>> 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. we have price certainty provisions worked into the contract. we all know the erosion of the credit markets and the impact that had on citigroup, the parent company, really caused our program to come apart. we immediately began

negotiations with a second supplier, but by thatrañ point,e credit terms and the challenges you have heard don explain -- dawn explain could not be achieved. put on top of that the financial condition that our communities found themselves in. we have essentially spent a tremendous amount of our local reserves fending off the fight from a so-called neutral or cooperative incumbent utility. we ran out of money. i will be real honest. our reserves got to a level where we felt it was most prudent to stop, let the credit markets stabilize, and continue to support in the regulatory environment, and speaks the -- seeks stability out of the regulatory arena and legislative

and financial arena. today, where we find ourselves, although suspended, we are spending a tremendous amount of time in the regulatory process supporting comments and providing input into the san francisco and marin efforts. we continue to be parties to various proceedings that were initiated prior to our suspension. we are working with our communities to explore the potential of a regional solar project. we went out for a request for proposal to identify qualified solar developers with substantial experience to work with our communities to create a regional program and a combined series of small smaller projects -- small solar projects. some of the waste water treatment plant facilities they are looking to convert to solar. to do that, a tremendous amount

of response. we had 18 qualified respondents to that request. we are in the process of going through those. we will make recommendations to the power authority board of directors at the january meeting. we have participated in -- and support of michael's effort to bring reason into the energy efficiency regulation. we continue to look at market conditions and assess where we go from here. the one thing i've learned this -- learn through this is the credit markets this dynamic. the instability present remarkable challenges for all of us. it is important that we keep our eye on the end game. for our region, that is to expand the local generation capacity to improve the

reliability of the greater fresno area delivery systems. as i work with my boards, we are going to necessarily have to begin to look at larger renewable footprints, larger components of renewable projects, and expand that resources in smaller ways than the 500-megawatt plants we were pursuing several years ago. again, i appreciate the opportunity and the invitation to be here and speak with you. if there are questions, i would be happy to answer them. i will stop there. thank you. commissioner mirkarimi: we very much appreciate the time you have taken to join us here. we just want you to know that we have not had really the pleasure.

it is rare to get into such discussion with representatives and leaders from san joaquin valley. i was pleased that when we were before the senate panel testifying, the many cities came together to share their experiences and perspectives. we have not done that before. we congregated in the same room. i think it was moon's three informative and instructive to memorialize that record -- it was extremely informative and instructive to memorialize the record. it was -- it had a level of detail to it that this is something we have heard about, something we have read about, rumor has carried, the stories

of trials and tribulations and torture that city governments have gone through, yet we have never had the opportunity to exchange notes as we had at that time. you are trailblazers. you really helped lead the path. i am sorry to see the efforts of pg&e have stalled you. i am hoping you will be able to resuscitate. one question i have for you is that often come it is asserted that our pursuit of municipalization is a liberal fang, a progressive thing. we are often castigated or relegated by others to -- who try to slot us as being in a less-minded way of thinking

about municipal is asian region municipalizat -- about m unicipalization. you were leading the pack. you should speak to that. people in san francisco hear it from others who want to mutate the debate as to what this means. when we hear it from other counties who are not necessarily like san francisco, i think it is important to share some insight. >> thank you. i will. let me mention that i appreciated participating in the aforementioned senate hearing last month. mr. chairman, you represented this group of very well. it was the first time i had a chance to listen to you speak. you did announce standing job in speaking to the vision and the

issues we have been challenged with. yes. the central san joaquin valley is not a liberal hotbed. it is not a political -- should not be a political issue. what drives our region, and i think everybody knows the greater fresno area tend to be fairly conservative in its political alignment, my board certainly is probably right of center across the board, but that is the beauty of community choice. it allows local government to come together around its about abuse, it -- together around its values, its vision. i spent a lot of time in front of the commission and in front of elected officials throughout the state, making sure they understood that choice is not