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has locked in several long-term energy contracts and owns a substantial amount of <br />generation capacity. PG&E can also benefit from economies of scale and may be able <br />to command better pricing than smaller CCAs in the energy market. <br /> <br />Procurement risk is associated with the lack of available renewable energy resources to <br />meet the program’s needs. The State’s Renewable Portfolio Standard, which requires <br />utilities to source an increasing amount of their energy from renewable energy <br />resources over time, may incentivize development of additional renewable energy <br />sources from which PCE may purchase energy. Too, if CCAs in the PG&E territory <br />capture more of the market, that may, over time, cause PG&E to contract for less <br />renewable energy, which could potentially leave more renewable resources available for <br />procurement by the CCAs. <br />Opt-out risk may be mitigated by outreach performed first by the County and then by the <br />JPA. SMC has been providing outreach to the public regarding PCE, and once member <br />agencies of the JPA adopt their CCA ordinances, PCE will continue to provide outreach <br />to the public regarding its services and information about opting out. Customers will, <br />however, be able to opt out during the program if, for example, the rates become higher <br />than PG&E’s. <br />Operational risks exist with all start-ups. To date, these risks have been managed <br />successfully by the current California CCAs since their formation. In a worst case <br />scenario of a CCA failure, staff understands that customers would be able to opt back in <br />to PG&E service without service interruption or exit charge. In this circumstance, staff <br />expects that customers, including municipalities, would be treated like customers who <br />opted out of PCE after the end of the opt-out period, and thus would be charged on a <br />market-based rate schedule, which may be more or less expensive than the prevailing <br />PG&E rates. <br />In terms of financial risk to the members, the JPA is meant to be and remain separate <br />from the County and member cities and to assume all liabilities and obligations <br />associated with the program. Accordingly, the JPA agreement states that the “debts, <br />liabilities or obligations of the Authority shall not be debts, liabilities or obligations of the <br />individual Parties unless the governing board of a Party agrees in writing to assume any <br />of the debts, liabilities or obligations of the Authority” (Section 2.2). In addition, the JPA <br />agreement states that the JPA will indemnify the City and its agents for any claims <br />related to the JPA. These protections notwithstanding, the City could be exposed to risk <br />if the JPA fails to carry sufficient insurance to meet its indemnification responsibilities <br />under the JPA agreement. In addition, there is minimal risk that a court will deem the <br />JPA an “alter ego” of the City and thus find the City responsible for the debts, liabilities, <br />or obligations of the JPA. Furthermore, there could be exit fees should the City leave <br />the JPA voluntarily or involuntarily. <br />7.A - Page 4