FILEU NOV ) CAUSE NO. PUD Rebuttal Testimony. Sarah C. Staton. on behalf of. Oklahoma Gas and Electric Company.

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1 BEFORE THE CORPORATION COMMISSION OF OKLAHOMA IN THE MATTER OF THE APPLICATION OF OKLAHOMA GAS AND ELECTRIC COMPANY FOR AN ORDER OF THE COMMISSION AUTHORIZING APPLICANT TO MODIFY ITS RATES, CHARGES, AND TARIFFS FOR RETAIL ELECTRIC SERVICE IN OKLAHOMA ) ) CAUSE NO. PUD ) FILEU NOV COURT CLERK'S OFFICE - OKC CORPORATION COMMISSION OF OKLAHOMA Rebuttal Testimony of Sarah C. Staton on behalf of Oklahoma Gas and Electric Company November 29, 2011

2 Sarah C. Staton Rebuttal Testimony 1 QUALIFICATIONS, EXPERIENCE AND PURPOSE 2 Q. Would you please state your name, business address and job responsibilities. 3 A. My name is Sarah C. Staton. My business address is 321 North Harvey, Oklahoma City, 4 Oklahoma I am Managing Director of Corporate Marketing for Oklahoma Gas and Electric Company ("OG&E" or "Company"). I am responsible for portfolio 6 management, marketing communications, customer experience, and product 7 development. 8 9 Q. Would you please summarize your education and professional background? 10 A. I graduated from Emporia State University in 1994 with a degree in chemistry and went 11 on to complete a Bachelor of Science degree in Chemical Engineering at Kansas State 12 University in I received my Masters in Business Administration from Oklahoma 13 State University in I have held the position of Managing Director of Corporate Marketing since February I established the current marketing team at OG&E which includes responsibility 16 for customer experience, portfolio management, marketing communications, brand 17 management, and product innovations. Prior to OGE Energy Corp, I held marketing, 18 technical sales, business development, and research and development positions at other 19 companies in the Oklahoma area Q. Have you previously filed testimony before the Oklahoma Corporation Commission 22 (the "Commission" or 110CC")? 23 A. No. 2 Q. What is the purpose of your testimony in this cause? 26 A. The purpose of my testimony is to rebut the responsive testimony of Ms. Barbara 27 Alexander on behalf of AARP. In my testimony, I will address the recommendations of 28 Ms. Alexander as they relate to the pricing education funding. I will describe the overall 29 performance objectives, how OG&E will segment and target customers, and effectively 1

3 I use mass media. In addition, I will describe the online information and tools that will be 2 available to customers, the specific performance objectives through each phase of the 3 price plan education communication initiative (the "Plan"), other specific educational 4 funding, and finally the peak time rebate proposal. 6 Q. What is the overall performance objective for the Plan? 7 A. The overall performance objective of the Plan is to support the Company's 2020 Plan as 8 described in Mr. Langston's testimony. In support of the 2020 Plan, the proposed Plan 9 will extensively expand OG&E's time based pricing programs through well planned 10 media channels designed to educate and enroll customers. The documented residential 11 and small commercial demand response targets in the Integrated Resource Plan are 12 approximately 70 MW per year of additional demand response beginning in 2012 and 13 continuing through 20. To achieve this MW reduction, OG&E will need to market to and successfully subscribe an estimated twenty percent (20%) of its residential customers 1 in Demand Response programs over the next 3 years. Achieving this amount of customer 16 subscription will position OG&E and its customers to defer additional generation 17 capacity Q. Do you agree with Ms. Alexander's recommendation that the $3 million per year in 20 education campaign expenses should be rejected? 21 A. I do not. Elimination of funding for the Plan will severely hamper the Company and its 22 customers in swiftly achieving the performance objective and the associated savings Q. Why are the Plan funds necessary? 2 A. The majority of customers currently pay standard electric rates, which unlike dynamic 26 pricing and time variant rates, do not provide customers with an opportunity or incentive 27 to reduce energy usage during higher cost hours. Company witness Scott has pointed out 28 in his direct testimony that through OG&E's conjoint study, the Company knows that 29 customers are not knowledgeable of what drives electricity cost on the bill. 30 OG&E has developed a comprehensive educational campaign to educate customers on 31 the fundamentals of peak period electricity costs. In addition, education through analysis, 2

4 II 1 tools and tips after enrollment to reinforce behavior changes is essential to ensure 2 demand response is sustained. This is an integrated campaign that requires many tactics 3 and utilization of new and existing tools for the customers' benefit. 4 Due to the relatively low awareness of price plan programs, multiple touch points and tactics will be necessary to raise awareness to the point of enrollment. Targeted 6 television, radio and print will be leveraged to raise awareness in conjunction with the 7 direct communication with customers. Personalized direct communication utilizing 8 direct mail, , digital offers, and bill inserts will be utilized concurrent to the 9 television, radio, and print. These tactics will include targeting the move-in process 10 through the customer service representatives and a follow-up move in packet Q. Are the Plan costs reasonable? 13 A. Yes, these costs are reasonable. 1 Q. How do you know that OG&E will be successful in subscribing enough customers to 16 meet the objective and achieved the savings? 17 A. While the performance objective is very aggressive, the Company has gained valuable 18 experience subscribing the first 6,000 customers to participate in the program. In 19 addition, focus groups and customer surveys have provided insight on what motivates 20 customers to change behavior Q. Ms. Alexander asserts OG&E's Plan is insufficient and lacks any performance goals 23 or tracking mechanisms. Is this true? 24 A. No. The pilot study used over the last two years included performance metrics and 2 tracking mechanisms and gathered valuable data regarding customer segmentation. This 26 information helped the Company to understand which customers to target based on 27 performance and their likelihood to respond. The Company is using the information 28 gained from the pilot study to refine the metrics to specifically include enrollment 29 statistics including acquisition costs, targeting new customers on dynamic pricing and 30 time variant rates and is a measure of the education and enrollment elements of the Plan. 31 The customer engagement will be measured on a monthly basis during peak season by 3

5 U C 1 evaluating the actual peak demand shift and proactive educational messages used to 2 enhance performance. Finally, the retention rate on the program will be measured to 3 determine the long term sustainability of customers on dynamic pricing and time variant 4 pricing programs. 6 Q. Ms. Alexander asserts the Company's Plan does not help customers to choose 7 between rate options. Is this true? 8 A. No. A rate comparison tool is being added to the existing Energy Information Website 9 ("EIW") and will become available in the first quarter of The EIW tool 10 automatically compares the rate plans for customers and allows them to evaluate 11 scenarios such as shifting a percentage of usage off-peak and calculates the bill impact. 12 In addition, the EIW tool already allows customers to compare their usage with those in 13 their neighborhood. 1 Q. Ms. Alexander references the online information that Arizona Public Service 16 Company and Salt River Project provide customers about rate plans and asserts 17 that the rate plan information on the OG&E website is insufficient and that no 18 customer tools are provided. Is this true? 19 A. No. She is incorrect on at least three points. First, in 2011, OG&E enhanced the time of 20 use information that is provided online. No public rate information was provided in on variable peak pricing and critical peak pricing because the rates were available only to 22 customers with a smart meter participating in the study. Second, the Company already 23 has a plan in place to expand information about these additional time based pricing plans 24 to its website in Third, for residential customers, the energy information website 2 will be provided to all customers with a smart meter as a tool providing insight into their 26 electricity usage as well as provide a platform for enrollment into the various pricing 27 plans. For commercial and industrial customers, the existing RateTamer tool will be 28 utilized to provide customers insight into their electricity usage. 4

6 I, 1 Q. Why does the OG&E believe a Peak Time Rebate program will not be as effective as 2 its current rate offerings? 3 A OG&E will address the Peak Time Rebate in rebuttal testimony to be filed on December 2, Peak Time Rebate is a more complex program because it requires not only the explanation of peak time but also how the rebate is calculated based on a baseline. OG&E has achieved great results from the 2010 and 2011 summer studies and consideration of a Peak Time Rebate option will not reduce the need for education.. None of the study results or customer feedback indicates a change of course is required Q Ms. Alexander indicates that OG&E should evaluate the load profiles of customers to target customers that will benefit from peak shifting opportunities. She asserts that OG&E is not planning to use such a model. Is this true? 13 A. No, the Company has such a model and is planning on deploying it. A model has been developed that evaluates a customer's load shape and potential to shift load off-peak. A second model is under development that will evaluate a customer's propensity to enroll in a pricing plan. These two models will be combined to segment and target customers for focusing the communication plan. This model will be tested across the entire population. Once customers begin to enroll the model will be updated to develop an enrollment 19 response model to further identify the target audience for the price plan communications. 20 This targeting approach is being used to efficiently utilize the education funding Q. Ms. Alexander indicates that the education funding is only for variable peak price 23 and time of use education. Please describe what rates the Plan will support. 24 A. For residential customers the Company's Plan will support the time of use, critical peak 2 price, and variable peak price offerings. 26 For commercial and industrial customers, the Plan will include load reduction, real time 27 pricing, time of use, and flex price offerings.

7 1 Q. Ms. Alexander claims that the educational funding relies heavily on expensive mass 2 3 media to reach customers. How much of the annual budget of the Plan is estimated for television and radio and how much is for direct communication with customers? 4 A. 6 The television and radio production and media is estimated at 11% of the total budget, while direct communication tactics account for 78% of the total budget. The remainder is the expense for the online enrollment tool. 7 8 Q Ms. Alexander claims that customers do not want dynamic pricing programs and that the conjoint analysis supports her statements. Please explain why the conjoint analysis supports customer's preference for dynamic pricing. 11 A. As discussed in detail in Mr. Scott's direct testimony the conjoint study results clearly Q. show customers have a preference for the entire range of options from price security to price risk plans. OG&E already offers a price security program with the Guaranteed Flat Bill. Based on the analysis, 31% of the customers prefer a pricing plan that allows them the opportunity to save money. In response to these customer preferences, OG&E is expanding those offerings with time of use, variable peak pricing, and flex price options. Ms. Alexander claims that smart grid funds were used to promote time of use in A and that there is overlap of education funds with the smart grid funding. Is this true? No. In her response to OG&E Data Request 3-2, Ms. Alexander assumed that OG&E 22 used smart grid funds for the 2011 time of use campaign. This is not true and there is no 23 overlapping of educational funds. The time of use campaign during the summer of was funded by a separate marketing communications budget, not by the smart grid related 2 education funding as claimed by Ms. Alexander.

8 I Q. Ms. Alexander asserts that low income customers are not receiving benefit from the A company's demand response program. Does the Company have evidence that low income customers can benefit from its proposed demand response program? Yes, all customers will benefit from the program including low income customers. Based on 2010 smart grid study results, residential participants (by income group) achieved the following bill savings on average during the four summer months in aggregate: Low $2.42 Middle $ High $ A portion of these bill savings were a result of shifting peak demand which benefits all OG&Es customers by postponing future generation costs. OG&E believes that bills savings will also occur year round as customers have the tools and education to take control of their electric bills and is currently gathering data to support this belief. 16 Q. Do you have a recommendation regarding the Company's proposed customer 17 education plan funding? 18 A. Yes. I would recommend that the Commission adopt the Company's Plan, including the 19 requested $3 million funding request and reject the recommendations of Ms. Alexander. 20 Based on OG&E's analysis the Plan represents a cohesive, thoughtful and appropriate 21 method and manner to educate customers on the options available to them. The Plan also A a provides the necessary tools with which customers can make intelligent and informed decisions regarding their usage patterns and behaviors and provide the means for the Company, along with customer support, to achieve the desired demand response reductions described above. Does this conclude your testimony? Yes, it does. 7