Peaker Facility We Discussed Last Week

Dan: I wanted to follow up on our discussion last week regarding the peaker we're helping Lodi to develop.

The project is a peaker plant inside Lodi's territory, with the power sold to DWR.
The deal is both price and time sensitive (no surprise there). Needs to be on line Q3/Q4, 2002, at a price that's in line with price negotiated with DWR.
For the gas interconnect, your folks tell us that the project requires $8-$11 MM in system upgrades that will take 14-16 months to complete.
By contrast, the project could connect directly to Lodi's gas storage facility for about $2.6 MM and could be completed in about 4-6 months.
In short, PG&E's offers blows through both the time and price constraints; the Lodi option accommodates both very well.
We are very senstive to the tariff revenues you would forgo via a direct connect to Lodi and potential concerns regarding precedent over connecting directly to the storage facility.
Therefore, 1) we'd be willing to pay the local distribution tariff price, irrespective of being connected directly to the Lodi facility, 2) we'd be willing to switch over and connect with PG&E once the upgrades in the Lodi/Stockton area are done, and 3) we'd agree that the direct connection with Lodi should be viewed as a "special case" (and not precendent) with the goal of avoiding exacerbating California's problems with supply shortages.

Thanks for listening. Let me know what you think.

Best,
Jeff