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 because of your verbal authorization to ton do it. if you would rather not have the second resolved it is really your call whether you want to just continue the item or whether you want to have it without that resolve. we believe that we have the authority to negotiate, we just don't have the authority to make a decision. so you would have a choice of continuing the item or taking

it out. the board expressed an interest in seeing this. but i am not sure, i believe it may be calendared on their tentative calendar. on their friday calendar they have it. that does not mean you have to send it to them for their discussion. >> i like the idea of us giving some guidance so we do not just get a negotiated contract that you thought was right but for some reason does not. if we continue the item we need to continue the discussion. i will tell you this, there are four areas where if we work to proceed, and i could try to send a term sheet to the board, i would like the term sheet modified in four ways.

and i don't know that this will answer your questions, but it is what is on my mind. the first is to the extent that we have funded reserves, that they are structured in such a way, and i think they are, they be structured in such a way that they establish a cap on our liability. if somebody is asking for cold hard cash up front the other side of the coin is that will be all that they get. second, i would like to see a more conservative roll out. my reasons are twofold. one is -- threefold. one is that it is an area where we have to mitigate. we can't fund the impact of that. that is an area where i get more conservative. second is if we do roll it out to the most likely customers first it means the ones we have

held in reserve are the least likely customers and we can't assume that they will accept at the rate the first batch will. and then the third is that frankly i was -- i forget what slide it is. the slide that shows the comparative costs, actually caught me by surprise. we talked about it being a small percent of a small percent. i kept looking and seingly $7. that is pretty cheap. the $23 took me by surprise. it is 18% of the electric portion of the pge bill. sorry. >> of the total bill. >> of the total. it is 30 odd percent of the portion of it. on a percentage basis it sent a huge amount of money. but it is a big percentage thing.

it may not be of great concern to everyone but it will be part of the ad campaign or the whispering campaign. it makes me feel less confident that the rates that we saw in the marketing survey would actually be forth coming. if pressed to put a number on it the number would be going down to 20 megawatts, about 150,000 people. now that is a non-scientific number. it is the best that i could give you. and if it is something that we wanted to spend more time figuring out a better way to come up with that number, that is fine too. smaller, i think, is important. the next two items are number one to put into the term sheet the escrow concept that we are negotiating contracts that we will not execute until the entire program is put together and we have a chance to do it

and adopt it in whole. the last one, which is the tough one we have not talked about, is that i think the value of the reserves is substantial. my guess was some number of tens of millions of dollars. and this is for a program which while useful and beneficial and important is option optional. at the same time the fund projections are we have a $60 million to $80 million problem over the next 10 years in terms of unfunded capital needs. and if we are talking about tens of millions of dollars on top of that without having an answer to how we deal with that problem, i think that is not right. so, i would add in there something saying that all of this is also contingent, not only on the escrow but us having adopted a plan to the point where we can say that the ongoing fund balance projections are sustainable for

a hedge. that is a tough set of stuff to meet. i recognize that. but it is -- as i have been wrestling with the issues, it ends up being the minimum they can get me to yes on on agreeing to a term sheet at this point. if we need more discussion on that continuing it is appropriate but i could go either way. >> all right. i think it would be interesting to go back. these are all complex. i think that they need further staff thought and discussion. for the most part i am in agreement that some of these i think are good ideas, you know. some of the liability issues and the abilities with the reserve questions. i feel that the time is ticking.

i wonder if there is a way to submit the current term sheet, maybe not to the board, but so at least there is a starting place, and possible tow the bore as well where it is sort of a work in progress to get feedback and get some of the wisdom of the other policy bodies as we do the work on these other issues and continue any type of a decision really on a resolution. it is calendared for friday so there will be a discussion and maybe what we do is continue it from our decision-making body to be able to at least review the current term sheet, get the wisdom of their input and then continue the item until september for a vote. >> do we have a meeting on friday? >> not for us. it is not a joint meeting.

>> ok. >> is there any objection or any comments. >> i don't know what the proposal is? >> to continue the item on but that it continues. it will go over there for friday on comments. >> right. >> they will be looking at the same term sheet. they might have an additional set of comments anyway. hopefully our staff will be there and bring it back in addition to these comments and issues that need resolution in order to bring it back. i do want to ask the general manager on the timeline. i know we are eager to keep the train moving here. looks like september is the next time we will review the

term sheet. >> if you look at the timeline that you have on slide 20 we are not talking about executing a contract with shell until the first quarter of 2012. so, it is really a matter of when before then you would want to authorize the contract. but i think we are looking at either signing a contract in february of 2012 if you want to go into business in the summer of 2012. >> are there any other issues from the commission for the term sheet for the staff to be considering so they can come back to us with a more fleshed out complete term sheet that we will be able to vote on in september? >> i would like to associate my remarks --

>> if a majority of the commission does not want to do the program it would be great to hear that as opposed to continuing to negotiate. if you think there are enough parts of it we would be happy to do that. if you think the risk can't be mitigated enough or another issue is important enough it would be important to continue. we are spending a lot of staff time negotiating. it is something that would be good to know. >> one thing that is convenient about continuing it until september is because at the retreat we will talk about some of the long-term financial issues and power rates. i think that is part of that discussion. we are talking about putting an additional burden on that. the solution to one could be

the solution for the other. the september discussion could benefit from our august discussion. so i think it works out pretty reasonable. >> yes. i am committed to the concept. i am committed to the initiative. i said before i took a position on this commission but i want to make sure that i want to align myself. we may decide that it is worth the risk. before i make that decision i want to know what the risks are so i want to know if they are worth it. >> thank you. i appreciate that. i am very committed to this program. i know the potential it could have on the reduction of greenhouse gas emissions. it could be a huge player driving the market. as far as what we need to be

doing as a city to reduce and comply with the state mandate that we are all scrambling to comply with. so i really want to see this program succeed. i would move to continue this item until september. any other comments from the commissioner? >> what percludes us from having a hearing in august? >> we could have a special meeting on this item. but i don't know. maybe i will take that off-line with the general manager and we can talk about that. >> thank you. it would be interest to see what they come up with in their further thoughts as well.