Air Credits in the South Coast Air Basin 1 Mohsen Nazemi P.E. Deputy Executive Officer South Coast Air Quality Management District Southern California Electricity Reliability California Energy Commission 2015 IEPR Lead Commissioner Workshop University of California, Irvine August 17, 2015

CPUC Procurement Authorization Requirements for SCE * Resource Type Track 1 LCR Resources (D ) Additional Track 4 (D ) Total Authorization Preferred Resources Minimum Requirement 150 MW400 MW550 MW Energy Storage Minimum Requirement 50 MW--50 MW Gas-fired Generation Minimum Requirement 1000 MW MW Optional Additional From Preferred Resources/Energy Storage Only Up to 400MW Additional from any Resource 200 MW100 to 300 MW300 to 500 MW Total Procurement Authorization 1400 to 1800 MW 500 to 700 MW1900 to 2500 MW Maximum Gas Fired Generation 1200 MW 300 MW1500 MW * Source: CPUC Decision Authorizing Long Term Procurement to Replace Permanent Shutdown of San Onofre Nuclear Station – March 14, 2014

Other Issues Related to SCE’s Application for approval of the LCR RFO Summary of issues raised by parties (i.e. Sierra Club, Cal Energy Storage Alliance, Office of Ratepayer Advocates) Procurement from Alamitos and Huntington Beach (approx. 640 MW each) exceed the minimum 1,000MW fossil fuel procurement authorization. SCE should limit additional gas fired generation to the 1,000MW NRG demand response contracts (re-characterized by SCE as distributed generation)– issue of using backup generators as a Preferred Resource SCE should not have limited in-front-of-the-meter energy storage to 100 MW. No need to procure additional gas-fired-generation from the Stanton Peaker 3

Once Through Cooling Units Status in South Coast AQMD 4 FacilityEquipmentMW Rating State Water OTC Removal Date Repower Permit Status AES Alamitos Boilers 1 thru 61950Dec Appls. Canceled 2/2015 (1936 MW) AES Redondo Beach Boilers 5 thru 81310Dec PDOC 6/2014 (546.4 MW) AES Huntington Beach Boilers 1 & 2430Dec FDOC / Canceled 2/2015 (1032 MW) Boilers 3 & 4450Dec Retired -MW to Walnut Creek NRG El Segundo Boilers 1 thru 3685Dec Repower Complete (573 MW) Boiler 4335Dec FDOC revised 7/2015 (335 MW) Total Repower Pending under CAISO Authority4,025 MW

Once Through Cooling Units Status in South Coast AQMD (cont’d.) 5 FacilityEquipmentMW Rating State Water OTC Removal Date Repower Permit Status LADWP Harbor Turbines 1 & 2 combined 182Dec No Appl. Filed LADWP Haynes Boilers 1 & 2, Turbines 9 & 10 combined 1050Dec No Appl. Filed Boilers 5 & 6573Dec Repower Complete (616 MW) LADWP Scattergood Boilers 1 & 3639Dec Repower Permits Issued (533 MW) 8/2015 Boiler 2179Dec No Appl. Filed Total Repower Pending for LADWP1,411 MW

Facility Repowered Capacity (MW) Units which maybe Repowered New Equipment GenOn West*640 Boiler 3, 320 MW (1963)Undetermined Boiler 4, 320 MW (1963)Undetermined Burbank DWP 99 Boiler Olive 1, 44 MW (1959)Undetermined Boiler Olive 2, 55 MW (1964)Undetermined Glendale DWP108 Boiler 3, 20 MW (1953)Undetermined Boiler 4, 44 MW (1959)Undetermined Boiler 5, 44 MW (1969)Undetermined Total Potential Non-OTC Repower 847 *NRG California South LP, Etiwanda Generating Station is currently awaiting CEC’s decision of Termination of Application for Certification Proceedings

SCAQMD Rules for Use Of SCAMD Offset s by Electrical Generating Facilities Rule 1304(a)(2) exempts electric utility boiler replacements from offsets, however SCAQMD still has to provide offsets from Internal Bank Rule adopted on September 6, 2013 to require fees for use of this exemption & SCAQMD offsets Proposing New Rules to allow the use of SCAQMD SOx & PM10 Offsets for new and expanding Electrical Generating Facilities Not mandatory to obtain offsets from SCAQMD offset accounts 7

PM10 ERC Supply & Cost 2000 – 2015* *Up to July 2015 None Sold Yet

Proposed Rules & Proposed Rule – Investor Owned Utilities (IOUs) – New Generation only Proposed Rule – Local Publicly Owned Electric Utility servicing their Native Load – New Generation and Increased capacity of existing units 9

Objectives of Proposed Rules & Implement Governor’s Grid Reliability Task Force Report – Contingency Measures Promote preferred resources  CPUC Loading Order  CARB AB32 Scoping Plan  SCAQMD Energy Policy Level playing field for new generation and capacity increases Facilitate grid reliability Assist in implementation of attainment strategy 10

Use of Offset Mitigation Fees Impacted Surrounding Communities consistent with AQMP with Emphasis on: Preferred Resources  Energy Efficiency  Demand Response  Energy Storage  Renewables Meeting AQMP Reduction Needs Near Zero- or Zero-Emission Vehicles & Charging Infrastructure 11

Side By Side Rule Comparison PR (IOU with CPUC approved contract) PR (Native) Load Purpose & Applicability New construction only New construction and increased capacity of existing generation Required IOU to establish needed MW based on LTPP approved by CPUC Based on LPOEU approved IRP or similar public process Serve Native Load & Grid Reliability Preferred Loading Order Determining MW Needed IOU to provide estimate of needed fossil fuel generation based on CPUC approved LTPP Based on IRP approved by public agency or municipality designed to service native load requirements & grid reliability 12

PR (IOU with CPUC approved contract) PR (Native) Load Requirements to Earmark / Encumber Offsets Executed contracts between QEGF and IOU QEGF to procure ERCs Comply with 1315(d) Federal NSR Equivalency Determination Reports Any encumbrances must not reduce the Districts internal offset accounts balance below 50 lb/day of SOx and 420 lb/day of PM Appropriate CEQA document has been certified Payment of either the single fee or 1 st year annual payment Documented Good Faith Effort to obtain ERCs Must not cause increase in the Rule 1315 Projections of Net Cumulative Net Emission Increase Documented Good Faith Effort to obtain ERCs Application Deemed Complete Comply with 1315(d) Federal NSR Equivalency Determination Reports Any encumbrances must not reduce the Districts internal offset accounts balance below 50 lb/day of SOx and 420 lb/day of PM In compliance with all other District Rules and Regulations Must first exhaust all offsets available pursuant to Rule 1304(a)(2), Rule 1309 and Rule Must not cause increase in the Rule 1315 Projections of Net Cumulative Net Emission Increase “Lower of RFQ and requested MW” Side By Side Rule Comparison (cont.) 13

PR (IOU)PR (Native) Load Requirements for Use of Offsets (Prior to Issuance of P/C) CEQA approved Make first payment CEQA approved Make first payment Additional Conditions QEGFs will be assigned offsets for a fee per executed CPUC approved contracts Earmarked offsets will be available for use for a period of 24 months after EO approval after which must be renewed for a maximum of additional 36 months after which they are forfeit back to District offset accounts LPOEU shall procure offsets as needed pursuant to an publicly approved/adopted IRP 14 Side By Side Rule Comparison (cont.)

Rule Development Proposed Rules & Schedule Informal MeetingsMarch - June 2014 Working Group Meeting #1July 10, 2014 Working Group Meeting #2November 20, 2014 Working Group Meeting #3April 22, 2015 Future Working Group MeetingsSummer/Fall 2015 Adoption Hearing1 st Quarter

Maximum Potential Amount of Offsets from SCAQMD Internal Bank Total Repower Pending under CAISO4,025 MW Total Repower Pending for LADWP1,411 MW Total Non-OTC Repower 847 MW CPUC Procurement Authorization for SCE1,500 MW Total Maximum Potential7,783 MW 16

Offset Requirements/ Availability* 17 VOCsNOxSOxCOPM10 Max. Offsets Required for 7,783 MW SCAQMD Internal Bank Offsets* * Based on latest Federal NSR Final Determination of Equivalency (Tons/Day)