supervisor campos: i think we are ready. good afternoon and welcome to the special meeting of friday, july 29, 2011 of the san francisco local agency formation commission. my name is david campos, and i am the chair of the commission.

we are joined today by commissioners john avalos, hope schmeltzer, commission alternate leah pimentel, and we will be joined shortly by ross mirkarimi. madam clerk, do we have any announcements? >> please make sure to turn off cellular phones and electronic devices. completed speaker carts and copies of documents to be submitted as part of the file should be submitted to the clerk. supervisor campos: please call item two. >> approval of minutes for the june 3, 2011, lafco meeting. supervisor campos: colleagues, you have before you the minutes of the june 3, 2011, meeting. i do not know if you have comments or questions. commissioner schmeltzer: i move

we approve the minutes. supervisor campos: before we act on that, is there any member of the public that would like to speak on item two? seeing none, public comment is closed. we have a motion and a second by commissioner avalos. can we take that without objection? so done. can you call item 3? >> item 3, report on the status of cca activities. a, approving a resolution authorizing the continued implementation and definition of a community choice aggregation program. b, a california state legislation update. c, status update on proceedings at the california public utilities commission. supervisor campos: great, and mr. campbell is here to present for the public utilities commission. before that, i just want to ask the executive officer if you

wanted to say anything before mr. campbell spoke. >> we have arranged the proceeding that mr. campbell will present a brief synopsis of the term sheet before you, and i will follow-up on that with -- with comment. >> good afternoon, commissioners. in your packet, you had received the presentation that i and my colleagues at the puc had given at the san francisco public utilities commission meeting on tuesday. i am going to provide a high level overview, and i'm happy to take questions throughout the presentation as you see fit. one thing to start out, just to highlight is, we have been working together very collaborative lee -- very

collaboratively. the chair of my commissioned it highlights how she would like to have feedback from this body. where we are -- i can just sort of go through a bit. first, as you know, the program, given the market research we have done in terms of where we think our likely participation would be and the ease of marketing 100% clean program, and that costs for the 100 percent premium will not be a driver of additional opt outs. we are looking at 100% renewable product. we are having the program be set so that our rate format is similar to pg&e's that will be

going into effect in july 2012. that is a flat generation rate where rates do not increase with usage. pg&e will be rolling out a similar type of rate in july 2012, and we were thinking we would roll out at the same time. low-income cristobal's -- low- income customers remain eligible for a discount. we are talking about a contract with shell for the same supply as the big-ticket item we have been discussing, talking about having a supply contract for wholesale supply with shell for a 4.5-year fixed term with the price is known in advance. i did not necessarily mean price a for all four years, but we know what the price is for the first year, what it is for the second, etc. we are also building into our expectations that we will have a

rate stabilization amount included. we will have a small surcharge included in the overall bill. that is to make sure we can cover any fluctuations as well as start to build up a reserve to handle price changes that we might see in the future after we get to additional rolling out to more customers or further development of new resources. the new resource of the term sheet we have been negotiating permits resourced substitutions. that means we would be able to substitute resources we may be able to develop with resources already part of the shell portfolio. in addition, we are talking about having a customer enrollments strategy where we

phase in new customers. new customers will be coming on line, so we can sync those of so the new loaded generation customers comes online at the same time as the new resources. when the board of supervisors were talking about getting details about greenpowersf, the strategy was to enroll all customers at the same time. there is significant risk with offering to all customers at once. one of the biggest ones, when we are talking about a program where we have a fixed volume of energy we are buying from our supplier, is if we do not get the right amount of load, then there is a possibility you would be having to buy energy from the supplier and not have the customers purchasing enough

energy, having enough revenues to buy that energy. we really want to make sure that we can mitigate the risk. we were thinking of doing it in phases. it makes a lot of sense. we were looking at a target of 75,000 in old customers in the first wave. that would be a 30-megawatt program. bringing customers over time allows us to add additional loads as appropriate. one key reason why this is important is that at one point, there was the hope we would find a single supplier that would take on all the roles we wanted and would take on 100% all risk, and it would be no risk whatsoever. this is a way of mitigating the risk by phasing in period we are currently in negotiations with

shell energy. that is for energy supply and schedule coordinator services. we are also talking with noble america's about the customer care side of things, account management. again, this is a change from where policies were in 2007. we hope to have a single entity that would take on all of the supplies and performances we would need with zero risk to the city, before issuing our rfp, we got an ordinance that related to changing that. moving on briskly to the areas of risk allocation and the city's liability, one of the things we are getting by working with shell is we are getting to work with a credit or the entity -- a credit worthy entity. they are committing to a price, and we think that that

commitment is a very firm one. on the flip side, the negotiations have raised the need for the power enterprise to have the appropriations to get the program up and started, and there is a few. one is a reserve amount that would be required, similar to what marin has with shell. they call it a reserve appropriation that would go into the account that the customer revenues go into that pays all the various bills, and it is designed to give shall comfort -- shell comfort that the bills will be paid on time. we also think it would be prudent for us to have an operating reserve appropriated, just in case something does not go as expected. even though we are being very conservative, should we estimate the up doubts -- the opt-outs

incorrectly, we would be able to pay and keep moving forward. we do not want to have to terminate the program because things are off by $50,000. the big one we are working on with shell currently is funds to provide security in the event the city defaults, and that will be another appropriation. that is a number we still do not have. i touched on the issue of flow of funds in terms of the reserve amount. need to take a moment on that. the customer revenues -- remember that the genie is the billing on our behalf. they collect the funds associated with our program from our customers. they send that to an account that we specify. there would be a specific account that would have specific controls on it, and shell would be given the first priority on

that account. they would pay their bills, and the account would be swept, and the remainder would go to pay for the noble contract as well as other city things in the process of managing the development of renewals that the city would be managing. there are several outstanding issues, just to touch base on quickly. one, we have talked about before the regulatory question that remains about what we call the cpuc bond amount. this is something that is required by the cca statute where thec -- the cpuc has been

required to set a method for calculating what has been estimated to be the potential cost to pg&e of a sudden return of cca customers. the idea is if it were to collapse suddenly and all the customers were dumped on pg&e at a time when prices were high, this would be an amount equal to what the additional cost would before serving those customers. the cpuc has been moving very slowly on this. it is an open decision for them to make, how you do the method for calculating what that bond amount should be. that may require an appropriation to cover. we have been aggressive in those proceedings and are continuing to push the commission to try to make some sort of decision there.

also, we talk about the termination provision. last is that there is the -- we have been given indicative prices from shell as we go along with after the contract is approved by the board of supervisors and signed by the mayor, we are thinking the contract would have -- it will specify terms under which the general manager of the sfpuc may execute the contract, and one of those would be to make sure there are no favorable regulatory decisions, and the other would be that the pricing from shell is x or below to make sure it matches what we are forecasting for prices. quickly, on timeline, here we are almost in august. on tuesday, we presented to our commission. the full package i just went through here, although i went

through in more detail with them. the sfpuc was the first time that all five of those commissioners had been briefed in total. there were a lot of questions from the commission, particularly around program designed -- design, how rates are designed and such, and who would be the likely customers. what would be the total appropriation necessary, and what might be coming down the pike from the puc. based upon those items, the puc did not vote on the resolution before them and wanted to hear the -- some more information before approving the term sheet. the chair and others at the commission on tuesday expressed an interest in having a special meeting in august, so i think there'll be some work in trying to pull that together.

on a parallel path, and i know this body is looking at the term sheet. quickly, in 2012, just going forward for launch, after getting a contract approved and have the terms taken care of, we would be finalizing rates for shell, executing a contract in the first quarter of 2012. we would be going through a public process around the same time, establishing the rates, and getting geared up for our marketing outreach plan, making sure everyone is aware of the program. such sending up the pre- enrollment opt-outs. again, we will be targeting 70% of overall residential customers, so it will be peppered brown the vast majority of the city. in 2012, july, flat generation rates go into effect. that is around the same time we

think we will be starting to serve customers. august-september timeframe, we think we will be doing the post- enrollment. in terms of the legislative update, there were two bills of interest to us all. a.b. 976 was a bill that none of us like very much. the good news is that it is looking like in the parlance of the folks of the legislature that it did not make it through the hurdles it needed to get through in committee on time, so it is definitely not happening in this year's session. we have been informed by our lobbyists in sacramento that for all intents and purposes, it is dead, so that is good news. s.b. 790 is the bill we are

cosponsoring along with the sierra club. it has gone through the senate, and is now with the assembly. we made it through the first committee, and it is slated to go next to the appropriations committee. the other item i touched on in my previous remarks about the big things going on regulatorily with the bond amount being the biggest. supervisor campos: thank you, mr. campbell. ms. miller, did you want to add anything to that? >> briefly, through the chair, the plan was that the sfpuc would approve the term sheet, and we would hear on friday any of the changes or comments that they had. since that did not occur, i want to briefly say that that may change my recommendation to you. a number of questions they had

related -- i think mike did a good job of summarizing this. the related mainly to risk and what the risk was to the city, so there are some specific questions that the sfpuc is bringing back to them. hopefully, they will be able to meet in august. if that does not occur, we might want to consider meeting with them in a joint meeting in september. the only thing i have been at is if you want to fall -- hear the full presentation, mike is perfectly willing to give it to you. it could be that because the puc did not approve the term sheet, we may be continue each day until such time as they do approve it. given that, i would like to hear your comments or questions. supervisor campos: colleagues, if i may, i just wanted to provide some context in terms of the process or the timeline i

was envisioning with respect to this item. one of the things i want to make clear is while we want to do the process right, it also is important for us to do it expeditiously. the hope and the intention that i had was that by the time this item came to us today, that the term sheet would have been improved -- approved by the san francisco puc. i appreciate the presentation by mr. campbell and the work that has gone into it, but i have to say that i am disappointed that the san francisco puc did not act on this. we all know that the discussions and conversations, negotiations have been ongoing for quite some time. some of the questions and issues that came up, i think, are issues that have come up before, and it is somewhat frustrating that those issues remain unresolved.

my hope and expectation would be that the puc would indeed have a special meeting in august so there is a full vetting of the term sheet, so we understand what the concerns are and what we're going to do about those concerns, but i think it is important from my perspective to get a commitment on the part of the san francisco public utilities commission by having an actual vote to this program. i think that that would be my hope and expectation, and i would ask that -- i mean, i agree with ms. miller that it makes sense for us to continue any approval of a term sheet because that may change, but i would also ask that we direct the executive officer to send a

letter to the puc requesting a prompt resolution of this issues and prompt action on this program -- from resolution of those issues. those are just sort of my thoughts on that. what would happen is if there is approval by the puc, the item would then come to the lafco, and at some point after, we would proceed to introduce something and forward it to the entire board of supervisors for their consideration. with respect, the final point i would say is that i do think we also need to have a joint meeting with the puc, but i do not think the meeting should happen only if they do not approve the term sheet. i think the meeting should happen in respect of -- in respect of -- the meeting should happen irrespective.

commissioner mirkarimi. supervisor mirkarimi: thank you. i have a question to mr. campbell. as mayor knew some -- as mere -- mayor newsom was excellent office and -- mayor newsom was exiting office and mayor lee was taking over, how were they planning to arrive at that 100%, and what is the plan? >> one of the things we are excited about the program is 100% renewable for cca. i know the puc and department of environment have a working on a task force on