<Ned.Ford@FUSE.NET>

On Monday, February 23rd Sierra Club settled an Electric Security Plan
case with Dayton Power and Light (DP&L), along with industrial,
commercial, residential, low income and local government representatives
and the Ohio Environmental Council. This case resulted from passage of
Senate Bill 221 in May of 2008. The Sierra Club's primary goal was to
ensure fulfillment of the energy efficiency and renewable energy
requirements of SB 221. The case involved important rate reforms and
other issues, some of which
 affect our basic strategy to improve the
financial rewards for DP&L to meet and/or exceed the energy saving
provisions of the new law and to maximize renewable resource use.

DP&L sells about $1 billion worth of electricity each year, about 9% of
Ohio's $11 billion electric spending. SB 221 requires DP&L (and the
other regulated electric companies) to use energy efficiency programs to
reduce their gross sales one third of one percent in 2009. The reduction goal
increases each year until 2019 when new annual savings should increase 2%
each year thereafter. The settlement does not change the company's
requirement under SB221, but provides strong assurances that the savings
will occur as stated. (About 12% of Ohio's electricity is sold by
municipally owned public power companies or co-ops, which are not
affected by SB 221 or State regulation).

DP&L has agreed to a customer advisory group which
 will provide ongoing
recommendations to improve program performance and cost-effectiveness.
The impact will not be determined until after the year's end, but this
settlement should cause DP&L to spend about $5 million on efficiency
programs in 2009, which can be expected to cause about $15 million in customer
cost savings, spread over some future years. Some of the savings will
be retained by the company or shared with the company, depending on your
perspective, to compensate for the loss of expected sales. Program
costs are generally paired with avoidable costs for electricity
generation, and are therefore not a direct cost to the utility, but rather
replace customer costs for fuel and operation and maintenance with
the cost of the efficiency programs.

SB 221 also requires each Ohio regulated electric company to provide
0.25% of it's generation from renewable energy in 2009 (rising to 12.5%
in 2025),
 but since no commercial wind exists in Ohio in 2009, the first
year requirements will be met with purchases of renewable electricity
from nearby states.

DP&L is the smallest of the four companies directly affected by SB 221,
and was the last to file a new plan. Duke settled it's ESP case last
October along similar lines, although the Duke settlement includes an
incentive payment for overcompliance, which we strongly support as a
good economic deal for Duke customers and the environment. DP&L
proposed cost recovery for efficiency programs in a different manner and
was not interested in defining a plan for overcompliance, but agreed to
some changes we proposed to keep that possibility open in the future.

DP&L is one of the two major Ohio utilities which have some good wind
resources in their service area, and apparently plans to develop some of
those resources in the next few years. DP&L's
 plan includes provisions
for net metering of customer-generated renewable power, and grid
modifications to facilitate renewable energy. Terms for those elements
of the plan were improved in the settlement.

This case was advanced through a very effective alliance of consumer and
environmental organizations which developed last year when rules to
implement SB 221 were developed. This alliance has allowed sharing of
analytical resources, and has probably added considerable speed to the
high pressure negotiations. The alliance, led by Ohio Consumers'
Counsel Janine Migden-Ostrander, a Sierra Club member, one time
Ohio Chapter Vice Chair, and the Club's attorney for approximately
26 utility interventions in the 1990's, has substantially enhanced
Ohio's move toward a sustainable and affordable energy future.

Electric utility efficiency programs are well known in parts of the U.S.
but are slow in coming to the
 lower Midwest coal producing states. In
the last year Illinois, Ohio, Michigan and Pennsylvania have embarked
along similar paths. Illinois and Ohio have the strongest laws, which
will take them to the level of efficiency activity that the strongest
states presently have. Saving this much electricity will be enough to
eliminate all new growth of greenhouse gases from electricity generation
in these states, and perhaps much more, depending on the economy and how
well the public and the regulators come to understand the economic
benefits of these programs.

For more information contact:

Ned Ford
Energy Advisor
Sierra Club, Ohio Chapter
513/600-4200
Ned.Ford@fuse.net

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