REMITTANCE PROCESSING AT CPS ENERGY

1. REMITTANCE PROCESSING ATCPS ENERGY Presented BY SYLVIA M ARNOLD DIRECTOR OF CUSTOMER SERVICES SPETEMBER 25, 2007

2. Table of Contents • Meet CPS Energy • Then and Now • Drivers of Change

3. Meet CPS Energy • Nation’s largest municipally owned provider of both electricity and gas • Acquired by City of San Antonio in 1942 • 630,000+ electric customers and and 310,000+ gas customers and growing • 8th largest city in U.S. • Provide 20% of City’s operating budget • Bills among lowest in nation • Highest financial rating of any electric system

4. Meet CPS Energy J D POWER 2007 RESIDENTIAL CUSTOMER SATISFACTION STUDY • # 9 in the Nation; #2 in South Region • Nationally ranked First Quartile in : • Customer Satisfaction • Company Image • Price and Value • Communications • Billing & Payments

5. Then and Now

6. What Changed? THEN • Limited # of Pay Stations • Daily pick-up of cash by armored car • Limited functionality of pay stations (no partial or delinquent payments) • No credit card or electronic check payments

7. What Changed? NOW • Over 100 Pay Agents • Payments received electronically • Partnered with BillMatrix for credit card and electronic check payments • BillPower and Striata for e-billing • Electronic ACH • Direct On-line Payment files

8. ACH • Percent of ACH payments remains constant at .5%. • Customers formerly sending check and lists now sending ACHs with addenda records • ACH file converted then uploaded. • Posted the business day after the payment is posted to CPS Energy’s bank account

9. ONLINE PAYMENTS • Increased from 2.7% to 7.6% • Checkfree was our first provider of an electronic file with online payments • Currently receive files from six providers • Posted between 7 and 9 A.M. the morning file is received

10. DIRECT DEBIT • Our product is called AutoPay • Percent remains fairly constant. Was 4.2% and is now 4.4% • Most convenient way to pay • Communicating benefits to customers • Automatically posted on the due date

11. PAY AGENTS • Over 100 agents in Bexar County • Includes all HEB’S and Walmarts • Increased from 7.5% to 11.7% • Can handle both partial payments and delinquent payments • Payments posted electronically between 7 and 9 A.M. the following business day.

12. BILL MATRIX • Partnership initiated in July 2004 • Provides telephone electronic checks, online electronic checks through Bill Matrix website, and credit card payments • 4% payments • Customer pays usage fee.

13. BILLPOWER • E-bill presentment and payment through in-house product • First offered in December 2004 • Residential Customer Program • 6% of payments received • Emergis challenge • SAP lawsuit pending against Emergis

14. STRIATA • Third party provider • Pilot program for large commercial customers with multiple accounts • Mixed reviews

15. OTHER • Still receive most payments through the mail. • Have 3 walk-in facilities with tellers • Still have drop boxes

16. Payment Statistics – December 2006

17. Payment Options Payment Methods – Jan. 2006 – Dec. 2006 • 46.2% - U.S. mail • 13.0% - In person at CPS Energy service center • 11.7% - 107 separate pay agent locations • 8.8% - Online banking payments • 7.5% - CPS Energy BillPower • 5.0% - BillMatrix • 4.4% - AutoPay • 2.8% - Payment drop box • 0.6% - Automated Clearinghouse (ACH) and Wire

18. Costs of Payment Options Cost to Cost to Payment OptionCustomerCPS Energy Pay agent locations $1.00 $0.04 AutoPay 0.00 0.07 BillMatrix 2.95 0.07 CPS Energy BillPower 0.00 0.08 Online banking 0.00 0.12 Payment drop box 0.00 0.14 U.S. mail 0.39 0.16 ACH ~1.00 0.58 In person at CSC 0.00 1.71 Wire ~8.00 9.09

19. Questions and Comments Questions and Comments