adopted in 2007 that really hit on these key points. rate, to meet or beat. stability, we want to make sure we provide long-term rate stability, not programs that have a lot of fluctuation in rates. we were asked to provide our renewable mix that was 51% dependent on renewable generation sources by the year 2017. at that time it was a 10-year ramp up. the objective was to develop 360 megawatts. we were asked to enroll all san franciscans from day one of the program. the expectation was we would have a contractor ration of about 15 years or longer that was perceived to be necessary to allow for this large in-city

generation and efficiency component. that there would be a single supplier to reduce the administrative accountability issues and the risk would be allocated primarily to the supply year where the city would not be are risky under this program. no financial liability to the city. in the course of our effort, reaching out to the marketplace to achieve those objectives, it became clear we needed to compromise on some of them in order to launch a stable and effective program. what you see on this side is a comparison between the original goals and what we're proposing today on each of those points. our rates we are proposing is to have rates that are higher than pg&e that paid for the full program cost, but an energy mix that is 100 percent signed renewable from day one, not a 10-year ramp up, but a day one

wanted to% renewable with rates being stabilized over the multi-year contract of 4.5 years. with enrollment based, about 50 to 75 residential accounts at the start. that we would have multiple suppliers, show energy north america for the supply, and noble for the back office work, and that the city would take on some financial responsibility, some risk, which involves an appropriation of 19.5 million for the first phase of the program. i will spend more time on that, that important point as we go

through this. it is important for us to know the program as we have designed it has built into some mitigation of their overall risk. that starts with the phasing of the program. we are targeting that initial 50-75,000 residential customers. that allows us to flex up in the program offering if it turns out we have higher numbers of customers saying no thank you during that process that mr. harrington mentioned. we will process those and hope to stabilize the program in the early months of the program. we are resuming relatively high it off-ouopt-out rates.

the fact that we are offering our customers 19% renewal product, we see this distinguishing our product from the product that pg&e is offering. wanting our program in mid-2012 will correspond with -- and that pg&e regulatory authority house authorize them to implement in june of 2012. we do not want to get our message is mixed up with the rate changes that are happening on the usual schedule with pg&e. the shell energy folks will be

providing the energy products for us. noble america will provide the customer-side services. and then the as i mentioned, it will require an 19.5 million appropriation to launch the initial phase out. finally, in terms of term sheet highlights, once customer revenue stream is established, we will be able to embark on the aggressive local build out objective that has been part of the program from the initial days of the ordinance was adopted in 2004. let's spend time talking about the appropriation i mentioned. we need to provide shell with a demonstration of our obligation to make a shell hole if the city defaults and the contract terminates prior to the

expiration. through our negotiation process with shell, we are proposing a $15 million fund to secure the obligation. the $15 million appropriation would be placed in an escrow account. it is possible the obligation will go down over time during the 4.5 year term. we're still talking about that prospect with shell, but we are proposing to obligate the city to secure its obligation with an initial 15 million. we are also proposing to have a $4 million reserve set aside that will help mitigate any potential program risk with funds available to us to help carry the program forward as we go through opt-out process and the customer base settles down.

19 million is not a program cost. it is collateral in the unlikely event that we terminate the program early. supervisor chiu: have you assess what you think that might be internally? >> what we've done is look at the expectation of being wrong honor expectations. having looked at the market's expectation and individuals telling us directly, we think we are conservatively estimating what the program cost will be an participation rates will be. i think we have minimized the risk of being wrong, and we have negotiated that amount. we are not just negotiating with shell a formula, but the $15 million is a commitment in the shell contract, and that is a cap. that is the highest it could be

under the city obligations scenario. it could exceed 15 million in limited circumstances. if the program is not financially successful, it is the $15 million figure. if the city decides on its own, for whatever reason, while the program is successful, healthy, to terminate the contract during the 4.5 year term, under our agreement with shell, we would be obligated to reimburse show for its losses, and under that scenario where the city determines on its own to terminate the program while it is a healthy program, we would not have a cap obligation. it would be effectively capped if the losses of the contract, but it would none -- would not be the lower $15 million amount.

that helped get shell comfortable with the lower 15 million. supervisor campos: from my perspective, is important to note that would be the case only if the program is acceptable. at that point the question would be what reasons with the city have to end a successful program that presumably is not only meeting the environmental goals that we have, but also bringing in revenue? why would we do that? that is a very important distinction, and we would be in control of that. >> it would be the city's decision. it would be on the city's time clock. the city could take a look at what market prices are, evaluate and make an informed decision to do that if it chose.

with this premium product comes additional cost, as we mentioned. what we're looking at here on slide 16 is burial -- varying levels of renewal. the overall cost increase the customer would see on the bill. small ball of puerto clara brajamost would see a premium of $6.70, over and above the pg&e bill a customer would seek, had they chosen to say no, thank you and stayed with pg&e. we are here per board -- here before you providing you with an overview of the program today. we are actively finalizing our

negotiations with shell and noble. we intend to have a contract ready for approvals and appropriation amounts defined and before you early next year, and intend to begin and rolling customers with your approval of that contract and appropriation request in july and august. with that, i would like to take any questions you may have. if not, turned to mr. reid strostrom. supervisor campos: i have a quick question. i know at some point we will have a discussion and hear from some folks in the community about what the proper scope of the program should be. you outlined the original objectives of the 2007 ordinance, and i am wondering if

you can generally speak to why this approach, as opposed to a larger program for the benefit of those who have not heard about the program, and one of the reasons we wanted to have this hearing, is because for those members of the boards that are not part of lafco, this is the first time they are hearing about this. >> we're really looking at this program offering as an opportunity to provide san francisco and with choice. over time, as we develop a consistent revenue stream and began to demonstrate on going sustainable nature of the program, we hope to include resources that are locally built. renewable resources that are on our san francisco-controlled

land with san francisco in performing the work to own and operate them. the overall goal of the program really goes back to the city's policy on climate change, on the electric resource planning work the city has done and adopted to it really green up the decision of your electric supply decisions that you make every day. the choice has not really been there for san francisco in a resident's -- san franciscan residents to have our resources portfolio. this provides for that opportunity. relative to the original ordinance, we're starting small, but when we work through with a competitor, the competitive marketplace, putting those

offers out for what our goal was, we really got the message back that it was not an overall package of goals that was achievable in the marketplace. the concept of community choice aggregation is relatively new. there are not providers in the market where this is their business plan, this is their market niche. that is developing. as we -- if we flash forward 4.5 years, we may find ourselves in a different circumstance with more providers helping us with the objective of the program and hope to be in a position of seeing it grow and mature towards really realizing the initial goals of the program that articulated in the 2004 ordinance. president chiu: i have a couple of quick question about the shell company. they're not a local company,

right? >> no, they are not. they are in fourth american company. they are working with iramorwin, and it is something we've discussed with them and they're open to, but we do not have any commitments at this point. >> i think it is fairly office -- obvious that that be an important component of this. i would be curious in the future for briefings on this. president chiu: thank you. >> good afternoon or good morning. general manager for business

services. part of the past before business services is to assess the business risk, as well as the market risk, put that into a financial statement, and what that would ultimately mean to customers. as ms. hill mentioned, we have done a lot to mitigate the risk, in particular looking at how we size this for a particular business opportunity. the big one was making the assumption we would have load or demand of 30 megawatts when the market was 360 megawatts. in addition to that, very careful on this and crudeness, we're also implementing this where the entire state is under a mandate to increase grenoble's for the portfolio standard purchases up to 33%. there will be a lot of future demand in the marketplace, which is one of the reasons we have been able to come before you and

provide what we think are -- a window of opportunity of very reasonable start up costs and commitments. the financial statements also look very good, because unlike pacific gas and electric, we do not have a profit built in. we did not have required dividends to shareholders. we're giving 100% clean power without any profit, and giving all of those moneys, investing them in to clean and green energy. that is the biggest and largest cost of running operation. 82 percent signed of all of the groups are doing that. we're setting aside amount for benefit reserves for the benefit of future customers. so we are able to do this at a time in a window while the economy may still be

floundering, that has allowed for there to be a lot of reasonably priced renewable energy right now in the marketplace where we think we can take an opportunity to take advantage of that and locked into a long-term contract to help people of san francisco. what that looks like over a multi-tiered time on the financial statements is that we build up rate stabilization reserves over time, and we also take components of those $19.5 million of start up reserves, and we put those into the program to make sure we have adequate cash flow to meet monthly bills. you will recall, you use electricity all month, but do not get the bill and pay for it until the following month. how is this possible and how will it affect average in franciscans? most of franciscans are already very conifers -- conservation-

minded. they typically have a smaller footprint them a lot of other communities in california, a special central valley communities that need more electricity for cooling their homes. in our case, because we have relatively moderate footprints, studio condos and smaller homes, which typically have users who use very little electricity. that makes the premium green products of very small amount. by way of comparison, over half of all of the residences in san francisco would be considered small users of electricity. that translates into the build impact, and that is why it makes it such a winning proposition. and the small user is an example

of our tier 1 customer. this is the same way pg&e presents materials. a small user in a small bedroom or studio apartment or condo typically would pay about $40 per month under the current bill. what this would do is say if you want to come at you now have a choice, and that choice you did not have before, but now you would to stay with pg&e who was providing 18 percent signed a standard renewable energy, or you could come here and have 100% clean and green power. that would be $17 per month for you to make the environmentally conscious decision for you to do that. you would not have to do that, but you least have an option to pay $7 to help the environment. that is going to be over 40% of all the residences in san francisco would have the very

minimal impact. if you are in the next year, which is well over half of household, you would only be paying $14 per month. pretty small numbers when you look at them in monthly terms, even smaller when you compare them to a cup of coffee at starbucks. how does that fit into a household pocketbook? president chiu: i have heard different estimates as opposed to the members here that you show better in the 10-16% range. could you address the assumptions out there and how certain you are about this. >> what this is is a reflection of what the rates are proposed to take effect on july 2012. they have made a conscious decision to move to flat that -- flat-rate generation pricing. in the past they charge different rates for small users and the customers.

the california pcu has granted the authority to move to one price for everyone who uses the generation. these comparison compared to that. it is to moving parts. for customers, this would be the real impact of what they would really feel if you are a small user or have a very large home. if you have a very large home, of course you have a higher monthly bill, in your cost of having one & green would be higher. -- 100% green would be higher. every customer pays their fair share, and no more than their fair share. they pay exactly what their proportionate cost would be. how does this affect the average pocketbook and the average monthly budget for a family? to g>> one reason you are hearig

different percentages is we are comparing this to the total bill. if you just took the generation line, it is a greater component of that. we were looking at the total impact on a customer that has regular usage, which is a mix. and they will have all the transmission distribution cost, but just the one line of electric generation. that is the difference. >> that it's a great distinction, and i think if you turn to slide 23, you will see that. if i could draw your eye all the way to the right side of the slide, an average household in san francisco gets a bill today for gas and electric service over to the far right of about $123 per month. the figures we have given you and the percentages we have given you look at the impact against the total bill.

as mr. harrington mentioned, different people use different comparisons or calculations. whether you are comparing it to the total bill that you received, or just the electric portion, which is about half of it or just the gas portion, which is the other half, you will get slightly different percentages. families have to pay these bills every month. we understand that. we have also compared how participating in this program, that would compare to $100-month cellphone and data and text plan. that would compare to an average bill for water and sewer at $76 or to an average monthly garbage collection of $27. what we as shown in this chart is the average of all of the small users and conservationists and a larger users with larger

homes. the average would be about $20. for very large users it would be more because they use more electricity. that is the majority of the financial slides. i have attached one final slide, which is how the average bill looks and how it would change under clean power san francisco. the bill is going to have the same number of lines, except for one. there will be one related to clean power san francisco. they would also be able to call us and talk to our representatives to know they are getting 100% green product for $7 per month, and we would also answer any of their questions as well. we are happy to answer any question. president chiu: the impacts on

this on the general fund is the $50 million that was discussed by the previous -- >> there are two options. one option we have assumed when presenting to our commission is the san francisco public utilities commission fund could have the available fund balances in order to fund the startup cost. in this case the startup costs are to put money into a reserve, which we hope and project will not need to be spent, but you have to put them into research. right now that is the assumption. if the general fund a word to fund those reserves, we would not be opposed to that, but that is not our working assumption. supervisor campos: thank you. >> i just wanted to make one

other point about the risk to the city and make sure we understand that part of the discussion also. we're putting 15 million aside, and that money would only be used if the program was just not successful. and if the market changed so that if we go out and help show you are buying this much power from us, and the market rates have increased, shell can determine to sell it. the cost does nothing, except the administrative cost of doing that. this only happens if the market is such that we have lowered the price of renewals, which seems highly unlikely. what happens is if we go out there and buy it at a certain rate and they cannot sell it because the market has changed, then we owe the difference between what the market is and

what it would be. most probably in the type of renewable cost would be going up, and they can turn around and resell it. we believe it is highly unlikely we will use the 15 million. the more uncapped liability discussion, that would really be where the city would make a policy decision -- decision to close a successful program and time it for when the market was wrong. you would have to wait until the market was going against you and the policy decision to incur any kind of liability like that. we believe it is unlikely that power rates will go down in california. if something were to happen, shell would turn around and sell it to someone else and we would not have the liability we're talking about. it is really an insurance policy that we hope will never be used. thank you. supervisor campos: thank you.

i do not know if lafco staff wants to add anything. unless there are questions, why don't we open it up to public comment? president chiu: i have a speaking engagement that i am happy that now lay for, but my staff is watching this. supervisor campos: given the complexities of the issue in the first time many of the board are hearing about this, i hope to have a follow-up discussion. i think it is important for us to do a lot of the work before the matter goes to the full board at some point in the future, so this is just the beginning of this discussion. president chiu: i think that is entirely appropriate. it is complicated and a lot of questions. >>