1. R.08-03-009 / I.08-03-010 Workshop Agenda Introductions and housekeeping1:00pm Objectives and scope1:10pm Background  Public Utilities Code 399.2.51:15pm  Renewable Energy Transmission Initiative 1:30pm Facilitated discussion1:45pm Break 3:00pm Facilitated discussion (cont’d) 3:15pm Summary and next steps 4:30pm

2. Objectives and Scope Today: Explore whether the output of the RETI process can be used to support cost recovery for IOUs in planning new transmission projects to serve renewable resources What is RETI providing? What are the implications for CPUC responsibilities under Public Utilities Code 399.2.5? Later workshop: How to incorporate the output of the RETI and LTPP processes in proceedings for individual applications for transmission Certificates of Public Convenience and Necessity

3. Backstop Cost Recovery Statute and Implementation February 26, 2009

4. Public Utilities Code 399.2.5 (a) “…Transmission facilities shall be deemed to be necessary…if the commission finds that the new facility is necessary to facilitate achievement of the renewable power goals established in Article 16…” (b) “With respect to a transmission facility described in subdivision (a)…” the Commission shall take several actions, including:  (4) “Allowing recovery in retail rates of any increase in transmission costs incurred by an electrical corporation resulting from the construction of the transmission facilities that are not approved for recovery in transmission rates by the Federal Energy Regulatory Commission after the commission determines that the costs were prudently incurred…”

5. CPUC Implementation D.03-07-033 – Adopted general framework D.06-06-034 – Modified D.03-07-033, established eligibility criteria:  High-voltage, bulk-transfer transmission facilities, whether classified as network or gen-tie, that are designed to serve multiple RPS-eligible generators where it has been established that the amount of added transmission capacity will likely be utilized by RPS-eligible generation projects within a reasonable period of time  New network transmission facilities needed to interconnect an RPS-eligible resource whose developer has entered into a Commission-approved power purchase agreement

6. CPUC Implementation D.07-03-012 – Established three-pronged test for “necessary to facilitate achievement” of RPS goals: (1) that a project would bring to the grid renewable generation that would otherwise remain unavailable; (2) that the area within the line's reach would play a critical role in meeting the RPS goals; and (3) that the cost of the line is appropriately balanced against the certainty of the line's contribution to economically rational RPS compliance. D.07-03-012 and D.07-03-045 used above test to justify the first 3 segments of the Tehachapi upgrades and guarantee backstop cost recovery for segment 3

7. CPUC Implementation E-3969 (2006) – Commission approved recovery costs of environmental studies identified by Tehachapi Collaborative Study Group – no mention of 399.2.5  D.06-06-034: “We adopted Resolution E-3969 because studies had already demonstrated that Tehachapi is an especially rich resource area for renewable and development of that area is almost certainly necessary to meet the 20% RPS goal. We are unwilling to open the ratepayers’ pockets for transmission facilities in areas that do not rise to this level of certainty, since study and permitting costs for facilities in unexplored areas will be large.” E-4052 (2007) – Commission declined to discuss whether 399.2.5 recovery applied to studies performed before a specific project was identified

8. Questions to consider Should the Commission clarify whether studies performed before a project is identified could qualify for 399.2.5 cost recovery? Can RETI serve as a quick check of the three-pronged test for purposes of 399.2.5 cost recovery and/or need determination? (1) that a project would bring to the grid renewable generation that would otherwise remain unavailable; (2) that the area within the line's reach would play a critical role in meeting the RPS goals; and (3) that the cost of the line is appropriately balanced against the certainty of the line's contribution to economically rational RPS compliance.

9. California’s Renewable Energy Transmission Initiative http://www.energy.ca.gov/reti/ Overview http://www.energy.ca.gov/reti/ February 26, 2009

10. Renewable Energy Transmission Initiative Statewide collaborative study effort to identify and facilitate the development of the transmission needed to access the most cost-effective and environmentally-preferable renewable resources in CA and neighboring states Three-Phased Process  Phase 1 – Identification and ranking of Competitive Renewable Energy Zones (CREZs)  Phase 2 – Refinement of analysis for priority CREZs and development of statewide conceptual transmission plan  Phase 3 – Detailed transmission planning for priority CREZs

12. RETI Organization / Roles Coordinating Committee  Oversees the overall RETI process  Ensures development of needed information  Keeps the process on schedule Stakeholder Steering Committee  Primary working group  Key stakeholder representatives  ~30 members Plenary Stakeholder Group  Reviews Steering Committee work  Provides feedback, “ground- truthing”  All stakeholders and the public

13. Phase 1 Identify developable renewable resources in California and neighboring areas – engineering review and consideration of environmentally sensitive areas Rank CREZs according to cost-competitiveness Rate CREZs according to environmental concerns Final Phase 1 Report completed in December 2008

14. Phase 1B Report - Results Black & Veatch, in consultation with Phase 1B working group  > 2,100 individual “pre-identified” and “proxy” generation projects  > 80,000 MW within 29 CREZs in California; 6 CREZs were split at “breaks” in their supply curves, resulting in total of 37 distinct, ranked areas  40,000 MW outside of CA with potential to deliver energy to CA. Environmental Working Group  CREZs identified by Black & Veatch are rated according to environmental concerns associated with the projected generation

15. CREZ and non-CREZ resources identified throughout the study area

17. Phase 2 Refine and verify priority CREZs Develop conceptual transmission plans for the highest ranking CREZs – group co-led by CAISO and LADWP Draft report – end of March 2009 Final report – end of April 2009

18. Phase 3 Existing transmission planning organizations collaboratively design plans of service that result in applications to construct new transmission infrastructure to meet RPS goals ~ 8 month-long process; may be iterative Explore joint projects as appropriate Final result = Statewide Plan

20. Discussion February 26, 2009

21. Discussion Does current status present a barrier to planning for a 33% by 2020 RPS target and applying 399.2.5 provision to transmission projects needed for 33%, but perhaps not 20%? Does the Commission need to clarify whether early-stage project study costs – not jus those associated with identified projects – are eligible for 3992.5 cost recovery? What is RETI producing in terms of high priority CREZs or transmission projects that might facilitate CPUC decisions on backstop cost recovery or “need” determination?

22. Discussion To what exactly might the CPUC defer from RETI’s Phase 1, 2 and 3 results, and for what purposes (recovery of pre-siting costs, CPCN determination of need, recovery of construction costs)?  If pre-siting study costs are eligible, could and should authority to record and recover studies of RETI projects be granted an expedited advice letter process, i.e Tier 1 or Tier 2?  Is SCE’s proposal that cost recovery should be granted for obtaining rights-of-way for RETI-identified projects that have not yet been granted CPCNs appropriate?

23. Summary and Next Steps February 26, 2009