SCE Signs Long-Term Power Contracts in Its Continuing Effort to Attract New Generation to Southern California

Business Wire, Feb 16, 2007

ROSEMEAD, Calif. -- Southern California Edison (SCE) today announced the winning bidders in its competitive solicitation for long-term contracts leading to new power generation to serve Southern California's growing energy needs.

The power-purchase agreements with two companies will provide Southern California with 945 megawatts (MW) of new generating capacity, enough power to serve 614,000 average homes. The contracts will be submitted to the California Public Utilities Commission (CPUC) for review and approval.

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"Southern California needs additional new generating capacity because of rising demand and older power plants closing," said Alan Fohrer, SCE chief executive officer. "We congratulate the winning bidders for proposals that will provide customers with the greatest value."

SCE's new generation initiative was started in 2005 in response to forecast future shortages of generation supply in the Southern California region of the electrical system overseen by the California Independent System Operator. On July 20, 2006, the CPUC approved SCE's plan for signing 10-year contracts with new generation projects with the benefits and costs of the contracts allocated to all customers within SCE's service territory who benefit from the enhanced reliability. SCE issued a request for offers (RFO) for up to 1,500 MW of new or repowered generating capacity. The request eventually provided the option to bid into one or more of three different "tracks," depending on when the bidder's project would be online.

"This unique procurement process allows us to sign contracts that benefit all customers on our distribution system, regardless of their choice of electric provider," said Pedro Pizarro, SCE senior vice president of power procurement. "It provides a transitional means to attract much-needed new generation while a market framework is put in place that will provide new resources when needed."

The fastest of three solicitation tracks in SCE's new generation RFO was for projects that could be online by Aug. 1, 2007. SCE announced Nov. 16, 2006, the winning bidder in this track - Long Beach Generation, LLC, a subsidiary of NRG Energy Inc. (NYSE:NRG). Long Beach Generation received a 10-year power-purchase agreement to provide 260 MW of new generating capacity to serve all customers on SCE's grid. Retired in January 2005, the plant will be refurbished and refitted with the latest emissions-control technology. The CPUC approved the contract with NRG late last month.

Today's announcement relates to the second track - new generating capacity that could be available by Aug. 1, 2010. A third track, for new facilities that could be operational by Aug. 1, 2013, is still underway and will conclude next year.

Background - SCE's Competitive Solicitation Process

SCE power contract solicitations adhere to specific rules established by the CPUC to ensure the utility's power procurement process is open, fair, and transparent and delivers the greatest value possible to customers.

- As the process begins, a public request for offers is widely distributed and solicitation information is posted on SCE's public access Web site. Independent power producers are encouraged to propose projects that will meet the future needs of SCE's customers outlined in the solicitation.

- Bidder briefings are held to answer questions and provide information power producers need as they consider preparing contract proposals.

- Contract bids are received and evaluated by SCE. A short list of the most attractive offers is selected and final negotiations occur. Winning bidders are chosen and contracts signed and submitted to the CPUC for review and approval. The CPUC issues its decision on whether the contracts serve the interests of customers on whose behalf the commitments have been made. In this case, the commission is expected to make its decision later this year.

- During the course of the solicitation, an independent evaluator (IE) oversees the process, verifying that no preferential treatment is provided to any bidder. Additionally, SCE consults frequently with an independent procurement review group comprised of CPUC staff members and representatives of consumer, environmental, and labor groups that are not market participants.

An Edison International (NYSE:EIX) company, Southern California Edison is one of the nation's largest electric utilities, serving a population of more than 13 million via 4.7 million customer accounts in a 50,000-square-mile service area within central, coastal and Southern California.