Summer 2000 – Present in California Date Event (Prices are per MWh) May-Jun ‘00 ISO’s real-time price reached $750 ten times Jun. 28 PX’s day-ahead price (NP15) reached $1,099 July 1 ISO lowers the price cap from $750 to $500 Aug. 7 ISO further reduced the price cap to $250 Nov. 1 FERC issued an order, proposing a “soft cap” of $150 as an interim remedy Jan. 8 ‘01 Gov. Gray Davis declared deregulation a “colossal and dangerous failure” and proposed state intervention Jan. 11 CA ISO issued first Stage 3 alert Jan. 17-18 Rolling blackouts Feb. 16 32nd day of Stage 3 alert; State of CA has spent $1 billion in less than one month to purchase power Apr. 6 PG&E filed bankruptcy seeking court protection

Cost of Electricity in California

Western U.S. Power Markets: Low, Stable Prices until mid 2000 Energy crunch Capacity crunch Calm Source: NyMEX

Natural Gas Transmission in California On August 19, an explosion ruptured 36-inch El Paso Natural Gas mainline near the Pecos River Crossing about 30 miles south of Carlsbad, NM, killing twelve people. About 900 MMcf/d of capacity initially was lost from the ruptured line and two looped lines nearby that were shut in. All three lines are around 50 years old. El Paso had managed to make up about 500 MMcf/d of the lost capacity by drawing on storage, diverting gas to an alternative route and through customer cutbacks. However, for every day the outage continues, storage for the already stressed California market and generators east of California is dropping by 500 MMcf/d. The primary market impact from the El Paso explosion was to push basis for the Southern California border to unheard-of heights that are expected to yield a September index easily surpassing $6. Federal regulators responded with an order issued four days after the accident, requiring extensive testing and repairs before any of the lines could go back into service. By increasing the pressure on two unaffected pipe-lines, 85 to 95 percent of the 2.1 Bcfd flow through the Carlsbad area has been restored. El Paso is awaiting the Office of Pipeline Safety’s final approval of repairs. Source: EIA

Natural Gas Spot Prices Daily Natural Gas Prices - 2000 0.00 10.00 20.00 30.00 40.00 50.00 60.00 12/31/1999 02/29/2000 04/30/2000 06/30/2000 08/31/2000 10/31/2000 $/MMBtu Southern California Border Henry Hub Prices for Canadian supplies started to increase following the rupture on the El Paso system to the south Each wave of cold weather has caused prices to increase Prices have been higher recently in order for financially-strapped PG&E to attract supplies Source: NG Daily Index

How much does rising gas prices affect electricity prices? NP-15 Prices: “Nominal” and adjusted for natural gas prices. 200 400 600 800 1000 1/1/00 3/1/00 5/1/00 7/1/00 9/1/00 11/1/00 $/MWh Original Price Adjusted Price Source: California PX

Prices Exploded Across the West 1999 Power Price 2000 Power Price Mid Col $26.53 137.03 COB $30.66 137.56 NP-15 $35.82 114.05 Four Corners $30.39 114.43 SP-15 $32.69 110.94 CA PX $29.36 91.33 Palo Verde $31.25 114.18 EVA: Power Markets Week, annual averages of day-ahead transactions weekly indices. NP, SP-15 began 3-20-99.