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March 25, 2015

Customer Centricity & Growing Consumer

Imperatives that Drive Innovation

Jose Antonio T. Valdez

Vice President & Head,

Marketing, Customer Solutions & Product Development

MANILA ELECTRIC COMPANY

A presentation for the 2nd Southeast Asia Utilities Innovation Forum

OUR COMPANY2

We are part of a bigger group…

OUR COMPANY2 33

The franchise area of MERALCO is the seat ofeconomic, political and social activity in thecountry.

25%

112

50%60%

3%

years in service

of Philippine land areaof total Philippine populationof Philippine GDPof Philippine manufacturing output

55% of Philippine electricity sales

OUR COMPANY2 44

MERALCO is the largest distribution utility in the country.

114 substations

855 circuits

10 sector offices

213 power transformers

160,621 distribution transformers

50+ customer touchpoints

Primary Distribution

Secondary Distribution

Sub-Transmission

Transmission

Generation

USD($) 7.2 B Market Capitalization*As of Feb. 28, 2015

OUR CUSTOMERS2 55

MERALCO segmented customers to answer their unique needs

CORPORATEBUSINESS

HOME & MICROBUSINESS

BUSINESS (small & medium enterprise)

5.5M customers35.2% of total energy sales

80.3K customers17.7% of total energy sales

16.4K customers47.1% of total energy sales

14,6791,571 + 285 conglomerate

= 1,856 Corporate accounts

1,756National Government

Units

5.1 M Households

18,366LGU Accounts

367,260 Microbusinesses

59,950Small

20,343Medium

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OUR CUSTOMERS2 66

MERALCO utilizes various research studies to better understand customers

Accelerate

your digital

business

Embrace the

mobile shift

Transform the

customer

experience

Turn big data into

business insights…

possibly monetize

7Source: The CIO's And CMO's Blueprint For Strategy In The Age Of The Customer, Forrester Research, Inc.

Why do we want to do this?

“Meralco will be an internet company with a power business” -Manuel V. Pangilinan (MVP), Meralco Chairman

“This is our future…” - Gavin Barfield,

Chief Technology Officer

“We want to be a customer-centric company…”

- Al Panlilio, Customer Retail Services & Corporate Communications Head

“ We have the fiduciary right to help our customers save…” - Oscar Reyes, President & CEO

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TOP CONCERNS2 88

What are the top concerns of our customers, our country and our people

Affordable Rates Continuous Supply

Estimated Timeof Restoration (ETR)

2 912

Price, efficient service and product qualityARE PART OF AN EQUATION.

VALUE FOR MONEY

DENOMINATOR: PRICE =VFMPRICE

(Reasonable Payment)

NUMERATOR: BENEFITS

Interaction with Personnel

Programs, Solutions,

Communication

Bill Transparency

Good Service & Product Quality

Value For Money

Source: 2014 Customer Satisfaction Index, October 2013, Synergy Business Consultancy

21014

Major Drivers of Customer Satisfaction

VALUE FOR MONEY

Affordable Rate Continuous Supply

Estimated Timeof Restoration (ETR)

21115

INTELLIGENT GRID

Value:

1 + 1 < 2

1 + 1 > 2

Cost:

Intelligent Grid is an integrated solution to

deliver VFM

PREPAID ELECTRICITY SERVICE

Offers customers the ability to monitor

and manage their daily consumption and

the flexibility to pay their electric bill by

loading in smaller denominations

Empowering customers to consume

energy efficiently and within their

budget.

Target by Dec 2015: 40K customers

Target by June 2016: 140K customers

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Research Background

134 March 2015

1. To understand the customer experience of PRES

a. Determine benefits and disadvantages of PRES, and if adjustments need to be made

b. Gain insights on consumption behaviors under PRES/ how households adapt to the new system

2. Fieldwork dates: June 28 to July 15, 2014

3. Conducted by an external research agency

4. Within pilot areas in Angono, Taytay, and Cainta, Rizal

5. Face-to-face interviews among 150 Meralco PRES customers with an average of three months experience under PRES

6. Customer meter data from Meralco’s Marketing Decision Support System (MDSS)

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90% of customers are satisfied with KLoad

3%7%

32%

58%

Very satisfied

Somewhat satisfied

Somewhat not satisfied

Not satisfied at all

Overall Satisfaction with

‘Consumer goods’ hurdle rate is 40% for “very satisfied”

Social dimension of Kload

• Makes cash flow easy• No bill shock• Customers takes responsibility

for their own usage

More convenient cash flow

“hindi mabigat sa bulsa angpag load kasi mayroon

namang maliit nadenomination kung

magkanong denomination anggusto ko ay makakabili ako”

No bill shock“nakikita mo ang konsumo

mo na naisasama ko sabudget hindi katulad sa

post paid hindi mo agadalam ang babayaran mo

monthly.”

Q: On overall, how satisfied or not are you with the Kuryente Load/K-load?--Sa kabuuan, gaano kayo nasisiyahan o hindi sa Kuryente Load/K-load?

Comml Pilot Monitoring Research, June - July 2014, Synergy and TNS

90%Base: Total interviews (n=15)

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Inclusive of segments previously

disenfranchised

Meralco System Control13

MERALCO GREEN AGENDA (MGA)

TO GENERATION

SUBSTATION

Meralco Green

Agenda (MGA)

Initiatives promoting

environmental sustainability

through emerging technologies

in the utility space

• Localized energy grid with the capability to

disconnect from the traditional grid and operate

autonomously

MICROGRIDS

• Programs aimed at managing the

amount or timing of a consumer’s

electricity consumption in response to

changes in electricity supply or prices

DEMAND RESPONSE

• Vehicles powered entirely or partially by

electricity

ELECTRIC VEHICLES

• Technology that directly converts light energy

into electricity using solar panels

SOLAR

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MERALCO GREEN AGENDA (MGA)

Meralco-Net Lima EV Power Station

Initiatives for Meralco Green Agenda

Meralco EV Power Station

Renewable Energy POC

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Ateneo eShuttle Service & Charging Station

MERALCO GREEN AGENDA (MGA)

Initiatives for Meralco Green Agenda

EV Philippine Summit

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Meralco eBike Sharing Program

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INTELLIGENT GRID

Value:

1 + 1 < 2

1 + 1 > 2

Cost:

Intelligent Grid is an integrated solution to

deliver VFM

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Programs Affordable Rates Continuous SupplyEstimated Time of

Restoration

AMI

Consumption Control No Bill Shock OPEX Savings

Power Advisories Outage Map

ANA

OPEX Savings Reduction of System Loss Peak Demand Reduction

Improved Power Quality Automatic Power Outage

Detection / Isolation of disturbances(i.e. Line Faults)

Reliable delivery of Power Supply

Power Advisories Outage Map

MGA

Rate options (thru DR Programs)

Renewable energy sources Security of Power Supply Generation Diversity Minimal supply outage

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Benefits of IG Initiatives

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Challenges

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1. Regulatory and Policy Frameworks• Cost Recoveries of Investments for Intelligent Grid

• Alignment of Polices and Regulatory Frameworks with Intelligent Grid Initiatives of Utilities

• Local and National Government Support (e.g. Enabling Laws, Ordinances, etc.)

• Incentives (e.g. Custom Duties, Efficiency, Commercial arrangements or contracts)

2. Strategic Direction• Shared Vision for Intelligent Technologies and Intelligent Solutions Deployment with

National Government and all power industry stakeholders (last working group meeting was Oct 2014)

3. Customer Education and Engagement

4. Harmonized Ecosystem• Interoperability between different networks (e.g. DUs, Transmission Utility)

• Data & Information Security

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THANK YOU