>> good afternoon welcome to the san francisco local formation agency commission. i'm ross ross mirkarimi chair. good afternoon. would you please read roll call. [roll call]

>> thank you. would you please read the next item? >> item number two, election of the chairperson and vice-chairperson for 2011. >> this is something that we do annually. i have been absolutely honored to hold the position of chair for four years now, and i have decided that i think it's time that we expand the leadership circle here in lafco. and so to that i nominate commissioner david compos -- campos as chair of lafco.

>> second. >> by commissioners mar, avalos. very good. are there any other nominations for chair? i just want to add to this particular point as i transfer the gavel to commissioner campos, who has been a very able-bodied member of this commission that his -- he's made me quite proud to work with staff of lafco and the san francisco public utilities commission and with the legion of advocates who had been steadfast in their commitment. some of them are taking the day off i think. but there are some tried and true and always here, and i appreciate that. in over the years i think to realize in over the years i think to realize an obvious objective that i think fits san

francisco's outlook and that i think objective is that we cannot gamble on the inaction or any superficial attempts to really step up to the plate and diversify our energy portfolio in san francisco with a healthy substantial use of renewables, and when we consider the annual aggregate consumption of mega wattage that is used in our electricity, and the consumption that really doesn't seem to be waning and the fact that the private utility pg&e has done everything in their power since be garnering, securing a franchise in perpetuity in 1939 without signs of any ability to try to modify, correct, update or even suspend that franchise, it has made it very difficult

for the san francisco city government in efforted like lafco and advocates to chart a path in providing consumers an alternative choice. i appreciate the challenges, i appreciate the trials and tribulations that we have all undertaken and our predecessors have taken when lafco had started in 2001, approximately 2002. so in about eight years or so, there has been i think great effort in mounting from a grass roots movement of public power to an institutional recognition that it's high time for san francisco to do what i think people would expect us to do and that is provide our taxpayers and our consumers a choice. and i've said this many times, if the federal government is going to move as the glacial pace that they are moving in

addressing issues about inserting an aggressive load of renewable energy usage because the infrastructure just isn't there and they are not moving fast enough, if the state government seems to be hamstrung or hijacked by special interest, and as we've seen private utilities such as pg&e to literally mastermind a monopoly by leveraging the ballots as evidence of prop 16 last year, but our ability to fight that back, then really a great amount of the responsibility is deflected onto municipal governments. so if we care to take care, then i think it's time to really press forward and on that note, i end on the cautious optimism in the conversations that we've been having with the p.u.c., ongoing conversations, of course, with lafco and advocates that the in the next six months or so i'm expecting that c.c.a.

becomes a reality in 2011 and that, that reality is grounded in the fine work, in the bidding process and in the contracting process that we expect to be forwarded to the board environment supervisors and then to the mayor. with that i think with -- i think the stage well set, commissioner campos will do an excellent job of leading lafco, and i know the rest of the supervisors/commissioners and people here who like commissioner schmeltzer and others who are citizen advocates that are here will continue to do everything they can to make sure that we aid commissioner campos in the direction that i think we need to go. so commissioner campos, do i hear any objection to the -- i

was going to do this together. the nominations are close on chair and then public comment on chair, please. seeing none. public comment is closed. then without objection, commissioner campos, you are now chair. >> thank you very much, commissioner mirkarimi and i want to begin by thanking my colleagues for their vote of confidence and to especially thank commissioner mirkarimi for his kind words. the thing about lafco is lafco in san francisco is a unique entity, is a unique agency and it's interesting how life works because at some point as a deputy city attorney i actually did legal work around issues involving lafco. but one of the things that is clear about lafco in san francisco is that it would not be an existence but for the work

of pretty amazing leaders beginning with now assembly member ammiano, then supervisor tom ammiano and including especially commissioner ross mirkarimi. i want to thank you for the leadership that you have provided this agency for more than four years as chair but also the many years that you have been an advocate for consumers and for clean energy in san francisco and throughout the state of california and the country. we have a real opportunity to build upon the amazing work of tom ammiano, of ross mirkarimi and so many advocates and members of the community. and the only thing i can promise you as chair of this body i will do everything that i can to make sure that we work collectively in making community choice aggregate today a reality in san francisco. like forward to working with every member of this commission and i also look forward to working with public utilities

commission, p.u.c. here in san francisco and i extend my open-door policy to make sure that we move forward in an expeditious, transparent and open way. and to the staff of lafco, we're very lucky that we have the level of talent that we have working on this -- for this agency and i look forward to working closely with you and the one thing about being in this position is that there has to be the humility to know that you're not going have all of the answers, you're not going to know everything and i look forward to the input that each one of you has provided and will continue to provide and to the members of the community, thank you for your involvement and i look forward to working closely with you. we are where we are today because of the fact you have been involved in the tremendous work that you have done and one of the things that i do want to focus on is to make sure that this message of what lafco is trying to do is extend it throughout san francisco,

especially through the diverse communities of san francisco who may not be aware of everything we're trying to do and what we're trying to accomplish through community choice aggregation and the foundation has been laid, and we need to move forward. again, thank you very much. with that if we can move now to the election of a vice chair finance i may, i ask for your indulgence, i would like to nominate commissioner ross mirkarimi to serve as vice chair. i think that it would be person for the agency to maintain some continuity and certainly no one knows more about the inner workings of this agency and the goals that we're trying took accomplish than ross mirkarimi. so i would make that nomination f. we can get -- if we can get a second. seconded by commissioner avalos. are there any other nominations for vice chair? seeing none, why don't we open it up to public comment. is there any member of the public that would like to speak

on the nominations? seeing none, public comment is closed. commissioner mirkarimi, is there anything you want to add before we vote? >> it's been so long since i spoke. i think it's all been said. i really look forward to working with you in the capacity and the ongoing body of lafco members now and we i think are expecting to see some newer members of the board of supervisors potentially joining us. so i think that this will -- this is a milestone, an important one in a new era. >> thank you, commissioner. so if we can take that without objection, congratulations commissioner mirkarimi. madam clerk, if you can please read item number three. >> item number three, approval of the minutes from the december 10, 2010 joint meeting of the lafco and the public utilities commission. >> colleagues, if we can have a motion on the approval of the

minutes. motion by commissioner mirkarimi. seconded by commissioner mar. is there any member of the public who would like to speak on this item? seeing none, public comment is closed. colleagues, any changes? >> moigs to approve. motion to approve. >> we can take that without objection. thank you. we can call item number four. >> item number four, report on the status of community choice aggregation activities. >> great. thank you very much. if we can now ask the executive officer, we have a presentation from lafco staff and also from the public utilities commission, miss miller. >> thank you, and welcome chair campos. mike campbell, the director of the clean energy s.f. program has praintation i would like to have him present first regarding the status of where we are currently with the bidders and the process as we go forward.

>> great, thank you. mr. campbell, good afternoon. >> good afternoon, chairman, commissioners. congratulations. my name is mike campbell. i'm the director of the community choice aggregation program, commonly referred to as clean power s.f. as miss miller noted i will give an update on where we stand and what we have for next steps. i'm really excited here to be able to note that we have some high-quality firm that's expressed interest and responded to our most recent solicitation. it's important to note many of the firms that responded were many of the same firm that's responded to mirren sa listtation. solicitation. as you all know, mirren is up and running with a program that is by all accounts successful. while we continue to look to the neighbors to the north and look at the contract marion struck with their supplier as a guide

post moving forward, balances, what's commercially feasible with the interest of san franciscoans in particular. we're really interested in trying to get the program rolling and give san francisco residents and citizens a choice about their electric supply and their ability to choose a greener future. commissioners, in your packet you do have some materials that outline my remarks today and i will be speaking from those today. i will use the overhead for that. i will skip the first line because it just says who i am and what day it is. the first key thing to note is we did get responses from major players of the industry but no firm responded to our request for proposal to provide high level renewable along to no risk to the city at lower cost than what pg&e currently charges. so given those realities we have two ways forward. we can move forward with direct

negotiations or we can work on developing the program entirely in house. we discussed both at length here at this body through a direct negotiation process. one of the key benefits that we have there is that we have the opportunity to figure out a way to strike some balance where the supplier takes on some of the risks. as we've noted in the past, doing some of the services in house, we do have a lot of those functionalities already at sfpuc but the downside in such an approach is there would be a fair amount of time spent getting those various functionalities up to speed and ramped up as well as the fact that the city would have to be taking on and hedging all of the financial risks. that brings me to the staff recommendation. and this is the recommendationly bring to sfpuc when it meets next on february 8. at that meeting i will be presenting and seeking authority from sfpuc to begin direct

negotiations and the negotiation team will have many of the same folks on it that participated last year. that will include sfpuc team, alongside lafco staff, city attorney and external consultants as needed. to execute the contract we're anticipating we need review by lafco as well as formal approval from sfpuc and from the board of supervisors. i'm not used to presenting slides. i usually just speak off the cuff to you all. in our negotiations we will need to have the ability to work creatively as we've seen as i noted earlier, we don't have firms in the marketplace that are capable or able to provide everything that we've asked for

in the past that are rates lower than pg&e's. so we need to be close on program requirements and we have been closely examining the program in marin and what it executed and looking not as a model to start from. i want to be clear on what type of flexibility we're talking about here. what we're talking about is for one, we need to focus on getting fixed prices. we know it's something customers care a lot about, prices where we know what the performance guarantees are for what we're getting went have a road map for those prices. that would be different from having a hard cap on prices, if it's not a certain price, then we don't move forward. the other is really keen and the getting the choice for customer so they have the opportunity to have energy supply that has a high renewable content. and we're going to need to be making sure that we keep an eye on that and make sure that the renewable content of whatever we negotiate is significantly superior to what pg&e offers.

we're going to make sure that the -- going to make sure that the portfolio meets or exceeds the state requirements for r.p.f. i think that's important for the health of the planet as well as a marketing effort to emply but we'll focus on that rather than a prespecified ramp rate to get to the 51% trespecified ramp ra to the 51% that we'll need to be able to move with that as we go through negotiations. we're also going to have to deviate from -- we've talked about the past city taking on no financial risk whatsoever. we'll have to be sharing the risk swt supplier. in the responses firms were clear they could not take on all of the financial risks so what that means i believe at a minimum is san francisco will be required to put up some collateral to get the program started and the amount of the collateral and loan guarantees will depend a fair amount on the size of the initial program and type of portfolio that's offered.

looking how that played out with marin contract. marin did strike a contract with shell. there are a few aspects of that contract i want to go over with you here today and highlight, especially as they related to the flexibility i was just describing on the previous slide. one is the price that's marin set in their contract are for specified energy volumes. what i mean by that is there's specified amount per year of energy that's expected to be sold and there's a dead band around that volume for which to customers use more or less energy outside of that dead band than marin is responsible for making the supplier whole, either by bying excess energy and making whatever losses shell

may have and selling excess energy. to start out, the government agencies -- the government entities in marin as well as a few generous supporters guaranteed start-up loans. these were loans needed for working capital to get started and marin found it was critical because in the beginning marin -- and this was described by don weiss, their interim director when she was presented before you last month -- they had no -- they had no track record of revenues from customers. and so they need to have the more established entity in the form of the government in marin step up and provide those guarantees. and the exciting news is that marin was now since may able to demonstrate with the prack record of -- track record of revenues, use that futechull stream as collateral and was able to refinance the loans. so was able to take the governments of marin off the

hook there. some of the costs in the marin contract such as price of renewables were not guaranteed at the signing of the contract but marin was able to work with shell to bring renewables in at a price that worked for their initial phase. and one of the ways we expected a similar thing there, there also was no development of new resources as part of the initial contract with ha marin. but marin had a close and it's one we have spoken to here before and will be key for us, a clause allowing for resource substitution, so as renewables can get built over time for the program they can be used to substitute for existing generation in the portfolio. that's something we'll want definitely to make. those are some of the key things on moving forward for the program. but i also since this is my opportunity to give you all an update, i wanted to highlight quickly a few activities that were taking place in the regulatory environment.

one major action was us managing to make sure that the cpuc didn't take an adverse reaction for us. this is where the cpuc was poised to produce a settlement between the c.c.a. entities and those no longer pursuing c.c.a. and this was going to set a mechanism for calculating what the bond amount would be for c.c.a.'s -- like a clot ral c.c.a.'s would have post to cover the potential cost of re-entry fees such the c.c.a. suddenly cass troskically -- catastrophicically no longer exist. this is part of the legislation requirement in 117. this is going to be -- that mechanism we thought would be very adverse to not only our program but other c.c.a.'s and we were able to be successful in having the cpuc pull that decision from consideration and they're going to be -- they've

reopened the record to example of the points that we along with our allies have put forward. so we're hoping to have a better outcome there. we've also been very active along with other c.c.a. parties in the generation rate flattening proposal that we have before cpuc. we've been keeping a record there as to how such a rate proposal could be harm to c.c.a.'s ability to set rates appropriately and lastly with more prodding, we've been rather pesty at the cpuc and prodding of our allies, cpuc is taking considerations about revisions to the exit fee mechanisms so these are the charges the customers would pay -- c c.a. customers would pay every month back to pg&e for, quote, stranded energy costs and from what we're seeing in workshops and our participation there, the

cpuc is very receptive to our arguments and looks like we'll be able to have movement there as well w that, that's my update. thank you very much for your attention. i can answer questions. i don't know if miss miller wants to follow up. >> thank you, mr. campbell. miss miller, anything to add to mr. campbell's presentation? >> i just want to add kind of the next steps and a couple of clarifying points. the next steps would be for mr. campbell to go to the sfpuc commission and seek authorization to begin negotiations. and those negotiations, what mike has been talking about, is the flexibility in some of the terms for our original c.c.a. implementation plan and those are in the four key areas that are potential to phase as opposed all in when we start the program. the only on obviously we're going to negotiate the rates and our original goal would meet or

beat -- that's still our goal but based on what we've seen from these bidders, we h from these bidders, we have some negotiating to do in terms of that and there's some flexibility that we talked about in our last r.f. narks we would have flexibility in that area as well. the third is the risk allocation . obviously, if you go all in, it's very risky. if you phase, let's risk. there will be risk allocation discussions flexibility there. finally on the issue of the resource mix son we will still be planning the phase two, our in-city renewable, the most exciting part of the program, i think, and the other renewables that are the development that we will be doing ourselves. and that will be part of those negotiations as well about when we layer that in, which will be as quickly as possible. so i think with that, i will take any questions.

>> colleagues, do we have any questions on the presentation? i do have a couple of questions that i wanted to just follow up on. thank you for your presentation, mr. campbell, thank you miss miller. in terms of the two ways forward you described, so the decision of which one or combination thereof to go with that's left to the p.u.c.? >> yes, sir, it's left to the p.u.c., the staff's recommendation will be to go with direct negotiations. that's what will be planned for being presented at the meeting on february 8th. >> and in making that choice, is there any change to the legislation that was passed by the board of supervisors essentially creating lafco and creating the program? just wondering what the parameters of what the p.u.c. can do or not do are. >> i think there would be a

significant change if there was direction from the commission to try to go forward with the sfpuct would be significant change from the ordinance that the supervisors passed. >> that would require that it go back to the board of supervisors? >> i believe so. >> and in terms of the two options that you listed, is there a third option? i mean, is there a hybrid of the two? or is that you take one or the other? trying to understand that a little bit more. >> sure. thank you for the opportunity to clarify on that a little bit. there really always is that -- the sfpuc is going to be involved in the program no matter how it's structured. and to be clear what i'm talking about what i'm saying begin a bilateral negotiation, it's that we would be seeking really the key part of the industry language for it as full requirement supply. so this is an entity that would be relied upon to procure all of

the energy for the customers we need, figuring how to map that to how the loads fluctuate over time and have them take on some of the risks of managing the portfolio hour by hour or day by day. if we weren't to go with that approach, then we would be entering into all of the very myriad of smaller contracts basically whoever the supplier would be, so it's just more to manage. and that's really the big key difference. that's one of the main benefits i think of going with this approach of seeking a full requirement supplier. so thanks for the opportunity to clarify that. >> thank you very much. colleagues, any other questions? commissioner avalos? >> just a question you touched upon briefly in your presentation mr. campbell and that is this last bullet point in your power point, cpuc has