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May 10, 2002

Meeting Information


Special Meeting

Friday, May 10, 2002, 2:00 p.m.
City Hall, Room 263

Chairperson: Commissioner Gonzalez; Vice Chairperson: Commissioner McGoldrick
Members: Commissioners Ammiano, Hall and Schmeltzer
Alternate: Commissioners Peskin and Fellman
Clerk: Monica Fish


(There will be public comment on each item)

1. Call to Order and Roll Call

The meeting was called to order by Chairperson Gonzalez at 2:10 p.m.

Members Present: Chair Commissioner Gonzalez, Vice-Chair Commissioner McGoldrick; Commissioner Schmeltzer and Commissioner Fellman.

Members Absent: Commissioner Ammiano and Commissioner Hall

2. Approval of Minutes of the Commission Meeting and Public Hearing dated April 12, 2002 and Commission Meeting dated April 24, 2002 (Action Item).

Vice-Chair Commissioner McGoldrick moved to approve the minutes. Minutes were duly seconded. No objection. Minutes approved.

No Public Comment

3. Presentation by Ed Smeloff, Assistant General Manager for Power Policy, Planning and Resource Development, San Francisco Public Utilities Commission.

Mr. Smeloff stated I have a prepared presentation and ready to take questions from you. Let me start out by saying I have met with your consultants, and our office is fully prepared to cooperate with them to share data and work together so there isn’t any overlap or redundancy. I think this can be an effort where the Electricity Resource Plan that we’re going to bring forward to the Board of Supervisors around June 3rd will be complimented with the work that the LAFCo Commission is doing.

I thought I would walk through some of the things we have developed in the Electricity Resource Plan. We have held eight public hearings throughout San Francisco and have taken input from a variety of people in the community, as well as written input. We have developed several goals that we think should inform any legislation or charter amendment that should be what we’re aiming to achieve here in San Francisco.

1. Support and develop renewable sources of electricity. The voters strongly supported that in the last November election.

2. Maximize energy efficiency. It’s both the most environmentally benign and least costly in many cases meeting our long-term needs. You will see even in the short-tem, given some of the vulnerabilities that San Francisco has, is a very important resource.

3. Assure reliable power. Obviously it is an increasing technology. In a technological society, reliability is even more important than it had been in the past. San Francisco has some vulnerability that gives it a less reliable system than other parts of the state.

4. Support Affordable Electric Bills. I use the term electric bills specifically rather than rates because that is what people pay. Electric bills are a combination of both the rate and volume of the commodity that they use.

5. Improve Air Quality. Improving air quality is a key issue in San Francisco. The largest industrial polluters in San Francisco are the two power plants that are located in the City. You would have a substantial improvement in air quality if we use them less or close them.

6. Support Environmental Justice. We held several meetings out in the Bayview, and it’s a major issue in the City because many of the infrastructure that you need for an operating city are all located in the low-income and predominantly African-American, Latino neighborhoods.

7. Increase Local Control over Energy Resources. Particularly now with deregulation, we’ve seen that relying on others to meet your needs or relying on market forces for such a vital commodity can have some very disruptive effects.

Let me describe the vulnerabilities that we face in San Francisco. We’re pretty unique. We are really the most vulnerable part of the state for electric reliability. All of the power that we import comes in through two sets of substations, one at San Mateo County and one near the Cow Palace. All of our transmission lines are subject to disruption at either one of those substations. Or if there were an airline that flew into the lines which all go right into the International Airport, we could lose electricity as was the case in December 1998. Our system is limited. We can’t import all of our needs. We will see later in one of the slides that about 30 - 35 percent of the time we need to be operating plants in the city to meet our needs.

The plants that we do have in the city are very old. Hunter’s Point is 44 years old; Potrero is 37 years old. Plants that old tend to break down a lot more than new plants and they are less efficient and dirtier. Obviously, our dependence on these old plants impacts air quality and people’s health. I think this is really important why we are addressing this issue. The current market realities in California, but really nationwide, have undermined the basic assumption of deregulation, and that is the private investors would invest in new power plants based on forward price curves and their perception of risk. That is not happening in California and it is not happening in the eastern states where deregulation has occurred.

What’s happening now is that the power plant developers are demanding to be secured through long-term power purchase contracts. The plants we’re seeing developed in California, the Calpine Plants and others are being done so because they do have long-term contracts including the ones proposed for San Francisco, like the Merant Plant. They have told us clearly that they need a long-term power purchase agreement to proceed with construction. It’s a big vulnerability given the current uncertainties about who is going to buy. We don’t have other than the state any creditworthy buyers of electricity other than some other public power entities in the state. Lastly, one of our vulnerabilities is what you see being built in California and elsewhere are natural gas plants. Gas is clean and is relatively abundant. But putting all your eggs in one basket is not a prudent policy.

One of the things driving the whole interest in local control and our resource plan is shutting down Hunter’s Point Power Plant. This is the Mayor’s top priority for San Francisco is to achieve that as soon as possible. Operation of the Hunter’s Point is a little bit peculiar even though PG&E owns the plant, doesn’t really control when it operates. It only operates when dictated to do so by the Independent System Operator (ISO). It’s what we call a Reliability Must Run Power Plant so the ISO says turn it on. They actually pay PG&E a pretty substantial availability fee just to have that plant there available to run to meet the needs.

The Mayor and PG&E have signed a binding agreement. PG&E has agreed to shut down Hunter’s Point as soon as the ISO makes a finding that it’s no longer needed for reliability. We did have a success at the ISO a couple of weeks ago. We got their governing board appointed by Governor Davis to agree for the very first time that they will sit down with the staff of the City and other stakeholders and come up with a plan for the shutdown. Up until that time, senior management of the ISO didn’t recognize that the ISO had a role in the shutdown of Hunter’s Point. It’s an important step. Hunter’s Point, even though it only meets eight percent of all of the electricity used still produces a pretty substantial amount of power, enough for about 100,000 apartments in the City. It was available to operate 5800 hours. There is 8760 hours in a year. So you see the plant given its age was not available for a new plant. New plants are available 90 to 95 percent of the time.

Vice-Chairperson McGoldrick asked if the Potrero Plant was not under the ISO Must Run?

Mr. Smeloff stated it is. It actually has the very same contract. It is a Reliability Must Run. But it runs a lot more of the time because it tends to be a more reliable plant, and the ISO dispatches that plant first.

Vice-Chairperson McGoldrick asked which plant was subjected to fines?

Mr. Smeloff stated those are Merant’s peakers. They are at Potrero. Potrero has a base low plant, three peakers. In 2001 they ran beyond the hours they were allowed to under the Regional Air Quality Management District so they were fined for that.

Vice-Chairperson McGoldrick asked so that wasn’t a Reliability Must Run situation?

Mr. Smeloff stated what happened with those peakers was last year during the energy crisis, so many plants were unavailable for operation. When the utilities lost their creditworthiness they didn’t pay so-called qualifying facilities, these third party plants. So in order to have enough power, the ISO did order Merant to run these plants and then Merant actually made a substantial amount of money doing it when the prices were very high as well.

Vice-Chairperson McGoldrick asked but in the meantime the Air Quality Board fined Merant?

Mr. Smeloff stated actually, the Air Quality Board gave them an exemption from their license, and then the City sued both the Air Quality Management District and Merant. Then, there was a settlement on that lawsuit.

Commissioner Schmeltzer asked when you say that the plant was available to operate, is that the number of hours that it was not down for maintenance?

Mr. Smeloff stated that is the number of hours that it was reported to the ISO that it was available to operate under its RMR contract.

I thought I would show you what a load curve looks like for San Francisco. I said there was 8760 hours in a year. The peak day occurred last January 2001 at 875 megawatts. You see that we get down to a little bit less than 400 megawatts in the wee hours of the morning. The reason I put this here is to show you that later we had the ability to import about 640 megawatts, which is about 3000 hours. All the rest of the time we were relying on resources located in San Francisco. This is how we meet our needs. We import up to 640 megawatts and we have the two big plants, one at Potrero and one at Hunter’s Point. There are actually four peaking plants. I only listed three, because the way the ISO treats it as they assume that one plant won’t come on when started. So what we really have available for reliability purposes is three plants equivalent of 156 megawatts.

This shows how the plants have been operating in the past years. There used to be four plants out at Hunter’s Point. Two were shut down in 2000. So there is only the large plant and the peaking plant. So the use of Hunter’s Point actually is declining--it was 8 percent last year. Where Potrero has been increasing--it’s up to 22 percent of all of the electricity sold comes from the Potrero Plant. Hunter’s Point really only operates during peak times when the power is needed, and Unit 3 is not enough. But it also operates when Unit 3 is out of service for repairs or when it breaks down unexpectedly.

I wanted to point this out to you because what we are facing here in San Francisco, and I really want to underline this is a big potential crisis in 2004 and 2005. In 2005, the Clean Air Act requires that all of these old plants substantially reduce emissions of oxide and nitrogen, cutting them more than half from 43 parts per million down to 19 parts per million. The only way you can do this is putting on end of the stack technology that cuts down on the emissions. This will have to be done at Potrero in 2004, and that plant will be out of operation for at least three months, perhaps longer. There are also some major repairs. So in 2004 we’re facing a situation during the fall of the year when our reliability is dependent on a plant at that time that will be 46 years old. So we need to do certain things beginning now. The charter amendment you are conceiving should create the right kinds of authorities and powers so we can effectively reduce peak demand and get resources in place in the next 30 months so that we have reliability come the end of 2004.

In 2005, the issue really is what happens to Hunter’s Point? PG&E is facing a dilemma whether they either have to make major capital improvements in that plant, perhaps as much as 30 million dollars to put on this Clean Air technology or face not complying with the Clean Air Act. If they put on that amount of money, then they are going to expect to be compensated for that and try to keep that plant in operation a lot longer. So if we’re going to meet our goal of commitment to the community in Bayview Hunter’s Point to shut it down, we really need to act so we get some resources in place by 2005.

We have a lot more detail in our Resource Plan, but we’ve done some projections, looked at what the California Energy Commission has done and what the growth in electricity demand will be in San Francisco over the next ten years. We have three projections. One will show you how inherently unpredictable or subject to economic changes. Back during the .Com days of 1999, we were forecasting well over 1300 megawatts of electricity demand in San Francisco by the year 2012. That was revised last year by the Energy Commission and dropped the demand down to under 1200. In 2001, we really saw a remarkable reduction in load in California and in San Francisco. Statewide, people reduced their electricity consumption by about 6 percent. Our peak demand in San Francisco went down from 940 to 875 and if you really look after the price spikes, in May, the summer peak was down to 840, almost a 100-megawatt reduction from the year before. Some of that was behavioral. Some of that is a result of investment and more efficient technologies. What we’ve done is forecast based on last year’s 2001 and increased it by 1 1/2 percent. It shows that by the year 2012, we’ll be a little over a 1000 megawatts. That’s what we have to plan for. The ISO is still saying we have to plan for that middle line. They’re being more cautious. That means you need to put more resources in place. Between the low line and the high line, our gap in 2005 when we need to replace Hunter’s Point is between 130 megawatts and 305 megawatts. So we’re really challenged how we’re going to get that in place. We need to have the tools here in San Francisco to do that. These are the resources that are really feasible that I have identified. There may be others out there.

Chairperson Gonzalez asked Mr. Smeloff the point that you are just making related to the gap being 130 to 305 megawatts?

Mr. Smeloff stated maybe I need to explain that better.

Chairperson Gonzalez asked why wouldn’t it just be adding Potrero and Hunter’s Point together because they’re not operating at the same time?

Mr. Smeloff stated this is what is available in each of these years assuming that you have taken Hunter’s Point and shut it down. Then, you need to plan your system in a way that the largest unit can break down, and you still have enough resources to meet the need. So if Potrero is unavailable because it is out for maintenance or it breaks down, you have a gap between roughly 800 and whatever you believe the peak demand is going to be for that year. That is what we have to fill. You will always need to operate the system assuming that the largest resource that you have could break down or be tripped offline for one reason or another. That’s how we assure reliability.

These are the resources that we are looking at. There’s been a lot of controversy and a lot of discussion about Merant’s proposal to build this very large power plant down in Potrero, 540 megawatts. That’s now before the Energy Commission for its license. They haven’t yet set a schedule. A lot of challenging issues Merant faces just in the licensing process, let alone trying to finance this plant.

Commissioner Fellman asked what is the scheduled online date for Potrero 7 if everything would fall in place and they would get a contract?

Mr. Smeloff stated realistically, I think you need to plan for two years of construction after they obtain their license. Assuming there’s no legal challenges, which I think given the controversy of it, particularly if they don’t change their cooling system. I guarantee you if they use once through cooling try to use the quantity of bay water they are proposing, there will be legal challenges that could tie it up for a couple of years. If there were no legal challenges, perhaps they could get it online in mid 2006. It doesn’t really solve the 2005 problem. It’s going to take some real focus to solve that problem.

The Jefferson Martin transmission line is being proposed to being built by PG&E. It goes up a different pathway up the peninsula and connects into San Francisco near the Cow Palace. It just got approved by the ISO to allow the cost of that line to be recovered from ratepayers. It now needs to be approved by the California Public Utilities Commission that needs to give it a Certificate of Need and then do an Environmental Impact Report Analysis for that. Jefferson Martin can be online, PG&E is estimating in September of 2005. We’re trying to push them to crash that so they could get it in place before the summer of 2005 so we could avoid the problem with Hunter’s Point. It goes through some pretty well connected neighborhoods in San Mateo County, Hillsborough, and places like that. The transmission lines are controversial even though this one will go underground most of the way in Northern San Mateo County.

There are a couple of power plants that we could build elsewhere. There is an opportunity to build a co-gen plant downtown where we have existing boilers to provide steam for the downtown steam load in the various hotels and office buildings. Developers come forward to us and ask us to enter into a power purchase contract to support that. We’re analyzing that and we’ve actually encouraged them to begin discussions with PG&E to interconnect to the Mission Substation down at 9th and Mission.

The University of California has approached us to form a Joint Powers Agreement to build a power plant out at Mission Bay Campus. They have already put in place a steam loop and chilled water loop to make the campus ready for co-generation. The university has told me that they need some power plant out there because the PG&E grid is simply not reliable enough for the purposes they have. So when opportunity is to build a larger plant, a 50-megawatt plant, if the City has the capability into entering into a JPA and financing the plant with the university.

We’ve also been looking at opportunities on Port property to do another power plant. Probably the best location we’ve found right now is just north of Islais Creek right on the bay on Port property. The reason that is good is that we are putting in a duct bank, a conduit under Islais Creek that we could run cable from this site out to the Hunter’s Point switchyard, which then would allow electricity to feed into the grid. You can size all kinds of different plants out there. We’ve chosen the smallest combined cycle plant that you can economically build which is 57 megawatts.

Then we’ve looked at what we can achieve at other resources by 2005, solar if we push it. I think we can do 10 megawatts of solar by then. One of the new things that are happening is that a lot of people are proposing to build small reciprocating engines in existing-office buildings. The CPUC is putting one in their building as well as the State Office Building on Golden Gate are going to put in these small fairly clean internal combustion engines that run on natural gas. If that market opened up, there are a lot of businesses in San Francisco that would be interested. The issue with these small-scale generators is that they are not as clean in terms of air emissions as the larger plants. They are a lot cleaner than Hunter’s Point and Potrero, but not as clean as the state of art large plant.

Load Reduction. Load reduction is the cleanest that we saw what we could do in 2001, where we reduce load by 100 megawatts in San Francisco in the summer months.

When we were out in the community, we reminded people that the air quality impacts is not just how clean or dirty the plant is, but how many hours it runs and how large the plant is. Whereas, the Hunter’s Point Plants are relatively dirty, if they run a few hours compared to a brand new large plant you may end up with a similar amount of emissions in the area.

This is the pounds per megawatt hour metric that we’ve chosen for this graph for the Merant Plant. It is pretty clean when you look at it compared to Hunter’s Point. This is what Hunter’s Point Potrero Plant looks like now. This is what Potrero would look like after it has the clean air technology, the SCR put on it in 2005 obviously when hydro solar have no emissions in Nox.

To summarize and lay the context for what you are doing with LAFCo, I will just say that my view of the most pressing needs is we need to reduce electric consumption within the next 30 months, particularly during the peak hours. Particularly targeting some of the larger commercial customers in San Francisco where there are some economies that can be achieved. We need to develop some new power plants such as the ones at Mission Bay and Downtown. To be able to do that, the City needs to have more tools than it currently has. We are limited by not being able to issue revenue bonds, and we are limited by not being able under the City Charter to enter into long-term power purchase agreements because in the provision that subjects annual power purchase contracts to an annual appropriation. So, if we can achieve those, we can assure reliability and meet our goal of shutting down Hunter’s Point.

Vice-Chairperson McGoldrick asked Mr. Smeloff, could you repeat those last two limitations you talked about? The first one you said was we are limited in our ability to issue revenue bonds?

Mr. Smeloff stated the PUC is limited. The current Charter requires that revenue bonds with certain exceptions have to be approved by the voters, and that is a pretty time consuming process for each kind of investment that a utility would make. So that’s one. Another is this issue of not being able to enter into long-term contracts. The way we did it with Calpine is we got a letter from the City Attorney’s Office that said if there wasn’t an appropriation by the governing body by the Board of Supervisors that that would constitute default, and that gave some sort of confidence to Calpine. You’re going to pay a premium to have to enter into those types of contracts, and you are going to limit the number of parties that are going to want to sell power. To have an effective electric utility, you need to put together a portfolio of resources, some that you own and some that you may buy. You don’t want to be in the short-term market for everything as we saw last year. You want to have a mixed portfolio of different types of technologies that you are buying electricity from.

Chairperson Gonzalez asked do other municipalities that you are familiar with have the same restrictions regarding revenue bonds for this kind of acquisition?

Mr. Smeloff stated no other municipal utility that’s a City department has that restriction. So you look at Palo Alto, or Alameda, or Santa Clara or any of the other municipal utilities that are part of City government--they don’t have that restriction. The limitation on the city of Anaheim (I just called down) has entered into contracts as long as thirty years with power suppliers. I think it is just San Francisco and San Diego (I am told by the City Attorney) that have this limitation on revenue bonds where they have to go to the voters. I think all counties have this requirement to go to the voters for general obligation bonds, but not the case for revenue bonds.

Chairperson Gonzalez asked what could you tell us about a much-publicized piece that was in the Chronicle related to a plan that you are putting forward. Is there anything you can tell us about that?

Mr. Smeloff stated this is the core of the plan. What the Chronicle played up, and it was part of that plan is that we recommended or draft recommended that in order to facilitate these things, San Francisco should take on the responsibility of being "a load serving entity" or a "community aggregator of load". That is we should be the responsible party for serving the businesses and residences of San Francisco. Right now, we are somewhat precluded from doing that by regulations of the California Public Utilities Commission, but there is a bill that Assemblywoman Migden is carrying that would enable San Francisco and other municipalities to be community aggregators. That bill I understand is past the Assembly and is now in the Senate and is scheduled in July for its first Committee. If that passes, then next January we would have to get an ordinance from the Board of Supervisors and then develop an implementation plan. We could take on the responsibility from PG&E of providing the commodity without owning the wires or other pieces of equipment necessary to deliver the electricity to customers. It could get us in the business a lot sooner than for municipalization or condemnation. I have actually talked to PG&E and as they were quoted to see if they were quoted correctly in the Chronicle. They have told me they are not opposed to San Francisco taking on that responsibility. They would actually share data and assist San Francisco in becoming a load serving entity. Their interest apparently is in maintaining their franchise and business as a distributor of electricity.

Commissioner Fellman asked isn’t it the case that PG&E has stated in the bankruptcy proceeding it doesn’t really want to be a generator any longer under the regulated utility function?

Mr. Smeloff stated exactly. What they are trying to do is get rid of their generation from their regulated utility and turn it over to their unregulated or federally regulated subsidiary and then be able to sell at market prices. So, they would be in the position then of being able to compete for San Francisco’s business against other suppliers.

Chairperson Gonzalez asked and the prohibition from community aggregation has been in place for how long?

Mr. Smeloff stated I think since last July. Commissioner Fellman may know better. I think it’s been in place since July or September of last year.

Commissioner Fellman stated in September there was a final vote, and there really never was under the restructuring, a community aggregation process that worked. It was more individual rather than the City.

Mr. Smeloff stated what is special about the Migden legislation is that it allows the City to be the default provider. That is, that it would take on the load and then it would have an opportunity for individual customers to opt out. If they wanted to choose a different supplier, they would have 180 days after the beginning of this to opt out at no cost. The City would have certain obligations to inform everybody of their rights and the opportunity to make a choice. The old way is you had to opt in and that was extraordinarily expensive. The transaction costs in having to go out and market and get individual customers to sign a contract made it prohibitive for cities to get into the business of aggregating customers. That is the big difference with Assemblywoman Migden’s bill.

Public Comment

Mr. Charles Kalish asked Mr. Smeloff, I know that you had a response when people asked why you seemed to be in favor of this over going to public ownership of power. If there’s a way to have our cake and eat it, that is your concern is that it is going to take us too long to go to public power, we’re going to get sued, etc. etc. Is there a way for us to start aggregating interimly and at the same time implement public ownership of power or vote on it this November?

Vice-Chairperson McGoldrick stated that procedurally in terms of questions from the public, you don’t have to answer the question. However, I would be interested if you were able to answer the question procedurally.

Mr. Smeloff stated the reason I am focusing on community aggregation is because the immediate problems we need to solve require immediate action. It is my belief that if you try to condemn the system, that does get you into a legal process that could take years with PG&E. There is a provision of state law called rebuttable presumption, which means that your decision to condemn PG&E’s property is not final. It is not conclusive. PG&E can rebut it and show that there is not a higher public need being served by the City taking over their property.

Nothing that I am proposing here and focusing on community aggregation would prohibit the City at a later date from trying to take over the distribution system. What I am trying to do is to provide a focus on what needs to be done first. What is the most important energy policy problem in San Francisco and keep the focus on solving that problem. If we focus on solving this problem, we are going to see whether PG&E wants to cooperate in solving the problem or not. There are some real important reasons why PG&E should want to cooperate in shutting down Hunter’s Point and assuring reliability. If they fail to do that and help interconnect these small power plants and cooperate on the solar, then you lay a stronger basis for the public need, the public necessity of taking over their distribution system.

Chairperson Gonzalez asked couldn’t the opposite be argued though that to the extent that we do community aggregation and some of the other things that you are describing, that we strengthen their ability to respond to the under rebuttable presumption theory?

Mr. Smeloff stated I think you do if PG&E turns out to be cooperative and helps the City in solving these problems, reducing load, and getting new power plants connected. Then the argument that there is a higher public good being served by taking over their distribution system is weakened.

Chairperson Gonzalez stated if it is weakened, then taking this approach does in some ways set you back.

Mr. Smeloff stated if that is your goal. If you goal is taking over the distribution system, this has the potential of weakening the argument that you would make at the time of condemnation. If PG&E is cooperative and helps solve these problems, I think they then could make the argument that there isn’t a higher public good being served here by taking over their system.

Chairperson Gonzalez stated correct me if I am wrong. PG&E right now can engage in activity that essentially amounts to taking themselves, even though they are not a government entity in some cases, can’t they? Under what circumstances can they do that?

Donald Maynor, Esquire stated PG&E can use the power of condemnation if it needs right of way. That is primarily the only time they use it is for purposes of right of way for transmission lines or if they had to acquire a generation site, they have a limited use of the power of condemnation.

Chairperson Gonzalez asked is there any other non-governmental entity that has that taking authority?

Mr. Maynor stated there are some unusual rules in the California law of condemnation. Private people can or they used to have that right under certain circumstances, private water companies, and even private individuals in certain circumstances. There is a very high burden they need to meet in order to use that.

Commissioner Fellman asked are there any entities outside of those regulated by the California Public Utilities Commission that can exercise imminent domain?

Mr. Maynor stated there was a provision in certain circumstances having to do with easements where an individual could actually go into court. The only other situation I am aware of is in the utility context. So the primary use of condemnation is by public agencies and public utilities. I might add with respect to that rebuttable presumption concern-oftentimes that issue could be addressed at the very beginning of a lawsuit, and it doesn’t necessarily have to take years to litigate that issue. Particularly in view of what’s happened with respect to energy rates and a company that’s been in bankruptcy, this presumption may not be as difficult as one would think.

Chairperson Gonzalez asked because of the reliability question?

Mr. Maynor stated before, there was an absolute presumption that the public need outweighs the current private use. They changed that presumption a few years ago to make that a rebuttable presumption. It is the kind of issue that you would address right at the beginning. You would make a motion before the court. I have condemned a lot of PG&E property. I have never heard them make that argument before. They likely would in this case because it is very important to them. That particular issue in my view is not one that would go on for years and years. I think it would be an issue that would be resolved up front in an initial proceeding. In view of the facts that have taken place in the last couple of years, meeting that presumption shouldn’t be that difficult.

Commissioner Fellman asked Mr. Smeloff, you told us that you met with the consultants to coordinate with them. For the record, how do you see LAFCo’s work interfacing with the work that you are doing in the Public Utilities Commission?

Mr. Smeloff stated the work that we are doing is putting together a resource plan, a vision for the future and blueprint on some steps that we could take to get there. As I understand it, your consultants are going to advise you on different organizational structures for a Municipal Utility on some of the risks and benefits of a municipal utility. We have data that we will be glad to share, and we have load data for all of San Francisco. We have information that we have collected from the ISO and elsewhere that would probably be easier for us to simply just give to the consultants rather than have them collect it themselves. We think we can help them out in meeting your goals by meeting with them and providing them with the information that we have.

Commissioner Fellman asked will the resource plan that you are developing contain any recommendations regarding structure also? Is that something you see LAFCo focusing on?

Mr. Smeloff stated I see that as outside of our mandate. We have been instructed specifically by the Board of Supervisors by Resolution that Supervisor Maxwell introduced to look at all practical transmission, load management, conservation, renewable and other ways of shutting down Hunter’s Point providing reliability and as an alternative to the Merant proposed power plant.

Mr. Maynor asked to what extent is Mr. Smeloff’s plan premised on the enactment of the aggregation legislation, and if it’s not adopted to what extent does that impede it?

Mr. Smeloff stated to build new power plants, as I mentioned earlier, the developers and owners of those plants are going to need a long term power purchase agreement. To prudently, from the City’s perspective, enter into a long term power purchase agreement, you need to have customers that you are then going to sell that power to. I would not recommend the City to buy power from a power developer and then try to market that in the wholesale market. I think that is too risky an activity for City government. The City really needs to have end users and to have load that it is willing to serve so you have a predictable stream of revenue then you can use to service that power purchase agreement or any debt financing that the City has entered into. That’s why I think it is crucial to implement this plan to have customers that you are responsible for. The community aggregation gives you most of the customers in San Francisco.

Chairperson Gonzalez thanked Mr. Smeloff for his presentation.

4. Public Hearing: Discussion and Adoption of the proposed SF LAFCo 2002-2003 FISCAL YEAR BUDGET (Government Code Section 56381). Action item.

Gloria L. Young, Executive Officer stated the Commission has received the staff report related to the budget that refers to the Cortese-Knox-Hertzberg Act requirement to adopt an annual budget. You held your first hearing on April 12, 2002. As previously stated, the budget before the Commission is identical to the one that was approved by the Commission last year in the amount of $458,750. As you may recall funds for LAFCo were set up as a project fund and currently there is $364,444 on reserve. As of May 8th this week, the Board of Supervisors Finance Committee released an amount of $125,000, which was a request from this Commission for legal counsel and for the energy consulting services contract that you have before you today. This will need to go to the full Board for approval on May 13. I should also note that the Finance Committee and the Board of Supervisors were both advised by the City Attorney’s Office that after the fiscal year no longer will the Board of Supervisors be able to reserve LAFCo funds. That is in accordance with the new law. The remaining balance that is currently on reserve with the Board of Supervisors, if in fact the Board approves the release of $125,000, is $239,806, which will offset the budget if it is adopted by the Board today. The $458,750 would include the $239,806, and the difference would be what would be allocated by the Board of Supervisors for the next fiscal year.

I should also note and you had before you and is in this packet as well a detailed list of what the budget entails. I should also note that Commissioner Ammiano spoke at the previous meeting and asked that I reiterate the desire to return to inside counsel for Fiscal Year 2002-2003. I’m supportive of that. I suggest that we continue to use our outside legal counsel as we go through this energy consultant services. The existing contracts with both Don Maynor and Nancy Miller are billable and terminate on June 30, 2002. We do have the availability to do a month to month so if there are in fact funds left, we could also work with them if we needed their outside services. I recommend approval of this item.

Chairperson Gonzalez asked are you saying that Commissioner Ammiano said that to you at an actual LAFCo meeting?

Ms. Young stated yes, Commissioner Ammiano expressed that at the last Commission meeting, which I believe was April 24th. He also indicated to me since he was going to be absent from this meeting today that it be reiterated to the Commission today. We have been very fortunate to have the two outside attorneys that we have used. There will be a cost whether we use inside or outside attorneys so you need to keep that in mind, and that is why there are funds budgeted for legal services.

Chairperson Gonzalez stated I’m sure we all have our own opinions about this item. I would not be inclined to change counsel anytime this year. We could discuss that at a later time.

Commissioner Schmeltzer asked how is that decision made or implemented?

Ms. Young asked which one, the decision to go with outside legal counsel versus inside legal counsel?

Commissioner Schmeltzer stated yes. Is that part of the budget?

Ms. Young stated that was a decision made by the previous members of the San Francisco LAFCo last year to seek outside services. It was as a result of the internal counsel indicating their lack of interest in supporting the LAFCo.

Chairperson Gonzalez stated when the contract is up in June, we’ll make a decision whether we will want to renew it, whether we want to go month to month, or whether to go to the City Attorney. To the extent that Ms. Young brought it up related to something Commissioner Ammiano was saying, I don’t want it to pass without others knowing that. I think it is going to be a contested issue when the time comes.

Ms. Young stated there is an issue that keeps coming up at our LAFCo meetings with respect to the funding and whether or not internal counsel would be less costly than external counsel. I have in fact provided you with information that shows it would be relatively the same.

Vice-Chairperson McGoldrick asked where is the information?

Ms. Young stated you received that information previously, Commissioner McGoldrick. It was a printout, and I do have it available if you would like to take a look at it. It was a printout of the expenditures of our inside counsel including their use of outside counsel as well. The amount for services was $153,699 from 2000-2001 if I recall correctly.

Commissioner Fellman asked did that also include some outside counsel?

Ms. Young stated absolutely. That is included in the printout.

Commissioner Fellman asked other outside counsel?

Ms. Young stated not the counsel I contracted with last year, but previous other counsel.

Chairperson Gonzalez stated that is a decision the City Attorney was making without any direct request of the LAFCo. They made their own decision to do that, and the LAFCo was essentially paying for it.

Ms. Young concurred.

Commissioner Fellman stated I would like to see this item discussed. How do we put it on the agenda? I agree with Commissioner Gonzalez that we shouldn’t approve a process on counsel while we are approving going forward with the budget.

Ms. Young stated it is two separate issues and as I said before, the current contracts that we have with the City Attorney expire on June 30, 2002. We can agendaize it for the next meeting. We do have the ability on a month to month to use their services until such time as this Commission decides how it wants to go. We could discuss it now or we could agendaize it for a future meeting.

Vice-Chairperson McGoldrick stated it seems like an item that is correlated to the budget, but also it could be considered extraneous at this point. We could approve the monies and decide who we want to give us the counsel.

Ms. Young concurred.

Vice-Chairperson McGoldrick stated there is no description in the budget that specifies one way or the other?

Ms. Young stated no, it is generic so it allows the Commission to make the decisions it needs to make.

Commissioner Schmeltzer asked then we can agendaize it for the next meeting?

Chairperson Gonzalez stated we’re not sure when the next meeting is going to be, but we’ll agendaize it before we get to the conclusion of the contract.

Ms. Young stated before June 30.

Vice-Chairperson McGoldrick asked shouldn’t we give ourselves a little bit more lead time as well as for our counsel?

Ms. Young stated we will be coming back to you well before June 30 because if the consultants have their first draft report, we can probably agendaize it at that time.

Vice-Chairperson McGoldrick stated you just put a condition on that. I think we definitely need to agendaize this item in June.

Ms. Young stated we will.

Chairperson Gonzalez stated it might be helpful in the interim to focus on what the issue is in terms of the purpose for changing counsel. Is it because we’re going to save money? Is it because you think you are going to get better services? Just having a general sense that you would like to go back to your previous attorneys given the nature of that previous decision that led us to seek outside counsel. If we’re satisfied with the representation we’re getting, and there’s not a significant cost difference. As I recall from our previous meeting if anything Ms. Young came forward and said the cost was less since we’ve been using this counsel. This is something to consider.

Vice-Chairperson McGoldrick stated we’ll have to compare whether we are talking about apples or oranges. If we are saying it costs us less did we tap into their services less, or are we saying the number of hours we billed? Did we use more hours from our previous counsel? I would have to look at the report that you just handed me in some detail. Indeed, if we are comparing time issues, I don’t know what we’re comparing. We would have time to do that in June.

Chairperson Gonzalez stated keep in mind you are dealing with the City Attorney’s Office. Because of the nature of work orders, in many cases they have a captive client, and your ability to bill clients at a particular rate and make certain decisions is such that drives the cost up for some of the departmental clients. One of the things I was always shocked at during the budget process was the extent to which you are budgeting to departments to pay for the work of the City Attorney. It doesn’t surprise me at all that the costs would be relatively the same if not lower not to use them.

Commissioner Schmeltzer asked would we be able to have the City Attorney representative who we would be considering be here at that meeting?

Ms. Young stated I will make that request to City Attorney, Dennis Herrera when we find a date that is available for us to meet.

Commissioner Fellman stated I would like to know some of the history. This is obviously a charged item. Is it correct that the City Attorney backed out of representing LAFCo or elected not to represent LAFCo? Or was it LAFCo’s decision? I would like to be directed to some of that history so I could read that.

Ms. Young stated you are more than welcome to also visit the web page. The minutes are reflective of that discussion and of what led to that discussion. It is on the web, and all of the minutes are available there on the LAFCo web page. It has a detailed discussion of how we got to that point, and it also includes a discussion of City Attorney’s Office here with their representative indicating their desire to no longer serve LAFCo.

Commissioner Fellman stated I would also like to add to the discussion or this agenda item, but not expand it to infinity. I think as a LAFCo we need to look at what we will be doing in the next year that the services will be provided for. I think we had some specific activities this year that Mr. Maynor and Ms. Miller were uniquely qualified to assist us with and advise us on. Going forward, what are our needs going to be, and which entity is best to serve that? If we are going to be working with the City anyway, there seems to be some synergies there with the City Attorney’s Office. So, I don’t know what the future holds for LAFCo. I would also like to suggest that we look at that as well in the context of the representation question.

Ms. Young stated If you want through the Chair, we can broaden the item that will be on the agenda, not only focus on the use of inside versus outside legal counsel, but also what the scope of work or work plan is for LAFCo for Fiscal Year 2002-2003.

Chairperson Gonzalez stated I think the point that Ms. Fellman makes is probably the strongest reason why absent some overarching reason, a change in counsel in June wouldn’t make sense particularly to the extent that any members of the Board or Commissioners are talking about putting items on the ballot related to the study that we’re preparing right now. The thought that we would change counsel after counsel has essentially carried us through a variety of public hearings, etc.--we have worked very closely with these consultants. For that reason, my earlier comment to Ms. Young was that I would not be inclined to change counsel this year. Obviously, depending upon what future issues the LAFCo gets involved in we’re still at the other point, which is if it’s not more cost effective, then?

I recall the representation by the City Attorney as very politically charged. I know we have a different City Attorney, but he’s not going to be coming to our meetings. It’s going to be the previous Deputies. It was a very awkward time. The LAFCo put an item on the ballot. The attorneys representing the LAFCo were appearing before the Board of Supervisors as the Board of Supervisors attorneys telling the Board of Supervisors that what the LAFCo was doing wasn’t proper. It was a very complicated matter. To the extent that it is an agency that is not the Board of Supervisors, we would want to think about not having the same counsel

Vice-Chairperson McGoldrick stated I think it is also important particularly for our two newer Commissioners to note that the composition of the LAFCo itself was different at the time. There were different perspectives that were being presented, and one could say that a representation that came out of this Commission and not necessarily from each and every Commissioner as individuals, represented a different approach to the use of the legal counsel and the interpretations of what the legal counsel’s advice was, as the Deputy City Attorney’s who came here presented that advice. There were different kinds of understandings or misunderstandings, agreements and disagreements which occurred with a Commissioner who is no longer serving on this Commission. I think it is important to understand that you have a different perspective from certain individuals and collectively as well.

I would still be open for further discussion, as Commissioner Fellman indicates, in terms of knowing with some specificity what the anticipated work would be. In understanding, as Chairperson Gonzalez indicates, that continuity in terms of the work that has been done by our current outside counsel, I think is paramount. But if we have other descriptions of specific work, it may be necessary to decide one way or the other on those specific items of work to be anticipated over the next year. I would not just be locked into the entire year. I would rather we look at what it is that we anticipate to be the work that is required. From the Deputy City Attorney or Attorneys that advised this Commission in the past, there is a history there. There is some memory there, and there is some expertise there that is worth considering. I am not saying one way or the other where I am going to go. But, I think all of those factors need to be weighted in terms of deliberating on this issue later on.

Commissioner Fellman stated I just have one point of clarification. Commissioner Ammiano’s statement or preference as I heard it was that it seems our funding cycle is not in conjunction with our operations cycle. That the report and what we do with the report is going to go beyond this fiscal year. So what he was proposing is that, as I understand it, is that we continue with current counsel until we finish this project phase where we go through the consultant’s report, and get the results of that which will go beyond the fiscal year.

Ms. Young stated that is my understanding. There is a staff person from his office here, Brad Benson, that could speak to Commissioner Ammiano’s intent. If in fact the Commission was interested in bringing the legal services back inside this organization, I was concerned equally that at least it occur after we complete the cycle of information that we need with respect to the consultant services. It seems to me that we needed to keep that consistency as we work through those processes. So, that was going to be my caveat.

Commissioner Fellman stated that is critical to keep in mind here.

Vice-Chairperson McGoldrick asked about the law that changed. What law was that? The Board of Supervisors can no longer provide a reserve?

Ms. Young stated last year the Cortese Knox Hertzberg bill went into effect and what it indicated was first of all, the LAFCo has to approve a budget each and every year, and that the year 2001 was the base year budget for LAFCo. It took away any opportunity for the Board or another legislative body to have control over the LAFCo’s Commission’s budget. When this entity was initiated in 2000, the Board of Supervisors placed a large portion of the funds on reserve, so we have been existing with the existing funds and going back for a release of reserves as we needed it, and did so this week. The $239,000 that is currently on reserve would be no longer on reserve. That is per the City Attorney’s advice to the Board of Supervisors. It was made as a part of the Budget Analyst’s Report this week when the Finance Committee heard LAFCo’s item on the release of reserves.

Vice-Chairperson McGoldrick asked what do we in accountancy language call the place where the money is held?

Ms. Young stated it is held right now on reserve in a project fund. The Controller’s Office is working right now with the Mayor’s Budget Office so that when the Board adopts the new Fiscal Year Budget 2002-2003, those funds will be moved from a project fund. It was set up as a project fund because it was felt that it might not last past the last fiscal year, and it has. It was anticipated that it was going to be a short-term process, and that is why it was set up in project funds, and that is why it was able to have reserve funds. Recognizing that this is an ongoing entity, it does need to have its own budget and not be set up in a project fund that is not available in terms of expenditures. It will be moved from the project fund, and the Controller’s Office could speak better to this than I could, but be placed in the regular budget document that the Board and the Mayor will be approving this year.

Vice-Chairperson McGoldrick asked what will we be asking the Board of Supervisors and the Mayor to approve, the $458,000?

Ms. Young stated the Mayor’s Budget Office specifically, the Budget Analyst, Taylor Emerson and my office have been working closely with Deborah Newman from the Budget Analyst’s Office. What will be requested this year is new monies is the difference between the $239,806 which is currently on reserve and the $458,750 which is our requested budget, which was the baseline budget from last year. So a little over $210,000.

Vice-Chairperson McGoldrick stated it is about $220,000 almost. So if we need to go and ask for money again, we’ll just ask for money?

Ms. Young stated if you were to expend more than the $458,000 yes, you would be asking for a supplement.

Mr. Brad Benson, Legislative Aide to Supervisor Ammiano’s Office stated I was not present when Commissioner Ammiano made the comment about legal counsel for LAFCo. I would suspect that he would want to discuss a lot of the issues that all of you have raised at a later time.

Vice-Chairperson McGoldrick moved to approve the adoption of the proposed SF LAFCo 2002-2003 Fiscal Year Budget; duly seconded, and unanimously approved. No objection.

Public Comment

No public comment.

5. Report by Commissioner Ammiano regarding the Public Power Authority Measure.

Mr. Benson stated that Commissioner Ammiano regrets that he couldn’t be here today to talk to you about this item. This is one of the principal projects that he is going to be working on over the next several weeks in anticipation of the completion of some of the work that LAFCo has contracted for on public power feasibility. I understand from Commissioner Gonzalez that the Commission would appreciate a brief history of the drafting of Proposition F, which was on last November’s ballot and possibly a few words about what Supervisor Ammiano might envision going forward coming the November ballot. Is that correct?

Chairperson Gonzalez stated yes.

Mr. Benson stated I am giving you a copy of a revised version of Proposition F that Supervisor Ammiano introduced to the Clerk of the Board of Supervisors shortly after the November election. It is substantially the same as what was on the ballot with a few minor changes. In drafting this measure which was placed on the ballot at the same time as the Municipal Utility District measure that was put on the ballot, Supervisor Ammiano went through a series of drafting meetings with different constituencies. He met with environmental groups, business groups, homeowners, consumer groups, and worked closely with the City Attorney and also got a significant amount of advice from the Public Utilities Commission staff about obstacles that they saw with the current Public Utilities Commission. Through that consultation arrived at a measure that would replace the Public Utilities Commission, which is currently an appointed Commission with an elected Board with seven members elected by districts with a number of powers that are enumerated in measure, the ability to appoint a General Manager, setting forth specific goals and objectives for the agency related to consumer protection and environmental issues.

As you well know, the PUC is the steward for very far reaching properties throughout the state of California all the way up to Hetch Hetchy. There are a broad number of environmental issues involved. We looked at issuance of debt to finance capital projects and to pursue public power. We looked at rate setting and how the PUC sets rates for both water, sewer, and also power if it were to enter into public power. We looked at a variety of options and asked the agency to look at a variety of options for pursuing public power including some that you have heard Mr. Smeloff describe from the PUC. Community aggregation was one of the options. Taking over distribution facilities owned by PG&E was another option that would have been studied. The third option was developing new generation capacity in San Francisco. The final major provisions in the legislation were negotiated at length with representatives from organized labor about how employees from PG&E might become City employees if the agency pursued imminent domain and took over the distribution grid in the City. That’s about as brief a summary as I could provide about what’s in the measure and the process that he went through. He will probably want to consult with Commissioners and other members.

Chairperson Gonzalez stated I don’t remember asking for a brief summary. You’re free to take as much time as you want. I thought it might be more helpful to break down some of the specifics rather than overview it.

Mr. Benson stated I would be happy to talk about any of the specific questions you would like to talk about. Let me just continue by saying that there are deadlines for the Board of Supervisors to draft and consider Charter Amendments that are proposed for the November ballot. This measure has already been introduced. The last day to introduce Charter Amendments for voter consideration is May 20th. Then, it has to sit under public review for a 30-day period of time and then Charter Amendments are scheduled in the Rules Committee of the Board of Supervisors and need to stay there under public review if they are substantive amendments to the measure. Chairperson Gonzalez, the final submittal date, is it in July or early August? I think it is in either later July or early August. So as you can see the time is not a great deal of time. The initial report back in terms of the LAFCo feasibility study that you are pursuing would occur sometime around the end of June at least in terms of draft findings. The Board would need to act fairly quickly on those draft findings to get those recommendations into a new Charter amendment that would be presented to voters. Supervisor Ammiano wants to be inclusive in drafting a measure, bring constituencies who care about this issue together to talk about it because it affects a lot of folks. I know that of particular concern to him will be involving people in the Potrero and Bayview communities who are concerned about some of the aging power plants in their neighborhoods and really getting their advice about what should be in this measure.

Back to the specific components, do you want me to walk through the different sections?

Chairperson Gonzalez stated that would be best.

In the new draft that Supervisor Ammiano introduced in November, Page 3, Section 8B.100 just establishes the agency, the Municipal Water and Power Agency to succeed to the functions of the Public Utilities Commission. That would be effective in January of next year.

Section 8B.101. Agency Goals and Objectives calls for a public hearing process to invite comment on agency goals and objectives. It asks the agency to adopt and then update goals that deal with the provision of water, water pollution control, and electric service to San Francisco residents, businesses and departments at rates that are both affordable and stable for ratepayers. I’m not going to read from the measure, but it includes other goals and objectives that go to health and safety of the public, protecting and managing lands and resources. Under the jurisdiction of this new agency what is currently the PUC, and sets further on aggressive goals in terms of implementing energy conservation and renewable energy programs, storm water overflow programs, odor control in certain neighborhoods that are complaining about odors from sewage treatment facilities in San Francisco, etc.

Section 8B.102. Governance and Duties. As I described before, a seven-member Board of Directors would be elected via district elections that would need to be a process to establish lines for the seven districts. The City recently saw that process occur for the redistricting for the Board of Supervisors. It is a complicated process but something that would need to be undertaken in order to elect seven members by district. The elected Directors would act through a General Manager who would actually manage the rest of the agencies employees. They would be compensated elected directors, and they would be subject to campaign contributions and other ethics laws in the City. The agency would appoint its own general counsel so similar to the discussion that you’ve been having, decide who would represent the agency. Some issues that are specific to public power. Right now the City sells some Hetch Hetchy power in some months of the year to Modesto and Turlock. Irrigation districts. The agency would have precluded that if there was a need to supply residents or businesses in the service area here in San Francisco, which is allowed under those contracts with some notice to those districts. The agency would be able to enter into joint powers agreements. The agency would be able to issue revenue bonds or other forms of indebtedness provided the Controller certified that the agency had revenue to meet those obligations. Had this measure passed, the City might not be in as much of a debate as it is now about how to finance improvements to the water and sewer enterprises at the PUC. Along with that ability to issue revenue bonds, voters would maintain the ability to trigger referendum so that if they opposed the issuance of a large bond, they could have gathered signatures to put it on the ballot.

Chairperson Gonzalez asked what kind of vote is necessary for this measure to issue the revenue bonds?

Mr. Benson stated a majority vote of the agency directors would have been sufficient. On advice from counsel, the agency directors would have had to recommend the exercise of imminent domain to the Board of Supervisors for the acquisition of property and facilities. Again, on advice of the City Attorney, the Agency Board of Directors would have recommended to the Board of Supervisors the adoption of water, water pollution control, and energy impact development fees or connection fees. Those are powers granted under state law to the Board of Supervisors and can’t be transferred to the agency board. The measure also dealt with an issue that is still being debated around what has been a consistent practice to transfer surplus funds from the Hetch Hetchy enterprise and the PUC to the General Fund of the City and County for general City purposes. This would have prohibited any General Fund transfer for a period of five years and then created a threshold where it would only be allowed by a two thirds vote of the Board of Supervisors.

Section 8B.103 starting on Page 12 dealt with budget issues.

Chairperson Gonzalez asked was that specifically where you are thinking about the Hetch Hetchy rebuild for that reason or just general infrastructure?

Mr. Benson stated I think this was something that Supervisor Ammiano heard complaints from constituencies who felt like it was unfair that surplus Hetch Hetchy revenues would be transferred to the General Fund when capital projects for water and sewer needed to be funded and felt like that was inappropriate. There is also the perspective of finance managers at the PUC and maybe people who are rating the bonds for the PUC who say when there is an arbitrary amount of money being taken out of the agency on an annual basis, that it is not as good from a fiscal perspective, and that it would be better that it be a fixed amount or no money coming out of the agency.

Chairperson Gonzalez stated particularly now as the public is becoming aware of a very large bond that is being suggested for the rebuild, it would seem that if this measure clearly earmarked money to that specific project, not just that it obviously could just stay in Hetch Hetchy and would be used for those projects. But if you went so far as to underscore that, I’m sure it would strengthen public support.

Vice-Chairperson McGoldrick asked, the last two fiscal years, the one that we are currently in and last year, there were no monies surpluses transferred to the General Fund from the PUC?

Mr. Benson stated from my understanding is it is unlikely to occur any time in the near future.

Section 8B.103. Budget on Page 12. On advice from PUC Finance Managers, set up a schedule of priorities for how revenues to the PUC or the Municipal Water and Power Agency would be used. This section actually describes how they should set up their ten-year capital and long-range financial plan. A lot of criticism of the PUC has been that it has not engaged in long-range planning. Also called for a five-year business plan and then two-year budget. The goal being that more long range planning, more stabilization of rates would occur. A lot of these sections came when Supervisor Ammiano consulted with current PUC staff and other utility experts on what best practices were for utilities.

Section 8B.104. Rates. On Page 15. Describes a rate setting methodology that is sufficient to meet bond indebtedness by the agency to meet operating costs, long-term capital costs and maintain a prudent reserve, all of which are standard utility practice, adopt rate structures for each utility service designed to induce conservation and deter waste including contemplating possible surcharges to fund implementation of water conservation programs, environmental and public health programs, odor control programs and/or alternative water pollution projects or waste water treatment projects. Also looking at low income rate discounts for cable service, for energy service, it’s fairly standard to have life line rates for classes of ratepayers who cannot afford to pay. This enabled the agency to consider those issues and also allowed for if the agency were to enter into public power and consider taking over PG&E, PG&E pays the City franchise fees that are fairly substantial and part of the City’s revenue for general City purposes. This provision would have required that the agency set up surcharges sufficient so that the City would not have lost money.

Section 8B.105. Public Power Feasibility and Mandates starting on Page 16 looked at public power feasibility and mandates and gave the agency direction to look at public power and how it could be provided. Looking at generation, looking at community aggregation, looking at taking over distribution facilities.

Section 8B.106. Labor Relations on page 17 was probably one of the most complicated portions of the drafting process. Supervisor Ammiano met at length with effected employee bargaining units who currently represent employees working with the PUC and others who work at PG&E to figure out a process by which people who are employees of a private company might move over and become City employees, which is not an easy thing to figure out. There are a lot of complicated details there. That I think sums up the major portions of the legislation and questions.

Chairperson Gonzalez stated it is not a major item, but with the Department of Elections, with the creating of the new lines, I suspect that requires additional work on their part in terms of being able to segregate out balance for any new districts. I am wondering if there is any other way to do it. I guess there isn’t a way to utilize the state assembly lines or something like that.

Mr. Benson stated I think that the rules for establishing districts are pretty standard, the bounds of population, keeping constituencies together, keeping communities and interests together. The number chosen here was seven. I think that in the initial drafting process people felt like that’s the number of people that we have on the School Board, that’s the number of people we have on the Community College Board, and that’s the current number of PUC Commissioners. It made sense in terms of the size of the Utility Board. You’d have to draw new lines. It would create new ballot types, which is I think what Commissioner Gonzalez is referring to and it would increase costs of running elections. The way around that would be to consider a larger Board that ran in the same lines, as the Board of Supervisors for instance.

Chairperson Gonzalez stated I think a lot of what was driving the district lines was the fact that that`s how the Municipal Utility District kind of worked with some districts. Although that was complicated and that you got elected citywide.

Mr. Benson stated you had to run citywide, but represent a geographic area.

Chairperson Gonzalez asked any thought on rather than seven districts, just doing it like the Community College Board or School Board? Although there is a lot of talk now about taking the School Board and moving it to District lines.

Mr. Benson stated those would be policy questions that I think would be better for my boss to answer.

Public Comment

Mr. Richard Knee asked if he could address a question to Mr. Benson.

Vice-Chairperson McGoldrick stated I think that it depends on the question.

Chairperson Gonzalez stated I think Mr. Benson could let us know if he can’t answer.

Mr. Knee stated I had heard that there was some discussion of switching in the new amendment, the proposal that is to be put before the voters this coming November, to an appointed rather than an elected Commission. I would like to find out if that is the case.

Chairperson Gonzalez stated I think the point that Mr. Benson just brought up was that there are certain things that he would prefer for Commissioner Ammiano to answer. Although there was a lot of discussion about an item for this November, Mr. Benson was primarily going over last year’s item and just giving everybody a lay of the land.

No further public comment.

Public Comment Closed.

6. Report on the status of Assemblyman Kelley’s bill (AB 2266).

Mr. Maynor stated we were concerned when we saw this bill because it had some really ugly provisions in it. It would essentially preclude any meaningful opportunity to become a municipal utility. So we understand that that bill is no longer active. We will continue to monitor it and if there are any developments there, we will let you know.

Public Comment

No Public Comment.

7. R. W. Beck, Energy Consultant Status Report on the Scope of Work and Timeline for the SF LAFCo Energy Services Study.

Mr. Mike Bell, R. W. Beck, stated I would also like to point out that also in attendance this afternoon are Barry Flynn of Flynn Resource Consultants and Ken Mellor, who is also with R. W. Beck. I would also ask if they would like when there are questions to be addressed by each of their areas, if they would like to step forward. I would like to make a few points before I get into the actual presentation. I would like to start out by saying that we began this process by first meeting with the Task Force members here about a week and a half ago to get some input from the Task Force. We’ve also had meetings amongst the three consulting firms Beck, Henwood Energy Services, and Flynn Resource Consultants to work on this scope and come up with a plan, a timeline, and clear responsibility assignments so all three of us are in lock step with one another as we proceed. That results in the scope that we will discuss with you this afternoon.

We also took advantage of our time here today with Mr. Smeloff to talk with him about the work that he is doing and about the direction that he is taking. Also, to find out from him what data he has already collected and has available to him so we are not out searching for information that is already readily available. As Mr. Smeloff noted, he has offered to help provide that information to us. I would also like to point out, based on our discussion with Mr. Smeloff that as he outlined today, the issues that he is addressing are largely generation and transmission-related. Because of the severity of the situation looking out to 2004, he is very much focused on what happens between now and then. So it would appear from my perspective, that the work that you are engaged in certainly covers those same areas. But, the focus of your attention is more long-term and also takes into account other components such as distribution and service options that he hasn’t spent quite as much time with.

With that, I would like to introduce the scope by saying what we have done is identified major components such as the generation, transmission, distribution, as well as customer service, rates, energy efficiency, renewables, and the like in terms of our scope of our work. What we intend to do then is take that and look at the different options that will be available that being continued service from PG&E, City services, and municipal options, and report back in the final report. With that, let me start to walk through the presentation.

What we would envision the scope to include would be an introduction section that would deal with the energy market and what’s happened in the recent past and how that impacts the City in its future decision making. We also would talk about the unique aspects of San Francisco’s electric system, some of which you’ve heard about today from Mr. Smeloff. It is a unique system and is different from many other locales based upon how its been built out and by its geography. The wholesale power generation cost is largely made up of three components. I believe that we should be able to get much of the data we need for this area from Mr. Smeloff.

The first section would be the position report, which would identify the City load requirements, area generation, and status of the wholesale market in the City. Potential cost outcomes would begin to get into energy forecasts and what happens under different scenarios such as spot market prices, continued service as is today or alternatives along the lines of municipal development or options that would be available to the City.

Commissioner Schmeltzer asked will you be considering the potential fixed charges that could be imposed by the DWR contracts through the CPUC in that section?

Mr. Bell stated that will probably come into play not only in this section, but in the distribution section. A lot of these issues are interrelated, but that certainly is a very important component of this study. The results of how that plays out could obviously have a big impact on decision-making. Yes, that would apply not only here, but in the distribution section of the study. Also, the wholesale power market risk factors. What we would identify there is just what the risks are in the generation component of the market as well as what the opportunities are to mitigate that risk, insulate one-self, and protect one-self from those risks.

The transmission evaluation would also discuss the current environment, where things are at and the activities that are taking place today. We would also look at alternatives to improve reliability as a key component. This again will interact with the generation piece because none of these options stand-alone. They need to be considered in the whole. There also are potentials to avoid future load interruptions depending upon both physical improvements to the transmission system as well as organizational issues that will be around these various alternatives. Transmission pricing is going to be important. There are directions that the Federal Energy Regulatory Commission is taking and the ISO is taking regarding future pricing of transmission resources. Those will be identified and included in the report. As well as local control issues, which obviously come into play when you talk about reliability and the ability to avoid future interruptions of service.

Commissioner Schmeltzer asked could you give us a couple of examples of the types of local control issues that you are thinking of?

Mr. Bell stated I think a good example would be with regard to trying to increase reliability by participating and supporting, as Mr. Smeloff noted, the development of say, Jefferson Martin. Or, taking an active role in both the physical construction of facilities or organizationally, creating a structure that would insulate the City from blackouts. Along the lines of for example, what Los Angeles Department of Water and Power had done in order to free themselves from mandated rolling blackouts and the like--a combination of those items.

With regard to distribution, again we would look at the current environment, how that stands, and where we think it’s going to go in the future. Look at a full range of potential retail service options ,and I would envision that being anything from aggregation of services to acquiring wires and facilities. There is a lot in between those options. So, articulate them and identify what they are. I will show you in an upcoming slide on conclusions, pros, cons, risks, costs, etc., which really gets to the costs of pricing issues and again the local control issues associated with involvement in the actual distribution system.

Commissioner Schmeltzer asked are you going to identify what additional studies would be recommended to get when you say that there are potential retail service options like aggregation or acquiring the wires or a range of other things in between. What the pieces would be to get there?

Mr. Bell stated yes. I will come back to that in just a minute. Then identify other considerations that really transcend all of the generation, transmission, and distribution areas. Those are going to be important no matter what option or which issue is ultimately decided upon. Those include things and items such as conservation, efficiency, renewable resources, rates, pricing, economic development, etc. They will come into play no matter which option is pursued.

Inclusions are where we think you will get the most value from the report. What we would envision is identifying the range of options that are available, summarize the pros and cons of each one. All will have strengths and weaknesses associated with them. Each one will have risks and benefits. We would identify just what those are and how they play out in each of the individual options. One thing that there is still a lot of uncertainty about is legislative and regulatory change. What we would do in the report is identify those key issues that have yet to be resolved, but will obviously have a big impact. The example of exit fees and non by-passable charges is a good example of that. Back to your point Commissioner, identifying the next steps for each of the options. What would need to be done, milestones, identifying the major pieces in order to pursue that option as well as timeline for implementation, should you determine to move forward with any of the options.

Commissioner Schmeltzer asked will you have projected cost estimates?

Mr. Bell stated we could that. I would say those cost ranges at this early stage are going to be pretty broad. Sometimes, it is difficult--you put a number out there and people really grab a hold of it. We can do it, but I would caution at this early stage that it would be a broad range.

Commissioner Schmeltzer asked that may be something that the Task Force could consider when they see drafts?

Mr. Bell stated I think that would be helpful to do that in that process.

Commissioner Fellman asked could you please comment how you see your work interfacing with what Mr. Smeloff is doing? He gave us your prospective and I would like to hear yours.

Mr. Bell stated I think that the perspective here, and this really should come from the LAFCo. But my vision of that is that this is a longer-term perspective that really looks out over a longer period of time in terms of organizationally and structurally what options are there, with particular regard to the distribution side. I see Mr. Smeloff, and for good logical reason, focused on the near time future in terms of generation, transmission, and reliability. Right now, those are real critical issues to the day to day operation of electrical facilities here in the City. I would envision that what we would look at would be, where do you want to be 15 or 20 years from now. What are the choices that could be made today to position the City to be at that position at that point in time. From that standpoint, that would be what would provide you with the best value.

Commissioner Fellman asked do you have a rough estimate of the proportion of the background transmission discussion and this more interesting part? Do you have a sense of how that is going to divide up in your report?

Mr. Bell stated not just yet. I think we need to get into it. From what I have seen form talking with Mr. Smeloff today, a good deal of work and effort has been put forth in the generation and transmission components. Mr. Flynn has actually been working with the City on transmission issues, and I think he is in a good unique position with regard to this report to report on where those are at. We’ll work through that in the coming weeks and make certain that we have covered all of those bases.

Commissioner Fellman stated just as a general comment, given that the City is already engaged in a resource planning process, it would be useful to spend less time on the background and more time on what do you do with the resource plan from my perspective.

Mr. Bell stated I think what will be a value to us is the Task Force. As you will see when I get the schedule, what we are trying to do is trying to make sure that we have at least two or three more meetings with the Task Force. I have structured it so that we have a couple of drafts out there also to make sure that the work produce as we proceed is positioned such that it fulfills your ultimate objective.

We prepared a responsibility matrix as much for our own planning purposes as anything else in terms of structure and who is going to what work. What we did was we collectively got together and determined which of the firms has the expertise and resources to fulfill those areas. This chart represents what I would describe as the lead-consulting firm for each of those areas. As I mentioned earlier, most of these are interrelated and if you make a change and an assumption for one, it’s going to impact in other areas. I don’t want to leave you with the impression that each firm is doing just what’s in that block because we are going to need to talk to one another and make sure that as we go forward, that we’re all consistent. But for purposes of who is the lead, that is what this chart represents. I would say in the discussions that we’ve had so far, the interaction between the three firms has been very good. I was a little worried about having to coordinate three different agencies in this process, but I think we’ve already seen that each of us has unique skills, abilities, and knowledge that will make the final work product stronger for doing it. I know there were some concerns on the Commission about this group being too large, but from what I’ve seen thus far, it’s working pretty well.

The other thing we did we looked at the responsibilities and the work product that we envisioned, and we came up with a budget amongst the three of us that we all could agree to that covers the work product that we envision. We distributed that work and came up with a budget that is within the amount that was discussed at the last meeting. Finally, with regard to the timeline. We would envision having a first draft available by the end of this month. We’ve positioned three-future Task Force updates in that process. We may want to add one more if your time permits or if during the course of discussion, we see certain areas that need to be addressed in more detail. I would err on the side of making sure that we are communicating well particularly with the Task Force during this process because we don’t have a lot of time if we are going to have the report done by the end of June. As in a project management role, I prefer that we have the ability to do that if necessary.

The second draft then would be available the middle of June. What we envision the final report would be delivered the end of June in order to meet your timetable. With that, if you have any further questions, I would be happy to address them.

Chairperson Gonzalez stated I have a question for Ms. Young related to your thoughts on whether or not you think it would be a good idea to have public meetings or any kind of presentation of the final report on the Energy Services Study.

Ms. Young stated when we first envisioned the schedule of not only the letting of the bids, but also receiving and having the interviews, etc., we looked at an opportunity for a public hearing to allow members of the public to have an opportunity to express their feelings on what the actual results of the study would look like. What we modified the plan to do was to have a public hearing for the review of the first or second draft at a time when we could have public comment before we finalize the plan. What I would suggest for the LAFCo Commission is that we have an evening meeting for when we get that first draft so the public has an opportunity to come and comment. That would give an opportunity for the second draft to include the comments that come from the public hearing on the first draft. Around the 17th of June is when the time schedule says we could schedule an evening meeting to allow public testimony. That’s within the information that was provided to the consultants. I think it was discussed when we had our Task Force meeting

Chairperson Gonzalez asked to our counsel, Is there any part of the proposal that you want to comment on?

Mr. Maynor stated I had a chance to look at their outline this morning and last night. We’ve already talked more about this briefly earlier this afternoon. I think the content of what they’re going to have in the report is pretty much what I expected them to have. My preference would be that the form be presented a little bit differently. The way I would suggest, and Ms. Young is going to hand out a rough draft of something I put together this morning that gives you an idea. I am not sure this is necessarily the right way to do it. It will give you a flavor of what I had in mind. I think it works well with Mr. Smeloff’s plan as well. I am very pleased that he was here. Whenever he comes, we learn a lot of information from him, and it is very helpful.

When we went to the hearings, we learned that being a municipal utility or any type of utility involves a number of different parts to it. I thought it would be helpful particularly for a person who doesn’t have a lot of technical expertise to use this document and learn from it. One way you might be able to do that is if we had an Executive Summary that sort of outlined the purpose of the study, but then give a little primer and made sure that they understand what some of these terms mean. Then get into the description that is unique to San Francisco that Mr. Smeloff talked about. Then as you go through the various components of being a utility, you actually could include within that:

· What they’re currently getting with PG&E or likely to get in the future from PG&E in the state.

· What the City is doing or proposes to do, and that is when you would get into Mr. Smeloff’s plan.

· Then also discuss what a municipal utility could do.

For each one of these sections, you would have an easy comparison. You also would have different layers of complexity in this report. My suggestion would be to make sure that the text of it is not more than 50-60 pages, and then have more of the technical appendices attached to it. So people that want to get more in the meat of these things can see it through the appendices or some of the more technical studies. The average person could read through the primary text and come away from reading the report with what the differences are:

· What they get from PG&E?

· What they are going to get with the City?

· What they are going to get with the City if they are going to get their aggregation legislation and have the plan that Mr. Smeloff is suggesting, but also what the possibilities are with the municipal utility?

I think it would be easier for somebody to digest. You could put this altogether in one large analysis describing the whole thing, and maybe that’s a better way to do it in the sense that’s how utilities operate. You don’t do generation in isolation from transmission. It all kind of fits together. However, to read all of that and digest it and then come back down to the conclusions at the end of the report might be a bit much to ask. That is just a suggestion. It may be a bad idea. I am not sure. Sometimes when you get a draft and you lay it all out, you change your mind on these things. One advantage to doing it my suggested way is it will make sure that you cover all of the important issues in comparing the various options. I actually feel stronger about it after hearing Mr. Smeloff’s plan because I think it is a way to compare the three options.

Chairperson Gonzalez asked you mentioned it to the three consultants and it sounded like you just had a brief discussion?

Mr. Maynor stated I think they can speak for themselves. I think Mr. Mellor would like me not to get funded after June. We have different approaches. The other part about it that is important is that there be some perspective to this, that it not be a typical LAFCo study with a lot of EIR’s, with a lot of technical information. I think this is a little bit different, and you want to get a historical perspective of utility industry where it is today and where it is heading. Otherwise, if you just get a snapshot, I think you are going to miss it. I was pleased to hear R. W. Beck talk about having the longer-range perspective because I think it is very important in this type of analysis.

Chairperson Gonzalez stated I do think Mr. Maynor, in the course of the telephone call that many of us participated in, seeing it in writing, you did articulate this approach. I think I like the benefit of within a particular subject area getting a comparitive opportunity, and I think that is attractive.

Mr. Maynor stated we proceded that way when we went through the public hearing process, and that is why, when I was going through that, I sort of came away with that feeling of addressing each component of the utility business. It doesn’t necessarily fit well with the way a utility actually operates because it is more of an integrated sort of proposal. That’s the bad part of it. I think you can also include a section in the report that mentions that and talks about why these things are all integrated.

Commissioner Schmeltzer stated I think it is a nice way of trying to draw out that comparison so people can see it. I think Mr. Smeloff’s report did something similar in portions of the report that came out last month. I think it would be nice to have all in one place, all of the background information about all of San Francisco’s and California’s history in electricity.

Mr. Maynor stated I don’t mean the whole history, just a little bit.

Commissioner Schmeltzer stated I would like to see references for where some of the material where it’s well written could be easily found and that we not spend too much of the short time and money that we have restating what’s been said elsewhere. I think identifying where that information is would be sufficient.

Mr. Maynor stated I didn’t mean that it should be a scholarly topic. In fact, I suggested that if most of this is in our heads, we could pull it out pretty quickly. I think it is important, particularly today, when there is a question going on at the PUC whether to go back to the old way of regulation. If you simply looked at what’s happened the last two years and didn’t look at what it looked like ten years ago, I am not sure you would capture the whole picture. I think you need enough of it to be able to get the perspective. I was a history major. Otherwise, you are going to get a snapshot, and that is not necessarily enough. I agree with you, you don’t want pages and pages of history. There is a lot written on these subjects, and you really want a condensed version in a couple of paragraphs. That is what I had in mind.

Chairperson Gonzalez asked to hear from our consultants.

Mr. Bell stated first, I would like to thank Mr. Maynor. He called me this morning and told me that he had some concerns and was gracious enough to meet with us just before this meeting to express those. What I got from our meeting was that from a technical standpoint, we don’t have a problem there. We are kind of looking at the same issues. I think where I saw Mr. Maynor’s comments as being valuable was with regard to presentation. We are after all consultants and engineers and more focused on the technical side of these issues. What is going to be of value for the Commission is a report that can be used in the public and not necessarily worded as if it were delivered to a utility, which most of our reports are.

What I would suggest is what we could do next is begin to fashion the structure and the presentation style of the report. Before we get you that first draft before the end of the month, what I would like to do is get you an outline and maybe some language associated with it that would get into the style of presentation and how we would piece this together and work with the Task Force to make certain that it addresses the needs that Mr. Maynor has expressed here. I think that would be helpful for us to not get too far down the road in terms of structuring it. It’s not along the lines that would be of value.

Commissioner Schmeltzer asked that would be information that you would provide to the Task Force before the next proposed phone meeting?

Mr. Bell stated before the first draft comes out. I think that would probably be the best way to work with it. That way we get to begin to put it in the format perhaps as Mr. Maynor described and make sure that you get a chance to see that before we invest three or four weeks in the effort and find we need to change it around. Again, I don’t think there is a fundamental problem here. I think it’s more in terms of how the work is presented as opposed to what we’re doing.

Commissioner Fellman stated I think it is a question of presentation. This comparitive aspect is what we discussed in our Task Force meeting. I thought it worked well to schedule those meetings using a conference call and Ms. Fish and Ms. Young to just send out e-mails, and we pick out the times that will work. It was very focussed. We set an hour or an hour and a half, a limited time with an agenda. It would be helpful to get information in advance to have a chance to look at it so we could give you reactions rather than going through it. I feel we are always one step behind in the process. What Mr. Maynor gave us today reflects what we talked about. I think if you two talk beforehand and what kind of format you would like us to look at, we can look at it ahead of time and give you our feedback in real time.

Mr. Bell stated certainly. We recognize your time is valuable too. I don’t want to have so many phone calls and meetings that it intrudes upon what your other schedules have. From our standpoint, it is helpful to get that regular feedback and make sure that we’re not wasting resources or going down a path that we ultimately don’t want to be on.

Commissioner Fellman stated I think it’s always tough when you do reports like this because if you decide to parcel it out under topics, then you don’t necessarily have the comparitive analysis. If you decide to parcel it out under the comparitive analysis, you are duplicating some of the topics. That is going to be a juggling act. That is why we’re paying you to figure out. I think from my perspective, even if we talk about it really does help to have something in writing to reach to. We don’t want you to spend all of the time preparing for conference calls, but I think if you give us a product that will be used as your Table of Contents, that will be really useful and some examples of charts. We also have Ms. Miller’s proposal. Did you want to separate those out? We are considering them for one report now.

Public Comment

Mr. Kalish stated I would like to second what Mr. Maynor just recommended. Actually, take it a step further to let R. W. Beck know now that this type of Executive Summary, if you will, is something that we would expect them to create for the purpose of bringing this to the public and not just for public comment or a public hearing, but rather to reach out to the public in a complete and thorough outreach program presented by R. W. Beck to organizations varying from the Board of Supervisors, the Board of Supervisors staff, other elected officials, other appointed officials, other environmental community, just any kind of organization that might in any way be interested in this throughout the City to really inform them. I feel that there is a responsibility of the LAFCo to the public, and this is the best way that it can realize that responsibility. The reason for having R. W. Beck do the presentations is that they have the credibility and the independent view that they’re not trying to push one agenda over another, so they will be above suspicion, so the chips fall where they may as far as the study is concerned, and get all of their findings out to the public. I would like to see them be the ones that do it.

Nancy Miller, Esquire stated on the Scope of Services that you have from me has to do with complimenting the services that your consultants will be provided. What I intend is to briefly summarize for you different types of governance structures in dealing with the issue of providing electric services. Depending on the recommendations, pros and cons that the consultants give you, there will be a section of specific ways that you could in San Francisco implement those depending on your Commission’s decision. Those would include obviously amendments to the Charter designating additional duties to the SFPUC or perhaps similar actions similar to Measure F and then revenue type actions. I would also spend a little time on the Municipal Utility District and then the idea of City to spot municipalization issues that we have discussed in the past. This is all dependent upon where your consultant goes in terms of the issues that they spot as pros and cons depending on the different types of governance.

Commissioner Schmeltzer stated I think that sounds good.

No further public comment.

Public Comment Closed.

8. Future Agenda Items

Chairperson Gonzalez asked Ms. Young, that last item was not an action item, was it? Or was it informational in terms of how we are proceeding?

Ms. Miller stated we are assuming that we are proceeding. Unless there are some indication that you want things to go different than how we presented them to you, then we will be proceeding as we have stated. I just want to make one thing clear. In that first draft, we will be asking the consultant to also have recommendations so in the event you want to take action in early June, you will have that opportunity.

Chairperson Gonzalez stated unless a Commissioner states otherwise, we were in support of the approach that Mr. Maynor was articulating if there is any doubt.

Ms. Young stated what I would suggest, and I just had a brief conversation with Mike Bell, is that we could have the Task Force process occur before we get our first draft and to look over the scope. By the 14th, we could look at perhaps an evening meeting for public hearing or the 21st, one of the two. That would be in June. We also wanted to discuss the attorneys and that process. We could do that June 7th and perhaps have the hearing on the 21st.

Chairperson Gonzalez stated so on June 7th if we could also re-calendar the item on the report by Commissioner Ammiano so he can address us and take any questions related to the presentation Mr. Benson made.

Vice-Chairperson McGoldrick stated I think Friday evenings are unusual for public meetings. The 14th of June and the 21st of June are both Fridays. Maybe some other weekday might be preferable.

Ms. Young stated what we could look at is the week of the 16th and see how that works with your schedule in terms of your Committee meetings. Some of you will have longer days because that will be when the final budgets are before you at the Budget Committee. We will look at the week of the 16th and see where there is better day for public comment. On the 7th, as I hear Chairperson Gonzalez, we will re-agendaize a presentation of Commissioner Ammiano. We will have the discussion of the inside versus outside legal counsel, and the third piece of that as I understood from Commissioners McGoldrick and Fellman was to talk about the future LAFCo work plan.

Chairperson Gonzalez asked could we also add something related to what the public speaker noted, the possible presentation of this study to the public, any advantages, disadvantages and what we may want to consider?

Ms. Young stated and that would be on the 7th prior to our hearing the week of the 16th.

Vice-Chairperson McGoldrick asked what you are referring to is with the Budget Committee at the Board of Supervisors, there will be very long hearings, sometimes 12, 14 hours for three days during the week of the 9th, and three days during the week of the 16th scheduled for the Tuesday, Wednesday, and Thursday?

Ms. Young stated that is my understanding. The first round is the week of the 9th when you will have all of the departments coming before you and the second week is the final adoption.

Vice-Chairperson McGoldrick stated and on the Monday the full Board of Supervisors has hearings that could go until 5:00, but they could go until 10:00 p.m. as well.

Ms. Young stated we will look at what works because if the Chamber is booked, then we will have to look at another venue.

Commissioner Schmeltzer stated in light of that, does that mean that Monday is the only other day that there isn’t the potential for budget hearings to go into the evening?

Ms. Young stated what I suggested is that we could possibly look at another venue. We would have to make sure that the Commissioners that are present here are not on the Budget Committee. Commissioners McGoldrick, Ammiano and Peskin are on the Budget Committee.

Vice-Chairperson McGoldrick stated which brings us back to those dates that you were recommending. If we were not able to do evening hearings, what about later on these afternoons such as late Friday afternoons to start at 3:00 or 4:00 p.m.?

Ms. Young stated when we raised this issue on the 7th, we may want to just think about those kinds of issues. My concern is that if we wait until the 7th to start talking about who we want to be there, how we get the report out, we won’t have a lot of time for advertising and making it known to the public. We need to keep that in mind when scheduling that meeting if it is going to be the week of the 17th on the first draft.

Commissioner Schmeltzer asked I think what you said is that the Budget Committee meets Tuesday, Wednesday, and Thursday?

Ms. Young stated yes, it is my understanding that they meet Tuesday, Wednesday and Thursday starting the week of the 9th and the follow-up is the week of the 16th.

Commissioner Schmeltzer asked so we don’t have that issue on Monday?

Ms. Young stated we have Board meetings.

Commissioner Schmeltzer asked on Monday night?

Ms. Young stated there is no way of gaging whether it goes into the evening. It starts at 2:00 p.m. Generally it’s over at 6:00 p.m. There are some times public hearings and items such as closed session that may take you into the evening.

Commissioner Fellman stated what’s the timing on the final deliverable? What have we told the consultants?

Ms. Young stated I believe that we wanted the final deliverable before the first of July. So if you’re pushing it back, the issue becomes the second draft and the final.

Commissioner Fellman asked are Saturday public hearings unprecedented?

Vice-Chairperson McGoldrick stated I think there was at least one Saturday hearing for the budget last year. The Board of Supervisors had a Saturday meeting for the budget. It’s unusual, but it is certainly a possibility.

Chairperson Gonzalez stated if I recall, the Board of Supervisors meetings during the budget time were relatively quick matters. They seemed to be relatively short meetings. So if we scheduled a LAFCo meeting on Monday evening, we might be able to accommodate it if we were thinking about 6:00 on the 17th because the Board meetings start at 2:00 p.m.

Ms. Young stated that’s a possibility.

Vice-Chairperson McGoldrick stated or let’s say 7:00 p.m. to allow a little time.

Ms. Young stated if we did that, then we would have enough time for this second draft and to notify people.

Commissioner Fellman stated I want to feel that the public input is incorporated, not just an afterthought.

Ms. Young stated, then we are looking at Monday, the 17h at 7:00 or 6:00 p.m.

Chairperson Gonzalez stated I would be interested in the possibility of having a discussion at the next meeting related to some of the current governing structure at the PUC to the extent that we’ve heard a little bit about what Prop F was and some of the duties in some general sense. Perhaps to have either Mr. Smeloff or perhaps the PUC could be invited to speak to us to explain its management structure right now.

Ms. Young asked do you see Mr. Smeloff returning on the 7th or is there someone else in mind that you have?

Chairperson Gonzalez stated if he is available and willing to do it. I think we’ve kind of put this idea of where there was a little bit of discussion on how Measure F related to elected by district type concerns and I think it might be helpful to know what the PUC looks like right now, how it is put together, and that sort of thing. It might not be a bad thing to get some preliminary discussion going on about it. I think one of the natural advantages for instance about district elections is that you assure that there is geographic representation on a body. On the other hand, sometimes the theory is that if you appoint directors, you can be assured that they are going to be exceptionally well qualified as opposed to running elections. I think it would be interesting to get some presentation.

Mr. Smeloff stated I will extend to the General Manager, Pat Martel, and if she would like me to come on her behalf I would be glad to do that, but it should go to the General Manager.

9. Public Comment on Items not on the Agenda

No Public Comment

10. Adjournment

The meeting adjourned at 5:08 p.m.

Last updated: 8/18/2009 1:54:51 PM