2012 Summer Reliability

Presentation May 29, 2012

2

Presentation team

• Ken Zagzebski, President and CEO • Kelly Huntington, SVP, CFO • Joe Bentley, SVP, Customer Operations • Kevin Crawford, SVP, Power Supply

3

Overview

• Putting safety first

• Planning for environmental compliance

• Ensuring resource adequacy

• Preparing for the future

4

Putting safety first

5

IPL’s OSHA recordable rate trending downward, but our target

is zero

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

2007 2008 2009 2010 2011

To

tal

Reco

rdab

le I

nju

ry a

nd

Ill

ness C

ase R

ate

IPL EEI

IPL

EEI

Peers

No

t Y

et

Avail

ab

le

IPL EEI

IPL EEI

IPL EEI

Lower is better

6

Focus on contractor safety

• IPL partners with contractors who put safety first

• At a minimum, must comply with IPL and AES Safety Standards

• Pre-qualification through the Metropolitan Coalition for Construction Safety (MICCS) certification program

7

Planning for environmental

compliance

8

New EPA rules will drive price increases

Risk State of RulemakingExpected

Compliance Date

Key Issues

Utility Mercury and Air Toxic Standards (MATS)

• Final rule issued April 2012 April 1, 2015 • Stringent mercury, PM limits

• Install controls on large units

Cross-State Air Pollution Rule (CSAPR) • CAIR remains in effect until new rule January 1, 2014 • Further NOx and SOx reductions

• Further pressure on small units

Ash • EPA proposed rule: 6/2010 • Final Rule: post-2012 election

December 1, 2017 • Possible hazardous waste designation• Upgrade / close ponds & landfills

Cooling Tower Intake (316b) • Final rule scheduled for July 2012 January 1, 2016 • Reduce impact on fish

• Install cooling towers or upgrade intakes

Greenhouse Gas (GHG) • Cap & Trade • Proposed New Source Performance Standards

TBD • Cap & Trade - indefinite delay• NSPS - proposed for new units only

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Utility MATS has the most significant impact on the industry

• Requirements — New emission limits for mercury, acid gases — Compliance averaging allowed on a per plant basis — Install continuous emission monitors for particulate

matter (PM), hydrochloric gas (HCL), and mercury

• Challenges — Compliance timelines are extremely aggressive — New emission limits

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Utility MATS control equipment

Rule will require most coal plants to upgrade existing controls and/or install additional controls

Control Equipment Purpose Cost / unit

Activated Carbon Injection Mercury Capture $ 3M - $ 5M Dry Sorbent Injection SO3 & Mercury Control $ 6M - $ 10M

Baghouse Retrofit Particulate Matter and Mercury $125M - $175M

Electrostatic Precipitator Replacement

Particulate Matter and Mercury $ 60M - $100M

Continuous Emission Monitoring Systems (CEMS)

Compliance Demonstration $ 6M - $ 10M

Cost/unit values are provided for perspective only and may or may not be indicative of the actual cost. Costs are indicative for a 500 MW unit. It is difficult to establish a standard cost range for retrofitting environmental controls. Actual costs will be dependent on the specific configuration at each site and may fall substantially outside of this range.

11

Utility MATS requires controls on IPL’s base load generation

• Environmental control equipment needs to be installed on our base load units

• Currently finalizing plans based on the final rule

• Petition to be filed this summer

12

Utility MATS will likely force small unit retirements

• Likely retirement of ten generating units by 2016

• Issuing RFP for replacement capacity this summer – Gas price/

availability attractive

$-

$2

$4

$6

$8

$10

$12

$14

$16

Jan-

04

Jul-0

4 Ja

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Jul-0

6 Ja

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Jul-1

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$/M

MB

TU

Natural Gas Price Summary

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Impact of the EPA Utility MATS rule

$0

$20

$40

$60

$80

$100

$120

2011 2012 2013 2014 2015 2016 2017 2018

1,0

00

kW

h r

esi

den

tial cu

sto

mer

bil

l Indiana IOU average

IPL

EPA required environmental controls and resource additions

For Illustrative purposes Only includes impact of Utility MATS and replacement generation

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Ensuring resource adequacy

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IPL is prepared to meet the MISO summer requirements

2982 17 2965 45 2920

111 3037

2500

2600

2700

2800

2900

3000

3100

Projected Peak w/o

2012 Energy Efficiency

(EE)

2012 EE Projected Peak after EE

Demand Response

(DR)

Net Peak for Planning

Reserves for 3.79%

Planning Reserve Margin

IPL Generation

Plus Purchases

Resources Obligation 3031 MW (3.79% PRMUCAP)

IPL

Gene

ratio

n

2887

Purc

hase

s

16

HARDING STREET GEORGETOWN

PETERSBURG

EAGLE VALLEY 1565

883

296

142

Petersburg

Harding Street

Eagle Valley

Georgetown

% of nameplate capacity

2887 UCAP MW

The fleet continues to be primarily coal- fired generation

Coal 73%

Gas 13%

Oil 6%

Wind PPA 8%

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DSM will play an important role in resource adequacy

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2,200,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

MW

H r

ed

uce

d

Cumulative MWH reduced

Incremental MWH reduced

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Preparing for the future

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Helping customers manage their electric bills

• CoolCents®

• Home Energy Inspector

• Renewable Energy Incentive Program

• Refrigerator Recycling Program

IPL has the second-lowest residential bill among the 20 largest cities in the U.S. with investor owned utilities.

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Finding better ways to serve our customers

• Expanded self-service options online

• Online outage reporting

• Daily energy consumption tool coming in Q3

IPL is in the top quartile of Midwest utilities for customer satisfaction according to J.D. Power and Associates surveys.

21

Providing innovative options for customers

• IPL offers renewable incentives

• First IOU in Indiana to offer: – Net metering rate – Feed-in tariff (Rate REP) – Green Power program

• IPL is preparing the way for Electric Vehicle adoption

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Utilizing technology to improve system reliability

• Minimizing the impact of

service interruptions with midpoint reclosers

• Providing fault location information to reduce outage duration

• Reducing outage durations with new distribution relays

IPL is in the top decile for SAIDI in the United States based on the most recent IEEE survey.

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Input

Other OMS

OMS

IVARA

EMPAC

GIS

3rd Party Workforce

Asset History

Capital Review

Committee

Output

Book of Work

Work Prioritization Determine:

• Work prioritization • Resource management • Program replacements • Maintenance Strategy

• RCM Program • Periodic • Break / fix

Inspection Information

Asset Specific

Knowledge

Field and Engineering Input

Product Manufacturers

Simulation Tools

Industry Information

Safety and Reliability

Expectations

Service Level Expectations

Capital Review

Committee

Challenge Process Risk / Cost of

Failure (Non- financial & Financial)

Alternative Solutions

Work Performance Expectations

Non- Financial Information

Asset Management

Team

Managing assets to optimize life cycle performance

PI

Others

Accountability for execution of the work

Criteria

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Planning for a transitioning workforce

• Focusing on more structured knowledge transfer

• Reviewing succession plans

• Attracting new talent – Taking steps to ensure IPL is a

preferred employer – Supporting community

involvement

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The IPL mission

Improving lives by providing safe, reliable and affordable energy solutions in the communities we serve.

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Appendix

Environmental regulatory challenges: 2012 and beyond

Air

Climate

Water

Land & Natural

Resources

Waste & Chemical

Management

Coal Ash

PCBs in Electrical

Equipment

HazMat Transport

Transmission Siting and Permitting

Avian Protection

Endangered Species

Vegetation Management

316(b)

Effluent Guidelines Limitations

Waters of the United States

NPDES Pesticide Permits

NSPS- New & Modified

Sources

NSPS-Existing Sources

BACT Permitting

International Negotiations

Utility MACT

Interstate Transport

(CAIR/CSAPR)

Regional Haze/Visibility

Multiple NAAQS

New Source Review (NSR)

Waterbody- Specific

Standards

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Smart Grid project status

• Funded in part through Smart Grid Investment Grant (SGIG) from DOE

• 3 areas: Metering, Customer Systems, and Distribution Automation

• $48.9 million total project

• $15 million of $20 million grant received as of April 30, 2012

• In month 26 of 36 per the schedule with 75% of the work complete