1. Division of Energy Resources
Massachusetts
Division of Energy Resources
Energy Roundtable
April 12, 2002
4/12/02
Confidential Draft

2. PG&E NEG Generation Mix
Coal/Oil (10 facilities)
2,997 MW
Hydro
(3 facilities)
1,166 MW
Natural Gas
(10 facilities)
2,277 MW
Windpower
(2 facilities)
78 MW
*As of 12/31/2001, PG&E NEG had ownership or leasehold interests in 25 operating generating facilities with a net generating capacity of 6,518 megawatts. Source: PG&E National Energy Group Form 10K published on 3/5/2002.

3. PG&E National Energy Group
Breakdown of New England Generating Unit Output
4,386 Megawatts Total*
Hydro 1,167 MW
Coal/Oil 2,336 MW
Natural Gas 2,052 MW
*Includes 1,152 MWs under construction

4. Preserving Diversity Does Not Mean Sacrificing Environmental Protection
PG&E National Energy Group plans to invest hundreds of millions of dollars in environmental improvements at Brayton Point Station and Salem Harbor Station over the next several years.
Brayton Point Station:
Air - $150 - $170 M
Reductions in NOX by 80% from 1990 levels
Reductions in SO2 by 70% from 1990 levels
Water - $58 M - ?
33% reduction in heat and flow of water discharge
Mercury Controls - ?
Greenhouse Gas Controls - ?
Confidential Draft

5. The Benefits of Preserving Diversity
Maintaining a reliable electricity supply
Stabilizing costs
Gross margin not materially different from RI’s Synapse data
Synapse appears to have excluded emission allowance costs
Synapse incorrectly looked at gross margin and not the actual cash BP generates.
Capital requirements are the significant drivers in the near term
These costs were not envisioned at the time the assets were purchased by PG&E, purchase price would have been lower reducing the benefits to consumers that they are enjoying now.
Our view now is that the station is not profitable near term and we are looking long them only if future exposure to further costs are minimized.
Confidential Draft

10. Impact of Removing Coal from the New England Portfolio
We call this a load duration curve, illustrates the type of technology needed to meet various loads (customers needs) in the market and the cost of such generation.
Cite typical on and off-peak loads and which technologies set market prices
Coal based units play a critical role in keeping power prices low on and off peak.
If these units are removed form the generation mix then the price paid by all customers will be higher in all hours but particularly the off-peak or low load hours when coal sets the clearing price.
Estimated cost to the New England economy is more than $500 million
Confidential Draft

11. Reliability Concerns
“…major changes are underway in New England’s energy situation and the region is headed toward sharply increased dependence on natural gas, particularly for electric generation. These changes …will have potential risks for the reliability of energy supplies and the cost of energy that will be born by the people of New England.”
Glenn Schleede, Energy Market and Policy Analysis, Inc.

12. Public Policy Considerations
Past efforts at maintaining diversity
Brayton Point and Salem Harbor were required by the federal government to switch to coal in the late 1970’s and early 1980’s because of concerns about excess dependency on oil
For the future: Who is looking at the cumulative impacts of policies and regulations on fuel diversity?