September 23, 2004

MINUTES
of the
POWER PLANT TASK FORCE

MEETING
September 23, 2004 at 4:00 p.m.

City Hall
1 Dr. Carlton B. Goodlett Place, Room 408

1. CALL TO ORDER AND ROLL CALL

The meeting was called to order by Chair Philip DeAndrade at 4:15 p.m.

2. DISCUSSION OF UNDERGROUND TRANSMISSION CABLE FROM PITTSBURGH, CA TO POTRERO

Mr. David Parquet of Babcock & Brown Power Operating Partners LLC returned to provide further information on the cable project. On August 23^rd, Babcock & Brown issued its Notice of Preparation under the California Environmental Quality Act (CEQA). Presently have a team of people in town from Siemans (Germany), Pirelli (Italy) for prescoping meetings with BCDC, Army Corps of Engineers, Coast Guard, State Lands, Water Board. Group is on a schedule for setting down transmission in SF. Schedule today is to come into commercial operation

December, `07 or March of '08. ISO has come out with an action plan for shutting down generation in the City.

Babcock & Brown has been working on project with ISO for a year. Eventually, ISO has to approve the project because it regulates the rates under which group is governed and that cable will become a regulated utility. ISO now evaluating the project.

ISO supports the peakers and so does Babcock & Brown. Economic analysis which ISO is confirming indicates that the cable project will pay back benefits in excess of costs to the tune of approximately $20 million per year. With the Transbay Cable, ratepayer rates will actually go down. Cable will also serve the load for a long time. Cable schedule is precisely the same as required to participate in the shutdown of the SF power plants.

Gary DeShazo, Regional Planning Manager for the ISO appeared to speak Believes that maintaining a focus on the transbay cable is the right thing to do. ISO believes there is value in the project. Wants TF to continue focusing on the City's energy plan. All a matter of timing. Not possible to shut something down without replacing it with something. ISO supports the shutdown of Hunters Point but should only do that as long as power needs are maintained. HP 2 and 3 have been released. Need to get some transmission in place. Believes we are well on way to see HP being retired. We can retire the units as long as we maintain the amount of power we require.

Value of peaker project (CT's) is that it brings the City 70% to 80% closer to retiring the HP and Potrero Power Plants. Believe that the plan the ISO has in place is enough for it to anticipate that Potrero 3, 4, 5 and 6 can be released from the RMR contract and ultimately released from service.

a. Karen Kubick, PUC, stated that the PUC is watching the transbay cable project, supportive of it, interested but not taking a position at this point. PUC has met with project sponsors and representatives from Pittsburgh.

3. ISO STAFF REPORT TO ISO BOARD OF GOVERNORS

Chair DeAndrade announced that ISO Staff created an action plan whereby certain actions would result in removal of RMR, first with regard to HP 1 and 4, and then with regard to Potrero 3, 4 and 5 and then Potrero 3, based on various upgrades of transmission and the City's peaker plan; those actions in various combinations could result in removal of RMR from the City's generation.

a. Deputy City Attorney Theresa Mueller: City was satisfied with ISO staff plan since it gives the City to shut down all the old generation by end of 2007. City asked ISO to think about reversing the order of how it would shut down Potrero units if City sited the CTs. City believes there is a very good basis for ISO to conclude that it could shut down Unit 3 when CTs sited instead of only shutting down 4, 5 and 6. Staff was very open to looking at that question. City believes that, in terms of capacity the CTs provide to the system and the number of hours they can generate energy, exchanging Unit 3 for the CTs is a very good trade.

4. TASK FORCE POSITION RE SITING OF POTRERO CTs OFFSETS AND MITIGATIONS

Chair DeAndrade: TF is looking at a position paper to describe the conditions under which it might accept the peakers in the community. TF is close to finalizing position. TF is now to consider offsets and mitigations with concerns re conflict of interest. Deputy City Attorney Joe Come stated that the position paper as it is currently written does not present any conflict of interest problems. Should it become more specific, then there might be individual concerns.

Chair DeAndrade suggested that since mitigations were being discussed at the Dept. of the Environment meeting taking place next door, discussion of mitigations might be moot. Ms. Levy moved that the meeting be adjourned so that members might leave to attend the Environment meeting. Seconded by Mr. Millet, motion to adjourn passed.

5. ADJOURNMENT

The meeting was adjourned at 5:50 p.m.