Before the Public Utilities Commission of the State of California

BEFORE THE PUBLIC UTILITIES COMMISSION FILED OF THE STATE OF CALIFORNIA 10-03-14 04:59 PM

Order Instituting Rulemaking to Integrate and Refine Procurement Policies and Consider R.13-12-010 Long-Term Procurement Plans (Filed December 19, 2013)

PACIFIC GAS AND ELECTRIC COMPANY’S (U 39 E) PROPOSED 2014 BUNDLED PROCUREMENT PLAN

PUBLIC VERSION (Redacted: Cover Pleading, Attachment A and Attachment C)

CHARLES R. MIDDLEKAUFF MARK R. HUFFMAN PACIFIC GAS AND ELECTRIC COMPANY 77 Beale Street, B30A San Francisco, CA 94105 Telephone: (415) 973-6971 Facsimile: (415) 973-5520 E-mail: [email protected] Attorneys for PACIFIC GAS AND ELECTRIC COMPANY

Dated: October 3, 2014

TABLE OF CONTENTS Page

I. OVERVIEW OF THE PROPOSED 2014 BPP ...... 2 A. Structure and Organization of the BPP ...... 4 B. PG&E’s Alternative Scenario ...... 5 C. Procurement Limits ...... 10 D. Appendices Addressing Scheduling, Bidding, And CAISO Operating Orders ...... 11 E. Hedging Plan Changes ...... 12 F. Nuclear Fuel Plan Changes ...... 12 G. Scoping Memo Issues ...... 13 II. SECTION I – INTRODUCTION ...... 14 III. SECTION II – STATUTORY AND LOADING ORDER REQUIREMENTS ...... 14 IV. SECTION III – COMPLIANCE WITH THE COMMISSION’S PROCUREMENT STANDARDS OF CONDUCT ...... 15 V. SECTION IV – DESCRIPTION OF PG&E FILINGS MADE TO DEMONSTRATE COMPLIANCE AND COST RECOVERY ...... 16 VI. SECTION V – PRE-APPROVAL, APPROVAL, AND FILING REQUIREMENTS ...... 16 VII. SECTION VI – UPDATES TO THE BUNDLED PROCUREMENT PLAN VIA ADVICE LETTER...... 18 VIII. APPENDIX A – PROCUREMENT PRODUCTS ...... 18 IX. APPENDIX B – PROCUREMENT PROCESSES AND METHODS ...... 20 X. APPENDIX C – PROCUREMENT LIMITS AND RATABLE RATES ...... 22 A. Electric Capacity and Energy Limits ...... 22 B. Gas Limits ...... 24 C. GHG Limits ...... 24 XI. APPENDIX D – DESCRIPTION AND EVALUATION OF CPUC MANDATED AND PG&E ALTERNATIVE SCENARIOS ...... 25 A. CPUC Mandated Scenario ...... 25 B. PG&E Alternative Scenario ...... 26 1. CCA Load Assumptions ...... 26 2. Direct Access Load Assumptions ...... 26 3. Distributed Generation Load Assumptions ...... 27 4. Overlap Issues ...... 28

-i-

TABLE OF CONTENTS (continued) Page

XII. APPENDIX E – ELECTRIC PORTFOLIO HEDGING PLAN...... 29 A. Tenor ...... 29 B. Hedging Targets and Limits...... 29 C. 32 D. Execution Strategy ...... 33 E. 33 F. Transition Plan ...... 33 G. Unusual Events, market Dislocations and Emergencies ...... 34 H. Liquidity Management Strategy ...... 35 I. Deletions from the 2010 BPP ...... 35 XIII. APPENDIX F – NUCLEAR FUEL PROCUREMENT PLAN ...... 36 A. Forward Contracting and Price Terms ...... 36 B. Nuclear Fuel Strategic Inventory ...... 36 C. Proposed Risk Management Measures ...... 37 XIV. APPENDIX G – GREENHOUSE GAS PROCUREMENT PLAN ...... 37 XV. APPENDIX H – CONVERGENCE BIDDING ...... 38 XVI. APPENDIX I – CONGESTION REVENUE RIGHTS ...... 39 XVII. APPENDIX J – BROKERAGES AND EXCHANGES ...... 39 XVIII. APPENDIX K – BIDDING AND SCHEDULING PROTOCOLS ...... 41 XIX. APPENDIX L – CAISO OPERATING ORDER PROTOCOLS ...... 42 XX. APPENDIX M – PROCUREMENT REVIEW GROUP, COST ALLOCATION MECHANISM GROUP, AND INDEPENDENT EVALUTOR ADMINISTRATION ...... 43 XXI. APPENDIX N – RISK MANAGEMENT POLICY AND TEVAR METHODOLOGY ...... 45 XXII. APPENDIX O – ACRONYM LIST AND GLOSSARY ...... 46 XXIII. CONCLUSION ...... 47 Attachment A - 2014 Bundled Procurement Plan (“BPP”) Sections, Corresponding 2010 BPP Sections, and Description of Changes Attachment B - Substantive Changes for Commission Approval Attachment C - PG&E’s Proposed 2014 Bundled Procurement Plan

-ii-

TABLE OF AUTHORITIES Page(s)

STATUTES Legislation

AB 57 ...... 14, 15

Dodd-Frank Wall Street Reform and Consumer Protection Act ...... 19, 20, 46

Public Utilities Code

Section 454.5...... 2, 11, 14 Section 454.5(g) ...... 2

CALIFORNIA PUBLIC UTILITIES COMMISSION

Decisions

D.03-12-062 ...... 21 D.04-12-048 ...... 17 D.06-11-048 ...... 19 D.07-12-052 ...... 17 D.10-12-034 ...... 38 D.11-10-002 ...... 11 D.12-01-033 ...... 1, 10, 12, 21, 22, 23 D.12-04-046 ...... 10, 25, 40 D.13-03-017 ...... 38 D.13-10-040 ...... 15 D.14-02-040 ...... 3, 6, 22 D.14-05-023 ...... 11, 14, 41

Resolutions

Resolution E-4135 ...... 17, 44, 45 Resolution E-4122 ...... 17 Resolution E-4660 ...... 38

-iii-

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Integrate and Refine Procurement Policies and Consider R.13-12-010 Long-Term Procurement Plans (Filed December 19, 2013)

PACIFIC GAS AND ELECTRIC COMPANY’S PROPOSED 2014 BUNDLED PROCUREMENT PLAN (PUBLIC VERSION)

Pursuant to the Scoping Memo and Ruling of Assigned Commissioner and Administrative

Law Judge (“Scoping Memo”) issued in this proceeding on May 6, 2014, Pacific Gas and

Electric Company (“PG&E”) is submitting to the California Public Utilities Commission

(“CPUC” or “Commission”) for its review and approval PG&E’s proposed 2014 Bundled

Procurement Plan (“BPP”). This filing includes a cover pleading and three attachments. The cover pleading provides an overview of PG&E’s 2014 BPP and a description of each section in or appendix to the BPP. The cover pleading also provides an explanation of how the 2014 BPP differs from PG&E’s existing BPP which was approved by the Commission in Decision (“D.”)

12-01-033, including substantive changes that PG&E has made in the 2014 BPP. In this pleading, PG&E’s current, Commission-approved BPP is referred to as the “2010 BPP.”

Attachment A provides a table that lists all of the sections in or appendices to the 2014

BPP, identifies the corresponding section or appendix in the 2010 BPP, and provides a brief explanation of changes or modifications that have been made in each section or appendix.

Attachment A will allow parties to readily compare portions of the proposed 2014 BPP to

PG&E’s 2010 BPP. Attachment B includes a list of the substantive changes in the 2014 BPP for which PG&E is specifically requesting Commission approval. Finally, Attachment C is the proposed 2014 BPP. Because the 2014 BPP and this filing include market sensitive information

under Public Utilities Code § 454.5(g), PG&E is submitting public and confidential versions of this filing and the 2014 BPP.

I. OVERVIEW OF THE PROPOSED 2014 BPP Under Public Utilities Code § 454.5, California’s investor-owned utilities (“IOUs”) are directed to submit procurement plans that, once approved by the Commission, establish the up-front standards for IOU procurement activities and cost recovery. Because each IOU’s procurement plan is for its bundled electric customers, it is typically referred to as a “Bundled

Procurement Plan” or “BPP.” PG&E’s 2014 BPP is intended to achieve PG&E’s goals to provide safe, reliable, affordable, and environmentally sensitive electric and gas service to its customers throughout northern and central California.

It has been four years since the IOUs last filed their BPPs, and while much of the energy industry in California has remained the same during that time, there have also been significant changes. Some aspects of PG&E’s 2014 BPP filing are similar or identical to PG&E’s existing

2010 BPP. For example, the list of approved procurement products and processes is relatively unchanged, as are specific procurement strategies, such as strategies related to convergence bidding. Other aspects of PG&E’s BPP have been updated to reflect the passage of time or

Commission decisions that have been issued during the last four years. For example, the discussion of PG&E’s compliance with the loading order adopted by the Commission as a part of the Energy Action Plan (“EAP”) has been updated to reflect significant developments in and

Commission decisions affecting PG&E’s Energy Efficiency (“EE”), Demand Response (“DR”), and Distributed Generation (“DG”) programs. In addition, over the last four years, there have been substantial developments in the procurement of renewable resources and the implementation by the California Air Resources Board (“CARB”) of California’s ground-breaking Cap and Trade Program.

In addition to updates to reflect the passage of time, there are a number of important substantive changes in PG&E’s 2014 BPP. These changes reflect the rapid evolution of the electric industry in California and throughout the United States. This evolution is being hastened by technological developments, regulatory decisions and requirements, and legislative initiatives.

PG&E’s 2014 BPP reflects a number of these key changes which have occurred in the last four years and impact PG&E’s procurement activities. Below, PG&E highlights six key changes in its 2014 BPP, which include:

1. Significant structure and organization changes to the BPP to make it more streamlined, easy to use, and transparent;

2. The inclusion of PG&E’s Alternative Scenario for its bundled electric forecast for the years 2015-2024 to reflect updated forecasts of departing load consistent with the Commission’s direction in D.14-02-040;

3. The addition of electric energy, natural gas, and greenhouse gas (“GHG”) compliance instrument procurement limits;

4. New appendices which address PG&E’s scheduling and bidding practices in the California Independent System Operator (“CAISO”) markets and PG&E’s response to CAISO operating orders related to system reliability;

5. Changes to PG&E’s electric portfolio hedging plan (“Hedging Plan”) to reduce complexity, clarify compliance obligations, and address additional price exposure; and,

6. Changes to PG&E’s nuclear fuel procurement plan given the substantial changes in the worldwide nuclear fuel market.

In addition to discussing these six key changes, this Overview section also addresses the issues raised in the Scoping Memo related to the BPP. After the Overview section, the remainder of this cover pleading provides a detailed description of each section or appendix in the 2014 BPP, and describes changes or updates to the 2010 BPP that are reflected in PG&E’s proposed 2014 BPP.

/// /// /// 3

A. Structure and Organization of the BPP

PG&E’s 2014 BPP substantially restructures the 2010 BPP to make it more streamlined, easy to use, and transparent. The structure and organization of the 2010 BPP dates back to 2006 and the Commission’s 2006 Long-Term Procurement Plan (“LTPP”) proceeding. The 2010 BPP structure reflects an outline developed in the 2006 LTPP proceeding, which, eight years later, needs to be updated and refreshed. The 2010 BPP includes sections and discussions on certain topics that are redundant or, in other cases, spread over multiple sections of the 2010 BPP. For example, rules concerning the Procurement Review Group (“PRG”) and Independent Evaluators

(“IE”) are discussed in the body of the 2010 BPP and a separate appendix; these sections are redundant and have substantial overlap. Other topics appear in multiple places throughout the

2010 BPP. For example, there are numerous references in the body and appendices of the 2010

BPP describing how to update various portions of the 2010 BPP through an advice letter process.

The 2014 BPP has been restructured and reorganized to reduce redundancies, make it easy to locate materials, and to be more transparent. With regard to reducing redundancies,

PG&E has reorganized the 2014 BPP to consolidate rules and discussions concerning specific topics in a single part of the BPP. For example, all of the rules regarding the PRG and IEs are now included in Appendix M. All of the sections in the 2010 BPP concerning updates through the advice letter process have been consolidated into a single discussion in Section VI of the

2014 BPP. The restructuring and consolidation of topics makes the 2014 BPP much easier to use; the Commission and parties will be able to go to a single section or appendix in the 2014

BPP to find information regarding a specific topic or issues, rather than having to look through the entire document for information.

In addition to eliminating redundancies, PG&E also restructured the 2014 BPP to make materials and information easier to find. For example, the approved products and procurement

processes were embedded in a lengthy narrative discussion in the 2010 BPP. This information has now been put into two separate appendices – one for products (Appendix A) and the other for procurement processes (Appendix B) – so that they are easy to locate. PG&E has increased the number of appendices, and each appendix addresses a specific procurement-related issue or topic and so that it is easy for parties using the BPP to locate materials or information.

Finally, PG&E has restructured the BPP to increase its transparency. In the 2010 BPP, certain procurement-related topics were discussed without ready references to Commission decisions or rules. For example, PG&E’s 2010 BPP included a narrative of the procurement- related filings that PG&E was required to make, but did not identify the Commission decisions or rules requiring these filings. A table has been added to Section IV of the 2014 BPP that lists

PG&E’s procurement-related filing requirements and the corresponding Commission decisions or rules. Similarly, Appendix M includes a table of all of the PRG, Cost Allocation Mechanism

(“CAM”) Group, and IE requirements and corresponding Commission decisions. Appendix M replaces the narrative discussion in Appendix I of the 2010 BPP that did not include specific references to Commission decisions. The 2014 BPP will allow parties to review the procurement-related rules and requirements listed in the BPP, and to compare these rules and requirements to specific Commission decisions.

B. PG&E’s Alternative Scenario In the 2010 BPP, PG&E included 10-year energy and capacity forecasts based on

Commission-mandated assumptions and inputs. The 2014 BPP includes a similar forecast, referred to as the “CPUC Mandated Scenario,” that provides 10-year energy and capacity forecasts based on assumptions and inputs mandated by the Commission for the 2014 LTPP proceeding.

However, there have been significant developments that have occurred since 2010 that are not completely reflected in the CPUC Mandated Scenario. To address these developments,

PG&E is also providing the PG&E Alternative Scenario in the 2014 BPP. The PG&E

Alternative Scenario differs from the CPUC Mandated Scenario in three key areas of the demand-side of the forecast: Community Choice Aggregation (“CCA”), Direct Access (“DA”), and DG. These differences are described below. There are no other substantive differences between the PG&E Alternative Scenario and the CPUC Mandated Scenario.

First, the PG&E Alternative Scenario reflects a higher amount of departing load for CCA.

In recent years, the number of customers served by CCA has increased and there are now two active CCA providers in PG&E’s service territory – Marin Clean Energy and Sonoma Clean

Power. PG&E believes that there is substantial uncertainty regarding the amount of load that will depart for these and other possible CCAs and that the CPUC Mandated Scenario underestimates the amount of CCA departing load. Thus the PG&E Alternative Scenario has an increased forecast of CCA load departures. This is consistent with the Commission’s recent direction in Decision 14-02-040 that PG&E estimate reasonable levels of expected CCA departing load.1

Second, the PG&E Alternative Scenario includes an updated forecast for DA load.

Direct Access is currently capped by California statute and cannot be expanded without additional legislation. Thus, PG&E is not forecasting substantial increases in DA. However,

PG&E has adjusted the DA load forecast in the PG&E Alternative Scenario as the DA load forecast in the CPUC Mandated Scenario is not based on the most recent DA load information.

/// ///

1 D.14-02-040 at pp. 16-17 and Ordering Paragraph (“OP”) 1.

Third, the PG&E Alternative Scenario reflects increasing load departure attributable to

DG. As with CCA, there is substantial uncertainty regarding the levels of DG that will ultimately materialize. However, levels of DG, especially solar DG, are growing significantly in

PG&E’s service area and PG&E is currently forecasting substantial load reductions associated with the rapid expansion of DG. The PG&E Alternative Scenario reflects PG&E’s current forecast of anticipated DG growth over the next ten years.

PG&E believes that its alternative scenario provides a more accurate forecast of PG&E’s bundled procurement needs over the next ten years and thus is proposing that the Commission adopt the PG&E Alternative Scenario rather than the CPUC Mandated Scenario. In addition to the accuracy of the forecast, the PG&E Alternative Scenario raises a number of critical procurement and policy issues.

With regard to procurement issues, if the Commission adopts the PG&E Alternative

Scenario, PG&E’s forecasted bundled load will be substantially lower than the CPUC Mandated

Scenario. A substantially lower forecast for bundled load has a direct impact on PG&E’s procurement targets and limits. The consequential effect is that, to meet the needs of its bundled customers, PG&E would aim to procure less. In addition, a reduction in bundled load impacts the volume (annual gigawatt-hours (GWh)) of PG&E’s Renewable Portfolio Standard (“RPS”) requirements. Because a Load-Serving Entity’s (“LSE”) RPS requirements are based on a percentage of that LSE’s load, a reduction in PG&E’s forecasted bundled load reduces the volume of RPS-eligible energy that PG&E would aim to procure to meet its RPS requirements.

However, PG&E still expects to be fully compliant with California’s RPS requirements.

The PG&E Alternative Scenario also raises a number of key policy issues. These policy issues include: (1) which entities are responsible for long-term planning; (2) each LSE’s procurement obligations to meet reliability need; (3) each LSE’s procurement obligations to meet

statutory and regulatory mandates; (4) cost allocation among LSEs; and (5) obligations to be the provider of last resort.

With respect to long-term planning, past and current practice is for the IOUs to be responsible for developing long-term resource and procurement plans to ensure reliable service and adequate supply in their respective service areas. Going forward, as PG&E’s bundled load decreases and the load of other LSEs in PG&E’s service territory substantially increases, the

Commission and policy makers will need to carefully consider how to ensure that other LSEs in

PG&E’s service territory are making adequate long-term plans and entering into long-term procurement obligations to ensure sufficient supply and reliability. Long-term planning can no longer be solely the responsibility of the IOUs, especially as the load served by other LSEs increases.

Concerning cost allocation, past and current practice has assigned to the IOUs procurement obligations to meet long-term system reliability, local reliability, and some policy mandates on behalf of all customers in the IOUs’ respective service territories. If the

Commission requires an LSE to procure resources to meet a need beyond the load it is contracted to supply—whether that need is for system reliability, local reliability, or some policy goal— there must be equitable cost allocation to all LSEs. For PG&E, this means that the costs associated with any obligation PG&E would have to procure for non-bundled customers must be equitably allocated to the LSEs serving these non-bundled customers.

In addition, the Commission and policy makers may need to re-examine what are the obligations to be a provider of last resort for California electric customers. The Commission and

California policy makers should consider how to ensure that all LSEs are prepared to reliably service their load on a long-term basis, and that there is appropriate compensation and cost recovery for entities that act as a provider of last resort. As the number of LSEs increase and the

load served by non-IOU LSEs increases, re-examining issues concerning responsibilities and costs of being a provider of last resort is critical.

The Commission and policy makers also need to consider how responsibility for statutory and regulatory mandates will be applied going forward. Currently, many of the statutory and regulatory procurement-related mandates have been adopted for the IOUs only (or primarily), including programs such as the Renewable Auction Mechanism (“RAM”) and Feed-In Tariffs

(“FIT”) for small renewable and combined heat and power (“CHP”) projects. Many of these programs and mandates were adopted for the IOUs based on each IOU providing bundled electricity supply and electricity delivery to all but a small fraction of the total load in the IOU’s service territory. As LSEs other than the IOUs supply a greater percentage of the load under the

Commission’s jurisdiction, these types of programs and mandates will need to apply to all LSEs, not just the IOUs.

The Commission and policy makers should carefully consider how policies intended to facilitate CCA, DA, and DG growth impact the procurement responsibilities and requirements in

California. While the policy issues described above will not necessarily be addressed in Phase 2 of the 2014 LTPP proceeding, the PG&E Alternative Scenario vividly demonstrates the need to consider these issues expeditiously.

Finally, two additional issues related to PG&E’s Alternative Scenario merit discussion. First, PG&E’s Alternative Scenario is intended to be a long-term planning forecast and is not intended to be used as a shorter-term forecast for ratemaking or customer services in other proceedings or other similar uses. PG&E’s Alternative Scenario is intended to consider potential trends over the next decade, not more immediate ratemaking or customer service or program issues in other proceedings that will be based on shorter-term forecasts. Second,

PG&E’s Alternative Scenario is a forecast and it includes a number of assumptions regarding

events which may or may not occur. For example, PG&E is assuming that certain entities which have announced plans to form a CCA actually go ahead and form the CCA and serve customers. In some cases, events such as new CCAs forming or DG growth may not occur, or may occur at a less rapid pace than forecasted in PG&E’s Alternative Scenario. If the

Commission adopts PG&E’s Alternative Case, PG&E intends to update its forecasts when it files advice letters to update the 2014 BPP procurement limits; these updated bundled load forecasts reflect updated circumstances, including events that actually occurred or did not occur.

C. Procurement Limits In D.12-01-033, the Commission expressed strong support for the use of procurement limits in the IOUs’ respective bundled procurement plans. As the Commission explained:

As a general matter, this approach is reasonable – the Commission sets an upper boundary, and the utilities can procure up to that level without coming back to the Commission. This makes it easier for the Commission to find that the resulting rates are just and reasonable, as there is effectively a cap on procurement amounts and associated costs.2

In response to this direction, PG&E included electric capacity limits in its 2010 BPP. The

Commission subsequently approved GHG procurement limits when it approved PG&E’s proposed GHG Procurement Plan in D.12-04-046. Consistent with the Commission’s direction,

PG&E has expanded the procurement limits in the 2014 BPP to include electric capacity, electric energy, GHG, and natural gas procurement limits. These limits are included in Appendix C of the 2014 BPP and will be based on the forecast approved by the Commission, as described above

(i.e., either the CPUC Mandated Scenario or the PG&E Alternative Scenario). The proposed

/// /// ///

2 D.12-01-033 at p. 7.

limits establish PG&E’s procurement authority and ensure that procurement rates for PG&E’s bundled customers are just and reasonable.3

D. Appendices Addressing Scheduling, Bidding, And CAISO Operating Orders Since the IOUs resumed procurement responsibilities in 2003, the Commission has directed that the IOUs dispatch their resource portfolios in a least-cost manner. However, the

IOUs’ dispatch responsibilities changed significantly when the CAISO implemented its Market

Redesign and Technology Upgrade in April 2009.4 As the Commission recently explained,

“[t]he regulated utility is responsible for scheduling and bidding its generation to the CAISO, but once that is done, it is the CAISO’s responsibility to dispatch the generation.”5

The 2010 BPP provided an overview as to how PG&E dispatched its owned and contracted resources. The 2014 BPP significantly expands this discussion and makes it consistent with recent Commission decisions which explain that PG&E is responsible for scheduling and bidding, and that the CAISO performs the actual dispatch.6 In Appendix K,

PG&E provides a detailed discussion of its scheduling and bidding principles, processes, and protocols for PG&E-owned and contracted resources. Appendix K explains how PG&E develops its bids and schedules for the CAISO, including considerations such as incremental costs and opportunity costs.

Appendix L provides protocols for PG&E’s responses to specific CAISO Operating

Orders associated with maintaining system reliability. Under its tariff, the CAISO can issue operating orders to PG&E and other market participants to address system emergencies,

3 Id., Conclusions of Law (“COL”) 1-4 (procurement limits help ensure that rates are just and reasonable under Public Utilities Code section 454.5). 4 D.11-10-002, Finding of Fact (“FOF”) 1. 5 D.14-05-023, FOF 15. 6 Id.

congestion, and overgeneration. These operating orders are generally the exception, rather than the norm, but it is likely that with increasing amounts of intermittent, inflexible renewable generation on the CAISO-controlled grid, situations involving system emergencies, congestion, and overgeneration may substantially increase in the future. Appendix L provides a description of how PG&E will respond to CAISO Operating Orders issued to address these operational situations.

E. Hedging Plan Changes

The Commission has approved utility hedging plans as a means of protecting customers from significant price spikes or swings in the market.7 In the 2014 BPP, PG&E has proposed a number of changes to its existing hedging plan to simplify PG&E’s hedging plan and address additional price exposure. The proposed changes will ultimately reduce the complexity of the hedging plan, clarify compliance obligations, and address additional price exposure. The specific changes to PG&E’s hedging plan are described in more detail in Section XII below.

F. Nuclear Fuel Plan Changes PG&E has revised procurement targets in its Nuclear Fuel Plan to reflect the fact that there have been substantial changes in the worldwide nuclear fuel market as a result of the

Fukushima Daiichi incident in Japan and subsequent changes in nuclear generation worldwide as a result of this incident. The proposed revisions to the Nuclear Fuel Procurement Plan will allow

PG&E

The Nuclear Fuel Plan runs through 2024 and ensures an adequate supply of fuel throughout the Diablo Canyon Power Plant (“DCPP”) license period.

7 D.12-01-033 at p. 25.

G. Scoping Memo Issues

The Scoping Memo identified four issues related to the BPP that are within the scope of this proceeding: (1) procurement limits; (2) approved products; (3) procurement rules; and (4) compliance with state policies including the loading order.8 Each of these issues is addressed in the 2014 BPP. Procurement limits are addressed in Appendix C and approved products are addressed in Appendix A. Procurement rules are addressed in Sections I-VI and specific processes are addressed in Appendix B. In addition, PG&E’s 2014 BPP includes a number of appendices that address specific procurement strategies, such as CRRs (Appendix I), GHG procurement (Appendix G), and convergence bidding (Appendix H). Finally, the 2014 BPP provides PG&E’s integrated plan to comply with state policies, such as the loading order, by describing in detail PG&E’s programs to implement the loading order (Section II) and the application of the loading order in procurement (Appendix B). In addition, the 2014 BPP also addresses other state policies such as once-through cooling (Appendix B), procurement of renewable resources (Section II), and compliance with California’s rigorous GHG requirements

(Appendices B, C, and G).

One issue that was not identified for this phase of the 2014 LTPP proceeding was safety.

Establishing clear Commission rules and guidelines for how safety considerations should be integrated into the procurement process is important to provide clear, consistent direction to the

IOUs as to how they should incorporate safety into their BPPs. Consideration of procurement- related safety issues will require substantial time and resources from the Commission and parties to develop a comprehensive and clear approach to safety. Therefore, PG&E recommends that the Commission establish a third phase of the 2014 LTPP proceeding that is solely focused on

8 Scoping Memo at p. 11.

how safety should be incorporated into the IOU procurement process, including consideration of how safety is used in the offer evaluation process and the assignment of responsibilities between generators and the IOUs for the safe operation of facilities. The Commission and parties would benefit from a third phase of this proceeding that is dedicated to safety issues.

II. SECTION I – INTRODUCTION Section I of the 2014 BPP provides an introduction and a summary of PG&E’s procurement goals, an overview of PG&E’s planning, procurement and scheduling/bidding activities, and an overview of the remainder of the 2014 BPP. PG&E changed the term

“dispatch” used in the 2010 BPP to “Scheduling/Bidding” to reflect the fact that the CAISO performs the actual dispatch of resources, and PG&E’s role is to schedule and bid into the

CAISO market.9 In addition, PG&E significantly expanded the discussion of its Scheduling and

Bidding practices by adding Appendix K to the 2014 BPP.

III. SECTION II – STATUTORY AND LOADING ORDER REQUIREMENTS

Section II of the 2014 BPP addresses statutory and loading order requirements and provides a summary of how PG&E complies with the requirements of Assembly Bill (“AB”) 57

(i.e., Public Utilities Code § 454.5) and the loading order adopted by the Commission as a part of the EAP. Sections II.B.1 through II.B.4 of the 2014 BPP update the descriptions of PG&E’s EE,

DR, RPS, and DG Programs that were included in the 2010 BPP. These updates reflect changes in Commission policies and Commission decisions that were issued after the 2010 BPP was approved. Section II.B.5 describes other generation resources available to PG&E after preferred resources are considered in procurement. Other generation resources were previously described in Section IV.F of the 2010 BPP. PG&E has shortened the discussion of other generation resources by deleting information that was duplicated in other parts of the BPP or was

9 D.14-05-023, FOF 15.

unnecessary. PG&E has also added a discussion of energy storage to this section to reflect the

Commission’s recent energy storage decision (i.e., D.13-10-040).

In addition to these updates, PG&E deleted 2010 BPP Section IIA.1 which included a description of each of the departments in PG&E’s Energy Procurement organization. The

Energy Procurement organizational structure is not part of PG&E’s AB 57 procurement authority and thus including the organizational structure in the BPP is not necessary. Therefore, this section was largely deleted, except for Section II.A.1.f concerning compliance with Standard of

Conduct (“SOC”) 2. Compliance with SOC 2 is now addressed in Section III of the 2014 BPP.

IV. SECTION III – COMPLIANCE WITH THE COMMISSION’S PROCUREMENT STANDARDS OF CONDUCT Section III in the 2014 BPP addresses PG&E’s compliance with the Commission’s procurement-related SOCs. Table 3 in Section III of the 2014 BPP has been updated to reflect changed references to the location of applicable materials in the 2014 BPP. In addition, the summary of compliance for SOC 4 has been revised to indicate that the review of contract administration occurs in the annual Energy Resource Recovery Account (“ERRA”) Compliance

Review proceedings.

Section II.A.f.1 in the 2010 BPP, which addressed SOC 2, provided a link to a description of PG&E’s ethics training. This discussion has been shortened to remove the link, as the link may change with time. Instead, Section III of the 2014 BPP simply states that PG&E’s

Energy Procurement employees are required to execute an electronic certification that they are aware of the Code of Conduct, and that these employees are required to complete a training course on an annual basis.

/// /// ///

V. SECTION IV – DESCRIPTION OF PG&E FILINGS MADE TO DEMONSTRATE COMPLIANCE AND COST RECOVERY Section IV of the 2014 BPP describes the regulatory filings made by PG&E to demonstrate compliance with its Commission-approved BPP and the cost recovery that is authorized for generation resources procured in compliance with the BPP’s upfront standards.

Section IV is a significant improvement to the 2010 BPP, which contained a lengthy narrative describing monthly, quarterly and annual procurement-related filings. Section IV.A of the 2014 BPP consolidates the lengthy 2010 BPP narrative into a single table which describes

PG&E’s procurement-related filings and provides a citation to the Commission decision(s) or statutory authority which requires the filing. This table provides an efficient and transparent means of summarizing PG&E’s procurement-related filing and reporting requirements. PG&E added items to the table which had not been included in the 2010 BPP, such as the RPS Request for Offers Shortlist and Project Development Reports, the Annual RPS Plan, RAM and

Photovoltaic (“PV”) Program Reports, the Convergence Bidding Quarterly Report, and the

Energy Storage Plan biennial filing. In addition, PG&E updated certain descriptions. For example, PG&E updated the description of the Resource Adequacy (“RA”) Annual Report to include System, Local, and Flexible RA.

One item was deleted from the 2010 BPP discussion of filing requirements. The

2010 BPP included the LTPP proceeding as a PG&E filing. However, this is not a filing made by PG&E, but is instead a Rulemaking initiated by the Commission. Thus, PG&E deleted it from the 2014 BPP discussion of PG&E filing requirements.

VI. SECTION V – PRE-APPROVAL, APPROVAL, AND FILING REQUIREMENTS Section V of the 2014 BPP describes the pre-approval, approval, and filing requirements associated with PG&E’s procurement authority under the BPP.

PG&E has updated this section of the BPP to reflect the pre-approval requirements established by the Commission when an IOU’s BPP includes procurement limits.10 The 2010

BPP provided that PG&E could execute contracts that are less than five years in duration without

Commission pre-approval, and that duration was determined either at the time the contracted resource begins delivery if delivery begins within one year of execution or at the time of contract execution if delivery occurs more than one year from execution. In D.07-12-052, the

Commission determined that the pre-approval requirements are different for IOUs with procurement limits. Because the 2014 BPP includes procurement limits for electric energy and capacity, natural gas, and GHG compliance instruments, PG&E has changed the pre-approval language in the 2014 BPP to be consistent with the Commission’s direction in D.07-12-052.

Section V of the 2014 BPP includes Table 5 which identifies different types of transactions and the corresponding filing requirement. This table is similar to the table in the

2010 BPP, but includes some updates and corrections to the appropriate venue for approval of certain transactions. Specifically, consistent with Commission decisions, non-RPS transactions with a contract duration of less than five years and Congestion Revenue Rights (“CRR”) transactions are approved through the Quarterly Compliance Report (“QCR”), not through the annual ERRA Compliance application as indicated in the 2010 BPP.11 Therefore, Table 5 in

Section V of the 2014 BPP has been changed to indicate that these transactions are approved through the QCR, rather than the annual ERRA Compliance application.

In addition, PG&E clarified in Items #2 and #3 of Table 5 that form contracts that are pre-approved by the Commission do not require approval, such as the form contracts approved

10 D.07-12-052 at p. 172 and OP 19. 11 D.07-12-052 at p. 185 (describing QCR); D.04-12-048 at pp. 107-108 (approval of contracts less than five years through compliance filing and five years or greater through an application); Resolutions E- 4135, OP 4 and E-4122, OP 4 (CRRs and Long-Term CRRs (“LT-CRRs”) are included in QCR).

for the Feed-in Tariff Program and the RAM Program. PG&E also added Item #5 regarding the approval process for contracts arising from the Qualifying Facility and Combined Heat and

Power (“QF/CHP”) Settlement and Item #6 to indicate the approval process for amendments to existing QF contracts.

VII. SECTION VI – UPDATES TO THE BUNDLED PROCUREMENT PLAN VIA ADVICE LETTER Section VI of the 2014 BPP describes the process for updating PG&E’s BPP between

LTPP proceeding cycles. This section consolidates sections that were scattered throughout the

2010 BPP. Section VI also includes specific requirements for updates to PG&E’s Electric

Portfolio Hedging Plan, and provides that updates to PG&E’s electric energy, electric capacity, and natural gas limits are filed annually (or more frequently if necessary) in a Tier 1 advice letter and PG&E’s GHG compliance forecasts and purchase limits are filed as necessary in a Tier 2 advice letter.

In addition to consolidating sections from the 2010 BPP, PG&E deleted a paragraph from

Appendix L, Section D.9 of the 2010 BPP that allowed PG&E to file an advice letter to update the GHG Procurement plan to reflect changes in market conditions, PG&E’s electric portfolio, or

CARB regulations. This sentence was redundant and simply repeated the general authorization for PG&E to file advice letters to update its BPP during LTPP proceeding cycles.

VIII. APPENDIX A – PROCUREMENT PRODUCTS

Appendix A of the 2014 BPP addresses PG&E’s approved products. Most of the products identified in Appendix A have already been approved by the Commission. However,

PG&E is proposing some modifications and additions.

For electric products in Table A-1 of the 2014 BPP, PG&E has made minor updates and corrections in product descriptions. Changes were made to the descriptions of Item #7 (Financial

Call Option or Swaption), Item #8 (Financial Swap), Item #13 (Electricity Futures), Item #16 18

(Physical Call Options) and Item #24 (Non-Firm Transmission Rights Locational Swaps and

Futures). In addition, Item #10 (Reliability Demand Response Resource) was renamed and Item

#30 (Convergence Bids) was updated to reflect the fifteen minute market. These changes reflect more accurate product descriptions in accordance with recent industry developments and implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In addition, a new electric product was added to Table A-1 for Structured Transactions (Item #33).

While this is a new product for PG&E’s BPP, it was approved in D.07-12-052 for Southern

California Edison Company’s (“SCE”) 2006 BPP, and in SCE’s subsequent 2010 BPP.

Table A-2 lists PG&E’s GHG products. These products were previously included in the electric products table and the GHG Procurement Plan, but have now been moved to a separate table within Appendix A.

For fuel products, PG&E has consolidated several products and made minor updates and corrections in product descriptions in Tables A-3 and A-4 of the 2014 BPP. First, Items #1 and #2 from Table II-2 of the 2010 BPP were consolidated into a single product which is now

Item #1 in Table A-3 in the 2014 BPP. Purchases and sales of natural gas continue to be approved products within the 2014 BPP; the distinction “spot” natural gas that was used in

Item #2 in the 2010 BPP is not necessary and is redundant. The description in Item #1 was also clarified.

Second, PG&E added distillate as a fuel product in Table A-3 of the 2014 BPP. PG&E’s

Humboldt Bay Generating Station primarily uses natural gas as a fuel source, but does use some distillate fuel for certain situations. Thus, PG&E added distillate fuel to the list of approved products. The recovery of distillate fuel costs for the Humboldt facility was approved in

D.06-11-048, OP 17.

The last two changes to fuel products were to the descriptions of Item #1 and Item #2 in

Table A-4 of the 2014 BPP. Similar to the changes made to Items #7, #8, #13, #24 in Table A-1 in the 2014 BPP for electric products, the descriptions of these two fuel products were updated to reflect recent industry developments due to the implementation of the Dodd-Frank Act.

For credit products in Table A-5, PG&E clarified that Credit Intermediation Arrangement

(Item #3) may not be limited to just financial institutions as previously stated in 2010 BPP.

IX. APPENDIX B – PROCUREMENT PROCESSES AND METHODS

Appendix B of the 2014 BPP addresses PG&E’s approved procurement processes and methods. Section B of this Appendix has been restructured to separate market processes

(Section B.1), such as electronic solicitations and voice brokers, and Commission-mandated procurement programs (Section B.2), such as the RAM Program. Separating the procurement processes into market processes and Commission-mandated procurement programs provides greater clarity as to the source and requirements for a specific procurement process.

Section B.3 of the 2014 BPP describes the CARB auctions and allowance price containment reserve for GHG compliance instruments. This discussion was in Appendix L of the 2010 BPP (i.e., PG&E’s 2010 GHG Procurement Plan), but has been moved to Appendix B to consolidate the discussion of procurement processes and has been updated to reflect CARB’s implementation of the auction process.

Table B-1 includes the addition of a “Cashout” process (Item #15). Although cashout transactions are generally characterized as direct bilateral purchases or sales of natural gas,

PG&E added this item as a separate procurement process because the cashout process has important differences from most purchases or sales. Most importantly, a cashout is applied in accordance with a pipeline’s tariff, and the volumes and prices may not be known until after the fact, when the pipeline invoices PG&E. Although pipeline customers, including PG&E,

typically try to avoid cashouts, they may be unavoidable in some circumstances due to the variable nature of gas demand for electric generation, among other factors. For example, if the

CAISO dispatches a unit late in the evening unexpectedly, PG&E has no opportunity to adjust gas supplies because gas nomination deadlines have passed. Under certain balancing or flow order conditions, this may result in a cashout. Cashouts include such mechanisms that may use a variety of names, including standby procurement charge and buy-back rate, depending on the pipeline.

PG&E also added Item #16 in Table B-1, which addresses the process for bilateral transactions for natural gas storage and pipeline capacity. This process was approved by the

Commission in D.03-12-062, COL 15, but had not been added to PG&E’s 2010 BPP.

Finally, PG&E is seeking clarification of Item #10 in Table B-1. Specifically, PG&E seeks clarification that the limitation stating that electronic solicitations are approved only for

“non-utility-owned resources” is not intended to bar transactions with PG&E California Gas

Transmission for natural gas storage products. The limitation on utility-owned resources (in

D.12-01-033, for example), clearly referred to “bids related to the development of utility-owned generation.”12 PG&E seeks clarification here to avoid a reading of this Item which might prevent the use of storage services provided by PG&E California Gas Transmission, for example. Bilateral transactions for storage products are allowed (Table B-1, Item #16), so a prohibition on electronic solicitations would be incongruous. Moreover, a transaction as simple and important to daily operations as a park or loan on a weekend, may be negotiated via electronic solicitation. PG&E seeks clarification that this process, which can be critical to managing daily gas balances, remains available to PG&E Electric Fuels.

12 D.12-01-033, p. 42 (emphasis added).

Appendix B, Section D addresses Commission-adopted requirements for specific procurement processes. This section is a consolidation of several separate discussions in different portions of the 2010 BPP,13 and also includes several new requirements that have been adopted in recent Commission decisions, such as requirements related to upgraded and repowered plants participating in LTRFOs (Section D.3) and the determination of the term of a contract (Section D.6).

X. APPENDIX C – PROCUREMENT LIMITS AND RATABLE RATES

Appendix C of the 2014 BPP addresses PG&E’s procurement limits and ratable rates.

The Commission endorsed the use of procurement limits and ratable rates in D.12-01-033 and in

D.14-02-040. PG&E’s 2014 BPP includes electric capacity limits, and new limits for electric energy, natural gas, and GHG compliance instrument procurement. The limits are addressed in detail below.

A. Electric Capacity and Energy Limits

PG&E’s 2014 BPP includes three key changes related to electric procurement limits and ratable rates. First, PG&E made one modification to the methodology for electric capacity procurement limits in comparison to the 2010 BPP. For the purpose of calculation and compliance with electric capacity procurement limits, “planned preferred resources” was changed to also include procurement to comply with the Commission’s Energy Storage Program targets (see Footnote 4 in Section A.1 of Appendix C). This change was made because procurement for the Energy Storage Program is already factored into the calculation of the

13 Specifically, rules related to procurement of Once-Through Cooling resources that were located within Section II.A.7. of the 2010 BPP were moved to this Section D. Rules related to procurement of Utility- Owned Generation were moved into Section D from Section II.A.4.f. of the 2010 BPP. Rules related to procurement through Long-Term Request for Offers (“LTRFO”) were moved from Appendix I, Section C of the 2010 BPP. A discussion of the loading order applicability to procurement was moved into this appendix from Section II.A.8.c of the 2010 BPP. A discussion of the evaluation and selection of resources through an RFO was moved from Section II.A.8 of the 2010 BPP.

electrical capacity procurement limits. Therefore, any procurement towards the Energy Storage

Program targets will not count against the electrical capacity procurement limits.

Second, PG&E has added new procurement limits and ratable rates for electric energy.

The calculation and compliance of PG&E’s electrical energy procurement limits and ratable rates follow the methodology employed by SCE for energy procurement limits and ratable rates included in SCE’s Commission-approved 2006 and 2010 BPPs, except for three modifications.

The first modification is that PG&E’s 2014 BPP includes just one overall net procurement limit for electric energy, rather than four separate limits (i.e., for on-peak purchases, on-peak sales, off-peak purchases and off-peak sales). One overall procurement limit for electric energy achieves the Commission’s objective of establishing procurement limits to assure just and reasonable rates14, but with the added benefit of being much simpler to manage.15 Another modification to SCE’s electrical energy procurement limit methodology is a clarification with respect to what transactions count against the electric energy procurement limits and ratable rates. This clarification concerns paired transactions, locational basis contracts, and CRRs and was made to accurately capture transactions and avoid double-counting certain transactions against the procurement limits. The last modification to SCE’s electric energy procurement limit methodology is a clarification indicating that the absolute notional volumes for all transactions will be used when counting against the procurement limits. This change was made in order to appropriately adapt the counting rules to the consolidated overall net procurement limit for electrical energy approach explained above.

14 D.12-01-033, COL 1-2. 15 The calculation of this procurement limit is detailed in Appendix C, Section A.2.

Finally, in Appendix C PG&E included calculated electric capacity and energy procurement limits for both the PG&E Alternative Scenario and the CPUC Mandated Scenario.

The calculations of these two scenarios reflect the electric portfolios described in Appendix D.

B. Gas Limits PG&E’s 2014 BPP includes procurement limits and ratable rates for gas products in

Appendix C.16 The procurement limits, ratable rates, and calculation methodologies in PG&E’s

2014 BPP match those employed in SCE’s CPUC-approved 2006 and 2010 BPPs. The natural gas procurement limits in Appendix C replace the targets previously included in the 2010 BPP

Gas Supply Plan (“GSP”). The limit structure identifies limits on gas procurement activities, while reducing complexity relative to the targets and goals of PG&E’s 2010 GSP. PG&E’s natural gas limits include limits for gas supply (i.e., the natural gas commodity), pipeline capacity, and natural gas storage. These were the three elements of PG&E’s Commission- approved 2010 GSP. Similar to the electric procurement limits, PG&E calculated gas procurement limits for both PG&E’s Alternative Scenario and the CPUC Mandated Scenario described in Appendix D.

C. GHG Limits Finally, Appendix C includes updated Direct Compliance Instrument Purchase Limits for

2015 and 2016 based upon PG&E’s current GHG compliance instrument forecast. These GHG limits are the same for both the PG&E Alternative and CPUC Mandated Scenarios, since the same GHG-emitting resources existing within the electric portfolios of both scenarios.

Since the filing of the 2010 BPP, the uncertainty regarding the GHG Cap-and-Trade

Program has declined and the market for GHG products has developed substantially. Thus,

16 The Electric Portfolio Hedging Plan in Appendix E establishes further limits and strategies for the execution of financial gas transactions (hedges).

PG&E has also included Financial Exposure Purchase Limits for 2015 and 2016 in its 2014 BPP.

Financial Exposure (calculated in accordance with the Commission’s approved methodology in

D.12-04-046) estimates PG&E’s indirect exposure to GHG costs embedded in the price of energy. PG&E will only use approved GHG Products provided in Appendix A to hedge GHG price risk that would be subject to these limits. Since the amount of energy to be purchased within the market varies between the PG&E Alternative and CPUC Mandated Scenarios, the

Financial Exposure Limits of the two scenarios are different. Therefore, calculations for both scenarios are provided.

XI. APPENDIX D – DESCRIPTION AND EVALUATION OF CPUC MANDATED AND PG&E ALTERNATIVE SCENARIOS Appendix D of the 2014 BPP provides a description and evaluation of two separate scenarios for bundled procurement needs between 2015 and 2024. The first scenario is the

CPUC Mandated Scenario, which includes load and resource assumptions mandated by the

Commission in the Scoping Memo. The second scenario, the PG&E Alternative Scenario, is based on the CPUC Mandated Scenario, but includes three demand-side modifications which impact the bundled load forecast. Both scenarios are described in more detail below.

A. CPUC Mandated Scenario Appendix D includes a description and evaluation of the CPUC Mandated Scenario, similar to the description and evaluation of the Commission-mandated case in the 2010 BPP.

The 2014 BPP incorporates the load and resource assumptions mandated by the Scoping Memo.

Tables D-1 and D-2 provide the energy and capacity balances under the CPUC Mandated

Scenario for the period 2015 to 2024.

/// /// ///

B. PG&E Alternative Scenario

The PG&E Alternative Scenario differs from the CPUC Mandated Scenario in three key areas. The three key areas all are on the demand-side of the forecast: CCA, DA, and DG. These differences are described below.

1. CCA Load Assumptions PG&E developed its estimate of CCA load loss for the PG&E Alternative Scenario based on an evaluation of current activity levels for existing CCAs, as well as activity levels for entities that have engaged in an extensive analysis of CCA. PG&E recognizes that there is substantial uncertainty about the amount of CCA that will materialize and, as discussed in Section I.B above, these forecasts may need to be adjusted as events do or do not occur. Notwithstanding this uncertainty, PG&E believes that its estimate of CCA load loss is more reasonable than the

CPUC Mandated Scenario estimate, given that the CPUC Mandated Scenario shows a level of load loss in 2024 for the combined categories of CCA and DA that is less than the current level of CCA and DA load. Specifically, the CPUC Mandated Scenario shows CCA and DA load combined in 2024 as 8,600 GWh per year, while existing DA load is about 9,600 GWh per year.

The CCA load loss in the CPUC Mandated Scenario is not realistic in light of the load served by existing CCAs, much less the expected activity of those communities engaged in evaluating

CCA. PG&E developed its CCA load forecast by estimating departing load based on the current load served by existing CCAs, combined with load that may be served by these entities, along with load that may be served by entities that are actively engaged in exploring CCA. PG&E’s estimates are described in more detail in Appendix D.

2. Direct Access Load Assumptions PG&E has taken the current amount of load served under DA (approximately 9,600 GWh per year) and has kept it flat throughout the forecast period. While PG&E implicitly agrees with

the CPUC Mandated Scenario that DA load will be limited to current legislative limits, PG&E believes that maintaining DA load at current levels (as opposed to reducing these loads over time, as is done in the CPUC Mandated Scenario) is a more realistic estimate of DA load.

3. Distributed Generation Load Assumptions PG&E forecasted PV adoptions by examining historical PV adoption rates, and adjusting growth projections based on anticipated policy developments. PG&E forecasted adoption of non-PV DG by the following technology categories: CHP, Fuel Cells, and Other. For traditional

CHP and “Other” technologies, PG&E’s forecast was developed using an historic 10-year average adoption rate. For fuel cell adoption, an exponential trend function, showing increasing rates of capacity addition, has been used.

By 2024, PG&E estimates that there will be approximately 12,100 GWh of generation from retail DG facilities, which equates to 13,300 GWh of avoided procurement at the point of generation (Table D-5, sum of lines 4 and 5). This compares to approximately 5,900 GWh of avoided procurement estimated in the CPUC Mandated Scenario (Table D-2, sum of lines 4 and

5). PG&E recognizes that there is substantial uncertainty as to the level of DG penetration that will occur. However, PG&E believes that its current forecast is more reasonable than the CPUC

Mandated Scenario.

The CPUC Mandated Scenario for DG relied on the mid-case scenario from the 2014

California Energy Demand forecast developed by the California Energy Commission (“CEC”).

A significant portion of the difference between CEC and PG&E forecasts is likely explained by different modeling approaches used by the CEC and by Bloomberg New Energy Finance

(“BNEF”), whose forecast informed PG&E’s projection. The CEC uses a modeling approach that is based on the United States Energy Information Administration’s National Energy

Modeling System model and the National Renewable Energy Laboratory’s SolarDS model. The

CEC model predicts adoption based on consumer response to cost effectiveness as measured by a payback calculation.17 This approach was developed when most PV systems were owned by host customers, and is likely to under predict how cost effective PV is for consumers now that third-party owned (“TPO”) solar financing models are widely available. Under a third party ownership financing structure, cost effectiveness is more appropriately measured by comparing retail rates with prices that a third party solar provider can offer, given solar costs and profit margins.

BNEF uses an adoption model that measures cost effectiveness by comparing levelized bill savings against the levelized cost of solar. PG&E believes the approach used by Bloomberg better captures consumer decision-making under the current residential retail PV market environment in which third party financing models predominate. With TPO financing, the customer will have an economic incentive to install solar if bill savings are greater than the financing payment. Payback may not be the most applicable metric in this context.

Another difference between the PG&E Alternative and CPUC Mandated Scenario forecasts is that PG&E estimated an increase in installed MW associated with Zero Net Energy

(“ZNE”) policy, whereas the CEC did not. PG&E estimates that, starting in 2020, approximately

70 MW per year will be added as a result of California’s ZNE policy goals.

4. Overlap Issues

To address any overlap that may exist between its load forecasts, PG&E subtracted from the CCA load departures described above the DA load percentage across the service area, and the estimated amount of DG growth within these communities. This estimated DG growth was

17 California Energy Demand 2014-2024 Final Forecast Volume 1 Appendix B (January 2014), p. B-6.

derived by applying the DG growth rates to the current proportion of DG penetration that is located within the various communities that have implemented or are actively exploring CCA.

XII. APPENDIX E – ELECTRIC PORTFOLIO HEDGING PLAN Appendix E includes PG&E’s Hedging Plan. PG&E has proposed a number of substantive changes to its Hedging Plan that will reduce complexity, clarify compliance obligations, and address additional price exposure. Changes to PG&E’s Hedging Plan are described in detail below.

A. Tenor In context of the Hedging Plan, tenor means the length of the delivery period to be hedged.

B. Hedging Targets and Limits

The hedging targets and limits in the 2014 BPP Hedging Plan are renamed and redefined from those in the 2010 BPP. The specific changes include the following:

D. Execution Strategy

F. Transition Plan The Transition Plan in the 2010 BPP was intended to guide the transition from the 2006

BPP Hedging Plan to the 2010 BPP Hedging Plan. The Transition Plan is updated to guide the

transition from the 2010 BPP to this plan.

G. Unusual Events, market Dislocations and Emergencies

H. Liquidity Management Strategy

I. Deletions from the 2010 BPP

XIII. APPENDIX F – NUCLEAR FUEL PROCUREMENT PLAN Appendix F includes PG&E’s procurement plan for nuclear fuel used for DCPP. PG&E generally updated the tables and information in the plan to reflect the coverage of the plan from

2015 to 2024. In addition to these updates, PG&E made three substantive changes to the plan, which are described in detail below.

A. Forward Contracting and Price Terms

B. Nuclear Fuel Strategic Inventory

C. Proposed Risk Management Measures

XIV. APPENDIX G – GREENHOUSE GAS PROCUREMENT PLAN

Appendix G of the 2014 BPP addresses PG&E’s GHG Procurement Plan. In the background section of Appendix G, PG&E included updates related to modifications of CARB’s

Cap-and-Trade regulation since the approval of the 2010 BPP. In particular, CARB expanded coverage of the Cap-and-Trade regulation in the second compliance period to cover suppliers of natural gas. Appendix G has been updated to indicate that the authority to procure for new natural gas-related obligations is being addressed in Commission Order Instituting Rulemaking

(“R.”) 14-03-003, and thus Appendix G only addresses those GHG compliance obligations related to PG&E’s electric procurement activities.

In addition, Appendix G was updated to reflect CARB’s approval on May 10, 2013 of the linkage with Quebec. Under this linkage, compliance instruments issued by CARB or Quebec are equally fungible and there is no way to identify what jurisdiction issued a particular

compliance instrument. As such, PG&E modified the definition of allowances and offset credits to clarify that authorized compliance instruments are “accepted” by CARB rather than “created” or “issued” by CARB.

Finally, the GHG Procurement Plan in the 2010 BPP covered procurement for obligations related to GHG emissions from PG&E’s natural gas compressor stations.21 Subsequent to the approval of the 2010 BPP, authority to procure for GHG emissions related to PG&E’s natural gas compressor stations was approved in D.13-03-017 and thus this procurement obligation no longer needs to be covered in the BPP. As such, references to emissions from PG&E’s natural gas compressor stations have been deleted in the 2014 BPP.

XV. APPENDIX H – CONVERGENCE BIDDING

Appendix H of the 2014 BPP addresses Commission authorizations and requirements for

PG&E’s participation in the CAISO’s convergence bidding market. PG&E has not made any substantive changes to the convergence bidding appendix approved by the Commission in the

2010 BPP. PG&E has updated Appendix H to reflect market design changes implemented by

CAISO on May 1, 2014 (i.e., new ‘15 minute market’) and changes the reporting requirements.

Monthly reporting requirements expired one year after the start of CAISO convergence bidding markets; the quarterly reporting requirements started with the Q1 2012 report.22

/// /// ///

21 See e.g., 2010 BPP, Sheet Nos. 287-288. 22 See D.10-12-034, OP 7.

XVI. APPENDIX I – CONGESTION REVENUE RIGHTS

Appendix I of the 2014 BPP addresses PG&E’s procurement of CRRs. PG&E made several substantive and non-substantive changes to the 2010 BPP in order to increase clarity and avoid repetition. First, the explanation of the analysis to identify candidate CRRs was updated and simplified. This analysis to determine the congestion cost and value of a CRR may be determined by transmission simulation studies, historical analyses, or a combination of both.

Second, PG&E eliminated the requirement to participate in CAISO auctions and the secondary market, making participation in both CRR-related procurement processes now optional.

Third, redundant language was eliminated. The CRR and LT-CRR sections were consolidated into one section. Duplicative language regarding the factors and measures which

PG&E will rely upon to make CRR selection was provided once (rather than twice as in the 2010

BPP) and is applicable to both the CAISO allocation and auction processes. For example, the

“Excess CRR” section in the 2010 BPP was removed since the authority to sell excess CRRs is covered in other areas of Appendix I: Auctions and Transactions in the Secondary Market.

Finally, PRG review of CRR procurement is now addressed in Appendix M and includes proposed changes to PRG review of CRRs. These changes are discussed in more detail in

Section XX below. Section K in Appendix F of the 2010 BPP, which addressed cost recovery for CRRs, was deleted from Appendix I in the 2014 BPP to avoid a duplicative discussion of cost recovery for authorized products. In the 2014 BPP, cost recovery is addressed in Section V.

XVII. APPENDIX J – BROKERAGES AND EXCHANGES Appendix J of the 2014 BPP addresses approved brokerages and exchanges. The list of approved brokers was updated to include the effective entity names for each broker (as of the filing date for this Pleading), to add one new broker, and to remove entities with which PG&E has ceased transacting. 39

In an effort to allow additional options for executing RPS-eligible transactions, PG&E requests to add the following broker to its existing list of Commission-approved brokerages the

Finerty Group, Inc. Authorizing this addition to PG&E’s list of approved brokerages does not obligate PG&E to use them. Instead, adding this broker will simply provide PG&E an option to do so. The decision to use this or any enabled brokerages in Appendix J will be made on a transaction-by-transaction basis. PG&E has routinely updated its list of brokerages and exchanges in order to add potential new counterparties for transactions that are consistent with

PG&E’s Conformed BPP. Further, should PG&E execute any RPS-eligible transaction through any brokerage on the list of approved brokers, PG&E will request Commission approval in accordance with the filing requirements provided in Section V of the 2014 BPP.

The following brokerage was deleted:

x Prebon was acquired by Tullett, which is already an approved broker list.

The following exchanges and futures commission markets were deleted:

x Green Exchange, LLC (“GreenX”), which was acquired by CME Group in 2012. CME Group also owns NYMEX, which is already listed as an approved exchange.

x Parity Energy, Inc., which ceased doing business on May 31, 2014.

There were three changes to Appendix J specific to GHG transactions. First, PG&E has clarified in footnote 1 that it only has authority to procure GHG products from brokerages though an RFO. Second, PG&E has noted in footnote 2 the requirements for requesting approval of new exchanges for GHG products as set forth by the Commission in D.12-04-046. Finally, to facilitate adherence to those requirements, PG&E has separately specified those exchanges that are authorized to transact GHG products.

/// /// ///

XVIII. APPENDIX K – BIDDING AND SCHEDULING PROTOCOLS

Appendix K of the 2014 BPP describes scheduling and bidding practices for the resources in PG&E’s bundled portfolio. PG&E changed the term “dispatch” used in the

2010 BPP to “Scheduling/Bidding” to reflect the fact that the CAISO performs the actual dispatch of resources, and PG&E’s role is to schedule and bid into the CAISO market.23 PG&E significantly expanded the discussion of its Scheduling and Bidding practices in this Appendix.

Appendix K provides an overview of the CAISO markets, describes the scheduling and bidding principles that PG&E utilizes to achieve least-cost dispatch (“LCD”), and describes the specific scheduling and bidding processes used by PG&E.

Section B of Appendix K provides an overview of the CAISO markets, including the day-ahead and real-time markets administered by the CAISO. These markets are fundamental to

PG&E’s scheduling and bidding practices, and the dispatch of PG&E’s owned and contracted resources.

Section C describes the principles that PG&E uses for bidding and scheduling. These principles, while similar to the principles described in the 2010 BPP with regard to dispatch, have been expanded to include greater detail regarding PG&E’s scheduling and bidding process.

Finally, Section D describes PG&E’s scheduling and bidding process, including how

PG&E develops the incremental costs for its bids into the CAISO markets, how GHG costs are factored into PG&E’s scheduling and bidding, and the use of opportunity costs for certain resources such as hydroelectric resources and dispatchable renewable resources. This section also describes self-scheduling, which PG&E is required to use as a result of constraints on

23 D.14-05-023, FOF 15 (“The energy regulated utility is responsible for scheduling and bidding its generation into the CAISO, but once that is done, it is the CAISO’s responsibility to dispatch the generation.”).

certain resource types, such as run of river hydro, and for certain types of contracts that cannot be dispatched, such as pre-2010 QF contracts.

The demonstration of compliance with the Commission’s LCD requirements for a specific record year is addressed in PG&E’s ERRA Compliance application.

XIX. APPENDIX L – CAISO OPERATING ORDER PROTOCOLS Appendix L of the 2014 BPP describes PG&E’s actions when responding to CAISO system reliability needs, such as system emergencies, congestion, or overgeneration, and provides protocols for PG&E’s responses to specific CAISO Operating Orders associated with maintaining system reliability. Under its tariff, the CAISO can issue operating orders to PG&E and other scheduling coordinators to address system conditions. These operating orders are currently the exception, rather than the norm, but it is likely that with increasing amounts of intermittent, inflexible renewable generation on the CAISO-controlled grid, situations involving system emergencies, congestion, and overgeneration will increase in the future, and may increase substantially. The intent of providing this section is to provide transparency to the Commission and parties regarding PG&E’s existing protocols and preparedness when responding to CAISO system reliability events and CAISO operating orders.

Section B of Appendix L describes PG&E’s protocols for responding to CAISO declared system emergency events, including specific requirements for difference resource types.

Section C of Appendix L describes PG&E’s protocols for responding to CAISO declared physical congestion events, including a description of the various actions the CAISO can take to manage the event. Section C also describes specific requirements for different resource types, along with a description of the approach PG&E uses to manage situations when the distribution of the generation reduction among units is not specified by the CAISO.

Finally, Section D of Appendix L describes PG&E’s protocols for responding to CAISO- declared overgeneration events, including a description of the various actions the CAISO can take to manage the event. This section describes how PG&E responds to such conditions during different timeframes and depending on the resource type. Section D also provides a description of the approach PG&E uses to manage situation when the distribution of generation reduction among the units is not specified by the CAISO.

XX. APPENDIX M – PROCUREMENT REVIEW GROUP, COST ALLOCATION MECHANISM GROUP, AND INDEPENDENT EVALUTOR ADMINISTRATION Appendix M of the 2014 BPP addresses the Commission requirements regarding the

PRG, CAM Group, and IE administration requirements. PG&E consolidated three similar sections from the 2010 BPP (Section II.A.9, II.A.10, and Appendix I) into a single appendix in the 2014 BPP.

There is one substantive clarification that has been included in Appendix M. In Table

M-1, Item #1, PG&E is requesting clarification that PRG review of each transaction greater than three months in duration executed according to a strategy previously reviewed by the PRG (but not part of a LTRFO) is not required prior to execution of the transaction. PG&E may review a procurement strategy with the PRG, such as a strategy for an RFO seeking products that are less than five years in duration. These types of RFOs are often based solely on price and winning offers are often executed within a short time after submission. In this situation, going back to the

PRG to review each transaction would take time, and potentially result in lost opportunities. If

PG&E has reviewed a procurement strategy with the PRG, then executes that strategy, it should not be required to bring each transaction back to the PRG for review prior to execution.

There are also several substantive changes that PG&E is proposing with regard to PRG review of CRR transactions. First, with respect to the annual CRR process, PG&E plans to continue to consult with its PRG prior to the start of the annual process. However, PG&E 43

proposes to change the PRG consultation to cover its CRR and LT-CRR position and overall procurement approach and strategy for the upcoming annual allocations and tiers. In Resolution

E-4135, the Commission directed PG&E “to provide the PRG participants, prior to the PRG meeting, a list of proposed annual and long term CRR nominations for allocation and auction…”24 PG&E has found this obligation impractical to implement. Similar to the time constraints applicable to the CAISO’s monthly CRR process, there is limited time to identify and finalize a list of proposed nominations in advance of the PRG meeting. Additionally, the CAISO provides critical information needed to determine nominations only days in advance of the nomination submission dates. For example, limits on the node-pairs that can be nominated in the long-term process are released only five business days before the long-term nominations are due. Therefore, PG&E proposes this requirement be changed to allow PG&E to consult with the

PRG prior to the start of the annual process regarding its CRR and LT-CRR position and approach for the upcoming process, and provide the PRG the full list of awarded CRRs and LT-

CRRs after the conclusion of the annual process.

Second, in an effort to standardize the CRR reporting requirements to the PRG, PG&E is proposing the notification timeframe for all awarded CRRs from annual and monthly processes as well as all transactions in the secondary market be five (5) business days. Five (5) business days matches the timeframe the Commission has allowed SCE for reporting transactions from the monthly process. Changing the reporting deadline to five business days for all CRR awards and transactions simplifies and makes more consistent BPP implementation and compliance.

Third, PG&E proposes to review its CRR position with the PRG at least once per year. This is a clarification of the requirement that “directs PG&E to review its CRR position

24 Resolution E-4135, p. 12

with the PRG in its periodic position update discussions…”25 As noted above, PG&E will provide the PRG with numerous reports throughout the year with information regarding CRRs.

In addition to changes regarding CRRs, PG&E also deleted the pro forma consulting services contract for IEs that was attached to the 2010 BPP as Attachment 1 to Appendix I.

Including a pro forma version of the consulting services agreement for IEs is not required by the

Commission.

XXI. APPENDIX N – RISK MANAGEMENT POLICY AND TEVAR METHODOLOGY Appendix N of the 2014 BPP addresses PG&E’s Risk Management Policy and TeVaR methodology. PG&E has updated this portion of the 2014 BPP in a number of areas. In

Section A.3, PG&E has provided further clarification of the definition of investment grade based on the ratings provided by Standard and Poor’s (“S&P”) and Moody’s. PG&E specifically clarified the external rating levels that are reflective of investment level credit rating, which are

BBB- by S&P or Baa3 by Moody’s. PG&E further clarified that it does not grant unsecured credit to counterparties that do not have an investment grade credit rating from the credit agencies or if PG&E’s internal evaluation does not support a credit rating equivalent of investment grade. Counterparties are instead requested to provide an appropriate amount of collateral for the transactions under consideration. In addition, counterparties which qualify for unsecured credit may still need to post additional collateral if the expected exposure is beyond the assigned credit limit.

In this same section, PG&E also clarified utilization of both its internal credit evaluation criteria and the external ratings to determine if a counterparty may qualify for unsecured credit with PG&E. The reason for this clarification is that not all counterparties have an external rating

25 Resolution E-4135, p. 12

and therefore internal credit evaluation by default is the only source for credit decision. In addition, credit ratings may not always reflect the latest financial disclosures or recent events. It is therefore important to highlight that credit decisions include both internal and external ratings, when available, for validation of overall assessment of creditworthiness.

PG&E has removed the specific dollar amounts associated with the various security requirements and instead retained the description for security amounts PG&E requires for the various financial and physical products. The reason for the removal of specific amounts is due to changes in security dollar amounts over time because of financial market conditions as well as market liquidity for a specific product.

PG&E has also clarified that it has incorporated collateral requirement for GHG products, both allowances and offset credits, in its bilateral agreements which were not in effect in 2010, but became effective starting in 2013. In addition, PG&E recognizes that for offset credits, there are additional invalidation risks that remain after receiving the offset credits. For this reason,

PG&E requires a different amount of collateral after the delivery to specifically address invalidation risk for offset credits.

In Section A.3, because PG&E utilizes financial products for its hedging program, it must comply with the The Dodd-Frank Wall Street Reform and Consumer Protection Act which was enacted in July 2010. The 2014 BPP was updated to reflect this compliance obligation.

Finally, Table E-1 in the 2010 BPP, containing long-term forecast TeVaR values, has been moved to Appendix D in the 2014 BPP to be presented consistently alongside other forecast values from the same set of simulations.

XXII. APPENDIX O – ACRONYM LIST AND GLOSSARY Appendix O is a list of acronyms and a glossary. PG&E has updated the acronym list and substantially reduced the glossary. The glossary in the 2010 BPP was 43 pages long and

included many terms which are either no longer applicable to PG&E’s procurement authority, or which are simply outdated. PG&E edited the glossary to delete terms which were irrelevant to the 2014 BPP.

XXIII. CONCLUSION As PG&E has demonstrated above, the proposed 2014 BPP is consistent with California statutes and Commission decisions, reasonable, and will result in affordable procurement-related costs for PG&E’s customers. PG&E respectfully requests that the Commission approve the proposed 2014 BPP, and, in addition, approve the specific substantive changes identified in

Attachment B.

Respectfully submitted,

CHARLES R. MIDDLEKAUFF MARK R. HUFFMAN

By: /s/ Charles R. Middlekauff CHARLES R. MIDDLEKAUFF

Pacific Gas and Electric Company 77 Beale Street, B30A San Francisco, CA 94105 Telephone: (415) 973-6971 Facsimile: (415) 973-5520 E-Mail: [email protected]

Attorneys for PACIFIC GAS AND ELECTRIC COMPANY Dated: October 3, 2014

ATTACHMENT A

2014 Bundled Procurement Plan (“BPP”) Sections, Corresponding 2010 BPP Sections, and Description of Changes

(Public Version)

2014 BPP SECTIONS, CORRESPONDING 2010 BPP SECTIONS, AND DESCRIPTION OF CHANGES

Line No. 2014 BPP Section 2010 BPP Section Description of Changes 1 Section I – Introduction Section I – Introduction Updated to reflect 2014 Long-Term (Sheet No. 1)1 Procurement Plan Rulemaking. Discussion of process for updating the BPP moved to Section VI. 2 Section I.A – PG&E’s Section I.A – Overview of Updated to reflect PG&E’s Procurement Procurement Goals Procurement Activities Goals, including safety, reliability, Consistent with State Energy affordability and environmentally Action Plan sensitive electric service. (Sheet Nos. 1-4) 3 Section I.B – Overview of Section II.A.2 – Overview of Updated descriptions of overview of PG&E’s Planning, PG&E’s Procurement Process procurement process. Section II.A.2.c Procurement and (Sheet Nos. 15-17) of the 2010 BPP has been updated and Scheduling/Bidding moved into Appendix K. Activities 4 Section I.C – Overview of Section I.B – Overview of Updated and shortened overview of the PG&E’s Bundled PG&E’s Bundled Procurement 2014 BPP. Procurement Plan Plan (Sheet Nos. 5-10) 5 Section II.A – Compliance Section VI.A – Compliance with Updated the BPP reference column to with AB 57 AB 57 reflect sections in the 2014 BPP. (Sheet Nos. 90-91) 6 Section II.B – Compliance Sections II.A.8.c – Loading order Updated to reflect new, Commission- with the Loading Order Section IV approved programs to implement the loading order. (Sheet Nos. 48-49 and 67-85) 7 Section III – Compliance Sections II.A.1.f – Compliance Updated discussion of Standards of with Commission’s with Commission Standard of Conduct for procurement and Procurement Standards of Conduct #2 corresponding references in 2014 BPP. Conduct Section VI.B – Compliance with Commission’s Procurement Standards of Conduct (Sheet Nos. 13-15, 91-93) 8 Section IV.A – Monthly, Section VI.C – Description of Updated to reflect PG&E’s Quarterly and Annual Filings PG&E Filings Made to procurement-related reporting and Reports Demonstrate Compliance requirements and a new table was added to reflect these requirements. (Sheet Nos. 94-99) Section VI.C.5.b (regarding the ERRA Trigger) was moved to Section IV.B in the 2014 BPP and Section VI.C.5.c from the 2010 BPP was deleted.

1 Sheet No. references are to the most current version of the 2010 BPP, which is dated April 11, 2014.

A-1

Line No. 2014 BPP Section 2010 BPP Section Description of Changes 9 Section IV.B – Section VI.C.5.b – ERRA Trigger Updated description of the ERRA Additional Reporting Trigger Application. (Sheet Nos. 97-98) Requirements – ERRA Trigger 10 Section IV.C – Description Section VI.D – Description of Updated description to reflect changes of Cost Recovery for BPP Costs Recovered Through ERRA since 2010 BPP, including deleting Procurement reference to the WaveConnect program (Sheet Nos. 99-100) which no longer exists. 11 Section V – Pre-Approval, Section VI.E – Pre-Approval, Updated the filing requirements for Approval and Filing Approval and Filing certain types of transactions and added Requirements Requirements additional filing requirements for existing QF contract amendments and (Sheet Nos. 100-102) contracts under the QF/CHP Settlement. 12 Section VI – Updates to Section I – Introduction Updated to consolidate discussions of Bundled Procurement Plan BPP updating requirements that were (Sheet No. 1) Via Advice Letter described in various sections of the 2010 Section II.A.6 – Electrical BPP. Capacity Procurement Limits and Ratable Rates (Sheet No. 44) Appendix B, Section E – Hedging Plan Updates Via Advice Letter (Sheet No. 133) Appendix D, Section B.3.c. – Updates to the Gas Supply Plan (Sheet Nos. 151-152) Appendix H, Section G – Future Convergence Bidding Strategies (Sheet No. 171) Appendix L, Section D.9 – Updates Via Advice Letter (Sheet No. 307) 13 Appendix A, Section A – Section II.A.3.a – Updated to reflect corrections and Electric Products Electric Products modifications in the product descriptions, and moved to new (Sheet Nos. 18-22) Appendix A. Added a new product “Structured Transaction.” 14 Appendix A, Section B – Section II.A.3.a – Moved the GHG products from the Greenhouse Gas Products Electric Products Electric Product section in the 2010 BPP into a separate table in the 2014 BPP. (Sheet Nos. 18-22) Appendix L.D.2 –Greenhouse Gas-Related Products (Sheet No. 289)

A-2

Line No. 2014 BPP Section 2010 BPP Section Description of Changes 15 Appendix A, Section C – Section II.A.3.b – Gas Products Updated and clarified descriptions; Fuel Products merged two products from the 2010 (Sheet Nos. 22-24) BPP. Added distillate product, which is used for backup and startup fuel at one facility and was approved by the Commission in D.06-11-048. 16 Appendix A, Section D – Section II.A.3.c – Credit Products Updated to reflect minor updates and Credit Products corrections in the product descriptions. (Sheet Nos. 24-25) 17 Appendix B, Section A – New Section – Not Applicable New Appendix added to 2014 BPP. Introduction 18 Appendix B, Section B – Section II.A.4 – Overview of Market and Commission-mandated Overview of Procurement Energy Products Market processes separated into two Processes (Sheet Nos. 26-33) subsections. Added a subsection regarding GHG compliance instrument Appendix L, Section A.2 – GHG procurement. Procurement Plan (Sheet Nos. 282-284) 19 Appendix B, Section C -- Section II.A.5 – PG&E’s Updated process descriptions and added Approved Procurement Procurement Methods and new transaction process for Cashout and Processes And Practices Practices Bilateral Transactions for Natural Gas Storage and Pipeline Capacity. (Sheet Nos. 33-35) 20 Appendix B, Section D – Section II.A.7 – Contracting Updated to consolidate discussions of Commission Adopted Rules for Once-Through Cooling certain procurement processes that were Limitations for Specific Units in various sections of the 2010 BPP, and Procurement Processes incorporate requirements from D.14-02- (Sheet Nos. 44-46) 040. Section II.A.5.f – Solicitations and Request for Offers (Sheet 31) Section II.A.8.c – Loading Order (Sheet Nos. 48-49) Appendix I, Section C – Request for Offer Process (Sheet Nos. 180-181) Section II.A.8 – The Application of Least-Cost Best-Fit and the Loading Order in PG&E’s Procurement Processes (Sheet Nos. 46-48) 21 Appendix C, Section A – Section II.A.6 – Electrical Updated electric capacity limits, added Electric Limits Capacity Procurement Limits and as new electric energy limits, and Ratable Rates provided procurement limit calculations for a PG&E Alternative Scenario as well (Sheet Nos. 41-44) as for the CPUC Mandated Scenario. Appendix A – Table PGE-3 and PGE-4 (Sheet Nos. 106-107)

A-3

Line No. 2014 BPP Section 2010 BPP Section Description of Changes 22 Appendix C, Section B – Gas Appendix D – Electric Portfolio Updated to replace the Gas Supply Plan Limits Gas Supply Plan in the 2010 BPP and includes procurement limits for natural gas (Sheets 147-152) supply, pipeline capacity and storage. Provided procurement limit calculations for a PG&E Alternative Scenario as well as the CPUC Mandated Scenario. 23 Appendix C, Section C – Appendix L.D.4.i – Maximum Moved from the GHG Plan into this Greenhouse Gas Limits Volume Limits appendix to allow all procurement limits to be covered in one area of the BPP. Appendix L.D.4.j – Financially Updated to reflect the new plan duration Hedging Greenhouse Gas and market changes, and provided Compliance Instrument Price Financial Exposure Purchase Limit Risk calculations (in accordance with the (Sheet Nos. 300-305) methodology approved in D.12-04-046) for a PG&E Alternative Scenario as well Section V.C. – Greenhouse Gas as the CPUC Mandated Scenario. Emission Evaluation Direct Compliance Obligation Purchase (Sheet No. 89) Limits were also provided, but the calculation did not differ between the two scenarios. 24 Appendix D, Section A – Section III – Description of Updated to describe Appendix D (i.e., Introduction Commission-mandated case CPUC Mandated Scenario and the PG&E Alternative Scenario). (Sheet No. 61) 25 Appendix D, Sections B.1 Sections III.A and III.B – Load Updated to reflect the CPUC Mandated and B.2 – CPUC Mandated Forecast and Existing and Scenario load and resource assumptions Scenario Load Forecast and Planned Resources for for the 2014 LTPP. Existing and Planned Commission-mandated Case Resources Appendix A – Energy and Capacity Tables (Sheet Nos. 61-67, 104-105) 26 Appendix D, Section B.3 – Section V – Evaluation of Updated to reflect the evaluation for CPUC Mandated Scenario Commission-mandated Case CPUC Mandated Scenario. Evaluation of Revenue (Sheet Nos. 86-89) Requirements, Rates and Risk 27 Appendix D, Section C – Adds the PG&E Alternative Scenario. PG&E Alternative Scenario 28 Appendix E, Section A – Introduction No substantive changes. Introduction (Sheet No. 109) 29 Appendix E, Section B – Section A – Scope of the Hedging Updated text in the beginning of this Hedging Plan Structure Plan section (i.e., Section A.1 regarding GHG has been moved to Section B.1.c (Sheet Nos. 109-111) and updated in reference to PG&E’s GHG Plan) and the remaining subsections have only minor, non- substantive changes.

A-4

Line No. 2014 BPP Section 2010 BPP Section Description of Changes 30 Appendix E, Section C.1 – Section B.1 – Tenor Tenor (Sheet No. 112) 31 Appendix E, Section C.2 – Section B.2 – Operating Targets Hedging Targets and Limits (Sheet Nos. 112-117)

32 Appendix E, Section C.2 – Hedging Targets and Limits (Sheet Nos. 117-119) 33 Appendix E, Section C.3.a – Section B.3.a – Product Mix Product Mix Targets Targets (Sheet Nos. 120-122) 34 Appendix E, Section C.3.b –

(Sheet Nos. 122-123) 35 Appendix E, Section C.4 – Section B.4 – Execution Strategy Execution Strategy (Sheet Nos. 124-125)

36 Appendix E, Section C.5 –

(Sheet Nos. 125-126) 37 Appendix E, Section D.1 – Section C.1 – Transition Plan Transition Plan (Sheet Nos. 126-127)

38 Appendix E, Section D.2 – Section C.2 – Unusual Events, Unusual Events, Market Market Dislocations, and Dislocations, and Emergencies Emergencies (Sheet Nos. 127-129)

39 Appendix E, Section E – Section D – Liquidity Liquidity Management Management Strategy Strategy (Sheet Nos. 129-133)

40 Appendix F, Section A.1 – Appendix C, Section A.1 ‒ Updated to reflect new information The Nuclear Fuel Cycle The Nuclear Fuel Cycle about the number of suppliers and customers for various portions of the (Sheet Nos. 135-136) nuclear fuel cycle. 41 Appendix F, Section A.2 – Appendix C, Section A.2 – Diablo Canyon Power Plant Diablo Canyon Power Plant Operations Plan Operations Plan (Sheet Nos. 136-137)

A-5

Line No. 2014 BPP Section 2010 BPP Section Description of Changes 42 Appendix F, Section B – Appendix C, Section B– PG&E’s Nuclear Fuel PG&E’s Nuclear Fuel Procurement Plan Procurement Plan

(Sheet Nos. 137-138) 43 Appendix F, Section B.1 – Appendix C, Section B.1 – Forward Contracting and Forward Contracting and Price Terms Price Terms

(Sheet Nos. 138-140) 44 Appendix F, Section B.2 ‒ Appendix C, Section B.2 ‒ Nuclear Fuel Strategic Nuclear Fuel Strategic Inventory Inventory (“SI”) Management Management (Sheet Nos. 140-141) 45 Appendix F, Section B.3 ‒ Appendix C, Section B.3 ‒ Proposed Risk Management Proposed Risk Management Measures Measures

(Sheet Nos. 141-142) 46 Appendix F, Section B.4 ‒ Appendix C, Section B.4 ‒ Risk Nuclear Liability and Issues Regarding Nuclear Fuel Insurance Issues Regarding Contracts Nuclear Fuel Contract (Sheet Nos. 142-144) 47 Appendix F, Section B.5 ‒ Appendix C, Section B.5 – Updated to incorporate title change and Capped Liability Under Suppliers Seeking to refine discussion. Some Contracts Contractually Cap Liability (Sheet No. 144) 48 Appendix F, Section C.1 ‒ Appendix C, Section C.1 ‒ Regulatory and Political Regulatory and Political Outlook Outlook Not Specific to Not Specific to PG&E PG&E (Sheet Nos. 144-145) 49 Appendix F, Section C.2 ‒ Appendix C, Section C.2 ‒ No substantive changes. Transactions Outside the Transactions Outside the Scope Scope of the Plan of the Plan (Sheet No. 145) 50 Appendix F, Section D – Appendix C, Section D – Summary of Proposal and Summary of Proposal and Conclusion Conclusion

(Sheet Nos. 145-146) 51 Appendix G –GHG Appendix L – GHG Procurement Updated to reflect the following: (1) the Procurement Plan Plan plan only covers compliance obligations related to PG&E’s electric procurement (Sheet Nos. 279-309) and (2) minor edits for the passage of time.

A-6

Line No. 2014 BPP Section 2010 BPP Section Description of Changes 52 Appendix H – Convergence Appendix G – Convergence Updated to reflect market design Bidding Bidding changes and reporting requirement updates. (Sheet Nos. 166-171) 53 Appendix I, Section A – Appendix F, Section A – No substantive changes. Introduction Introduction (Sheet Nos. 157-158) 54 Appendix I, Section B – Appendix F, Section B – No substantive changes. Congestion Revenue Rights Congestion Revenue Rights and and Long-Term Congestion Long-Term Congestion Revenue Revenue Rights Procurement Rights Procurement Objectives Objectives (Sheet No. 158) 55 Appendix I, Section C – Appendix F, Sections C and D Updated and reorganized (i.e., Sections Congestion Revenue Rights C and D from Appendix F in the 2010 (Sheet Nos. 158-160) Procurement BPP have been merged into a single section in the 2014 BPP, and Section D.3 from Appendix F is now in Section D of the 2014 BPP. 56 Appendix I, Section D – Appendix F, Section E – Volume No substantive changes. Volume Limits Limits (Sheet Nos. 160-161) 57 Appendix I, Section E – Appendix F, Section F – Updated and reorganized (i.e., Sections Selection Criteria for Valuation and Risk Analysis F, G, and a portion of H from Appendix Congestion Revenue Rights (Sheet No. 161-162) F in the 2010 BPP have been merged in Allocations and Auction into a single section in the 2014.BPP in Appendix F, Section G – Processes order to avoid redundancy so that there Nomination Criteria in is just one overall explanation of the Congestion Revenue Rights selection criteria for CRRs in allocation Allocation Process and auction processes.. (Sheet Nos. 162-163) Appendix F, Section H – Congestion Revenue Rights Auction Participation (Sheet Nos. 163-165) 58 Appendix I, Section F – Appendix F, Section H – Updated to reflect that participation in Congestion Revenue Rights Congestion Revenue Rights CRR auctions will be optional, as Auction Participation Auction Participation opposed to mandatory. This section F (Sheet Nos. 163-165) (of Appendix I) also clarifies actions PG&E may take to sell excess CRRs Appendix F, Section J – Excess within the auction process. Congestion Revenue Rights (Sheet No. 165) 59 Appendix I, Section G – Appendix F, Section H – Updated to reflect that participation in Transactions in Secondary Congestion Revenue Rights secondary markets will be optional, as Congestion Revenue Right Auction Participation opposed to mandatory. This section G Market (Sheet Nos. 163-165) (of Appendix I) also clarifies actions PG&E may take to sell excess CRRs Appendix F, Section J – Excess within the secondary markets.. Congestion Revenue Rights (Sheet No. 165)

A-7

Line No. 2014 BPP Section 2010 BPP Section Description of Changes 60 Appendix J – Brokerages and Appendix H – Brokerages and Updated to reflect the following: (1) the Exchanges Exchanges deletion and name change of several (Sheet Nos. 173-173-A) brokerages; (2) the name change of several exchanges; (3) specifically identifying those exchanges approved for GHG products, and (4) the addition of a new broker: Finerty Group, Inc. 61 Appendix K – Section I.B.1 New Appendix added that incorporates Bidding and Scheduling and updates information regarding (Sheet No. 6) scheduling and bidding of PG&E’s Section II.A.2.c – Dispatch owned and contracted resources. (Sheet Nos. 16-17) Section II.A.5.a – Daily and Hour-Ahead Planning and CAISO’s Real-Time Market (Sheet Nos. 38-40) 62 Appendix L – CAISO New Section – Not Applicable New Appendix added, which was not Operating Order Protocols included in the 2010 BPP, that describes PG&E’s actions when responding to CAISO system reliability needs. 63 Appendix M, Section A – Section II.A.9 – PG&E’s Use of Updated to reflect expanded discussion Procurement Review Group the Procurement Review Group on the regular PRG and the CAM and Cost Allocation Process Group. Two tables were added to Mechanism Group reflect Commission requirements (Sheet Nos. 49-52) associated with consulting and reporting Appendix I, Section A – to the PRG and CAM Group. Procurement Review Group Clarification requested to PRG review (Sheet Nos. 175-177) of transaction three months or greater (Table M-1, Item #1) and modifications to PRG review of CRRs and LT-CRRs. 64 Appendix M, Section B – Section II.A.9 – PG&E’s Use of Updated to include Table M-3 which Independent Evaluators the Independent Evaluators outlines the procurement activities requiring an independent evaluator and (Sheet No. 52) the associated directive. Appendix I, Section B – Independent Evaluators (Sheet Nos. 177-180, 182-222) 65 Appendix N, Section A.1 – Section II.B.1 – Portfolio Risk Updated bundled system average rate Portfolio Risk Assessment Assessment and Customer Risk and associated Customer Risk Tolerance and Customer Risk Tolerance consistent with the 10 percent risk Tolerance tolerance factor for 2014 (see (Sheet Nos. 52-55) description of risk assessment and Customer Risk Tolerance). 66 Appendix N, Section A.2 – Section II.B.2 – PG&E’s Current Updated the refine the discussion, but Current Risk Management Risk Management Practices are no substantive changes were made. Practices (Sheet Nos. 55-56)

A-8

Line No. 2014 BPP Section 2010 BPP Section Description of Changes 67 Appendix N, Section A.3 – Section II.B.3 – PG&E’s Credit Updated to refine the discussion and Credit and Collateral and Collateral Requirements categories of transactions were modified Requirements to reflect the passage of time. (Sheet Nos. 57-60) 68 Appendix N, Section B – Appendix E – PG&E’s TeVaR Updated by moving Table E-1 in TeVaR Methodology Methodology Appendix E of the 2010 BPP to Appendix D in the 2014 BPP. (Sheet Nos. 154-155) 69 Appendix O – Acronym List Appendices J and K Updated to reflect acronyms and and Glossary relevant terms used in the 2014 BPP. (Sheet Nos. 223-277)

A-9

ATTACHMENT B

Substantive Changes for Commission Approval

In its cover pleading, PG&E provides an overview of the 2014 BPP and described in detail changes between the 2010 BPP and the 2014 BPP. Many of the changes were updates to reflect the passage of time or events which have occurred since the 2010 BPP was approved. Other changes were substantive changes to PG&E’s current procurement authority. In the table below,

PG&E identifies the substantive changes to its procurement authority that were included in the

2014 BPP for which PG&E is requesting Commission approval. PG&E is requesting approval of the entire 2014 BPP, but is providing this table of substantive changes so that the Commission and parties can identify substantive changes for which Commission approval is requested.

Topic and Section of 2014 BPP Summary of Substantive Change and request for Approval

Appendix A, Table A-1, Item #33 – Structured Approve adding Structured Transactions product (this Transactions product has already been approved for SCE).

Appendix B, Table B-1, Item #10 Approve clarification that limitation on electronic solicitations for utility-owned resources does not apply to natural gas storage provided by PG&E California Gas Transmission.

Appendix B, Table B-1, Item #15 – Cashout Approve the addition of a new procurement process for gas pipeline imbalances referred to as a “cashout”

Appendix C, Procurement Limit Approve the proposed procurement limits for electric capacity and energy, natural gas (including natural gas supply, transportation and storage), and GHG compliance instruments

Appendix D, PG&E Alternative Scenario Approve PG&E’s Alternative Scenario and the corresponding capacity and energy balance tables as well as the corresponding procurement limits

Appendix E, Electric Portfolio Hedging Plan Approved PG&E’s revised Electric Portfolio Hedging Plan

Appendix F, Nuclear Fuel Procurement Plan Approve PG&E’s revised Nuclear Fuel Procurement Plan

B-1

Topic and Section of 2014 BPP Summary of Substantive Change and request for Approval

Appendix G, Greenhouse Gas Procurement Plan Approve PG&E’s revised Greenhouse Gas Procurement Plan, which covers PG&E’s obligations related to electric procurement (not its obligations as a natural gas supplier)

Appendix I, Congestion Revenue Rights Approve PG&E’s revised CRR procurement

Appendix J, Brokers Approve the addition of a new broker -- Finerty Group, Inc.

Appendix K, Scheduling and Bidding Protocols Approve new Appendix K

Appendix L, CAISO Operating Order Protocols Approve new Appendix L

Appendix M, PRG consultation regarding Approve the clarification proposed in Table M-1, Item transactions that are three months or more in #1 regarding PRG review of transactions three months duration or greater in duration

Appendix M, PRG review of CRRs Approve the modified language in Table M-1, Item #9 and Table M-2, Item #12 regarding review of CRR and LTCRR transactions with the PRG

Appendix N, Risk Management Policy Approve PG&E’s revisions and clarifications to its Risk Management Policy

B-2

ATTACHMENT C

PG&E’s Proposed 2014 Bundled Procurement Plan

(Public Version)

3$&,),&*$6$1'(/(&75,&&203$1< %81'/('352&85(0(173/$1 25'(5,167,787,1*58/(0$.,1*72,17(*5$7($1'5(),1( 352&85(0(1732/,&,(6$1'&216,'(5/21*7(50 352&85(0(173/$16 7$%/(2)&217(176

6HFWLRQ 7LWOH 6KHHW1R , ,1752'8&7,21 $ 3* (¶V3URFXUHPHQW*RDOV % 2YHUYLHZRI3* (¶V3ODQQLQJ3URFXUHPHQWDQG 6FKHGXOLQJ%LGGLQJ$FWLYLWLHV 3ODQQLQJ 3URFXUHPHQW 6FKHGXOLQJ%LGGLQJ & 2YHUYLHZRI3* (¶V%XQGOHG3URFXUHPHQW3ODQ 6HFWLRQ,,±6WDWXWRU\DQG/RDGLQJ2UGHU5HTXLUHPHQWV 6HFWLRQ,,,±3URFXUHPHQW6WDQGDUGVRI&RQGXFW 6HFWLRQ,9±&RPSOLDQFH)LOLQJVDQG5HTXLUHPHQWVDQG &RVW5HFRYHU\ 6HFWLRQ9±3UH$SSURYDO$SSURYDODQG)LOLQJ 5HTXLUHPHQWV 6HFWLRQ9,±3URFHVVIRU8SGDWHVWRWKH%XQGOHG 3URFXUHPHQW3ODQ $SSHQGLFHV ,, 67$78725<$1'/2$',1*25'(55(48,5(0(176 $ &RPSOLDQFH:LWK$% % &RPSOLDQFH:LWKWKH/RDGLQJ2UGHU (QHUJ\(IILFLHQF\ D 3* (¶V/RQJ7HUP&RPPLWPHQWWR(QHUJ\ (IILFLHQF\ E 3* (¶V3URJUDPV F 3RVW3URJUDPV 'HPDQG5HVSRQVH D 3* (¶V$GRSWHG'HPDQG5HVSRQVH 3URJUDPV E 5HJXODWRU\,QLWLDWLYHVDQG%ULGJH )XQGLQJ F 1HZ'HPDQG5HVSRQVH3URJUDPVDQG3LORWV

L 3$&,),&*$6$1'(/(&75,&&203$1< %81'/('352&85(0(173/$1 25'(5,167,787,1*58/(0$.,1*72,17(*5$7($1'5(),1( 352&85(0(1732/,&,(6$1'&216,'(5/21*7(50 352&85(0(173/$16 7$%/(2)&217(176 &217,18('

6HFWLRQ 7LWOH 6KHHW1R 536(OLJLEOH5HVRXUFH3URFXUHPHQW 'LVWULEXWHG*HQHUDWLRQ D &DOLIRUQLD6RODU,QLWLDWLYH E 6HOI*HQHUDWLRQ,QFHQWLYH3URJUDP F 1HW0HWHULQJ3URJUDPV 2WKHU*HQHUDWLRQ5HVRXUFHV ,,, &203/,$1&(:,7+7+(&200,66,21¶6 352&85(0(1767$1'$5'62)&21'8&7 ,9 '(6&5,37,212)3* (),/,1*60$'(72 '(021675$7(&203/,$1&($1'&2675(&29(5< $ 0RQWKO\4XDUWHUO\DQG$QQXDO)LOLQJVDQG5HSRUWV % $GGLWLRQDO5HSRUWLQJ5HTXLUHPHQWV±(55$7ULJJHU & 'HVFULSWLRQRI&RVW5HFRYHU\IRU%XQGOHG3URFXUHPHQW 3ODQ3URFXUHPHQW 9 35($33529$/$33529$/$1'),/,1* 5(48,5(0(176 9, 83'$7(6727+(%81'/('352&85(0(173/$1 9,$$'9,&(/(77(5 $33(1',;$ 352&85(0(17352'8&76 $ (OHFWULF3URGXFWV % *UHHQKRXVH*DV3URGXFWV & )XHO3URGXFWV ' &UHGLW3URGXFWV

LL 3$&,),&*$6$1'(/(&75,&&203$1< %81'/('352&85(0(173/$1 25'(5,167,787,1*58/(0$.,1*72,17(*5$7($1'5(),1( 352&85(0(1732/,&,(6$1'&216,'(5/21*7(50 352&85(0(173/$16 7$%/(2)&217(176 &217,18('

6HFWLRQ 7LWOH 6KHHW1R $33(1',;% 352&85(0(17352&(66$1'0(7+2'6 $ ,QWURGXFWLRQ % 2YHUYLHZRI3URFXUHPHQW3URFHVVHV 0DUNHW3URFHVVHV D ([FKDQJHV E 9RLFH%URNHUV F &$,620DUNHWV G (OHFWURQLF6ROLFLWDWLRQV H 5HTXHVWIRU2IIHUV I %LODWHUDO1HJRWLDWLRQV &RPPLVVLRQ'LUHFWHGRU0DQGDWHG3URFXUHPHQW 3URJUDPV D 4XDOLI\LQJ)DFLOLW\&RPELQHG+HDWDQG3RZHU 6WDQGDUG3URJUDP E 5HQHZDEOH$XFWLRQ0HFKDQLVP3URJUDP F 3* (¶V3KRWRYROWDLF3URJUDP G (QHUJ\6WRUDJH3URJUDP H 5HQHZDEOH)HHG,Q7DULII3URJUDPV &$5%*+*$XFWLRQVDQGWKH$OORZDQFH3ULFH &RQWDLQPHQW5HVHUYH & $SSURYHG3URFXUHPHQW3URFHVVHVDQG3UDFWLFHV ' &RPPLVVLRQ$GRSWHG/LPLWDWLRQVDQG5HTXLUHPHQWVIRU 6SHFLILF3URFXUHPHQW3URFHVVHV 5HTXLUHPHQWVIRU2QFH7KURXJK&RROLQJ8QLWV 5HTXLUHPHQWVIRU8WLOLW\2ZQHG*HQHUDWLRQ /RQJ7HUP5)2V /RDGLQJ2UGHU$SSOLFDELOLW\WR3URFXUHPHQW (YDOXDWLRQDQG6HOHFWLRQRI5HVRXUFHV7KURXJK5)2V 'HWHUPLQLQJWKH7HUPRID&RQWUDFW

LLL 3$&,),&*$6$1'(/(&75,&&203$1< %81'/('352&85(0(173/$1 25'(5,167,787,1*58/(0$.,1*72,17(*5$7($1'5(),1( 352&85(0(1732/,&,(6$1'&216,'(5/21*7(50 352&85(0(173/$16 7$%/(2)&217(176 &217,18('

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

LY 3$&,),&*$6$1'(/(&75,&&203$1< %81'/('352&85(0(173/$1 25'(5,167,787,1*58/(0$.,1*72,17(*5$7($1'5(),1( 352&85(0(1732/,&,(6$1'&216,'(5/21*7(50 352&85(0(173/$16 7$%/(2)&217(176 &217,18('

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¶V1XFOHDU)XHO3URFXUHPHQW3ODQ )RUZDUG&RQWUDFWLQJDQG3ULFH7HUPV

Y 3$&,),&*$6$1'(/(&75,&&203$1< %81'/('352&85(0(173/$1 25'(5,167,787,1*58/(0$.,1*72,17(*5$7($1'5(),1( 352&85(0(1732/,&,(6$1'&216,'(5/21*7(50 352&85(0(173/$16 7$%/(2)&217(176 &217,18('

6HFWLRQ 7LWOH 6KHHW1R 1XFOHDU)XHO6WUDWHJLF,QYHQWRU\0DQDJHPHQW 3URSRVHG5LVN0DQDJHPHQW0HDVXUHV 1XFOHDU/LDELOLW\DQG,QVXUDQFH,VVXHV5HJDUGLQJ 1XFOHDU)XHO&RQWUDFWV &DSSHG/LDELOLW\8QGHU6RPH&RQWUDFWV & ,VVXHV$IIHFWLQJWKH3ODQ 5HJXODWRU\DQG3ROLWLFDO2XWORRN1RW6SHFLILFWR3* ( 7UDQVDFWLRQV2XWVLGHWKH6FRSHRIWKH3ODQ ' 6XPPDU\RI3URSRVDODQG&RQFOXVLRQ $33(1',;* *5((1+286(*$6352&85(0(173/$1 $ %DFNJURXQG &DOLIRUQLD$LU5HVRXUFH%RDUG¶V&DSDQG7UDGH 5HJXODWLRQV *UHHQKRXVH*DV&RPSOLDQFH,QVWUXPHQWVDQG&$5% $XFWLRQV % 3* (¶V$OORZDQFH&RQVLJQPHQW & 3* (¶V3RWHQWLDO*UHHQKRXVH*DV5LVNV *UHHQKRXVH*DV2EOLJDWLRQV &DSDQG7UDGH3HQDOWLHV 2IIVHW&UHGLWV ' 3* (¶V*+*5HODWHG3URGXFW3URFXUHPHQW *UHHQKRXVH*DV2EOLJDWLRQV *UHHQKRXVH*DV5HODWHG3URGXFWV *UHHQKRXVH*DV5HODWHG3URFHVVHV *UHHQKRXVH*DV3URFXUHPHQW6WUDWHJ\

YL 3$&,),&*$6$1'(/(&75,&&203$1< %81'/('352&85(0(173/$1 25'(5,167,787,1*58/(0$.,1*72,17(*5$7($1'5(),1( 352&85(0(1732/,&,(6$1'&216,'(5/21*7(50 352&85(0(173/$16 7$%/(2)&217(176 &217,18('

6HFWLRQ 7LWOH 6KHHW1R L *+*3URFXUHPHQW/LPLWV 3URFXUHPHQW5HYLHZ*URXS&RQVXOWDWLRQ &RVW5HFRYHU\ $SSURYDOIRU&RQWUDFW7HUP'XUDWLRQ ,QGHSHQGHQW(YDOXDWRU $33(1',;+ &219(5*(1&(%,'',1* $ %DFNJURXQG % &38&$XWKRUL]DWLRQ & 3* (¶V&RQYHUJHQFH%LGGLQJ3DUWLFLSDWLRQ ' 8WLOLW\&RQYHUJHQFH%LGGLQJ5HSRUWLQJ ( 6WRS1HW/RVV ) &DOLIRUQLD,QGHSHQGHQW6\VWHP2SHUDWRU1RWLILFDWLRQ 5HTXLUHPHQWV * )XWXUH&RQYHUJHQFH%LGGLQJ6WUDWHJLHV $33(1',;, &21*(67,215(9(18(5,*+76 $ ,QWURGXFWLRQ % &RQJHVWLRQ5HYHQXH5LJKWVDQG/RQJ7HUP&RQJHVWLRQ 5HYHQXH5LJKWV3URFXUHPHQW2EMHFWLYHV & &RQJHVWLRQ5HYHQXH5LJKWV3URFXUHPHQW

YLL 3$&,),&*$6$1'(/(&75,&&203$1< %81'/('352&85(0(173/$1 25'(5,167,787,1*58/(0$.,1*72,17(*5$7($1'5(),1( 352&85(0(1732/,&,(6$1'&216,'(5/21*7(50 352&85(0(173/$16 7$%/(2)&217(176 &217,18('

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

YLLL 3$&,),&*$6$1'(/(&75,&&203$1< %81'/('352&85(0(173/$1 25'(5,167,787,1*58/(0$.,1*72,17(*5$7($1'5(),1( 352&85(0(1732/,&,(6$1'&216,'(5/21*7(50 352&85(0(173/$16 7$%/(2)&217(176 &217,18('

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

L[ 3$&,),&*$6$1'(/(&75,&&203$1< %81'/('352&85(0(173/$1 25'(5,167,787,1*58/(0$.,1*72,17(*5$7($1'5(),1( 352&85(0(1732/,&,(6$1'&216,'(5/21*7(50 352&85(0(173/$16 7$%/(2)&217(176 &217,18('

6HFWLRQ 7LWOH 6KHHW1R $33(1',;0 352&85(0(175(9,(:*5283&267$//2&$7,21 0(&+$1,60*5283$1',1'(3(1'(17 (9$/8$725$'0,1,675$7,21 $ 3URFXUHPHQW5HYLHZ*URXSDQG&RVW$OORFDWLRQ 0HFKDQLVP*URXS 0HPEHUVKLS 3* (¶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

[ &DO38&6KHHW1R 1 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

I. Introduction ,QDFFRUGDQFHZLWKWKH6FRSLQJ0HPRDQG5XOLQJRI$VVLJQHG&RPPLVVLRQHUDQG

$GPLQLVWUDWLYH/DZ-XGJHLVVXHG0D\LQ5XOHPDNLQJ ³5´ 3DFLILF

*DVDQG(OHFWULF&RPSDQ\ ³3* (´ LVILOLQJLWV%XQGOHG3URFXUHPHQW3ODQ ³%33´

FRYHULQJWKHSHULRGIURPWKHGDWHWKH%33LVDSSURYHGWR'HFHPEHU3* (¶V

%33ZLOOEHFRPHHIIHFWLYHRQWKHGDWHWKH&DOLIRUQLD3XEOLF8WLOLWLHV&RPPLVVLRQ

³&38&´RU³&RPPLVVLRQ´ LVVXHVDGHFLVLRQDSSURYLQJWKH%33DQGZLOOUHPDLQLQ

HIIHFWXQWLO'HFHPEHURUWKH%33LVVXSHUVHGHGE\DVXEVHTXHQW

&RPPLVVLRQDSSURYHG%33ZKLFKHYHULVHDUOLHU3* (¶V%33HVWDEOLVKHVWKHXSIURQW

DFKLHYDEOHVWDQGDUGVDQGFULWHULDIRU3* (¶VSURFXUHPHQWDFWLYLWLHVDQGWKHUHFRYHU\RI

SURFXUHPHQWFRVWVZLWKRXWDQDIWHUWKHIDFWUHDVRQDEOHQHVVUHYLHZFRQVLVWHQWZLWK

&DOLIRUQLD3XEOLF8WLOLWLHV&RGH ³3XE8WLO&RGH´

A. PG&E’s Procurement Goals 3* (¶VJRDOVDUHWRSURYLGHVDIHUHOLDEOHDIIRUGDEOHDQGHQYLURQPHQWDOO\

VHQVLWLYHHOHFWULFDQGJDVVHUYLFHWRLWVFXVWRPHUVWKURXJKRXWQRUWKHUQDQGFHQWUDO

&DOLIRUQLD7KH%33LVLQWHQGHGWRDFKLHYHWKHVHJRDOVIRU3* (¶VEXQGOHGHOHFWULF

FXVWRPHUV

3* (¶VILUVWSULRULW\LVVDIHW\)RU3* (RZQHGIDFLOLWLHVWKHIRFXVRQVDIHW\

LQFOXGHVHQVXULQJWKDW3* (¶VIDFLOLWLHVDUHGHYHORSHGPDLQWDLQHGDQGRSHUDWHGLQDVDIH

PDQQHU3* (KDVXQGHUWDNHQFRPSUHKHQVLYHVDIHW\HIIRUWVDQGKDVLQLWLDWHGDQXPEHU

RINH\VDIHW\SURJUDPVWRHQVXUHWKDWLWVK\GURHOHFWULFUHQHZDEOHIRVVLOIXHOHGDQG

QXFOHDUIDFLOLWLHVDUHPDLQWDLQHGDQGRSHUDWHGLQDVDIHDQGUHOLDEOHPDQQHU)RU

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 2 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

FRQWUDFWHGUHVRXUFHVWKDWDUHRZQHGE\LQGHSHQGHQWWKLUGSDUW\JHQHUDWRUVORFDOVWDWH

DQGIHGHUDODJHQFLHVKDYHUHYLHZDQGDSSURYDODXWKRULW\RYHUWKHJHQHUDWLRQIDFLOLWLHVDQG

DUHFKDUJHGZLWKHQIRUFLQJVDIHW\HQYLURQPHQWDODQGRWKHUUHJXODWLRQVIRUWKHWKLUGSDUW\

IDFLOLW\6DIHW\IRUFRQWUDFWHGUHVRXUFHVRZQHGE\WKLUGSDUWLHVLVDOVRDGGUHVVHGWKURXJK

WKHLQWHUFRQQHFWLRQSURFHVVVSHFLILFSURYLVLRQVLQ3RZHU3XUFKDVH$JUHHPHQWV ³33$´

WKDWDGGUHVVVDIHW\DQG3* (¶VFRQVWUXFWLRQPRQLWRULQJSURFHVVIRUQHZUHVRXUFHVWKDW

DUHEHLQJGHYHORSHG7KHVSHFLILFRSHUDWLRQDQGPDLQWHQDQFHSUDFWLFHVIRU3* (RZQHG

IDFLOLWLHVRU33$VDIHW\SURYLVLRQVDUHQRWZLWKLQWKHVFRSHRIWKH%33+RZHYHUWKHVH

DFWLYLWLHVDUHWKHIRXQGDWLRQRI3* (¶VVDIHW\HIIRUWVIRULWVRZQHGDQGFRQWUDFWHGHQHUJ\

UHVRXUFHVDQGWKXVLWLVLPSRUWDQWWRGHVFULEHWKHPLQWKLVRYHUYLHZ

5HOLDEOHVHUYLFHLVDOVRFULWLFDOIRU3* (¶VEXQGOHGFXVWRPHUV3* (¶V%33

LQFOXGHVDSSURYHGJDVDQGHOHFWULFSURGXFWVDQGSURFHVVHVZKLFKDUHLQWHQGHGWRHQDEOH

3* (WRPDLQWDLQDUHOLDEOHVXSSO\RIHOHFWULFLW\RYHUWKHVKRUWPHGLXPDQGORQJWHUP

3* (¶V%33LVLQWHQGHGWRHQVXUHWKDW3* (LVDEOHWRVDWLVI\WKH&RPPLVVLRQ¶V

5HVRXUFH$GHTXDF\ ³5$´ UHTXLUHPHQWVDVZHOODVRWKHUUHOLDELOLW\DQGUHVRXUFH

UHTXLUHPHQWVDGRSWHGE\WKH&DOLIRUQLD,QGHSHQGHQW6\VWHP2SHUDWRU ³&$,62´ WR

HQVXUHDUHOLDEOHVXSSO\RIJHQHUDWLRQLQ&DOLIRUQLD3* (¶V%33GHVFULEHVLQGHWDLOLWV

SODQQLQJSURFXUHPHQWDQGVFKHGXOLQJDQGELGGLQJSURFHVVHVDOORIZKLFKDUHGHVLJQHG

WRHQDEOH3* (WRSURYLGHUHOLDEOHFRVWHIIHFWLYHEXQGOHGHOHFWULFVHUYLFH3* (KDV

DOVRLQFOXGHGDQXFOHDUIXHOVXSSO\SODQWRDVVXUHWKDWQXFOHDUIXHOLVDYDLODEOHWRDOORZIRU

WKHFRQWLQXHGHIILFLHQWRSHUDWLRQRIWKH'LDEOR&DQ\RQ3RZHU3ODQW ³'&33´

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 3 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

&XVWRPHUFRVWLVDOVRDJRDODGGUHVVHGE\WKH%33,QDGGLWLRQWRSURFXUHPHQW

SURFHVVHVGHYHORSHGWRJHWWKHEHVWDYDLODEOHPDUNHWSULFHV3* (¶V%33DOVRLQFOXGHVD

KHGJLQJSODQXVHRIFRQYHUJHQFHELGGLQJDQG&RQJHVWLRQ5HYHQXH5LJKWV ³&55´ DQG

D7RH[SLUDWLRQ9DOXHDW5LVN ³7H9D5´ PHWKRGRORJ\LQWHQGHGWRHIIHFWLYHO\PDQDJH

FXVWRPHUSULFHULVNV7KH%33LQFOXGHVSURFXUHPHQWSURFHVVHVDQGUXOHVPDQ\RIZKLFK

KDYHEHHQSUHYLRXVO\DSSURYHGE\WKH&RPPLVVLRQDVDPHDQVRIHQVXULQJFRVWHIIHFWLYH

SURFXUHPHQWIRUEXQGOHGFXVWRPHUV

)LQDOO\LQDGGLWLRQWRVDIHW\UHOLDELOLW\DQGDIIRUGDELOLW\3* (¶V%33

LQFRUSRUDWHVDQGUHIOHFWV&DOLIRUQLD¶VSURJUHVVLYHHQYLURQPHQWDOSROLFLHV)RUGHFDGHV

WKH&DOLIRUQLD/HJLVODWXUHDQGWKH&RPPLVVLRQKDYHSLRQHHUHGODZVUHJXODWLRQVDQG

SROLFLHVWKDWKDYHDGGUHVVHGFULWLFDOHQHUJ\DQGHQYLURQPHQWDOLVVXHVDQGFRQFHUQV)RU

H[DPSOHRQ0D\WKH&RPPLVVLRQ&DOLIRUQLD(QHUJ\&RPPLVVLRQ ³&(&´ DQG

WKH&DOLIRUQLD&RQVXPHU3RZHUDQG&RQVHUYDWLRQ)LQDQFLQJ$XWKRULW\MRLQWO\LVVXHGDQ

(QHUJ\$FWLRQ3ODQ ³($3´ IRUWKHVWDWHRI&DOLIRUQLDRXWOLQLQJVWDWHHQHUJ\DQG

HQYLURQPHQWDOSROLFLHVDQGVWUDWHJLHV7KH($3ZDVXSGDWHGLQ2FWREHUDQG

LQFOXGHVDSUHIHUUHGUHVRXUFHRUGHUWRDFKLHYH&DOLIRUQLD¶VHQHUJ\DQGHQYLURQPHQWDO

SROLF\JRDOVFRVWHIIHFWLYH(QHUJ\(IILFLHQF\ ³((´ DQG'HPDQG5HVSRQVH ³'5´

IROORZHGE\UHQHZDEOHUHVRXUFHVLQFOXGLQJ5HQHZDEOHV3RUWIROLR6WDQGDUG

³536´ HOLJLEOHUHVRXUFHV'LVWULEXWHG*HQHUDWLRQ ³'*´ DQGFOHDQHIILFLHQW

FRQYHQWLRQDOIDFLOLWLHV&DOLIRUQLDKDVDOVRHQDFWHGOHJLVODWLRQLQWHQGHGWRUHGXFH

&DOLIRUQLD*UHHQKRXVH*DV ³*+*´ HPLVVLRQVDQGWRSURPRWHUHQHZDEOHWHFKQRORJLHV

7KHXSGDWHG($3LVDYDLODEOHDWKWWSGRFVFSXFFDJRYZRUGBSGI5(3257SGI

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 4 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3* (¶V%33LVGHVLJQHGWRLPSOHPHQWWKH($3ORDGLQJRUGHUDQGRWKHUHQYLURQPHQWDOO\

RULHQWHGSURFXUHPHQWSROLFLHVZKLOHHQVXULQJWKDW3* (¶VFXVWRPHUVUHFHLYHUHOLDEOH

DQGFRVWHIIHFWLYHVHUYLFH,QSDUWLFXODUWKH%33GHVFULEHV3* (¶VRQJRLQJDQG

VLJQLILFDQWHIIRUWVWRVSXUFRQWLQXHGLQYHVWPHQWLQ((GHYHORSFRVWHIIHFWLYH'5

SURJUDPVDQGHQFRXUDJHWKHFRQWLQXHGGHYHORSPHQWRIUHQHZDEOHUHVRXUFHV3* (¶V

%33DOVRLQFRUSRUDWHVWKHSURYLVLRQVRIWKH4XDOLI\LQJ)DFLOLW\DQG&RPELQHG+HDWDQG

3RZHU6HWWOHPHQW ³4)&+36HWWOHPHQW´ DSSURYHGE\WKH&RPPLVVLRQLQ'HFLVLRQ

³'´ ZKLFKLVGHVLJQHGWRGHYHORSD&RPELQHG+HDWDQG3RZHU ³&+3´

SURJUDPWKDWLQFUHDVHVUHOLDELOLW\DQGGHFUHDVHV*+*HPLVVLRQV

B. Overview of PG&E’s Planning, Procurement and Scheduling/Bidding Activities 3* (¶VSURFHVVIRUPHHWLQJWKHQHHGVRILWVEXQGOHGFXVWRPHUVLQYROYHV

WKUHHSKDVHVSODQQLQJSURFXUHPHQWDQGVFKHGXOLQJELGGLQJ$QRYHUYLHZRIHDFKRI

WKHVHWKUHHSKDVHVLVSURYLGHGEHORZ

1. Planning ,QWKHSODQQLQJSKDVH3* (LGHQWLILHVWKHUHVRXUFHQHHGVRILWVEXQGOHG

FXVWRPHUVDQGSODQVWRVDWLVI\WKHVHQHHGVFRQVLVWHQWZLWKWKH6WDWH/RDGLQJ2UGHU($3

DQGRWKHU&RPPLVVLRQDQGOHJLVODWLYHGLUHFWLYHVWRHQVXUHVDIHUHOLDEOHDIIRUGDEOHDQG

HQYLURQPHQWDOO\VHQVLWLYHHOHFWULFLW\VHUYLFH3* (LGHQWLILHVVSHFLILFSURGXFWVWRPHHW

LWVFXVWRPHUV¶QHHGV7KHVHSURGXFWVLQFOXGHHQHUJ\SURGXFWV EDVHORDGVKDSLQJDQG

SHDNLQJ FDSDFLW\SURGXFWVWRPHHW5$UHTXLUHPHQWVDQGYDULRXVDQFLOODU\VHUYLFHV

SURGXFWVLQFOXGLQJUHJXODWLRQORDGIROORZLQJ LHEDODQFLQJVHUYLFHV VSLQQLQJ

3* (DOVRORRNVDWWKHUHOLDELOLW\DQGRSHUDWLRQDOIOH[LELOLW\QHHGVIRULWVHQWLUHVHUYLFHDUHD

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 5 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

QRQVSLQQLQJDQGEODFNVWDUWFDSDELOLW\6HFWLRQ,,EHORZSURYLGHVIXUWKHUGHWDLO

FRQFHUQLQJWKHSODQQLQJSKDVHDVZHOODV$SSHQGLFHV&DQG'

2. Procurement 3* (LPSOHPHQWVLWV&RPPLVVLRQDSSURYHG%33WKURXJKYDULRXVSURFXUHPHQW

PHWKRGVDQGSUDFWLFHVLQFOXGLQJFRPSHWLWLYHVROLFLWDWLRQVELODWHUDOQHJRWLDWLRQVDQG

SDUWLFLSDWLRQLQYDULRXVPDUNHWV3* (HQWHUVLQWRVKRUWPHGLXPDQGORQJWHUP

FRQWUDFWVWKDWUHVXOWIURPWKHSURFXUHPHQWSURFHVV3* (GHILQHVVKRUWWHUPFRQWUDFWVDV

FRQWUDFWVZLWKDWHUPRIRQH\HDURUOHVVPHGLXPWHUPFRQWUDFWVDVFRQWUDFWVZLWKDWHUP

JUHDWHUWKDQRQH\HDUEXWOHVVWKDQILYH\HDUVDQGORQJWHUPFRQWUDFWVDUHFRQWUDFWVZLWK

DWHUPILYH\HDUVRUJUHDWHU5HQHZDEOHFRQWUDFWVDUHDQH[FHSWLRQWRWKLVUXOHZLWK

DQ\WKLQJXQGHU\HDUVLQGXUDWLRQEHLQJVKRUWWHUPIRUWKLVFRQWUDFWFDWHJRU\3* (

DOVRKDVSURFXUHPHQWSODQVIRUVSHFLILFSURGXFWVVXFKDVQXFOHDUIXHODQG*+*

FRPSOLDQFHLQVWUXPHQWV$SSHQGL[$SURYLGHVPRUHGHWDLOFRQFHUQLQJWKHSURGXFWVWKDW

3* (SURFXUHV$SSHQGLFHV%(-DQG01SURYLGHPRUHGHWDLODERXWSURFXUHPHQW

SURFHVVHVDQGVSHFLILFSURFXUHPHQWSODQVDQG$SSHQGL[&SURYLGHVWKHSURFXUHPHQW

OLPLWVIRUHOHFWULFFDSDFLW\HOHFWULFHQHUJ\QDWXUDOJDVDQG*+*SURGXFWV

3. Scheduling/Bidding 3* (VFKHGXOHVDQGRUELGVLWVRZQHGDQGFRQWUDFWHGUHVRXUFHVLQWRWKH&$,62

GD\DKHDGDQGUHDOWLPHPDUNHWVWRDFKLHYH/HDVW&RVW'LVSDWFK ³/&'´ 3* (¶V

VFKHGXOLQJDQGELGGLQJSURFHVVHVDUHGHVFULEHGLQPRUHGHWDLOLQ$SSHQGL[.,QDGGLWLRQ

WRLWVVFKHGXOLQJDQGELGGLQJ/&'DFWLYLWLHV3* (PD\DWWLPHVUHFHLYHRSHUDWLQJRUGHUV

6HH3XE8WLO&RGH E 'DWSS

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 6 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

IURPWKH&$,62WRDGGUHVVFHUWDLQHYHQWVWKDWPD\LPSDFWV\VWHPUHOLDELOLW\IRUWKH

&$,62FRQWUROOHGJULG,Q$SSHQGL[/3* (GHVFULEHVLWVUHVSRQVHVWRFHUWDLQ&$,62

RSHUDWLQJRUGHUVIRUV\VWHPHPHUJHQFLHVFRQJHVWLRQDQGRYHUJHQHUDWLRQ

C. Overview of PG&E’s Bundled Procurement Plan

1. Section II – Statutory and Loading Order Requirements 6HFWLRQ,,GHVFULEHV3* (¶VFRPSOLDQFHZLWK$VVHPEO\%LOO ³$%´ 3XE8WLO

&RGH DQG3* (¶VUHVRXUFHDFTXLVLWLRQVWUDWHJLHVIRU(('5536HOLJLEOH

UHVRXUFHV'*FRQYHQWLRQDOJHQHUDWLRQDQGRWKHUJHQHUDWLRQLQFOXGLQJLPSRUWV

2. Section,,,±ProcurementStandardsRIConduct 6HFWLRQ,,,GHVFULEHV3* (¶VFRPSOLDQFHZLWKWKH&RPPLVVLRQ¶VSURFXUHPHQW

UHODWHG6WDQGDUGVRI&RQGXFW 62&

3. Section IV – Compliance Filings and Requirements and Cost Recovery 6HFWLRQ,9GHVFULEHVWKHYDULRXVPRQWKO\TXDUWHUO\DQGDQQXDOILOLQJVPDGHWR

GHPRQVWUDWHFRPSOLDQFHZLWKLWVDSSURYHGSODQDQG&RPPLVVLRQSROLF\DQGFRVWUHFRYHU\

XQGHUWKH%33

4. Section9±3UHApprovalApproval,andFilingRequirements 6HFWLRQ9GHVFULEHVWKHSUHDSSURYDODSSURYDODQGILOLQJUHTXLUHPHQWVDVVRFLDWHG

ZLWKSURFXUHPHQWXQGHUWKH%33

5. SectionVI±ProcessforUpdatesWRtheBundled Procurement Plan 6HFWLRQ9,GHVFULEHVWKHSURFHVVIRUXSGDWLQJWKH%33EHWZHHQ&RPPLVVLRQ

SURFHHGLQJV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 7 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

6. Appendices 7KH%33LQFOXGHVWKHIROORZLQJ$SSHQGLFHV

$SSHQGL[$ 3URFXUHPHQW3URGXFWV

$SSHQGL[% 3URFXUHPHQW3URFHVVHVDQG0HWKRGV

$SSHQGL[& 3URFXUHPHQW/LPLWVDQG5DWDEOH5DWHV

$SSHQGL[' 'HVFULSWLRQDQG(YDOXDWLRQRI&38&0DQGDWHGDQG3* ( $OWHUQDWLYH6FHQDULRV

$SSHQGL[( (OHFWULF3RUWIROLR+HGJLQJ3ODQ

$SSHQGL[) 1XFOHDU)XHO3URFXUHPHQW3ODQ

$SSHQGL[* *UHHQKRXVH*DV3URFXUHPHQW3ODQ

$SSHQGL[+ &RQYHUJHQFH%LGGLQJ

$SSHQGL[, &RQJHVWLRQ5HYHQXH5LJKWV

$SSHQGL[- %URNHUDJHVDQG([FKDQJHV

$SSHQGL[. %LGGLQJDQG6FKHGXOLQJ3URWRFROV

$SSHQGL[/ &$,622SHUDWLQJ2UGHU3URWRFROV

$SSHQGL[0 3URFXUHPHQW5HYLHZ*URXS&RVW$OORFDWLRQ0HFKDQLVP *URXSDQG,QGHSHQGHQW(YDOXDWRU$GPLQLVWUDWLRQ

$SSHQGL[1 5LVN0DQDJHPHQW3ROLF\DQG7H9$50HWKRGRORJ\

$SSHQGL[2 $FURQ\P/LVWDQG*ORVVDU\

II. Statutory and Loading Order Requirements

A. Compliance With AB 57 $%LQFOXGHVGHWDLOHGUHTXLUHPHQWVIRUDQ,QYHVWRU2ZQHG8WLOLW\¶V ³,28´

SURFXUHPHQWSODQ3* (¶V%33IXOO\FRPSOLHVZLWKWKHVHUHTXLUHPHQWVDV7DEOH

EHORZGHPRQVWUDWHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 8 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/( 3$&,),&*$6$1'(/(&75,&&203$1< &203/,$1&(:,7+$%

38&6HFWLRQ E 5HTXLUHPHQWV &LWDWLRQ7R3* (¶V%33 $QDVVHVVPHQWRISULFHULVNDVVRFLDWHGZLWK $SSHQGLFHV&'(DQG1 3* (¶VSRUWIROLR 'HILQLWLRQRIHOHFWULFLW\SURGXFWVHOHFWULFLW\ $SSHQGLFHV$DQG&, UHODWHGSURGXFWVDQGSURFXUHPHQWUHODWHG ILQDQFLDOSURGXFWVLQFOXGLQJMXVWLILFDWLRQDQG WKHDPRXQWWREHSURFXUHG 7KHSODQGXUDWLRQ 6HFWLRQ, 7KHGXUDWLRQWLPLQJDQGUDQJHRITXDQWLWLHVRI 6HFWLRQ,,%DQG$SSHQGLFHV%, HDFKSURGXFWWREHSURFXUHG $GHVFULSWLRQRI3* (¶VFRPSHWLWLYH $SSHQGLFHV%(*,DQG- SURFXUHPHQWSURFHVV $Q\SURSRVHGLQFHQWLYHPHFKDQLVP 1RWDSSOLFDEOH 7KHXSIURQWVWDQGDUGVDQGFULWHULDIRUWKH 6HFWLRQV,,9DQG$SSHQGLFHV$&(0 DFFHSWDELOLW\DQGHOLJLELOLW\IRUUDWHUHFRYHU\ DQGDQ\H[SHGLWHGDSSURYDOSURFHVV 3URFHGXUHVIRUXSGDWLQJWKHSODQ 6HFWLRQ9, $VKRZLQJWKDWWKHSODQDFKLHYHV D WKH536 6HFWLRQ,,%DQG$SSHQGLFHV%DQG' VWDQGDUG E DGLYHUVLILHGSRUWIROLRRIVKRUW WHUPDQGORQJWHUPHOHFWULFLW\DQG'5 SURGXFWVDQG F PHHWLQJUHVRXUFHQHHGV WKURXJKDOODYDLODEOHHQHUJ\HIILFLHQF\DQG GHPDQGUHGXFWLRQZKHQLWLVFRVWHIIHFWLYH UHOLDEOHDQGIHDVLEOH 3* (¶VULVNPDQDJHPHQWSROLFLHV $SSHQGL[1 $GLYHUVLW\RIRZQHUVKLSDQGIXHOVXSSO\ 6HFWLRQ,,%DQG$SSHQGLFHV%') $PHFKDQLVPIRUUHFRYHU\RIUHDVRQDEOH 6HFWLRQ,9 DGPLQLVWUDWLYHFRVWVUHODWHGWRSURFXUHPHQWLQ WKHJHQHUDWLRQFRPSRQHQWRIUDWHV

B. Compliance With the Loading Order $FFRUGLQJWRWKH($3FRVWHIIHFWLYH((DQG'5DUHSUHIHUUHGWRPHHW&DOLIRUQLD¶V

JURZLQJHQHUJ\QHHGVIROORZHGE\FRVWHIIHFWLYHUHQHZDEOHDQG'*UHVRXUFHVDQG

ILQDOO\FOHDQDQGHIILFLHQWIRVVLOIXHOHGJHQHUDWLRQ3XUVXDQWWR'3* (VKDOO

SURFXUHDGGLWLRQDO((DQG'5UHVRXUFHVWRWKHH[WHQWWKH\DUHIHDVLEO\DYDLODEOHDQGFRVW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 9 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

HIIHFWLYH7KLVDSSURDFKFRQWLQXHVIRUHDFKVWHSGRZQWKHORDGLQJRUGHULQFOXGLQJ

536HOLJLEOHUHVRXUFHVDQG'*7KH($3DOVRUHTXLUHVLPSURYHPHQWVWR7UDQVPLVVLRQ

DQG'LVWULEXWLRQ ³7 '´ V\VWHPVWRVXSSRUWGHPDQGJURZWKDQGHQDEOHWKH

LQWHUFRQQHFWLRQRIQHZJHQHUDWLRQ

3* (¶V%33LVGHVLJQHGWRLPSOHPHQWWKH($3ORDGLQJRUGHUDQGOHJLVODWLYHDQG

&RPPLVVLRQGLUHFWLYHVUHJDUGLQJSURFXUHPHQW7KH%33EDODQFHVWKUHHSULPDU\

REMHFWLYHV DVVHPEOLQJDSRUWIROLRRIVDIHUHOLDEOHDQGRSHUDWLRQDOO\IOH[LEOH

UHVRXUFHV SUHIHUUHGUHVRXUFHVDQG PDQDJLQJFXVWRPHUSULFHDQGSULFHYRODWLOLW\

,QWKLVVHFWLRQ3* (GHVFULEHVLWVUHVRXUFHDFTXLVLWLRQVWUDWHJLHVIRU(('5

536HOLJLEOHUHVRXUFHV'*DQGRWKHUJHQHUDWLRQUHVRXUFHVLQFOXGLQJ4XDOLI\LQJ

)DFLOLWLHV ³4)´ DQG&+3FOHDQHIILFLHQWIRVVLOILUHGJHQHUDWLRQQRQ536HOLJLEOH

UHQHZDEOHVDQGLPSRUWV0DQ\RIWKHVSHFLILFUHVRXUFHVWUDWHJLHVDUHGHYHORSHGDQG

DSSURYHGLQRWKHU&RPPLVVLRQSURFHHGLQJV0RUHRYHUWKHVHVWUDWHJLHVFKDQJHRYHUWLPH

)RUH[DPSOH((DQG'5SURJUDPVDUHW\SLFDOO\UHYLHZHGHYHU\\HDUVWRGHWHUPLQHLI

SURJUDPFKDQJHVDUHDSSURSULDWHRUDGGLWLRQDOSURJUDPPHDVXUHVFDQEHLPSOHPHQWHG

7KHGLVFXVVLRQEHORZUHSUHVHQWV3* (¶VLPSOHPHQWDWLRQRIWKHORDGLQJRUGHUZKHQWKH

%33ZDVILOHGLQ2FWREHU7KHVSHFLILFVWUDWHJLHVDQGSURJUDPVZLOOFKDQJHZLWK

WLPHDVWKH\DUHIXUWKHUUHYLHZHGDQGUHILQHGE\WKH&RPPLVVLRQDQGSDUWLHVDFWLYHLQ

WKHVHSURJUDPV

'DWS

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 10 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

1. Energy Efficiency

a. PG&E’s Long-Term Commitment to Energy Efficiency 3* (KDVEHHQDQGFRQWLQXHVWREHDNH\FRQWULEXWLQJSDUWQHUWR&DOLIRUQLD¶V

OHDGHUVKLSLQ((,Q3* (EHFDPHRQHRIWKHILUVWXWLOLWLHVLQWKHQDWLRQWRRIIHU

((SURJUDPVWRLWVFXVWRPHUV6LQFHWKHQ3* (KDVKHOSHGFXVWRPHUVVDYHELOOLRQVRI

NLORZDWWKRXUV N:K RIHOHFWULFLW\DQGKDVUHFHLYHGQXPHURXVDZDUGVDQGUHFRJQLWLRQDV

DOHDGHULQWKH((LQGXVWU\IURPRUJDQL]DWLRQVOLNH(1(5*<67$5WKH$PHULFDQ

&RXQFLOIRUDQ(QHUJ\(IILFLHQW(FRQRP\DQGPRVWUHFHQWO\&HUHV&OHDQ(GJH

3* (¶VORQJVWDQGLQJFRPPLWPHQWWR((KDVNHSWPRUHWKDQPLOOLRQWRQVRIFDUERQ

GLR[LGHRXWRIWKHDWPRVSKHUH3* (KDVEHHQDQGFRQWLQXHVWREHVXSSRUWLYHRIWKH

($3³ORDGLQJRUGHU´IRUHQHUJ\QHHGVLQ&DOLIRUQLDZKLFKSODFHV((DWWKHWRSRIWKHOLVW

IROORZHGE\RWKHUGHPDQGVLGHUHVRXUFHVDQGUHQHZDEOHV7KH&DOLIRUQLD,28V¶((

SURJUDPVKDYHEHHQDNH\FRQWULEXWRUWRPHHWLQJPDQ\RIWKHVWDWH¶VORQJWHUPHQHUJ\

SROLF\JRDOVVXFKDV$%WKH*OREDO:DUPLQJ6ROXWLRQV$FW

b. PG&E’s 2013-2014 Programs 3* (¶V((SRUWIROLRLVGHVFULEHGLQ'DQG3* (¶VILUVW

*$($ DQGVHFRQG *%(% VXSSOHPHQWDODGYLFHOHWWHUV

3* (¶V((SRUWIROLREXLOGVXSRQVXFFHVVHVRISULRU((SURJUDPVDQGLV

GHVLJQHGWRPHHWRUH[FHHGWKHJRDOVHVWDEOLVKHGE\WKH&RPPLVVLRQLQ'

7KHSRUWIROLRGHOLYHUVDFRPSUHKHQVLYHVXLWHRI((UHEDWHVLQFHQWLYHVVHUYLFHVDQGWRROV

IRUWDUJHWLQJFXVWRPHUVWKURXJKPXOWLSOHGHOLYHU\FKDQQHOV7KHVHFKDQQHOVLQFOXGH

KWWSZZZFHUHVRUJSUHVVSUHVVUHOHDVHVILUVWRILWVNLQGUHSRUWUDQNVXVHOHFWULFXWLOLW\ FRPSDQLHVUHQHZDEOHHQHUJ\HQHUJ\HIILFLHQF\SHUIRUPDQFH 6HHKWWSZZZSJHFRPDERXWHQYLURQPHQWSJHHQHUJ\HIILFLHQF\LQGH[VKWPO

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 11 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

XWLOLW\SURJUDPVWDIIJRYHUQPHQWSDUWQHUVKLSVDQGWKLUGSDUWLHVLQFOXGLQJWUDGH

SURIHVVLRQDOVUHWDLOHUVGLVWULEXWRUVPDQXIDFWXUHUVDQGGHVLJQDWHGWKLUGSDUW\SURJUDPV

7KHSRUWIROLRRIIHUV((VROXWLRQVWR3* (FXVWRPHUVLQHYHU\VHFWRU UHVLGHQWLDO

FRPPHUFLDOLQGXVWULDODJULFXOWXUDO DQGDGGUHVVHVHYHU\HOHPHQWRIWKH((SURGXFW

HYROXWLRQIRVWHULQJHPHUJLQJWHFKQRORJLHVWUDLQLQJWKHZRUNIRUFHGHOLYHULQJDQG

PDUNHWLQJSURGXFWVDQGVROXWLRQVSURYLGLQJILQDQFLQJRSWLRQVWRFXVWRPHUVLQWHJUDWLQJ

((RIIHULQJVZLWKRWKHU'HPDQG6LGH0DQDJHPHQW ³'60´ RSWLRQVDQGZRUNLQJWR

PRYHPDWXUHSURGXFWVWRFRGH

c. Post-2014 Programs )RUDQGEH\RQG&DOLIRUQLDLVH[SORULQJPRYLQJWRD³UROOLQJSRUWIROLR´

SURFHVVIURPWKH\HDU³F\FOH´SURFHVVWKDWKDVEHHQXVHGLQWKHSDVW$³UROOLQJ

SRUWIROLR´ZRXOGHVWDEOLVKILUPIXQGLQJIRUWKHORQJWHUP HJ\HDUV ZLWKSHULRGLF

SRUWIROLRDGMXVWPHQWVDQGIXQGLQJUHQHZDO7KHSULPDU\REMHFWLYHRIWKHUROOLQJSRUWIROLR

LVWRHOLPLQDWHWKH³VWDUWVWRS´QDWXUHRIWKHSURJUDPVDQGPDUNHWDFWLYLWLHVZKLFKDUH

FXUUHQWO\WLHGWRWKHUHJXODWRU\FDOHQGDU7KHUROOLQJSRUWIROLRZRXOGDOORZPDUNHW

DFWLYLW\WRIROORZWKHQRUPDOEXVLQHVVF\FOHDQGKHQFHLPSURYHPDUNHWHIILFLHQF\

7KH&RPPLVVLRQKDVHVWDEOLVKHGDSURFHVVIRUVKLIWLQJWRDUROOLQJSRUWIROLRLQ

5ZKLFKLQFOXGHVHVWDEOLVKLQJIXQGLQJIRUDVDQLQWHULPVWHSZKLOHWKH

UROOLQJSRUWIROLRSURFHVVLVHVWDEOLVKHG7RGDWHVDYLQJVJRDOVIRUKDYHEHHQ

HVWDEOLVKHG,28VKDYHVXEPLWWHGIXQGLQJSURSRVDOVDQGD&RPPLVVLRQGHFLVLRQRQ

IXQGLQJDSSURYDOIRULVH[SHFWHGE\WKHHQGRIWKH\HDU3* (¶VSURSRVDOLVWR

ODUJHO\FRQWLQXHSURJUDPVZKLOHVXSSRUWLQJNH\VWDWHHIIRUWVDQGFKDOOHQJHVOLNH

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 12 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3URSRVLWLRQ((IXQGLQJIRUVFKRROVWDUJHWLQJRI'60SURJUDPVWRSURYLGH7 '

GHIHUUDOEHQHILWVDQGRIIHULQJVROXWLRQVWRUHGXFHZDWHUXVDJHLQVXSSRUWRIWKHVWDWH¶V

UHVSRQVHWRWKHGURXJKW3* (¶VSURSRVDOZLOODOVRPHHWRUH[FHHGVWDWHVDYLQJVJRDOV

'DQG5LQFOXGHGXWLOLW\VSHFLILFJRDOVIRUWKHSURJUDP

F\FOHV7KHJRDOVHVWDEOLVKHGIRU3* (FDQEHIRXQGLQ7DEOHEHORZ

7$%/( 3$&,),&*$6$1'(/(&75,&&203$1< 3* ((1(5*<()),&,(1&<*2$/6)25±

/LQH 1R 0HWULF ¶¶3URJUDP&\FOH (OHFWULFLW\6DYLQJV *:K ,283URJUDPV &RGHVDQG6WDQGDUGV$GYRFDF\ 3HDN6DYLQJV 0: ,283URJUDPV &RGHVDQG6WDQGDUGV$GYRFDF\

2. Demand Response '5LVDYDOXDEOHUHVRXUFHIRUPDQDJLQJ3* (¶VSHDNGHPDQGLPSURYLQJV\VWHP

UHOLDELOLW\WKURXJK5$DYRLGLQJRUGHIHUULQJFRVWO\FDSLWDOLQYHVWPHQWVDGYDQFLQJ

6PDUW*ULGJRDOVIDFLOLWDWLQJLQWHJUDWLRQRILQWHUPLWWHQWUHQHZDEOHUHVRXUFHVSURYLGLQJ

FXVWRPHUVDOWHUQDWLYHVWRPDQDJHWKHLUELOOVDQGIXUWKHULQJWKHREMHFWLYHVRI&DOLIRUQLD¶V

($3$VVXFK3* (KDVGHYHORSHGDSRUWIROLRRI'5UHVRXUFHVWKDWDUHFDSDEOHRI

IXUWKHULQJWKHVHJRDOV3* (LVFRPPLWWHGWRIXUWKHUHQKDQFLQJLWV'5SRUWIROLRLQ

WHUPVRIFDSDELOLW\HIILFLHQF\IOH[LELOLW\DQGVL]H

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 13 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

a. PG&E’s Adopted 2012-2014 Demand Response Programs 3* (KDVDSRUWIROLRRIURXJKO\PHJDZDWWV ³0:´ RI'5SURJUDPVWKDW

VSDQDPL[WXUHRIUHVLGHQWLDOFRPPHUFLDOLQGXVWULDODQGDJULFXOWXUDOFXVWRPHUVZKLFK

HLWKHUKDYHDSULFHUHVSRQVLYH HFRQRPLF RUUHOLDELOLW\EDVHG HPHUJHQF\ IXQFWLRQDOLW\

)RULWVUHVLGHQWLDOFXVWRPHUV3* (UXQVDQHPHUJHQF\GLVSDWFKSURJUDPFDOOHG

6PDUW$&WKDWFDQGLUHFWO\FRQWUROFXVWRPHUV¶DLUFRQGLWLRQLQJXQLWVLQRUGHUWRUHGXFH

ORDG3* (RSHUDWHVDQRWKHUHPHUJHQF\GLVSDWFKSURJUDPIRURILWVODUJH

FRPPHUFLDODQGLQGXVWULDOFXVWRPHUVNQRZQDVWKH%DVH,QWHUUXSWLEOH3URJUDPZLWKD

WRWDORI0:RISRWHQWLDOORDGGURS,QWHUPVRIHFRQRPLFGLVSDWFK3* (UXQVD

'HPDQG%LGGLQJ3URJUDP ³'%3´ DVZHOODVWZRDJJUHJDWRUPDQDJHGSURJUDPV²

&DSDFLW\%LGGLQJ3URJUDPDQG$JJUHJDWRU0DQDJHG3RUWIROLR3URJUDP²ZKLFKFRPELQH

IRUQHDUO\0:RISRWHQWLDOORDGGURSZLWKFXVWRPHUVHQUROOHG)LQDOO\3* (

KDVWZRG\QDPLFSULFLQJSURJUDPVRQHIRULWVFRPPHUFLDOFXVWRPHUVNQRZQDV3HDN'D\

3ULFLQJDQGRQHIRULWVUHVLGHQWLDOFXVWRPHUVNQRZQDV6PDUW5DWHZKLFKKDYHD

FRPELQHGWRWDOHQUROOPHQWRIFXVWRPHUV:LWKWKHH[FHSWLRQRILWVG\QDPLF

SULFLQJSURJUDPVDOO'5SURJUDPVDUHORFDWLRQDOO\GLVSDWFKDEOHDFFRXQWLQJIRU

DSSUR[LPDWHO\0:,QDGGLWLRQWRWKHVHSURJUDPV3* (LVDOVRFRQGXFWLQJDUDQJH

RISLORWVZKLFKDUHH[SODLQHGEHORZLQ6HFWLRQ,,%F

3* (¶V'5SURJUDPVZHUHDSSURYHGE\WKH&RPPLVVLRQRQ$SULO

LQ'3* (¶VDGRSWHG'5SURJUDPVDOVRLQFRUSRUDWH

FKDQJHVWRDOORZ3* (¶V'5SURJUDPVWRELGLQWRWKH&$,62PDUNHWDVDVXSSO\

UHVRXUFHYLDWKH3UR[\'HPDQG5HVRXUFHRU5HOLDELOLW\'HPDQG5HVSRQVH5HVRXUFH

SURGXFW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 14 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

b. Regulatory Initiatives and 2015-2016 Bridge Funding ,QWKH&38&LQLWLDWHGWKH'55XOHPDNLQJ LH5 ³WRHQKDQFH

WKHUROHRI'5LQPHHWLQJWKHVWDWH¶VUHVRXUFHSODQQLQJQHHGVDQGRSHUDWLRQDO

UHTXLUHPHQWV´7KH&RPPLVVLRQLQLWLDWHGWKH'55XOHPDNLQJWRGHWHUPLQHZKHWKHUDQG

KRZWRELIXUFDWHFXUUHQWXWLOLW\DGPLQLVWHUHGFXVWRPHUIXQGHG'5SURJUDPVLQWR

GHPDQGVLGHDQGVXSSO\VLGHUHVRXUFHVLQRUGHUWRSULRULWL]H'5DVDXWLOLW\SURFXUHG

UHVRXUFHFRPSHWLWLYHO\ELGLQWRWKH&$,62ZKROHVDOHHOHFWULFLW\PDUNHW7KH'5

5XOHPDNLQJRXWOLQHGWKHSXUSRVHVRIWKHSURFHHGLQJDVIROORZV UHYLHZDQGDQDO\]H

FXUUHQW'5SURJUDPVWRGHWHUPLQHZKHWKHUDQGKRZWKH\FRXOGEHELIXUFDWHGLQWR

GHPDQGVLGHDQGVXSSO\VLGHUHVRXUFHV FUHDWHDQDSSURSULDWHFRPSHWLWLYH

SURFXUHPHQWPHFKDQLVPIRUVXSSO\VLGH'5UHVRXUFHV GHWHUPLQHSURJUDPDSSURYDO

DQGIXQGLQJF\FOHV SURYLGHJXLGDQFHIRUWUDQVLWLRQ\HDUVDQG GHYHORSDQGDGRSWD

URDGPDSIRUFROODERUDWLRQDQGFRRUGLQDWLRQZLWKRWKHU&RPPLVVLRQSURFHHGLQJVDQGVWDWH

DFWLYLWLHVUHODWHGWR'5

'HFLVLRQDSSURYHG%ULGJH)XQGLQJIRU'5SURJUDPVIURP

WKURXJKWREULGJHWKHSHULRGXQWLOVXEVWDQWLDOFKDQJHVIURPWKH'55XOHPDNLQJFDQ

EHLPSOHPHQWHGEHJLQQLQJLQ:KLOHWKLVGHFLVLRQSULPDULO\VHUYHGWRH[WHQGWKH

EXGJHWIRUH[LVWLQJSURJUDPVLWDOVRDSSURYHGPLQRUSURJUDPLPSURYHPHQWVSURSRVHGE\

WKH,28V3* (¶VSURSRVDOVLQFOXGHGWKHFRQWLQXDWLRQRIWKH7 ''HIHUUDO3LORWDQGWKH

,QWHUPLWWHQW5HVRXUFH0DQDJHPHQW3LORWDVZHOODVLPSURYHPHQWVIRUWKH'%3

c. New Demand Response Programs and Pilots ,QDGGLWLRQWR3* (¶VH[LVWLQJ'5SURJUDPVZKLFKLQFOXGHDYDULHW\RISURJUDPV

IRUFRPPHUFLDODQGUHVLGHQWLDOFXVWRPHUV3* (LVZRUNLQJRQDUDQJHRISLORWV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 15 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

SURJUDPVDQGLQLWLDWLYHVWKDWDGGUHVVFKDQJLQJJULGQHHGVDQGOHYHUDJHDGYDQFHG

WHFKQRORJLHV2Q$XJXVWSDUWLHVILOHGDVHWWOHPHQWSURSRVDOLQWKH'5

5XOHPDNLQJWKDWZRXOGHVWDEOLVKDIUDPHZRUNWRGHWHUPLQHLVVXHVLQFOXGLQJWKHIXWXUH

YDOXHRI'5SURJUDPVQHZSURFXUHPHQWPHFKDQLVPV VXFKDVWKH'5$XFWLRQ

0HFKDQLVP H[WHQGHGEXGJHWF\FOHV7KHGHFLVLRQIRUWKLVVHWWOHPHQWLVH[SHFWHGWREH

LVVXHGLQ'HFHPEHU

3. RPS-Eligible Resource Procurement 3* (VWURQJO\VXSSRUWVWKHGHYHORSPHQWRIFRVWHIIHFWLYHUHQHZDEOHUHVRXUFHV

FRQVLVWHQWZLWKWKH($3/RDGLQJ2UGHU$VRI-XQH3* (KDGVLJQHG

FRQWUDFWVZLWK536HOLJLEOHUHVRXUFHVWRWDOLQJRYHU0:RIFDSDFLW\,Q

DGGLWLRQWRWKHFRQWUDFWV3* (KDV8WLOLW\2ZQHG*HQHUDWLRQ ³82*´ WKDWLV

536HOLJLEOHVXFKDVK\GURHOHFWULFUHVRXUFHVDQG82*GHYHORSHGWKURXJK3* (¶V

3KRWRYROWDLF ³39´ 3URJUDPDSSURYHGE\WKH&RPPLVVLRQLQ'3* (LV

FRQWLQXLQJWRSURFXUH536HOLJLEOHUHVRXUFHVWRDFKLHYHWKHSHUFHQWE\JRDO

HVWDEOLVKHGE\6HQDWH%LOO ³6%´ LQWKH)LUVW([WUDRUGLQDU\6HVVLRQ 6%;

3* (¶VUHQHZDEOHSURFXUHPHQWVWUDWHJ\LVGHVFULEHGLQGHWDLOLQLWV'UDIW536

3URFXUHPHQW3ODQ ³3ODQ´RU³5363ODQ´ ILOHGRQ-XQHLQ5

$OWKRXJK3* (KDVH[HFXWHGFRQWUDFWVWKDWUHSUHVHQWZHOORYHUSHUFHQWRILWVIXWXUH

HQHUJ\QHHGV3* (¶VDELOLW\WRPHHWWKH536WDUJHWVLVVHQVLWLYHWRWKHWLPHO\

FRPSOHWLRQRIUHQHZDEOHHQHUJ\SURMHFWVZKLFKDUHVXEMHFWWRXQFHUWDLQWLHVDQGULVNV

&KLHIDPRQJWKHXQFHUWDLQWLHVIDFLQJUHQHZDEOHSURMHFWVXQGHUGHYHORSPHQWDUH

SHUPLWWLQJFKDOOHQJHVUHODWHGWRWLPHLQWHQVLYHDQGSRWHQWLDOO\KLJKFRVWWUDQVPLVVLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 16 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

SODQQLQJDQGGHYHORSPHQWDQGDFFHVVWRILQDQFLQJ$GGLWLRQDOO\VXVWDLQHGYDULDELOLW\LQ

HLWKHU3* (¶VORDGRU536JHQHUDWLRQFDQVLJQLILFDQWO\LPSDFW3* (¶V536FRPSOLDQFH

VWDWXV)RUH[DPSOHWKHRQJRLQJGURXJKWLQ&DOLIRUQLDWHQGVWRUHGXFHJHQHUDWLRQIURP

536TXDOLI\LQJK\GURHOHFWULFIDFLOLWLHV3* (¶V5363ODQSURYLGHVDGHWDLOHGGLVFXVVLRQ

UHJDUGLQJWKHVHULVNVDQGSRWHQWLDOLPSHGLPHQWV

3* (JHQHUDOO\SURFXUHVUHQHZDEOH536HOLJLEOHUHVRXUFHVWKURXJKDQQXDO

VROLFLWDWLRQVFRQGXFWHGSXUVXDQWWRLWV5363ODQDQGELODWHUDOQHJRWLDWLRQV,QDGGLWLRQ

3* (DOVRSURFXUHVUHQHZDEOHUHVRXUFHVWKURXJKVSHFLILF&RPPLVVLRQDSSURYHG

SURJUDPVWKDWDUHWDUJHWHGWRVSHFLILFW\SHVRI536HOLJLEOHUHVRXUFHV)RUH[DPSOHLQ

'WKH&RPPLVVLRQGLUHFWHG3* (DQGWKHRWKHU&DOLIRUQLD,28VWRFRQGXFW

5HTXHVWIRU2IIHUV ³5)2´ IRUUHQHZDEOHUHVRXUFHVXQGHU0:DVDSDUWRIWKH

5HQHZDEOH$XFWLRQ0HFKDQLVP ³5$0´ 3URJUDP,Q5HVROXWLRQ(WKH

&RPPLVVLRQGHIHUUHGRQHWKLUGRIWKHUHPDLQLQJXQVXEVFULEHGFDSDFLW\WKDWZRXOGKDYH

EHHQSURFXUHGLQWKHIRXUWKDQGILQDO5$0VROLFLWDWLRQWRDILIWK5$0VROLFLWDWLRQ,Q

DGGLWLRQ3* (ILOHGD3HWLWLRQIRU0RGLILFDWLRQRI'LQWRFRPELQHWKH

UHPDLQLQJDXWKRUL]HGFDSDFLW\LQ3* (¶V393URJUDPLQWRWKH5$03URJUDP

3* (DOVRSURFXUHV536HOLJLEOHHQHUJ\WKURXJK&RPPLVVLRQDSSURYHG)HHGLQ

7DULIIV ³),7´ ZKLFKLQFOXGHWDULIIVDQGVWDQGDUGIRUPFRQWUDFWVIRUVPDOOUHQHZDEOH

UHVRXUFHVWKDWDUH0:RUOHVV,Q'DQG'WKH&RPPLVVLRQ

DSSURYHG3* (¶V(OHFWULF5HQHZDEOH0DUNHW$GMXVWLQJ7DULII ³5H0$7´ WRLPSOHPHQW

6%7KH&RPPLVVLRQLVDOVRLPSOHPHQWLQJ6%ZKLFKZRXOGIXUWKHULQFUHDVHWKH

6HH3* (¶V-XQH'UDIW5HQHZDEOH(QHUJ\3URFXUHPHQW3ODQILOHGLQ 5DW6HFWLRQSSDQG6HFWLRQSS

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 17 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

VWDWHZLGHSURFXUHPHQWWDUJHWRIVPDOOUHQHZDEOHUHVRXUFHVWDUJHWLQJVPDOOVFDOHQHZ

EXLOGELRHQHUJ\SURMHFWV ELRJDVGDLU\RWKHUDJULFXOWXUDOELRHQHUJ\DQGE\SURGXFWVRI

VXVWDLQDEOHIRUHVWPDQDJHPHQW

)LQDOO\3* (SURFXUHV536HOLJLEOHHQHUJ\DQGFDSDFLW\IURPUHQHZDEOH4)V

0DQ\RIWKHVH4)SURMHFWVDUHSURYLGLQJ536HOLJLEOHHQHUJ\WR3* (XQGHUORQJWHUP

FRQWUDFWVH[HFXWHGLQWKH¶VDQG¶V

4. Distributed Generation 3* (KDVVXSSRUWHG'*EHIRUHWKH&DOLIRUQLD/HJLVODWXUHWKH&RPPLVVLRQDQG

WKURXJKDYDULHW\RILQWHUQDOSURFHVVLPSURYHPHQWV3* (¶VFXVWRPHUVFRQWLQXHWRSOD\

DQLPSRUWDQWUROHLQGHYHORSLQJ'*E\DGGLQJJHQHUDWLRQWRWKHHOHFWULFDOJULG,Q

DGGLWLRQWR536SURJUDPVZKLFKFDQLQFOXGH'*VXFKDVWKH),73URJUDP3* (DOVR

DGPLQLVWHUVVHYHUDOSURJUDPVWKDWVXSSRUW'*WKH&DOLIRUQLD6RODU,QLWLDWLYH ³&6,´ WKH

6HOI*HQHUDWLRQ,QFHQWLYH3URJUDP ³6*,3´ DQGVHYHUDO1HW(QHUJ\0HWHULQJ ³1(0´

SURJUDPV7KHIROORZLQJVHFWLRQVGHVFULEH3* (¶VFXUUHQW'*VWUDWHJLHV

a. California Solar Initiative 3* (LVFRPPLWWHGWRUHWDLQLQJLWVUROHDVDOHDGHULQWKHVRODUPDUNHW3* (KDV

VXSSRUWHGUHJXODWLRQDQGOHJLVODWLRQWKDWFUHDWHGRUH[WHQGHGSURJUDPVSURYLGLQJ

DVVLVWDQFHWRFXVWRPHUVZKRFKRRVHWRLQVWDOOVRODUJHQHUDWLRQ3* (VXSSRUWHGWKH&6,

HVWDEOLVKHGE\WKH&RPPLVVLRQLQDQGVXSSRUWHG6%ZKLFKFRGLILHG&6,&6,

ZDVGHVLJQHGWRSURPRWHVRODUDGRSWLRQDQGORZHUWKHFRVWRIVRODUV\VWHPVIRUFRQVXPHUV

RYHUD\HDUSHULRG$VRQHRIWKHSURJUDPDGPLQLVWUDWRUV3* (KDVKHOSHGPDNH

VRODUPRUHDIIRUGDEOHE\RIIHULQJLQFHQWLYHVIRUUHVLGHQWLDODQGFRPPHUFLDOFXVWRPHUV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 18 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7KHFXVWRPHUVLGHVRODUPDUNHWKDVVKRZQVLJQLILFDQWSURJUHVVWRZDUGPDUNHW

WUDQVIRUPDWLRQVLQFHWKHLQLWLDWLRQRIWKH&6,3URJUDP7RGDWHWKHSURJUDPKDVUHVXOWHG

LQLQVWDOODWLRQVRI0:RIVRODUJHQHUDWLRQE\3* (¶VFXVWRPHUV&XVWRPHUV

LQVWDOOLQJWKHVHV\VWHPVKDYHUHFHLYHGRUZLOOUHFHLYHPLOOLRQLQLQFHQWLYHV'XHWR

WKHSRSXODULW\RIWKH&6,WKHSURJUDPKDVEHHQIXOO\VXEVFULEHGDQG3* (LVRQWUDFNWR

PHHWLWV0:WDUJHWV

,QWHUPVRIVRODULQWHUFRQQHFWLRQV3* (LVWKHOHDGLQJVRODUXWLOLW\LQWKH8QLWHG

6WDWHVDQGLVFRPPLWWHGWRFRQWLQXLQJDQGH[SDQGLQJWKDWOHDGHUVKLSUROH7KRXVDQGVRI

DGGLWLRQDO39VRODUV\VWHPVDUHLQWHUFRQQHFWHGWR3* (¶VV\VWHPHYHU\\HDUE\

FXVWRPHUVVHHNLQJWRDGGUHVVHQYLURQPHQWDOFRQFHUQVRUWRIXOILOODGHVLUHIRUHQHUJ\

LQGHSHQGHQFH,QIDFW3* (KDVKHOSHGFXVWRPHUVLQWHUFRQQHFWPRUHVRODUV\VWHPVWKDQ

DQ\RWKHUXWLOLW\LQWKHFRXQWU\ VHHEHORZIRUDGHVFULSWLRQRIWKH1(03URJUDP

b. Self-Generation Incentive Program 7KHVHFRQGLQFHQWLYHSURJUDPDYDLODEOHIRU3* (FXVWRPHUVZKRFKRRVHWR

LQVWDOOFOHDQDQGUHQHZDEOH'*RUVWRUDJHWRKHOSPHHWFXVWRPHUQHHGLVWKH6*,3

3* (KDVDGPLQLVWHUHGWKH6*,3VLQFH)RUWKHILUVWVL[\HDUVRIWKHSURJUDP

LQFHQWLYHVZHUHDYDLODEOHIRULQVWDOODWLRQVXSWR0:RIVRODUZLQGIXHOFHOODQG

HIILFLHQWFRPEXVWLRQHQJLQHV,QWKHVRODULQFHQWLYHVZHUHVXEVXPHGLQWRWKH&6,

6WDUWLQJLQWKH6*,3ZDVRQO\DYDLODEOHIRUZLQGDQGIXHOFHOOVZLWKVWRUDJH

WHFKQRORJLHVDGGHGLQZKHQXVHGLQFRQMXQFWLRQZLWKTXDOLI\LQJZLQGRUIXHOFHOOV

3DVVDJHRI6%LQH[SDQGHGWKHSURJUDPWRDJDLQLQFOXGHHIILFLHQW&+3DVZHOO

DVHQHUJ\VWRUDJHDVDQHOLJLEOHVWDQGDORQHWHFKQRORJ\,QDGGLWLRQ6%LPSOHPHQWHG

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 19 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

DSHUIRUPDQFHEDVHGLQFHQWLYHVWUXFWXUHIRUODUJHV\VWHPV0RVWUHFHQWO\WKHSURJUDP

ZDVH[WHQGHGE\LQFOXGLQJLWLQWRWKHVWDWHEXGJHWWUDLOHUELOOSUHVHQWHGDQGDSSURYHGDV

$%$VRI-XQHSURMHFWVKDYHWDNHQDGYDQWDJHRIWKH6*,3WRLQVWDOORYHU

0:RIJHQHUDWLRQWRKHOSPHHWWKHLUHQHUJ\QHHGVUHFHLYLQJPLOOLRQLQ

LQFHQWLYHV

)RUFOHDQDQGUHQHZDEOHFXVWRPHUJHQHUDWLRQWKH6*,3FDQLPSURYHDFXVWRPHU¶V

SURMHFWHFRQRPLFVE\SURYLGLQJDUHEDWHWRRIIVHWWKHFDSLWDOFRVWLQYROYHGZLWK

LQVWDOODWLRQ:KHWKHURUQRWDFXVWRPHUWDNHVDGYDQWDJHRIWKH6*,3DQ\FXVWRPHU

LQVWDOOLQJDWVLWHJHQHUDWLRQZLOOEHQHILWIURPERWKLQWHUFRQQHFWLRQSURFHVVLPSURYHPHQWV

DQGVDYLQJVRQHQHUJ\ELOOV

c. Net Metering Programs 7KH1(03URJUDPDOORZVFXVWRPHUVZLWKUHQHZDEOHJHQHUDWLRQLQVWDOODWLRQVXSWR

0:WRH[SRUWSRZHUZKHQWKHLUJHQHUDWRUSURGXFHVPRUHWKDQWKH\QHHGDWDQ\JLYHQ

WLPH7KHVHH[SRUWVFDQEHXVHGWRRIIVHWFXVWRPHUXVDJHZKHQWKHLUUHQHZDEOHSRZHU

GRHVQRWPHHWRQVLWHQHHGV HJDWQLJKWZKHQWKHVXQGRHVQRWVKLQH 2QDPRQWKO\

EDVLVDQ\H[FHVVN:KH[SRUWVDUHFRQYHUWHGWRDPRQHWDU\FUHGLWXVLQJWKHFXVWRPHU¶V

UHWDLOUDWH7KHVHFUHGLWVDUHDYDLODEOHWRRIIVHWFKDUJHVRYHUDQDQQXDO³WUXHXS´SHULRG

+LVWRULFDOO\WKHOHJLVODWXUHUHTXLUHGWKDWDWWKHHQGRIWKHWUXHXSSHULRGDQ\H[FHVV

FUHGLWVEHIRUIHLWHG+RZHYHULQWKHOHJLVODWXUHSDVVHG$%ZKLFKSURYLGHVIRU

SD\PHQWIRUQHWH[FHVVJHQHUDWLRQRYHUWKHFRXUVHRIWKHWUXHXSSHULRG2Q-XQH

WKH&RPPLVVLRQDSSURYHGWKH1HW6XUSOXV&RPSHQVDWLRQ ³16&´ UDWHIRU1(0

FXVWRPHUVZKRSURGXFHPRUHHOHFWULFLW\ N:K WKDQWKH\XVHRYHUWKHLUWUXHXSSHULRG

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 20 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

XVXDOO\ELOOLQJPRQWKV7KH16&UDWHLVEDVHGRQDUROOLQJPRQWKDYHUDJHRIVSRW

PDUNHWSULFHV%DVHGRQFXUUHQWPDUNHWSULFHVWKHUDWHZRXOGEHDERXWFHQWVSHUN:K

7KLVFRPSHQVDWLRQLVIRUWKHHQHUJ\RQO\7KH5HQHZDEOH$WWULEXWH$GGHUSD\PHQWWR

FXVWRPHUVIRUWKH536HOLJLEOH5HQHZDEOH(QHUJ\&UHGLWV ³5(&´ ZDVVHWDWFHQWV

SHUN:K7KH&RPPLVVLRQGHWHUPLQHGWKHFRPSHQVDWLRQIRUWKH5(&EXWOHIWLWWRWKH

&(&WRVHWXSDSURFHVVWRYHULI\DQGWUDFNWKHVHDWWULEXWHV7KLVSURFHVVLVLQSODFHDQG

3* (ZLOOPDNHDQDGGLWLRQDOSD\PHQWIRUWKH5(&YDOXHRIWKHH[FHVVN:KWR

FXVWRPHUVZKRRSWWRUHJLVWHUZLWKWKH:HVWHUQ5HQHZDEOH(QHUJ\*HQHUDWLRQ

,QIRUPDWLRQ6\VWHP ³:5(*,6´ DQGWKH&(&DQGZKRWUDQVIHUWKHLU5(&VWR3* (

7KH&RPPLVVLRQDQGOHJLVODWXUHKDYHDOVRDPHQGHGWKH1(03URJUDPWRDGGUHVV

WKHQHHGVRIVRPHVSHFLILFFXVWRPHUVJURXSV/RZLQFRPHSDUWLFLSDQWVLQWKH&6,

3URJUDPFDQDOORFDWHWKHJHQHUDWLRQIURPWKHLUUHQHZDEOHLQVWDOODWLRQWRDQ\FXVWRPHU

ZLWKLQWKHVDPHORZLQFRPHKRXVHSURMHFW)RUQRQORZLQFRPHFXVWRPHUVDQ\EXLOGLQJ

RZQHUFDQDOORFDWHJHQHUDWLRQWRDQ\DFFRXQWVEHKLQGVDPHVHUYLFHGHOLYHU\SRLQWDQG

DQ\FXVWRPHUFDQDOORFDWHJHQHUDWLRQIURPDUHQHZDEOHJHQHUDWRUWRDQ\RWKHUDFFRXQW

WKH\KDYHRQWKHLURZQFRQWLJXRXVRUDGMDFHQWSURSHUW\

$VRI-XO\RYHU3* (FXVWRPHUVKDGLQVWDOOHGRYHU0:

RIUHQHZDEOHJHQHUDWLRQXQGHUWKH1(03URJUDP

)LQDOO\3* (DGPLQLVWHUV5HQHZDEOH(QHUJ\6HOI*HQHUDWLRQ±%LOO&UHGLW

7UDQVIHUDQHWPHWHULQJSURJUDPWKDWDOORZVORFDOJRYHUQPHQWVLQFOXGLQJVFKRROGLVWULFWV

DQGWKH8QLYHUVLW\RI&DOLIRUQLD&DOLIRUQLD6WDWH8QLYHUVLWLHVWRVLWHUHQHZDEOHJHQHUDWLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 21 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

DWRQHORFDWLRQDQGH[SRUWH[FHVVHOHFWULFLW\WR3* (¶VJULG3* (FDOFXODWHVDFUHGLW

IRUWKRVHH[SRUWVEDVHGRQWKHJHQHUDWLRQFRPSRQHQWRIWKHHQHUJ\UDWHRIWKHFXVWRPHU¶V

WDULIIDWWKHSRLQWZKHUHWKHJHQHUDWRULVORFDWHG7KLVFUHGLWFDQEHXVHGWRRIIVHW

JHQHUDWLRQFKDUJHVDWDQ\RWKHUDFFRXQWIRUWKDWORFDOJRYHUQPHQWFXVWRPHU

5. Other Generation Resources ,QDGGLWLRQWRWKH(('5536DQG'*SURFXUHPHQWSURJUDPVDQGUHVRXUFHV

GHVFULEHGDERYH3* (SURFXUHVHQHUJ\DQGFDSDFLW\RQEHKDOIRILWVFXVWRPHUVIURP

RWKHUW\SHVRIUHVRXUFHV7KLVVHFWLRQGHVFULEHVWKHRWKHUW\SHVRIUHVRXUFHVLQ3* (¶V

SRUWIROLRWKDWDUHXVHGWRPHHWFXVWRPHUQHHGV

)LUVW3* (SURFXUHVHOHFWULFSURGXFWVIURPQRQ536HOLJLEOH&+3DQG4)

UHVRXUFHV6RPHRIWKH&+34)SURFXUHPHQWLVXQGHUSUHH[LVWLQJOHJDF\FRQWUDFWV

ZKLOHRWKHUSURFXUHPHQWLVEDVHGRQFRQWUDFWVDSSURYHGDVDSDUWRIWKH4)&+3

6HWWOHPHQW7KH4)&+36HWWOHPHQWZDVDSSURYHGE\WKH&RPPLVVLRQLQ'

DQGEHFDPHHIIHFWLYHRQ1RYHPEHU6LQFHWKH4)&+36HWWOHPHQWEHFDPH

HIIHFWLYH3* (KDVLVVXHGQHZVWDQGDUGRIIHUFRQWUDFWVDQGFRQGXFWHGWKUHH5)2VIRU

DGGLWLRQDO&+3JHQHUDWLRQLQDGGLWLRQWRDPHQGLQJFHUWDLQH[LVWLQJ4)33$V1HZ

FRQWUDFWVLQFOXGHGDVDSDUWRIWKH4)&+36HWWOHPHQWLQFOXGHWKH7UDQVLWLRQ33$ IRU

4)VRYHU0:WKDWZLOOH[SLUHSULRUWR-XO\ DQ2SWLRQDO$V$YDLODEOH33$

DQGD4)3XEOLF8WLOLW\5HJXODWRU\3ROLFLHV$FW33$IRUIDFLOLWLHVXQGHU0:7KH

4)&+36HWWOHPHQWDOVRLQFOXGHGD&+33UR)RUPD33$WREHXVHGLQ&+35)2VDQG

DOORZV4)&+3UHVRXUFHVWRFRQYHUWWR8WLOLW\3UHVFKHGXOHG)DFLOLWLHVWKURXJKD

GLVSDWFKDEOH33$VWUXFWXUH,QDGGLWLRQWRSURFXUHPHQWXQGHUWKH4)&+36HWWOHPHQW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 22 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3* (LVDOVRUHTXLUHGWRRIIHUWKUHHVWDQGDUGRIIHUFRQWUDFWVDVDUHVXOWRI&RPPLVVLRQ

GHFLVLRQVLVVXHGLQ5ZKLFKLPSOHPHQWV$%7KHVHFRQWUDFWVDUHIRU

QHZHOLJLEOH&+3XQLWVXQGHU0:DQGDUHVHSDUDWHDJUHHPHQWVIURPWKRVH

HVWDEOLVKHGDVDSDUWRIWKH4)&+36HWWOHPHQW7ZRRIWKHVHFRQWUDFWV²RQHIRUXQLWV

ZLWKDFDSDFLW\XQGHU0:DQGRQHIRUXQLWVZKLFKH[SRUWQRPRUHWKDQ0:²KDYH

EHHQDSSURYHGDQGDVLPSOLILHGFRQWUDFWIRUXQLWVZLWKDFDSDFLW\XQGHUN:KDVEHHQ

VXEPLWWHGWRWKH&RPPLVVLRQIRUDSSURYDO

6HFRQG3* (SURFXUHVHOHFWULFSURGXFWVWKURXJKVKRUWPHGLXPDQGORQJWHUP

FRQWUDFWVZLWKIRVVLOIXHOHGUHVRXUFHVWKURXJKWKHDSSURYHGSURGXFWVLQ$SSHQGL[$WKH

DSSURYHGSURFXUHPHQWSURFHVVHVLQ$SSHQGL[%DQGZLWKLQWKHSURFXUHPHQWOLPLWVLQ

$SSHQGL[&

7KLUG3* (SXUFKDVHVK\GURHOHFWULFJHQHUDWLRQWKURXJKPHGLXPDQGORQJWHUP

DJUHHPHQWVZLWK,UULJDWLRQ'LVWULFWVDQGZDWHUDJHQFLHV2ULJLQDWLQJLQWKHVWKH

PDMRULW\RIWKHRULJLQDO,UULJDWLRQ'LVWULFWFRQWUDFWVZLOOH[SLUHE\+RZHYHU3* (

H[SHFWVWKDWWKHXQGHUO\LQJUHVRXUFHVZLOOFRQWLQXHWRRSHUDWHEH\RQGWKRVHH[SLUDWLRQ

GDWHV%HFDXVHRIWKHODUJHVL]HRIWKHIDFLOLWLHVPDQ\RIWKHVHK\GURHOHFWULFUHVRXUFHV

DUHQRW536HOLJLEOH+RZHYHUWKHVHIDFLOLWLHVGRQRWUHOHDVH*+*HPLVVLRQVDQG

SURYLGHQXPHURXVHQYLURQPHQWDODQGUHOLDELOLW\EHQHILWV

)RXUWK3* (SURFXUHVHOHFWULFSURGXFWVIRULWVFXVWRPHUVWKURXJKLPSRUWVDQG

XWLOLW\H[FKDQJHDJUHHPHQWV7KH3* (HOHFWULFV\VWHPLVZLWKLQWKH&$,62FRQWURO

DUHDDQGLVHOHFWULFDOO\LQWHJUDWHGZLWKWKHZHVWHUQVWDWHVLQFOXGHGLQWKH:HVWHUQ(OHFWULF

&RRUGLQDWLQJ&RXQFLOHOHFWULFJULG(OHFWULFSRZHUFDQEHLPSRUWHGLQWRWKH&$,62

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 23 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

FRQWURODUHDDORQJWUDQVPLVVLRQOLQHVDVIDUQRUWKDV&DQDGDDQGDVIDUVRXWKDVWKH

0H[LFR'HVHUW6RXWKZHVWUHJLRQV,Q3* (¶VHOHFWULFSRUWIROLRLPSRUWHGJHQHUDWLRQ

PD\FRQVLVWRIH[LVWLQJFRQWUDFWVIXWXUHFRQWUDFWVDQGSRWHQWLDOO\PDUNHWSXUFKDVHV,Q

DGGLWLRQ3* (¶VHOHFWULFSRUWIROLRLQFOXGHVRQHFRQYHQWLRQDOFRQWUDFWIRUJHQHUDWLRQ

ORFDWHGLQWKH1RUWKZHVWDQGDQXPEHURIFRQWUDFWVIRUUHQHZDEOHJHQHUDWLRQORFDWHGERWK

LQWKH1RUWKZHVWDQG6RXWKZHVW7KH3XJHW6RXQG(QHUJ\ ³36(´ ([FKDQJHFRQWUDFW

LPSRUWVIURPWKH1RUWKZHVW7KH36(DJUHHPHQWLVDQH[FKDQJHRIJLJDZDWWKRXUV

RQDFDOHQGDU\HDUHQHUJ\EDVLVEHWZHHQ36(DQG3* (3* (FDQWDNHXSWR0:

KRXUO\EHWZHHQ-XQH6HSWHPEHUDQGLQUHWXUQ36(FDQWDNHXS0:KRXUO\EHWZHHQ

-DQXDU\)HEUXDU\DQG1RYHPEHU'HFHPEHU7KLVFRQWUDFWLVDQHYHUJUHHQFRQWUDFWZLWK

D\HDUWHUPLQDWLRQQRWLFH

)LIWKSXUVXDQWWR'3* (ZLOOVRRQEHSURFXULQJHOHFWULFSURGXFWV

IURPHQHUJ\VWRUDJHIDFLOLWLHV7KHVHIDFLOLWLHVPD\EHRZQHGE\WKLUGSDUWLHVRUE\

3* (3* (¶VHQHUJ\VWRUDJHSURFXUHPHQWVWUDWHJ\LVGHVFULEHGLQLWV

(QHUJ\6WRUDJH3URFXUHPHQW3ODQ ³(QHUJ\6WRUDJH3ODQ´ ILOHGRQ)HEUXDU\LQ

$SSOLFDWLRQ

)LQDOO\3* (RZQVDQGRSHUDWHVDQXPEHURIQRQ536HOLJLEOHJHQHUDWLQJ

IDFLOLWLHV7KHVHIDFLOLWLHVLQFOXGLQJODUJHK\GURHOHFWULFIDFLOLWLHVWKDWDUHQRW

536HOLJLEOHWKH+HOPV3XPSHG6WRUDJHIDFLOLW\IXHOFHOOVFOHDQDQGHIILFLHQW

FRQYHQWLRQDOJHQHUDWLQJIDFLOLWLHV LHWKH+XPEROGW&ROXVDDQG*DWHZD\*HQHUDWLQJ

6WDWLRQV DQG*+*IUHHQXFOHDUSRZHU LH'&33 7KLV82*SURYLGHVFRQVLGHUDEOH

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 24 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

EHQHILWVWR3* (¶VFXVWRPHUVEHFDXVHLWLVVDIHUHOLDEOHDIIRUGDEOHDQGHQYLURQPHQWDOO\

EHQHILFLDO

III. Compliance With the Commission’s Procurement Standards of Conduct ,Q'WKH&RPPLVVLRQDGRSWHGVHYHQ62&VIRUXWLOLW\SURFXUHPHQW

7KHVHVWDQGDUGVKDYHVXEVHTXHQWO\EHHQPRGLILHGDQGWZRRIWKHPKDYHEHHQ

HOLPLQDWHG3* (¶V%33LVLQIXOOFRPSOLDQFHZLWK&RPPLVVLRQ¶V62&V7KH

IROORZLQJWDEOHLQFOXGHVHDFK62&DVXPPDU\RI3* (¶VFRPSOLDQFHZLWKWKHVWDQGDUG

DQGWKHSRUWLRQRIWKH%33WKDWDGGUHVVHV3* (¶VFRPSOLDQFHLIDSSOLFDEOH

'DWSS 6HH'2UGHULQJ3DUDJUDSK ³23´ PRGLI\LQJVWDQGDUGV '23 PRGLI\LQJVWDQGDUGVDQGHOLPLQDWLQJ6WDQGDUG1RV DQG'23 FODULI\LQJWKDW ³6WDQGDUGRI&RQGXFWGRHVQRWSUHFOXGHDQRQ\PRXVWUDQVDFWLRQVFRQGXFWHGWKURXJKWKH,62RU WKURXJKEURNHUVDQGH[FKDQJHV´ 3* (DOVRUHFHLYHGDZDLYHUIURP62&IRUFHUWDLQJDV WUDQVSRUWDWLRQWUDQVDFWLRQVLQ'

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 25 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/( 3$&,),&*$6$1'(/(&75,&&203$1< &203/,$1&(:,7+7+(&200,66,21¶6352&85(0(1767$1'$5'62)&21'8&7

6XPPDU\RI&RPSOLDQFHDQG&LWDWLRQWR 6WDQGDUGRI&RQGXFW 3* (¶V%33LI$SSOLFDEOH (DFKXWLOLW\PXVWFRQGXFWDOOSURFXUHPHQWWKURXJKD 3* (¶VSURFXUHPHQWSURFHVVHVDQGPHWKRGV FRPSHWLWLYHSURFHVVZLWKRQO\DUPVOHQJWK LQFOXGLQJFRPSHWLWLYHDUPVOHQJWKVROLFLWDWLRQVDUH WUDQVDFWLRQV7UDQVDFWLRQVLQYROYLQJDQ\VHOIGHDOLQJ GHVFULEHGLQ$SSHQGL[%7RWKHH[WHQW3* ( WRWKHEHQHILWRIWKHXWLOLW\RUDQDIILOLDWHGLUHFWO\RU FRQGXFWVDQ\DIILOLDWHWUDQVDFWLRQVWKHVH LQGLUHFWO\LQFOXGLQJWUDQVDFWLRQVLQYROYLQJDQ WUDQVDFWLRQVZLOOEHFRQGXFWHGLQIXOOFRPSOLDQFH XQDIILOLDWHGWKLUGSDUW\DUHSURKLELWHG ZLWKWKH&RPPLVVLRQ¶VDIILOLDWHDQGSURFXUHPHQW UXOHV (DFKXWLOLW\PXVWDGRSWDFWLYHO\PRQLWRUDQG 3* (HQVXUHVWKDWLWV(QHUJ\3URFXUHPHQW HQIRUFHFRPSOLDQFHZLWKDFRPSUHKHQVLYHFRGHRI RUJDQL]DWLRQHPSOR\HHVDUHLQFRPSOLDQFHZLWK FRQGXFWIRUDOOHPSOR\HHVHQJDJHGLQWKH 62&DVGHVFULEHGLQWKLV6HFWLRQ,,,DQGSURYLGHV SURFXUHPHQWSURFHVVWKDW LGHQWLILHVWUDGHVHFUHWV LQIRUPDWLRQWRGHPRQVWUDWHFRPSOLDQFHWRWKH DQGRWKHUFRQILGHQWLDOLQIRUPDWLRQ VSHFLILHV &RPPLVVLRQ¶V:DWHUDQG$XGLW'LYLVLRQ ³$XGLW SURFHGXUHVIRUHQVXULQJWKDWVXFKLQIRUPDWLRQUHWDLQV 'LYLVLRQ´ DVDSDUWRIWKH4XDUWHUO\&RPSOLDQFH LWVWUDGHVHFUHWDQGRUFRQILGHQWLDOVWDWXV 5HSRUW ³4&5´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¶V WUDGHVHFUHWVDQGRWKHUFRQILGHQWLDOLQIRUPDWLRQ GXULQJRUVXEVHTXHQWWRWKHLUHPSOR\PHQWE\WKH XWLOLW\

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 26 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/( 3$&,),&*$6$1'(/(&75,&&203$1< &203/,$1&(:,7+7+(&200,66,21¶6352&85(0(1767$1'$5'62)&21'8&7 &217,18('

6XPPDU\RI&RPSOLDQFH$QG&LWDWLRQ7R 6WDQGDUGRI&RQGXFW 3* (¶V%33LI$SSOLFDEOH ,QILOLQJWUDQVDFWLRQVIRUDSSURYDOWKHXWLOLWLHVVKDOO 3* (KDVILOHGSURFXUHPHQWLQIRUPDWLRQLQD PDNHQRPLVUHSUHVHQWDWLRQRURPLVVLRQRIPDWHULDO QXPEHURIGLIIHUHQWUHSRUWVZKLFKDUHGHVFULEHGLQ IDFWVRIZKLFKWKH\DUHRUVKRXOGEHDZDUH PRUHGHWDLOLQ6HFWLRQ,9EHORZ3* (KDVQRW PLVUHSUHVHQWHGDQ\LQIRUPDWLRQRUPDGHDQ\ RPLVVLRQRIPDWHULDOIDFWLQDQ\RIWKHVHUHSRUWV 7KHXWLOLWLHVVKDOOSUXGHQWO\DGPLQLVWHUDOOFRQWUDFWV 3* (¶VVFKHGXOLQJDQGELGGLQJSUDFWLFHVDUH DQGJHQHUDWLRQUHVRXUFHVDQGGLVSDWFKWKHHQHUJ\LQD GHVFULEHGLQ$SSHQGL[.3* (¶VFRQWUDFW OHDVWFRVWPDQQHU2XUGHILQLWLRQVRISUXGHQW DGPLQLVWUDWLRQDQGLWVGHPRQVWUDWLRQRI/&'DUH FRQWUDFWDGPLQLVWUDWLRQDQG/&'DUHWKHVDPHDVRXU UHYLHZHGE\WKH&RPPLVVLRQDQQXDOO\DVDSDUWRI H[LVWLQJVWDQGDUG3UXGHQWFRQWUDFWDGPLQLVWUDWLRQ WKHDQQXDO(QHUJ\5HVRXUFH5HFRYHU\$FFRXQW LQFOXGHVDGPLQLVWUDWLRQRIDOOFRQWUDFWVZLWKLQWKH ³(55$´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³,(´ IRUORQJWHUPWUDQVDFWLRQVDQG DQGJHQHUDWLRQUHVRXUFHV GLVFXVVHGVKRUWPHGLXPDQGORQJWHUP WUDQVDFWLRQVZLWKWKH3URFXUHPHQW5HYLHZ*URXS ³35*´ 3* (¶VSURFXUHPHQWSURFHVVHVDQG PHWKRGVDUHGHVFULEHGLQGHWDLOLQ$SSHQGL[%DQG WKHLQYROYHPHQWRIWKH35*DQG,(DUHGHVFULEHGLQ $SSHQGL[0 3* (KDVDOVRDSSURSULDWHO\DGPLQLVWHUHGLWV SURFXUHPHQWFRQWUDFWV3* (¶VRQJRLQJ DGPLQLVWUDWLRQLVUHYLHZHGWKURXJKWKH(55$ SURFHVVDQGTXDUWHUO\DXGLWVGHVFULEHGLQ 6HFWLRQ,9 :LWKUHJDUGWR62&HDFKHPSOR\HHRI3* (HQJDJHGZLWKSURFXUHPHQW

DFWLYLWLHVLVUHTXLUHGWRFHUWLI\WKDWKHVKHLVDZDUHRI3* (¶V(PSOR\HH&RGHRI

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 27 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

&RQGXFW$FHUWLILFDWLRQLVHOHFWURQLFDOO\VLJQHGE\HDFKHPSOR\HH,QDGGLWLRQ3* (

HPSOR\HHVDUHUHTXLUHGWRFRPSOHWHD&RPSOLDQFHDQG(WKLFVWUDLQLQJFRXUVHRQDQDQQXDO

EDVLV

IV. Description of PG&E Filings Made to Demonstrate Compliance and Cost Recovery

A. Monthly, Quarterly and Annual Filings and Reports 3* (VXEPLWVPRQWKO\TXDUWHUO\DQGDQQXDOILOLQJVWRGHPRQVWUDWHFRPSOLDQFH

ZLWKWKH%33DQGRULQFRPSOLDQFHZLWK&RPPLVVLRQUHTXLUHPHQWVUHJDUGLQJ

SURFXUHPHQW7KHVHILOLQJVLQFOXGH

7$%/( 3$&,),&*$6$1'(/(&75,&&203$1< 0217+/<48$57(5/<$1'$118$/&203/,$1&(),/,1*6

/LQH 1R )LOLQJ5HTXLUHPHQW &RPPLVVLRQ$XWKRULW\ 0RQWKO\3RUWIROLR5LVN5HGXFWLRQ5HSRUW±3* (UHSRUWV7H9D5RQ ' DPRQWKO\EDVLVWRERWKWKH(QHUJ\'LYLVLRQDQG2IILFHRI5DWHSD\HU $GYRFDWHV7H9D5LVUHSRUWHGRQERWKDSHUFHQWDQGSHUFHQW &RQILGHQFH,QWHUYDOIRUWKHIROORZLQJSHULRGV x 0RQWKO\IRUWKHUROOLQJPRQWKSHULRG HJ2FWREHU2FWREHU x 4XDUWHUO\IRUWKHEDODQFHRIWKHFXUUHQWFDOHQGDU\HDU HJ x 4XDUWHUO\IRUWKHQH[WWKUHHFDOHQGDU\HDUV HJDQG x

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 28 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/( 3$&,),&*$6$1'(/(&75,&&203$1< 0217+/<48$57(5/<$1'$118$/&203/,$1&(),/,1*6 &217,18('

/LQH 1R )LOLQJ5HTXLUHPHQW &RPPLVVLRQ$XWKRULW\ 0RQWKO\(55$5HSRUW±3* (ILOHVWKLVUHSRUW³VKRZLQJWKHDFWLYLW\ '' LQWKH(55$EDODQFLQJDFFRXQWZLWKFRSLHVRIRULJLQDOVRXUFHGRFXPHQW VXSSRUWLQJHDFKHQWU\RYHUUHFRUGHGLQWKHDFFRXQW´QRODWHU WKDQWKHWKIROORZLQJWKHHQGRIWKHPRQWKDQGEHVHUYHGRQLQWHUHVWHG SDUWLHVLQWKHSURFHHGLQJ7KHVWDWHGLQWHQWLRQRIWKLVUHSRUWZDVWRJLYH WKH&RPPLVVLRQDQRSSRUWXQLW\WRDQWLFLSDWHZKHQDQ,28PLJKWILOHDQ H[SHGLWHGWULJJHUDSSOLFDWLRQDQGWRUHGXFHWKHWLPHWRUHYLHZVXFKDQ DSSOLFDWLRQ 0RQWKO\6WDQGLQJ'DWD5HTXHVWIURP(QHUJ\'LYLVLRQ±3* ( (QHUJ\'LYLVLRQUHTXHVW UHVSRQGVRQDPRQWKO\EDVLVWRWKH(QHUJ\'LYLVLRQGDWDUHTXHVWIRU HOHFWULFJHQHUDWLRQSURFXUHPHQWLQIRUPDWLRQ7KHUHTXHVWHG SURFXUHPHQWLQIRUPDWLRQUHODWHVWRZHHNO\DQGPRQWKO\ZHLJKWHG DYHUDJHFRVWRIHOHFWULFSURFXUHPHQWPRQWKO\HQHUJ\DQGPD[LPXP FDSDFLW\ORDGIRUHFDVWVIRUDUROOLQJPRQWKSHULRGPRQWKO\UHVLGXDO QHWVKRUWIRUHFDVWIRUDUROOLQJPRQWKSHULRGDQGPRQWKO\HOHFWULFLW\ DQGJDVSULFHIRUHFDVWVXVHGWRGHULYHWKHUHVLGXDOQHWVKRUWIRUHFDVW 4XDUWHUO\&RPSOLDQFH5HSRUW±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¶VDSSURYHGSURFXUHPHQWSODQWKH(QHUJ\ 'LYLVLRQ'LUHFWRUFDQDSSURYHWKHUHSRUWV7KH$XGLW'LYLVLRQUHYLHZV HDFK4&5DQGPD\SURSRXQGGLVFRYHU\UHJDUGLQJVSHFLILF4&5LWHPV $IWHULWVUHYLHZDQGDQ\GLVFRYHU\WKH$XGLW'LYLVLRQLVVXHVDQDXGLW UHSRUW7KH,28VKDYHWKHRSSRUWXQLW\WRUHVSRQGWRDQ\ILQGLQJEHIRUH WKHUHSRUWLVPDGHILQDODQGEHIRUHWKHILQDODSSURYDORIWKHILOLQJLV PDGHE\WKH'LUHFWRURIWKH(QHUJ\'LYLVLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 29 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/( 3$&,),&*$6$1'(/(&75,&&203$1< 0217+/<48$57(5/<$1'$118$/&203/,$1&(),/,1*6 &217,18('

/LQH 1R )LOLQJ5HTXLUHPHQW &RPPLVVLRQ$XWKRULW\ $QQXDO(55$IRUHFDVWDSSOLFDWLRQDQG$QQXDO(55$FRPSOLDQFH '' DSSOLFDWLRQ±7KH&RPPLVVLRQHVWDEOLVKHGWKH(55$EDODQFLQJDFFRXQW ' IRUDOOWKUHH,28VDQGHVWDEOLVKHGDQXSGDWHSURFHVVZKHUHE\WKH,28V ZRXOGRQFHD\HDU ³ILOHDSSOLFDWLRQVSURSRVLQJWRHVWDEOLVKDQQXDO IXHODQGSXUFKDVHGSRZHUIRUHFDVWVDQGWUXHXSIXHODQGSXUFKDVHG FRVWV´ LH(55$)RUHFDVW5HYHQXH5HTXLUHPHQWSURFHHGLQJ DQG XQGHUJRD³UHYLHZRIEDODQFLQJDFFRXQWVFRQWUDFWDGPLQLVWUDWLRQ XWLOLW\UHWDLQHGJHQHUDWLRQH[SHQVHVDQGOHDVWFRVWGLVSDWFK´ LH(55$ &RPSOLDQFH5HYLHZSURFHHGLQJ $QQXDO536&RPSOLDQFH5HSRUW±7KLVUHSRUWDGGUHVVHV3* (¶V ' FRPSOLDQFHZLWK&DOLIRUQLD¶V536UHTXLUHPHQWV 5365)26KRUWOLVW±$VSDUWRI3* (¶V$QQXDO5363ODQLWLV ' UHTXLUHGWRILOHD7LHUDGYLFHOHWWHUWKDWLQFOXGHVWKHHYDOXDWLRQFULWHULD DQGVHOHFWLRQSURFHVVIRUDQ5365)2VKRUWOLVWDQGWKHUHODWHG,(UHSRUW 6HPL$QQXDO5363URMHFW'HYHORSPHQW6WDWXV5HSRUW±7KLVUHSRUW ' SURYLGHVDQXSGDWHRQWKHFRPPHUFLDODQGUHJXODWRU\GHYHORSPHQWVRI 3* (¶VFRQWUDFWHGUHQHZDEOHUHVRXUFHV $QQXDO5363ODQ±3* (¶VDQQXDO536SODQ 3XE8WLO&RGH D $QQXDO5367UDQVPLVVLRQ5HSRUW±$QQXDOUHSRUWWRWKH&38& 3XE8WLO&RGH LGHQWLI\LQJDQ\HOHFWULFDOWUDQVPLVVLRQIDFLOLW\XSJUDGHRUHQKDQFHPHQW D WKDWLVUHDVRQDEO\QHFHVVDU\WRDFKLHYHWKH536WDUJHWV $QQXDO5$03URJUDP&RPSOLDQFH5HSRUW±7KLVUHSRUWFRQFHUQV ' 3* (¶VDGPLQLVWUDWLRQRIWKH5$0SURJUDP $QQXDO393URJUDP&RPSOLDQFH5HSRUW±7KLVFRPSOLDQFHUHSRUW ' GHVFULEHV3* (¶V395)2SURFHVV 5HVROXWLRQ( 4XDUWHUO\&RQYHUJHQFH%LGGLQJ5HSRUW±7KLVUHSRUWGHVFULEHV ' 3* (¶VFRQYHUJHQFHELGGLQJDFWLYLWLHVIRUWKHSUHFHGLQJTXDUWHUDQGLV LQFOXGHGZLWKWKH4&5 $QQXDO5$5HSRUW±7KLVUHSRUWGHPRQVWUDWHVFRPSOLDQFHZLWK '' 3* (¶V

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 30 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/( 3$&,),&*$6$1'(/(&75,&&203$1< 0217+/<48$57(5/<$1'$118$/&203/,$1&(),/,1*6 &217,18('

/LQH 1R )LOLQJ5HTXLUHPHQW &RPPLVVLRQ$XWKRULW\ 5$

WHUPLQDWHRUDUHPRGLILHGE\WKH&RPPLVVLRQ,QDGGLWLRQWRWKHVHUHSRUWV3* (DOVR

SURYLGHVWKH&RPPLVVLRQZLWKLQIRUPDWLRQLQUHVSRQVHWRVWDQGLQJGDWDUHTXHVWVDVZHOO

DVRQHWLPHGDWDUHTXHVWVLVVXHGIRUDVSHFLILFSXUSRVH

B. Additional Reporting Requirements – ERRA Trigger ,Q$%WKH&DOLIRUQLDVWDWH/HJLVODWXUHHVWDEOLVKHGDWULJJHUPHFKDQLVPWKDW

ZRXOGHQVXUHWKDWDQ\RYHUFROOHFWLRQRUXQGHUFROOHFWLRQLQWKHDSSURSULDWHHOHFWULF

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 31 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

SURFXUHPHQWEDODQFLQJDFFRXQWGRHVQRWH[FHHGSHUFHQWRIDXWLOLW\¶VUHFRUGHG

JHQHUDWLRQUHYHQXHVH[FOXGLQJ&DOLIRUQLD'HSDUWPHQWRI:DWHU5HVRXUFHV ³&':5´

UHYHQXHVIRUWKHSULRU\HDU7KLVWULJJHUPHFKDQLVPSURYLGHVWKHQHFHVVDU\DVVXUDQFH

WR3* (WKDWLWVHOHFWULFSURFXUHPHQWFRVWVZLOOEHUHFRYHUHGLQDWLPHO\IDVKLRQ,Q

'WKH&RPPLVVLRQDGRSWHGWKH$%EDODQFLQJDFFRXQWWULJJHUPHFKDQLVP

IRUWKH,28V,QWKDWGHFLVLRQWKH&RPPLVVLRQGLUHFWHGWKHXWLOLWLHVWRILOHDQH[SHGLWHG

³WULJJHU´DSSOLFDWLRQIRUDSSURYDOZLWKLQGD\VRIILOLQJZKHQWKH(55$EDODQFH

UHDFKHVRUH[FHHGVSHUFHQWRIWKHSULRU\HDUUHFRUGHGJHQHUDWLRQUHYHQXHVH[FOXGLQJ

&':5UHYHQXHV7KLVDSSOLFDWLRQLVWRLQFOXGHDSURMHFWHGDFFRXQWEDODQFHLQGD\VRU

PRUHWRLOOXVWUDWHZKHQWKHEDODQFHZLOOUHDFKWKHSHUFHQWWKUHVKROG7KHDSSOLFDWLRQLV

DOVRWRDGRSWDQDPRUWL]DWLRQSHULRGRIQRWOHVVWKDQGD\VWRHQVXUHWLPHO\UHFRYHU\RI

WKHSURMHFWHG(55$EDODQFH,Q'WKH&RPPLVVLRQDGRSWHG$SULODVWKH

GDWHZKHQDOOWKUHH&DOLIRUQLDXWLOLWLHVDUHWRILOHWKHLUDQQXDO(55$WULJJHUDGYLFHOHWWHU

ZKLFKVHWVWKHWULJJHUDPRXQWIRUWKHIROORZLQJPRQWKV

,Q'WKH&RPPLVVLRQFRPPLWWHGWRNHHSWKH(55$WULJJHUPHFKDQLVP

³LQHIIHFWGXULQJWKHWHUPRIWKHORQJWHUPFRQWUDFWVRUWHQ\HDUVZKLFKHYHULVORQJHU´

%HFDXVHWKHORQJWHUPFRQWUDFWVWKDWZHUHHQWHUHGLQWRDVDUHVXOWRI'KDYH

QRW\HWH[SLUHGWKH(55$WULJJHUPHFKDQLVPUHPDLQVLQSODFH

3XE8WLO&RGH G 'DWSS&RQFOXVLRQRI/DZDQG23 ')LQGLQJRI)DFW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 32 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

C. Description of Cost Recovery for Bundled Procurement Plan Procurement 3* (¶V(55$LVWRUHFRUGDQGUHFRYHUSRZHUFRVWVH[FOXGLQJ&':5FRQWUDFW

FRVWVDVVRFLDWHGZLWK3* (¶VDXWKRUL]HGSURFXUHPHQWSODQSXUVXDQWWR'

'DQG3XE8WLO&RGH G DQGDQ\VXFFHHGLQJGHFLVLRQZKLFK

DSSURYHV3* (¶VSURFXUHPHQWDFWLYLWLHV&RVWVUHFRUGHGLQ(55$LQFOXGHEXWDUHQRW

OLPLWHGWRSURFXUHPHQWFRVWVDVVRFLDWHGZLWKWKLUGSDUW\FRQWUDFWV82*IXHOV&$,62

PDUNHWSXUFKDVHVDQGFKDUJHV*+*SURFXUHPHQWFRVWVKHGJLQJDQGFROODWHUDOFRVWV

UHYHQXHVRUFRVWVUHODWHGWR&55VDQGFRQYHUJHQFHELGGLQJFRVWVUHODWHGWR,(DQGIHHV

DVVRFLDWHGZLWKSDUWLFLSDWLQJLQWKH:5(*,67KHVHFRVWVDUHRIIVHWE\UHYHQXHVUHFHLYHG

IURPWKH&$,62PDUNHWVVDOHVWRWKLUGSDUWLHVDQGRWKHUPDUNHWWUDQVDFWLRQVUHODWHGWR

SURFXUHPHQW7KHVSHFLILFFRVWVH[SHQVHVDQGUHYHQXHVUHFRYHUHGLQ(55$DUH

LGHQWLILHGLQ(OHFWULF3UHOLPLQDU\6WDWHPHQW&3±(55$

V. Pre-Approval, Approval, and Filing Requirements 3* (PD\H[HFXWHFRQWUDFWVWKDWDUHFRQVLVWHQWZLWKWKH%33ZLWKDFRQWUDFW

GXUDWLRQRIOHVVWKDQILYH\HDUVZLWKRXW&RPPLVVLRQSUHDSSURYDO6SHFLILFDOO\3* (

FDQHQWHULQWRFRQWUDFWVZLWKGHOLYHU\WHUPVRIOHVVWKDQILYH\HDUVSURYLGHGWKHGHOLYHU\

WHUPHQGVZLWKLQWKHFDOHQGDU\HDU/RQJ7HUP3URFXUHPHQW3ODQSURFXUHPHQWF\FOH

HJIRUWKH%33FRQWUDFWVXWLOL]LQJWKLVUXOHPD\QRWLQFOXGHGHOLYHULHVEH\RQG

'HFHPEHU 7KHOHQJWKRIWKHFRQWUDFWGXUDWLRQLQFOXGHVDQ\H[WHQVLRQ

RSWLRQVSURYLGHGIRULQWKHFRQWUDFW)RUFRQWUDFWVZLWKDGXUDWLRQRIILYH\HDUVRUJUHDWHU

3* (ZLOOILOHDQDSSOLFDWLRQIRUSUHDSSURYDORIWKHFRQWUDFW7KHRQO\H[FHSWLRQVWR

6HH'DWSDQG23

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 33 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

WKLVUHTXLUHPHQWDUHIRU 536FRQWUDFWVZKLFKDUHILOHGE\D7LHUDGYLFHOHWWHU

SXUVXDQWWR' 3* (LVQRWUHTXLUHGWRILOHDQDSSOLFDWLRQZLWKWKH

&RPPLVVLRQIRUDSSURYDORIWKHDFTXLVLWLRQRI/RQJ7HUP&RQJHVWLRQ5HYHQXH5LJKWV

³/7&55V´ ZLWKDGXUDWLRQRIPRUHWKDQILYH\HDUV QXFOHDUIXHOFRQWUDFWV

SXUVXDQWWRWKH1XFOHDU)XHO3URFXUHPHQW3ODQ $SSHQGL[) VSHFLILFIRUPFRQWUDFWV

WKDWDUHSUHDSSURYHGE\WKH&RPPLVVLRQVXFKDVFRQWUDFWVXQGHUWKH4)&+36HWWOHPHQW

DQGWKH5H0$73URJUDPDQG JDVVXSSO\SLSHOLQHFDSDFLW\DQGVWRUDJHWUDQVDFWLRQV

ZLWKGXUDWLRQIURP\HDUVLQGXUDWLRQPD\EHILOHGIRUDSSURYDOYLDD7LHUDGYLFH

OHWWHU,QDGGLWLRQWKH&RPPLVVLRQPD\LVVXHGHFLVLRQVSURYLGLQJWKDWRWKHUVSHFLILF

W\SHVRIFRQWUDFWVRUWUDQVDFWLRQVWKDWDUHILYH\HDUVRUJUHDWHULQGXUDWLRQGRQRWUHTXLUH

DQDSSOLFDWLRQIRUSUHDSSURYDO

:LWKUHJDUGWRILOLQJUHTXLUHPHQWVWKH&RPPLVVLRQKDVDGRSWHGWKHIROORZLQJ

UHTXLUHPHQWV

6HH5HVROXWLRQ(DWS ' DSSURYLQJ3* (¶VJDVVXSSO\SODQH[FHSWIRUELRPHWKDQHSXUFKDVHVZKLFK LQFOXGHGDSURYLVLRQWKDWJDVVXSSO\SLSHOLQHFDSDFLW\DQGVWRUDJHWUDQVDFWLRQVZLWKGXUDWLRQ IURP\HDUVLQGXUDWLRQPD\EHILOHGYLDD7LHUDGYLFHOHWWHU

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 34 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/( 3$&,),&*$6$1'(/(&75,&&203$1< &$/,)251,$38%/,&87,/,7,(6&200,66,21),/,1*5(48,5(0(176

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±4XDUWHUO\&RPSOLDQFH 5HSRUW )LYH\HDUVWRWHQ\HDUVLQFRQWUDFW ' GXUDWLRQ±$GYLFH/HWWHU &RPELQHG+HDWDQG3RZHU&RQWUDFWV )LYH\HDUVRUORQJHULQFRQWUDFW ' GXUDWLRQ±$GYLFH/HWWHU 7LHUIRU PDWHULDOPRGLILFDWLRQWRWKHSURIRUPD 33$7LHUIRUPRGLILHGSURIRUPD 33$ZLWKRXWPDWHULDOFKDQJHV /HVVWKDQILYH\HDUVLQFRQWUDFW GXUDWLRQ±4XDUWHUO\&RPSOLDQFH 5HSRUW $PHQGPHQWVWRH[LVWLQJ4)FRQWUDFWV /HVVWKDQILYH\HDUVLQFRQWUDFW ' GXUDWLRQ±$QQXDO(55$&RPSOLDQFH 5HSRUWRU$GYLFH/HWWHU )LYH\HDUVRUORQJHULQFRQWUDFW ' GXUDWLRQ±$SSOLFDWLRQ ' 1XFOHDU)XHO&RQWUDFWVSXUVXDQWWRWKH $QQXDO(55$&RPSOLDQFH5HSRUW ' 1XFOHDU)XHO3URFXUHPHQW3ODQ /7&55VDQG&55 4XDUWHUO\&RPSOLDQFH5HSRUWV 5HVROXWLRQV( DQG(

$GYLFHOHWWHUVDUH7LHUDGYLFHOHWWHUVXQOHVVRWKHUZLVHQRWHG

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 35 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/( 3$&,),&*$6$1'(/(&75,&&203$1< &$/,)251,$38%/,&87,/,7,(6&200,66,21),/,1*5(48,5(0(176 &217,18('

/LQH &RPPLVVLRQ 1R 7\SHRI7UDQVDFWLRQ )LOLQJ5HTXLUHPHQWV $XWKRULW\ 1RQ536HOLJLEOH82* $GYLFH/HWWHUILOLQJGHPRQVWUDWLQJ ' 5)2IDLOXUH$IWHUWKH&RPPLVVLRQ LVVXHVDUHVROXWLRQGHWHUPLQLQJWKDWDQ 5)2KDVIDLOHG3* (PD\ILOHDQ DSSOLFDWLRQIRUDSURSRVHGQHZ 1RQ536HOLJLEOH82*UHVRXUFH 536HOLJLEOH82* $SSOLFDWLRQ ' &RQWUDFWVZLWK2QFH7KURXJK&RROLQJ &RQWUDFWVWKDWDUHWZR\HDUVRUOHVVLQ ' UHVRXUFHV GXUDWLRQDQGWHUPLQDWHGPRUHWKDQD \HDUEHIRUHWKH6WDWH:DWHU5HVRXUFHV &RQWURO%RDUG ³6:5&%´ FRPSOLDQFHGHDGOLQHLQWKH4XDUWHUO\ &RPSOLDQFH5HSRUW &RQWUDFWVWKDWDUHPRUHWKDQWZR\HDUV EXWOHVVWKDQILYH\HDUVLQGXUDWLRQRU WHUPLQDWHD\HDURUOHVVEHIRUHWKH 6:5&%FRPSOLDQFHGHDGOLQHLQDQ DGYLFHOHWWHU &RQWUDFWVWKDWDUHILYH\HDUVRUPRUHLQ GXUDWLRQE\$SSOLFDWLRQ &RQWUDFWVZLWKGXUDWLRQEH\RQGWKH 6:5&%FRPSOLDQFHGHDGOLQHHLWKHUE\ DQDGYLFHOHWWHU IRUFRQWUDFWVWKDWDUH OHVVWKDQILYH\HDUVLQGXUDWLRQ RU DSSOLFDWLRQ IRUFRQWUDFWVWKDWDUHILYH \HDUVRUPRUHLQGXUDWLRQ *UHHQKRXVH*DV3URGXFWV 7UDQVDFWLRQVIRU*+*3URGXFWVZLWK ' YLQWDJH\HDUVIRXU\HDUVRUIHZHULQWR DSSURYLQJ3* (¶V WKHIXWXUH4XDUWHUO\&RPSOLDQFH *+*3ODQ 5HSRUW 7UDQVDFWLRQVIRU*+*3URGXFWVZLWK YLQWDJH\HDUVPRUHWKDQIRXU\HDUVLQWR WKHIXWXUH3* (ZLOOVXEPLWWKH WUDQVDFWLRQVIRUUHYLHZWKURXJKWKH &RPPLVVLRQ¶VDGYLFHOHWWHUSURFHVV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 36 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

VI. Updates to the Bundled Procurement Plan Via Advice Letter 8SGDWHVDQGPRGLILFDWLRQVWRWKH%33SURSRVHGEHIRUHWKHQH[W%33DSSOLFDWLRQ

LQFOXGLQJDUHTXHVWIRUDQH[WHQVLRQRISURFXUHPHQWDXWKRULW\ZLOOEHPDGHYLDD

7LHUDGYLFHOHWWHU

,QDGGLWLRQWRWKHJHQHUDODXWKRULW\WRSURSRVHXSGDWHVDQGPRGLILFDWLRQVWRWKH

%33WKURXJKD7LHUDGYLFHOHWWHUWKH&RPPLVVLRQKDVDSSURYHGDVSHFLILFPHFKDQLVP

IRUVHHNLQJDSSURYDORIPRGLILFDWLRQVWR3* (¶V+HGJLQJ3ODQ6KRXOGPDUNHW

FRQGLWLRQVRUWKHHOHFWULFSRUWIROLRFKDQJHWRWKHSRLQWRIQHFHVVLWDWLQJPRGLILFDWLRQVWR

WKH+HGJLQJ3ODQ3* (ZLOOVXEPLWDQDGYLFHOHWWHUWRWKH&RPPLVVLRQUHTXHVWLQJ

FKDQJHVXVLQJDSURFHVVVLPLODUWRWKHDGYLFHOHWWHUSURFHVVDSSURYHGLQ

5HVROXWLRQ(,QWKDWUHVROXWLRQWKH&RPPLVVLRQVWDWHG :KLOH3* (¶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¶VFRVWVDQGEHQHILWVDQGGHPRQVWUDWHKRZWKH SURSRVDOLVFRQVLVWHQWZLWKWKH&RPPLVVLRQ¶VGLUHFWLYHVDQG3* (¶V &RPPLVVLRQDSSURYHGSURFXUHPHQWSODQV

5HVROXWLRQ(S

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 37 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3* (ZLOODOVRILOHDQDQQXDO RUPRUHIUHTXHQWLIQHFHVVDU\ XSGDWHVWRLWV

HOHFWULFDOFDSDFLW\HOHFWULFDOHQHUJ\DQGQDWXUDOJDVSURFXUHPHQWOLPLWVDQGUDWDEOHUDWHV

LQFOXGHGLQ$SSHQGL[&LQD7LHUDGYLFHOHWWHU7KLVXSGDWHZLOOSURYLGH3* (ZLWK

WKHRSSRUWXQLW\WRDGMXVWLWVSURFXUHPHQWOLPLWVDQGUDWDEOHUDWHVWRUHIOHFWFKDQJHVLQ

3* (¶VSRUWIROLRDQGXSGDWHGIRUHFDVWDVVXPSWLRQV

)LQDOO\3* (ZLOOXSGDWHLWV*+*FRPSOLDQFHIRUHFDVWVDQGFRUUHVSRQGLQJ

SXUFKDVHOLPLWVLQFOXGHGLQ$SSHQGL[&DVQHFHVVDU\YLDD7LHUDGYLFHOHWWHU7KH

DGYLFHOHWWHUZLOOLQFOXGHDGHVFULSWLRQDQGZRUNSDSHUVGHWDLOLQJWKHFDOFXODWLRQRIWKH

HVWLPDWHGSXUFKDVHOLPLWVDQGDQH[SODQDWLRQRIWKHNH\GULYHUVRIGLIIHUHQFHVIURPWKH

SULRUHVWLPDWHV

7KHXSGDWHGOLPLWVFDOFXODWLRQVVKDOOEHFRQVLVWHQWZLWKWKHPHWKRGRORJ\HPSOR\HGLQ $SSHQGL[& '23

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 38 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;$ 352&85(0(17352'8&76

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 39 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Electric Products 3DFLILF*DVDQG(OHFWULF&RPSDQ\ ³3* (´ XVHVDYDULHW\RISK\VLFDODQG

ILQDQFLDOHOHFWULFSURGXFWVWRPHHWLWVHOHFWULFSURFXUHPHQWQHHGV7DEOH$EHORZ

SURYLGHVSURGXFWQDPHVGHVFULSWLRQVDQGFLWDWLRQVWRWKHLQLWLDOUHJXODWRU\DXWKRULW\

DSSURYLQJSURFXUHPHQWRIWKHVHSURGXFWV

7$%/($ 3$&,),&*$6$1'(/(&75,&&203$1< (/(&75,&352'8&76

/LQH ,QLWLDO 1R 3URGXFW 'HVFULSWLRQ $XWKRUL]DWLRQ $QFLOODU\6HUYLFHV 3URGXFWVWKDWDUHXWLOL]HGE\WKHFRQWURODUHDRSHUDWRUWR ' ³$6´ HQVXUHHOHFWULFV\VWHPUHOLDELOLW\IRUH[DPSOHWKRVHWKDW DUHOLVWHGLQFRQWURODUHDRSHUDWRUWDULIIVVXFKDVWKH &DOLIRUQLD,QGHSHQGHQW6\VWHP2SHUDWRU ³&$,62´ &DSDFLW\ 7KHDPRXQWRISRZHUFRQVXPHGE\DFXVWRPHUPHDVXUHG ' 'HPDQG6LGH LQPHJDZDWWV ³0:´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³&55´ ORVVHV RUWKHXVH ' RIORFDWLRQDOVSUHDGVIRU&$,62DQGQRQ&$,62 WUDQVPLVVLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 40 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

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³,)0´ 8SOLIW /RDG2EOLJDWLRQV 6ZDSVDUHILQDQFLDOO\VHWWOHGGLUHFWO\ ZLWKDFRXQWHUSDUW\RUPD\EHILQDQFLDOO\FOHDUHGWKURXJK DILQDQFLDOFOHDULQJKRXVH )RUZDUG(QHUJ\ (OHFWULFHQHUJ\SODQQHGWREHFRQVXPHGE\DFXVWRPHU ' 'HPDQG6LGH PHDVXUHGLQPHJDZDWWKRXU ³0:K´ WKDWLVDJUHHGWREH UHGXFHGIRUDVSHFLILFSHULRGIRUDVSHFLILHGWLPHLQWKH IXWXUH 3UR[\'HPDQG5HVSRQVH 3'59LUWXDOJHQHUDWRUWKDWLVSDLGIRUUHVSRQVHWR ' ³3'5´ 5HOLDELOLW\ GLVSDWFKHVDQGPDUNHWDZDUGVZLWKSHUIRUPDQFHEDVHGRQ ' 'HPDQG5HVSRQVH DEDVHOLQHPHWKRG $/($ 5HVRXUFH ³5'55´ DQG $/($ 5'559LUWXDOJHQHUDWRUWKDWLVSDLGIRUUHVSRQVHWR 3DUWLFLSDWLQJ/RDG ³3/´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

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 41 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

/LQH ,QLWLDO 1R 3URGXFW 'HVFULSWLRQ $XWKRUL]DWLRQ 2Q6LWH(QHUJ\RU 7KHDPRXQWRISRZHUPHDVXUHGLQ0:RU0:KWKDWFDQ ' &DSDFLW\ EHJHQHUDWHGGRZQVWUHDPRIWKHFXVWRPHU¶VHOHFWULFPHWHU 6HOI*HQHUDWLRQRQ WKDWFDQEHXVHGWRRIIVHWWKHFXVWRPHU¶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¶VORDGDQGVXSSO\ 5HVRXUFH$GHTXDF\ $FDSDFLW\SURGXFWLQWHQGHGWRPHHW5$REOLJDWLRQV $/( ³5$´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³)75´ /RFDWLRQDO 7UDQVPLVVLRQ5LJKWV6ZDSVDUHILQDQFLDOO\VHWWOHG 6ZDSV GLUHFWO\ZLWKDFRXQWHUSDUW\RUPD\EHILQDQFLDOO\FOHDUHG WKURXJKILQDQFLDOFOHDULQJKRXVH 1RQ)75/RFDWLRQDO /RFDWLRQDOEDVLVVZDSVRUIXWXUHV6ZDSVDUHILQDQFLDOO\ ' 6ZDSVDQG)XWXUHV VHWWOHGGLUHFWO\ZLWKDFRXQWHUSDUW\RUPD\EHFOHDUHG WKURXJKDILQDQFLDOFOHDULQJKRXVH)XWXUHVDUHWUDGHGRQ DQH[FKDQJH :HDWKHU7ULJJHUHG $PHWKRGIRUPDQDJLQJWHPSHUDWXUHDQGRWKHUZHDWKHU ' 2SWLRQV IRUHFDVWULVNV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 42 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

/LQH ,QLWLDO 1R 3URGXFW 'HVFULSWLRQ $XWKRUL]DWLRQ 5HVRXUFH$GHTXDF\ 7KHULJKWWRFRXQWLPSRUWHQHUJ\RULPSRUW5$SURGXFWDW $/( ,PSRUW&DSDFLW\&RXQWLQJ DQLQWHUWLHWRZDUGVDWLVI\LQJ5$UHTXLUHPHQWV 5LJKW /RQJ7HUP&RQJHVWLRQ )LQDQFLDOLQVWUXPHQWVWRKHGJH/RFDWLRQDO0DUJLQDO3ULFH $/( 5HYHQXH5LJKWV ³/03´ FRQJHVWLRQLQ0DUNHW5HGHVLJQDQG7HFKQRORJ\ 8SJUDGH ³0578´ IRU\HDUV &RQJHVWLRQ5HYHQXH )LQDQFLDOLQVWUXPHQWVWRKHGJH/03FRQJHVWLRQLQ ' 5LJKWV 0578LQFOXGLQJIRUH[DPSOHPRQWKO\&55VDQG ' VHDVRQDO&55V $/( 3DWK5HVRXUFH 7KHULJKWWRFRXQWVRXWKRI3DWK5$SURGXFWWRZDUG ' $GHTXDF\&DSDFLW\ VDWLVI\LQJ5$UHTXLUHPHQWV &RXQWLQJ5LJKWV &RQYHUJHQFH%LGV 9LUWXDOVXSSO\RUYLUWXDOGHPDQGELGVVXEPLWWHGLQWKH ' &$,62GD\DKHDG,)0VWKDWLIFOHDUHGZRXOG ' DXWRPDWLFDOO\OLTXLGDWHZLWKDQRSSRVLWHEX\RUVHOOLQWKH &$,62)LIWHHQ0LQXWH0DUNHW 7UDGDEOH5HQHZDEOH 75(&WKDWFDQEHXVHGIRUFRPSOLDQFHZLWK&DOLIRUQLD¶V ' (QHUJ\&UHGLWV ³75(&´ 5HQHZDEOHV3RUWIROLR6WDQGDUG3URJUDP ' 4))L[HGIRU6KRUW5XQ $IL[HGIRUIORDWLQJ65$&VZDSVHWWOHGGLUHFWO\ZLWKWKH ' $YRLGHG&RVW ³65$&´ 4)FRXQWHUSDUW\ )ORDWLQJ6ZDS SXUFKDVH 6WUXFWXUHG7UDQVDFWLRQ &RPELQHRQHRUPRUHSURGXFWW\SHVYDU\LQJH[SLUDWLRQ ' GDWHVWLHUHGSULFHVHWF

B. Greenhouse Gas Products 3* (XVHVDYDULHW\RISURGXFWVWRPHHWLWVJUHHQKRXVHJDV ³*+*´ FRPSOLDQFH

REOLJDWLRQV7DEOH$EHORZSURYLGHVSURGXFWQDPHVGHVFULSWLRQVDQGFLWDWLRQVWRWKH

LQLWLDOUHJXODWRU\DXWKRULW\DSSURYLQJSURFXUHPHQWRIWKHVHSURGXFWV

7$%/($33(1',;$ 3$&,),&*$6$1'(/(&75,&&203$1< *+*352'8&76

/LQH ,QLWLDO 1R 3URGXFW 'HVFULSWLRQ $XWKRUL]DWLRQ *+*$OORZDQFH $FRPSOLDQFHLQVWUXPHQWDFFHSWHGE\&DOLIRUQLD$LU ' 5HVRXUFHV%RDUG ³&$5%´ SURYLGLQJWKHULJKWWRHPLW RQHPHWULFWRQVRIFDUERQGLR[LGHHTXLYDOHQWWRVDWLVI\ REOLJDWLRQVXQGHUWKH&DSDQG7UDGHUHJXODWLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 43 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

/LQH ,QLWLDO 1R 3URGXFW 'HVFULSWLRQ $XWKRUL]DWLRQ *+*2IIVHW&UHGLW $FRPSOLDQFHLQVWUXPHQWUHSUHVHQWLQJDYHULILHG ' ³2IIVHW´ HPLVVLRQUHGXFWLRQWKDWLVDFFHSWHGE\&$5%LQOLHXRI D*+*$OORZDQFHWRVDWLVI\REOLJDWLRQVXQGHUWKH &DSDQG7UDGHUHJXODWLRQ

C. Fuel Products 3* (XVHVDYDULHW\RISK\VLFDODQGILQDQFLDOJDVSURGXFWVWRVXSSRUWHOHFWULF

SURFXUHPHQWDQGUHOLDELOLW\,QDGGLWLRQ3* (XVHVDVPDOODPRXQWRIGLVWLOODWHIXHOIRU

LWV+XPEROGW%D\*HQHUDWLQJ6WDWLRQ7DEOH$EHORZSURYLGHVSK\VLFDOJDVSURGXFW

QDPHVGHVFULSWLRQVDQGLQIRUPDWLRQDERXWWKHLQLWLDOUHJXODWRU\DXWKRULW\DSSURYLQJ

SURFXUHPHQWRIWKHVHSURGXFWVDVZHOODVGLVWLOODWHIXHO

7$%/($ 3$&,),&*$6$1'(/(&75,&&203$1< )8(/3+<6,&$/352'8&76

/LQH ,QLWLDO 1R 3URGXFW 'HVFULSWLRQ $XWKRUL]DWLRQ 1DWXUDO*DV 3K\VLFDO 3XUFKDVHVVDOHVH[FKDQJHVRISK\VLFDOQDWXUDOJDVIRU ' 6XSSO\ WHUPVLQFOXGLQJRQHGD\ ³VSRW´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

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 44 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

/LQH ,QLWLDO 1R 3URGXFW 'HVFULSWLRQ $XWKRUL]DWLRQ 'LVWLOODWH 3K\VLFDO 3XUFKDVHRUVDOHRIGLVWLOODWHIRUXVHDVEDFNXSDQGRU ' 6XSSO\ VWDUWXSIXHO LH+XPEROGW%D\ 23 )LQDQFLDOSURGXFWVDUHXVHGWRVXSSRUWJDVKHGJLQJ7DEOH$EHORZSURYLGHV

ILQDQFLDOJDVSURGXFWQDPHVGHVFULSWLRQVDQGLQIRUPDWLRQDERXWWKHLQLWLDOUHJXODWRU\

DXWKRULW\DSSURYLQJSURFXUHPHQWRIWKHVHSURGXFWV

7$%/($ 3$&,),&*$6$1'(/(&75,&&203$1< )8(/),1$1&,$/352'8&76

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

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 45 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

D. Credit Products &UHGLWSURGXFWVDUHXVHGWRVXSSRUWHOHFWULFDQGJDVKHGJLQJDQGSURFXUHPHQW

7DEOH$EHORZSURYLGHVFUHGLWSURGXFWQDPHVGHVFULSWLRQVDQGLQIRUPDWLRQDERXWWKH

LQLWLDOUHJXODWRU\DXWKRULW\DSSURYLQJSURFXUHPHQWRIWKHVHSURGXFWV

7$%/($ 3$&,),&*$6$1'(/(&75,&&203$1< &5(',7352'8&76

/LQH ,QLWLDO 1R 3URGXFW 'HVFULSWLRQ $XWKRUL]DWLRQ &RXQWHUSDUW\&UHGLW $PHWKRGIRUPDQDJLQJSD\PHQWRUSHUIRUPDQFHULVN ' ,QVXUDQFH IRUDIHH $/( &RXQWHUSDUW\6OHHYHV )DFLOLWDWLQJDWUDQVDFWLRQZLWKDQXQFRQWUDFWHGRU ' QRQFUHGLWZRUWK\FRXQWHUSDUW\WKURXJKDFRQWUDFWHG ' FUHGLWZRUWK\FRXQWHUSDUW\$SSOLHVWRSK\VLFDODQG $/( ILQDQFLDOHOHFWULFDQGJDVSURGXFWV &UHGLW,QWHUPHGLDWLRQ (OLPLQDWHVWKHQHHGWRSRVWFROODWHUDORQVSHFLILF $/( $UUDQJHPHQW LGHQWLILHGH[LVWLQJKHGJHSRVLWLRQV8QGHUWKLV DUUDQJHPHQW3* (ZRXOGQRYDWHH[LVWLQJSRVLWLRQV IURPRQHFRXQWHUSDUW\WRDQRWKHUFUHGLWZRUWK\ FRXQWHUSDUW\WKDWGRHVQRWUHTXLUH3* (WRSRVW FROODWHUDOLQH[FKDQJHIRUDQHJRWLDWHGIHH7KHQHZ FRXQWHUSDUW\PD\RUPD\QRWSRVWFROODWHUDOWR3* ( GHSHQGLQJRQWKHDUUDQJHPHQW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 46 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;% 352&85(0(17352&(66(6$1'0(7+2'6

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 47 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Introduction 7KLV$SSHQGL[DGGUHVVHV3DFLILF*DVDQG(OHFWULF&RPSDQ\¶V ³3* (´

SURFXUHPHQWSURFHVVHVDQGPHWKRGV,Q6HFWLRQ%3* (SURYLGHVDQDUUDWLYH

GHVFULSWLRQRIYDULRXVSURFXUHPHQWSURFHVVHVWKDWLWXVHVWRSURYLGHVDIHUHOLDEOH

DIIRUGDEOHDQGHQYLURQPHQWDOO\VHQVLWLYHHOHFWULFVHUYLFHIRULWVFXVWRPHUV7KLVVHFWLRQ

DOVRGHVFULEHV&DOLIRUQLD3XEOLF8WLOLWLHV&RPPLVVLRQ ³&38&´RU³&RPPLVVLRQ´

GLUHFWHGRUPDQGDWHGSURFXUHPHQWSURJUDPVWKDWLQFRUSRUDWHVSHFLILFSURFXUHPHQW

SURFHVVHVDQGSURFXUHPHQWSURFHVVHVDGPLQLVWHUHGE\WKH&DOLIRUQLD$LU5HVRXUFHV%RDUG

³&$5%´ 6HFWLRQ&SURYLGHVDWDEOHRI&RPPLVVLRQDSSURYHGSURFHVVHVWKDWFDQEH

XWLOL]HGE\3* (IRUSURFXUHPHQW6HFWLRQ'GHVFULEHV&RPPLVVLRQDGRSWHGOLPLWDWLRQV

RUUHTXLUHPHQWVRQVSHFLILFSURFHVVHV

B. Overview of Procurement Processes 7KLVVHFWLRQSURYLGHVDQRYHUYLHZRIWKHSURFXUHPHQWSURFHVVHVDYDLODEOHWR

3* (7KHVHSURFHVVHVLQFOXGH PDUNHWSURFHVVHVLQFOXGLQJ&DOLIRUQLD,QGHSHQGHQW

6\VWHP2SHUDWRU ³&$,62´ PDUNHWV &RPPLVVLRQPDQGDWHGRUGLUHFWHGSURFXUHPHQW

SURJUDPVWKDWLQFRUSRUDWHVSHFLILFSURFXUHPHQWSURFHVVHVDQG *UHHQKRXVH*DV

³*+*´ FRPSOLDQFHLQVWUXPHQWDXFWLRQVDQGWKH$OORZDQFH3ULFH&RQWDLQPHQW5HVHUYH

³$3&5´ DGPLQLVWHUHGE\&$5%

1. Market Processes

a. Exchanges )RUHOHFWULFJDVDQG*+*PDUNHWVWKHUHDUHVHYHUDOW\SHVRIWUDQVSDUHQW

H[FKDQJHVHOHFWURQLFWUDGLQJSODWIRUPVVXFKDVWKH,QWHUFRQWLQHQWDO([FKDQJH ³,&(´

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 48 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

1HZ

DQGRSHQRXWFU\H[FKDQJHVVXFKDVWKH1<0(;$OLVWRIH[FKDQJHVWKDW3* (LV

DXWKRUL]HGWRXVHLVLQFOXGHGLQ$SSHQGL[-

(OHFWURQLFWUDGLQJSODWIRUPVDOORZPDUNHWSDUWLFLSDQWVWRSRVWELGVDQGRIIHUVIRU

VSHFLILFSURGXFWV7RFRPSOHWHDWUDGHDEX\HUPXVWOLIWDQRIIHURUDVHOOHUPXVWKLWD

ELG2QFHFRPSOHWHGWKHH[FKDQJHFRQILUPVWKHWUDQVDFWLRQVWRERWKSDUWLHV1<0(;

KRVWVRSHQRXWFU\WUDGLQJIRULWVQDWXUDOJDVIXWXUHVFRQWUDFWVDQGQDWXUDOJDVRSWLRQV

%X\HUVDQGVHOOHUVWUDQVPLWELGVDQGRIIHUVWRWKHWUDGLQJSLWVWKURXJKD)XWXUHV

&RPPLVVLRQ0HUFKDQW ³)&0´ 7KHWUDGHLVH[HFXWHGE\WKHWUDGHULQWKHWUDGLQJSLW

7KHUHVXOWVRIWKHWUDGHDUHFRPPXQLFDWHGEDFNWRWKHEX\HURUVHOOHUWKURXJKWKH)&0

,QWKHVHZD\VH[FKDQJHVDOORZEX\HUVDQGVHOOHUVWRDGMXVWWKHLUSULFHVRSHQO\LQ

WKHPDUNHWSODFHWUDQVSDUHQWO\DQGDQRQ\PRXVO\XQWLODWUDGHLVH[HFXWHG([FKDQJHV

DOVRHQVXUHSURGXFWVWDQGDUGL]DWLRQ7KLVWUDQVSDUHQF\DQGKRPRJHQHLW\KHOSVHQVXUH

WKDWWUDQVDFWLRQVHOHFWLRQLVPDGHRQSURGXFWDYDLODELOLW\FUHGLWDYDLODELOLW\DQGSULFH

b. Voice Brokers 9RLFHEURNHUVIDFLOLWDWHWUDGHVLQWKHZKROHVDOHPDUNHWV%URNHUVFRPPXQLFDWH

ELGVDQGRIIHUVWRPDUNHWSDUWLFLSDQWVWKURXJKVTXDZNER[HVHOHFWURQLFPHVVDJHVVXFK

DVLQVWDQWPHVVDJLQJDQGWHOHSKRQHFDOOV%URNHUVZRUNZLWKEX\HUVDQGVHOOHUVWR

IDFLOLWDWHWUDGHV2QFHFRPSOHWHGEURNHUVFRQILUPWKHWUDQVDFWLRQVZLWKERWKSDUWLHVDQG

PD\DOVRLQLWLDWHILQDQFLDOFOHDULQJZLWKDFOHDULQJKRXVHVXFKDV1<0(;RUWKH,&(

$VTXDZNER[LVDQLQWHUFRPVSHDNHUXVHGIRUFRPPXQLFDWLRQEHWZHHQEURNHUVDQGWUDGHUV 7KHER[DOORZVEURNHUVWREURDGFDVWPDUNHWLQIRUPDWLRQWRWUDGHUVDQGWRKDYHRQHRQRQH FRQYHUVDWLRQVZLWKWUDGHUV3* (UHFRUGVDOOFRPPXQLFDWLRQRQLWVVTXDZNER[HVDVSDUWRILWV WUDGLQJSURFHVVFRQWUROV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 49 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

%URNHUVIDFLOLWDWHWKHWUDGLQJRISK\VLFDODQGILQDQFLDOSURGXFWV%URNHUVDVSDUWRIWKHLU

SULFHGLVFRYHU\UROHSURYLGHSULFHUHSRUWLQJVHUYLFHVWRVXEVFULELQJFOLHQWV

%X\HUVFRPPXQLFDWHELGVWRWKHEURNHU,IDVHOOHUKLWVWKHELGWKHWUDGHLV

FRPSOHWHG,IDVHOOHUGRHVQRWKLWWKHELGWKHEX\HUFDQDVNWKHEURNHUWRZRUNLWVELGLQ

WKHPDUNHW7KHEURNHUZLOOSURYLGHWKHEX\HUIHHGEDFNLILWVELGLVQRWKLWE\DVHOOHU

7KHEX\HUFDQDGMXVWLWVELGXQWLOLWLVKLWE\DVHOOHU$OWHUQDWLYHO\LIWKHEX\HUOLNHVDQ

RIIHUFRPPXQLFDWHGE\WKHEURNHUWKHEX\HUFDQOLIWWKDWRIIHUWRFRPSOHWHWKHWUDGH

6LQFHEURNHUVIDFLOLWDWHWUDGHVRIVWDQGDUGSURGXFWVDQGWUDGLQJLVDQRQ\PRXVVHOHFWLRQLV

PDGHE\SURGXFWDYDLODELOLW\FUHGLWDYDLODELOLW\DQGSULFH$OLVWRIEURNHUVWKDW3* (LV

DXWKRUL]HGWRXVHLVLQFOXGHGLQ$SSHQGL[-

c. CAISO Markets 6LQFH$SULOWKH&$,62KDVPDQDJHGD'D\$KHDG0DUNHW ³'$0´ DOVR

NQRZQDVWKH,QWHJUDWHG)RUZDUG0DUNHW ³,)0´ DQGSURYLGHGIRU/RFDWLRQDO0DUJLQDO

3ULFLQJ ³/03´ DWWKRXVDQGVRI³QRGHV´RUSRLQWVRILQMHFWLRQDQGZLWKGUDZDORISRZHU

RQWKHWUDQVPLVVLRQJULG8QGHUWKH/03IUDPHZRUNVXSSOLHUVWKDWELGLQWRWKH'$0DUH

SDLGEDVHGRQDVSHFLILFQRGDOSULFHZKLOHORDGVHUYLQJHQWLWLHV ³/6(´ DUHFKDUJHG

EDVHGRQDQDJJUHJDWLRQRIQRGDOSULFHVLQHDFKXWLOLW\¶VVHUYLFHWHUULWRU\RU/RDG

$JJUHJDWLRQ3RLQWV7KH&$,62UHFHLYHVELGVDQGRIIHUVIURPLQGLYLGXDOEX\HUVDQG

VHOOHUVGHWHUPLQHVZKLFKVXSSOLHVZRXOGEHXVHGWRPHHWWKHQHHGV LHHQHUJ\DQG

DQFLOODU\VHUYLFHVZKLOHVLPXOWDQHRXVO\DGGUHVVLQJWUDQVPLVVLRQFRQJHVWLRQDQG

WUDQVPLVVLRQOLQHORVVHV DQGVHWVPDUNHWFOHDULQJSULFHVIRUDOOWUDQVDFWLRQV7KURXJKLWV

PDUNHWSURFHVVHVWKH&$,62SURGXFHV/03VIRUWKH'$0DQGWKH5HDO7LPH0DUNHWV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 50 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

³570´ 6LQFH0D\WKH570KDVFRQVLVWHGRIERWK)LIWHHQ0LQXWH QHZ DQG

)LYH0LQXWH0DUNHWV ³)00´

7KH&$,62PDUNHWVZHUHH[SDQGHGWRLQFOXGHFRQYHUJHQFHELGGLQJSURGXFWV

VWDUWLQJ-DQXDU\&RQYHUJHQFHELGVDUHILQDQFLDOWUDQVDFWLRQV LHYLUWXDOELGV

IRUHQHUJ\WKDWZLOOQRWEHFRQVXPHGRUSURGXFHG WKDWFDQRQO\EHVXEPLWWHGLQWKH

GD\DKHDGPDUNHWDQGDUHUHFRJQL]HGE\WKH&$,62DVQRWEHLQJSK\VLFDO&RQYHUJHQFH

ELGVUHSUHVHQWDILQDQFLDOFRPPLWPHQWWRVHOO RUEX\ HQHUJ\LQWKHGD\DKHDG,)0DWWKH

LQGLYLGXDOSULFLQJQRGHORFDWLRQZKHUHWKHFRQYHUJHQFHELGLVVXEPLWWHG,IWKHVHELGVDUH

FOHDUHGLQWKH'$0WKH\DUHDXWRPDWLFDOO\OLTXLGDWHGE\WKH&$,62ZLWKDQRSSRVLWH

EX\EDFNE\VHOOHURUVHOOEDFNE\EX\HURIWKHVDPHTXDQWLW\RIHQHUJ\LQWKH)00,Q

'HFLVLRQ ³'´ WKH&RPPLVVLRQDXWKRUL]HGEXWGLGQRWUHTXLUH3* (WR

VXEPLWFRQYHUJHQFHELGVVSHFLILFDOO\WRPDQDJHJHQHUDWRUSHUIRUPDQFHULVNVORDG

IRUHFDVWXQFHUWDLQW\ULVNVUHQHZDEOHUHVRXUFHVFKHGXOLQJDQGKHGJLQJDQGDOVRWR

SURYLGHGHIHQVLYHELGVDJDLQVWPDUNHWG\QDPLFV&RQYHUJHQFHELGGLQJLVGHVFULEHGLQ

JUHDWHUGHWDLOLQ$SSHQGL[+

d. Electronic Solicitations (OHFWURQLFVROLFLWDWLRQVIDFLOLWDWHWKHFRPSHWLWLYHSXUFKDVHRUVDOHRIFRPPRGLW\

SURGXFWVDQGDUHGHILQHGDVDQ\FRPSHWLWLYHSURFHVVZKHUHSURGXFWVDUHUHTXHVWHGIURP

WKHPDUNHW3* (PD\SDUWLFLSDWHLQRUDGPLQLVWHUDVHLWKHUDEX\HURUVHOOHUDQ

HOHFWURQLFVROLFLWDWLRQWKDWGRHVQRWLQYROYHXWLOLW\RZQHGUHVRXUFHV,QDQHOHFWURQLF

VROLFLWDWLRQWKHEX\HURUVHOOHUPD\SRVWDSURGXFWIRUSXUFKDVHRUVDOHWKURXJKDYDULHW\

RIHOHFWURQLFSODWIRUPV7KHVHSODWIRUPVPD\LQFOXGHEXWDUHQRWOLPLWHGWRDVHFXUH

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 51 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

LQWHUQHWVLWHDQLQVWDQWPHVVDJHFRPPXQLFDWLRQHPDLORUYLDDYRLFHVROLFLWDWLRQWR

SDUWLFLSDQWV3DUWLFLSDQWVFRPSHWHLQDFRPSHWLWLYHSURFHVVWRSURYLGHWKHEX\HURUVHOOHU

ZLWKWKHPRVWDGYDQWDJHRXVSULFH%RWKVHDOHGELGDQGOLYHRSHQRXWFU\VROLFLWDWLRQVDUH

FRQVLGHUHGDFRPSHWLWLYHSURFHVV%LGGHUVDUHUHTXLUHGWRPHHWWKHEX\HURURUJDQL]HU¶V

FUHGLWTXDOLILFDWLRQVLQRUGHUWRSDUWLFLSDWH6HOHFWLRQLVPDGHE\SURGXFWDYDLODELOLW\DQG

SULFH

e. Request for Offers 3* (FDQDOVRSXUFKDVHRUVHOOSURGXFWVWKURXJKD5HTXHVWIRU2IIHUV ³5)2´

*HQHUDOO\DQ5)2LVDPRUHIRUPDOFRPSHWLWLYHSURFXUHPHQWSURFHVVZLWKSURWRFROV

VSHFLI\LQJWKHUHTXLUHPHQWVWRSDUWLFLSDWHDQGWKHHYDOXDWLRQDQGVHOHFWLRQRIELGVRU

RIIHUV,I3* (FRQGXFWVDQ5)2LWGHILQHVWKHSURGXFWVIRUSXUFKDVHRUVDOHDQGWKHQ

UHYLHZVELGVDQGRIIHUVUHFHLYHGDFFRUGLQJWRWKHVSHFLILHGSURWRFROV3* (PD\DOVR

SDUWLFLSDWHLQ5)2VRU5HTXHVWIRU3URSRVDOV ³5)3´ KHOGE\JHQHUDWLRQRZQHUV/6(RU

RWKHUPDUNHWSDUWLFLSDQWV

f. Bilateral Negotiations %LODWHUDOQHJRWLDWLRQVFDQEHXVHGIRUWKHSXUFKDVHDQGVDOHRIHOHFWULFDQGJDV

SURGXFWV7KHSKUDVH³ELODWHUDOQHJRWLDWLRQV´LVJHQHUDOO\XVHGLQWKHFRQWH[WZKHUH

QHJRWLDWLRQVWDNHSODFHLQDRQHRQRQHVHWWLQJUDWKHUWKDQDVDSDUWRIDFRPSHWLWLYH

VROLFLWDWLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 52 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2. Commission Directed or Mandated Procurement Programs

a. Qualifying Facility/Combined Heat and Power Standard Program 3* (LVRIIHULQJILYHVWDQGDUGIRUPFRQWUDFWVDVSDUWRILWVLPSOHPHQWDWLRQRIWKH

4XDOLI\LQJ)DFLOLW\DQG&RPELQHG+HDWDQG3RZHU ³4)&+3´ 6HWWOHPHQWZKLFKZDV

DSSURYHGE\WKH&RPPLVVLRQLQ'DQGEHFDPHHIIHFWLYH1RYHPEHU

,QDGGLWLRQ3* (DOVRLVUHTXLUHGWRRIIHUWKUHHVWDQGDUGRIIHUFRQWUDFWVDVDUHVXOWRI

&RPPLVVLRQGHFLVLRQVLVVXHGLQ5XOHPDNLQJLPSOHPHQWLQJ$VVHPEO\%LOO

³$%´ 7KHVHFRQWUDFWVDUHIRUQHZHOLJLEOH&+3IDFLOLWLHVXQGHUPHJDZDWWV

³0:´ 7ZRRIWKHVHFRQWUDFWVʊRQHIRUXQLWVZLWKDSRZHUUDWLQJXQGHU0:DQG

RQHIRUXQLWVZKLFKH[SRUWQRPRUHWKDQ0:ʊKDYHEHHQDSSURYHGE\WKH&RPPLVVLRQ

DQGDVLPSOLILHGFRQWUDFWIRUXQLWVZLWKDFDSDFLW\XQGHUNLORZDWWVKDVEHHQVXEPLWWHG

WRWKH&RPPLVVLRQ

b. Renewable Auction Mechanism Program ,Q'WKH&RPPLVVLRQGLUHFWHG&DOLIRUQLD¶V,QYHVWRU2ZQHG8WLOLWLHV

³,28´ WRFRQGXFW5)2VIRUUHQHZDEOHUHVRXUFHVXQGHU0:DVDSDUWRIWKH

5HQHZDEOH$XFWLRQ0HFKDQLVP ³5$0´ 3URJUDP6XEVHTXHQWO\LQ5HVROXWLRQ(

WKH&RPPLVVLRQGHIHUUHGRQHWKLUGRIWKHUHPDLQLQJXQVXEVFULEHGFDSDFLW\WKDWZRXOG

KDYHEHHQSURFXUHGLQWKHIRXUWKDQGILQDO5$0VROLFLWDWLRQWRDILIWK5$0VROLFLWDWLRQ

$3HWLWLRQIRU0RGLILFDWLRQRI'ZDVILOHGLQWRFRPELQHWKHUHPDLQLQJ

DXWKRUL]HGFDSDFLW\LQWKH3KRWRYROWDLF ³39´ 3URJUDPLQWRWKH5$03URJUDP

DVVXPLQJWKHDERYH3HWLWLRQIRU0RGLILFDWLRQRI'WRWHUPLQDWHWKH39

3URJUDPLVDSSURYHG

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 53 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

c. PG&E’s Photovoltaic Program 3XUVXDQWWRWKHDXWKRULW\JUDQWHGLQ'3* (SUHYLRXVO\FRQGXFWHG

WZRVHSDUDWH5)2VWRLPSOHPHQWLWV393URJUDPRQHIRUXWLOLW\RZQHUVKLSELGVDQGWKH

VHFRQGIRU3RZHU3XUFKDVH$JUHHPHQWV ³33$´ $3HWLWLRQIRU0RGLILFDWLRQRI

'ZDVILOHGLQWRKROGDILQDO3933$5)2WHUPLQDWHWKH393URJUDP

DQGWKHQFRPELQHWKHUHPDLQLQJDXWKRUL]HGFDSDFLW\RIWKH393URJUDPLQWRWKH5$0

3URJUDP

d. Energy Storage Program $%ZDVSDVVHGLQUHTXLULQJWKH&RPPLVVLRQWRRSHQDSURFHHGLQJWR

GHWHUPLQHDSSURSULDWHWDUJHWVLIDQ\IRUWKHSURFXUHPHQWRIYLDEOHDQGFRVWHIIHFWLYH

HQHUJ\VWRUDJHUHVRXUFHV,QWKH&RPPLVVLRQLQLWLDWHGDQ2UGHU,QVWLWXWLQJ

5XOHPDNLQJWRLPSOHPHQW$%DQGVXEVHTXHQWO\IDFLOLWDWHGDVHULHVRIZRUNVKRSV

DORQJZLWKSXEOLFFRPPHQWVRQHQHUJ\VWRUDJHLVVXHV,Q2FWREHUWKH&RPPLVVLRQ

DSSURYHGDILQDOGHFLVLRQ ' VHWWLQJHQHUJ\VWRUDJHSURFXUHPHQWWDUJHWVIRU

&38&MXULVGLFWLRQDOORDGVHUYLQJHQWLWLHVDQGUHTXLULQJWKH,28VWRILOHDSSOLFDWLRQVWKDW

LQFOXGHGSODQVIRUSURFXULQJHQHUJ\VWRUDJH

e. Renewable Feed-In Tariff Programs &RQVLVWHQWZLWK3XEOLF8WLOLWLHV&RGHWKH&RPPLVVLRQGLUHFWHGWKH,28V

WRSURYLGHWDULIIVDQGVWDQGDUGIRUPFRQWUDFWV LH)HHGLQ7DULIIV IRUVPDOOUHQHZDEOH

UHVRXUFHVWKDWDUH0:VRUOHVV,Q'DQG'WKH&RPPLVVLRQ

DSSURYHG3* (¶V(OHFWULF5HQHZDEOH0DUNHW$GMXVWLQJ7DULIIWRLPSOHPHQW6HQDWH%LOO

³6%´ 7KH&RPPLVVLRQLVDOVRFXUUHQWO\FRQVLGHULQJWKHLPSOHPHQWDWLRQRI

6%ZKLFKZRXOGIXUWKHULQFUHDVHWKHVWDWHZLGHSURFXUHPHQWWDUJHWRIVPDOO

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 54 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

UHQHZDEOHUHVRXUFHVWDUJHWLQJVPDOOVFDOHQHZEXLOGELRHQHUJ\SURMHFWV ELRJDVGDLU\

RWKHUDJULFXOWXUDOELRHQHUJ\DQGE\SURGXFWVRIVXVWDLQDEOHIRUHVWPDQDJHPHQW

3. CARB GHG Auctions and the Allowance Price Containment Reserve &$5%¶V*+*DOORZDQFHDXFWLRQVFRQVLVWRIVLQJOHURXQGELGGLQJZLWKVHDOHG

ELGVFRQVLVWLQJRISULFHDQGTXDQWLW\DQGELGXQLWVRIPHWULFWRQVRIFDUERQGLR[LGH

HTXLYDOHQW ³PW&2H´ %LGGHUVPD\VXEPLWPXOWLSOHELGV&$5%¶V&DSDQG7UDGH UHJXODWLRQVLQFOXGHGHWDLOHGUXOHVUHJDUGLQJWKHDXFWLRQSURFHVVDQGVHWWOHPHQWSULFHWKH

DPRXQWRIDOORZDQFHVWREHDXFWLRQHGELGJXDUDQWHHVDOORZDQFHKROGLQJOLPLWVDQG

SXUFKDVLQJOLPLWV

7KH$3&5ZKLFKLVDGPLQLVWHUHGE\&$5%LQFOXGHVDVSHFLILFQXPEHURI

DOORZDQFHV7KHUHLVQRUHILOOPHFKDQLVPIRUWKH$3&5DQGXVHRIWKH$3&5LV

UHVWULFWHGWRHQWLWLHVUHJLVWHUHGZLWKWKH&DOLIRUQLDFDSDQGWUDGHV\VWHP$OORZDQFHV

SXUFKDVHGIURPWKH$3&5JRLQWRDQHQWLW\¶VFRPSOLDQFHDFFRXQWDQGFDQQRWEH

ZLWKGUDZQRUWUDGHG$3&5VDOHVDUHFRQGXFWHGRQWKHILUVWGD\VL[ZHHNVDIWHUHDFK

TXDUWHUO\DXFWLRQ7KH$3&5FRQVLVWVRIWKUHHWLHUVZLWKGLIIHUHQWDVVRFLDWHGSULFHVHDFK

WLHUFRQVLVWVRIRQHWKLUGRIWKHPLOOLRQPW&2HDOORZDQFHVZLWKZKLFKWKH$3&5LV LQLWLDOO\SRSXODWHG,Q7LHUDOORZDQFHVZLOOEHVROGWRHQWLWLHVZLWKDFRPSOLDQFH REOLJDWLRQDWPW&2H 7LHUDWPW&2HDQG7LHUDWPW&2H

C. Approved Procurement Processes and Practices 7DEOH%EHORZUHIOHFWVWKH&RPPLVVLRQDSSURYHGSURFXUHPHQWSURFHVVHVDQG

PHWKRGVWKDW3* (LVDXWKRUL]HGWRXVH

7KH$3&5SULFHIRUHDFKWLHUZLOOULVHE\SHUFHQWSOXVWKH&RQVXPHU3ULFH,QGH[HDFK\HDU

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 55 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(% 3$&,),&*$6$1'(/(&75,&&203$1< 352&85(0(17352&(66(6$1'0(7+2'6

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³5$´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³536´ (OLJLEOH 5)2XQGHUFHUWDLQFRQGLWLRQV VHH'DW ' 8WLOLW\2ZQHUVKLSRI 'DW RURXWVLGHRIWKH5)2SURFHVVXQGHU *HQHUDWLRQ FHUWDLQFRQGLWLRQV VHH'DW' DW 1RQ536HOLJLEOH8WLOLW\ 8WLOLW\RZQHUVKLSRIJHQHUDWLRQFDQEHSXUVXHGRXWVLGHRIDQ ' 2ZQHUVKLSRI*HQHUDWLRQ 5)2SURFHVVXQGHUFHUWDLQFRQGLWLRQV VHH'DW ' 'DWDQG'DWSS '

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 56 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(% 3$&,),&*$6$1'(/(&75,&&203$1< 352&85(0(17352&(66(6$1'0(7+2'6 &217,18('

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³35*´ UHYLHZDQG,QGHSHQGHQW &ODULILFDWLRQ@ (YDOXDWRU ³,(´ UHTXLUHPHQWV 0DUNHW5)3 ,28VFDQELGLQRSHQVHDVRQVRU5)3VKHOGE\JHQHUDWRU ' RZQHUV/6(VDQGRWKHUPDUNHWSDUWLFLSDQWV6XFKUHTXHVWV $/( PD\DOVREHFDOOHG5HTXHVWVIRU%LGVRU5)2V ' &$,62$OORFDWLRQVDQG &$,62DOORFDWLRQDQGDXFWLRQVIRU/7&RQJHVWLRQ5HYHQXH $/( $XFWLRQV 5LJKWV ³&55´ DQG&55VDQGDOORFDWLRQRI5$FRXQWLQJ $/( ULJKWV ' $/( &$5%$XFWLRQ $XWKRUL]DWLRQWRSURFXUH*+*$OORZDQFHVWKURXJKDQ\&$5% ' $XFWLRQLQDFFRUGDQFHZLWKWKH&DSDQG7UDGHUHJXODWLRQ $OORZDQFH3ULFH $XWKRUL]DWLRQWRSURFXUH*+*$OORZDQFHVWKURXJK&$5%¶V ' &RQWDLQPHQW5HVHUYH $OORZDQFH3ULFH&RQWDLQPHQW5HVHUYH &DVKRXW $VDUHVXOWRIFHUWDLQSLSHOLQHLPEDODQFHVJDVSLSHOLQHXVHUV >3HQGLQJ PD\EHFDVKHGRXWDFFRUGLQJWRWKHSLSHOLQH¶VWDULIIUXOHV7KH $SSURYDO@ UHVXOWLVDFRPPRGLW\WUDQVDFWLRQZLWKWKHSLSHOLQHKDYLQJ ERXJKWRUVROGJDVWRRUIURPWKHFXVWRPHU7KHSLSHOLQH¶V WDULIIVLQFOXGHWKHSULFHIRUPXODRUPHWKRGRORJ\EXWWKHDFWXDO YROXPHDQGSULFHPD\QRWEHNQRZQXQWLODIWHUWKHWUDQVDFWLRQ LVFRPSOHWH %LODWHUDOWUDQVDFWLRQVIRU :KHUHWKHUHDUHILYHRUIHZHUFRXQWHUSDUWLHVLQWKHUHOYDQW ' WKHVWDQGDUGSURGXFWVJDV PDUNHWELODWHUDOWUDQVDFWLRQVIRUJDVVWRUDJHDQGJDVSLSHOLQH VWRUDJHDQGSLSHOLQH WUDQVDFWLRQVDUHDXWKRUL]HG FDSDFLW\

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 57 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

D. Commission-Adopted Limitations and Requirements for Specific Procurement Processes

1. Requirements for Once-Through Cooling Units 3* (PD\SURFXUHDXWKRUL]HGSURGXFWVIURPRQFHWKURXJKFRROLQJ ³27&´

IDFLOLWLHVWKURXJKWKHDXWKRUL]HGSURFHVVHVLGHQWLILHGLQ6HFWLRQ%DERYHVXEMHFWWRWKH

FRQGLWLRQVDSSURYHGE\WKH&RPPLVVLRQLQ'ZKLFKSURYLGHV

D )LOLQJ5HTXLUHPHQWV$JUHHPHQWVZLWK27&XQLWVZLWKDFRQWUDFW GXUDWLRQRIPRUHWKDQWZR\HDUVEXWOHVVWKDQILYH\HDUVPXVWEHVXEPLWWHG WRWKH&RPPLVVLRQIRUDSSURYDOYLDD7LHUDGYLFHOHWWHU,QRUGHUWR SURYLGHJXLGDQFHWR(QHUJ\'LYLVLRQLQHYDOXDWLQJWKHVHDJUHHPHQWVDQGWKH XWLOLWLHVLQSUHSDULQJDQGVXEPLWWLQJWKHVHDJUHHPHQWVWKHDSSOLFDEOH FULWHULDVKDOOLQFOXGHWKHIROORZLQJ KRZWKHFRQWUDFWKHOSVIDFLOLWDWH FRPSOLDQFHZLWKWKH6WDWH:DWHU5HVRXUFHV&RQWURO%RDUG ³6:5&%´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

'DWSS

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 58 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

&RPPLVVLRQ DUHFRQVLVWHQWZLWKDQHHGDXWKRUL]DWLRQIURPWKH6\VWHP 7UDFNRIWKH/RQJ7HUP3URFXUHPHQW3ODQ ³/733´ SURFHHGLQJDQG DUHFRQVLVWHQWZLWKRWKHUSURFXUHPHQWUXOHVLQFOXGLQJWKH' UHTXLUHPHQWWRILOHHLWKHUD7LHU$GYLFH/HWWHU IRUFRQWUDFWVZLWKD GXUDWLRQRIOHVVWKDQILYH\HDUV RUDQDSSOLFDWLRQ IRUFRQWUDFWVZLWKD GXUDWLRQRIPRUHWKDQILYH\HDUV

F 3* (ZLOOFRQVLGHUDUHVRXUFH¶VXVHRI27&LQLWVHYDOXDWLRQRIRIIHUVLQ 5)2VRUVROLFLWDWLRQV

2. Requirements for Utility-Owned Generation ,Q'WKH&RPPLVVLRQHVWDEOLVKHGSURFXUHPHQWSURFHVVUHTXLUHPHQWV

IRUFHUWDLQ8WLOLW\2ZQHG*HQHUDWLRQ ³82*´ SURSRVDOV7KHVHUXOHVSURYLGH

D 82*SURSRVDOVFDQQRWSDUWLFLSDWHLQXWLOLW\5)2V

E 82*SURFXUHPHQWPXVWEHGRQHWKURXJKD&HUWLILFDWHRI3XEOLF &RQYHQLHQFHDQG1HFHVVLW\ ³&3&1´ SURFHVV

F $82*SURMHFWFDQRQO\EHSURSRVHGWKURXJKD&3&1DIWHUDFRPSHWLWLYH VROLFLWDWLRQKDVIDLOHG7KH&RPPLVVLRQDGRSWHGVSHFLILFILOLQJ UHTXLUHPHQWVGHPRQVWUDWLQJDQ5)2IDLOXUHWKDWPXVWEHVDWLVILHGEHIRUHD XWLOLW\FDQVXEPLWDQDSSOLFDWLRQIRUD82*SURMHFW

G $XWLOLW\DSSOLFDWLRQIRU82*FDQLQFOXGHDQDQDO\VLVFRPSDULQJ82*DQG 33$VDQGVKRXOGLQFOXGHVSHFLILFW\SHVRILQIRUPDWLRQ

,GDWS ,GDWS 7KHUXOHVGRQRWDSSO\WR82*SURSRVDOVIRUUHVRXUFHVWKDWDUH536HOLJLEOH VHH' DWS DQGIRUHQHUJ\VWRUDJH VHH'DWSS 'DWS ,G ,GDWSS ,GDWSS ,GDWSS

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 59 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

H 7KH&RPPLVVLRQZLOOFRQVLGHUDOOSURMHFWFRVWVZKHQUHYLHZLQJD82* SURSRVDODQGVKDOOHYDOXDWHWKH82*SURSRVDOXVLQJFULWHULDFRPSDUDEOHWR WKRVHXVHGWRHYDOXDWHLQGHSHQGHQWO\RZQHGJHQHUDWLRQ

3. Long-Term RFOs ,Q'DVPRGLILHGE\VXEVHTXHQW&RPPLVVLRQGHFLVLRQVWKH

&RPPLVVLRQDGRSWHGVSHFLILFUXOHVDQGUHTXLUHPHQWVFRQFHUQLQJWKHFRQGXFWRI5)2VIRU

QHZORQJWHUPJHQHUDWLRQUHVRXUFHVW\SLFDOO\FDOOHG/RQJ7HUP5HTXHVWIRU2IIHUV

³/75)2´

D ,QDGYDQFHRIDQ/75)23* (LVUHTXLUHGWRPHHWZLWKDQ,(35*DQG (QHUJ\'LYLVLRQ ³('´ WRRXWOLQHLWVSODQVDQGVROLFLWIHHGEDFNSULRUWR GUDIWLQJ/75)2ELGGRFXPHQWV'UDIW/75)2ELGGRFXPHQWVDUHWREH GHYHORSHGXQGHUWKHRYHUVLJKWRIDQ,(YHWWHGWKURXJKWKH35*DQGDQ\ GLIIHUHQFHVUHVROYHGE\('VWDIILQDGYDQFHRIWKHSXEOLFLVVXDQFHRIWKHELG GRFXPHQWV3* (VKDOOSUHVHQWDQGFRQVXOWZLWKLWV35*RQLWV/75)2 SURWRFROVELGHYDOXDWLRQELGVDQGVKRUWOLVWOLVW&RPPLVVLRQDSSURYDOLV UHTXLUHGIRUORQJWHUPWUDQVDFWLRQVWKURXJKDQDSSOLFDWLRQ

E ,I3* (QHHGVQHZIRVVLOUHVRXUFHVQRWIRUPDOO\DXWKRUL]HGLQD &RPPLVVLRQGHFLVLRQLQD/733SURFHHGLQJ3* (VKDOOPDNHDVKRZLQJ WKURXJKDQDGYLFHOHWWHUWKDWXQXVXDORUH[WUHPHFLUFXPVWDQFHVZDUUDQWVXFK DQDFWLRQ

F 3* (VKDOOUHFRJQL]HWKHHIIHFWVRIGHEWHTXLYDOHQFHZKHQFRPSDULQJ 33$VDJDLQVW33$VLQWKHLUELGHYDOXDWLRQV

,GDWSDQG2UGHULQJ3DUDJUDSK ³23´ 6HH'DWSS)RUFHUWDLQW\SHVRIUHVRXUFHVDQGSURJUDPVWKH &RPPLVVLRQKDVDGRSWHGPRUHVSHFLILFDQGVRPHWLPHVGLIIHUHQWUXOHV)RUH[DPSOHIRUWKH 5$03URJUDPWKH&RPPLVVLRQKDVDGRSWHGVSHFLILF5)2UXOHV7KHVDPHLVWUXHIRURWKHU SURJUDPVVXFK5365)2VHQHUJ\VWRUDJH5)2VDQGRWKHUVSHFLILFSURJUDPV7KLVGHVFULSWLRQ RIWKHUHTXLUHPHQWVLQ'GRHVQRWVXSHUVHGHRUPRGLI\&RPPLVVLRQUHTXLUHPHQWVIRU UHVRXUFHVSHFLILF5)2VVXFKDVWKH5$0SURJUDPRU536 ,GDWS ,G 6HH'DWSS

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 60 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

G 3* (VKDOOXVHWKHSURMHFWDSSOLFDWLRQWHPSODWHGHYHORSHGE\('ZKHQ GHYHORSLQJDQDSSOLFDWLRQIRUDSSURYDORIZLQQLQJELGSURMHFWVLQD /75)2

H 3* (VKDOOFRQVLGHUWKHXVHRIEURZQILHOGVLWHVILUVWEHIRUHEXLOGLQJQHZ JHQHUDWLRQRQ*UHHQILHOGVLWHVVXEMHFWWRWKHSDUDPHWHUVVHWIRUWKLQ '

I 3* (VKDOOSXEOLFO\UHYHDOWKHQDPHVRIZLQQLQJELGGHUVDIWHUNH\ FRPPHUFLDOWHUPVKDYHEHHQILQDOL]HGZLWKLQGD\VRIILOLQJDQ DSSOLFDWLRQRUZLWKGUDZWKHDSSOLFDWLRQXQWLOWKHELGGHU¶VLGHQWLW\DQGRWKHU UHTXLUHGLQIRUPDWLRQFDQEHUHOHDVHG7KHDFWXDOFRQWUDFWZLOOQRWEH UHYHDOHG ,QDGGLWLRQWRWKHVHUHTXLUHPHQWVLQ'WKH&RPPLVVLRQGHWHUPLQHG

WKDWLQFUHPHQWDOFDSDFLW\IURPH[LVWLQJSODQWVRUUHSRZHUHGSODQWVFDQSDUWLFLSDWHLQ

/75)2VIRUQHZJHQHUDWLRQVXEMHFWWRWKHIROORZLQJGHILQLWLRQV

x 8SJUDGHGSODQWV8SJUDGHVDUHGHILQHGDVH[SDQGLQJWKHJHQHUDWLRQFDSDFLW\ DWRUHQKDQFLQJWKHRSHUDWLRQRIDJHQHUDWLRQIDFLOLW\VRORQJDVVXFK LQFUHPHQWDO0:DQGRUHQKDQFHGRSHUDWLQJFKDUDFWHULVWLFVFDQSURYLGHWKH QHFHVVDU\DWWULEXWHVWKDWWKH&RPPLVVLRQKDVDXWKRUL]HGWKHXWLOLW\WRSURFXUH $QXSJUDGHGSODQWRUDSODQWZLWKLQFUHPHQWDOFDSDFLW\DGGLWLRQVZRXOGEHD SODQWZKHUHWKHPDLQJHQHUDWLQJHTXLSPHQWLVUHWDLQHGDQGFRQWLQXHVWR RSHUDWH

x 5HSRZHUHGSODQWV5HSRZHUVDUHGHILQHGDVFDSLWDOLQYHVWPHQWVWKDWH[WHQG WKHXVHIXOOLIHRIDJHQHUDWLRQIDFLOLW\DIWHUWKHSODQQHGUHWLUHPHQWGDWH$ UHSRZHUHGIDFLOLW\LVDIDFLOLW\ZKHUHWKHPDLQJHQHUDWLQJHTXLSPHQW VXFKDV WKHWXUELQH LVFKDQJHGRXWIRUQHZHTXLSPHQW

'DWSS ,GDWS ,GDWSS 'DWSSDQG23

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 61 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

,QFUHPHQWDOFDSDFLW\ELGLQWRDQ/75)2LV³HYDOXDWHGEDVHGRQWKHFRVWDQGYDOXHRI

WKHLQFUHPHQWDOFDSDFLW\DORQHDQGQRWVRPHFRPELQDWLRQRIWKHH[LVWLQJDQG

LQFUHPHQWDOFDSDFLW\RIWKHXQLWLQTXHVWLRQ´

4. Loading Order Applicability to Procurement ,Q'WKH&RPPLVVLRQLQGLFDWHGWKDWWKHORDGLQJRUGHUDSSOLHVWRDOO

XWLOLW\SURFXUHPHQWSURFHVVHV7KH&RPPLVVLRQGLUHFWHGWKDW3* (DQGWKHRWKHU

XWLOLWLHVSURFXUHDGGLWLRQDO(QHUJ\(IILFLHQF\DQG'HPDQG5HVSRQVHUHVRXUFHVWRWKH

H[WHQWWKH\DUHIHDVLEO\DYDLODEOHDQGFRVWHIIHFWLYH7KLVDSSURDFKFRQWLQXHVIRUHDFK

VWHSGRZQWKHORDGLQJRUGHULQFOXGLQJUHQHZDEOHDQGGLVWULEXWHGJHQHUDWLRQ7KH(QHUJ\

$FWLRQ3ODQDOVRUHTXLUHVLPSURYHPHQWVWR7UDQVPLVVLRQDQG'LVWULEXWLRQV\VWHPWR

VXSSRUWGHPDQGJURZWKDQGHQDEOHWKHLQWHUFRQQHFWLRQRIQHZJHQHUDWLRQ

5. Evaluation and Selection of Resources Through RFOs 3* (DSSOLHVDFRQVLVWHQWHYDOXDWLRQPHWKRGRORJ\WRRIIHUVLWUHFHLYHVLQ5)2V

%\DSSO\LQJ/HDVW&RVW%HVW)LW ³/&%)´ SULQFLSOHV3* (REWDLQVWKHPRVWYDOXHIRU

FXVWRPHUVIRUDJLYHQVHWRISRUWIROLRQHHGV/&%)SURYLGHVIRUUHVRXUFHDOWHUQDWLYHVWR

EHVHOHFWHGEDVHGRQWKHLUUHODWLYHFRVWHIIHFWLYHQHVVDQGWKHLUDELOLW\WRPHHWWKHVSHFLILF

QHHGVRIWKHSRUWIROLR$UHVRXUFH¶VFRVWHIIHFWLYHQHVVLVGHWHUPLQHGUHODWLYHWRFRPPRQ

PDUNHWEHQFKPDUNVRU³PDUNHWYDOXH´$UHVRXUFH¶VSRUWIROLRILWFDQEHDTXDOLWDWLYH

DVVHVVPHQWRUTXDQWLWDWLYHPHDVXUHWKDWUHSUHVHQWVKRZZHOOLWVHQHUJ\SURILOHORFDWLRQ

DQGRWKHURIIHUHGFKDUDFWHULVWLFVPHHWWKHQHHGVRIWKHSRUWIROLRIRUDSDUWLFXODUSURGXFW

'DWS 'DWSSDQG237KHORDGLQJRUGHUGRHVQRWDSSO\WR3* (¶VVFKHGXOLQJ DQGELGGLQJRIUHVRXUFHVLQWRWKH&$,62PDUNHWVZKLFKLVGRQHSXUVXDQWWROHDVWFRVWGLVSDWFK SULQFLSOHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 62 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

6. Determining the Term of a Contract ,Q'WKH&RPPLVVLRQFODULILHGWKDW³>I@RUWKHSXUSRVHRIPHGLXPWHUP

DQGORQJWHUPFRQWUDFWVPXOWLSOHFRQWUDFWVHQWHUHGLQWRDWWKHVDPHWLPHIRUWKHVDPH

UHVRXUFHDQGIRUFRQVHFXWLYHWLPHSHULRGVDUHFRQVLGHUHGRQHFRQWUDFWDQGPD\QRWEH

WUHDWHGDVGLIIHUHQWWUDQVDFWLRQVIRU&RPPLVVLRQDSSURYDO0RUHVSHFLILFDOO\IRUWKH

SXUSRVHRIGHWHUPLQLQJWKH³WHUP´RIDFRQWUDFWWZRRUPRUHFRQWUDFWVLQFOXGLQJ

FRQWUDFWXDORSWLRQVDUHWUHDWHGDVRQH OLQNHG ZKHUH D 7KH\VSHFLI\WKHVDPHUHVRXUFHDVWKHSULPDU\GHOLYHU\VRXUFHRU IRU DQXQVSHFLILHGVRXUFHWKH\DUHZLWKWKHVDPHFRXQWHUSDUW\DQG E 7KH\DUHQHJRWLDWHGRUH[HFXWHGZLWKLQDQ\WKUHHFRQVHFXWLYHPRQWK SHULRGH[FHSWLIHQWHUHGLQWRDVDUHVXOWRIVHSDUDWH5)2VDQGWKHFRQWUDFW IURPWKHHDUOLHU5)2LVH[HFXWHGEHIRUHWKHODWHU5)2KDVUHFHLYHGDQ\ ELGV HLWKHULQGLFDWLYHRUILQDO ´

'DWS

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 63 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;& 352&85(0(17/,0,76$1'5$7$%/(5$7(6

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 64 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Limits

1. Electrical Capacity Procurement Limits and Ratable Rates ,Q'HFLVLRQ ³'´ WKH&DOLIRUQLD3XEOLF8WLOLWLHV&RPPLVVLRQ

³&38&´RU³&RPPLVVLRQ´ GLUHFWHG3DFLILF*DVDQG(OHFWULF&RPSDQ\ ³3* (´ WR

LQFOXGHHOHFWULFDOFDSDFLW\SURFXUHPHQWOLPLWVDQGUDWDEOHUDWHVLQ3* (¶V%XQGOHG

3URFXUHPHQW3ODQ ³%33´ 3* (¶V%33LQFOXGHVWKHIROORZLQJUHTXLUHPHQWVIRU

SURFXUHPHQWOLPLWVDQGUDWDEOHUDWHVIRUHOHFWULFDOFDSDFLW\

D 7KHSURFXUHPHQWOLPLWVDQGUDWDEOHUDWHVDSSO\WRHOHFWULFDOFDSDFLW\ WUDQVDFWLRQVZLWKGHOLYHULHVEH\RQGWKHSURPSWFDOHQGDU\HDU HJIRU HOHFWULFDOFDSDFLW\WUDQVDFWLRQVRFFXUULQJLQSURFXUHPHQWOLPLWVDQG UDWDEOHUDWHVKDOODSSO\WRFRQWUDFWGHOLYHULHVLQDQGEH\RQG 7KH SURFXUHPHQWOLPLWVDQGUDWDEOHUDWHVUHIOHFWDOLPLWRQQHWFDSDFLW\ SURFXUHPHQWZKLFKLVSXUFKDVHVOHVVVDOHVRIFDSDFLW\LQDJLYHQ\HDU

E 1ROLPLWVRUUDWDEOHUDWHVDSSO\WR3* (PHHWLQJLWV5HVRXUFH$GHTXDF\ ³5$´ FDSDFLW\UHTXLUHPHQWVIRUWKHFXUUHQWFDOHQGDU\HDUDQGSURPSW FDOHQGDU\HDU LHWKHFDOHQGDUGHOLYHU\\HDULPPHGLDWHO\IROORZLQJWKH FXUUHQW\HDU

'DWSSDQG2UGHULQJ3DUDJUDSK ³23´ 1RIRUPDOOLPLWVRUUDWDEOHUDWHVDUHVHWEH\RQGWKHWHUPRIWKH%33$SSURYDOIRUDQ\ HOHFWULFDOFDSDFLW\SURFXUHPHQWEH\RQGWKHWHUPRIWKH%33ZLOOEHVRXJKWWKURXJK DQDSSOLFDWLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 65 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

F 'HOLYHU\\HDUVWZRDQGRQZDUGPD[LPXPDQQXDOHOHFWULFDOFDSDFLW\ SURFXUHPHQWOLPLWVDUHHTXDOWRWKHGLIIHUHQFHEHWZHHQ 3* (¶V IRUHFDVWHOHFWULFDOFDSDFLW\UHTXLUHPHQWWRPHHWLWV5$UHTXLUHPHQW LHSHDNDQQXDOKRXUORDGXVLQJDLQ\HDUORDGIRUHFDVWPXOWLSOLHGE\ SHUFHQW DQG WKHIRUHFDVW1HW4XDOLI\LQJ&DSDFLW\RI3* (¶V FRPPLWWHGUHVRXUFHVDQGSODQQHGSUHIHUUHGUHVRXUFHV

G 5DWDEOHUDWHVHTXDOWRWKHDQQXDOHOHFWULFDOFDSDFLW\SURFXUHPHQWOLPLWV GLYLGHGE\WKHQXPEHURI\HDUVEHWZHHQWKHGHOLYHU\\HDUDQGWKH WUDQVDFWLRQ\HDUDSSO\IRUGHOLYHU\\HDUVWZRDQGRQZDUGDQGUHIOHFWWKH PD[LPXPFDSDFLW\SURFXUHPHQWRIQRQSUHIHUUHGHOHFWULFDOFDSDFLW\ DOORZHGXQGHUWKH%33LQWKDW\HDU)RUH[DPSOHWKHUDWDEOHUDWHIRU GHOLYHU\

H $WUDQVDFWLRQFRXQWVDJDLQVWWKHDQQXDOHOHFWULFDOFDSDFLW\SURFXUHPHQW OLPLWVDQGUDWDEOHUDWHVLQWKH\HDUWKHFRQWUDFWLVHIIHFWLYH$WUDQVDFWLRQ LVFRPSOLDQWZLWK3* (¶VDXWKRUL]HGSURFXUHPHQWOLPLWVDQGUDWDEOHUDWHV LIDWWKHWLPHWKHFRQWUDFWEHFRPHVHIIHFWLYHWKHWUDQVDFWLRQGRHVQRWFDXVH 3* (WRH[FHHGLWVSURFXUHPHQWOLPLWRUUDWDEOHUDWHIRUWKHDSSOLFDEOH \HDU$WUDQVLWLRQIURPDWZRWLPHVUDWDEOHUDWHWRDRQHWLPHVUDWDEOHUDWH ZLWKLQDJLYHQ\HDUZLOOQRWFDXVHDQ\WUDQVDFWLRQDFWLYLW\WKDWRFFXUUHG

$VVXPLQJQRUHFRQWUDFWLQJRIUHVRXUFHVWKDWDUHQRWSUHIHUUHG )RUSXUSRVHVRIFDOFXODWLQJ3* (¶VDQQXDOHOHFWULFDOFDSDFLW\SURFXUHPHQWOLPLWVDQG FRPSOLDQFHZLWKVXFKOLPLWVSUHIHUUHGUHVRXUFHVDUH(QHUJ\(IILFLHQF\SURJUDPV'HPDQG 5HVSRQVHSURJUDPV5HQHZDEOH6RXUFHV'LVWULEXWHG*HQHUDWLRQLQFOXGLQJ&RPELQHG+HDWDQG 3RZHU ³&+3´ UHVRXUFHV RUWKRVHUHVRXUFHVTXDOLILHGWRFRXQWWRZDUGWKH&RPPLVVLRQ¶V&+3 JRDOV DQG(QHUJ\6WRUDJH3URJUDPSURFXUHPHQWLQFOXGLQJSURFXUHPHQWRISUHIHUUHGUHVRXUFHV DERYHWKH&RPPLVVLRQ¶VWDUJHWVRUJRDOV 3URFXUHPHQWDWWZRWLPHVWKHUDWDEOHUDWHLVDOORZHGRQO\ZKHQWKHFRQWUDFWLVHIIHFWLYHXSRQ H[HFXWLRQVLQFHWKHDELOLW\WRSURFXUHDWWKLVOHYHOLVGHWHUPLQHGDWWKHWLPHRIH[HFXWLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 66 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

SULRUWRWKHWUDQVLWLRQGDWHWREHQRQFRPSOLDQWZLWK3* (¶VUDWDEOHUDWHV SURYLGHGWKDWVXFKWUDQVDFWLRQVFRPSOLHGZLWKWKHDSSOLFDEOHUDWDEOHUDWH ZKHQH[HFXWHG

I 2QRFFDVLRQZKHWKHUGXHWRWKHOXPSLQHVVRISURFXUHPHQW&RPPLVVLRQ PDQGDWHGSURFXUHPHQW VXFKDVQRQUHQHZDEOHQRQ&+34XDOLI\LQJ )DFLOLWLHVQRQ(QHUJ\6WRUDJHRUXQLTXHDQGIOHHWLQJRSSRUWXQLWLHV WUDQVDFWLRQVLQDJLYHQ\HDUPD\H[FHHGWKHHOHFWULFDOFDSDFLW\SURFXUHPHQW OLPLWVDQGRUUDWDEOHUDWHVIRUWKDW\HDU)RUWKHVHWUDQVDFWLRQV3* (ZLOO UHTXHVWIURPWKH&RPPLVVLRQDQH[HPSWLRQIURPWKHDQQXDOHOHFWULFDO FDSDFLW\SURFXUHPHQWOLPLWVDQGRUUDWDEOHUDWHVDVQHFHVVDU\ZKHQVHHNLQJ DSSURYDOIRUWKHWUDQVDFWLRQ

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< &38&0$1'$7('6&(1$5,2 (/(&75,&$/&$3$&,7<352&85(0(17$1';5$7$%/(5$7(/,0,76 0: &21),'(17,$/

'HOLYHU\ 3URFXUHPHQW [55LQ [55LQ [55LQ [55LQ

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< 3* ($/7(51$7,9(6&(1$5,2 (/(&75,&$/&$3$&,7<352&85(0(17$1';5$7$%/(5$7(/,0,76 0: &21),'(17,$/

'HOLYHU\ 3URFXUHPHQW [55LQ [55LQ [55LQ [55LQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 67 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< (/(&75,&$/&$3$&,7<,03/,('0$5.(7+($75$7(0$5.(7&21',7,210($685(

/LQH 9DOXH 1R 0HDVXUH 00%WX0:K

7ZR6WDQGDUG'HYLDWLRQ+LJK 7KHIRUZDUGSRZHUFXUYHVXVHGWRFDOFXODWHWKHWZRVWDQGDUGGHYLDWLRQPHDVXUH

VSDQSHULRGVWKDWSUHGDWHWKH-DQXDU\VWDUWGDWHRI&DOLIRUQLD¶V&DSDQG7UDGH

3URJUDP,QFRQWUDVWWKHIRUZDUGFXUYHXVHGWRFDOFXODWHWKH,PSOLHG0DUNHW+HDW5DWH

³,0+5´ WKDWLVWREHFDOFXODWHGDWWKHWLPHRISURFXUHPHQWDQGFRPSDUHGWRWKH

PHDVXUHH[WHQGVEH\RQG'HFHPEHU%HFDXVHLPSOLHGJUHHQKRXVHJDV ³*+*´ FRVW

LVHPEHGGHGLQWKHSRVW'HFHPEHUPRQWKO\IRUZDUGSULFHVDQDGMXVWPHQWWRWKH

UHOHYDQWPRQWKO\IRUZDUGSULFHVLVQHFHVVDU\ZKHQFDOFXODWLQJWKH,0+5DWWKHWLPHRI

SURFXUHPHQW,QFDOFXODWLQJ,0+5IRUZDUGSULFHVIRUGHOLYHU\PRQWKV-DQXDU\DQG

DIWHUZLOOEHUHGXFHG)RUWKHFDOFXODWLRQRIWKLVUHGXFWLRQPDUNHWEDVHGIRUZDUG*+*

SULFHFXUYHVZLOOEHXVHG

2. Electric Energy Procurement Limits and Ratable Rates 3* (¶V%33LQFOXGHVWKHIROORZLQJUHTXLUHPHQWVIRUSURFXUHPHQWOLPLWVDQG

UDWDEOHUDWHVIRUHOHFWULFHQHUJ\

D 7KHSURFXUHPHQWOLPLWVDQGUDWDEOHUDWHVDSSO\WRHOHFWULFHQHUJ\ WUDQVDFWLRQVZLWKGHOLYHULHVEH\RQGWKHSURPSWPRQWK HJIRUHOHFWULF

5HGXFWLRQLQRQSHDNSRZHUSULFHIRUPRQWKV-DQXDU\DQGDIWHUZLOOEHFDOFXODWHGDVWKH SURGXFWRI WKHDYHUDJHRIWKHKLVWRULFDOPRQWKIRUZDUGRQSHDN,0+5IRUWKHKLVWRULFDO SHULRGXVHGIRUWKHFDOFXODWLRQRIWKH0DUNHW&RQGLWLRQ0HDVXUH WKH*+*HPLVVLRQVIURP QDWXUDOJDVRIPHWULFWRQV0LOOLRQVRI%ULWLVK7KHUPDO8QLWV ³00%WX´ DQG WKH *+*SULFHIRUWKDW\HDU

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 68 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

HQHUJ\WUDQVDFWLRQVRFFXUULQJLQ0DUFKSURFXUHPHQWOLPLWVDQG UDWDEOHUDWHVVKDOODSSO\WRFRQWUDFWGHOLYHULHVLQ0D\DQGEH\RQG 1RSURFXUHPHQWOLPLWVDSSO\WRFXUUHQWPRQWKDQG3URPSW0RQWK WUDQVDFWLRQVLQRUGHUWRDOORZ3* (WRPHHWLWVIRUHFDVWUHTXLUHPHQWV

E 0RQWKO\HOHFWULFHQHUJ\SURFXUHPHQWOLPLWVIRUSXUFKDVHDQGVDOHV WUDQVDFWLRQVDUHGHWHUPLQHGE\WKHVXPRI L WKHJURVVQHWVKRUWSRVLWLRQ LHWKHDEVROXWHYDOXHRIWKHVXPRIDOOKRXUO\QHWVKRUWSRVLWLRQV IRUHDFK PRQWKEDVHGRQHFRQRPLFGLVSDWFKRI3* (¶VH[LVWLQJSRUWIROLRDQGGHOWD DGMXVWHGKHGJHYROXPHVDVVXPLQJDWZRVWDQGDUGGHYLDWLRQKLVWRULFDOORZ LPSOLHGPDUNHWKHDWUDWH LL WKHJURVVQHWORQJSRVLWLRQ LHWKHDEVROXWH YDOXHRIWKHVXPRIDOOKRXUO\QHWORQJSRVLWLRQV IRUHDFKPRQWKEDVHGRQ HFRQRPLFGLVSDWFKRI3* (¶VH[LVWLQJDQGSODQQHGSRUWIROLRDQGGHOWD DGMXVWHGKHGJHYROXPHVDVVXPLQJDWZRVWDQGDUGGHYLDWLRQKLVWRULFDOKLJK LPSOLHGPDUNHWKHDWUDWH7DEOHV&DQG&FRQWDLQ3* (¶VSURFXUHPHQW OLPLWVIRUHOHFWULFDOHQHUJ\IRUWKH&38&0DQGDWHG6FHQDULRDQG3* ( $OWHUQDWLYH6FHQDULRUHVSHFWLYHO\7KHVHOLPLWVILOHGDVPRQWKO\ TXDQWLWLHVVHWWKHPD[LPXPDOORZDEOHQHWIRUZDUGSXUFKDVHDQGVDOHV WUDQVDFWLRQVIRUWKHGXUDWLRQRIWKLV%33

1RIRUPDOOLPLWVRUUDWDEOHUDWHVDUHVHWEH\RQGWKHWHUPRIWKH%33$SSURYDOIRUDQ\HOHFWULF HQHUJ\SURFXUHPHQWEH\RQGWKHWHUPRIWKH%33ZLOOEHVRXJKWWKURXJKDQDSSOLFDWLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 69 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< &38&0$1'$7('6&(1$5,2 (/(&75,&(1(5*<352&85(0(17$1';5$7$%/(5$7(/,0,76 *:+ &21),'(17,$/

/LQH 1R 0RQWK -DQ )HE 0DU $SU 0D\ -XQ -XO $XJ 6HS 2FW 1RY 'HF

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 70 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< 3* ($/7(51$7,9(6&(1$5,2 (/(&75,&(1(5*<352&85(0(17$1';5$7$%/(5$7(/,0,76 *:+ &21),'(17,$/

/LQH 1R 0RQWK -DQ )HE 0DU $SU 0D\ -XQ -XO $XJ 6HS 2FW 1RY 'HF

F $QQXDOUROOLQJ\HDU LHUROOLQJPRQWK UDWDEOHSURFXUHPHQWOLPLWVVKDOO DSSO\WR3* (¶VSXUFKDVHDQGVDOHRIHOHFWULFHQHUJ\SURGXFWV7KHDQQXDO UDWDEOHUDWHVKDOOHTXDOSHUFHQWRIWKHVXPRIWKHPRQWKO\SURFXUHPHQW OLPLWVIRU

0DUNHWTXRWHVIRU13RQSHDNIRUZDUGV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 71 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7KHIRUZDUGSRZHUFXUYHVXVHGWRFDOFXODWHWKHWZRVWDQGDUGGHYLDWLRQ PHDVXUHVSDQSHULRGVWKDWSUHGDWHWKH-DQXDU\VWDUWGDWHRI &DOLIRUQLD¶V&DSDQG7UDGH3URJUDP,QFRQWUDVWWKHIRUZDUGFXUYHXVHGWR FDOFXODWHWKHPRQWKIRUZDUGRQSHDNSRZHUSULFHWKDWLVWREHFDOFXODWHG DWWKHWLPHRISURFXUHPHQWDQGFRPSDUHGWRWKHPHDVXUHH[WHQGVEH\RQG 'HFHPEHU%HFDXVHLPSOLHG*+*FRVWLVHPEHGGHGLQWKHSRVW 'HFHPEHUPRQWKO\IRUZDUGSULFHVDQDGMXVWPHQWWRWKHUHOHYDQW PRQWKO\IRUZDUGSULFHVLVQHFHVVDU\7KHUHIRUHIRUZDUGSULFHVIRUGHOLYHU\ PRQWKV-DQXDU\DQGDIWHUZLOOEHUHGXFHG)RUWKHFDOFXODWLRQRI WKLVUHGXFWLRQPDUNHWEDVHGIRUZDUG*+*SULFHFXUYHVZLOOEHXVHG

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< (/(&75,&(1(5*<5$7$%/(5$7($87+25,7<

5DWDEOH5DWH 55 /LQH )URP'HOLYHU\ 7R'HOLYHU\ $VRI0RQWKO\ 1R 3HULRG 0RQWK 0RQWK 3URFXUHPHQW/LPLW [55

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

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 72 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

FRXQWLQJZLWKWKHSRVLWLRQZLWKZKLFKWKHEDVLVZRXOGEHSDLUHGWRFRPSOHWH DVLQJOHWUDQVDFWLRQ6LPLODUO\&RQJHVWLRQ5HYHQXH5LJKWVVKDOOQRWFRXQW DJDLQVWHOHFWULFHQHUJ\SURFXUHPHQWRUUDWDEOHUDWHOLPLWVDVWKHLUXVHLV DOUHDG\JRYHUQHGE\$SSHQGL[, &RQJHVWLRQ5HYHQXH5LJKWV 5$WROOLQJ FRQWUDFWVDQGILUPHQHUJ\LPSRUWVWKDWFDQEHXVHGWRPHHW5$UHTXLUHPHQWV VKDOOQRWFRXQWDJDLQVWWKHHOHFWULFHQHUJ\SURFXUHPHQWRUUDWDEOHUDWHOLPLWV DVWKHVHSURGXFWVPD\EHUHTXLUHGWRPHHW3* (¶V5$UHTXLUHPHQW $GGLWLRQDOO\SURGXFWVWKDWGRQRWILQDQFLDOO\KHGJHFRVWVRURWKHUZLVHDOWHU 3* (¶VSURFXUHPHQWFRVW7RH[SLUDWLRQ9DOXHDW5LVN ³7H9D5´ HJ,QGH[HGSULFHGHOHFWULFHQHUJ\WUDQVDFWLRQV VKDOOQRWFRXQWDJDLQVW HOHFWULFDOHQHUJ\SURFXUHPHQWRUUDWDEOHUDWHOLPLWV$EVROXWHQRWLRQDO YROXPHVIRUDOOWUDQVDFWLRQVZLOOEHXVHGZKHQFRXQWLQJDJDLQVWWKH SURFXUHPHQWOLPLWV

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< (/(&75,&(1(5*<13213($.32:(535,&(0$5.(7&21',7,210($685(

/LQH 1R 0HDVXUH 9DOXH 0:K 7ZR6WDQGDUG'HYLDWLRQ+LJK

B. Natural Gas Procurement Limits

1. Natural Gas Procurement Limits and Ratable Rates 3* (LVDXWKRUL]HGWRH[HFXWHQDWXUDOJDVWUDQVDFWLRQVIRUGHOLYHU\SHULRGVXSWR

WHQ \HDUVXVLQJWKHDSSURYHGSURGXFWV $SSHQGL[$ DQGSURFXUHPHQWPHWKRGVDQG

SURFHVVHV $SSHQGL[% DQGDFFRUGLQJWRWKH+HGJLQJ3ODQ $SSHQGL[( RIWKLV%33

7KHSURFXUHPHQWOLPLWVDQGUDWDEOHUDWHVLQWKLV$SSHQGL[&GHILQHOLPLWVIRU3* (¶V

QDWXUDOJDVSURFXUHPHQWDXWKRULW\

3URFXUHPHQWOLPLWVDQGUDWDEOHUDWHVDSSO\WRQDWXUDOJDVWUDQVDFWLRQVZLWKGHOLYHU\

PRQWKVEH\RQGWKHSURPSWPRQWK3* (ZLOOQHWSXUFKDVHVDQGVDOHVRIQDWXUDOJDVIRU

SXUSRVHVRIDVVHVVLQJFRPSOLDQFHZLWKLWVSURFXUHPHQWOLPLWV3* (ZLOOHVWDEOLVK

PRQWKO\JDVSURFXUHPHQWOLPLWVDVWKHVXPRIIRUHFDVWSRUWIROLRJDVUHTXLUHPHQWVPLQXV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 73 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

GHOWDDGMXVWHGKHGJHVIRUHDFKPRQWKDVVXPLQJDWZRVWDQGDUGGHYLDWLRQKLJK,0+5

EDVHGRQ HFRQRPLFGLVSDWFKWKHSRUWIROLRDQG DQHTXLYDOHQWYROXPHRIQDWXUDO

JDVWKDWZRXOGEHUHTXLUHGWRVHUYHWKHIRUHFDVWQHWVKRUWHOHFWULFDOHQHUJ\SRVLWLRQ

7DEOHV&DQG&EHORZFRQWDLQ3* (JDVSXUFKDVHSURFXUHPHQWOLPLWVGLVSOD\LQJWKH

PD[LPXPDOORZDEOHQHWIRUZDUGSURFXUHPHQWIRUQDWXUDOJDVIRUWKH&38&0DQGDWHG

6FHQDULRDQG3* (¶V$OWHUQDWLYH6FHQDULRUHVSHFWLYHO\

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< 1$785$/*$6352&85(0(17$1';5$7$%/( 5$7(/,0,76±&38&0$1'$7('6&(1$5,2 0,//,2100%78 &21),'(17,$/

/LQH 1R 0RQWK -DQ )HE 0DU $SU 0D\ -XQ -XO $XJ 6HS 2FW 1RY 'HF

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 74 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< 1$785$/*$6352&85(0(17$1';5$7$%/( 5$7(/,0,76±3* ($/7(51$7,9(6&(1$5,2 0,///,2100%78 &21),'(17,$/

/LQH 1R 0RQWK -DQ )HE 0DU $SU 0D\ -XQ -XO $XJ 6HS 2FW 1RY 'HF 7KHDQQXDOUDWDEOHUDWHHTXDOVSHUFHQWRIWKHVXPRIWKHPRQWKO\SURFXUHPHQW

OLPLWVIRU

7DEOH&7KHUDWDEOHUDWHPHWKRGRORJ\ZLOODOORZIRUQHWQDWXUDOJDVSXUFKDVHVDQG

VDOHVRIWZRWLPHVWKHUDWDEOHUDWHIRUGHOLYHU\

FRQGLWLRQVDUHSUHVHQWVXEMHFWWRLQGLYLGXDOPRQWKO\SURFXUHPHQWOLPLWV7KHRSHUDWLYH

WUDQVDFWLRQOLPLWIRUQHWSXUFKDVHVDQGVDOHVLQGHOLYHU\

IROORZV

7ZRWLPHVWKHUDWDEOHUDWHLIWKHSURPSWPRQWKIRUZDUG3* (&LW\JDWH JDVSULFHLVOHVVWKDQWKHWZRVWDQGDUGGHYLDWLRQKLJKYDOXHFRQWDLQHGLQ 7DEOH&

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 75 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2QHWLPHVWKHUDWDEOHUDWHLIWKHSURPSWPRQWKIRUZDUGQDWXUDOJDVSULFH LVJUHDWHUWKDQRUHTXDOWRWKHWZRVWDQGDUGGHYLDWLRQKLJKYDOXHFRQWDLQHG LQ7DEOH&

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< 1$785$/*$65$7$%/(5$7($87+25,7<

5DWDEOH5DWH 55 /LQH )URP'HOLYHU\ 7R'HOLYHU\ $VRI0RQWKO\ 1R 3HULRG 0RQWK 0RQWK 3URFXUHPHQW/LPLW [55

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< 1$785$/*$635,&(0$5.(7&21',7,210($685(&21),'(17,$/

/LQH 1R 0HDVXUH 9DOXH00%WX 7ZRVWDQGDUGGHYLDWLRQKLJK $RQHWLPHVUDWDEOHUDWHVKDOODSSO\IRUQHWSXUFKDVHVDQGVDOHVLQGHOLYHU\

WKURXJK

TXDQWLW\ RQHEX\DQGRQHVHOOHTXDOVRQHKHGJH WRPHDVXUHDJDLQVWWKHOLPLWDQGUDWDEOH

UDWH6LPLODUO\EDVLVFRQWUDFWZLOOQRWFRXQWDJDLQVWWKHOLPLWVWRDYRLGGRXEOHFRXQWLQJ

ZLWKWKH1HZ

FRPSOHWHDVLQJOHKHGJH3URGXFWVWKDWGRQRWILQDQFLDOO\KHGJHFRVWVRURWKHUZLVHDOWHU

SURFXUHPHQWFRVWRU7H9D5 HJ,QGH[SULFHGQDWXUDOJDV GRQRWFRXQWDJDLQVWQDWXUDO

JDVPRQWKO\SURFXUHPHQWRUDQQXDOUDWDEOHUDWHOLPLWV7UDQVDFWLRQVZLOOEHPHDVXUHGDW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 76 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

WKHLUQRWLRQDO LHQRWGHOWDDGMXVWHG FRQWUDFWTXDQWLW\EXWWKHQHWRSHQSRVLWLRQ

FDOFXODWLRQXVHGWRVHWWKHPRQWKO\SURFXUHPHQWDQGDQQXDOUDWDEOHUDWHVZLOOXVHGHOWD

DGMXVWHGYROXPHVIRUJDVSURGXFWV

2. Pipeline Capacity Procurement Limits 3* (PD\DOVRSURFXUHQDWXUDOJDVSLSHOLQHFDSDFLW\LQRUGHUWRSXUFKDVHQDWXUDO

JDVVXSSOLHVLQDSURGXFLQJEDVLQRUDWDERUGHUSRLQWDQGWKHQWUDQVSRUWWKHJDVWRWKH

3* (&LW\JDWH3* (LVDXWKRUL]HGWRREWDLQJDVSLSHOLQHFDSDFLW\WRWKHH[WHQW

QHFHVVDU\WRVXSSRUWGHOLYHU\RIJDVIURPJDVUHFHLSWSRLQWVWRWKHJHQHUDWRUEXUQHUWLS

3* (PD\FRQWUDFWIRUJDVSLSHOLQHFDSDFLW\WRPHHWHDFKJHQHUDWRU¶VSHDNDQQXDO

UHTXLUHPHQW,IJDVWUDQVSRUWDWLRQFDSDFLW\LVWHPSRUDULO\QRWUHTXLUHGRUXQHFRQRPLFWR

WUDQVSRUWJDVIRUSRUWIROLRGHPDQG3* (ZLOODWWHPSWWRPDUNHWWKHVXUSOXVFDSDFLW\RU

VXSSO\WRWKHH[WHQWDOORZHGE\WKHWDULIIRIWKHJDVWUDQVSRUWDWLRQSURYLGHU

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< 1$785$/*$63,3(/,1(&$3$&,7<352&85(0(17/,0,76 &21),'(17,$/

/LQH 1R /LPLW 'HVFULSWLRQ 9ROXPH/LPLW 3HDNDQQXDOGHPDQGIRUHDFKJHQHUDWRU LQSRUWIROLR 7HUP/LPLW 8SWRWHQ\HDUVVXEMHFWWR%33DSSURYDO UHTXLUHPHQWV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 77 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< 1$785$/*$63,3(/,1(&$3$&,7<352&85(0(17/,0,76 &21),'(17,$/

/LQH 1R

3. Natural Gas Storage Procurement Limits 7RUHOLDEO\PHHW3* (¶V(OHFWULF3RUWIROLRGHPDQG3* (PD\SURFXUHQDWXUDO

JDVVWRUDJHVHUYLFHV3* (LVDXWKRUL]HGWRSURFXUHVWRUDJHXSWRWKHIROORZLQJOLPLWV

D :LWKGUDZDO/LPLW±:LWKGUDZDOHTXDOWRWKHODUJHVWGLIIHUHQFHEHWZHHQWKH PD[LPXPGDLO\SRUWIROLRGHPDQGIRUHFDVWDQGWKHH[SHFWHGGHPDQG IRUHFDVWIRUHDFKPRQWKWKURXJKRXWWKH\HDU

E ,QMHFWLRQ/LPLW±,QMHFWLRQHTXDOWRWKHODUJHVWGLIIHUHQFHEHWZHHQPLQLPXP GDLO\IRUHFDVWGHPDQGDQGH[SHFWHGGDLO\GHPDQGIRUHDFKPRQWK WKURXJKRXWWKH\HDU

F /LPLWFDOFXODWLRQVDUHEDVHGRQ3* (¶VPRQWKO\JDVEXUQIRUHFDVW DVVXPLQJHFRQRPLFGLVSDWFKXQGHUDQLPSOLHGPDUNHWKHDWUDWHWKDWLV WZRVWDQGDUGGHYLDWLRQVKLJKHUWKDQWKHEDVHFDVH

G 6WRUDJH,QYHQWRU\&DSDFLW\/LPLW±&DOFXODWHGWRVHFXUHHQRXJKLQYHQWRU\ IRU GD\VRIZLWKGUDZDODVFDOFXODWHGDERYH LH WLPHVWKH6WRUDJH :LWKGUDZDO/LPLW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 78 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< 1$785$/*$66725$*(352&85(0(17/,0,76 &21),'(17,$/

/LQH 1R /LPLW 'HVFULSWLRQ 6WRUDJH9ROXPH/LPLWV :LWKGUDZDO/LPLW±:LWKGUDZDOHTXDOWRWKHODUJHVW GLIIHUHQFHEHWZHHQWKHPD[LPXPGDLO\SRUWIROLRGHPDQG IRUHFDVWDQGWKHH[SHFWHGGHPDQGIRUHFDVWIRUHDFKPRQWK WKURXJKRXWWKH\HDU ,QMHFWLRQ/LPLW±LQMHFWLRQHTXDOWRWKHODUJHVWGLIIHUHQFH EHWZHHQPLQLPXPGDLO\IRUHFDVWGHPDQGDQGH[SHFWHG GDLO\GHPDQGIRUHDFKPRQWKWKURXJKRXWWKH\HDU ,QYHQWRU\/LPLW± WLPHVWKH:LWKGUDZDO/LPLW 7HUP 8SWR\HDUVVXEMHFWWR%33DSSURYDOUHTXLUHPHQWV

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< 1$785$/*$66725$*(352&85(0(17/,0,76 &21),'(17,$/

:LWKGUDZDO ,QMHFWLRQ ,QYHQWRU\ &DSDFLW\ &DSDFLW\ 0LOOLRQ

C. GHG Procurement Limits

1. Maximum Volume Limits &RQVLVWHQWZLWK'VSHFLILFRYHUDOOYROXPHOLPLWVIRU3* (¶V*+*

SURGXFWSURFXUHPHQWZLOOFRUUHVSRQGWRWKHDFWXDODQGIRUHFDVWHG*+*HPLVVLRQVIRU

3* (¶VIDFLOLWLHVFHUWDLQWROOLQJDJUHHPHQWVDQGHOHFWULFLPSRUWV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 79 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7KH&DOLIRUQLD$LU5HVRXUFHV%RDUG¶V ³&$5%´ UHJXODWLRQVDOVRVHWOLPLWVRQWKH

QXPEHURIDOORZDQFHVWKDWFDQEHKHOGDQGRIIVHWVWKDWFDQEHXVHGIRUFRPSOLDQFH7KH

&DSDQG7UDGHUHJXODWLRQVUHVWULFW3* (IURPSXUFKDVLQJPRUHWKDQSHUFHQWRIWKH

DOORZDQFHVRIIHUHGDWHDFKDXFWLRQRFFXUULQJSULRUWRDQGUHVWULFW3* (IURP

SXUFKDVLQJPRUHWKDQSHUFHQWRIWKHDOORZDQFHVRIIHUHGDWHDFKDXFWLRQIURP

RQZDUG7KHVHOLPLWVZLOOFDSWKHDPRXQWRI*+*3URGXFWV3* (ZLOOSURFXUH3* (

ZLOOSURFXUH*+*3URGXFWVFRQVLVWHQWZLWKUHJXODWLRQVHVWDEOLVKHGUHJDUGLQJWKHXVHRI

VXFKSURGXFWVIRUFRPSOLDQFHZLWK&DSDQG7UDGH3* (PD\SXUFKDVH*+*3URGXFWV

LQH[FHVVRILWVDQQXDOFRPSOLDQFHUHTXLUHPHQWVDQGPD\³EDQN´VXUSOXV*+*3URGXFWV

WRXVHLQIXWXUHFRPSOLDQFH\HDUVLQDFFRUGDQFHZLWKLWVSURFXUHPHQWVWUDWHJ\SURYLGHGLQ

$SSHQGL[*DQGWKH*+*SURFXUHPHQWOLPLWVVHWIRUWKEHORZ

,QWKHFXUUHQW\HDU3* (PD\SXUFKDVH*+*3URGXFWVWRIXOILOOSHUFHQWRILWV

FXUUHQWQHWUHPDLQLQJFRPSOLDQFHREOLJDWLRQDQGLWVIRUHFDVWHGFRPSOLDQFHREOLJDWLRQIRU

WKHUHPDLQGHURIWKHFXUUHQW\HDU,QDGGLWLRQLQWKHFXUUHQW\HDU3* (PD\SXUFKDVHD

SRUWLRQRILWVIRUHFDVWHGFRPSOLDQFHREOLJDWLRQIRUWKHIROORZLQJWKUHHFRPSOLDQFH\HDUV

QRWWRH[FHHGDVHWSHUFHQWDJHLQWRWDOIRUHDFK\HDU3* (ZLOOQRWSXUFKDVH*+*

3URGXFWVZLWKYLQWDJHVPRUHWKDQWKUHH\HDUVIURPWKHFXUUHQW\HDU)LQDOO\3* (ZLOO

QRWSXUFKDVHPRUHWKDQHLJKW SHUFHQWRILWVGLUHFWFRPSOLDQFHREOLJDWLRQDVGHILQHG

EHORZLQWKHIRUPRIRIIVHWVSURYLGHGWKHVHSXUFKDVHVDOVRVWD\ZLWKLQWKHRYHUDOO*+*

SURGXFWSURFXUHPHQWOLPLWVLGHQWLILHGEHORZ

7KHSURFXUHPHQWOLPLWVHWVWKHPD[LPXPDPRXQWRI*+*3URGXFWV3* (PD\

SXUFKDVHLQWKHFXUUHQW\HDUWRIXOILOOLWV³GLUHFWFRPSOLDQFHREOLJDWLRQ´GHILQHGDVWKH

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 80 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

WRQVRIHPLVVLRQVIRUZKLFK3* (KDVDQREOLJDWLRQWRUHWLUHDOORZDQFHVRQLWVRZQ

EHKDOIDVDUHJXODWHGHQWLW\XQGHU&$5%¶V&DSDQG7UDGH3URJUDPDQGRULVRWKHUZLVH

REOLJDWHGWRSURFXUH*+*3URGXFWVIRUDWKLUGSDUW\WKDWLVDUHJXODWHGHQWLW\XQGHUWKH

&DSDQG7UDGH3URJUDP LHFHUWDLQFRQWUDFWXDODUUDQJHPHQWVZKHUH3* (LV

FRQWUDFWXDOO\UHVSRQVLEOHRUFRXOGHOHFWWRDVVXPHWKDWUHVSRQVLELOLW\IRUSURFXULQJ*+*

3URGXFWVIRUDWKLUGSDUW\ $³SXUFKDVH´LVGHILQHGDVWDNLQJWLWOHRIWKH*+*SURGXFW

ZKHQLWLVGHOLYHUHG7KXVIRUZDUGSXUFKDVHVFRXQWDJDLQVWWKHSURFXUHPHQWOLPLWLQWKH

\HDUGHOLYHUHGZKLFKPD\QRWEHWKHFXUUHQW\HDU

3* (¶V'LUHFW&RPSOLDQFH2EOLJDWLRQ3XUFKDVH/LPLWIRUWKHFXUUHQW\HDULV

FDOFXODWHGDV

஼௒ାଷǡͲሻܦܨʹ஼௒ାଶ ൅ͲǤܦܨ஼௒ାଵ ൅ͲǤͶܦܨ஼௒ ൅ͲǤ͸ܦܨ൅ܣ஼௒ ൌ݉ܽݔሺܮ :KHUH

³/´LVWKHPD[LPXPQXPEHURI*+*3URGXFWV3* (FDQSXUFKDVHIRU SXUSRVHVRIPHHWLQJLWVGLUHFWFRPSOLDQFHREOLJDWLRQ

³&<´LVWKH&XUUHQW

³$´LV3* (¶VQHWUHPDLQLQJFRPSOLDQFHREOLJDWLRQWRGDWHFDOFXODWHGDV WKHVXPRIWKHDFWXDOHPLVVLRQVIRUZKLFK3* (LVUHVSRQVLEOHIRUUHWLULQJ DOORZDQFHV RUREOLJDWHGWRSXUFKDVHIRUDWKLUGSDUW\ XSWRWKH&XUUHQW

³)'´LV3* (¶V³IRUHFDVWHGFRPSOLDQFHREOLJDWLRQ´WKHSURMHFWHGDPRXQW RIHPLVVLRQVIRUZKLFK3* (LVUHVSRQVLEOHIRUUHWLULQJ*+*3URGXFWVRU

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 81 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

REOLJDWHGWRSXUFKDVHIRUDWKLUGSDUW\FDOFXODWHGXVLQJDQ,0+5WKDWLV WZRVWDQGDUGGHYLDWLRQVDERYHWKHH[SHFWHG,0+5 ,IWKLVHTXDWLRQUHVXOWVLQDQHJDWLYHQXPEHULQDJLYHQ\HDU3* (¶V'LUHFW

&RPSOLDQFH2EOLJDWLRQ3XUFKDVH/LPLWIRUWKDW\HDUVKRXOGEHVHWDW]HUR

,QDGGLWLRQWRLWV'LUHFW&RPSOLDQFH2EOLJDWLRQ3XUFKDVH/LPLWLQWKHFXUUHQW\HDU

3* (ZLOOQRWSXUFKDVH*+*3URGXFWVIRUIXWXUH\HDUVJUHDWHUWKDQWKHSHUFHQWDJH

DOORZHGLQWKH'LUHFW&RPSOLDQFH2EOLJDWLRQ3XUFKDVH/LPLWIRUPXOD7KHUHIRUHIRUWKH

SURPSW\HDU FXUUHQW\HDUSOXVRQH 3* (ZLOOQRWSXUFKDVHLQDJJUHJDWHGXULQJWKH

FXUUHQW\HDUPRUHWKDQSHUFHQWRIWKHSURPSW\HDU¶VIRUHFDVWHGFRPSOLDQFHREOLJDWLRQ

DVFDOFXODWHGDERYH 6LPLODUO\WKHSHUFHQWDJHVIRUFXUUHQW\HDUSOXVWZRDQGFXUUHQW

\HDUSOXVWKUHHDUHSHUFHQWDQGSHUFHQWUHVSHFWLYHO\

&RQVLVWHQWZLWK2UGHULQJ3DUDJUDSKRI'7DEOH&GHWDLOV

HVWLPDWHGIRUHFDVWRIWKHDPRXQWRI*+*FRPSOLDQFHLQVWUXPHQWV LQPHWULFWRQVFDUERQ

GLR[LGHHTXLYDOHQWV WKDWFRUUHVSRQGWRWKHPD[LPXPSURFXUHPHQWOHYHOVDSSOLFDEOHWR

ERWKWKHDQGSHULRGVGHWDLOHGLQ7DEOH&

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

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 82 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< &203/,$1&(,167580(17)25(&$67)257+528*+ 0,//,2107&2( &21),'(17,$/

7ZR6WDQGDUG /LQH %DVH 'HYLDWLRQ+LJK 1R

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< ',5(&7&203/,$1&(2%/,*$7,21385&+$6(/,0,76)25$1' 0,//,2107&22( &21),'(17,$/

/LPLWIRU /LPLWIRU /LQH1R /LPLW $ $

2. Financially Hedging Greenhouse Gas Compliance Instrument Price Risk 3* (¶VSXUFKDVHRIDSSURYHG*+*3URGXFWV VHH$SSHQGL[$ WRKHGJH*+*

SULFHULVNZLOOEHVXEMHFWWRWKHSURFXUHPHQWOLPLWVHWIRUWKEHORZ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 83 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7KH³ILQDQFLDOH[SRVXUH´SXUFKDVHOLPLWVHWVWKHVSHFLILFOLPLWRQWKHDPRXQWRI

*+*3URGXFWV3* (FDQSXUFKDVHWRKHGJHLWVILQDQFLDOH[SRVXUHWR*+*FRVWVXQGHU

WKH&DSDQG7UDGH3URJUDP$VZLWKWKH'LUHFW&RPSOLDQFH2EOLJDWLRQ3XUFKDVH/LPLW

IRUPXODDERYHWKLVLVDSXUFKDVHOLPLWPHDQLQJWKHQXPEHUWKDWHPHUJHVIURPWKLV

FDOFXODWLRQZRXOGVHWWKHPD[LPXPDPRXQWRI*+*3URGXFWV3* (LVDOORZHGWR

SXUFKDVHLQWKHFXUUHQW\HDUIRUSXUSRVHVRIKHGJLQJLWVILQDQFLDOH[SRVXUH³3XUFKDVH´LV

GHILQHGDVWDNLQJWLWOHRIWKH*+*SURGXFWZKHQLWLVGHOLYHUHG3* (ZLOOQRWSXUFKDVH

DOORZDQFHVRURIIVHWVIRUKHGJLQJSXUSRVHVZLWKYLQWDJHVPRUHWKDQWKUHH\HDUVIURPWKH

FXUUHQW\HDU

3* (¶V)LQDQFLDO([SRVXUH3XUFKDVH/LPLWLVFDOFXODWHGDV

)/&< )(&< )(&< )(&< )(&<±% :KHUH

³)/´LVWKHPD[LPXPQXPEHURI*+*3URGXFWV3* (FDQSXUFKDVHIRU SXUSRVHVRIKHGJLQJLWVILQDQFLDOH[SRVXUHWR*+*FRVWV

³&<´LVWKHFXUUHQW\HDULHWKH\HDULQZKLFK3* (LVWUDQVDFWLQJLQWKH PDUNHW

³)(´LVDQHVWLPDWHRI3* (¶VILQDQFLDOH[SRVXUHWR*+*FRVWVWKDWZLOO RUDUHDQWLFLSDWHGWREHHPEHGGHGLQWKHSULFHRIHQHUJ\FDOFXODWHGEDVHG RQWKHWRQVRI*+*HPLVVLRQVIRUZKLFK3* (EHOLHYHVLWZLOOEHDUWKH FRVWVWKURXJKDQHPEHGGHGFRVWRIVXFKHPLVVLRQVDVUHIOHFWHGLQHQHUJ\ SULFHV7KLVDPRXQWGRHVQRWLQFOXGHWKHFRVWV3* (DQWLFLSDWHVLQFXUULQJ DVDUHVXOWRILWVGLUHFWFRPSOLDQFHREOLJDWLRQDV³GLUHFWFRPSOLDQFH REOLJDWLRQ´LVGHILQHGDERYH

³%´LV3* (¶VQHWSXUFKDVHVRI*+*3URGXFWVWRGDWHIRUKHGJLQJ SXUSRVHVFDOFXODWHGDVWKHWRWDOSXUFKDVHVRI*+*3URGXFWVIRUSXUSRVHVRI KHGJLQJ3* (¶VILQDQFLDOH[SRVXUHXSWRWKHFXUUHQW\HDUPLQXVWKRVH *+*3URGXFWVVROGXSWRWKHFXUUHQW\HDU7KLVWHUPKHOSVHQVXUHWKDWLI

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 84 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3* (KHGJHGFRQVLGHUDEO\LQSULRU\HDUVDQGWKRVHKHGJHVGLGQRWSD\RXW LHWKHSULFH3* (VDZLQWKHPDUNHWIRU*+*3URGXFWVVWD\HGEHORZ ZKDW3* (SDLGIRUD*+*3URGXFWDQGVR3* (GLGQRWVHOOWKH LQVWUXPHQW WKDWJHWVIDFWRUHGLQWRWKHDPRXQWRIDGGLWLRQDOKHGJLQJ3* ( LVDOORZHGWRXQGHUWDNH ,IWKLVHTXDWLRQUHVXOWVLQDQHJDWLYHQXPEHULQDJLYHQ\HDU3* (¶V)LQDQFLDO

([SRVXUH3XUFKDVH/LPLWIRUWKDW\HDUZLOOEHVHWDW]HUR

&RQVLVWHQWZLWK2UGHULQJ3DUDJUDSKRI'7DEOH&GHWDLOV

HVWLPDWHGIRUHFDVWRI3* (¶VILQDQFLDOH[SRVXUHWR*+*FRVWVWKDWZLOORUDUH

DQWLFLSDWHGWREHHPEHGGHGLQWKHSULFHRIHQHUJ\ LQPHWULFWRQVFDUERQGLR[LGH

HTXLYDOHQWV WKDWFRUUHVSRQGWRWKHPD[LPXPSURFXUHPHQWOHYHOVDSSOLFDEOHWRERWKWKH

DQGSHULRGVGHWDLOHGLQ7DEOH&IRUWKH&38&0DQGDWHG6FHQDULR

7DEOHV&DQG&SURYLGHWKHVDPHLQIRUPDWLRQIRU3* (¶V$OWHUQDWLYH6FHQDULR

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< ,1',5(&7&203/,$1&(,167580(17)25(&$67)257+528*+ &38&0$1'$7('6&(1$5,2 0,//,2107&2(

/LQH 1R

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 85 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(& ),1$1&,$/(;32685(385&+$6(/,0,76)25$1' &38&0$1'$7('6&(1$5,2 0,//,2107&2(

/LPLWIRU /LPLWIRU /LQH1R /LPLW % %

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< ,1',5(&7&203/,$1&(,167580(17)25(&$67)257+528*+ 3* ($/7(51$7,9(6&(1$5,2 0,//,2107&2(

/LQH 1R

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 86 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(& 3$&,),&*$6$1'(/(&75,&&203$1< ),1$1&,$/(;32685(385&+$6(/,0,76)25$1' 3* ($/7(51$7,9(6&(1$5,2 0,//,2107&2(

/LQH /LPLWIRU /LPLWIRU 1R /LPLW % %

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 87 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;' '(6&5,37,21$1'(9$/8$7,212)&38&0$1'$7('$1' 3* ($/7(51$7,9(6&(1$5,26

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 88 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Introduction 7KLV$SSHQGL[SURYLGHVDGHVFULSWLRQDQGHYDOXDWLRQRIWZRVHSDUDWHVFHQDULRVIRU

EXQGOHGSURFXUHPHQWQHHGVEHWZHHQDQG7KHILUVWVFHQDULRLVWKH

&DOLIRUQLD3XEOLF8WLOLWLHV&RPPLVVLRQ ³&38&´RU³&RPPLVVLRQ´ 0DQGDWHG6FHQDULR

7KLVVFHQDULRLQFOXGHVORDGDQGUHVRXUFHDVVXPSWLRQVPDQGDWHGE\WKH6FRSLQJ0HPR

DQG5XOLQJRI$VVLJQHG&RPPLVVLRQHUDQG$GPLQLVWUDWLYH/DZ-XGJHLVVXHG0D\

³6FRSLQJ0HPR´ 7KLV&38&0DQGDWHG6FHQDULRLVEDVHGRQWKHVWDQGDUGL]HG

SODQQLQJDVVXPSWLRQVWKDWZHUHHVWDEOLVKHGLQWKH$VVLJQHG&RPPLVVLRQHU¶V5XOLQJ

7HFKQLFDO8SGDWHVWR3ODQQLQJ$VVXPSWLRQVDQG6FHQDULRVIRUXVHLQWKH

/RQJ7HUP3URFXUHPHQW3ODQDQG&$,62733LVVXHG0D\

³3ODQQLQJ$VVXPSWLRQV´ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ ³3* (´ QHLWKHU

H[SOLFLWO\QRULPSOLFLWO\DGRSWVWKHVHSODQQLQJDVVXPSWLRQVDVLWVRZQDQGLVVXEPLWWLQJ

WKLV&38&0DQGDWHG6FHQDULRDQGLWVUHVXOWVDVGLUHFWHGE\WKH6FRSLQJ0HPR

7KH&38&0DQGDWHG6FHQDULRLVGHVFULEHGLQ6HFWLRQ%RIWKLV$SSHQGL[6HFWLRQ%DOVR

SURYLGHVDQHYDOXDWLRQRIWKH&38&0DQGDWHG6FHQDULRZKLFKLQFOXGHVWKHUHVXOWLQJ

FDSDFLW\DQGHQHUJ\ORDGUHVRXUFHEDODQFHWDEOHVDQG 7RH[SLUDWLRQ9DOXHDW5LVN

³7H9D5´ PHDVXUHIRUWKH&38&0DQGDWHG6FHQDULR

7KHVHFRQGVFHQDULRLQFOXGHGLQWKLV$SSHQGL[LVWKH3* ($OWHUQDWLYH6FHQDULR

7KH3* ($OWHUQDWLYH6FHQDULRLVEDVHGRQWKH&38&0DQGDWHG6FHQDULREXWLQFOXGHV

WKUHHGHPDQGVLGHPRGLILFDWLRQVZKLFKLPSDFWWKHEXQGOHGORDGIRUHFDVW6SHFLILFDOO\

WKH3* ($OWHUQDWLYH6FHQDULRLQFOXGHVKLJKHUIRUHFDVWVIRU&RPPXQLW\&KRLFH

$JJUHJDWLRQ ³&&$´ 'LUHFW$FFHVV ³'$´ DQG'LVWULEXWHG*HQHUDWLRQ ³'*´

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 89 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7KHRQO\VXSSO\VLGHUHVRXUFHVPRGLILHGLQWKH3* ($OWHUQDWLYH6FHQDULRDUHWKH

UHGXFHGUHQHZDEOHYROXPHVQHHGHGWRFRPSO\ZLWKWKH5HQHZDEOHV3RUWIROLR6WDQGDUG

³536´ SURFXUHPHQWWDUJHWVUHVXOWLQJIURPDQRYHUDOOORZHUEXQGOHGORDGIRUHFDVW

7KH3* ($OWHUQDWLYH6FHQDULRLVGHVFULEHGLQPRUHGHWDLOLQ6HFWLRQ&RIWKLV

$SSHQGL[,QDGGLWLRQ6HFWLRQ&DOVRLQFOXGHVWKHUHVXOWLQJ FDSDFLW\DQGHQHUJ\

ORDGUHVRXUFHEDODQFHWDEOHVDQG 7H9D5PHDVXUHIRUWKH3* ($OWHUQDWLYH6FHQDULR

B. CPUC Mandated Scenario %HORZ3* (SURYLGHVDGHVFULSWLRQRIHDFKRIWKHORDGDQGUHVRXUFHDVVXPSWLRQV

LQFOXGHGLQWKH&38&0DQGDWHG6FHQDULR

1. Load Forecast $VGLUHFWHGLQWKH6FRSLQJ0HPRWKHORDGIRUHFDVWLQ7DEOH'OLQHVDUH

IURPWKHPLGFDVHRIWKH&DOLIRUQLD(QHUJ\&RPPLVVLRQ¶V ³&(&´ ,QWHJUDWHG

(QHUJ\3ROLF\5HSRUW&DOLIRUQLD(QHUJ\'HPDQGDQGUHIOHFWWKHPLGFDVHRIWKH&(&¶V

$GGLWLRQDO$FKLHYDEOH(QHUJ\(IILFLHQF\SURMHFWLRQV

7KH'HPDQG5HVSRQVH ³'5´ YDOXHVLQ7DEOH'OLQHLQFOXGHWKRVH'5

SURJUDPVUHSRUWHGLQWKHPRVWUHFHQW$SULO/RDG,PSDFWUHSRUW3* (KDVILOHGZLWKWKH

&RPPLVVLRQ7KH\UHSUHVHQWWKHH[DQWH$XJXVWORDGLPSDFWLQDLQZHDWKHU\HDU

FRQGLWLRQ

2. Existing and Planned Resources 3* (RZQHGIRVVLOUHVRXUFHV 7DEOH'OLQH LQFOXGHWZRFRPELQHGF\FOH

SODQWV *DWHZD\DQG&ROXVD DQGDVHULHVRIJDVILUHGUHFLSURFDWLQJHQJLQHVWKDW

UHSODFHGWKH+XPEROGW%D\3RZHU3ODQW,QDGGLWLRQ3* (RZQVWKUHHIXHOFHOOHOHFWULF

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 90 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

JHQHUDWLQJIDFLOLWLHVWRWDOLQJPHJDZDWWV ³0:´ RILQVWDOOHGFDSDFLW\RQWZR6WDWHRI

&DOLIRUQLDSURSHUWLHV&DOLIRUQLD6WDWH8QLYHUVLW\±(DVW%D\DQG6DQ)UDQFLVFR6WDWH

8QLYHUVLW\

3* (RZQVDQGRSHUDWHVWZRQXFOHDUSRZHUXQLWVDWWKH'LDEOR&DQ\RQ3RZHU

3ODQWZLWKDFRPELQHGSHDNFDSDFLW\RI0: 7DEOH'OLQH

3* (RZQVDQGRSHUDWHVYDULRXVK\GURHOHFWULFIDFLOLWLHV 7DEOH'OLQH

LQFOXGLQJUXQRIULYHUDQGGLVSDWFKDEOHK\GURHOHFWULFIDFLOLWLHVDVZHOODVWKH

+HOPV3XPSHG6WRUDJH)DFLOLW\0DQ\RIWKHVHIDFLOLWLHVDUH536HOLJLEOHUHVRXUFHV

8QGHU3* (¶V6RODU3KRWRYROWDLF ³39´ SURJUDPDGRSWHGLQ&RPPLVVLRQ

'HFLVLRQ3* (RZQV0: LQVWDOOHGFDSDFLW\ RIGLVSHUVHGPLGVL]HG

W\SLFDOO\WR0: VRODU39LQVWDOODWLRQVZLWKLQ3* (¶VVHUYLFHWHUULWRU\3* (

DOVRRZQVWKUHHVPDOOVRODU39IDFLOLWLHVLQ6DQ)UDQFLVFRWKDWHQWHUHGFRPPHUFLDO

RSHUDWLRQVLQ$OORIWKHVHDUHUHIOHFWHGLQ7DEOH'OLQHZKLFKUHSUHVHQWVWKHLU

FDSDFLW\FRQWULEXWLRQDWWKHWLPHRIWKHSHDN

3* (RZQVWZRKRXUVWRUDJHVRGLXPVXOIXUEDWWHU\V\VWHPV7KH0:

LQVWDOOHGFDSDFLW\ 9DFD'L[RQ6WRUDJH3LORW3URMHFWDQGWKH0: LQVWDOOHGFDSDFLW\

0D\UHVSHFWLYHO\7KHVHDUHUHIOHFWHGLQ7DEOH'OLQHZKLFKUHSUHVHQWVWKHLU

FDSDFLW\FRQWULEXWLRQDWWKHWLPHRIWKHSHDN

$WWKHEHJLQQLQJRIWKH.LQJV5LYHU&RQVHUYDWLRQ'LVWULFWFRQWUDFWLVWKH

RQO\&DOLIRUQLD'HSDUWPHQWRI:DWHU ³&':5´RU³':5´ FRQWUDFWDOORFDWHGWR3* (

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 91 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

WKDWKDVQRW\HWH[SLUHG 7DEOH'OLQH 7KLVFRQWUDFWLVVFKHGXOHGWRH[SLUHODWH

3* (KDV3RZHU3XUFKDVH$JUHHPHQWVZLWKDSSUR[LPDWHO\RSHUDWLQJ

4XDOLI\LQJ)DFLOLWLHV ³4)´ 7DEOH'OLQH 7KH4)FRQWUDFWVFRYHUDZLGHUDQJH

RIWHFKQRORJLHVLQFOXGLQJ536HOLJLEOHDQGIRVVLOUHVRXUFHV

,QDGGLWLRQWR536HOLJLEOH4)V3* (KDVRWKHUFRQWUDFWVZLWK536HOLJLEOH

UHVRXUFHV 7DEOH'OLQH 3* (GHYHORSHG536DVVXPSWLRQVIRUWKH&38&

0DQGDWHG6FHQDULRFRQVLVWHQWZLWK3* (¶V'UDIW5363ODQ7KHQRQ4)536

SRUWIROLRUHIOHFWHGLQFOXGHVDOOH[HFXWHGFRQWUDFWVDWSHUFHQWRIQHJRWLDWHGHQHUJ\

GHOLYHULHVDQGRQOLQHGDWHVUHIOHFWWKHEHVWDYDLODEOHLQIRUPDWLRQRQWKHGHYHORSPHQW

VWDWXVRISURMHFWVXQGHUFRQWUDFWWR3* (

)RUWKH&38&0DQGDWHG6FHQDULRJHQHULFUHQHZDEOHUHVRXUFHV 7DEOH'

OLQH UHSUHVHQWV &38&DSSURYHGSURJUDPVLQFOXGLQJWKH5HQHZDEOH$XFWLRQ

0HFKDQLVP VPDOOVFDOHELRHQHUJ\)HHGLQ7DULII ³),7´ SURFXUHPHQWUHTXLUHG

SXUVXDQWWR6HQDWH%LOODQG),7SURFXUHPHQWXQGHUWKH5HQHZDEOH0DUNHW

$GMXVWLQJ7DULIISURJUDP 3* (¶V39SURJUDPDQG DGGLWLRQDOSURFXUHPHQW

QHHGHGWRFRPSO\ZLWKWKH536SURFXUHPHQWWDUJHWV7KHODWWHULVXVHGWRILOOWKH

536VSHFLILFQHWVKRUWSRVLWLRQZLWKJHQHULF536UHVRXUFHVXVLQJWKHIROORZLQJ

WHFKQRORJ\PL[SHUFHQWZLQGDQGSHUFHQWVRODU397KLVWHFKQRORJ\PL[LV

3* (¶VFXUUHQWEHVWHVWLPDWHRIDEOHQGRIWHFKQRORJLHVIRUORQJWHUP536SURFXUHPHQW

SXUSRVHV&RPPHUFLDOQHJRWLDWLRQVDQGPDUNHWIDFWRUVZLOOXOWLPDWHO\GHWHUPLQHWKH

'UDIW3* (5HQHZDEOH(QHUJ\3URFXUHPHQW3ODQILOHGLQ5-XQH

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 92 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

WHFKQRORJ\PDNHXSRI3* (¶VUHQHZDEOHSRUWIROLRVRWKHQXPEHUVSUHVHQWHGKHUHZLOO

FKDQJHRYHUWLPH

&38&'HFLVLRQHVWDEOLVKHGDSURFXUHPHQWWDUJHWIRU3* (RI

0:RILQVWDOOHGFDSDFLW\RIQHZHQHUJ\VWRUDJHXQLWV 7DEOH'OLQH 3* (¶V

IRUHFDVWRQWKLVOLQHLVFRQVLVWHQWZLWKWKRVHRXWOLQHGLQWKH3ODQQLQJ$VVXPSWLRQVDQG

UHIOHFWVFDSDFLW\WREHFRPHRSHUDWLRQDOLQUHDFKLQJWKHIXOOLQVWDOOHGFDSDFLW\RI

0:E\9DOXHVVKRZQRQWKLVOLQHUHSUHVHQWWKHFDSDFLW\FRQWULEXWLRQDWWKH

WLPHRIWKHSHDN

3* (¶V2WKHU%LODWHUDO&RQWUDFWXDO5HVRXUFHV 7DEOH'OLQH FRQVLVWVRI

ELODWHUDOFRQWUDFWVLQFOXGLQJ LQFUHPHQWDOVXSSO\VLGH&RPELQHG+HDWDQG3RZHU

³&+3´ YDULRXVWROOLQJFRQWUDFWV ODUJHK\GURFRQWUDFWV WKH3XJHW3RZHUDQG

/LJKW&RPSDQ\H[FKDQJHFRQWUDFWDQG 5HVRXUFH$GHTXDF\FRQWUDFWV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 93 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(' 3$&,),&*$6$1'(/(&75,&&203$1< &38&0$1'$7('6&(1$5,2 &$3$&,7<%$/$1&(

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

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 94 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(' 3$&,),&*$6$1'(/(&75,&&203$1< &38&0$1'$7('6&(1$5,2 (1(5*<%$/$1&(

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

3. Evaluation of Risk 7DEOH'VXPPDUL]HV3* (¶VHYDOXDWLRQRIWKH&38&0DQGDWHG6FHQDULRLQ

WHUPVRIULVNE\SURYLGLQJWKHUHVXOWLQJEXQGOHG7H9D5PHDVXUH$IXUWKHUGHVFULSWLRQRI

WKH7H9D5PHWKRGRORJ\FDQEHIRXQGLQ$SSHQGL[1

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 95 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(' 3$&,),&*$6$1'(/(&75,&&203$1< &38&0$1'$7('6&(1$5,25,6.

7H9D5 0LOOLRQV

C. PG&E Alternative Scenario

1. Load Forecast 7KHGLIIHUHQFHEHWZHHQWKH&38&0DQGDWHG6FHQDULRDQG3* ($OWHUQDWLYH

6FHQDULRLVWKHIRUHFDVWHGDPRXQWVRI&&$'$DQG'*GHSDUWXUHOHYHOV

:LWKUHJDUGWR&&$3* (LVHVWLPDWLQJGHSDUWLQJORDGEDVHGRQWKHFXUUHQWORDG

VHUYHGE\H[LVWLQJ&&$V 0DULQ&OHDQ(QHUJ\ ³0&(´ DQG6RQRPD&OHDQ3RZHU

³6RQRPD´ FRPELQHGZLWKORDGWKDWPD\EHVHUYHGE\WKHVHHQWLWLHVDORQJZLWKORDG

WKDWPD\EHVHUYHGE\HQWLWLHVWKDWDUHDFWLYHO\HQJDJHGLQH[SORULQJ&&$6SHFLILFDOO\

EDVHGRQDFXUUHQWVQDSVKRWRIDFWLYLW\3* (QRWHVWKDW6RQRPDLVSKDVLQJLQDGGLWLRQDO

ORDGZLWKLQWKHFRPPXQLWLHVWKDWDUHFXUUHQWO\PHPEHUVRIWKH-RLQW3RZHUV$XWKRULW\

³-3$´ DQGLVDFWLYHO\HQJDJLQJZLWKWKHWZRFLWLHVLQ6RQRPD&RXQW\WKDWDUHQRW

FXUUHQWO\SDUWRIWKH-3$EXWZLOOEHFRQVLGHULQJMRLQLQJEHIRUHWKHHQGRI

3HWDOXPDDQG5RKQHUW3DUN ,QWKHFDVHRI0&(XQLQFRUSRUDWHG1DSD&RXQW\KDV

UHFHQWO\MRLQHGWKH-3$DQGLVH[SHFWHGWREHJLQUHFHLYLQJVHUYLFHLQ,QERWKFDVHV

3* (XVHGHVWLPDWHVRIWKHORDGZLWKLQWKHVHDUHDVDSSOLHGDSUREDELOLW\

DGMXVWPHQWRIURXJKO\SHUFHQWWKDWWKH\ZLOODFWXDOO\SURFHHGZLWK&&$VHUYLFH

DQGIXUWKHUDGMXVWHGWKHORDGVWRUHIOHFWH[SHFWHGRSWRXWVDQGDQQXDOORDGJURZWK

)LQDOO\3* (UHFRJQL]HVWKHUHLVVXEVWDQWLDOXQFHUWDLQW\UHJDUGLQJWKHDPRXQWRIORDG

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 96 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

WKDWPD\EHVHUYHGE\HQWLWLHVWKDWDUHFXUUHQWO\HQJDJHGLQDFWLYHO\H[SORULQJ&&$$

QXPEHURIFRPPXQLWLHVKDYHXQGHUWDNHQDVLJQLILFDQWILQDQFLDOFRPPLWPHQWWRHYDOXDWH

&&$DQGKDYHSDVVHGUHVROXWLRQVVWDWLQJWKHLULQWHQWWRPRYHGRZQWKLVSDWK,QWKHVH

FDVHV3* (HVWLPDWHGWKHGHSDUWLQJORDGE\PXOWLSO\LQJHVWLPDWHVRIWKHOLNHOLKRRGWKDW

WKH\ZLOOSURFHHGWRVHUYHWKHDPRXQWRIORDGZLWKLQWKHVHFRPPXQLWLHVDGMXVWHGE\DQ

HVWLPDWHGRSWRXWUDWHDQGDQDQQXDOORDGJURZWKIDFWRU

:LWKUHJDUGWR'$3* (KDVWDNHQWKHFXUUHQWDPRXQWRIORDGVHUYHGXQGHU'$

DSSUR[LPDWHO\JLJDZDWWKRXUV ³*:K´ SHU\HDU DQGNHSWLWIODWWKURXJKRXW

IRUHFDVWSHULRG

:LWKUHJDUGWR'*3* (IRUHFDVWHG39DGRSWLRQVE\H[DPLQLQJKLVWRULFDO39

DGRSWLRQUDWHVDQGDGMXVWLQJJURZWKSURMHFWLRQVEDVHGRQDQWLFLSDWHGSROLF\

GHYHORSPHQWV7KH&RPSRXQG$QQXDO*URZWK5DWH ³&$*5´ LQDQQXDOLQVWDOOHGUHWDLO

39FDSDFLW\LQ3* (¶VWHUULWRU\IURPZDVSHUFHQW7KLVJURZWKKDVEHHQ

IXHOHGSULPDULO\E\DWWUDFWLYHSURMHFWHFRQRPLFVDQGWKHDYDLODELOLW\RIPRUHDFFHVVLEOH

ILQDQFLQJPRGHOV)URPWR\HDUHQG3* (DQWLFLSDWHVDQLQFUHDVHLQWKH

&$*5WRSHUFHQWDVFXVWRPHUVLQVWDOOV\VWHPVEHIRUHDGMXVWPHQWRIWKHIHGHUDO

,QYHVWPHQW7D[&UHGLWDQGEHIRUHFKDQJHVWR1HW(QHUJ\0HWHULQJWDULIIVDUHHQDFWHG

7KLVJURZWKUDWHLVLQOLQHZLWKQHDUWHUPSURMHFWLRQVIRU&DOLIRUQLDE\%ORRPEHUJ1HZ

(QHUJ\)LQDQFHLQWKHLU+86390DUNHW2XWORRNUHSRUW 0DUFK ,Q

3* (HVWLPDWHVWKDWDQQXDODGGLWLRQVZLOOUHWXUQWROHYHOVRIDSSUR[LPDWHO\

0:\HDUDQGLQFUHDVHUHODWLYHO\OLQHDUO\WRDERXW0:\HDUE\

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 97 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3* (IRUHFDVWHGDGRSWLRQRIQRQ39'*E\WKHIROORZLQJWHFKQRORJ\FDWHJRULHV

&+3)XHO&HOOVDQG2WKHU³2WKHU´WHFKQRORJLHVFRQVLVWRIZLQGV\VWHPVDQGQRQ&+3

PLFURWXUELQHVDQGHQJLQHV)RUWUDGLWLRQDO&+3DQG³2WKHU´WHFKQRORJLHV3* (¶V

IRUHFDVWZDVGHYHORSHGXVLQJDQKLVWRULF\HDUDYHUDJHDGRSWLRQUDWH7KHVH

WHFKQRORJLHVDUHVLWHGDOPRVWH[FOXVLYHO\RQFRPPHUFLDODQGLQGXVWULDOSURSHUWLHVDQGWKH

HOHFWULFUDWHVWUXFWXUHDQGWHFKQRORJ\VSHFLILFDWLRQVWKDWLPSDFWDGRSWLRQHFRQRPLFVDUH

QRWH[SHFWHGWRFKDQJHVXEVWDQWLDOO\LQWKHQHDUWHUP'XHWROLPLWHGDYDLODELOLW\RI

LQIRUPDWLRQRQKLVWRULFDGRSWLRQSULRUWR3* (IRUHFDVWHGLQFUHPHQWDODGRSWLRQ

XVLQJDKLVWRULFDOEDVHOLQHRI)XHOFHOODGRSWLRQRQWKHRWKHUKDQGKDVLQFUHDVHGLQ

PRVW\HDUVVLQFH,QFHQWLYHVDYDLODEOHWKURXJKWKH6HOI*HQHUDWLRQ,QFHQWLYH

3URJUDPGHFOLQLQJFRVWVDQGULVLQJV\VWHPHIILFLHQFLHV SDUWLFXODUO\IURPDOOHOHFWULF

V\VWHPV DUHLPSURYLQJWKHHFRQRPLFVRIIXHOFHOOV$VDUHVXOWDQH[SRQHQWLDOWUHQG

IXQFWLRQVKRZLQJLQFUHDVLQJUDWHVRIFDSDFLW\DGGLWLRQLVXVHGWRGHYHORSWKHIXHOFHOO

IRUHFDVW

%\3* (HVWLPDWHVDSSUR[LPDWHO\*:KRIJHQHUDWLRQIURPUHWDLO

'*IDFLOLWLHVZKLFKHTXDWHVWR*:KRIDYRLGHGSURFXUHPHQWDWWKHSRLQWRI

JHQHUDWLRQ 7DEOH'VXPRIOLQHVDQG

)LQDOO\WRDGGUHVVWKHRYHUODSWKDWPD\H[LVWEHWZHHQWKHVHYDULRXVIRUPVRIORDG

GHSDUWXUH3* (VXEWUDFWHGIURPWKH&&$ORDGGHSDUWXUHVGHVFULEHGDERYHWKH'$ORDG

SHUFHQWDJHDFURVVWKHVHUYLFHDUHDDQGWKHHVWLPDWHGDPRXQWRI'*JURZWKZLWKLQWKHVH

FRPPXQLWLHV7KLVHVWLPDWHG'*JURZWKZDVGHULYHGE\DSSO\LQJWKH'*JURZWKUDWHVWR

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 98 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

WKHFXUUHQWSURSRUWLRQRI'*SHQHWUDWLRQWKDWLVORFDWHGZLWKLQWKHYDULRXVFRPPXQLWLHV

WKDWKDYHLPSOHPHQWHGRUDUHDFWLYHO\H[SORULQJ&&$

2. Existing and Planned Resources 7KH3* ($OWHUQDWLYH6FHQDULRKDVRQO\RQHGLIIHUHQFHLQWKLVVHFWLRQLQ

FRPSDULVRQWRWKH&38&0DQGDWHG6FHQDULRVSHFLILFDOO\WKH*HQHULF5HQHZDEOH

5HVRXUFHV 7DEOH'OLQH 7KHUHVLGXDOHIIHFWRIWKHORZHUORDGIRUHFDVWLQWKH

3* ($OWHUQDWLYH6FHQDULRGLVFXVVHGDERYHUHGXFHVWKHQHHGIRUDGGLWLRQDOUHQHZDEOH

SURFXUHPHQWQHHGHGWRFRPSO\ZLWKWKH536SURFXUHPHQWWDUJHWV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 99 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(' 3$&,),&*$6$1'(/(&75,&&203$1< 3* ($/7(51$7,9(6&(1$5,2 &$3$&,7<%$/$1&(

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 100 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(' 3$&,),&*$6$1'(/(&75,&&203$1< 3* ($/7(51$7,9(6&(1$5,2 (1(5*<%$/$1&(

3. Evaluation of Risk 7DEOH'VXPPDUL]HV3* (¶VHYDOXDWLRQRIWKH3* ($OWHUQDWLYH6FHQDULRLQ

WHUPVRIULVNE\SURYLGLQJWKHUHVXOWLQJEXQGOHG7H9D5PHDVXUH$IXUWKHUGHVFULSWLRQRI

WKH7H9D5PHWKRGRORJ\FDQEHIRXQGLQ$SSHQGL[1

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 101 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(' 3$&,),&*$6$1'(/(&75,&&203$1< 3* ($/7(51$7,9(6&(1$5,2 5,6.

7H9D5 0LOOLRQV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 102 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;( (/(&75,&3257)2/,2+('*,1*3/$1

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 103 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Introduction 7KLV$SSHQGL[GHVFULEHV3DFLILF*DVDQG(OHFWULF&RPSDQ\¶V ³3* (´ KHGJLQJ

SODQ ³+HGJLQJ3ODQ´ IRULWVHOHFWULFSRUWIROLR7KH+HGJLQJ3ODQJXLGHV3* (¶V

PDQDJHPHQWRIWKHFRPPRGLW\SULFHULVNLQWKHSRUWIROLR,QDGGLWLRQWKH+HGJLQJ3ODQ

VHUYHVDVDIUDPHZRUNIRU&DOLIRUQLD3XEOLF8WLOLWLHV&RPPLVVLRQ ³&38&´RU

³&RPPLVVLRQ´ FRPSOLDQFHUHYLHZWKURXJKWKHTXDUWHUO\FRPSOLDQFHUHSRUWVDQGDQQXDO

(QHUJ\5HVRXUFH5HFRYHU\$FFRXQW ³(55$´ SURFHHGLQJV

B. Hedging Plan Structure 7KH+HGJLQJ3ODQLQFOXGHVWKHIROORZLQJFRPSRQHQWV

x 3ODQWHQRU

x +HGJLQJWDUJHWVDQGOLPLWV

x 3URGXFWPL[VWUDWHJ\

x ([HFXWLRQVWUDWHJ\

x &RQGLWLRQVZKHQLWLVDFFHSWDEOHWRRSHUDWHRXWVLGHWKHKHGJLQJSODQDQG

x /LTXLGLW\PDQDJHPHQWVWUDWHJ\ 7KHUHPDLQGHURIWKLVVHFWLRQGHVFULEHVLPSRUWDQWSODQQLQJDVSHFWVWKDWDUHQRWSDUW

RIWKH+HGJLQJ3ODQ

1. Physical Supply Managed Separately From the Hedging Plan

a. Electricity 3* (¶VREMHFWLYHVIRUPDQDJLQJWKHHOHFWULFSRUWIROLR¶VH[SRVXUHWRSK\VLFDOULVNV

DUHGLIIHUHQWIURP3* (¶VREMHFWLYHVIRUPDQDJLQJWKHHOHFWULFSRUWIROLR¶VH[SRVXUHWR

ILQDQFLDOULVNV7KHUHIRUH3* (PDQDJHVWKHHOHFWULFSRUWIROLR¶VSK\VLFDOHOHFWULFVXSSO\

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 104 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

VHSDUDWHO\IURPWKHHOHFWULFSRUWIROLR¶VH[SRVXUHWRILQDQFLDOULVNV,QPDQDJLQJWKH

HOHFWULFSRUWIROLR¶VILQDQFLDOULVNV3* (¶VREMHFWLYHVDUHWRUHGXFHH[SRVXUHRIWKH

HOHFWULFSRUWIROLRWRHOHFWULFLW\SULFHYRODWLOLW\WRUHGXFHSRUWIROLR7RH[SLUDWLRQ9DOXHDW

5LVN ³7H9D5´ DQGXOWLPDWHO\WRVWDELOL]HHOHFWULFUDWHVIRUFXVWRPHUV

7RPDQDJHDVSHFWVRIWKHHOHFWULFSRUWIROLRRWKHUWKDQILQDQFLDOULVNV²DVSHFWVVXFK

DVRSHUDWLRQDOIOH[LELOLW\²3* (PD\SURFXUHHOHFWULFLW\SURGXFWV6XFKWUDQVDFWLRQVIRU

HOHFWULFLW\SURGXFWVPD\DIIHFWWKHSK\VLFDOSRVLWLRQVDQGILQDQFLDOSRVLWLRQVRIWKH

HOHFWULFSRUWIROLR9DULRXVHOHFWULFLW\ULVNVDUHQRWPDQDJHGWKURXJKWKH+HGJLQJ3ODQEXW

WKURXJKRWKHUSDUWVRIWKH%XQGOHG3URFXUHPHQW3ODQ ³%33´ 0DQDJLQJULVNVDVVRFLDWHG

ZLWKGLIIHUHQFHVLQHOHFWULFLW\SULFHVEHWZHHQGD\DKHDGDQGUHDOWLPHSULFHVDUHGHVFULEHG

LQ$SSHQGL[+3* (¶VSODQIRUFRQYHUJHQFHELGGLQJ0DQDJLQJFRQJHVWLRQULVNLV

GHVFULEHGLQ$SSHQGL[,3* (¶VSODQIRUXVLQJ&RQJHVWLRQ5HYHQXH5LJKWV ³&55´

DQGSDUWLFLSDWLQJLQWKH&DOLIRUQLD,QGHSHQGHQW6\VWHP2SHUDWRU¶VDOORFDWLRQDQGDXFWLRQ

SURFHVVHVIRU&55V

b. Natural Gas 3* (¶VREMHFWLYHVIRUPDQDJLQJWKHHOHFWULFSRUWIROLR¶VH[SRVXUHWRSK\VLFDO

QDWXUDOJDVVXSSO\ULVNVDUHGLIIHUHQWIURP3* (¶VREMHFWLYHVIRUPDQDJLQJWKHHOHFWULF

SRUWIROLR¶VH[SRVXUHWRILQDQFLDOULVNVDVVRFLDWHGZLWKQDWXUDOJDV7KHUHIRUH3* (

PDQDJHVWKHHOHFWULFSRUWIROLR¶VSK\VLFDOJDVVXSSO\VHSDUDWHO\IURPWKHHOHFWULF

SRUWIROLR¶VH[SRVXUHWRILQDQFLDOULVNV,QPDQDJLQJWKHHOHFWULFSRUWIROLR¶VILQDQFLDOULVNV

DVVRFLDWHGZLWKQDWXUDOJDV3* (¶VREMHFWLYHVDUHWRUHGXFHH[SRVXUHRIWKHHOHFWULF

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 105 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

SRUWIROLRWRQDWXUDOJDVSULFHYRODWLOLW\WRUHGXFH7H9D5DQGWRVWDELOL]HHOHFWULFUDWHVIRU

FXVWRPHUV

c. Greenhouse Gas 3* (¶VREMHFWLYHVIRUPDQDJLQJWKHHOHFWULFSRUWIROLR¶VH[SRVXUHWRSK\VLFDO

JUHHQKRXVHJDV ³*+*´ FRPSOLDQFHLQVWUXPHQWVXSSO\ULVNVDUHGLIIHUHQWIURP3* (¶V

REMHFWLYHVIRUPDQDJLQJWKHHOHFWULFSRUWIROLR¶VH[SRVXUHWRILQDQFLDOULVNVDVVRFLDWHGZLWK

*+*FRVWV7KHUHIRUH3* (PDQDJHVWKHHOHFWULFSRUWIROLR¶VSK\VLFDO*+*FRPSOLDQFH

LQVWUXPHQWVXSSO\VHSDUDWHO\IURPWKHHOHFWULFSRUWIROLR¶VH[SRVXUHWRILQDQFLDOULVNV,Q

PDQDJLQJWKHHOHFWULFSRUWIROLR¶VILQDQFLDOULVNVDVVRFLDWHGZLWK*+*FRVWV3* (¶V

REMHFWLYHVDUHWRUHGXFHH[SRVXUHRIWKHHOHFWULFSRUWIROLRWR*+*FRPSOLDQFHLQVWUXPHQW

SULFHYRODWLOLW\WRUHGXFH7H9D5DQGWRVWDELOL]HHOHFWULFUDWHVIRUFXVWRPHUV

C. Hedging Plan

1. Tenor ,QWKHFRQWH[WRIWKH+HGJLQJ3ODQWHQRUPHDQVWKHOHQJWKRIWKHGHOLYHU\SHULRGWR

EHKHGJHG

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 106 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2. Hedging Targets and Limits 3* (¶V+HGJLQJ3ODQWDUJHWVDQGOLPLWVDUHGHILQHGDVIROORZV

7$%/(( 3$&,),&*$6$1'(/(&75,&&203$1< (/(&75,&3257)2/,2+('*,1*7$5*(76)25&2002',7<+('*,1*

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 107 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(( 3$&,),&*$6$1'(/(&75,&&203$1< (/(&75,&3257)2/,2+('*,1*/,0,76)25&2002',7<+('*,1*

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 108 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 109 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

),*85(( 3$&,),&*$6$1'(/(&75,&&203$1<

3. Product Mix

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 110 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

a. Product Mix Targets

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 111 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(( 3$&,),&*$6$1'(/(&75,&&203$1<

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 112 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

4. Execution Strategy

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 113 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

),*85(( 3$&,),&*$6$1'(/(&75,&&203$1<

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 114 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

D. Operating Outside of the Hedging Plan

1. Transition Plan %HFDXVHWKLV+HGJLQJ3ODQLQFRUSRUDWHVVLJQLILFDQWFKDQJHVIURP3* (¶VFXUUHQW

&RPPLVVLRQDSSURYHGKHGJLQJSODQDQGEHFDXVHWKLV+HGJLQJ3ODQZLOOEHDSSOLHGWR

3* (¶VH[LVWLQJSRUWIROLRXSRQ&RPPLVVLRQDSSURYDO3* (PD\QRWEHDEOHWR

LPPHGLDWHO\XSRQ&RPPLVVLRQDSSURYDOLPSOHPHQWWKLV+HGJLQJ3ODQDQGUHDFKWKH

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 115 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2. Unusual Events, Market Dislocations, and Emergencies

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 116 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

E. Liquidity Management Strategy

1. Liquidity Management Structure

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 117 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 118 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

),*85(( 3$&,),&*$6$1'(/(&75,&&203$1< /,48,',7<0$1$*(0(176758&785(

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 119 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2. Liquidity Measurement and Reporting

7$%/(( 3$&,),&*$6$1'(/(&75,&&203$1< /,48,',7<0$1$*(0(176758&785(

3. Liquidity Mitigation Strategies

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 120 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;) 18&/($5)8(/352&85(0(173/$1

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 121 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Background on Nuclear Fuel Procurement

1. The Nuclear Fuel Cycle :LWKLQWKHQXFOHDUIXHOF\FOHWKHUHDUHIRXUPDLQVHJPHQWVRIDFWLYLW\ZKLFK

XVXDOO\LQYROYHVVHSDUDWHSURFXUHPHQWVIRUHDFKVHJPHQW7KHVHVHJPHQWVDUHWKH

SXUFKDVHRIXUDQLXPFRQFHQWUDWHV ³82´ FRQYHUVLRQVHUYLFHVWRFRQYHUWWKHXUDQLXP

WRXUDQLXPKH[DIOXRULGHJDV ³8)´ HQULFKPHQWVHUYLFHVWRUDLVHWKHFRQFHQWUDWLRQOHYHO

RIILVVLRQDEOHPDWHULDOLQWKHXUDQLXPWRPHHW'LDEOR&DQ\RQ3RZHU3ODQW¶V ³'&33´

IXHOF\FOHUHTXLUHPHQWVDQGIDEULFDWLRQRIWKHDFWXDOIXHODVVHPEOLHVLQWKHIRUPUHTXLUHG

WREHORDGHGLQWR'&33¶VUHDFWRUV

3DFLILF*DVDQG(OHFWULF&RPSDQ\ ³3* (´

7KHUHDUH

DSSUR[LPDWHO\XUDQLXPSURGXFHUVLQWKHZRUOGZLWKXSWRDQRWKHUMXQLRU

PLQLQJFRPSDQLHVWKDWFXUUHQWO\HQJDJHLQH[SORUDWLRQDQGUHVRXUFHGHYHORSPHQW

&RQYHUVLRQVHUYLFHVDUHSURYLGHGZRUOGZLGHE\IRXUFRPPHUFLDOSURGXFHUV

7KHVHIDFLOLWLHVFRQYHUWWKHVROLGXUDQLXPFRQFHQWUDWHVLQWRDJDVHRXVVROXWLRQ8)

WKURXJKDFRPSOH[SURFHVVRIFKHPLFDOUHDFWLRQV8)LVWKHIHHGVWRFNIRUWKH

HQULFKPHQWVHJPHQWRIWKHSURFHVV

7KHIHHGVWRFN8)LVGHOLYHUHGWRWKHHQULFKPHQWIDFLOLWLHVZKHUHWKH

FRQFHQWUDWLRQRIWKHILVVLRQDEOHLVRWRSH8LVLQFUHDVHGIURPQDWXUDOEDFNJURXQGOHYHOV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 122 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

WRWKHFRQFHQWUDWLRQUHTXLUHGWRIXHO'&337KHZRUNLQJXQLWIRUHQULFKPHQWLVFDOOHGD

6HSDUDWLYH:RUN8QLW ³6:8´ ZKLFKLVWKHPHDVXUHRIWKHDPRXQWRIHQHUJ\UHTXLUHG

WRFRPSOHWHWKHFRQFHQWUDWLRQSURFHVV7KHUHDUHILYHFRPPHUFLDOHQULFKPHQWIDFLOLWLHVLQ

WKHZRUOG

(83LVWKHILQDOSURGXFWRIWKHHQULFKPHQWSURFHVVDQGEHFRPHVWKHIHHGPDWHULDO

WRFUHDWHIXHOSHOOHWVWKDWDUHORDGHGLQWRWKHIXHODVVHPEOLHVGXULQJWKHIXHOIDEULFDWLRQ

SURFHVV

$W\SLFDOUHORDGRIQHZIXHODVVHPEOLHVUHTXLUHVPLOOLRQSRXQGV ³OEV´ RI

XUDQLXPNLORJUDPV8UDQLXP ³NJ8´ RIFRQYHUVLRQVHUYLFHVDQG6:8

RIHQULFKPHQWVHUYLFHV7KHUHORDGFRQVLVWVRIEHWZHHQIXHODVVHPEOLHVURXJKO\

SHUFHQWRIWKHUHDFWRUFRUH

2. Diablo Canyon Power Plant Operations Plan

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 123 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 124 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/() 3$&,),&*$6$1'(/(&75,&&203$1< '&33(67,0$7('18&/($5)8(/6833/<5(48,5(0(176

BBBBBBBBBBBBBBB

B. PG&E’s Nuclear Fuel Procurement Plan

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 125 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

1. Forward Contracting and Price Terms

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 126 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 127 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2. Nuclear Fuel Strategic Inventory Management

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 128 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3. Proposed Risk Management Measures

4. Nuclear Liability and Insurance Issues Regarding Nuclear Fuel Contracts

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 129 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 130 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

5. Capped Liability Under Some Contracts

C. Issues Affecting the Plan

1. Regulatory and Political Outlook Not Specific to PG&E

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 131 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2. Transactions Outside the Scope of the Plan

D. Summary of Proposal and Conclusion 3* (KDVRIIHUHGWKHIROORZLQJUHFRPPHQGDWLRQVIRUSUXGHQWDQGFRVWHIIHFWLYH

SURFXUHPHQWRIQXFOHDUIXHOPDWHULDOVDQGVHUYLFHVGXULQJWKHSHULRGRIWKURXJK

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 132 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3* (¶V1XFOHDU)XHO3URFXUHPHQW3ODQLVLQWHQGHGWRDVVXUHWKHVHFXULW\RIIXHO

VXSSO\IRUWKHFRQWLQXHGVDIHDQGHIILFLHQWRSHUDWLRQRIWKH'&33UHDFWRUVHVVHQWLDOIRU

SRZHUUHOLDELOLW\LQQRUWKHUQ&DOLIRUQLDDQGZLOOFRQWULEXWHWRUHGXFHGRSHUDWLRQDOQXFOHDU

IXHOH[SHQVHV7KHSODQLQFOXGHVXSIURQWVWDQGDUGVDQGFULWHULDE\ZKLFKWKHDFFHSWDELOLW\

DQGHOLJLELOLW\IRUUDWHUHFRYHU\RISURSRVHGQXFOHDUIXHOSURFXUHPHQWWUDQVDFWLRQVZLOOEH

NQRZQE\3* (SULRUWRH[HFXWLRQRIWKHWUDQVDFWLRQV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 133 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;* *5((1+286(*$6352&85(0(173/$1

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 134 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Background

1. California Air Resource Board’s Cap-and-Trade Regulations $VVHPEO\%LOO ³$%´ LV&DOLIRUQLD¶VJURXQGEUHDNLQJ*UHHQKRXVH*DV

³*+*´ OHJLVODWLRQWKDWUHTXLUHVWKHUHGXFWLRQRIVWDWHZLGH*+*HPLVVLRQVWR

OHYHOVE\7RWKLVHQGWKH&DOLIRUQLD$LU5HVRXUFHV%RDUG ³&$5%´ SURSRVHGD

VWDWHZLGH&DSDQG7UDGHUHJXODWLRQDQGRWKHUSURJUDPPDWLFPHDVXUHVLQFOXGLQJD

5HQHZDEOHV(QHUJ\6WDQGDUG&XVWRPHU(QHUJ\(IILFLHQF\DQG&RPELQHG+HDWDQG

3RZHUWRDFKLHYHWKHVHHPLVVLRQVUHGXFWLRQV7KH&DSDQG7UDGHUHJXODWLRQZKLFK

EHFDPHHIIHFWLYHRQ-DQXDU\LVLQWHQGHGWRHVWDEOLVKDPDUNHWEDVHGSULFHIRU

*+*HPLVVLRQVDQGRYHUWLPHSURYLGHPDUNHWVLJQDOVIRUHIILFLHQWUHVRXUFHXWLOL]DWLRQ

DQGSURFXUHPHQWDFWLYLWLHVWRUHGXFH*+*HPLVVLRQV

&RPSOLDQFHZLWKWKHHPLVVLRQVFDSHVWDEOLVKHGLQWKH&$5%&DSDQG7UDGH

UHJXODWLRQEHJDQLQDQGLVEURNHQXSLQWRWKUHHFRPSOLDQFHSHULRGV7KH

ILUVWFRPSOLDQFHSHULRG²IRUWKH\HDUVWKURXJK²EHJDQRQ-DQXDU\

&RYHUHGHQWLWLHVLQWKHILUVWFRPSOLDQFHSHULRGLQFOXGHRSHUDWRUVRIDQ\IDFLOLW\WKDW DQQXDOO\HPLWVDWOHDVWPHWULFWRQVRIFDUERQGLR[LGHHTXLYDOHQW ³PW&2H´ 2SHUDWRUVDUHUHTXLUHGWRREWDLQDQGVXUUHQGHUFRPSOLDQFHLQVWUXPHQWVHTXLYDOHQWWRWKH

DQQXDO*+*HPLVVLRQVIRUHDFKVXFKIDFLOLW\,PSRUWHUVRIHOHFWULFLW\LQWR&DOLIRUQLDDUH

DOVRUHVSRQVLEOHIRUREWDLQLQJDQGUHWLULQJFRPSOLDQFHLQVWUXPHQWVIRU*+*HPLVVLRQV

GHHPHGWREHDVVRFLDWHGZLWKHOHFWULFLW\LPSRUWVIRUSXUSRVHVRIFRPSOLDQFHZLWK

&DSDQG7UDGH

8QLWVRI*+*DUHW\SLFDOO\PHDVXUHGLQWHUPVRIPW&2H

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 135 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7KHVHFRQGFRPSOLDQFHSHULRG²IRUWKH\HDUVWKURXJK²LVVFKHGXOHGWR

FRPPHQFHRQ-DQXDU\%HJLQQLQJLQWKHVHFRQGFRPSOLDQFHSHULRGFRYHUHG

HQWLWLHVH[SDQGWRLQFOXGHDPRQJRWKHUVVXSSOLHUVRIQDWXUDOJDVWKDWPHHWRUH[FHHGWKH

PW&2HWKUHVKROG$VXSSOLHURIQDWXUDOJDVLVUHTXLUHGWRREWDLQDQGVXUUHQGHU

FRPSOLDQFHLQVWUXPHQWVIRUHYHU\PHWULFWRQRI&2HWKDWZRXOGUHVXOWIURPWKHIXOO FRPEXVWLRQRUR[LGDWLRQRIDOOIXHOGHOLYHUHGWRHQGXVHUVLQ&DOLIRUQLDOHVVWKHHPLVVLRQV

DVVRFLDWHGZLWKIXHOWKDWLVGHOLYHUHGWRLWVFXVWRPHUVWKDWDUHUHTXLUHGWRSDUWLFLSDWHLQWKH

&DSDQG7UDGH3URJUDP ³FRYHUHGHQWLWLHV´

7KLVSODQRQO\FRYHUVSURFXUHPHQWDFWLYLWLHVQHFHVVDU\WRFRPSO\ZLWK3DFLILF*DV

DQG(OHFWULF&RPSDQ\¶V ³3* (´ REOLJDWLRQVUHODWHGWRHOHFWULFSURFXUHPHQW

$GGLWLRQDOSURFXUHPHQWQHFHVVDU\WRPHHW3* (¶VFRPSOLDQFHREOLJDWLRQVDVDQDWXUDO

JDVVXSSOLHUDQGWKHDVVRFLDWHGFRVWUHFRYHU\ZLOOEHDVDXWKRUL]HGWKURXJK&DOLIRUQLD

3XEOLF8WLOLWLHV&RPPLVVLRQ ³&38&´RU³&RPPLVVLRQ´ 2UGHU,QVWLWXWLQJ5XOHPDNLQJ

³5´ RUVXEVHTXHQW&RPPLVVLRQSURFHHGLQJV

7KHUHDUHWZRW\SHVRIFRPSOLDQFHLQVWUXPHQWV

L $OORZDQFHVDUHOLPLWHGWUDGDEOHDXWKRUL]DWLRQVDFFHSWHGE\&$5%WRHPLW XSWRRQHPW&2H$OORZDQFHVDUH\HDUVSHFLILFDQGFDQEHXVHGIRUDQ DQQXDOFRPSOLDQFHILOLQJIRUWKH\HDULWZDVLVVXHGRUIRUDQ\VXEVHTXHQW FRPSOLDQFHILOLQJ$QDOORZDQFHFDQEHERXJKWVROGWUDQVIHUUHGRU ³EDQNHG´IRUXVHLQDSDUWLFXODUFRPSOLDQFHSHULRG$OORZDQFHVDUH DYDLODEOHYLDGLUHFWDOORFDWLRQE\&$5%DXFWLRQVFRQGXFWHGXQGHUWKH

$FFRUGLQJWRWKH&DSDQG7UDGHUHJXODWLRQWKH,QYHVWRU2ZQHG8WLOLWLHV ³,28´ DUHUHTXLUHG WRFRQVLJQSHUFHQWRIWKHLU(OHFWULF'LVWULEXWLRQ8WLOLW\ ³('8´ GLUHFWO\DOORFDWHG DOORZDQFHVWRWKHDXFWLRQVLQWKHDOORFDWLRQ\HDU$Q,28FDQQRWXVHDGLUHFWO\DOORFDWHG('8 DOORZDQFHVWRVDWLVI\LWVFRPSOLDQFHREOLJDWLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 136 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

DXVSLFHVRI&$5%DQGWKH$OORZDQFH3ULFH&RQWDLQPHQW5HVHUYH ³$3&5´ HVWDEOLVKHGE\&$5%&$5%DXFWLRQVDUHKHOGTXDUWHUO\ $OORZDQFHVDUHDOVRDYDLODEOHLQWKHPDUNHW

LL 2IIVHW&UHGLWV ³2IIVHWV´ DUHWUDGDEOHFRPSOLDQFHLQVWUXPHQWVDFFHSWHGE\ &$5%WKDWUHSUHVHQWYHULILHGUHGXFWLRQVRIRQHPW&2HIURPSURMHFWV ZKRVHHPLVVLRQVRUDYRLGHGHPLVVLRQVDUHQRWIURPDVRXUFHFRYHUHGXQGHU WKH&DSDQG7UDGH3URJUDP)RUFRPSOLDQFHSXUSRVHVDQ2IIVHWDQGDQ DOORZDQFHDUHYLUWXDOO\LQWHUFKDQJHDEOHIRUWKH\HDULVVXHGKRZHYHUDQ HQWLW\FDQRQO\XVH2IIVHWVWRPHHWXSWRSHUFHQWRILWVFRPSOLDQFH REOLJDWLRQLQDQ\FRPSOLDQFHSHULRG,QDGGLWLRQ&$5%¶V&DSDQG7UDGH UHJXODWLRQDOORZV&$5%WRLQYDOLGDWHDQ2IIVHWIRUHUURUVUHJXODWRU\ YLRODWLRQVRUIUDXG&$5%KDVDGRSWHGVSHFLILFUXOHVIRUXVLQJ2IIVHWVIRU &DSDQG7UDGHFRPSOLDQFHLQFOXGLQJWKHW\SHVRISURMHFWVWKDWTXDOLI\DQG WKHSURFHVVIRU2IIVHWYHULILFDWLRQLVVXDQFHDQGUHJLVWUDWLRQ $OORZDQFHVDQG2IIVHWVPD\DOVREHDYDLODEOHIURPH[WHUQDO*+*(PLVVLRQV

7UDGLQJ6\VWHPVWRZKLFK&DOLIRUQLDKDVOLQNHG

3* (¶VDFWXDO&DSDQG7UDGHFRPSOLDQFHREOLJDWLRQIRUDJLYHQ\HDULV

GHWHUPLQHGE\WKH*+*HPLVVLRQVUHSRUWHGDQQXDOO\WR&$5%SHUWKH0DQGDWRU\

5HSRUWLQJ5XOH$QQXDOUHSRUWVDUHGXHWR&$5%E\$SULORIWKHFDOHQGDU\HDU

IROORZLQJWKHHPLVVLRQ\HDUIRUIDFLOLW\RSHUDWRUVRUVXSSOLHUVDQG-XQHIRUHOHFWULF

SRZHUHQWLWLHV&DSDQG7UDGHFRPSOLDQFHVKRZLQJVDUHPDGHDQQXDOO\DQGDWWKHHQGRI

HDFKFRPSOLDQFHSHULRG,QRUGHUWRGHPRQVWUDWHFRPSOLDQFHLQDJLYHQ\HDU3* (PXVW

VXUUHQGHUHQRXJKFRPSOLDQFHLQVWUXPHQWVWRFRYHUSHUFHQWRILWVTXDOLI\LQJHPLVVLRQV

E\1RYHPEHURIWKHIROORZLQJFDOHQGDU\HDU DQQXDOVXUUHQGHUGDWH ,QDGGLWLRQ

7KH&$5%$3&5LVSRSXODWHGZLWKDILQLWHTXDQWLW\RIDOORZDQFHVDYDLODEOHIRUSXUFKDVHDW IL[HGSULFHVDQGRQO\E\FRYHUHGHQWLWLHV &$5%¶V%RDUGDSSURYHGDPHQGPHQWVDOORZLQJIRUWKHXVHRIFRPSOLDQFHLQVWUXPHQWVLVVXHG E\OLQNHGMXULVGLFWLRQVRQ0D\&DOLIRUQLDLVFXUUHQWO\OLQNHGZLWK4XHEHF 5HJXODWLRQIRUWKH0DQGDWRU\5HSRUWLQJRI*+*(PLVVLRQV 'LYLVLRQ&KDSWHU 6XEFKDSWHU$UWLFOH6HFWLRQVWLWOH&DOLIRUQLD&RGHRI5HJXODWLRQV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 137 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3* (PXVWVXUUHQGHUHQRXJKFRPSOLDQFHLQVWUXPHQWVWRFRYHUWKHEDODQFHRILWV

TXDOLI\LQJHPLVVLRQVRYHUDPXOWL\HDUFRPSOLDQFHSHULRGE\1RYHPEHURIWKHFDOHQGDU

\HDUIROORZLQJWKHHQGRIHDFKFRPSOLDQFHSHULRG ³FRPSOLDQFHSHULRGVXUUHQGHUGDWH´

3* (UHFHLYHVDQDOORFDWLRQRIIUHHDOORZDQFHVDVVRFLDWHGZLWKLWVEXVLQHVVDVDQ

('8GLUHFWO\IURP&$5%DQQXDOO\KRZHYHUWKHVHIUHHDOORZDQFHVFDQQRWEHXVHG

GLUHFWO\E\3* (WRVDWLVI\LWVFRPSOLDQFHREOLJDWLRQ

$OOGLUHFWO\DOORFDWHGHOHFWULFDOORZDQFHVPXVWEHFRQVLJQHGE\3* (LQWRRQHRU

PRUHRIWKHDXFWLRQV,QHDFK\HDUDOORZDQFHVFRQVLJQHGDWOHDVWGD\VSULRUWRD

TXDUWHUO\DXFWLRQZLOOEHRIIHUHGIRUVDOHDWWKDWDXFWLRQDQGHDFKFRQVLJQLQJHQWLW\DJUHHV

WRDFFHSWWKHDXFWLRQVHWWOHPHQWSULFHIRUDOORZDQFHVVROGDWDXFWLRQ8QWLORQO\

,28VDQG3XEOLFO\2ZQHG8WLOLWLHVFDQFRQVLJQDOORZDQFHVWRWKHDXFWLRQDQGEHJLQQLQJ

LQQDWXUDOJDVVXSSOLHUVFDQDOVRFRQVLJQDOORZDQFHVLQWRWKHDXFWLRQ

2. Greenhouse Gas Compliance Instruments and CARB Auctions $GHVFULSWLRQRIWKHDXWKRUL]HG*+*FRPSOLDQFHLQVWUXPHQWVLVSURYLGHGLQ

$SSHQGL[$$GHVFULSWLRQRIWKH&$5%$XFWLRQDQG$3&5SURFHVVLVSURYLGHGLQ

$SSHQGL[%RIWKH%XQGOHG3URFXUHPHQW3ODQ ³%33´

B. PG&E’s Allowance Consignment

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 138 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

C. PG&E’s Potential Greenhouse Gas Risks

1. Greenhouse Gas Obligations 3* (LVUHTXLUHGE\&$5%¶V&DSDQG7UDGHUHJXODWLRQWRVXUUHQGHUFRPSOLDQFH

LQVWUXPHQWVIRULWVTXDOLI\LQJ8WLOLW\2ZQHG*HQHUDWLRQ ³82*´ DQGLPSRUWV

FROOHFWLYHO\GHVFULEHGDV³SK\VLFDO´REOLJDWLRQV 3* (DOVRKDVFRQWUDFWXDOREOLJDWLRQV

DVVRFLDWHGZLWKFHUWDLQWROOLQJDJUHHPHQWVWKDWUHTXLUHLWWRHLWKHU SURYLGHWKH

FRXQWHUSDUW\ZLWKFRPSOLDQFHLQVWUXPHQWVIRUWKHHQHUJ\XQGHUFRQWUDFWRU UHLPEXUVH

WKHFRXQWHUSDUW\IRUWKH&DSDQG7UDGHFRPSOLDQFHFRVWVDVVRFLDWHGZLWKLWVIDFLOLW\¶V

RSHUDWLRQXQGHUWKHFRQWUDFW

2. Cap-and-Trade Penalties 3* (FRXOGIDFH&$5%SHQDOWLHVIRUIDLOXUHWRVXUUHQGHUDQDGHTXDWHQXPEHURI

FRPSOLDQFHLQVWUXPHQWVIRUZKLFKLWKDVDFRPSOLDQFHREOLJDWLRQ&$5%¶V

&DSDQG7UDGHUXOHLPSRVHVDIRXUWLPHH[FHVVHPLVVLRQVSHQDOW\UHVXOWLQJIURP

³XQWLPHO\VXUUHQGHU´RIDOORZDQFHV7KLVSHQDOW\ZRXOGEHDVVHVVHGE\UHTXLULQJWKDW

DGGLWLRQDOFRPSOLDQFHLQVWUXPHQWVEHVXUUHQGHUHGUDWKHUWKDQE\FDVKSD\PHQW,Q

DGGLWLRQLIDQHQWLW\IDLOVWRVXUUHQGHUWKHUHTXLUHGFRPSOLDQFHLQVWUXPHQWVZLWKLQ

ILYHGD\VRIWKHILUVWDXFWLRQRUUHVHUYHVDOHFRQGXFWHGE\&$5%IROORZLQJWKHDSSOLFDEOH

VXUUHQGHUGDWHZKLFKHYHULVWKHODWWHUDQGIRUZKLFKWKHUHJLVWUDWLRQGHDGOLQHKDVQRW

SDVVHGZKHQWKHXQWLPHO\VXUUHQGHUREOLJDWLRQLVDVVHVVHG&$5%¶V&DSDQG7UDGHUXOH

ZRXOGWUHDWHDFKWRQRI*+*HPLVVLRQVIRUZKLFKDFRPSOLDQFHLQVWUXPHQWZDVQRW

VXUUHQGHUHGDVDVHSDUDWHYLRODWLRQIRUHDFKGD\WKHYLRODWLRQFRQWLQXHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 139 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3. Offset Credits &$5%¶V&DSDQG7UDGHUHJXODWLRQDOORZV&$5%WRLQYDOLGDWHDQ2IIVHWIRUHUURUV

UHJXODWRU\YLRODWLRQVRUIUDXG,QWKHFDVHZKHUHDQ2IIVHWLVXVHGWRPHHWDFRPSOLDQFH

UHTXLUHPHQWDQGLVODWHULQYDOLGDWHGWKHFRPSO\LQJHQWLW\PXVWUHSODFHWKHLQYDOLGDWHG

2IIVHWZLWKDYDOLGFRPSOLDQFHLQVWUXPHQWZLWKLQVL[PRQWKVRIQRWLILFDWLRQE\&$5%RI

WKH2IIVHW¶VLQYDOLGDWLRQRUEHVXEMHFWWRFRPSOLDQFHSHQDOWLHV3* (ZLOORQO\SXUFKDVH

2IIVHWVLIWKHSXUFKDVHFRQWUDFWUHTXLUHVWKHVHOOHUWRDVVXPHWKHULVNRILQYDOLGDWLRQDQG

WRSRVWDSSURSULDWHFROODWHUDO3* (ZLOODVVHVVWKHULVNRILQYDOLGDWLRQIRUHDFK2IIVHW

WUDQVDFWLRQ

D. PG&E’s GHG-Related Product Procurement 7KLV*+*3URFXUHPHQW3ODQDGGUHVVHVWKH*+*UHODWHGSURFXUHPHQWDXWKRULW\

QHFHVVDU\IRU3* (WRFRPSO\ZLWKWKHREOLJDWLRQVDVVRFLDWHGZLWKHPLVVLRQVIURP

HOHFWULFLW\VHFWRUVFRYHUHGE\&DSDQG7UDGH3URJUDPQDPHO\IDFLOLWLHVZLWK*+*

HPLVVLRQVJUHDWHUWKDQRUHTXDOWRPW&2HSHU\HDUDQGLPSRUWHGHOHFWULFLW\$V DQHQWLW\WKDWLVUHTXLUHGWRFRPSO\ZLWK&DSDQG7UDGH3* (ZLOOQHHGWRSURFXUH

FRPSOLDQFHLQVWUXPHQWVWRPHHWWKHFRPSOLDQFHUHTXLUHPHQWVDVVRFLDWHGZLWKLWVRZQ

IDFLOLWLHVDQGLPSRUWVDVZHOODVWKH*+*FRQWUDFWXDOREOLJDWLRQVDVVRFLDWHGZLWK3RZHU

3XUFKDVH$JUHHPHQWVZLWKWKLUGSDUWLHVWKDWUHTXLUH3* (WRSURFXUH*+*FRPSOLDQFH

SURGXFWVRUDVVXPH*+*FRPSOLDQFHFRVWVIRUVXFKSDUWLHV%HORZ3* (GHVFULEHVLWV

*+*REOLJDWLRQVDQG*+*SURFXUHPHQWVWUDWHJ\$VQRWHGEHORZ

&RPPLVVLRQDSSURYHG*+*UHODWHGSURGXFWV ³*+*3URGXFWV´ SURFXUHPHQWSURFHVVHV

DQG*+*3URFXUHPHQW/LPLWVDUHSURYLGHGLQ$SSHQGLFHV$%DQG&UHVSHFWLYHO\RI

WKLV%337KHSURGXFWVSURFXUHPHQWSURFHVVHV*+*3URFXUHPHQW/LPLWVDQG*+*

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 140 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

SURFXUHPHQWVWUDWHJ\HVWDEOLVKWKHXSIURQWDFKLHYDEOHVWDQGDUGVIRU3* (¶VSURFXUHPHQW

DFWLYLWLHVFRQVLVWHQWZLWK$%

1. Greenhouse Gas Obligations 3* (¶VSULPDU\QHHGWRSURFXUH*+*FRPSOLDQFHLQVWUXPHQWVDQGHQJDJHLQ

*+*WUDQVDFWLRQVDULVHVLQFRQQHFWLRQZLWKWKHIROORZLQJ

x 8WLOLW\2ZQHG)DFLOLWLHV&RQYHQWLRQDOJHQHUDWLRQIDFLOLWLHVRZQHGE\3* ( WKDWDUHHLWKHURSHUDWLQJRUXQGHUFRQVWUXFWLRQDQGWKDWHPLWDWOHDVW PW&2HSHU\HDUVXFKDVWKH+XPEROGW*HQHUDWLQJ6WDWLRQ&ROXVD *HQHUDWLQJ6WDWLRQDQG*DWHZD\*HQHUDWLQJ6WDWLRQZLOOKDYHDFRPSOLDQFH REOLJDWLRQXQGHU&DSDQG7UDGH

x &HUWDLQ7ROOLQJ$JUHHPHQWV&RQWUDFWVWKDWDOORFDWHWR3* (RUZKHUH3* ( KDVDVVXPHG*+*FRPSOLDQFHLQVWUXPHQWSURFXUHPHQWUHVSRQVLELOLW\IRUVXFK FRXQWHUSDUWLHV

x (OHFWULFLW\,PSRUWV3* (LVUHVSRQVLEOHIRU*+*HPLVVLRQVGHHPHGWREH DVVRFLDWHGZLWKLWVHOHFWULFLW\LPSRUWVIRUSXUSRVHVRIFRPSOLDQFHZLWK &DSDQG7UDGH

2. Greenhouse Gas-Related Products *+*3URGXFWVDSSURYHGE\WKH&RPPLVVLRQDUHOLVWHGLQ$SSHQGL[$

3. Greenhouse Gas-Related Processes 3* (ZLOOSURFXUH*+*3URGXFWVXVLQJWKHSURFXUHPHQWPHWKRGVDQGSURFHVVHV

LQDFFRUGDQFHZLWK$SSHQGL[%

4. Greenhouse Gas Procurement Strategy 3* (ZLOOSURFXUHVXIILFLHQW*+*3URGXFWVGXULQJHDFKFRPSOLDQFHSHULRGWR

PHHWLWV*+*REOLJDWLRQV3* (¶VSURFXUHPHQWVWUDWHJ\LQFOXGHVWKHIROORZLQJNH\

HOHPHQWV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 141 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

L *+*3URFXUHPHQW/LPLWV (DFKRIWKHVHHOHPHQWVLVGHVFULEHGLQPRUHGHWDLOEHORZ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 142 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 143 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 144 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 145 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 146 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 147 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 148 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 149 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

i. GHG Procurement Limits *+*3URFXUHPHQWOLPLWVDUHSURYLGHGLQ$SSHQGL[&

5. Procurement Review Group Consultation 3* (¶VFRQVXOWDWLRQZLWKWKH35*LVDGGUHVVHGLQ$SSHQGL[0

6. Cost Recovery &RVWUHFRYHU\RI*+*3URGXFWVLVGLVFXVVHGLQ6HFWLRQ,9)RIWKH%33

7. Approval for Contract Term Duration &38&DSSURYDORIWUDQVDFWLRQVLVGLVFXVVHGLQ6HFWLRQ9RIWKH%33

8. Independent Evaluator ,QGHSHQGHQW(YDOXDWRUUHTXLUHPHQWVDUHGLVFXVVHGLQ$SSHQGL[0

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 150 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 151 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 152 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;+ &219(5*(1&(%,'',1*

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 153 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Background 6LQFH$SULOWKH&DOLIRUQLD,QGHSHQGHQW6\VWHP2SHUDWRU ³&$,62´ KDV

PDQDJHGD'D\$KHDG0DUNHW ³'$0´ DQGSURYLGHGIRU/RFDWLRQDO0DUJLQDO3ULFLQJ

³/03´ 7KURXJKLWVPDUNHWSURFHVVHVWKH&$,62SURGXFHV/03VIRUWKH'$0 LH

RQHGD\SULRUWRWKHIORZRISRZHU DQGWKH5HDO7LPH0DUNHWV ³570´ LHXSWRRQH

KXQGUHGDQGWKLUW\ILYHPLQXWHVSULRUWRWKHIORZRISRZHU 6LQFH0D\WKH570

KDVFRQVLVWHGRIERWK)LIWHHQ0LQXWH QHZ DQG)LYH0LQXWH0DUNHWV

&RQYHUJHQFHELGVDUHILQDQFLDOWUDQVDFWLRQV LHYLUWXDOELGVIRUHQHUJ\WKDWZLOO

QRWEHFRQVXPHGRUSURGXFHG WKDWFDQRQO\EHVXEPLWWHGLQWKH'$0DQGDUH

UHFRJQL]HGE\V\VWHPRSHUDWRUVDVQRWEHLQJSK\VLFDO&RQYHUJHQFHELGVUHSUHVHQWD

ILQDQFLDOFRPPLWPHQWWRVHOO RUEX\ HQHUJ\LQWKH'$0DWWKHLQGLYLGXDOSULFLQJQRGH

ORFDWLRQZKHUHWKHFRQYHUJHQFHELGLVVXEPLWWHG,IWKHVHELGVDUHFOHDUHGLQWKH'$0

WKH\DUHDXWRPDWLFDOO\OLTXLGDWHGE\WKH&$,62ZLWKDQRSSRVLWHEX\EDFNE\VHOOHURU

VHOOEDFNE\EX\HURIWKHVDPHTXDQWLW\RIHQHUJ\LQWKH)LIWHHQ0LQXWH0DUNHW

7KH&$,62LQLWLDWHGFRQYHUJHQFHELGGLQJRQ)HEUXDU\

B. CPUC Authorization 2Q'HFHPEHUWKH&DOLIRUQLD3XEOLF8WLOLWLHV&RPPLVVLRQ ³&38&´RU

³&RPPLVVLRQ´ LVVXHG'HFLVLRQDXWKRUL]LQJWKHLQYHVWRURZQHGXWLOLWLHV

³,28´ WRSDUWLFLSDWHLQFRQYHUJHQFHELGGLQJXQGHUWKUHHVHSDUDWHVWUDWHJLHV7KH

GHFLVLRQSURYLGHGLQWHULPDXWKRULW\XQWLODVXEVHTXHQWGHFLVLRQVXSHUVHGHGRUPRGLILHG

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 154 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

WKHDXWKRULW\JUDQWHGRUDVWRSORVVOLPLWZDVUHDFKHG7KHGHFLVLRQIXUWKHUHVWDEOLVKHG

WKDWWKH,28VDUHQRWUHTXLUHGWRXVHDQ\RUDOORIWKHWKUHHELGGLQJVWUDWHJLHVDQGPD\

DSSO\WKHPIOH[LEO\WRPHHWWKHLURZQFLUFXPVWDQFHV'HFLVLRQZDV

VXEVHTXHQWO\PRGLILHGE\'HFLVLRQ

C. PG&E’s Convergence Bidding Participation 3DFLILF*DVDQG(OHFWULF&RPSDQ\ ³3* (´ PD\XVHRQHRUPRUHRIWKH

IROORZLQJFRQYHUJHQFHELGGLQJVWUDWHJLHVDXWKRUL]HGE\WKH&RPPLVVLRQ

x 6WUDWHJ\±*HQHUDWLRQSHUIRUPDQFHULVNDQGORDGIRUHFDVWXQFHUWDLQW\ KHGJLQJ3* (LVDXWKRUL]HGWRSDUWLFLSDWHLQFRQYHUJHQFHELGGLQJWRPDQDJH 5HDO7LPHSULFHH[SRVXUHUHVXOWLQJIURPXQDQWLFLSDWHGIRUFHGRXWDJHV GHUDWLQJRIJHQHUDWLQJXQLWVGHUDWLQJRIWUDQVPLVVLRQRUXQFHUWDLQJHQHUDWLRQ SHUIRUPDQFHIRUUHVRXUFHVVFKHGXOHGE\3* (LQWKH&$,62¶V'$07KLV VWUDWHJ\DOVRDXWKRUL]HGVXEPLVVLRQRIELGVUHODWHGWRORQJVWDUWJHQHUDWLRQ XQLWV

x 6WUDWHJ\±,QWHUPLWWHQWUHVRXUFHVFKHGXOHDQGKHGJLQJ3* (LVDXWKRUL]HG WRVXEPLWYLUWXDOVXSSO\ELGVLQWKH&$,62¶V'$0XSWREXWQRWH[FHHGLQJ WKHDPRXQWRIWKH'D\$KHDGIRUHFDVWRILQWHUPLWWHQWJHQHUDWLRQLQWKH 'D\$KHDG0DUNHWIROORZHGE\EX\LQJLWEDFNWKURXJKWKHFRQYHUJHQFHVDOH LQWKH&$,62570

x 6WUDWHJ\±'HIHQVLYHELGGLQJDJDLQVWPDUNHWG\QDPLFV3* (LV DXWKRUL]HGWRSDUWLFLSDWHLQGHIHQVLYHFRQYHUJHQFHELGGLQJLQWKH&$,62¶V 'D\$KHDGDQG5HDO7LPHHQHUJ\PDUNHWVWRPLWLJDWHUHDOKDUPVIURPPDUNHW PDQLSXODWLRQRURWKHUXQLQWHQGHGPDUNHWG\QDPLFV$Q\,28XVLQJGHIHQVLYH FRQYHUJHQFHELGGLQJPXVWUHSRUWVXFKXVHRQDFDVHE\FDVHEDVLVZLWKDFWXDO PDUNHWDQGVHWWOHPHQWGDWDDQGQRWMXVWK\SRWKHWLFDOVFHQDULRVVKRZLQJKRZ HQJDJLQJLQFRQYHUJHQFHELGGLQJE\WKH,28VSURWHFWHGUDWHSD\HUV(DFK,28 PXVWUHSRUWLIDQGKRZLWHPSOR\HGFRQYHUJHQFHELGGLQJVWUDWHJLHVLQWHQGHGWR

$GD\UROOLQJVWRSQHWORVVOLPLWRIPLOOLRQIRU3* (DQG6RXWKHUQ&DOLIRUQLD(GLVRQ &RPSDQ\DQGPLOOLRQIRU6DQ'LHJR*DV (OHFWULF&RPSDQ\WKDWUHTXLUHVVXVSHQVLRQRI FRQYHUJHQFHELGGLQJSHQGLQJ,28H[SODQDWLRQDQG&38&UHDXWKRUL]DWLRQ '23

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 155 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

SURWHFWWKH,28¶VUDWHSD\HUVIURPDYRLGDEOHULVNVDWLGHQWLILHGORFDWLRQV7KLV LQIRUPDWLRQZLOOEHXVHGIRUIXWXUHUHYLHZRIFRQYHUJHQFHELGGLQJDXWKRULW\ DQGQRWIRUSRVWKRFUHDVRQDEOHQHVVUHYLHZVRIXWLOLW\ELGGLQJDFWLYLWLHV 3* (¶VFRQYHUJHQFHELGGLQJXQGHUDOOVWUDWHJLHVZLOOEHUHVWULFWHGWRWKHQRGHVRU

ORFDWLRQVZKHUH3* (RZQHGRUFRQWUDFWHGUHVRXUFHVRUORDGVDUHSK\VLFDOO\ORFDWHGDW

LQWHUWLHVZKHUHXWLOLW\UHVRXUFHVRUORDGVDUHORFDWHGDVZHOODVDWWKHSUHYLRXVO\

DXWKRUL]HGQRGHVRUORFDWLRQV

D. Utility Convergence Bidding Reporting 3* (ZLOOSURYLGHTXDUWHUO\FRQYHUJHQFHELGGLQJUHSRUWVWRWKH&38&¶V

(QHUJ\'LYLVLRQ ³('´ 7KHUHSRUWVZLOOLQFOXGH

)RUWKDWPRQWKDOLVWRIHDFKFOHDUHGFRQYHUJHQFHELGFRQWDLQLQJWKHKRXU ORFDWLRQYROXPHDQGMXVWLILFDWLRQIRUWKHWUDQVDFWLRQ

$OLVWRIWKH'D\$KHDGDQGUHOHYDQW+RXU$KHDG6FKHGXOLQJ3URFHVVRU 5HDO7LPHSULFHVFRUUHVSRQGLQJZLWKHDFKFRQYHUJHQFHELGGXULQJWKH PRQWK

)RUHDFKGD\GXULQJWKHPRQWKWKHJDLQVRUORVVHVLQGROODUVDVDUHVXOWRI FRQYHUJHQFHELGGLQJ

)RUWKDWPRQWKDQGDQ\SDVWPRQWKVGXULQJWKHFDOHQGDU\HDULQZKLFK FRQYHUJHQFHELGVZHUHWUDQVDFWHGDPRQWKO\WRWDORIYROXPHJDLQVRU ORVVHV LQGROODUV WKHQXPEHURIWLPHV E\KRXUO\ELG HDFKVWUDWHJ\ZDV HPSOR\HGDQGWKHQXPEHURIELGVFRQGXFWHGRXWVLGHRI3* (¶VVHUYLFH WHUULWRU\

7KHDSSURYHGFRQYHUJHQFHELGGLQJVWUDWHJLHVXWLOL]HGGXULQJWKDWWLPH SHULRG

4XDOLWDWLYHDQDO\VLVRIFRQYHUJHQFHELGGLQJLPSDFWVXSRQRWKHUUHODWHG SURGXFWVVXFKDV&RQJHVWLRQ5HYHQXH5LJKWVGXULQJWKHSHULRG

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 156 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$OLVWRIDQ\3* (DIILOLDWHVZKRKDYHRUDUHUHJLVWHUHGZLWKWKH&$,62WR SDUWLFLSDWHLQFRQYHUJHQFHELGGLQJ 7KHTXDUWHUO\UHSRUWLQJZLOOEHLQFOXGHGDVSDUWRIWKH4XDUWHUO\&RPSOLDQFH

5HSRUWILOLQJV3* (ZLOODOVRFRQVXOWTXDUWHUO\ZLWKWKH3URFXUHPHQW5HYLHZ*URXS

³35*´ WRSURYLGHDUHYLHZRI3* (¶VFRQYHUJHQFHELGGLQJVWUDWHJLHVSHUIRUPDQFHDQG

PDUNHWDQDO\VLV

E. Stop Net-Loss 3* (ZLOOPRQLWRUWKHQHWSURILWDQGORVVHVDVVRFLDWHGZLWKVXEPLWWDORI

FRQYHUJHQFHELGV,QWKHHYHQWWKDWWKHGD\UROOLQJQHWORVVH[FHHGVRULVH[SHFWHGWR

H[FHHGPLOOLRQ3* (ZLOOFHDVHLPSOHPHQWDWLRQRIDOOFRQYHUJHQFHELGGLQJ

VWUDWHJLHVDQGFRQIHUZLWKWKH35*7RWKHH[WHQWWKDW3* (GHWHUPLQHVWKDW

FRQWLQXDWLRQRIFRQYHUJHQFHELGGLQJLVZDUUDQWHGLWZLOOILOHD7LHU$GYLFH/HWWHU

³$/´ ZLWKWKH&RPPLVVLRQ7KH$/PXVWFRQWDLQDWDPLQLPXP DQH[SODQDWLRQ

IRUZK\3* (H[FHHGHGWKHVWRSORVVOLPLW DQH[SODQDWLRQRIZKDWDFWLRQVRU

FKDQJHVWRLWVELGGLQJDFWLYLW\3* (ZLOOLPSOHPHQWWRHQVXUHWKDWIXWXUHFRQYHUJHQFH

ELGGLQJZLOOQRWFRQWLQXHWRORVHUDWHSD\HUIXQGVDQG DQH[SODQDWLRQIRUZK\3* (¶V

DXWKRULW\WRHQJDJHLQFRQYHUJHQFHELGGLQJVKRXOGEHUHLQVWDWHGLQOLJKWRIWKHVSHFLILF

IDFWVRI3* (¶VFRQYHUJHQFHELGGLQJKLVWRU\DQGUHPHGLDODFWLYLWLHVWRSURWHFWUDWHSD\HU

IXQGV8QOHVVDQGXQWLOWKH&RPPLVVLRQDSSURYHVWKH$/ZLWKRUZLWKRXWFRQGLWLRQV

3* (VKDOOKDYHQRDXWKRULW\WRHQJDJHLQFRQYHUJHQFHELGGLQJUHJDUGOHVVRIKRZORQJ

WKH&RPPLVVLRQWDNHVWRLVVXHDUXOLQJRQWKH$/

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 157 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

F. California Independent System Operator Notification Requirements 3* (VKDOOZLWKLQRQH EXVLQHVVGD\RILWVUHFHLSWRIQRWLFHSURYLGHZULWWHQ

QRWLFHWRWKH&38&¶V([HFXWLYH'LUHFWRUWKH'LUHFWRURI(QHUJ\'LYLVLRQDQGWKH

*HQHUDO&RXQVHORI QRWLFHIURPWKH&$,62RULWV'HSDUWPHQWRI0DUNHW0RQLWRULQJ

WKDW3* (RULWVVFKHGXOLQJFRRUGLQDWRULVWKHVXEMHFWRIDQLQYHVWLJDWLRQSXUVXDQWWRWKH

&$,627DULIILQFOXGLQJ6HFWLRQ QRWLFHIURPWKH&$,62WKDWWKHFRQGXFWRI

3* (RULWVVFKHGXOLQJFRRUGLQDWRU¶VFRQGXFWKDVEHHQUHIHUUHGWRWKH)HGHUDO(QHUJ\

5HJXODWRU\&RPPLVVLRQE\WKH&$,62SXUVXDQWWRWKH&$,627DULIILQFOXGLQJ

6HFWLRQRU QRWLFHIURPWKH&$,62WKDW3* (RULWVVFKHGXOLQJFRRUGLQDWRU¶V

FRQYHUJHQFHELGGLQJWUDGLQJKDVEHHQVXVSHQGHGRUOLPLWHGE\WKH&$,62

G. Future Convergence Bidding Strategies 3* (PD\VHHNDXWKRULW\WKURXJKD7LHU$/ILOLQJWRSDUWLFLSDWHLQDGGLWLRQDO

FRQYHUJHQFHELGGLQJDUHDVDQGRUSURSRVHDGGLWLRQDOFRQYHUJHQFHELGGLQJVWUDWHJLHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 158 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;, &21*(67,215(9(18(5,*+76

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 159 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Introduction 3DFLILF*DVDQG(OHFWULF&RPSDQ\ ³3* (´ LVDXWKRUL]HGWRSURFXUH&RQJHVWLRQ

5HYHQXH5LJKWV ³&55´ XQGHUWZR&DOLIRUQLD3XEOLF8WLOLWLHV&RPPLVVLRQ ³&38&´RU

³&RPPLVVLRQ´ UHVROXWLRQV&55VDUHILQDQFLDOLQVWUXPHQWVLVVXHGE\WKH&DOLIRUQLD

,QGHSHQGHQW6\VWHP2SHUDWRU ³&$,62´ 5HVROXWLRQ(DXWKRUL]HG3* (WR

SURFXUH&55VLQWKH&$,62¶VPRQWKO\DQGDQQXDOSURFHVVHV5HVROXWLRQ(

DXWKRUL]HG3* (WRSURFXUH/RQJ7HUP&RQJHVWLRQ5HYHQXH5LJKWV ³/7&55´ LQWKH

&$,62¶VORQJWHUPSURFHVV%RWKUHVROXWLRQVDXWKRUL]HG3* (WRSXUFKDVHDQGVHOO

&55VLQWKHVHFRQGDU\PDUNHWV

7KHPRQWKO\DQGDQQXDO&55SURFHVVHVFRQVLVWRIXSWRWKUHHDOORFDWLRQWLHUVDQG

DQDXFWLRQ,QWKHDOORFDWLRQWLHUVRQO\/RDG6HUYLQJ(QWLWLHV ³/6(´ VXFKDV3* (FDQ

QRPLQDWH&55VWKDWWKH\ZLVKWRREWDLQDWQRGLUHFWFRVW/6(VFDQSURFXUH&55VXSWR

DQDPRXQWGHWHUPLQHGE\WKHLUKLVWRULFDORUIRUHFDVWHGORDG,QWKHDXFWLRQVZKLFKDUH

RSHQWRDOOPDUNHWSDUWLFLSDQWV3* (FDQSXUFKDVHRUVHOO&55VDWPDUNHWEDVHGSULFHV

GHWHUPLQHGWKURXJKWKHFRPSHWLWLYHDXFWLRQ7KH$QQXDO&55SURFHVVUHOHDVHV&55V

ZLWKFDOHQGDUTXDUWHUGHOLYHU\SHULRGVWKDWRFFXURYHUWKHQH[W\HDU7KHPRQWKO\&55

SURFHVVUHOHDVHV&55VZLWKPRQWKO\GHOLYHU\SHULRGVIRUWKHQH[WPRQWK

7KH/7&55SURFHVVFRQVLVWVRIRQHDOORFDWLRQWLHUHDFK\HDUDQGLVSHUIRUPHGDV

SDUWRIWKHDQQXDO&55SURFHVV,QWKLV/RQJ7HUP7LHUTXDUWHUO\WHUP&55VSUHYLRXVO\

DFTXLUHGIURPWKHDQQXDO7LHUDOORFDWLRQFDQEHQRPLQDWHGIRUFRQYHUVLRQWR/7&55V

ZLWKVDPHTXDUWHUGHOLYHULHVIRUWKHVXEVHTXHQWQLQH\HDUV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 160 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

B. Congestion Revenue Rights and Long-Term Congestion Revenue Rights Procurement Objectives $VWKH&RPPLVVLRQGHWHUPLQHGLQ5HVROXWLRQV(DQG(3* (XVHV

&55VDQG/7&55VWRKHGJHDJDLQVWH[SHFWHGFRQJHVWLRQFRVWV3* (GRHVQRWXVH

&55VDQG/7&55VIRUILQDQFLDOVSHFXODWLRQ

C. Congestion Revenue Rights Procurement

1. Congestion Revenue Rights Source-Sink Pairs and Paths 3* (LVDXWKRUL]HGWRDFTXLUH&55VDQG/7&55VIRUDQ\SDWK UHSUHVHQWHGE\D

VRXUFHVLQNSDLU FRQQHFWLQJH[LVWLQJJHQHUDWLRQVRXUFHVWRH[LVWLQJORDGV UHWDLOORDGV

+HOPVSXPSLQJORDGDQGZKROHVDOHORDGREOLJDWLRQV RUIRUDQ\SDWKWKDW3* (

UHDVRQDEO\DQWLFLSDWHVLWPLJKWQHHGWRIORZHQHUJ\LQWKHIXWXUHGXHWRWKHDGGLWLRQRI

QHZFRQWUDFWVUHVRXUFHVRUORDGREOLJDWLRQV$GGLWLRQDOO\WKHUHPD\EH&55VRU

/7&55VZKLFKDUHSRVLWLYHO\FRUUHODWHGLQYDOXHZLWK&55VRU/7&55VIRUSDWKVWKDW

KDYHOLPLWHGDYDLODELOLW\3* (LVDXWKRUL]HGWRDFTXLUH&55VDQG/7&55VIRUVXFK

SRVLWLYHO\FRUUHODWHGSDWKVDVZHOO7KHUHIRUH3* (ZLOOREWDLQDQ\&55VDQG/7

&55VWKDWDUHGHWHUPLQHGWREHYDOXDEOHDVKHGJHVDJDLQVWFRQJHVWLRQFRVWVDWWKHWLPH

WKH\DUHRIIHUHGVXEMHFWWRVHOHFWLRQFULWHULDUHJDUGLQJWKHVSHFLILFVRXUFHVLQN

FRPELQDWLRQVDVGHVFULEHGLQ6HFWLRQ(RIWKLV$SSHQGL[

2. Procurement Review Group Consultation 3* (FRQVXOWVZLWKLWV3URFXUHPHQW5HYLHZ*URXS ³35*´ UHJDUGLQJ&55VDQG

/7&55V35*FRQVXOWDWLRQLVGHVFULEHGLQPRUHGHWDLOLQ$SSHQGL[0

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 161 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

D. Volume Limits 3* (¶V&55DQG/7&55SURFXUHPHQWLVVXEMHFWWRVRXUFHVSHFLILFYROXPH

OLPLWV7KDWLV3* (ZLOOOLPLWWKH³QHW´YROXPHWKDWLWFRXOGSURFXUHDWHDFKVRXUFH

QRGHWRWKHPD[LPXPQRQFRLQFLGHQWFDSDFLW\RIWKHVRXUFHV H[LVWLQJSRWHQWLDOSODQQHG

RU³SRVLWLYHO\FRUUHODWHG´ DWWKDWQRGHIRUWKDWGHOLYHU\SHULRG7KHUHDUHVHSDUDWH

VRXUFHVSHFLILFYROXPHOLPLWVIRUWKHRQSHDNDQGRIISHDNKRXUVLQWKHGHOLYHU\SHULRG

2YHUDOORUWRWDO&55YROXPHOLPLWVDUHXQQHFHVVDU\EHFDXVH3* (LVDOUHDG\OLPLWHGE\

&$,62UXOHVDQGWRKHGJLQJQRPRUHWKDQLWVWRWDOH[SHFWHGRUDQWLFLSDWHGJULGXVH

E. Selection Criteria for Congestion Revenue Rights in Allocation and Auction Processes

³1HW´YROXPHUHIHUVWRWKHUHVXOWRIQHWWLQJ&55VLQRQHGLUHFWLRQZLWK&55VLQWKH FRXQWHUIORZGLUHFWLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 162 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

F. Congestion Revenue Rights Auction Participation

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 163 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

G. Transactions in Secondary Congestion Revenue Rights Market

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 164 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;- %52.(5$*(6$1'(;&+$1*(6

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 165 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Brokerages

x 7XOOHWW3UHERQ)LQDQFLDO6HUYLFHV//&

x ,&$38QLWHG,QF

x 7)6(QHUJ\)XWXUHV//&

x $PHUH[%URNHUV//&

x /DQGPDUN

x 6DGGOHEDFN

x $QDKDX(QHUJ\//& D:RPHQ0LQRULW\RU'LVDEOHG9HWHUDQ2ZQHG %XVLQHVV(QWHUSULVHV ³:0'9%(´

x (YROXWLRQ0DUNHWV,QF

x %OXHVRXUFH(QHUJ\//& :0'9%(

x (QHUJ\7UDGH0DQDJHPHQW*3//&

x (TXXV(QHUJ\*URXS//&

x 0DUH[6SHFWURQ

x .DUERQH,QF

x %*&(QYLURQPHQWDO%URNHUDJH6HUYLFHV/3

x (GJH(QHUJ\//&

x (2;+ROGLQJV//& LQFOXGHV&KRLFH(QHUJ\/3DQG&KRLFH1DWXUDO*DV

x &OHDU(QHUJ\%URNHUDJH &RQVXOWLQJ//&

x 7KH)LQHUW\*URXS,QF :0'9%(

x 6WHUOLQJ3ODQHW,QF

3* (FDQRQO\SURFXUHJUHHQKRXVHJDV ³*+*´ SURGXFWVYLDEURNHUVWKURXJKD5HTXHVWIRU 2IIHUV6HH'HFLVLRQ ³'´ 2UGHULQJ3DUDJUDSK ³23´ J

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 166 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

B. Exchanges and Futures Commission Merchants

x ,QWHUFRQWLQHQWDO([FKDQJH ³,&(´ ±([FKDQJHDQG&OHDUHG &OHDU(XURSH WUDGHV

x 1HZ

x 1DWXUDO*DV([FKDQJH ³1*;´ ±3K\VLFDODQG)LQDQFLDOO\&OHDUHG*DV 3URGXFWV

x %DUFOD\V&DSLWDO,QF DOORZVDFFHVVLELOLW\WR1<0(;1<0(;&OHDULQJDQG ,&(&OHDU(XURSH

x -30RUJDQ)XWXUHV,QF DOORZVDFFHVVLELOLW\WR1<0(;1<0(;&OHDULQJ ,&(&OHDU(XURSHDQG*UHHQ;&0(&OHDULQJ

x 0L]XKR6HFXULWLHV86$ DOORZVDFFHVVLELOLW\WR1<0(;1<0(;&OHDULQJ ,&(&OHDU(XURSHDQG*UHHQ;&0(&OHDULQJ

x :HOOV)DUJR$GYLVRUV//& DOORZVDFFHVVLELOLW\WR1<0(;1<0(; &OHDULQJDQG,&(&OHDU(XURSH

x %133DULEDV3ULPH%URNHUDJH,QF DOORZVDFFHVVLELOLW\WR,&(&OHDU(XURSH DQG*UHHQ;&0(&OHDULQJ

x ,&$3(QHUJ\//&±WKH,&$3WXUH(OHFWURQLF7UDGLQJ3ODWIRUP RQOLQH HQHUJ\GHULYDWLYHWUDGLQJ

x 0DFTXDULH)XWXUHV86$//& DOORZVDFFHVVLELOLW\WR1<0(;1<0(; &OHDULQJ,&(&OHDU(XURSH

C. GHG Product Authorized Exchanges

x ,&(±([FKDQJHDQG&OHDUHG &OHDU(XURSH WUDGHV

3* (FDQSURFXUH*+*SURGXFWVRQH[FKDQJHVWKDWZHUHDSSURYHGE\WKH&DOLIRUQLD3XEOLF 8WLOLWLHV&RPPLVVLRQ ³&38&´RU³&RPPLVVLRQ´ IRUSRZHUSURFXUHPHQWEHIRUH' ZDVLVVXHG)RUH[FKDQJHVQRWSUHYLRXVO\DSSURYHG3* (PXVWVXEPLWD7LHUDGYLFHOHWWHU GHWDLOLQJ ZKDWH[FKDQJHLWLVVHHNLQJWRXVH WKHOLTXLGLW\DQGWUDQVSDUHQF\RIWKH H[FKDQJHVSHFLILFWR*+*3URGXFWVLQFOXGLQJDQH[SODQDWLRQRIKRZWKH&RPPLVVLRQFDQEH DVVXUHGWKDWWKHSULQFHRIWKHSURGXFWVSURFXUHGRQWKHH[FKDQJHLVUHDVRQDEOHDQG WKH UHJXODWRU\DXWKRULW\RUDXWKRULWLHVWKHH[FKDQJHLVVXEMHFWWR,G23K([FKDQJHVDSSURYHG IRU*+*SURGXFWVDUHLGHQWLILHGLQ6HFWLRQ&EHORZ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 167 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

x 1<0(;±([FKDQJHDQG&OHDUHG 1<0(;1<0(;&OHDULQJ *UHHQ;&0(&OHDULQJ WUDGHV

x 1*;±3K\VLFDODQG)LQDQFLDOO\&OHDUHG*DV3URGXFWV

x %DUFOD\V&DSLWDO,QF DOORZVDFFHVVLELOLW\WR1<0(;1<0(;&OHDULQJDQG ,&(&OHDU(XURSH

x -30RUJDQ)XWXUHV,QF DOORZVDFFHVVLELOLW\WR1<0(;1<0(;&OHDULQJ ,&(&OHDU(XURSHDQG*UHHQ;&0(&OHDULQJ

x 0L]XKR6HFXULWLHV86$ DOORZVDFFHVVLELOLW\WR1<0(;1<0(;&OHDULQJ ,&(&OHDU(XURSHDQG*UHHQ;&0(&OHDULQJ

x :HOOV)DUJR$GYLVRUV//& DOORZVDFFHVVLELOLW\WR1<0(;1<0(; &OHDULQJDQG,&(&OHDU(XURSH

x %133DULEDV3ULPH%URNHUDJH,QF DOORZVDFFHVVLELOLW\WR,&(&OHDU(XURSH DQG*UHHQ;&0(&OHDULQJ

x ,&$3(QHUJ\//&±WKH,&$3WXUH(OHFWURQLF7UDGLQJ3ODWIRUP RQOLQH HQHUJ\GHULYDWLYHWUDGLQJ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 168 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;. %,'',1*$1'6&+('8/,1*35272&2/6

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 169 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Introduction 7KH&DOLIRUQLD3XEOLF8WLOLWLHV&RPPLVVLRQ ³&RPPLVVLRQ´RU³&38&´ KDV

DGRSWHG6WDQGDUGVRI&RQGXFW ³62&´ IRUSURFXUHPHQWUHODWHGDFWLYLWLHVLQFOXGLQJ

62&ZKLFKSURYLGHVWKDWWKHXWLOLWLHVVKRXOGGLVSDWFKWKHLUJHQHUDWLRQUHVRXUFHVLQD

OHDVWFRVWPDQQHU7KH&RPPLVVLRQKDVUHFHQWO\UHFRJQL]HGWKDWZLWKWKH&DOLIRUQLD

,QGHSHQGHQW6\VWHP2SHUDWRU¶V ³&$,62´ LPSOHPHQWDWLRQRILWV0DUNHW5HGHVLJQDQG

7HFKQRORJ\8SJUDGH ³0578´ ³>W@KHUHJXODWHGHQHUJ\XWLOLW\LVUHVSRQVLEOHIRU

VFKHGXOLQJDQGELGGLQJLWVJHQHUDWLRQWRWKH&$,62EXWRQFHWKDWLVGRQHLWLVWKH

&$,62¶VUHVSRQVLELOLW\WRGLVSDWFKWKHJHQHUDWLRQ´7KLV$SSHQGL[GHVFULEHV3DFLILF

*DVDQG(OHFWULF&RPSDQ\¶V ³3* (´ VFKHGXOLQJDQGELGGLQJSUDFWLFHVIRUWKH

UHVRXUFHVLQLWVEXQGOHGSRUWIROLR)RUSXUSRVHVRIWKLV$SSHQGL[WKHVFKHGXOLQJDQG

ELGGLQJSURFHVVLVDOVRUHIHUUHGWRDV/HDVW&RVW'LVSDWFKRU³/&'´

6HFWLRQ%EHORZSURYLGHVDQRYHUYLHZRIWKH&$,62PDUNHWV,Q6HFWLRQ&

3* (GHVFULEHVLWVVFKHGXOLQJDQGELGGLQJSULQFLSOHVWKDWKHOS3* (DFKLHYH/&'DQG

6HFWLRQ'GHVFULEHVWKHVSHFLILFVFKHGXOLQJDQGELGGLQJSURFHVVHVXVHGE\3* (

B. Overview of CAISO Markets

1. Day-Ahead Markets 7KH&$,62¶V'D\$KHDG0DUNHW ³'$0´ SURYLGHVPDUNHWSDUWLFLSDQWVZLWKWKH

RSSRUWXQLW\WRFRQWUDFWILQDQFLDOO\IRUWKHEX\LQJDQGVHOOLQJRIHQHUJ\IRUWKHIROORZLQJ

GD\7KH'$0LQFOXGHV0DUNHW3RZHU0LWLJDWLRQ5HOLDELOLW\5HTXLUHPHQW

'HWHUPLQDWLRQWKH,QWHJUDWHG)RUZDUG0DUNHW ³,)0´ DQGWKH5HVLGXDO8QLW

'HFLVLRQ)LQGLQJRI)DFW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 170 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

&RPPLWPHQW,QWKH,)0WKH&$,62FOHDUVILQDQFLDOO\ELQGLQJRIIHUVWREX\DQGVHOO

HQHUJ\EDVHGRQWKHSK\VLFDOFKDUDFWHULVWLFVDQGORFDWLRQVRIDYDLODEOHUHVRXUFHVDQG

FXVWRPHUORDGVIRUHDFKRIWKHKRXUVRIWKHIROORZLQJGD\7KH&$,62DOVRXVHVWKH

,)0WRSHUIRUPLWVRZQSURFXUHPHQWRI$QFLOODU\6HUYLFHV ³$6´ UHJXODWLRQXS

UHJXODWLRQGRZQVSLQQLQJUHVHUYHDQGQRQVSLQQLQJUHVHUYH WRHQVXUHV\VWHPUHOLDELOLW\

IRUWKHQH[WGD\0DUNHWFOHDULQJDQG$6SURFXUHPHQWDUHSHUIRUPHG³RSWLPDOO\´ VRIDU

DVFXUUHQWWHFKQRORJLHVDOORZ XVLQJDVHFXULW\FRQVWUDLQHGXQLWFRPPLWPHQWDOJRULWKP

ZKLFKPLQLPL]HVWRWDOFRVWVEDVHGRQVXEPLWWHGELGVWKH&$,62¶V$6UHTXLUHPHQWVDQG

WKHFRQVWUDLQWVRQSRZHUIORZVLPSRVHGE\WKHFRQWURODUHD¶VODUJHDQGFRPSOH[

WUDQVPLVVLRQQHWZRUN

%HFDXVHWKH,)0LVILQDQFLDOO\UDWKHUWKDQSK\VLFDOO\ELQGLQJIRUPRVWHQHUJ\

VFKHGXOHV WKHH[FHSWLRQVDUHORQJVWDUWLQVWUXFWLRQVDQGDQ\HQHUJ\DVVRFLDWHGZLWKWKH

ELQGLQJSURFXUHPHQWRI$6E\WKH&$,62 WKH&$,62SHUIRUPVD³SRVWSURFHVVLQJ´

5HVLGXDO8QLW&RPPLWPHQWSKDVHLQWKH'$0VWRHQVXUHWKDWVXIILFLHQWFDSDFLW\LV

DYDLODEOHLQWKH5HDO7LPH0DUNHWV ³570´ WRPHHWWKH&$,62¶VRZQIRUHFDVWRI

FRQWURODUHDORDG

2. Real-Time Markets 7KH&$,62H[HFXWHVVHYHUDORYHUODSSLQJPDUNHWSURFHVVHVWKDWWRJHWKHUDUH

FDWHJRUL]HGDV³UHDOWLPH´EHFDXVHWKH\DUHSK\VLFDOO\ELQGLQJDWWKHWLPHRIGHOLYHU\

2QO\WZRRIWKHVHSURFHVVHVWKH)LIWHHQ0LQXWH0DUNHW ³)00´ DQGWKH5HDO7LPH

(FRQRPLF'LVSDWFK ³57('´ PDUNHWSURFHVVUHVXOWLQSULFHVWKDWDUHXVHGIRUHQHUJ\

DQG$6VHWWOHPHQWV7KH)00PDUNHWXWLOL]HVWKH5HDO7LPH8QLW&RPPLWPHQW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 171 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

³578&´ SURFHVVHYHU\PLQXWHVWRGHWHUPLQHELQGLQJXQLWFRPPLWPHQWVDQG$6

DZDUGVDQGILQDQFLDOO\ELQGLQJHQHUJ\DZDUGVDORQJZLWKORFDWLRQDOPDUNHWSULFHV7KH

57('UXQVHYHU\ILYHPLQXWHVDQGGHWHUPLQHVELQGLQJGLVSDWFKLQVWUXFWLRQVDORQJZLWK

ORFDWLRQDOPDUNHWSULFHV7ZRRWKHUSURFHVVHVWKH6KRUW7HUP8QLW&RPPLWPHQWDQGWKH

+RXU$KHDG6FKHGXOLQJ3URFHVVUHVXOWLQFRPPLWPHQWVRUSUHVFKHGXOHVRIUHVRXUFHVWKDW

FDQEHVWDUWHGVKXWGRZQRUSUHVFKHGXOHGLQWKHLUUHVSHFWLYHWLPHIUDPHVEXWGRQRWUHVXOW

LQELQGLQJHQHUJ\VFKHGXOHVRUFOHDULQJSULFHV)LQDOO\/RFDO0DUNHW3RZHU0LWLJDWLRQ

³/030´ UXQVGXULQJHDFKUXQRI578&WRPLWLJDWHELGVXVHGLQWKH578&DQG57('

SURFHVVHVIRUDJLYHQKRXU

%HWZHHQWKHGD\DKHDGDQGKRXUDKHDGPDUNHWWLPHIUDPHVFKDQJHVLQV\VWHP

FRQGLWLRQVZHDWKHUWUDQVPLVVLRQDQGUHVRXUFHDYDLODELOLW\DUHLQHYLWDEOH3* (

UHVRXUFHVZLWKWKHIOH[LELOLW\WRLQFUHDVHDQGGHFUHDVHJHQHUDWLRQLQUHVSRQVHWRFKDQJHV

LQORDGDQGRSHUDWLQJUHTXLUHPHQWVDUHELGLQWRERWKWKHGD\DKHDGDQGUHDOWLPHPDUNHWV

C. Scheduling and Bidding Principles 3* (KDVDGRSWHGWKHIROORZLQJSULQFLSOHVWRJXLGHLWVVFKHGXOLQJDQGELGGLQJ

DFWLYLWLHV

x 3* (DLPVWRPLQLPL]HLWVWRWDOFRVWRIHQHUJ\UHTXLUHGWRPHHWORDGDQG$6 UHTXLUHPHQWVVXEMHFWWRUHJXODWRU\OHJDORSHUDWLRQDOFRQWUDFWXDODQG ILQDQFLDOUHTXLUHPHQWV

x 3* (¶VVFKHGXOLQJDQGELGGLQJSURFHVVFRQVLGHUVDOOUHJXODWRU\OHJDO RSHUDWLRQDOFRQWUDFWXDODQGILQDQFLDOUHTXLUHPHQWV

7KH/030SURFHVVSURGXFHVQRELQGLQJHQHUJ\VFKHGXOHVRUFOHDULQJSULFHVLWVHOIWKRXJKWKH UHVXOWLQJPLWLJDWHGELGVPD\DIIHFWHQHUJ\VFKHGXOHVDQGFOHDULQJSULFHVLQWKH)00DQG570 PDUNHWSURFHVVHVWKDWIROORZ/030

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 172 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

x 3* (PLQLPL]HVHQHUJ\FRVWVE\H[SOLFLWO\FRQVLGHULQJWKHLQFUHPHQWDOFRVWV RIDOOUHVRXUFHVDYDLODEOHWRLWLQVFKHGXOLQJRUELGGLQJGHFLVLRQV

x 3* (LQWHJUDWHVDQ\ORFDODUHDUHOLDELOLW\GD\DKHDGVFKHGXOLQJUHTXLUHPHQWV DQGGHOLYHUDELOLW\UHTXLUHPHQWVLQWRLWVVFKHGXOLQJRUELGGLQJGHFLVLRQV

x 7KH&$,62PDUNHWVSHUIRUP/&'IRUDOOUHVRXUFHVELGVFKHGXOHGLQWRWKH PDUNHWVEDVHGRQLQIRUPDWLRQSURYLGHGE\DOOPDUNHWSDUWLFLSDQWV WUDQVPLVVLRQLQIRUPDWLRQWKDWLVVROHO\DYDLODEOHWRWKH&$,62DQG LQIRUPDWLRQUHJDUGLQJV\VWHPFRQGLWLRQVWKDWDUHVROHO\DYDLODEOHWRWKH &$,62

x 7KHSDUDPHWHUVDQGIRUHFDVWVWKDW3* (KDVDELOLW\WRFRQWUROZLWKUHJDUGWR /&'DUHWKHIROORZLQJORDGIRUHFDVWPDUNHWSULFHIRUHFDVWLQFUHPHQWDOKHDW UDWHDQGPDVWHUILOHVXEPLVVLRQ7KHVHSDUDPHWHUVDQGIRUHFDVWVDUHXVHGLQ WKHFDOFXODWLRQRIVXEPLWWHGELGVDQGRUVFKHGXOHV

x /&'DFWLYLWLHVDUHVXEMHFWWRIRUHFDVWDQGPDUNHWXQFHUWDLQWLHVLQFOXGLQJWKRVH DVVRFLDWHGZLWKDFWXDOFXVWRPHUORDGVEHKDYLRURIRWKHUPDUNHWSDUWLFLSDQWV DFWXDOHQHUJ\GHOLYHULHVIURP4XDOLI\LQJ)DFLOLWLHVDQGLQWHUPLWWHQWUHVRXUFHV QRQSXEOLFWUDQVPLVVLRQFRQVWUDLQWVDQG&$,62UHOLDELOLW\EDVHGGLVFUHWLRQDU\ GHFLVLRQV 7KHSULQFLSOHVGHVFULEHGDERYHUHPDLQHVVHQWLDOIRUDFKLHYLQJ/&'DQGPHHWLQJ

DOOWKHUHJXODWRU\OHJDORSHUDWLRQDOFRQWUDFWXDODQGILQDQFLDOUHTXLUHPHQWVDVVRFLDWHG

ZLWK3* (¶VSRUWIROLR7KHVHSULQFLSOHVLQIRUPWKHVSHFLILFVFKHGXOLQJDQGELGGLQJ

SURFHVVHVGHVFULEHGEHORZLQ6HFWLRQ'

D. Scheduling/Bidding Processes $OOUHVRXUFHVDUHVFKHGXOHGRUELGLQWRWKH&$,62PDUNHWVEDVHGRQWKHLU

LQFUHPHQWDOFRVWRSSRUWXQLW\FRVWRUVHOIVFKHGXOHGEDVHGRQFRQVWUDLQWVWKDWOLPLWWKHLU

DELOLW\WREHELG7KHIXQGDPHQWDOSULQFLSOHRI/&'LVWRHQVXUHWKDW3* (¶V

GLVSDWFKDEOHUHVRXUFHVDUHXVHGZKHQWKHLULQFUHPHQWDOFRVWVRURSSRUWXQLW\FRVWVDUH

EHORZWKHFRVWRIHQHUJ\LQWKH&$,62ZKROHVDOHPDUNHWV%\DSSURSULDWHO\VFKHGXOLQJ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 173 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

DQGELGGLQJLWVUHVRXUFHVLQWRWKH&$,62PDUNHWVDWWKHLULQFUHPHQWDORURSSRUWXQLW\

FRVWV3* (HQVXUHVWKDWWRWDOSURFXUHPHQWWRPHHWFXVWRPHUGHPDQGLQWKH&$,62

PDUNHWVLVDWOHDVWFRVW

1. Incremental Costs 3* (VFKHGXOHVRUELGVUHVRXUFHVLQWRWKH&$,62PDUNHWVDWLQFUHPHQWDOFRVWRI

SURYLGLQJHQHUJ\FRQVLGHULQJERWKWKHYDULDEOHRSHUDWLQJFRVWRILWVUHVRXUFHVDQGWKH

PDUNHWFRVWRIJHQHUDWLRQ)L[HGFRVWVWKDWFDQQRWEHDIIHFWHGE\KRZUHVRXUFHVDUH

GLVSDWFKHGVXFKDVFDSLWDOLQYHVWPHQWFRVWVRUFRQWUDFWFDSDFLW\SD\PHQWVDUHWUHDWHGDV

VXQNDQGKHQFHQRWLQFUHPHQWDO5HVRXUFHFRVWVWKDWFDQHLWKHUEHLQFUHDVHGRUGHFUHDVHG

GHSHQGLQJRQKRZWKHUHVRXUFHUXQVDUHSURSHUO\WUHDWHGDVLQFUHPHQWDOFRVWV

'D\DKHDGGLVSDWFKFRQVLGHUVLQFUHPHQWDOFRVWVLQFXUUHGKRXUO\DQGLQFUHPHQWDO

FRVWVLQFXUUHGZKHQUHVRXUFHV RUFRPSRQHQWVRIUHVRXUFHV DUHVWDUWHGXSRU

³FRPPLWWHG´+RXUO\LQFUHPHQWDOFRVWVLQFOXGHIXHOFRVWVDQGYDULDEOHRSHUDWLRQVDQG

PDLQWHQDQFH ³2 0´ FRVWVWKDWYDU\GLUHFWO\ZLWKGHVLUHGHQHUJ\RXWSXWDVZHOODVWKH

³PLQLPXPORDG´FRVWRINHHSLQJDUHVRXUFHRQOLQHDWLWVPLQLPXPRSHUDWLQJOHYHO

SHUKRXU,QFUHPHQWDOFRVWVRIFRPPLWPHQWUHFRJQL]HGE\WKH&$,62LQLWV0DVWHU)LOH

DUHFKDUDFWHUL]HGDV³VWDUWXS´DQGIRU0XOWL6WDJH*HQHUDWLRQUHVRXUFHV³VWDWHWUDQVLWLRQ´

FRVWV0LQLPXPORDGVWDUWXSDQGWUDQVLWLRQFRVWVLQFOXGHIXHOFRVWVDVZHOODVYDULDEOH

2 0FRVWV,QDGGLWLRQLIWKHFRVWVRILQVSHFWLRQVDQGRYHUKDXOVDUHLQFUHDVHGZKHQ

XQLWVUXQIRUPRUHKRXUVRUF\FOHPRUHWKHVHPDLQWHQDQFHFRVWVDUHDOVRWUHDWHGDV

YDULDEOHFRVWVLQ/&'7KH&$,62HQDEOHVJDVILUHGUHVRXUFHVWRVXEPLWWRLWVPDUNHWV

PLQLPXPORDGDQGVWDUWXSFRVWSDUDPHWHUVHLWKHUDV³SUR[\´FRVWVRU³UHJLVWHUHG´FRVWV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 174 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3UR[\FRVWVDUHFDOFXODWHGGDLO\E\WKH&$,62DVWKHSURGXFWRIDKHDWUDWHWLPHVDIXHO

FRVWLQGH[SOXVYDULDEOH2 0FRVWV5HJLVWHUHGFRVWVDUHDVLQJOHGROODUYDOXHIRUQROHVV

WKDQGD\VDWDWLPHDQGUHIOHFWDIDFLOLW\¶VIXHODQGQRQIXHOFRVWVLQFOXGLQJORQJHU

WHUPPDLQWHQDQFHFRVWVWKDWYDU\ZLWKQXPEHURIVWDUWVRUQXPEHURIKRXUVUXQQLQJDW

PLQLPXPORDG5HJLVWHUHGFRVWVDUHFDSSHGDWDPXOWLSOHRIWKH&$,62FDOFXODWLRQRI

SUR[\FRVWVSHUIRUPHGZKHQFRVWFKDQJHVDUHVXEPLWWHGWRWKH&$,620DVWHU)LOH

7KH&$,62¶VRSWLPL]DWLRQRIHDFKRILWVPDUNHWVUHVXOWVLQVXSSO\FOHDULQJDJDLQVW

GHPDQGEDVHGRQKRXUO\ELGVDQGWKHFRVWVRIJHWWLQJHQHUJ\IURPVXSSO\QRGHVWR

GHPDQGQRGHVLQWKH&$,62JULG0DUNHWSULFHVDUHWKHQGHWHUPLQHGRQDQKRXUO\EDVLV

WKHFRVWRIHQHUJ\DWHDFKORFDWLRQLQWKH&$,62JULG

a. Greenhouse Gas 7KH*UHHQKRXVH*DV ³*+*´ FRPSOLDQFHREOLJDWLRQIRUWKH&DSDQG7UDGH

3URJUDPLVUHJXODWHGE\WKH&DOLIRUQLD$LU5HVRXUFHV%RDUG$Q\UHVRXUFHWKDWHPLWV

JUHDWHUWKDQPHWULFWRQVRIFDUERQGLR[LGHHTXLYDOHQW ³PW&2H´ LVUHTXLUHGWR VXUUHQGHUDOORZDQFHVIRULWVHPLVVLRQV$QDOORZDQFHLVDWUDGDEOHSHUPLWWRHPLW

RQHPW&2H*+*HPLVVLRQ7KHVHDOORZDQFHVDUHWUDGHGLQWKHFDUERQPDUNHW7R DFFRXQWIRUWKHFRVWRIFRPSO\LQJZLWKWKH&DSDQG7UDGH3URJUDP3* (LQFOXGHVD

*+*DGGHULQWKHELGIRUDQ\UHVRXUFHWKDWKDVHPLWWHGRQDQDQQXDOEDVLVJUHDWHUWKDQ

PW&2H7KHGDLO\*+*SULFHLVEDVHGRQDIRUZDUGFXUYHZKLFKLVEDVHGRQ LQGH[DQGEURNHUTXRWHV3* (PD\FKDQJHWKHPHWKRGRORJ\GXHWREXWQRWOLPLWHGWR

PDUNHWUHJXODWRU\RUOHJDOFKDQJHVWKDWLPSDFWWKH&DSDQG7UDGH3URJUDPDQGRU

*+*FRPSOLDQFH

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 175 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2. Opportunity Cost 5HVRXUFHVZLWKQRH[SOLFLWIXHOFRVWVXFKDVK\GURHOHFWULFSODQWVDUHELGDWWKHLU

RSSRUWXQLW\FRVWVZKLFKDUHHTXLYDOHQWWRIXHOFRVWVLQWKHLUHIIHFWRQWRWDOH[SHFWHGFRVW

WRFXVWRPHUV(DFKK\GURHOHFWULFSODQWRUZDWHUVKHGLVVXEMHFWWRFRPSOH[RSHUDWLQJ

FRQVWUDLQWVLQFOXGLQJ)HGHUDO(QHUJ\5HJXODWRU\&RPPLVVLRQOLFHQVHUHTXLUHPHQWVDQG

VDIHW\FRQVWUDLQWVDVZHOODVWRWKHIXQGDPHQWDOOLPLWVRQWKHLUHQHUJ\RXWSXWVWKDWUHVXOW

IURPOLPLWHGQDWXUDOLQIORZVLQWRUHVHUYRLUV2SSRUWXQLW\FRVWVWDNHLQWRFRQVLGHUDWLRQWKH

IXWXUHYDOXHRIHQHUJ\RUHTXLYDOHQWO\IRUK\GURUHVRXUFHVWKHIXWXUHYDOXHRIZDWHUDQG

WKHIDFWWKDWWKHDPRXQWRIDYDLODEOHZDWHULVOLPLWHG$VVXFKLWPD\EHPRUHSUXGHQW

DQGORZHUFRVWWRGHIHUK\GURJHQHUDWLRQWRKLJKHUYDOXHIXWXUHSHULRGVUDWKHUWKDQXVLQJLW

LQWKHFXUUHQWGD\DWEHORZLWVRSSRUWXQLW\FRVW

6LPLODUO\HFRQRPLFELGGLQJRIHOLJLEOHUHQHZDEOHFRQWUDFWVFDSWXUHVWKH

RSSRUWXQLW\FRVWVDVVRFLDWHGZLWKFRQWUDFWXDOUHJXODWRU\DQGRSHUDWLRQDOFRQVWUDLQWV

7KLVDOVRLQFOXGHVWKHLQFUHPHQWDOFRVWRIDQ\FRPSOLDQFHLQVWUXPHQWVUHTXLUHGWRFRPSO\

ZLWKWKHSHUFHQW5HQHZDEOHV3RUWIROLR6WDQGDUG ³536´ OHJLVODWLRQ0RUHGHWDLO

UHJDUGLQJWKHLQFUHPHQWDOFRVWRI536FRPSOLDQFHLQVWUXPHQWVLVLQFOXGHGLQFRQILGHQWLDO

$WWDFKPHQWWRWKLV$SSHQGL[.

3. Self-Scheduling 6HOIVFKHGXOHVDUHLQWHUSUHWHGE\WKH&$,62PDUNHWVDVSULFHWDNLQJVXSSO\RU

GHPDQG3ULFHWDNLQJVXSSO\LVVXSSO\WKDWLVZLOOLQJWRDFFHSWDQ\SULFHWRLQMHFWHQHUJ\

LQWRWKHJULG,QRWKHUZRUGVVHOIVFKHGXOHGVXSSO\LVZLOOLQJWRDFFHSWDQ\SULFHWR

JHQHUDWH3ULFHWDNLQJGHPDQGVHOIVFKHGXOHVZKLFKFDQRQO\EHVXEPLWWHGE\/RDG

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 176 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

6HUYLQJ(QWLWLHVLQWKH'$0LQGLFDWHDZLOOLQJQHVVWRSD\DQ\SULFHWRFOHDUGHPDQGLQ

WKDWPDUNHW

3* (VHOIVFKHGXOHVVRPHORDGLQWKH'$0DQGVRPHVXSSO\LQERWKWKH'$0V

DQG570VEXWPLQLPL]HVWKHULVNVDQGFRVWVRIGRLQJVRE\RIIHULQJDVPXFKIOH[LELOLW\

IURPLWVVXSSO\DQGGHPDQGSRUWIROLRDVSRVVLEOH

6RPHRI3* (¶VVXSSO\SRUWIROLRLVPXVWWDNHHLWKHUGXHWRVDIHW\HQYLURQPHQWDO

DQGOLFHQVHFRQVWUDLQWVFRQWUDFWWHUPVUHJXODWRU\UHTXLUHPHQWVRUEHFDXVHLWLVLQKHUHQWO\

QRQGLVSDWFKDEOH IRUH[DPSOHUXQRIULYHUK\GURZLWKQRUHVHUYRLUFRQWUROV 3* (VHOI

VFKHGXOHVPXVWWDNHVXSSO\LQWKH'$0DQGWKHQPRGLILHVWKHVHVHOIVFKHGXOHVLQ

UHDOWLPHLIWKHIRUHFDVWRIJHQHUDWLRQKDVFKDQJHG

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 177 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;. $77$&+0(17 &21),'(17,$/ 5('$&7(',1,76(17,5(7< 81'(53527(&7,2162)' $1' &$/,)251,$38%/,&87,/,7,(6&2'( 6(&7,216 * $1'

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 178 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;/ &$,6223(5$7,1*25'(535272&2/6

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 179 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Introduction 7KH&DOLIRUQLD,QGHSHQGHQW6\VWHP2SHUDWRU ³&$,62´ KDVWKHUHVSRQVLELOLW\WR

PDLQWDLQWKHUHOLDELOLW\DQGVWDELOLW\RIWKHHOHFWULFJULGIRULWV%DODQFLQJ$XWKRULW\$UHD

$V&$,62PDUNHWSDUWLFLSDQWV3DFLILF*DVDQG(OHFWULF&RPSDQ\ ³3* (´ PXVW

FRQIRUPWR&$,627DULIIUHTXLUHPHQWV:KHQHYHQWVRFFXUWKDWPD\DGYHUVHO\LPSDFW

V\VWHPUHOLDELOLW\WKH&$,62PD\GHFODUHRQHRIWKHIROORZLQJHYHQWV6\VWHP

(PHUJHQF\&RQJHVWLRQRU2YHUJHQHUDWLRQ$VD6FKHGXOLQJ&RRUGLQDWRU ³6&´ IRU

JHQHUDWLRQUHVRXUFHVLQLWVSRUWIROLR3* (PXVWPDQDJHLWVSRUWIROLRWRUHVSRQGWRWKHVH

&$,62GHFODUHGHYHQWV7KLV$SSHQGL[GHVFULEHV3* (¶VSURWRFROVIRUPDQDJLQJLWV

SRUWIROLRGXULQJ&$,62GHFODUHGHYHQWVE\LPSOHPHQWLQJVFKHGXOHFKDQJHVDQG

H[HUFLVLQJFRQWUDFWXDOELGGLQJDQGFXUWDLOPHQWULJKWVLQUHVSRQVHWR&$,62GHFODUHG

6\VWHP(PHUJHQFLHV&RQJHVWLRQRU2YHUJHQHUDWLRQ7KHVHSURWRFROVGRQRWDPHQGRU

PRGLI\WKHUHVSRQVLELOLWLHVRUWHUPVDQGFRQGLWLRQVRIH[LVWLQJDJUHHPHQWVEHWZHHQ

3* (DQGLWVFRQWUDFWHGUHVRXUFHV

3* (XWLOL]HVWKHVHSURWRFROVWRKHOSHQDEOHHIIHFWLYHDQGWLPHO\DFWLRQWRUHVSRQG

WRWKHVHHYHQWVDVWKH6&IRUQXPHURXVJHQHUDWLRQUHVRXUFHV&RQGLWLRQVRUVLWXDWLRQV

PD\DULVHWKDWLPSDFW3* (¶VDELOLW\WRLPSOHPHQWDOORIWKHLGHQWLILHGDFWLRQVGHVFULEHG

LQWKLV$SSHQGL[,QWKHHYHQWWKDW3* (UHFHLYHVDQ2SHUDWLQJ2UGHUIURPWKH&$,62

3* (ZLOOVHHNWRUHVSRQGWRWKH2SHUDWLQJ2UGHUE\XVLQJUHDVRQDEOHHIIRUWVVXEMHFWWR

VDIHW\RSHUDWLRQDODQGWLPHOLPLWDWLRQVWRLPSOHPHQWWKHSURWRFROVLGHQWLILHGLQWKLV

$SSHQGL[

&DSLWDOL]HGWHUPVLQWKLV$SSHQGL[KDYHWKHVDPHPHDQLQJDVWKHGHILQHGWHUPLQWKH&$,62 7DULIIXQOHVVRWKHUZLVHGHILQHGLQWKLV$SSHQGL[

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 180 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

)RUSXUSRVHVRIWKLV$SSHQGL[WKHWHUP³&$,622SHUDWLQJ2UGHUV´LVGHILQHGDV

RSHUDWLQJRUGHUVWKDWPXVWEHFRPSOLHGZLWKDVGHVFULEHGLQ6HFWLRQRIWKH

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¶VIDLOXUHWRREH\DQRSHUDWLQJ RUGHUFRQWDLQLQJPXOWLSOHLQVWUXFWLRQVWRDGGUHVVDVSHFLILFRSHUDWLQJFRQGLWLRQ ZLOOUHVXOWLQDVLQJOHYLRODWLRQRI6HFWLRQ,IVRPHOLPLWDWLRQSUHYHQWVWKH 0DUNHW3DUWLFLSDQWIURPIXOILOOLQJWKHDFWLRQUHTXHVWHGE\WKH&$,62WKHQWKH 0DUNHW3DUWLFLSDQWPXVWSURPSWO\DQGGLUHFWO\FRPPXQLFDWHWKHQDWXUHRIDQ\ VXFKOLPLWDWLRQWRWKH&$,62

B. PG&E Protocols During CAISO-Declared System Emergencies

1. CAISO Description of System Emergency 7KH&$,627DULIIGHILQHVD6\VWHP(PHUJHQF\DV &RQGLWLRQVEH\RQGWKHQRUPDOFRQWURORIWKH&$,62WKDWDIIHFWWKHDELOLW\RI WKH&$,62%DODQFLQJ$XWKRULW\$UHDWRIXQFWLRQQRUPDOO\LQFOXGLQJDQ\ DEQRUPDOV\VWHPFRQGLWLRQZKLFKUHTXLUHVLPPHGLDWHPDQXDORUDXWRPDWLF DFWLRQWRSUHYHQWORVVRI/RDGHTXLSPHQWGDPDJHRUWULSSLQJRIV\VWHP HOHPHQWVZKLFKPLJKWUHVXOWLQFDVFDGLQJ2XWDJHVRUWRUHVWRUHV\VWHP RSHUDWLRQWRPHHW$SSOLFDEOH5HOLDELOLW\&ULWHULD

)RUDOO6\VWHP(PHUJHQFLHVWKH&$,62LVUHVSRQVLEOHIRUPDQDJLQJWKHHPHUJHQF\DQG

UHVWRUDWLRQRIWKHV\VWHPDVVSHFLILHGLQWKH&$,627DULII7KH&$,627DULIISURYLGHV

WKDW³>D@OO*HQHUDWLQJ8QLWVDQG6\VWHP8QLWVWKDWDUHRZQHGRUFRQWUROOHGE\D

3DUWLFLSDWLQJ*HQHUDWRUDUH ZLWKRXWOLPLWDWLRQWRWKH&$,62¶VRWKHUULJKWVXQGHUWKLV

%DVHGRQWKH&$,62&RPELQHGDQG&RQIRUPHG7DULIIDVRI6HSWHPEHU

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 181 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

&$,627DULII VXEMHFWWRFRQWUROE\WKH&$,62GXULQJD6\VWHP(PHUJHQF\DQGLQ

FLUFXPVWDQFHVLQZKLFKWKH&$,62FRQVLGHUVWKDWD6\VWHP(PHUJHQF\LVLPPLQHQWRU

WKUHDWHQHG´8QGHU6HFWLRQRIWKH&$,627DULIIWKH&$,62KDVWKHDXWKRULW\WR

³LQVWUXFWD3DUWLFLSDWLQJ*HQHUDWRUWREULQJLWV*HQHUDWLQJ8QLWRQOLQHRIIOLQHRU

LQFUHDVHRUFXUWDLOWKHRXWSXWRIWKH*HQHUDWLQJ8QLWDQGWRDOWHUVFKHGXOHGGHOLYHULHVRI

(QHUJ\DQG$QFLOODU\6HUYLFHVLQWRRURXWRIWKH&$,62&RQWUROOHG*ULGLIVXFKDQ

LQVWUXFWLRQLVUHDVRQDEO\QHFHVVDU\WRSUHYHQWDQLPPLQHQWRUWKUHDWHQHG6\VWHP

(PHUJHQF\RUWRUHWDLQ2SHUDWLRQDO&RQWURORYHUWKH&$,62&RQWUROOHG*ULGGXULQJDQ

DFWXDO6\VWHP(PHUJHQF\´

2. PG&E Protocols for Response 3* (ZLOOFRPPXQLFDWH&$,622SHUDWLQJ2UGHUVUHJDUGLQJ6\VWHP(PHUJHQFLHV

WRDIIHFWHG*HQHUDWRUVIRUZKLFK3* (LVWKH6&VXEMHFWWRWKHSURWRFROVIRUVSHFLILF

UHVRXUFHVGHVFULEHGLQ6HFWLRQ%EHORZ

3. Qualifying Facilities With Existing QF Contracts 4XDOLI\LQJ)DFLOLWLHV ³4)´ ZLWKDQ([LVWLQJ4)&RQWUDFWDUHQRWUHTXLUHGWR

H[HFXWHD3DUWLFLSDWLQJ*HQHUDWRU$JUHHPHQW ³3*$´ ZLWKWKH&$,62&$,627DULII

6HFWLRQVWDWHV³(DFK4)VXEMHFWWRDQ([LVWLQJ4)&RQWUDFWDQGQRWVXEMHFWWRD

3*$RU1HW6FKHGXOHG3*$ZLOOPDNHUHDVRQDEOHHIIRUWVWRFRPSO\ZLWKWKH&$,62¶V

LQVWUXFWLRQVGXULQJD6\VWHP(PHUJHQF\ZLWKRXWSHQDOW\IRUIDLOXUHWRGRVR´+RZHYHU

IRU4)VZLWK([LVWLQJ4)&RQWUDFWVZKLFKFRQWDLQSURYLVLRQVWKDWUHTXLUHWKH4)WR

LQWHUUXSWRUUHGXFHGHOLYHULHVGXULQJDQHPHUJHQF\RULQFRPSOLDQFHZLWKSUXGHQW

HOHFWULFDOSUDFWLFHV3* (ZLOOGLUHFWWKDWVXFK4)LQWHUUXSWRUUHGXFHGHOLYHULHVEDVHGRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 182 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

&$,622SHUDWLQJ2UGHUV)RU4)VZLWK([LVWLQJ4)&RQWUDFWVWKDWGRQRWFRQWDLQ

SURYLVLRQVWKDWUHTXLUHWKH4)WRLQWHUUXSWRUUHGXFHGHOLYHULHVGXULQJDQHPHUJHQF\RULQ

FRPSOLDQFHZLWKSUXGHQWHOHFWULFDOSUDFWLFHV3* (ZLOOFRQYH\&$,622SHUDWLQJ

2UGHUVWKDWWKH4)LQWHUUXSWRUUHGXFHGHOLYHULHVEDVHGRQ&$,622SHUDWLQJ2UGHUV,ID

4)UHVRXUFHZLWKDQ([LVWLQJ4)&RQWUDFWLQGLFDWHVWR3* (WKDWLWZLOOQRWFRPSO\ZLWK

&$,622SHUDWLQJ2UGHUVGXULQJD6\VWHP(PHUJHQF\3* (ZLOOQRWLI\&$,62

*HQHUDWLRQ'LVSDWFKVRWKDWWKH&$,62FDQWDNHDSSURSULDWHDGGLWLRQDOPHDVXUHV

C. PG&E Protocols During CAISO-Declared Physical Congestion

1. CAISO Description of Physical Congestion 7KH&$,627DULIIGHILQHV&RQJHVWLRQDV $FKDUDFWHULVWLFRIWKHWUDQVPLVVLRQV\VWHPSURGXFHGE\DELQGLQJ 7UDQVPLVVLRQ&RQVWUDLQWWRWKHRSWLPXPHFRQRPLFGLVSDWFKWRPHHW'HPDQG VXFKWKDWWKH/03H[FOXVLYHRI0DUJLQDO&RVWRI/RVVHVDWGLIIHUHQW /RFDWLRQVRIWKHWUDQVPLVVLRQV\VWHPLVQRWHTXDO

&RQJHVWLRQRQWKH&$,62FRQWUROOHGJULGRFFXUVZKHQHYHUWKHSUHIHUUHG

JHQHUDWLRQGHPDQGVFKHGXOHUHTXLUHVWKHSURYLVLRQRIWUDQVPLVVLRQVHUYLFHVEH\RQGWKH

SK\VLFDOFDSDELOLW\RIWKHWUDQVPLVVLRQV\VWHP,QVXFKDFDVHWKHSUHIHUUHGVFKHGXOH

FDQQRWEHDFFRPPRGDWHGZLWKRXWYLRODWLQJWKHSK\VLFDOOLPLWVRIWKHWUDQVPLVVLRQV\VWHP

&RQJHVWLRQPDQDJHPHQWLVRQHRIWKHPDMRUWDVNVSHUIRUPHGE\WKH&$,62WRHQVXUHWKH

RSHUDWLRQRIWKHWUDQVPLVVLRQV\VWHPGRHVQRWYLRODWHRSHUDWLQJOLPLWV

7KH&$,62PD\PDQDJHRUDGGUHVV&RQJHVWLRQLQWKHIRUPRIDQLVVXDQFHRIWKH

IROORZLQJ2SHUDWLQJ2UGHUV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 183 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

x ([FHSWLRQDO'LVSDWFKHVവ&HUWDLQFLUFXPVWDQFHDVGHVFULEHGLQ&$,627DULII 6HFWLRQZKLFKPD\UHTXLUHGHUDWHVIRUFHG6KXW'RZQVIRUFHG 6WDUW8SVRUIRUFHG0XOWL6WDJH*HQHUDWLRQ ³06*´ 7UDQVLWLRQV

x 5HWXUQWR6FKHGXOHവ$&$,622SHUDWLQJ2UGHUWRJHQHUDWHWRD6FKHGXOH GHILQHGDVWKHFXUUHQW'LVSDWFK2SHUDWLQJ7DUJHWWKURXJKWKH$XWRPDWHG 'LVSDWFK6\VWHP ³$'6´ RU&$,62¶VODVWYHUEDOLQVWUXFWLRQ

x 0DQGDWRU\5HGXFWLRQVവ$&$,622SHUDWLQJ2UGHUWRUHGXFHJHQHUDWLRQ

2. PG&E Protocols for Response 3* (ZLOOFRPPXQLFDWH&$,622SHUDWLQJ2UGHUVLQWKH'D\$KHDGRU

5HDO7LPHUHJDUGLQJ&RQJHVWLRQWRDIIHFWHG*HQHUDWRUVIRUZKLFK3* (LVWKH6&

VXEMHFWWRWKHSURWRFROVIRUVSHFLILFUHVRXUFHVGHVFULEHGLQ6HFWLRQV&DQG&EHORZ

6HFWLRQ&EHORZDGGUHVVHVKRZ3* (ZLOOUHVSRQGWR&$,622SHUDWLQJ2UGHUVWKDW

GLUHFWSURUDWDJHQHUDWLRQUHGXFWLRQVWRDGGUHVV&RQJHVWLRQ

3. Qualifying Facilities With Existing QF Contracts ,IWKH&$,62LVVXHVD&RQJHVWLRQUHODWHG2SHUDWLQJ2UGHUWR3* (IRUDVSHFLILF

4)8QLWWKDWKDVDQ([LVWLQJ4)&RQWUDFWDQGGRHVQRWKDYHD3*$3* (ZLOO

FRPPXQLFDWHWKH&$,622SHUDWLQJ2UGHUWRWKHDIIHFWHG4)IRUZKLFK3* (LVWKH6&

,IWKH4)UHVRXUFHLQGLFDWHVWR3* (WKDWWKH4)ZLOOQRWFRPSO\ZLWKD&$,62

2SHUDWLQJ2UGHUGXULQJD&RQJHVWLRQVLWXDWLRQ3* (ZLOOQRWLI\&$,62*HQHUDWLRQ

'LVSDWFKVRWKDWWKH&$,62FDQWDNHDSSURSULDWHDGGLWLRQDOPHDVXUHV

4. Nuclear 'LDEOR&DQ\RQ3RZHU3ODQW ³'&33´ 8QLWVDQGZLOOUHVSRQGWR&$,62

&RQJHVWLRQ5HODWHG2SHUDWLQJ2UGHUVFRQVLVWHQWZLWKWKH'&333URWRFROV

$FRS\RIWKH6KRUW7HUP(OHFWULF6XSSO\'&331RQ(PHUJHQF\&XUWDLOPHQW3URWRFROV ³'&333URWRFROV´ LVDWWDFKHGWRWKLV$SSHQGL[DV&RQILGHQWLDO$WWDFKPHQW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 184 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

5. Pro Rata Generation Reductions 'XULQJ&RQJHVWLRQWKH&$,62PD\LVVXHDQ2SHUDWLQJ2UGHULQWKH'D\$KHDGRU

5HDO7LPHIRUDUHGXFWLRQRIJHQHUDWLRQDPRQJVHYHUDOLGHQWLILHG8QLWVZLWKRXW

VSHFLI\LQJWKHGLVWULEXWLRQRIWKHUHGXFWLRQDPRQJVWWKH8QLWV3* (ZLOOVHHNWR

PDQDJHVXFK2SHUDWLQJ2UGHUE\XVLQJUHDVRQDEOHHIIRUWVFRQVLGHULQJVDIHW\RSHUDWLRQDO

FRQWUDFWXDODQGWLPHOLPLWDWLRQVWRLPSOHPHQWWKHIROORZLQJ

D. PG&E Protocols During CAISO-Declared Overgeneration

1. CAISO Description of Overgeneration 7KH&$,627DULIIGHILQHV2YHUJHQHUDWLRQDV $FRQGLWLRQWKDWRFFXUVZKHQWRWDO6XSSO\H[FHHGVWRWDO'HPDQGLQWKH &$,62%DODQFLQJ$XWKRULW\$UHD

(DFK%DODQFLQJ$XWKRULW\$UHDKDVDFRPPLWPHQWWRFRQWUROLWVJHQHUDWLRQLQD

PDQQHUVRDVQRWWREXUGHQLQWHUFRQQHFWHGV\VWHPV&$,62SHUVRQQHODUHUHVSRQVLEOHIRU

LGHQWLI\LQJDQGPDQDJLQJ2YHUJHQHUDWLRQFRQGLWLRQVDQGIRUHFDVWLQJWKHH[WHQWRIWKH

DQWLFLSDWHG2YHUJHQHUDWLRQ7KH&$,62KDVDGRSWHGDQ2SHUDWLQJ3URFHGXUH

LH2SHUDWLQJ3URFHGXUH WRDGGUHVV&$,62V\VWHPZLGH2YHUJHQHUDWLRQ/RFDO

2YHUJHQHUDWLRQHYHQWVDUHSRVVLEOHZKHQWKHUHLVH[FHVVJHQHUDWLRQLQDORFDOL]HGDUHDRU

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 185 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

VHWRIDUHDV HJ=3 ZKLFKKDVWKHSRWHQWLDOWRUHVXOWLQVWDELOLW\LVVXHVRU

FRQVWUDLQHGRSHUDWLRQV

,QWKH'D\$KHDG0DUNHW ³'$0´ WKH&$,62PD\DQQRXQFHDSRWHQWLDOIRU

2YHUJHQHUDWLRQSULRUWRWKH'$0RUDIWHUWKH'$0UHVXOWVKDYHEHHQSXEOLVKHG

7KLVDQQRXQFHPHQWLVLQWHQGHGWRHQFRXUDJH0DUNHW3DUWLFLSDQWVWRVXEPLWDGGLWLRQDO

GHFUHPHQWDO ³'(&´ ELGVIRUHQHUJ\LQWRWKH'$0DQGRU5HDO7LPH0DUNHW ³570´

DQGWRSURYLGHDQHDUO\DOHUWWKDWV\VWHPFRQGLWLRQVPD\ZDUUDQWWKHXVHRIWKH&$,62¶V

2YHUJHQHUDWLRQ3URFHGXUH

&$,62RSHUDWRUVPD\UXQRXWRIPDUNHWVROXWLRQVDQGUHVRUWWRRXWRIPDUNHW

VROXWLRQVDQGRUGHU8QLWVWRFXUWDLOJHQHUDWLRQ

7KH&$,62PD\PDQDJHRUDGGUHVV2YHUJHQHUDWLRQRXWRIPDUNHWLQWKHIRUPRI

WKHIROORZLQJ&$,622SHUDWLQJ2UGHUV

x ([FHSWLRQDO'LVSDWFKHVവ&HUWDLQFLUFXPVWDQFHDVGHVFULEHGLQ&$,627DULII 6HFWLRQZKLFKPD\UHTXLUHGHUDWHVIRUFHG6KXW'RZQVRUIRUFHG06* 7UDQVLWLRQV

x 5HWXUQWR6FKHGXOHവ$&$,622SHUDWLQJ2UGHUWRJHQHUDWHWRD6FKHGXOH GHILQHGDVWKHFXUUHQW'LVSDWFK2SHUDWLQJ7DUJHWWKURXJKWKH$'6RUWKH &$,62¶VODVWYHUEDOLQVWUXFWLRQ

x 0DQGDWRU\5HGXFWLRQVവ$&$,622SHUDWLQJ2UGHUWRUHGXFHWKH JHQHUDWLRQ

2. PG&E Protocols in Response 3* (¶V'D\$KHDGDQG5HDO7LPHUHVSRQVHVWR2YHUJHQHUDWLRQDUHGHVFULEHG

EHORZLQ6HFWLRQV'DQG'3* (ZLOOFRPPXQLFDWH&$,622SHUDWLQJ2UGHUV

UHJDUGLQJ2YHUJHQHUDWLRQWRDIIHFWHG*HQHUDWRUVIRUZKLFK3* (LVWKH6&VXEMHFWWR

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 186 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

WKHSURWRFROVIRUVSHFLILFUHVRXUFHVGHVFULEHGLQ6HFWLRQV'DQG'EHORZ6HFWLRQ'

EHORZDGGUHVVHVKRZ3* (ZLOOUHVSRQGWR&$,622SHUDWLQJ2UGHUVWKDWGLUHFWSURUDWD

JHQHUDWLRQUHGXFWLRQV

3. Day-Ahead Response

4. Real-Time Response ,IWKH&$,62DQQRXQFHV2YHUJHQHUDWLRQLQ5HDO7LPHDQGUHTXHVWVRXWRIPDUNHW

RIIHUVWRUHGXFHRXWSXW3* (ZLOORIIHURXWRIPDUNHWGLVSDWFK LH([FHSWLRQDO

'LVSDWFK IURPWKHIROORZLQJVRXUFHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 187 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

5. Qualifying Facilities With Existing QF Contracts ,IWKH&$,62LVVXHVDQ2YHUJHQHUDWLRQUHODWHG2SHUDWLQJ2UGHUWR3* (IRUD

VSHFLILF4)8QLWWKDWKDVDQ([LVWLQJ4)&RQWUDFWDQGGRHVQRWKDYHD3*$3* (ZLOO

FRPPXQLFDWHWKH&$,622SHUDWLQJ2UGHUWRWKHDIIHFWHG4)IRUZKLFK3* (LVWKH6&

,IWKH4)UHVRXUFHLQGLFDWHVWR3* (WKDWWKH4)ZLOOQRWFRPSO\ZLWKD&$,62

2SHUDWLQJ2UGHUGXULQJDQ2YHUJHQHUDWLRQVLWXDWLRQ3* (ZLOOQRWLI\&$,62

*HQHUDWLRQ'LVSDWFKVRWKDWWKH&$,62FDQWDNHDSSURSULDWHDGGLWLRQDOPHDVXUHV

6. Nuclear %DVHGRQ'$0UHVXOWV'&338QLWVDQGZLOOEHHYDOXDWHGIRUSRWHQWLDO

VFKHGXOHDGMXVWPHQWVFRQVLVWHQWZLWKWKH'&333URWRFROV'&338QLWVDQGZLOO

UHVSRQGWR&$,622YHUJHQHUDWLRQUHODWHG2SHUDWLQJ2UGHUVFRQVLVWHQWZLWKWKH'&33

3URWRFROV

7. Pro Rata Generation Reductions ,QDQ2YHUJHQHUDWLRQVLWXDWLRQWKH&$,62PD\LVVXHDQ2SHUDWLQJ2UGHUWR6&V

IRUD³SURUDWD´JHQHUDWLRQUHGXFWLRQRIDVSHFLILHGQXPEHURIPHJDZDWWVIRUHDFK6&WKDW

UHSUHVHQWVORDGZLWKRXWVSHFLI\LQJXQLWVWREHFXUWDLOHG,I3* (UHFHLYHVDSURUDWD

JHQHUDWLRQUHGXFWLRQ2SHUDWLQJ2UGHUIURPWKH&$,623* (ZLOOVHHNWRPDQDJHVXFK

2SHUDWLQJ2UGHUE\XVLQJUHDVRQDEOHHIIRUWVFRQVLGHULQJVDIHW\RSHUDWLRQDOFRQWUDFWXDO

DQGWLPHOLPLWDWLRQVWRLPSOHPHQWWKHIROORZLQJSURWRFROLQWKHIROORZLQJVHTXHQFH

9HUVLRQRIWKH&$,622YHUJHQHUDWLRQ2SHUDWLQJ3URFHGXUH LH2SHUDWLQJ 3URFHGXUH WKDWLVHIIHFWLYHDVRI0DUFKGRHVQRWLQFOXGHXVHRISURUDWD UHGXFWLRQV+RZHYHU&$,627DULII6HFWLRQDOORZVIRUSURUDWDUHGXFWLRQVWRDGGUHVV RYHUJHQHUDWLRQ7KLVVHFWLRQLVLQFOXGHGLQWKHVHSURWRFROVWRDGGUHVVSURUDWDUHGXFWLRQVLI 2SHUDWLQJ3URFHGXUHLVDPHQGHGWRLQFOXGHSURUDWDUHGXFWLRQV &$,627DULII6HFWLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 188 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 189 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;/ $77$&+0(17 &21),'(17,$/ 5('$&7(',1,76(17,5(7< 81'(53527(&7,2162)' $1' &$/,)251,$38%/,&87,/,7,(6&2'( 6(&7,216 * $1'

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 190 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;0 352&85(0(175(9,(:*5283 &267$//2&$7,210(&+$1,60*5283 $1',1'(3(1'(17(9$/8$725$'0,1,675$7,21

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH Senior 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 191 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Procurement Review Group and Cost Allocation Mechanism Group

1. Membership 3URFXUHPHQW5HYLHZ*URXS ³35*´ PHPEHUVKLSLQFOXGHVERWKRUJDQL]DWLRQVDQG

LQGLYLGXDOV7KH&DOLIRUQLD3XEOLF8WLOLWLHV&RPPLVVLRQ¶V ³&38&´RU³&RPPLVVLRQ´

(QHUJ\'LYLVLRQ ³('´ HPSOR\HHVDUHH[RIILFLRSDUWLFLSDQWVLQWKH35*$OO35*

PHPEHUVPXVWEHQRPLQDWHGDQGWKHQHYDOXDWHGIRUSDUWLFLSDWLRQLQWKH35*E\3DFLILF

*DVDQG(OHFWULF&RPSDQ\ ³3* (´ DQGWKHQ3* (PD\UHFRPPHQGWKH

RUJDQL]DWLRQ V DQGLQGLYLGXDO V WR('IRUDSSURYDO

:KHQSURFXULQJRUSRWHQWLDOO\SURFXULQJ&RVW$OORFDWLRQ0HFKDQLVP ³&$0´

UHVRXUFHVSXUVXDQWWR&RPPLVVLRQ'HFLVLRQV ³'´ DQGRU

&RPELQHG+HDWDQG3RZHU ³&+3´ UHVRXUFHVXQGHU'ZKHUHWKHFRVWVDUH

DOORFDWHGWRDOO³EHQHILWWLQJFXVWRPHUV´ HJEXQGOHGGLUHFWDFFHVVDQGFRPPXQLW\

FKRLFHDJJUHJDWLRQFXVWRPHUV 3* (ZLOOXWLOL]HDQDGYLVRU\&$0*URXSFRQVLVWHQW

ZLWKWKHSURSRVDODGRSWHGLQ'$WWDFKPHQW'2UJDQL]DWLRQVDQGRU

LQGLYLGXDOVPXVWEHQRPLQDWHGDQGWKHQHYDOXDWHGIRUSDUWLFLSDWLRQLQWKH&$0*URXSE\

3* (DQGWKHQ3* (PD\UHFRPPHQGWKHRUJDQL]DWLRQ V DQGLQGLYLGXDO V WR('IRU

DSSURYDO35*PHPEHUVDUHDXWRPDWLFDOO\SDUWRIWKH&$0*URXS

2UJDQL]DWLRQVDQGRULQGLYLGXDOVRQWKH35*DQGRU&$0*URXSPXVWEH

QRQPDUNHWSDUWLFLSDQWVDQGDUHUHTXLUHGWRH[HFXWHD1RQ'LVFORVXUH$JUHHPHQW

³1'$´

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH Senior 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 192 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2. PG&E’s Use of the PRG and CAM Group 3* (FRQVXOWVZLWKWKH35*RQDZLGHUDQJHRIWUDQVDFWLRQVJHQHUDOO\RQD

PRQWKO\EDVLVDQGVRPHWLPHVPRUHRIWHQDVQHFHVVDU\$OWKRXJKWKH35*RQO\DFWVLQ

DQDGYLVRU\FDSDFLW\3* (DFWLYHO\VROLFLWVIHHGEDFNIURP35*PHPEHUVDQGPD\

LQFRUSRUDWHWKDWIHHGEDFNLQWRLWVSURFXUHPHQWSURFHVVHV

&RQVXOWDWLRQZLWKWKH&$0*URXSRFFXUVIRUWUDQVDFWLRQVLQZKLFKWKHFRVWVPD\

EHDOORFDWHGWRDOOEHQHILWWLQJFXVWRPHUVRUIRU&+3UHVRXUFHVSURFXUHGXQGHUWKH

VHWWOHPHQWDSSURYHGLQ'

3. Scope of PRG and CAM Group Review 7KHWDEOHVEHORZSURYLGHDPRUHGHWDLOHGGLVFXVVLRQRIVSHFLILF&RPPLVVLRQ

UHTXLUHPHQWVIRUFRQVXOWDWLRQZLWKWKH35*DQGRU&$0JURXS7DEOH0GHVFULEHVWKH

SURFXUHPHQWWUDQVDFWLRQVDQGVROLFLWDWLRQVWKDWUHTXLUH35*UHYLHZ7DEOH0GHWDLOV

SURFXUHPHQWUHODWHGDFWLYLW\DQGUHSRUWLQJUHTXLUHPHQWVWKDWUHTXLUHFRQVXOWDWLRQZLWKWKH

35*SXUVXDQWWRWKHFLWHG&RPPLVVLRQGHFLVLRQVUHVROXWLRQVDQGGLUHFWLYHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH Senior 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 193 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(0 3$&,),&*$6$1'(/(&75,&&203$1< 75$16$&7,216$1'62/,&,7$7,2165(48,5,1*35*5(9,(:

/LQH &38&'HFLVLRQDQGRU 1R 7RSLF 'HVFULSWLRQ %335HTXLUHPHQW 7UDQVDFWLRQV 7UDQVDFWLRQVZLWKGHOLYHU\WHUPVRIJUHDWHUWKDQ ')LQGLQJRI JUHDWHUWKDQ WKUHHFDOHQGDU PRQWKVRURQHTXDUWHULQGXUDWLRQ )DFW ³)2)´ DQG WKUHH PRQWKV 3* (ZLOOGLVFXVVKRZWUDQVDFWLRQVPHHWSRUWIROLRQHHGV 2UGHULQJ3DUDJUDSK WKHVROLFLWDWLRQRURWKHUSURFXUHPHQWSURFHVVHVHYDOXDWLRQ ³23´ ' PHWKRGVQHJRWLDWLRQDQGFRQWUDFWWUDQVDFWLRQVVHOHFWLRQ $SSHQGL[(DWS SURFHVV 'HOLYHU\WHUPLVGHILQHGE\WKHGXUDWLRQRIWKHFRQWUDFW 'S UHJDUGOHVVRIH[HFXWLRQGDWHDQGZKHQWKHGHOLYHULHVEHJLQ ([FHSWIRUWKHFDVHRI/RQJ7HUP5HTXHVWVIRU2IIHUV >5HTXHVWHG ³/75)2´ ZKLFKKDYHVSHFLILFUHTXLUHPHQWV VHH &ODULILFDWLRQ@ EHORZ 35*UHYLHZRIHDFKH[SOLFLWWUDQVDFWLRQH[HFXWHG DFFRUGLQJWRDVWUDWHJ\SUHYLRXVO\UHYLHZHGE\WKH35*LV QRWUHTXLUHGSULRUWRH[HFXWLRQRIWKHWUDQVDFWLRQ /75)2V 'HVLJQGUDIWLQJRIELGGRFXPHQWVDGPLQLVWUDWLRQ ' HYDOXDWLRQDQGRIIHUVHOHFWLRQFULWHULDUDQNLQJVKRUWOLVW SSDQG23V DQGUHVXOWLQJH[HFXWHGWUDQVDFWLRQV DQG &+35HTXHVWIRU 3* (FRQVXOWVZLWKWKH35*DQG&$0*URXSUHJDUGLQJ 4XDOLI\LQJ)DFLOLW\DQG 2IIHUV ³5)2´ &+35)2V &+36HWWOHPHQW7HUP 6KHHW6HFWLRQ DSSURYHGLQ ' 5HQHZDEOH3RUWIROLR 3* (FRQVXOWVZLWKWKH35*UHJDUGLQJ5365)2 ')2) 6WDQGDUG ³536´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³*+*´ 3URGXFWV DQG SULRUWRWUDQVDFWLQJIRUDQ\*+*3URGXFWLQWKH DQG23 J L DQG PDUNHWZLWKDYLQWDJH\HDUPRUHWKDQWKUHH\HDUVLQWKH 3* (¶V%33 IXWXUHEH\RQGWKHFXUUHQWFDOHQGDU\HDU 6KHHW1RVDQG 3* (ZLOOUHSRUWWRWKH35*DQ\*+*3URGXFWVDOHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH Senior 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 194 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

/LQH &38&'HFLVLRQDQGRU 1R 7RSLF 'HVFULSWLRQ %335HTXLUHPHQW &RQJHVWLRQ5HYHQXH 3* (FRQVXOWVZLWKLWV35*SULRUWRWKHVWDUWRIWKH 5HVROXWLRQ( 5LJKWV ³&55´ DQQXDO&55SURFHVVUHJDUGLQJLWV&55SRVLWLRQDQGWKH S)LQGLQJ DQQXDODQGPRQWKO\ SURFXUHPHQWDSSURDFKDQGVWUDWHJ\IRUWKHXSFRPLQJ DQG23 &55V DQG/RQJ DOORFDWLRQDQGDXFWLRQWLHUV7KLVFRQVXOWDWLRQGRHVQRW 5HVROXWLRQ( 7HUP&55V ³/7 UHTXLUH3* (WRSURYLGHDOORIWKHVSHFLILFSURSRVHG S)LQGLQJV &55´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³,(´

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH Senior 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 195 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7$%/(0 3$&,),&*$6$1'(/(&75,&&203$1< 352&85(0(17$1'5(3257,1*,7(065(48,5,1*35*5(9,(:

/LQH &38&'HFLVLRQDQGRU 1R 7RSLF 'HVFULSWLRQ %335HTXLUHPHQW 0DUNHW (OHFWULFPDUNHWFRQGLWLRQVDQGIXHODQGSRZHUSULFH ')2) &RQGLWLRQV IRUHFDVWV TXDUWHUO\ 3URFXUHPHQW &XUUHQWSRVLWLRQUHODWLYHWRDSSURYHGSURFXUHPHQWOLPLWVRQ 'S /LPLWV DUROOLQJPRQWKIRUZDUGEDVLVFRPSDUHGWRSUHYLRXV TXDUWHU +HGJLQJ3ODQ 3ULRUWRILOLQJDQDGYLFHOHWWHUVHHNLQJPLQRUPRGLILFDWLRQV 5HVROXWLRQ(S WR3* (¶V+HGJLQJ3ODQ3* (ZLOOSUHVHQWWKHSURSRVHG PRGLILFDWLRQVWRWKH35* +HGJLQJ3ODQ± 8SGDWHVUHTXLUHGE\WKH+HGJLQJ3ODQQHHGIRUDWUDQVLWLRQ ' /LTXLGLW\ SODQVXVSHQVLRQRUUHVXPSWLRQRI+HGJLQJ3ODQ 5HVROXWLRQ( 0DQDJHPHQW 3* (¶V%33 6WUDWHJ\ 6KHHW1RVDQG 1XFOHDU)XHO3ODQ 1XFOHDU)XHO3ODQXSGDWHVDQGUHYLVLRQV ' 3* (¶V%33 6KHHW1RV 5HQHZDEOH1HW 8SGDWHUHJDUGLQJ3* (¶V5HQHZDEOH1HW6KRUWSRVLWLRQ $GPLQLVWUDWLYH/DZ-XGJH 6KRUW TXDUWHUO\EDVLVLQDQQXDO536SURFXUHPHQWSODQVDQGLQ 5XOLQJ$GRSWLQJ 536FRPSOLDQFHUHSRUWV 5HQHZDEOH1HW6KRUW &DOFXODWLRQ0HWKRGRORJ\ LVVXHGLQ 5XOHPDNLQJRQ $XJXVW $SSHQGL[$SS *+*&RPSOLDQFH *+*FRPSOLDQFHIRUHFDVWDQGSURFXUHPHQWOLPLWXSGDWHV 'SS )RUHFDVW DQG*+*3URGXFWWUDQVDFWLRQV TXDUWHUO\ *+*$XFWLRQ $QQXDOUHYLHZRI3* (¶V&DOLIRUQLD$LU5HVRXUFHV%RDUG ' %LGGLQJ6WUDWHJ\ ³&$5%´ DXFWLRQELGGLQJVWUDWHJ\ 5HVROXWLRQ( 3* (¶V%33 6KHHW1R &+37DUJHWV 3* (DGYLVHVWKH35*LILWZLOOEHXQDEOHWRPHHW&+3 4XDOLI\LQJ)DFLOLW\DQG 7DUJHWV &+36HWWOHPHQW7HUP 6KHHW6HFWLRQ DSSURYHGLQ ' &RQYHUJHQFH 3* (SURYLGHVTXDUWHUO\SUHVHQWDWLRQVWRWKH35* '23 %LGGLQJ UHJDUGLQJLWVFRQYHUJHQFHELGGLQJVWUDWHJLHVSHUIRUPDQFH DQGPDUNHWDQDO\VLV,QWKHHYHQWWKDWWKHGD\UROOLQJ QHWORVVH[FHHGVRULVH[SHFWHGWRH[FHHGPLOOLRQ 3* (ZLOOFHDVHLPSOHPHQWDWLRQRIDOOFRQYHUJHQFH ELGGLQJVWUDWHJLHVDQGFRQIHUZLWKWKH35*

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH Senior 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 196 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

/LQH &38&'HFLVLRQDQGRU 1R 7RSLF 'HVFULSWLRQ %335HTXLUHPHQW &XVWRPHU5LVN 3* (SURYLGHVDPRQWKO\XSGDWHRILWVSRUWIROLRSRVLWLRQ 'SDQG 7ROHUDQFH DQGULVNLQFOXGLQJ&57DQG7H9D5,IWKH&57LV 23'DQG ³&57´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

4. Meeting and Notification Requirements $JHQGDV3* (ZLOOSURYLGH35*PHPEHUVZLWKILQDOPHHWLQJDJHQGDVDQG

PDWHULDOVDWDPLQLPXPRIEXVLQHVVKRXUVLQDGYDQFHRIWKH35*PHHWLQJXQOHVVWKHUH

DUHXQXVXDOH[WHQXDWLQJFLUFXPVWDQFHVZKHUH3* (FRPPXQLFDWHVWR35*PHPEHUVLQ

DQHPDLODQQRXQFLQJDPHHWLQJRUGLVWULEXWLQJPHHWLQJPDWHULDOVRQDWLJKWHUWLPHIUDPH

6XPPDULHV3* (ZLOOSURYLGHFRQILGHQWLDOPHHWLQJVXPPDULHVWR35*

PHPEHUVWKDWLQFOXGHDOLVWRIDWWHQGLQJ35*PHPEHUV LQFOXGLQJWKHRUJDQL]DWLRQV

UHSUHVHQWHG DVXPPDU\RIWRSLFVSUHVHQWHGDQGGLVFXVVHGDQGDOLVWRILQIRUPDWLRQ

UHTXHVWHGRURIIHUHGWREHVXSSOLHGDIWHUWKHPHHWLQJDQGWKHLGHQWLW\RIWKHUHTXHVWLQJ

SDUW\3* (ZLOOGLVWULEXWHPHHWLQJVXPPDULHVRQWKHHDUOLHURI D GD\VDIWHUWKH

35*PHHWLQJRU E EXVLQHVVKRXUVEHIRUHWKHQH[WUHJXODUO\VFKHGXOHG35*PHHWLQJ

,IGXHWRXQXVXDOFLUFXPVWDQFHVWKHDIRUHPHQWLRQHGWLPHIUDPHLVGHHPHGXQUHDVRQDEOH

'$SSHQGL[(S ,G

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH Senior 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 197 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

WKHQ3* (PD\GLVWULEXWHWKHVXPPDU\GD\VDIWHUWKH35*PHHWLQJEXWPD\GRVR

RQO\LI3* (QRWLILHVWKH35*PHPEHUV YLDHPDLO LQIRUPLQJWKHPRIWKHGHOD\LQ

GLVWULEXWLRQ

:HE%DVHG&DOHQGDU3* (PDLQWDLQVDZHEEDVHG35*FDOHQGDU3* (ZLOO

SURYLGHWKHIROORZLQJLQIRUPDWLRQWRWKHSXEOLFWKURXJKDZHEEDVHGIRUXPGDWH

PHHWLQJWLPHDQGGXUDWLRQRIWKHPHHWLQJWKHLQGLYLGXDOVSDUWLFLSDWLQJLQWKHPHHWLQJ

DQGWKHRUJDQL]DWLRQUHSUHVHQWHGE\WKHLQGLYLGXDODQGDOLVWRIQRQFRQILGHQWLDOLWHPV

GLVFXVVHGRUDVXPPDU\RIJHQHUDOWRSLFVGLVFXVVHG

1RWLILFDWLRQVWRWKH35*,QDGGLWLRQWRWKHDJHQGDSUHVHQWDWLRQVDQGPHHWLQJ

VXPPDULHV3* (PD\SURYLGHQRWLILFDWLRQWRWKH35*LQEHWZHHQVFKHGXOHGPHHWLQJV

B. Independent Evaluators

1. Independent Evaluator Pool 3* (LQFRQVXOWDWLRQZLWKLWV35*VKDOOGHYHORSDSRRORIDWOHDVWWKUHHEXW

SUHIHUDEO\PRUH,(V3* (ZLOOGHYHORSDQGSHULRGLFDOO\DGGWRLWV,(SRRODVIROORZV

3* (VKDOOGHYHORSDOLVWRISURVSHFWLYH,(VYLDLQGXVWU\FRQWDFWVOLWHUDWXUH VHDUFKHV35*UHFRPPHQGDWLRQVDQGVLPLODUPHWKRGV3* (ZLOOVROLFLW LQIRUPDWLRQIURPWKHSURVSHFWLYH,(VDQGFLUFXODWHWKHOLVWRIFDQGLGDWHVDQG WKHLU³UHVXPHV´WRWKH35*DQG('IRUIHHGEDFN$OOLQGLYLGXDOVZKR SHUIRUPWKHVSHFLILF,(UHVSRQVLELOLWLHVDQGGXWLHVDUHFRYHUHGXQGHUWKH,( RUJDQL]DWLRQRUFRPSDQ\

3* (VKDOOUHO\RQWKHJXLGDQFHUHJDUGLQJ,(H[SHUWLVHDQGTXDOLILFDWLRQV SURYLGHGLQ''DQG'+RZHYHUWKHVH TXDOLILFDWLRQVVKRXOGUHSUHVHQWWKHPLQLPXPWKUHVKROGQHFHVVDU\IRUDQ,( WREHHIIHFWLYHDQG3* (DQGWKH35*ZLOOHYDOXDWHDOOUHOHYDQWHQHUJ\ SURFXUHPHQWUHODWHGNQRZOHGJHVNLOODQGH[SHULHQFHDVSDUWRIWKH,( VHOHFWLRQSURFHVV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH Senior 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 198 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3* (DQGLWV35*VKDOOLGHQWLI\DQGLQWHUYLHZDVXEVHWRISURVSHFWLYH FDQGLGDWHVWKDW3* (WKH35*DQG('VWDIIGHHPPRVWVXLWDEOHIRUWKH UROH

3* (VKDOOFRRUGLQDWHPDWHULDOVDQGVXEPLWLWVUHFRPPHQGDWLRQVWRWKH 35*UHJDUGLQJHDFKSURVSHFWLYHFDQGLGDWH LQFOXGLQJWKHJHQHUDOFRQVHQVXV DQGDQ\RSSRVLWLRQWRWKHFRQVHQVXV 3* (VKDOOVXEPLWDZULWWHQOLVWRI TXDOLILHG,(VWR('WRDGGWRWKHFRQWUDFWLQJSRRO7KHOLVWZLOOFRQWDLQWKH UHFRPPHQGDWLRQVRIWKH35*WKDWZHUHVXEPLWWHGWRWKH35*('ZLOO HYDOXDWHWKHSURSRVHG,(¶VFRPSHWHQFLHVEDVHGRQWKHJXLGHOLQHVLQ 'DVZHOODVHYDOXDWLQJWKH,(¶VLQGHSHQGHQFHLQFOXGLQJDQ\ FRQIOLFWVRILQWHUHVW('VKDOOJLYHILQDODSSURYDOIRULQFOXVLRQRIDQ,(LQ WKH,(SRROE\OHWWHUWR3* (('ZLOODOVRKDYHWKHULJKWWRILQDODSSURYDO RIWKHXVHRIDSDUWLFXODU,(IRUHDFK5)2

%H\RQGWKHGHYHORSPHQWRIWKHLQLWLDO,(SRRODGGLWLRQDO,(VPD\EHDGGHG WRWKHSRROE\IROORZLQJWKHVDPHSURFHGXUHVOLVWHGDERYH

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

3* (KDVGHYHORSHGDSURIRUPDPDVWHUFRQWUDFWWREHXVHGHDFKWLPHLW FRQWUDFWVZLWKDQ,(,IGHYLDWLRQVIURPWKHSURIRUPDFRQWUDFWDUH QHFHVVDU\WKHQWKHPRGLILFDWLRQVPXVWEHDSSURYHGE\WKH(' 3* (ZLOOSURYLGHWRWKH35*WKHQDPHRIWKH,(WREHXVHGLQDVSHFLILF

SURFXUHPHQWVROLFLWDWLRQDORQJZLWKWKHHVWLPDWHGDQGDFWXDO,(FRVWVEHIRUHDQGDIWHUWKH

VROLFLWDWLRQWDNHVSODFH

,GSSDQG$SSHQGL[(SSDVDIILUPHGDQGPRGLILHGLQ'S ,G$SSHQGL[(S

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH Senior 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 199 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2. Independent Evaluator Requirements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

3. Independent Evaluator Reports $Q\UHTXLUHG,(5HSRUWVKDOOEHLQFOXGHGZLWKWKH4XDUWHUO\&RPSOLDQFH5HSRUW

³4&5´ $GYLFH/HWWHURU$SSOLFDWLRQVHHNLQJDSSURYDOIRUWKHVSHFLILFWUDQVDFWLRQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH Senior 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 200 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

,(VVKDOOXVHWKHWHPSODWH V DSSURYHGE\WKH('7KHWHPSODWH V PD\EHPRGLILHGE\

('RUWKH&RPPLVVLRQDVDSSURSULDWH3XEOLFYHUVLRQVRI,(UHSRUWVVKDOOEHLGHQWLFDOWR

WKHFRUUHVSRQGLQJFRQILGHQWLDOYHUVLRQVH[FHSWIRUWKHUHGDFWLRQRIFRQILGHQWLDOPDWHULDO

4. Independent Evaluator Disclosure Requirements 3* (KDVGHYHORSHGDFRPSUHKHQVLYHFRQIOLFWRILQWHUHVWGLVFORVXUHUHTXLUHPHQW

IRU,(V$Q,(PD\EHGLVTXDOLILHGIURPSDUWLFLSDWLQJLQDQ5)2SURFHVVLIWKHUHDUH

SDUWLFXODUHJUHJLRXVFRQIOLFWVRILQWHUHVWWKDWDULVHGXULQJWKH5)2UHYLHZSURFHVVRU

GXULQJWKHFRQWUDFWQHJRWLDWLRQSURFHVV$Q,(PD\DOVREHGLVTXDOLILHGIURPWKH,(SRRO

LIWKHUHDUHSDUWLFXODUHJUHJLRXVFRQIOLFWVRILQWHUHVWVQRWGLVFORVHGGXULQJWKHHYDOXDWLRQ

SURFHVV,QDGGLWLRQ3* (UHTXLUHVWKDWDOO,(VVLJQDQ1'$ZKLFKDGGUHVVHVSRWHQWLDO

FRQIOLFWVRILQWHUHVWLQFOXGLQJEXWQRWOLPLWHGWRHVWDEOLVKLQJEXVLQHVVUHODWLRQVKLSV

EHWZHHQWKH,(DQGWKHSDUWLHVWRWKHWUDQVDFWLRQ RIZKLFKWKH\DUHHYDOXDWLQJ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH Senior 9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 201 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;1 5,6.0$1$*(0(1732/,&< $1'7(9$50(7+2'2/2*<

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 202 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

A. Risk Management Policy and Strategy

1. Portfolio Risk Assessment and Customer Risk Tolerance 3DFLILF*DVDQG(OHFWULF&RPSDQ\ ³3* (´ PDQDJHVWKHQHWRSHQSRVLWLRQVRI

WKHEXQGOHGHOHFWULFSRUWIROLRLQDFFRUGDQFHZLWKWKH&DOLIRUQLD3XEOLF8WLOLWLHV

&RPPLVVLRQ ³&38&´RU³&RPPLVVLRQ´ JXLGHOLQHV7KHSRUWIROLRDQG3* (¶VDELOLW\

WRPDQDJHWKHSRUWIROLRLVDIIHFWHGE\QXPHURXVULVNVLQFOXGLQJSULFHPDUNHWOLTXLGLW\

PRGHOFRXQWHUSDUW\FUHGLWH[SRVXUHDQGFUHGLWOLTXLGLW\

)LUVWZLWKUHJDUGWRSULFHULVNLQFUHDVHVLQHOHFWULFLW\JDVDQGJUHHQKRXVHJDV

³*+*´ FRPSOLDQFHLQVWUXPHQWSULFHVLQFUHDVHWKHFRVWVRIWKHSRUWIROLRDQGLQFUHDVHWKH

ULVNRIHYHQKLJKHUFRVWVRIWKHSRUWIROLR,QFUHDVHVLQSULFHYRODWLOLW\DOVRLQFUHDVHWKH

ULVNRIKLJKHUFRVWVRIWKHSRUWIROLR7KHSRUWIROLR¶VH[SRVXUHWRSULFHULVNLVLQFOXGHGLQ

WKH7RH[SLUDWLRQ9DOXHDW5LVN ³7H9D5´ PHDVXUH$PRQJWKHFKDOOHQJHVLQPDQDJLQJ

WKHSRUWIROLR¶VH[SRVXUHWRSULFHULVNDUHEDODQFLQJKRZPXFKWRKHGJHZKHQWRKHGJH

DQGZKDWSURGXFWVWRXVHWRKHGJH

6HFRQGWKHSRUWIROLRDQG3* (IDFHPDUNHWOLTXLGLW\ULVN'HSHQGLQJRQWKHVL]H

RIWKHSRUWIROLR¶VQHWRSHQSRVLWLRQVSULFHVPD\PRYHDGYHUVHO\ZKHQWUDQVDFWLRQVDUH

H[HFXWHGWRUHGXFHWKRVHQHWRSHQSRVLWLRQV'HSHQGLQJRQPDUNHWFRQGLWLRQVWKLV

DGYHUVHSULFHPRYHPHQWFRXOGEHVLJQLILFDQW,QIRUPXODWLQJDSODQWRH[HFXWH

WUDQVDFWLRQVDQGLQDFWXDOWUDQVDFWLRQH[HFXWLRQ3* (FRQVLGHUVWKHSRWHQWLDOHIIHFWVRI

PDUNHWOLTXLGLW\ULVN

7KLUGWKHSRUWIROLRDQG3* (FDQEHDIIHFWHGE\PRGHOULVN0RGHOULVNUHODWHV

WRWKHULVNVLQYROYHGLQXVLQJPRGHOVWRHVWLPDWHSRUWIROLRULVNDQGPDQDJHWKHSRUWIROLR¶V

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 203 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

QHWRSHQSRVLWLRQV2IWHQ3* (¶VSRUWIROLRSRVLWLRQVDUHQRWGLUHFWO\WUDGHGLQDQ\

PDUNHWSODFH,QWKLVVLWXDWLRQPRGHOVDUHXVHGWRHVWLPDWHQHWRSHQSRVLWLRQH[SRVXUH

PHDVXUHSRUWIROLRULVNDQGJXLGHLQPDQDJLQJWKHSRUWIROLR0RGHOULVNLQFOXGHVWKHULVN

RIHVWLPDWLQJH[WUDSRODWLQJRUIRUHFDVWLQJLQSXWVQHHGHGIRUSRUWIROLRHYDOXDWLRQVXFKDV

HQHUJ\GHPDQGK\GURVXSSO\IRUZDUGSULFHVYRODWLOLWLHVDQGFRUUHODWLRQV3* (¶VULVN

PDQDJHPHQWSROLFLHVDQGSURFHGXUHVLQFOXGHSURYLVLRQVDQGDFWLYLWLHVWRDVVHVVDQG

PDQDJHPRGHOULVN

)RXUWKWKHSRUWIROLRDQG3* (FDQEHDIIHFWHGE\FRXQWHUSDUW\FUHGLWULVN7KH

SRUWIROLRDQG3* (KROGFRQWUDFWVZLWKFRXQWHUSDUWLHVDQGWKHUHLVDULVNWKDW

FRXQWHUSDUWLHVPD\QRWSD\RUSHUIRUPRQWKHLUFRQWUDFWXDOREOLJDWLRQV3* (¶VFUHGLW

GHSDUWPHQWPDQDJHVWKLVULVN6LQFHUHWXUQLQJWRSURFXUHPHQWLQ3* (¶VFUHGLW

GHSDUWPHQWKDVHPSOR\HGDFUHGLWSROLF\ZKHUHE\DOOWUDQVDFWLRQVZLWKFRXQWHUSDUWLHVDUH

VXEMHFWWRWHUPDQGGROODUOLPLWV*HQHUDOO\WKHVHOLPLWVDUHEDVHGRQFROODWHUDO

WKUHVKROGVFUHGLWUDWLQJVDQGFRQWUDFWXDOFRQGLWLRQVWKDWERWK3* (DQGFRXQWHUSDUWLHV

KDYHDJUHHGWRIRUPDQDJLQJFROODWHUDOREOLJDWLRQRIHDFKSDUW\WRPRUHHIIHFWLYHO\

PDQDJHFRXQWHUSDUW\FUHGLWULVN

$GGLWLRQDOO\WKHSRUWIROLRDQG3* (IDFHFUHGLWOLTXLGLW\ULVN3* (LVREOLJDWHG

WRSRVWFROODWHUDOZLWKFRXQWHUSDUWLHVDVZHOODVH[FKDQJHV7KHFROODWHUDOSRVWLQJE\

3* (UHVXOWVIURPWKHFRPELQDWLRQRIDFFUXDOVIRUGHOLYHUHGSK\VLFDOHQHUJ\DQGPDUNWR

PDUNHWRIREOLJDWLRQVDERYHDQGEH\RQGWKHQHJRWLDWHGFUHGLWWKUHVKROGZLWK

FRXQWHUSDUWLHV,QDGGLWLRQPRVWRIWKHSRUWIROLR¶VFRQWUDFWXDODJUHHPHQWVUHTXLUH3* (

WRSRVWFROODWHUDOLI3* (¶VFUHGLWUDWLQJE\H[WHUQDOUDWLQJDJHQFLHVZHUHWRIDOOEHORZ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 204 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

LQYHVWPHQWJUDGH)RUH[FKDQJHVDQGFOHDUHGWUDQVDFWLRQV3* (LVUHTXLUHGWRSRVW

LQLWLDOPDUJLQDVZHOODVPDUNWRPDUNHWDQGWKHSRUWIROLRGRHVQRWEHQHILWIURPDQ\

XQVHFXUHGFUHGLWOLPLWV

3* (UHSRUWVLWVHOHFWULFSRUWIROLR7H9D5WRWKH&RPPLVVLRQ¶V(QHUJ\'LYLVLRQ

³('´ RQDPRQWKO\EDVLV&RQVLVWHQWZLWK'HFLVLRQ ³'´ 3* (

PHDVXUHV7H9D5DVWKHSRWHQWLDOFKDQJHLQSRUWIROLRFRVWVXQGHUDORZSUREDELOLW\

SHUFHQW RXWFRPHRUDSHUFHQWFRQILGHQFHOHYHO7KH7H9D5PHDVXUHDVVXPHVWKDW

QRIXUWKHUIRUZDUGKHGJLQJLVSHUIRUPHGDQGWKDWDOOH[LVWLQJSRVLWLRQVDUHWDNHQWR

GHOLYHU\,Q'WKH&XVWRPHU5LVN7ROHUDQFH ³&57´ OHYHOZDVVHWE\WKH

&RPPLVVLRQDWSHUFHQWRI3* (¶VV\VWHPDYHUDJHUDWH7KHFDOFXODWLRQRIWKH&57

YDOXHLVGHULYHGE\PXOWLSO\LQJSHUFHQWRIWKHDGRSWHGEXQGOHGV\VWHPDYHUDJHUDWHE\

WKHEXQGOHGIRUHFDVWHGVDOHVIRUWKHUROOLQJPRQWKSHULRG%DVHGRQ3* (¶VHIIHFWLYH

-DQXDU\EXQGOHGV\VWHPDYHUDJHUDWHRIFHQWVSHUNLORZDWWKRXU ³N:K´ D

SHUFHQWULVNWROHUDQFHIDFWRU\LHOGVD&57RIFHQWVN:K3XUVXDQWWR

'WKLV&57FDOFXODWLRQZLOOEHXSGDWHGHYHU\WZR\HDUVLQHDFK/RQJ7HUP

3URFXUHPHQW3ODQ ³/733´ ILOLQJ,IWKH/733ILOLQJLVGHOD\HGRUQRWPDGHWKH&57

ZLOOEHXSGDWHGWZR\HDUVIURPWKHILOLQJRIWKHSUHYLRXV/733YLDD7LHUDGYLFHOHWWHU

$GHVFULSWLRQRI3* (¶V7H9D5PHWKRGRORJ\LVLQFOXGHGLQ6HFWLRQ%EHORZ

6HHDOVR$SSHQGL[0 UHJDUGLQJ7H9D5QRWLILFDWLRQWRWKH3URFXUHPHQW5HYLHZ*URXSDV UHTXLUHGE\'DQG' 3* ($GYLFH/HWWHU ³$/´ (%³6XSSOHPHQWDO)LOLQJ±$QQXDO(OHFWULF7UXH8S± &RQVROLGDWHG&KDQJHVWR3* ((OHFWULF5DWHVRQ-DQXDU\´ KWWSZZZSJHFRPQRWVUDWHVWDULIIVWPSGI(/(&B(%SGI

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 205 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2. Current Risk Management Practices 3* (KHGJHVWKHSULFHULVNRILWVSRUWIROLRLQDFFRUGDQFHZLWKLWV

&RPPLVVLRQDSSURYHG(OHFWULF3RUWIROLR+HGJLQJ3ODQ +HGJLQJ3ODQRU3ODQ 8QGHU

WKH+HGJLQJ3ODQ3* (LVDXWKRUL]HGWRXWLOL]HILQDQFLDOLQVWUXPHQWVLQDGGLWLRQWR

SK\VLFDOFRQWUDFWVWRKHGJHLWVSULFHULVN7KH+HGJLQJ3ODQSURYLGHV3* (ZLWKDQ

DSSURYHGJXLGHOLQHIRUYROXPHWHUPDQGWHQRUDQGSHUPLWWHGSURGXFWW\SH7KH+HGJLQJ

3ODQDOVRHVWDEOLVKHVWKHFUHGLWOLTXLGLW\DPRXQWWKDWFDQEHDOORFDWHGWRWKHKHGJLQJRI

3* (¶VHOHFWULFSRUWIROLRDVRXWOLQHGLQWKH/LTXLGLW\0DQDJHPHQW6WUDWHJ\VHFWLRQ

3* (KHGJHVXVLQJ6ZDSVDQG2SWLRQVDVZHOODVIL[HGSULFHFRQWUDFWV7KHVH

KHGJHVFRPSOHPHQWRWKHUSRUWIROLRSRVLWLRQV$VLJQLILFDQWIUDFWLRQRISRUWIROLRSULFHULVN

LVFXUUHQWO\³KHGJHG´WKURXJK3* (¶VRZQHUVKLSRISK\VLFDODVVHWVRUWKHULJKWVWR

RXWSXWIURPSK\VLFDODVVHWV SRZHUSODQWVORQJWHUPSRZHUFRQWUDFWVJDVSLSHOLQHVDQG

JDVLQVWRUDJH $ORQJZLWKH[LVWLQJSK\VLFDOSRVLWLRQV3* (XVHVILQDQFLDO6ZDSVDQG

2SWLRQVWRIXUWKHUKHGJHFRPPRGLW\SULFHULVN

3* (¶VVHOHFWLRQRIILQDQFLDOKHGJHLQVWUXPHQWVLVJXLGHGE\LWV+HGJLQJ3ODQ

$Q2SWLRQUHTXLUHVDNQRZQXSIURQWSD\PHQWDQGFRXOGUHVXOWLQDODWHUFDVKLQIORZWKDW

LVXQNQRZQXQWLOH[SLUDWLRQDQGVHWWOHPHQW2QWKHRWKHUKDQGDILQDQFLDO6ZDSKDVQR

XSIURQWSD\PHQWDQGUHVXOWVLQDODWHUFDVKLQIORZRURXWIORZWKDWLVXQNQRZQXQWLO

H[SLUDWLRQDQGVHWWOHPHQW6ZDSVDUHDOVRVXEMHFWWRFROODWHUDOSRVWLQJUHTXLUHPHQWVDQG

GRQRWDOORZWKHEX\HUWRWDNHDGYDQWDJHRIORZHUSULFHVLIFRPPRGLW\SULFHVGURSLQ

WKHIXWXUH

7KH(OHFWULF3RUWIROLR+HGJLQJ3ODQLVLQ$SSHQGL[(

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 206 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

7\SLFDOO\3* (LVWKHEX\HURIWKHKHGJHLQVWUXPHQWV2QUDUHRFFDVLRQV3* (

DQWLFLSDWHVLQDGYDQFHKDYLQJPRUHFRPPRGLW\WKDQQHHGHGWRVHUYHFXVWRPHUGHPDQG

2QVXFKRFFDVLRQVWKHVDOHRIKHGJHLQVWUXPHQWVZRXOGVHUYHDVDKHGJHUHGXFLQJWKH

SRUWIROLR¶VH[SRVXUHWRFRPPRGLW\SULFHULVN

)LQDOO\LWLVLPSRUWDQWWRQRWHWKDWZKLOHKHGJLQJUHGXFHVWKHULVNRIDGYHUVHSULFH

PRYHPHQWVDQGOHDGVWRPRUHVWDEOHSRUWIROLRFRVWVKHGJLQJGRHVQRWUHGXFHWKHH[SHFWHG

WKDWLVDYHUDJHRUPHDQ SRUWIROLRFRVW

3. Credit and Collateral Requirements 7KH&RPPLVVLRQKDVQRWHVWDEOLVKHGVSHFLILFUXOHVIRUFRXQWHUSDUW\RUFXVWRPHU

ULVNWKDWDSSO\WRFUHGLWH[SRVXUH3* (¶VFUHGLWDQGFROODWHUDOUHTXLUHPHQWVHYROYHG

IURPDFFHSWHGHQHUJ\LQGXVWU\SUDFWLFHVLQFOXGLQJFRQFHSWVWKDWFDQEHIRXQGLQ(GLVRQ

(OHFWULF,QVWLWXWH ³((,´ 1RUWK$PHULFDQ(QHUJ\6WDQGDUGV%RDUG ³1$(6%´ DQG

,QWHUQDWLRQDO6ZDSVDQG'HULYDWLYHV$VVRFLDWLRQ,QF ³,6'$´ PDVWHUDJUHHPHQWV7KH

SULPDU\HOHPHQWVRI3* (¶VFUHGLWDQGFROODWHUDOUHTXLUHPHQWVLQFOXGHFROODWHUDO

WKUHVKROGV XQVHFXUHGFUHGLWOLQHV FROODWHUDOSRVWLQJIRUSXUFKDVHVDQGVDOHVRISK\VLFDO

RUILQDQFLDOJDVDQGSRZHUDQGPDUNWRPDUNHWSRVWLQJWRFRYHUWKHFKDQJHLQYDOXHRID

FRQWUDFWUHODWLYHWRWKHPDUNHW7KHJHQHUDOJRDOLVWRSURWHFWFXVWRPHUVDJDLQVWWKHULVN

RIGHIDXOWE\SDUWLHVZLWKZKRP3* (HQWHUVLQWRZKROHVDOHFRPPRGLW\WUDQVDFWLRQVRU

KHGJLQJWUDQVDFWLRQV3* (¶VFUHGLWULVNPDQDJHPHQWSURFHVVLQFOXGHV

FUHGLWZRUWKLQHVVHYDOXDWLRQVFROODWHUDOUHTXLUHPHQWVIRUYDULRXVW\SHVRIWUDQVDFWLRQV

DQGWKHOHYHORIFROODWHUDODXWKRULW\(DFKRIWKHVHDVSHFWVRIFUHGLWULVNPDQDJHPHQWLV

GHVFULEHGEHORZ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 207 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3* (PDQDJHVWKHFUHGLWULVNUHJDUGLQJHDFKFRXQWHUSDUW\E\DVVLJQLQJXQVHFXUHG

FUHGLWOLPLWVRUXQVHFXUHGFUHGLWWKUHVKROGVWRHDFKFRXQWHUSDUW\,QHVWDEOLVKLQJ

XQVHFXUHGFUHGLWOLQHVIRUFRXQWHUSDUWLHV3* (SHUIRUPVHYDOXDWLRQVRIFRXQWHUSDUW\

FUHGLWZRUWKLQHVV3* (DVVHVVHVHDFKFRXQWHUSDUW\¶VILQDQFLDOVWUHQJWKWUDQVDFWLRQULVN

DQGGXUDWLRQFUHGLWVWDQGLQJDQGRWKHUFUHGLWFULWHULDDVGHHPHGDSSURSULDWH3* (

SHULRGLFDOO\UHYLHZVWKHXQVHFXUHGFUHGLWOLQHVDVVLJQHGWRDFRXQWHUSDUW\WRHQVXUHWKH

XQVHFXUHGFUHGLWOLQHVDUHDSSURSULDWHIRUWKHWKHQFXUUHQWFUHGLWTXDOLW\RIWKH

FRXQWHUSDUW\

6RPHFRXQWHUSDUWLHVPD\KDYHWKHLUGHEWUDWHGE\6WDQGDUGDQG3RRU¶V ³6 3´

0RRG\¶VRU)LWFK$FUHGLWUDWLQJRI%%%RUKLJKHUE\6 3RU%DDE\0RRG\¶VLV

FRQVLGHUHGLQYHVWPHQWJUDGH,IDFRXQWHUSDUW\LVLQYHVWPHQWJUDGHUDWHGE\WKHDJHQFLHV

DQGLWDOVRPHHWV3* (¶VFUHGLWHYDOXDWLRQFULWHULDLWPD\WKHQTXDOLI\IRUVRPH

XQVHFXUHGFUHGLWDPRXQW,IDFRXQWHUSDUW\LVQRWUDWHGE\DUDWLQJDJHQF\LWPD\VWLOO

TXDOLI\IRUVRPHXQVHFXUHGFUHGLWOLPLWLILWPHHWV3* (¶VFUHGLWHYDOXDWLRQFULWHULD

2WKHUZLVHIRUDOORWKHUFRXQWHUSDUWLHVFUHGLWVXSSRUWPD\EHUHTXLUHGLQWKHIRUPRID

FDVKGHSRVLWJXDUDQW\IURPDQLQYHVWPHQWJUDGHHQWLW\RUDOHWWHURIFUHGLWIURPDQ

DFFHSWDEOHFUHGLWVXSSRUWSURYLGHULQIRUPDQGVXEVWDQFHVDWLVIDFWRU\WR3* (

&RXQWHUSDUWLHVZKLFKTXDOLI\IRUXQVHFXUHGFUHGLWPD\VWLOOQHHGWRSRVWDGGLWLRQDO

FROODWHUDOLIWKHH[SHFWHGH[SRVXUHLVEH\RQGWKHDVVLJQHGFUHGLWOLPLW

6RPHRIWKHVSHFLILFFROODWHUDOUHTXLUHPHQWVWKDWDSSO\WRYDULRXVFDWHJRULHVRI

WUDQVDFWLRQVDUHGHVFULEHGEHORZ

x 6WDQGDUG3K\VLFDO&RQWUDFWV±3K\VLFDOSRZHUFRQWUDFWVDUHJHQHUDOO\ H[HFXWHGXQGHUVWDQGDUGDJUHHPHQWVVXFKDVWKH:HVWHUQ6\VWHP3RZHU3RRO

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 208 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

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

x 6WDQGDUG)LQDQFLDO&RQWUDFWV±)LQDQFLDOWUDQVDFWLRQVDUHH[HFXWHGGLUHFWO\ WKURXJKWKHH[FKDQJHVRUH[HFXWHGGLUHFWO\ZLWKDFRXQWHUSDUW\LQWKH 2YHU7KH&RXQWHU ³27&´ PDUNHW:KHQH[HFXWHGZLWKH[FKDQJHV 3* (PXVWSRVWDSSURSULDWHFROODWHUDOEDVHGRQWKHH[FKDQJH¶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

x 5HQHZDEOH&RQWUDFWV±5HQHZDEOHFRXQWHUSDUWLHVPD\EHUHTXLUHGWRSRVW YDULRXVGHSRVLWVFRQVLVWLQJRIDELGGHSRVLWZKLFKLVODWHULQFUHDVHGWRD GHYHORSPHQWDQGFRQVWUXFWLRQSHULRGGHSRVLW DPRXQWRIVHFXULW\GHVLJQDWHG LQN: DQGPXOWLSOLHGE\WKHJUHDWHURI WKHFDSDFLW\IDFWRURU IRULQWHUPLWWHQWWHFKQRORJLHVDQGDGHOLYHU\WHUPVHFXULW\RIXSWRPRQWKV RIWKHDYHUDJHUHYHQXHGHSHQGLQJRQFRQWUDFWWHUPRQFHFRPPHUFLDO RSHUDWLRQVEHJLQ

x *UHHQKRXVH*DV&RQWUDFWV±3* (XWLOL]HVERWK$OORZDQFHVDQG2IIVHW &UHGLWV ³2IIVHWV´ DVGHVFULEHGLQ$SSHQGLFHV$DQG*WRPHHWLWV FRPSOLDQFHREOLJDWLRQV)RUELODWHUDOWUDQVDFWLRQV3* (PD\UHTXLUHD

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 209 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

VHFXULW\WRFRYHUWKHH[SHFWHGH[SRVXUHDQGDQDGGLWLRQDOVHFXULW\VSHFLILFDOO\ IRU2IIVHWVLQYDOLGDWLRQULVNDIWHUGHOLYHU\

x 5HVRXUFH$GHTXDF\ ³5$´ ±5$FRXQWHUSDUWLHV LIQRWUDWHGDVLQYHVWPHQW JUDGH DUHJHQHUDOO\UHTXLUHGWRSRVWFROODWHUDOGHSHQGLQJRQWKHWHUPVRIWKH DJUHHPHQW

x 7ROOLQJ&RQWUDFWV±,QWHUPHGLDWHWHUPWROOLQJFRXQWHUSDUWLHVDUHVXEMHFWWR PDUNWRPDUNHWSRVWLQJLQDFFRUGDQFHWRWKH0DUNHW,QWULQVLF9DOXHRU HTXLYDOHQWPHWKRGRORJ\/RQJWHUPWROOLQJFRXQWHUSDUWLHVPD\EHUHTXLUHGWR SRVWDELGGHSRVLWSOXVDQDGGLWLRQDODPRXQWZKHQDQH[HFXWHGFRQWUDFWLV VXEPLWWHGWRWKH&RPPLVVLRQSOXVDQDGGLWLRQDOGHYHORSPHQWDODQG FRQVWUXFWLRQSHULRGGHSRVLWLVUHTXLUHGDWWKHWLPHWKH&RPPLVVLRQDSSURYHV WKHFRQWUDFW DPRXQWRIVHFXULW\GHVLJQDWHGLQNLORZDWW ³N:´ DQGRQFH FRPPHUFLDORSHUDWLRQVEHJLQWKHFRXQWHUSDUW\LVVXEMHFWWRWKH0DUNHW,QWULQVLF 9DOXHRUHTXLYDOHQWPHWKRGRORJ\

x 3URFXUHPHQW$FWLYLWLHV7KURXJKWKH&DOLIRUQLD,QGHSHQGHQW6\VWHP 2SHUDWRUV ³&$,62´ ±3* (VFKHGXOHVDOOLWVHQHUJ\SURFXUHPHQWWKURXJK WKH&$,62V\VWHP,WDOVRSURFXUHVDSRUWLRQRILWVSK\VLFDOQHHGVGDLO\DQG KRXUO\WKURXJKWKH&$,62RUPD\UHVHOODQ\H[FHVVHQHUJ\LWPD\KDYH ,QDGGLWLRQ3* (PDQDJHVWUDQVPLVVLRQFRQJHVWLRQULVNVWKURXJK SURFXUHPHQWRIILQDQFLDOFRQWUDFWVIRU&RQJHVWLRQ5HYHQXH5LJKWV ³&55´ WKURXJKWKH&$,62DXFWLRQDQGWHUPDOORFDWLRQSURFHVV3* (LVDOVR UHVSRQVLEOHIRUYDULRXV&$,62FKDUJHVUHODWHGWR7UDQVPLVVLRQDQG 'LVWULEXWLRQ/RVVHVDQGDGPLQLVWUDWLYH7KHFRPELQHGH[SRVXUHWRDPDUNHW SDUWLFLSDQWLVUHIHUUHGWRDV(VWLPDWHG$JJUHJDWH/LDELOLW\ ³($/´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

x 6KRUW7HUP7UDQVDFWLRQV±6KRUWWHUPWUDQVDFWLRQVLQFOXGHKRXUDKHDG GD\DKHDGEDODQFHRIWKHPRQWKDQGPXOWLPRQWKGHDOV([SRVXUHVIURP SXUFKDVHVDQGVDOHVRISRZHUDQGJDVDUHWUDFNHGGDLO\&ROODWHUDO

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 210 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

UHTXLUHPHQWVDUHJRYHUQHGE\WKHPDVWHUDJUHHPHQWVXQGHUZKLFKWKHVH WUDQVDFWLRQVDUHH[HFXWHG 'JUDQWV3* (DPRQJRWKHUWKLQJVDXWKRULW\WRLVVXHXSWR

ELOOLRQRIVKRUWWHUPGHEWVXEMHFWWRWKHUHVWULFWLRQWKDWPLOOLRQRIWKDWDXWKRULW\

PD\RQO\EHXVHGIRUWKHIROORZLQJSXUSRVHV

± 3URFXULQJQDWXUDOJDVIRU3* (¶VFXVWRPHUVGXULQJSULFHVSLNHV

± 3URFXULQJHOHFWULFLW\IRU3* (¶VFXVWRPHUVGXULQJSULFHVSLNHV

± 5HVSRQGLQJWRPDMRUQDWXUDOGLVDVWHUVODUJHVFDOHWHUURULVWDWWDFNVRURWKHU FDWDFO\VPV

± 3URYLGLQJOLTXLGLW\GXULQJDPDMRUGLVUXSWLRQRI3* (¶VDELOLW\WRELOO FROOHFWDQGRUSURFHVVXWLOLW\FXVWRPHUELOOV *LYHQWKHVHUHVWULFWLRQV3* (HIIHFWLYHO\KDVELOOLRQRIJHQHUDOVKRUWWHUP

GHEWDXWKRULW\ZLWKWKHDGGLWLRQDOPLOOLRQRIDXWKRUL]DWLRQUHVHUYHGIRUWKH

IRUHJRLQJVSHFLILHGFRQWLQJHQFLHV6KRUWWHUPGHEWLVXVHGWRPHHWWKHOLTXLGLW\

UHTXLUHPHQWVRIWKHHOHFWULFSRUWIROLRDQGILQDQFHRWKHURSHUDWLRQVDW3* (7KH

OLTXLGLW\PDQDJHPHQWVWUXFWXUHVSHFLILHGLQ$SSHQGL[(GHSOR\VVKRUWWHUPGHEWWRWKH

HOHFWULFSRUWIROLR

B. TeVaR Methodology )OXFWXDWLRQVLQQDWXUDOJDVHOHFWULFSRZHUDQG*+*SULFHVK\GURHOHFWULF

JHQHUDWLRQDQGHOHFWULFORDGYDULDWLRQVUHVXOWLQIOXFWXDWLRQVLQWKHRYHUDOOFRVWRIWKH

3* (HOHFWULFSRUWIROLR7KH7H9D5PHWULFLVDPHDVXUHRIXQH[SHFWHGFKDQJHVLQ

3* (¶VYDULDEOHHOHFWULFSRUWIROLRSURFXUHPHQWFRVWVQHWRIHOHFWULFSRUWIROLRUHYHQXHV

'GHILQHVWKHFRPPHQFHPHQWRID³SULFHVSLNH´DVDQLQFUHDVHLQWKHSULFHRIJDVRU HOHFWULFLW\RIDWOHDVWSHUFHQWRYHUWKHDYHUDJHRIWKHSUHFHGLQJPRQWKV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 211 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

IURPVDOHVRIFXPXODWLYHORQJSRVLWLRQVRYHUVRPHVSHFLILHGWLPHSHULRGW\SLFDOO\

PRQWKV7H9D5PHDVXUHVKRZKLJKWKHQHWSRUWIROLRFRVWIRUWKHSURMHFWLRQSHULRG

PD\EHFRPHLIFHUWDLQPDUNHWFKDQJHVRFFXU

5HYHQXHVDQGFRVWVZKLFKDFFUXHWR3* (¶VHOHFWULFSRUWIROLRDQGWKXVWR3* (

FXVWRPHUVGHSHQGRQSULFHVIRUQDWXUDOJDVDQGSRZHUDWVSHFLILFORFDWLRQV&XUUHQWO\

3* (¶V7H9D5PRGHOLQFOXGHVIRUZDUGDQGVSRWQDWXUDOJDVGDLO\SULFHVDQGIRUZDUG

DQGGD\DKHDGHOHFWULFLW\SULFHV'D\DKHDGHOHFWULFLW\SULFHVDUHEDVHGRQWLPHRIXVH

VXFKDVVXSHUSHDNKRXUV KRXUHQGLQJWKURXJK0RQGD\WKURXJK)ULGD\ RQSHDN

EXWQRWVXSHUSHDNKRXUV KRXUHQGLQJWKURXJK0RQGD\WKURXJK6DWXUGD\H[FHSW

6XSHUSHDNKRXUV ³6XQGD\DQGKROLGD\´KRXUVRIISHDNKRXUV DOORWKHUUHPDLQLQJ

KRXUV

7KH7H9D5PHWULFLVFRPSXWHGXVLQJD0RQWH&DUORVLPXODWLRQ,QWKLV

VLPXODWLRQIRUHDFK0RQWH&DUOR³WULDO´GDLO\VSRWSULFHVDUHUDQGRPO\JHQHUDWHGIRU

HDFKRIWKHVSHFLILHGORFDWLRQVDQGIRUHDFKGD\RIWKHSURMHFWLRQSHULRGDQGK\GUR

JHQHUDWLRQDQGHOHFWULFORDGDUHVLPXODWHGDWKRXUO\OHYHOIRUWKHSURMHFWLRQSHULRG'DLO\

HOHFWULFLW\VSRWSULFHVDUHIXUWKHUVKDSHGLQWRWLPHRIXVHSULFHV)RUZDUGSULFHVIRU

QDWXUDOJDVDQGHOHFWULFLW\DUHDOVRVLPXODWHGWRFRPSXWHSD\RIIIURPWKHILQDQFLDOKHGJH

SRVLWLRQV VZDSVDQGRSWLRQV 7KHSULFHVXVHGLQWKHVLPXODWLRQDUHFRQVLVWHQWZLWK

FXUUHQWPDUNHWIRUZDUGSULFHVYRODWLOLW\WHUPVWUXFWXUHVLPSOLHGE\PDUNHWGDWDDQGZLWK

KLVWRULFDOFRUUHODWLRQVRIPDUNHWGDWD)RUHDFKGD\RIWKHSURMHFWLRQSHULRGWKHQHWFRVW

DWGHOLYHU\LVFRPSXWHGIRUHYHU\SRVLWLRQLQWKHSRUWIROLR1HWFRVWVRYHUWKHSURMHFWLRQ

SHULRGWKHQSURGXFHDVLQJOH DJJUHJDWHG QHWFRVWIRUHDFKVXFKWULDO7KHYDULDWLRQRIQHW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 212 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

FRVWVRYHUWULDOVSURGXFHVDSUREDELOLW\GLVWULEXWLRQRIQHWFRVWV&RVWVDUHUHSUHVHQWHGDV

QHJDWLYHQXPEHUVVRWKHVWSHUFHQWLOHLQWKHGLVWULEXWLRQRIQHWFRVWUHSUHVHQWVPRUHFRVW

WRFXVWRPHUVWKDQWKHWKSHUFHQWLOHLQWKHVDPHGLVWULEXWLRQRIQHWFRVW7KHGLIIHUHQFH

EHWZHHQWKHPHDQQHWFRVWDQGWKHWKSHUFHQWLOHRIQHWFRVWLVLGHQWLILHGDV7H9D5DWWKH

WKSHUFHQWLOH ³7H9D5´

7H9D5UHSUHVHQWVWKHODUJHVWDGGLWLRQDOXQH[SHFWHGYDULDEOHSURFXUHPHQWFRVW

IRU3* (¶VHOHFWULFSRUWIROLRZLWKSUREDELOLW\7KHUHLVDSUREDELOLW\WKDW

XQH[SHFWHGFRVWVFDQEHHYHQJUHDWHUWKDQ7H9D58VLQJ7H9D5WRPHDVXUH

SRUWIROLRULVNHQDEOHVFORVHPRQLWRULQJRISRWHQWLDOXQH[SHFWHGFRVWVWR3* (¶V

FXVWRPHUV

/RQJWHUPIRUHFDVW7H9D5YDOXHVDUHVKRZQDQGGLVFXVVHGZLWKRWKHUGHWDLOHG

VFHQDULRIRUHFDVWYDOXHVLQ$SSHQGL['

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 213 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$33(1',;2 $&521<0/,67$1'*/266$5<

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 214 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$&521<0/,67

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 215 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$FURQ\P )XOO1DPH

$ $SSOLFDWLRQ

$% $VVHPEO\%LOO

$&((( $PHULFDQ&RXQFLOIRUDQ(QHUJ\(IILFLHQW(FRQRP\

$'6 $XWRPDWHG'LVSDWFK6\VWHP

$/ $GYLFH/HWWHU

$03 $JJUHJDWRU0DQDJHG3RUWIROLR3URJUDP

$3&5 $OORZDQFH3ULFH&RQWDLQPHQW5HVHUYH

$6 $QFLOODU\6HUYLFHV

%,3 %DVH,QWHUUXSWLEOH3URJUDP

%1() %ORRPEHUJ1HZ(QHUJ\)LQDQFH

%33 %XQGOHG3URFXUHPHQW3ODQ

&$,62 &DOLIRUQLD,QGHSHQGHQW6\VWHP2SHUDWRU

&$5% &DOLIRUQLD$LU5HVRXUFHV%RDUG

&%3 &DSDFLW\%LGGLQJ3URJUDP

&& &RPELQHG&\FOH

&&$ &RPPXQLW\&KRLFH$JJUHJDWLRQ

&':5RU':5 &DOLIRUQLD'HSDUWPHQWRI:DWHU5HVRXUFHV

&(& &DOLIRUQLD(QHUJ\&RPPLVVLRQ

&+3 &RPELQHG+HDWDQG3RZHU

&2 &DUERQ'LR[LGH

&3&1 &HUWLILFDWHRI3XEOLF&RQYHQLHQFHDQG1HFHVVLW\

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 216 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$FURQ\P )XOO1DPH

&3, &RQVXPHU3ULFH,QGH[

&38&RU &DOLIRUQLD3XEOLF8WLOLWLHV&RPPLVVLRQ &RPPLVVLRQ

&55 &RQJHVWLRQ5HYHQXH5LJKWV

&57 &XVWRPHU5LVN7ROHUDQFH

&6, &DOLIRUQLD6RODU,QLWLDWLYH

' 'HFLVLRQ

'$ 'LUHFW$FFHVV

'$0 'D\$KHDG0DUNHW

'%3 'HPDQG%LGGLQJ3URJUDP

'&33 'LDEOR&DQ\RQ3RZHU3ODQW

'(& GHFUHPHQWDO

'* 'LVWULEXWHG*HQHUDWLRQ

'5 'HPDQG5HVSRQVH

'60 'HPDQG6LGH0DQDJHPHQW

($/ (VWLPDWHG$JJUHJDWH/LDELOLW\

($3 (QHUJ\$FWLRQ3ODQ

(' (QHUJ\'LYLVLRQ

('8 (OHFWULF'LVWULEXWLRQ8WLOLW\

(( (QHUJ\(IILFLHQF\

((, (GLVRQ(OHFWULF,QVWLWXWH

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 217 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$FURQ\P )XOO1DPH

(QHUJ\6WRUDJH3ODQ (QHUJ\6WRUDJH3URFXUHPHQW3ODQ

(QULFKHU (QULFKPHQW6HUYLFHV6XSSOLHU

(3 3* (¶V(QHUJ\3URFXUHPHQWRUJDQL]DWLRQ

(55$ (QHUJ\5HVRXUFH5HFRYHU\$FFRXQW

(76 (PLVVLRQV7UDGLQJ6\VWHP

(83 (QULFKHG8UDQLXP3URGXFW

)&0 )XWXUHV&RPPLVVLRQ0HUFKDQW

)(5& )HGHUDO(QHUJ\5HJXODWRU\&RPPLVVLRQ

),7 )HHGLQ7DULII

)00 )LIWHHQ0LQXWH0DUNHW

)10 )XOO1HWZRUN0RGHO

)75 )LUP7UDQVPLVVLRQ5LJKWV

*'3,3' *URVV'RPHVWLF3URGXFW±,PSOLFLW3ULFH'HIODWRU

*+* *UHHQKRXVH*DV

*+*3URGXFWV *+*5HODWHG3URGXFWV

*63 *DV6XSSO\3ODQ

*:K JLJDZDWWKRXU

+$63 +RXU$KHDG6FKHGXOLQJ3URFHVV

+67 +\GURVWDWLF7HVWLQJ

,&( ,QWHUFRQWLQHQWDO([FKDQJH

,' ,UULJDWLRQ'LVWULFW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 218 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$FURQ\P )XOO1DPH

,( ,QGHSHQGHQW(YDOXDWRU

,(35 ,QWHJUDWHG(QHUJ\3ROLF\5HSRUW

,)0 ,QWHJUDWHG)RUZDUG0DUNHW

,28 ,QYHVWRU2ZQHG8WLOLW\

,6 ,QGLFDWHG6KLSSHUV

,6'$ ,QWHUQDWLRQDO6ZDSVDQG'HULYDWLYHV$VVRFLDWLRQ,QF

-3$ -RLQW3RZHUV$XWKRULW\

NJ8 NLORJUDPV8UDQLXP

N: NLORZDWW

N:K NLORZDWWKRXU

OEV SRXQGV

/&%) /HDVW&RVW%HVW)LW

/&' /HDVW&RVW'LVSDWFK

/&5 /RDG&RQWURO5HFHLYHUV

/03 /RFDWLRQDO0DUJLQDO3ULFH

/030 /RFDO0DUNHW3RZHU0LWLJDWLRQ

/27 /RZHU2SHUDWLQJ7DUJHW

/6( /RDG6HUYLQJ(QWLW\

/7 /RQJ7HUP

/7&55 /RQJ7HUP&RQJHVWLRQ5HYHQXH5LJKWV

/733 /RQJ7HUP3URFXUHPHQW3ODQ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 219 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$FURQ\P )XOO1DPH

/75)2 /RQJ7HUP5HTXHVWIRU2IIHUV

0&( 0DULQ&OHDQ(QHUJ\

0&50 0DUNHWDQG&UHGLW5LVN0DQDJHPHQW

0'6 0DUNHW'DWD6\VWHP

00%WX 0LOOLRQVRI%ULWLVK7KHUPDO8QLWV

055 0DQGDWRU\5HSRUWLQJ5XOH

0578 0DUNHW5HGHVLJQDQG7HFKQRORJ\8SJUDGH

06* 0XOWL6WDJH*HQHUDWLRQ

PW&2H PHWULFWRQVRIFDUERQGLR[LGHHTXLYDOHQW

0: PHJDZDWWV

0:H PHJDZDWWHOHFWULFDO

0:K PHJDZDWWKRXU

1$(6% 1RUWK$PHULFDQ(QHUJ\6WDQGDUGV%RDUG

1(0 1HW(QHUJ\0HWHULQJ

1(06 1DWLRQDO(QHUJ\0RGHOLQJ6\VWHP

1(5& 1RUWK$PHULFDQ(OHFWULF5HOLDELOLW\&RUSRUDWLRQ

1*; 1DWXUDO*DV([FKDQJH

109 1HW0DUNHW9DOXH

1'$ 1RQ'LVFORVXUH$JUHHPHQW

1RQ)75 1RQ)LUP7UDQVPLVVLRQ5LJKWV

13 1RUWKRI3DWK

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 220 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$FURQ\P )XOO1DPH

14& 1HW4XDOLI\LQJ&DSDFLW\

16& 1HW6XUSOXV&RPSHQVDWLRQ

1<0(; 1HZ

2 0 RSHUDWLRQVDQGPDLQWHQDQFH

2IIVHWV 2IIVHW&UHGLWV

23 2UGHULQJ3DUDJUDSK

25$ 2IILFHRI5DWHSD\HU$GYRFDWHV

27& 2QFH7KURXJK&RROLQJ

27& 2YHU7KH&RXQWHU

3&& 3RUWIROLR&RQWHQW&DWHJRU\RQH

3'3 3HDN'D\3ULFLQJ

3'5 3UR[\'HPDQG5HVSRQVH

3* ( 3DFLILF*DVDQG(OHFWULF&RPSDQ\

3*$ 3DUWLFLSDWLQJ*HQHUDWRU$JUHHPHQW

3/ 3DUWLFLSDWLQJ/RDG

328 3XEOLFO\2ZQHG8WLOLW\

33$ 3RZHU3XUFKDVH$JUHHPHQW

35* 3URFXUHPHQW5HYLHZ*URXS

36( 3XJHW6RXQG(QHUJ\

3XE8WLO&RGH 3XEOLF8WLOLWLHV&RGH

39 3KRWRYROWDLF

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 221 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$FURQ\P )XOO1DPH

4&5 4XDUWHUO\&RPSOLDQFH5HSRUW

4) 4XDOLI\LQJ)DFLOLW\

4)&+36HWWOHPHQW 4XDOLI\LQJ)DFLOLW\DQG&RPELQHG+HDWDQG3RZHU 6HWWOHPHQW

5 5XOHPDNLQJ

5$ 5HVRXUFH$GHTXDF\

5$0 5HQHZDEOH$XFWLRQ0HFKDQLVP

5'55 5HOLDELOLW\'HPDQG5HVSRQVH5HVRXUFH

5(& 5HQHZDEOH(QHUJ\&UHGLW

5H0$7 5HQHZDEOH0DUNHW$GMXVWLQJ7DULII

5)2 5HTXHVWIRU2IIHUV

5)3 5HTXHVWIRU3URSRVDOV

536 5HQHZDEOHV3RUWIROLR6WDQGDUG

57(0 5HDO7LPH(FRQRPLF0DUNHW

57' 5HDO7LPH'LVSDWFK

570 5HDO7LPH0DUNHW

578& 5HDO7LPH8QLW&RPPLWPHQW

6 3 6WDQGDUGDQG3RRU¶V

6 7 6XSSOLHU¶VDQG7UDQVSRUWHU¶V

6% 6HQDWH%LOO

6& 6FKHGXOLQJ&RRUGLQDWRU

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 222 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$FURQ\P )XOO1DPH

6&( 6RXWKHUQ&DOLIRUQLD(GLVRQ&RPSDQ\

6&(' 6HFXULW\&RQVWUDLQHG(FRQRPLF'LVSDWFK

6&8& 6HFXULW\&RQVWUDLQHG8QLW&RPPLWPHQW

6'* ( 6DQ'LHJR*DV (OHFWULF&RPSDQ\

6*,3 6HOI*HQHUDWLRQ,QFHQWLYH3URJUDP

6, 6WUDWHJLF,QYHQWRU\

62& 6WDQGDUGRI&RQGXFW

65$& 6KRUW5XQ$YRLGHG&RVW

67(6 6KRUW7HUP(OHFWULF6XSSO\

678& 6KRUW7HUP8QLW&RPPLWPHQW

6:5&% 6WDWH:DWHU5HVRXUFHV&RQWURO%RDUG

6:8 6HSDUDWLYH:RUN8QLW

7 ' 7UDQVPLVVLRQDQG'LVWULEXWLRQ

7H9D5 7RH[SLUDWLRQ9DOXHDW5LVN

7H9D5 7H9D5DWWKHWKSHUFHQWLOH

732 WKLUGSDUW\RZQHG

75(& 7UDGDEOH5HQHZDEOH(QHUJ\&UHGLWV

82 8UDQLXP&RQFHQWUDWHV

8) 8UDQLXP+H[DIOXRULGH

82* 8WLOLW\2ZQHG*HQHUDWLRQ

827 8SSHU2SHUDWLQJ7DUJHW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 223 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$FURQ\P )XOO1DPH

86 8QLWHG6WDWHV

:(&& :HVWHUQ(OHFWULF&RRUGLQDWLQJ&RXQFLO

:0'9%( :RPHQ0LQRULW\RU'LVDEOHG9HWHUDQ2ZQHG%XVLQHVV (QWHUSULVHV

:5(*,6 :HVWHUQ5HQHZDEOH(QHUJ\*HQHUDWLRQ,QIRUPDWLRQ 6\VWHP

=1( =HUR1HW(QHUJ\

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 224 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

*/266$5<

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 225 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

$8720$7('',63$7&+6<67(0 $'6 ±7KH&$,62V\VWHPVDSSOLFDWLRQWR FRPPXQLFDWHGLVSDWFKLQVWUXFWLRQVWR6FKHGXOLQJ&RRUGLQDWRUV

$)),/,$7(±$FRPSDQ\WKDWLVFRQWUROOHGE\DQRWKHURUWKDWKDVWKHVDPHRZQHUDV DQRWKHUFRPSDQ\

$**5(*$7,21±7KHSURFHVVRIRUJDQL]LQJVPDOOJURXSVEXVLQHVVHVRUUHVLGHQWLDO FXVWRPHULQWRDODUJHUPRUHHIIHFWLYHEDUJDLQLQJXQLWWKDWVWUHQJWKHQVWKHLUSXUFKDVLQJ SRZHUZLWKXWLOLWLHV

$**5(*$725±$QHQWLW\WKDWSXWVWRJHWKHUFXVWRPHUVLQWRDEX\LQJJURXSIRUWKH SXUFKDVHRIDFRPPRGLW\VHUYLFH7KHYHUWLFDOO\LQWHJUDWHGLQYHVWRURZQHGXWLOLW\ PXQLFLSDOXWLOLWLHVDQGUXUDOHOHFWULFFRRSHUDWLYHVSHUIRUPWKLVIXQFWLRQLQWRGD\¶VSRZHU PDUNHW2WKHUHQWLWLHVVXFKDVEX\HUFRRSHUDWLYHVRUEURNHUVFRXOGSHUIRUPWKLVIXQFWLRQ LQDUHVWUXFWXUHGSRZHUPDUNHW

$1&,//$5<6(59,&(6±5HJXODWLRQ6SLQQLQJ5HVHUYH1RQ6SLQQLQJ5HVHUYH 9ROWDJH6XSSRUWDQG%ODFN6WDUWWRJHWKHUZLWKVXFKRWKHULQWHUFRQQHFWHGRSHUDWLRQ VHUYLFHVDVWKH&$,62PD\GHYHORSLQFRRSHUDWLRQZLWKPDUNHWSDUWLFLSDQWVWRVXSSRUW WKHWUDQVPLVVLRQRIHQHUJ\IURPJHQHUDWLRQUHVRXUFHVWRORDGVZKLOHPDLQWDLQLQJUHOLDEOH RSHUDWLRQRIWKH&$,62FRQWUROOHGJULGLQDFFRUGDQFHZLWK:(&&VWDQGDUGVDQG*RRG 8WLOLW\3UDFWLFH

$5($/2$'±7KHHOHFWULFDOORDGLQJLYHQJHRJUDSKLFDUHDLUUHVSHFWLYHRIZKDW/6(V DUHSURYLGLQJJHQHUDWLRQVHUYLFHVWRHQGXVHUVZLWKLQWKHDUHD

$9(5$*(&267±7KHUHYHQXHUHTXLUHPHQWRIDXWLOLW\GLYLGHGE\WKHXWLOLW\¶VVDOHV $YHUDJHFRVWW\SLFDOO\LQFOXGHVWKHFRVWVRIH[LVWLQJSRZHUSODQWVWUDQVPLVVLRQDQG GLVWULEXWLRQOLQHVDQGRWKHUIDFLOLWLHVXVHGE\DXWLOLW\WRVHUYHLWVFXVWRPHUV,WDOVR LQFOXGHGRSHUDWLQJDQGPDLQWHQDQFHWD[DQGIXHOH[SHQVHV

$92,'('&267 5HJXODWRU\ ±7KHDPRXQWRIPRQH\WKDWDQHOHFWULFXWLOLW\ZRXOG QHHGWRVSHQGIRUWKHQH[WLQFUHPHQWRIHOHFWULFJHQHUDWLRQWRSURGXFHRUSXUFKDVH HOVHZKHUHWKHSRZHUWKDWLWLQVWHDGEX\VIURPDFRJHQHUDWRURUVPDOOSRZHUSURGXFHU

%$/$1&,1*$87+25,7<$5($±7KHFROOHFWLRQRIJHQHUDWLRQWUDQVPLVVLRQDQG ORDGVZLWKLQWKHPHWHUHGERXQGDULHVRIWKH%DODQFLQJ$XWKRULW\7KH%DODQFLQJ $XWKRULW\PDLQWDLQVORDGUHVRXUFHEDODQFHZLWKLQWKLVDUHD

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 226 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

%$6(/,1(0(7+2'±$SUHGLFWLRQRIIXWXUHHQHUJ\QHHGVZKLFKGRHVQRWWDNHLQWR DFFRXQWWKHOLNHO\HIIHFWVRIQHZFRQVHUYDWLRQSURJUDPVWKDWKDYHQRW\HWEHHQVWDUWHG

%,/$7(5$/&2175$&7±$WZRSDUW\DJUHHPHQWIRUWKHSXUFKDVHDQGWKHVDOHRI SURGXFWVDQGRUVHUYLFHV

%,2*$6±0HWKDQHSURGXFHGE\WKHGHFRPSRVLWLRQRUSURFHVVLQJRIRUJDQLFPDWWHU

%,20(7+$1( 3XUFKDVHRU6DOH ±3LSHOLQHTXDOLW\QDWXUDOJDVSURGXFHGIURP UHQHZDEOH QRQIRVVLOEDVHG UHVRXUFHV0D\LQFOXGHUHQHZDEOHRUHQYLURQPHQWDO DWWULEXWHV

%/$&.67$57±7KHSURFHGXUHE\ZKLFKDJHQHUDWLQJXQLWVHOIVWDUWVZLWKRXWDQ H[WHUQDOVRXUFHRIHOHFWULFLW\WKHUHE\UHVWRULQJDVRXUFHRISRZHUWRWKH&$,62%DODQFLQJ $XWKRULW\$UHDIROORZLQJV\VWHPRUORFDODUHDEODFNRXWV

%5,7,6+7+(50$/81,7 %WX ±7KHTXDQWLW\RIKHDWQHFHVVDU\WRUDLVHWKH WHPSHUDWXUHRIRQHSRXQGRIZDWHURQHGHJUHH)DKUHQKHLWIURPWRGHJUHHV )DKUHQKHLWXQGHUVWDQGDUGSUHVVXUHRILQFKHVRIPHUFXU\DWRUQHDULWVSRLQWRI PD[LPXPGHQVLW\2QH%WXHTXDOVFDORULHVIRRWSRXQGVMRXOHVRU ZDWWKRXUV

%81'/('&86720(56±%XQGOHGFXVWRPHUVDUHWKRVHFXVWRPHUVRIWKH,28IRU ZKRPWKH,28SURYLGHVDVXLWHRI³EXQGOHG´VHUYLFHVLQFOXGLQJSURFXULQJDQGVXSSO\LQJ HOHFWULFLW\DVZHOODVSURYLGLQJWUDQVPLVVLRQGLVWULEXWLRQDQGFXVWRPHUVHUYLFHV

%8<(5±$QHQWLW\WKDWSXUFKDVHVHOHFWULFDOHQHUJ\RUVHUYLFHVIURPDQ([FKDQJHRU WKURXJKDELODWHUDOFRQWUDFWRQEHKDOIRIHQGXVHFXVWRPHUV

&$/,)251,$(1(5*<&200,66,21±7KHVWDWHDJHQF\HVWDEOLVKHGE\WKH :DUUHQ$OTXLVW6WDWH(QHUJ\5HVRXUFHV&RQVHUYDWLRQDQG'HYHORSPHQW$FWLQ 3XEOLF5HVRXUFHV&RGH6HFWLRQVHWVHT UHVSRQVLEOHIRUHQHUJ\SROLF\7KH (QHUJ\&RPPLVVLRQ¶VILYHPDMRUDUHDVRIUHVSRQVLELOLWLHVDUH

)RUHFDVWLQJIXWXUHVWDWHZLGHHQHUJ\QHHGV

/LFHQVLQJSRZHUSODQWVVXIILFLHQWWRPHHWWKRVHQHHGV

3URPRWLQJHQHUJ\FRQVHUYDWLRQDQGHIILFLHQF\PHDVXUHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 227 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'HYHORSLQJUHQHZDEOHDQGDOWHUQDWLYHHQHUJ\UHVRXUFHVLQFOXGLQJ SURYLGLQJDVVLVWDQFHWRGHYHORSFOHDQWUDQVSRUWDWLRQIXHOVDQG

3ODQQLQJIRUDQGGLUHFWLQJVWDWHUHVSRQVHWRHQHUJ\HPHUJHQFLHV &$/,)251,$,1'(3(1'(176<67(023(5$725 &$,62 ±DQLQGHSHQGHQW QRQSURILWLQGHSHQGHQWV\VWHPRSHUDWRUVHUYLQJ&DOLIRUQLDWKDWRYHUVHHVWKHRSHUDWLRQRI &DOLIRUQLD¶VEXONHOHFWULFSRZHUV\VWHPWUDQVPLVVLRQOLQHVDQGHOHFWULFLW\PDUNHWJHQHUDWHG DQGWUDQVPLWWHGE\LWVPHPEHUXWLOLWLHV7KH&$,62ZDVFUHDWHGE\&DOLIRUQLD3XEOLF 8WLOLWLHV&RGHHWVHT

&$/,)251,$38%/,&87,/,7,(6&200,66,21 &38& ±$VWDWHDJHQF\FUHDWHG E\FRQVWLWXWLRQDODPHQGPHQWLQWRUHJXODWHWKHUDWHVDQGVHUYLFHVRIPRUHWKDQ SULYDWHO\RZQHGXWLOLWLHVDQGWUDQVSRUWDWLRQFRPSDQLHV7KH&38&LVDQ DGPLQLVWUDWLYHDJHQF\WKDWH[HUFLVHVERWKOHJLVODWLYHDQGMXGLFLDOSRZHUVLWVGHFLVLRQVDQG RUGHUVPD\EHDSSHDOHGRQO\WRWKH&DOLIRUQLD6XSUHPH&RXUW

&$3$%,/,7<±0D[LPXPORDGWKDWDJHQHUDWLQJXQLWFDQFDUU\ZLWKRXWH[FHHGLQJ DSSURYHGOLPLWV

&$3$&,7< 'HPDQGVLGH ±7KHDPRXQWRISRZHUFRQVXPHGE\DFXVWRPHUPHDVXUHG LQ0:VWKDWFDQEHSURGXFHGXSRQUHTXHVW

&$3$&,7< 3XUFKDVHRU6DOH ±7KHDPRXQWRISRZHUFDSDEOHRIEHLQJJHQHUDWHG PHDVXUHGLQ0:VWKDWFDQEHUHGXFHGXSRQUHTXHVW

&$3$&,7<)$&725±$SHUFHQWDJHWKDWWHOOVKRZPXFKRIDSRZHUSODQW¶VFDSDFLW\LV XVHGRYHUWLPH)RUH[DPSOHW\SLFDOSODQWFDSDFLW\IDFWRUVUDQJHDVKLJKDVSHUFHQW IRUJHRWKHUPDODQGSHUFHQWIRUFRJHQHUDWLRQ

&$5%21',2;,'(±$FRORUOHVVRGRUOHVVQRQSRLVRQRXVJDVWKDWLVDQRUPDOSDUWRI WKHDLU&DUERQGLR[LGHDOVRFDOOHG&2LVH[KDOHGE\KXPDQVDQGDQLPDOVDQGLV DEVRUEHGE\JUHHQJURZLQJWKLQJVDQGE\WKHVHD

&2*(1(5$725±&RJHQHUDWRUVXVHWKHZDVWHKHDWFUHDWHGE\RQHSURFHVVIRUH[DPSOH GXULQJPDQXIDFWXULQJWRSURGXFHVWHDPZKLFKLVXVHGLQWXUQWRVSLQDWXUELQHDQG JHQHUDWHHOHFWULFLW\

&20%,1('&<&/(3/$17±$QHOHFWULFJHQHUDWLQJVWDWLRQWKDWXVHVZDVWHKHDWIURP LWVJDVWXUELQHVWRSURGXFHVWHDPIRUFRQYHQWLRQDOVWHDPWXUELQHV

&20%867,21±5DSLGR[LGDWLRQZLWKWKHUHOHDVHRIHQHUJ\LQWKHIRUPRIKHDWDQG OLJKW

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 228 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

&200(5&,$/23(5$7,21±2FFXUVZKHQFRQWURORIWKHJHQHUDWRULVWXUQHGRYHUWR WKHV\VWHPGLVSDWFKHU

&20081,7<&+2,&($**5(*$7,21&86720(56±&XVWRPHUVZKROLYHLQDQ\ FLW\FRXQW\RUFLW\DQGFRXQW\RUJURXSRIFLWLHVFRXQWLHVRUFLWLHVDQGFRXQWLHVZKRVH JRYHUQLQJERDUGRUERDUGVHOHFWWRFRPELQHWKHORDGVRIWKHLUUHVLGHQWVEXVLQHVVHVDQG PXQLFLSDOIDFLOLWLHVLQDFRPPXQLW\ZLGHHOHFWULFLW\EX\HUV¶SURJUDP 6HH38 &RGH

&203(7,7,9(352&(66±7KLVLVDSURFHGXUHWKDWXWLOLWLHVXVHWRVHOHFWVXSSOLHUVRI QHZHOHFWULFFDSDFLW\DQGHQHUJ\8QGHUDFRPSHWLWLYHSURFHVVDQHOHFWULFXWLOLW\VROLFLWV ELGVIURPSURVSHFWLYHSRZHUJHQHUDWRUVWRPHHWFXUUHQWRUIXWXUHSRZHUGHPDQGV

&21*(67,21±$FRQGLWLRQWKDWRFFXUVZKHQLQVXIILFLHQWWUDQVIHUFDSDFLW\LVDYDLODEOH WRLPSOHPHQWDOORIWKHSUHIHUUHGVFKHGXOHVVLPXOWDQHRXVO\

&21*(67,210$1$*(0(17±$OOHYLDWLRQRIFRQJHVWLRQE\WKH,62

&217,1*(17)25:$5' 3XUFKDVHRU6DOH ±$FRQWUDFWHQWHUHGLQWRLQDGYDQFHRI GHOLYHU\WLPHWKHSHUIRUPDQFHRIZKLFKLVFRQWLQJHQWXSRQWKHVXEVHTXHQWRFFXUUHQFHRI RQHRUPRUHHYHQWVDJUHHGXSRQE\WKHFRXQWHUSDUWLHV

&2817(53$57<6/((9(6 )RU(OHFWULF3URGXFWV ±$QDJUHHPHQWE\DFRXQWHUSDUW\ WREX\ VHOO HOHFWULFLW\IURPRQHFRXQWHUSDUW\DQGVHOOLWWR EX\LWIURP DQRWKHU FRXQWHUSDUW\

&2817(53$57<6/((9(6 )RU1DWXUDO*DV3K\VLFDO3URGXFWV ±)DFLOLWDWLQJD WUDQVDFWLRQZLWKDQXQFRQWUDFWHGRUQRQFUHGLWZRUWK\WKURXJKDFRQWUDFWHGFUHGLWZRUWK\ FRXQWHUSDUW\

'$<$+($'0$5.(7 '$0 ±$VHULHVRISURFHVVHVFRQGXFWHGLQWKH'D\$KHDG WKDWLQFOXGHVWKH0DUNHW3RZHU0LWLJDWLRQ5HOLDELOLW\5HTXLUHPHQW'HWHUPLQDWLRQWKH ,QWHJUDWHG)RUZDUG0DUNHWDQGWKH5HVLGXDO8QLW&RPPLWPHQW

'$<$+($'6&+('8/(±$VFKHGXOHLVVXHGE\WKH&$,62RQHGD\SULRUWRWKH WDUJHWWUDGLQJGD\LQGLFDWLQJWKHOHYHOVRIVXSSO\DQGGHPDQGIRUHQHUJ\FOHDUHGWKURXJK WKH,)0DQGVFKHGXOHGIRUHDFKVHWWOHPHQWSHULRGIRUHDFK3QRGHRU$JJUHJDWHG3ULFLQJ 1RGHLQFOXGLQJVFKHGXOLQJSRLQWVRIWKDWWUDGLQJGD\

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 229 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

'(/,9(5<32,17±3RLQWDWZKLFKJDVOHDYHVDWUDQVSRUWHU¶VV\VWHPFRPSOHWLQJDVDOH RUWUDQVSRUWDWLRQVHUYLFHWUDQVDFWLRQEHWZHHQWKHSLSHOLQHFRPSDQ\DQGDVDOHRU WUDQVSRUWDWLRQVHUYLFHFXVWRPHU

'(0$1' 8WLOLW\ ±7KHOHYHODWZKLFKHOHFWULFLW\RUQDWXUDOJDVLVGHOLYHUHGWRXVHUVDW DJLYHQSRLQWLQWLPH(OHFWULFGHPDQGLVH[SUHVVHGLQNLORZDWWV

'(0$1'5(63216(352*5$06±³'HPDQGUHVSRQVH´UHIHUVWRDFWLRQVWDNHQE\ HQGXVHUVWRUHGXFHSRZHUGHPDQGGXULQJFULWLFDOSHDNWLPHVRUWRVKLIWGHPDQGWR RIISHDNWLPHV$GHPDQGUHVSRQVHSURJUDPSURYLGHVFXVWRPHUVZLWKLQFHQWLYHVIRU UHGXFLQJORDGLQUHVSRQVHWRDQHYHQWVLJQDO7KHVHLQFHQWLYHVFDQWDNHWKHIRUPRID ILQDQFLDOFUHGLWRUWKHLUELOODG\QDPLFUDWHRUH[HPSWLRQIURPUROOLQJEODFNRXWV(YHQWV FDQEHFDOOHGIRUHFRQRPLFRUUHOLDELOLW\UHDVRQV%HFDXVHGHPDQGUHVSRQVHSURJUDPVDUH GHVLJQHGWRRSHUDWHRQO\DIHZKRXUVSHUHYHQWWKH\W\SLFDOO\UHGXFHFDSDFLW\ N: EXW QRWHQHUJ\ N:K

'(5,9$7,9(6±$VSHFLDOL]HGVHFXULW\RUFRQWUDFWWKDWKDVQRLQWULQVLFRYHUDOOYDOXH EXWZKRVHYDOXHLVEDVHGRQDQXQGHUO\LQJVHFXULW\RUIDFWRUDVDQLQGH[$JHQHULFWHUP WKDWLQWKHHQHUJ\ILHOGPD\LQFOXGHRSWLRQVIXWXUHVIRUZDUGVHWF

',5(&7$&&(66±7KHDELOLW\RIHQGXVHFXVWRPHUVORFDWHGLQWKHVHUYLFHWHUULWRU\RI DQ,28WRSXUFKDVHHOHFWULFLW\IURPUHWDLOVHOOHUVRWKHUWKDQWKHLUORFDOXWLOLW\

',63$7&+±7KHRSHUDWLQJFRQWURORIDQLQWHJUDWHGHOHFWULFV\VWHPWR$VVLJQ JHQHUDWLRQWRVSHFLILFJHQHUDWLQJSODQWVDQGRWKHUVRXUFHVRIVXSSO\WRHIIHFWWKHPRVW UHOLDEOHDQGHFRQRPLFDOVXSSO\DVWKHWRWDORIWKHVLJQLILFDQWDUHDORDGVULVHVRUIDOOV &RQWURORSHUDWLRQVDQGPDLQWHQDQFHRIKLJKYROWDJHOLQHVVXEVWDWLRQVDQGHTXLSPHQW LQFOXGLQJDGPLQLVWUDWLRQRIVDIHW\SURFHGXUHV2SHUDWHWKHLQWHUFRQQHFWLRQDQG6FKHGXOH HQHUJ\WUDQVDFWLRQVZLWKRWKHULQWHUFRQQHFWHGHOHFWULFXWLOLWLHV

',63$7&+$%/(±7KLVLVWKHDELOLW\RIDJHQHUDWLQJXQLWWRLQFUHDVHRUGHFUHDVH JHQHUDWLRQRUWREHEURXJKWRQOLQHRUVKXWGRZQDWWKHUHTXHVWRIDXWLOLW\¶VV\VWHP RSHUDWRU

',675,%87,21±7KHGHOLYHU\RIHOHFWULFLW\WRWKHUHWDLOFXVWRPHU¶VKRPHRUEXVLQHVV WKURXJKORZYROWDJHGLVWULEXWLRQOLQHV

',675,%87('*(1(5$7,21±$GLVWULEXWHGJHQHUDWLRQV\VWHPLQYROYHVVPDOO DPRXQWVRIJHQHUDWLRQORFDWHGRQDXWLOLW\¶VGLVWULEXWLRQV\VWHPIRUWKHSXUSRVHRI PHHWLQJORFDO VXEVWDWLRQOHYHO SHDNORDGVDQGRUGLVSODFLQJWKHQHHGWREXLOGDGGLWLRQDO RUXSJUDGH ORFDOGLVWULEXWLRQOLQHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 230 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

':5&2175$&76±&RQWUDFWVIRUJHQHUDWLQJUHVRXUFHFDSDFLW\DQGHQHUJ\GHOLYHULHV H[HFXWHGE\WKH&DOLIRUQLD'HSDUWPHQWRI:DWHU5HVRXUFHVGXULQJDQGDOORFDWHGWR WKHLQYHVWRURZQHGXWLOLWLHVIRUFRQWUDFWDGPLQLVWUDWLRQSXUSRVHVRQO\

(

(&2120,&',63$7&+±7KHGLVWULEXWLRQRIWRWDOJHQHUDWLRQUHTXLUHPHQWVDPRQJ DOWHUQDWLYHVRXUFHVIRURSWLPXPV\VWHPHFRQRP\ZLWKFRQVLGHUDWLRQWRERWKLQFUHPHQWDO JHQHUDWLQJFRVWVDQGLQFUHPHQWDOWUDQVPLVVLRQORVVHV

(/(&75,&',675,%87,2187,/,7< ('8 ±7KHUHJXODWHGHOHFWULFXWLOLW\HQWLW\WKDW FRQVWUXFWVDQGPDLQWDLQVWKHGLVWULEXWLRQZLUHVFRQQHFWLQJWKHWUDQVPLVVLRQJULGWRWKH ILQDOFXVWRPHU7KHGLVWULEXWLRQXWLOLW\FDQDOVRSHUIRUPRWKHUVHUYLFHVVXFKDV DJJUHJDWLQJFXVWRPHUVSXUFKDVLQJSRZHUVXSSO\DQGWUDQVPLVVLRQVHUYLFHVIRUFXVWRPHUV ELOOLQJFXVWRPHUVDQGUHLPEXUVLQJVXSSOLHUVDQGRIIHULQJRWKHUUHJXODWHGRU QRQUHJXODWHGHQHUJ\VHUYLFHVWRUHWDLOFXVWRPHUV7KH³ZLUHV´DQG³FXVWRPHUVHUYLFH´ IXQFWLRQVSURYLGHGE\DGLVWULEXWLRQXWLOLW\FRXOGEHVSOLWVRWKDWWZRWRWDOO\VHSDUDWH HQWLWLHVDUHXVHGWRVXSSO\WKHVHWZRW\SHVRIGLVWULEXWLRQVHUYLFHV

((,&2175$&7±(GLVRQ(OHFWULF,QVWLWXWHFRQWUDFWLVDVWDQGDUGPDVWHUDJUHHPHQWWKDW SURYLGHVWKHEDVHWHUPVDQGFRQGLWLRQVIRUWUDQVDFWLRQVH[HFXWHGEHWZHHQWZRSDUWLHVRI WKHPDVWHUDJUHHPHQW

()),&,(1&<±7KHUDWLRRIWKHXVHIXOHQHUJ\GHOLYHUHGE\DG\QDPLFV\VWHP VXFKDVD PDFKLQHHQJLQHRUPRWRU WRWKHHQHUJ\VXSSOLHGWRLWRYHUWKHVDPHSHULRGRUF\FOHRI RSHUDWLRQ7KHUDWLRLVXVXDOO\GHWHUPLQHGXQGHUVSHFLILFWHVWFRQGLWLRQV

(/(&75,&6(59,&(3529,'(5 (63 ±$QHQWLW\WKDWLVOLFHQVHGE\WKH&38&WR SURYLGHHOHFWULFSRZHUVHUYLFHWR'LUHFW$FFHVV&XVWRPHUV VHH38&RGH DQG $QHQGXVHFXVWRPHUFDQDFWDVLWVRZQ(63DVORQJDVLWFRPSOLHVZLWKDOO UHTXLUHPHQWVRIEHLQJDQ(63$OVRUHIHUUHGWRDV(QHUJ\6HUYLFH3URYLGHUV

(/(&75,&6<67(0±7KLVWHUPUHIHUVWRDOORIWKHHOHPHQWVQHHGHGWRGLVWULEXWH HOHFWULFDOSRZHU,WLQFOXGHVRYHUKHDGDQGXQGHUJURXQGOLQHVSROHVWUDQVIRUPHUVDQG RWKHUHTXLSPHQW

(/(&75,&,7<±$SURSHUW\RIWKHEDVLFSDUWLFOHVRIPDWWHU$IRUPRIHQHUJ\KDYLQJ PDJQHWLFUDGLDQWDQGFKHPLFDOHIIHFWV(OHFWULFFXUUHQWLVFUHDWHGE\DIORZRIFKDUJHG SDUWLFOHV HOHFWURQV

(/(&75,&,7<75$160,66,21352'8&76±7KHDPRXQWRIHOHFWULFLW\ WUDQVSRUWDWLRQFDSDELOLW\RIDWUDQVPLVVLRQOLQHPHDVXUHGLQ0:V

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 231 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

(0,66,216&5(',76)8785(625)25:$5'6±&UHGLWVRUDOORZDQFHVIRU HPLVVLRQVWKDWFDQEHERXJKWRUVROGLQRUGHUWRFRPSO\ZLWKHPLVVLRQVOLPLWV

(1'86(5±7KHILQDOFRQVXPHUZLWKWKHVSHFLILFSXUSRVHIRUZKLFKHOHFWULFLV FRQVXPHG LHKHDWLQJFRROLQJFRRNLQJHWF

(1(5*<±7KHDPRXQWRIHOHFWULFLW\SURGXFHGIORZLQJRUVXSSOLHGE\JHQHUDWLRQ WUDQVPLVVLRQRUGLVWULEXWLRQIDFLOLWLHVRUFRQVXPHGRYHUWLPH8VXDOO\LWLVPHDVXUHGLQ XQLWVRIZDWWKRXUVRUVWDQGDUGPXOWLSOHVWKHUHRIHJ:K N:KN:K 0:KHWF

(1(5*<'(/,9(5,(6±(QHUJ\JHQHUDWHGE\RQHV\VWHPGHOLYHUHGWRDQRWKHUV\VWHP

(1(5*<()),&,(1&<±3URJUDPVDQGPHDVXUHVGHVLJQHGWRUHGXFHFRQVXPHUHQHUJ\ FRQVXPSWLRQ([DPSOHRISURJUDPVDQGPHDVXUHVLQFOXGHOLJKWLQJUHWURILWSURFHVV UHGHVLJQDQGDSSOLDQFHUHEDWHVZKLFKHQFRXUDJHFRQVXPHUVWRSXUFKDVHKLJKHIILFLHQF\ DSSOLDQFHV

(1(5*<5(6285&(6±(YHU\WKLQJWKDWFRXOGEHXVHGE\VRFLHW\DVDVRXUFHRI HQHUJ\

(1(5*<86($*(±(QHUJ\FRQVXPHGGXULQJDVSHFLILHGWLPHSHULRGIRUDVSHFLILF SXUSRVH XVXDOO\H[SUHVVHGLQN:K

(;&+$1*( (OHFWULFXWLOLW\ ±$JUHHPHQWVEHWZHHQXWLOLWLHVSURYLGLQJIRUSXUFKDVH VDOHDQGWUDGLQJRISRZHU8VXDOO\UHODWHVWRFDSDFLW\ NLORZDWWV EXWVRPHWLPHVHQHUJ\ NLORZDWWKRXUV

(;32576 (OHFWULFXWLOLW\ ±3RZHUFDSDFLW\RUHQHUJ\WKDWDXWLOLW\LVUHTXLUHGE\ FRQWUDFWWRVXSSO\RXWVLGHRILWVRZQVHUYLFHDUHDDQGQRWFRYHUHGE\JHQHUDOUDWH VFKHGXOHV

)

)$&,/,7<±$ORFDWLRQZKHUHHOHFWULFHQHUJ\LVJHQHUDWHGIURPHQHUJ\VRXUFHV

)('(5$/(1(5*<5(*8/$725<&200,66,21 )(5& ±$QLQGHSHQGHQW UHJXODWRU\FRPPLVVLRQZLWKLQWKH86'HSDUWPHQWRI(QHUJ\WKDWKDVMXULVGLFWLRQRYHU HQHUJ\SURGXFHUVWKDWVHOORUWUDQVSRUWIXHOVIRUUHVDOHLQLQWHUVWDWHFRPPHUFHWKH DXWKRULW\WRVHWRLODQGJDVSLSHOLQHWUDQVSRUWDWLRQUDWHVDQGWRVHWWKHYDOXHRIRLODQGJDV SLSHOLQHVIRUUDWHPDNLQJSXUSRVHVDQGUHJXODWHVZKROHVDOHHOHFWULFUDWHVDQG K\GURHOHFWULFSODQWOLFHQVHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 232 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

),1$1&,$/&$// 25387 237,21 )RU(OHFWULF3URGXFWV ±7KHULJKWEXWQRWWKH REOLJDWLRQWREX\ FDOO DIRUZDUGHOHFWULFFRQWUDFWRQDVSHFLILFGDWH H[SLUDWLRQ DWD VSHFLILFSULFH VWULNH 7KHULJKWWRVHOOLVDSXWRSWLRQ

),1$1&,$/237,21 )RU1DWXUDO*DV)LQDQFLDO3URGXFWV ±7KHULJKWEXWQRWWKH REOLJDWLRQWREX\ FDOO DIRUZDUGJDVFRQWUDFWRQJDVRQDSDUWLFXODUGDWH H[SLUDWLRQ DWD SDUWLFXODUSULFH VWULNH 7KHULJKWWRVHOOLVDSXWRSWLRQ

),1$1&,$/6:$3±$QDJUHHPHQWWRH[FKDQJHRQHW\SHRISULFLQJIRUDQRWKHU ([DPSOHVLQFOXGHIL[HGIRUIORDWLQJVZDSVDQGEDVLVVZDSV6ZDSVDUHILQDQFLDOO\VHWWOHG GLUHFWO\ZLWKDFRXQWHUSDUW\RUPD\EHILQDQFLDOO\FOHDUHGWKURXJKDILQDQFLDOFOHDULQJ KRXVH

),50(1(5*<±3RZHUVXSSOLHVWKDWDUHJXDUDQWHHGWREHGHOLYHUHGXQGHUWHUPV GHILQHGE\FRQWUDFW

),506(59,&(±5HWDLODQGZKROHVDOHVHUYLFHRIIHUHGWRFXVWRPHUVXQGHUVFKHGXOHVRU FRQWUDFWVZKLFKDQWLFLSDWHQRLQWHUUXSWLRQV7KHSHULRGRIVHUYLFHPD\EHIRURQO\D VSHFLILHGSDUWRIWKH\HDUDVLQ2II3HDN6HUYLFH&HUWDLQILUPVHUYLFHFRQWUDFWVPD\ FRQWDLQFODXVHVZKLFKSHUPLWXQH[SHFWHGLQWHUUXSWLRQLQFDVHWKHVXSSO\WRUHVLGHQWLDO FXVWRPHUVLVWKUHDWHQHGGXULQJDQHPHUJHQF\

),;('&2676±7KHDQQXDOFRVWVDVVRFLDWHGZLWKWKHRZQHUVKLSRISURSHUW\VXFKDV GHSUHFLDWLRQWD[HVLQVXUDQFHDQGWKHFRVWRIFDSLWDO

)25&('287$*(±$QRXWDJHWKDWUHVXOWVIURPHPHUJHQF\FRQGLWLRQVDQGUHTXLUHVD FRPSRQHQWWREHWDNHQRXWRIVHUYLFHDXWRPDWLFDOO\RUDVVRRQDVVZLWFKLQJRSHUDWLRQVFDQ EHSHUIRUPHG7KHIRUFHGRXWDJHFDQEHFDXVHGE\LPSURSHURSHUDWLRQRIHTXLSPHQWRU E\KXPDQHUURU

)25(&$67,1685$1&(±$PHWKRGIRUPDQDJLQJORDGIRUHFDVW YROXPHDQGVKDSH ULVN

)25:$5'(1(5*< 'HPDQGVLGH ±(OHFWULFHQHUJ\SODQQHGWREHFRQVXPHGE\D FXVWRPHUPHDVXUHGLQ0:KVWKDWLVDJUHHGWREHUHGXFHGIRUDVSHFLILFSHULRGIRUD VSHFLILHGWLPHLQWKHIXWXUH

)25:$5'(1(5*< 3XUFKDVHRU6DOH ±(OHFWULFHQHUJ\SXUFKDVHGRUVROGE\D FRXQWHUSDUW\PHDVXUHGLQ0:KVWKDWLVDJUHHGWREHVXSSOLHGRUUHFHLYHGIRUDVSHFLILF SHULRGDWDVSHFLILFORFDWLRQIRUDVSHFLILHGWLPHLQWKHIXWXUH

)25:$5'6327 '$<$+($' +285$+($' 385&+$6(6$/(25 (;&+$1*(±(OHFWULFHQHUJ\FDSDFLW\DQFLOODU\VHUYLFHVRUWUDQVPLVVLRQSXUFKDVHGRU

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 233 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

VROGE\DFRXQWHUSDUW\RUH[FKDQJHGEHWZHHQFRXQWHUSDUWLHVPHDVXUHGLQ0:VRU0:KV WKDWLVDJUHHGWREHVXSSOLHGUHFHLYHGRUH[FKDQJHGIRUDVSHFLILFSHULRGDWDVSHFLILF ORFDWLRQLQWKH'D\$KHDGRU+RXU$KHDGPDUNHWV

)5(48(1&<±7KHQXPEHURIF\FOHVZKLFKDQDOWHUQDWLQJFXUUHQWPRYHVWKURXJKLQ HDFKVHFRQG6WDQGDUGHOHFWULFXWLOLW\IUHTXHQF\LQWKH8QLWHG6WDWHVLVF\FOHVSHU VHFRQGRU+HUW]

)75/2&$7,21$/6:$36±2YHUWKHFRXQWHUEDVLVVZDSVDVVRFLDWHGZLWK)LUP 7UDQVPLVVLRQ5LJKWV6ZDSVDUHILQDQFLDOO\VHWWOHGGLUHFWO\ZLWKDFRXQWHUSDUW\RUPD\EH ILQDQFLDOO\FOHDUHGWKURXJKILQDQFLDOFOHDULQJKRXVH

)8(/±$VXEVWDQFHWKDWFDQEHXVHGWRSURGXFHKHDW

)8(/&(//±$GHYLFHRUDQHOHFWURFKHPLFDOHQJLQHZLWKQRPRYLQJSDUWVWKDWFRQYHUWV WKHFKHPLFDOHQHUJ\RIDIXHOVXFKDVK\GURJHQDQGDQR[LGDQWVXFKDVR[\JHQGLUHFWO\ LQWRHOHFWULFLW\7KHSULQFLSDOFRPSRQHQWVRIDIXHOFHOODUHFDWDO\WLFDOO\DFWLYDWHG HOHFWURGHVIRUWKHIXHO DQRGH DQGWKHR[LGDQW FDWKRGH DQGDQHOHFWURO\WHWRFRQGXFW LRQVEHWZHHQWKHWZRHOHFWURGHVWKXVSURGXFLQJHOHFWULFLW\

*$6±*DVHRXVIXHO XVXDOO\QDWXUDOJDV WKDWLVEXUQHGWRSURGXFHKHDWHQHUJ\

*$66725$*( 3XUFKDVHRU6DOH ±,QFOXGHVILUPDQGDVDYDLODEOHVWRUDJHLQYHQWRU\ LQMHFWLRQDQGZLWKGUDZDO$OVRLQFOXGHVSDUNLQJDQGERUURZLQJVHUYLFHV

*$675$163257$7,21 3XUFKDVHRU6DOH ±,QWHUVWDWH,QWUDVWDWHDQGGLVWULEXWLRQJDV WUDQVSRUWDWLRQVHUYLFHV,QFOXGHVILUPDVDYDLODEOHDQGLQWHUUXSWLEOHVHUYLFHV

*(1(5$7,1*67$7,21±$VWDWLRQWKDWFRQVLVWVRIHOHFWULFJHQHUDWRUVDQGDX[LOLDU\ HTXLSPHQWIRUFRQYHUWLQJPHFKDQLFDOFKHPLFDORUQXFOHDUHQHUJ\LQWRHOHFWULFHQHUJ\

*(1(5$7,1*81,7±$Q\FRPELQDWLRQRISK\VLFDOO\FRQQHFWHGJHQHUDWRUVUHDFWRUV ERLOHUVFRPEXVWLRQWXUELQHVDQGRWKHUSULPHPRYHUVRSHUDWHGWRJHWKHUWRSURGXFH HOHFWULFSRZHU

*(1(5$7,21 (OHFWULFLW\ ±3URFHVVRISURGXFLQJHOHFWULFHQHUJ\E\WUDQVIRUPLQJRWKHU IRUPVRIHQHUJ\

*(1(5$7,21&203$1

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 234 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

XQLWV7KHJHQHUDWLRQFRPSDQ\PD\RZQWKHJHQHUDWLRQXQLWVRULQWHUDFWZLWKWKH VKRUWWHUPPDUNHWRQEHKDOIRISODQWRZQHUV

*,*$:$77 *: ±2QHWKRXVDQGPHJDZDWWV 0: RURQHPLOOLRQNLORZDWWV N: RURQHELOOLRQZDWWV ZDWWV RIHOHFWULFLW\

*,*$:$77+285 *:+ ±2QHPLOOLRQNLORZDWWKRXUVRIHOHFWULFSRZHU

*5((1),(/'6,7(±5HIHUVWRDQHZHOHFWULFSRZHUJHQHUDWLQJIDFLOLW\EXLOWIURPWKH JURXQGXS

*5,'±$V\VWHPRILQWHUFRQQHFWHGSRZHUOLQHVDQGJHQHUDWRUVWKDWLVPDQDJHGVRWKDW WKHJHQHUDWRUVDUHGLVSDWFKHGDVQHHGHGWRPHHWWKHUHTXLUHPHQWVRIWKHFXVWRPHUV FRQQHFWHGWRWKHJULGDWYDULRXVSRLQWV

+($75$7(±$QXPEHUWKDWWHOOVKRZHIILFLHQWDIXHOEXUQLQJSRZHUSODQWLV 0HDVXUHGE\%WXN:K7KHKHDWUDWHHTXDOVWKH%WXFRQWHQWRIWKHIXHOLQSXWGLYLGHGE\ WKHN:KRUSRZHURXWSXW7KHORZHUWKHKHDWUDWHRIDJHQHUDWLQJXQLWLVWKHPRUH HIILFLHQWWKHXQLWLV

+('*,1*±$Q\PHWKRGRIPLQLPL]LQJWKHULVNRISULFHFKDQJH6LQFHWKHPRYHPHQWRI FDVKSULFHVLVXVXDOO\LQWKHVDPHGLUHFWLRQDQGDERXWLQWKHVDPHGHJUHHDVWKHPRYHPHQW RIWKHSUHVHQWSULFHVRIIXWXUHVFRQWUDFWVDQ\ORVV RUJDLQ UHVXOWLQJIURPFDUU\LQJWKH DFWXDOPHUFKDQGLVHLVDSSUR[LPDWHO\RIIVHWE\DFRUUHVSRQGLQJJDLQ RUORVV ZKHQWKH FRQWUDFWLVOLTXLGDWHG

+(15<+8%±$SLSHOLQHLQWHUFKDQJHORFDWHGLQ9HUPLOLRQ3DULVK/RXLVLDQDZKLFK VHUYHVDVWKHGHOLYHU\SRLQWRIQDWXUDOJDVIXWXUHVFRQWUDFWV

+<'52±(OHFWULFLW\SURGXFHGE\IDOOLQJZDWHUWKDWWXUQVDWXUELQHJHQHUDWRU

,&(±,QWHUFRQWLQHQWDO([FKDQJH ,&( LVWKHZRUOG¶VOHDGLQJHOHFWURQLFPDUNHWSODFHIRU HQHUJ\WUDGLQJDQGSULFHGLVFRYHU\

,0%$/$1&((1(5*<±7KHUHDOWLPHFKDQJHLQJHQHUDWLRQRXWSXWRUGHPDQG UHTXHVWHGE\WKH,62WRPDLQWDLQUHOLDELOLW\RIWKH,62FRQWUROOHGJULG6RXUFHVRI LPEDODQFHHQHUJ\LQFOXGHUHJXODWLRQVSLQQLQJDQGQRQVSLQQLQJUHVHUYHVUHSODFHPHQW UHVHUYHDQGHQHUJ\IURPRWKHUJHQHUDWLQJXQLWVWKDWDUHDEOHWRUHVSRQGWRWKH,62¶V UHTXHVWIRUPRUHRUOHVVHQHUJ\

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 235 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

,032576 (OHFWULFXWLOLW\ ±3RZHUFDSDFLW\RUHQHUJ\REWDLQHGE\RQHXWLOLW\IURP RWKHUVXQGHUSXUFKDVHRUH[FKDQJHDJUHHPHQW

,1'(3(1'(176<67(023(5$725 ,62 ±7KHHQWLW\FKDUJHGZLWKUHOLDEOH RSHUDWLRQRIWKHJULGDQGSURYLVLRQRIRSHQWUDQVPLVVLRQDFFHVVWRDOOPDUNHWSDUWLFLSDQWV RQDQRQGLVFULPLQDWRU\EDVLV7KH,62SHUIRUPVLWVIXQFWLRQE\FRQWUROOLQJWKHGLVSDWFK RIIOH[LEOHSODQWVWRHQVXUHWKDWORDGVPDWFKUHVRXUFHVDYDLODEOHWRWKHV\VWHP

,1'(;35,&(±7\LQJWKHFRPPRGLW\SULFHLQDFRQWUDFWWRRWKHUSXEOLVKHGSULFHVVXFK DVVSRWSULFHVIRUJDVRUDOWHUQDWHIXHOVRUJHQHUDOLQGH[HVOLNHWKH&RQVXPHU3ULFH,QGH[ RU3URGXFHU3ULFH,QGH[

,167$//('&$3$&,7<±7KHWRWDOJHQHUDWLQJXQLWV¶FDSDFLWLHVLQDSRZHUSODQWRURQ DWRWDOXWLOLW\V\VWHP7KHFDSDFLW\FDQEHEDVHGRQWKHQDPHSODWHUDWLQJRUWKHQHW GHSHQGDEOHFDSDFLW\

,1685$1&( &2817(53$57<&5(',7,1685$1&(&5266&2002',7< +('*(6 ±$PHWKRGIRUPDQDJLQJSD\PHQWRUSHUIRUPDQFHULVNIRUDIHH

,17(5&211(&7,21 (OHFWULFXWLOLW\ ±7KHOLQNDJHRIWUDQVPLVVLRQOLQHVEHWZHHQWZR XWLOLWLHVHQDEOLQJSRZHUWREHPRYHGLQHLWKHUGLUHFWLRQ,QWHUFRQQHFWLRQVDOORZWKH XWLOLWLHVWRKHOSFRQWDLQFRVWVZKLOHHQKDQFLQJV\VWHPUHOLDELOLW\

,17(5(67('3$57<±$Q\SHUVRQZKRPWKHFRPPLVVLRQILQGVDQGDFNQRZOHGJHVDV KDYLQJDUHDODQGGLUHFWLQWHUHVWLQDQ\SURFHHGLQJRUDFWLRQFDUULHGRQXQGHURUDVD UHVXOWRIWKHRSHUDWLRQRIWKLVGLYLVLRQ

,17(50,77(175(6285&(6±5HVRXUFHVZKRVHRXWSXWGHSHQGVRQVRPHRWKHU IDFWRU\WKDWFDQQRWEHFRQWUROOHGE\WKHXWLOLW\HJZLQGRUVXQ7KXVWKHFDSDFLW\ YDULHVE\GD\DQGE\KRXU

,17(55837,%/(6(59,&(257$5,)) (OHFWULFXWLOLW\ ±(OHFWULFLW\VXSSOLHGXQGHU DJUHHPHQWVWKDWDOORZWKHVXSSOLHUWRFXUWDLORUVWRSVHUYLFHVDWWLPHV$VHUYLFHXQGHU ZKLFKXSRQQRWLILFDWLRQIURPWKH,QGHSHQGHQW6\VWHP2SHUDWRUWKH,28UHTXLUHVWKH FXVWRPHUWRUHGXFHWKHGHPDQGLPSRVHGRQWKHHOHFWULFDOV\VWHPWRILUPVHUYLFHOHYHO LHDOHYHOEHORZZKLFKWKHFXVWRPHU¶VORDGZLOOQRWEHLQWHUUXSWLEOH DQGWKHFXVWRPHU PXVWFRPSO\ZLWKLQPLQXWHV

,17(57,(±$WUDQVPLVVLRQOLQHWKDWOLQNVWZRRUPRUHUHJLRQDOHOHFWULFSRZHUV\VWHPV

,19(67252:1('87,/,7< ,28 ±$SULYDWHFRPSDQ\RZQHGE\VWRFNKROGHUVWKDW SURYLGHVHOHFWULFXWLOLW\VHUYLFHVWRDVSHFLILFVHUYLFHDUHD$GHVLJQDWLRQXVHGWR GLIIHUHQWLDWHDXWLOLW\RZQHGDQGRSHUDWHGIRUWKHEHQHILWRIVKDUHKROGHUVIURPPXQLFLSDOO\

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 236 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

RZQHGDQGRSHUDWHGXWLOLWLHVDQGUXUDOHOHFWULFFRRSHUDWLYHV$&DOLIRUQLDLQYHVWRURZQHG XWLOLW\LVUHJXODWHGE\WKH&DOLIRUQLD3XEOLF8WLOLWLHV&RPPLVVLRQ

1RHQWULHVIRUWKHOHWWHU-

.,/2:$77 N: ±2QHWKRXVDQG ZDWWV$XQLWRIPHDVXUHRIWKHDPRXQWRI HOHFWULFLW\QHHGHGWRRSHUDWHJLYHQHTXLSPHQW2QDKRWVXPPHUDIWHUQRRQDW\SLFDO KRPHZLWKFHQWUDODLUFRQGLWLRQLQJDQGRWKHUHTXLSPHQWLQXVHPLJKWKDYHDGHPDQGRI IRXUN:HDFKKRXU

.,/2:$77+285 N:K ±7KHPRVWFRPPRQO\XVHGXQLWRIPHDVXUHWHOOLQJWKH DPRXQWRIHOHFWULFLW\FRQVXPHGRYHUWLPH,WPHDQVRQHNLORZDWWRIHOHFWULFLW\VXSSOLHG IRURQHKRXU

/(9(/,=('±$OXPSVXPWKDWKDVEHHQGLYLGHGLQWRHTXDODPRXQWVRYHUSHULRG RIWLPH

/,1(±$V\VWHPRISROHVFRQGXLWVZLUHVFDEOHVWUDQVIRUPHUVIL[WXUHVDQGDFFHVVRU\ HTXLSPHQWXVHGIRUWKHGLVWULEXWLRQRIHOHFWULFLW\WRWKHSXEOLF

/2$'±/RDGLVDQHQGXVHGHYLFHRIDQHQGXVHFXVWRPHUWKDWFRQVXPHVSRZHU/RDG VKRXOGQRWEHFRQIXVHGZLWKGHPDQGZKLFKLVWKHPHDVXUHRISRZHUWKDWDORDGUHFHLYHV RUUHTXLUHV

/2$'6(59,1*(17,7< /6( ±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

/2&$7,21$/0$5*,1$/35,&( /03 ±7KHPDUJLQDOFRVW 0:K RIVHUYLQJ WKHQH[WLQFUHPHQWRIGHPDQGDWWKDW3QRGHFRQVLVWHQWZLWKH[LVWLQJWUDQVPLVVLRQIDFLOLW\ FRQVWUDLQWVDQGWKHSHUIRUPDQFHFKDUDFWHULVWLFVRIUHVRXUFHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 237 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

/266(6 (OHFWULFXWLOLW\ ±(OHFWULFHQHUJ\RUFDSDFLW\WKDWLVZDVWHGLQWKHQRUPDO RSHUDWLRQRIDSRZHUV\VWHP6RPHNLORZDWWKRXUVDUHORVWLQWKHIRUPRIZDVWHKHDWLQ HOHFWULFDODSSDUDWXVVXFKDVVXEVWDWLRQFRQGXFWRUV/,1(/266(6DUHNLORZDWWVRU NLORZDWWKRXUVORVWLQWUDQVPLVVLRQDQGGLVWULEXWLRQOLQHVXQGHUFHUWDLQFRQGLWLRQV

0$5*,1$/&267±7KHVXPWKDWKDVWREHSDLGWKHQH[WLQFUHPHQWRISURGXFWRI VHUYLFH7KHPDUJLQDOFRVWRIHOHFWULFLW\LVWKHSULFHWREHSDLGIRUNLORZDWWKRXUVDERYH DQGEH\RQGWKRVHVXSSOLHGE\SUHVHQWO\DYDLODEOHJHQHUDWLQJFDSDFLW\,QWKHXWLOLW\ FRQWH[WWKHFRVWWRWKHXWLOLW\RISURYLGLQJWKHQH[W PDUJLQDO NLORZDWWKRXURIHOHFWULFLW\ LUUHVSHFWLYHRIVXQNFRVWV

0$5.(7%$6('35,&(±$SULFHVHWE\WKHPXWXDODFWLRQRIPDQ\EX\HUVDQGVHOOHUV LQDFRPSHWLWLYHPDUNHW

0$5.(7&/($5,1*35,&(±7KHSULFHLQDPDUNHWDWZKLFKVXSSO\HTXDOVGHPDQG $OOGHPDQGSUHSDUHGWRSD\DWOHDVWWKLVSULFHKDVEHHQVDWLVILHGDQGDOOVXSSO\SUHSDUHGWR RSHUDWHDWRUEHORZWKLVSULFHKDVEHHQSXUFKDVHG

0$5.(73$57,&,3$17±$QHQWLW\LQFOXGLQJD6FKHGXOLQJ&RRUGLQDWRUZKR SDUWLFLSDWHVLQWKHHQHUJ\PDUNHWSODFHWKURXJKWKHEX\LQJVHOOLQJWUDQVPLVVLRQRU GLVWULEXWLRQRIHQHUJ\RUDQFLOODU\VHUYLFHVLQWRRXWRIRUWKURXJKWKH,62FRQWUROOHG JULG

0$67(5),/(±$ILOHPDLQWDLQHGE\WKH&$,62IRUXVHLQELGGLQJDQGELGHYDOXDWLRQ SURWRFROWKDWFRQWDLQVLQIRUPDWLRQUHJDUGLQJJHQHUDWLQJXQLWVORDGVDQGRWKHUUHVRXUFHV RULWVVXFFHVVRU

0(*$:$77 0: ±2QHWKRXVDQGNLORZDWWV N: RURQHPLOOLRQ ZDWWV

0(*$:$77+285 0:K ±2QHWKRXVDQGNLORZDWWKRXUV

0(7(5±$GHYLFHWKDWPHDVXUHVWKHOHYHOVDQGYROXPHVRIDFXVWRPHU¶VJDVDQG HOHFWULFLW\XVH

0(7+$1( &+ ±7KHILUVWRIWKHSDUDIILQVHULHVRIK\GURFDUERQV7KHFKLHI FRQVWLWXHQWRIQDWXUDOJDV3XUHPHWKDQHKDVDKHDWLQJYDOXHRI%WXSHUFXELFIRRW

0,1,080/2$'±7KHORZHVWOHYHORIRSHUDWLRQRIRLOILUHGDQGJDVILUHGXQLWVDW ZKLFKWKH\FDQEHFXUUHQWO\DYDLODEOHWRPHHWSHDNORDGQHHGV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 238 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

00%78±$WKHUPDOXQLWRIHQHUJ\HTXDOWR%WXVWKDWLVWKHHTXLYDOHQWRI FXELFIHHWRIJDVKDYLQJDKHDWLQJFRQWHQWRI%WXVSHUFXELFIRRW

08677$.(*(1(5$7,21±(QHUJ\JHQHUDWLRQWKDWXWLOLWLHVDUHPDQGDWHGWRWDNH IURPVSHFLILFUHVRXUFHVRUIDFLOLW\W\SHVLGHQWLILHGE\WKH&38&5HJXODWRU\PXVWWDNH JHQHUDWLRQLQFOXGH4)JHQHUDWLQJXQLWVXQGHUIHGHUDOODZQXFOHDUXQLWVDQGSUHH[LVWLQJ SRZHUSXUFKDVHFRQWUDFWVWKDWKDYHPLQLPXPWDNHSURYLVLRQV

1$785$/*$6±+\GURFDUERQJDVIRXQGLQWKHHDUWKFRPSRVHGRIPHWKDQHHWKDQH EXWDQHSURSDQHDQGRWKHUJDVHV

1$785$/*$6385&+$6(6 3K\VLFDO6XSSO\ ±3XUFKDVHVVDOHVH[FKDQJHVRI SK\VLFDOQDWXUDOJDVIRUWHUPVRIRQHPRQWKRUORQJHU

1(7:25.±$V\VWHPRIWUDQVPLVVLRQDQGGLVWULEXWLRQOLQHVFURVVFRQQHFWHGDQG RSHUDWHGWRSHUPLWPXOWLSOHSRZHUVXSSO\WRDQ\SULQFLSDOSRLQWRQLW

121)75/2&$7,21$/6:$36±2YHUWKHFRXQWHUEDVLVVZDSVRUIXWXUHV6ZDSV DUHILQDQFLDOO\VHWWOHGGLUHFWO\ZLWKDFRXQWHUSDUW\RUPD\EHFOHDUHGWKURXJKILQDQFLDO FOHDULQJKRXVH)XWXUHVDUHWUDGHGRQDQ([FKDQJHRUFOHDUHGWKURXJKDILQDQFLDO FOHDULQJKRXVH

1257+$0(5,&$1(/(&75,&5(/,$%,/,7<&281&,/ 1(5& ±&RXQFLOIRUPHG E\HOHFWULFXWLOLW\LQGXVWU\LQWRSURPRWHWKHUHOLDELOLW\DQGDGHTXDF\RIEXONSRZHU VXSSO\LQXWLOLW\V\VWHPVRI1RUWK$PHULFD1(5&FRQVLVWVRIHLJKWUHJLRQDOUHOLDELOLW\ FRXQFLOV)ORULGD5HOLDELOLW\&RRUGLQDWLQJ&RXQFLO )5&& 0LGZHVW5HOLDELOLW\ 2UJDQL]DWLRQ 052 1RUWKHDVW3RZHU&RRUGLQDWLQJ&RXQFLO 13&& 5HOLDELOLW\)LUVW &RUSRUDWLRQ 5)& 6(5&5HOLDELOLW\&RUSRUDWLRQ 6(5& 6RXWKZHVW3RZHU3RRO5( 633 7H[DV5HOLDELOLW\(QWLW\ 75( DQG:HVWHUQ6\VWHPV&RRUGLQDWLQJ&RXQFLO :(&&

18&/($532:(5±(QHUJ\REWDLQHGE\VSOLWWLQJKHDY\DWRPV ILVVLRQ RUMRLQLQJOLJKW DWRPV IXVLRQ $QXFOHDUHQHUJ\SODQWXVHVDFRQWUROOHGDWRPLFFKDLQUHDFWLRQWRSURGXFH KHDW7KHKHDWLVXVHGWRPDNHVWHDPUXQFRQYHQWLRQDOWXUELQHJHQHUDWRUV

1<0(;±1HZ

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 239 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

2))3($.±3HULRGVRIORZGHPDQGV$OOWKHWLPHRXWVLGHWKHRQSHDNSHULRG

213($.±3HULRGVRIWKHKLJKHVWGHPDQG

216,7((1(5*<25&$3$&,7< 6(/)*(1(5$7,2121&86720(56,'( 2)7+(0(7(5 ±7KHDPRXQWRISRZHUPHDVXUHGLQ0:VRU0:KVJHQHUDWHGE\WKH FXVWRPHUXVHGWRRIIVHWWKHFXVWRPHU¶VORDGVHUYHGE\WKHHOHFWULFVHUYLFHSURYLGHU

237,216±$QRSWLRQLVWKHULJKWEXWQRWWKHREOLJDWLRQWREX\RUVHOODIL[HGTXDQWLW\ RIDVHFXULW\RUFRPPRGLW\DWDSULFHDQGWLPHVSHFLILHGLQWKHFRQWUDFW

287$*( (OHFWULFXWLOLW\ ±$QLQWHUUXSWLRQRIHOHFWULFVHUYLFHWKDWLVWHPSRUDU\ PLQXWHV RUKRXUV DQGDIIHFWVDUHODWLYHO\VPDOODUHD EXLOGLQJVRUFLW\EORFNV

29(5*(1(5$7,21±$FRQGLWLRQWKDWRFFXUVZKHQWRWDOVXSSO\H[FHHGVWRWDOGHPDQG LQWKH&$,62%DODQFLQJ$XWKRULW\$UHD

3$5.,1*6(59,&(±6KRUWWHUPVWRUDJHRIDVKLSSHU¶VH[FHVVJDVVRWKDWVKLSSHU GRHVQ¶WKDYHWRVHOOLWLQWKHPDUNHW

3$57,&,3$7,1**(1(5$725$*5((0(17 3*$ ±$QDJUHHPHQWEHWZHHQWKH &$,62DQGDSDUWLFLSDWLQJJHQHUDWRU

3($.'(0$1'253($./2$'±7KHHOHFWULFORDGWKDWFRUUHVSRQGVWRDPD[LPXP OHYHORIHOHFWULFGHPDQGLQDVSHFLILHGWLPHSHULRG

3($.)252))3($.(;&+$1*(±(OHFWULFHQHUJ\FDSDFLW\RUDQFLOODU\VHUYLFHV RUWUDQVPLVVLRQH[FKDQJHGEHWZHHQFRXQWHUSDUWLHVPHDVXUHGLQ0:VRU0:KVWKDWLV DJUHHGWREHVXSSOLHGLQDQRQSHDNSHULRGLQH[FKDQJHIRUUHFHLYLQJDQDPRXQWLQDQ RIISHDNSHULRG

3* ( 3$&,),&*$6$1'(/(&75,&&203$1< ±$QHOHFWULFDQGQDWXUDOJDV XWLOLW\VHUYLQJWKHFHQWUDODQGQRUWKHUQ&DOLIRUQLDUHJLRQ

3+27292/7$,&6±$WHFKQRORJ\WKDWGLUHFWO\FRQYHUWVOLJKWLQWRHOHFWULFLW\7KH SURFHVVXVHVPRGXOHVZKLFKDUHXVXDOO\PDGHXSRIPDQ\FHOOV WKLQOD\HUVRI VHPLFRQGXFWRUV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 240 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

3+<6,&$/&$// 25387 237,21±7KHULJKWEXWQRWWKHREOLJDWLRQWREX\ FDOO SK\VLFDOHOHFWULFLW\IRUGHOLYHU\RQDVSHFLILFGDWHDWDIL[HGRULQGH[HGSULFH VWULNH 7KH ULJKWWRVHOOLVDSXWRSWLRQ

3+<6,&$/237,216211$785$/*$66833/< 3XUFKDVHRU6DOH ±7KHULJKW EXWQRWWKHREOLJDWLRQWREX\ FDOO SK\VLFDOJDVIRUGHOLYHU\RQDSDUWLFXODUGDWHDWDIL[HG RULQGH[SULFH VWULNH 7KHULJKWWRVHOOLVDSXWRSWLRQ

3,3(/,1(±$OLQHRISLSHZLWKSXPSLQJPDFKLQHU\DQGDSSDUDWXV LQFOXGLQJYDOYHV FRPSUHVVRUXQLWVPHWHULQJVWDWLRQVUHJXODWRUVWDWLRQVHWF IRUFRQYH\LQJDOLTXLGRUJDV

3,3(/,1(&$3$&,7<±7KHPD[LPXPTXDQWLW\RIJDVWKDWFDQEHPRYHGWKURXJKD SLSHOLQHV\VWHPDWDQ\JLYHQWLPHEDVHGRQH[LVWLQJVHUYLFHFRQGLWLRQVVXFKDVDYDLODEOH KRUVHSRZHUSLSHOLQHGLDPHWHU V PDLQWHQDQFHVFKHGXOHVUHJLRQDOGHPDQGIRUQDWXUDO JDVHWF

3257)2/,2&217(17&$7(*25<21( 3&& ±7KLVFDWHJRU\UHIHUVWRIDFLOLWLHV ZLWKILUVWSRLQWRILQWHUFRQQHFWLRQZLWKLQD&DOLIRUQLD%DODQFLQJ$XWKRULW\ &%$ RUZLWK JHQHUDWLRQVFKHGXOHGLQWRD&%$

32:(5±(OHFWULFLW\IRUXVHDVHQHUJ\

32:(53/$17±$FHQWUDOVWDWLRQJHQHUDWLQJIDFLOLW\WKDWSURGXFHVHQHUJ\

32:(5385&+$6($*5((0(17±$FRQWUDFWWKDWVSHFLILHVWKHWHUPVDQG FRQGLWLRQVXQGHUZKLFKHOHFWULFSRZHUZLOOEHJHQHUDWHGDQGSXUFKDVHG3RZHUSXUFKDVH DJUHHPHQWVUHTXLUHWKH6HOOHUWRVXSSO\SRZHUXQGHUVSHFLILFWHUPVDQGFRQGLWLRQVIRUWKH OLIHRIWKHDJUHHPHQW:KLOHSRZHUSXUFKDVHDJUHHPHQWVYDU\WKHLUFRPPRQHOHPHQWV LQFOXGHVSHFLILFDWLRQRIWKHVL]HSULFLQJVWUXFWXUHRSHUDWLQJIOH[LELOLW\GHOLYHU\SRLQW YDULRXVVHUYLFHDQGSHUIRUPDQFHREOLJDWLRQVGLVSDWFKDELOLW\RSWLRQVFUHGLWFROODWHUDO WHUPVDQGFRQGLWLRQVRIWHUPLQDWLRQRUGHIDXOW

35,&(&859(6

x )RUZDUG&XUYH RU)XWXUHV3ULFH ±$WHUPVWUXFWXUHRIIRUZDUGSULFHV REVHUYHGLQWKHPDUNHW)RUZDUGFRQWUDFWVOLNHIXWXUHVDUHDJUHHPHQWVWREX\ RUVHOODFRPPRGLW\DWDIXWXUHWLPH)RUZDUGSULFHLVWKHSULFHWREHSDLGDW GHOLYHU\

x 3ULFH)RUHFDVW±$SURMHFWLRQRIIXWXUHSULFHOHYHOV WKHVHFRXOGEHGD\DKHDG SULFHVIXWXUHVSULFHVPRQWKO\SULFHVHWF H[SUHVVHGHLWKHULQQRPLQDORUD JLYHQ\HDU¶VGROODUVQRWQHFHVVDULO\UHIOHFWLYHRIPDUNHWSULFHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 241 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

352'8&7,21±7KHDFWRUSURFHVVRIJHQHUDWLQJHOHFWULFHQHUJ\

38%/,&/<2:1('87,/,7,(6 328V ±0XQLFLSDOXWLOLWLHV XWLOLWLHVRZQHGE\ EUDQFKHVRIORFDOJRYHUQPHQW DQGRUFRRSHUDWLYHV XWLOLWLHVRZQHGFRRSHUDWLYHO\E\ FXVWRPHUV

3803('6725$*(±)DFLOLW\GHVLJQHGWRJHQHUDWHHOHFWULFSRZHUGXULQJSHDNORDG SHULRGVZLWKDK\GURHOHFWULFSODQWXVLQJZDWHUSXPSHGLQWRDVWRUDJHUHVHUYRLUGXULQJ RIISHDNSHULRGV

48$/,)<,1*)$&,/,7< 4) ±$QRQXWLOLW\JHQHUDWRURIHQHUJ\WKDWPXVWPHHW FHUWDLQRSHUDWLQJHIILFLHQF\DQGIXHOXVHVWDQGDUGVVHWIRUWKE\WKH)HGHUDO(QHUJ\ 5HJXODWRU\&RPPLVVLRQ )(5& SXUVXDQWWR3853$ 7KH3XEOLF8WLOLW\5HJXODWRU\ 3ROLFLHV$FWRI 4)VLQFOXGHERWKFRJHQHUDWRUDQGVPDOOSRZHUSURGXFHUIDFLOLWLHV

5($/7,0( 3XUFKDVHRU6DOH ±7KHDPRXQWRIHQHUJ\PHDVXUHGLQ0:KVVXSSOLHGRU UHFHLYHGE\WKHFRQWURODUHDRSHUDWRUWREDODQFHDXWLOLW\¶VORDGDQGVXSSO\

5($/7,0(0$5.(7 570 ±7KHVSRWPDUNHWFRQGXFWHGE\WKH&$,62XVLQJ6&8& DQG6&('LQWKHUHDOWLPHDIWHUWKH+$63LVFRPSOHWHGZKLFKLQFOXGHVWKH578& 678&DQGWKH57'IRUWKHSXUSRVHRIXQLWFRPPLWPHQWDQFLOODU\VHUYLFHSURFXUHPHQW FRQJHVWLRQPDQDJHPHQWDQGHQHUJ\SURFXUHPHQWEDVHGRQ6XSSO\%LGVDQG&$,62 IRUHFDVWRI&$,62GHPDQG

5($/7,0(35,&,1*±7KHLQVWDQWDQHRXVSULFLQJRIHOHFWULFLW\EDVHGRQWKHFRVWRIWKH HOHFWULFLW\DYDLODEOHIRUXVHDWWKHWLPHWKHHOHFWULFLW\LVGHPDQGHGE\WKHFXVWRPHU

5($&725±$GHYLFHLQZKLFKDFRQWUROOHGQXFOHDUFKDLQUHDFWLRQFDQEHPDLQWDLQHG SURGXFLQJKHDWHQHUJ\

5(*8/$7,21±7KHVHUYLFHSURYLGHGE\JHQHUDWLQJXQLWVHTXLSSHGDQGRSHUDWLQJZLWK DXWRPDWLFJHQHUDWLRQFRQWUROVWKDWHQDEOHVWKHXQLWVWRUHVSRQGWRWKH,62¶VGLUHFWGLJLWDO FRQWUROVLJQDOVWRPDWFKUHDOWLPHGHPDQGDQGUHVRXUFHVFRQVLVWHQWZLWKHVWDEOLVKHG RSHUDWLQJFULWHULD

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 242 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

5(/,$%,/,7<±(OHFWULFV\VWHPUHOLDELOLW\KDVWZRFRPSRQHQWV²DGHTXDF\DQGVHFXULW\ $GHTXDF\LVWKHDELOLW\RIWKHHOHFWULFV\VWHPWRVXSSO\WKHDJJUHJDWHHOHFWULFDOGHPDQG DQGHQHUJ\UHTXLUHPHQWVRIWKHFXVWRPHUVDWDOOWLPHVWDNLQJLQWRDFFRXQWVFKHGXOHGDQG XQVFKHGXOHGRXWDJHVRIV\VWHPIDFLOLWLHV6HFXULW\LVWKHDELOLW\RIWKHHOHFWULFV\VWHPWR ZLWKVWDQGVXGGHQGLVWXUEDQFHVVXFKDVHOHFWULFVKRUWFLUFXLWVRUXQDQWLFLSDWHGORVVRI V\VWHPIDFLOLWLHV

5(1(:$%/((1(5*<±5HVRXUFHVWKDWFRQVWDQWO\UHQHZWKHPVHOYHVRUWKDWDUH UHJDUGHGDVSUDFWLFDOO\LQH[KDXVWLEOH7KHVHLQFOXGHVRODUZLQGJHRWKHUPDOK\GURDQG ZRRG$OWKRXJKSDUWLFXODUJHRWKHUPDOIRUPDWLRQVFDQEHGHSOHWHGWKHQDWXUDOKHDWLQWKH HDUWKLVDYLUWXDOO\LQH[KDXVWLEOHUHVHUYHRISRWHQWLDOHQHUJ\5HQHZDEOHUHVRXUFHVDOVR LQFOXGHVRPHH[SHULPHQWDORUOHVVGHYHORSHGVRXUFHVVXFKDVWLGDOSRZHUVHDFXUUHQWV DQGRFHDQWKHUPDOJUDGLHQWV

5(1(:$%/((1(5*<&5(',7 5(& ±$5HQHZDEOH(QHUJ\&UHGLWUHSUHVHQWVWKH HQYLURQPHQWDODQGUHQHZDEOHDWWULEXWHVRIUHQHZDEOHHOHFWULFLW\$5(&FDQEHVROGHLWKHU EXQGOHGZLWKWKHXQGHUO\LQJHQHUJ\RUXQEXQGOHGDVDVHSDUDWHFRPPRGLW\IURPWKH HQHUJ\LWVHOILQWRDVHSDUDWH5(&WUDGLQJPDUNHW

5(1(:$%/(5(6285&(6±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

5(6(59(±7KHH[WUDJHQHUDWLQJFDSDELOLW\WKDWDQHOHFWULFXWLOLW\QHHGVDERYHDQG EH\RQGWKHKLJKHVWGHPDQGOHYHOLWLVUHTXLUHGWRVXSSO\WRPHHWLWVXVHUVQHHGV

5(6(59(0$5*,1±7KHGLIIHUHQFHVEHWZHHQWKHGHSHQGDEOHFDSDFLW\RIDXWLOLW\¶V V\VWHPDQGWKHDQWLFLSDWHGSHDNORDGIRUDVSHFLILHGSHULRG

5(6285&($'(48$&< 5$ ±7KHSURJUDPWKDWHQVXUHVWKDWDGHTXDWHSK\VLFDO JHQHUDWLQJFDSDFLW\GHGLFDWHGWRVHUYLQJDOOORDGUHTXLUHPHQWVLVDYDLODEOHWRPHHWSHDN GHPDQGDQGSODQQLQJDQGRSHUDWLQJUHVHUYHVDWRUGHOLYHUDEOHWRORFDWLRQVDQGDWWLPHVDV PD\EHQHFHVVDU\WRHQVXUHORFDODUHDUHOLDELOLW\DQGV\VWHPUHOLDELOLW\

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 243 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

6&( 6287+(51&$/,)251,$(',621&203$1< ±$QHOHFWULFXWLOLW\VHUYLQJ WKHVRXWKHUQ&DOLIRUQLDUHJLRQ

6'* ( 6$1',(*2*$6 (/(&75,& ±$QHOHFWULFDQGQDWXUDOJDVXWLOLW\VHUYLQJ WKH6DQ'LHJR&DOLIRUQLDUHJLRQ

6&+('8/,1*&225',1$725±6FKHGXOLQJ&RRUGLQDWRUV 6&V VXEPLWELGVDQG VFKHGXOHVLQ&$,62PDUNHWVDQGSURYLGHVHWWOHPHQWTXDOLW\PHWHUGDWDWRWKH&$,62 6FKHGXOLQJ&RRUGLQDWRUVDOVR

x $VVXPHILQDQFLDOUHVSRQVLELOLW\IRUDOOVFKHGXOHVDQFLOODU\VHUYLFHDZDUGVDQG GLVSDWFKLQVWUXFWLRQVLVVXHGLQWKH&$,62PDUNHWV

x 0DLQWDLQD\HDUURXQGKRXUVFKHGXOLQJFHQWHU

x 5HVSRQGWRGLVSDWFKLQVWUXFWLRQV

6($621$/(;&+$1*(±(OHFWULFHQHUJ\FDSDFLW\RUDQFLOODU\VHUYLFHVRU WUDQVPLVVLRQH[FKDQJHGEHWZHHQFRXQWHUSDUWLHVPHDVXUHGLQ0:VRU0:KVWKDWLV DJUHHGWREHVXSSOLHGGXULQJRQHVHDVRQRUVHWRIPRQWKVLQH[FKDQJHIRUUHFHLYLQJDQ DPRXQWLQDQRWKHUVHDVRQRUVHWRIPRQWKV'ROODUVPD\RUPD\QRWEHH[FKDQJHGLQVXFK DWUDQVDFWLRQ

6(/)*(1(5$7,21±$JHQHUDWLRQIDFLOLW\GHGLFDWHGWRVHUYLQJDSDUWLFXODUUHWDLO FXVWRPHUXVXDOO\ORFDWHGRQWKHFXVWRPHU¶VSUHPLVHV7KHIDFLOLW\PD\HLWKHUEHRZQHG GLUHFWO\E\WKHUHWDLOFXVWRPHURURZQHGE\DWKLUGSDUW\ZLWKDFRQWUDFWXDODUUDQJHPHQWWR SURYLGHHOHFWULFLW\WRPHHWVRPHRUDOORIWKHFXVWRPHU¶VORDG

6(59,&($5($±7KHJHRJUDSKLFDOWHUULWRU\VHUYHGE\DXWLOLW\

6(77/(0(17±7KHSURFHVVRIILQDQFLDOVHWWOHPHQWIRUSURGXFWVDQGVHUYLFHVSXUFKDVHG DQGVROG(DFKVHWWOHPHQWLQYROYHVDSULFHDQGTXDQWLW\7KH,62PD\SHUIRUP VHWWOHPHQWIXQFWLRQV

6,7(±$Q\ORFDWLRQRQZKLFKDIDFLOLW\LVFRQVWUXFWHGRULVSURSRVHGWREHFRQVWUXFWHG

60$//32:(5352'8&(5±5HIHUVWRDSURGXFHUWKDWJHQHUDWHVDWOHDVWRILWV HQHUJ\IURPUHQHZDEOHVRXUFHV

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 244 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

63,11,1*5(6(59(±7KHSRUWLRQRIXQORDGHGV\QFKURQL]HGJHQHUDWLQJFDSDFLW\ FRQWUROOHGE\WKH,62ZKLFKLVFDSDEOHRIEHLQJORDGHGLQPLQXWHVDQGZKLFKLV FDSDEOHRIUXQQLQJIRUDWOHDVWWZRKRXUV

63270$5.(7±$PDUNHWLQZKLFKWUDQVDFWLRQVWDNHSODFHDWPRVWRQHGD\DKHDGRI VFKHGXOHGGHOLYHU\

63271$785$/*$6 3K\VLFDO6XSSO\ ±3XUFKDVHVVDOHVH[FKDQJHVRISK\VLFDO QDWXUDOJDVIRUWHUPVOHVVWKDQRQHPRQWK

632735,&(±7KHSULFHIRUVSRWWUDQVDFWLRQV

675$1'('&2676±&RVWVLQFXUUHGE\DXWLOLW\ZKLFKPD\QRWEHUHFRYHUDEOHXQGHU PDUNHWEDVHGUHWDLOFRPSHWLWLRQ&RVWVLQFXUUHGE\DXWLOLW\ZKLFKPD\QRWEH UHFRYHUDEOHXQGHUPDUNHWEDVHGUHWDLOFRPSHWLWLRQ

68%67$7,21±$IDFLOLW\WKDWVWHSVXSRUVWHSVGRZQWKHYROWDJHLQXWLOLW\SRZHUOLQHV 9ROWDJHLVVWHSSHGXSZKHUHSRZHULVVHQWWKURXJKORQJGLVWDQFHWUDQVPLVVLRQOLQHV,WLV VWHSSHGGRZQZKHUHWKHSRZHULVWRHQWHUORFDOGLVWULEXWLRQOLQHV

6833/,(5±$SHUVRQRUFRUSRUDWLRQJHQHUDWRUEURNHUPDUNHWHUDJJUHJDWRURUDQ\ RWKHUHQWLW\WKDWVHOOVHOHFWULFLW\WRFXVWRPHUVXVLQJWKHWUDQVPLVVLRQRUGLVWULEXWLRQ IDFLOLWLHVRIDQHOHFWULFGLVWULEXWLRQFRPSDQ\

6833/<%,'±$ELGLQGLFDWLQJDSULFHDWZKLFKDVHOOHULVSUHSDUHGWRVHOOHQHUJ\RU DQFLOODU\VHUYLFHV

6833/<6,'(±$FWLYLWLHVFRQGXFWHGRQWKHXWLOLW\¶VVLGHRIWKHFXVWRPHUPHWHU $FWLYLWLHVGHVLJQHGWRVXSSO\HOHFWULFSRZHUWRFXVWRPHUVUDWKHUWKDQPHHWLQJORDG WKRXJKHQHUJ\HIILFLHQF\PHDVXUHVRURQVLWHJHQHUDWLRQRQWKHFXVWRPHUVLGHRI WKHPHWHU

6<67(0±$FRPELQDWLRQRIHTXLSPHQWDQGRUFRQWUROVDFFHVVRULHVLQWHUFRQQHFWLQJ PHDQVDQGWHUPLQDOHOHPHQWVE\ZKLFKHQHUJ\LVWUDQVIRUPHGWRSHUIRUPDVSHFLILF IXQFWLRQVXFKDVFOLPDWHFRQWUROVHUYLFHZDWHUKHDWLQJRUOLJKWLQJ

7(03(5$785(±'HJUHHRIKRWQHVVRUFROGQHVVPHDVXUHGRQRQHRIVHYHUDODUELWUDU\ VFDOHVEDVHGRQVRPHREVHUYDEOHSKHQRPHQRQ VXFKDVWKHH[SDQVLRQ

72//,1*$*5((0(17±$QDJUHHPHQWWRSURYLGH UHFHLYH JDVLQH[FKDQJHIRU UHFHLYLQJ SURYLGLQJ HOHFWULFLW\

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 245 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

75$16,7,21&2676±6WUDQGHGFRVWVZKLFKDUHFKDUJHGWRXWLOLW\FXVWRPHUVWKURXJK VRPHW\SHRIIHHRUVXUFKDUJHDIWHUWKHDVVHWVDUHVROGRUVHSDUDWHGIURPWKH YHUWLFDOO\LQWHJUDWHGXWLOLW\

75$160,66,21±7UDQVSRUWLQJEXONSRZHURYHUORQJGLVWDQFHV

75$160,66,21$1'',675,%87,21 7 ' /266(6±(OHFWULFHQHUJ\RUFDSDFLW\ WKDWLVZDVWHGLQWKHQRUPDORSHUDWLRQRIDSRZHUV\VWHP6RPHNLORZDWWKRXUVDUHORVWLQ WKHIRUPRIZDVWHKHDWLQHOHFWULFDODSSDUDWXVVXFKDVVXEVWDWLRQWUDQVIRUPHUV/LQHORVVHV DUHNLORZDWWVRUNLORZDWWKRXUVORVWLQWUDQVPLVVLRQDQGGLVWULEXWLRQRIHOHFWULFLW\

75$160,66,21$1'',675,%87,21 7 ' 6<67(0±$QLQWHUFRQQHFWHGJURXS RIHOHFWULFWUDQVPLVVLRQOLQHVDQGDVVRFLDWHGHTXLSPHQWIRUWKHPRYHPHQWRUWUDQVIHURU HOHFWULFHQHUJ\LQEXONEHWZHHQSRLQWVRIVXSSO\DQGSRLQWVDWZKLFKLWLVWUDQVIRUPHGIRU GHOLYHU\WRWKHXOWLPDWHFXVWRPHUV

75$160,66,21/,1(6±+HDY\ZLUHVWKDWFDUU\ODUJHDPRXQWVRIHOHFWULFLW\RYHUORQJ GLVWDQFHVIURPDJHQHUDWLQJVWDWLRQWRSODFHVZKHUHHOHFWULFLW\LVQHHGHG7UDQVPLVVLRQ OLQHVDUHKHOGKLJKDERYHWKHJURXQGRQWDOOWRZHUVFDOOHGWUDQVPLVVLRQWRZHUV

86'(3$570(172)(1(5*< '2( ±7KH'2(PDQDJHVSURJUDPVRIUHVHDUFK GHYHORSPHQWDQGFRPPHUFLDOL]DWLRQIRUYDULRXVHQHUJ\WHFKQRORJLHVDQGDVVRFLDWHG HQYLURQPHQWDOUHJXODWRU\DQGGHIHQVHSURJUDPV'2(DQQRXQFHVHQHUJ\SROLFLHVDQG DFWVDVDSULQFLSDODGYLVRUWRWKH3UHVLGHQWRQHQHUJ\PDWWHUV

81&(57$,17,(6±8QFHUWDLQWLHVDUHIDFWRUVRYHUZKLFKWKHXWLOLW\KDVOLWWOHRUQR IRUHNQRZOHGJHDQGLQFOXGHORDGJURZWKIXHOSULFHVRUUHJXODWRU\FKDQJHV 8QFHUWDLQWLHVDUHPRGHOHGLQDSUREDELOLVWLFPDQQHU+RZHYHULQWKH'HWDLOHG :RUNERRN\RXPD\ILQGLWLVPRUHFRQYHQLHQWWRWUHDWXQFHUWDLQWLHVDV³XQNQRZQEXW ERXQGHG´YDULDEOHVZLWKRXWDVVXPLQJDSUREDELOLVWLFVWUXFWXUH$VSHFLILHGXQFHUWDLQW\LV DVSHFLILFYDOXHWDNHQRQE\DQXQFHUWDLQW\IDFWRU HJSHUFHQWSHU\HDUIRUORDG JURZWK $IXWXUHXQFHUWDLQW\LVDFRPELQDWLRQRIVSHFLILHGXQFHUWDLQWLHV HJSHUFHQW SHU\HDUORDGJURZWKSHUFHQWSHU\HDUUHDOFRDODQGRLOSULFHHVFDODWLRQDQGSHUFHQW LQFUHDVHLQKRXVLQJVWDUWV

83*5$'(±$QLQFUHDVHLQWKHUDWLQJRUVWDWHGPHDVXUHRIJHQHUDWLRQRUWUDQVIHU FDSDELOLW\

87,/,7<±$UHJXODWHGHQWLW\ZKLFKH[KLELWVWKHFKDUDFWHULVWLFVRIDQDWXUDOPRQRSRO\ )RUWKHSXUSRVHVRIHOHFWULFLQGXVWU\UHVWUXFWXULQJ³XWLOLW\´UHIHUVWRWKHUHJXODWHG

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 246 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

YHUWLFDOO\LQWHJUDWHGHOHFWULFFRPSDQ\³7UDQVPLVVLRQXWLOLW\´UHIHUVWRWKHUHJXODWHG RZQHURSHUDWRURIWKHWUDQVPLVVLRQV\VWHPRQO\³'LVWULEXWLRQXWLOLW\´UHIHUVWRWKH UHJXODWHGRZQHURSHUDWRURIWKHGLVWULEXWLRQV\VWHPZKLFKVHUYHVUHWDLOFXVWRPHUV

87,/,7<2:1('*(1(5$7,21±5HVRXUFHVRZQHGE\DQLQYHVWRURZQHGXWLOLW\ 'RHVQRWLQFOXGHUHVRXUFHVWKDWPD\EHXQGHUFRQWUDFWRURWKHUZLVHDYDLODEOHWRXWLOLWLHV VXFKDV':5FRQWUDFWV

9$5,$%/(&2676±7KHFRVWDVVRFLDWHGZLWKIXHOFRVWDQGYDULDEOHRSHUDWLRQVDQG PDLQWHQDQFHFRVWV

:($7+(575,**(5('237,216±$PHWKRGIRUPDQDJLQJWHPSHUDWXUHDQGRWKHU ZHDWKHUIRUHFDVWULVNV

:+2/(6$/(32:(50$5.(7±7KHSXUFKDVHDQGVDOHRIHOHFWULFLW\IURP JHQHUDWRUVWRUHVHOOHUV ZKRVHOOWRUHWDLOFXVWRPHUV DORQJZLWKWKHDQFLOODU\VHUYLFHV QHHGHGWRPDLQWDLQUHOLDELOLW\DQGSRZHUTXDOLW\DWWKHWUDQVPLVVLRQOHYHO

;

1RHQWULHVIRUWKHOHWWHU;

1RHQWULHVIRUWKHOHWWHU<

1RHQWULHVIRUWKHOHWWHU=

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV &DO38&6KHHW1R 247 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 3DFLILF*DVDQG(OHFWULF&RPSDQ\ 6DQ)UDQFLVFR&DOLIRUQLD %XQGOHG3URFXUHPHQW3ODQ

/LVWRI6RXUFHV

KWWSZZZHQHUJ\FDJRYJORVVDU\

KWWSZZZHQHUJ\FHQWUDOFRPUHIHUHQFHJORVVDU\

KWWSZZZHLDGRHJRYWRROVJORVVDU\

&38&'HFLVLRQV ' DQG

$GYLFH/HWWHU(

KWWSZZZDJDRUJ

KWWSZZZSJHFRP

KWWSZZZFDLVRFRP'RFXPHQWV&RQIRUPHG7DULIIB6HSBSGI

KWWSZZZFDLVRFRPSDJHVJORVVDU\DVS[

KWWSZZZFSXFFDJRY

'HFLVLRQ1R ,VVXHGE\ 'DWH)LOHG October 3, 2014 6WHYHQ0DOQLJKW(IIHFWLYH 6HQLRU9LFH3UHVLGHQW 5HVROXWLRQ1R 5HJXODWRU\$IIDLUV