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Proposed Amendments to the Massachusetts Electric Utility Restructuring Act of 1997

Proposed Amendments to the Massachusetts Electric Utility Restructuring Act of 1997. January 30, 2004 Massachusetts Restructuring Roundtable Patrick G. Jeffery Vice President, Govt. Affrs. (978) 764-6398 Pjeff@na.centrica.com. British Gas Corporation. 1985. Privatization.

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Proposed Amendments to the Massachusetts Electric Utility Restructuring Act of 1997

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  1. Proposed Amendments to the Massachusetts Electric Utility Restructuring Act of 1997 January 30, 2004 Massachusetts Restructuring Roundtable Patrick G. Jeffery Vice President, Govt. Affrs. (978) 764-6398 Pjeff@na.centrica.com

  2. British Gas Corporation 1985 Privatization British Gas plc 1997 Demerger BG plc + Centrica plc Competition & diversification 1997-2003 Centrica plc Centrica’s Origins Key Facts Today • US$23bn annual turnover • US$13bn market capitalisation • Serves over 20 million households • Sales average 2 products per household • 38,000 employees (of which 2,500 in North America) • Long term credit rating A2/A

  3. E MG business services Centrica’s UK Business Units Gas and electricity production, trading, commodity sourcing, risk management Gas, electricity, home services Roadside assistance, travel services, automobile sales and service, home & motor insurance, financial services Retail telecoms, mobile, broadband B2B energy and services

  4. Centrica’s North American Business Gas customersin Manitoba Business services customersacross Canada Main Offices Oil and gas liquidsproduction in Alberta 1.9 million households taking2.8 million energy and servicesproducts in Ontario 980,000 gas and electricity customersbeing acquired in Alberta Gas customersin Michigan, Ohioand Pennsylvania Gas customersin Georgia 770,000 electricitycustomers in West and South Texas Electricity customers in Houstonand Dallas/Fort Worth

  5. The Central Elements of the Proposal for Massachusetts • This Proposal is designed to improve the quality of delivery service and reliability in Massachusetts, while providing consumer benefits similar to those achieved in Texas and the UK. • Rep. Bosley’s familiarity with the Texas experience is reflected in his proposal, which improves upon the successful Texas model. The main concepts in Rep. Bosley’s proposal have our full support. • Key focus is on the structural separation of Retailing and Wires function. • Two companies in lieu of the current Utility. • Transitional process for Retail Services (no metering change in our current proposal).

  6. Benefits of Texas-Style Restructuring • Customers are saving $. • Customers have choices of providers and products. • Customers are switching to new entrants. • Costs and functions effectively separated. • Other benefits to economy – jobs, taxes. • Marketers face incentives for innovation, efficiency and customer care. • Wires Company focuses on increasing reliability of core delivery services.

  7. Choices available to Consumers in Texas • In five T&D service areas, residential customers have: • Between 6 and 12 choices of REPs, including the affiliated REP. • Upwards of 11 products to choose from, including renewable energy in most areas. • As of September, 2002, approximately 19 REPs in all service territories open to competition serving commercial and industrial customers. [Texas data is from the “Report to the Texas Legislature: Scope of Competition in Electric Markets in Texas” Public Utility Commission of Texas, January, 2003]

  8. Consumer Benefits and Switching in Texas • In Houston, for example, there are 8 REPs with a total of 10 offers other than PTB. • 7 of those offers are less than PTB • Over the last 6 months, offers are from 1% to 23% under PTB (currently 16% max discount) • The three offers not below PTB are green products. • Over 1.1 million customers have switched (to a non-affiliated REP, reported in restructuring Today, January, 2003). [Texas data is from the “Report to the Texas Legislature: Scope of Competition in Electric Markets in Texas” Public Utility Commission of Texas, January, 2003, and www.powertochoose.org/yourchoice ]

  9. Below are some companies who serve residential customers today in Texas • www.powertochoose.org/yourchoice

  10. Other Benefits to Texas Economy • Over 5,000 additional permanent jobs • Nearly $40 million in additional retail sales • Over $200 million in additional personal income • $350 million in additional gross product for state [Texas data is from the “Report to the Texas Legislature: Scope of Competition in Electric Markets in Texas” Public Utility Commission of Texas, January, 2003]

  11. Transition To New Structure • Mass market customers auctioned to RSPs with DTE oversight (Utility Affiliated RSP (“ARSP”) can bid). • Customers receive more choice than status quo as they can “opt out” of Auction under Bosley plan. • Large C&I customers will experience market-based pricing. • Retail Services provided through ARSP through DTE approved tariff. • SOLR service mimics Texas POLR solution.

  12. Utility ARSP Provides Retail Services • Retail Services include billing and customer service. • Retail Services will be tariffed. • DTE to set rates, terms and conditions for Retail Services. • Competitive RSPs must purchase Retail Services through the ARSP’s tariff for one year. • Proposal assures quality of basic retail functions. • Provides Utility a full year to adjust its operations for the new market.

  13. Massachusetts is Poised to Become the Next Leader in Electric Restructuring • The Proposal represents the opportunity for Massachusetts to become a national leader in electric restructuring, by embracing a restructuring plan for residential consumers that provides more customer choices and greater consumer benefits than other Choice programs in the US.

  14. Patrick G. Jeffery Vice President, Govt. Affrs. (978) 764-6398 Pjeff@na.centrica.com

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