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HomeMy WebLinkAboutTC Agd Pkt 2009-12-07 (2)Marin Energy Authority „_j2 Responses to Current Frequently Asked Questions r ,v( 12-7-09 1. Issue: Rate payer risk and bond repayment Response: Ratepayers are not obligated to pay for energy they do not use. Revenue bonds are secured by the sale of the power from the asset. The bonds that would be issued for building a new project would be covered by ratepayers in the normal course of business, just as is now the case with the incumbent utility. But to take it a step further, it is actually the revenue from the newly created asset that will secure payback on the bonds. So, for example, if a solar field is built using a bond issuance, the energy being created from that asset is sold to repay the bond over time. In the normal course of business the ratepayers would be covering that debt by paying for the energy generated each month. If MEA failed, however, or ratepayers were not available to cover the cost, then the power would be sold elsewhere and revenue from that sale would cover the bond repayment. Rate payers are only obligated to pay for the electricity they purchase from MEA, and rates will include debt service on any bond issuances as is now the case with the current utility. Under no scenario would ratepayers be obligated to help pay for energy they do not use or to "bail out" MEA in the unlikely event of an organizational default. 2. Issue: MEA Member General Fund Exposure Response: Cities and Towns do not have any financial liability for MEA debts and liabilities or MCE costs. There is a legal firewall between MEA and its member agency general funds that is codified by State law and further codified in the JPA Agreement and the Marin Clean Energy Power Supply Contract. Although cities and towns are members of MEA, it will function as a governmental, non-profit agency whose operations and financial obligations are completely separate from that of its local government members. In fact, there are multiple layers of protection for member agencies against the debts, liabilities and obligations of the MEA. Under Government Code Section 6507, the MEA is a legal entity separate from its members. Government Code Section 6508.1 authorizes a Joint Powers Agreement to provide that the debts, liabilities and obligations of the Joint Powers Authority shall not be the debts, liabilities or obligations of the individual members of the JPA. The MEA Joint Powers Authority Agreement provides that the debts, liabilities and 1 as necessary) to remain competitive with PG&E rates. It should be noted that in the unlikely event that PG&E's costs drop below their historic threshold, their cost could drop below MEA costs. Conversely, if what market analysis suggests is true and the costs of fossil-based energy and natural gas continue to rise, then PG&E's prices will continue to climb above MEA's projected costs. The good news here is that with MEA, customers will have a choice of energy providers and can choose the lower cost of two options (subject to nominal exit fees) at any time. 7. Issue: Staff Expertise and Expense MEA has and will hire additional highly qualified professional staff whose costs account for only 3% of the MEA budget. MEA has and will continue to draw on the same market expertise that has served many utilities and municipal utilities for several decades. MEA will combine that expertise with reliable technical and legal support under a governmental, not-for profit structure, which has significant economic benefits over that of a private utility, helping keep costs down. Currently, MEA has three staff, three legal firms, multiple technical consultants, and is making full use of expert consultants in the areas of energy modeling and implementation support, transactional and municipal law, infrastructure finance and planning. In the future, MEA's plans call for a staff of 20.5 professionals, which is quite small compared to other municipal utilities and also the incumbent utility. 8. Issue: Exit Fees and Customer Choice Response: Most PG&E exit fees for customers will be covered by MEA; Customers have the option of switching suppliers at any time MEA will cover the projected PG&E "exit fee" for customers that choose to stay with MEA as their energy supplier during the 120-day opt-out period. During that opt out period consumers can make a decision with no exit fee either way. After the opt-out period, both suppliers (i.e. MEA and PG&E) will charge a nominal exit fee for customers that choose to switch between companies. This fee covers the cost of unused power purchased on their behalf and amounts to a few dollars per month on the monthly bill. 9. Issue: Contract Support and Review Response: The Contract, or Power Supply Agreement (PPA), has been subject to extensive review from industry experts, member agencies and the public. The PPA has been reviewed by City and Town Councils, City and Town Attorneys, City Managers, and an extensive cadre of Legal and Technical support for MEA including Navigant Consulting, Nixon-Peabody LLP, Milbank, 3 y O .N y W y y y y O t y y L 0 W 06 0 IL 0 0 N as 3 O r c as as 'L^ V y O O t y to Q E W CM y y ca C ~ W c L m 2 O r O N N 0 U N ' 0 o U Z ® It ON 0 Tl- LO N 0I Ui N O 0 U Z ■ ■ X0 Ild- O 0 o .g W U) m 0 4) U) Z) 0 rL^ V W 08 0 O. Too' O N a) a L LJ L 0 d+ A L W L cc 0 wMEND U) ■9 W U) m 0 1~ LA IVM Q N O r N 0 N V O O U Z! 0 0 I M N 10 U ■ N 0! U OI Z! 8< M 0 LO 00 Page 1 of 1 Diane Crane lacopi From: Cheryl Ross [cherylaross@gmail.com] Sent: Monday, December 07, 2009 3:51 PM To: Diane Crane lacopi Subject: To Tiburon Town Council concerning Marin Clean Energy Mayor Collins, Vice Mayor Slavitz and Council Members Fredericks, Fraser, and O'Donnell: I urge you to support clean energy for Tiburon by voting to stay in the Marin Energy Authority. I recognize this initiative to be the single most impactful action we can take to reduce our green house gas emissions and mitigate the impact of climate change. I have been supportive of this project since its inception 7 years ago. I have attended the workshops and stayed informed about the pros and cons of the project. I applaud the Council's decision to opt into the program provisionally. I recognize that there is some risk involved but I feel that the risks are far greater if we don't go forward with this project. Our scientists tell us that climate change is happening faster than anticipated. We need to move as quickly as we can toward large scale conversion to renewable sources of energy. The Marin Clean Energy Project will get us there much more quickly and sustainably than PG&E. I feel that the critical decisions about our energy future need to be made by a body that represents the community, i.e., The Marin Energy Authority, not by a private corporation whose primary allegiance is to shareholders and the bottom line. I urge you to stay the course and vote to continue supporting this initiative, to secure a clean green energy future for Tiburon. Respectfully, Cheryl Ross CherylARoss@gmail.com Cheryl Ross OEC 7 2000 415-235-3338 TOWN CLERK 321 Cecilia Way # 16 TOWN OF T IBURON Tiburon, CA 94920 _ry COUNCIL 1i E T L MA MEETING DATE 12/7/2009 Pacific G$ and E I e c t 6 c Compan December 3, 2009 Charles McGlashan, Chair Board of Directors Marin Energy Authority 3501 Civic Center Drive, #308 San Rafael, CA 94903-4157 Joshua Townsend Government Relations Manager Public Affairs E C E ~ V E DEC - 3 2009 TOWN CLERK TOWN OF TIBURON 415 257-3407 phone 415 257-3302 fax JDT©@pge.com 1220 Andersen Drive San Rafael, CA 94901 Re: Marin Energy Authority Draft Community Choice Aggregation Implementation Plan Dear Charles: PG&E understands that the Marin Energy Authority (MEA) Board of Directors intends to consider approving a draft implementation plan for a Community Choice Aggregation (CCA) program at its December 3, 2009, board meeting. The draft of the implementation plan was posted on the MEA web site last week. Based on our preliminary review of the MEA draft CCA implementation plan, we recommend that MEA reject the draft plan as deficient, incomplete and premature in numerous respects. The deficiencies and omissions in the draft plan include, among other things: 1. The large majority of citizens and consumers in Marin have no knowledge that MEA is proposing to switch their electric service, and MEA consistently has refused to allow Marin citizens the opportunity to vote on whether they support MEA establishing a government-run electricity business. 2. MEA's draft contract with. Shell Energy North America would not result in any new local renewable energy projects but would instead increase greenhouse gas emissions under California's AB 32 climate change law by at least 300,000 metric tons per year compared to PG&E's existing electricity service in Marin. Nonetheless, MEA continues to refuse to perform a complete evaluation of the environmental impacts of its CCA program. under the California Environmental Quality Act (CEQA), including refusing to consider alternatives to its CCA program as part of this implementation plan, such as enhanced "green" electricity services and energy efficiency programs from PG&E and other parties, and/or immediate construction of new local renewable energy projects by local energy suppliers to serve Marin. 3. MEA has no contract with an electricity supplier and its draft contract with its preferred electricity supplier, Shell Energy North America, has no prices and no committed sources of electricity. As Mill Valley Councilmember Ken Wachtel has pointed out, the contract does have a provision that would preclude MEA from substituting local renewable projects for Shell's electricity unless MEA compensates Shell for any lost profits on its electricity displaced by the local renewables. This "poison pill'' provision makes it nearly impossible for MEA to plan ahead for local renewables because the "penalty" MEA must pay to Shell will not be known until the actual date that Shell's power is displaced. 4. MEA has no access to credit or capital or significant assets of any kind, but is proposing that it finance its $300 million CCA contract with at least $10 million in initial short-term loans and then borrow at least $375 million in long-term debt to finance further energy projects in addition to its electricity supply contract. 5. MEA's preferred electricity supplier, Shell Energy North America, has no demonstrated ability to meet the State of California's renewable portfolio standard, and in fact recently reported to the California Public Utilities Commission that its renewable energy sales in California were only 0.3 percent, compared to California's 20 percent and 33 percent renewable energy targets. 6. MEA is proposing to approve its draft CCA implementation plan despite the fact that its own Joint Powers Agreement with member Marin governments gives each Marin government and their elected officials until February 4, 2010, to determine whether to reject the CCA program and withdraw from MEA. MEA's prejudicial. consideration of its CCA implementation plan over sixty clays befol•e the deadline for MEA member governments to determine whether to proceed with a. CCA program makes a mockery of the rights of Marin local governments and the elected officials that serve those governments. PG&E and other members of the public have identified these and other deficiencies in MEA's proposed CCA program.. However, our November 5, 2009, letter to you and other questions raised by the public have been unanswered by MEA. Again, PG&E urges you and MEA to stop and reconsider your mash to approve MEA's risky venture into a government-run electricity business which would represent one of the largest expansions of government in Marin in many decades. We also reiterate our request that you put this risky energy scheme to a public vote of the citizens of Marin, so that all voters can have an opportunity to express their views. Thank you for your consideration of our request. If you have any questions, feel free to contact me. Very truly yours, i JOSHUA TOWNSEND Cc: Members of Board, Marin Energy Authority Marin County Board of Supervisors Councllmembers, Members of Marin Energy Authority Matthew Hymel, Marin County Administrator Dawn Weisz, Interim Director, Marin Energy Authority Councilmembers, Novato, Larkspur, Corte Madera marin energy authority December 3, 2009 TO: FROM: RE: ATTACHMENTS: Dear Board Members: E C E oV E 1 DEC _ 7 2009 ll` TOWN CLERK TOWN OF TIBURON Marin Energy Authority Board Dawn Weisz, Interim Director (Agenda item #2) COUNCIL L.ATE MEETING DATE 12 T air Analysis of Service Agreements Report by MRW and Associates During the month of October the City Manager commissioned a third party peer review of the draft power supply contract for MEA. This process was helpful to the draft contract development process and many suggestions made during the course of the peer review were incorporated into the final draft contract, approved by your Board on November 5, 2009. The results of the peer review were released several days ago and have been have been summarized by the City Managers as follows: • MRW identified a number of potential concerns. MEA has incorporated several MRW's recommendation to improve the provider agreement to protect MEA's and its customer's interests going forward. • There are no fatal flaws with the proposed agreements. • There are inherent market risks to go forward with CCA. MEA cannot fully avoid market risks that may put them in a position to charge rates that may exceed PG & E rates. • In general, the largest market risk MEA faces is if natural gas prices (and, as a result, wholesale electricity prices) go down substantially for a long period of time. • Conversely, if natural gas prices increase substantially in the future, MEA will have more competitive rates, be able to establish reserves and invest in additional renewable energy. The three primary risks mentioned in the report are associated with mitigation strategies and/or decision points as follows: #1 Basis Risk from Point of Supply to Point of Delivery Under the agreements, SENA prices its product at the "NP15 EZ Gen Hub", rather than the "PG&E Load Aggregation Point (LAP)." MRW was concerned about the added charges and risks that might result from bringing the power from the EZ Gen Hub to the LAP. MEA was advised by the California Independent System Operator (CAISO) on transmission charges and Congestion Revenue Rights (CRR's). Because Marin is on a peninsula with a surplus of transmission coming in from the north side it is expected that Marin will be awarded ample CRRs to cover this transmission. Therefore, requiring the supplier to deliver the power to the LAP would be more likely to decrease the overall value of the product. In this case the technical recommendations agreed to by the MEA Contract Committee were based on the CAISO expertise in the area of transmission and their specific knowledge of the transmission environment in Marin County. #2 Uncertainty in Customer Loads The MRW Peer review raises the point that customer loads will be difficult to firm up until after the opt-out period is concluded. Partly in response to this concern MEA added a provision to the draft Power Purchase Agreement that allows MEA to lock in volumes on Aug. 31, after the opt-out period, to avoid volume risk. This change was made at the conclusion of the peer review process and has resolved the concern that was raised. #3 Uncertainty in PG&E Exit Fees The cost of covering exit fees for customers who stay with MEA electricity supply during the initial opt-out period is included in the overall costs for customers going forward. In the future, if exit fees go above the projected and budgeted for amount, the MEA Board will be able to make a policy decision about increasing the exit fee coverage. High exit fees would only be likely to occur in the case of low natural gas prices.