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									        Request for Offers for
       Natural Gas Physical and
          Financial Products

                         RFO Instructions

                                       April 7, 2006



Southern California Edison                             Page 1
RFO for Natural Gas Physical and Financial Product
April 7, 2006
                                                        TABLE OF CONTENTS
A.      INTRODUCTION ..................................................................................................................... 4
B.      GAS RFO SOLICITATION AND OFFER SUBMITTAL PROCESS ....................................... 5
            B.1. SCE AND DWR RESPONSIBILITIES ......................................................................... 5
            B.2. RFO SCHEDULE......................................................................................................... 5
            B.3. GAS RFO NOTICE OF INTENT TO OFFER .............................................................. 6
            B.4. OFFER SUBMISSION PROCESS .............................................................................. 6
            B.5. RESERVATION OF RIGHTS ...................................................................................... 7
C.      PRODUCTS SOLICITED FOR SCE ....................................................................................... 8
            C.1. PRODUCT DETAILS ................................................................................................... 8
            C.2. PHYSICAL GAS DELIVERY POINTS ......................................................................... 9
            C.3. GAS QUALITY........................................................................................................... 10
            C.4. INFRASTRUCTURE PROJECTS ............................................................................. 10
            C.5. ENABLING AGREEMENT REQUIREMENTS FOR PHYSICAL OFFERS ............... 10
            C.6. ENABLING AGREEMENT REQUIREMENTS FOR FINANCIAL OFFERS .............. 11
            C.7. CREDIT TERMS........................................................................................................ 12
            C.8. SCE INDICATIVE OFFER SUBMITTAL PACKAGE ................................................. 12
            C.9. SCE FINAL OFFER SUBMITTAL PACKAGE ........................................................... 14
D.      PRODUCTS SOLICITED FOR DWR .................................................................................... 15
            D.1. PRODUCT DETAILS ................................................................................................. 15
            D.2. INFRASTRUCTURE PROJECTS AND VALUATION ............................................... 16
            D.3. ENABLING AGREEMENT REQUIREMENTS FOR FINANCIAL OFFERS .............. 16
            D.4. CREDIT TERMS........................................................................................................ 17
            D.5. DWR INDICATIVE OFFER SUBMITTAL PACKAGE ................................................ 18
            D.6. DWR FINAL OFFER SUBMITTAL PACKAGE .......................................................... 19
E.      GAS RFO CONTACT INFORMATION ................................................................................. 20
Appendix A ................................................................................................................................... 21




Southern California Edison                                                                                                                          Page 2
RFO for Natural Gas Physical and Financial Product
April 7, 2006
                                                 APPENDICES

SCE and DWR Common Appendices:
Appendix A:       Definitions
Appendix B:       Notice of Intent to Offer


SCE Specific Appendices:
Appendix SCE-1:            Gas RFO Confidentiality Agreement
Appendix SCE-2:            SCE Indicative Offer Cover Letter
                                     Attachment 1: Respondent Information
                                     Attachment 2: SCE Offer Submittal Spreadsheet
                                     Attachment 3: Infrastructure Project Information
Appendix SCE-3:            SCE NAESB Elections and Special Provisions
Appendix SCE-4:            SCE Elections and Special Provisions to NAESB Credit Support Addendum (including
                           form of Letter of Credit)
Appendix SCE-5:            SCE ISDA Schedule Elections
Appendix SCE-6:            SCE, paragraph 13 Elections to the ISDA CSA (including form of Letter of Credit)
Appendix SCE-7:            SCE Fixed Price Physical Gas Confirmation
Appendix SCE-8:            SCE Indexed Price Physical Gas Confirmation
Appendix SCE-9:            SCE Fixed/Floating Swap Confirmation
Appendix SCE-10:           SCE Call Option Confirmation
Appendix SCE-11:           SCE Call Spread Confirmation
Appendix SCE-12:           SCE Final Offer Cover Letter


DWR Specific Appendices:
Appendix DWR-1:            Gas RFO Confidentiality Agreement
Appendix DWR-2:            DWR Indicative Offer Cover Letter
                                     Attachment 1: Respondent Information
                                     Attachment 2: DWR Offer Submittal Spreadsheet
                                     Attachment 3: Infrastructure Project Information
Appendix DWR-3:            Standard DWR Terms and Conditions for ISDA Agreements
Appendix DWR-4:            DWR Final Offer Cover Letter




Southern California Edison                                                                                    Page 3
RFO for Natural Gas Physical and Financial Product
April 7, 2006
A.       INTRODUCTION

         This is a Request For Offers (“RFO”) by Southern California Edison Company (“SCE”)
         and the California Department of Water Resources (“DWR”), for whom SCE serves as a
         limited agent.
         SCE is seeking Offers for physical natural gas and for financial natural gas hedging
         products in order to manage the risks faced by SCE arising from the operation of SCE-
         owned natural gas fired power plants, SCE tolling agreements, and from that portion of
         SCE’s qualifying facility portfolio where the power purchase price is dependent upon the
         price of natural gas.
         DWR is seeking Offers for financial natural gas hedging products in order to hedge the
         risk associated with DWR tolling contracts allocated to SCE.
         These products requested by SCE and DWR are summarized in Section C and Section
         D of these RFO Instructions.
         As specified in Section C.4. and Section D.2. herein, SCE and DWR have a preference
         for Offers that enhance the natural gas supply infrastructure.
         These RFO Instructions describe the products solicited by SCE and DWR, and the RFO
         process and timeline, including the documents and information that will be required for
         the submittal of Offers.
         This RFO is not a binding offer by SCE or DWR to purchase natural gas or any other
         product.
         SCE and DWR will not entertain Offers from any affiliate of SCE for this RFO.
         Capitalized terms used in this RFO that are not otherwise defined herein are used with
         the meanings ascribed to them in Appendix A.




Southern California Edison                                                                  Page 4
RFO for Natural Gas Physical and Financial Product
April 7, 2006
B.       GAS RFO SOLICITATION AND OFFER SUBMITTAL PROCESS

     B.1. SCE AND DWR RESPONSIBILITIES
         Although this is a single RFO, SCE and DWR will be shortlisting, negotiating and
         accepting Offers separately. Respondents must submit Offers separately to SCE and to
         DWR in accordance with the instructions herein. Respondents should note that SCE will
         be assisting DWR in its evaluation of the Offers it receives pursuant to this RFO, and
         SCE will review and evaluate DWR’s Offers on DWR’s behalf. Furthermore, SCE may
         disclose to DWR, in order to provide DWR with assistance in evaluating DWR’s Offers,
         certain components of the Offers SCE receives and its analysis of those Offers. DWR
         and SCE can exchange information related to their respective Offers in accordance with
         the terms of the confidentiality provisions contained in the Operating Order between
         SCE and DWR approved by the California Public Utilities Commission in Decision 02-12-
         069 on December 19, 2002.




     B.2. RFO SCHEDULE



                                                Gas RFO Timeline

 April 7, 2006                     Gas RFO documentation will be posted on http://www.sce.com/GASRFO

 April 14, 2006 at 5:00 PM PPT     Notice of Intent to Offer is due.

 April 18, 2006 at 10:00 AM –      Bidder’s Conference Call. Call-in number is (866) 858-1283.
 11:00 AM PPT

 April 21, 2006                    Strike prices for Indicative Offers for financial products will be posted on SCE’s
                                   Gas RFO website.

 April 28, 2006 at 5:00 PM PPT     Respondent’s complete Indicative Offer Submittal Package to SCE is due and
                                   complete Indicative Offer Submittal Package to DWR is due.

 May 12, 2006                      SCE and DWR will notify Respondents whether or not they are included in SCE’s
                                   or DWR’s shortlist.

 June 30, 2006 at 5:00 PM PPT      Applicable and mutually agreed Confirmations with the exception of the Final
                                   Offer prices are due (“Lockdown Date”).

 July 12, 2006 at 5:00 PM PPT      Applicable, mutually agreed and executed Enabling Agreements are due.

 July 14, 2006 at 12:00 PM         SCE and DWR will notify Shortlisted Respondents if their Confirmations and
 PPT                               Enabling Agreements are acceptable and they are therefore eligible to supply final
                                   pricing for this RFO.
                                   Eligible Respondents will be sent SCE Offer Submittal Spreadsheet or DWR Offer
                                   Submittal Spreadsheet including final strike prices. This form must be used for
                                   final offers.



Southern California Edison                                                                                        Page 5
RFO for Natural Gas Physical and Financial Product
April 7, 2006
 July 17, 2006 at 12:00 PM         Respondent’s complete Final Offer Submittal Package to SCE is due and
 PPT                               complete Final Offer Submittal Package to DWR is due. Respondent shall (1)
                                   email an executed PDF or scanned signed Final Offer Cover Letter, (2) a PDF or
                                   scanned and Excel version of SCE Offer Submittal Spreadsheet or DWR Offer
                                   Submittal Spreadsheet with final pricing, and (3) PDF or scanned applicable
                                   mutually agreed Confirmations and Enabling Agreements.

 July 18, 2006 prior to 11:00      Award notifications via recorded phone call to Respondent’s representative
 AM PPT                            indicated in the applicable Final Offer Submittal Spreadsheet (“Award Date”).



    B.3. GAS RFO NOTICE OF INTENT TO OFFER
         Respondent must provide a non-binding Notice of Intent to Offer by emailing the form
         shown in Appendix B by the date shown in Section B.2. to GasRFO@sce.com.


    B.4. OFFER SUBMISSION PROCESS
         Respondents must provide a complete Indicative Offer Submittal Package as described
         in C.8. for SCE Offers and Section D.5. for DWR Offers. Indicative Offer prices are non-
         binding. All Respondents must use the applicable Offer Submittal Spreadsheet to
         submit both their Indicative and Final Offers. SCE offers must use the SCE Offer
         Submittal Spreadsheet and DWR Offers must use the DWR Offer Submittal
         Spreadsheet. SCE and DWR reserve the right to reject any or all Offers from a
         Respondent if the Respondent has changed or tampered with any protected area within
         the applicable Offer Submittal Spread Sheet. Respondents can only modify the light blue
         highlighted sections of these spread sheets. Pull down menus are used where possible
         to aid the bidding process.
         Two weeks after receipt of Indicative Offer Submittal Packages, SCE and DWR will
         notify Respondents if they are included on SCE’s or DWR’s shortlist, at which time SCE
         or DWR will continue to negotiate Enabling Agreements and Confirmations with those
         Shortlisted Respondents.
         Approximately two weeks before Final Offers are due, all terms and conditions of the
         Offer as described in the Confirmations must be finalized with the exception of the Final
         Offer price. No additional changes to the Confirmation will be accepted after the
         Lockdown Date.
         Two months after Shortlist notification, an applicable mutually agreed Enabling
         Agreement must be executed and delivered to SCE. Two days after the Enabling
         Agreement due date, SCE and DWR will notify Shortlisted Respondents of their eligibility
         to submit a Final Offer. At this time SCE will email a unique SCE Final Offer Submittal
         Spreadsheet to each eligible Respondent. The unique SCE Final Offer Submittal
         Spreadsheet will contain only the products for which the Respondent is eligible. For the
         eligible Respondents, the unique SCE Final Offer Submittal Spreadsheets will contain
         strike price data for call options and call spreads. The Final Offers must be received by
         the date shown in Section B.2. In order for Final Offers to SCE or DWR to be eligible for
         award, Respondents must deliver all requisite documents in the appropriate formats to
         SCE before 12:00 PM PPT the day before the Award Date. The requisite documents and
         formats are described for SCE in Sections C.5. through C.6. and for DWR in Section
         D.3.



Southern California Edison                                                                                     Page 6
RFO for Natural Gas Physical and Financial Product
April 7, 2006
         Binding Final Offer prices must remain open until 11:00am PPT on the Award Date.
         SCE and DWR will award contracts to successful Respondents via a recorded telephone
         call prior to 11:00am PPT.
         The terms, conditions, and representations in the Indicative Offer Submittal Package
         attached as Appendix SCE-2 and applicable Confirmations will serve as a basis for a
         potential future agreement between SCE and/or DWR and Respondent and are not
         intended to and do not constitute a binding agreement of, or establish any obligation of,
         SCE or Respondent. Respondent must state on the Offer Submittal Spreadsheet all
         Offer limitations and constraints including limitations on total award quantity and note to
         which specific Offers Respondent’s limitations apply.
         Respondents should note that SCE and DWR expect that Respondent, in submitting its
         Offers, will be able to make certain representations, warranties, and covenants to SCE
         or to DWR; therefore, Respondents should read the contents of the Indicative Offer
         Cover Letter as applicable prior to preparing any of its Offers. It is expected that
         Respondent will not engage in any communications with any other actual or potential
         participant in the RFO concerning either the RFO process, price terms in Respondent’s
         Offer or related matters, and Respondent has not engaged in collusion or any other
         unlawful or unfair business practices in connection with the RFO.


    B.5. RESERVATION OF RIGHTS
         SCE and DWR reserve the right at any time, in their sole discretion, to abandon this
         solicitation process, to change any dates specified in this RFO, to change the basis for
         evaluation of Offers, to terminate further participation in this process by any party, to
         accept any Offer or to enter into any definitive agreement, to evaluate the qualifications
         of any Respondent or the terms and conditions of any Offer, to reject any or all
         proposals or Offers, to change any form used in this RFO at any time during the RFO
         process, or waive any irregularities, all without notice and without assigning any reasons
         and without liability of Edison International, SCE, DWR or any of their respective
         subsidiaries, affiliates or representatives to any Respondent. SCE and DWR shall have
         no obligation to consider any Offer submitted. SCE and DWR will not reimburse any
         Respondent for its expenses under any circumstances, regardless of whether the
         bidding process proceeds to a successful conclusion or is abandoned. SCE and DWR
         shall not be deemed to have accepted any Offer, and shall not be bound by any term
         thereof, unless and until it signs applicable Confirmations and, if appropriate, any related
         Enabling Agreement with the Respondent.




Southern California Edison                                                                      Page 7
RFO for Natural Gas Physical and Financial Product
April 7, 2006
C.       PRODUCTS SOLICITED FOR SCE

     C.1. PRODUCT DETAILS
         In this RFO, SCE will not consider Offers for products other than those specifically set
         forth on this list. The maximum total award per Respondent under this RFO for SCE is
         limited to 60,000 MMBtu/day of physical products and 60,000 MMBtu/day of financial
         products. All physical or financial product Offers must quote fixed and/or indexed prices
         in dollars per MMBtu.


         Physical Products
         SCE is seeking Firm fixed and Firm indexed physical products delivered to the
         SoCalGas system with contract durations of one year, two years, three years, four years,
         or 59 months. (SCE is limited by its CPUC-approved Procurement Plan to contract
         durations of less than 5 years without explicit CPUC pre-approval). The earliest start
         date is November 1, 2006. All contracts must start on November 1 of the offered year
         and no contract shall extend beyond October 31, 2013. Offers can be submitted in any
         of these quantities: 10,000, 20,000, 30,000, 40,000, 50,000 or 60,000 MMBtu/day.
         Physical products are summarized in the following table.

   PHYSICAL                                                         CONTRACT TERM
 TRANSACTION         OFFER QUANTITY
    TYPES                                       Start Date     Latest End Date                  Durations

                                            November 1, 2006   September 30, 2011   12, 24, 36, 48 or 59 months
                                            November 1, 2007   September 30, 2012   12, 24, 36, 48 or 59 months
                         10,000, 20,000,    November 1, 2008   September 30, 2013   12, 24, 36, 48 or 59 months
                         30,000, 40,000,
 Fixed Price                                November 1, 2009    October 31, 2013    12, 24, 36, or 48 months
                        50,000 or 60,000
                           MMBtu/day        November 1, 2010    October 31, 2013    12, 24, or 36 months
                                            November 1, 2011    October 31, 2013    12 or 24 months
                                            November 1, 2012    October 31, 2013    12 months
                                            November 1, 2006   September 30, 2011   12, 24, 36, 48 or 59 months
                                            November 1, 2007   September 30, 2012   12, 24, 36, 48 or 59 months
                         10,000, 20,000,    November 1, 2008   September 30, 2013   12, 24, 36, 48 or 59 months
                         30,000, 40,000,
 Indexed Price                              November 1, 2009    October 31, 2013    12, 24, 36, or 48 months
                        50,000 or 60,000
                           MMBtu/day        November 1, 2010    October 31, 2013    12, 24, or 36 months
                                            November 1, 2011    October 31, 2013    12 or 24 months
                                            November 1, 2012    October 31, 2013    12 months



         Financial Products
         For financial products, SCE is seeking Offers for fixed/floating price swaps, call options,
         and call spreads. The Gas Index is the only index that can be used for settlement of
         financial Offers. Requested contract durations are one year, two years, three years, four
         years, or 59 months. (SCE is limited by its CPUC-approved Procurement Plan to
         contract durations of less than 5 years without explicit CPUC pre-approval.) The earliest
         start date is November 1, 2006. All contracts must start on November 1 of the year
         offered and no contract shall extend beyond October 31, 2013. Offers can be submitted
         in any of these quantities: 10,000, 20,000, 30,000, 40,000, 50,000 or 60,000 MMBtu/day.


Southern California Edison                                                                                     Page 8
RFO for Natural Gas Physical and Financial Product
April 7, 2006
         SCE will only consider Offers for call options and call spreads at strike prices specified
         by SCE. For consideration in Indicative Offers, monthly strike prices will be provided on
         www.sce.com/GasRFO on the date indicated in Section B.2. For Final Offers, monthly
         strike prices will be provided to Respondents upon notification of eligibility to submit
         Final Offer pricing on the date indicated in Section B.2.
         For financial products, SCE is seeking products as summarized in the following table.


  FINANCIAL                                                            CONTRACT TERM
                           OFFER
 TRANSACTION
                         QUANTITIES               Start Date      Latest End Date                     Durations
    TYPES
                                               November 1, 2006   September 30, 2011      12, 24, 36, 48 or 59 months
                                               November 1, 2007   September 30, 2012      12, 24, 36, 48 or 59 months
                          10,000, 20,000,      November 1, 2008   September 30, 2013      12, 24, 36, 48 or 59 months
 Fixed/Floating
                      30,000, 40,000, 50,000   November 1, 2009    October 31, 2013       12, 24, 36, or 48 months
 Price Swaps
                       or 60,000 MMBtu/day
                                               November 1, 2010    October 31, 2013       12, 24, or 36 months
                                               November 1, 2011    October 31, 2013       12 or 24 months
                                               November 1, 2012    October 31, 2013       12 months
                                               November 1, 2006   September 30, 2011      12, 24, 36, 48 or 59 months
                                               November 1, 2007   September 30, 2012      12, 24, 36, 48 or 59 months
                          10,000, 20,000,      November 1, 2008   September 30, 2013      12, 24, 36, 48 or 59 months
 Call Options         30,000, 40,000, 50,000   November 1, 2009    October 31, 2013       12, 24, 36, or 48 months
                       or 60,000 MMBtu/day     November 1, 2010    October 31, 2013       12, 24, or 36 months
                                               November 1, 2011    October 31, 2013       12 or 24 months
                                               November 1, 2012    October 31, 2013       12 months
                                               November 1, 2006   September 30, 2011      12, 24, 36, 48 or 59 months
                                               November 1, 2007   September 30, 2012      12, 24, 36, 48 or 59 months
                          10,000, 20,000,      November 1, 2008   September 30, 2013      12, 24, 36, 48 or 59 months
 Call Spreads         30,000, 40,000, 50,000   November 1, 2009    October 31, 2013       12, 24, 36, or 48 months
                       or 60,000 MMBtu/day     November 1, 2010    October 31, 2013       12, 24, or 36 months
                                               November 1, 2011    October 31, 2013       12 or 24 months
                                               November 1, 2012    October 31, 2013       12 months



    C.2. PHYSICAL GAS DELIVERY POINTS
         All physical gas must be delivered into the following interconnection points on the
         SoCalGas system (see applicable Confirmations for further details):

                                     INTERCONNECTION                                   RECEIPT POINT
                                 El Paso Natural Gas Company                          South Needles/Topock
                                 El Paso Natural Gas Company                               Ehrenberg
                                Transwestern Pipeline Company                            North Needles
                                Transwestern Pipeline Company                                Topock
                                      Kern Mojave Pipeline                               Wheeler Ridge
                                      Kern Mojave Pipeline                              Kramer Junction
                          Questar Pipeline Company – Southern Trails                     North Needles




Southern California Edison                                                                                           Page 9
RFO for Natural Gas Physical and Financial Product
April 7, 2006
                                 Kern River Pipeline Company                Kramer Junction
                                 Kern River Pipeline Company                Wheeler Ridge
                         Pacific Gas & Electric Company Transmission       Kern River Station
                                   Mojave Pipeline Company                   Hector Road
                            Occidental Petroleum Company/Elk Hills      Wheeler Ridge/Gosford
                                      California Production                     Line 85
                                      California Production                  North Coastal
                                      California Production                      Other



    C.3. GAS QUALITY
         Any delivered physical gas shall meet the pressure, quality and heat content
         requirements of the applicable transporter.


    C.4. INFRASTRUCTURE PROJECTS
         SCE encourages Offers that support the development of Infrastructure Projects as
         defined in Appendix A. During SCE’s evaluation of the Offers, SCE may, at its sole
         discretion, assign a benefit to an Offer that supports the development of an Infrastructure
         Project. Examples of Infrastructure Projects are LNG projects, new pipeline projects,
         new stranded gas recovery projects, incremental increases in capacity of existing
         projects, etc.
         Respondents must note any Offer that is sourced from an Infrastructure Project in
         Attachments 2 and 3 to the Indicative Offer Cover Letter. For all Infrastructure Projects,
         Respondents must provide the following information:
                     Description of the Infrastructure Project including capacity, location, proposed
                      gas interconnection point;
                     Proposed timeline;
                     Status of environmental permits and construction applications;
                     Expected natural gas quality specifications;
                     Proposed contractual assurances that the Offer will be sourced from the
                      Infrastructure Project;
                     Financing plan for project; and
                     Other proposed terms and conditions.


    C.5. ENABLING AGREEMENT REQUIREMENTS FOR PHYSICAL OFFERS
         A mutually agreed and executed NAESB Gas Contract or Gas Annex to the EEI Master
         Power Agreement with its corresponding collateral or credit support annex is one of the
         requirements to be allowed to submit final pricing for physical products.
         If Respondent and SCE are not already parties to a NAESB Gas Contract or Gas Annex
         to the EEI Master Power Agreement, Respondent must submit as part of its Indicative


Southern California Edison                                                                      Page 10
RFO for Natural Gas Physical and Financial Product
April 7, 2006
         Offer Submittal Package an electronic redlined copy of all applicable Enabling
         Agreements. See SCE’s RFO website or contact the Gas RFO Project Manager for
         copies of our current standard Enabling Agreements. See Section B.2. for schedule
         details.
         If Respondent has an executed NAESB Gas Contract with SCE, then for the purposes of
         a long-term transaction under this RFO, the SCE NAESB Elections and Special
         Provisions in Appendix SCE-3 and the SCE Special Provisions to the NAESB Credit
         Support Addendum in Appendix SCE-4 will apply, and the parties must amend their
         existing NAESB Gas Contract.
         If Respondent has an executed EEI Master Power Purchase and Sale Agreement with
         SCE, and would like to execute a Gas Annex for physical Offers under this RFO, please
         contact the Gas RFO Project Manager (see Section E) to determine if Respondent can
         meet the credit requirements to use a Gas Annex.
         If Respondent has an executed EEI Gas Annex with SCE, no additional Enabling
         Agreements are required for physical Offers.

                          SCE Physical Enabling Agreement Documents
                                Required       Required
                                  for             for
                                                           Notes/Instructions:
                                Physical       Financial
                                 Offers         Offers

 1. SCE Standard NAESB
 including Cover sheet and                                 Mutually acceptable executed NAESB Gas Contract.
 Special Provisions


 2. NAESB Credit Support                                   Mutually acceptable executed SCE NAESB Gas
 Addendum                                                  Contract Credit Support Addendum.

                                                           Mutually acceptable and executed Guaranty, if
 3. Guaranty
                                                           applicable.



    C.6. ENABLING AGREEMENT REQUIREMENTS FOR FINANCIAL OFFERS
         A mutually agreed and executed ISDA Master Agreement is one of the requirements to
         be allowed to submit final pricing for financial products.
         If Respondent and SCE are not already parties to an ISDA Master Agreement,
         Respondent must submit as part of its Indicative Offer Submittal Package an electronic
         redlined copy of all applicable Enabling Agreements. See SCE’s RFO website or
         contact the Gas RFO Project Manager for copies of SCE’s current standard Enabling
         Agreements.




Southern California Edison                                                                                 Page 11
RFO for Natural Gas Physical and Financial Product
April 7, 2006
                          SCE Financial Enabling Agreement Documents
                                Required       Required
                                  for             for
                                                           Notes/Instructions:
                                Physical       Financial
                                 Offers         Offers

 1. ISDA, Schedule to the                                  Mutually acceptable executed ISDA Master
 2002 Master Agreement                                     Agreement and ISDA Schedule.



 2. ISDA, Paragraph 13 to                                  Mutually acceptable executed Paragraph 13 to the
 the CSA                                                   ISDA CSA


                                                           Mutually acceptable and executed Guaranty, if
 3. Guaranty
                                                           applicable.



    C.7. CREDIT TERMS
         Respondents must meet SCE’s standard credit requirements. SCE requires that
         Respondents must post collateral (either cash or a letter of credit) for SCE’s exposure
         above an unsecured line, if any. Only investment grade rated Respondents are eligible
         for an unsecured line. Alternatively, a Respondent may be eligible for an unsecured line
         by providing a guaranty from an investment grade rated corporate parent. Respondents
         which are not rated or rated below investment grade must post collateral for all of SCE’s
         exposure in addition to an independent amount. Respondents should note that, in
         SCE’s evaluation of Offers pursuant to this RFO, SCE reserves the right to disqualify
         those Respondents that are unwilling or unable to meet these credit requirements.
         SCE is a California load-serving utility with investment grade Credit Ratings and
         substantial tangible net worth. Unlike most other energy market participants, SCE
         operates under a state legislative structure designed to minimize the negative impact
         that energy market uncertainty may have on a utility's creditworthiness. Accordingly,
         SCE believes that Respondent will have a lower risk to SCE relative to the risk that SCE
         will have to Respondent. SCE therefore believes it should not be required to provide
         collateral and encourages potential Respondents to submit Offers that conform to this
         strong preference. Respondents should note that, in SCE's evaluation of Offers
         submitted pursuant to this RFO, SCE will significantly devalue Offers requiring SCE to
         post collateral in order to reflect the potential negative impact on SCE's liquidity and to
         recognize the relative value of bids from Respondents who do not require collateral from
         SCE.


    C.8. SCE INDICATIVE OFFER SUBMITTAL PACKAGE
         SCE will only consider Indicative Offers that contain each of the applicable items
         specified in the chart below. Refer to Section B.2 for required due dates.




Southern California Edison                                                                                 Page 12
RFO for Natural Gas Physical and Financial Product
April 7, 2006
                               SCE Indicative Offer Submittal Package
                                Required       Required
                                  for             for
                                                           Notes/Instructions:
                                Physical       Financial
                                 Offers         Offers

 1. Gas RFO
                                                           Must be executed and submitted in PDF format.
 Confidentiality Agreement

 2. SCE Indicative Offer
                                                           Must be executed and submitted in PDF format.
 Cover Letter
 3. SCE Indicative Offer
                                                           Must be completed and submitted in PDF or WORD
 Cover Letter Attachment 1
                                                           format.
 - Respondent Information
 4. SCE Indicative Offer
 Cover Letter Attachment 2
                                                           Must be completed and submitted in Excel format.
 - SCE Offer Submittal
 Spreadsheet
 5. SCE Indicative Offer
 Cover Letter Attachment 3                                 Must be completed and submitted in PDF or WORD
 – Infrastructure Project                                  format.
 Information
                                                           If a NAESB Gas Contract has previously been
                                                           executed and is in effect, then the parties must
 6. SCE Standard NAESB                                     amend the existing NAESB Gas Contract to include
 including Special                                         these special provisions.
 Provisions                                                For all offers utilizing a NAESB Gas Contract
                                                           comments must be supplied and submitted in
                                                           redlined WORD format.
                                                           If a NAESB Gas Contract has previously been
                                                           executed and is in effect, then the parties must
 7. SCE NAESB Credit
                                                           amend the existing NAESB Gas Contract to include
 Support Addendum
                                                           this Credit Support Addendum.
 including Special
                                                           For all offers utilizing a NAESB Gas Contract
 Provisions
                                                           comments must be supplied and submitted in
                                                           redlined WORD format.

 8. SCE ISDA Schedule to                                   If Respondent and SCE are not parties to an ISDA
 the 2002 Master                                           Enabling Agreement, comments must be supplied
 Agreement                                                 and submitted in redlined WORD format.


                                                           If Respondent and SCE are not parties to an ISDA
 9. SCE Paragraph 13 to
                                                           Enabling Agreement, comments must be supplied
 the ISDA CSA
                                                           and submitted in redlined WORD format.

 10. Applicable SCE
 Physical Gas                                              Must be submitted in redlined WORD format.
 Confirmations
 11. Applicable SCE
 Financial Gas                                             Must be submitted in redlined WORD format
 Confirmation




Southern California Edison                                                                                 Page 13
RFO for Natural Gas Physical and Financial Product
April 7, 2006
         Due to the expected size and number of responses, faxed offers will not be accepted.
         SCE will not consider Offers received after the submittal deadline.


    C.9. SCE FINAL OFFER SUBMITTAL PACKAGE
         If a Respondent is shortlisted and eligible to submit a Final Offer, Respondent must
         provide to SCE the following required documents in the format requested, for
         consideration of its Final Offer. Refer to Section B.2. for required due dates.

                                  SCE Final Offer Submittal Package
                                Required       Required
                                  for             for
                                                           Notes/Instructions:
                                Physical       Financial
                                 Offers         Offers
                                                           Executed with PDF or scanned copy of Final Offer
                                                           Cover Letter and PDF or scanned copy of Offer
 1. SCE Final Offer Cover
                                                           Submittal Spreadsheets containing Final Offer price.
 Letter
                                                           [Enabling Agreements and Confirmations to be
                                                           attached]

 2. SCE Offer Submittal                                    Must be completed and submitted with Final Offer
 Spreadsheet                                               Submittal Package with final pricing.


 3. Applicable SCE                                         Mutually acceptable confirmation must be submitted
 Physical Gas                                              with Final Offer Submittal Package without final
 Confirmations                                             pricing.
 4. Applicable SCE                                         Mutually acceptable confirmation must be submitted
 Financial Gas                                             with Final Offer Submittal Package without final
 Confirmation                                              pricing.



         Due to the expected size and number of responses, faxed Offers will not be accepted.
         SCE will not consider Offers received after the submittal deadline.




Southern California Edison                                                                                    Page 14
RFO for Natural Gas Physical and Financial Product
April 7, 2006
D.       PRODUCTS SOLICITED FOR DWR

     D.1. PRODUCT DETAILS
         DWR will only consider financial products in this Gas RFO. In this RFO, DWR will not
         consider Offers for products other than those specifically set forth on this list. All
         financial product Offers must quote in dollars per MMBtu. The maximum total financial
         award under this RFO for DWR is limited to 60,000 MMBtu/day per Respondent.


         Financial Products
         DWR is seeking Offers for fixed/floating price swaps, call options, and call spreads. The
         Gas Index is the only index that can be used for financial Offers. Requested contract
         durations are noted in the table below. All contracts must start on November 1 and no
         contract shall extend beyond September 30, 2011. Contract quantities are limited to
         10,000, 20,000, 30,000, 40,000, 50,000 or 60,000 MMBtu/day.
         DWR will only consider Offers for call options and call spreads at specific strike prices.
         For consideration in Indicative Offers, monthly strike prices will be provided on
         www.sce.com/GasRFO on the date indicated in Section B.2. For Final Offers, monthly
         strike prices will be provided to Respondents upon notification of eligibility to submit
         Final Offer pricing on the date indicated in Section B.2.
         DWR is seeking financial products as summarized in the following table.


  FINANCIAL                                                         CONTRACT TERM
                           OFFER
 TRANSACTION                                  Earliest Start
                         QUANTITIES                            Latest End Date                  Durations
    TYPES                                         Date
                                            November 1, 2006   September 30, 2011   12, 24, 36, 48 or 59 months
                         10,000, 20,000,    November 1, 2007   September 30, 2011   12, 24, 36, or 47 months
                         30,000, 40,000,
 Call Options                               November 1, 2008   September 30, 2011   12, 24, or 35 months
                        50,000 or 60,000
                           MMBtu/day        November 1, 2009   September 30, 2011   12 or 23 months
                                            November 1, 2010   September 30, 2011   11 months
                                            November 1, 2006   September 30, 2011   12, 24, 36, 48 or 59 months
                         10,000, 20,000,    November 1, 2007   September 30, 2011   12, 24, 36, or 47 months
 Fixed/Floating          30,000, 40,000,
 Price Swaps            50,000 or 60,000    November 1, 2008   September 30, 2011   12, 24, or 35 months
                           MMBtu/day        November 1, 2009   September 30, 2011   12 or 23 months
                                            November 1, 2010   September 30, 2011   11 months
                                            November 1, 2006   September 30, 2011   12, 24, 36, 48 or 59 months
                         10,000, 20,000,    November 1, 2007   September 30, 2011   12, 24, 36, or 47 months
                         30,000, 40,000,
 Call Spreads                               November 1, 2008   September 30, 2011   12, 24, or 35 months
                        50,000 or 60,000
                           MMBtu/day        November 1, 2009   September 30, 2011   12 or 23 months
                                            November 1, 2010   September 30, 2011   11 months




Southern California Edison                                                                                     Page 15
RFO for Natural Gas Physical and Financial Product
April 7, 2006
    D.2. INFRASTRUCTURE PROJECTS
         DWR encourages Offers that support the development of Infrastructure Projects as
         defined in Appendix A. During DWR’s evaluation of the Offers, DWR may, at its sole
         discretion, assign a benefit to an Offer that supports the development of an Infrastructure
         Project. Examples of Infrastructure Projects are LNG projects, new pipeline projects,
         new stranded gas recovery projects, incremental increases in capacity of existing
         projects, etc.
         Respondents must note any Offer that is sourced from an Infrastructure Project in the
         Attachments 2 and 3 to the Indicative Offer Cover Letter. For all Infrastructure Projects,
         Respondents must provide the following information:
                     Description of the Infrastructure Project including capacity, location, proposed
                      gas interconnection point;
                     Proposed timeline;
                     Status of environmental permits and construction applications;
                     Expected natural gas quality specifications;
                     Proposed contractual assurances that the Offer will be sourced from the
                      Infrastructure Project;
                     Financing plan for project; and
                     Other proposed terms and conditions.


    D.3. ENABLING AGREEMENT REQUIREMENTS FOR FINANCIAL OFFERS
         A mutually agreed and executed ISDA Master Agreement is one of the requirements to
         be allowed to submit final pricing for financial products.
         If Respondent and DWR are not already parties to an ISDA Master Agreement,
         Respondent must submit as part of its Indicative Offer Submittal Package an electronic
         redlined copy of all applicable Enabling Agreements. See DWR’s RFO website or
         contact the DWR Gas RFO Contact noted in Section E of this RFO for copies of DWR’s
         current standard enabling agreements.
                          DWR Financial Enabling Agreement Documents
                                Required       Required
                                  for             for
                                                           Notes/Instructions:
                                Physical       Financial
                                 Offers         Offers

 1. ISDA, Schedule to the                                  Mutually acceptable executed ISDA Master
 1992 Master Agreement                                     Agreement and ISDA Schedule.



 2. Paragraph 13 to the                                    Mutually acceptable executed ISDA Paragraph 13 to
 ISDA CSA                                                  the CSA


                                                           Mutually acceptable and executed Guaranty, if
 3. Guaranty
                                                           applicable.




Southern California Edison                                                                                 Page 16
RFO for Natural Gas Physical and Financial Product
April 7, 2006
         If Respondent and DWR are not parties to an executed ISDA at the time of indicative
         Offer, Respondent must contact the DWR Gas RFO Contact noted in Section E of this
         RFO or go to http://www.cers.water.ca.gov/natural_gas.cfm.


    D.4. CREDIT TERMS
         For DWR’s Portfolio, Respondents will need to meet DWR’s standard credit
         requirements. Respondent’s senior unsecured credit rating must be investment grade, or
         Respondents must be willing to provide cash collateral, a letter of credit and/or a
         parental guarantee from an investment grade rated entity. Investment grade rated
         counterparties will be granted an unsecured line based on their credit rating.
         Alternatively, counterparties providing a parental guaranty from an investment grade
         rated entity will receive an unsecured line based on the parent’s credit rating and the
         amount of the parental guaranty. Non-rated Respondents must post collateral for all of
         DWR’s exposure. Respondents should note that, in DWR’s evaluation of Offers
         pursuant to this RFO, DWR reserves the right to disqualify those Respondents that are
         unwilling or unable to meet these credit requirements.
         DWR will be the counterparty to any transaction entered into as a result of Offers made
         to DWR through this RFO process. DWR administers the State of California Electric
         Power Fund (the “Fund”). The Fund was established and funded through a bond offering
         to the investment community and its costs and debt service are recoverable through
         rates charged to a portion of the State’s electric customers. DWR operates the Fund
         under a state legislative and regulatory structure with rate setting and cost recovery
         processes designed to minimize the negative impact from market volatility and
         uncertainty to the stability of the Fund and its ratepayers and bondholders. The Fund
         has investment grade credit ratings. Due to this stable structure, DWR believes the
         Respondent will have a lower risk to DWR, relative to the risk DWR will have to the
         Respondent. Thus, DWR does not believe it should be required to provide collateral and
         encourages potential Respondents to submit Offers that conform to this strong
         preference.
         Respondents should note that, in the evaluation of Offers submitted pursuant to this
         RFO, there will be a devaluation of Offers requiring DWR to post collateral in order to
         reflect the implied potential negative impact on DWR’s liquidity and to recognize the
         relative value of bids from Respondents who do not require collateral from DWR.




Southern California Edison                                                                   Page 17
RFO for Natural Gas Physical and Financial Product
April 7, 2006
    D.5. DWR INDICATIVE OFFER SUBMITTAL PACKAGE
         DWR will only consider Indicative Offers that contain each of the applicable items
         specified in the chart below. Refer to Section B.2. for required due dates.


                              DWR Indicative Offer Submittal Package
                                Required       Required
                                  for             for
                                                           Notes/Instructions:
                                Physical       Financial
                                 Offers         Offers

 1. Gas RFO
                                                           Must be executed and submitted in PDF format.
 Confidentiality Agreement

 2. DWR Indicative Offer
                                                           Must be executed and submitted in PDF format.
 Cover Letter
 3. DWR Indicative Offer
                                                           Must be completed and submitted in PDF or WORD
 Cover Letter Attachment 1
                                                           format.
 - Respondent Information
 4. DWR Indicative Offer
 Cover Letter Attachment 2
                                                           Must be completed and submitted in Excel format.
 - DWR Offer Submittal
 Spreadsheet
 5. DWR Indicative Offer
 Cover Letter Attachment 3                                 Must be completed and submitted in PDF or WORD
 – Infrastructure Project                                  format.
 Information

 6. DWR ISDA, Schedule                                     If Respondent and DWR are not parties to an ISDA
 to the 1992 Master                                        Enabling Agreement, comments must be supplied
 Agreement                                                 and submitted in redlined WORD format.

 7. Applicable DWR
 Financial Gas                                             Must be submitted in redlined WORD format
 Confirmation



         Due to the expected size and number of responses, faxed Offers will not be accepted.
         SCE and DWR will not be responsible for Offers received after the submittal deadline.




Southern California Edison                                                                                 Page 18
RFO for Natural Gas Physical and Financial Product
April 7, 2006
    D.6. DWR FINAL OFFER SUBMITTAL PACKAGE
         If a Respondent is shortlisted and eligible to submit a Final Offer, Respondent must
         provide to DWR the following required documents in the format requested, for
         consideration of its Final Offer. Refer to Section B.2. for required due dates.

                                 DWR Final Offer Submittal Package
                                Required       Required
                                  for             for
                                                           Notes/Instructions:
                                Physical       Financial
                                 Offers         Offers
                                                           Executed with PDF or scanned copy of Final Offer
 1. DWR Final Offer Cover
                                                           Cover Letter and PDF or scanned copy of Offer
 Letter
                                                           Submittal Spreadsheets containing Final Offer price.


 2. DWR Offer Submittal                                    Must be completed and submitted with Final Offer
 Spreadsheet                                               Submittal Package with final pricing.


                                                           Mutually acceptable confirmation must be submitted
 3. Applicable Financial
                                                           with Final Offer Submittal Package without final
 Gas Confirmations
                                                           pricing.



         Due to the expected size and number of responses, faxed Offers will not be accepted.
         SCE and DWR will not be responsible for Offers received after the submittal deadline.




Southern California Edison                                                                                    Page 19
RFO for Natural Gas Physical and Financial Product
April 7, 2006
E.       GAS RFO CONTACT INFORMATION
         Questions regarding this RFO or SCE’s Enabling Agreements and Confirmations must
         be submitted to:
                  Gas RFO Hotline            626 302-1729
                  Or,
                  GasRFO@sce.com


         SCE may, at its sole discretion, post frequently asked questions on its website
              http://www.sce.com/GASRFO.


         Offer submittal address is:
                  Project Manager, Gas RFO
                  Southern California Edison Company
                  G.O. 1, Quad 1-C
                  2244 Walnut Grove Avenue
                  Rosemead, California 91770
                  GasRFO@sce.com


         Questions regarding DWR Enabling Agreements and Confirmations must be submitted
         to:
                  George Baldini
                  baldini@water.ca.gov
                  Project Manager, Gas RFO
                  Department of Water Resources
                  http://www.cers.water.ca.gov/natural_gas.cfm




Southern California Edison                                                                 Page 20
RFO for Natural Gas Physical and Financial Product
April 7, 2006
Appendix A
                                                     Definitions


“Award Date” means: the date award notifications are made.
“Confirmation” means: the documents and other confirming evidence exchanged between parties which
sets forth the terms and conditions of a transaction entered into by the parties.
“CPUC” means: California Public Utility Commission.
“CSA” means: with respect to the ISDA, ISDA Credit Support Annex to the Schedule to the ISDA 2002
Master Agreement. With respect to the NAESB, “CSA” means the model Credit Support Addendum to
the NAESB Base Contract.
“DWR” means: California Department of Water Resources.
“EEI” means: Edison Electric Institute.
“Enabling Agreement” means: an ISDA Master Agreement, NAESB Gas Contract, or Gas Annex to the
EEI Master Agreement, together with their corresponding collateral or credit support annexes.
“Final Offer” means: consist of applicable confirmations, final pricing and other support documentation
submitted to SCE as a final Offer.
“Final Offer Submittal Package” means: the complete set of applicable documentation as detailed in
Section C.9 and Section D.6 of this RFO Instructions.

“Firm” means: that either party may interrupt its performance without liability only to the extent that such
performance is prevented for reasons of force majeure or uncontrollable force (as defined in the
applicable Enabling Agreement).
“Gas Annex to the EEI Master Power Agreement“ means: the terms and conditions that are added,
modify and made part of the EEI Master Power Purchase and Sale Agreement that enable the parties to
transact for the purchase and sale of physical natural gas under the terms of the EEI Master Power
Purchase and Sale Agreement.
“Gas Index” means: the monthly index from the NGI's Bidweek Survey for the applicable month in the
table for Gas Traded for Baseload Delivery under sub-table for “California” under the listing for “Southern
California Border Average” under the listing for “Avg.”
 “Indicative Offer” means: all applicable documentation indicated in Indicative Offer Submittal Package
section of this RFO submitted to SCE or DWR, as the case may be, as an indicative Offer.
“Indicative Offer Submittal Package” means: the complete set of applicable documentation as detailed
in Section C.8 and Section D.5 of this RFO Instructions.
“Infrastructure Projects” mean: New Projects that increase the gas capacity delivered into the Southern
California region.
“ISDA” means: International Swaps and Derivatives Association, Inc.
“ISDA Master Agreement” means: with respect to SCE, the 2002 ISDA Master Agreement including the
Schedule to the Master Agreement and the ISDA Credit Support Annex (1994 New York Law Version).
With respect to DWR, “ISDA Master Agreement” means: the 1992 ISDA Master Agreement and the
Credit Support Annex (1994 New York Law Version).
“Lockdown Date” means: the date applicable and mutually agreed Confirmations with the exception of
the Final Offer prices are due.
“NAESB” means: North American Energy Standards Board, Inc.


Southern California Edison                                                                            Page 21
RFO for Natural Gas Physical and Financial Product
April 7, 2006
“NAESB Gas Contract” means: Version 6.3.1 (dated 4/19/02) of the NAESB Base Contract for Sale and
Purchase of Natural Gas including its Special Provisions, and the Model Credit Support Addendum to the
NAESB Base Contract.
“NAESB Special Provisions” means: the unique terms and conditions that the parties have agreed to,
and made a part of the NAESB Gas Contract.
“New Projects” means: projects that have not started construction as of date of this RFO.
”NGI's Bidweek Survey” means: NGI’s Bidweek Survey Supplement to NGI’s Weekly Gas Price Index
published by Natural Gas Intelligence.
“Offer” means: offers submitted pursuant to this RFO.
“PDF” means: a file format developed by Adobe Systems.
“PPT” means: Pacific Daylight time when California observes Daylight Savings Time, and Pacific
Standard Time otherwise.
“Respondents” mean: bidders to this RFO.
“RFO” means: this Request for Offers for Natural Gas Physical and Financial Products.
“SCE” means: Southern California Edison Company.
“Shortlisted Respondents” means: Respondents that have been notified by SCE or DWR that they are
shortlisted for this RFO.
“SoCalGas” means: Southern California Gas Company.
“WORD” means: a word processing software developed by Microsoft.




Southern California Edison                                                                       Page 22
RFO for Natural Gas Physical and Financial Product
April 7, 2006

								
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