ȱ ȱ ȱ ȱ ȱ ȱ CommunityȱChoiceȱAggregationȱ ȱ ȱ ȱ BaseȱCaseȱFeasibilityȱEvaluationȱ ȱ CountyȱofȱSanȱDiegoȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ PreparedȱByȱNavigantȱConsulting,ȱIncȱ 3100ȱZinfandelȱDrive,ȱSuiteȱ600ȱ RanchoȱCordova,ȱCAȱ95670ȱ 916.631.3200ȱ ȱ Mayȱ2005ȱ EXECUTIVEȱSUMMARYȱ ȱ ThisȱreportȱoffersȱNavigantȱConsulting,ȱInc.’’sȱ(NCI)ȱevaluationȱofȱtheȱfeasibilityȱ ofȱ formingȱ aȱ Communityȱ Choiceȱ Aggregationȱ program,ȱ pursuantȱ toȱ provisionsȱ ofȱAssemblyȱBillȱ117,ȱwherebyȱtheȱCountyȱwouldȱaggregateȱtheȱelectricȱloadsȱofȱ customersȱ withinȱ theȱ unincorporatedȱ areasȱ ofȱ theȱ Countyȱ forȱ purposesȱ ofȱ procuringȱelectricalȱservices.ȱȱCommunityȱChoiceȱAggregationȱrelatesȱtoȱelectricȱ generationȱ servicesȱ only.ȱ ȱ Deliveryȱ ofȱ theȱ electricȱ powerȱ wouldȱ continueȱ toȱ beȱ providedȱoverȱSDG&Eȱtransmissionȱandȱdistributionȱfacilitiesȱatȱratesȱregulatedȱ byȱtheȱCaliforniaȱPublicȱUtilitiesȱCommissionȱ(CPUC)ȱandȱunderȱtheȱsameȱtermsȱ andȱ conditionsȱ thatȱ applyȱ today.ȱ ȱ Communityȱ Choiceȱ Aggregationȱ allowsȱ theȱ Countyȱ toȱ provideȱ retailȱ generationȱ servicesȱ toȱ customersȱ withoutȱ theȱ needȱ toȱ acquireȱ transmissionȱ andȱ distributionȱ infrastructure.ȱ ȱ Allȱ SDG&Eȱ customersȱ withinȱtheȱCountyȱwouldȱhaveȱtheȱoptionȱofȱbuyingȱelectricityȱfromȱtheȱCountyȱ or,ȱ alternatively,ȱ remainingȱ asȱ generationȱ customersȱ ofȱ SDG&Eȱ byȱ exercisingȱ theirȱrightsȱtoȱoptȬoutȱofȱtheȱprogram.ȱȱȱ ȱ ABȱ 117ȱ grantsȱ theȱ Countyȱ authorityȱ toȱ competitivelyȱ procureȱ electricȱ servicesȱ ratherȱ thanȱ continuingȱ toȱ relyȱ onȱ SDG&Eȱ asȱ theȱ singleȱ supplierȱ forȱ electricȱ servicesȱ providedȱ toȱ customersȱ withinȱ theȱ County.ȱ ȱ Implementationȱ ofȱ Communityȱ Choiceȱ Aggregationȱ providesȱ theȱ communityȱ theȱ powerȱ toȱ chooseȱ whatȱresourcesȱwillȱserveȱtheirȱloads.ȱȱExpandedȱaccessȱtoȱcompetitiveȱsuppliersȱ andȱ localȱ controlȱ ofȱ resourceȱ planningȱ decisionsȱ provideȱ opportunitiesȱ toȱ enhanceȱ rateȱ stabilityȱ forȱ customers,ȱ significantlyȱ increaseȱ utilizationȱ ofȱ renewableȱenergyȱresources,ȱandȱgenerateȱelectricityȱcostȱsavings.ȱ ȱ Theȱ detailedȱ analysisȱ performedȱ forȱ theȱ Countyȱ suggestsȱ thatȱ byȱ formingȱ aȱ CommunityȱChoiceȱAggregationȱprogram,ȱbackedȱbyȱinvestmentsȱinȱgenerationȱ resources,ȱtheȱCountyȱcouldȱobtainȱtheȱfollowingȱbenefits:ȱ ȱ x Achieveȱ nominalȱ electricityȱ costȱ savingsȱ averagingȱ approximatelyȱ $25.3ȱ millionȱperȱyearȱoverȱtheȱnextȱ20ȱyears,ȱequivalentȱtoȱapproximatelyȱ5%ȱofȱ totalȱelectricityȱbills;ȱ x Increaseȱrenewableȱenergyȱutilizationȱtoȱ40%ȱbyȱ2017,ȱmoreȱthanȱdoublingȱ theȱrenewableȱenergyȱcontentȱthatȱSDG&Eȱisȱrequiredȱtoȱprovideȱoverȱtheȱ sameȱtimeȱperiod;ȱ x Obtainȱ controlȱ overȱ electricȱ generationȱ costsȱ toȱ provideȱ aȱ higherȱ levelȱ ofȱ rateȱstabilityȱforȱlocalȱresidentsȱandȱbusinesses;ȱandȱ x Improveȱstatewideȱandȱlocalȱreliabilityȱbyȱincreasingȱcapitalȱinvestmentȱinȱ generationȱplants.ȱ ȱ 3 ȱ Underȱtheȱbaseȱcaseȱassumptions,ȱratepayerȱbenefitsȱwouldȱbeginȱtoȱaccrueȱinȱtheȱ fifthȱ yearȱ ofȱ programȱ operations,ȱ assumingȱ aȱ 2006ȱ implementationȱ dateȱ andȱ noȱ changesȱ inȱ theȱ currentȱ rateȱ designsȱ ofȱ SDG&E.ȱ ȱ Duringȱ theȱ initialȱ fourȱ yearsȱ ofȱ programȱ operations,ȱ programȱ costsȱ wouldȱ likelyȱ exceedȱ theȱ equivalentȱ ratesȱ chargedȱbyȱSDG&EȱdueȱtoȱtheȱrequirementȱthatȱCommunityȱChoiceȱAggregationȱ customersȱpayȱaȱseparateȱsurchargeȱ(““costȱresponsibilityȱsurcharge””)ȱtoȱSDG&E.ȱȱ Ifȱ theȱ Countyȱ initiatedȱ aȱ Communityȱ Choiceȱ Aggregationȱ programȱ inȱ 2006,ȱ itȱ wouldȱlikelyȱhaveȱtoȱchargeȱslightlyȱhigherȱratesȱ(1%ȱtoȱ2%)ȱinȱtheȱinitialȱyearsȱofȱ theȱ program,ȱ orȱ itȱ wouldȱ needȱ toȱ financeȱ approximatelyȱ $34ȱ millionȱ ofȱ accumulatedȱ lossesȱ duringȱ theȱ fourȬyearȱ startȬupȱ period.ȱ ȱ Becauseȱ customersȱ wouldȱ haveȱ theȱ abilityȱ toȱ optȬoutȱ ofȱ theȱ Communityȱ Choiceȱ Aggregationȱ program,ȱ chargingȱ higherȱ ratesȱ thanȱ SDG&Eȱ isȱ likelyȱ notȱ aȱ viableȱ option.ȱȱ Implementingȱ aȱ Communityȱ Choiceȱ Aggregationȱ programȱ inȱ phasesȱ wouldȱ reduceȱ theȱ needȱ forȱ startupȱ financingȱ andȱ generallyȱ minimizeȱ implementationȱ risks.ȱ ȱ Theȱ Countyȱ couldȱ phaseȬinȱ implementationȱ ofȱ theȱ Communityȱ Choiceȱ Aggregationȱ programȱ toȱ reduceȱ itsȱ programȱ startupȱ costsȱ andȱ helpȱ ensureȱ aȱ smoothȱtransitionȱforȱcustomersȱthatȱjoinȱtheȱprogram.ȱȱAlternatively,ȱtheȱCountyȱ couldȱdelayȱimplementationȱtoȱtheȱ2008ȱorȱ2009ȱtimeframeȱtoȱavoidȱtheȱnextȱfewȱ yearsȱduringȱwhichȱtheȱcostȱresponsibilityȱsurchargesȱwillȱbeȱtheȱhighest.ȱ ȱ NotwithstandingȱtheȱnearȬtermȱchallengesȱcreatedȱbyȱSDG&E’’sȱimpositionȱofȱtheȱ costȱresponsibilityȱsurchargesȱonȱCommunityȱChoiceȱAggregationȱcustomers,ȱtheȱ scenarioȱanalysisȱconductedȱforȱthisȱstudyȱshowsȱmoderateȱcostȱsavingsȱareȱlikelyȱ overȱ theȱ longȬtermȱ underȱ mostȱ reasonableȱ sensitivityȱ cases.ȱ ȱ Theȱ averageȱ programȱsavingsȱrangeȱfromȱaȱlowȱofȱ1%ȱtoȱaȱhighȱofȱ10%ȱacrossȱtheȱsevenȱcasesȱ evaluatedȱ toȱtestȱ theȱsensitivityȱofȱtheȱ baseȱcaseȱ resultsȱ toȱchangesȱinȱwholesaleȱ energyȱ marketȱ conditions,ȱ SDG&Eȱ rateȱ projections,ȱ andȱ costȱ responsibilityȱ surcharges.ȱ ȱ However,ȱ underȱ theȱ baseȱ caseȱ andȱ fiveȱ ofȱ theȱ sensitivityȱ casesȱ examined,ȱprogramȱratesȱwouldȱbeȱfromȱ1%ȱtoȱ2%ȱhigherȱthanȱthoseȱofȱSDG&Eȱ withinȱ theȱ initialȱ fourȱ yearsȱ ofȱ programȱ operations.ȱ ȱ Inȱ theȱ ““worstȱ case””ȱ (anȱ assumedȱ increaseȱ inȱ theȱ costȱ responsibilityȱ surchargeȱ ofȱ 50%),ȱ programȱ ratesȱ wouldȱ beȱ 4%ȱ toȱ 7%ȱ higherȱ thanȱ thoseȱ ofȱ SDG&Eȱ duringȱ theȱ earlyȱ yearsȱ ofȱ theȱ program.ȱȱȱ ȱ Oneȱ noteworthyȱ sensitivityȱ caseȱ isȱ theȱ impactȱ ofȱ SDG&E’’sȱ proposalsȱ toȱ modifyȱ itsȱelectricȱrateȱdesigns,ȱcurrentlyȱbeingȱconsideredȱbyȱtheȱCPUCȱinȱtheȱSDG&Eȱ Rateȱ Designȱ Windowȱ proceeding.ȱ ȱ SDG&E’’sȱ rateȱ proposalsȱ wouldȱ improveȱ theȱ nearȱ andȱ longȬtermȱ economicȱ viabilityȱ ofȱ aȱ Countyȱ Communityȱ Choiceȱ Aggregationȱprogramȱbecauseȱtheirȱadoptionȱwouldȱtendȱtoȱraiseȱtheȱgenerationȱ ȱ 4 ratesȱ paidȱ toȱ SDG&Eȱ byȱ electricȱ customersȱ withinȱ theȱ County.ȱ ȱ Ifȱ SDG&E’’sȱ proposalsȱ areȱ ultimatelyȱ adoptedȱ byȱ theȱ CPUC,ȱ NCIȱ expectsȱ thatȱ theȱ County’’sȱ CommunityȱChoiceȱAggregationȱprogramȱwouldȱbeginȱproducingȱsurplusesȱ byȱ theȱsecondȱyearȱofȱprogramȱoperations,ȱallȱotherȱfactorsȱbeingȱequal.ȱȱBecauseȱofȱ theȱ importanceȱ ofȱ thisȱ regulatoryȱ eventȱ toȱ theȱ nearȬtermȱ viabilityȱ ofȱ aȱ Countyȱ Communityȱ Choiceȱ Aggregationȱ program,ȱ NCIȱ recommendsȱ thatȱ theȱ Countyȱ closelyȱ monitorȱ theȱ SDG&Eȱ Rateȱ Designȱ Windowȱ Proceedingȱ andȱ evaluateȱ whetherȱtoȱproceedȱtowardȱimplementationȱofȱaȱCommunityȱChoiceȱAggregationȱ programȱonceȱtheȱoutcomeȱofȱthatȱproceedingȱisȱknownȱinȱearlyȱ2006.ȱȱȱ ȱ Energyȱ procurementȱ andȱ resourceȱ planningȱ areȱ subjectȱ toȱ certainȱ risksȱ orȱ uncertaintiesȱthatȱmustȱbeȱmanagedȱbyȱtheȱenergyȱsupplier,ȱwhetherȱitȱisȱSDG&Eȱ orȱ theȱ operatorȱ ofȱ aȱ Communityȱ Choiceȱ Aggregationȱ program.ȱ ȱ Formingȱ aȱ Communityȱ Choiceȱ Aggregationȱ programȱ wouldȱ notȱ increaseȱ energyȱ procurementȱrisks,ȱbutȱresponsibilityȱforȱtheirȱmanagementȱwouldȱtransferȱtoȱtheȱ CommunityȱChoiceȱAggregatorȱand/orȱitsȱsuppliers.ȱȱTheȱCountyȱwillȱbeȱableȱtoȱ obtainȱservicesȱfromȱaȱvarietyȱofȱlarge,ȱexperiencedȱsuppliersȱtoȱhelpȱmanageȱtheȱ CommunityȱChoiceȱAggregationȱprogram.ȱȱTheȱCountyȱwouldȱexerciseȱaȱgreaterȱ degreeȱofȱautonomyȱinȱitsȱenergyȱprocurementȱactivitiesȱthanȱSDG&Eȱisȱallowedȱ underȱ currentȱ regulations.ȱ ȱ Theȱ Countyȱ shouldȱ thereforeȱ beȱ ableȱ toȱ manageȱ energyȱ procurementȱ risksȱ atȱ leastȱ asȱ effectivelyȱ asȱ doesȱ SDG&E.ȱ ȱ Professionalȱ programȱ managementȱ andȱ applicationȱ ofȱ standardȱ industryȱ riskȱ managementȱ practicesȱwillȱbeȱkeysȱtoȱthisȱeffort.ȱ ȱ TheȱCountyȱcouldȱimplementȱitsȱCommunityȱChoiceȱAggregationȱprogramȱaloneȱ orȱ throughȱ formationȱ ofȱ aȱ jointȱ powersȱ agencyȱ (JPA)ȱ withȱ otherȱ localȱ governments.ȱ ȱ Formationȱ ofȱ aȱ regionalȱ programȱ throughȱ theȱ JPAȱ providesȱ economiesȱ ofȱ scaleȱ thatȱ enhanceȱ theȱ economicȱ benefitsȱ availableȱ toȱ theȱ Countyȱ throughȱ Communityȱ Choiceȱ Aggregation.ȱ ȱ Theȱ JPAȱ structureȱ alsoȱ providesȱ anȱ appropriateȱ financingȱ vehicleȱ forȱ theȱ capitalȱ investmentsȱ neededȱ toȱ supportȱ aȱ costȬeffectiveȱaggregationȱprogram.ȱ ȱ Theȱ baseȱ caseȱ feasibilityȱ analysisȱ containsȱ conservativeȱ assumptionsȱ regardingȱ theȱfutureȱdirectionȱofȱSDG&E’’sȱgenerationȱrates,ȱwhichȱareȱtheȱreferenceȱpointsȱ forȱ estimatingȱ theȱ economicȱ benefitsȱ ofȱ formingȱ aȱ Communityȱ Choiceȱ Aggregationȱ program.ȱ ȱ Forȱ purposesȱ ofȱ thisȱ analysis,ȱ SDG&E’’sȱ ratesȱ areȱ projectedȱ toȱ declineȱ inȱ realȱ termsȱ (adjustedȱ forȱ inflation)ȱ duringȱ theȱ 20Ȭyearȱ forecastȱperiod.ȱȱInȱnominalȱterms,ȱSDG&E’’sȱratesȱareȱprojectedȱtoȱincreaseȱbyȱanȱ averageȱ annualȱ rateȱ ofȱ 2.4%,ȱ whichȱ isȱ consistentȱ withȱ historicalȱ trends.ȱ ȱ Theȱ financialȱ projectionsȱ areȱ particularlyȱ sensitiveȱ toȱ theȱ futureȱ directionȱ ofȱ SDG&Eȱ ȱ 5 rates.ȱ ȱ Asȱ shownȱ inȱ theȱ sensitivityȱ cases,ȱ ifȱ SDG&Eȱ generationȱ ratesȱ wereȱ toȱ increaseȱbyȱanȱaverageȱofȱ3%ȱperȱyearȱratherȱthanȱtheȱ2.4%ȱprojectedȱinȱtheȱbaseȱ case,ȱ theȱ financialȱ benefitsȱ ofȱ theȱ Communityȱ Choiceȱ Aggregationȱ programȱ wouldȱapproximatelyȱdoubleȱ(fromȱ5%ȱtoȱ10%).ȱ ȱ Whereasȱ allȱ currentȱ CPUCȱ decisionsȱ areȱ reflectedȱ inȱ theȱ feasibilityȱ assessment,ȱ theȱCPUCȱisȱstillȱinȱtheȱprocessȱofȱfinalizingȱcertainȱdetailedȱrulesȱandȱprotocolsȱ thatȱ willȱ applyȱ toȱ Communityȱ Choiceȱ Aggregation.ȱ ȱ Theȱ ongoingȱ phaseȱ ofȱ theȱ CPUCȱrulemakingȱisȱfocusedȱonȱoperationsȱandȱtransactionalȱissuesȱthatȱwillȱbeȱ importantȱ toȱ aȱ Communityȱ Choiceȱ Aggregationȱ program’’sȱ operationsȱ butȱ thatȱ areȱ unlikelyȱ toȱ materiallyȱ impactȱ theȱ baseȱ caseȱ feasibilityȱ assessmentȱ presentedȱ herein.ȱȱNCIȱexpectsȱtheȱCPUCȱrulemakingȱtoȱbeȱcompletedȱbyȱtheȱendȱofȱ2005.ȱ ȱ 6 LISTȱOFȱACRONYMSȱ ȱ A&Gȱ––ȱAdministrativeȱandȱGeneralȱ ABȱȱ1890ȱ––ȱAssemblyȱBillȱ1890ȱ ABȱ117ȱ––ȱAssemblyȱBillȱ117ȱ CAISOȱ––ȱCaliforniaȱIndependentȱSystemȱOperatorȱ CCAȱ––ȱCommunityȱChoiceȱAggregationȱ CECȱ––ȱCaliforniaȱEnergyȱCommissionȱ CPUCȱ––ȱCaliforniaȱPublicȱUtilitiesȱCommissionȱ CRSȱ––ȱCostȱResponsibilityȱSurchargeȱ CTCȱ––ȱCompetitionȱTransitionȱChargeȱȱ DGȱ––ȱDistributedȱGenerationȱ DWRȱ––ȱDepartmentȱofȱWaterȱResourcesȱ FERCȱ––ȱFederalȱEnergyȱRegulatoryȱCommissionȱ GRCȱ––ȱGeneralȱRateȱCaseȱ IOUȱ––ȱInvestorȱOwnedȱUtilitiesȱ ITȱ––ȱInformationȱTechnologyȱ JPAȱ––ȱJointȱPowersȱAgencyȱ KWȱȬȱKilowattȱ KWhȱ––ȱKilowattȱhourȱ MWȱ––ȱMegawattȱ MWhȱ––ȱMegawattȱhourȱ NOPECȱ––ȱNorthernȱOhioȱPublicȱEnergyȱCouncilȱ NOxȱ––ȱNitrogenȱOxidesȱ NP15ȱ––ȱNorthȱofȱPathȱ15ȱ O&Mȱ––ȱOperationsȱandȱMaintenanceȱ PG&Eȱ––ȱPacificȱGasȱandȱElectricȱCompanyȱ PTCȱ––ȱProductionȱTaxȱCreditȱ PUCȱ––ȱPublicȱUtilitiesȱCodeȱ PUCOȱ––ȱPublicȱUtilitiesȱCommissionȱofȱOhioȱ PVȱȬȱPhotovoltaicȱ QFȱ––ȱQualifyingȱFacilitiesȱ REȱ––ȱRenewableȱEnergyȱ RECȱ––ȱRenewableȱEnergyȱCertificateȱ RPSȱ––ȱRenewableȱPortfolioȱStandardȱ RRDRȱ––ȱRenewableȱResourceȱDevelopmentȱReportȱ SCEȱ––ȱSouthernȱCaliforniaȱEdisonȱCompanyȱ SDG&Eȱ––ȱSanȱDiegoȱGasȱandȱElectricȱCompanyȱ SEPȱ––ȱSupplementalȱEnergyȱPaymentȱ VEEȱ––ȱVerification,ȱEditingȱandȱEstimationȱ ȱ 7 TABLE OF CONTENTS 1 INTRODUCTION..............................................................................................................................11 1.1 1.2 1.3 2 Objective.......................................................................................................... 11 ProjectȱElementsȱAndȱTimeline.................................................................... 12 Phaseȱ2ȱȬȱImplementationȱPlan .................................................................... 12 OVERVIEW OF CCA.........................................................................................................................15 2.1 WhatȱIsȱCCA? ................................................................................................. 15 2.2 LegalȱAndȱRegulatoryȱAuthority................................................................. 17 2.2.1 RequirementsȱAfterȱFilingȱTheȱImplementationȱPlan ...................... 17 2.3 StatusȱOfȱCPUCȱRulemaking ....................................................................... 19 2.3.1 Phaseȱ1ȱIssues ......................................................................................... 19 2.3.2 Phaseȱ2ȱIssues ......................................................................................... 19 2.4 AggregationȱInȱOtherȱStates ......................................................................... 20 2.5 ImplementationȱModels ................................................................................ 21 2.5.1 SingleȱThirdȱPartyȱSupplier .................................................................. 21 2.5.2 MultipleȱThirdȱPartyȱServiceȱProviders.............................................. 22 2.5.3 MunicipalȱOperations............................................................................ 22 2.5.4 UnilateralȱorȱJointȱOperations .............................................................. 22 3 BENEFITS OF CCA............................................................................................................................25 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 4 LowerȱElectricityȱCosts.................................................................................. 26 FuelȱEfficiencyȱandȱEnvironmentalȱBenefits .............................................. 29 RateȱStability ................................................................................................... 29 EnergyȱSecurity .............................................................................................. 31 CustomerȱChoice............................................................................................ 31 DemandȱSideȱEnergyȱEfficiency .................................................................. 31 SelfȱGenerationȱAndȱWheeling .................................................................... 32 RegionalȱEconomicȱCompetitiveness.......................................................... 33 CreationȱofȱStrategic/AssetȱValue ................................................................ 33 OpportunitiesȱForȱInnovation ...................................................................... 33 RISK ASSESSMENT .........................................................................................................................35 4.1 ImplementationȱPlanȱStageȱRisks ................................................................ 35 4.2 OperationalȱPlanningȱStageȱRisks ............................................................... 37 4.3 OperationsȱStageȱRisks.................................................................................. 38 4.3.1 OperationsȱRiskȱDiscussion.................................................................. 41 4.4 RegulatoryȱRiskȱDiscussion.......................................................................... 42 4.5 RiskȱMitigationȱThroughȱPhysicalȱandȱFinancialȱReserves ..................... 42 4.5.1 PhysicalȱReserves ................................................................................... 42 4.5.2 FinancialȱReserves.................................................................................. 43 4.6 RiskȱMitigationȱThroughȱPhasedȱImplementation ................................... 43 ȱ 9 5 FEASIBILITY ANALYSIS ................................................................................................................45 5.1 StudyȱApproach ............................................................................................. 45 5.2 CustomerȱBase ................................................................................................ 46 5.3 KeyȱAssumptions ........................................................................................... 46 5.3.1 UtilityȱRateȱBenchmarks ....................................................................... 47 5.3.2 CostȱResponsibilityȱSurcharges............................................................ 50 5.3.3 RenewableȱEnergyȱSubsidies................................................................ 52 5.4 FinancialȱAnalysisȱStructure......................................................................... 54 5.5 LoadȱAnalysis ................................................................................................. 55 5.5.1 LoadȱForecastȱMethodology................................................................. 55 5.5.2 CommunityȱEnergyȱLoadȱShape ......................................................... 56 5.5.3 RenewableȱPortfolioȱStandardsȱRequirements .................................. 57 6 FINANCIAL PROJECTIONS...........................................................................................................61 6.1 SupplyȱPortfolioȱDetails ................................................................................ 62 6.2 AlternativeȱSupplyȱScenarios ....................................................................... 64 6.2.1 AlternativeȱSupplyȱScenarioȱ1.............................................................. 64 6.2.2 AlternativeȱSupplyȱScenarioȱ2.............................................................. 65 6.2.3 AlternativeȱSupplyȱScenarioȱ3.............................................................. 65 6.2.4 AlternativeȱSupplyȱScenarioȱ4.............................................................. 66 6.3 SensitivityȱCases............................................................................................. 66 7 EVALUATION OF COSTS AND BENEFITS ...............................................................................77 7.1 AbilityȱToȱDeliverȱLowerȱRates ................................................................... 77 7.2 RateȱStability ................................................................................................... 77 7.3 IncreasedȱUtilizationȱOfȱRenewableȱEnergy .............................................. 78 7.3.1 CostȱOfȱRenewableȱEnergy................................................................... 78 7.3.2 MunicipalȱFinancingȱofȱRenewableȱEnergyȱDevelopment .............. 80 7.3.3 OperationalȱIssuesȱForȱRenewableȱEnergy ........................................ 81 8 REGIONAL COMMUNITY CHOICE AGGREGATION PROGRAM OPERATED UNDER A JOINT POWERS AGENCY ...................................................................................................83 8.1 8.2 8.3 8.4 8.5 8.6 9 EconomiesȱOfȱScaleȱFromȱCombinedȱCCAȱOperations ........................... 83 JointȱPowersȱAgencyȱStructureȱOption....................................................... 83 PurposeȱandȱParties ....................................................................................... 84 Authorization ................................................................................................. 85 JPAȱGovernance ............................................................................................. 85 RevenueȱBondȱIssuance................................................................................. 86 CONCLUSIONS AND RECOMMENDATIONS ........................................................................91 9.1 9.2 Conclusions..................................................................................................... 91 Recommendations.......................................................................................... 93 ȱ ȱ 10 1 INTRODUCTIONȱ ȱ 1.1 Objectiveȱ ȱ Theȱ Countyȱ isȱ aȱ participantȱ inȱ theȱ Communityȱ Choiceȱ Aggregationȱ Demonstrationȱ Project,ȱ whichȱ wasȱ commissionedȱ byȱ theȱ Californiaȱ Energyȱ Commissionȱ (CEC)ȱ andȱ theȱ Unitedȱ Statesȱ Departmentȱ ofȱ Energyȱ toȱ assistȱ localȱ governmentsȱ inȱevaluatingȱandȱimplementingȱ CommunityȱChoiceȱAggregation,ȱ wherebyȱtheȱCountyȱwouldȱaggregateȱtheȱelectricȱloadsȱofȱcustomersȱwithinȱtheȱ Countyȱforȱpurposesȱofȱprocuringȱelectricalȱservices.ȱ ȱ TheȱpurposeȱofȱthisȱreportȱisȱtoȱevaluateȱtheȱfeasibilityȱofȱtheȱCountyȱformingȱaȱ Communityȱ Choiceȱ Aggregationȱ Program.ȱ ȱ Theȱ reportȱ containsȱ detailedȱ economicȱ feasibilityȱ analysesȱ andȱ recommendationsȱ toȱ helpȱ theȱ communityȱ evaluateȱtheȱcostsȱandȱbenefitsȱaffordedȱbyȱCommunityȱChoiceȱAggregationȱandȱ moveȱtowardsȱdevelopmentȱofȱanȱImplementationȱPlan.ȱȱȱ ȱ Theȱ reportȱ andȱ analysesȱ containedȱ hereinȱ compriseȱ projectȱ deliverableȱ Taskȱ 4:ȱ Loadȱ Analysisȱ andȱ CPUCȱ Decisionȱ Basedȱ Feasibilityȱ Analysisȱ forȱ theȱ CECȬ fundedȱ Communityȱ Choiceȱ Aggregationȱ Pilotȱ Project.ȱ ȱ Thisȱ reportȱ buildsȱ uponȱ theȱ Loadȱ Analysisȱ andȱ Assumptionsȱ Basedȱ Feasibilityȱ Analysisȱ previouslyȱ providedȱtoȱtheȱCounty,ȱwhichȱpresentedȱeconomicȱfeasibilityȱresultsȱforȱaȱCCAȱ programȱ utilizingȱ fourȱ alternativeȱ supplyȱ portfolios.ȱ ȱ Uponȱ reviewȱ ofȱ theȱ preliminaryȱresults,ȱtheȱCountyȱprovidedȱinputȱonȱitsȱpreferredȱsupplyȱportfoliosȱ withȱ respectȱ toȱ theȱ percentageȱ ofȱ itsȱ supplyȱ itȱ desiresȱ toȱ beȱ producedȱ fromȱ renewableȱ energyȱ resourcesȱ andȱ whetherȱ theȱ Countyȱ intendsȱ toȱ utilizeȱ itsȱ municipalȱfinancingȱcapabilitiesȱtoȱreduceȱtheȱcostsȱofȱisȱelectricityȱprocurementȱ programȱ byȱ financingȱ energyȱ developmentȱ projects.ȱ ȱ Theseȱ supplyȱ preferencesȱ andȱ otherȱ feedbackȱ receivedȱ fromȱ theȱ Countyȱ staffȱ areȱ reflectedȱ inȱ thisȱ finalȱ report.ȱ ȱ Thisȱ reportȱ additionallyȱ incorporatesȱ theȱ CPUC’’sȱ Decemberȱ 16,ȱ 2004ȱ decisionȱinȱPhaseȱ1ȱofȱtheȱCCAȱrulemakingȱ(DecisionȱNo.ȱD.04Ȭ12Ȭ046).ȱ ȱ AsȱsecondȱphaseȱofȱtheȱDemonstrationȱProjectȱwillȱincludeȱtheȱdevelopmentȱofȱaȱ templateȱ forȱ useȱ byȱ communitiesȱ inȱ developingȱ Implementationȱ Plansȱ forȱ submissionȱ toȱ theȱ Californiaȱ Publicȱ Utilitiesȱ Commissionȱ (CPUC).ȱ ȱ Projectȱ fundingȱisȱavailableȱtoȱoffsetȱtheȱcostsȱofȱcreatingȱtheȱtemplate.ȱȱCommunitiesȱcanȱ utilizeȱ theȱ templateȱ toȱ developȱ theȱ specificȱ Implementationȱ Planȱ forȱ theirȱ CCAȱ program.ȱ ȱ ȱ 11 1.2 ProjectȱElementsȱAndȱTimelineȱ ȱ NCIȱ recommendsȱ aȱ twoȬphasedȱ approachȱ forȱ considerationȱ ofȱ formingȱ aȱ CCAȱ program.ȱȱTheȱcurrentȱPhaseȱ1ȱincludesȱtheȱbaseȱcaseȱfeasibilityȱstudyȱandȱreport,ȱ whileȱPhaseȱ2ȱincludesȱdevelopmentȱofȱanȱImplementationȱPlanȱforȱsubmittalȱtoȱ theȱCPUC.ȱȱAȱhighȱlevelȱoverviewȱofȱtheseȱphasesȱisȱshownȱbelow:ȱ ȱ Phaseȱ1ȱElementȱ ȱ ȱ ȱ ȱ ȱ Timelineȱ CommunityȱSelectionȱ ȱ ȱ ȱ ȱ Completeȱ ParticipantȱOrientationȱ ȱ ȱ ȱ ȱ Completeȱ RenewableȱResourcesȱWorkshopȱ ȱ ȱ ȱ Completeȱ BaseȱCaseȱFeasibilityȱAnalysisȱ ȱ ȱ ȱ Completeȱ ParticipationȱinȱCPUCȱCCAȱRulemakingȱPhaseȱ1ȱ Completeȱ DraftȱEvaluationȱandȱReportȱ ȱ ȱ ȱ Completeȱ FinalȱFeasibilityȱAnalysisȱ ȱ ȱ ȱ ȱ Marchȱ2005ȱ FinalȱEvaluationȱandȱReportȱ ȱ ȱ ȱ Marchȱ2005ȱ ȱ Phaseȱ2ȱElementȱ DevelopmentȱofȱImplementationȱPlanȱTemplateȱ Ongoingȱ ParticipationȱinȱCPUCȱCCAȱRulemakingȱPhaseȱ2ȱ Jan.ȱ2005ȱ––ȱJul.ȱ2005ȱȱȱ PrepareȱandȱSubmitȱImplementationȱPlanȱ ȱ Fallȱ2005ȱ SupportȱImplementationȱPlanȱFilingȱAtȱCPUCȱ ȱ Fallȱ2005ȱ ȱ 1.3 Phaseȱ2ȱȬȱImplementationȱPlanȱ ȱ Afterȱ consideringȱ theȱ expectedȱ benefitsȱ andȱ costsȱ ofȱ formingȱ aȱ CCAȱ program,ȱ communitiesȱ thatȱ wishȱ toȱ proceedȱ withȱ formingȱ aȱ CCAȱ programȱ willȱ needȱ toȱ developȱ anȱ Implementationȱ Plan.ȱ ȱ ABȱ 117ȱ requiresȱ submissionȱ ofȱ anȱ Implementationȱ Planȱ toȱ theȱ CPUCȱ priorȱ toȱ theȱ CCAȱ commencingȱ operations.ȱȱ Theȱ lawȱ requiresȱ theȱ Implementationȱ Planȱ toȱ ““detailȱ theȱ processȱ andȱ consequencesȱ ofȱ aggregation.””ȱ ȱ Theȱ Implementationȱ Planȱ andȱ subsequentȱ changesȱ toȱ itȱ mustȱ beȱ adoptedȱ atȱ aȱ dulyȱ noticedȱ publicȱ hearing.ȱ ȱ Theȱ ImplementationȱPlanȱmustȱcontainȱallȱofȱtheȱfollowing:ȱ ȱ ¾ Anȱorganizationalȱstructureȱofȱtheȱprogram,ȱitsȱoperations,ȱandȱitsȱfunding.ȱ ¾ Ratesettingȱpoliciesȱandȱotherȱcostsȱtoȱparticipants;ȱ ¾ Provisionsȱforȱdisclosureȱandȱdueȱprocessȱinȱsettingȱratesȱandȱallocatingȱcostsȱ amongȱparticipants;ȱ ¾ Theȱmethodsȱforȱenteringȱandȱterminatingȱagreementsȱwithȱotherȱentities;ȱ ȱ 12 ¾ Theȱ rightsȱ andȱ responsibilitiesȱ ofȱ programȱ participants,ȱ including,ȱ butȱ notȱ limitedȱ to,ȱ consumerȱ protectionȱ procedures,ȱ creditȱ issues,ȱ andȱ shutoffȱ procedures;ȱ ¾ Terminationȱofȱtheȱprogram;ȱandȱ ¾ Aȱdescriptionȱofȱtheȱthirdȱpartiesȱthatȱwillȱbeȱsupplyingȱelectricityȱunderȱtheȱ program,ȱincluding,ȱbutȱnotȱlimitedȱto,ȱinformationȱaboutȱfinancial,ȱtechnical,ȱ andȱoperationalȱcapabilities.ȱ ȱ AȱCCAȱmustȱprepareȱaȱstatementȱofȱintentȱwithȱtheȱImplementationȱPlan.ȱȱAnyȱ CCAȱprogramȱshallȱprovideȱforȱtheȱfollowing:ȱ ȱ ¾ Universalȱaccessȱ ¾ Reliabilityȱ ¾ Equitableȱtreatmentȱofȱallȱclassesȱofȱcustomersȱ ¾ Anyȱ requirementsȱ establishedȱ byȱ stateȱ lawȱ orȱ byȱ theȱ CPUCȱ concerningȱ aggregatedȱserviceȱ ȱ Theȱ Californiaȱ Publicȱ Utilitiesȱ Commissionȱ hasȱ responsibilityȱ toȱ reviewȱ theȱ Implementationȱ Planȱ submittedȱ byȱ anȱ Aggregator,ȱ andȱ itȱ mayȱ establishȱ additionalȱ detailȱ regardingȱ theȱ formȱ andȱ contentȱ ofȱ anȱ Implementationȱ Planȱ inȱ Phaseȱ2ȱofȱR.03Ȭ10Ȭ003.ȱ ȱ 13 OMIT Pages 15-142 14 2 OVERVIEWȱOFȱCCAȱ 2.1 WhatȱIsȱCCA?ȱ ȱ Assemblyȱ Billȱ 117ȱ permitsȱ Californiaȱ cities,ȱ counties,ȱ orȱ cityȱ andȱ countyȱ jointȱ powersȱ agenciesȱ (““localȱ governments””),ȱ toȱ implementȱ aȱ programȱ toȱ aggregateȱ theȱ electricȱ loadsȱ ofȱ electricȱ serviceȱ customersȱ withinȱ theirȱ jurisdictionalȱ boundariesȱtoȱfacilitateȱtheȱpurchaseȱandȱsaleȱofȱelectricity.ȱTheȱlocalȱgovernmentȱ wouldȱ becomeȱ aȱ Communityȱ Choiceȱ Aggregatorȱ (““Aggregator””)ȱ toȱ procureȱ electricȱenergyȱforȱresidentsȱandȱbusinessesȱwithinȱaȱcommunity.ȱȱAllȱcustomersȱ currentlyȱ receivingȱ electricȱ generationȱ servicesȱ fromȱ SDG&Eȱ wouldȱ beȱ automaticallyȱ enrolledȱ inȱ theȱ program,ȱ unlessȱ theȱ customerȱ notifiesȱ theȱ Countyȱ ofȱitsȱdesireȱtoȱoptȬoutȱandȱremainȱaȱbundledȱserviceȱcustomerȱofȱSDG&E.ȱȱȱTheȱ Countyȱ wouldȱ beȱ responsibleȱ forȱ operatingȱ theȱ CCAȱ program,ȱ eitherȱ byȱ performingȱ theȱ functionsȱ necessaryȱ forȱ programȱ operationsȱ utilizingȱ itsȱ ownȱ employeesȱorȱbyȱcontractingȱoutȱoperationsȱtoȱoneȱorȱmoreȱthirdȬpartyȱoperatorsȱ orȱenergyȱservicesȱproviders.ȱ ȱ Withinȱ theȱ contextȱ ofȱ CCA,ȱ ““electricity””ȱ meansȱ theȱ electricȱ energyȱ commodityȱ only.ȱ CCA’’sȱ enablingȱ legislationȱ requiresȱ localȱ utilitiesȱ suchȱ asȱ SDG&Eȱ toȱ provideȱelectricityȱdeliveryȱoverȱitsȱexistingȱdistributionȱsystemȱandȱprovideȱendȬ consumerȱmetering,ȱbilling,ȱcollectionȱandȱallȱtraditionalȱretailȱcustomerȱservicesȱ (i.e.,ȱcallȱcenters,ȱoutageȱrestoration,ȱextensionȱofȱnewȱservice).ȱ1ȱAccordingly,ȱtheȱ infrastructureȱ requirementsȱ ofȱ theȱ CCAȱ programȱ doȱ notȱ includeȱ anyȱ electricȱ transmissionȱorȱdistributionȱrelatedȱfacilitiesȱtoȱserveȱCCAȱretailȱloads.ȱȱSDG&Eȱ mustȱ provideȱ deliveryȱ servicesȱ toȱ CCAȱ customersȱ underȱ theȱ sameȱ termsȱ andȱ conditionsȱasȱprovidedȱtoȱotherȱofȱitsȱcustomers.ȱ ȱ Itȱ isȱ importantȱ toȱ distinguishȱ anȱ Aggregatorȱ fromȱ municipalȱ utilitiesȱ andȱ fromȱ energyȱserviceȱprovidersȱasȱeachȱofȱtheseȱentitiesȱprovidesȱdifferentȱservices,ȱhasȱ differentȱresponsibilities,ȱandȱoperatesȱunderȱdifferentȱregulatoryȱframeworks.ȱȱAȱ localȱ governmentȱ thatȱ implementsȱ aȱ communityȱ choiceȱ aggregationȱ programȱ doesȱ notȱ becomeȱ aȱ municipalȱ utilityȱ inȱ theȱ mannerȱ ofȱ theȱ Losȱ Angelesȱ Departmentȱ ofȱ Waterȱ andȱ Powerȱ orȱ theȱ Sacramentoȱ Municipalȱ Utilityȱ District,ȱ whichȱ ownȱ andȱ operateȱ transmissionȱ andȱ distributionȱ systems.ȱ ȱ Aȱ criticalȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ Theȱ CCAȱ willȱ alsoȱ provideȱ customerȱ serviceȱ functionsȱ toȱ disseminateȱ programȱ information,ȱ respondȱ toȱ customerȱ inquires,ȱ conductȱ customerȱ notificationsȱ forȱ theȱ optȬoutȱ process,ȱ andȱ conductȱotherȱcustomerȱaccountȱmanagementȱfunctionsȱrelatedȱtoȱtheȱCCAȱprogram.ȱ 1 ȱ 15 distinguishingȱfactorȱisȱthatȱtheȱCountyȱwouldȱnotȱ ownȱtheȱelectricȱdistributionȱ systemȱwithinȱtheȱCounty.ȱȱRather,ȱitȱwouldȱownȱorȱprocureȱelectricȱpowerȱfromȱ theȱwholesaleȱmarkets,ȱeitherȱthroughȱownershipȱofȱresources,ȱmarketȱpurchases,ȱ orȱ throughȱ aȱ partnerȱ onȱ behalfȱ ofȱ theȱ customersȱ thatȱ chooseȱ toȱ aggregateȱ theirȱ loads.ȱȱTheȱlocalȱinvestorȱownedȱutilityȱ(SCE,ȱPG&E,ȱorȱSDG&E)ȱwouldȱthenȱbeȱ requiredȱ toȱ deliverȱ theȱ electricȱ energyȱ toȱ theȱ endȬuseȱ customerȱ acrossȱ itsȱ transmissionȱandȱdistributionȱfacilities.ȱȱInȱthisȱsense,ȱanȱAggregatorȱisȱsimilarȱtoȱ anȱ electricityȱ serviceȱ providerȱ thatȱ sellsȱ electricityȱ toȱ directȱ accessȱ customers.ȱȱ However,ȱ thereȱ areȱ importantȱ differencesȱ betweenȱ CCAȱ andȱ directȱ access,ȱ andȱ theseȱtwoȱprogramsȱwillȱoperateȱunderȱdifferentȱsetsȱofȱrulesȱestablishedȱbyȱtheȱ CPUC.ȱ ȱ CustomersȱofȱtheȱCCAȱwillȱpayȱtheȱsameȱchargesȱforȱdeliveryȱ(transmissionȱandȱ distribution)ȱ asȱ customersȱ thatȱ remainȱ asȱ fullȱ service,ȱ ““bundled””ȱ customersȱ ofȱ SDG&E.ȱ ȱ Customersȱ willȱ receiveȱ aȱ singleȱ billȱ fromȱ SDG&Eȱ thatȱ includesȱ SDG&E’’sȱ deliveryȱ chargesȱ andȱ theȱ CCA’’sȱ charges.ȱ ȱ Theseȱ deliveryȱ chargesȱ representȱapproximatelyȱoneȱhalfȱofȱtheȱtypicalȱhousehold’’sȱmonthlyȱelectricȱbill.ȱȱ Theȱ Countyȱ willȱ establishȱ ratesȱ forȱ theȱ generationȱ servicesȱ itȱ providesȱ toȱ CCAȱ customers,ȱ andȱ theseȱ customersȱ willȱ noȱ longerȱ payȱ SDG&Eȱ forȱ generationȱ services.ȱȱHowever,ȱSDG&Eȱwillȱbeȱauthorizedȱtoȱassessȱaȱsurchargeȱforȱcertainȱofȱ itsȱ generationȱ relatedȱ costsȱ thatȱ mightȱ otherwiseȱ beȱ shiftedȱ toȱ itsȱ remainingȱ bundledȱserviceȱcustomers.ȱȱThisȱsurchargeȱisȱknownȱasȱtheȱ““costȱresponsibilityȱ surcharge””ȱ orȱ ““CRS””,ȱ andȱ itȱ willȱ beȱ regulatedȱ byȱ theȱ CPUC.ȱ ȱ Theȱ costȱ responsibilityȱsurchargeȱisȱdiscussedȱinȱgreaterȱdetailȱinȱSectionȱ5.3.2.ȱ ȱ Byȱ law,ȱ SDG&Eȱ willȱ performȱ allȱ meteringȱ andȱ billingȱ forȱ CCAȱ customers.ȱȱ SDG&Eȱwillȱcollectȱ theȱCounty’’sȱ chargesȱfromȱCCAȱcustomersȱandȱtransferȱtheȱ fundsȱ collectedȱ toȱtheȱCountyȱinȱtheȱ monthlyȱbillingȱprocess.ȱȱToȱaȱlargeȱextentȱ SDG&E’’sȱcostsȱofȱprovidingȱmetering,ȱbillingȱandȱcustomerȱservicesȱareȱincludedȱ inȱtheirȱexistingȱdeliveryȱcharges.ȱȱHowever,ȱtheȱutilitiesȱhaveȱassertedȱthatȱCCAȱ programsȱ willȱ causeȱ additionalȱ costsȱ relatedȱ toȱ metering,ȱ billingȱ andȱ customerȱ services,ȱandȱtheyȱhaveȱrequestedȱtheȱCPUCȱtoȱauthorizeȱadditionalȱchargesȱtoȱbeȱ assessedȱonȱAggregatorsȱorȱCCAȱcustomers.ȱȱThisȱandȱotherȱissuesȱinȱtheȱCPUCȱ RulemakingȱareȱdiscussedȱinȱSectionȱ2.3.ȱ ȱȱ ȱ 16 2.2 LegalȱAndȱRegulatoryȱAuthorityȱ ȱ Aȱ CCAȱ programȱ forȱ electricȱ customersȱ isȱ governedȱ byȱ theȱ Communityȱ Choiceȱ Aggregationȱ legislationȱ (ABȱ 117,ȱ Chapterȱ 838,ȱ Septemberȱ 24,ȱ 20022).ȱ ȱ Aȱ localȱ governmentȱ couldȱ becomeȱ anȱ Aggregatorȱ forȱ electricȱ utilityȱ generationȱ byȱ passingȱ legislationȱ declaringȱ itselfȱ toȱ beȱ aȱ CCAȱ andȱ developingȱ anȱ ImplementationȱPlanȱforȱsubmissionȱtoȱtheȱCPUC.ȱȱABȱ117ȱcreatesȱanȱimportantȱ opportunityȱforȱtheȱsuccessȱofȱCCAȱbyȱrequiringȱthatȱcustomersȱ““optȬout””ȱofȱtheȱ CCAȱprogramȱratherȱthanȱ““optȬin””.ȱȱThisȱallowsȱtheȱCountyȱtoȱsignȱupȱcustomersȱ willingȱ toȱ switchȱ fromȱ SDG&Eȱ generationȱ serviceȱ toȱ CCAȱ serviceȱ withoutȱ theȱ necessityȱ ofȱ developingȱ anȱ activeȱ marketingȱ effortȱ toȱ reachȱ everyȱ customer.ȱȱ Instead,ȱ theȱ Countyȱ wouldȱ merelyȱ needȱ toȱ notifyȱ customersȱ ofȱ theȱ impendingȱ Communityȱ Choiceȱ Aggregationȱ program.ȱ ȱ Anyȱ customersȱ thatȱ doȱ notȱ wantȱ toȱ participateȱ inȱ theȱ programȱ wouldȱ beȱ requiredȱ toȱ notifyȱ theȱ Countyȱ ofȱ theirȱ electionȱ toȱ optȬoutȱ withinȱ aȱ specifiedȱ amountȱ ofȱ time.ȱ Customersȱ optingȱ outȱ duringȱtheȱinitialȱperiodȱwouldȱnotȱbeȱsubjectȱtoȱpenaltyȱofȱanyȱkind.ȱȱCustomersȱ choosingȱtoȱexitȱtheȱprogramȱafterȱtheȱinitialȱoptȬoutȱperiodȱmayȱbeȱsubjectȱtoȱexitȱ feesȱimposedȱbyȱtheȱCCAȱand/orȱreȬentryȱfeesȱimposedȱbyȱSDG&E.ȱ ȱ ABȱ 117ȱ alsoȱ requiresȱ fullȱ cooperationȱ byȱ theȱ hostȱ investorȱ ownedȱ utilityȱ inȱ anyȱ CCAȱprogramȱimplementedȱbyȱtheȱCounty.ȱȱInȱthisȱregard,ȱABȱ117ȱwouldȱrequireȱ SDG&Eȱ toȱ provideȱ necessaryȱ loadȱ informationȱ andȱ otherȱ importantȱ dataȱ andȱ continueȱ toȱ provideȱ transmission,ȱ distribution,ȱ metering,ȱ meterȱ reading,ȱ billingȱ andȱotherȱessentialȱcustomerȱservices.ȱ ȱ 2.2.1 RequirementsȱAfterȱFilingȱTheȱImplementationȱPlanȱ ȱ 1. Within 10 days after the Implementation Plan is filed, the CPUC will notify SDG&E (PUC Section 366.2(c)(6)). ȱ 2. Withinȱ 90ȱ daysȱ afterȱ theȱ Countyȱ filesȱ anȱ Implementationȱ Planȱ theȱ CPUCȱ shallȱ certifyȱ thatȱ itȱ hasȱ receivedȱ theȱ Implementationȱ plan,ȱ includingȱ anyȱ additionalȱ informationȱ necessaryȱ toȱ determineȱ aȱ costȱ recoveryȱ mechanism.ȱȱ Theȱ Commissionȱ shallȱ designateȱ theȱ earliestȱ possibleȱ dateȱ forȱ implementationȱofȱaȱCCAȱprogramȱ(PUCȱSectionȱ366.2(c)(7)).ȱ ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱȱ 2 ȱ ABȱ 117ȱ becameȱ effectiveȱ Januaryȱ 1,ȱ 2003ȱ amendsȱ Sectionsȱ 218.3,ȱ 366,ȱ 394,ȱ andȱ 394.25ȱ ofȱ theȱPublicȱUtilitiesȱCodeȱandȱcreatesȱSectionsȱ331.1,ȱ366.2,ȱandȱ381.1ȱtoȱtheȱsameȱCode.ȱ 17 3. ȱ 4. ȱ 5. 6. ȱ 7. ȱ 8. ȱ 9. Theȱ Countyȱ mustȱ offerȱ theȱ opportunityȱ toȱ purchaseȱ electricityȱ toȱ allȱ residentialȱ customersȱ withinȱ itsȱ politicalȱ boundariesȱ(PUCȱ Sectionȱ 266.2(b)).3ȱ SDG&Eȱ shallȱ fullyȱ cooperateȱ withȱ theȱ County,ȱ includingȱ providingȱ appropriateȱ billing,ȱ andȱ electricalȱ loadȱ data,ȱ inȱ accordanceȱ withȱ CPUCȱ proceduresȱ(PUCȱSectionȱ366.2(c)(9)).ȱ TheȱCountyȱmustȱfullyȱinformȱallȱcustomersȱofȱtheirȱrightȱtoȱoptȬoutȱofȱtheȱ CCAȱ programȱ andȱ toȱ continueȱ toȱ receiveȱ serviceȱ asȱ aȱ bundledȱ customerȱ fromȱSDG&E.ȱȱAllȱcustomersȱmustȱbeȱnotifiedȱtwiceȱwithinȱtwoȱmonthsȱorȱ 60ȱdaysȱpriorȱtoȱtheȱdateȱofȱautomaticȱenrollment.ȱȱInȱaddition,ȱnotificationȱ mustȱ continueȱ forȱ participatingȱ customersȱ forȱ atȱ leastȱ twoȱ consecutiveȱ billingȱcyclesȱafterȱenrollmentȱ(PUCȱSectionȱ366.2(c)(11),(13).ȱ Notificationȱmustȱcontainȱtheȱfollowingȱinformation:ȱ Customerȱwillȱbeȱautomaticallyȱenrolled;ȱ EachȱcustomerȱhasȱtheȱrightȱtoȱoptȬoutȱofȱtheȱprogramȱwithoutȱpenalty;ȱ andȱ TheȱtermsȱandȱconditionsȱofȱCCAȱserviceȱ(PUCȱSectionȱ366.2(13)(A)).ȱ TheȱCountyȱmayȱrequestȱtheȱCommissionȱtoȱapproveȱandȱorderȱSDG&Eȱtoȱ provideȱtheȱcustomerȱnotificationsȱ(PUCȱSectionȱ366.2(13)(B)).ȱ TheȱCountyȱmustȱregisterȱwithȱtheȱCPUCȱandȱmayȱbeȱrequiredȱtoȱprovideȱ additionalȱ informationȱ inȱ orderȱ toȱ verifyȱ complianceȱ withȱ rulesȱ forȱ consumerȱprotectionȱandȱotherȱproceduresȱ(PUCȱ366.2(c)(14)).ȱȱAtȱtheȱtimeȱ ofȱ registration,ȱ theȱ Countyȱ mustȱ postȱ aȱ bondȱ orȱ provideȱ evidenceȱ ofȱ sufficientȱinsuranceȱtoȱcoverȱanyȱreentryȱfeesȱthatȱmayȱbeȱimposedȱagainstȱitȱ byȱ theȱ CPUCȱ forȱ involuntarilyȱ returningȱ aȱ customerȱ toȱ serviceȱ ofȱ SDG&Eȱ (PUCȱSectionȱ394.25(e)).ȱ TheȱCountyȱmustȱnotifyȱSDG&EȱthatȱCCAȱserviceȱwillȱbeginȱwithinȱ30ȱdaysȱ (PUCȱSectionȱ366.2(c)(15)).ȱ ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱHowever,ȱtheȱCCAȱmayȱimplementȱitsȱprogramȱinȱstagesȱasȱdiscussedȱinȱSectionȱ4.1.5.ȱ 3 ȱ 18 10. ȱ 11. Onceȱ notified,ȱ SDG&Eȱ shallȱ transferȱ allȱ applicableȱ accountsȱ toȱ theȱ newȱ supplierȱwithinȱaȱ30Ȭdayȱperiodȱfromȱtheȱdateȱofȱtheȱcloseȱofȱtheirȱnormallyȱ scheduledȱmonthlyȱmeteringȱandȱbillingȱprocessȱ(PUCȱSectionȱ366.2(c)(16)).ȱ SDG&E shall recover from the County any costs reasonably attributable to the County, as determined by the CPUC (PUC Section 366.2(c)(17)). ȱ 2.3 StatusȱOfȱCPUCȱRulemakingȱ ȱ Whileȱ ABȱ 117ȱ doesȱ provideȱ aȱ statutoryȱ basisȱ forȱ Communityȱ Aggregationȱ projects,ȱ theȱ CPUCȱ hasȱ notȱ yetȱ developedȱ andȱ implementedȱ finalȱ rulesȱ forȱ theȱ developmentȱ ofȱ suchȱ programs.ȱ ȱ Onȱ Septemberȱ 4,ȱ 2003,ȱ theȱ CPUCȱ issuedȱ anȱ orderȱ institutingȱ aȱ rulemakingȱ orȱ ““OIR””ȱ (Rulemakingȱ 03Ȭ09Ȭ007)ȱ inȱ orderȱ toȱ developȱtheȱguidelinesȱforȱcommunityȱaggregationȱprograms,ȱasȱitȱwasȱdirectedȱ toȱ doȱ underȱ ABȱ 117.ȱ ȱ ȱ Onȱ Octoberȱ 2,ȱ 2003,ȱ theȱ CPUCȱ reissuedȱ theȱ rulemakingȱ underȱ Docketȱ No.ȱ R.03Ȭ10Ȭ003.ȱ ȱ Theȱ CPUCȱ bifurcatedȱ theȱ proceedingȱ intoȱ twoȱ phases.ȱȱTheȱscopeȱofȱPhaseȱ1ȱwasȱtoȱdetermineȱissuesȱrelatedȱtoȱcostsȱimposedȱ byȱ theȱ localȱ utilitiesȱ onȱ Aggregatorsȱ andȱ CCAȱ customers,ȱ namelyȱ costȱ responsibilityȱ surcharges,ȱ transactionȱ fees,ȱ andȱ implementationȱ costs.ȱ ȱ Theȱ generalȱ scopeȱ ofȱ Phaseȱ 2ȱ isȱ toȱ addressȱ theȱ processesȱ forȱ interactionsȱ betweenȱ Aggregatorsȱ andȱ theȱ localȱ utilitiesȱ andȱ otherȱ operationalȱ details.ȱ ȱ Theȱ issuesȱ identifiedȱwithȱeachȱphaseȱareȱlistedȱbelow:ȱ ȱ 2.3.1 Phaseȱ1ȱIssuesȱ ȱ x Costȱ responsibilityȱ surchargesȱ ––ȱ methodology,ȱ transparency,ȱ caps,ȱ newȱ utilityȱprocurement,ȱrateȱdesign,ȱphasing,ȱassumptionȱofȱinȱlieuȱMWhȱ x Transactionsȱ costsȱ Ȭȱ implementationȱ fees,ȱ feesȱ relatedȱ toȱ CCAȱ establishment,ȱ enrollmentȱ fees,ȱ billing,ȱ paymentȱ andȱ collection,ȱ monthlyȱ accountȱ maintenanceȱ fee,ȱ intervalȱ meteringȱ fee,ȱ terminationȱ ofȱ CCAȱ programȱfee,ȱspecialȱrequestȱfee,ȱinformationȱfeesȱ x Customerȱ informationȱ issuesȱ ––ȱ dataȱ needsȱ ofȱ Aggregators,ȱ customerȱ confidentialityȱprotectionsȱ ȱ 2.3.2 Phaseȱ2ȱIssuesȱȱȱ ȱ x Theȱ detailedȱ processes,ȱ costs,ȱ andȱ feesȱ authorizedȱ forȱ theȱ utilities’’ȱ CCAȱ implementationȱ activitiesȱ andȱ utilityȱ transactionsȱ withȱ CCAsȱ (e.g.,ȱ metering,ȱ billing,ȱ CCAȱ establishment,ȱ notifications,ȱ enrollments,ȱ accountȱ maintenance,ȱtermination)ȱȱ ȱ 19 x x x x x x Rulesȱ andȱ formatsȱ forȱ notifyingȱ customersȱ ofȱ CCAȱ serviceȱ andȱ customerȱ optȬoutȱopportunitiesȱ Rulesȱ forȱ switchingȱ customersȱ toȱ CCAȱ service,ȱ processingȱ customerȱ optȬ outs,ȱandȱreturningȱCCAȱcustomersȱtoȱutilityȱserviceȱ CustomerȱreentryȱfeesȱandȱbondingȱrequirementsȱimposedȱonȱCCAsȱ CCAȱphaseȬinȱmechanismsȱandȱguidelines,ȱincludingȱimpactsȱonȱtheȱcostȱ responsibilityȱsurchargeȱ CCAȱconsumerȱprotectionȱobligationsȱ CCAȱImplementationȱPlanȱrequirementsȱ ȱ Theȱ Commissionȱ issuedȱ itsȱ finalȱ decisionȱ (D.04Ȭ12Ȭ046)ȱ inȱ Phaseȱ 1ȱ onȱ Decemberȱ16,ȱ 2004,ȱ andȱ thatȱ phaseȱ isȱ nowȱ completed.ȱ ȱ Phaseȱ 2ȱ isȱ expectedȱ toȱ concludeȱinȱtheȱthirdȱquarterȱofȱ2005.ȱ ȱ 2.4 AggregationȱInȱOtherȱStatesȱ ȱ Aggregationȱ programsȱ existȱ inȱ bothȱ Massachusettsȱ andȱ Ohio,ȱ withȱ theȱ Ohioȱ programȱ beingȱ mostȱ similarȱ toȱ Communityȱ Choiceȱ Aggregationȱ inȱ California.ȱȱ Ohioȱ includesȱ provisionsȱ forȱ governmentȱ aggregationȱ onȱ anȱ optȬinȱ orȱ optȬoutȱ basis.ȱ ȱ Accordingȱtoȱ theȱPublicȱUtilitiesȱCommissionȱ ofȱOhioȱ(PUCO),ȱOhioȱhasȱ hadȱ amongȱ theȱ mostȱ successfulȱ electricȱ choiceȱ programsȱ inȱ theȱ nation,ȱ withȱ governmentȱaggregationȱleadingȱtheȱway.4ȱȱTheȱgreatestȱsuccessȱisȱinȱthoseȱareasȱ ofȱOhioȱthatȱhaveȱadoptedȱaggregation.ȱȱNorthernȱOhioȱhasȱexperiencedȱaȱhighȱ rateȱ ofȱ customerȱ switchingȱ dueȱ inȱ largeȱ partȱ toȱ thisȱ processȱ wherebyȱ communitiesȱbandȱtogetherȱtoȱbuyȱelectricity,ȱinȱbulk,ȱforȱtheirȱresidents.ȱȱInȱtheȱ firstȱtwoȱyearsȱofȱelectricȱchoice:ȱ ȱ x Moreȱ thanȱ 150ȱ localȱ governmentsȱ passedȱ ballotȱ issuesȱ andȱ wereȱcertifiedȱ byȱ theȱ PUCOȱ toȱ allowȱ localȱ unitsȱ ofȱ governmentȱ toȱ representȱ theirȱ communitiesȱ inȱ theȱ competitiveȱ electricityȱ market.ȱ ȱ Ohioȱ isȱ homeȱ toȱ theȱ Northeastȱ Ohioȱ Publicȱ Energyȱ Councilȱ (NOPEC),ȱ theȱ largestȱ publicȱ aggregatorȱ inȱ theȱ Unitedȱ States.ȱ ȱ NOPECȱ representsȱ 112ȱ communitiesȱ inȱ eightȱcountiesȱandȱmoreȱthanȱ350,000ȱresidentialȱcustomers.ȱ ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ Informationȱ aboutȱ theȱ Ohioȱ aggregationȱ experienceȱ wasȱ obtainedȱ fromȱ Theȱ Ohioȱ Retailȱ Electricȱ Choiceȱ Programsȱ Reportȱ ofȱ Marketȱ Activityȱ 2001Ȭ2002,ȱ Aȱ Reportȱ byȱ Theȱ Publicȱ Utilitiesȱ Commissionȱ ofȱ Ohio,ȱ Mayȱ2003.ȱ 4 ȱ 20 OfȱthoseȱcustomersȱwhoȱhaveȱswitchedȱinȱOhio5,ȱaggregationȱprogramsȱaccountȱ for:ȱ x Nearlyȱ93%ȱofȱresidentialȱcustomersȱwhoȱhaveȱswitchedȱinȱOhioȱ x Moreȱthanȱ88%ȱofȱcommercialȱcustomersȱwhoȱhaveȱswitchedȱinȱOhioȱ x Nearlyȱ20%ȱofȱindustrialȱcustomersȱwhoȱhaveȱswitchedȱinȱOhioȱ ȱ NOPEC customers are able to opt out of the program every two years. NOPEC currently provides rates that provide a 6% discount off the generation portion of electricity bills for residential and governmental accounts and a 4% discount for commercial and small industrial accounts. The supply contract NOPEC negotiated with its energy provider, Green Mountain Energy, guarantees its electricity generation charges will always be less than the utility’’s generation charges. The electricity supplied through the NOPEC program is about 70% less polluting than the typical system power in Ohio. ȱ 2.5 ImplementationȱModelsȱ ȱ ThereȱareȱaȱvarietyȱofȱapproachesȱtheȱCountyȱcouldȱtakeȱinȱimplementingȱaȱCCAȱ program,ȱvaryingȱinȱtheȱdegreeȱofȱoperationalȱcontrol,ȱriskȱandȱbenefitsȱaffordedȱ toȱtheȱCounty.ȱ ȱ 2.5.1 SingleȱThirdȱPartyȱSupplierȱ ȱ Atȱ oneȱ endȱ ofȱ theȱ spectrum,ȱ theȱ Countyȱ couldȱ pursueȱ aȱ minimalistȱ approach,ȱ essentiallyȱ servingȱ asȱ aȱ conduitȱ betweenȱ electricȱ customersȱ withinȱ theȱ Countyȱ andȱaȱthirdȱpartyȱelectricȱsupplier.ȱȱTheȱCountyȱwouldȱsolicitȱoffersȱfromȱelectricȱ suppliersȱ toȱ serveȱ theȱ customersȱ thatȱ chooseȱ toȱ participateȱ inȱ theȱ programȱ (i.e.,ȱ doȱ notȱ optȱ out)ȱ andȱ wouldȱ largelyȱ relyȱ onȱ theȱ supplierȱ toȱ administerȱ theȱ program.ȱ ȱ Anȱ exampleȱ wouldȱ beȱ forȱ theȱ Countyȱ toȱ negotiateȱ aȱ guaranteedȱ discountȱtoȱtheȱprevailingȱSDG&Eȱrateȱsuchȱthatȱtheȱsupplierȱabsorbsȱtheȱrisksȱofȱ meetingȱ theȱ obligationȱ toȱ provideȱ electricityȱ costȱ savings.ȱ ȱ Thisȱ approachȱ offersȱ veryȱlittleȱriskȱtoȱtheȱCountyȱbutȱalsoȱlimitsȱtheȱpotentialȱupside,ȱespeciallyȱwithȱ respectȱ toȱ theȱ benefitsȱ offeredȱ byȱ municipalȬfinancedȱ generationȱ assetsȱ orȱ financingȱ arrangements.6ȱ Suppliersȱ mayȱ notȱ beȱ willingȱ toȱ absorbȱ theȱ risksȱ associatedȱwithȱfactorsȱthatȱareȱoutsideȱtheȱcontrolȱofȱtheȱsupplier,ȱsuchȱasȱthoseȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ Remainingȱ customerȱ switchingȱ isȱ attributableȱ toȱ nonȬgovernmentȱ aggregation,ȱ suchȱ asȱ directȱ accessȱ arrangementsȱbetweenȱenergyȱsuppliersȱandȱretailȱcustomers.ȱ 6ȱ Itȱmayȱbeȱpossibleȱtoȱnegotiateȱagreementsȱwithȱtheȱelectricȱsupplierȱtoȱintegrateȱmunicipalȱresourcesȱorȱ utilizeȱ municipalȱ bonding,ȱ butȱ thisȱ wouldȱ necessitateȱ greaterȱ Countyȱ involvementȱ thanȱ representedȱ byȱ theȱpureȱminimalistȱapproachȱoutlinedȱhere.ȱ 5 ȱ 21 posedȱ byȱ changesȱ inȱ SDG&Eȱ ratesȱ orȱ theȱ CRS.ȱ ȱ Furthermore,ȱ underȱ theȱ assumptionȱ thatȱ suppliersȱ wouldȱ notȱ chargeȱ lessȱ thanȱ theȱ marketȱ priceȱ ofȱ electricityȱasȱutilizedȱinȱthisȱanalysis,ȱtheȱimpositionȱofȱtheȱCRSȱwouldȱappearȱtoȱ eliminateȱ theȱ opportunityȱ forȱ costȱ savingsȱ toȱ beȱ obtainedȱ inȱ theȱ nearȱ term.ȱȱ Indicativeȱ bidsȱ fromȱ electricityȱ suppliersȱ shouldȱ beȱ obtainedȱ earlyȱ inȱ theȱ County’’sȱ implementationȱ planningȱ toȱ helpȱ determineȱ whetherȱ thisȱ approachȱ isȱ financiallyȱviable.ȱ ȱ 2.5.2 MultipleȱThirdȱPartyȱServiceȱProvidersȱ ȱ Inȱ pursuingȱ thisȱ approach,ȱ theȱ Countyȱ wouldȱ ““unbundle””ȱ theȱ electricȱ servicesȱ neededȱforȱtheȱprogramȱandȱnegotiateȱcontractsȱwithȱthirdȱpartiesȱforȱprovisionȱ ofȱ theseȱ discreteȱ servicesȱ (e.g.,ȱ customerȱ accountȱ services,ȱ schedulingȱ coordination,ȱelectricȱsupply).ȱȱTheȱCountyȱwouldȱassumeȱoverallȱresponsibilityȱ forȱtheȱprogramȱandȱforȱtheȱperformanceȱofȱitsȱcontractors.ȱȱTheȱCountyȱwouldȱ beȱ responsibleȱ forȱ settingȱ ratesȱ andȱ programȱ policiesȱ andȱ forȱ generalȱ administrationȱ ofȱ theȱ program.ȱ ȱ Thisȱ approachȱ offersȱ severalȱ advantages,ȱ includingȱ limitedȱ staffingȱ requirements,ȱ greaterȱ control,ȱ diffusionȱ ofȱ riskȱ (associatedȱwithȱsupplierȱdefault),ȱandȱtheȱaccumulationȱofȱindustryȱknowledgeȱ andȱexperienceȱthatȱcreatesȱstrategicȱvalueȱatȱtheȱCounty.ȱȱUnderȱthisȱapproach,ȱ theȱ Countyȱ wouldȱ bearȱ soleȱ accountabilityȱ forȱ theȱ resultsȱ achievedȱ byȱ theȱ program;ȱregardlessȱofȱwhetherȱtheseȱareȱsuccessesȱorȱfailures.ȱȱȱȱȱȱ ȱ 2.5.3 MunicipalȱOperationsȱ ȱ Inȱ theȱ longerȱ term,ȱ theȱ Countyȱ couldȱ createȱ theȱ organizationȱ neededȱ toȱ operateȱ theȱ CCAȱ program,ȱ utilizingȱ inȬhouseȱ staffȱ andȱ resources.ȱ ȱ Recruitingȱ skilledȱ professionalȱ staffȱ withȱ electricityȱ operationsȱ experienceȱ wouldȱ beȱ aȱ challengingȱ endeavorȱ inȱ theȱ nearȱ termȱ andȱ isȱ probablyȱ notȱ feasibleȱ forȱ aȱ plannedȱ 2006ȱ startȱ date.ȱȱOverȱtime,ȱasȱtheȱCountyȱgainsȱexperienceȱwithȱtheȱprogram,ȱsomeȱorȱallȱ functionsȱthatȱwereȱinitiallyȱcontractedȱoutȱtoȱthirdȱpartiesȱcouldȱbeȱbroughtȱinȬ house,ȱifȱdesired.ȱȱ ȱ 2.5.4 UnilateralȱorȱJointȱOperationsȱ ȱ TheȱCountyȱcouldȱimplementȱaȱCCAȱprogramȱonȱitsȱownȱorȱinȱcombinationȱwithȱ otherȱcitiesȱand/orȱcountiesȱthroughȱaȱJointȱPowersȱAgencyȱ(JPA).ȱClearly,ȱthereȱ wouldȱbeȱefficienciesȱandȱcostȱsavingsȱachievedȱbyȱjointlyȱimplementingȱaȱsingleȱ program.ȱȱSuchȱaȱcombinedȱprogramȱprovidesȱscaleȱeconomies,ȱimprovingȱtermsȱ ofȱ financingȱ andȱ powerȱ supplyȱ options.ȱ ȱ Customersȱ wouldȱ getȱ theȱ benefitsȱ ofȱ ȱ 22 greaterȱbulkȱbuyingȱpowerȱandȱprofessionalȱexpertiseȱavailableȱthroughȱaȱlargerȱ organization.ȱȱAȱlargerȱorganizationȱwouldȱwieldȱgreaterȱpoliticalȱinfluenceȱandȱ moreȱeffectivelyȱparticipateȱinȱtheȱregulatoryȱprocessȱtoȱprotectȱmemberȱinterests.ȱȱ Individualȱ implementationȱ wouldȱ requireȱ aȱ greaterȱ investmentȱ ofȱ timeȱ andȱ expenseȱbyȱtheȱCounty,ȱandȱwouldȱentailȱgenerallyȱhigherȱoperationsȱcosts.ȱ ȱ TheȱprimaryȱdisadvantagesȱofȱimplementationȱthroughȱaȱJPAȱareȱaȱjointȱprogramȱ couldȱreduceȱtheȱdegreeȱofȱautonomyȱexercisedȱbyȱtheȱCountyȱoverȱitsȱprogramȱ andȱtheȱJPAȱdecisionȬmakingȱprocessȱcanȱbeȱcumbersome.7ȱ ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ Theȱ individualȱ membersȱ ofȱ theȱ JPAȱ couldȱ retainȱ ratemakingȱ authority,ȱ suchȱ thatȱ eachȱ communityȱ maintainsȱitsȱownȱtariffsȱapplicableȱtoȱcustomersȱwithinȱitsȱjurisdiction.ȱ 7 ȱ 23 24 3 BENEFITSȱOFȱCCAȱ ȱ TheȱprimaryȱbenefitsȱofferedȱbyȱCCAȱareȱlocalȱcontrolȱoverȱtheȱenergyȱresourcesȱ utilizedȱ byȱ theȱ communityȱ andȱ theȱ abilityȱ toȱ eitherȱ provideȱ electricityȱ toȱ customersȱatȱaȱlowerȱoverallȱcost,ȱincreaseȱrevenuesȱforȱpublicȱbenefitȱprograms,ȱ orȱaȱcombinationȱofȱtheȱtwo.ȱȱTheȱcostȱsavingsȱcanȱaccrueȱtoȱcustomersȱthroughȱ lowerȱelectricȱbillsȱorȱcanȱbeȱusedȱbyȱtheȱCountyȱtoȱprovideȱenhancedȱservicesȱtoȱ itsȱconstituents.ȱȱLocalȱcontrolȱmanifestsȱinȱaȱvarietyȱofȱbenefitsȱgivingȱcustomersȱ aȱ meansȱ toȱ effectuateȱ theirȱ preferencesȱ regardingȱ theȱ typeȱ ofȱ electricityȱ productionȱ theyȱ supportȱ asȱ wellȱ asȱ obtainingȱ energyȱ servicesȱ thatȱ satisfyȱ theirȱ uniqueȱ needs.ȱ ȱ Throughȱ CCA,ȱ theȱ Countyȱ canȱ chooseȱ toȱ structureȱ aȱ supplyȱ portfolioȱ thatȱ achievesȱ costȱ efficiencies,ȱ fuelȱ andȱ technologicalȱ diversity,ȱ environmentalȱ improvement,ȱ and/orȱ costȱ stability.ȱ ȱ Theȱ Countyȱ canȱ chooseȱ toȱ developȱ itsȱ ownȱ energyȱ resourcesȱ andȱ decideȱ whichȱ typeȱ ofȱ resourcesȱ willȱ beȱ developedȱ andȱ whereȱ suchȱ resourcesȱ shouldȱ beȱ located,ȱ consistentȱ withȱ itsȱ generalȱ planningȱ responsibilities.ȱ ȱ Newȱ generationȱ infrastructureȱ developedȱ toȱ serveȱtheȱCCAȱprogramȱcanȱimproveȱtheȱreliabilityȱofȱtheȱstate’’sȱelectricȱsystem.ȱ ȱ CCAȱwouldȱfacilitateȱtheȱCounty’’sȱimplementationȱofȱanȱaggressiveȱprogramȱtoȱ increaseȱutilizationȱofȱrenewableȱenergyȱresourcesȱandȱpromoteȱimprovedȱenergyȱ efficiency.ȱ ȱ Theȱ County’’sȱ localȱ perspectiveȱ andȱ itsȱ primaryȱ missionȱ toȱ serveȱ itsȱ customersȱ ratherȱ thanȱ maximizeȱ profitsȱ forȱ shareholdersȱ placesȱ itȱ inȱ aȱ uniqueȱ positionȱ toȱ integrateȱ effectiveȱ demandȬsideȱ energyȱ efficiencyȱ programsȱ withȱ procurementȱ ofȱ electricityȱ suppliesȱ toȱ lowerȱ overallȱ energyȱ costsȱ forȱ theȱ community.ȱ ȱ Generallyȱ speaking,ȱ theȱ costȱ competitivenessȱ ofȱ theȱ CCAȱ programȱ willȱ dependȱ onȱtheȱfollowingȱfactors:ȱ ȱ x Theȱ quantityȱ andȱ mixȱ ofȱ customersȱ servedȱ byȱ theȱ Countyȱ andȱ theȱ rateȱ designsȱchargedȱbyȱSDG&Eȱforȱtheȱvariousȱcustomerȱclassesȱ x Theȱ compositeȱ loadȱ profilesȱ (hourȬbyȬhourȱ energyȱ consumptions)ȱ ofȱ theȱ County’’sȱcustomerȱportfolioȱ x TheȱresourceȱmixȱutilizedȱbyȱtheȱCountyȱ x Theȱ useȱ ofȱ lowȱ costȱ municipalȱ bondsȱ toȱ financeȱ generationȱ resourceȱ projectsȱ x Electricityȱpricesȱandȱpricesȱforȱotherȱservicesȱnegotiatedȱwithȱthirdȱpartyȱ electricȱsuppliersȱ x TheȱtrajectoryȱofȱSDG&E’’sȱgenerationȱcostsȱandȱwhetherȱallȱcostȱincreasesȱ areȱpassedȱonȱtoȱCCAȱcustomersȱthroughȱtheȱcostȱresponsibilityȱsurchargeȱ ȱ 25 x Theȱ costsȱ chargedȱ byȱ SDG&Eȱ forȱ implementationȱ activitiesȱ andȱ transactionsȱsuchȱasȱmetering,ȱbilling,ȱandȱcustomerȱservices.ȱ ȱ AȱCCAȱprogramȱwouldȱenableȱtheȱCountyȱtoȱcaptureȱtheȱbenefitsȱofȱcompetitionȱ amongȱ suppliersȱ forȱ theȱ rightȱ toȱ serveȱ theȱ community’’sȱ load.ȱ ȱ California’’sȱ experienceȱ withȱ directȱ accessȱ showedȱ thatȱ suppliersȱ wereȱ willingȱ toȱ offerȱ discountsȱtoȱlargeȱcustomersȱofȱtheȱinvestorȱownedȱutilitiesȱ(IOUs).ȱȱForȱtheȱmostȱ part,ȱdiscountedȱratesȱwereȱnotȱofferedȱtoȱresidentialȱcustomersȱbecauseȱofȱtheirȱ relativelyȱ smallȱ loadsȱ andȱ theȱ highȱ marketingȱ andȱ transactionsȱ costsȱ relatedȱ toȱ servingȱ massȬmarketȱ customers.ȱ ȱ Someȱ suppliersȱ wereȱ ableȱ toȱ chargeȱ higherȱ pricesȱ thanȱ theȱ IOU’’sȱ forȱ renewableȱ orȱ ““green””ȱ energy,ȱ andȱ mostȱ residentialȱ customersȱ thatȱ switchedȱ toȱ directȱ accessȱ didȱ soȱ toȱ increaseȱ theȱ amountȱ ofȱ renewableȱ energyȱ usedȱ toȱ supplyȱ theirȱ homes.ȱ ȱ Theȱ optȬoutȱ featureȱ ofȱ CCAȱ eliminatesȱ mostȱ ofȱ theȱ marketingȱ andȱ transactionsȱ costsȱ thatȱ limitedȱ theȱ opportunitiesȱ inȱ theȱ directȱ accessȱ marketȱ forȱ residentialȱ andȱ smallȱ commercialȱ customers.ȱ ȱ Throughȱ communityȱ aggregation,ȱ smallȱ customersȱ canȱ obtainȱ competitiveȱ electricityȱ suppliesȱ directlyȱ fromȱ theȱ wholesaleȱ marketȱ onȱ aȱ scaleȱ thatȱwasȱsimplyȱnotȱfeasibleȱunderȱdirectȱaccessȱrules.ȱȱȱȱȱ ȱ 3.1 LowerȱElectricityȱCostsȱ ȱ Toȱ theȱ extentȱ theȱ Countyȱ canȱ obtainȱ electricityȱ atȱ aȱ lowerȱ costȱ thanȱ chargedȱ byȱ SDG&E,ȱtheȱmarginȱcanȱbeȱusedȱtoȱlowerȱratesȱforȱCCAȱcustomers,ȱcontributeȱtoȱ reserveȱorȱcontingencyȱfunds,ȱorȱaugmentȱtheȱCounty’’sȱrevenuesȱforȱprovisionȱofȱ publicȱservicesȱtoȱitsȱconstituents.ȱȱ ȱ AȱcomparisonȱofȱSDG&E’’sȱratesȱtoȱcurrentȱmarketȱpricesȱforȱelectricityȱindicatesȱ theȱ marginȱ embeddedȱ inȱ theȱ generationȱ ratesȱ chargedȱ byȱ SDG&E.ȱ ȱ Theȱ tableȱ belowȱ comparesȱ theȱ currentȱ systemȱ averageȱ generationȱ rateȱ forȱ SDG&Eȱ toȱ theȱ estimatedȱcostȱofȱsupplyingȱtheȱCountyȱatȱcurrentȱmarketȱpricesȱofȱelectricity.ȱ ȱ ȱ CentsȱPerȱ Costȱ KWhȱ SDG&EȱAvg.ȱGenerationȱ 7.1ȱ Rateȱ EstimatedȱSupplyȱCostȱ 5.6ȱ GrossȱMarginȱ 1.5ȱ ȱ ȱ 26 Absentȱ theȱ impositionȱ ofȱ aȱ CRS,ȱ theȱ Countyȱ couldȱ captureȱ upȱ toȱ 1.6ȱ centsȱ perȱ kWhȱofȱmarginȱbyȱprocuringȱelectricityȱatȱmarketȱpricesȱtoȱsupplyȱtheȱprogram.ȱȱ However,ȱ ABȱ 117ȱ andȱ ensuingȱ CPUCȱ rulesȱ authorizeȱ SDG&Eȱ toȱ imposeȱ surchargesȱonȱcustomersȱofȱtheȱCCAȱthatȱareȱdesignedȱtoȱshieldȱSDG&Eȱandȱitsȱ remainingȱ customersȱ fromȱ theȱ costsȱ ofȱ losingȱ customersȱ toȱ theȱ CCA.ȱ ȱ Theȱ surchargeȱ representsȱ theȱ difference,ȱ onȱ aȱ systemȱ averageȱ basis,ȱ ofȱ theȱ averageȱ costȱ ofȱ SDG&E’’sȱ supplyȱ portfolioȱ andȱ theȱ marketȱ priceȱ ofȱ electricity.ȱȱ Conceptually,ȱ theȱ impositionȱ ofȱ theȱ CRSȱ onȱ CCAȱ customersȱ meansȱ theȱ Countyȱ mustȱ obtainȱ electricityȱ suppliesȱ atȱ belowȱ marketȱ pricesȱ ifȱ itȱ isȱ toȱ provideȱ electricityȱ costȱ savingsȱ toȱ itsȱ customersȱ duringȱ theȱ timeȱ periodȱ thatȱ theȱ CRSȱ applies.ȱ ȱ ThereȱareȱessentiallyȱtwoȱwaysȱtheȱCountyȱcouldȱobtainȱbelowȬmarketȱelectricityȱ prices:ȱ ȱ 1)ȱ theȱ Countyȱ couldȱ negotiateȱ forȱ lowȱ costȱ electricȱ suppliesȱ fromȱ thirdȱ partyȱ providers,ȱ someȱ ofȱ whomȱ mayȱ beȱ willingȱ toȱ offerȱ discountedȱ pricesȱ inȱ orderȱtoȱgainȱmarketȱshareȱandȱpositionȱtheirȱfirmsȱforȱsalesȱofȱotherȱvalueȱaddedȱ services;ȱ orȱ 2)ȱ theȱ Countyȱ couldȱ utilizeȱ itsȱ abilityȱ toȱ issueȱ lowȱ costȱ municipalȱ bondsȱtoȱdevelopȱorȱcontractȱforȱgenerationȱresources.ȱȱWhereasȱtheȱopportunityȱ forȱnegotiationȱofȱlowȱcostȱsuppliesȱwouldȱbeȱcircumstantialȱandȱultimatelyȱmayȱ notȱ materialize,ȱ theȱ County’’sȱ financingȱ advantageȱ offersȱ aȱ clearȱ andȱ lastingȱ competitiveȱ advantage.8ȱ ȱ Theȱ County,ȱ beingȱ aȱ publicȱ agency,ȱ canȱ financeȱ generationȱprojectsȱatȱanȱeffectiveȱcostȱofȱcapitalȱthatȱisȱapproximatelyȱoneȱhalfȱofȱ SDG&E’’sȱ orȱ theȱ typicalȱ merchantȱ generationȱ developer’’s.ȱ ȱ Asȱ describedȱ inȱ greaterȱdetailȱ inȱSectionȱ7.3.2,ȱtheȱ municipalȱ financingȱadvantageȱisȱparticularlyȱ wellȬsuitedȱ toȱ developmentȱ ofȱ renewableȱ generationȱ projects,ȱ withȱ theirȱ relativelyȱ highȱ capitalȱ costsȱ andȱ lowȱ operatingȱ costs.ȱ ȱ Byȱ financingȱ generationȱ resourcesȱ (conventionalȱ orȱ renewable)ȱ orȱ providingȱ capitalȱ toȱ prepayȱ forȱ electricityȱpurchases,ȱtheȱCountyȱcanȱobtainȱelectricityȱatȱbelowȱmarketȱcosts.ȱ ȱ Onceȱ theȱ CRSȱ terminatesȱ atȱ someȱ pointȱ inȱ theȱ future,ȱ theȱ Countyȱ willȱ competeȱ againstȱSDG&E’’sȱthenȱcurrentȱsupplyȱportfolio,ȱandȱSDG&Eȱwillȱnoȱlongerȱhaveȱ theȱprotectionȱaffordedȱbyȱtheȱCRS.ȱȱByȱ2013,ȱapproximatelyȱ40%ȱofȱtheȱSDG&Eȱ supplyȱ portfolioȱ willȱ beȱ comprisedȱ ofȱ powerȱ purchaseȱ contractsȱ executedȱ afterȱ 2005.ȱȱTherefore,ȱtheȱcostȱcompetitivenessȱofȱSDG&E’’sȱportfolioȱinȱtheȱpostȱCRSȱ timeframeȱwillȱlargelyȱdependȱuponȱhowȱefficientlyȱSDG&Eȱprocuresȱelectricityȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ Forȱ theȱ financialȱ analysisȱ containedȱ inȱ thisȱ feasibilityȱ analysisȱ itȱ isȱ assumedȱ thatȱ thirdȱ partyȱ electricȱ suppliersȱwouldȱofferȱelectricityȱatȱtheȱfullȱmarketȱpriceȱofȱelectricityȱandȱwouldȱnotȱofferȱdiscountsȱforȱtheȱ purposesȱofȱgainingȱmarketȱshare.ȱ 8 ȱ 27 suppliesȱduringȱ theȱnextȱseveralȱ years.ȱȱTheȱconservativeȱassumptionȱwouldȱbeȱ thatȱ SDG&Eȱ willȱ procureȱ electricityȱ atȱ prevailingȱ marketȱ pricesȱ andȱ thatȱ theȱ Countyȱ willȱ needȱ toȱ bringȱ itsȱ financingȱ advantagesȱ toȱ bearȱ inȱ orderȱ toȱ obtainȱ electricityȱcostȱsavingsȱinȱtheȱpostȱCRSȱperiod.9ȱȱȱ ȱ Whileȱ conceptually,ȱ theȱ impositionȱ ofȱ theȱ CRSȱ eliminatesȱ costȱ savingsȱ opportunitiesȱ exceptȱ toȱ theȱ extentȱ theȱ Countyȱ canȱ procureȱ electricityȱ atȱ belowȬ marketȱ prices,ȱ inȱ practiceȱ theȱ customerȱ mixȱ ofȱ theȱ County’’sȱ programȱ isȱ anȱ importantȱ determinantȱ ofȱ whetherȱ costȱ savingsȱ opportunitiesȱ existȱ dueȱ toȱ theȱ presenceȱ ofȱ crossȱ customerȱ subsidiesȱ inȱ SDG&E’’sȱ rateȱ structure.ȱ ȱ Theȱ CRSȱ isȱ calculatedȱasȱifȱtheȱCountyȱservedȱaȱmixȱofȱcustomersȱidenticalȱtheȱoverallȱmixȱofȱ customersȱ onȱ SDG&E’’sȱ system.ȱ ȱ Theȱ actualȱ customerȱ mixȱ withinȱ theȱ Countyȱ isȱ moreȱ heavilyȱ weightedȱ towardsȱ residentialȱ customers,ȱ whichȱ areȱ subsidizedȱ byȱ otherȱ customerȱ classesȱ underȱ SDG&E’’sȱ currentȱ generationȱ rateȱ structure.ȱ ȱ Theȱ averageȱ generationȱ ratesȱ paidȱ toȱ SDG&Eȱ byȱ customersȱ withinȱ theȱ Countyȱ areȱ approximatelyȱ4%ȱlessȱthanȱtheȱaverageȱofȱallȱcustomersȱwithinȱSDG&E’’sȱserviceȱ territory,ȱasȱshownȱinȱtheȱchartȱbelow:ȱ ȱ CurrentȱSDG&EȱGenerationȱRates10ȱ SystemȱAverageȱVs.ȱSanȱDiegoȱCountyȱ ȱ 8 Cents Per KWh 7.5 7 6.5 6 5.5 5 System Average County ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱȱ Asȱ discussedȱ inȱ Sectionȱ 5.3.1,ȱ SDG&E’’sȱ futureȱ generationȱ costsȱ areȱ modeledȱ basedȱ onȱ itsȱ longȬtermȱ resourceȱ planȱ andȱ assumingȱ itȱ procuresȱ aȱ mixȱ ofȱ shortȱ andȱ longȬtermȱ contractsȱ atȱ prevailingȱ marketȱ prices.ȱȱSDG&Eȱmayȱalsoȱacquireȱnewȱgenerationȱassetsȱinȱtheȱfuture.ȱȱHowever,ȱtheȱCCAȱprogramȱwouldȱ haveȱanȱinherentȱcostȱadvantageȱinȱdevelopingȱnewȱgenerationȱresourcesȱdueȱtoȱitsȱlowerȱcostȱofȱcapitalȱ andȱnotȬforȬprofitȱstatus.ȱȱSeeȱdiscussionȱinȱSectionȱ7.3.2.ȱ 10ȱȱIncludesȱ Electricȱ Energyȱ Commodityȱ Componentȱ (EECC),ȱ Competitionȱ Transitionȱ Chargeȱ (CTC)ȱ andȱ DWRȱBondȱCharge.ȱ 9 ȱ 28 ȱ TheȱresidentialȱrateȱsubsidiesȱareȱnotȱreflectedȱinȱtheȱCRS;ȱi.e.ȱtheȱCRSȱisȱtheȱsameȱ perȱ kWhȱ rateȱ forȱ allȱ customers.ȱ ȱ Therefore,ȱ theseȱ subsidiesȱ poseȱ anȱ additionalȱ costȱthatȱmustȱbeȱovercomeȱinȱtheȱimplementationȱofȱaȱCCAȱprogramȱwithinȱtheȱ County.ȱȱAsȱdiscussedȱinȱsectionȱ6.3,ȱtheȱrateȱchangesȱproposedȱbyȱSDG&Eȱinȱitsȱ currentȱ RateȱDesignȱWindowȱproceedingȱ wouldȱeliminateȱ theȱcurrentȱsubsidiesȱ inȱ theȱ generationȱ rateȱ structure,ȱ andȱ theȱ adoptionȱ ofȱ theseȱ proposalsȱ wouldȱ improveȱtheȱeconomicsȱofȱaȱCountyȱCCAȱprogram.ȱ ȱ 3.2 FuelȱEfficiencyȱandȱEnvironmentalȱBenefitsȱ ȱ Byȱ implementingȱ aȱ CCAȱ program,ȱ theȱ Countyȱ canȱ causeȱ newȱ generationȱ toȱ beȱ developed,ȱeitherȱbyȱofferingȱcontractsȱtoȱsuppliersȱforȱtheȱpurchaseȱofȱenergyȱorȱ byȱ directȱ involvementȱ inȱ developingȱ newȱ resources.ȱ ȱ Developmentȱ ofȱ newȱ generation,ȱ whetherȱ renewableȱ orȱ fossilȱ fueled,ȱ willȱ displaceȱ productionȱ fromȱ old,ȱinefficientȱgenerationȱsources,ȱwhichȱcanȱsignificantlyȱreduceȱenvironmentalȱ impactsȱ ofȱ electricityȱ production.ȱ ȱ Accordingȱ toȱ theȱ CEC,ȱ approximatelyȱ oneȱ thirdȱ ofȱ naturalȱ gasȱ consumptionȱ inȱ Californiaȱ derivesȱ fromȱ productionȱ ofȱ electricity.ȱ ȱ Today’’sȱ naturalȱ gasȬfiredȱ generationȱ unitsȱ canȱ operateȱ 30%ȱ toȱ 40%ȱ moreȱ efficientlyȱ thanȱ theȱ 1960’’sȱ eraȱ generatorsȱ thatȱ areȱ currentlyȱ onlineȱ inȱ California.ȱ ȱ Forȱ everyȱ kWhȱ producedȱ fromȱ aȱ newȱ generationȱ resource,ȱ thereȱ wouldȱbeȱupȱtoȱ40%ȱlessȱnaturalȱgasȱconsumptionȱandȱevenȱgreaterȱreductionsȱinȱ airȱemissionsȱandȱgreenhouseȱgases.ȱ ȱ Aȱ benefitȱ thatȱ isȱ particularlyȱ importantȱ toȱ someȱ communitiesȱ isȱ theȱ abilityȱ toȱ promoteȱ useȱ ofȱ renewableȱ energyȱ resourcesȱ andȱ significantlyȱ exceedȱ theȱ renewableȱ energyȱ standardsȱ applicableȱ toȱ SDG&E.ȱ ȱ Increasedȱ renewableȱ generationȱ wouldȱ reduceȱ airȱ pollutionȱ andȱ emissionsȱ ofȱ greenhouseȱ gasesȱ andȱ reduceȱdependenceȱonȱnaturalȱgasȱconsumptionȱevenȱfurther.ȱȱForȱtheȱsameȱkWhȱ producedȱbyȱrenewableȱenergyȱresources,ȱnaturalȱgasȱconsumptionȱwouldȱdropȱ toȱ zeroȱ and,ȱ dependingȱ onȱ theȱ renewableȱ technologyȱ employed,ȱ airȱ emissionsȱ couldȱalsoȱbeȱeliminated.ȱȱ ȱ 3.3 RateȱStabilityȱ ȱ CCAȱenablesȱtheȱCountyȱtoȱlockȱinȱelectricityȱpricesȱandȱprovideȱmultiȬyearȱrateȱ stabilityȱ toȱ itsȱ customers.ȱ ȱ Businessȱ customersȱ inȱ particularȱ tendȱ toȱ valueȱ predictabilityȱinȱtheirȱenergyȱcostsȱtoȱaidȱinȱbusinessȱplanning.ȱȱRateȱstabilityȱcanȱ beȱanȱattractiveȱfeatureȱtoȱhelpȱlureȱnewȱbusinessesȱintoȱtheȱcommunityȱorȱretainȱ thoseȱthatȱmayȱbeȱconsideringȱleavingȱdueȱtoȱhighȱandȱunstableȱelectricityȱcosts.ȱȱ ȱ 29 CCAȱ allowsȱ theȱ communityȱ toȱ negotiateȱ forȱ longȬterm,ȱ fixedȱ pricedȱ electricȱ suppliesȱfromȱaȱvarietyȱofȱsuppliers.ȱȱLikewise,ȱincreasedȱrelianceȱonȱrenewableȱ energyȱ technologiesȱ reducesȱ exposureȱ toȱ theȱ volatileȱ naturalȱ gasȱ market,ȱ whichȱ inȱturnȱisȱaȱprimaryȱdriverȱofȱelectricityȱpriceȱvolatility.ȱȱȱ ȱ Historically,ȱ SDG&E’’sȱ ratesȱ haveȱ exhibitedȱ periodsȱ ofȱ relativeȱ stabilityȱ punctuatedȱ byȱ periodsȱ ofȱ highȱ ratesȱ duringȱ timesȱ ofȱ crisisȱ orȱ theȱ additionȱ ofȱ majorȱ generationȱ investments.ȱ ȱ Dueȱ toȱ actionsȱ takenȱ inȱ responseȱ toȱ theȱ energyȱ crisisȱ ofȱ 2000Ȭ2001,ȱ SDG&E’’sȱ currentȱ supplyȱ portfolioȱ isȱ muchȱ moreȱ heavilyȱ weightedȱ towardȱ fixedȱ priceȱ contractsȱ andȱ renewableȱ energyȱ contractsȱ thanȱ inȱ theȱ yearsȱ immediatelyȱ precedingȱ theȱ energyȱ crisis,ȱ andȱ shouldȱ beȱ expectedȱ toȱ deliverȱ relativelyȱ stableȱ (butȱ increasing)ȱ costsȱ overȱ theȱ nextȱ severalȱ years.ȱȱ However,ȱ SDG&Eȱ isȱ notȱ freeȱ toȱ operateȱ inȱ theȱ marketȱ inȱ theȱ mostȱ efficientȱ mannerȱandȱmustȱmakeȱprocurementȱdecisionsȱwithinȱtheȱregulatoryȱcontextȱinȱ whichȱitȱoperates.ȱToȱaȱlargeȱextent,ȱSDG&Eȱdoesȱnotȱcontrolȱitsȱownȱdestinyȱtheȱ wayȱanȱAggregatorȱcan.ȱ ȱ TheȱCountyȱwouldȱpossessȱautonomyȱoverȱitsȱelectricityȱprocurementȱdecisionsȱ andȱtheȱratesȱitȱchargesȱtoȱcustomers,ȱwhichȱprovidesȱmoreȱcontrolȱoverȱitsȱcostsȱ andȱgreaterȱflexibilityȱinȱitsȱrateȱstructuresȱthanȱSDG&EȱisȱallowedȱunderȱCPUCȱ regulation.ȱȱMoreȱtoolsȱareȱavailableȱtoȱtheȱCountyȱtoȱcontrolȱitsȱelectricȱsupplyȱ costsȱandȱrates.ȱȱForȱexample,ȱpubliclyȬownedȱ(i.e.,ȱmunicipal)ȱutilitiesȱcommonlyȱ createȱ rateȱ stabilizationȱ fundsȱ usingȱ retainedȱ marginsȱ thatȱ enableȱ theȱ utilityȱ toȱ weatherȱshortȬtermȱcostȱincreasesȱwithoutȱtheȱneedȱtoȱincreaseȱrates.ȱȱInȱcontrast,ȱ SDG&Eȱ cannotȱ executeȱ supplyȱ contractsȱ orȱ buildȱ newȱ generationȱ resourcesȱ withoutȱ CPUCȱ approval,ȱ norȱ canȱ itȱ establishȱ orȱ modifyȱ itsȱ ratesȱ orȱ reserveȱ accountsȱ withoutȱ expressȱ approvalȱ fromȱ theȱ CPUC.ȱ ȱ Theȱ regulatoryȱ approvalȱ processȱcanȱtakeȱmanyȱmonths,ȱandȱtheȱCPUCȱmayȱinȱtheȱendȱdenyȱtheȱutility’’sȱ requestedȱ authorization.ȱ ȱ Putȱ simply,ȱ theȱ Countyȱ hasȱ moreȱ autonomyȱ inȱ itsȱ operationsȱ thanȱ doesȱ SDG&E,ȱ whichȱ enhancesȱ theȱ County’’sȱ abilityȱ toȱ provideȱ rateȱstabilityȱtoȱitsȱcustomers.ȱ ȱ Newȱ generationȱ isȱ neededȱ toȱ serveȱ California’’sȱ increasingȱ populationȱ andȱ toȱ replaceȱthousandsȱofȱmegawattsȱofȱagingȱpowerȱplantsȱthatȱwillȱbeȱretiredȱinȱtheȱ nextȱ severalȱ years.ȱ ȱ Californiaȱ isȱ enteringȱ aȱ periodȱ ofȱ majorȱ electricityȱ infrastructureȱ investments,ȱ andȱ theȱ additionȱ ofȱ newȱ utilityȬownedȱ generationȱ willȱ placeȱ upwardȱ pressureȱ onȱ SDG&E’’sȱ rates,ȱ contributingȱ toȱ futureȱ rateȱ instability.ȱ ȱ Byȱ assumingȱ theȱ responsibilityȱ forȱ developingȱ theȱ infrastructureȱ neededȱtoȱserveȱtheȱCounty’’sȱconstituents,ȱtheȱCountyȱcanȱshieldȱitsȱconstituentsȱ fromȱfutureȱrateȱincreasesȱcausedȱbyȱSDG&Eȱgenerationȱinvestments.ȱȱȱ ȱ 30 ȱ 3.4 EnergyȱSecurityȱ ȱ Asȱ theȱ majorityȱ ofȱ newȱ powerȱ plantsȱ inȱ theȱ Unitedȱ Statesȱ areȱfueledȱ byȱ naturalȱ gas,ȱtheȱnationȱisȱincreasinglyȱbecomingȱdependentȱuponȱimportedȱnaturalȱgas.ȱȱ Theȱ flurryȱ ofȱ activityȱ relatedȱ toȱ constructionȱ ofȱ newȱ liquefiedȱ naturalȱ gasȱ terminalsȱ (LNG)ȱ alongȱ theȱ Californiaȱ andȱ Bajaȱ Californiaȱ coastȱ attestsȱ toȱ theȱ increasedȱ demandȱ forȱ importedȱ naturalȱ gas.ȱ ȱ Manyȱ peopleȱ areȱ concernedȱ thatȱ duringȱtheȱnextȱtenȱtoȱtwentyȱyearsȱtheȱUnitedȱStatesȱwillȱbecomeȱasȱdependentȱ onȱ naturalȱ gasȱ importsȱ asȱ itȱ currentlyȱ hasȱ becomeȱ onȱ importedȱ oil.ȱ ȱ Suchȱ dependenceȱ raisesȱ aȱ hostȱ ofȱ political,ȱ environmentalȱ andȱ securityȱ issuesȱ thatȱ potentiallyȱ threatenȱ theȱ nation’’sȱ vitalȱ interests.ȱ ȱ Byȱ implementingȱ aȱ CCAȱ programȱthatȱreliesȱmoreȱheavilyȱonȱrenewableȱenergyȱresources,ȱtheȱCountyȱcanȱ ensureȱthatȱtheȱelectricityȱconsumptionȱofȱcustomersȱparticipatingȱinȱtheȱprogramȱ doesȱ notȱ contributeȱ toȱ theȱ problemsȱ associatedȱ withȱ increasedȱ dependenceȱ onȱ importedȱnaturalȱgas.ȱ ȱ 3.5 CustomerȱChoiceȱ ȱ CCAȱprovidesȱchoiceȱtoȱallȱelectricityȱcustomersȱbecauseȱallȱcustomersȱhaveȱtheȱ optionȱofȱbeingȱautomaticallyȱenrolledȱinȱtheȱCCAȱprogramȱorȱofȱremainingȱwithȱ SDG&Eȱforȱprovisionȱofȱgenerationȱservices.ȱȱDirectȱaccessȱhasȱbeenȱ““suspended””ȱ byȱ theȱ Californiaȱ legislature,ȱ andȱ presentlyȱ CCAȱ isȱ theȱ onlyȱ mechanismȱ thatȱ allowsȱ customersȱ toȱ buyȱ electricityȱ fromȱ anȱ entityȱ otherȱ thanȱ SDG&E.ȱ 11ȱ ȱ Allȱ customersȱcanȱbenefitȱfromȱ opportunitiesȱ forȱ choiceȱandȱtheȱdisciplinaryȱ effectsȱ ofȱ competitionȱ onȱ SDG&E’’sȱ serviceȱ evenȱ ifȱ theyȱ doȱ notȱ takeȱ advantageȱ ofȱ theȱ CCAȱprogram.ȱ ȱ 3.6 DemandȱSideȱEnergyȱEfficiencyȱ ȱ Aȱ CCAȱ programȱ wouldȱ provideȱ anȱ organizationalȱ structureȱ toȱ supportȱ administrationȱofȱenergyȱefficiencyȱprograms,ȱandȱitȱwouldȱalsoȱenableȱseamlessȱ integrationȱofȱenergyȱefficiencyȱintoȱtheȱresourceȱplanningȱprocessȱofȱtheȱCounty.ȱȱ Energyȱ efficiencyȱ orȱ demandȱsideȱmanagementȱprogramsȱcanȱbeȱtailoredȱ toȱtheȱ uniqueȱneedsȱofȱtheȱcommunityȱandȱcanȱbeȱintegratedȱwithȱtheȱsupplyȱplanningȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱVariousȱproposalsȱhaveȱbeenȱdiscussedȱatȱtheȱstateȱlegislatureȱthatȱwouldȱreinstateȱdirectȱaccessȱ alongȱtheȱcore/nonȬcoreȱstructureȱthatȱwasȱusedȱinȱtheȱnaturalȱgasȱindustry;ȱhoweverȱinȱtheȱlastȱ legislativeȱsession,ȱtheȱGovernorȱvetoedȱlegislationȱthatȱwouldȱhaveȱcreatedȱsuchȱaȱstructure.ȱ 11 ȱ 31 ofȱ theȱ Aggregator,ȱ yieldingȱ overallȱ lowerȱ supplyȱ costs.ȱ ȱ Theȱ County’’sȱ ratesȱ canȱ provideȱ theȱ revenueȱ bondingȱ capacityȱ toȱ financeȱ worthyȱ publicȱ benefitsȱ programsȱ suchȱ asȱ installationȱ ofȱ rooftopȱ photovoltaicȱ systems,ȱ combinedȱ heatȱ andȱ powerȱ andȱ energyȱ efficiencyȱ investments,ȱ withȱ debtȱ serviceȱ providedȱ viaȱ monthlyȱ customerȱ bills.ȱ ȱ Theȱ County’’sȱ knowledgeȱ ofȱ theȱ communityȱ canȱ helpȱ improveȱtheȱeffectivenessȱofȱenergyȱefficiencyȱinvestments,ȱasȱtheȱCountyȱwouldȱ beȱinȱ aȱ betterȱ positionȱtoȱ identifyȱhighȱpotentialȱenergyȱefficiencyȱopportunitiesȱ inȱtheȱcommunity.ȱȱ ȱ Localȱ governmentsȱ shouldȱ alsoȱ haveȱ strongȱ motivationȱ toȱ deployȱ effectiveȱ energyȱ efficiencyȱ programs.ȱ ȱ InvestorȬownedȱ utilities,ȱ suchȱ asȱ SDG&E,ȱ faceȱ aȱ potentialȱconflictȱofȱinterestȱinȱadministeringȱenergyȱefficiencyȱprogramsȱbecauseȱ theȱ successȱ ofȱtheirȱprogramsȱreducesȱ theȱutilities’’ȱsalesȱgrowthȱandȱpotentiallyȱ theirȱ profitability.12ȱ ȱ Asȱ anȱ Aggregator,ȱ theȱ Countyȱ wouldȱ beȱ motivatedȱ toȱ reduceȱoverallȱenergyȱcosts,ȱbothȱonȱtheȱsupplyȱandȱdemandȱside.ȱȱAnȱintegratedȱ approachȱ toȱ supplyȱ planning,ȱ energyȱ efficiencyȱ andȱ demandȱ response,ȱ whichȱ reflectsȱtheȱspecificȱcircumstancesȱofȱtheȱcommunity,ȱshouldȱtranslateȱintoȱgreaterȱ energyȱsavings.ȱ ȱ ABȱ117ȱrequiresȱthatȱaȱproportionalȱshareȱofȱenergyȱefficiencyȱfundingȱbeȱspentȱ inȱ theȱ Countyȱ ifȱ itȱ formsȱ aȱ CCAȱ program.ȱ ȱ Thus,ȱ formationȱ ofȱ aȱ CCAȱ programȱ wouldȱobligateȱSDG&EȱtoȱensureȱthatȱtheȱCountyȱisȱnotȱunderȬservedȱbyȱcurrentȱ energyȱ efficiencyȱ programsȱ administeredȱ byȱ SDG&Eȱ orȱ thirdȱ partyȱ administrators.ȱ Theȱ Countyȱ couldȱ seekȱ authorityȱ toȱ replaceȱ SDG&Eȱ asȱ administratorȱ ofȱ energyȱ efficiencyȱ programsȱ byȱ submittingȱ aȱ programȱ applicationȱ toȱ theȱ CPUC.ȱ ȱ However,ȱ currentȱ CPUCȱ rulesȱ doȱ notȱ grantȱ Aggregatorsȱspecialȱrightsȱregardingȱaccessȱtoȱpublicȱgoodsȱfundingȱforȱpurposesȱ ofȱ administeringȱ energyȱ efficiencyȱ programs.ȱȱ Thisȱ issueȱ mayȱbeȱ reevaluatedȱ inȱ Phaseȱ2ȱofȱtheȱCCAȱrulemakingȱ(R.03Ȭ10Ȭ003).ȱ ȱ 3.7 SelfȱGenerationȱAndȱWheelingȱ ȱ Aȱ CCAȱ programȱ wouldȱ provideȱ aȱ legalȱ mechanismȱ toȱ transmitȱ excessȱ powerȱ fromȱ generationȱ locatedȱ ““behindȬtheȬmeter””ȱ toȱ otherȱ loadsȱ withinȱ theȱ County.ȱȱ Forȱ example,ȱ excessȱ productionȱ fromȱ aȱ Countyȱ cogenerationȱ orȱ solarȱ facilityȱ couldȱbeȱusedȱtoȱserveȱotherȱfacilitiesȱratherȱthanȱbeingȱsoldȱtoȱSDG&Eȱorȱlostȱtoȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ Existingȱ regulatoryȱ mechanismsȱ thatȱ decoupleȱ utilityȱ earningsȱ fromȱ salesȱ attemptȱ toȱ reduceȱ theȱ disincentivesȱtoȱutilityȱenergyȱefficiencyȱprograms.ȱ 12 ȱ 32 theȱsystem.ȱȱTheȱCCAȱprogramȱcouldȱenableȱtheȱCountyȱtoȱobtainȱgreaterȱvalueȱ forȱitsȱdistributedȱgenerationȱfacilities.13ȱ ȱ 3.8 RegionalȱEconomicȱCompetitivenessȱ ȱ Theȱ Countyȱ couldȱ useȱ itsȱ ratemakingȱ authorityȱ toȱ establishȱ economicȱ developmentȱandȱbusinessȱattractionȱratesȱtoȱhelpȱlureȱdesirableȱbusinessesȱandȱ jobsȱtoȱtheȱcommunityȱwithȱtheȱbenefitȱofȱlowerȱrates.ȱȱCompetitiveȱelectricȱratesȱ canȱ alsoȱ beȱ aȱ factorȱ inȱ retainingȱ businessesȱ thatȱ mightȱ otherwiseȱ leaveȱ theȱ community,ȱ seekingȱ locationsȱ withȱ lowerȱ costsȱ ofȱ doingȱ business.ȱ ȱ Aȱ CCAȱ programȱ thatȱ providesȱ lowȱ andȱ stableȱ ratesȱ canȱ beȱ anȱ importantȱ factorȱ inȱ maintainingȱregionalȱeconomicȱcompetitiveness.ȱ ȱ Reliabilityȱ ofȱ theȱ electricȱ systemȱ isȱ fundamentalȱ toȱ theȱ region’’sȱ economicȱ competitiveness.ȱ ȱ Toȱ theȱ extentȱ theȱ Countyȱ initiatesȱ developmentȱ ofȱ localȱ generationȱ resourcesȱ toȱ serveȱ theȱ CCAȱ program,ȱ theȱ reliabilityȱ ofȱ theȱ localȱ areaȱ wouldȱbeȱenhanced.ȱȱ ȱȱȱ 3.9 CreationȱofȱStrategic/AssetȱValueȱ ȱ FormationȱofȱaȱCCAȱprogramȱcreatesȱstrategicȱvalueȱarisingȱfromȱtheȱcreationȱofȱ assets,ȱinfrastructureȱandȱannualȱcashȱflows.ȱȱTheȱCountyȱwouldȱbeȱdevelopingȱ expertiseȱinȱenergyȱmatters,ȱbuildingȱinfrastructure,ȱandȱpositioningȱitselfȱforȱanȱ expandedȱroleȱinȱtheȱprovisionȱofȱenergyȱservicesȱifȱfutureȱcircumstancesȱwarrantȱ suchȱanȱexpandedȱrole.ȱȱ ȱ 3.10 OpportunitiesȱForȱInnovationȱ ȱ Aȱ CCAȱ programȱ presentsȱ opportunitiesȱ forȱ theȱ Countyȱ toȱ provideȱ innovativeȱ energyȱservicesȱtoȱcustomers.ȱȱTheȱCountyȱcouldȱdevelopȱprogramsȱthatȱrespondȱ toȱ theȱ localȱ concerns,ȱ needs,ȱ andȱ valuesȱ ofȱ theirȱ communityȱ members.ȱ ȱ Oneȱ exampleȱ wouldȱ beȱ formationȱ ofȱ ““greenȱ pricing””ȱ programsȱ thatȱ provideȱ customersȱtheȱoptionȱofȱchoosingȱtoȱuseȱmoreȱrenewableȱenergy.ȱȱCustomersȱthatȱ valueȱrenewableȱenergyȱwouldȱbeȱableȱtoȱvoluntarilyȱpayȱforȱanyȱadditionalȱcostsȱ ofȱ increasingȱ theȱ renewableȱ energyȱ mix,ȱ reducingȱ theȱ costsȱ toȱ beȱ paidȱ byȱ moreȱ priceȱsensitiveȱcustomers.ȱȱOtherȱinnovativeȱservicesȱcouldȱincludeȱspecialȱratesȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱȱWhetherȱgreaterȱvalueȱcanȱbeȱachievedȱinȱpracticeȱwouldȱdependȱuponȱwhetherȱanȱexistingȱcontractȱisȱinȱ placeȱgoverningȱtheȱsaleȱofȱexcessȱpowerȱfromȱtheȱfacilityȱandȱuponȱtheȱpricingȱtermsȱandȱconditionsȱofȱ theȱcontract.ȱ 13 ȱ 33 forȱ populationȱ subgroupsȱ (e.g.,ȱ lowȱ income,ȱ governmentȱ facilities,ȱ enterpriseȱ zones,ȱ etc.),ȱ programȬfinancedȱ distributedȱ generation,ȱ orȱ aȱ hostȱ ofȱ otherȱ valueȬ addedȱservices.ȱȱ ȱ ȱ 34 4 RISKȱASSESSMENTȱ ȱ Theȱ risksȱ ofȱ formingȱ aȱ CCAȱ programȱ evolveȱ asȱ theȱ Countyȱ beginsȱ itsȱ implementationȱ planningȱ processȱ andȱ thenȱ progressesȱ toȱ startupȱ ofȱ programȱ operations.ȱ ȱ Theȱ County’’sȱ riskȱ exposureȱ alsoȱ dependsȱ greatlyȱ uponȱ theȱ implementationȱ approachȱ utilizedȱ byȱ theȱ County,ȱ asȱ previouslyȱ discussedȱ inȱ sectionȱ2.5.ȱȱTherefore,ȱtheȱrisksȱwillȱbecomeȱmoreȱclearȱasȱtheȱCountyȱengagesȱinȱ itsȱimplementationȱplanning.ȱȱȱ ȱ TheȱmajorȱriskȱassociatedȱwithȱformingȱaȱCCAȱprogramȱisȱtheȱpossibilityȱthatȱtheȱ ratesȱ ofȱ theȱ programȱ exceedȱ theȱ comparableȱ ratesȱ chargedȱ byȱ SDG&E,ȱ causingȱ customersȱ toȱ becomeȱ dissatisfiedȱ withȱ theȱ programȱ orȱ attemptȱ toȱ returnȱ toȱ SDG&Eȱservice.ȱȱWhenȱconsideringȱrisks,ȱitȱisȱimportantȱtoȱdistinguishȱbetweenȱ risksȱborneȱbyȱtheȱCCAȱentityȱandȱrisksȱborneȱbyȱtheȱcustomersȱthatȱparticipateȱ inȱ theȱ program.ȱ ȱ Customerȱ attritionȱ couldȱ leaveȱ theȱ CCAȱ programȱ withȱ longȬ termȱobligationsȱandȱreducedȱrevenues.ȱȱTheȱCounty’’sȱratemakingȱauthorityȱandȱ abilityȱ toȱ raiseȱ ratesȱ ifȱ necessaryȱ wouldȱ protectȱ theȱ Countyȱ fromȱ theȱ financialȱ impactsȱ ofȱunanticipatedȱ programȱcostȱ increases.ȱȱTheȱCountyȱcouldȱimposeȱanȱ exitȱ feeȱ toȱ recoverȱ theȱ costȱ ofȱ longȬtermȱ obligationsȱ thatȱ mayȱ beȱ strandedȱ byȱ customersȱleavingȱtheȱprogram.ȱȱHowever,ȱtheseȱcostsȱwouldȱbeȱpaidȱbyȱtheȱveryȱ constituentsȱwhoseȱinterestsȱtheȱCountyȱrepresents.ȱȱForȱtheseȱreasons,ȱtheȱrisksȱ ofȱtheȱCountyȱformingȱaȱCCAȱprogramȱgenerallyȱremainȱwithȱtheȱcustomersȱthatȱ electȱ toȱ participateȱ inȱ theȱ program.ȱ ȱ Similarly,ȱ customersȱ ofȱ SDG&Eȱ ultimatelyȱ bearȱ theȱ risksȱ ofȱ SDG&E’’sȱ energyȱ procurementȱ practices,ȱ butȱ SDG&Eȱ isȱ notȱ accountableȱtoȱitsȱratepayersȱtoȱtheȱsameȱdegreeȱasȱisȱtheȱCounty.ȱȱȱȱ ȱ Pendingȱ theȱ developmentȱ ofȱ switchingȱ protocolsȱ inȱ Phaseȱ 2ȱ ofȱ theȱ CCAȱ rulemaking,ȱ theȱ Countyȱ couldȱ ultimatelyȱ terminateȱ theȱ program,ȱ ifȱ necessary,ȱ andȱ returnȱ customersȱ toȱ SDG&Eȱ service.ȱ ȱ Theȱ programȱ wouldȱ likelyȱ setȱ asideȱ financialȱreservesȱtoȱcoverȱanyȱreentryȱfeesȱthatȱmayȱbeȱapplicableȱinȱtheȱcaseȱofȱ programȱtermination.ȱȱ ȱ 4.1 ImplementationȱPlanȱStageȱRisksȱ ȱ AtȱtheȱImplementationȱPlanȱstage,ȱtheȱCountyȱwillȱhaveȱevaluatedȱtheȱfeasibilityȱ ofȱbecomingȱanȱAggregatorȱandȱassessedȱtheȱexpectedȱcosts,ȱbenefits,ȱandȱrisksȱofȱ implementingȱ aȱ CCAȱ program.ȱ ȱ Toȱ progressȱ toȱ theȱ nextȱ stage,ȱ theȱ Countyȱ willȱ needȱ toȱ commitȱ additionalȱ fundsȱ forȱ theȱ developmentȱ ofȱ anȱ Implementationȱ Plan.ȱȱTheȱprimaryȱriskȱatȱtheȱImplementationȱPlanȱstageȱisȱpolitical,ȱespeciallyȱifȱ SDG&Eȱ directlyȱ orȱ indirectlyȱ opposesȱ theȱ CCAȱ program.ȱ ȱ Whereasȱ eachȱ ofȱ theȱ ȱ 35 localȱ utilitiesȱ hasȱ publiclyȱ supportedȱ CCA,ȱ thereȱ areȱ alwaysȱ caveatsȱ thatȱ inȱ practiceȱ mightȱ causeȱ themȱ toȱ opposeȱ aȱ specificȱ implementationȱ effortȱ asȱ itȱ progressesȱtowardsȱanȱImplementationȱPlan.ȱ ȱ Typicalȱ utilityȱ responsesȱ toȱ localȱ governmentȱ energyȱ initiativesȱ areȱ toȱ urgeȱ theȱ localȱ government’’sȱ leadersȱtoȱ slowȱ downȱsoȱasȱnotȱtoȱrushȱintoȱsomethingȱ theyȱ doȱ notȱ fullyȱ understand.ȱ ȱ Theȱ utilityȱ mayȱ criticizeȱ theȱ feasibilityȱ study’’sȱ assumptionsȱandȱmethodologyȱandȱsuggestȱthatȱbecomingȱanȱAggregatorȱentailsȱ greatȱ riskȱ withȱ littleȱ orȱ noȱ commensurateȱ benefits.ȱ ȱ Furthermore,ȱ SDG&Eȱ mayȱ formallyȱ opposeȱ elementsȱ ofȱ theȱ Implementationȱ Planȱ atȱ theȱ CPUC.ȱ ȱ Forȱ example,ȱ eachȱ ofȱ theȱ utilitiesȱ hasȱ voicedȱ oppositionȱ toȱ allowingȱ Aggregatorsȱ toȱ phaseȬinȱoperationsȱoverȱaȱmultiȬyearȱperiod,ȱandȱphaseȬinȱproposalsȱcontainedȱ inȱ anȱ Implementationȱ Planȱ mayȱ beȱ protested.ȱ ȱ Inȱ theȱ extremeȱ case,ȱ theȱ utilityȱ mightȱ sponsorȱ communityȱ organizationsȱ toȱ opposeȱ theȱ program,ȱ asȱ hasȱ beenȱ doneȱ byȱ bothȱ SDG&Eȱ andȱ SCEȱ inȱ theirȱ effortsȱ toȱ opposeȱ municipalitiesȱ fromȱ formingȱ distributionȱ utilitiesȱ withinȱ theirȱ historicalȱ serviceȱ territories.ȱ ȱ Whileȱ suchȱ strongȱ oppositionȱ toȱ aȱ potentialȱ CCAȱ programȱ isȱ unlikely,ȱ theȱ Countyȱ shouldȱbeȱrealisticȱandȱnotȱexpectȱcompleteȱsupportȱfromȱtheȱutilityȱforȱitsȱefforts.ȱȱ ȱ Onceȱ aȱ commitmentȱ toȱ developingȱ theȱ Implementationȱ Planȱ isȱ madeȱ aȱ fairlyȱ intensiveȱ effortȱ willȱ beȱ requiredȱ toȱ decideȱ theȱ particularsȱ ofȱ theȱ CCAȱ program.ȱȱ Choicesȱ mustȱ beȱ madeȱ regardingȱ programȱ managementȱ andȱ organizationalȱ structure,ȱ suppliersȱ andȱ resources,ȱ ratesȱ andȱ customerȱ protections,ȱ termsȱ andȱ conditionsȱofȱservice,ȱfinancingȱandȱstaffing.ȱ ȱ Atȱthisȱstage,ȱthereȱisȱalsoȱtheȱregulatoryȱriskȱthatȱtheȱCPUCȱwillȱadoptȱorȱmodifyȱ implementationȱ rulesȱ toȱ theȱ detrimentȱ ofȱ theȱ CCAȱ programȱ orȱ inȱ aȱ wayȱ thatȱ requiresȱ modificationsȱ toȱ theȱ Implementationȱ Plan.ȱ ȱ ȱ ȱ Theȱ developmentȱ ofȱ theȱ Implementationȱ Planȱ canȱ beȱ doneȱ inȱ parallelȱ withȱ theȱ CPUCȱ process.ȱ ȱ Theȱ Implementationȱ Planȱ shouldȱ beȱ filedȱ withȱ theȱ CPUCȱ afterȱ theȱ CPUCȱ issuesȱ itsȱ finalȱ (Phaseȱ 2)ȱ decisionȱ inȱ orderȱ toȱ avoidȱ theȱ potentialȱ expenseȱ ofȱ reȬfilingȱ theȱ plan.ȱȱHowever,ȱdelaysȱinȱtheȱCPUCȱprocessȱcanȱderailȱtheȱimplementationȱeffortȱ ifȱ theȱ processȱ isȱ draggedȱ outȱ indefinitely.ȱ ȱ Electedȱ leadersȱ thatȱ wereȱ earlyȱ supportersȱ ofȱ implementingȱ aȱ CCAȱ programȱ mayȱ finishȱ theirȱ termsȱ beforeȱ theȱ programȱ canȱ beȱ implemented,ȱ andȱ newlyȱ electedȱ leadersȱ mayȱ desireȱ toȱ reconsiderȱtheȱdecisionȱtoȱproceedȱwithȱCCAȱimplementation.ȱȱTurnoverȱofȱkeyȱ staffȱcouldȱalsoȱjeopardizeȱtimelyȱprogramȱimplementation.ȱ ȱ ȱ 36 4.2 OperationalȱPlanningȱStageȱRisksȱ ȱ FollowingȱdevelopmentȱandȱacceptanceȱofȱtheȱImplementationȱPlan,ȱtheȱCountyȱ willȱbeginȱmakingȱcommitmentsȱtoȱbeȱableȱtoȱcommenceȱoperations.ȱȱDependingȱ onȱ howȱ theȱ Countyȱ electsȱ toȱ structureȱ itsȱ program,ȱ additionalȱ fundsȱ willȱ beȱ neededȱtoȱfinanceȱtheȱstartȬupȱactivities.ȱȱTheseȱmayȱincludeȱtheȱfollowing:ȱ ȱ x Conductȱrecruitingȱandȱstaffingȱ x Developȱinformationalȱandȱprogramȱmarketingȱmaterialsȱ x Establishȱcallȱcenterȱforȱcustomerȱinquiriesȱ x Contactȱ keyȱ customersȱ toȱ explainȱ program,ȱ obtainȱ commitment,ȱ andȱ obtainȱauthorizationȱtoȱreleaseȱcustomerȱinformationȱtoȱtheȱCCAȱprogramȱ x PrepareȱshortȱandȱlongȬtermȱloadȱforecastȱ x Developȱcapabilityȱorȱnegotiateȱcontractsȱforȱoperationalȱservicesȱ Electronicȱ dataȱinterchangeȱwithȱutility:ȱacceptȱ meterȱ andȱ usageȱ data,ȱ sendȱ billingȱ data,ȱ acceptȱ paymentȱ andȱ remittanceȱ information,ȱ exchangeȱcustomerȱswitchingȱinformationȱ Customerȱbillȱcalculationsȱ Schedulingȱcoordinatorȱservicesȱ Applicationȱ ofȱ statisticalȱ loadȱ profilesȱ andȱ submittalȱ ofȱ hourlyȱ usageȱ dataȱforȱgridȱoperatorȱsettlementsȱ Resourceȱplanning,ȱportfolioȱandȱriskȱmanagementȱ Ratemakingȱ Loadȱforecastingȱ Wholesaleȱsettlementsȱ Creditȱ InformationȱTechnologyȱ x Executeȱcontractsȱforȱelectricȱsupplyȱ x Identifyȱgenerationȱprojectsȱandȱnegotiateȱparticipation,ȱifȱapplicableȱ x Obtainȱfinancingȱforȱprogramȱcapitalȱrequirementsȱ x Executeȱserviceȱagreementȱwithȱutilityȱȱ x Completeȱutilityȱtechnicalȱtestingȱ x Establishȱaccountȱwithȱutilityȱ x Sendȱ customerȱ noticesȱ toȱ eligibleȱ andȱ ineligibleȱ (e.g.,ȱ directȱ access)ȱ customersȱ x ProcessȱcustomerȱoptȬoutȱrequestsȱ x SubmitȱnotificationȱcertificationȱtoȱCPUCȱ ȱ TheseȱcommitmentsȱshouldȱnotȱbeȱmadeȱuntilȱtheȱCPUCȱhasȱfinalizedȱtheȱrulesȱ forȱCCAȱimplementation,ȱwhichȱisȱexpectedȱtoȱtakeȱplaceȱinȱtheȱFallȱofȱ2005.ȱȱAtȱ ȱ 37 thatȱ point,ȱ theȱ regulatoryȱ riskȱ diminishesȱ significantly,ȱ andȱ theȱ Countyȱ hasȱ aȱ greatȱdealȱ moreȱcertaintyȱregardingȱtheȱdetailedȱprocessesȱthatȱwillȱbeȱrequiredȱ forȱoperatingȱaȱCCAȱprogram.ȱ ȱ 4.3 OperationsȱStageȱRisksȱ ȱ TheȱprimaryȱrisksȱinherentȱinȱtheȱCCAȱoperationsȱareȱthatȱunanticipatedȱeventsȱ causeȱtheȱCounty’’sȱcostsȱtoȱincreaseȱorȱtheȱratesȱofȱSDG&Eȱtoȱdecrease.ȱȱInȱtheseȱ casesȱ theȱ ratesȱ chargedȱ byȱ theȱ Countyȱ couldȱ exceedȱ thoseȱ ofȱ SDG&E,ȱ andȱ customersȱmayȱ becomeȱdissatisfiedȱwithȱtheȱprogram.ȱȱToȱtheȱextentȱcustomersȱ areȱ notȱ precludedȱ fromȱ leavingȱ theȱ program,ȱ theȱ Countyȱ couldȱ faceȱ strandedȱ costsȱ andȱ higherȱ ratesȱ promptingȱ additionalȱ customersȱ toȱ leaveȱ theȱ program.ȱȱ Appropriateȱprogramȱrulesȱthatȱlimitȱcustomerȱswitchingȱorȱthatȱimposeȱexitȱfeesȱ toȱ compensateȱ remainingȱ programȱ customersȱ forȱ commitmentsȱ madeȱ onȱ behalfȱ ofȱ theȱ departingȱ customersȱ willȱ mitigateȱ theȱ riskȱ ofȱ losingȱ customers,ȱ fromȱ theȱ perspectiveȱ ofȱ theȱ CCAȱ operator.ȱ ȱ However,ȱ theȱ program’’sȱ customersȱ wouldȱ thenȱ bearȱ theȱ riskȱ ofȱ potentiallyȱ payingȱ higherȱ ratesȱ thanȱ thoseȱ offeredȱ byȱ SDG&Eȱ (orȱ otherȱ competitors).ȱ ȱ Theseȱ risksȱ highlightȱ theȱ importanceȱ ofȱ clearȱ disclosuresȱ inȱ theȱ customerȱ notificationȱ processȱ soȱ thatȱ potentialȱ customersȱ areȱ clearlyȱ informedȱ ofȱ theirȱ rightsȱ andȱ obligationsȱ priorȱ toȱ takingȱ serviceȱ inȱ theȱ program.ȱ ȱ Potentialȱ customersȱ shouldȱ beȱ informedȱ priorȱ toȱ theȱ customerȱ enrollmentȱ processȱ thatȱ ratepayerȱ savingsȱ areȱ expectedȱ butȱ cannotȱ beȱ guaranteed.14ȱ ȱ Theȱ predominantȱ costȱ ofȱ serviceȱ variablesȱ andȱ risksȱ thatȱ mightȱ impactȱ theȱ County’’sȱoperationsȱcostȱareȱasȱfollows:ȱ ȱ x Theȱ costȱ responsibilityȱ surchargeȱ willȱ varyȱ yearȬtoȬyear.ȱ ȱ Theȱ CRSȱ isȱ inverselyȱ relatedȱ toȱ theȱ prevailingȱ marketȱ priceȱ ofȱ electricityȱ suchȱ thatȱ ifȱ marketȱpricesȱfall,ȱtheȱCRSȱwillȱincrease.ȱȱToȱtheȱextentȱtheȱCRSȱincreasesȱ andȱ theȱ Countyȱ hasȱ lockedȱ inȱ electricityȱ pricesȱ throughȱ longȬtermȱ electricityȱ orȱ fuelȱ contracts,ȱ theȱ CCAȱ customers’’ȱ totalȱ ratesȱ willȱ increase.ȱȱ Theȱ CRSȱ couldȱ alsoȱ increaseȱ ifȱ theȱ CPUCȱ allowsȱ SDG&Eȱ toȱ includeȱ newȱ powerȱpurchaseȱcontractsȱorȱresourcesȱinȱtheȱCRS,ȱandȱtheȱcostsȱareȱaboveȱ prevailingȱmarketȱprices.ȱ ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱThisȱdiscussionȱassumesȱanȱimplementationȱmodelȱwhereȱtheȱprogram’’sȱenergyȱsupplierȱisȱnotȱ offeringȱaȱguaranteedȱsavingsȱpricingȱstructure.ȱ 14 ȱ 38 x Theȱ Countyȱ couldȱ unfavorablyȱ hedgeȱ itsȱ exposureȱ toȱ electricityȱ and/orȱ naturalȱgasȱpriceȱvolatility,ȱandȱadverseȱpriceȱmovementsȱcouldȱcauseȱrateȱ increasesȱforȱitsȱcustomers.ȱȱSimilarly,ȱtheȱCountyȱcouldȱoverȬrelyȱonȱlongȬ termȱ contractsȱ withȱ fixedȱ pricesȱ andȱ findȱ itselfȱ holdingȱ aȱ highȱ costȱ portfolioȱifȱmarketȱpricesȱsubsequentlyȱfall.ȱ x Theȱ Countyȱ couldȱ failȱtoȱproperlyȱsecureȱitsȱcustomerȱ base,ȱmakingȱdebtȱ financingȱ viaȱ theȱ capitalȱ marketsȱ impossibleȱ toȱ obtainȱ andȱ exposingȱ theȱ CountyȱtoȱstrandedȱcostsȱifȱcustomersȱoptȬoutȱofȱtheȱCCAȱprogram.ȱȱEvenȱ withȱappropriateȱswitchingȱrules,ȱlargeȱcustomersȱmayȱgoȱoutȱofȱbusinessȱ orȱ leaveȱ theȱareaȱ andȱ leaveȱbehindȱcostsȱthatȱmustȱbeȱ paidȱbyȱremainingȱ programȱcustomers.ȱȱȱ x Theȱ County’’sȱ energyȱ suppliersȱ couldȱ defaultȱ onȱ supplyȱ contractsȱ (creditȱ risk)ȱ atȱ timesȱ whenȱ energyȱ spotȱ marketsȱ areȱ high,ȱ forcingȱ theȱ Countyȱ toȱ purchaseȱ energyȱ atȱ excessivelyȱ highȱ prices.ȱ ȱ Customersȱ couldȱ failȱ toȱ payȱ theȱ County’’sȱ charges,ȱ andȱ theȱ County’’sȱ creditȱ policiesȱ andȱ customerȱ depositsȱmayȱbeȱinsufficientȱtoȱrecoverȱtheȱuncollectibleȱbillsȱ.ȱ x SDG&Eȱ couldȱ makeȱ changesȱ toȱ itsȱ rateȱ designsȱ thatȱ reduceȱ theȱ costȱ ofȱ generationȱservicesȱandȱincreaseȱtheȱcostsȱofȱdeliveryȱservicesȱorȱthatȱshiftsȱ costsȱ amongȱ customerȱ classesȱ inȱ aȱ mannerȱ thatȱ disadvantagesȱ theȱ customerȱmixȱservedȱbyȱtheȱCounty.ȱ x Otherȱ regulatoryȱ risksȱ associatedȱ withȱ changesȱ inȱ theȱ rulesȱ andȱ tariffsȱ administeredȱ byȱ theȱ CPUCȱ orȱ inȱ theȱ wholesaleȱ marketsȱ regulatedȱ byȱ theȱ Federalȱ Energyȱ Regulatoryȱ Commissionȱ (FERC)ȱ couldȱ increaseȱ theȱ County’’sȱ costȱ ofȱ providingȱ service.ȱ ȱ Forȱ example,ȱ theȱ institutionȱ ofȱ aȱ requirementȱ toȱ useȱ geographicȬspecificȱ loadȱ profilesȱ forȱ electricityȱ procurementȱ couldȱ advantageȱ coastalȱ communitiesȱ toȱ theȱ detrimentȱ ofȱ thoseȱlocatedȱinȱhotter,ȱinlandȱclimates.ȱ x Theȱ availabilityȱ andȱ costȱ ofȱ firmingȱ servicesȱ forȱ intermittentȱ renewableȱ resources,ȱsuchȱasȱwindȱenergy,ȱinȱtheȱprogram’’sȱsupplyȱportfolioȱasȱwellȱ asȱtheȱadequacyȱofȱtheȱtransmissionȱsystemȱtoȱsupportȱintegrationȱofȱnewȱ renewableȱenergy.15ȱȱȱȱ ȱ ȱ ȱ ȱ ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ Theȱ specificȱ supplyȱ sourcesȱ utilizedȱ byȱ theȱ program,ȱ includingȱ issuesȱ ofȱ deliverability,ȱ wouldȱ beȱ addressedȱ inȱ theȱ Implementationȱ Planȱ study.ȱ ȱ Firmingȱ servicesȱ couldȱ beȱ providedȱ fromȱ dispatchableȱ naturalȱgasȬfiredȱresourcesȱor,ȱideally,ȱhydroȬelectricȱresources.ȱ 15 ȱ 39 ȱ Eachȱ ofȱ theseȱ risksȱ canȱ beȱ mitigated,ȱ althoughȱ notȱ altogetherȱ eliminated.ȱ ȱ Theȱ Countyȱcanȱstructureȱitsȱprogramȱinȱsuchȱaȱwayȱthatȱitȱwouldȱbeȱexposedȱtoȱveryȱ littleȱrisk.ȱȱElectricityȱsupplyȱcontractsȱcanȱbeȱstructuredȱtoȱtransferȱmanyȱofȱtheȱ risksȱ toȱ theȱ program’’sȱ suppliers.ȱ ȱ Theȱ followingȱ tableȱ describesȱ basicȱ riskȱ managementȱtechniquesȱforȱeachȱofȱtheȱprimaryȱrisksȱassociatedȱwithȱoperatingȱaȱ CCAȱprogram.ȱ ȱ Riskȱ Mitigationȱ CostȱResponsibilityȱSurchargeȱ Utilizingȱ shorterȱ durationȱ supplyȱ Volatilityȱ contractsȱ toȱ aȱ greaterȱ extentȱ thanȱ wouldȱ otherwiseȱ beȱ indicatedȱ wouldȱ offsetȱ theȱ CRSȱ risk.ȱ ȱ Ifȱ marketȱ pricesȱ decrease,ȱtheȱCounty’’sȱsupplyȱportfolioȱ costsȱ willȱ alsoȱ decrease,ȱ offsettingȱ theȱ increaseȱ inȱ theȱ customer’’sȱ CRSȱ paymentsȱtoȱSDG&E.ȱ CommodityȱPriceȱVolatilityȱ Diversifyȱ supplyȱ portfolioȱ withȱ contractsȱ ofȱ variousȱ termsȱ andȱ withȱ multipleȱ suppliers,ȱ renewableȱ energy,ȱ andȱ conventionalȱ generation.ȱ Layoffȱ commodityȱ priceȱ risksȱ toȱ energyȱ suppliersȱ throughȱ fixedȱ pricedȱ contractsȱ orȱ guaranteedȱ discountȱ pricingȱstructuresȱ CustomerȱAttritionȱ Establishȱ exitȱ feesȱ followingȱ freeȱ optȬ outȱ period.ȱ ȱ Negotiateȱ termȱ contractsȱ withȱlargeȱcustomers.ȱ CreditȱRiskȱ Periodicȱ creditȱ andȱ exposureȱ monitoring;ȱ supplierȱ diversity;ȱ collateralȱ andȱ suretyȱ instruments.ȱȱ Requireȱ depositsȱ fromȱ highȱ riskȱ customersȱ andȱ returnȱ toȱ utilityȱ forȱ failureȱtoȱpayȱbills.ȱ UtilityȱRateȱChangesȱandȱOtherȱ ParticipateȱinȱCPUCȱprocessȱtoȱpreventȱ RegulatoryȱRisksȱ shiftingȱofȱcostsȱtoȱprogramȱcustomersȱ ȱ ȱ 40 4.3.1 OperationsȱRiskȱDiscussionȱ ȱ Ultimately,ȱ theȱ majorȱ operationalȱ risksȱ areȱ underȱ theȱ controlȱ ofȱ theȱ program’’sȱ management.ȱ ȱ Disciplined,ȱ professionalȱ managementȱ isȱ keyȱ toȱ managingȱ risksȱ inherentȱ inȱ offeringȱ retailȱ electricȱ services.ȱ ȱ Theȱ Countyȱ willȱ beȱ ableȱ toȱ contractȱ forȱ servicesȱ fromȱ aȱ varietyȱ ofȱ large,ȱ experiencedȱ energyȱ suppliersȱ thatȱ haveȱ operationalȱ capabilitiesȱ equalȱ toȱ orȱ betterȱ thanȱ thoseȱ ofȱ SDG&E.ȱ ȱ Itȱ shouldȱ beȱ notedȱ thatȱ municipalȱ utilitiesȱ haveȱ beenȱ successfullyȱ managingȱ commodity,ȱ credit,ȱ andȱ operationalȱ risksȱ forȱ manyȱ decades,ȱ evenȱ duringȱ timesȱ ofȱ highȱ commodityȱ pricesȱ andȱ supplyȱ shortages.ȱ ȱ Theȱ Countyȱ couldȱ contractȱ withȱ municipalȱ utilitiesȱ orȱ privateȱ energyȱ companiesȱ toȱ provideȱ servicesȱ toȱ theȱ CCAȱ program.ȱ ȱ TheȱexperiencesȱofȱSCE,ȱPG&EȱandȱSDG&Eȱduringȱtheȱenergyȱcrisisȱofȱ2000Ȭ2001ȱ illustrateȱwhatȱcanȱhappenȱwhenȱrisksȱareȱnotȱproperlyȱmanaged.ȱȱTheȱinvestorȱ ownedȱutilities’’ȱexposureȱtoȱcommodityȱpriceȱrisksȱduringȱtheȱenergyȱcrisisȱandȱ theȱensuingȱfinancialȱdevastationȱexperiencedȱbyȱSCEȱandȱPG&Eȱstemmedȱfromȱ anȱartificialȱconstraintȱimposedȱbyȱtheȱCPUCȱonȱtheirȱhedgingȱabilities,ȱcoupledȱ withȱ anȱ inabilityȱ toȱ increaseȱ retailȱ ratesȱ dueȱ theȱ legislatedȱ rateȱ freeze.ȱ ȱ Theȱ CPUC’’sȱ soȬcalledȱ buy/sellȱ requirementȱ forcedȱ theȱ utilitiesȱ toȱ buyȱ 100%ȱ ofȱ theirȱ energyȱfromȱtheȱstateȱsanctionedȱ(nowȱdefunct)ȱCaliforniaȱPowerȱExchangeȱdailyȱ marketȱ auctionȱ andȱ sellȱ 100%ȱ ofȱ theirȱ generationȱ resourcesȱ intoȱ thatȱ market.ȱȱ Becauseȱtheȱutilitiesȱhadȱdivestedȱnearlyȱallȱofȱtheirȱnaturalȱgasȱfiredȱgenerationȱ resources,ȱ theyȱ wereȱ eachȱ heavilyȱ shortȱ onȱ resourcesȱ andȱ overlyȱ reliantȱ onȱ theȱ spotȱmarket.ȱȱWhenȱspotȱmarketȱpricesȱspikedȱforȱanȱextendedȱperiodȱofȱtime,ȱtheȱ cashȱdrainȱnecessitatedȱtheȱStateȱofȱCaliforniaȱ(DepartmentȱofȱWaterȱResources)ȱ toȱtakeȱoverȱelectricityȱprocurementȱresponsibilitiesȱfromȱtheȱutilities.ȱȱCustomersȱ ofȱ SDG&Eȱ wereȱ notȱ protectedȱ byȱ theȱ rateȱ freezeȱ andȱ sufferedȱ fromȱ excessiveȱ ratesȱ asȱSDG&Eȱwasȱ ableȱ toȱpassȱthroughȱitsȱcostsȱofȱprocuringȱelectricityȱfromȱ theȱspotȱmarkets.ȱ ȱ Theȱ Countyȱ willȱ notȱ beȱ subjectȱtoȱtheseȱ typesȱ ofȱconstraintsȱ onȱitsȱ procurementȱ practices.ȱ ȱ Beingȱ aȱ municipality,ȱ itȱ willȱ exerciseȱ itsȱ ownȱ authorityȱ overȱ itsȱ resourceȱ planningȱ andȱ ratemakingȱ decisions.ȱ ȱ Aȱ professionallyȱ managedȱ electricityȱ procurementȱ program,ȱ followingȱ soundȱ riskȱ managementȱ practices,ȱ wouldȱnotȱexposeȱitselfȱtoȱtheȱrisksȱthatȱtheȱinvestorȱownedȱutilitiesȱfacedȱduringȱ theȱenergyȱcrisis.ȱȱȱȱ ȱ ȱ 41 4.4 RegulatoryȱRiskȱDiscussionȱ ȱ Regulatoryȱ risksȱ referȱ toȱ theȱ potentialȱ thatȱ decisionsȱ byȱ regulatorsȱ couldȱ causeȱ costȱ increasesȱ forȱ theȱ CCAȱ program.ȱ ȱ Theȱ Countyȱ canȱ participateȱ inȱ regulatoryȱ proceedingsȱ atȱ theȱ CPUCȱ orȱ FERCȱ toȱ tryȱ toȱ influenceȱ theȱ regulatoryȱ processȱ toȱ protectȱitsȱinterestsȱandȱthoseȱofȱitsȱcustomers.ȱȱTypically,ȱassociationsȱareȱformedȱ amongȱ entitiesȱ withȱ commonȱ interestsȱ toȱ participateȱ onȱ theirȱ behalfȱ inȱ theȱ regulatoryȱprocessȱtoȱeffectuateȱmaximumȱinfluenceȱonȱregulators.ȱȱTheȱamountȱ ofȱ influenceȱ wieldedȱ inȱ theȱ regulatoryȱ processȱ dependsȱ onȱ theȱ resourcesȱ theȱ associationȱ canȱ devoteȱ toȱ participationȱ andȱ theȱ politicalȱ influenceȱ ofȱ theȱ associationsȱmembers.ȱȱThus,ȱtoȱsomeȱextentȱtheȱdegreeȱbyȱwhichȱregulatoryȱriskȱ canȱbeȱmanagedȱdependsȱuponȱtheȱprevalenceȱofȱCCAȱthroughoutȱtheȱstate.ȱȱIfȱ CCAȱ becomesȱ aȱ widespreadȱ phenomenon,ȱ withȱ manyȱ communitiesȱ beingȱ directlyȱimpactedȱbyȱCPUCȱdecisions,ȱtheȱCPUCȱisȱlessȱlikelyȱtoȱmakeȱdecisionsȱ thatȱimposeȱadditionalȱcostsȱonȱAggregatorsȱthanȱifȱonlyȱoneȱorȱtwoȱcommunitiesȱ wouldȱbeȱimpacted.ȱȱ ȱ 4.5 RiskȱMitigationȱThroughȱPhysicalȱandȱFinancialȱReservesȱ ȱ Physicalȱ andȱ financialȱ reservesȱ areȱ importantȱ componentsȱ ofȱ aȱ CCAȱ programȱ thatȱreduceȱprogramȱrisk.ȱȱIndustryȱrulesȱdictateȱcertainȱreserveȱrequirementsȱforȱ allȱmarketȱparticipantsȱtoȱprotectȱtheȱintegrityȱofȱtheȱsystem.ȱȱTheseȱrulesȱensureȱ noȱ degradationȱ ofȱ reliabilityȱ wouldȱ resultȱ ifȱ theȱ Countyȱ wereȱ toȱ implementȱ aȱ CCAȱprogram.ȱ ȱ 4.5.1 PhysicalȱReservesȱ ȱ Theȱ programȱ willȱ beȱ requiredȱ toȱ complyȱ withȱ industryȱ rulesȱ governingȱ theȱ provisionȱ ofȱ physicalȱ reservesȱ toȱ ensureȱ reliableȱ operationȱ ofȱ theȱ electricȱ grid.ȱȱ Theȱ Californiaȱ Independentȱ Systemȱ Operatorȱ (CAISO)ȱ requiresȱ loadȬservingȱ entitiesȱtoȱmaintainȱoperatingȱreservesȱ(6%ȱtoȱ8%ȱofȱload)ȱandȱregulatingȱreserveȱ (2.5%ȱ toȱ 5%)ȱ thatȱ canȱ beȱ quicklyȱ calledȱ uponȱ inȱ theȱ eventȱ thatȱ scheduledȱ resourcesȱexperienceȱoutagesȱorȱelectricityȱconsumptionȱunexpectedlyȱincreases.ȱȱ Loadȱ servingȱ entitiesȱ canȱ arrangeȱ forȱ theirȱ ownȱ reserves,ȱ orȱ theȱ CAISOȱ willȱ chargeȱ theȱ loadȱ servingȱ entityȱ forȱ theȱ costsȱ ofȱ reservesȱ procuredȱ onȱ itsȱ behalf.ȱȱ Theȱcostsȱofȱtheseȱreservesȱareȱincludedȱasȱanȱexpenseȱitemȱinȱtheȱproȱforma.ȱ ȱ OnȱaȱlongerȬtermȱbasis,ȱtheȱCPUCȱrequiresȱloadȬservingȱentitiesȱtoȱarrangeȱforȱaȱ 15%ȱplanningȱreserveȱmargin,ȱapproximatelyȱoneȱyearȱinȱadvance.ȱȱTheȱplanningȱ reserveȱ requirementȱ wasȱ institutedȱ inȱ 2004ȱ andȱ isȱ intendedȱ toȱ bothȱ ensureȱ theȱ ȱ 42 existenceȱ ofȱ adequateȱ generationȱ capacityȱ asȱ wellȱ asȱ toȱ reduceȱ theȱ abilityȱ ofȱ powerȱsuppliersȱtoȱchargeȱhighȱelectricityȱpricesȱthatȱcanȱoccurȱwhenȱcapacityȱisȱ scarce.ȱȱTheȱcostsȱofȱplanningȱreservesȱareȱincludedȱasȱanȱexpenseȱitemȱinȱtheȱproȱ forma.ȱ ȱ 4.5.2 FinancialȱReservesȱ ȱ Theȱ programȱ willȱ maintainȱ financialȱ reservesȱ inȱ theȱ formȱ ofȱ rateȱ stabilizationȱ fundsȱ orȱ otherȱ reserveȱ fundsȱ thatȱ wouldȱ beȱ requiredȱ byȱ theȱ banksȱ toȱ supportȱ debtȱfinancingȱofȱprogramȱassets.ȱȱȱRateȱstabilizationȱfundsȱareȱaccruedȱthroughȱ ratesȱ andȱ maintainedȱ atȱ theȱ discretionȱ ofȱ programȱ managementȱ andȱ theȱ program’’sȱgoverningȱboard.ȱȱTheyȱareȱusedȱtoȱcushionȱshortȬtermȱcostȱincreasesȱ asȱwellȱasȱtoȱaccrueȱcashȱforȱfutureȱcapitalȱexpenditures.ȱȱToȱtheȱextentȱthatȱdebtȱ financingȱ isȱ utilizedȱ toȱ fundȱ capitalȱ expenditures,ȱ banksȱ willȱ requireȱ minimumȱ debtȱserviceȱreservesȱequalȱtoȱapproximatelyȱ10%ȱofȱtheȱamountȱborrowed,ȱandȱ willȱ alsoȱ imposeȱ minimumȱ debtȱ serviceȱ ratiosȱ toȱ ensureȱ adequateȱ debtȱ serviceȱ coverage.ȱȱTheseȱfinancialȱreservesȱareȱincludedȱinȱprogramȱratesȱinȱtheȱbaseȱcaseȱ analysis,ȱ butȱ theseȱ fundsȱ areȱ anȱ assetȱ ofȱ theȱ programȱ thatȱ willȱ ultimatelyȱ beȱ accessibleȱforȱfutureȱrateȱreductionsȱorȱotherȱprogramȱpurposes.ȱ ȱ 4.6 RiskȱMitigationȱThroughȱPhasedȱImplementationȱ ȱ Theȱ Countyȱ couldȱ implementȱ aȱ CCAȱ programȱ inȱ phasesȱ toȱ limitȱ anyȱ risksȱ associatedȱwithȱprogramȱstartupȱandȱtheȱtransitionȱofȱcustomersȱfromȱSDG&Eȱtoȱ serviceȱ byȱ theȱ program.ȱ ȱ Anȱ exampleȱ couldȱ beȱ toȱ initiallyȱ offerȱ theȱ programȱ toȱ nonȬresidentialȱ customersȱ forȱ aȱ pilotȱ phaseȱ suchȱ asȱ sixȱ monthsȱ orȱ oneȱ yearȱ andȱ thenȱtoȱopenȱtheȱprogramȱtoȱallȱcustomersȱafterȱtheȱpilotȱphaseȱisȱcompleted.ȱȱByȱ startingȱ withȱ nonȬresidentialȱ customers,ȱ theȱ numberȱ ofȱ transactionsȱ (accountȱ transfers,ȱcoordinationȱwithȱSDG&E’’sȱmonthlyȱbillingȱprocess,ȱetc.)ȱthatȱmustȱbeȱ completedȱ wouldȱ beȱ aȱ smallȱ fractionȱ ofȱ whatȱ wouldȱ beȱ requiredȱ toȱ serveȱ theȱ entireȱ communityȱ atȱ oneȱ time.ȱ ȱ Anotherȱ benefitȱ ofȱ thisȱ typeȱ ofȱ phasingȱ arisesȱ becauseȱ nonȬresidentialȱ customersȱ areȱ higherȱ marginȱ customersȱ soȱ theȱ initialȱ phaseȬinȱ periodȱ wouldȱ provideȱ greaterȱ marginsȱ forȱ theȱ programȱ toȱ helpȱ coverȱ programȱstartupȱcosts.ȱ ȱ Inȱitsȱ finalȱ Decisionȱinȱ Phaseȱ1ȱofȱ theȱCCAȱRulemaking,ȱtheȱCPUCȱruledȱitȱ willȱ notȱdetermineȱwhichȱcustomersȱtheȱCCAȱshouldȱserveȱandȱwillȱleaveȱtheȱmatterȱ toȱtheȱCCA.16ȱȱHowever,ȱtheȱCountyȱmustȱcomplyȱwithȱtheȱlegalȱrequirementsȱofȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱSeeȱD.04Ȭ12Ȭ046,ȱConclusionȱofȱLawȱNo.ȱ38.ȱ 16 ȱ 43 ABȱ117ȱthatȱrequiresȱequitableȱtreatmentȱofȱallȱcustomerȱclassesȱandȱtheȱofferingȱ ofȱserviceȱtoȱallȱresidentialȱcustomers.ȱȱTheȱImplementationȱPlanȱshouldȱdescribeȱ theȱ phasingȱ approach,ȱ ifȱ any,ȱ thatȱ theȱ Countyȱ intendsȱ toȱ utilizeȱ andȱ howȱ thatȱ approachȱ compliesȱ withȱ theȱ law.ȱ ȱ Thereȱmayȱ alsoȱ beȱ incrementalȱ costsȱ assertedȱ byȱ SDG&Eȱ toȱ accommodateȱ theȱ County’’sȱ specificȱ phasingȱ proposal,ȱ whichȱ theȱ Countyȱwouldȱresponsibleȱforȱpaying.ȱ ȱ ȱ 44 5 FEASIBILITYȱANALYSISȱ ȱ 5.1 StudyȱApproachȱ ȱ Inȱ preparingȱ theȱ financialȱ evaluationȱ forȱ aȱ CCAȱ program,ȱ NCIȱ didȱ aȱ thoroughȱ analysisȱ of:ȱ ȱ (1)ȱ SDG&E’’sȱ forecastedȱ ratesȱ (includingȱ costȱ responsibilityȱ surcharges);ȱ (2)ȱ CCAȱ energyȱ orȱ commodityȱ costsȱ (includingȱ generationȱ ownership,ȱ powerȱ purchaseȱ contracts,ȱ renewableȱ energyȱ contractsȱ andȱ spotȬ marketȱ purchases;ȱ (3)ȱ CAISOȱ charges;ȱ (4)ȱ operationsȱ andȱ schedulingȱ costs;ȱ (5)ȱ financingȱcosts;ȱandȱ(6)ȱrevenueȱoffsetsȱandȱavailableȱfinancialȱincentives.ȱȱEachȱ ofȱ theseȱ itemsȱ wasȱ factoredȱ intoȱ theȱ proȱ formaȱ analysis.ȱ ȱ Theȱ CCAȱ program’’sȱ capitalȱcostsȱareȱamortizedȱoverȱaȱ30Ȭyearȱperiodȱandȱfinancedȱatȱaȱrateȱofȱ5.5%.ȱȱ Theȱ interestȱ andȱ amortizationȱ areȱ includedȱ inȱ theȱ annualȱ costsȱ ofȱ theȱ program.ȱȱ Theȱ financialȱproȱ formaȱanalysisȱcomparesȱtheȱtotalȱcostsȱofȱoperatingȱtheȱ CCAȱ programȱ withȱ theȱ totalȱ costsȱ ofȱ continuingȱ toȱ takeȱ retailȱ utilityȱ serviceȱ fromȱ SDG&E.ȱ ȱ Aȱ financialȱ analysisȱ wasȱ performedȱ inȱ orderȱ toȱ developȱ financialȱ proȱ forma,ȱ whichȱ areȱ thenȱ structuredȱ asȱ consolidatedȱ statementsȱ ofȱ incomeȱ forȱ theȱ CCAȱ program.ȱ ȱ Theȱ consolidatedȱ statementsȱ basedȱ onȱ theȱ financialȱ proȱ formaȱ areȱ locatedȱ inȱ Appendixȱ E.ȱ Asȱ notedȱ above,ȱ savingsȱ orȱ potentialȱ incomeȱ isȱ theȱ marginȱ betweenȱ currentȱ retailȱ powerȱ costs,ȱ asȱ providedȱ byȱ SDG&E,ȱ andȱ theȱ County’’sȱ projectedȱ costȱ toȱ provideȱ theȱ power.ȱ NCIȱ beganȱ itsȱ evaluationȱ withȱ aȱ planningȱ horizonȱ beginningȱ inȱ theȱ currentȱ yearȱ (2005)ȱ andȱ thenȱ projectedȱ costsȱ 20Ȭyearsȱforwardȱtoȱ2024.ȱ ȱȱ SDG&Eȱ providesȱ servicesȱ atȱ regulatedȱ costȬbasedȱ rates.ȱ ȱ Hence,ȱ SDG&E’’sȱ ratesȱ areȱ directlyȱ tiedȱ toȱ aȱ demonstratedȱ ““revenueȱ requirement””,ȱ whichȱ isȱ theȱ totalȱ revenuesȱ theȱ utilityȱ isȱ authorizedȱ toȱ recoverȱ throughȱ rates.ȱ ȱ Theȱ revenueȱ requirementȱ includesȱ theȱ utility’’sȱ expenses,ȱ returnȱ orȱ profit,ȱ andȱ taxesȱ paidȱ byȱ theȱ utility.ȱ ȱ Theȱ financialȱ analysisȱ providedȱ hereinȱ comparesȱ SDG&E’’sȱ revenueȱ requirementȱatȱcurrentȱandȱprojectedȱratesȱwithȱtheȱrevenueȱrequirementȱofȱtheȱ CCAȱ programȱ toȱ determineȱ potentialȱ savingsȱ orȱ income.ȱ Proȱ formaȱ summaryȱ tablesȱ compareȱ eachȱ supplyȱ portfolioȱ basedȱ onȱ theirȱ relativeȱ abilityȱ toȱ produceȱ operationalȱcostȱsavingsȱorȱbenefits.ȱ ȱ Inȱ aȱ CCAȱ program,ȱ utilityȱ serviceȱ isȱ limitedȱ toȱ theȱ electricȱ energyȱ commodityȱ only.ȱ SDG&Eȱ wouldȱ continueȱ toȱ provideȱ electricityȱ deliveryȱ overȱ itsȱ existingȱ distributionȱ systemȱ andȱ provideȱ endȬconsumerȱ metering,ȱ billing,ȱ collectionȱ andȱ allȱ traditionalȱ retailȱ customerȱ servicesȱ (i.e.,ȱ callȱ centers,ȱ outageȱ restoration,ȱ ȱ 45 extensionȱ ofȱ newȱ service).17ȱ ȱ Accordingly,ȱ toȱ evaluateȱ theȱ potentialȱ benefitsȱ forȱ CCA,ȱonlyȱcostsȱassociatedȱwithȱwholesaleȱelectricȱcommodityȱprocurementȱandȱ relatedȱbusinessȱexpensesȱareȱconsidered.ȱ ȱ 5.2 CustomerȱBaseȱ ȱ TheȱpotentialȱcustomerȱbaseȱforȱtheȱCCAȱprogramȱisȱallȱofȱtheȱelectricȱcustomersȱ inȱtheȱunincorporatedȱareasȱofȱtheȱCounty.ȱȱHowever,ȱcustomersȱhaveȱtheȱoptionȱ toȱoptȬoutȱofȱtheȱCCAȱprogramȱandȱcontinueȱtoȱreceiveȱtheirȱelectricȱserviceȱfromȱ SDG&E.ȱȱSomeȱcustomersȱmayȱchooseȱtoȱnotȱparticipateȱinȱtheȱprogram,ȱorȱoptȬ outȱduringȱtheȱ60ȬdayȱoptȬoutȱperiod,ȱandȱsomeȱdirectȱaccessȱcustomersȱmayȱbeȱ contractuallyȱ preventedȱ fromȱ initiallyȱ joiningȱ theȱ programȱ untilȱ theirȱ directȱ accessȱ contractsȱ expire.ȱ ȱ Theȱ prevalenceȱ ofȱ customerȱ optȬoutsȱ willȱ dependȱ onȱ aȱ numberȱ ofȱ factors,ȱ notȱ theȱ leastȱ ofȱ whichȱ isȱ howȱ theȱ County’’sȱ electricȱ ratesȱ compareȱtoȱthoseȱofȱSDG&E.ȱȱOtherȱfactorsȱthatȱwillȱinfluenceȱcustomers’’ȱoptȬoutȱ decisionsȱ includeȱ whetherȱ theȱ Countyȱ providesȱ nonȬpriceȱ featuresȱ importantȱ toȱ customersȱ suchȱ asȱ increasedȱ renewableȱ energyȱ purchasesȱ orȱ expandedȱ energyȱ efficiencyȱprograms;ȱcustomerȱloyaltyȱorȱenmityȱtoȱSDG&E;ȱandȱotherȱcustomerȱ perceptions.ȱ ȱ Manyȱ ofȱ theseȱ factorsȱ areȱ directlyȱ dependentȱ onȱ theȱ detailsȱ ofȱ theȱ County’’sȱImplementationȱplan,ȱandȱtheȱimpactsȱcannotȱbeȱreasonablyȱestimatedȱ priorȱ toȱ completionȱ ofȱ theȱ County’’sȱ implementationȱ planningȱ process.ȱ ȱ Forȱ theȱ purposesȱ ofȱ thisȱ feasibilityȱ analysis,ȱ theȱ reportȱ presentsȱ theȱ potentialȱ benefitsȱ fromȱ CCA,ȱ assumingȱ 100ȱ percentȱ customerȱ participation,ȱ exceptȱ forȱ existingȱ directȱ accessȱ customers.ȱ ȱ Withinȱ aȱ reasonableȱ rangeȱ ofȱ assumedȱ optȬoutȱ percentages,ȱtheȱstudyȱresultsȱcanȱbeȱadjustedȱproportionately.ȱ ȱ 5.3 KeyȱAssumptionsȱ ȱ AsȱdescribedȱinȱSectionȱ2.2,ȱtheȱCPUCȱisȱinȱtheȱprocessȱofȱfinalizingȱtheȱrulesȱforȱ CCAȱ implementation.ȱ ȱ NCIȱ developedȱ severalȱ frameworkȱ assumptionsȱ forȱ thisȱ feasibilityȱ analysisȱ andȱ alsoȱ adoptedȱ aȱ setȱ ofȱ detailedȱ assumptionsȱ forȱ variousȱ unknownȱcostsȱandȱimplementationȱrules.ȱȱThisȱsectionȱdescribesȱtheȱhighȱlevelȱ assumptionsȱ thatȱ provideȱ theȱ frameworkȱ forȱ theȱ analysis.ȱ ȱ Theȱ detailedȱ assumptionsȱareȱlistedȱinȱAppendixȱB.ȱ ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ TheȱCCAȱoperatorȱwillȱneedȱtoȱprovideȱcustomerȱandȱaccountȱservicesȱforȱtheȱservicesȱitȱprovides.ȱȱItȱwillȱ alsoȱneedȱtoȱexchangeȱbillingȱandȱpaymentȱdataȱwithȱSDG&EȱtoȱcoordinateȱwithȱSDG&E’’sȱmonthlyȱbillingȱ process.ȱȱTheseȱactivitiesȱareȱdiscussedȱinȱAppendixȱD.ȱ 17 ȱ 46 1. ȱ 2. ȱ 3. ȱ 4. ȱ 5. ȱ 6. ȱ 7. ȱ 8. ȱ 9. ȱ 10. CCAȱ Rulemakingȱ isȱ completedȱ byȱ theȱ thirdȱ quarterȱ ofȱ 2005,ȱ andȱ CCAȱ operationsȱcanȱbeginȱinȱJanuaryȱ2006ȱ ChargesȱauthorizedȱbyȱtheȱCPUCȱforȱAggregatorsȱandȱCCAȱcustomersȱareȱ similarȱ toȱ thoseȱ chargedȱ toȱ directȱ accessȱ customersȱ (transactionȱ andȱ implementationȱfees)ȱ Aggregatorsȱ mustȱ maintainȱ adequateȱ capacityȱ reservesȱ toȱ maintainȱ reliabilityȱ standardsȱ andȱ willȱ followȱ standardȱ industryȱ riskȱ managementȱ practices.ȱȱȱAggregatorsȱwillȱbeȱheldȱtoȱtheȱsameȱcapacityȱreserveȱstandardȱ asȱSDG&E.ȱ AggregatorsȱwillȱmatchȱorȱexceedȱtheȱrenewableȱenergyȱcontentȱofȱSDG&E’’sȱ portfolioȱ andȱ areȱ eligibleȱ forȱ theȱ existingȱ CECȱ subsidiesȱ providedȱ forȱ renewableȱ energyȱ procurementȱ upȱ toȱ theȱ minimumȱ renewableȱ portfolioȱ standardȱ(i.e.,ȱsubsidiesȱareȱavailableȱforȱtheȱfirstȱ20%ȱofȱrenewableȱenergy)ȱ Marketȱ pricesȱ forȱ renewableȱ energyȱ willȱ reflectȱ theȱ developer’’sȱ costs,ȱ includingȱtheȱeffectsȱofȱavailableȱsubsidiesȱ Aggregatorsȱcanȱfinanceȱgenerationȱprojectsȱ Aggregatorsȱ canȱ obtainȱ electricityȱ fromȱ theȱ wholesaleȱ marketȱ onȱ comparableȱtermsȱwithȱtheȱIOUsȱ Theȱ CPUCȱ doesȱ notȱ allowȱ IOUsȱ toȱ negotiateȱ specialȱ ratesȱ orȱ contractsȱ toȱ retainȱcustomersȱ CCAȱoperationsȱcanȱbeȱoutsourcedȱtoȱthirdȱpartiesȱ ReinstatementȱofȱdirectȱaccessȱdoesȱnotȱpreemptȱCCAȱrightsȱandȱcustomerȱ relationshipsȱ ȱ 5.3.1 UtilityȱRateȱBenchmarksȱ ȱ EstimatesȱofȱCCAȱcostȱsavingsȱpotentialȱareȱassessedȱbyȱcomparingȱCCAȱcostsȱtoȱ theȱ ratesȱ thatȱ wouldȱ otherwiseȱ beȱ chargedȱ byȱ SDG&E.ȱ ȱ Theȱ baseȱ caseȱ utilizesȱ SDG&E’’sȱcurrentȱrateȱdesignsȱandȱadjustsȱcurrentȱratesȱforȱexpectedȱchangesȱinȱ SDG&E’’sȱgenerationȱcostsȱinȱorderȱtoȱprojectȱSDG&Eȱratesȱforȱtheȱ20Ȭyearȱstudyȱ period.ȱȱNCIȱpreparedȱaȱsensitivityȱcaseȱforȱtheȱrateȱdesignȱchangesȱproposedȱbyȱ ȱ 47 SDG&Eȱ inȱ itsȱ ongoingȱ Rateȱ Designȱ Windowȱ Case,ȱ whichȱ transfersȱ certainȱ costsȱ outȱ ofȱ generationȱ ratesȱ intoȱ nonȬbypassableȱ deliveryȱ charges.18ȱ ȱ Theȱ effectȱ isȱ toȱ increaseȱtheȱgenerationȱratesȱofȱresidentialȱcustomersȱandȱreduceȱtheȱgenerationȱ ratesȱofȱcommercialȱandȱindustrialȱcustomers.ȱȱTheseȱproposals,ȱifȱadoptedȱbyȱtheȱ CPUC,ȱwouldȱimproveȱtheȱeconomicsȱofȱaȱCountyȱCCAȱprogramȱbecauseȱofȱtheȱ relativelyȱhighȱmixȱofȱresidentialȱcustomersȱwithinȱtheȱCounty’’sȱpotentialȱserviceȱ area.ȱȱTheȱsensitivityȱresultsȱareȱdescribedȱinȱSectionȱ6.3.ȱ ȱ SDG&E’’sȱratesȱderiveȱfromȱitsȱcostsȱorȱ““revenueȱrequirement””,ȱandȱNCIȱmodeledȱ SDG&E’’sȱ annualȱ generationȱ revenueȱ requirementsȱ forȱ theȱ 2005ȱ toȱ 2024ȱ studyȱ period.ȱ ȱ Theȱ resultingȱ rateȱ projectionȱ showsȱ generationȱ ratesȱ increasingȱ atȱ aȱ modestȱ averageȱ rateȱ ofȱ 2.4%ȱ perȱ yearȱ dueȱ toȱ offsettingȱ influencesȱ onȱ SDG&E’’sȱ generationȱ costs.ȱ ȱ Theȱ projectedȱ annualȱ rateȱ increaseȱ ofȱ 2.4%ȱ isȱ inȱ lineȱ withȱ historicalȱ trends.19ȱ ȱ Generationȱ costȱ increasesȱ areȱ somewhatȱ offsetȱ byȱ theȱ expirationȱ ofȱ highȱ costȱ DWRȱ contractsȱ inȱ theȱ 2004ȱ toȱ 2012ȱ period,ȱ andȱ theȱ netȱ resultȱisȱaȱmoderatelyȱincreasingȱrateȱforecast.ȱOnceȱtheȱDWRȱcontractsȱexpireȱinȱ 2012,ȱSDG&E’’sȱgenerationȱcostsȱareȱexpectedȱtoȱshowȱannualȱincreasesȱconsistentȱ withȱgeneralȱlevelsȱofȱinflationȱandȱgasȱpriceȱescalation.ȱȱ ȱ SDG&E System Average Rate Projections 2005 - 2024 250 DollarsPerM W h 200 150 Non-gen. Rate DWR Bonds Gen. Rate 100 50 20 23 20 21 20 19 20 17 20 15 20 13 20 11 20 09 20 07 20 05 0 ȱ SDG&E’’sȱ generationȱ revenueȱ requirementsȱ areȱ modeledȱ forȱ eachȱ resourceȱ inȱ SDG&E’’sȱgenerationȱportfolio,ȱincludingȱtheȱDWRȱcontractsȱtheȱCPUCȱallocatedȱ toȱSDG&EȱinȱDecisionȱNo.ȱ02Ȭ09Ȭ053.ȱȱAsȱproductionȱfromȱexistingȱresourcesȱorȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱȱApplicationȱNumberȱA.05Ȭ02Ȭ019,ȱfiledȱonȱFebruaryȱ19,ȱ2005.ȱ ȱȱDependingȱ uponȱ theȱ specificȱ timeframeȱ selectedȱ forȱ comparison,ȱ duringȱ theȱ pastȱ twentyȬfiveȱ years,ȱ SDG&Eȱratesȱhaveȱincreasedȱbyȱanȱaverageȱannualȱrateȱofȱbetweenȱ1%ȱandȱ4%.ȱ 18 19 ȱ 48 supplyȱ contractsȱ declineȱ overȱ time,ȱ theyȱ areȱ replacedȱ byȱ newȱ powerȱ purchaseȱ contractsȱ atȱ prevailingȱ marketȱ prices.ȱ ȱ ShortȬtermȱ ““spotȱ market””ȱ purchasesȱ areȱ maintainedȱatȱ15%ȱofȱtheȱtotalȱportfolio.ȱȱNewȱrenewableȱcontractsȱareȱaddedȱtoȱ theȱ resourceȱ mixȱ toȱ meetȱ theȱ applicableȱ Renewableȱ Portfolioȱ Standardsȱ requirements,ȱandȱplanningȱreserveȱrequirementsȱofȱ15%ȱareȱenforcedȱinȱtheȱrateȱ projections.ȱȱȱ ȱ SDG&E Resource Mix 2005-2024 MWH Per Year 30,000,000 25,000,000 Residual Net Short 20,000,000 New Bilaterals New Renew ables (RPS) 15,000,000 DWR Contracts 10,000,000 Otay Mesa PPA QFs/Purchased Pow er 5,000,000 Palomar 21 23 20 20 17 19 20 20 13 15 20 20 09 11 20 20 20 20 05 07 San Onofre ȱ Theȱ revenueȱ requirementȱ forȱ eachȱ resourceȱ typeȱ wasȱ modeledȱ basedȱ onȱ dataȱ providedȱ byȱ SDG&Eȱ inȱ itsȱ 2003ȱ Costȱ ofȱ Serviceȱ Proceedingȱ andȱ FERCȱ Formȱ 1ȱ filings.ȱȱTheȱcurrentȱcostsȱareȱshownȱbelow.ȱȱCostsȱwereȱprojectedȱforwardȱforȱtheȱ studyȱ periodȱ byȱ calculatingȱ annualȱ depreciation,ȱ operationsȱ andȱ maintenanceȱ expenses,ȱtaxes,ȱandȱauthorizedȱreturnȱonȱrateȱbaseȱforȱeachȱresource.ȱ ȱ ȱ 49 SDG&E 2005 Resource Cost 90 Dollars Per MWh 80 70 San Onofre 60 Residual Net Short 50 New Bilateral Contracts 40 New Renewables 30 QFs 20 DWR Contracts 10 0 ȱ ȱ 5.3.2 CostȱResponsibilityȱSurchargesȱ ȱ TheȱsingleȱgreatestȱobstacleȱtoȱachievingȱsignificantȱcostȱsavingsȱthroughȱCCAȱinȱ theȱnextȱseveralȱyearsȱisȱSDG&E’’sȱimpositionȱofȱcostȱresponsibilityȱsurchargesȱonȱ CCAȱcustomers,ȱwhichȱareȱdesignedȱtoȱshieldȱSDG&Eȱfromȱanyȱfinancialȱlossesȱ orȱ costȱ increasesȱ thatȱ mightȱ resultȱ fromȱ customersȱ switchingȱ toȱ serviceȱ byȱ theȱ Aggregator.ȱ ȱ NCIȱ modeledȱ expectedȱ costȱ responsibilityȱ surchargesȱ usingȱ theȱ methodologyȱadoptedȱinȱtheȱCCAȱPhaseȱ1ȱDecisionȱ(D.04Ȭ12Ȭ046).ȱȱAccordingȱtoȱ thisȱ methodology,ȱ theȱ aboveȱ marketȱ portionȱ ofȱ SDG&E’’sȱ generationȱ portfolio,ȱ includingȱSDG&EȱcontractsȱandȱresourcesȱandȱtheȱDWRȱcontracts,ȱareȱincludedȱ inȱtheȱ CRS.ȱAnȱadditionalȱelementȱofȱtheȱCRSȱisȱ theȱDWRȱBondȱCharge,ȱ whichȱ wasȱestablishedȱtoȱrecoverȱpastȱpowerȱpurchaseȱexpensedȱincurredȱbyȱtheȱDWRȱ duringȱ theȱ energyȱ crisis.ȱ ȱ Theȱ DWRȱ Bondȱ Chargeȱ isȱ reasonablyȱ certainȱ andȱ predictable,ȱ whileȱ theȱ uneconomicȱ portfolioȱ costsȱ areȱ lessȱ easilyȱ predictedȱ becauseȱ theyȱ directlyȱ dependȱ onȱ futureȱ electricityȱ marketȱ pricesȱ andȱ SDG&E’’sȱ futureȱgenerationȱcosts.ȱ ȱ InȱD.04Ȭ12Ȭ046,ȱtheȱCPUCȱadoptedȱanȱinterimȱCRSȱofȱ2.0ȱcentsȱperȱkWh. 20ȱȱTheȱ CPUCȱestablishedȱtheȱinterimȱCRSȱforȱanȱ18ȬmonthȱperiodȱandȱorderedȱSDG&Eȱ toȱ calculateȱ anȱ updatedȱ CRSȱ basedȱ onȱ currentȱ forecastȱ data.ȱ ȱ Theȱ adoptedȱ CRSȱ methodologyȱcausesȱtheȱCRSȱtoȱbeȱinverselyȱrelatedȱtoȱelectricityȱmarketȱprices:ȱ i.e.,ȱ asȱ marketȱ pricesȱincreaseȱtheȱCRSȱdeclinesȱandȱviceȱversa.ȱȱBecauseȱcurrentȱ marketȱpriceȱprojectionsȱareȱhigherȱthanȱthoseȱusedȱbyȱtheȱCPUCȱtoȱestablishȱtheȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱTheȱ2.0ȱcentsȱperȱkWhȱinterimȱCRSȱisȱinȱadditionȱtoȱtheȱDWRȱBondȱCharge.ȱ 20 ȱ 50 interimȱCRSȱestimate,ȱtheȱupdatedȱCRSȱisȱexpectedȱtoȱbeȱlowerȱthanȱtheȱinterimȱ amount.ȱ ȱ NCIȱ usedȱ theȱ interimȱ CRSȱ forȱ 2005ȱ andȱ assumedȱ thatȱ itȱ wouldȱ beȱ updatedȱbyȱSDG&Eȱpriorȱtoȱ2006.ȱ ȱ Theȱ CRSȱ costȱ estimatesȱ usedȱ inȱ thisȱ analysisȱ areȱ consistentȱ withȱ theȱ electricityȱ costȱ projectionsȱ underlyingȱ theȱ County’’sȱ modeledȱ supplyȱ portfolio.ȱ ȱ Theȱ electricityȱ marketȱ pricesȱ areȱ somewhatȱ higherȱ thanȱ theȱ estimatesȱ usedȱ byȱ theȱ CPUCȱ toȱ developȱ theȱ 2.0ȱ centsȱ perȱ kWhȱ interimȱ CRS.ȱ ȱ Asȱ aȱ result,ȱ inȱ NCI’’sȱ analysisȱtheȱCRSȱisȱprojectedȱtoȱdeclineȱsharplyȱfromȱ2005ȱtoȱ2006ȱasȱtheȱinterimȱ numberȱ isȱ replacedȱ withȱ theȱ updatedȱ costȱ figures.ȱ ȱ Ifȱ futureȱ powerȱ pricesȱ turnȱ outȱ lowerȱ thanȱ thoseȱ usedȱ forȱ theȱ baseȱ caseȱ analysis,ȱ theȱ CRSȱ wouldȱ beȱ higherȱ thanȱ theȱ forecastsȱ usedȱ inȱ thisȱ analysis.ȱ ȱ However,ȱ theȱ costȱ ofȱ procuringȱ powerȱ forȱtheȱCCAȱprogramȱwouldȱbeȱlowerȱthanȱtheȱcostsȱusedȱinȱtheȱanalysis.ȱȱTheseȱ twoȱ impactsȱ tendȱ toȱ offsetȱ eachȱ other.ȱ ȱ Therefore,ȱ theȱ magnitudeȱ ofȱ theȱ CRSȱ shouldȱnotȱbeȱlookedȱatȱinȱisolation,ȱbutȱshouldȱbeȱassessedȱinȱcontextȱwithȱtheȱ marketȱ priceȱ assumptionsȱ usedȱ inȱ theȱ overallȱ feasibilityȱ assessment.ȱ ȱ Theȱ netȱ effectȱofȱhigherȱorȱlowerȱpowerȱpricesȱonȱtheȱoverallȱcostȱofȱserviceȱforȱtheȱCCAȱ programȱcanȱbeȱseenȱinȱtheȱsensitivityȱanalysisȱresultsȱpresentedȱinȱSectionȱ6.3.ȱ ȱ TheȱfollowingȱchartȱshowsȱtheȱcomponentsȱofȱtheȱCRSȱforȱSDG&Eȱoverȱtheȱstudyȱ periodȱunderȱtheȱbaseȱcaseȱscenario.ȱ ȱ Cost Responsibility Surcharges San Diego Gas And Electric Company Dollars Per MWh 30.00 25.00 20.00 DWR Bond 15.00 DWR Power 10.00 CTC 5.00 20 05 20 07 20 09 20 11 20 13 20 15 20 17 20 19 20 21 20 23 - ȱ ȱ WithȱtheȱexceptionȱofȱtheȱDWRȱbondȱcharge,ȱtheȱCRSȱisȱexpectedȱtoȱbecomeȱzeroȱ byȱ2012,ȱasȱDWRȱcontractsȱexpireȱandȱmarketȱpricesȱtrendȱupwards.ȱ ȱ ȱ 51 Forȱpurposesȱofȱtheȱbaseȱcaseȱanalysis,ȱNCIȱhasȱcalculatedȱtheȱCRSȱbasedȱonȱtheȱ methodologyȱ adoptedȱ byȱ theȱ CPUCȱ inȱ itsȱ Phaseȱ 1ȱ Decisionȱ andȱ withȱ theȱ assumptionȱ thatȱ theȱ CPUCȱ willȱ reviseȱ theȱ interimȱ CRSȱ basedȱ onȱ moreȱ recentȱ marketȱdata,ȱasȱorderedȱinȱthatȱdecision.ȱȱTheȱbaseȱcaseȱestimatesȱareȱconsistentȱ withȱtheȱPhaseȱ1ȱOrder.ȱȱHowever,ȱthereȱisȱtheȱpossibilityȱthatȱtheȱCPUCȱwillȱnotȱ updateȱ theȱ interimȱ CRSȱ beforeȱ theȱ 18Ȭmonthȱ interimȱ periodȱ expires,ȱ whichȱ wouldȱbeȱJulyȱ2006.ȱȱThatȱeventualityȱwouldȱeffectivelyȱdelayȱtheȱearliestȱfeasibleȱ startȱ dateȱ forȱ programȱ implementationȱ toȱ theȱ secondȱ halfȱ ofȱ 2006,ȱ becauseȱ applicationȱ ofȱ theȱ interimȱ CRSȱ wouldȱ causeȱ programȱ ratesȱ toȱ exceedȱ theȱ ratesȱ chargedȱbyȱSDG&E.ȱȱTheȱeffectsȱofȱaȱhigherȱCRSȱareȱshownȱinȱtheȱsensitivityȱcaseȱ describedȱ inȱ Sectionȱ 6.3,ȱ whereȱ NCIȱ modeledȱ theȱ financialȱ impactȱ ofȱ increasingȱ theȱCRSȱbyȱ50%ȱfromȱtheȱbaseȱcaseȱestimates.ȱ ȱ Onceȱ theȱ Countyȱ filesȱ itsȱ CCAȱ Implementationȱ Plan,ȱ theȱ futureȱ procurementȱ activitiesȱ ofȱ SDG&Eȱ willȱ notȱ impactȱ theȱ CRSȱ paidȱ byȱ theȱ County’’sȱ customersȱ becauseȱ theȱ setȱ ofȱ SDG&Eȱ procurementȱ obligationsȱ applicableȱ toȱ theȱ CCAȱ programȱwillȱlockedȬinȱasȱofȱthatȱdate.ȱȱTheȱCountyȱmayȱbeȱableȱtoȱprovideȱnoticeȱ toȱ SDG&Eȱ inȱ advanceȱ ofȱ theȱ Implementationȱ Plan,ȱ utilizingȱ theȱ ““Openȱ Season””ȱ conceptȱ currentlyȱ beingȱ discussedȱ inȱ Phaseȱ 2ȱ ofȱ theȱ CCAȱ Rulemaking,ȱ whichȱ wouldȱ insulateȱ theȱ CCAȱ programȱ fromȱ anyȱ additionalȱ SDG&Eȱ procurementȱ costs.ȱȱItȱshouldȱbeȱnotedȱthatȱSDG&E’’sȱlongȬtermȱprocurementȱactivitiesȱwillȱnotȱ necessarilyȱtranslateȱintoȱaȱhigherȱCRS;ȱtheirȱimpactȱonȱtheȱCRSȱdependsȱonȱtheȱ pricesȱ thatȱ SDG&Eȱ paysȱ forȱ supplyȱ asȱ comparedȱ toȱ theȱ market.ȱ ȱ Ifȱ SDG&Eȱ obtainsȱresourcesȱatȱmarketȱprices,ȱthereȱwouldȱbeȱnoȱimpactȱonȱtheȱCRS.ȱȱThus,ȱ theȱnetȱeffectȱofȱSDG&E’’sȱlongȬtermȱprocurementȱsolicitationȱcouldȱbeȱtoȱincreaseȱ theȱCRS,ȱdecreaseȱtheȱCRS,ȱorȱbeȱneutralȱtoȱtheȱCRS.21ȱȱTheȱCountyȱshouldȱsignalȱ itsȱintentȱtoȱformȱaȱCCAȱprogramȱatȱtheȱearliestȱpossibleȱdateȱsoȱthatȱSDG&Eȱcanȱ refineȱ itsȱ CCAȱ activityȱ estimatesȱ andȱ adjustȱ itsȱ procurementȱ practicesȱ goingȱ forward.ȱ ȱ 5.3.3 RenewableȱEnergyȱSubsidiesȱ ȱ Aȱ varietyȱ ofȱ taxȱ incentives,ȱ creditsȱ andȱ publiclyȱ fundedȱ subsidiesȱ existȱ forȱ renewableȱenergyȱdevelopment,ȱwhichȱreduceȱtheȱeffectiveȱcostȱofȱincreasingȱtheȱ renewableȱenergyȱcontentȱofȱtheȱprogram’’sȱsupplyȱportfolio.ȱȱTheseȱincludeȱtheȱ followingȱsubsidies:ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ Theȱ baseȱ caseȱ analysisȱ assumesȱ SDG&Eȱ procuresȱ resourcesȱ atȱ market,ȱ andȱ thereforeȱ newȱ SDG&Eȱ procurementȱdoesȱnotȱimpactȱtheȱCRS.ȱ 21 ȱ 52 ProductionȱTaxȱCreditsȱ RenewableȱEnergyȱProductionȱIncentivesȱ SupplementalȱEnergyȱPaymentsȱ(PublicȱGoodsȱFunds)ȱ ȱ Someȱ ofȱ theȱ incentives,ȱ suchȱ asȱ theȱ productionȱ taxȱ creditȱ forȱ renewableȱ energyȱ production,ȱareȱshortȬtermȱandȱmustȱbeȱreauthorizedȱbyȱCongressȱonȱanȱannualȱ basis.ȱ ȱ Others,ȱ suchȱ asȱ theȱ publicȱ goodsȱ fundingȱ forȱ renewableȱ energyȱ developmentȱ administeredȱ byȱ theȱ Californiaȱ Energyȱ Commissionȱ (““Supplementalȱ Energyȱ Payments””),ȱ areȱ moreȱ longȱ lived,ȱ butȱ areȱ contingentȱ onȱ theȱ sufficiencyȱ ofȱ theȱ publicȱ goodsȱ fundȱ collectedȱ throughȱ utilityȱ rates.ȱ ȱ Theȱ economicȱanalysisȱconductedȱforȱtheȱCountyȱincludesȱtheȱeffectȱofȱSupplementalȱ Energyȱ Paymentsȱ availableȱ toȱ producersȱ ofȱ renewableȱ energyȱ asȱ describedȱ inȱ moreȱdetailȱbelow.ȱȱTheȱotherȱpotentialȱsubsidiesȱareȱnotȱincludedȱinȱtheȱanalysisȱ althoughȱtheyȱmayȱultimatelyȱbeȱavailableȱtoȱfurtherȱreduceȱtheȱprogram’’sȱcostȱofȱ service.ȱ ȱ Subsidiesȱ areȱ includedȱ forȱ renewableȱ energyȱ purchasesȱ fromȱ theȱ market,ȱ toȱ theȱ extentȱsuchȱpurchasesȱareȱ neededȱtoȱ supplementȱ productionȱfromȱtheȱCounty’’sȱ resources.ȱ ȱ Theȱ renewableȱ energyȱ costsȱ forȱ purchasesȱ upȱ toȱ theȱ minimumȱ renewableȱ portfolioȱ standardȱ areȱ offsetȱ byȱ Supplementalȱ Energyȱ Payments,ȱ whileȱ theȱ incrementalȱ renewableȱ energyȱ aboveȱ andȱ beyondȱ theȱ minimumȱ requirementȱ isȱ assumedȱ toȱ receiveȱ noȱ subsidy.ȱ ȱ Thus,ȱ theȱ costsȱ ofȱ renewableȱ energyȱutilizationȱaboveȱtheȱfirstȱ20%ȱwouldȱbeȱpaidȱentirelyȱbyȱcustomersȱofȱtheȱ CCA.ȱ ȱ NoȱSupplementalȱEnergyȱPaymentsȱareȱassumedȱtoȱbeȱavailableȱtoȱoffsetȱcostsȱofȱ theȱCounty’’sȱrenewableȱresourcesȱthatȱitȱownsȱorȱotherwiseȱfinances.ȱȱTheȱreasonȱ forȱ thisȱ assumptionȱ isȱ thatȱ theȱ processȱ forȱ determiningȱ Supplementalȱ Energyȱ Paymentsȱwasȱpremisedȱonȱtheȱutilitiesȱconductingȱcompetitiveȱsolicitationsȱforȱ longȬtermȱ supplyȱ contractsȱ withȱ producersȱ ofȱ renewableȱ energy.ȱ ȱ Fundsȱ areȱ madeȱ availableȱ toȱ winningȱ biddersȱ toȱ coverȱ theȱ excessȱ ofȱ theirȱ costsȱ aboveȱ aȱ marketȱ benchmark,ȱ determinedȱ byȱ theȱ CPUC.ȱ ȱ Theȱ CPUCȱ hasȱ soȱ farȱ beenȱ focusedȱonȱhowȱtheȱutilitiesȱareȱtoȱmeetȱtheȱRenewableȱPortfolioȱStandards,ȱandȱ theȱrulesȱandȱprotocolsȱforȱmakingȱSupplementalȱEnergyȱPaymentsȱavailableȱtoȱ CommunityȱChoiceȱAggregatorsȱhaveȱnotȱyetȱbeenȱestablished.ȱ ȱ Itȱisȱunclearȱatȱthisȱtimeȱhowȱtheȱprocessȱdevelopedȱforȱtheȱutilitiesȱwouldȱapplyȱ toȱanȱAggregatorȱthatȱdevelopsȱitsȱownȱrenewableȱresourcesȱratherȱthanȱprocuresȱ renewableȱ energyȱ throughȱ longȬterm,ȱ competitivelyȱ solicitedȱ contracts.ȱȱ FinancingȱstructuresȱthatȱentailȱprepaymentȱforȱenergyȱthroughȱlongȬtermȱpowerȱ ȱ 53 purchaseȱcontractsȱwithȱaȱrenewableȱenergyȱproducerȱshouldȱtheoreticallyȱallowȱ theȱCountyȱtoȱreceiveȱtheȱbenefitsȱofȱitsȱfinancingȱadvantagesȱandȱalsoȱqualifyȱtheȱ producerȱ forȱ Supplementalȱ Energyȱ Payments.ȱ ȱ However,ȱ asȱ statedȱ above,ȱ theȱ rulesȱ haveȱ notȱ beenȱ established,ȱ andȱ theȱ conservativeȱ assumptionȱ thatȱ noȱ suchȱ subsidyȱwouldȱbeȱavailableȱwasȱusedȱinȱthisȱanalysis.ȱȱȱȱȱ ȱ 5.4 FinancialȱAnalysisȱStructureȱ ȱ CCAȱ customerȱ populationȱ electricȱ loadsȱ areȱ appliedȱ toȱ SDG&E’’sȱ currentȱ andȱ projectedȱ generationȱ ratesȱ toȱ yieldȱ itsȱ revenueȱ requirementȱ recoveredȱ fromȱ theȱ customersȱinȱtheȱpotentialȱCCAȱarea.ȱȱCCAȱoperatingȱexpensesȱareȱprojectedȱandȱ subtractedȱ fromȱ SDG&E’’sȱ revenueȱ requirementȱ toȱ yieldȱ theȱ projectedȱ financialȱ benefit.ȱȱElementsȱcontainedȱinȱtheȱanalysisȱareȱsummarizedȱbelowȱandȱdetailsȱofȱ theȱinputs,ȱassumptionsȱandȱsourcesȱareȱprovidedȱinȱAppendixȱB:ȱ ȱ UtilityȱForecastȱGenerationȱRatesȱ ȭ UtilityȱRetainedȱGenerationȱ ȭ QualifyingȱFacilityȱGenerationȱ ȭ BilateralȱPowerȱPurchaseȱContractsȱ ȭ NewȱRenewableȱEnergyȱPurchasesȱ ȭ CAISOȱchargesȱ ȭ ResidualȱSpotȱMarketȱPurchasesȱorȱSalesȱ ȱ CCAȱEnergyȱCostȱ(CommodityȱCosts)ȱ ȭ SpotȱMarketȱPurchasesȱ ȭ PowerȱPurchaseȱContractsȱ ȭ RenewableȱEnergyȱContractsȱ ȭ GenerationȱOwnershipȱ ȱ CaliforniaȱIndependentȱSystemȱOperatorȱChargesȱ ȭ AncillaryȱServices/Reservesȱ ȭ GridȱManagementȱChargesȱ ȭ DeviationȱChargesȱ ȱ OperationȱandȱSchedulingȱCostsȱ ȭ ElectricityȱProcurementȱȱ ȭ RiskȱandȱCreditȱManagement22ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ Theȱ costsȱ ofȱ uncollectibleȱ customerȱ accountsȱ areȱ notȱ explicitlyȱ includedȱ inȱ theȱ proȱ forma,ȱ underȱ theȱ premiseȱ thatȱ theȱ Aggregatorȱ wouldȱ requireȱ customerȱ depositsȱ fromȱ customersȱ thatȱ poseȱ likelyȱ creditȱ 22 ȱ 54 ȭ ȭ ȭ ȭ ȭ LoadȱForecastingȱ SchedulingȱandȱSettlementsȱ Ratesȱ AccountȱServicesȱ Administrationȱ ȱ NonȬBypassableȱCharges/CostȱResponsibilityȱSurchargeȱ ȭ UneconomicȱUtilityȱRetainedȱGenerationȱandȱPowerȱContractsȱ ȭ DWRȱPowerȱPurchaseȱContractsȱ ȭ DWRȱBondȱChargesȱȬȱFinancingȱPastȱPurchasesȱ ȱ 5.5 LoadȱAnalysisȱ ȱ Detailedȱ definitionȱ ofȱ communityȱ electricȱ powerȱ needsȱ isȱ requiredȱ toȱ assessȱ theȱ economicȱviabilityȱofȱtheȱCCAȱprovidingȱelectricȱenergyȱasȱanȱalternativeȱtoȱtheȱ community’’sȱexistingȱsupplier,ȱSDG&E.ȱCommunityȱelectricȱdemandȱandȱenergyȱ consumption,ȱ generallyȱ referredȱ toȱ asȱ electricȱ load,ȱ hasȱ beenȱ analyzedȱ andȱ describedȱ inȱ chartsȱ andȱ graphsȱ locatedȱ inȱ Appendixȱ G.ȱ ȱ NCIȱ performedȱ loadȱ analysisȱ andȱ constructedȱ aȱ loadȱ forecastȱ beginningȱ withȱ andȱ basedȱ uponȱ dataȱ providedȱ byȱ SDG&Eȱ inȱ responseȱ toȱ theȱ Community’’sȱ formalȱ requestȱ (seeȱ Appendixȱ Cȱ forȱ sampleȱ dataȱ requestȱ letter).ȱ Theȱ Community’’sȱ annualȱ hourlyȱ loadȱ shapeȱ wasȱ developed,ȱ andȱ aȱ determinationȱ madeȱ regardingȱ associatedȱ energyȱ supplyȱ requirements.ȱ Theȱ timeȬofȬuseȱ supplyȱ requirementsȱ serveȱ toȱ defineȱtheȱtypesȱofȱresourcesȱnecessaryȱtoȱsupplyȱelectricȱenergyȱtoȱtheȱCCA.ȱ ȱȱ 5.5.1 LoadȱForecastȱMethodologyȱȱ ȱ Communityȱ electricȱ loadȱ dataȱ providedȱ byȱ SDG&Eȱ wasȱ 12Ȭmonth,ȱ yearȬtoȬdateȱ energyȱ consumptionȱ byȱ rateȱ classȱ andȱ zipȱ codeȱ asȱ ofȱ Octoberȱ 2004.ȱ SDG&Eȱ providedȱ dataȱ forȱ 4ȱ rateȱ classesȱ (Residential,ȱ Commercial,ȱ Agricultural,ȱ Lighting). 23ȱȱȱ ȱ Theȱ loadȱ informationȱ wasȱtreatedȱ asȱprototypicalȱ forȱ 2004ȱenergyȱ consumption.ȱ SDG&E’’sȱ publishedȱ staticȱ loadȱ profilesȱ wereȱ employedȱ toȱ allocateȱ monthlyȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ risks,ȱ similarȱ toȱ theȱ acceptedȱ utilityȱ practice.ȱ ȱ Becauseȱ underȱ currentȱ rulesȱ theȱ Aggregatorȱ cannotȱ causeȱ serviceȱtoȱbeȱshutȬoffȱtoȱtheȱcustomersȱforȱfailureȱtoȱpayȱitsȱportionȱofȱtheȱbillȱwhereasȱtheȱutilityȱcan,ȱitȱisȱ importantȱ thatȱ theȱ Aggregatorȱ haveȱ theȱ abilityȱ toȱ screenȱ customersȱ priorȱ toȱ automaticȱ enrollmentȱ forȱ administrationȱ ofȱ itsȱ creditȱ policiesȱ andȱ thatȱ theȱ Aggregatorȱ hasȱ theȱ rightȱ toȱ returnȱ theȱ customerȱ toȱ theȱ utilityȱforȱfailureȱtoȱpaysȱitsȱcharges.ȱȱThisȱissueȱshouldȱbeȱaddressedȱinȱPhaseȱ2ȱofȱR.03Ȭ10Ȭ003.ȱ 23ȱȱTheȱdataȱexcludeȱloadsȱofȱdirectȱaccessȱcustomers.ȱ ȱ 55 energyȱ (kWh)ȱ intoȱ eachȱ hourȱ ofȱ theȱ monthȱ andȱ thenȱ toȱ eachȱ ofȱ theȱ 8,760ȱ hoursȱ withinȱaȱyear.ȱ ȱ Aȱ twentyȬyearȱelectricȱloadȱforecastȱwasȱ performedȱforecastingȱelectricȱdemandȱ energyȱ requirementsȱ forȱ yearsȱ 2005ȱ throughȱ 2024.ȱ Electricȱ energyȱ requirementsȱ andȱ customerȱ populationsȱ wereȱ escalatedȱ basedȱ uponȱ sectorȱ specificȱ growthȱ planningȱ statisticsȱ providedȱ byȱ theȱ County;ȱ ifȱ noneȱ wasȱ providedȱ SDG&Eȱ systemȬwideȱgrowthȱratesȱwereȱapplied.ȱ ȱ Theȱ numberȱ ofȱ customerȱ accountsȱ andȱ annualȱ energyȱ salesȱ forȱ theȱ initialȱ yearȱ (2006)ȱofȱtheȱprogramȱareȱshownȱbelow.ȱ ȱ Accounts 2004 * MWh Accounts 2005 * MWh Accounts 2006 * MWh Residential Small Commercial Medium Commercial Large Commercial/Industrial Agricultural Street Lighting/Traffic Control 228,566 9,089 1,457 35 6,938 601 1,329,807 162,496 679,628 97,621 163,251 9,901 236,950 9,422 1,510 36 7,193 624 1,378,584 168,456 704,557 101,202 169,239 10,264 244,920 9,739 1,561 38 7,435 645 1,424,953 174,123 728,255 104,606 174,931 10,609 Total 246,686 2,442,704 255,735 2,532,302 264,337 2,617,477 * Data Provided by Distribution Utility (SDG&E) Was Energy Usage for 2-Months of 2003 and 10-Months of Energy Used for 2004 Data Were Treated as 2004 Data and Escalated Annually By the Following Growth Rates: Residential Commercial Street Lighting and Traffic Control variable variable variable Declines from 4% TO 2% by 2012; 2% flat from 2013-2024 Consistent With CEC Energy and Regional Demographic Forecasts ȱ ȱ 5.5.2 CommunityȱEnergyȱLoadȱShapeȱ ȱ Theȱcommunityȱcompositeȱannualȱenergyȱloadȱshapeȱ(averageȱkWȱperȱhour)ȱwasȱ developedȱbyȱcombiningȱaverageȱloadsȱinȱeachȱhourȱfromȱeachȱofȱtheȱCustomerȱ Sectorȱstaticȱloadȱprofilesȱidentifiedȱabove.ȱȱAȱprototypicalȱannualȱloadȱprofileȱisȱ shownȱinȱtheȱfollowingȱfigure.ȱȱ ȱ ȱ 56 Elecetric Demand 8760 Hours per Year ȱ Electricȱloadȱwasȱnextȱbrokenȱdownȱintoȱquarterlyȱandȱweeklyȱdemandȱperiodsȱ toȱcaptureȱseasonalȱvariationȱinȱprojectedȱloadsȱandȱelectricȱgenerationȱresourceȱ requirements.ȱ Theȱ resultingȱ quarterlyȱ minimum,ȱ asȱ wellȱ asȱ peakȱ powerȱ requirements,ȱ isȱ theȱ basisȱ forȱ ““sizing””ȱ theȱ portfolioȱ ofȱ contractsȱ andȱ generationȱ resourcesȱneededȱtoȱserveȱtheȱCounty’’sȱloadȱprofile.ȱ ȱ 5.5.3 RenewableȱPortfolioȱStandardsȱRequirementsȱ ȱ Theȱ Californiaȱ Renewableȱ Portfolioȱ Standardȱ Programȱ (RPS)ȱ establishedȱ byȱ Senateȱ Billȱ 1078ȱ requiresȱ thatȱ aȱ retailȱ sellerȱ ofȱ electricityȱ purchaseȱ aȱ specifiedȱ minimumȱ percentageȱ ofȱ electricityȱ generatedȱ byȱ qualifyingȱ renewableȱ energyȱ resources.ȱ ȱ Communityȱ Choiceȱ Aggregatorsȱ areȱ requiredȱ underȱ SBȱ 1078ȱ toȱ procureȱ aȱ specifiedȱ minimumȱ percentageȱ ofȱ totalȱ kilowattȱ hoursȱ soldȱ toȱ retailȱ endȬuseȱcustomersȱeachȱcalendarȱyearȱfromȱrenewableȱresources.ȱȱ ȱ Eachȱ distributionȱ utilityȱ isȱ requiredȱ toȱ increaseȱ itsȱ totalȱ procurementȱ ofȱ eligibleȱ energyȱ resourcesȱ byȱ atȱ leastȱ 1%ȱ perȱ yearȱ soȱ thatȱ 20%ȱ ofȱ itsȱ retailȱ salesȱ areȱ procuredȱfromȱeligibleȱrenewableȱenergyȱresourcesȱbyȱyearȱ2017.ȱCCAȱprogramȱ aggregatedȱloadsȱareȱaȱsubsetȱofȱloadȱcurrentlyȱservedȱbyȱtheȱdistributionȱutilitiesȱ (SCE,ȱ PG&Eȱ andȱ SDG&E).ȱ Therefore,ȱ analysesȱ containedȱ hereinȱ assumeȱ thatȱ customerȱ energyȱ requirementsȱ ofȱ theȱ prospectiveȱ CCAȱ will,ȱ atȱ aȱ minimum,ȱ beȱ equalȱtoȱtheȱrenewableȱenergyȱpercentageȱrequiredȱofȱeachȱdistributionȱutility.ȱȱ ȱ Further,ȱ whenȱ theȱ Countyȱ appliedȱ forȱ andȱ wasȱ acceptedȱ intoȱ theȱ CCAȱ Demonstrationȱ Projectȱ itȱ declaredȱ asȱ aȱ goalȱ toȱ doubleȱ theȱ RPSȱ andȱ achieveȱ aȱ renewableȱ energyȱ contentȱ ofȱ 40%ȱ byȱ 2017.ȱ Theȱ followingȱ tableȱ reflectsȱ distributionȱutilityȱRPSȱrenewableȱenergyȱrequirementsȱprojectedȱforward.ȱ ȱ 57 ȱ Year PG&E MIN SCE MIN 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 12% 13% 14% 15% 16% 17% 18% 19% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 16% 17% 18% 19% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% SDG&E MIN 5% 6% 7% 8% 9% 10% 11% 13% 14% 15% 16% 17% 18% 19% 20% 20% 20% 20% 20% 20% 20% 20% ȱ ȱ Theȱ billȱ requiresȱ theȱ CPUCȱ toȱ adoptȱ rulesȱ forȱ implementingȱ theȱ RPS,ȱ andȱ CCAȱ plannersȱ mustȱ understandȱ theȱ renewableȱ energyȱ requirementsȱ beforeȱ theyȱ canȱ assessȱ theȱ costȬbenefitsȱ andȱ makeȱ thresholdȱ decisionsȱ toȱ implementȱ aȱ CCAȱ program.ȱCountyȱminimumȱ renewableȱenergyȱrequirementsȱareȱsummarizedȱinȱ theȱtableȱbelow.ȱ ȱ 58 Renewable Resource Requirements Projected Forward Energy MWh 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2,698,210 2,774,526 2,846,487 2,914,186 2,977,743 3,037,296 3,098,042 3,160,003 3,223,203 3,287,667 3,353,420 3,420,488 3,488,898 3,558,676 3,629,850 3,702,447 3,776,496 3,852,026 Renewable Capacity (MW) Requirement 1 X RPS 153 168 184 199 215 231 236 240 245 250 255 260 266 271 276 282 287 293 2 X RPS 307 337 367 398 429 461 472 481 491 500 510 521 531 542 552 564 575 586 Renewable Energy (MWh) Requirement 1 X RPS 403,382 442,537 482,480 523,096 564,282 605,941 619,608 632,001 644,641 657,533 670,684 684,098 697,780 711,735 725,970 740,489 755,299 770,405 2 X RPS 806,765 885,074 964,959 1,046,193 1,128,565 1,211,881 1,239,217 1,264,001 1,289,281 1,315,067 1,341,368 1,368,195 1,395,559 1,423,470 1,451,940 1,480,979 1,510,598 1,540,810 ȱ ȱ *ȱȱCapacityȱfigureȱisȱbasedȱonȱaȱcapacityȱfactorȱofȱ30%,ȱtypicalȱofȱwindȱresources.ȱ ȱ 59 60 6 FINANCIALȱPROJECTIONSȱ ȱ TheȱsupplyȱportfolioȱmodeledȱforȱtheȱCountyȱcontainsȱaȱdiverseȱmixȱofȱresourcesȱ reflectiveȱofȱaȱstrongȱcommitmentȱtoȱpromotionȱofȱrenewableȱenergy.ȱ ȱ Theȱresourceȱtypesȱinclude:ȱ ȱ x Spotȱ marketȱ purchasesȱ ––ȱ shortȬtermȱ electricityȱ purchasesȱ toȱ supplementȱ resourcesȱunderȱcontractȱcontrolȱofȱtheȱCountyȱ x Contractȱ purchasesȱ ––ȱ longerȱ term,ȱ fixedȱ priceȱ powerȱ purchases.ȱ ȱ Termsȱ canȱ beȱ monthly,ȱ quarterly,ȱ annualȱ orȱ multiȬyear.ȱ ȱ Forȱ purposesȱ ofȱ thisȱ analysis,ȱtheȱcontractsȱwereȱstructuredȱwithȱsequentialȱtwo,ȱthree,ȱorȱfiveȬ yearȱterms.ȱ x Naturalȱ gasȱ powerȱ productionȱ ––ȱ productionȱ fromȱ aȱ combinedȱ cycleȱ naturalȱgasȱcombustionȱturbineȱownedȱbyȱtheȱCountyȱusedȱforȱbaseloadȱorȱ shapingȱpurposesȱ x Renewableȱenergyȱpurchasesȱ––ȱpurchasesȱofȱrenewableȱenergyȱtoȱmeetȱtheȱ County’’sȱ renewableȱ resourceȱ goals,ȱ withȱ aȱ minimumȱ equalȱ toȱ SDG&E’’sȱ renewableȱenergyȱmix.ȱȱForȱpurposesȱofȱthisȱanalysis,ȱpurchasesȱareȱfromȱaȱ genericȱ renewableȱportfolioȱwithȱaȱcostȱ equalȱtoȱ theȱweightedȱaverageȱofȱ theȱrenewableȱresourcesȱexpectedȱtoȱfulfillȱCalifornia’’sȱRPS.ȱ x Renewableȱenergyȱpowerȱproductionȱ––ȱproductionȱfromȱrenewableȱenergyȱ resourcesȱownedȱbyȱtheȱCounty.ȱȱForȱpurposesȱofȱthisȱanalysis,ȱanȱequityȱ positionȱ inȱ windȱ andȱ geothermalȱ facilitiesȱ sizedȱ toȱ meetȱ theȱ County’’sȱ renewableȱresourceȱgoalsȱȱ x Offȱ systemȱ salesȱ ––ȱ salesȱ ofȱ excessȱ energyȱ intoȱ theȱ spotȱ marketȱ atȱ timesȱ whenȱ theȱ resourcesȱ underȱ contractȱ orȱ ownershipȱ areȱ inȱ excessȱ ofȱ theȱ County’’sȱloadȱrequirementsȱ ȱ Theȱ totalȱ costȱ ofȱ serviceȱ forȱ theȱ CCAȱ programȱ wasȱ calculatedȱ andȱ comparedȱ toȱ theȱ generationȱ costsȱ chargedȱ byȱ SDG&E.ȱ ȱ Theȱ differenceȱ representsȱ potentialȱ savingsȱorȱcostsȱassociatedȱwithȱtheȱCCAȱprogram.ȱȱTheseȱsavingsȱareȱshownȱforȱ eachȱ yearȱinȱtheȱstudyȱperiod,ȱwithȱpositiveȱnumbersȱindicatingȱlowerȱcostsȱforȱ theȱ CCAȱ andȱ negativeȱ numbersȱ indicatingȱ higherȱ costs.ȱ ȱ Costsȱ orȱ savingsȱ areȱ shownȱ bothȱ inȱ millionsȱ ofȱ dollarsȱ perȱ yearȱ andȱ asȱ aȱ percentageȱ ofȱ customers’’ȱ monthlyȱelectricȱbills.24ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱȱTheȱ percentageȱ savingsȱ areȱ expressedȱ basedȱ onȱ totalȱ electricȱ bills,ȱ includingȱ SDG&Eȱ deliveryȱ charges.ȱȱ Theȱ percentageȱ savingsȱ onȱ theȱ generationȱ componentȱ ofȱ billsȱ wouldȱ beȱ approximatelyȱ doubleȱ theȱ percentagesȱshown.ȱ 24 ȱ 61 ȱ SummaryȱOfȱElectricȱCostȱSavingsȱFromȱCommunityȱChoiceȱAggregationȱ BaseȱCaseȱScenarioȱ (MillionsȱofȱDollars)ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Total CCA Costs SDG&E Charges 207.8 198.6 210.6 204.7 213.1 209.6 228.8 227.6 228.0 237.9 217.2 232.6 223.7 247.2 237.7 257.1 245.0 266.9 247.7 278.9 255.2 287.8 281.8 305.8 300.1 336.2 319.0 364.3 330.5 379.5 344.0 384.7 353.3 396.3 352.1 402.0 372.6 431.0 5,168.2 5,648.6 Savings 0.0 (9.2) (5.9) (3.5) (1.2) 9.9 15.4 23.5 19.4 21.9 31.2 32.6 24.0 36.1 45.3 49.1 40.7 43.0 49.8 58.5 480.4 Percentage Of Total Bill 0% -2% -1% -1% 0% 2% 3% 5% 4% 4% 6% 6% 4% 6% 7% 7% 6% 6% 7% 8% 5% ȱ Totalȱ nominalȱ savingsȱ overȱ theȱ studyȱ periodȱ areȱ $480.4ȱ millionȱ orȱ approximatelyȱ 5%ȱ ofȱ customers’’ȱ totalȱ electricityȱ costs.ȱ ȱ Costȱ savingsȱ averageȱ approximatelyȱ$25.3ȱmillionȱperȱyear.ȱȱ ȱ 6.1 SupplyȱPortfolioȱDetailsȱ ȱ Theȱ CCAȱ programȱ wouldȱ beȱ suppliedȱ fromȱ aȱ diverseȱ portfolioȱ ofȱ energyȱ resources.ȱ ȱ Theȱ portfolioȱ isȱ designedȱ toȱ matchȱ SDG&E’’sȱ renewableȱ energyȱ content.ȱȱTheȱCountyȱinvestsȱinȱgenerationȱresourcesȱtoȱmeetȱitsȱbaseloadȱenergyȱ requirements.ȱ ȱ Theȱ portfolioȱ alsoȱ includesȱ powerȱ purchasesȱ throughȱ contractsȱ withȱ termsȱ rangingȱ fromȱ twoȱ toȱ fiveȬyearsȱ andȱ spotȱ marketȱ purchasesȱ toȱ supplementȱtheȱproductionȱofȱtheȱCounty’’sȱgenerationȱresources.ȱ ȱ 62 ȱ Theȱresourceȱmixȱincludesȱbothȱconventionalȱandȱrenewableȱresourceȱownership.ȱȱ Theȱ portfolioȱ initiallyȱ containsȱ onlyȱ purchasesȱ fromȱ theȱ openȱ market,ȱ andȱ beginningȱ inȱ 2009,ȱ itȱ includesȱ productionȱ fromȱ aȱ naturalȱ gasȱ fueledȱ resource,ȱ supplementedȱ byȱ investmentsȱ inȱ windȱ andȱ geothermalȱ resourcesȱ inȱ 2012ȱ andȱ 2015,ȱrespectively.ȱȱ2009ȱwasȱselectedȱasȱaȱfeasibleȱdateȱforȱtheȱCountyȱtoȱacquireȱ equityȱ inȱ aȱ newȱ generationȱ resources,ȱ consideringȱ leadȱ timesȱ forȱ negotiations,ȱ permittingȱ andȱ financing.ȱ ȱ Approximatelyȱ halfȱ ofȱ theȱ nonȬrenewableȱ portionȱ ofȱ theȱportfolioȱwouldȱconsistȱofȱnew,ȱcleanerȱburningȱfossilȬfueledȱplantȱownedȱbyȱ theȱCounty,ȱbeginningȱinȱ2009.ȱ ȱ CCAȱGenerationȱResourcesȱInȱCCAȱPortfolioȱ ȱ Resource Type Capacity (MW) On-line Capital Cost ($ Millions) Gas Combined Cycle 200 2009 160.2 Wind 120 2012 140.2 Geothermal 25 2015 74.0 ȱ Theȱassumedȱrenewableȱgenerationȱresourcesȱwereȱsizedȱtoȱmeetȱtheȱmajorityȱofȱ theȱ County’’sȱ renewableȱ energyȱ targetsȱ projectedȱ forȱ theȱ nextȱ severalȱ years.ȱ ȱ Asȱ loadȱ growthȱ continues,ȱ theȱ renewableȱ productionȱ mustȱ beȱ supplementedȱ withȱ renewableȱenergyȱpurchasesȱtoȱmeetȱtheȱCounty’’sȱtargetedȱrenewableȱpercentageȱ ofȱ20%.ȱ ȱ ȱ 63 LongȱTermȱResourceȱMixȱUtilizedȱForȱFinancialȱProȱFormaȱ 120% 100% 80% 60% 40% 20% 0% -20% 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Renew able Generation Renew able Purchases Gas Generation Contract Purchases Spot Market Purchases Off System Sales ȱ Noȱ subsidiesȱ areȱ assumedȱ toȱ beȱ availableȱ toȱ offsetȱ costsȱ ofȱ theȱ County’’sȱ renewableȱresources.ȱȱSubsidiesȱareȱincludedȱforȱrenewableȱenergyȱpurchases,ȱtoȱ theȱ extentȱ suchȱ purchasesȱ areȱ needed,ȱ consistentȱ withȱ theȱ subsidyȱ treatmentȱ discussedȱinȱSectionȱ5.3.3.ȱ ȱ Capitalȱexpendituresȱassociatedȱwithȱtheȱpreferredȱportfolioȱincludeȱstartupȱcostsȱ ofȱ $400ȱ thousandȱ andȱ generationȱ investmentsȱ ofȱ $160ȱ millionȱ inȱ 2009,ȱ $140ȱ millionȱinȱ2012,ȱandȱ$74ȱmillionȱinȱ2015.ȱ ȱ 6.2 AlternativeȱSupplyȱScenariosȱ ȱ Financialȱ proȱ formaȱ wereȱ preparedȱ forȱ fourȱ additionalȱ supplyȱ portfoliosȱ thatȱ differȱ byȱ varyingȱ theȱ mixȱ ofȱ renewableȱ energyȱ inȱ theȱ portfolioȱ andȱ byȱ whetherȱ theȱCountyȱownsȱgenerationȱresourcesȱusedȱtoȱsupplyȱelectricityȱtoȱtheȱprogram.ȱȱ TheȱproȱformaȱforȱtheȱalternativeȱsupplyȱportfoliosȱareȱincludedȱinȱAppendixȱF.ȱȱ Analysisȱ ofȱ theȱ alternativeȱ supplyȱ scenariosȱ canȱ assistȱ theȱ Countyȱ inȱ understandingȱ theȱ costȱ effectivenessȱ andȱ tradeoffsȱ amongȱ differentȱ resourcesȱ thatȱcouldȱbeȱincludedȱinȱaȱportfolioȱtoȱsupplyȱtheȱCCAȱprogram.ȱ ȱ 6.2.1 AlternativeȱSupplyȱScenarioȱ1ȱ ȱ SupplyȱScenarioȱ1ȱassumesȱtheȱCountyȱdoublesȱtheȱrenewableȱcontentȱofȱSDG&Eȱ andȱ purchasesȱ allȱ ofȱ itsȱ loadȱ requirementsȱ fromȱ theȱ openȱ market.ȱ ȱ Inclusionȱ ofȱ ȱ 64 renewableȱ energyȱ increasesȱ theȱ portfolio’’sȱ cost,ȱ evenȱ afterȱ consideringȱ theȱ subsidiesȱpotentiallyȱavailableȱtoȱtheȱCounty’’sȱrenewableȱenergyȱsuppliers.ȱȱTheȱ renewableȱ energyȱ costsȱ forȱ purchasesȱ upȱ toȱ theȱ minimumȱ renewableȱ portfolioȱ standardȱ areȱ assumedȱ toȱ beȱ offsetȱ byȱ supplementalȱ energyȱ paymentsȱ administeredȱ byȱ theȱ CEC,ȱ whileȱ theȱ incrementalȱ renewableȱ energyȱ aboveȱ andȱ beyondȱtheȱminimumȱrequirementȱisȱassumedȱtoȱreceiveȱnoȱsubsidy.ȱȱThus,ȱtheȱ secondȱ 20%ȱ ofȱ targetedȱ renewableȱ energyȱ isȱ paidȱ entirelyȱ byȱ customersȱ ofȱ theȱ CCA.ȱ ȱ Capitalȱ expendituresȱ associatedȱ withȱ Scenarioȱ 1ȱ isȱ limitedȱ toȱ programȱ startupȱ costsȱestimatedȱatȱ$400ȱthousand.ȱ ȱ Thisȱsupplyȱstrategyȱresultsȱinȱaȱlossȱoverȱtheȱstudyȱperiodȱofȱ$169.7ȱmillionȱorȱ 2%ȱofȱtotalȱelectricityȱcosts.ȱ ȱ 6.2.2 AlternativeȱSupplyȱScenarioȱ2ȱ ȱ SupplyȱScenarioȱ2ȱassumesȱtheȱCountyȱmatchesȱtheȱrenewableȱcontentȱofȱSDG&Eȱ andȱ purchasesȱ allȱ ofȱ itsȱ loadȱ requirementsȱ inȱ theȱ openȱ market.ȱ ȱ Renewableȱ energyȱ subsidiesȱ areȱ availableȱ toȱ offsetȱ theȱ incrementalȱ costȱ ofȱ theȱ County’’sȱ renewableȱenergyȱpurchases.ȱ ȱ Capitalȱ expendituresȱ associatedȱ withȱ Scenarioȱ 2ȱ isȱ limitedȱ toȱ programȱ startupȱ costsȱestimatedȱatȱ$400ȱthousand.ȱ ȱ Thisȱsupplyȱstrategyȱresultsȱinȱaȱlossȱoverȱtheȱstudyȱperiodȱofȱ$96.3ȱmillionȱorȱ 1%ȱofȱtotalȱelectricityȱcosts.ȱ ȱ 6.2.3 AlternativeȱSupplyȱScenarioȱ3ȱ ȱ SupplyȱScenarioȱ3ȱassumesȱtheȱCountyȱdoublesȱtheȱrenewableȱcontentȱofȱSDG&Eȱ andȱproducesȱelectricityȱfromȱresourcesȱthatȱitȱowns.ȱȱTheȱportfolioȱalsoȱincludesȱ powerȱ purchasesȱ throughȱ fiveȬyearȱ contractsȱ andȱ spotȱ marketȱ purchasesȱ toȱ supplementȱ theȱ productionȱ ofȱ theȱ County’’sȱ generationȱ resources.ȱ ȱ Supplyȱ Scenarioȱ 3ȱ includesȱ bothȱ conventionalȱ andȱ renewableȱ resourceȱ ownership.ȱ ȱ Theȱ portfolioȱ initiallyȱ containsȱ onlyȱ marketȱ purchasesȱ similarȱ toȱ Supplyȱ Scenarioȱ 1,ȱ butȱ beginningȱ inȱ 2008,ȱ itȱ includesȱ productionȱ fromȱ windȱ andȱ naturalȱ gasȬfired,ȱ combinedȱcycleȱresources.ȱ ȱ ȱ 65 Noȱ subsidiesȱ areȱ assumedȱ toȱ beȱ availableȱ toȱ offsetȱ costsȱ ofȱ theȱ County’’sȱ renewableȱresources.ȱȱSubsidiesȱareȱincludedȱforȱrenewableȱenergyȱpurchases,ȱtoȱ theȱ extentȱ suchȱ purchasesȱ areȱ needed,ȱ consistentȱ withȱ theȱ subsidyȱ treatmentȱ describedȱforȱScenarioȱ1.ȱ ȱ Capitalȱ expendituresȱ associatedȱ withȱ Scenarioȱ 3ȱ includeȱ startupȱ costsȱ ofȱ $400ȱ thousandȱandȱgenerationȱinvestmentsȱofȱ$575ȱmillionȱinȱ2008.ȱ ȱ Thisȱ supplyȱstrategyȱresultsȱinȱtotalȱsavingsȱoverȱ theȱ studyȱ periodȱofȱ$544.6.9ȱ millionȱorȱ5%ȱofȱtotalȱelectricityȱcosts.ȱ ȱ 6.2.4 AlternativeȱSupplyȱScenarioȱ4ȱ ȱ Scenarioȱ4ȱisȱsimilarȱtoȱScenarioȱ3ȱexceptȱthatȱtheȱportfolioȱmatchesȱtheȱrenewableȱ contentȱ ofȱ SDG&E’’sȱ supplyȱ portfolio,ȱ withȱ aȱ correspondingȱ increaseȱ inȱ theȱ capacityȱofȱnaturalȱgasȱfiredȱgenerationȱfinancedȱbyȱtheȱCounty.ȱ ȱ Capitalȱ expendituresȱ associatedȱ withȱ Scenarioȱ 4ȱ includeȱ startupȱ costsȱ ofȱ $400ȱ thousandȱandȱgenerationȱinvestmentsȱofȱ$438ȱmillionȱinȱ2008.ȱ ȱ Thisȱ supplyȱ strategyȱ resultsȱ inȱ totalȱ savingsȱ overȱ theȱ studyȱ periodȱ ofȱ $615.8ȱ millionȱorȱ6%ȱofȱtotalȱelectricityȱcosts.ȱ ȱ Comparingȱ theȱ alternativeȱ supplyȱ scenariosȱ revealsȱ theȱ costȱ advantageȱ enjoyedȱ byȱ theȱ CCAȱ inȱ financingȱ capitalȬintensiveȱ generationȱ projects.ȱ ȱ Theȱ incrementalȱ costȱofȱincreasingȱrenewableȱenergyȱfromȱ20%ȱtoȱ40%ȱisȱnotȱaȱsignificantȱfactorȱinȱ theȱprogram’’sȱcostȬeffectiveness.ȱ ȱ 6.3 SensitivityȱCasesȱ ȱ Sensitivityȱ analysesȱ canȱ helpȱ putȱ upperȱ andȱ lowerȱ boundsȱ onȱ theȱ expectedȱ financialȱresultsȱfromȱimplementingȱaȱCCAȱprogram.ȱȱNCIȱperformedȱsensitivityȱ analysesȱ forȱ theȱ majorȱ variablesȱ expectedȱ toȱ impactȱ theȱ financialȱ results.ȱ ȱ Theȱ resultsȱofȱtheseȱsensitivitiesȱareȱshownȱbelow:ȱȱ ȱ x Naturalȱgasȱandȱpowerȱpricesȱ(+/Ȭȱ25%)ȱ x Costȱresponsibilityȱsurchargesȱ(+/Ȭȱ50%)ȱ x SDG&Eȱsystemȱaverageȱrateȱprojectionsȱ(1.5%ȱtoȱ3%ȱannualȱgrowth)ȱ x Rateȱ restructuringȱ proposedȱ byȱ SDG&Eȱ inȱ itsȱ 2005ȱ Rateȱ Designȱ Windowȱ applicationȱ ȱ 66 ȱ Noneȱofȱtheȱsensitivityȱcasesȱeliminatedȱprogramȱsavingsȱoverȱtheȱstudyȱperiod.ȱȱ However,ȱinȱallȱcasesȱexceptȱtheȱlowȱCRSȱcaseȱ(Caseȱ4)ȱandȱtheȱrevisedȱSDG&Eȱ rateȱdesignȱcaseȱ(Caseȱ8),ȱrevenueȱlossesȱwereȱincurredȱinȱtheȱearlyȱyearsȱofȱtheȱ program.ȱ ȱ Theȱ Countyȱ shouldȱ payȱ particularȱ attentionȱ toȱ changesȱ inȱ theseȱ variablesȱifȱandȱwhenȱitȱproceedsȱwithȱimplementationȱofȱitsȱCCAȱprogram.ȱȱAȱ phaseȬinȱ ofȱ programȱ operationsȱ wouldȱ mitigateȱ exposureȱ toȱ theseȱ factors.ȱȱ Anotherȱ methodȱ forȱ acceleratingȱ financialȱ benefitsȱ wouldȱ beȱ toȱ createȱ aȱ rateȱ stabilizationȱ fundȱ byȱ issuingȱ debtȱ thatȱ wouldȱ beȱ backedȱ byȱ theȱ futureȱ revenueȱ streamsȱofȱtheȱprogram,ȱtherebyȱmovingȱaȱportionȱofȱfutureȱsavingsȱforwardȱinȱ time.ȱ ȱ Annualȱ financialȱ resultsȱ associatedȱ withȱ theȱ sensitivityȱ casesȱ areȱ shownȱ inȱ theȱ followingȱtables.ȱ ȱ ȱ 67 Caseȱ1:ȱȱBaseȱCaseȱ ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Total CCA Costs SDG&E Charges 207.8 198.6 210.6 204.7 213.1 209.6 228.8 227.6 228.0 237.9 217.2 232.6 223.7 247.2 237.7 257.1 245.0 266.9 247.7 278.9 255.2 287.8 281.8 305.8 300.1 336.2 319.0 364.3 330.5 379.5 344.0 384.7 353.3 396.3 352.1 402.0 372.6 431.0 5,168.2 5,648.6 Savings 0.0 (9.2) (5.9) (3.5) (1.2) 9.9 15.4 23.5 19.4 21.9 31.2 32.6 24.0 36.1 45.3 49.1 40.7 43.0 49.8 58.5 480.4 Percentage Of Total Bill 0% -2% -1% -1% 0% 2% 3% 5% 4% 4% 6% 6% 4% 6% 7% 7% 6% 6% 7% 8% 5% ȱ ȱ 68 Caseȱ 2:ȱ ȱ Naturalȱ Gasȱ Andȱ Powerȱ Pricesȱ Areȱ Reducedȱ Byȱ 25%ȱ Fromȱ Theȱ Baseȱ Caseȱ ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Total CCA Costs 193.3 196.3 191.3 211.0 209.1 189.4 199.5 208.1 214.2 218.2 224.6 243.9 256.2 268.8 278.3 291.2 300.0 295.1 309.6 4,498.2 SCE Charges 184.4 189.9 187.1 203.5 210.8 199.1 206.8 214.8 222.7 232.2 239.5 253.6 275.8 297.6 309.7 314.3 323.8 324.8 347.5 4,737.9 Savings 0.0 (8.9) (6.4) (4.2) (7.5) 1.7 9.6 7.3 6.6 8.5 14.0 14.9 9.8 19.5 28.8 31.4 23.1 23.8 29.8 37.9 239.7 Percentage Of Total Bill 0% -2% -2% -1% -2% 0% 2% 2% 2% 2% 3% 3% 2% 4% 5% 5% 4% 4% 5% 6% 3% ȱ ȱ *ȱ Forȱ comparison,ȱ totalȱ savingsȱ underȱ theȱ baseȱ caseȱ isȱ $480.4ȱ millionȱ orȱ 5%.ȱȱ Lowerȱ naturalȱ gasȱ pricesȱ reduceȱ savingsȱ becauseȱ lowerȱ naturalȱ gasȱ andȱ powerȱ pricesȱ increaseȱ theȱ CRSȱ andȱ reduceȱ theȱ SDG&Eȱ rateȱ benchmark. ȱ 69 Caseȱ3:ȱȱNaturalȱGasȱAndȱPowerȱPricesȱ25%ȱHigherȱThanȱBaseȱCaseȱ ȱȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Total CCA Costs 222.2 224.8 234.8 247.6 248.5 260.7 264.1 281.4 290.3 291.7 300.5 333.9 356.6 380.0 394.1 410.8 422.1 424.7 450.0 6,039.1 SCE Charges 212.7 219.4 232.0 251.6 265.0 266.2 287.6 299.4 311.2 325.5 336.1 358.0 396.6 431.1 449.4 455.1 468.7 479.1 514.6 6,559.2 Savings 0.0 (9.5) (5.4) (2.8) 4.0 16.5 5.4 23.5 18.0 20.8 33.8 35.6 24.0 40.0 51.1 55.3 44.3 46.6 54.4 64.6 520.1 Percentage Of Total Bill 0% -2% -1% -1% 1% 3% 1% 5% 3% 4% 6% 6% 4% 6% 7% 7% 6% 6% 7% 7% 5% ȱ ȱ *ȱ Forȱ comparison,ȱ totalȱ savingsȱ underȱ theȱ baseȱ caseȱ isȱ $480.4ȱ millionȱ orȱ 5%.ȱȱ Higherȱnaturalȱgasȱpricesȱwouldȱincreaseȱsavingsȱbecauseȱhigherȱnaturalȱgasȱandȱ powerȱpricesȱreduceȱtheȱCRSȱandȱincreaseȱtheȱSDG&Eȱrateȱbenchmark.ȱ ȱ 70 Caseȱ4:ȱȱCRSȱIsȱReducedȱByȱ50%ȱFromȱBaseȱCaseȱ ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Total CCA Costs 182.6 186.8 190.6 205.3 210.7 210.5 216.8 230.7 237.9 240.4 247.6 274.2 292.3 311.1 322.4 335.8 344.9 352.1 372.6 4,965.4 SCE Charges 192.6 198.6 203.3 221.1 231.3 225.9 240.3 250.1 259.8 271.6 280.3 298.2 328.4 356.4 371.5 376.5 387.9 402.0 431.0 5,526.7 Savings 0.0 10.0 11.8 12.6 15.8 20.6 15.4 23.5 19.4 21.9 31.2 32.7 24.0 36.1 45.3 49.1 40.7 43.0 49.8 58.5 561.4 Percentage Of Total Bill 0% 3% 3% 3% 4% 5% 4% 5% 4% 4% 6% 6% 4% 6% 7% 7% 6% 6% 7% 8% 5% ȱ ȱ *ȱForȱcomparison,ȱtotalȱsavingsȱunderȱtheȱbaseȱcaseȱisȱ$480.4ȱmillionȱorȱ5%.ȱ ȱ ȱ 71 Caseȱ5:ȱȱCRSȱIsȱIncreasedȱByȱ50%ȱFromȱBaseȱCaseȱ ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Total CCA Costs 233.0 234.4 235.5 249.5 245.3 224.0 233.0 244.8 252.2 255.0 262.8 289.4 307.8 326.9 338.5 352.2 361.7 352.1 372.6 5,370.7 SCE Charges 204.5 210.8 215.8 234.0 244.5 239.4 254.1 264.1 274.1 286.2 295.2 313.4 343.9 372.2 387.6 392.9 404.7 402.0 431.0 5,770.4 Savings 0.0 (28.5) (23.6) (19.7) (15.5) (0.8) 15.4 21.1 19.4 21.9 31.2 32.5 24.0 36.1 45.3 49.1 40.7 43.0 49.8 58.5 399.7 Percentage Of Total Bill 0% -7% -6% -5% -4% 0% 3% 4% 4% 4% 6% 6% 4% 6% 7% 7% 6% 6% 7% 8% 4% ȱ *ȱ Forȱ comparison,ȱ totalȱ savingsȱ underȱ theȱ baseȱ caseȱ isȱ $480.4ȱ millionȱ orȱ 5%. ȱ 72 Caseȱ 6:ȱ ȱ SDG&Eȱ Generationȱ Ratesȱ Increaseȱ Atȱ Anȱ Annualȱ Rateȱ Ofȱ 1.5%ȱ Vs.ȱ 2.4%ȱOfȱTheȱBaseȱCaseȱ ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Total CCA Costs 207.8 210.6 213.1 228.8 228.0 217.3 223.7 237.7 245.0 247.7 255.2 281.8 300.0 318.8 330.3 343.8 353.1 351.9 372.3 5,166.8 SCE Charges 198.1 207.1 215.9 224.7 233.3 241.7 250.0 258.7 267.6 276.8 286.3 296.2 306.4 317.0 328.0 339.3 351.0 346.1 358.3 5,302.5 Savings 0.0 (9.7) (3.5) 2.8 (4.1) 5.3 24.5 26.3 20.9 22.6 29.1 31.2 14.5 6.5 (1.8) (2.3) (4.5) (2.1) (5.8) (14.0) 135.7 Percentage Of Total Bill 0% -3% -1% 1% -1% 1% 6% 6% 4% 4% 6% 6% 3% 1% 0% 0% -1% 0% -1% -2% 1% ȱ *ȱForȱcomparison,ȱtotalȱsavingsȱunderȱtheȱbaseȱcaseȱisȱ$480.4ȱmillionȱorȱ5%.ȱ ȱ 73 Caseȱ7:ȱȱSDG&EȱGenerationȱRatesȱIncreaseȱAtȱAnȱAnnualȱRateȱOfȱ3%ȱVs.ȱ2.4%ȱ OfȱTheȱBaseȱCaseȱ ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Total CCA Costs 207.8 210.6 213.1 226.1 228.1 217.3 223.8 237.9 245.2 247.9 255.4 282.0 300.2 319.1 330.6 344.2 353.5 352.4 372.7 5,167.8 SCE Charges 200.8 212.9 225.1 237.5 250.0 262.7 275.6 289.1 303.3 318.2 333.9 350.3 367.6 385.7 404.7 424.7 445.7 450.6 473.5 6,212.0 Savings 0.0 (7.0) 2.3 11.9 11.4 21.9 45.4 51.8 51.3 58.2 70.4 78.5 68.3 67.4 66.6 74.2 80.5 92.2 98.3 100.7 1,044.2 Percentage Of Total Bill 0% -2% 1% 3% 3% 5% 10% 11% 11% 12% 13% 15% 12% 11% 10% 11% 12% 13% 13% 13% 10% ȱ ȱ *ȱForȱcomparison,ȱtotalȱsavingsȱunderȱtheȱbaseȱcaseȱisȱ$480.4ȱmillionȱorȱ5%.ȱ ȱ 74 Caseȱ 8:ȱ ȱ SDG&Eȱ Rateȱ Designȱ Windowȱ Proposalsȱ Forȱ Removingȱ Costsȱ Andȱ SubsidiesȱFromȱGenerationȱRatesȱȱ ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Total CCA Costs 207.8 210.6 213.1 226.1 228.0 217.3 223.8 237.8 245.1 247.8 255.2 281.8 300.2 319.1 330.5 344.1 353.4 352.2 372.6 5,166.4 SCE Charges 206.4 212.7 217.8 236.6 247.3 241.8 257.0 267.3 277.5 290.0 299.2 318.0 349.6 379.0 394.8 400.1 412.2 418.8 449.1 5,875.5 Savings 0.0 (1.4) 2.1 4.7 10.5 19.3 24.6 33.3 29.5 32.5 42.2 44.0 36.1 49.5 59.9 64.2 56.1 58.8 66.6 76.5 709.1 Percentage Of Total Bill 0% 0% 1% 1% 2% 4% 5% 7% 6% 6% 8% 8% 6% 8% 9% 9% 8% 8% 9% 10% 7% ȱ ȱ *ȱ Forȱ comparison,ȱ totalȱ savingsȱ underȱ theȱ baseȱ caseȱ isȱ $480.4ȱ millionȱ orȱ 5%.ȱȱ Savingsȱ improveȱ becauseȱ theȱ generationȱ ratesȱ paidȱ byȱ customersȱ withinȱ theȱ Countyȱ toȱ SDG&Eȱ underȱ theȱ newȱ rateȱ designsȱ wouldȱ increaseȱ relativeȱ toȱ theȱ currentȱrateȱstructure,ȱcreatingȱadditionalȱsavingsȱachievableȱbyȱtheȱCCA.ȱ ȱ 75 76 7 EVALUATIONȱOFȱCOSTSȱANDȱBENEFITSȱ ȱ Thisȱ sectionȱ summarizesȱ NCI’’sȱ evaluationȱ ofȱ theȱ costsȱ andȱ benefitsȱ ofȱ implementingȱaȱCCAȱprogramȱinȱtheȱCounty.ȱȱEvaluationȱcriteriaȱareȱtheȱabilityȱ toȱ deliverȱ lowerȱ rates,ȱ stableȱ prices,ȱ andȱ allowanceȱ forȱ increasedȱ utilizationȱ ofȱ renewableȱenergy.ȱ ȱ 7.1 AbilityȱToȱDeliverȱLowerȱRatesȱ ȱ Theȱ economicȱ analysisȱ demonstratesȱ thatȱ itȱ isȱ feasibleȱ forȱ theȱ Countyȱ toȱ implementȱaȱCCAȱprogram.ȱȱCustomersȱwouldȱbeȱableȱtoȱobtainȱelectricȱserviceȱ atȱratesȱbelowȱthoseȱchargedȱbyȱSDG&Eȱwithinȱfourȱyearsȱofȱoperation.ȱȱUnderȱ theȱmostȱlikelyȱscenario,ȱexpectedȱsavingsȱaverageȱ5%ȱofȱtotalȱelectricȱbillsȱoverȱ theȱstudyȱperiod.ȱȱ ȱ Basedȱ onȱ theȱ yearȬbyȬyearȱ financialȱ projections,ȱ NCIȱ concludesȱ thatȱ electricȱ billȱ savingsȱ opportunitiesȱ wouldȱ beginȱ inȱ yearȱ fourȱ ofȱ programȱ operationsȱ andȱ wouldȱ increaseȱ overȱ time.ȱ ȱ Savingsȱ wouldȱ beȱ dependentȱ uponȱ utilizationȱ ofȱ municipalȱ debtȱ financingȱ ofȱ generationȱ projectsȱ orȱ longȬtermȱ powerȱ purchases,ȱ assumingȱcurrentȱSDG&Eȱrateȱdesignsȱremainȱinȱplace.ȱȱIfȱSDG&E’’sȱrateȱdesignȱ proposalsȱmadeȱinȱitsȱcurrentȱRateȱDesignȱWindowȱproceedingȱareȱadopted,ȱtheȱ CCAȱ benefitsȱ wouldȱ improveȱ toȱ approximatelyȱ 7%,ȱ onȱ averageȱ overȱ theȱ studyȱ period,ȱ andȱ beginȱ toȱ accrueȱ inȱ theȱ secondȱ yearȱ ofȱ programȱ operationsȱ (Seeȱ sensitivityȱCaseȱ8ȱinȱSectionȱ6.3).ȱȱWithȱtheȱproposedȱSDG&Eȱrateȱdesigns,ȱaȱCCAȱ programȱ wouldȱ beȱ economicallyȱ viableȱ evenȱ withoutȱ investmentȱ inȱ generation,ȱ producingȱslightȱsavingsȱofȱapproximatelyȱ1%ȱonȱaverageȱoverȱtheȱstudyȱperiod.ȱ ȱ Theȱ rangeȱ ofȱ expectedȱ costȱ savingsȱ mayȱ beȱ sufficientȱ inȱ andȱ ofȱ themselvesȱ toȱ justifyȱtheȱdecisionȱtoȱpursueȱCCA.ȱȱTheȱestimatedȱcostȱsavingsȱalsoȱhelpȱsupportȱ andȱ justifyȱ theȱ decisionȱ toȱ pursueȱ CCAȱ toȱ achieveȱ otherȱ benefits,ȱ suchȱ asȱ rateȱ stability,ȱ localȱ control,ȱ andȱ increasedȱ opportunitiesȱ forȱ renewableȱ energyȱ development.ȱ ȱȱȱ 7.2 RateȱStabilityȱ ȱ Theȱ Countyȱ couldȱ structureȱ itsȱ portfolioȱ toȱ emphasizeȱ costȱ predictabilityȱ andȱ provideȱ stableȱ pricesȱ toȱ CCAȱ customers.ȱ ȱ LongȬtermȱ supplyȱ contractsȱ atȱ fixedȱ pricesȱcanȱprovideȱpredictableȱcostsȱforȱtermsȱofȱtenȱyearsȱorȱlonger.ȱȱInvestmentsȱ inȱrenewableȱresources,ȱsuchȱasȱwindȱresources,ȱsolar,ȱbiomassȱandȱgeothermal,ȱ ȱ 77 eliminateȱ theȱ dependenceȱ onȱ naturalȱ gasȱ andȱ theȱ exposureȱ toȱ fluctuationsȱ inȱ naturalȱgasȱpricesȱforȱthatȱelementȱofȱtheȱsupplyȱportfolio.ȱ ȱ Theȱsensitivityȱanalysisȱshowsȱanȱexpectedȱrangeȱofȱprogramȱsavingsȱofȱbetweenȱ 1%ȱandȱ10%ȱoverȱtheȱstudyȱperiod.ȱȱTheȱCounty’’sȱportfolioȱwouldȱdemonstrateȱ relativelyȱ stableȱ pricesȱ toȱ consumers.ȱ ȱ Underȱ theȱ baseȱ caseȱ scenario,ȱ whichȱ reflectsȱ conservativeȱ assumptionsȱ regardingȱ futureȱ increasesȱ inȱ SDG&E’’sȱ rates,ȱ theȱCCAȱprogramȱcostsȱareȱexpectedȱtoȱshowȱ25%ȱgreaterȱstabilityȱthanȱSDG&E’’sȱ rates.ȱ ȱ 7.3 IncreasedȱUtilizationȱOfȱRenewableȱEnergyȱ ȱ Theȱ Countyȱ wouldȱ determineȱ howȱ muchȱ renewableȱ energyȱ toȱ includeȱ inȱ itsȱ portfolio,ȱ overȱ andȱ aboveȱ theȱ minimumȱ percentagesȱ requiredȱ pursuantȱ toȱ theȱ Californiaȱ RPS.ȱ ȱ Theȱ costȱ ofȱ purchasingȱ renewableȱ energyȱ isȱ greaterȱ thanȱ theȱ costsȱ ofȱ purchasingȱ electricityȱ producedȱ fromȱ fossilȱ fuels,ȱ soȱ exceedingȱ theȱ RPSȱ viaȱ powerȱ purchasesȱ willȱ increaseȱ theȱ averageȱ costȱ ofȱ theȱ County’’sȱ portfolioȱ toȱ someȱ degree.ȱ ȱ However,ȱ theȱ analysisȱ showsȱ thatȱ doublingȱ theȱ RPSȱ wouldȱ haveȱ onlyȱaȱmodestȱoverallȱimpactȱonȱcustomerȱbills,ȱasȱdiscussedȱbelow.ȱ ȱ 7.3.1 CostȱOfȱRenewableȱEnergyȱ ȱ Theȱ CEC’’sȱ Renewableȱ Resourcesȱ Developmentȱ Reportȱ (RRDR)ȱ publishedȱ inȱ Novemberȱ 2003ȱ showsȱ theȱ mixȱ andȱ costsȱ ofȱ theȱ renewableȱ resourcesȱ thatȱ willȱ likelyȱ beȱ utilizedȱ toȱ meetȱ theȱ Californiaȱ RPS.ȱ ȱ Theȱ costȱ ofȱ buyingȱ renewableȱ energyȱcanȱbeȱestimatedȱbyȱcreatingȱaȱgenericȱportfolioȱofȱtheseȱresourcesȱusingȱ theȱ contributionsȱ forȱ eachȱ typeȱ projectedȱ inȱ theȱ RRDRȱ studyȱ toȱ calculateȱ aȱ weightedȱ averageȱ cost.ȱ ȱ Theȱ averageȱ costȱ ofȱ theseȱ resources,ȱ weightedȱ byȱ theirȱ expectedȱcontributionȱtoȱtheȱRPS,ȱisȱshownȱbelow:ȱ ȱ ȱ 78 Renewableȱ Resourceȱ Technologiesȱ Expectedȱ Toȱ Fulfillȱ Theȱ Californiaȱ RenewableȱPortfolioȱStandardȱ(2003ȱDollars)ȱ Source:ȱCECȱRenewableȱDevelopmentȱResourceȱReportȱ ȱ 2005 Levelized Portfolio Production Cost Resource Contribution ($/MWh) Wind (Class 4 site) 66% 60 * Concentrating Solar 1% 121 Landfill Gas 4% 44 Solid Biomass (Direct 4% 66 Combustion) Geothermal (Binary) 25% 55 Weighted Average 59 ȱ *ȱȱTheȱcostȱofȱwindȱisȱbasedȱonȱtheȱlevelizedȱcostȱofȱ$49ȱperȱMWhȱpresentedȱinȱtheȱRRDRȱplusȱanȱ additionalȱ$11ȱperȱMWhȱcapacityȱcostȱtoȱreflectȱthatȱcapacityȱmustȱbeȱacquiredȱseparatelyȱbecauseȱ ofȱ theȱ intermittencyȱ ofȱ windȱ resources.ȱ ȱ Theseȱ figuresȱ doȱ notȱ includeȱ productionȱ taxȱ credits,ȱ whichȱmanyȱpeopleȱbelieveȱwillȱbeȱreinstatedȱonceȱCongressȱpassesȱaȱcomprehensiveȱenergyȱbill.ȱ ȱ Escalatingȱ theȱ costȱ toȱ 2006ȱ byȱ assumingȱ 2.5%ȱ annualȱ inflationȱ yieldsȱ aȱ 2006ȱ averageȱ renewableȱ costȱ ofȱ $62ȱ perȱ MWh.ȱ ȱ Thisȱ representsȱ aȱ premiumȱ ofȱ approximatelyȱ$16ȱperȱMWhȱaboveȱtheȱprojectedȱmarketȱpricesȱofȱsystemȱpowerȱ inȱ2006.ȱ ȱ Allȱ elseȱ beingȱ equalȱ andȱ assumingȱ noȱ Countyȱ capitalȱ financingȱ ofȱ renewableȱ energy,ȱ theȱ costȱ ofȱ doublingȱ SDG&E’’sȱ 7%ȱ renewableȱmixȱ wouldȱ beȱ $16/MWhȱ *ȱ 0.07ȱ=ȱ$1.12ȱperȱMWh.ȱȱAȱtypicalȱhouseholdȱwouldȱpayȱ$0.56ȱmoreȱperȱmonthȱtoȱ doubleȱ theȱ amountȱ ofȱ renewableȱ energyȱ usedȱ toȱ supplyȱ itsȱ electricityȱ consumption.25ȱ ȱ Theȱ premiumȱ declinesȱ overȱ timeȱ asȱ naturalȱ gasȱ andȱ electricityȱ marketȱ pricesȱ areȱ expectedȱ toȱ riseȱ fasterȱ thanȱ theȱ costȱ ofȱ renewableȱ energyȱ production.ȱȱForȱinstance,ȱassumingȱaverageȱannualȱincreasesȱinȱtheȱmarketȱpriceȱ ofȱsystemȱpowerȱofȱ2.8%ȱusedȱinȱthisȱstudy,ȱtheȱrenewableȱpriceȱpremiumȱfallsȱtoȱ $4ȱperȱMWhȱbyȱ2014.ȱȱByȱ2018,ȱtheȱmarketȱpriceȱofȱrenewableȱenergyȱisȱexpectedȱ toȱbeȱnoȱgreaterȱthanȱtheȱcostȱofȱconventionalȱgenerationȱresources.26ȱ ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱȱTypicalȱresidentialȱconsumptionȱisȱapproximatelyȱ500ȱkWhȱorȱ0.5ȱMWhȱperȱmonth.ȱ ȱȱTheȱcostȱofȱtransmissionȱinvestmentsȱthatȱmayȱbeȱneededȱtoȱbringȱlargeȱamountsȱofȱrenewableȱenergyȱtoȱ loadȱ centersȱisȱ notȱ includedȱ inȱ thisȱ analysis.ȱ ȱ Theseȱ costsȱwillȱ beȱ includedȱ inȱ transmissionȱ ratesȱ thatȱ areȱ paidȱbyȱallȱusersȱofȱtheȱgridȱandȱshouldȱnotȱimpactȱtheȱCCAȱeconomicȱanalysis.ȱ 25 26 ȱ 79 Theȱ projectedȱ costsȱ ofȱ renewableȱ andȱ conventionalȱ electricityȱ areȱ shownȱ inȱ theȱ followingȱchart:ȱ ȱ Sanȱ Diegoȱ Areaȱ Marketȱ Priceȱ Projectionsȱ Forȱ Renewableȱ Andȱ Conventionalȱ Electricityȱ ȱ 100.0 90.0 Dollars Per MWh 80.0 70.0 60.0 Renewable Energy 50.0 System Power 40.0 30.0 20.0 10.0 2023 2021 2019 2017 2015 2013 2011 2009 2007 2005 - ȱ 7.3.2 MunicipalȱFinancingȱofȱRenewableȱEnergyȱDevelopmentȱ ȱ Asȱdescribedȱinȱthisȱfeasibilityȱstudy,ȱtheȱCountyȱcanȱreduceȱtheȱcostȱofȱacquiringȱ renewableȱ energyȱ byȱ financingȱ developmentȱ ofȱ renewableȱ resourcesȱ usedȱ toȱ supplyȱ itsȱ CCAȱ program.ȱ ȱ Theȱ followingȱ tableȱ comparesȱ theȱ totalȱ costȱ ofȱ aȱ hypotheticalȱ 100ȱ MWȱ windȱ energyȱ projectȱ utilizingȱ theȱ financingȱ structuresȱ typicalȱ ofȱ anȱ investorȱ ownedȱ utilityȱ vs.ȱ thoseȱ availableȱ toȱ theȱ County.ȱ ȱ Theȱ underlyingȱ assumptionsȱ areȱ thatȱ theȱ utility’’sȱ capitalȱ structureȱ isȱ comprisedȱ ofȱ 50%ȱ debtȱ andȱ 50%ȱ equityȱ atȱ anȱ overallȱ costȱ ofȱ capitalȱ ofȱ 9%,ȱ whileȱ theȱ Countyȱ employsȱ 100%ȱ debtȱ financingȱ atȱ aȱ rateȱ ofȱ 5.5%.ȱ ȱ Theȱ utilityȱ isȱ subjectȱ toȱ federalȱ andȱstateȱincomeȱtaxesȱofȱ40.75%ȱsoȱthatȱtheȱtaxȬeffectedȱcostȱofȱcapitalȱisȱ12.9%.ȱȱ Theȱ Countyȱ makesȱ noȱ return,ȱ hasȱ noȱ incomeȱ taxȱ obligationȱ andȱ establishesȱ itsȱ revenueȱrequirementȱbasedȱonȱ theȱcashȱ requirementsȱ neededȱ toȱcoverȱ expensesȱ andȱdebtȱservice. 27ȱ ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱSectionȱ8.1.6ȱdiscussesȱfinancingȱoptionsȱavailableȱtoȱtheȱCounty’’sȱCCAȱprogram.ȱ 27 ȱ 80 CostȱComparisonȱ––ȱIOUȱVs.ȱCountyȱOwnershipȱofȱWindȱResourceȱ (ThousandȱofȱDollars)ȱ ȱ Investor-Owned Cost Element Utility County Capital Cost ($000) 15,951 7,730 Operations & Maintenance 2,198 2,198 ($000) Firming Capacity ($000) 3,022 3,022 Total First Year Cost ($000) 21,171 12,950 Cost Per MWh ($/MWh) 77 47 ȱ Theȱ capitalȬrelatedȱ costsȱ areȱ significantlyȱ lessȱ ifȱ theȱ Countyȱ wereȱ toȱ ownȱ orȱ otherwiseȱ financeȱ theȱ resource,ȱ comparedȱ toȱ ownershipȱ byȱ anȱ investorȱ ownedȱ utilityȱ suchȱ asȱ SDG&E.ȱ ȱ Theȱ costsȱ ofȱ maintainingȱ andȱ operatingȱ theȱ resourceȱ wouldȱbeȱtheȱsame,ȱasȱwouldȱbeȱtheȱcostȱofȱcapacityȱneededȱtoȱ““firm””ȱtheȱwindȱ resource’’sȱ intermittentȱ production.ȱ ȱ Theȱ useȱ ofȱ lowȱ costȱ debtȱ andȱ greaterȱ financialȱleverageȱbyȱtheȱCountyȱreducesȱtheȱannualizedȱcosts.ȱȱDuringȱtheȱfirstȱ yearȱ ofȱ operation,ȱ theȱ Countyȱ canȱ produceȱ energyȱ atȱ aȱ costȱ thatȱ isȱ nearlyȱ 40%ȱ lowerȱthanȱwhatȱtheȱinvestorȱownedȱutilityȱwouldȱincurȱifȱitȱownedȱtheȱidenticalȱ resource.ȱȱTheȱCounty’’sȱcostȱofȱproducingȱrenewableȱenergyȱwouldȱbeȱnearlyȱtheȱ sameȱasȱtheȱmarketȱpriceȱofȱsystemȱpower.ȱ ȱ 7.3.3 OperationalȱIssuesȱForȱRenewableȱEnergyȱ ȱ Renewableȱ resourcesȱ areȱ generallyȱ nonȬdispatchable,ȱ operatingȱ asȱ eitherȱ baseloadȱ resourcesȱ orȱ onȱ anȱ asȬavailableȱ basis.ȱ ȱ Windȱ andȱ solarȱ resourcesȱ produceȱelectricityȱonlyȱduringȱcertainȱtimesȱofȱtheȱdayȱwhenȱthereȱisȱsufficientȱ windȱ orȱ sun.ȱ ȱ Theseȱ characteristicsȱ placeȱ anȱ operationalȱ limitȱ onȱ theȱ amountȱ ofȱ renewableȱenergyȱthatȱcanȱbeȱincludedȱinȱtheȱoverallȱ resourceȱmix.ȱȱDependingȱ onȱaȱcommunity’’sȱloadȱdurationȱcurve,ȱwhichȱdefinesȱitsȱbaseȱloadȱrequirements,ȱ theȱoperationalȱlimitȱcouldȱrangeȱbetweenȱ50%ȱandȱ70%.28ȱȱItȱwouldȱbeȱpossibleȱ toȱ exceedȱ theseȱ amountsȱ byȱ overȬprocuring,ȱ butȱ doingȱ soȱ wouldȱ requireȱ theȱ Aggregatorȱtoȱsellȱexcessȱenergyȱintoȱtheȱmarketȱduringȱmanyȱhoursȱofȱtheȱyear,ȱ therebyȱtakingȱonȱadditionalȱrisksȱassociatedȱwithȱwholesaleȱsalesȱofȱenergy.ȱ ȱ Aȱ similarȱ issueȱ existsȱ withȱ relianceȱ onȱ intermittentȱ windȱ production.ȱ ȱ Ifȱ anȱ Aggregatorȱ withȱ anȱ averageȱ loadȱ requirementȱ ofȱ 200ȱ MWȱ establishedȱ aȱ 50%ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱȱThisȱrefersȱonlyȱtoȱtheȱCounty’’sȱprogramȱoperationsȱandȱisȱnotȱintendedȱtoȱimplyȱthatȱtheȱentireȱsystemȱ couldȱefficientlyȱintegrateȱsuchȱlargeȱamountsȱofȱrenewableȱenergy.ȱ 28 ȱ 81 renewableȱtarget,ȱitȱwouldȱneedȱapproximatelyȱ300ȱMWȱofȱwindȱcapacity.ȱȱWithȱ aȱ typicalȱ capacityȱ factorȱ ofȱ 32%,ȱ productionȱ fromȱ 300ȱ MWȱ ofȱ windȱ capacityȱ wouldȱaverageȱtheȱ100ȱMWȱneededȱtoȱmeetȱtheȱtarget.ȱȱHowever,ȱatȱanyȱmomentȱ inȱtime,ȱtheȱAggregatorȱcouldȱhaveȱbetweenȱ0ȱandȱ300ȱMWȱofȱproduction.ȱȱTheȱ Aggregatorȱwouldȱeitherȱneedȱtoȱpurchaseȱ200ȱMWȱofȱreplacementȱenergyȱorȱitȱ wouldȱ haveȱ 100ȱ MWȱ excessȱ energyȱ toȱ sell.ȱ ȱ Theseȱ imbalancesȱ imposeȱ financialȱ riskȱonȱtheȱAggregatorȱasȱtheȱpricesȱatȱwhichȱitȱmustȱbuyȱandȱsellȱenergyȱmayȱnotȱ beȱidentical. 29ȱ ȱ Oneȱ wayȱthatȱtheȱCCAȱcouldȱsafelyȱexceedȱ theȱoperationalȱlimitsȱ onȱrenewableȱ energyȱisȱbyȱpurchasingȱrenewableȱenergyȱcertificatesȱ(RECs)ȱfromȱproducersȱofȱ renewableȱ energy.ȱ ȱ Theȱ CECȱ isȱ currentlyȱ investigatingȱ aȱ systemȱ thatȱ wouldȱ facilitateȱtradingȱ ofȱRECs,ȱ andȱ privateȱmarketsȱforȱRECsȱ haveȱbeenȱ inȱexistenceȱ forȱ severalȱ years.ȱ ȱ Theȱ tradableȱ RECȱ conceptȱ allowsȱ theȱ renewableȱ attributeȱ associatedȱ withȱ renewableȱ energyȱ productionȱ toȱ beȱ soldȱ separatelyȱ fromȱ theȱ electricalȱ energy.ȱȱ Throughȱappropriateȱtrackingȱandȱ verification,ȱtheȱbuyerȱ canȱ beȱ assuredȱ thatȱ forȱ eachȱ RECȱ purchasedȱ aȱ kWhȱ ofȱ renewableȱ energyȱ wasȱ producedȱ duringȱ theȱ year;ȱ however,ȱ theȱ renewableȱ productionȱ needȱ notȱ matchȱ theȱ buyer’’sȱ loadȱ requirementsȱ onȱ anȱ hourȬbyȬhourȱ basis.ȱ ȱ Byȱ separatingȱ theȱ renewableȱattributeȱfromȱtheȱelectricalȱenergy,ȱaȱCCAȱcouldȱensureȱthatȱenoughȱ renewableȱenergyȱwasȱproducedȱoverȱtheȱcourseȱofȱtheȱyearȱtoȱsupplyȱ100%ȱofȱitsȱ customers’’ȱloadȱrequirements,ȱwhileȱavoidingȱtheȱneedȱtoȱsellȱexcessȱenergy.ȱȱTheȱ priceȱ ofȱ theȱ RECȱ shouldȱ beȱ approximatelyȱ equalȱ toȱ theȱ costȱ differenceȱ betweenȱ theȱmarketȱpriceȱforȱsystemȱpowerȱandȱtheȱcostȱofȱrenewableȱenergyȱproduction,ȱ afterȱconsideringȱallȱavailableȱincentives.ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱȱFirmingȱ servicesȱ areȱ availableȱ viaȱ contractȱ withȱ energyȱ suppliers,ȱ typicallyȱ thoseȱ withȱ significantȱ hydroelectricȱresourcesȱinȱtheirȱportfolio.ȱ 29 ȱ 82 8 REGIONALȱ COMMUNITYȱ CHOICEȱ AGGREGATIONȱ PROGRAMȱ OPERATEDȱUNDERȱAȱJOINTȱPOWERSȱAGENCYȱ ȱ 8.1 EconomiesȱOfȱScaleȱFromȱCombinedȱCCAȱOperationsȱ ȱ Byȱ combiningȱ theȱ electricȱ loadsȱ ofȱ multipleȱ citiesȱ and/orȱ countiesȱ forȱ CCAȱ operations,ȱ scaleȱ economiesȱ canȱ beȱ achievedȱ thatȱ increaseȱ theȱ benefitsȱ availableȱ toȱ theȱ individualȱ members.ȱ ȱ Operationalȱ costȱ savingȱ canȱ beȱ capturedȱ throughȱ commonȱ programȱ administrationȱ andȱ energyȱ procurementȱ activities.ȱ ȱ Diversityȱ amongȱ communityȱ loadȱ shapesȱ enablesȱ theȱ sharingȱ ofȱ capacityȱ reserves,ȱ loweringȱoverallȱprocurementȱcosts.ȱȱTheȱflatterȱloadȱshapeȱofȱaȱcombinedȱCCAȱ programȱ reducesȱ theȱ costsȱ ofȱ servingȱ theȱ load,ȱ therebyȱ increasingȱ theȱ benefitsȱ availableȱtoȱeachȱofȱtheȱparticipatingȱcommunities.ȱ ȱ 8.2 JointȱPowersȱAgencyȱStructureȱOptionȱ ȱ Jointȱ Powerȱ Agenciesȱ (JPA)ȱ areȱ commonȱ legalȱ structuresȱ thatȱ manyȱ publicȱ agenciesȱ haveȱ formedȱ andȱ usedȱ toȱ offerȱ servicesȱ inȱ aȱ moreȱ economicalȱ andȱ efficientȱmanner.ȱȱȱȱCCAȱJPAȱformationȱcanȱcombineȱcityȱandȱcountyȱjurisdictionsȱ toȱ secureȱ longȬtermȱ powerȱ contractsȱ orȱ developȱ itsȱ ownȱ generationȱ resources.ȱȱ Multipleȱ memberȱ CCAȱ JPAsȱ mayȱ benefitȱ fromȱ flatterȱ electricȱ loadȱ shapes,ȱ reducingȱ theȱ overallȱ costȱ toȱ serve.ȱ Thereȱ areȱ numerousȱ operatingȱ examplesȱ ofȱ jurisdictionsȱ formingȱ JPAsȱ toȱ procureȱ electricȱ energyȱ inȱ wholesaleȱ marketsȱ forȱ deliveryȱtoȱ memberȱconstituentȱ retailȱ markets.ȱTheȱfollowingȱdescribesȱsomeȱofȱ theȱbenefitsȱandȱimpedimentsȱofȱtheȱCCAȱJPAȱstructureȱoption:ȱ ȱ SummaryȱofȱBenefitsȱ ȱ ¾ TheȱJPAȱstructureȱenablesȱitsȱpartyȱagenciesȱtoȱjointlyȱexerciseȱanyȱpowerȱ commonȱ toȱ them.ȱ CCAȱ enablingȱ legislationȱ citesȱ eligibleȱ jurisdictionsȱ asȱ cities,ȱcountiesȱorȱJPAsȱcomprisedȱofȱcitiesȱandȱcounties.ȱ ¾ TheȱCCAȱJPAȱwillȱbeȱaȱgovernmentalȱagencyȱandȱitsȱmotivesȱareȱnotȱprofitȱ driven.ȱ ¾ PartiesȱtoȱtheȱJPAȱwouldȱshareȱcost/riskȱandȱassistȱwithȱanyȱJPAȱproject.ȱ ¾ JPAȱ formationȱ canȱ combineȱ itsȱ membersȱ inȱ securingȱ longȬtermȱ powerȱ contractsȱorȱenteringȱintoȱagreementsȱwithȱagenciesȱinȱtheȱdevelopmentȱofȱ generationȱresources.ȱ ¾ JPAȱ membersȱ couldȱ benefitȱ fromȱ economiesȱ ofȱ scaleȱ associatedȱ withȱ buildingȱ aȱ largeȱ projectȱ withȱ itsȱ greaterȱ plantȱ efficienciesȱ andȱ lowerȱ unitȱ costs.ȱ ȱ 83 ¾ Theȱ JPAȱ mayȱ authorizeȱ theȱ issuanceȱ ofȱ lowȱ costȱ bondsȱ byȱ ordinanceȱ subjectȱtoȱreferendumȱbutȱwithoutȱaȱvoteȱofȱtheȱelectorsȱwithinȱtheȱpublicȱ entitiesȱcomprisingȱtheȱJPAȱ ¾ Aȱ JPAȱ providesȱ anȱ organizational,ȱ legalȱ andȱ financialȱ structureȱ toȱ integrateȱ itsȱ partiesȱ andȱ facilitateȱ theȱ implementationȱ andȱ operationȱ ofȱ projectsȱ(inȱthisȱcaseȱutilities)ȱ ¾ Thisȱstructureȱminimizesȱdirectȱexposureȱofȱtheȱmemberȱjurisdictionsȱandȱ atȱ theȱ sameȱ timeȱ providesȱ aȱ conduitȱ toȱ keyȱ capital,ȱ political,ȱ andȱ intellectualȱresourcesȱforȱtheȱotherȱJPAȱmembers.ȱ ¾ Thisȱstructureȱcouldȱreduceȱorȱeliminateȱtheȱneedȱforȱredundantȱpersonnelȱ andȱ systemsȱ toȱ facilitateȱ energyȱ supplyȱ forȱ theȱ multipleȱ memberȱ jurisdictions.ȱȱ ¾ JPAȱ Operationalȱ Businessȱ Plansȱ couldȱ incorporateȱ phasedȱ customerȱ segmentȱ participationȱ andȱ provideȱ flexibilityȱ toȱ subcontractȱ theȱ organizationalȱdepthȱneededȱduringȱinitialȱCCAȱoperation.ȱ ȱȱ SummaryȱofȱImpedimentsȱ ȱ ¾ Formingȱ aȱ JPAȱ isȱ timeȱ consuming;ȱ itȱ isȱ necessaryȱ toȱ establishȱ aȱ workingȱ groupȱorȱadvisoryȱpanelȱofȱallȱparties,ȱandȱpartiesȱmustȱagreeȱonȱapproachȱ andȱstructureȱ(theȱfewerȱtheȱpartiesȱtheȱmoreȱstreamlinedȱtheȱprocess).ȱȱ ¾ Theȱ challengeȱ forȱ governanceȱ isȱ toȱ provideȱ equitableȱ representationȱ forȱ bothȱlargeȱandȱsmallȱmembersȱwithoutȱcompromisingȱeither’’sȱoptions.ȱ ¾ TheȱdecisionȬmakingȱprocessȱcanȱbeȱcumbersome,ȱduringȱbothȱformationȱ andȱoperationȱ(decisionsȱtendȱtoȱbeȱ““consensus””ȱdriven,ȱslowingȱprocessesȱ andȱcompromisingȱpositionsȱȬȱmembersȱseekȱtoȱprotectȱtheirȱownȱinterest).ȱ ȱ 8.3 PurposeȱandȱPartiesȱ ȱ AȱJPAȱisȱformedȱwhenȱitȱisȱtoȱtheȱadvantageȱofȱtwoȱorȱmoreȱpublicȱentitiesȱwithȱ commonȱ powersȱ toȱ consolidateȱ theirȱ forcesȱ toȱ acquireȱ orȱ constructȱ aȱ jointȬuseȱ facilityȱ orȱ whenȱ localȱ publicȱ entitiesȱ wishȱ toȱ poolȱ withȱ otherȱ publicȱ entitiesȱ toȱ saveȱ costsȱ toȱ acquireȱ equipmentȱ orȱ toȱ acquireȱ orȱ constructȱ facilitiesȱ forȱ theirȱ individualȱuse.ȱȱȱAȱjointȱexerciseȱofȱpowersȱagreementȱmustȱbeȱapprovedȱbyȱallȱ participatingȱentities,ȱandȱthisȱmayȱincludeȱtheȱfederalȱgovernmentȱorȱanyȱfederalȱ departmentȱ orȱ agency,ȱ thisȱ state,ȱ anotherȱ stateȱ orȱ anyȱ stateȱ departmentȱ orȱ agency,ȱaȱcounty,ȱcountyȱboardȱofȱsupervisors,ȱcityȱpublicȱcorporation,ȱorȱpublicȱ districtȱofȱthisȱstateȱorȱanotherȱstate.ȱ ȱ ȱ 84 8.4 Authorizationȱ ȱ AȱJointȱPowersȱauthorityȱisȱempoweredȱbyȱChapterȱ5,ȱcommencingȱwithȱsectionȱ 6500ȱ ofȱ Divisionȱ 7ȱ ofȱ Titleȱ 1ȱ ofȱ theȱ Governmentȱ Code,ȱ toȱ issueȱ bonds,ȱ notes,ȱ Commercialȱ paper,ȱ includingȱ certainȱ kindsȱ ofȱ variableȱ rateȱ securitiesȱ forȱ specifiedȱpurposes,ȱandȱtoȱenterȱintoȱleasesȱtoȱacquireȱlandȱandȱequipmentȱorȱtoȱ acquireȱ orȱ constructȱ publicȱ facilities.ȱ ȱ Theȱ JPAȱ entityȱ isȱ createdȱ whenȱ memberȱ jurisdictionsȱ enterȱ intoȱ aȱ jointȱ exerciseȱ ofȱ powersȱ agreement,ȱ formingȱ aȱ jointȱ powersȱagencyȱandȱbyȱadoptingȱidenticalȱconcurrent,ȱordinances.ȱ ȱȱ 8.5 JPAȱGovernanceȱ ȱ AȱcommissionȱresponsibleȱforȱadministeringȱtheȱCCAȱJPAȱwouldȱbeȱestablishedȱ andȱcomprisedȱofȱrepresentativesȱfromȱeachȱpartyȱtoȱtheȱCCAȱJPAȱJointȱPowersȱ Agreement.ȱ ȱ Aȱ quorumȱ ofȱ theȱ CCAȱ JPAȱ Commissionȱ (Commission)ȱ wouldȱ consistȱ ofȱ thoseȱ Commissioners,ȱ orȱ theirȱ designatedȱ alternatives,ȱ representingȱ aȱ numericalȱ majorityȱ ofȱ theȱ Parties.ȱ Votingȱ onȱ JPAȱ actionsȱ couldȱ beȱ facilitatedȱ whereinȱ eachȱ Partyȱ wouldȱ haveȱ theȱ rightȱ toȱ castȱ oneȱ vote.ȱ Inȱ theȱ alternative,ȱ votingȱ mayȱ beȱ conductedȱ whereȱ eachȱ partyȱ hasȱ aȱ numberȱ ofȱ votesȱ equalȱ toȱ itsȱ percentageȱ shareȱ ofȱ CCAȱ JPAȱ expenses.ȱ ȱ Suchȱ proceduresȱ wouldȱ beȱ developedȱ byȱaȱworkingȱgroupȱorȱadvisoryȱpanelȱofȱallȱpartiesȱasȱreferencedȱabove.ȱ ȱ InȱadditionȱtoȱvotingȱrepresentationȱonȱtheȱCommission,ȱflexibilityȱforȱPartiesȱtoȱ takeȱ actionsȱ aloneȱ orȱ inȱ concertȱ withȱ otherȱ selectedȱ JPAȱ members,ȱ andȱ therebyȱ ensureȱ membersȱ canȱ protectȱ andȱ pursueȱ individualȱ interests,ȱ canȱ beȱ facilitatedȱ throughȱtheȱdevelopmentȱandȱuseȱofȱaȱhierarchyȱofȱstructuredȱagreements.ȱInȱtheȱ exampleȱbelow,ȱprecedenceȱofȱagreementsȱcanȱbeȱestablishedȱwhere,ȱforȱexample,ȱ aȱProjectȱorȱOperatingȱAgreementȱtakesȱprecedenceȱoverȱaȱFacilitiesȱAgreement.ȱ InȱthisȱcaseȱactionȱcanȱbeȱtakenȱbyȱJPAȱmembersȱwithoutȱexecutingȱaȱhigherȬlevelȱ membershipȬwideȱ agreement.ȱ Inȱ thisȱ wayȱ specificȱ operationalȱ arrangementsȱ betweenȱ aȱ limitedȱ numbersȱ ofȱ Partiesȱ takeȱ ““precedence””ȱ overȱ higherȬlevelȱ membershipȬwideȱ agreements.ȱ Theȱ namesȱ andȱ useȱ ofȱ agreementȱ structuresȱ wouldȱbeȱadjustedȱtoȱmoreȱcloselyȱreflectȱCCAȱJPAȱactivities.ȱȱTheȱfollowingȱisȱanȱ exampleȱ ofȱ hierarchicalȱ ofȱ JPAȱ Agreementsȱ usedȱ byȱ theȱ Northernȱ Californiaȱ PowerȱAgency:ȱ ȱ ȱ 85 ȱ ȱ AgreementȱHierarchy:ȱ 1. 2. 3. 4. 5. JointȱPowersȱAgreementȱ PoolingȱAgreementȱ FacilitiesȱAgreementȱ ProjectȱAgreementȱ OperatingȱAgreementȱ ȱ JointȱPowersȱAgreement:ȱThroughȱtheȱJointȱpowersȱAgreementȱaȱCCAȱmightȱbeȱ establishedȱasȱaȱpublicȱagencyȱpursuantȱtoȱtheȱJointȱExerciseȱofȱPowersȱActȱofȱtheȱ Governmentȱ Codeȱ ofȱ theȱ Stateȱ ofȱ Californiaȱ authorizedȱ toȱ acquire,ȱ construct,ȱ financeȱ andȱ operateȱ buildings,ȱ works,ȱ facilitiesȱ andȱ improvementsȱ forȱ theȱ generationȱ ofȱ electricȱ capacityȱ andȱ energyȱ forȱ resale.ȱ Eachȱ ofȱ theȱ Partiesȱ toȱ theȱ Agreementȱ wouldȱ beȱ aȱ cityȱ orȱ aȱ countyȱ jurisdictionȱ authorizedȱ toȱ implementȱ aȱ CCAȱpursuantȱasȱdefinedȱinȱenablingȱlegislationȱABȱ117ȱ(Migdenȱ––ȱChapterȱ838,ȱ Statutesȱofȱ2002).ȱ ȱȱ PoolingȱAgreement:ȱEachȱPartyȱtoȱtheȱPoolingȱAgreementȱisȱaȱPartyȱtoȱtheȱCCAȱ JointȱPowersȱAgreement.ȱTheȱPoolingȱAgreementȱestablishesȱfacilities,ȱstaff,ȱandȱ theȱ capabilityȱ for:ȱ Planningȱ forȱ theȱ additionȱ ofȱ facilities;ȱ enteringȱ intoȱ longȬtemȱ andȱ shortȬterm,ȱ firmȱ andȱ nonȬfirmȱ interchangeȱ transactions;ȱ dispatchingȱ andȱ schedulingȱallȱavailableȱresourcesȱtoȱmeetȱtheȱcombinedȱloadsȱofȱtheȱParties.ȱ ȱ FacilitiesȱAgreement:ȱAȱParticipantȱinȱaȱCCAȱFacilitiesȱAgreementȱisȱaȱCCAȱJPAȱ memberȱ andȱ aȱ signatoryȱ toȱ theȱ CCAȱ Jointȱ Powersȱ Agreementȱ (JPA).ȱ Theȱ Facilitiesȱ Agreementȱ providesȱ aȱ frameworkȱ forȱ membershipȱ jointȱ design,ȱ constructionȱandȱoperationȱofȱpowerȱsupplyȱfacilities.ȱ ȱ Projectȱ Agreement:ȱ Establishesȱ theȱ frameworkȱ forȱ theȱ development,ȱ design,ȱ financing,ȱconstructionȱandȱoperationȱofȱspecificȱprojects.ȱ ȱ Operatingȱ Agreement:ȱ Detailedȱ descriptions,ȱ principlesȱ andȱ proceduresȱ (includingȱoperatingȱandȱcostȱrecovery)ȱforȱCCAȱJPAȱprojects.ȱȱ ȱ 8.6 RevenueȱBondȱIssuanceȱ ȱ Theȱ JPAȱ mayȱ authorizeȱ theȱ issuanceȱ ofȱ revenueȱ bondsȱ byȱ ordinanceȱ subjectȱ toȱ referendumȱ butȱ withoutȱ aȱ voteȱ ofȱ theȱ electorsȱ withinȱ theȱ publicȱ entitiesȱ comprisingȱ theȱ JPA.ȱ ȱ However,ȱ JPAsȱ mayȱ alsoȱ issueȱ securitiesȱ pursuantȱ toȱ aȱ resolutionȱ ofȱ theȱ authorityȱ backedȱ byȱ loanȱ agreementsȱ and/orȱ bondȱ purchaseȱ ȱ 86 agreementȱwithȱparticipatingȱmemberȱagencies.ȱȱTheȱlawȱprovidesȱthatȱsomeȱbutȱ notȱnecessarilyȱallȱofȱtheȱmembersȱofȱaȱJPAȱmayȱparticipateȱinȱaȱbondȱissueȱandȱ thatȱonlyȱthoseȱparticipatingȱwillȱbeȱobligatedȱtoȱrepayȱtheȱdebtȱincurred.ȱȱȱ ȱ BelowȱweȱlistȱaȱnumberȱofȱfinancingȱalternativesȱtoȱconsiderȱonceȱaȱJPAȱhasȱbeenȱ formed.ȱ ȱ ȱ 87 ComparativeȱFeaturesȱofȱAlternativeȱFinancingȱMethodsȱ ȱ Financingȱ Method/Characteristicsȱȱ ȱ ProjectȱFinanceableȱ ȱ ȱ Authorizationȱ ȱ ȱ Areaȱ ofȱ Authorizationȱ Jurisdictionȱ ȱ HearingȱProcedureȱ ȱ Validationȱ ȱ Natureȱ ofȱ debtȱ serviceȱ paymentsȱ ȱ ȱ Sourceȱ ofȱ debtȱ serviceȱ paymentȱ ȱ ȱ Securityȱ ȱ Lessor/LesseeȱRequiredȱ Refundableȱ Debtȱ Serviceȱ Fundsȱ subjectȱtoȱGannȱLimitȱ StructuralȱFeaturesȱ ReserveȱFundȱ CapitalizedȱInterestȱ ȱ ȱ DebtȱServiceȱCoverageȱ ȱ ȱ MethodȱofȱSaleȱ ȱ ȱ Advantagesȱ ȱ ȱ Disadvantagesȱ ȱ Generalȱ Obligationȱ Bondsȱ Acquisitionȱ&ȱ improvementsȱ ofȱlandȱandȱ buildingsȱ Issuer’’sȱ governingȱboardȱ &ȱpublicȱelectionȱ (2/3ȱvote)ȱ Boundaryȱofȱ issuerȱfacilitiesȱ districtȱ(flexible)ȱ Noneȱ Limitedȱ Obligationsȱ Bondsȱ Acquisitionȱ&ȱ improvementsȱofȱ landȱandȱ buildingsȱ Resolutionȱofȱ issueȱgoverningȱ boardȱandȱ2/3ȱ voteȱ Boundaryȱofȱ issuerȱfacilitiesȱ districtȱ(flexible)ȱ Noneȱ Noneȱ Unlimitedȱadȱ valoremȱtaxȱ Noneȱ Portionȱofȱ currentȱrevenuesȱ Propertyȱownersȱ inȱissuerȱ jurisdictionȱ Generalȱ revenuesȱofȱ issuerȱ Fullȱfaithȱandȱ creditȱ Noȱ Yesȱ Revenueȱ collectionsȱandȱ coverageȱtestȱ Noȱ Yesȱ Noȱ Specialȱ Assessmentȱ Facilitiesȱofȱlocalȱ benefitȱtoȱ propertyȱ Resolutionȱofȱ issuer,ȱpetitionȱofȱ beneficiariesȱ Flexibleȱ Majorityȱprotestȱ hearingȱ Noneȱ Annualȱ assessmentsȱ basedȱonȱbenefitsȱ received;ȱ propertyȱtaxesȱ mayȱnotȱbeȱusedȱ Annualȱpropertyȱ assessmentsȱ Certificatesȱ ofȱ Participationȱ Unrestrictedȱ RevenueȱBondsȱ Revenueȱproducingȱ facilitiesȱ Resolutionȱofȱ issuerȱ governingȱ boardȱ N/Aȱ Resolutionȱofȱissuerȱ governingȱboardȱ Maybeȱ ordinanceȱ adoptionȱ Noneȱ Rentalȱorȱ installmentȱ paymentsȱ Noneȱ Serviceȱareaȱofȱissuerȱ Noneȱ Serviceȱchargesȱandȱ feesȱfromȱusersȱ Serviceȱchargeȱandȱfeeȱ collectionsȱ Noȱ Yesȱ Generalȱ&/orȱ enterpriseȱ revenuesȱofȱ issuerȱ Leaseȱorȱ installmentȱ saleȱcontractȱ Yesȱ Yesȱ Noȱ Noȱ Yesȱ Yesȱ ȱ Noȱ Noȱ ȱ Yesȱ Noȱ ȱ Yesȱ Yesȱ ȱ Yesȱ Yesȱ ȱ Yesȱ Newȱenterpriseȱonlyȱ Noȱ Yesȱ Value/lienȱratioȱ 3:1ȱ Noȱ Yesȱ Competitiveȱorȱ Negotiatedȱ Competitiveȱorȱ Negotiatedȱ Competitiveȱorȱ Negotiatedȱ Competitiveȱorȱ Negotiatedȱ Lowerȱinterestȱ rateȱ ȱ Voterȱapprovalȱ requiredȱ Noȱpledgeȱofȱ GeneralȱFundȱ Isolatesȱprojectsȱ Competitiveȱ orȱ Negotiatedȱ Noȱvoterȱ approvalȱ Voterȱapprovalȱ Limitedȱsecurityȱ Higherȱinterestȱ ratesȱ Taxȱcollections/ȱ Foreclosureȱ Highlyȱ structuredȱ Limitedȱ flexibilityȱ Coverageȱtestȱandȱ contractsȱ Noȱ Yesȱ Lowerȱinterestȱrateȱ DebtȱServiceȱReserveȱ Fundȱ ȱ ȱ 88 Theȱ overviewȱ aboveȱ providesȱ aȱ broadȱ perspectiveȱ onȱ theȱ variousȱ financingȱ techniquesȱthatȱwillȱbeȱavailableȱtoȱaȱCCAȱJPA.ȱȱHowever,ȱtheȱultimateȱmethodȱ thatȱtheȱCCAȱJPAȱchoosesȱwillȱbasedȱonȱaȱnumberȱofȱfactors:ȱ ȱ Purposesȱ ofȱ Financing:ȱ ȱ Proceedsȱ ofȱ theȱ financingȱ canȱ beȱ usedȱ forȱ aȱ numberȱ ofȱ differentȱ usesȱ includingȱ butȱ notȱ limitedȱ to:ȱ ȱ StartȬupȱ costs,ȱ constructionȱ ofȱ newȱ plantȱ andȱ equipment,ȱ initialȱ capitalȱ forȱ powerȱ purchases,ȱ Operationsȱ andȱ maintenanceȱ expensesȱ amongȱ others.ȱ ȱ Asȱ outlinedȱ above,ȱ theȱ purposeȱ ofȱ theȱ financingȱcanȱandȱwillȱaffectȱtheȱtypeȱofȱbondȱissueȱthatȱtheȱCCAȱJPAȱcanȱutilizeȱ toȱfinanceȱitsȱvariousȱcosts.ȱȱInȱtheȱendȱtheȱJPAȱmayȱexecuteȱaȱseriesȱofȱdifferentȱ productsȱtoȱmeetȱeachȱofȱitsȱvariousȱpurposes.ȱȱȱ ȱ 89 90 9 CONCLUSIONSȱANDȱRECOMMENDATIONSȱ 9.1 Conclusionsȱ ȱ Thereȱ areȱ threeȱ generalȱ criteria,ȱ asȱ describedȱ underȱ Sectionȱ 7,ȱ forȱ assessingȱ benefitsȱofȱCCA.ȱȱTheseȱareȱtheȱpotentialȱforȱreducedȱrates,ȱtheȱabilityȱtoȱincreaseȱ utilizationȱ ofȱ renewableȱ energy,ȱ andȱ enhancedȱ localȱ control/rateȱ stability.ȱ ȱ Thisȱ analysisȱshowsȱitȱisȱpossibleȱtoȱachieveȱeachȱofȱtheȱthreeȱobjectivesȱbyȱformingȱaȱ CCAȱ program,ȱ underȱ theȱ mostȱ likelyȱ scenarios.ȱ ȱ Formationȱ ofȱ aȱ CCAȱ programȱ offersȱbenefitsȱbutȱisȱnotȱentirelyȱwithoutȱrisks,ȱbothȱfinancialȱandȱpolitical.ȱȱTheȱ Countyȱ shouldȱ clearlyȱ defineȱ itsȱ reasonsȱ forȱ pursuingȱ CCAȱ soȱ thatȱ programȱ implementationȱ reflectsȱ andȱ fulfillsȱ clearlyȱ definedȱ objectives.ȱ ȱ Theseȱ reasonsȱ couldȱincludeȱoneȱorȱmoreȱofȱtheȱfollowingȱgoals:ȱ ȱ ȭ Proactivelyȱaddressȱenergyȱandȱinfrastructureȱissuesȱinȱtheȱcommunityȱ ȭ Expandȱuseȱofȱrenewableȱenergyȱresourcesȱandȱincreaseȱenergyȱefficiencyȱ (e.g.,ȱreduceȱgreenhouseȱgasȱemissions,ȱreduceȱdependenceȱonȱfossilȱfuelsȱ andȱimportedȱnaturalȱgas)ȱ ȭ Reduceȱenergyȱcostsȱorȱenhanceȱpublicȱbenefitȱfundingȱ ȭ Provideȱforȱelectricȱrateȱstabilityȱandȱlocalȱcontrolȱ ȭ Provideȱ otherȱ utilityȱ services,ȱ suchȱ asȱ energyȱ efficiencyȱ andȱ distributedȱ generationȱ ȭ Increaseȱtheȱtoolsȱavailableȱforȱeconomicȱdevelopmentȱandȱplanningȱ ȭ PositionȱCountyȱforȱprovisionȱofȱexpandedȱelectricityȱserviceȱofferingsȱinȱ theȱfutureȱ ȱ The primary risks of providing aggregation services to customers are: ȱ ȭ Underȱ someȱ scenariosȱ thatȱ haveȱ aȱ reasonableȱ chanceȱ ofȱ occurring, programȱ ratesȱ couldȱ beȱ upȱ toȱ 3%ȱ higherȱ thanȱ thoseȱ offeredȱ byȱ SDG&E,ȱ particularlyȱwithinȱtheȱfirstȱthreeȱyearsȱofȱprogramȱoperations.ȱȱUnderȱtheȱ worstȬcaseȱ scenario,ȱ programȱ ratesȱ couldȱ beȱ 4%ȱ toȱ 7%ȱ higherȱ thanȱ thoseȱ offeredȱbyȱSDG&Eȱduringȱtheȱfirstȱfourȱyears.ȱ ȭ Theȱ Countyȱ wouldȱ beȱ undertakingȱ resourceȱ obligationsȱ onȱ behalfȱ ofȱ participantsȱ andȱ suchȱ investmentsȱ couldȱ ultimatelyȱ proveȱ toȱ beȱ uneconomicȱ ȭ Risksȱ inherentȱ inȱ procuringȱ electricityȱ forȱ retailȱ customersȱ canȱ beȱ significantȱ andȱ mustȱ beȱ properlyȱ managedȱ orȱ laidȱ offȱ toȱ theȱ program’’sȱ energyȱsuppliersȱ ȱ ȱ 91 Ultimately,ȱ aȱ primaryȱ benefitȱ ofȱ CCAȱ isȱ givingȱ consumersȱ greaterȱ controlȱ overȱ theirȱenergyȱchoicesȱandȱdevolvingȱresponsibilityȱforȱenergyȱplanningȱtoȱtheȱlocalȱ level.ȱ ȱ Theȱ Countyȱ shouldȱ takeȱ aȱ longȬtermȱ viewȱ inȱ consideringȱ theȱ decisionȱ toȱ formȱ aȱ CCAȱ programȱ andȱ beȱ preparedȱ toȱ weatherȱ challengesȱ thatȱ mayȱ ariseȱ inȱ theȱ shortȬterm.ȱȱ Aȱstagedȱapproachȱtoȱimplementation,ȱbothȱ withȱrespectȱtoȱtheȱ numberȱ ofȱ customersȱ participatingȱ inȱ theȱ programȱ andȱ theȱ levelȱ ofȱ directȱ involvementȱ byȱ theȱ Countyȱ inȱ theȱ program’’sȱ operationsȱ (procurement,ȱ riskȱ management,ȱresourceȱdevelopment,ȱetc.),ȱwouldȱbeȱadvisableȱtoȱavoidȱpotentialȱ pitfallsȱ asȱ theȱ Countyȱ embarksȱ onȱ aȱ newȱ enterpriseȱ ofȱ thisȱ magnitude.ȱ ȱ Moreȱ specificȱ informationȱ regardingȱ benefitsȱ andȱ risksȱ willȱ becomeȱ knownȱ asȱ theȱ Countyȱobtainsȱoffersȱfromȱelectricityȱserviceȱprovidersȱduringȱtheȱdevelopmentȱ ofȱitsȱImplementationȱPlan,ȱandȱthereȱwillȱbeȱanȱadditionalȱdecisionȱpointȱatȱthatȱ timeȱonȱwhetherȱtoȱproceedȱwithȱprogramȱoperations.ȱ ȱ ParticipationȱinȱaȱregionalȱCCAȱprogramȱviaȱformationȱofȱaȱjointȱpowersȱagencyȱ wouldȱ offerȱ benefitsȱ ofȱ scaleȱ thatȱ wouldȱ notȱ beȱ availableȱ underȱ aȱ standaloneȱ program.ȱȱTheȱCountyȱshouldȱexploreȱopportunitiesȱforȱjoiningȱwithȱotherȱlocalȱ governmentsȱ inȱ theȱ regionȱ toȱ formȱ aȱ regionalȱ CCAȱ programȱ ifȱ theȱ Countyȱ decidesȱtoȱmoveȱforwardȱwithȱimplementation.ȱȱ ȱ LowerȱRatesȱ ȱ Theȱ analysisȱ indicatesȱ theȱ Countyȱ isȱ likelyȱ toȱ obtainȱ costȱ savingsȱ equalȱ toȱ approximatelyȱ $25.3ȱ millionȱ perȱ yearȱ orȱ approximatelyȱ 5%ȱ ofȱ customers’’ȱ electricityȱ billsȱ onȱ averageȱ overȱ theȱ studyȱ period.ȱ ȱ Theseȱ costȱ savingsȱ couldȱ beȱ usedȱ toȱ reduceȱ ratesȱ and/orȱ toȱ createȱ aȱ newȱ revenueȱ streamȱ forȱ publicȱ benefitȱ funding.ȱȱTheȱsensitivityȱanalysisȱshowsȱthatȱsavingsȱareȱnotȱdependentȱuponȱtheȱ specificȱfinancialȱassumptionsȱunderlyingȱtheȱbaseȱcaseȱoverȱtheȱlongȱterm.ȱȱTheȱ averageȱ programȱ savingsȱ rangeȱ fromȱ aȱ lowȱ ofȱ 1%ȱ toȱ aȱ highȱ ofȱ 10%ȱ acrossȱ theȱ sevenȱ casesȱ evaluatedȱ toȱ testȱ theȱ sensitivityȱ ofȱ theseȱ resultsȱ toȱ changesȱ inȱ wholesaleȱ energyȱ marketȱ conditions,ȱ SDG&Eȱ rateȱ projections,ȱ andȱ costȱ responsibilityȱsurcharges.ȱ ȱ Aȱconservativeȱinterpretationȱofȱtheseȱfindingsȱsuggestȱthatȱoverȱtheȱnextȱseveralȱ yearsȱthereȱwouldȱbeȱlittleȱratepayerȱbenefitȱfromȱimplementingȱaȱCCAȱprogram,ȱ primarilyȱ dueȱ toȱ theȱ impositionȱ ofȱ costȱ responsibilityȱ surchargesȱ onȱ CCAȱ customers.ȱȱIndeed,ȱtheȱstudyȱindicatesȱthatȱratesȱwouldȱlikelyȱbeȱslightlyȱhigherȱ thanȱ thoseȱ offeredȱ byȱ SDG&Eȱ forȱ theȱ 2006ȱ toȱ 2009ȱ timeȱ period.ȱ ȱ Costȱ benefitsȱ shouldȱ materializeȱ overȱ theȱ longerȱ termȱ asȱ theȱ CRSȱ beginsȱ toȱ declineȱ andȱ eventuallyȱexpires.ȱ ȱ 92 ȱ If achieving lower rates in the near-term is a primary motivation for the County’’s investigation of CCA, NCI recommends awaiting the outcome of SDG&E’’s current Rate Design Window proceeding before committing to CCA implementation. The CPUC’’s approval of SDG&E’’s rate design proposals to reallocate generation costs among customer classes would change the near-term outlook for a County CCA program, making cost savings achievable as early as 2007. ȱ IncreasedȱRenewableȱEnergyȱ ȱ Theȱanalysisȱshowsȱthatȱaȱ40%ȱrenewableȱenergyȱtargetȱcouldȱbeȱachievedȱwithȱ noȱ rateȱ increasesȱ forȱ customersȱ ifȱ theȱ Countyȱ isȱ willingȱ toȱ financeȱ renewableȱ resourceȱ developmentȱ toȱ supplyȱ theȱ CCAȱ programȱ (Seeȱ Alternativeȱ Supplyȱ Scenarioȱ 3ȱ inȱ Sectionȱ 6.2.3ȱ andȱ theȱ proȱ formaȱ inȱ Appendixȱ F).ȱ ȱ Theȱ costȱ effectivenessȱofȱincreasingȱrenewableȱenergyȱutilizationȱtoȱthisȱdegreeȱisȱgreatlyȱ enhancedȱ byȱ theȱ involvementȱ ofȱ theȱ publicȱ sectorȱ throughȱ CCAȱ becauseȱ ofȱ theȱ publicȱ sector’’sȱ accessȱ toȱ lowȱ costȱ capitalȱ andȱ theȱ contractȱ coverageȱ affordedȱ byȱ theȱCCA’’sȱlargeȱcustomerȱbase.ȱȱAȱprimaryȱbenefitȱofȱformingȱaȱCCAȱprogramȱisȱ toȱ createȱ theȱ abilityȱ toȱ increaseȱ utilizationȱ ofȱ renewableȱ energy.ȱ ȱ Aȱ realisticȱ implementationȱ approachȱ wouldȱ incorporateȱ aȱ hybridȱ supplyȱ strategyȱ andȱ gradualȱ rampȬupȱ ofȱ renewableȱ energyȱ utilization,ȱ initiallyȱ utilizingȱ contractsȱ withȱ thirdȱ partiesȱ toȱ matchȱ theȱ SDG&Eȱ renewableȱ energyȱ mixȱ andȱ eventuallyȱ progressingȱtoȱmunicipalȱownership/financingȱofȱgeneration.ȱ ȱ Localȱcontrol/rateȱstabilityȱ ȱ Ultimatelyȱ theȱ longȬtermȱ benefitsȱ ofȱ aȱ CCAȱ programȱ inȱ theȱ communityȱ resolveȱ aroundȱ localȱ control.ȱ ȱ Suchȱ controlȱ includesȱ theȱ abilityȱ forȱ theȱ Countyȱ andȱ alignedȱagenciesȱtoȱeffectȱresourceȱplanningȱandȱinfrastructureȱinvestmentȱinȱanȱ integratedȱ fashionȱ responsiveȱ toȱ theȱ community’’sȱ needsȱ andȱ values.ȱ ȱ Localȱ controlȱalsoȱmanifestsȱinȱavoidingȱtheȱcostȱconsequencesȱofȱtheȱutility’’sȱlongȬtermȱ procurementȱdecisions,ȱwhichȱmustȱbeȱmadeȱconsideringȱtheȱcompetingȱinterestsȱ ofȱshareholders,ȱregulators,ȱandȱconsumers.ȱȱTheȱCountyȱfacesȱnoȱsuchȱconflictsȱ andȱcanȱfocusȱonȱitsȱprimaryȱmissionȱofȱrepresentingȱtheȱinterestsȱofȱconsumers.ȱȱȱȱ ȱ 9.2 Recommendationsȱ ȱ 1. Communicateȱ finalȱ studyȱ resultsȱ throughȱ communityȱ workshopsȱ andȱ identifyȱnextȱstepsȱinȱproceedingȱtowardȱImplementationȱPlanȱfiling.ȱ ȱ 93 ȱ 2. ȱ 3. ȱ 4. Considerȱ whetherȱ naturalȱ alliancesȱ existȱ amongȱ neighboringȱ communities,ȱ andȱ exploreȱ partneringȱ arrangementsȱ toȱ optimizeȱ supplyȱ sideȱ alternativesȱ andȱregionalȱCCAȱimplementation.ȱ MonitorȱtheȱoutcomeȱofȱSDG&E’’sȱcurrentȱRateȱDesignȱWindowȱproceeding.ȱ MakeȱdecisionȱwhetherȱtoȱproceedȱwithȱdevelopmentȱofȱanȱImplementationȱ Plan.ȱ ȱȱ ȱ 94 APPENDICES 95 96 AppendixȱAȱ––ȱResourceȱPortfolioȱPlanningȱTemplateȱ ȱ ȱ FifthȱSupplyȱScenarioȱVariablesȱ ȱ 1. RenewableȱEnergyȱ(RE)ȱTargetsȱ a. EndȬStateȱPercentageȱ(20Ȭ100%ȱbyȱ2017)ȱ________ȱ b. REȱRampȱRateȱ2006ȱ––ȱ2023,ȱCiteȱYearlyȱTargetsȱ 1) 2006ȱmin.ȱ14%ȱ 2) 2017ȱmin.ȱ20%ȱ c. REȱEquityȱPositionȱ 1) PhysicalȱResourceȱEntitlementȱ(ownership/investment)ȱ a) Yesȱ__ȱȱNoȱ__ȱ b) PercentageȱofȱTotalȱREȱ__ȱ c) InȬServiceȱDatesȱandȱCapacitiesȱ(MW)ȱ 2) MarketȱPurchasesȱ a) PercentageȱofȱTotalȱREȱ__ȱ b) ContractȱScheduleȱandȱCapacitiesȱ(MW)ȱ 2. ConventionalȱGenerationȱResourceȱEquityȱPositionȱ a. PhysicalȱResourceȱEntitlementȱ(ownership/investment)ȱ 1) Yesȱ__ȱNoȱ__ȱ 2) InȬServiceȱDatesȱandȱCapacitiesȱ(MW)ȱ b. MarketȱPurchasesȱȬȱContractȱScheduleȱandȱCapacitiesȱ(MW)ȱ 3. DistributedȱGenerationȱ a. Capacityȱ(kW)ȱ 1) Existingȱ a) Technologyȱ(PV/microȬturbine/etc)ȱ b) Capacityȱ(kW)ȱ c) Energyȱ(kWh)ȱ d) Costȱ e) InȬServiceȱDatesȱ 2) Plannedȱ a) Technologyȱ(PV/microȬturbine/etc)ȱ b) Capacityȱ(kW)ȱ c) Energyȱ(kWh)ȱ d) Costȱ e) InȬServiceȱDatesȱ 4. Spotȱ Marketȱ Purchasesȱ (assumedȱ minimizedȱ ––ȱ underȱ 15%ȱ energyȱ unlessȱ instructedȱotherwise)ȱ ȱ 97 5. Basedȱ Uponȱ theȱ 5thȱ orȱ ““Preferred””ȱ Supplyȱ Portfolioȱ Sensitivitiesȱ Willȱ beȱ AssessedȱforȱtheȱFollowingȱVariables:ȱ a. Naturalȱgas/powerȱpricesȱ(+/Ȭȱ25%)ȱ b. Costȱresponsibilityȱsurchargeȱ(+/Ȭȱ25%)ȱ c. IOUȱrateȱprojectionsȱ(+/Ȭȱ5%)ȱ d. IOUȱrateȱdesignȱ(GRCȱproposals)ȱ e. Renewableȱsubsidiesȱ(SEP,ȱPTC)ȱ f. CombinedȱoperationȱwithȱotherȱProjectȱparticipantsȱ ȱ 98 AppendixȱBȱ––ȱDetailedȱAssumptionsȱ ȱ ȱ Keyȱ Assumptionsȱ Usedȱ Inȱ CCAȱ Feasibilityȱ Analysisȱ andȱ Modelingȱ ––ȱ Sanȱ DiegoȱGasȱandȱElectricȱTerritoryȱ ȱ 1) MeteringȱandȱBillingȱ ȱ a) NoȱnewȱmeteringȱrequirementsȱforȱCCAȱcustomers.ȱ b) BillingȱchargesȱsameȱasȱdirectȱaccessȱfromȱScheduleȱDA.ȱ c) BillingȱchargesȱbasedȱonȱratesȱfromȱScheduleȱDA.ȱ ȱ 2) Financingȱ ȱ a) Taxȱ exemptȱ financingȱ forȱ startupȱ costsȱ andȱ anyȱ newȱ generationȱ developmentȱ@ȱ5.5%.ȱ b) 100%ȱdebtȱfinancing.ȱ c) Financingȱtermȱisȱ30ȱyears.ȱ d) Minimumȱdebtȱcoverageȱratioȱofȱ1.25.ȱ e) Bondȱinsuranceȱcostȱofȱ1.6%ȱofȱparȱvalue.ȱ f) Bondȱtransactionȱcostȱofȱ1%ȱofȱparȱvalue.ȱ g) Debtȱreserveȱofȱ10%ȱofȱparȱvalue.ȱ ȱ 3) StartupȱandȱOperationsȱCostsȱ ȱ a) Startupȱcostsȱincludeȱregulatoryȱandȱlegalȱ@ȱ$350,000.ȱ b) Operationalȱcostsȱareȱoutsourcedȱ@ȱ$2.50ȱperȱMWhȱunlessȱandȱuntilȱCCAȱ reachesȱapproximatelyȱ1.5ȱmillionȱMWhȱinȱsales.ȱ c) Ifȱ performedȱ internally,ȱ theȱ costȱ isȱ estimatedȱ atȱ $3.9ȱ Mȱ perȱ yearȱ plusȱ 10ȱ centsȱperȱMWh,ȱincludingȱIT.ȱ d) Activitiesȱ includeȱ schedulingȱ coordination,ȱ procurement/planning,ȱ riskȱ management,ȱcredit,ȱratesȱandȱloadȱresearch,ȱA&G,ȱandȱIT.ȱ e) TheȱCCAȱwillȱbeginȱservingȱcustomersȱinȱJanuaryȱ2006ȱ f) WorkingȱcapitalȱcostsȱareȱbasedȱonȱoneȬmonthȱlagȱbetweenȱpayablesȱandȱ receivables,ȱ financedȱ atȱ anȱ annualȱ rateȱ ofȱ 5%.ȱ ȱ Costsȱ areȱ includedȱ inȱ theȱ program’’sȱ supplyȱ costsȱ andȱ wouldȱ beȱ fundedȱ byȱ theȱ program’’sȱ energyȱ supplier.ȱ ȱ ȱ 99 4) ResourceȱAdequacyȱ ȱ a) CCAsȱsubjectȱtoȱsameȱresourceȱadequacyȱrequirementȱasȱIOUs,ȱperȱD.04Ȭ 01Ȭ050.ȱ b) Planningȱ reservesȱ areȱ requiredȱ toȱ bringȱ totalȱ reserves,ȱ includingȱ ISOȱ requiredȱancillaryȱservices,ȱupȱtoȱ15%ȱofȱpeakȱload.ȱ c) Costsȱofȱmeetingȱplanningȱreservesȱequalȱtoȱmarketȱvalueȱofȱcapacity.ȱ d) Spotȱmarketȱpurchasesȱlimitedȱtoȱbetweenȱ5%ȱandȱ20%ȱofȱCCAȱportfolio;ȱ theȱremainderȱofȱtheȱportfolioȱisȱcomprisedȱofȱlongȬtermȱcontractsȱand/orȱ resourceȱownership.ȱ ȱ 5) RenewableȱEnergyȱPortfolioȱ ȱ a) Renewableȱ purchasesȱ areȱ fromȱ aȱ genericȱ portfolioȱ comprisedȱ ofȱ Classȱ 4ȱ Wind,ȱBinaryȱGeothermal,ȱSolidȱFuelȱBiomass,ȱLandȱFillȱGasȱBiomass,ȱandȱ ConcentratingȱSolarȱPower.ȱ b) Theȱ costȱ andȱ resourceȱ mixȱ comprisingȱ theȱ portfolioȱ isȱ derivedȱ fromȱ theȱ CECȇsȱ Renewableȱ Resourcesȱ Developmentȱ Reportȱ (11/7/03)ȱ Seeȱ RRDR,ȱ Tableȱ 4,ȱpageȱ 37ȱandȱdiscussionȱatȱpageȱ87.ȱȱ 2005ȱcostsȱareȱescalatedȱatȱ aȱ nominalȱrateȱofȱ1%ȱperȱyear.ȱ c) Theȱ costȱ ofȱ theȱ genericȱ renewablesȱ portfolioȱ equalsȱ theȱ estimatedȱ developersȇȱ costs,ȱ includingȱ returnȱ onȱ investment.ȱ ȱ Marketȱ priceȱ ofȱ renewableȱ energyȱ equalȱ toȱ maximumȱ ofȱ costȱ orȱ marketȱ priceȱ ofȱ systemȱ energyȱ d) Theȱ costȱ ofȱ windȱ energyȱ assumesȱ noȱ extensionȱ ofȱ theȱ productionȱ taxȱ credit.ȱ e) Windȱenergyȱmustȱbeȱfirmedȱviaȱcapacityȱcontractsȱdueȱtoȱitsȱintermittentȱ nature.ȱȱ Theȱ costȱ ofȱwindȱenergyȱisȱ adjustedȱforȱaȱcapacityȱ adderȱtoȱ firmȱ theȱintermittentȱresource,ȱatȱmarketȱvalueȱofȱcapacity.ȱ f) Renewableȱownershipȱcostsȱareȱderivedȱbyȱapplyingȱmunicipalȱfinancingȱ assumptionsȱtoȱtheȱcostȱdataȱinȱRRDRȱAppendixȱD,ȱpageȱDȬ6.ȱȱ2005ȱcostsȱ areȱescalatedȱatȱaȱnominalȱrateȱofȱ1%ȱperȱyear.ȱ g) Ownershipȱ costȱ incorporateȱ technologyȱ specificȱ assumptionsȱ regardingȱ installedȱ capitalȱ costs,ȱ fixedȱ operationsȱ andȱ maintenance,ȱ capacityȱ factor,ȱ fuelȱcost,ȱandȱcapacityȱcostȱadderȱappliedȱtoȱintermittentȱresources.ȱ h) Theȱownershipȱcostsȱofȱintermittentȱresourcesȱalsoȱincludesȱaȱriskȱfactorȱofȱ $5ȱperȱMWhȱrelatedȱtoȱtheȱpotentialȱdifferencesȱbetweenȱenergyȱpricesȱforȱ salesȱfromȱexcessȱproductionȱversusȱpurchasesȱforȱproductionȱshortfalls.ȱȱ ȱ 100 i) CCAsȱ willȱ relyȱ primarilyȱ onȱ largeȬscaleȱ renewableȱ projectsȱ toȱ meetȱ andȱ exceedȱ theȱ RPS.ȱ ȱ Theseȱ areȱ Wind,ȱ Geothermal,ȱ Solidȱ Fuelȱ Biomass,ȱ andȱ ConcentratingȱSolarȱPower.ȱ j) CCAȱownedȱgenerationȱresourcesȱcanȱbeȱonlineȱbyȱ2008.ȱ k) Distributedȱ generationȱ options,ȱ suchȱ asȱ rooftopȱ PVȱ systems,ȱ areȱ incorporatedȱ inȱ theȱ feasibilityȱ analysisȱ basedȱ onȱ communityȱ specificȱ planning.ȱ ȱ Renewableȱ DGȱ production,ȱ ifȱ any,ȱ willȱ beȱ inȱ additionȱ toȱ theȱ RPSȱminimums.ȱ l) Supplementalȱ energyȱ paymentsȱ areȱ availableȱ toȱ offsetȱ theȱ incrementalȱ costsȱofȱrenewableȱcontractȱpurchasesȱ(10ȬYearȱTerms)ȱupȱtoȱtheȱminimumȱ RPSȱrequirement.ȱȱPGCȱfundsȱareȱsufficientȱtoȱbuyȱdownȱ100%ȱofȱtheȱcostȱ premiumȱofȱrenewables.ȱ m) Supplementalȱ energyȱ paymentsȱ areȱ notȱ availableȱ forȱ CCAȬownedȱ resourcesȱandȱnotȱavailableȱforȱpurchasesȱinȱexcessȱofȱtheȱRPSȱminimums.ȱ n) CCAsȱ areȱ requiredȱ toȱ matchȱ theȱ renewableȱ energyȱ percentageȱ ofȱ theȱ respectiveȱinvestorȱownedȱutilityȱinȱtheȱfirstȱyearȱofȱCCAȱoperations.ȱ o) IOUȱrenewableȱbaselineȱpercentagesȱareȱderivedȱfromȱRRDRȱAppendixȱA,ȱ pageȱAȬ2ȱandȱincreasedȱbyȱ1%ȱperȱyearȱuntilȱ20%ȱisȱachievedȱbyȱ2017.ȱ ȱ 6) WholesaleȱEnergyȱMarketsȱ ȱ a) Electricityȱ marketȱ priceȱ forecastȱ basedȱ onȱ projectedȱ marketȱ clearingȱ systemȱheatȱratesȱandȱnaturalȱgasȱpriceȱprojections.ȱ b) NaturalȱgasȱpriceȱprojectionsȱpreparedȱbyȱNCIȱinȱJanuaryȱ2005.ȱ c) Heatȱratesȱforȱ2005ȱȬȱ2010ȱareȱ8,000,ȱ8250,ȱ8700,ȱ9000,ȱ10000,ȱ10500.ȱȱMarketȱ equilibriumȱassumedȱatȱheatȱrateȱofȱ11000ȱafterȱ2010.ȱ d) OnȬpeakȱ energyȱ pricedȱ atȱ 15%ȱ premium;ȱ offȬpeakȱ energyȱ pricedȱ atȱ 15%ȱ discount;ȱrealȱtimeȱenergyȱatȱ10%ȱpremium.ȱ e) LongȬtermȱ contractsȱ pricedȱ atȱ 5%ȱ premiumȱ toȱ expectedȱ spotȱ marketȱ prices.ȱ f) Capacityȱ costsȱ valuedȱ atȱ $100,000ȱ perȱ MWȬYear,ȱ escalatedȱ atȱ 2.5%ȱ annually;ȱcostsȱareȱembeddedȱinȱenergyȱpricesȱderivedȱasȱabove.ȱ g) Ancillaryȱ servicesȱ andȱ relatedȱ costsȱ estimatedȱ basedȱ onȱ historicalȱ relationshipȱtoȱmarketȱprices,ȱprojectedȱforward.ȱ h) Ancillaryȱ servicesȱ requirementsȱ basedȱ onȱ percentageȱ ofȱ CCAȇsȱ loadȱ perȱ currentȱCAISOȱpractice.ȱ i) Ancillaryȱ servicesȱ typesȱ areȱ Regulation,ȱ Spinningȱ Reserve,ȱ NonȬSpinningȱ Reserve,ȱReplacementȱReserve.ȱ ȱ 101 j) Californiaȱ Independentȱ Systemȱ Operatorȱ (CAISO)ȱ administrativeȱ andȱ neutralityȱ chargesȱ areȱ derivedȱ fromȱ currentȱ rates,ȱ escalatedȱ atȱ 2.5%ȱ annually.ȱ k) CAISOȱchargesȱareȱGridȱManagementȱChargeȱȬȱControlȱAreaȱService,ȱGridȱ ManagementȱChargeȱȬȱInterȬzonalȱScheduling,ȱGridȱManagementȱChargeȱȬȱ Ancillaryȱ Servicesȱ andȱ Realȱ Timeȱ Operations,ȱ Unaccountedȱ Forȱ Energyȱ Charge,ȱNeutralityȱCharge,ȱCongestionȱCharge,ȱDeȱ l) Noȱexplicitȱmodelingȱofȱimpactȱfromȱmoveȱtoȱlocationalȱmarginalȱpricing;ȱ assumedȱ thatȱloadsȱ willȱbeȱprotectedȱfromȱcongestionȱcostsȱ byȱ allocationȱ ofȱcongestionȱrevenueȱrightsȱandȱzonalȱaveragingȱofȱpricesȱ m) Distributionȱlossesȱareȱ7%.ȱ ȱ 7) GenerationȱCostȱ ȱ a) CCAȇsȱ choosingȱ toȱ ownȱ generationȱ willȱ acquireȱ equityȱ interestsȱ inȱ combinedȱ cycleȱ gasȱ turbineȱ facilitiesȱ basedȱ onȱ theȱ followingȱ costȱ andȱ operatingȱparameters:ȱ b) Installedȱcostȱofȱ$700ȱperȱKW.ȱ c) Heatȱrateȱofȱ7,000ȱmmbtu/MWh.ȱ d) $3ȱperȱMWhȱfixedȱandȱvariableȱO&M.ȱ e) 0.1ȱpoundsȱperȱMWhȱemissions..ȱ f) $10ȱperȱpoundȱcostȱofȱNOxȱemissions.ȱ g) 90%ȱplannedȱcapacityȱfactor.ȱ h) 2%ȱforcedȱoutageȱrate.ȱ i) Excessȱsalesȱsoldȱatȱprevailingȱmarketȱclearingȱprices.ȱ ȱ 8) CostȱResponsibilityȱSurchargesȱ ȱ a) Costȱ responsibilityȱ surchargesȱ calculatedȱ annuallyȱ usingȱ totalȱ portfolioȱ indifferenceȱmethodȱadoptedȱinȱdirectȱaccessȱproceedingȱ(includesȱoldȱandȱ newȱresources)ȱ(R.02Ȭ01Ȭ011)ȱandȱCCAȱrulemakingȱ(D.04Ȭ12Ȭ046)ȱ b) CRSȱreducedȱbyȱproȱ rataȱshareȱofȱcostȱofȱ ancillaryȱservicesȱandȱ planningȱ reservesȱ c) NoȱcapȱonȱcostȱresponsibilityȱsurchargeȱforȱCCAs.ȱ d) Costȱ responsibilityȱ surchargeȱ includesȱ DWRȱ bonds,ȱ DWRȱ powerȱ charge,ȱ andȱutilityȱCTC;ȱNoȱhistoricalȱprocurementȱcharge.ȱ e) UniformȱȈindifferenceȱfeeȈȱperȱKWhȱforȱallȱCCAȱcustomers,ȱregardlessȱofȱ rateȱ classȱ andȱ CCAȱ startupȱ date.ȱ ȱ Noȱ baselineȱ creditsȱ reflectingȱ AB1Xȱ protectionsȱforȱresidentialȱconsumptionȱupȱtoȱ130%ȱofȱbaselineȱallocation.ȱ f) UniformȱDWRȱbondȱchargeȱperȱKWh,ȱstatewide.ȱ ȱ 102 g) CTCȱ rateȱ variesȱ byȱ customerȱ classȱ basedȱ onȱ currentȱ tariffs.ȱ ȱ ABȱ 265ȱ undercollectionȱfullyȱrecoveredȱbyȱ2005.ȱ h) DWRȱbondȱchargeȱbasedȱonȱcurrentlyȱapplicableȱrateȱasȱofȱJanuaryȱ2005.ȱ i) Noȱ transferȱ toȱ CCAȱ ofȱ DWRȱ contracts,ȱ renewableȱ energy,ȱ orȱ capacityȱ contractsȱimpliedȱbyȱpaymentȱofȱcostȱresponsibilityȱsurcharges.ȱ ȱ 9) IOUȱRateȱProjectionsȱ ȱ a) IOUȱratesȱforȱgenerationȱareȱtheȱcompetitiveȱreferenceȱpointȱforȱassessingȱ CCAȱcostȱsavingsȱpotential.ȱ b) Currentȱ IOUȱ rateȱ schedulesȱ (Februaryȱ 2005)ȱ appliedȱ toȱ CCAȱ customerȱ billingȱdeterminantsȱ(estimated),ȱaggregatedȱbyȱmajorȱrateȱgroup.ȱ c) Generationȱ ratesȱ andȱ totalȱ ratesȱ (generationȱ plusȱ nonȬgeneration)ȱ projectedȱ forwardȱ basedȱ onȱ percentageȱ changesȱ inȱ IOUȱ systemȱ averageȱ rates.ȱ d) IOUȱ generationȱ costsȱ projectedȱ basedȱ onȱ currentȱ resourceȱ mix,ȱ adjustedȱ overȱ timeȱ forȱ plannedȱ generationȱ retirements,ȱ DWRȱ contracts,ȱ QFȱ contracts,ȱ newȱ SDG&Eȱ generationȱ (Palomar),ȱ newȱ powerȱ purchaseȱ contractsȱ(OtayȱMesaȱandȱgeneric)ȱandȱrenewableȱenergyȱcontractsȱtoȱmeetȱ RPS.ȱ e) SDG&Eȱ ownedȱ generationȱ resourcesȱ includesȱ 20%ȱ shareȱ ofȱ SONGS,ȱ decliningȱ toȱ 17%ȱ inȱ 2010.ȱ ȱ SONGSȱ continuesȱ toȱ operateȱ dueȱ toȱ steamȱ turbineȱ replacement.ȱ ȱ SONGSȱ capitalȱ andȱ operatingȱ andȱ maintenanceȱ expensesȱbasedȱonȱSDG&Eȱprojectionsȱinȱitsȱ2003ȱGeneralȱRateȱCaseȱ(A.02Ȭ 05Ȭ004)ȱandȱSDG&E’’sȱ2006ȱGeneralȱRateȱCase.ȱ f) Generationȱ costsȱ andȱ beginningȱ rateȱ baseȱ forȱ eachȱ generationȱ typeȱ areȱ derivedȱfromȱ2003ȱCostȱofȱServiceȱfilingȱ(A.02Ȭ12Ȭ028).ȱ g) Generationȱ costsȱ includeȱ operationsȱ andȱ maintenance,ȱ return,ȱ depreciation,ȱuncollectibles,ȱA&G,ȱfranchiseȱfees,ȱtaxesȱotherȱthanȱincome,ȱ taxesȱbasedȱonȱincome,ȱfuel,ȱthermalȱdecommissioning,ȱandȱother.ȱ h) PurchasedȱPowerȱincludesȱQFȱcontracts,ȱexistingȱbilateralȱcontracts,ȱDWRȱ contracts,ȱ newȱ renewableȱ contracts,ȱ newȱ bilateralȱ contracts,ȱ andȱ spotȱ marketȱpurchases.ȱ i) Newȱbilateralȱcontractsȱenteredȱintoȱasȱneededȱtoȱmaintainȱspotȱpurchasesȱ (residualȱnetȱshort)ȱatȱorȱbelowȱ10%ȱofȱIOUȱportfolio.ȱ j) SDG&Eȱmaintainsȱplanningȱreservesȱofȱ15%ȱofȱannualȱpeakȱload.ȱȱExistingȱ ancillaryȱservicesȱrequirementsȱareȱincludedȱinȱtheȱ15%ȱplanningȱreservesȱ requirement.ȱ k) Spotȱmarketȱpurchasesȱtoȱmeetȱtheȱresidualȱnetȱshortȱareȱpricedȱatȱaverageȱ ofȱSP15ȱpeakȱ(6ȱXȱ16)ȱandȱbaseȱ(7ȱXȱ24)ȱpowerȱprices.ȱ ȱ 103 l) MajorityȱofȱQFsȱpaidȱaccordingȱtoȱsettlementȱpriceȱthroughȱ2007,ȱandȱthenȱ basedȱonȱannualȱshortȱrunȱavoidedȱcostȱformula.ȱ m) QFȱcapacityȱpaymentsȱderivedȱfromȱFERCȱFormȱ1ȱdata.ȱ n) QFȱ capacity/energyȱ projectionsȱ andȱ SDG&Eȱ loadȱ forecastȱ derivedȱ fromȱ theȱConsultantȇsȱReportȱsupportingȱDWRȱbondȱfinancing.ȱ o) RPSȱ purchasesȱ fromȱ genericȱ renewableȱ portfolioȱ asȱ describedȱ above;ȱ Supplementalȱ Energyȱ Paymentsȱ fullyȱ offsetȱ incrementalȱ costsȱ relativeȱ toȱ nonȬrenewableȱenergy.ȱ p) DWRȱ costsȱ andȱ volumesȱ adjustedȱ overȱ timeȱ basedȱ onȱ termsȱ ofȱ theȱ individualȱcontractsȱallocatedȱtoȱSDG&EȱperȱD.02Ȭ09Ȭ053.ȱ q) DWRȱ Ȉremittanceȱ rateȈȱ calculatedȱ usingȱ CPUCȱ methodologyȱ (D.ȱ 04Ȭ12Ȭ 014).ȱ r) Costȱoffsetȱforȱbundledȱcustomerȱgenerationȱcostsȱfromȱcostȱresponsibilityȱ surchargesȱ paidȱ byȱ Directȱ Accessȱ Customersȱ basedȱ onȱ cappedȱ collectionȱ rateȱfromȱdirectȱaccessȱproceedingȱ(R.02Ȭ01Ȭ011).ȱ s) NonȬgenerationȱcostsȱescalatedȱatȱconstantȱ1.5%ȱperȱyear.ȱȱNonȬgenerationȱ ratesȱ areȱ onlyȱ usedȱ toȱ expressȱ theȱ CCAȱ costȱ impactsȱ asȱ percentageȱ ofȱ customersȇȱtotalȱelectricȱbills.ȱ t) Sameȱinputȱassumptionsȱasȱaboveȱforȱwholesaleȱelectricityȱprices,ȱcapacityȱ prices,ȱnaturalȱgasȱprices,ȱancillaryȱservicesȱcosts,ȱCAISOȱcharges,ȱRPSȱ%ȱ andȱprices,ȱsupplementalȱenergyȱpayments,ȱandȱDWRȱbondsȱcharges.ȱ ȱ 104 AppendixȱCȱ––ȱSampleȱDataȱRequestȱLetterȱ [DATE] San Diego Gas and Electric Company Attention: [LOCAL GOVERNMENTAL AFFAIRS REPRESENTATIVE NAME] 101 Ash Street San Diego, CA 92101 SUBJECT: Information Request Per D.03-07-034 Dear [LOCAL GOVERNMENTAL AFFAIRS REPRESENTATIVE NAME]: The [CITY OR COUNTY] of [NAME] (CITY OR COUNTY) is currently reviewing its options in becoming a Community Choice Aggregator (CCA), in accordance with legislation enacted in 2002 (Assembly Bill 117), for: 1) administering energy efficiency programs; and 2) possibly providing electrical energy as related to this legislation. On July 10, 2003, the California Public Utilities Commission (CPUC) approved an ““Interim Opinion Implementing Provisions of Assembly Bill 117 Relating to Energy Efficiency Program Fund Disbursements”” (Decision 03-07-034). As part of this Decision, the CPUC directed San Diego Gas and Electric Company (SDG&E) to provide certain types of information to cities, counties, and CCAs. The [CITY OR COUNTY] respectfully requests the information listed below, as enumerated in Attachment C of D.03-07-034 for all electric customers within the [CITY OR COUNTY]. ȱ 105 1. Aggregate annual usage data (kWh) broken out by city, zip code and customer and rate classes, on a monthly basis. 2. Public Goods Charge customer payments by zip code and city. Quarterly or monthly aggregated participation data already tracked for Commission reports. 3. The proportional share in a CCA’’s territory or proposed territory as defined in the Commission’’s energy efficiency policy manual. Please include the number of electric service accounts in 1 above and separate the information between customers currently receiving bundled utility service from SDG&E and customers currently served under direct access arrangements. The [CITY OR COUNTY] understands that D.03-07-034 ordered that SDG&E ““shall provide the information and data described in Attachment C to any city, county or CCA that requests it, as set forth in this order without charge.”” We also understand through this Decision that this information ““should be provided……within one week of the request.”” Please send this information in electronic form via e-mail to [E-MAIL ADDRESS]. If you have any questions regarding this request, please contact [NAME] at [TELEPHONE NUMBER]. The [CITY OR COUNTY OF NAME] thanks you for your assistance. Sincerely, [NAME] [TITLE] [DEPARTMENT] [CITY OR COUNTY NAME]ȱ ȱ 106 AppendixȱDȱ––ȱCCAȱFunctionalȱElementsȱ ȱ Theȱ operationsȱ ofȱ aȱ CCAȱ programȱ includeȱ allȱ activitiesȱ neededȱ toȱ procureȱ electricityȱ forȱ endȬuseȱ customers,ȱ scheduleȱ deliveryȱ ofȱ theȱ electricity,ȱ conductȱ financialȱsettlementsȱforȱwholesaleȱelectricityȱpurchasesȱandȱsales,ȱdetermineȱtheȱ costsȱchargedȱtoȱindividualȱcustomers,ȱandȱinterfaceȱwithȱSDG&Eȱwhichȱwouldȱ provideȱ billing,ȱ metering,ȱ andȱ customerȱ servicesȱ toȱ CCAȱ customers.ȱ ȱ Theseȱ activitiesȱcanȱbeȱgroupedȱintoȱtheȱbroadȱcategoriesȱdescribedȱbelow.ȱ ȱ 1. PortfolioȱOperationsȱ ȱ Portfolioȱ operationsȱ encompassȱ theȱ activitiesȱ necessaryȱ forȱ wholesaleȱ procurementȱ ofȱ electricityȱ toȱ serveȱ endȬuseȱ customers.ȱ ȱ Theseȱ activitiesȱ areȱ virtuallyȱidenticalȱtoȱtheȱsupplyȱfunctionsȱperformedȱbyȱlocalȱutilities,ȱmunicipalȱ utilities,ȱandȱenergyȱserviceȱproviders.ȱ ȱ a. ElectricityȱProcurementȱ ȱ Theȱ essentialȱ purposeȱ ofȱ theȱ Aggregatorȱ isȱ toȱ assembleȱ aȱ portfolioȱ ofȱ electricityȱ supplyȱ sourcesȱ onȱ behalfȱ ofȱ itsȱ customers.ȱ ȱ Asȱ anȱ Aggregator,ȱ theȱ Countyȱ canȱ chooseȱ fromȱ variousȱ typesȱ ofȱ resourcesȱ andȱ wholesaleȱ electricityȱ productsȱ toȱ achieveȱaȱsupplyȱportfolioȱthatȱappropriatelyȱreflectsȱtheȱdesiredȱbalanceȱofȱcostȱ certainty,ȱ environmentalȱ considerations,ȱ costȱ effectiveness,ȱ andȱ operationalȱ andȱ contractualȱflexibility.ȱȱȱȱ ȱ Aȱ varietyȱ ofȱ generationȱ resourcesȱ orȱ electricityȱ purchaseȱ contractsȱ canȱ beȱ employedȱ toȱ provideȱ forȱ theȱ timeȬvaryingȱ loadȱ requirementsȱ ofȱ theȱ CCAȱ program.ȱ ȱ Theȱ patternȱ ofȱ aggregateȱ electricityȱ usageȱ typicallyȱ followsȱ daily,ȱ weeklyȱandȱseasonalȱcycles,ȱpeakingȱduringȱtheȱafternoonȱhoursȱandȱtheȱsummerȱ months.ȱ ȱ Theȱ Countyȱ mustȱ considerȱ theseȱ loadȱ patternsȱ whenȱ assemblingȱ aȱ supplyȱ portfolioȱ toȱ properlyȱ matchȱ resourcesȱ toȱ theȱ aggregateȱ loadȱ shapeȱ ofȱ itsȱ customerȱ base.ȱ ȱ Differentȱ typesȱ ofȱ generationȱ resourcesȱ andȱ supplyȱ contractsȱ supplyȱ theȱ baseȱ loadȱ requirements,ȱ intermediateȱ resourceȱ needs,ȱ andȱ peakingȱ loadȱrequirements.ȱȱTheseȱconceptsȱareȱillustratedȱinȱtheȱfollowingȱdiagram.ȱ ȱ ȱ 107 SpotȱMarketȱPurchases ““Imbalances””ȱor LoadȱFollowingȱProducts 300,000.0 250,000.0 kW PeakȱLoadȱorȱ 6ȱXȱ16ȱPowerȱ 200,000.0 Product 150,000.0 Tuesday Thursday Friday Saturday 100,000.0 50,000.0 BaseȱLoadȱforȱGenerationȱResources orȱ7ȱXȱ24ȱPowerȱProducts 0.0 ȱ Aȱ typicalȱ supplyȱ portfolioȱ wouldȱ utilizeȱ generationȱ ownedȱ byȱ theȱ Countyȱ orȱ longȬtermȱcontractsȱforȱtheȱmajorityȱofȱprojectedȱbaseȱloadȱrequirements.ȱȱTheseȱ baseȱloadȱresourcesȱwouldȱbeȱsupplementedȱwithȱintermediateȱresourcesȱorȱpeakȱ productsȱ asȱ wellȱ asȱ shortȬtermȱ contractsȱ coveringȱ theȱ additionalȱ seasonalȱ loadȱ requirementsȱ ofȱ theȱ portfolio,ȱ typicallyȱ inȱ theȱ thirdȱ quarterȱ ofȱ eachȱ year.ȱ ȱ Spotȱ marketȱ purchasesȱ andȱ salesȱ areȱ usedȱ toȱ fillȱ theȱ residualȱ ““netȱ short””ȱ loadȱ requirements.ȱ ȱ b. Risk And Credit Management ȱ Riskȱ managementȱ techniquesȱ wouldȱ beȱ employedȱ toȱ reduceȱ theȱ County’’sȱ exposureȱ toȱ theȱ volatilityȱ ofȱ energyȱ marketsȱ andȱ insulateȱ customerȱ ratesȱ fromȱ suddenȱchangesȱinȱwholesaleȱmarketȱprices.ȱȱCreditȱmonitoringȱisȱalsoȱimportantȱ toȱ keepȱ abreastȱ ofȱ changesȱ inȱ aȱ supplier’’sȱ financialȱ conditionȱ andȱ creditȱ rating.ȱȱ Commonȱpracticeȱinȱtheȱenergyȱindustryȱisȱtoȱperiodicallyȱcalculateȱtheȱfinancialȱ exposureȱ toȱ aȱ supplierȱ byȱ comparingȱ theȱ valueȱ ofȱ theȱ supplyȱ contractȱ toȱ theȱ contractualȱ price,ȱ utilizingȱ soȱ calledȱ ““markȬtoȬmarket””ȱ valuation.ȱ ȱ Exposureȱ toȱ suppliersȱ isȱ greatestȱ whenȱ theȱ contractualȱ priceȱ isȱ lowȱ relativeȱ toȱ prevailingȱ marketȱ prices,ȱ andȱ theȱ riskȱ ofȱ defaultȱ becomesȱ aȱ concern.ȱ ȱ Collateralȱ andȱ otherȱ securityȱ instruments,ȱ suchȱ asȱ lettersȱ ofȱ creditsȱ orȱ suretyȱ bonds,ȱ areȱ commonlyȱ usedȱtoȱmanageȱcreditȱrisksȱbetweenȱwholesaleȱelectricityȱbuyersȱandȱsellers.ȱȱ ȱ ȱ 108 c. Load Forecasting ȱ Inȱ performingȱ theȱ electricityȱ procurementȱ functions,ȱ itȱ isȱ necessaryȱ toȱ developȱ accurateȱloadȱforecasts,ȱbothȱlongȬtermȱforȱresourceȱplanningȱandȱshortȬtermȱforȱ theȱelectricityȱpurchasesȱandȱsalesȱneededȱtoȱmaintainȱaȱbalanceȱbetweenȱhourlyȱ resourcesȱandȱloads.ȱȱȱ ȱ TheȱCCAȱwillȱbeȱrequiredȱtoȱpurchaseȱenergyȱonȱtheȱwholesaleȱmarketȱforȱeachȱ hourȱ ofȱ theȱ day.ȱ ȱ Toȱ supportȱ financialȱ settlementsȱ andȱ energyȱ procurement,ȱ anȱ accurateȱrecordȱofȱtotal,ȱtimeȬofȬdayȱspecificȱelectricityȱdemandȱandȱenergyȱusageȱ isȱessential.ȱLackingȱthis,ȱtheȱCCAȱoperatorȱisȱrequiredȱtoȱrelyȱonȱtheȱdistributionȱ utility’’sȱ recordedȱ usageȱ forȱ eachȱ individualȱ customer.ȱ Allȱ customerȱ classesȱ areȱ notȱ meteredȱ inȱ theȱ sameȱ way.ȱ Inȱ particular,ȱ residentialȱ andȱ smallȱ commercialȱ consumersȱ (electricȱ demandȱ lessȱ theȱ 20ȱ kW)ȱ typicallyȱ haveȱ simpleȱ electroȬ mechanicalȱ metersȱ capableȱ ofȱ meteringȱ onlyȱ cumulativeȱ energyȱ consumption.ȱ Mediumȱ commercialȱ customersȱ (electricȱ demandȱ inȱ theȱ rangeȱ ofȱ 20ȱ toȱ 500ȱ kW)ȱ areȱtypicallyȱmeteredȱwithȱenergyȱandȱdemandȱmeters,ȱbutȱstillȱlackȱtimeȬofȬdayȱ recording.ȱ Largeȱ commercialȱ andȱ industrialȱ customersȱ (electricȱ demandȱ greaterȱ thanȱ 500ȱ kW)ȱ areȱ typicallyȱ equippedȱ withȱ dataȱ recordingȱ metersȱ recordingȱ electricȱ demandȱ onȱ five,ȱ tenȱ orȱ fifteenȱ minuteȱ intervalsȱ (intervalȱ dataȱ recordingȱ metersȱorȱIDR).ȱ ȱ WithoutȱaȱtimeȬofȬuseȱrecordȱofȱenergyȱconsumed,ȱtheȱCountyȱwillȱhaveȱtoȱrelyȱ onȱ prototypicalȱ rateclassȱ loadȱ profiles.ȱ Theȱ Californiaȱ Independentȱ Systemȱ Operatorȱ (CAISO)ȱ allowsȱ useȱ ofȱ loadȱ profilesȱ thatȱ areȱ approvedȱ byȱ theȱ localȱ regulatoryȱagencyȱ(CPUC)ȱforȱschedulingȱandȱsettlement.ȱȱTheseȱloadȱprofilesȱareȱ derivedȱbyȱdistributionȱutilityȱloadȱresearchȱbasedȱonȱIDRȱmeteringȱofȱaȱstratifiedȱ randomȱ sampleȱ fromȱ eachȱ rateclassȱ (residential,ȱ smallȱ commercial,ȱ mediumȱ commercial,ȱ industrial).ȱ Hence,ȱ theyȱ representȱ theȱ averageȱ orȱ typicalȱ customerȱ andȱnotȱtheȱCCA’’sȱactualȱcustomers.ȱȱToȱdate,ȱtheȱCPUCȱhasȱapprovedȱtheȱuseȱofȱ rateclassȱ loadȱ profilesȱ forȱ useȱ byȱ theȱ utilitiesȱ andȱ energyȱ serviceȱ providersȱ forȱ electricityȱschedulingȱandȱsettlement.ȱȱTheȱlocalȱutilitiesȱhaveȱopposedȱproposalsȱ madeȱ inȱ R.03Ȭ10Ȭ003ȱ thatȱ Aggregatorsȱ beȱ allowedȱ toȱ useȱ areaȬspecificȱ loadȱ profilesȱforȱtheseȱpurposes.ȱȱȱ ȱ CCAsȱ haveȱ theȱ option,ȱ underȱ theȱ law,ȱ toȱ meterȱ electricityȱ suppliedȱ toȱ theȱ jurisdictionalȱ territoriesȱ comprisingȱ theȱ CCAȱ toȱ obtainȱ anȱ accurateȱ recordȱ ofȱ aggregatedȱ loads.ȱ ȱ SDG&Eȱ isȱ requiredȱ toȱ ““install,ȱ maintainȱ andȱ calibrateȱ meteringȱdevicesȱatȱmutuallyȱagreeableȱlocationsȱwithinȱorȱadjacentȱtoȱtheȱCCA’’sȱ politicalȱboundaries””ȱatȱtheȱrequestȱandȱatȱtheȱexpenseȱofȱtheȱCCA.ȱSDG&Eȱwillȱ ȱ 109 alsoȱbeȱrequiredȱtoȱ““readȱtheȱmeteringȱdevicesȱandȱprovideȱtheȱdataȱcollectedȱtoȱ theȱCCAȱatȱtheȱaggregator’’sȱexpense.””30ȱȱUtilitiesȱareȱdirectedȱunderȱCPUCȱOrderȱ Institutingȱ Rulemakingȱ R.03.09.007ȱ (Augustȱ 21,ȱ 2003)ȱ toȱ developȱ specificȱ tariffȱ languageȱ toȱ meetȱ theȱ requirements.ȱ Assessingȱ theȱ size,ȱ type,ȱ location,ȱ quantityȱ andȱinstallationȱcostȱofȱsuchȱCCAȱwholesaleȱmeteringȱwillȱrequireȱanȱanalysisȱofȱ SDG&E’’sȱ distributionȱ system,ȱ inȱ concertȱ withȱ utilityȱ Serviceȱ Planners,ȱ and,ȱ willȱ requireȱ SDG&Eȱ toȱ complyȱ withȱ theȱ CPUC’’sȱ Orderȱ toȱ developȱ applicableȱ tariffȱ termsȱandȱconditions.ȱȱAtȱthisȱtime,ȱitȱisȱnotȱclearȱtoȱwhatȱextentȱtheȱCPUCȱorȱtheȱ CAISOȱ wouldȱ haveȱ toȱ approveȱ theȱ County’’sȱ useȱ ofȱ boundaryȱ metersȱ forȱ electricityȱschedulingȱandȱsettlement.ȱ ȱ d. Scheduling Coordination ȱ Schedulingȱ coordinationȱ costsȱ areȱ theȱ costsȱ associatedȱ withȱ schedulingȱ andȱ settlingȱelectricȱsupplyȱtransactionsȱwithȱtheȱCAISO.ȱȱAllȱcustomerȱmetersȱmustȱ beȱ representedȱ byȱ aȱ CAISOȬcertifiedȱ schedulingȱ coordinator.ȱ ȱ Theȱ schedulingȱ coordinatorȱ submitsȱ schedulesȱ toȱ theȱ CAISOȱ ofȱ hourlyȱ electricȱ demandsȱ andȱ supplyȱ resourcesȱ onȱ behalfȱ ofȱ theȱ County.ȱ ȱ Theȱ schedulingȱ coordinatorȱ isȱ responsibleȱforȱcostsȱassociatedȱwithȱimbalancesȱorȱdeviationsȱbetweenȱtheȱactualȱ hourlyȱloadsȱandȱtheȱactualȱhourlyȱproductionȱofȱtheȱresourcesȱitȱrepresents.ȱȱItȱisȱ alsoȱresponsibleȱforȱtheȱcostsȱofȱreservesȱandȱotherȱservicesȱ(““ancillaryȱservices””)ȱ providedȱbyȱtheȱCAISOȱthatȱareȱneededȱforȱreliableȱoperationȱofȱtheȱtransmissionȱ system.ȱȱ ȱ Theȱ Countyȱ hasȱ severalȱ choicesȱ forȱ obtainingȱ servicesȱ ofȱ aȱ schedulingȱ coordinator.ȱ ȱ Someȱ companiesȱ actȱ asȱ independentȱ schedulingȱ coordinatorsȱ andȱ chargeȱserviceȱfeesȱforȱtheirȱservices.ȱȱOtherȱcompaniesȱsuchȱasȱpowerȱmarketersȱ orȱenergyȱserviceȱprovidersȱwillȱprovideȱschedulingȱcoordinationȱservicesȱasȱpartȱ ofȱ aȱ largerȱ packageȱ ofȱ energyȱ services,ȱ includingȱ wholesaleȱ electricityȱ supply,ȱ loadȱ forecasting,ȱ andȱ riskȱ management.ȱ ȱ Theȱ chargesȱ forȱ providingȱ theȱ schedulingȱ coordinatorȱ servicesȱ areȱ bundledȱ intoȱ theȱ overallȱ costȱ ofȱ electricityȱ providedȱbyȱtheȱsupplier.ȱȱItȱisȱalsoȱpossibleȱforȱtheȱCountyȱtoȱbecomeȱaȱCAISOȱ certifiedȱ schedulingȱ coordinator,ȱ whichȱ requiresȱ acquisitionȱ ofȱ specializedȱ software,ȱ completionȱ ofȱ certificationȱ trainingȱ conductedȱ byȱ theȱ CAISO,ȱ andȱ continuousȱstaffingȱofȱaȱschedulingȱdeskȱforȱ24ȱxȱ7ȱoperations.ȱ ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱȱ 30 ȱ CaliforniaȱPublicȱUtilitiesȱCodeȱ§366.2(c)(18)ȱ 110 2. Ratesȱ ȱ Theȱ Countyȱ isȱ responsibleȱ forȱ settingȱ itsȱ chargesȱ forȱ theȱ generationȱ servicesȱ itȱ providesȱ toȱ CCAȱ customers.ȱ ȱ Theȱ firstȱ stepȱ inȱ settingȱ ratesȱ isȱ toȱ determineȱ theȱ totalȱ dollarsȱ thatȱ mustȱ beȱ collectedȱ fromȱ customersȱ inȱ orderȱ toȱ coverȱ allȱ ofȱ theȱ County’’sȱ costsȱ ofȱ doingȱ business.ȱ ȱ Thisȱ amountȱ isȱ knownȱ asȱ theȱ revenueȱ requirementȱ andȱ consistsȱofȱ operatingȱexpenses,ȱdepreciationȱ andȱamortization,ȱ interestȱandȱfinancingȱexpenses,ȱtaxes,ȱandȱreserveȱfunds.ȱ ȱ Theȱ revenueȱ requirementȱ isȱ allocatedȱ toȱ theȱ variousȱ classesȱ ofȱ customersȱ inȱ theȱ CCAȱprogram,ȱsuchȱasȱresidential,ȱsmallȱcommercial,ȱmediumȱcommercial,ȱlargeȱ industrial,ȱ agricultural,ȱ andȱ streetȱ lightingȱ customers.ȱ ȱ Revenueȱ allocationȱ isȱ typicallyȱdoneȱonȱaȱcostȱofȱserviceȱbasis,ȱsoȱthatȱratesȱareȱreflectiveȱofȱdifferencesȱ inȱtheȱCounty’’sȱcostsȱofȱservingȱtheȱdifferentȱcustomerȱclasses.ȱȱTheȱCountyȱmayȱ employȱloadȱresearchȱtoȱestimateȱcustomerȱclassȱloadȱprofilesȱandȱcostȱofȱserviceȱ byȱ useȱ ofȱ samplingȱ techniques,ȱ wherebyȱ loadȱ researchȱ metersȱ thatȱ canȱ recordȱ customerȱelectricityȱconsumptionȱonȱaȱ5ȱtoȱ15ȱminuteȱintervalȱbasisȱareȱinstalledȱ onȱaȱsmallȱsampleȱofȱcustomersȱwithinȱeachȱrateȱclass.ȱȱAlternatively,ȱtheȱCountyȱ mayȱutilizeȱtheȱcustomerȱclassȱloadȱprofilesȱcreatedȱbyȱSDG&E.ȱ ȱ Rateȱ designȱ isȱtheȱ processȱofȱsettingȱ theȱspecificȱchargesȱapplicableȱ toȱcustomerȱ electricityȱusage.ȱȱRateȱschedulesȱdefineȱtheȱchargesȱforȱ eachȱkWh,ȱ kWȱorȱotherȱ unitȱofȱelectricȱservice,ȱandȱthereȱmayȱbeȱoneȱorȱmoreȱrateȱschedulesȱapplicableȱtoȱ eachȱcustomerȱclass.ȱȱRatesȱareȱsetȱsoȱrecoverȱtheȱCounty’’sȱrevenueȱrequirementȱ onȱaȱforecastȱbasisȱandȱareȱadjustedȱasȱneededȱtoȱmaintainȱsufficientȱrevenuesȱforȱ theȱCounty.ȱ ȱ 3. AccountȱServicesȱ ȱ Theȱ Countyȱ mustȱbeȱableȱtoȱexchangeȱcustomerȱmeterȱusageȱdataȱelectronicallyȱ withȱSDG&Eȱusingȱtheȱutility’’sȱstandardȱelectronicȱdataȱinterchangeȱproceduresȱ andȱformats.ȱȱTheȱCountyȱmustȱreceiveȱandȱprocessȱcustomerȱpaymentsȱcollectedȱ byȱ SDG&E.ȱ ȱ Aggregatorsȱ mayȱ alsoȱ needȱ theȱ capabilityȱ toȱ calculateȱ individualȱ customerȱbillsȱandȱprovideȱtheȱamountȱtoȱbeȱcollectedȱtoȱSDG&Eȱinȱtheȱformatsȱ andȱbyȱtheȱtimelinesȱrequiredȱforȱinclusionȱinȱtheȱbillsȱsentȱbyȱtheȱlocalȱutilities.ȱȱ PG&Eȱ isȱ theȱ onlyȱ localȱ utilityȱ thatȱ offersȱ ““rateȱ ready””ȱ billingȱ service,ȱ wherebyȱ PG&Eȱ willȱ calculateȱ individualȱ customerȱ billsȱ usingȱ theȱ ratesȱ providedȱ byȱ theȱ County.ȱ ȱ PG&Eȱ alsoȱ offersȱ ““billȱ ready””ȱ billingȱ serviceȱ wherebyȱ theȱ Countyȱ calculatesȱ theȱ amountsȱ dueȱ fromȱ eachȱ customerȱ andȱ submitsȱ toȱ PG&Eȱ forȱ collections.ȱȱSCEȱandȱSDG&Eȱonlyȱofferȱ““billȱready””ȱbilling.ȱ ȱ 111 ȱ TheȱCountyȱmustȱalsoȱbeȱableȱtoȱobtainȱcustomerȱmeterȱdataȱandȱprocessȱtheȱdataȱ forȱ submissionȱ toȱ theȱ CAISOȱ throughȱ itsȱ schedulingȱ coordinatorȱ soȱ thatȱ theȱ CAISOȱcanȱcompleteȱitsȱfinancialȱsettlementȱprocess.ȱȱCustomerȱmeterȱdataȱmustȱ beȱ processedȱ inȱ accordanceȱ withȱ theȱ CPUC’’sȱ protocolsȱ forȱ verification,ȱ estimation,ȱ andȱ editingȱ (VEE)ȱ ofȱ meterȱ data.ȱ ȱ SDG&Eȱ willȱ performȱ theȱ VEEȱ functionȱforȱAggregatorsȱasȱpartȱofȱtheirȱmeteringȱserviceȱfunction.ȱȱHowever,ȱtheȱ Countyȱ mustȱ applyȱ loadȱ profilesȱ toȱ theȱ usageȱ dataȱ ofȱ customersȱ whoseȱ consumptionȱ isȱ measuredȱ onȱ aȱ cumulativeȱ monthlyȱ basisȱ (e.g.ȱ residentialȱ andȱ smallȱ commercial)ȱ inȱ orderȱ toȱ createȱ theȱ hourlyȱ usageȱ dataȱ thatȱ mustȱ beȱ submittedȱtoȱtheȱCAISO.ȱ ȱ 4. Administrationȱ ȱ Administrationȱ andȱ managementȱ ofȱ theȱ CCAȱ programȱ includesȱ finance,ȱ legal,ȱ regulatory,ȱ contractȱ managementȱ andȱ otherȱ programȱ managementȱ functions.ȱȱ TheȱscopeȱofȱtheȱadministrativeȱfunctionȱdependsȱonȱtheȱcomplexityȱofȱtheȱCCAȱ implementation,ȱwhichȱcanȱrangeȱfromȱaȱsingleȱcontractȱwithȱanȱenergyȱservicesȱ providerȱforȱoperationȱofȱtheȱprogramȱtoȱtheȱplanningȱandȱstaffingȱrequiredȱforȱ inȬhouseȱ operationȱ andȱ managementȱ ofȱ allȱ aspectsȱ ofȱ theȱ CCAȱ program,ȱ withȱ variationsȱinȱbetweenȱtheseȱtwoȱextremes.ȱȱAtȱaȱminimum,ȱaȱseniorȱlevelȱmanagerȱ withȱexperienceȱinȱtheȱelectricȱutilityȱindustryȱshouldȱheadȱtheȱCCAȱprogram.ȱ ȱ 112 Appendix Base Case Pro Forma And Supporting Data 113 114 COUNTY OF SAN DIEGO SUMMARY OF PRO FORMA RESULTS ($ MILLIONS) $ - Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Commodity Costs 140.9 145.8 150.4 156.7 164.6 174.0 171.8 185.0 191.5 189.2 195.7 221.4 238.0 255.2 265.7 278.8 287.3 301.9 321.0 4,035.0 Ancillary Services and ISO Charges 10.7 11.3 11.9 13.0 13.9 15.0 15.7 16.4 17.1 17.8 18.5 19.6 21.2 22.9 23.8 24.3 25.1 26.4 28.1 352.9 SDG&E CCA_Current_SD County_Jan 05 X Operations & Scheduling 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.3 4.3 4.3 4.3 4.3 80.2 Non-bypassable Charges 50.5 47.8 45.0 41.6 34.8 13.5 13.8 14.0 14.3 14.6 15.2 15.2 15.5 15.8 16.1 16.4 16.8 400.8 Metering & Billing 0.8 0.9 0.9 1.0 1.0 1.0 1.1 1.1 1.2 1.3 1.3 1.4 1.4 1.5 1.6 1.6 1.7 1.8 1.9 24.4 Financing Costs 0.7 0.7 0.7 12.4 9.6 9.5 17.1 16.9 16.7 20.5 20.2 19.9 19.7 19.4 19.0 18.6 18.1 17.7 17.3 274.9 Financial Summary Total Costs SDG&E Charges 207.8 198.6 210.6 204.7 213.1 209.6 228.8 227.6 228.0 237.9 217.2 232.6 223.7 247.2 237.7 257.1 245.0 266.9 247.7 278.9 255.2 287.8 281.8 305.8 300.1 336.2 319.0 364.3 330.5 379.5 344.0 384.7 353.3 396.3 352.1 402.0 372.6 431.0 5,168.2 5,648.6 Savings 0.0 (9.2) (5.9) (3.5) (1.2) 9.9 15.4 23.5 19.4 21.9 31.2 32.6 24.0 36.1 45.3 49.1 40.7 43.0 49.8 58.5 480.4 Percentage Of Total Bill 0% -2% -1% -1% 0% 2% 3% 5% 4% 4% 6% 6% 4% 6% 7% 7% 6% 6% 7% 8% 5% 1 COUNTY OF SAN DIEGO MONTHLY CUSTOMER BILL IMPACT ($/MONTH) $ - Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Monthly Bill Impact Residential 0 (2) (1) (1) (0) 2 3 4 3 3 5 5 4 5 6 7 6 6 7 8 #N/A Monthly Bill Impact Small Commercial 0 (6) (4) (2) (1) 6 9 13 10 12 16 16 12 18 22 23 19 19 22 25 #N/A SDG&E CCA_Current_SD County_Jan 05 X Monthly Bill Impact Medium Commercial 0 (122) (76) (46) (15) 122 186 278 224 249 346 355 256 377 463 491 399 413 468 538 #N/A Monthly Bill Monthly Bill Impact Impact Medium Industrial Large Industrial 0 0 (730) 0 (453) 0 (273) 0 (92) 0 730 0 1,111 0 1,660 0 1,341 0 1,487 0 2,071 0 2,123 0 1,530 0 2,251 0 2,769 0 2,936 0 2,386 0 2,471 0 2,801 0 3,219 0 #N/A #N/A Monthly Bill Impact Agricultural 0 (7) (4) (3) (1) 7 11 16 13 15 20 21 15 22 27 29 23 24 28 32 #N/A Financial Summary Monthly Bill Impact Street Lighting 0 (4) (2) (1) (0) 4 6 8 7 7 10 11 8 11 14 15 12 12 14 16 #N/A 2 COUNTY OF SAN DIEGO ELECTRIC SUPPLY RESOURCE MIX $ - CATEGORY Spot Market Purchases Contract Purchases Power Production - Natural Gas Renewable Energy Purchases Power Production - Renewable Energy Off System Sales Total SDG&E CCA_Current_SD County_Jan 05 X 2005 0% 0% 0% 0% 0% 0% 0% 2006 12% 81% 0% 8% 0% -1% 100% 2007 13% 78% 0% 9% 0% 0% 100% 2008 14% 76% 0% 10% 0% 0% 100% 2009 13% 25% 51% 11% 0% 0% 100% 2010 14% 25% 50% 13% 0% 0% 100% 2011 14% 24% 48% 14% 0% 0% 100% Portfolio Summary 2012 14% 24% 48% 4% 10% 0% 100% 2013 13% 25% 47% 6% 10% 0% 100% 2014 14% 24% 46% 7% 10% 0% 100% 2015 14% 24% 45% 3% 15% 0% 100% 2016 14% 23% 44% 4% 15% 0% 100% 2017 11% 26% 43% 6% 14% -1% 100% 2018 12% 26% 42% 6% 14% 0% 100% 2019 14% 25% 41% 7% 13% 0% 100% 2020 15% 25% 41% 7% 13% 0% 100% 1 COUNTY OF SAN DIEGO ELECTRIC SUPPLY RESOURCE MIX $ - CATEGORY Spot Market Purchases Contract Purchases Power Production - Natural Gas Renewable Energy Purchases Power Production - Renewable Energy Off System Sales Total SDG&E CCA_Current_SD County_Jan 05 X 2021 15% 25% 40% 7% 13% 0% 100% 2022 16% 25% 39% 8% 12% 0% 100% 2023 17% 24% 38% 8% 12% 0% 100% 2024 19% 24% 37% 9% 11% 0% 100% Portfolio Summary 2 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS LOAD AGGREGATION SUMMARY # [1] 2005 CATEGORY [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 I. SDG&E SDG&E'S UNBUNDLED GENERATION RATES ($/KWH) RESIDENTIAL (DR) $0.06604 $0.06712 $0.06711 $0.06683 $0.07070 $0.07219 $0.06910 $0.07198 SMALL COMMERCIAL (A) $0.08592 $0.08735 $0.08735 $0.08697 $0.09210 $0.09407 $0.08998 $0.09378 MEDIUM COMMERCIAL (AL-TOU) $0.08478 $0.08619 $0.08618 $0.08582 $0.09087 $0.09281 $0.08878 $0.09253 MEDIUM INDUSTRIAL (AL-TOU) $0.08478 $0.08619 $0.08618 $0.08582 $0.09087 $0.09281 $0.08878 $0.09253 LARGE INDUSTRIAL (AL-TOU) $0.08478 $0.08619 $0.08618 $0.08582 $0.09087 $0.09281 $0.08878 $0.09253 AGRICULTURAL PUMPING $0.08474 $0.08615 $0.08615 $0.08578 $0.09083 $0.09277 $0.08874 $0.09248 STREET LIGHTING AND TRAFFIC CONTROL $0.07855 $0.07985 $0.07985 $0.07951 $0.08417 $0.08596 $0.08224 $0.08570 RESIDENTIAL (DR) $0 $95,640,499 $98,584,879 $100,948,485 $109,564,703 $114,532,464 $112,019,670 $119,011,913 SMALL COMMERCIAL (A) $0 $15,209,753 $15,677,984 $16,052,737 $17,438,939 $18,235,614 $17,823,113 $18,947,933 MEDIUM COMMERCIAL (AL-TOU) $0 $62,767,885 $64,700,194 $66,246,938 $71,964,599 $75,251,103 $73,551,163 $78,190,722 MEDIUM INDUSTRIAL (AL-TOU) $0 $9,015,917 $9,293,472 $9,515,645 $10,336,924 $10,808,994 $10,564,817 $11,231,238 LARGE INDUSTRIAL (AL-TOU) $0 $0 $0 $0 $0 $0 $0 $0 AGRICULTURAL PUMPING $0 $15,070,365 $15,534,306 $15,905,676 $17,278,444 $18,067,513 $17,659,382 $18,773,306 STREET LIGHTING AND TRAFFIC CONTROL $0 $847,151 $873,230 $894,123 $971,055 $1,015,312 $992,561 $1,054,988 $0 $198,551,570 $204,664,066 $209,563,605 $227,554,664 $237,911,000 $232,610,704 $247,210,099 $0.00000 $0.07586 $0.0759 $0.0755 $0.0799 $0.0816 $0.0781 $0.0814 II. SDG&E SDG&E'S REVENUE REQUIREMENT FOR POWER SUPPLY ($) TOTAL - POWER SUPPLY REVENUE REQUIREMENT AVERAGE RATE ($/KWH) III. OPERATING EXPENSES ($) 1. POWER SUPPLY COSTS: (A) ANCILLARY SERVICES AND RESERVES $0 $8,173,206 $8,633,105 $9,058,995 $9,973,853 $10,747,698 $11,630,681 $12,198,049 (B) RENEWABLE PORTFOLIO STANDARD (RPS) $0 $15,780,220 $18,572,604 $21,514,527 $24,599,457 $27,821,023 $31,173,097 $10,949,752 (C) DWR POWER $0 $0 $0 $0 $0 $0 $0 $0 (D) POWER PRODUCTION $0 $0 $0 $0 $65,521,664 $66,568,967 $68,273,010 $80,962,101 (E) CONTRACT PURCHASES $0 $115,212,286 $115,212,286 $115,212,286 $51,391,999 $51,391,999 $51,391,999 $51,391,999 (F) MARKET PURCHASES $0 $15,643,182 $18,168,653 $20,465,482 $21,572,476 $24,680,291 $28,028,893 $30,128,645 $0 $154,808,894 $160,586,647 $166,251,291 $173,059,449 $181,209,978 $190,497,679 $185,630,545 SUBTOTAL POWER SUPPLY COSTS 2. OTHER COSTS: (A) CALIFORNIA ISO COSTS $0 $2,561,008 $2,705,795 $2,848,977 $3,028,288 $3,198,154 $3,376,635 $3,533,029 (B) NON-BYPASSABLE CHARGES $0 $50,512,417 $47,754,389 $45,007,591 $41,578,206 $34,752,244 $13,489,176 $13,758,950 (C) START UP COSTS AMORTIZATION $0 $5,528 $5,833 $6,153 $6,492 $6,849 $7,225 $7,623 (D) OPERATIONS & SCHEDULING COORDINATION $0 $4,161,748 $4,169,821 $4,177,453 $4,184,649 $4,191,419 $4,197,774 $4,203,730 $0 $57,240,702 $54,635,838 $52,040,174 $48,797,634 $42,148,666 $21,070,811 $21,503,332 SUBTOTAL - OTHER COSTS SDG&E CCA_Current_SD County_Jan 05 X Load Aggregation 3 1 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS LOAD AGGREGATION SUMMARY # [1] 2005 CATEGORY [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 3. UTILITY OPERATIONS: (A) DISTRIBUTION O&M $0 $0 $0 $0 $0 $0 $0 (B) CUSTOMER SERVICE $0 $0 $0 $0 $0 $0 $0 $0 (C) METERING & BILLING $0 $812,835 $858,853 $905,224 $951,919 $998,923 $1,046,227 $1,093,829 (D) ADMINISTRATIVE AND GENERAL $0 $0 $0 $0 $0 $0 $0 $0 $0 $812,835 $858,853 $905,224 $951,919 $998,923 $1,046,227 $1,093,829 $0 $212,862,431 $216,081,338 $219,196,689 $222,809,002 $224,357,567 $212,614,717 $208,227,707 $0 $0 $0 $0 $22,025 $6,888 $619,981 $648,894 $21,721 $0 $655,958 $677,679 $21,400 $0 $687,172 $708,572 $8,831,131 $2,755,365 $776,973 $12,363,468 $8,709,147 $0 $848,119 $9,557,266 $8,580,454 $0 $914,235 $9,494,690 $16,157,782 $0 $973,736 $17,131,517 (A) EXCESS ENERGY SALES $0 $756,207 $520,274 $365,298 $497,084 $389,908 $294,990 $245,415 (B) EXCESS ANCILLARY SERVICE SALES $0 $0 $0 $0 $0 $0 $0 $0 (C) SUPPLEMENTAL ENERGY PAYMENTS $0 $4,973,133 $5,674,688 $6,456,789 $5,900,088 $5,517,546 $4,595,158 $1,395,584 $0 $5,729,341 $6,194,962 $6,822,087 $6,397,172 $5,907,454 $4,890,148 $1,640,999 VI. REVENUE REQUIREMENT - NET MARKET SALES ($) $0 $207,781,984 $210,564,056 $213,083,174 $228,775,299 $228,007,379 $217,219,259 $223,718,225 VII. CCA OPERATIONAL MARGIN $0 $9,903,621 $15,391,445 $23,491,874 SUBTOTAL - UTILITY OPERATIONS TOTAL OPERATING EXPENSES IV. INTEREST EXPENSE ($) (A) INTEREST EXPENSE ($) (B) DEBT COVERAGE (C) WORKING CAPITAL EXPENSE SUBTOTAL - FINANCING EXPENSE $0 V. REVENUES FROM MARKET SALES ($) SUBTOTAL - OTHER REVENUES NET PRESENT VALUE OF OPERATIONAL MARGIN $129,572,445.84 NOMINAL MARGIN $480,374,159.63 ($9,230,414) ($5,899,990) ($3,519,569) ($1,220,635) DISCOUNT ON POWER SUPPLY REVENUE REQUIREMENTS 6% 0% -5% -3% -2% -1% 4% 7% 10% DISCOUNT ON TOTAL REVENUE REQUIREMENTS 3% 0% -2% -1% -1% 0% 2% 3% 5% $0 $0 $2,755,365 $0 $0 $0 $1,534,730 $9,903,621 $15,391,445 $23,491,874 DEBT COVERAGE FUND ADDITION $0 NET VARIANCE $0 NET VARIANCE (% OF GENERATION RATE) NET VARIANCE (% OF TOTAL RATE) SDG&E CCA_Current_SD County_Jan 05 X $6,888 ($9,223,526) ($5,899,990) ($3,519,569) 0% -5% -3% -2% 1% 4% 7% 10% 0% -2% -1% -1% 0% 2% 3% 5% Load Aggregation 3 2 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS LOAD AGGREGATION SUMMARY # CATEGORY [1] 2005 [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 VIII. CCA POWER SUPPLY REVENUE REQUIREMENT ($/MWh) (A) MARKET PURCHASES - 5.98 6.73 7.38 7.58 8.47 9.41 9.92 (B) CONTRACT PURCHASES - 44.02 42.70 41.53 18.05 17.64 17.26 16.92 (C) POWER PRODUCTION - - - - 23.02 22.84 22.93 26.66 (D) RPS ENERGY - 6.03 6.88 7.75 8.64 9.55 10.47 3.61 (E) DWR POWER - - - - - - - - (F) ANCILLARY SERVICES & DEMAND RESERVES - 3.12 3.20 3.27 3.50 3.69 3.91 4.02 (G) CALIFORNIA ISO COSTS - 0.98 1.00 1.03 1.06 1.10 1.13 1.16 (H) NON-BYPASSABLE CHARGES - 19.30 17.70 16.22 14.61 11.93 4.53 4.53 (I) FINANCING EXPENSE - 0.25 0.25 0.26 4.35 3.28 3.19 5.64 (J) OPERATIONS & SCHEDULING COORDINATION - 1.59 1.55 1.51 1.47 1.44 1.41 1.38 (K) METERING & BILLING - 0.31 0.32 0.33 0.33 0.34 0.35 0.36 SUBTOTAL - CCA REVENUE REQUIREMENT - 81.57 80.33 79.26 82.62 80.27 74.59 74.20 IX. REVENUES FROM MARKET SALES, SEP ($/MWh) - 2.19 2.30 2.46 2.25 2.03 1.64 0.54 X. CCA REVENUE REQUIREMENT - NET MARKET SALES ($/MWh) - 79.38 78.04 76.80 80.37 78.24 72.95 73.66 0.00 (3.53) (2.19) (1.27) (0.43) 3.40 5.17 7.73 Commodity Costs Reserves/CAISO Costs Non-bypassable Charges Operations & Scheduling Financing Expense Metering & Billing TOTAL - 53.83 4.10 19.30 1.59 0.25 0.31 79.38 54.02 4.20 17.70 1.55 0.25 0.32 78.04 54.20 4.29 16.22 1.51 0.26 0.33 76.80 55.05 4.57 14.61 1.47 4.35 0.33 80.37 56.47 4.79 11.93 1.44 3.28 0.34 78.24 58.43 5.04 4.53 1.41 3.19 0.35 72.95 56.56 5.18 4.53 1.38 5.64 0.36 73.66 SDG&E Generation Rate - 75.86 75.85 75.53 79.94 81.64 78.12 81.39 Breakeven Exit Fee - 15.77 15.51 14.95 14.18 15.32 9.70 12.26 VARIANCE SDG&E MINUS CCA ($/MWH) SDG&E CCA_Current_SD County_Jan 05 X Load Aggregation 3 3 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS LOAD AGGREGATION SUMMARY # [9] 2013 CATEGORY [10] 2014 [11] 2015 [12] 2016 [13] 2017 [14] 2018 [15] 2019 [16] 2020 I. SDG&E SDG&E'S UNBUNDLED GENERATION RATES ($/KWH) RESIDENTIAL (DR) $0.07338 $0.07468 $0.07648 $0.07737 $0.08057 $0.08680 $0.09219 $0.09414 SMALL COMMERCIAL (A) $0.09563 $0.09736 $0.09973 $0.10091 $0.10515 $0.11339 $0.12053 $0.12311 MEDIUM COMMERCIAL (AL-TOU) $0.09435 $0.09605 $0.09840 $0.09956 $0.10374 $0.11186 $0.11890 $0.12145 MEDIUM INDUSTRIAL (AL-TOU) $0.09435 $0.09605 $0.09840 $0.09956 $0.10374 $0.11186 $0.11890 $0.12145 LARGE INDUSTRIAL (AL-TOU) $0.09435 $0.09605 $0.09840 $0.09956 $0.10374 $0.11186 $0.11890 $0.12145 AGRICULTURAL PUMPING $0.09431 $0.09601 $0.09835 $0.09951 $0.10370 $0.11181 $0.11885 $0.12139 STREET LIGHTING AND TRAFFIC CONTROL $0.08738 $0.08895 $0.09111 $0.09218 $0.09604 $0.10353 $0.11002 $0.11237 $182,383,851 II. SDG&E SDG&E'S REVENUE REQUIREMENT FOR POWER SUPPLY ($) RESIDENTIAL (DR) $123,753,646 $128,469,772 $134,193,628 $138,468,406 $147,092,696 $161,626,613 $175,103,271 SMALL COMMERCIAL (A) $19,708,737 $20,465,282 $21,384,653 $22,069,590 $23,457,702 $25,801,252 $27,973,717 $29,144,164 MEDIUM COMMERCIAL (AL-TOU) $81,329,181 $84,450,100 $88,242,497 $91,068,163 $96,793,589 $106,459,052 $115,419,019 $120,246,914 MEDIUM INDUSTRIAL (AL-TOU) $11,682,044 $12,130,329 $12,675,065 $13,080,941 $13,903,336 $15,291,673 $16,578,674 $17,272,148 $0 $0 $0 $0 $0 $0 $0 $0 $19,526,829 $20,276,142 $21,186,670 $21,865,096 $23,239,727 $25,560,324 $27,711,539 $28,870,681 LARGE INDUSTRIAL (AL-TOU) AGRICULTURAL PUMPING STREET LIGHTING AND TRAFFIC CONTROL $1,097,246 $1,139,271 $1,190,320 $1,228,380 $1,305,408 $1,435,379 $1,555,873 $1,620,846 $257,097,683 $266,930,895 $278,872,832 $287,780,576 $305,792,457 $336,174,293 $364,342,092 $379,538,604 $0.0830 $0.0845 $0.0865 $0.0875 $0.0912 $0.0983 $0.1044 $0.1067 (A) ANCILLARY SERVICES AND RESERVES $12,705,769 $13,205,995 $13,818,345 $14,283,298 $15,206,759 $16,568,708 $17,935,919 $18,681,592 (B) RENEWABLE PORTFOLIO STANDARD (RPS) $14,371,100 $17,979,440 $7,312,826 $11,544,702 $16,920,317 $20,297,502 $23,892,997 $26,437,222 $0 $0 $0 $0 $0 $0 $0 $0 (D) POWER PRODUCTION $82,562,129 $84,001,891 $89,111,147 $90,075,604 $93,989,037 $100,547,257 $106,840,911 $108,978,367 (E) CONTRACT PURCHASES $60,868,420 $60,868,420 $60,868,420 $60,868,420 $84,939,331 $84,939,331 $84,939,331 $84,939,331 (F) MARKET PURCHASES $29,287,429 $31,024,638 $32,948,034 $34,680,052 $28,857,871 $35,453,075 $42,854,616 $48,623,815 $199,794,847 $207,080,384 $204,058,772 $211,452,076 $239,913,314 $257,805,873 $276,463,773 $287,660,326 TOTAL - POWER SUPPLY REVENUE REQUIREMENT AVERAGE RATE ($/KWH) III. OPERATING EXPENSES ($) 1. POWER SUPPLY COSTS: (C) DWR POWER SUBTOTAL POWER SUPPLY COSTS 2. OTHER COSTS: (A) CALIFORNIA ISO COSTS (B) NON-BYPASSABLE CHARGES (C) START UP COSTS AMORTIZATION (D) OPERATIONS & SCHEDULING COORDINATION SUBTOTAL - OTHER COSTS SDG&E CCA_Current_SD County_Jan 05 X $3,690,364 $3,852,646 $4,028,771 $4,200,243 $4,411,126 $4,660,260 $4,916,632 $5,135,249 $14,034,129 $14,314,812 $14,601,108 $15,169,696 $15,190,993 $15,494,813 $15,804,709 $16,120,803 $8,042 $8,484 $8,951 $9,443 $9,963 $10,511 $11,089 $11,699 $4,209,804 $4,216,000 $4,222,320 $4,228,767 $4,235,342 $4,242,049 $4,248,890 $4,255,868 $21,942,339 $22,391,943 $22,861,150 $23,608,149 $23,847,424 $24,407,633 $24,981,319 $25,523,619 Load Aggregation 3 4 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS LOAD AGGREGATION SUMMARY # [9] 2013 CATEGORY [10] 2014 [11] 2015 [12] 2016 [13] 2017 [14] 2018 [15] 2019 [16] 2020 3. UTILITY OPERATIONS: (A) DISTRIBUTION O&M $0 $0 $0 $0 $0 $0 $0 (B) CUSTOMER SERVICE $0 $0 $0 $0 $0 $0 $0 $0 $1,143,599 $1,195,632 $1,250,034 $1,306,910 $1,366,375 $1,428,545 $1,493,543 $1,561,500 (C) METERING & BILLING (D) ADMINISTRATIVE AND GENERAL SUBTOTAL - UTILITY OPERATIONS TOTAL OPERATING EXPENSES IV. INTEREST EXPENSE ($) (A) INTEREST EXPENSE ($) (B) DEBT COVERAGE (C) WORKING CAPITAL EXPENSE SUBTOTAL - FINANCING EXPENSE $0 $0 $0 $0 $0 $0 $0 $0 $0 $1,143,599 $1,195,632 $1,250,034 $1,306,910 $1,366,375 $1,428,545 $1,493,543 $1,561,500 $222,880,785 $230,667,959 $228,169,956 $236,367,136 $265,127,113 $283,642,050 $302,938,636 $314,745,445 $15,908,061 $0 $1,014,177 $16,922,239 $15,644,606 $0 $1,053,704 $16,698,310 $19,438,508 $0 $1,102,088 $20,540,595 $19,089,062 $0 $1,136,632 $20,225,695 $18,720,397 $0 $1,216,791 $19,937,188 $18,331,456 $0 $1,340,333 $19,671,789 $17,921,123 $0 $1,455,101 $19,376,223 $17,488,221 $0 $1,515,745 $19,003,966 $361,094 V. REVENUES FROM MARKET SALES ($) (A) EXCESS ENERGY SALES $338,998 $272,874 $229,282 $180,897 $1,428,425 $1,000,370 $686,796 (B) EXCESS ANCILLARY SERVICE SALES $0 $0 $0 $0 $0 $0 $0 $0 (C) SUPPLEMENTAL ENERGY PAYMENTS $1,731,000 $2,080,509 $769,252 $1,240,749 $1,842,676 $2,217,915 $2,618,033 $2,903,528 $2,069,997 $2,353,383 $998,534 $1,421,646 $3,271,101 $3,218,285 $3,304,830 $3,264,622 $237,733,026 $245,012,886 $247,712,017 $255,171,184 $281,793,200 $300,095,553 $319,010,030 $330,484,789 $19,364,657 $21,918,009 $31,160,816 $32,609,392 $23,999,257 $36,078,740 $45,332,062 $49,053,815 SUBTOTAL - OTHER REVENUES VI. REVENUE REQUIREMENT - NET MARKET SALES ($) VII. CCA OPERATIONAL MARGIN NET PRESENT VALUE OF OPERATIONAL MARGIN $129,572,445.84 NOMINAL MARGIN $480,374,159.63 DISCOUNT ON POWER SUPPLY REVENUE REQUIREMENTS 6% 8% 8% 11% 11% 8% 11% 12% 13% DISCOUNT ON TOTAL REVENUE REQUIREMENTS 3% 4% 4% 6% 6% 4% 6% 7% 7% $0 $0 $0 $0 $0 $0 $0 $0 $19,364,657 $21,918,009 $31,160,816 $32,609,392 $23,999,257 $36,078,740 $45,332,062 $49,053,815 DEBT COVERAGE FUND ADDITION NET VARIANCE NET VARIANCE (% OF GENERATION RATE) 8% 8% 11% 11% 8% 11% 12% 13% NET VARIANCE (% OF TOTAL RATE) 4% 4% 6% 6% 4% 6% 7% 7% SDG&E CCA_Current_SD County_Jan 05 X Load Aggregation 3 5 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS LOAD AGGREGATION SUMMARY # CATEGORY [9] 2013 [10] 2014 [11] 2015 [12] 2016 [13] 2017 [14] 2018 [15] 2019 [16] 2020 VIII. CCA POWER SUPPLY REVENUE REQUIREMENT ($/MWh) (A) MARKET PURCHASES 9.45 9.82 10.22 10.55 8.61 10.36 12.28 13.66 (B) CONTRACT PURCHASES 19.65 19.26 18.88 18.51 25.33 24.83 24.35 23.87 (C) POWER PRODUCTION 26.65 26.58 27.65 27.40 28.03 29.40 30.62 30.62 (D) RPS ENERGY 4.64 5.69 2.27 3.51 5.05 5.93 6.85 7.43 (E) DWR POWER - - - - - - - - (F) ANCILLARY SERVICES & DEMAND RESERVES 4.10 4.18 4.29 4.34 4.53 4.84 5.14 5.25 (G) CALIFORNIA ISO COSTS 1.19 1.22 1.25 1.28 1.32 1.36 1.41 1.44 (H) NON-BYPASSABLE CHARGES 4.53 4.53 4.53 4.61 4.53 4.53 4.53 4.53 (I) FINANCING EXPENSE 5.46 5.29 6.38 6.15 5.95 5.75 5.56 5.34 (J) OPERATIONS & SCHEDULING COORDINATION 1.36 1.33 1.31 1.29 1.26 1.24 1.22 1.20 (K) METERING & BILLING 0.37 0.38 0.39 0.40 0.41 0.42 0.43 0.44 SUBTOTAL - CCA REVENUE REQUIREMENT 77.40 78.28 77.16 78.05 85.01 88.68 92.38 93.78 IX. REVENUES FROM MARKET SALES, SEP ($/MWh) 0.67 0.74 0.31 0.43 0.98 0.94 0.95 0.92 76.74 77.54 76.85 77.61 84.03 87.73 91.44 92.87 6.25 6.94 9.67 9.92 7.16 10.55 12.99 13.78 Commodity Costs Reserves/CAISO Costs Non-bypassable Charges Operations & Scheduling Financing Expense Metering & Billing TOTAL 59.72 5.29 4.53 1.36 5.46 0.37 76.74 60.61 5.40 4.53 1.33 5.29 0.38 77.54 58.71 5.54 4.53 1.31 6.38 0.39 76.85 59.54 5.62 4.61 1.29 6.15 0.40 77.61 66.03 5.85 4.53 1.26 5.95 0.41 84.03 69.59 6.21 4.53 1.24 5.75 0.42 87.73 73.15 6.55 4.53 1.22 5.56 0.43 91.44 74.67 6.69 4.53 1.20 5.34 0.44 92.87 SDG&E Generation Rate 82.99 84.47 86.52 87.53 91.19 98.28 104.43 106.65 Breakeven Exit Fee 10.78 11.47 14.20 14.53 11.69 15.08 17.52 18.31 X. CCA REVENUE REQUIREMENT - NET MARKET SALES ($/MWh) VARIANCE SDG&E MINUS CCA ($/MWH) SDG&E CCA_Current_SD County_Jan 05 X Load Aggregation 3 6 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS LOAD AGGREGATION SUMMARY # [17] 2021 CATEGORY [18] 2022 [19] 2023 [20] 2024 I. SDG&E SDG&E'S UNBUNDLED GENERATION RATES ($/KWH) RESIDENTIAL (DR) $0.09355 $0.09447 $0.09340 $0.09819 SMALL COMMERCIAL (A) $0.12233 $0.12355 $0.12359 $0.12994 MEDIUM COMMERCIAL (AL-TOU) $0.12068 $0.12188 $0.12186 $0.12811 MEDIUM INDUSTRIAL (AL-TOU) $0.12068 $0.12188 $0.12186 $0.12811 LARGE INDUSTRIAL (AL-TOU) $0.12068 $0.12188 $0.12186 $0.12811 AGRICULTURAL PUMPING $0.12062 $0.12182 $0.12180 $0.12805 STREET LIGHTING AND TRAFFIC CONTROL $0.11166 $0.11277 $0.11240 $0.11817 $184,865,286 $190,421,017 $192,026,049 $205,914,747 $29,538,470 $30,429,740 $31,049,943 $33,295,697 $121,874,202 $125,550,885 $128,043,020 $137,304,008 $17,505,890 $18,034,005 $18,391,973 $19,722,212 $0 $0 $0 $0 $29,261,388 $30,144,136 $30,741,936 $32,965,413 II. SDG&E SDG&E'S REVENUE REQUIREMENT FOR POWER SUPPLY ($) RESIDENTIAL (DR) SMALL COMMERCIAL (A) MEDIUM COMMERCIAL (AL-TOU) MEDIUM INDUSTRIAL (AL-TOU) LARGE INDUSTRIAL (AL-TOU) AGRICULTURAL PUMPING STREET LIGHTING AND TRAFFIC CONTROL $1,642,813 $1,692,321 $1,720,531 $1,844,973 $384,688,049 $396,272,104 $401,973,453 $431,047,049 $0.1060 $0.1070 $0.1064 $0.1119 (A) ANCILLARY SERVICES AND RESERVES $18,954,710 $19,535,932 $20,616,126 $22,030,371 (B) RENEWABLE PORTFOLIO STANDARD (RPS) $28,011,603 $30,185,520 $33,498,459 $37,694,993 $0 $0 $0 $0 $108,105,788 $109,066,448 $112,872,914 $118,409,233 (E) CONTRACT PURCHASES $96,798,434 $96,798,434 $96,798,434 $96,798,434 (F) MARKET PURCHASES $49,297,211 $54,709,046 $62,451,631 $72,217,853 $301,167,746 $310,295,379 $326,237,564 $347,150,884 $6,114,617 TOTAL - POWER SUPPLY REVENUE REQUIREMENT AVERAGE RATE ($/KWH) III. OPERATING EXPENSES ($) 1. POWER SUPPLY COSTS: (C) DWR POWER (D) POWER PRODUCTION SUBTOTAL POWER SUPPLY COSTS 2. OTHER COSTS: (A) CALIFORNIA ISO COSTS (B) NON-BYPASSABLE CHARGES (C) START UP COSTS AMORTIZATION (D) OPERATIONS & SCHEDULING COORDINATION SUBTOTAL - OTHER COSTS SDG&E CCA_Current_SD County_Jan 05 X $5,327,208 $5,549,270 $5,815,589 $16,443,219 $16,772,084 $0 $0 $12,342 $13,021 $13,737 $14,493 $4,262,985 $4,270,245 $4,277,650 $4,285,203 $26,045,754 $26,604,620 $10,106,976 $10,414,312 Load Aggregation 3 7 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS LOAD AGGREGATION SUMMARY # [17] 2021 CATEGORY [18] 2022 [19] 2023 [20] 2024 3. UTILITY OPERATIONS: (A) DISTRIBUTION O&M $0 $0 $0 (B) CUSTOMER SERVICE $0 $0 $0 $0 $1,632,548 $1,706,829 $1,784,490 $1,865,684 (C) METERING & BILLING (D) ADMINISTRATIVE AND GENERAL SUBTOTAL - UTILITY OPERATIONS TOTAL OPERATING EXPENSES IV. INTEREST EXPENSE ($) (A) INTEREST EXPENSE ($) (B) DEBT COVERAGE (C) WORKING CAPITAL EXPENSE SUBTOTAL - FINANCING EXPENSE $0 $0 $0 $0 $0 $1,632,548 $1,706,829 $1,784,490 $1,865,684 $328,846,048 $338,606,828 $338,129,030 $359,430,880 $17,031,510 $0 $1,535,640 $18,567,150 $16,549,679 $0 $1,581,692 $18,131,371 $16,041,349 $0 $1,674,889 $17,716,238 $15,505,059 $0 $1,796,029 $17,301,089 $0 V. REVENUES FROM MARKET SALES ($) (A) EXCESS ENERGY SALES $308,802 $106,035 $0 (B) EXCESS ANCILLARY SERVICE SALES $0 $0 $0 $0 (C) SUPPLEMENTAL ENERGY PAYMENTS $3,082,488 $3,327,321 $3,697,911 $4,166,501 $3,391,290 $3,433,356 $3,697,911 $4,166,501 $344,021,908 $353,304,843 $352,147,357 $372,565,468 $40,666,142 $42,967,261 $49,826,096 $58,481,582 SUBTOTAL - OTHER REVENUES VI. REVENUE REQUIREMENT - NET MARKET SALES ($) VII. CCA OPERATIONAL MARGIN NET PRESENT VALUE OF OPERATIONAL MARGIN $129,572,445.84 NOMINAL MARGIN $480,374,159.63 DISCOUNT ON POWER SUPPLY REVENUE REQUIREMENTS 6% 11% 11% 12% 14% DISCOUNT ON TOTAL REVENUE REQUIREMENTS 3% 6% 6% 7% 8% $0 $0 $0 $0 $40,666,142 $42,967,261 $49,826,096 $58,481,582 DEBT COVERAGE FUND ADDITION NET VARIANCE NET VARIANCE (% OF GENERATION RATE) NET VARIANCE (% OF TOTAL RATE) SDG&E CCA_Current_SD County_Jan 05 X 11% 11% 12% 14% 6% 6% 7% 8% Load Aggregation 3 8 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS LOAD AGGREGATION SUMMARY # CATEGORY [17] 2021 [18] 2022 [19] 2023 [20] 2024 VIII. CCA POWER SUPPLY REVENUE REQUIREMENT ($/MWh) (A) MARKET PURCHASES 13.58 14.78 16.54 18.75 (B) CONTRACT PURCHASES 26.67 26.14 25.63 25.13 (C) POWER PRODUCTION 29.78 29.46 29.89 30.74 (D) RPS ENERGY 7.72 8.15 8.87 9.79 (E) DWR POWER - - - - (F) ANCILLARY SERVICES & DEMAND RESERVES 5.22 5.28 5.46 5.72 (G) CALIFORNIA ISO COSTS 1.47 1.50 1.54 1.59 (H) NON-BYPASSABLE CHARGES 4.53 4.53 - - (I) FINANCING EXPENSE 5.12 4.90 4.69 4.50 (J) OPERATIONS & SCHEDULING COORDINATION 1.17 1.15 1.13 1.11 (K) METERING & BILLING 0.45 0.46 0.47 0.48 SUBTOTAL - CCA REVENUE REQUIREMENT 95.71 96.35 94.23 97.80 IX. REVENUES FROM MARKET SALES, SEP ($/MWh) 0.93 0.93 0.98 1.08 X. CCA REVENUE REQUIREMENT - NET MARKET SALES ($/MWh) 94.78 95.42 93.25 96.72 VARIANCE SDG&E MINUS CCA ($/MWH) 11.20 11.61 13.19 15.18 Commodity Costs Reserves/CAISO Costs Non-bypassable Charges Operations & Scheduling Financing Expense Metering & Billing TOTAL 76.81 6.69 4.53 1.17 5.12 0.45 94.78 77.60 6.78 4.53 1.15 4.90 0.46 95.42 79.95 7.00 1.13 4.69 0.47 93.25 83.32 7.31 1.11 4.50 0.48 96.72 SDG&E Generation Rate 105.98 107.03 106.44 111.90 15.73 16.14 13.19 15.18 Breakeven Exit Fee SDG&E CCA_Current_SD County_Jan 05 X Load Aggregation 3 9 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS DEBT SERVICE # I. TOTAL DEBT ISSUANCES CATEGORY [1] 2005 [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 [9] 2013 [10] 2014 [11] 2015 [12] 2016 (A) STARTUP COSTS $0 $400,458 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 (B) GENERATION DEVELOPMENT $0 $0 $0 $0 $160,183,066 $0 $0 $140,238,141 $0 $0 $74,033,571 $0 SUBTOTAL - DEBT ISSUANCE $0 $400,458 $0 $0 $160,183,066 $0 $0 $140,238,141 $0 $0 $74,033,571 $0 II. TOTAL DEBT SERVICE CATEGORY [1] 2005 [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 [9] 2013 [10] 2014 [11] 2015 [12] 2016 (A) STARTUP COSTS $0 $27,554 $27,554 $27,554 $27,554 $27,554 $27,554 $27,554 $27,554 $27,554 $27,554 $27,554 (B) GENERATION DEVELOPMENT $0 $0 $0 $0 $11,021,458 $11,021,458 $11,021,458 $20,670,598 $20,670,598 $20,670,598 $25,764,507 $25,764,507 SUBTOTAL - FINANCING COSTS $0 $27,554 $27,554 $27,554 $11,049,012 $11,049,012 $11,049,012 $20,698,152 $20,698,152 $20,698,152 $25,792,061 $25,792,061 (D) DEBT COVERAGE ( 1.25 ) $0 $6,888 $0 $0 $2,755,365 $0 $0 $0 $0 $0 $0 $0 $0 $34,442 $27,554 $27,554 $13,804,377 $11,049,012 $11,049,012 $20,698,152 $20,698,152 $20,698,152 $25,792,061 $25,792,061 TOTAL DEBT SERVICE III. INTEREST PORTION OF DEBT SERVICE CATEGORY [1] 2005 [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 [9] 2013 [10] 2014 [11] 2015 [12] 2016 (A) STARTUP COSTS $0 $22,025 $21,721 $21,400 $21,062 $20,705 $20,328 $19,931 $19,511 $19,069 $18,603 $18,110 (B) GENERATION DEVELOPMENT $0 $0 $0 $0 $8,810,069 $8,688,442 $8,560,126 $16,137,851 $15,888,550 $15,625,537 $19,419,905 $19,070,952 SUBTOTAL - FINANCING COSTS $0 $22,025 $21,721 $21,400 $8,831,131 $8,709,147 $8,580,454 $16,157,782 $15,908,061 $15,644,606 $19,438,508 $19,089,062 $0 $22,025 $21,721 $21,400 $8,831,131 $8,709,147 $8,580,454 $16,157,782 $15,908,061 $15,644,606 $19,438,508 $19,089,062 TOTAL INTEREST SDG&E CCA_Current_SD County_Jan 05 X Debt Service 4 1 IV. PRINCIPAL PORTION OF DEBT SERVICE CATEGORY [1] 2005 [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 [9] 2013 [10] 2014 [11] 2015 [12] 2016 (A) STARTUP COSTS $0 $5,528 $5,833 $6,153 $6,492 $6,849 $7,225 $7,623 $8,042 $8,484 $8,951 $9,443 (B) GENERATION DEVELOPMENT $0 $0 $0 $0 $2,211,390 $2,333,016 $2,461,332 $4,532,747 $4,782,049 $5,045,061 $6,344,602 $6,693,555 SUBTOTAL - FINANCING COSTS $0 $5,528 $5,833 $6,153 $2,217,881 $2,339,865 $2,468,557 $4,540,370 $4,790,091 $5,053,546 $6,353,553 $6,702,998 $0 $5,528 $5,833 $6,153 $2,217,881 $2,339,865 $2,468,557 $4,540,370 $4,790,091 $5,053,546 $6,353,553 $6,702,998 TOTAL PRINCIPAL V. RESERVES [1] 2005 [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 [9] 2013 [10] 2014 [11] 2015 [12] 2016 CATEGORY DEBT COVERAGE RESERVE ($ B.O.Y.) $0 $0 $6,888 $6,888 $6,888 $2,762,253 $2,762,253 $2,762,253 $2,762,253 $2,762,253 $2,762,253 $2,762,253 DEBT SERVICE RESERVE ($) $0 $40,046 $40,046 $40,046 $16,058,352 $16,058,352 $16,058,352 $30,082,166 $30,082,166 $30,082,166 $37,485,524 $37,485,524 $0 $40,046 $46,934 $46,934 $16,065,241 $18,820,605 $18,820,605 $32,844,419 $32,844,419 $32,844,419 $40,247,777 $40,247,777 TOTAL DEBT SERVICE RESERVES SDG&E CCA_Current_SD County_Jan 05 X Debt Service 4 2 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS DEBT SERVICE # I. TOTAL DEBT ISSUANCES [13] 2017 CATEGORY [14] 2018 [15] 2019 [16] 2020 [17] 2021 [18] 2022 [19] 2023 [20] 2024 (A) STARTUP COSTS $0 $0 $0 $0 $0 $0 $0 $0 (B) GENERATION DEVELOPMENT $0 $0 $0 $0 $0 $0 $0 $0 SUBTOTAL - DEBT ISSUANCE $0 $0 $0 $0 $0 $0 $0 $0 II. TOTAL DEBT SERVICE [13] 2017 CATEGORY [14] 2018 [15] 2019 [16] 2020 [17] 2021 [18] 2022 [19] 2023 [20] 2024 $27,554 $27,554 $27,554 $27,554 $27,554 $27,554 $27,554 $27,554 (B) GENERATION DEVELOPMENT $25,764,507 $25,764,507 $25,764,507 $25,764,507 $25,764,507 $25,764,507 $25,764,507 $25,764,507 SUBTOTAL - FINANCING COSTS $25,792,061 $25,792,061 $25,792,061 $25,792,061 $25,792,061 $25,792,061 $25,792,061 $25,792,061 $0 $0 $0 $0 $0 $0 $0 $0 $25,792,061 $25,792,061 $25,792,061 $25,792,061 $25,792,061 $25,792,061 $25,792,061 $25,792,061 (A) STARTUP COSTS (D) DEBT COVERAGE ( 1.25 ) TOTAL DEBT SERVICE III. INTEREST PORTION OF DEBT SERVICE [13] 2017 CATEGORY (A) STARTUP COSTS [14] 2018 [15] 2019 [16] 2020 [17] 2021 [18] 2022 [19] 2023 [20] 2024 $17,591 $17,043 $16,465 $15,855 $15,211 $14,533 $13,816 $13,061 (B) GENERATION DEVELOPMENT $18,702,806 $18,314,413 $17,904,658 $17,472,366 $17,016,298 $16,535,147 $16,027,532 $15,491,998 SUBTOTAL - FINANCING COSTS $18,720,397 $18,331,456 $17,921,123 $17,488,221 $17,031,510 $16,549,679 $16,041,349 $15,505,059 $18,720,397 $18,331,456 $17,921,123 $17,488,221 $17,031,510 $16,549,679 $16,041,349 $15,505,059 TOTAL INTEREST SDG&E CCA_Current_SD County_Jan 05 X Debt Service 4 3 IV. PRINCIPAL PORTION OF DEBT SERVICE [13] 2017 CATEGORY (A) STARTUP COSTS [14] 2018 [15] 2019 [16] 2020 [17] 2021 [18] 2022 [19] 2023 [20] 2024 $9,963 $10,511 $11,089 $11,699 $12,342 $13,021 $13,737 $14,493 (B) GENERATION DEVELOPMENT $7,061,700 $7,450,094 $7,859,849 $8,292,141 $8,748,209 $9,229,360 $9,736,975 $10,272,509 SUBTOTAL - FINANCING COSTS $7,071,663 $7,460,605 $7,870,938 $8,303,840 $8,760,551 $9,242,381 $9,750,712 $10,287,001 $7,071,663 $7,460,605 $7,870,938 $8,303,840 $8,760,551 $9,242,381 $9,750,712 $10,287,001 TOTAL PRINCIPAL V. RESERVES [13] 2017 [14] 2018 [15] 2019 [16] 2020 [17] 2021 [18] 2022 [19] 2023 [20] 2024 CATEGORY DEBT COVERAGE RESERVE ($ B.O.Y.) DEBT SERVICE RESERVE ($) TOTAL DEBT SERVICE RESERVES $2,762,253 $2,762,253 $2,762,253 $2,762,253 $2,762,253 $2,762,253 $2,762,253 $2,762,253 $37,485,524 $37,485,524 $37,485,524 $37,485,524 $37,485,524 $37,485,524 $37,485,524 $37,485,524 $40,247,777 $40,247,777 $40,247,777 $40,247,777 $40,247,777 $40,247,777 $40,247,777 $40,247,777 SDG&E CCA_Current_SD County_Jan 05 X Debt Service 4 4 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS ANNUAL LOADS AND COMPOSITION OF RESOURCES [1] 2005 CATEGORY [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 [9] 2013 [10] 2014 [11] 2015 [12] 2016 [13] 2017 [14] 2018 SECTION I - PROJECTED MARKET PRICES: (A) MARKET ENERGY ($/MWH): AVERAGE ENERGY PRICE ON-PEAK ENERGY PRICE OFF-PEAK ENERGY PRICE REAL-TIME PREMIUM $48.74 $56.05 $41.43 $4.87 $45.95 $52.85 $39.06 $4.60 $47.08 $54.14 $40.02 $4.71 $47.93 $55.12 $40.74 $4.79 $52.67 $60.57 $44.77 $5.27 $56.16 $64.58 $47.73 $5.62 $60.39 $69.45 $51.33 $6.04 $62.18 $71.51 $52.85 $6.22 $63.39 $72.90 $53.88 $6.34 $64.42 $74.09 $54.76 $6.44 $66.11 $76.03 $56.20 $6.61 $66.64 $76.64 $56.65 $6.66 $70.15 $80.67 $59.63 $7.01 $76.31 $87.76 $64.87 $7.63 $76.58 $75.76 $75.20 $80.33 $91.37 $89.73 $67.49 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 7.1% $66.90 - 8.2% $67.57 26 26 9.3% $68.25 31 31 10.4% $68.93 35 35 11.4% $69.62 40 40 12.5% $70.31 44 44 13.6% $71.02 49 49 14.6% $71.73 17 54 15.7% $72.44 22 59 16.8% $73.17 27 65 17.9% $74.63 10 71 18.9% $75.23 17 76 20.0% $79.18 23 82 20.0% $86.14 26 84 $11.02 $6.87 $10.09 $32.22 $32.22 $10.39 $6.48 $9.51 $30.37 $30.37 $10.64 $6.64 $9.75 $31.12 $31.12 $10.83 $6.76 $9.92 $31.68 $31.68 $11.90 $7.43 $10.90 $34.81 $34.81 $12.69 $7.92 $11.62 $37.12 $37.12 $13.65 $8.51 $12.50 $39.92 $39.92 $14.05 $8.77 $12.87 $41.10 $41.10 $14.33 $8.94 $13.12 $41.90 $41.90 $14.56 $9.08 $13.34 $42.58 $42.58 $14.94 $9.32 $13.69 $43.70 $43.70 $15.06 $9.40 $13.80 $44.05 $44.05 $15.85 $9.89 $14.52 $46.37 $46.37 $17.25 $10.76 $15.80 $50.44 $50.44 AVERAGE NATURAL GAS PRICE $6.09 $5.57 $5.41 $5.33 $5.27 $5.35 $5.49 $5.65 $5.76 $5.86 $6.01 $6.06 $6.38 $6.94 REFEENCE GAS PRICE - HIGH REFEENCE GAS PRICE - MID REFEENCE GAS PRICE - LOW $7.62 $6.09 $4.57 $6.96 $5.57 $4.18 $6.76 $5.41 $4.06 $6.66 $5.33 $3.99 $6.58 $5.27 $3.95 $6.69 $5.35 $4.01 $6.86 $5.49 $4.12 $7.07 $5.65 $4.24 $7.20 $5.76 $4.32 $7.32 $5.86 $4.39 $7.51 $6.01 $4.51 $7.57 $6.06 $4.54 $7.97 $6.38 $4.78 $8.67 $6.94 $5.20 (F) EMISSIONS CREDIT PRICE ($/LB): $10.00 $10.25 $10.51 $10.77 $11.04 $11.31 $11.60 $11.89 $12.18 $12.49 $12.80 $13.12 $13.45 $13.79 $100,000 $102,500 $105,063 $107,689 $110,381 $113,141 $115,969 $118,869 $121,840 $124,886 $128,008 $131,209 $134,489 $137,851 (B) CDWR CONTRACT ENERGY ($/MWH): AVERAGE CDWR CONTRACT PRICE (C) RENEWABLE PORTFOLIO STANDARD (RPS): RPS REQUIREMENTS (%) RPS ENERGY PRICE ($/MWH) RPS CONTRACT CAPACITY (MW) TOTAL RENEWABLE CAPACITY (MW) (D) ANCILLARY SERVICE PRICES ($/MWH): SPINNING RESERVE NON-SPINNING RESERVE REPLACEMENT RESERVE REGULATION - UP REGULATION - DOWN (E) NATURAL GAS PRICE ($/MMBtu): (G) CAPACITY ($/MW): SDG&E CCA_Current_SD County_Jan 05 X Annual Summary 13 1 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS ANNUAL LOADS AND COMPOSITION OF RESOU [15] 2019 CATEGORY [16] 2020 [17] 2021 [18] 2022 [19] 2023 [20] 2024 SECTION I - PROJECTED MARKET PRICES: (A) MARKET ENERGY ($/MWH): AVERAGE ENERGY PRICE ON-PEAK ENERGY PRICE OFF-PEAK ENERGY PRICE REAL-TIME PREMIUM $82.18 $94.50 $69.85 $8.22 $83.79 $96.36 $71.22 $8.38 $82.30 $94.65 $69.96 $8.23 $82.65 $95.05 $70.25 $8.27 $85.86 $98.74 $72.98 $8.59 $90.79 $104.41 $77.17 $9.08 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 20.0% $92.76 28 85 20.0% $94.57 31 87 20.0% $92.90 33 89 20.0% $93.29 36 90 20.0% $96.91 38 92 20.0% $102.48 41 94 $18.57 $11.59 $17.01 $54.32 $54.32 $18.94 $11.81 $17.34 $55.38 $55.38 $18.60 $11.60 $17.04 $54.40 $54.40 $18.68 $11.65 $17.11 $54.63 $54.63 $19.40 $12.11 $17.77 $56.75 $56.75 $20.52 $12.80 $18.79 $60.01 $60.01 AVERAGE NATURAL GAS PRICE $7.47 $7.62 $7.48 $7.51 $7.81 $8.25 REFEENCE GAS PRICE - HIGH REFEENCE GAS PRICE - MID REFEENCE GAS PRICE - LOW $9.34 $7.47 $5.60 $9.52 $7.62 $5.71 $9.35 $7.48 $5.61 $9.39 $7.51 $5.64 $9.76 $7.81 $5.85 $10.32 $8.25 $6.19 (F) EMISSIONS CREDIT PRICE ($/LB): $14.13 $14.48 $14.85 $15.22 $15.60 $15.99 $141,297 $144,830 $148,451 $152,162 $155,966 $159,865 (B) CDWR CONTRACT ENERGY ($/MWH): AVERAGE CDWR CONTRACT PRICE (C) RENEWABLE PORTFOLIO STANDARD (RP RPS REQUIREMENTS (%) RPS ENERGY PRICE ($/MWH) RPS CONTRACT CAPACITY (MW) TOTAL RENEWABLE CAPACITY (MW) (D) ANCILLARY SERVICE PRICES ($/MWH): SPINNING RESERVE NON-SPINNING RESERVE REPLACEMENT RESERVE REGULATION - UP REGULATION - DOWN (E) NATURAL GAS PRICE ($/MMBtu): (G) CAPACITY ($/MW): SDG&E CCA_Current_SD County_Jan 05 X Annual Summary 13 2 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS ANNUAL LOADS AND COMPOSITION OF RESOURCES [1] 2005 CATEGORY [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 [9] 2013 [10] 2014 [11] 2015 [12] 2016 [13] 2017 [14] 2018 SECTION II - PROJECTED LOADS AND ANCILLARY SERVICES: (A) PROJECTED LOADS (KWH): PROJECTED LOADS INCLUDING LOSSES ON-PEAK OFF-PEAK 0 0 1,745,858,843 1,054,842,081 1,799,707,778 1,087,377,428 1,850,610,304 1,118,132,564 1,898,608,138 1,147,132,696 1,943,763,710 1,174,415,541 1,986,156,189 1,200,028,935 2,025,877,911 1,224,028,667 2,066,395,469 1,248,509,241 2,107,723,379 1,273,479,425 2,149,877,846 1,298,949,014 2,192,875,403 1,324,927,994 2,236,732,911 1,351,426,554 2,281,467,570 1,378,455,085 TOTAL 0 2,800,700,924 2,887,085,207 2,968,742,868 3,045,740,834 3,118,179,251 3,186,185,124 3,249,906,578 3,314,904,710 3,381,202,804 3,448,826,860 3,517,803,397 3,588,159,465 3,659,922,655 ON-PEAK OFF-PEAK 0 0 1,631,643,778 985,833,721 1,681,969,886 1,016,240,587 1,729,542,340 1,044,983,705 1,774,400,129 1,072,086,631 1,816,601,598 1,097,584,618 1,856,220,737 1,121,522,369 1,893,343,842 1,143,952,025 1,931,210,719 1,166,831,066 1,969,834,933 1,190,167,687 2,009,231,632 1,213,971,041 2,049,416,265 1,238,250,462 2,090,404,590 1,263,015,471 2,132,212,682 1,288,275,780 TOTAL 0 2,617,477,499 2,698,210,474 2,774,526,045 2,846,486,761 2,914,186,216 2,977,743,106 3,037,295,868 3,098,041,785 3,160,002,621 3,223,202,673 3,287,666,727 3,353,420,061 3,420,488,462 SPINNING RESERVE NON-SPINNING RESERVE REPLACEMENT RESERVE REGULATION - UP REGULATION - DOWN 0 0 0 0 0 92,135,208 65,436,937 31,933,225 58,893,244 58,893,244 94,977,009 67,455,262 32,918,168 60,709,736 60,709,736 97,663,317 69,363,151 33,849,218 62,426,836 62,426,836 100,196,334 71,162,169 34,727,138 64,045,952 64,045,952 102,579,355 72,854,655 35,553,072 65,569,190 65,569,190 104,816,557 74,443,578 36,328,466 66,999,220 66,999,220 106,912,815 75,932,397 37,055,010 68,339,157 68,339,157 109,051,071 77,451,045 37,796,110 69,705,940 69,705,940 111,232,092 79,000,066 38,552,032 71,100,059 71,100,059 113,456,734 80,580,067 39,323,073 72,522,060 72,522,060 115,725,869 82,191,668 40,109,534 73,972,501 73,972,501 118,040,386 83,835,502 40,911,725 75,451,951 75,451,951 120,401,194 85,512,212 41,729,959 76,960,990 76,960,990 TOTAL - ANCILLARY SERVICES REQ. 0 307,291,858 316,769,910 325,729,358 334,177,546 342,125,462 349,587,041 356,578,535 363,710,106 370,984,308 378,403,994 385,972,074 393,691,515 401,565,345 SPINNING RESERVE NON-SPINNING RESERVE REPLACEMENT RESERVE REGULATION - UP REGULATION - DOWN $0 $0 $0 $0 $0 $971,337 $430,405 $308,353 $1,815,945 $1,815,945 $1,025,815 $454,545 $325,648 $1,917,793 $1,917,793 $1,073,887 $475,846 $340,908 $2,007,665 $2,007,665 $1,210,661 $536,452 $384,328 $2,263,370 $2,263,370 $1,321,600 $585,610 $419,546 $2,470,774 $2,470,774 $1,452,194 $643,477 $461,003 $2,714,924 $2,714,924 $1,525,210 $675,831 $484,182 $2,851,430 $2,851,430 $1,586,009 $702,771 $503,483 $2,965,094 $2,965,094 $1,644,010 $728,471 $521,895 $3,073,529 $3,073,529 $1,720,899 $762,541 $546,304 $3,217,276 $3,217,276 $1,769,420 $784,041 $561,707 $3,307,986 $3,307,986 $1,899,672 $841,757 $603,056 $3,551,497 $3,551,497 $2,107,941 $934,042 $669,172 $3,940,863 $3,940,863 TOTAL - ANCILLARY SERVICES COSTS $0 $5,341,985 $5,641,594 $5,905,971 $6,658,181 $7,268,304 $7,986,521 $8,388,083 $8,722,449 $9,041,435 $9,464,296 $9,731,141 $10,447,478 $11,592,880 PLANNING RESERVES REQUIREMENTS (K $0 $27,622 $28,474 $29,279 $30,038 $30,753 $31,423 $32,052 $32,693 $33,347 $34,014 $34,694 $35,388 $36,096 PLANNING RESERVES COSTS ($) $0 $2,831,221 $2,991,510 $3,153,025 $3,315,672 $3,479,394 $3,644,160 $3,809,966 $3,983,320 $4,164,561 $4,354,048 $4,552,157 $4,759,281 $4,975,828 PROJECTED LOADS EXCLUDING LOSSES (B) ANCILLARY SERVICES: ANCILLARY SERVICE REQUIREMENTS (KWH): ANCILLARY SERVICE COSTS ($) (C) PLANNING RESERVES: SDG&E CCA_Current_SD County_Jan 05 X Annual Summary 13 3 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS ANNUAL LOADS AND COMPOSITION OF RESOU [15] 2019 [16] 2020 [17] 2021 [18] 2022 [19] 2023 [20] 2024 ON-PEAK OFF-PEAK 2,327,096,921 1,406,024,187 2,373,638,859 1,434,144,671 2,421,111,637 1,462,827,564 2,469,533,869 1,492,084,115 2,518,924,547 1,521,925,798 2,569,303,038 1,552,364,313 TOTAL 3,733,121,108 3,807,783,530 3,883,939,201 3,961,617,985 4,040,850,344 4,121,667,351 ON-PEAK OFF-PEAK 2,174,856,936 1,314,041,296 2,218,354,074 1,340,322,122 2,262,721,156 1,367,128,564 2,307,975,579 1,394,471,136 2,354,135,090 1,422,360,558 2,401,217,792 1,450,807,770 TOTAL 3,488,898,232 3,558,676,196 3,629,849,720 3,702,446,715 3,776,495,649 3,852,025,562 SPINNING RESERVE NON-SPINNING RESERVE REPLACEMENT RESERVE REGULATION - UP REGULATION - DOWN 122,809,218 87,222,456 42,564,558 78,500,210 78,500,210 125,265,402 88,966,905 43,415,850 80,070,214 80,070,214 127,770,710 90,746,243 44,284,167 81,671,619 81,671,619 130,326,124 92,561,168 45,169,850 83,305,051 83,305,051 132,932,647 94,412,391 46,073,247 84,971,152 84,971,152 135,591,300 96,300,639 46,994,712 86,670,575 86,670,575 TOTAL - ANCILLARY SERVICES REQ. 409,596,652 417,788,585 426,144,357 434,667,244 443,360,589 452,227,801 $2,315,375 $1,025,958 $735,022 $4,328,668 $4,328,668 $2,407,922 $1,066,966 $764,401 $4,501,687 $4,501,687 $2,412,585 $1,069,032 $765,882 $4,510,405 $4,510,405 $2,471,224 $1,095,015 $784,497 $4,620,032 $4,620,032 $2,618,451 $1,160,252 $831,234 $4,895,277 $4,895,277 $2,824,180 $1,251,412 $896,544 $5,279,894 $5,279,894 $12,733,691 $13,242,663 $13,268,310 $13,590,800 $14,400,490 $15,531,924 $36,818 $37,554 $38,305 $39,071 $39,853 $40,650 $5,202,228 $5,438,929 $5,686,401 $5,945,132 $6,215,635 $6,498,447 CATEGORY SECTION II - PROJECTED LOADS AND ANCILLAR (A) PROJECTED LOADS (KWH): PROJECTED LOADS INCLUDING LOSSES PROJECTED LOADS EXCLUDING LOSSES (B) ANCILLARY SERVICES: ANCILLARY SERVICE REQUIREMENTS (K ANCILLARY SERVICE COSTS ($) SPINNING RESERVE NON-SPINNING RESERVE REPLACEMENT RESERVE REGULATION - UP REGULATION - DOWN TOTAL - ANCILLARY SERVICES COSTS (C) PLANNING RESERVES: PLANNING RESERVES REQUIREMENTS (K PLANNING RESERVES COSTS ($) SDG&E CCA_Current_SD County_Jan 05 X Annual Summary 13 4 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS ANNUAL LOADS AND COMPOSITION OF RESOURCES [1] 2005 CATEGORY [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 [9] 2013 [10] 2014 [11] 2015 [12] 2016 [13] 2017 [14] 2018 SECTION III - PROJECTED RESOURCES: (A) RENEWABLE PORTFOLIO STANDARD (KWH): ON-PEAK OFF-PEAK 0 0 143,409,833 86,647,742 167,115,722 100,970,761 191,670,353 115,806,587 216,983,787 131,100,879 242,970,464 146,801,943 269,549,768 162,861,070 105,776,904 40,445,953 133,849,784 57,407,493 162,926,920 74,975,802 77,471,734 12,899,633 113,267,584 31,333,289 149,971,895 54,055,451 163,179,034 62,558,879 TOTAL 0 230,057,576 268,086,483 307,476,940 348,084,667 389,772,406 432,410,838 146,222,858 191,257,277 237,902,722 90,371,367 144,600,873 204,027,347 225,737,913 ON-PEAK OFF-PEAK 0 0 9,846,305 5,933,915 11,588,655 6,983,950 13,424,312 8,090,216 15,349,200 9,250,257 17,359,344 10,461,679 19,450,921 11,722,176 7,893,217 3,056,535 10,038,628 4,332,472 12,300,822 5,678,619 6,181,817 1,131,009 8,962,963 2,581,739 12,382,409 4,537,908 14,621,567 5,675,935 TOTAL 0 15,780,220 18,572,604 21,514,527 24,599,457 27,821,023 31,173,097 10,949,752 14,371,100 17,979,440 7,312,826 11,544,702 16,920,317 20,297,502 ON-PEAK OFF-PEAK 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ON-PEAK OFF-PEAK 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ON-PEAK OFF-PEAK 0 0 1,602,449,009 968,194,339 1,632,592,056 986,406,667 1,658,939,951 1,002,325,977 1,681,624,351 1,016,031,816 1,700,793,246 1,027,613,598 1,716,606,420 1,037,167,865 1,920,101,007 1,183,582,714 1,932,545,685 1,191,101,747 1,944,796,459 1,198,503,624 2,072,406,112 1,286,049,381 2,079,607,819 1,293,594,705 2,086,761,016 1,297,371,103 2,118,288,536 1,315,896,206 TOTAL 0 2,570,643,348 2,618,998,723 2,661,265,928 2,697,656,167 2,728,406,845 2,753,774,285 3,103,683,721 3,123,647,433 3,143,300,082 3,358,455,493 3,373,202,525 3,384,132,119 3,434,184,741 ON-PEAK OFF-PEAK 0 0 0 0 0 0 0 0 894,700,800 650,563,200 894,700,800 650,563,200 894,700,800 650,563,200 1,085,570,304 789,350,016 1,085,570,304 789,350,016 1,085,570,304 789,350,016 1,201,135,824 873,381,096 1,196,513,203 870,019,853 1,192,075,487 866,793,059 1,187,815,280 863,695,338 TOTAL 0 0 0 0 1,545,264,000 1,545,264,000 1,545,264,000 1,874,920,320 1,874,920,320 1,874,920,320 2,074,516,920 2,066,533,056 2,058,868,547 2,051,510,617 ON-PEAK OFF-PEAK 0 0 0 0 0 0 0 0 37,936,744 27,584,920 38,543,128 28,025,839 39,529,761 28,743,249 46,876,687 34,085,414 47,803,096 34,759,033 48,636,711 35,365,180 51,594,947 37,516,200 52,153,363 37,922,241 54,419,223 39,569,814 58,216,403 42,330,854 TOTAL 0 0 0 0 65,521,664 66,568,967 68,273,010 80,962,101 82,562,129 84,001,891 89,111,147 90,075,604 93,989,037 100,547,257 ON-PEAK OFF-PEAK 0 0 1,602,449,009 968,194,339 1,632,592,056 986,406,667 1,658,939,951 1,002,325,977 786,923,551 365,468,616 806,092,446 377,050,398 821,905,620 386,604,665 834,530,703 394,232,698 846,975,381 401,751,731 859,226,155 409,153,608 871,270,288 412,668,285 883,094,616 423,574,852 894,685,529 430,578,043 930,473,256 452,200,868 TOTAL 0 2,570,643,348 2,618,998,723 2,661,265,928 1,152,392,167 1,183,142,845 1,208,510,285 1,228,763,401 1,248,727,113 1,268,379,762 1,283,938,573 1,306,669,469 1,325,263,572 1,382,674,124 COSTS ($): (B) CDWR CONTRACT ENERGY (KWH): COSTS ($): BALANCE (KWH): (C) POWER PRODUCTION (KWH): COSTS ($): BALANCE (KWH): SDG&E CCA_Current_SD County_Jan 05 X Annual Summary 13 5 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS ANNUAL LOADS AND COMPOSITION OF RESOU [15] 2019 CATEGORY [16] 2020 [17] 2021 [18] 2022 [19] 2023 [20] 2024 SECTION III - PROJECTED RESOURCES: (A) RENEWABLE PORTFOLIO STANDARD (KW ON-PEAK OFF-PEAK 176,394,703 71,046,513 189,629,298 79,525,470 202,893,012 88,002,714 216,195,851 96,485,064 229,547,644 104,979,198 242,958,052 113,491,667 TOTAL 247,441,216 269,154,768 290,895,727 312,680,915 334,526,842 356,449,719 ON-PEAK OFF-PEAK 16,986,035 6,906,963 18,585,444 7,851,778 19,503,663 8,507,940 20,842,500 9,343,021 22,961,472 10,536,987 25,671,744 12,023,249 TOTAL 23,892,997 26,437,222 28,011,603 30,185,520 33,498,459 37,694,993 $106 ON-PEAK OFF-PEAK 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL 0 0 0 0 0 0 ON-PEAK OFF-PEAK 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL 0 0 0 0 0 0 ON-PEAK OFF-PEAK 2,150,702,218 1,334,977,674 2,184,009,561 1,354,619,201 2,218,218,624 1,374,824,850 2,253,338,018 1,395,599,051 2,289,376,903 1,416,946,599 2,326,344,985 1,438,872,646 TOTAL 3,485,679,892 3,538,628,762 3,593,043,474 3,648,937,069 3,706,323,503 3,765,217,632 ON-PEAK OFF-PEAK 1,183,725,481 860,721,525 1,179,799,274 857,866,664 1,176,030,115 855,125,998 1,172,411,723 852,494,959 1,168,938,066 849,969,161 1,165,603,355 847,544,396 TOTAL 2,044,447,006 2,037,665,938 2,031,156,113 2,024,906,682 2,018,907,227 2,013,147,751 61,860,399 44,980,511 63,097,977 45,880,390 62,592,757 45,513,030 63,148,975 45,917,472 65,352,902 47,520,012 68,558,405 49,850,828 106,840,911 108,978,367 108,105,788 109,066,448 112,872,914 118,409,233 966,976,737 474,256,149 1,004,210,288 496,752,536 1,042,188,509 519,698,851 1,080,926,295 543,104,092 1,120,438,837 566,977,438 1,160,741,630 591,328,251 1,441,232,886 1,500,962,824 1,561,887,360 1,624,030,388 1,687,416,275 1,752,069,881 COSTS ($): (B) CDWR CONTRACT ENERGY (KWH): COSTS ($): BALANCE (KWH): (C) POWER PRODUCTION (KWH): COSTS ($): ON-PEAK OFF-PEAK TOTAL BALANCE (KWH): ON-PEAK OFF-PEAK TOTAL SDG&E CCA_Current_SD County_Jan 05 X Annual Summary 13 6 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS ANNUAL LOADS AND COMPOSITION OF RESOURCES [1] 2005 CATEGORY [2] 2006 [3] 2007 [4] 2008 [5] 2009 [6] 2010 [7] 2011 [8] 2012 [9] 2013 [10] 2014 [11] 2015 [12] 2016 [13] 2017 [14] 2018 (D) LONG-TERM CONTRACT PURCHASES (KWH): ON-PEAK OFF-PEAK 0 0 1,521,600,000 737,600,000 1,521,600,000 737,600,000 1,521,600,000 737,600,000 659,360,000 110,640,000 659,360,000 110,640,000 659,360,000 110,640,000 659,360,000 110,640,000 684,720,000 129,080,000 684,720,000 129,080,000 684,720,000 129,080,000 684,720,000 129,080,000 811,520,000 129,080,000 811,520,000 129,080,000 TOTAL 0 2,259,200,000 2,259,200,000 2,259,200,000 770,000,000 770,000,000 770,000,000 770,000,000 813,800,000 813,800,000 813,800,000 813,800,000 940,600,000 940,600,000 ON-PEAK OFF-PEAK 0 0 115,212,286 0 115,212,286 0 115,212,286 0 51,391,999 0 51,391,999 0 51,391,999 0 51,391,999 0 60,868,420 0 60,868,420 0 60,868,420 0 60,868,420 0 84,939,331 0 84,939,331 0 TOTAL 0 115,212,286 115,212,286 115,212,286 51,391,999 51,391,999 51,391,999 51,391,999 60,868,420 60,868,420 60,868,420 60,868,420 84,939,331 84,939,331 ON-PEAK OFF-PEAK 0 0 80,849,009 230,594,339 110,992,056 248,806,667 137,339,951 264,725,977 127,563,551 254,828,616 146,732,446 266,410,398 162,545,620 275,964,665 175,170,703 283,592,698 162,255,381 272,671,731 174,506,155 280,073,608 186,550,288 283,588,285 198,374,616 294,494,852 83,165,529 301,498,043 118,953,256 323,120,868 TOTAL 0 311,443,348 359,798,723 402,065,928 382,392,167 413,142,845 438,510,285 458,763,401 434,927,113 454,579,762 470,138,573 492,869,469 384,663,572 442,074,124 ON-PEAK OFF-PEAK 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ON-PEAK OFF-PEAK 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ON-PEAK OFF-PEAK 0 0 80,849,009 230,594,339 110,992,056 248,806,667 137,339,951 264,725,977 127,563,551 254,828,616 146,732,446 266,410,398 162,545,620 275,964,665 175,170,703 283,592,698 162,255,381 272,671,731 174,506,155 280,073,608 186,550,288 283,588,285 198,374,616 294,494,852 83,165,529 301,498,043 118,953,256 323,120,868 TOTAL 0 311,443,348 359,798,723 402,065,928 382,392,167 413,142,845 438,510,285 458,763,401 434,927,113 454,579,762 470,138,573 492,869,469 384,663,572 442,074,124 COSTS ($): BALANCE (KWH): (E) SHORT-TERM CONTRACT PURCHASES (KWH): COSTS ($): BALANCE (KWH): SDG&E CCA_Current_SD County_Jan 05 X Annual Summary 13 7 COUNTY OF SAN DIEGO FINANCIAL PRO FORMA ANALYSIS ANNUAL LOADS AND COMPOSITION OF RESOU [15] 2019 CATEGORY [16] 2020 [17] 2021 [18] 2022 [19] 2023 [20] 2024 (D) LONG-TERM CONTRACT PURCHASES (KW ON-PEAK OFF-PEAK 811,520,000 129,080,000 811,520,000 129,080,000 836,880,000 147,520,000 836,880,000 147,520,000 836,880,000 147,520,000 836,880,000 147,520,000 TOTAL 940,600,000 940,600,000 984,400,000 984,400,000 984,400,000 984,400,000 ON-PEAK OFF-PEAK 84,939,331 0 84,939,331 0 96,798,434 0 96,798,434 0 96,798,434 0 96,798,434 0 TOTAL 84,939,331 84,939,331 96,798,434 96,798,434 96,798,434 96,798,434 ON-PEAK OFF-PEAK 155,456,737 345,176,149 192,690,288 367,672,536 205,308,509 372,178,851 244,046,295 395,584,092 283,558,837 419,457,438 323,861,630 443,808,251 TOTAL 500,632,886 560,362,824 577,487,360 639,630,388 703,016,275 767,669,881 ON-PEAK OFF-PEAK 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL 0 0 0 0 0 0 ON-PEAK OFF-PEAK 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL 0 0 0 0 0 0 ON-PEAK OFF-PEAK 155,456,737 345,176,149 192,690,288 367,672,536 205,308,509 372,178,851 244,046,295 395,584,092 283,558,837 419,457,438 323,861,630 443,808,251 TOTAL 500,632,886 560,362,824 577,487,360 639,630,388 703,016,275 767,669,881 COSTS ($): BALANCE (KWH): (E) SHORT-TERM CONTRACT PURCHASES (KW COSTS ($): BALANCE (KWH): SDG&E CCA_Current_SD County_Jan 05 X Annual Summary 13 8 140 AppendixȱFȱ––ȱProȱFormaȱSummaryȱWithȱAlternativeȱSupplyȱPortfoliosȱ ȱ AlternativeȱScenarioȱ1ȱ ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Ancillary Services Commodity and ISO Costs Charges 144.4 10.7 149.2 11.3 153.9 11.9 161.5 13.0 200.7 13.9 208.3 15.0 214.0 15.7 219.3 16.4 224.7 17.1 260.3 17.8 265.5 18.5 274.3 19.6 287.0 21.2 300.4 22.9 344.6 23.8 349.5 24.3 356.6 25.1 367.8 26.4 382.0 28.1 4,864.0 352.9 Operations & Scheduling 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.3 4.3 4.3 4.3 4.3 80.2 Nonbypassable Charges 50.5 47.8 45.0 41.6 34.8 13.5 13.8 14.0 14.3 14.6 15.2 15.2 15.5 15.8 16.1 16.4 16.8 400.8 Metering Financing & Billing Costs 0.8 0.7 0.9 0.7 0.9 0.7 1.0 0.8 1.0 0.9 1.0 0.9 1.1 1.0 1.1 1.0 1.2 1.1 1.3 1.1 1.3 1.2 1.4 1.2 1.4 1.4 1.5 1.5 1.6 1.6 1.6 1.6 1.7 1.6 1.8 1.7 1.9 1.8 24.4 22.5 Total Costs 211.3 214.0 216.6 222.0 255.5 243.0 249.7 256.1 262.6 299.3 305.9 316.0 330.8 346.3 391.9 397.7 406.1 402.0 418.1 5,744.9 SDG&E Charges 198.6 204.7 209.6 227.6 237.9 232.6 247.2 257.1 266.9 278.9 287.8 305.8 336.2 364.3 379.5 384.7 396.3 402.0 431.0 5,648.6 Savings 0.0 (12.7) (9.4) (7.0) 5.5 (17.6) (10.4) (2.5) 1.0 4.3 (20.5) (18.1) (10.2) 5.4 18.1 (12.3) (13.0) (9.8) 0.0 12.9 (96.3) Percentage Of Total Bill 0% -3% -2% -2% 1% -4% -2% -1% 0% 1% -4% -3% -2% 1% 3% -2% -2% -1% 0% 2% -1% ȱ ȱ AlternativeȱScenarioȱ2ȱ ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total ȱ Commodity Costs 148.0 153.8 159.3 167.6 203.0 211.0 217.2 223.0 228.9 258.0 264.0 275.9 293.8 312.0 347.5 351.3 358.8 372.8 391.5 4,937.5 Ancillary Services and ISO Charges 10.7 11.3 11.9 13.0 13.9 15.0 15.7 16.4 17.1 17.8 18.5 19.6 21.2 22.9 23.8 24.3 25.1 26.4 28.1 352.9 Operations & Scheduling 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.3 4.3 4.3 4.3 4.3 80.2 Nonbypassable Charges 50.5 47.8 45.0 41.6 34.8 13.5 13.8 14.0 14.3 14.6 15.2 15.2 15.5 15.8 16.1 16.4 16.8 400.8 Metering Financing & Billing Costs 0.8 0.7 0.9 0.7 0.9 0.7 1.0 0.8 1.0 0.9 1.0 0.9 1.1 1.0 1.1 1.0 1.2 1.1 1.3 1.1 1.3 1.2 1.4 1.2 1.4 1.4 1.5 1.5 1.6 1.5 1.6 1.6 1.7 1.6 1.8 1.7 1.9 1.8 24.4 22.4 Total Costs 214.8 218.6 222.0 228.1 257.7 245.7 252.9 259.8 266.8 297.1 304.4 317.6 337.5 357.9 394.8 399.5 408.3 407.0 427.6 5,818.2 SDG&E Charges 198.6 204.7 209.6 227.6 237.9 232.6 247.2 257.1 266.9 278.9 287.8 305.8 336.2 364.3 379.5 384.7 396.3 402.0 431.0 5,648.6 Savings 0.0 (16.3) (13.9) (12.5) (0.6) (19.8) (13.1) (5.7) (2.7) 0.1 (18.2) (16.6) (11.8) (1.3) 6.4 (15.3) (14.8) (12.0) (5.1) 3.4 (169.7) Percentage Of Total Bill 0% -4% -3% -3% 0% -4% -3% -1% -1% 0% -3% -3% -2% 0% 1% -2% -2% -2% -1% 0% -2% 141 ȱ AlternativeȱScenarioȱ3ȱ ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Ancillary Services Commodity and ISO Costs Charges 144.0 10.7 149.8 11.3 117.2 11.9 123.9 13.0 138.3 13.9 147.2 15.0 155.1 15.7 162.5 16.4 169.6 17.1 186.0 17.8 192.9 18.5 204.5 19.6 221.4 21.2 238.9 22.9 260.6 23.8 266.6 24.3 275.8 25.1 290.7 26.4 309.8 28.1 3,754.9 352.9 Operations & Scheduling 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.3 4.3 4.3 4.3 4.3 80.2 Nonbypassable Charges 50.5 47.8 45.0 41.6 34.8 13.5 13.8 14.0 14.3 14.6 15.2 15.2 15.5 15.8 16.1 16.4 16.8 400.8 Metering Financing & Billing Costs 0.8 0.7 0.9 0.7 0.9 42.2 1.0 32.0 1.0 31.6 1.0 31.2 1.1 30.7 1.1 30.2 1.2 29.7 1.3 29.2 1.3 28.6 1.4 28.0 1.4 27.4 1.5 26.7 1.6 26.0 1.6 25.2 1.7 24.4 1.8 23.5 1.9 22.7 24.4 490.7 Total Costs 210.9 214.6 221.4 215.6 223.8 212.2 220.6 228.5 236.1 253.1 260.6 272.9 291.1 310.0 332.4 338.5 348.1 346.8 366.8 5,103.9 SDG&E Charges 198.6 204.7 209.6 227.6 237.9 232.6 247.2 257.1 266.9 278.9 287.8 305.8 336.2 364.3 379.5 384.7 396.3 402.0 431.0 5,648.6 Savings 0.0 (12.4) (9.9) (11.9) 11.9 14.1 20.5 26.6 28.6 30.8 25.8 27.2 32.9 45.0 54.3 47.2 46.2 48.2 55.2 64.2 544.6 Percentage Of Total Bill 0% -3% -2% -3% 3% 3% 5% 6% 6% 6% 5% 5% 6% 7% 8% 7% 7% 7% 8% 8% 5% Total Costs 206.6 209.4 217.2 213.9 220.9 208.1 216.5 224.2 231.7 248.8 256.2 268.8 287.8 307.4 329.6 334.9 344.2 343.0 363.4 5,032.7 SDG&E Charges 198.6 204.7 209.6 227.6 237.9 232.6 247.2 257.1 266.9 278.9 287.8 305.8 336.2 364.3 379.5 384.7 396.3 402.0 431.0 5,648.6 Savings 0.0 (8.1) (4.7) (7.6) 13.6 17.0 24.5 30.7 32.9 35.2 30.0 31.6 37.0 48.3 56.9 49.9 49.7 52.1 59.0 67.6 615.8 Percentage Of Total Bill 0% -2% -1% -2% 3% 4% 6% 7% 7% 7% 6% 6% 6% 8% 9% 7% 7% 7% 8% 9% 6% ȱ AlternativeȱScenarioȱ4ȱ ȱ Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total ȱ Ancillary Services NonCommodity and ISO Operations & bypassable Costs Charges Scheduling Charges 139.8 10.7 4.2 50.5 144.6 11.3 4.2 47.8 122.9 11.9 4.2 45.0 129.6 13.0 4.2 41.6 142.8 13.9 4.2 34.8 150.4 15.0 4.2 13.5 158.0 15.7 4.2 13.8 165.1 16.4 4.2 14.0 172.0 17.1 4.2 14.3 188.4 17.8 4.2 14.6 195.0 18.5 4.2 15.2 206.8 19.6 4.2 15.2 224.3 21.2 4.2 15.5 242.3 22.9 4.2 15.8 263.7 23.8 4.3 16.1 268.8 24.3 4.3 16.4 277.4 25.1 4.3 16.8 292.2 26.4 4.3 311.4 28.1 4.3 3,795.4 352.9 80.2 400.8 Metering & Billing 0.8 0.9 0.9 1.0 1.0 1.0 1.1 1.1 1.2 1.3 1.3 1.4 1.4 1.5 1.6 1.6 1.7 1.8 1.9 24.4 Financing Costs 0.7 0.7 32.3 24.5 24.3 24.0 23.6 23.3 22.9 22.5 22.0 21.6 21.2 20.7 20.2 19.6 18.9 18.3 17.7 379.0 142 ȱ Appendix Electric Customers and Load Analysis 143 144 San Diego County CCA Electric Demand and Energy Consumption Peak Day Electric Load 500 450 400 350 300 250 200 150 100 50 0 1 2 3 4 5 6 Street Lights 7 8 9 Agriculture 10 11 Large C-I 12 13 14 Medium C-I 15 16 17 18 Small Commercial 19 20 21 22 23 24 Residential Annual Energy Consumption 0% 4% 7% 28% 54% 7% 145 145 CCA Load Characteristics Compared to SDG&E System-Wide Annual Load Duration Curve % of Peak Load 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% % of Time Annual Load Duration Curve % Of Peak Load 120.0% 100.0% 80.0% CCA SDG&E 60.0% 40.0% 20.0% 0.0% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% % of Time 146 San Diego County CCA Load Plots and Power Blocks Third Quarter 500,000.0 450,000.0 400,000.0 350,000.0 300,000.0 250,000.0 200,000.0 150,000.0 100,000.0 50,000.0 0.0 kW kW First Quarter 1 13 25 37 49 61 73 85 500,000.0 450,000.0 400,000.0 350,000.0 300,000.0 250,000.0 200,000.0 150,000.0 100,000.0 50,000.0 0.0 97 109 121 133 145 157 1 10 19 28 37 46 55 64 73 82 91 100 109 118 127 136 145 154 163 Fourth Quarter 500,000.0 450,000.0 400,000.0 350,000.0 300,000.0 250,000.0 200,000.0 150,000.0 100,000.0 50,000.0 0.0 kW kW Second Quarter 1 Quarter 1 2 3 4 13 25 7X24 200000 215000 240000 210000 37 49 61 73 6X16 100000 100000 120000 105000 85 500,000.0 450,000.0 400,000.0 350,000.0 300,000.0 250,000.0 200,000.0 150,000.0 100,000.0 50,000.0 0.0 97 109 121 133 145 157 Dumped kWh 9,140,300 19,684,654 20,376,170 4,021,273 53,222,396 1 10 19 28 37 46 55 64 73 82 91 100 109 118 127 136 145 154 163 Req. kWh Qtr % kWk 604,736,164 1.51% 616,296,685 3.19% 726,926,202 2.80% 669,518,448 0.60% 2,617,477,499 1.99% Total Energy 2,617,477,499 Spot Purchases 9.5% 7X24 6X16 Spot On-Peak Spot Off-Peak Total Energy Purchases (kWh) 71.0% 1,895,160,000 19.5% 520,640,000 4.0% 106,879,626 5.5% 148,020,270 100.0% 2,670,699,895 147 148 AppendixȱHȱ––ȱImplementationȱScheduleȱ ȱ Inȱ orderȱ toȱ beginȱ providingȱ electricȱ serviceȱ toȱ customersȱ inȱ theȱ communityȱ inȱ earlyȱ2006,ȱtheȱCountyȱwouldȱneedȱtoȱfollowȱanȱaggressiveȱtimelineȱforȱdecisionȬ makingȱ andȱ implementationȱ activities.ȱ ȱ Aȱ timelineȱ thatȱ wouldȱ allowȱ forȱ operationsȱtoȱbeginȱinȱMayȱ2006ȱisȱshownȱbelow.ȱȱAȱkeyȱdecisionȱonȱtheȱcriticalȱ pathȱisȱtheȱdecisionȱtoȱdevelopȱtheȱImplementationȱPlan.ȱȱDelaysȱinȱtheȱdecisionȱ toȱ developȱ anȱ Implementationȱ Planȱ wouldȱ causeȱ oneȬforȬoneȱ delaysȱ inȱ theȱ programȱstartȱdate.ȱ ȱ ȱ COMMUNITYȱCHOICEȱAGGREGATIONȱIMPLEMENTATIONȱPROCESSȱ ANDȱTIMELINEȱ ȱ ESTIMATED START TASK DATE 1 Feasibility Assessment and Evaluation 1.1 Review Final Feasibility Report 1.2 Conduct Public Workshop(s) and council sessions to consider proceeding to implementation 1.3 Decision to Develop CCA Implementation Plan 2 Implementation Plan Development 2.1 Obtain Billing Data From Utility 2.2 Issue Request For Qualifications/Offers To Suppliers 2.3 Identify uncommitted generation projects and negotiate participation, if applicable 2.4 Develop program structure, organization, operations plans and funding 2.5 Document participant rights and responsibilities 2.6 Select Preferred electric supplier(s) and partners; Evaluate and document their financial, technical and operational capabilities 2.7 2.8 ȱ Develop preliminary energy supply resource portfolio Perform Rate Design (cost allocation methodology and disclosure) 6/1/05 –– 7/7/05 6/1/05 6/21/05 7/7/05 7/14/05 –– 10/30/05 7/14/05 8/4/05 8/4/05 8/11/06 8/11/05 8/25/05 8/25/05 9/2/05 149 TASK 2.9 Complete Draft Implementation Plan 2.10 Conduct Public Workshop(s) on Draft Implementation Plan 2.11 Issue Resolution Adopting Implementation Plan 3 CPUC Implementation Plan Filing 9/9/05 9/16/05 9/30/05 10/6/05 –– 1/5/06 3.1 File Implementation Plan and Statement of Intent with CPUC 10/6/05 3.2 Respond to information requests from CPUC or intervenors 10/13/05 3.3 Participate as required in CPUC process to support implementation plan 10/13/05 3.4 Monitor CPUC decisions 4 Initiate CCA Startup Activities 4.1 Conduct Recruiting and Staffing 4.2 Develop informational and program marketing materials 4.3 Establish call center for customer inquiries 4.4 Develop in house capabilities or execute contracts for performance of operational services: - Electronic data interchange with utility - Customer bill calculations - Scheduling coordinator services - Application of statistical load profiles and submittal of hourly usage data for CAISO settlements - Resource planning, portfolio and risk management - Ratemaking - Load forecasting - Wholesale settlements - Credit and finance - Information Technology ȱ ESTIMATED START DATE 1/5/06 10/13/05 ––2/10/06 10/13/05 10/20/05 10/20/05 Ȭȱ Ȭȱ Ȭȱ Ȭȱ Ȭȱ Ȭȱ Ȭȱ Ȭȱ Ȭȱ Ȭȱ 150 TASK - Legal and regulatory support 4.5 Contact key customers to explain program, obtain commitment, and release customer information 4.6 Execute contracts for electric supply 4.7 Update program rates 4.8 Obtain financing for program capital requirements 4.9 Execute service agreement with utility31 4.10 Complete utility technical testing 4.11 Establish account with utility 4.12 Register with CPUC, post bond or demonstrate insurance ESTIMATED START DATE Ȭȱ 10/27/05 1/12/06 1/12/06 1/12/06 1/19/06 1/26/06 2/3/06 2/10/06 5 Customer Notification and Enrollment 5.1 Send first opt-out notice to eligible and ineligible customers 5.2 Send second opt-out notice to eligible and ineligible customers 5.3 Process customer opt-out requests and enroll customers 5.4 Submit notification certification to CPUC 5.5 Notify utility when CCA service will begin to initiate account transfer 5.6 Obtain updated billing data from utility 5.7 Update load forecasts and supply plan 2/17/06 –– 4/19/06 2/17/06 6 CCA Operations 6.1 Activate energy supply resource plan 6.2 Commence mass account transfer 6.3 Manage supply portfolio and risk management (ongoing) - Prepare daily load forecasts 5/2/06 –– Ongoing 4/2/06 5/3/06 5/3/06 3/21/06 3/28/06 4/5/06 4/5/06 4/12/06 4/19/06 5/3/06 ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱȱTheȱCounty,ȱasȱaȱCCAȱoperator,ȱwillȱneedȱtoȱestablishȱaȱlegalȱrelationshipȱwithȱSDG&E.ȱȱItȱisȱanticipatedȱ thatȱ aȱ serviceȱ agreementȱ willȱ includeȱ processesȱ forȱ informationȱ exchangeȱ includingȱ electronicȱ dataȱ interchange,ȱ proceduresȱ forȱ settlingȱ financialȱ transactions,ȱ treatmentȱ ofȱ customerȱ billȱ paymentȱ fundsȱ transfer,ȱ creditȱ terms,ȱ accessȱ toȱ confidentialȱ customerȱ information,ȱ auditȱ provisions,ȱ andȱ regulatoryȱ oversightȱandȱcomplaintȱprocesses.ȱ 31 ȱ ȱ 151 ESTIMATED START DATE TASK - Balance portfolio with purchases and sales Schedule loads and resources Monitor credit of suppliers and mark to market exposure - Maintain risk controls on supply portfolio 6.4 Perform Account Management and Settlements (ongoing) - Process customer transfers into and out of program - Receive and respond to customer inquiries - Pay electric suppliers - Obtain customer meter data from IOU - Prepare bill calculations - Provide bill amounts to IOU - Apply statistical load profiles to meter data and submit to ISO for settlement - Pay IOU transaction fees - Receive remittances from IOU from customer collections - Verify ISO settlement statements and pay ISO charges 6.5 Distribute third opt-out notice 6.6 Complete mass account transfer 6.7 Process opt-outs 6.8 Prepare operating statements and financial reports (ongoing) 6.9 Distribute fourth opt-out notice 6.10 Process opt-outs 5/3/06 5/3/06 5/3/06 5/3/06 5/3/06 5/4/06 5/4/06/ 5/19/06 6/2/06 6/2/06 6/2/06 6/2/06 6/2/06 6/19/06 7/6/06 6/2/06 6/2/06 6/3/06 6/19/06 7/6/06 7/7/06 ȱ ȱ 152