secure another 4.5, if there was a need for a security fund. that is the another unknown. the 6 million the p.u.c. is proposing to spend on go solar sfs subsidy and studies for a build-out would represent an injection to the economy and in fact, that is something we believe would be an economic benefit to the program. so to consider the economic impact factors, we present the economic impact of legislation as kind of a sum of the different elements that are changing as a result of the legislation. so in this case we have a situation where one of the economic impacts stems from the fact that residential consumers who remain in the program will pay more for electricity. part of that is as they phase higher prices for electricity those consumers will reduce energy consumption. however, we don't believe it is reasonable to think that prices will go up so much or that consumption will be reduced so much

that people's aggregate electric payments go down. there are markets where people are cost-sensitive, the price goes up. the total amount people pay goes down. we don't think electricity falls into that cat gir. that means despite the conservation effect higher electricity prices will lead to higher payment business san francisco consumers. what that means is because this money is essentially leaving to pay for shell's cost, this will reduce the net amount of consumer spending in san francisco. that will have a broader economic impact in the city. on the other hand the investment and energy efficiency, alternative energy programs and, in fact, the studies represent an economic benefit. so there are economic gains associated with that. the program funds require funds from the hetch hetchy enterprise and indirectly from the general fund. as i mentioned that will

result in a reduction of local government spending during the period. so essentially you have an economic reduction associated with higher electricity prices. you have an economic gain associated with the local energy efficiency and other program commitments and second contraction associated with local government spending. to get to the bottom line in terms of what that means for the economy we believe the electricity cost also be in the neighborhood of 13 million. again, supervisor, that is in reference to the $18 number. if that jumps by 50% it is reasonable to think this number will jump by around 50% as well. the 4.3 million annual reduction in government spending, that comes from the security payments and the program costs, that would not change regardless of what the final rates would be. then the benefits coming

from the $6 million spending on profession services, energy efficiency and go solar sfs would be benefits. according to our modeling this represents a less of 95 million jobs annually and reduction in the city's economy about $8 million during the four and a half years of the program. to put those figures into context, san francisco has approximately 550,000 wage and salary job, approximately 100 billion economy and these represent 1.01% of city in terms of total employment. >> just a question. >> uh-huh. >> the -- what is the source of funding for -- that we are using for the withdrawal of government funding? >> from an economic modeling point of view it is government funding. the money comes directly from the hetch hetchy enterprise. >> so we are saying we are moving it from a particular

service and function to something else but it seems like that function service of the hetch hetchy enterprise might not be impactful to local economies. so are we doing an apples to apples comparison? >> i think we are. we are legally required to maintain a balance in the enterprise fund. so even though it is a reserve and technically not actively doing something, if it is reduced it needs to be raised. whereever it raised does mean something. raised by a general fund or rate increase the general fund's paid for that is a reduction for the general fund. >> had you done modeling excluding this fund -- source of government withdrawal? have you done a model that actually did not consider

this loss of funding for the hetch hetchy fund? >> i have not. we think that is the right way. it would affect the economy. >> thank you. >> thank you, supervisor avalos. supervisor campos? >> thank you. on that note does the report take into account if this reserve is not spent it would be injected back into the economy? >> if the reserve was not spent? you mean if the program did not go forward? >> or that at some point there was no need for the reserve to remain in place. >> if the reserve were not needed and those could be spent in other ways, that would represent a net positive to the economy, yes. >> could you talk about the extent to which your report takes into account the phase ii of program, the

buildout. i understand the item is this contract. your report, as i understand it, does not take into account benefits of build-out in terms of employment creation and jobs we are hoping to create in that event, right? >> that is correct, supervisor. we were not able to have specifics on what a phase ii local build-out would look like. it is true those benefits that include economic benefits are not considered in our report. it is also true to the extent a local build-out would lead to higher rates, those costs are also not considered in the report. >> thank you. >> thank you. supervisor ferl. >> thank you. that was a question about phase ii. we heard from mr. harrell on the there were not enough specificks to consider it in terms of the bonding capacity so on and so forth. i think whether it is job creation or economic pain, if you will to consumers,

based upon a rate, that is something that really can be factored in. the question for you around maybe -- this was touched on by supervisor avalos, i think. because of the reserve in hetch hetchy, there is one line item he talked about increasing in the departments in terms of their electricity costs. can you talk a little more about that. >> it is my understanding that the need to restore the hetch hetchy fund balance requires -- the option proposed to address that is a rate increase by general fund departments. that is why our report makes the link between the security payment that comes from that fund balance and some impact on the general fund. i have not tried to say that all of it gets paid by the general fund or all that increase is solely caused by this program, but

absent a change in the reserve requirement around hetch hetchy, one way or the other, taking the 13.5 million out, or whatever amount it is, does represent a withdrawal of government spending. >> okay. so the job loss you had estimated 95 jobs with your report. >> right. >> again, if the cost goes from 18 to 27 per average consumer -- again, we are saying average. i understand that is a complicated way to phrase it. how does that roll through? >> as i mentioned, supervisor, there are two pieces of the negative impact. there is reduction in consumer spending, then reduction in government spending. i haven't broken out those two separately, per supervisor avalos' question. i cannot say it will be 50% more, it will be probably more than less of 50% more.

>> supervisor avalos? >> just want to have you continue with your presentation, but a question to general manager harrington about our hetch hetchy reserve and his point of view of -- we are actually seeing a real withdrawal of government spending by moving money from that reserve to the clean power reserves. supervisors, hetch hetchy has had a high reserve because we are self-insured. we would not otherwise be spending this money. i think the answer is we could have. but our proposal would be that if we are not spending on this, we don't have something else we think needs to be taken care of instead. we would leave that money and to make sure we have adequate reserves to self-insure. the reason we are comfortable here is it is going into reserves. if we were really spending it we would feel less comfortable. >> so from your point of view you are not saying withdrawal of government funding. >> we would not have

anticipated spending this money, no. so we don't believe withdrawing government money. i understand mr. egan's point we could. we would not normally be doing that. >> thank you. quick question. about the increase to -- i know we talked about city hall gets a break on electricity and maybe it is time to pay more of a fair share. you are saying that would happen regardless? >> yes. >> okay. okay. one other thing because -- sorry, you are up there. we are 19.5 in total. six going to programmatic elements, not necessarily reserve. decoupling those, could you theoretically. could you spend $2 million on go solar sf and two million on energy efficiency items independent of a program? >> yes. >> i imagine the 2 million to study local build-out is correlated here. maybe not necessarily but i want to make sure this is

bundled together now but it can be done separately. >> all those things are good ideas we should do. the difference is instead of go seller for anyone, we would do it for our own customers. it is more directed so they are still decent programs. >> thank you. supervisor avalos? supervisor composure. >> thank you. i have a question for mr. harrington, since you are up there. my apologies. we heard from the economist and the report about the 95 jobs that apparently are going to be lost a year. do you have any thoughts about, you know, the issue of job loss? i honestly -- i understand where mr. -- where the economist is coming from. i don't know that i necessarily agree with that. but i'm wondering what your thoughts are on that issue. >> sure, supervisor. i guess it is an economic model. economic models do things that are important.

to take an analogy, let's talk about tomatos. they are good now, ripe, wonderful. you can go to safeway and buy a tomato for a certain price or go to the farmer's market and pay probably a higher price there are no tomato farms in san francisco. if you buy a tomato from a farmer down there probably that money is going out of the city. reducing money spent in san francisco. if you ran that through this model it would reduce jobs in san francisco. so if you are serious about this, then you shouldn't issue a permit to have a farmer's market in front of the building. of course people would tell you you are crazy. there are two reasons. one people believe it is their choice to spend money, if they want to spend more on the tomato at the farmer's market. second people can go and believe if they have the ability to buy organically grown, chemical and pesticide free vine-ripened tomatos that taste better and better for their family that is the choice they may

make. similarly people may make a choice to spend money that leaves san francisco in some short-term way to stop the devastation of our planet by greenhouse gasses. the model doesn't account for equality. it accounts for money, not equality. >> i don't know that there is anything else to say, thank you. >> thank you. [ laughter] >> supervisor ferl. >> sorry. last one. i love your analogy. i think clean solar, i liken it to the heirloom tomatos delivered and you have to opt out to buy a cheaper one else where. [ laughter] >> but i understand your comments about the pod dell, understand the modeling and ted is terrific at what he does. i was asking him about the

18 versus 27. again he said it ones the care program so -- >> actually, my staff and others are trying to figure that out one view of the world that is exactly the same numbers. one is meaning versus the average. and they are just talking about the different ways of spreading the same dollar amounts. i would love to wait until they finish that. i will agree before we try the guess. >> great. i think from a -- the place i come from is a consumer perspective. if we are talking about 20 versus 30, it is a big difference so appreciate that. >> the percentages we have in our proposal there are the 20% rate increases, they are at the higher number. i believe -- many of my staff believes it is a difference of how they split the numbers. they are trying to decide that. >> okay. >> thank you. why don't -- did you finish your report? continue on. >> i have a couple more

points, supervisors. there's been discussion, and it is a point we raised in our report about the economics of opt out versus opt in. is it true, as you have heard first that opt in systems are not a wonderful measure of consumer preferences. opt-in is preferable as a gauge of what people want. it is also true the state law does not allow a cca to change an opt-out process into an opt-in process. it is required to be an opt out process. in addition is it true state law requires residential customers to be offered service. it is not true, however that, the city has no flexibility in terms of how it structures the opt out process or that there is no role for opt-in features into the process. for example the city could elect to roll out the program officially enrolling through the opt out process, only those neighborhoods where people are most likely to favor

the service and allow others to opt in and market on that basis. judging this is how many we get for opt-out and through an opt-in and making a policy decision about what the acceptance is on that basis. the program had an opt-out default that you were enrolled in by default through the opt-out, whose rates were i believe set to equal or be very close to pg&e's rates. there is no harm to consumers in an opt-out process which enrolls them into a program where rates are the same as paying now. in marin if you wanted 100% green power you could affirmatively opt in. that is not what the p.u.c. is doing but a feature to introduce into a program

that is nevertheless opt-out. the only point i'm making is to the extent opt-in could be part of this program it would move away from the well-known prom that with opt-out it is not the same to consumer as affirmative choice for something. another high level consideration thinking of cca as environmental point, mr. harrington mentioned it is powerful towards reducing the overall carbon footprint but the state law has certain imperfections or let's just say equity programs in using ccas as environmental policy and directly connects to the opt-out character. if you do not opt out of the program, you will pay higher rates for 100% green power and take the city toward the climate goal. however, if you opt out you have no responsibility. the burden of the city's climate plan falls entirely on those who do not opt out.

it is worth consideration by policy makers, that there are tax measures on energy use, on electricity use that could discourage people from using electricity if they are deciding or finding themselves in a program still using brown power. in other words, the city could adopt a tax on brown power alongside that would have the effect of reducing price difference between clean power program and the other. that would essentially give customers a more robust choice between brown power and a tax and green power that costs more. there could be economic harm associated with the tax increase. however that could be made neutral by reducing other taxes or fees consumers pay. so i think that that kind of complimentary policy, particularly if cca were to be made an opt in, you

could have a consumer driven and highly efficient -- perhaps the most cost efficient way of climate reduction policy in san francisco. >> supervisor campos, do you have a question? >> yes. i know we have the contract with shell and the novel contract. i'm wondering if you took -- my understanding is one of the things that comes out of that contract is there is a new customer care center that is created by that contract. was that taken into account in your analysis, your report? >> you mean jobs? yes, it was. >> thank you. >> supervisor kim, you have a question? >> i do. for clarification, the job center will be locally for local residents. >> we are counting that as spending. i haven't entered it as jobs directly. it will not i think materially affect the results. >> actually i had read this. i thought this was interesting, the idea of

residential users utility tax for those that just opt out. what is the process for thousand that gets set? >> like any tax increase, this is generally a tax, it would have to be approved by voters. >> thank you. >> we are the only city in california that doesn't have a residential one however. >> thank you. >> just in conclusion, we do project that given the assumptions we have had to make around rates and spending impacts of this legislation, it would have a slight negative impact to the tune of about 95 jobs, which would be about.01 of the city's economy. we believe the city could reduce risk to itself. this is in the report but i didn't touch on it in this. by returning the excess fund balances to offset the satisfied reserve or asking rates as you commented

earlier, to ensure rate payers make the city whole effectively for the security payments. i also believe that the negative economic impact may be changed by making it more of an ot-in process. also by making an opt-in process adjoin to a residential tax on those who choose to use brown power, that could better balance the city's cost -- cost of the city's climate goals. thanks very much. >> thank you very much for your presentation. why don't we go to the budget analyst report. go ahead. >> just if i could clarify that 18 versus $27. my understanding is that it really is the same numbers looked at in different ways. if you look at all the -- thank you. i was thinking something was missing. if you look alt all the potential customers in the 400 megawatts, you have high-end, immediate yam and low-end users. the average * if they participate would be 27.

the people most likely are tier one and tier two on lower end. they tend to be the 9, the 20 dollar types of monthly impact. so the 18 monthly impact is what is probable to people who will probably join. the 27 is what it would be if everyone joined because you would get larger homes, higher priced, all that kind of thing. it is the same numbers we are talking about, just splitting the total differently. so the 18 is the impact on those most probable to join in. >> thank you for your impromptu work. can we make sure to just go back so we can clarify for tuesday. before next tuesday that would be great. >> thank you. supervisor campos. >> if i may, i think that is a very important point. i want to make sure there is no misunderstanding that somehow from the time the report was completed there was a 50% increase in cost to hearing date. i'm wondering if you can

briefly comment on the issue opt out, opt in, maximizing or incorporating opt in to the program. wondering if you could shed light onto the extent how that was considered, how we are approaching that. >> sure. we needed a program at least robust enough to generate interest in someone like shell or someone else. that needs to be a program worth 20 or 30 megawatts. that is why we started with that many. then go to the smallest number of people in the city who have to make that choice and use that much power. we did multiple surveys and ended up if we target the precincts in the city where more than half the people want to be in this program we impact the least number of people that we might have an impact on but have a program large enough to do something with shell. after that everybody has a chance to opt in on day one. businesses, small businesses may want to opt in saying we are green, but

they are not part of the original program. the idea, then, is after that is stable, after people have a sense that power still came to their home, things still worked, we could go and hopefully that polling would -- the results would change. people would have faith in the program and their opt-in, opt-out would be better. we wanted to target ones where we had the least chance of impacting people not with us. >> thank you. >> thank you. why don't we go to the budget analyst report now. >> good afternoon, chair chu, members of the committee, supervisors. i'm with the budget legislative office. i will call out a couple details in the legislation that haven't been discussed inasmuch detail. one is the discussion about estimated rate increases but the rates need to be approved by the puc. once the rates are approved by the puc the board of supervisors will have 30

days to reject the rates. the contract between shell energy and puc doesn't go into effect until those rates have been finally approved. that would be one piece of this. the other is there is a $6 million appropriation request for the sustainability program. there is not a detailed budget for these programs. we are recommending that $6 million be placed on budget and finance committee reserve, punisheding budget details for the program. another point which hasn't really been talked about in much detail is pg&e has subsequently to the city, looking at the program has proposed their own program that could potentially be competitive with any green energy program the city recommends. we have a couple recommendations. mr. harrington has proposed an alternative to the recommendation, we concur with, which is approve

resolution to approve term to up to five years, so that would be different. up to five years. we also do recommend placing the $6 million on budget and finance committee reserve for sustainability and approve as a policy matter for the board. >> thank you. if there are no questions or comments from colleagues, i would like to open it for public comment. if there are members of the public here on this item i have your cards here. i will read off names from speaker cards. if you hear your name please line up in the center aisle. there is one person supervisor campos did want to bring first. >> i want to acknowledge we have someone here representing assemblymember tom ammiano and then supervisor ammiano is largely responsible for a lot of this work. i wanted to make sure i gave an opportunity. i know it is a long list,

so thank you. >> thank you very much for letting me be first. i am in awe of the presentation. the information provided and questions asked and discussion. tom does regret he is not able to be here, so i am here asking you to appropriate the funds for san francisco community choice aggregation program. it was back in 1999 that tom, when he was on the board of supervisors, he passed a resolution asking the state to pass a community choice law, which it did do in 2002. in 2001 he sponsored proposition h, a successful bond measure to fund energy projects. i have to say when he

started all this his main concern with this was a consumer rights issue. he felt profit motive should be taken out of service, because it is a basic right. it's taken a long time but tom is proud we are at this point. with the revenue stream through clean power san francisco, we will begin to invest in our local renewable and official build out. thank you very much. >> thank you. i have been asked by the chair to call names for public comment. i will do that now. when you hear your name please line up on the side of the wall over here by the windows. here we go. gwenn mclellan. gragorio ferrera.

lolita ramos. rudy ascione. jenny crock. you can come up in any order from how those names were called. >> good afternoon. i speak a little, supervisors. we are here because of the -- of this proposal. we are here because we will tell you frankly that if you -- in our