Association of Electricity Suppliers

Transcription

1 Association of Electricity Suppliers supported by Assessment of Profitability of Smart Electricity Meters Implementation under the Slovak Conditions January 2012 Version 1.1 Copyright Accenture, 2012

2 Strana 2, Verzia 1.1 LIST OF ABBREVIATIONS used in the document Abbreviation Description Abbreviation Description AMM Automatic Meter Management NPV Net present value CAPEX Investment costs OKTE Short term electricity market organiser CRM Customer relationship management OM Point of Consumption DSL Digital subscriber line OC, OPEX Operative costs DC Distribution Company Renewables Renewables EC European Commission PDA Personal Digital Assistant FTE Full Time Employee PLC Power Line Communication GPRS General Packet Radio Service SEPS SEPS Slovenská elektrizačná a prenosová sústava Company operating the Slovak transmission grid SM Smart Meter SME Small and Medium Enterprises KA Key Account SR Slovak Republic LAN Local Area Network RONI Regulatory Office for Network Industries MoE Ministry of Economy of the Slovak Republic HV High Voltage MDM Meter Data Management VHV Very High Voltage LV Low Voltage AES Association of Electricity Suppliers

3 Strana 3, Verzia 1.1 Agenda Objectives of the Study Overview of Market Participants and Classification of Target Group for Implementation of Smart Meters Smart Metering - Communication, Smart Meters, Prices Result of Study Summary of Benefits and Costs Details of Benefits Details of Costs

4 Strana 4, Verzia 1.1 Objectives of the Study The objective of this study is to review factors connected with the implementation of the smart meters (hereinafter referred to as SM) in the Slovak Republic in an independent manner. Objectives of the Study Outputs of the Study To identify benefits connected with the implementation of SM, to describe their basis, to quantify them (where possible) and to divide them into individual groups involved To identify costs connected with the implementation of SM, to describe their basis, to quantify them (where possible) and to divide them into individual groups involved To evaluate profitability of SM implementationfor the Slovak Republic To consider Directive "2009/72/EC", issued by the European Parliament Summary of Electricity Market in the Slovak Republic Explanation of technology for SM infrastructure List of benefits and costs connected with SM implementation Evaluation of profitability of SM implementation from the viewpoint of the entire society, namely all the entities involved Description of recommendations for or preconditions of SM implementation This study has been sponsored by the Association of Electricity Suppliers of the Slovak Republic The study has been prepared in cooperation with Accenture, s.r.o. The study has been prepared to provide input information for the Ministry of Economy of the Slovak Republic needed for the preparation of the study resulted from Directive 2009/72/EC 1 1. The study does not provide a legal interpretation of SR legislation or EU directives.

5 Strana 5, Verzia 1.1 Agenda Objectives of the Study Overview of Market Participants and Classification of Target Group for the Implementation of the Smart Meters Smart Metering - Communication, Smart Meters, Prices Result of the Study Summary of Benefits and Costs Details of Benefits Details of Costs

6 Strana 6, Verzia 1.1 Market participants potentially affected by SM implementation SM implementation may affect all the electricity market participants. State The study for SM implementation takes into account all mentioned groups of participants. Gener ation Transmission and Settlement OZE 1... and others The study assigns individual identified benefits or costs connected with SM implementation to these participants. In detailed description of benefits and costs, the study details a method by which the given benefit or cost will impact the participant. Distribution Sale Local Distributors... and others Benefits and costs, which cannot be quantified with sufficient accuracy, or there are not sufficient input data/information for their quantification, are included in the study and assigned to groups of participants too. The study does not deal with the assessment and elaboration of benefits and costs related to groups of participants out of the Slovak Republic territory. Customers 2 KA SME VHV HV Households LV (households, companies) 1. Renewable energy sources (photovoltaics, wind power plants etc.) 2. Abbreviations of customers are explained hereinafter.

7 Strana 7, Verzia 1.1 Determination of SM implementation target group The study considers potential SM implementation at low voltage electricity consumers the consumption of which is not measured by SM today. By voltage type By customers VHV VHV is not affected by SM implementation, since SM are not used for this voltage type KA KA utilise usually HV and they are not affected by SM implementation, except for cases when KA consumes LV electricity HV HV is not affected by SM implementation, since HV has already SM implemented. SME A major part of SME consumes LV electricity and therefore they are directly affected by SM implementation LV SM implementation relates directly to LV and all the affected customer segments, which represents about 2.3 mil. OM Households SM implementation relates directly to households, since they represent LV consumers The aforementioned group of customers represents the part for which the study quantifies benefits and costs. The target group determined in this manner represents about 2.3 million customers. SM implementation with direct impact (addressed in this study) SM implementation without any impact (not included in this study)

8 Strana 8, Verzia 1.1 Agenda Objectives of the Study Overview of Market Participants and Classification of Target Group for the Implementation of the Smart Meters Smart Metering - Communication, Smart Meters, Prices Result of the Study Summary of benefits and costs Details of Benefits Details of Costs

9 Strana 9, Verzia 1.1 Smart Metering - Communication, Smart Meters, Prices Implementation of the smart metering system requires three groups of costs: Meter, Communication Infrastructure and AMM/MDM. Customer's equipment Smart meter Communication Infrastructure Automatic Meter Management Meter Data Management 2 PLC Concentrator GPRS LAN, DSL AMM MDM PDA GPRS IM is connected to appliances via own grid (household / SME operation). Appliances in household consume electricity. It measures, records and saves records on consumption. It executes AMM commands. It displays recorded information. The infrastructure transmits data from SM to MDM (measured consumption, information about an action to SM etc.) and also from AMM to SM (command for sending the measured consumption, disconnection etc.) - reciprocal communication. The concentrator collects, saves and sends data from several SMs to MDM. Communication between SM and AMM/MDM is realised by GPRS, in places where it is not profitable to use PLC. Otherwise PLC (data transmission by power cables) between SM and concentrator and GPRS/LAN/DSL between the concentrator and AMM/MDM. PDA programmes SM for distribution purposes, for customer. AMM communicates with SM in two ways. It sends commands to SM such as request for sending a reading, disconnection etc. AMM is connected with distribution systems by interfaces; it covers the SM management. MDM collects, saves and processes and provides readings from SM. MDM is connected with distribution systems, systems of sellers and others using information about consumption of its customers by interfaces. 1. There are various technologies for data transmission between IM and AMM/MDM. For the purposes of this study, combination of technologies PLC and GPRS has been selected. This combination of technologies was used in several European countries for the purposes of the study (Italy, Sweden, Netherlands) 2. An implement part of AMM is also web portal, data storage and logics for processing or data evaluation (e.g. for the identification of "non-standard behaviour of the customer")

10 SM functionalities Recommendations issued by the European Commission were considered during the specification of required functionalities. 1 Selected SM must comply with a request for modularity, which will enable to flexibly extent the SM functionality by the insertion of other modules without its complete replacement. Thanks to the modularity, SM can be extended by an additional display. The meter must have sufficient memory capacity for saving readings. Smart Metering - Communication, Smart Meters, Prices Smart meters considered in the study comply with requirements for functionality required by the European Commission and they bring benefits to market participants. Recording of readings often enough Displaying of readings Remote reading Bidirectional communication Multi-tariff system support Remote disconnection/limitation of supply Safe data exchange Prevention and detection of illegal consumptions Ad-hoc readings Benefits resulted from functionalities Detailed information about consumption of the customer based on 1. Source: Set of common functional requirements of the SMART METER (European Commission, October 2011) 2. The benefit is based on informing the customer through several channels such as display on the SM, an ability to extend the SM by a domestic display, more detail information on a bill, information about consumption Limitation available of electricity on a web portal. supply to place of disconnection which: Electricity consumption can be reduced by the customer 1 Electricity distribution can be scheduled in more details Blackouts, illegal consumptions can be evaluated more precisely Invoices can be issued on the basis of more detail consumption without estimations "A tailor-made product" can be offered to the customer Specify more exactly the calculation of power grid deviations Readings can be made remotely; if compared with manual readings made today, it is less expensive and also quicker and more flexible: Readings Disconnections Change of tariff New functionalities, which cannot be utilised today: An ability to use more tariffs than today Strana 10, Verzia 1.1

11 Smart Metering - Communication, Smart Meters, Prices When considering costs of SMs from other countries, the following prices of meters were used in calculation: 70 / single-phase SM; 90 / three-phase SM Country/Manufactu rer Source 1 phase meter 3 phase meter study 73 1 N/A implementation study manufacturer manufacturer manufacturer The study reflected experience from other countries where SMs were implemented or where an analysis for their implementation was prepared. The study considers the ratio of 40:60 - single-phase and three-phase SM 5 Based on the aforementioned prices, the price for calculation was set to 70 /single-phase SM and 90 /three-phase IM 1. Source: Accenture benchmark The price for the device itself, excluding costs on infrastructure, installation, HW7 SW. 2. Source: The price (for IM implementation in Italy) is a final price for one IM, including costs on infrastructure and its equipment, installation, SW (AMM/MDM) & HW. Smart meter is produced by ENEL. 3. Source: Accenture benchmark The price for the device itself, excluding costs on infrastructure, installation, HW7 SW. 4. Source: Research into the costs of smart meters for electricity and gas DSOs. The price for the device itself, excluding costs on infrastructure, installation, HW7 SW 5.. Source: AES Strana 11, Verzia 1.1

13 Methodology of the Study The study for SM implementation was prepared by calculation of a financial business case model quantifying NPV for benefits and costs in 20 years. Key preconditions Calculation inputs 1 Calculation The study calculates NPV for the company as a whole, by placing quantified costs opposite quantified benefits expressed in NPV. Additional benefits and costs which cannot be quantified are mentioned and explained in the study. For each benefit and cost, the study shows participants which are impacted. WACC No. of SM WACC used for NPV calculation 6.04% 2 For quantification of the total No. of SMs, the study assumes that each SM represents a single electricity meter. Maximum number of SMs in case of 100% implementation in the Slovak Republic, the study assumes about 2.38 mil. 3 Projection The study calculates each cost and benefit for the period of next 20 years, separately for every year. Share of SM Share of GPRS SM in total number - 5 % and of PLC - 95 %. Share of 1-phase SM in total number - 40 % and of 3-phase - 60%. Electricity consumption Price of electricity Because of simplification, the calculation considers unchanged electricity consumption in the Slovak Republic during the designed time Because of simplification, the calculation considers unchanged electricity consumption in the Slovak Republic during the designed time Price of electricity Optimisation of electricity consumption. Electricity price used in calculation: 124 /MWh4 Total LV electricity consumption represents about 7700 GWh/year For detail calculation of benefits and costs, the following sources were used: international benchmarks, publicly accessible documents (SEPS, RONI, MoE SR, distribution companies, etc.), knowledge of the sector and Accenture methodology. 2. Source RONI Regulation 225/ No. of consumption points as at 31 Dec 2010 (source: DSO) 4. Average price for LV 2011, calculated on the basis of the price lists of electricity sellers in Slovakia as an average price of electricity for LV households ( calculated as a weighted mean for respective tariffs valid for households) and average price of electricity for LV for SME ( ). The above mentioned prices include a distribution fee 5. Source: ZDE, data for 2010 Strana 13, Verzia 1.1

14 The study deals with two scenarios of SM implementation The study result is the total benefit of 6.3 mil. increase by other 71.3 mil. (aggressive scenario) (conservative scenario) with real potential of its Input data Conservative scenario Aggressive scenario Comments NPV final +6.3 Mil Mil Mil. No. of implemented SMs1 80% from the total no. of points of consumption will be equipped with SMs Based on Directive 2009/72/EC 99% 1 from the total No. of points of consumption will be equipped with SMs Implementation of higher No. of SMs will increase saving from today's activities and increase an extent of benefits Savings from extent Intensity of SM implementation in time 3 Implementation during 8 years Implementation 15% / year the first 4 years, then 10% SM/year Shortened implementation during 4 years Linear implementation 25% SM/year Quicker implementation of SM will enable to withdraw benefits sooner, and it will reduce costs for doubled operation of systems Lower electricity consumption 5 Lower electricity consumption by 1.5% at the customers with SM Lower electricity consumption by 1.8% at the customers with SM The aggressive scenario moves the estimation of savings to 50% of potential calculated on the basis of a consumption basket 2 Impact of SM on detection of illegal consumptions SM will help to detect 80% of illegal consumptions not detected today 6 SM will help to detect 90% of illegal consumptions not detected today With regard to benchmarks in other countries, the estimation of 80% is conservative with potential of increase by 10% 4 Ratio of No. of SMs per one concentrator 100 SMs per one concentrator 160 SMs per one concentrator Maximum capacity of 1 concentrator is about 1000 meters. 1. Based on experience from implementation in Italy, where 99% SMs were implemented 2. The consumption basket was set based on an average Slovak household and based on this basket a minimum potential for electricity saving by a customer equal to 3.6% of the existing LV consumption was calculated.3. The SM implementation plan is grounded on installation capacities, in conservative scenario the study assumes gradual implementation, which will reduce total benefits. In aggressive scenario, even implementation of SMs during 4 years is assumed; it will maximise benefits from Strana SM installation.4 14, Verzia 1.1

15 Strana 15, Verzia 1.1 Conservative scenario Development of cumulated costs and benefits in time Based on the development of cumulated costs and benefits expressed in NPV, it is assumed that SM implementation will start to be profitable in 2024 in case of aggressive and in 2029 in case of conservative scenario. 400 MIL Aggressive scenario MIL Mil. Development of cumulated costs and benefits 2 Development of cumulated costs and benefits MIL 200 MIL 100 MIL Mil Mil. Náklady 300 MIL 200 MIL 100 MIL Mil. Náklady Prínosy Prínosy 0 MIL Spent costs during the first years of the SM implementation slightly increase since the investment costs for implementation of new and modification of existing systems with gradual replacement of meters with SM are divided to longer time = 8 years 2. Implementation of meters in the Slovak Republic finished in In 2029, the benefits will exceed the costs so the company will start to benefit from the SM implementation 0 MIL Spent costs during the first years of the SM implementation rapidly increase since the investment costs for implementation of new and modification of existing systems with gradual replacement of meters with SM are divided to shorter time = 4 years 2. Implementation of meters in the Slovak Republic finished in In 2024, the benefits will exceed the costs so the company will start to benefit from the SM implementation 1. The aggressive scenario is not defined in details in the study as the study deals only with the conservative scenario. 2 and 3 The above mentioned costs / benefits are defined in the present value, i.e. discounted at NPV

16 Strana 16, Verzia 1.1 Development of costs and benefits for conservative scenario Costs are decreased during first years where the benefits are growing at the same time; stabilisation of costs and benefits will take place after SM implementation in 2021; costs will increase in 2027 due to start SM replacement 40 MIL 30 MIL 20 MIL 10 MIL 0 MIL Overall benefit development Overall benefit grows depending on the sequence of SM implementation till 2021 when initial implementation of IM will be completed and overall annual benefit will reach an absolute value of 26.2 Mil. 2. Starting from 2021, the overall benefit will be the same as in every year but significantly higher comparing to costs. After replacement of SM in 2027, the overall benefits will exceed total costs by approximately 13.7 Mil. every year. 40 MIL 30 MIL 20 MIL 1 Composition and trend of total costs OPEX CAPEX 1. Costs on SM implementation are the highest during the first two years as the result of investments into information systems. The biggest part of CAPEX is composed of investment into new meters. 2. Implementation of meters in the Slovak Republic finished in 2021 Cost of next years are operative costs for operation of smart metering system 3. In 2027, continual renewal on the basis of investment into new SM will start - it will lead to CAPEX 2 costs increase 10 MIL 0 MIL The aforementioned investments are expressed in absolute values not re-calculated by NPV 2. Renewal cycle counts with an interval of 16 years (Regulation No. 210/2000 Coll. of the Slovak Office of Standards, Metrology, and Testing on Measurement Gauges and Metrological Check). SM replacement is scheduled to start earlier so the process could run evenly in the following years as a continual activity (as it is toady) and costs could be minimised. 3 and 4 The above mentioned costs/benefits are specifies as an absolute value, i.e. not discounted on NPV.

17 Strana 17, Verzia 1.1 Agenda Objectives of the Study Overview of Market Participants and Classification of Target Group for the Implementation of the Smart Meters Smart Metering - Communication, Smart Meters, Prices Result of the Study Summary of benefits and costs Details of Benefits Details of Costs

18 Benefits resulting from the SM implementation in Slovakia 1/2 SM implementation concerns benefits divided into four groups: Benefits from a lower consumption; Benefits from more effective utilisation of grid; Benefits from activities automation; Other benefits Category of benefit Name of benefit Description Monetary impact 3 (Mil. ) Lower electricity consumption by customer (P1)1 Reduction of consumption by the rationalisation of electricity use on the basis of more detailed informing of the customer Benefits from a lower consumption Electricity consumption by meters themselves(p2) 1 Comparing to classic ones, SM have lower own consumption 10.6 Better supervision of frauds and thefts (P3) 1 Thanks to the meters, currently uncovered illegal consumptions will become easier and more precisely identifiable and quantifiable Quicker reaction to blackout (P4) 1 Thanks to SM, it is possible to check blackouts continuously in time and to act quicker decreasing the volume 2.8 Benefits from more effective utilisation of the grid Better control of electricity during peak consumption (P5) 2 Savings from power grid optimisation (P6) 2 1. Benefits are described in the documents in more details, specifying impacted customers, reasoning, impacts, key preconditions of calculation. 2. Benefit is described in the document in the summary More effective purchase, allocation and nominations (P7) 2 "Other benefits". 3. Monetary impact represents the summary of 20 years, expressed in NPV. Lower costs for purchase of electricity needed in the time of the biggest power grid utilisation. Savings resulted from the power grid optimisation based on lower deviations in the grid. More effective purchases of electricity by sellers and lower deviations between ordered and consumed energy Strana 18, Verzia 1.1

19 Benefits resulting from the SM implementation in Slovakia 2/2 SM implementation concerns benefits divided into four groups: Benefits from a lower consumption; Benefits from more effective utilisation of the grid; Benefits from activities automation; Other benefits Benefit category Name of benefit Description Monetary impact 3 (Mil. ) Less physical visits because of readings (P8) 1 When SMs are implemented, there is not a need to manually read the meters and record data into the systems Benefits from activities automation Less physical visits due to disconnection and re-connection (P9) 2 Less calls to call centres (P10) 2 Reduction of No. of visits due to disconnection/reconnection of the customer Thanks to better informing of the customer, No. of calls due to misunderstandings of invoices will reduce Less administration (P11) 1 Thanks to SM implementation, administration connected with correction of data in the system and with the followup invoicing will reduce. 2.9 Profits of the new tariff system (P12) 2 Based on detail information about customer, a tailor-made offer can be prepared for the customer. 2.4 Other benefits Less losses due to non-payment (P13) 2 Savings from quicker payments of customer (P14) 2 Reduction of no. of people, who do not pay, thanks to an ability to remotely disconnect them. Improvement of a payment discipline of customers thanks to an ability to immediately remotely disconnect them Savings from replacement of old meters (P15) 1 Existing meters must be calibrated, which will not be necessary for a certain time after the SM implementation Benefits are described in the documents in more details, specifying impacted customers, reasoning, impacts, key preconditions of calculation. 2. Benefit is described in the document in the summary "Other benefits". 3. Monetary impact represents the summary of 20 years, expressed in NPV. Strana 19, Verzia 1.1

20 State Generation Transmissio n Distribution Sale Customers Strana 20, Verzia 1.1 Benefits not quantified in this study SM implementation brings other non-quantified benefits for all market participants which extend already quantified benefits in the study Non-quantified benefits Reducing the need of investment to grid renewal and extension of generation capacities Due to lower ups and downs in the grid, wear will be reduced and thus a need to invest into its renewal Due to lower consumption of electricity, the need to invest into generation capacities will be reduced Increasing support to electricity market liberalisation Space form simplifying and accelerating the process the change of electricity supplier Increasing competition among seller thanks to the use of several tariff systems and customer oriented products Additional information related to supplies and electricity consumption (sellers, local distributors, distribution) Additional information for the customer as a source document for deciding the change of the supplier Details of Benefits Lower CO2 emissions Based on lower electricity consumption at LV by 1.5%, there is lower production of CO2 in Slovakia, by ~90 ths. ton. Another CO2 reduction due to transfer to lower tariff range 1 Higher level of provided services and higher comfort of the customer Less visits at the customer; more quick and flexible connecting and disconnecting; shortening the period for handling with the customer Quicker repairs of blackouts More informed Customer Sharing costs by SM implementation for measuring gas and water consumption Merge SM implementation for electricity and gas and based on a synergy save costs for installation Utilisation of AMM, MDM communication infrastructure for gas distribution Savings by reduction of technical losses Technical losses will be calculated from the exact profile of a consumption diagram Information will enable the grid operator to decrease technical losses 1. Transfer of electricity to lower tariff range will lead to smaller involvement of thermal power plants which produce a lot of CO2

21 Costs 6 connected with SM implementation in Slovakia SM implementation is connected to investment and operative costs in the amount of Mil. in total. The investment costs will be spent during 8 years with the highest volume during the first two years Mil Mil Investment costs 1 1. Investment into facility 2 Smart meters Concentrators Installation ~6.4 Mil. 2. Investment into information systems 3 Interfaces (CRM, Billing, Energy management) AMM / Data centre ~150.1 Mil. ~15.9 Mil. Investment costs 5 4. Communication costs ~10.8 Mil. Between meter and concentrator Between concentrator and AMM/MDM Between meter and AMM/MDM 5. IT operation ~14.9 Mil. Operation IT costs (CRM, Billing, Energy management) 3. Additional investment into information systems ~0.9 Mil. Vendor s investment to data processing due to electricity purchase 4 6. Maintenance Maintenance of meters and concentrators and infrastructure ~26.1 Mil. 1. Investment costs are one-off costs. 2. Investments into installations depend on SM implementation period - 8 years for conservative scenario. 3. The calculation includes investment into information systems during the first two years of SM implementation. 4. Investment is not necessary for smart metering system operation but it enables benefits application. Investment into more effective functioning of the seller at electricity purchase (processing and assessment of data on the customer consumption) 5. Operative costs are continual costs on operation and maintenance. 6. Costs are expressed in NPV for the period of 20 years. Strana 21, Verzia 1.1

22 Strana 22, Verzia 1.1 Agenda Objectives of Study Overview of Market Participants and Classification of Target Group for Implementation of Smart Meters Smart Metering - Communication, Smart Meters, Prices Result of the Study Summary of benefits and costs Details of Benefits Details of Costs

23 State Generation Transmissio n Distribution Sale Customers Reasoning of benefit The customer will reduce his consumption by rationalisation of its use based on the fact that SM will inform him on consumption in details. The consumer will have several options of obtaining information about his consumption: Display informing of current consumption and price (directly on SM or as an alternative SM accessory thanks to its modularity) Invoice including more detailed information (data available for the vendor, information available for the customer in an invoice) Web portal, others (depends on the vendor) P1: Lower electricity consumption of customers (1/2) After implementation of SM LV electricity consumption by the customers will reduce thanks to more detailed information about consumption. The study assumes the consumption reduction by 1.5% at least Mil. 1 Absolute annual benefit after complete implementation of SM Share of benefit in total benefit Mil Year 57% 43% 2 Impacts of benefit Total reduction of low voltage electricity consumption in the Slovak Republic by 1.5% Reduction of power grid load as well as lower requests for electricity generation (not quantified in the benefit) Reduction of costs for construction of new capacities (not quantified in the benefit) Reduction of CO2 emissions (not quantified in the benefit) Potential for further saving of electricity consumption (not quantified in the benefit) Key assumptions of calculation 5 The customer will reduce consumption by 1.5%, -a conservative assumption of calculated 3.6% minimum potential based on a consumption basket of households 4 Total electricity consumption in the Slovak Republic equals to GWh 6 Average household consumption about 2400 kwh Average price of 1 MWh for LV about 124 Eur No. of points of consumption about 2.38 mil., out of which 88.2% of households 1. Contribution expressed by NPV in 20 years 2. Market participants involved impacted by the benefit 3. Share of contribution in total benefit by NPV in 20 years 4. The consumption basket was set based on an average Slovak household and based on this basket a minimum potential for electricity saving by a customer equal to 3.6% of the existing LV consumption was calculated. 5. The calculation covers the following: LV electricity consumption (7703 GWh - source distribution companies), average LV electricity price for households (EUR calculated as weighted average for individual tariffs valid for households), average LV electricity price for SME (EUR ), consumed LV electricity in the Slovak Republic. 6. SEPS, 2010 Strana 23, Verzia 1.1

24 Strana 24, Verzia 1.1 P1: Lower electricity consumption of customers (2/2) Lower electricity consumption will decrease maximum load of the grid and transfer of electricity to lower tariff range will lead to steadier consumption during day Behaviour of the customer Decrease in consumption by approximately 1.5%, what will positively impact load and wear of the grid (not-quantified in benefits) Transfer of certain types of consumption (e.g. washing, ironing) to time zone with lower tariff - what represents additional decrease of peaks in the grid, more balanced electricity supplies and wear in the grid (not-quantified in benefits) More effective use of electricity sources 1 OZE Additional benefits 3 Decrease of the grid load Decrease of the grid wear Rationalisation of electricity consumption by transfer to cheaper tariff ranges Decrease of an average invoiced amount of the customer More effective management of electricity sources utilisation More balanced electricity consumption and at the same time more stabile electricity supplies Decrease in the share of involving balancing electricity sources Electricity generation will be more stabile and cheaper at the same time Development of consumption in SR Electricity sources in Ostatné in Vodné 3500 Tepelné 3000 Jadrové MW GWh Decreasing peaks in electricity consumption will lead to the decrease in involving regulatory electricity sources balancing a shortage of electricity in the grid or sale of surplus energy at the time of surplus of energy in the grid. The use of regulatory electricity sources will be rationalised. This benefit is not quantified in P1. 2. Source: SEPS 3. This benefit is not quantified in P1. 4. Source: SEPS

25 State Generation Transmissio n Distribution Sale Customers Strana 25, Verzia 1.1 P2: Electricity consumption by meters themselves The SM installation results in more exact measurement of electricity consumed by customers and it reduces also consumption of electricity by the meters themselves Mil. Reasoning of benefit Classical meters, if compared with SMs, have markedly higher own consumption and they can measure with higher deviations comparing to SM. By replacement of classical meters, consumption of electricity by the meters themselves will reduce, and another saving will represent saving of consumed electricity costs. The primary benefit is for: Customer Vendors Distribution Absolute annual benefit after complete implementation Share of SM of benefit in 5% total benefit 1.2 Mil Year 95% Impacts of benefit Lower consumption of electricity by the meters themselves - it will reduce costs spent for measurement of electricity consumption 1 More exact measurement of customer's consumption (not quantified in benefit) Higher reliability of SM (not quantified in the benefit) More satisfied customer and higher level of provided services (not quantified in the benefit) Key assumptions of calculation No. of points of consumption about 2.38 mil., out of which 88.2% of households 2 Planned to install about 1.9 mil. smart meters at 80% LV customers Difference in consumption of electricity of old meters and consumption of electricity for SM 3 Average price of 1 MWh for LV about EUR Saved absolute electricity consumption by the meter itself is derived from foreign benchmarks and adjusted as to the Slovak conditions according to average consumption and electricity price 2. Source: MoE SR 3. The basis for calculation are data from countries using SM, adjusted for the Slovak Republic taking into account the volume of consumption.

26 State Generation Transmissio n Distribution Sale Customers P3: Better supervision of frauds and thefts Due to the analysis of detailed data on consumption and prevention functions and illegal consumptions detection, SM implementation will lead to the reduction of illegal consumptions by more than 80% what will save approximately 2.9 mil. annually Mil. Reasoning of benefit Thanks to the meters, currently uncovered illegal consumptions and meters handling will become easier identifiable and quantifiable. Based on benchmarks from foreign countries, SMs contribute to detection of 95% of frauds not revealed today. SMs help to detect frauds: By exact data from points of consumption By better data analysis By more exact calculation of missing energy Energy thefts represent financial losses mainly for distribution companies, which are reflected also in the prices of the sellers and customers. Absolute annual benefit after complete implementation of SM 2.9 Mil Year Share of benefit in total benefit 14% 86% Impacts of benefit Additional profit from illegal consumption detection in the form of fining dead customer Make the commercial loss LV at the whole loss more realistic (notquantified in the benefit) Possibility of more accurate calculation of stolen energy 3 (notquantified in the benefit) Reduction of illegal consumption due to better overview of DSO on actual consumption in the grid, abnormalities, deviations analysis and thus the possibility of precise and quick detection of losses ( not-quantified in the benefit) Key assumptions of calculation Total loss during LV electricity transmission is about ~12.52% 4 Assumed LV electricity loss in the Slovak Republic due to illegal consumptions is ~0.7 % 5 Benchmarks from foreign countries about an ability of SM to reveal illegal consumptions with potential of detection as much as 99% The fine amount is assumed by the distribution company individually 1. Total loss during the LV electricity transmission consists of technical and commercial losses; the technical loss represents about 10% from the total LV electricity transmitted and the commercial loss represents about 2.52% from the total transmitted electricity of LV and the calculation considers the fact that 1/2 of the commercial loss are illegal consumptions. 2. The calculation covers the following: The existing ability to detect illegal consumptions, a SM effect on detection of illegal consumptions (80% - the calculation considers a conservative estimation, based on benchmarks, this figure is about 95%), an average LV electricity price, sufficient income from penalties, prevention of illegal consumptions by installation of SM itself and by informing the public. 3. There is an assumption in the study that SM implementation will help to decrease losses caused by illegal consumption by less than 0.15% of total delivered electricity at LV. 4. Source: Regulatory Office for Network Industries 5. Calculation Strana 26, Verzia 1.1

27 State Generation Transmissio n Distribution Sale Customers Strana 27, Verzia 1.1 P4: Quicker reaction to blackout SMs enable quicker reaction to blackouts and thus to assure shorter repair. Improvement of quality of supply represents a social benefit in particular for the customer. Reasoning of benefit +2.8 Mil. Thanks to SM it is possible to check blackouts by more detailed and more accessible information on customers consumption and thus quicker reactions. Total time of reconnection of points of consumption will shorten, which will bring a benefit to the customer as well as to other parties involved. The benefit is possible in particular thanks to: An ability of operative and quick acquisition of detailed information on blackout thanks to remote communication between IM and AMM 1 Communication with SM will enable remotely determine the area of blackouts and check successfulness at each point of consumption 2 after renewal of supply Absolute annual benefit after complete implementation Share of SM of benefit in total benefit 0.3 Mil Year 1% 99% Impacts of benefit An ability to quicker detect blackout Shortening the failures of electricity due to timely correction of failures or timely renewal of electricity supplies to final customers Decrease of costs for failures detection and localisation within the works on supply renewal Reduction of loss from non-supplied electricity during blackouts Reduction of economic loss evoked by the blackout in affected area ( not-quantified in the benefit) Key assumptions of calculation No. of points of consumption about 2.38 mil., out of which 88.2% of households Planned to install about 1.9 mil. smart meters at 80% customers Average price of 1 MWh for LV about EUR 124 Average period of one blackout 3.3 min 3 1. Thanks to SM also small blackouts may be quickly localised and based on it problem can be removed more quickly and effectively 2.. SM helps to quick localisation and precise specification of blackout point as well as to check whether supply at all points of consumption was fully renewed. Communication with SM will accelerate period of blackout repairs and thus savings at FTE 3. Source: Regulatory Office for Network Industries

28 State Generation Transmissio n Distribution Sale Customers Strana 28, Verzia 1.1 P8: Less physical visits because of readings After SM implementation, manual readings of meters will not be required, which will lead to reduction of FTE of meters as well as of clerks and it will make the process more effective Mil. Reasoning of benefit Thanks to an ability to automatically remotely read meters after the SM implementation, a necessity to read the meters manually and to record data into the systems of distribution companies will cease to exist. This benefit represents the primary FTE saving: Saving of FTE of persons making readings 1 Saving of FTE of clerks 2 Absolute annual benefit after complete implementation of SM 4.5 Mil Year Share of benefit in total benefit 83% 17% Impacts of benefit Saving of costs for physical reading and administration connected with reading, including employees, equipment, etc. More accurate reading with a minimised possibility of human factor error 3 Reduction of customer claims connected with reading and readings communicated by the customer Bigger comfort of the customer, without the necessity of cooperation of the customer at reading (not quantified in the benefit) Making the entire administration connected with reading and invoicing more effective (not quantified in the benefit) Key assumptions of calculation No. of points of consumption about ~2.38 mil., out of which 88.2% of households Frequency of readings of old meters performed at DSO once a year for every point of supply The benefit covers also the following activities: visit of the place of consumption for reading reading itself insertion of reading data to systems 1. Saving of persons making reading is 169 FTE. 2. Saving related to clerks needed for processing data from readings is 59 FTE 3. Based on less error rate, a necessity to re-write data to the system or repeat the reading reduces 4. The calculation covers the following: Average length of a reading, wage costs of persons making readings, of clerks and call centre agents, additional wage costs, costs connected with re-writing of data from readings to information systems, total no. of visits of points of supply due to readings

29 State Generation Transmissio n Distribution Sale Customers Strana 29, Verzia 1.1 P11: Less administration By SM implementation necessity of additional administration connected with invoicing to the customer as well as connected with correction of data to systems will reduce. Reasoning of benefit +2.9 Mil. By SM implementation necessity of additional administration connected with invoicing to the customer as well as connected with correction of data to systems will reduce. Therefore distribution as well as sale can save FTE related to clerks. The aforementioned benefit relates in particular to: Correction of issued invoices Correction of customer data Other corrections regarding consumption data Absolute annual benefit after complete implementation Share of SM of benefit in 1% total benefit Impacts of benefit Lower administrative costs 1 More exact invoicing to the customer Better data in time as well as more exact data about the customer Less claims from the customers Key assumptions of calculation No. of points of consumption about ~2.38 mil., out of which 88.2% of households Planned to install about 1.9 mil. smart meters at 80% customers Costs spent for correction of invoices and other administration 0.4 Mil Year 99% 1. Saving of administrative costs in this benefit are represented by more accurate data in the system, less corrections of invoices as well as less complaints from customers what will accelerate the whole administrative process and make it more effective, in addition it will enable to achieve saving of FTE related to clerks.

30 State Generation Transmissio n Distribution Sale Customers Strana 30, Verzia 1.1 P15: Saving from the replacement of old meters Costs for SM implementation will reduce by costs needed for the replacement of old meters as well as costs connected with maintenance of old meters Mil. Reasoning of benefit The existing meters must be calibrated or replaced if they do not meet required parameters. Replacements, re-installation and calibration of old meters are costs, which, after the SM implementation, will not exist in some period and can be considered an additional benefit. The benefit covers the following: Saving of costs for calibration of old meters Saving from replacement and purchase of old meters Absolute annual benefit after complete implementation of SM 4.4 Mil Year Share of benefit in total benefit 16% 84% Impacts of benefit Reduction of costs for investment into classical meters, which have to be replaced at the end of their lifetime Increase of customer's comfort due to lower No. of physical visits (not quantified in the benefit) More satisfied customer owning SM with new functions (not quantified in the benefit) Key assumptions of calculation Lifetime of the existing meters is about 20 years Every 16 years, the existing meters must be calibrated pursuant to the Slovak legislation 1 No. of points of consumption about ~2.38 mil., out of which 88.2% of households Each point of consumption has one electricity meter. Costs connected with meters are primarily born by distribution companies 1. Source: Regulation No. 210/2000 Coll. "Decree of the Slovak Office of Standards, Metrology, and Testing on Measurement Gauges and Metrological Check". 2. The calculation covers the following: Prices of 1-phase and 3-phase old meters (1-phase classical meter EUR 20, 3-phase classical meter 40, costs for calibration (13 ), costs for de-installation and installation of meters, time for deinstallation/installation of a meter, share of 1-phase and 3-phase meters, wage costs of technicians, other costs connected with installation/de-installation

31 State Generation Transmissio n Distribution Sale Customers Strana 31, Verzia 1.1 Other benefits - summary Other benefits representing a minor monetary part of calculated benefits were divided as follows: Benefits from more effective utilisation of the grid; Benefits from activities automation; Other benefits +6.9 Mil. The list of benefits Benefits from more effective utilisation of the grid: P5: Better control of electricity during peak hours about ~1.4 Mil. Impacts of benefits More satisfied customer, higher customer's comfort More balanced power grid, better control of the power grid Higher payment discipline of customers Lower operation in the call centres Space for improvement of offer of the sellers An ability to use several tariffs by the customers P6: Savings from power grid optimisation about ~0.7 Mil. P7: More effective purchase, allocation and nominations (P14) Benefits from activities automation: P9: Less physical visits due to disconnection and re-connection about ~1.3 Mil. P10: Less calls to call centres about ~0.4 Mil. Absolute annual benefit after complete implementation Share of SM of benefit in 3% total benefit Other benefits: P12: Profits of the new tariff system about ~2.4 Mil. P13: Less losses due to non-payment about ~0.5 Mil. 0.9 Mil Year 97% P14: Savings resulted from quicker customer payments about ~0.1 Mil.

32 State Generation Transmissio n Distribution Sale Customers Strana 32, Verzia 1.1 Other benefits - detail (1/3) More effective use of the power grid will be positively reflected in costs spent on peaks control, grid optimisation and less inaccuracies in the process of procurement Impacts of benefits +2.2 Mil. Lower deviations in the grid during peaks i.e. balanced grid from the point of view of consumption and electricity supplies Decrease maximum load of the grid and less wear of infrastructure More effective allocations at electricity purchases via long-term contracts and decrease of costs occurred by inaccuracies in estimations Lower demands on the involvement of back-ups in order to balance the lack of electricity More balanced grid and more effective use of nuclear energy Absolute annual benefit after complete implementation Share of SM of benefit in 1% total benefit 0.3 Mil Year 99% Benefits from more effective utilisation of the grid P5: Better control of electricity during peak hours about ~1.4 Mil. Lower costs for purchase of electricity needed in the time of the biggest power grid utilisation. P6: Savings from power grid optimisation about ~0.7 Mil. Savings resulted from less wear of the power grid based on lower deviations in the grid. P7: More effective purchase, allocation and nominations ~0.2 Mil. More effective purchases of electricity by sellers and lower deviations between ordered and consumed energy. Key assumptions of calculation Costs for maintenance of the grid Maximum load of the grid in Slovakia 1 Costs related to allocations and nominations 2 Average price of 1 MWh for LV is EUR ~ Maximum load of the grid in Slovakia obtained from SEPS, URSO data 2. Source: SEPS Annual report Thanks to SM implementation, load of the grid may be decreased by 5-15% according to foreign benchmarks. Source: The Impact of Consumer Engagement on the Value of the European Smart Grid (September 2011)

33 State Generation Transmissio n Distribution Sale Customers Strana 33, Verzia 1.1 Other benefits - detail (2/3) Activities automation will increase effectiveness and bring the savings in the amount of costs for their manual performance Impacts of benefits +1.7 Mil. Higher comfort of the customer related to the possibility of remote connecting and disconnecting without physical intervention of an employee at the point of consumption More effective management of connecting and disconnecting of nonpayers More satisfied customer as he/she will be better informed about his/her consumption Lower operation in the call centres Higher quality of provided services Absolute annual benefit after complete implementation Share of SM of benefit in 1% total benefit Benefits from activities automation: P9: Less physical visits due to disconnection and re-connection 1 about ~1.3 Mil. Reduction of visits due to disconnection/re-connection of the customer P10: Less calls to call centres about ~0.4 Mil. Less calls of the customer because of unclearness in invoicing as they are better informed Key assumptions of calculation Number of visits due to disconnection/re-connection of the customers No. of points of consumption about ~2.38 mil., out of which 88.2% of households Number of disconnections due to non-payments, number of disconnections due to changes of address Number of calls to call centres related to readings, disconnecting and tariffs Mil Year 99% 1. Physical visits present primary situations when the customer is connected due to the debt payment or disconnected due to non-payment. 2. The study takes into account approximately 30 ths. of visits a year due to re-connection or disconnection of the customers 3. Reducing the number of calls to call centres from the above mentioned reasons by approximately 60%.

34 State Generation Transmissio n Distribution Sale Customers Strana 34, Verzia 1.1 Other benefits - detail (3/3) Other benefits will enable better offer of the vendors for the customer and thus better payment behaviour of the customer +3.0 Mil. Other benefits P12: Profits of the new tariff system about ~2.4 Mil. Tailor made offers due to detailed information about the customer Impacts of benefits More satisfied customer thanks to more attractive offer Use of several tariff systems by the customer Higher payment discipline of the customers Decreasing the number of non-payers Transfer of the part of consumption to lower tariff range (not quantified in the benefit) Absolute annual benefit after complete implementation Share of SM of benefit in 1% total benefit 0.4 Mil Year 99% P13 Less losses due to non-payment about ~0.5 Mil. 1 Reduction of no. of people, who do not pay, thanks to an ability to remotely disconnect them. P14: Savings resulted from quicker customer payments about ~0.1 Mil. Improvement of a payment discipline of customers thanks to an ability to immediately remotely disconnect them. Key assumptions of calculation No. of points of consumption about ~2.38 mil., out of which 88.2% of households Costs concerning non-payers or payment behaviour of the customers Overall estimated improvement of payment behaviour of the customers Average price of 1 MWh for LV is EUR ~ SM implementation will reduce the number of non-payers as well as payment behaviour of the customers what will be positively reflected in cash flow of all electricity market participants

36 State Generation Transmissio n Distribution Sale Customers Investments into facilities and their installation Investment into facilities and installations represent the biggest part of investments in particular thanks to costs for electricity meters themselves which have been quantified to more than 125 Mil Mil. Investment costs Meters and accessories Quantity (pc) Investments per piece ( ) 1 PLC 1,806, Meters Concentrators Installations GPRS Modem PDA Mil Mil Mil. Concentrators Data used in calculations: Basic price of a single-phase smart meter is about EUR 70 Basic price of the single-phase smart meter is about EUR 90 Share of 1-phase meters represents 40% The smart meter's lifetime is 15 years, the concentrator's lifetime is 20 years PDA lifetime is 10 years The frequency of reading is once per 15 minutes, and the frequency of data sending to MDM is once per month. Concentrator Installation of the equipment includes: PLC meters 1,806,880 ~10 GPRS meters ~12 Concentrators Investment per 1 piece was selected of several benchmarks of implementation or study of implementing SM abroad. 2. The price is based on a weighted mean between the price of 1 and 3 phase SM taking into account its rate in Slovakia. 3. The number of PDA depends on the number of installation technicians and 10 year lifetime. 4 and 5 Price of equipment is based on experience from abroad. 6. Installation of one concentrator requires two installation employees due to safety reasons. 7. When calculating costs on equipment installations, the study considers: Average period required for installation, costs of labour force, number of employees for installation, costs on equipment. 8. The price of equipment based on experience in Italy. Strana 36, Verzia 1.1

37 State Generation Transmissio n Distribution Sale Customers Strana 37, Verzia 1.1 Investment into information systems Capital expenditures for information systems represent in particular costs for construction of AMM/MDM which will serve for processing and management of the smart measuring system Mil. Investment costs The value of investment ( ) 1 AMM 2 / MDM 3 11,646,000 Web portal 250,000 AMM / MDM Interfaces Web portal Interfaces 5,450,000 CRM 2,000,000 Billing 3,000, Mil Mil Mil. Energy management 450,000 Implementation of data centre (MDM) serving for saving, processing and provision of data to entities utilising these data Implementation of AMM serving for management of the smart measuring system Adaptation of existing systems to receipt and processing of data recorded by smart meter Programming of a web portal for accessing data by final consumer Incorporated costs representing formation of functionalities and existing systems needed for operation of the smart measuring system The calculation includes investment into information systems during the first two years of SM implementation. 1. The aforementioned investments are expressed in absolute values not re-calculated by NPV 2. Costs for AMM includes implementation of control system and interfaces necessary for communication between AMM and DSO. 3. Costs for AMM includes implementation of control system and interfaces necessary for communication between AMM and DSO, vendors, SEPS, etc.