MARKET RATES UPDATEINTRODUCTION BY:

Paula Gold-WilliamsPresident & Chief Executive Officer (CEO)

PRESENTED BY:Cory Kuchinsky

Interim Vice President, Financial Services

September 24, 2018

In fo rmat iona l Update

AGENDA

2

• OVERVIEW OF MARKET INTELLIGENCE PROGRAM

• DRIVERS & RECENT TRENDS

• RESIDENTIAL USAGE LEVELS

• TEXAS CITIES COMPARISON

3

MARKET INTELLIGENCE PROGRAM CPS ENERGY COMPARES OUR RATES TO THOSE OF OTHER UTILITIES ON A MONTHLY BASIS

CPS Energy ensures value for our community by comparing rates to other prominent utilities

• Electric & gas utilities

• Texas cities comparison

• Top 20 cities in the country

• Publicly available information

‒ Utility websites

‒ Other industry recognized sources (e.g., PowertoChoose.org)

4

TRACKING THE DEREGULATED MARKETTHE PUCT OWNS & OPERATES POWERTOCHOOSE.ORG AS A COMPARISON RESOURCE FOR DEREGULATED MARKETS

Current tracking method is an industry standard approach

• Historically, we have utilized a report published monthly by the PUC; report was discontinued in April 2018

• Our new approach is more comprehensive & informative– Data captured daily from PowerToChoose.org– Long-term plans offered by retailers w/ comparable customer service

levels– Documented & consistently applied

$0

$50

$100

$150

$200

$250

$300

Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18

$/M

Wh

51 Forward price view from www.snl.com for ERCOT South Zone for the month of August 2018

WHOLESALE MARKET TRENDS

Wholesale market has been influenced by available generation and weather

Forward Price for August 2018 Power by Quote Day

Reserve margins reduced by plant retirements

Weather

Market prices practically doubled in spring of 2018

773 712

829 910

1,274

1,561 1,541 1,429

1,068

833 846

1,251

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18

kWh

Average Usage of CPS Energy Residential Customers By Month1

Use Per Bill Average Consumption

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RESIDENTIAL USAGE PATTERNS

While the annual average usage is approximately 1,000 kWh/month, peaks are experienced during extreme weather swings

1,086 kWh = CPS Energy FYE 2018 Average

1 Average usage data from FYE 2018

Winter Peak

Summer Peak

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CUSTOMER SERVICE LEVELS

Summer peaks are consistently experienced across out entire system

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Cal

l Vo

lum

e an

d R

etai

l Lo

ad

Electric (MWh) - retail Call Volumes Service Levels

Summer Peaks

Call Volumes and Customer Service Levels

TEXAS CITIES COMBINED RESIDENTIAL BILL COMPARISONTRAILING TWELVE MONTHS ENDING AUGUST 2018

$168.62

$167.30

$166.07

$164.25

$154.95

$150.41

Gas Bill Electric Bill

San Antonio

Austin

Dallas¹

El Paso

Houston¹

Corpus Christi¹

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1 Electric bill based on Power To Choose data for 12-month offers with a 4 and 5 Star rating for May-August 2018, all other months based on PUCT report.2 Average monthly residential consumption for FYE 2018

1,000 kWh & 5 MCFCPS Energy avg2 is ~1,086 kWh

TEXAS CITIES COMBINED RESIDENTIAL BILL COMPARISONTRAILING TWELVE MONTHS ENDING AUGUST 2018

$294.39

$288.51

$287.50

$287.18

$275.18

$262.96

Gas Bill Electric Bill

San Antonio

Dallas¹

Houston¹

Corpus Christi¹

El Paso

Austin

9

1 Electric bill based on Power To Choose data for 12-month offers with a 4 and 5 Star rating for May-August 2018, all other months based on PUCT report.

2,000 kWh and 6 MCF

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INTERESTING CUSTOMER USAGE PATTERNS

Smooth

Annual Summer

Peak

Focus

9%

14%17% 15%

12%9%

7%5% 3% 2%

5%

0%

5%

10%

15%

20%

% o

f T

ota

l

kWh

111 Usage data from FYE 2018

RESIDENTIAL ELECTRIC USAGE DISTRIBUTION

% of Residential Bills by Average Monthly Usage Level for FYE 20181

Annually: Less than 10% of our residential customers use more than 2,000 kWh per month

~55% < 1,000 kWh

~10% > 2,000 kWh A

A

121 Usage data from June – September of FYE 2018

RESIDENTIAL ELECTRIC SUMMER USAGE DISTRIBUTION

% of Residential Bills by Average Monthly Usage Level for Summer Months1

Summer Only: 25% of our residential customers use more than 2,000 kWh per month during the summer months

6% 7%

9%11%

12% 12%11%

9%7%

5%

11%

0%2%4%6%8%

10%12%14%

% o

f To

tal

kWh

~25% > 2,000 kWh A

A

Summer Average Monthly Usage = ~1,451 kWh

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SIMPLE SUMMER SAVINGS

Conservation Matters

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CONCLUSIONS

Our benchmarking process is comprehensive, follows a standard industry approach & incorporates timely data from transparent sources.

Our rates continue to remain competitive while delivering great value and service to our customers and community.

Conservation activities continue to be important for our customers and community, especially in summer months

Thank You