Energy Optimization Overview

May 11, 2009

Legislation

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Energy Optimization in PA 295

• Detroit Edison must achieve the following energy savings targets:

Incremental Energy Savings

~Impact to Detroit Edison– 2008/9 0.30% of 2007 retail sales

150,000 MWh

– 2010 0.50% of 2009 retail sales250,000

MWh– 2011 0.75% of 2010 retail sales

375,000 MWh

– 2012+ 1.00% of prior year retail sales500,000

MWh

Subject to MPSC rulemaking and outcome of final order

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• The program is paid for via customer surcharges

• Non-residential electric customers will be assessed a monthly meter charge, estimated to be:

• Primary metered sites• 2009 - $250• 2010 - $350

• Secondary metered sites*• 2009 - $2.75• 2010 - $3.75

*Represents an estimated average. The MPSC Temporary Order specifies that multiple per-meter charges be offered to reflect the diverse load characteristics of this class

• All classes will contribute toward low income residential programs

Subject to MPSC rulemaking and outcome of final order. Also subject to program spending levels, program launch date and other variables.

Energy Optimization Surcharges by Customer Class

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Energy Optimization Program Spending & Impact

• To comply with legislation and ensure all customers have the opportunity to participate, programs

will be offered to each customer class• Programs likely to be offered include: Residential Low Income, ENERGY STAR, Appliance

Recycling, Residential HVAC, Multifamily Direct Install, New Home Construction, C&I Prescriptive,

and C&I Non-Prescriptive • Our program will include customer education and pilot programs for future EO program

development and emerging technologies• Program cost will include customer incentives, program delivery and other costs

Preliminary Detroit Edison EO Program Spending & Impact

Program Year Est. Maximum Program Cost

($mil)

Est. Annual Savings Goal (MWh)

Est. Cumulative Savings Goal

(MWh)

2009 $33.1 150,000 150,000

2010 $44.2 250,000 400,000

2011 $66.3 375,000 775,000

2012+ $88.4 500,000 1,275,000

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Energy Optimization Program Timeline

Legislation signed

MPSC temporary

order

EO plan filed

EO Plan approved by

MPSC

Launch Programs

October 6, 2008

December 4, 2008

March 4, 2009

June 3, 2009

Mid to Late 2009

EO Programs

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Detroit Edison Energy Optimization Portfolio

Integration with MichConMichConPortfolio

Detroit Edison Portfolio

Residential Programs

C&I Programs

C&I Prescriptive

C&I Non-Prescriptive

ENERGY STAR

Residential HVAC

Appliance Recycling

Residential New Homes

Custom Program

RFP Program

New Construction

Low Income Program

Emerging Technologies

Multifamily Direct Install

Demand Response

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Program Description Products

Key Delivery Channel

ENERGY STAR

Increase the market share of ENERGY STAR qualified products sold through retail sales channels

CFLs

Clothes Washers

Room ACs/Dehumidifiers

Retailers

Appliance Recycling

Provide pick-up and special drop-off events for operable, inefficient appliances and, dismantle and recycle these appliances in an environmentally safe manner

Refrigerators & Freezers

Room ACs

Dehumidifiers

Certified Recycling Agency & Retailers

HVAC Encourage customers to install energy-efficiency heating and cooling equipment

Central AC

EMC furnace motors

Distributors &

HVAC Dealers

Low Income Work with existing CAP Agencies to expand their low income services and issue RFPs for vendor(s) to install energy-efficiency equipment and improve insulation levels for low income homeowners

Refrigerators CFLs & Education

CAP Agencies and Contractors

New Home Construction

Provide incentives and assistance to encourage the construction of ENERGY STAR certified homes

Electrical appliances, building shell materials

Homeowners, Builders/Dev.

Multifamily

Direct Install

Provide direct installation of EE measures to residential customers living in multifamily buildings.

CFLs, T-8 & T-5 lamps, LED signs,

Contractors

Residential Program Overview

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Program Description ProductsKey Delivery

Channel

C&I Prescriptive The C&I Prescriptive Program provides incentives to Detroit Edison’s C&I primary and secondary customers for the installation of energy-efficient equipment for numerous applications

Lighting

HVAC

Motors/VFDs

Food Service

Detroit Edison Account Mgrs/ Energy Partnership

Equipment Dealers & Distributors

C&I Custom The C&I Custom Program provides custom incentives to C&I customers for the installation of innovative and unique energy-efficiency equipment and controls.

Compressed air

Process equipment

Unique processes

Detroit Edison Account Mgrs/ Energy Partnership

Equipment Dealers & Distributors

C&I RFP The C&I RFP Program provides custom incentives to select C&I customers/markets on a very targeted and limited time basis for the installation of innovative and non-standard energy-efficiency equipment and controls.

Unique processes Detroit Edison Account Mgrs/ Energy Partnership

Equipment Dealers & Distributors

C&I New Construction

The C&I New Construction Program provides design assistance and custom incentives to customers for building more efficient new buildings and installing energy-efficiency equipment and controls that are not required by building energy codes and are above standard construction practices

Lighting

HVAC

Building envelope

Controls

Architects and Engineers, Building Owners

Commercial & Industrial (C&I) Program Overview

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Collaboration with Other Michigan Utilities

Potential areas of collaboration Include:

• Common database for measures and their deemed savings value

• Common cost effectiveness model – DSMore

• Similar or Consistent Programs•High Level – Custom, Prescriptive, New Construction, Low Income, Multi-Family•Detailed Level – Coordination of measures, incentive levels & processing, qualification & technical standards•Possible joint RFP for implementation (ex: Low Income, Refrigerator Turn In, Application Processing)

• EM&V – range from similar approaches to combined evaluations

C&I Prescriptive

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C&I Prescriptive Program

Encourages C&I customers to improve energy efficiency in existing and new facilities using predetermined measures and incentive amounts.

– Lighting

– Motors/Pumps/Drives

– HVAC equipment

– Controls

– Refrigeration and other Food Service equipment

T-12

T-8

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C&I Prescriptive Program Process Flow

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C&I Prescriptive Program – Q & A

What is the target market? All Detroit Edison C & I customers.

How many measures are offered? Over 170 measures will be offered.

What are the incentives? Incentives vary widely based on the measure installed (ex. perhaps $20 for a T8 fixture, $1,000 for a large HVAC roof top unit).

How is the program implemented? Detroit Edison will manage the program with a third party implementation contractor who will work with our Michigan located trade allies to deliver the programs.

When will the program be available? Detroit Edison will file its program with the MPSC in March 2009 and the programs will be available in mid to late 2009.

How do customers receive incentives? The customer or their contractor completes and submits a rebate form (which they will find on our web site) with the appropriate documentation to receive incentive dollars.

How do customer know what qualifies as a prescriptive measure?

Through promotional and educational materials created for Account Managers and our web site.

What if my customer’s technology is not included in the prescriptive program?

The prescriptive program offers proven technologies that will help Detroit Edison achieve the mandated savings goal. Non-standard technologies could be covered in the non-prescriptive programs.

How will Account Managers be kept informed of developments or changes in the program?

Tactical Marketing will develop periodic updates to keep you informed.

C&I Non-Prescriptive

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C&I Non-Prescriptive Programs

Flexible programs that encourage C&I customers to install energy efficient measures in their facilities using custom incentives to draw out innovative and unique energy efficient equipment and controls

•Three non-prescriptive programs:

– C&I Custom. Detroit Edison incentives for approved customer projects

– C&I RFP. Detroit Edison targets certain market sector (i.e. hospitals), limited time basis.

– C&I New Construction. Incentives for upgrade of whole building as a system, above current building codes.

C&I Non-Prescriptive Measures Policies

• Pre-approved engineering estimates will be used to set targets for per kW and kWh savings from each application.

• Incentive levels will vary over time based on costs and market need, but Detroit Edison will typically set them in one-year increments.

• Detroit Edison will use two tiers for Custom Program incentives.

– Tier I: Uses a lower rate, focuses on established, known technologies that customers may not use without incentives.

– Tier II: Higher-level tier rewards customers for using technologies that are newer, riskier, or otherwise less likely to be used.

• Most new technologies will start at the second tier and migrate to the first as the market accepts them.

• Projects may have payback period restrictions

• Projects may be bundled under RFP Programs

• Customers who self-direct will not be eligible

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C&I Non-Prescriptive Program Process Flow

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C&I Non-Prescriptive Program – Q & A

What is the target market? Existing C&I customers utilizing more complicated systems or unique processes in existing and new facilities.

How do customers apply for a custom program?

Customers submit an application that must be approved by Detroit Edison.

How are incentive levels set? C & I Custom

Incentives will be set using a per kW and kWh basis so that both energy and demand savings will be rewarded.

We may have other limitations to ensure equity among customers

C & I RFPIncentives will be based on the RFP issued by Detroit Edison for a narrowly defined market or technology, e.g. hospitals, schools, etc.Incentives will be set using a per kW and kWh basis.

C & I New ConstructionIncentives will be based on the percent improvement above the local building code or above the ASHRAE 90.1-2004 standards as determined by DOE-2 or equivalent building simulation modeling.

How will custom programs be verified?

Customer programs will be evaluated by an independent firm to ensure approved application measures are installed and estimated savings are achieved.