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GHG Modeling Kickoff Meeting

September 21, 2007

Modeling of Greenhouse Gas Emissions Reduction Strategies and Cap Options in the California Electricity Sector

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Introductions Snuller Price, Project Manager

Dr. Ren Orans, Model Integration

Dr. Jim Williams, E3 Lead Analyst

Amber Mahone, E3 Analyst

Steven Schiller, Schiller Consulting

Eric Toolson, PLEXOS Lead

Dr. Yihsu Chen, UC Merced (Advisor)

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E3 Projects in California CPUC Projects (contracting utility)

Avoided costs for energy efficiency (PG&E, SCE) ‘E3 Calculator’ for cost-effectiveness of energy efficiency (PG&E, SCE) Market Price Referent for the renewable portfolio standard Cost-effectiveness of clean DG (SGIP) (PG&E) Statewide potential for demand response (Sempra) BC – California Renewable Energy Partnership (PG&E)

CEC Projects 2005 and 2008 Title 24 building energy efficiency standards Programmable Communicating Thermostat CASE study Renewable Program, Guidebooks and SEPs calculation support Renewable DG assessment

CAISO Projects Sunrise transmission line WECC RPS transmission study

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PLEXOS Solutions LLC Team

Eric Toolson Project manager for CAISO’s TEAM demonstration and PVD2 transmission

evaluation 25+year of resource planning, SMUD Resource Planning Manager (‘89-’92)

Dr. Tao Guo Principal algorithm developer for PROMOD (‘89 to ‘93) and PROSYM (’93 to

’05), PhD in Power Systems Engineering Recognized national expert in unit commitment and dispatch modeling

Dr. Wenxiong Huang Principal developer for ProView, ProScreen (Strategist), ’92-’94 Product manager for MARKETSYM, RISKYM, MAINSYM (’94-’06) Expert in areas of market price formation, stochastic portfolio evaluation, and

maintenance optimization

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Agenda

Project Goals and Overview Stakeholder Process and Timeline Modeling Approach Technical Plan Key Issues and Agency Proceedings

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Project Overview

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Two Stage Project Approach

Stage 1 (Now to End of November) Develop data and methodology Develop and test analysis tool Focus on electricity sector-wide issues Results feed into CPUC Interim Decision in Feb. ‘08 Results for CARB Integration Workshop in Mar.’08

Stage 2 (December – August 2008) LSE-specific issues such as allocation Cross-sector trading issues More detail through topic-specific working groups

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Stage 1 Key Questions

How much CO2 reduction can be expected in the electricity sector from different policy options?

How much will these policy options increase electricity rates for consumers?

Underlying CPUC question: At what electricity sector target level do incremental improvements get expensive?

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Stage 2 Key Questions

What is the cost to California of complying with AB32 under different policy options for the electricity sector?

What is the cost to different LSEs and their customers of these options?

Underlying CPUC question: What option has the best combination of cost, fairness, and enforceability?

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Project Deliverables Key Deliverables

Non-proprietary GHG Calculator Unlimited “runs” to evaluate policy options

Agency staff and stakeholders can evaluate their own scenarios

PLEXOS production simulation Validation of GHG calculator results with detailed model of California

and the Western Interconnect

Stakeholder engagement and support

Timeline Tied to AB32 timeline

Results feed into R.06-04-009 proposed decisions

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‘Stylized’ View of the ResultsScenario A Other

Scenarios…

CA By LSE CA By LSE

Electricity Sector Emissions

Change in Cost from Base Case(s)

Cost of Reductions $/ton CO2

Rate Impact ¢/kWh

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Modeling Approach

CARB Macro-economic Model (EDRAM)CARB Multi-Sector Model (ICF)

E3 GHG Calculator

Results for Validation

PLEXOS for Power SystemsTM

Zonal Supply Curves for WECC

Loads

Prices

•Sector Targeted Policies•Technology Development•Fuel Prices•GHG Policies

•Production by zone•GHG Impacts•Rate Impacts

•Modified SSG-WI Database•Resources•Loads•Fuel Prices

•Production by zone•GHG Impacts

Inputs to Calculator

New Resource AssessmentGHG EmissionsCapacity CostsEnergy CostsGHG Costs

Rate impact AnalysisAverage retail rate

WECC-Wide Production Simulation Optimization

Zonal or NodalCA MRTU

Detailed Emissions Results

Inp

uts

Ou

tpu

tsC

alcu

lati

on

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Key Features

Spreadsheet tool is designed to help users answer key questions, not just a report Transparent, publicly available information Will be made available to stakeholders

Model links expansion planning, GHG emissions and costs to consumers

Right level of detail to answer policy questions through 2020 and beyond

Expert team familiar with CPUC process, GHG policy, CAISO, and targeted options

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Model Scoping

Years: 2008, 2020 Sectors: Electricity and Natural Gas Scale: LSE, California, WECC LSEs: 7 entities

PG&E, SCE, SDG&ELADWP, SMUDNorthern CA other, Southern CA other

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Joint CPUC/CEC GHG Stakeholder ProcessR.06-04-009

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Process Goals for GHG Modeling

Transparency in model and input data

Open stakeholder process

Inform the CPUC Decisions in R.06-04-009

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GHG Modeling and Process

Model results feed into R.06-04-009

Interim Decision expected ~ February 2008

CARB integration workshop ~ March 2008 to review sector targets

Decision expected ~ September 2008

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Jan-

07M

ar-0

7M

ay-0

7Ju

l-07

Sep-

07Nov

-07

Jan-

08M

ar-0

8M

ay-0

8Ju

l-08

Sep-

08Nov

-08

Agency Leadership Group Meets

Beta Model Development

Comment Period

Interim Decision

Working Groups Meet

Develop Final Model

Expand Policy Options

Evaluate Additional Scenarios

Comment Period

Decision

MonthSummary of Activities

Project TimelineCARB Integration Workshop

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Upcoming Key Dates (Tentative) September 21st

Kick-off Meeting for GHG Modeling October 24th

Public release of data and methodology summaries on E3 website November 2nd

Public release of initial model and summary of results on E3 website

November 14th

CPUC workshop on initial model data, method, and results November 30th, Mid-December

Post-workshop Comments and Reply Comments complete

http://www.ethree.comInformation and Results

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Technical Plan

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Technical Plan in 8 Steps Step 1: Compile available public data Step 2: Modify WECC data to create 2020 reference case Step 3: Develop 2020 PLEXOS and aggregate by zone Step 4: ‘Download’ PLEXOS dispatch in GHG Calculator Step 5: Define scenarios using the ‘GHG Calculator’ Step 6: Run the GHG Calculator to evaluate scenarios Step 7: ‘Upload’ GHG Calculator results to PLEXOS Step 8: Deliver output of selected runs to CARB models

Re-evaluate Assumptions with Stakeholder Process

Available Publicly so that stakeholders can review, and make their own runs

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Step 1: Compile Available Public Data

Start with WECC 2008 & 2017 Reference Cases Generation Resources Loads Fuel Prices

Public DataCOI

North of Hanford

PDCI

Paul-Allston

Allston-Keeler

Montana to NW

West of Broadview

West of Colstrip

BorahWest

Idaho-Montana

Bridger West

Path C

Southwest of Four Corners

Intermountain-Gonder

TOT 1A

TOT 2A

Bonanza West

TOT 2C

TOT 3

IID -SCECoronado –SKing-Kyl

WOR

EORCholla-Pinnacle Peak

Western InterconnectTransmission Congestion Areas/Paths

N & S. New Mexico

Alb to BC

Denver Area

Phoenix Tucson Areas

SF Bay Area

S. Calif. Area

Puget Sound Area

PNW Internal

Identified by the WCATFFor Submission to US DOE

May 8, 2006

NOTES:

1. See Table 4 for Congestion Area Criteria

2. Map identifies all Congestion Areas

Identified in DOE Tasks 1 and 3

3. Many Congestion Areas are dependent

upon location of future W.I. resources

Nev S. Id Wind Congestion Area

Congested WECC Path

(See Table 3)

Direction of Congestion

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WECC reference cases may not reflect

CPUC desired base caseLevel of renewable investmentLevel of energy efficiency investmentKnown new plants coming onlinePlant retirement schedules

Provide publicly the changes made to the reference cases

Step 2: Modify WECC data to create 2020 case

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Step 3: Develop 2020 Case, and aggregate results into zones Extend PLEXOS database to 2020

New resources Transmission Loads

Summarize results

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Running PLEXOS with Reference Case

Scan the input database Decide variables, constraints,

and objective need to be used for each object

Dynamically construct and solve the LP/QP/MIP

Write solution data to one or more databases

Input and solutions viewed in PLEXOS interface

Creatable reports connect directly to solution databases

RelationalInput Database Text Files

PLEXOS Engine

Compiler

Solver (LP/QP/MIP)

Executive

SolutionDatabases

and Text Files

Flow of Execution

PLEXOSReport Writer

Reports

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About PLEXOS

PLEXOS 4.0 first released in 2000 Co-optimization architecture is based on the Ph.D. work of Glenn

Drayton* Advanced Mixed Integer Programming (MIP) is the core algorithm of

the simulation and optimization Foundation for the mathematical formulation of the New Zealand,

Australia, and Singapore energy and spinning reserve markets PLEXOS licensed in United States, Europe, Asia-Pacific, Russia, and

Africa (17 countries, about 40 sites) PLEXOS Solutions distributes and supports PLEXOS in the United

States and Canada

* G.R. Drayton. Coordinating Energy and Reserves in a Wholesale Electricity Market. University of Canterbury, New Zealand, 1997.

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PLEXOS and California

MRTU compliant Integrated Forward Market

Co-Optimization of Ancillary Service and Energy Locational Marginal Prices (LMP) Ancillary Service Market Prices (ASMP)

Full Network Model DC-OPF WECC or CA focus

Used by CAISO Competitive path assessment MRTU LMP forecast Transmission feasibility studies

Past studies done with PLEXOS reviewed by CPUC – TEAM, PVD2

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PLEXOS and GHGs

Capable of modeling WECC at any level of detail from one zone to 15,000+ nodes

Extensive emission modeling capability Automatic decomposition takes annual or quarterly emission constraints

and breaks them down into daily limits for detailed short-term simulation Operations-quality modeling of thermal units including all CC components,

dead zones, chronological constraints, limited starts per week, multi-fuel, etc.

Accurate forecast of emission shadow prices Emission rates can be expressed multi-point or exponential curves

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Step 4: ‘Download’ PLEXOS Dispatch to GHG Calculator

Zonal Supply Curves Demand and Energy Prices

Supply Curves by Zone in the WECC

Demand and Energy Forecasts

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Step 5: Define scenarios in GHG Calculator

GHG Calculator ‘Dashboard’ for Setting the Scenarios to Evaluate

CPUC GHG Calculator Dashboard

Incremental Resources Base MW Scenario MW LSE Inputs Growth % 2020 AllocationWind 10,000 12,000 PG&E

Small Hydro 500 400 SMUDGeothermal 3,500 3,500 N. Cal

Central Solar 3,500 3,500 SCEBiomass 1,000 1,000 LADWP

California Solar Initiative 1,000 1,200 SDG&ECCS 0 0 S. Cal

Nuclear 0 0 Total

Energy Efficiency GWhAggressive X GHG Policy Options

Moderate 2020 Cap CO2e 80 MMTBase Case

Policy Options (Stage 2)Additional Gas Added MW Banking and Borrowing XCCGT Cross-Sector Trading XCT Offsets X

Fuel Costs $/MMBtu 2008 Escalation Out of State AssumptionsNatural Gas 7.50$ 2% Coal Renewals 100%Coal 3.00$ 2% Southwest Imports 1100 lbs/MWh

Northwest Imports 1100 lbs/MWhCalifornia Pool 800 lbs/MWh

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RPS Supply Curve Example

Based on publicly available data sources for generation and transmission options: CEC/PIER, CPUC, NPPC, DOE, CAISO, NTAC,WECC, utilities, developers, literature

Levelized costs of energy for California for RPS compliance

Other supply curves: energy efficiency, CHP, renewables, PV, clean DG, IGCC, carbon sequestration

Illustrative Example from CA ISO Sunrise Analysis

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Step 6: Run the GHG Calculator to evaluate scenarios

SimpleForecast of

thesecomponents

Average Retail Rate = Revenue Requirement / Sales

Revenue Requirement (RR)Generation capacityEnergyGHG CostsTransmissionDWRExisting RBExpenseOther Costs

$/M

Wh

MW

Load

SupplyCurve

Addition of New Resources Changes

Supply Curve to Hit Cap

Module 1: New Resource Assessment Module 2: Rates Impact Analysis

SimpleForecast of

thesecomponents

Average Retail Rate = Revenue Requirement / Sales

Revenue Requirement (RR)Generation capacityEnergyGHG CostsTransmissionDWRExisting RBExpenseOther Costs

$/M

Wh

MW

Load

SupplyCurve$/

MW

h

MW

Load

SupplyCurve

Addition of New Resources Changes

Supply Curve to Hit Cap

Module 1: New Resource Assessment Module 2: Rates Impact Analysis

GHG Calculator Calculates Two Modules New Resource Assessment Rates Impact Analysis

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Evaluating Rate Impacts

A key aspect of evaluating GHG policy is in determining how costs of different policies flow through to consumers

Cost-of-service and revenue requirement calculations are an E3 practice area

Cost components for analysis Capacity, energy, transmission,

and other components Extensive experience

Dr. Ren Orans Brian Horii

Year 2008 2009 2010

ResMWh 29,829,960,645 30,051,939,279 30,270,213,431Gen Total 1,602,662,429$ 1,602,338,861$ 1,555,919,549$ DWR 186,865,952$ 54,564,358$ (10,573,403)$ QF 436,394,457$ 454,120,608$ 424,274,834$ Indexed 374,574,099$ 406,559,050$ 462,856,787$ Non-Indexed 604,827,921$ 687,094,846$ 679,361,332$ Other 1,985,645,988$ 2,051,166,295$ 2,107,119,430$ Total 3,588,308,417$ 3,653,505,156$ 3,663,038,979$ Rate ($/kWh) 0.1203 0.1216 0.1210

Sm CommercialMWh 8,414,435,363 8,477,051,097 8,538,621,870Gen 629,716,707$ 629,589,571$ 611,350,536$ DWR 73,423,205$ 21,439,379$ (4,154,492)$ QF 171,467,725$ 178,432,668$ 166,705,693$ Indexed 147,177,324$ 159,744,823$ 181,865,280$ Non-Indexed 237,648,453$ 269,972,700$ 266,934,055$ Other 561,664,522$ 561,791,658$ 580,030,693$ Total 1,191,381,229$ 1,191,381,229$ 1,191,381,229$ Rate ($/kWh) 0.1416 0.1405 0.1395

Med CommercialMWh 13,151,666,887 13,249,534,568 13,345,768,987Gen 1,255,080,844$ 1,254,827,450$ 1,218,475,447$ DWR 120,336,615$ 35,145,065$ (7,013,541)$ QF 281,026,219$ 292,500,434$ 281,429,621$ Indexed 241,215,582$ 261,865,894$ 307,021,769$ Non-Indexed 389,492,811$ 442,559,834$ 450,633,379$ Other 893,517,433$ 914,727,019$ 896,849,653$ Total 1,925,588,661$ 1,946,798,247$ 1,928,920,881$ Rate ($/kWh) 0.1464 0.1469 0.1445

Retail Rate Forecast for CEC Title 24

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Steps 7 and 8: Upload Results

Validate 2020 case in PLEXOS Output results to CARB models for cases

identified in the working group to evaluate

Generation OutputsExpenditure on new generation resourcesExpenditure on new transmission

Wholesale MarketWholesale electric pricesImports / Exports

GHG OutputsGHG priceWECC-wide emissionsEmissions to serve CA

Rate Analysis OutputsRetail rate impact

Outputs from the GHG CalculatorPLEXOS for Power Systems TM

Verify Results in 2030

CARB Macro-economic Model

Economic Impact of GHG PolicyAffects on California

Generation OutputsExpenditure on new generation resourcesExpenditure on new transmission

Wholesale MarketWholesale electric pricesImports / Exports

GHG OutputsGHG priceWECC-wide emissionsEmissions to serve CA

Rate Analysis OutputsRetail rate impact

Outputs from the GHG CalculatorPLEXOS for Power Systems TM

Verify Results in 2020

CARB Models: Energy 2020, EDRAM

Economic Impact of GHG Policyon California

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Data Sources and Agency Proceedings

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Joint Agency Proceedings Stakeholder Process Agency & Industry

Data

Options and Inputs: Informing the Model

CPUC Tool

GHG Policy

Targeted Policy

GHG Methodology

Data Inputs

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GHG Policy Agency Process

Cap system / point of regulation

CPUC/CEC GHG Phase 2, MAC Report/First Seller track. Next step En Banc 8/21/07

Electricity sector emissions target

CARB scoping plan. Draft decision 6/08. Next step status workshop 10/07

LSE allocation method CPUC/CEC GHG Phase 2, entity-specific allocation track. Ruling on options late 10/07

Banking and borrowing CPUC/CEC GHG Phase 2, flexible compliance track. Staff straw proposal 9/14/07

Cross-sector trading / offsets

CPUC/CEC GHG Phase 2, flexible compliance track. Staff straw proposal 9/14/07

SB1368 implementation

CPUC GHG Phase 1. CEC 06-OIR-1 proceeding on POU EPS. Decision on revised regulations 8/29/07

Regional/federal trading system uplink

CPUC GHG Phase 2. 4/19/07 workshop. Governor's office regional initiatives.

Natural gas sector CPUC/CEC GHG Phase 2, natural gas track. Scoping memo 9/07

GHG Policies

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Targeted PoliciesTargeted Policy Agency Process

Renewable Portfolio Standard

SB107/CPUC & CEC RPS dockets. EAP II 33% target. POU RPS targets. Pending legislation on MPR/SEPs.

Renewable Energy Certificates

SB107/CPUC & CEC RPS dockets. WECC WREGIS online 6/25/07. Next step REC workshop 9/5-7/07. Bundled vs non-bundled

Energy Efficiency AB2021/CPUC & CEC EE dockets. 2006-2008 EE program. POU EE targets. EE in load forecast & GHG sector cap.

California Solar Initiative / RE DG

SB1/CPUC & CEC CSI dockets. CPUC SGIP program. POU PV targets.

Demand Response CPUC DR/AMI dockets. EAP II 5% of peak load target. DR 2007 expansion 1/25/07.

Environmental Adder CPUC avoided cost/procurement/RPS dockets. GHG planning adder adopted 1/05. GHG MPR adder 8/07

Renewable Transmission SB1079/AB974 CPUC/CAISO/CEC kickoff on RE transmission planning 6/1/07. CPUC CA RE Transmission Initiative (CRETI)

Plant Retirements / Repowering

AB1576/CPUC RA docket. 5/07 workshop. CEC 2005 IEPR retirement strategy. 2007 IEPR scenarios workshop 8/16/07

Resource Adequacy CPUC/CAISO RA docket, local RA, MRTU.

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GHG MethodologiesGHG Methodology Agency Process

Unspecified electricity import emissions assignment

CPUC/CEC GHG Phase 2 reporting track. CPUC 8/15 proposed decision, final decision CPUC 9/6, CEC 9/12

Unspecified CAISO pool emissions assignment

CPUC/CEC GHG Phase 2 reporting track. CPUC 8/15 proposed decision, final decision CPUC 9/6, CEC 9/13

Current emissions by LSE

CPUC/CEC GHG Phase 2 baseline track. CARB inventory 8/13 workshop. Ruling 10/07

Non-CO2 GHGs CPUC/CEC GHG Phase 2 baseline track. CARB inventory 8/13 workshop. Ruling 10/07

CHP assignment / behind the fence DG assignment

CPUC/CEC GHG Phase 2 baseline track. CARB inventory track. Cogeneration workshop 7/27/07

Fuel emission factors CPUC/CEC GHG Phase 2 baseline track. CARB inventory 8/13 workshop.

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Regional PoliciesRegional Policy Agency Process

Regional / Multi-State GHG Cap

Western Regional Climate Action Initiative 2/07. Regional cap & trade proposal 8/08. West Coast Governor's GWI, named actions. RGGI. Federal legislation.

State-by-state GHG policy

CPUC/CEC cooperation with agencies in other states on GHG actions, including OR, WA, NV, NM, AZ, UT, BC

State-by-state RPS Western Governors' Association Clean and Diversified Energy Initiative. CDEAC working groups.

Long-distance Transmission

CAISO WECC long-distance RPS transmission working group. BC-CA transmission project. WGA CDEAC working group.

Regional emissions reporting

CEC dialogue w/ OR-WA energy departments. WRCAI multi-sector registry.

Regional generation tracking

WREGIS online in WECC 6/25/07.

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Data InputsData Input Agency Process

Existing WECC loads, resources, transmission

CAISO/WECC SSG-WI database. CEC 2007 IEPR Scenarios

Generation ownership by LSE

CPUC procurement docket. CEC SB1305 Filing. FERC Form 1 filing. CEC 2007 IEPR Scenarios

Long-term contracts by LSE

CPUC procurement docket. CEC SB1305 Filing. FERC Form 1 filing. CEC 2007 IEPR Scenarios

Load forecasts by LSE, WECC region

CEC electricity office forecast. CEC 2007 IEPR Scenarios

Resource plan by LSE, WECC region

CPUC procurement docket. CEC 2007 IEPR Scenarios

Fuel price & hydro forecast

CEC fuel price forecast. CPUC MPR proceeding. CEC 2007 IEPR Scenarios

New resource technology costs

CPUC RPS and procurement dockets. CEC generation cost study. CEC 2007 IEPR Scenarios

Transmission costs CAISO/CPUC/CEC transmission corridor planning. CRETI. CAISO/WECC trans study. CEC 2007 IEPR Scenarios

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Questions? Next Steps

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Upcoming Key Dates (Tentative) September 21st

Kick-off Meeting for GHG Modeling October 24th

Public release of data and methodology summaries on E3 website November 2nd

Public release of initial model and summary of results on E3 website

November 14th

CPUC workshop on initial model data, method, and results November 30th, Mid-December

Post-workshop Comments and Reply Comments complete

http://www.ethree.comInformation and Results