HomeMy WebLinkAbout2019-08-20; City Council; ; Community Choice Energy Program Governance Analysis Report and Joint Powers Authority FormationCA Review i,.uc.,,.
~ CITY COUNC I L
~ Staff Report
Meeting Date: August 20; 2019
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Jason Haber, Assistant to the City Manager
Jason .haber@carlsbadca.gov or 760-434-2958
Subject: Community Choice Energy Program Governance Analysis Report and Joint
Powers Authority Formation
Recommended Action
1) Receive a Community Choice Energy Program Governance Analysis Report prepared for
the Cities of Carlsbad, Del Mar, and Encinitas;
2) Receive a City Council Ad-Hoc Subcommittee recommendation to negotiate and enter
into a Community Choice Energy Authority Joint Powers Agreement with the Cities of Del
Mar and Encinitas, subject to certain conditions; and
3) Directstaffto:
a. Initiate negotiations with the Cities of Del Mar, Encinitas and other potential
partner agencies to prepare a Community Choice Energy Authority Joint Powers
Agreement, subject to the conditions outlined in the recommendation of the City
Council Ad-Hoc Subcommittee on Community Choice Energy,
b. Prepare an ordinance implementing a City of Carlsbad Community Choice Energy
program through a Joint Powers Authority, and
c. Return to the City Council to obtain the approvals and appropriations needed to
establish and convene a Community Choice Energy Joint Powers Authority Board
of Directors in time to approve and submit a Community Choice Energy
Implementation Plan to the California Public Utilities Commission by December
31, 2019 and launch a Community Choice Energy program in 2021.
Executive Summary
California Assembly Bill 117 allows local governments to form Community Choice Energy (CCE)
programs that offer an alternative electric power option to constituents currently served
electric power by investor owned utilities {IOUs). Under the CCE model, local governments
purchase and manage their community's electric power supply by sourcing power from a
preferred mix of traditional and renewable generation sources, while the incumbent IOU
continues to provide distribution service. This gives CCEs the opportunity to design and
potentially reduce retail rates for their constituents, promote local economic development and
offer a cleaner power supply.
August 20, 2019 Item #15 Page 1 of 135
This item presents for City Council consideration, a CCE Program Governance Analysis Report
prepared for the Cities of Carlsbad, Del Mar and Encinitas (Partners), which provides a
quantitative and qualitative evaluation of the following CCE program governance options:
1. Enterprise Program
2. Partner Joint Powers Authority
3. Solana Energy Alliance Joint Powers Authority
4. City of San Diego Joint Powers Authority
Based upon a comparative analysis of the options above, the report recommends establishing a
Partner Joint Powers Authority (JPA) as the preferred governance structure for implementing a
CCE program.
This item also presents a recommendation from the City Council Ad-Hoc Subcommittee on
Community Choice Energy, identifying the Partner Joint Powers Authority as the preferred
governance structure, subject to certain conditions to be addressed in negotiating a JPA
Agreement.
Furthermore, this item recommends that the City Council direct staff to pursue the necessary
steps to implement and fund the recommended CCE program governance structure.
Discussion
Background
The City Council has taken the following prior actions related to Community Choice Energy:
• July 11, 2017 - Adopted Resolution No. 2017-141, authorizing the city’s participation in a
CCE Technical Feasibility Study.
• February 26, 2019 - Adopted Resolution No. 2019-025, authorizing the city’s participation
in an evaluation of CCE program governance options.
• March 19, 2019 - Adopted Resolution No. 2019-036, expressing the City Council’s
intention to pursue a CCE program that prioritizes certain operating principles.
• April 16, 2019 - Adopted Resolution No. 2019-052, accepting the North San Diego County
Cities CCE Technical Feasibility Study and authorizing the procurement of joint legal
services to assist in negotiating and preparing CCE formation documents.
• June 25, 2019 - Adopted Resolution No. 2019-112, authorizing the formation of a City
Council ad-hoc subcommittee, comprised of Mayor Hall and Councilmember
Schumacher, to receive information and advise the City Council on Community Choice
Energy.
August 20, 2019 Item #15 Page 2 of 135
Additional staff and consultant presentations on Community Choice Energy to the City Council
and community stakeholders have included:
• January 13, 2016 – The Future of Energy panel discussion
• March 20, 2019 – Carlsbad Chamber of Commerce – Board of Directors
• March 21, 2019 – CCE Feasibility Study Community Workshop – Senior Center
• April 1, 2019 – Southwest Carlsbad Homeowners Association Coalition
• May 1, 2019 – Carlsbad Chamber of Commerce - Government Affairs Committee
• May 23, 2019 – Carlsbad Republican Women Federated
On June 14, 2019, the city received the following official statement from SDG&E regarding SDG&E
and Energy Procurement:
As the energy market in California becomes increasingly decentralized, we
see a future in which SDG&E focuses primarily on the safe and reliable
transmission and distribution of energy to our customers. SDG&E is working
with regulators and legislators to determine how a state-level procurement
entity can be established to assume energy buying responsibilities from
investor-owned utilities (IOUs), should a utility choose to no longer perform
this function.
It’s important that the state’s procurement rules evolve to support this new
model. SDG&E does not believe IOUs should continue to be required to take
on long-term supply commitments for customers who have chosen, or may
choose, a different energy provider, such as Community Choice Aggregation.
Instead, it makes better sense for IOUs to evaluate whether they are best
suited to serve in a commodity-purchaser role for their territory and to plot
their course accordingly. In the case of SDG&E, we believe our best course is
to move out of procurement and focus on the safe and reliable delivery of
energy to our customers.
Community Choice Energy Program Governance Analysis Report
EES Consulting, Inc., has prepared a Community Choice Energy Program Governance Analysis
Report for the Cities of Carlsbad, Del Mar and Encinitas (Exhibit 1). To determine the range of
governance options available to the city, a Request for Interest was released in April 2019 seeking
responses from existing CCE programs, other cities currently exploring CCE, and third parties
interested in a potential CCE partnership. Responses to the Request for Interest were received
from the City of San Diego and Solana Energy Alliance and are included for reference in the
report.
The report assessed the following governance options: 1) Enterprise Program, 2) JPA among the
Partners, 3) JPA proposed by Solana Energy Alliance, and 4) JPA proposed by the City of San Diego.
The governance options were analyzed and compared in the evaluation matrix found below. For
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analysis purposes, a “1” is the lowest rating and a “5” is the highest rating. A detailed discussion
of each Issue and associated ranking is provided in Section 6 of the report.
Evaluation of Different Governance Options
Issue
Enterprise
Partner
JPA
Solana Energy
Alliance JPA
City of San
Diego JPA
Availability of Pre-Launch Funding 2 2 3 4
Launch by 2021 3 3 3 4
Voting Protocol 5 4 3 2
Local Decision Making 5 4 3 2
Amount of Rate Discount 1 3 3 3
Achieve CAP/Policy Goals 5 5 5 4
General Fund Protection 1 4 4 4
Existing Track Record 1 2 3 2
Future Flexibility 5 4 3 2
Local Renewable Development 4 4 3 2
Partner Staff Impact 1 2 3 5
Total 33 37 36 34
Based upon EES’s evaluation of governance options, as presented in the matrix above, it is
apparent that each governance option has its pros and cons. The Partner JPA option received the
highest total score; however, scores for all four governance options are relatively close,
suggesting they are all viable options that could produce benefit to the Partners and their
constituents.
Enterprise Option
Under the Enterprise option, each of the Partners would operate independent Community Choice
Energy programs. Each city would establish a new city department or enterprise to house the
CCE. This approach provides operational flexibility and independence; however, according to
EES’s analysis, economies of scale benefits would not be maximized and some implementation
efforts would be duplicated. This option is not deemed feasible for the City of Del Mar.
Joint Powers Authority (JPA) Options
A Joint Powers Authority offers potential benefits to the Partners and can be structured multiple
ways and with a variety of member agencies. The report analyzed forming a JPA among the
Partners, forming a JPA with Solana Energy Alliance (SEA), and entering a JPA with the City of San
Diego. Each of these JPA options is discussed below.
Partner JPA
Under the Partner JPA option, the Partners would operate jointly with each Partner having equal
representation on the JPA board. The Partners have an established working history and similar
environmental policy goals. The Partner JPA would be expected to operate efficiently and
equitably due to the size of the JPA board and anticipated one-city/one-vote protocol. Risk
considerations would be minimized in a Partner JPA by aggregating a large enough load volume
to maximize economies of scale in both operating overhead and energy procurement, economic
diversification among the cities, and a shared funding approach to meet pre-launch capital
August 20, 2019 Item #15 Page 4 of 135
requirements. A Partner JPA is appealing in terms of local control and operational expediency;
however, the Partners would need to obtain startup capital and provide staff support to establish
the JPA.
Solana Energy Alliance JPA
The Solana Energy Alliance JPA would be a JPA formed among the Partners and SEA. This option
offers the benefit of including members with environmental policy goals and Climate Action Plans
(CAP) that are well aligned. SEA responded to the Partners’ RFI with interest in forming a JPA and
prepared draft terms of a CCE JPA agreement, including goals of the agency, makeup of the
governing board, and voting protocols, among other details, as provided and discussed in detail
in the report. SEA has also offered to cover the JPA’s pre-launch costs in cooperation with their
data management vendor, Calpine. When considering a possible partnership with SEA, a material
issue is SEA’s pre-existing commitments, contracts and current assets/liabilities, which may
constrain the Partners in their selection of outside vendors and require the assumption of current
SEA commitments.
City of San Diego JPA
A City of San Diego JPA would be a JPA formed among the City of San Diego and any other
interested partner(s) in SDG&E territory. The City of San Diego would lead the JPA start-up effort
and has initiated exploratory discussions regarding a possible JPA formation among interested
cities throughout the region. Some of the agencies participating in these discussions have
included the Partners, Chula Vista, La Mesa, Solana Beach, and the County of San Diego, among
others.
The City of San Diego has initiated discussions on the terms of a JPA agreement, including goals
of the agency, makeup of the governing board and voting protocols, among other details, as
provided and discussed in detail in the report. The City of San Diego has offered to cover all initial
startup costs of forming a JPA. The report evaluated the City of San Diego’s RFI response and
draft JPA terms sheet, dated June 27, 2019. Additional correspondence related to the City of San
Diego JPA proposal includes a June 17, 2019, letter from Richards Watson Gershon Law (see
report Appendix D) and a July 17, 2019, joint comment letter from staff of the Cities of Carlsbad,
Del Mar, Encinitas and Solana Beach (Exhibit 2). A final City of San Diego draft JPA Agreement,
dated August 7, 2019, is attached for reference (Exhibit 3), but was not evaluated in the report.
One of the most notable provisions in the City of San Diego JPA terms sheet is the option to call
a load-based weighted vote after an equal vote is complete, if requested by two or more board
members. The option for weighted voting would provide the City of San Diego with a significantly
large amount of control over JPA decisions because its load is significantly greater than all of the
Partners’ electrical loads combined. In EES’s estimation, this is not a voting structure deemed
beneficial for the Partners.
Economies of Scale
The report also analyzed the estimated pre-launch and operating costs of different CCE
configurations. Costs for CCE programs consist of two primary types – overhead costs and power
supply costs. Power supply costs constitute roughly 90% of a CCE’s budget. Operating/overhead
costs comprise roughly 10% of a CCE’s budget. Based upon an analysis of existing operational
August 20, 2019 Item #15 Page 5 of 135
CCEs, all of the JPA governance options evaluated in the report are large enough that both
overhead and wholesale power supply costs are optimized. That is not the case for the Enterprise
option.
Report Summary and Recommendations
Based upon the analysis conducted by EES, all four CCE governance options presented in the
report have the likely potential to lead to a successful CCE program for the City of Carlsbad, with
the ability to launch in 2021.
Although viable, the Enterprise option lacks enough size to offer maximum operational
efficiencies and rate discounts. It also offers less General Fund liability protection than the JPA
options. As such, the Enterprise option is not recommended for any of the Partner cities.
In the City of San Diego JPA option, given the relative sizes of the likely JPA participants and the
provision to optionally call a weighted vote in the proposed JPA agreement terms, the City of San
Diego could guide key CCE decisions. This may take away much of the desirable local control and
decision-making from the Partner cities. Notwithstanding the availability of start-up funding
offered under the Regional JPA option, the weighted voting provision makes this governance
option inferior to other JPA options available to the Partners and is not recommended for the
Partners.
The Solana Energy Alliance JPA option could be attractive given SEA’s recent experience
launching a CCE, close proximity to the Partners, and SEA’s willingness to cover start-up costs.
However, in EES’s view, a material issue with SEA is its pre-existing commitments and current
assets/liabilities. The nature of these pre-existing commitments and disposition of current
assets/liabilities may constrain the Partners in their selection of outside vendors and require the
assumption of current SEA commitments and assets/liabilities. SEA also has power procurement
constraints with The Energy Authority, data management contracts with Calpine and banking
commitments with River City Bank with terms through at least 2022. While all necessary
mitigation arrangements can likely be achieved at some point in time, setting up a Solana Energy
Alliance JPA may take more time than is available and comprise a 2021 launch for the Partners.
These pre-existing consultant agreements may also preclude the Partners from competitively
bidding services with annual fees that approach $3 million. As such, this option is not
recommended.
Of the four options, the Partner JPA, was determined to have the greatest benefits to the Partners
and is the recommended governance option to utilize going forward. This option has the benefits
of being large enough to be economically and operationally efficient and the Partner cities have
jointly worked on CCE-related activities for several months and generally understand each other’s
policy goals and objectives. The Partners can likely reach agreement on key JPA bylaw issues such
as goals and objectives of the CCE, voting protocols, project labor agreements, etc., and have the
synergies and pre-existing work product to effectuate a 2021 launch. A Partner JPA would
seemingly achieve a good balance of local control in decision-making while providing enough size
to maximize operational efficiencies.
August 20, 2019 Item #15 Page 6 of 135
City Council Ad-Hoc Subcommittee on Community Choice Energy Recommendation
By August 20, the City Council Ad-Hoc Subcommittee on Community Choice Energy will have held
eight meetings, including discussions with staff and/or elected representatives of the Cities of
Del Mar, Encinitas, Escondido, Oceanside, San Marcos, Solana Beach and Vista. The
subcommittee has received information, including an initial draft version of EES’s Governance
Analysis Report and the JPA proposals received from Solana Energy Alliance and the City of San
Diego.
Upon considering all of the information received, the subcommittee agreed to offer the following
advice and recommendation to the City Council:
The Carlsbad City Council Ad-Hoc Subcommittee on Community Choice Energy advises
and recommends to the City Council that the City of Carlsbad negotiate and enter into
a Community Choice Energy Authority Joint Powers Agreement with the Cities of Del
Mar and Encinitas, on the condition that such agreement provide for the following:
1. Equal Vote Protocol (No Weighted Vote),
2. Equal Pre-Launch Cost Sharing Formula,
3. 2021 Program Launch,
4. Minimum 50% Renewables Portfolio, and
5. JPA membership for the Cities of Escondido, Oceanside, San Marcos, Solana
Beach and Vista shall not be denied, and shall be approved on the same
terms enjoyed by the Partners in the event they request to join and agree to
contribute a proportionate share of the JPA’s pre-launch operating and
administrative costs, plus any direct costs associated with their
incorporation into the JPA, which costs shall be eligible for reimbursement
by the JPA.
Fiscal Analysis
There is no fiscal impact associated with the recommended action to initiate negotiations with
the Cities of Del Mar, Encinitas and other potential partner agencies to prepare a Community
Choice Energy Authority Joint Powers Agreement, and to prepare an ordinance implementing a
City of Carlsbad Community Choice Energy program through a Joint Powers Authority.
On April 16, 2019, the City Council authorized participation in a cost-sharing agreement to
procure joint legal services to assist in negotiating and preparing CCE formation documents. The
City of Encinitas subsequently contracted with Richards Watson Gershon Law (RWG) to negotiate
and prepare a CCE enabling ordinance and CCE Joint Powers Authority agreement. RWG’s scope
of work can be applied to support the Partners in pursuit of any of the CCE JPA formation options.
If the Enterprise CCE option is selected, the City would need to fund the preparation of a CCE
enabling ordinance and governing documents independently. In this scenario, staff would return
to the City Council with a mid-year budget request to secure the necessary support services.
August 20, 2019 Item #15 Page 7 of 135
If a CCE program is formed based on action taken at a future City Council meeting, future fiscal
impacts may be as follows:
Enterprise CCE
To form an Enterprise CCE, the City would fund the preparation of an Implementation Plan
estimated to cost $25,000 and would bear the program’s initial startup costs, which could be
funded as a loan from the city’s General Fund or by securing outside funding from a data
management vendor, power vendor, commercial bank or financial institution, to be reimbursed
by the CCE JPA with interest. The pre-launch Operating and Administrative costs for a Carlsbad
Enterprise CCE (excluding initial energy procurement) were estimated at approximately $959,000
in the Partners’ CCE Technical Feasibility Study. It is estimated that the cost of forming an
Enterprise CCE would not be greater, in total, than any of the JPA options, however the entire
cost would be born by the City of Carlsbad.
Partner JPA
To form a Partner JPA, the Partner cities would jointly fund completion of an Implementation
Plan (≈$25,000). The Partners could amend the current contract with EES or select another firm
to perform the work. The pre-launch Operating and Administrative costs for a Partner JPA
(excluding initial energy procurement) are estimated at $1.25 million. These costs would be
shared among the Partner cities, to be reimbursed by the CCE JPA with interest, or the JPA could
seek outside funding from a data management vendor, power vendor, commercial bank or
financial institution, to be refunded by the JPA with interest. As such, assuming a three-party
Partner JPA, the City of Carlsbad’s share of pre-launch costs are estimated not to exceed
$500,000.
Solana Energy Alliance JPA
To form a Solana Energy Alliance JPA, SEA has offered to finance all start-up costs, estimated at
$615,000, in cooperation with their data management vendor, Calpine, to be reimbursed by the
CCE JPA with interest.
City of San Diego JPA
To form a City of San Diego JPA, the City of San Diego has offered to fund all start-up costs, to be
reimbursed by the CCE JPA with interest, including development of the JPA Agreement, CCE
formation ordinance, Implementation Plan, and working capital requirements. Estimated start-
up costs have not been provided by the City of San Diego.
Next Steps
Should the City Council direct staff to pursue the recommended action, staff will initiate
negotiations with the Cities of Del Mar and Encinitas and other potential partner agencies to
prepare a Partner JPA agreement and prepare a CCE implementing ordinance. Upon
successfully negotiating such agreement, staff would return to City Council for the necessary
approvals and appropriations to establish the Joint Powers Authority and fund the city’s share
of pre-launch Operating and Administrative costs.
August 20, 2019 Item #15 Page 8 of 135
Should negotiations fail to achieve agreement among the Partners, staff will seek to reconvene
the City Council Ad-Hoc Subcommittee on Community Choice Energyto develop and present an
alternative recommendation to the City Council.
Environmental Evaluation (CEQA)
Pursuant to Public Resources Code section 21065, this action does not constitute a “project”
within the meaning of CEQA in that it has no potential to cause either a direct physical change
in the environment, or a reasonably foreseeable indirect physical change in the environment,
and therefore does not require environmental review.
Public Notification
This item was noticed in accordance with the Ralph M. Brown Act and was available for public
viewing and review at least 72 hours prior to scheduled meeting date.
Exhibits
1. Community Choice Energy Program Governance Analysis Report – Prepared for the Cities of
Carlsbad, Del Mar and Encinitas
2. July 17, 2019 - Joint Comment Letter on City of San Diego CCE JPA Draft Term Sheet
3. August 7, 2019 - City of San Diego Draft JPA Agreement
August 20, 2019 Item #15 Page 9 of 135
Contents
CONTENTS .............................................................................................................................................................. 1
SECTION 1-EXECUTIVE SUMMARY ....................................................................................................................... 1
INTRODUCTION ..................•.•...•........•••.••••....•...•........•.................•.••...••.•••................................•...•....••••••......••••........•... 1
OBJECTIVES OF GOVERNANCE REPORT .....•..............•.....•........•.•.•.•.••.....•.•.•.........................•...••..••..•••.•.••••.••...•••.•...••..•...... 1
GOVERNANCE ANALYSIS PROCESS ..................•.•..•.•••••••.•..•.•...............................•...•••......••.•................................ : ........•.••• 1
GOVERNANCE OPTIONS ...••.•...............•..............••.••..•........•.••.••....................•......••..........••..•....•......•.....................••.•..... 2
ECONOMIES OF SCALE ..................................................................................................................................................... 7
SUMMARY EVALUATIONS AND RECOMMENDATIONS ............................................................................................................. 7
OBSERVATIONS AND RECOMMENDATIONS .......................................................................................................................... 8
SECTION 2-GOVERNANCE CONSIDERATIONS ..................................................................................................... 11
STRUCTURE CONSIDERATIONS ........................................................................................................................................ 11
REGIONAL CONSIDERATIONS .......................................................................................................................................... 14
SECTION 3 -ECONOMIES OF SCALE ..................................................................................................................... 15
ECONOMIES OF SCALE IN OPERATING COSTS ..................................................................................................................... 15
ECONOMIES OF SCALE IN POWER SUPPLY .......................................................................................................................... 16
SECTION 4-GOVERNANCE STRUCTURES ............................................ : ................................................................ 17
ENTERPRISE ................................................................................................................................................................ 17
PARTNER JPA ............................................................................................................................................................. 18
OTHER JPA OPTIONS ................................................................................................................. : ................................. 18
SECTION 5 -ANAL VSIS OF RFI· RESPONSES ........................................................................................................... 19
RFI RESPONSES ........................................................................................................................................................... 19
CITY CLIMATE ACTION PLAN (CAP) GOALS ....................................................................................................................... 19
START-UP COSTS •••.•••......••.••.••.....•.•••...••••.••.........................••...••.•...••.•..••.•.....•.•..........•........•..•....•.....•••.•.••.......•..•.•.•. 21
Solana Energy Alliance JPA ................................................................................................................................. 21
City of San Diego JPA .......................................................................................................................................... 21
STAFFING AND CONSULTANTS ........................................................................................................................................ 21
Solana Energy Alliance JPA ................................................................................................................................. 21
City of San Diego JPA .......................................................................................................................................... 22
Qualitative Considerations ................................................................................................................................. 22
VOTING .••.•.•.•.......•....... '. ............................................................................................................................................ 23
Solana Energy Alliance JPA ................................................................................................................................. 23
City of San Diego JPA .......................................................................................................................................... 23
SCHEDULE .................................................................................................................................................................. 23
Solana Energy Alliance JPA ................................................................................................................................. 23
City of San Diego JPA .......................................................................................................................................... 24
LEAVING THE JPA ........................................................................................................................................................ 24
Solana Energy Alliance JPA ................................................................................................................................. 24
City of San Diego JPA ........................................................................................................................................... 24
SUMMARY .. , ............................................................................................................................................................... 24
SECTION 6-RESULTS AND RECOMMENDATIONS ................................................................................................ 25
Availability of Pre-launch Funding ..................................................................................................................... 25
launch by 2021 .................................................................................................................................................. 26
Voting Protocol ................................................................................................................................................... 26
local Decision Making ........................................................................................................................................ 26
Rate Discount ..................................................................................................................................................... 27
CAP Goal Alignment ........................................................................................................................................... 27
GOVERNANCE ANALYSIS REPORT
August 20, 2019 Item #15 Page 12 of 135
General Fund Protection .................................................................................................................................... 27
Existing Track Record ......................................................................................................................................... 27
Future Flexibility ................................................................................................................................................. 27
Local Renewable Development .......................................................................................................................... 28
Total Rating ........................................................................................................................................................ 28
O BSERVATIONS AND RECOMMENDATIONS ........................................................................................................................ 28
APPENDIX A -RFI AND SUPPLEMENT .................................................................................................................. 31
APPENDIX B -RFI DISTRIBUTION LIST .................................................................................................................. 32
APPENDIX C -SEA RFI RESPONSE AND CORRESPONDENCE .................................................................................. 37
APPENDIX D -CITY OF SAN DIEGO RFI RESPONSE AND CORRESPONDENCE ......................................................... 38
NORTH SAN DIEGO COUNTY CITIES-GOVERNANCE ANALYSIS REPORT ii
August 20, 2019 Item #15 Page 13 of 135
Section 1-Executive Summary
Introduction
California Assembly Bill 117 allows local governments to form Community Choice Aggregation
(CCA) entities, which are also referred to as Community Choice Energy (CCE) entities. The cities
of Carlsbad, Del Mar, Encinitas, and Oceanside conducted a Technical Feasibility Study (Feasibility
Study) that concluded a CCE program would be financially viable. The Feasibility Study explored
the pros and cons of multiple governance options and recommended further analysis to
determine appropriate governance structure and identify potential third-party alliances. This
Report further explores the governance options introduced in the Feasibility Study for Carlsbad,
Del Mar, and Encinitas (Partners).1 The Partners released a Request for Interest (RFI), which
solicited information from entities that had interest in joining with the Partners in forming a CCE.
The RFI garnered interest from Solana Energy Alliance CCA (SEA) and the City of San Diego. The
responses to this RFI and other governance options will be discussed below.
Objectives of Governance Report
The objective of this Report is to provide detailed information and EES's best professional
recommendations regarding the most advantageous governance structure for the Partners. This
assessment investigates the Partners' options for governance, and compares the opportunities
currently available and associated costs, risks and benefits. This Report will assist the P·artners in
decision making, contract negotiations, staffing decisions, CCE launch timing and governance
expectations. This Report will explore 1) an Enterprise CCE, 2) a joint powers agreement among
the Partners, 3) a joint powers agreement among the Partners plus SEA, and 4) a regional CCE/JPA
led by the City of San Diego.
Governance Analysis Process
Once the Partners established that a CCE business model was financially feasible, the Partners
sought to qualitatively and quantitatively analyze each available governance option. In order to
efficiently identify governance options, the Partners released an RFI. The RFI process eliminated
analysis of options that may be unavailable or too costly to structure, and it insured that costs
and timing assumptions are current. The RFI also reduced the resources needed to negotiate any
potential JPA with a third party by eliminating parties that have no demonstrated interest.
The RFI was released on April 12th and supplemented on April 19th• A copy of this RFI is included
as Appendix A. The RFI solicited interest from third parties who may desire to join with Partners
to form a CCE. The RFI also solicited interest and feedback pertaining to the cost to join and exit,
governance structure, organization and cost allocation. The supplement provided high-level
Partner load information so that respondents could more accurately address the questions in the
1 Oceanside chose not to participate in the governance analysis.
GOVERNANCE ANALYSIS REPORT 1
August 20, 2019 Item #15 Page 14 of 135
RFI. Responses to the RFI were due on May 15th. The Partners received two responses from the
Solana Energy Alliance (SEA) and the City of San Diego. This Report analyzes governance options,
evaluates the responses to the RFI and provides CCE governance structure recommendations for
the Partners.
Governance Options
This Report analyzed the various ways the Partners could structure the governance of a CCE.
Economics plays a role in choice of governance structure as does culture, shared capabilities, risks
and resource sharing. Any JPA governance option will require the Partners to define parameters
and goals of governance in order to define how a JPA contract should be structured. The
governance options available to the Partners include:
■ Enterprise
■ Joint Power Authority (JPA)
• Partner JPA
• Partners Plus SEA JPA (Solana Energy Alliance JPA)
• City of San Diego JPA Led by City of San Diego (City of San Diego JPA)
A description of each option follows.
Enterprise Option
Under the Enterprise option, each of the Partners would operate independently. Each city would
establish a new city department or enterprise to house the CCE. This approach provides
operational flexibility and independence; however, economies of scale benefits would not be
maximized, and some implementation efforts would be duplicated. Additionally, it should be
noted that the Feasibility Study found that an individual enterprise CCE business model for
Carlsbad was feasible, for Encinitas was feasible but with very slim margins and for Del Mar was
not financially feasible. The cities' general funds would also need to be protected in both the
enterprise establishment documents and power purchase agreements (PPA). While the
enterprise option has been implemented successfully in other parts of California, it is
recommended that the Partner cities consult their respective legal counsel regarding available
risk mitigation strategies before selecting this option. The enterprise CCE business model has
been implemented within the Cities of King City, Rancho Mirage, Apple Valley, Lancaster, Solana
Beach and San Jose. This business model was selected due to local preference for total local
control and/or lack of other partnering opportunities.
GOVERNANCE ANALYSIS REPORT 2
August 20, 2019 Item #15 Page 15 of 135
Joint Powers Authority ()PA)
A JPA has potential benefits to the Partners and can be structured multiple ways with a variety
of entities. This Report analyzed forming a JPA among the Partners or forming a JPA with SEA
and a City of San Diego JPA led by the City of San Diego. Each of these three JPA options is
discussed below.
Partner JPA Option
Under the Partner JPA option, the Partners would operate jointly. A Partner JPA is most
appealing from the perspective of local control and operational expediency; however, the
Partners would need to obtain upfront capital funds. Start-up capital funding would need
to be obtained by the Partner JPA for the following items assuming a 2021 launch is
desired.
This Report has assumed all three cities would participate in the Partner JPA. Less than
three would not achieve the necessary economies of scale as discussed later in the
Report.
In the event of a Partner JPA option, the Partners would define a structure for the JPA
including cost sharing formulas, voting, membership structure, expenditure priorities and
termination or exit penalties. This structure would determine the JPA contract and is the
foundation for the JPA itself. When defining the structure of the JPA, the Partners may
allow for additional CCE's to join once the JPA is launched. In the even the Partners agree
to allow additional CCE's to join, then the Partner JPA Option's overall structure and
agreements should include a process to join, costs, voting for new members and formula
to share in certain costs and benefits of the JPA.
Exhibit ES-1
Initial Funding needs for the Partner JPA Option
Timing Item Amount
September -December 2019 Develop JPA Agreement $25,000
File Implementation Plan $25,000
Subtotal $50,000
January -May 2020 CPUC Bond $200,000
JPA Start-Up Overhead $100,000
Legal/Technical Consultants $200,000
Subtotal $500,000
June -December 2020 JPA Salary/Overhead $300,000
Legal/Technical Consultants $250,000
SDG&E Set-Up Costs $200,000
Subtotal $750,000
Totals 2019 $50,000
Totals 2020 $1,250,000
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Additional funding may also be needed for an SDG&E billing deposit and collateral
requirements for power purchase agreements entered into in 2020.
The numerous ways to fund these start-up capital needs are as follows:
■ If the Partners wish to launch in 2021, an Implementation Plan must be filed with the
CPUC by December 31, 2019. In order to file an Implementation Plan, the Partner JPA
must be formed and approve the Implementation Plan. It is estimated that $50,000 in
legal/technical expense will be required by the end of 2019 to pay for the drafting of
a JPA agreement and Implementation Plan. This $50,000 will be provided by the
Partners (i.e. general fund).
■ During 2020, the Partner JPA will begin hiring staff, negotiating power management
and data management/call center consulting contracts, meeting with SDG&E on data
issues and procuring power supply for a 2021 launch. It is estimated that another
$1,250,000 will be needed to cover expenses during 2020. There are several options
to fund this requirement. These options include:
• The Partners could internally finance this cash requirement via a prorated
contribution from each Partner's general fund. An allocation of the 2020 funding
needs based upon electrical load would result in obligations for the Partner cities
of $37,500 for Del Mar, $312,500 for Encinitas and $900,000 for Carlsbad.
• There are numerous data management and power vendors that will fund start-up
costs to be repaid after launch.
• Commercial banks and financial institutes have shown interest in funding these
types of costs.
The decision on how to fund these start-up costs will ultimately rest with the JPA
Board of Directors.
There may be other capital needs in 2020. For example, SDG&E may require a deposit
from the Partner JPA. Additionally, various power purchase agreements may require
collateral deposits or down payments. These types of costs are typically financed
externally through third parties but to be paid off over time by the CCE.
In summary, the Partner JPA option has a cash requirement, the majority of which can
· be financed externally. This option also could be the most expedient to execute given
the ongoing working relationship among the Partner cities. If pursued, this option can
likely result in a 2021 launch.
Solana Energy Alliance JPA
The Solana Energy Alliance JPA would be a JPA formed among the Parthers plus SEA. The
Partners and SEA would operate under a Solana Energy Alliance JPA agreement. This
GOVERNANCE ANALYSIS REPORT 4
August 20, 2019 Item #15 Page 17 of 135
option has potential since the Partners' policy goals and Climate Action Plans (CAP) are
already well aligned with SEA's policy goals and the City of Solana Beach's CAP.
SEA responded to the Partners' RFI and prepared a draft term sheet outlining a proposed
CCE JPA agreement, including goals of the agency, makeup of the governing board, voting
options, committee selection, etc. On July 1, 2019, the Partners submitted additional
questions in writing. The questions and responses are attached in Appendix C.
SEA has indicated a willingness to structure the Solana Energy Alliance JPA so that the
funding of certain start-up costs would be borne from various sources, including The
Energy Authority (TEA), Calpine Energy Solutions, and SEA. The discussions to date have
fallen short of a full commitment to fund start up and at this time, little information is
known, including interest rate, terms or amounts. In the event funding cannot be secured
in this manner, SEA has . recommended that the Partners seek funding from an
experienced CCE lender like River City Bank. This CCE lender option would be available
regardless of governance option selected for the Partners, however.
SEA has already established an account with the CAISO . This account would continue to
be used for the Solana Energy Alliance JPA, which avoids CAISO costs for the Partners.
This would also apply to additional entities should they join the Solana Energy Alliance
JPA. Most energy management providers/schedulers would also have a CAISO account
established, therefore avoidance of CAISO costs is assumed in all governance options.
Within the SEA response, the proposed governance structure is as follows:
• No entry fee for Partners if TEA continues to be the new entity's power management
consultant and consideration is given to SEA for its prior investment in the current CCE
as well as net revenues SEA has accumulated to date.
• If a Partner city exits the new entity after power supply has been procured on its
behalf, an exit fee will be imposed.
• A new JPA would be formed with a one member-one vote protocol.
• The new JPA Board governances would be negotiated.
• Calpine Energy Solutions (Calpine), the SEA data management consultant, should be
retained due to Calpine's working knowledge of the SDG&E billing system .
• An Implementation Plan would be filed at the CPUC by December 31, 2019 to facilitate
a January 1, 2021, launch. The Implementation Plan would be a revised version of
SEA's Implementation Plan approved by the CPUC on February 19, 2018. It is
estimated that $50,000 in legal/technical expense will be required by the end of 2019
to pay for the drafting of a JPA agreement and Implementation Plan . This $50,000 will
be provided by the Partners (i.e. general fund).
• It is estimated that in 2020 the Partners will spend $850,000. The Partners could
internally finance the 2020 cash requirement via a prorated contribution from each
Partner's general fund. An allocation of the 2020 funding needs based upon electrical
GOVERNANCE ANALYSIS REPORT 5
August 20, 2019 Item #15 Page 18 of 135
load would result in obligations for the Partner cities of $25,500 for Del Mar, $212,500
for Encinitas and $612,000 for Carlsbad.
• Power supply portfolio would be customized to the maximum amount possible, to
reflect the Partners' individual goals and objectives.
• Allocation of surplus CCE revenues would be subject to negotiation.
• SEA has no stated Project Labor Agreement (PLA) policies but would not object to a
CCE pro-PLA condition especially if the benefits of such a condition are clearly
demonstrated.
• Under the terms of SEA's response to the RFI, a 2021 launch is attainable. Exhibit ES-
2 highlights some of the expected costs based on SEA's proposal.
Exhibit ES-2
Initial Funding needs for the Solana Energy Alliance JPA Option
Shared Among JPA Members
Timing Item Amount
September -December 2019 Develop JPA Agreement $25,000
File Amended Implementation Plan $25,000
Subtotal $50,000
January -May 2020 JPA Start-Up Overhead $100,000
Legal/Technical Consultants $200,000
Subtotal $300,000
June -December 2020 JPA Salary/Overhead $300,000
Legal/Technical Consultants $250,000
Subtotal $550,000
Totals 2019 $50,000
Totals 2020 $850,000
City of San Diego JPA
A City of San Diego JPA would be a JPA formed among the Partners and any other
interested party in SDG&E territory. The City of San Diego would lead the start-up effort
for a City of San Diego JPA and has initiated discussions and coordination regarding a
possible City of San Diego JPA. The City of San Diego has also initiated discussions on the
terms of the JPA agreement, including goals of the agency, makeup of the governing
board, voting protocols, committee selection, etc. A draft JPA term sheet has been
produced and discussions have occurred relating to the term sheet. On July 29, 2019, the
Partners submitted additional questions in writing. The questions are attached in
Appendix E.
A summary of the City of San Diego's proposed Term Sheet follows :
• Base power supply product of 50% renewable but can opt up to 100%.
• Special rates for economic development and communities of concern.
• Prioritize local resource development (silent on PLA).
GOVERNANCE ANALYSIS REPORT 6
August 20, 2019 Item #15 Page 19 of 135
• Requires agreement by governing boards by October 1, 2019. First vote by City of San
Diego JPA Board by December 2019.
• Start-up costs financed by and later reimbursed to City of San Diego, for founding
members.
• Voting starts with 1 member - 1 vote. Two or more members can call for load-based
weighted vote to veto decisions made by unweighted vote. Weighted votes require
2/3 majority to pass.
• Board/committee make-up in JPA agreement. Each member can appoint one
committee member.
• Allocation of excess revenues available to reimburse members for CCE-related
activities. The term sheet is silent on excess revenues for member-specific programs.
• If pursued, this option can likely result in a 2021 launch.
Economies of Scale
The Report also analyzed the costs of different sizes of CC Es. Costs for CCEs consist of two primary
types -overhead costs and power supply costs. Power supply costs constitute roughly 90% of a
CCE's budget. Operating/overhead costs are roughly 10% of a CCE's budget. The three JPA
governance options are large enough that wholesale power supply costs are already optimized.
A review of the operating/overhead costs for several CCEs was undertaken and benchmarked.
There are modest operating cost savings going from a small to large CCE, but these savings are
virtually insignificant when looking at overall CCE financial metrics and may be eroded when
additional consideration is made for portfolio targets, goal alignment and political differences.
Based upon this research, the operating cost per unit is fairly flat after a CCE exceeds
approximately 75,000 accounts. Conversely, diseconomies of scale and disproportionate market
share does occur once the JPA is large enough. The scenarios evaluated in this Report are not
large enough for diseconomies of scale to be a concern and each of the three JPA governance
options would result in exceedance of account volume necessary to achieve operating cost
efficiency.
Summary Evaluations and Recommendations
To assist in evaluating the Partners' various governance options, an evaluation matrix of these
options is provided below in Exhibit ES-3. For purposes of analyzing Exhibit ES-3, a "1" is the
lowest rating and a "5" is the highest rating.
GOVERNANCE ANALYSIS REPORT 7
August 20, 2019 Item #15 Page 20 of 135
Exhibit ES-3
Evaluation of Different Governance Options
Partner Solana Energy City of San
Issue Enterprise JPA Alliance JPA Diego JPA
Availability of Pre-Launch Funding 2 2 3 4
Launch by 2021 3 3 3 4
Voting Protocol 5 4 3 2
Local Decision Making 5 4 3 2
Amount of Rate Discount 1 3 3 3
Achieve CAP/Policy Goals 5 5 5 4
General Fund Protection 1 4 4 4
Existing Track Record 1 2 3 2
Future Flexibility 5 4 3 2
Local Renewable Development 4 4 3 2
Partner Staff Impact 1 2 3 5
Total 33 37 36 34
Based upon the evaluation of governance options iri Exhibit ES-3, different options have their
pros and cons. The total scores for the four governance options are relatively close, suggesting
that all options are viable and could produce benefit to the Partners and their constituents.
Additional observations are provided below.
Observations and Recommendations
In an effort to focus attention on core considerations, the following observations are offered:
■ Pre-launch capital is needed for all options and obtaining the necessary pre-launch capital of
$500,000-$1,000,000 is attainable for the Partners. Numerous lending institutions, service
providers and investment bankers represent viable sources of pre-launch capital. Many start-
up CCEs have successfully obtained start-up funding from such sources. It is also possible that
. the Partners could loan this capital to the CCE and be repaid after the launch.
■ The achievable rate discount for power procurement, with the exception of the Enterprise
fund, should be consistent across the other three governance options. The Partner JPA,
Solana Energy Alliance JPA and City of San Diego JPA are large enough to offer about the same
rate discount.
■ It appears that all likely participants in the governance options have similar CAP goals. To the
extent there are minor CAP variations among participants, it is deemed likely these
differences can be resolved.
EES's recommendations on the remaining governance issues are as follows:
■ The Enterprise option lacks enough size to offer maximum operational efficienc:ies and rate
discounts for each of the Partner cities. It also offers less general fund liability protection than
GOVERNANCE ANALYSIS REPORT 8
August 20, 2019 Item #15 Page 21 of 135
the JPA options. As such, the Enterprise option is not recommended for the Partner cities.
The Partners should enter into a JPA arrangement of some sort in order to achieve the
necessary economies of scale. The JPA can be a Partner JPA, Solana Energy Alliance JPA or
the City of San Diego JPA. The cities should be aligned and select the same governance
option, or the values discussed in the Report would change.
■ The weighted voting provisions in the proposed City of San Diego JPA option could create
disadvantages for the Partner cities. Given the relative sizes of the potential JPA participants,
the City of San Diego could guide key CCE decisions. For better or worse, this outcome may
take away local control and decision-making attendant with the CCE business model.
Notwithstanding the availability of start-up funding offered under the City of San Diego JPA
option, the weighted voting provision makes this governance option less appealing, when
compared to other JPA options available. Therefore, the City of San Diego JPA option is not
recommended for the Partners.
■ The Solana Energy Alliance JPA with SEA has some desirable attributes. This option is a
manageable size, has a track record, albeit short, and SEA is in close proximity to the Partners.
SEA also asserts that the $500,000 CAISO deposit for scheduling coordinator registration
would be avoided. Although the deposit would be avoided in all scenarios in which a third-
party power manager is contracted for. In EES's view, a material issue with SEA is its pre-
existing commitments and current SEA assets/liabilities. The nature of these pre-existing
commitments and disposition of current assets/liabilities may constrain the Partners in their
· selection of outside vendors and require the assumption of current SEA commitments and
assets/liabilities. For example, SEA has deferred costs which must be dealt with. The general
fund loan, TEA deferred costs, Calpine financing of CCE bond and repayment of Solana Beach
internal administrative costs currently total approximately $500,000. These costs have been
discussed orally yet the Partners have not yet executed the necessary agreements. SEA must
negotiate restructuring of contracts with TEA and Calpine and those negotiations will
naturally feed into the JPA agreement. Until a Solana Energy Alliance JPA agreement can be
negotiated, there cannot be clear understanding of the Solana Energy Alliance JPA structure
or the risks associated with timing and contract negotiations. SEA also has power
procurement constraints with TEA, data management contracts with Calpine and banking
commitments with River City Bank with terms through at least 2022. While all the necessary
mitigation arrangements can likely be achieved at some point in time, setting up a Solana
Energy Alliance JPA may take more time than is available and compromise a 2021 launch for
the Partners. These pre-existing consultant agreements may also preclude the Partners from
competitively bidding services with annual fees that approach $3M. As such, this option is
not recommended.
■ The Partner JPA is the recommended governance option for the Partners to utilize going
forward. This option has the benefits of being large enough to be economically .and
operationally efficient. Partner cities have jointly worked on CCE-related activities for the
past two years and understand each other's objectives/goals. The Partners can likely agree
on key JPA bylaw issues such as goals and objectives of the CCE, voting protocol, project labor
GOVERNANCE ANALYSIS REPORT 9
August 20, 2019 Item #15 Page 22 of 135
agreements, etc., and have the synergies and pre-existing work product to effectuate a 2021
launch. A Partner JPA would seemingly achieve a good balance of local control in decision-
making versus enough size to maximize operational efficiencies. Allocation of program-
related funds could be administered more equitably and efficiently through a Partner JPA
than via a City of San Diego JPA. Finally, under this recommended governance option, the
Partner JPA governance structure has the flexibility to undertake all needed back office
functions independently or look to jointly undertake these functions with other CCEs.
■ One final thought in the recommendations to the Partners is that SEA is close in proximity,
has similar CAP goals and has some operational CCE experience. But as noted above, SEA has
existing commitments that reduce the benefits of joining the SEA CCE compared with the
recommended Partner JPA. If the Partner JPA option is pursued, the Partners could offer to
incorporate the SEA customer base into the Partner JPA. If this offer is accepted either now
or in the future, the current SEA customer base could be included in a much larger CCE with
the attendant cost/rate savings. The Partner JPA could relieve SEA of its current
commitments, if desirable to the Partner, and SEA could manage any remaining commitments
outside of the Partner JPA. By relieving SEA of its current commitments, the Partner JPA may
assume certain liabilities of the SEA contracts. This creates the potential of exposing the
Partner JPA to financial exposure in amendments to previously established power purchases.
At this time, the full extent of SEA's contractual commitments is unknown. While additional
information and legal assistance and advice would be needed to effectuate this last option,
it could result in an optimal outcome for SEA and the Partners. Likewise, in addition to
considering SEA, a Partner JPA could opt to take on other partners in the future if it is deemed
mutually beneficial to do so. Some potential partners include the City of Oceanside that were
a part of the four-city CCE Feasibility Study, other North County cities and possible interested
cities in south Orange County that are within the SDG&E utility territory.
In summary, there are several governance options available to the Partners, all of which could
provide the desired rate savings as well as offer different levels of local control. On balance and
assuming the Partners wish to launch in 2021, EES recommends the Partners pursue the Partner
JPA model with an option to include the SEA customer base in the initial launch or other cities
after the Partner JPA is set up. Establishing the Partner JPA model now and extending
membership to other cities at a later date provides an expedient path for a 2021 launch for the
Partners while preserving the option to add other member agencies in the future.
GOVERNANCE ANALYSIS REPORT 10
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the two governance options. Each factor has features that create benefits and drawbacks as
outcomes from any organizational structure. These considerations should drive decisions when
setting up a CCE and establishing the foundational elements of governance and supporting
agreements.
Exhibit 1
Governance Decision Matrix
Factors to Feature Enterprise JPA Consider Considerations
Board Large boards are less Board members are Reduction in
selection/appoint-nimble but more city council members responsibility per
ment, board term, diverse. Odd number and will have an board member.
board boards mitigate tied existing working Broader pool of
responsibilities, votes. Board should relationship. qualified board
board count, board have oversight with members who may
Board qualifications. separation from day bring greater diversity
Structure to day functions. in expertise and
Representation capacities.
among the cities
should provide
equitable voice. Board
capabilities may drive
staffing decisions.
Change in city Large growth in one Greater flexibility. Additional CCE
demographics customer class or one Easier to align Partners may enable
(growth, customer city may change portfolio goals. easier growth. Larger
class weighting), culture and costs. If total CCE customer
new CCE additions, future CCE growth is base may empower
CCE Growth parameters to join considered, what are legislative voice.
the CCE. the potential Greater economic
limitations diversification.
(geography,
distribution utility,
sustainability goals,
etc.)?
Voting parameters Default mitigation, Decisions made locally One city, one vote
and process, rate impact tolerance, by city council. may become 25%,
dispute resolution, independent cultures 10% or even 5% of the
vendor vs. internal and optimization of vote depending on
services. shared cultures. Partner count within
Decision the JPA. Dispute
Making resolution structure
should consider risks
of a large city to .
pursue litigation or
exit. Larger JPAs often
need more time to
make decisions.
GOVERNANCE ANALYSIS REPORT 12
August 20, 2019 Item #15 Page 25 of 135
Exhibit 1
Governance Decision Matrix
Factors to Feature Enterprise JPA Consider Considerations
Economies of Administrative Easier to allocate Transaction allocation
scale, rough oversight and transactions and track can become costly and
Cost justice, economic margins. cost causation. cost causation may
Allocation transparency, cost allocate costs to other
causation. JPA members. Can
become difficult to
administer.
Default risk, credit Administrative costs, Higher upfront capital Higher administrative
risk, market optimization vs. risk cost. Larger say in costs to allocate
exposure risk, avoidance, market trading partners and transactions. Smaller
Risk hedging practices, exposure tolerance. hedging practices. startup capital cost
Allocation transaction May need additional per JPA member.
allocation. language in power Protection of Partner
contracts to help general funds can be
protect general fund. achieved.
Allocations of CCE Rate impacts of Each city would have Economic gains in any
benefits, cultural decisions, full local control over year may fund capital
programming, cultural impacts of program decisions. projects located
staffing oversight, cost and risk within or outside of
Cultural and salaries and decisions. member cities'
Political benefits, corporate boundaries. Staffing
Interests culture and risk may be easier to
tolerance, rate attract/retain, and
tolerance, salaries may be more
sustainability competitive. Local
targets. control is limited.
Sharing costs of Capital injection up Entry costs are Anticipated energy
startup and front with regular cost duplicated for same load often mirrors
upfront capital true up and start-up effort across start-up costs. One
reserves. reconciliation. all Partner cities. city one vote structure
averages startup costs
regardless of size.
Smaller entities may
have lower startup
Entry Costs costs in a weighted
vote structure.
Recouping financial
reserves may also be a
larger burden for the
small cities. Per city,
start-up costs are
lower compared with
Enterprise option.
Cost to leave. Transaction structures Exit fees borne by Diverse opinions on
term, volume, credit each Enterprise Fund. transaction structures
Exit Costs and capital projects all and portfolio goals.
impact the exit fee. Established CCEs may
have predefined exit
GOVERNANCE ANALYSIS REPORT 13
August 20, 2019 Item #15 Page 26 of 135
Exhibit 1
Governance Decision Matrix
Factors to Feature Enterprise JPA Consider Considerations
fees and termination
penalties.
Partners' role and Roles and city council would Larger overall volume
operations agent responsibilities should determine operation. may decrease cost of
Operations role. be clearly stated. operations agent.
Agent Role Partner oversight
should be the same
for all Partners.
Regional Considerations
Various cities within the county ranging in size and goals and even the county of San Diego
themselves, are pursuing CCE programs. Separate CCE programs throughout the county allow
for diverging goals and structures but do not decrease the climate reduction achieved county
wide. Inland cities vary in load shape compared to coastal as a larger amount of air conditioning
load would reside inland. The peak load of inland cities would be higher than coastal and this
variance in load shape may drive rate design and power supply strategies. Climate action plans
are at various stages throughout the county and additional cities may seek to form CCE's at a
later date. The CCE landscape is evolving daily.
GOVERNANCE ANALYSIS REPORT 14
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Economies of Scale in Power Supply
The greatest benefit from economies of scale is in reduction in power supply costs. The bulk of
the reduction in power supply costs comes from the ability to have multiple power supplier
options. Custom tailored power supply is needed to meet the Partners' renewable portfolio goals
(among others). This is due to the structure of the wholesale energy market. When available
buyers or sellers are reduced, a transaction lacks liquidity and the purchaser or seller will add a
risk premium that recognizes that the transaction cannot be liquidly traded. Small volume
transactions also carry additional curtailment risk which can increase a CCE:s costs.
Power supply is based on energy forecasts that, in general, become more accurate the closer to
delivery in which they are run. Since forecasts change over time, the power supply markets allow
for transacting around several supply products, including long term (or structured), annual,
quarterly, prompt month, within month, day-ahead, and real time within the hour through the
California Independent System Operator (CAISO). In each of the wholesale markets, the market
participants round up or down in 25 MW increments which creates liquidity for purchases and
sales by establishing like products. When transacting in a volume that is not divisible by 25 MW,
the CCE transacting pays a no-liquidity premium.
The premiu·m is a result of the fact that the party buying from or selling to the CCE must combine
the transaction with other power transactions in order to trade the power in the wholesale
market. Regardless of the transaction term-long term, mid-term or within hour transaction-
the CCE would pay a premium to purchase or receive less revenue when trading a transaction
not divisible by 25 MW.
As such, purchases of at least 25 MW in 25 MW increments will produce favorable power prices.
The Partners have a peak load of roughly 250 MW and an average load of 125 MW. A CCE of this
size should receive optimal power supply pricing. This efficiency is reached in all three JPA
options.
GOVERNANCE ANALYSIS REPORT 16
August 20, 2019 Item #15 Page 29 of 135
the most expedited but may not be optimal due to operational costs, lack of economies of scale
and the financial inability to mitigate risk.
Partner JPA
Under the Partner JPA option, each of the Partners would operate jointly under a JPA. When
considering operations, the day to day of the Partner JPA may have varying perspectives on
portfolio goals, staffing, and JPA structure; however, the Partners have established history and
similar environmental goals. The Partner JPA can be decisive due to the size of the JPA board
(typically one board member from each member city). Risk considerations would be minimized
with a larger volume of trading, economic diversification from three separate cities, the reduction
of upfront cash burden on any individual city ano the impact of any default by a city or supplier.
The combined strength of a Partner J°PA optimizes the value of the shared capabilities from the
Partners.
Forming a Partner JPA requires contracts be written to support a defined structure that preserves
each city's unique needs while leveraging economies of scale. The Partners would have control
in decision-making and can determine the structure of the Partner JPA. This approach will take
additional time when compared to the Enterprise option. Although a larger JPA brings more
negotiation resources to the table, communication and establishment of risk, goals and
environmental targets may take time. If the Partners formed a JPA, a launch date of 2021 is
possible. Exhibit 4 below summarizes initial funding and start-up costs.
Exhibit 4
Initial Funding needs for the Solana Energy Alliance JPA Option
Shared Among JPA Members
Timing Item Amount
September -December 2019 Develop JPA Agreement $25,000
File Amended Implementation Plan $25,000
Subtotal $50,000
January-May 2020 JPA Start-Up Overhead $100,000
Legal/Technical Consultants $200,000
Subtotal $300,000
June -December 2020 JPA Salary/Overhead $300,000
Legal/Technical Consultants $250,000
Subtotal $550,000
Totals 2019 $50,000
Totals 2020 $850,000
Other JPA Options
The next section in this Report details the other JPA options available to the Partners based on
the response to the RFI issued in April 2019.
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Section 5 -Analysis of RFI Responses
The RFI was released on April 12t_h and supplemented on April 19th• Responses were due on May
15th• The RFI structure solicited interest in the form of a question and answer dialog. The RFI
was formally distributed to 21 CCEs throughout California. In addition, informal conversations
were held with eight entities that were at various stages in the process of determining feasibility
and establishing a CCE. The following exhibits are attached:
1. Appendix A --RFI and Supplement
2. Appendix B --RFI distribution list
3. Appendix C --SEA RFI response and associated correspondence
4. Appendix D -City of San Diego RFI response and associated correspondence
RFIResponses
The Partners received two responses to the RFI, one from Solana Energy Alliance {SEA) and one
from City of San Diego. This establishes the following:
l. Of the CCEs and JPAs currently operating outside of SDG&E's service territory, none are
interested in entering into a shared operations arrangement with the Partners.
2. There were no currently established JPAs that expressed interest in expanding to include the
Partners.
3. There was interest in forming a Solana Energy Alliance JPA and a City of San Diego JPA.
4. Costs and standard terms of JPA membership within the SDG&E service territory are in the
process of being established and negotiations are ongoing.
The RFI responses and associated climate goals, staffing, start-up costs, voting and staffing are
considered in this section.
City Climate Action Plan (CAP) Goals
Exhibit 5 below summarizes some of the high-level CAP goals developed by the Partners and the
two RFI respondents: City of San Diego and SEA. There are several CAP goals and measures
included in each report; however, Exhibit 5 addresses only those most directly related to a CCE
partnership. The greenhouse gas reduction goals are all consistent with the State goals although
each city defines the baseline differently and the subsequent reduction.
GOVERNANCE ANALYSIS REPORT 19
August 20, 2019 Item #15 Page 32 of 135
Exhibit 5
Comparison of City CAP Goals
Municipal Reduce
Zero Municipal Zero
Reduce GHG Renewable Emission Energy Emission
City Emissions Energy Vehicles Consumption Solar PV Vehicles
51% below 25% energy 2010 San Diego emissions by 100% by 2035 90% by 2035 use reduction Not defined Not defined
2035 by 2035
By 2035 :
Solana 50% Below 50% 10.8 MW Increase ZEV
Beach 2010 levels 100% by 2035 reduction in Not defined Residential miles to 30% by 2035 gasoline use 2 MW Non-
Residential
By 2035: 9.1
MW
Carlsbad 49% below State Not defined Not defined Residential Increase ZEV
2005 by 2035 Mandate 10.7 MW for miles to 25%
Non-
Residential
By 2030: 1
Reduce fossil 15% energy MW Convert the
41% below Residential city's light-Encinitas 2012 by 2030 100% by 2030 fuel use by use reduction 0.8 MW for duty fleet to 30% by 2030 by 2030 Non-ZEV by 2030
Residential
By 2035: 1
MW
Del Mar 50% Below 100% by 2035 Not defined Not defined Residential Not defined 2012 by 2035 1.5 MW for
Non-
Residential
Each of the RFI respondents plan to procure 100% renewable energy to meet electricity
requirements by 2035, which is consistent with Del Mar's CAP goal. With either option, Encinitas
may have the option to purchase 100% renewable energy as part of the rate offerings in order to
meet the Encinitas CAP goal at 2030. The City of San Diego's latest draft term sheet dated June
27, 2019, indicates that the base product would consist of 50% renewable energy with the option
to opt up to 80% and 100% renewable energy products. The long-term goal is 100% renewable
energy by 2035, with other variations set by each member city.
All of the cities have goals for on-site, customer owned solar generation distributed throughout
the Partners' service territory. Although the City of San Diego's CAP does not specify a goal, goals
are defined in supporting documents. Net energy metering (NEM) rates that incentivize these
installations as well as streamlining the permitting process may help increase the penetration of
these resources. Based on the above CAP goals, it could be expected that a CCE governance
option would allow for strong incentivization for NEM resources. Zero Emissions Vehicles (ZEV)
goals for range from not defined to 90% by 2035.
GOVERNANCE ANALYSIS REPORT 20
August 20, 2019 Item #15 Page 33 of 135
Start-Up Costs
Solana Energy Alliance JPA
If they joined SEA, the Partners would avoid certain costs required to participate in the CAISO.
This assumption is true in all the JPA scenarios however; EES has assumed that any po~er
manager/scheduler would be a registered schedule coordinator for the CAISO. SEA provides that
other start-up costs would be funded through various sources including current service providers:
The Energy Authority (TEA), Calpine Energy Solutions (Calpine), and SEA. Should additional
financing be required, River City Bank may be an option. Calpine offers $500,000 in start-up
funding at 5% interest which can be used to cover staffing, marketing, and notice mailing. TEA
may provide a deferral arrangement for power supply costs to assist with the cash flow
requirements. Specific offers from TEA and other power management vendors would need to
be evaluated in order to determine if additional funding for cash flow is required.
Cities/jurisdictions are often reimbursed for CCE implementation costs (staff time) once the CCE
begins to generate revenues. SEA is willing to reimburse the Partners' staff time spent on
implementation. SEA provided the following estimates for start-up costs as shown in Exhibit 6.
Exhibit 6
Start-Up Costs and Financing per SEA
Cost Estimate Financed By
CAISO Fee and CCE Bond $148,000 SEA and Calpine
Opt-out Notices $302,500 Calpine
Technical Consulting $115,000 SEA
Discretionary Marketing $50,000 Calpine
Energy Procurement including Cost of Credit $29,000,000 TEA
Total $29,615,500 Various
City of San Diego JPA
The City of San Diego plans to cover all CCE implementation costs and working capital
requirements. The City of San Diego would be reimbursed for these expenses once the CCE
begins to generate positive cash flow.
Staffing and Consultants
Solana Energy Alliance JPA
SEA plans to continue using the same consultants if the Partners select a Solana Energy Alliance
JPA option and join SEA. The current contracts wouid be amended to cover the new cities and
loads. SEA believes using the same consultants will create a smooth transition for the Solana
Energy Alliance JPA operation. Once established, these contracts will be subject to review by the
JPA Board. These contracts could be renegotiated or terminated after 2022.
While there would be benefits to continuing with SEA's current contracts, it would also be worth
evaluating the same services through an . RFP process. An RFP process would ensure that the
GOVERNANCE ANALYSIS REPORT 21
August 20, 2019 Item #15 Page 34 of 135
Partners obtain the needed services at an efficient price. However, it would not be efficient
administratively utilizing both SEA's current contractors and possibly a different set of
contractors for the balance of the JPA load.
City of San Diego JPA
Under the City of San Diego JPA option, the JPA Board would be tasked with defining the staffing
and consulting needs. Each member jurisdiction would have one board member to evaluate and
vote on various staffing and contract decisions. Consulting services would be contracted through
an RFP process for all JPA members.
Qualitative Considerations
Both the Partner JPA structure and the Solana Energy Alliance JPA structure result in similar
savings from an economies of scale perspective; however, there are some qualitative factors to
consider such as local economic impacts for hiring JPA staff, and use of consultants, and potential
program offerings. Exhibit 7 below summarizes the analysis for these qualitative factors.
Exhibit 7
Qualitative Considerations for CCE Program Size
Partner JPA or Solana Energy Alliance City of San Diego JPA
JPA
Local Economic Impacts Hire staff that live and work locally Staffing will be central to population
creating greater impacts. center, likely City of San Diego.
Program Offerings May take longer to achieve funding for More quickly obtain funding for new
new programs; however, program programs from larger kWh sales;
benefits will remain within the Partner however, ensuring Partner cities
cities. obtain an equitable share of CCE
benefit is not a given.
Risk Exposure Less diversified across member city Potentially more diversified across
economies. member city economies.
Ability to Respond to Smaller staff, executive oversight is Broader executive · perspective and
Industry Changes easier to align, and more focused politics larger staff eases implementation of
allows for expedited decision making. decisions. However, more members
could make it more difficult to
achieve a quorum and agreement
when making board decisions.
Legislative Strength A smaller portion of the San Diego A unified San Diego region CCE voice
demographic may have divergence in the could result in larger political sway,
regional CCE advocacy but also could however consensus among a larger
result in alignment on legislative issues group is difficult to achieve and
y,,ith sharper policy focus. compromised positions can result in
little political impact.
GOVERNANCE ANALYSIS REPORT 22
August 20, 2019 Item #15 Page 35 of 135
Voting
Solana Energy Alliance JPA
In a Solana Energy Alliance JPA, it has been proposed that each member jurisdiction would have
one vote regardless of electric load size and that a weighted voting structure for special votes
such as veto would not be utilized. Committees would be established by the Board and each
member agency would appoint a representative to the established committees. The· member
agencies would determine the location of board meetings, responsibilities of board members,
and determine the applicability of project labor agreements.
City of San Diego JPA
The City of San Diego has proposed that certain votes be subject to weighted structure when
requested. After an equal vote is complete (1 member= 1 vote), 3 or more board members may
request a weighted vote. Weighted votes require a super majority to pass (2/3). The weighting
would be determined by each member's share of the total JPA load. A super majority vote would
be required for issuing bonds or debt or to amend the JPA or bylaws. New JPA members would
be admitted by unanimous consent of all members.
The City of San Diego has proposed the following committees: Executive, Finance/Risk, Technical,
and Community Advisory. Weighted voting would allow the City of San Diego to hold influence
over the JPA since its relative load share is greater than 50% in most cases (will ultimately depend
on how many jurisdictions join). The latest JPA Agreement draft does caps any one vote to a 49%
share and any excess vote over 49% would be distributed equally among the remaining members.
Exhibit 8 below provides an example of a voting structure where half of the vote is equally
weighted, and half the vote is based on the share of load.
Carlsbad
Del Mar
Encinitas
San Diego
Solana Beach
Total Load
Schedule
Member Agency
Solana Energy Alliance JPA
Exhibit 8
Weighted Voting 5 Members
Pro Rata Estimated
Voting Annual Load
Share GWh
10% 735
10% 30
10% 258
10% 6,000
10% 70
50% 7,093
Total
Weighted Voting
Vote% Share
5.2% 15.2%
0.2% 10.2%
1.8% 11.8%
42.3% 52.3%
0.5% · 10.5%
50% 100%
A Solana Energy Alliance JPA proposes to perform a technical study, establish the JPA agreement,
and develop the Implementation Plan in the August to October timeframe. The Implementation
GOVERNANCE ANALYSIS REPORT 23
August 20, 2019 Item #15 Page 36 of 135
Plan would be filed in December 2019 following the formation of the JPA Board in October.
Financial support would be pursued in December for any costs not deferred by the consultants.
City of San Diego JPA
The City of San Diego also plans to finish the JPA negotiations by October and to file an
Implementation Plan to the CPUC in December.
Leaving the J PA
Solana Energy Alliance JPA
SEA has not determined a specific requirement for the case where a member city wishes to
withdraw from the Solana Energy Alliance JPA.
City of San Diego JPA
The City of San Diego proposal would require that any member provide 1-year notice before
leaving the JPA.
Summary
Exhibit 9 summarizes the offers from SEA and the City of San Diego. Both offers propose similar
timing for the launch. The primary differences are in the CCE size, organization of consultants
and staffing, weighted voting, and status of operation (meaning SEA is currently operating and
the City of San Diego is not).
Exhibit 9
RFI Response Summary
Specific Features Solana Energy Alliance JPA City of San Diego JPA
Respondent SEA City of San Diego
Climate Goals Similar goals with rate options Similar goals with rate options
Start-Up Costs and Working Capital Funded by existing organizations Funded by the City of San Diego
Financing and reimbursed after launch and reimbursed after launch
(consultants and SEA)
Organization TEA, Calpine, and SEA staff RFP process
Voting Equal voting Equal and load-weighted voting
Schedule Launch 2021 Launch 2021
Exit Process Not yet defined 1-year notice
GOVERNANCE ANALYSIS REPORT 24
August 20, 2019 Item #15 Page 37 of 135
Section 6 -Results and Recommendations
The Partners must each decide among the four governance options described in this Report. The
Enterprise and Partner JPA options are analyzed based on the technical Feasibility Study results
and CCE best practices. The other two options: Solana Energy Alliance JPA and City of San Diego
JPA are analyzed based on the responses to the RFI issued for the purposes of this Report. In
order to help compare governance options, the matrix in Exhibit 10 was developed based on
qualitative ranking in nominal scale. For purposes of analyzing Exhibit 10, a "1" is the lowest
rating and a "5" is the highest rating.
Exhibit 10
Evaluation of Different Governance Options
Partner Solana Energy City of San
Issue Enterprise JPA Alliance JPA Diego JPA
Availability of Pre-Launch Funding 2 2 3 4
Launch by 2021 3 3 3 4
Voting Protocol 5 4 3 2
Local Decision Making 5 4 3 2
Amount of Rate Discount 1 3 3 3
Achieve CAP Goals 5 5 5 4
General Fund Protection 1 4 4 4
Existing Track Record 1 2 3 2
Future Flexibility 5 4 3 2
Local Renewable Development 4 4 3 2
Partner Staff Impact 1 2 3 5
Total 33 37 36 34
Exhibit 10 shows that the four governance options have very similar scores. Justification for each
score is provided below based on the findings of this Report.
Availability of Pre-Launch Funding
The City of San Diego JPA is the best option for pre-launch funding since the City of San Diego is
planning to loan funds for start-up and working capital. The City of San Diego has already hired
initial consultants to support CCE start-up. The funds would be repaid to the City of San Diego
once the CCE is operational. A score of 4 was given since the terms of repayment are not yet
defined. A Sol_ana Energy Alliance JPA is the next best option where SEA's contractors have
offered funding for start-up. This option is slightly less secure since official offers are not in place
and the Partners may need to obtain additional funding from a financial institute to cover working
capital. Lastly, the Partner JPA and Enterprise options are rated as 2 since these cases would
require funding from the bank or the option for the cities to loan some or all of the pre-launch
costs. In all cases, the appropriate funding is expected to be available; however, the ranking
reflects the relative ease with which the funding may be obtained.
GOVERNANCE ANALYSIS REPORT 25
August 20, 2019 Item #15 Page 38 of 135
Launch by 2021
An Implementation Plan must be filed with the CPUC by December 31, 2019, in order for a CCE
to launch in 2021. The Partner JPA option requires filing of an implementation plan, completing
JPA and vendor contract negotiations and hiring and onboarding staff. The Solana Energy Alliance
JPA would require the filing of a new or amended implementation plan and SEA would need to
unwind current contracts, complete a JPA and layer on new or amended vendor contracts and
add additional staff. The City of San Diego JPA requires the filing of a joint implementation plan,
completing JPA and vendor contract negotiations and hiring and onboarding staff. The Partner
JPA option is on track to achieve a 2021 launch date, the City of San Diego JPA option would
require additional consensus and greater negotiations resources however, the City of San Diego
is motivated to put a JPA in place and file an implementation Plan in 2019. SEA has also
committed to meeting the 2021 launch date (Solana Energy Alliance JPA); however, in order to
ensure the amended Implementation Plan is filed in December, the Partners would need to
largely accept SEA's proposal and expeditiously form a JPA. With similar effort, the Partners could
negotiate a JPA among themselves to form a Partner JPA, or each Partner city could pursue the
Enterprise option. All options are feasible for a 2021 launch with varying degrees of effort by the
Partners.
Voting Protocol
The Enterprise option provides the most voting power to each city since each respective city
council would make decisions for their CCE. The Partner JPA provides the next best voting
protocol given a one city one vote construct. Slightly less preferred is the Solana Energy Alliance
JPA where SEA is included in the governance. Adding another city dilutes the voting power of
each city based on the representative load. Finally, the City of San Diego JPA is the least preferred
for voting protocol as the JPA proposal calls for both equal and weighted voting. The weighted
voting would provide the City of San Diego a larger amount of influence because its load is
significantly greater than all the Partners' loads combined.
Local Decision Making
The Enterprise option allows the highest level of involvement in local decision making. The
Partner JPA, Solana Energy Alliance JPA and City of San Diego JPA decision making scores were
ranked based on voting structure. The Partner JPA allows the highest score for local decision
making while garnering some of the JPA benefits. The Solana Energy Alliance JPA has an equal
weighting of votes and therefore allows for a higher amount of control over decision making than
the City of San Diego JPA.
Once the JPA is established in any option, the JPA would have ongoing decision-making
requirements, including investment and other spending decisions. Special programs may be
developed that can be custom tailored to meet individual cities' goals. The Partner JPA option
would restrict these decisions to the Partners and therefore empower the Partners to deve_lop
local programs unique to Encinitas, Del Mar and Carlsbad.
GOVERNANCE ANALYSIS REPORT 26
August 20, 2019 Item #15 Page 39 of 135
Rate Discount
The three JPA options have the potential for the highest rate discounts and were given a ranking
of 3. The Enterprise option has a ranking of 1 since the Partn_er's technical Feasibility Study
showed that Del Mar and Encinitas had lower ability to offer rate discounts compared with the
JPA option.
CAP Goal Alignment
All four governance options are desirable ways to assist the Partners in meeting individual CAP
goals such as renewable energy and customer programs for electric vehicles or energy efficiency.
The Enterprise and smaller JPA options (Partner or North County) are ranked highest due to local
control in voting construct. CCE discretionary revenue is more likely to remain within the
Partners' service areas.
General Fund Protection
All three JPA options are rated as 4 for general fund protection. Since each JPA will'be the
contracting entity for services including power supply, city general funds are not likely to be
directly liable but legal advice on the liability issue is recommended. The Enterprise option means
that each city must enter in.to service contracts individually and protection of the city's general
fund can be established but may be more challenging.
Existing Track Record
The Solana Energy Alliance JPA option is ranked at 3 for "existing track record" since SEA is a
currently operating CCE. SEA scored high overall as they have experience as a CCE and the
necessary relationships to manage power supply. SEA has a track record of rate reduction for
customers, although current wholesale energy pricing and PCIA increases are impacting this
reduction. SEA's balance sheet has debt which will impact rates going forward The other JPA
options are ranked lower, at 2, since these entities have not yet operated CCE programs;
however, the inclusion of several jurisdictions would broaden the experience and talent pool for
board members in public electric utility operation. Finally, the Enterprise option is ranked lowest
at 1 since each city would be individually responsible for decision making with regard to CCE
operations. It is less likely that each city could offer the same experience for CCE operation as
several cities combined under a JPA.
Future Flexibility
The ability to adapt to changing circumstances and political pressures is a consideration in
governance structures. Any governance model should be agile and able to adapt to changing
conditions. Future flexibility is ranked the same as voting protocol and local decision making.
The greater the local control and voting power, the greater flexibility is afforded going forward.
For example, when majority voting is required for new programs and rate decisions, an Enterprise
GOVERNANCE ANALYSIS REPORT 27
August 20, 2019 Item #15 Page 40 of 135
option will vote consistent with what is in the city's best interest while a JPA vote may not result
in optimal decisions for individual members.
Local Renewable Development
Local renewable development can be incentivized through direct investment from the CCE or
incentives through net energy metering or feed-in-tariffs. With regard to direct utility
investment, an Enterprise CCE can ensure that investments are made within its service area to
provide maximum local benefit. Therefore,· the Enterprise option was ranked highest in this
category. Under the JPA options, there is decreasing certainty the local renewable development
will occur within any particular city's service area. As the size and service area of the JPA
increases, the certainty of local development decreases since most JPAs do not have provisions
that allocate direct investments based on load share. Therefore, the City of San Diego JPA is
given the lowest ranking while the North County and Partner JPAs are given higher rankings due
to the smaller size.
Partner Staff Impact
Partner staff will be responsible for implementation, contracting and ongoing oversight for any
governance options selected. The Enterprise option would create the highest staff responsibility
as each Partner would need to separately contract for or onboard the necessary expertise to
successfully launch and run a CCE. Accordingly, the Enterprise scored the lowest. The City of San
Diego JPA scored the highest due to the City of San Diego's offer to lead the formation effort,
including the contracting and financing processes. Both the Partner JPA and the Solana Energy
Alliance JPA options will require contract negotiations, financing and launching efforts, however
the ongoing staff work for the Solana Energy Al Hance JPA would be reduced due to the experience
that SEA would naturally contribute.
Total Rating
When all factors and rankings are summed in each column the Partner JPA has the greatest score
due to its ability to achieve economies of scale while maintaining local control. Next, the Solana
Energy Alliance JPA, then City of San Diego JPA and finally the Enterprise option. An Enterprise
CCE in Del Mar, and to a lesser extent Encinitas, are not likely to provide significant rate discounts,
the Solana Energy Alliance JPA would be the next best. Finally, the City of San Diego JPA is the
lowest JPA rank option due to diluted decision-making authority of each city. While the cities
would have a lower degree of local decision-making control, there would be diversity in the size
of CCE load as well as the benefit of not having to put a lot of effort into start-up through staff
engagement and financing.
Observations and Recommendations
In an effort to eliminate issues that are not determinative, and to focus on issues that matter,
the following observations are offered:
GOVERNANCE ANALYSIS REPORT 28
August 20, 2019 Item #15 Page 41 of 135
■ Pre-launch capital is readily available for all options but obtaining pre-launch capital of
$500,000 -$1,000,000 is not judged to be a serious concern. Numerous lending institutes,
service providers and investment bankers are available for this pre-launch capital. Many start-
up CCEs have successfully implemented this option. It is also possible that the Partners could
loan this capital to the CCE and be repaid after the launch.
■ The achievable rate discount, with the exception of the Enterprise option, should be
consistent across the other three governance options. The Partner JPA, Solana Energy
Alliance JPA and City of San Diego JPA are large enough to offer about the same rate discount.
■ It appears that all likely participants in the governance options have similar CAP goals. To the
extent there are minor CAP variations among participants, it is deemed likely these
differences can be resolved.
■ There must be alignment among the Partners for any governance decision. Selection of any
of the JPA options would result in a viable governance option, however the individual cities
do not have the necessary size to achieve economies of scale alone.
EES's observations on the remaining governance issues are as follows:
■ The Enterprise option lacks enough size to offer maximum operational efficiencies and rate
discounts. It also offe.rs less general fund liability protection than the JPA options. As such,
the Enterprise option is not recommended for the Partner cities.
■ The weighted voting provisions in the current City of San Diego JPA option may be
problematic. Given the relative sizes of the likely JPA participants, the City of San Diego could
guide key JPA decisions. For better or worse, this outcome may take away much of the
desirable local control and decision-making attendant with the CCE business model.
Notwithstanding the availability of start-up funding offered under the City of San Diego JPA
option, the weighted voting provision makes this governance option inferior to other JPA
options available to the Partners and is not recommended for the Partners going forward.
■ The Solana Energy Alliance JPA has some desirable attributes. This option is a manageable
size, has a track record, albeit short, and SEA is in close proximality to the Partners. SEA has
pre-existing commitments and current SEA assets/liabilities. The nature of these pre-existing
commitments and disposition of current assets/liabilities may constrain the Partners in their
selection of outside vendors and require the assumption of current SEA commitments and
assets/liabilities. SEA must negotiate new contracts or amendments with TEA and Calpine
while negotiating the Solana Energy Alliance JPA. SEA has debt that will impact future rates.
SEA also has power procurement constraints with TEA, data management contracts with
Calpine and banking commitments with River City Bank with terms through at least 2022.
While all the necessary mitigation arrangements can likely be achieved at some point in time,
setting up a Solana Energy Alliance JPA may take more time than is available for a 2021 launch
GOVERNANCE ANALYSIS REPORT 29
August 20, 2019 Item #15 Page 42 of 135
for the Partners. These pre-existing consulting agreements may also preclude the Partners
from competitively bidding services. As such, this option is not recommended.
■ The Partner JPA is operationally efficient, the Partner cities have jointly worked on CCE-
related activities for several months and understand each other's objectives/goals, can likely
agree on key JPA bylaw issues such as voting protocol, project labor agreements, etc., and
have the synergies and pre-existing work product to effectuate a 2021 launch. A Partner JPA
would seemingly achieve a good balance of local control in decision-making versus enough
size to maximize operational efficiencies. Allocation of program-related funds could be
administered efficiently as well. The Partners may elect to allow other CCE's to join the JPA.
This governance option allows the Partners the flexibility to undertake all needed back office
functions independently or look to jointly undertake these functions with other CCEs. The
Partner JPA is the recommended governance option.
■ One final thought in the recommendations to the Partners is that SEA is close in proximity,
has similar CPA goals and has some real-time CCE experience. But as noted above, SEA has
existing commitments that reduce the benefits of the CCE compared with the recommended
Partner JPA. If the Partner JPA option is pursued, the Partners could offer to incorporate the
SEA customer base into the Partner JPA. If this offer is accepted either now or in the future,
the current SEA customer base could be included in a much larger CCE with the attendant
cost/rate savings. The Partner JPA could relieve SEA of its current commitments, if desirable
to the Partner JPA, and SEA could manage any remaining commitments outside of the Partner
JPA. While legal assistance and advice would be needed to effectuate this last option, it could
result in an optimal outcome for SEA and the Partners.
In summary, there are several governance options available to the Partners, all of which could
provide the desired rate savings as well as offer different levels of local control. On balance and
assuming the Partners wish to launch in 2021, EES recommends the Partners pursue the Partner
JPA model with an option to include the SEA customer base in the initial launch or other cities
after the Partner JPA is set up. Establishing the Partner JPA model now and extending
membership to other cities at a later date provides an expedient path for a 2021 launch for the
Partners while preserving the option to add other similar-minded cities in the future.
GOVERNANCE ANALYSIS REPORT 30
August 20, 2019 Item #15 Page 43 of 135
Appendix A -RFP-Northern SD Cities RFI-CCE
Program Governance -Final plus Supplemental
August 20, 2019 Item #15 Page 44 of 135
City of Encinitas1 Del Mar and Carlsbad (Partner Cities)
Requestforlnterest
CONTACT
Ms. Crystal Najera
City of Encinitas
SOS South Vulcan Avenue
Encinitas, CA 92024
INTRODUCTION:
Background and Location
TECHNICAL CONSULTANT
EES Consulting, Inc.
Kirkland, WA; Portland, OR; La Quinta, CA
The City of Encinitas has an approximate population of 60,000 and is characterized by coastal beaches,
cliffs, flat-topped coastal areas, steep mesa bluffs and rolling hills. The City of Encinitas was incorporated
in 1986, drawing together the communities of New Encinitas, Old Encinitas, Cardiff-by-the-Sea, Olivenhain
and Leucadia. Encinitas is located along six miles of Pacific coastline in northern San Diego County, and
offers a unique blend of art and culture. The century-old Downtown 101 coastal shopping district features
historic architect_ure, quaint shops, sidewalk cafes, specialty retail stores and upscale restaurants.
The City of Carlsbad has a great climate, beautiful beaches and lagoons, and abundant natural open space
combined with world class resorts, family attractions, well-planned neighborhoods, excellent schools and
a small-town beach community feel. Covering 39-square miles, the City of Carlsbad is home to
approximately 112,000 residents. Carlsbad is also home to a thriving business community with a focus in
the action sports, life sciences, technology and tourism industries.
The City of Del Mar was incorporated in 1959 and with a population of 4,194 people, is the smallest city
in San Diego County. However, the 2.2-mile coastline with beach access and the County Fairgrounds
which hosts large, year-round events, including the annual county fair and the thoroughbred races, means
a large influx of visitors. The community is primarily composed of single-family residential neighborhoods,
with retail uses and restaurants in the downtown, a small commercial area, and several hotels.
Interest in CCE and Justification for RFI
The Cities of Encinitas, Del Mar and Carlsbad (Partner Cities) are considering the formation of a community
choice energy (CCE) program as permitted under California Assembly Bill 117. The Partner Cities are
nearing the completion of a CCE°Technical Feasibility Study and are currently evaluating the best approach
to governance and to developing an affiliation among themselves with existing CCEs, other cities exploring
CCE, and/or a third party.
The objective of this Request for Interest (RFI) is to solicit feedback and interest to assist the Partner Cities
in determining governance options, affiliations with existing CCEs, other cities exploring CCE, and/or
pg. 1
August 20, 2019 Item #15 Page 46 of 135
REQUEST FOR INTEREST {RFI):
The Partner Cities are developing a detailed assessment of available governance options as the next
exploratory phase of forming a new CCE or joining an existing CCE. To assist in this effort, the Partner
Cities are seeking interest or potential partners or management entities, along with policy and financial
metrics in order to make informed decisions and advise their elected officials. The Partner Cities require
response no later than May 14, 2019.
Process:
A. Obtaining RFI Documents
The website for this RFP and related documents is: PlanetBids (http://www.encinitasca.gov/bids). All project
correspondence will be posted on the PlanetBids website. It is the responsibility of Proposers to check the
website regularly for information updates and RFI clarifications, as well as any RFI addenda. To submit a
proposal, a Proposer must be registered with the City of Encinitas as a vendor. To register as a vendor, go to
the following link (http://www.encinitasca.gov/bids), and then proceed to the "New Vendor Registration"
link. All addenda will be available on the PlanetBids website.
B. RFI Contact
The City of Encinitas will receive information requests on this RFI up to 5:00 p.m., Pacific Standard Time
on April 24, 2019, after which all qualified responses will be acknowledged. Responses received after the
specified deadline will be returned unopened.
All questions regarding the RFI documents shall be submitted through PlanetBids. All project
correspondence will be posted on the PlanetBids website. It is the responsibility of the Respondents to
check the website regularly for information updates, clarifications, and addenda.
Proposals must be submitted electronically via the PlanetBids system used to download the RFI. The
maximum file size for submittal is 50 megabytes, and the file type shall be Portable Document Format
(PDF). The electronic system will close .submissions exactly at the date and time set forth in the RFI or as
changed by addenda.
C. Proposal Acceptance
Respondents are responsible for submitting and having their submittal accepted before the closing time
set forth in this RFI or as changed by addenda. NOTE: Pushing the submit button on the electronic system
may not be instantaneous; it may take time for the Respondent's documents to upload and transmit
before the submittal is accepted. It is the Respondent's sole responsibility to ensure their document(s)
are uploaded, transmitted, and arrive in time electronically. The City of Encinitas will have no
responsibility for submittals that do not arrive in a timely manner, no matter what the reason.
D. Page Limit
No responses exceeding twenty-five (25) pages will be accepted (excluding attachments). In addition,
attachments may not exceed twenty-five (25) pages. The City of Encinitas discourages "padding" of
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August 20, 2019 Item #15 Page 49 of 135
responses with brochures, extensive literature, and boilerplate material not applicable to the CCE
Technical Feasibility Study. In the case of contract award, the successful bidder will be required to sign a
contract.
E. Proposal Format
Proposals must be organized in the following format and include the following content:
1. Letter of transmittal signed by an individual authorized to bind the proposing entity stating
the firm has read and will comply with all terms and conditions of the RFI.
2. General information about the firm, including the size of the organization, location of offices,
number of years in business, organizational chart, name of owners and principal parties,
number and position titles of staff.
3. Responses to all RFI questions that are applicable along with supporting qualifications,
evidence and detail.
F. Schedule
The Cities will generally comply with the following schedule for the request for interest.
Release of RFI
Deadline for Questions and Inquires
Answers to Questions Posted on Planet Bids
Response Deadline
Evaluation of Responses
Interviews if needed
Recommend vendor(s)/ partner(s) and initiate contract negotiations
Responding to this RFI:
April 11, 2019
April 24, 2019
April 30, 2019
May 14, 2019
May 14 -21, 2019
May 22, 2019
May 30, 2019
Responders to this RFI must be (i) a qualified US business; (ii) a CCE, an organization in process to become
a CCE, an energy utility or broker with demonstrated trading experience; (iii) a creditworthy business with
the ability to meet the Partner Cities' demonstration of creditworthiness.
RFI responses must include:
• Name, title and contact information for the primary point of contact for the responders .
• Demonstration of creditworthiness that should include either financial feasibility studies or 2
years of published financials, credit ratings from Moody's, Fitch, S&P, etc., as applicable.
• Identification of key individuals who collaborated on the RFI responses and will be working on
this engagement if selected.
pg.5
August 20, 2019 Item #15 Page 50 of 135
RFI Questions:
The Partner Cities are requesting responses to the following questions: A conceptual framework in
response to financial questions is acceptable.
1. Please specify if you are currently a CCE, are in process to become a CCE or an energy manager, broker
or utility.
2. If you are currently a CCE and are interested in allowing the Partner Cities to join your CCE, together
or separately:
a. How many members do you have?
b. Is there an entry fee to join your CCE? What exit fees, if any, would your CCE or organization
require in the event the City or Partner Cities exit after joining. For this question, assume that
joining occurs in 2021 and exiting occurs in 2022.
c. What is your projection of new members?
d. Do you have a joint power authority (JPA) structure? If so, please describe. lfso, please
include a copy of your JPA agreement with your response.
e. What is the voting protocol of the CCE? Is the voting weighted? If so, how and under what
circumstances?
f .. How is the board elected or appointed? How many board seats does your CCE have? If any
or all of the Partner Cities join your CCE, how many Board seats would they have?
g. What is the current distribution utility for your CCE members? If your CCE or any of your
members are outside of the SDG&E service territory, do you have experience with SDG&E as
a distribution utility? If you do not, what is your plan to learn SDG&E's requirements and
work with them day to day? If applicable, what is your expected approach to manage multiple
distribution service areas?
h. What is the process to join your CCE?
i. How would power supply costs be allocated to the Partner Cities? Would the allocation be
blended? Would the allocation be incremental?
j. What options are available to the Partner Cities for power supply? How are these options
provided and selected? Would the Partner Cities be allowed to request distributed energy
resources or generation within its service territory? Can individual Partner Cities request
specific power sources?
k. How many full-time employees do you anticipate in 2022?
I. What is the anticipated schedule to join? What is the earliest possible date to join? When
would you anticipate launching should the Partner Cities' wish to join your organization?
m. What is your process to share econom ic benefits and what flexibility is available for local
control over portfolio type and performance?
n. Can Partner Cities select specific benefit/conservation programs for their residents and
businesses?
3. If you are not a CCE and you are in process to form a CCE:
a. Have you completed a feasibility study? If so, please attach your response.
b. What is your current distribution utility?
c. What is the earliest date you could accommodate the City or Partner Cities?
pg.6
August 20, 2019 Item #15 Page 51 of 135
d. Do you anticipate fees to join with your organization?
e. What is your preferred cost allocation method for assigning various power supply contracts
and resources?
f. How many full-time employees do you anticipate in 2022?
g. What are your sources for start-up capital and cash working capital? Under what terms have
you secured this capital?
4. If you are a utility, broker, energy manager or other third party and you wish to respond:
a. What is your organization's preferred business structure to provide services· to the Partner
Cities? What are your collateral and notice requirements?
b. How would power supply costs be allocated to the Partner Cities? Would the allocation be
blended? Would the allocation be incremental?
c. What options are available to the Cities for power supply? How are these options provided
and selected? Would the Partner Cities be allowed to request distributed energy resources
or generation within its service territory?
d. How many full-time employees do you anticipate in 2022?
e. What is the anticipated schedule to contract with your organization? What is the earliest
possible date to contract? What is the earliest possible date to launch?
RFI Limitations:
The Partner Cities reserve, each to themselves, the right to contract with any responder before the
deadline. The issuance of this RFI does not constitute a commitment by the Partner Cities, jointly or
individually, that any contract will be entered into. The Partner Cities expressly reserve the right at any
time to reject any or all offers, accept more than one offer, reissue the RFI, or change deadline dates. The
Partner Cities shall not be liable for any pre-contractual expenses incurred by ariy bidder.
All offers submitted in response to this RFI are subject to contract negotiations and credit clearance.
pg. 7
August 20, 2019 Item #15 Page 52 of 135
City of Encinitas1 Del Mar and Carlsbad (Partner Cities)
Load Data Supplement to the Request/or Interest
CONTACT
Ms. Crystal Najera
City of Encinitas
505 South Vulcan Avenue
Encinitas, CA 92024
Supplement to t he RFI:
TECHNICAL CONSULTANT
EES Consulting, Inc.
Kirkland, WA; Portland, OR; La Quinta, CA
On April 12, 2019, the Cities of Encinitas, Del Mar and Carlsbad (Partner Cities) issued a Request for
Interest in efforts to solicit feedback and interest to assist the Partner Cities in determining governance
and affiliation options. The Partner Cities have issued this supplement to the RFI to notify interested
parties that additional load data detail is available through San Diego Gas & Electric's energy data access
process which includes interested parties signing a non-disclosu_re agreement (NDA). Interested parties
should have appropriate representatives sign Exhibit A of Form 124-1010 on behalf of the Partner Cities
and send to ALaCerva@semprautilities.com with copy to CNajera@encinitasca.gov.
Supplemental RFI Questions:
Has your CCE, agency, or organization adopted policies, and/or would it consider entering into a CCE
operating agreement requiring:
1. Payment of prevailing wages for construction of local clean energy resources;
2. The use of community benefit agreements and project labor agreements demonstrating local
hiring preferences; and/or
3. _ Remaining neutral in the event CCE workers seek to unionize.
RFI and Supplement to the RFI Limitations:
The Partner Cities reserve, each to themselves, the right to contract with any responder before the.
deadline. The issuance of this RFI does not constitute a commitment by the Partner Cities, jointly or
individually, that any contract will be entered into. The Partner Cities expressly reserve the right at any
time to reject any or all offers, accept more than one offer, reissue the RFI, or change deadline dates.
The Partner Cities shall not be liable for any pre-contractual expenses incurred by any bidder.
All offers submitted in response to this RFI are subject to contract negotiations and credit clearance.
pg.2
August 20, 2019 Item #15 Page 54 of 135
Appendix B -RFI Distribution List
August 20, 2019 Item #15 Page 55 of 135
Redwood Coast Energy Authority
Allison Campbell
633 Third Street
Eureka; CA 95501
info@RedwoodEnergy.org
Peninsula Clean Energy
Siobhan Doherty
2075 Woodside Road
Redwood City, CA 94061
info@peninsulacleanenergy.com
San Jose Clean Energy
Lori Mitchell, Director
200 East Santa Clara Street, 14th Floor
San Jose, CA 95113
customerservice@sanjoseca.gov
Lancaster Choice Energy
44933 Fern Avenue
Lancaster, CA 93534
info@LancasterChoiceEnergy.com
Pico Rivera Innovative Municipal Energy
Derek Hung
PO BOX 1016
6615 Passons Blvd
Pico Rivera, CA 90660-1016
info@poweredbyprime.org
San Jacinto Power
P.O. Box 488
San Jacinto, CA 92581
customerservice@sanjacintopower.com
Desert Community Energy
73710 Fred Waring Drive, Suite 200
Palm Desert CA 92260
Patrick.Ta llarico@palmspringsca.gov
August 20, 2019 Item #15 Page 56 of 135
Solana Energy Alliance
635 S, City Hall, Hwy 101,
Solana Beach, CA 92075
lnfo@SolanaEnergyAlliance.org
Pioneer Community Energy
2510 Warren Drive, Suite B
Rocklin, CA 95677
customerservice@pioneercommunityenergy.ca.gov
Valley Clean Energy Alliance
Jim Parks
604 2nd Street
Davis, CA 95616
info@valleycleanenergy.org
City of San Diego
Naina Gupta
202 C St.
San Diego, CA 92101
customercare@sandiego.gov
SMUD
Brian Daly
P.O. Box 15830
Sacramento, CA 95852-0830
brian.daly@smud.org
Clean Power Alliance
Natasha Keefer
Director, Power Planning and Procurement
DO NOT SEND HARD COPY MAILINGS
Procurement@cleanpoweralliance.org
California Community Choice Association
Beth Vaughen
Executive Director
DO NOT SEND HARD COPY MAILINGS
info@cal-cca .org
August 20, 2019 Item #15 Page 57 of 135
Northern California Power Authority
Tony Zimmer
Assistant General Manager, Power Management
651 Commerce Drive
Roseville, CA 95678-6411
Tony.zimmer@ncpa.com
Southern California Public Power Authority
Katherine Ellis
Director, Asset Manager, Special Projects
1160 Nicole Court
Glendora, CA 91740
kellis@scppa.org
East Bay Community Energy
Howard Chang
Chief Operating Officer
1111 Broadway, 3rd Floor
Oakland, CA 94607
customer-support@ebce.org
Dan Lieberman
Director of Marketing
1111 Broadway, 3rd Floor
Oakland, CA 94607
danblieberman@gmail.com
Clean Power San Francisco
DO NOT SEND HARD COPY MAILINGS
cleanpowersf@sfwater.org
Monterey Bay Community Power
Jeremy Clark
Energy Trading Manager
70 Garden Court Suite 300
Monterey, CA 93940
jclark@mbcommunitypower.org
August 20, 2019 Item #15 Page 58 of 135
Sonoma Clean Power
Carlos Gomes
Director, Energy Procurement
P.O. Box 1030
Santa Rosa, CA 95402
cgomes@sonomacleanpower.org
Marin Clean Energy
David Potovsky
Power Supply Contracts Manager
1125 Tamalpais Avenue
San Rafael, CA 94901
d potovs ky@mceclea ne ne rgy.org
CB Hall
Power Supply Contracts Manager
1125 Tamalpais Avenue
San Rafael, CA 94901
chall@mcecleanenergy.org
Western Community Energy
Chula Vista/Santee/La Mesa
City of Irvine
San Diego County
· San Marcos
Escondido
San Clemente
National City
Informal Conversations with:
August 20, 2019 Item #15 Page 59 of 135
Appendix C -SEA RFI Response and
Correspondence
August 20, 2019 Item #15 Page 60 of 135
General Information
Paving the way for future cities, the City of Solana Beach made history by launching Solana
Energy Alliance (SEA) in June 2018, the first community choice aggregation (CCA) program in
San Diego Gas & Electric (SDG&E) territory. With over 7,500 customers, SEA currently serves
over 91% of all eligible accounts. SEA has successfully maintained a 3% discount compared to
SDG&E generation rates, saving its customers nearly $275,000 since June 2018.
A key priority in launching SEA was reducing greenhouse emissions, and in support of that
objective offers a default energy product from 75% carbon free sources {SEA Choice) and offers
a 100% renewable energy product (SEA Green) for those customers who choose to opt-up. SEA
supports its customers with roof top solar by offering SEA NEM, a program that pays a higher
Net Surplus Compensation than SDG&E to those customers whose system generates more
power than they use in a 12-month relevant period.
Working together with SEA's partners, Calpine Energy Solutions, Bayshore Consulting Group
and The Energy Authority, SEA worked diligently through the CCA implementation phase to test
and develop successful processes with SDG&E in the electronic data interchange environment.
Subsequent to launch, processes and procedures have been established to ensure a good
c,ustomer experience for not only SEA customers, but also for all future CCA customers in
SDG&E territory. SEA has developed a good working relationship with SDG&E to address issues
and challenges that arise from time to time. This established partnership will benefit any future
partners of SEA.
Benefits of Partnering with Solana Energy Alliance
As the first and only operating CCA in SDG&E's service territory, SEA is uniquely positioned to
leverage the experience it has gained during its first year of operation to enable Encinitas, Del
Mar and Carlsbad to efficiently launch a CCE program with less risk than if the three cities
elected to begin from scratch. Additionally, the service agreements that SEA executed with its
business partners to reduce its upfront risk and capital funding requirements can serve as a
starting template for possible expansion to meet similar requirements for a new partnership
between our cities. While continuing SEA's existing partnerships would require negotiation with
SEA's partners, and is not mandatory to working together, the contract templates that SEA has
already created could serve as a starting point for discussions and save significant time and cost
in selecting partners to assist us in standing up a new joint-CCA.
Answers to the specific questions listed in the RFI are answered in the following section. In
summary, however, Solana Beach is open to discussing with the three cities alternative
partriership structures that are in the mutual best interest of all four cities. Solana Beach will
want to discuss how its investment, existing accumulated net revenues and power purchases
are absorbed into a new partnership; but Solana Beach also recognizes that it will benefit from
the greater economies of scale that a new partnership will provide. Solana Beach strongly
3
August 20, 2019 Item #15 Page 63 of 135
believes that it is in the best interest of our communities to explore how we can work
cooperatively to provide CCE in north San Diego County.
SEA is an enterprise of the City of Solana Beach, with the City Council acting as the governing
Board of the CCA. Through its partnership with The Energy Authority (TEA), Solana Beach was
able to launch SEA with a minimal amount of capital outlay, protection of its general fund, and
minimal impact to staff. The City Manager is the Executive Director of SEA, and all related
functions such as Finance, are performed by Solana Beach staff. In addition to TEA, Solana
Beach has contracts with Calpine Energy Solutions for data management and call center
services, Bayshore Consulting Group for administrative and operational support and Tosdal Law
for legal, regulatory compliance and regulatory advocacy assistance. An organization chart is
shown below:
I
THE ENERGY AUTHORITY
L PROCUREMENT /SCH EDU LING
COORDINATOR
CITY of SOLANA BEACH/SOLANA ENERGY ALLIANCE
CALPINE ENERGY SOLUTIONS
L DATA MANAGEMENT/CALL
CENTER
I
I
I
L
Cl1 Y COUNCIL
CITY MANAGER
FINANCE
ACCOUNTING/ACCOUNTS
PAYABLE/AUDITS
BAYSHORE CONSULTING
GROUP
L ADMINISTRATIVE &
OPERATIONAL SUPPORT L
TOSDAL LAW
LEGAL/REGULATORY
COMPLIANCE/REGULA TORY
ADVOCACY
Responses to RFI Questions
1. Please specify if you are currently a CCE, are in process to become a CCE or an energy
manager, broker or utility.
The City of Solana Beach, operating as Solana Energy Alliance (SEA), is a current
operating CCE.
4
August 20, 2019 Item #15 Page 64 of 135
2. If you are currently a CCE and are interested in allowing the Partner Cities to join your
CCE, together or separately:
a. How many members do you have?
SEA is currently organized as an enterprise of the City of Solana Beach.
b. Is there an entry fee to join your CCE? What exit fees, if any, would your CCE or
organization require in the event the City or Partner Cities exit after joining. For
this question, assume that joining occurs in 2021 and exiting occurs in 2022.
SEA has not established an entry fee, however, should Solana Beach and the
Partner Cities move forward to create a JPA our goal would be to work with our
partner, The Energy Authority, to mirror the terms under which SEA launched,
with no up-front costs to the Partner Cities. Additionally, as noted above, SEA
will want to consider the investment made by the City of Solana Beach, as well as
the net revenues that SEA has accumulated while operating as an enterprise
CCA. SEA and the City also recognize that it will benefit from the greater
economies of scale that a new partnership will provide.
Should a City, or the Partner Cities exit after joining, and after power purchases
have been made, an exit fee may be required to address losses the JPA would
incur from liquidating energy contracts. The specific exit fee, if any, would be
determined mutually as part of the overall JPA agreement development.
c. What is your pr;ojection of new members?
Solana Beach has not made any projections of future members.
d. Do you have a joint power authority (JPA) structure? If so, please describe. If so,
please include a copy of your JPA agreement with your response.
Solana Beach does not have an existing JPA structure. It is envisioned that
Solana Beach and the Partner Cities would work together to analyze the various
JPA options _and select the structure that best meets the priorities of Solana
Beach and the Partner Cities. Once a structure is selected the details regarding
the structure would be mutually decided upon.
e. What is the voting protocol of the CCE? Is the voting weighted? If so, how and
under what circumstances?
City of Solana Beach/SEA would prefer a one city one vote protocol. Any other
voting protocol can be discussed as part of the broader JPA structure
negotiations.
5
August 20, 2019 Item #15 Page 65 of 135
f. How is the board elected or appointed? How many board seats does your CCE
have? If any or all Partner Cities join your CCE, how many Board seats would they
have?
As an enterprise CCE, our City Council serves as the SEA Board. The make-up of a
future joint CCE board would be determined a part of the broader JPA structure
negotiations. As noted in 2e above, Solana Beach feels strongly that equal board
representation should be a priority.
g. What is the current distribution utility for your CCE members? If your CCE or any
of your members outside of the SDG&E service territory, do you have experience
with SDG&E as a distribution utility? If you do not, what is your plan to learn
SDG&E's requirements and work with them day to day? If applicable, what is
your expected approach to manage multiple distribution service areas?
San Diego Gas & Electric is the distribution utility for Solana Energy Alliance.
Solana Beach and its partner, Calpine Energy Solutions, have been working with
SDG&E for nearly two years to develop processes, procedures and effective
electronic data interchanges in the implementation and successful operation of
SEA. Since launch we have been working to refine and enhance processes
through consistent coordination with SDG&E. This relationship will enhance any
future partnerships in SDG&E territory.
h. What is the process to join your CCE?
If selected by the Partner Cities to move forward in developing a joint CCE
program, we would desire to move forward as quickly as possible to analyze
energy usage and develop financial models that reflect current market
conditions, SDG&E generation rates and projected PCIA costs. SEA's partner,
TEA, has developed a model that uses actual market based data, developed from
actually procuring power for SEA. With this information, the Partner Cities and
Solana Beach (parties) would evaluate the various JPA options available to them
(traditional vs hybrid). Upon deciding on the structure, the parties would move
forward in preparing agreements, Council actions, and preparing the
Implementation Plan, to be filed to meet the deadline of January 1, 2020 for
serving load in 2021.
i. How would power supply costs be allocated to the Partner Cities? Would the
allocation be blended? Would the allocation be incremental?
Allocation of costs, if any, would be dependent on tbe organization structure
(JPA type) that is selected that best fits the goals of the Partner Cities and Solana
Beach.
6
August 20, 2019 Item #15 Page 66 of 135
j. What options are available to the Partner Cities for power supply? How are these
options provided and selected? Would the Partner Cities be allowed to request
distributed energy resources or generation within its service territory? Can
individual Partner Cities request specific power sources?
It is envisioned that policies regarding power supply, and options open to the
Partner Cities, would be developed as part of the JPA agreement negotiation.
Our preference would be that the joint CCE be developed to provide the most
flexibility for the participating cities to meet their individual priorities and goals.
k. How many full-time employees do you anticipate in 2022?
We anticipate identification of staff and consultant support would be part of the
financial modeling process.
I. What is the anticipated schedule to join? What is the earliest possible date to
join? When would you anticipate launching should the Partner Cities' wish to join
your organization?
Based on the current California Public Utilities Commission (CPUC) CCA timeline,
an Implementation Plan must be filed by January 1, 2020 in order for the Partner
Cities to serve customers in 2021. SEA is committed to working with the Partner
cities to prepare and submit an Implementation Plan by this date.
m. What is your process to share economic benefits and what flexibility is available
for local control over portfolio type and performance?
Any sharing of economic benefits, and flexibility for local control over portfolio
type and performance is possible and contemplated in either a JPA or hybrid JPA
structure and would be subject to being agreed upon as part of the JPA
establishment process.
n. Can Partner Cities select specific benefit/conservation programs for their
residents and businesses?
Our goal would be that the joint CCE program be developed to provide the most
flexibility to each of the participating cities to meet their individual CAP and
conservation goals.
Questions 3 and 4 are not applicable.
7 August 20, 2019 Item #15 Page 67 of 135
Supplemental Questions to the Request for Interest:
Has your CCE, agency, or organization adopted policies, and/or would it consider entering into a
CCE operating agreement requiring:
1. Payment of prevailing wages for construction of local clean energy resources;
While SEA has not adopted policies specific to the payment of prevailing wages, as a
local governmental entity that is already required to pay prevailing wages for all its
public works contracts/projects, the City of Solana Beach would expect to meet this
obligation and is supportive of doing so whether acting as SEA or as a party to a
future CCE JPA.
2. The use of community benefit agreements and project labor agreements
demonstrating local hiring preferences; and/or
3. Remaining neutral in the event CCE workers seek to unionize.
While SEA has not adopted any formal policies regarding Project Labor Agreements,
local hiring practices, community benefit agreements or remaining neutral in the
event CCE workers seek to unionize, it is likely that our City Council would not object
to such efforts should Partner Cities wish to pursue such policies especially if the
benefits of a JPA were clearly demonstrated.
Key Individuals
The following individuals collaborated on the RFI response and would be working on this
engagement if selected:
Jeff Fuller, [)irector, Client Services, West, The Energy Authority
Barbara Boswell, Partner, The Bayshore Consulting Group
Ty Tosdal, Tosdal Law Firm
Calpine Energy Solutions
8
August 20, 2019 Item #15 Page 68 of 135
MEMORANDUM TO Dan King
June 14, 2019
Page 2
11. Does SEA desire to grow the CCE beyond adding the three cities?
12. How does SEA envision decision making and board oversight of the JPA?
13. Please provide SEA's recent statement and balance sheet.
14. Please provide SEA's forecast financials for 2020 and beyond as available.
15. Please provide copies of TEA and Calpine contracts with SEA.
16. Estimate of any payments owing or liabilities incurred at yearend 2019 to TEA and
Calpine.
August 20, 2019 Item #15 Page 70 of 135
NORTH COASTAL CCA JPA
ELECTED OFFICIALS MEETING
JULY 16, 2019
August 20, 2019 Item #15 Page 71 of 135
4 SEA STRUCTURE BENEFITS
• Streamlined Implementation Process
• Providers already on board and ready to begin working on JPA CCA
• Experienced team to support North County JPA CCA
• No Initial Staff Hiring Required
• Experienced team that successfully implemented and currently operating SEA to
support implementation and operations of North County JPA CCA -Providers are
open and .willing to renegotiate current terms; contracts allow flexibility
• Future staffing/structure can be decided by JPA Board
• Opportunity for Member Agencies to be Reimbursed for Staff Support of
North Coastal JPA CCA (Admin costs, community outreach, etc.)
August 20, 2019 Item #15 Page 74 of 135
MEMORANDUM TO Greg Wade and Dan King
July 1, 2019
Page 2
• We also estimate roughly $20M in cash working capital and other PPA collateral will be
required for a four-City CCA. How will these funds be obtained, collateralized and paid
for?
o While it is unclear upon what assumptions this estimate is made, based upon our
active and ongoing participation in an operational CCA, the majority of the
working capital a new CCA needs is re lated to power procurement. SEA's
agreement with TEA provided a deferral of payment of initial power costs to
assist with cash flow. This arrangement is being offered to the new JPA CCA that
is being contemplated for the four cities . In addition, Calpine Energy Solutions
offers a similar structure with the first bills for data management not coming due
until power has started to flow, and there is the ability to defer the initial bill by
60 days and gradually come current. Additionally, Calpine offers up to $500,000
in start-up funding (at 5% interest) which can be used to cover soft costs such as
staffing, marketing, mailings, etc. Should there be additional cash flow needs
beyond these arrangements, Solana Beach has a relationship with River City
Bank, and we have reached out to them to discuss potential for funding options.
• Does the City of Solana Beach anticipate reimbursement of City staff time by a new
CCA?
o As mentioned in the interview, Solana Beach supports all participating cities
being reimbursed for City staff time spent on CCA activities. In addition, should
the North County JPA partner agencies desire to have Solana Beach staff actively
participate in the implementation of the new CCA, over and above that of the
other cities (due to Solana Beach's experience in launching and operating a CCA),
Solana Beach is open to and willing to provide that service, with an agreed upon
reimbursement.
August 20, 2019 Item #15 Page 83 of 135
MEMORANDUM TO Greg Wade and Dan King
July 1, 2019
Page 3
■ SEA Rate/Quarterly Operations update -July-March 2019 Resulting Questions
• What current SEA assets/liabilities, if any, will be transferred to a new CCA/JPA?
o SEA assets include cash held in reserves at River City Bank, and account
receivables from customers. Potential liabilities include contracts for
conventional energy, resource adequacy and renewable energy. The transfer of
the assets and liabilities would be determined as part of the negotiations of the
JPA CCA among the four agencies.
• Under a new four-City CCA, what would happen to the contractual obligations attendant
with the existing contracts SEA has with various power suppliers, River City Bank,
Calpine and TEA?
o The new four-City CCA will have a need for services, including those that are
mentioned above (power supply, financial institution, regulatory counsel, data
manage r and ca ll center provider). As mentioned in the meeting, the new four-
city CCA would have the benefit of these existing contracts being able to be
assigned to the new JPA CCA. However, SEA's load is a sma ll percentage of the
total load of the new CCA, and any contracts for power that SEA brings to the
table would fulfill a small amount of the energy needs of the new larger CCA. As
an example, SEA will have a contract for local resource adequacy going out to
2021 and 2022. This contract can be transferred to the new larger CCA,
however, the larger CCA would have a requirement to procure additiona l local
resource adequacy beyond what is transferred from SEA. As proposed, Solana
Beach is offering to have the JPA CCA with the Partner Cities continue its
contractual re lationship with all of SEA's cu rrent partners to provide an optimal
and seamless transition for a JPA launch and operation. Once established, these
ongoing contractual relationships would be subject to review and consideration
by the JPA Board.
• On Slide #13, Update SEA Financial Proformas, SEA net income is projected to decline
from $404K in FY19 to $(32)K in FY 2022. If these projections are accurate, bringing SEA
into a CCA with the other three Cities would seemingly not be as financially attractive as
these three Cities forming their own CCA without SEA. How does SEA propose
addressing this potential issue?
o In a multi-jurisdiction JPA CCA, each city's individua l "net results" (revenues less
related costs) are variable. A proforma that looks just at Encinitas will reflect a
different net result than that for just a Del Mar CCA. A multi-jurisdictional JPA
will result in lower per-unit administrative costs, for all participating cities,
through improved economies of scale than any city can achieve on its own. Also,
as noted above, SEA's only contractual commitment for power supply in 2022 is
a Local Resource Adequacy purchase .
August 20, 2019 Item #15 Page 84 of 135
MEMORANDUM TO Greg Wade and Dan King
July 1, 2019
Page 4
Should the decision be made that the four-city JPA is in the best interest of all
four cities, then the focus should be on the financia I outlook of the larger JPA
and not focusing on the individual results of the member agencies. Additionally,
it cannot be overstated that projections regarding energy procurement, energy
costs and revenues out into 2022 are both conservative and speculative.
The assumptions maintain the original structure including the 3% rate reduction
out until 2021/2022 for projection purposes. However, because SEA is the
smallest CCA in the state, it has always been contemplated that the rate
reduction may have to eventually be revised to maintain the primary goals (for
SEA) of a higher RPS and local control. In addition to the size of SEA, regulatory
decisions recently made by the CPUC have altered the projections for all CCAs in
the state. All CCAs have had to adjust their projections and make necessary
changes as a result of these decisions, and it would be likely that SEA would have
to mak~ some adjustments to the program to ensure that the CCA would not
experience negative revenues for any given year. Therefore, we would caution
against basing a decision to form a JPA upon a single year projection of SEA in
2022. Again, while also speculative, the focus should be on the net revenue
projections of a larger CCA JPA as included as an attachment to this response.
■ Governance/Administrative Issues
• Would SEA accept a JPA agreement that mandated Project Labor Agreements (PLA) for
all JPA contracts greater than $1M?
o Although no formal position has been taken on this issue by its Board/City
Council, SEA is open to considering this either as a part of a JPA agreement or as
decided upon by the JPA Board if/when it is established.
• Would SEA accept a JPA agreement with "weighted voting language" similar to than
contained in the most recently City of San Diego's "CCA JPA Draft Term Sheet" updated
6/10/19?
o No.
• If the four Cities formed a new CCA entity, what would its name be?
o If a CCA JPA is formed about Solana Beach and the Partner Cities, this decision
would be up to the JPA. If the Partner Cities are interested in pursuing the offer
presented by Solana Beach, and given that the Implementation Plan to be
submitted would be an amended Implementation Plan already submitted and
approved for SEA, and Solana Beach has an account established with the CAISO,
our suggestion to continue to call the JPA Solana Energy Alliance until such time
as the JPA Board decides otherwise.
• If the four Cities decide to move forward with forming a new CCA, what is the
procedural schedule between now and a 1/1/21 launch date?
o See the attached Term Sheet for an anticipated schedule.
August 20, 2019 Item #15 Page 85 of 135
MEMORANDUM TO Greg Wade and Dan King
July 1, 2019
Page 5
If responses to these questions could be wrapped into a proposed term sheet, we would greatly
appreciate. Otherwise, brief responses to each question would be fine.
We look forward to hearing back from you at the earliest possible date but no later than the
end of this week.
Thanks.
August 20, 2019 Item #15 Page 86 of 135
North County JPA CCA Draft Term Sheet
• ·Goals of North County JPA CCA
o Establish base product renewable percentage that supports meeting Climate Action Plan goals
of the partner cities, at a minimum 50% RPS, 75% GHG free
o Offer a 100% renewable opt-up option
o Establish rates that are competitive with SDG&E while providing sufficient funds to cover
expenses and fund reserves initially.
o After the JPA is established, then develop and implement programs to address-the needs of the
cities' Climate Action Plans.
• Benefits of North County JPA CCA
o Local Control -governance is from local elected officials close to community
o Alignment of environmental & Climate Action Plan goals
o Similar climate zone
o Smaller load -more options available to cover energy needs/procurement
o Financial protections for member agencies
o Lower risk -partner agency (Solana Beach) with experience implementing and operating a CCA
o Streamlined implementation process
• Providers already on board and ready to begin working on JPA CCA
• Experienced team to support North County JPA CCA
o No need to hire staff initially
• Experienced team that successfully implemented and currently operating Solana Energy
AIHance to support implementation and operations of North County JPA CCA
o · Opportunity for Member Agencies to be reimbursed for staff support of North County JPA CCA
• Start-Up Costs and Services
o Partners willing to pro"'.ide/assist with deferred start-up costs
• All upfront costs can be provided by existing partners
• If the JPA wants to explore financing through a traditional bank, SEA has established
relationship with River City Bank
o Estimated upfront costs that could be covered through existing partners
• CAISO Fee and CCA Bond -$148,000 (SEA and Calpine)
• Opt-out noticing requirements -$302,500 (Calpine)
• Technical Consulting -$115,000 (SEA)
• Discretionary Marketing -$50,000 (Calpine)
• Energy Procurement including Cost of Credit and RA -$29,000,000 (TEA)
• Formation/Schedule
o August -October
• Technical Study
• JPA Agreement Development
• CCA Implementation Plan Development
1 August 20, 2019 Item #15 Page 88 of 135
North County JPA CCA Draft Term Sheet
o October
• Member Agencies Adopt CCA Ordinance .
• Member Agencies Adopt JPA Agreement
• JPABoard Members Appointed
o December
• JPA Board approve Implementation Plan
• Implementation Plan filed with CPUC for Certification
o Solana Energy Alliance has relationship with River City Bank
• Financing potential for Start-up Costs not deferred by providers
• Board of Directors
o One elected official from each Member Agency to be appointed to North County JPA CCA Board
o Member Agencies appoint an alternate board member to attend and vote at North County JPA
CCA Board meetings when the regular Board Member is unable to attend
o Member Agencies determine the term of office for their appointed board member and
alternate
• Board Voting
o One Member One Vote -simple majority
o Special voting to follow applicable State law
• North County JPA CCA Board Officers
o Elected Officers
• Chair
• Vice Chair
• Secretary
• Treasurer
o Committees
• North County JPA CCA Board to establish Committees
• Each Member Agency to appoint a representative to the Committees
• Items for Member Agencies to decide upon
o Location of Board Meetings
o Define responsibilities of Board Members
o Applicability of Project Labor Agreements
2 August 20, 2019 Item #15 Page 89 of 135
Appendix D -City of San Diego RFI Response and
Correspondence
August 20, 2019 Item #15 Page 90 of 135
Request for Interest
Community Choice Energy Program
General information about the City of San Diego:
The City of San Diego has a city population estimate of more than 1.39 million residents according the 2010
United States Census Bureau. The City is the eighth largest city in the Unites States and the second largest city in
California. The City is a world-class hub for clean energy, technology, research and development, and the perfect
place to demonstrate how energy and innovation can come together to create a more prosperous economy,
environment, and quality of life for all.
The City's Sustainability Department is currently leading the initiative to form a Community .Choice Energy (CCE)
program. The Sustainability Department is located at 9601 Ridgehaven Court, Suite 120, San Diego, California
92123. Cody Hooven, Director of the Sustainability Department, and Aaron Lu, Program Coordinator, submitted
this set of responses to the RFI on behalf of the City.
Responses RFI Questions:
1. Please specify if you are currently a CCE, are in process to become a CCE or an energy manager, broker or
utility.
The City of San Diego is in process to form a Community Choice Aggregation program, also called
Community Choice Energy (CCE). City Council adopted a resolution of intent in February 2019, directing
the Mayor or his designee to negotiate with potential partners to form a CCE with a Joint Powers
Authority (JPA) governance structure.
2. If you are not a CCE and you are in process to form a CCE:
a. Have you completed a feasibility study? If so, please attach your response.
Please see attached City of San Diego Business Plan. Further research on CCE can be found at
www.sandiego.gov/sustainability/clean-and-renewable-energy.
d raft_final_cca_busine
ss_plan_city_of_san_dii
b. What is your current distribution utility?
SDG&E is the current distribution and transmission utility for the City of San Diego.
c. What is the earliest date you could accommodate the City or Partner Cities?
The City of San Diego anticipates potential founding JPA partners to commit to join the CCE
JPA by summer 2019, providing enough time for each partner city/local government to adopt
relevant ordinances and provide data for the City of San Diego to develop an implementation
plan no later than December 2019. The CCE JPA would continue formation and establishment
throughout 2020 and begin serving customers in 2021. Additional cities may join at a later date
(after 2019) but would not be part of the founding partners that will begin work to establish
· operating policies, guidelines, and procedures and would not be able to serve customers until
2022 or later.
d. Do you anticipate fees to join with your organization?
August 20, 2019 Item #15 Page 91 of 135
If partners join the City of San Diego to from the CCE in 2019, there will be no entry fee. If the
partners join the City later, an entry fee may be required.
e. What is your preferred cost allocation method for assigning various power supply contracts and
resources? How would power supply costs be allocated to the Partner Cities? Would the
allocation be blended? Would the allocation be incremental?
This will be determined by the Board of the CCE JPA. Likely, costs for various power supply
contracts and resources will be assigned based on each partner's load volume and profile.
These costs will cover both power supply and resource adequacy.
f. What options are available to the Partner Cities for power supply? How are these options
provided and selected? Would the Partner Cities be allowed to request distributed energy
resources or generation within its service territory? Can individual Partner Cities request specific
power sources?
This will be determined by the Board of the CCE JPA. Likely, there will be various options for
power supply in terms of renewable percentage. Requests for specific power sources and
distributed energy resources or generation will have to be reviewed and approved by the
Board.
g. How many full-time employees do you anticipate in 2022?
This will be determined by the executive director of the CCE JPA. As an estimate, the CCE may
employ up to 20 employees by 2022.
h. What are your sources for start-up capital and cash working capital? Under what terms have you
secured this capital?
The City of San Diego is finalizing its selection for a financial advisor to assist with securing
capital for both start-up and working capital (operating and procurement costs). The CCE can
may secure a short-term loan from the City of San Diego and/or a financial entity for start-up
capital. The CCE JPA would secure a longer-term loan from a financial entity for working
capital.
3. Has your CCE, agency, or organization adopted policies, and/or would it consider entering into a CCE
operating agreement requiring:
a. Payment of prevailing wages for construction of local clean energy resources;
b. The use of community benefit agreements and project labor agreements demonstrating local
hiring preferences; and/or
c. Remaining neutral.in the event CCE workers seek to unionize.
The City of San Diego has considered the above items as part of CCA discussions. It will
ultimately be a decision of the Mayor and City Council what policy directives or guidance .
. should be included in a JPA agreement; it will be a decision of a JPA Board what policy
directives are adopted for CCA operations.
August 20, 2019 Item #15 Page 92 of 135
CCA JPA Draft Term Sheet
Goals of regional CCA (include as guiding principles in JPA agreement)
• Base product= 50% RPS, option to opt up to higher renewable content at launch (e.g., 80% and
100% opt up options)
• Long term goal= 100% renewable electricity by 2035 (or variation of this set by each city based
on their goals)
• Embedded fiscal responsibility
• Rates
o Establish economic development rates
o Establish rates specific to communities of concern
o Maintain cost competitive rates
• Prioritization of local renewable power development with emphasis on:
o Local jobs
o Skilled and trained workforce
o Investment in communities of concern
o No energy from unbundled Renewable Energy Certificates (RECs)
o Other economic benefits remaining/returning to JPA partners
Benefits of regional CCA
• Regional/ratepayer consistency in benefits and rate reductions
• Economies of scale for procurement of power (both bulk purchase and buying power), services,
and staffing
• Stronger regulatory and legislative influence in the state
• Financial protections for individual members
Formation
• Founding members:
o Agencies who have submitted electricity data to the City of San Diego for the
development of a proforma on or before June 30, 2019 AND adopted the JPA
agreement by their governing body no later than October 1, 2019
■ Actions needed: adopt CCA ordinance, adopt JPA agreement, appoint a JPA
board member
• First vote of JPA board needed by December 2019 to adopt Implementation
Plan
o Startup costs will be covered by City of San Diego/JPA and waived for other founding
members (pro rata shares expenditures .including staffing, bonding, general admin,
technical consulting, marketing, regulatory/legal support, data management, etc.)
o Consider a neutral party as interim board member if the founding JPA only has two
parties at time of foundation, as agreed upon by both founding members
• New members:
o New members admitted by unanimous consent of all members (action by legislative
bodies) after January 1, 2020.
Board of Directors
• 1 board member who is an elected official to be appointed from each member jurisdiction
Updated 6/10/19
August 20, 2019 Item #15 Page 93 of 135
o Only board members can cast votes at board meetings and serve as elected officers of
the JPA.
o Only entities that are eligible to form a CCA are eligible to be a voting member of the
board of the JPA.
• Each jurisdiction can appoint two alternate board members who may vote on matters when the
regular Board member is absent from a Board meeting
o Alternate members can cast votes at board meetings when the primary board member
is not present and when designated to do so by their jurisdiction.
o Alternate members may vote in committee, chair committees, and fully participate in
discussion and debate during board meetings.
• Term limits
o Each member jurisdiction shall determine the term of office for their board member and
alternates.
Board Voting
• All votes start with an Equal Vote (1 member, 1 vote) with a simple majority.
• After an Equal Vote is completed, if two or more board members call for a weighted vote then a
weighted vote may be used. Once the JPA reaches 5 members, 1/3 of board members will be
required to call for a weighted vote.
• Weighted votes require a supermajority 2/3 vote to pass.
• Members can only call for a weighted vote to break a tie or revise a vote initially passed by a
simple majority, but no actions can be approved solely by a weighted vote.
• A jurisdiction's weighted vote is determined by it's the percentage of the JPA's annual energy
load.
o Board will set an annual date for calculating load.
• 2/3 of Equal Vote is required for selection and termination of appointed officers (see below,
CEO, Auditor, General Counsel)
o Define selection process for CEO to ensure equity (nomination process, etc.)
• Special Voting: State law requires a supermajority vote under certain conditions. In these
instances, an Equal Vote with a supermajority would be required after which, a weighted vote
requiring supermajority could be called for with two board members requesting.
o Examples:
■ !~sue bonds or other debt;
■ Amend the JPA agreement or adopt/amend bylaws;
Officers of the Board
• Elected officers (no more than one from a single member at the same time):
o Chair
o Vice Chair
o Secretary
o Treasurer
• Appointed Officers (may not be board members or alternate members)
o CEO -board should establish qualifications
. o Auditor-board should establish qualifications
o General Counsel -board should establish qualifications
Committees
• Board can establish committees and establish criteria in order to qualify for appointment.
Updated 6/10/19
August 20, 2019 Item #15 Page 94 of 135
• Committees should be representative of members (e.g., each member agency can appoint one
committee member).
• The following are required:
o Executive Committee
• Chaired by Chair
• Vice Chair, Secretary, Treasurer as members
o Finance/Risk Committee
o Technical Committee
o Community Advisory Committee
• Eligibility requirements for committee members ·
o Significant experience in either:
• an electric utility or company, or nonprofit providing services to a utility;
• a regulatory agency or local government body overseeing an electric utility or a
company;
• an academic or nonprofit organization engaged in research and/or advocacy
related to the electric sector; or,
• expertise in electricity markets.
Retained Local Control
• Set local renewable portfolio standards (RPS) goals
• Withdrawal from JPA with one-year notice
*Items to Consider
• Allocation of portion of excess revenue to member jurisdictions for administrative support
provided to CCA/constituents, if applicable
• Prioritize/weight procurement of local generation developed by member jurisdictions (needs
legal analysis)
• Rotate Board meetings regionally to ensure all member constituents can access public meetings
(determined by Board)
• Define responsibilities of board members -they have fiduciary responsibility to the JPA
Updated 6/10/19
August 20, 2019 Item #15 Page 95 of 135
//RWG
Gregory W. Stepanicich
T 415.421.8484
F 415.421.8486
E gstepanicich@rwglaw.com
LAW
MEMORANDUM
ATTORNEY-CLIENT PRIVILEGE
TO:
FROM:
DATE:
SUBJECT:
Crystal Najera, Clem Brown and Jason Haber
Greg Stepanicich, Special Counsel
June 17, 2019
Comments on San Diego CCA JPA Term Sheet
44 Montgomery Street, Suite 3800
San Francisco, CA 94104-4811
rwglaw.'com
Pursuant to your request, I have reviewed the revised draft CCA JPA Term Sheet (dated
June 10, 2019) prepared by the City of San Diego. References to JPA mean the Joint Powers
Authority that would be created by agreement to operate a CCA program. References to the
Agreement mean the Joint Powers Agreement creating the JPA. The following are my
comments by subject matter:
Goals of Regional CCA
1. The Term Sheet says that the renewable electricity goals of the JPA can be set
individually by each City. This has not been the practice of the CCA JPA's that I have worked
with. The Renewable Energy goals for these agencies have been established by the JPA as a
whole which then guides the actual purchase of ele1=tricity on behalf of all customers of the JPA.
As a practical matter, I am not sure how it would work for each member to set their individual
Renewable Energy goals. This is not a legal issue but an operational one and I recommend
getting advice on this approach from EES. I understand that East Bay Community Energy (EBCE)
has permitted its members to choose the default service for its residents. EBCE has established
different levels of service for its customers throughout the jurisdiction of EBCE with its
premium level providing 100% renewable energy. The governing board of each member is
given the authority to establish the default service for its residents. Two cities have established
the premium service as the default service for its residents with the residents having the option
to opt down to a cheaper level of service that provides a lower percentage of renewal energy.
2. With respect to rate setting, I am not sure what is meant by establishing rates
specific to communities of concern. It may be best to not include rate setting policies in the
San Francisco Los Angeles Orange County Temecula Central Coast RICHARDS WATSON GERSHON August 20, 2019 Item #15 Page 96 of 135
Crystal Najera
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ATTORNEY-CLIENT PRIVILEGE
Page I 2
Agreement but leave that for policy making when the JPA becomes operational and the Board
establishes rate policies. Rate policies may change over time to respond to changing
circumstances so it is desirable to leave flexibility for later decision-making. A Joint Powers
Authority is the constitution for the newly created agency that provides its legal structure.
Generally it is preferable to leave organizational details and policy making to the decision-
making of the Board of Directors. However, if there are certain policies that are critical to
members joining the JPA, then these policies can be included in the Agreement.
Board of Directors
Regular members and Alternates. The revised Term Sheet limits eligibility of the regular
Board members to elected officials. This has been the practice of the CCA JPA's I have worked
with. The Term Sheet does not expressly state who will pick the City's representatives on the
Board. The Term Sheet should address who picks the representatives (regular and alternate
members) to the JPA Board and I recommend that it be the City Council. The Term Sheet
provides for two alternates. I have not seen that before in a JPA. It raises a question as to
which alternate attends the Board meeting with the regular member cannot attend. The
revised Term Sheet does not address the qualifications of alternates. I recommend that the
Term Sheet address this point. Some CCA JPA's require the alternate to also be an elected
official and others permit the alternate to be either an elected official or alternate.
Board Voting
1. The Term Sheet provides that the Equal Vote will be a simple majority unless a
supermajority vote is specifically required. The Term Sheet also should address whether the
majority vote is a majority of a quorum or a majority of the entire Board. Requiring a majority
vote of the entire Board avoids a situation where an important action is taken by a relatively
small number of Board members if only a bare quorum is present. This requirement in practice
encourages attendance at Board meetings.
2. The Term Sheet provides that a weighted vote may be called for by two or more
members. It also increases the weighted vote threshold as the JPA grows larger. This is a good
provision as it preverits a single member or in a larger membership only two members from
invoking weighted voting. I note that with the CCA JPA's I have worked with; a weighted vote
has not been called to date. Once weighted voting is invoked, a tw_o-thirds weighted vote is
then required to pass the item. The CCA JPA Agreements I have reviewed use weighted voting
only as a veto of the Equal Vote by the larger members. As proposed by the Term Sheet,
weighted voting also is used to break a tie vote. For this purpose, requiring a two-thirds
weighted vote requirement lessens the power of the larger members on the tie-breaker. The
RICHARDS WATSON GERSHON August 20, 2019 Item #15 Page 97 of 135
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ATTORNEY-CLIENT PRIVILEGE
Term sheet provides that no action can be approved by a weighted vote only. This is an
important provision for the protection of the smaller sized city members.
Page I 3
3. The Term Sheet states that state law requires a supermajority vote under certain
conditions and gives the examples of issuing bonds, amending the JPA Agreement, and
adopting or amending Bylaws. Very few actions require a supermajority vote under state law.
One relevant example is eminent domain. However, the three examples given in the Term
Sheet are not required by state law to be adopted by a supermajority vote. This is in the
discretion of the members forming the JPA. The Term Sheet should list all potential items that
the group would like to consider for having a supermajority vote requirement. Typical actions
requiring a supermajority vote are the following:
a. Addition of new members
b. Expulsion of existing member
c. Amendment to the Agreement
d. Issuance of bonds or other debt
e. Eminent domain (state law requires a two-thirds vote to commence and the
Agreement can provide a higher voting threshold such as 75%}
4. The Term Sheet provides for a two-thirds Equal Vote for the appointment of the
CEO, Auditor and General Counsel. JPA Agreements generally provide for these appointments
to be made by majority vote. In practice these_ hires are going to be unanimous or near
unanimous as it is undesirable to have these positions filled on a divided vote.
Committees
1. A key issue is whether to list in the Agreement mandatory committees. My
recommendation is not to require any specific committee in the JPA Agreement other than
maybe an Executive Committee which most JPA's establish. Each of the existing CCA's have
established a variety of advisory committees with different titles and purposes. It is best to set
up the committees once the JPA is operational and the Board can discuss and decide what
types of committees will be most helpful. If the JPA Agreement is going to provide for a
Community Advisory Committee, the Agreement should be very specific about its duties and
that it is only advisory to the Board.
RICHARDS WATSON GERSHON August 20, 2019 Item #15 Page 98 of 135
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Page I 4
2. Qualifications of Committee members. The revised Term Sheet requires that
committee members have significant experience with electric utilities or the electricity field. In
practice, most CCA committees will be comprised of Board members for which such an
experience requirem~nt would not be applicable. For any committees with public members,
the qualifications for these committees should be determined for each particular committee
based on its purpose and function. I strongly recommend that the Agreement not provide
specific qualifications for committee members.
Retained Local Control
The Term Sheet identifies the right to withdraw upon one-year notice. A one-year
notice requirement is reasonable. Some CCA JPA's provide for a shorter 180 day notice
requirement with the withdrawal date tied to the start of a new fiscal year for the JPA. In
addition to a minimum notice period, the withdrawal section of the Agreement needs to
address the responsibility of the withdrawing party from any damages, losses or costs incurred
by the JPA resulting from the withdrawal, including but not limited to losses from the resale of
power contracted for by the JPA to serve the withdrawing party's load.
Items to Consider
1. If the cities want to make sure that there will be at least some reimbursement of
staff costs related to the operations of the JPA, it is a good idea to conceptually provide for this
type of payment in the Agreement with the actual amount of reimbursement provided by
action of the Board after the JPA begins receiving customer revenues. The actual payment
should be based on a reasonable estimate of the time required by the staffs of the members to
provide appropriate support. I suggest notreferring to this payment as being made from
excess revenues since this is an operational cost of the JPA.
2. Prioritizing or given extra weight to procurement of local generation developed
by member jurisdictions also seems like a policy that should be considered by the JPA Board
after the JPA becomes operational and the JPA adopts a plan/policy for purchasing electricity.
3. When the jurisdiction of a CCA JPA becomes large, having more than one
meeting place or rotating locations can provide better public access to meetings and can be less
burdensome to Board members who have to travel a long distance to get to a single meeting
place. However, the Agreement should provide that meeting times and locations shall be
established by Board resolution. This provides the greatest flexibility to the Board for
establishing a meeting location or locations based on the cities that actually become members
of the JPA. This approach also provides the most flexibility for changing meeting locations in
RICHARDS WATSON GERSHON August 20, 2019 Item #15 Page 99 of 135
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the future. I have worked with JPA's that rotate their meeting locations and this can be
accomplished by resolution in a manner that meets the Brown Act.
Additional Items for Term Sheet
Page I 5
1. Specifying one of the members as the agency whose limitations on the exercise of its
powers by state law will apply to the exercise of the JPA's powers. This designation under
Government Code Section 6509 does not need to be made at the beginning of the discussion of
Agreement terms but must be determined and placed in the Agreement before the Agreement
becomes final for adoption and execution. It is not sufficient to refer to the members in
general, a specific member must be listed. It is best to list the member whose limitations on
the exercise of powers is the m_ost flexible. In the context of a JPA, we recommend designating
a general law city. Counties have more restrictive operating rules under state law and charter
cities can have unusual requirements unique to the particular city that do not necessarily fit
well with a CCA program.
2. Amendment of Agreement. Whether the Agreement may be amended by the
Board or must be approved by the governing bodies of the members is an important point that
should be addressed by the Term Sheet. The CCA JPA's generally are providing for Board
approval of Agreement amendments with prior notice given to the governing bodies of the
members. This approach makes it much easier to make necessary amendments. to the
Agreement over time. Another approach is to provide for the approval of amendments by the
Board except for specified major amendments that require the approval.of the governing
bodies of the members.
3. Labor provisions. The City of Carlsbad adopted a resolution expressing its
intention to pursue a community choice energy program and prioritized certain labor principles.
These principles are that (1) the CCE shall pay prevailing wages for construction of local clean
energy resources, (2) the CCC shall enter into community benefits agreements and project
labor agreements demonstrating local hiring preferences where allowed by law, and (3) the CCE
shall remain neutral in the event its workers seek to unionize. These principles are not
incorporated into the Term Sheet. Although these labor provisions could be incorporated into
the Agreement, these are the type of policies that more typically are addressed by the Board
once the JPA becomes operational.
RICHARDS WATSON GERSHON August 20, 2019 Item #15 Page 100 of 135
CCA JPA Draft Term Sheet
Goals of regional CCA (include as guiding principles in JPA agreement)
• Base product= 50% RPS, option to opt up to higher renewable content at launch (e.g., 80% and
100% opt up options)
• Long term goal= 100% renewable electricity by 2035 (each city can opt down to. lower
renewable content level based on their goals until SBl00 or other statutory deadline takes
effect)
• Embedded fiscal responsibility
• Rates (specific rates will be set by the Board of the JPA)
o Establish economic development rates
o Establish rates specific to communities of concern
o Maintain cost competitive rates
• Prioritization of local renewable power development with emphasis on:
o Local jobs
o Skilled and trained workforce
o Investment in communities of concern
o Investment in communities with unique energy needs such as wildfire rebuilding
o No energy from unbundled Renewable Energy Certificates (RECs)
o Other economic benefits remaining/returning to JPA partners
Benefits of regional CCA
• Regional/ratepayer consistency in benefits and rate reductions
• Economies of scale for procurement of power (both bulk purchase and buying power), services,
and staffing
• Stronger regulatory and legislative influence in the state
• Financial and legal protections for individual members
Formation
• Founding members:
o Agencies who have submitted electricity data to the City of San Diego for the
development of a proforma on or before June 30, 2019 AND adopted the JPA
agreement by their governing body no later than October 1, 2019
• Actions needed: adopt CCA ordinance, adopt JPA agreement, appoint a JPA
board member
• First vote of JPA board needed by December 2019 to adopt Implementation
Plan
o Startup costs will be covered by City of San Diego/JPA and waived for other founding
members (pro rata shares expenditures including staffing, bonding, general admin,
technical consulting, marketing, regulatory/legal support, data management, etc.); City
will also provide credit backing for start-up loan
o Consider a neutral party as interim board member if the founding JPA only has two
parties at time of foundation, as agreed upon by both founding members
• New members:
o New members admitted by super majority 2/3 vote of all members after January 1,
2020; can't begin service until 2022
Updated 6/27 /19
August 20, 2019 Item #15 Page 101 of 135
Board of Directors
• 1 Board member who is an elected official to be appointed from each member jurisdiction
o Only Board members can cast votes at board meetings and serve as elected officers of
the JPA.
o Only entities that are eligible to form a CCA are eligible to be a voting member of the
Board of the JPA.
• Each jurisdiction can appoint one alternate Board member who may vote on matters when the
regular Board member is absent from a Board meeting
o Alternate member can cast votes at board meetings when the primary board member is
not present and when designated to do so by their jurisdiction.
o Alternate member may vote in committee, chair committees, and fully participate in
discussion and debate during board meetings.
o Alternate member should be an elected or appointed official from the member
jurisdiction (e.g., executive-level staff of city)
• Term limits
o Each member jurisdiction shall determine the term of office for their board member and
alternates.
• Selection of Board members
o Selected for each member jurisdiction by a vote of their respective governing body
(Council, Board, etc.)
Board Voting
• All votes start with an Equal Vote (1 member, 1 vote) with a simple majority.
• Vote counts are based on a quorum.
• Some actions may require an Equal Vote with a supermajority 2/3 vote to pass, such as:
o Adding/removing members
o Amending the JPA agreement
o Issuance of bonds or debt
o Eminent domain
o Selection and termination of appointed officers (see below, CEO, Auditor, General
Counsel)
■ Define selection process for CEO to ensure equity (nomination process, etc.)
• After an Equal Vote is completed, if two or more board members call for a weighted vote then a
weighted vote may be used. Once the JPA reaches 5 members, 1/3 of Board members will be
required to call for a weighted vote.
• Weighted votes require a supermajority 2/3 vote to pass.
• Members can only call for a weighted vote to break a tie or revise a vote initially passed by a
simple majority, but no actions can be approved solely by a weighted vote.
• A jurisdiction's weighted vote is determined by it's the percentage of the JPA's annual energy
load.
o Board will set an annual date for calculating load.
• . Special Voting: State law requires a supermajority vote under certain conditions. In these
instances, an Equal Vote with a supermajority would be required after which, a weighted vote
requiring supermajority could be called for with two Board members requesting.
Officers of the Board
Updated 6/27 /19
August 20, 2019 Item #15 Page 102 of 135
• Elected officers (no more than one from a single member at the same time):
o Chair
o Vice Chair
o Secretary
o Treasurer
• Appointed Officers (may not be board members or alternate members)
o CEO -board should establish qualifications
o Auditor -board should establish qualifications
o General Counsel -board should establish qualifications
Committees
• Board can establish committees and establish criteria in order to qualify for appointment.
• Committees should be representative of members (e.g., each member agency can appoint one
committee member).
• The following are required and will be composed of Board members only:
o Executive Committee
• Chaired by Chair
• Vice Chair, Secretary, Treasurer as members
o Finance/Risk Committee
• The following are recommended and will be advisory in nature only:
o Technical Committee -should have significant experience in electricity markets,
procurement, regulatory/legislative process, legal, etc.
o Community Advisory Committee
• Eligibility requirements for committee members, if not a Board member, should be set by the
Board based on the purpose of the committee
Retained Local Control
• Set local renewable portfolio standards (RPS) goals
• Individual parties retain control of land use
• Withdrawal from JPA with one-year notice
o Withdrawing party will be responsible for any damages, losses or costs incurred by the
.JPA resulting from the withdrawal, including but not limited to losses from the resale of
power contracted for by the JPA to serve the withdrawing party's load.
*Items to Consider
• Specify one of the members as the agency whose limitations on the exercise of its powers by
state law will apply to the exercise of the JP A's powers (see Government Code 6509)
o Recommend to list the member city who's limitations on the exercise of powers is the
most flexible (e.g. a general law city)
• Reimbursement through a cooperative service agreement with JPA to member jurisdictions for
administrative support provided to CCA/constituents, if applicable
• Prioritize/weight procurement of local generation developed by member jurisdictions (needs
legal analysis)
• Rotate Board meetings regionally to ensure all member constituents can access public meetings
(determined by Board)
• Define responsibilities of board members -they have fiduciary responsibility to the JPA
Updated 6/27 /19
August 20, 2019 Item #15 Page 103 of 135
Mia De Marzo
From:
Sent:
To:
Cc:
Subject:
Don Christiansen
Sunday, August 18, 2019 2:10 PM
All Receive • Aienda lt@m # IS
For the Information of th;-
. Cl rv COUNCIL
Date fil~"<:A ~ cc Y'
CM Z, coo )( DCM (3\ )C
Matthew Hall; Barbara Hamilton; Keith Blackburn; Cori Schumacher; Priya Bhat-Patel
Scott Chadwick; Jason Haber; Attorney; City Clerk; cblakespear@encinitasca.gov;
mdelin@encinitasca.gov; cnajera@encinitasca.gov
Community Choice Energy Governance--Tuesday's Council meeting
Good Day Mayor and Councilmembers!
I have read/reviewed the Governance Analysis Report and agree with its conclusion that the best Governance would be
achieved via a Joint Powers Authority {JPA) between Carlsbad, Encinitas, and Del Mar.
Although it might be "easier" to follow the "Big Dog" of the City of San Diego, it is my understanding from reading the
Report that any perceived advantage of a larger economy of scale becomes negligible after a certain size. In short, not
much monetary savings between following the City of San Diego and the proposed three City JPA.
In my opinion a North County Coastal JPA would provide LOCAL governance that would create more LOCAL jobs and
business opportunities, AND more tax revenue. It is my understanding that Carlsbad and Encinitas have successfully
worked together for years via the Encina Wastewater Authority JPA.
I also understand from the Report that the three City JPA may be the most expedient and thus move us faster towards
the goals of our Climate Action Plans.
Thank you for working for the best interests of Carlsbad!
All the best,
Don Christiansen
Pro-active Carlsbad Citizen
Decentralized Renewable Energy Advocate
1
Mia De Marzo
From: Manager Internet Email
Sent:
To:
Monday, August 19, 2019 11 :44 AM
City Clerk
Cc: Jason Haber
Subject:
Attachments:
FW: SanDiego350 Comment Letter on North County CCE Governance Study
SanDiego350 North County Governance Structure Letter.pdf
Regarding CCE
From: Ryan Oconnor
Sent: Monday, August 19, 2019 10:26 AM
To: ryan@sandiego350.org
Subject: SanDiego350 Comment Letter on North County CCE Governance Study
Dear Honorable Elected Official,
Thank you for your work on moving toward adopting a Community Choice Energy program.
At SanDiego350 and as a member of the San Diego Community Choice Alliance we .believe that a CCE program is the best
path forward to achieve 100% renewable energy goals, provide local control of developing renewable energy resources,
creating programs to address environmental justice issues and reinvest rate payer dollars back into the community for
local economic development.
Please find attached a letter that provides input on the North County governance study for a CCE program. As the letter
outlines we believe that the best path forward is for North County jurisdictions to join a regional CCE program with the
City of San Diego and other regional partners.
Please let me know if you have any questions or if we can provide any additional input into the process or governance
study.
Thank you for your time and consideration.
Ryan
Ryan O'Connor
Policy Organizer
SanDiego350 -Climate Change Action
www.sandieqo350.org I www.facebook.com/SanDieqo350
1
SAN DIEGO •350
August 19, 2019
Dear Honorable Elected Officials,
RE: Review of North County CCE Governance Report and Call for a Regional JPA
SanDiego350 is an inclusive volunteer organization devoted to inspiring a movement to prevent
the worst impacts of climate change and climate injustice. We strive to create a future that
supports a livable planet and just society through education and outreach, public policy
advocacy, and mobilizing people to take action. We represent approximately 10,000 local
volunteers and supporters in the San Diego area
Given the urgency of the need to act on climate, and the need to move CCE forward this year to
reach our 100 percent goals, we offer our review of the North County CCE Governance Report,
and our recommendations for next steps.
Overall, we believe that the decision to expend taxpayer dollars to create a separate JPA
offering redundant services should only be considered if there are considerable additional
benefits gained to the relevant jurisdictions to justify those redundancies and taxpayer
expenses. As We discuss below, we do not believe that to be the case. We also do not believe
the report offers sufficient or accurate information to make an informed decision, lacks
appropriate scoring criteria, and offers misguided conclusions. For these reasons and more, we
strongly recommend the San Diego Regional JPA option to best meet the needs of all of our
families.
The Governance Report Lacks Key Information and Reaches a Misguided Conclusion
The report contains a number of selected criteria to evaluate different governance options. We
tried to distill what we believe are the most important data points, some offered and some not
offered in this report.
Ability to Launch This Year
We all agree that we must launch this year to tackle the climate crisis and ensure we reach our
ambitious climate goais and renewable energy targets. The report claims "all options are
feasible for a 2021 launch with varying degrees of effort." However, this claim is suspect.
Starting a CCE JPA requires significant staff time and resources, as cities are negotiating
complex financial, political and regulatory commitments that require months of lead time. Given
the small program proposed by the North County JPA will only add to the time frame needed to
secure financing. Only the city of San Diego has completed this work, and only the city of San
Diego staff appears ready, willing, and able to lead this complex effort.
Financing Challenges and Revenue Constraints
The report seems overly optimistic in its analysis of financing opportunities for a prospective
North County JPA, while ignoring its limited revenue potential as a small CCE program -
especially in its initial formation. (Any future cities that may join will be subject to a
one year delay period -so they would not be able to procure power or serve customers until at
least 2022. Further, none of these other north county cities have made the commitment to
100% renewable energy, and many do not have a CAP.)
These revenue constraints will hinder local clean energy development, programming, and CAP
implementation. After conversations with CCE financing experts, we have learned that the
proposed North County JPA will be more difficult and expensive to finance, and require more
time to secure funding than the report suggests. This reality will likely delay the launch of the
CCE, and burden the start-up with higher debt it will have to manage for a longer period of time,
which will cascade to further delays in local clean power development and programmatic
opportunities to reach local CAP targets. A CCE cannot start procuring new power and creating
community programs unless there is revenue after creating reserves and loan repayment, which
North County would not have until much later and after a delayed launch.
Misrepresentation of the San Diego Regional JPA Proposal
There are numerous misrepresentations and omissions about the San Diego regional JPA
proposal, which run counter to facts and the consultant's own analysis in this report, and their
other reports done for San Diego and other jurisdictions. For instance:
• The rate discount is claimed to be consistent across all JPA options, however the same
analysis done by the report consultants for Chula Vista and La Mesa identified more
savings for those cities with a regional JPA. If Chula Vista and La Mesa can see
significantly more savings with a regional JPA, why not North County?
• The City of San Diego has a 100 percent clean energy commitment and a legally binding
Climate Action Plan, yet the report states that a regional JPA would be less likely to
achieve those targets. In reality, only a regional JPA would have the revenue (1.1 billion+
· over 10 years) to build out new clean power -North County's revenue projections ($50
million over 1 0 years) clearly show that clean energy build out is impossible in the near
or mid term. A regional JPA is most likely, not least likely, to achieve CAP targets.
• Additionally, with regards to clean energy targets, as currently negotiated in the draft
regional JPA, any member may opt in to a 100 percent product for their city at any time,
enabling them to reach their CAP targets sooner, which may only be achieved through
the economies of scale pricing that exists with a regional JPA.
• The regional JPA governance structure outlined in the report does not fully detail the
many protections for smaller cities. While there is a weighted vote option (which is
important to ensure equity for all members and which is deemed "fair'' by the
consultants own legal review), that option is only allowed after a tally vote and if three or
more members agree to it. In the highly unlikely event a weighted vote is called, it must
pass with a 213rd majority, with San Diego's weight capped at 49%. Under this proposal,
local control is protected, not lost, as the consultants erroneously claim .
• The consultants also fails to share an important fact: that across the 19 CCEs covering
160+ cities and counties in California, a weighted vote has only been called once. Just
once, over issues connected to the JPA foundational documents. The truth is, energy
procurement has proven to not be a controversial issue, and CCE programs are driven by
consensus.
• The consultants omit the real and practical benefits of a regional CCE with regards to
volumetric contract pricing, a larger customer base over which to spread fixed
operational costs, accelerated accumulation of reserves to support rate stabilization and
new energy programs, a greater chance of achieving a credit rating with its many market
benefits, and more power products and pricing options for all customers.
This last bullet point is perhaps one of the most compelling for choosing a regional JPA.
Multiple cities in North County have suggested they justify creating inefficiencies and
redundancies because they want to maximize local clean energy buildout and program
opportunities for residents, in addition to offering more power products and pricing options.
This can only be done if there is sufficient resources, and only the regional JPA offers those
opportunities.
Definition of "Local Control "
Finally, one of the criteria used to evaluate the merits of each proposal is the concept of local
control. Local control is certainly one of the benefits of community choice, and it is commonly
· referenced as local control versus state control. That is how we have always discussed
Community Choice, since currently all of our energy decisions are made in San Francisco at the
PUC and at the state legislature. We are excited about the proposition to finally have decisions
niade here in our community.
Now, however, the term "local control" is being narrowly defined to be city specific, or defined as
certain groupings of cities. Comments we hear is that some cities don't want to necessarily
mingle or work with other cities because of different populations, income levels or values. We
strongly urge you to reject this way of thinking. Not only does it have dark undertones, but it
undermines our need to grasp that the climate crisis is going to affect all of us, as we are in this
fight together. This is not the time for siloes, or walls, or groupings according to race or
affluence, it is time to unite and remind ourselves that our fates are tied together.
San Diego Regional JPA is the Most Efficient, Cost-Effective and lmpactful Path Forward
For these reasons and more, we strongly recommend that we join hands and leverage our
collective economic power to form a regional CCE JPA. This is not only the best decision for
every individual city, it is in the best interest of all current and future families who will need to
come together to support each other and survive as conditions change and threats emerge. We
must move lock step together to reach 100, not build climate walls.
Sincerely,
Ryan O'Connor, Policy Organizer
SanDiego350
Mia De Marzo
From:
Sent:
To:
Subject:.
Attachments:
Manager Internet Email
Monday, August 19, 2019 11 :51 AM
City Clerk
FW: Climate Action Campaign Review of North County CCE Program Governance Report
Climate Action Campaign North County CCE Letter.pdf
From: Matthew Vasilakis
Sent: Friday, August 16, 2019 6:01 PM
To: Matthew Vasilakis
Cc: Nicole Capretz
Subject: Climate Action Campaign Review of North County CCE Program Governance Report
Dear Honorable Elected Officials,
Please accept Climate Action Campaign's review of the North County Community Choice Energy Program Governance
Analysis Report, and why we believe the San Diego regional JPA is the most efficient, cost-effective and impactful path
forward.
We look forward to partnering with you on this important initiative, and all future climate solutions.
Thank you for everything you do.
Best,
Matthew Vasilakis
Climate Justice Advocate & Organizer
1
CAMPA I GN
August 16, 2019
RE: Review of North County CCE Gover~ance Report and Call for a Regional JPA
Dear Honorable Elected Officials,
Climate Action Campaign has a simple mission: stop the climate crisis. We are proud to have
partnered with you and your cities to adopt bold climate action plans with Community Choice.
We have been inspired by the leadership you have set for the region, and we look forward to .
continuing to partner with you. This is an all hands on deck moment,-and it's going to take all of
us working together to prepare for the climate crisis as one region, united and committed to
protecting our future and our intertwined fates.
Today, we can stand tall knowing that we have seven cities who have committed to 100 percent
renewable energy by 2030 or 2035, at least 10 years ahead of the state: City of San Diego,
Encinitas, Del Mar, Solana Beach, Chula Vista, La Mesa and Imperial Beach. This is
unprecedented and we believe leads the nation. We have shown that we can all move in one
direction to confront the biggest challenge-and opportunity-in human history. These cities
also happen to be the cities most likely to move on Community Choice first.
Community Choice is the only mechanism to allow us to reach this 100% goal, and offers unique
opportunities to continue to steeply reduce our carbon emissions, build regional unity, develop a
local clean energy economy, create jobs, restore local control and achieve environmental, racial
and social justice.
It also requires immediate implementation. Given the PUC requirement to wait a year to launch
after forming a program, all of these cities must join forces to be able to start procuring power
and serving customers in 2021 --it is our best hope of reaching 100 percent renewables by 2030
or 2035.
Given the urgency of the need to act on climate, and the need to move CCE forward this year to
reach our 100 percent goals, we offer our review of the North County CCE Governance Report,
and our recommendations for next steps
Overall, we believe that the decision to expend taxpayer dollars to create a separate JPA
offering redundant services should only be considered if there are considerable additional
CAMPA I GN
benefits gained to the relevant jurisdictions to justify those redundancies and taxpayer ·
expenses. As we discuss below, we do not believe that to be the case. We also do not believe
the report offers sufficient or accurate information to make an informed decision, lacks
appropriate scoring criteria, and offers misguided conclusions. For these reasons and more, we
strongly recommend the Sail Diego Regional JPA option to best meet the needs of all of our
families.
The Governance Report Lacks Key Information and Reaches a Misguided Conclusion
The report contains a number of selected criteria to evaluate different governance options. We
tried to distill what we believe are the most important data points, some offered and some not
offered in this report .
. Ability to Launch This Year
We all agree that we must launch this year to tackle the climate crisis and ensure we reach our
am.bitious climate goals and renewable energy targets. The report claims "all options are
feasible for a 2021 launch with varying degrees of effort." However, this claim is suspect.
Starting a CCE ·JPA requires significant staff time and resources, as cities are negotiating
complex financial, political and regulatory commitments that require months of lead time. Given
the small program proposed by the North County JPA will only add to the time frame needed to
secure financing. Only the city of San Diego has completed this work, and only the city of San
Diego staff appears ready, willing, and able to lead this complex effort.
Financing Challenges and Revenue Constraints
The report seems overly optimistic in its analysis of financing opportunities for a prospective
North County JPA, while ignoring its limited revenue potential as a small CCE
program-especially in its initial formation. (Any future cities that may join will be subject to a
one year delay period-so they would not be able to procure power or serve customers until at
least 2022. Further, none of these other north county cities have made the commitment to
100% renewable energy, and many do not have a CAP.) These revenue constraints will hinder
local clean energy development, programming, and CAP implementation.
&LIMA TE ACTION
CAMPA I GN
After conversations with CCE financing experts, we have learned that the proposed North
County JPA will be more difficult and expensive to finance, and require more time to secure
funding than the report suggests. This reality will likely delay the launch of the CCE, and burden
the start-up with higher debt it will have to manage for a longer period of time, which will
cascade to further delays in local clean power development and programmatic opportunities to
reach local CAP targets. A CCE cannot start procuring new power and creating community
programs unless there is revenue after creating reserves and loan repayment, which North
County would nqt have until much later and after a delayed launch.
Additionally, the report does not in any way address the combined revenue potential of the three
cities. Based on the consultants numbers provided in the North County CCE Feasibility Study, we
estimate conservatively the combined revenue potential of the three cities is a mere $5 million
per year over 10 years on average (in comparison to regional JPA at $110 million+ per year over
10 years on average), and thus, significantly less effective to leverage in power procurement
contract negotiations to provide more affordable rates. Ironically, a smaller North County JPA,
unable to procure fair energy contracts on the open market, may inevitably become a forced
customer of San Diego's regional JPA (see Lancaster model), losing that desired control and
wasting significant revenue on redundant overhead costs that could otherwise go to ratepayer
benefits, and clean energy development and programs.
Overall, the consultants do not address the real financing difficulties for a prospective North
County JPA, nor do they even mention the very real revenue constraints that will hinder local
clean power development and programmatic opportunities for years after the delayed JPA is
formed. This is a glaring gap in the analysis and undermines the recommendation for a
separate JPA.
Misrepresentation of the San Diego Regional JPA Proposal
There are numerous misrepresentations and omissions about the San Diego regional JPA
proposal, which run counter to facts and the consultant's own analysis in this report, and their
other reports done for San Diego and other jurisdictions. For instance:
• The rate discount is claimed to be consistent across all JPA options, however the same
analysis done by the report consultants for Chula Vista and La Mesa identified more
savings for those cities with a regional JPA. If Chula Vista and La Mesa can see
significantly more savings with a regional JPA, why not North County?
CAMPA I GN
• The City of San Diego has a 100 percent clean energy commitment and a legally binding
Climate Action Plan, yet the report states that a regional JPA would be less likely to
achieve those targets. In reality, only a regional JPA would have the revenue (1 .1 billion+
over 1 0 years) to build out new clean power-North County's revenue projections ($50
million over 1 0 years) clearly show that clean energy build out is impossible in the near
or mid term. A regional JPA is most likely, not least likely, to achieve CAP targets.
• Additionally, with regards to clean energy targets, as currently negotiated in the draft
regional JPA, any member may opt in to a 100 percent product for their city at any time,
enabling them to reach their CAP targets sooner, which may only be achieved through
the economies of scale pricing that exists with a regional JPA.
• The regional JPA governance structure outlined in the report does not fully detail the
many protections for smaller cities. While there is a weighted vote option (which is
important to ensure equity for all members and which is deemed "fair" by the
consultants own legal review), that option is only allowed after a tally vote and if three or
more members agree to it. In the highly unlikely event a weighted vote is called, it must
pass with a 213rd majority, with San Diego's weight capped at 49%. Under this proposal,
local control is protected, not lost, as the consultants erroneously claim.
• The consultants also fails to share an important fact: that across the 19 CCEs covering
160+ cities and counties in California, a weighted vote has only been called once. Just
once, over issues connected to the JPA foundational documents. The truth is, energy
procurement has proven to not be a controversial issue, and CCE programs are driven by
consensus.
• The consultants omit the real and practical benefits of a regional CCE with regards to
volumetric contract pricing, a larger customer base over which to spread fixed
operational costs, accelerated accumulation of reserves to support rate stabilization and
new energy programs, a greater chance of achieving a credit rating with its many market
benefits, and more power products and pricing options for all customers.
This last bullet point is perhaps one of the most compelling for choosing a regional JPA.
Multiple cities in North County have suggested they justify creating inefficiencies and
redundancies because they want to maximize local clean energy buildout and program
&LIMA 1E ACTION
CAMPA I GN
opportunities for residents, in addition to offering more power products and pricing options.
This can only be done if there is sufficient resources, and only the regional JPA offers those
opportunities.
Definition of "Local Control"
Finally, one of the criteria used to evaluate the merits of each proposal is the concept of local
control. Local control is certainly one of the benefits of community choice, and it is commonly
referenced as local control versus state control. That is how we have always discussed
Community Choice, since currently all of our energy decisions are made in San Francisco at the
PUC and at the state legislature. We are excited about the proposition to finally have decisions
made here in our community.
Now, however, the term "local control" is being narrowly defined to be city specific, or defined as
certain groupings of cities. Comments we hear is that some cities don't want to necessarily
mingle or work with other cities because of different populations, income levels or values. We
strongly urge you to reject this way of thinking. Not only does it have dark undertones, but it
undermines our need to grasp that the climate crisis is going to affect all of us, as we are in this
fight together. This is not the time for siloes, or walls, or groupings according to race or
affluence, it is time to unite and remind ourselves that our fates are tied together.
San Diego Regional JPA is the Most Efficient, Cost-Effective and lmpactful Path Forward
For these reasons and more, we strongly recommend that we join hands and leverage our
collective economic power to form a regional CCE JPA. This is not only the best decision for
every individual city, it is in the best interest of all current and future families who will need to
come together to support each other and survive as conditions change and threats emerge. We
must move lock step together to reach 100, not build climate walls.
Sincerely,
Nicole Capretz
Executive Director
Climate Action Campaign
~vd ttt c,-hj CcMncil
M-e:e-n ~ 8 /?-0 I l q re. J +-cw. ~,s
PROPOSED CCA JPA LANGUAGE: SIERRA CLUB/IBEW 569/SAN
DIEGO COMMUNITY CHOICE ALLIANCE
Recitals
By establishing the Authority, the Parties seek to:
Provide electricity rates that are lower or competitive with those offered by the incumbent
utility for similar products;
Offer differentiated energy options (minimum 50% qualified renewable) for default service
and a 100% renewable content option in which customers may "opt-up" and voluntarily
participate;
Develop an electric supply portfolio with a lower greenhouse gas (GHG) intensity than the
incumbent utility and one that supports the achievement of the parties' greenhouse gas
reduction goals and the comparable goals of all participating jurisdictions;
Establish an energy portfolio that prioritizes the use and development of local renewable
resources and excludes Category 2 or 3 energy resources as defined under the RPS, coal and
nuclear energy;
Demonstrate quantifiable economic benefits to the region (e.g. union and prevailing wage
jobs, local workforce development, new energy programs, and increased local energy
investments);
Recognize the value of workers in existing jobs that support the energy infrastructure of San
Diego County. The Authority, as a leader in the shift to clean energy, commits to ensuring it
will take steps to minimize any adverse impacts to these workers to ensure a "just transition"
to the new clean energy economy.
Deliver clean energy programs and projects using a stable, skilled workforce through such
mechanisms as project labor agreements, or other workforce programs that are cost effective,
designed to avoid work stoppages, and ensure quality.
Create an administering agency that is financially sustainable, responsive to regional priorities,
well managed, and a leader in fair and equitable treatment of employees through adopting
appropriate best practices employment policies, including, but not limited to, promoting
efficient consideration of petitions to unionize, and providing appropriate wages and benefits.
Pursue purposeful and focused investment in communities of concern, prioritization of local
renewable power and workforce development and policies and programs centered on
economic, environmental and social equity.
Page 1 of3
PROPOSED CCA JPA LANGUAGE: SIERRA CLUB/IBEW 569/SAN
DIEGO COMMUNITY CHOICE ALLIANCE
Powers
The Authority shall have all powers common to the Parties and such additional powers accorded to it
by law. The Authority is authorized, in its own name, to exercise all powers and do all acts necessary
and proper to carry out the provisions of this Agreement and fulfill its purposes, including, but not
limited to, each of the following:
To negotiate project labor agreements, community benefits agreements and collective bargaining
agreements with the local building trades council and other interested parties.
Community Advisory Committee
Seep. 10 East Bay JPA for sample language.
Strategic Plan
The Authority shall cause to be prepared a Strategic Plan, which will include a roadmap for the
development, procurement and integration of renewable energy resources. The Strategic Plan shall
include a description of how the CCA Program will foster meaningful and equitable environmental
and economic benefits in the San Diego Region. The Strategic Plan shall identify opportunities for
local power development and how the CCA program can identify the goals outlined in Recitals_
and __ of this Agreement. The Strategic Plan shall include specific language detailing community
benefits, equity, employment and labor standards that relate to the execution of the CCA Program as
referenced in this Agreement. The Strategic Plan shall identify clear and transparent marketing
practices to be followed by the CCA Program, including the identification of the sources of its
electricity and explanation of the various types of electricity procured by the Authority. The Strategic
Plan shall cover the first five (S) years of the operation of the CCA Program with an update every
subsequent five (5) years. The Strategic Plan shall be completed by the Authority no later than one
year after the seating of the Authority Board of Directors. Progress on the implementation of the
Strategic Plan and any subsequent plans shall be subject to annual public review.
Procurement. The Authority shall provide its customers renewable energy primarily from Category 1
eligible renewable resources, as defined under the California RPS and consistent with the goals of the
CCA Program. The Authority shall not procure energy from Category 2 or 3 eligible renewable
resources, nuclear or coal.
Labor Organization Neutrality
The Authority shall agree in writing to neutrality in the event employees or contractor employees
wish to unionize.
Page 2 of3
PROPOSED CCA JPA LANGUAGE: SIERRA CLUB/IBEW 569/SAN
DIEGO COMMUNITY CHOICE ALLIANCE
Inclusive and Sustainable Workforce Policy
The Authority shall adopt, prior to issuance of any requests for proposals to purchase power,
an Inclusive and Sustainable Workforce Policy that includes, at minimum, the same elements
as the Peninsula Clean Energy Inclusive and Sustainable Workforce Policy, as revised on
October 25, 2018.
The Policy shall further require that:
(a) All contractors and subcontractors on construction and maintenance projects
undertaken by or for the Authority must use a skilled and trained workforce, as
defined in Section 2601 of the California Public Contract Code.
(b) The Authority's requests for proposals and agreements with developers or
suppliers of power, including for feed-in tariffs, shall require, to the maximum extent
legally permissible and practically feasible, that all contractors and subcontractors
performing construction, alteration, demolition, installation, and repair work in
connection with the construction or maintenance of the energy generating capacity
must pay the workers performing such work at least the prevailing rate of wages, as
defined in Article 2 (commencing with Section 1770) of Chapter 1 of Part 7 of Division
2 of the California Labor Code.
(c) The Authority shall, to the maximum extent legally permissible and practically feasible, give
priority to projects and proposals in which the construction and maintenance of the energy
generating capacity will be performed under a multi-craft project labor agreement that
requires the use of apprentices enrolled in state-approved apprenticeship programs in the
Counties of San Diego or Imperial.
Page 3 of3
Jason Haber, Assistant to the City Manager
August 20, 2019
Community Choice Energy Program
Governance Analysis Report and
Joint Powers Authority Formation
Recommended Action
•Receive CCE Governance Analysis Report
•Receive Ad-Hoc Subcommittee Recommendation
•Direct staff to:
−Negotiate JPA Agreement
−Prepare CCE Implementation Ordinance
−Return to obtain necessary approvals & appropriations
Prior City Council Action
•July 11, 2017 -Authorized participation in CCE Feasibility Study
•February 26, 2019 -Authorized participation in evaluation of CCE
program governance options
•March 19, 2019 –Intention to pursue a CCE program
•April 16, 2019 -Accepted CCE Feasibility Study & authorized
procurement of joint legal services for CCE formation documents
•June 25, 2019 -Authorized formation of City Council ad-hoc
subcommittee –Mayor Hall & Councilmember Schumacher
Community Presentations
•January 13, 2016 –The Future of Energy panel discussion
•March 20, 2019 –Carlsbad Chamber of Commerce –Board of Directors
•March 21, 2019 –CCE Feasibility Study Community Workshop
•April 1, 2019 –Southwest Carlsbad Homeowners Association Coalition
•May 1, 2019 –Carlsbad Chamber of Commerce -Government Affairs
•May 23, 2019 –Carlsbad Republican Women Federated
SDG&E Statement on Energy Procurement
“As the energy market in California becomes increasingly decentralized, we see a future in which SDG&E focuses primarily on the safe and reliable transmission and distribution of energy to our customers.”
“…we believe our best course is to move out of procurement and focus on the safe and reliable delivery of energy to our customers. “
June 2019
Presented by:
EES Consulting, Inc.(EES)
Gary Saleba,President/CEO
EES Consulting,Inc.
CITY OF
CARLSBAD / DEL MAR /ENCINITAS
GOVERNANCE OPTIONS AVAILABLE FOR FORMING A CCE
AUGUST 2019
A registered professional engineering and management consulting firm
with offices in Kirkland, WA; Portland, OR; Spokane, WA and La Quinta,CA
(425)889-2700 www.eesconsulting.com
AGENDA
7
Introduction and Background
Governance Options
Economies of Scale
Evaluation of Options
Observations and Recommendations
Timeline and Next Steps
INTRODUCTION AND BACKGROUND
8
Background on CCE
CCE Technical Feasibility Study Confirmed CCE was Financially Feasible, Could Reduce Greenhouse
Gases and Promote Local Economic Development
Directed to Analyze Different CCE Governance Structures
“Partner” Group Now Consists of Carlsbad, Del Mar and Encinitas
Tonight Will Discuss Available Governance Options and the Findings of Governance Report
CCE GOVERNANCE OPTIONS
9
Enterprise
•Each City set up and operate a CCE
JPA
•Partner JPA
•Solana Energy Alliance (SEA) –JPA
•City of San Diego –JPA
Received Responses to RFI from City of San Diego and SEA
DETAILS OF EACH OPTION
10
1.Enterprise 2. Partner CCE JPA 3. Solana Energy Alliance
JPA
4. City of San Diego JPA
Pre-Launch Costs
for Partners $600K -800K(each)$50,000 for 2019
$1,250,000 in 2020
$0 $0
Estimated
Rate
Discount
0-2%2%2%At least 2%
Probable Launch Date 2021?2021 2021?2021
Rate Setting Full control 1 city, 1 vote 1 city, 1 vote 1 city, 1
vote, w/
weightedvote
General Fund Liability Moderate/Low Low Low Low
Financing Each secure
own
financing
JPA securesfinancing
SEA arranges for financing with
reimbursement. SEA to
resolve current contracts and
financial commitments
City of San Diego
Finances with
reimbursement
Comply with RPS?Yes Yes Yes Yes
PROPOSED RENEWABLE ENERGY SHARE
Under Enterprise or Partner JPA , City
of Carlsbad would determine opt-in
energy portfolio with minimum 50%
renewable mix
City of San Diego JPA to offer 50%
renewable in 2021 with option to opt
up to 80% or 100% renewable
SEA JPA suggests minimum 50% RPS,
75% GHG-Free –with 100% RPS opt up
option
6
120%
~ 100%
ro ..c V'l 80% > "° ai C 60% lJ.J
(U :n ro 40% ~ (U
C (U er: 20%
0%
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
--Enterprise -Partner CCA JPA
--Solana Energy Alliance JPA -City of San Diego JPA
ECONOMIES OF SCALE
Primary CCE Costs are Operating and
Power Supply
Power Supply Costs (90%)
•Purchases in 25MW blocks or more
optimize pricing
Operating Costs ($/per month per
account)(10%)
Conclusion: All Three CCE JPA Options
Large Enough to Receive Optimal Pricing
for Power Supply and Operating Costs.
Likely not the case with Enterprise
option.
Operating Costs,$/Account
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
0
Calrsbad
25,000 50,000 75,000 100,000 150,000 200,000 250,000 300,000
Encinitas Del Mar 3 City monthly Cost per meter
12
----
EVALUATION OF OPTIONS
13
“1” is the lowest rating and a “5” is the highest/best rating
Issue Enterprise Partner
JPA
Solana Energy
Alliance JPA
City of SanDiego
JPA
Availability of Pre-Launch Funding 2 2 3 4
Launch by 2021 3 3 3 4
Voting Protocol 5 4 3 2
Local Decision Making 5 4 3 2
Amount of Rate Discount 1 3 3 3
Achieve CAP Goals 5 5 5 4
General Fund Protection 1 4 4 4
Existing Track Record 1 2 3 2
Future Flexibility 5 4 3 2
Local Renewable Development 4 4 3 2
Partner Staff Impact 1 2 3 5
Total 33 37 36 34
OBSERVATIONS AND RECOMMENDATIONS
14
Observations
•Funding for Partner JPA option
Need $50,000 in 2019 plus $800,000 -$1,200,000 in 2020
External funding very likely for 2020 expenses
•With exception of Enterprise option, all rate discounts about the same
•CAP goals fairly well aligned for all
OBSERVATIONS AND RECOMMENDATIONS (CONT’D)
15
Recommendations
•All four CCE governance options are viable and could launch by2021
•Enterprise doesn’t work well due to lack of maximum rate discounts and general fund liabilitypotential
•City of San Diego JPA offered the benefit of start-up funding but also has weighted voting. Given the size of City of San Diego, local control by Partners would be lessened; inferior option compared to other alternatives
•Solana Energy Alliance JPA has desirable attributes but pre-existing SEA contracts and balance sheet items make this option more complicated and inferior
•Partner JPA recommended –good balance between size and local control / good working relationship. Consider taking in SEA’s customer base and assume any SEA existing commitments that might be advantageous to the Partner JPA
TIMELINE AND NEXT STEPS
16
Assumes 2021 Launch
2019 2020 2021
Task DueDate Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Governance Report Final 8/7/2019
Council Presentations
Carlsbad 8/20/2019
Encinitas 8/21/2019
Del Mar 9/5/2019
Approval of Ordinance and Resolution to Create CCE andJPA 9/30/2019
Prepare, approve, and file ImplementationPlan 12/31/2019
Hire Executive Director 1/1/2020
File Historic Load Data withCPUC/CEC 3/17/2020
RPS ProcurementPlan 3/31/2020
Register with CPUC and submitBond 4/1/2020
Hire Staff 4/1/2020
File Year-Ahead LoadForecast 4/20/2020
CPUC confirmsregistration 5/1/2020
File Integrated Resource Plan 5/1/2020
RFP &Contract for Scheduling Coordinator/Portfolio Mngr 7/1/2020
RPS Compliance Report 8/1/2020
RFP & Contract forFinancial Services, Data Mgmt, Marketing 8/1/2020
Power Purchase and Contracting (IncludingRA)1/1/2021
Launch Activities (opt-out notices, testingetc)1/10/2021
TIMELINE AND NEXT STEPS
17
Next Steps
•Decide whether or not to proceed forming CCE, and, if so, which governance option is preferred
•If decision is to proceed, return to Council with JPA Agreement &Ordinance
•Draft Implementation Plan, if needed, by yearend
CCE Subcommittee Recommendation
The Carlsbad City Council Ad-Hoc Subcommittee on Community
Choice Energy advises and recommends to the City Council that the
City of Carlsbad negotiate and enter into a Community Choice
Energy Authority Joint Powers Agreement with the Cities of Del Mar
and Encinitas, on the condition that such agreement provide for the
following:
CCE Subcommittee Recommendation
1.Equal Vote Protocol (No Weighted Vote),
2.Equal Pre-Launch Cost Sharing Formula,
3.2021 Program Launch,
4.Minimum 50% Renewables Portfolio, and
CCE Subcommittee Recommendation
5.JPA membership for the Cities of Escondido, Oceanside, San
Marcos, Solana Beach and Vista shall not be denied, and shall
be approved on the same terms enjoyed by the Partners in the
event they request to join and agree to contribute a
proportionate share of the JPA’s pre-launch operating and
administrative costs, plus any direct costs associated with their
incorporation into the JPA, which costs shall be eligible for
reimbursement by the JPA.
Recommended Action
•Direct staff to:
–Initiate negotiations with the Cities of Del Mar, Encinitas
and other potential partner agencies to prepare a
Community Choice Energy Authority Joint Powers
Agreement, subject to the conditions outlined in the
recommendation of the City Council Ad-Hoc
Subcommittee on Community Choice Energy,
Recommended Action
–Prepare an ordinance implementing a Community Choice
Energy program through a Joint Powers Authority, and
–Return to City Council to obtain approvals and appropriations
needed to establish and convene a Joint Powers Authority
Board of Directors in time to approve and submit an
Implementation Plan to the CPUC by December 31, 2019 and
launch a Community Choice Energy program in 2021.
August 20, 2019
Community Choice Energy Program
Governance Analysis Report and
Joint Powers Authority Formation