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					CPUC Workshop on California
 Natural Gas Infrastructure



        April 17, 2001


                              1
 Agenda

 Overview
 Background Information
 Projections into the Future
 Potential Infrastructure Needs
    Backbone Capacity
    Local Transmission
    Peaking Supply (Storage)
 Summary and Conclusions




                                   2
 Overview

 PG&E’s transmission and storage capacity is adequate
  to meet the projected 2001 gas demands without
  diversions/curtailments, but expect
    Very high load factor through the upcoming summer and
     winter
    Continued high gas prices and potential for price spikes due
     to high load factors
 Longer-term, PG&E will need additional gas system
  capacity
    Need to agree on guidelines for maintaining adequacy of
     infrastructure
         Backbone
         Local Transmission
         Storage

                                                               3
   Overview, cont’d.

 Potential capacity additions during 2003-2007:
    Backbone
         200-500 MMcf/d Redwood and/or Baja capacity
    Storage
         400-600 MMcf/day withdrawal capacity
    Local Transmission
         Various local reinforcements
            New EG interconnects/reinforcements
            Improve reliability




                                                        4
 Overview, cont’d.

 Gas Accord II proceeding is right
 forum to address PG&E’s gas system
 infrastructure needs and guidelines
   Northern California market structure is different from Southern
    California
   Ability to integrate capacity expansion needs with cost
    allocation and rate effects
   Gas Accord II proceeding can allow timely decision by
    mid-2002 for implementation by January 1, 2003

 Rate impact of
 capacity/infrastructure investments
 is small relative to commodity price
 exposure                                                         5
   Core Transportation Cost is Small
   Relative to Commodity Cost
Historical Residential Gas Rates – Class Average Transportation &
Procurement Rate, $/Dth

    $20.00
    $18.00
    $16.00
    $14.00
    $12.00                  Total Cost, incl. Procurement
    $10.00
     $8.00
     $6.00
     $4.00
                             Average Transportation Charge
     $2.00
                              (primarily distribution costs)
     $0.00
              9


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                                                                          04
 Capacity additions are cheap relative to the risk of commodity price spikes
                                                                                6
     Noncore Transportation Cost is Very
     Small Relative to Commodity Cost
Historical Electric Generation Gas Rates –Transportation (G-EG) & Core
Subscription Procurement (G-CSP) Rates, $/Dth                $21.70

      $14.00
      $12.00
      $10.00
       $8.00
       $6.00
       $4.00
       $2.00
       $0.00
                9




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           Average Transportation Charge   Backbone
           Total w/ Procurement
                                                                         7
 Agenda

 Overview
 Background Information
 Projections into the Future
 Potential Infrastructure Needs
    Backbone Capacity
    Local Transmission
    Peaking Supply (Storage)
 Summary and Conclusions




                                   8
Western North American Overview




                                  9
                       Malin, OR
                                                                       PG&E GAS
                     C Tionesta
                                                                  TRANSMISSION SYSTEM
                    C Burney
                                                                            LEGEND
                C Gerber                                            C     Compressor Station
                C Delevan                                           S     Storage Facility
                                                                          Terminal / Station
         Antioch S McDonald Island                                        Line 300
Los Medanos S C Bethany
                                                                          Line 400
     Milpitas                                                             Line 401
                                                                          Bay Area Loop
                       Panoche                                            Line 2
                                                                          Local Transmission
                       C Kettleman

                                                                         Firm Capacity (MMcf/d)
                                                                    Line 300                1,140
                                   Kern River Station
                                                                    Line 400/401            1,803
                                                                    California gas            200
                                               Hinkley
                                           C                C       Storage Injection*      165-290
                                                         Topock     Storage Withdrawal* 1,175-1,450
                                                                     (* varies with field pressure)

                                                                                                10
 Agenda

 Overview
 Background Information
 Projections into the Future
 Potential Infrastructure Needs
    Backbone Capacity
    Local Transmission
    Peaking Supply (Storage)
 Summary and Conclusions




                                   11
                                             CGT Near Maximum Capacity in 2001
                                             due largely to dry hydro year
                                     3,600
                                     3,400
                                     3,200
                                     3,000
                                     2,800
                                     2,600
Average Daily Throughput, MDth/day




                                     2,400
                                     2,200
                                     2,000
                                     1,800
                                     1,600
                                     1,400
                                     1,200
                                     1,000                                                                                                                                          Storage Withdrawal
                                      800                                                                                                                                           Storage Injection
                                      600                                                                                                                                           Off-System
                                      400                                                                                                                                           On-System Flowing Supply
                                      200                                                                                                                                           Available Supply/Capacity
                                        0
                                             Jan-00


                                                      Feb-00


                                                               Mar-00


                                                                        Apr-00


                                                                                 May-00


                                                                                          Jun-00


                                                                                                   Jul-00


                                                                                                            Aug-00


                                                                                                                     Sep-00


                                                                                                                              Oct-00


                                                                                                                                       Nov-00


                                                                                                                                                Dec-00


                                                                                                                                                         Jan-01


                                                                                                                                                                  Feb-01


                                                                                                                                                                           Mar-01


                                                                                                                                                                                    Apr-01


                                                                                                                                                                                             May-01


                                                                                                                                                                                                      Jun-01


                                                                                                                                                                                                               Jul-01


                                                                                                                                                                                                                        Aug-01


                                                                                                                                                                                                                                 Sep-01


                                                                                                                                                                                                                                          Oct-01


                                                                                                                                                                                                                                                   Nov-01


                                                                                                                                                                                                                                                            Dec-01
                                     -200
                                     -400
                                     -600
                                                                                                                                                                                                                                                                     12
        Future gas demand for power generation
        may be uncertain, and likely more volatile
        MMcf/day
1,300
          Note: Historical gas throughput for electric                  Recorded         Forecast
          generation excludes oil burns.                                                 Range
1,200
                                                                                                           Dry
1,100
                            Historical fluctuation +/- ~230 MMcf/day
1,000
                                                      Dry                                           ~450 MMcf/day
 900

 800

 700                                                                                                   Normal
                                     Historical Average
 600

 500
                      Wet                                         Wet
 400

 300
        '82   '84     '86      '88      '90     '92         '94   '96     '98      '00       '02     '04         '06
                                                                                                                       13
 Agenda

 Overview
 Background Information
 Projections into the Future
 Potential Infrastructure Needs
    Backbone Capacity
    Local Transmission
    Peaking Supply (Storage)
 Summary and Conclusions




                                   14
                                  A cold year planning guideline may mask
                                  the need for new backbone capacity
                                                                 Cold Year Demand
                                 3,500

                                         Max. Firm Capacity
                                 3,000
                                         90% Capacity
Average Daily Demand, MMcf/day




                                         80% Capacity
                                 2,500

                                                                        Electric
                                 2,000                                 Generation


                                 1,500                               Non-EG Noncore


                                 1,000
                                                                          Core
                                  500
                                                                        Off-system
                                    0                                   Contracts
                                     2003                 2004             2005       2006   2007

                                                                                               15
                                   A dry year planning guideline may be a
                                   better gauge of capacity needs
                                                                 Dry Year Demand
                                 3,500

                                         Max. Firm Capacity
                                 3,000
                                         90% Capacity
Average Daily Demand, MMcf/day




                                         80% Capacity
                                 2,500
                                                                        Electric
                                 2,000                                 Generation


                                 1,500                               Non-EG Noncore


                                 1,000
                                                                          Core

                                  500
                                                                       Off-system
                                                                       Contracts
                                    0
                                     2003                 2004            2005        2006   2007

                                                                                               16
 Why a Dry Year Reserve Margin

 Maintaining reserve margin above dry year
  demands will:
    Account for difficulty in forecasting EG demand
    Accommodate potential for supply
     disruptions/limitations
    Provide market flexibility in use of storage
    Help to avoid commodity price spikes
    Provide flexibility to manage daily demand fluctuations
 Cost of reserve margin is significantly less than
  commodity cost increase in times of shortage



                                                               17
 Additional PG&E backbone capacity
 needs for dry hydro year guideline


         (MMcf/day)   2003 2004 2005 2006 2007
10% Reserve Margin    133   148   137   176   218
15% Reserve Margin    253   268   257   299   343
20% Reserve Margin    373   389   377   422   469




                                                    18
 CGT Path Expansion Potential

 Redwood Path expansion to match PG&E-GT-NW
  expansions
    200-500 MMcf/d        ~$30-100 million
 Baja path expansion to match expansions on Kern
  River, Transwestern, and/or El Paso Natural Gas
    Expansion of entire pipeline from Topock would be
     relatively expensive
            ~ 200 MMcf/d ~ $400 million
    Expansion from Bakersfield area or Daggett to Bay Area
     would cost less




                                                              19
 Agenda

 Overview
 Background Information
 Projections into the Future
 Potential Infrastructure Needs
    Backbone Capacity
    Local Transmission
    Peaking Supply (Storage)
 Summary and Conclusions




                                   20
 LT System Reliability Design Standard

PG&E’s Local Transmission systems are designed to
  serve the greater of the following two load conditions:
 Serve all Core load on an Abnormal Peak Day (APD).
    APD is a system average temperature of 29 degrees
     Fahrenheit, which occurs about 1 in 90 years
    Core load is forecast using historical temperature
     sensitivity
 Serve all noncore and EG load on a Cold Winter Day
  (CWD).
    CWD is a system average temperature of 38 degrees
     Fahrenheit, which occurs about 1 in 4 years
    Noncore and EG load is modeled based on expected peak
     usage for each customer
    All core load is served under this criterion

                                                         21
Gas Usage versus Temperature


                                 Diversions
Demand Served




                                      Core




                                       Noncore




                           CWD                APD
                System Weighted Temperature
                                                    22
 Local Transmission (LT) Investment Option

 Could change LT capacity design criterion to further
  improve reliability, e.g., 1-in-20 year probability, if
  desired
 Change would need to be phased-in over several
  years
 Cost in nominal dollars would likely be about:
    $50 million one-time capital cost to move to higher
     standard
    $19 million per year in annually recurring capital costs to
     maintain the 1-in-20 year planning standard, $76 million
     2004-2007


                                                               23
 Agenda

 Overview
 Background Information
 Projections into the Future
 Potential Infrastructure Needs
    Backbone Capacity
    Local Transmission
    Peaking Supply (Storage)
 Summary and Conclusions




                                   24
                      Supply-Demand Illustration

                                            Illustrative
               5000
                                                                            Noncore Diversion
                                                                            and Curtailments
               4000
MMcf per Day




               3000                                                         Diversions Needed
                                                                            To Support Core
                                                              Core Supply
               2000


               1000


                  0
                       Average Winter Day   Cold Winter Day     Abnormal Peak Day
                             (AWD)               (CWD)                 (APD)
                                              1 in 4 years         1 in 90 years
                                                                                          25
 Noncore Customer Issues

 Noncore customers no longer required to maintain
  alternate fuel back-up
 The non-electric generation portion of the noncore
  market is about one-third to one-half of the total
  noncore market
    Supply available for diversion could be limited
    Shut down of business and loss of profits
 Gas-fired electric generation diversions would be
  likely under extreme cold day core demand
  conditions and would reduce in-area electric
  generation

                                                       26
 Customer Impacts, absent Improved
 Reliability

 Reduced electric generation could lead to costly
  power price spikes, similar to current conditions,
  which tend to persist
 Blackouts affecting residential customers under very
  cold day conditions (e.g. 1-in-20 year) would
  counteract the intent of maintaining core gas service,
  i.e., without power, many gas furnaces can not run
 Noncore gas outages and electric system blackouts
  could result in significant economic loss




                                                       27
 Storage Investments to Provide
 Additional Peaking Supply
 Core would need about 400-600 MMcf/day of
  additional peaking supply to avoid diverting
  noncore supply more than about once in twenty
  years.
 PG&E storage expansion by 400-600 MMcf/day
  would cost about $75-100 million
    The expansion would depend on the installation of Line
     57C from McDonald Island storage field for reliability at
     a cost of about $50-70 million




                                                                 28
 Agenda

 Overview
 Background Information
 Projections into the Future
 Potential Infrastructure Needs
    Backbone Capacity
    Local Transmission
    Peaking Supply (Storage)
 Summary and Conclusions




                                   29
 Summary and Conclusions

 PG&E’s capacity is adequate to meet the projected 2001
  gas demands without diversions/curtailments
 Longer-term, PG&E will need additional gas system
  capacity
    Need to agree on guidelines for maintaining adequacy of
     infrastructure
    Backbone
         200-500 MMcf/d Redwood and/or Baja capacity
    Storage
         ~400-600 MMcf/day withdrawal capacity
    Local Transmission
         Various local reinforcements


                                                           30
 Summary and Conclusions, cont’d.

 Gas Accord II proceeding is right forum to address
  PG&E’s gas system infrastructure needs and
  guidelines
 Rate impact of capacity/infrastructure investments
  is small relative to commodity price exposure
    Rule of Thumb: $100 million capital investment would be
     about $0.03/Dth (average per unit increase on a
     volumetric basis)




                                                           31

				
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