Common use of SOURCES OF DISAGREEMENT Clause in Contracts

SOURCES OF DISAGREEMENT. While the PG&E evaluation committee and Xxxxxx Seco Consulting did disagree on some specific decisions in the administration of the evaluation process, nearly all of these issues were resolved in the course of review. Issues underlying disagreements included: • Xxxxxx disagreed with some of the PG&E team’s preliminary assignments of some Offers to local nodal areas or to pricing zones. After review and discussion, these disagreements were resolved, either through changes to the assignments or agreement that the assignments were correct. • Xxxxxx disagreed with initial analyses in which PG&E assigned Resource Adequacy value to a few Offers that proposed to interconnect intermittent generation facilities outside the CAISO grid. Upon review, the PG&E team agreed that these Offers would not likely provide RA value to customers. • Xxxxxx suggested that selection of Imperial Valley Offers with viability scores below PG&E’s viability cutoff would amount to a preference for Imperial Valley projects. Preferential treatment of such Offers was explicitly rejected for the 2009 RPS RFO in the CPUC’s Decision approving the 2009 procurement plans. Based on guidance from PRG members, PG&E chose to drop one such Offer from its draft short list; another failed to stay on the final short list. • PG&E made a preliminary selection of projects from two Developers that were not the Participant’s highest-valued Offers; upon review, and given feedback from PRG members and the IE, PG&E decided to select higher-valued Offers. • Xxxxxx’x Project Viability Calculator scores for many individual Offers varied considerably from the PG&E team’s scores. Upon comparison and discussion, PG&E revised its scores downwards for some Offers that it had included in a preliminary draft short list. This led the utility to decide to reject these Offers from the final short list. Similarly, Xxxxxx was convinced by PG&E’s analysis to revise some of its Calculator scores upwards for Offers that PG&E had placed on the preliminary draft short list and to which Xxxxxx had raised objections. • In the final short list, PG&E selected a few Offers that met its value cutoff but fell below the cutoff for viability. For most of these, Xxxxxx concurred with the decision to short-list based on other considerations. However, Xxxxxx disagreed with PG&E’s decision to select two Offers for the short list. • One Offer, described previously, was short-listed on the basis of achieving greater portfolio diversity by providing a proposed project with a different technology. The PG&E team scored this proposal as lower in value, lower in viability, and equal in RPS Goals, vs. other competing Offers that were not selected for the short list. Its selection for the short list appears to be inconsistent and possibly unfair. • Another Offer was for a short-term transaction from an existing facility. Xxxxxx assigned a much lower viability score to this Offer using the Project Viability Calculator than PG&E did. Xxxxxx had difficulty finding a factual basis in the Offer materials to consider this project more viable than other Offers that PG&E rejected from the short list for poor viability, creating concerns about fairness of selection. The disagreement between the IE and the utility about placing the two Offers on the short list comes down to different opinions about the viability of the projects underlying the proposed transactions. If one accepts PG&E’s opinion about the viability of the two Offers (disregarding the PG&E team’s Project Viability Score for the first one), then their selection for the short list was entirely fair, reasonable, and consistent; if one accepts Xxxxxx’x opinion, their selection would not be.

SOURCES OF DISAGREEMENT. While Xxxxxx disagreed with some minor aspects of the PG&E evaluation committee analysis and selection, but these pertained to micro-level issues that did not affect overall selection of a short list. For example, Xxxxxx Seco Consulting did disagree on some specific decisions and the PG&E team scored Offers using the same Project Viability Calculator; in the administration of the evaluation process, nearly all cases the scores differed, but relative rankings of these issues Offers were resolved in the course similar overall. Other examples of review. Issues underlying disagreements includedminor disagreement with no impact on selection include: • Xxxxxx disagreed with some the estimates of the PG&E team’s preliminary assignments of some Offers LMP multipliers applied to local nodal areas or CAISO delivery points outside California which had not been assigned to pricing zones. After review and discussion, these disagreements were resolved, either through changes to the assignments or agreement that the assignments were correct. an LMP zone; • Xxxxxx disagreed would have rejected as non-compliant more out-of-state Offers with initial analyses in which PG&E weak cases for achieving regulatory treatment as bundled in-state resources; • Xxxxxx would not have assigned full Resource Adequacy value to a few some of the out-of-state Offers that proposed to interconnect intermittent generation facilities outside the deliver power at CAISO grid. Upon review, the PG&E team agreed that these Offers would not likely provide RA value to customers. • Xxxxxx suggested that selection of Imperial Valley Offers with viability scores below intertie points where PG&E’s viability cutoff would amount ability to secure RA import capability is limited. Xxxxxx’x primary critique of PG&E’s short list is that it is too large. Total volume is a preference multiple of the target for Imperial Valley projectsprocurement of contracts from the 2011 RFO. Preferential treatment of such Offers was explicitly rejected for the 2009 RPS RFO in the CPUC’s Decision approving the 2009 procurement plans. Based on guidance from PRG membersBy choosing to accommodate a large short list, PG&E chose to drop one such Offer from its draft short list; another failed to stay has selected some Offers that Xxxxxx considers marginally attractive, rather than focusing on the final highest valued, most viable proposals: • Because PG&E chose a different cutoff for valuation for different types or locations of resources, it selected several Offers that Xxxxxx ranked as mediocre in net value. Xxxxxx would have shortened the short listlist by rejecting these lower-valued proposals. • PG&E made used a preliminary selection of projects from two Developers that were not the Participant’s highest-valued Offers; upon review, and given feedback from PRG members and the IE, PG&E decided cutoff for viability score to select higher-valued screen out many Offers. • Xxxxxx’x Project Viability Calculator scores for many individual Offers varied considerably from However, the PG&E team’s scores. Upon comparison and discussion, PG&E revised its scores downwards for some team selected a very few Offers that it had included scored below this threshold, because of other attributes that PG&E considered sufficiently attractive to outweigh the projects’ weaker viability assessments. Xxxxxx would have rejected those proposals based on the projects’ mediocre viability. • Xxxxxx’x input assumptions to the independent valuation place a lower value on Resource Adequacy capacity than PG&E’s do. As a result, Xxxxxx would have ranked some solar projects lower than PG&E did, and some wind generation projects higher; Xxxxxx would have considered selecting more wind generation. Although Xxxxxx disagreed with the resulting short list that PG&E selected, the basis for these disagreements largely centers on differences in business judgments about relative priorities and choices of numerical inputs. Xxxxxx believes that the choices the PG&E team made were reasonable and justifiable. For example, PG&E’s choice to lower the valuation cutoff for certain resource types and locations was fully consistent with placing a preliminary draft short listrelatively high priority on the non-quantitative sub-criterion of resource diversity and on the stated preference for projects within PG&E’s service territory. This led the utility to decide to reject these Offers from the final short listWhile Xxxxxx’x relative preferences differ, Xxxxxx believes that PG&E’s relative priorities, based on its business judgment, are reasonable. Similarly, Xxxxxx was convinced by PG&E’s analysis to revise some of its Calculator scores upwards for Offers that PG&E had placed on the preliminary draft short list and to which Xxxxxx had raised objections. • In the final short list, PG&E selected a few Offers that met its value cutoff but fell below the cutoff for viability. For most of these, Xxxxxx concurred with the decision to short-list based on other considerations. However, Xxxxxx disagreed disagrees with PG&E’s decision selection of inputs for its valuation of capacity, but acknowledges that the underlying sources of the inputs which generate the RA value estimates come directly from the CPUC and the California Energy Commission. It seems reasonable for a regulated utility to select two parameters in a way that they are consistent with guidance from regulators, though Xxxxxx believes that better choices are available for inputs. Separately, Xxxxxx can offer only a qualified opinion about whether the selection of Offers for the short listsites for development was made fairly. • One Offer, described previously, was short-listed on The group within PG&E that analyzes these Offers provided incomplete documentation of the basis of achieving greater portfolio diversity by providing a proposed project for selection decisions. Xxxxxx disagrees with a different technologythe shortlisting decisions about these Offers. The CPUC will have a better opportunity to review these if PG&E team scored this proposal as lower in value, lower in viability, and equal in RPS Goals, vs. other competing Offers that were not selected executes contracts for the short list. Its selection for the short list appears to be inconsistent and possibly unfair. • Another Offer was for a short-term transaction from an existing facility. Xxxxxx assigned a much lower viability score to this Offer using the Project Viability Calculator than PG&E did. Xxxxxx had difficulty finding a factual basis these in the Offer materials to consider this project more viable than other Offers that PG&E rejected from the short list for poor viability, creating concerns about fairness of selection. The disagreement between the IE and the utility about placing the two Offers on the short list comes down to different opinions about the viability of the projects underlying the proposed transactions. If one accepts PG&E’s opinion about the viability of the two Offers (disregarding the PG&E team’s Project Viability Score for the first one), then their selection for the short list was entirely fair, reasonable, and consistent; if one accepts Xxxxxx’x opinion, their selection would not befuture.

SOURCES OF DISAGREEMENT. While Xxxxxx disagreed with one aspect of how PG&E applied its methodology and with a few of the PG&E evaluation committee and Xxxxxx Seco Consulting did disagree on some specific decisions choices made in the administration selection process. Specific areas of the evaluation process, nearly all of these issues were resolved in the course of review. Issues underlying disagreements disagreement included: • Imperial Irrigation District Transmission Adders. In Xxxxxx’x opinion it would have been fairer to apply transmission adders for network upgrade costs in the Imperial Irrigation District’s grid, even though those costs are not directly borne by PG&E ratepayers. In Xxxxxx’x opinion, PG&E’s methodology advantages projects within IID’s territory whose net valuations are uncompetitive when full costs, including required grid upgrades, are taken into account. This disparate treatment seems less than fully fair. '' Xxxxxx disagreed with some acknowledges that PG&E’s logic for its selection is sound when based on the utility’s sole focus on direct costs to PG&E ratepayers, because the deliveries from these projects to PG&E customers would be subsidized by IID ratepayers. Xxxxxx’x concern here is that it seems less than fair for an evaluation methodology to so strongly favor one class of projects (new IID-interconnecting generators) over another (new CAISO-interconnecting generators) and it seems undesirable from a public policy standpoint to select projects that are far from the PG&E team’s preliminary assignments of some Offers least-cost alternatives when all costs to local nodal areas or society, including costs to pricing zones. After review and discussionIID customers residing in California, these disagreements were resolved, either through changes to the assignments or agreement that the assignments were correctare considered. • Offers Ranked Low for Project Viability. Xxxxxx disagreed with initial analyses ranked in which PG&E assigned Resource Adequacy value to a few the bottom quartile among all Offers for project viability, using the Project Viability Calculator. On that proposed to interconnect intermittent generation facilities outside the CAISO grid. Upon review, the PG&E team agreed that these Offers basis Xxxxxx would not likely provide RA value to customers. • Xxxxxx suggested that selection of Imperial Valley Offers with viability scores below PG&E’s viability cutoff would amount to have selected such a preference for Imperial Valley projects. Preferential treatment of such Offers was explicitly rejected project for the 2009 RPS RFO short list ' ' '' ' ' ' ' Also, Xxxxxx ranked in the CPUC’s Decision approving the 2009 procurement plans. Based on guidance from PRG members, PG&E chose to drop one such Offer from its draft short list; another failed to stay on the final short list. • PG&E made a preliminary selection of projects from two Developers that were not the Participant’s highest-valued Offers; upon review, and given feedback from PRG members and the IE, PG&E decided to select higher-valued bottom quartile in project viability among all Offers. • Xxxxxx’x Project Viability Calculator scores On that basis Xxxxxx would not have selected such a project for many individual Offers varied considerably from the PG&E team’s scores. Upon comparison and discussion, PG&E revised its scores downwards for some Offers that it had included in a preliminary draft short list. This led the utility to decide to reject these Offers from the final short list. Similarly, Xxxxxx was convinced by PG&E’s analysis to revise some of its Calculator scores upwards for Offers that PG&E had placed on the preliminary draft short list and to which Xxxxxx had raised objections. • In the final short list, PG&E selected ' Figure 7 displays a few histogram of the independent scores Xxxxxx assigned to the projects offered in the RFO and to the shortlisted Offers. Most of the shortlisted proposals were scored above median, Figure 7. # Projects Histogram of IE Project Viability scores Other Offers that met its value cutoff but fell below the cutoff for viability. For most Shortlisted Offers 0 - 30 30 - 40 40 - 50 50 - 60 60 - 70 70 - 80 80 - 90 90 - 100 Scores Figure 8 displays a histogram of these, Xxxxxx concurred with the decision to short-list based on other considerations. However, Xxxxxx disagreed with PG&E’s decision to select two Offers estimated PAV for all Offer variants and for the short list. • One Offer, described previously, was short-listed on the basis of achieving greater portfolio diversity by providing a proposed project with a different technology. The PG&E team scored this proposal as lower in value, lower in viability, and equal in RPS Goals, vs. other competing Offers picked proposals that were not selected for the short list. Its selection for the short list appears to be inconsistent and possibly unfair. • Another Offer was for a short-term transaction from an existing facility. Xxxxxx assigned a much lower viability score to this Offer using the Project Viability Calculator than PG&E did. Xxxxxx had difficulty finding a factual basis mostly ranked in the Offer materials to consider this project more viable than other Offers that PG&E rejected from the short list for poor viabilitytop-valued quartile, creating concerns about fairness of selection. The disagreement between the IE and the utility about placing the two Offers on the short list comes down to different opinions about the viability of the projects underlying the proposed transactions. If one accepts PG&E’s opinion about the viability of the two Offers (disregarding the PG&E team’s Project Viability Score for the first one), then their selection for the short list was entirely fair, reasonable, and consistent; if one accepts Xxxxxx’x opinion, their selection would not be.' '

SOURCES OF DISAGREEMENT. While Xxxxxx disagreed with some minor aspects of the PG&E evaluation committee analysis and selection, but these pertained to micro-level issues that did not affect overall selection of a short list. For example, Xxxxxx Seco Consulting did disagree on some specific decisions and the PG&E team scored Offers using the same Project Viability Calculator; in the administration of the evaluation process, nearly all cases the scores differed, but relative rankings of these issues Offers were resolved in the course similar overall. Other examples of review. Issues underlying disagreements includedminor disagreement with no impact on selection include: • Xxxxxx disagreed with some the estimates of the PG&E team’s preliminary assignments of some Offers LMP multipliers applied to local nodal areas or CAISO delivery points outside California which had not been assigned to pricing zones. After review and discussion, these disagreements were resolved, either through changes to the assignments or agreement that the assignments were correct. an LMP zone; • Xxxxxx disagreed would have rejected as non-compliant more out-of-state Offers with initial analyses in which PG&E weak cases for achieving regulatory treatment as bundled in-state resources; • Xxxxxx would not have assigned full Resource Adequacy value to a few some of the out-of-state Offers that proposed to interconnect intermittent generation facilities outside the deliver power at CAISO grid. Upon review, the PG&E team agreed that these Offers would not likely provide RA value to customers. • Xxxxxx suggested that selection of Imperial Valley Offers with viability scores below intertie points where PG&E’s viability cutoff would amount ability to secure RA import capability is limited. Arroyo’s primary critique of PG&E’s short list is that it is too large. Total volume is a preference multiple of the target for Imperial Valley projectsprocurement of contracts from the 2011 RFO. Preferential treatment of such Offers was explicitly rejected for the 2009 RPS RFO in the CPUC’s Decision approving the 2009 procurement plans. Based on guidance from PRG membersBy choosing to accommodate a large short list, PG&E chose to drop one such Offer from its draft short list; another failed to stay has selected some Offers that Xxxxxx considers marginally attractive, rather than focusing on the final highest valued, most viable proposals: • Because PG&E chose a different cutoff for valuation for different types or locations of resources, it selected several Offers that Xxxxxx ranked as mediocre in net value. Xxxxxx would have shortened the short listlist by rejecting these lower-valued proposals. • PG&E made used a preliminary selection of projects from two Developers that were not the Participant’s highest-valued Offers; upon review, and given feedback from PRG members and the IE, PG&E decided cutoff for viability score to select higher-valued screen out many Offers. • Xxxxxx’x Project Viability Calculator scores for many individual Offers varied considerably from However, the PG&E team’s scores. Upon comparison and discussion, PG&E revised its scores downwards for some team selected a very few Offers that it had included scored below this threshold, because of other attributes that PG&E considered sufficiently attractive to outweigh the projects’ weaker viability assessments. Xxxxxx would have rejected those proposals based on the projects’ mediocre viability. • Arroyo’s input assumptions to the independent valuation place a lower value on Resource Adequacy capacity than PG&E’s do. As a result, Xxxxxx would have ranked some solar projects lower than PG&E did, and some wind generation projects higher; Xxxxxx would have considered selecting more wind generation. Although Xxxxxx disagreed with the resulting short list that PG&E selected, the basis for these disagreements largely centers on differences in business judgments about relative priorities and choices of numerical inputs. Xxxxxx believes that the choices the PG&E team made were reasonable and justifiable. For example, PG&E’s choice to lower the valuation cutoff for certain resource types and locations was fully consistent with placing a preliminary draft short listrelatively high priority on the non-quantitative sub-criterion of resource diversity and on the stated preference for projects within PG&E’s service territory. This led the utility to decide to reject these Offers from the final short listWhile Xxxxxx’x relative preferences differ, Xxxxxx believes that PG&E’s relative priorities, based on its business judgment, are reasonable. Similarly, Xxxxxx was convinced by PG&E’s analysis to revise some of its Calculator scores upwards for Offers that PG&E had placed on the preliminary draft short list and to which Xxxxxx had raised objections. • In the final short list, PG&E selected a few Offers that met its value cutoff but fell below the cutoff for viability. For most of these, Xxxxxx concurred with the decision to short-list based on other considerations. However, Xxxxxx disagreed disagrees with PG&E’s decision selection of inputs for its valuation of capacity, but acknowledges that the underlying sources of the inputs which generate the RA value estimates come directly from the CPUC and the California Energy Commission. It seems reasonable for a regulated utility to select two parameters in a way that they are consistent with guidance from regulators, though Xxxxxx believes that better choices are available for inputs. Separately, Xxxxxx can offer only a qualified opinion about whether the selection of Offers for the short listsites for development was made fairly. • One Offer, described previously, was short-listed on The group within PG&E that analyzes these Offers provided incomplete documentation of the basis of achieving greater portfolio diversity by providing a proposed project for selection decisions. Xxxxxx disagrees with a different technologythe shortlisting decisions about these Offers. The CPUC will have a better opportunity to review these if PG&E team scored this proposal as lower in value, lower in viability, and equal in RPS Goals, vs. other competing Offers that were not selected executes contracts for the short list. Its selection for the short list appears to be inconsistent and possibly unfair. • Another Offer was for a short-term transaction from an existing facility. Xxxxxx assigned a much lower viability score to this Offer using the Project Viability Calculator than PG&E did. Xxxxxx had difficulty finding a factual basis these in the Offer materials to consider this project more viable than other Offers that PG&E rejected from the short list for poor viability, creating concerns about fairness of selection. The disagreement between the IE and the utility about placing the two Offers on the short list comes down to different opinions about the viability of the projects underlying the proposed transactions. If one accepts PG&E’s opinion about the viability of the two Offers (disregarding the PG&E team’s Project Viability Score for the first one), then their selection for the short list was entirely fair, reasonable, and consistent; if one accepts Xxxxxx’x opinion, their selection would not befuture.

SOURCES OF DISAGREEMENT. While the PG&E evaluation committee and Xxxxxx Seco Consulting did disagree on some specific decisions in the administration of the evaluation process, nearly all of these issues were resolved in the course of review. Issues underlying disagreements included: • Xxxxxx disagreed with some of the PG&E team’s preliminary assignments of some Offers to local nodal areas or to pricing zones. After review and discussion, these disagreements were resolved, either through changes to the assignments or agreement that the assignments were correct. • Xxxxxx disagreed with initial analyses in which PG&E assigned Resource Adequacy value to a few Offers that proposed to interconnect intermittent generation facilities outside the CAISO grid. Upon review, the PG&E team agreed that these Offers would not likely provide RA value to customers. • Xxxxxx suggested that selection of Imperial Valley Offers with viability scores below PG&E’s viability cutoff would amount to a preference for Imperial Valley projects. Preferential treatment of such Offers was explicitly rejected for the 2009 RPS RFO in the CPUC’s Decision approving the 2009 procurement plans. Based on guidance from PRG members, PG&E chose to drop one such Offer from its draft short list; another failed to stay on the final short list. • PG&E made a preliminary selection of projects from two Developers that were not the Participant’s highest-valued Offers; upon review, and given feedback from PRG members and the IE, PG&E decided to select higher-valued Offers. • Xxxxxx’x Arroyo’s Project Viability Calculator scores for many individual Offers varied considerably from the PG&E team’s scores. Upon comparison and discussion, PG&E revised its scores downwards for some Offers that it had included in a preliminary draft short list. This led the utility to decide to reject these Offers from the final short list. Similarly, Xxxxxx was convinced by PG&E’s analysis to revise some of its Calculator scores upwards for Offers that PG&E had placed on the preliminary draft short list and to which Xxxxxx had raised objections. • In the final short list, PG&E selected a few Offers that met its value cutoff but fell below the cutoff for viability. For most of these, Xxxxxx concurred with the decision to short-list based on other considerations. However, Xxxxxx disagreed with PG&E’s decision to select two Offers for the short list. • One Offer, described previously, was short-listed on the basis of achieving greater portfolio diversity by providing a proposed project with a different technology. The PG&E team scored this proposal as lower in value, lower in viability, and equal in RPS Goals, vs. other competing Offers that were not selected for the short list. Its selection for the short list appears to be inconsistent and possibly unfair. • Another Offer was for a short-term transaction from an existing facility. Xxxxxx assigned a much lower viability score to this Offer using the Project Viability Calculator than PG&E did. Xxxxxx had difficulty finding a factual basis in the Offer materials to consider this project more viable than other Offers that PG&E rejected from the short list for poor viability, creating concerns about fairness of selection. The disagreement between the IE and the utility about placing the two Offers on the short list comes down to different opinions about the viability of the projects underlying the proposed transactions. If one accepts PG&E’s opinion about the viability of the two Offers (disregarding the PG&E team’s Project Viability Score for the first one), then their selection for the short list was entirely fair, reasonable, and consistent; if one accepts Xxxxxx’x Arroyo’s opinion, their selection would not be.

SOURCES OF DISAGREEMENT. While the PG&E evaluation committee and Xxxxxx Seco Consulting did disagree on some specific decisions in the administration of the evaluation process, nearly all of these issues were quickly resolved in the course of reviewreview and discussion. Most of these 29 Pacific Gas and Electric Company, “Renewables Portfolio Standard: 2009 Solicitation Protocol”, June 29, 2009, page 44 disagreements were in the nature of an IE proposing minor technical changes to preliminary draft analyses rather than any serious disagreements about fairness or reasonableness. Issues underlying the disagreements included: • Xxxxxx disagreed with some of the PG&E team’s preliminary assignments of some Offers to local nodal areas or to pricing zones. After review and discussion, these disagreements were resolved, either through changes to the assignments or agreement that the assignments were correct. • Xxxxxx disagreed with initial analyses in which PG&E assigned Resource Adequacy value to a few Offers that proposed to interconnect intermittent generation facilities outside the CAISO grid. Upon review, the PG&E team agreed that most of these Offers would not likely provide RA value to customerscustomers and should not be credited with it in the valuation methodology. • Xxxxxx suggested that selection of Imperial Valley Offers with viability scores below PG&E’s viability cutoff would amount to a preference for Imperial Valley projects. Preferential treatment of such Offers was explicitly rejected for the 2009 RPS RFO in the CPUC’s Decision approving the 2009 procurement plans. Based on guidance from PRG members, PG&E chose to drop one such Offer from its draft short list; another failed to stay remain on the final short list, with the result that Xxxxxx regards that list as representing fair and non-preferential treatment of Imperial Valley developers. • PG&E made a preliminary selection of projects from two Developers that were not the Participant’s highest-valued Offers; upon review, and given feedback from PRG members and the IE, PG&E decided to select higher-valued Offers. • Xxxxxx’x Project Viability Calculator scores for many individual Offers using the Project Viability Calculator varied considerably from the PG&E team’s scores. Upon comparison and discussion, PG&E revised its scores downwards for some Offers that it had included in a preliminary draft short list. This led the utility to decide to reject these Offers from the final short list. Similarly, Xxxxxx was convinced by PG&E’s analysis to revise some of its Calculator scores upwards for some Offers that PG&E had placed on the preliminary draft short list and to which Xxxxxx had raised objections. • This eliminated Xxxxxx’x disagreements with PG&E on those Offers. In the final short list, PG&E selected a few Offers that met its value cutoff but fell below the (somewhat arbitrary) cutoff for viability. For most of these, Xxxxxx concurred with the decision to short-list based on list, because (1) Xxxxxx had assigned the project a higher viability score than the PG&E team had, (2) the gap between the project’s viability score and the cutoff was within Xxxxxx’x estimate of the standard error of the Calculator’s analysis, (3) the Offer scored particularly high in some other considerationsevaluation criterion, and/or (4) inspection of the Offers suggested that other non-shortlisted Offers that received a higher viability score than the selected Offer were rejected for reasons other than low viability (such as low valuation, non-preferred delivery point, excess supplier concentration, and later on-line date) so that Xxxxxx concluded that no other developers were unfairly disadvantaged by selection of the slightly lower-viability Offers. However, Xxxxxx disagreed with PG&E’s decision to select two Offers for the short list. • One Offer, described previously, was short-listed on the basis of achieving greater portfolio diversity by providing a proposed project with a different technology. The PG&E team scored this proposal as lower in value, lower in viability, and equal in RPS Goals, vs. other competing Offers that were not selected for the short list. Its selection for the short list appears to be inconsistent and possibly unfair. • Another Offer was for a short-term transaction from an existing facility. Xxxxxx assigned a much lower viability score to this Offer using the Project Viability Calculator than PG&E did. As described previously, it is not clear to Xxxxxx whether the utility is obligated to use the Project Viability Calculator to score existing facilities. However, Xxxxxx had difficulty finding a factual basis in the Offer materials to consider this project more viable than other Offers that PG&E rejected from the short list for poor viability, creating concerns about the fairness of the selection. Xxxxxx raised an issue of inconsistent treatment of this Offer in valuation when compared to the treatment of other Offers; this issue was partially resolved through discussion and is described more fully in the confidential appendix. Additionally, PG&E selected one Offer for the short list despite the fact that its value dropped below the valuation cutoff, and was lower-valued than a less-viable competing offer that was rejected. This could be considered reasonable based on the utility’s emphasis on project viability, but it creates the appearance of unfair treatment of the competing Participant. The disagreement between the IE and the utility about placing the two Offers on the short list comes down to different opinions about the viability of the projects underlying the proposed transactions. This is a situation where reasonable observers, presented with the same Offer materials, can arrive at opposing opinions, whether based on the Calculator or simply based on judgment and opinion. If one accepts PG&E’s opinion about the viability of the two Offers (disregarding the PG&E team’s Project Viability Score for the first one), then their selection for the short list was entirely fair, reasonable, and consistent; if one accepts Xxxxxx’x opinion, their selection would not be. Details for the basis of the disagreements are provided in the confidential appendix to this report.

SOURCES OF DISAGREEMENT. While the PG&E evaluation committee and Xxxxxx Seco Consulting did disagree on some specific decisions in the administration of the evaluation process, nearly all of these issues were resolved in the course of review. Issues underlying disagreements included: • Xxxxxx disagreed with some minor aspects of the PG&E team’s preliminary assignments analysis and selection, but these pertained to micro-level issues that did not affect overall selection of some a short list. For example, Xxxxxx and the PG&E team scored Offers to local nodal areas or to pricing zonesusing the same Project Viability Calculator; in nearly all cases the scores differed, but relative rankings of Offers were similar overall. After review and discussion, these disagreements were resolved, either through changes to the assignments or agreement that the assignments were correct. • Other examples of minor disagreement with no impact on selection include:  Xxxxxx disagreed with initial analyses in the estimates of LMP multipliers applied to CAISO delivery points outside California which PG&E had not been assigned to an LMP zone;  Xxxxxx would have rejected as non-compliant more out-of-state Offers with weak cases for achieving regulatory treatment as bundled in-state resources;  Xxxxxx would not have assigned full Resource Adequacy value to a few some of the out-of-state Offers that proposed to interconnect intermittent generation facilities outside deliver power at CAISO intertie points where PG&E’s ability to secure RA import capability is limited. Xxxxxx’x primary critique of PG&E’s short list is that it is too large. Total volume is a multiple of the CAISO gridtarget for procurement of contracts from the 2011 RFO. Upon reviewBy choosing to accommodate a large short list, PG&E has selected some Offers that Xxxxxx considers marginally attractive, rather than focusing on the highest valued, most viable proposals:  Because PG&E chose a different cutoff for valuation for different types or locations of resources, it selected several Offers that Xxxxxx ranked as mediocre in net value. Xxxxxx would have shortened the short list by rejecting these lower-valued proposals.  PG&E used a cutoff for viability score to screen out many Offers. However, the PG&E team agreed that these Offers would not likely provide RA value to customers. • Xxxxxx suggested that selection of Imperial Valley Offers with viability scores below PG&E’s viability cutoff would amount to selected a preference for Imperial Valley projects. Preferential treatment of such Offers was explicitly rejected for the 2009 RPS RFO in the CPUC’s Decision approving the 2009 procurement plans. Based on guidance from PRG members, PG&E chose to drop one such Offer from its draft short list; another failed to stay on the final short list. • PG&E made a preliminary selection of projects from two Developers that were not the Participant’s highest-valued Offers; upon review, and given feedback from PRG members and the IE, PG&E decided to select higher-valued Offers. • Xxxxxx’x Project Viability Calculator scores for many individual Offers varied considerably from the PG&E team’s scores. Upon comparison and discussion, PG&E revised its scores downwards for some very few Offers that it had included scored below this threshold, because of other attributes that PG&E considered sufficiently attractive to outweigh the projects’ weaker viability assessments. Xxxxxx would have rejected those proposals based on the projects’ mediocre viability.  Xxxxxx’x input assumptions to the independent valuation place a lower value on Resource Adequacy capacity than PG&E’s do. As a result, Xxxxxx would have ranked some solar projects lower than PG&E did, and some wind generation projects higher; Xxxxxx would have considered selecting more wind generation. Although Xxxxxx disagreed with the resulting short list that PG&E selected, the basis for these disagreements largely centers on differences in business judgments about relative priorities and choices of numerical inputs. Xxxxxx believes that the choices the PG&E team made were reasonable and justifiable. For example, PG&E’s choice to lower the valuation cutoff for certain resource types and locations was fully consistent with placing a preliminary draft short listrelatively high priority on the non-quantitative sub-criterion of resource diversity and on the stated preference for projects within PG&E’s service territory. This led the utility to decide to reject these Offers from the final short listWhile Xxxxxx’x relative preferences differ, Xxxxxx believes that PG&E’s relative priorities, based on its business judgment, are reasonable. Similarly, Xxxxxx was convinced by PG&E’s analysis to revise some of its Calculator scores upwards for Offers that PG&E had placed on the preliminary draft short list and to which Xxxxxx had raised objections. • In the final short list, PG&E selected a few Offers that met its value cutoff but fell below the cutoff for viability. For most of these, Xxxxxx concurred with the decision to short-list based on other considerations. However, Xxxxxx disagreed disagrees with PG&E’s decision selection of inputs for its valuation of capacity, but acknowledges that the underlying sources of the inputs which generate the RA value estimates come directly from the CPUC and the California Energy Commission. It seems reasonable for a regulated utility to select two parameters in a way that they are consistent with guidance from regulators, though Xxxxxx believes that better choices are available for inputs. Separately, Xxxxxx can offer only a qualified opinion about whether the selection of Offers for the short listsites for development was made fairly. • One Offer, described previously, was short-listed on The group within PG&E that analyzes these Offers provided incomplete documentation of the basis of achieving greater portfolio diversity by providing a proposed project for selection decisions. Xxxxxx disagrees with a different technologythe shortlisting decisions about these Offers. The CPUC will have a better opportunity to review these if PG&E team scored this proposal as lower in value, lower in viability, and equal in RPS Goals, vs. other competing Offers that were not selected executes contracts for the short list. Its selection for the short list appears to be inconsistent and possibly unfair. • Another Offer was for a short-term transaction from an existing facility. Xxxxxx assigned a much lower viability score to this Offer using the Project Viability Calculator than PG&E did. Xxxxxx had difficulty finding a factual basis these in the Offer materials to consider this project more viable than other Offers that PG&E rejected from the short list for poor viability, creating concerns about fairness of selection. The disagreement between the IE and the utility about placing the two Offers on the short list comes down to different opinions about the viability of the projects underlying the proposed transactions. If one accepts PG&E’s opinion about the viability of the two Offers (disregarding the PG&E team’s Project Viability Score for the first one), then their selection for the short list was entirely fair, reasonable, and consistent; if one accepts Xxxxxx’x opinion, their selection would not befuture.