AgdaPkt 2016-01-25 Closed and Interview and Joint SA PFA

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Legislative and regulatory risks come primarily from CPUC rate and policy making. The utilities may design and set rates in ways that affect PCE competitiveness, increasing their charges for transmission or solar interconnection, for example. PCE customers will have to pay an exit fee, which is set by CPUC, to the incumbent utility (PG&E in the case of Redwood City) to cover its costs of advance energy procurement. This cuts into the incentive for customers to stay with PCE. PG&E has requested and the CPUC has recently approved a 95% increase in exit fees. This increase in exit fees may remove the cost competitive advantage of PCE. If, on the other hand, PG&E loses many customers to PCE, their overhead on the distribution system will be higher, which will then motivate them to petition the CPUC to allow them to charge higher transmission and distribution rates or exit fees. The State could also change the requirements for providing evidence of resource adequacy, placing an additional burden on CCAs to contract for more energy in advance to meet forecast demand. These risks are being addressed and to some extent mitigated by the existing CCAs’ active efforts at CPUC proceedings on behalf of CCA members’ and future members’ interests. In summary, while these risks can be mitigated to a certain degree, they cannot all be eliminated, and in some cases, such as rate risk and regulatory risks, the risk level cannot be easily measured with any degree of certainty. Should the program fail, however, customers, including the member agencies, would return to PG&E on a transitional bundled commodity cost rate schedule, which is market-based and could be either more or less expensive than the prevailing rate schedule. Next Steps The County approved the JPA agreement on November 17, 2015. The deadline for cities to join the JPA as a founding member and adopt the PCE ordinance is at the end of February 2016. The JPA agreement is silent as to whether cities that do not meet the February deadline or initially opt not to participate in PCE formation will be allowed to join at a later date. If cities are allowed to join late, such cities may incur a joining fee. Any late entrants would have less influence over the formation of PCE and determination of program goals, but they would potentially join with a clearer understanding of the program goals, services, and rates that PCE will ultimately offer. Once the founding member agencies join PCE, they will form the JPA Board and determine the policies of PCE. Each participating city will have one vote, and the County will have two votes. Decisions will require a majority vote, with an option to call for a weighted vote which will be based on the member agency’s electricity load. When PCE formation is complete, PCE will conduct required noticing to customers regarding the opt-out period and then begin providing service, anticipated in October 2016. 7.A - Page 5