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Benefits for Colton <br />• The project lowers the cost per kilowatt hour of electricity to Colton's customers. <br />• The project increases reliability: It will reduce our reliance on long transmission lines. <br />• The City will receive additional revenues from: <br />o Added franchise fees from the Gas Company (about 20,000 per year). <br />o Sales tax on major equipment (about $150,000). <br />Expected Results <br />• The current Agua Mansa site will have its generation increase from 44 MW to 60 MW. <br />• The City will increase it local generation from 44 MW to 60 MW. <br />• Each megawatt hour coming out of the Project will cost $97/MWh.* <br />• The new generation cost will be less than the on -peak market price of electricity <br />($120/MWh).* <br />*Assumes gas cost of $10.00/MMBtu and on -peak market price of electricity based on a heat <br />rate of 12,000Btu/kWh and unit capacity factor of 80%. <br />Conceptual Comparison <br />• Current — 45 MW Electrical Energy <br />• Future — 45 MW (CTG) + 15 MW (STG) <br />On the Horizon <br />• AB 32 — Greenhouse Gas <br />• 33% of resources invested in renewable energy by 2020 <br />• Rising costs for materials and fuel, ISO charges <br />• Market Redesign and Technology Upgrade (MRTU) <br />Natural Gas <br />Financial Impact <br />• The cost to meet the future energy needs of the city and comply with State and Federal <br />reliability standards, and to improve power quality is approximately $25 million. <br />• The cost to expand Agua Mansa Power Plant is approximately $38 million. <br />• Rate increases at strategic points over the next few years will be required to enable to <br />the utility to maintain its credit rating and borrow the funds necessary for the <br />improvements. <br />• SCE has filed for a rate increase greater than 20% because of increasing fuel prices and <br />costs to upgrade infrastructure. <br />Conclusion <br />• The utility is diligently working to reduce costs and improve operating efficiencies. <br />• Infrastructure must be upgraded to maintain reliability and provide for future needs of the <br />community. <br />• Agua Mansa Power Plant must be expanded to improve efficiency and provide for future <br />needs. <br />• Further increases in costs are on the horizon due to regulation. <br />• Prudent fiscal management dictates that rate increases are necessary to meet these <br />challenges. <br />ADJOURNMENT <br />2008 JULY 29 JT SPC CC/RDA/CUA MEETING - 5 - <br />