Sierra Pacific Power Company’s Proposal for a Net Surplus Compensation Rate

1. Sierra Pacific Power Company’s Proposal for a Net Surplus Compensation Rate July 9, 2010 Workshop

2. Background on Sierra Pacific • Small California service territory (approximately 46,000 customers) • Unique geographic/topographic service territory (most customers are located above 6,000 feet, snowfall is prevalent) • Unique electric demand (peaks in the winter) • Low California NEM customer participation (20 NEM customers, only 2 with a net surplus in 2009)

3. Background on Sierra Pacific • Multi-jurisdictional utility with relatively few California customers • Smaller program budgets, staffing, and customer bases for recovery of program design, development, implementation and administration costs • Seek to administer programs efficiently and cost effectively

4. AB 920 • “In establishing the rate…the ratemaking authority shall ensure that the rate does not result in a shifting of costs between solar customer-generators and other bundled service customers.” (Pub. Util. Code Section 2827(h)(4)(B).)

5. Sierra Pacific’s Proposal • Use a reasonable proxy for avoided cost, thus maintaining customer indifference and cost shifting. • Ensure administrative simplicity and cost effectiveness (use an established and published rate, avoid administrative work associated with implementing a more complex rate methodology).

6. Sierra Pacific’s Proposal • Net Surplus Compensation Rate is equal to the generation component for baseline quantities of Sierra’s otherwise applicable retail rate. • Generation Component = $0.05745 per kWh

7. Questions • Please direct any questions to: Jed Gibson Ellison, Schneider & Harris L.L.P. 2600 Capitol Ave, Suite 400 Sacramento, CA 95816 (916) 447-2166 jjg@eslawfirm.com