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HomeMy WebLinkAboutStaff Report 383-09TO: FROM: DATE: ATTENTION: SUBJECT: HONORABLE CITY COUNCIL CITY MANAGER OCTOBER 27, 2009 FINANCE COMMITTEE DEPARTMENT: UTILITIES CMR: 383:09 Utilities Advisory Commission Recommendation to Use Up to $2 Million in Calaveras Reserve Funds Over Four Years for a City of Palo Alto Utilities Department Business Electric Efficiency Financing Program RECOMMENDATION The Utilities Advisory Commission (UAC) and staff recommend that Council approve the funding for a Business Electric Efficiency Financing Program from the Calaveras Reserve. EXECUTIVE SUMMARY On August 3, 2009, Council approved staff's recommendation to implement an electric efficiency -financing program for nonresidential customers through a third party contractor. Staff is requesting that the Council approve funding for both program administration and the loans to customers over four years through the Electric Reserve Account known as the Calaveras Reserve. The UAC concurs with staff's recommendation. Only electric efficiency projects will be supported under this pilot program. BACKGROUND The City's energy efficiency activities are guided by both internal documents such as the Ten - Year Energy Efficiency Portfolio Plan approved by Council in April 2007 (CMR:216:07) and external requirements such as Assembly Bill 2021 (enacted in September 2006), which requires publicly -owned utilities to set ten year goals for energy efficiency results and to implement and fund third party measurement and verification of the results of these programs. One of the major barriers to small businesses installing energy efficiency equipment, such as new lighting or heating, air conditioning ventilation (HVAC), is the upfront cost. To address that problem, the City is proceeding with a pilot zero -interest business energy efficiency program. The loan program will target small commercial customers and be administered by a third party contractor (CMR 336:09). The program design and timeline for implementation have been submitted to Council for information on September 21, 2009. Assuming the Finance CMR: 383:09 Page 1 of 4 Committee's recommendation, the request for funding from the Calaveras Reserve is scheduled to go to Council for approval on October 19, 2009. On January 12, 2009, Council directed staff to work with the UAC to review possible projects that would benefit electric ratepayers for consideration of funding from the calculated "excess" Calaveras Reserve Fund (CMR: 110:09). On June 15, 2009, as recommended by staff, the UAC, and the Finance Committee, Council approved changes to the Calaveras Reserve guidelines (CMR: 275:09), including a provision that, to the extent that there are funds available in excess of long-term stranded cost needs, staff will work with the UAC to identify and recommend projects for Council consideration and approval. Such projects shall be to the benefit of electric ratepayers. DISCUSSION Because utilizing the Utilities billing system to provide loan management services related to facility energy efficiency improvements proved to be too costly and time-consuming, staff recommended and Council approved contracting with a third -party Non Governmental Organization (NGO). This model would be similar to the management of several existing Council -approved energy efficiency programs and can result in a lower program implementation cost with greater flexibility. One or more NGO contractors would be selected via the City's Request for Proposals (RFP) process. Preliminary program attributes include: 1. Loans will be restricted to commercial customers in good standing, and a loan agreement will be required. 2. The borrower will be the tenant (except in the case of master meters). Owner permission will be required. 3. The maximum loan amount is equal to total equipment cost plus total installation cost less rebate. 4. Loan repayment by owner when the tenant is in default or the building space is unoccupied. This will require the property owner to be a signatory, or guarantor, to the loan. 5. These will be unsecured loans and measures to establish creditworthiness will be required. 6. The program will apply to electric energy efficiency projects, but not natural gas or water. Additional program design details are presented in the September 21, 2009 staff report. The recommendation of this memo addresses the funding source for the pilot program. Staff is requesting that the Council approve funding for the program up to $2 million from the Electric Reserve Account known as the Calaveras Reserves. These funds would be used to develop and administer the program and as the funding source for the loans themselves. Table 1 below shows the preliminary budget for ongoing operation of this pilot program. It should be noted that there will be additional set-up charges for legal review and City operational costs that are not included in the budget to be funded from the Calaveras Reserve. CMR: 383:09 Page 2 of 4 Table 1 Business Energy Efficiency Financing Program Preliminary Budget Budget for Business Energy Efficiency Financing Program Program Number Year of Loans Average Loan Amount Total Amount Loaned Contractor Verification Total Program Administration Budget 2 3 4 12 $25,000.00 14 $27,500.00 15 $30,250.00 17 $33,275.00 $ 300,000.00 $ 385,000.00 $ 453,750.00 $ 565,675.00 $ 30,000.00 $ 38,500.00 $ 45,375.00 $ 56,567.50 $15,600.00 $20,020.00 $23,595.00 $29,415.10 $ 345,600.00 $ 443,520.00 $ 522,720.00 $ 651,657.60 $ 1,963,497.60 Note that number of loans by year is an estimate, and loans could come earlier or later in the program development. Assumptions Maximum loan amount Loan Amount Rate of Increase 10% Administration Percentage Verification Percentage 5% $50,000 10% RESOURCE IMPACT If approved, up to $2 million for this energy efficiency financing program for nonresidential customers would be from the Calaveras Reserve. Sufficient funds would remain in the Calaveras Reserve to cover stranded costs of the electric portfolio. POLICY IMPLICATIONS Implementing this financing mechanism will reinforce the City of Palo Alto's policies and goals to encourage energy efficiency installations and to assist customers in their attempts to use electricity more effectively. Goals being supported include the City Council Priority Number Three, "Environmental Protection," the Ten Year Energy Efficiency Program, and the Climate Protection Plan. ENVIRONMENTAL REVIEW The study of the City's provisions of these services does not constitute a project pursuant to Section 21065 of the California Public Resources Code, thus no environmental review under CEQA is required. CMR: 383:09 Page 3 of 4 ATTACHMENTS A: Excerpted Draft Minutes from Utilities Advisory Commission's September 2, 2009 meeting B. Utilities Advisory Commission memo dated September 2, 2009: Use of Up to $2 Million in Calaveras Reserve Funds for an Energy Efficiency Financing Program for Nonresidential Customers PREPARED BY: APPROVED BY: DEPARTMENT APPROVAL: CITY MANAGER APPROVAL: JOY L KINNEAR Manager arketing Services TOM NE Assistant Director, Utilities Customer Support Services VALE 4t� O F of Uti ie Director VA NG s CMR: 383:09 Page 4 of 4 ATTACHMENT A Excerpt from Draft Minutes of September 2, 2009, UAC Meeting ITEM 3: ACTION ITEM: Use of Up to $2 Million in Calaveras Reserve Funds for an Energy Efficiency Financing Program for Nonresidential Customers Utility Marketing Services Manager Joyce Kinnear provided a brief history of the development process of a business energy efficiency financing program. She described the objectives of the program and why a third party program provider is being sought. Finally, she pointed out that staff is recommending that the funds for this program come from the Calaveras Reserve. Commissioner Eglash mentioned that the UAC report suggests that the attorney's office is reviewing whether or not a lien can be placed against the property if a tenant has the loan, but in the meantime the owner will be asked to co-sign a loan. He asked if staff believes that owners will be willing to do so. Kinnear responded that the owners who have spoken with staff have stated that they would due to the fact that they typically have a low vacancy rate, owners would typically want to be involved in a process where modifications are being made to their property, and owners are used to paying the utility bills once a space is vacant. Commissioner Foster asked if such a program would be helpful to businesses like his, which has a triple net lease where his company pays a percentage of total building utility charges. Kinnear responded that the loan may be helpful for some in a triple net lease, but not all, and staff continues to search for appropriate programs for these types of customers. Commissioner Berry asked if the program would fund natural gas installations. Director Fong responded that they would not, as the funds would come from the electric utility. Chair Melton wanted to know if staff had reviewed whether other sources of funds were available for this type of program. Kinnear responded that they had, and if the program were to be funded by the public benefit funds, many other programs would have to be eliminated or severely restricted, which was deemed not to be acceptable nor appropriate under current state law and city goals and plans. Commissioner Eglash then asked if it would be legal to have a voluntary additional charge on the natural gas bill to fund such a program, and Kinnear responded that it would. Lisa Van Deussen, an employee of Wave One (a group working to improve the environmental responsiveness of small businesses) and a resident of Palo Alto, spoke to the program. She praised the program and supported the necessity for operating the program with a third party consultant. She also pointed out that loans currently budgeted for up to a four year period might come early in the program, and the program should be designed with that flexibility. Action: Vice Chair Waldfogel moved the staff recommendation to recommend Council direct staff to design a financing program for small commercial customers with initial funding of $2 million from the Calaveras Reserve. Commissioner Eglash seconded the motion. The motion passed unanimously (6-0). ATTACHMENT B TO: FROM: DATE: SUBJECT: MEMORANDUM UTILITIES ADVISORY COMMISSION UTILITIES DEPARTMENT SEPTEMBER 2, 2009 USE OF UP TO $2 MILLION IN CALAVERAS RESERVE FUNDS FOR AN ENERGY EFFICIENCY FINANCING PROGRAM FOR NONRESIDENTIAL CUSTOMERS REQUEST Staff requests that the Utilities Advisory Commission (UAC) recommend that Council approve the funding of an Energy Efficiency Financing Program for Nonresidential Customers from the Calaveras Reserve. EXECUTIVE SUMMARY Council approved a recommendation to implement an energy efficiency -financing program for nonresidential customers through a third party contractor. Staff is requesting that the UAC recommend to Council that this program be funded through the Electric Reserve Account known as the Calaveras Reserve. BACKGROUND The Long-term Electric Acquisition Plan (LEAP) objectives and guidelines set the direction for staff in planning and managing the electric supply portfolio, including the use of cost-effective efficiency as energy resources. Council approved the latest update to the LEAP Objectives and Guidelines in March 2007 (CMR:158:07). In addition, the City's Ten -Year Energy Efficiency Portfolio Plan, approved by Council in April 2007 (CMR:216:07) identifies and sets high goals for gas and electric conservation and efficiency programs. The State Legislature has also enacted an update to California's Public Resources Code through Assembly Bill 2021 (AB 2021, enacted in September 2006), which requires publicly -owned utilities to set goals for energy efficiency results and implement and fund third party measurement and verification of the results of these programs. The proposed contracts are intended to meet the state and local requirements by enhancing our energy efficiency programs. City Council members previously requested that staff review financing options for CPAU customer energy efficiency installation projects. A financing program helps to overcome the first Page 1 of 7 cost barrier that inhibits customers from investing in energy efficient equipment. Depending on the repayment terms of the financing program, the loan payments would be offset by the energy cost savings. On May 18, 2009, staff brought a report to Council identifying the costs associated with in-house programming and implementation of on -bill and off -bill loan financing options in the new Utilities SAP -Customer Care and Service (CCS) billing system (CMR:234:09; Attachment A to this report). At that time, staff recommended a multi -pronged approach to energy efficiency loan financing including: short-term contracting with a commercial lending institution to provide traditional secured loans; longer -term staff review and implementation of Utilities on- or off -bill energy efficiency loan financing; and investigation of a lien -based loan repayment through property taxes. These loans will assist small businesses in implementing energy efficiency measures. One of the major barriers to implementation is the upfront cost which is what the loans will help to offset. On May 18, 2009, Council directed staff to return by September 30 with a plan to quickly implement an on -bill or off -bill Utilities -financed loan program for businesses wishing to improve their energy efficiency to install equipment such as new lighting or heating, air conditioning ventilation (HVAC). Staff was also directed to solicit input and assistance from community volunteers. This community input, including input from one of the UAC members, resulted in the current third -party -based proposal. Staff returned to Council on August 3`d (CMR 336:09; Attachment B to this report) with a recommendation to direct staff to design a pilot Utilities Department zero -interest energy efficiency loan program targeting small commercial customers to be administered by a third party contractor. The program design and timeline for implementation will be submitted to Council for approval by September 30, 2009. Council approved this recommendation. On January 12, 2009, Council directed staff to work with the UAC to review possible projects that would benefit electric ratepayers for consideration of funding from the calculated "excess" Calaveras Reserve Fund (CMR: 110:09). On June 15, 2009, as recommended by staff, the UAC, and the Finance Committee, Council approved changes to the Calaveras Reserve guidelines (CMR: 275:09), including a provision that, to the extent that there are funds available in excess of long-term stranded cost needs, staff will work with the UAC to identify and recommend projects for Council consideration and approval. Such projects shall be to the benefit of electric ratepayers. DISCUSSION Community Input Staff investigated the implementation requirements for both on -bill and off -bill Utilities financing programs and obtained input from a number of individuals including Asher Waldfogel, Utilities Advisory Commissioner, Walter Hays of the Community Environmental Action Partnership (CEAP), Jim Baer of Premier Properties, and Debbie Mytels of Acterra. The interests of the various stakeholders are aligned as follows. Environmental advocates want to reduce energy consumption by a significant percentage in the shortest timeframe possible. Property owners and managers want to identify new ways to partner with tenants to reduce energy Page 2 of 7 consumption. The City of Palo Alto (City) wants to design and implement a loan program which encourages energy efficiency goals, meets the needs of the participants, protects rate payers from the risk of loan defaults, and minimizes program administrative costs. Utilities Billing System Staff initiated discussions with the contractor that implemented the City's new SAP utility billing system, HCL-Axon (Axon). Staff asked Axon to develop cost estimates and timelines for on -bill and off -bill loan management options. The costs for three scenarios were developed. The "Minimalist CCS" scenario allows for a very simple on -bill financing approach with no changes to the customer program, no early payment option, no loan payment transfers from one customer to the other, and no changes in loan rates. The cost for the "Full -Functionality CCS" accommodates a more robust on -bill financing scenario at significantly greater cost than the "Minimalist CCS." The "SAP Loan Management" scenario is an "off -the -shelf' SAP product that can be used to implement off -bill financing. The table below highlights the key attributes and costs for the three options. Table 1 Loan Financing and Management Alternatives (Billing System Attribute Minimalist CCS Full -functionality CCS SAP Loan Management Integrated w/utility bills Yes Yes No Integrated w/utility bill payment Yes Yes No Code enhancement required Medium Complex Minimal Impact on bill printing Requires changes to bill print Requires changes to bill print No changes to bill print — separate document Technical support Limited support from SAP Limited support from SAP Supported by SAP Functionality Limited: No adjustable rates, no early payment, no loan transfers Full functionality of advanced payment processing Full functionality of advanced payment processing Cost $89,000 $530,000 $531,000 Development time 2 months 6 months 6 months Third -Party Programs As an alternative to using the Utilities billing system, the City could contract with a third -party Non Governmental Organization (NGO) to provide loan management services related to facility energy efficiency improvements. This model would be similar to the management of several existing Council -approved energy efficiency programs. Examples of these programs include Right Lights+ with Ecology Action and Green@Home energy audits through Acterra. The Page 3 of 7 approach can result in a lower program implementation cost with greater flexibility. A qualified NGO could efficiently operate an energy efficiency loan program, resulting in greater economies of scale. This is the program design alternative preferred by the majority of the stakeholders due to greater speed to market, lower impact on City staffing requirements, and the ability for staff to utilize existing contractual resources to support loan program auditing, inspection, and Measurement and Verification (M&V) functions. One or more NGO contractors would be selected via the City's Request for Proposals (RFP) process. Other Utility Loan Programs Staff engaged in discussions with other utilities in California and Connecticut that have implemented programs for energy efficiency financing to gain insight from those organizations. While several municipalities contract with lending agencies to provide energy efficiency loans and several utilize property lien systems, no municipalities engage in unsecured financing of energy efficiency projects. There are some investor -owned utilities with on -bill financing programs including San Diego Gas and Electric and Southern California Gas Company (both subsidiaries of Sempra) and the United Illuminating Company in Connecticut. Staff reported on some of the findings regarding these programs to the City Council in CMR: 234:09. Also in that report, staff referenced Sacramento Municipal Utility District's (SMUD's) off -bill financing program, which is limited to property owners. While some information can be gleaned regarding program development cost, loan parameters, default rates and ongoing staffing requirements, none of these programs translate directly to the program under consideration for Palo Alto. Staff has focused the investigation into two different loan financing and management options: • Traditional and non-traditional third -party programs delivered through non -governmental organizations (NGO), and, • Billing and repayment through the City's current SAP billing system. Staff solicited input from the community volunteers to help determine which option best meets stakeholder needs. Preliminary Legal Review and Administrative Review The City Attorney's office investigated state requirements for loan programs and the program elements needed to mitigate the risk to the City and rate payers. The City Attorney's office determined the City is exempt from the State of California Finance Lender's Law, and, since this program is conceived for business efficiency loans only, the Truth in Lending Act. Exemption from both of these laws will greatly reduce the amount of documentation, implementation time and oversight required to develop either of the program options described above. Staff is still reviewing other potential legal requirements, such as the Equal Credit Opportunity Act, to determine how this might impact the program. In addition to legal review, staff is evaluating requirements for serving in the role of lender and loan administrator. Page 4 of 7 Proposed Utilities Program Attributes and Outstanding Issues Any on -bill program approach would require sufficient time for the SAP-CCS billing system to address all of the post -implementation bugs and for the system to achieve full stability, irrespective of the high programming costs for implementation. Staff's conclusion from this research is that the third -party program design is the best solution to meet both the Council's goals and customers' requests for a program that can be quickly implemented. An on -bill program appears too complex, time-consuming, and costly for the implementation timeline under consideration. An off -bill program would require significant increases in staff resources and significant delays in speed to market while these resources were identified and assembled. Council approved this proposal on August 3rd. An RFP for program delivery is now in development. Preliminary program attributes include: 1. Loans will be restricted to commercial customers in good standing, and a loan agreement will be required. 2. The borrower will be the tenant (except in the case of master meters). Owner permission will be required. 3. The maximum loan amount is equal to total equipment cost plus total installation cost less rebate. 4. Loan repayment by owner when the tenant is in default or the building space is unoccupied. These will be unsecured loans and measures to establish credit worthiness will be required. 5. The program will apply to electric and gas energy efficiency projects, but not water. Issues to be Addressed The following issues were being analyzed as of the August 2009 report to Council. Staff indicated that they would be addressed in the September 2009 staff memo to Council: 1. Legal constraints to offering loan programs through a third -party program provider 2. Co-sign requirement for the loan 3. Borrower qualifications and credit status 4. Qualifying measures 5. Potential of combining rebates and loans 6. Loan minimum and maximum amounts 7. Program funding and budget 8. Repayment terms 9. Transaction documentation and loan agreements 10. Risk management approvals 11. Verification of purchases/installations 12. Loan payments to tenant and/or vendor 13. Loan adjustments to accommodate project cost changes 14. Contractor lists or multiple bid requirement 15. Loan commitment period for project completion 16. Source of loan funds (which could include funds from the Electric Reserve Account known as the Calaveras Reserves and which would require Council review and approval) Page 5 of 7 17. What customers qualify for loans 18. The City can place a lien on property if the loan is unpaid, provided that Council adopts an ordinance codifying the lien procedure prior to implementing the program. Staff is still working on understanding these issues. Most will be addressed before issuing an RFP for a contractor. Some issues may be impacted by the third -party contractor preference. One issue in the above list is the funding source for the pilot program. Staff is requesting that the UAC recommend to Council that the pilot program be funded for up to $2 million out of the Electric Reserve Account known as the Calaveras Reserves. These funds would be used to develop and administer a financing program for nonresidential customers. A table showing the preliminary budget for ongoing operation of this pilot program is shown below. It should be noted that there will be additional set-up charges for legal review and City operational costs that are not included in the budget to be funded from the Calaveras Reserve. Table 2 Energy Efficiency Financing Program for Nonresidential Customers Preliminary Budget Budget for Energy Efficiency Financing Program for Nonresidential Customers Program Number Average Year of Loan Loans Amount Total Amount Loaned Contractor Total Program Administration Verification Budget 2 3 4 12 14 15 17 $25,000.00 $27,500.00 $30,250.00 $33,275.00 $ 300,000.00 $ 385,000.00 $ 453,750.00 $ 565,675.00 $ 30,000.00 $ 38,500.00 $ 45,375.00 $ 56,567.50 $15,600.00 $20,020.00 $23,595.00 $29,415.10 $ 345,600.00 $ 443,520.00 $ 522,720.00 $ 651,657.60 $ 1,963,497.60 Note that number of loans by year is an estimate, and loans could come earlier or later in the program development. Assumptions Maximum loan amount Loan Amount Rate of Increase Administration Percentage Verification Percentage $50,000 10% 10% 5% NEXT STEPS If this funding is approved, staff will issue an RFP for a third party vendor to deliver this program. This RFP is currently scheduled to be issued by September 30, 2009. Responses are expected by November 2009 and a program contract is expected to go to Council by the first Page 6 of 7 quarter of 2010. The program would then be expected to begin in mid -2010 after contracting and design is complete with the vendor. RESOURCES If approved, up to $2 million for this energy efficiency financing program for nonresidential customers would be from the Calaveras Reserve. Sufficient funds would remain in the Calaveras Reserve to cover stranded costs of the electric portfolio. ATTACHMENTS A: CMR 234:09 Approval of Plan to Develop Three Options for a City of Palo Alto Utilities Customer Energy Efficiency Financing Program B: CMR 336:09 Approval of Recommendation to Direct Staff to Design a Third -Party City of Palo Alto Utilities Department Zero -Interest Energy Efficiency Loan Program for Small Commercial Customers (without attachment) PREPARED BY: JOYCE Utili REVIEWED BY: TO Manager Assistvnt Director, Customer Support Services APPROVED BY: a/144 ERIE O. FONG ector of Utilities Page 7 of 7 ATTACHMENT A TO: FROM: DATE: REPORT TYPE: SUBJECT: HONORABLE CITY COUNCIL CITY MANAGER MAY 18, 2009 CONSENT Approval of Plan to Develop Three Options for a City of Palo Alto Utilities Customer Energy Efficiency Financing Program DEPARTMENT: UTILITIES CMR: 234:09 RECOMMENDATION After researching four options that could provide a City of Palo Alto Utilities (CPAU) customer energy efficiency financing program, staff recommends that City Council direct staff to develop a multi -prong approach to meet customer needs by offering different solutions over a timeline that would allow programs to phase in as soon as they are possible. • The first, early option would be to contract with a lending agency to provide energy efficiency loans. This program is likely able to start within six months. • In parallel, City Council would direct staff to undertake a thorough legal and administrative review of one or both of the following programs: (i) an on -bill or off -bill financing program; (ii) a municipal financing program that would allow property owners to repay energy efficiency loans through superior liens on property tax bills. Pursuing different program options provide the greatest flexibility to customers in financing efficiency upgrades, allowing both residential and business customers to receive loans for a variety of upgrades at a low or no cost interest rate (depending on the City's cost to buy down the interest rate). If Council does direct staff to implement a financing option, staff will return to Council with the details of the programs and a more complete timeline after detailed legal and project reviews are completed. This will be delivered to Council by the end of the third quarter in 2009. BACKGROUND City Council members have requested that staff review financing options for CPAU customer energy efficiency installation projects. A financing program helps to overcome the first cost barrier that inhibit customers from investing in energy efficient equipment. Depending on the repayment terms of the financing program, the loan payments would be offset by the energy cost CMR: 234:09 Page 1 of 8 savings, resulting in significantly lower upfront cost to the customer. Staff has reviewed four program types available in the industry: 1. Superior liens payable on property tax bills, 2. Notes secured by a Deed of Trust, 3. On -Bill or Off -Bill Financing, and 4. Contracting with a lending agency to provide efficiency loans. To date, staff has spoken with several utility, industry and City representatives, and completed a preliminary analysis of the costs and risks associated with each type of financing program. Each type of financing program for customer energy efficiency and renewable projects has different legal, financial, and customer costs, benefits, and risks. Each methodology would require some lead time to implement and most would require additional staffing for program development and administration. The types of energy efficiency financing are summarized below. A full discussion of the costs, benefits, and risks is presented below in the Discussion section. Superior Liens Payable on Property Tax Bills: Charter cities may use one of two methods to create superior liens on property which secure the repayment of energy retrofit loans. The first is to create contractual assessments; the second is to create a Mello -Roos community facilities district. Each of these debts is paid on the property owner's property tax bill, through a contractual assessment that is not a tax. Note Secured By Deed of Trust from the Property Owner A note secured by deed of trust is a lien on the property and is paid on a monthly or other time period basis. Repayment may also be required within a short period of time or upon sale. However, such a lien is last in priority after other liens. In other words, in the event of foreclosure, this lien will be last to be paid back from the equity left in the property (if any exists) after other pre-existing mortgages and liens. This makes the property appraisal prior to the retrofit much more important. If the City does not do an extensive appraisal, it is possible to lose money when homes are foreclosed. On the other hand, formal appraisals increase the cost of making the loans in the first place. According to the Santa Clara County Assessor's Office, eight properties were foreclosed in Palo Alto in calendar year 2008. Loan Paid on Utility Bill ("On -Bill Financing") or with the Utility Bill ("Of •Bill Financing") Another option is a loan taken by the customer from the utility for an energy efficiency upgrade. The loan is repaid on the utility bill and is called "on -bill financing." This kind of loan is unsecured and thus dischargeable upon bankruptcy. This option is likely only available to businesses under California law. Loans to customers would come with significant cost, reporting, and auditing requirements for the City. A variation of this option is to provide "Off -Bill Financing." In this option, the utility provides funding for a project, and the bill is manually computed separately from a utility bill. The bill for an energy efficiency project can be included with the utility bill. Contracting with a Lending Agency (Bank or Credit Union) to Provide Low/No-Cost Efficiency Loans A program widely undertaken by many utilities including Alameda Municipal Power and City of Palo Alto several years ago is for the utility to work with a lending institution or credit agency to provide loans for customers' efficiency projects. Staff is currently discussing the interest of the local credit union in revitalizing this program. CMR: 234:09 Page 2 of 8 DISCUSSION Superior Liens paid on property tax bills. Using superior liens to assure loan repayment is desirable for several reasons. First, these liens are superior to all other liens and mortgages on the property with the exception of property tax. In the case of bankruptcy or foreclosure, the City will be repaid second, after only the county. The lender would be third. In addition, repayment may be scheduled for a short period of time. This will prevent legal challenges on issues including successor liability and gifts of public funds. There are two ways to set up a system in which the loan would be treated as a lien on property. The first is to create a contractual assessment pursuant to the Improvement Act of 1911, which was amended last year by AB 811 specifically to allow the creation of contractual assessments for energy retrofits. To create contractual assessments, which take the form of liens on affected property, Council must adopt a resolution initiating study of an AB 811 program and determining that the program would be in the public interest. Next, the City will create a report that ensures that the assessment is based on a specific benefit to the property and defines program specifics. The contents of the report are specifically enumerated in the amended Improvement Act. After the report is complete, Council must hold a hearing and adopt a second resolution establishing and approving the program. AB 811 contractual assessments take place only upon consent of the property owner or owners. Additionally, AB 811 affirms that the lien created by this assessment would be superior to all other liens and mortgages on the property. The City, as assessment administrator, could require property appraisals and a credit review prior to lending. Cities are permitted to issue bonds to support an AB 811 program, and program administration costs can be built into the loan amounts. A second way to create a loan repaid on the property tax bill is to create a Mello -Roos community facilities district. AB 811 Programs and Mello -Roos districts have four main commonalities: 1) both allow a lien to be placed against the property, 2) both are done with property owner consent, 3) both allow the lien to be secured with bonds or other financing, and 4) both ensure that the lien is positioned ahead of the mortgage in the event of foreclosure. Creating a Mello -Roos district, or special tax assessment district, is an option available only to charter cities such as Palo Alto. In 2007, Berkeley used a Mello -Roos -like formulation to create a solar loan program called BerkeleyFIRST. Because a Mello Roos district creates a tax, it does not have to be apportioned based on the exact benefit to the property. This means that less background justification will be required, though it is, of course, optional. To use this procedure, Palo Alto would first enact legislation allowing it to create a special tax assessment district and to fund the program from its electric utility funds. At creation, this district will be city-wide, but "empty" - property owners will choose to opt into it, thus avoiding Proposition 218 requirements for a city-wide vote. Once a property owner opts into the district, the energy retrofit will be installed and the City will assess a special tax on the affected property. This tax would be paid back to the electric utility via the yearly property tax bill. There are benefits to this option. While it may take more background research to form and staff time to administer, it is by far the most secure option, may be designed to suit the City's specific needs, and is suitable for residential customers, commercial customers, and even property CMR: 234:09 Page 3 of 8 owners with tenants. The staff time to coordinate between the County assessor, property owners, and contractors is not insignificant, however. The City of Berkeley has a full-time staff person assigned to its $1,500,000 pilot So1arFIRST program (in addition to working with bond counsel and consultants to administer the program). There are contractors who have assisted cities and counties in the development of this type of program, e.g. the City of Palm Desert and Sonoma County used the same consultant in setting up their AB 811 program. To lower the implementation costs of an AB 811 program the City could participate in a county -wide or even a statewide program. One such program that is currently being developed by Renewable Funding, a private investment firm, is the CaliforniaFIRST Statewide Program. Note Secured by Deed of Trust from the Property Owner: A note secured by deed of trust is a lien on the property and is paid on a billed basis. Repayment may also be required within a shorter period of time or upon sale. However, such a lien is last in priority after other liens. In other words, at foreclosure, this lien will be last to be paid back from any equity left in the property after other pre-existing mortgages and liens. This makes the property appraisal prior to the retrofit much more important. If the City does not do an extensive appraisal, it is more likely to lose money when homes are foreclosed. On the other hand, a formal appraisal increases the cost of making the loans in the first place. More research on this option could be completed; however, due to the fact that this lien would require similar up -front costs as with the superior liens and would be much riskier to the City, this option has not been researched extensively. On or OfBi11 Financing: On -bill financing incorporates 0% interest loans and short payment terms for customers, allowing easier payment of upfront costs to install efficiency measures. A drawback to this option is that the utility is exposed to default risks. The risk of default increases over time particularly for efficiency projects with long payback periods. Consumer lending laws and license requirements make lending funds for non -business customers for less than $5,000 a very arduous and expensive process. As in a lease, collection problems could also arise upon sale or foreclosure, making it important that adequate screening is done before approving a loan. Non- payment of the loan portion of the bill likely cannot justify turning utilities off. One of the largest concerns about this method is that it is insecure for the City and entails risk of nonpayment and of implementation, which results from an inexperienced entity trying to become a lender and high upfront program implementation costs over a relatively small base of participants. Program implementation costs consist of utility billing system conversion cost and ongoing program administration cost. At Southern Gas Company (SGC) and San Diego. Gas & Electric (SDG&E), both subsidiaries of Sempra Energy, the conversion costs were relatively high and the process time consuming. At SDG&E, the billing IT conversion took one year and cost around $400,000. The program has been in place since 2006, and there are 3 full time employees currently administering the program. To date, there have been 120 projects funded, and an average of one application is filed per week. At SCG, the IT utility bill conversion project cost about $120,000. The program has also been in place since 2006, and one and one-half full-time employees are required to administer the program. This program has only nine customer projects funded. These utilities were not comfortable giving out information about the exact number of defaults, but CPAU staff members were led to believe that default rates are relatively low, and the utilities expect a one to five percent default rate. CMR: 234:09 Page 4 of 8 To implement an on -bill financing program for the City, staff working on the SAP utility billing system conversion estimated the cost will be $500,000. Billing system upgrades typically involve a fixed number of programming hours regardless of the number of customer accounts. Therefore, the cost for system upgrade on a per customer basis is much higher in smaller utilities. Staff estimates that an implementation of an on -bill financing program would take at least 24 months. Off bill financing is used by the Sacramento Municipal Utility District (SMUD). It helps to provide funding for efficiency projects without changing the utility's billing program. To avoid the issues related to utility billing systems and much of the risk with lending to tenants, SMUD lends only to property owners and sends the bills through a separate system in the same envelope as the utility bill. To further reduce utility risk, SMUD has a limit of $10,000 per loan, charges the customers interest and an application fee to cover the costs of the program, and has credit requirements for any customer who wishes to enroll in the program. Information is not yet available on exact numbers of customers involved or in the numbers of defaults, but SMUD staff have told CPAU staff that loan applications are not high. Within the state of California, there are stringent legal, licensing and reporting requirements to consumer loan providers. Some of these requirements come from the Truth in Lending Act, the Equal Credit Opportunity Act, the California Code of Regulations and the California Finance Lender's Law. Consumer loans are any loans for residential use or any commercial loan of less than $5,000. These requirements are so onerous that the two utilities in California providing on - bill financing, SGC and SDG&E, have chosen not to include this type of loan for residential customers or for commercial customers seeking less than $5,000 in their program. Even for commercial loans, there are lengthy and costly licensing requirements. This begins with completing the license application with the State Department of Corporations (http://www.corp.ca.gov/forms/pdf/1422CFLLF.pdf). To avoid some of the restrictions and cost of the license (which is based on total business sales, not a percentage of the lending operation), SGC and SDG&E obtained an official exemption from the Department of Corporations for these areas. This exemption process took six months. CPAU staff was advised by Sempra staff that it is unknown whether this exemption would be available for publicly owned utilities, as part of the justification from the Department of Corporations for the exemption was that a state body (the California Public Utilities Commission) would be over -seeing the program. Once this exemption was in effect, the utilities still had to follow general guidelines with extensive reporting and compliance requirements as listed below: o Licensees are subject to periodic regulatory examinations that the licensee must pay for. o Licensees must pay an annual assessment each year. o Licensees must file an Annual Report by March 15th each year. o Licensees are subject to statutory books and record requirements. o Licensees are responsible for compliance with all applicable laws and regulations. o Licensees must maintain a $25,000 surety bond at all times. Typically, applicants must receive a loan approval from the utility prior to installation of any equipment. The installation property must have an active, connected electric account with the utility and, preferably, no record of missed or late payments. The equipment to be installed must meet all the efficiency requirements as a rebated item. To determine the amount of the loan, the utility will evaluate the simple payback period of the equipment installation. Typically, loan CMR: 234:09 Page 5 of 8 periods are limited to three to five years. Equipment for which a loan is received must have a payback that is shorter than the loan period. If this method is ultimately selected, it should be coupled with an unsecured promissory note and the loan capped at a pre -determined amount to minimize the risk of non-payment. Staff has not completed a thorough legal review of this option due to its complexity and will need to conduct a more thorough review should the Council direct staff to pursue this option. Contracting with a Lending Agency: Since the purpose of a lending agency is to provide loans, several utilities with whom CPAU staff spoke have developed this option. The City of Palo Alto itself, in late 1999 (CMR 447:99), contracted with the Palo Alto Community Federal Credit Union to provide home energy efficiency improvement loans with City subsidized loan rates. This contract was completed after a Request for Proposals response from the Credit Union to provide loans during a two year program life to customers who wished to install efficiency measures. This program was mostly used by residential customers. In particular, residents who owned "Eichler" homes found this a low-cost way to fund efficiency measures. Over $2.2 million was loaned to residents during the program's life. Staff is currently confirming the credit union's interest in reinitiating such a program. Because banks and credit unions are set up to fill customer loans, many of the utility's administrative issues, such as licensure, restrictions on consumer lending, changes to the utility billing system, or credit requirements, are removed in this option. The utility's cost will be limited to a part-time staff person to assist customers in completing the loan application and any amount the utility wishes to "pay down" the interest rate for customers' loans. This option does have a higher transaction cost for customers, however, as customers must work with both utility and lending agency staff to complete the transaction. Alameda's collaborative program with a local bank offers business customers low -interest loans for approved electric technologies, including energy -efficient lighting and charging equipment for electric vehicles. Several outside agencies, most particularly the Electric and Gas Industries Association (EGIA) also provide a service of utility sponsored financing for residential efficiency and renewable (solar electric and hot water heating) projects. Whether working with a bank, credit union, or agency such as EGIA, the utility assists the customer in developing the project and loan applications and "buys -down" the interest rate. The bank will have pre -developed guidelines for appropriate lending limits and credit requirements and may work with the utility to expand its typical credit requirements. Given the risks and costs involved with the different financing program options, staff recommends that City Council direct staff to contract with a lending agency to provide energy efficiency loans as a short term solution. In parallel, City Council would direct staff to undertake a thorough legal and administrative review of one or both of the following programs: (i) an on - bill or off -bill financing program; (ii) a municipal financing program that would allow property owners to repay energy efficiency loans through superior liens on property tax bills. An off -bill financing program could begin within a year, while an on -bill program is expected to take at least 24 months. The timing of a municipal financing program would depend on whether or not the City participates in a regional or statewide program; such a program will likely take at least 12 months before an official launch. CMR: 234:09 Page 6 of 8 RESOURCE IMPACT Any of the options discussed in this staff report would have resource impacts on the City. A table summarizing the most important impacts is shown below: Program Name Upfront Capital for Lending Staffing Estimate for 3 Year Program Operations Estimate for 3 Year Program Legal Review Financing Estimate Total Cost Risk (1 to 5, with 5 being highest) Superior Lien on Property Tax $1,500,000 One full-time professional —salary and benefits-- $75,000 per year Consultant — Estimated at $50,000 per year Outside counsel: $50,000 $1,925,000 1 Note Secured by Deed of Trust $1,500,000 One full-time professional —salary and benefits-- $75,000 per year Consultant— Estimated at $50,000 per year Outside counsel: $25'000 plus In- house counsel: $10,000 $1,900,000 4* On -Bill Financing $1,500,000 One full-time professional —salary and benefits-- $75,000 per year Billing System-- $500,000 one time Marketing, Processing, etc. --$50,000 per year In-house counsel: $10,000 Costs to Buy - Down Interest — Estimated at $50,000 $2,435,000 5* Off-Bi11 Financing $1,500,000 One full-time professional —salary and benefits-- $75,000 per year Billing processing-- $75,000 per year In-house counsel: $10,000 Costs to Buy- Down Interest— Estimated at $50,000 $1,960,000 5* Contract with Financing $0 Agency One-half full- time professional —salary and benefits-- $35,000 per year Minimal In-house counsel: $10,000 Costs to Buy - nterest— Estimated at $50,000 $165,000 1 * Some risk can be reduced by program design. Note: all costs are annual for the three year duration of a pilot program except for upfront capital infusion of the program and modifications to the billing system, which are presumed to be one- time. CMR: 234:09 Page 7 of 8 Staff will look at ways to keep risks at a reasonable level for other rate payers. Risk reduction methods, including starting with a shorter -term, such as three years, limiting/capping the numbers of customers or dollars invested, and limiting loans to a time period less than the lifetime of the equipment being installed will help to reduce credit risk. In addition, limiting the program to customers who have not had a late payment and who have been utility customers for at least two years can be used as terms to pre -qualify applicants. Final risk reduction steps will be included when the programs have completed legal and management review and are ready to launch. Funding for this proposed pilot project could come from the Calaveras Reserve and/or Public Benefits funding (if sufficient funds are available in that area without eliminating other efficiency programs). Staff will further review these funding options and return with a complete proposal to implement a program as directed by Council. POLICY IMPLICATIONS Implementing any of these options would demonstrate the City of Palo Alto's policy to encourage energy efficiency installations and to assist customers in their attempts to use electricity and natural gas more effectively. Approval of staff's recommendations to implement a Customer Energy Efficiency Financing Program would support the City Council Priority Number Three, "Environmental Protection." ENVIRONMENTAL REVIEW The provision of these services do not constitute a project pursuant to Section 21065 of the California Public Resources Code, thus no environmental review under CEQA is required. ATTACHMENT None. PREPARED BY: DEPARTMENT APPROVAL: CITY MANAGER APPROVAL: JOYCE KINNEAR, Utility Marketing Services Manager CHRISTINE TAM, Resource Planner AMY BARTELL, Deputy City Attorney KARL VAN ORSDOL, Manager, Energy Risk TOM AUZENNE, Assistant Director, Utilities JANE RATCHYE, Assistant Director, Utilities JOE SACCIO, Deputy Director, Administrative Services VALERI Director of L J Director of Administrative Services ,/e/ 7 CMR: 234:09 Page 8 of 8 ATTACHMENT B TO: FROM: DATE: REPORT TYPE: SUBJECT: HONORABLE CITY COUNCIL CITY MANAGER AUGUST 3, 2009 CONSENT DEPARTMENT: UTILITIES CMR: 336:09 Approval of Recommendation to Direct Staff to Design a Third -Party City of Palo Alto Utilities Department Zero -Interest Energy Efficiency Loan Program for Small Commercial Customers RECOMMENDATION Staff recommends that Council directs staff to design a pilot Utilities zero -interest energy efficiency loan program, to be administered by a third party contractor, and targeting small commercial customers. The program design and timeline for implementation will be submitted to Council for approval by September 30, 2009. A Request for Proposals to find a third party contractor to implement and administer this program for the City will also be released by September 30, 2009. Responses are expected by November 2009 and a program contract is expected to go to Council by the first quarter of 2010. BACKGROUND On May 18, staff brought a report to Council identifying the costs associated with in-house programming and implementation of on -bill and off -bill loan financing options in the new Utilities SAP -Customer Care and Service (CCS) billing system (CMR:234:09). At that time, staff recommended a multi -pronged approach to energy efficiency loan financing including: short-term contracting with a commercial lending institution to provide traditional secured loans; longer -term staff review and implementation of Utilities on- or off -bill energy efficiency loan financing; and investigation of a lien -based loan repayment through property taxes. These loans will assist small businesses in implementing energy efficiency measures. One of the major barriers to implementation is the upfront cost, which the loans will pay for. On May 18, 2009, Council directed staff to return by September 30 with a plan to quickly implement an on -bill or off -bill Utilities -financed loan program for businesses wishing to improve their energy efficiency to install equipment such as new lighting or heating, air conditioning ventilation (HVAC). Staff was also directed to solicit input and assistance from community volunteers. This community input has resulted in the current third -party -based proposal. CMR: 336:09 Page 1 of 5 DISCUSSION Community Input Since May 18, staff has investigated the implementation requirements for both on -bill and off - bill Utilities financing programs and obtained input from a number of individuals including Asher Waldfogal, Utilities Advisory Commissioner, Walter Hays of the Community Environmental Action Partnership (CEAP), Jim Baer of Premier Properties, and Debbie Mytels of Acterra. The interests of the various stakeholders are aligned as follows. Environmental advocates want to reduce energy consumption by a significant percentage in the shortest timeframe possible. Property owners and managers want to identify new ways to partner with tenants to reduce energy consumption. The City of Palo Alto (City) wants to design and implement a loan program which meets the needs of the participants, protects rate payers from the risk of loan defaults, and minimizes program administrative costs. Utilities Billing System Staff initiated discussions with the contractor that implemented the City's new SAP utility billing system, HCL-Axon (Axon). Staff asked Axon to develop cost estimates and timelines for on -bill and off -bill loan management options. The cost for three scenarios were developed. The "Minimalist CCS" scenario allows for a very simple on -bill financing approach with no changes to the customer program, no early payment option, no loan payment transfers from one customer to the other, and no changes in loan rates. The cost for the "Full -Functionality CCS" accommodates a more robust on -bill financing scenario at significantly greater cost than the "Minimalist CCS." The "SAP Loan Management" scenario is an "off -the -shell" SAP product that can be used to implement off -bill financing. The table below highlights the key attributes and costs for the three options. nt Alternatives (Billing System Attribute vA a Minimalist CCS Full -functionality CCS SAP Loan Management No Integrated w/utility bills Yes Yes Integrated w/utility bill payment Yes Yes No Code enhancement required Medium Complex Minimal Impact on bill printing Requires changes to bill print Requires changes to bill print No changes to bill print — separate document Technical support Limited support from SAP Limited support from SAP Supported by SAP Functionality Limited: No adjustable rates, no early payment, no loan transfers Full functionality of advanced payment processing Full functionality of advanced payment processing Cost $89,000 $530,000 $531,000 Development time 2 months 6 months 6 months Third -Party Programs As an alternative to using the Utilities billing system, the City can contract with a third -party Non Governmental Organization (NGO) to provide loan management services related to facility energy efficiency improvements. This model would be similar to the management of several CMR: 336:09 Page 2 of 5 existing Council -approved energy efficiency programs. Examples of these programs include Right Lights+ with Ecology Action and Green@Home energy audits through Acterra. This approach can result in a lower program implementation cost with greater flexibility. A qualified NGO could efficiently operate an energy efficiency loan program, resulting in greater economies of scale. This is the program design alternative preferred by the majority of the stakeholders due to greater speed to market, lower impact on City staffing requirements, and the ability for staff to utilize existing contractual resources to support loan program auditing, inspection, and Measurement and Verification (M&V) functions. One or more NGO contractors would be selected via the City's Request for Proposals process. Other Utility Loan Programs In addition, staff engaged in discussions with other utilities in California and Connecticut that have implemented programs for energy efficiency financing to gain insight from those organizations. While several municipalities contract with lending agencies to provide energy efficiency loans and several utilize property lien systems, no municipalities engage in unsecured financing of energy efficiency projects. There are some investor -owned utilities with on -bill financing programs including San Diego Gas and Electric and Southern California Gas Company (both subsidiaries of Sempra) and the United Illuminating Company in Connecticut. Staff reported on some of the findings regarding these programs in CMR: 234:09 on May 18, 2009. Also in that report, staff referenced Sacramento Municipal Utility District's (SMUD's) off -bill financing program, which is limited to property owners. While some information can be gleaned regarding program development cost, loan parameters, default rates and ongoing staffing requirements, none of these programs translate directly to the program under consideration for Palo Alto. Staff has focused the investigation into two different loan financing and management options: • Traditional and non-traditional third -party programs delivered through non -governmental organizations (NGO), and, • Billing and repayment through the City's current SAP billing system. Staff solicited input from the community volunteers to help determine which option best meets stakeholder needs. Preliminary Legal Review and Administrative Review The City Attorney's office investigated state requirements for loan programs and the program elements needed to mitigate the risk to the City and rate payers. The City Attorney's office determined the City is exempt from the State of California Finance Lender's Law, and, since this program is conceived for business efficiency loans only, the Truth in Lending Act. Exemption from both of these laws will greatly reduce the amount of documentation, implementation time and oversight required to develop either of the program options described above. Staff is still reviewing other potential legal requirements, such as the Equal Credit Opportunity Act, to determine how this might impact the program. In addition to legal review, staff is evaluating requirements for serving in the role of lender and loan administrator. CMR: 336:09 Page 3 of 5 Proposed Utilities Program Attributes and Outstanding Issues Any on -bill program approach would require sufficient time for the SAP-CCS billing system to address all of the post -implementation bugs and for the system to achieve full stability, irrespective of the high programming costs for implementation. Staff's conclusion is that the third -party program design is the best solution to meet both the Council's goals and customers' requests for a program that can be quickly implemented. An on - bill program appears too complex, time consuming, and costly for the implementation timeline under consideration. An off -bill program would require significant increases in staff resources and significant delays in speed to market while these resources were identified and assembled. For these reasons, attention is now being focused on developing a Request for Proposal (RFP) scope of work for third -party loan services. Preliminary program attributes include: 1. Loans will be restricted to commercial customers in good standing, and a loan agreement will be required. 2. The borrower will be the tenant (except in the case of master meters). Landlord permission will be required. 3. The maximum loan amount is equal to total equipment cost plus total installation cost less rebate. 4. Loan repayment by owner when the tenant is in default or the building space is unoccupied. These will be unsecured loans and measures to establish credit worthiness will be required. 5. The program will apply to electric and gas energy efficiency projects, but not water. Issues to be Addressed The following issues are being analyzed and will be addressed in the September 2009 staff memo to Council: 1. Legal constraints to offering loan programs through a third -party program provider 2. Co-sign requirement for the loan 3. Borrower qualifications and credit status 4. Qualifying measures 5. Potential of combining rebates and loans 6. Loan minimum and maximum amounts 7. Program funding and budget 8. Repayment terms 9. Transaction documentation and loan agreements 10. Risk management approvals 11. Verification of purchases/installations 12. Loan payments to tenant and/or vendor 13. Loan adjustments to accommodate project cost changes 14. Contractor Lists or multiple bid requirement 15. Loan commitment period for project completion 16. Source of loan funds (which could include funds from the Electric Reserve Account known as the Calaveras Reserves and which would require Council review and approval) 17. What customers qualify for loans CMR: 336:09 Page 4 of 5 18. The City can place a lien on property if the loan is unpaid, provided that Council adopts an ordinance codifying the lien procedure prior to implementing the program. Staff is still working on understanding these issues. Most will be addressed before going out with an RFP for a contractor. Some issues may be impacted by the third -party contractor preference. RESOURCE IMPACT At this point, no significant resource impacts have occurred. Staff time to develop the program has been allocated and some costs for outside legal review have been incurred. While funding for this proposed pilot project could come from the Calaveras Reserve, staff will evaluate all funding options and return with a complete program implementation proposal to Council upon receipt of proposals from third party vendors. This timeline is expected to be in the first quarter of 2010. POLICY IMPLICATIONS Implementing this financing mechanism will reinforce to the City of Palo Alto's policies and goals to encourage energy efficiency installations and to assist customers in their attempts to use electricity and natural gas more effectively. Goals being supported include the City Council Priority Number Three, "Environmental Protection," the Ten Year Energy Efficiency Program, and the Climate Protection Plan. ENVIRONMENTAL REVIEW The study of the City's provisions of these services does not constitute a project pursuant to Section 21065 of the California Public Resources Code, thus no environmental review under CEQA is required. ATTACHMENT A. CMR 234:09 — Approval of Plan to Develop Three Options for a City of Palo alto Utilities Customer Energy Efficiency Financing Program PREPARED BY: DEPARTMENT APPROVAL: CITY MANAGER APPROVAL: JOYCE KINNEAR, Utility Marketing Services Manager KARLA DAILEY, Senior Resource Planner TOM AUZENNE, Assistant Director, Utilities JANE RATCHYE, Assistant Director, Utilities 4A/ VALERI) O. ItONG Director of Utilities JAM 9#0,,. City Manager ES KEEN CMR: 336:09 Page 5 of 5