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CC 2013-06-11_08.g. Community Choice Aggregation Feasibility Study�"p,RR O Y0 INCORPORATED '72 U IT JULY 10, 1911 cQ4QFOR�`P MEMORANDUM TO: CITY COUNCIL FROM: TER SA MCCLISH COMMUNITY DEVELOPMENT DIR CTOR frKELLY HEFFERNON, ASSOCIATE PLANNER It is recommended that the City Council adopt a Resolution confirming the City's participation in the Community Choice Aggregation (CCA) feasibility study. IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: No financial impact is projected. BACKGROUND: Community Choice Aggregation (CCA) is a provision of California law (California Public Utilities Code § 331.1(a)) that allows cities, counties or joint powers agencies to purchase electricity and other necessary electrical services on behalf of the customers in their area. CCAs differ from municipal utility districts in that the investor -owned utility, in this case Pacific Gas and Electric (PG &E), continues to own the electricity distribution infrastructure and to provide electricity transmission, distribution, billing, and related customer services. However, CCAs are able to determine their own energy supply mixes and rate structures. Background on Enabling Statute The statute that enables local governments to form CCA programs was passed by the legislature as AB 117 in 2002 (California Public Utilities Code § 331.1(a)). This statute allows local government or group of local governments "to combine the loads of its residents, businesses, and municipal facilities, in a community -wide electricity buyers' program." In order to form a CCA, the bill requires jurisdictions to submit an implementation plan to the California Public Utilities Commission (CPUC) that provides information on the proposed CCA's organiational structure, rate setting procedures, and Item 8.g. - Page 1 CITY COUNCIL COMMUNITY CHOICE AGGREGATIO-N JUNE 11, 1 PAGE 2 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. Examples of such "stranded" costs include expenses related to the electricity crisis of 2001 and other contracts previously negotiated by the incumbent utility on behalf of the departing customers. The CPUC has established the methodology for determining how stranded costs will be calculated. This CPUC decision instituted a Cost Responsibility Surcharge (CRS) that CCAs must pay to incumbent utilities until stranded costs are paid off. The CRS potentially affects the cost - competitiveness of CCAs because a high CRS must be recovered in the CCA's rates. SLO Clean Energy SLO Clean Energy, which is a coalition of San Luis Obispo County leaders and volunteers committed to local clean energy for communities within San Luis Obispo County, recently approached the City to consider joining with other jurisdictions to explore the economic benefits, risks and feasibility of creating a CCA in San Luis Obispo County. Currenty, the counties immediately north of San Luis Obispo County (Monterey, Santa Cruz, and San Benito) are actively exploring creating a CCA in the region. A shared -cost feasibility study is being organized in these counties and the communities in San Luis Obispo County have been invited to participate. Monterey Bay CCA is the organization supporting the exploration of CCA feasibility (more information on the process and orgainzational structure can be found at http: / /montereybaycca.org /). Since May 2013, ten (10) jurisdictions have passed resolutions to participate in this shared -cost feasibility study. Counties that have passed resolutions to participate include Monterey and Santa Cruz Counties. Cities that have passed resolutions in Santa Cruz County are Capitola, Santa Cruz, Scotts Valley, and Watsonville. The City of Seaside has passed a resolution to participate in Monterey County. As outreach continues, SLO Clean Energy expects that other cities in Monterey County, along with San Benito County and the Cities of Hollister and San Juan Bautista, will be participating. SLO Clean Energy is working with a number of cities in the County, but Arroyo Grande will be the first city to adopt the Resolution if approved. Status of CCA's in California Below is a status list of CCA's within the State of California: Item 8.g. - Page 2 CITY COUNCIL JUNE 11, 2013 PAGE OPERATING MARIN ENERGY AUTHORITY marinenergyauthority.com • Not - for - profit public agency created in December 2008. • Participating jurisdictions: County of Marin, and the cities and towns of Belvedere, Corte Madera, Fairfax, Larkspur, Mill Valley, Novato, Richmond, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon. • Thirteen- member Board of Directors representing each participating jurisdiction. • Administers and oversees the Marin Clean Energy (mcecleanenergy.com) program. Marin Clean Energy became California's first operating CCA program in 2010. It's worthwhile to note that the City of Richmond, which is in Contra Costa County across the Bay, is a member of the Marin Energy Authority. LAUNCHING SONOMA CLEAN POWER www.scwa.ca.gov/cca/ • March 2011: Sonoma County Water Agency investigates Community Choice Aggregation (CCA) including preparing a feasibility study. • October 2011: Sonoma County Water Agency accepts the feasibility study. • April 2012: Sonoma County Water Agency took steps toward the creation of Sonoma Clean Power: • Implementation Plan (business plan) preparation including start -up costs, financing, and level of participation. • Approval of Sonoma Clean Power goals: • reduce greenhouse gas emissions. • be cost competitive. • develop local jobs in renewable energy. • develop long -term rate stability and energy reliability. • Pursue the creation of a Joint Powers Authority to govern Sonoma Clean Power. • Investigate possible sources of start -up funding for Sonoma Clean Power. • Conduct an in -depth interview study with local businesses to determine value and price and electricity derived from local and renewable sources for Sonoma Clean Power. Item 8.g. - Page 3 • G-^OlkE : YT O` JUNE 11, 1 PAGE ai • December 2012: Sonoma County Water Agency's Board of Directors approved the formation of the joint powers authority for Sonoma Clean Power. • April 2013: Sonoma Clean Power Authority Board of Directors voted to authorized Sonoma County Water Agency staff to continue with a number of tasks including negotiating with First Community Bank for startup funding and approval of a contract with MIG for public outreach and education services. • May 2013: Sonoma Clean Power presentations to seven city councils. Windsor voted 'yes' to participate in Sonoma Clean Power. Sebastopol and Cotati have votes scheduled in June. Remaining cities have yet to schedule votes. • January 2014: Projected milestone to begin service. Preliminary electricity rates have been released for Sonoma Clean Power. As a result of eleven bids received from potential power providers, estimated rates have been calculated which are extremely competitive with PG &E. Sonoma Clean Power's residential rates are estimated to fall between 1.8 percent below and 1 percent above PG &E's 2013 rates. Commercial power rates are estimated to be from 3 percent below to 0.5 percent above. CLEAN POWER SF cleanpowersf.org CleanPowerSF will be administered by San Francisco Public Utilities Commission and monitored by San Francisco Local Agency Formation Commission San Francisco is currently working to finalize its implementation plan prior to launching later this year. ANIJOym-c� MONTEREY / SANTA CRUZ / SAN BENITO COMMUNITIES montereybaycca. org • May 2013: Resolutions of participation passed by the Monterey County; Santa Cruz County; the cities of Capitola, Seaside, Scotts Valley, Watsonville, Santa Cruz; Salinas Valley Solid Waste Authority; Monterey Bay Unified Air Pollution Control District; Monterey Regional Waste Management District. • June 2013: Exploration Phase for public /private partnerships, fundraising for technical study, and formation of project development advisory committee. Item 8.g. - Page 4 COMM I A. ITTGAOIGE-JAGG + ' z .. 4 JUNE 11, 1 PAGE 5 YOLO COUNTY & THE CITY OF DAVIS city- council.cityofdavis.org/ commissions /natural- resources - commission climateactioncenter.org ® June 2012: City of Davis' Natural Resources Commission, Valley Climate Action Center, & Cool Davis Foundation conducted a workshop on Community Choice Energy to develop recommendations for the City to take actions: http: / /dctv.davismedia.org /node /37705 Jan 2013: County of Yolo Board of Supervisors' 2013 State Legislative and Agency Priorities reads: Secure funding for the development and implementation of community choice aggregation in Yolo County: Yolo County's climate action plan relies on community choice aggregation to achieve approximately 40% of the County's emissions reduction goals. Absent the implementation of community choice aggregation, many of the voluntary measures of the plan would have to become mandatory in order to meet emissions goals... SAN DIEGO COUNTY AND CITIES sand ie oq energydistrict.org Other California communities known to be exploring CCA include Albany, Berkeley, Emeryville, Mendocino, Oakland, and Santa Barbara. There are most likely others. ANALYSIS OF ISSUES: Adopting the attached Resolution does not obligate the City to pay for any portion of the feasibility study. Currently, fundraising for this effort has commenced in other jurisdictions. Below are the commitments the City will be making by adopting the Resolution: 1. The City of Arroyo Grande agrees to participate in an inter jurisdictional effort to investigate the feasibility of CCA, including support for efforts by a CCA Exploration Advisory Committee (CEAC) to guide preparation of a feasibility study, without obligation of the expenditure of City Funds, unless separately authorized in a future action by the City Council. 2. The City Council authorizes the City Manager to appoint up to three designees to participate as members of the CEAC. Item 8.g. - Page 5 CITT CO1RCIL . 2013 JUNE 11, PAGE 6 3. The City Manager is authorized to execute the appropriate documentation to allow the CEAC and its technical consultants to request energy usage load data from PG &E so it may be analyzed as part of the feasibility study. 4. Adoption of this Resolution in no way binds or otherwise obligates the City of Arroyo Grande to participate in a Community Choice Agg regation,,p rog ram. ALTERNATIVES: The following alternatives are presented for the Council's consideration: 1. Adopt the attached Resolution confirming participation in the Community Choice Aggregation (CCA) Project Development Advisory Committee (PDAC); 2. Do not adopt the Resolution; or 3. Provide direction to staff. ADVANTAGES: The potential general benefits of CCA include: • Reduce the environmental impact of consuming electricity; • Electricity is offered at rates equal to or below PG &E rates, while achieving better environmental performance; • Potential to generate local green jobs; • Potential revenue to the City of Arroyo Grande; and • Customers have more influence in the decisions related to their electricity service. The primary advantage of adopting the attached Resolution is that it allows the City to explore the possibility of being a part of a CCA without separately paying for its own feasibility study, or sharing the costs of a feasibility study with less participating jurisdictions. The timing is critical since the above - mentioned participating jurisditions expect to initiate the feasibility study process later this summer. 791MITOTENTITTITC14.3 There are challenges and risks of forming a CCA, but the feasibility study is intended to flush these issues out. Because the City is not committing funds to prepare the feasibility study at this time, there are no risks associated with adopting the Resolution. ENVIRONMENTAL REVIEW: No environmental review is required for this item. Item 8.g. - Page 6 COUNCIL CITY JUNE 11, �x 1 PAGE 7 PUBLIC NOTICE AND COMMENT: The Agenda was posted in front of City Hall on Thursday, June 6, 2013. The Agenda and report were posted on the City's website on Friday, June 7, 2013. No public comments were received. Item 8.g. - Page 7 ' • • li, we] • • WHEREAS, the City Council of the City of Arroyo Grande has demonstrated its commitment to increasing energy efficiency, and to supporting more broad availability and use of local renewable power sources within the City; and WHEREAS, Community Choice Aggregation (CCA) is a mechanism through which an authority, represented by participating local governments within its jurisdiction, procures electrical power on behalf of its residential and commercial customers; and WHEREAS, Pacific Gas & Electric Company (PG &E) remains an important partner, responsible for reliable delivery of power and enhancement and maintenance of grid infrastructure; and WHEREAS, the Arroyo Grande City Council has identified CCA as a potential strategy that could be very effective in helping the City meet its AB 32 greenhouse gas reduction targets; and WHEREAS, CCA, if determined to be technically and financially feasible, could provide substantial environmental and economic benefits to all residents and businesses in the City of Arroyo Grande; and WHEREAS, CCA provides the opportunity to fund and implement a wide variety of energy related programs of interest to the community; and WHEREAS, in addition to technical and financial feasibility, it is important to determine whether there is adequate public support for CCA; 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, financial and /or organizational mechanisms; with the charge to develop CCA feasibility information and to advise the Arroyo Grande City Council and participating local agencies; and WHEREAS, determining technical and financial feasibility requires obtaining and analyzing energy load data from PG &E and conducting public education and outreach. NOW, THEREFORE, BE IT RESOLVED by the City Council of City of Arroyo Grande.that: 1. The City of Arroyo Grande agrees to participate in an inter - jurisdictional effort to investigate the feasibility of CCA, including support for efforts by a CCA Exploration Advisory Committee (CEAC) to guide preparation of a feasibility study, without obligation of the expenditure of City Funds, unless separately authorized in a future action by the City Council. Item 8.g. - Page 8 2. The City Council authorizes the City Manager to appoint up to three designees to participate as members of the CEAC. 3. The City Manager is authorized to execute the appropriate documentation to allow the CEAC and its technical consultants to request energy usage load data from PG &E so it may be analyzed as part of the feasibility study. 4. Adoption of this Resolution in no way binds or otherwise obligates the City of Arroyo Grande to participate in a Community Choice Aggregation program. On motion by Council Member , seconded by Council Member and by the following roll call vote, to wit: • the foregoing Resolution was adopted this 11 t" day of June 2013. Item 8.g. - Page 9 TIMOTHY J. CARMEL, CITY ATTORNEY Item 8.g. - Page 10