1. ISO Confidential Overview of California’s Current Drought and its Effects on the Energy System Dede Subakti, P. E. Director, Operations Engineering Services August 28, 2015

2. ISO Confidential Summary of Summer Assessment CAISO performs two types of Summer Assessment: –BA resource assessment –Transmission normal and contingency assessment Project adequate reserve margins to meet peak summer conditions Drought impacts offset by: –Moderate load growth –Additional 2,135 MW of new generation (2,066 MW Solar) –Reduction of hydro generation is projected to be offset by the addition of renewable generation Transmission upgrades in San Diego and Orange County are beginning to come online, providing an overall improvement in these area from resource and transmission perspective Slide 2

3. ISO Confidential ISO projected operating reserve margin is trending up as California progresses to 33% RPS Slide 3

4. ISO Confidential Page 4 Pre-summer projections of drought’s impact on summer hydroelectric generation: further capacity reductions over 2014

5. ISO Confidential Solar production significantly reduces the need for conventional resources on peak demand days. Slide 5 Net Demand September 18, 2014 Net Demand is calculated by taking the actual demand and subtracting the electricity produced by wind and solar resources that are directly connected to the ISO grid.

6. ISO Confidential Impact of Low Hydro in Local Areas PG&E Area: –Table Mountain area –Fresno area SCE Area: –Big Creek area Drought impact in non-hydro units –Water supply for thermal units can be more unpredictable with water releases restrictions from storage –Limit operations due to water requirement Extreme low hydro, high load, and contingency scenario could produce overload. –Procedure in place to manage to manage generation commitment and dispatch –Flexibility in dispatch are keys to manage potential overload. This include flexibility in pump and hydro generation schedule. Page 6

7. ISO Confidential Summary  ISO Operating reserve margin  ISO System – Normal scenario > 25%  ISO System – Extreme scenario > 11%  Probability of shedding firm load  0.1% for ISO – Moderate import and high hydro derate  Reduction of hydro generation is projected to be offset by the addition of new generations  Looking to the future:  Flexibility in dispatch at the right locations are keys to manage potential overload. This include flexibility in pump and hydro generation schedule.  When water returns, flexibility of pump and water management will be critical to minimize over generation Slide 7