Electric Industry Update · Projections (9/2015) Projections (8/2016) Notes: Total company spending of U.S. Investor-Owned Electric Companies, consolidated at the parent or appropriate

David K. Owens

Aryeh B. Fishman Associate General Counsel, Regulatory Legal Affairs

Edison Electric Institute

AGA/EEI Accounting ConferenceMay 22, 2017

Newport Beach, CA

Electric Industry Update

Our Industry Vision IsCustomer-Driven

Value-Focused

More Dynamic, More Secure Energy Grid

Cleaner Energy

Innovative Energy

Solutions

3

Hurricane Matthew Response

Improvements help utilities respond quicker to hurricane storm damage

10 Days of Blackouts Cut to 2 After U.S. Utility Spends Billions

Hurricane Matthew Tests Electric Grid’s New Storm-Resistant Technology

4

1 Million+Direct and Indirect Jobs

5

6% 4%5% 3%

12% 15%

18% 17%

26% 26%

32%35% Generation

Distribution

Transmission

Gas-Related

Environment

Other

108.6 B

Industry Capital Expenditures

Actuals

Projections (9/2015)

Projections (8/2016)

Notes: Total company spending of U.S. Investor-Owned Electric Companies, consolidated at the parent or appropriate holding company. Projections based on publicly available information and extrapolated for companies reporting fewer than three projected years (11% and 15% of industry for 2017 and 2018). 2015P total does not sum to 100% due to rounding.

Source: EEI Finance Department, company reports, S&P Global Market Intelligence (August 2016).

as of 9/2015 as of 8/2016

2015P 2016P

120.8 B

Total Functional

108.6101.2

92.2

120.8

104.596.5

59.9

74.1 82.8

77.7 74.378.6

90.3 90.396.1

103.3

$0 B

$20 B

$40 B

$60 B

$80 B

$100 B

$120 B

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

6

$6.2B 6% $4.7B 4%$5.7B 5% $3.4B 3%

$13.3B 12% $17.9B 15%

$19.3B 18% $20.8B 17%

$28.7B 26%$32.0B 26%

$35.3B 32%

$42.0B 35%

$0 B

$20 B

$40 B

$60 B

$80 B

$100 B

$120 B

Projected Functional CapEx

$108.6 Bas of September 2015 as of August 2016

$120.8 B

Generation

Distribution

Transmission

Gas-Related

Environment

Other

2015P 2016P

Notes: Total company functional spending of U.S. Investor-Owned Electric Companies. 2015P total does not sum to 100% due to rounding. Projections based on publicly available information and extrapolated for companies not reporting functional detail (1.3% and 0.7% of the industry for 2015 and 2016, respectively).

Source: EEI Finance Department, company reports, S&P Global Market Intelligence (August 2016).

7

Electricity Is a Great Value

Sources: U.S. Department of Labor, Bureau of Labor Statistics (BLS), and U.S. Department of Energy, Energy Information Administration (EIA)

8

Industry Goal

Attain Customers’

Desired Level of Electric

Reliability . . .

. . . And Society’s

Clean Energy Policy Goals . .

. . . At as Low a Cost to

Electricity Customers as

Possible.

Sustainability AffordabilityReliability

Strike a Balance Among Reliability, Sustainability, and Affordability

9

Key Administration Players

Steven MnuchinSecretary ofthe Treasury

Gen. James Mattis (Ret.)

Secretary of Defense

Wilbur RossSecretary ofCommerce

Rep. Ryan Zinke (R-MT)Secretary of the

Interior

Elaine ChaoSecretary of

Transportation

Ben CarsonSecretary of

Housing and Urban Development

David ShulkinSecretary of

Veterans Affairs

Betsy DeVosSecretary ofEducation

Rick PerrySecretary of

Energy

Linda McMahonAdministrator of the

Small Business Administration

Reince PriebusChief of Staff

Steve BannonChief Strategist

Sonny PerdueSecretary of Agriculture

Alex AcostaSecretary of

Labor

Tom PriceSecretary of

Health & Human Services

Mick MulvaneyDirector of the Office of Management and

Budget

Robert LighthizerU.S. Trade

Representative

Nikki HaleyU.S.

Ambassador to the United

Nations

?Chair

Council of Economic Advisors

Scott PruittAdministrator of

the Environmental Protection Agency

Lt. Gen. H.R. McMaster

National Security Advisor

?Chair of the Council on Environmental

Quality

Sen. Jeff Sessions (R-AL)

Attorney General

Gary CohnChair

National Economic Council

Michael PompeoDirector to the Central

Intelligence Agency

Kellyanne ConwayCounselor

Gen. John Kelly (Ret.)

Secretary of Homeland Security

Rex TillersonSecretary of

State

*Current as of March 3, 2017.

Presenter

Presentation Notes

Trump Administration Priorities: Tax Reform, Infrastructure Development (and Health Care Reform) Different Directions? National Trends/Blue States A New Direction for USDOE: A Texan at the Helm A New Composition of FERC: Timing and Direction

Cheryl A. LaFleurActing Chairman

Colette D. HonorableCommissioner

Commissioner

? ? ?

FERC

Commissioner Commissioner

Presenter

Presentation Notes

Commissioner Vacancies Infrastructure Development Transmission and Pipeline Construction Adequate ROEs PURPA Reform Energy Storage Notice of Proposed Rulemaking Wholesale Market Reform Technical Conference Reliability/Cyber Security

Industry Priorities

Comprehensive Tax Reform Infrastructure

Investments Grid Security Preserving Balanced

Energy Mix

12

Preserve Interest Deductibility Preserve Deductibility for State and Local

Taxes- Largely Property Taxes

Retain Normalization Provide Excess Deferred Tax Transition Rule Provide Dividend and Capital Gains Rate

Parity

Industry Tax Reform Priorities

13

Approach To Grid Security

Presenter

Presentation Notes

The electric industry’s approach to managing delivery networks is known as “Defense In Depth,” which includes: Contingency-based planning prevention response and recovery Addresses the wide variety of risks to electric grid operations. Effective management of electricity networks ensures protection against systemwide failures.

14

Grid Security:Industry-Government Partnership

Presenter

Presentation Notes

The ESCC is the principal liaison between the electric sector and the federal government for coordinating efforts to prepare for, and respond to, national-level disasters or threats to critical infrastructure. The ESCC facilitates and supports policy and public affairs-related activities and initiatives designed to enhance the reliability and resilience of the electric grid. The ESCC is not operational. The ESCC is considered a model for how critical infrastructure sectors can more effectively partner with the federal government

15

Our National Fuel Mix Is Changing

Source: U.S. Department of Energy, Energy Information AdministrationChart percentages are based on net generation data.

2016 National Energy Resource Mix

(Preliminary)

2006 National Energy Resource Mix

16

17

18

Smarter Energy Infrastructure

19

Projected:$52.8 Billion Invested

in the Energy Grid in 2016(Transmission and Distribution)

20

Data Analytics

21

STATE REGULATED

T&D

Energy Storage: Why Now?

Energy storage can be deployed in all parts of the energy grid, and has applications in all parts of the value chain.

Source: Adapted from DOE/EPRI Handbook, EEI (graphic)

Enhance Electric Company Operations

Alleviate high energy prices through time shifts

Reduce the need for new generation

Provide Grid Support

Regulate frequency Reduce spinning, non-spinning,

and supplemental reserve requirements

Voltage support Black start electricity restoration

Defer transmission and distribution upgrades

Relieve electricity congestion

Higher power quality and reliability

Retail electric energy time shift

Enhance Customer Experience

FERC REGULATED

END USE

Optimize Power System

22

Storage Growth

Projected Deployment of Energy Storage Through 2021

Source: GTM/Market Storage Monitor, Q4 2016

The amount of deployed storage is projected to grow 687 percent over the next five years.

Presenter

Presentation Notes

Energy storage is already here. Most of you are building it or thinking about it because of all the ways in which it can help your operations (from integration of renewables, to resiliency improvements). Electric companies have a tremendous opportunity to build storage Threats do exist however and barriers as well.

23

Regulatory and Legislative Energy Storage Activity

Legislative Activity

Regulatory Activity

Legislative & Regulatory Activity

Source: EEI, Energy Supply Department, as of February 2017

Presenter

Presentation Notes

Policy activity is accelerating at federal level with FERC (NOPR,…) – wholesale market rules, interconnection - Also states are being very active. Many states have some type of legislative or regulatory activity. Activity is mostly around: Treatment of storage (ownership, quantification…) Treatment of storage IRPs and “valuation” Targets Grid mod related activities… Opportunities for member companies to engage and educate early. We have a good story. Tell it now.

24

EVs: Leading the Charge

Growing Role for Electric Companies

$250 million in customer projects/programs underway to deploy charging infrastructure and accelerate electric transportation

$1.5 billion new projects/programs proposed

Leading by Example

Fleet Electrification Committed $128 million in 2016 and increased number of PEVs in their fleets by 18%

Employee Engagement Encouraging workforce to lead adoption and set example in their communities

25

Charging Infrastructure Evolving

SOURCE: CharIN

12

20

27

40

80

350

200

150

100

50

Pow

er (k

W)

Charging time to add 250 miles (minutes)

SOURCE: EVgo

350 kW-capable DCFC deployed in Fremont, CA

Increasing power, decreasing charge time

26

Micro Grids Are Evolving and Utility Partnerships Are Emerging

Source Data: GTM Research

27

28

Rate & Regulatory Reform

29

Questions?

Documents

Electric Industry Update · Projections (9/2015) Projections (8/2016) Notes: Total company spending of U.S. Investor-Owned Electric Companies, consolidated at the parent or appropriate