elected and appointed? as the members of the board of supervisors know, we are all regulated through the back likin act. their private meetings going on that are not transparent or open to the public. do we know what the result was from those meetings? >> in some cases, the elected officials reported after words or ask questions of staff to confirm information they were provided. there is no official record of these meetings. they were not held in a situation where there were brown act issues because there were not multiple decision makers in the room. >> you might find some exceptions that are appropriate

to utilize in future incidents. i support your efforts. having just been to the swearing-in, things have changed in the capital. we have a new budget chair for the senate. we have not heard of the remainder of the members of the policy committee through our jurisdiction. i think at the appropriate time, a meeting with leadership and the senate and assembly would be appropriate on this issue. in addition, we really need to develop a narrative of some of these abuses that have occurred. perhaps changes in the law might be appropriate with respect to this three-year option. thank you. commissioner mirkarimi: well said. welcome to the commission. commissioner pimentel: i have

two questions for the customers that have opted out. are they bound to the three-year rule? are they let back into the program since pg any made a mistake? what will be done to make sure the situation does not incur moving forward? >> currently, all customers who opt out are bound by the rule. it does not matter if they opted out under false pretenses. what will be done to address that issue? we are hopeful that the legislative reporting requirement will help bring that to light. we are considering bringing this issue to be cpuc on a separate document to address it on its own. as mike campbell i outlined, there are many issues happening there right now. we have limited resources.

that is one we are eager to bring to the cpuc as soon as resources allow. that might be within the next few months. i understand there has been discussion at the energy committee of around cca cleanup legislation. that is one issue that might be inappropriate place to address it. one other thing i want to mention that i should have brought up earlier, i think a real problem is that our private utility really has an incentive to not perform well. it really does not have a disincentive to not perform well. there are no financial penalties for damages that have ever been levied on pg&e over the last few years. their actions have really had a solid impact on our budget. we have not been able to recoup

costs for all of the lost customers that have opted out under false pretenses, nor have we been able to recoup costs for the legal battles we have been drawn into. commissioner mirkarimi: i would almost correct the statement there is no disincentive. the incentive is all the private utilities. >> thank you. commissioner campos: again, just to echo the comments welcoming the members of the commission for being here, just a question on the three-year rule. i think what the senator indicated makes a lot of sense. we need to seek a change in the law, if possible. i am also wondering if there is any legal recourse in terms of challenging the legality of that within the puc or in court.

i am just wondering if the attorney's office has any thoughts on that, or if lafco has that. >> i am from the city attorney's office. the three-year waiting period for customers to switch back is a tariff rule that was adopted by the cpuc. the legislature could just tell them what the ruleless. -- rule is. those are the two most obvious ways to change that. >> if i could follow up on that, nancy miller, as a result of the senate committee, we are hearing where many of these issues were brought out. there is a group that is meeting.

they're working to develop a list of legislative issues to be drafted into legislation for next year. i think they are thinking about waiting for the report to come in to finalize that. the idea is definitely to go to the legislature this next session with some legislation to repeal and modify and amend some of these provisions. commissioner mirkarimi: if i am not mistaken, they are talking about the part of the modifications, clarifying and strengthening the laws govern for municipalities. it is also cpuc reform that is part of this. >> that is correct. the list i have seen as fairly extensive and includes a number of things, such as the three-

year rule. the problem with litigation as it is just a long, expensive process. there is limited resources for this program. litigation is not usually the best option. commissioner schmeltzer: i just wanted to follow up on commissioner campos' question. my guess is when the tariff rule was adopted, there was some time within which it could have been challenged, but that time has passed. was that part of your question? it sounded like that has been some time ago that that was adopted. >> it has been some time. the cpuc retains discretion to revisit and modify any of the tools at anytime, and parties can petition for modification. they must state why they waited. i think we have a good case

here, given the genie -- pg&e's change un position. we have missed the prescribed truck -- time right after the rule was adopted. >> nancy miller again. a good outcome of this meeting might be to ask staff to come back at our next meeting to talk about the legislative issues that we may want to support, to ask our legislators for some of these corrections in the law. commissioner mirkarimi: why don't we then go a step further? based on this panel hearing, the testimony that a number of us engaged in and what has come from that, literally go to legislation. use those elements to and try to support what those are from the puc commission and from the board of supervisors so we can

contemplate some level of affirmation that this is the right direction we want to go, and then see the city and county of san francisco support it through that legislative instrument. we can pull that together. >> i would like to support that as well, and even go a step further, and possibly have a resolution urging the cpuc or the legislature to direct the cpuc to change the three-year tariff rule. if there are other issues we can weigh in on, at least start the process in that way. commissioner mirkarimi: that makes sense. is that something you want to do for the next joint meeting or something you want to do today? >> i don't think we can do it today. this is a discussion item. commissioner mirkarimi: all

right. >> it is an action item for lafco. it is a discussion item for the puc. we could take action. i think you could take action enter next meeting. we don't have to do this jointly. commissioner mirkarimi: we get to have all the fun. ok. commissioners, is that something -- do you mind if we do this right now? do i see any problems? we will do public comment after the of the speakers. commissioner schmeltzer: as far as moving forward, can we give authority -- can we take an action to give authority to our staff to work with the puc staff to craft a joint resolution? commissioner mirkarimi: yes.

seconded by commissioner campos. very good. without objection. so moved. do you have anything further to say? >> no, thank you. >> i do have one question. could you spend one minute talking about the phase-in approach and how you came about the structure of that from a business perspective and financial perspective? what has worked and what hasn't? >> sure. we initially planned to do a phase-in approach many years ago. that has been the plan. one reason was we wanted to work out the kinks before we were at full roll-out serving customers. it proved to be a good decision to do that. as i described, there are many kinks. i did not describe a lot of them.

there are a whole lot, partly because of the non-cooperative relationship we have with our providers. that has been very helpful to a place to find out what the kinks are and get them worked out. the second reason it was important to roll things out incrementally was from a financing perspective. it was a necessity that we roll things out incrementally. as a new agency, we entered the market last winter and spring with no assets, no credit, and a brand new program that had never been done in this state before. it was difficult to borrow money. also, it was right after the economic crisis when folks were not looking for non-credit- worthy folks. we could not have borrowed much more than we borrowed to get going. our initial loan was $1.6 million.

the need for the up front implementation revenue was to do the initial marketing that is needed than to cover working capital costs. their ways a period of time for which you are buying it before you are reimbursed by the customer. there are a couple of months of lack. they get their bill, they have a few weeks to pay it, then it gets transferred into our account. there is a need for working capital to be in place. as we roll out to our next phase, we will need to have additional assets in place to cover that working capital requirement. that proved to be a very good strategy. i definitely recommend phasing in for both of those reasons. i cannot see any advantage to doing it all at one time. i should mention that the data manager, they have been

excellent to work with, and have streamlined a lot of the issues that would have been difficult for us to figure out on our own. they recommended this approach as well, having an incremental phase-in. it gives them an opportunity to address issues with more of a microscope on issues, and getting them resolved before having to do them on such a massive scale. i think that strategy has served us very well. >> that is being used to pay your service supplier and to the new sources you are bringing on line. >> yes, in part, and paying our legal, regulatory staff office costs. the lion's share of it as working capital. which we are paying off now, by

the way. we are republic agency. i can disclose plenty of information. we are at a point now after six months of serving customers where we are paying $150,000 in principal every month. we are paying off the loan right now every month pretty dramatically and are said to have it paid off by august. commissioner mirkarimi: related to that, how vulnerable is mea when you are taking the tears of new populations of customers from interference from the private utilities? >> can you restate that? commissioner mirkarimi: as you are moving toward other populations. >> i see what you're saying. commissioner mirkarimi: you have a thousand customers now. >> you mean as we expand. commissioner mirkarimi: as you

do it in phases, those invite the opt-in, opt-out process. there is a reset of the campaign of making sure that the rules are being abided by by a private utility and all the other players. as you enter into those agreements, we may -- we may or may not do it that way, how do you forecast the experience to come with the other phases that to expand? >> that is an excellent question. we spent a lot of time thinking about that. i do believe that now come at this point in history, there is unlikely to be the type of marketing war we saw last year. because of the response and the action the legislature has taken, that sort of thing. pg&e has pulled out from a marketing perspective that this

point. this might be a good time to start launching new faces. we may see some marketing. i don't think it would be at the same level. there is a lot more attention and sensitivity around them doing that this year. from a marketing perspective, it might be a useful thing to employ a strategy of mini phases spread out over a year. we have not made definitive decisions. that seems to make a lot of sense from a financing and marketing perspective. it allows you flexibility to bring in new resources and match them up with load. that is an advantage we have in being able to have a new several thousand customers for a new power source, if we find one. i expect we will see some resistance. i expect it to be at a lower level.

i expect us to be able to withstand it better going forward, and be a little more proactive in making sure we get our information out there first. commissioner mirkarimi: if i am not mistaken, mea ramping up this year. there were perceived concerns about your creditworthiness. you had some private donors that step up to the plate to offer or provide for substantial sums of money in order to back the credibility of the mea. is that correct? >> it is correct. the marketing onslaught and one- on-one onslaught that we saw was so pervasive, it affected our local banks. we went to six or seven banks and got turned down. we wanted to use a community bank, a local bank, and use funds into the local economy, but we ended up having to go to

a bank in sacramento. we found a community bank there that was willing to work with us. many of the bank's -- pg&e were keeping funds in some of these banks. there was a lot of misinformation going around that had an impact on our banks. it made it difficult for us to find credit anywhere. the individuals stepping forward turned out to be -- it was not our top choice of how to get started, but it became necessary. we are grateful they did that. we are ready point now where we actually might be paying those loans off within a couple of months. they are no longer on the hook for it. that is what helped us get started. commissioner mirkarimi: fantastic. 2010 has been a monumental year for the county and mea.

on behalf of everybody here, we are absolutely cheering for you and inspired by what mea has demonstrated to us and the rest of california. thank you for your time and for all the experiences you have shared with us. our best to the supervisor. it is really nice to have comrades in arms from other cities. >> thank you very much. the feeling is mutual. please let us know if there are other ways we can support your efforts here. we're excited to see the trend going this direction. commissioner mirkarimi: thank you. >> i'm the general manager of the kings river conservation district and the executive director of the san walking power authority. it is an honor and privilege to address the commission's today. i will share with you our experiences thus far as we have attempted to implement a

community choice program in the greater fresno area of california. i have spoken to some of you. i have worked with your staff over the last several years. it has been a very positive working relationship as we have shared thoughts and resources across the street with the public utility commission issues you have heard about. i would like to give you a really quick history and overview of what we have accomplished. i will read out of the current chapter of this book before i start and go back to the beginning, and share with you all that we are in a temporarily suspended state. in june of 2009, there were reasons that i will cover. the kings river conservation district board of directors and the san walking valley power authority board of directors took action to suspend our efforts for a number of reasons.

to roll back to the beginning, the kings river conservation district start of this effort in the central valley in 2001. we were exploring the potential of municipalization. we reached out to communities. we talked about issues relative to energy supply and service. we felt that because of our footprint and our experience, we were positioned well to create and lead a municipalization effort. we own and operate 165 megawatts of hydro. we own and operate 97 [inaudible] that serves the greater fresno area. based in large part on the representations of pg&e, and

southern california edison, they would support our efforts to about with the feasibility of community choice. the board decided, rather than start the fight of municipalization, let's pursue community choice. we began a second round of communication with the local city councils and the regional board of supervisors. we ultimately form the the san what keene valley power authority in 2006. -- formed the san joaquin valley power authority in 2006. we brought two counties to the table. fresno county never made the final step. we worked closely with that board of supervisors as we developed our implementation plan. we have the somewhat dubious honor of saying we were the

first entity to file an implementation plan and have it certified by the public utility commission for commencement of a community choice program for our member agencies. that initial certification was achieved in april of 2007. we worked through the processes as a result of a request for proposal process. we identified a potential full- service energy supplier. we also identified a number of potential renewable projects we pursued, potential development. our long term this and is somewhat different from visions here. it was for krcd to construct and operate a large generation facility that to this day we would argue the greater fresno area needs to maintain reliability and hedge its

exposure to transmission infrastructure deficiencies and an extreme dependence upon hydro to serve our region. our contract negotiations took about 18 months with citigroup energy. they were very much different credit conditions than today. we were seeking to develop a full-service energy supply contract that would give us six -- fixed price certainty for all the components of the energy piece of this trend selection -- transaction. with the corporate credit and price certainty for seven years, those were objectives established by our power authority board to address what we believed were the important requirements of our program, that we have price discounts, stability in the price, and certainty for a least seven years.

during that timeframe, we spent a great deal of time in front of the public utility commission dealing with the development of the implementation roles and also seeking clarification in response to challenges brought up by pg&e. let me sidebar. although we overlie persons of both edison and pg&e, the latter brought the problems to our efforts. edison was lower-key and far more supportive in assisting us with our assessment of cca feasibility. we had to withstand and beat down an effort to undermine the structure of our joint powers authority as pg&e sought to enforce upon us a requirement that each member would be

jointly and federally liable for all of the liabilities of all of the communities as part of that organization. we negotiated the initial bond requirement of $100,000. there were existing regulations for direct access energy service provider. we ultimately worked for resettlement of the bond methodology that is now a high topic of discussion. both san francisco and marin have expressed concerns about that methodology. we championed the exposure of a process and worked with the commission staff and the other parties you have heard from today to try to gain some clarity as to when and how pg&e can market for opt-out. i think we, through a complaint

filed in front of the public community commission in june of 2007 in response to aggressive marketing going on in our region that led to the departure of two of our biggest potential customers, we went to the commission and said there has got to be better guidance on how pg&e can be waived. they say they are neutral and support in, but they are working aggressively to undermine our efforts. through that complaint, there was ultimately a cpuc-assisted settlement in july of 2008. probably the most important piece of that settlement is a public admission by pg&e that they really changed their minds on not cooperating but simply intending to market against cca effort. that change in their senior

management policy occurred in january of 2007. we kind of flushed them out, if you will, and started to better understand the playing field, as ever tilted as it is, that we were going to have to deal with going forward. i mentioned earlier that we were forced to suspend our efforts in june of 2009. the erosion of the credit market that occurred in the fall of 2008 had serious impact on our efforts. it had serious impact on what citigroup energy, the supplier we renegotiating with, were capable to offer us. we had a substantial amount of risk position. citigroup was willing to take it relative to credit. we had secured a $40 million line of working capital credit to support our program.