1. Capital Expenditure Forecast
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Gas Accord II Workshop
Capital Expenditure Forecast
Welcome everyone to todays workshop. This mornings first presentation is to provide you with our forecast of future capital expenditures.

2. Agenda Known Capital Expenditures Potential Capital Expenditures
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Agenda
Known Capital Expenditures
Local Transmission
Backbone
Storage
Other
Potential Capital Expenditures
Pipeline Safety
Central Backbone
Local Transmission Reliability
Winter Supply Reliability
Backbone Transmission Expansion
Here’s our agenda.
We have broken the presentation down to two areas. First I will present some of our known capital expenditures. These are specific projects that PG&E has identified as being scheduled in the future. These projects can be broken down into 4 areas: local transmission projects, backbone projects, storage projects and other projects that don’t fit into these three areas.
Then I will discuss potential capital expenditures that are in addition to the known capital expenditures. These projects have less certainty regarding scope and cost. Items we will discuss in the potential capital expenditures are:
Pipeline safety, which is a project that PG&E expects will be required due to new federal safety rules.
Central Backbone, which represents system reinforcements needed to transport potential new storage capacities to market demand.
Local Transmission Reliability which provides a review of the costs and benefits associated with increasing Local Transmission reliability.
Winter Supply Reliability which addresses the costs to increase PG&E storage capacity to improve supply reliability.
Backbone Expansion which discusses the economics expanding our Lines 400/401 or Line 300

3. Known Capital Expenditures
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Known Capital Expenditures
This chart represents PG&E’s current forecast of future capital expenditures from 2001 through Please note that this is PG&E’s best current forecast on currently identified projects. This forecast is subject to change as new projects and requests occur.
I’ll go over this chart in summary level and then later will discuss each component of the chart in detail.
Across the bottom of the chart are the expected local transmission capital expenditures. As you can see the expenditures are relatively constant ranging from a low of 16.3 million to a high of 21.8 million. I’ll provide examples of these projects shortly.
Next are the identified backbone capital expenditures. These expenditures have a relatively high variability due to the identified need for significant major projects for every year but The major projects are driven primarily by either existing emission reduction rules or expected emission reduction rules at compressor stations. I’ll discuss this area in more detail shortly.
Next is storage related capital. The expenditures here are relatively constant with base spending generally of about $6 to $12 million per year for general storage reliability. The increased spending levels in 2003 and 2004 represent the installation of a new pipeline, Line 57C, from McDonald Island. Once again I’ll discuss this in more detail.
Finally Other generally represents system wide projects that cannot be placed in any of the other categories.

4. Base Capital Expenditure Forecast (continued)
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Base Capital Expenditure Forecast (continued)

5. Local Transmission Typical Local Transmission Projects:
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Local Transmission
Typical Local Transmission Projects:
Reliability: Replacement of older pipeline equipment
Safety: Development near pipelines, replacement of older pipelines or related equipment.
Requirements to relocate pipelines: Caltrans, cities, counties, etc.
Capacity: Maintain adequate capacity to meet design standards
New business: Installation of new pipelines to serve new customers
Ok, I would like to talk in a bit more detail about the Local Transmission projects. First I would like to provide you a description of the typical local transmission projects.
First, are projects done to maintain LT reliability. These involve replacement or reworking of older pipeline equipment such as pipelines, regulators and other related equipment.
A second area of LT work is related to safety. Projects that fall under safety include replacement of older pipeline equipment. Another area of expenditure is when development occurs near our pipelines. When this happens we are required to either test the integrity of the pipeline to ensure it can continue operating at its current pressure, replace the pipeline with new higher pressure pipe, or reduce the operating pressure of the pipe.
Another area involves requirements to relocate pipelines. This occurs when Caltrans, cities, or counties require PG&E to move our lines due to conflicts with their facilities or other planned land use.
Another LT project area is installation of new pipelines to ensure adequate capacity to meet design standards. Examples of this include installation of pipe to meet design standards.
New business is another area where we install new pipe to meet the addition of new customers. This differs somewhat from capacity in that new business is usually extensions of the existing system where capacity is generally the installation of pipe to improve the capacity of the existing system.

6. Local Transmission Major Projects ($ million) Total Cost Years
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Local Transmission
Total Investment : $136.9 million
Major Projects ($ million) Total Cost Years
L-108 Replacement - Stockton $
Replace DFM - Monterey $
New Power Plants $
L-103 Relocation - Hollister $
L-147 Relocation - Peninsula $
Belt Main Reinforcement - Fresno $
Projects < $2 million $
This slide provides information on some of the major LT projects. The total forecast investment for LT is $137 million.
Major projects include:
Line 108 replacement in Stockton for about $10 million - safety and reliability
Monterey DFM replacement for $6.4 million - safety and reliability
New Power plant connections for $5.8 million - new business and capacity
Line 103 relocation in Hollister for $4.8 million - safety and reliability
Line 147 relocation on the Peninsula for $2.7 million - safety and reliability
Belt Main reinforcement in Fresno for $2.1 million - capacity
Finally, for projects less than $2 million we expect spending about $105 million. As you can see the majority of LT spending is for many relatively small projects rather than a few large ones.

7. Backbone Transmission
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Backbone Transmission
Typical Backbone Projects:
Reliability: Replacement of older pipeline equipment
Safety: Development near pipelines, replacement of older pipelines
Requirements to relocate pipelines: Caltrans, cities, counties, etc.
Environmental: Install emission reduction equipment at compressor stations or replace engine/turbines with new lower emission units.
I will now describe some typical backbone projects
Some of the same drivers for LT projects apply to backbone transmission projects.
Like LT we have backbone projects due to reliability, safety, and pipeline relocations. I described these during the LT discussion so I won’t repeat them here.
Currently a major driver of backbone projects is environmental rules. These type of projects require PG&E to install emission reduction equipment at compressor stations or to replace older engines or turbines with new lower emission units.

8. Backbone Transmission
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Backbone Transmission
Total Investment : $206.1 million
Major Projects ($ millions) Total Cost Years
Existing Emission Rules:
Delevan Emission Reduction $
Hinkley Emission Reduction $
Kettleman Emission Reduction $
Gerber Emission Reduction $
Expected Future Emission Rules:
Topock Emission Reduction $
Burney Emission Reduction $
The expected total capital investment for backbone for the years is $206 million.
A major portion of the expected backbone investment are due to emission rules.
There are two basic categories for these projects. The first is for projects where there are emission rules already in place. These existing rules result in the need to reduce emissions at Delevan and Gerber compressor stations on Line 400/401 and at Hinkley and Kettleman compressor stations on Line 300.
The second emission driven area is where emission rules are not currently in place but PG&E expects the emission rules in the near future. PG&E maintains contact with emission rule makers and based on this expects new emission rules to be in place at Burney compressor station on Line 400/401 and at Topock compressor station on Line 300.
In all cases for the Line 400/401 compressor stations, and possibly at Topock on Line 300, PG&E plans to replace the year old turbines with new low emission units rather than attempt to retrofit emission equipment to the older technology.
Other areas of expenditure are $3 million per year for a total of $18 million for general Line 300 reliability. This work involves replacement and rework of equipment on this 1950’s pipeline system. Similarly, we expect to spend $1.5 million per year or $9 million total for maintaining reliability on the mid 1960’s Line 400 system.
We also plan to replace the Tionesta unit on Line 400/401 due to its age at a cost of $12.5 million.
We expect to spend a total of $34.4 million on various projects on the backbone system.
Backbone tends to be a limited number of relatively large projects whereas LT was a large number of smaller projects.

9. Backbone Transmission (continued)
Major Projects (continued) ($ millions) Total Cost Years
Non-Emission Projects:
L-300 Reliability ($3 million/yr) $
Replace Tionesta Turbine $
L-400/401 Reliability ($1.5 million/yr) $
L300 Inspection & Recoating $
Projects < $5 million $

10. Storage Typical Storage Projects:
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Storage
Typical Storage Projects:
Reliability: Replacement or looping of pipelines or older pipeline equipment, reworking of storage wells, rebuild or replacement of compressor or processing equipment
Safety: Replacement of older pipeline equipment
Typical storage projects.
The expected storage projects involve reliability and safety which I have discussed previously.

11. Storage Total Investment 2001-2007: $92.0 million
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Storage
Total Investment : $92.0 million
Major Projects ($ millions) Total Cost Years
Install Line 57C $
UGS Reliability ($3 annually) $
Projects < $1 million $
Total expected investments for storage total $92 million.
Of this total $42 million involves the installation of Line 57C. This new pipeline will be installed to improve the reliability of PG&E’s McDonald Island storage field, our largest, most critical field. McDonald Island provides a significant portion of the supplies during the winter and during cold events. Currently McDonald Island relies on a single pipe to move gas from the storage field. This single line runs through the Delta where it makes numerous water crossings, levee crossings, and is in an area soft peat soil. Given the criticalness of McDonald Island as a supply source, PG&E plans to install a second line from McDonald Island, Line 57C, to improve supply reliability. Cost for this pipeline is about $42 million.
Other areas of expenditure are general storage reliability for our three storage fields, $3 million annually or $18 million total. Projects less than $1 million total $32 million.

12. Other Capital Expenditures
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Other Capital Expenditures
Total Investment: $38.8 million
Major Projects ($ millions) Total Cost Years
Development near pipelines $
Pipeline Recoating $
Power Plant Connections $
Projects < $3 million $
Our last area of identified expenditures falls under the category Other. This category generally represents systemwide expenditures that are expected but currently cannot be identified under any of the previously described categories.
For example, some costs have been already forecast in LT or backbone due to development near our pipelines. However, based on history, we can expect to spend an additional $10 million for this work although the individual projects have not been yet identified.
Similar issues occur with pipeline recoating, and power plant connections. As you know there is a large effort to install new electric generation. PG&E has received hundreds of new power plant proposals, but most are currently speculative and therefore cannot be identified as individual projects. Therefore, we have placed $3.5 million in this area to cover anticipated actual power plant connections into the future.
Projects less than $3 million total $20.5 million.

13. Potential Future Capital Expenditures
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Potential Future Capital Expenditures
Thus far we’ve talked about projects that PG&E has identified. At this point I would like to discuss potential future projects. These projects are ones that may or may not be built or have highly uncertain costs due to regulatory uncertainty or Gas Accord 2 agreements.

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Pipeline Safety
New pipeline safety regulations are expected in the near future
Scope of regulations uncertain
Likely to require significant costs for validating pipeline integrity
Hydro testing, special equipment, and pipeline modifications likely
Estimated cost is $35 million, depending on scope of legislation. Estimate includes some pipeline replacement but additional pipeline costs are anticipated.
The first area of potential projects involves Pipeline Safety.
The driver for this area is that the Department of Transportation is working on new pipeline safety regulations. These regulations will be issued in the near future. The scope of the regulations is uncertain.
The regulation is very likely to require significant costs to validate pipeline integrity. This validation will require:
Hydro testing the pipelines to ensure their ability to hold pressure
The installation of special equipment to allow devices to be run through the pipeline to understand the internal condition of the lines
Potential pipeline replacements
Based on our best estimate at this time, PG&E expects the cost to be $35 million. This cost has significant uncertainty depending on the scope of the rules, the results of our testing, will the pipe pass the integrity test or will we have to replace it. The estimate includes some pipeline replacement costs but additional costs will likely occur.

15. Central Backbone Expansion
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Central Backbone Expansion
Facilities required to provide adequate capacity to transport increased storage field capabilities to market demand
Expected facility reinforcements include portions of Line 400/401, the Bay Area Loop from Brentwood to Milpitas, and Line 300
Estimated reinforcement costs are $ million
Depends on actual increased storage capabilities and market needs
Another area of potential investment is an expansion of the Central Backbone system.
There are proposals to add new storage capacity on the PG&E system. This project involves the installation of facilities needed to help ensure adequate pipeline capacity to move increased storage supplies to areas of market demand thereby contributing to improved supply reliability.
Expected facility installations include portions of Line 400/401, the Bay Area Loop from Brentwood to Milpitas, and Line 300.
Estimated cost for the reinforcements is dependent on the actual increased storage capabilities and market needs and therefore ranges from $ million.

16. Central Backbone Expansion Schematic
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Central Backbone Expansion Schematic c s
Proposed
Wild Goose Expansion
Proposed Lodi Storage
McDonald Island
Delevan
Antioch
Irvington
Milpitas
Panoche
Bethany
Brentwood
Possible L-300 Reinforcement
L-400
L-401
L-57
L-57C
L-2
L-300
To East Bay
Possible Bay Area Reinforcement

17. Local Transmission Reliability
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Local Transmission Reliability
Existing Reliability:
About 95% of non-core demand is served under a Stage 1 curtailment (about 33.5 deg F daily mean temperature)
About 90% of non-core demand can be served during a Stage 2 curtailment (about 29 deg F daily mean temperature, 1 in 90 year occurrence)
Some areas have lower reliabilities than shown above
Use text directly from the slide.

18. Local Transmission Reliability
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Local Transmission Reliability
Increased Reliability:
Estimated cost to increase the non-core design standard for local transmission to a 1 in 20 year cold weather occurrence is about $206 million for all areas. This investment would serve an additional 152 MMcf/d during cold weather events.
Investing only in areas that provide higher reliability per dollars invested would result in spending $39 million for the Sacramento, Stockton, Yosemite, and South San Jose local transmission areas.
This investment would serve about 119 MMcf additional non-core demand during cold weather events. This provides cold weather service to about 80% of the non-core demand at only 20% of the cost associated with the $206 million investment.
The additional 119 MMcf served represents about 4% of the total non-core demand.
Another area of potential additional capital investment involves improving local transmission reliability. Lets discuss the costs and benefits of increasing local transmission reliability.
From the previous workshop, we provided an estimated cost to increase the non-core design standard for local transmission to a 1 in 20 year cold weather occurrence as about $206 million for all areas. This would serve an
We also communicated that we could likely substantially reduce these costs by investing only in areas that provide large benefit (significant additional non-core demand served) relative to the costs.
One potential investment would be to invest $39 million for the Sacramento, Stockton, Yosemite, and South San Jose areas. This investment would serve an additional 119 MMcf/d. This represents serving 80% of the unserved non-core demand under cold conditions at less than 20% of the full $206 million cost.

19. Winter Supply Reliability
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Winter Supply Reliability
Install additional wells, processing, and compression to increase McDonald Island injection and withdrawal capacities and seasonal cycle. Depending on increase capability costs range from $ million.
This potential investment involves increasing winter supply reliability by expanding the capability of PG&E’s McDonald Island storage field. Increasing the capacity of McDonald Island requires installing additional wells, processing equipment and compression. These facilities will increase the withdrawal and injection capacities and the seasonal cycle capability of the field. Depending on the magnitude of the increase, costs range from about $50 to 150 million.

20. Backbone Transmission Capacity Increase
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Backbone Transmission Capacity Increase
Line 400/401: Relatively inexpensive to increase capacity. About $20-25 million to increase capacity by about 250 MMcf/d.
Line 300: Very expensive to increase capacity. About $430 million to increase capacity by about MMcf/d.
Another area of potential additional capital investment involves increasing the backbone transmission capacity. I will share information related to the costs to incrementally expand Line 400/401 and Line 300.
Line 400/401 is relatively inexpensive to increase capacity. About $20-25 million to increase capacity by about 250 MMcf/d.
Line 300 is very expensive to increase capacity. About $430 million to increase capacity by about MMcf/d.
This line is expensive to increase capacity because the line was designed back in the ’50’s with decreasing pipeline wall thickness to reduce costs. Decreasing wall thickness means that the allowable operating pressure is reduced as gas flows downstream resulting in difficulty to incrementally expand the pipeline without paralleling long distances.

21. Potential Future Capital Expenditure Summary ($ millions)
Total Cost Years
Pipeline Safety ($5 million/yr) $
Central Backbone Expansion $
Local Transmission Reliability $
Winter Supply Reliability $
L-400/401 Capacity Increase $ (~250 MMcf/d)
L-300 Capacity Increase $ (~ MMcf/d)