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HomeMy WebLinkAbout2002-11-06 Utilities Advisory Commission Summary MinutesCity of Palo Alto Utilities Advisory Commission NOVEMBER 6, 2002 MINUTES NOVEMBER 6, 2002 __________________________________________________________________ 1 MINUTES___________________________________________________________________________ 1 ROLL CALL_______________________________________________________________________ 2 ORAL COMMUNICATIONS _________________________________________________________ 2 APPROVAL OF MINUTES___________________________________________________________ 2 AGENDA REVIEW AND REVISIONS _________________________________________________ 3 REPORTS FROM COMMISSIONER MEETINGS/EVENTS ________________________________ 3 DIRECTOR OF UTILITIES REPORT___________________________________________________ 3 UNFINISHED BUSINESS____________________________________________________________ 5 NEW BUSINESS ___________________________________________________________________ 5 UTILITIES 1ST QUARTER REPORT _________________________________________________ 5 CUSTOMER SALES CONTRACTS UPDATE (FIXED-TERM GAS RATES)________________ 15 SET DATE FOR FIBER TO THE HOME STUDY SESSION _____________________________ 22 ADJOURNMENT__________________________________________________________________ 27 Page 1 of 27 ROLL CALL [Roll call in progress at the beginning of tape] (Chairman Carlson and Commissioners Bechtel, Rosenbaum, Dawes, and Ferguson are present.) ORAL COMMUNICATIONS Carlson: We have oral communications and I see one winding its way up. Not an oral communication? I have no oral communication requests. APPROVAL OF MINUTES Carlson: The next item, in that case, is approval of the minutes. Do I have any additions or changes to the minutes? Dawes: I recommend approval. Bechtel: Second. Carlson: All in favor? All Commissioners: Aye. Balachandran: He wants to speak on this item. Carlson: On this item? Excuse me, since it was an agenda item, I assumed it was for later. Go ahead. Herb Borock: I just wanted to request a change in words on my remarks on page 32 of the minutes. It’s in the 4th line where it has quotes from Frances Brenner. First, I want to thank staff. Her name is spelled correctly. In the quotation, the 2nd word should be “in” – “detail in procedure is everything” – in the quotation on the 4th line. Carlson: So “detail in procedure”. Borock: Right. Thank you. Carlson: Thank you, Herb. I’m sorry -- when I saw “agenda item”, I assumed .... Borock: I was just following the agenda. Carlson: Fine. Thank you. Page 2 of 27 AGENDA REVIEW AND REVISIONS Carlson: Agenda review. Anything missing from the agenda, which is wondrously short, for a rare occasion? REPORTS FROM COMMISSIONER MEETINGS/EVENTS Carlson: The next item is reports from meetings. Are there any meetings? I don’t know of any. Go ahead anyone. Commissioner Bechtel? Bechtel: I attended the BAWUA sponsored suburban tour of the San Francisco Watershed and I’d have to say I’m impressed with a lot of projects that are going on. There has been criticism of the SFPUC and the water district of not spending money. But there are a lot of projects we saw. Things are well under way in terms of keeping the system up to date. It turns out that at least one thing impressed me, and I don’t know how much money is being spent on it totally, but we’re converting to a different chlorination process and that is causing no end of expenditures. The Pulgas Water Temple is all torn up, basically, to strip out the chlorination that’s inserted across the bay in the Tracy plant to be able to put it in to the Crystal Springs Reservoir and that’s all caused by changing our process. The second item was very timely. San Francisco water department is opening up some of their property. There’s a beautiful 11-mile trail in the Crystal Springs area that’s going to be opened up to hikers, cyclists and equestrians. Interestingly enough, because it goes through some prime property there, it will be docent-led trails that will allow you to go from, essentially, this side of the coastal range to the other side. They are still going through the approval process, but they are recognizing that because of all of the bond measure publicity about the system, they’re going to have to open it up to the public. This will be the first public access to what ends up to be a beautiful watershed. I recommend anybody who has not done the San Francisco Area Watershed Tour to do so. It’s a great tour. Carlson: Thank you. Any other meeting? DIRECTOR OF UTILITIES REPORT Carlson: Director of Utilities report. I understand that John Ulrich is ill, so welcome. Balachandran: I am Girish Balachandran. I’ll be John for this evening. Utilities Director’s Report, I’ll read this out for you. Most of the updates have been provided in the Quarterly Reports, which we’ll discuss later, but some of the highlights: First item - An update to the Gas Quarterly Report with respect to natural gas customer fixed term rates. The temporary rate suspension was lifted and a large customer has signed up for a new fixed price deal and more customers are expected to extend their existing fixed term deals in coming weeks and months. Page 3 of 27 Second item – Staff continues to monitor and intervene on the FERC ISO Grid Planning initiatives, Standard Market Design, and Market Design 02 to ensure the city load is treated fairly. In October, the NCPA Utility Directors formally recommended, and the Commission approved, active involvement by NCPA as it coordinates the efforts of members, particularly Palo Alto, Alameda and Santa Clara. Essentially, the Consultant that we had hired and got a cost-sharing arrangement with Alameda, is now working for NCPA, so the costs are being shared by an even larger group, so our consultant costs have gone down over here. We sent out an RFP to get master agreements for gas supply. Right now we have 2 gas suppliers and we want to get about 5 to 6 gas suppliers. We sent an RFP out. We’ve got a good set of responses and we are in the process of evaluating them and will be negotiating contracts. We hope to have these master agreements taken to Council for approval in January. Council approved the Energy Risk Management Policies on October 21, and the position of Energy Risk Manager was also approved by the Council on the same day. This position is not posted on the HR website. We’ve advertised in various trade publications including websites, public power websites and private websites too. We expect to complete due diligence on the outsourcing alternatives and make a decision on filling this position by the end of January depending on response to the job posting. The Risk Oversight Committee continues to move forward implementing the Risk Management Program Plan, and has made significant progress in addressing recommendations from the City Auditor and from outside Consultants. The last item over here. Most of you will be aware of the results of the San Francisco elections. I’ll just touch on Prop A - the Hetch-Hetchy $1.6 billion Bond Measure passed to pay for San Francisco’s part of the Regional Water System CIP. Prop B - the San Francisco SFPUC Reform Measure passed. The measure is a charter amendment that would end the freeze of water and sewer rates on January 1, 2003. Future rate increases will be subject to review by new rate (inaudible) requiring vote of Board of Supervisors approval. Lastly, Prop D – Public Power Measure – failed. The measure was a charter amendment that would have changed authority, duties and composition of the SFPUC in order to make it the primary provider of power to San Francisco residents and business. That’s the end of the Utility Report. Carlson: Are there any questions? I have one question. San Francisco’s Proposition E, which, as I understood it, was a proposition allowing the city to issue revenue bonds. It’s a sleeper, but it’s important. Do I have that right? Balachandran: Yes. That authorizes the city to issue bonds up to $100 million without voter approval and it eliminates the retail rate freeze in San Francisco. Page 4 of 27 Carlson: So those two were together? Balachandran: Yes. Carlson: Thank you. UNFINISHED BUSINESS Carlson: Do we have any unfinished business? NEW BUSINESS UTILITIES 1ST QUARTER REPORT Carlson: Then let’s move on to the Utilities Quarterly Report. Balachandran: We don’t have a presentation for you, but, as usual, we are prepared for questions on the report. Carlson: I know there were some questions here. Does anybody want to start? I wonder, George, you had an important question on this. You might bring it up at this point. Bechtel: I did have questions and we might as well just take them. I was more interested in the financial section of the report, which is Attachment D to the report. For the first time I really noticed a difference between the three funds and how we report the quarterly financial information. But after some discussion with Randy by email in the last day or so, he’s told me, he jogged my memory as to why we do things. What I noticed was that the Electric Fund, we are reporting a comparison on an annual basis. If you look at the Gas (on page 3), there we’re comparing Fiscal Year ’02-’03 Budget with Actuals for just a period of, I believe, it’s one month. I’m not sure if that’s one month or two months, but anyways, July ’02 to August ’02. The Water was even more different. It was a quarterly comparison. As I commented to Randy, things seem to be in line; there seems to be no problems. But I was wondering why we are not able to get a uniform reporting period for the financials. I look at these numbers when they come out and I’m always interested in our margins. I always look at the percentages. But when we’re doing different periods, it seems to me that the percent differences or any particular problem can’t be compared for the three different funds. The reserves -- we do a really a good job of reporting on those. There’s a lot of detail on the reserves and that’s the other part. I’m satisfied on the reserves table. But I was wondering why we could not have a more uniform system in these Quarterly Reports, which I believe, we only instituted about a year or maybe two years ago. Page 5 of 27 Why couldn’t we go to a process of having, let’s say, the previous quarter -- we are now, I believe, in what, the second quarter of the fiscal year, so the first quarter (which would have been the summer quarter) numbers are out. Now, I’m used to making estimates on margins and so on and then making the adjustments through the year so that they report. Maybe this triggered a thought. We keep talking every year about spending money on a new financial system for the City. I’m wondering why all the money we’re spending on these financial systems for the City can’t help those of us in the Utilities to look and put together a report. Basically I’m not asking for any specific action tonight. But as we go through these and fine-tune these reports over the course of the UAC discussions, why we couldn’t move to a more uniform system of reporting of, let’s say, the previous quarter or so? I see Randy is here to talk about that. Baldschun: For the benefit of the public, it would probably be useful for me to explain the point that you brought out in your email earlier this week or last week. In the Electric fund, for example, we show the results through fiscal year ’01- ’02, which starts with July 1, 2001 and goes through June 30, 2002. But in the Gas and Water, we’re reporting in this Quarterly Report really the results for July, August and September of ’02, which is a different period. So your question is a good question – why don’t we report the same period for all three utilities? The answer is, in the Electric fund, we get our bills from NCPA. Unlike bills that come from our gas suppliers and water suppliers, NCPA bills typically come two or three months late. I say late not because they’re at fault for anything, but they have a very complicated process with their own suppliers, and generation and transmission. It just takes that much time to get corrected bills to Palo Alto. So we don’t know what the results are in our power-purchase cost until we get the bills from NCPA. What we’re trying to do here is to give you the most up-to-date factual information, whether it’s through ’01-’02 or even through last month. It’s important that you get the most recent, actual information. In terms of the financial accounting system, this has nothing to do with the financial accounting system that we currently have or are going to be replacing. In terms of sales revenues, which is part of the equation for this financial statement, our sales revenues are currently on a daily basis and we have no problem extracting that data and providing an accurate picture of our sales revenue. The problem lies in getting NCPA bills on time and then matching the purchases and sales revenue for the exact same period so that we’re not mismatching the purchases and sales for different periods. That’s why we’re presenting it this way, where you have the Electric fund for fiscal year ’01-’02 and then you have the Gas and Water funds showing the first quarter results for this fiscal year. The other option would be to do a projection for all three utilities. We obviously have projections; as we go through the budget process, we have Electric fund purchase cost projections. You’d gain uniformity in reporting periods, but you’d lose, in that your Actuals are now combined with projections so you don’t really have a good firm handle when you look at the numbers on what our Actuals are. It’s really a matter of preference on how it’s presented. We’re open to any Page 6 of 27 way you want us to do it. It’s just that this is the way we decided to do it for the Quarterly Report. This is an interim process so we appreciate your feedback. Bechtel: Randy, I’m wondering if we could at least go part way towards a uniform system by reporting the previous quarter’s retail sales units. For example, I’m looking at the Electric report in kilowatt-hours, the average rate and so on. I understand the problem. The problem is really the cost side. You have not worked out the cost for last quarter’s sales to us. But we perhaps at least look at the revenue side of the equation and just report that quarterly in some way or another. Then at some point continue looking at the overall margin with the period that you have available. I don’t want to create extra work on the part of the staff to develop, let’s say, cost estimating just to look at the margins. On the other hand, I know that you collect from me, so I know the revenue side is current. Baldschun: It wouldn’t be very difficult at all to add the actual sales revenue in the Electric fund up to the most recent quarter. That obviously wouldn’t be reflected in the operating margin because we wouldn’t have the purchases, but we can certainly tell you if our sales revenues are above or below our projections for the quarter. Of course, we do that throughout the year, as our sales tend to go lower than we projected. Eventually you’ll see in the rate stabilization reserve notes that we made adjustments in our sales revenue projections for the fiscal year, if we see a trend in sales decline. We did that last year. For this quarter, it’s probably too premature to make any adjustments, but you may see something next time after six months of Actuals. Bechtel: Let me ask one last question. When I look at the tables on rate stabilization reserves, are those based on a snapshot in time as of the last quarter? What is the period, or is that an annual number? When I look at, for example, the very first table on page 2, Proposed Electric Stabilization Rate, Supply Rate Stabilization Reserve. Of those numbers, I see change in operating margins through June on there. This table is valid as of the end of the last fiscal year, is that right? Baldschun: That’s right. Bechtel: And when we look at this next quarter ... Baldschun: These are unaudited figures, though. Correct. These are not audited yet, so these are our estimates of where we’re going to end last fiscal year ’01-’02. Bechtel: So we’re always looking -- when we look at this next quarter, I didn’t go back and look -- these are the revised, the snapshot as of last year and the forecast for the end of this coming year? Baldschun: Are you on the Gas? Bechtel: No, I’m on the Electric. Page 7 of 27 Baldschun: Still on the Electric. On the Electric fund, since we’re only covering stuff through ’01-’02, we’re not addressing any changes that we have experienced. Staff can correct me if I’m wrong. For the first quarter this fiscal year, again, because we’re held up with the NCPA purchases cost, we basically draw a line in the sand that the reporting period goes through June 30, 2002. What we’re doing here is taking the adopted budget projected balance for the fiscal year and then we’re showing you all the changes that we believe that once the auditors go through all the books are going to be reflected in some fashion in the ending balance for ’01-’02. It’s critical -- because that becomes the beginning balance for ’02-’03. That sets the stage for any potential gas rate changes during the ’03-’04 time period. Bechtel: That brings up the point, then, that if I look at the Electric, then when I look at the ending balance and the maximum guideline of $49,833,000 ending balance, that’s last year’s ending balance. This is not a forecast for the end of this year. Yet when we go to Gas, you’re projecting. Maybe that is more of a problem than my concern over what the margins are on a quarterly basis. Maybe we ought to be looking at the Electric on a more current basis than estimating our NCPA bills. This is something I hope we can fine-tune and come up with some kind of a projection, some way of handling it, certainly by the time next year we start to deal with the budget for next year, some kind of a system can come out of our budgeting process. Baldschun: I agree. But I would also suggest you answer the rhetorical question: as a UAC Commissioner, if you have this information on a quarterly basis, what kind of long term decisions (which you are given to in the Muni code as your duties as a Commissioner) and how important is it to have this information on a quarterly basis? I’m not suggesting we shouldn’t provide it, but the question you always need to ask yourself when you ask staff to do something like this -- present more information or more information in different ways -- how you’re going to use it in your decision making process? Is it relevant to your decision making process? I can see some cases where it is and some cases where it isn’t, but those are the questions you’re going to have to ask yourselves. Bechtel: We look at reserves, and with respect to rates, we adjust our rates in one way of looking at whether we need an adjustment of the reserves. That’s pushing back, and I appreciate you pushing back and I’ll push back again that perhaps the rates maybe is the key thing, maybe the only thing, where the financials are a concern. I’ll leave it at that. I’m not real comfortable with why we are having to do it this way, but on the other hand, I understand why. I just believe that we can, as we move along, do an estimating process to maintain something more current. Balachandran: Commissioner, if I could add one thing to what Randy was saying right at the end? As part of Risk Management procedures, we’re going to present to you new additional information -- for example, our load and resource balance, the kinds of transactions we’ve entered into -- and you’re going to get additional financial information in a more standardized format for both electric and gas. Now that’s in the process of Page 8 of 27 being developed. You’re going to be seeing some potentially forward looking financials, which should be directly applicable to what Randy was saying, which will help you make some of the forward looking decisions. Carlson: Commissioner Dawes? Dawes: As a follow-up to Commissioner Bechtel’s thoughts, I had some conversations with Randy beforehand trying to understand the numbers a little better. Certainly the purpose of the Quarterly Reports is something that should be in the forefront of our minds. George was very correct in saying that focus on rates is the ultimate purpose. I would add that in today’s volatile supply world -- not quite as volatile as it was a year or two or three ago, but still pretty volatile in comparison to what it had been decades ago -- Quarterly Reports are highly useful in dealing with these two subjects. I certainly remember, about 18 months ago when there was a great deal of concern on the part of this Commission regarding the pace of increase of gas rate increases, and [we] urged staff to undertake an additional rate increase, which had not been included in the budget based on the quarterly numbers, which showed us just falling behind the curve at a much more rapidly increasing rate. The Quarterly Reports are exceedingly useful in this regard. On the basis of these numbers here, look at the Gas fund particularly, and raise the same issue. But on the other side of the coin we had kept our rates high and certainly considerably higher than PG&E rates that much more closely track commodity costs to replenish our RSR. We now see that our RSR as of the beginning of this FY are above the maximum. I would raise the point now that perhaps staff should be looking at a rate adjustment earlier than we had thought about here before. The issue is the quarterly results do not encompass the entire picture, by any matter or means, which enters into the CIPs that the division is about to undertake. Now we have to deal with Bond payments as well, at least two of our funds. So there’s additional complexity. But when I see the reserve above the maximum, certainly that question -- blended with what I have at the back of my mind about how these trends are, I believe the Quarterly Reports, when you combine what the current operating trends are with where our rates are and where our reserves are -- it is important to raise questions about rates. And I’m doing it. That’s the reason I’d like to see Quarterly Reports. The same is probably true for the Electric fund. Frankly, as I’ve expressed myself just before the meeting, this is a fairly opaque way of presenting the data. It’s hard to see trends. I’m going to have some proposals that I’ll exchange with staff through emails and so forth to see if there’s a way that seems to work better for everybody that’s not a lot of additional cost. There are some other aspects of the Quarterly Reports, which I wanted to bring up. I was interested in the situation with the our long-term gas contracts. Item 2 is that subject, but it’s also brought up in the Quarterly Reports as well where we’ve had a major run-up in our gas contracts. Girish just remarked earlier that that may be picking back up. I’d like a little more sort of information on what drove the run-up in the long-term contracts -- what apparently is causing people’s renewed interest in doing it, and what our policy is. There was one comment in here -- that customers are free to leave the system -- which Page 9 of 27 surprised me, because I thought we had knocked off the ability for customers to opt out of any of our commodity purchases. I’d like information on that too. I’m just trying to see where I read that. Daley: That’s true for the Electric utility, but it’s not true for the Gas utility. We still offer G4, which is a direct access. Dawes: So is it something that we should look at? Or have our customers raised any questions about why we offer an opt-out or direct purchase alternative in one commodity, but not the other? Balachandran: No, they haven’t and maybe I should turn to Randy. I don’t think they have asked us. Baldschun: There is a lot of interest, certainly not on the Electric, because the idea has been suspended, but it is alive and well in the Gas. But our gas rates have been so competitive that no one’s elected to take advantage, or to leave the system. The big change, which we’ll get to in the contract report, is that we reduced the number of contracts with our customers, from 10 down to 4. That’s because the fixed-term rates aren’t quite as favorable as the monthly current mark-up price for gas rates. Dawes: Randy, even during the last year when our rates were considerably higher than market due to our replenishing of our RSR, there still were not folks that were bailing out of the system? Baldschun: What we did was, in accordance with our rules and regulations, we offered these fixed-term gas rates to these large gas customers where the cost was based on the one or two year market price at that time. We had not previously bought gas on their behalf, so they made a decision. They said, “We want to buy a one or two year contract with Palo Alto.” We went out, secured the gas at that price and you see the results in the table in the next report in the next agenda item. Dawes: Thank you. Carlson: Any more questions on this? Go ahead Rick. Ferguson: I have three little unrelated questions. One, let’s start with the Water report on BAWSCA, the new agency. I’m just curious why someone actually calculated two different time schedules for implementation. What drove that slow and fast estimate? Balachandran: It’s maybe reflecting reality of how 29 public agencies in San Francisco need to work together. Right now we are heading towards the fast track. That’s our goal. Ferguson: Who are the directors of the new agency? Are they the elected officials of BAWUA agencies, like NCPA? Page 10 of 27 Balachandran: The legislation doesn’t specify that. We expect that it would be at that level. The first meeting will probably be held sometime in December or January or so, and all the stakeholders will get together and they will decide that. From Palo Alto’s perspective, we’re leaning towards, we recommend a public elected official be on the board. Ferguson: A second little question on the Dark Fiber report. There was something like a $600,000 margin. Where does that go? Does it just go into a fund, a nameless surplus fund? Balachandran: I’ll have Scott or Randy answer that. Ferguson: This question came up before. It’s allocated in the 10-year forecast, but I’m just curious where the money ... Baldschun: Is this on page C7 you’re talking about? Ferguson: Yes, someone put together a short a little accounting for Dark Fiber sales minus expenses. It’s C7 -- 2002 revenue at year-end: $636,000. Baldschun: For telecom operation in the Electric fund, if there are any residual net revenues at the end of the year, then they will go into the Rate Stabilization Reserve in the Electric fund. Ferguson: Thanks. My last little question – in the news a week or two ago, there were a couple of incidents of slightly orchestrated disinformation by energy traders. They were sending bad information on energy price forecasts -- I don’t know if it was gas or electric -- to the trade sheets. In light of our conversation a couple months ago with the auditor, our discussion of the activities of our Risk Oversight Committee, I’m just curious. If we’ve got major players sending bad data into the energy press, how do we protect ourselves against that? What independent sources do we use? Balachandran: Some of those actions essentially move the entire market. I’m not sure how we would directly protect ourselves, other than what we normally do and what we continue to actively do, which is ask for protections against market power and increase the authority that FERC has to actually impose fines that mean something. Right now, they don’t have much of an ability. The stick that FERC has isn’t very large. So we’ve been asking for more consumer protection as buyers representing the consumer before new market designs like standard market designs are imposed on the rest of the country. Other than that, we don’t have -- public power, public gas -- we don’t have the watchdog ability to actually go in and do anything, other than asking regulators to do their jobs. Ferguson: Thank you. Carlson: Mr. Rosenbaum. Page 11 of 27 Rosenbaum: On page C4, under the LEAP, Long-Term Electric Acquisition Plan, it mentions that Council made a number of changes in the guideline. The significant change was to specify an additional renewable resource target of 20% by 2015 of a retail rate impact not to exceed ½ a cent a kilowatt-hour. Then it says the original staff/UAC recommendation was to reach 10% by the year 2008. Had we also specified as much as .5 -- ½ a cent per kilowatt-hour as the limit? Balachandran: I believe it was to .25. Rosenbaum: All right. So the significant change is that the Council has indicated a willingness to spend twice as much as staff and the UAC recommended? Balachandran: I’m reminded from the back that, yes, you recommended .25. Now the second part, we can provide you the exact motion that was passed, but it said the second part of it, which was getting to 20% by 2015, the caveat was “if financially viable.” So it was not as if, it’s not as hard a target as the 10% by 2008. Rosenbaum: And the .5 cents, was that in the motion? Balachandran: I need to refresh my memory on this. I have a feeling that actually the Commission may have changed this, but the .5 cents was in the motion too. Ulrich: [returning to the room] I kind of like this position I’m in now -- watching it all. I’d like to make a couple of comments. Thank you Girish and other members of the staff for getting here on time and doing the meeting. I haven’t been feeling very good in the last few hours, but I feel a lot better now. A comment about that, Commissioner Rosenbaum. We did go to the Finance Committee and, as outlined in the report and as Girish discussed, the Finance Committee had read and asked us to give them information about the renewables legislation that Senator Sher had authored and was approved by both the Senate and the House. It was signed by the Governor and also had support by Assemblyman Simitian. As you read through the legislation, for entities that are governed locally by City Councils, there is a different provision in there that does not mandate that the State have control over those percentages and over the dates in which they must be reached. I don’t have the exact wording of it, but it gives the option to the local entities to make their own decisions about how aggressive they are. The reason for that is that there are some cities that have already exceeded the 10% or even the 20% based on the existing contracts they have for renewable energy. An example of that is Alameda. They have a far higher percentage of geothermal, which counts as a renewable, whereas Palo Alto because of our hydro -- as you know we’re predominantly hydro, it would be considered as large hydro -- does not qualify under the legislation as a renewable. However, as we understand it, it allows the local entities to make a decision that changes the way energy is categorized if they so choose. It also allows for us to either be more aggressive or less aggressive in coming up with the percentage of renewables that you’d like to have. We listened intently to the Finance Committee because they had seen the benefit of moving more aggressively towards renewables. We have an option of coming back and discussing our recommended of 10%. But as we read Page 12 of 27 it from there, we have a clear direction from the Finance Committee to be more aggressive and come back with that in our LEAP plan, and we would proceed to do that. I wanted to give you a little more of a background. This isn’t to show that this isn’t cast in concrete, but I believe that we’re listening to the opinion of the City Council as it relates to that matter. Rosenbaum: Thank you. Ulrich: Could I comment on a couple of other items just for a minute, if it’s all right with the Chair? I apologize for me being a little bit out of it. Commissioner Bechtel asked questions and I read through the email. He has excellent points. If I was running a business similar to what he’s had, those are very important pieces of information to have. I would just question about -- what we do here is to look at either the amount of work and/or the accuracy of the information that we’re able to provide and to factor in to our Strategic Plan and our budget process, how you would like to have that kind of information presented. We do what, rather than doing it as an ad-hoc basis, answering the questions and looking at it, would be to fold that into our budget process. If you want that “non-traditional” information, based on your direction, we can then go back and put it together. It would be important to agree on what dates that you wanted that to start and how we would do it. That will require some debate and discussion about the objective. So if it’s all right with you, I would recommend that we pick a date or a time along with other financial areas. This gets to my comment. Mr. Dawes mentioned about looking at our reserves. That’s very important to do, particularly since we have significant amounts in some reserves. But I would hate to see us make a decision about changing the rates or doing anything else without looking at the forecast of where money will be spent, and some of the risks that we have, and why we have the current level of reserve. That may necessitate an opinion back that we should change the level of the reserve as opposed to saying that should be cast in concrete based on decisions we made some months back. We ought to revisit the levels, minimum and maximum, and look at why we recommend what we recommend and then ferret that out to get the appropriate levels based on where we all agree is the direction of our energy purchases in the future and the risks that we currently have or foresee. Thanks for your indulgence on that. Did that help answer or give you some feedback? Dawes: Basically, that was my point, that while the Quarterly Reports are very useful for showing trends and the absolute size of the reserve, you also have to take into account, as I expressed, CIPs, bond payments, future expenditures that aren’t on this particular schedule -- before you can entertain any rate changes. Ulrich: Thank you. I would just suggest that we factor that into our analysis and set a date to discuss that, to correspond with our other activities that we have. Dawes: Brings me back to my favorite 10-year plan schedule, right? Page 13 of 27 Ulrich: Oh, absolutely. We’re on to that. Baldschun: Let me add one thing. I recall discussions we had when we reduced gas rates last time with the UAC. As I recall, my commitment to you was, when we get the audited results of ’01-’02 in the Gas fund, that that becomes the base in which discussions begin for potential gas rate decrease during the fiscal year, this fiscal year. So it’s premature to make any decisions obviously tonight, but that will be coming and when we get that, it will certainly be in the next Quarterly Report. That’s when we can have a really live discussion on whether we should bring forward a decrease, whether we should change the reserve guidelines, whatever we want to do, that’s the time. Carlson: I want to add a couple comments and questions. I really do think that George picked up on something important in the Electric area. Since the rate numbers are forecast estimates in any case, I really would find a forecast of the Rate Stabilization Reserve and [throughout] ’02-’03 more useful than a backward looking estimate of where we ended up a few months ago, for the purposes expressed by Dexter. It’s fluctuations and those numbers that lead to discussions of whether the rates are too low or too high. Baldschun: You hit the nail on the head. ’02-’03 is really what we care about. The only reason why ’01-’02 shows in this particular Quarterly Report is because we don’t have the NCPA bills for July. But next Quarterly Report, it’s going to be focused on, in the Electric fund, it’s going to be focused on the Rate Stabilization Reserve in ’02-’03. We’ll have a beginning balance, and we’ll have changes in the current fiscal year that we’ve experienced to date, and what we projected to date. Carlson: Good. Thank you. I’ve got one more question in the Water area, which is getting awfully interesting in this new agency. How are we going to pronounce it? “BAWSCA”? Balachandran: Yes, “BAWSCA”. Ferguson: BAWSCA is better than BAWRFA. Carlson: How does the voting work there? Is that specified in the legislation or does that have to be worked out. We have some really tiny agencies and some very large agencies. We’re one of the larger. Balachandran: I don’t recollect how the voting works. Sorry, I could check on that. I don’t want to give you an incorrect answer on certain answers. Carlson: That’s going to turn out to be pretty interesting, because there’s an enormous -- I mean, there’s little Purissima up there and I can think of 3 or 4 really tiny agencies that are part of the group and half a dozen really large ones and a bunch in between. Just had a question on that. Any more questions on this item or can we move ahead? Bechtel: Mr. Chairman. Page 14 of 27 Carlson: Go ahead, George. Bechtel: There was a discussion about the Plan of Reorganization for PG&E and that’s still going on. Am I not right that, let’s see, the State is going to move the purchase of energy back to the independent investor-owned utilities fairly soon or so? If they are, what’s your take on any impact on the direct purchases by them and so on? Probably doesn’t affect us since we don’t buy from PG&E other than on a wholesale basis. Balachandran: Yes, back from PG&E we buy indirectly through our Western contract. From what I understand, they’re still playing a game of chicken where the IOUs are saying no we’re not ready yet and the DWR is basically saying no you’re going or the PUC is saying you’re going to take it over in January 1. Potential impacts to us are - we don’t see really any significant impacts to us. One of the reasons being DWR has bought so many long-term contracts that it’s not like PG&E is going to come in and suddenly move the market. They’ve also initiated their procurement Order of Rulemaking, OOR, so we have started to follow that and so that is where the PUC actually give guidance to the IOUs on how they can actually procure and what would be free from prudency review and things like that. So those proceedings are going on right now. We don’t have definite answer yet as to whether the IOUs will take over the procurement function on January 1. Bechtel: Thank you Girish. CUSTOMER SALES CONTRACTS UPDATE (FIXED-TERM GAS RATES) Carlson: Next item, the fixed term gas rate contracts. Baldschun: Excuse me, Chairman. Before we move to that, I just have to point out one thing in the Quarterly Report. Something that’s dear to my heart, and I have to give Girish and his staff credit. If you notice that rate comparison of PG&E and Palo Alto gas rates, we’ve been higher than PG&E since May of 2001. If you look at the current month in October, and actually you don’t have November’s, but we’re about dead even with PG&E and winter’s coming and our rates are fixed. Guess where PG&E’s going to be going? We’re going to be looking real good over the next 6 months. I’m pretty pleased about that. Carlson: Very good. Congratulations. Dawes: As a follow-up, Randy, I was surprised that because of that spread, we didn’t lose more, have more people move into long-term contracts if they could drop out of the higher gas rate and lock into a lower one. It seemed like they could have saved a lot of money. Yet it went the other way. People were on long-term contracts, went out of them and went into the Palo Alto tariff. Page 15 of 27 Baldschun: They’ll have this window. The window is usually between July and September each year. That’s when they have to make elections. They’re basing their decisions on whatever the market forecast is at that time, where are rates are in relationship to the market at that time. Of course, a year ago, as you can see by the chart, we were quite high. If you look at it now, we’re very competitive. They’re not jumping at the long-term contracts now. They are jumping on G3. There are only a finite number of customers that actually qualify for contracts. It must be 10 or 15, Karla? Dailey: 11. Baldschun: So out of 23,000 gas customers, there are 11 that can actually qualify for these kinds of contracts. Dawes: And they can only make that election in the summer months? They can’t do it in the middle of the wintertime? Dailey: Actually, they can make the election at any time. There were 10 that signed up last year. Four of those signed up for 24-month contracts. Six were one-year contracts. All six of those expired some time between July and October of this year. One of those customers has signed up for a two-year this time, and there are two more of those customers who have started -- when winter comes close, gas becomes more to the forefront of some of the managers’ minds -- so two of the other customers have started conversations with customer reps about wanting to lock in. They’re starting to think about it finally. I wouldn’t be surprised that there weren’t more that took them. Dawes: I was just trying to understand why last winter when our rates were above market that they didn’t say, “whoops, time to move into a market-based purchase?” We had just dropped our rates from really high to just sort of pretty high. Maybe they welcomed the reduction, but I’m still trying to understand the customer, why more didn’t switch at the time we had that spread over PG&E, which is more the market rate. Dailey: Right. You’re comparing the G7 rate to the PG&E’s rate? Because all of those - - well, 10 out of the 11 large customers -- had already switched to G11. And once they had done that, once you take a fixed term rate, you have to stay on it until the end of your term, whether it be one year or two years. Baldschun: The G7 rate -- we didn’t have any customers on last year. They all switched to the fixed term contracts, or G3, because the rate was high. Dawes: The answer to my question is, everybody did switch. Baldschun: They did switch. Did they switch to stay with Palo Alto as opposed with another supplier? My point was that there was this window which, once they sign a contract for 11 months, they can’t just get out of it on any given month. There’s a certain window when they have to make the decision. There are a couple things I just want to Page 16 of 27 mention on this contract performance report. Right now, as I mention the report, we don’t have any customers on electric contracts. We’ve had 2 over the last 5 or 6 years. We just terminated one contract to save about $1.4 million to the utility over the life of the contract. On the gas side, as we’ve been talking about, we’ve got 10 customers that were on contracts last fiscal year. We terminated a contract with one of our suppliers because they were financially incapable, in our opinion, of delivering the gas. It so happens that when we replace that contract, the gas price in the supply contracts were quite a bit lower, so we ended up with $900-some thousand net revenue on the long term contracts, which goes basically into the Rate Stabilization Reserve Supply. Carlson: Are there any more questions on this long-term gas contract area? Go ahead George. Bechtel: Randy, I was wondering why in the Executive Summary, thinking ahead to submitting this to the Council, that you didn’t make some comment about the results on financial results of these contracts. You state here very simply that some factual information that would useful to the Council. But it might be worthwhile to make some statements in the Executive Summary, right up front. Just what you just last said: that there’s $900 thousand net revenue went into the Rate Stabilization Reserve. That’s a very positive thing to say. It’s something that is a result and it’s good. It meant we did a good job at negotiating supply contracts. We did a good job at pricing it. You should put that right up in front of this report. Similarly, I guess, on the electric one as well -- that some sort of a financial result there would be useful. Otherwise, good job. Baldschun: Yes, your point’s well taken. Especially at the Council level where they typically just look at the bottom line. So that’s good advice. Carlson: Sure, go ahead. Dawes: A question on margins. I’m not sure if I’m comparing apples and oranges, but it looks as though the margin from Table 2 is about 31% of the $1,079,000 expected net revenue, which actually I get to be $1,089,000. I don’t quite understand if there’s arithmetical mistake or not, versus the actual revenue, but then if you look at the budgeted gas on the retail side, it looks to be like a 54-55% margin. Are these apples and oranges figures? Certainly I can understand why wholesale customers who are on these contracts would have a different profit margin than our retail customers, but I don’t know if this distribution cost that are included or excluded or what, but I would like a comment on the margins that we get on these. Baldschun: Table 2 is strictly looking at the supply or commodity revenue and commodity cost. The way our contract policy is written is, basically, we want to break even on these things. We don’t want to lose. We don’t want to make money. We establish a risk premium to give us some kind of protection for various volume metric risks and other things. Our goal really is to break even. It so happens that we made 900- some thousand dollars as a result of getting a better contract in the market conditions. But that’s all on supply. It’s not distribution. Page 17 of 27 Dawes: How does it compare to the adopted budget of FY ’02-’03 on the gas side that shows $108,000,000 operating margin on 3.3 of sales, retail sales -- like 55% margin? Baldschun: If you look at Page 4 of the Quarterly Report in Financial section, you’ll see a figure of $6.8 million that’s going into the Supply Reserve for the current fiscal year. That really includes, I believe, the $900 thousand plus other reduced supply costs that we experienced from other customers as a result of this renewed contract. I may be wrong, but Lucie can correct me. Dawes: Wow. It says the total revenue is $3.2 for retail sales and the contracts made up $2.4. Is that -- and so our non-contract sales are only $800 thousand? That doesn’t seem right to me. Baldschun: Our non-contract sales are more in the millions. $15, $20, $30 million? What’s our total? Bechtel: Dexter, you’re getting now into the fact that that is a monthly number on Gas Table on Page 3. Dawes: Oh., I’m sorry. I’m all off base. Bechtel: We’re back to those apples and oranges. Dawes: I’m all off base. Sorry about that. It’s versus $40 million, but the margin issue is still the same. We make $20 million margin in ’01-’02 on $40 million in revenues and it looks like on the gas we make roughly 30%. Baldschun: It’s quite a margin on those contracts. As I say, our intention is to have really no margin, but circumstances are favorable for us. Carlson: Go ahead, George. Bechtel: Randy, you said earlier though that you just want to break even on these contracts, but you just said we’re doing very well. We’re doing 30% margins. So what is our strategy? What is our goal here? Baldschun: When we set the prices for these contracts. We set the retail price based on floor prices for one or two years depending on the individual contracts with the customers and at the time we set it, we went out and secured a corresponding purchase agreement with another supplier at an off setting cost. Girish, do you want to? Balachandran: Let me just jump in over here. If what you’re talking about on the last report about the pretty large margin between the revenue and the cost, the cost doesn’t include some of the…. After we cancelled the Enron contract -- let me step back. The revenue, when we charge the customer a certain contract price, it was based on market Page 18 of 27 prices at that time and we did a lot of those contracts through Enron. We cancelled Enron contract and we are buying from the market now. We bought from Enron at these really high prices and these costs reflect our actual costs right now. It’s overstating, so the revenue over here, you can say it’s been overstated, because it doesn’t include the Enron contract cost. Dawes: But just as a policy matter, we attempt to break even on the commodities on these ... Balachandran: Correct. Dawes: ... and we target a 50% margin on all other contracts, on all other sales. Baldschun: Well, it’s not a target; it’s a result after the fact. When we sign a contract with a customer, they agree to a certain price. That price is what you see on the revenue side. What I’m saying is -- if we had to pay more, let’s say the contract that we had received to supply that customer somehow went away and we had to replace it with a more expensive contract -- we would have eaten it. We wouldn’t have raised their price, because it’s a contract. Dawes: I understand. I’m talking about non-contract customers. I’m contrasting non- contract to contract customers and what our target margin policy is on that. Baldschun: On the commodity side, it’s break even. Dawes: For both? Baldschun: It’s break even, unless there’s a component to build the rate stabilization reserve. Sometimes we have to build up supply reserves, so we’ll bump up the rate a little bit. But there is no policy in terms of a specific margin. It’s basically: pass through the cost. Sometimes we have to subsidize it -- because in the past, sometimes we’re taking money out of the Rate Stabilization Reserve to stabilize rates and sometimes we’re putting money into it. The intention is to break even, but you always have this flow into or out of the Rate Stabilization Reserve. Dawes: So it’s the distribution charges that covers all our administration costs and all our infrastructure costs and so on. Baldschun: And those just become the revenue requirement and that includes all of our fixed costs. Balachandran: I can add some more to that, if you want to get into gory details. It’s in the Quarterly Report. Karl has written up a number of pages here about risk premiums. The philosophy over there is break even, protecting the portfolio customers and to that extent, we add a risk premium. You had requested that we come back to you several months ago, talking about how the risk premium was calculated. So in the Quarterly Page 19 of 27 Report we do that. At the end of the year, we may see some additional revenues if certain risks don’t materialize. But we’ve essentially been quite conservative in establishing this risk premium. Dailey: Just to add one more thing. A risk premium greater than zero is a new thing. So all of the numbers you’re looking at in Randy’s report reflect rates that were established with a zero risk premium. Risk premium does not contribute to the $900 thousand number that you see at the bottom of that table. Dawes: Thanks. Carlson: Okay. Any more questions on this? I’ve got one. I want to be sure I understand these contracts. These are not take-or-pay contracts. Balachandran: The fixed-term rate contracts? Carlson: Yes. Balachandran: Well, we don’t limit them to a certain quantity. Carlson: Correct. Balachandran: We just say, “It’s flip the switch. You can use whatever you want.” That’s why we’ve added a risk premium for load variation. We’ve added a risk premium for the potential loss of business if they move out of the city and at that time if market prices are low, and we have to sell the gas we bought for them at a loss. We have a premium for that, and I believe there’s a third risk too. There are just two risks. Carlson: So that’s really this volumetric risk, that we referred to. They’re not strict take- or-pay contracts, if business is lousy or it’s a warm winter or whatever. We’re really taking that risk. Balachandran: Right. Carlson: And that’s what we’re adjusting for in what you call the risk premium? Balachandran: Right. And we’ve done a probability analysis on that. We’ve been pretty conservative in what we compare other suppliers would have charged our customers to get a product just as flexible as what we’re offering. We use a number of criteria to come up with the appropriate risk premium and one of the being competitiveness. That’s how we came up with the risk premium. Carlson: There are also some other risks here. Do we allow Direct Access for gas? I know we don’t for electric, but we do for gas? Balachandran: Yes. Page 20 of 27 Carlson: Because there’s a risk to the City if people come back in. This happened in the electric area to the State. A number of large energy consumers had contracts with companies that failed, so the consumers came back to the standard rate, which was basically opened to all customers, which was below the spot market at that time. The utilities in the state were forced to buy power at the spot rate for these new customers, which required those purchases and they were charged much lower. There’s a tremendous incentive to people to walk away. They were paying suppliers to walk away from contract. Suppliers were collapsing. Do we take into account that risk at all? Dailey: The way we have the rules set up, the risk is fairly small to us, because G7, which is the pool rate, the rate that we’re buying fixed price gas for over a 3-year planning horizon and all of that, once a customer takes that rate, they can’t leave it. Carlson: It’s the other way around that I’m concerned about, somebody that’s not on that rate. Balachandran: That’s a one-time risk in the sense that, yes, they may be able to come back, but once they’re there, they’re there. Carlson: Yes, once they’re there, they’re there, but they may, they have an option to come back when you don’t want them to come back. Balachandran: It’s a one-time option. It’s 25% of our load. It’s 10 customers and we’ve offered them some other rates over here. So the timing has to be perfect, because if they are on a fixed term rate for 12 months or 24 months, they can’t do any switching regardless of where the market is or our bundled rate to other customers. They’re fixed on that rate. When their fixed term rate expires, the situation has to be that the market is high and our bundled rate is low, then they’ll switch over to G7. Baldschun: They forfeit their right to Direct Access after that. Carlson: They forfeit their Direct Access, but by coming back in at that point, they would force a broader rate increase, in effect. Balachandran: The thing that’s different from PG&E is PG&E has a monthly rate, so they can just keep coming back at any time. On the electric side, too, they basically paid their suppliers to get out of some contracts and come back to a fixed rate. For us, if they come back, it’s just a one-time entry and the window, there has to be a number of stars lined up perfectly for that to happen, and that’s a one-time risk for us. I guess the way to protect against that is maybe you set up certain rules which essentially prohibits them from coming back and, say, select one rate or the other. But we have things in place and that risk is pretty small. Page 21 of 27 Carlson: You have to at least have some warning time that “if you have to drop off this rate, we have to have 90 days” -- or something -- so in case the stars do line up just wrong for us, that we’ve got some adjustment time. Balachandran: We can take a look at what the potential impact of such a case is -- and that’s kind of what we did. The first year of fixed term rates, we didn’t have a risk premium. We recognized the volumetric risk, the risk of business default and we’ve added a risk premium. We’ll look at this again and the next go around of contracts, which will probably be next year, we’ll analyze it and see if we want to add another risk premium. Carlson: Thank you very much. Anything else? SET DATE FOR FIBER TO THE HOME STUDY SESSION Carlson: Per agenda, I guess the last item then is timing for the study session, which we were going to have last month, which I believe we still need for this very important and complex Fiber to the Home issue. I know I’ve got schedule problems and I expect we all do late in the month, so how quickly can we do it? Go ahead, Girish. Balachandran: We’ve checked availability of the Council Chambers and let me give you 3 dates we have. We’ve kept it on hold from 6pm to 10pm. The first is Friday, November 15th, second date is Thursday, November 21st and the third date is Wednesday, November 27th. Carlson: The 27th is Thanksgiving. Balachandran: The day before Thanksgiving. These are the only 3 that we have at the City Council, but we haven’t checked the dates yet for Lucie Stern and Cubberley, so those could be places. So the first two dates -- I’m assuming the third is probably not going to work. Carlson: I don’t think so. Balachandran: For the first two dates, if those don’t work, we can maybe come up with a few dates and check with Lucie Stern and Cubberley. Carlson: Well, let’s start with the 15th. That happens to be the only one I’m available. Ulrich: Before you make that decision, you may want to look at some additional variables. One, the meeting does not have to be here. We can look at other ones. You need to maybe tell us what your preferences might be. Scott can give you information about how to line up all the stars so that everybody is available. Besides yourself, it’s the idea of all the consultants and others so that you can have everybody here and take full advantage of all the questions that you want. This agenda item is really to set the date, so Page 22 of 27 it’s important for you to figure out how soon you want to do it and your expectation of who’s going to be here and your schedule. Then we’ll try to find locations if Council Chambers is not available for the meeting. Carlson: What does everybody else think about this one? Rick? Ferguson: The 15th is fine with me. In general, sooner is better than later, because of the holiday crunch. People were disappointed that it didn’t happen last month. So there’s a little bit of a fairness obligation here to make it sooner rather than later. Carlson: Pent-up demand. Bradshaw: We do have some issues with consultants. I do know that Blake can talk with the consultants that they could be available on the 20 th. It’s a little harder for them to be available on the 13th, but they can do that. We haven’t checked on the other days – the 15th and the 27th. We haven’t checked on those days at all, so if those are issues that are important, we’ll need to check with the consultants on those. Carlson: Go ahead, Commissioner Rosenbaum. Rosenbaum: I guess there had been an email from John speaking of the 13th or the 20th, Wednesdays as the dates. I guess the question then would be the meeting room. The 20th, if other people are available would be a perfect date. I don’t think Friday night is generally considered by constituents to be a good night to hold a meeting -- they think you’ve got something to hide. I would certainly like to suggest the 20th if we’re available and find a suitable room. Bradshaw: I’m sure that we can find a room on the 20th. If we have to, we can have it out at the MSC or on Elwell Court. I know that we can get into those two facilities, but I would prefer Lucie Stern or someplace else. We can probably find a location. Carlson: What about the 13th? That’s too quick? Rosenbaum: If the consultant were available, if that’s all right with .... Bradshaw: I’m sure we can do what we can to get the consultants here. It would be a little tougher, but we’ve talked to them and we’re sure we can make proper arrangements with them. Rosenbaum: I would think the volume of questions and such that staff would appreciate some additional time. That’s why I’m questioning the 13th, but that would be the only concern I have there. Carlson: Commissioner Bechtel, do you have any feelings there? Page 23 of 27 Bechtel: I’m available either Wednesday. I’m thinking about what Dick just said about needing preparation time. The format is going to be a workshop, so unless we do a good job of submitting questions in advance, then I’m not sure how much preparation, whether preparation is an appropriate criterion to put on this. On the other hand, if the consultant or some one dealing, let’s say, with the statistical issue that’s been raised by all of us, if we can’t address that carefully that night on the 13th or the 20th, then let’s make sure we pick a date where we can address those things. Anyways, I’m available both days. Bradshaw: Our preference would be the 20th, but if not the 20th, sometime close to that so I can confirm with the consultants and make arrangements so that they can be there. But our preference would be the 20th. You’re absolutely right in the fact that it would take a little better preparation and it would be a little tight for the 13th. Ulrich: There’s another factor and that’s the public. When we have put this on the agenda with short periods of time, it appears that it does not give the public opportunity to go through all the documents and look at them one more time. What we’d like to do is put all this again on the web and show everybody where it’s located. If we’re going to do it, let’s make sure that the public and everybody who wants to be involved in this -- if you’ve seen all the letters back and forth, it may not be a large percentage of residents, but there is a group that would like to have a lot of questions answered. By giving them additional time, then we don’t have any ambiguities about whether they’ve had time to look at it and analyze it. Carlson: Well, it sounds like the 20th. Can everybody make it on the 20th? Rosenbaum: Yes. Carlson: Well let’s go ahead and do the 20th. As I understand it, this room is not available and so you’ll have to find another room somewhere? Bradshaw: Yes, we’ll have to in the next couple of days. We’ll try to find a room, some place suitable for the meeting and for the public. Carlson: Let’s go ahead then. Ulrich: The issue is around the time that you want it. When you start at 6 o’clock, it affects other things. Then you want to keep it open throughout the evening, so it’s also the length of time. Do you want to decide how long you want to have the meeting, or the time that it starts? Give us some feedback on that and then we can establish the location and the start time and we can also do advertisements about this, so that everybody knows where it is and when it is. Carlson: Commissioner Rosenbaum, you had some questions on this? Rosenbaum: When we discussed this last time, we heard from the public. Then we said we were going to continue it to another meeting, but the public wouldn’t get to speak Page 24 of 27 again because they’ve already spoken. Now this is a study session. I don’t know what the thoughts are on public participation, but I would much prefer that we don’t spend time listening to the public once again on this issue, and that we are able to discuss it among ourselves and with the consultants with the public present. I don’t know what the rules are or what we anticipate, but that would determine the time we’d want to allot for the meeting. Does anybody know that it would necessary to allow the public to speak once again on this issue? Ulrich: Since this is a policy matter, that’s something that you need to decide to do. You can see from the questions that we’ve received and perhaps some of those are from you as individual commissioners, we would like to be prepared to answer them. I would not want to come to the meeting [where] there’s a member of the public that has some pent- up question, technical or otherwise, and we have the consultant here that couldn’t answer it. One thing we could do in the announcement for the meeting is to ask the public to submit questions early. Then we could sort them together and have an opportunity to answer them. That’s another alternative, but it’s strictly what you’d like to do. Rosenbaum: With all due respect to the public, the study session is being held for the benefit of the Commission, in my view, with the public in attendance. The public has had two opportunities already to tell us what they think and to offer advice and indeed ask questions. I don’t see the study session being for that purpose so I’m just trying to get some idea as to whether this meeting can be arranged so that the public is in attendance, but does not speak? Ulrich: That decision is clearly up to you and what you’d like. That of course is the reason for having it on the agenda tonight -- so you could debate that and give us direction on what you’d like. Rosenbaum: I know what I would like, but I am just concerned about the rules of procedure for this body. Carlson: Commissioner Ferguson. Ferguson: Yes, I agree with Commissioner Rosenbaum on this. We gave an absolutely accurate cue to the public at the last meeting. I made the motion to continue it -- precisely because it was intended to be a single block of time last month. We burned up a lot of the block of time hearing public comments, and we simply reserved for ourselves the opportunity to finish that block of time. So I don’t feel the usual obligation to re- open the period for live public comments there. I mentioned at the last meeting, it’s a great idea again to invite submissions by the public, email submissions. There’s been some great analysis and comment up on the email boards lately on this topic. More of that can only help. But we should make it clear that this is a continuation of the discussion we tried to begin a month ago. We need to have time for the Commission to kick it around. There’s no miscue here to the public. Page 25 of 27 Carlson: I would modify this in a couple ways. I like the idea of putting out on the website a request for questions to make sure they get answered, but the additional thing I’d like to do is to instead of having this line of 3 minute presentations, all of which say the same thing, is to invite the major interested parties like the Fiber to the Home Group, whatever they’re called lately, to actually make a 5-minute presentation, if there are identifiable major groups like that, because I’m not sure if we’ve heard updates from them. That’s the only public participation would add to our deliberations. I don’t know what the other Commissioners think of that. Bechtel: Mr. Chairman, I’m more in the camp of Commissioner Rosenbaum, feeling that discussion needs to happen in the workshop. We need to focus on it and have time for ourselves to do that, what Commissioner Ferguson said about it being a continuation. The continuation was for our benefit, to have some time to do it. Then recognize the fact is that really the very next meeting, we’re going to have some specifics. And then we’ll have time for the public to make specific comments at that point. To have oral presentation at the workshop meeting really isn’t necessary. Sending us stuff is really good, we encourage that. But I would not want oral presentations at the workshop. Carlson: Any other comments? Go ahead, Dexter. Dawes: I agree with Dick and George. Let’s have it for us. I also want to put in a plug for what we’re doing. We’re deciding to authorize or recommend authorizing basically $100 grand to do another round of the business plan. We’re not debating the specifics of whether we’d recommend going forward or not. With that in mind, I agree with Commissioner Rosenbaum’s observations that the guts of the issue here revolve around the community’s potential willingness to step up and subscribe to these services and that the market survey goes to the heart of these issues. I, for one, feel dangerously uneducated on what constitutes good market research and bad market research. I’ve heard descriptions batted around about what we have in front of us here. I, for one, would love to be able to as a way of making an educated recommendation on going forward here, whether or not we have good market research or bad, or whether or not as part of the authorization for the next evolution of the business plan, that in fact that considerably more market research needs to be done, which may mean that $100 grand ain’t enough. I don’t know how to address that. Dick raised the issue initially and I wholeheartedly subscribe to it. We ought to address it at this study session. Carlson: We’ve got a clear consensus that we’re going to have written presentation from the public. We’ll broadly invite that, and look at anything that comes in. The additional thing that’s important is to try to structure this, because we’re talking about not just whether we should spend another $100 thousand to keep this thing moving, but specifically what needs to be examined in the greatest detail in the next go around, which covers that issue. There are some others -- including some options like financing mechanisms or requiring advanced deposits to be really sure. That’s in some way the ultimate survey. But there are options like that worth looking at, and that’s something that will come out of the ultimate decision. Given that, I don’t think we need to start all that early at 6. Can we just go ahead and start at 7? Okay, we’ll start at 7 and we’ll Page 26 of 27 Page 27 of 27 certainly invite observers and we will do a broadcast invitation. All the studies that people can find, the experience elsewhere, the opinions -- we’re delighted to read them. Bradshaw: So we’re talking about 7 o’clock to 9 o’clock at a location that we’ll find and we’ll set it for November 20th. Is that correct? Carlson: Yes. I’m not sure about the 9, but we’ll sure try for it. Ulrich: Two final comments. One, I get a clear understanding of how you want to deal with the study session. As we get emails and communication addressed to the UAC, we’ll just convey that to you so you get a chance to read it and factor it into your analysis, when you come to the meeting. Two, as you go through your additional due diligence on this, as you have been doing, if you could continue to send those questions to us. That would allow us, one, to analyze some of the questions and have some answers all thought through prior to the meeting and then we can, of course, elaborate on that if that’s satisfactory to you? ADJOURNMENT Carlson: Thank you very much. Motion to adjourn? Ferguson: So moved. Bechtel: Second. Carlson: All in favor? All Commissioners: Aye. Carlson: Thank you. And we’re out before 9.