TRANSMISSION COSTS

Summary  The availability and cost of transmission are primary components in the Net Market Value (NMV) calculation used to rank competing resources in the RPS Calculator  They reflect the cost to deliver new renewable generation to California loads  The methodology of identifying available capacity and transmission costs in Version 6.0 is generally the same as previous version, additional updates planned RPS Calculator Valuation Framework Levelized Cost of Energy Transmission Cost Capacity Value Energy Value Net Resource Cost Integration Cost* − = − *Not currently quantified in RPS Calculator

Summary Continued  Transmission availability and cost estimates for all existing CREZs will be updated in Version 6.0 of the RPS Calculator to reflect all available CAISO study information  Black & Veatch also identified new major resource areas (“Super CREZs”) for which new transmission cost estimates need to be developed (i.e. 3,000 MW new wind capacity in Sacramento River Valley)  Out of state transmission cost estimates are derived from previously vetted studies

RPS Calculator in Transmission Planning  RPS Calculator receives information from and provides information to CAISO transmission planning processes  Transmission projects included in CAISO Transmission Planning Process (TPP) are recovered through the Transmission Access Charge (TAC) levied on all users of the transmission system  TAC costs are passed on to ratepayers  Generation projects accessing transmission lines in the TPP may avoid additional delivery network upgrade (DNU) costs  Since the CAISO TPP is based on the CPUC’s RPS Calculator portfolios, it is critical the overall process shown here works CAISO GIDAP Transmission Inputs Available Capacity [MW] Delivery Network Upgrade (DNU) Costs [$/kW-yr] RPS Calculator RPS Portfolios Commercial Projects [MW] Generic Projects [MW] CAISO TPP CPUC LTPP Iterative - informs next cycle and other processes

Role of Transmission in RPS Calculator  In developing each portfolio, the RPS Calculator considers the:  Availability of existing transmission  Cost of building new transmission  General treatment of transmission availability and costs has not changed between Version and 6.0  Updates have been made to inputs and additional updating required, as described in following slides

TRANSMISSION AVAILABILITY

Transmission Availability in RPS Calculator  General treatment of transmission availability has not changed between Version and 6.0:  Each zone has estimates of the amount of fully deliverable capacity (and associated costs) available on existing transmission, minor upgrades, and major upgrades  Existing transmission & minor upgrades assumptions provided by CAISO  Existing transmission capacity is allocated to (1) IOU contracts and (2) most favorably ranked generic projects  These projects have no associated upgrade costs  Remaining projects are bundled together for selection on minor and major upgrades

Transmission Availability by Electrical Zone  Estimates of existing capacity and minor upgrades provided by CAISO  Major upgrades are assumed to represent a new transmission line Note: Graph reflects old transmission cost estimates and available transmission capacity data that will be updated prior to the F15-16 TPP by Q1 2015

Allocation of Transmission Capacity  Resources are ranked and sorted in each zone based on their net cost without accounting for transmission  Available capacity for new transmission is allocated to the most favorably ranked projects  Existing transmission is allocated to IOU contracts prior to ranking/selection process  No upgrade costs for these resources  Higher cost projects assigned minor and major upgrade costs No Tx Cost Minor Upgrade Cost Major Upgrade Cost

ESTIMATING TRANSMISSION COSTS  General Methodology  Interconnection Cost  Delivery Network Upgrades  Zone Identification  Out-of-state Transmission

 Transmission costs split in three categories:  Interconnection Cost  Delivery Network Upgrades (minor and major upgrades)  Out-of-state Transmission  Unit costs based on:  IOU Per Unit Costs  B&V WECC methodology  Previous E3 RPS calculator estimates  CAISO Delivery Network Upgrades Methodology Overview

 Gen-tie line  Substation costs  New switching station  New breaker position at existing substation Interconnection Facility Costs

 Gen-tie lines  Costs vary depending on interconnecting utility Utility Voltage Class (kV) – Cost/mile < 100 kV115 kV230 kV500 kV PG&E$1,400,000 $1,690,000$4,610,000 SCE$1,559,000$1,606,000$2,276,000$3,796,000 SDG&E$1,922,000$3,981,000$4,431,000$4,559,000 VEAN/A$1,590,000$1,770,000N/A From 2013 PTO Per Unit Cost Information Interconnection Facility Costs Note: Costs will be updated with 2015 estimates prior to the F15-16 TPP by Q1 2015

 Two substation options based on project location. Example:  Project A is within reasonable gen-tie distance – new breaker position  Project B is not within reasonable gen-tie distance, but can connect to the 115 kV line – new switching station Project A 20 MW Project B 20 MW Sub A 115 kV Sub B 115 kV 115 kV Line Interconnection Facility Costs

 New Breaker Position (Existing BAAH Substation)  New Switching Station (Ring Bus) Utility Voltage Class (kV) < 100 kV115 kV230 kV500 kV PG&E$1,400,000$1,550,000$2,100,000N/A SCE$878,000$919,000$2,170,000$5,232,000 SDG&E$528,000$680,000$2,036,000$3,940,000 VEAN/A$603,000$1,004,000N/A From 2013 PTO Per Unit Cost Information Utility Voltage Class (kV) < 100 kV115 kV230 kV500 kV PG&E $10,800,000$12,000,000$16,000,000N/A SCE $3,222,000$3,471,000$17,767,000$36,715,000 SDG&E $4,233,000$7,377,000$13,509,000$40,610,000 VEA N/A$4,602,000$6,170,000N/A From 2013 PTO Per Unit Cost Information Interconnection Facility Costs Note: Costs will be updated with 2015 estimates prior to the F15-16 TPP by Q1 2015

Delivery Network Upgrade (DNU) Costs

 DNU costs consist of minor and major upgrades  Worked with CAISO to determine best way to incorporate DNU in analysis  Proposed method is to use costs for upgrades based on interconnection studies for projects in Competitive Renewable Energy Zones (CREZ)  Three categories:  Available transmission capacity with no upgrades  Available transmission capacity with minor upgrades  Available transmission capacity with major upgrades Delivery Network Upgrade (DNU) Costs

 Example DNU Costs: Delivery Network Upgrade (DNU) Costs MW of Available Capacity in 2020 on Existing Transmission (No Upgrades) MW of Available Capacity in 2020 on Existing Transmission (Minor Upgrades) Cost of Minor Upgrades ($M) Major Upgrade Segment Size (MW) Major Upgrade Segment Capital Cost ($ millions) Riverside East (Riverside East, Palm Springs)350 2, Tehachapi3,7744, Westlands02,5901,512

 CAISO has not studied all areas and so transmission availability and costs for minor and major upgrades in several areas have not been established  Currently use costs estimated by E3 in previous version of the RPS Calculator.  CPUC and CAISO have developed a proposed approach to update the costs (see following slides)  Estimates will be updated in time for the F15-16 TPP by Q  Updated resources need to be assigned to zones. Many are outside original boundaries.  Proposed method and new Super CREZ described in “California Renewable Energy Resource Potential and Cost Update” presentation Delivery Network Upgrade (DNU) Costs - Key Issues

1.The 2010 estimates would be used as an initial starting point for the 6.0 Version of the Calculator 2.The Calculator would be run with the initial estimates, and the most economical Super CREZs would be identified 3.These Super CREZs would then be examined by the CAISO to update the major and minor transmission costs estimates for each area 4.The calculator would be re-run with the updated costs, and the most economical Super CREZs would be identified again 5.If there are any changes in the list of most economical Super CREZs, these would be sent to the CAISO for re-study, returning to step 3 6.This process would continue until the list of most economical Super CREZs does not change after updating the transmission cost estimates. These costs would be incorporated into Version 6.1 of the RPS Calculator, which would then be vetted by stakeholders. Proposed Approach for Updating Transmission (DNU) Cost and Availability

2. RPS Calc Run 3. Special CAISO Study of Tx for Selected Super CREZ 4. RPS Calc Run New Super CREZ Identified? 6. No Costs and availability to Version 6.1 of RPS Calculator 5. Yes: re-study new areas Updated Major/Minor Tx Cost Estimates for Super CREZ Selected portfolio of most economic Super CREZ from RPS Calc Supply Curve 1. Starting Tx Cost and Availability (Past CAISO Studies + E3 Estimates) Most Economic Super CREZ

 Largely based on previously vetted initiatives:  RETI 2B (2010)  B&V work for WECC on transmission costs ( )  WREZ Generation and Transmission Cost Model ( ) Out Of State Transmission Costs

 Out-of-state transmission costs  Cost basis: 500 kV single-circuit ac transmission, 1500 MW capacity, $1.8 million/mile, federally financed,  Delivered to “gateway CREZs” (e.g., Mountain Pass)  From WREZ Generation and Transmission model  Line utilization based on resource capacity factor  In-state transmission costs:  Added CAISO DNU costs to OOS costs using same approach as California projects Out-of-state (OOS) Transmission Cost Approach Note: Costs will be updated with 2015 estimates prior to the F15-16 TPP by Q1 2015

Focus is on highest quality OOS resources for CA  Pacific Northwest > Round Mountain  Northern & Central Nevada > Owens Valley  Southern Nevada, Utah and Wyoming > Mt. Pass  Arizona, New Mexico > Riverside East  Baja California > Imperial Valley South OOS Resources Delivered To California Gateway Substations / CREZs

Notes: Costs are for 500 kV single-circuit ac line. In many cases other options may be more cost effective, particularly HVDC for long distance transmission Costs include the line, necessary substations, and right of way. Do not include overhead and AFUDC, estimated as an additional 17.5%. Operations and maintenance and losses need to be separately considered. Portions of the BJ_NO zone are very close to the California border. As such, this average cost for the zone is likely to overestimate the costs for certain resources that might directly interconnect across the border. Estimated Transmission Capital Costs For OOS Zones, 500 kV Single-circuit ZoneTx Capital Costs (Millions) AZ_NE$ 734 AZ_NW$ 267 AZ_SO$ 699 AZ_WE$ 236 BC_CT$ 2,598 BC_EA$ 1,711 BC_NE$ 2,899 BC_NO$ 2,707 BC_NW$ 3,107 BC_SE$ 1,711 BC_SO$ 1,875 BC_SW$ 1,890 BC_WC$ 1,805 BC_WE$ 2,095 BJ_NO$ 205 BJ_SO$ 488 ZoneTx Capital Costs (Millions) ID_EA$ 1,411 ID_SW$ 1,015 NM_EA$ 1,621 NM_SE$ 1,889 NV_EA$ 719 NV_NO$ 539 NV_SW$ 399 NV_WE$ 699 OR_NE$ 1,022 OR_SO$ 232 OR_WE$ 794 UT_WE$ 553 WA_SO$ 1,066 WY_EA$ 2,208 WY_EC$ 1,690 WY_NO$ 1,956 WY_SO$ 1,989 Note: Costs will be updated with 2015 estimates prior to the F15-16 TPP by Q1 2015

RPS Calculator Guide The parameters that affect Transmission can be found on the following tabs: –Tx_Inputs: cost and availability of transmission for each SuperCREZ Includes existing capacity and minor & major upgrades