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Sec` ark?a7777 <br />n <br />—�, <br />NCI has developed a sound approach for organizing and managing its efforts to <br />effectively complete the Work Plan presented below within its proposed schedule and <br />budget. NCI's Project Team believes that the optimal approach to undertaking its <br />proposed Work Plan is to divide it into specific tasks, some of which will be addressed <br />simultaneously and others which will be addressed sequentially. Reiterative updating <br />of earlier drafts of work products will occur throughout development of the final work <br />product to ensure that findings are constantly refreshed if new information is developed <br />as each task proceeds. <br />Task I —Review Baseline Data and Develop Colton Electric Operations, Resources, and <br />Electrical Sales and Fuel Projections <br />Based upon an initial review of the operations of Colton Electric, NCI will work with <br />Colton Electric staff to develop a five—year peak load, energy sales and fuel <br />requirements forecast that will serve as part of the background data for the assignment. <br />After review with Colton Electric, NCI will establish five-year forecast data which will <br />serve as a reference point when addressing future tasks. <br />Task 2 - Discussion of Risk Related Issues and Tools for Managing Risk <br />NCI will identify the types and levels of risk, establish appropriate tolerances for various <br />risk exposures, identify those areas where risk management should be of concern to <br />Colton, and identify recognized methods and tools available for managing risk. <br />Hedging strategies, utility hedging practices, the reason hedges are used, and the types <br />of hedges available to the electric utility industry will also be outlined and explained. <br />And finally, Colton's exposure to risk including price volatility will be identified and <br />discussed. <br />Task 3 — Natural Gas Market Analysis <br />The availability of supply and the price of natural gas greatly influences the <br />dispatchable hours of Colton Electric's local generation. As well, average daily and peak <br />demand for natural gas from end-users both inside and outside of California can impact <br />the reliability and price of the gas supply required by Colton Electric. Other <br />fundamental aspects of the natural gas market including the affects of LNG will be <br />identified as key drivers behind the changing natural gas market. These drivers will <br />also be those which are shaping the current gas market and apt to influence the gas <br />Colton Electric — Risk Assessment and Management Plan 3 <br />