SCEs Balanced Energy Portfolio Pedro J Pizarro Senior

SCE’s Balanced Energy Portfolio Pedro J. Pizarro Senior VP, Power Procurement Southern California Edison National Energy Symposium June 15, 2006 1

Southern California Edison Overview p An Edison International company, SCE is one of the nation’s largest investor-owned electric utilities, with more than 120 years of service. p Serves a population of 13 million people, via 4. 7 million business and residential accounts in a 50, 000 -square-mile service area within central, coastal and Southern California. p Delivering that power takes 93, 500 circuit miles of line connecting 1. 5 million poles, 683, 000 transformers and 737, 000 area and street lights and the days and nights of 13, 000 2 employees.

Southern California Edison Overview Surveyors at Big Creek near junction with Pitman Creek in 1910. p SCE’s history begins in 1886. p In 1909, the name Southern California Edison was born. p More than 200 predecessors have come together to create Southern California Edison. p From late 1940 s through mid 1970 s SCE built numerous oil- and gas-fired plants to meet the increasing electric load. p In the 1960 s and 1970 s Edison also built a large coastal nuclear plant. p Today SCE’s energy mix includes gas, nuclear, coal hydro power and renewable power. San Onofre Nuclear Generating Station Big Creek Power House 1 today. 3

Portfolio (2005 Energy Mix) ~2/3 from non-SCE-owned resources NOTE: Percentages based on SCE’s December 2004 forecast, 2003 GRC Request, 2005 ERRA Forecast Proceeding, 2004 DWR Interim Revenue Requirement Decision (D. 04 -01 -028), and Final DWR Power Allocation Decision (D. 04 -12 -014). 4

Power Mix Comparison: SCE, California and U. S. Other Large Hydroelectric Coal Renewables Nuclear Natural Gas Sources: * SCE’s Power Content Label - Projected, March 2006 ** CEC’s “Net System Power: A Small Share of California’s Power Mix in 2005” Report, April 2006 *** Energy Information Administration’s Electric Power Annual, November 2005 5

SCE’s Procurement Objectives – Implementation Of The Loading Order System Reliability p p p Price stability Resource adequacy Local area reliability Adequate transmission p p p Cost minimization Financial risk management Optimization of commitments Environmental Considerations p p p Resources with lower greenhouse emission More efficient resources More energy efficiency Balance objectives through CPUC/CEC’s loading order: n Energy Efficiency n Demand Response n Renewable resources n Distributed Generation n Clean and efficient fossil-fired generation. 6

SCE’s Renewable Portfolio 100% = 16% of total system k. Wh in 2006 (expected)* p p The Renewable Portfolio Standard in California requires all load serving entities to serve 20% of their retail customer load with renewable energy by the year 2017, preferably by 2010. SCE is making every effort to meet this requirement. Among the major challenges are: long transmission development lead times, long project lead times, unknown viability of new projects, renewables supply/demand increasing load forecast. * Mix percentages by technology based on 2005 renewable portfolio 7

Estimated Generation Need in Southern California 1, 870 MW Other So. Cal. (“ISO SP-26”) Territory SCE Distribution Service Territory 1, 480 370 300 1, 000 200 1, 500 310 p p p 450 90 60 250 360 2007 2008 1, 180 800 2009 2010 2011 There is significant need for new generation in the So. Cal. region. The challenge is to encourage investment in new generation under retail competition. SCE and others* have proposed interim solution: n CPUC-approved utility long-term (10 -year) contracts for new generation capacity to ensure system-wide reliability n Allocate benefits and costs to all customers n Limit transitional contracts to the minimum amount of capacity needed * SCE, PG&E, NRG, AES, TURN, CCUE, CURE 8

Distributed Energy Resources – Collection Of Different Technologies and Applications Distributed generation: Primarily small scale generation of electric power by a unit sited close to the load being served. Typical technologies include microturbines, internal combustion engines, fuel cells, small gas turbines, solar photovoltaic, and combine heat and power (CHP). Energy Efficiency: Products or systems using less energy to do the same or better job than conventional products or systems. Energy efficiency saves energy, saves money on utility bills, and helps protect the environment by reducing the amount of electricity that needs to be generated. Demand Response: The ability to buy back capacity from customers with discretionary demand so that others with high and consistent demand levels can continue to be served during critical high demand periods. DR programs provide incentives to curtail electricity demand reduce load during peak periods in response to system reliability. 9

Distributed Generation Capacity (2004) Small scale generation vs. total generating capacity 100% = 18, 000 -20, 000 MW 100% = 53, 000 MW SCE California p 100% = 1, 032, 000 MW U. S. A. While Distributed Generation (DG) has several undisputed benefits, and it is useful in several applications (e. g. emergency backup, combined heat and power) it is not an economic generation resource option in the large scale in the near term. n DG has significantly higher installation costs and emissions output per k. Wh than central station power plants. n The most competitive DG technologies are still in the experimental phase. n Large scale commercial viability is not proven yet. 10

Energy Efficiency at SCE Business and Residential Energy Programs n n SCE offers its customers one of the largest arrays of energy efficiency programs, products and services in the nation. The programs have… p Paid 258, 400 rebates to residential, commercial, and industrial customers for energy-efficient appliances, lighting, motors, and heating and air conditioning systems, totaling more than $140 million; p Provided over 130, 000 residential home energy surveys; p Picked up from residential customers more than 70, 000 older, inefficient refrigerators, recycling them in an environmentally safe manner; and p Assisted builders who constructed nearly 27, 000 thousand new, energy-efficient homes. 11

Demand Response Programs for 2006 22, 700 MW (1, 140 MW) (83 MW) 21, 560 MW 21, 477 MW SCE Unmanaged System Peak Demand 2006 Dependable Capacity of Day -Of Reliability Demand Response (DR) Non-firm Voluntary Day. Ahead Price Responsive DR SCE Managed System Peak Demand 2006 12

Future Technologies: Advanced Meters Intelligently Connecting Edison to our Customers n n n The California Public Utilities Commission has approved the development of a "nextgeneration" electric meter— phase 1 of a potential 3 phased program to implement an advanced metering infrastructure (AMI). AMI is an intelligent metering system that provides new functionality to meet the needs of our customers and our company into the future. AMI has the potential to do: p p p Develop demand flexibility as a resource to enhance the electric system reliability Reduce power purchase and individual consumer costs Protect the environment 13