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HomeMy WebLinkAbout9/18/2018 Item 14, Read D kc_J City of San Luis Obispo, Council Memorandum DATE: September 14, 2018 TO: City Council FROM: Robert Hill, Interim Deputy Director, Office of Sustainability VIA: Derek Johnson, City Manager PREPARED BY: Chris Read, Sustainability Manager SUBJECT: Item 14 - Community Choice Energy Public Hearing Updated Information This memo provides updated information on two Community Choice Energy (CCE) related items: 1. California Public Utilities Commission (CPUC) Proceeding regarding the Power Charge Indifference Adjustment (PCIA); and 2. September 11, 2018, City of Morro Bay City Council, CCE Study Session summary. PCIA Proceeding As noted in the Council Agenda Report for Item 14: “The PCIA is one of the most critical variables in projecting future CCE program financial viability. The PCIA is an exit fee charged by investor-owned utilities to customers that switch to another provider of electricity generation service through direct access or community choice aggregation. The fee is designed to cover above-market costs from contracts that the utilities entered into but no longer need and cannot sell in the market for the price they paid. The California Public Utilities Commission has an open proceeding, the PCIA Rulemaking Proceeding R.17-06- 026, intended to make changes to how the fee is calculated. The final outcome of this proceeding is expected to be known on September 13, 2018 but may not be known until October. If the CPUC issues a ruling on the PCIA on September 13, 2018, staff will provide an assessment of the ruling’s impact on feasibility via a written addendum to this report and presentation at the September 18, 2018 City Council meeting.” Ahead of the the September 13, 2018 CPUC meeting, Commissioner Peterman held the PCIA items (#31 and #31A) until the September 27, 2018 meeting. Given this timeline, staff has worked with the City’s technical consultant, The Energy Authority (TEA), and outside counsel to develop contingencies, should the outcome of the ruling render a local CCE program financially infeasible. The following contingencies provide a path for continuing with the program’s forward momentum on the current timeline, while allowing for no cost and no risk “offramps” should the CPUC PCIA ruling render the program financially infeasible: Item 14 - Community Choice Energy Public Hearing Updated Information Page 2 1. TEA has agreed to “pause” transitioning to Phase II of the work program until the CPUC has issued a ruling on the PCIA. This means that the “go/no go” decision point triggering City responsibility for deferred time and material costs to TEA would be not occur until after the ruling. Should the City elect to not move forward based on the PCIA ruling, it would not be responsible for repaying TEA for work completed to date. 2. Should the CPUC further delay of the PCIA ruling beyond September 27, the City will formally request a waiver from the CPUC allowing for submittal of the Implementation Plan after January 1, 2019, while still being allowed to begin service in 2020. It is not known if the CPUC would grant the waiver. 3. Staff has conferred with outside counsel regarding the ability to cancel the CCE ordinance. If a negative PCIA decision occurs on September 27, staff could alert Council, who could then “pull” the second reading of the ordinance from the October 2, 2018 Consent Agenda and vote against adopting the ordinance. If a negative PCIA decision occurs after September 27, Council could simply adopt an Ordinance in the future rescinding the CCA Ordinance. 4. Staff has conferred with outside counsel regarding the ability to dissolve Central Coast Community Energy (CCCE) joint powers authority (JPA). To dissolve CCCE, consistent with Section 6.4 (Mutual Termination) of the agreement (Council Agenda Report Attachment C), the Board of Directors could vote unanimously to dissolve the agency. City of Morro Bay City Council CCE Study Session Summary As noted in the Council Agenda Report for Item 14: Staff will be present at the City of Morro Bay CCE study session on September 11, 2018 and will ask Morro Bay’s City Council to communicate intention of proceeding and to provide any requested changes to the JPA. Due to the potentially dynamic nature of this coordination, staff anticipates supplemental written information to be provided as an addendum after this report has been posted to the public. This information will be made publicly available on the City’s website and presented during the presentation at the City of San Luis Obispo City Council meeting on September 18, 2018. City of San Luis Obispo staff attended the September 11, 2018 meeting of the Morro Bay City Council, which included the same information that was provided to the City of San Luis Obispo City Council at its study session on September 4, 2018. The City of Morro Bay’s Council unanimously expressed support for the proposed path of creating a JPA with the City of San Luis Obispo and submitting in Implementation Plan by the end of 2018 to begin serving customers in 2020. Notable feedback provided by the City of Morro Bay City Council included a request for a minor edit to the JPA agreement and a proposal for sharing exposure to start-up credit risk. Item 14 - Community Choice Energy Public Hearing Updated Information Page 3 Requested Joint Exercise of Power’s Document Edits The City of Morro Bay requested two minor edits to the JPA agreement:  Edit Request 1 (Recital C). C: Carrying out programs to increase energy efficiency reduce energy consumption  Edit Request 2 (Section 2.4) The purpose of this Agreement is to establish an independent public agency in order to exercise powers common to each Party to establish and operate a CCE Program that achieves long-term GHG emission reductions by offering clean, cost effective and price stable electricity to residents, businesses, and agricultural producers, while carrying out innovative programs to increase customer energy efficiency reduce customer energy use, substantially increase local renewable energy production, and power the local transportation system. To that end, CCCE will study, promote, develop, conduct, operate, and manage energy, energy efficiency and conservation, and other energy-related programs, and to exercise all other powers necessary and incidental to accomplishing this purpose. Without limiting the generality of the foregoing, the Parties intend for this Agreement to be used as a contractual mechanism by which the Parties are authorized to participate in the CCE Program, as further described in Section 4.1. The Parties intend other agreements shall define the terms and conditions associated with the implementation of the CCE Program and any other energy programs approved by CCCE. It is staff’s opinion that the requested edits are reasonable and agreeable. Staff recommends that any motion made by Council to adopt the JPA include direction to update the agreement with these edits Support for Shared Financing and Responsibility of Deferred Compensation Risk The City of Morro Bay City Council also provided a proposal for shared financing and responsibility for deferred compensation risk. The proposal discussed provided for Morro Bay providing credit backing for 20 percent of the financing based on Morro Bay’s electricity load relative to San Luis Obispo’s electricity load. Under an “80/20” split, and assuming the $1,100,000 startup capital need included in the TEA technical study pro forma, the City of San Luis Obispo would provide credit backing for $880,000 and the City of Morro Bay for $220,000. Specifics around potential financing approaches and packages will be brought before Council in late 2018 or early 2019. If you have any questions, please contact Chris Read, Sustainability Manager at (805) 781-7151 or cread@slocity.org.