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 the general manager the authority to determine to execute that contract. the types of things to examine well-being of the outcome -- will be the outcome if there is any regulatory decision that may happen between now and then. this is potentially one of them. another is the final -- market prices are [unintelligible] for 4.5 years. they are not willing to give this a price to pay for something we execute two months, four months, five months from now. there will be a price refresh

and the contract that will be approved by this body, where thinking it will say something along the line of as long as prices are x or below, the contract can be authorized. that is why i was reading that. >> the presentation shows there is a program reserve for operating reserve, something to do with defaults. there may be something in the noble contract, although it is a different kind of deal. in sum, am i correct in assuming that the total amount that would have to be appropriate for reserves is in the tens of millions of dollars? >> given that we're talking about $5 million, there will be an additional one. one of the things we do not want

to do is say to much -- too much. >> i tried to ward it generally enough -- word it generally enough. the point being it is substantial. >> that is a fair characterization. >> my last slide i lo go for. >> there will not be a contract unless we it agreed to appropriate those funds. >> i am hoping on the next slide, one of the things that has been uncomfortable about reviewing this agenda item, it has the implication of our signing off on a program when we are looking at the term sheet,

it does not include the amount in the noble contract and other issues. i have been trying to figure out how to deal with that. the thing that seems most sensible to me is we establish almost like an escrow. at some point the entire program comes back to this commission so we can say, given the amount of the bond and the final contract, negotiated with shell and noble, are we ready to go? and we have the whole thing in front of us and we're not looking at it piecemeal. that would give me a great deal of comfort and that is not the structure that is in the timeline. we have not talked in those terms. i do not want to -- define the elephant, i want to see the

whole thing at one time. >> most of what you are asking for can be accommodated. the issue is on the finalized rate, those rates change every day. you'd have to give some authority within that period in terms of appropriating any reserves to make them meaningful, you would have to have the preparation in front of you and the goal would be to have that corp. happen with the contract. you would be signing the contract knowing what it cost and appropriating the money to do it. one issue that is a problem is that cpuc bond. that is out of our control when that might happen. the project is contingent on that, we pretty much go as far as we can and we stop. that could be a very long time. that is the problem we have had.

>> i appreciate that. at the moment i am not comfortable saying i am ready to proceed without knowing. it is such a potentially big ticket item. that seems unwise. >> [inaudible] >> i think so. >> maybe you could move it along a little bit. >> sorry. >> that is ok. >> 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