Details for: PGE AL 5670-E-A.pdf


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Erik Jacobson
Director
Regulatory Relations

Pacific Gas and Electric Company
77 Beale St., Mail Code B13U
P.O. Box 770000
San Francisco, CA 94177
Fax: 415-973-3582

December 27, 2019

Advice 5670-E-A
(Pacific Gas and Electric Company ID U 39 E)

Public Utilities Commission of the State of California
Subject:

Supplemental: Procurement Transaction Quarterly Compliance Filing
(Q3, 2019)

Purpose
Pacific Gas and Electric Company (“PG&E”) is submitting this advice letter to the
California Public Utilities Commission (“Commission” or “CPUC”) related to its
Procurement Transaction Quarterly Compliance Report (“QCR”) for record period July 1,
2019 to September 30, 2019, (Q3-2019) to supplement the material in Confidential
Attachment G of Advice Letter 5670-E. Please note this workpaper is being provided as
additional documentation to Attachment G and does not replace Attachment G.
Background
Advice Letter 5670-E
PG&E submitted its QCR for Q3-2019 on October 30, 2019 in accordance with D.03-12062, Ordering Paragraph 19, which requires that the Procurement Transaction Quarterly
Compliance Reports to be submitted within 30 days of the end of the quarter.
Advice Letter 5670-E-A
The Multi-Year Local RA Solicitation (Phases I and II) spanned two quarters and was still
ongoing at the time of the Q3 2019 QCR Filing. The IE Report for this Solicitation could
not be finalized before the Q3 2019 QCR Filing date. In lieu of the IE Report, PG&E
included a Project Status Memo with its Q3 2019 QCR Filing stating that PG&E would
submit the final IE Report in a Q3 2019 QCR Supplemental Advice Letter Filing.

Attachment 1: Public Attachment G
Final Phase I and II Multi-Year RA Solicitation IE Report





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Advice 5670-E-A -2- December 27, 2019 Attachment 2: Confidential Attachment G Final Phase I and II Multi-Year RA Solicitation IE Report Protests PG&E asks that the Commission, pursuant to GO 96-B, General Rule 7.5.1, maintain the original protest and comment period designated in Advice 5670-E and not reopen the protest period. Effective Date PG&E requests that this Tier 2 advice letter become effective on regular notice, November 29, 2019, which is 30 calendar days after the date of filing. Advice Letter 5670E was suspended for a period of up to 120 days therefore there is no need to extend the effective date. The effective date of Advice Letter 5670-E-A remains suspended until disposition by Energy Division. Notice In accordance with General Order 96-B, Section IV, a copy of this advice letter is being sent electronically and via U.S. mail to parties shown on the attached list and the service list for Rulemaking (“R.”) 16-02-007. Address changes to the General Order 96-B service list should be directed to PG&E at email address PGETariffs@pge.com. For changes to any other service list, please contact the Commission’s Process Office at (415) 703-2021 or at Process_Office@cpuc.ca.gov. Send all electronic approvals to PGETariffs@pge.com. Advice letter filings can also be accessed electronically at: http://www.pge.com/tariffs/. /S/ Erik Jacobson Director, Regulatory Relations Attachments Attachment 1: Final Phase I and II Multi-Year RA Solicitation IE Report (Public) Attachment 2: Final Phase I and II Multi-Year RA Solicitation IE Report (Confidential) Attachment 3: Confidentiality Declaration and Matrix cc: Service List R.16-02-007 (Public Version) PG&E’s Procurement Review Group (Confidential Version)
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ADVICE LETTER SUMMARY ENERGY UTILITY MUST BE COMPLETED BY UTILITY (Attach additional pages as needed) Company name/CPUC Utility No.: Pacific Gas and Electric Company (ID U39E) Utility type: ELC GAS PLC HEAT ELC = Electric PLC = Pipeline WATER Contact Person: Kimberly Loo Phone #: (415)973-4587 E-mail: PGETariffs@pge.com E-mail Disposition Notice to: KELM@pge.com EXPLANATION OF UTILITY TYPE GAS = Gas WATER = Water HEAT = Heat (Date Submitted / Received Stamp by CPUC) Tier Designation: 2 Advice Letter (AL) #: 5670-E-A Subject of AL: Supplemental: Procurement Transaction Quarterly Compliance Filing (Q3, 2019) 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 #: with D.03-12-062 Does AL replace a withdrawn or rejected AL? If so, identify the prior AL: No 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 and Matrix 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: Jay Bukowski, (415)973-1727, JBBi@pge.com Resolution required? Yes No Requested effective date: 11/29/19 No. of tariff sheets: 0 Estimated system annual revenue effect (%): N/A Estimated system average rate effect (%): N/A 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: N/A Service affected and changes proposed1: N/A Pending advice letters that revise the same tariff sheets: N/A 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: Erik Jacobson, c/o Megan Lawson Title: Director, Regulatory Relations Utility Name: Pacific Gas and Electric Company Address: 77 Beale Street, Mail Code B13U City: San Francisco, CA 94177 Zip: 94177 State: California Telephone (xxx) xxx-xxxx: (415)973-2093 Facsimile (xxx) xxx-xxxx: (415)973-3582 Email: PGETariffs@pge.com Name: Title: Utility Name: Address: City: State: District of Columbia Telephone (xxx) xxx-xxxx: Facsimile (xxx) xxx-xxxx: Email: Zip: Clear Form
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PACIFIC GAS AND ELECTRIC COMPANY Attachment 1 Final Phase I and II Multi-Year RA Solicitation IE Report (Public)
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PACIFIC GAS & ELECTRIC Independent Evaluator Report for the 2019 Multi-Year Resource Adequacy Solicitation November 2019 CONFIDENTIAL – between PA and PG&E
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PA Regional Office: PA Consulting Group US Bank Tower, 633 W 5th Street, 26th Floor Los Angeles, CA 90071 USA Tel: +1 213 689 1515 Fax: +1 213 486 4801 www.paconsulting.com Version no: Prepared by: Document reference: PGE RA18 170410 C. Janecek CONFIDENTIAL – between PA and PG&E 1.0
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EXECUTIVE SUMMARY PA Consulting Group, Inc. (PA) served as the Independent Evaluator (IE) for the Pacific Gas & Electric (PG&E) 2019 Multi-Year Resource Adequacy (RA) Solicitation (2019 Multi-Year RA Solicitation or the Solicitation). This report provides PA's evaluation of the process from the drafting of the Solicitation documents through to the recommendation of selected bids and negotiation of contracts. Overview of Solicitation PG&E issued its 2019 Multi-Year RA Solicitation on July 26, 2019. Through this solicitation, PG&E offered to sell and requested bids for the following types of Resource Adequacy: Local, System, and Flexible RA and Import Allocation Rights (IAR). Additionally, PG&E’s Solicitation stated that PG&E would be willing to execute a limited number of combined purchase and sales transactions, provided the combined transactions would not result in a short position for PG&E. PG&E sought bids for the above RA types for Delivery Periods of January 2020 through December 2022. For all the RA types listed above, PG&E solicited interest and offers to purchase or execute combined purchase and sales transactions for RA in monthly transactions. The Solicitation evolved as it proceeded into a complex solicitation including the originally planned Phase I and Phase II of the Solicitation, as well including “Tranche 2” activities related to Phase I of the Solicitation. PG&E did not specify the amounts of RA capacity it wished to sell. Ultimately, PG&E contracted for over XXXX MW-mo of RA capacity and over XXXX MW of Import Allocation Rights sales for the 2020-2022 period, with a single month maximum of XXX MW in January 2020. PA’s IE Report PA’s IE report generally follows the California Public Utilities Commission’s (Commission or CPUC) Solicitation Shortlist Report Templates. The main sections include: • Section 1: Summary of the 2019 Multi-Year Resource Adequacy (RA) Solicitation • Section 2: Summary of PA’s role as IE for the Solicitation • Section 3: PG&E’s outreach efforts • Section 4: PG&E’s methodology design • Section 5: Fairness of the application of PG&E’s Bid Evaluation Criteria • Section 6: Merit of Solicitation shortlists • Section 7: Fairness of negotiations • Section 8: PA support for contract approval 1 CONFIDENTIAL – between PA and PG&E
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Main IE activities during solicitation PA’s role in PG&E’s Solicitation spanned approximately three months from July to October 2019. The following provides a summary of PA’s main activities during this solicitation: • PA participated in teleconference meetings with PG&E held prior to the issuance of the 2019 Multi-Year RA Solicitation to review all aspects of the protocol and methodologies for the bid conformance, evaluation and selection process. • PA reviewed drafts of the Solicitation documents prior to PG&E issuing the Solicitation. • PA participated in PG&E’s Phase I solicitation webinar held on July 30, 2019 and participated in PG&E’s Phase II solicitation webinar held on September 19, 2019. • PA received all communications between PG&E and bidders through PG&E’s Solicitation website and email system. PA directly received all the emails, including bids that were sent to and received from bidders through the Power Advocate procurement platform. PA also participated in calls that PG&E had with individual bidders. • PA discussed PG&E’s proposed Petition for Modification (PFM) with PG&E prior to the Petition’s filing, and PA participated in PG&E’s PFM Questions and Answers conference call session offered to all Phase I shortlisted bidders, held on September 12, 2019. • PA reviewed all Phase I and Phase II bids. • PA reviewed PG&E’s shortlisted bids prior to the initial shortlist notifications and prior to the final shortlisted notifications for both Phase I and Phase II. • PA reviewed PG&E’s contract negotiations via redlined documents with selected bidders to ensure that the negotiation process was fair and all bidders were treated consistently. • PA participated in PG&E’s Procurement Review Group (PRG) meetings on August 20, August 23, and September 17 of 2019. High level summary of findings Overall, PA confirms that PG&E conducted a fair and equitable Solicitation. Some specific findings are noted below: • PG&E in no way prevented PA from observing its process and analyzing its methods and did not interfere with PA’s conducting the Independent Evaluation. • PA finds that PG&E’s outreach for the Solicitation was adequate, the solicitation materials were clear and concise, and that PG&E further clarified its position in several follow-up bidder questions. • PA found the compressed timeline of the combined Phase I and Phase II solicitations proved challenging, and that PA recommends that the Independent Evaluator provide additional more comprehensive bid evaluations in future Solicitations. 2 CONFIDENTIAL – between PA and PG&E
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• Based on our review of PG&E’s analysis, our participation in calls and meetings and other IE activities, PA finds that PG&E conducted the 2019 Multi-Year RA Solicitation evaluation analysis fairly and selected appropriate offers. 3 CONFIDENTIAL – between PA and PG&E
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CONTENTS EXECUTIVE SUMMARY 1 Overview of Solicitation 1 PA’s IE Report 1 Main IE activities during solicitation 2 High level summary of findings 2 1 SUMMARY OF THE 2019 MULTI-YEAR RESOURCE ADEQUACY SOLICITATION 6 1.1 Solicitation Bid Evaluations, Shortlisting, and Negotiations 7 2 INDEPENDENT EVALUATOR ACTIVITIES DURING THE SOLICITATION 8 2.1 IE’s key roles and responsibilities 8 2.2 PA's activities as IE 8 3 ADEQUACY OF PG&E’S OUTREACH 12 3.1 Notifications and announcements 12 3.2 Solicitation materials 12 4 PG&E’S BID EVALUATION DESIGN 13 4.1 Principles used to evaluate methodology 13 4.2 Amount and type of RA products 13 4.3 Description of PG&E’s bid evaluation methodology 13 4.4 Evaluation of PG&E’s methodology 15 5 FAIRNESS OF PG&E BID EVALUATION 16 5.1 Principles IE used to evaluate evaluation methodology 16 5.2 Administration of bid evaluation process 16 5.3 IE’s review of PG&E’s conformance checks 16 5.4 Review of PG&E’s application of the bid evaluation methodology 16 5.5 IE’s review of PG&E’s selected shortlists 17 5.6 Fairness of PG&E’s evaluation 18 5.7 Recommendations 18 6 MERIT OF SOLICITATION SHORTLIST 20 6.1 Did PG&E conduct the solicitation consistent with Commission decisions and PG&E’s defined bid evaluation methodology? 20 6.2 Do selected shortlisted bids provide the best overall value to ratepayers? 20 6.3 Did the shortlist conform to PG&E’s RA sales strategy? 20 6.4 Reasonableness of the shortlist 20 7 FAIRNESS OF PROJECT-SPECIFIC NEGOTIATIONS 21 4 CONFIDENTIAL – between PA and PG&E
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7.1 Principles PA used to evaluate fairness of negotiations 21 7.2 Describe fairness of negotiations 21 7.3 What terms and conditions underwent significant changes during the course of negotiations? 21 7.4 Was similar information/options made available to other participants? 22 8 MERIT OF CONTRACT APPROVAL 23 5 CONFIDENTIAL – between PA and PG&E
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1 SUMMARY OF THE 2019 MULTI-YEAR RESOURCE ADEQUACY SOLICITATION Through this solicitation, PG&E offered to sell and requested bids for the following types of Resource Adequacy (RA): Local, System, and Flexible RA and Import Allocation Rights (IAR). Additionally, PG&E’s Solicitation stated that PG&E would be willing to execute a limited number of combined purchase and sales transactions, provided the combined transactions would not result in a short position for PG&E. The Solicitation evolved as it proceeded into a complex solicitation including the originally planned Phase I and Phase II of the Solicitation, as well including “Tranche 2” activities related to Phase I of the Solicitation. The two Phases of the Solicitation were originally contemplated. The Solicitation protocol for Phase I, launched on July 26, 2019, stated that Phase I was intended to seek bids after the Initial 2020 Year-Ahead RA Allocations from the CPUC had been received by Load Serving Entities (LSE). Ultimately, Phase I bids were due August 6, 2019. Further, the Phase I protocol indicated that Phase II would be issued after PG&E received its Final 2020 Year-Ahead Allocations from the CPUC. Ultimately, the Phase II Solicitation was launched prior to LSEs receiving their Final Allocations; however, the bid submittal deadline for Phase II occurred after the Allocations were received. Prior to Phase I bids being due, it became apparent that in addition to being generally long on RA on a System basis, PG&E was in fact short on RA for certain months and for certain Local areas, specifically the Kern, North Coast/North Bay, Sierra, and Stockton areas. At this point, PG&E decided to create a “Tranche 2” of the Phase I solicitation and issued a Market Notice requesting parties with potential availability of RA in those Local Areas and who wished to sell RA to contact PG&E. PG&E issued the Tranche 2 Market Notice on Friday, August 16. The Market Notice did not specify a deadline for “bids” in response to the Notice, but rather indicated that discussions related to potential PG&E Local RA purchases would occur concurrently with the existing Phase I discussions. At the time of the Tranche 2 Market Notice, PG&E transaction teams were busy conducting negotiations with Phase I shortlisted counterparties, which resulted in significant email exchanges and negotiation conference calls. In addition to the Tranche 2 Market Notice, PG&E transaction teams also verbally asked counterparties during these negotiation calls if they had any available Local RA in those areas which they may be interested in selling to PG&E. Further, finding that it was likely to remain short for certain months in certain Local Areas for RA, PG&E issued a Petition for Modification (PFM) on Monday, September 11, related to its Local RA requirements. The PFM requested that the CPUC Decision 19-02-022 be modified to allow PG&E to comply with its Local RA requirements using its existing length in Other Local areas as it did before the Decision. At this time, PG&E notified all shortlisted counterparties of its PFM filing and provided them with a courtesy notification and link to the PFM filing. Further, the PG&E team held a conference call forum open to all shortlisted bidders to answer questions about the PFM; after the forum call, PG&E distributed a Questions and Answers (Q and A) document to all shortlisted bidders and to the PRG. The 6 CONFIDENTIAL – between PA and PG&E
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forum and subsequent Q and A document provided clear and consistent messaging regarding the PFM from PG&E to the bidders. At the time of this report, the CPUC has not yet ruled on the PFM. Phase II of the Solicitation was launched September 18, with Phase II bids due October 3, 2019 – the Phase II bid submittal deadline was deliberately set to occur after LSEs received Final Allocations for 2020 Year-Ahead Allocations from the CPUC and after the Final Net Qualifying Capacity (NQC) List for 2020 was released by the CAISO. Phase II concluded with final transactions being executed in late October. 1.1 Solicitation Bid Evaluations, Shortlisting, and Negotiations 1 counterparties in the Phase I Solicitation. After bid PG&E received bids from compliance checks and evaluations, PG&E sent shortlist notifications to bidders on August 30, 2019. Phase I and Tranche 2 activities have concluded, with PG&E executing transactions with counterparties for a total of MW of Generic RA and MW of Import Allocations Rights sales by PG&E, and MW of Generic RA purchases by PG&E. Phase II of the solicitation was launched on September 18, 2019. PG&E received bids from counterparties in the Phase II Solicitation. After bid compliance checks and evaluations, PG&E sent shortlist notifications to shortlisted bidders. Phase II executed transactions totaled MW of Generic RA and MW of Import Allocations Rights sales by PG&E, and MW of Generic RA purchases by PG&E. 1 There were bidders. However, the bids were identical and identified as mutually exclusive. The Solicitation did not allow mutually exclusive bids across different counterparties. After clarifying with the bidders, the and was not evaluated, ultimately leaving counterparties’ bids to be evaluated. 7 CONFIDENTIAL – between PA and PG&E
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2 INDEPENDENT EVALUATOR ACTIVITIES DURING THE SOLICITATION This section provides a description of PA’s activities as the Independent Evaluator throughout the Solicitation, bid selection process, and contract negotiations. 2.1 IE’s key roles and responsibilities The role of the IE is to provide advice to the utility on the design, administration, and evaluation aspects of the Solicitation. The CPUC has clarified that the role of the IE is not to conduct or administer the solicitation, but to "separately evaluate and report on the IOU's entire solicitation, evaluation, and selection process.” Additionally, the IE is to ensure that PG&E treats all bidders fairly and equitably and that no particular counterparty is favored. The IE also ensures that the bid selection process is transparent and is aligned with the procurement requirements. PG&E can also call on the IE’s advice as to various evaluation issues that may arise during the Solicitation process. During the course of this Solicitation, PG&E did consult with the IE regarding certain aspects of the evaluation process. 2.2 PA's activities as IE This section describes the activities PA performed associated with each stage in the Solicitation process in the role of IE for the 2019 Multi-Year RA Solicitation. PA was involved from PG&E's development of the solicitation materials in mid-July through the selection of the bids and the negotiation and execution of contracts in late October. PA evaluated whether the procedures followed by PG&E were aligned with the process it established in its Solicitation protocol and provided fair and equitable treatment of all bids. PA was in regular contact with PG&E staff throughout the process, addressing PG&E's questions, identifying and resolving potential issues, and providing recommendations throughout the process. 2.2.1 Solicitation planning meetings PA reviewed the Phase I Solicitation protocol prior to its issuance and held discussions with PG&E regarding the development of the solicitation protocol, evaluation methodology, draft Confirmation Agreement, and other solicitation materials. PG&E provided the draft Confirmation Agreement including highlights of changes from prior versions. Similarly, PG&E held planning discussions with PA and provided PA with the draft Phase II Solicitation protocol for review prior to launching Phase II. 2.2.2 Solicitation materials PG&E shared early copies of the draft materials with PA in July 2019 prior to the Solicitation protocol issuance. PG&E developed the solicitation materials to reflect the specifics of the 2019 Multi-Year RA Solicitation, including discussion of the planned Phase II Solicitation. While this Solicitation was complex as it contemplated two Phases as well as potential combined purchase and sales transactions, PG&E kept the Solicitation materials as clear and concise as possible while describing the two Phases. While evaluating Phase I bids, it became apparent that even after consideration of the aggregate bid volumes, PG&E was in fact short on RA for certain months and for certain 8 CONFIDENTIAL – between PA and PG&E
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Local areas, specifically the Kern, North Coast/North Bay, Sierra, and Stockton areas. PG&E held a discussion with PA regarding PG&E’s decision to create a “Tranche 2” of the Phase I solicitation, and issued a Market Notice on requesting parties with potential availability of RA in those Local Areas and who wished to sell RA to contact PG&E. PG&E provided PA with draft Phase II Solicitation materials, which were similar to Phase I materials and described the process and timing for Phase II bid submittals. 2.2.3 Bid submittal process PG&E maintained a Solicitation website2 which contained all relevant documents, including Phase I and II Solicitation protocols, draft RA Confirmations, and Bid Forms. PG&E used the Power Advocate procurement website for the Solicitation. All Phase I and Phase II Bids for this Solicitation were required be submitted electronically through Power Advocate. During the Phase I launch, PG&E strongly encouraged participants to register with Power Advocate at least one week before bids were due. PG&E posted detailed instructions on the Solicitation website for submitting bids and using the Power Advocate platform. In the Tranche 2 Market Notice, PG&E requested bidders with interest in selling Local RA in the four Local Areas of need for PG&E – Kern, North Coast/North Bay, Sierra, and Stockton – to contact PG&E to discuss potential transactions. 2.2.4 Communication with bidders Prior to bids being submitted, PG&E communicated with bidders primarily via email and via the pre-bid webinars. PG&E conducted a Phase I pre-bid webinar on July 30, 2019 and presented the solicitation materials to the webinar attendees and answered questions during the webinar. PG&E conducted a Phase II pre-bid webinar on September 19, 2019, presenting Solicitation materials and answering questions. The PG&E team held a conference call forum open to all Phase I shortlisted bidders to answer questions about the PFM; after the forum, PG&E distributed a Questions and Answers (Q and A) document to all shortlisted bidders. PA participated in the webinars and conference call, reviewed bidder questions submitted during the webinars, and listened to the audio recordings of both webinars’ Question and Answers sections. 2.2.5 Initial bid review and conformance check After receiving Phase I bids, PG&E conducted a conformance check on each bid to determine its compliance with all bid requirements. Several bidders had failed to include every form required in the bid instructions. PG&E contacted the bidders at once, copying PA on all emails, informing bidders of their missing forms and providing a one-day window for bidders to provide any missing information. Neither PG&E nor PA considered these bids to be non-conforming as much as incomplete; PA considered PG&E’s efforts to include as many bids as possible in the Phase I evaluation reasonable. Several Phase II bidders had questions regarding the use of the Bid Form template to submit their bids, and emailed PG&E prior to the bid submittal deadline for clarification. The majority of the bidders copied PA on initial email contacts with PG&E; for those that didn’t, PG&E copied PA on the initial replies in answering questions about the forms. 2 www.pge.com/rfo/ra-solicitation 9 CONFIDENTIAL – between PA and PG&E
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Given the complexity of the Solicitation, with PG&E buying and selling both Local and System RA as well as Import Allocation Rights, PA did not consider the number of questions regarding the bidding process to be excessive. PG&E and PA did not find any of the bids to be fully non-conforming and PG&E did not reject any bids for non-conformance. 2.2.6 Evaluation process PG&E held discussions with PA prior to both Phases’ bid submittal deadlines to review the evaluation methodology. PG&E developed an optimization model incorporating PG&E’s initial supply positions for System and Local RA and IAR; the optimization model and evaluation process are described in detail in Section 4 of this report. PG&E described the model and its methods for ranking, accepting, and rejecting bids based on a combination of bid price and requested volumes. PG&E awarded equally priced bids on a pro rata basis subject to PG&E’s supply availability for the given product and given delivery timeframe. While PA did not execute the optimization models, PA conducted random “spot checks” of several bids from both Phase I and Phase II and their ultimate acceptance or rejection and found no issues with PG&E’s ultimate bid shortlisting. 2.2.7 Shortlist determination The initial proposed Phase I shortlist was provided to the Procurement Review Group (PRG) on Friday, August 16. PG&E provided PA with copies of the proposed shortlist and the PRG presentation materials. PG&E reviewed and discussed revisions to the shortlist with PA over the course of the following week and provided the final shortlist prior to notifying bidders of their shortlisting status. The Phase II shortlisting process had challenges as described in Section 5 of this report. However, the issues PA identified were related to the bid evaluation process, including the short evaluation timeframe, rather than being issues related to the evaluation outcomes or any concerns regarding fairness toward bidders. Ultimately PG&E reviewed with and discussed all shortlists with PA prior to notifying any bidders and incorporated PA’s recommendations regarding decisions PG&E faced. 2.2.8 Contract negotiations To streamline the process and reduce time between shortlisting notifications and Confirm executions, PG&E included the draft Confirms documents in the Solicitation protocols and requested that prospective bidders provide comments and redline edits to the draft Confirms with their bid submittals. Following receipt of bids, PG&E began discussing bidders’ comments to the draft Confirms via emails and conference calls. In each call, PG&E notified bidders that they hadn’t yet finalized the shortlist but wished to expedite negotiations by discussing Confirm language before shortlisting. Though a small number of counterparties expressed their wishes to not discuss the Confirm until they had been shortlisted, PA agreed with PG&E’s approach and found that it helped to expedite negotiations. PG&E began negotiations in earnest with the selected bidders immediately following the Phase I and Phase II shortlisting notifications. With a total of counterparties shortlisted across Phase I and Phase II, in addition to several counterparties responding to the Tranche 2 Market Notice, there were hundreds of emails and approximately 50 conference calls between PG&E and counterparties. PA monitored all email communications during negotiations and participated in the majority of negotiation meetings via phone. More details of any negotiation observations and issues are discussed further in Section 7. 10 CONFIDENTIAL – between PA and PG&E
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2.2.9 PG&E's Procurement Review Group meetings During the Solicitation, there were three PRG meetings at which PG&E presented information related to the Solicitation: On August 20, August 23, and September 17. Additionally, the PG&E team provided regular updates to the PRG via emails containing summaries of the bids and summaries of the shortlists. PA participated in the three PRG meetings concerning the Solicitation and answered questions and provide additional feedback during the meetings as requested by the PRG. PA also monitored all emails between PG&E and the PRG. 11 CONFIDENTIAL – between PA and PG&E
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3 ADEQUACY OF PG&E’S OUTREACH This section addresses the adequacy of PG&E's outreach for the Solicitation as well as the Solicitation materials. 3.1 Notifications and announcements PG&E‘s outreach included notifications to PG&E’s wholesale RFO distribution list and PG&E’s e-solicitation RA list. Because the Solicitation primarily involved PG&E selling RA products, there was a relatively small number of counterparties who could be expected to participate in the Solicitation, as either load serving entities (LSE) or their representatives. However, early in Phase I of the Solicitation it became apparent that PG&E was going to hold short positions in certain Local RA areas. At this time, PG&E widened its outreach to include as many potential RA sellers as possible, including non-LSEs. PG&E released a Market Notice on August 16, advertising its desire to purchase Local RA. Further, PG&E also placed a notice on the California Independent System Operator (CAISO) electronic Bulletin Board, seeking Local RA availability. Also, as PG&E was having negotiation calls with counterparties regarding the draft Confirms (calls which PA was monitoring), PG&E directly asked all counterparties if they were aware of the Market Notice and if they had any Local RA volumes for sale. At the time of the Solicitation, there was an elevated interest in RA procurement across the California energy markets, due to the pending RA compliance requirements for 2020-2022. PA believes that between this general market awareness of RA procurement activities and PG&E’s efforts to publicize its Solicitation and desire to purchase Local RA volumes, PG&E extended adequate outreach for the Solicitation. 3.2 Solicitation materials PG&E created Solicitation protocols and associated materials for each Phase of the Solicitation. The solicitation materials were posted to PG&E’s 2019 Multi-Year RA Solicitation website that allowed the bidders to easily access the Solicitation protocols, draft RA Confirmation and Confidentiality agreements, Bid Form Templates, and responses to Frequently Asked Questions (FAQ), as well as view the overall Solicitation schedule for each Phase. PG&E also conducted a pre-bid webinar for each Phase of the Solicitation, during which PG&E presented the solicitation materials to the webinar attendees, answered questions during the webinar, and provided audio recordings of the webinar on the Solicitation website. The presentations covered during the webinars were also posted on the Solicitation website. In addition to the Solicitation protocols and bid documents, PG&E also provided a posting to the CAISO electronic Bulletin Board seeking indicative offers for Local Areas where PG&E was short. In PA's opinion, PG&E provided appropriate Solicitation materials and provided prompt response to any questions received by potential bidders. 12 CONFIDENTIAL – between PA and PG&E
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PG&E’S BID EVALUATION DESIGN 4 This section describes PG&E’s bid evaluation methodology for fair offer evaluation. 4.1 Principles used to evaluate methodology PA used the following principles to guide its evaluation: • The procurement targets and objectives should be clearly defined in PG&E’s solicitation materials; • The evaluation should only be based on those criteria requested in the response form; • The methodology should identify how quantitative measures will be considered and be consistent with an overall metric; • The approach should not be biased for or against specific counterparties; and • The methodology does not have to be the one that the IE would independently have selected but it needs to be “reasonable”. 4.2 Amount and type of RA products In the Solicitation, PG&E offered to sell and requested bids for the following types of Resource Adequacy (RA): Local, System, and Flexible RA and Import Allocation Rights (IAR). Additionally, PG&E’s Solicitation stated that PG&E would be willing to execute a limited number of combined purchase and sales transactions, provided the combined transactions would not result in a short position for PG&E. Finally, as PG&E’s thinking and RA positions evolved during Phase I, PG&E began advertising its need to purchase Local RA volumes in four Local Areas. PG&E did not specify the volumes it had available to sell or volumes it needed to purchase. The delivery terms for all the RA products covered by the Solicitation were January 2020 through December 2020 (in monthly transactions, no annual, seasonal, or quarterly strips were considered by PG&E) for System RA and Import Allocation Rights, and January 2020 through December 2022 for Local RA and combined purchases and sales transactions. 4.3 Description of PG&E’s bid evaluation methodology PG&E’s valuation and selection approach was intended to evaluate the different product types on as equal a footing as possible. The initial step included a conformance check of each offer. The conforming offers then went through an optimization analysis designed to maximize ratepayer value while maintaining compliance with RA requirements. The methodology considered both quantitative as well as qualitative factors as described below. 4.3.1 Conformance check The initial analysis included an assessment of conformance. All offers needed to conform to the minimum participation criteria and eligibility. The Solicitation was less complex than other procurement processes in which the utility is seeking to acquire resources, and as such had more limited conformance requirements. The conformance requirements were generally limited to the following required documents: 13 CONFIDENTIAL – between PA and PG&E
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• A redline mark-up of the RA Confirmation or a statement that the bidder accepts PG&E’s form RA Confirmation without change; • RA Bid Form Template, indicating the types, delivery term, and volumes the bidder wished to purchase; • An acknowledgement of the Solicitation Confidentiality Agreement; and • Documentation of the bidding entity’s legal status from the California Secretary of State. Bids were required to be submitted electronically to PG&E’s Solicitation site on the Power Advocate platform by the given deadline for each Phase of the Solicitation. PA is not aware of any late bids which were submitted past the submittal deadlines. 4.3.2 Quantitative bid evaluation PG&E primarily relied on a quantitative evaluation of each bidder’s proposed volumes of RA desired and the bidders proposed price for each product. PG&E noted that due to regulatory changes related to disaggregating PG&E’s “Other Local” Local Area and related to the revised three year forward requirements, there was increased complexity with the evaluation of bids received relative to prior RA solicitations: 2018 Multi-Year RA Sale Solicitation 2019 Multi-Year RA Solicitation • • • Combined Purchase and Sales System Local Flexible • 14 CONFIDENTIAL – between PA and PG&E Sales • Development of supply curves Purchases • Flexible Stockton • Local Sierra • System North Coast/North Bay • Sales Kern • • Humboldt • Other Fresno • • Product • Bay Area Bay Area • Transaction Type • • • • Local Area Import Allocation Rights
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Bid optimization 4.4 Evaluation of PG&E’s methodology This section addresses the application of PG&E methodology and the review of PG&E’s results is provided in Section 5. Overall PA believes that PG&E’s methodology is reasonable. This judgment is within the context of the principles set forth in Section 4.1. While PA believes the methodology is reasonable, PG&E’s application of the methodology did result in relatively minor challenges as described in Section 5. 15 CONFIDENTIAL – between PA and PG&E
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FAIRNESS OF PG&E BID EVALUATION 5 This section addresses the application or administration of the methodology described in Section 4. 5.1 Principles IE used to evaluate evaluation methodology As in the previous section, PA used the following principles to guide its evaluation, and in this case phrased as questions: • Were bidder questions answered fairly and consistently and the answers made available to all? • Did the utility ask for "clarifications" that provided the bidder an advantage over others? • Were all bids given equal credibility in the economic evaluation? 5.2 Administration of bid evaluation process A description of PA’s activities in its role as IE is provided in Section 2. Based on PA’s participation and observations we believe that: • Bidder questions were answered fairly and consistently – PA monitored all communications between bidders and PG&E including questions, and believes the questions posed were reasonably and fairly answered – PG&E posted FAQs on the Solicitation’s website; • PG&E’s clarification questions were minimal and reasonable, and did not advantage any bidder; • PG&E applied conformance requirements fairly to all bids and consistent with bid documents; • All conforming bids were given equal credibility in the quantitative evaluation; • Bids were ranked and evaluated as consistently as possible; and • PG&E’s evaluation of bids and selection of shortlisted bids conformed to the Solicitation documents. 5.3 IE’s review of PG&E’s conformance checks After the Phase I and II bids were submitted and the Solicitation(s) closed, PG&E began an initial conformance check. PA also received a complete copy of all the bids as they were submitted and prepared an independent assessment to determine if the bids conformed the requirements. Given the Solicitation was relatively straightforward with few requirements, PA did not anticipate and in fact did not identify any non-conforming bids. PA is not aware of any bids which PG&E rejected for non-conformance. 5.4 Review of PG&E’s application of the bid evaluation methodology 5.4.1 Review of supply curves and general assumptions PA reviewed the supply curves that PG&E developed to evaluate the bids and found them reasonable. 16 CONFIDENTIAL – between PA and PG&E
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5.4.2 Review of evaluation of offers PA reviewed PG&E’s quantitative evaluation through a spot checking of individual bids and their acceptance for shortlisting or rejection by PG&E. This process and spot checking occurred over several iterations of potential shortlists for both Phase I and Phase II bids. Through this process, PA was able to review and confirm PG&E’s interpretation of the original bid data as well as the application of the optimization modeling. PG&E’s evaluation of the bids consisted of optimizing the bids for value and RA requirements compliance, which required updating PG&E’s RA positions for System RA as well as various Local RA positions after combined purchase and sales transactions were selected, as the combined transactions both increased and decreased RA positions depending on the specifics of the transaction. PA held evaluation protocol discussions with PG&E for both Phase I and Phase II evaluations, and PA further conducted individual bid checks, following the bid through the optimization logic to confirm the bid was ultimately either selected or rejected appropriately. 5.5 IE’s review of PG&E’s selected shortlists PA held discussions with PG&E regarding each of its proposed shortlists in Phase I and Phase II. The Phase I shortlisting process was previewed to the PRG on August 20, 2019. PA participated in that PRG meeting via telephone and answered questions from PRG members. The final shortlist was provided on August 21; PA agreed with the accepted bids on the final shortlist. 17 CONFIDENTIAL – between PA and PG&E
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After revisions to the initial Phase II shortlist to account for the issues described above, PA believes the final Phase II shortlist was selected appropriately. 5.6 Fairness of PG&E’s evaluation Based on PA’s review of PG&E’s analysis, participation in calls and meetings and other IE activities, PA believes that PG&E conducted the 2019 Multi-Year RA solicitation evaluation analysis fairly. 5.7 Recommendations PA believes that PG&E conducted the 2019 Multi-Year RA Solicitation evaluation in a fair and consistent manner and that the Solicitation process went reasonably smoothly. While PA found the timeline for this Solicitation to be relatively short, we found that the majority of the time spent on the negotiations for the transactions was spent on negotiating language in the Confirm agreements related to the transactions. PA noted that the majority of the time spent negotiating the Confirm agreement language was related to the insertion of clauses to PG&E’s standard Confirms which addressed credit and pre-payment terms resulting from PG&E’s bankruptcy. Specific to the bid evaluation process and timeline, PA recommends that wherever possible, in future Solicitations PG&E allow for additional time to conduct the quantitative evaluations. PA understands that the timeframes for both the Phase I and Phase II evaluations were driven by the timing of the preliminary and final RA allocations released by the CPUC and the final NQC determinations by the CAISO relative to the October 31st compliance filing requirement. While PA understands that the timing of the allocations and NQC list are driven by entities outside of PG&E’s control, PA also notes that the challenges related to the Phase II shortlist were internal to PG&E, and involved the bids being inadvertently omitted from the bid 18 CONFIDENTIAL – between PA and PG&E
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evaluation model. PA commends PG&E for immediately advising the IE upon discovery of the omissions, and for notifying affected counterparties immediately that a shortlisted volumes revision would be made soon. However, PA recognizes that the situation could have caused compliance issues for PG&E if PG&E hadn’t revised the shortlist. To this end, PA has advised PG&E that in future solicitations, PA will recommend that PA conduct more detailed evaluations of all bids, enabling PA to also potentially identify any shortlisting issues and alert PG&E prior to counterparties being notified of their awards. 19 CONFIDENTIAL – between PA and PG&E
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6 MERIT OF SOLICITATION SHORTLIST Through the bid evaluation and selection process, PA believes that PG&E selected the best offers submitted for the 2019 Multi-Year RA Solicitation. 6.1 Did PG&E conduct the solicitation consistent with Commission decisions and PG&E’s defined bid evaluation methodology? It is PA’s opinion that PG&E conducted a fair solicitation consistent with Commission decisions and PG&E’s defined bid evaluation methodology. 6.2 Do selected shortlisted bids provide the best overall value to ratepayers? PA believes PG&E fairly selected its shortlists of bids for the Solicitation and that the bids provide the best overall value to ratepayers. 6.3 Did the shortlist conform to PG&E’s RA sales strategy? The shortlists prepared by PG&E did conform to the RA sales strategy. Primarily due to increasing CCA load-shifting, PG&E has seen an increasing surplus of RA in PG&E’s Bundled Portfolio. PG&E’s Bundled Procurement Plan provides for PG&E’s goal of providing affordable electric service for its bundled customers. PG&E’s RA sales strategy in this Solicitation was to seek to offset its procurement costs by partially monetizing its RA length. PG&E succeeded in this effort. 6.4 Reasonableness of the shortlist In PA’s opinion, PG&E’s shortlists were reasonable. 20 CONFIDENTIAL – between PA and PG&E
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FAIRNESS OF PROJECT-SPECIFIC NEGOTIATIONS 7 PA closely monitored the contract negotiations and PG&E gave PA the opportunity to join negotiation teleconferences, provided PA copies of contract drafts, included PA on e-mails, and instructed counterparties to include PA on all communications. 7.1 Principles PA used to evaluate fairness of negotiations PA applied the following three principles to evaluate the fairness of negotiations: • PG&E should not show favoritism toward any bidder by allowing contract conditions not offered to other bidders unless those conditions are balanced by comparable concessions by the bidder; • PG&E should not negotiate harder or less hard with a bidder than with any other bidder; and • PG&E should not attempt to impose contract conditions in the negotiation that significantly change the balance of the bargain, relative to what the bidder could have reasonably expected based on the Solicitation protocol materials. 7.2 Describe fairness of negotiations PA participated in most of the negotiation meetings and received copies of red-lined draft contract documents to review. The negotiations largely consisted of discussions related to the counterparties’ desire to avoid collateral requirements by using pre-payments for each RA product period. PA believes that PG&E treated bidders consistently and fairly relative to each other (the first two principles above). 7.3 What terms and conditions underwent significant changes during the course of negotiations? PG&E provided bidders a draft RA Confirm agreement with the initial Solicitation materials. Providing draft contracts prior to bid submittal is beneficial for both the bidders and PG&E. Draft contract documents provide bidders more clarity on the product, risk sharing, technical and other factors so that they are able to design and price their offers appropriately. It also can improve PG&E’s ability to evaluate the bids when the requirements and parameters are clearly identified as part of the bidding process. 7.3.1 Credit Requirements Several bidders requested alternative credit and pre-payment requirements related to PG&E’s current bankruptcy status. PA found that PG&E addressed these questions consistently across counterparty negotiations. While PG&E attempted to ensure that Confirm agreements remained standard across counterparties, in some cases PG&E did agree to modify language to satisfy counterparty concerns. PA reviewed all modifications – without conducting any legal review and without providing any legal opinion – and believes the modifications were: 1) appropriate to satisfy counterparty concerns; and 2) did not unfairly advantage one bidder over another. 21 CONFIDENTIAL – between PA and PG&E
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7.4 Was similar information/options made available to other participants? Overall PA believes that similar information/options were made available to each participant, including the opportunity to discuss Confirm language related to counterparty protections related to PG&E’s current bankruptcy status. 22 CONFIDENTIAL – between PA and PG&E
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8 MERIT OF CONTRACT APPROVAL PG&E negotiated and signed a total of thirty-six contracts through this Solicitation, including PG&E purchases and sales in Phase I and Phase II of the Solicitation. These contracts will involve RA sales of over MW of RA sales including RA Import Allocation Rights and over MW of RA purchases, with RA sales in every month from January 2020 through December 2022. Through the bid evaluation and selection process, PA believes that PG&E selected appropriate offers. Based on the analysis and assumptions described throughout this report, PA recommends approval of these transactions. 23 CONFIDENTIAL – between PA and PG&E
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1 CONFIDENTIAL – between PA and PG&E
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PACIFIC GAS AND ELECTRIC COMPANY Attachment 2 Final Phase I and II Multi-Year RA Solicitation IE Report (Confidential)
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PACIFIC GAS AND ELECTRIC COMPANY Attachment 3 Confidentiality Declaration and Matrix
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BEFORE THE PUBLIC UTILITIES COMMISSION OF STATE OF CALIFORNIA PACIFIC GAS AND ELECTRIC COMPANY QUARTERLY COMPLIANCE REPORT FILING SUPPLEMENTAL ADVICE LETTER 5670-E-A DECLARATION OF JAY BUKOWSKI SEEKING CONFIDENTIAL TREATMENT OF CERTAIN DATA ANI) INFORMATION CONTAINED IN PG&E’S SUPPLEMENTAL ADVICE LETTER 5670-E-A Q3 2019 OCR: CONFIDENTIAL ATTACIIMENT FINAL PHASE I AND II MULTI-YEAR RA SOLICTATION IE REPORT I, Jay Bukowski, declare: l. I am presently employed by Pacific Gas and Electric Company and have been an employee at PG&E since October 1998. My current title is Manager within PG&E’s Energy Policy and In this position, my responsibilities include review of regulatory reports and managing PG&E"s Procurement Review Group and Independent Evaluator program. In carrying out these responsibilities, I have acquired knowledge ofPG&E’s regulatory reporting and have also gained knowledge of electric energy procurement data, processes, and practices. This declaration is based on my personal knowledge of PG&E’s practices and my understanding ofthe Commission’s decisions protecting the confidentiality ol‘ markevsensitivc information. Attachment 2. Based on my knowledge and experience, and in accordance with Decisions 06- 06-066, l4—l 0-033 and relevant Commission rules, I make this declaration seeking confidential treatment ol‘PG&E‘s December 27, 2019 Supplemental Advice Letter 5670-E-A, Q3 20l QCR, Confidential Attachment Final Phase I and II Multi-Year RA Solicitation IE Report. 3. Attached to this declaration is a matrix identifying the data and information for which
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PG&E is Sccking conliclential treatment. The matrix specifies that the material PG&l-L is seeking to protect constitutes enntidential market sensitive data and information covered by D.06-06- 066, 14-] 0033, and/or Public Utilities Code Section 454.5(g). The matrix also why eonlidential protection is justified. Further, the data and information: (1) is not already public; and (2) cannot be aggregated, redacted, summarized or otherwise protected in a way that allows partial disclosure. By this reference, I am incorporating into this declaration all of the explanatory text in the attached matrix that is pertinent to this submittal. declare under penalty of perjury, under the laws 0l‘the State of California, that the foregoing is true and correct. Executed on December 27, 2019, at San Francisco, Califoritia. Jay Bukowski
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PACIFIC GAS AND ELECTRIC COMPANY’S (U 39 E) QUARTERLY COMPLIANCE REPORT ADVICE LETTER 5670-E-A PROCUREMENT TRANSACTION QUARTERLY COMPLIANCE REPORT OF Q3 2019 DECEMBER 27, 2019 IDENTIFICATION OF CONFIDENTIAL INFORMATION Redaction Reference Category from D.06-06-066, Appendix 1, or Separate Confidentiality Order that Data Corresponds To Justification for Confidential Treatment Length of Time Date To Be Kept Confidential Document: Quarterly Compliance Report Supplemental Advice Letter 5670-E-A Item VI) E) and F) Utility Planning Area Matrix Net Open (Electric) Confidential Attachment 2: Final Phase I and II Multi-Year RA Solicitation IE Report Item VII) B) Bilateral Contract Terms and Conditions – contracts and power purchase agreements between utilities and non-affiliated third parties; Items VIII) A) Bid Information and VIII) B) Specific quantitative analysis involved in scoring and evaluation of participating bids Disclosure of information in these executed contracts could provide market participants regarding PG&E’s net open position. 3 Years Disclosure of bid term, price and notional value information would provide market sensitive information regarding PG&E bid strategy and selection. This is commercially market sensitive information because it could be used by other market participants to gain a commercial advantage and could impact market prices and cause harm to PG&E’s customers. 3 Years Matrix Page 1
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PG&E Gas and Electric Advice Submittal List General Order 96-B, Section IV AT&T Albion Power Company Alcantar & Kahl LLP Alta Power Group, LLC Anderson & Poole Atlas ReFuel BART Barkovich & Yap, Inc. P.C. CalCom Solar California Cotton Ginners & Growers Assn California Energy Commission California Public Utilities Commission California State Association of Counties Calpine Cameron-Daniel, P.C. Casner, Steve Cenergy Power Center for Biological Diversity Chevron Pipeline and Power City of Palo Alto City of San Jose Clean Power Research Coast Economic Consulting Commercial Energy County of Tehama - Department of Public Works Crossborder Energy Crown Road Energy, LLC Davis Wright Tremaine LLP Day Carter Murphy Dept of General Services Don Pickett & Associates, Inc. Douglass & Liddell Downey & Brand East Bay Community Energy Ellison Schneider & Harris LLP Energy Management Service Engineers and Scientists of California Evaluation + Strategy for Social Innovation GenOn Energy, Inc. Goodin, MacBride, Squeri, Schlotz & Ritchie Green Charge Networks Green Power Institute Hanna & Morton ICF International Power Technology Intestate Gas Services, Inc. Kelly Group Ken Bohn Consulting Keyes & Fox LLP Leviton Manufacturing Co., Inc. Linde Los Angeles County Integrated Waste Management Task Force Los Angeles Dept of Water & Power MRW & Associates Manatt Phelps Phillips Marin Energy Authority McKenzie & Associates Modesto Irrigation District Morgan Stanley NLine Energy, Inc. NRG Solar Office of Ratepayer Advocates OnGrid Solar Pacific Gas and Electric Company Peninsula Clean Energy Pioneer Community Energy Praxair Redwood Coast Energy Authority Regulatory & Cogeneration Service, Inc. SCD Energy Solutions SCE SDG&E and SoCalGas SPURR San Francisco Water Power and Sewer Seattle City Light Sempra Utilities Southern California Edison Company Southern California Gas Company Spark Energy Sun Light & Power Sunshine Design Tecogen, Inc. TerraVerde Renewable Partners Tiger Natural Gas, Inc. TransCanada Troutman Sanders LLP Utility Cost Management Utility Power Solutions Utility Specialists Verizon Water and Energy Consulting Wellhead Electric Company Western Manufactured Housing Communities Association (WMA) Yep Energy
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