Intermediate-Term

Request for Offers

October22, 2008

Pacific Gas & Electric CompanyIssuance Date: October 22, 2008

Intermediate-Term Request for Offers

Table of Contents

SectionPage

  1. Introductionand Overview...... 3
  2. Overview
  3. Expected Schedule
  4. Schedule Overview
  5. RFO Process
  6. Disclaimers for Rejecting Offers and / or Terminating this RFO
  1. RFO Goals...... 5
  2. PGE Resource Needs
  3. Products Sought
  4. RPS Energy
  5. Qualifying Facility Energy and Capacity
  6. Operational Flexibility
  7. Local and System Resource Adequacy
  8. Eligible Resources
  9. Renewable Resources
  10. Distributed Generation
  11. Qualifying Facilities
  12. Conventional Generation
  13. Operational Flexibility Characteristics
  14. Peaking Generation
  15. Shaping or Load Following Generation
  16. Contract Options
  17. PPAs
  18. Qualifying Facility Standard Offer
  1. Eligibility Requirements...... 12
  1. Evaluation of Offers...... 13
  1. Participation in the RFO Process...... 14
  2. Agreement by Participant
  3. Offer
  1. Participation Protocols...... 15
  2. Overview
  3. Required Information
  1. Communications...... 15
  1. Credit 16
  1. Pricing Terms and Conditions...... 16
  1. Confidentiality Agreement...... 18

Table of Contents (cont.)

SectionPage

  1. Accounting...... 18
  1. Executionof Agreement...... 19
  1. RegulatoryApproval...... 19
  1. Participants Wavier of Claims and Limitations of Remedies...... 20
  1. Termination of the RFO-Related Matters...... 20
  1. Participant’s Representations and Warranties...... 21

Appendix

  1. Cover Sheet...... A
  1. Intermediate Term Request for Offer Agreement...... B
  1. Confidentiality Agreement...... C
  1. Power Purchase Agreement ...... D
  1. Generation Facility Information Forms...... E

Non-As-Available Resources...... E1

As-Available Resources...... E2

Resource Adequacy Only Resources...... E3

  1. Supplier Diversity Questionnaire...... F

Page 1

Pacific Gas & Electric CompanyIssuance Date: October 22, 2008

Intermediate-Term Request for Offers

  1. Introduction and Overview:
  1. Overview

Pacific Gas and Electric Company (“PG&E”) is issuing this Intermediate-Term Request For Offers (“RFO”) to obtain the following products:

  • California’s Renewables Portfolio Standard ("RPS") energy;
  • Qualifying Facility (“QF”) capacity;
  • Dispatchable, operationally flexible resources, and;
  • Resource adequacy (“RA”)

PG&E will consider offers fromthe following new and existing resources in this RFO:

  • Renewable Generation
  • Distributed Generation
  • QFs
  • Conventional Generationtechnologies

Participants may submit offers for a Power Purchase Agreement (“PPA”) with PG&E. A PPA, with related documentation, is alternatively or collectively referred to as a “Contract” or “Agreement” in this document and for existing resources is included as Appendix D. Participants desiring to submit offers for new construction resources should contract PG&E at for more information concerning the requirements for such a submission. QFs may also submit a request for a standard offer contract.

  1. Expected Schedule
  1. Schedule Overview

The RFO schedule is subject to change at PG&E’s sole discretion at any time. PG&E will endeavor to notify Participants of any schedule change via notification on the Company’s RFO website. Participants may sign-up at the RFO website to receive notice of these and other RFO changes. PG&Ewill have no liability or responsibility to any Participant for change in the schedule or for failing to provide notice of any change.

For some new construction resources certain actions may be required prior to offer submission. An offer deposit is required for all new construction offers. Participants desiring to submit offers for new construction resources mustnotify PG&Eof its intent at by October 31, 2008.

The expected schedule for this RFO process is (all times are in Pacific Prevailing Time (“PPT”)):

Date/Time /
Event
October22, 2008 / PG&E issues RFO
January 14, 2009
3:00 p.m. / Deadline for Participants to submit offer including mark-up of PPA
March 26, 2009 / Shortlisted Participants notified; negotiations begin
Q3 2009 / PG&E notifies Participants if offers are accepted or rejected; power purchase agreement(s) executed

To be considered in this RFO, an offer must be received by PG&E in accordance with this RFO no later than 3:00 P.M.PPT on, January 14, 2009.

PG&E may be seeking CPUC approval of some or all of theAgreements, QF standard offer contracts excepted, resulting from this RFO prior to the Agreement taking effect. PG&E reserves the right to execute Agreements with individual Participants anytime after shortlisting and to file separate CPUC applications for approval of individual Agreements in order to expedite the approval process.

PG&E is fully committed in this RFO to minimizing the amount of time required to negotiate Agreements and obtain Regulatory Approval, while ensuring the Participants have sufficient time to prepare offers and PG&E has sufficient time to evaluate and review offers to ensure the best ones are selected. Some of the most significant ways to reduce the amount of time spent in the RFO process include:

  • Participants provide all of the requested information and in the format requested;
  • Provide complete and clear red-lined changes to the form agreement;
  • Unless necessary based on the product offered, minimize the number of changes to the form agreements provided in this RFO.

As described in SectionIV, the evaluation criteria include a Participant's conformance with PG&E's non-price terms and conditions.

  1. RFO Process
  1. Offers Due. Participant’s offer must be submitted by the January 14, 20093:00 p.m. PPT deadline and include without limitation the documents described in Section VI.B “Required Information” as included as Appendices to the RFO. The Participant’s offer must include a mark-up of the PPA as described in Section II.E “Contract Options.” By responding to this RFO as described in Section V.A “Agreement by Participant” the Participant agrees to be bound by all of the terms, conditions and other provisions of this RFO and any changes or supplements to it that may be issued by PG&E.
  1. PG&E Selects Shortlist. PG&E expects to select a shortlist of offers by March 26, 2009. Participants who have been selected for the shortlist will be required to execute a Confidentiality Agreement in the form attached as Appendix C, agreeing to keep confidential the terms discussed during the course of finalizing the Agreements. These Participants must execute and return to PG&E the Confidentiality Agreement within five (5) business days of Participant’s receipt of notice of its selection for PG&E’s shortlist. PG&E reserves the right to request additional information and to add additional Participants to the shortlist following the initial selection.
  1. Negotiations and PPA Execution. Final PPA will be negotiated with shortlisted Participants. PG&E will notify Participants if their offers are not accepted. PG&E may then submit any executed agreements to the CPUC for approval.

PG&E reserves the right, following shortlisting, to execute Agreements with individual Participants and to file separate CPUC applications for approval of those individual Agreements. PG&E further reserves the right to request refreshed offers from remaining shortlisted bidders at or after that time.

  1. Disclaimers for Rejecting Offers and/or Terminating this RFO

This RFO does not constitute an offer to buy and creates no obligation to execute any Agreement or to enter into a transaction under an Agreement as a consequence of the RFO. PG&E shall retain the right at any time, in its sole discretion, to reject any offer on the grounds that it does not conform to the terms and conditions of this RFO and reserves the right to request information at any time during the solicitation process. PG&E also retains the discretion, in its sole judgment, to: (a) reject any offer on the basis that it does not provide sufficient ratepayer benefit or that it would impose conditions that PG&E determines are impractical or inappropriate; (b) formulate and implement appropriate criteria for the evaluation and selection of offers; (c) negotiate with any Participant to maximize ratepayer benefits; (d) modify this RFO as it deems appropriate to implement the RFO and to comply with applicable law or other direction provided by the CPUC; and (e) terminate the RFO should the CPUC not authorize PG&E to execute Agreements of the type sought through this RFO. In addition, PG&E reserves the right to either suspend or terminate this RFO at any time for any reason whatsoever. PG&E will not be liable in any way, by reason of such withdrawal, rejection, suspension, termination or any other action described in this paragraph to any Participant, whether submitting an offer or not.

  1. RFO Goals:

A. PG&E Resource Needs

Through this RFO, PG&E is seekingoffers from resources that meet the specifications noted in Section III “Eligibility Requirements.” Optimal offers will be those that best provide PG&E the opportunity to procure energy and capacity products that are compatible with PG&E’s requirements, and contribute to the other criteria specified in Section IV “Evaluation of Offers.”

B. Products Sought

In this solicitation, PG&E is seeking offers for deliveries between January 1, 2010 and December 31, 2013. Conforming offers will specify one or more of the three following delivery periods:

  1. January 1, 2010 throughDecember 31, 2010
  2. January 1, 2011 through December 31, 2013
  3. January 1, 2010 through December 31, 2013

Participants are encouraged to provide offers for all three terms as PG&E’s needs vary over this period. QFs seeking standard offer contracts should specify the desired term consistent with D.07-09-040. The term must include deliveries for at least a one year period during January 1, 2010 and December 31, 2013 to be considered in this RFO. Requests for standard offer contracts with terms outside this period should be directed to PG&E’s contract administration department.

PG&E has a need for the following products to satisfy a portion of its resource needs through 2013.

  1. RPS Energy
  2. QF Capacity
  3. Operational Flexibility
  4. Local and System RA

Preference will be given to those offers that provide the best value while meeting these portfolio needs. In evaluating offers, PG&E will assess the value of anofferagainstanoffer’s costs. To the extent an offer fills more than one of PG&E’s needs identified above it will be more favored than an offer that fills fewer needs. For example if a biomass facility is able to provide RPS energy, operational flexibility and RA it willbe more favored in the RFO offer evaluation than the same biomass facility that provides RPS energy and RA but does not provides operational flexibility. Similarly a combustion turbine situated in a local RA area will be more favored than the same combustion turbine that is only qualified to provide system RA.

Participants may submit one or multiple offers meeting the terms and conditions contained in the PPA. Participants may submit multiple product and pricing structures. Mutually exclusive offers should be clearly identified.

Resources must be located within the CAISO control area though PG&E prefers delivery within NP15. Other general characteristics of each product sought are described below.

  1. RPS Energy

In this RFO PG&E is seeking RPS eligible energy to meet the requirements of California’s RPS Program established by California Senate Bill 1078, effective January 1, 2003 which requires PG&E to procure 20% of its energy needs from eligible renewable resources. PG&E’s RPS energy needs can only be filled by resources that are certified by the CEC as an RPS Eligible Renewable Energy Resource and participate in the CEC’s Generation Tracking System (WREGIS). Details on the requirements of these programs can be found at http://www.energy.ca.gov/renewables/documents/.

  1. QF Capacity

In this RFO PG&E is seeking QF capacity to meet the requirements of CPUC D.07-12-052 which requires PG&E to maintain its contracted QF capacity at 2,166 MW. PG&E’s QF capacity needscan only be filled by those facilities satisfying the requirements under the Public Utility Regulatory Policies Act of 1978.

  1. Operational Flexibility

In this RFO PG&E is seeking operational flexibility to maintain its ability to reliably meet its customer’s variable load and respond to unforeseen events. For this product, PG&E will consider offers from full units only. An operationally flexible resource is one that provides PG&E with hour-ahead dispatch rightsas well as other specific characteristics described more fully in Section II.D. As PG&E is seeking in this RFO resources with hour-ahead dispatch rights, an offer that provides only day-ahead dispatch rights will not be considered in the evaluation of offers providing operational flexibility. Such an offer could be eligible to provide RPS energy, QF capacity or RA if it meets the requirements of those products.

In addition to providing hour-ahead dispatch rights, operationally flexible resources are thosethat are capable of being committed to production a high number of times per year and arecapable of either multiple starts and stops per day or operating at a low loading point during low need period. For example, operationallyflexible resources should be capable of being “cycled” on and off at least 300 times per year or be able to operate as low as 10% of full load power during off-peak or other low need period.

PG&E prefers resources that have a relatively short startup time to full operation. For example, PG&E prefers resources that have start times of 30 minutes or less, or, in the case of resources offering daily cycling, start times of 60 minutes or less. Resources with longer start up times to full load, such as4 hours or more, are less valuable.

PG&E prefers resources that have the ability to turndown to a low minimum output level relative to their maximum output. The ability to change output quickly from maximum to minimum or minimum to maximum is also a valued attribute. For example, a ramp rate of at least 7% of full output per minute is desirable.

PG&E expects each offer to include all the ancillary services that a resource is certified to provide to the ISO. The ability to provide ancillary services such as Automatic Generation Control (“AGC”) will have incremental value. However, AGC will have greater value for resources that are expected to operate enough hours such that it can be effectively utilized. PG&E will also consider the value of other ancillary services.

PG&E must fully understand operational limitations due to environmental constraints, such as air quality limitations. If applicable, Participants should specify all operational constraints the resource will have to meet, such as those needed to comply with local Air Board requirements as well as other permitting requirements.

  1. Local and System RA

In this RFO PG&E is seeking local and system RA to meet the requirement of CPUC D.04-10-035 and D.06-06-064to procure sufficient resource adequacy when and where needed. In addition to including RA as a bundled product with its offers for the products discussed above, Participants are encouraged to provide offers for local and system RA as stand alone products for all three terms as PG&E’s needs for RA differ from its energy and operational flexibility needs.

Local RA product must be located within the Bay Area, NCNB, Sierra, Stockton, Humboldt, Fresno, or Kern LCR areas as identified by the CAISO in the Net Qualifying Capacity Report posted at

As intertie capacity for RA counting rights is only allocated on an annual basis and only one year ahead, imports for RA will not be considered in this RFO.

C. Eligible Resources

PG&E will consider offers from the following resources in this RFO.

  1. Renewable Resources

For the purposes of this solicitation, renewable resources refer to those resources which meet the requirements of California’s RPS program.[1] Currently, RPS renewables include facilities burning biodiesel, digester gas, landfill gas or municipal solid waste, fuel cells using renewable fuels, geothermal facilities, ocean wave, ocean thermal and tidal current facilities, solar photovoltaic and solar thermal facilities, small hydroelectric (30 megawatts or less) facilities and wind generators. This RFO seeks new and existing renewable generation. New renewable generation facilities must be available to deliver for one of the three delivery periods sought in this RFO.

Minimum offer size is 25 MW from each facility.

  1. Distributed Generation

Distributed generation is small-scale generation facilities interconnected to PG&E’s transmission or distribution system. For the purposes of this solicitation, PG&E will consider distributed generation which exports power to the CAISO controlled-grid. This RFO seeks new and existing distributed generation. New distributed generation facilities must be available to deliver for one of the delivery periods terms sought in this RFO.

Minimum offer size is 25 MW of power to the grid, which can come from multiple sites, but no individual site can offer less than 10 net MW. The offer must be net of any on-site customer use.

  1. Qualifying Facilities

QF generators are those facilities satisfying the requirements under the Public Utility Regulatory Policies Act of 1978. This RFO seeks new and existing QF resources. QF generation facilities seeking a PPA must be available to deliver during one of the three delivery periods sought in this RFO. For QFs seeking a PPA and currently under contract to sell power to PG&E during the term of this RFO, the existing QF contract will need to be terminatedif the offer is accepted and the Agreement is approved by the CPUC.

QF generators seeking a standard offer contract from PG&E are also encouraged to submit their request in the RFO. QF generators seeking a standard offer contract should include at least a one year overlap with one of the three delivery periods sought in this RFO. Going forward, PG&E intends to fill its QF capacity needs to the extent possible during its RFO solicitations.

Minimum offer size is 20 MW from each facility for QFs seeking a PPA. There is no minimum offer size for QFs requesting a standard offer contract.

  1. Conventional Generation

Conventional generation includes steam, combined cycle technologies, combustion turbines, and reciprocating engines fueled by fossil or bio-fuels that have the operational flexibility characteristics outlined in Section II.D below. This RFO seeks new and existing conventional generation. New conventional generation facilities must be available to deliver for one of the three delivery periods sought in this RFO.

Minimum offer size is 25 MW from each facility.

D. Operational Flexibility Characteristics

In meeting its customer’s energy needs, PG&E has a need for resources with specific operating characteristics. One of those sought in this RFO is the ability to provide operational flexibility. Resources selected to fill this need will be operated to provide products as needed to support the system. For most of these resources, this is expected to include multiple daily starts and stops or operation at low loading points, rapid turndown and ramp up within the unit’s capabilities and full compliance with environmental permit conditions. The following details the desired characteristics of operationally flexible units. Resources that do not provide operational flexibility as generally outlined below will not be considered to fill PG&E’s operational flexibility needs but can fill PG&E’s other needs as identified in this RFO.