The California Energy Crisis

Continuing Update

Lon W. House, Ph.D.530.676.8956

ACWA Energy Advisor

Gas Pipelines

Natural Gas Storage Facilities

New CA Gas ProjectsPGT-GTN and PG&E Company at Malin (1)Kern River Pipeline (2)SoCalGas - Wheeler Ridge and other in-state expansion (3)Kern River Lateral to High Desert (3)Transwestern pipeline expansion (4)Questar Southern Trails Pipeline (4)SoCalGas Line 6900 to SDG&E (5)North Baja to Mexico (6)

1

2

4

5

6

3

LNG Projects

Project PurposeCapacity (MMcfd)

Online date

1 Bechtel/ Shell Enterprises Mare Island Serve Northern California 1,400 2006

2 Mitsubishi LNG in Los Angeles Harbor Serve Southern California685

2006 or later

3 Crystal Energy LLC 11 miles off Ventura County Coastline on Platform Grace

Serve Southern California600 NA

4 El Paso & Phillips Co., Rosarito Beach New LNG terminal in Rosarito, Baja California

610 2005

5 Marathon Oil Co.'s LNG facility,Tiajuana Serve Baja California, Southern California and East of California 750 2005

6 Shell Group's LNG facility, Ensenada. Serve Baja California, Southern California and East of California 1,300 2005

7 Sempra & Pacific LNG Consortium, Ensenada

Serve Baja California, Southern California and East of California 800 2006

8 Chevron LNG Facility, Midway between Tiajuana and Rosarito

Serve Baja California, Southern California and East of California 750 2007

LNG Projects in Baja California, Mexico

LNG Projects in Southern California

LNG Projects in Northern California

LNG Project Proposals on the West Coast

• Natural Gas Futures (April 30, 2003)

– June ‘03 - $5.24– June ‘03-Oct ‘03 - $5.33– Balance ‘03 - $5.33– 12 month - $5.29– 2004 - $4.89– 2005 - $4.60

May 2003 Futures

Generation Additions in California

California Capacity Resource Diversity2000 2002-2003 2003-2006

installed 2000 installed installedMW (1) % MW (2) MW (3)

1,083 3% 1292,262 5%2,049 5% 4155,372 13%

23,881 57% 6,022 3,3115,109 12%

296 1%125 0%

1,574 4% 76741,751

Notes1 California Energy Commission2 Table A-1: Preliminary Electricity and Natural Gas Infrastructure3 Tables 2-6, 2-7: Preliminary Electricity and Natural Gas Infrastructure

Assumptions, California Energy Commission, 100-03-004SD, Feb. 11, 2003.

SolarWind

HydroNatural Gas

NuclearOil

BiomassCoal

Geothermal

Energy Companies

California Power Plants Withdrawn:

2000 634 MW withdrawn2001 1,591 MW withdrawn2003 2,821 MW withdrawn

$ billion debt 52 week ----- average return % -------Energy Company maturing 03-06 current high 1 year 3 year 5 year

Aquila $2.44 $26.74Williams $6.2 $4.08 $25.49Dynergy $2.43 $32.19Mirant $5.1 $2.12 $15.05

Reliant Resources $5.9 $5.40 $17.44El Paso $5.4 $9.96 $46.89 -83.5 -41.9 -24.8

Duke Energy $8.7 $17.90 $39.60 -48.2 -4.8 -3.3Calpine $7.3 $4.00 $15.24 -80.6 -41.2 11.9

AES $26.96 $44.98 -81.5 -56.8 -33.6Sempra $26.25 $22.89 0.6 15.9 2.8Edison $12.83 $19.60 -21.5 -21.8 -13.2PG&E $13.05 $23.75 -27.8 -11.1 -12.4FPL $53.87 $59.30 11 16.6 4.3

Delayed/Cancelled Projects

Will We Make It Through The Next Two

Years?

Electricity Price Forecasts

Important Decisions• Self-Generation - CPUC D.03-04-030

Departing Load Obligation - exemptions• Generating before February 1, 2001

• Biogas digestors

• <1 MW and subject to net metering (solar)

• Eligible for CPUC/CEC self-generation programs: photovoltaics; wind turbines; fuel cells; microturbines, small gas turbines and internal combustion engines with waste heat recovery. No diesel or back-up

• >1 MW “ultra-clean and low emissions” do not pay DWR ongoing charges or HPC

• 3,000 MW cumulative total - do not have to pay DWR ongoing charges: 1500 MW renewable, nonrenewable generation amounts caps:

– 2004 600 MW

– 7/1/2008 500 MW

– 2008+ 400 MW

• Technical Assistance Available• $50/kW. Can be either equipment or behavior. $25/kW

when expected load drop certified by registered engineer, $25/kW when 50% of estimated load is dropped

• Has to have advanced meter (interval meter, communication pathway, and internet-based access to usage information)

• Reduction = load drop from average of same hour in 3 highest use days during the past two weeks

• CPP - Critical Peak Pricing - All Utilities– 5 to 15 summer weekdays/year, notification the day before

– CPP days: 3-6pm energy 5x regular on peak price

noon-3 and 6-7pm energy 3x partial peak price

– Non CPP days - energy costs discounted

– Rate protection available - never pay more than under old tariff

• HPO - Hourly Pricing Option - SDG&E– Day ahead price signal

• DBP - Demand Biding Program - All Utilities– You offer amount and price

– Between noon and 8 pm weekdays

– Triggered when energy price >15¢/kWh

– Emergency test trigger twice a year for less than 4 hours, will pay you 50¢/kWh

Important Proposed Decisionin R.02-06-001

Conclusions/Recommendations

• High electricity (through 2011) and probably natural gas prices around for awhile

• Traditional tariffs (I-6) disappearing• Regulatory agencies eventually want to

go to real-time pricing for everyone• Take advantage of technical assistance

$$ now, figure out what you can do before you have to do it

• Look into demand reduction pilot programs (e.g. CPP) to test your operational changes while you are still protected on the down side

• Stay tuned, the California Energy Crisis just keeps on happening