The calculation of the OMC is provided in Attachment 1 and effective with this e-mail replacing the 2014 value of $2.10 per thousand pounds of steam with $3.01 for 2015.

Three categories of operations and maintenance (OM) costs are included in the OMC: 1) OM costs that are common to both types of steam produced—from Unit 1 (gas turbine) co-generation and the auxiliary boiler, 2) OM costs that are only for cogeneration, and 3) OM costs that are only for the auxiliary boiler.

A significant item included in number three above, is the cost of gas (priced at 3.36 per mmbtu) used to produce steam with the auxiliary boiler. These costs are summed up for steam produced by both cogeneration and the auxiliary boiler to $1.29 per thousand pounds steam and $8.17 per thousand pounds of steam respectively. To arrive at overall OMC for steam production, these amounts are weighted at 75% and 25% respectively to reflect expected amounts of steam from the two sources and consistent with the Service Factor in the Agreement. The overall OMC from these calculations is: $3.01 per thousand pounds of steam or an increase of $0.91 per thousand pounds of steam.

The increase is due to several factors:

1. The Capital costs are spread across the expected volume of steam to be sold, not the maximum output of steam by Coyote. Past OMC have spread capital costs across the maximum output of steam by Coyote - a much larger volume of steam sales than actually ever occurs. This change for 2015 resolves under

Calculation of 2015 O & M Price

Volume Change

Post2006

CapitalCo-Generation Aux 2014 2015 Change

Category 1: Water 0.42$ 0.42$

$ 0.27 $ 0.42 52%

Category 1: PGE Steam Distribution System O&M 0.05$ 0.05$

$ 0.03 $ 0.05 87%

Category 1: Cost Recovery of Capital Investment2. 0.80$ 0.80$

$ 0.27 $ 0.31 $ 0.22 $ 0.80 196%

Subtotal Common Costs 1.27$ 1.27$

Category 2: Steam pH control 0.02$

$ 0.02 $ 0.01 -38%

Subtotal Co-Gen Only Costs 0.02$ Category 3: Other Auxiliary Boiler Operating Cost

$ 1.47

$ 0.03 $ 0.37

Category 3: Auxilary Boiler Maintenance $ -

$ 0.18 $ -

Category 3: Gas Auxilary Boiler $ 5.43

$ 1.30 $ 1.36 5%

Subtotal Aux Boiler Only Costs 6.90$ Total 1.29$ 8.17$ Percent of Steam 75% 25%

Weighted Contribution to O & M 0.96$ 2.04$ 3.01$ 2.10$ 3.01$

1. Based on a gas price of: 3.36$ 2. Includes an annual charge of $183,944through January 2019 (5 year recovery).

Total O & M

Annual Maintenance Cost of Aux Boiler for all Steam Production / (Annual Average Steam Sales*.25)

(Gas Commodity Price + Gas Transportation + Var Gas Transportation) x (Gas MMbtu per 1000 LBS of Steam at Coyote Springs) / CS Aux Boiler Efficiency

Gas MMbtu per 1,000 LBS of Steam at Coyote Springs=1.173

((Annual Operating Cost for Aux Boiler + Annual Aux Boiler Electrical Load x Market Price of Power (Flat))/ Annual Average Steam Sales*.25

74%

(Amine Feed x Cost of Amine x Specific Gravity of Amine) / Average Daily Steam Sales

PGE Steam Distribution System O&M / (Average Hourly Steam Requirements x Annual Steam System Service)

Price for Makeup Water + Price for Makeup Water Chemicals + Water Train Maintenance Cost(=Calculations!D11)

(Capital Investment in Cogen Facility x Capital Recovery Rate+RO Recovery+ Post 2006 Capital) / (Annual Steam System Service hours x Steam Production Capabilities

RO Recovery ends 12/31/2018Post 2006 Capital ends 12/31/2023

Notice of Update to Operations and Maintenance Cost As of 1-1-2015

collection of these costs in past OMC, and avoids passing capital costs to PGE electric customers. This added about $0.31 per thousand lbs of steam.

2. Additional capital was included in the costs to recover. This added about $0.22 per thousand lbs of steam. The capital investment in the Coyote Aux boiler has increased substantially in the last two years.

3. The budget for O & M was increased to reflect experience in 2014. The 2014 budget for steam O & M was of $0.53 per thousand lbs of steam was far short of covering actual cost of $0.937 per thousand lbs of steam. This added about $0.32 per thousand lbs of steam.

4. Finally, Aux boiler fuel cost increased by $0.06 per thousand lbs of steam.

The OMC for 2014 and it components is presented below along with history of the OMC and it components going back to 2007.

Year

Capital base for Aux Boiler in Million of $

2007 1.442008 1.442009 1.442010 1.442011 1.442012 1.442013 1.442014 2.362015 2.66

2007 2008 2009 2010 2011 2012 2013 2014 2015 Delta Capital 0.14$ 0.14$ 0.14$ 0.14$ 0.14$ 0.14$ 0.14$ 0.27$ 0.80$ 0.53$ O & M Only 0.56$ 0.55$ 0.73$ 0.85$ 0.86$ 0.86$ 1.00$ 0.53$ 0.85$ 0.32$ Aux Boiler Fuel 2.68$ 2.48$ 2.61$ 1.69$ 1.31$ 1.31$ 1.21$ 1.30$ 1.36$ 0.06$ Total 3.38$ 3.17$ 3.48$ 2.67$ 2.31$ 2.31$ 2.34$ 2.10$ 3.01$ 0.91$

Lost Generation 5.16$ 4.84$ 2.78$ 2.78$ 2.96$ 1.92$ 2.24$ 1.92$ 1.99$ 0.07$ (Forecasted Only)

total 8.54$ 8.01$ 6.26$ 5.45$ 5.27$ 4.23$ 4.58$ 4.02$ 5.00$ 0.98$ (Forecasted Only)

1. 2015 Lost Generation is an estimate only. The final valuewill be on a determined on a monthly basis as the year unfolds.2. This $0.53 increase is $0.31 due to the reduction in volume to spread the capita costs costs across from 1.5 million klbs to.562 million kbls (expected sales 2015), and the balance or $0.22 is due to the inclusion of capital added 2006-2014not previously included.

For 2014-2015Steam Pricing 2007-2015

Notice of Update to Operations and Maintenance Cost As of 1-1-2015

Your overall steam price will be updated monthly per the applicable Agreement using the resulting OMC. Please contact me at 503-464-7491 with questions regarding this Notice.