Details for: 4110-E (Part 1 of 1).pdf


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Gary A. Stern, Ph.D.
Managing Director, State Regulatory Operations

PUBLIC VERSION

November 20, 2019
ADVICE 4110-E
(U 338-E)
PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
ENERGY DIVISION
SUBJECT:

I.

Request to Amend Southern California Edison Company’s
Assembly Bill 57 Bundled Procurement Plan Appendices A and
B

PURPOSE

In accordance with Decision (D.) 15-10-031,1 Southern California Edison
Company (SCE) respectfully submits this advice letter (AL) to amend its 2014
Assembly Bill (AB) 57 Commission-approved Bundled Procurement Plan (BPP).
Specifically, SCE requests to: (1) update Appendix B to include Resource
Adequacy (RA) Purchases as a non-standard product, (2) update Appendices A
and B to designate RA Swaps as an authorized product and a non-standard
product, (3) add California Carbon Offset Futures as an authorized product for
greenhouse gas (GHG) emissions reduction procurement in Appendix A, and (4)
revise Appendices A and B to clarify other names for the Import Counting Rights
product.

1

See p. 41 “The Advice Letter process is the appropriate vehicle for the utilities’
requests to add new products and other changes in the years that Bundled Plans
are not reviewed in the LTPP.” In addition, Ordering Paragraph (OP) 1, on pp. 6265, adopts SCE’s 2014 BPP, which states at Sheet 2: “In accordance with the
Commission’s previous decisions, SCE will make any proposed updates or
modifications to the 2014 Conformed AB 57 BPP before the next biennial
procurement plan proceeding through an Advice Letter process.

P.O. Box 800

8631 Rush Street

Rosemead, California 91770

(626) 302-9645

Fax (626) 302-6396





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ADVICE 4110-E (U 338-E) -2- November 20, 2019 Included with this advice letter are Attachments A and B, which respectively are: (1) redlined versions of Appendices A and B reflecting the changes, and (2) clean versions of Appendices A and B incorporating the changes requested herein. II. DISCUSSION A. RA Product Modifications Due to various challenges currently present in the RA markets, SCE is proposing two modifications to its BPP to enhance SCE’s ability to procure RA for the benefit of its customers. 1. RA Market Challenges a. Lack of Available RA As the California Public Utilities Commission (Commission or CPUC) has acknowledged, the RA market is undergoing significant transformation and experiencing challenges. On September 3, 2019, pursuant to D.19-02-022, the Commission’s Energy Division released a report, titled The State of the Resource Adequacy Market, in which it concludes that “the RA market is tight” and that it expects the market to “continue to tighten.”2 This market condition was readily apparent in October 2018 when 10 out of the 36 Commission-jurisdictional loadserving entities (LSEs) submitted local waiver requests because they were not able to procure sufficient capacity to meet their 2019 year-ahead local RA requirements. These waiver requests spanned multiple geographic regions and came from all types of LSEs (i.e., investor-owned utilities, community choice aggregators, and energy service providers).3 There were several reasons for the deficiencies and some LSEs were unable to procure enough capacity even after conducting solicitations and, when those were unsuccessful, contacting generators, brokers, and other LSEs bilaterally.4 In addition, in October 2019, 18 LSEs submitted local waiver requests because they are not able to meet threeyear-ahead local RA requirements for 2020, 2021, and/or 2022. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. 2 3 4 The State of the Resource Adequacy Market, September 2019, p. 20. Id, p. 14. Id.
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ADVICE 4110-E (U 338-E) -3- November 20, 2019 The year-over-year decrease of offers received in the 2017 RA RFO to the 2018 RA RFO is primarily attributed to the retirement of large Once-Through Cooling (OTC) generating stations and increased competition for RA supply due to the entrance of new LSEs. The lack of RA availability has continued and is expected to continue as the retirement of OTC units is set to continue through 2020. XXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X XXXXXXXXXX XXXXXXXX. b. Multi-Year RA Requirements and Uneven Restrictions Among LSEs Recently adopted RA rules require LSEs (including SCE) to meet year-ahead and three-year ahead compliance requirements. Currently, SCE purchases RA for multi-year terms via solicitations, which require a multi-step process that requires a significant amount of time to conduct. The time required to run solicitations puts SCE at a competitive disadvantage against LSEs not required to run solicitations because SCE cannot transact bilaterally. While SCE must conduct time-intensive solicitations, other LSEs in the RA market are able to purchase RA bilaterally and have fewer restrictions on purchasing RA, allowing them to react quickly and enter into bilateral RA purchase transactions at any time. In addition, SCE must also consult twice (at the launch of the solicitation and at selection) with its Procurement Review Group (PRG).5 As a result, SCE risks non-compliance with RA requirements and SCE’s bundled customers are at risk of absorbing higher RA prices. While SCE can and has transacted RA through brokers for longer term, the broker market remains relatively illiquid and SCE requires all available avenues (e.g., solicitations, brokers, and bilateral) to transact and adequately protect SCE bundled customers. 2. RA Purchases RA Purchases are an authorized product in SCE’s BPP. However, because it is not on the list of SCE’s non-standard products, SCE cannot conduct bilateral RA purchases for terms greater than one-calendar quarter or whose first delivery is 5 The PRG is a group of participants, including members of the CPUC and other governmental agencies and consumer groups, established by the CPUC in D.02-08071 and D.03-06-071 to review and provide input on SCE’s energy procurement activities.
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ADVICE 4110-E (U 338-E) -4- November 20, 2019 more than one quarter forward without having to seek Commission approval through an advice letter.6 D.15-10-031 stated, “RA capacity is a standard product and that RFOs are the appropriate vehicle for RA purchases.”7 However, as explained in Section II.A.1 above, the RA marketplace has experienced significant changes since the Commission last reviewed this issue. Designating RA purchases as a non-standard product will allow SCE to purchase RA bilaterally for terms longer than three months or for terms starting longer than three months forward and to purchase RA more quickly, while still remaining within the broader BPP parameters. Approval of this AL will provide SCE a greater ability to compete with other LSEs that can currently transact for RA more quickly, and enable SCE to procure multi-year RA. Therefore, SCE requests approval to add RA Purchases to its Appendix B, “Authorized Non-Standard Products.” 3. RA Swaps On June 7, 2019, SCE submitted AL 4011-E to request Commission approval of an RA Swap between SCE and Marin Clean Energy (MCE). An RA Swap is an exchange of one type of RA for another type of RA, typically via simultaneous buy and sell transactions. For example, the RA Swap for which approval is requested in AL 4011-E is a swap of North System RA capacity for South RA System capacity. Specifically, SCE buys 61 MW of South System Capacity from MCE and SCE sells 61 MW of North System Capacity to MCE. RA Swaps can be swaps for other types of RA as well. Another example of an RA Swap is System RA for Local RA. In AL 4011-E, SCE noted that it would submit a separate advice letter to add the RA Swap as an authorized, non-standard product in SCE’s BPP. Through this advice letter, SCE requests to add RA Swaps to the list of authorized products in Appendix A of its BPP and as a non-standard product in Appendix B of its BPP. Adding RA Swaps as an authorized non-standard product will provide SCE, and other LSEs with whom it engages in swaps, greater ability to meet RA needs. For example, an LSE may have excess local RA but need system RA. The LSE could make the local RA available to other LSEs that are able to return system RA. This will provide SCE and the LSEs with whom it contracts greater flexibility for meeting multi-year RA requirements in a tightening market. 6 7 SCE BPP, Sheets 51-52. D.15-10-031, p. 33.
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ADVICE 4110-E (U 338-E) -5- November 20, 2019 B. California Carbon Offset Futures Contract The California Air Resources Board’s (CARB) Cap-and-Trade program involves two greenhouse gas (GHG) emissions reduction compliance instruments: GHG allowances and GHG offsets. SCE currently is authorized to transact both GHG Products as described in its BPP Appendix table for Authorized Products.8 The Intercontinental Exchange (ICE), one of the exchanges authorized in SCE’s BPP, recently added a new product, called California Carbon Offset (CCO) Futures, to its suite of products.9 The first CCO Futures contract was traded in April 2019.10 The CCO Futures product “provides critical price clarity and hedging capabilities to entities involved with offset credits in the California Cap and Trade program…[and contributes] to market liquidity and spur[s] the development of new projects.”11 The BPP states, “[i]f changes to the market require other GHG Products not listed in Appendix A, SCE will submit an Advice Letter for approval to expand that list.”12 Therefore, SCE requests approval to add the CCO Futures product as an authorized product in Appendix A of its BPP. The Commission previously expressed “hope that functional and liquid exchanges will develop quickly” and authorized its jurisdictional utilities to procure GHG compliance instruments on “exchanges that the Commission has previously approved for power procurement”13 As noted above, ICE is already a Commission-approved exchange in SCE’s BPP. C. Clarification of Import Counting Rights Product The Import Counting Rights product is currently in SCE’s BPP as an authorized product in Appendix A and a non-standard product in Appendix B. This product is also known in the electric industry as “Import Allocation Rights” and is the same product as what the California Independent System Operator (CAISO) calls “Import Capability Transfers.” To avoid potential confusion by parties and to provide clarity, SCE proposes to revise the Import Counting Rights product name to indicate other names for the product. 8 9 10 11 12 13 SCE BPP, Appendix A. https://www.theice.com/products/71544060/California-Carbon-Offset-Futures/specs https://www.prnewswire.com/news-releases/climeco-involved-in-the-first-californiacarbon-offset-futures-transaction-300826175.html Id. SCE BPP, Sheet 47. D.12-04-046, pp. 53-54.
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ADVICE 4110-E (U 338-E) -6- November 20, 2019 SAFETY CONSIDERATIONS SCE is strongly committed to safety in all aspects of its business. No impacts to safety are anticipated as a result of this advice letter. Renewable sellers are responsible for the safe construction and operation of their generating facilities and compliance with all applicable safety regulations. REQUEST FOR COMMISSION APPROVAL For the reasons stated above, SCE requests that its AB 57 BPP be revised, as discussed herein and as set forth in Attachments A and B. TIER DESIGNATION This Advice Letter is submitted with a Tier 3 Designation. EFFECTIVE DATE This advice letter will become effective on December 20, 2019, the 30th calendar day after the date submitted. NOTICE Anyone wishing to protest this advice letter may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received by the Energy Division and SCE no later than 20 days after the date of this advice letter. Protests should be submitted to: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California 94102 E-mail: EDTariffUnit@cpuc.ca.gov Copies should also be mailed to the attention of the Director, Energy Division, Room 4004 (same address as above). In addition, protests and other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of:
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ADVICE 4110-E (U 338-E) -7- November 20, 2019 Gary A. Stern, Ph.D. Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California 91770 Telephone: (626) 302-9645 Facsimile: (626) 302-6396 E-mail: AdviceTariffManager@sce.com Laura Genao Managing Director, State Regulatory Affairs c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California 94102 Facsimile: (415) 929-5544 E-mail: Karyn.Gansecki@sce.com With a copy to: Mario E. Dominguez Attorney Southern California Edison Company 2244 Walnut Grove Avenue, 3rd Floor Rosemead, California 91770 Facsimile: (626) 302-6016 E-mail: Mario.E.Dominguez@sce.com There are no restrictions on who may submit a protest, but the protest shall set forth specifically the grounds upon which it is based and must be received by the deadline shown above. In accordance with General Rule 4 of GO 96-B, SCE is furnishing copies of this Advice Letter to the interested parties shown on the attached R.15-02-020, R.18-07-003, R.13-12-010 and GO 96-B service lists. Address change requests to the GO 96-B service list should be directed to AdviceTariffManager@sce.com or (626) 302-4039. For changes to any other service list, please contact the Commission’s Process Office at (415) 703-2021 or Process_Office@cpuc.ca.gov. Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by submitting and keeping the Advice Letter at SCE’s corporate headquarters. To view other SCE advice letters submitted with the Commission, log on to SCE’s web site at https://www.sce.com/wps/portal/home/regulatory/advice-letters.
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ADVICE 4110-E (U 338-E) -8- November 20, 2019 For questions, please contact Ezana Emmanuel at (626) 328-3194 or by electronic mail at Ezana.Emmanuel@sce.com Southern California Edison Company /s/ Gary A. Stern /s/ Gary A. Stern, Ph.D. Gary A. Stern, Ph.D. GAS:rm:jm Enclosures
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ADVICE LETTER SUMMARY ENERGY UTILITY MUST BE COMPLETED BY UTILITY (Attach additional pages as needed) Company name/CPUC Utility No.: Southern California Edison Company (U 338-E) Utility type: ELC GAS PLC HEAT ELC = Electric PLC = Pipeline WATER Contact Person: Darrah Morgan Phone #: (626) 302-2086 E-mail: AdviceTariffManager@sce.com E-mail Disposition Notice to: AdviceTariffManager@sce.com EXPLANATION OF UTILITY TYPE GAS = Gas WATER = Water HEAT = Heat (Date Submitted / Received Stamp by CPUC) Tier Designation: 3 Advice Letter (AL) #: 4110-E Subject of AL: Request to Amend Southern California Edison Company's Assembly Bill 57 Bundled Procurement Plan Appendices A and B Keywords (choose from CPUC listing): Compliance, Procurement AL Type: Monthly Quarterly Annual One-Time Other: If AL submitted in compliance with a Commission order, indicate relevant Decision/Resolution #: Decision 15-10-031 Does AL replace a withdrawn or rejected AL? If so, identify the prior AL: Summarize differences between the AL and the prior withdrawn or rejected AL: Confidential treatment requested? Yes No If yes, specification of confidential information: See Confidentiality Declaration Confidential information will be made available to appropriate parties who execute a nondisclosure agreement. Name and contact information to request nondisclosure agreement/ access to confidential information: Resolution required? Yes No Requested effective date: 12/20/19 No. of tariff sheets: -0- Estimated system annual revenue effect (%): Estimated system average rate effect (%): When rates are affected by AL, include attachment in AL showing average rate effects on customer classes (residential, small commercial, large C/I, agricultural, lighting). Tariff schedules affected: None Service affected and changes proposed1: Pending advice letters that revise the same tariff sheets: None 1 Discuss in AL if more space is needed. Clear Form
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Protests and all other correspondence regarding this AL are due no later than 20 days after the date of this submittal, unless otherwise authorized by the Commission, and shall be sent to: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, CA 94102 Email: EDTariffUnit@cpuc.ca.gov Name: Gary A. Stern, Ph.D. Title: Managing Director, State Regulatory Operations Utility Name: Southern California Edison Company Address: 8631 Rush Street City: Rosemead Zip: 91770 State: California Telephone (xxx) xxx-xxxx: (626) 302-9645 Facsimile (xxx) xxx-xxxx: (626) 302-6396 Email: advicetariffmanager@sce.com Name: Laura Genao c/o Karyn Gansecki Title: Managing Director, State Regulatory Affairs Utility Name: Southern California Edison Company Address: 601 Van Ness Avenue, Suite 2030 City: San Francisco State: California Zip: 94102 Telephone (xxx) xxx-xxxx: (415) 929-5515 Facsimile (xxx) xxx-xxxx: (415) 929-5544 Email: karyn.gansecki@sce.com Clear Form
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ENERGY Advice Letter Keywords Affiliate Direct Access Preliminary Statement Agreements Disconnect Service Procurement Agriculture ECAC / Energy Cost Adjustment Qualifying Facility Avoided Cost EOR / Enhanced Oil Recovery Rebates Balancing Account Energy Charge Refunds Baseline Energy Efficiency Reliability Bilingual Establish Service Re-MAT/Bio-MAT Billings Expand Service Area Revenue Allocation Bioenergy Forms Rule 21 Brokerage Fees Franchise Fee / User Tax Rules CARE G.O. 131-D Section 851 CPUC Reimbursement Fee GRC / General Rate Case Self Generation Capacity Hazardous Waste Service Area Map Cogeneration Increase Rates Service Outage Compliance Interruptible Service Solar Conditions of Service Interutility Transportation Standby Service Connection LIEE / Low-Income Energy Efficiency Storage Conservation LIRA / Low-Income Ratepayer Assistance Street Lights Consolidate Tariffs Late Payment Charge Surcharges Contracts Line Extensions Tariffs Core Memorandum Account Taxes Credit Metered Energy Efficiency Text Changes Curtailable Service Metering Transformer Customer Charge Customer Owned Generation Mobile Home Parks Name Change Transition Cost Transmission Lines Decrease Rates Non-Core Transportation Electrification Demand Charge Non-firm Service Contracts Transportation Rates Demand Side Fund Nuclear Undergrounding Demand Side Management Oil Pipelines Voltage Discount Demand Side Response PBR / Performance Based Ratemaking Wind Power Deposits Portfolio Withdrawal of Service Depreciation Power Lines Clear Form
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DECLARATION OF GUS FLORES REGARDING THE CONFIDENTIALITY OF CERTAIN DATA I, Gus Flores, declare and state: 1. 1am a Contract Origination Principal Manager in the Southern California Edison (SCE) Contract Origination Department. As such, I had responsibility for overseeing and reviewing SCE’s Advice Letter Requesting to Amend Southern California Edison Company’s Assembly Bill 57 Bundled Procurement Plan Appendices A and B (Advice Letter). I make this declaration in accordance with Commission Decisions (D.) 06-06-066 and D.08-04-023, issued in Rulemaking 05-06-040. 1 have personal knowledge of the facts and representations herein and, if called upon to testify, could and would do so, except for those facts expressly stated to be based upon information and belief, and as to those matters, I believe them to be true. 2. Listed below are the data in the Advice Letter for which SCE is seeking confidential protection and the categories of the Matrix of Allowed Confidential Treatment Investor-Owned Utility (LOU) Data (Matrix) appended to D.06-06-066 to which these data correspond. Data RFO and position information 3. Location Page 2 & 3 of SCE’s Advice Letter Matrix Category VI) Net Open Position Information Electric A) Utility Bundled Net Open (Long or Short) Position for Capacity (MW) — Limitations on Confidentiality Specified in Matrix Front three years of forecast data confidential I am informed and believe and thereon allege that the data in the table in paragraph 2 above cannot be aggregated, redacted, summarized, masked or otherwise protected in a manner that would allow partial disclosure of the data while still protecting confidential information, because the Advice Letter requires that the data be provided in this form. 4. I am informed and believe and thereon allege that the data in the table in paragraph 2 above has never been made publicly available. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. I Executed on November 07, 2019 at Rosemead,Calfornia. Gus Flores—
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Southern California Edison Rosemead, California (U 338-E) SOUTHERN CALIFORNIA EDISON COMPANY’S CONFORMED 2014 AB 57 BUNDLED PROCUREMENT PLAN APPENDICES Appendix A Authorized Procurement Products for Energy and Energy-Related Products (Continued) (To be inserted by utility) Advice 3349-E Decision 15-10-031 1D0 Issued by Russell G. Worden Director (To be inserted by Cal. PUC) Date Filed Effective Resolution
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Southern California Edison Rosemead, California (U 338-E) SOUTHERN CALIFORNIA EDISON COMPANY’S CONFORMED 2014 AB 57 BUNDLED PROCUREMENT PLAN Sheet A-1 APPENDICES Authorized Procurement Products Product / Transaction Description Energy Efficiency (demand side) The implementation of load-reducing measures for electrical customers Demand Response (demand side) Ability to reduce electrical consumption from specified electrical customers at specified times Distributed Generation (DG) (demand side or supply side) Energy or capacity products on the customer side of the meter or in front of the meter, interconnected at the Distribution grid level such as combined heat and power (CHP) Purchase pre-scheduled energy or load reductions at either a fixed-price or index-based price Forward Spot (Day-Ahead & Hour-ahead (purchase, sale, or exchange) Real-time (purchase or sale) Forward Energy (purchase or sale) Futures Contract Energy imbalance transactions or load reductions Contracts entered into in advance of delivery time, includes block/forward products (e.g., fixed amounts of energy over a specified period of time (e.g., 7x24, 6x16, super-peak, and shaped products) Could be fixed price or index-based price An agreement to make or take delivery of a particular commodity or financial instrument at a pre-determined price in the future. Futures are distinguished from generic forward contracts in that they contain standardized terms, trade on a formal exchange, are regulated by overseeing agencies, and are guaranteed by clearinghouses. Also, in order to ensure that payment will occur, futures have a margin requirement that must be settled daily. Benefit /Cost Reduces load and mitigates energy price risk. Meets the State’s Loading Order. Provides load reduction when needed and mitigates energy price risk. Meets the State’s Loading Order. Can provide load reduction and lowers energy price risk. Meets the State’s Loading Order. Needed to balance short-term load/resource changes/ Vulnerable to price volatility Balances Short-term needs/ Vulnerable to price volatility Reduces price risk / Risk that prices will be below contracted rate (for purchases) Similar to forwards in that they reduce price risk by locking in a fixed cost of gas on a forward basis. However, there is always a physical delivery component associated with a futures contract which must be closed out prior to contract expiration. (Continued) (To be inserted by utility) Advice 3349-E Decision 15-10-031 1D0 Issued by Russell G. Worden Director (To be inserted by Cal. PUC) Date Filed Effective Resolution
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Southern California Edison Rosemead, California (U 338-E) Sheet A-2 SOUTHERN CALIFORNIA EDISON COMPANY’S CONFORMED 2014 AB 57 BUNDLED PROCUREMENT PLAN APPENDICES Product / Transaction Description Resource Adequacy (RA) Capacity Only (purchase or sale) Resource Adequacy (RA Swaps) The product is capacity meeting the Commission’s Resource Adequacy requirements. Does not convey any energy attributes to the buyer. An exchange of one type of RA for another type of RA, typically via simultaneous buy and sell transactions. For example, sell local RA while buying system RA, and vice versa Tolling Agreement Peak for off-peak exchange Seasonal exchange Call (or put) option (purchase or sale) Financial swap (purchase or sale) QF Fixed for SRAC Floating Swap (purchase) Benefit /Cost Type of capacity product where buyer hedges fuel cost risk by providing the gas supply, transportation, and storage Trades peak energy for off-peak energy (x peak MWH < y off-peak MWH) Buyer receives peak energy in Summer and returns peak energy in Winter The right but not the obligation to buy (sell) an underlying asset at some pre-specified price by some pre-determined point in time. May be purely a financially settled instrument or an option to buy (sell) some physical underlying commodity or asset. Options may be combined with other options or swaps to hedge a wide variety of positions. An agreement between two counterparties to exchange cash flows for the mutual benefit of the exchangers. Usually, one leg involves quantities that are known in advance (e.g., the “fixed leg”) the other involves quantities that are uncertain or variable (e.g., the “floating leg”). However, a floating leg versus a floating leg swap may be structured as well, e.g., gas daily index versus first of the month index. An agreement between two counterparties to exchange cash flows for the mutual benefit of the exchangers. Usually, one leg involves quantities that are known in advance (e.g., the “fixed leg”) the other involves quantities that are uncertain or variable (e.g., the “floating SRAC leg”). Allows trading of capacity to meet RA or local RAR Allows SCE, and other Load Serving Entities (LSEs) with whom it engages in swaps, greater ability to meet RA needs. Reduces peak price risk / Buyer pays reservation or capacity charges, and is open to gas price risk Reduces peak price risks / Increases offReduces summer price risk /Increases winter peak price Sets a cap (floor) on the purchase price of an underlying asset at the expense of paying an option premium (fee) Swaps out one type of risk exposure for another. In a fixed for floating swap: locks in a fixed price (reduces price risk) / Risk that prices will be lower than contracted Provides an opportunity for SRAC-based QF pricing to be converted to a fixed price eliminating gas price risk (Continued) (To be inserted by utility) Advice 3349-E Decision 15-10-031 1D0 Issued by Russell G. Worden Director (To be inserted by Cal. PUC) Date Filed Effective Resolution
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Southern California Edison Rosemead, California (U 338-E) SOUTHERN CALIFORNIA EDISON COMPANY’S Sheet A-3 CONFORMED 2014 AB 57 BUNDLED PROCUREMENT PLAN APPENDICES Product / Transaction Insurance (Counterparty credit insurance, cross commodity hedges) Electricity Transmission Products (Purchase or Sale) Long-Term Congestion Revenue Rights (LT-CRRs)1 Import Counting Right (purchase or sale) (also known as Import Allocation Rights and Import Capability Transfers) Gas Transportation Receipt Point Rights (Purchases and Sales) Gas Transportation Transaction (Purchases and Sales) Gas Storage Gas Purchases and Sales 1 Description Buyer can insure against various adverse events (such as extreme temperature, a generating unit failure, or counterparty default, among others), to reduce price risk Arranged through the California Independent System Operator (CAISO) and with non-ISO transmission owners, and including Congestion Revenue Rights (CRRs). Also includes purchase or sale of transmission rights or use of locational spreads. LT-CRRs with terms of up to 10 years. Benefit /Cost Insurance policies can reduce price risk, but increase energy costs by the amount of the insurance premium Reduces price risk associated with varying transmission conditions. LT-CRRs provide hedges of up to 10 years against congestion costs under the CAISO’s Market Redesign and Technology Upgrade (MRTU) market. Conveys the right to import capacity at an intertie for RA-counting purposes only. Does not convey physical capacity of the tie or of a generating resource, nor the energy output from a generating facility. Allows the buyer to obtain import counting rights, which can then be combined with an RAcountable import resource to obtain RA credit Provides buyer with firm delivery or first priority for delivery of natural gas at specified points on Southern California Gas Company’s delivery system. Buyer contracts for transportation of gas to a determined delivery point, at a set price (could be fixed or variable) over a specified time-frame Assists SCE in its effort to maintain continued reliability of electric service for its customers. Buyer reserves gas storage capacity for a defined price Transactions on a daily, monthly, multi-month, or annual block basis Reduces price risk associated with gas transportation (and therefore, limits some electric generation price risk for gas-fired units) Hedges price risk associated with gas storage Used to hedge fuel cost risk associated with capacity contracts See Resolution E-4134, dated Dec. 6, 2007, for a full description of the upfront and achievable standards and criteria for SCE’s procurement of LT-CRRs under its AB 57 BPP. (Continued) (To be inserted by utility) Advice 3349-E Decision 15-10-031 1D0 Issued by Russell G. Worden Director (To be inserted by Cal. PUC) Date Filed Effective Resolution
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Southern California Edison Rosemead, California (U 338-E) SOUTHERN CALIFORNIA EDISON COMPANY’S Sheet A-4 CONFORMED 2014 AB 57 BUNDLED PROCUREMENT PLAN APPENDICES Product / Transaction Ancillary Services Structured Transactions Emissions Credits futures or forwards Weather triggered options Description Replacement reserve, regulation up, regulation down, spinning-reserve, non-spinning reserve Combine one or more product types, varying expiration dates, tiered prices, etc. Provides right to purchase emissions credits at a fixed price. Any transaction otherwise authorized with payment/exercise rights based on weather. Forecast Insurance Payment to SCE occurs in case of deviations of weather from forecast. SO2 Allowances2 Credits (“Allowances”) established under the 1990 Acid Rain Program amendments to the U.S. Clean Air Act to reduce sulfuric emissions from electric power plants and other SO2 sources. Under the EPA emission allowance trading program, regulated sources of SO2 emissions are required to relinquish one SO2 Allowance for each ton of SO2 emitted in the previous year. Purchase or sale of SO2 Allowances that are delivered within a few days of the transaction SO2 Allowance (Immediate Cash Settled) (purchase or sale) Forward SO2 Allowance (purchase or sale) 2 Purchase or sale of SO2 Allowances that are delivered at a future pre-determined date, could be fixed price or index-based price Benefit /Cost Needed to assure system reliability Tailor hedges to match your exposure. Hedge exposure to emissions limits resulting from contractual terms. Tailor hedges to match exposure correlated with weather conditions. Hedges costs resulting from inaccurate forecasts. Trading of SO2 Allowances furthers the intentions of U.S. Acid Rain Program of 1990. Net proceeds from the sale of SO2 Allowances benefit bundled service customers. Trading of SO2 Allowances furthers the intentions of U.S. Acid Rain Program of 1990. Net proceeds from the sale of SO2 Allowances benefit bundled service customers. Trading of SO2 Allowances furthers the intentions of U.S. Acid Rain Program of 1990. Net proceeds from the sale of SO2 Allowances benefit bundled service customers. Resolution E-4112, dated Oct. 18, 2007, which approved Advice 2133-E. (Continued) (To be inserted by utility) Advice 3349-E Decision 15-10-031 1D0 Issued by Russell G. Worden Director (To be inserted by Cal. PUC) Date Filed Effective Resolution
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Southern California Edison Rosemead, California (U 338-E) SOUTHERN CALIFORNIA EDISON COMPANY’S Sheet A-5 CONFORMED 2014 AB 57 BUNDLED PROCUREMENT PLAN APPENDICES Product / Transaction Description Benefit /Cost Options on SO2 Allowances (call or put options) (purchase or sale) The right but not the obligation to buy (sell) an underlying asset at some pre-specified price by some pre-determined point in time. May be purely a financially settled instrument or an option to buy (sell) some physical underlying commodity or asset. Options may be combined with other options or swaps to hedge a wide variety of positions. Purchase or sale of SO2 allowances (i.e., Sulfur Financial Instrument (SFI) Futures) that are delivered at a future pre-determined date. Futures are distinguished from generic forward contracts in that they contain standardized terms, trade on a formal exchange, are regulated by overseeing agencies, and are guaranteed by clearinghouses. Also, in order to insure that payment will occur, futures have a margin requirement that must be settled daily. Purchase or sale of GHG allowances that are delivered within a few days of the transaction. Sets a cap (floor) on the purchase price of an underlying asset at the expense of paying an option premium (fee) SO2 Allowance Futures (purchase or sale) Immediate Cash Settled (Spot) GHG allowance3 Forward GHG allowance4 3 Purchase or sale of GHG allowances that are delivered at a future pre-determined date. Allows trading of allowances to meet GHG compliance obligations and price risk management Allows trading of allowances to meet GHG compliance obligations. Allows trading of allowances to meet GHG compliance obligations and price risk management. Added per D.12-04-046, Ordering Paragraph (OP) 8. Id. 4 (Continued) (To be inserted by utility) Advice 3349-E Decision 15-10-031 1D0 Issued by Russell G. Worden Director (To be inserted by Cal. PUC) Date Filed Effective Resolution
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Southern California Edison Rosemead, California (U 338-E) SOUTHERN CALIFORNIA EDISON COMPANY’S Sheet A-6 CONFORMED 2014 AB 57 BUNDLED PROCUREMENT PLAN APPENDICES Product / Transaction Description Futures GHG allowance5 Purchase or sale of GHG allowances on approved exchanges that are delivered at a future predetermined date. Futures are distinguished from generic forward contracts in that they contain standardized terms, trade on a formal exchange, are regulated by overseeing agencies, and are guaranteed by clearinghouses. Also, in order to insure that payment will occur, futures have a margin requirement that must be settled daily. Purchase or sale of GHG offsets that are delivered within a few days of the transaction Immediate Cash Settled (Spot) CARB-certified GHG offset with Seller liability6 Forward CARB-certified GHG offset with Seller liability7 California Carbon Offset (CCO) Futures 5 Purchase or sale of GHG offsets that are delivered at a future pre-determined date. Product traded on the Intercontinental Exchange (ICE). Physically delivered CARB GHG offset credits. Benefit /Cost Allows trading of allowances to meet GHG compliance obligations and price risk management. Allows trading of offsets to meet GHG compliance obligations. Allows trading of offsets to meet GHG compliance obligations and price risk management Allows trading of offsets to meet GHG compliance obligations and price risk management Id. Id. Id. 6 7 (Continued) (To be inserted by utility) Advice 3349-E Decision 15-10-031 1D0 Issued by Russell G. Worden Director (To be inserted by Cal. PUC) Date Filed Effective Resolution
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Southern California Edison Rosemead, California (U 338-E) SOUTHERN CALIFORNIA EDISON COMPANY’S CONFORMED 2014 AB 57 BUNDLED PROCUREMENT PLAN APPENDICES Appendix B Authorized Non-Standard Products (Continued) (To be inserted by utility) 3349-E Advice Decision 1D0 15-10-031 Issued by Russell G. Worden Director (To be inserted by Cal. PUC) Date Filed Effective Resolution
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Southern California Edison Rosemead, California (U 338-E) SOUTHERN CALIFORNIA EDISON COMPANY’S CONFORMED 2014 AB 57 BUNDLED PROCUREMENT PLAN Sheet B-1 APPENDICES Authorized Non-Standard Products Products Demand Response Capacity (Demand Side) Electricity Transmission Products for non-CAISO Transmission Hourly Electricity Products Traded in the Day-Ahead or Beyond Day-Ahead Markets Locational Natural Gas Options Import Counting Rights (also known as Import Allocation Rights and Import Capability Transfers) Natural Gas Basis Options Physical Natural Gas Index Options Sales of Forward Energy from Resources Located Outside the CAISO Resource Adequacy Capacity Sales Resource Adequacy Capacity Purchases Resource Adequacy Swaps QF fixed for SRAC Floating Swap (Continued) (To be inserted by utility) 3349-E Advice Decision 1D0 15-10-031 Issued by Russell G. Worden Director (To be inserted by Cal. PUC) Date Filed Effective Resolution
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