Friday, December 1, 2000

1. “Price, Reliability, & Environmental Impacts of Fuel Diversity Trends & Low-Income Ratepayers Under Restructuring” Massachusetts Electric Restructuring Roundtable Friday, December 1, 2000 PG&E National Energy Group and any other company referenced herein which uses the PG&E name or logo are not the same company as Pacific Gas and Electric Company, the California utility. These companies are not regulated by the California Public Utilities Commission, and customers do not have to buy products from these companies in order to continue to receive quality regulated services from the utility.

2. IN BRIEF . . . . . . . . • New England is becoming over-reliant on a single fuel source • Reliability of electricity supply is at risk • Threat of price shock is real • We need a balanced approach

3. Announced Gas-Fired Power Plants in New England By Planned Year of Online Operation TURBINE-BASED PLANTS BY YEAR ONLINE 7,000 Dual Fuel 6,000 Natural Gas Only 4,752 5,000 4,000 3,441 3,330 Capacity, MW 3,000 2,420 1,866 2,000 1,000 - 1999 or Prior 2000 2001 2002 2003 Note: Includes only power plants with a likelihood rating of '4' or better.

4. Two Future Scenarios For New England Note: Percentage Share of Net Power Production.

5. Compressor Station Failure Scenario

6. Compressor Failure Scenario

7. Qualitative Ranking of Gas Pipeline Customer Types and Their Required Degree of Pipeline Reliability Degree of Pipeline Electric System Reliability Required Grid Reliability Electric CC without Dual Fuel Electric CC with Dual Fuel Residential Commercial with Limited Industrial Alternatives Load Pipeline Customer Types

8. Electric Price Volatility: Example

9. Comparison of Price Volatility ($/BBL) ($/MMBtu) $6.00 45 Reduced Drilling & Massive Cold Front and Technical Factors Well Freeze Off Early Winter Iranian oil prices Gulf War, supply 1999 OPEC 40 peak at $45/BBL restricted $5.00 1996/97 Production Accord January 1994 Blizzard Technical 35 December 1989 Factors January 1996 $4.00 Cold Spell Blizzard 30 Hurricane Hurricane Georges Andrew 25 $3.00 Hurricane Opal 20 $2.00 1973/1974 15 OPEC oil embargo Excess Storage and Hurricane Mild Winter $1.00 Danny March 1993 10 Blizzard Mild Winter 1986 price crash S.T. Demand > Excess supply due to excess OPEC production S.T. Supply 5 Asian economic crisis $0.00 and over production 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 0 Source: NGW 1967 1972 1977 1982 1987 1992 1997 Source: DOE & Bridge/CRB ($/MMBtu) $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Note: Northeast includes CT, MA, ME, NH, NJ, NY, PA, RI, and VT. Source: FERC Form 423 HENRYHUB: WTI: COAL:

10. 67% Growth 40% Growth Fuel Diversity Study • “Relying Mainly on Natural Gas for Power Supply Will • Likely Result in a Host of Negative Consequences on • the “Reliability and Price of Power and Gas ……….” • 15, 809 MW of New Combined Cycle By 2003 • 9,040 MW Already Under Construction

11. Fuel Diversity Study (cont.) • Only 1/2 of All New Generation Has Alternate Fuel Capability • Few, If Any, Facilities Have Contracted for “Long Haul” Gas Transportation • 77% of the Region’s Pipeline Capacity Would Be Consumed for Power Generation • The Coming Competition:“LIGHTS OR PILOT LIGHTS”