PG&E’s Oakley Application (A ) Yuliya Shmidt, lead Selena Huang, analyst Candace Morey, attorney May 23, 2012 Image of proposed Oakley plant from California Energy Commission:

22 Oakley (Contra Costa) Power Plant  New combined cycle natural gas-fired facility in Contra Costa County  584 megawatts (MW)  Heat rate of 6,752 British Thermal Units per kilowatt-hour (BTU/kWh)  Total cost of approximately $1.15 billion  Alleged to be efficient (low fuel consumption and GHG emissions) and fast- ramping  Bid into PG&E’s 2008 Long-Term Request for Offers (LTRFO)  Was shortlisted  PG&E executed a power and sale agreement (PSA) for the facility in 2009  Fully permitted (although CEC permit is being challenged in the courts) and began construction in June 2011

33 Procedural Background  In 2007, the Long-Term Procurement Plan proceeding found a need of 800-1,200 MW of new generation for PG&E (D )  PG&E filled that need in 2008 and 2009 with two projects which have been approved (Mariposa and Mirant Marsh Landing)  To fill the last of its need, PG&E proposed three facilities simultaneously in 2009:  Oakley Plant (utility-owned generation, A ): 584 MW  GWF Tracy (PPA, A ): 145 MW  Calpine Los Esteros (PPA, A ):109 MW  DRA recommended that the Commission approve either Oakley or GWF Tracy and Calpine Los Esteros

44 Procedural Background  The Commission conditionally approved the GWF Tracy and Calpine Los Esteros plants if Oakley were denied (D )  The Commission then rejected Oakley citing a lack of need for the plant but allowing it to be resubmitted if one of three events occurred (D ):  a project fails creating an open need  PG&E is able to retire a Once Through Cooling plant ahead of schedule  The CAISO Renewable Integration Study demonstrates that there are reliability risks from integrating the 33% RPS  Since Oakley was denied, GWF Tracy and Calpine Los Esteros were approved Continued…

55 Procedural Background  PG&E immediately filed a Petition for Modification (PFM) of the Oakley decision  Changed the online date from 2014 to 2016 to better fit with PG&E’s need  All other aspects of the Application remained the same  Procedurally, the CPUC could not approve the facility as a PFM  The Commission, sua sponte, converted the PFM to an Application  The Application for PG&E to purchase and operate the Oakley facility with a 2016 online date was approved in 2010 (D )  TURN challenged D in the California Court of Appeal  In March 2012, the Court annulled the Decision because did not follow “proper procedures” (TURN v. California Public Utilities Commission, Case No. A132439) Continued…

66 Updated Application  PG&E immediately filed a new Application to purchase and operate the Oakley plant with the 2016 online date (A )  Proposal is identical to previous Application  Leaves open the possibility that the plant comes online in 2014 and operates as a merchant until purchase date of 2016  PG&E claims this is unlikely  PG&E did not filed Testimony with its Application but alleged that its Testimony will be filed on May 16  Eight parties, including DRA, filed protests  Two parties – CARE and Independent Energy Producers – filed Motions to Dismiss  Administrative Law Judge Rulings set a Prehearing Conference for May 22, directed parties to immediately begin discovery, and shortened PG&E’s time to reply to protests

77 DRA’s Protest  PG&E has no authority nor outstanding need to procure this plant  PG&E has not met any of the three requirements for resubmitting Oakley  Need for new generation being determined in the LTPP (R )  That proceeding is ongoing with a Decision expected by the end of 2012  It is the appropriate venue for a need determination  Application does not comply with requirements for filing a UOG proposal, new rules require a Certificate of Public Convenience and Necessity (D )  The previous proceeding’s partial settlement on cost recovery – to which DRA is a signatory – is no longer in effect  The plant may no longer be competitive and its value, as a potentially-used plant, is not the same as a brand-new facility

88 Follow-up Actions  At Pre-Hearing Conference on May 22 emphasized that:  PG&E does not have authority for this plant  PG&E has not satisfied the requirements for submitting this Application  Challenge PG&E’s extremely aggressive proposed schedule  Request more time for discovery and intervenor testimony  Reserve right to hearings  Supported Independent Energy Producer’s Motion to Dismiss