Positioned for Success Today…
Building for Success Tomorrow
Wall Street Access/Berenson & Company
Wall Street Access/Berenson & Company
Transmission/Distribution Seminar
Transmission/Distribution Seminar
Paul Barry, Senior Vice President & CFO
Paul Barry, Senior Vice President & CFO
William Gausman, Vice President, Asset Management
William Gausman, Vice President, Asset Management
January 9, 2008
January 9, 2008
2
Safe Harbor Statement
Some of the statements contained in today’s presentation are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 and are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. These statements include all financial projections and any declarations
regarding management’s intents, beliefs or current expectations. In some cases, you can identify forward-looking
statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology.
Any forward-looking statements are not guarantees of future performance, and actual results could differ
materially from those indicated by the forward-looking statements. Forward-looking statements involve estimates,
assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, levels of
activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by such forward-looking statements. Each forward-looking
statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result of new information, future events or
otherwise.A number of factors could cause actual results or outcomes to differ materially from those indicated by
the forward-looking statements contained in this presentation. These factors include, but are not limited to,
prevailing governmental policies and regulatory actions affecting the energy industry, including with respect to
allowed rates of return, industry and rate structure, acquisition and disposal of assets and facilities, operation and
construction of plant facilities, recovery of purchased power expenses, and present or prospective wholesale and
retail competition; changes in and compliance with environmental and safety laws and policies; weather
conditions; population growth rates and demographic patterns; competition for retail and wholesale customers;
general economic conditions, including potential negative impacts resulting from an economic downturn; growth
in demand, sales and capacity to fulfill demand; changes in tax rates or policies or in rates of inflation; rules and
changes in accounting standards or practices; changes in project costs; unanticipated changes in operating
expenses and capital expenditures; the ability to obtain funding in the capital markets on favorable terms;
restrictions imposed by Federal and/or state regulatory commissions, PJM and other regional transmission
organizations (NY ISO, ISO New England), the North American Electric Reliability Council and other applicable
electric reliability organizations; legal and administrative proceedings (whether civil or criminal) and settlements
that affect our business and profitability; pace of entry into new markets; volatility in market demand and prices
for energy, capacity and fuel; interest rate fluctuations and credit market concerns; and effects of geopolitical
events, including the threat of domestic terrorism. Readers are referred to the most recent reports filed with the
Securities and Exchange Commission.
Section 21E of the Securities Exchange Act of 1934 and are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. These statements include all financial projections and any declarations
regarding management’s intents, beliefs or current expectations. In some cases, you can identify forward-looking
statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology.
Any forward-looking statements are not guarantees of future performance, and actual results could differ
materially from those indicated by the forward-looking statements. Forward-looking statements involve estimates,
assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, levels of
activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by such forward-looking statements. Each forward-looking
statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result of new information, future events or
otherwise.A number of factors could cause actual results or outcomes to differ materially from those indicated by
the forward-looking statements contained in this presentation. These factors include, but are not limited to,
prevailing governmental policies and regulatory actions affecting the energy industry, including with respect to
allowed rates of return, industry and rate structure, acquisition and disposal of assets and facilities, operation and
construction of plant facilities, recovery of purchased power expenses, and present or prospective wholesale and
retail competition; changes in and compliance with environmental and safety laws and policies; weather
conditions; population growth rates and demographic patterns; competition for retail and wholesale customers;
general economic conditions, including potential negative impacts resulting from an economic downturn; growth
in demand, sales and capacity to fulfill demand; changes in tax rates or policies or in rates of inflation; rules and
changes in accounting standards or practices; changes in project costs; unanticipated changes in operating
expenses and capital expenditures; the ability to obtain funding in the capital markets on favorable terms;
restrictions imposed by Federal and/or state regulatory commissions, PJM and other regional transmission
organizations (NY ISO, ISO New England), the North American Electric Reliability Council and other applicable
electric reliability organizations; legal and administrative proceedings (whether civil or criminal) and settlements
that affect our business and profitability; pace of entry into new markets; volatility in market demand and prices
for energy, capacity and fuel; interest rate fluctuations and credit market concerns; and effects of geopolitical
events, including the threat of domestic terrorism. Readers are referred to the most recent reports filed with the
Securities and Exchange Commission.
3
PHI Overview
$8.9B LTM Revenues
$15.1B Total Assets
$5.2B Market Cap
1.8 Million Electric Customers
121,000 Gas Customers
Regulated
Electric
& Gas
Delivery
Business
Competitive
Energy/
Energy/
Other
65% of Operating Income
35% of Operating Income
Financial and customer data as of September 30, 2007. Operating Income percentage calculations are for the twelve months
ended September 30, 2007, net of special items. See appendix for details.
ended September 30, 2007, net of special items. See appendix for details.
PHI Investments
Note:
4
Power Delivery Overview
5
Power Delivery Overview (continued)
Commercial 46%
Diversified Customer Mix*
Residential 35%
Government 10%
Industrial 9%
* Based on 2006 MWh Sales; excludes Virginia operations sold on 1/2/08.
Regulatory Diversity*
District of Columbia
23%
23%
New Jersey 20%
Delaware 17%
Maryland 40%
Combined Service Territory
6
Power Delivery Drivers of Growth
Note: See Safe Harbor Statement at the beginning of today’s presentation.
Higher utility infrastructure investments
● Continued focus on reliability improvements and
replacement of aging T&D equipment
replacement of aging T&D equipment
● Transmission upgrades to support load growth and
generation retirements
generation retirements
● Implementation of MAPP and Blueprint
● Constructive rate case outcomes
● 2007 decisions in Pepco and Delmarva MD electric cases
and Delmarva DE gas case
and Delmarva DE gas case
● FERC order issued Nov. 16 authorizing a 50-basis point
incentive ROE adder in recognition of RTO membership;
applies to pre-2006 assets making the ROE for all
transmission assets 11.3%
incentive ROE adder in recognition of RTO membership;
applies to pre-2006 assets making the ROE for all
transmission assets 11.3%
● Stable service territory with organic growth
7
Significant Rate Base Growth
Note: See Safe Harbor Statement at the beginning of today’s presentation.
* Includes MAPP and Blueprint projects as described on pages 17 and 25.
2007-2012 reflects the budget for 2007 of $581mm and the forecast for 2008-2012 of $4,993mm.
8
Construction Forecast
Note: See Safe Harbor Statement at the beginning of today’s presentation.
Summary - T&D Infrastructure Investment
William Gausman
Vice President, Asset Management
Transmission and Distribution
Review
Review
10
• Infrastructure investments driven by:
• Upgrades due to load growth projected at 1.6% annually
• Changing location of load centers as compared to the
location of new generation sources
location of new generation sources
• Upgrades due to normal replacement for reliability
• Retirement of existing generation in PJM
• Total Miles of Transmission Lines - 3,616
Note: See Safe Harbor Statement at the beginning of today’s presentation.
Transmission Overview
11
· 230 mile, 500kV line originating in northern Virginia, crossing Maryland,
traveling up the Delmarva Peninsula and into southern New Jersey
· Preliminary cost estimate - $1.05 billion; completion by 2013
· ROE authorized in FERC formula rates - 11.3%
Status of the MAPP Project
Note: See Safe Harbor Statement at the beginning of today’s presentation.
Mid-Atlantic Power Pathway (MAPP) Project
· PJM Board approved the
500kV portion of the
project on 10/17/07
500kV portion of the
project on 10/17/07
· PJM evaluating the 230kV
upgrades for local
reliability and in support
of the retirement of
generation at Indian River;
decision expected in 2008
upgrades for local
reliability and in support
of the retirement of
generation at Indian River;
decision expected in 2008
· PHI continues to evaluate
the installation of a Direct
Current (DC) system under
the Bay
the installation of a Direct
Current (DC) system under
the Bay
12
Permitting & Right of Way
Construction
Oct.
2007*
2007*
2008
2009
2010
2011
2012
2013
Possum Pt. to
Calvert Cliffs
Calvert Cliffs
24 Months
48 Months
36 Months
20 Months
24 Months
36 Months
Vienna to
Indian River
Indian River
Indian River
to Salem
to Salem
Calvert
Cliffs to
Vienna
Cliffs to
Vienna
(Chesapeake Bay
Crossing)
Crossing)
54 Months
18 Months
Mid-Atlantic Power Pathway Project - Timeline
Note: See Safe Harbor Statement at the beginning of
today’s presentation.
today’s presentation.
* PJM approval.
13
The ability to complete this project rests with two key elements -
communication of the need for the line and compliance with
environmental regulations
communication of the need for the line and compliance with
environmental regulations
Mid-Atlantic Power Pathway Project - Next Steps
● PHI and PJM are reviewing different technologies for performing
the Chesapeake Bay crossing; PHI expected to have
recommendation to PJM in February 2008
the Chesapeake Bay crossing; PHI expected to have
recommendation to PJM in February 2008
● Environmental studies starting in early 2008
● Certificate of Public Convenience and Necessity (CPCN) is
expected to be applied for with the Maryland PSC in late 2008
into 2009
expected to be applied for with the Maryland PSC in late 2008
into 2009
● Maryland PSC coordinates all studies and approves construction
of the line in Maryland via the issuance of the CPCN
of the line in Maryland via the issuance of the CPCN
● No single agency performs the coordination role in Delaware;
PHI will work with the individual agencies to obtain the necessary
permits and approvals
PHI will work with the individual agencies to obtain the necessary
permits and approvals
14
Mid-Atlantic Power Pathway Project -
Communications Approach
Communications Approach
• Each major segment has its own unique communications
plan and outreach approach
plan and outreach approach
• PHI is informing policy-makers and local leaders at every
step of the project
step of the project
• PHI is holding community information meetings along
each major segment
each major segment
• MAPP Representatives are meeting with community-
based and environmental organizations
based and environmental organizations
• During the next year, PHI will establish Citizens’ Advisory
Committees in several regions along the line
Committees in several regions along the line
• A project Web site (www.powerpathway.com) with up-to-
date information for the public will go live in January 2008
date information for the public will go live in January 2008
15
Environmental Stewardship
The MAPP project will be sensitive to environmental concerns:
• A majority of the project will be built on, or adjacent to, existing rights of
way
way
• The line will include an underwater crossing of the Chesapeake Bay
using the most advanced underwater line placement technology
using the most advanced underwater line placement technology
• MAPP will use environmentally-conscious construction techniques to
minimize its impact
minimize its impact
• Full environmental impact studies will be developed for all sensitive areas
and the public will be encouraged to provide input during this process
and the public will be encouraged to provide input during this process
• PHI regularly assesses the impact of its operations on the environment to
ensure that we are meeting our environmental obligations
ensure that we are meeting our environmental obligations
• Throughout the MAPP project, we will work with local, state and federal
regulatory agencies as well as environmental organizations to address
wildlife, vegetation, aquatic and other environmental concerns
regulatory agencies as well as environmental organizations to address
wildlife, vegetation, aquatic and other environmental concerns
16
CABLE BURIAL TECHNIQUES
MATTING IN WETLANDS
USE OF HELICOPTER SETTING POLES
Environmental Stewardship
17
Mid-Atlantic Power Pathway Project -
Preliminary Cost and Timing
Preliminary Cost and Timing
Note: See Safe Harbor Statement at the beginning of today’s presentation.
(Dollars in Millions)
Recovery of costs is determined by PJM/FERC and will include more
than PHI customers in each jurisdiction.
Excludes proposed 230kV being evaluated by PJM; excludes cost of a possible Direct Current (DC)
underwater bay crossing.
underwater bay crossing.
18
Age of PHI Transmission Lines
0
100
200
300
400
500
600
700
800
900
1,000
0-10
11-20
21-30
31-40
41-50
> 51
Age
Continued Focus on Reliability
Opportunity for significant
transmission investment
transmission investment
• Upgrade aging lines
• Proactive evaluation and
replacement of 500 kV
transformers
replacement of 500 kV
transformers
19
* Includes generation not owned by PHI.
Total Generation within PHI Service Area*
Supporting Generation Retirements
· Within the PHI service area,
88% of the coal generation and
73% of the oil generation is
older than 30 years
88% of the coal generation and
73% of the oil generation is
older than 30 years
· Environmental regulations may
cause some coal and oil
generation to retire because it
is not economical to meet the
new restrictions
cause some coal and oil
generation to retire because it
is not economical to meet the
new restrictions
· Increased transmission, new
generation and energy
efficiency and demand
response initiatives will be
required to replace this
generation
generation and energy
efficiency and demand
response initiatives will be
required to replace this
generation
20
Infrastructure investments driven by:
• Customers - new service connections, meter installations,
highway relocations
highway relocations
• Reliability - facility replacements/upgrades
• Load growth - new and upgraded facilities to support load
growth
growth
PHI Distribution System
Number of Substations | 364 |
Overhead Lines (Miles) | 65,687 |
Underground Feeder Cable (Miles) | 29,580 |
Distribution Overview
21
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
0 - 10
11 - 20
21 - 30
31 - 40
> 40
Age
PHI Distribution Cable Miles by Age
Continued Focus on Reliability
PHI is addressing the need for increased reliability by:
• Increasing the total quantity of underground cable replacement
• Replacement of 12 kV, 25kV and 69kV oil circuit breakers
• Replacement and Conversion of 4kV equipment and lines
• Increased focus on circuits most impacted by storms and outages
22
Energy Efficiency
• Energy Star Appliances
• Efficient Heat Pumps
• Efficient Lighting
Demand Response
•Smart Thermostats
• Innovative Rate Structures
Renewable Energy
•Net Energy Metering
• Green Choice
Blueprint for the Future
• Responsive to customer expectations:
– Managing energy costs
– Enhancing reliability
– Protecting the environment
• Includes significant investment:
– Advanced metering
– Demand side management
applications
– Distribution automation
– Customer information systems
• Programs will provide the tools customers need to move into thefuture:
• Multi-year effort across PHI service territory
• Regulatory support is essential
23
Note: See Safe Harbor Statement at the beginning of today’s presentation.
* PHI territories
AMI - Advanced Metering Infrastructure
CPP - Critical Peak Pricing
Blueprint for the Future -
Estimated Peak Load Reductions*
Estimated Peak Load Reductions*
24
Blueprint for the Future - Status
● In Delaware, an order was issued March 20 opening a proceeding to consider the filing
● Docket No. 07-28
● Workshop meetings held
● AMI Business Case filed Aug. 29
● Data requests/responses submitted Sept./Oct.
● Staff filed interim status report on Nov. 16
● In Maryland, an order was issued on June 8 for a “two track approach”
● Established a Pepco/Delmarva collaborative on near-term DSM initiatives
● Created a state-wide collaborative on advanced metering and DSM initiatives
● Case No. 9111
● Order No. 81618 issued Sept. 19 approving first Blueprint program - Compact
Fluorescent Light Bulbs; surcharge for cost recovery
Fluorescent Light Bulbs; surcharge for cost recovery
● Plans for AMI and DSM programs filed on Oct. 26; AMI Business Case filed Dec. 21
● PSC directed Pepco and Delmarva to file a program for Demand Response Service
by Feb. 15
by Feb. 15
● Maryland distribution rate case orders issued July 19 included the approval of a
decoupling mechanism for Pepco and Delmarva
decoupling mechanism for Pepco and Delmarva
● In the District of Columbia, an order was issued on April 23 opening a proceeding to
consider the filing
consider the filing
● Formal Case No. 1056
● Business Case filed Oct. 1; comments due Nov. 13 with reply comments filed Dec. 13
● In New Jersey, the filing was docketed opening a proceeding to consider the case
● Docket No. EO07110881
● AMI Business Case included in filing
25
Blueprintfor the Future -
Estimated Capital Cost and Timing *
Note: See Safe Harbor Statement at the beginning of today’s presentation.
(Dollars in Millions)
Excludes CIS improvement; excludes additional Blueprint related program costs proposed to be
deferred and recovered via surcharge (i.e. Smart Thermostats)
deferred and recovered via surcharge (i.e. Smart Thermostats)
*
Paul Barry
Senior Vice President & CFO
Summary
27
Summary
• Significant investment planned for the
regulated Power Delivery utility
business over the next several years
regulated Power Delivery utility
business over the next several years
• Solid track record of execution,
including success in siting and building
transmission
including success in siting and building
transmission
• Stable returns encourage investment -
11.3% return on transmission assets
11.3% return on transmission assets
• Constructive distribution rate case
outcomes in MD and DE
outcomes in MD and DE
• Power Delivery focus results in steady
long-term earnings and dividend
growth
long-term earnings and dividend
growth
Note: See Safe Harbor Statement at the beginning of today’s presentation.
Positioned for Success Today…
Building for Success Tomorrow
Wall Street Access/Berenson & Company
Wall Street Access/Berenson & Company
Paul Barry, Senior Vice President & CFO
Paul Barry, Senior Vice President & CFO
William Gausman, Vice President, Asset Management
William Gausman, Vice President, Asset Management
January 9, 2008
January 9, 2008
Appendix
30
Reported Operating Income Reconciled to Operating Income Excluding Special Items
For the twelve months ended September 30, 2007
(Dollars in Millions)
Note: Management believes the Special items are not representative of the Company’s ongoing business operations.
Reconciliation of Operating Income