>> the details are on here. the general concept is we are here today to get your feedback. the resolution is adopted and it will be presented to the board of supervisors during august and september. we would bring that back to you. the thought that we have been trying to aim toward this having all the elements being part of the same commission packet so that all the elements are being voted on together and the beginning of 2012, execute the contract and go through the customer education and marketing and outreach process. opting out at the time when the flat generation rates -- i am

happy to answer questions and there are some financial slides to go through you with you all. >> i have more later but why do we not proceed? >> how are you? >> that afternoon. i have five brief slides that summarize what we know now would be this potential impact. if i may go through those. the overarching program is in addition to be a 4.5 year term structured contract with shell north america. $30 million or $40 million in cost revenue expenditures. what we're showing you here is half a year for 2012, growing to -- slightly up for lease

loping here. -- upwardly sloping here. the important thing to notice here is we have maximize the amount of green power by having no profit. it is different than an industrial utility which has profits built in. we have no profit to maximize screen power. what we're doing is will be finalizing the overarching cost structure and you will see right now in a pro-forma, 80% of the cost is going to war that -- toward that. san francisco will be a lot -- eligible to participate in the rate stabilization reserves.

that will be included in the rates and that will be put on deposit for the benefits of our clean power ratepayers. there -- will consume the remainder of expenditures. our goal will be to tighten these numbers down and minimize the cost as much as possible to be able to ensure we can keep rates as affordable as possible. the items that also we do not know yet, the performance bonds or other potential termination bonds, those with the changes as well. the next slide i would like to go through -- >> you made the statement that [inaudible] >> yes. that is our job. i would not say it is meeet

et or beat. we are proposing a superior premium product that goes beyond grenoble's. >> [inaudible] >> if we do not we are not providing the lowest cost as possible. our goal is to provide the cost of service -- we are accountable to our ratepayers and the repairs will go through and attend the rate service meeting and look at every line item. just like on the water and sewer rates were we have to justify those costs to the rate fairness board and you -- >> [inaudible] >> it sure would. the assumption is that we also

build up reserves. we talked a little bit about those reserves. that is on slide 24. what we do know is that we would need a program reserves of $3.50 million. that is the blue bar on this chart. that would need to be on deposit with the findings of the contract with shel north america. we would need to have operating reserves. we estimate upwards of $1.50 million would be needed on may 30 or $40 million annual budget. we need $1,000,000.5$1.5 millio. that accounts for rate stability's. we're assuming we have a successful program. we are assuming customers will

participate. the market survey we have done shows that want to participate. the reserve would into overtime and would be able to put this in a deposition to invest that into owned grenoble's or when we renewed -- to get the most advantageous terms for our customers at that time. the items that is not down here -- on here is a performance bond. that would be another bar that we could add to the reserves. >> the rate stabilization reserve, one of the questions i had, given that we are buying a fixed amount of power, how do we intend to deal with successful conservation programs?

>> it is a good question treated in this case based on market research, we have seen responsiveness of one-third of customers were interested in that premium. because we're looking at certain megawatts, we can bring on or in five new customers that are in queue. whether they are residential or commercial. very different than on the water or waste water treatment where we are 100% provider utility already. we have the entire market. we would be looking at a sliver of the market and we could mitigate at risk bringing on new customers. one of the most -- slides is

like 25. i want to go through the pie chart on the side. this is the market make up of a typical customer in san francisco. what it shows is that we have some customers, tier 1 customers. they use very little power. typically they have smaller dwelling units and/or their active conservationists in power consumption. we have tier to customers who are more kilowatts per hour. 280 kilowatts per hour. tier 1 and tier 2, the way we have tracked customers has been reviewed by the california puc, are typically small users and that is because of our stable demand profile. you may recall that from us -- our power rate study where we showed the use.

we do not have large searches. we have large users in larger homes in the city. and what this would mean for 100% greener, cleaner, affordable program is the small user customer the right now uses 138 kilowatts per month, their bill is about $40 per month from pg&e. that power bill includes their electricity and natural gas. they get one consolidated bill. if they were to continue to opt in to the program that would be $7 per month for their family budget to incur. they could go from pg&e energy which is 16% renewable to 100% grenoble with clean power and

for that customer household it would be $7 per month. that is 25 cents per day. many san franciscans -- this represents 43% of all households and that would allow them to enjoy that opportunity of choice. tier 2 is $16 additional. you can see the dollar's per month or cents per day make it affordable to go to that 100% screen option -- green option. this is a chart you have asked me to do in the past when we have looked at water and sewer. i would like to walk you through this. it is telling for what the household budget or the family purse can afford. if a customer were to continue to participate in the clean power sf program, they would

have a family budget between tier one to tier five. an average cost of $20 per month. less than $1 to said that they have clean energy. that is in addition. they will get the bill from pg&e and it will be a combined for gas and electric and continue to get the generation component of 100% renewable. it would be 70 cents per day in order to continue to be in our program. that is similar to what an average household in san francisco pays for a land mine into their home. that is lower than the average monthly garbage bill of $28 a month. the internet with streaming video, most folks are using the netflix downloadable video as it seems. that is $60 per month in the family budget. the comcast digital cable $62 a

month in san francisco and the muni fast pass run $72 per month for an individual. our water and sewer bill per month and this is with our changes effective july 1 is combined, 44 for sewer and 31 for water. and for texting would be $100 per month. that would include the other utility user taxes that would apply. to the far right on the largest chunk of utility budget would be the pg&e bill from power and electricity and that averages $123 under the existing composition. that would beat a 16% renewable. -- that would be a 16% renewable. for participation in the plan at 100% renewable, it would be each

customer's decision to pay about 70 cents extra to participate and continue to participate. with that, we are happy to answer any questions you have. >> commissioner courtney: on page 25, with the five tiers, if i have both the electric and gas portion, and i still paying the -- am i still paying the gas portion myself? >> that bill has a couple of rows on it that shows usage in kilowatts and shows the usage in british thermal units on your natural gas so you will continue to see that. there will be one row that says clean power sf.

>> commissioner moran: you'll pay most of the charges for electricity. they will still do with -- deal with pg&e? >> could remove the gas part? >> that is a fair question. we show the breakout on how much of that pg&e bill is how much gas, how much electricity. we do the same thing on our water bill to save on costs and so we combine the water and sewer under one bill just like pg&e combines a electricity and gas. customers typically -- that is why we show them with two parts to the column. >> commissioner moran: in the term sheet itself, let me start

with the simplest of questions. this is the parameter for contract negotiations. it seems it is really contract, not so much program. am i missing something there? >> there were a number of things describing the program. if someone was writing this in isolation but would not just be looking at contract terms. there are broader discussions at the beginning. >> the reason for my question is, not having seen non- counterparts of the program, i am not comfortable with the term sheet. if we are talking about how comfortable are we with the shell contract, that is one

issue. if it is extending that to the rest of the program as yet unseen, i am not comfortable with that. >> maybe we can change the title. the customer enrollment strategy is a contract term but is part of the program. >> commissioner moran: to the extent that is helpful in guiding the contract, that is fine. if -- if it is asking for approval for a broader thing, we really have not had for consideration the entire program. we have some elements in here. >> if you are more comfortable saying to the extent those are described, that would work. my problem is the amount of power we are talking about buying is based on the number of

customers we have which is based on the enrollment strategy. not having it for someone to read could be >> it is not designed to having you commit to things that are not in here if that is the concern. >> what that probably translates into is i need to be comfortable with all the elements in here, whether it is shell related or not. >> ok. >> if we end up, assuming the success scenario, that we have an initial solicitation and people sign up for it. say that we consume the amount of power that is in the contract with shell. and we go to another contract, the cost of energy in that

additional contract may be more or less than what is in there now. how do we intend to deal with those issues as the program grows and changes? >> if we listed it as one of the risks. the risk of being very successful and having additional demands. the timing and rolling in of the new phase, in addition to that we are subject, just like everybody is, to the whims in the market pricing. some of the market pricing becomes affordable. that may also help us, you know, as we build our own renewable generation. it is a risk. we have it listed. >> if there are slight modifications, that is one of the reasons. i think the real answer is that

we do not start doing the opt out until we lock in the next prices. if the power market is high we don't do the next opt out period. you have noticed they announced and pulled it back because they are looking for that sweet spot. we would do the exact same thing. >> the anticipation is that we would be doing annual rate setting. if we needed an adjustment that would be the time to do it. >> that is up to you folks. we are really trying to push the stable thing. whether you choose to do a two or three-year rate setting process is the same thing. >> one item in the term sheet says the city will be responsible for all charges,

does that include penalties? >> yes. >> some combination of shell and noble in fact a way that incurs penalties we will be responsible for those? >> no. thanks for the opportunity to clarify. the i.s.o. charges associated with the straight up schedule coordination activities. those are actually part of what is rolled into shell's price. they get that right. if they get it significantly wrong that is on them. there are other charges for a megawatt power passing through the system. it is not standard necessarily for a wholesale supplier to take on those risk in the pricing. that would be a pass through. we would see the invoices from i.s.o. and just pay that. >> and then i see that you have

in here, and i am very glad to see, the provision that the city can basically substitute its own power for what we contract from shell and the provision is that the city would be responsible for any cost incurred by shell in displacing that energy? i would love to see what that would look like for the substitution, so if we are successful in conserving as a city department for example and have power freed up that we could put into the mix for the cca program, what are the financials? and i guess there are two issues. how do we structure it to avoid a problem is a better version of that question. and then what do we expect the charges to look like.

what i am hoping to see is that if we spend eight cents getting some conservation energy and we put it into the cca at 15 or 18 cents, but there is a charge of a couple of pennies for shell dealing with what they have to do, that would be, from my perspective, the most compelling reason to do this at all. because we need a place to recover the cost of our various programs. but i would like to see that penciled out. >> in terms of how the substitution would work what we have been discussing we can't schedule the electricity so we couldn't put it into a contract saying a certain number of

megawatt hours you are going to offset supply from shell. just do a straight substitution where the market price is the market price. shell has some supplies that it can offload, maybe at a loss or profit. then they would buy the power at the market price which would be the exact same price. it is something that we do not expect much of any cost associated with that, standard operating procedure. we would be guaranteed that we would be no richer or poorer for having done that. shell would be neither hurt financially or make any money from doing this.

it needs more fleshing out but that is the general concept. if we really thought we had enough hetchi power to deliver on a long-term basis. >> right. and i don't need that for this item but if i could be provided with that it would be very helpful. i don't have any more questions. out of this discussion i have had four things to come out that are important to me that i would like to work into the resolution in some way. but i don't want to preempt any additional discussion. >> i have just a quick question. i guess it is a mike probably. is there advance marketing before the roll out to the customers saying that this is

exciting, we have a new clean power program. you know you are going to be enrolled. if your bill is going to reflect that it is going to go up because there are not any surprises. so you are really minimizing the opt out rate as much as possible. and who is going to be in charge of that marketing strategy program. we have not talked much about it. >> thank you for that. i got towards the end and forgot to get through that. absolutely. we are definitely going to have a strong both marketing and education program because maybe for some folks it does not fit their pocket book or sensibilities. the facility will be managed by us. you know the communications department has already been working with staff on this. we will be talking with folks. there is an educational flyer that went out last year and we

are thinking more along those lines. we are talking about and budgeting for a two-pronged approach. one city wide to let folks know what it is and there is the state mandated area that you know, whatever region is being determined you as the account holder would get a specific notice just to you. we are talking about billboards on buses, radio, cable tv, so we really want to make sure that people know it is coming and they know why it is a good thing and also know what it might mean to their pocket book and give folks the opportunity that they are given. we think it is great they have choice. we think it is great to stay with us. they have the choice to do something else. we definitely don't want to have them feel like it is a gotcha. it is amazing that the price of cable tv runs these days are

very cheap because there is a variety of options these days available to us. >> i get the same sense that there are all of these pieces and components of the program. you know i am eager to keep the process moving and kind of get this term sheet negotiating. maybe negotiated. i am hoping also we can use the cpucs however long they take in their process to our advantage to look the marketing capone and all of these components of the program and to continue this discussion so that we are by the time we have a contract ready to be signed, which i assume is based on cpuc's timeline that we are really ready to go with a complete understanding of all of the multiple components of the program.

>> i am looking at how the item is worded. it does say that a general manager should continue to work on the cca program, but what i don't think is to submit the term sheet to the board of supervisors because there are too many unanswered questions. and i think that would be irresponsible of us to do so. in the form it is in now. >> do you have specific changes or comments? >> you don't like the second result. the reason that it is there is that should we go forward with this, the contract would have to come through both this

commission and the board. so, do you give them a chance before the contract is finalized to have a discussion like you have had today, or do you wait until the contract is finalized before sending it to them? it is a policy discussion of how you want to handle it. >> well, my feeling is that the same questions are going to come up at the board, the same unanswered problems we have been talking about. so i don't think it should be submitted to the board at this time. >> do you feel confident through your continued negotiates if we took it out that you would be able to get clarity to bring back to us? >> it wouldn't be before september. you know at some point we need a term sheet that will be submitted to the board. >> we are continuing to negotiate without this already