Form of Offset Credit Confirmation

Appendix E

2016 GHG Offset Credit RFO

FORM OF OFFSET CREDIT CONFIRMATION

This Confirmation confirms a Transaction under the Master Agreement by and between Pacific Gas and Electric Company (“PG&E” or “Party A” “or “Buyer”) and [______] (“Party B” or “Seller”), dated ______(the “Master Agreement”) pursuant to which Buyer shall purchase and Seller shall sell Product to Buyer on the Delivery Dates on the terms set forth in the Master Agreement, Credit Support Addendum and this Confirmation (collectively the “Transaction Documents”). All capitalized terms are defined in the Master Agreement or the Credit Support Addendum, and if not therein, in the Cap-and-Trade Regulations, unless otherwise defined in this Confirmation.

Product: Offset Credit

Transaction Date: ______

Seller: ______

Buyer: Pacific Gas and Electric Company

Quantity: ______

Contract Price (dollars per Offset Credit): $______/Offset Credit

Delivery Date of Offset Credit: ______

Deadline for Shortened Invalidation Period: ______

Fixed Differential (dollars per Offset Credit): For purposes of this Confirmation, the Fixed Differential shall be $___.__/Offset Credit.

[Offset Project and Vintage Year fields below are optional if Seller has InvestmentGrade Credit Rating pursuant to PG&E’s 2016Protocol.]

[OffsetProject: ______

Vintage Year: ______]

[If Seller is delivering more than one set of Offset Credits, please use the chart below and delete duplicate provisions above. Please delete the chart below if not applicable for this Transaction]

[Required information] / [Optional information if Investment Gradepursuant to PG&E’s 2016 Protocol]
Quantity / Contract Price / Delivery Date of Offset Credit / Deadline for Shortened Invalidation Period / Fixed Differential / Offset Project / Vintage Year

SPECIAL PROVISIONS

1.Confirmation Effective Dateand Confirmation Term. The“Confirmation Effective Date” shall be the same as the Transaction Date, specified above. This Confirmation shall be effective upon execution by the authorized representatives of each of Buyer and Seller and shall remain in effect until the end of the Invalidation Term and each Party’s obligations for payment and return of collateral have been satisfied; provided that any termination shall not affect or excuse the performance of either Party under any provision hereof that by its terms survives termination (the “Confirmation Term”).

2.Offset Credits and Transfer.

(a)Offset Credits. Seller shall sell and Deliver, and Buyer shall purchase and receive, or cause to be received, the Offset Credits as set forth in this Confirmation. Seller shall cause all such Offset Credits toresult from the Compliance Offset Protocol or Early Action Offset Program (pursuant to the Cap-and-Trade Regulations).

(b)Ongoing Compliance and Transfer of Offset Credits. Seller covenants that it shall comply, and shall cause the relevant Offset Project Operator to comply, with all Laws and the Compliance Offset Protocols (as defined in the Cap-and-Trade Regulations), to ensure that the Offset Credits and the transfer of Offset Credits hereunder comply therewith and with all Cap-and-Trade Regulations. If Seller receives notice of an initial determination by CARB of possible grounds for invalidation of Offset Credits in accordance with the Cap-and-Trade Regulations, then Seller shall provide a copy of such notice to Buyer immediately. In addition to the Parties’ obligations under Section 3.3 of the Master Agreement (“Transfer of Product”), the Parties shall work in good faith to provide one another with the information provided in the “Compliance Instrument Transfer Worksheet” template attached hereto as Attachment III, at least ten (10) days prior to [the][each] Delivery Date; provided that such worksheet may be modified by either Party with Notice to reflect modifications to the Tracking System requirements or Cap-and-Trade Regulations or for clarification purposes. For sake of certainty, failure of either Party to complete the “Compliance Instrument Transfer Worksheet” shall not relieve either Party of its obligations under Section 3.3 of the Master Agreement.

3.Representations and Warranties. Each Party represents and warrants that the representations set forth in Article 7 of the Master Agreement are true and correct.

(a)Further Seller Representations and Warranties. Without limiting any other representation or warranty made by Seller, Seller further represents and warrants to Buyer that:

(i)the Offset Credits will result from the Offset Project(s) and Vintage Year(s) set forth herein.[This provision is optional if Seller is Investment-Gradepursuant to PG&E’s 2016Protocol.]

(ii)Seller has not sold or attempted to sell the Offset Credits or GHG Emission Reductions relating to the Offset Credits or any part thereof (by natural gas agreement or otherwise) to any other person or entity, including any Governmental Authority.

(iii)Seller has obtained written evidence, satisfactory to Buyer, in Buyer’s reasonable opinion, establishing Seller’s right, title and ownership to the GHG Emissions Reductions from each Offset Project and the Offset Credits. Neither Seller, nor any of its Affiliates or its customers, have claimed any Offset Credits to be sold or Delivered to Buyer hereunder, from any of the Offset Projects or any part thereof, including theGHG Emission Reductions, as part of its own carbon inventory, footprint, or other carbon statement or declaration.

(iv)having made due inquiries, the Offset Credits have not been issued in another program with the same Offset Project Boundary for the same Reporting Period in which the Offset Credits were issued for GHG Emission Reductions; or as required pursuant to the Cap-and-Trade Regulations.

(v)having made due inquiries, the Offset Project Data Report for the Offset Credits does not contain errors that overstate the amount of GHG Reductions by more than five percent (5%).

(vi)having made due inquiries, Seller has no knowledge that the Offset Project activity and implementation of the Offset Project wasnot in accordance with Law during the Reporting Period for which the Offset Credits were issued.

(vii)having made due inquiries, the Offset Project Operator has complied with all Laws and the Compliance Offset Protocols (and the Early Action Offset Program if applicable) to ensure that the Product qualifies as an Offset Credit pursuant to the Cap-and-Trade Regulations and the Product and the transfer of Product hereunder complies with all Cap-and-Trade Regulations

(viii)No Invalidation Event has occurred with respect to the Offset Credits.

(b)Continuing Nature of Representations and Warranties. Seller makes the representations and warranties set forth in this Special Provision 3 as of the Confirmation Effective Date and on each Delivery Date and shall notify Buyer immediately in the event that any of these representations or warranties becomes untrue, incorrect, or incomplete in all respects.

4.Seller Obligations and Covenants.

(a)Shortened Invalidation Period. If the Offset Credit is subject to an Invalidation Period longer than the minimum period permitted under the Cap-and-Trade Regulations, then on or before the date set forth in this Confirmation for the “Deadline for Shortened Invalidation Period”, Seller shall obtain a Second Verification and take any other action required under the Cap-and-Trade Regulations in order to reduce the Invalidation Period to the minimum applicable to the Offset Credit under the Cap-and-Trade Regulations (“Shortened Invalidation Period”).

(b)Progress Report. To the extent that at the time of the Confirmation Effective Date Offset Credits as set forth in this Confirmation have not yet been issued by CARB, then within fifteen (15) days after the close of each month from the first month following the Confirmation Effective Date until the Offset Credits areissued by CARB, Seller shall provide to Buyer a Progress Report. Seller shall not be excused from its Delivery obligations under this Agreement due to failure to obtain Offset Credits prior to the Delivery Date.[This provision is optional if Seller is Investment-Gradepursuant to PG&E’s 2016Protocol.]

(c)Costs and Expenses. During the Invalidation Term, Seller shall, in relation to the Buyer, bear all costs and expenses of the Offset Project maintenance and operation, including all CARB and Verifier fees and expenses, royalties, license fees or other charges for licenses and intellectual property for designs, processes, equipment, technology, published or unpublished data, information or materials in connection with the Offset Project or the Delivery or sale of the Offset Credits.

(d)Double Selling. During the Invalidation Term, Seller shall not attempt,or enable another,to sell the Offset Credits or GHG Emission Reductions relating to the Offset Credits or any part thereof (by natural gas agreement or otherwise) to any other person or entity, including any Governmental Authority.

(e)Supplier Diversity. Seller shall comply with the terms of Buyer’s Supplier Diversity Program, in accordance with Attachment II hereto.

5.Seller Events of Default and Early Transaction Termination.

(a)In addition to the events constituting an Event of Default in the Master Agreement, the occurrence of any of the following shall constitute an Event of Default by Seller:

(i)any representation, warranty, or covenant made under this Confirmation by Seller is not true and complete in any material respect, if such failure is not remedied within five (5) Business Days after Notice of such failure is given by Buyer;

(ii)an Invalidation Event occursand Seller does not Deliver Replacement Product in accordance with Special Provision 5(b) below following the Invalidation Event(“Invalidation Default”); or

(iii)Seller fails to obtain a Shortened Invalidation Period consistent with the requirement set forth in Special Provision 4(a) of this Confirmation on or before the Deadline for Shortened Invalidation Period set forth in this Confirmation

(b)Replacement Product due to Invalidation Notice. If CARB issues written notice of anInvalidation Event with respect to an Offset Credit (“Invalidation Event Notice”), then Seller shall cause Buyer to be provided a copy of such notice immediately. Sellershall have aone-time right to cure the Invalidation Eventbyreplacing the quantity of Offset Credits subject to the Invalidation Event with one of the product or payment options set forth in subsections(i) through (iv) below(“Replacement Product”) within fifteen (15) days of the date set forth in the Invalidation Event Notice:

(i)Offset Credits, that are not designated for sale to Buyer or any other entity, [from Offset Projects and Vintage Years that are acceptable to Buyer in its sole discretion ] [This provision is optional if Seller is Investment-Gradepursuant to PG&E’s 2016Protocol.]provided that (A) such Offset Credits have not been affected by an Invalidation Event, and (B) the remaining Invalidation Term for such Offset Credits is equivalent to or shorter than the Invalidation Term for those Offset Credits subject to the Invalidation Event under this Transaction; or

(ii)Offset Credits for which theInvalidation Term has expired; or

(iii)Allowances, of the same or earlier Vintage Year [(or, in the case of pre-2014 Vintage Year Offset Credits, 2013 Vintage Year Allowances)]; or

(iv)financial compensation at the Replacement Price multiplied by the quantity of Offset Credits invalidated pursuant to such Invalidation Event.

(c)Early Transaction Termination.

(i)If an Event of Default has occurred pursuant to Special Provision 5(a)(i) or 5(a)(iii), (each an “Offset Credit Default”), the terms and conditions of Sections 9.3 and 9.4 of the Master Agreement shall apply to such Events of Default, except that the Parties agree that Buyer may elect to terminate this Transaction only or all Transactions under the Master Agreement as of the Early Termination Date.

(ii) If an Event of Default has occurred due to an Invalidation Default, pursuant to Special Provision 5(a)(ii), then, Buyer may terminate this Transaction only and neither Party shall have the right to accelerate any amounts owing between the Parties nor liquidate or terminate any other Transactions under Section 9.3 of the Master Agreement unless there is a separate Event of Default under the Master Agreement.

(iii)If Buyer terminates this Transaction onlypursuant to Section 5(c)(i) or (ii) above, then Buyer shall calculate a “Termination Payment” which for purposes of the Confirmation means the Settlement Amount for this Transaction only; provided that if the Event of Default is pursuant to Special Provision 5(a)(ii) above, the Seller shall also be liable to pay Buyer for the Invalidation Payment Amount (defined below). Buyer shall give Notice to Seller of the Termination Payment amount due, as soon as practicable following the termination, and Seller shall pay such amounts within ten (10) Business Days after such Notice is given by Buyer. As used in this Special Provision 5(c), “Invalidation Payment Amount” shall mean the amount resulting from the termination of this Transaction based on the (A) quantity of Offset Credits subject to the Invalidation Default multiplied by the Contract Price for such Offsets Credit plus (B) the sum of the Gains, Losses, and Costs for the quantity of Offset Credits subject to the Invalidation Default, each calculated in accordance with Section 9.4 of the Master Agreement.

6.Dispute Resolution. Without limiting Article 13 of the Master Agreement, any disputes relating to the compliance with the Protocols must be arbitrated with a report delivered by an individual selected from CARB Verifiers or Verification Bodies, with such individual to be selected by the arbitrator selected pursuant to the AAA’s Commercial Arbitration Rules.

7.Definitions.

“Compliance Offset Protocol” is defined in the Cap-and-Trade Regulations and which is applicable to the Offset Project.

“Confirmation Effective Date” is defined in Special Provision 1.

“Confirmation Term”is defined in Special Provision 1.

“Early Action Offset Credit” is defined in the Cap-and-Trade Regulations.

“Early Action Offset Program” is defined in the Cap-and-Trade Regulations.

“GHG Emission Reduction” is defined in the Cap-and-Trade Regulations, and for purposes of this Confirmation, includes GHG reductions, GHG Removal Enhancement, Direct GHG Removal Enhancements, and Direct GHG Emission Reductions as those terms are used in the Cap-and-Trade Regulations.

“Invalidation Event” is a final determination by CARB to invalidate Offset Credits in accordance with the Cap-and-Trade Regulations.

“Invalidation Period” means the period of time during which CARB may invalidate an Offset Credit under the Cap-and-Trade Regulations.

“Invalidation Term” means (a) the period from the Transaction Date through the later of (i) the last day of the Invalidation Period or (ii) the last day of the Delivery Term; or (b) for Replacement Product, the period from the date of Delivery of Offset Credits provided in accordance with Special Provision 5(b) (Replacement Product) through and including the last day of the period during which the Offset Credit may be invalidated pursuant to the Cap-and-Trade Regulations.

“Offset Project” is defined in the Cap-and-Trade Regulations.

“Offset Project Data Report” is defined in the Cap-and-Trade Regulations.

“Offset Project Operator” is defined in the Cap-and-Trade Regulations.

“Offset Verification Statement” is defined in the Cap-and-Trade Regulations.

[“Progress Report” means a report to Buyer in the form of Attachment I.][This definition is optional if Seller is Investment-Gradepursuant to PG&E’s 2016Protocol.]

“Second Verification” means (i) a subsequent Offset Project Data Report, or (ii) the re-verification of the initial Offset Project Data Report, in each case by a different offset verification body, within three (3) years of CARB’sissuance of the Offset Credit pursuant to the requirements set forth in Section 95985 of the Cap-and-Trade Regulations, as such requirements are amended, supplemented or replaced (in whole or in part) from time to time.

“Shortened Invalidation Period” has the meaning set forth in Special Provision 4(a) of this Confirmation.

“Verifier” is defined in the Cap-and-Trade Regulations.

Pacific Gas and Electric Company, a California corporation / ____[Seller]_____, a[include place of formation and business type)]
Signature: / Signature:
Name: / Name:
Title: / Title:
Date: / Date:

1

Exhibit B - Offset Credit Confirmation to

PG&E and ______

2016Master Allowance/Offset Credit Purchase Agreement

Attachment Ito OFFSET CREDIT CONFIRMATION

FORM OF PROGRESS REPORT

[This Attachment Iis optional if Seller isInvestment-Gradepursuant to PG&E’s 2016 Protocol.]

This Progress Report is presented pursuant to that certain Offset Credit Confirmation dated ___entered into pursuant to that certain Master Allowance/Offset Credit Purchase Agreement by and between Pacific Gas and Electric Company, a California corporation (“PG&E” or “Party A” or “Buyer”) and [______],(“Seller” or “Party B”). Seller attests that the information contained herein is true and correct.

The Progress Report shall identify the key activities required for the creation of Product qualifying as an Offset Credit under the Agreement (”Milestones”), including but not limited to detailing the efforts being made to convert any Early Action Offset Credits to Offset Credits (if applicable), and indicate whether Seller has met or is currently scheduled to meet such Milestones prior to the Delivery Date.

[Seller to suggest appropriate form for PG&E review]

The Progress Report shall be delivered in accordance with the Notice provision of the Master Agreement, to Buyer’s Portfolio Management department and Contract Management department, below:

Portfolio Management Contact

Attn: Andrew Lee

415-973-0660

Contract Management Contact

Attn: Marcus Keller

415-973-6759

1

Exhibit B - Offset Credit Confirmation to

PG&E and ______

2016Master Allowance/Offset Credit Purchase Agreement

ATTACHMENT II to OFFSET CREDIT CONFIRMATION

SUPPLIER DIVERSITY PROGRAM

1. Women-, Minority-, and service Disabled Veteran-owned Business Enterprises, (“WMDVBE”) and Lesbian-, Gay-, Bisexual- and Transgender-owned Business Enterprises (“LGBTBE”), as verified pursuant to the procedures prescribed in Section 2 of CPUC General Order 156 (collectively, Diverse Business Enterprise or “DBE”), shall have the maximum practicable opportunity to participate in the performance of work supporting Seller’s fulfillment of this Transaction.

2.Upon request from Buyer, Seller shall provide a separate “Supplier Plan” consisting of a specific list of suppliers that may participate in the performance of the work supporting fulfillment of this Transaction, and a statement setting forth any additional efforts Seller will employ to increase the participation of DBEsuppliers supporting fulfillment of this Transaction.