Utility Procurement: What’s Next? IEP 2015 Annual Conference September 29, 2015 Colin Cushnie V.P., Energy Procurement & Management Southern California Edison Company

SCE’s Procurement Objectives SCE’s mission is to safely deliver reliable, affordable and clean energy to our customers Reliability Resource Adequacy (RA) – Conducted on behalf of bundled customers System & Local Area Reliability – “New Generation” contracting conducted on behalf of all wires customers (CAM) Policy and Compliance Renewables Portfolio Standard (RPS) Combined Heat and Power (CHP) Energy Storage (ES) Distributed Energy Resources (DERs) Demand Side is experiencing new developments Supply Side is just beginning to be developed Net short financial exposure SCE’s procurement programs and competitive solicitations are the mechanisms used to ensure we meet the reliability and compliance objectives as defined by the various regulatory entities (i.e. CPUC and CAISO) Other compliance and policy programs with specific MW targets (to be discussed later in the presentation) include: ReMAT, BioMAT, RAM, SPVP DRAM, Energy Storage

SCE Energy Procurement Programs Recently Completed LCR RFO Energy Storage 2013 RPS CHP 3 PRP 1 SPVP 4 RAM 5 In-Flight RAM 6 SPVP 5 2014 RPS RFO Re-MAT All-Source RA (annual) PRP 2 Upcoming 2015 RPS RFO CHP RFO DRAM BioMAT Green Rate* Enhanced* Community Renewables Upcoming procurement dates: 2015 RPS RFO Launch: Q4 2015/Q1 2016 CHP 4 RFO Launch Date: Q1 2016 DRAM Launch Date: Q3 2015 Bio-MAT Launch Date: Q4 2015 Green Rate: 50 MW advance procurement via RAM 6. Ongoing procurement is driven by subscription level and procured via annual RPS plan. Enhance Community Renewables projects will be procured via ReMAT procurement mechanism (i.e. ECR ReMAT PPA rider to take into consideration the differences of the requirements for ECR projects) * Green Tariff Shared Renewables

Significant Recent Procurement Activities Local Capacity Reliability (LCR) Solicitations Contracted 1,883 MW of new resources in West LA Basin Contracted 328 MW of new and refurbished resources in Moorpark RPS Solicitations Contracted over 1,500 MW in the 2013 RPS solicitation 2014 RPS procurement is concluding; Advice Letters seeking approval of PPAs underway 2014 Energy Storage (ES) Solicitation SCE procured approximately 260 MW of ES in its LCR RFO, some of which counted towards SCE’s 2014 CPUC ES procurement target of 90 MW Contracted 16.3 MW of ES resources to meet the balance of the target LCR resources were procured per the authorization included in the LTPP (Track 1 and Track 4) SCE did not procure any resources from the 2011 and 2012 RPS Plan because of our solid position meeting the RPS compliance targets at that time. The 2013 RPS solicitation resulted in SCE procuring 7 new solar projects and 1 geothermal project representing ~1,539 MW of renewable capacity. All of these contracts have been approved by the CPUC The 2014 RPS solicitation was very robust and competitive and will help fill our need in the 3rd compliance period and beyond. Total executed so far is 976 MW and 11 PPAs. [TF comment: this number is public because we include it in the executed PPA section of the AL below] 4 Advice letters have been filed: Mesquite (Sempra), Blythe II (NextEra), TKO Enel (small hydro), RE Garland (Recurrent) Recently announced on September 22nd, SCE selected two energy storage projects totaling 16.3 MW from W Power and Western Grid Development

Procurement Targets & Status Prescribed Target/Mandate Procurement Mechanism Prescribed Target/Mandate SCE Procured Balance Remaining RAM 787.4 MW 713.6 MW 73.8 MW CHP Capacity Target = 1,402 MW GHG Target = 1,220,000 MT¹ 1,400 MW 602,550 MT¹ 2 MW 617,450 MT SPVP 125 MW 98.1 MW 26.9 MW Energy Storage 580 MW 90 MW1 490 MW LCR RFO2 West LA Basin = 1,900 – 2,500 Moorpark = 215 – 290 West LA = 1,889 MW Moorpark = 274 MW ~100 MW3 0 MW Re-MAT 99.29 MW 31.823 MW 111.65 MW4 ¹ SCE has procured approximately 275 MW of Energy Storage through its LCR and 2014 ES RFOs, but the table only reflects the 2014 MW target ² SCE’s LCR RFO consisted of technology targets for Preferred Resources, ES, gas-fired generation and “all source” products ³ SCE’s residual LCR procurement will target Preferred Resources and Energy Storage ⁴ MW balance remaining has increased from the original target due to terminations in the CREST Program

SB 350 Provides Additional Market Opportunities 50% RPS by 2030 More contracting options (e.g., use of short-term products across all portfolio content categories) Establishes a new Integrated Resources Plan process for retail sellers and publicly owned utilities Beginning 2017, requires comprehensive plans that coordinate renewable procurement with supply side and demand side procurement to reliably integrate renewables and further the achievement of the State’s broader GHG goals of reductions of 40% from 1990 levels by 2030 CAISO Governance Establishes a process to provide for the evolution of CAISO into a regional organization to promote the development of regional electricity transmission markets in the western states and to improve the access of consumers served by CAISO to those markets

Challenges in Meeting Procurement Objectives Number of procurement programs is increasing Increased procurement activity for smaller resources Uncertainty around future market design and rules Procuring Preferred Resources in specific geographic regions Distribution and transmission infrastructure and associated interconnection process Regulatory oversight and timing does not always align with commercial opportunities Balance sheet and capital lease implications Special interests A significant amount of procurement activity includes executing contracts with smaller projects which significantly increases the workload associated with Contract Management, operations, and settlements. Procuring preferred resources per the loading order in specific geographic regions has proven to be challenging. Permit requirements are significant for developers to manage and introduce challenges depending on the location/site of the project Distribution and transmission infrastructure capabilities and build out timing Regulatory PPA approval delays: Critical to developer and the project milestones; specifically, financing. Also critical for the IOU for cost recovery certainty The on-going potential for capital lease treatment of resources in SCE procurement portfolio (Assessments are conducted as provisions of new and existing contracts are executed or amended) Evolving regulatory and legislative actions create opportunities and risk associated with serving SCE’s customers (i.e. CCA migration, ensuring equal rules for all load serving entities, increasing of RPS to 50 %, electric transportation adoption, etc)

Regulatory Oversight Regulation Demand-side Resources Renewables Conventional Resources Regulation Regulatory oversight becomes more, rather than less, restrictive for higher loading order resources

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