Loading...
HomeMy WebLinkAbout03-31-2015 B3 Exploration of CCA ProgramCity of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number FROM: Michael Codron, Assistant City Manager SUBJECT: RESOLUTION SUPPORTING CITY PARTICIPATION IN THE EXPLORATION OF COMMUNITY CHOICE AGGREGATION (CCA), TOGETHER WITH OTHER JURISDICTIONS IN THE REGION. RECOMMENDATION Adopt a resolution in support of an inter-jurisdictional investigation into the feasibility of CCA and to communicate this support to the County Board of Supervisors and the other cities in the County. There is no obligation to expend City funds or commitment to establish or participate in a potential future CCA program. DISCUSSION Background In December 2013 City staff presented the City Council with a detailed report to educate the Council and community about CCA, and identify options available to the City to participate in an exploration of the feasibility of such a program in the region (Attachment 1, 12-3-13 Council Agenda Report).1 At this meeting, the Council stopped short of officially endorsing CCA exploration (because no resolution of support was adopted), but a majority of the Council expressed sufficient interest that two exploratory steps were taken, as follows: 1. Council Member Christianson was appointed to be the City’s representative on a CCA Exploration Advisory Committee supported by SLO Clean Energy. Council Member Ashbaugh was selected to be the alternate; and 2. The City Manager was authorized to allow the release of City power usage data to facilitate the exploration of feasibility. Council Member Christianson was able to attend all of the meetings that occurred in 2014 and has now been replaced on the Committee by Council Member Rivoire. Current Request Following the 2014 meetings it has become clear that the next official step is for a lead agency to step forward and formally organize and fund a feasibility study. For this to happen, it would be helpful for interested jurisdictions to step forward and declare their support. The City of San Luis Obispo can express its support by passing a resolution similar to the one passed in 2014 by the City of Morro Bay. The proposed resolution has no funding or other resources attached to it, but is a clear indication of the City’s formal desire to participate in the exploration process if it moves forward (Attachment 2). 1 Community Choice Aggregation (CCA) essentially leverages the aggregate buying power of individual customers in a city or county to secure a different mix of energy sources than the standard investor-owned utility (PG&E). CCA is often used to secure contracts with energy providers that use alternative power sources such as solar or wind. 3/31/15 B3 B3-1 Community Choice Aggregation Resolution Page 2 The proposed action is consistent with the Climate Action Plan (CAP) adopted in August 2012. A specific implementation item in the CAP calls for the City to: “Evaluate the feasibility of a regional Community Choice Aggregation program to procure electricity from renewable resources.”2 The proposed action is one of many steps that the City can take to advance this action item. Furthermore, the City is a member of the Air Pollution Control District’s Greenhouse Gas Stakeholder Group, which supports a regional CCA feasibility study. Should the Council adopt the resolution and direct a letter to be sent to the County and other cities in the County, staff from Administration will craft that correspondence for the Mayor’s signature. Supporting Documentation and Resources In addition to the information included in Attachment 1, SLO Clean Energy has provided the following links for those that wish to research the issue more deeply: 1. Introduction to CCA by Geof Syphers, CEO of Sonoma Clean Power https://www.youtube.com/watch?v=-pQLETdzcy4 (15 Minutes) 2. Recommendations on starting your own CCA from Geof Syphers https://www.youtube.com/watch?v=queqJZUODB8 (22 Minutes) 3. Videos submitted by community choice leaders at a Business for Clean Energy Conference in Silicon Valley http://biz4cleanenergy.com/new-energy-choices-silicon- valley/ CONCURRENCES The Utilities Department concurs with information included in this report. FISCAL IMPACT There is no fiscal impact associated with passing a resolution expressing interest in exploring a CCA. It is likely that a funding request would be made to the City in the future, should another jurisdiction take the lead role in the feasibility analysis, however the City makes no commitments with respect to funding by passing the proposed resolution. ALTERNATIVES 1. Do not pass a resolution in support of CCA. This alternative is not recommended because the next steps in learning more about CCA require jurisdictions like the City of San Luis Obispo to formally express their interest so that a lead agency might step forward to facilitate the exploration process and feasibility study. 2. Continue consideration to a future meeting. The Council can continue consideration of the draft resolution if more information is needed. In this case, direction should be provided to staff to conduct additional research and return to the City Council at a future date. 2 City of San Luis Obispo. Climate Action Plan: Pg.: A-4. 2012 B3-2 Community Choice Aggregation Resolution Page 3 ATTACHMENTS 1. 12-3-13 Council Agenda Report with background information about CCA 2. Draft resolution expressing the City’s support for participation in an exploration of the feasibility of CCA B3-3 THIS PAGE IS INTENTIONALLY LEFT BLANK ATTACHMENT 1 FROM: Carrie Mattingly, Utilities Director Prepared By: Ron Munds, Conservation Manager SUBJECT: COMMUNITY CHOICE AGGREGATION PROGRAMS (RELATED TO ENERGY GENERATION CHOICES) RECOMMENDATION Receive information regarding Community Choice Aggregation Programs. DISCUSSION Background In response to Council direction, the following report gives an overview of Community Choice Aggregation (CCA). In 2002 the California Legislature passed Assembly Bill 117, which permitted the creation of CCA programs. Under the legislation, a city, county, or Joint Powers Authority, may implement a CCA program. A CCA entity is allowed to set rates for its customers and choose the form of energy generation, enabling communities to choose renewable energy sources rather than the local utility’s mix of energy sources. CCA essentially leverages the aggregate buying power of individual customers in a city or county. Once formed, individual customers within a CCA service area can opt out of the CCA and continue to receive power from the local (usually investor -owned) utility. Although a CCA contracts for its own energy supply mixes, the local utility continues to own the electricity distribution infrastructure and provide electricity transmission, distribution, billing, and related customer services. This means customers of a CCA continue to pay the same charges for the power transmission and distribution charges as customers that remain with the utility. The CCA entity must pay the local utility for services provided to the CCA (such as meter reading and billing). In order to form a CCA, the law requires jurisdictions to submit an implementation plan to the California Public Utilities Commission (CPUC) that provides information on the proposed CCA’s organizational structure, rate setting procedures, and a description of the financial and technical capabilities of any third parties that will supply power to the CCA. AB 117 further stipulates that the CPUC shall ensure that no costs are shifted to the remaining customers of the incumbent utility as a result of the CCA customers’ departure from the electricity load served by the utility. The CPUC has instituted a Cost Responsibility Surcharge that CCAs must pay to incumbent utilities until shifted or “stranded” costs are paid off. The Cost Responsibility Surcharge potentially can affect the cost-competitiveness of CCAs because a high Cost Responsibility Surcharge must be recovered in the CCA’s rates. There is only one operating CCA in California, Marin Energy Authority; the rates in their service area are currently competitive with PG&E’s rates with some customers paying slightly less and others paying slightly more than PG&E customers. Meeting Date Item Number Dec. 3, 2013 SS1 B3-4 Community Choice Aggregation Page 2 Things to Consider – Potential Advantages of a CCA Program There are a number of potential benefits to having a public CCA entity provide electrical power rather than an investor owned utility: 1. Increased Renewable Energy Use: Because a CCA entity can select the type of power it provides to its customers, it can focus on carbon-free renewable power sources, and reduce its reliance on generation using fossil fuels such as gas or coal. 2. Local Economic Benefits: If the CCA entity were to focus on local renewable generation sources, the revenues for electrical service paid by residents in a region would remain in the area of benefit rather than be paid to the incumbent utility’s investors, thus potentially creating local jobs and improving the local economy. 3. Local Control: The governing board of the CCA entity would be comprised of local elected officials, so that residents could more easily influence decisions about the operation and priorities of the CCA entity. 4. Lower Financing costs: Because public entities are able to finance electrical generation facilities with tax-exempt bonds and do not have to pay dividends to shareholders, a public CCA program may, in the long run, be able to provide electrical power at a lower cost than an investor-owned utility. 5. Increased Customer Choice: A public CCA increases consumer choice, by giving customers an option of receiving power from the CCA entity or remaining with the incumbent utility. 6. Influence Conservation Programs: A public CCA could choose to undertake more aggressive energy conservation programs than the incumbent utility which would provide a community-wide benefit. 7. Implementation of City Policies: There are General Plan and Climate Action Plan policies that support use of renewable energy. 8. Provide for Small-Scale Renewables: A CCA can provide a market for small-scale renewable energy projects such as photovoltaics. Things to Consider – Potential Issues and Risks of a CCA Program The risks associated with CCA formation fall into two categories: Pre-formation risks and post- formation (operational) risks. Pre-formation Issues - Creating a CCA program will require a number of political, engineering, legal, and financial steps, including the development of a detailed implementation plan that must be submitted to and certified by the CPUC. The development work and the preparation of the implementation plan will require the hiring of expert consultants to perform necessary analysis including a feasibility study. B3-5 Community Choice Aggregation Page 3 The city received correspondence from the SLO Clean Energy coalition which indicated an opportunity to share costs for a regional CCA feasibility study between San Luis Obispo, Santa Cruz, Monterey, and San Benito Counties (Attachment, SLO Clean Energy Letter). The costs of the study and cost allocation are not detailed in the submitted letter although it states a CCA feasibility study can be over $200,000 for a single county. Other California counties have completed CCA feasibility studies, including Sonoma County which estimated the total start-up cost for a CCA in their county to be $1.7 million. Sonoma County’s study also indicates that $500,000 to $750,000 of the total cost may not be recoverable from CCA rates once in operation. The non-recoverable costs would include the feasibility study and the drafting and execution of the necessary formation related agreements (such as a Joint Powers Agreement). Once the decision has been made to initiate a CCA program, the entity will then need to begin taking steps to commence operations. Depending on how the CCA elects to structure its program, additional funds will be needed to finance start-up costs which would include but not be limited to the following: 1. Recruit and hire staff 2. Develop information and outreach materials 3. Establish a customer call center for inquiries 4. Prepare short and long term load forecasts 5. Develop capability or negotiate contracts for operational services (such as electronic data interchange with utility, customer bill calculations, schedule coordinator services, etc.) 6. Execute contracts for electric supply; identify generation projects and negotiate participation 7. Obtain financing for program capital requirements 8. Send customer notices and explain opt-out option 9. Submit notification of certification to the CPUC Post-formation Risks - The predominant cost of service variables and risks that might impact the CCA’s operational costs are: 1. The Cost Responsibility Surcharge (CRS) will vary year-to-year: The CRS is inversely related to the prevailing market price of electricity such that if market prices fall, the CRS will increase. To the extent the CRS increases and CCA program has locked in electricity prices through long-term contracts, the CCA customers’ total rates will increase. 2. Procurement Risks: This broad category of risks relates to the ability of a CCA to procure power at reasonable costs, to avoid significant under- or over-procurement, avoid a supplier’s ability to default on a supply contract at times when energy spot markets are high forcing the CCA to purchase expensive power, and the future success of the CCA at renewing power supply agreements. 3. Regulatory Risks: These risks consist of uncertainty in regulatory decisions by the California Public Utilities Commission that could adversely affect the costs that customers have to pay to take service from a CCA, such as exit fees paid by customers and bonding requirements for the CCA. B3-6 Community Choice Aggregation Page 4 4. Policy Risks: While all CCA members have a voice on a governing Board, no single city can control policy. Thus, due to the differing demographic, economic, and business composition relative to a regional body, the City might find that the interests of its citizens and businesses are not well served by decisions of the governing Board. 5. Customer Cost Risks: These risks consist of the uncertainty in exit fees, whether the CCA can continue to “meet or beat” PG&E’s costs of service, how a CCA will handle adding different types of customers in the future, and the uncertainty in costs that are passed through directly from the CCA’s power supplier to customers. This also includes the risk that the CCA may not be willing, or able, to provide low-income customers rates that will be no higher than PG&E’s. Community Choice Aggregation Programs in California CCA Programs have been authorized in California since 2003. The only CCA program currently operating in California was created in Marin County and began serving customers in May 2010. However, there are multiple other cities or counties exploring the feasibility and program requirements of establishing a CCA. The following is a summary and status of programs in California: Entity Status Milestones Additional Information Marin Energy Authority Operating Only operational CCA in California marinenergyauthority.com Sonoma Clean Power Initiating Projected to begin service in January 2014 www.scwa.ca.gov/cca/ Clean Power SF Initiating Working to finalize implementation plan cleanpowersf.org Monterey/Santa Cruz/ San Bonito Counties Investigating Counties and interested cities pass resolution of participation in May 2013 montereybaycca.org Yolo County/City of Davis Investigating Early stages of investigation City- council.cityofdavis.org San Diego County Very Early Stages of Investigation Exploring funding sources and other organizational issues sandiegoenergydistrict.org This is not an all-inclusive list; there may be other cities and/or counties investigating the formation of a CCA. Next Steps Should Council be interested in further exploring the formation of a CCA or expressing its support for such a venture, more fully understanding the exact cost of participating in a feasibility study and funding sources for such a study will be important. Some other items for consideration would be B3-7 Community Choice Aggregation Page 5 any electricity data access restrictions, collective community support for CCA formation, the current energy mix of PG&E, and a broader study of the successes/challenges experienced by other cities and/or counties who are doing this or attempted such an action. Exploration of the formation of a CCA is not currently on the work program of any city department. Undertaking such exploration would require a very significant commitment of interdepartmental staff resources and financial resources, not currently contemplated or budgeted. Thus, if the Council is interested in further studying the formation of a CCA, staff would recommend that Council consider options and priorities in the context of the City’s existing budget processes, whereby current Major city goal and work program impacts, workload re-prioritizations, and/or additional staff and financial resource needs can be evaluated in a comprehensive way. CONCURRENCES The Community Development Department concurs with the information provided in this report. FISCAL IMPACT The material provided in this report has been presented for information purposes therefore there is no fiscal impact associated with this report. ATTACHMENT 1. SLO Clean Energy Letter ..\CCA (MattinglyMunds) B3-8 ATTACHMENT 2 RESOLUTION NO. ________ A RESOLUTION OF THE CITY COUNCIL CONFIRMING CITY OF SAN LUIS OBISPO PARTICIPATION IN THE EXPLORATION OF COMMUNITY CHOICE AGGREGATION (CCA) WHEREAS, the San Luis Obispo City Council is committed to supporting actions that promote local economic benefit and job creation; and WHEREAS, the San Luis Obispo City Council is committed to promoting choice and competition for the benefit of its residents and businesses; and WHEREAS, the San Luis Obispo City Council is committed to increasing energy efficiency, and to supporting more broad availability and use of local renewable power sources; and WHEREAS, Community Choice Aggregation (CCA) is a program through which an energy district, represented by participating local governments within its jurisdiction, purchases electrical power on behalf of its residential and commercial customers; and WHEREAS, the electric distribution utility is an important partner, responsible for reliable delivery of power and enhancement and maintenance of grid infrastructure; and WHEREAS, Community Choice Aggregation, if determined to be technically and financially feasible, could provide substantial economic and environmental benefits to all residents and businesses in the City of San Luis Obispo; and WHEREAS, Community Choice Aggregation provides the opportunity to fund and implement a wide variety of energy related programs of interest to the community; and WHEREAS, it is intended for the CCA Exploration Advisory Committee (CEAC), to be an advisory group comprised of local agency staff, local elected officials or their designees, and members of the public with expertise in energy, finance, law and/or any other pertinent skills; with the charge to develop CCA feasibility information and to advise the San Luis Obispo City Council and participating local agencies; and WHEREAS, the City of San Luis Obispo’s adopted Climate Action Plan states that the City shall evaluate the feasibility of a regional Community Choice Aggregation program to procure electricity from renewable resources. NOW, THEREFORE, BE IT RESOLVED by the San Luis Obispo City Council that: 1. The San Luis Obispo City Council agrees to participate in an inter-jurisdictional investigation into the feasibility of Community Choice Aggregation (CCA), through a CCA Exploration Advisory Committee (CEAC), supported by SLO Clean Energy, to guide preparation of feasibility information without obligation of the expenditure of B3-9 ATTACHMENT 2 General Funds unless separately authorized in a future action by the San Luis Obispo City Council. 2. The San Luis Obispo City Council will appoint at least one designee and an alternate to participate as a member of the CEAC. 3. City staff is authorized to execute the appropriate documents to allow the city, CEAC, and its technical consultants to acquire energy usage load data from the electric distribution utility so it may be analyzed as part of the exploration process. 4. Adoption of this resolution in no way binds or otherwise obligates the San Luis Obispo City Council to establish or participate in a Community Choice Aggregation program. Upon Motion of , seconded by , and on the following roll call vote: AYES: CITY COUNCIL MEMBERS NOES: CITY COUNCIL MEMBERS ABSENT: CITY COUNCIL MEMBERS The foregoing resolution was adopted this day of , 2015. ____________________ Mayor Jan Marx ATTEST: ____________________ Anthony J. Mejia, MMC City Clerk APPROVED AS TO FORM: ____________________ J. Christine Dietrick City Attorney \\chstore7\team\council agenda reports\2015\2015-03-31\cca resolution\attachment 2 - resolution.docx B3-10 THIS PAGE IS INTENTIONALLY LEFT BLANK