1. David Howarth MRW & Associates Oakland, California dnh@mrwassoc.com 1 JUST THE FACTS: RESOURCE PLANNING AND PROCUREMENT INDEPENDENT ENERGY PRODUCERS ANNUAL MEETING SEPTEMBER 18, 2014

2.  Update on 2012 long-term procurement plan (LTPP) proceeding and associated procurement  Introduction to 2014 LTPP proceeding  Review of other resource planning and procurement activities  Conclusions 2 OVERVIEW OF PRESENTATION

3. 3 2012 LTPP UPDATE

4.  System requirements (Track 2) deferred to 2014 LTPP  Local capacity requirements (Track 1) expanded to address 2013 SONGS retirement (Track 4)  CAISO modeling identified ~4600 MW of local need, assuming ~200 MW DR, ~980 MW incremental EE, and ~460 MW DG  D.14-03-004 reduced CAISO’s need estimate to account for some combination of load shedding, transmission, and incremental uncommitted EE, energy storage, demand response and customer PV resources to determine procurement authorization:  SCE also authorized to procure 215 -290 MW in Moorpark sub-area of Big Creek/Ventura 4 2012 LTPP UPDATE SCE (LA Basin)SDG&ETotal Preferred Resources550 - 950175725 - 1125 Storage502575 Gas-Fired1000 Any Source300-500300-600600-1100 Total1900-2500500-8002400-3300

5.  SCE issued Track 1 LCR RFO in September 2013 5 2012 LTPP UPDATE  Offers were due 12/16/13  Initially open to projects within West LA area  Expanded to include Track 4 authorization in March 2014  No new bids  Eligible area revised to include just the southern portion  Final offers 9/4/14  Final selections by 10/16/14  Application to CPUC 11/21/14

6.  SDG&E negotiated bilateral contract with Carlsbad Energy Center for 600 MW peaker  Application to CPUC for contract approval (A.14-07-009) filed July 21, 2014  SDG&E issued Track 4 RFO seeking 800 MW on September 5, 2014  If approved, the 600 MW Carlsbad contract will count towards the authorized need, leaving 25 MW of storage and 175 MW of preferred resources to be procured through the RFO  Offers due January 5, 2015  Application to CPUC for approval of contracts Q1 2016 6 2012 LTPP UPDATE

7. 7 2014 LTPP KICKOFF

8. 8 2014 LTPP: FORECAST OF LOADS & RESOURCES

9.  2014 LTPP proceeding is focused on determining system reliability needs in 2024  CAISO & ORA filed testimony in August presenting deterministic modeling results estimating reserve shortfalls for various scenarios  SCE performed stochastic modeling of the High Load Scenario only  Expected shortfall of 8,500 MW, with 34-37 Stage 3 emergencies and 1,000 GWh of expected dump energy 9 2014 LTPP: PHASE 1A MODELING RESULTS Scenario Upward/ Downward Number of Hours Maximum Shortfall (MW)Types of Reserve Shortfall CAISO/ORA: Trajectory ScenarioUpward51,489 Load Following, Non-Spin CAISO: Trajectory without Diablo Canyon Upward193,730 Load Following, Non-Spin, Spin CAISO: High Load ScenarioUpward345,353 Load Following, Non-Spin, Spin, Regulation, Energy CAISO: Expanded Preferred Resource Scenario N/A 0 CAISO: 40% RPS in 2024 Scenario Upward92,242 Load Following, Non-Spin ORA: Trajectory + PVUpward41,188Load Following ORA: Trajectory + Tracks 1&4Upward1164Load Following

10.  None of the modeling parties conclude that system reliability need can be determined from the Phase 1a results  Shortfall amounts do not account for 2,315 MW of Track 1&4 authorization not included in the CPUC scenarios  CAISO: unlimited renewable curtailment potentially masking the need for flexible resources, need further study  SCE: any need in 2024 can be addressed in 2016 LTPP, other ways to mitigate over-generation  ORA: given duration of shortfall, no need for additional capacity or further study in this LTPP proceeding  Reply testimony due September 24 th  Will include PG&E modeling testimony  CAISO and SCE to submit stochastic results for Trajectory scenario in November 13th 10 2014 LTPP: INITIAL CONCLUSIONS

11. 11 OTHER RESOURCE PLANNING AND PROCUREMENT ACTIVITIES IN CA

12.  Renewable Energy Procurement (R.11-05-005)  2013 RPS purchases: PG&E 23.8%, SDG&E 23.6%, SCE 21.6%  Appear to be on track to reach 33% by 2020  Procurement expenditure limitation to be adopted by CPUC 12 RESOURCE PLANNING AND PROCUREMENT ACTIVITIES

13.  PG&E’s forecasted renewable net short (2014 RPS Procurement Plan) 13 RESOURCE PLANNING AND PROCUREMENT ACTIVITIES Source: PG&E 2014 Draft RPS Procurement Plan June 6, 2014

14.  SCE’s forecasted renewable net short (2014 RPS Procurement Plan) 14 RESOURCE PLANNING AND PROCUREMENT ACTIVITIES Source: SCE 2014 Draft RPS Procurement Plan, June 6, 2014

15.  SDG&E’s forecasted renewable net short (2014 RPS Procurement Plan) 15 RESOURCE PLANNING AND PROCUREMENT ACTIVITIES Source: SDG&E 2014 Draft RPS Procurement Plan, June 6, 2014

16.  Comparison of SDG&E’s forecasted REC bank balances (2013 Plan vs. 2014 Plan) 16 RESOURCE PLANNING AND PROCUREMENT ACTIVITIES

17.  Energy Storage (R.10-12-007)  October 2013 decision set specific energy storage targets for each IOU totaling 1,325 MW by 2020  PG&E (580 MW); SCE (580 MW); SDG&E (165 MW)  First RFOs anticipated December 1, 2014  Energy Efficiency (R.13-11-005)  Considering move to “rolling portfolios” with long term (10 yr.) funding approval  Would avoid program funding disruptions and embed EE in demand forecasts used for resource planning and procurement  Rolling portfolios will not be considered in time for setting 2015 goals and funding levels, which will continue as an extension of the 2013-14 budget cycle 17 RESOURCE PLANNING AND PROCUREMENT ACTIVITIES

18.  Demand Response (R.13-09-011)  Demand Response Auction Mechanism (DRAM) proposal  Intended to create competitive procurement mechanism through reverse auction and to integrate DR supply resources into CAISO energy markets  Aim is to launch in 2015 and achieve 5% of peak by 2020  Settlement agreement proposes DRAM pilot auctions to be held in 2015 and 2016, many details to be determined  CAISO/CPUC Joint Reliability Plan  Multi-year RA requirement, market-based replacement of CAISO backstop, unified long-term reliability planning  Facing pushback from legislature over FERC role in regulating RA market 18 RESOURCE PLANNING AND PROCUREMENT ACTIVITIES

19.  Residential Rate Design Rulemaking and Net Energy Metering (NEM)  Will new rate design and NEM rules hinder further expansion of residential solar?  PG&E Gas Transmission and Storage  Combined with already approved pipeline safety enhancement plan (PSEP), likely to result in a significant increase in gas transportation costs for gas-fired generators 19 REGULATORY PROCEEDINGS WITH IMPLICATIONS FOR PROCUREMENT

20.  Procurement for local resources is under way  Results of all-source RFOs will tell us if EE and DR can compete with other supply resources to provide local capacity  If incremental EE and DR fall short of levels assumed in the procurement authorization, there will be implications for reliability  Significant modeling work remains to quantify system reliability needs  What level of forecasted shortfall justifies procurement?  Long-term procurement of system resources appears at least 1-2 years away  Renewable procurement seems to be reaching a plateau, but poised for new growth phase  Will the RPS be expanded or will there be other drivers for renewable procurement?  What is future of RAM and FiT? 20 CONCLUSIONS

21. David Howarth MRW & Associates Oakland, California dnh@mrwassoc.com 21 QUESTIONS? THANKS!