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HomeMy WebLinkAboutStaff Report 4.B 12/15/2014 Staff Report - Attachments 1 and 2DATE: December 15, 2014 TO: Honorable Mayor and Members of the City Council through City Manager FROM: Scott Duiven, Senior Plaimevi�� SUBJECT: Resolution requesting that the Sonoma Clean Power Authority Act as Community Choice Aggregator on behalf of the City and Implement the Sonoma Clean Power Community Choice Aggregation Program within the City of Petaluma; and, Introduction (First Reading) of an Ordinance Authorizing the Implementation of a Community Choice Aggregation Program. RECOMMENDATION It is reconmiended that the City Council: 1. Adopt the attached Resolution Requesting that the Sonoma Clean Power Authority Act as Community Choice Aggregator on behalf of the City and Implement the Sonoma Clean Power Community Choice Aggregation Program within the City of Petaluma; and, 2. Introduce the attached Ordinance Authorizing the Implementation of a Community Choice Aggregation Program. BACKGROUND Historically, Pacific Gas and Electric Company (PG&E) has provided for the production, procurement, and transmission of electricity to Petaluma residents and businesses. This includes related services such as billing, customer service, and emergency repairs. PG&E is a for-profit company, under the regulatory authority of the California Public Utilities Commission (CPUC) and other state agencies. In 2002, California Assembly Bill 117 authorized cities and counties to purchase and/or generate electricity and related energy services for residents and businesses within their jurisdictions through a Community Choice Aggregation (CCA). A CCA is the means by which local governments instead of the investor-owned utility can provide commodity electricity services to their constituents. The ability to create CCAs was originally in response to the state's electricity crisis when volatile prices and uncertainty in supplies were the driving concern. Since then, environmental considerations related to electricity supply have become a driving factor, particularly with respect to reducing greenhouse gas emissions (GHGs). In 2008 the Climate Protection Campaign (more recently, the Center for Climate Protection) prepared the Sonoma County Community Action Plan which introduced the formation of a Community Choice Aggregation as a means of reducing greenhouse gas emissions in Sonoma County. In 2011, the Sonoma County Board of Supervisors authorized the Sonoma County Water Agency to explore the feasibility of forming a CCA through a steering committee comprised of City Council members, City Managers and staff, local business leaders, activists, and other interested parties. In December 2012, the Sonoma Clean Power Authority was created for the purpose of establishing a CCA. In 2013, the Water Agency released a detailed implementation plan and began the process of forming Sonoma Clean Power (SCP). On May 20, 2013 the Petaluma City Council heard a presentation from Sonoma Clean Power and was asked to consider joining the community choice aggregation effort along with the County of Sonoma and the other cities in Sonoma County. The City Council chose not to take any formal action on the matter and to revisit the matter at a future date. At the time, Petaluma, like many of the cities, expressed concerns about the operations, costs, pricing, and implementation process of forming a CCA for Sonoma County and expressed the need for more time in malting a decision as to whether or not to join. In 2013, the cities of Santa Rosa, Sonoma, Windsor, Cotati, and Sebastopol joined the County of Sonoma as participants in Sonoma Clean Power and in 2014 Cloverdale approved the transition to SCP. Healdsburg already operates its own municipal electrical utility and is not eligible for SCP service. Sonoma Clean Power began operations on May 1, 2014. On November 25, 2014 Rohnert Park decided to join SCP, leaving Petaluma as the last city to make a decision on joining. Petaluma's deadline to join SCP, without incurring costs, is January 31, 2015. The deadline is to ensure that SCP has adequate time to negotiate with potential power suppliers, to ensure adequate power to serve customers in participating cities, and to allow time to file all of the necessary paperwork with the Public Utilities Commission. Additionally, it costs the same amount to expand the program for one city as it does to expand to three cities, so there is an issue of efficiency in grouping the entry of the remaining cities at one time. As part of its goal to reduce greenhouse gas emissions, Petaluma's General Plan 2025 Policy 4- P-28 states: "Prepare a feasibility report for the City of Petaluma forming a Community Choice Aggregation (AB 117 permits any city or county to aggregate the electric loads of residents, businesses and municipal facilities to facilitate the purchase and sale of electrical energy) as a way of supplying renewable energy to the community." As the CCA has already been formed, the focus of this staff report, consistent with the City Council's Goals and Priorities for 2013- 2015 is to "conduct a technical merit review of Community Choice Aggregation," in this case Sonoma Clean Power. DISCUSSION The discussion below, along with the attachments to this report, attempt to address the many comments and questions heard from the May 2013 Sonoma Clean Power presentation to the City Council and comments submitted from the public prior to and since that meeting. Since SCP is now up and operating, many of the questions regarding power supply, rates, and governance have been answered and can be found in the accompanying attachments to this report. These attachments are not the sum of all documents submitted to the City on this subject since May 2013; only those that provide factual information the Council may find the most useful in deciding to join SCP are provided here. What is Sonoma Clean Power? Sonoma Clean Power is a locally -run, not-for-profit public agency formed to implement a Community Choice Aggregation program to provide electricity in Sonoma County. Sonoma Clean Power is guided and governed by a Joint Powers Agreement (.TPA) that establishes SCP's basic policy framework. The .TPA is attached to this report (Attachment 3) and the stated purposes include: 1. Reducing greenhouse gas emissions related to the use of power in Sonoma Comity and neighboring regions; 2. Providing electric power and other forms of energy to customers at a competitive cost; 3. Carrying out programs to reduce energy consumption; 4. Stimulating and sustaining the local economy by developing local jobs in renewable energy; 5. Promoting long-term electric rate stability, energy security, and reliability for residents through local control of electric generation resources. SCP has made progress on its first two goals. Sonoma Clean Power has successfully launched two programs for its customers. CleanStart, the standard service for its customers, offers energy with greenhouse gas emissions 34% below those of PG&E and rates about 5% below PG&E. The EverGreen option provides customers with a greener option, with greenhouse gas emissions 84% below PG&E, at rates approximately 13% higher. The latter three goals have not received as much focus during SCP's start-up phase. However, recent procurements of local clean energy including an expansion of geothermal energy purchases from the Geysers from 10 MW to 50 MW in 2018 have begun to address these goals. SCP also recently announced a partnership to fund a 1 megawatt (MW) solar project near Cloverdale as part of its ProFIT program. The ProFIT program is a feed -in -tariff program that allows local renewable projects under 1 MW to sell solar energy to SCP under a standard 20 year contract. In addition, SCP entered into a contract with a solar energy producer in the Central Valley to provide 70 MW over 20 years, with service beginning in 2016. While not all local, these types of renewable sources increase demand and capacity for cleaner energy and help reduce GIIG emissions associated with fossil fuel based generation. In addition, with fixed pricing, these longer-term contracts for renewable energy will provide price stability for this portion of SCP's energy portfolio. In addition to the large scale procurements, both SCP and PG&E currently offer programs aimed at promoting small-scale local solar energy production. SCP has developed the NetGreen program to allow customers, similar to PG&E, to spin their meters both forward and backwards. For the energy produced up to the amount used, PG&E provides a credit at PG&E's retail rates. SCP provides the same credit plus 1 cent/kilowatt hour (kWh), creating an additional incentive for solar production and enrollment with SCP. In addition, surplus solar production is compensated at the full retail generation plus 1 cenUkWh for amoral surplus; this compensation ranges between 12 and 23 cents/kWh. This compares to PG&E which allows its customers to request a payment for their net annual surplus and to receive the wholesale cost for the net surplus, typically ranging between 4 and 6 cents/kWh. The attached Draft Resource Plan outlines 3 SCP's current programs/procurements and weighs them against SCP's stated goals (Attachment 4). Joint Powers Agreement The Sonoma Clean Power Authority (SCPA) is a new public agency, formed to implement a Community Choice Aggregation program. The operations of this CCA business enterprise is known as Sonoma Clean Power. SCPA is governed by a Board of Directors comprised of local elected officials whose jurisdictions have opted to participate in the CCA. The operations are managed by a Chief Executive Officer and General Counsel, a Business Operations Committee, and a Ratepayer Advisory Committee, all of whom are supported by staff, technical consultants, and service contracts as needed. The SCPA is currently governed under the Second Amended and Restated Joint Powers Agreement dated Judy 25, 2013 (Attachment 3). Staff asked SCP if there are any impending changes to the current Joint Powers Agreement being discussed by the Board at this time of which the City of Petaluma should be aware. There are currently a couple of issues that the Board will consider in 2015 after Petaluma votes on participation. The issues include: ® Under the Recitals, one of the purposes of the JPA includes "Promoting... energy security and reliability..." yet SCP has no control over grid management, grid security or power reliability. Consequently, SCP staff is recommending that the Board review this purpose. ® Section 2.4 allows the formation of a subsidiary corporation, which was originally included to explore the option of SCP's customers benefitting from the federal tae credit for renewable power systems. SCP now has reason to believe that they cannot effectively form this type of subsidiary corporation and are recommending the Board revisit this item. Neither of these issues appears reason for Council concern or an impediment to joining SCP if the Council is otherwise inclined to do so. Each participating jurisdiction holds one seat on the Board of Directors. In most instances actions of the Board require the affirmative vote of a majority of Directors present at a meeting. However, there is a provision for weighted votes based on each jurisdiction's energy use. Weighted voting can be called by any Director but is limited in scope. Any item to pass must first pass with the majority of the popular vote (unweighted), regardless of the result of a weighted vote, limiting use of weighted voting to attempting to veto an item. No single Director can veto an item regardless of voting shares. A veto requires a minimum of two `no' votes. Based on the weighted shares, this would give Santa Rosa and Sonoma County a stronger position with respect to veto power as no two other jurisdictions could combine voting shares to veto. With Rohnert Park's recent decision to join, Petaluma's voting share would be 13 percent. Voting shares for all jurisdictions are shown in the table below: 4 SCPA Voting Shares by Jurisdiction Energy Usage Voting Shares Cloverdale 39,178,811 1 Cotati 35,225,135 1 Petaluma 350,340,984 13 Rohner[ Park 190,927,012 7 Santa Rosa 917,356,138 34 Sebastopol 46,269,378 2 Sonoma 70,456,332 3 Windsor 109,156,425 4 County Unincorporated 962,970,050 35 Sonoma County 2,721,880,265 100 Joining Sonoma Clem: Poiver For Petaluma to join Sonoma Clean Power, the City Council is required to adopt a resolution (Attachment 1) and an ordinance (Attachment 2) requesting that the Sonoma Clean Power Authority act as the Community Choice Aggregator on behalf of the City and also requesting implementation of the program in Petaluma. The City Council will also need to designate both a representative and an alternate to represent the City on the Board of Directors of the Sonoma Clean Power Authority, although that designation need not be made immediately. Appointments can be made with all other Council appointments in January. If Petaluma decides to join, roll-out to customers would be in the summer of 2015. Historically, PG&E has been the default power provider to Northern California customers. By law, a Community Choice Aggregation is structured as an `opt ouC program. When a community approves participation in a CCA, customers within that jurisdiction are automatically enrolled in the program. Customers are then given the opportunity to opt out and stay with the investor- owned utility for energy services, in this case PG&E. During the initial launch within a community, customers receive 4 notices over a 4 month period (60 days prior to start of service and 60 days after the start of service). During this initial launch, there is no cost to customers to opt out. After the initial launch, Sonoma Clean Power will charge a $5 administrative fee for residential customers to opt out, and a $25 administrative fee for commercial customers to opt out. Customers can leave SCP at any time, and their transfer to PG&E service would be effective within 30 days. After a participant opts out of SCP, however, that participant must stay with PG&E for 12 months prior to being eligible to rejoin SCP. Currently there has been a 12% opt out rate in the initial phase of SCP. This compares to an average of 25% in other CCA start-ups. SCP's business plan assumes an opt out rate of 23%. Billing and all other services currently provided by PG&E remain the same for SCP customers, only the energy services portion of the billing would change. Sonoma Clean Power customers will receive a single bill from PG&E, the only difference being that the line item for electricity generation will show Sonoma Clean Power instead of PG&E. PG&E will continue to provide all 5 other services in addition to billing, including transmission and distribution, turning on and off power when customers move, maintaining the power lines, and handling all emergencies. Liability for Participants and Ratepayers Questions were raised about liability, attendant to membership in the Sonoma Clean Power Authority, which is a separate legal entity formed by the JPA. Slate sharing of powers law provides that members of a JPA are liable for its debts, liabilities, and obligations unless the JPA provides otherwise. Section 2.2 of the Seconded Amended and Restated JPA for the SCPA provides that all financial obligations and other liabilities of the SCPA are the financial and legal obligations of SCPA and are not obligations of any of the participating jurisdictions, unless otherwise agreed to by the participating jurisdictions. Energy providers contracting with SCP and experiencing a loss, would be limited to the assets of Sonoma Clean Power to recover their losses. No member or participant of the SCPA has individual liability. If, for example, SCP's rates were to increase dramatically to where enough customers or participating jurisdictions were to opt out of the program, then SCP would have to wind down its operations. In this case, all of SCP's customers would automatically and seamlessly transfer back to PG&E. SCP has already posted a bond with the California Public Utilities Commission to cover the cost of this transition in case this ever happens. Rates When the Petaluma City Council heard the SCP presentation in 2013, significant concern was expressed regarding rates, and rate competitiveness. Sonoma Clean Power's rates are set for one year at a time. The next rate adjustment will be in the summer of 2015. The current rate schedule, along with additional information, can be found in the Joint Rate Comparisons for all account types (Attachment 6). The tables below illustrate the rates and cost difference for three of the most common account types. SCP rates for the CleanStart program average approximately 5% below PG&E's rates. Rates for the EverGreen program are approximately 13% above PG&E. PG&E is expected to increase rates effective January 1, 2015. The amount of the increase is unknown at this time but is anticipated to be approximately 5%. Sonoma Clean Power will evaluate its needs based on participating jurisdictions and develop a new mix of supplies and rates in spring of 2015 with new rates effective in July. Consequently a comparison of future rates at this time is not possible. Residential 2014 Residential Rate Sonoma Clean Power Comparison, E-1 and Res-1 PG&E CleanStart EverGreen Generation Rate ($/kWh) $0.09202 $0.07100 $0.10600 PG&E Delivery Rate ($/kWh) $0.11128 $0.11128 $0.11128 PG&E PCIA/FF ($/kWh) I N/A $0.01164 $0.01164 Total Electricity Cost ($/kWh) 1 $0.20330 $0.19392 1 $0.22892 Average Monthly Bill 1$) 1 $108.94 1 $103.91 1 $122.67 Percent Difference 1 1 -4.7% 1 +12.8% "This compares electricity costs for a typical residential customer in the SCP/PG&E service area (Sonoma County) with an average monthly usage of 536 kilowatt-hours (kWh). This is based on the recent 12 -month billing history for all customers on E-1/RES-1 rate schedules for PG&E's and SCP's published rates as of May 1, 2014. 3 Small Commercial 2014 Commercial Rate Sonoma Clean Power Comparison, A-1 TOU and CleanStart EverGreen COMA TOU* PG&E Generation Rate ($IkWh) $0.09768 $0.07668 $0.11168 PG&E Delivery Rate ($/kWh) $0.10941 $0.10941 $0.10941 PG&E PCIAIFF ($/kWh) N/A $0.01031 $0.01031 Total Electricity Cost ($/kWh) 1 $0.20709 $0.19640 $0.23140 Average Monthly Bill Is) 1 $237.63 $225.36 $265.52 Percent Difference 1 -5.2% +11.7% 'This compares electricity costs for a typical small commercial customer In the SCP/PG&E service area (Sonoma County) with an average monthly usage of 1,147 kilowatt-hours (kWh). This is based on the recent 12 -month billing history for all customers on A-1 TOU/COM-1 TOU rate schedules for PG&E's and SCP's published rates as of May 1, 2014. Commercial 2014 Commercial Rate Sonoma Clean Power Comparison, A -10S Non-TOU CleanStart EverGreen and COM -10A* PG&E Generation Rate ($/kWh) $0.10275 $0.08085 $0.11585 PG&E Delivery Rate ($/kWh) $0.08338 1 $0.08338 1 $0.08338 PG&E PCIA/FF ($/kWh) N/A 1 $0.01115 1 $0.01115 Total Electricity Cost ($/kWh) $0.18613 1 $0.17539 1 $0.21039 Average Monthly Bill ($) $2,178.89 1 $2,053.13 $2,462.85 Percent Difference 1 1 -5.8% I +13.0° 'This compares electricity costs for a typical commercial customer in the SCP/PG&E service area (Sonoma County) with an average monthly demand of 39 kW and an average monthly usage of 11,706 kilowatt-hours (kWh). This is based on the recent 12 -month billing history for all customers on A-1 OS Non-TOU/COM-10A rate schedules for PG&E's and SCP's published rates as of May 1, 2014. Concerns have been raised regarding the long-term, suggesting that SCP's competitive rates are the result of current market conditions that create a short-term competitive advantage. PG&E was required by the State to buy a significant amount of renewable power at a time when the prices for renewable energy were higher. SCP notes that it has taken advantage of current wholesale market conditions, and that it has secured 10+ year contracts for 33% of SCPs load at favorable costs. SCP is confident that based on its recent procurements and PG&E's planned rate increase, that its rates will be further below PG&E. SCP notes that because it is not burdened by having to own energy sources, they have more flexible and competitive ability to procure from lower cost resources, while PG&E has rapidly increasing costs associated with the generation sources it owns, such as nuclear and hydroelectric facilities. All of SCP's current power contracts have known pricing for the full term. Most contracts are priced at a flat rate with no annual escalator (including both solar contracts and the first geothermal contract). fn this sense, the prices are both fixed and flat. One contract (the second geothermal contract) has fixed pricing with an annual escalator. Because this escalator is fixed for the life of the contract, SCP has certainty on the pricing, meaning that none of the contracts in its present portfolio float with any index. SCP determines whether pricing is favorable through several means, including comparison of pricing within previously executed contracts, comparison with procurement cost projections used to set SCP rates, impacts on blended SCP portfolio procurement cost growth, and any publicly -available information on similar California procurement efforts. Actual contract pricing is not publicly available. For executed procurement contracts, copies are available to the public with the market -sensitive data redacted. The redacted market sensitive data is made available either 3 years after contract execution or 1 year after contract termination, depending on the comparative relevance of current market pricing. This practice is standard in the industry and is necessary to secure the most favorable pricing and therefore rates for SCP customers. For executed contracts not related to procurement, unredacted copies are available to the public. The legal basis for SCP's approach to keeping market sensitive procurement data confidential is the California Government Code Sections 6254(1.) and 6255. Under Section 6254(k), California State law, as promulgated through the California Public Utilities Commission, provides for confidentiality provisions similar to those used by SCP to protect the market sensitive procurement data of California's investor owned utilities, which includes Pacific Gas and Electric Company. Under Section 6255, the interests of SCP customers in receiving the cleanest electric energy at the lowest price outweighs the marginal benefit of the public receiving precise pricing information during a three year redaction period. In other words, if SCP did not keep market sensitive pricing information confidential, SCP's customers could be seriously disadvantaged relative to other market participants, such as Pacific Gas and Electric Company. In addition, all market sensitive data are provided to the Power ad hoc Committee of the Board of Directors and to the Chairs of the Ratepayer Advisory Committee and Business Operations Committee for their review. Beyond the electricity generation costs, SCP customers pay the same rates for transmission, billing, and other services, same as PG&E customers. All medical and low-income subsidies will continue unchanged and without any action required by customers; there will be no need to reapply. SCP estimates that under the current rate schedule, there will be $6 million in savings through June 30, 2015, across all customers. Energy Composition Sonoma Clean Power is currently offering two programs: CleanStart and EverGreen. The table below shows the current electric power generation mix for PG&E and Sonoma Clean Power.Since the publication of the table, SCP has purchased a long-term supply contract to build 70 MW of new solar power in California and purchased 50 MW of regional geothermal power from the Geysers that more than triples use of that resource for Sonoma County. At this point in time, about 2% of Phase 1 customers have signed up for the EverGreen option. SCP anticipates more will sign up for this option in 2015 when SCP begins actively promoting the option. Attachment 5 outlines SCP's current procurements. 8 Etecfrlc Power I Sonoma Clean Power Generation Mix' I gid, I: Renewable 22% 33% 10096 • Biomass & Blowaste 4% 9% 01, • Geothermal 5% 15% ru056 • Eligible hydroelectric 2°6 01. 0% •Solar electric 5% 0% 0% • Wind s% 01"6 Coal - I 0% 0% 0% Large hydroelectric 10% I 37% 0% ' Natural Gas _ 2896 09; 0% Nuclear _ 22% 001. 0% Other I 0",6 0% 0% Unspecified Sources 18136 3016 0 of Power ' PG&E's generation data represents 2013 and is provided in the "Annual Report to the California Energy Commission: Power Source Disclosure Prauram". SCP's generation data is forecast for 2014. Questions have also arisen regarding the use of unbundled Renewable Energy Credits (RECs). RECS are a way of paying a remote renewable energy producer to support renewable power. Unbundled RECs are allowed for use in California as a way of increasing renewable energy and reducing greenhouse gas emissions, by incentivizing the renewable energy production where it may otherwise not occur. However, unbundled RECs are not effective at supporting our local economy and have a limited benefit for supporting the construction of new renewable resources. SCP did, in fact, launch with the intention to use a considerable number of Category 3 RECs (same as "unbundled RECs) to offset GHG emissions and for voluntary Renewable Portfolio Standard (RPS) compliance purposes. Because California has not provided CCAs direction in these areas, SCP's original plan to use Category 3 RECs to offset GHG and for voluntary RPS compliance purposes was not, and is not, in violation of any California laws or regulations. However, shortly after SCP's May 2014 launch, SCP made the decision to voluntarily impose limits on the use of Category 3 RECs as follows: 1. SCP has not and will not use Category 3 RECs to offset greenhouse gas emissions, and 2. SCP limits its use of Category 3 RECs to the same amount allowed for compliance purposes, which is 3% of total load. This policy is essentially the same as the policy the CPUC imposes on PG&E. For a more detailed description of this issue see Chapter 2 of the draft Resource Plan (Attachment 4). In addition to the current portfolio, SCP intends to develop other services including implementation of more aggressive energy efficiency programs for its customers, energy reduction programs, and distributed generation of renewables through net -metering or feed -in tariffs from residents and commercial users that generate more supply than consumed. Future direct investment in the development of local renewable generation facilities from solar, geothermal, and biomass are also planned. PG&E Green Option In June 2013 the City Council received an update on PG&E's activities, which included discussion of a "Green Option." On February 21, 2014, PG&E tiled a proposal for an Enhanced Community Renewable option with the CPUC. This option would supplement PG&E's prior voluntary green power option. Under PG&E's new proposal, customers world have two ways to participate: • Customers can pay for the output from a pool of small to mid-sized solar projects within PG&E's service territory. • Customers can pay for the output from a solar project near them of their choosing. PG&E hopes to begin offering a shared renewables program to its customers in the first half of 2015. At this point in time there is no information on rates for this program, hence no means of adding to the above comparisons. Indications are that this program would have a net cost of three to four cents per kwh. Climate Action Plan CCAs and the SCP program have the potential to address statewide and local goals and policies aimed at reducing CO2 emissions. In 2006, the California Legislature adopted AB32, the Global Warming Solutions Act, which mandates a reduction in greenhouse gas emissions by 2020 to 1990 levels. State law recommends a 15% reduction by 2020. In 2005, the City of Petaluma adopted a goal of reducing greenhouse gas emissions by 25% below 1990 levels by 2015 for community emissions. The City is currently participating in a county -wide effort to develop a Community Climate Action Plan, consistent with State law, to develop and implement strategies for reduction of greenhouse gas emissions. The major sources of greenhouse gas emissions are the transportation, energy, and solid waste sectors. Increased use of renewable energy through participation in a CCA program such as SCP can be a significant reduction strategy for reducing greenhouse gas emissions from the energy sector. The table below compares CO2 emissions from electricity sales between PG&E and SCP's programs. Total CO2 Emissions from Electricity Sales per Megawatt -Hour" PG&E CleanStart Evergreen 445 pounds 294 pounds 1 70 pounds "The CO2 emission rates reflect the energy generation provided by PG&E in 2012. SCP's CO2 emission data is forecast for 2014. CEOA In May 2014, the City received a substantial package of information from the International Brotherhood of Electrical Works Local 1245 (LB.E.W.L.) asserting that the act of joining a Community Choice Aggregation program such as Sonoma Clean Power constitutes a project under the California Environmental Quality Act (CEQA). The City of Cloverdale, which voted to join this past July, took the approach of adopting a Notice of Exemption on the basis that such an action is not within CEQA jurisdiction. Rohnert Park also concluded that there is no possibility that its participation in SCP would cause significant negative environmental impacts, 10 therefore its decision to participate is exempt from review under CEQA. Petaluma staff recommends a similar approach. The CEQA Guidelines provide that CEQA does not apply to a discretionary action if "it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment." (14 Cal. Code Regs. Section 15061(b)(3)). Changes in the sources of energy generation resulting from participating, along with other members, in SCP would not result in a significant negative impact on the environment. As shown earlier, the sources of energy used by SCP would produce fewer greenhouse gases than those currently provided by PG&E. In the event of the development of new energy producing facilities, those facilities themselves would be subject to CEQA review. To date, no JPA member has received notice of a CEQA lawsuit regarding SCPA membership. For most JPA members, that statute of limitations has already run. Marin Cleary Energy At the SCP presentation to the City Council, the question was posed as to whether or not the City could/should consider joining Marin Clean Energy (MCE) which has similar stated goals as SCP. MCE Clean Energy has already added Richmond, San Pablo, and Napa County to its program. MCE Clean Energy continues to receive interest from other communities seeking to join its CCA program, including the cities of Benicia and El Cerrito. MCE Clean Energy is open to adding new communities; however, they are focused on those communities that don't currently have access to a CCA option. Petaluma staff contacted MCE Clean Energy, and while there is currently no set policy, the initial response to inviting Petaluma or another Sonoma County community to join at this time or in the foreseeable future was no. FINANCIAL IMPACTS As a participant of Sonoma Clean Power and a member of the Governing Board, it is anticipated that there will be costs associated with developing in-house knowledge and expertise or contracting for special consultants to supplement staff in an effort to support the Council as a Director on the Governing Board. The City's representative would require staff or consultant support in approving and overseeing operating policies, business procedures, legal issues, and measurement/performance standards for Sonoma Clean Power and the development of its programs, particularly during the early years of SCP start-up. At this point in time, there is no estimate of such costs or reimbursement to the City's representative to the Governing Board to cover their time or expenses. The City has a complex load and rate schedule across many accounts. An in-depth analysis would need to be conducted to accurately quantify the expected savings associated with purchasing power from Sonoma Clean Power. It appears however, that based on the current rate schedule, and assuming that the City opted to participate in the C1eanStart program, that the City could anticipate an annual savings of over 5% on its electrical costs. For example, the Ellis Creek Water Recycling Facility accounts for more than half of the City's energy bill at $120,000 per month. The Sonoma Clean Power rate is currently 6.8% less than PG&E's rate for this category. Based on the 2014 SCP rates this could amount to a savings of almost $100,000 annually, for this facility alone. Assuming an average of 5% savings across the City's other accounts, this could amount to an additional $60,000 in savings or a total of $160,000 in annual savings for the City. Should future rates amount to an increase in costs in the future in comparison to PG&E, the City always has the option of opting out of Sonoma Clean Power and returning to PG&E. Participation in the EverGreen program would cost the City on average 13% more than its current electricity costs, or close to $250,000 in additional annual electricity costs. Due to budget constraints, this option is not recommended at the present time. If the City were to initially participate in SCP and opt out after the initial enrollment period, the City could be subject to opt out fees for all accounts. SCP has established termination fees of $5.00 per residential account and $25.00 per non-residential account. The City has an estimated 350 non-residential accounts that could total as much as $8,750 in termination fees if the City were to opt out after initial enrollment. This cost would be more than balanced by the projected savings. Should the City opt to participate in SCP, then the City should establish some form of regular evaluation of the energy rate schedules of PG&E and SCP to ensure that the City is getting the best value in obtaining energy services in the future. In further regard to opting out, Article 7 of the JPA addresses how a city may force the complete withdrawal of all customers within its jurisdiction, regardless of the choice those customers have made. Per that Article, a participant city may withdraw all customers in its jurisdiction: 1. Effective only at the beginning of SCPA's fiscal year (July I"); 2. Upon affirmative vote of the participant's governing board; 3. Providing 6 months written notice prior to July 1 to all JPA members; 4. Subject to potential continuing liabilities occurred prior to the July 1 withdrawal — to ensure the remaining SCP customers do not have increased costs due to the withdrawal, sufficient additional notice or costs may be required to avoid or offset stranded costs related to forward procurement. Upon receiving notice of a citys intent to leave the program, SCP staff would provide the soonest date upon which no costs world be incurred for the exit and the city could then make a decision to wait or cover the stranded costs of leaving early. In addition, a special provision found in Section 7.1.2 of the JPA provides for withdrawal of a participant who votes against an amendment of the JPA itself that otherwise passes. Under this narrow circumstance, an affirmative vote of the participant's governing board is still required and the participant is still subject to potential continuing liabilities, but only 30 days' notice is required and the departure date is effective as of the 30 days' notice. CONCLUSION This report addresses the major concerns expressed by the City Council including: • Goals and priorities of Sonoma Clean Power • SCP's governance structure • Liability for participants • Rate structure • Energy composition • Climate benefits 12 Based on the outcome of this review, and the possibility of rate reductions (with reversal to PG&E on a 30 -day notice if these savings fail to sustain) staff recommends that the City join the Sonoma Clean Power CCA. Furthermore, participation in SCP has the following additional benefits: • Providing businesses and residents a choice of power providers; • Increasing local control and involvement in and collaboration on energy rates and other energy-related matters; • Providing more stable long-term electric rates that are competitive with those provided by the incumbent utility; • Reducing greenhouse gas emissions arising from electricity use within Sonoma County; • Increasing local renewable generation capacity; • Increasing energy conservation and efficiency projects and programs; • Increasing regional energy self-sufficiency: and • Improving the local economy resulting from the implementation of local renewable energy and energy conservation and efficiency projects. Choosing to join SCP now also avoids the additional costs associated withjoining after January 31, 2015. Should the City Council choose to take action, a resolution and ordinance have been prepared. ATTACHMENTS 1. Resolution 2. Ordinance 3. Second Amended and Restated Joint Powers Agreement (July 25, 2013) 4. 2014-2018 Resource Plan (Draft Version v.3) 5. Major Energy Procurements as of November 2014 6. PG&E - Sonoma Clean Power Joint Rate Comparisons (August 2014) 7. Sonoma Clean Power Frequently Asked Questions S. Response to Questions on Sonoma Clean Power (August 27, 2014) ❑X Items listed below are large in volume and are not attached to this report, but may be viewed in the City Clerk's office. 1. May 19, 2014 submittal from International Brotherhood of Electrical Workers 13 lei .. �"iii-.TIiiIS A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA REQUESTING THAT THE SONOMA CLEAN POWER AUTHORITY ACT AS COMMUNITY CHOICE AGGREGATOR ON BEHALF OF THE CITY AND IMPLEMENT THE SONOMA CLEAN POWER COMMUNITY CHOICE AGGREGATION PROGRAM WITHIN THE CITY OF PETALUMA WHEREAS, the City of Petaluma has investigated options to provide electric services to customers within the City, with the intent of achieving greater local control and involvement over the provision of electric services, competitive electric rates, the development of clean, local renewable energy projects, reduced greenhouse gas emissions, and the wider implementation of energy conservation and efficiency projects and programs; and WHEREAS, the Sonoma County Water Agency prepared a Feasibility Study and a draft Implementation Plan for a community choice aggregation ("CCA") program in Sonoma County under the provisions of Public Utilities Code §366.2; and WHEREAS, the Feasibility Study and Implementation Plan show that implementing a community choice aggregation program would provide multiple benefits, including: • Providing customers a choice of power providers; • Increasing local control and involvement in and collaboration on energy rates and other energy-related matters; • Providing more stable long-term electric rates that are competitive with those provided by the incumbent utility; • Reducing greenhouse gas emissions arising from electricity use within Sonoma County; • Increasing local renewable generation capacity; • Increasing energy conservation and efficiency projects and programs; • Increasing regional energy self-sufficiency; and • Improving the local economy resulting from the implementation of local renewable energy and energy conservation and efficiency projects; and WHEREAS, on December 4, 2012, the County of Sonoma and the Sonoma County Water Agency approved a Joint Powers Agreement creating the Sonoma Clean Power Authority ("the Authority'), and under the Joint Powers Agreement, cities and towns within Sonoma County may participate in the Sonoma Clean Power CCA program by adopting the resolution and ordinance required by Public Utilities Code §366.2; and WHEREAS, the Town of Windsor and the cities of Cotati, Sonoma, Sebastopol, Cloverdale, Rohnert Park and Santa Rosa have also adopted the ordinance and resolution required by Public Utilities Code §366.2, and are now participants in the Sonoma Clean Power CCA program; and 14 WHEREAS, cities and towns choosing to participate in the CCA program will have membership on the Board of Directors of the Sonoma Clean Power Authority as provided in the joint powers agreement; and WHEREAS, the Authority has entered into agreements with electric power suppliers and other service providers, and based upon those agreements, the Authority is able to provide power to residents and businesses at rates that are competitive with those of the incumbent utility (PG&E); and WHEREAS, the California Public Utilities Commission approved the Implementation Plan for the CCA program, and on May 1, 2014, the Authority began providing service to customers within the unincorporated area of Sonoma County and within the jurisdiction of those cities who have chosen to participate in the CCA program; and WHEREAS, under Public Utilities Code §366.2, customers have the right to opt -out of a CCA program and continue to receive service from the incumbent utility, so that City residents and businesses who wish to continue to receive service from the incumbent utility will be able to do so. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PETALUMA FINDS AND RESOLVES AS FOLLOWS: The foregoing recitals are true and correct. 1. The City of Petaluma hereby requests that the Sonoma Clean Power Authority act as Community Choice Aggregator on its behalf within the jurisdiction of the City, and authorizes the Authority to implement and carry out within the City the community choice aggregation program as generally described in the Implementation Plan. 2. The Council finds and determines that it can be seen with certainty that there is no possibility that the implementation of the Sonoma Clean Power CCA program within the jurisdiction of the City of Petaluma will cause any significant adverse effects on the environment, and thus that such implementation is exempt from the California Environmental Quality Act. The City Manager is authorized and directed to file a Notice of Exemption pursuant to the CEQA guidelines. 3. This Resolution shall be effective immediately. 15 Attachment 2 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PETALUMA AUTHORIZING THE IMPLEMENTATION OF A COMMUNITY CHOICE AGGREGATION PROGRAM WHEREAS, The City of Petaluma has investigated options to provide electric services to customers within the City, with the intent of achieving greater local control and involvement over the provision of electric services, competitive electric rates, the development of clean, local renewable energy projects, reduced greenhouse gas emissions, and the wider implementation of energy conservation and efficiency projects and programs. WHEREAS, The Sonoma County Water Agency prepared a Feasibility Study and a draft Implementation Plan for a community choice aggregation ("CCA") program in Sonoma County under the provisions of Public Utilities Code §366.2. The Feasibility Study and Implementation Plan show that implementing a community choice aggregation program would provide multiple benefits, including: • Providing customers a choice of power providers; • Increasing local control and involvement in and collaboration on energy rates and other energy-related matters; • Providing more stable long-term electric rates that are competitive with those provided by the incumbent utility; • Reducing greenhouse gas emissions arising from electricity use within Sonoma County; • Increasing local renewable generation capacity; • Increasing energy conservation and efficiency projects and programs; • Increasing regional energy self-sufficiency; and • Improving the local economy resulting from the implementation of local renewable energy and energy conservation and efficiency projects. WHEREAS, On December 4, 2012, the County of Sonoma and the Sonoma County Water Agency approved a Joint Powers Agreement creating the Sonoma Clean Power Authority ("the Authority"). Under the Joint Powers Agreement, cities and towns within Sonoma County may participate in the Sonoma Clean Power CCA program by adopting the resolution and ordinance required by Public Utilities Code §366.2. Cities and towns choosing to participate in the CCA program will have membership on the Board of Directors of the Sonoma Clean Power Authority as provided in the joint powers agreement. The Town of Windsor and the cities of Cotati, Sonoma, Sebastopol, Cloverdale, Rohnert Park, and Santa Rosa have also adopted the ordinance and resolution required by Public Utilities Code §366.2, and are now participants in the Sonoma Clean Power CCA program 16 WHEREAS, The Authority has entered into agreements with electric power suppliers and other service providers, and based upon those agreements the Authority is able to provide power to residents and businesses at rates that are competitive with those of the incumbent utility (PG&E). The California Public Utilities Commission approved the Implementation Plan for the CCA program, and on May 1, 2014, the Authority began providing service to customers within the unincorporated area of Sonoma County and within the jurisdiction of those cities who have chosen to participate in the CCA program. WHEREAS, Under Public Utilities Code §366.2, customers have the right to opt -out of a CCA program and continue to receive service from the incumbent utility. Customers who wish to continue to receive service from the incumbent utility will be able to do so. WHEREAS, on December 15, 2014, the City Council held a duly noticed public hearing to consider joining the Sonoma Clean Power CCA program. NOW THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF PETALUMA AS FOLLOWS: SECTION 1. Findings. The City Council of the City of Petaluma hereby finds: 1. The above recitals are true and correct and are adopted as findings of the City Council. 2. The City Council finds and determines that it can be seen with certainty that there is no possibility that the implementation of the Sonoma Clean Power CCA program within the jurisdiction of the City of Petaluma will cause any significant adverse effects on the environment, and thus that such implementation is exempt from the Californian Environmental Quality Act. The City Manager is authorized and directed to file a Notice of Exemption pursuant to the CEQA guidelines. 3. Based upon the forgoing, and in order to provide businesses and residents within the City of Petaluma with a choice of power providers and with the benefits described above, the Council hereby affirmatively elects to implement a community choice aggregation program within the jurisdiction of the City of Petaluma by participating as a group with the County of Sonoma, the Sonoma County Water Agency, and other cities in Sonoma County in the Community Choice Aggregation program of the Sonoma Clean Power Authority, as generally described in the Implementation Plan. SECTION II. Severability. If any section, subsection, sentence, clause, or phrase of this ordinance is for any reason held to be unconstitutional or invalid, such decision shall not affect the validity of the remaining portion of this ordinance. The City Council hereby declares that it would have passed this ordinance and every section, subsection, sentence, clause or phrase thereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses, 17 or phrases be declared unconstitutional or invalid. SECTION III. Effective Date. This ordinance shall be and the same is hereby declared to be in full force and effect from and after thirty (30) days after the date of its adoption by the Petaluma City Council. SECTION IV. Posting/Publishing of Notice. The City Clerk is hereby directed to publish or post this ordinance or a synopsis for the period and in the manner provided by the City Charter and other applicable law. 18