NASHVILLE ELECTRIC SERVICE |

Association for Financial Professionals

March 2012

NASHVILLE ELECTRIC SERVICE |

Introduction

• Overview of NES• Compliance/Regulation Summary• Electric Vehicles• Electric Rates• Smart Grid• Funding of Underground Utilities

NASHVILLE ELECTRIC SERVICE |

Overview of NES

NES is the 12th largest public power electric distributor in the United States.

• Approximately 360,000 customers • 1,000 employees• $1.2 Billion in annual revenues• Largest taxpayer in Metro Nashville with in-lieu-

of taxes of $26.3 million last year

NASHVILLE ELECTRIC SERVICE |

Overview of NES

NES’ service territory includes nearly all of Davidson County and

portions of six surrounding counties; it

contains about 700 square miles.

NASHVILLE ELECTRIC SERVICE |

Overview of NES

NES has no generating capacity and purchases its entire supply of power from the Tennessee

Valley Authority (TVA) under long-term contract.

About 80% of all electric revenue received by NES is passed on to TVA for power costs.

NASHVILLE ELECTRIC SERVICE |

Customers % kWh

Sales

% Total Operating

Revenue

Residential Customers 320,000 40.50% 42.30%

Commercial & Industrial Customers 40,000 59.50% 57.70%TOTAL: 360,000 100.00% 100.00%

Service Area Makeup

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Compliance/Regulation

TVA’s Role as Regulator

• Rates

• Use of Revenues

• Cash Reserves

Renewable Portfolio Standards

North American Reliability Corporation

Electric Vehicles

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• NES has been an integral part of the Electronic Vehicle (EV) movement here in Middle Tennessee.

• NES is an original member of the Tennessee Governor’s Zero Emission Vehicle Partnership with Nissan.

• We have partnered with TVA and EPRI to study the impact of plug-in electric vehicles on the electric distribution system.

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Rates

TVA’s New Rate Structure • An effort to reduce peak power demand

throughout the region• Wholesale rate options• After extensive research and a thorough customer

impact analysis, NES selected a rate that provides stability and helps avoid an immediate rate increase

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Rates

TVA’s New Rate Structure - Impacts• Need for higher cash reserves• Confusion for our customers

– Higher rate in summer and winter when fuel costs are higher—June through September and December through March

– Lower rates in transition months—April, May, October, November

• Need for better data and more control

Grant from TVA for Pilot Projects• Advanced Voltage Management

–Voltage reduction results in a reduction in total power–Approx. 700 meters will monitor system voltage

• Direct Load Control–Commercial Rooftop HVAC–Commercial and Residential Water Heaters

• Critical Peak Pricing–Voluntary load reduction/conservation

Smart Grid

• What Do We Hope to Accomplish?– Install 30,000 new meters at key points in the NES

service area

– Reduce a total of 52 megawatts (MW) of peak demand on the NES system

• 40 MW through voltage reduction

• 10 MW using direct load control devices

• 2 MW through critical peak pricing rates  

Smart Grid Project Goals

Benefits to NES•Accurate system information•Improved system reliability and power quality•Dynamically manage system load

Benefits to the Customer•Meter readings done remotely•Better for the environment•Lights coming on sooner after an outage

Benefits of Upgraded Meters

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Smart Meters

Conversion to Smart Meters• Transition toward time of use• Demand response• Automatic detection of problems; enhanced ability to correct

problems• Better prediction of energy usage

Concerns• Privacy, particularly in light of open records• Radio frequency

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Underground Utilities

Current Policy on Underground Utilities•Conversion projects are funded by the requesting party•Allowances for new construction are revenue-based•Conduit and excavation cost is borne by the developer during new construction•Underground services are provided at no additional charge

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Underground Utilities

Converting System to Underground•Disregarding lighting costs, customer wiring and other utilities, NES estimates the cost to be $7,000+ per residential customer•Based on an estimated 320,000 residential customers, the total cost would be $2.25 billion

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Underground Utilities

New Construction•Distribution conductor – 13 times more expensive•Service conductor – 2 times more expensive•Transformer – 1.4 times more expensive

Music City Center

• A tunnel was built to place high-voltage transmission lines underground downtown.

• In 2011, we completed the relocation of a downtown substation that was required to be moved due to the construction of Nashville’s new Convention Center.

• The new Peabody Substation was constructed with state-of-the-art equipment and is designed to be completely enclosed upon completion of the project.

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Partially Completed Tunnel

Architectural Rendering of Enclosed Peabody Substation

QUESTIONS?

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