PWP 2015 IRP Update Item 18 June 22, 2015

Foundation – Earlier IRPs This IRP Update builds on concepts & action plans from 2009 & 2012 IRPs. Environmental Stewardship System Reliability Fiscal Responsibility Sustainable Cost Effective Feasible Viable System Reliability: Maintain a capacity planning reserve margin of at least 15-18%; Maintain CAISO Resource Adequacy requirements in compliance with the CAISO Tariff (including System Resource Adequacy, Local Capacity Resources, and Flexible Resource Adequacy Capacity requirements); Preserve, optimize, and enhance local generation to reduce risk of overreliance on a single transmission tie at the TM Goodrich substation;Integrate remote and variable generation (wholly owned or joint project participation), demand side management and distributed generation. Fiscal Responsibility: Maintain stable, competitive rates; Reduce market and price volatility in fuel and other cost factors; Minimize levelized Net Present Value of generation-related direct costs, including costs of greenhouse gas regulation compliance; Provide transparency in expected power-related rates for the average ratepayer, both in terms of percentage and dollar impact. Environmental Stewardship: Minimize the environmental impact of meeting Pasadena’s electric energy needs; Comply with all federal, state and local laws and regulations; Meet or exceed required standards for renewables (RPS percentage) and CO2 emission reductions.

IRP Process Action Plan Sustainable 20-Year Strategic Resource Plan Identify Needs Load Forecast Resources (Supply and Demand) Regulatory Requirements Reliability Requirements Identify & Evaluate Resource Portfolios Supply & Reliability Adequacy Regulatory Compliance Contractual Compliance Least Cost Environmental Impact Societal Factors Flexibility Updates & Uncertainty Analysis Scenarios & Sensitivities Changes in Market Changes in Law Changes in Contracts Changes in Load Profile Public / Stakeholder Involvement Advisory Group Public Meetings Website Social Media Survey Action Plan Short-Term Recommendations Sustainable 20-Year Strategic Resource Plan Updated Every 2-3 Years Balances: Reliability, Fiscal Responsibility, Environmental Stewardship

2015 PWP IRP Identify Needs

Billed Sales Forecast

Balancing Capacity/Energy

PWP Power Supplies Our actual total came in closer to 28% renewables for 2014, but as you can see, today a lot of PWP’s power supply comes from the Intermountain Power Project, which is coal-fired, in Utah. But the next biggest chunk, and growing at a rapid rate, is renewables, including geothermal, small hydro, solar, wind, and what the state calls biomass and biowaste, but for us is primarily biomethane and landfill gas. Back on the conventional side, we also get 4% from a large hydro project outside of Las Vegas (Hoover Dam), 7% from a nuclear plant in Arizona (Palo Verde), and 8% each from natural gas (primarily at our local plants) and market purchases.

RPS Progress

Identify & Evaluate Resource Portfolios 2015 PWP IRP Identify & Evaluate Resource Portfolios

(Preferred Portfolio) “Green” Market Influence IRP Terminology Portfolios 1 Stay the Course (Preferred Portfolio) 2 IPP (Coal) Reduction 40% RPS (by 2020) 3 50% Renewable Portfolio Standard (by 2025) 4 70% Renewable Portfolio Standard (by 2030) 5 Carbon (GHG) Neutral (by 2030) Scenarios Base Case B&V Energy Market Perspective High Gas Prices Low Gas Prices “Green” Market Influence Higher Carbon Pricing Sensitivities Higher Energy Efficiency IPP (Coal) Economic Dispatch (slightly higher generation than Business As Usual) IPP Early Retirement in 2025 (original contract expires in 2027) Groups of Power Supply Resources Sets of Market Assumptions Basic Model Variations

Reducing IPP Generation (under current contract) 2014 Average Generation = 70 MW

(Preferred Portfolio) Base Case Portfolio Scorecards: Financial (Fiscal Responsibility) Measures 60% GHG Reduction (Preferred Portfolio) $1,377 $101.1 $91.90 IPP 2025 Retirement $1,419 $103.9 $94.06 Reduced IPP Dispatch $1,437 $104.9 $95.85 50% RPS by 2025 $1,477 $108.1 $98.57 70% RPS by 2030 $1,524 $112.2 $101.74 Carbon Neutral $1,743 $129.2 $115.53 Total System Cost NPV ($Millions) Avg. 20-Year Portfolio Cost ($Millions/Yr) Levelized Direct Electric Cost 2015 ($/MWh)

Base Case Portfolio Scorecards: System Reliability Measures 60% GHG Reduction (Preferred Portfolio) 21% 9% 53 23% 5% IPP 2025 Retirement 20% Reduced IPP Dispatch 11% 6% 50% RPS by 2025 24% 78 12% 70% RPS by 2030 29% 17% Carbon Neutral 7% 0% Average Reserve Margin (%) Minimum Reserve Margin (%) Incremental FRAC from 2015 (MW) 20-Year Avg. Wholesale Sales (%) 20-Year Avg. Wholesale Purchases (%)

Base Case Portfolio Scorecards: Environmental Stewardship Measures 60% GHG Reduction (Preferred Portfolio) 13,003 -64% N/A 1,070 45,629 59,610 IPP 2025 Retirement 12,167 $110 1,014 40,581 62,763 Reduced IPP Dispatch 9,416 $37 876 23,807 73,532 50% RPS by 2025 9,088 -68% $56 837 23,757 67,857 70% RPS by 2030 8,783 -74% $77 792 23,755 63,352 Carbon Neutral 5,838 -100% $113 572 28,270 48,642 CO2 Emissions (thousand metric tons) 2030 GHG Reduction from 2008 (%) Realized GHG Emission Cost ($/metric ton) 20 year Avg GHG Intensity (lbs/MWh) Coal Burned (thousand tons) Natural Gas Burned (Gbtu)

Portfolio Cost Comparison ($2015)

Portfolio Cost Comparison Expected Increase from Starting (Today’s) Cost to 20-Year Levelized Increase from Status Quo (2008) or Stay the Course (2015) Total Portfolio Cost Increase 2008 IRP ($2008) 28% 6% 34% 1A – Stay the Course ($2015) 27.7% N/A 2A – Reduce IPP ($2015) 4.3% 32.0% 3A – 50% RPS ($2015) 7.3% 35.0% 4A – 70% RPS ($2015) 10.7% 38.4% 5A – GHG Neutral ($2015) 26.8% 54.5%

What Portion of PWP Costs Are We Addressing in the IRP? The IRP Modeling addresses only the Direct Cost component of the Energy Service Charge. Analyses of the economic impact of various alternatives under the IRP on customer rates/bills assume that all other components of the power bill and rate structure remain unchanged from FY2017. It is reasonable to assume that there will be increases in these other components as well over the next 20 years.* It is very difficult to accurately predict all components of rates over a 20 year horizon. PBC = Rebate & Assistance Programs. 53% is for Utility Rebates, 15% is for Direct Installation Rebates, 10% is for Utility Assistance, 10% is Labor & Burden, 12% is Services, Supplies and Other Operating Expenses. The PBC increased by 2% in 2009, and 0.7% in 2015. Transmission Services Charge = Operations, maintenance and portion of capital costs for transmission assets. Distribution and Customer Charges = Call center, billing, customer service, Distribution system operations and maintenance, Debt service, PAYGO for capital investment. Approved Rate increases for 2015 = 2.7%, 2016 = 2.4%, and 2017 = 2.2%. 38% of the D&C charge is Labor & Burden, 21% is depreciation and amortization, 17% is services, supplies and other operating expenses, 15% is debt, and 9% is general fund transfer. Energy Services Charge = Debt Service for GT5 project, Renewable energy premiums, Cap and trade program, Market gas and energy purchases * For example, the CAISO is forecasting significant increases in its transmission access charge.

Estimated Impact of Direct Electricity Cost Only – Monthly Residential Bill (by Usage) Assumes no changes to other cost components or rate structure from FY 2017 approved rates Portfolio Portfolio Name 500 kWh 1000 kWh Current Annual Average Monthly Bill – As of March 2015 $84.95 $189.78 20-Year Levelized (2015$) 1 Stay the Course (Preferred Portfolio) Economic IPP Dispatch + carbon premium 40% RPS by 2020 $96.31 $216.03 2 Reduced IPP Output Reduce IPP to Min starting in 2015 $100.77 $224.93 3 Blended – 50% RPS 50% RPS by 2025 (Solar/Wind/Base Mix) $102.01 $227.42 4 Blended – 70% RPS 50% RPS by 2025 & 70% by 2030 (Solar/Wind/Base Mix) $103.47 $230.34 5 Carbon (GHG) Neutral Starting in 2015: Reduce IPP to Min, no power market purchases, natural gas plants burn 100% biomethane. 50% RPS by 2025 & 100% Carbon-Free by 2030 (e.g., 88% Renewable and 12% existing large hydro/nuclear) $110.24 $243.88

Estimated Impact of Direct Electricity Cost Changes on Monthly General Service Bill (by Usage) Assumes no changes to other cost components or rate structure from FY 2017 approved rates Portfolio Portfolio Name 2,000 kWh 10,000 kWh 50,000 kWh 100,000 kWh Current Annual Average Monthly Bill – As of March 2015 $327 $1,664 $7,563 $14,875 20-Year Levelized (2015$) 1 Stay the Course (Preferred Portfolio) Economic IPP Dispatch + carbon premium 40% RPS by 2020 $372 $1,898 $8,630 $16,965 2 Reduced IPP Output Reduce IPP to Min starting in 2015 $390 $1,988 $9,081 $17,847 3 Blended – 50% RPS 50% RPS by 2025 (Solar/Wind/Base Mix) $395 $2,014 $9,208 $18,093 4 Blended – 70% RPS 50% RPS by 2025 & 70% by 2030 (Solar/Wind/Base Mix) $401 $2,043 $9,355 $18,382 5 Carbon (GHG) Neutral Starting in 2015: Reduce IPP to Min, no power market purchases, natural gas plants burn 100% biomethane. 50% RPS by 2025 & 100% Carbon-Free by 2030 (e.g., 88% Renewable and 12% existing large hydro/nuclear) $427 $2,181 $10,042 $19,722

Public / Stakeholder Involvement 2015 PWP IRP Public / Stakeholder Involvement

Stakeholder Technical Advisory Group Member Representing Margaret McAustin Pasadena City Council / MSC George Falardeau Art Center College of Design Brian Killett Citizens Climate Lobby Paul Little Chamber of Commerce Dennis Murphy Pasadena Resident John Onderdonk Cal Tech Tom Romeyn Huntington Hospital Reuben Smith Pasadena City College Morey Wolfson Environmental Advisory Commission Michael Beck Pasadena City Manager Julie Gutierrez Pasadena Asst. City Manager Laura Dahl Pasadena Planning Dept. Phyllis Currie PWP General Manager Eric Klinkner PWP Asst. General Manager (alt) Sandra Ell Environmental Adv. Commission (alt) Pedro Pizarro Cal Tech Board (first few meetings)

Customer and Stakeholder Involvement Stakeholder Technical Advisory Group 15 members appointed by Mayor 8 meetings MSC and EAC Briefings 3 Open Public Meetings Electronic Updates PWP Website Email Social Media Survey Video

Some Key Customer Survey Observations Top Priorities: Reliability Low Cost Environmental Responsibility Everything is a Priority! Higher RPS Supported by Many Cost/Rates = Major Concern Coal = Major Concern Many Interesting & Valuable Comments. See at www.pwpweb.com/irp

Updates & Uncertainty Analysis 2015 PWP IRP Updates & Uncertainty Analysis

Key Issues/Changes CAISO Reliability Requirements Local & Flexible Resource Adequacy Capacity (“FRAC”) Energy Imbalance Market (“EIM”) The “Duck Curve” Changing Net Load Profile alters timing of “peak” and “off-peak” loads/prices Over-generation Need for fast-ramping, flexible resources Retail Load Increasing penetration of distributed generation (e.g., rooftop solar, microgrids) which reduce load, and EV charging would increase load Change hourly and seasonal shape and load factor Cap-and-Trade Will it continue past 2020, or be replaced by federal carbon tax or some other program?

The Duck Curve

Key Issues/Changes (con’t) GHG Emission Levels 1990 levels by 2020 (AB32 – The Global Warming Solutions Act) 80% GHG reduction below 1990 levels by 2050 (Schwarzenegger’s Executive Order S-3-05) 40% GHG reduction below 1990 levels by 2030 (Brown’s Executive Order B-30-15, issued 4-29-15) California’s RPS At least 33% by 2020 (AB32) Brown’s “Golden State Standards (aka: the 50/50/50 plan): 50% RPS by 2030 Renewable Resources and Energy Storage Costs expected to continue to decline Technology still evolving Tax incentives, legislative changes and reliability requirements uncertain Intermountain Power Project Contract

Intermountain Power Project (“IPP”) IPP is the largest contributor of GHG emissions in the PWP generation portfolio.* * Percentages using current CARB GHG reporting methodology for electric utilities

PWP Carbon Emissions to Date Emission Source 2008 2009 2010 2011 2012 2013 2014 Local Generation 82,724 73,355 74,590 80,551 139,828 59,603 64,217 Imports (incl. IPP Coal) 672,321 666,596 629,755 642,935 514,443 536,241 546,314 Magnolia* 38,553 36,285 40,727 19,169 5,723 4,540 12,073 Net Market Purchases* 111,720 106,925 65,898 74,751 97,901 63,304 85,656 Total Emissions/ (2008 Method) Reduction from 2008 905,317 N/A 883,161 2.4% 810,970 10.4% 817,406 9.7% 757,895 16.3% 663,687 26.7% 708,261 21.8% Total Emissions/ (Current Method) 755,045 739,951 2.0% 704,345 6.7% 723,486 4.2% 654,271 13.3% 595,844 21.1% 610,531 19.1% *In 2008, Magnolia & Net Market Purchases were included in PWP Emissions. Current Method excludes them because they are counted by other entities (Burbank for Magnolia; Generation owners or first importers for CAISO market purchases). Switching from natural gas to biomethane at Magnolia produces RPS RECs but does not show up as PWP carbon emission reduction under current CARB methodology.

PWP Carbon Emissions vs. 1990 (MT) 2014 Actual Emissions 40% Reduction 60% Reduction 80% Reduction 918,622 708,261 551,173 367,488 183,724

2015 PWP IRP Action Plan

Recommendations GHG reduction of at least 60% from 1990 levels by 2030 (to approx. 367,500 MT) Eliminate coal fired generation no later than 6/16/2027. Preserve IPP related transmission rights. Have an option to reduce or opt out of any IPP natural gas repowering no later than 2019. Until IPP is repowered, reduce IPP coal-fired generation when operationally & economically practicable.

Recommendations (con’t) Continue to acquire all cost-effective and viable energy efficiency. At least 1% of annual net energy load (12,750 MWh/year) and 0.7% of annual peak demand 2.3 MW/year) through 2023. Update recommendations to City Council in 2017. Continue to acquire cost effective renewable energy. Renewable Portfolio Standard Policy & Annual Procurement Plan Pasadena target = 40% RPS by 2020 State target = at least 33% RPS by 2020; may increase to 50% RPS by 2030 Support local renewable energy resources and community solar efforts. Establish Feed-in Tariff by the end of 2016. Launch a Community Solar pilot project by the end of 2016.

Recommendations (con’t) Continue to ensure reliability and flexibility to respond to electric industry changes. Explore and procure viable, cost-effective new technologies and efficient conventional technologies as needed to meet reliability and flexibility requirements. Including distributed generation and energy storage. Preserve existing local generation. Evaluate repair and/or replacement options for Glenarm Unit 2.

Why “Stay the Course?” Reaffirms Pasadena’s Aggressive 2012 IRP Commitments Achieves a 60% GHG Reduction from 1990 Levels by 2030 Ahead of California statewide goal to reduce GHG 40% by 2030 under Governor Brown’s Executive Order B-30-15 Meets or Exceeds All of PWP’s Current Requirements Legal, Regulatory, Reliability and Environmental Provides Flexibility to Adapt to Changing Conditions Least Cost Option Considered

Preferred Portfolio: Stay the Course = 60% GHG Reduction by 2030 Eliminate Coal Energy Efficiency Renewable Energy Local & Community Renewable Programs 60 % GHG REDUCTION FROM 1990 LEVELS BY 20301 1 Statewide GHG targets are 40% reduction by 2030 & 80% by 2050 from from 1990 levels.

2015 IRP Update Supporting Materials

Average New Renewable Technology IRP Cost Assumptions Net Metering No PWP program in place yet – generic assumption is higher than most other utility programs. Assumes reduction in federal Investment Tax Credit post 2016. Current solar PV offers are significantly less.

Average PWP Generation Cost by Resource

Expected PWP Gas-Fired Generation Cost

Assumptions – Natural Gas Prices

Assumptions – Electricity Prices

Assumptions – Carbon Prices

2030 Total Power Supply Content Comparison by Portfolio Baseload Renewables include Geothermal and Biogas/ Biomethane.

Power Supply Changes Over Time – Stay the Course Baseload Renewables include Geothermal and Biogas/ Biomethane.

Base Case Portfolio GHG Comparison Carbon (GHG) Intensity = GHG Emissions / Sales Average over 20 years One-year (2030) GHG emissions compared to 2008

How much does the 40% RPS portfolio (above and beyond the SBX1-2 33% mandate) cost rate payers? During the last rate case, PWP explored the potential impact on rates of reducing the local RPS from 40% to the state mandated 33%. As the table below shows, the savings would be very small. Reduce Renewable Portfolio Standard from 40% to 33% Fiscal Year 2015 Fiscal Year 2016 Fiscal Year 2017 Fiscal Year 2018 System Average Rate per kWh 16.150¢ 17.120¢ 18.030¢ Change in ¢ per kWh n/a (0.035¢) (0.027¢) (0.053¢) New System Average Rate per kWh 17.085¢ 18.003¢ 17.977¢ Annual Savings for 500 kWh per month Customer $2.10 $1.58 $3.18 Annual Savings for 1000 kWh per month Customer $4.20 $3.24 $6.36 Annual Savings for 10,000 kWh per month Customer $42.00 $32.40 $63.60 Annual Savings for 100,000 kWh per month Customer $420.00 $320.40 $636.00

Energy Charge (Adjusted by formula) Power Supply FTE: 52

Progress Toward 2012 IRP Recommendations Target Status Renewable Energy: RPS 40% by 2020; Meet/exceed state mandated level of 33% by 2020 On Track; 28% for 2014; Well on our way to 40% by 2020 Renewable Energy: Local Solar 15 MW by 2020; 19 MW by 2024 Approximately 6.2 MW installed Coal Power Displacement Reduce coal purchases by at least 35 MW by 2016 (via power sale to non-California public entity buyers) No willing/qualified buyers; Sales blocked by CARB Resource Shuffling Rules. Able to achieve some reduced output w/economic dispatch + additional carbon premium. New Local Gas-Fired Generation Replace Broadway power plant with a comparably sized new combined cycle plant by 2014 GT-5 Under Construction; Commercial Operation expected June 2016 Energy Savings Incorporate adopted 2010 Energy Efficiency Goals Adopted 2013 Energy Efficiency Goals: 12,750 MWh, 2.3 MW = ~ 1% per year (energy), 0.7% (demand) Additional Demand Response Additional 5 MW by 2012 through incentives and programs None identified to date. Under review pending development of smart grid strategy. GHG Emissions Reductions 25% by 2015; 40% by 2020 (from 2008 levels) 19.1% as of 2014 Upgrades of Existing Generation Continue to maintain and upgrade Glenarm Units 1 and 2 to extend their lives through 2030 Unit 1 complete. Unit 2 still being evaluated. Separate staff recommendation pending.

Customer Survey 470 responses to 24 questions between August 2014 & May 2015 Respondents self-selected & not restricted as to the number of times they could respond to the survey. 83.5% indicated that they live in Pasadena. 48.1% indicated that they work or own a business in Pasadena. 82.8% indicated that they were answering from a residential customer perspective. Not necessarily statistically significant. Summary data on the responses, charts, and lists of additional comments received, if any available on PWP IRP website. 470 responses to 24 questions between August 2014 & May 2015 Respondents self-selected & not restricted as to the number of times they could respond to the survey. 83.5% indicated that they live in Pasadena. 48.1% indicated that they work or own a business in Pasadena. 82.8% indicated that they were answering from a residential customer perspective. Not necessarily statistically significant. Summary data on the responses, charts, and lists of additional comments received, if any available on PWP IRP website. It was intended to give a voice to some of PWP’s stakeholders who might not speak up during public meetings, who might not attend public meetings, or who were seeking guidance to structure specific comments with respect to the IRP. The survey also provided an opportunity to offer a couple of thought provoking insights on of a couple of IRP related topics. As an aside, the survey also provided interesting demographic data on responding stakeholders.