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HomeMy WebLinkAboutStaff Report 2212-04755.Approve Participation in the GoGreen Home Energy Financing Program as Recommended by the Utilities Advisory Commission in an Amount Not-to-Exceed $300,000 over a Term of up to Two Years, Authorizing the Execution of a Memorandum of Agreement with the California Alternative Energy and Advanced Transportation Financing Authority; and Approve a FY 2024 Budget Amendment in the Gas Fund; CEQA Status: Not a project. CITY COUNCIL STAFF REPORT From: City Manager Report Type: CONSENT CALENDAR Lead Department: Utilities Meeting Date: September 11, 2023 Staff Report: 2212-0475 TITLE Approve Participation in the GoGreen Home Energy Financing Program as Recommended by the Utilities Advisory Commission in an Amount Not-to-Exceed $300,000 over a Term of up to Two Years, Authorizing the Execution of a Memorandum of Agreement with the California Alternative Energy and Advanced Transportation Financing Authority; and Approve a FY 2024 Budget Amendment in the Gas Fund; CEQA Status: Not a project. RECOMMENDATION Staff and the Utilities Advisory Commission recommend that the City Council: 1. Authorize the City Manager or their designee to execute a memorandum of agreement (MOA) with the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) to provide credit enhancements for Palo Alto Residential Customer Home Energy Efficiency and Electrification Project Loans facilitated by CAEATFA’s GoGreen Home Energy Financing Program (GoGreen Program) in amount not-to-exceed $300,000 over a term of up to two years, and approve the use of the City’s Cap and Trade Reserve funds to cover the cost of the City’s Participation in the GoGreen Program; and 2. Amend the Fiscal Year 2024 Budget Appropriation for the Gas Fund (requires 2/3 approval) by: a. Increasing the Gas Fund Operating Budget for contractual services by $300,000; and b. Decreasing the Gas Cap and Trade Reserve by $300,000. EXECUTIVE SUMMARY To meet Palo Alto’s ambitious greenhouse gas reduction goals, residents will need to implement energy efficiency and electrification projects at their homes. These projects may need thousands of dollars in capital expenditures. The GoGreen Home Program1 is a long-standing State-run 1 https://gogreenfinancing.com/residential financing program that partners with participating financing companies (PFCs) to provide consumer financing for these types of projects at competitive interest rates (4% to 8% for PFCs operating in Santa Clara County2, with the program average interest rate to-date being about 5%3). Loans of up to $50,000 can be made for a variety of project types4, with no up-front payment. Many contractors are registered with the program5 and GoGreen strives to make the program easy for new contractors to join. Palo Alto is one of select places in California not served by any investor-owned energy utilities, and therefore needs a special agreement with the State to participate. Staff is recommending approval of such an agreement to be able to offer this program to the City’s residential homeowners. This program has the potential to offer financing to support upcoming advanced pilot programs for home electrification to achieve the community climate goals embodied in the Sustainability and Climate Action Plan (S/CAP), though even simpler financing programs will likely be needed to support longer-term full-scale electrification programs. City’s Cap and Trade Reserve funds will be used to cover the cost of the Program. BACKGROUND The California Hub for Energy Efficiency Financing (CHEEF) was formed as a public-private partnership between the State and California’s investor-owned utilities (IOUs). It was authorized by the California Public Utilities Commission (CPUC) in 2013 and is administered by CAEATFA, an agency under the State’s Treasury Department. The GoGreen Home Program issued its first loan in 2016 and has only been available in areas served by an IOU such as Pacific Gas & Electric (PG&E). The objective of the GoGreen Home Financing Program is to offer residential customers attractive financing options, through participating financial institutions, for energy efficiency and decarbonization projects by providing a ‘credit enhancement’ to lenders in the form of a loan loss reserve (LLR), funded by the IOUs and other participating entities (e.g., TECH Clean California). CPAU’s participation to facilitate Palo Alto customer access to GoGreen Home would be the first credit enhancement funded by a municipal utility; others are expected to follow. 2 Current participating financing companies operating in Santa Clara county are Matadors Community Credit Union (Lending Terms: https://www.treasurer.ca.gov/caeatfa/cheef/reel/resources/lender-profiles/MCU-lender- profile.pdf) and California Coast Credit Union (Lending Terms: https://www.treasurer.ca.gov/caeatfa/cheef/reel/resources/lender-profiles/CCCU-lender-profile.pdf). 3 Program data available at https://www.treasurer.ca.gov/caeatfa/cheef/monthlyreel/2023/202303.pdf 4 Eligible Energy Efficiency Measures include: appliances (including electrified appliances such as heat pumps), building envelope, demand response, HVAC, lighting, pool products, water heating. https://gogreenfinancing.com/residentialcontractors/about#tab-9 5 https://gogreenfinancing.com/contractorfinder The benefits to residential homeowners participating in the Program include: •No lien on property (unsecured consumer loan) •Available to borrowers with a wide range of credit scores and incomes •Loans of up to $50,000 per unit receiving upgrades •Finance 100% of the project cost, including required related upgrades (e.g. electrical upgrades) •Up to 30% of loan amount can be used toward non-energy improvements (e.g. home remodels, drought tolerant landscaping) •No prepayment penalties •Currently no closing costs or origination fees (may change in the future) •No contractor fees (lenders often charge contractors thousands of dollars to finance projects) •Below-market interest rates and extended payback periods (due to credit enhancement provided to lender) •Broad list of energy efficiency measures to choose from6; can be layered with utility incentives ANALYSIS Staff recommends that the City join the GoGreen program as a way to quickly begin providing financing to Palo Alto homeowners for higher-cost electrification projects. The program would require little staff time to implement at a competitive cost to the City. The City’s current showcase electrification program is focused on heat pump water heaters. These projects are lower cost, so it was possible to provide financing using utility funds. As the City expands its programs into higher cost projects like residential space heating, or into projects that require panel upgrades and electrical upgrades, costs will increase and financing will become even more important to customers. Cost of Participating in the Program and Funding Needs As the first GoGreen Home Program funded by a non-IOU utility, the administrative cost of the Program is being charged on an incremental cost basis to Palo Alto, to make the same Program that is offered to the IOU customers available to Palo Alto residents. The City will not be responsible for administering or reviewing loans in any capacity. Palo Alto’s cost to participate in the GoGreen Home Program for the first two years is estimated at $109,000, as shown in the year 1 and year 2 total estimated administrative funds required below in Table 1. In addition to the projected administrative costs, the City is required to provide a contribution to a loan loss reserve. The amount will depend on the credit scores of the homeowners seeking loans, but the program average contribution to- date is 15% to 16% of each loan. For the first two years, staff is proposing to budget for $160,000 in credit enhancement 6 Eligible Energy Efficiency Measures include: Appliances, building envelope, demand response, HVAC, lighting, pool products, water heating. funding contributions, which would support approximately $1 million in loans. This amount is expected to support around 60 loans, assuming loan sizes in Palo Alto match the statewide average (about $17,000 per loan). Staff is recommending 2-year estimated budget of $140,000 to cover administrative cost and a NTE total budget of $300,000 to cover both administrative and credit enhancement funding, with the entire amount be made available in year 1. The Utilities Advisory Commission (UAC) at their July 5, 2023 meeting7, recommended a contract not-to-exceed limit of $300,000 for the two-year term of the MOA. Table 1: Contract Terms Table 1 above provides estimates of program expenditures in Year 1 and Year 2, but actual expenditures in the two years could vary widely. Hence a contingency amount was added to account for this variability and align with the UAC direction. If the total expenses are projected to increase beyond $300,000 staff will return to Council for additional authorization. After the second year of the Program, the basis of apportioning the administrative cost may be revisited by the CPUC. Since administrative costs are shared by all participating utilities, the CPUC approves administrative cost allocations to ensure no IOU ratepayer money is being used to fund non-IOU programs. The City’s participation in the program is voluntary, and the City is not obligated to continue its participation for any reason, including if the proposed new CPUC cost allocations are unacceptable to the City. However, if the program is successful and the City wishes to continue its participation, staff will return to Council for necessary amendments the MOA. The actual cost related to potential future loan defaults is difficult to estimate; defaults depend on many factors and past performance of loans is not an effective way to estimate future 7 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisory- commission/archived-agenda-and-minutes/agendas-and-minutes-2023/07-jul-2023/packet.pdf Estimated MOA Budget and NTE Budget: Assumes 60 loans totaling $1M over 2-years, All Funds Available in Year 1 Year 1 Year 2 2-Year Estimate Administrative Cost Start-up/Development Costs $ 41,250 Ongoing Fixed Costs $ 30,000 $ 30,000 Variable (per loan) Costs $ 2,600 $ 5,200 Total Estimated Administrative Funds Required $ 73,850 $ 35,200 $ 140,000 Credit Enhancement Contributions CE to PFCs' LR Accounts - 16% of enrolled loan principal (Funds encumbered, but not expensed. Inclusive of seed to Holding Account) $ 52,800 $ 105,600 Total Estimated Credit Enhancement Funds Required $ 52,800 $ 105,600 $ 160,000 Annual Estimated Funds and MOA NTE Budget $ 126,650 $ 140,800 $ 300,000 <=2-Year NTE Amount performance. However, GoGreen Home loans have had a low default rate historically. Of 3,102 loans that have been enrolled since 2016, loss reserve claims have been made on 43 loans. From a credit enhancement funds perspective, this has resulted in a loss reserve expenditure rate of about 4.4% of all invested loss reserve funds ($382,224 of loss reserve funds spent, after recoveries, of $8.68M in total available loss reserve funds)8. When compared to the total amount loaned (about $55 million) the loss rate is approximately 1%. Staff recommends to fund all administrative and loan loss reserve costs from revenues gained from the auction of allowances allocated the City as part of its participation in the State’s Cap and Trade program. This conforms with City’s policy on the use of Cap and Trade funds9. This would protect utility rate payer funds and the City’s General Fund from any program cost impacts. Demand for Financing Energy Efficiency and Electrification Projects in Palo Alto The level of demand for the GoGreen Home financing products in Palo Alto is difficult to gauge. As a relatively affluent community City residents have a wide array of options to finance projects. Staff anticipates the GoGreen Home financing product (unsecured consumer loan) will be a unique and useful product for residents as they embark on larger investments to electrify their homes, for residents with lower credit scores, or for residents who do not want to tap into the equity in their home or who have limited equity available to tap into. The tables below illustrate the spread of borrower credit scores and interest rates charged over the life of the Program as of March 202310. In the current climate of economic uncertainty and high interest rates, GoGreen Home’s relatively low interest rates may be compelling for interested Palo Altans. 8 https://www.treasurer.ca.gov/caeatfa/cheef/monthlyreel/2023/202303.pdf 9 Staff Report#14606, 9/27/2022, Attachment E. 10 March 2023 Data Summary; All Reports Process to Select Contractor, Apply for Loan & Pay for the Home Improvement Project The process for implementing a project is illustrated below. It is designed to be simple and efficient, with minimal need for intervention (and thus, few delays) by Program staff. SUMMARY OF UTILITIES ADVSIORY COMMISSION (UAC) DISCUSSION ON JULY 5, 2023 At the UAC meeting on 7/5/2023 the Commissioners were supportive of bringing the GoGreen Home program to Palo Alto, but questioned the need for staff’s request for broad authority under the MOA – the $2 million expenditure limit and the 5-year Term limit. They wanted staff to come back to the UAC with information on the performance of the program within 12-18 months of program launch and seek additional authority from Council at that time, if warranted. After much discussion with staff, UAC recommended Council approve the MOA for an Amount Not-to-Exceed $300,000 over a Term of up to Two Years. They also reiterated to staff, to come back to seek expanded authority even before 2 years, if the $300,000 amount proves to insufficient due to higher levels of participation by Palo Alto customers. FISCAL/RESOURCE IMPACT Staff is requesting City Council approve a FY 2024 budget amendment to increase expenses by $300,000 for Gas Cap and Trade program in the Gas Fund to pay for the administrative costs and anticipated loan loss reserve contributions in FY 2024. The $300,000 would be funded by the Gas Cap and Trade Fund Reserves, which will not impact utility rates or the General Fund. Cap and Trade Fund Reserves totaled about $7.9 million at the end of FY 2022. After $1.2 million was earmarked in FY 2023 for the Advance Heat Pump Water Heater Pilot Program, the projected FY 2023 ending balance is $6.4 million. This earmark of $0.3 million for the GoGreen Home program in FY 2024 will lower the reserve by an equivalent amount. The revenues each year under the Gas Cap and Trade program is approximately $2 million to $7 million depending on market prices for Cap and Trade Program allowances. The $300,000 will be used to create a loan loss reserve (LLR) maintained in an escrow account between the state and lender. The State will track the LLR status and report to the City on a quarterly basis. The City would stop budgeting additional funding for the LLR if the State ends the GoGreen program, and any remaining LLR funding will be returned to the City after each loan is repaid and fully returned (less any default loan funding paid to lender). If the loan uptake in Palo Alto exceeds current projection of 60 loans totaling $1 million over 2 years, staff will return for Council for additional authority. STAKEHOLDER ENGAGEMENT Through the S/CAP community engagement process, Palo Alto residents are aware of CPAU’s efforts to enroll in GoGreen Home. Staff met with the Council Ad Hoc S/CAP Committee’s Working Group Finance Team on April 21, 2023, and with the S/CAP Committee itself on May 19, 2023. Community stakeholders in attendance supported the City’s participation in the program and the S/CAP Committee gave its unanimous recommendation. The UAC also discussed this on July 5, 2023 and approved it unanimously, albeit restricting the funding to a lower amount and the MOA term to a shorter duration. Upon approval of the MOA by Council and implementation of systems to accept loan applications from Palo Altans, CPAU staff would promote this Program along with other home efficiency and electrification programs to all residents. ENVIRONMENTAL REVIEW Approval of the attached agreement described in this staff report does not meet the definition of a project under the California Environmental Quality Act (CEQA), pursuant to the California Public Resources Code Section 21065, because it is not an activity that will cause a direct physical change in the environment. POLICY IMPLICATIONS The MOA to facilitate energy efficiency and electrification project loans for Palo Alto residents supports the community’s climate goals as embodied in the S/CAP, the Council-approved Utilities Ten-Year Energy Efficiency Goals, and Comprehensive Plan Goals N4.2.1 (educate customers on efficient water use), N7.4.2 (implement cost effective energy efficiency programs for all customers) and N7.7.2 (explore the transition of existing buildings from gas to electric or solar water and space heating). ATTACHMENTS Attachment A: Memorandum of Agreement (MOA) between CAEATFA and Palo Alto APPROVED BY: Dean Batchelor, Director of Utilities Staff: Shiva Swaminathan, Senior Resource Planner 1 6056767 Memorandum of Agreement (MOA) between California Alternative Energy and Advanced Transportation Financing Authority and City of Palo Alto Agreement to Facilitate Access for City of Palo Alto Utility Customers to the GoGreen Home Energy Financing Program Administered by CAEATFA 1. INTRODUCTION This Memorandum of Agreement (“MOA” or “Agreement”) dated ___________, 2023, is entered into by California Alternative Energy and Advanced Transportation Financing Authority (“CAEATFA”), a public instrumentality of the State of California created pursuant to Division 16 (commencing with Section 26000) of the California Public Resources Code, and the City of Palo Alto, a California chartered municipal corporation (“CITY”). CAEATFA and CITY are sometimes referred to in this Agreement individually as a “Party” and together as the “Parties.” RECITALS i. In November 2016, the Palo Alto City Council approved the Sustainability Climate Action Plan (“S/CAP”) to lower the greenhouse gas emissions of the Palo Alto community; in December 2017, the City Council accepted the Sustainability Implementation Plan that identified energy efficiency and building decarbonization as key actions the community needs to undertake to achieve the community’s goal of reducing Greenhouse Gasses (“GHGs”) by 80% below 1990 levels by 2030. ii. The CITY has identified financing for residents to undertake home energy upgrades to lower their energy consumption and GHG footprint as critical to achieve the community’s GHG reduction goals. iii. The CITY has identified that the GoGreen Home Energy Financing Program (“GoGreen Home” or “Program”) offered by CAEATFA for California residents undertaking energy upgrade projects, through which Credit Enhancements are provided to Participating Finance Companies (“PFCs”) to improve loan terms for borrowers, is beneficial to Palo Alto residents. iv. GoGreen Home provides PFCs with a Credit Enhancement in the form of a Loss Reserve which allows the PFCs to directly offer borrowers improved financing products with benefits such as broadened credit approvals, reduced interest rates, extended term lengths, and/or access to larger amounts to borrow. v. CAEATFA has been authorized since 2013 by the California Public Utilities Commission (“CPUC”) through Decisions including D.13-09-044 and D.17-03-026 to administer the California Hub for Energy Efficiency Financing (“CHEEF”) which runs the GoGreen Financing programs, including 2 6056767 GoGreen Home. The CHEEF and GoGreen Financing programs have historically utilized Public Purpose Program (“PPP”) funds of ratepayers of Investor-Owned Utilities (“IOUs”). vi. Through its rulemaking authority, CAEATFA issues regulations which govern the GoGreen Financing programs, including rules for participation by PFCs, contractors, and customers. GoGreen Home is the longest-running of the programs and has served over 3,500 residential borrowers with $64 million loans as of June 30, 2023. vii. The PPP IOU ratepayer funds are limited to supporting Eligible Loans for IOU customers. CITY residents receive gas and electric utility service from the CITY and thus are POU, not IOU, customers. Since 2019, CAEATFA has advocated to expand the CHEEF to be able to offer the GoGreen Financing programs statewide in line with California’s EE and GHG reduction goals, and to support program simplicity and uptake for contractors and PFCs through uniformity of rules across utility jurisdictions. viii. On August 5, 2021, the CPUC issued D.21-08-006 Decision Extending California Hub for Energy Efficiency Financing Programs and Conditionally Approving Use of Platform for Non-Ratepayer Funded Programs. This Decision allows for CAEATFA to incorporate non-PPP IOU ratepayer funds to expand the reach of the GoGreen Financing programs by expanding access to non-IOU customers, provided that the costs of expanded access come from corresponding non-IOU ratepayer funds. ix. CITY wishes to join GoGreen Home to provide Palo Alto residents and City of Palo Alto Utility (“CPAU”) customers with access to attractive financing products to support home energy upgrades. Since Palo Alto residents and CPAU customers are non-IOU customers, CITY wishes to provide funding to CAEATFA to expand access of GoGreen Home to them, as required by D.21- 08-006. x. This MOA will allow GoGreen Home to serve more utility customers in the state and facilitate CITY and state’s mutual goals of energy efficiency, decarbonization, and GHG reduction. It will also facilitate CAEATFA’s goal of program simplification across utility jurisdictional lines in the state. This Agreement between CAEATFA and CITY will offer CPAU customers a pathway to energy efficiency and decarbonization through access to attractive financing products not available outside the GoGreen Home program. The Agreement will enable CAEATFA to offer GoGreen Home under uniform terms more thoroughly in Santa Clara County, allowing for desired simplification for contractors and PFCs. CAEATFA and CITY commit to working together to extend GoGreen Home, as established under the Program Regulations that govern GoGreen Home and which may be modified by CAEATFA under its rulemaking authority from time-to-time during the Term of this MOA, to CPAU customers. Implementation tasks to enable CPAU customers access to the Program include: establishing budgets, providing funding to CAEATFA to fund Credit Enhancements for PFCs, funding CAEATFA’s administrative expenses, establishing invoicing procedures, coordinating on operations, and publicizing the Program to CPAU customers. Specific activities and commitments are outlined in Exhibit 1. 3 6056767 NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the Parties agree: 2. DEFINITIONS Administrative Funds: Funds provided by CITY for CAEATFA to expand and administer the GoGreen Home Program to CITY utility customers. They include costs incurred by CAEATFA for Start- up/Development costs, Ongoing Fixed costs, and Ongoing Variable (per-loan) costs as detailed in Exhibit 2. They do not include the Credit Enhancement Funds. California Public Utilities Commission (“CPUC” or “Commission”): The California state regulatory agency that is responsible for regulating privately owned electric, natural gas, telecommunications, water, railroad, rail transit, and passenger transportation companies. City of Palo Alto Holding Account (“Holding Account”): An account set up as described in Section 3 for the purpose of CITY providing Credit Enhancement funds for CAEATFA to utilize for GoGreen Home and to return funds to CITY. City of Palo Alto Program CE Account (“Program Account”): An account set up as described in Section 3 for the purpose of allocating contributions to the Loss Reserve Accounts of Participating Finance Companies (PFCs) as the PFCs enroll Eligible Loans into GoGreen Home. Credit Enhancement (“CE”) Funds: Funds provided by CITY for CAEATFA to allocate as a type of insurance that helps PFCs mitigate the risk that Eligible Loans will not be repaid in full. GoGreen Home utilizes a form of Credit Enhancement called a Loss Reserve for this purpose. Eligible Loans: Loans or other eligible financial agreements, made by a Participating Finance Company to customers receiving gas or electric utility service from the CITY which are otherwise eligible for enrollment in GoGreen Home per the Program Regulations. GoGreen Home Energy Financing Program (“GoGreen Home” or “Program”): Program designed to help California homeowners and renters access affordable financing for energy efficiency products and retrofits as codified in Title 4, Division 13, Article 5, of the California Code of Regulations. Investor-Owned Utilities (“IOUs”): Southern California Edison (“SCE”), San Diego Gas and Electric (“SDG&E”), Pacific Gas and Electric (“PG&E”), and The Southern California Gas Company (“SoCalGas”). Loss Reserve (“LR”) Accounts: Accounts set up for PFCs to hold Credit Enhancement contributions as the PFCs enroll Eligible Loans in the Program, against which the PFC can file claims in the case of a borrower default.  Personal Information: As defined in the Information Practices Act of 1977, Personal Information means “any information that is maintained by an agency that identifies or describes an individual, including, but not limited to, his or her name, social security number, physical description, home address, home telephone number, education, financial matters, and medical or employment history. It includes statements made by, or attributed to, the individual.” Participating Finance Company (“PFC”): Finance companies approved by CAEATFA for participation in GoGreen Home to provide Eligible Loans. 4 6056767 Program Regulations: California Code of Regulations Title 4. Business Regulations Division 13. California Alternative Energy and Advanced Transportation Financing Authority Article 5. GoGreen Home Energy Financing Program Provider: Third party product and service providers contracted to support operation of the CHEEF programs (including but not limited to: Contractor Manager, Master Servicer, Statewide Marketing Implementer, etc.) Publicly Owned Utilities (“POUs”): In California, municipal or community-managed Load Serving Entities. 3. CITY FUNDING OF ADMINSTRATIVE AND CREDIT ENHANCEMENT COST UNDER THE MOA CITY will provide CAEATFA with funding to support the administration of the GoGreen Home Program (Administration Funds) and Credit Enhancements for Eligible Loans to CPAU customers (Credit Enhancement Funds). The total budget for Administrative Funds under this Agreement is estimated at One Hundred and Forty Thousand Dollars ($140,000). The total budget for Credit Enhancement Funds is estimated at One Hundred and Sixty Thousand Dollars ($160,000). The total funding under this MOA shall not exceed Three Hundred Thousand Dollars ($300,000) over the two-year term of the Agreement. CAEATFA may access unused Administrative Funds for Credit Enhancements if Program demand exceeds estimates, so long as the total MOA funding does not exceed $300,000. The Parties have agreed to a cost allocation methodology by which CAEATFA will allocate costs to CITY. The methodology will be is consistent with CPUC Decision D.21-08-006 and is detailed in Exhibit 2. Should the agreed upon budget for either Administrative Funds or Credit Enhancement Funds be fully utilized, and should CAEATFA not have another source of non-PPP ratepayer funds available to support Eligible Loans for CPAU customers, CAEATFA will cease enrolling Eligible Loans for CPAU customers in accordance with CPUC Decision D.21-08-006, until this MOA is amended and the CITY can secure additional funding. To the extent permitted by the Program Regulations and governing CPUC Decisions, CAEATFA will also cease performing additional administrative work detailed in Table 2Bi of Exhibit 2, including reporting obligations to CITY further detailed in Section 4 and Exhibit 4, and will take all reasonable steps so as not to incur any expenses for which payment would result in a total exceeding the maximum amount of compensation set forth herein. 3.1 Funding of Administrative Costs CAEATFA will use Administrative Funds to cover administrative costs which include: Start- up/Development Costs to expand GoGreen Home to Palo Alto and CPAU customers as detailed in Table 2A of Exhibit 2, Ongoing Fixed Costs as detailed in Table 2Bi of Exhibit 2, and Variable (per loan) Costs as detailed in Table 2Bii of Exhibit 2. 3.2 Monthly Invoicing & Payment (i) Beginning the end of the first month following the date of execution and each month thereafter during the Term, within sixty (60) calendar days after the end of each month, CAEATFA shall submit to CITY an invoice for its actual Administrative Costs incurred in the prior month. 5 6056767 (ii) CITY will pay each monthly invoice no later than forty five (45) calendar days after receiving the monthly invoice. 3.3 Funding of Credit Enhancement Cost, CE Funding Requests, Establishment and Management of Trustee Accounts 3.3.1 Funding of Credit Enhancement Cost CAEATFA will use Credit Enhancement Funds to make contributions to PFCs’ LR Accounts, in accordance with Program Regulations, for Eligible Loans to CPAU customers that enroll in the Program. Credit Enhancement Funds will be allocated to PFC LR Accounts only as Eligible Loans enroll in the Program and will be recaptured as Eligible Loans are paid off, per Program Regulations. In the event of a customer default, Credit Enhancement Funds that have been allocated to PFCs’ LR Accounts may be expended to pay an approved claim to a PFC, in accordance with Program Regulations. Tables 3 and 4 of Exhibit 2 further detail the management of Credit Enhancement Funds. The Holding Account, Program Account, and LR Accounts for each PFC are trustee accounts established and maintained by CAEATFA’s trustee bank in accordance with the Program Regulations, to hold Credit Enhancement Funds. The Holding Account and Program Account hold unencumbered funds. The LR Accounts hold encumbered funds for the benefit of the PFCs, per Program Regulations. 3.3.2 Establishment and Operation of Trustee Accounts, and Funding Requests City of Palo Alto Holding Account. CAEATFA shall establish a Holding Account with its contracted trustee bank for GoGreen Home to hold CITY funds to be used for Credit Enhancements. This account will hold unencumbered funds separately from any PPP IOU ratepayer or any other sources of funds. CAEATFA shall use the Holding Account solely: (i) to receive Credit Enhancement Funds provided by CITY in accordance with this Agreement, and (ii) to hold funds due to be returned to the City of Palo Alto. City of Palo Alto Program CE Account. CAEATFA shall also establish a Program Account with the contracted trustee bank for GoGreen Home from which Credit Enhancements will be transferred to PFC LR Accounts in accordance with the Program Regulations. This account will also hold unencumbered funds separately from any PPP IOU ratepayer or any other sources of funds. The Program Account shall be used: (i) to transfer Credit Enhancement Funds to PFC LR Accounts for enrollment of Eligible Loans made to CPAU customers in accordance with Program Regulations and Exhibit 2, and (ii) to recapture funds as part of the annual rebalance of PFCs’ LR Accounts, per the Program Regulations. CAEATFA will draw on the Holding Account only to fund the Program Account. CAEATFA will draw from the Program Account only as required to provide Credit Enhancements for Eligible Loans in accordance with the Program Regulations and Cost Allocation Methodology detailed in Exhibit 2. 6 6056767 CE Funding Requests. After initial seed funding of $50,000 to the Holding Account, CAEATFA shall direct CE Funds requests to CITY in increments of a maximum of $100,000.00, depending on real or anticipated need to fund the Program Account. Upon receiving a request for CE Funds from CAEATFA, CITY will approve and disburse the requested funding to CAEATFA within fourteen (14) calendar days. Interest. CAEATFA shall use commercially reasonable efforts to cause the Holding Account and Program Account to be interest-bearing accounts that accrue interest in U.S. dollars, and such interest will be re- deployed as loss reserve contributions to PFCs. Account Information. CAEATFA shall direct its Trustee to provide the CITY with electronic access to the Holding and Program Accounts and to monthly statements reflecting account activity. 3.3.3 Return of Uncommitted Funds from Trustee Accounts Uncommitted Funds are Credit Enhancement Funds provided by the CITY, and held in the Holding Account, or in the Program Account that have not been allocated to a PFC’s LR Account, or that have already been recaptured from PFC’s LR Accounts. Upon termination of this MOA, (i) CAEATFA shall return Uncommitted Funds to CITY within thirty (30) calendar days, except as specified below, unless the Parties agree to extend the Agreement, and (ii) As Eligible Loans pay off and CAEATFA performs periodic rebalance and recapture of funds from PFCs’ LR Accounts back to the Program Account, per the Program Regulations and per Table 3 in Exhibit 2, CAEATFA shall return those funds not less than annually to CITY. However, should the CITY decide to terminate this MOA ahead of the Term, within fourteen (14) calendar days after receiving written notice from CITY, CAEATFA shall perform necessary communications with GoGreen Home PFCs and contractors, and all other Program contributors to terminate deal flow for Eligible Loans that would require funding from CITY. Within one hundred twenty (120) calendar days of receiving notice, CAEATFA shall return all Uncommitted Funds from the Program Account and Holding Account to CITY. The return of funds from PFCs LR Account will be processed annually until all outstanding loans to CPAU customers are paid-off by CPAU customers or charged off by the PFCs. 4. DATA AND REPORTING 4.1 Data Sharing On a monthly basis, CAEATFA will provide CITY with data related to enrolled GoGreen Home Eligible Loans for which CITY provides Administrative Funds and Credit Enhancement Funds. Specific data to be shared are further detailed in Exhibit 4. This data is necessary for CITY to track and reconcile Variable (per loan) costs and Credit Enhancement Funds contributed to PFCs’ LR Accounts for enrolled Eligible Loans. It is also necessary to evaluate progress toward the City’s Sustainability Implementation Plan and the impact of marketing and education efforts. 7 6056767 The GoGreen Home Program Regulations include a Customer Privacy Disclosure allowing CAEATFA to share Personal Information with CITY, as a program funder. However, CAEATFA and CITY will establish a secure file transfer protocol for sharing project and customer data. CITY will share with CAEATFA data on marketing and educational efforts, and data or information related to inquiries received about financing for CAEATFA to evaluate interest in GoGreen Home and Program performance. Specific data to be shared are further detailed in Exhibit 4. 5. TERM This Agreement will commence on the date of execution, and unless terminated in accordance with this Agreement, will be in effect for 2 years. Extension. The Parties may mutually agree to extend this Agreement for three additional years, or to amend the Agreement to adjust Program funding, in the event CPAU customer participation exceeds estimates. The Parties acknowledge that at such time that Eligible Loans to CPAU customers become a significant portion of GoGreen Home activity, CAEATFA will need to adjust the Cost Allocation Methodology detailed in Exhibit 2, in accordance with D.21-08-006. The Parties agree to re-negotiate the Budget and Cost Allocation structure at such time. To the extent there is sufficient budget remaining in the contract as specified in Section 3, such changes may be agreed to by amending the Exhibits, without the need to amend the body of the MOA. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code, as amended from time to time. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This Section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. 6. WARRANTIES 6.1 CAEATFA Warranties CAEATFA represents and warrants that: a. Subject to appropriation, CAEATFA has full power, right, authority, and budget authorizations to execute this Agreement and to perform its obligations hereunder, and the execution of this Agreement has been duly and validly approved through all requisite actions on its part. b. CAEATFA shall assure that its operations, and all agreements with PFCs and Providers, comply with all of requirements of CPUC Decisions governing the Program, and the Program Regulations. CAEATFA holds (and throughout the Term will hold) all necessary permits, approvals, insurance, and licenses that are required to carry on its businesses in compliance with applicable laws. c. CAEATFA is not in default under any applicable law that materially and adversely affects its business or financial condition or its performance of its obligations under this Agreement. 8 6056767 d. CAEATFA will use funds contributed by CITY pursuant to this Agreement solely to carry out the terms of this Agreement, in accordance with the terms of this Agreement, and for no other purpose. 6.2 CITY Warranties CITY represents and warrants to CAEATFA that: a. It has full power, right and authority to execute this Agreement and to perform its obligations hereunder, and the execution of this Agreement has been duly and validly approved through all requisite actions on its part. b. It holds (and throughout the Term will hold) all necessary permits, approvals, insurance, and licenses that are required to carry on its businesses in compliance with applicable laws. c. It is not in default under any applicable law that materially and adversely affects its business or financial condition or its performance of its obligations under this Agreement. 7. DATA PROTECTION AND DATA SHARING Each Party agrees to use a higher or the same degree of care it uses with respect to its own proprietary or confidential information or a reasonable standard of care to prevent unauthorized use or disclosure of the Personal Information. CITY further acknowledges that CAEATFA as a public instrumentality is also subject to the Information Practices Act (Chapter 1 (commencing with Section 1798) of Title 1.8 of Part 4 of Division 3 of the California Civil Code) and pursuant to the Information Practices Act may be required to withhold certain Personal Information in its possession and may also be required to provide notice to individuals prior to releasing Personal Information as a condition of participation in the Program. If, pursuant to this contract with CAEAFTA, CITY shares with CAEAFTA Personal Information as defined in California Civil Code section 1798.81.5(d) about a California resident, CAEAFTA shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform CITY immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CAEAFTA shall not use that Personal Information for direct marketing purposes without CITY’s express written consent. Each Party that receives Personal Information shall observe and comply with all applicable laws, including, but not limited to, data privacy, data protection, and consumer privacy laws. 8. LIMITATION OF LIABILITY AND FORCE MAJEURE a. Indemnification. To the extent permitted by law, the Parties agree that all losses or liabilities incurred by a Party shall not be shared pro rata but, instead, the Parties agree that each Party hereto shall fully indemnify and hold the other Party, their officers, Board members, Council members, employees, and agents, harmless from any claim, expense or cost, damage or liability, including that imposed for injury (as defined in Government Code Section 810.8) occurring by reason of the negligent acts or omissions of the indemnifying Party, its officers, Board members, Council members, employees or agents, under or in connection with or arising out of any work, 9 6056767 authority or jurisdiction delegated to such Party under this Agreement. No Party, nor any officer, Board member, Council member, employee or agent thereof shall be responsible for any damage or liability occurring by reason of the negligent acts or omissions of the other Party hereto, their officers, Board members, Council members, employees, or agents, under or in connection with or arising out of any work authority or jurisdiction delegated to such other Party under this Agreement. b. Except as provided in section 8.a. of this Agreement, in no event will any Party be liable to any other Party for any lost profits, loss of business or other consequential, special, or indirect damages, even if it has been advised of the possibility of such damages. c. Force Majeure. Neither Party shall be in default in the performance of its obligations under this Agreement to the extent that such performance is prevented or delayed by any cause, existing or future, which is beyond the reasonable control of that Party, if Party notifies the other promptly of its inability to perform and the circumstances preventing or delaying performance and uses commercially reasonable efforts to re-commence performance as soon as is reasonably practicable. 9. TERMINATION 9.1 Default a. Either Party, by written notice of default to the other Party, may declare a default of the whole or any part of this Agreement, if such other Party has breached any of its obligations under the Agreement. b. Upon delivery of a notice of default, the breaching Party and non-breaching Party shall have a reasonable amount of time, but not greater than thirty (30) calendar days, to agree on a plan for the breaching Party to cure the default. Termination shall occur if the parties fail to agree on a plan for the breaching Party to cure within such notice period. 9.2 Voluntary Termination a. Either Party, by written notice to the other Party, may terminate this Agreement at any time. b. Upon delivery of a notice of voluntary termination, each party shall have a reasonable amount of time, but not greater than thirty (30) calendar days, to agree on a plan to terminate the Agreement, including a termination date. The Termination Date shall be no greater than one hundred and twenty (120) calendar days after the parties reach an agreement on a plan to terminate. 9.3 Other Reasons This Agreement will also be terminated upon reaching the end of the Term should the Parties choose not to extend the Agreement, upon exhaustion of Administrative or Credit Enhancement Funds, or GoGreen Home Program termination. 10 6056767 10. MISCELLANEOUS 10.1 Approval This Agreement is of no force or effect until signed by all Parties. 10.2 Regulatory Oversight The Parties each acknowledge and agree that this Agreement and the Program shall always be subject to the authority and discretion of the Commission, including review and modifications, as the Commission may direct from time to time in the exercise of its jurisdiction through the issuance of Commission Decisions. 10.3 Governing Law and Jurisdiction This Agreement and performance under it will be governed by and construed in accordance with the substantive laws of the State of California and the United States of America without regard to choose of law principles. In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 10.4 Notices Any notice, request, statement, demand, claim, offer or other written instrument required or permitted to be given pursuant to this Agreement shall be in writing and shall be delivered by hand delivery, first class United States mail, overnight courier service or electronic mail, in each case at the address or e- mail address set forth below: If delivered to CAEATFA, California Alternative Energy & Advanced Transportation Financing Authority (CAEATFA) Post Office Box 942809 Sacramento, CA 94209-0001 Attn: Executive Director Email: caeatfa@treasurer.ca.gov Phone: 916-651-8157 If delivered to CITY, City of Palo Alto – City Attorney’s Office 250 Hamilton Avenue Palo Alto, CA 94303 Attn: City Attorney’s Office Email: city.attorney@cityofpaloalto.org Phone: 650-329-2171 11 6056767 10.5 Counterparts This Agreement may be executed in one or more counterparts and delivered by electronic means, each of which will be deemed to be an original, but all of which will together constitute one and the same agreement. 10.6 Binding effect This Agreement, any instrument or agreement executed pursuant to this Agreement, and the rights, covenants, conditions, and obligations of the Parties are contained herein and therein, shall be binding upon the Parties and their successors, assigns and legal representatives. 10.7 Severability If any provision of this Agreement is held invalid by a court with jurisdiction over the Parties to this Agreement, such provision will be deemed to be restated to reflect as nearly as possible the original intentions of the Parties in accordance with Applicable Law, and the remainder of this Agreement will remain in full force and effect. 10.8 Survival Any provision of this Agreement that contemplates or governs performance or observance after termination or expiration of this Agreement will survive the expiration or termination of this Agreement for any reason. 10.9 Independent Contractor; No providers No provision of this Agreement shall be construed or represented as creating a partnership, joint venture, or any similar relationship among the Parties, or any of them. Neither CAEATFA nor its Providers nor the employees, agents, or representatives of any of them shall be deemed to be agents, representatives, or employees of any other Party in connection with this Agreement. CITY does not have the right to control, nor have any actual, potential, or other control over the methods and means by which CAEATFA, any Provider or any of their respective agents, representatives, or employees conducts their independent business operations. 10.10 Prevailing Wage The Parties agree that upgrade projects completed via the GoGreen Home Program described in this MOU are not subject to compliance with California public works requirements, including, but not limited to payment of prevailing wage, under Labor Code section 1720(c)(5(C), as assistance provided for the rehabilitation of single-family homes. 10.11 Entire Agreement This Agreement constitutes the entire agreement between the Parties with respect to its subject matter and merges, integrates and supersedes all prior and contemporaneous agreements and understandings between the Parties, whether written or oral, concerning its subject matter. 12 6056767 10.12 Amendments No amendment or variation of the terms of this Agreement shall be valid unless made in writing, signed by the parties, and approved as required. No oral understanding or Agreement not incorporated in the Agreement is binding on any of the parties. 10.13 Construction Interpretation The headings contained in this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement. When a reference is made in this Agreement to an Article, Section, or Exhibit, such reference shall be to an Article or Section in, or Exhibit to, this Agreement. This Agreement was the product of drafting, review, and negotiation by and among the Parties. Each of the Parties was represented by counsel or had the opportunity to seek counsel during negotiations. Accordingly, the Parties agree that there shall be no presumption against any Party about any ambiguity or uncertainty in this Agreement, and no Party shall be deemed to be the draftsman of this Agreement. Unless otherwise expressly stated “day,” “week,” “month,” and “year” mean calendar day, week, month, and year, respectively. All references to times and days are based on Pacific Standard Time, United States of America. When used in this Agreement, the term “including” means “including but not limited to.” Whenever this Agreement specifically refers to any law, tariff, Governmental Authority or other organization, the reference also refers to any successor to such law, tariff, Governmental Authority, or other organization. 13 6056767 Authorized representative signatures CITY OF PALO ALTO ______________________ Ed Shikada City Manager APPROVED AS TO FORM: ____________________________ City Attorney or designee California Alternative Energy & Advanced Transportation Financing Authority (CAEATFA) ______________________ Claudia Quezada Executive Director Exhibits Exhibit 1: Scope of Work & Implementation Tasks Exhibit 2: Cost Allocation Methodology Shared with CPUC for Expansion of GoGreen Home Program to City of Palo Alto Customers Exhibits 3: Budgets, Invoicing & Management of Trustee Accounts Exhibit 4: Data Sharing 14 6056767 Exhibit 1: Scope of Work & Implementation Tasks Task A: Incorporating CPAU customer eligibility to participate in GoGreen Home Upon execution of the MOA, CAEAFTA will diligently work towards incorporating CPAU customers into all aspects the Program, including updating the program website, informing PFCs and the Program’s contractor networks, and establishing a launch date after which PFCs may begin submitting loans for enrollment in the Program. Task B: Publicizing the Program to CPAU Customers In coordination with Task A, CITY will publicize the Program to CPAU customers. These activities include: • Updating CITY websites and link to Program website established by CAEATFA • Educating and informing CITY staff and CITY contractors who provide services to CPAU customer with information about GoGreen Home and how customers apply for loans • Developing information for distribution at community events, bill inserts, cobranding, etc. Publicizing financing opportunities of the Program to CPAU customers will be key to Program utilization and the Parties commit to collaborating on marketing and outreach initially and then during the entire Term of the Agreement. Task C: Establishment and Management of Trustee Accounts CAEATFA will set up a Holding Account and a Program Account for CITY, which shall be trustee accounts established and operated by CAEATFA to hold unencumbered Credit Enhancement Funds. CAEATFA shall also establish trustee LR Accounts that hold encumbered funds for the benefit of the PFCs, according to Program Regulations. Task D: On-going Activities and Operations under the MOA Beginning the first month following the date of execution, CAEATFA will invoice CITY monthly for actual Administrative Costs. Separately, CAEATFA will request CE Funds periodically as agreed. Once this MOA is executed, CE Funds are provided to CAEATFA, and other necessary steps are performed, CAEATFA will begin accepting and enrolling Eligible Loans submitted for CPAU customers according to Program Regulations. Additionally, upon execution of the MOA, both teams will meet on regular intervals for information sharing. 15 6056767 Exhibit 2: Cost Allocation Methodology Shared with CPUC for Expansion of GoGreen Home Program to City of Palo Alto Customers City of Palo Alto Customers: Clarifications and specifications Categories and examples of expenses Proposed Cost Allocation Reasoning 1. Past investment E.g. Industry research, establishment of regulations, building website, lender and contractor recruitment, etc. IOU Ratepayers meaning EE PPP Funds These costs were incurred to set up the CHEEF and CHEEF Programs for ratepayers. Expanding the Program now does not change the fact that these costs were necessary to launch. 2. Ongoing operational costs to maintain programs "as- is" (i.e. financing for IOU-fuel measures only) E.g. Contracts, labor, operating expense and equipment (OE&E). IOU Ratepayers meaning EE PPP Funds The CHEEF would continue to incur these costs whether or not the Program removes limit on 30% non-IOU fuel measures. If expansion of the Program leads to more projects in IOU territory, as expected, fixed operational costs would be spread over a larger volume of loans and rate-payers would experience cost-inefficiencies. 3. Incremental cost to expand financing to include non- IOU fuel measures A. Start-up: operational changes to allow for expanded eligibility B. Ongoing : E.g. Inspections of electric-saving measures in POU territory, review and processing of loan enrollments, credit enhancement contribution for electric measures in POU territory (Note: not an expense unless a claim payment is made) Non-IOU Ratepayer Source meaning source outside of EE PPP funds These costs would [mostly] not be incurred by ratepayers if measure eligibility were not being expanded All measures will be "non-IOU fuel measures" so most of same logic as originally presented to and approved by CPUC applies 2A. Start-up/Development costs (examples)Proposed Cost Allocation Potential Methodology and Notes Contracts Contractor Manager: E.g. Time spent updating training materials, communicating expansion to contractors, QA set-up, building additional reporting infrastructure Non-IOU Ratepayer Source meaning source outside of EE PPP funds Could be allocated by 1) actual time spent, 2) pro- rata of monthly historical charges or 3) estimate of hours Master Servicer: E.g. Database build out Non-IOU Ratepayer Source meaning source outside of EE PPP funds Billable by specific task order and invoiced hours Marketing Implementer: E.g. Updating information on gogreenfinancing.com Non-IOU Ratepayer Source meaning source outside of EE PPP funds Allocated by invoiced hours including coordination with CAEATFA. (Not a CAEATFA-administered contract. SoCalGas-administered) CAEATFA Labor Operations: E.g. Updating forms and data collection and tracking, updating accounting procedures, coordination with Trustee Non-IOU Ratepayer Source meaning source outside of EE PPP funds Determine a percentage of time for a # of FTEs for an estimated period Outreach and education: E.g. updating websites, roll-out of new rules to Lenders, updating program materials, etc. Non-IOU Ratepayer Source meaning source outside of EE PPP funds Determine a percentage of time for a # of FTEs for an estimated period CHEEF Program expansion: Incorporation of non-ratepayer funds Original Cost Allocation Methodology referred to in D.21.08.066 (red text shows clarifications post Decision) Table 1. Expense Overview by Category Table 2: Identifying Incremental Costs for Expansion to non-IOU fuel measures 16 6056767 2B. Ongoing costs (examples)Proposed Cost Allocation Potential Methodology and Notes 2Bi. Fixed Costs Contracts Master Servicer monthly fee IOU Ratepayers meaning EE PPP Funds Not an incremental expense; cost is incurred with or without expansion Trustee Bank monthly fee IOU Ratepayers meaning EE PPP Funds Not an incremental expense; cost is incurred with or without expansion Contractor Manager ME&O, Support, Enrollment Shared Determine a percentage of effort and apply pro- rata to invoiced hours or look at contractor service territory to allocate Support and Enrollment costs Contractor Manager monthly costs for Training and Reporting IOU Ratepayers meaning EE PPP Funds Not an incremental expense; cost is incurred with or without expansion Other Expenditures and Equipment Overhead IOU Ratepayers meaning EE PPP Funds Not an incremental expense until expansion requires hiring additional FTEs and more usage of office equipment, etc. Conferences, event sponsorships, travel Shared Continue to bill EE PPP Funds because no events are actually planned right now. Will revisit if this changes. Allocated by specific conference or event expenses Labor Program, ME&O and compliance staff Shared Continue to bill EE PPP Funds because staff currently regularly handle eligibility questions around IOU/POU splits. Only the actual eligibility is changing, not the workload. Pro-rata portion of a # of FTE(s) in each unit to support the expanded program Slight change from what was revised to CPUC for TECH. This will be a shared cost. For City of Palo Alto, CAEATFA staff will be getting loan questions from lenders CAEATFA otherwise wouldn't have gotten. Also, experience with TECH has shown that CAEATFA needs to budget time for ongoing accounting, invoicing and reporting. Therefore CAEATFA will bill a prorata portion of some FTE time for this category. 2Bii. Variable Costs Technical consultant Fees Shared Allocated based on time billed Transaction Expense Examples (per loan) Loan review and enrollment (Master Servicer) Non-IOU Ratepayer Source meaning source outside of EE PPP funds Allocated based on # of loans QA Desktop reviews (Contractor Manager) Non-IOU Ratepayer Source meaning source outside of EE PPP funds Allocated based on # of loans QC Site-inspections (Contractor Manager) Non-IOU Ratepayer Source meaning source outside of EE PPP funds Allocated based on # of loans Loans with only non-IOU fuel measures 17 6056767 Encumbrance/Cost Examples Proposed Cost Allocation Potential Methodology and Notes Loss Reserve Account set-up Loss Reserve Contributions to Lender's Accounts (Encumbered, but not expensed funds)Shared See methodology options in Table 4 below Claims Payments (Expenses)Shared Paid to lenders from their Loss Reserve Account regardless of the fuel source makeup of the underlying measures. New loans with non-IOU fuel measures should have similar risk to old loans so the risk of default is proportional to the number of loans in the portfolio. More non-IOU fuel loans in the portfolio will mean more risk of default, but also come with more $ in loss reserve contribution. As older, IOU-fuel only loans are paid off, funds are recaptured to the IOU Program account. Recoveries Shared Recoveries on losses after claims will be repaid to the lender's loss reserve account or to the Program account(s), per Regulations. Annual Rebalance (Recapture of encumbered funds)Shared The original loan loss reservation will be recouped for paid-off loans. The value of any contribution that was paid from ratepayer LLR funds will be returned to the ratepayer Program account and the value that was paid from non-ratepayer funds will be returned to the non-ratepayer Program account. Allocation Option Pros Cons 1. Pro-rata for each loan/project by measure fuel source. Allocate transaction costs and loss reserve contributions directly to measure costs. CAEATFA would use non- ratepayer funds first, whenever available, to pay for the pro-rata cost corresponding to the non-IOU measures. If non-ratepayer funds aren't available, CAEATFA would revert to rate-payer funds to allow for up to 30% of loan to support non-IOU fuel measures. Allowed additional related costs (e.g. landscaping) would have to be pro-rata allocated based on overall gas versus electric composition. This is the methodology preferred by the CPUC per D.21.08.006. See detail in next table. Most "fair" method for ratepayers or other funding source as costs for all loans are pro-rated specifically to measures and corresponding fuel source. When feasible, CAEATFA prefers this method. If another funding source is available, CHEEF Programs don't need to use the 30% allowance for non-IOU measures. The calculation for cost allocation is run uniquely for each loan. CAEATFA currently collects measure cost breakdown for REEL but not for SBF projects. Building envelope measures would have to be split and allocated between fuels. Retaining same methodology as CPUC approved. Just clarifying here that all per-loan transaction costs and Credit Enhancement costs will be paid by City of Palo Alto because all measures will be non-IOU fuel measures. 2. Screen for non-IOU measures, then even split: Any project that includes a non-IOU fuel conserving measure will be allocated x% to ratepayer and x% to non- ratepayer costs. Calculations are simple as all loans with non-IOU measures are treated the same. This would be easy to implement. 3. Treat all loans the same: A simple formula would be developed and applied to all projects for properties where the customer has a non-IOU fuel provider, regardless of any measures. We would assume a constant x% of costs allocated for gas and x% for electricity. Calculations are simple as all loans to properties with a non-IOU fuel provider are treated the same. Table 4: Options for Allocating Loan Transaction Costs and Credit Enhancement Contribution for Loans with Both IOU and non-IOU Fuel Measures CAEATFA is presenting several options for comment and discussion. Note that the Program currently allows 30% of the Claim-Eligible Loan Principal to support non-IOU fuel measures. These methods are more estimated and less precise. We could end up with an allocation of costs that doesn't correspond to the types of measures by fuel source that end up being installed. For example, the non-ratepayer source could end up subsidizing a bunch of projects without any electric measures. Other potential funding partners may hesitate to participate as they would not be able to target funds toward specific technology. Since non-IOU fuel measures have only been offered previously in a very limited way, there is not much history on which to base a formula. Significant re-evaluation would be needed. Table 3: Credit Enhancement Management Both ratepayer and non-ratepayer funds would be contributed to a lender's existing single loss reserve account(s) per one or more of the methodology options below in Table 4. Maintaining distinct loss reserve accounts for the lenders between different sources of funds would drastically diminish the value of the loss reserve as risk mitigation comes from having a pool of loans. 18 6056767 Exhibit 3: Budgets, Invoicing & Management of Trustee Accounts Estimated MOA Budget and NTE Budget: Assumes 60 loans totaling $1M over 2-years, All Funds Available in Year 1 Year 1 Year 2 2-Year Estimate Administrative Cost Start-up/Development Costs $ 41,250 Ongoing Fixed Costs $ 30,000 $ 30,000 Variable (per loan) Costs $ 2,600 $ 5,200 Total Estimated Administrative Funds Required $ 73,850 $ 35,200 $ 140,000 <=2-Year NTE Amount Credit Enhancement Contributions CE to PFCs' LR Accounts - 16% of enrolled loan principal (Funds encumbered, but not expensed. Inclusive of seed to Holding Account) $ 52,800 $ 105,600 Total Estimated Credit Enhancement Funds Required $ 52,800 $ 105,600 $ 160,000 Annual Estimated Funds and MOA NTE Budget $ 126,650 $ 140,800 $ 300,000 <=2-Year NTE Amount 19 6056767 Exhibit 4: Data Sharing Where available, CAEATFA will provide CITY with the following data related to enrolled GoGreen Home Eligible Loans for which CITY provides Administrative Funds and Credit Enhancement Funds. CAEATFA may further agree to share other relevant data with CITY on request, subject to other agreements and applicable laws. CAEATFA will not report to CITY data on individual loan terms, but may on request report aggregated and anonymized loan data. Category Fields Purpose Borrower and Site • Name • Contact Information • Site address • Utility Account Number • Number of units being upgraded 1. Match GGH borrowers with CPAU customer projects Measure(s) • Installed Energy Efficiency Measure name, quantity, equipment cost, and whether the installation resulted in fuel substitution? 1. Document popularity of EE measures alongside heat pump technology 2. Document progress toward CITY’s electrification initiative goals Project • Completion and Enrollment Dates • Total Project Cost 1. Track # projects and program uptake by CPAU customers 2. Reconcile Variable (per loan) Cost spend Participating Contractor • Name or DBA • California State License Board number 1. Document participating contractors to plan future outreach 2. Measure frequency, diversity, and consistency of contractor participation For the initial two-year Term, energy savings achieved as a result of installation of Energy Efficiency measures will be calculated according to a “deemed savings” approach, in line with CAEATFA’s established methodologies. If the Term is extended, CAEATFA and CITY intend to revisit whether this approach continues to serve the needs and requirements for both Parties, and will amend the data sharing processes and requirements if necessary.