Pacific Gas & Electric (PCG)

EXHIBIT B-1
(TO PG&E APPENDIX B)

Path 15 Real-Time South-to-North Curtailment Priorities^1/

1/

This table may change from time to time as existing contracts are terminated, or the rights under those contracts change (e.g., termination of a QF contract).

2/

Curtailments within Priority Group 1 are based on each party's contract right or entitlement amount.

3/

CDWR has both EHV and Comprehensive Agreement rights. When curtailments are required, CDWR's EHV schedules are curtailed beginning at the then-current maximum operating limit of the path (as it may increase or decrease from time to time).

4/

The Priority Group 1 capacity available to PG&E south-to-north in real time is the capacity remaining after CDWR's EHV and SCE/SDG&E's CCPIA Existing Contract schedules (as may be curtailed) are subtracted from the amount of available capacity. This remaining capacity is available for CDWR's Comprehensive Agreement schedules and PG&E's must-take encumbrances. PG&E's must-take encumbrances rights correspond to the amount of Path 15 south-to-north transfer capability historically available for PG&E must-take generation in ZP26, including but not limited to the generation of PG&E's Diablo Canyon Nuclear Power Plant, minus PG&E load in ZP26. As used in this footnote, "PG&E's must-take encumbrances" means an amount of transmission transfer capability that is reserved for ISO New Firm Uses across Path 15 south-to-north that is the lesser of PG&E's must-take encumbrances rights defined above or the IOU imputed use of Path 15. The IOU imputed use of Path 15 is the expected power flow resulting from the load, interchange and resource schedules of PG&E, SCE and SDG&E across Path 15. CDWR's Comprehensive Agreement schedules are curtailed, pro rata with the Priority Group 1 capacity available to PG&E, beginning at the then-current maximum operating limit of the path (as it may increase or decrease from time to time).

5/

TANC's 300 MW is firm bi-directional service using the Points of Receipt and Delivery set forth in section 2.4 of the SOTP and in accordance with the Curtailment Priorities set forth in section 3.2 of the SOTP. PG&E supports these transfer capabilities by implementing mitigation measures when necessary, to the extent such measures are available, up to a total of 200 MW south-to-north and 700 MW north-to-south. These mitigation measures consist of switching PG&E's scheduled transmission service from the AC Lines to the DC Line.

6/

Priority Group 4 is available for ISO use for New Firm Uses.

7/

"New ETC Requests" includes any requested service by an ETC in excess of the rights set forth in this table for Priority Groups 1-4, provided that this footnote shall not apply to arrangements between or among PG&E and one or more ETC Parties for future capacity upgrades, if such parties agree, or an existing contractual commitment provides otherwise.

ATTACHMENT 1

CALIFORNIA ISO PATH 15 ATC DETERMINATION METHODOLOGY

Note: This document is intended to explain the procedures for calculation and allocation of Available Transfer Capacity (ATC) over Path 15 pursuant to the Federal Energy Regulatory Commission's May 22, 2002 order in Docket ER99-1770-001 (99 FERC ¶ 61,212). It should not be interpreted in any way to modify Exhibit B-1 of the Transmission Control Agreement.

California ISO calculation of Path 15 ATC in the Day Ahead and Hour Ahead Markets (largely described in Exhibit B-1):

1.

The ISO calculates the Operating Transfer Capability (OTC) for Path 15 and calculates the Existing Contract (ETC) rights of the Edison ETC rights holders.

2.

By 8:30 a.m. of each week day prior to the start of the Trading Day PG&E submits to the ISO the ETC capacity to be reserved in the Day Ahead Market, and by 4:30 p.m. of each week day prior to the start of the Trading Day PG&E may submit a revised ETC reservation amount to the ISO for the ETC capacity to be reserved in the Hour Ahead Market. Any revisions to the amount of megawatts reserved for use by the ETC Parties after these times shall be as provided in ISO operating procedures (currently M-423). (The amount reserved by PG&E in the Day-Ahead Market is based on pre-scheduled amounts submitted by the PG&E-facilitated ETC rights holders to PG&E by 8:15 a.m. or on the previous day's schedules and PG&E's view of the capacity that will be used by such ETC rights holders, with an additional amount of margin to ensure that sufficient capacity is available to the PG&E-facilitated ETC rights holders that wish to modify their pre-scheduled use of their capacity in the Hour-Ahead and real time scheduling processes. PG&E can but does not ordinarily provide updates in advance of the Hour Ahead Market.)

3.

The ISO subtracts the capacity reserved for the PG&E-facilitated and Edison ETC rights holders over Path 15 from the Path 15 OTC to determine the ATC available for New Firm Uses (NFU).

        Allocation of ATC on Path 15 in real-time, i.e. calculate ETC available rights and curtailments based on applicable priorities (largely described in Exhibit B-1 and Attachment A to Exhibit B-1):

1.

Path 15 OTC: Confirm Path 15 South-to-North OTC and adjust for Unscheduled Flows.

2.

Priority Group 1 ETCs: Retrieve all actual schedules by ETC Parties in Priority Group 1 (as set forth in Attachment A to Exhibit B-1) from all SCs scheduling on behalf of such parties over Path 15.

3.

PG&E Must Take Encumbrance and IOU Imputed Use: Retrieve amounts for PG&E Must-Take Encumbrance (which is available for NFU, but needed to assess certain parties' ETC rights) and the IOU Imputed Use—formerly PX Imputed Use—(as set forth in footnote 4 of Attachment A to Exhibit B-1). Adjust, if necessary, for known changes in generation amounts from amounts forecast in Day Ahead Markets.

4.

Capability Available to Lower Priority ETCs: Subtract from the Path 15 OTC the amounts for Priority Group1 ETCs actual net south-to-north scheduled amounts (2 above) and for each hour the lesser of PG&E's Must Take Encumbrance or the IOU Imputed Use (3 above). This is the amount of transmission capacity available for lower priority ETCs (as set forth in Attachment A to Exhibit B-1).

5.

ATC Available for NFU: All ATC not used by ETC Parties is available for NFU (this includes any amount remaining after subtracting from the Path 15 OTC the Priority Group 1-3 ETCs actual scheduled amounts as they are adjusted for any real-time curtailments). Thus the lesser of the PG&E Must Take Encumbrance or the IOU Imputed Use has priority over Priority 2-3 ETCs, but shares the available OTC with Priority 1 ETCs actually scheduled amounts.

Thus, in real time, NFU access to transmission capacity over Path 15 has two levels of priority:

•

First, as the capacity represented by the lesser of the PG&E Must Take Encumbrance or the IOU Imputed Use amount, which has priority over lower priority ETCs and may use the unscheduled rights of Priority 1 ETC rights holders, and

Second, as any capacity that remains after subtracting from OTC the actual schedules for Priority 1-3 ETCs and the NFU amount above.

        However, operationally the ISO does not allocate particular NFU schedules to a particular priority but rather treats all NFU schedules as a single block. The following example illustrates how this occurs:

        Assume that OTC over Path 15 is 2,500 MW in a given hour and that there is no Unscheduled Flow. Assume that there are 800 MW of Priority 1 ETC actual schedules, 1,000 MW of PG&E Must Take Encumbrance, 200 MW of lower priority ETC actual schedules, and 1,500 MW of NFU. This NFU amount, as described above, uses the 1,000 MW of PG&E Must Take Encumbrance and the amount of capability remaining after accommodating the lower priority ETC schedules. Assume that Path 15 is derated to 2,000 MW. In this example, no ETC curtailment is indicated, thus the ISO must take actions to reduce the flow. The ISO would use Adjustment Bids and Supplemental Energy bids in the BEEP stack to attempt to accommodate the transactions without curtailing any of the NFU schedules. Assume that after bids in the BEEP stack are exhausted, 1,200 MW of NFU remain on Path 15 and curtailments are required (this occurrence is rare). If feasible within the time available to manage the Path derating, the 1,200 MW of NFU would be curtailed on a pro-rata basis to result in NFU of 1,000 MW. Assume that Path 15 is further derated to 1,000 MW and that all bids in the BEEP stack remain exhausted. If feasible within the time available to manage the Path derating, the 1,000 MW of NFU (the amount that is using the priority rights equal to the amount of the PG&E Must Take Encumbrance) would be curtailed on a pro-rata basis to result in NFU of 200 MW and the lower priority ETC schedules would be curtailed to 0 MW. Note: Priority 1 ETC rights are determined on the basis of the Path 15 OTC, and only curtailed if the Priority 1 ETC rights holder's schedule exceeds its contract right or entitlement amount.

TRANSMISSION CONTROL AGREEMENT