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December 20, 2002


Special Meeting

Friday, December 20, 2002, 10:00 a.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 Commissioner Gonzalez at 10:09 a.m.

    Members Present: Vice-Chairperson Commissioner McGoldrick, Commissioners Ammiano, Hall, Schmeltzer, and Fellman.

    Member Absent: None

    Gloria L. Young, Executive Officer and Nancy Miller, Esquire were noted as present.

2. Approval of Minutes for the Commission Meeting of November 8, 2002 (Action Item).

    Chairperson Commissioner Gonzalez moved to approve the November 8, 2002 meeting minutes; duly seconded. No public comment. The November 8, 2002 meeting minutes were unanimously approved with no objection.

3. Discussion and approval of Indemnification Insurance for SFLAFCo Commissioners and Executive Officer (Discussion and Action Item).

    Gloria L. Young, Executive Officer stated that the issue of indemnification insurance for Commissioners and the Executive Officer was discussed at the California Local Agency Formation Commission's Annual Conference. Upon her return, she checked whether indemnification insurance had been instituted for the Commissioners and realized that it hadn't. If the Commission approves this item, we will process insurance coverage. It is $100.00 per year for $25,000 standard coverage for each Commissioner and the Executive Officer.

    No public comment. Public comment closed.

    Chairperson Commissioner Gonzalez stated that the Commission is to direct the Executive Officer to secure indemnification insurance and asked how long it would take to secure the insurance.

    Ms. Young stated that as soon as the Commissioners sign the application forms, staff will begin the process. It is her understanding that it takes from twenty-four to thirty-six hours to secure the insurance after the forms are submitted to the Risk Management Unit.

    Commissioner Hall asked what the necessity is for indemnification insurance.

    Ms. Young stated that the members of the Commission need to be covered to avoid any personal liability for contracting decisions that the Commission has or will make. One of the questions was whether as the Board of Supervisors, you had the coverage that also would cover you as LAFCo members and whether the public members would be covered. When we were at the conference in Santa Barbara, it was clear that several counties had issues with not having coverage, so Commissioners were personally liable. Considering the fact that this Commission enters into a number of contracts and makes many decisions, it appeared that it should be appropriate that all of the members be covered.

    Commissioner Hall asked if the funds would come out of the LAFCo budget.

    Ms. Young stated it would come out of LAFCo's existing funds, and we would shift monies from our existing budget to cover it.

    Commissioner Hall asked what the estimated cost would be.

    Ms. Young stated the estimated cost is approximately $100 per Commissioner and $100 for the Executive Officer. The total would be $800 a year for $25,000 coverage per member.

    Commissioner Hall moved to approve the purchase of indemnification insurance for LAFCo Commissioners and Executive Officer; duly seconded. Unanimously approved with no objection.

4. Commissioner Ammiano's Request that SFLAFCo Provide Direction to the Executive Officer to Work with the San Francisco Public Utilities Commission (SFPUC), the Department of Environment (DOE) and the City Attorney to Develop a Scope of Work, Select and Contract With a Consultant to Analyze the Feasibility of Becoming a Community Aggregator and Develop a Plan Required for the City to Exercise its Option to Become a Community Aggregator under Chapter 838 of 2002, or Assembly Bill 117 (Migden), the California Community Choice of Energy Law (Discussion and Action Item).

    Commissioner Schmeltzer asked if Items 4 and 5 could be heard together. The Commission agreed.

5. Discussion and approval of the Proposed SFLAFCo's Work Plan Approach and Next Steps (Discussion and Action Item).

    Commissioner Ammiano stated that he has worked for the passage of a California community choice law since 1999 when the San Francisco Board of Supervisors passed a Resolution under his sponsorship calling for the state legislature to give us an alternative to PG&E. Under AB117, which is now Chapter 838 passed by the legislature and signed by Governor Davis on September 24th under the sponsorship of Assemblywoman Migden, San Francisco now can do the following. It can find an alternative energy service provider to PG&E and wheel the power to City businesses and residents over PG&E wires. It can purchase green power through contract stipulations that a portion of wholesale power purchase will come from renewable energy sources, and it can directly run its own energy efficiency programs with its residents and businesses, public benefits charge funds.

    The principal of community choice is that by aggregating the purchasing power of the whole community of San Francisco, residents and businesses, public agencies and institutions, San Francisco can achieve independence and approve its energy services for consumers both in terms of price and the environment. Electricity is the nation's single largest cause of climate change, urban childhood asthma, and radiation. So the implications here are enormous. Community choice holds another important prospect for the City. In 2001, Supervisor Mark Leno and I sponsored Propositions B and H giving San Francisco revenue bond authority to finance solar power, wind power, and hydrogen renewable energy facilities as well as energy efficiency and conservation facilities. In order to utilize this bonding authority, Hetch Hetchy must be rated by bond rating agencies. In general, Hetch Hetchy will be a better credit risk if it serves a larger customer base. While Prop D would have accomplished this goal, PG&E spent enormous sums to defeat it at the polls. Community choice now provides the timeliest route to accomplishing the goal of expanding Hetch Hetchy's customer base. The coupling of community choice and Prop H revenue bond authority will allow us to pursue aggressive renewable energy investment like the 50 megawatt solar power facility I proposed in 2001. I believe it is the consensus of the Board and the community of San Francisco to make San Francisco a world leader in green energy, to demonstrate a real alternative to the Bush energy policy.

    In closing today's agenda item, we will direct the Executive Officer of LAFCo to develop an issue, an RFP for energy consultant services necessary to analyze the feasibility of community choice and work with the San Francisco Public Utilities Commission (SFPUC) and the Department of the Environment (DOE) to prepare for an application to the California Public Utilities Commission (CPUC), the state regulatory agency that must approve local plans under AB117.

    While this does address one element of Proposition D, this is not the same as Proposition D or Proposition F. This is not going to accomplish what the proponents of those two measures wanted, but it is a step in that direction. It is taking advantage of something that is now state law, which San Francisco is very much behind, which is community aggregation. In terms of the whole public power question, this does not resolve that as supported by those of us who supported Propositions D and F. However, it is an important issue and I think San Francisco has the resources and the talent to take advantage of this in a way that could be positive for rate payers.

    Edward Smeloff, San Francisco Public Utilities Commission, stated that the administration also supported Assembly Bill 117, and we are pleased to see its passage. We were active in shaping one provision of that that would allow the cities to have a larger role in administering the funds that are collected currently by PG&E, so-called public-goods charge funds that is used for energy efficiency renewable energy programs and other public purpose programs. I thought maybe I could review a little bit about what is included in AB117 and then talk in high level terms of some of the benefits and risks of community aggregation. The law allows cities, counties, or a city and county through its governing board elect to be an aggregator of the residential business municipal load within the city's boundaries for the purpose of serving those customers' electricity. It actually also allows for cities to form joint power agencies and actually do this on a multi-city or multi-county basis as well.

    The major benefit of community aggregation compared to other forms of aggregation is that the community aggregation bill allows for the City to aggregate customers on a so-called opt-out basis. That is, the City under the law is required to inform every customer that they have a right not to be served by the City and either be served by the incumbent utility, in our case PG&E, or a third provider. They are given the option of not being served, and they have to then make an affirmative declaration that they are not going to be served by the City. If they simply ignore this, then they are deemed to have chosen to be part of the aggregated pool of customers. It is that feature of community aggregation that makes it attractive for cities because trying to sign up customers affirmatively one by one is quite costly. We saw in the experiment with deregulation and so called direct access that very few residential customers elected to leave the utility and sign up with an alternative provider. An alternative provider except for a handful of green energy providers were simply not willing to make the investment in going out and trying to sign up customers. This provides a realistic alternative for customers through their elected officials to choose an alternative provider.

    The law requires that the City develop a fairly detailed implementation plan. I think it is wise that you are doing this feasibility study before we submit that implementation plan. I won't go through the details of an implementation plan, unless you want me to, but I am prepared to discuss that. Prior to us being able to file an implementation plan with the California Public Utilities Commission, the Public Utilities Commission itself has to adopt certain rules and regulations to allow for community aggregation to occur. They need to do several things. Perhaps the most important thing that the CPUC has to do is determine what stranded costs or historical procurement costs will need to be allocated to the customers that will be served by the community aggregator. Those stranded costs include a whole list of costs that have been incurred on behalf of either PG&E or the state.

    The Department of Water Resources has entered into a number of long-term power-purchase contracts. Those contracts, some of which have above-market costs will end up being allocated to the customers of a community choice aggregator. In addition to that, there are still uncollected costs that PG&E has incurred during the period of the energy crisis that could be allocated to the community-aggregated customers. Also, all the revenue bond costs associated with the recently issued bonds by the California Department of Treasury to pay for previously purchased power will have to be paid for in part by any community aggregator. The Public Utilities Commission needs to determine both the mechanism and the quantity of costs that would be applied to any community aggregator. They also need to develop a number of other rules.

    Last week, my staff and I and the Department of the Environment met with the staff of the California Public Utilities Commission to find out what their timetable is for developing these rules and what process they were going to use. They informed us that they had not yet made a decision on the process. They have two choices. One would be to fold it in to existing proceedings and there are four existing proceedings that are going on that are relevant to community aggregation. One of them is how to administer energy-efficiency funds, public-goods funds. Second is how to implement newly mandated renewable portfolio standards. The third is how to allocate these so-called stranded costs. The fourth is very important. The utilities are being reassigned responsibility by the Public Utilities Commission for long term planning and for procurement. PG&E and other utilities will submit to the Public Utilities Commission this April long-term plans for procurement in which they will provide a list of contracts and other resources that they intend to enter into to meet the demands of their customers. It is very important that we pay attention to that because If you want to do community aggregation, there needs to be a smooth transition from what the utilities are doing, any commitments they are making and commitments that we would have to make as the supplier of electric resources. We need to be having a dialogue with PG&E at this time to make sure that they don't incur costs and make commitments that would make it difficult or more costly for us to do community aggregation in the future.

    We have submitted to you and you have adopted our Electricity Resource Plan. The Electricity Resource Plan calls for developing some new power plants in San Francisco, most notably a co-generation plant out at UCSF, Mission Bay, and a co-generation plant downtown associated with the downtown steam supply system. Those plants cannot be developed unless there is a long-term power purchase contract. It could be done through community aggregation; it could be done through PG&E. It could be done through a combination of PG&E agreeing in the short-term to enter into that kind of contract and transitioning to community aggregation.

    Commissioner Hall stated I have to leave in about five minutes. For the sake of the public that may be viewing, I want to make it very clear that I do not want another study in public power, and I think that Supervisor Ammiano laid that out. The concept of community aggregation is something that the City has always been able to do. Now we're entering into that. Could you explain briefly how the Migden Bill might have helped us or facilitated our effort to do so, and why we didn't do this before? Just those two concepts.

    Commissioner Ammiano stated I would like to clarify that my remarks were not meant to state that I do not still support public power.

    Commissioner Hall stated I understand that. I want to find a way that works and do not want to go down the same path that we've been the last couple of years. That is why I'm asking the questions I am asking.

    Mr. Smeloff stated that what the Migden bill does is it provides this opt-out feature prior to this law going into effect. If the City wanted to serve non-municipal customers, we would have to sign them up one by one, get an affirmative declaration that they would be our customer. That's a transaction that is very costly to do. What this does is it allows you sitting as the Board of Supervisors to enact an ordinance that says we will be the default provider for all businesses and residents in San Francisco unless those customers decide to choose someone else including PG&E. That's the big difference.

    The administration is pleased and eager to work cooperatively with the LAFCo in developing the scope of work, and if you want us to help in the review of qualified contractors, we would be glad to do that as well. We understand that you have the funds. We understand this is something that is going to be paid for by LAFCo. We have not budgeted this at the Public Utilities Commission or the Department of Environment.

    Commissioner Hall stated just to follow-up on something that Commissioner Ammiano said. I'm not against public power either. I'm against it in the way that it failed the last two times out. If this leads us to closer to lower rates for the customers and public power, so be it, I think that's wonderful. I just don't want to thread over the same ground we have been in the last couple of years.

    Commissioner Schmeltzer stated I wanted to note that in the proposed work plan that was provided, this probably should have been stated a little more clearly, but the intent of Item E was to focus on AB117 implementation, which ties in to what Mr. Smeloff is talking about.

    Commissioner Ammiano stated that I was also going to suggest that since Mr. Broomhead from the DOE isn't here yet, that we might discuss Item 5 while we are waiting, then have public comment on 4 and 5.

    Commissioner Gonzalez stated I think there is certainly nothing that mandated this particular discussion about AB117 coming to the LAFCo. I think the last point Mr. Smeloff makes is really wise, which is the LAFCo appears to have money to be able to fund this continuing study that the City has a need to do. I think it is important that we keep in mind that the previous study we did was-I think we often get caught up in this idea that was very specific about a political campaign measure that was before the voters. I think the very first year that the LAFCo was around when I was an alternate member, it was very clear that there was a lot of discussion at the LAFCo talking about that campaign measure, etc. etc. I think that was a mistake. I think that the City has a benefit in pursuing its various options and that the earlier study by R. W. Beck really wasn't an expanded energy study, which we have discussed and which is laid out in part in that study. I think the balance here is to figure out how we are going to spend our resources to be able to do both these things and at the same time move the LAFCo into areas that I think we are all interested in getting into. We don't want to be on the topic of energy forever. I don't know how we do that given the budget that we have.

    Commissioner Hall stated I agree with you totally. I would have preferred to have been at this spot a year ago when I came on this board. Let's move ahead.

    Mr. Smeloff stated I don't know how much more detail you want from me at this time.

    Commissioner Fellman stated I want to comment on behalf of the LAFCo Energy Committee, and I prefer to call it the Work Plan Committee. We came up with an approach that we would divide our available funds between energy and new issues, and we have some proposals for those new issues as well. What I would suggest in going forward is that we hear from Mr. Smeloff to complete your presentation. What I would like to hear is what the SFPUC approach would be. I think our understanding in developing the scope of work is that AB117 would be the focus of the energy piece of that. We would certainly want to work with the SFPUC as well as with other City departments in coming up with a scope of work--to work quickly and expeditiously to come up with our analysis so we know exactly what should be presented to the Board of Supervisors for consideration of community aggregation.

    Chairperson Commissioner Gonzalez stated I appreciate that two members considered how the LAFCo should spend its money. To a certain extent, the advice or the recommendation is certainly something to consider. But I think that AB117 is a new enough phenomena that while it fits in to what we are working on, it also does slow down other priorities that we had set for ourselves. I think that is a discussion that we have to have. I am supportive of moving forward on the item, but I am not sure that saying that we are going to devote only half of our budget to energy necessarily works given AB117 is going to take up how much of that budget, Ms. Young?

    Ms. Young stated as you will recall, the future work plans that was approved by the Commission included further work by R. W. Beck. I had asked R. W. Beck to submit a proposal. That is what the Commission directed me to work on with the two members of SFLAFCo. We had anticipated that the work including the work on AB117 would be less than $100,000, and we had worked with R. W. Beck to agree to that. That was a part of the recommendations that came out of the Energy Study. It was in association with the work plan that this Commission approved, and it also included some of the other issues.

    Chairperson Commissioner Gonzalez stated what did you expect would be under $100,000? Could you break down the parts?

    Ms. Young stated it is currently in your packet, the last item associated with Item 5, which is the discussion of the work plan. We also included what R. W. Beck had anticipated in terms of following up on the issues that came out of the Resolution that this Commission approved and sent forward to the Board of Supervisors.

    Chairperson Commissioner Gonzalez asked are you referring to the October 30, 2002 letter to you, Items 1-7?

    Ms. Young stated, exactly. Legal counsel and I met with R. W. Beck and as a result, the October 30, 2002 memo came out of the discussions with proposed costs. We then had further discussions that broke these costs down further.

    Chairperson Commissioner Gonzalez asked which parts of Items 1-7 are you saying correspond with what you are talking about under $100,000?

    Ms. Young stated if I recall correctly, it was Items 2 and 3, which came to about $125,000 and we broke that down further to reflect more of AB117. Commissioners Schmeltzer and Fellman may speak on this issue as well.

    Chairperson Commissioner Gonzalez stated I just want to make sure I understand. When we split the budget in half and we said we were going to devote half of it to energy, you are saying that the half that we are devoting to energy will be consumed by the work on AB117?

    Ms. Young stated the cost is further outlined in the memo in your packet.

    Chairperson Commissioner Gonzalez asked Ms. Young did you participate in the Subcommittee discussions?

    Ms. Young stated, absolutely.

    Chairperson Commissioner Gonzalez stated then you are comfortable saying that once we divide up half the budget like that and it gets consumed by AB117, it is your opinion that there is no more energy work for the LAFCo to do?

    Ms. Young stated no, this was in the priority order.

    Commissioner Schmeltzer stated I don't think she said that. I think what she said and my understanding is that we looked at the items proposed by R. W. Beck. In light of what happened in the election, it was not appropriate to continue looking at some of the items in that report because they were specifically focused on things that were related to public power as it was looked at in the election. We then went back and spoke to R. W. Beck about the remaining items and we discussed this at the last meeting, which were focused on AB117 and asked what that would cost to move forward on a study. It was determined that that would be less than $100,000.

    Ms. Young stated that R. W. Beck was present at the last meeting and spoke to those issues at that meeting.

    Commissioner Fellman stated I think where we're struggling here is that we as the LAFCo need to establish what the study is going to address, and then R. W. Beck was going to come back with a final budget.

    Chairperson Commissioner Gonzalez stated I just wanted to understand what the Subcommittee was considering. What parts of what happened at the election are you saying preempt continued work?

    Commissioner Schmeltzer stated the discussion, I believe at the last LAFCo meeting, was on what parts of the items in the R. W. Beck study would be appropriate to go forward with. That discussion touched on in light of the election there is nothing that legally preempts us from looking at anything in that R. W. Beck study. The discussion was what would be appropriate to continue looking at. Everybody who said something discussed that it would be appropriate to continue looking in depth at AB117 and moving forward with that since that has just been signed by the Governor. That is what we focussed on.

    Nancy Miller, Esquire stated that specifically it was the acquisition of PG&E which they had estimated at $150,000 and the financing plan for that acquisition that they had estimated at another $20,000. We did this as a phasing project. Those two items would be something we would not be looking at this fiscal year, and we are talking about this fiscal year's budget. I am talking about what we discussed at our last meeting. We moved those monies or that work plan off the table.

    Ms. Young stated the other piece of that was the risk management piece, which it was our understanding that the SFPUC had hired R. W. Beck to do a portion of the risk management. It was a concern as to whether or not we would wait to see what the outcome was, to see whether or not we needed to expend any funds. The other area that was moved off the table was the model of governance.

    Ms. Miller stated they are still going to look at that, but they had estimated $25,000 and we negotiated with them to provide that a lower cost. So they would still look at a conceptual model of governance which included the idea of a potential public power alternative, but at a diminished analysis. The long time resource plan became much more important because of the passage of the Migden bill as well as the community aggregation issue at least at this time.

    Chairperson Commissioner Gonzalez stated the way I am looking at it is the measure that went to the ballot was not directly about acquiring PG&E. That was not what the measure was about. It had certain contingencies that could have allowed for that under very limited circumstances. I think the LAFCo ultimately makes a mistake if we settle for that initial R. W. Beck study without exploring other possibilities that were flushed out, some of what we are talking about here and then moving on to other areas. I think the idea of saying well, let's put these to the side because AB117 is at the forefront and talking about something in the future I think is the nexus between that work and the original R. W. Beck study gets attenuated. I think it's better to get the work done up-front and move on into other areas. That's my own assessment.

    Commissioner Fellman stated I think we are talking about the same thing. When you say get the work done, what work do you specifically mean?

    Chairperson Commissioner Gonzalez stated I think the recommendations made by R. W. Beck in the original study that they produced and what's being enumerated here in the letter to Ms. Young, the problem I have isn't that we would prioritize AB117. I think that makes perfect sense. But I have a problem with the idea that with the money that we have, we are going to limit ourselves to what is going to be devoted into this area before we are ready to move onto other areas. I think that would be a mistake.

    Commissioner Ammiano asked, is that the intent?

    Commissioner Fellman stated where we started was with the LAFCo Energy Services Study. The intention of going forward was to look at what Mr. Smeloff was doing in the San Francisco PUC, what other issues were being raised with the City Attorney before the State Public Utilities Commission, what legislation had been passed. Also, what the City had before it now that would allow it to take a new direction with respect to the energy issue. I think we are in agreement with that. The fact that the election occurred and there was a coalescence around the issue of public power and pronouncements about that, that informed the future work, but it wasn't the driver of the future work.

    Chairperson Commissioner Gonzalez stated I agree, but I am not sure that the remarks I am hearing today are taking into account the available budget that we have.

    Commissioner Schmeltzer stated I think they were. However, I think I am hearing something different from you than what was expressed before which was that we should take only half of the money that was available and use it for energy. Given that, what could we do with that budget?

    Chairperson Commissioner Gonzalez stated that is what I understood the Subcommittee decided.

    Commissioner Schmeltzer stated we didn't decide that. That was decided at the Commission meeting.

    Chairperson Commissioner Gonzalez asked at the last Commission meeting?

    Commissioner Schmeltzer stated yes. That is not something the Subcommittee decided. The Subcommittee was told given that you are going to use half the money on energy and we'll save half the money for other things, what can we do with that, and that's what we came back with. If what we are saying is that we really want to focus on energy and finish that-what we were discussing was whether we split the efforts of the LAFCo into energy and other things, and that decision had been supported.

    Chairperson Commissioner Gonzalez asked, but did the Subcommittee make a recommendation to the full LAFCo about that budgeting decision?

    Commissioner Fellman stated that is where we are today. What we've worked with was the concepts expressed in discussion by the LAFCo members that there were other issues of concern and possibly importance to LAFCo, and we should look at those other issues in addition to the energy issues. I think one question that I have for Commissioner Ammiano is whether Item 4 is something outside of what Item 5 contemplated? Or is Item 4 something that would fold into our previous LAFCo discussions?

    Chairperson Commissioner Gonzalez asked for clarification from Ms. Young-the decision that was made at the last LAFCo meeting, I was not in attendance. Can you show me where in the minutes it discusses this issue?

    Ms. Young stated I don't have the minutes in front of me, but the report itself speaks to that item in terms of background. If you look at Item 5, the background indicates that on November 8, 2002, the SFLAFCo has adopted the Resolution.

    Chairperson Commissioner Gonzalez asked Ms. Young what are you referring to?

    Ms. Young stated, item 5 in your packet-the second item after the memo indicating that the work plan is attached. It came as a separate packet to you. It indicates what the Commission's actions that you took. There were a couple of actions. You approved the Resolution.

    Chairperson Commissioner Gonzalez stated I am with you on that. On Item #3, the cost of the study where it says "the Subcommittee anticipates allocating approximately $100,00 to energy issues." That's when I asked my colleagues. I am assuming that is the Subcommittee that made that recommendation.

    Ms. Young stated no, that is part of the recommendations in terms of discussion items for you today to take action on. Item #1 is strictly the recommendation that came out of the Commission in terms of directing the Executive Officer and the Subcommittee to go off, prioritize, and look at those issues that the Commission had raised. A number of you had indicated a desire to move forward, and that was your top priority around the energy issues that came out of R. W. Beck. Commissioner Hall was very much concerned about other issues such as the title, etc. that some of you came up with with respect to other study areas. Our job was simply to look at that, prioritize them, and bring them back to you in terms of a potential cost.

    Chairperson Commissioner Gonzalez stated I do not have any disagreement what the Committee indicated in terms of the future work and prioritizing that. I think we're in agreement. What I am trying to understand is when a decision was made about a budgeting decision related to the available monies that we have and what we would spend that on.

    Ms. Young stated there was no decision by this Commission nor any decision by the Subcommittee on the determination. There is in there a recommendation of $100,000 and $100,000 totaling $200,000. That came out of our conference call based on the fact that was a recommendation for us to go off and come back to you with some information for you to look at today.

    Chairperson Commissioner Gonzalez stated and the reason there is no discussion about that in the minutes of the last LAFCo meeting is because it didn't get taken up?

    Ms. Young stated exactly. That conference call came after your November 8 meeting, and it is back on this agenda.

    Commissioner Ammiano stated I am glad these things are being clarified in terms of the sequencing and when the decision making is going to be made. I think Commissioner Gonzalez does have a good point though. That is that part of our discussion needs to be that while we are looking at AB117 which is important, that shouldn't preclude the concurrent further study of the Beck recommendations, particularly the one on the PG&E analysis. I think that is what he is trying to underline, and I would support that. I am not saying you are not supporting that. It appeared the perceptions were that decisions were made about the money.

    Commissioner Schmeltzer stated our understanding was that is what we were asked to go look at.

    Mr. Smeloff stated let me make a point that might be relevant to that discussion. That is yesterday we met with the energy offices from the cities of San Jose, Oakland, and Berkeley. They too are interested in AB117 and the opportunity to do community aggregation. I informed them that I would be here today to talk about your selection of a consultant to study this issue. They indicated an interest if it were appropriate, in piggybacking onto that study and maybe bringing additional resources of their own to that study. We need to get back to them to let them know 1) if there is any interest-I think there are generic issues related to community aggregation. If we did this together with the other large bay area cities, there would be a value. There are certain specifics to each city given its geographical configuration and constraints of serving those cities that would need to have a specific focus. Let me see if there is an interest in this and at least my further exploring with those other cities the possible cooperation in doing this study. I need to report to them how much resources San Francisco is going to bring to the table to do a community aggregation study, and we can see if they can bring some additional resources.

    Commissioner Ammiano stated and my hope would be that it would be the will of the Commission again while looking at AB117, that that would not preclude another study in terms of the recommendations made, particularly the PG&E analysis.

    Mr. Smeloff stated doing a study on community aggregation, I think is important to move quickly because of this issue of long-term procurement. PG&E will be submitting a plan on behalf of all their customers in Northern California to procure additional resources. If they don't do it in a way that leaves some opportunities for community aggregation or do it in a coordinated way, there can be some additional significant costs imposed on the city if it were to choose further in the future to do community aggregation. I wanted to show you what the major benefit is of community aggregation. The benefit of community aggregation is that San Francisco can purchase electricity to meet its particular needs-purchase to its specific load profile. Low profile simply means that we have over the course of a day and the course of a year a specific pattern on how we use electricity. We see here that we start using electricity with a higher degree of quantity, at six in the morning and it grows, peaks at 8:00 in the morning and then its pretty constant throughout the day on a typical spring day.

    Our load is very different than the load in Sacramento or the load in the Central Valley, which is enormously more peaky. Where you will see in Sacramento, where I have worked for a number of years, peak demand on a hot summer day could be 400 or 500 megawatts greater than it was on an average day, and you need to procure resources to meet your peak needs. Those peak resources can be extraordinarily expensive. Right now PG&E averages all of its costs for procuring resources over their entire service area. What ends up happening is that San Francisco and the other Bay Area cities end up paying for resources that are primarily used in the Central Valley and other areas that have more air conditioning load. To be able to do community aggregation and match your load profile with your costs, procure resources that match this load is where you are going to save significant amounts of funds. Now doing this also, and this is why you need to have a very good consultant. There are risks involved as well in procuring resources to meet your needs because you can be short of your peak need and have to go out in the short term market and procure. That is where PG&E got damaged in the energy crisis. Alternatively, you can be long. You can procure more resources than you actually need and then sell those into the wholesale market. You really need to think about what our risk management strategy is under a community aggregation portfolio.

    The other benefit of community aggregation is this profile is not dictated entirely by the weather. There are choices we make as customers, and we can manage our load through active, through technologies, and choices that we make, through pricing signals, and Cal Broomhead is going to talk a little bit more about energy efficiency. The real benefit of this is that we are responsible as the City for managing our load. During those periods when it is more peaky, hot days or cold evenings, we can do certain things to manage that load and lower our overall costs. That is the benefit of doing community aggregation. It is a long-term benefit because you can change load shapes a little bit in the short-term, more in the long-term as you change the kind of equipment that is in buildings. It really does give a large measure of self-control to cities that do that. That's why we are eager to work with you on framing the RFP and the scope of work for your consultant and to move as quickly as we can because of the decisions that the California PUC is going to make.

    Cal Broomhead, Department of the Environment, stated currently energy efficiency programs are funded through the public goods charge fund, which is approximately three percent, and PG&E collects it and hands it to the state and the state hands it out. Typically, they have been handing it back to the investor-owned utilities, PG&E etc. Last year, they actually opened that up to a little bit of competition from third parties. The City applied for three and a half million dollars to extend our power savers small business lighting retrofit program and expand the scope to include refrigeration, etc. and we were denied. We didn't get funded. This coming year we were expecting to go look for more funding to continue the power savers program, and it appears as if from an interim ruling that that money may be taken off the table and no third party will be able to apply for it. What this really points out is that a continuing problem in the energy efficiency funding field is that funding tends to be very cyclic. It is there one year and gone the next. It makes it very difficult for local businesses to hire and train employees, purchase equipment for doing energy efficiency work, and our power savers program is an example of that. Most of the work is being performed by an outside firm that specializes in this kind of work, and only 40 percent of the work is actually being done by local San Francisco contractors.

    The other part is that these energy efficiency funds programs, they tend to be state-wide programs so they have to apply to residents and businesses across the state. As Ed was pointing out about the differences between San Francisco's load curve and the load curve of the rest of the state, that we have some very unique peak periods. One of our peak periods is actually a cold winter evening when we have a lot of electric resistance heating in our residential units that comes on, and this is very unusual in the state. However, there are no statewide programs that address this. So, if the City had control of those efficiency funds through the community aggregation process, we would be able to target the funding better to meet San Francisco's needs that are very unique. We would also be able to provide multi-year programs where we could develop a local infrastructure among local small businesses and community organizations to perform the work and provide a good strong base for this work in this industry. There are a lot of other reasons for supporting it, but those are the two primary ones.

    Vice-Chairperson Commissioner McGoldrick asked, could you put this into dollars and cents?

    Mr. Broomhead stated it has been some time since I looked at the actual electricity revenues for the City, but I think we are talking in the realm of about $10 to $12 million dollars a year. As a matter of scale, we got $7.8 million for the small business program.

    Commissioner Schmeltzer asked, is that the amount of money, $10 to $12 million that would be received through the public goods charge or could be saved through...

    Mr. Broomhead stated that would be received through the public goods charge. The savings would vary depending upon the kind of programs we develop.

    Public Comment

    Bruce Brugmann, Bay Guardian, stated Supervisor Ammiano says the Migden bill will allow the City to aggregate, and Mr. Smeloff and the Mayor's Office have given us details. Let me remind this group that the Raker Act has created the dam. What we are talking about here is that the legal authority mandates that San Francisco is supposed to have a real public power authority, and that is what the Supreme Court says. It is a public power authority that is supposed to bring our own Hetch Hetchy water to our own residents and our own businesses. That is why you are here today because we got nowhere with the city officials and the City department. Hetch Hetchy and the PUC--we had to go out and get the signatures and create a MUD which created a LAFCo which is here to help move this process along and not thwart it and subvert it at this point, which is what the issue is before you today.

    I don't know why anybody doesn't come out and say we need a real legitimate feasibility study. I've been down here since 1969 asking for a real legitimate feasibility study. Never have we gotten it. We didn't have it for the MUD campaign. We didn't have it for the last year's campaign. So PG&E has been allowed to come in here and say, gee, public power and enforcing the Raker Act is too risky and too costly, and they hire a firm and pay for it to come up with their study, and we don't have one except for the Bay Guardian study which has held up. The LIPA Study in Long Island, studies for 2200 public power cities in the United States of America, which are not required by federal law to have public power--they seem to be able to get not only a study, but real public power.

    Here we are in the midst of an energy crisis, another one. PG&E is doing injustice to us all over again on service. Front page of the Chronicle, of all things, front page of the Chronicle which has backed PG&E for the last eight decades has more to say about this issue than you folks do. It's very clear. You have to have two studies moving along on parallel tracks. One on aggregation and one on finishing up the R. W. Beck study and doing a real energy options study for the City and County of San Francisco. Mr. Smeloff just gave us another reason why--directly out of the Mayor's Office. We need to work with PG&E and keep a dialogue going. That's been the City's position now for eighty years. A dialogue with PG&E in which we lie on our back underneath a naked light bulb negotiating with PG&E. I am tired of this, and I would think that you folks would be a little bit tired of this too. What you need with PG&E is leverage, and that's exactly what this study would do. You would get cheap, easy leverage with PG&E because this study would bring out for the first time a real study by real consultants by R. W. Beck which is the best in the country. They would come in here and they would tell you what your real options are. Not a PG&E-funded study like they did at the last moment to help defeat us on the election campaign with $3 million dollars. All the election did was show how deficient you folks were in never coming up with a study. I don't mean just you folks, but the City.

    Literally, I have been down here since 1969. I came before Alioto's Public Power Committee. I have come down here again and again. I beg you folks to do a study. You didn't do it. Now you are mumbling fumbling around again. There has to be two studies, otherwise you have no leverage with PG&E. Otherwise you don't know how aggregation fits into the larger issue of enforcing the Raker Act, how it fits into a real public power authority, how it offsets PG&E, how you can move with the other public power cities. Just make a couple of phone calls and check and see how good the public power cities were in dealing with the outages during the current storm. KQED had a big thing this morning on how bad PG&E was. The Chronicle had one. All you folks have to do is make a call to Sacramento, to Lodi, to Palo Alto, to Santa Clara, to Healdsburg, to any of these cities that have public power, real public power with their own people doing this. Two studies are what you have to do at this point. A report from the Bay Guardian entitled "Public Power will Save You Money" was received in the Commission hearing and passed out to all Commissioners.

    Chairperson Commissioner Gonzalez stated the LAFCo took public testimony from individuals coming from some of the areas that do have public power and we took testimony on the advantages of public power. I am aware of the study that you are essentially handing us today. I think much of the discussion that has been going on today is about whether or not that original R. W. Beck study naturally leads to a feasibility study and expanded energy study, and I think the answer to that is yes. However, it is ultimately going to be a question of budgeting, and I don't think anybody or even any supporter of public power can quarrel with the priority of AB117 given our current situation.

    Mr. Brugmann stated I can, because it is a small down-payment, only really major money making machine for the City and County of San Francisco. If you listened to us in 1969, you would be having $200 or $300 million dollars a year on our own public power system. The recession would not be so bad; we would be able to get out of the recession. I have heard this budget argument for years.

    Chairperson Commissioner Gonzalez stated I don't disagree with you. I think the City would be way better off with public power. I don't think there is any question about it. But in order for that to happen, there are a number of things that have to come into place including an election including the study that you are talking about. There has to be a political will, public will etc. That being said, right now in our climate, in our historical moment, I cannot disagree with what the Committee did in terms of prioritizing AB117 and I don't see how you could.

    Mr. Brugmann stated I would like to know what the Committee did. I have not seen any report on it. I could not find anything in the Minutes. Nothing was said here at the meeting. It's very annoying. It's almost like a secret meeting where these things have been decided.

    Chairperson Commissioner Gonzalez stated these are not secret meetings.

    Mr. Brugmann asked, where is the report of the Subcommittee? I sure would like to see it and I would like to see it presented to people when they come to testify. I think that people know that the Bay Guardian is working on this issue.

    Chairperson Commissioner Gonzalez stated when we launch off to try to tackle what is a very large problem, not everybody agrees on how to tackle the problem. So that original R. W. Beck study was really about laying the land and really explaining many of the different alternatives that were out there. One of them is a path that you and I would like the City to take. Not everybody shares our opinion. Be that as it may, I think that original study naturally lends itself to the further inquiry that you want. I think Commissioner Ammiano and the other Commissioners are committed to that. But given what happened recently, AB117, and an opportunity that the City has to try to improve its situation, I don't see how we can ignore that.

    Mr. Brugmann stated I am not saying to ignore that. Go ahead and do it-it's just a baby step. But it can only be done in the context of an additional study.

    Commissioner Ammiano stated and we agree.

    Mr. Brugmann stated then you have to discuss them together, push them together, and fund them together.

    Commissioner Ammiano stated we agree. We have established a common ground of AB117, a deserving study along with a congruent study that you are addressing. I don't understand what the problem is. I have been around since 1969 as well.

    Mr. Brugmann stated I will tell you what the problem is. The problem is that you cannot move ahead with this one study. You have to do them both and you have to put them in context. So you put them out and you fund them and you discuss them openly. You mention that this is an option study to take over PG&E if the study gives some evidence for that.

    Chairperson Commissioner Gonzalez stated Mr. Brugmann, and that is why so many of my earlier remarks related to the LAFCo's budget, whether or not we had made the decision it was going to make it impossible for us to move forward from the recommendations in the original Beck study.

    Mr. Brugmann asked, what am I missing here? I see based on what I saw sitting out here-I am an experienced reporter reporting on this issue for a long time. I see a meeting that looks to me as if you are going to approve one and not the other. Isn't that right?

    Chairperson Commissioner Gonzalez stated you are right that we are going to approve AB117 today.

    Mr. Brugmann asked what about the other one?

    Chairperson Commissioner Gonzalez stated the other one will be coming back. You will see it in January and we will see how the Commissioners vote on it.

    Mr. Brugmann asked why can't they be done in context? We've watched this being stalled now for years and years.

    Chairperson Commissioner Gonzalez stated I think Ms. Young could speak to that. R. W. Beck I think is the group that may be doing both.

    Ms. Young stated as a part of the proposal and R. W. Beck selection, it is a phase project. As part of the next steps for the recommendations that this Commission approved as a part of the Resolution adopting a future work plan is the feasibility study. I would just indicate in accordance with the Sunshine Ordinance, the items being discussed have been agendized and are part of the packet. In addition, the agenda and packet have been posted on the web in a timely manner. The items are also available in the Clerk's Office in a packet. The meeting that has been referred to with respect to the two members of the Commission was less than a quorum of the Commission, and that is why it was able to occur.

    Commissioner Ammiano stated that in the discussion of Item 5, I would like to introduce under New Business for the meeting in January the proposed confluent study that Mr. Brugmann is addressing.

    Commissioner McGoldrick stated in January I will second that motion. I intend to also move forward in that direction, and that is all I had wanted to say on this today. It is not before us today, but it is going to be before us. I think that I would get a general sense that when it comes before us there will be a confluence of support for moving forward and really understanding what the picture will be. I don't think we're really in a position to discuss it at this juncture today, but I think that lends an understanding to the public regarding the direction this membership in the LAFCo probably in its majority will support.

    Ms. Young stated I know that the Commission is in the middle of public comment. It probably would do our listening audience and the Commissioners well if at some point we have the Subcommittee report in terms of the recommendations that are before you. We have hinted at it and not had that dialogue yet as a part of this discussion. We've been talking about Commissioner Ammiano's item and it has come up.

    Chairperson Commissioner Gonzalez asked Ms. Young, if we approve Item 4, presumably you would negotiate a price?

    Ms. Young stated yes, we would recommend a couple of modifications to Item 4 since it relates to Item 5 and yes, you are correct we would negotiate pricing.

    Chairperson Commissioner Gonzalez asked what benefit would there be to negotiating a price for the kind of study that we are talking about here in addition to Item 4? Why shouldn't they be discussed together?

    Ms. Young stated that was our purpose to begin with when we walked into this meeting because Item 4 is included in Item 5, and so the issue was whether we needed to go forward and do a separate RFP, a separate scope of study. From my perspective as the Executive Officer, I would recommend that we amend the existing contract with R. W. Beck and include the scope that we would be allowed to develop. I would defer to legal counsel.

    Chairperson Commissioner Gonzalez stated that the only problem I have with what you are saying going back to the letter that R. W. Beck sent to you relating to the various costs. It just doesn't seem to say that it's fair to say that Items 4 and 5 are the same thing. Clearly, Item 4 is encapsulated in Item 5, but obviously there are parts of Item 5 that are not included in Item 4. Item 4 is a subset.

    Commissioner Fellman stated that is where we need clarification from Commissioner Ammiano on his intentions of how the two would relate.

    Commissioner Ammiano stated I am going to put it on the New Business calendar to make sure that we have that discussion in January.

    Commissioner Fellman asked, but this is with respect to AB117 elements?

    Commissioner Ammiano stated we will come up with some language. I want the item discussed in January that has been referred to, and we will find a way with the help of legal counsel to do that.

    Nancy Miller, Esquire, stated we can do that because the R. W. Beck letter and even the attachments to your agenda item refer to all of the elements of our phasing project, not just the AB117, the new aggregation statute. The only clarification that I would like to make on Item 4 is that we already have selected a consultant through a very extensive RFP process. If you want us to go back through another RFP process we can do that, but we do not legally need to do that. We have a selected consultant and we can use that consultant to identify the scope of work.

    Chairperson Commissioner Gonzalez asked, you mean R. W. Beck?

    Ms. Miller stated yes, I mean R. W. Beck. When you are discussing Item 4, I would request that you amend that to say that we could use our selected consultant because we already have been through the RFP process. We don't need to go through it again.

    Commissioner Ammiano stated it would make it quicker.

    Ms. Miller stated, yes it would make it quicker.

    Ms. Young stated I requested that R. W. Beck provide the analysis with respect to costs in October. It was early on prior to a number of discussions that took place because I anticipated that the Board as a part of its future work plan would be wanting to look at those recommendations that were spelled out. So this was prior to additional conversations including and up to the elections process. So we have continued to have discussions with Mike Bell about given the fact that there may be some priorities and future phasing, what that cost would be and what the pricing would be. Again, I would defer also to Commissioners Schmeltzer and Fellman.

    Mr. Brugmann stated I am really not trying to lecture. I am just bringing out a point. I thought both of these items were going to be settled at the same time today. So it's extremely important that unless you do the full study, this other study takes you almost into a cul de sac. All you will have is a little bit of air and PG&E and Mirant will be largely in control of our future and destiny here in San Francisco. It is a very critical point.

    Steven Moss, San Francisco Community Cooperative, stated I want to support you moving forward with this scoping study and have a couple of comments about it. My coop represents folks in the Bayview Hunter's Point Potrero area so we are very concerned about the timing of things moving forward quickly. As you know the City has adopted an Electricity Resources Plan and to the extent possible, community aggregation should support the elements of that plan rather than be on a separate track. In other words, the City is on a pathway and community aggregation should be part of that pathway. So, I would encourage the study that you are going to fund, not ask the question should there be community aggregation, but how best can you implement community aggregation given the long process of discussion that the City has already occurred.

    The City is about to launch on large solar efforts, but the City has not yet found out yet how to actually implement the key aspects of solar. For example, Hetch Hetchy does not allow for net metering currently, which is essential if you are going to have solar systems in the City, which will provide excess power to the overall grid. If you are a Hetch Hetchy customer, you do not have access to the current state subsidies. These problems can be solved as a part of community aggregation, and they can be solved at lower costs because of the things that Ed told you. We need to tailor our energy plan to our energy needs here.

    The other thing I want to mention about R. W. Beck-I understand that consultant has already been selected. A great deal of research has been done on community aggregation-I want to introduce my colleague from the Center from Neighborhood Technology. She is doing some work on neighborhood aggregation nationwide. I would encourage you to encourage R. W. Beck to rely on those existing studies. We know a lot about this. What we don't know is how fast and how well this City can implement it when.

    Richard Ow stated I am a proponent or community activist in both the MUD issue and recently the public power Issue, ballot measure D. We know that there are studies, but we need a one-page study giving the benefit of obtaining public power. We have experts-the study is this thick, and the average citizen does not have access to this study or understand all of it. PG&E put out a good public relations campaign and talks to the community. That is why the public power initiative failed. So whatever study you may have and since you are spending a lot of money on it, insist that whoever is doing the study give us one page and list all of the benefits and all of the answers to all of the questions people may have. I am sure then that the citizens will come to the benefit of public power.

    No further public comment. Public comment closed.

    Chairperson Commissioner Gonzalez asked Ms. Young to come forward and stated on Item 4 what I have in my packet is a memo from Ms. Young to the LAFCo related to Commissioner Ammiano's request. Then it has on page 2 the recommendations. Shall we go through each one and make sure that everyone is on the same page?

    Ms. Young stated we do have a potential request for an amendment to the recommendations on Item 4. This was based on the fact that Commissioner Ammiano requested that we put forth some recommendations in order to make this happen. One was to direct the Executive Officer to work with the San Francisco Public Utilities Commission, the Department of Environment, and the City Attorney to prepare a scope of work. That was the first recommendation.

    Chairperson Commissioner Gonzalez asked and the scope of work is specifically related to AB117?

    Ms. Young stated absolutely. The second, and there is a question whether or not we could go ahead and work on the scope and simply amend the existing contract that we have with R. W. Beck. Item 2 is to direct the Executive Officer to use an informal process for securing consultants rather than a formal request for proposal. Again, I would just reiterate that this recommendation was Commissioner Ammiano's, and I forwarded it to the Commission. The question would be whether or not we actually need to do an RFP (as Item 2) because if we amend the existing contract, then there's no need to send a separate RFP unless this Commission chooses to do so. Item 3 relates to Item 2, which is a two-week period in order to provide and get a list of consultants and also to make public the scope of services. Item #4 is to determine whether or not the Commission as a whole or as a Subcommittee would like to review the proposals with me as the Executive Officer.

    Chairperson Commissioner Gonzalez asked, your comments on Items 2 and 3 seem to be that if we amend the arrangement we already have, then we don't have to go through the RFP process?

    Ms. Young stated unless this Commission wishes to do so, you are absolutely correct because we have the existing relationship with R. W. Beck for the consultant services, and there was the opportunity to move into the additional phases which included AB117.

    Chairperson Commissioner Gonzalez stated then on Number 4, I would amend it to strike subcommittee so the Commission as a whole would review the proposals with the Executive Officer.

    Ms. Young stated you may also want to hear from legal counsel. Have I reflected all of the changes or do you have additional ones?

    Ms. Miller stated no, you reflected all of the changes I have.

    Vice-Chairperson Commissioner McGoldrick asked, why do you want to strike Subcommittee?

    Chairperson Commissioner Gonzalez stated if you prefer Subcommittee, then let's strike Commission as a whole. We should pick one or the other. I would prefer that we all be involved.

    Vice-Chairperson Commissioner McGoldrick stated I agree. We could not strike it and still make sure it's the Commission as a preference to have a contingency factor built in there.

    Ms. Young stated if we are amending the contract to have R. W. Beck continue, then the question becomes you won't have proposals before you, you will have their response to the scope of work.

    Chairperson Commissioner Gonzalez stated let's go over Item #5 just to make sure everybody is in agreement with this. The subject of the outline of the immediate work plan and the process for public review and comment, and attached to that is the Resolution?

    Ms. Young stated it is the approved Resolution by the Board of Supervisors. At your previous meeting, you requested that that happen and that did in fact occur. They approved it unanimously.

    Chairperson Commissioner Gonzalez asked so as to Item #5, the work plan here if I understand it correctly is a summary of the Commission and Committee's recommendations?

    Ms. Young stated that is correct with a proposal for what the Subcommittee anticipated. Item #1 was to give you background. Item #2 was the scope of work for R. W. Beck, and it did include AB117. Item #3 was a potential possibility for allocating the funds you currently have in your budget which is approximately $200,000. It was to review and respond to the additional study areas that this Commission had in fact indicated including but not limited to a study of tidal current generation and then to provide for public review as we did for the Energy Study. I would defer to the Commissioners that participated in this process. It was prepared by our legal counsel after that conference call.

    Chairperson Commissioner Gonzalez stated just so I am understanding this. In the memo to the Commissioners and Legal Counsel listed as Item 5 on the agenda, under Subsection 2, the "Scope of Work for R. W. Beck," so it basically modifies the Beck memo dated October 30th to focus work in light of the passage of AB117? Do you have the October 30th letter that R. W. Beck wrote to you?

    Ms. Young stated that was done prior to your adoption of the work plan and I initiated that from R. W. Beck in order for you to have information that you could use as you looked at the work plan. You adopted the work plan. He spoke to the outline. Mike Bell also indicated that some of the issues would be related to what would occur with respect to the Elections process. So what you have before you now is a reflection of what the legal counsel prepared based on our conference call as well as conversations with Mike Bell.

    Chairperson Commissioner Gonzalez asked aren't some of the comments here the scope of work for R. W. Beck? Weren't they already covered in the original study that they gave us last year?

    Ms. Young stated yes, absolutely.

    Chairperson Commissioner Gonzalez stated so tell me why we would need to amend anything from the October 30th memo with things that they have already done for us.

    Ms. Miller stated we were trying to clarify in particular the public review process which was not outlined in the Beck memo and get more specific about that. Also, since the passage of the Migden bill, we wanted to focus a little bit more on the necessity of the study emphasizing that at this time. And money. We actually negotiated the price down. We also didn't want them to spend as much time on the history and brief overview that they had anticipated in their original letter.

    Commissioner Schmeltzer stated I think what we were looking at here was what a new standalone study would include and some of these items were in the last report. It would just be pulled from that so you have an introduction, and you don't just start from Page 10. It would not be substantive time spent on that because it has already been done.

    Ms. Young stated your Resolution reflects it. The Resolution attached goes through each and every one of those items.

    Chairperson Commissioner Gonzalez asked as it relates to the October 30th plan, are we amending it or supplanting it?

    Commissioner Fellman stated with respect to October 30th, that wasn't really a plan or a formal proposal. We wanted to get a ballpark estimate of what future work would cost. So when we were shaping what LAFCo would do next, we would know what we were looking at in terms of how much money we had available to spend and what kinds of things we wanted to do. We knew we had an infinite amount of dollars so we needed to recommend a priority for the Commission to choose on how the dollars would be spent. So October 30th was never intended to represent R. W. Beck's budget proposals.

    Ms. Young stated it was to provide you with information to help you identify and coordinate with your work plan. As you look at the work plan specifically identified in the Resolution approved by the Board, Items 1-7--those are the very items reflected in the October 30th memo only associated with the costs. Then the question became, how do you prioritize, what do you do first because the discussions that occurred at this Commission was we also want to do some other things. So the question was to bring you back as much information as possible for you to make the decisions you needed to make.

    Chairperson Commissioner Gonzalez stated that whatever the language is would modify the scope of work, it just suggests that there is a scope of work that we are changing and modifying. In many respects you are asking the LAFCo to agree that this is a scope of work. This is it right here. So everything in the October 30th memo and all of the discussions that we previously had, this is A-G. Is that correct?

    Ms. Young stated it is here for you to have a discussion on. I think none of these are decisions. This was an informational outline of the work that came out of the discussions that the Subcommittee members Commissioners Schmeltzer and Fellman had. It's here for you to deliberate. It's not a decision-making document. It is a document that will help you make the decisions you need to make. It was not a recommendation.

    Commissioner Schmeltzer stated it is a way to break out a couple of items from the October 30th letter. If we decide we want to that, then we still have the October 30th letter as information about what a ballpark figure might cost to go forward with other items. This was a way to break out based on the budget guidelines we were discussing of how to move forward. Nothing in the October 30th letter was definitive. There were no decisions made one way or the other. So nothing can eliminate what was said before.

    Commissioner Fellman stated given where we are with Item 4, we will have to further define the scope of work based on the input from the Public Utilities Commission, the Department of Energy, and our Executive Officer's conversations with them. I think when we are voting today, we would vote on a concept and an approach, but we would not be voting on a specific scope of work other than I would see we would only impose perhaps a ceiling on how much would be spent on the study. We would allocate dollars for the study.

    Ms. Miller stated just to clarify. The plan was that if you approved this conceptual plan, then we would bring the scope of work back to you for approval because we would be entering into a contract based on that. Also a point of clarification, we will be bringing back as a new agenda item in January the final or the next step elements. I don't want to go back to an in-artfully draft memo, and I apologize, because I think it's gotten us off on the wrong track. We would come back with the next steps as identified by R. W. Beck and the study, which have to do with acquisition, financing, more longer-range steps in January for development of a scope at that time.

    Chairperson Commissioner Gonzalez stated it just seems to me that to the extent that there is a sense that there was a previous discussion as outlined in the October 30th correspondence about the future cost estimates or the implementation of a strategic plan or whatever it's being called at the time. It just seems to me that maybe we should go through the recommendations for what was being discussed there to see if maybe they should be included here. There should be no reason if we are going to direct you to go speak to R. W. Beck about the future work the LAFCo is going to do, that we might as well be asking you to put it together right now. What advantages are there to waiting until January?

    Ms. Miller stated there isn't. I was actually thinking that if you approved conceptually what we have offered today, then we would bring the actual scope of work with the contract back to you in January. We wouldn't enter into it without you looking at it and approving it first.

    Chairperson Commissioner Gonzalez stated that is not what I was thinking. I was thinking more about if you take any of the issues 1-7 on the October 30th letter, why any of them are not included. It just seems that whatever the Committee discussed to decide what to include or not to include if members of the Commission are indicating that they want to do something in January that is more expansive than what's included here, then why are we hammering it out now?

    Ms. Miller stated we don't have to. I think that's clear. The Committee in my mind was given the task of what are the immediate next steps. We have a future work plan that we go over a number of months and maybe even years.

    Chairperson Commissioner Gonzalez asked what is the timeline on AB117, Mr. Smeloff?

    Mr. Smeloff stated the immediate next step is to intervene at the Public Utilities Commission to help shape the rules. It is our intent to send a letter on behalf of the Mayor and others, and it is my recommendation that the PUC consolidate its proceedings on AB117 into one proceeding so that cities can intervene and our goal would be to get those rules out of the PUC. There is no formal deadline. To move that along as quickly as possible because we cannot submit in implementation plan to the Public Utilities Commission until they develop their rules.

    Commissioner Fellman asked isn't that a larger question, Mr. Smeloff, which is not necessarily intervening but perhaps presenting to the California Public Utilities Commission a motion or some kind of request for the rulemaking on AB117 to start a separate proceeding where there's a focus on it?

    Mr. Smeloff stated that is our intent. You have said it better than I have said it, but that is specifically what we intend to do is to initiate a request that the Commissioners initiate a rulemaking on AB117 rather than to parcel it out into multiple existing proceedings.

    Commissioner Fellman stated and that will be done independent of what LAFCo does with respect to its study, but certainly if we coordinate with your office and DOE and the Executive Officer, the LAFCo study can support or can work with you on that effort.

    Mr. Smeloff stated it certainly would be helpful. In our intervention in that proceeding, it would help to clarify the issues that the Public Utilities Commission itself needs to resolve and to facilitate.

    Commissioner Fellman stated I think what is not being said clearly, what we need to understand is that in the absence of a kick in the pants, the California Public Utilities Commission isn't taking this on through its own volition. The Commission would probably put more focus on tree trimming in Burlingame. They will look at what's in front of them. This is not one of their top priority policy issues.

    Mr. Smeloff stated I think that is absolutely correct. Unless they hear from the cities and interested parties that this should be a priority, it would be put on a back burner.

    Chairperson Commissioner Gonzalez stated I am not in disagreement with what the immediate priority is or the need to move it forward. It just seems that in negotiation with R. W. Beck to the extent that there is going to be a discussion about what it is going to cost us, why wouldn't we want to know everything we are going to be trying to negotiate with them price-wise for the coming year? That way we can set up a price for all of it up-front.

    Commissioner Fellman stated in the event that we are deciding today that we can establish our priorities, then we can go ahead and do that. I think there was some discussion and we were originally discussing half of our available funds go to implementation of our energy study, which I assume now we are focussed on AB117 and then reserving treatment of the additional half until a future date when there would be some discussion about what that should include. So if you feel, Commissioner Gonzalez, that we can move forward today... I think the discussion was that we would look at January as a time to look at the second half of the money.

    Chairperson Commissioner Gonzalez stated I think the only problem with that is a question of budget then. Then everybody will say that there's a priority to do the second part, but if there's no money when we get there, then we are going to have a problem. If we already know it's a priority, then we need to negotiate that up-front.

    Commissioner Fellman stated and which is why we said let's take half of the available funds now for what we want to do right away and reserve half that doesn't preclude additional monies out of that second half going to the first order of priority, but at least allowing LAFCo the opportunity to look at that second half of the budget allocation. In the process, we have been able to get a better deal out of R. W. Beck by telling them that there is only so much money available to do the amount of work we want them to do.

    Ms. Miller stated if you are concerned about the next step, we can continue to phase the project which is what we have been doing. We can certainly scope the next phase. We don't need a contract for it right now, but we can certainly scope it.

    Chairperson Commissioner Gonzalez stated but there wouldn't be a reason that we wouldn't, as we're outlining the work plan, to not be losing some of the things in the October 30th memo, to keep that in there as well with a focus on AB117.

    Commissioner Schmeltzer stated I think that's right and that's fine. The money was reserved in deference to your expressed wishes to have other priorities besides energy so that was why it was set aside.

    Chairperson Commissioner Gonzalez stated I don't appreciate the deference to me if that was the case, but I think the real question is whether it is going to make a difference in negotiating with R. W. Beck. That's the question. Maybe I don't understand how they negotiate, but it would just seem to me that if we work out a price and come back a few weeks later trying to work out a price for something else, why are we talking it all at once?

    Ms. Young stated we can and I concur with that and make it part of the process. We'll scope it out so there's Phase 1, Phase 2 and bring it back with a scope on the agenda and a potential contract on the agenda for your review since you have indicated it is a full Commission review.

    Chairperson Commissioner Gonzalez stated tell me what Phase 2 is going to be now.

    Ms. Miller stated Phase 2 would be more of the study, the financing and acquisition of PG&E facilities, which would be Items 5-7 from the October 30th letter. Now 5 is a little bit of what we are doing now in the AB117 because they will do some risk analysis but there will also be risk analysis with the acquisition of PG&E. It's on Page 3 of the October 30th letter, he's got the seven steps and the money on the side.

    Chairperson Commissioner Gonzalez stated Ms. Young, let's just go through them. Number 1 would not be considered. This was covered, wasn't it?

    Ms. Miller stated there is a portion of it. It wouldn't be covered at the extent that they originally, the $25,000. We negotiated that way down. We've been through that a little bit. They will still spend some time on it, but won't cost that.

    Chairperson Commissioner Gonzalez asked and Number 2?

    Ms. Miller started it's part of this Phase 1. It's part of the community aggregation analysis and Number 3. Number 4 had to do with them monitoring legislation and which we are not going to have them do. A little bit of Number 5 will be in this first phase because they will do some risk management. The number of speakers that you have had from DOE and SFPUC-they have their own studies and they have a lot of their own information. So a part of the reason why we were able to negotiate the price down was also assuming that we would be working with those entities. They have a lot of their own information. They will have a lot of input so we will get some efficiencies. We won't be duplicating a lot of things. R. W. Beck is already under contract with SFPUC for Hetch Hetchy for a risk management plan.

    Chairperson Commissioner Gonzalez stated so it wouldn't exactly be 5, 6 and 7-it would really be 6 and 7?

    Ms. Miller stated it would be 6 and 7 with 5, the Risk Management Plan just allocated to 6 and 7. So, it's 1, 2, 3 and a little bit of 5 to risk management allocated to 2 and 3.

    Chairperson Commissioner Gonzalez asked and 7 would be?

    Ms. Miller stated 7 has to do with the ability to finance the acquisition of 6. These are all future cost models. It is quite complicated. They separated out that component. Does that make sense?

    Chairperson Commissioner Gonzalez stated yes it does.

    Vice-Chairperson Commissioner McGoldrick stated I am fine with all this.

    Commissioner Schmeltzer stated I am fine with scoping it all out now. What I would hope to see assuming we move forward with all of it is that we actually end up with two reports, one on community aggregation and one on the Phase 2 items. I don't think anything we've said here precludes considering it that way.

    Chairperson Commissioner Gonzalez stated I agree with that. But, I do think they should be discussed together with R. W. Beck at the time you are trying to price it out.

    Ms. Young stated we will definitely have them here and we will also have a proposed contract so when it comes back, you can look at all of those and make the decisions that you need to make.

    Commissioner Fellman stated I have a procedural question for counsel. Since we have discussed these together, Commissioner Ammiano, do you see Item 4 as a separate item for a vote, or would you agree that we could meld Items 4 and 5 so we could have one vote on both?

    Commissioner Ammiano stated it doesn't matter. I think do it together since we heard them together.

    Chairperson Commissioner Gonzalez stated to the extent that we have the items in the October 30th memo, is there any reason we cannot incorporate it into Part 2 of the immediate work plan which is Item 5? So the scope of work for R. W. Beck-if we can include the October 30th memo, the portions related to 6, 7 and 5 as part of 5 and incorporate what Commissioner Schmeltzer said which is bring it forward as two separate things for consideration in January?

    Ms. Young stated yes, you can do that.

    Chairperson Commissioner Gonzalez asked, can we amend the item orally as discussed that in addition to a - g, that a- g be considered the component of AB117, but that 5, 6, and 7, primarily 6 and 7 of the October 30th memo would be incorporated in there as another area that we're interested in pursuing?

    Ms. Young stated so that the public is clear is from the Energy Committee's outline, page 2, you are looking at a - g. From the October 30th memo from R. W. Beck, you are looking at part of 5 and 6 and 7. That there is a scoping element and the direction to bring the information and the contract back to the full Commission in January.

    Chairperson Commissioner Gonzalez stated as separate considerations. That way there could be a policy discussion.

    Ms. Miller stated and for the public consistent with that will be direction to staff, your Executive Officer to work with the stakeholders being SFPUC and Department of Energy to make sure the scope of work is consistent with their needs in terms of the community aggregation information.

    Chairperson Commissioner Gonzalez stated so there is a recommendation that we consider these items together. Unless anyone indicates that they intend to dissent, then I don't think there's going to be a problem. Why don't we do them separately since they're on the agenda separately?

    Vote on Item 4 as amended:

    AYES: Vice-Chairperson Commissioner McGoldrick, Commissioners Ammiano

        and Schmeltzer, Chairperson Commissioner Gonzalez

    NOES: None

    ABSENT: Commissioner Hall

    ACTION: Approved as amended.

    Chairperson Commissioner Gonzalez asked if Commissioner Fellman is an alternate for any of the absent members?

    Ms. Young stated only for the public member.

    Vote on Item 5 as amended:

    AYES: Vice-Chairperson Commissioner McGoldrick, Commissioners Ammiano,

        Schmeltzer, Chairperson Commissioner Gonzalez

    NOES: None

    ABSENT: Commissioner Hall

    ACTION: Approved as amended.

6. Discussion and action regarding the Mayor's Budget Office Request for a Three Percent Cut to the FY 2002-03 Budget to Assist in Balancing the Budget (Discussion and Action Item).

    Ms. Young stated this item is before the Commission for your discussion. The Mayor's Policy Instructions for the Budget for Fiscal Year 2003-2004 included that all City departments as well as agencies that are funded through the City and County of San Francisco review their budgets in order to submit to the Mayor's Budget Office three-percent cuts in the budget for Fiscal Year 2002-2003. This is before you for your discussion. You are a separate agency, and this decision is before you in terms of whether or not you wish to reduce your budget by three percent. If you were to reduce your budget, which is $448,969 by three percent, that would be $13,469. That is a decision for the Commission to make.

    Vice-Chairperson Commissioner McGoldrick asked do you have any recommendations where that money would come from?

    Ms. Young stated from our professional services contract. I have spoken to our legal counsel. We have set aside as we have said $200,000 for the studies. The other $100,000 has been used for legal counsel. We anticipate that for the next six months, there could be a total of about $36,000 in legal counsel which leaves us with about $13,000 out of that $100,000 that we could use to offset the request if the Commission chose to do so.

    No public comment. Public comment closed.

    Vice-Chairperson Commissioner McGoldrick asked is there also a contingency plan given the fact that we have heard further bad news from Sacramento and also the problems locally that we are all going to anticipate there?

    Ms. Young stated we will come back to you at a future date. The departments on behalf of the Board of Supervisors have been looking at four percent cuts as well, but that has not been requested from the Mayor's Budget Office. Simply the three percent cuts that were due December the 9th. Since our meeting was after that, this is the first opportunity we could deal with the three percent cuts.

    Chairperson Commissioner McGoldrick stated that the Commission would take the action to enforce a three-percent cut to the budget.

7. Request from Commissioner Gonzalez to Discuss and Act on Meeting Twice a Month. (Discussion and Action Item).

    Chairperson Commissioner Gonzalez stated since a couple of our Commissioners are gone, I think we can take this up at the next meeting. My thinking on it is that we try to schedule twice a month and cancel meetings as opposed to working to find dates that everyone can attend.

    Commissioner Schmeltzer stated the Item mentioned the first and third Friday and the calendar showed something separate.

    Ms. Young stated the agenda reflected something different than the memo and was corrected.

    Vice-Chairperson Commissioner McGoldrick stated if you look at the twelve month calendar that is attached, the second and the fourth are the predominant dates, but there are at least two months where the first and the third are indicated, and then there is one month where the third and the fifth are indicated. I think there might be a little bit of spottiness there that might affect our schedules given the fact that some of us have other Friday meeting commitments. Mondays, given the fact that we are moving the Board of Supervisors meetings to Tuesdays--Mondays become blank as far as our consideration of moving to Tuesdays was concerned because we are trying to reserve Mondays for preparation for Tuesdays. So I think Fridays may become meeting dates for Board of Supervisors Committees and in that regard that may interfere with LAFCo or LAFCo may interfere with meeting dates. So we have a lot of considerations.

    Ms. Young stated I think the Commission can make their decision in January and no later than February those can be factored into the planning of the new President with respect to the Committee meetings. I would just correct the record to indicate that what you have before you is a calendar as the agenda was corrected reflects that is twice a month. So that is a discussion you can have what those two dates twice a month on a Friday might look like. It was just a sample for you to review.

    Chairperson Commissioner Gonzalez stated I think it is a good point that the dates that the Board meets is going to change, and we have to consider everybody's availability. We will take it up in the January meeting.

    No public comment. Public comment closed.

    This item has been continued to the January meeting.

9. Future Agenda Items.

    Ms. Miller stated I think it might have been encompassed in our amended motion. What we are bringing back in January is an agenda item with the scope of work and budget for the second phase of the R. W. Beck which includes PG&E acquisition, the financing plan, and the risk management study.

    No public comment. Public comment closed.

10. Public Comment on Items not on the Agenda.

    No public comment. Public comment closed.

11. Adjournment.

    The meeting of the San Francisco Local Agency Formation Commission adjourned at 12:00 p.m.

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