1. Real Implications of Alternative Energy Sources for Communities WCCMA 2008 Summer Conference Roger Garratt Director, Resource Acquisition & Emerging Technologies August 20, 2008

2. Agenda PSE Overview PSE Renewable Resources Market Overview Community Benefits Conclusions

3. PSE, a Washington Company State’s oldest and largest utility, serving more than half of State’s population Over 1 million electric customers Over 700,000 natural gas customers Added 56,000 customers in last two years Public Service Company with an obligation to serve Sample

4. PSE Energy Need *Energy need before conservation, includes new contracts, new wind and hydro shapes, and Sumas

5. *Lowest Reasonable Cost Resource Portfolio, from May 2007 Integrated Resource Plan PSE Resource Strategy

6. Wind & Solar Acquisitions

7. Renewables Strategy New Renewables

8. Greenhouse Gas (GHG) Targets

9. Renewables development is boomin g Source: Renewable Northwest Project

10. Rise in Wind Component Manufacturers in the U.S. Clipper Windpower Cedar Rapids, Iowa Manufacture and assembly of 2.5-MW Liberty wind turbines and spare parts for support services Fuhrländer (Proposed) Helena, Montana Will manufacture 2.5 MW AG wind turbine, which has 150-ft. blades DMI West Fargo, ND & Tulsa, OK All three facilities (2 US and 1 Canada) manufacture wind towers. Knight & Carver Howard, South Dakota Blade construction and repair facility LM Glasfiber Little Rock, AK & Grand Forks, ND Both facilities manufacture blades for wind turbines. PPG Industries Shelby, North Carolina Facility produces high-tech fiberglass for blades; PPG also produces blade and tower coatings Trinity Structural Towers Clinton, IL & Fort Worth, TX Both facilities manufacture wind towers that support turbines as large as 2.5 MW. Vestas Windsor, Colorado Manufactures 130- and 144-foot long blades for 1.65 and 3 MW turbines Gamesa Philadelphia, Pennsylvania Multiple plant sites manufacture turbine parts, nacelles and towers for G80, G83, G87 and G90 2 MW machines.. TECO-Westinghouse Round Rock, Texas Assembles nacelles, using Composite Technology’s DeWind brand turbines; and also produces the rotor hub. Note: Map is illustrative only; it is not intended to be a representation of all wind component manufacturing in the U.S.

11. Economic Benefits – Wild Horse $8 million – to local community during construction $1.3 million – 2008 property taxes Hospital $45,000 Local schools$556,442 County$345,248 State$369,156 Lease and royalty payments to state agencies: WDFW$80,000 DNR (schools)$306,000

12. Renewable Energy Center - over 10,000 visitors since opening April 1, 2008 Guided Tours – over 125 tour groups Tourism

13. Conclusions Renewable resources are consistent with public interests Environmental benefits Sustainability Energy independence Community members “connect” with renewable resources Over time, renewables will become more and more prevalent

14. Questions?

15. Appendix

16. Rising Wind Project Costs Charts Source: Thorndike Landing analysis Wind turbines comprise 60% of total project costs. Rising Installed Wind Project Costs Rising Turbine Costs

17. Summer Transfers Winter Transfers Constrained Transmission Path Additional transmission investment required

18. Technology Development Concept Proof of Concept Pilot Early Commercial Favorable High Market Economics Favorable Mass Market Economics Solar PV Dairy Digester Fuel Cells Wind Traditional Biomass Geothermal Wave Algae CSP - PV TidalCSP Solar Thermal Electric PHEV Biomass Gasification Batteries

19. Hopkins Ridge Wind Facility 157 MW November 2005 service date Four new units added in 2008 87 Vestas V80 1.8 MW turbines ~1,069,000 MWh generated

20. Wild Horse Wind Facility 229.6 MW December 2006 service date 127 Vestas V80 1.8 MW turbines Over 1,058,000 MWh generated 22-unit expansion planned for 2009-2010

21. Wild Horse Solar Facility 500 kW Facility 450 kW Phase I October 2007 service date 573 MWh generated 5-acre footprint $4.5 million capital cost

22. Klondike III Power Purchase Agreement 223.6 MW Facility 50 MW PSE share 80 GE 1.5 MW, 44 Siemens 2.3 MW, 1 MHI 2.4 MW Owned/operated by PPM Energy December 2007 service date