison analysis

• Success of CES depends on achieving EE targets

• EE is a cost-effective mechanism to achieve carbon reduction but goals are significant:

• NYS 2015 performance estimated at only 1/3rd

what CES targets each year

• REV / CEF efforts are long-term investments -will take time to have impact

• Larger, more market-based utility programs can provide needed bridge

CES white paper EE targets translate into incremental savings of ~1.3% per year for 13 years