Gas Accord II Capital Expenditure Forecast Gas Accord

Gas Accord II Capital Expenditure Forecast Gas Accord II Workshop Capital Expenditure Forecast Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 1

Gas Accord II Capital Expenditure Forecast Agenda q Known Capital Expenditures ð Local Transmission ð Backbone ð Storage ð Other q Potential Capital Expenditures ð Pipeline Safety ð Central Backbone ð Local Transmission Reliability ð Winter Supply Reliability ð Backbone Transmission Expansion Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 2

Gas Accord II Capital Expenditure Forecast Known Capital Expenditures Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 3

Gas Accord II Capital Expenditure Forecast Base Capital Expenditure Forecast (continued) Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 4

Gas Accord II Capital Expenditure Forecast Local Transmission q Typical Local Transmission Projects: ð Reliability: Replacement of older pipeline equipment ð Safety: Development near pipelines, replacement of older pipelines or related equipment. ð Requirements to relocate pipelines: Caltrans, cities, counties, etc. ð Capacity: Maintain adequate capacity to meet design standards ð New business: Installation of new pipelines to serve new customers Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 5

Gas Accord II Capital Expenditure Forecast Local Transmission q Total Investment 2001 -2007: $136. 9 million q Major Projects ($ million) Total Cost Years ð L-108 Replacement - Stockton $9. 7 2001 -05 ð Replace DFM - Monterey $6. 4 2004 ð New Power Plants $5. 8 2001 -06 ð L-103 Relocation - Hollister $4. 8 2005 ð L-147 Relocation - Peninsula $2. 7 2006 ð Belt Main Reinforcement - Fresno $2. 1 2001 -02 ð Projects < $2 million $105. 4 2001 -07 Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 6

Gas Accord II Capital Expenditure Forecast Backbone Transmission q Typical Backbone Projects: ð Reliability: Replacement of older pipeline equipment ð Safety: Development near pipelines, replacement of older pipelines ð Requirements to relocate pipelines: Caltrans, cities, counties, etc. ð Environmental: Install emission reduction equipment at compressor stations or replace engine/turbines with new lower emission units. Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 7

Gas Accord II Capital Expenditure Forecast Backbone Transmission q Total Investment 2001 -2007: $206. 1 million q Major Projects ($ millions) Existing Emission Rules: ð Delevan Emission Reduction $25. 1 ð Hinkley Emission Reduction $18. 0 ð Kettleman Emission Reduction $14. 5 ð Gerber Emission Reduction $12. 5 Expected Future Emission Rules: ð Topock Emission Reduction $33. 0 ð Burney Emission Reduction $23. 3 Total Cost Years 2002 -04 2005 -06 2003 -04 Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 8

Gas Accord II Capital Expenditure Forecast Backbone Transmission (continued) q Major Projects (continued) ($ millions) Total Cost Years Non-Emission Projects: ð L-300 Reliability ($3 million/yr) $18. 0 2002 -07 ð Replace Tionesta Turbine $12. 5 2003 -04 ð L-400/401 Reliability ($1. 5 million/yr) $9. 0 2002 -07 ð L 300 Inspection & Recoating $5. 8 2001 -02 ð Projects < $5 million $34. 4 2001 -07 Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 9

Gas Accord II Capital Expenditure Forecast Storage q Typical Storage Projects: ð Reliability: Replacement or looping of pipelines or older pipeline equipment, reworking of storage wells, rebuild or replacement of compressor or processing equipment ð Safety: Replacement of older pipeline equipment Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 10

Gas Accord II Capital Expenditure Forecast Storage q Total Investment 2001 -2007: $92. 0 million q Major Projects ($ millions) Total Cost Years ð Install Line 57 C $42. 0 2002 -04 ð UGS Reliability ($3 annually) $18. 0 2002 -07 ð Projects < $1 million $32. 0 2002 -07 Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 11

Gas Accord II Capital Expenditure Forecast Other Capital Expenditures q Total Investment: $38. 8 million q Major Projects ($ millions) ð Development near pipelines ð Pipeline Recoating $4. 8 ð Power Plant Connections $3. 5 ð Projects < $3 million $20. 5 Total Cost $10. 0 2003 -07 2002 -07 2003 -07 2001 -07 Years Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 12

Gas Accord II Capital Expenditure Forecast Potential Future Capital Expenditures Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 13

Gas Accord II Capital Expenditure Forecast Pipeline Safety q New pipeline safety regulations are expected in the near future ð Scope of regulations uncertain q Likely to require significant costs for validating pipeline integrity ð Hydro testing, special equipment, and pipeline modifications likely q Estimated cost is $35 million, depending on scope of legislation. Estimate includes some pipeline replacement but additional pipeline costs are anticipated. Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 14

Gas Accord II Capital Expenditure Forecast Central Backbone Expansion q Facilities required to provide adequate capacity to transport increased storage field capabilities to market demand q Expected facility reinforcements include portions of Line 400/401, the Bay Area Loop from Brentwood to Milpitas, and Line 300 q Estimated reinforcement costs are $50 -200 million ð Depends on actual increased storage capabilities and market needs Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 15

Gas Accord II Capital Expenditure Forecast Central Backbone Expansion Schematic Delevan c L-400 Antioch L-2 Possible Bay Area Reinforcement Brentwood To East Bay Irvington Milpitas Possible L-300 Reinforcement L-300 L-401 L-57 Proposed Lodi Storage Proposed Wild Goose Expansion s Mc. Donald Island s s L-57 C c Bethany L-401 Panoche Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 16

Gas Accord II Capital Expenditure Forecast Local Transmission Reliability q Existing Reliability: ð About 95% of non-core demand is served under a Stage 1 curtailment (about 33. 5 deg F daily mean temperature) ð About 90% of non-core demand can be served during a Stage 2 curtailment (about 29 deg F daily mean temperature, 1 in 90 year occurrence) ð Some areas have lower reliabilities than shown above Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 17

Gas Accord II Capital Expenditure Forecast Local Transmission Reliability q Increased Reliability: ð Estimated cost to increase the non-core design standard for local transmission to a 1 in 20 year cold weather occurrence is about $206 million for all areas. This investment would serve an additional 152 MMcf/d during cold weather events. ð Investing only in areas that provide higher reliability per dollars invested would result in spending $39 million for the Sacramento, Stockton, Yosemite, and South San Jose local transmission areas. ð This investment would serve about 119 MMcf additional non-core demand during cold weather events. This provides cold weather service to about 80% of the non-core demand at only 20% of the cost associated with the $206 million investment. ð The additional 119 MMcf served represents about 4% of the total noncore demand. Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 18

Gas Accord II Capital Expenditure Forecast Winter Supply Reliability q Install additional wells, processing, and compression to increase Mc. Donald Island injection and withdrawal capacities and seasonal cycle. Depending on increase capability costs range from $50 -150 million. Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 19

Gas Accord II Capital Expenditure Forecast Backbone Transmission Capacity Increase q Line 400/401: Relatively inexpensive to increase capacity. About $20 -25 million to increase capacity by about 250 MMcf/d. q Line 300: Very expensive to increase capacity. About $430 million to increase capacity by about 200 -250 MMcf/d. Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 20

Gas Accord II Capital Expenditure Forecast Potential Future Capital Expenditure Summary ($ millions) Total Cost Years q Pipeline Safety ($5 million/yr) $35 q Central Backbone Expansion 2001 -07 $50 -200 q Local Transmission Reliability $39 2003 -05 q Winter Supply Reliability $50 -150 q L-400/401 Capacity Increase $20 -25 (~250 MMcf/d) 2003 -06 q L-300 Capacity Increase $430 (~200 -250 MMcf/d) Prepared for Settlement Discussions Under November 8, 2000 Rule 51 of the CPUC Rules of Practice and Procedure, Rule 601 et seq. of the FERC Rules of Practice, Rule 408 of the Federal Rules of Evidence, and Section 1152 of the California Evidence Code. 21