1. Electricity and Natural Gas Supply, Reserves, and Resource Adequacy CMTA Energy Conference Energy: Growing Californias Economy William J. Keese California Energy Commission July 29, 2004

2. 2 An Opening Thought… Promote energy efficiency Diversify portfolio with renewable energy Offer consumers energy choices Strengthen Californias energy infrastructure Remember the Loading Order

3. 3 Helping the California Economy: An Energy Report Card (Post Crisis) Energy Efficiency –5000 MW during crisis –About one-third permanent savings –Demand Response programs being developed Renewable Energy –Lots of PV –RPS –WREGIS Consumer choice –No direct access and some exit fees –Core/noncore structure being addressed Californias Energy Infrastructure –New generation and natural gas infrastructure added. –LNG on the horizon?

4. 4 California Electricity Outlook: Summer 2004 Interruptibles Spot Market Imports High Probability Additions- Only Net Firm Imports adjustments for retiring units and 1-in-10 Summer Temperature Demand (Normal) counts plants deemed 75% or better chance of being built. Emergency Response Programs/ Existing Generation (reflects Demand (Hot) 1-in-2 Summer Temperature both forced & planned outages)

5. 5 California Electricity Outlook: 2004 - 2010 Emergency Response Programs/ Interruptibles Spot Market Imports High Probability Additions- Only counts plants deemed 75% or better chance of being built. Net Firm Imports Existing Generation (reflects adjustments for retiring units and both forced & planned outages) 1-in-10 Summer Temperature Demand (Hot) 1-in-2 Summer Temperature Demand (Normal) 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 70,000 2004200520062007200820092010 MegaWatts

6. 6 Californias Electricity Outlook: Projected Operating Reserves

7. 7 Power Plant Status Report Over 20,000 MW approved, but many projects not moving forward… Approved but No Construction Under Review Approved & Operating Approved & Under Construction

8. 8 Resource Adequacy Definition: A condition in which sufficient generation and transmission resources exist to cover load and satisfy reserve requirements Outstanding issues: –Tradeable capacity credits –ISO dispatch control over nominated resources

9. 9 Californias Electricity Future…

10. 10 Natural Gas Price Situation (Dollars per MMBtu) High natural gas prices continue to be a national problem. California natural gas prices have exceeded $5.00 per MMBtu for most of this year. California is actually doing better than the rest of the nation. –Main reason: Infrastructure enhancements and efficient use of storage. 4.00 4.50 5.00 5.50 6.00 6.50 7.00 05/03/04 05/06/04 05/11/04 05/14/04 05/19/0405/24/04 05/27/0406/02/0406/07/0406/10/0406/16/04 06/21/0406/24/04 06/29/04 07/02/0407/08/0407/13/0407/16/04 $/MMBtu PG&E-Malin PG&E-Topock SoCalGas Border Average Henry Hub

11. 11 Natural Gas Storage Capacity and Inventories (Billion Cubic Feet) Beginning of the month levels, unless otherwise indicated California Energy Commission estimate - 25 50 75 100 125 150 175 200 225 250 Aug-2001 Oct-2001 Dec-2001 Feb-2002 Apr-2002 Jun-2002 Aug-2002 Oct-2002 Dec-2002 Feb-2003 Apr-2003 Jun-2003 Aug-2003 Oct-2003 Dec-2003 Feb-2004 Apr-2004 Jun-2004 July 15, 2004 Billion Cubic Feet Capacity Inventories Average inventories over the previous 5 years

12. 12 Californias Natural Gas Outlook General Observations Current supply/infrastructure is adequate…FOR NOW. Prices are higher than desired, but we are positioned to do better than the rest of the nation. Demand for natural gas is growing in California despite aggressive energy efficiency programs. Additional import capacity is needed to meet future demand.

13. 13 Californias Natural Gas Future…

14. 14 So Is State Policy Moving in the Right Direction??? Core/Noncore Market Redesign AB 2006 Tradeable Capacity Market Procurement

15. 15 Closing Thought: It All Depends on Your Perspective