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HomeMy WebLinkAboutStaff Report 3200 City of Palo Alto (ID # 3200) Finance Committee Staff Report Report Type: Action ItemsMeeting Date: 11/14/2012 City of Palo Alto Page 1 Summary Title: Resolution to Continue Palo Alto CLEAN Program Title: Utilities Advisory Commission Recommendation that Council Adopt a Resolution Approving the Continuation of the Palo Alto Clean Local Energy Accessible Now (CLEAN) Program From: City Manager Lead Department: Utilities Recommendation Staff and the Utilities Advisory Commission (UAC) recommend that the Finance Committee recommend that the City Council adopt a resolution (Attachment A) approving the continuation of the Palo Alto CLEAN program, with a review of the program by the UAC in one year. Executive Summary In March 2012 the Council adopted Palo Alto CLEAN, a CLEAN (Clean Local Energy Accessible Now program (also commonly referred to as a feed-in tariff, or FIT, program). The program was designed to complement the City of Palo Alto Utilities (CPAU’s) existing photovoltaic (PV) Partners solar rebate program, which was established in 1999 and which has one of the highest participation levels per customer in the country. Palo Alto CLEAN created an additional alternative for property owners by enabling them to build a new solar system and sell the energy to CPAU under a long-term, fixed-rate contract rather than participate in the PV Partners program and use the energy on site. Though a large number of solar developers have expressed interest in Palo Alto CLEAN, no project applications have been submitted to date. Staff believes the current price (14 cents per kilowatt-hour (¢/kWh) for a 20 year contract) is insufficient at this time to f acilitate the most common business model used by project developers, which involves a 3rd party investor leasing roof space from a property owner. It may, however, be sufficient to provide a moderate return to a property owner who owns and finances a sola r system without the involvement of a third party investor. A property owner using this business model is participating in Marin Energy Authority’s FIT, which is priced at roughly 13.7 ¢/kWh. City of Palo Alto Page 2 Staff therefore recommends continuing Palo Alto CLEAN at the current price and making it available to any property owner interested in participating. CPAU staff would increase its marketing efforts to commercial customers and property owners, both for the PV Partners program and Palo Alto CLEAN, and will also investigate ways to help commercial customers decrease the cost of installing solar. Staff expects that most growth in commercial solar installations over the next 2-3 years will come from customers participating in the PV Partners program, with Palo Alto CLEAN participation increasing slowly as property owners are educated about how to make the program work for them. Palo Alto CLEAN will be available to residential customers as well, but staff expects PV Partners will continue to be their preferred program. When it was adopted, Palo Alto CLEAN was considered nearly cost neutral, since the 14 ¢/kWh price was close to 13.55 ¢/kWh, staff’s estimate of the cost of buying renewable energy outside Palo Alto and transmitting it here. However, since the program was adopted, the price of renewable energy delivered to Palo Alto has dropped to roughly 11.6 ¢/kWh. Based on its experience and research, staff believes that 14 ¢/kWh is the lowest price that can make local solar projects viable. This means that buying energy from 4 MW of local solar projects through the Palo Alto CLEAN program will cost about $158,000 per year more than buying the same energy outside of Palo Alto. This is equivalent to a 0.1% increase in the electric utility’s costs. At its October 2012 meeting, the UAC supported the proposal to continue the Palo Alto CLEAN Program at the same price. Background CPAU has a long history of supporting solar power. It initiated the PV Partners program in 1999, and in 2007 the program was expanded to meet the requirements of the State’s Million Solar Roofs Bill (Senate Bill 1, 2006). Under the PV Partners program CPAU provides rebates to residential and commercial customers who install solar for their own use. The program has been successful at stimulating solar development, with more than 3.4 megawatts (MW) of local solar capacity installed by nearly 500 participants over the program’s life. New participants have entered the program at a rate of 50-100 per year in recent years, and Palo Alto is one of the top ten utilities nationwide in installations per customer. Through PV Partners CPAU already provides substantial financial support for local solar. The total CPAU SB1 program budget for 2008-2017 is $13 million and the total program goal is 6.6 MW. When this goal is achieved the energy generated by the program annually will be 11.2 GWh (1.1% of Palo Alto load). The average annual cost to ratepayers of these rebate payments is roughly $1.1 million per year, which does not include the cost of administration or the lost distribution system revenue associated with net metering. The rate impact of this program is City of Palo Alto Page 3 roughly 1-1.5% per year while rebates are being paid. Once all rebates have been paid the rate impact of lost revenue due to net metering will continue to be 0.3-0.5% per year. Due to SB1, PV Partners is now a state mandated program, and regardless of the rate impact, CPAU is required to offer it. In April 2012 CPAU expanded its support for local distributed generation by launching Palo Alto CLEAN. That program expanded the options available to property owners by enabling them to sell energy directly to CPAU under a long term contract instead of using the energy on site. This business model facilitates certain types of projects that could not happen otherwise, such as installations by property owners who have no use for on -site solar energy or whose tenants are uninterested in using the energy. It also can lower certain project costs. For example, banks consider publicly owned utilities to be good counterparties for energy purchases so project owners can more easily obtain financing. In the first few months Palo Alto CLEAN generated a high level of interest from solar developers who wanted to lease rooftops in Palo Alto in order to build a solar system and sell the energy to CPAU. There was also some interest from property owners looking to invest in a system on their own rooftops. It soon became apparent, though, that the 14 ¢/kWh price was insufficient to enable 3rd party developers to earn their target returns while still offering attractive rooftop lease rates. The property owners who have investigated the program to -date either chose not to participate or chose to evaluate projects under the PV Partners program instead. The level of new interest has decreased, though staff still regularly receives new inquiries from developers and property owners. Despite the lack of participation, there have been some positive results from the program. By adopting the program CPAU prompted developers to take a serious look at the cost of developing solar projects in Palo Alto, and some of them shared that information with CPAU staff. Staff has gained considerable insight into the cost of building large solar systems in Palo Alto. The program also created new excitement around local solar, prompting several property owners to evaluate whether solar could be feasible for them. At least one large property owner is expected to proceed with a PV Partners application as a result. In addition, many p ublic utilities across the country have called to discuss how to follow Palo Alto’s lead and develop a CLEAN program in their own service areas. There are encouraging indications that Palo Alto CLEAN, as currently priced, will generate some participation in the future. As mentioned above, the 14 ¢/kWh price was insufficient to enable a business model involving a 3rd party developer, but if a property owner invested in a system partially financed with debt, a project could generate a reasonable return. I n Marin County the owner of the San Rafael Airport recently chose to participate in Marin Energy Authority’s (MEA) FIT program by installing a 1 MW project on the rooftop of his hangers. The property owner City of Palo Alto Page 4 financed the project himself, assisted by a loan from a local bank. With those terms the project generated a modest return at the FIT price MEA offered, 13.7 ¢/kWh, and showed that a project can work at that price when properly structured. MEA’s FIT program commenced in late 2010, but the San Rafael Airport project did not get started until 2012. A similar project may work in Palo Alto, but as in Marin, it may take some time to find the right site or collection of sites. Based on staff’s analysis and the result of the MEA FIT, staff believes 14 ¢/kW h is a reasonable price for the program. Still, even if it is possible to see results at the current Palo Alto CLEAN price of 14 ¢/kWh, the City must decide whether to seek out such projects. At the program’s inception the Palo Alto CLEAN price was considered nearly cost-neutral, but the results of CPAU’s recent renewable RFP, as well as publicly available data from other renewable procurements in the state, has revealed that the price of renewable energy has dropped since staff’s original calculations. Staff now estimates the cost of buying renewable energy outside of Palo Alto and transmitting it here to be 11.6 ¢/kWh, compared to the Palo Alto CLEAN price of 14 ¢/kWh. Discussion The first Palo Alto CLEAN program year expires on December 31, 2012, an d staff has no authority to make purchases after that date. Staff recommends that Council authorize the program’s continuation, but rather than changing the price, staff recommends giving the program time to work at the current price. The attached resolution (Attachment A) would extend the program deadline until the 4 MW program capacity is filled. Staff also recommends removing the minimum project size of 100 kW. If Council adopts this strategy, staff predicts that program participation will increase slowly, with a modest impact on utility costs (see “Program Cost,” below). In 2013 and 2014 there might be minimal or no uptake. During this time growth in local distributed generation would come primarily from the PV Partners program, which still has over 4 MW of capacity available. Meanwhile, staff would reach out to local property owners and educate them on the benefits of investing in a Palo Alto CLEAN project while looking for opportunities to help customers lower the cost of installation. Staff believes this recommendation represents the best compromise between two competing objectives: 1) expanding support for local distributed generation and 2) pursuing the least costly method of fulfilling the CPAU electric portfolio objectives. Program Cost Buying the energy from 4 MW of local solar generating systems through Palo Alto CLEAN would be more expensive than buying the same amount of renewable energy from solar projects outside of Palo Alto, but because the amount of energy is small, the total impact on the utility’s costs would also be small. Using the cost of renewable energy as a baseline, and assuming the full program capacity is used, the City’s cost of renewable energy would be an additional City of Palo Alto Page 5 $158,000 per year. This is equivalent to a 0.1% increase in the electric utility’s costs. See Table 2 in the following section for examples of bills for various customer types and how those costs compare to their monthly bills. This represents a change from CPAU staff’s original assessment of the program. When the price for the 2012 Palo Alto CLEAN program was adopted, it was determined to be nearly cost neutral. In late 2011, the cost of buying renewable energy outside of Palo Alto and transmitting it here was estimated to be 13.55 ¢/kWh. This price is referred to as the City’s “avoided cost,” since these costs are avoided by buying local renewable energy. Council approved a 0.45 ¢/kWh adder to bring the Palo Alto CLEAN program price to 14 ¢/kWh (for a 20 year contract term). The adopted Palo Alto CLEAN price was so close to the CPAU avoided costs that the program could be considered to have negligible impact on the utility’s costs. Since then, however, prices for renewable energy have fallen considerably as evidenced by proposals submitted into the last Request for Proposals (RFP) for renewable energy. Based on that indication of the cost of renewable energy outside of Palo Alto, the avoided costs are about 11.6 ¢/kWh. This means that the Palo Alto CLEAN price of 14 ¢/kWh is 2.4 ¢/kWh higher than the cost of buying renewable energy outside of Palo Alto and paying the transmission and other related costs to bring it here. There are several reasons that local solar projects are more expensive than remote solar projects: 1. Palo Alto does not have developable open land, and installing solar on rooftops is more expensive than installing it on the ground. A number of solar developers have noted that the cost associated with leasing a roof is higher than the cost of purchasing open land. Many large solar projects outside of Palo Alto are located on disturbed land (marginal farmland) outside of urban areas. The land costs associated with these projects are far lower than the lease costs associated with a rooftop. 2. Owners of office space require a higher rate of return for the use of their rooftops than owners of warehouses or other similar facilities. Most of the facilities in California that host large wholesale commercial solar installations are warehouses or similar facilities with large rooftops, little rooftop equipment, and low lease rates. The revenue owners of these facilities receive for hosting a solar system is small but substantial when compared to the revenue from leasing the facility itself. In Palo Alto, however, Class A office facilities command much higher revenue per square foot, and the facilities themselves are generally much smaller than a warehouse. The revenue from leasing a solar system can appear relatively small, and therefore not worth the potential problems associated with a rooftop lease. Depending on the contract terms, a long term City of Palo Alto Page 6 rooftop lease can reduce the property owner’s flexibility in reconfiguring the site. Office space owners are also concerned about potential disruptions to tenants during installation of the solar system, something that is less of a problem with other types of facilities. 3. Remote solar projects can be located where there is more sun. Palo Alto receives excellent amounts of solar energy, but other parts of California receive even more. This can make a significant difference in the price of solar energy because the developer can generate more energy from every panel they install. Cost of Solar Installations in Palo Alto Staff has estimated the cost of installing solar in Palo Alto based on discussio ns with developers, property owners, other utilities, and using data from existing systems installed in Palo Alto and throughout the Bay Area. The prices below assume that the projects will be financed by a 3 rd party developer leasing a rooftop, or by a customer or facility owner willing to commit capital to the project. They do not assume any debt financing. While larger systems can achieve certain economies of scale on a per unit (kW) basis, the cost of installing small commercial solar systems (<30 kW) and residential systems is substantially higher than the cost of installing the larger systems that have been evaluated for the existing Palo Alto CLEAN program. 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 2013 2014 2015 2016 $/ k W h Cost of solar in Palo Alto Residential Small Commercial Large Commercial RPS-eligible Avoided Cost Brown Power Avoided Cost Alternatives Considered In developing its recommendation, staff considered several other alternatives for the future of Palo Alto CLEAN. The first two alternatives listed below are priced to attract rapid participation City of Palo Alto Page 7 by efficient 3rd party developers. The prices would be high enough to provide an attractive return to a facility owner who invests in an efficient, low-priced solar system, and would also be enough to enable a 3rd party developer to earn a moderate return while paying a moderate lease rate for a Palo Alto rooftop. These program alternatives increase the chance of rapid uptake in the program by setting a price that is attractive to those facility owners willing to commit capital to build their own solar systems, but also provides enough of a return to enable 3rd party developers to lease rooftops on facilities whose owners are not willing to commit capital. The third alternative is the staff recommendation, which relies on efficient systems financed partially by property owners and partially using debt financing. The fourth and fifth alternatives minimize CPAU’s cost and eventual ratepayer impact, but are expected to result in little or no program uptake. The five alternatives are described below: 1) Program that accommodates 3rd party developers, with prices differentiated by system size: Adopt a CLEAN program with different prices for residents, small commercial property owners, and large commercial property owners. The program would include separate capacity allocations for large systems, small systems, and residential systems, and the price would be set to reflect th e different costs of development for each type of system (32.4 ¢/kWh for residents, 28.1 ¢/kWh for small commercial customers less than 35 kW in size, and 18.8 ¢/kWh for large commercial customers for a 20-year contract). 2) Program that accommodates 3rd party developers, with a single price: Adopt a CLEAN program intended to promote participation primarily by large commercial property owners. The program would be open to all property owners, but it would be priced so that only larger systems or aggregations of smaller systems would be economically feasible (18.8 ¢/kWh for a 20-year contract). 3) Current Program (Staff Recommendation): Extend the current program at the same rate (14 ¢/kWh for a 20-year contract). 4) Cost-neutral Program: Extend Palo Alto CLEAN, but price it at the cost of buying renewable energy and transporting it to Palo Alto (11.6 ¢/kWh for a 20 -year contract). 5) No Program: Eliminate Palo Alto CLEAN. City of Palo Alto Page 8 Staff believes that Program Alternatives 1 and 2 would be rapidly subscribed, but would cost substantially more than the other alternatives. Program Alternative 3, the staff recommendation, may take some time to generate results, but has a very small cost and eventual rate impact compared to adding other types of renewable generation to the supp ly portfolio. Program Alternative 4 does not increase utility costs, but staff believes the price would not be adequate to generate any response. The costs of the five program alternatives are summarized in Table 1 below, and are compared to the CPAU avoided cost of energy. The annual budgets below are calculated based on a 4 MW program, but they vary linearly, so doubling the program size would double the budgets and rate impacts below, and halving it would halve the budgets and rate impacts. TABLE 1: Annual Cost of Program Alternatives Program Alternative Description Energy Cost (₵/kWh) Annual Excess Cost* $ and % increase in utility costs 1 Accommodates 3rd party development, price varies based on system size 25.0** $874,000 (0.7%) 2 Accommodates 3rd party development, single price 18.8 $483,000 (0.4%) 3 Extend the current program at the current price 14.0 $158,000 (0.1%) 4 Extend the program, reprice at avoided cost 11.6 N/A 5 Eliminate the program N/A N/A Renewable Avoided Cost Buying renewable energy outside Palo Alto 11.6 N/A Non-renewable Avoided Cost Buying non-renewable energy outside Palo Alto 9.7 N/A * This figure represents the cost of each program alternative compared to the cost of buying renewable energy outside of Palo Alto. ** Average energy cost for this program alternative. Detailed costs: $324/MWh for the residential portion, $281/MWh for the small commercial portion (35 kW or less) and $188 for the large commercial portion (>35 kw). City of Palo Alto Page 9 To give some perspective on the costs for each program alternative, staff has prepared Table 2, below, which shows what would happen if the annual costs of each program alternative were allocated to customers on a per-kWh basis. These costs are calculated for a 4 MW program, but it is possible to vary the program size. The costs vary linearly, so doubling the program size would double the costs below, and halving it would halve the costs. TABLE 2: Program Costs Compared to Customer Bills Customer Type / Monthly Consumption # of Customers Current Average Monthly Bill Monthly Program Costs by Alternative*: 1 2 3 4 5 Residential Customers: Summer (365 kWh) 25,678 $37 $0.33 $0.18 $0.06 $0 $0 Winter (453 kWh) 25,678 $48 $0.41 $0.23 $0.07 $0 $0 Commercial Customers: 0-1,000 kWh 1,844 $45 $0.30 $0.17 $0.06 $0 $0 1,001-8,000 kWh 1,481 $427 $3 $2 $1 $0 $0 8,001-100,000 kWh 606 $3,198 $27 $15 $4 $0 $0 > 100,000 kWh 101 $48,893 $405 $224 $74 $0 $0 *If allocated on a per-kWh basis. Resource Impact In addition to the energy costs described above, the staff recommendation will require staff time associated with marketing and project review. The project review can be absorbed with existing staff over the life of the program, and costs will be recovered through project review fees. The additional marketing will require less than 0.25 FTE of staff time, and may involve an additional budget for marketing materials, which would be requested through the annual budget process. The marketing work will be absorbed by existing staff, bu t will decrease time spent on other account management and efficiency program delivery. Commission Review and Recommendation On October 3, 2012, the UAC reviewed the staff proposal and on a 5-1 vote (with Commissioner Waldfogel voting no) recommended that Council approve the staff recommendation with a review of the program after one year. Several commissioners expressed their support for renewable energy within Palo Alto, but were concerned about allowing the CLEAN price to deviate too far from the City’s avoided cost. Commissioners expressed some concern about City of Palo Alto Page 10 devoting staff resources to marketing the program instead of marketing other successful programs, such as the PV Partners or energy efficiency programs. One commissioner supported raising the program’s price to encourage more rapid participation. The draft minutes from the UAC’s October 3, 2012 meeting are provided in Attachment C. Policy Implications The staff recommendation implements Long-term Electric Acquisition Plan (LEAP) Strategy #4, Local Generation, which states “promote and facilitate the deployment of cost-effective local resources.” The program will facilitate the deployment of local resources, but the recommended price, 14 ¢/kWh, will only support the most efficient local solar pro jects. It also implements Climate Protection Plan Chapter 3 (Utilities), Goal 3, “Expand use of renewable energy installed or purchased directly by customers.” The program also implements Comprehensive Plan Goal N-9, “A clean, efficient, competitively-priced energy supply that makes use of cost-effective renewable resources” and Policy N-48, “Encourage the appropriate use of alternative energy technologies.” Environmental Review The adoption of this resolution does not constitute a project under the California Environmental Quality Act, California Public Resources Code section 21080, subdivision (b)(8). Attachments:  Attachment A: Resolution Approving Amendments to Palo Alto CLEAN (PDF)  Attachment B: Revised Palo Alto CLEAN program rules (PDF)  Attachment C: Draft Excerpt of October 3, 2012 UAC Meeting Minutes (PDF) *NOT YET APPROVED* 120925 DM 6051788 Resolution No. _________ Resolution of the Council of the City of Palo Alto Approving the Continuation of The Palo Alto Clean Local Energy Accessible Now (CLEAN) Program R E C I T A L S A. On March 5, 2012, the City approved the Palo Alto Clean Local Energy Accessible Now Program, a CLEAN program (or feed-in tariff). Under the CLEAN Program, participants who build a new solar generating system in Palo Alto may obtain a long -term, fixed-price contract with the City to sell the energy from the system to the City’s electric utility. B. The first program year of Palo Alto CLEAN commenced on April 2, 2012 and terminates on the earlier of: 1) the date the City receives applications for contracts for 4 MW of solar capacity, or 2) December 31, 2012. The City Council has not granted authority to staff to enter in to contracts after December 31, 2012. C. There have been no applications for the program to-date, but the City wants to continue the program past December 31, 2012 . The Council of the City of Palo Alto (“City”) RESOLVES: SECTION 1. Revised Program Eligibility Requirements for Palo Alto CLEAN are adopted as shown in Exhibit A. SECTION 2. The Council hereby authorizes the City Manager or his designee to sign contracts for the output of one or more solar energy generating facilities meeting the Program Eligibility Requirements described in Section 1. The total CLEAN Program cost commitment made by the City during the life of the Program shall not exceed $23,600,000. SECTION 3. The Council finds that the City of Palo Alto Utilities’ (CPAU’s) purchase of energy from local renewable sources provides additional local benefits to CPAU when compared to energy purchased outside Palo Alto, which in turn become benefits to CPAU ratepayers and the local community. These benefits include a reduction in CPAU’s costs and energy losses associated with energy transmission and distribution, and a reduction in CPAU’s capacity requirements. When the City purchases energy from local sources, a portion of the City’s electric expenditures remain within the community, which provides revenue for local economic development. Locating generation near load centers can also reduce the need for new transmission lines, thus reducing the environmental impacts of the electric system and improving reliability in transmission-constrained regions like the Greater Bay Area. The Council therefore finds that continued implementation of the Palo Alto CLEAN Program is a reasonable cost of providing electric service to CPAU’s electric customers. *NOT YET APPROVED* 120925 DM 6051788 SECTION 4. The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act, California Public Resources Code section 21080, subdivision (b)(8). INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ _______________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ _______________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services PALO ALTO CLEAN (CLEAN LOCAL ENERGY ACCESSIBLE NOW PROGRAM ) PROGRAM ELIGIBILITY RULES AND REQUIREMENTS PROGRAM YEAR 2012 Effective January 1, 2013 A. PARTICIPATION ELIGIBILITY REQUIREMENT: The Palo Alto Clean Local Energy Accessible Now Program (the “CLEAN Program”) , Program Year 2012, is open to participation by any Eligible Renewable Energy Resource, as defined in Section D.45, with a total generation capacity of at least 100 kilowatts (kW).. B. TERRITORIALITY REQUIREMENT: In order to be eligible to participate in the CLEAN Program during Program Year 2012, an Eligible Renewable Energy Resource must be located in and generating electricity from within the utility service area of the City of Palo Alto. C. PRICES FOR CERTIFIED RENEWABLE POWER: The following purchase prices (“Program Prices”) shall apply to the electricity produced by an Eligible Renewable Energy Resource participating in the Program starting in Program Year 2012, except as provided in Sections D.5 D.3 and D.6. Solar generation facilities: Contract Term Price 10 years 12.360 ¢ / kWh 15 years 13.216 ¢ / kWh 20 years 14.003 ¢ / kWh D. ADDITIONAL RULES AND REQUIREMENTS: 1. The owner of the Eligible Renewable Energy Resource shall enter into a Eligible Renewable Energy Resource Power Purchase Agreement, Eligible Renewable Energy Resource (“PPA”) with the City of Palo Alto. 2. The last Eligible Renewable Energy Resource that is eligible for participation in the CLEAN Program during Program Year 2012 will be the Eligible Renewable Energy Resource that first causes the total capacity of Eligible Renewable Energy Resources receiving payments under the Program to exceed four (4) MW (the “Program Capacity”). 3. An application for participation in the CLEAN Program to sell output to the City (the “Application”) may be submitted at any time. Applications will be considered in the order received. during the month. Any number of PPAs may be awarded at the end of each month. If the City can accept all Applications submitted without exceeding the Program Capacity, then all Applications will be accepted at the applicable Program Price(s). If, in any month, the City cannot accept all Applications submitted during that month without exceeding the Program Capacity, then the PPAs will be awarded in the following order of precedence: PALO ALTO CLEAN (CLEAN LOCAL ENERGY ACCESSIBLE NOW PROGRAM ) PROGRAM ELIGIBILITY RULES AND REQUIREMENTS PROGRAM YEAR 2012 Effective January 1, 2013 . The City will provide notification to all applicants that apply in the current month that there is insufficient capacity to accept all Applications. All applicants that apply for participation in the current month will be afforded two (2) weeks from the notification date to submit bid prices at which electricity from its proposed resource will be sold to the City. The bid price must be less than the price for the applicable term described in Section C, or the City will reject or will be deemed to have rejected the bid price. . The City will award one or more PPAs based upon the proposed bid prices. The first award will be made to the applicant offering the lowest bid price and any subsequent award(s) will be made to the next higher prices, until the Program Capacity has been attained. . Nothing in this ‘bid price’ process will affect the status of applica tions accepted in previous months. 8. In order for an Eligible Renewable Energy Resource to be eligible for participation in the CLEAN Program during Program Year 2012, the City must receive an Application on or before December 31, 2012 or, if that day does not fall on a regular business day of the City, on the business day immediately preceding December 31, 2012. 9.4. For the purposes of Program Year 2012, an Eligible Renewable Energy Resource means an electric generating facility that: (a) is defined and qualifies as an “eligible renewable energy resource” under California Public Utilities Code Section 399.12(e) and California Public Resources Code Section 25471, respectively, as amended; (b) uses a solar fuel source; and (c) meets the territoriality requirement set forth in Section B. 10.5. The California Energy Commission’s (“CEC”) certification of the Eligible Renewable Energy Resource shall be required within six (6) months of the commercial operation date of the electric generating facility; the facility’s owner shall provide written notice of the CEC’s certification to the City within ten (10) business days. If the City takes delivery of the facility’s electricity prior to the CEC’s certification, then, as the facility’s electricity cannot be considered in fulfillment of the City’s RPS requirements, the price that the City will pay for the facility’s electricity (the “Pre-Certification Price”) will be set at 65% of the applicable Contract Price. Upon the CEC’s certification of the facility, the City will pay the applicable Contract Price for the facility’s electricity delivered on and after the date of the CEC’s certification. The City will “true-up”, as appropriate, the difference between the Contract Price and the Pre-Certification Price for any electricity received and paid for by the City, effective as of the date of certification of the Resource. 11.6. If an Eligible Renewable Energy Resource is authorized to participate in the CLEAN Program, then that Resource shall not be entitled to receive any rebate or other incentive from the City’s Photovoltaic (PV) Partners Program, Power from Local Ultra -Clean Generation Incentive (PLUG-In) Program, or other similar programs funded by the City’s ratepayers. To the extent any rebate or incentive is paid to the owner of the Resource, that rebate or incentive shall be disgorged and refunded to the City if the Eligible Renewable Energy Resource continues to participate in the CLEAN Program. If a rebate or an incentive has been paid to the Eligible Renewable Energy Resource, then that Resource shall be PALO ALTO CLEAN (CLEAN LOCAL ENERGY ACCESSIBLE NOW PROGRAM ) PROGRAM ELIGIBILITY RULES AND REQUIREMENTS PROGRAM YEAR 2012 Effective January 1, 2013 ineligible to participate in the CLEAN Program. 12.7. All electricity generated by the Eligible Renewable Energy Resource shall be delivered only to the City. No portion of the electricity may be used to offset any load of the generating facility (other than incidental loads associated with operating the generating facility). 13.8. A metering and administration fee of $34.73/month will be charged to each Eligible Renewable Energy Resource that participates in the CLEAN Program during Program Year 2012. . See Utilities Rate Schedule E-15 (Electric Service Connection Fees). Excerpted Draft Minutes of the October 3, 2012 UAC Meeting ITEM 1: ACTION: UAC Recommendation that Council Adopt a Resolution Approving the Continuation of the Palo Alto Clean Local Energy Accessible Now (CLEAN) Program Public Comment: Craig Lewis, representing the CLEAN Coalition, stated that the Palo Alto CLEAN has had no takers so far, but that the program could be tweaked to be successful. The CLEAN Coalition had hoped when the program started that property owners rather than develo pers would develop and own projects, eliminating the need for a lease payment. He said the price offered seems to have been too low and developers and that property owners were not attracted by the rate of return from a project in Palo Alto. He believed property owners would be more interested in leasing their rooftops to a third party developer. He stated that the lease payment to building owners translates to a 3 cent/kilowatt-hour (₵/kWh) increase in price so that a price of 17 ₵/kWh or higher would be required to get local solar projects. He recommended implementing a Volumetric Price Adjustment (VPA) whereby non-participation in the program over some period of time (e.g. a month) would result in an automatic increase in the price until participants were attracted. Resource Planner Jon Abendschein provided a summary of the written report. He stated that the City has supported local solar photovoltaic (PV) system installations since 1999 and the PV Partners program has resulted in the City being one of the top utilities nationwide for PV system installations. Abendschein stated that, despite a large amount of interest, the CLEAN program has not had any participants, primarily because the PV Partners is a more cost - effective option for most facilities and the returns for CLEAN program are insufficient. Abendschein explained the staff recommendation is to extend the program at the current 14 ₵/kWh price, eliminate the 100 kW minimum size, and ramp up efforts to market the PV Partners program. Since the program was evaluated last year, and the price was set at 14 ₵/kWh, the City's projection of the avoided cost has fallen to 11.6 ₵/kWh so that additional cost to ratepayers is $158,000 per year. Abendschein explained that the alternatives to the reco mmendation were considered and included increasing the price, lowering the price, or eliminating the program. Increasing the price would increase the cost to ratepayers, while lowering the price would not result in any participation. He also stated that staff had examined other types of renewable energy sources, but did not find any other energy sources aside from solar that were viable in Palo Alto aside from City-owned sources that could be developed without a CLEAN program. Commissioner Melton said that originally the program had been priced at the City's avoided cost, but now the price was 20% higher than the avoided cost. He asked what the City’s pricing policy was, and at what price would the cost of the program be too high compared to the City’s avoided cost. He did not want the program to entirely lose its relationship to avoided costs. Director Valerie Fong stated that the City Council had been comfortable with a small premium over avoided cost when the program was adopted, but had not provide d specific policy direction on the maximum acceptable premium. Commissioner Eglash asked how many PV systems had been installed in Palo Alto since the CLEAN program had been adopted. Abendschein stated that there had been from 25 -50 systems installed in residences, but he did not have the exact numbers. Commissioner Eglash said that many people were continuing to install solar even without Palo Alto CLEAN. He said the goal was not to have a feed -in tariff (FIT) simply to have a FIT. It was to stimulate solar development. He said the PV Partners program was economically more attractive and that solar was being installed at a healthy rate even without Palo Alto CLEAN. That implied that Palo Alto CLEAN was obsolete and unnecessary. He said the cost of solar was falling substantially, and 3rd party developers were offering excellent prices. He was against raising the price, but he was happy leaving the program operating as it was if it did not cost much to maintain it. Commissioner Waldfogel asked what the equivalent cost of the PV Partners program was. Abendschein said the avoided cost was the same, but if PV Partners were translated into a FIT price it would be equivalent to 20 -24 ¢/kWh. PV Partners was a State mandated program, however. Commissioner Waldfogel asked whether the size of the PV Partners program was also a State mandate. Abendschein said it was. Vice Chair Foster asked who paid for the PV Partners program. Director Fong stated the City did. Vice Chair Foster asked whether it was better to have people participating in PA CLEAN or PV Partners, since PV Partners was more expensive. Director Fong stated that PA CLEAN participation would not relieve the City of its SB1 obligation, which the PV Partners program fulfilled. Abendschein added that even if customers chose to participate in Palo Alto CLEAN, the PV Partners capacity would still be available. Vice Chair Foster asked how much the Brannon Solar project factored into the avoided cost calculation. Abendschein said it was a small part of the calculation. Vice Chair Foster asked whether the staff recommended program would allow people to fund solar on each other’s roofs if they chose to. Abendschein said the funding source was not important as long as they sold the energy to the City. Vice Mayor Scharff asked what it would cost to continue the program. Abendschein said the staff time involved in maintaining the program without marketing it was minimal, but that the staff proposal had involved some staff time for marketing which would be absorbed by existing staff. Utility Marketing Services Manager Joyce Kinnear said that Key Account Representatives, who market the City’s programs, including energy efficiency, would spend time on marketing Palo Alto CLEAN, which would replace some of the time they spent marketing other programs like energy efficiency. Commissioner Foster stated that the program is an innovative program. The City should be doing it and would like to see an increase in the price to get more participation. He wa s not sensing much support for that proposal, so he would support the staff recommendation. He would be opposed to eliminating the program. Chair Cook thanked the CLEAN Coalition for support, but would not want to move much further away from the avoided cost. He would support the staff recommendation, but would want to review it again at some point in time, rather than have the program continue indefinitely. Commissioner Melton remarked that the goal is to increase the amount of renewable power generated within city limits, so he supported continuing the program despite the small increase in price. ACTION: Vice Chair Foster made a motion to support staff's recommendation. Melton seconded the motion. Commissioner Eglash offered a friendly amendment to review the program in one year. Vice Chair Foster and Commissioner Melton accepted the amendment. Commissioner Waldfogel asked if the failure of the program could be attributed to a marketing shortcoming. Abendschein said it was a matter of expanding the marketing to the specific customers who the program would work for. Commissioner Waldfogel stated that he believed that anyone who was eligible for the program had already heard about the program and had determined it was not worthwhile. He was uncomfortable continuing to spend money to market the program. Vice Chair Foster said that some level of marketing should exist as not all have heard of the program and it is being expanded to more customers. The motion passed by a vote of 5-1 with Commissioner Waldfogel voting no.