Southeastern Power Users Group

1. Southeastern Power Users Group A new strong voice with and for industry across the Tennessee Valley

2. Southeastern Power Users Group A coalition of industries representing larger power users dedicated to promoting fair and equitable utility rates and energy cost savings MISSION STATEMENT: To continually maximize energy cost savings, promote cost-to-serve utility rates, and create strategic partnerships for the good of all member companies. SEPUG

3. Purpose TVA Distributors who are strong supporters of industry said it best, “Industry must join together now to stop TVA’s unfair escalation of industrial rates which has been going on for some time.” Instead of using fair and balanced approaches to setting rates on a true cost-to-serve basis, just the opposite is happening. The reason for this is that a number of TVA Distributors are trying to keep residential rates abnormally low. As a result, the combined impact of TVA’s firm rate increases in October 2005, April 2006, April 2008, and October 2009 have increased industrial rates by 40% to 50%. Incredible fuel adjustment increases on 10/1/08 have added another 25% to large power users. Fuel costs temporarily decreased in 2009 & 2010, but are already ramping back up big time. In addition TVA must have more and more rate increases because of over 3.2 billion in coal ash expenses coming to all coal plants. SEPUG

4. Services and Benefits • Give member companies a unified voice to TVA, its Distributors, and to members of the Rates & Contracts Committee of the TVPPA • Work for lower industrial rates and a better variety of rates from TVA through active participation with all TVA Distributors • Take on high load factor and low load factor firm rate disparities within TVA • Provide regular feedback to our members on the dynamic market of natural gas pricing with methods to promote savings • As a added benefit to member companies, we will act as an “energy answer team” and provide ideas and guidance on individual company energy cost saving opportunities SEPUG

5. “Energy Answer Team” General guidance to all members on their individual energy related system questions and opportunities in such areas as: • Electric and natural gas energy conservation systems and promoting overall energy cost savings • Electric primary and secondary distribution systems and relationship to potential rate savings • Co-generation and standby generation including peak-shaving and load-sharing possibilities • Load factor improvement techniques to reduce costs • Least expensive ways to correct low power factors • Advice on the validity and effectiveness of various energy saving products or systems on the market • Saving electric & natural gas costs big time by using high tech heat recovery and heat reclaim exchangers • Customized energy cost saving seminars at plants SEPUG

6. Structure • A non-profit coalition of large power users of electricity and natural gas seeking to reduce energy costs by all means possible. • Regularly scheduled meetings will be held at SEPUG offices in Brentwood, TN and at other member company locations in Middle, West, and East Tennessee. • Quarterly updates to all members including our activities within the Tennessee Valley and in Washington, D.C. • Membership fees per company are $500 per month, which will cover all plant locations of any company within the Tennessee Valley. Minimum membership commitment is desired for a 12 month period of time. For smaller single companies under 1,000 kW, membership fees are $300 per month. Our team of energy engineers are always available to each plant. SEPUG

7. Management Advisors • Director: Paul W. Holland, P.E., CEO of Energy Architects, a Division of Paul Holland & Associates, Inc. • Brian Burst, Natural Gas Rate Consultant • Gary Meisner, CPA/MBA and former operating unit CFO/CIO of Fortune 500 Companies • Jimmy Williamson, General Manager of Dyersburg Electric in Dyersburg, TN • Keith Wilkins, Electric Utility Rate Consultant • Spike Noonan, CPA, McKerley & Noonan PC SEPUG

8. Industry Advisors • Curt Buchheit, Chief Financial Officer Havco Wood Products in Scott City, MO. • Mike Ward, Engineering Manager Tyson Foods in Union City, TN. • Jason Joyner, Engineering Manager Excel Polymers in Dyersburg, TN • Mickey Crook, Energy Coordinator Procter & Gamble in Jackson, TN • Dan Gerstner, General Manager Gap Regional Distribution / Gallatin, TN SEPUG

9. Industry Advisors . . . Continued • Joel Huguley, Procurement Energy Manager /Vulcan Materials in Birmingham, AL, • Todd Wortman, Chief Financial Officer Franklin Minerals in Nashville, TN • Bernie Sleadd, General Manager PML Inc. in Paris, TN • Stan Carver, Director of Engineering Hoeganaes Steel in Gallatin, TN • Phil Boyd, Plant Manager Unimin Corporation in Gleason, TN SEPUG

10. Action Items Needed Now • Present case for using a “cost-to-serve” basis for setting industrial rates with TVA and the Rates & Contract Committee of the TVPPA, as we feel just the opposite is now being done by not providing fair and balanced rates to large power users. • Inject new rate ideas into rate proposals being reviewed for industry by TVA and the TVPPA for implementation in 2011 and 2012, because TVA’s rates have doubled since 2004 • Communicate with all 14 TVA Distributors who are on the Rates & Contracts Committee of the TVPPA as well with the other major TVA Distributors within the Tennessee Valley in order to let them hear a direct voice from their large power users and from all industry within TVA. During the past 5 years TVA’s industrial rates have gone up twice as fast as their residential rates putting a real burden on profits. • Schedule regular meetings with U.S. Congressmen, Senators, and their chief of staffs to help pull TVA back in line on their industrial rates. We will be focusing on positioning and leverage with the Tennessee Delegation. SEPUG

11. Action items … Continued • High load factor customers provide higher rates of return to TVA and its Distributors and should have load factor discount riders or proper time-of-day rate incentives to lower their costs • Lower load factor customers can provide flexible benefits to TVA’s system during tight generation through load control programs and can vary their operations with well designed time of day rates. • Represent the interests of past VPI customers of TVA, whose electric budgets were destroyed in 2005 by much higher VPI energy prices (because of “High Fuel Costs”) due to covering costs for the firm rate users. A challenge is underway for recovery of at least 35 million in overpayments. • Some industries within TVA have seen 100% increases in their total cost per kWh from 2005 through 2009 and in addition later in 2010 TVA’s fuel adjustments are moving back up and more rate increases will be necessary to cover coal ash remediation expenses of 3.2 billion at all coal plants to convert from wet to dry ash. SEPUG

12. . . . Additional Action items • And last, but not least, work for a much better variety of interruptible and curtailment rate offerings for both high and low load factor customers who can provide good benefits to TVA’s peak generation needs. We are asking TVA to consider incremental demand rates where plants can help out some, but not for the entire peak periods. This way all plants can help reduce peaks In his representation of clients before regulatory agencies and with utility boards across the country, Paul Holland has been successful 100% of the time. SEPUG

13. Contact Information Southeastern Power Users Group (SEPUG) 5123 Virginia Way Suite C-21 Brentwood, Tennessee 37027 Contact: Paul W. Holland, P.E. (Executive Director) E-mail : pholland@energyarchitects.com Phone: 615-221-9022 Fax: 615-221-9672 Website: www.sepowerusers.org SEPUG

14. Southeastern Power Users Group Working Together as an Effective Coalition of Industries, We can get Fair and Balanced Rates and bring Jobs back to the Tennessee Valley