1. CALIFORNIA ENERGY COMMISSION NATURAL GAS ASSESSMENT: SHORT AND LONG TERM Briefing to the Legislature Assembly Utilities and Commerce Committee January 15, 2004 James D. Boyd, Commissioner California Energy Commission

2. CALIFORNIA ENERGY COMMISSION November 14, 20152 TOPICS COVERED TODAY Recent natural gas market price increases Impact on ratepayers Status of California’s infrastructure Upcoming issues

3. CALIFORNIA ENERGY COMMISSION November 14, 20153 NG MARKET PRICES Market prices are highly volatile Daily Spot market prices at Henry Hub are the most volatile and most widely quoted in the media Daily Spot market prices are also quoted at the California border Monthly market prices are less volatile Futures prices are even less volatile

4. CALIFORNIA ENERGY COMMISSION November 14, 20154 NG MARKET PRICES California’s market prices are tied to national market events California border prices have been significantly lower than national prices, due to: –Moderate demand –Excess infrastructure capacity that allows gas-on-gas competition –Ample storage inventories –Risk management by California gas IOUs

5. CALIFORNIA ENERGY COMMISSION Regional Natural Gas Spot Market Prices Source: Natural Gas Intelligence

6. CALIFORNIA ENERGY COMMISSION November 14, 20156 Regional Natural Gas Spot Market Prices Source: Natural Gas Intelligence

7. CALIFORNIA ENERGY COMMISSION November 14, 20157 NG MARKET PRICE INVESTIGATIONS CEC, CPUC, and FERC have investigated past market price spikes Feb/March 2003: Henry Hub Spot hit $18; we found no evidence of manipulation We have agreed to cooperate fully on investigating future “unusual” market events California sees current prices resulting from cold temperatures, high national demand, and tight national supplies –Prices could be higher if national storage were lower

8. CALIFORNIA ENERGY COMMISSION November 14, 20158 IMPACT TO CALIFORNIA RATEPAYERS Henry Hub Daily Spot market prices are not a good indicator of what California Core gas ratepayers will pay –PG&E ratepayer costs up about 30% Henry Hub Monthly market prices are more closely correlated California gas IOUs have purchased NG at less than the monthly market prices Ratepayers pay the IOU’s blended cost, called the Weighted Average Cost of Gas (WACOG)

9. CALIFORNIA ENERGY COMMISSION November 14, 20159 IMPACT TO CALIFORNIA RATEPAYERS California gas IOUs purchase fuel for Core (residential) ratepayers, and some non-core Noncore (large commercial and industrial) purchase gas for themselves using many mechanisms Electric generators (EG) purchase fuel for themselves Spiking Henry Hub Daily Spot prices can potentially affect some Noncore and EG –Potential impact on the cost of electricity and other goods/services

10. CALIFORNIA ENERGY COMMISSION November 14, 201510 California Natural Gas Annual Average Consumption - 2002

11. CALIFORNIA ENERGY COMMISSION November 14, 201511 SoCalGas Monthly Weighted Average Cost of Gas and Henry Hub Monthly and Daily Contract Prices

12. CALIFORNIA ENERGY COMMISSION November 14, 201512 INFRASTRUCTURE STATUS California has added storage capacity California has filled its storage facilities California has added pipeline capacity California is currently in good shape to weather the national NG “storm”

13. CALIFORNIA ENERGY COMMISSION November 14, 201513 Current California Storage Inventories Beginning of the Month, Energy Commission Estimate

14. CALIFORNIA ENERGY COMMISSION November 14, 201514 Interstate Pipeline Expansions Interstate pipeline expansions increased California delivery capacity by over 20 percent since 2001.

15. CALIFORNIA ENERGY COMMISSION November 14, 201515 UPCOMING ISSUES Future price trends—UP Longer term need for additional infrastructure capacity Need to embrace LNG coming to the West Coast CEC and CPUC working together well on gas issues –EAP –IEPR/energy policy –Regulatory agenda

16. CALIFORNIA ENERGY COMMISSION November 14, 201516. Questions?

17. CALIFORNIA ENERGY COMMISSION November 14, 201517 BACKGROUND INFORMATION CEC Long Term NG Assessment IEPR Natural Gas Working Group NG Infrastructure Workshop (Dec 9-10)

18. CALIFORNIA ENERGY COMMISSION November 14, 201518 Comparison of U.S. Lower 48 Wellhead Prices with Energy Commission Forecast