BEIJING BOSTON BRUSSELS CENTURY CITY CHICAGO DALLAS GENEVA FOUNDED May 1, 2017

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1 SIDLEY AUSTIN LLP 701 FIFTH AVENUE, SUITE 4200 SEATTLE, WA FAX BEIJING BOSTON BRUSSELS CENTURY CITY CHICAGO DALLAS GENEVA HONG KONG HOUSTON LONDON LOS ANGELES MUNICH NEW YORK PALO ALTO SAN FRANCISCO SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C FOUNDED 1866 May 1, 2017 The Honorable Carmen A. Cintron Chief Administrative Law Judge Federal Energy Regulatory Commission 888 First Street, NE Washington, DC Re: Joint Offer of Settlement, Docket No. ER01-889, [ ] Dear Judge Cintron: Enclosed for filing is a Joint Offer of Settlement, including Attachments A and B, submitted in Docket No. ER This Joint Offer of Settlement is submitted on behalf of Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company pursuant to the Order of Chief Judge Continuing to Hold Proceeding in Abeyance, Docket Nos. ER01-889, et al. (Mar. 2, 2017). Please do not hesitate to contact me if you have any questions about the filing. Very truly yours, /s/ Eric Todderud Eric Todderud Sidley Austin LLP Of Attorneys for Pacific Gas and Electric Company Enclosure Sidley Austin (DC) LLP is a Delaware limited liability partnership doing business as Sidley Austin LLP and practicing in affiliation with other Sidley Austin partnerships.

2 SIDLEY AUSTIN LLP 701 FIFTH AVENUE, SUITE 4200 SEATTLE, WA FAX BEIJING BOSTON BRUSSELS CENTURY CITY CHICAGO DALLAS GENEVA HONG KONG HOUSTON LONDON LOS ANGELES MUNICH NEW YORK PALO ALTO SAN FRANCISCO SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C FOUNDED 1866 May 1, 2017 The Honorable Carmen A. Cintron Chief Administrative Law Judge Federal Energy Regulatory Commission 888 First Street, NE Washington, DC Re: Joint Offer of Settlement, Docket No. ER01-889, [ ] Dear Judge Cintron: Enclosed for filing is a Joint Offer of Settlement, including Attachments A and B, submitted in Docket No. ER This Joint Offer of Settlement is submitted on behalf of Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company pursuant to the Order of Chief Judge Continuing to Hold Proceeding in Abeyance, Docket Nos. ER01-889, et al. (Mar. 2, 2017). Please do not hesitate to contact me if you have any questions about the filing. Very truly yours, /s/ Eric Todderud Eric Todderud Sidley Austin LLP Of Attorneys for Pacific Gas and Electric Company Enclosure Sidley Austin (DC) LLP is a Delaware limited liability partnership doing business as Sidley Austin LLP and practicing in affiliation with other Sidley Austin partnerships.

3 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION California Independent System Operator Corporation ) ) Docket No. ER JOINT OFFER OF SETTLEMENT To: The Honorable Carmen A. Cintron Chief Administrative Law Judge Pursuant to Rules 602(b)(2)(1) and (g) 1 of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission ( Commission ), PG&E, SCE, and SDG&E (collectively, the Parties ) 2 respectfully request that Your Honor certify this Joint Offer of Settlement ( Joint Offer ) to the Commission for approval. Upon approval, the Settlement Agreement will resolve certain claims among the Parties in the captioned proceeding relating to payment for energy provided to CERS during the period January 17, 2001, hour 22, through February 28, 2001, hour 24 (the Invoice Restatement Period ) for service to the Parties retail customers. This proceeding may then be terminated C.F.R (b)(2)(1) and (g) (2016). 2 Capitalized terms not defined in this Joint Offer of Settlement shall have the meanings set forth in the April 26, 2017 Settlement Agreement among the Parties ( Settlement Agreement ).

4 In accordance with Commission Rule 602 (c), 3 the Parties attach hereto the following documents: a Joint Explanatory Statement (Attachment A); and the Settlement Agreement (Attachment B). I. GENERAL OVERVIEW OF SETTLEMENT The Settlement Agreement provides for the settlement of claims related to invoicing for the ISO s purchases in the ISO Real Time Market to serve the load requirements of the customers of PG&E and SCE during a portion of the western energy crisis of In the ER Proceeding, FERC determined that CERS should be billed for the ISO s purchases of energy in the ISO Real Time Market for energy that CERS used to serve the load requirements of the Parties retail customers during the period January 17, 2001, hour 22, through February 28, 2001, hour 24 (defined in the Settlement Agreement as the Invoice Restatement Period ). 4 The invoices, however, were submitted to the PX instead of to CERS, and the PX, in turn, invoiced those amounts to PG&E and SCE. The total amount at issue in this Settlement Agreement, including interest through December 31, 2016, is $77,534,749. Rather than litigate over the liability for this amount in the ER Proceeding, the Parties have agreed to adjust, among themselves, the total liability for the purchases in question made during the Invoice Restatement Period. The Settlement Agreement bases that liability on the Parties proportionate share of the CERS Revenue Requirement. The Parties have agreed to certain credits and charges, as set forth in the Settlement Agreement, to ensure that each Party is liable for its correct share of the total amount invoiced for the ISO s purchases during the Invoice 3 18 C.F.R (c) (2016). 4 See California Independent System Operator Corp., 98 FERC 61,335 at 62,434 (2002)

5 Restatement Period. The adjustment of the Parties liability merely shifts liabilities among the three Parties for a fixed amount of dollars $77,534,749 and therefore does not affect CERS, the ISO, the PX, or market participants other than the Parties. The invoices to the PX, and the PX s invoices to the Parties, will not be adjusted. The Parties have discussed the provisions of this Settlement with representatives of the ISO, the PX, CERS, and the CPUC. The Parties anticipate that those entities will support or not oppose the Settlement Agreement. The Settlement Agreement becomes effective only upon the occurrence of the Settlement Effective Date, which is the date that the Commission approves the Settlement Agreement. Implementation of the charges and credits will be delayed so that the Parties that owe amounts under the Settlement Agreement will not be required immediately to make substantial out-ofpocket payments to satisfy their respective share of liabilities. Instead, the charges and credits will be applied at the time of the final reconciliation among the Parties of liabilities related to the western energy crisis of This Settlement Agreement simply adjusts liabilities among the Parties (that is, the California investor-owned utilities). It does not shift liability to or from any other person or entity, it does not impact the rights of third parties, and it does not impact any other Commission proceeding. Furthermore, although the settlement addresses transactions in the ISO Real Time Market, the ISO and PX s involvement is not necessary to implement the terms of this Settlement Agreement, and nothing in the Settlement Agreement will impact those entities accounts. Commission approval of the Settlement Agreement will permit closure of the ER Proceeding

6 II. REQUEST FOR APPROVAL OF SETTLEMENT The settlement benefits the Parties by resolving pending claims related to liabilities for energy purchases during January and February The settlement reaches a fair and reasonable resolution of issues among the Parties. Both the Commission and the United States Court of Appeals for the Ninth Circuit have actively encouraged settlements of claims relating to transactions in the ISO and PX markets during the crisis period in 2000 and Here, settlement is particularly appropriate because ongoing issues concerning mitigation do not affect this Settlement Agreement; the issue instead relates to charges for purchases at pre-mitigation prices that were invoiced to the wrong entities. Accordingly, the Parties respectfully request the Presiding Judge to certify to the Commission for approval this Joint Offer as embodied in the Settlement Agreement. III. COMMENTS Comments on this settlement should be filed in the above-captioned proceeding. In accordance with Rules 602(d)(2) and 602(f), 6 initial comments are due on May 21, 2017, and reply comments are due on May 31, See, e.g., San Diego Gas & Elec. Co., 145 FERC 61,015 at P 26 (2013) ( [W]e note that the Commission has long encouraged the settlement of disputes in general and in these proceedings in particular. ); Pub. Utils. Comm n of Cal., 99 FERC 61,087 at 61,384 (2002) ( [W]e want to strongly encourage all parties involved in disputes arising from the California crisis to seriously negotiate settlements. ); Pub. Utils. Comm'n of Cal. v. FERC, No , slip op. at 3 (9th Cir. Oct. 23, 2006) (extending deadlines to encourage further settlement efforts ) C.F.R (d)(2) and (f) (2016)

7 Respectfully submitted, /s/ Stan Berman Stan Berman Eric Todderud Sidley Austin LLP 701 Fifth Avenue, Suite 4200 Seattle, WA Mark D. Patrizio Joshua S. Levenberg Pacific Gas and Electric Company 77 Beale Street, B30A Post Office Box 7442 San Francisco, CA Attorneys for Pacific Gas and Electric Company /s/ Richard L. Roberts Richard L. Roberts Jane I. Ryan Steptoe & Johnson LLP 1330 Connecticut Avenue, NW Washington, DC Russell C. Swartz J. Eric Isken Russell A. Archer Southern California Edison Company 2244 Walnut Grove Avenue Rosemead, CA Attorneys for Southern California Edison Company /s/ James R. Dean, Jr. James R. Dean, Jr. Covington & Burling LLP One City Center 850 Tenth Street, N.W. Washington, DC Attorneys for San Diego Gas & Electric Company May 1,

8 CERTIFICATE OF SERVICE I hereby certify that I have this day served an electronic copy of the foregoing document upon each person designated on the service list established in Docket No. ER Dated at Washington, D.C. this 1st day of May, /s/ Alec Weingart Alec Weingart Sidley Austin LLP 1501 K Street, NW Washington, DC (202) aweingart@sidley.com

9 Attachment A

10 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION California Independent System Operator Corporation ) ) Docket No ER JOINT EXPLANATORY STATEMENT Pacific Gas and Electric Company ( PG&E ), Southern California Edison Company ( SCE ), and San Diego Gas & Electric Company ( SDG&E ) (collectively, the Parties ) respectfully submit this Joint Explanatory Statement ( Explanatory Statement ) as part of a Joint Offer of Settlement to resolve claims in the abovecaptioned proceeding relating to amounts due by and owing to the Parties. I. INTRODUCTION This Explanatory Statement is provided solely to comply with Rule 602(c)(1)(ii) of the Commission s Rules of Practice and Procedure. 1 Except as otherwise defined herein, the capitalized terms used in this Explanatory Statement have the meanings set forth in Article I of the April 26, 2017 Settlement Agreement. 2 This Explanatory Statement is not intended to, and does not, alter any of the provisions of the Settlement 1 18 C.F.R (c)(1)(ii) (2016). 2 The Settlement Agreement is Attachment B to the Joint Offer of Settlement.

11 Agreement. In the event of an inconsistency between the Explanatory Statement and the Settlement Agreement, the Settlement Agreement shall control. II. GENERAL OVERVIEW OF SETTLEMENT The Settlement Agreement resolves disputes among the three California investorowned utilities (the Parties ) over their respective liabilities for energy purchases in the ISO Real Time Market made to serve the Parties retail customers during the Invoice Restatement Period (January 17 through February 28, 2001). The invoices were submitted to the PX, which in turn invoiced PG&E and SCE, but those invoices for the Invoice Restatement Period should have been submitted to CERS. The principal amount of the relevant invoices is $37,465,111. With interest, the amount at stake is $77,534,749, as of December 31, Disputes over the invoicing of these amounts were set for hearing in the ER Proceeding. Through the Settlement Agreement, the Parties have agreed to resolve, as among themselves, all such disputes through charges and credits among the Parties. To accomplish those adjustments, the Settlement Agreement identifies the amounts that were invoiced to the PX (the Invoiced Amounts ), which the PX then billed to PG&E and SCE, and interest on those amounts from the invoice due date through December 31, 2016 (the Interest on Invoiced Amounts ). The Settlement Agreement then establishes the agreed-upon amounts for which each Party is liable (the Restated Invoiced Amounts and the Restated Interest on Invoiced Amounts ). The Settlement Agreement then provides for adjustments, in the form of credits and charges, to the amounts that the Parties owe among themselves. Through those adjustments, PG&E is entitled to a credit - 2 -

12 of $26,857,024. SCE incurs a charge in the amount of $18,870,945, and SDG&E incurs a charge in the amount of $7,986,079. The charges and credits will be implemented as part of final market clearing through the final reconciliation among the Parties of their energy crisis-related liabilities. The Parties anticipate that, as a result of the Fuel Cost Allowance True Up, PG&E will have significant liabilities to the other Parties, and the credits that the Parties owe to PG&E under the Settlement Agreement would offset amounts that PG&E owes to the other Parties. Amounts that are still owed under the Settlement Agreement following the adjustments to the Fuel Cost Allowance True Up will be applied in the final reconciliation of amounts owed among the Parties, with the intent that no Party be required to make a cash payment under this Settlement Agreement until such final reconciliation. III. DESCRIPTION OF PROCEEDINGS The ER Proceeding addresses the amounts owed for purchases made in the ISO Real Time Market to serve the Parties retail customers. Because these issues relate to the California refund proceeding (the EL00-95 Proceeding) and the ISO s refund rerun process, the proceedings have been suspended, awaiting developments in the EL00-95 Proceeding, for a number of years. 3 3 A detailed description of the development and scope of the ER Proceeding is included in the ISO s status report submitted in this docket on February 28,

13 The ISO has filed periodic status reports during the suspension of the ER Proceeding. After its status report of May 16, 2016, Chief Administrative Law Judge Cintron convened a status conference, which occurred on June 9, In a status report dated January 17, 2017, the ISO reported that PG&E had identified, as the only live issue in the proceeding, the question of the proper invoicing of ISO purchases during the Invoice Restatement Period. The ISO also reported in its status report that the parties were discussing a settlement of that issue. On January 18, 2017, Chief Administrative Law Judge Cintron issued an order continuing to hold the proceeding in abeyance. 4 She ordered the parties to submit a status report on February 28, 2017, at which time she would consider further proceedings. On February 28, 2017, the ISO submitted a status report on behalf of the active participants in the ER Proceeding. 5 The ISO reported that the California investorowned utilities (the Parties under the Settlement Agreement) had reached a settlement in principle to resolve the remaining issue in the ER Proceeding. The ISO further reported that the Parties were preparing documentation of the settlement, which they expected to file for approval by May 1, Judge Cintron granted the parties request and held the proceedings in abeyance until May 1, Order of Chief Judge Continuing to Hold Proceeding in Abeyance and Ordering Status Report, Docket Nos. ER01-889, et al. (Jan. 18, 2017). 5 Status Report, Docket Nos. ER01-889, et al. (Feb. 28, 2017). 6 Order of Chief Judge Continuing to Hold Proceeding in Abeyance at P 3, Docket Nos. ER01-889, et al. (Mar. 2, 2017)

14 The accompanying Joint Offer of Settlement submits the Parties settlement. Once approved, the Settlement Agreement will resolve all pending claims in the ER Proceeding, and the Commission may terminate the docket. IV. SUMMARY OF SETTLEMENT AGREEMENT TERMS The principal terms of the Settlement Agreement are briefly described below, with reference to the sections of the Settlement Agreement that contain them. A. Effective Date The Parties have executed the Settlement Agreement and it became binding as of the Execution Date. Some of the provisions, however, become effective only as of, or in relation to, the Settlement Effective Date. Section 2.1. The Settlement Effective Date is defined as the date on which FERC issues the FERC Settlement Order approving the Settlement Agreement, regardless of whether such order is subject to rehearing or appeal, provided that such order has not been stayed pending such rehearing or appeal, subject to certain conditions in the event that the Commission modifies or conditions its approval of the Settlement Agreement. Sections 1.11, 1.31, 2.2.1, 6.1, 6.2. B. Termination The Settlement Agreement terminates on the date of a Final Order rejecting the Settlement Agreement in whole or in material part or accepting it with material conditions or modifications unacceptable to any adversely affected Party. Section

15 C. Time Period The Settlement Agreement governs charges for ISO purchases during the Invoice Restatement Period, which is the period beginning January 17, 2001, hour 22, through February 28, 2001, hour 24. Section 1.18, Art. III. D. Restatement of Invoices The Parties acknowledge that the amounts that the ISO invoiced to the PX, and for which PG&E and SCE ultimately were billed for ISO purchases during the Invoice Restatement Period including interest through December 31, 2016 (the Invoiced Amounts and Interest on Invoiced Amounts, respectively), are the amounts set forth in Table 3.1. Sections 1.15, 1.17, 3.1 & Table 3.1. Those amounts total $77,534,749. Table 3.1. Table 3.2 sets forth the share of the total of $77,534,749 for which each Party is liable (the Restated Invoiced Amounts and the Restated Interest on Invoiced Amounts, respectively). Sections 1.26, 1.27, 3.2 & Table 3.2. Each Party s liability was calculated based on the percentage allocations among the Parties of the CERS Revenue Requirement established through proceedings at the Public Utilities Commission of the State of California. Section 1.4, Table 3.2. To account for the differences between the Invoiced Amounts and Interest on Invoiced Amounts, on the one hand, and the Restated Invoiced Amounts and the Restated Interest on Invoiced Amounts, on the other hand, Section 3.3 provides for adjustments, in the form of credits and charges to the Parties accounts, in the amounts set forth in Table 3.3. Section 3.3 & Table 3.3. Through those adjustments, PG&E is entitled to a credit of $26,857,024. SCE incurs a charge of $18,870,945, and SDG&E incurs a charge of - 6 -

16 $7,986,079. Id. Those amounts reflect interest that has accrued at the FERC Interest Rate through December 31, Sections 1.10, No interest accrues on the Restated Invoiced Amounts and the Restated Interest on Invoiced Amounts after that date. Section E. Implementation of Restatement of Invoices Rather than require immediate cash payments of the credits and charges established under Section 3.3, the Parties have agreed to implement the adjustments as charges and credits to amounts that the Commission establishes in the Fuel Cost Allowance True Up, which will establish market participants liability for Fuel Cost Allowances. Sections 1.13, 1.14, The Parties intent is to settle these amounts as part of the final reconciliation of the Parties energy crisis-related liabilities. Section Such adjustments will not affect the Parties ISO and PX accounts. Section 4.1. F. Resolution of ER Proceeding The Settlement Agreement provides for the settlement of all claims among the Parties related to the issues set for hearing in the ER Proceeding. Sections 1.6, 5.1. Following the Settlement Effective Date, the Parties must notify the Chief Administrative Law Judge that all disputes in the ER Proceeding have been resolved. Section 5.2. May 1,

17 Attachment B

18 Execution Copy SETTLEMENT AGREEMENT This Settlement Agreement ( Agreement ) is entered into by and among PG&E, SCE, and SDG&E. Each of the foregoing is a Party, and collectively they are the Parties to the Agreement. RECITALS A. Whereas, beginning on January 17, 2001, CERS assumed the obligation to procure energy to serve the load requirements of PG&E and SCE in excess of those Parties available resources, and it met that obligation, in part, through ISO purchases made in the ISO Real Time Market; and B. Whereas, in the ER Proceeding, FERC determined that the ISO should bill CERS for the ISO s purchases of energy in the ISO Real Time Market to serve the load requirements of one or more of the Parties during the Invoice Restatement Period; and C. Whereas, FERC set for hearing the issue of whether the ISO correctly billed CERS for the ISO s purchases of energy in the ISO Real Time Market to serve the load requirements of one or more of the Parties during the Invoice Restatement Period; and D. Whereas, the ISO invoiced certain amounts to the PX that the Parties agree should have been invoiced to CERS for purchases of energy in the ISO Real Time Market to serve the load requirements of one or more of the Parties during the Invoice Restatement Period, and the PX, in turn, invoiced those amounts to PG&E and SCE; and E. Whereas, rather than continue litigating in the ER Proceeding, the Parties desire to resolve their disputes through a restatement of amounts invoiced to the Parties, all as set forth below. Now, therefore, in consideration of the mutual covenants and agreements, and other good and valuable consideration provided for herein, and subject to and upon the terms and conditions hereof, the Parties agree as follows: ARTICLE I DEFINITIONS Unless otherwise expressly provided for herein, the following capitalized terms, when used in this Agreement, including the preamble and recitals above, shall have the meanings specified in this Article I. 1.1 Agreement shall have the meaning set forth in the preamble, and shall include all modifications accepted by an adversely affected Party pursuant to Section Business Day has the same meaning as provided in California Civil Code Section

19 Execution Copy 1.3 CERS means the California Department of Water Resources acting solely under the authority and powers created by California Assembly Bill 1 of the First Extraordinary Session of , codified in Sections through of the California Water Code, and not under its powers and responsibilities with respect to the State Water Resources Development System. 1.4 CERS Revenue Requirement means the costs of procuring power and other related operational costs that CERS is permitted to recover from the Parties through its wholesale power rates. 1.5 EL00-95 Proceeding means the FERC proceeding conducted in Docket Nos. EL00-95, et al. and EL00-98, et al. and related appeals of orders in that proceeding and any proceedings upon remand. 1.6 ER Proceeding means the FERC proceeding conducted in Docket No. ER Execution Date means the date on which this Agreement has been duly executed by all Parties and, if execution occurs on various dates, the Execution Date shall be the date shown on the signature pages that is last in time. 1.8 FERC means the Federal Energy Regulatory Commission. 1.9 FERC Allowances Determination means the FERC order or orders, including orders on rehearing, directing the payment (including by offset) of Fuel Cost Allowances and/or emissions offsets and/or cost offsets in the EL00-95 Proceeding, regardless of whether such order or orders is/are subject to requests for stay, rehearing or appeal, provided that such order or orders has/have not been stayed pending such rehearing or appeal FERC Interest Rate shall have the meaning set forth in 18 C.F.R a(a)(2)(iii) (2016) or any successor thereto FERC Settlement Order means the FERC order approving this Agreement in accordance with Section 6.1, regardless of whether such order is subject to rehearing or appeal, provided that such order has not been stayed pending such rehearing or appeal Final Order means a FERC order that is no longer subject to further rehearing before FERC regardless of whether such order is subject to appeal, provided that such order has not been stayed pending such appeal. The date of a Final Order shall be the date upon which it is no longer subject to rehearing Fuel Cost Allowance means the claim for recovery of fuel costs incurred by a Participant s generating units during the Refund Period made pursuant to FERC orders in the EL00-95 Proceeding. See, e.g., San Diego Gas & Elec. Co., 110 FERC 61,293 (2005)

20 Execution Copy 1.14 Fuel Cost Allowance True Up means the adjustment required under various energy crisis settlements involving the Parties and other market participants to reflect an increase or decrease in the allocation of Fuel Cost Allowances as a result of a FERC order or orders, including on rehearing, directing the payment (including by offset) of Fuel Cost Allowances in the EL00-95 Proceeding. For illustrative purposes only, Fuel Cost Allowance True Up refers to any adjustment related to Fuel Cost Allowances of the type described in section of the Settlement and Release of Claims Agreement between the California Parties (as defined therein) and Nevada Power Company and Sierra Pacific Power Company, approved by FERC in San Diego Gas & Elec. Co., 138 FERC 61,084 (2012) Interest on Invoiced Amounts means the interest on the Invoiced Amounts that has accrued at the FERC Interest Rate through December 31, 2016, as set forth in Table Interest Shortfall means the difference between the interest actually earned on funds held by the PX and/or ISO and the interest that would be earned through application of the FERC Interest Rate Invoiced Amounts means the amounts the ISO invoiced to the PX through SCID PXC1, that the Parties agree should have been invoiced to CERS, for ISO purchases made in the ISO Real Time Market during the Invoice Restatement Period, as set forth in Table Invoice Restatement Period means the period beginning January 17, 2001, hour 22, and continuing through February 28, 2001, hour ISO means the California Independent System Operator Corporation, a California public benefit corporation ISO Real Time Market means the market operated by the ISO for sales of imbalance energy in the time period immediately prior to delivery. See, e.g., CPUC v. FERC, 462 F.3d 1027, (9 th Cir. 2006) Party or Parties shall have the meaning set forth in the preamble PG&E means Pacific Gas and Electric Company, a California corporation PX means the California Power Exchange Corporation, a California public benefit corporation Refund Period means the period October 2, 2000 through June 20, Required Approval means the regulatory approval set forth in Section Restated Interest on Invoiced Amounts shall have the meaning set forth in Section

21 Execution Copy 1.27 Restated Invoiced Amounts shall have the meaning set forth in Section SCE means Southern California Edison Company, a California corporation SCID PXC1 means the scheduling coordinator identification number that the ISO used for PX transactions in the ISO Real Time Market SDG&E means San Diego Gas & Electric Company, a California corporation Settlement Effective Date means the date on which FERC issues the FERC Settlement Order. 2.1 Effect of Settlement Effective Date. 2.2 Termination. ARTICLE II EFFECTIVENESS OF AGREEMENT Conditions Precedent. The occurrence of the Settlement Effective Date is a condition precedent to the following: (i) the obligation of any Party to perform hereunder, and (ii) the effectiveness of all releases and the withdrawals of claims and defenses specified hereunder Binding Obligation. Except as provided in Section 2.1.1, this Agreement shall be a binding obligation of each Party upon the occurrence of the Execution Date Grounds for Termination. This Agreement shall terminate on the date of a Final Order rejecting this Agreement in whole or in material part or accepting this Agreement with material conditions or modifications deemed unacceptable to any adversely affected Party. In the event of a material condition or modification that adversely affects any Party, each Party so affected shall communicate its consent or lack of consent to such material condition or modification in writing to the other Parties no later than five (5) Business Days after the date of the order that imposes the material condition or modification on FERC s approval of this Agreement. The failure of an adversely affected Party to provide written notice to the other Parties in accordance with the foregoing sentence shall constitute acceptance by such Party of the material condition or modification; provided, however, that the Parties may, in the sole discretion of each Party, agree to attempt to modify this Agreement in a manner that would resolve the grounds for which the Required Approval by FERC was denied. Nothing herein shall be construed as obligating any Party to appeal a Final Order rejecting this Agreement or approving this Agreement with a material condition or modification unacceptable to any adversely affected Party

22 Execution Copy Effect of Termination. If this Agreement is terminated for any reason, pursuant to this Section 2.2, then this Agreement shall be null and void and of no further effect, with all rights, duties, and obligations of the Parties thereafter restored as if this Agreement had never been executed. ARTICLE III INVOICED AMOUNTS AND RESTATED INVOICED AMOUNTS 3.1 Invoiced Amounts and Interest. The Parties acknowledge and agree as follows: Invoiced Amounts. The Invoiced Amounts are the amounts set forth in the column labeled Invoiced Amounts Principal in Table Interest on Invoiced Amounts. The Interest on Invoiced Amounts are the amounts set forth in the column labeled Interest on Invoiced Amounts in Table 3.1, which reflects interest at the FERC Interest Rate calculated from the invoice due date though December 31, Table 3.1 Party Invoiced Amounts Principal Interest on Invoiced Amounts Total PG&E $28,787,702 $30,788,986 $59,576,688 SCE $8,677,409 $9,280,652 $17,958,061 Total $37,465,111 $40,069,638 $77,534, Liability for ISO Purchases. The Parties acknowledge and agree that the Invoiced Amounts should have been billed to CERS, to be allocated among the Parties through the CERS Revenue Requirement. 3.2 Restated Invoiced Amounts and Restated Interest on Invoiced Amounts. Notwithstanding the Invoiced Amounts set forth in Table 3.1, the Parties agree that their appropriate respective shares of the Invoiced Amounts and the Interest on Invoiced Amounts (the Restated Invoiced Amounts and the Restated Interest on Invoiced Amounts, respectively) are instead the amounts set forth in Table

23 Execution Copy Table 3.2 Party Principal Share of Restated Invoiced Amounts (Based on CERS Revenue Requirement Allocation) Restated Interest on Invoiced Amounts (Based on CERS Revenue Requirement Allocation) Total PG&E $15,810,277 $16,909,387 $32,719,664 SCE $17,795,928 $19,033,078 $36,829,006 SDG&E $3,858,906 $4,127,173 $7,986,079 Total $37,465,111 $40,069,638 $77,534, Adjustments Among the Parties Credits/Charges. The Parties shall account for the difference between (i) the Invoiced Amounts, plus Interest on the Invoiced Amounts, as set forth in Table 3.1, and (ii) each Party s liability for Restated Invoiced Amounts plus Restated Interest on Invoiced Amounts, as set forth in Table 3.2, through a credit to PG&E and a charge to SCE and SDG&E in the amounts set forth in Table 3.3, to be implemented as set forth in Section Table 3.3 Party Credit/(Charge) PG&E $26,857,024 SCE ($18,870,945) SDG&E ($7,986,079) Interest Interest Accrual. Amounts stated in this Article III reflect the accrual of interest at the FERC Interest Rate through December 31, After December 31, 2016, interest shall not accrue on Restated - 6 -

24 Execution Copy Invoiced Amounts or Restated Interest on Invoiced Amounts due and owing under this Agreement but interest shall continue to accrue on Invoiced Amounts and Interest on Invoiced Amounts Interest Shortfall. Interest calculated and provided for pursuant to this Agreement shall be applicable only to the Parties, and shall be separate from and not included in the calculation or allocation of Interest Shortfall in the EL00-95 Proceeding or any other FERC docket. Nothing in this Agreement shall impact or modify the calculation or allocation of Interest Shortfall in the PX and/or ISO in their respective markets in the EL00-95 Proceeding or any other FERC docket Implementation. The credits and charges set forth in Table 3.3 shall be implemented after the FERC Allowances Determination and shall be applied as an adjustment increasing or decreasing the amount each Party owes, or is owed, as a result of the Fuel Cost Allowance True Up. No Party shall be required to pay, nor entitled to collect, any part of the amounts set forth in Table 3.3 until the occurrence of such Fuel Cost Allowance True Up. All such amounts shall be credited or charged, as appropriate, at the time of the final reconciliation of the Parties respective liabilities, it being the intent of the Parties to minimize, to the extent consistent with this Agreement, amounts paid to or from any Party until such time as all liabilities among the Parties related to the California energy crisis are settled. ARTICLE IV ISO AND PX ACCOUNTING 4.1 No ISO and PX Account Adjustments. All credits and charges provided for under this Agreement shall be implemented among the Parties, and no payments, credits, or charges pursuant to this Agreement will be made by, through, or to the ISO or PX. Such adjustments among the Parties will not affect ISO or PX accounts, and the books of the ISO and PX will not be adjusted or conformed in any way as a result of this Agreement. Because the Parties respective liability for the Invoiced Amounts and Interest on the Invoiced Amounts is being separately adjusted among the Parties pursuant to this Agreement, the Parties acknowledge and agree that those amounts may not be reinvoiced to CERS by the ISO or PX, and the Parties shall remain responsible to the PX for the amounts on PX invoices. 4.2 Tariff Waivers. FERC approval of this Agreement in the FERC Settlement Order shall constitute a grant of such waivers of the ISO and the PX tariffs as may be necessary to implement this Agreement

25 Execution Copy ARTICLE V RELEASES AND WAIVERS 5.1 Scope of Settlement and Releases. In return for the consideration specified elsewhere in this Agreement and full performance by the Parties of their respective obligations hereunder, and subject to the occurrence of the Settlement Effective Date, all claims as among the Parties for damages, refunds, disgorgement of profits, costs and attorneys fees, or other monetary or non-monetary remedies in the ER Proceeding shall be deemed settled and resolved. The foregoing release of claims applies only to the Parties liabilities for the Invoiced Amounts and the Interest on Invoiced Amounts, and nothing in this Agreement shall affect the rights or liabilities of any person or entity that is not a Party, or in any proceeding other than the ER Proceeding. 5.2 Termination of ER Proceeding. No later than ten (10) Business Days following the Execution Date, the Parties shall jointly report to the Chief Administrative Law Judge at FERC that all pending disputes in the ER Proceeding will be resolved upon the issuance of the FERC Settlement Order. The ER Proceeding will be terminated on the Settlement Effective Date. ARTICLE VI REQUIRED APPROVAL 6.1 Required Approval. The settlement made pursuant to this Agreement shall be subject to approval by FERC in the FERC Settlement Order without material change or condition unacceptable to any adversely affected Party. 6.2 Parties Cooperation. The Parties shall cooperate in (i) the preparation and submission of the application or other form of filing necessary to obtain the FERC Settlement Order, (ii) the submission of appropriate responses to any protests to the filing of the settlement, and (iii) the submission of appropriate responses to any requests for rehearing challenging the FERC Settlement Order. ARTICLE VII REPRESENTATIONS AND WARRANTIES 7.1 Representations of all Parties. Each Party makes the following representations and warranties, for itself only, to each other Party, to be effective from and after the Execution Date: Organizational Status, Power, and Authority. It is a corporation, limited partnership, or limited liability company duly organized, validly existing, and in good standing under the laws of the jurisdiction of its formation. It possesses all necessary power and authority to execute, deliver, and perform its obligations under this Agreement

26 Execution Copy Authority to Execute. The execution, delivery, election to participate, and performance of this Agreement (i) are within its powers, (ii) have been duly authorized by all necessary action on its behalf and all necessary consents or approvals have been obtained and are in full force and effect, and (iii) do not violate any of the terms and conditions of any applicable law, or materially violate any contracts to which it is a party Binding Obligation. This Agreement constitutes its legal, valid, and binding obligation, enforceable against it in accordance with its terms Ownership of Claims. It is the sole owner of the claims that are being resolved and compromised by it pursuant to this Agreement, and except as provided in this Agreement, there has been no sale, assignment, transfer, pledge, or hypothecation, or attempted sale, assignment, transfer, pledge, or hypothecation, by it of any such rights or claims, whether directly, indirectly, by operation of law, or otherwise. ARTICLE VIII MISCELLANEOUS 8.1 Notices. All notices, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given: (i) when personally delivered; (ii) upon actual receipt (as established by confirmation of receipt or otherwise) during normal business hours, otherwise on the first Business Day thereafter, if transmitted by facsimile or telecopier with confirmation of receipt; (iii) on the date of receipt when mailed by certified mail, return receipt requested, postage prepaid; or (iv) on the first Business Day thereafter when sent by overnight courier; in each case, to the addresses set forth in Section 8.2, or to such other addresses as a Party may from time to time specify by notice to the other Parties given pursuant hereto. 8.2 Notice to Parties. Notices required under this Agreement shall be delivered to: If to PG&E: Mark Patrizio Physical address: PG&E Corporation Legal Department 77 Beale Street San Francisco, CA

27 Execution Copy Mailing address: Mail Code B30A P.O. Box 7442 San Francisco, CA Telephone: (415) Fax: (415) With a copy to: Stan Berman Sidley Austin LLP 701 Fifth Ave., Suite 4200 Seattle, WA Telephone: (206) Fax: (415) sberman@sidley.com If to SCE: J. Eric Isken Southern California Edison Company 2244 Walnut Grove Avenue Rosemead, CA Telephone: (626) Fax: (626) j.eric.isken@sce.com With a copy to: Richard Roberts Steptoe & Johnson LLP 1330 Connecticut Avenue, N.W. Washington, DC Telephone: (202) Fax: (202) rroberts@steptoe.com

28 Execution Copy If to SDG&E: Pamela Mills San Diego Gas & Electric Company 8333 Century Park Court, CP San Diego, CA Telephone: (858) Fax: (619) With a copy to: James Dean Covington & Burling LLP th Street, N.W. Washington, DC Telephone: (202) Fax: (202) jdean@cov.com 8.3 Governing Law. To the extent not governed by federal law, this Agreement and the rights and duties of the Parties hereunder will be governed by and construed, enforced, and performed in accordance with the laws of the State of California, without giving effect to principles of conflicts of laws that would require the application of laws of another jurisdiction. 8.4 Monetary Denomination. All dollar amounts stated in this Agreement are in U.S. dollars. 8.5 Entire Agreement. This Agreement and any other documents with respect to the subject matter hereof executed contemporaneously by the Parties constitute the entire agreement among the Parties with respect to the subject matter hereof and there are no agreements, understandings, representations, or warranties between the Parties other than those set forth or referred to herein. 8.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their permitted successors and assigns. 8.7 Costs. Except as provided in this Agreement, each of the Parties shall pay its own costs and expenses, including, but not limited to, attorneys fees, incurred in connection with the disputes that are settled herein and the negotiation and preparation of this Agreement and its implementation, including, but not limited to, costs and expenses incurred in preparing stipulations, making motions, and seeking the Required Approval. 8.8 Execution. This Agreement may be executed in counterparts, each of which will be deemed to be an original and all of which taken together shall constitute a single

29 Execution Copy instrument. This Agreement may be executed by signature via facsimile transmission or PDF file image, which shall be deemed the same as an original signature. 8.9 Modifications. This Agreement may be modified only if in writing and signed by each of the Parties affected by the proposed modification. No waiver of any provision of this Agreement or departure from any term of this Agreement shall be effective unless in writing and signed by each of the Parties. No modification will be effective absent approval by FERC, except that the Parties may agree to, and make, modifications to this Agreement after it is filed with FERC and pending FERC s approval of the Agreement; provided, however, that the Parties shall supplement any filing made to FERC seeking approval of this Agreement with a revised Agreement showing and explaining the modifications Assignment. No Party shall assign this Agreement or its rights hereunder without the prior written consent of the other Parties; provided, however, that any Party may, without the consent of the other Parties (and without relieving itself from liability hereunder), transfer or assign this Agreement to any person or entity succeeding to all or substantially all of the assets of such Party, in which case the assignee shall agree in writing to be bound by the terms and conditions hereof Ambiguities Neutrally Construed. This Agreement is the result of negotiations among, and has been reviewed by, each Party and its respective counsel. Accordingly, this Agreement shall be deemed to be the product of each Party, and no ambiguity shall be construed in favor of or against any Party No Third-Party Beneficiaries; No Admissions. This Agreement is not intended to confer upon any person or entity that is not a Party any rights or remedies hereunder, and no one, other than a Party, is entitled to rely on any representation, warranty, covenant, release, waiver, or agreement contained herein. Moreover, except for the purpose of enforcing the terms and conditions of this Agreement as between and among the Parties, nothing herein shall establish any facts or precedents as between the Parties and any third parties as to the resolution of any dispute. In no event shall this Agreement, any of its provisions or any negotiations, statements, or court proceedings relating to this Agreement or the settlement memorialized herein in any way be construed as, offered as, received as, used as, or deemed to be evidence of any kind in any action, or in any judicial, administrative, regulatory, or other proceeding, except in a proceeding to enforce the terms or obtain the benefits of this Agreement or to obtain the Required Approval No Joint and Several Liability. Except as may be expressly provided for herein, nothing in this Agreement shall be deemed to create any joint and several liability among any of the Parties Duty of Cooperation. Each Party shall reasonably and in good faith cooperate with each other to effectuate the terms of this Agreement

30 Execution py Co SIGNATURE PAGE TO SETTLEMENT AGREEMENT PACIFIC GAS AND ELECTRIC COMP ANY By: Name: R.Simon Title / ecutive Vice President and General Counsel V PG&E Corporation Authorized Representative Date: t--/ /17 / 2 r -13-

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33 FERC rendition of the electronically filed tariff records in Docket No. ER Filing Data: CID: C Filing Title: Joint Offer of Settlement, Docket No. ER Company Filing Identifier: 1112 Type of Filing Code: 1380 Associated Filing Identifier: Tariff Title: Other Tariffs and Rate Schedules (Tariff ID 3100) Tariff ID: 3100 Payment Confirmation: Suspension Motion: Tariff Record Data:

34 Document Content(s) Filing Letter for ER Settlement.PDF ER Settlement Final.PDF FERC GENERATED TARIFF FILING.RTF