1. THE MIX: FACTS, FIGURES, AND THE FUTURE INDEPENDENT ENERGY PRODUCERS ANNUAL MEETING SEPTEMBER 26, 2013 William A. Monsen MRW & Associates Oakland, California wam@mrwassoc.com

2.  Key procurement issues in the California power markets  Regulatory issues related to procurement  The facts and figures related to procurement  The unknowns  Questions? OVERVIEW OF PRESENTATION 2

3. 3 KEY ISSUES

4.  Local Resource Procurement  Shutdown of SONGS  Pending shutdown of OTC Units  Difficulty siting plants in load pockets  Difficulty siting transmission  System Level Procurement  Increasing level of renewables and need for resources for renewable integration  Cross-Cutting Issues  RPS requirements  Loading order preferences 4 KEY ISSUES

5. 5 REGULATORY ISSUES

6.  Local and System Procurement  Long-Term Procurement Plan (LTPP) (R.12-03-014)  Track 1: Local Reliability (completed)  Track 2: System Needs (cancelled on 9/16/2013)  Track 3: Bundled Procurement (completed)  Track 4: SONGS-related Issues (ongoing)  Renewable and Storage Procurement  Storage OIR (R.10-12-007)  September 2013 proposed decision set specific energy storage targets for each IOU totaling 1,325 MW by 2020  PG&E (580 MW); SCE (580 MW); SDG&E (165 MW)  RPS Proceeding (R.11-05-005)  How to meet RPS requirements at a reasonable cost 6 REGULATORY RESPONSE TO PROCUREMENT ISSUES

7.  Alternatives to Grid-Based Generation  Post-2008 Energy Efficiency Policies OIR (R.09-11-014)  D.12-05-015 established specific energy efficiency targets for each IOU totaling peak savings of 746 MW by 2014  2013 peak savings: PG&E (150 MW); SCE (187 MW); SDG&E (45 MW)  2014 peak savings: PG&E (139 MW); SCE (183 MW); SDG&E (42 MW)  Residential Rate Design Rulemaking and Net Energy Metering  New Demand Response Rulemaking  Fallout from Shutdown of SONGS  SONGS Investigation (I.12-10-013)  Determine if over $700 million in 2012 SONGS-related expenses should be refunded to ratepayers  Potential to review reasonableness of ongoing replacement power costs 7 REGULATORY RESPONSE TO PROCUREMENT ISSUES

8. 8 THE FACTS AND FIGURES (NEAR-TERM)

9. ELECTRIC DEMAND BEFORE EE OR DG 9 Source: CEC Preliminary Demand Forecast 2013 Note: Includes self-generation

10. 10 FORECASTED DEMAND AFTER EE AND DG Source: May 2013 CEC Demand Forecast Total Peak before EE and DG PV Non-PV Self Gen Non-Res EE Res EE Net Demand Forecasted demandObserved demand

11. 11 SYSTEM RESOURCES NET OF RETIREMENTS Other Non- Renewables SONGS OTC Net Supply Retirem ents Source: Appendix C, D.12-12-010 in 2012 LTPP R.12-03-014, December 20, 2012

12. 12 CAISO SYSTEM RESOURCES Imports Event-Based DR Existing Supply Net of Retirements RPS Non-RPS

13. SCESDG&ETOTAL Transmission Additions?Yes Gas-Fired Generation1,000-1,2003081,308 – 1,508 Storage (minimum)50n/a50 Preferred Resources (minimum)150n/a150 Storage or Preferred Resources400n/a400 All Sources (per IOUs)500500 - 5501,000 – 1,050 Total2,300808 - 8583,108 – 3,158 CAISO Estimates* 3,022 - 3,7221,485 - 9204,507 – 4,642 13 CURRENT VIEW ON 2022 LOCAL RESOURCE NEEDS (MW) *Does not include any transmission additions

14.  Preliminary Reliability Plan for LA Basin and San Diego prepared by the CPUC, CEC, and CAISO released August 30  Key recommendations:  Consider procurement of about 1,000 MW of preferred resources— local energy efficiency, DR, renewable generation, CHP, and storage— on top of 3,000 MW already targeted  Consider development of transmission, including infrastructure that supports resource sharing between Orange County and San Diego  Procure about 3,000 MW of conventional generation to meet the remaining needs in the SONGS area—above the 1,700-2,100 MW already authorized  Establish backstop permits so that OTC requirements can be quickly deferred and generation resources can be quickly deployed to meet needs 14 JOINT STAFF ASSESSMENT

15. 15 CURRENT VIEW ON SYSTEM RESOURCE NEEDS IN 2022  Preliminary Results from LTPP Proceeding  CAISO (deterministic results)  Base case: 1,036 MW – 2,621 MW (for 2-4 hours per year)  Replicating TPP case: 4,253 MW – 5,359 MW (12-16 hours per year)  High DG/DSM case: 0 MW  CAISO (stochastic)  No results yet  SCE (stochastic results)  No need for flexible resources  Won’t know the final answers until next LTPP

16. 16 BIG UNKNOWNS

17.  Can new transmission be built in time?  Managed load growth?  Energy efficiency  Behind-the-meter solar  Ultimate use of OTC plants?  Will new project development models (such as Energy Parks, conditional permitting, buying project development options) prove successful?  Failure rates for contracted resources?  How will cost containment affect renewable program? 17 MAJOR WILDCARDS

18. 18 TRANSMISSION PROJECTS Source: Southern California Reliability Preliminary Plan Presentation, CEC/CPUC/CAISO, September 9, 2013

19.  Ability of uncommitted resources to provide significant amounts of reliable capacity in local areas?  Will changes in demand response prove effective?  New resources on the horizon?  Will low gas prices continue, thereby putting price pressure on non-gas resources? 19 MAJOR WILDCARDS

20. 20 QUESTIONS? THANKS! William A. Monsen MRW & Associates Oakland, California wam@mrwassoc.com