to have a transparent way of rationalizing resources investment decisions. i think it would be worthwhile having a discussion about what we mean by that and what we think might be workable. we spend a whole lot of consulting time developing what may be elaborate structures. if they did not get very far, i think it is worth having additional discussion. those are my suggestions. >> if that is the consensus, we can work with that. >> i think if that sounds right on, and i believe the format question and i believe, it was

much more effective this year. if there is a way to integrate it a little bit into every other meeting or discussion around the immediate actions that we need to take and we can maybe do that once a month, maybe the other meetings will be more content rich and we can make more informed decisions. >> will also probably benefit from putting a time and that on those discussions because they can get out of hand. >> a number of city councils consider what they have -- have what they consider working sessions. >> it would be good to continue the conversation in some format. maybe we can with the calendar to see if there is some way to hit the hot button issues.

>> that works the more comfortable you are with consent kelli this. as long as we can make those is clear and transparent as possible, it will give you room that have the kind of conversations. >> i am quite comfortable with the consent calendar model. we have a good general manager at this point, and that might change, that this moment, it feels like it is the everyday contract pieces silicon have these richer conversation. any further funds for, and fly the fear of the general manager.

>> several items today, the commissioners. a meeting of the a month ago, only talk about the status for four had a variety of different- ha. i love to have the staff report on love of our. and of the hat and five of death in their relative few, half of local power. we're trying to a and gave a full the, if off. the telephone lived in them out. the 50 foot of the fate of the an f of the meetings we have lived in the governor's office in asia the vetting of of of them.

-- if you could also say a word of other means we have in the governor's office. >> of the meetings we have been attending with the the governor 's energy team. the president and died and others also attended. we and other allies, folks from the energy authority have been talking with the governors energy advisory team about mechanisms that could be put in place to help promote community choice aggregation across the state. we think it could be an avenue and a mechanism to end the

support of the governor's generation goal for the state. the good news is, those types of folks are extremely busy and have numerous priorities. we have had two meetings now, they are seeking another follow- up meeting. that is what i consider success. >> success in terms of the number of kilowatt hours that we can contribute to the governor's plan? >> in terms of helping convince the governor's team that it will play an important role. >> was part of that discussion a cost that the rate payers would be < provided by pg&e, or anyone else? >> the rates are part of that discussion.

the governor is very concerned about the cost across the board. i don't think he wants to move in the direction of any program that is not going to benefit the ratepayers. i understand it is laudable that we are all going to reach a goal, but at what price? >> those were some of the questions from a couple of those meetings. it started as a conversation around the toe thousand megawatt goal and what kind of role they can play. one thing that surfaced quite quickly was the financing mechanism that would really address rate structure. the risk issues related to the financing of it. that is something that the staff keeps putting on the table. >> he is doing it to us every week, and rightly so, with the

director of finance. an incredible person that heads of the department of finance about how we all have to be so careful about the bonding mechanism. san francisco's credit rating is pretty good, but the state of california's is not. >> the last couple of meetings have been about educating in getting them up to speed. there is still some work to be done in that area. >> with that, i will switch to the other day. i will start out answering questions and refreshen folks in terms of where we are and i will be followed by the cfo on the mechanisms and options for financing.

i didn't wear glasses, i get thrown off. it's up on the screen, very good. to refresh, what are the questions we had at the last meeting? we have four main points. there was question about using that cash and under what circumstances and how large. i had not finalized negotiations on that. the status of where the performance bond is. that is still outstanding. commissioner moran have questions about scaling. and again, we will see if we can talk about the funding option. >> one quick question, how much

have the rate payers are the taxpayers paid already in preparation for this? >> defunding -- the funding for my work -- >> and not yours, all of it. >> the budget that was appropriate in this city. $6 million was appropriated. 5 million was appropriated five years ago, six years ago. $1 million was added this year. back to the slides. just a quicker fresher and adding to what we had. we were talking about some of

the risk and phasing the program. that would be the average lows, offering 100% renewable product. timing the launch of 2012, around the time that the rates switch over to where the generation component of the bill remains constant regardless of energy usage. we're talking about a 4.5 year contract for the energy supply. they were still negotiating that. the internal politics, because it is a different deal, they are used to getting their senior management comfortable with the various ways of having a cap termination payment. the total appropriations for getting the first phase of the program, 75,000 customers, $19.5

million to get started. we are also very much planning on following the policy of once we get a revenue stream established, that we would be able to start building renewable sources in the city. breaking out with that 19.5 million, there is $500,000 for shell and $500,000 for noble. $15 million is to secure the city's obligation. there is a structural issue if they don't get enough customers that they would have some skin in the game and they would have the ability to get some

compensation if prices were to move and they found themselves in a position where -- they would have to lose money and sell. $15 million out of the $19 million would be put in escrow. we have confidence that that is there. there would have to be subjects to make sure that they wouldn't have gone. and it would be appropriated on top of the $15 million reserves. >> the $15 million city defaults, i understand that, you

mentioned the value of the fuel and the energy. >> only in the instance where our program is unable to continue so a couple of things have to happen. our program is able to continue for whatever reason. we would be into default. that is the form. and we don't necessarily of the $15 million if that happens. what they are going to do is offer a fixed price, they're going to purchase 4.5 years of instruments to buy energies that they are committing to sell to us at a certain price. the expectation is to be able to get revenues at that price. if we were to terminate early and prices moved against them,

after six months, there are four years left of energy that they are committing to buy from someone else. that would have the cell that energy and they are not selling it to us. then there is no penalty. >> and if we terminate prior to expiration, that is litigation? counsel? >> i can answer that if you would like. that is what the next slide is getting into in terms of where the liability is capped. for the liability to be capped, pretty standard provisions in the energy market. it is pretty commonplace to figure out if one party defaults, how to value that

energy and to decide whether or not there is a payment owed to the non defaulting party. we're only having the contract being worked on in such a way that a defaulting party in no circumstances could benefit from defaulting. the uncapped provision, that is the next slide. >> you are referencing the mitigation of whatever has occurred in respect to the purchase of that energy. if it went down, we would be liable for that cost. if it did not, we would still be liable in terms of mitigating the cost or upon the alliance of their contract with us. >> if the price went up, the expectation is that they could sell it to some other third party and we would not of them

anything. >> these trade balance for less than, that is what we are dealing with. >> correct. the liability is capped at $15 million in the instance where the program is not able to have sufficient revenues coming in to the door. because the counterparty was concerned about political risk, they were operating just fine inconsistent. they just want to terminate the program. in the as instances, we were agreeing that the termination payment would not be capped.

>> i have a question. i simply don't understand something. what advantage is it to us to have show purchase this energy they won for 4.5 years out? >> the primary one is that we don't have credit. to enter into the market wholesale energy marketplace, you have to give the counterparties some confidence that you will be able to purchase its for the price specified, and we're talking about millions of dollars. shell is able to enter into those contracts on our behalf with this type of collateral which would be insufficient if we were doing it on our own. >> they were trying for some rate stability, so you can lock in the rates for a longer time if you're subject to the market

value and fluctuations, you would not be able to offer the kind of rate stability. >> my point here is that this type of energy, i feel, will be going down in future years horse soon. what is the advantage of locking in an array when these sources are going to be costing less? >> hail advantage, if there is one, obviously, if the market is such that if there is more demand for renewals, i also think you are right that renewable will go down in terms of its cost, but since california is requiring investor of utility to provide a greater degree of renewal as part of the normal portfolio, the competition for those same kinds of things will be going of and

that has a tendency to make the price go the other direction. there is the risk that when everybody else is trying to buy renewable, we would not be protected in that situation. it is an educated risk mitigation decision to make. >> i don't know if you're going to talk about and if you have as part of your negotiation, the substitution peace that could affect the rate structure as well and could affect pricing to a certain extent. it will beg the conversation on local billed out. if you could address that at some point, too. >> there are terms written into the contract where we do have the ability to substitute resources that we procured directly or own directly.

and to the extent that there are benefits, hopefully we can use those to our advantage. one thing to amplify what the general manager was nothing, because of the doldrums of the economy, the prices for energy both renewable and otherwise are lower. in the time we have been negotiating, the price has fallen of little bit. by the time we signed, it might be a little bit higher, but we are not seeing skyrocketing prices. >> i am not sure i quite fully understand that either. if we were able to identify additional resources and take advantage of the substitution caused and it was at a lower rate, we would still be on the puck? >> it depends on where the

market is. >> what we are discussing, if they can unload that other power and to make money, there is a way to capture that. if that is an expensive thing, we might be facing that. but we're talking about fading customers in overtime, so one way of clearing in the new resources is timing it with future phases. i am now on slide 6. as a general manager was noting, the renewable standard is currently being litigated in terms of what is going to count and what isn't. even after all the approvals would go through this body, and

go to the board of supervisors, get an a or a signature. there are final factor is that we will have in the contract that will need to be determined before the general manager with a sign the contract. one is the issue of the performance bond and what that method is, how to calculate what we would need to post to make sure that is something we can handle financially. the staff decision has been moving very slowly. we are lobbying and working with commissioner offices to set up meetings on a very senior level. the last point i already foreshadowed of that, i get that the market prices are within a certain band, and we have a

recent refresher on indicative pricing for show. that allows the average rate of customers, it has declined from 11.3 cents. it to go back to 5 cents by the time we are striking a contract. their questions there. in terms of the questions specifically the commissioner moran had, the 30 megawatt basce basis, it would be a 50,000 accounts. it makes a difference of 25,000 that would be likely to participate. there would be a number of opt out notices, and to expect

another 25,000 additional likely customers. the difference of going between 20 and 30 megawatts, about 3.5% higher. we also spent some time since the last time we met before this body talking with the counterparty about how it might affect the type of collateral they are wanting. it reduced its a bit, but not by direct percentage. 19.5 million to 18 million. it is not a major driver in terms of that issue, i would say. it is important to note that we did discuss how small a program that would be willing to contemplate. it is less than 20 megawatts.

>> the good news, as you might imagine, the prices should be pretty variable. we had a certain amount of fixed costs for marketing. it would make a big difference in the price because you really are saying that virtually all of the costs are variable. it is more of a policy called that a financial one. it is not a rate one. on slide 8, to break that down, for a typical bilhah, it is the difference between $6.70 at $6.90.

we talked about $7 a month, i think that as a lot more accurate for a particular customer. really, the interesting thing here is that the bottom in terms of comparing the program size and the effect on customers is and comparing to what we expect customers would otherwise be paying. the 30 megawatt program as far as their total bill, would go up by 17.5% and 8 20 megawatt program would be about 18%. >> when you say the total bill, is that the total pg&e bill? >> we have jurisdictions for getting a ballpark estimate on that. >> of the savings would be $6.70

for 30 what? -- 30-watt? >> a majority of our customers are low energy usage. the bulk of the customers would see their bill by about $7. >> up from the current pg&e rating? >> correct. >> what is it costing us to increase their rates? >> this is what it costs. our costs -- >> how much total money would we have expended to ensure that a ratepayer will get a second dollar increase? >> we will have spent the $3 million we have spent so far. and the additional $19 million to appropriate. >> what is the total?

>> $25 million. >> plenty of that is security. >> don't fall in love with appropriations. i am just trying to get a handle about whether this is the right thing to do for the ratepayers. we don't know -- that we know that is not the case. at the minimum, it could be an increase of seven or maybe more. when does this program start? ok, thanks. >> you are basing this on the minimum. >> the typical customer falls in various usage bands.

we are using the majority of customers falling within this band and using them out of kilowatt hours per month. -- the amount of kilowatt hours per month. the vast majority are in that 40%. >> this does not assume by energy prices going down. >> no. >> it does not assume substitutions. >> this assumes we're not substituting anything. all the unknowns are not in this. president vietorcommissioner caw studies about