Creating The 21 st Century Grid Global Energy

Creating The 21 st Century Grid Global Energy Management Institute Power Conference C. John Wilder Chief Executive Officer June 29, 2006

Today’s Discussion § § 20 th century’s greatest achievement Global electrification challenge 21 st century power needs § § § Digitization of advanced economies Historic lack of investment Economic cost of outages Grid technology advances § § § Evolving technology opportunities Investment requirements TXU technology examples § § Lifestyle improvement Innovative products and services Global electricity Customer benefits of a smart grid 2

Electrification Changed The World In The 20 th Century, But Faces Significant Challenges In The 21 st Century The world’s population is expected to reach 9 billion by 2050; electricity’s global impact must be even greater in the 21 st century to meet the world’s growing energy needs 3

Universal Electrification Could Drive Step Changes In Productivity… Lights out: World population without power 05; Percent (100%=6. 5 billion) Without electricity With electricity 12. 0 12. 2 Cost to EU GDP build 10 TW 05 E Small price to pay: Cost to modernize grid vs. average electric bill 05; $/month per household Avg. bill In demand: Cost required for universal electrification 05; $ trillion 12. 4 U. S. GDP 05 E Productivity pays: Est. annual GDP increase 25 E-50 E; $ trillions Cost to modernize grid Source: EPRI Electricity Technology Roadmap 4

…And Improve Quality Of Life Around The Globe Lower infant mortality… Average infant mortality rate 03; Mortalities per 1000 births …and stronger economic output Average GDP per capita 03; $ person 80% 829% Abundant power supply drives better health care and stronger economies Source: EIA, CIA Factbook 5

Today’s Discussion § § 20 th century’s greatest achievement Global electrification challenge 21 st century power needs § § § Digitization of advanced economies Historic lack of investment Economic cost of outages Grid technology advances § § § Evolving technology opportunities Investment requirements TXU technology examples § § Lifestyle improvement Innovative products and services Global electricity Customer benefits of a smart grid 6

The Emerging Digital Economy Is Testing The Limits Of The Current System… Growing demand: U. S. Electricity consumption 40 -03; % of total energy use 300% Stressed system: Congestion Need for technology: “Digital loading relief requests 97 - quality” electrical load 8003; Number 20; Percent 1, 500% 1, 600 400% 50 40 70 03 97 03 80 00 20 E Without greater investment, the existing U. S. system will not reliably support the increasing demand for energy 7

…Compounded By A Historical Lack Of Investment In R&D And Infrastructure… U. S. investment in energy R&D 90 -00; $ billions Private sector R&D investment 95; % of net sales 50% Medi- Comm. Svcs. Trans. Chem- Energy cine equip. icals U. S. federal R&D support for energy is only about 4% of total federal energy R&D outlays Source: EPRI 8

…Causing Outages That Cost Customers Billions Annually U. S. economic cost of outages $ billions/year § Today, outage costs represent 1% of GDP § This loss represents a cost of $0. 50 for every $1 spent on electricity § Technology investments could reduce outage costs by 50 -80% § If no investment is made to transform the grid system, the annual cost of outages could reach $300 billion Source: EPRI 9

Today’s Discussion § § 20 th century’s greatest achievement Global electrification challenge 21 st century power needs § § § Digitization of advanced economies Historic lack of investment Economic cost of outages Grid technology advances § § § Evolving technology opportunities Investment requirements TXU technology examples § § Lifestyle improvement Innovative products and services Global electricity Customer benefits of a smart grid 10

A Slate Of Breakthrough Technologies Are On The Horizon… Stage 3: Potential future technology Stage 2: Near-term technology Stage 1: Current technology § Automated switching § Smart appliances § Digital fault analysis § Power quality monitoring services § Broadband over Power Line § Customized power service packages § Advanced load management with smart appliances § AC/DC microgrids § Advanced distributed energy solutions TXU Electric Delivery is investing in today’s leading-edge technology, but more will be required as new “game changers” become commercially available 11

…Requiring Significant Investment To Realize The Full Benefits Transmission investment needs 05 -25 E; $ billions Load growth Correcting deficiencies Transformed delivery system Distribution investment needs 05 -25 E; $ billions Load growth Correcting deficiencies Transformed delivery system To achieve this grid transformation, annual transmission and distribution investment would have to increase by 65% and the 20 -year total is over $850 billion 12

“Self-Healing” Technologies Will Change The Way We Manage And Respond To Outages… ld O ay W 2 1 Tree limb falls on line causing a feeder outage Customer calls outage in and Operations Center receives notification 3 Dispatcher notifies field technician who inspects entire feeder for outage source; average restoration time of 40 mins. New Wa y 2 Automated switches reconfigure system to restore service to majority of customers within 1 min. 3 Disruption location pinpointed and service restored to remaining customers within 24 mins. Where deployed, automation technology enhances customer service by eliminating sustained interruptions for 2/3 of the customers and reducing restoration time up to 40% for the remaining 1/3 of the customers 13

…And Digital Fault Analysis Could Prevent Disruptions… § A tree limb was hanging § § Source: TAMU/EPRI study over a line, causing 17 poletop recloser operations over 23 hours There were no substation breaker trips, so Operations did not recognize a problem The tree limb burned down the line, locking out the recloser and interrupting 140 customers for 62 mins. 14

…Resulting In Industry-Leading Reliability Performance U. S. electric delivery company performance 05; SAIDI 1 Top quartile cost TXU ED’s target Top quartile SAIDI TXU Distribution O&M and capital cost ($/customer) TXU Electric Delivery has achieved top quartile cost and reliability 1 Excluding major events and planned outages 15

TXU Is Redefining Utility Service Enabled By BPL 16

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Today’s Discussion § § 20 th century’s greatest achievement Global electrification challenge 21 st century power needs § § § Digitization of advanced economies Historic lack of investment Economic cost of outages Grid technology advances § § § Evolving technology opportunities Investment requirements TXU technology examples § § Lifestyle improvement Innovative products and services Global electricity Customer benefits of a smart grid 18

Advanced Grid Technologies Are Enhancing The Quality Of Life In The Communities We Serve… Lifestyle Area 1 Basic needs 2 Comfort 3 Security 4 Productivity 5 Conservation/ Environment Benefits of Electricity § Lighting § Medicine storage § Food preparation and preservation § Heating/Hot water § Air conditioning § Well maintained electric infrastructure § Video surveillance § Enabling digital devices, e. g. PCs § Enhanced reliability § Power quality § Remote monitoring and meter reading § Smart home applications 19

…And Unleashing The Potential For Innovative New Products And Services For Customers Yesterday Tomorrow (06+) On-site load mgmt PTB Discount Bundled svcs. (data, video) Simple Savings One regulated price Rewards+ Indexed Energy efficiency Term savings Savings Power quality mgmt Surge Protection Renewable Freedom Plan Time of use Market Tracker+ 99 00 01 02 03 04 05 06 Smart homes 07 08 09 10 Future products will give customers greater choice and control over their energy consumption and costs 20

Advancements And Investments In Technology Can Provide The Solution To The World’s Energy Needs § The world is facing bigger energy challenges than ever before – Digital economy – World population will increase more than 33% by 2050 – 25% of the world has little or no access to power (and growing) § Investments in technology and infrastructure can provide universal electrification – In the U. S. alone, GDP could increase by $3 trillion – In the world, GDP could increase by $11 trillion § Technology advances will drive benefits for society – Better reliability and power quality – Innovative products and services allowing customer choice and control over energy usage – Improved safety and security of the system 21

Creating The 21 st Century Grid Global Energy Management Institute Power Conference C. John Wilder Chief Executive Officer June 29, 2006