Pasadena Water & Power Intermountain Power Project Amend the Existing Contracts Participate in Renewal Project Pasadena City Council Item 11 July 20, 2015

Pasadena Water & Power Intermountain Power Project (“IPP”) 2 Coal generating 900 MW each STS and NTS transmission systems Owned by IPA, Legal Subdivision of State of Utah established in 1977 Includes 30 participants in Utah and 6 California municipal utilities (Anaheim, Burbank, Los Angeles, Glendale, Pasadena, and Riverside) 2

Pasadena Water & Power Intermountain Power Project (“IPP”) Current IPP Contracts  Pasadena share of 1,800 MW… ~ 6% (108 MW)  ~ 50% Pasadena’s energy needs  ~ 90% Pasadena’s carbon emissions  Expire on June 15, 2027  Option to renew coal power prohibited by CA law 3

Pasadena Water & Power Intermountain Power Project (“IPP”) Resources near or connected to STS/NTS  Milford 1 (Wind) … 5 MW  300+ MW operating wind projects  300+ MW proposed solar projects  Potential for more wind, solar and geothermal  Salt caverns ideal for compressed air energy storage  Connectivity to Utah and Nevada energy markets 4

Pasadena Water & Power Regulatory Considerations Impacting Power Sector Coal is out of favor Decabonization of electric sector More mandated renewables Regional transmission connectivity Evolving laws and regulations 5 Manage carbon liability More renewables in the power mix Manage solar and wind variability Manage regulatory uncertainty Inter-regional transmission systems

Pasadena Water & Power Options for Pasadena 6 Contractual Options Net (Cost) /Revenue $ (NPV) Option to be in the Renewal Project Early Carbon Reduction Transmission & Access to Renewables 1 Do Nothing Existing contracts continue until June 2027; Renewal Project does not proceed (5.4 to 82.8 million) No 2 Amend Contracts; Do not subscribe to Renewal Project; Get the Transmission 27.4 millionNoYes 3 Amend Contracts; Subscribe to Renewal Project with option to exit in 2019; Get the Transmission (Recommended) 27.3 million Yes with Option to Opt out by 2019 Yes Note Costs and revenues estimates are based on assumptions which may significantly change over period of time such as, but not limited to, cost of fuel, energy, capacity, decommissioning, transmission, congestion pricing, pollution control equipment costs, regulatory and legislative requirements.

Pasadena Water & Power Why Change IPP Contracts Mandated and voluntary carbon reduction policies for California Purchaser Cities Preserve value of present investments in IPP beyond 2027 for Purchasers LADWP’s desire for early exit from coal and a replacement project beyond 2027 Regulatory certainty for IPA and Purchasers until 2027 and beyond Certainty for jobs and revenues for IPA (and Utah) beyond Drivers Diverse needs of 36 Purchasers and IPA Different regulatory policies between California and Utah Not all Purchasers ready to commit for 50 years beyond 2027 Practical constraints ….future transmission rights tied to future generation One Purchaser willing to take on the entire project Challenges Early Carbon Reduction and Flexibility for Future Planning

Pasadena Water & Power New Project...Major Deal Points All 36 participants must approve amendment to the existing contracts ,200 MW natural gas plant, may include renewables Commissioning of new power plant by 2025 Transmission entitlement tied to generation subscription New project term for 50 years starting June 16, 2027 Development cost to be paid by new power plant particpants Decommissioning cost of coal units to be a part of new power plant financing 8

Pasadena Water & Power Renewal Project...Major Deal Points Between commissioning of new power plant & June 2027  Existing participants get current percentage of capacity entitlement  Existing participants’ transmission entitlements remain unchanged  Existing participants pay prorated share for decommissioning of coal plants Option for California participants (except LADWP) to opt out by Aug 2019 If opted out by Aug 2019, California participants get 50% of current transmission entitlement from LADWP….a good faith non-binding agreement California participants can opt to take power on behalf of Utah participants and therefore, get rights to NTS transmission system. 9

Pasadena Water & Power Good Faith Agreement with LADWP If Pasadena executes 2nd APSC but does not subscribe to new Power Sales Contracts initially or opt out by Nov 2019, LADWP will provide STS, NTS and Adelanto-Sylmar transmission service equal to 50% of PWP’s present entitlement in IPP:  STS IPP to Adelanto = 71 MW  STS Adelanto to IPP = 41 MW  NTS IPP to Mona = 52 MW  NTS Mona to IPP = 18/45 MW  NTS IPP to Gonder = 8 MW  NTS Gonder to IPP = 5 MW Rates & other contract terms to be finalized by May

Pasadena Water & Power Staff & MSC Recommendation Pros…Greater Flexibility  Early reduction in carbon and other air emissions  Option to stay-in or opt-out by 2019  Access to renewables connected with IPP transmission beyond 2027  More regulatory certainty… uninterrupted operation  Ability to balance energy portfolio… getting away from the largest contingency  Access to regional transmission  Potentially reduced coal plant decommission cost  Geographic and resource diversity Cons  Estimated $25 million (NPV) cost compared to continuing current operations through Recommendation: Amend the existing contracts; and Subscribe to New Project up to 40 MW with option to opt out by 2019

Pasadena Water & Power Back Up Slides BACK UP SLIDES 12

Pasadena Water & Power Pasadena’s Share of costs 13 Activities Costs, NPV Revenue, NPV 2025 to 6/2027 Renewal Project impact $ 24,841,044 Decommissioning if no Renewal Project $ 5,405,167 SCR retrofits $ 77,475,868 Transmission value $ 52,273,633 Development cost until 8/2019 $ 170,152 Notes: (1)The actual cost may vary significantly depending upon new plant start up date; capacity, energy and emissions costs; and regulatory requirements (2)NOx SCR retrofit may be enforced by USEPA..

Pasadena Water & Power Contractual Options….MSC 14 Contractual options Loss of economic value between 2025 and 2027 Regulatory Certainty Early Carbon reduction beginning 2025 Option to extend generation contract beyond 2027 Option to extend transmission contract beyond 2027 Access to Renewables in Utah and Nevada Option to opt out of Renewal Project by 8/2019 Geographic diversity beyond 2025 Do Nothing Not amend the existing contracts None to potentially very high impact* Very LowNo N/ANo Amend the Existing Contracts but not subscribe to Renewal Project $25 million** (NPV) HighYesNo Not from IPA; Yes from LADWP No No in IPP Yes for others (Recommended) Amend the Existing Contracts and subscribe to Renewal Project $25 million** (NPV) HighYes OR If opted out: Not from IPA; Yes from LADWP Yes * Depending on the impact of US EPA regulations. ** The actual cost may vary significantly depending upon new plant start up date; capacity, energy and emissions costs; and regulatory requirements.

Pasadena Water & Power Three New Contracts 1.2 nd Amendatory Power Sales Contract (APSC )…All Purchasers (including Pasadena) must sign and IPA approve for it to be effective Renewal beyond 2027 with natural gas plant Allows including renewables and other resources in the Renewal Project IPA to offer Renewal Power Sales Contract within 45 days Allocation of energy, capacity & costs during transition period Allocation for coal plant decommissioning cost IPA’s commitment to offer Renewal Power Sales Contracts Renewal project construction start by 2020 & commissioning by 2025 If Renewal Project does not materialize  The existing project extends to 2032; No coal generation after 6/2027  Decommissioning to be completed by 2032  Purchasers pay in proportion to energy received over the contract term  Transmission contracts extended for next 50 years 15

Pasadena Water & Power Three New Contracts …continued 2.Renewal Power Sales Contract …Optional or opt out by 11/2019 for PWP 2 natural gas units MW or less Subscription by percentage in generation Formula based STS (CA) & NTS (UT) entitlements linked to % in generation LADWP to provide STS equivalent Adelanto to Sylmar transmission to PWP Renewal project construction start by 2020 & commissioning by 2025 Coal plant decommissioning cost paid by Renewal Purchasers after 2027 Subscription increased if Renewal Project subscribed ≥ 85% but <100%. Californians, except LADWP, can reduce subscription by 20% or terminate contract by providing a notice by 8/2019. LADWP’s subscription will increase by the amount the subscription is reduced by other CA Purchases 16

Pasadena Water & Power Three New Contracts …continued 3.Excess Renewal Power Sales Contract …Optional or opt out by 2019 for PWP Contract with Utah Purchasers and IPA… allows entitlement to NTS. Utah Purchasers assign their entitlements and costs in generation and NTS to California Purchasers. LADWP obligated to assume entire Utah Purchasers entitlements if no other California Purchaser willing to assume. Utah Purchasers can recall their entitlements in parts on annual basis. If Utah Purchasers recall all of their entitlement, California Purchasers will retain some of the NTS based on a formula. 17