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Countywide Community Choice Aggregation Task Force Meeting Thursday, April 14, 2016; 10: 00 am Countywide Community Choice Aggregation Task Force Meeting Thursday, April 14, 2016; 10: 00 am – 12: 00 pm City of Palmdale Development Services Building 38250 Sierra Hwy. , Palmdale, CA 93550

Agenda • Introductions • Technical Analysis/Business Plan Update • High Level Schedule Update • Agenda • Introductions • Technical Analysis/Business Plan Update • High Level Schedule Update • Regulatory Update • Governance • City of Palmdale Power Plant • Next Meeting

LA County CCA Study Update Palmdale, California April 14, 2016 Presented by: Gary Saleba, LA County CCA Study Update Palmdale, California April 14, 2016 Presented by: Gary Saleba, President Anne Falcon, Senior Associate A registered professional engineering and management consulting firm Telephone (425) 889 -2700 www. eesconsulting. com EES Consulting EES

Session Outline 1 Objective of Session Technical Analysis Update Schedule Questions and Answers Session Outline 1 Objective of Session Technical Analysis Update Schedule Questions and Answers

Objective of Session 2 Update on State/Local CCA Activities LA County Specific Updates Objective of Session 2 Update on State/Local CCA Activities LA County Specific Updates

Technical Analysis Update 3 Economics of CCA Based on Load/Resource Balance Cost vis-à-vis SCE Technical Analysis Update 3 Economics of CCA Based on Load/Resource Balance Cost vis-à-vis SCE Rates Update load analysis for LA County Historic 2015 data excluding Direct Access Annual Peak (MW)* Annual Energy (a. MW) County Facilities 65 54 Unincorporated 731 439 Cities 4, 271 2, 563 Total LA County 5, 067 3, 056 * Estimated Forecast based on population growth and participation rates

Technical Analysis Update (cont’d) 4 Technical Analysis Update (cont’d) 4

Technical Analysis Update (cont’d) 5 Technical Analysis Update (cont’d) 5

Technical Analysis Update (cont’d) 6 Resource Considerations Must meet demand + Resource Portfolio Standards Technical Analysis Update (cont’d) 6 Resource Considerations Must meet demand + Resource Portfolio Standards (RPS) + Resource Adequacy (RA) + Storage Requirements Renewable portfolio standards SB 1078 in 2002 – 20% renewable by 2017 SB 107 in 2016 – 20% renewable by 2010 SB 2 in 2011 – 33% renewable by 2020 SB 350 in 2015 – 50% renewable by 2030 Resource Adequacy requirement System RA: Generation equal to total load forecast + 15% planning reserve margin Local RA: Generation equal to total load forecast for a particular constrained region (Bay area) Energy storage Storage projects to meet 1% of peak load Contracts by 2020 In place by 2024

Resource Portfolio Requirements 7 Meet RPS Requirements – Meets Current Requirements 25 percent 2020 Resource Portfolio Requirements 7 Meet RPS Requirements – Meets Current Requirements 25 percent 2020 – 23 33 percent 2024 – 26 40 percent 2027 – 29 45 percent 2017 – 19 2030 – 50 percent Need to Meet Load RPS Requirements, Resource Adequacy and Storage Requirements with Market Purchases, Renewables and Long-Term Power Purchase Agreements

11 Resource Portfolio Requirements (cont’d) 8 Market Price Forecast Wholesale Market Price Forecast Developed 11 Resource Portfolio Requirements (cont’d) 8 Market Price Forecast Wholesale Market Price Forecast Developed Using Forecast Natural Gas Prices and Projected Market-Implied Heat Rates So. Cal Natural Gas price forecast = NYMEX forward gas prices + So. Cal basis differentials Wholesale market price forecast = So. Cal natural gas price x market-implied heat rate Escalation rate of 2. 5% assumed beginning in July 2026 for market price forecast (beyond forward prices)

So. Cal (SP 15) Wholesale Market Price Forecast 9 12 So. Cal (SP 15) Wholesale Market Price Forecast 9 12

Resource Portfolio Requirements (cont’d) 10 Base Case Renewable Price Forecast Renewable resource costs vary Resource Portfolio Requirements (cont’d) 10 Base Case Renewable Price Forecast Renewable resource costs vary greatly Wind and solar levelized project costs vary from $60 to $100/MWh Landfill gas project costs can vary from $60 to $120/MWh Based a survey of renewable resource costs a base renewable energy market price of $85/MWh assumed

Base Case Forecast Resource Costs 11 Base Case Forecast Resource Costs 11

Meet RPS, RA and Storage Requirements for LA County Total Load 12 Meet RPS, RA and Storage Requirements for LA County Total Load 12

20 -Year Levelized Costs for Various Portfolios ($2016) 13 20 -Year Levelized Costs for Various Portfolios ($2016) 13

17 Power Cost Indifference Adjustment (PCIA) 14 Big Picture No incentive to minimize IOU 17 Power Cost Indifference Adjustment (PCIA) 14 Big Picture No incentive to minimize IOU generation/power purchase costs PCIA actually provides perverse incentive as high PCIA killer DA and CCA customers’ economics PCIA has no end-date PCIA = Net of Power Supply Costs Less Lost Revenues Actual in Power Supply Costs and Market Price Benchmarks (MPB) Calculated Inconsistently Capital costs for IOUs up front but levelized for MPB No environmental costs in MPB IOUs assure low cost out of state RECs to meet RPS No new transmission in MPB uses spot gas prices rather than forward curve PCIA greater for residential/commercial than industrial

Power Cost Indifference Adjustment (PCIA) (cont’d) 18 15 What is Needed? l Better review Power Cost Indifference Adjustment (PCIA) (cont’d) 18 15 What is Needed? l Better review of PCIA calculation (more transparency) l Look for opportunities to reduce stranded costs rather than pass them on l No IOU over commitment/load forecast for CCAs should be accurate l Set fixed term for CCA or set one-time charge l Need a formal proceeding just on PCIA to establish calculations, review process and public vetting

19 What’s Next for LA County? 16 Forecast of SCE Rates Organizational Structure, Governance 19 What’s Next for LA County? 16 Forecast of SCE Rates Organizational Structure, Governance and Behind the Meter Ideas Overall Budget for CCA Business Plan Ready for Stakeholder Vetting

20 Schedule for LA Project 17 20 Schedule for LA Project 17

High Level Schedule Update High Level Schedule Update

REGULATORY UPDATE PRESENTED TO LA COUNTY COMMUNITY CHOICE AGGREGATION TASK FORCE APRIL 14, 2016 REGULATORY UPDATE PRESENTED TO LA COUNTY COMMUNITY CHOICE AGGREGATION TASK FORCE APRIL 14, 2016

Today’s Talk 2 What’s happening with regulatory agencies and community choice aggregation? Exit Fees: Today’s Talk 2 What’s happening with regulatory agencies and community choice aggregation? Exit Fees: Power Charge Indifference Adjustment (PCIA) Initially for direct access Increasingly applied to other types of departing load Long-term procurement Distributed Energy Resources Jody London Consulting April 2016

3 Exit Fees: Power Charge Indifference Adjustment Initially established as part of 1990 s 3 Exit Fees: Power Charge Indifference Adjustment Initially established as part of 1990 s electricity industry restructuring. Idea is to leave bundled customers “indifferent” to fact that other customers were taking electricity through direct access. Utilities are supposed to account for load they will no longer need to serve. Much legislation over the years on this. PG&E may presage other utilities: December 2015 surprisingly high charge upheld by CPUC Latest estimates from PG&E show PCIA could be as high as 4¢/kwh in coming years. Jody London Consulting April 2016

4 Exit Fees: Power Charge Indifference Adjustment What’s in the PCIA Formula? Vintage: utilities 4 Exit Fees: Power Charge Indifference Adjustment What’s in the PCIA Formula? Vintage: utilities want to assign a specific charge to each “batch” of customers that takes service from a CCA. If a CCA adds customers at different times, different PCIA charges would apply. And, every time a customer moves, the customer is assigned to a new “vintage, ” even though the load from that site stays relatively constant. Term: there is no standard time frame over which the PCIA charge applies. Methodology: the process and terms by which the PCIA is developed are not clear. What’s not in the PCIA formula? Benefits that CCAs provide Jody London Consulting April 2016

5 Exit Fees: Power Charge Indifference Adjustment What is the CPUC doing about this? 5 Exit Fees: Power Charge Indifference Adjustment What is the CPUC doing about this? March 8 workshop; report forthcoming Expect CPUC will establish a working group of utilities, CCAs, other to hash out a solution LA County is working with other established and forming CCAs to have proposals for the working group (when it commences) Jody London Consulting April 2016

Exit Fees: Popping up in other places 6 Energy Storage Utility green tariffs Customer Exit Fees: Popping up in other places 6 Energy Storage Utility green tariffs Customer self-generation Net energy metering (potential) Probably others Jody London Consulting April 2016

Long-Term Procurement 7 SB 350 (2015) includes CCAs as “load-serving entities” and requires them Long-Term Procurement 7 SB 350 (2015) includes CCAs as “load-serving entities” and requires them to develop Integrated Resource Plans. CCAs must show they will: Reduce greenhouse gas emissions Procure at least 50% renewables resources by 2030 Double energy efficiency savings by 2030 Make sure customers who remain with the utility are indifferent to the CCA proposals Fairly allocate costs for non-performance by the CCA or utility New rulemaking (R. 16 -02 -007) requires CCAs to participate Comments were submitted in March First scheduling meeting will be April 26; LA County will be there Jody London Consulting April 2016

Distributed Energy Resources 8 Rulemaking 14 -10 -003 is looking at how to integrate Distributed Energy Resources 8 Rulemaking 14 -10 -003 is looking at how to integrate distributed energy resources with traditional generation resources CPUC looking at whether it can create an incentive by which utilities will solicit distributed energy resources. Would first perform a two-year pilot. LA County CCA could be a provider of these resources Jody London Consulting April 2016

COMMUNITY CHOICE AGGREGATION Joint Powers Authority John L. Geiger, Esq. General Manager – Standards COMMUNITY CHOICE AGGREGATION Joint Powers Authority John L. Geiger, Esq. General Manager – Standards & Practices Internal Services Department April 14, 2016

R 1. Whereas the Members want to establish and participated in a Community Choice R 1. Whereas the Members want to establish and participated in a Community Choice Aggregator, as defined in California Public Utilities Code sections 331. 1, 366. 2, et al. (the “CCA Act) to: (1) Reduce greenhouse gases and accelerate the use of renewable energy resources; (2) Procure electricity for a lower price; and (3) Bring new revenue sources into the local economy.

1. 01 Creation of Authority. Pursuant to the JPA Act, the Members hereby create 1. 01 Creation of Authority. Pursuant to the JPA Act, the Members hereby create a public entity to be known as the “_________” (hereinafter, the “Authority”). The Authority shall be a public entity separate and apart from the Members who shall administer this Agreement. The jurisdiction of the Authority shall be all territory within the geographic boundaries of the Members; however the Authority may undertake any action outside such geographic boundaries as is necessary and incidental to the accomplishment of its purpose.

1. 03 Membership in the Authority. Participation in the Authority is open to public 1. 03 Membership in the Authority. Participation in the Authority is open to public agencies, as defined by the JPA Act, that: (a) have adopted an ordinance under California Public Utilities Code section 366. 2(c)(12)(B); and (b) have duly approved and executed this Agreement, subject to the limitations in Sections 1. 04 (Term) and 7. 02 (Addition of Members and Amendments).

1. 04 Term. This Agreement shall become effective, and the Authority shall come into 1. 04 Term. This Agreement shall become effective, and the Authority shall come into existence, when the Agreement is authorized and executed by the County of Los Angeles and at least one other public agency each of the following occurs (the “Effective Date”). Upon the Effective Date and for 120 days thereafter, public agencies may become Members of the Authority, without Board approval, by adoption and execution of this Agreement. After the Effective Date, membership is subject to approval by the Board as set forth in Section 7. 02(a) of this document.

2. 01 Composition of the Board The Authority shall be administered by a Board 2. 01 Composition of the Board The Authority shall be administered by a Board of Directors (the “Board”), consisting of a minimum of five (5) Directors and not more than nine (9) Directors, identified by the County of Los Angeles as the appointing authority. Each Director appointed shall designate their Alternate Director. An Alternate Director may act in their Director’s absence and shall exercise all rights and privileges of a Director. At the time of appointment and for the duration of service, each Director and Alternate Director shall be employee or officer of a Member. All Directors and Alternate Directors shall be nonelected officials.

2. 02 Purpose of Board. The general purpose of the Board is to: (a) 2. 02 Purpose of Board. The general purpose of the Board is to: (a) Provide structure for administrative and fiscal oversight; (b) Retain an Executive Director to oversee day-to-day operations; (c) Identify and pursue funding sources; (d) Set policy; (e) Maximize the utilization of available resources; and (f) Oversee all Committee activities.

3. 05 Other Agents. The Board shall have the power by resolution to hire 3. 05 Other Agents. The Board shall have the power by resolution to hire employees or appoint or retain such other agents, including officers, loan-out employees, or independent contractors, as may be necessary or desirable to carry-out the purpose of this Agreement. The Board shall retain an Executive Director as soon as reasonably possible from the Effective Date, pursuant to Section 2. 02(b). By resolution or motion, the Board may delete any of its powers and authority to the Executive Director.

3. 07 Advisory Committees. The Board shall establish the following Advisory committees: (a) Technical 3. 07 Advisory Committees. The Board shall establish the following Advisory committees: (a) Technical & Operations Committee – The Operations Committee’s primary purpose is to review and recommend to the Board operating policies and procedures that will ensure the System resources are used efficiently to meet the needs of all Members. (b) Finance Committee – The Finance Committee’s primary purpose is to review and recommend to the Board: (1) Each fiscal year budget; (2) Financial policies and procedures to ensure equitable rate setting; (3) The availability and desirability of federal or state grant or program funding. (c) Regulatory and Legislative Committee – The Legislative Committee’s primary purpose is to consider and advise the Board on regulatory and legislative matters. 3. 08 Membership of Advisory Committees. Each Member may, but is not required to, serve on each Advisory Committee.

4. 04 Limitation on Exercise of Powers. All common powers exercised by the Board 4. 04 Limitation on Exercise of Powers. All common powers exercised by the Board shall be exercised in a manner consistent with, and subject to, the restrictions and limitations upon the exercise of such powers as are applicable to the County of Los Angeles, as may be amended from time to time.

4. 05 Obligations of Authority. The debts, liabilities, and obligations of the Authority shall 4. 05 Obligations of Authority. The debts, liabilities, and obligations of the Authority shall not be the debts, liabilities, and obligations of the Members. In addition, pursuant to the JPA Act, no Director shall be personally liable on the bonds or subject to any personal liability or accountability by reason of the issuance of bonds.

5. 01 Contributions. Members are not required under this Agreement to make any financial 5. 01 Contributions. Members are not required under this Agreement to make any financial contributions. Consumers may subscribe as customers of the Authority pursuant to the CCA Act and outside of this Agreement and through their on-bill selections.

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5. 01 Contributions. Members are not required under this Agreement to make any financial 5. 01 Contributions. Members are not required under this Agreement to make any financial contributions. Consumers may subscribe as customers of the Authority pursuant to the CCA Act and outside of this Agreement and through their on-bill selections.

5. 01 Contributions. Members are not required under this Agreement to make any financial 5. 01 Contributions. Members are not required under this Agreement to make any financial contributions. Consumers may subscribe as customers of the Authority pursuant to the CCA Act and outside of this Agreement and through their on-bill selections.

6. 01 Withdrawal by Members. Any Member may withdraw from the Authority following written 6. 01 Withdrawal by Members. Any Member may withdraw from the Authority following written notification submitted to the Executive Director at least ninety (90) days in advance of the effective date of withdrawal from the Authority.

jgeiger@isd. lacounty. gov [email protected] lacounty. gov

Seattle-based developer: Clean energy projects. Founded 22 years ago: U. S. Secretary of Energy, Seattle-based developer: Clean energy projects. Founded 22 years ago: U. S. Secretary of Energy, Don Hodel. COO of Department of Energy, Earl Gjelde. Over 9, 000 MW to date. Full and partial scope engagements. Development, financing, off-take marketing, program management, and asset management: -Utility scale wind and solar PV. -Natural gas fired combustion turbines. -Major coal gasification facilities. -CO 2 capture for EOR. 2

Palmdale Energy Project • Purpose - flexible capacity resource: • Help integrate additional renewable Palmdale Energy Project • Purpose - flexible capacity resource: • Help integrate additional renewable resources and; • Provide energy when renewable resources not generating. • History - developed by City of Palmdale – acquired by Summit 2015. • Jobs - 340 high-paying union jobs during construction period. • Total construction payroll $120 million. • Over 70 jobs long term. • Direct and indirect. • Taxes - The Project will be a significant taxpayer: • Annual tax payments - multiple $millions: • Support local services - schools, police and fire protection. Confidential 3

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Palmdale Energy Project – Efficiency and Flexibility • • 650 MW Combined Cycle Gas Palmdale Energy Project – Efficiency and Flexibility • • 650 MW Combined Cycle Gas Turbines. Fast Start: • 440 MW in ten minutes. Very Flexible: • Minimum Load (130 MW) to full load (650 MW) in 13 minutes. Dry Cooled – ultra low water use - reclaimed waste water. Very Efficient - (6771 MMBtu/MWh - HHV) • 20 percent more efficient than system average; • 50% more efficient than older power plants, resulting in; • Low greenhouse gas and other emissions. State-of-the-art control technology: • Minimize project emissions. • Cleanest natural gas generation in CA. Confidential 5

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Discussion of the Need for Flexible Resources Confidential 7 Discussion of the Need for Flexible Resources Confidential 7

Flexible Capacity – it’s not just about generating energy: • In addition to energy, Flexible Capacity – it’s not just about generating energy: • In addition to energy, the electric system needs: • Ancillary Services – for grid stability and reliability. • • • Renewable generation – great for clean energy but is intermittent: • Renewables: overall increased need for Ancillary Services. • • Frequency Control Load Following Spinning Reserves Reactive Power Support and Voltage Control Fast ramp-up and ramp-down is critical. Morning and evening ramping will become increasingly important. This need is illustrated by the following duck chart. Older existing thermal generators: • Cannot ramp quickly enough. • Cannot operate cleanly at partial loads. Confidential 8

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Discussion of the Future CAISO Resource Needs Confidential 12 Discussion of the Future CAISO Resource Needs Confidential 12

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Once Through Cooling Retirements SCE and SDG&E Confidential 15 Once Through Cooling Retirements SCE and SDG&E Confidential 15

Palmdale Energy Project - Benefits • • Inexpensive source of needed flex capacity: • Palmdale Energy Project - Benefits • • Inexpensive source of needed flex capacity: • Perfect addition to CCA portfolios with high renewable content. Excellent complement to renewable portfolios and energy storage: • Provides controllable, inexpensive capability: • • Is already permitted: • • Manage variability of renewable generators. Charge energy storage devices. Ancillary and grid support services. But revisions to project reduce virtually all permitted impacts. • Cleanest and most efficient gas fired generator in CA. Material benefit to LA County: • • Taxes Jobs Local road paving Local grid stability Confidential 16