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Capacity Costs PG&E must procure capacity to meet 115%of its anticipated peak demand in order to fulfill its resource adequacy requirement. PG&E's own power plants can be used to meet this requirement, as can power plants with which PG&E has contracts. To estimate PG&E's capacity requirements, MRW started with the Capacity Supply Plan that PG&E submitted to the California Energy Commission in 2015,36 which forecasts PG&E's peak demand and existing capacity resources for each of the years 2013-2024. With limited exception,37 MRW used PG&E's data where publicly available and extended the forecasts to 2030. In extending these forecasts, we used assumptions that are consistent with those used in our assessments of energy sales and costs, including load growth escalation and the projected retirement of PG&E's nuclear plant. We also added in anticipated capacity from new renewable procurement and from new energy storage and adjusted the calculation to account for the portion of Resource Adequacy credits that is allocated to non-bundled customers. As with the Alameda CCA's capacity cost forecast, MRW priced capacity at the median price of recent Resource Adequacy capacity sales, escalated with inflation.38 Rate Development Following the methodologies described above, MRW developed a forecast of PG&E's generation revenue requirement and divided these expenses by the expected PG&E sales in order to obtain a forecast of the system-average generation rate. We calculated annual escalators based on these system-average rates and applied them to the generation rates that are currently in effect for each customer class.39 36 California Energy Commission,Energy Almanac,Utility Capacity Supply Plans from 2015. September 4,2015 37 The main exception is that we increased energy efficiency and demand response growth to comply with SB 350 requirements to double energy efficiency by 2030 and the anticipated continuation of CPUC demand response initiatives. 38 CPUC 2013-2014 Resource Adequacy Report Final,August 5,2015,page 23 Table 11. 39 PG&E Advice Letter AL-4805-E,effective March 24,2016. C-5