PG&E National Energy Group and any other company referenced herein which uses the PG&E name or logo are not the same company as Pacific Gas and Electric Company, the California utility. These companies are not regulated by the California Public Utilities Commission, and customers do not have to buy products from these companies in order to continue to receive quality regulated services from the utility.

Massachusetts

Division of Energy Resources

Energy Roundtable

April 12, 2002

4/12/02

4/12/022

PG&E NEG Generation Mix

Fuel Breakdown*

Windpower1%Natural Gas

35%

Hydro18%

Coal/Oil46%

Coal/Oil (10

facilities)

2,997 MW

Hydro(3 facilities)

1,166 MW

Natural Gas

(10 facilities)

2,277 MW

Windpower

(2 facilities)

78 MW

*As of 12/31/2001, PG&E NEG had ownership or leasehold interests in 25 operating generating facilities with a net generating capacity of 6,518 megawatts. Source: PG&E National Energy Group Form 10K published on 3/5/2002.

4/12/023

PG&E National Energy GroupBreakdown of New England Generating Unit Output

4,386 Megawatts Total*

*Includes 1,152 MWs under construction

Coal/Oil 2,336 MW

Natural Gas 2,052 MW

Hydro 1,167 MW

4/12/024

Preserving Diversity Does Not Mean Sacrificing Environmental Protection

PG&E National Energy Group plans to invest hundreds of millions of dollars in environmental improvements at Brayton Point Station and Salem Harbor Station over the next several years.

Brayton Point Station:

Air - $150 - $170 M

Reductions in NOX by 80% from 1990 levels

Reductions in SO2 by 70% from 1990 levels

Water - $58 M - ?

33% reduction in heat and flow of water discharge

Mercury Controls - ?

Greenhouse Gas Controls - ?

4/12/025

The Benefits of Preserving Diversity

Maintaining a reliable electricity supply

Stabilizing costs

4/12/026

4/12/027

4/12/028

4/12/029 9

Energy Ventures Analysis, Inc.

Northeast Coal Price HistoryNORTHEAST MONTHLY SPOT COAL PRICES: SO2 < 1.2 lbs/MMBtu

$0

$1

$2

$3

$4

$5

$6

$7

$8

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

($/MMBTU, 2000$)

Note: Northeast includes CT, MA, ME, NH, NJ, NY, PA, RI, and VT.Source: FERC Form 423

4/12/0210

Impact of Removing Coal from the New England Portfolio

Example of NEPOOL Cost Curve

$0

$20

$40

$60

$80

$100

$120

$140

0 5,000 10,000 15,000 20,000 25,000 30,000

MWs in NEPOOL

$/ M

Wh

Hydro Nuclear Coal Gas & Oil

Estimated cost to the New England economy is more than $500 million

4/12/0211

Reliability Concerns

• “…major changes are underway in New England’s energy situation and the region is headed toward sharply increased dependence on natural gas, particularly for electric generation. These changes …will have potential risks for the reliability of energy supplies and the cost of energy that will be born by the people of New England.”

– Glenn Schleede, Energy Market and Policy Analysis, Inc.

4/12/0212

Public Policy Considerations

• Past efforts at maintaining diversity– Brayton Point and Salem Harbor were required by

the federal government to switch to coal in the late 1970’s and early 1980’s because of concerns about excess dependency on oil

• For the future: Who is looking at the cumulative impacts of policies and regulations on fuel diversity?