customers, equivalent to 30,000 matawan. -- megawatts. there is another 100,000 customers would not have sent -- to send notices to. we wwere -- were thinking we could have customers opt in through the city at the same time and we could have them be available to help offset any underestimation. the last thing, i want to touch base on there. >> >> commissioner moran: how did you come up with the 2 rudder 30,000? >> there were a couple of things that, the first, the goal is to

hit everybody. the city i -- the whole city is a bit optimistic and does not address these risks. two-thirds of the residential class, that is a nice chunk and leave some left over. in conversations, there is a size of program which we -- it is not worth the hassle for them. by comparison, the arrangement that iran has -- mraimarini has has with shell, it is not all these terms are in flux, nothing is totally hammered out. that is the general [inaudible] of it. there is megawatt hours which do

not change very much depending on how many customers you have. the more you have, the lure that becomes. -- lower that becomes. >> commissioner moran: how would they be selected? >> we were thinking that would be a geographic areas. 7% of the overall residential accounts. that would be across san francisco. the actual identification of which census tract or block or however we cut of the geographic areas, we have not finalized on that. the first crack out of the box, we do not want them to opt out. but what customers that want to stick with the program. -- we want customers that want to stick with the program. it might be more receptive.

>> commissioner moran: in a market survey we went over, some parts of town for more inclined to stay in. are you -- is it to equalize? >> my goal would be those who have the most chance. >> the issue i am concerned about here is as we go through this, there is several risks that are monetized and put into a reserve fund and that is how we deal with them. this is one that cannot be monetized. this cannot be dealt with as a reserve funding and the structure we're looking at is we by the power first and without customers, and try to get rid of

it. this is an area where there is unreserved risk. i am concerned that we're too aggressive here. i could hold this in abeyance but i wanted to identify this as an issue. especially if we are oriented to the most successful people first. the remaining 111,000 customers will be those who are least inclined to stay in the program. it is not an equally fertile back up plan. if you look at 75,000 as a percentage of the whole, that is an optimum rate of 32%. that is a number to keep in mind. this is a key risk element for us. i am inclined without further discussion to look at something

which is more conservative -- a more conservative rollout plan that would cover that kind of risk. >> it is important to realize that some things can be mitigated. that is what we are doing with the program. >> 85% -- what does that mean? >> the firmed and shaped are resources were you take a intermittent resource, these are regulatorily definied.

the wind power works when it is windy and the sun power works when the sun is out. when you are trying to get a block to try and cover when people are using their appliances and such -- >> how do we anticipate forecasting? >> we have historic data and we are forecasting the load. since we have so many -- is accurate. >> 30%, 40%, 50%? >> it will be in the 90's. >> commissioner torres: in the 90's? i did not think we have the technology for that.

>> forecasting how much energy is needed at certain times of day? >> commissioner torres: yes. >> we have been given information and it varies through the year. >> >> commissioner torres: i do not think pg&e has the capacity to forecast accurately. local jobs, we have talked about that before. what local jobs will be coming to san francisco? is shell hiring local people? >> more notably some local jobs, we have been in discussions with noble americas. i will touch base on this as not having a single entity providing all services. we are talking about shell

making sure that the buys are put in the system at the same time. these are large dollars but the one area where there is labour associated with it is the call center operations. dealing with customer interaction and the like. that is services we're talking about with noble americas about and they have expressed flexibility in how to -- who i are answering phones. they are a global commodities trading company. >> a temp agency? >> they are a broad company, dealing with shipping iron and other things across the world but they have acquired a subsidy that used to be a subsidy of -- and they do electricity

commodity trading. when marin hired them they were sempra. they changed names but the same people located in the same place. >> commissioner torres: how many local jobs do we anticipate creating? >> with shell, none to speak of. shell is doing it on a part-time basis. >> they're going to be the broker. >> that is accurate. on noble, they have said they will have their call center in san francisco. >> commissioner torres: will

those people be unionized? >> we have not gotten to that part of everything we have done has been unionized. >> i believe you will get to this in your presentation. maybe you could finish the presentation and we can take questions but on the local building out pieces, the idea is this will be the job generator. >> i am not sure if understood the answer. firming and shipping? -- shaping. my brothers and sisters in ipew want to understand that further. >> i appreciate your bringing me back to this. the concept is in -- interim and

resources. that resources will provide -- resource will provide [unintelligible] those are an equivalent number of megawatt hours tied with the resources. there is the wind and hydro resource. the firming is the fact that hydro is coming and you want the energy when you are contracting. the balance is not being provided as being from up by the hydro. >slide 16. we touched on this, i will go

briefly. this is a concept where we are working with shell and noble. a four and a half year term which offers a -- stability and reflects -- flexibility for developing resources. 17. we in terms of mitigating risk, we are talking about the supplier taking on 100% of the risk and the city having no skin in the game. we have not found a counterparty that is willing to take them on. we do have a counterparty in shell that is a credit for the entity. -- credithworthy and today. by the same token, shell wants

certainty that the energy they are buying and the hedges they are placing, they will be able to recover their costs. there is some future preparations -- appropriations and are being discussed. one is a program for a reserve amount, all thse numbers -- these numbers are in flux. this is what would be in a reserve account that shell would have access to. we are talking about an operating reserve. this would be in the 500,000 to $1.5 million. if something were to go not as anticipated, would have to go into the process of terminating the program suddenly. this would be we get opt out

rates incorrectly and take a few months to issue new opt out notices to the number of customers and we do not have sufficient revenues to cover the cost of the 30 megawatts of power we are purchasing. given that cost, mitigated by the amount of excess energy shell would be providing, we're not going to eat the whole thing but there is a portion that we might have to recover. this is designed to cover things like that. the last of the big ones under discussion is providing security to shell, in the case of a default by the city. we do not have the capacity for an open-ended termination payment.

that is requiring some creativity on both sides. >> when you say security, do you mean cash? >> yes. to be clear, with marin, the jpa signed a contract saying they would be liable if there was a default. which is a great thing if you have no money. to offer to be liable is not very meaningful. it is a different discussion. that is why the discussion has been more involved with sh ell. we are saying the city will not be open to any other liability and to make this effective, we would have to appropriate the money to be available to you. it would not be available to anything else which is why a would-be important to negotiate. >> with that establish a limit? -- wpi;d that established --

what that establish a limit -- would that establish a limit? >> if the power market is such that should we default, which is not the intent, if the power market has higher prices, there would be no liability except whenever trading. that is fine. this kicks in if we default. and the power market is such that there is lower costs and the cannot buy that. it is an interesting place. we want to limit our liability. >> what this be in reimbursement of actual cost? when you use the phrase default payment. >> it would be what they lost. the auditor would have to

demonstrate their costs were greater than what they were able to sell it for. >> the cca program allows an opt out for the stand out program. opt in is how the state law [inaudible] to better understand why i was talking about this reserve, i am on slide 18. similar, to get shell comfortable with the model, what they are able to work out and what we're following upon is the process whereby customer revenues, they send to the cca and send it to a specific

account. that would be controlling language from the bank that owns the account. shell would have the first priority. this is part of getting shell credit and other folks comfortable, when they have a bill that would get paid on time. that reserve -- that would be a minimum amount. that would be in the contract in order to avoid a default. those are the general broad overview i wanted to touch on for the term sheet. moving on to the outstanding issues, we're talking about,

there is a few other things that are outstanding. one is that if you, i do not know if you recall. there is a rather esoteric part of the statute which requires a cca to post a bond capable of covering the estimated costs to the incumbent utility, pg&e, of the cost of having 100% of the enrolled cca customers returned to the utilities. in the case of a cca, all the customers go back to pg&e. it costs more to procure energy for them. cca once there to the bond amount if sufficient that they bundled customers would not bear any cost. this is something that has been litigated at the cpuc and still

remains in question. >> when you say bond, marin tried to obtain a bond and nobody sold it. it is cash? >> it is hard to -- it would be some type of insurance. as a city where are thinking we might be able to self-insure. it could go to an insurance broker and buy an insurance instrument from them. marin could not find an agent that knew how to quantify that risk and was only willing to sell it to them for the full cost, a cash bond. the amounts of money that have been thrown around are quite small. it would be fine to go ahead and

appropriate it. we do not know how large it may end up being. the current amount is $100,000. we have that on deposit. >> if we fail here and the customers we signed up, it could be up to 130,000. it could grow to 230,000. we default or we cannot continue with those discussions, it would not cost more than 100 grand? >> power prices are low and there would prefer to have customers go back. the amount, we are figuring out

calculations is 100,000. >> there have been other numbers offer. >> this is the bond to cover the cost of defaults. the amount that would be available is not the amount that cpuc would be determining. >> the rate payers have chosen not to go this route and would have to pay if we fail. >> this is -- the boughnd amoun- the customers would not have to -- >> the money comes from somewhere. it is passed on to the ratepayers. >> that depends on what the

market rate value would be. that would be passed to our customers in some fashion. >> our rate payers who chose not to become part of this are being punished. >> no. if they calculate the bond they would charge and the people who chose to be in our program would pay for it. there would avoid charging the people who had not chosen. >> let's say the program defaulted. not at the fall of the ratepayers. if the cost goes back to the ratepayers, that only chose to be part of the program or across the board? >> a cost that the customers would have been paying for. not this new charge. >> the participating customers

are paying for the debt service on the bond that we have occurred -- incurred? >> yes. it is not a bond of like a debt service bond. this is someone says recalculating the liability. they want you to post that bond. >> somebody has to buy the bond. bonds do not occur -- someone has to buy it. >> the people in our program would buy it. >> commissioner torres: based upon their utility. what factors are we including in that to preclude if the costs were to go higher than we had anticipated, that current rates would not be injured? >> we have no access.

>> it is said issue of fiscal integrity. the rate payers are there to protect. you are nodding but not responding. >> commissioner moran is spot on. the cost of the program would [unintelligible] participating customers. remodeling the financial costs associated with those appropriations. -- with those appropriations would be financed. there is no planning mechanism to reach through to other customers who were not part of the program. >> you may by default.

>> if the california puc established a bond, there is the possibility that should this occur, it would not have collected enough money. >> would have to go after them to -- we would have to going after them to collect that money. that is a venture i would like not to embark on. >> this would occur if we went out of business. >> that is a possibility. >> if we went out of business and market rates were not up, it would not matter. the increase to pg&e, if the california puc hasd estimated --

if they estimate incorrectly, the world would be responsible for making up the difference. >> i am not comfortable relying on the puc to take care of my ratepayers. i just do not. >> but ioff [unintelligible] that is the process we have. >> than you would have a class action. why should we have to pay? >> i am not an attorney soil will not speak to class action. >> we have an attorney here.

>> the payers could a class action. i could check and get back to on that. >> one of the difficulties here is we do not know how much this is. it is hard to make decisions on a program when you have something that is undetermined. if that is under litigation, the methodology that cpuc is under litigation. are we involved in that litigation? >> yes. >> are we making the case that they pg&e should be obligated

to assume whatever energy contracts are freed up by virtue of our default? >> that is one of the points we made. >> one of the points you made or one of the points that was negotiated? >> one of the points we made in litigation that is being considered. this point came up as noting that the contract is contingent on a few things. even after final contract is negotiated, assuming this entity -- the final contract we bring that this -- if this body approves that, it is still not done. the next -- we will put into this contract are some terms that allow