San Francisco Public Utilities Commission
Citizens' Advisory Committee
Power Subcommittee

MINUTES

Tuesday, April 4, 2006
5:00 p.m. - 7:00 p.m.
1155 Market Street, 4th Floor Conference Room
San Francisco, CA

Members present: David Hochschild, David Pascal, Aaron Israel, Kimia Mizani, Ken Cleaveland

Members not present: Ken Monteiro

Staff:   Jim Marks, Communications

Guest speaker:  Barbara Hale, AGM, Power Enterprise

Public:   Ken Smolkaska

David Hochschild (DH) noted that, over the last few weeks, subcommittee members have done a number of site visits to wind farms, solar installations and to power plants.  DH noted he personally hadn’t heard anything about Community Choice Aggregation (CCA) since the last presentation and would love to have an update, particularly about how viable CCA really is.  Thanked Barbara Hale for such a stellar solar staff and the development of the City’s solar projects. 

Barbara Hale (BH) thanked DH for his compliment.  She then described the current status of the development of community choice aggregation (CCA).

Ms. Hale stated that CCA is an opportunity for the city to assume responsibility for providing the power component of electrical service to retail customers in San Francisco.  Today the city provides the power component and electrical service to all the municipal facilities -- City Hall, the hospital, the airport, port -- all provided by the SFPUC’s Power Enterprise.   CCA is an opportunity to provide power to SF businesses and residents. 

The SFPUC completed and presented a Draft Implementation Plan for CCA last year.  Another organization (Local Power) prepared and presented their plan.  There has been active discussion among stakeholders in this process to reconcile the differences between the two plans and produce an implementation plan, which is required by state statute. 

Ms. Hale noted that she thinks that discussion has come to the point now where stakeholders are in agreement that an implementation plan needs to incorporate the goals of the Electricity Resource Plan adopted by the City.  The CCA provider would deliver a very aggressive renewable energy and energy efficiency program in the city. 

Ms. Hale stated that there is a CCA Task Force empanelled by the Board of Supervisors to advise them on issues related to the formation of a CCA.  She is a member of the Task Force along with other members representing environmental justice, the business community, public finance, energy efficiency and expertise in CCA.  (Q.:  What is the difference between a task force and an advisory committee?  A.:  A task force sunsets at a designated time; an advisory committee does not have a preset sunset date.)

There are two sticking points on issues being discussed by the stakeholder group; we’re working toward resolution of them at this time.  The issues are CCA governance rate setting (“Meet or Beat”).  Would this new program be started and implemented within the SFPUC on behalf of the city, or, is this a program that would be run by a new organization within the city?   According to Ms. Hale, this issue is not yet resolved, but the stakeholder group are getting much closer to a resolution. 

Ms. Hale stated that a report by Howard Golub of the law firm, Nixon-Peabody, suggested that the CCA would need to be governed by an independent policy body, a board representing the interests of key stakeholders within the City.  The board, for example, could have 5 members with representation from the Mayor, the SFPUC’s General Manager and the Commission, one or two members of the Board of Supervisors, and so on.  Stakeholders have agreed that that is a good model, and that they could work out the details about how the reporting works.  A new policy body would provide guidance just on the CCA program.

There was discussion also among CCA stakeholders that the policy body would have a relatively short life.  It has been suggested that it might provide policy guidance only in the initial period or the start up of CCA.  Ms. Hale indicated that she feels the general concept of a separate policy body is a good one.  There are questions about how that body would relate to the existing Commission of the PUC, and to the BOS and Mayor. 

It looks like CCA would be housed within the PUC.  There would be dedicated staff and a program director responsible for it.  The program director would present issues and challenges to the CCA’s policy body and presumably also to the Board of Supervisors and the Mayor in order for there to be action taken.

Question:  Can you help me to understand then, what is it that pulls the trigger on this thing to get it going?   Does the structure have to be decided first?

Ms. Hale:  The Board of Supervisors will need to issue an ordinance that approves the implementation plan.  That will be the real “trigger” for the city and I think we are probably on the road to doing that. 

Question:  The “meet-or-beat” PG&E rates, would those policies also be in the ordinance?  

Ms. Hale responded that presumably they would be adopted by the Board.  CCA staff could then issue a Request for Information (RFI) to obtain feedback from the public and especially electric service providers (ESPs), to make sure of what the renewables target is for the community we are servicing, invite any comments on anything that might not have been addressed, so that they might take those comments into consideration when preparing an RFP.  That way, staff could put together an RFP that might draw bids and also modify the implementation plan details based on the type of feedback we get from the request for information. 

Compliant filing of the City’s Implementation Plan at the California PUC might need checking with the BOS.  The CCA might need to get some early direction from the board about how to move on the community aggregation concept.

Ms. Mizani:  You mentioned the compliance with the California PUC.  Will that be a lengthening point?

BH:  I don’t think that is going to be a lengthening point.  AB 117 says that the California PUC have 90 days to act once the Implementation Plan has been filed.  Now, in reality those kinds of short deadlines are more guiding targets.  Our implementation plan will be the first one, and it will be one of the biggest ones the CPUC sees, so it will take them a while. 

Question:  What other local jurisdictions are considering CCA?

BH:   Oakland, Emeryville and Berkeley are considering a joint powers authority (JPA).  Even if Oakland and Emeryville decide not to go forward, we are going to keep going.  We look at the economics; sometimes it makes more sense for some cities to do it than others.   Chula Vista near San Diego has been very active, as well as some districts in Los Angeles County.

Ken Cleaveland (KC) comment:  There were certainly a lot of questions expressed by downtown consumers, which are the largest consumers of electricity in this city and probably even outside of the city.  The task force has a task in front of it to sell the business community on buying electricity from the city as opposed to buying it from PGE.  There will be a lot of issues that need to be cleared up, regarding price, exit fees, etc.  We know what they are today, but conditions could change before we would file our plan.

KC:  Who would call the shots for CCA, the City or the electric service provider? 

BH:  No particular structure has been selected, so, as to “calling the shots,” the city either through the PUC or through this policy board that brings together representation through the mayor, the Board of Supervisors, the GM and PUC, would be responsible.
I think the board-of-control concept is a good model.  It is probably worth it so that we have more direct interface with the mayor and members of the board on some of the policy questions. 

Question:  Do you think customers will get some substantial discounts through the aggregation proposal that will not be met or beaten by the utility?

BH:  No, I don’t.  I think the program in the long run will prove to be better for customers.  Will the utilities be able to come in and compete effectively as we lay out the program?  I think they’ll make a good run at it. 

BH:  I think that one of the advantages of the community choice aggregation program will be a more stable rate structure.  The CCA program that we are talking about developing will shift that risk to the contract holder, will require renewables portfolios that are not subject to price fluctuation and will in the earlier years offer less uncertainty. 

Question:  regarding profit motive, critics would say it would be more expensive because you would have to create a new organization and buy more renewables. 

BH:  I think those are some of the items of concern. I don’t know that the administrative costs would be a real driver.  What is going to drive the cost is electric power procurement, whether the entity that the city contracts with can then go out into the market and compete successfully with PG&E.

Question:  On the rate structure, will CCA be able to change the rate structure that the CPUC has set up? 

BH:  the CCA will impact only the procurement part of the rates.  Everything else you see on your bill will remain the same, and these rates are all regulated by the California PUC, even for the CCA program.  The one thing that would not be regulated by the California PUC would be the commodity portion.

KC comment:  Our association’s (Building Owners and Managers Association – BOMA) contention is that customers ought to pay for service they receive and that every rate should be based on cost of service.  We know that commercial customers pick up a bigger share of the cost.  We fear -- and this fear has promoted a somewhat hands-off attitude towards CCA – that if the City gets hold of the rate structure, that it will skew those rates even more against industrial and commercial customers than the California PUC.

BH:  We are envisioning a program is fair to all customers.  If business customers were to opt out, CCA could still be a successful program.  You could design a program that is more of a green procurement program and market it accordingly.  Portland General Electric has a green energy program where customers pay more.  We haven’t really talked this through with the stakeholders.

Comment:  If you want an accurate bid, then you’ll need to know what your customer base is going to be.

BH:  There is certainly a challenging interlude there where you are courting a bidder, and you are trying to market the program and describe it to those to whom you are marketing it, and you are not sure if they are going to stay or go – there is some risk that what you are marketing, you are not going to be able to deliver.

BH:   When you consider that portion of PG&E’s revenue in San Francisco, they spend about $250M a year to procure power.  So it is about a $250M-a-year program we are looking at.
Comment:  you have to keep in mind that PG& E may try to keep its customers, but, in the long run, they don’t make their money on the commodity, they make their money on   the transmission and distribution of that commodity.  So, as long as they own the lines, they will continue to make money.

BH:  CCA takes over only the procurement part.  San Francisco residents and businesses would receive a bill from PG&E; they would not receive a bill from the community choice aggregator.  There would be one line on the bill that would describe this.

DH Question:  Did PG&E oppose AB 117?

BH:  They did not oppose AB 117.  They have a lot of work to do in the implementation of CCA, and we are seeing them trying to make sure that there are charges and fees to the aggregator to cover their costs.  For example, a customer’s bill will say the power is from the City and County of San Francisco.  They are going to charge us for that line.  They are not opposing the program, but they are making sure that we feel the impact of these costs.

Question:  Can you explain the RFI? 

BH:  The RFI has not gone out; we have been discussing it.  The purpose of the RFI is to put out what you think you would want to put out in a bid.  In effect, you put out a test bid to find out whether this is what the community wants.  We can then hear from potential bidders about whether they feel this is enough information, whether this is unrealistic, too shy, too aggressive, etc.  They can give us comments on all aspects of the program.  We have drafted an RFI and it has been talked through a couple of times.  We’ve talked with the stakeholders.  There seems to be agreement among the stakeholders that we can issue the RFI before filing the Implementation Plan at the CPUC.  If there is anything that is not supported by the community or not fleshed out enough for potential bidders, we will hear about that before we go public with the RFP. 

Question about inviting electric service providers to make a presentation to the CCA Task Force.

BH:  The task force decided to invite registered certified electrical service providers to a task force meeting to hear from them what they think of the program.  It is my understanding that that happened because the task force realized they were not going to come to an agreement on what the RFI should say.  They were looking for other ways to get some feedback.  April 6th is when the Task Force will be at city hall and we expect to hear from about six ESPs.  It should be very interesting to see what they have to say and how far in the future the qualifiers will put in bids.

Question to Barbara:  Has there been any change to the provisions in CCA for renewable energy and energy efficiency?

BH:  The plan as we are conceiving it now, as developed by the stakeholders, is to have a high percentage of renewables.  There is still a great deal of discussion about how much advance work the city will do.   The stakeholders are trying to determine whether to figure out all those details before the RFP versus having the bidding community coming to us with ideas on how that might happen.  There is still discussion on that point.

Comment:  If you are going to have something special with solar in this town you are going to have to have low-interest or no-interest financing.  Commercial building owners say, if you find a spot for solar on their building, who is going to pay?  We don’t want a 30-year pay back plan.  Building owners need a fast turn around and they need a low interest rate. There has to be a way to finance this. It is all about the financing.

Rebate programs should have a very short window in which you can qualify.  The programs need to be funded for 5 years at a time as opposed to one year.  People need that predictability. 

Question:  I wonder how the city will manage permitting and public rollout really quickly.  Will there be labor preferences or requirements?

BH:  The city contracting process will be one of the challenges that the program presents.  Any time the city contracts, there are certain rules about labor issues; it brings up all kinds of things.   A lot of corporations deal with labor issues because the City has special requirements that need to be addressed by the bidders.  The contract for community choice aggregation would be a challenge with respect to the permitting process.  We will need to engage with other city departments.  Planning and Finance, for example, will have a roll to help us.  Other arms of the city are going to need to come together to make this happen.  Certainly the city will need to make the permit process for residential installations an over-the-counter, pay-a-fee-and-walk-away process for this program.

Comment:  Various arms of the government take 3 months to get to.  Is that a scenario that would happen, a low, over-the-counter cost, and no delays?

BH:  This will be a city program and the budget challenges for the program director will require a smooth process for making that linkage between a certain provider and all their subcontractors, all the who folks are behind a particular contract.  All the city departments will need to make sure this is a smooth rollout.  There is a lot of work to do.

Question:  What is the timeline?

BH:  We would like to see an ordinance before the Board of Supervisors that describes the program and its policy implications.  Unfortunately there is no city attorney familiar with these matters at the moment.  We anticipate program rollout this summer.

Question:  When you say rollout, you mean launch it, RFP…?

BH:  Once we have the policy statement ordinance from the Board of Supervisors we are probably looking at about a year and a half before we have a contractor on board.  The best scenario assumes that most of the due diligence is done by the bidders.

David you had asked about the feasibility of rolling out the solar and how that could be done effectively; how fast the network can stomach all that development.  Those sorts of questions should be addressed by the city upfront before the proposal goes out, which would extend that year-and-a-half time frame.  In the city we’d be doing more work and analysis on the local network and how much of a concentration on solar the network can take, for example.

One last question:  How long will the prohibition against Direct Access continue?

BH:  It will continue until all of the Department of Water Resources’ energy procurement function ends, probably in the range of 2016 to 2020.

Would Direct Access be another party to compete with?

If we had a direct access, it would be another competitor, just like PG&E. The aggregation program is designed to work very much like the direct access program.  It is just that the provider is a city or a county. 

Question:  Will the City and County of San Francisco own the combustion turbines (CTs)?

BH:  Yes.  Under a power purchase agreement with DWR, they will purchase the power at cost.  When the city became the recipient of the turbines, it was agreed that the state would reimburse us the development costs.  DWR will purchase the output at cost.  The CTs will not be a revenue generating facility during the 10-year contract term. 

Question:  What ideas or role is public power playing?  Do you have more information? 

BH:  I can tell you that we are currently the power provider at Treasure Island.  The Department of Environment is responsible for putting together the Treasure Island Plan, so you might want to hear from them and the Treasure Island Development Authority. 
I can also give you names of the specific people and contacts.

Comments:  I would love to hear what the energy plans are for the Hunters Point Naval Ship Yard.  What are the plans for the decommissioned Hunters Point Power Plant site?

BH:  Hunter’s Point Naval Ship Yard is an area where we have been able to provide public power service.  I can have staff come and speak about the phasing of the development and what requirements Lennar has. 

On the closure of Hunter’s Point Power Plant – that has been just beyond our reach since 1998, when the City and County of San Francisco completed an agreement with PG&E to shut the plant down.  Once the last two transmission upgrades required for closing the plant are complete and operational, PG&E will officially notify the California Independent System Operator that they’ve met the requirements for electric power reliability.  They will provide a 10-day notice and then they shut the plant down.  PG&E has to demolish and clean that property up to residential standards.  If they choose to sell the land, the city has the right of first refusal to purchase it.  The settlement agreement lays out for the timeline. 

DH requested that Barbara Hale provide the names of persons who might provide a presentation on energy developments at Treasure Island.

BH:  Treasure Island staff have done this presentation a number of times.  They can coordinate one presentation for you.  You might want to have TIDA and Lennar come in May and provide a presentation.

There was a suggestion to have solar developers come to provide presentations with a view to make that part of the CCA rollout.  DH suggested that this would probably be more within the purview of the CCA Task Force.

Jim:  I’ll get the names to you and we can add on to the list then.

Question:  There is a lot of building in town and I wonder if green building, environmental building is being done or not.  I don’t know what the status of this is right now, how far behind are we, how good the city is in monitoring new projects that are being built. 

We just had a presentation on this the other day – they reviewed a 10-year efficiency plan.

Are you talking about the green building ordinance?  That is managed by the Department of the Environment.  Gary was talking about public buildings.  That is another possibility.

There are some really good models out there, like the California Academy of Sciences.  You might want to have a tour done of that building.

Could the SFPUC do a site visit for the leading LEED buildings in San Francisco in terms of energy efficiency?  Let’s see if we can find a platinum building.

Meeting ended at 6:20 p.m.