Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Copyright © 2011 Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved. Credit Ratings -- the USA, California, and California's Energy Businesses Power Association of Northern California San Francisco, CA October 11, 2011

2. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Agenda Overview of credit ratings U.S. corporate credit quality Power sector credit quality Challenges facing the power sector 2011 and beyond

3. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. What is a Credit Rating?

4. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Long-Term Debt Rating Scale ‘AAA’Highest Credit Quality ‘AA’ ‘A’ ‘BBB’  Investment Grade ‘BB’  Non-Investment Grade ‘B’ ‘CCC’ ‘CC’ ‘SD/D’Debt in Selective Default / Default

5. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Standard & Poor’s Rating Analysis Methodology Profile (“RAMP”) RATING Business Risk Industry Characteristics Company Position Profitability / Peer Group Comparisons Country Risk Financial Risk Accounting Governance, Risk Tolerance, Financial Policy Cash Flow Adequacy Capital Structure Liquidity/Short Term Factors

6. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Business and Financial Risk Profile Matrix Source: Standard & Poor’s “Criteria Methodology: Business Risk/Financial Matrix Expanded,” published 5/27/09.

7. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Global Corporate Average Cumulative Default Rates ( ) Source: Standard & Poor’s “2010 Annual Global Corporate Default Study And Rating Transitions,” published 3/30/11.

8. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Majority of Non-Financial Corporate Issuers Speculative Grace

9. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Speculative-Grade Default Experience And Forecast – A Fragile Recovery We Expect The Speculative-Grade Default Rate To Fall Shaded areas are periods of recession as defined by the National Bureau of Economic Research. Source: Standard & Poor’s Global Fixed Income Research; Standard & Poor’s CreditPro ®. U.S. Corporate Speculative-Grade Default Rate And 12-Month Forward Forecast

10. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Credit Quality: The Nation and California

11. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Power Sector Credit Quality: The Nation and California

12. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Rated Energy Universe Oil & Gas Energy / Power E&P Oilfield Services Midstream Energy Oil Refining Retail Distribution Regulated Utilities -Electric -Gas -Water Integrated Merchant Power -Renewables Solar Ethanol Project finance/independent pwr E&P = Exploration and production

13. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Ratings Profile of the U.S. Energy Sector Note: Utilities includes both gas and electric companies

14. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Merchants Credit Quality Under Pressure Source: Henry Hub Forward Prices, Platt’s,

15. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Major Merchant Energy Companies 2008 v Business profile Financial profile Corporate credit rating Business profile Financial profile Corporate credit rating Calpine Corp. VulnerableAggressiveD/--/--Weak Highly leveraged B/Stable/-- Dynegy Holdings Inc. Weak Highly leveraged B/Stable/--Vulnerable Highly leveraged CC/Watch Neg/-- Edison Mission Energy WeakAggressiveBB-/Stable/--Vulnerable Highly leveraged B-/Negative/-- Energy Future Holdings Corp. (formerly TXU Corp.) Weak Highly leveraged B-/Stable/--Weak Highly leveraged CCC/Negative/-- NRG Energy Inc. WeakAggressiveB+/Stable/B-2FairAggressiveBB-/Stable/B-2 Mirant Corp. WeakAggressiveB+/Stable/--Weak Highly leveraged B/Stable/--

16. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Project Finance: Renewables Development May Take a Breather  Three major incentives are expiring Department of Energy Loan Guarantees (Sep 2011), Investment tax credit (ITC) cash Grants (Dec 2011) Wind production tax credits (PTCs) (Dec 2012)  Fiscal conditions in US and Europe may affect support for renewables funding  Demand has been slow to respond to price declines Wind at $1000/kW now and Solar at $1/Watt by end-2011 Utility-scale projects can’t respond quickly and many utilities have reached RPS targets High reserve margins and low commodity prices Rooftop solar will grow and Fukushima is a positive

17. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Investor-Owned Electric Utility Ratings Western U.S.

18. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Credit Risks for Electric Utilities Capital spending needs are high Electric demand remains soft Retail electric rates are rising, even as natural gas prices fall Uncertainty regarding environmental regulation Need to maintain financial strength –Continued rate case activity required in many states –But declining authorized return on equity –Bonus depreciation benefits to cash flows tail off in 2012

19. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. The San Francisco Utilities and Infrastructure Team Anne Selting, Director Swami Venkataraman, Sr. Director Tony Bettinelli, Associate Grace Drinker, Associate Ben MacDonald, Associate Director

20. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Copyright © 2011 by Standard & Poor’s Financial Services LLC (S&P), a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved. No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P’s opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non–public information received in connection with each analytical process. S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, (free of charge), and and (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at STANDARD & POOR’S, S&P, GLOBAL CREDIT PORTAL and RATINGSDIRECT are registered trademarks of Standard & Poor’s Financial Services LLC.