this buildout timeline, i want to make sure you're reading it the way we intend. you can see the rows describe the actual activities, the resources we're investing in. the columns are related to the program year we're in. so, on launch day, the first day customers are enrolling in this program, we are maximizing their participation in existing energy efficiency programs. meanwhile, we're also at our desks developing new programs for energy efficiency. we are -- they already know how much we will pay them for any small-scale renewable electricity that they already have operating on their roofs or that they have invested in, but that they're not consuming at their home. that's the net energy metering part of the program. day one, that tariff is available to them. same thing for the go solar

s.f. program. they can take advantage of the go solar s.f. program from day one. feed-in tariffs, also a published tariff available to them on the day the program begins to enroll customers. meanwhile, we're also pursuing other activities associated with the larger scale renewables where we need to do some more development and design work and c-e-q-a work before we can actually bring projects on board. that's what you see reflected in years one, two, three, and deliveries happening in two, three, four, right? and the market purchases, that's happening from day one. and then we have that series of ongoing activities that are just part of providing good customer service and a good responsive program to our customer base. so, i want to make sure that we're not missing the point of how many of these local investment opportunities and activities are happening the

day the program launches. >> that all sounds good and i do think it would be helpful to understand leading up to launch date, you know, what are the decisions that need to be made and how we're going to really be able to kickoff on launch date with all these programs so we're really hitting the ground running. >> great. >> and also, we are already -- we're already having conversations with project developers. they're coming to us with ideas . and there's a lot we can do between now and launch date, you're right. >> great. that's what i want to hear. >> given the resources we have. any other questions on the buildout? then i'd like to move on to the rate-making options if we're done there. i think you've already heard about these trade-offs you have when you set rates for this program. you need to consider willingness to pay and fairness, the resource mix will influence the rates that you, that you set. the amount you want to set

aside for investment in the buildout will affect the rates the final shell power procurement rates and other costs like the administration and financing budget. right now our estimated range of rates is 11.14 cents per kilowatt hour and 14.5 cents per kilowatt hour. if you turn the page you'll see four scenarios that we've provided. in the second column there, and these are rates and associated resource mix and buildout revenues. the second column, you can see a rate case. i believe this is the scenarios you're familiar with from previous meetings with the s.f.puc staff. that shows a large reliance on

firmed and shaped shell power purchases, which has also been called bucket 2 resources, green energy resources, and then 10% of bundled green product. the rate that has been published in the newspapers that you're familiar with in that scenario, 14.75 cents, and there would be nothing left there, left to use for a buildout effort. >> what's the pg&e estimate of what they're going to offer? >> the latest article i saw pg&e was estimating its green rate would be -- its basic service rate plus 3-1/2 cents, more or less, which would bring it to about 11.5 cents. ~ >> so, about 3 cents less than what we would be offering? >> yes, in that scenario. also -- well, we can get into the details. there are some things we have concerns about because of how

the settlement describes how the rate would be -- >> rate concerns about the pg&e rate? >> about the pg&e proposed green rate. and barbara already mentioned some of that to you. there are three other scenarios there, and each one of them assumes that under the shell contract, the city purchases 85% renewable energy credits which are very inexpensive, they are considered -- they are considered the least green of the products that are consistent with california rules . but it's the only way that we would be able to ~ get the rate down and find some revenues for buildout. so, in that scenario 1 there, if you took all of the savings from bike rec's instead of firmed and shaped revenue -- energy products, there would be about $36 million in buildout funds over 4-1/2 years.

and that's the line towards the bottom that says additional funding 4.5 years. so, we would be able to collect about $9 million a year. but the rate in that scenario is still very high. in the next scenario, again, the resource mix would emphasize rec's, the purchase of rec's by shell. the rate, we split the savings between the rate and the need for some reserves for buildout. so, your rate goes down to 12.86 cents, and there is about $18 million that we would collect over 4-1/2 years for buildout. and then the third scenario is the lowest rate, 11.14 cents because it applies all of the savings in purchasing rec's to the rate instead of splitting it with the buildout.

and, of course, there are many other scenarios we could present to you with different types of resource mix. and if you'd like us to do that, we will. we're interested in something like the second scenario because we think it gets us closer to a rate, a rate that's competitive -- >> can you repeat that again? i just want to make sure. >> we're most interested in a scenario to rate and resource mix. so, we would come to you with something like a rate of about 12.68 cents with a little bit of room for reserves. >> say again what the pg&e today, what they're looking at. >> the last news article i saw pg&e was quoted as estimating

11.5 cent rate, assuming that there would be about a 3-1/2 cent premium over their basic rate which is right now just at about 8 cents. >> does that include any buildout? >> i don't know. i think their proposal has a lot of moving parts than ours does. >> right. >> if you can maybe say what the average bill impact would be because, you know, you've got to compare the average bill impact. >> because we've been able to lower the rate, the monthly bill impact would be just under $8 for our average users, which are pretty small. >> i guess my question is pg&e's -- >> oh, pg&e's? >> yeah. i can't speak for pg&e. i don't have the numbers. i think it will probably be $6 a month. >> that's tier 1? >> yes, that's tier 1.

>> most people at tier 1, [inaudible]. >> [inaudible]. >> about half, just under half. >> can we get verification on that? you had said that the pg&e rate assumed a $3.50 increment above their base rate. >> oh, a 3-1/2 cent per kilowatt hour above the base rate of 8 cents a kilowatt hour. again, the rate hasn't been set. there is a proposal before the california puc with a formula. and i guess what i'm trying to do, and what you may not be able to give me is on the green line ~ where it says that our lowest rate is 5.45. >> ~ >> um-hm.

>> what do we think the pg&e equivalent would be of that? >> i think about $6. >> a 2-1/2 dollar difference from what we know today? >> if we had an 11.14 cent rate, it would be lower than pg&e's green rate, the one they described in the recent news article. >> you're saying scenario 3 would be cheaper you think than pg&e? >> than pg&e's current estimate in the press. >> of their green rate proposed before the california puc. >> this is no incremental buildout, is that in 4-1/2 years? >> there would be no additional revenues in that jar yo to support the buildout. we would have to do that some other way. >> a bond issuance? >> yeah, bond issuance, relying on the market, using the $6 million we have to leverage market resources, third-party investments. before we could issue bonds. >> on the bond issuance

question, the last line -- the last row on the table has a possible bonding capacity which is the product of the head room that you create. and you had some discussion, that number is high, isn't it? >> it's complicated. and i'm going to let todd describe to you our bonding opportunity and constraints. >> so, the program is on average about $40 million a year. and of that $40 million a year, 30 million is to buy the green power. so, we have we are currently envisioning with the shell contract would be to buy that 4-1/2 years is one of the possibilities. ~ or we could also use that same $30 million and pay the mortgage on a renewable facility that we generate. and, so, that's really one of the decisions and that is also

encapsulated in the contract, that resource substitution clause. that could be an up side. so, from bonding capacity, the thing that matters the most under each of the scenarios, the ones at the higher rates are going to give you more capacity, more flexibility and allow you to bring on more customers faster and/or build things faster. and, so, that's really the key lever, the key lever, the bond. in order to sell the bonds, though, we need to have two years of paying same customers to prove that track record to borrow very low-cost money for the rate payerses and do the best we can and do right by the ray payers. ~ so, each of these scenarios at some future point we would be able to bond something. it's just that the lower the rate, the less you'll be able to bond and then build your own along the way. and, so, we can further perfect that.

whichever scenario you're leaning comfortably towards, we can sharpen the numbers and give you how fast we'd be able to build out. >> [speaker not understood] in the scenario 1, if you're creating additional revenues of 9 million a year at your dollar and a quarter per $10, that would be about 70 million bucks a year of bonding just from that increment? >> the trick is how much are you generating extra that you're going to generate every single year thereafter to pay a 30-year mortgage. so, that's the trick. and then we borrow money for the water department or the sewer department. we're borrowing under an indenture that says you have this certain revenue stream of paying same customers and we typically borrow money where the investors make us have a debt service coverage of 1.25 times. so, we have to have revenues that come in at a quarter over

just what the annual mortgage payment is. so, that's part of the math that goes in here. but in 67c.103 of the cases, there's going to be money to the degree we have paying same customers. the higher the rate it's going to be a bigger build out and the lower the rate will be a lower build out less quickly. >> and what we haven't come down to is whether the 360 million is not a reflection in that or not. >> the 360, i would say, is pretty accurate as far as upper bound range. so, the way i would disaggregate that, think about that is ongoing there's $30 million a year that's being able to generate and pay the debt service on a $300 million borrowing. and there is also some cash that's been collected up front over those four years as well that's going to be cash funding from the capital. so, i would describe it as total project. >> okay. we don't need to drive that to

closure at the moment. if you can provide me with a map because i'm still having trouble getting there. >> happy to do it. >> the main point being that the higher your rate is, the more bonding capacity you will create, the faster the build out program. the business about what we currently think the press releases show for the pg&e green alternative is very different than what we've been talking about. because we had been talking about an increment of about $4. >> that is correct. and, so, we had previously looked at when the press was reporting pg&e's initial, initial proposals what an average monthly bill of about $6 for tier 1 which was 43% of the customers, they were at around -- just around $4 a month for the tier 1. the latest version information that we're seeing and this is based on some preliminary analysis is it's going to depend a lot on the details of how they do their internal

power accounting to allocate costs either uniformly across all tiers of customers or if they somehow, somehow do it differently. we don't know the answer to that, but we're keenly watching because it will matter how we then market to the 43% of all san franciscans that are tier 1 and then the next 20% that are tier 2 because those two tiers are the vast majority of san francisco. >> it also determines whether or not we can say that we can provide a level of service that's at or below pg&e's price. >> it potentially makes our program and our marketing easier to the degree that they're doing these higher costs for their rate payers because it's easier to get to 11-1/2 cents for us than it was to get down to 8 cents. >> i just wanted to add i think

there are some ways -- and i'm looking into them with the staff -- that we can further economize to maybe shave a little bit off these rates. if we think we can do that, we'll present that to you. >> okay. >> what about these resource mixes? because it looks like all of a sudden our renewable purchasing of being, you know, becoming pretty reliant on rec's which in the early days was a good thing. and it seemed like, you know, what you propose to us is us sort of two opposite ends of the spectrum here. is there a way to increase the number, increase the shape, increase the rec's and play with the numbers? ~ so there's a little more -- >> here's a slide that shows a 10-45-45 mix. does that help because you have another option? >> do we have that here?

>> it's in the -- no, it's one we brought in case you asked that question. so, what it shows in the same format are some scenarios -- >> so, we don't have that in front of us? it's on the screen. >> it's not showing well right there. >> little too old to read those screens. >> is it on your screen there? >> what's the punch line? >> the punch line? the punch line is it's less additional funding for buildout at higher rates. [speaker not understood]. >> what's the rate? >> are you looking at this? >> i can't see it. it's not -- i'm looking at -- >> oh, i'm sorry. so, for example, under the scenario 2 where you have a 10% bundled product, a 45% purchases of firmed and shaped products, and the remainder rec's, the rate is 13.53 cents.

if you split the savings in order to get some reserve for buildout, and that number before you for 4-1/2 years is $12 million. >> so, maybe it would be easier we stick to the average bill impact because i think that's where, at least, i'm used to comparing everything. because you're jumping around and it gets kind of confusing. so, i guess the take away is that there are several variables that would determine the cost and you can play with each one, you know, so, endless possibilities. so, the question that we're asking is what is the appetite on the mix? do you want to go to the minimum and use the increase of, you know, the head room so we can

do buildout or do you want to increase the mix and do a little head room for buildout, but then that will impact the cost? so, how much the cost do you want to have? so, i guess for me, so that we can have direction, is what is the impact, the bill impact that you're seeking to accomplish? if you want it at par with pg&e, then we only have one option. if you want to go more, then we have different options. so, we need to know what's more important to you, increasing the mix, having more head room, or split the difference. and, so, i think that's what we need so that we can -- because the possibilities are endless. >> at the end of the day, what were the promises made to the voters about this proposal? that they would be less than pg&e [inaudible].

>> the same as. >> that's where the same as. isn't that the number that was made? >> and that was less or below aloepg&e's current brown power rate. but i guess pg&e is also having problems accomplishing that as well. >> barbara hale, general assistant manager for power. i think in the early days of the program policy statements, that was the objective, meet or beat the rate that was otherwise being offered to san franciscans by pg&e. given the method of recovering costs that the state of california requires for cca programs where if a customer leaves the utility service to go to the cca, they take some of the utility's costs with them. that's an incredibly heavy lift. add to that the fact that --

>> we shouldn't have made the promise, bottom line. [speaker not understood]. the promise was made on the basis of pg&e rates at that time, correct? >> so respectfully, commissioner, i think it wasn't a promise. i think it was a policy statement of the goal of the program. when it was initially conceived and captured in city resolutions in like 2004 -- >> let's not parse words. the impression that the rate payers on the street believe that a commitment was made for this program to initiate, then we would either meet or beat the pg&e rates. all i'm saying is that promise was made at a time but pg&e had no intention of coming up with a green product. is that correct? >> correct. and from that perspective, it's been a successful program. threatening to have it. now we have better options for san franciscans and better,

better climate achievements. >> excuse me. commissioner caen. >> i have asked the question twice, still haven't gotten an answer. in the initial way back when, was buildout part of the -- what do we call it? wasn't green. was buildout part of the idea? >> buildoutvx was part of the idea in the original underlying statutes, yes, ~ that the city adopted. talked about city-owned 150 megawatt wind project that was outside of the city, but it talked about in-city solar. it talked about the different resources that could be relied upon. and it wasn't -- the term local buildout wasn't used, but as it described the resources that would be relied upon, it was dependent on locally developed resources. >> and that would be concurrently with -- >> the meet or beat statement, yes. yes. that's the history on that. >> okay. i'm going to lose a quorum at 5 o'clock. so, i want to alert the

commissioners to that. plus we have an executive session where we need to take a motion. so, how much longer do we have on this topic? depend on the commissioners and those who -- >> i just have one last comment, i think, and summary statement. and i appreciate the general manager summarizing because i do think -- i guess my hope was that we would be able to find a sweet spot somewhere that was able to make this program competitive with pg&e and whatever that means, based on probably survey results. we've been out there, we've surveyed the market and we've gotten information on what people have the palate for. so, this competitive piece of cost is paramount to success. but also with the greenest product mix possible, the greatest resource mix possible. so, you know, to front load a possible for bundled or renewable portion, the greatest

amount of buildout as we can do to keep the rates down and to keep the mix as pure and green as possible. and understand that we need to do some cost recovery as well. and those are sort of the four main pieces. somewhere in there, there is a price that we will be able to come up with while maximizing those elements. i mean, that was sort of my hope. then we would get a plan that would say after year one we would be able to increase our green amount, our resource mix, improve our resource mix. after year two we will up the local build out piece because we will have generated enough money for it. ~ after year 3 we would be reducing the rates because we'll have our own system, what have you. but that's really what i want to hear a recommendation on. what is that -- and maybe there's two options, but what -- you know, how good can we get and still remain competitive and make this program a success. >> and you want some goals,

explicit goals. >> and a plan for how to get there. i mean, i think the goals have been put out there. >> i don't think they can do that just because of the var iance of the market and because we don't know what products shell will be able to come forward with during those 4-1/2 years. and if we find other products, how will we make them? how would we makeup the difference, and whether that would push us to a subsidyization issue, i don't think that's what the rate payers had in mind. so i think those are all important questions that were raised. >> we all agree with you. it is hard finding that spot that sort of maximizes all the good stuff and minimizes the -- >> yeah. and maybe there will be some variables that we just cannot pin down. and when we leave some opening for that, but to be able to then say, here's really the best we'll be able to do and here's some real -- it is known. >> i think the middle ground is

the scenario, too, but you're right, we have to purchase rec's if we go that route. >> i think it would be helpful for you to e-mail us that chart that you're referencing now so we have our product up to date. >> any other scenarios you'd like us to run in terms of resource mix? >> i think that's up to you to let us know all the scenarios that are available that reach the conclusion that the commissioner vietor and those of us solar in respect to how to move forward. ~ share i don't think we can be productive unless we know what we're talking about. >> this has been real helpful having this chart. i would like to have to* see the 10-45-45 on here as another option because that addresses a resource mix really more squarely. ~. and i would like to see kind of pg&e propose what we know today so that we can really have something to compare to so that

there's something that's really laid out. and then in the timeline, something that says we have to bite the bullet and go with a more [speaker not understood] mix. but by year 2 we'd be able to improve the mix or what have you. that's why i think the timeline and plan is really important in terms of this. >> serving as the commission, i'm just aware that we have become voracious readers by requirement. so, whatever information you want to give us, believe me, compared to the environmental impact reports we had to go there through, this is nothing. go ahead. >> just one comment. ~ the change in our understanding or best guess at the moment about what pg&e's green alternative is, that uncertainty is a huge problem. >> yeah. um-hm. >> when we were looking at a $4 incorrectverth for the pg&e green alternative, the logic flowed pretty easily from that. ~ that our cheapest version would still be more expensive than theirs and that's a loser.

and in order to create some differentiation so that we have a product that's better that we can market, we would have to increase the rates even further to create a buildout program that was attractive in the marketplace. so, that logic was pretty straightforward and that would lead me to where you ended up. if pg&e is sitting at $6, that throws that logic out the door. >> yeah, pg&e would be today at $6 or so. >> right. and it just makes it very difficult to make rate decisions in that kind of environment where we have no idea what they're going to be doing because they are the competition. >> yes. >> and they will compete. >> how soon are they coming out with their plan? >> they have to take it before the commission for approval which would take -- >> california public utilities commission. >> yes, the california public utilities commission. right now it's a period of

receiving protests from the commission. then the judge has to either decide to hold hearings or write an ex parte decision approving or rejecting this proposal. i would estimate, after 16 years as an administrative law judge, that would be -- the soonest there would be a decision would be three months, i'm guessing because the puc, the california puc's own procedural requirements can be much longer. >> so, can you present to us the next step, hopefully before our last meeting, a scenario that is going to assume a $6 rate for pg&e and where we can be in striking distance? i think that -- hate to even say it, a local buildout is such a priority that i think the rec -- the bundling piece should probably be a lesser of a priority. but i would want to see, you know, a pln