hearing more about that, the information is available on our website. that session was taped, so there is a summary version and a full version. we did face a lot of marketing threats by the private utility when we began to prepare to launch service. this was early last fall. also during that time and even before, we saw lot of political pressure being brought to decision makers in marin county. there were a lot of closed-door meetings with pg&e representatives, really working to prevent them from continuing to purchase a paid in the marin energy authority, promising duties, like energy efficiency programs and that sort of thing, and to convince some of our cities and towns not to participate. that did some damage to us but not enough to slow us down.

we also experienced legal threats from the income the utility. they threatened a ceqa lawsuit on our part purchase agreement, which was surprising because they have a power purchase agreement approved. particularly, when there is nothing new being built, it is impossible to do a ceqa review. so there were extra resources that we had to allocate in areas that were not anticipated. particularly, around the legal threats and marketing addressing the misinformation that was coming out of marketing. there were some things that were said which were completely untrue. even today, a lot of the marketing that was done at that time comes back to us in

customer calls that we get. they believe their lights will go out if they do not opt out. those things are unfortunate but they have not impacted us to a point where we cannot move forward. that is the good news. there have also been a number of challenges on the operations front, as far as pg&e handling the billing for us. it is a conundrum to have a competitive be responsible for handling your billing, a lot of your customer interface. so there have been some challenges on that front. for example, customers on the balanced payment plan, paying an equal amount every month, they were being charged double for generation for the first four months of service because our private utility could not figure out how to deoucouple those

rates. there are also continuing issues on the bill. the rate factors shown on the customer's bill are the bundled rates. our customers are no longer considered bundled customers. they're only paying half of the generation church, so they should have an unbubdndled rate. despite these difficulties, we have not seen the opt out rate get high enough to where it is impacting us. it came in driver we projected, right around 20%. -- right where we projected, right around 20%. it is unfortunate that customers had to go through this sort of thing though. budget-wise, we've been able to get up and running with a loan

from a bank and some individuals, but we are in the process of paying that back now. the financing side of mea is working as projected. we are in a position now where we can have all of our loans paid off by next summer and be operating from that point forward, building a reserve account. the other good news is that, despite the many challenges that we faced in marin -- and i know that you faced challenges in san francisco and san joaquin -- private utility now is really on its heels. they have done a lot of damage to their reputation, and as a result, are having to be more careful about their actions. i was just asked to sit in on a meeting with the cpuc energy division next week where there

is a new requirement discussion where they have to comply with, at the legislative level, for them having to show what issues cca's are having with utility, and then getting a response back on how they are complying with the cca. so we have a litany of issues that are poor are not in the process of being addressed. those will be combined into a report that will be submitted to the legislator at the end of january, and there will need to be quarterly reports at the end of the year on how things are progressing. these reports will actually be dating back quite a ways. we will be looking back as far as 2005 to look at areas where pg&e did not cooperate with the law, follow the mandate set forward in ab 117.

anytime you are planning a new path, there will be popbumps ine road, and we feel we have done a good job clearing the path. the opt out process is now in cca's court. we did a lot of toying with the statutory opt out service and pg&e was making outbound calls to customers outside of the law, convincing customers to opt out at that time, and that is no longer possible. that, and other things, have been fixed. i think they will continue to be fixed through this legislative process. the last point i would like to make, finding the balance between long-term goals and to

market realities is really the challenge that is faced by any new cca. i think we were able to strike that balance by not letting the perfect the enemy of the debt. we are getting better, we are excited about the programs we are launching. over the course of the next five, 10 years, we can make a real difference in the community. happy to answer any questions. supervisor mirkarimi: mr. torres, please. and feel free, colleagues, if you push the red button, i will be able to see you. >> thank you, mr. president, commissioners. i am disturbed by your testimony because, to me, it speaks volumes about a very unseemly nature of a corporate giant conducting itself in this

matter. i have three questions i would like to ask directly. the pressure you have given us indicates customers who opt out may be prohibited by pg&e from re-entering the marine clean energy for three years. under what authority are the authorized to do that? >> this is a provision that pg&e requested be included a, cpuc mandate. it is referred to as switching rules. basically, there is a requirement after the statutory opt out period, if they choose to, they may not return to the program for a three-year period. >> this was a regulation passed by the public utilities commission? it will be overturned, obviously. >> yes. there are a lot of things. our position is that the three- year rule should be eliminated.

many of our customers have opted out under false pretenses. a couple of months ago, one of our customers was in the process of opting out, was told by pg&e that there was no switching rule and that they could switch back and forth at any time. we got on the phone with their call center and even asked for a supervisor and they did not know. so yes, there are customers opting out under false pretenses, and we do not believe the three-year rule is appropriate. >> secondly, according to your testimony, the meetings that took place between pg&e, were those local officials duly appointed? >> you are referring to the meetings with -- >> where you decided in closed meetings with pg&e, local officials. were those officials appointed,

elected? >> in most cases, elected. >> so those officials per 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.