Barclays Capital
CEO Energy-Power Conference
NEW YORK • SEPTEMBER 15 - 16, 2010
1
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, as amended, and are subject to the safe harbor created by the Private Securities Litigation
Reform Act of 1995. These statements include declarations regarding Pepco Holdings’ intents, beliefs and 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 PHI’s 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. The forward-looking statements contained herein are qualified in their entirety by reference to the
following important factors, which are difficult to predict, contain uncertainties, are beyond Pepco Holdings’ control and may cause
actual results to differ materially from those contained in forward-looking statements: prevailing governmental policies and
regulatory actions affecting the energy industry, including allowed rates of return, industry and rate structure, acquisition and
disposal of assets and facilities, operation and construction of transmission and distribution facilities, and the recovery of
purchased power expenses; changes in and compliance with environmental and safety laws and policies; weather conditions;
population growth rates and demographic patterns; general economic conditions, including potential negative impacts resulting
from an economic downturn; changes in tax rates or policies or in rates of inflation; 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; rules and regulations imposed by Federal and/or state regulatory commissions, PJM, the
North American Electric Reliability Corporation and other applicable electric reliability organizations; legal and administrative
proceedings (whether civil or criminal) and settlements that influence PHI’s business and profitability; pace of entry into new
markets; volatility in customer demand for electricity and natural gas; interest rate fluctuations and credit and capital market
conditions; and effects of geopolitical events, including the threat of domestic terrorism. Any forward-looking statements speak
only as to the date of this presentation and Pepco Holdings undertakes no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for Pepco Holdings to predict all such factors, nor can Pepco
Holdings assess the impact of any such factor on Pepco Holdings’ business or the extent to which any factor, or combination of
factors, may cause results to differ materially from those contained in any forward-looking statement. The foregoing review of
factors should not be construed as exhaustive. Readers are referred to the most recent reports filed with the Securities and
Exchange Commission.
the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by the Private Securities Litigation
Reform Act of 1995. These statements include declarations regarding Pepco Holdings’ intents, beliefs and 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 PHI’s 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. The forward-looking statements contained herein are qualified in their entirety by reference to the
following important factors, which are difficult to predict, contain uncertainties, are beyond Pepco Holdings’ control and may cause
actual results to differ materially from those contained in forward-looking statements: prevailing governmental policies and
regulatory actions affecting the energy industry, including allowed rates of return, industry and rate structure, acquisition and
disposal of assets and facilities, operation and construction of transmission and distribution facilities, and the recovery of
purchased power expenses; changes in and compliance with environmental and safety laws and policies; weather conditions;
population growth rates and demographic patterns; general economic conditions, including potential negative impacts resulting
from an economic downturn; changes in tax rates or policies or in rates of inflation; 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; rules and regulations imposed by Federal and/or state regulatory commissions, PJM, the
North American Electric Reliability Corporation and other applicable electric reliability organizations; legal and administrative
proceedings (whether civil or criminal) and settlements that influence PHI’s business and profitability; pace of entry into new
markets; volatility in customer demand for electricity and natural gas; interest rate fluctuations and credit and capital market
conditions; and effects of geopolitical events, including the threat of domestic terrorism. Any forward-looking statements speak
only as to the date of this presentation and Pepco Holdings undertakes no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for Pepco Holdings to predict all such factors, nor can Pepco
Holdings assess the impact of any such factor on Pepco Holdings’ business or the extent to which any factor, or combination of
factors, may cause results to differ materially from those contained in any forward-looking statement. The foregoing review of
factors should not be construed as exhaustive. Readers are referred to the most recent reports filed with the Securities and
Exchange Commission.
Safe Harbor Statement
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Forecast Business Mix Based on
2011-2014 Projected Operating Income
Note: See Safe Harbor Statement at the beginning of today’s presentation.
PHI’s Strategic Repositioning
• We have been repositioning
PHI over the last year
PHI over the last year
– Wind-down of retail energy
supply business at Pepco
Energy Services
supply business at Pepco
Energy Services
– Completed sale of Conectiv
Energy’s wholesale power
generation business
Energy’s wholesale power
generation business
– Liquidation of Conectiv
Energy’s remaining contracts
and assets
Energy’s remaining contracts
and assets
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• Invest in T&D infrastructure
• Implement Blueprint for the Future - AMI, energy efficiency,
demand response, decoupling
demand response, decoupling
• Achieve constructive regulatory outcomes
• Increase operational excellence
Power Delivery
• Increase earnings contribution from energy services
Pepco Energy Services
Note: See Safe Harbor Statement at the beginning of today’s presentation.
PHI’s Strategic Focus
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Our plan positions us for significant long-term growth in both
transmission and distribution.
Note: See Safe Harbor Statement at the beginning of today’s presentation.
Power Delivery Business Outlook
• Over $5.4 billion in planned infrastructure investment over next 5 years
• Accelerated smart grid deployment backed by $168 million in stimulus
grants
grants
• Revenue growth through continued modest, long-term growth in the
number of customers - comparatively strong, resilient economy
number of customers - comparatively strong, resilient economy
• Achieving constructive regulatory outcomes - ongoing rate cases,
decoupling, FERC formula and incentive rates
decoupling, FERC formula and incentive rates
• Continued improvement in operating performance - safety, customer
satisfaction, reliability, cost
satisfaction, reliability, cost
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Power Delivery - The Driver of Growth
Total Rate Base
Growth - 80%
Growth - 80%
Electric Distribution Rate
Base Growth - 49%
Base Growth - 49%
Transmission Rate
Base Growth - 185%
Base Growth - 185%
$4,765
$8,563
$5,357
$6,123
$3,425
$3,749
$4,087
$4,417
$4,725
$5,115
$218
$226
$237
$243
$249
$252
$1,122
$1,382
$1,799
$2,390
$2,884
$3,196
Note: See Safe Harbor Statement at the beginning of today’s presentation.
6
MAPP - Project Update
Total Projected Construction cost: $1.2 billion
Current In-Service Date: June 2015
Note: See Safe Harbor Statement at the beginning of today’s presentation.
• Construction activities to begin upon receipt of
permits
permits
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Projected Construction Costs: $334 million
(1)
(1)
Other Expenditures: $241 million (2)
(1) Net of DOE Reimbursement
(2) Demand response and energy efficiency program costs are recorded as deferred regulatory assets
Combines smart grid technology with energy efficiency
programs to help customers control their energy use and
cost, while providing earnings potential for the Company
programs to help customers control their energy use and
cost, while providing earnings potential for the Company
Note: See Safe Harbor Statement at the beginning of today’s presentation.
Blueprint for the Future
• Advanced Metering Infrastructure
– Meter installation underway in DE (165,000 meters
installed through August 2010), regulatory asset
approved
installed through August 2010), regulatory asset
approved
– Meter installation to begin in DC in 4Q2010, regulatory
asset approved
asset approved
– Meter deployment approved in MD for Pepco (subject
to implementation of customer education/
communication plan), regulatory asset approved
to implementation of customer education/
communication plan), regulatory asset approved
• Energy efficiency and demand response programs
– Demand response programs approved in MD and NJ,
recovery through a surcharge; proposal pending in DC
recovery through a surcharge; proposal pending in DC
– Energy efficiency approved in MD and DC, recovery
through a surcharge
through a surcharge
• Revenue decoupling
– Implemented in MD and DC; 66% of total distribution
revenue is decoupled
revenue is decoupled
– To be implemented in DE following resolution of electric
distribution base rate case (early 4Q2010)
distribution base rate case (early 4Q2010)
• Innovative rate structures
– Dynamic pricing proposals pending in DC and DE
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* Final briefed position
Distribution Rate Cases -
Most Recent Decisions
Most Recent Decisions
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(1) Date of company’s reply brief.
(2) On 6/23/10, the Commission issued an order granting in part Pepco’s application for reconsideration.
The impact of the decision is an additional $1.0 million of allowed rate base and an additional increase in
revenues of approximately $0.5 million annually effective 7/21/10.
The impact of the decision is an additional $1.0 million of allowed rate base and an additional increase in
revenues of approximately $0.5 million annually effective 7/21/10.
Distribution Rate Cases -
Most Recent Decisions (continued)
Most Recent Decisions (continued)
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(1) As permitted by law, an interim rate increase of $2.5 million was put into effect on 11/17/09 and the remaining
amount of the requested rate increase was put into effect on 4/19/10, subject to refund.
amount of the requested rate increase was put into effect on 4/19/10, subject to refund.
(2) ROE with Modified Fixed Variable Rate Design (MFVRD) as addressed in Docket No. 09-277T, or 11.25% if the
Commission does not approve MFVRD.
Commission does not approve MFVRD.
(3) If the Commission does not approve MFVRD, the revenue requirement will increase by $0.5 million.
(4) As permitted by law, an interim rate increase of $2.5 million was put into effect on 8/31/10, subject to refund.
Note: See Safe Harbor Statement at the beginning of today’s presentation.
Distribution Rate Cases -
Current Filed Positions
Current Filed Positions
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PES Overview
• PES provides retail energy services to large
customers
customers
– Government
– Commercial and Industrial
– Institutional
• Energy Services
– PES develops, installs, operates, and maintains
energy efficiency, renewable energy, and
combined heat and power projects
energy efficiency, renewable energy, and
combined heat and power projects
• Energy Supply
– PES is in the process of winding down the
Retail Energy Supply business
Retail Energy Supply business
– PES also owns two peaking power plants that
will be retired in 2012
will be retired in 2012
PES has shifted its strategic focus from
Energy Supply to Energy Services
Energy Supply to Energy Services
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Wind-down of Retail Electric and
Natural Gas Supply and Power Plants
Natural Gas Supply and Power Plants
• PES is on track in winding down this
business and the retail supply contracts
completely roll off by 2014
business and the retail supply contracts
completely roll off by 2014
• Power Plants are scheduled for
retirement in May 2012
retirement in May 2012
• Gross margin expectations for the
contract backlog:
contract backlog:
– Electric: ~$6.00/MWh
– Natural Gas: ~$0.35/Dth
Note: See Safe Harbor Statement at the beginning of today’s presentation.
2010
2011
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Energy Services Overview
• Energy Efficiency
– PES is a leading developer of energy
efficiency projects
efficiency projects
– Since 1995, completed $850 million of
energy efficiency projects
energy efficiency projects
• Combined Heat and Power/ Thermal (CHP)
– PES develops, operates, and maintains
central heating and cooling plants
central heating and cooling plants
• 70,000 tons of cooling
• 950 MMBtu/hour of heating
• 23 MW of CHP
• Renewable Energy
– PES owns and operates 12 MW of
renewable energy facilities
renewable energy facilities
• Landfill gas to energy
• Solar energy
• Construction Companies
– Primarily underground high voltage
transmission construction for utilities
transmission construction for utilities
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Growing Energy Services
• PES is focused on government customers
– Federal, State, and Local governments
– Typical sales cycle averages 24 months, sometimes longer for the
Federal government
Federal government
– Talent added now will create sustainable value over the longer term
Our sales team has doubled since 2008
2008 North American Market Share
Energy Performance Contracting
Source: Frost and Sullivan
• PES has an established track record and was
ranked #10 in a 2008 survey with a
3% market share of the energy performance
contracting market
ranked #10 in a 2008 survey with a
3% market share of the energy performance
contracting market
– PES approximates its market share in the Mid-
Atlantic region in the range of 25% to 30%
Atlantic region in the range of 25% to 30%
– PES has an experienced, commercially-
oriented team
oriented team
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Recently Signed Energy Efficiency Contract
• PES signs $35 million energy efficiency
contract with Prince George’s County Public
Schools
contract with Prince George’s County Public
Schools
• Services
– New energy infrastructure (heating/cooling)
– Lighting/building improvements
– Energy controls/renewable energy systems
– 103 county school system facilities
• Project
– Construction began Mid-August; estimated
completion December 2011
completion December 2011
– Fourth contract award to PES by the school
system
system
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Note: See Safe Harbor Statement at the beginning of today’s presentation.
Conectiv Energy -
Asset Sale Completion
Asset Sale Completion
• Sale of wholesale power generation business completed on July 1, 2010
• Proceeds of $1.63 billion (after adjustments) used to pay down PHI debt
• Liquidation of Conectiv Energy’s contracts and remaining assets
underway; expected completion by year-end 2010
underway; expected completion by year-end 2010
• Total after-tax proceeds from the sale of the wholesale power generation
business and the liquidation of the contracts and remaining assets
currently expected to be approximately $1.7 billion
business and the liquidation of the contracts and remaining assets
currently expected to be approximately $1.7 billion
• Total after-tax loss from the sale of the wholesale power generation
business and the liquidation of the contracts and remaining assets
currently expected to be approximately $75 million to $100 million
business and the liquidation of the contracts and remaining assets
currently expected to be approximately $75 million to $100 million
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• Applied proceeds from Conectiv Energy sale to debt reduction
– Paid off $450 million bridge financing put in place to fund
• $200 million of 4% Notes due May 2010
• $250 million of Floating Rate Notes due June 2010
– Tendered/called $944 million of long-term debt
• $750 million of 6.45% Notes due 2012 ($835 million purchase price)
• $129 million of 6.125% Notes due 2017 ($145 million purchase price)
• $65 million of 7.45% Notes due 2032 ($78 million purchase price)
– Remaining proceeds used to pay down short-term debt
– Charges for debt extinguishment costs and rate lock losses totaling
approximately $79 million, after-tax, will be recorded in 3Q2010
approximately $79 million, after-tax, will be recorded in 3Q2010
Note: See Safe Harbor Statement at the beginning of today’s presentation.
Conectiv Energy -
Use of Asset Sale Proceeds
Use of Asset Sale Proceeds
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We are positioned to provide an attractive total return
to our shareholders and growth for the future
to our shareholders and growth for the future
Note: See Safe Harbor Statement at the beginning of today’s presentation.
POM Investment Case
• Robust T&D growth - over $5 billion planned investment, 42% in transmission
• Smart grid underway - aided by $168 million in stimulus funds
• Reasonable regulatory outlook - including FERC formula rates
• No equity issuance needs until at least 2012
• Commitment to the current dividend
• Clear value proposition - fundamentally a regulated T&D business
Appendix
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Sales and Customer Growth
While the economic downturn has slowed growth, we expect
continued growth over the long-term across our service territory.
Note: See Safe Harbor Statement at the beginning of today’s presentation.
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Blueprint for the Future Costs
(2) DOE awarded PHI $168 million under the ARRA. $100 million will offset Blueprint construction costs and $30 million will
offset other capital expenditures. $36 million will offset expenses associated with direct load control programs.
offset other capital expenditures. $36 million will offset expenses associated with direct load control programs.
(3) Demand response and energy efficiency program costs are recorded as deferred regulatory assets.
Note: See Safe Harbor Statement at the beginning of today’s presentation.
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$754
$1,100
$1,229
$1,232
$1,198
Construction Expenditures*
* Shown net of DOE Capital Reimbursement Awards, excludes Conectiv Energy
Total projected capital expenditures are $5.5 billion over 5 years
Note: See Safe Harbor Statement at the beginning of today’s presentation.