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RETAIL ELECTRIC CHOICE: PROVEN, GROWING, SUSTAINABLE

Philip R. OConnor, Ph.D. PROactive Strategies, Inc. On Behalf of The COMPETE Coalition Michigans Electricity Market Time for Gardening Lansing, Michigan October 15, 2012

THE ELECTRIC CHOICE SURGE: 40% Volume Growth 2008-2011


18 Choice Jurisdictions account for 44% of all U.S. electricity consumption During the economic slowdown overall U.S. electricity use in 2011 no greater than 2008 Yet competitive retail load has grown by 40% from 488mm MWh to 685mm MW Competitive customer accounts have grow 53% from 8.7 million to 13.3 million 18% of all U.S. load served competitively yearend 20111 will likely grow to 20%+ in 2012

RULES OF THE GAME MAKE THE DIFFERENCE


State and Federal Regulators have been harmonizing rules and achieving consistency Stable regulation and clear rules Wholesale competition & open access Cost-based delivery rates (no cross-subsidies) Market-based default service Customer Data & Electronic Data Interchange Utility Consolidated Billing (UCB) and Purchase of Receivables (POR) Customer Education & Promotion of Choice

Total Electric Industry - All Sectors


Average Rate (cents/kWh)

12.00 Ratio
1.14 1.13 1.13 1.12 1.07 1.12 1.12 1.13 1.11 1.05 1.02 0.95 0.97 0.93 0.90 0.86 0.81 0.94 0.97 0.94 0.93 0.90

Year
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Illinois
7.49 7.63 7.69 7.75 7.41 7.69 7.69 7.71 7.46 6.96 6.94 6.90 6.94 6.86 6.80 6.95 7.07 8.46 9.26 9.33 9.13 9.01

US
6.57 6.75 6.82 6.93 6.91 6.89 6.86 6.85 6.74 6.66 6.78 7.25 7.13 7.38 7.55 8.05 8.77 8.98 9.54 9.89 9.83 9.99

ILLINOIS RATES HIGHER THAN U.S. AVG. BEFORE CHOICE LOWER AFTER
1.95 1.75 1.55

10.00

8.00

cents/kWh

1.35

4.00

1.15

2.00

0.95

0.00

0.75

Year
Illinois US

Source: U.S. Energy Information Administration (EIA)

Ratio

6.00

MICHIGAN: LOSING GROUND v. U.S. AND MIDWEST ELECTRICITY RATES


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2001-11 Average Illinois Indiana Michigan Ohio Wisconsin 0.95 0.96 0.92 0.89 0.85 0.79 0.93 0.95 0.92 0.93 0.90 0.73 0.74 0.72 0.73 0.72 0.73 0.71 0.73 0.78 0.78 0.81 0.96 0.99 0.92 0.91 0.89 0.91 0.93 0.92 0.96 1.01 1.04 0.91 0.94 0.91 0.91 0.87 0.87 0.87 0.86 0.92 0.93 0.91 0.83 0.87 0.89 0.90 0.92 0.91 0.93 0.92 0.95 1.00 1.02 0.91 0.74 0.95 0.90 0.92

Source: U.S. Energy Information Administration (EIA)

MICHIGAN CUSTOMERS DENIED AT LEAST A HALF BIILION $ IN SAVINGS


Market is $20/MWH less than utility supply 9.2 mm MWH served competitively = 11% 9.2 mm MWH in unserved queue = 11% 9.2 mm MWH x $20 = $184 million annually Competitively served load in Illinois = 62% If Michigan choice load were just 40% of total customers would save additional $485mm At 62%, total savings, including current 11% of load exceed $1 billion versus monopoly rates.

Philip R. OConnor, Ph.D.


PROactive-Strategies, Inc. -- Chicago, Illinois
Dr. Phil OConnor is President of PROactive Strategies, a Chicago consulting firm providing advice in the energy and insurance industries. For over two decades Phil has been recognized as a leading advocate of competitive market solutions for regulated businesses. Phil is the author of Customer Choice in Electricity Markets: From Novel to Normal, published by COMPETE Coalition in November 2010 and co-author with Terrence L. Barnich of The Grand Experiment: Has Restructuring Succeeded on Either Continent?, published in Public Utilities Fortnightly, February 2007. In addition to a lengthy career in the private sector, Phil has had extensive government and political experience, having chaired the Illinois Commerce Commission serving as Director of the Illinois Department of Insurance and as a member of the Illinois State Board of Elections. Five consecutive Illinois Governors have appointed him to various boards and commissions. From March 2007 to March 2008, Phil served in the U.S. Embassy in Baghdad, Iraq with the US Army Corps of Engineers and the US State Department as an advisor to the Iraqi Ministry of Electricity. A magna cum laude graduate of Loyola University of Chicago, Phil received his Masters and Doctorate in Political Science from Northwestern University. Phil.OConnor@PROactive-Strategies.net Office 312-446-3536 Mobile 312-980-4860