The Competitive Environment

APPA Management and Leadership Workshop

October 2, 2006

Larry KoshireRochester Public Utilities

Today’s World

•“We Live In Interesting Times”(Old Chinese Proverb)

•Is “Competition” Today’s Model for the Electric Industry?

Where has the Industry Been?

• Energy Policy Act of 1992• FERC Order 888 (non-discriminatory

Access)• FERC Order 2000 (Advocate Creation

of RTO’s)• EPACT 2005 (PURPA revisions,

Reliability)• How do we define “Competition”?

Today’s Electric Market

• Wholesale experiences

• Retail Choice (a few states, Municipals can opt in)

• The re-regulation of the Industry and impacts on “non-regulated” entities such as Coops and Munis

Have You Been Audited Lately?

• Y2K Compliance and DOE oversight• New York and 9/11 impacts on Utilities• TSA/NERC terrorist alerts• Reliability Legislation and EPACT 2005• State Energy legislation and Reliability

Rules• Now “NIMS” !

Impacts of Retail Competition on Munis

• Some States Allowed Retail Choice.• If not choice, new regulations applied

to Municipals.• Minnesota debate included reliability,

REO, and customer rules.• RPU’s customers and established IOU

relationships.• California 2000-2001- Do we prepare

for Choice?

One Utility’s Approach to Electric Competition

• Survey of Utility’s identity.• Media Market domination by IOU’s and

Coops.• IOU’s servicing Retail Customers.• Needed a decision and actions to face

coming retail choice.

Energy mega brands are using service, pricing, and sophisticated advertising and marketing campaigns to change consumer expectations of the utility industry. As a result, consumers are demanding more from their utilities…better service, quality, innovation and price.

The Challenge

Leverage the creativity and strength of a branded utility partnership to communicate the benefits of public power to the community (legislature), and provide partners “best-of-breed” service models, resources and marketing tools to equip utilities for effectively servicing their consumers.

The Solution

Introducing

Enfinity Energy® is an organization that enables public utilities to partner to promote the benefits of public power through locally-owned servant-based utilities, and leverage shared experience and resources.

Our Approach

Enfinity Energy® Partnership

• Touchstone Membership Growth 600 cooperatives. 45 states. Collectively deliver power and energy solutions to more than 22 million customers.

• Touchstone Brand Strength – “highest customer satisfaction score in the electric utility industry” (American Customer Satisfaction Index, 2006 ).

The Model: Touchstone Energy®

Energy cooperatives faced the same challenge years ago and partnered to form the successful Touchstone Energy Cooperatives.

The Model: Touchstone Energy®

Branding and a Municipal Identity…Future Plan?

• Customers Get it…..Fellow Municipals Don’t.

• What do you think?

The Future of Competition In the Electric Industry

• Are politicians done tinkering with the rules?

• Back to the Future the 70’s and 80’s return– New generation and transmission– Requirement for renewables– New technologies and the new wave of

employees– Rate pressure and environmental issues.

Facing the Future Challenge

• Continued emphasis on the customer.

• Organizational culture change.

Recommendations

1. Provide superior customer service.2. Deliver value through power supply

service.3. Focus on distribution performance

and opportunity.4. Put communities first.5. Optimize community infrastructure.

Recommendations (cont.)

6. Lead in environmental stewardship.7. Build consensus through democratic

governance.8. Promote human resource excellence.9. Engage policymakers through

legislative advocacy.10. Invest in your technology future.

Thank You!Questions???