ESP Overview

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ESP Overview
Ohio Edison CompanyThe Cleveland Electric
Illuminating CompanyThe Toledo Edison Company

• William RidmannDirector, State Regulatory Affairs

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Disclaimer
The information contained in this presentation
material is intended to provide generally
descriptive and summary information. Any
conflict between the information contained in
this material, or conveyed orally during the
technical conference, and the information
provided as part of the Companies application in
Case No. 08-935-EL-SSO is unintentional and the
docketed material controls. The information
contained herein is subject to change during the
regulatory process.
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Plan Objectives

• Price Stability
• Ensure adequate supply of electricity
• Maintain and improve the distribution system
• Promote economic development, job retention,
  energy efficiency, and peak demand reduction
• Resolve pending PUCO cases
• Flexibility for PUCO to manage prices

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Benefits

• Service reliability
• Commitment to invest at least 1 billion in
  capital improvements
• Establishment of performance targets
• Energy Efficiency and Demand Response initiatives
• Up to 25 million in program support without
  recovery from customers
• Up to 1 million toward Advanced Metering
  Infrastructure pilot program without recovery
  from customers
• Commitment to undertake a comprehensive study of
  system enhancement, including Smart Grid
  technologies
• Economic Development and Job Retention
• Up to 25 million for programs without recovery
  from customers
• Arrangement with FirstEnergy Solutions (FES) for
  generation supply
• 1000 MW capacity additions
• Environmental remediation and reclamation of up
  to 45 million
• CEI RTC and Extended RTC waiver

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ESP Overview

• ESP is offered as a comprehensive plan, with a
  short term severable ESP option to provide
  flexibility
• 3 year standard service generation offer which
  will be phased in PUCO may terminate after 2
  years
• Further RTC and extended RTC charges waived for
  CEI
• Option to waive standby charges for customers who
  switch to an alternative generation supplier
• Resolution of the pending distribution rate case
• Commitment to keep distribution rates stable
  through 2013
• Recovery of transmission related costs through
  bypassable provision
• Significantly excessive earnings test

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Tariff Structure

• Generation rate design in ESP plan is consistent
  with Distribution Case tariff structure
• Voltage-based Schedules
• Residential Service (RS)
• General Service (GS, GP, GSU, GT)
• Lighting (STL, TRF, POL)
• Reduction in the overall number of tariffs
• Standardization across Ohio Companies

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Generation

• Stable and predictable pricing throughout the
  course of the plan
• 7.5 /kWh in 2009 (6.75 /kWh with phase-in)
• 8.0 /kWh in 2010 (7.15 /kWh with phase-in)
• 8.5 /kWh in 2011 (7.55 /kWh with phase-in)
• Seasonally and voltage adjusted
• Includes minimum default service provision and
  costs associated with requirement for renewable
  energy resources
• Expected average increase across all three
  companies

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Generation Phase-In

• Customers will gradually transition toward market
  pricing for retail generation
• Greater than 10 of base generation charges
  deferred
• Two options for financing of deferral amounts and
  carrying charges
• Company financing
• Securitization transactions
• Recovery may not exceed 10 years and is
  non-bypassable

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Potential Adjustments to Base Generation Charges

• Fuel Transportation Surcharge and
  EnvironmentalControl Provision
• Recovers increases in fuel transportation
  surcharges in excess of
• 30 million in 2009
• 20 million in 2010
• 10 million in 2011
• Recovery of costs associated with new alternative
  energy / renewable requirements, new taxes, new
  laws, or new interpretations of existing laws
  exceeding 50 million
• Fuel Cost Adjustment Provision
• Recovery of 2011 fuel costs exceeding 2010 levels

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Transmission

• Recovery through a reconcilable provision of all
  transmission related costs
• Includes ancillary services and congestion costs
• Reflects applicable FERC-approved charges or
  rates incurred under MISO tariffs and agreements
• ESP plan proposed rates are revenue-neutral
  placeholders in future years
• Rates to go into effect January 1, 2009 will be
  filed on or before October 17, 2008

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Distribution

• Provides for new distribution base rates to
  resolve the Companies Case No. 07-551-EL-AIR
• Annual increase over rates in effect at the time
  of the case
• 75 million for OE
• 34.5 million for CEI
• 40.5 million for TE
• CEI authorized to defer 25 million of
  distribution costs incurred from January 1, 2009
  April 30, 2009
• Rates stable until January 1, 2014
• Companies commit to 1 billion in capital
  investments in their distribution system through
  2013

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Resolution of Distribution Case

• Establish the allowed rate of return on equity at
  10.5 (midpoint of Staff recommendation)
• Approval of revenue distribution and rate design
  stipulation
• Resolution establishes distribution tariffs
• Acknowledgement that the Companies will continue
  to work with Commission Staff on routine audits

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Distribution Provisions

• Delivery Service Improvement Provision
• Continued reliability of the distribution system
• May be adjusted annually (/- 15) based on SAIDI
  performance
• Storm Damage and Distribution Enhancement
  Provision
• Recovery of storm damage expenses in excess of
  13.9 million annually
• Line extension costs recovery for deviation from
  proposal indistribution case
• Depreciation, tax, and carrying charges on
  capital investments to improve reliability
• Deferred Distribution Cost Recovery Provision
• Includes January-April 2009 CEI deferred amounts,
  post-date certain distribution costs, and
  deferred transition taxes, and unrecovered
  balances of line extension deferrals

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Other Provisions

• Non-Distribution Service Uncollectible Provision
• Uncollectible expense not permitted through
  distribution case
• PIPP Uncollectible Provision
• Recovery of PIPP-related uncollectible expense
  resulting from a modification of state policy
• Capacity Cost Adjustment Provision
• To recover the cost of capacity purchased to meet
  planning reserve requirements for Ohio retail
  load from May 1 to September 30 each year
• Experimental Dynamic Peak Pricing Provision
• AMI pilot program
• Offered on a voluntary basis to customers that
  the Companies have determined to have
  discretionary summer usage
• Green Resource Provision
• Gives customers the option to further support
  renewables through the purchase of renewable
  energy credits

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Other Provisions (continued)

• Economic Development Provision
• Promotes gradualism, recognizes efficiency,
  mitigates overall bill impact to customers
  through credits and charges
• Reasonable Arrangements Provision
• Mechanism to administer certain tariff discounts
  for reasonable arrangements pursuant to RC
  4905.31, 4905.34, and 49011-38 of commission
  proposed rules for customers committing to energy
  efficiency improvements
• Demand Side Management and Energy Efficiency
  Provision
• Recovers costs associated with EE, peak load
  reduction, and DSM programs
• Delta Revenue Recovery Provision
• Recovers the difference in revenues from the
  applicable rate schedule resulting from
  reasonable arrangements and special contracts
• Economic Load Response Provision
• Program designed to benefit customers who are
  able to quickly reduce their curtailable load in
  a critical period

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Other Provisions (continued)

• Deferred Fuel Cost Provision
• Recoveries 2006-2007 costs
• Required for all customers who receive electric
  service under the companies rate schedules
• Not avoidable for those who shop with a certified
  supplier
• Standby Provision
• Option for customers who shop with a certified
  supplier, including Governmental Aggregation
  Groups
• Optional Load Response Provision
• Benefits customers who are able to quickly reduce
  their curtailable load during a critical period
• Minimum Default Service Charge
• Applied to customers only during the period in
  which they shop with a certified supplier

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Other Provisions (continued)

• Deferred Generation Cost Provision
• Recovery may not exceed 10 years and is
  non-bypassable
• Grandfathered Contracts CEI Only
• Necessary to bill CEI contract customers at
  current contract levels for specific tariff
  charges
• Deferred Transmission Cost Recovery
• Continued recovery of deferred transmission and
  ancillary service-related costs through 2010 as
  authorized in 04-1931-EL-AAM

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Severable Short Term ESP

• Proposed in recognition of the constricted time
  period available to have an ESP or MRO in place
  January 1, 2009
• Ensures price certainty if adopted by November
  14, 2008
• Commission has until March 5, 2009 to act on long
  term ESP
• Provides a more measured MRO timeline should the
  long term ESP not be approved
• Short Term ESP pricing
• Average base generation 7.75 /kWh (6.75 /kWh
  with phase-in)
• Difference deferred for future recovery similar
  to long term
• Does not offer all of the benefits of the long
  term ESP, but provides a more flexible timeline
  than presently exists