1) Would a Sodium Sulfur ( Nas ) Battery Be Classified Into Distributed Generation Or Another

May 19, 2008 Q&A from the 2008 All Source LTRFO Mailbox

1) Would a Sodium Sulfur (“NaS”) battery be classified into Distributed Generation or another category in the RFO?

From what we know of the NaS battery technology, it appears that we would consider it to be distributed generation for the purposes of the All Source LTRFO.

2) We understand that total capacity to be acquired under the RFO is 800 - 1200MW. Do you have a plan as for how much portion (percentage) to be allocated to following resources respectively?

. New Distributed Generation . New Renewable Generation . New Conventional Generation such as CCGT . (category which battery technology is classified into, if any)

We do not plan to allocate the All Source LTRFO need to particular resource classifications. All resources will be evaluated in comparison to one another.

3) As you may know, the capital expenditure for the NaS battery is very high compared with a Gas Turbine. Is there any possibility that an Offer utilizing the NaS battery would be awarded a contract in this RFO? If yes, please let us know the reason. (Is the evaluation of such battery technology separate from the evaluation of GTs, etc? This question is related to ii) above.)

We cannot say at this time whether your Offer would be competitive. All Offers will be evaluated using the criteria described in Section IV of the All Source LTRFO Protocol.

4) If we offer our proposal based on utilizing the NaS battery, do you prefer PPA or PSA(i.e. purchase NaS battery)? We understand that PG&E already purchased a 6 MW NaS Battery.

We do not have a preference.

5) If a Participant is indexing capacity payments up to the construction financing milestone as well as indexing other components such as fixed O&M, variable O&M and/or fired hour charge, how do we fill out Appendix H1 and I1 given that we will not know the impact the of index on:

i. The initial capacity price proposed (from offer to construction financing milestone), and

ii. The initial fixed O&M, variable O&M and/or fired hour charge after the initial price in the 1st year?

Participants submitting indexed Offers will need to develop their own expectation of how the index will impact their pricing. Please also see answer #13 from the Q&As posted by PG&E on May 9.

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6) Can capacity payments decline over time?

7) On line dates:

i. How will earlier resources be evaluated?

Assuming all other things being equal, Offers with earlier online dates will tend to score higher on Portfolio Fit.

ii. Are some earlier years more valuable than others? For example, is coming online in 2012 more valuable than 2013? Is the value linear? In other words, is each year earlier than 2015 worth 1 extra point for example or is 2012 some multiple of value more than 2013 and some larger multiple more than 2014? Are some years (2014 and 2015, say) the same in PG&E’s view?

There is no simple relationship between online date and market value. Portfolio fit will prefer earlier years over later years.

iii. Can different COD dates for the same project be submitted under the same deposit as an Offer variation?

No. Differing COD dates would have to be submitted as separate Offers.

iv. If a project consists of independent units that are to come online approximately several months apart from each other will PG&E accept 2 different start and end dates from the same facility for independent units? For example, if my project is 4 peaker units and 2 are scheduled online in March and 2 are scheduled online in June, can I have 2 contract periods March to March 10 years later and June to June 10 years later?

PG&E would accept such an Offer, providing that the units all come online on the first day of their respective online months.

8) PG&E seeks to acquire 800 - 1200 MW of new generation capacity. How will PG&E finalize the number of MWs to be procured within that range?

The final MW amount to be procured will be a function of the attractiveness of Offers received and the project characteristics of those Offers.

9) Credit. What determines if the 3-year or 5-year time horizon is used for the mark-to-market calculation?

Please see answer #1 in the Q&A posted by PG&E on May 9.

10) Transmission

i. What if an appropriate proxy substation is not offered in the list by PG&E?

The closest proxy substation will be used.

ii. How will a repowering be analyzed as it relates to transmission upgrades? Current rules allow for replacement of current MWs 1:1 without required transmission upgrades. Will a repower be exempted from the transmission upgrade analysis?

In the initial assessment, transmission analysis of repowering projects will be based on either any available CAISO interconnection studies or the net impact on the transmission system as identified in the Transmission Ranking Cost Reports. Note that the current CAISO Large Generator Interconnection Procedure rules do not exempt repowering projects from a transmission upgrade analysis so such projects are required to submit an Interconnection Application upon short listing if they have not already done so.

iii. What purpose does PG&E have for requiring ALL correspondence between the Owner and the TO? Surely you don’t need an email confirming a meeting time, etc. What is your goal here?

The bidder should provide all correspondence with the CAISO and/or PTO that provides meaningful information concerning the scope and/or timing of the Interconnection Application or the work being done as a result of the application. This could include meeting agendas or minutes. However it is not necessary to provide communications on meeting or conference call logistics.

11) Weather data

i. The reports requested are $4 each. 10 years of monthly data is almost $500. Is this really what you are requesting? The annual reports do not provide the detail to calculate the required July Peak Conditions.

See Answer #14 in the Q&A posted by PG&E on May 9. Section V.C of the All Source LTRFO Protocol notes Participants are responsible for their expenses.

ii. Contract Capacity under Expected Operating Conditions: How is this table being used? Is it only for calculating what the capacity payments are to the Seller? Is PG&E expecting that these values be guaranteed in any way or are only the July Peak and ISO conditions the guarantee conditions?

Contract Capacity under Expected Operating Conditions in Appendix I-1 is to provide operational information regarding the Project. The first 12 months of Contract Capacity listed in Appendix I-1 should correspond to the Monthly Contract Capacity in the PPA which will be employed in the determination of payments to the Seller. As described in the PPA, PG&E will have the right to test capacity seasonally and

of 8 May 19, 2008 Q&A from the 2008 All Source LTRFO Mailbox compare the results of these tests, adjusted for July Peak and ISO conditions, against the guaranteed values for July Peak and ISO conditions. To the extent the seasonal tests vary from guaranteed, the PPA allows for adjustment of the Monthly Contract Capacity. Appendix XIV of the PPA provides an example this adjustment.

iii. The NCDC database you reference does not include RH% in its reports. How should July Peak Capacity be calculated without this? iv. What are we to do about months (or years) that are missing from the NCDC data set? Ignore them? Go back an additional year for each year that is missing so that we go back to 1997 and earlier if necessary?

Please see answer #14 in the Q&A posted by PG&E on May 9.

v. Please explain which data points to use for calculation of Peak July Conditions in Appendix N3 and the Input Sheets.

The data should be from the following NCDC website located at http://www4.ncdc.noaa.gov/cgi-win/wwcgi.dll?WWDI~getstate~USA.

Please also see Answer #9 in the Q&A posted by PG&E on May 9.

vi. Paragraph 1.2 of Appendix N3 includes yet a third definition for the “Peak July Conditions”, that being “as determined by the average of the July monthly maximum daily peak dry –bulb temperatures and coincident relative humidity for 1995-2004.” Unless there is a reason that the Peak July Conditions be defined differently in various parts of the RFO, we suggest that all three definitions be revised to read the same way and that the period in all cases be revised to read 1998 -2007 (i.e. the past 10 years).

We have revised Appendix N3 and posted it on the PG&E website.

vii. Appendix I, The Generation Facility Information Form, asks for capacity output and heat rate under July peak temperature conditions based on weather data as provided by the National Climate Data Center (“NCDC”). Can Participants use weather data from a source other than the NCDC?

No. Participants should use NCDC data. Data from the NCDC should be for a geographically nearby weather station that (1) approximates the conditions at the specific plant site; and (2) contains all of the necessary data to meet the requirements of Appendix I.

12) Equipment

i. Section III.2 states: “Facilities must be constructed with new equipment…”. Appendix J.1.b-e seems to indicate previously operated and installed equipment, gray market equipment, and/or

equipment in storage is permitted. Which of these statements is correct?

New equipment means zero operating hours. However, Repowered facilities will be considered per Section II.C.IV of the All Source LTRFO Protocol.

ii. Is a backup generator to meet essential loads required for PPA offers?

iii. Section D.1 and D.II define operating limits for PSA options. Will similar operating limits be defined for PPA options?

Similar operating limits will not be required for PPA Offers, but any lack of operating limits will be factored into the evaluation of Offers.

iv. Section II.D.I of the Protocol document defines 4,000 hours and 300 starts for a peaker. Do you really contemplate a peaking unit running at 45.7% capacity factor (n=4,000/8,760)?

Given the uncertainty in future market conditions as well as the uncertainty in load, hydro and intermittent resource additions, PG&E is seeking flexible resources that may operate a substantial amount of hours in any given year.

Section II.D.I describes operating characteristics that PG&E seeks for PSA Offers. Variations to these operating characteristics will be considered in the evaluation.

v. How will ancillary services such as AGC be evaluated?

Please see Section IV of the All Source LTRFO Protocol. Ancillary services will be considered in the Market Valuation.

vi. Is PG&E seeking to procure (and pay for) VAR support?

The ability to provide VAR support will be considered in the evaluation of Offers.

vii.What power factor should be used for calculating capacities in Appendix I-1?

A power factor of 1 should be used.

viii. At the Bidders Conference, PG&E talked about a GHG emissions adder (evaluation factor) of about $10/ton CO2 (2009 $). Has the amount of this adder been finalized?

PG&E considers the final amount of the GHG emissions adder confidential.

13) If a project misses a deadline (such as site control or interconnection filing) after being short-listed, what is the consequence? Is the project automatically eliminated from consideration? Would the project lose its credit posting? Is there a cure period?

Offers that fail to meet deadlines will be deemed non-compliant.

14) How will a repowering meeting the criteria be given priority as directed by the CPUC in Section 2.6.3.2 of the LTPP (Decision-07-12-52, December 20, 2007)?

The referenced section of D.07-12-052 does not use the term "priority." Instead, this section states: "Preference should be given to procurement that will encourage the retirement of aging plants, particularly inefficient facilities with once-through cooling, by providing, at minimum, qualitative preference to bids involving repowering of these units or bids for new facilities at locations in or near the load pockets in which these units are located." D.07-12-052 directs the utilities to work with the Energy Division and PRG to incorporate this preference into the bid evaluation criteria. PG&E is working with the Energy Division, Independent Evaluator, PRG and Cost Allocation Methodology group to review the bid evaluation criteria to ensure compliance with all aspects of D.07-12-052 and other Commission decisions, including the language quoted above.

15) Appendix I enumerates 7 cases: i. Max output with DF/PA ii. Max output with DF iii. Max output iv. Med-High v. Med vi. Med-Low vii.Minimum

Appendix J.31 (Heat Balance) identifies 6 cases: i. Max Output with DF/PA ii. Max output with DF iii. Maximum output iv. 75% of Maximum output v. 50% of Maximum output vi. Minimum load

How do these relate to each other? What does Med-High, Med, Med-Low mean in terms of % of gas turbine output? Is it whatever we deem reasonable or are 75% and 50% intended to match up with the categories in Appendix I?

Participants are asked to provide information in Appendix I and Appendix J which will be representative of the capabilities of their particular project. The terms Medium, Medium High and Medium Low were purposely undefined due to the variety in capabilities from different technologies and configurations. To assist PG&E in understanding the operational characteristics of an Offer, Participants in submitting Appendix J should provide data at specific output levels that reflect the operational characteristics of their facility. Participants should identify which percentage of

of 8 May 19, 2008 Q&A from the 2008 All Source LTRFO Mailbox output they have assumed in each of the cases. The information in Appendix J should directly address the the output levels provided in Appendix I. Furthermore, the Appendix I input sheet will accept less than the three output levels in question. For example, providing data for Medium High and Medium is acceptable. However, Participants must precisely identify the capabilities of the project at both maximum and minimum levels.

16) Could you specify which Appendices need to be submitted for a natural gas-fired combined cycle submitting a PPA? For example, Appendix N1 and N2 do not need to be addressed by a project submitting a PPA. Do either Appendix I1 or Appendix I2? Appendix K Table A or Appendix K Table B? There appears to be conflicting information in the RFO document and the appendices do not clearly state on the instruction sheet who has to fill out each specific form?

Offers for “Non-As-Available” resources, or dispatchable resources, should submit Appendix I1. Offers for “As Available” resources, or resources which cannot be dispatched, should submit Appendix I2. All Offers should submit both Appendix K Table A and Table B.

17) In the questions below, #13 from the April 30, 2008 Q&A posted, "5 variations" are mentioned. Can you please provide the Appendix or RFO document where the "5 variations" are mentioned and explained? Also, can you elaborate and explain as to where the documents state that only 3 variations can be offered for a PPA? Appendix A allows up to 4 variations for a PPA. For a PSA, below you mention only two variations. Appendix A allows only one variation for PSA. Please explain the difference between the documents and your response below.

We have reposted Appendix A to the website with the following corrected information:

• For a PSA, the Participant can submit two (2) variations under a single Offer Deposit which can only vary in price.

• For a PPA, the Participant can submit three (3) variations under a single Offer Deposit which can only vary in price and term.

18) Will PG&E accept a confirmed Letter of Credit for the Deposit?

We can accept a confirmed Letter of Credit if the confirming bank meets the criteria listed in the All Source LTRFO Protocol, on page 17 under the Offer Deposit. Also the confirming letter issued by the confirming bank must be satisfactory to Pacific Gas and Electric Company. To avoid possible delays please submit draft copies of the Letter of Credit and confirming letters to the PG&E Risk Credit Mailbox at [email protected] for review prior to its issuance.

19) Can we make a proposal for a suitable capacity power plant on a Facility Ownership basis on the condition that we don’t own the land and the site, PG&E provides us with the site and the fuel at the plant doorstep and we will build and operate the plant. If PG&E doesn’t want

us to operate the plant, then we can provide the plant operation proposal as an option.

PG&E is not planning to make any land available for development.

20) PG&E looking to purchase the energy at that rates or are you looking to offer customers the rates listed above? If there is a link to the CPUC ruling online you can send that over and I will refer to the information.

PG&E has issued this All Source LTRFO to fill the new resource need identified by the CPUC in D.07-12-052. This decision can be accessed at http://docs.cpuc.ca.gov/word_pdf/FINAL_DECISION/76979.pdf

21) Do I have to "mark-up" the PPA or PSA? Could I just highlight sections that require "discussion?"

A Participant must provide a completely executed PPA or PSA including any modifications to those documents that the Participant is requesting. Without a completed PPA or PSA, the Offer will be deemed non-compliant.