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CCA Pilot ProjectUpdate
Escondido, California
September 14, 2007
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Topics
• Project Overview• Renewable Energy Supply: Highlighting Marin
County’s Current CCA Initiative• Process & Timeline for CCA Implementation• Key Issues for Implementation
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CCA Pilot Project Overview
CCA Pilot Project
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CCA Pilot Project Participants
•Berkeley•Emeryville•Oakland•Pleasanton•Richmond•Vallejo
•Beverly Hills•West Hollywood•San Marcos•Marin County•Los Angeles County•San Diego County
Total Peak Demand: 2,500 MW
Total Annual Energy: 12,000 GWh
Approximately 8% of current load of PG&E, SCE and SDG&E
Renewable Energy Target At 40%: 4,800 GWh or 1,800 MW
Berkeley
3%Beverly Hills
5%
LA County
36%
West Hollywood
3%Marin County
9%
Emeryville
1%
Oakland
12%
Pleasanton
4%
Richmond
4%
Vallejo
3%
San Marcos
4%
San Diego County
16%
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Project Scope & Status
StatusTask
Phase 2:
FutureFinal Evaluation
Mostly CompleteImplementation Plans
FutureTemplate Application and Outreach
FutureMonitor Implementation Plans At CPUC
CompleteRenewable Resource Development Roadmap
Mostly CompletePilot Communities Decision Support
CompleteRecommendation To Pilot Communities
CompleteBase Case Evaluation
CompleteInitiate Pilot Communities’ Participation
CompletePilot Communities Selection
Mostly CompleteMonitor CPUC Proceeding
Phase 1:
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Project Approach
Phase 1 Feasibility Assessment:Compares Rates Under a CCA to the Utility’s Rates
1. Request information from utility regarding customers andelectricity sales for primary customer classifications.
2. Use statistical hourly load profiles and load projections to modelhourly electric loads for customers within the municipality.
3. Assemble prototypical supply portfolios with mix of powerpurchase contracts, renewable purchases, generation and shortterm purchases.
4. Layer in costs for administration, operations, metering, billing,exit fees (CRS) and other fees charged by the utility.
5. Compare total cost of CCA service to costs incurred under statusquo (utility service – generation rates).
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Utility Rate Projections Are Benchmark For CCAPerformance
SDG&E Electric Rate History and Forecast
(Total System Average Rate)
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* SDG&E rates have increased at an average annual rate of 2.4% since 1980 (Source: CEC).* Study used a projected utility rate of increase of 2% (red line) through 2024 based on
known utility resources and assumed efficient utility procurement at market prices.* Less conservative utility rate assumptions would significantly improve the CCA rate
comparisons made in the study; e.g., use of a 3% (yellow line) average utility rateincrease would double or triple the financial benefits of forming a CCA in many cases.
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Customer Mix and Usage Characteristics Are ImportantEconomic Factors
• Jurisdictions with greater prevalence of commercial/industrial customers willhave a better chance of offering lower rates.
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R e s i d e n t i a l S m a l l
C o m m e r c i a l
Medium and
Large C&I
S t r e e t
L i gh t i ng
A g r i c u l t u r a l
SDG&E Average Generation Rates - 2007
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Summary of FindingsCCA Generation
• Local governments can offer lower rates by using capitalstructure advantages available to public agencies:—Access to supply resources financed with tax-exempt
debt—No equity return/profit—No taxes
• Capital structural advantage can reduce average costs byapproximately 15% for the same asset.
• A benefit can be obtained by partnering with andprocuring power from another public agency, such asSCPPA or NCPA.
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Summary of Findings (Cont’d)CCA Wholesale Electric Purchases
• For the majority of participants, significant cost savings arenot achievable by simply purchasing wholesale power onbehalf of retail customers from the same sources as IOUs.— Cost responsibility surcharges neutralize most known difference
between utility rates and competitive market prices.— A CCA would incur administrative costs and incremental utility fees
of 3% to 5% that must be recovered through its rates.
• A CCA would avoid utility supply contracts or generationcosts incurred after the CCA assumes procurementresponsibility for its customers.— Avoidance of future utility procurement and/or generation
investments has significant value.— Rate stability and predictability can be achieved through longer-term
contracts.
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Summary of Findings (Cont’d)CCA Renewable Energy Cost Impact
• Increasing use of renewable resources has a very minorimpact on CCA generation rates.—Study assumed renewable premium of 1.8 cents per
kWh or 40% relative to fossil fueled generation.—Evaluated purchasing from a mix of wind (66%),
geothermal (25%), biomass (8%) and solar (1%)resources.
—Doubling the renewable energy used to serve theprogram to 40% was found to increase overall customerrates by 1% to 2%.
—CCA financing of renewable assets/contracts caneliminate cost increases associated with renewableenergy.
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Study ResultsAchieving 40% Renewable Energy Through CCA – Asset Based Supply Strategy
Under study assumptions,CCA costs are from 1% to11% lower than the IOU’srates (on average) over the20-year study period.
Access to cost-basedrenewable power, financedwith tax-exempt debt,provides savings.
Savings over study period equals the difference between total CCA cost of service and theIOU’s generation charges over the 20-year forecast period, expressed as a percentage of totalelectric bills.
-8%
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Build 40% Renewable
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Larger CCA Programs Offer Better Economics
• AB 117 provides that cities and counties can join together to offer CCAservice through creation of a joint powers agency.
• Larger programs offer several advantages:— Reduced overhead and startup costs— Load diversity benefits— More opportunities for generation and potentially transmission
investment• Can improve CCA margins by 20% to 30% relative to individual
implementation.
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Renewable Energy Supply:Highlighting Marin County’s Current
CCA Initiative
CCA Pilot Project
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• Maximize renewable energy supply, subject to thefollowing constraints/terms:— Program generation rates should remain at or below PG&E.— Maximize development of local renewable resources.— Develop rate tariff that allows Program participants to pay
premiums for increased renewable energy consumptions (GreenTariff).
— Begin operations by purchasing power from existing generatingfacilities and contracting for operating/administrative servicesfrom an experienced, financially stable supplier.
— Seek to partner with an experienced public power developer topurchase a minimum of 100 MW of renewable power from newrenewable generating facilities as soon as practical (e.g. by 2013).
Marin CCA: Power Supply Plan Principles
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• Could maintain approximate rate parity by starting at25% and increasing to over 50% in 2013.
Marin CCA – What Renewable Percentage Could Be Achieved With Rates at or Below Utility?
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Marin Renewables Utility Renewables Marin Rates Utility Rates
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• Including renewable energy in a CCA’s power supplyportfolio will impact program generation rates.
• For the Marin CCA, determining this balance has thefollowing implications:—Accepting a level of renewable power supply below
51% in 2013 (and beyond) will likely result in a slightcost savings relative to Utility.
— Increasing renewable power supply above 51% in 2013(and beyond) will likely result in additional costsrelative to Utility.
Marin CCA – Implications of Analysis
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Does Renewable Energy Consumption Mitigate Natural Gas Price Risk?
• If natural gas supplies are significantly reduced (pricesincrease), potential price risk is effectively mitigated byincreasing amounts of long-term renewable energypurchases.
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• Renewable generation is not subject to the fuel pricerisk associated with conventional generating resources.
• Fuel price risk is eliminated for the portion of a supplyportfolio that is met by retained renewable generatingcapacity and/or long-term renewable energy contracts.
• Meeting program energy supply with intermittentrenewable resources presents operational challenges.
Implications of Increased Renewable Energy Consumption
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Process & Timeline for CCAImplementation
CCA Pilot Project
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CCA Implementation Approaches
• Cities and counties electing to offer CCA to theirconstituents can choose to organize in one of the followingways:—Become a CCA directly by enacting an ordinance (single
City/County pursues CCA independent of others)—Pass an ordinance to offer CCA through participation in
a Joint Powers Agency (multiple Cities and/or Countiesjointly offer CCA within their collective jurisdictions)
• The CCA entity (City, County or JPA) would adopt anImplementation Plan and register as a CCA with thePublic Utilities Commission.
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CCA Implementation Timeline
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
January 2007 April 2009
Complete Feasibility Study(30-90 Days)
Establish Basic Program Goals
and Objectives (30-90 Days)
Develop Business Plan(90-120 Days)
Develop Draft ImplementationPlan (30-60 Days)
Prepare, Publish andEvaluate RFP/RFQfor Program Energy
Supply (90-120 Days)
Develop Draft Governance
Documents (JPA, if applicable,and CCA Agreements: 90-120 Days)
Form JPA (Coincides withDocument Development Timeline)
Negotiate with Potential
Program Suppliers andSign Power Supply
Contract (30-60 Days)
Finalize Implementation Planand Submit to CPUC (30 Days)
CCA Registration (30 Days)
Commence ServiceDelivery
CCA Implementation - Key Milestone Schedule(Monthly Time Intervals)
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CCA Implementation Issues
CCA Pilot Project
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Understanding Potential Risks of a CCA
Status Quo• Uncertain rates• No local control• Profit centered decision-
making• Minimum RPS compliance
(20%)
Community Choice• Rates may exceed IOU in some
years (generally +/- 5%)• Potential IOU opposition• Customer willingness to
participate• Supplier performance• Political accountability
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Implementation Issues
The following implementation issues are discussed and/or resolved in boththe Business Plan and Implementation Plan, providing a CCA withmultiple opportunities to review, revise and refine its approach to eachissue:
• Governance— City Council— JPA Board
• Organization— Internal staffing vs. third party contracts— Roles during startup vs. long term
• Ratesetting— Policies— Rate design— Process, including customer notice and input— Customer rights and responsibilities
• Financing— Startup activities, staffing, utility fees, systems— Working Capital— Generation investments
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Implementation Issues (Cont’d)
• Contracts— JPA Agreement— Supplier Agreements (electric supply, customer services)— Utility Agreements
• Resource Plan— Sales forecast, phasing, opt-outs— Supply— Renewable energy— Reserves— Demand side resources
• Risk Management— Allocation of risk among customers and third parties— Plan for program termination
