objection. okay. so just for members of the public and colleagues, we have two items remaining, items number 6. also 7, that is on the agenda. and 8 as well. beth of those sponsors of legislation supervisor campos and supervisor wiener are on their way. they are actually coming from the mtc across the bay at the moment. rather than start immediately, i would like to take ten-minute recess and we will come right back, just to make sure we find out where they are along the way so we will be back in ten minutes. to members of the public, given we have a small window or break, if you haven't filled out a yellow speaker card, please come up and fill out your name. the cards are over here. we will be calling speakers for public comment with the speaker cards. thank you very much. we will recess and be back in ten m m

hello, welcome back to the regular budget and finance. we came back from recess. i'm carmen chu, joined by supervisor avalos, vice chair. supervisor kim will join us shortly. i'm joined by supervisor campos and ferl. will you read item 6 and 7. >> 6, resolution authorizing public daily use commission subject to daily use to lawn tfp clean power sf, approving local assisting services for clean power sf customers and authorize general manager of the public utilities commission to execute a contract with shell energy for four years and six months to launch the clean power sf. it item 7, appropriating 19, 500,000 of hetch hetchy fund balance at public utilitis to support the

clean aggregation program regarding the authorization to the san francisco puc and board of supervisors and adding code 10.10037 2 and 3373 to establish clean power sf fund and clean power reserve fund. * >> thank you very much. colleagues, we have these two items before us. i think these two probably have traveled a long road before coming to us here at the budget and finance committee. we have a number of speakers here today. of course we have ed harrington and his staff from the puc. we will hear from the puc, then office of economic analysis and then our budget analyst report. before we do that i will ask my colleagues if anybody would like to make any opening comments. supervisor campos?

>> thank you very much, madam chair. thank you members of the budget committee. my apologies to you and members of the public for being late. i appreciate the brief recess. supervisor wiener and i have been coming back from the metropolitan transportation commission, where we ready the city and county of san francisco. first in terms -- there are some amendments to the resolution that is before you authorizing the puc to launch the clean power program. i have copies of those amendments and respectfully request the budget committee at some point make the amendments along the lines that are detailed in the document. i have the clerk -- i think you have them. make sure you have a copy and we have copies available to the public, if people would like them. let me begin by saying that

this has been a long time coming. community choice aggregation is something that the san francisco public utilities commission and local agency commission have been working on since 2004. i would like to begin the presentation today by taking the time to acknowledge the amazing work done over the years by the san francisco public utilities commission. in particular, i want to highlight and recognize the work of the general manager, ed harrington, who is here and presenting shortly. he and his staff have worked i don't know how many hours over the last few years to make this happen. i want to thank them for the professionism. the expertise, dedication and integrity that they have brought to this

process. it is greatly appreciated. my hope is this will be successful. i think this will be one of the many legacies that ed will leave the city and county of san francisco. it's been an honor, mr. harrington. i want to acknowledge lafco, a separate government agency. over the years lafco has had many members of this board and members of the community that have worked on this item. all of them have contributed over the years to make this product what it is today. i also want to acknowledge the work of the amazing lafco staff. we have our executive officer, nancy miller, as well as jason freed, who have put in many hours and have done a tremendous job moving this item forward. let me be honest about community choice aggregation and specifically the program that is before you. i don't believe that this program will answer all the world's problems but i also don't believe it will

create them. i think it is important for us as we hear this item, hear some of the public comment that's about to take place that we put things in context. we as a board have taken a position in the last few years. in 2007 we outlined -- we passed an ordinance that set out some really ambitious objectives with respect to community choice aggregation. puc and lafco have worked diligently to meet those objectives as much as possible but we have learned certain lessons. one is the ambitious objectives first set out by the board meetings were not attainable. the program that is before you is a program i believe, and as you will see by the presentation and puc, is as good a program as we can put together.

this is a phrase used by this board of supervisors before but i believe it is a phrase that aptly fit what is we are trying to do. i hope we don't let the perfect become the enemy of the good. this is not a perfect program. this is not as ambitious as those of us pushing community choice aggregation have wanted it to be. those of us who have talked about cca in the last few years wanted to launch cca so we not only had a contract before you but at the same time we had a build-out that could be approved at the same time and move forward at the same time. what we have is a program that has evolved in the last few years with the goal of making sure we have community choice aggregation, that we do so in a way that is fiscally responsible and minimizes financial risk to city and county of san francisco. that is why we have approached this in a phase,

through phases. phase one the contract and phase two in a fiscally responsible way it is something that will happen once we have a source of income out of phase one so we can then begin the process of doing our own buildout to generate our own energy and contracts like the one before you are no longer needed. that is the objective, that is the goal. the goal is not only to make this happen. but as you will hear from the puc, you will hear from the department of the environment, the program of ccs is something that is an integral part of what the city is trying to achieve in terms of environmental objectives. i think it is fair to say, certainly my opinion and i think from those who have read the reports i think it is reasonable to see we cannot meet environmental objectives without community choice

aggregation. that is why this is so critical. this is why it is so important. the current program has the following components. it is 100% renewable. the program will offer specifically customers a 100% renewable product. it will be at a premium rate. the initial phase was carefully crafted after extensive market research that found there is a market in san francisco for this kind of product. it would be a program between 20 to 30 megawatts or 50 to 75 residential accounts with an initial contract phase of 4.5 years. i know in the budget and analyst report there is a recommendation to change contract to five years. we are certainly open to that recommendation. yes, shell energy is the supplier of this contract. i will be the first to say

at the very outset that i wish the energy industry was run by different players. i wish the companies that we -- as a city could do business with had a different track record. the reality is that the reason why jurisdictions like ma ren county are doing business with shell is because that is the only option we have. that is to say, though, that we have to understand that as we look at this contract, the goal of this contract ultimately is to lead to a build-out that no longer requires us to engage in those type contracts. i'm not here to defend the track record of any company but i do believe there is a way we can responsibly do business and protect taxpayers and it does so in a way consistent with

values and principles we have as a city. this is an opt-out program. if i had a choice, i don't know that i would do it that way, but at the end of the day the program is set out the way it is because of state law. that is something the puc will be explaining very shortly. so i look forward to a robust discussion. i know there are a number of issues raised in the last few days. those are issues we have thought about. we care about the impact of this program on low income communities. someone who represents district nine with many low income residents. i'm mindful of the importance of protecting those communities. i guarantee we have done and will do everything we can to make sure the interest of those communities are taken into consideration and we go as far as we can possibly go legally and financially to make that happen. i know i have a commitment and the puc has that

commitment. i also believe some of the reports that have been presented on this, including the economist, which is very informative. i appreciate the work they did around that program -- around this program. i think that report has also -- should be put in the context that we at this point don't really know the full benefits of a buildout. i think it is important for us as a policy body to think about that as we try to figure out what some of the costs would be. so with that i will open it up to the public utilities commission. again, i look forward to a robust conversation. the goal is for us to make sure we offer rate payers in san francisco an option. it is about choice. i think at the end of the day there is a way to provide that choice in a

way that is fiscally responsible. the last pointly make is just yesterday mayor lee announced october will be the month of innovation in san francisco. we have an opportunity to city government to be a part of that. i think this is an innovative way of us offering choices to our consumers and do so in a way that protects the liability of the city. with that, mr. harrington. >> supervisor campos, do you want to briefly explain the substance of the amendments? >> yes, thank you. >> we will take that up after public comment. just make sure we are aware of what they are. >> one of the key changes is it makes it clear that it delegates the authority to the general manager of the puc to make any non-material amendments that may be required, technical amendments that may be required to finalize

the contract. the language basically is added to strengthen to the extent it is legally possible the commitment to a long-term build-out. we believed that the initial language did that, but to the extent that ceqa and other laws allow us to strengten that language, that is the intent of many of the changes. they are not substantive. it is simply a matter of emphasizing the commitment to that intent. i think there may be other minor technical changes recommended or need bid the attorney's office. but the substance of the program remains. we don't believe these are substantive changes. >> thank you. to the city attorney is there anything you would add?

>> john gifford, deputy city attorney. these amendments would be non substantive. >> thank you very much. why don't we go to the puc. >> good morning, board members. i'm general manager of sf public utilities commission. thank you for your opening comments, supervisor campos. i will try not to repeat those, in the interest of efficiency. with me is barbara hale, in charge of our power, todd is in charge of finance and mike campbell has been in charge of the community program for a while. as a note mike campbell will leave us to go to work for the california puc as a manager in the rate payer advocacy in the future but they are here to answer questions. i thought i would cover most points and make it easier but if you have detailed questions, we are available to answer those. the presentation today, first start with the big picture, obviously. we don't just do this because we think it is a fun idea. we do it because there is climate change, there are

things happening and san francisco has to respond to that. this is the single biggest program on the horizon with the city and county of san francisco to make any difference toward any of the goals toward the greenhouse gasses and climate change in san francisco. without this program you have very little sitting out there. this can make a dramatic change and provides the city to offer a choice. i'm sure some in the audience, including myself, got a robo-call that talked about the board forcing people into something. after this discussion i will be very clear the board is not forcing anyone to do anything. this is a choice we are making available to our citizens and residents in san francisco. many residents in the city are renters with low usage. i'm a renter in san francisco. i am not going to put a solar system on the roof of my landlord's property. for a small amount of money i can go out and change to get my electricity as a

totally greenway of doing business. it makes a change in my life and the world. options but that.n't have the program would start with 95,000 people. the long-term goal is reach everyone. that is what state law says. at some point all residential customers have to have the opportunity to be in this program. as supervisor campos said, the long-term look at this is really simple. if you look at our water system the reason it works so well for everybody in san francisco is we own our assets. we can control our costs and figure out how we will maintain those assets. the problem in the power system is we don't own it accept for hetchy. we have to start slow, get a revenue base. once we get that, it is possible then to start doing a real control of assets of generating green power. what we can do is this will leverage our ability to create energy future for the city and local jobs.

we have been working with lafco, outside consultants to jump start how we can do that local generation, create the jobs, make renewable programs and make a difference. the appropriation before you puts about $6 million into doing energy efficiency, doing solar and starting to prepare for those programs to create our own energy. the cca allows communitis to provide electric generation for customers within the territory, that is the idea. all we do is provide the generation. we do not take over and do anything else that pg&e does. if you have called and want new service, pge will handle that. if lights go out, if anything happens in your home, peg will come out. they are in charge of distribution systems in san francisco and the bill that will come from pg and e. the one thing we do is provide clean power and see a change on one or two

lines that will talk about the difference in rates we will charge. this is not taking over pg&e and not doing anything that would hurt in any way any jobs of pg&e persons in san francisco. they will still work doing the same things they do today. there's been discussion of opt-out services. in fact, people will have plenty of opportunity to opt out. at least two before we start the program with them. at least two after we do the program with them. then we are looking at having a minimal charge or no charge to have people opt out after the program starts if they choose not to be part of it. again, this provides the customer the ability to choose. if they want to pay a bit more and want to work on the environment of san francisco and the world. the history, i will not bore you too much, it's been a long time coming. we were first direct bid the board to start working on this eight years ago. the next several goes through in horrible detail all the different times you

have told us to do this. repeatedly different supervisors and different mayors have told the puc to get a program we can bring to you. 2004, 5, 6, 7 we appropriated $5 million to this program then. we spent a substantial portion of that. we appropriated another million in the last year or two. we have gone out several times and tried to get a program that would work the way we hoped. we hoped it would be cheaper. that is not what the market is having available to us. in 2010 with the second rfp we appropriated another million in the budget. you gave us the authority to negotiate a contract and bring it to you. that is what we are doing today. as supervisor campos mentioned lafco has been very involved and had 11 meetings on this topic. it is not news to anyone

and we are ready to go. before i get into the description of the program there have been questions raised. i thought it was better to hit those off the top. the first is the why isn't this an opt-in program? there is discomfort people will be captured by an opt-out. the first reason it is not an opt-in is that is not allowed by state law. the law says it is an opt-out process. in addition, there is no benefit to the puc or clean power program of inadvertently capturing anyone in this program. we need a stable base. capturing people in our base a couple months and losing them is of no interest to us at all. we have a major marketing plan we expect to go out with to make sure people understand their choice. this is a premium product. if they want to that is their choice. if they don't that is their choice. we would have great

assistance from pg&e in making sure customers knew they had a choice if they look around the room today. they can get people out when they want to. we are also saying that you don't get captured even after the first opportunities. after you are in the program a year you can opt out. is this really 100% green? so if you have hetch hetchy water in this building, i can promise that hetch hetchy water started at hetchy, put it in one of our pipes and brought it to this building, it is hetchy water. if it is power, though we say this building is powered by hetch hetchy power, clearly there is no extension cord running to the tuolumne river. that goes into the bathtub and other power comes out. this will put in for every bit of power we use, this program will put in a same

bit that will be renewable. may not be the exact same time of day or same unit, won't trace itself to this place but it is 100% green, guaranteing our customers for every time we get a unit of power here, it is a green unit of power. the only way anybody in the state does it, actually. protecting low-income customers, again, if you look at mr. rose's report on page ten it has a schedule that shows what we had thought about in terms of the rates. it showed we would not be producing the 20% discount industrial utilities do for low-income customers. if you look at our presentation we are including that 20% discount. that makes a difference in the rates, from the higher amount to about the average of everybody else in the program, so that though it is not a requirement we are proposing to our commission and rate fairness board we propose the same 20% rate discount pg&e has and other investor-owned utilities have in the state of

california. you will see that does include that 20% discount continuing there. we are sensitive to the fact some can't afford this, which is why we will not impose it on them. so what is the program? the goals that are on page 14 in many ways supervisor campos covered those. let me go to page 15. the original goal was meet or beat pg&e but you can't get that. green power costs more than brown. if it didn't, pg&e would have switched to green power. clearly there is a reason, because it is a premium product. we are telling people it will cost more money. the stability, we wanted to have multi-year fixed rates, we are planning on that. when you sign up on day one you will know your rates for the next four and a half years. no one has that kind of stability or information like that when they are

customers of pg&e. the energy mix, we want 51% renewable ten years from now. instead we are presenting a program 100% renewable day one. the development ultimately the goal is 260 megawatts. we are starting small, as we said. we will put money into starting that. that goal is a ways off. the enrollment will be the entire city. we are doing it in a phased approach to make sure we do this responsibly and proposing 30 megawatts to start, about 90,000 customers. in fact, there was a single supplier related to power but a separate supplier for the back office things that people can talk to and really the billing processes will be naibl america. the final thing with the supplier takes all risks, that is not possible but we have given you a program where we believe the risks are acceptable. there are risks when you walk across the street,

risks in life. the risk we think is an appropriate level of risk. to show you -- busy page but to show you the impact this has, the city has currently committed to spend $9 3 million on sunset solar, solar projects, micro hydro, cogent facilities. $9 3 million that. will reduce the carbon equivalent of less than 7,000 households. if you appropriate this 19.5, we don't expect to spend yet, ten times all the efforts of all the work we have done for san francisco. dramatically different impact this program can have based on anything else for any price we have ever approached.

the term sheet highlights, mitigation of risk is because we are going to phase it in. the opt-outs we expect to be sent to approximately less than half the people who own or rent in san francisco. we assume on the people we are working with that about 50% of people in those district also want to stay with the program and 50% will not want to stay with the program. we will offer our customers 100% renewal, plan to launch in mid 2013. again it is shell energy and noble america. we are asking for 19.5 supplemental to start but once the revenue stream is established the whole idea is to get it going with city resources layered in to replace the shell resources over time. the $13 million of city funds that's part of the 19.5, because six million is for other programs. the 13 million, 7 million into an escrow as collateral.

i will talk about when that might be used. 4.5 goes into a security account that takes care of the cash flow issues of the monthly billing and million half appropriated to mitigate potential costs. should we think we will get 90,000 customers, we won't have that at first, it will take us time to catch up. this is for that risk. we hope we will never have to spend. while we are appropriating, the goal is not to spend but the collateral and unlikely event of termination. what does that mean? what is the city liability? if the program is successful, obviously there is no liability. if the program is financially successful -- not successful, we just can't get the customers we can't get. we go to shell and say, this isn't going to work. can we go out and sell that power someplace else?

it is renewable power. with the rules in california there is such demand and the current rates are so cheap that we believe we could turn around and re-sell that power should this program not work. if for some reason that is not true we are liable up to $15 million should shell be unable to sell the power to someone else. that is the limit of that liability. that decides if we decide it is not viable and power rates in california change dramatically. if the program is financially successful and working and the board chooses to kill the program any way that is where liability is open and completely under our control. if you like to shoot yourself in the foot, we have the ability but you would have to intentionally want to do that. again, shell would only experience losss if the market changes in california and