Prepay Energy Working Group - Michigan

Prepay Energy Working Group - Michigan

LEVERAGING CUSTOMER DATA AND UTILITY COMMUNICATIONS FOR CUSTOMER BENEFIT: PREPAY ENERGY TO ENHANCED TRANSACTIONS 1 Michigan Smart Grid Collaborative Forum Jamie Wimberly, CEO, DEFG September 16, 2015 2015 Distributed Energy Financial Group LLC ABOUT DEFG DEFG Research Consortia 2 ABACCUS Prepay Energy Working Group Low Income Energy Issues Forum 2015 Distributed Energy Financial Group LLC PEWG OVERVIEW

In 2015, DEFG's Prepay Energy Working Group (PEWG) marks its 6 th year as the industry's leading forum for the exploration of prepaid energy service offerings The PEWG continues to grow because its members value the extensive and actionable research agenda and the record of accomplishments Participants include energy utilities and suppliers, metering and software vendors, a regional energy efficiency alliance, regulatory commissioners and consumer advocates. Together they cover a broad spectrum of perspectives and experiences The PEWG conducts research across 4 tracks: 1. Regulatory 2. Consumer / Market 3.

Potential for an Energy Conservation Impact 4. Operational Requirements / Business Side Research Prepaid energy service is a catalyst, forcing discusses about the need for innovative and smart consumer offerings and the need to bring the rulebook into the 21st century 3 2015 Distributed Energy Financial Group LLC 22 DIVERSE MARKET MEMBERS OF THE PEWG* 4 * PEWG research is sponsored by the member companies. Government agencies and non-profit organizations do not make any financial contribution to the work. PEWG work products do not necessarily represent the views of any participating organization, state regulatory agency, sponsoring company or individual participant. 2015 Distributed Energy Financial Group LLC TODAYS AGENDA I. Introductions

II. Overview of Prepay Energy III. Customer Research IV. Regulatory V. Energy Conservation and Environmental Impacts VI. Enhanced Transactions VII. ComEds Dollar-A-Day Low Income Pilot VIII. Conclusion

5 2015 Distributed Energy Financial Group LLC Todays Objectives Have a good dialogue and answer any questions you have Explore together the potential for smart grid to deliver customer benefits 2015 Distributed Energy Financial Group LLC Overview of Prepay Energy 2015 Distributed Energy Financial Group LLC WHAT IS PREPAY ENERGY? Prepay energy is a voluntary bill pay option for consumers to pay ahead for energy consumption in

the future. Some consumers appreciate the convenience and flexibility of the option. Others appreciate an alternative to security deposits or payment arrangements. Once consumers begin using prepay energy, they tend to drop their energy consumption significantly. 8 2015 Distributed Energy Financial Group LLC PREPAY ENERGY IS GROWING RAPIDLY AND PART OF MEGA TREND Prepay is a mega trend in consumer finance. TransCard projects that prepayments from all segments (consumer, commercial and public) will total $421 billion in transactions in 2017. Of that, the consumer segment will represent $112 billion, mainly reloadable debit cards but also gift and other forms of prepayment. Prepay energy is an example of grassroots innovation. Many co-ops and public power utilities have been offering prepay energy for years

now. Salt River Project has approximately 17 percent of their customer base on a prepay offering. Now, a number of the largest owned investor-owned utilities have a prepay energy pilot underway or planned. For North America, the installed base of prepay meters is expected to grow from 650,000 to 3.1 million during the forecast period, with a CAGR of 17.0%. Navigant Research Reports, Prepaid Metering: Meters, Software and Services, Q1 2015 Our consumer survey findings consistently show strong consumer interest. Since 2010, the top two box responses (i.e., extremely interested and very interested) have totaled 17 percent (2010), 22 percent (2012), 24 percent (2013) and 17 percent (2014). Interest has been higher among younger respondents in particular. 9 2015 Distributed Energy Financial Group LLC Annual Consumer Survey Results 2015 Distributed Energy Financial Group LLC

POSSIBLE TITLES FOR 2015 CONSUMER SURVEY REPORT Prepay Energy: Jumping Over The Hump Who Doesnt Love Prepay Energy???? Give The People What They Want: Prepay Energys Convenience and Control Prepay Energy: Getting The Messaging and Mechanics Right Lions, Tigers and Bears: Prepay Energy Works for Consumers Seeking Alternatives to High Security Deposits, Bad Debt Recovery and Payment Arrangements

The Regulatory Challenge Posed By Prepay Energy: When The Old Way Is Not Necessarily The Best Way For All Customers Prepay Energy: Leveraging Smart Grid for Consumer Benefit Prepay Energys Leap Into The 21st Century How Essential Is An Essential Service?: Prepay Energy and SelfDisconnection 11 2015 Distributed Energy Financial Group LLC METHODOLOGY The Russell Omnibus was conducted via the internet among 980 adults 18 years of age or older from Nov. 21-24, 2014. Figures for gender, age, and geography were weighted where necessary to match their actual proportions in the population. The bases shown in this report are the weighted bases. An invitation to participate in the study was sent by e-mail to panel members who have agreed to be contacted by Russell Research and interviewed over the Internet. Participating respondents were interviewed on-line at a secure Russell Research URL programmed for this study, with product / package images were shown for certain questions. Sample was provided to Russell Research from a leading sample provider.

In theory, with probability samples of this size, one could say with 95 percent certainty that the results have a statistical precision of plus or minus 3.1 percentage points of what they would be if the entire adult population had been polled with complete accuracy. Unfortunately, there are several other possible sources of error in all polls or surveys that are probably more serious than theoretical calculations of sampling error. They include refusals to be interviewed (non-response), question wording and question order, and weighting. It is impossible to quantify the errors that may result from these factors. This online survey is not a probability sample. These statements conform to the principles of disclosure of the National Council on Public Polls. All research was conducted to meet the standards of ISO 20252:2012. The statistical significance of a result in this survey is the probability that the observed relationship (e.g., between variables) or a difference (e.g., between means) in a sample occurred by pure chance, and that in the population from which the sample was drawn, no such relationship or differences exist. Using less technical terms, one could say that the statistical significance of a result tells us something about the degree to which the result is "true". More technically, the value of the p-value represents a decreasing index of the reliability of a result. The higher the p-value, the less we can believe that the observed relation between variables in the sample is a reliable indicator of the relation between the respective variables in the population. Specifically, the p-value represents the probability of error that is involved in accepting our observed result as valid, that is, as "representative of the population." For example, a p-value of .05 (i.e.,1/20) indicates that there is a 5% probability that the relation between the variables found in our sample is a fluke. The following statistical notations are used throughout the report: = Indicates figure is significantly higher than the other sub-group at a 95% confidence level (i.e. p-value of .05 or less). 12 2015 Distributed Energy Financial Group LLC PREPAID CARDS AND SERVICE HAVE BECOME COMMONPLACE Two-thirds of these consumers have used or purchased a prepaid card or service (66%)

Prepaid Card and Service Usage 13 Base: Total Respondents (n=980) Q.1: Have you ever used or purchased a prepaid card (e.g., payroll, gift or reloadable), prepaid wireless phone service plan or any other service that you paid before you used the good or service? 2015 Distributed Energy Financial Group LLC CUSTOMER SATISFACTION WITH PREPAID CARDS AND SERVICE IS HIGH Three-fourths of consumers that have used or purchased a prepaid card or service were satisfied with using prepayment as an option (74%) Satisfaction Level with Using Prepayment to Make Purchases or Contract Services 14 Base: Total Have Purchased/Used A Prepaid Card Q.2: How would you generally rate your satisfaction with using prepayment as an option to make purchases or contract for services? 2015 Distributed Energy Financial Group LLC NEARLY ONE IN FIVE WOULD BE INTERESTED IN PREPAID ELECTRICITY Interest in prepay energy was highest among men (22% v. 13% of women) and younger adults (23% among those 18 to 54 v. 7% of those 55+) Consumer Interest in Voluntary Prepaid Program for Electricity

15 Base: Total Respondents (n=980) Q.3: Your local electric utility or service provider may offer voluntary prepaid electric service to consumers in the future. Under this option, you would choose to pay upfront anytime you wanted before you used the energy rather than paying your bill at the end of the month after you used the service. Reasons for possibly using prepaid electricity would include no security deposit required or better managing your budget and energy use. You would always be able to check the balance remaining in your prepaid account. If your local utility or provider were to offer a voluntary prepaid option for consumers, how interested would you be? 2015 Distributed Energy Financial Group LLC THERE ARE OPPORTUNITIES TO INCREASE EDUCATION AND AWARENESS Older respondents were particularly likely to view this as a service for people having trouble paying their bills (52% vs. 40% for those age 18 to 54) Statements That Best Describe Prepaid Electric Service 16 Base: Total Respondents (n=980) Q.4: Which of the following best describes how you view prepaid electric service? 2015 Distributed Energy Financial Group LLC PREPAY ENERGY IS CONSIDERED CONVENIENT Frequently mentioned: convenient, unnecessary, and interesting Also: helpful, different, innovative, savings, uninterested, confusing, and easy One Word To Describe a Voluntary Prepaid Electric Service Option Offered by Local Electric Utility or Service Provider

17 Base: Total Respondents (n=980) Q.5: What one word would you use to describe a voluntary prepaid electric service option offered by your local electric utility or service provider? 2015 Distributed Energy Financial Group LLC PREPAYMENT: ELECTRONIC AND AUTOMATIC PAYMENTS The most important payment feature of prepaid service would be the ability to make payments online Consumers were also interested in setting up automatic payments and making payments by smart phone Top Two Most Important Payment Options for Reloading Account 18 Base: Total Respondents (n=980) Q.7: If you were to elect to use a prepaid electric service option, what payment options to reload your account would be the most important to you? Please choose your top two options. 2015 Distributed Energy Financial Group LLC PREFERRED NOTIFICATION: EMAIL, TEXT MESSAGE, MULTIPLE CHANNELS Consumers would also prefer to be contacted electronically, primarily by email, both regarding their account balance and about potential disconnection of service due to unpaid bills Two Most Preferred Ways to Be Notified of Account Balance 19

Base: Total Respondents (n=980) Q.9: If you were to elect to use a prepaid electric service option, how would you like to be notified of your account balance? Please choose your top two options. 2015 Distributed Energy Financial Group LLC PREPAYMENT: BEST OPTION FOR THOSE WITH BAD OR NO CREDIT Three in five respondents (58%) felt that a voluntary prepayment option was the best way for customers with no credit or bad credit to open an account Best Option for Those With Bad or No Credit to Open Account 20 Base: Total Respondents (n=980) Q.8: For those utility customers that either dont have credit (e.g., students) or bad credit, which option do you think would be better for those customers in order to open an account with the utility and start utility service? 2015 Distributed Energy Financial Group LLC CONSUMERS CONSIDER REMOTE RECONNECTION BENEFICIAL Nine in ten respondents thought there was a significant or some benefit to them if the utility can restore or reconnect electric service much faster through remote reconnection Perceived Benefit of Remote Reconnection 21 Base: Total Respondents (n=980) Q.13: How much benefit would you say there is for you as the customer if the utility can restore or reconnect your electric service much

faster through remote reconnection? 2015 Distributed Energy Financial Group LLC OPPORTUNITY FOR EDUCATION: SELF-DISCONNECTION One-fourth of respondents would consider self-disconnection to save energy (26%) One-fourth said it would depend on the circumstances (28%) Consideration of Self-Disconnection to Conserve Energy Base: Total Respondents (n=980) 22 Q.14: If you knew that your local utility could turn off your service and then restore your electric service within minutes or on your schedule, and could do so without any penalty or any fee, would you ever consider self-disconnection (e.g., just letting your account reach a zero balance so that the service is turned off temporarily) to conserve energy (away for a weekend), and then reconnecting at your convenience? 2015 Distributed Energy Financial Group LLC BIGGEST CONCERNS ABOUT PREPAY Concerns revolve around security, disconnection if they ran out of funds/forgot to pay, and cost Some felt the service was unnecessary; some said they could not think of any specific concerns One Word To Describe Biggest Concern with Regard to a Voluntary Prepaid Electric Service 23 Base: Total Respondents (n=980)

Q.15: What one word would you use to describe your biggest concern with regard to voluntary prepaid electric service? 2015 Distributed Energy Financial Group LLC TAKEAWAYS Prepay energy is part of a larger mega-trend in consumer finance A significant number of consumers would really like a voluntary prepay option. The right customer with prepay energy = very high customer satisfaction. Prepay energy, however, is not the preferred option for all consumers. In fact, there are very distinct segments of consumers who are more likely to want prepay energy: millennials, immigrant communities, property owners and small commercial, customer with credit/ debt issues, and customers who pay in cash. Customers have a wide range of preferences and needs in regard to customer channel and notifications. However, almost all customers are seeking more control and convenience.

Customers appreciate the benefits of smart grid, e.g., remote connection, in relation to prepay energy. 24 2015 Distributed Energy Financial Group LLC Regulatory Issues with Prepay Energy 2015 Distributed Energy Financial Group LLC INTRODUCTION As technologies and patterns of human behavior evolve, consumer-facing rules and protections must periodically be revisited. Policy approaches may no longer achieve their intended purpose and, moreover, there may be a better approach that considers current lifestyles and consumer preferences. There is no better example than communication channels. The 21st century has seen a steady move from paper to digital communication. With various service providers, consumers can elect to receive regular, actionable information that helps manage their services and bills. The information and delivery methods can be

customized and automated. 26 2015 Distributed Energy Financial Group LLC OVERVIEW: CRITICAL POLICY AREAS Following extensive research in 2012, the PEWG identified 9 policy areas most critical to the future of prepaid energy service, requiring the attention of lawmakers:* 1. Service must be voluntary 2. Applicability of weather protections 3. Concerns for vulnerable populations 4. Service disconnection 5. Account notifications

6. Arrearage management and deferred payment plans 7. Cost of service: deposits, penalties & fees** 8. Payment channels 9. Availability of / synergies with / payment assistance * ODwyer, C. B. (2012, September). Prepaid Energy: A Regulatory Path Forward. Prepay Energy Working Group. Washington, DC: Distributed Energy Financial Group LLC. http://defgllc.com/publication/prepaid-energy-a-regulatory-path-forward/ ** ODwyer, C. (2014, August). Security Deposits and Fees: Leveraging New Technologies to Create Greater Flexibility and Opportunities for Improved Budget Management. Prepay Energy Working Group. Washington, DC: Distributed Energy Financial Group LLC. 27 2015 Distributed Energy Financial Group LLC OVERVIEW: REGULATORY FRAMEWORK The PEWG employs four screens (analytical framework) to

identify the drivers behind relevant policy approaches 28 2015 Distributed Energy Financial Group LLC OVERVIEW: REGULATORY FRAMEWORK For account notification policies, there are three critical drivers: Principle customers need reliable and timely alerts to properly manage account and keep their lights on Practice or process content and method of delivery are critical, must consider how and when to effectively reach the customer Preference the ability of customers to exercise choice related to communication channels and account management options With an eye towards achieving these

drivers, regulators should revisit existing notification policies to weigh the benefits and risks / drawbacks associated with traditional and new methods of communication. 29 2015 Distributed Energy Financial Group LLC OVERVIEW: A NEW CONVERSATION WITH PREPAID With traditional post-pay, bills are rendered at monthly intervals, and must contain basic information (customers name, billing address, service address, account number; electric utilitys name and its payment address) the monthly bill is a statement of past usage & dollars owed, potentially with additional information related to usage patterns. With prepaid, the utility and customer need to receive regular alerts, to be in daily / near daily / weekly communication via text / email / IVR / mobile app (depending on customers needs & preferences); this creates an opportunity for customers to become energy literate (usage tied to $ in near real-time) and establish a regular conversation with their provider.

Critical Prepaid Service Alerts include: Account balance & usage (daily, weekly - depending on preference) High usage Low balance Late payment (friendly-credit period) Disconnect; pending disconnect Payment posted Reconnect established 30 2015 Distributed Energy Financial Group LLC ANALYSIS: ALERTS, DELIVERY & REPORTING TYPICAL PREPAID SERVICE ALERTS Alert Type Description

Daily Balance Informs customers of their current balance and usage as of the latest meter reading Daily Usage Informs customers of their daily consumption Disconnect Notifies customers when service has been disconnected High Usage Notifies customers when consumption is unusually high based on threshold Low Balance Notifies customers when their balance reaches a predetermined amount established by the customer Pending Disconnect

Notifies customers when their account is subject to disconnect Recharge Confirms Confirms successful posting of a payment to a prepaid account Reconnect Notifies customers when service has been reconnect 31 2015 Distributed Energy Financial Group LLC ANALYSIS: ALERTS, DELIVERY & REPORTING EVALUATION OF ALERT DELIVERY METHODS ACCORDING TO POLICY DRIVERS Channel Reliable Timely Consumer Preference USPS

Mostly (assuming address is correct) but no confirmation if/when notice is read, and no Sun. delivery and potentially no Sat. service No, requires lengthier disconnect notice periods to ensure delivery (leading to debt accumulation); too costly and slow for actionable usage alerts Increasingly less popular vs. e-mail and texting, especially with adults < 50 years In-Person (Backup Door Hanger) Potentially, depends on lifestyle, whether an adult is home during business hours; hanger on front door may be missed Potentially, if an adult is home; door hanger is not timely if customer arrives home many hours later or doesnt see it

More often not preferred; feels like a violation causes stress / embarrassment Text/SMS Yes (assuming # on record is correct and no other tech / service issues); plus, utility & vendor receive delivery codes to authenticate delivery / be made aware of any issues potentially actionable information Yes (assuming # is correct and no other tech / service issues) near immediate delivery Increasingly a preferred method of communication; for certain segments, #1 choice for alerts E-mail Yes (assuming address on record is correct and no other tech / service issues); plus,

utility & vendor receive delivery codes to authenticate delivery / be made aware of any issues potentially actionable information Yes (assuming address is correct and no other tech / service issues) near immediate delivery Increasingly a preferred method of communication; for certain segments, #1 choice for alerts IVR Good reliability if message sent to personal mobile phone of account holder; less reliable if sent to home and minor picks up call, but customer can automate time to receive alerts. Yes (assuming # on record is correct and no other tech / service issues) For certain segments, #1 choice for alerts

32 2015 Distributed Energy Financial Group LLC Energy Conservation and Environmental Impacts of Prepay 2015 Distributed Energy Financial Group LLC OVERVIEW In the U.S. and abroad, data have shown a linkage between prepayment and a conservation effect, with significant usage reductions of 5-15%. While there is an apparent link, it is not well understood or documented. Thus, in 2011, the Prepay Energy Working Group commissioned Dr. Michael Ozog to propose a methodology to measure the impact of prepaid service on energy consumption,* which was vetted by market and regulator participants of the Prepay Energy Working Group. The natural next step was to test the methodology. In cooperation with Oklahoma Electric Cooperative, Dr. Ozog analyzed customer usage data (both post-pay and prepaid) to determine at what level a relationship exists between prepaid service and a reduction in energy consumption. The initial findings are contained in this deck. * Ozog, M. (2011). A Method for Estimating the Conservation Effects of Energy Prepayment. Series of Regulatory Choices 7. Washington, DC: Distributed Energy Financial Group LLC.

http://defgllc.com/publication/method-for-estimating-the-conservation-effects-of-energy-prepayment/ 34 2015 Distributed Energy Financial Group LLC REGRESSION MODEL A fixed-effects panel model was used, with variables for temperature and disconnects as well as participation in prepay: ln( kWhit ) t i (t Tempt ) PPit PPit Discit Discit it A log specification was used, so estimated savings would appear as percent of usage. 35 2015 Distributed Energy Financial Group LLC KEY RESULTS Estimated Coefficients (savings are negative): Variable

Enrolled in Prepay Disconnects under Prepay Disconnects at any time Sample Size Coefficient t-value -11.0% -17.79 2.4% 2.06 3.3% 3 65.628 obs (1,217 houses) Enrollment in prepay results in a significant reduction in energy usage of 11% (about 2,250 kWh/year) This implies $192/year reduction in customers bill* * Assuming $146 per month total bill (OECs current monthly average) 36 2015 Distributed Energy Financial Group LLC

PREVIOUS EVALUATIONS This result is consistent with other evaluations of prepay programs: 12% reduction in a previous evaluation of OEC program in 2008 (Buck, Utility Automation, May 2008) 11% reduction in usage when customers receive training on the system, and a 4% reduction when for customers without training (EEI, January 2008) 12.8% reduction in energy use in the Salt River Project (SRP) Mprogram (EPRI Technical update 1020260, October 2010) 10.6% average reduction in energy use across two utilities in the Pacific Northwest (NEEA-DEFG, January 2014) 37

2015 Distributed Energy Financial Group LLC CONSUMER SURVEY IN THE NORTHWEST: ACTIONS TAKEN TO USE LESS ELECTRICITY* One question addressed specific actions that the customers may have taken since switching to prepay service. These include behavioral actions, investments, and the act of voluntarily allowing a service disconnection for nonpayment to reduce usage. Q-5. Now I am going to read a list of actions that some people take after they switch to prepay service. Please indicate whether you have taken this action since switching to prepay service with a simple yes or no. Rank Action Type Behavior 1 Action Made sure the lights are off in unused rooms Yes 97% 2

Behavior Intentionally made an effort to use less electricity 92% 3 Behavior Adjusted the thermostat a few degrees to use less electricity when the residence was empty 84% 4 Behavior Adjusted the thermostat a few degrees to use less electricity when you or others are in the residence 80% 5 Investment Replaced light bulbs with energy-efficient light bulbs

74% 6 Investment Applied weather stripping to windows and doors or added insulation to the attic or around the water heater 52% 7 Behavior Changed the time of day or how often you use your appliances 48% 8 Investment Made a major investment in the home heating system, in new insulated windows or in new energy-efficient appliances 43%

9 Behavior Lowered the temperature setting on the water heater to use less electricity 40% 10 Investment Upgraded or replaced the thermostat 37% 11 Other Allowed my electricity to be shut off as a way to use less electricity 36% 38 * Source: DEFG. (2014). Prepay Customer Survey. Report prepared for the Northwest Energy Efficiency Alliance. Final release:

forthcoming. 2015 Distributed Energy Financial Group LLC ENVIRONMENTAL IMPACTS Our research on prepay energy and other enhanced transactions in the utility sector is pointing to the potential for consumers to change behavior and drop energy consumption by 10% or more Utility offerings that combine customer preferences, robust communications and transactions (e.g., bill pay and energy management) could the fastest, cheapest and most satisfactory means to achieve positive environmental Potential of Prepay Energy to Reduce Electric Power outcomes Adoption scenarios GHG High Medium Low

Adoption rates 18% 10% 3% Average electricity savings 12% 10% 8% Million metric ton CO2 avoided annually 16.35 7.57 1.51 Percent of CO2 from residential electricity usage

2.2% 1.0% 0.2% 39 2015 Distributed Energy Financial Group LLC Enhanced Transactions 2015 Distributed Energy Financial Group LLC THE MAGIC WAND What if we could wave a magic wand that would allow utilities to: 1) Dramatically reduce customer costs, and perhaps eliminate bad debt 2)

Raise customer sat by 10 points or more 3) Hit all the mandated DSM targets for the year, with room to spare. The magic is here But need to move from a binary look at transactions to create a more holistic customer experience tied to the entire utility enterprise 41 2015 Distributed Energy Financial Group LLC WHAT ARE ENHANCED TRANSACTIONS? Transaction Data/ Analytics Communications

Customer Intelligence 42 2015 Distributed Energy Financial Group LLC CUSTOMER OPPORTUNITY WHEEL Customer Strategy Enhanced Transactions Channels Behavior Customer investment Segmentation 43 2015 Distributed Energy Financial Group LLC

WHAT IS THE DYNAMIC FOR ENHANCED TRANSACTIONS? Transactional: In dollars and cents that has an immediate and noticeable impact on customer bill Preferences: During enrollment, preferences are set in regard to channel, frequency, content, etc. Channel: Very aligned to mobile platforms Communication: A bill conversation every day through the channel that the customer chooses Intelligence: Learning from real customer behavior on a daily basis and making changes to adapt to that behavior

Segmented: Low income, younger Americans, Hispanics/ immigrant communities Flexibility: Moving away from the 30-day billing cycle 44 2015 Distributed Energy Financial Group LLC Choice of Service Level Payment Options Competitive Options MAPPING CUSTOMER CHOICES Choice of Provider Other Prepayment Program

Options Electronic Payment Paper and Check Other On-site Generation Mandatory Tariff Demand Response Energy Efficiency Other Tiered Structures Time-of-Use and Dynamic Pricing On-premises Devices Traditional Rate Design

Other Other devices Appliances Buildings Key: Mid 20th C. Recent decades Current issues Options Available to Residential Energy Consumers 45 2015 Distributed Energy Financial Group LLC + STRATEGY DEFGs + Strategy for Budget Billing Transaction + AMI With advanced metering infrastructure, close-to-real-time data allows more information to flow to the customer when/how s/he prefers. Information is

more relevant, andthrough budget alertsmore actionable Transaction + AMI + Energy Conservation Based on channel and frequency preferences, communications relating to energy conservation can be targeted to customer needs. S/he can act today and see the savings tomorrow Transaction + AMI + Positive reinforcement will be key. A feedback loop should be incorporated Energy Conservation + and grounded into a pairing with an associative good, either economic or Behavior social. Context is important: make budget billing mainstream (not just a low income option). Be proactive and positive, rather than defensive and targeting people who need help. (Many customers want to manage bills) Transaction + AMI + Help customer optimize what they are already doing by connecting the Energy Conservation + transaction and platform to other parts of the portfolio or customer service Behavior + Portfolio offering to allows more savings and control. When the utility fully enables budget management combining all the aspects of the customer portfolio it will allow for personalized and predictive planning with individual customers. This is a trusted energy advisor model in action 46 2015 Distributed Energy Financial Group LLC

ComEds Dollar-A-Day Low Income Pilot 2015 Distributed Energy Financial Group LLC DOLLAR-A-DAY PILOT OBJECTIVES Help low-income customers manage the affordability of their electric bills by setting their own energy saving goals, and influencing their behavior through incentives and frequent communication using the data from their AMI meters. This could reduce the need for long term financial assistance and operational costs. Vision: Leverage technology-based tools and customer education to help

low income customers get to a better place Reduce the need for energy bill assistance and energy conservation assistance; stretch limited assistance dollars Help consumers achieve their own goals: improve their cash management and household budgeting; get out of a debt cycle Target customers who are currently eligible for hardship (CARE) funds and/or LIHEAP participants who have received the maximum benefits Reduce customer contacts (call center & collections) 48 2015 Distributed Energy Financial Group LLC BACKGROUND ComEds service territory has 11% of customers that live below the poverty level, 22% with an income of under $25K, but only 5% of the premises are on one of our low income programs Customers who receive low income assistance funds have a history of cycling in and out of our programs

These customers also may have a higher cost of service: require more disconnection notices, request more DPAs. We have an example of one customer who called us 100 times. ComEd has limited funds for assistance programs: $10M annually and would like to stretch those funds to as many eligible participants as possible. The target audience includes customers currently eligible for hardship (CARE) funds and/or LIHEAP participants Care Program Customers with AMI meter as of May 15 , 2015 Care Program LIHEAP Residential Special Hardship Total Customers 167,548 6,704 AMI Meters 70,856 2,651

49 2015 Distributed Energy Financial Group LLC STRATEGY Conduct qualitative market research with low income focus groups to determine approach. Target customers to reduce their electricity usage and lower their respective amounts due. Reward participating customers in targeted segment with incentives for engaging in and delivering energy saving behavior Utilize Local Administering Agencies (LAA) for outreach to low income customers to encourage enrollment. Utilize an energy advisor for customer enrollment and to provide

baseline education and awareness on household energy usage, set a target and ways to save. Communicate frequently with customers to change behavior and message monetary savings. Measure the effectiveness of program in terms of customer behavior and enterprise cost reduction. Focus on behavioral change and individual accountability by setting the threshold to obtain an incentive higher as the pilot progresses. 50 2015 Distributed Energy Financial Group LLC TACTICS At time of application of LIHEAP or RSH, agency to offer fact sheet and gauge interest

Enroll 1,500 participants; track 1,500 interested customers (comparison group) Enrollment and goal setting through phone call with implementing vendor Energy advisor discussion: Participants choose their preferred form of communication (text, email or robo-call) and affirmatively agree to be messaged to frequently Participants receive information on how to reduce electricity usage Participants receive yesterdays cost and kWh usage; performance-to-date against their monthly budget; daily and accumulated incentive payments; positive affirmation

Participants earn $1 daily amount for meeting their daily kWh budget (weather adjusted calculation); incentive capped at $30 a month (Dollar a Day used in promotions) 51 2015 Distributed Energy Financial Group LLC CONTRAST: MONTHLY BILL VS. DAILY TEXT Sample Daily Text 52 2015 Distributed Energy Financial Group LLC Conclusion 2015 Distributed Energy Financial Group LLC CONCLUDING TAKEAWAYS I. Prepay energy is linked to a mega-trend in terms of customer finances and how Americans of all socioeconomic classes are choosing to interact. II. Why? Customers are highly satisfied with prepay. They greatly appreciate the convenience and control.

III. Prepay energy is challenging though to traditional regulations and policies that were developed decades ago. IV. Prepay energy results in significant energy conservation and environmental impacts. V. Prepay energy represents the cutting edge of a whole new set of customer offerings and enhanced transactions enabled by smart grid. VI. A good example of an enhanced transaction aimed at better serving low-income customers would be ComEds Dollar-A-Day program. 54 2015 Distributed Energy Financial Group LLC CONTACT

Jamie Wimberly CEO, DEFG Office: 202-255-2860 [email protected] DEFG believes retail customers are the future of energy. We partner with clients to improve all aspects of the customer relationship. We identify opportunities to create value in a commodity marketplace. Persons interested in our publications should Join Our Mailing List to receive the announcements: http://defgllc.com/publications/ 55 2015 Distributed Energy Financial Group LLC

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