HomeMy WebLinkAboutStaff Report 158-07City of Palo Alto
City Manager’s Report
TO:
FROM:
DATE:
SUBJECT:
HONORABLE CITY COUNCIL
CITY MANAGER
MARCH 5, 2007
UTILITIES ADVISORY
DEPARTMENT: UTILITIES
CMR:158:07
COMMISSION RECOMMENDATION TO
APPROVE CHANGES TO LONG TERM ELECTRIC ACQUISITION
PLAN (LEAP) OBJECTIVES AND GUIDELINES
RECOMMENDATION
The Utilities Advisory Commission recommends that City Council approve proposed changes to
the Long-term Electric Acquisition Plan (LEAP) Objectives and Guidelines.
BACKGROUND
The Long-term Electric Acquisition Plan (LEAP) objectives and. guidelines set the direction for
staff in planning and managing the electric supply portfolio. Council approved the LEAP
Objectives and Guidelines in 2001 and 2002 (CMR:425:01 and CMR:398:02). Staff updates the
Council at least annually on progress in implementing LEAP. The LEAP implementation tasks
were most recently updated in April 2006 (CMR: 169:06).
BOARD/COMMISSION REVIEW AND RECOMMENDATIONS
The Utilities Advisory Commission reviewed the new guidelines at its February 7, 2007 meeting
and voted unanimously to recommend approval of the proposed changes to the LEAP Objectives
and Guidelines.
RESOURCE IMPACT
There is no direct resource impact as a result of the proposed changes to the LEAP Objectives
and Guidelines, but subsequent supporting implementation programs will impact resources, for
which some of the alternatives and costs are not yet known. Implementation plans for various
programs that support the Objective and Guidelines will be brought to Council for approval and
will have a resource impact at that time. Implementation plans to increase the renewable resource
energy purchase target under Guideline #6 may increase retail rates, but will be within the
parameters specified in the guideline which maintains the existing rate impact limit of 0.5
e/kWh, equivalent to roughly $3.35/month for an average residential bill. Mandated new solar
CMR: 158:07 Page 1 of 2
program funding is projected to require an additional $1.1 million per year for ten years, with an
associated 0.1 C/kWh increase, or 65 C/month for an average residential bill. Increased efforts in
cost-effective energy efficiency and local generation programs are expected to have no adverse
impact on average electricity bills.
POLICY IMPLICATIONS
The proposed new LEAP Objectives and Guidelines support the Council-approved Utilities
Strategic Plan, Energy Risk Management Policies, and Comprehensive Plan Goal N-9.
ATTACHMENTS
A: UAC Report: February 7, 2007.
B: Draft UAC meeting minutes excerpts February 7, 2007.
PREPARED BY:
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
KARL E.
Senior Resource Plamaer
ARRISON
Assistant City Manager
CMR: 158:07 Page 2 of 2
TO:
MEMORANDUM
UTILITIES ADVISORY COMMISSION
FROM:
DATE:
SUBJECT:
UTILITIES DEPARTMENT
FEBRUARY 7, 2007
CHANGES TO LONG TERM ELECTRIC ACQUISITION PLAN (LEAP)
OBJECTIVES AND GUIDELINES
REQUEST
Staff recommends that the UAC recommend that the Council approve changes to the Long Term
Electric Acquisition Plan (LEAP) Objectives and Guidelines.
BACKGROUND
The 40-year electricity supply contract with Western Area Power Administration (Western) served
more than 90% of City’s electrical load until December 2004. In order to plan for the reduced supply
under the new 2005 Western Base Resource contract and plan for ways to meet the electric supply
needs with new sources of supply in a continually changing regulatory climate, Council provided
policy direction by adopting four LEAP Objectives (November 2001, CMR: 425:01) and seven
LEAP Guidelines (October 2002, CMR: 398:02) to guide staff. Within the LEAP Objectives and
Guidelines framework, Council also adopted the first LEAP hnplelnentation Plan in August 2003
(CMR:354:03).
Staff has kept the Council and the UAC apprised of the LEAP progress through periodic updates
(CMR: 370:04 in August 2004, and CMR: 198:05 in April 2005, and CMR:169:06 in April 2006)
and in UAC quarterly reports. The LEAP Implelnentation Plan was revised in the April 2006 update
to reflect the progress and completion of many of the implementation tasks and to incorporate new
legislative requirements, new policy directives, and the changing utility landscape.
Since 2001/2002, staff has maintained a supply cost advantage of the supply portfolio. Successful
execution of the implementation plan within the framework of the LEAP Objectives and Guidelines
has greatly transformed the electric supply po~folio make-up and portfolio management strategies.
The major aspects of these developments are:
¯Developed a flexible and competitive supply portfolio with focus on renewable supply
¯Entered into new long term renewable resource contracts from wind and landfill gas
resources projected to meet approximately 20% of the City’s supply needs;
°Established robust supply contracts with private sector suppliers to purchase market price
based energy supplies at competitive prices for the intermediate period;
¯Implemented an enhanced energy risk management program;
¯Gained experience in managing a volatile hydro supply portfolio that on an average year
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 1 of 15
could meet 50% of City’s supply needs, but could vary by 20-25% of annual electric energy
needs due to changes i!l hydrology;
Positively influenced new regulations and legislation to increase reliability and to establish
robust transmission and energy markets; and
Completed the local generation feasibility study, ruling out a large local gas-fired power
plant.
New legislation, regulations, and policies affecting electric energy procurement have been enacted
that were not in place when the Objectives and Guidelines were approved. Numerous new rules and
goals are now in place in arenas that include climate Change and greenhouse gases, energy
efficiency, renewable energy, market design, transmission planning, solar energy, risk management,
and retail rate design. Legislation at the state level is exhibiting ml ever-increasing encroachment on
local control for publicly owned utilities, with associated increases in compliance and reporting
activities.
New directions that affect electric energy procurement include:
1. City Policies and Community Actions
a.Utilities Strategic Plan (updated CMR: 148:05)
b.Energy Risk Management Policies (updated CMR:128:06)
co Interim Electric Utility Resource Adequacy Program (CMR:222:06)
d.National Action Plan for Energy Efficiency (NAPEE MOU) (CMR:316:06)
e.CMUA Greenhouse Gas Reduction Principles (CMR:315:06)
f.Ultra-clean Distributed Generation Incentive Program Guidelines (CMR:406:06)
o ICLEI Cities for Climate Protection Calnpaign (CMR:426:06)
h.Mayor’s Green Ribbon Task Force on Climate Protection (December 18, 2006)
2.State Policy
a. Integrated Energy Policy Reports (updated November 2006)
b. Governor’s Executive Order: Climate Action Team (June 2005)
Legislative &Regulatory
a. SB 1037(2005).-Loading Order
b. AB 2021 (2006) - Energy Efficiency
c. SB 1 (2006) - Million Solar Roofs
d. AB 32 (2006) - Global Warming Solutions Act
e.SB 1368 (2006) -Greenhouse gas.limits on long-term electricity baseload contracts
f.SB 107 (2006) - Accelerated Renewable Portfolio Standards
g.Federal Energy Policy Act of 2005
Successful implementation of LEAP tasks, experience gained in operating the transformed portfolio
over the past two years, and the need to keep up with changes in the industry environment, the
legislative landscape, and new opportunities necessitate the need to update the four Objective and
seven Guidelines.
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 2 of 15
DISCUSSION
Proposed Changes to LEAP Obiectives
The high-level LEAP Objectives set by Council in November 2001 are still largely valid. The
clarifying modifications proposed, as shown below, are mainly to emphasize Council oversight and
local control. The proposed revisions are aimed at placing greater emphasis on environmental
stewardship, ensuring compliance with new regulations, and bringing the Objectives more into line
with approved implementation plans.
Objective #1 has been combined with the previous Objective #4, with a small change in
wording to enhance clarity.
Objective #2 has been simplified.
Objective #3 is unchanged.
Objective #4 is new, highlighting the importance of local control by City Council in utility
matters.
Objective #1
Objective #2
Objective #3
Objective #4
Existing Objectives
Ensure low and stable electric
supply rates for customers.
Provide superior financial
performance to customers and the
City by maintaining a supply
portfolio cost advantage compared
to market cost and the retail supply
rate advantage compared to PG&E.
Enhance supply reliability to meet
City and customer needs by
pursuing oppol~unities including
transmission system upgrades and
local generation.
Balance environment, local
reliability, rates and cost impacts
when considering renewable
resource and energy efficiency
investments.
Provide competitive and predictable
supply cost while balancing
environmental, local reliability, rate
and cost impacts.
Maintain a supply portfolio cost
advantagecolnpared to wholesale
electricity market cost
Enhance supply reliability to meet
City and customer needs by pursuing
opportunities including transmission
system upgrades and local generation.
Act to maintain the City Council’s
ability to exercise local control of
decision making related to all aspects
of serving customer energy needs.
Proposed Changes to LEAP Guidelines
The proposed modifications to the LEAP Guidelines, set by Council in October 2002, are described
in detail in this section. The changes are intended to better reflect the revised Objectives, account for
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 3 of 15
initiatives that have been completed and new ones that are underway, eliminate portions of some
Guidelines that are no longer applicable, and bring the Guidelines more into line with approved
implementation plans and new priorities.
Guideline #1 recognizes the legislatively-mandated resource priorit:9 hierarchy.
Guideline #2 combines hydroelectric-related issues previously in separate guidelines into
one.
Guideline #3 has been updated to reflect the evolution of the City’s Energy Risk
Management Policies and Guidelines.
Guideline #4 delineates efforts in the areas of market design, transmission, and resource
adequacy that have progressed significantly since 2002.
Guideline #5 reflects Council’s decision (CMR: 169:06) to emphasize small-scale local ultra-
clean distributed generation.
Guideline #6 accelerates and expands the City’s renewable energy targets.
Guideline #7 reflects a renewed emphasis on cost-effective energy efficiency in keeping with
Council priorities and legislative requirements.
Guideline #8 is new (Climate Action Plan).
Proposed Guideline #1: Resource Loading Order
(formerly Electric Portfolio Dependence on Western)
With the transformation of the portfolio from a Western-centric supply prior to 2004 to a more
diverse portfolio owned or contracted directly by the City, Guideline #1 is now out of date. The new
guideline recognizes the legislatively-mandated resource priority order, or "loading order", when
acquiring resources to meet City loads. The City has followed this hierarchy. This loading order was
first codified with legislation in SB 1037 (2005) and modified slightly in AB 2021 (2006). The new
Guideline incorporates this language, and adds an additional priority to local ultra-clean distributed
generation above conventionial supply.
From SB 1037."
9615. (a) Each local publicly owned electric utility, in procuring energy, shall first acquire all
available energy efficiency and demand reduction resources that are cost effective, reliable,
and feasible.
From AB2021:
9615. (a) Each local publicly owned electric utility, in procuring energy to serve the load of
its retail end-use customers, shall first acquire all available energy efficiency and demand
reduction resources that are cost effective, reliable, and feasible.
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 4 of 15
delinGui #1 : :¯e :
PropoSed NeW GuidelineExisting Guideline
Electric Portfolio Dependence on Western
While maintaining the flexibility to adopt
favorable ’custom products’ offered by
Western, manage a supply portfolio
independent of Western beyond the Base
Resource Contract.
Resource Loading Order
Manage a supply portfolio comprising locally selected
and joint action cooperative purchases, with the
following preference hierarchy for resource
acquisition:
A.Efficiency
B.Renewable Supply
C.Local Ultra-Clean Distributed Generation
D.Conventional Supply
Proposed Guideline #2: Hydro Resource Management
(formerly Hydro Risk Management)
This guideline combines hydroelectric-related issues previously in separate guidelines into one, now
addressing both the value proposition and the risk associated with hydroelectric power generation.
Having gained experienced in successfully managing this volatile supply resource in 2005 and 2006,
the guideline was expanded to recognize the value created by the City’s participation in various
organizations and forums to maximize the value of City-owned Calaveras resource and the Central
Valley Project hydro resources under the City’s Western contract.
Hydro Risk Management
Manage hydro production risk by:
Planning for an average hydro year
on a long-tel?n basis;
B.Diversifying to renewable and/or
fossil generation technologies; and
C.Maintaining adequate supply rate
stabilization reserve.
Hydro Resource Management
Manage hydroelectric supply resources by:
Ao Planning for an average hydro year on a long-
term basis;
B, Maintaining the flexibility to adopt hydro
resource management products;
C. Maximizing value of the Western and Cataveras
resource; and
Do Maintaining adequate supply rate stabilization
reserves to manage hydro production volume
uncertainty.
Proposed Guideline #3: Energy Risk Management
(formerly Market Risk Management)
The risk management guideline requires updating to reflect the evolution of the City’s Energy Risk
Management Policies and Guidelines, which now incorporate detailed and specific credit,
contracting, and purchasing limits, Council’s decision to move away from large fossil fuel plant
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines.Page 5 of 15
investment commitment (CMR:169:06), and the increased commitment to renewable supply
resources.
Guideline #3
Existing Guideline
Market Risk Management
Manage market risk by adopting a pol~folio
strategy for electric supply procurement by:
A.Diversifying energy purchases across
commitment date, start-date, duration,
suppliers, pricing terms and fuel sources;
B.Targeting additional thermal plant
ownership/investment commitment at -25
MW but in no event more than 50 MW;
C.Maintaining a prudent exposure to changing
market prices by:
1. Procuring resources at fixed price for at
most 90% of expected load for 2 or
more years out, assuming average hydro
conditions; and
2. Procuring resources at fixed price for at
most 75% of expected load for 5 or
more years out, assuming average hydro
conditions; and
D.Avoiding contract-based fixed price energy
purchases (except for contracts for
renewable resources) for durations greater
than 10 years.
Proposed New Guideline
Energy Risk Management
Manage supply cost uncertainty and risk by:
A. Implementing the City’s Energy Risk
Management Policies and Guidelines;
B. Maintaining an adequate pool ofcredit-wol~hy
suppliers;
C. Diversifying supply purchases across commitment
date, start date, duration, suppliers, pricing terms
and fuel sources;
D. Maintaining a prudent exposure to changing
market prices; and
E. Maintaining adequate supply rate stabilization
reserves to manage market, credit, and other
uncertainties.
Proposed Guideline #4: Market Design, Transmission and Resource Adequacy
(formerly Reliable and Cost Effective Transmission Services)
Since the implementation of the flawed California deregulation rules in 1998 that resulted in the
energy market meltdown in 2000/2001, the state and federal agencies have taken several steps to
prevent such a reoccurrence. Solne of these changes, including compelling utilities to commit to
long term supply and less reliance on the spot market, have stabilized the energy markets in
California and have somewhat increased investment in generation plants to keep up with growing
loads.
Palo Alto, along with other municipal utilities, has intervened jointly in the new transmission market
design expected to be implelnented in 2008 with mixed results; municipal utilities have been
successful in maintaining a level playing field for municipal utilities, but on the other hand have not
been successful in opposing the complexity being built into the transmission markets. Palo Alto’s
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 6 of 15
efforts to increase reliability of the transmission system have also produced favorable results. Staff
expects to continue in these efforts in the coining years, including finding ways to better
interconnect with the transmission grid. The new guideline better describes this Council agenda.
Guideline #4
Existing .Guideline
Reliable and Cost Effective Transmission
Services
Ensure the reliability of supply at fair and
reasonable transmission cost by:
Supporting, through political and technical
advocacy and/or direct investment, the
upgrading of Bay Area trans mission to
improve reliability and relieve congestion;
B.Participating in transmission market design
to ensure that market design results in
workable competitive markets and equitable
cos~ allocation;
C.Pursuing the option of forming and/or
joining a Public Power Transmission
Control Area to increase control over
transmission operations and related costs;
and
D.Ensuring PG&E honors the Stanislaus
Commitments by providing to us firm-
transmission rights or equivalent.
Proposed New Guideline
Market Design, Transmission and Resource
Adequacy
Ensure the reliability of supply at fair and
reasonable transmission and capacity costs by:
A. Actively participating, as an individual entity and
also through collaborative efforts with other
entities, in local, regional, statewide and federal
regulatory and legislative forums. Supporting,
through legislative, regulatory and technical
advocacy and/or direct investment, the upgrading
of Northern California transmission to improve
reliability and to relieve both congestion and
local capacity costs;
B. Participating in transmiss ion and reliability
market design forums to ensure that adopted
market designs result in adequate reliability,
workabty competitive markets and equitable cost
allocation;
C. hnplementing the City of Palo Alto Electric
Utility Resource Adequacy Program;
Do Participating in Joint Action Agencies to
optimize value of City-owned translnission assets
and ensure compliance with FERC regulations;
E. Supporting, through legislative, regulatory and
technical advocacy, the development and
availability of long-term transmission rights to
serve load; and
F. Evaluating interconnection options to the City to
increase service reliability and lower delivery
costs.
Proposed Guideline #5: Local Generation
The proposed new local generation guideline reflects Council’s decision (CMR:169:06) to
emphasize small-scale local ultra-clean distributed generation, including solar and other renewable
energy resources as well as low-emission technologies such as cogeneration or fuel cells, instead of
larger local power pant alternatives. The Guideline explicitly highlights the role of customer-sited
solar photovoltaic systems as a component of the integrated supply portfolio, in accordance with
SB 1 (2006), often referred to as "million solar roofs" or "California-Solar Initiative". SB 1 requires
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 7 of 15
publicly-owned utilities to offer rebates for photovoltaic systems similar to those offered investor-
owned utilities like PG&E, and to budget for their load-based share of the state total goal of 3000
MW over ten years. Palo Alto already offers incentives that exceed the legislated level, but the new
law adds new restrictions, reporting requirements, and volumetric targets for the solar program. The
impact of SB1 is that an additional $1.1 million per year will need to be budgeted in order to
facilitate compliance with SB1, with a rate impact of 0.1 C/kWh. The guideline also explicitly
highlights the PLUG-In ultra-clean distributed generation incentive program, to be developed and
implemented within the parameters approved by Council in November 2006 (CMR:406:06), which
will be designed to impart no unfavorable rate impacts by recovering the initial costs over time
through shared transmission cost savings. SB 107(2006) requires a "local publicly owned utility to
adopt certain strategies in a long-term procurement plan to achieve efficiency in the use of fossil
fuels and to address carbon emissions", which is supported by pursuing small,scale local
cogeneration alternatives.
Ke~ excerpts f~vnl SB1 (2006):
PUC 387.5
(a) In order to further the state goal of encouraging the installation of 3,000 megawatts of
photovoltaic solar energy in California within 10 years, the governing body of a local
publicly owned electric utility, as defined in subdivision (d) of Section 9604, that sells
electricity at retail, shall adopt, implement, and finance a solar initiative prograln, funded
in accordance with subdivision (b), for the purpose of investing in, and encouraging the
increased installation of, residential and commercial solar energy systems.
(b) On or before January 1, 2008, a local publicly owned electric utility shall offer monetary
incentives for the installation of solar energy systems of at least two dollars and eighty
cents ($2.80) per installed watt, or for the electricity produced by the solar energy system,
measured in kilowatthours, as determined by the governing board of a local publicly
owned electric utility, for photovoltaic solar energy systems. The incentive level shall
decline each year thereafter at a rate of no less than an average of 7 percent per year.
(f) In establishing the program required by this section, no moneys shall be diverted from
any existing programs for low-income ratepayers, or from cost-effective energy efficiency
or demand response programs.
(g) The statewide expenditures for solar programs adopted, implemented, and financed by
local publicly owned electric utilities shall be seven hundred eighty-four million dollars
($784,000,000). The expenditure level for each local publicly owned electric utility shall
be based on that utility’s percemage of the total statewide load served by all local publicly
owned electric utilities. Expenditures by a local publicly owned electric utility may be
less than the utility’s cap amount, provided that funding is adequate to provide the
incentives required by subdivisions (a) and (b).
PUC 285t
(e)(2) Programs adopted, implemented, and financed in the amount of seven hundred eighty-
four million dollars ($784,000,000), by charges collected by local publicly owned
electric utilities pursuant to Section 387.5. Nothing in this subdivision shall give the
commission power and jurisdiction with respect to a local publicly owned electric utility
or its customers.
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 8 of 15
Guideline #5
Existing Guideline
Local Generation
Monitor the potential of local generation
options to meet customer needs, improve local
reliability, minimize congestion and wheeling
charges, and stabilize/reduce costs.
Proposed New Guideline
Local Generation
A.Promote and facilitate deployment of renewable
resource supplies by providing expertise,
education, incentives and rates to support
customer-owned solar power systems, and
demonstrating renewable generation
technologies.
B.Promote ultra-clean distributed g~neration
incentive program.
Proposed Guideline #6: Renewable Energy Supply
(formerly Renewable Portfolio Investments)
Since the 2002 Council adoption of renewable portfolio standards of 20% by 2015 with a retail rate ¯
impact not to exceed 0.5 C/kWh on average, the City has entered into five long-term contracts to
encourage landfill and wind energy supply development. Due to higher fossil fuel energy prices, the
City was fortunate to sign-up these renewable supplies and competitive rates with minimal or no
adverse impact on retail customer rates. These five contracts are projected to provide 20% of total
energy supply by 2008, of which 3-5% is meant for PaloAltoGreen, leaving 15-17% toward meeting
the portfolio target. In July 2006 (CMR296:06) Council also approved a joint action initiative
through the Northern California Power Agency Green Power Pool Project that could add an
additional 1.3%, sufficient to bring the CPAU power mix up to 28-30% from eligible renewable
resources. Along with the 50% hydro supply portfolio in an average hydro year, this increased target
could make the supply portfolio 80% renewable in an average hydro year, or 83% including
PaloAltoGreen.
CPAU Renewable Electric Energy Supply Contracts Summary
Supplier
Project Name
Contract Status
Fuel Type
Product Type
Location
Site Owner
Project Status
Projected/Actual Start Date
Term Years
Contract Arnount ($)
Price $/MWh
Average Cost S/year
Average Cost $/MWh
Levelized Cost $/MWh (2006)
Ultimate Facility Capacity
Initial Facility Capacity
Paio Alto Share
Palo Alto Capacity MW
Palo Alto Energy MWh/year
/o of CPAU Load
CMR
;ouncil Date
PPM
High Winds I
Executed
Wind
Day-Ahead Firm
Solano County
FPL
Operating
Dec-04
23-1/2 years
$78.4 million
$57.60 fixed
$3.3 million
$57.6O
$57.60
162 MW
162 MW
12.35%
2O MW
58,000
5.60%
CMR:424:04
8-Nov-04
Ameresco
Santa Cruz
Executed
Landfill Gas
Unit Contingent Firm
Watsonville
County of Santa Cruz
Operating
Feb-06
20 years
$13.9 million
$51/MWh
+ 1.5%/year
$0.7 million
$58.97
$54.95
3.2 MW
3.2 MW
50%
1.6 MW
11,800
1.10%
CMR:461:04
8-Nov-04
Ameresco
Half Moon
Executed
Landfill Gas
Unit Contingent Firm
Half Moon Bay
BFI
Permitting
Dec-07
20 years
$26.0-$61.8 million
$52/MWh
+ 1.5%/year
$3.1 million
$60.12
$53.45
5.7-13.4 MW
11 MW
50%
5,5 MW
43,000
4.10%
CMR:100:05
18-Jan-05
Ameresco
Keller Canyon
Executed,
Landfill Gas
Unit Contingent Firm
Pillsbury
BFI
Permitting
Nov-07
20 years
$15.6-$22.8 million
$59/MWh
+ 1.5%/year
$1.1 million
$68.21
$66.65
2.8-4,1 MW
3 MW
5O%
1.5 MW
12,000
1.10%
CMR:350:05
8-Aug-05
PPM
Shiloh
Executed
Wind
Month-Ahead Firm
Solano County
PPM
Operating
Jun-06
15 years
$75 million
$62.95 fixed
$5 million
$62.95
$62.95
150 MW
150 MW
16.66%
25 MW
74,800
7.10%
CMR:386:05
11-Oct-05
NCPA
NGPP
3rd Phase
TBD
TBD
TBD
TBD
RFP Completed
TBD
< 25 Years
$230 million
-$70/MWh
+ 2.41%/yr
$9.2 million
TBD
$70/MWh
79 aMW
TBD
18.75%
15 aMW
131,4OO
12.50%
CMR:296:06
17-JuP06
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 9 of 15
Aggressive renewable portfolio standards state-wide have been evolving through legislation and
state energy policy. The original goals for investor-owned utilities established by SB 1078 (2002),
were to increase the share of supply by 1% per year in order to achieve 20% of electric supply from
eligible renewable resources by 2017. Publicly-owned utilities were "responsible for implementing
and enforcing a renewables portfolio standard that recognizes the intent of the Legislature to
encourage renewable resources, while taking into consideration the effect of the standard on rates,
reliability, and financial resources and the goal of environmental improvement", and to report certain
information relative to renewable energy resources to its customers. Palo Alto’s existing RPS and
reporting complies with SB 1078.
The state’s Energy Action Plan and the California Energy Commission’s Integrated Energy Policy
Report expressed a state goal of accelerating the implementation of the RPS such that the 20% goal
is met seven years early--by 2010. The Governor endorsed this accelerated schedule and has set a
goal of achieving a 33% renewable energy share by 2020 for the state as a whole. SB107 (2006)
accelerates the 20% goal for IOUs to 2010, with the same requirement for publicly-owned utilities as
SB 1078 (a program that meets the iment of the Legislature), with an additional recruitment to report
progress to the CEC. The 33%-by-2020 goal remains a policy objective and has not been legislated.
Staff recommends increasing the new renewable resource target share of the portfolio to 30% by
2012 and 33% by 2015, but not increasing the overall rate impact cap of 0.5 C/kWh. The City would
pursue these targets by either jointly investing in new projects or encouraging investments by
contracting for renewable energy output from proposed or existing renewable energy generation
plants. The supplies to meet the delnand for the City’s PaloAltoGreen program, administered
separately and driven by retail customers, are in addition to the targets for the renewable energy
portfolio. Palo Alto uses the state Public Resources Code definition of eligible renewable energy
supplies, which excludes large hydroelectric facilities. "New" refers to facilities built or repowered
after adoption ofPalo Alto’s first LEAP guidelines, October 2002.
The guideline continues to include the voluntary renewable energy retail rate program,
PaloAltoGreen, which has achieved the number one ranking among all green power programs in the
country by participation percentage. At present now over 16% of customers subscribe to
PaloAltoGreen, and the recent addition of the City of Palo Alto as a customer of the program led to
the City becoming the fourth city in the nation to achieve the US EPA’s Green Power Community
milestone.
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 10 of 15
Guideline #6
Existing Guideline Proposed Ne~v Guideline
Renewable Portfolio Investments
The City shall continue to offer a renewable
resource-based retail rate for all customers who
want to voluntarily select an increased content
of renewable energy. In addition to the
Renewable Energy Supply
Reduce electric portfolio dependence on fossil fuels
by meeting at least 80% of City’s long term energy
needs from non-fossil and non-nuclear supply.
A. Renewable Portfolio Standard: In addition to the
voluntary program, the City shall invest in new
renewable resources to meet the City’s
sustainability goals while ensuring that the
retail rate impact does not exceed 0.5 C/kWh
on average. Pursue a target level of new
renewable purchases of 10% of the expected
po~folio load by 2008 and move to a 20%
target by 2015, contingent on economic
viability. The contracts for investment in
renewable resources are not to exceed 30 years
in term.
voluntary program, the City shall invest in new
renewable resources to meet the Citv’s
sustainability goals while ensuring that the retail
rate impact does not exceed 0.5 (/kWh on
average.
Pursue a target level of new renewable purchases
of 20% of the expected pol~tfolio load by 2008 and
move to a 30% target by 2012 and 33% by 2015.
The contracts for investment in renewable
resources shall not exceed 30 years in term.
Pal, Alto Green: In addition to the renewable
portfolio standard, the City shall continue to offer
a renewable resource-based retail rate for all
customers who want to voluntarily select an
increased content of non-hydro renewable energy.
Proposed Guideline #7: Electric Energy Efficiency and Demand Reduction
(formerly Electric Energy Efficiency Investments)
Pal, Alto has long been a leader in energy efficiency progralns, and views efficiency as a critical
long-term "supply" resource that plays a key role in long-term planning. The energy efficiency
guideline has been revised to explicitly incorporate language from SB1037 (2005) and AB2021
(2006), much of which is already included in the LEAP implementation tasks (CMR: 169:06), and to
concentrate on cost-effective energy efficiency as it relates to long-term energy supply planning and
procurement. The proposed guideline is also consistent with the National Action Plan for Energy
Efficiency Memorandum of Understanding (NAPEE MOU) endorsed by the Council (CMR:316:06).
The new revised guideline also facilitates addressing the federal Energy Policy Act of 2005,
particularly Title 1 (Energy Efficiency). Energy efficiency efforts are also critical in achieving
greenhouse gas reduction goals reflected in California Climate Action Team goals and AB32
(California Global Warming Solutions Act of 2006) and identified in the report to Council by the
Mayor’s Green Ribbon Task Force. AB 2021 requires 10-year energy efficiency plans on a three-
year cycle, the first being due by June 1, 2007.
From AB2021
PUC: 9615.
(a) Each local publicly owned electric utility, in procuring energy to serve the load of its
retail end-use customers, shall first acquire all available energy efficiency and demand
reduction resources that are cost effective, reliable, and feasible.
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 11 of 15
(b)...A local publicly owned electric utility’s determination of potentially achievable cost-
effective electricity efficiency savings shall be made without regard to previous minimum
investments undertaken pursuant to Section 385 ..... A local publicly owned electric utility
shall treat investments made to achieve energy efficiency savings and demand reduction
targets as procurement investments.
CPAU has already COlnpleted evaluation of technical and economic potential for energy efficiency in
work conducted with the Rocky Mountain Institute in 2005 (reported to UAC in November 2005 and
included as an attachment in CMR: 169:06). The RMI report contains numerous ideas and technical
data that serve as a solid analytical foundation upon which staff has been developing the long-term
efficiency portfolio plan, already included as a LEAP implementation task, which is forthcoming
shortly. Staff anticipates roughly doubling energy efficiency funding, but with no net increase in
average customer bills.
Staff recommends that economic impacts of energy efficiency programs focus on lowering average
bills, as opposed to retail rates. Energy efficiency reduces sales, and therefore can increase the rate
(C/kWh) component associated with fix costs that are collected through a volumetric charge, even
though the average bill (S/month) is lower because of lower consumption. Staff also recommends
that the efficiency program guideline aims to reach all customer sectors so that no one is precluded
from participating.
Guideline #7
Existing Guideline
Electric Energy Efficiency Investments
Offer quality Public Benefits programs,
utilizing funds collected through the 2.85%
Electric Energy Efficiency and Demand
Reduction
Ao Fund innovative programs that promote .and
Public Benefits charge embedded in electric
retail rates, to meet the resource efficiency
needs of customers. Additional funding for
cost-effective programs will be recommended
as appropriate. Pursue these investments by:
A.Providing expertise, education and
incentives to support cost-effective customer
Co
facilitate deployment of all cost-effective, reliable
and feasible energy efficiency and demand
reduction opportunities as high priority resources.
Use a community-wide perspective in program
evaluation criteria.
Use a bill reduction (utility cost) perspective in
programfunding criteria.
efficiency improvements;
B.Demonstrating renewable and/or alternative
generation technologies and new efficiency
alternatives; and
C.Providing rate assistance and efficiency
programs to low-income customers.
DoPromote equity by designing and making
programs available to all customers
Proposed Guideline #8: Climate Action Plan (new)
Climate change has emerged as a key global environmental challenge that impacts not only utilities,
but all City operations, the community, and beyond. The City is actively involved in several
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 12 of 15
activities that either directly or indirectly seek to reduce greenhouse gas elnissions, including utility
programs to foster energy efficiency and renewable energy, the Zero Waste strategic plan, use of
alternative fuels, commute programs, and encouraging green building. The City is an active
participant in Sustainable Silicon Valley, is a Climate Action Leader with the California Climate
Action Registry, and the Mayor has signed the UoS. Mayors’ Climate Protection Agreement. The
community at large has also been involved in developing approaches to address greenhouse gas
emissions, through the Mayor’s Green Ribbon Task Force that was created in March 2006 to
"recommend tangible steps and local actions by all stakeholder groups, including the city, to reduce
global warming and encourage sustainable practices",, delivering a comprehensive report to Council
in December 2006.
The same night, the City formally joined ICLEI’s Cities for Climate Protection® Campaign
(CMR:426:06), adopting the following five milestones:
¯ Conduct a greenhouse gas emissions inventory and forecast to determine the source and
quantity of greenhouse gas emissions in the jurisdiction;
¯Establish a greenhouse gas emissions reduction target;
¯Develop an action plan with both existing and future actions which when implemented will
meet the local greenhouse gas reduction target;
¯Implement the action plan; and
¯Monitor and report progress; and update plans.
The curi’ent LEAP implementation tasks already include the development of a Climate Action Plan
(CAP) to address greenhouse gas issues relating to utility operations (CMR: 169:06) and reinforced
with Council’s endorsement of the CalifoT’1~ia Publicly O~t~ed Electric Utilities’ Pri~Tciples
Addressing Greenhouse ReduCtion Goals (CMR:315:06). As the provider of electricity and natural
gas to all Palo Alto customers, CPAU is the logical entity to inventory and certify greenhouse gas
emissions related to utility operations, and to communicate the energy use ilnplications to customers.
CPAU will also support City efforts to report greenhouse gas invemories for City government
operations, as the data are needed to obtain an accurate accounting for the Utilities Depm~ment.
The proposed new LEAP guideline aims to incorporate and address recommendations and ideas that
were developed and submitted by the Mayor’s Green Ribbon Task Force (Dec 18, 2006), with the
expectation that continued collaboration with the community through the Task Force or a similar
group will help shape the CAR The proposed guideline will also position Palo Alto to be able to
comply with and forge ahead of new legislation such as AB 32 (California Global Warming
Solutions Act of 2006) and SB1368 (greenhouse gas emissions limits on baseload electricity
contracts), along with several other state policies and pending federal legislation. Utilities are at the
forefront of legislative action to combat greenhouse gas emissions, and more is expected in the next
few years.
The proposed guideline adds emphasis to the importance of these activities. The cost to develop a
CAP isestimated to be $50,000 to $100,000, which is available in the proposed budget. The
financi!l impact of the implementing such a CAP is not yet known. Staff expects to identify
alternatives and their associated costs during the development of the CAP. COz emissions associated
with electricity delivered to Palo Alto residents in 2005 are estimated to be 145,000 metric tons for
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 13 of 15
sales of 996 million kWh. Annual total CO2 emissions from electricity are expected to drop by 50%
over the next several years from efficiency and renewable energy supply plans already in place.
If the City were to offset these emissions with tradable emission reduction credits, currently trading
at $4.10hnetric ton on the Chicago Climate Exchange, the costs would be projected at approximately
$600,000 annually, equivalent to a rate increase of 0.06 C/kWh. Emissions associated with
community-wide natural gas use in 2005 were 165,000 metric tons for sales of 31.4 million therms.
The rate impact of a similar offset-based benchmark for natural gas would be $675,000
(approximately 2 ¢/therm). Staffexpects that a well-designed prograln can do much better than just
buying offsets. Offset prices could easily rise in the future; at $20/ton, the "offset benchmark" rate
impact without any decrease in emissions would increase to $2.9 million/year for electric sales to
customers (0.3 ~/kWh) and $3.3 million/year for gas sales to customers (10 ¢/therm).
Guideline #8 -
Proposed New Guideline
Climate Action Plan
As pm~ of the City’s COlmnitment to develop an implement an action plan to reduce greenhouse gas
emissions, develop and implement a Climate Action Plan relating to utility activities.
A. Consider all Mayor’s Green Ribbon Task Force utility-related recommendations.
B. The plan shall be consistent with the California Municipal Utilities Association Greenhouse Gas
Reduction Principles.
C. Take actions to meet ICLEf Cities for Climate Protection Carnpaign milestones.
D. Coordinate with and support Climate Action Plan efforts of other departments.
RESOURCE IMPACT
There is no direct resource impact as a result of the proposed changes to the LEAP Objectives and
Guidelines. Implementation of various programs that meet the Objective and Guidelines will be
broughtto Council for approval and will have a resource impact at that time. Implementation plans
to increase the renewable resource energy purchase target under Guideline #6 may increase retail
rates, but will be within the parameters specified in the guideline, which has not increased fi’om the
existing rate impact limit of 0.5 C/kWh, equivalent to roughly $3.35/month for an average
residential bill. Mandated new solar program funding is projected to require an additional $1.1
million per year for ten years, with an associated 0.1 C/kWh increase, or 65 C/month for an average
residential bill. Increased efforts in cost-effective energy efficiency and local generation programs
are expected to have no adverse impact on average electricity bills.
POLICY IMPLICATIONS
The proposed new LEAP Objectives and Guidelines support the Council-approved Utilities Strategic
Plan, Energy Risk Management Policies, and Comprehensive Plan Goal N-9.
ATTACHMENT
A. 2006 LEAP Implementation Tasks
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 14 of 15
B. 2007 (New) LEAP Objectives & Guidelines.
C. OLD LEAP Objectives & Guidelines
PREPARED BY:Karl E. Knapp, Senior Resource Planner, Utilities Department
Shiva Swaminathan, Senior Resource Planner, Utilities Department
APPROVED BY:
VALERIE O. FONG
DIRECTOR OF UTILITIES
UAC February 7, 2007: Changes to LEAP Objectives & Guidelines Page 15 of 15
2006 LEAP Implementation Plan Attachment A
Attachment A: 2006 LEAP Implementation Tasks (CMR:196:06)
1.Climate Action: Promote environmental stewardship by completing the California Climate
Action Registry process for reporting and certifying greenhouse gas emissions, developing a
Climate Action Plan for utilities, and supporting City efforts to address climate change and
other environmental issues.
2.Public Benefits: Continue implementation of electric public benefits programs, which is
funded by collecting a fee equal to 2.85% of the electric retail rate. These funds are partially
used to demonstrate renewable resources or alternative technologies and to assist customers
in pursuing efficiency improvements. Coordinate Public Benefits program enhancements
with efficiency po~folio plan development (Task #3)
Efficiency Portfolio: Enhance the existing efficiency programs by developing a long-term
integrated resource efficiency portfolio plan that recognizes cost-effective energy efficiency
and load management as priority resources in the "loading order" for energy resources.
Design efficiency programs to account for the combined benefits of electric, gas, and water
efficiency savings (e.go a horizontal clothes washer saves electricity, water and gas).
Leverage joint efforts with other public power providers via NCPA’s efficiency initiatives
and Public Benefits Committee. Enhance system efficiency through generation efficiency
improvements and electric distribution system enhancements to lower system losses. As
appropriate, additional funding for cost-effective efficiency programs will be recolnlnended
to complement and enhance the existing Public Benefits programs. Develop retail rate
options that provide price signals to customers that encourage efficiency.
4. Renewable Portfolio: Acquire renewable energy resources to meet LEAP Guideline 6o
Strive to meet 2015 goals by 2010. Work closely with suppliers to meet their contract
obligations and to ensure that projects under construction are completed in a timely manner.
Participate in NCPA "Green Pool" joint procurement initiative to meet remaining needs.
5. PaloAltoGreen: Continue implementation of the Palo Alto Green program, a green pricing
product available on a volunteer basis to customers who wish to purchase a greater fraction
of green resources. Where feasible, secure eligible renewable energy supplies to meet both
the renewable portfolio investments and the needs of the Palo Alto Green program. Evaluate
potential strategies to lneet the solar portion of PaloAltoGreen with local solar resources.
Clean Distributed Generation: Develop a long-term cogeneration implementation plan to
capitalize on environmentally friendly and cost-effective high-efficiency combined heat,
power and cooling (CHPC) opportunities at large customer sites that are compatible with the
Comprehensive Plan. Assist motivated large customers in evaluating technical and
economic feasibility of CHPC combined with energy efficiency, and in implementing cost-
effective and environmentally sound prospects. Establish standardized distributed generation
interconnection standards and procedures that leverage the groundwork of California Public
Utilities Commission Rule 21, and update retail and wholesale electric and gas rates for
small-scale clean distributed generation. Continue to monitor technology costs and
opportunities for smaller renewable technologies, cogeneration and other low-impact
generation that can be located within Palo Alto.
A-1
2006 LEAP Implementation Plan Attaclnnent A
o
o
10.
Natural Gas-Fired Generation: Redirect the local generation feasibility study CIP to focus
on clean small-scale distributed generation (Task #6) and power plant opportunities outside
of Palo Alto. Given regulatory uncertainty related to local capacity rules and uncertainty of
control area constraints, evaluate joint efforts toward power plant ownership opportunities
within and near the Greater Bay Area (consistent with levels listed in LEAP Guideline #3B
(25-50 MW).
Greater Bay Area Contracts: In parallel with Task #7, pursue firm energy and capacity
supply contracts within the Greater Bay Area on either medium or long-term basis. Conduct
a Request for Proposals to solicit firm energy and capacity offers from all sources within the
Greater Bay Area, including renewables, cogeneration and conventional generation.
Portfolio Management: Continue to diversify energy purchases to lneet load. Continue to
develop and lnaintain expertise and analytic tools, models and other efforts to evaluate
scenarios, new resource opportunities, and impact of uncertainties on portfolio position and
performance.
Risk Management: Develop improved transparent and streamlined Back Office process
(contract administration and settlements). Clarify surplus power wholesale sales procedures
to ensure transparency and the appropriateness of surplus energy commodity sales
transactions that are necessary to meet varying loads with varying and dispatchable electric
supplies. Maintain adequate reserves by recognizing the degree of uncertainty the City faces
in the future and periodically review and recommend appropriate level of financial reserves.
11. Local Interconnection: Evaluate transmission system upgrades to reduce cost and enhance
reliability. Investigate transmission connection voltage increase from 115 to 230 kV, and the
potential for a redundant transmission connection to west side.
12. Legislation and Regulation: Monitor and participate in regulatory and legislative initiatives
related to transmission market design and pursue alternatives to increase reliability at a
reasonable cost. Continue to advocate transmission upgrades in to the Bay Area toincrease
reliability. Establish a policy to address mandatory resource adequacy requirements.
A-2
Attachment B
Attachment B: Proposed 2007 Electric Supply Objectives and Guidelines
Prilnary Portfolio Planning Objectives
Objective 1: Provide competitive and predictable supply cost while balancing environmental,
local reliability, rate and cost impacts.
Objective 2:Maintain a supply pol~folio cost advantage compared to wholesale electricity
market cost
Objective 3:
Objective 4:
Enhance supply reliability to meet City and custolner needs by pursuing
opportunities including transmission system upgrades and local generation.
Act to maintain the City Council’s ability to exercise local control of decision
making related to all aspects of serving customer energy needs
LEAP Guidelines
Guideline 1: Resource Loading Order
Manage a supply portfolio comprising locally selected and joint action cooperative purchases,
with the following preference hierarchy for resource acquisition:
A.Efficiency
B.Renewable Supply
C.Local Ultra-Clean Distributed Generation
D.Conventional Supply
Guideline 2: Hydro Resource Management
Manage hydroelectric supply resources by:
A.Planning for an average hydro year on a long-term basis;
B.Maintaining the flexibility to adopt hydro resource management products;
C.Maximizing value of the Western and Calaveras resource; and
D.Maintaining adequate supply rate stabilization reserve to manage hydroproduction
volume uncertainty.
Guideline 3: Energy Risk Management
Manage supply cost uncertainty and risk byI
A.Implememing the City’s Energy Risk Management Policies and Guidelines;
B.Maintaining an adequate pool of credit-w0rthy suppliers;
C.Diversifying supply purchases across commitment date, start date, duration, suppliers,
pricing terms and fuel sources;
D.Maintaining a prudent exposure to changing market prices; and
E.Maintaining adequate supply rate stabilization reserves to manage market, credit, and
other uncm~aintieSo
Guideline 4: Market Design, Transmission and Resource Adequacy
Ensure the reliabilky of supply at fair and reasonable transmission and capacity costs by:
A. Actively participating, as an individual entity and also through collaborative efforts with
other entities, in local, regional, statewide and federal regulatory and legislative forums.
Supporting, through legislative, regulatory and technical advocacy and/or direct
investlnent, the upgrading of Northern California transmission to improve reliability and
to relieve both congestion and local capacity costs;
B-1
¯Attachment B
B.Participating in transmission and reliability market design forums to ensure that adopted
market designs result in adequate reliability, workably competitive markets and equitable
cost allocation;
C.Implementing the City of Palo Alto Electric Utility Resource Adequacy Program;
D.Participating in Joint Action Agencies to optimize value of City-owned transmission
assets and ensure compliance with FERC regulations;
E. Supporting, through legislative, regulatory and technical advocacy, the developlnent and
availability of long-term transmission rights to serve load; and
F.Evaluating interconnection options to the City to increase service reliability and lower
delivery costs.
Guideline 5: Local Generation
A. Promote and facilitate deployment of renewable resource supplies by providing
expertise, education, incentives and rates to support customer-owned solar power
systems, and demonstrating renewable generation technologies.
B. Promote ultra-clean distributed generation incentive program
Guideline 6: Renewable Energy Supply
Reduce electric portfolio dependence on fossil fuels by meeting at least 80% of City’s long
term energy needs from non-fossil and non-nuclear supply.
A. Renewable Portfolio Standard: In addition to the voluntary program, the City shall invest
in new renewable resources to meet the City’s sustainability goals while ensuring that the
retail rate impact does not exceed 0.5 C/kWh on average.
B. Pursue a target level of new renewable purchases of 20% of the expected portfolio load
by 2008 and move to a 30% target by 2012 and 33% by 2015. The contracts for
investment in renewable resources shall not exceed 30 years in term.
C. Palo Alto Green: In addition to the renewable portfolio standard, the City shall continue
to offer a rene~vable resource-based retail rate for all customers who want to voluntarily
select an increased content of non-hydro renewable energy.
Guideline 7: Electric Energy Efficiency and Demand Reduction
A. Fund innovative programs that promote and facilitate deployment of all cost-effective,
reliable and feasible energy efficiency and delnand reduction opportunities as high
priority resources.
B. Use a community-wide perspective in program evaluation criteria.
C. Use a bill reduction (utility cost) perspective in program funding criteria.
D. Promote equity by designing and making programs available to all customers
Guideline 8: Climate Action Plan
As part of the City’s commitment to develop an implement an action plan to reduce greenhouse
gas emissions, develop and implement a Climate Action Plan relating to utility activities.
A. Consider all Mayor’s Green Ribbon Task Force utility-related recommendations.
B. The plan shall be consistent with the California Municipal Utilities Association
Greenhouse Gas Reduction Principles.
C. Take actions to meet ICLEI Cities for Climate Protection Campaign milestones.
D. Coordinate with and support Climate Action Plan efforts of other departments.
B-2
Attachment C
Attachment C: 2002 Council Approved Electric Supply Objectives and Guidelines
The Ci_ty Council approved four Primal~r Portfolio Planning Objectives on November 13,
2001 (CMR:425:01)
Objective 1:Ensure low and stable electric supply rates for customers.
Objective 2:Provide superior financial, performance to customers and the City by
maintaining a supply portfolio cost advantage compared to market cost
and the retail supply rate advantage compared to PG&E.
Objective 3:Enhance supply reliability to meet City and customer needs by pursuing
opportunities including transmission system upgrades and local
generation,
Objective 4:Balance environment, local reliability, rates and cost impacts when
considering renewable resource and energy efficiency investmems.
The City Council approved seven LEAP Guidelines on October 21, 2002 (CMR:398:02).
Guideline 1:Electric Portfolio Dependence on Western
While maintaining the flexibility to adopt favorable ’custom products’ offered by
Western, manage a supply portfolio independent of Western beyond the Base
Resource Contract.
Guideline 2:Hydro Risk Management
Manage hydro production risk .by:
A.Plam~ing for an average hydro year on a long-term basis;
B.Diversifying to renewable and/or fossil generation technologies; and
C.Maintaining adequate supply rate stabilization reserve.
Guideline 3:Market Risk Management
Manage market risk by adopting a portfolio strategy for electric supply
procurement by:
A.Diversifying energy purchases across commitment date, start-date, duration,
suppliers, pricing terms and fuel sources;
B.Targeting additional thermal plant ownership/investment commitment at ~25 MW but in
no event more than 50 MW;
C. Maintaining a prudent exposure to changing market prices by:
Procuring resources at fixed price for at most 90% of expected load for 2 or more years Out,
assuming average hydro conditions; and
Procuring resources at fixed price for at most 75% of expected load for 5 or more years out,
assuming average hydro conditions; and
D.Avoiding contract-based fixed price energy purchases (except for contracts for
renewable resources) for durations greater than 10 years.
Attachment C
Guideline
A.
B.
C.
D.
4:Reliable and Cost Effective Transmission Services
Ensure the reliability of supply at fair and reasonable transmission cost by:
Supporting, through political and technical advocacy and/or direct investment, the
upgrading of Bay Area transmission to improve reliability and relieve congestion;
Participating in transmission market design to ensure that market design results in
workable competitive markets and equitable cost allocation;
Pursuing the option of forming and/or joining a Public Power Translnission Control
Area to increase control over transmission operations and related costs; and
Ensuring PG&E honors the Stanislaus Commitments by providing to us firm-
transmission rights or equivalent.
Guideline 5:
Guideline 6:
Guideline 7:
Local Generation
Monitor the potential of local generation options to meet customer needs,
improve local reliability, minimize congestion and wheeling charges, and
stabilize/reduce costs.
Renewable Portfolio Investments
The City shall continue to offer a renewable resource-based retail rate for all
customers who want to voluntarily select an increased content of renewable
energy. In addition to the voluntary program, the City shall invest in new
renewable resources to meet the CitY’s sustainability goals while ensuring that the
retail rate impact does not exceed 0.5 C/kWh on average. Pursue a target level of
new renewable purchases of 10% of the expected portfolio load by 2008 and
move to a 20% target by 2015, contingent on economic viability. The contracts
for investment in renewable resources are not to exceed 30 years in term.
Electric Energy Efficiency Investments
Offer quality Public Benefits programs, utilizing funds collected through
the 2.85% Public Benefits charge embedded in electric retail rates, to meet
the resource efficiency needs of customers. Additional funding for cost-
effective programs will be recommended as appropriate. Pursue these
investments by:
A.Providing expertise, education and incentives to support cost-effective customer
efficiency improvements;
B.Demonstrating renewable and/or alternative generation technologies and new
efficiency alternatives; and
Co Providing rate assistance and efficiency programs to low-income customers.
C-2
Attachment B
DRAFT UAC meeting minutes excerpts February 7, 2007
Lon.q-Term Acquisition Plan and Update
Presentation by staff with the following summary highlights:
LEAP last updated in April, 2006
Overview of portfolio with addition of renewables contracts
Energy efficiency plans should meet 3 to 5 percent of the City’s load over time. Green
Power Pool Agreement (through NCPA)is progressing and should result in 15 megawatts
of new renewable generation.
Guidelines are modified to reflect latest Council, State, Federal mandates with one new
guideline focused on Greenhouse Gas Initiatives
Commissioner Rosenbaum asked about the solar program including the amount of funding for the
program and the way in which customers achieve savings from their solar installations. Karl Knapp
(Sr. Resource Planner) and Tom Auzenne (Assistant Director, Customer Support Services)
explained costs assigned to munidpals for solar programs under SB1, indicated the Palo Alto
share will be roughly $1 million annually, and noted the growing demand for solar incentives.
They further explained the matter of under-recovery of distribution costs that thus far have been
very insignificant, so while not a matter for immediate concern, something to keep in mind as rates
are designed in the future.
In response to a query from Commissioner Keller on solar education, Knapp and Auzenne
explained how CPAU works with the Palo Alto Unified School District to educate students on solar
program benefits, and works with the facilities managers a PAUSD to increase the efficient use of
energy at the PAUSD facilities.
Page 1 of 3
Commissioner Rosenbaum asked about the Palo AltoGreen program and the underlying expenses
for that program. Auzenne explained that the 1.5 cents/kWh payment under the program takes
into account the actual cost of procurement and marketing efforts. Commissioner Rosenbaum
inquired whether the program administration costs are significant and whether the program could
be phased out with a concurrent increase in the renewable percent in the portfolio, or whether it
would be a good time to look at where the program is and how it might be improved. Staff agreed
that a review of the program goals and design was worthwhile and would get back to the
Commission,
Commissioner Melton asked staff to clarify the use of "non-fossi! and non-nuclear" under Guideline
#6, Renewable Energy Supply. Valerie Fong explained that the 80% number refers to CPAU’s total
energy supply from renewable resources, which includes large hydroelectric power plus the new
resources from "eligible renewable" technologies,
Commissioner Melton asked about the tests to determine whether an efficiency measure is cost-
effective. Knapp explained the approach of looking at bill reductions, not necessarily rate
reductions, and the goal of ensuring that all customers have the opportunity to participate in an
efficiency program, not just the large or commercial customers for instance.
Commissioner Keller asked for examples of hydro resource management products Shiva
Swaminathan (Senior Resource Planner) noted that one such product is the "Complimentary Hydro
Exchange Program" whereby we would contract with a large thermal plant owner to take on the
hydro risk. The thermal plant owner’s incentive to do so is driven by the complimentary nature of
the thermal vs. the hydro plant ... the value of the thermal plant asset decreases in a good hydro
year so it is compliments the hydro exposure. Another product is a "weather hedge"- a financial
hedge that would limit financial exposure to dry hydro conditions.
Page 2 of 3
Commissioner Melton observed that there is a state vs. federal issue in determining acceptable .
carbon emissions levels, and that there could be conflicting regulations coming from the legislative
entities,
Rosenbaum moved staff’s recommendation with Keller seconding. Motion passed unanimously
on voice vote.
Page 3 of 3