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PAGE 2 ENERGY SOLUTIONS CENTER INC. – 2011 ANNUAL REPORT

What is the ESC?The Energy Solutions Center is an organization of energy utilities and equipment manufacturers that deliver improved, energy efficient natural gas solutions to residential, commercial, and industrial energy users.

GoalsStrengthen the Ability of Energy Utilities to Achieve Excellence in Serving all Customer Segments

Accelerate the Introduction & Deployment of New Gas Solutions that Improve Customer Productivity, Competitiveness, Efficiency, Reliability, and Comfort

Enable Energy Customers to Achieve Conservation, Efficiency, and Environmental Goals through the Use of Natural Gas

ESC Highlights for 2011

Dear ESC members:

With a slowly recovering economy, stable natural gas pricing, and wider recognition of the positive attributes of natural gas, there is a feeling of “renewal” in our industry. Optimism may be too strong a word in some areas of the country, but gas professionals are again expressing confidence in the ability of their product to improve the productivity and competitiveness of industrial and commercial customers, and ensure service reliability and comfort for residential customers. The theme of our cover, Building Blocks for Growth, portrays the Energy Solutions Center’s ability and strategy to help our members grow their customer base through the selection of cost-effective and environmentally responsible natural gas solutions. If ESC can successfully contribute to such worthy goals, then ESC will be positioned to grow as well.

More people are utilizing more ESC products and services than ever before! As the only organization dedicated exclusively to the marketing, sales, and customer support needs of North American utilities that distribute natural gas, ESC continues to offer strategies, resources, and tools to enhance utility marketing and sales efforts during the tough times as well as the good. With more than 700 gas professionals in attendance at our Tampa, Portland, and Chicago Technology & Market Assessment Forums (breaking all our previous records), ESC is providing the crucial mix of business acumen, energy solutions, and customer linkages that bring our members value and benefit.

ESC’s consortia provide utilities a leveraged approach for successfully pursuing different customer niche markets. The newest consortium, Oil Conversion, was launched early this year, and by late fall produced marketing tools and customer education deliverables. Other consortia produced deliverables, such as the Industrial Metering Guidebook, a Survey of the Resale Value of Natural Gas Homes, a Residential Consumer Preference for Gas Appliances Survey, and a series of gas cooling videos.

The ESC Partnership Awards recognized ten different partnerships involving energy utilities, equipment manufacturers, and customers that resulted in the installation and implementation of new gas solutions at residential, commercial, and industrial customer locations. Congratulations to TECO Peoples, NW Natural, and Nicor for the award winning projects. We also want to congratulate Frymaster for winning our GFEN Blue Flame Award this year. Its Triple Play Fryer produces more perfectly-cooked food in less space, using less energy and less oil, ultimately saving foodservice operators money and reducing their impact on the environment.

ESC was proud to add to its growing ranks of corporate members Xcel Energy, Semco Energy, Equitable Gas Company, PSNC, PECO Energy, and Con Edison along with a number of new equipment manufacturer members.

On behalf of the Board, we would like to express our appreciation to all the members and the ESC staff whose involvement, support, and engagement have made 2011 a great year for our organization. We look forward to working together to make the coming year a rewarding one for us and our customers!

David Weiss Nancy Lange Gillian WrightESC Executive Director Chair Vice Chair

ESC Board of Directors ESC Board of Directors

ENERGY SOLUTIONS CENTER INC. – 2011 ANNUAL REPORT PAGE 3

ESC Leadership 2011

Equipment Manufacturers Council Leadership Team

Marc Grandbois, ChairSchwank North America

Mary Carson - RCEIRuth Ann Davis – Williams FurnacesBob Heller - GeneracJohn Koenig - AisinUday Purani – Kraft PowerJim Stephens – Relms, Inc.

ESC Support Team

David WeissExecutive Director

Richard BiljetinaIndustrial Markets

Eric BurgisCommercial & Residential Markets

Warren WillitsCommunications & Conference Coordination

Stephanie ReedMeeting Planner

Jennifer CoutoAccounting Assistant

Darrell WilsonChesapeake Utilities

Gillian WrightESC Board Vice ChairSouthern California Gas

Nancy LangeESC Board ChairNW Natural

Energy Solutions Executive Committee

Gary RehmAtmos Energy

Joe RendeNational Grid

Joe Gordon Southern Natural Gas

PAGE 4 ENERGY SOLUTIONS CENTER INC. – 2011 ANNUAL REPORT

Corey MinshewAGL Resources

Delivering Natural Gas Solutions Maximizing Return on Marketing Investment

Engaging CustomersImproving Marketing & Sales Force Productivity

Utilizing Gas to Meet Customer Efficiency & Environmental Goals

How Does ESC Deliver Value?

ENERGY SOLUTIONS CENTER INC. – 2011 ANNUAL REPORT PAGE 5

TMAFs continue to provide the skills, knowledge, and contacts vital in bringing new gas solutions to customers. Gregg Kantor, President and Chief Executive Officer; NW Natural (above left) and Gordon Gillette, President; Tampa Electric and Peoples Gas (above right) shared business insights with ESC members at TMAF.

Delivering Natural Gas Solutions

PAGE 6 ENERGY SOLUTIONS CENTER INC. – 2011 ANNUAL REPORT

Key to greater acceptance and utilization of natural gas equipment is the role of the equipment manufacturer, vendor, and contractor. ESC’s affiliate membership and Equipment Manufacturers Council strive to develop partnerships and business relationships among utilities and equipment manufacturers, vendors, and contractors, and end use customers. Our Technology and Market Assessment Forums offer free display tables so equipment manufacturers and utility staff can discuss options and strategies for introducing customers to new gas equipment and systems. ESC consortia offer equipment manufacturers the opportunity to partner with utilities and leverage resources to have a greater impact on potential customers.

ESC expanded its inventory of customizable marketing materials, brochures, and case studies in 2011. Materials on virtually any gas solution and any customer segment are in the ESC library, ready for reproduction by our member companies. Explaining and promoting the benefits of new gas solutions takes on different flavors at different companies, but collateral marketing materials, whether print, video, or web, provide a crucial tool to reinforcing the value of natural gas to customers. ESC case studies are utilized by virtually the entire ESC membership and cover a range of gas solutions, such as CHP, infrared heating, and tankless water heaters. ESC customer magazines continue to highlight new, successful installations of natural gas equipment and systems in residential, commercial, and industrial settings.

Demonstration of new gas equipment at customer locations throughout North America helps to reduce institutional, economic, and market barriers to the adoption of new gas solutions. ESC is partnering with National Grid,

Tecogen, and Energy Concepts in the installation and monitoring of the Tecogen CM 100 Inverter-Based Combined Heat and Power module

system for the Twin Marquis food processing plant in New York. This engine-based system promises seamless power transfer to stand-alone

operation during power outages and should enable fast-track interconnection permits with host utilities. The system is currently in a

twelve month evaluation period.

Maximizing Return on Marketing Investment

ENERGY SOLUTIONS CENTER INC. – 2011 ANNUAL REPORT PAGE 7

With a favorable outlook for gas pricing and supply, and higher heatingoil prices, some local distribution companies are again focusing on the conversion of home and business heating oil as a strategy for growth.

Working through our newly-formed Oil Conversion Consortium, utilities have developed a model business plan and significant marketing tools.

To help utilities conduct marketing campaigns in their own service territories, the Consortium produced videos, brochures, ads, a door hanger, and postcard mailers. Members used these deliverables to

launch oil conversion campaigns in the fall of 2011.

Market research conducted by the Center helps member utilities decide which market opportunities may have the greatest return. This allows the utility to pinpoint and focus resources in a particular direction. Our National Homebuilder Survey collected views of builders about the sales price difference between comparable homes built with gas appliances versus those built with electric appliances. Our Homeowner Energy Preference Survey documented the value ascribed to natural gas appliances by recent homebuyers. One of ESC’s recent market assessments offered key insights to the carbon impact and cost of geo-thermal heat pumps compared to conventional gas heating systems. Our recent Chef Energy Preference study confirmed that 98% of chefs prefer to cook with natural gas.

ESC produced a Commercial Account Rep Training Module that that provides critical information for gas utility professionals unfamiliar with the diversity of commercial customers, their energy needs, and appropriate applications of gas technologies. This Commercial Buildings Consortium training module is ideal for new hires, transitioning staff, or those individuals who may have been trained only in the electric side of the utility business. Modules cover nine primary markets, such as hospitals, universities, and office buildings, and include the major applications of natural gas solutions, such as cogeneration and humidity control.

This year ESC added nine more videos to its collection, making more than thirty videos available for utility members to reach an array of residential, commercial, and industrial customers. The two and four minute educational videos are designed for web viewing, video kiosks, or trade show booths. Our thirty and sixty second promotional videos are designed for broadcast television, cable access, or movie theater advertising. The most recent videos identified new energy efficiency strategies, the use of gas cooling to reduce air conditioning costs, and the benefit of converting from oil heat to gas. Members can use ESC videos on their websites to communicate the gas message to

PAGE 8 ENERGY SOLUTIONS CENTER INC. – 2011 ANNUAL REPORT

ESC continues to conduct workshops for utility customers in their own backyard. ESC staff, working with the utility staff, will

help target the proper customer segment, develop an appropriate workshop agenda, gather key speakers, and

undertake necessary logistical arrangements. ESC staff and speakers, highly proficient in energy use and energy efficiency,

ensure that participating customers will become more knowledgeable about their natural gas options. Recent

workshop topics included combined heat and power, commercial boilers, oil conversion, and gas air conditioning. Planning an

ESC customer workshop requires little input from the host utility and yet results in a rewarding customer experience.

The trend towards franchising in the restaurant and lodging industries continues unabated, increasing the importance of ESC’s National Accounts Consortium. Engaging this very important group of commercial customers is not easy for an individual utility. But acting as a group, ESC’s National Accounts Consortium has engaged more than two dozen national chains in various projects and initiatives to garner a large role for natural gas and the natural gas utility. Initiatives undertaken in 2011 include 1) assisting several restaurant chains in converting their restaurants from propane to natural gas 2) organizing franchisees in one metropolitan area to take advantage of utility energy efficiency rebates, and 3) facilitating the demonstration of energy efficient low oil volume fryers in fast food restaurants.

thousands of customers. One member translated our videos into Spanish for use at a bill payment center. ESC consortia provide the leverage needed to produce quality videos that do not strain member budgets.

Engaging Customers

Improving Marketing and Sales Force Productivity

Strategic marketing is an important component of ESC’s mission. ESC provided at no cost to its members workshops this year by The Growth Coach® and Leadership in International Management. These interactive sessions challenged members to rethink how their teams do business. The half-day sales and marketing workshops provided participants with techniques to improve their business development performance and insights to help them become more effective leaders.

ENERGY SOLUTIONS CENTER INC. – 2011 ANNUAL REPORT PAGE 9

ESC webinars were scheduled at a furious pace this year to position utility reps to take advantage of improving dynamics for natural gas solutions. ESC webinars are free to our members and available on request. Webinars in 2011 to educate and train utility staff included those on microCHP, industrial energy efficiency, gas conversions, infrared heating, destratification and air curtains, high efficiency boilers, heat pumps, humidity control, and new applications of tankless water heaters.

Our three Technology & Market Assessment Forums won accolades from members for continuing to bring equipment manufacturers and

utilities together to learn about new gas solutions and the most effective strategies and programs to bring them to customers. Record-breaking attendance at this year’s TMAFs reflected the desire of utility staff and

equipment vendors to identify new gas solutions, develop new marketing and sales strategies, and assess the impact of conservation and

efficiency programs. More than 70 equipment manufacturers shared their marketing approaches with the membership. The TMAFs have

become one of the largest venues in the country for the gathering of gas utility marketing and sales professionals.

Our Architect and Engineer kits help promote the efficiency and environmental benefits of various natural gas solutions to the “design and build” community. As with many ESC products, utility members added their own logos and selected inserts relevant to their service territory. Several utilities have distributed these kits at local chapter meetings of various engineering societies. Other ESC members used the kits in “lunch ‘n learns,” where the local utility and invited design professionals meet over an informal lunch.

Utilizing Natural Gas to Meet Customer Efficiency and Environmental Goals

PAGE 10 ENERGY SOLUTIONS CENTER INC. – 2011 ANNUAL REPORT

Our Industrial Energy Efficiency Consortium produced a comprehensive guide, Industrial Metering and Energy

Management, which provides critical guidance to industrial plants in developing metering plans that will increase

efficiency and reduce energy costs. The guide contains an assessment of various metering and control technologies.

ESC’s Commercial Carbon Calculator allows utility staff to help businesses, government, universities, and other commercial customers calculate their carbon emissions and impact based on current and future energy use. The calculator can help customers understand the benefits of natural gas compared to propane, oil, or electricity. In addition to CO2, NOx and SO2 calculations, the tool also can calculate average energy costs by state. The calculator is part of the new website ESC launched in early 2011, making it easier for members and the public to access ESC’s large inventory of deliverables, reports, and tools. Our residential carbon calculator was updated and refreshed this year using the latest available E-Grid data.

Boiler Burner ConsortiumCherif Youssef, Southern California GasAqeel Zaidi, Enbridge Gas

Commercial Buildings ConsortiumJoe Gordon, Southern Natural GasBud Walters, Southwest Gas

Construction Heater / Thermal Remediation WorkgroupSusan Clinesmith, Enbridge GasChris Cole, DTE Energy

Cooling Equipment & Markets ConsortiumPat Kotara, CPS EnergyTom Young, IntelliChoice Energy

Distributed Generation ConsortiumRob Eck, National FuelBob Fegan, DTE Energy

Gas Foodservice Equipment ConsortiumGloria Daniel, AGL ResourcesMelisa Marks, Southern California Gas

Industrial Energy Efficiency ConsortiumRuth Dekker, Union GasCherif Youssef, Southern California Gas

National Accounts Consortium

Greg Anderson, Atmos EnergyBill Chihata, Enbridge GasSusan Davis, Questar GasMelisa Marks, Southern California Gas

NGV WorkgroupRalph Wagner, Southwest GasGreg Woloszczuk, DTE Energy

Oil Conversion ConsortiumAnthony Cox, UGIBob Gallo, New Jersey Natural Gas

Residential & Commercial Energy Efficiency ConsortiumBill Holmes, South Jersey GasWinston Humphrey, Florida Public Utilities

Residential Burner Tips ConsortiumDiane Murray, Union GasBridget Wallace, Atmos Energy

Residential Video ConsortiumRob Eck, National FuelDarrell Wilson, Chesapeake Utilities

ENERGY SOLUTIONS CENTER INC. – 2011 ANNUAL REPORT PAGE 11

Energy Solutions Center Wishes to Recognize and Thank OurConsortia and Workgroup

Product Champions

Florida Public Utilities Co.Gaz MetroHeritage GasIntermountain GasLaclede GasManitoba HydroMissouri Gas EnergyMunicipal Gas Authority of GeorgiaNational Fuel GasNational GridNew Jersey Natural GasNicor GasNIPSCONorthwest NaturalONEOKPECO Energy CompanyPhiladelphia Gas Works

Corporate Members

AGL ResourcesAlagascoAtmos EnergyAvistaBlack Hills EnergyCenterPoint EnergyChesapeake UtilitiesCitizens EnergyCity of Richmond (Va.)Columbia GasCon EdisonCPS EnergyDominion EnergyDTE EnergyEnbridge Gas DistributionEquitable Gas CompanyFlorida Public Gas Group

Affiliate Members

AltronicA.O. SmithAisin World CorporationAmerican Gas AssociationArmstrong InternationalBradford WhiteBurnabyCapstoneCaterpillarClayton BoilersClearEdge PowerCleaver BrooksCombustion & Energy SystemsEnergenicEnershield IndustriesFirebridge, Inc. Fulton

Piedmont Natural GasPSNCPuget Sound EnergyQuestar GasSEMCO ENERGY Gas CompanySouth Jersey GasSouthern California Gas CompanySouthern Natural GasSouthwest Gas CorporationTECO Peoples GasThe Gas Company (Hawaii Gas)UGI UtilitiesUnion Gas Ltd.Vectren Washington GasXcel EnergyYankee Gas

Gas Technology InstituteGeneracGL&VGreen Building InitiativeGreffen SystemsHome Services USAHurst BoilerInsultech (Shannon Enterprises)IntelliChoice EnergyKraft PowerLime EnergyMarathon Engine SystemsMarathon InternationalMontagueModine ManufacturingNatural Gas Technologies Center Natural Gas Vehicle Institute

Navien AmericaNovitherm PrecisionTemp, Inc.QuikWater, Inc.Relms, Inc.Rheem Manufacturing RinnaiRoger Carson Enterprises IncSchwank Ltd.Solar TurbinesSuperior Boiler WorksSuperior Radiant ProductsTecogenThe Growth CoachWilliams Furnaces

Energy Solutions Center Inc. | 400 N. Capitol Street N.W. | Washington, DC 20001 | www.ESCenter.org

ESC 2011 Membership