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Procuring Our Way to Compliance IEP 27 th Annual Meeting September 23, 2008 Fong Wan, PG&E

Procuring Our Way to Compliance IEP 27 th Annual Meeting September 23, 2008 Fong Wan, PG&E. GHG Reduction: What’s Required of the Electric Sector?. 169 MMT of total reductions needed to reach the 2020 target of 427 MMT

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Procuring Our Way to Compliance IEP 27 th Annual Meeting September 23, 2008 Fong Wan, PG&E

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  1. Procuring Our Way to ComplianceIEP 27th Annual MeetingSeptember 23, 2008Fong Wan, PG&E

  2. GHG Reduction: What’s Required of the Electric Sector? • 169 MMT of total reductions needed to reach the 2020 target of 427 MMT • CARB’s Draft Scoping Plan describes several incremental reduction measures that could impact PG&E if adopted: CSI existing program targets are expected to contribute an additional 2.1 MMT

  3. PG&E Compliance Exposure Remains Uncertain • CARB continues to develop its AB32 recommendations but PG&E has limited direct GHG emissions • PG&E has been focused on reducing its direct and indirect emissions

  4. PG&E Continues to Emphasize Energy Efficiency • PG&E’s EE programs have contributed significant savings and are expected to provide even more in the next decade • Over 1,000 MW of installed energy efficiency projects in the last 5 years • An additional 1,050 MW expected over the next 3 years • CARB’s EE targets rely on ambitious government action, technology advancement, market transformation, and unprecedented customer adoption and rebate levels • CHP as a GHG reduction measure is uncertain • CHP must have true efficiency advantages and be matched against existing thermal load to achieve reductions • Based on currently available information, it’s questionable whether efficient CHP capacity exists for the 30,000 GWh described in the Draft Scoping Plan

  5. PG&E Will Reach and Exceed 20% Renewables • PG&E has 24% RPS eligible resources under contract for future delivery • Pursuing power contracts with diverse energy technologies • Seeking new supply options both within and outside of state • Key components to achieving RPS targets remain elusive • Extension of ITC and PTC • Transmission improvements • Expedited permitting approvals • Developer performance and timing consistent with contract Given the challenges with reaching 20% RPS, is 33% achievable by 2020?

  6. PG&E’s Role in a California Cap-and-Trade • PG&E will focus on mitigating significant increases in costs to its customers that may arise in a cap-and-trade • Compliance will result mostly from: • Role as a “first deliverer” of imports • Recent commitments to utility-owned fossil generation • PG&E may have a role in managing compliance costs for some power producers All of the uncertainties with EE, RPS and cap-and-trade suggest a need for high quality offsets and other cost containment measures

  7. Current Options for Compliance Strategies • Strategies for compliance with a cap-and-trade • Reduce energy consumption through EE and DR programs • Reduce carbon content of energy delivered with low or no carbon energy through PPAs, UOG and Distributed Generation • Purchase allowances • Purchase offsets • One of the key pre-compliance options are offsets where rules and protocols remain in flux Need defined rules to encourage offset market development before it can be a viable pre-compliance option

  8. PG&E Procurement Accomplishments to Date Since resuming procurement in January 2003, PG&E has worked to restore system reliability and implement the state’s policy goals • Energy Efficiency: Over 1,000MW of installed energy efficiency projects • Demand Reduction: About 750 MW of dependable programs • Renewables: Almost 3,700 MW under contract • California Solar Initiative: PG& E began implementation January 1, 2007 and has installed 232 MW of solar units at more than 25,000sites • The 2004 LTRFO and utility-owned generation: 3,000 MW of new, efficient gas-fired generation • The 2008 LTRFO seeks 800-1,200 MW of new, efficient, flexible resources

  9. Utility and IPP Generation Capacity Power Plant Ownership n Northern California by Net Qualifying Capacity (MW) PG&E Owned New Resources and PG&E PPAs in Northern California by Capacity (MW) PG&E Owned PG&E * Signed RPS PPAs QFs and Merchant Plants Municipal Utilities 2004 LTRFO PPAs 2008 LTRFO PG&E supports the current hybrid market structure for California *RPS resources have a lower net qualifying capacity

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