Loading...
HomeMy WebLinkAbout2010-03-31 Utilities Advisory Commission Summary MinutesFINAL UTILITIES ADVISORY COMMISSION MINUTES OF MARCH 31, 2010 CALL TO ORDER Chair Melton called to order at 7:06 p.m. the special meeting of the Utilities Advisory Commission (UAC). Present: Commissioners Ameri, Eglash, Foster, and Keller Absent: Vice Chair Waldfogel, Commissioner Berry and Council Liaison Yeh ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES None. AGENDA REVIEW None. REPORTS FROM COMMISSION MEETINGS/EVENTS None. UTILITIES DIRECTOR REPORT None. UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: ACTION ITEM: Renewable Energy Contract with Ameresco San Joaquin LLC and Ameresco Crazy Horse LLC Tom Kabat, Utilities Senior Resource Originator made a presentation to the Commission outlining several background areas including Palo Alto’s Renewable Portfolio Standard (RPS) and its history, progress toward meeting the Renewable Portfolio Standard (RPS) goals, Council and Finance Committee direction to staff on Energy Efficiency (EE) and renewables, integration of EE and renewables and a description of two Power Purchase Agreements (PPAs) negotiated variants from the set presented to Finance Committee on March 16, 2010. Kabat said that Palo Alto’s RPS target is to have 33% renewables by the year 2015 with a retail rate impact of ½ cent per kilowatt-hour (kWh) or less. Current contracts are expected to supply 21% renewables by 2015. The ½ cent per kWh rate impact limit equals $5 Million dollars per year that could not be exceeded by the acquisition of renewable resources. Current contracts have consumed only $176,000 of the $5M allowance Utilities Advisory Commission Minutes Approved on: May 12, 2010 Page 1 of 10 due to their relatively low premiums over the cost of brown power. The multiple venue search for renewables was described noting that NCPA efforts have not yet produced any renewable projects despite continued effort. However, several NCPA renewable project efforts that are still ongoing may result in contract opportunities in the coming months including solar, wind and landfill gas, amounting to less than 3% of Palo Alto’s energy needs. A geothermal project may be revived and could provide a chance to subscribe to about 6% of our energy needs but at a yet unknown price. A chart of other utilities’ progress toward acquiring eligible renewables in 2008 and 2009 showed Palo Alto in the middle of the pack at about 20% while PG&E lagged at 15%. This was significant since PG&E’s effort to meet their targets would require more than 150 times Palo Alto’s volume of renewables based on PG&E’s greater catch-up distance and 100 times larger size. Commissioner Eglash asked whether the green premium is recalculated over time as the price of brown power rises? Kabat replied “No.” Eglash noted that if brown power prices continue to rise, the green premium can go to zero over time. Staff acknowledged that to be the case and explained that the “economic scoring” of the renewables contracts is based on a premium determined at the time the agreement is presented to Council and does not reflect the rise and/or fall of the value over time. Kabat described Palo Alto’s renewables pursuit process and stated that Palo Alto issued its 5th Request For Proposals (RFP) for renewable resources in Fall 2009 and developed a scoring weight system including price and value, project viability, project environmental attributes and counterparty credit-worthiness. A 5 member team scored the 42 proposals on the criteria and the most attractive ones tuned out to be four from Ameresco that met the full volume staff was seeking. Other projects having less attractive scores could not be pursued under the City’s purchasing procedures. Negotiations commenced with Ameresco leading to four 20-year term landfill gas to energy (LFGTE) power purchase agreements (PPAs). Staff recommended Finance Committee recommend Council approve the four PPAs on March 16, 2010. The Finance Committee declined to recommend Council approval and instead directed staff to return at a future date to reexamine renewables policies and EE policies. Kabat mentioned the Committee’s concerns with contract duration subjecting the City to technology risk that disruptive new green technologies could depress the market for green resources particularly after 10 years and that filling to the target in one move would not diversify our efforts across time. Kabat also mentioned that the Finance Committee had expressed concerns when approving the last renewable PPA in July 2009 that the renewables were very expensive compared to energy efficiency and brown power and that perhaps staff was not relying enough on EE programs. Kabat read the August 3, 2009 Council Direction to staff: “To work with the Utilities Advisory Commission (UAC) and report back to the Finance Committee with a re-examination of the policies and goals that are being used in the alternate energy program, including the energy efficiency plans and the electric acquisition policies and plans.” Kabat explained staff’s follow-up efforts including getting UAC approval for an EE plan that compared EE measures to the cost of green power resources leading to a doubling of EE goals and a significant increase in EE budget. The EE plan will be presented to the Committee for consideration on April 6, 2010. The doubled goals would reduce loads by another 37 GWh by 2020 reducing the need to procure 1/3 of that, or 12 GWh of renewables. Forecasted electric loads are essentially flat by the doubled EE effort. Staff used this reduced load forecast to analyze the need for additional renewables. During Kabat’s discussion on the 10-year Energy Efficiency (EE) proposed plan, Chair Melton reminded the Commission that the new plan, recommended by the UAC on March 9th for Council approval, doubles the Utilities Advisory Commission Minutes Approved on: May 12, 2010 Page 2 of 10 goals and incorporates green premiums in the evaluation of EE. Chair Melton also noted that under the proposed 10-year EE plan, energy efficiency is sufficient to capture load growth through 2020. Kabat explained Ameresco’s stated need to complete contracting efforts with Palo Alto by April 19 so Ameresco could still have time to move on to complete contracts with backup parties if Palo Alto declines the PPAs, all focused on starting construction by the end of 2010 to qualify for stimulus funding. Kabat also mentioned staff’s plan to update the Long-term Energy Acquisition Plan (LEAP) guidelines, including a discussion of the RPS goals, timing and allowable budget. Following UAC review, the LEAP update would then be considered by Finance Committee and the Council. The March 16, 2010 proposal to the Finance Committee was presented as well as the Committee’s reaction stating concerns including: 1) staff had not yet completed the direction from the August 2009 to return to committee with review of policies and plans for acquiring renewable and energy efficiency resources, 2) technology risk of locking in prices for 20 years, 3) too much concentration with Ameresco in the portfolio, and 4) Ameresco’s creditworthiness. Given the timing situation and Ameresco’s willingness to continue negotiations, staff sought changes responsive to the concerns raised by the Committee. Namely, eliminating two of the projects, reducing the prices on the remaining two and negotiating terms of 20 years, 15 years and 12 years. These changes leave more room to buy other renewable supplies at potentially lower costs in the near to mid term future. Kabat stated that the City currently has contracts with Ameresco to provide 8.8% of City energy already and is proposing 2 new contracts that are expected to add 6.2% more. Conversely, Palo Alto is already contracted with 5 of Ameresco’s 20 power projects, 3 of them sharing output with Alameda Municipal Power. Kabat stated out that the possibility of an Ameresco default is mitigated in several ways; by the free standing Limited Liability Corporations (LLCs), by the PPA structure only requiring Palo Alto to pay for energy after delivery, by the highly motivated lender’s who would step in to run the projects if Ameresco fails and by the City having operational rights to step in if Ameresco or the lender fail to operate. Mr. Kabat pointed out that the last step is one we would only want to do if the contract was still attractive compared to the market. Kabat presented staff’s new renegotiated and pared down proposal, recommending approval of San Joaquin and Crazy Horse PPAs for 15-year terms at prices $2 and $4/MWh, respectively, lower than before and to prepay the interconnection charge toward the end of construction. Kabat described the 15-year option as being responsive to the risk of green energy price declines but vulnerable to brown energy price increases exceeding 2% per year and vulnerable to green energy price premiums not reducing. He described the 12-year proposals as being significantly higher priced than the 15 year option. Comparisons of the rates in the prepay and rate table versions of the interconnection cost pass through revealed that the prepay option has an internal rate of return of about 9% per year for the 15-year PPAs and about 11%/year for the 20-year PPAs making prepayment the attractive alternative compared to the City’s 4%/year investment portfolio. Kabat explained that there was a provision in the PPAs that would allow Palo Alto to get its money back if the projects were not built. Commissioner Eglash asked how the money would be returned, especially if the company was in bankruptcy. Eglash suggested that we would stand in line with other creditors in that case. Kabat agreed that this likely to be the case. Utilities Advisory Commission Minutes Approved on: May 12, 2010 Page 3 of 10 Commissioner Eglash asked whether analysis was done on the interconnection cost impact on the project costs. Utilities Assistant Director Jane Ratchye explained that for a 15 year contract, paying the interconnection costs upfront provides a 9% IRR. Commissioner Keller asked what assumed capacity factor was used. Ratchye replied that an 85% was assumed. Chair Melton raised the concern that PG&E’s control of interconnection cost could result in PG&E increasing interconnection costs for the projects so as to cause Ameresco to cancel its contract with Palo Alto. Were that to occur, PG&E could then step in and take over the project to achieve its own renewable goals. Commissioner Eglash noted that PG&E could not be so blatantly self-serving without facing legal consequences. Foster noted that the worst case scenario, complete failure of the project, would simply have Palo Alto shopping for new supplies once again. Keller asked whether there was a possibility for Ameresco to reduce its price on the Avenal project (the smallest but most expensive project proposed by Ameresco). Kabat indicated that the Avenal pricing was as low as it could be to still qualify for financing. Commissioner Keller asked how far the electric interconnection to the grid would be for the projects and asked whether there was a rule of thumb dollar per mile figure to help determine the exposure to interconnection costs. Kabat replied that the project developer was in a better position to determine the most efficient interconnection scheme and most economic costs. Commissioner Eglash asked whether the project premiums included amortization of prepayment for the interconnection costs. Kabat answered in the affirmative. Commissioner Ameri asked likelihood of emissions controls for San Joaquin. Kabat responded that he evaluated different scenarios but did not assign a probability. Kabat showed graphs of nominal energy prices from the past and quoted into the next six years and escalated at 2% per year after that. Also on those plots were carbon adders that would be charged according to proposed federal climate legislation and according to CPUC estimates. Also shown were the Market Price Referent (MPR) calculated by the CPUC and the price ranges for the proposed San Joaquin and Crazy Horse PPAs. The graphs showed that while the PPA rates were forecast to stay above the brown market rates, carbon emission fees could drive the cost of brown power above the rates in the PPAs in the outer years, especially if brown power escalates at more than 2% per year. Foster asked who provided the numbers for the price forecasts. Kabat replied that marketer quotes were obtained for the first five years, then the numbers were escalated by 2% per year, a conservative estimate. A thirty year view of the stacked bar renewable resource plot revealed many buying opportunities for renewables both to meet the 33% target the first time and to replace the PPAs that start expiring in 2021, 2028, and 2029. Several slides looked at several opinions of the “greenness” of Landfill Gas to Energy (LFGTE) power plants. The U.S. Environmental Protection Agency (the agency that administers the title 5 air permits for landfills and for LFGTEs strongly supports LFGTE. The Natural Resources Defense Council supports LFGTEs. The Sierra Club opposes LFGTEs unless the landfill is strictly managed to divert all organic wastes away and uses best management practices to minimize methane generation. The national Sierra Club supports the adoption of regulations to minimize methane emissions from landfills. Kabat explained that the two existing old landfill are EPA New Source Performance Standard compliant and will be even more stringently regulated by the California Air Resources Board new rules to reduce methane emissions from landfills. Utilities Advisory Commission Minutes Approved on: May 12, 2010 Page 4 of 10 In conclusion, Kabat stated that staff recommended UAC recommendation of 15 year PPAs for San Joaquin and Crazy Horse LFGTE projects and the waiving of the investment grade credit rating requirement of the Municipal Code for these PPAs. Joe Saccio, Deputy Director for Administrative Services, explained that he would be presenting the credit and risk issues in the absence of the Energy Risk Manager, Karl Van Orsdol. Saccio said that the presentation is almost the same as the one that Van Orsdol made to the Finance Committee on March 16, 2010. Saccio enumerated four key issues: 1) counterparty concentration (whether Palo Alto’s renewable plans rely too much on Amersco?); 2) credit condition of Ameresco (whether Ameresco’s financials provide sufficient assurance of long-term delivery?); 3) whether up-front payment of interconnection charges poses undue risk; and 4) whether 12, 15, or 20 year fixed-price contracting poses undue market risk. Saccio provided an overall summary of the positives and negatives of the proposed PPAs. The positives include Ameresco’s strong history of project completion and performance, the proposals were the lowest priced proposals offered, each PPA is with a separate LLC, the city only pays for power deliveries, the company will invest significantly in project before power is generated, and a default by the LLC results in a lender take-over of the project. The negatives include high concentration with one supplier, the fact that renewable power costs more than brown power, long-term contracts at fixed prices are at risk of falling prices in the future, and political risk that the mandates for renewable power will change in the future. Commissioner Eglash asked how we know if any of the LLCs is operating at a loss. Saccio said that Van Orsdol looks at the company’s financial information, but he didn’t know if Van Orsdol looks at each LLC or only at the parent company. Saccio stated that Ameresco currently accounts for 42% of the City’s renewable supplies and 9% of the City’s total supplies. With the proposed PPAs, Ameresco would account for 56% of the renewable supplies and 16% of the total supplies (assuming a 95% capacity factor) and be the second largest supplier after the Western Area Power Administration. Regarding Ameresco’s credit, Saccio explained that Ameresco has grown rapidly over the last 4 years and has $4 billion of projects under contract now. This growth has stressed Ameresco’s finances as debt has doubled since 2005 and the cost of sales has increased by 50%. Based on the company’s financial information, the expected default frequency for Ameresco increased in 2008 from 2007 and increased in the first three quarters of 2009. However, stresses on Ameresco are easing. Saccio also noted that if Ameresco defaulted, the project lenders could continue the project. Saccio discussed the risks and benefits of prepaying the interconnection costs. If the City paid upfront for the interconnection, but the project was not completed or the project stopped deliveries after a short period of time, then the City could lose the prepayment amount. However, Saccio stated that this risk was low since Ameresco would have invested over 50% of the project cost before the interconnection payment is made. He also noted that the prepayment would save money over using the price tables if the deliveries continued over the 12- , 15-, or 20-year contract terms. Saccio explained that there is some risk that the costs of renewable power will fall and the PPAs will lock in the cost to Palo Alto at above the market cost of renewable power in the future. New technology could reduce renewable energy costs in the future. In addition, it is difficult to compare renewable power prices as there is no transparent forward price curve for renewable power except for the Market Price Referent that the CPUC calculates annually. Although there is currently a high demand for renewable energy, Utilities Advisory Commission Minutes Approved on: May 12, 2010 Page 5 of 10 political changes and economic or rate pressures could weaken the mandates and reduce demand, which could lead to lower prices for renewable power. In conclusion, Saccio stated that the PPAs appear to be at or below renewable energy market prices for the medium term. In the long-term, new technologies could reduce the cost of renewable energy, but carbon management issues could have an upward effect on prices. ORAL COMMUNICATIONS ON THE AGENDA ITEM: David Coale from Palo Alto Cool Cities Team with Sierra Club complimented staff on the presentation and noted his disappointment with the earlier Finance Committee’s recommendations. Coale further encourage the Commission to take a greater perspective on rates versus greenhouse gas emissions and pointed out that customers in Palo Alto pay far less for electricity than the average PG&E customer for far lesser greenhouse gas emissions. He stated that we would be misguided to think rates should not go higher and that the City has an obligation to reduce greenhouse gas emissions when Palo Alto has lower rates and the ability to pay more. Coale also spoke in support of landfill gas to energy projects because it is baseload renewable energy. He cautioned that landfill operators must be careful with leakage since methane is twenty times more lethal than carbon dioxide and noted that it was good to see the amount of work staff had done in researching the matter. Bruce Hodge, also with PA Cool Cities Team expressed his support of 33% renewables by 2015 goal. He stated that it is time to get ahead of the game particularly when competing with PG&E. He mentioned his attendance at the earlier Finance Committee meeting where he spoke in favor of staff’s proposal which he thought made good sense. He noted his disappointment with a pared back proposal, stated his support of staff’s recommendation, and said he would like to know next steps to hit the 33% goal. He expressed his opinion that it is not in the Finance Committee’s purview to re-write the City Council recommendations on the renewable portfolio standard and urged the Commission to approve the contracts or even go further. Herb Borock mentioned an email sent to the UAC at 1:00 this afternoon reiterating his opinion that the issue being discussed was not in the Commission’s and was contrary to action of the Finance Committee. He noted the discussion at the Finance Committee regarding the Commission’s review of the Ameresco contracts where Fong said that contracts are not brought to the Commission because they are operational in nature and therefore not under the purview of the Commission. Borock gave an overview of the Finance Committee’s motion. Borock also argued that the Market Price Referent is not a floor. Rather the price for power is determined by supply and demand, and that as technological advances occur, prices goes down. He argued that contrary to what Commissioner Eglash said, Borock did not agree that the City should lock in high priced green power now in anticipation of higher brown prices. Borock also stated that per City policy, the City cannot contract with Ameresco because its credit rating is too low. Borock opined that staff is only focused on the 33% goal and that staff is not looking at the future power market. Borock said that the contracts were being rushed through the approval process. Borock also likened the current process to the Cuban missile crisis noting that there are two conflicting messages and staff has chosen to ignore one (the normal approval process) in order to achieve the other (the 33% goal). Chair Melton began the Commission’s deliberations by suggesting that the Commission consider the questions raised by the Finance Committee. He first reminded the Commission that governing Council adopted policy is to achieve 33% Renewable Portfolio Standard (RPS) by 2015, and that a change in that policy was not part of the meeting agenda, however, should the Council direct the Commission to reconsider the policy, it would do so at the appropriate time. Melton listed three items for discussion and Eglash added two more as follows: Utilities Advisory Commission Minutes Approved on: May 12, 2010 Page 6 of 10  Concentration of purchases with Ameresco and Ameresco’s credit rating;  15-year versus 20-year contract terms;  Political risk;  Environmental attributes of landfill gas to energy projects;  The role of energy efficiency. Chair Melton noted the Commission’s review of the 10-year EE Plan in March, and Commissioner Eglash added his observation that EE does not obviate need to purchase renewables if the City wants to meet RPS. Chair Melton noted that it would be important for the Commission to have a recommendation on whether it believes that landfill gas to energy (LFGTE) is a technology that is renewable in the same sense as solar, wind or other technologies available for renewables, and whether it would advise the Council to approve more LFGTE purchases. Commissioner Foster explained that he had spent some time looking into the issue. He noted first that it is clear that under applicable California policy, LFGTE is renewable (similar to solar, wind). He also mentioned that at least one Palo Alto resident expressed concerns about building new landfills just to build LFGTE, however, from his perspective, the issue was resolved for him based on the staff report. Further, he mentioned that he had contacted Ralph Cavanagh at NRDC who provided the following response: “We agree that landfill gas is an environmentally preferred fuel source for electric generation; NRDC should not be cited in opposition to such a contract.” Foster noted that if landfill gas is not collected but seeps into the atmosphere, its far worse than turning it into electricity. Commissioner Foster asked staff who has responsibility for regulated landfills. Kabat replied that the Environmental Protection Agency is responsible for Title 5 landfills and the California Air Resources Board is also responsible in California. Foster confirmed that both the Federal and State governments are involved in the regulations and not the City of Palo Alto. Foster noted that he is comfortable with the consideration of landfills as a renewable source for energy. Commissioner Eglash remarked that one can view the issue very simply as landfills already produce biomass and we are all much better off creating electricity from it rather than simply flaring it. He noted that even the Sierra Club’s opposition is based on avoiding encouraging future landfills. Commissioner Keller indicated agreement with prior comments and added that the landfill is a good source of baseload energy with a tried and true technology. Chair Melton mentioned that he had been asked how much CO2 goes into atmosphere when methane is burned to create electricity and noted that the answer was included in the staff report. He summarized it by noting that flaring methane and using natural gas to produce the same amount of electricity puts more greenhouse gases into the atmosphere than creating LFGTE energy. Chair Melton introduced the topic of Ameresco as counterparty and asked the Commission to consider its level of concern about Ameresco as a counterpary. Commissioner Foster stated his belief that the issue is fairly minor in this instance, noting that it would be very different if the City was prepaying for the energy or financing construction of plant, neither of which applies. He further noted that in the event of default by Ameresco, the City would purchase any shortfall from the market (although it might be brown power), and in any event, under the proposed contracts, the Utilities Advisory Commission Minutes Approved on: May 12, 2010 Page 7 of 10 City only pays for what is delivered. Lastly, he noted that each Ameresco project is a separate entity and each must achieve financing, so the odds are low that Ameresco will default, but even if it does,, the lights don’t go out. Commissioner Eglash stated that the City is a customer of Ameresco, and not an investor in the company, and that it has six years of history with Ameresco where the City is already purchasing power. He described the relationship as a mutually beneficial relationship. Commissioner Ameri spoke in agreement noting that the City is not investing, that Ameresco has an established track record and that it has been performing. Commissioner Keller also spoke in agreement noting that failure to approve a deal with Ameresco forces the City to deal with an entity with which it has no track record and may have other unknown risks. Chair Melton asked that the minutes reflect that the Commission does not find there is undue risk in signing additional contracts with Ameresco given the nature of the contracts and the safeguards built into them. Chair Melton then raised the matter of the term (length) of the contracts and asked the Commission to consider the risks associated with either shorter or longer terms. The commissioners agreed that the 12- year terms were not attractive because the prices were too high. Commissioner Eglash asked whether the contracts can be executed with either 15- or 20-year terms at the same price and staff responded affirmatively. Commissioner Keller noted her preference for the 20-year term because it was impossible to guess how much up or down prices might go in the future, the price is attractive now, and there is a need. Melton agreed that the prices are attractive, however, he noted a significant amount of the “green premium” is consumed by these contracts. Ratchye explained that the 0.5 cents/kWh cap could be accommodated if more power was available, up to the 33% amount, at the same prices as the proposed contracts, however, she conceded that the availability of comparably priced power was an uncertainty into the future. Commissioner Ameri noted that the common expectation is that the longer contract should result in a lower the price and asked why the prices for the 20-year contract are not less expensive than those for the 15- year contract. He noted that since there is no price benefit from the extra 5 years of commitment he would be inclined to stay with the 15-year contract. Commissioner Foster indicated that it was his preference to support the 20-year term, however, in an effort to address concerns raised by the Finance Committee over the length of the contract, and to provide the Finance Committee with something they could recommend to the Council, he would consider the 15-year term. Commissioner Keller pointed out that PG&E is also in the market trying to get renewables, and given transmission limitations, and the limitations on wind and geothermal project developments, it makes sense to lock in a longer term. Commissioner Eglash stated that he has no doubt that brown power prices will continue to rise because fossil fuels are finite resources and, if one considers a booming economy in a few years, a forecast of 1% to 2% annual increases in brown power might be low. He suggested that at some point, increases in prices for brown power may outpace inflation. He also stated that he had no doubt that further investment and technology advances, will result in cheaper renewables (solar for instance), although he was less clear that wind or LFGTE would get cheaper since they are more mature technologies, but also stated that the price Utilities Advisory Commission Minutes Approved on: May 12, 2010 Page 8 of 10 of green power is not going to get below the price of brown power. Green power is a “substitution” technology that takes the place of brown power, so as brown power prices increase, even as there are technological advances, there’s a floor for green energy set at the price of brown power plus a greenhouse gas adder plus another small adder for the green premium, so there will always be a positive green premium relative to brown. Eglash concluded that from a pricing trend point of view, he would have no problem recommending a longer contract. He noted that these contracts represent a small part of the renewable portfolio going forward, that there will be more contracts to sign if the City chooses to meet the RPS, and that over time, more contracts will expire and more will be needed to maintain the RPS. Chair Melton noted that legislative actions in both Sacramento and Washington are unknowns, but agreed that it is unlikely that green power will ever sell for less than brown power. Commissioner Foster stated that the UAC was trying to make sure it is serving the Palo Alto ratepayer as well as possible, and with that in mind he made the following three points: (1) the most cost effective way to meet the 33% by 2015 goal is through these contracts; (2) he opined that down the road, the City will be glad it entered into these agreements; and (3) since the City is largely dependent on hydro power and brown power, the LFGTE power provides good portfolio diversification that is not dependent on the fossil fuel market or on hydrologic conditions. Commissioner Ameri asked whether a change in regulation that affects costs encountered by the company (Ameresco) would be passed through to Palo Alto. Kabat replied that the proposed PPAs contain only one continuing automatic pass-through charge, which is the interconnection costs and the costs of emissions controls equipment for the San Joaquin landfill project. Fong noted that changes in regulation would be a market-wide change. Chair Melton summarized the sense and votes of the commission as follows: 1. The Commission does not support the 12-year contract term. 2. The Commission does support either the 15- or 20-year PPA terms with three commissioners (Melton, Eglash, Keller) preferring and recommending the 20-year term PPAs and two Commissioners (Ameri, Foster) preferring and recommending the 15-year term PPAs. Additionally, Foster wanted the minutes to reflect that, while he voted for the 15-year term, he did it in deference to the Finance Committee’s position, he would support the 20-year term. Ratchye noted a necessary change to staff’s recommendation in the staff report as follows: “change ‘for the acquisition of up to 52,000 MWh per year of energy over fifteen years at an estimated cost not to exceed…” to ‘for the acquisition of up to 52,000 MWh per year of energy over fifteen years at cost not to exceed…” for both Item 1 (San Joaquin) and Item 2 (Crazy Horse) contracts. ACTION: Commissioner Foster made a motion recommending that the Utilities Advisory Commission (UAC) recommends that the Council: 1. Adopt a resolution approving a Power Purchase Agreement (PPA) with Ameresco San Joaquin LLC, a Delaware limited liability company, for the acquisition of up to 52,000 MWh per year of energy over fifteen years at a cost not to exceed $88.7 million or over twenty years at a cost not to exceed XXX, including, if required, a payment of up to $1.425 million for electric transmission interconnection costs; 2. Adopt a resolution approving a PPA with Ameresco Crazy Horse LLC, a Delaware limited liability company, for the acquisition of up to 52,000 MWh per year of energy over fifteen years at a cost Utilities Advisory Commission Minutes Approved on: May 12, 2010 Page 9 of 10 Utilities Advisory Commission Minutes Approved on: May 12, 2010 Page 10 of 10 not to exceed $80.7 million or over twenty years at a cost not to exceed YYY, including, if required, a payment of up to $1.425 million for electric transmission interconnection costs; and 3. Waive the application of the investment-grade credit rating requirement of Section 2.30.340(d) of the Palo Alto Municipal Code, which applies to energy companies that do business with the City, as the Ameresco companies are not rated by credit agencies. The UAC requested that staff provide the XXX and YYY numbers to represent the appropriate not to exceed costs of the proposed PPAs for 20-year terms since they were not available at the time of the UAC meeting. The Commission voted unanimously to support the motion. Commissioner Eglash thanked staff for the research and presentations. He then noted that the Commission must respect two conflicting issues: the need for lowest possible rates and care for the environment. He acknowledged Melton’s earlier reminder that the City has an adopted RPS, and that even if it did not have its own RPS, it would be forced to comply with an RPS at some point. Therefore, as Commissioners, all are focused on trying to balance low rates and the environment, and do so as they consider long-term contracts, protections such contracts afford against future increases, and portfolio diversity, etc. Failure to execute the current contracts would likely force in higher cost contracts in the future. Keller, Foster and Melton all spoke in favor of recommending the contracts. ACTION: Chair Melton moved to designate Commissioners Foster and Eglash to represent the UAC at the Finance Committee on April 6, 2010 when this item is scheduled to be considered. Keller seconded the motion. The Commission voted unanimously to approve the motion. INFORMATIONAL REPORTS None. COMMISSIONER COMMENTS Commissioner Foster reported that he attended a community meeting organized by Bruce Hodge to discuss the electric portfolio and how to include additional resources to make it carbon neutral. Foster thanked attendees and thanked Bruce Hodge for organizing the event. Foster stated that he expected these issues to eventually be discussed by the UAC. He also stated that there was good representation of CPAU staff at the meeting. Meeting adjourned at 10:17p.m. Respectfully submitted, Marites Ward City of Palo Alto Utilities