PURPOSE:

The City of Burbank must formally adopt a Renewable Portfolio Standard (RPS) Policy to comply with Senate Bill 1078. Signed by the Governor on September 12, 2002, it became law on January 1, 2003. SB 1078 orders municipal electric utilities to implement local standards and targets for renewable power supply similar to the renewable power supply goals required of State regulated Investor Owned Utilities.

BACKGROUND:

SB 1078 established a Renewable Portfolio Standard. The Bill was signed by the Governor on September 12, 2002 and became law on January 1, 2003. It delineates a specific RPS for Investor Owned Utilities and orders a local publicly owned electric utility to devise local standards in light of the legislation�s public policy goals.

The purpose of the bill is to attain a target of 20 percent renewable energy within California by increasing the diversity, reliability, public health and environmental benefits of the energy mix by implementing the California Renewable Portfolio Standard Program. The Legislature further and declares that, "increasing California's reliance on renewable energy resources may promote stable electricity prices, protect public health, improve environmental quality, stimulate sustained economic development, create new employment opportunities, and reduce reliance on imported fuels." This bill requires utilities to increase procurement of electricity from renewable energy sources by at least one percent per year until the target of 20 percent is attained.

THE STANDARD FOR INVESTOR OWNED UTILITIES:

SB 1078 directs the Investor Owned Utilities (�IOUs�) to increase procurement of electricity from �eligible� renewable resources by at least 1% per year until portfolio target levels of 20% are reached by December 31, 2017 measured by the amount of energy procured in making retail sales of electricity. However, the IOUs are not required to begin RPS compliance until 90 days after they become creditworthy by at least two major rating agencies. At this time, none of the IOUs are considered credit worthy.

The IOUs will procure their renewable energy through a process established by the CPUC which includes criteria for the selection of the least-cost and best-fit resource. The resources that qualify as renewable are: biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric generation of 30 MW or less (if it does not require a new or increased appropriation of use of water), digester gas, certain municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, or tidal current. Further, SB 1078 states that resources must be located within the State, or that the first delivery point must be to a location within the State, in order to qualify.

The IOU requirement to purchase renewable energy is limited to what can be procured at �market rates� subsidized by public benefit funding. Appropriate market reference costs will be established annually by the CPUC based on the costs of conventional resources. The subsidies come from 17% of the funds generated by the IOUs �public benefit charge� that the IOUs add as a 2.85% surcharge to their retail bills. IOU renewable energy procurement obligations are contingent upon sufficient funds being available to make �supplemental energy payments� to subsidize the above-market costs of renewable energy. Thus, their commitment to buy is limited to what can be procured with the public benefit fund subsidy in order to avoid raising rates.

It is noteworthy that by limiting the procurement expenditure to a portion of the IOU�s public benefit funds, the Legislature signaled that it did not intend that renewable resources be promoted at the expense of ratepayers by requiring IOUs to raise rates in order to comply.

THE STANDARD FOR MUNICIPAL UTILITIES:

SB 1078 is brief in specific directives to municipal utilities, requiring that the utility�s governing body implement and enforce a RPS. It states that the standard must be one that �recognizes the intent of the Legislature to encourage renewable resources, while taking into consideration the effect of the standard on rates, reliability, and financial resources, and the goal of environmental improvement.� The statue is silent with regard to establishing a compliance date for publicly owned utilities. Municipal utilities are not required to adopt a particular percentage goal or favor any particular technologies. Cities with municipal utilities are required to implement and enforce a renewable standard that makes sense for their customers and without rate increases that are unacceptable to the customers/owners of the utility.

The statue also requires that municipals report annually to their customers on the progress toward the renewable standard. The legislation does not specify the form of the notice to customers but does list certain minimum requirements. It requires information about expenditures of public benefits funds used in renewable development and the resource mix by fuel type used to serve customers.

Specifically SB 1078 requires the following:

Public Utilities Code (PUC) Section 387:

(a) Each governing body of a local publicly owned electric utility, as defined in Section 9604, shall be responsible for implementing and enforcing a renewables portfolio standard that recognizes the intent of the Legislature to encourage renewable resources, while taking into consideration the effect of the standard on rates, reliability, and financial resources and the goal of environmental improvement.

(b) Each local publicly owned electric utility shall report, on an annual basis, to its customers, the following:

Expenditures of public goods funds [Public Benefit Funds] collected pursuant to Section 385 for renewable energy resource development. Reports shall contain description of programs, expenditures, and expected or actual results.
The resource mix used to serve its customers by fuel type. Reports shall contain the contribution of each type of renewable energy resource with separate categories for those fuels considered eligible renewable energy resources as defined by Section 39912.

PROPOSED RENEWABLE PORTFOLIO STANDARD FOR BURBANK:

BWP recognizes and supports the goals of renewable energy procurement, particularly as to the public health and environmental benefits of reduced dependence on fossil fuels.

Determining what should go into an RPS necessitates making policy choices, including the renewable target level, timing to meet the goal, consideration of the need for additional resources, the kinds of resources deemed eligible, sources of funding, and where the resources are located. Further, renewable energy procurement must be undertaken in a responsible manner to protect customers from excessive costs and ensure that municipal utilities assume equitable obligations similar to those required of the IOUs.

The remainder of this section delves into the policy matters described above. It outlines the policy issues and makes recommendations for Burbank�s RPS that are consistent with the provisions of SB 1078.

Renewable Target Level and Compliance Date:

City Councils are free to set the renewable target levels and compliance date for their municipal utilities. Staff recommends that Council adopt the target set for the IOUs in SB 1078 and have BWP increase procurement of electricity from eligible renewable resources until a portfolio level of 20% is reached by 2017 measured by the amount of energy procured in making retail sales of electricity.

Eligible Resources:

In general, staff is comfortable with the list of eligible resources for IOUs in SB 1078 and recommends that they be adopted. However, two issues warrant further discussion.

a) The first is hydroelectric generation. The standard for IOUs under SB 1078 limits hydroelectric generation to facilities less than 30 MW. All large hydro has been excluded. However certain hydroelectric developments provide environmental benefits like flood mitigation, or have minor impacts, thus making it arguable whether size should be the differentiation factor. Further, some hydro facilities less than 30 MW can be very harmful to the environment, contribute to poor land management, and endanger fish and wildlife.

While there is very little potential for hydroelectric generation in Southern California and the Pacific Southwest considerable comments were made regarding treating hydroelectric energy as a renewable. Hence, staff proposes that only energy generated by low impact hydroelectric generation should be eligible to be counted as renewable regardless of size. This standard was chosen as BWP would not label as renewable hydroelectric facilities that have relative adverse impacts on the environment compared to other renewable resources.

BWP�s Hoover contract expires in 2017 and the BPA contact expires in January 2008 thus making moot the issue of whether they should be counted towards meeting the 20% renewable goal we�ve set for 2017. Neither are considered as renewable energy by BWP or this policy.

b) The second issue is �Green Tickets.� SB 1078 is silent regarding whether purchasing green tickets alone is appropriate. Green Tickets are also known as Renewable Energy Credits (�REC�) and have two marketable components � an energy attribute and an environmental attribute. The environmental attributes are traded freely in the market separate from energy. For example, a utility could purchase power from a wind farm, but would not be able to claim a renewable benefit unless it also purchased the associated Green Ticket. Green Tickets have value and are considered the supporting �evidence� that utilities use to substantiate claims that they have purchased renewable energy.

Using Green Tickets during the interim until BWP has an opportunity to develop or participate in green projects provides a viable stopgap means for BWP to meet its renewable energy targets. However, purchasing such Green Tickets does take money away from the community that could be used to develop its own renewable resources. The RPS provides for the use of Green Tickets. BWP will secure such Green Tickets to meet its renewable obligations, but securing renewable resources is the higher objective. Green Tickets are to compliment the development of renewable resources.

Only For Unmet Needs:

SB 1078 directs IOUs to establish a RPS to fulfill unmet long-term resource needs. The requirements of SB 1078 should be interpreted similarly for municipal utilities. Thus, BWP should only be required to procure renewables consistent with the unmet needs of its long-term resource procurement plan.

During the past several years BWP has pursued a deliberate policy of gradualism in developing its resource plan. This encompassed modernizing our existing local generation and installing the best available retrofit technology to decrease emissions and a priority commitment to conservation. The consequence of these actions has put us in a position of currently being adequately resourced with competitively priced resources.

In view of the foregoing and in the absence of other reasons such as cost reduction, BWP will not recommend that it uneconomically terminate, abrogate, or otherwise end any existing long-term contract in order to meet the renewable target portion of its energy portfolio.

SB 1078 is silent on the issue of renewable energy �competing� with energy conservation efforts except the inherent limitation of only using up to 17% of the public benefits spending obligation on price supports for renewable versus other public benefits. The role of conservation for utilities like BWP who have successfully used conservation efforts in recent years to limit the need for new resources should be recognized for its positive benefits on the environment. BWP staff believes that like the limit inherent for the IOUs of 17% public benefit spending that pursuit of conservation and other Public Benefit objectives should be maintained while supporting the pursuit of renewable energy resources.

Price BWP Should Pay To Procure Renewable Energy:

The state�s policy supporting renewable resource procurement is intended to hold utility ratepayers harmless. SB 1078 provides for limits on what is considered a reasonable price that the IOUs would have to pay for renewables. As previously mentioned, the CPUC will establish referent market prices for conventional and renewable resources to determine the maximum price the IOUs should pay for renewables with the cost difference being made up from public benefit funding.

In considering appropriate prices for renewable resources, Burbank will take into account, but not necessarily be limited, to the same referent benchmark prices established by the CPUC. As well, staff proposes that any above-market costs for renewables, higher than the cost of conventional resources, should be counted against BWP�s required public benefits spending. Like the IOUs, PBC spending for the purpose of subsidizing renewables will be limited to 17% of BWP required public benefits spending.

The cost of renewable energy should also include transmission costs and associated transmission losses. This is consistent with the Legislature�s intent to provide ratepayers with the benefit of renewable power at the least cost, and the statutory requirement for IOUs that transmission costs be considered in selecting among the available renewable resources under their RPS programs.

Effect On Rates:

In order to stay competitive with neighboring utilities, it is necessary for BWP to control the cost it pays for power. Consequently, renewable purchases will be limited to the extent of the availability of PBC funds to subsidize the purchases. Using 17% of the of retail electric revenues required to spent for public benefits purposes would provide over $600,000 annually � staff estimates that is sufficient to subsidize about 60,000 MWh of renewable energy down to the market cost of conventional resources. 60,000 MWh of energy is about 6% of sales. Increasing the subsidy would provide more money to subsidize a higher percentage of sales. Assuming current market forecasts of the difference in cost between renewable resources and other resources are generally correct it will require the City to incur additional power supply costs of less than two percent in order to gradually meet the full 20% goal by 2017.

The RPS for Burbank found on Page 13 presents a summary of the policies that BWP would use as a guide for renewable resource procurement.

BURBANK�S CURRENT SITUATION:

As discussed earlier in this report, over the past several years BWP has pursued a deliberate policy of modernizing its existing local generation facilities by installing new control systems and reducing emissions by employing the best available retrofit technology on our Olive units. Three combustion turbines will be retired. And, we are building the Magnolia Power Project. In the renewable energy area we have installed photovoltaic, micro-hydro, and micro-turbines fueled by land fill gas. These actions are consistent with our resource acquisition strategy that emphasizes a bias for equity, or ownership like rights, in projects and clean local projects that provide reliability. The consequence of these actions and substantial conservation efforts results in BWP being adequately resourced with competitively priced resources. With the subsequent passage of SB 1078, we find ourselves challenged to remain committed to conservation and add new resources without driving up rates.

Recent economic and conservation efforts have added uncertainty in determining our future requirements. Despite connecting record amounts of new load during the past several years including the Empire Center, Pinnacle Building, and other new load, consumption has been flat. Our current forecast is the fourth downward forecast revision in the past two years, with the decreases largely attributable to increased and sustained conservation in BWP�s service territory. Conservation takes off load from a lower base than anticipated two years ago when we planned and executed the aforementioned power resource development policy. The forecast we are currently using was prepared in January 2003 and projects expected energy load growth to be around 1.5 % annually.

The following graph shows historical loads since 1980 along with the current forecast and adjustments that have been made to it over the past several years.

(The term NEL on the graph means Net Energy to Load and represents the energy supplied to Burbank at the interface of the Burbank � Los Angeles power systems.)

The dip in consumption during the 2000 to 2003 time frame is largely attributable to conservation. It is an open question as to how much of the effect is sustainable or persistent. Work done by the California Energy Commission suggests that 50% can be attributable to moral swaysion and is not likely to be permanent. Staff assumes that BWP needs to continue to emphasize conservation. It shouldn�t be viewed or treated as competing with renewable energy. It simply should continue to be emphasized and promoted as our number one resource.

The effect of load-resource uncertainty is illustrated in the following series of graphics. The first shows expected loads and resources for the time period covering the 1994-95 through 2016-17 fiscal years.

If load growth increases faster than expected, the red line which represents load growth would shifts up as indicated by the dashed purple line. The effect of each is to shift the green triangle to the left advancing the timing for new renewable resources.

IMPLEMENTATION OF THE RPS:

Since BWP is not likely to have to add any significant quantities of new resources (at least not capacity resources) for about a decade, how will BWP implement its RPS? The answer is to initially subsidize renewable attribute (Green Tickets) purchases using the Public Benefits spending obligation.

As discussed earlier in this report, 17% of the Public Benefits set aside corresponds to over $600,000 annually which staff estimates could be used to subsidize the above market cost of approximately 60,000 MWh (which is about 6% of retail sales) of renewable power down to the market price of conventional resources. This could be achieved through marrying a renewable resource like wind with a conventional resource like gas where gas provides capacity and wind energy. Intermittent wind power could be bought to displace energy normally produced through gas fired generation. For example, if the incremental cost of gas generation was $40/MWh and the cost of wind $50/MWh, it would take a $10/MWh subsidy to bring the cost of wind down to gas. This strategy is expected to keep us in compliance with the RPS for several years. After that, as the share of renewables in the power portfolio increases using only 17 % of Public Benefit spending may be insufficient to cover the expected cost premium between renewable and nonrenewable power resources. At that time, the option of increasing the percentage, or portion, of Public Benefit spending earmarked for renewable energy subsidization could be increased. In order to avoid raiding the other Public Benefit spending objectives like low income and conservation, another option is to leave the Public Benefit subsidy at 17% and have a small impact on power supply costs, on the order of 1 or 2 percent. Or, some combination of the two is another possibility should available cost effective conservation opportunities begin to decline over time.

As discussed earlier, BWP does not intend to count the energy it gets from large hydro as renewable. Further, the Hoover contract expires in 2017 and the BPA contract in 2008 so they won�t be available after 2017 to count towards the 20% target.

BWP also proposes that it may be possible to use existing contracts or generation resources economically so that renewable resources could be integrated into power supply operations. In order to implement such integration the cost of the renewable resource, its location, and power supply must be all taken into account. It is not known at this time if such an approach is practical, it has not been done, however, it is an approach we intend to carefully consider. This would allow advancing the date when additional renewables could be added to our portfolio in a cost-effective manner.

The following set of pie charts show the expected resource composition of BWP�s power resource portfolio for the 2004-05 Fiscal Year.

The following set of pie chars show the expected resource composition of BWP�s resource portfolio for the 20016/17 Fiscal Year once the RPS is fully implemented. Although energy and capacity are shown, it should be noted that the goal is to have renewable be 20% of energy sales and that the percentage of renewable based on capacity will probably be higher but for illustrative purposes is shown as 20% in the pie chart.

WHAT OTHER MUNICIPAL UTILITIES ARE DOING FOR THEIR RPS�s:

Appendix A includes copies of staff reports and associated RPS�s for municipals in California who have adopted RPS�s.

PUBLIC INPUT

In order to obtain customer input and feedback on Burbank�s proposed RPS, BWP staff held a public meeting on October 15, 2003 at the Buena Vista Branch Library.

An extensive advertising and promotional effort went into publicizing the public meeting. Two ads were run in the Burbank Leader on October 8 and 11. A filmed interview featuring Jeanette Meyer, BWP�s Marketing Manager, with Michael McManus, Burbank�s Public Information Officer, was produced and run on Burbank Television Channel 6. It explained what a Renewable Portfolio Standard is and why the community should come to the public meeting. A scroll was produced and run on Channel 6 with meeting information. As well, BWP sent out about 200 emails with the proposed RPS policy attached to businesses in the community inviting them to attend the meeting or comment via email if they couldn�t make the meeting. A pop-up message was placed on the BWP website with meeting information and a link to the proposed RPS. Additionally, BWP Board member Wendy James sent messages to several environmental agencies asking them to share the meeting information with their Burbank members.

About 15 people showed up for the public meeting. Based on the question and answer session at the end of the presentation, it appeared that about one-half of the audience were Burbank residents and the other half other interested parties.

The meeting format comprised of three BWP speakers followed by a question and answer period. Fred Fletcher, BWP Assistant General Manager, was the primary speaker. Mr. Fletcher made a formal presentation that highlighted the policy aspects of the proposed RPS and responded to all questions from the audience. Jeanette Meyer gave a brief presentation on the various conservation efforts and Public Benefits Programs she administers. Last, John Joyce, BWP Energy Analyst, introduced himself and offered his services as BWP�s resident solar photovoltaic program contact. The presentations lasted about an hour. Eight people spoke during the question and answer period: one BWP Board member, four residents, and three representatives from various environmental groups.

Comments were generally supportive of the proposed policy. Everyone seemed pleased that the City would be adopting a policy promoting more energy from renewable resources into BWP�s power resource portfolio. The questions and comments covered a wide range of aspects related to resource planning and the need to protect the environment and health of Burbank residents. Several of the speakers raised concerns that the proposed policy didn�t have a limit on the size of units for producing eligible hydroelectrically generated energy. As well, several individuals felt that Green Tickets shouldn�t be counted and that there should be moratorium on how long they would be included as an eligible resource. One email received by BWP applauded the fact that the RPS specifically states that renewable efforts would not come at the expense of conservation.

Based on feedback from the BWP Board, Council, and the public, staff has modified the proposed RPS eligible resource list to only include low impact hydroelectric resources.

CONCLUSION:

To meet the mandate of the California Legislature with the passage of SB 1078 last fall on cities with municipal utilities, it is necessary for Burbank to develop a RPS. The attached RPS takes into consideration Burbank�s unique circumstances while meeting both the requirements of SB 1078 and serving as a useful guide to BWP for acquiring renewable resources.

RECOMMENDATION:

Staff recommends that Council, by motion, adopt the attached Renewable Portfolio Standard for Burbank Water and Power.

City of Burbank

Water & Power

Renewable Portfolio Standard

______________________________________________________________________________

Purpose: This standard represents Burbank�s commitment to renewable resource procurement consistent with the provisions of SB 1078.

Goal: BWP will increase procurement of electricity from eligible renewable resources until a target portfolio level of 20% is reached by 2017, measured by the amount of energy required in making retail sales of electricity.

Qualifying Resources:

Electricity produced from the following technologies constitute �eligible� resources: biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, low impact hydroelectric generation, digester gas, municipal solid waste, landfill gas, ocean wave, ocean thermal, tidal current, renewable components of sales from other parties (green tickets), or renewable distributed generation on the customer side of the meter. Facilities can be located anywhere in the interconnected transmission system located in the interconnected WECC electrical grid.

Timing of Long-Term Resource Additions:

Renewable resources will be procured to the extent they fulfill unmet needs identified in BWP's long-term resource procurement plan. BWP will not uneconomically terminate, abrogate, or otherwise end any existing long-term contract in order to meet the renewable target portion of its energy portfolio.

Price Benchmarking:

In considering the appropriate reasonable prices to be paid for renewable resources, Burbank will consider but not be limited to the price benchmarks set by the CPUC for the State�s investor owned utilities and shall include the costs associated with transmission.

Limit on Subsidies:

The procurement obligation is contingent upon BWP having sufficient funds available to make �supplemental energy payments� to subsidize the above-market costs of renewable energy. Any subsidy will come from public benefit expenditures that BWP is required to make pursuant to the provisions of AB 1890. Renewable energy subsidies from Public Benefits Funds will not come at the expense of conservation programs. The availability of sufficient Public Benefits Funds will be a de facto limit on the annual renewable purchase obligation and compliance with this Standard will be deemed achieved where noncompliance is caused by the unavailability of PBC expenditures in an amount not to exceed 17% annually.

Rate Impact:

The addition of renewable energy resources should not materially increase system wide rates.

APPENDIX A

A Department of the City of Alameda

AGENDA ITEM NO: 6.C.1

MEETING DATE: 01/27/03

ADMINISTRATIVE REPORT NO. 2003-055

TO: Honorable Public Utilities Board Submitted by: _______________________

Valerie O. Fong

Utility Services Manager

From: Don Rushton Approved by: _ ______________________

Utility Planning Supervisor Junona A. Jonas

General Manager

SUBJECT: Approving Renewable Portfolio Standard

Recommendation:

By motion, it is recommended that the Public Utilities Board (Board) approve the following renewable portfolio standard for Alameda Power & Telecom (Alameda P&T): Alameda P&T intends to obtain at least 40 percent of its electrical energy from renewable resources, including large hydroelectric facilities, each year through 2020.

Background:

State Senate Bill 1078 (SB1078) became law on January 1, 2003. The legislation modifies the California Public Utilities Code to include a specific renewable resource requirement for the investor owned utilities (IOUs) consisting of at least 20 percent of eligible renewable resources by the year 2017. �Renewable Resources� is defined as biomass, solar photovoltaic, wind, geothermal, small hydropower of 30 megawatts or less, waste tire, digester gas, landfill gas, and non-combustion municipal solid waste generation technologies. Large hydroelectric plants (30 MW or greater) are excluded, presumably, because of the negative environmental consequences that can be attributable to such facilities.

The bill also contained provisions that apply specifically to publicly-owned utilities:

Requires the governing body to implement and enforce a renewable portfolio standard to encourage renewable resources
Requires the publicly owned utility to report annually to the customers:
- The amount of money spent on renewables from public goods funds
- The resource mix used to serve customers (this is already a requirement for Alameda P&T)

The public power community, including the California Municipal Utilities Association and the Northern California Power Agency (NCPA), participated actively in crafting the provisions that apply to public power. They were able to retain local control and flexibility for the governing boards in establishing the portfolio standards and in determining what defines �renewable� for each publicly owned utility.

Discussion/Analysis:

Alameda P&T currently receives more than 80 percent of its power from renewable resources. More than 50 percent comes from the NCPA geothermal plants, which are �eligible� renewable resources as defined in the California Public Utilities Code. Approximately 25 percent of Alameda P&T�s power supply comes from �large� hydroelectric facilities. Much of this hydro generation is from the NCPA Calaveras hydro plant, which would not be an eligible renewable resource for meeting the IOU�s portfolio requirements.

NCPA believes that the Calaveras plant combines water usage and electric power production in an environmentally sound manner. The project was designed and constructed to maximize benefit to mankind and the environment. Minimum flows in the North Fork Stanislaus River were increased as a result of the project to protect and enhance fish and other aquatic resources. Land has been enhanced and set aside to offset any impacts to wildlife from the expanded reservoir. Hydroelectric power generation is certainly a renewable resource, and to the extent that environmental impacts are minimized and/or mitigated, Alameda P&T staff believes that this resource should be included as contributing to a renewable portfolio. Staff also believes that the 30 MW limitation on hydro adopted by the State of California is arbitrary. For these reasons, it is recommended that Alameda P&T�s renewable portfolio standard be established to include large hydroelectric generation.

Projections of Alameda P&T�s future power supply indicate that the contribution of renewables will decline unless new renewable resources are added to the mix. This is due in part to the expected decline in the output of the NCPA geothermal plants, and in part because of forecast load growth. It is projected that renewables will decline to about 45 percent of Alameda�s power supply mix in the year 2017. If only �eligible� renewable resources are counted, the contribution is only about 24 percent. This still exceeds what some might say is a very aggressive goal established by the State for the IOUs of 20 percent renewables. During the interim years preceding 2017, Alameda P&T�s renewable portfolio will be greater than these percentages, far exceeding the statewide average. (During 2001 Alameda�s actual renewable resource contribution was 88 percent, including large hydro, while the comparable number for the State is about 30 percent.)

One stated intent of the subject legislation is to �encourage renewable resources�. Staff believes that Alameda P&T has already more than met this goal: it has succeeded in the development of renewable resources, supplying the great majority of its power from such resources while retaining very competitive rates. But Alameda P&T will not rest on its laurels in this regard. To

help meet its future needs in an economic and environmentally responsible manner, Alameda P&T is currently pursuing the development of a solid waste gasification generation project. It is also actively pursuing other renewable resources, such as wind and solar photovoltaic.

Because Alameda P&T has greatly exceeded the performance of other utilities in the State of California with regard to the development and utilization of renewable resources, and because of the uncertainty associated with the development of new generating resources, staff recommends that the renewable portfolio standard adopted by the Board not be unduly restrictive or aggressive. Even if Alameda P&T is not successful in developing new renewable generating resources, it will meet or exceed the portfolio goal established for the IOUs. Therefore, it is recommended that the renewable portfolio goal be to provide at least 40 percent of Alameda�s power supply mix from renewable resources, including large hydroelectric facilities, each year through 2020. This represents two times the standard set for the IOUs by the state.

Budget/Financial Considerations:

None. The cost of Alameda P&T�s renewable resources is already included in the budget and in long-term projections of power costs.

ANAHEIM

DATE: JULY 8, 2003

TO: CITY MANAGER/CITY COUNCIL

FROM: PUBLIC UTILITIES GENERAL MANAGER

SUBJECT: RENEWABLE PORTFOLIO STANDARD

RECOMMENDATION:

That the City Council, by Motion, approve the City of Anaheim�s Renewable Portfolio Standard (RPS), effective fiscal year 2003/04 through fiscal year 2017/18 and direct the Public Utilities General Manager, on behalf of the City, to implement the RPS.

DISCUSSION:

The Public Utilities Board (PUB) recommended approval of this item at its meeting of June 5, 2003.

Senate Bill 1078 - Renewable Portfolio Standard for Retail Electric Sellers
California State Senate Bill 1078 (SB 1078) requires retail sellers of electricity to raise the share of renewable resource generation in their power portfolios. Retail sellers of electricity include investor owned utilities (IOU) like Southern California Edison, and municipal owned utilities (MOU) such as the Anaheim Public Utilities Department (Department). Qualifying renewable generation resources for both IOU and MOU includes biomass and waste, geothermal, solar, and wind. However, MOUs also have the option to include generation from large (> 30 Megawatts) hydroelectric plants in their share of renewable resources, whereas IOUs may not.

The public policy goal of SB 1078 is to move electric retailers toward more diverse power portfolios in order to: (1) improve statewide reliability by lessening dependence on conventional fuel sources such as natural gas or coal, and (2) increase utilization of power resources that generate public health and environmental benefits.

Beginning in 2003, SB 1078 requires IOUs to increase the share of renewable energy in their power portfolios by at least one percent per year until a 20 percent share is reached. The deadline for IOUs to meet the 20 percent requirement is December 31, 2017. By contrast, an MOU has the flexibility to define and enforce its own RPS, provided that the local governing body approves it. The Department�s local governing body is the Anaheim City Council.

Finally, SB 1078 requires retail sellers to distribute an annual report to their customers on: (1) expenditures of public benefit funds collected for renewable energy resource development along with a description of programs, expenditures, and expected or actual results, and (2) the resource mix used to serve its customers by fuel type, including the contribution of each type of renewable energy resource.

Role of Renewable Resources in Anaheim�s Current Power Portfolio

Renewable resources account for approximately two percent of the Department�s power portfolio. By contrast, some California utilities have power portfolios with about eight to 10 percent of renewable resources, while others have around 20 percent.

The majority of the Department�s renewable resources come from hydroelectric power generated by Hoover Dam. The remainder comes from solar power systems installed at City facilities and private properties throughout Anaheim. These solar power systems generate over 380,000 kilowatt-hours of energy each year, or enough to power 63 homes.

Proposed RPS

With renewable resources comprising just two percent of the power portfolio, the Department proposes that the City Council approve a RPS that raises Anaheim�s renewable resource share to 15 percent by December 31, 2017 and maintains that level thereafter. However, be advised that there is currently proposed legislation at both the state and federal level that, if passed, will eliminate the compliance flexibility that we currently enjoy, as well as impose higher renewable mandates and reduced compliance time. Should that occur, the Department will present a revised plan to Council.

The Department selected a 15 percent goal based on the Department�s ability to absorb the higher cost of renewable resources without raising rates. Typically, renewable generation resources produce electricity that costs 1.5 to 3.0 cents per kilowatt-hour more than conventional resources like coal, natural gas, or nuclear. Therefore, due to the cost differential and the potential for higher electric rates stemming from the purchase of more renewable resources, at this time the Department does not recommend matching the 20 percent goal that the IOUs must attain, but instead strive for the gradual phase-in of a 15 percent target. New renewable purchases will be made in the amount and years that are outline in the following schedule:

Year	FY 03/04	FY 05/06	FY11/12	FY15/16
Renewable Purchase Amount	6MW	8MW	25MW	25MW
Renewable %	3%	5%	11%	15%

In order to pay for the renewable cost premium of 1.5 to 3.0 cents per kilowatt-hour, the Department proposes to retain 20 percent of public benefit funds or $1.3 million annually to purchase renewable energy. The Department currently allocates approximately $6.4 million in electric revenues per year to the public benefit fund. Therefore, the Department will pay the increased margin associated with renewable power by shifting spending priorities for public benefits funds, rather than passing on the higher cost to customers.

Reallocating the $1.3 million will still leave the Department with sufficient funds to continue its Advantage Services energy efficiency and low-income programs for residential and business community at current levels. However, the Department will have to scale back some of its larger research and development projects.

As the share of renewable resources in the power portfolio increases, particularly after year 2010, public benefit funds will be insufficient to cover the expected cost premium between renewable and nonrenewable power resources. Consequently, the Department recommends that the RPS be reviewed every five years to reconcile renewable resource goals with financial resource availability, and identify mechanisms to absorb higher renewable resource costs if needed.

Initial RPS Implementation

The Department recommends purchasing wind energy from Pacific Corp Power Marketing, Inc. (PPM). PPM was chosen via a green power bidding process that involved combining Anaheim�s desired green power requirements with that of a number of other Southern California municipal agencies to increase the aggregate volume of the bid, thereby lowering the price. The fixed price for this wind energy is $53.50 per MWh over 25 years, with the right to cancel after 20 years. The initial total premium cost paid by public benefit funds will be approximately $263,000 per year. Since the Department will be allocating approximately $1.3 million each year for renewables, the remaining amount will be held in a reserve account, which will be used to offset future renewable purchase costs. This agreement will be presented for Council approval in a separate agenda item.

IMPACT ON THE BUDGET:

There is no impact on the General Fund. The Power Supply Budget in Fund 525 will cover costs for renewable resources up to the standard market price. Allocated public benefit funds, which are located in Advantage Services Fund 537, will then be used to pay the renewable resource premium over the standard market price starting in FY 2003/04. In total, the Department will allocate 20 percent of public benefit funds for renewable resources in Fund 537 for FY 2003/2004 through FY 2016/2017. This re-prioritization of current public benefit fund spending does not represent a rate increase or new fee imposed on the customer.

Respectfully submitted,

Marcie L. Edwards

Public Utilities General Manager

AGENDA ITEM

TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL

FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES

DATE: MAY 21, 2003

SUBJECT: AUTHORIZATION TO ENTER INTO CONTRACTS WITH PPM ENERGY, INC., FOR THE PURCHASE OF THREE (3) MEGAWATTS OF WIND POWERED ELECTRICAL ENERGY AND TO ADOPT A RENEWABLE PORTFOLIO STANDARD

RECOMMENDATION

It is recommended that the Utility Board authorize the Mayor to execute the agreement with PPM Energy, Inc. (�PPM�) once the final agreement is prepared, for the purchase of wind powered electrical energy associated with a (3) MW share of the 145.6 MW High Winds wind generation facility currently under construction in Solano County, California.

It is further recommended that Utility Board adopt the Renewable Portfolio Standard (RPS) in fulfillment of SB 1078 requirements.

BACKGROUND

STATE RENEWABLE PORTFOLIO STANDARD

Senate Bill 1078 became law January 1, 2003 and requires local publicly owned utilities to establish and implement a renewable portfolio standard that recognizes the intent of the Legislature to encourage renewable resources, while taking into consideration the effect on rates, reliability, financial resources, and the goal of environmental improvement. The law also requires that each local publicly owned utility report to its customers, on an annual basis, the fuel mix used to serve its customers and the expenditure of public goods funds for renewable resources. The recommended Renewable Portfolio Standard (RPS) for the adoption by the Utility Board is attached in Attachment A.

DESCRIPTION OF THE RESOURCE SELECTION PROCESS

In February 2002 the Southern California Public Power Authority (SCPPA) issued a request for proposals (RFP) for renewable energy projects on behalf of its members, including Pasadena. SCPPA received a total of 44 proposals for various types of renewable energy projects including wind, solar, geothermal, biomass, and landfill gas. The proposals were reviewed by the SCPPA Resource Planning Committee, which recommended retaining 20 proposals for further consideration.

The wind generation proposals were identified as the lowest cost renewable resources, when compared to the solar, geothermal, and biomass proposals. However, the intermittent nature of the wind resources, i.e. energy production based on weather patterns, and associated scheduling burdens and price risk make many wind proposals less attractive for power system operations than other resources with more predictable outputs. Many SCPPA members do not have sufficient scheduling resources to implement complex hourly wind prediction, load balancing, and scheduling procedures.

A proposal from PPM, a wholly owned subsidiary of PacifiCorp Holdings, Inc., and Scottish Power, attracted several SCPPA members and was able to achieve the necessary minimum subscription to go forward. PPM�s proposal created more value than its other wind competitors by providing a redelivery service, providing firm energy from a wind project on a continuous basis, independent of wind patterns. This energy can be relied upon during summer months and scheduled on a firm basis thus reducing hourly scheduling burden and price risk associated with deviations between amounts actually generated versus those scheduled.

SUMMARY OF THE AGREEMENT

Source: Initially, 145.6 MW High Winds Project owned & operated by FPL energy, in Solano County, California (�Project�).

Alternate: PPM has option to designate up to two alternative sources for the wind energy starting in 2007. Minimum of 70% must be generated in California. If State law requires, 100% must be generated in California.

Quantity: Actual metered output from 3 MW of Project (or alternate source), or approximately 8,800 MWh per year

Delivery: Delivered firm in Southern California (Cal ISO SP-15), seven days per week and 24 hrs/day (7x24) at 1 MWh/hour, except during true-up.

Term: 25 years, with each Party having a unilateral right to cancel after 20 years upon one-year written notice to the other party.

Price: Fixed price of $53.50/MWh, with no escalation over the term.

Note that PPM requires a minimum subscription of 30 MW from all participating SCPPA members combined in order to make this project viable. The contract will not be executed by PPM without this minimum subscription.

The proposed wind energy agreement is in compliance with SB 1078 and will increase the amount of renewable energy in Azusa�s energy portfolio by approximately 8.8 GWh per year, representing 4% of retail energy sales in FY2004.

In addition to the proposed wind energy agreement, Azusa currently receives about 5 GWh of hydroelectric energy from Hoover.

ECONOMICS OF THE RESOURCE

The firmed wind energy product, including all environmental attributes, is delivered at a fixed price of $53.50/MWh or 5.35�/kWh, without escalation over the term. Although this price is somewhat higher than proposals for non-firm wind energy, which ranged from $46/MWh to $49/MWh when levelized for no escalation, it is a superior product without delivery and price risk that is more comparable to predictable resources such as biomass or solar, which were offered to SCPPA at $60/MWh and up, excluding the cost of transmission.

Azusa�s annual cost for the expected average output of 8,800 MWh is $470,800. This cost is expected to be between $50,000 to $125,000 per year higher than local spot market energy sources (non-renewable) in the next five years, resulting in a system-wide rate impact of up to 0.5% for the period. This is commonly known as the �premium� paid the renewable resource. The City is likely to absorb some cost increase in the retail rates in the next five years since only limited funds are available from the Public Benefits Charge to reduce the �premium� paid.

FISCAL IMPACT

This firmed wind energy agreement is expected to cost up to $125,000 per year more than generic non-renewable power, resulting in a rate premium of approximately 0.5% for the next five years. Currently, there are limited funds available from the Public Benefit Charge (approximately $60,000 per year) to reduce the cost of this purchase and anticipated funds from PBC are likely to be insufficient for the next five years for this purpose. Therefore, staff has included the increased cost in the proposed retail rate adjustment for Board consideration.

Prepared by: Bob Tang, Assistant Director Resource Management

ATTACHMENT A

City of Azusa
Renewable Power Portfolio Standard (RPS)

May 21, 2003

Purpose:

This standard represents Azusa�s commitment to renewable resource procurement consistent with the provisions of SB 1078.

Goal:

Azusa will increase procurement of electricity from �eligible� renewable resources until a target portfolio level of 20% is reached by 2017, measured by the amount of energy procured in making retail sales of electricity.

Qualifying Resources:

Electricity produced from the following technologies constitute �eligible� resources: biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, hydroelectric generation, digester gas, municipal solid waste, landfill gas, ocean wave, ocean thermal, tidal current, renewable components of system sales from other parties, or renewable distributed generation on the customer side of the meter. Facilities can be located anywhere in the interconnected transmission system located in the west, and with preferences to resource locations within California.

Timing of Long-Term Resource Additions:

Renewable resources will be procured to the extent they fulfill unmet needs identified in Azusa's long-term resource plan and supplement short-term resource needs. Azusa will not terminate, abrogate, or otherwise end any existing long-term contract in order to meet the renewable target portion of its energy portfolio.

Price Benchmarking:

The appropriate reasonable prices to be paid for renewable resources will be established by the Azusa�s Utility Board and should to the maximum extent feasible consistent with the price benchmarks set by the CPUC for the State�s investor owned utilities and shall include the cost of associated transmission to deliver the energy to Azusa�s service territory.

Limit on Subsidies:

Azusa may utilize the funds generated by the �public benefits charge� (PBC) that Azusa adds as a surcharge to retail bills pursuant to the provisions of AB 1890 to subsidize the above-market costs of renewable energy. To the extent such funds are not insufficient, Azusa may defer the renewable resources procurement up to three years as described below until such funds are sufficient for this purpose.

Flexible Compliance:

Azusa is authorized to purchase the �environmental attributes� or �green tickets� from a renewable resource, without purchasing the associated energy, to comply with this RPS. Also, �catching-up� for procurement shortfalls and �banking� excess procurements for credit in the future over as many as three years will be allowed. However, procurement preference should be given to physical renewable resources in the first instance.

System Rate Impact:

The addition of renewable energy resources shall not increase system wide rates by more than a level by the Utility Board, currently set at 5% of the retail rates.

City of Gridley

Gridley Municipal Utilities� Electric Renewable Portfolio Standard

PURPOSE:

To state City policy regarding 2002 SB1078 � Renewable Portfolio Standard (RPS).

BACKGROUND:

State Senate Bill 1078 (SB1078) was signed into law on September 12, 2002 and was effective January 1, 2003. The legislation modifies the California Public Utilities Code to include a specific renewable resource requirement for investor owned utilities (IOUs). The legislation also includes provisions that apply to publicly owned utilities. These provisions would include:

Requirement that the governing body implement and enforce a renewable portfolio standard to encourage renewable resources
Requirement that publicly owned utilities report annually to their customers the following
- The amount of money spent on renewables from public benefit funds
- The resource mix used to serve the customers (Gridley Municipal Utilities already publishes a quarterly notice)
Each municipal utility governing board must define the terms of its RPS. The terms would include:
- What qualifies as a renewable resource (i.e. whether or not to count large hydroelectric projects (in excess of 30MW))
- The percentage of the total energy resources that are to be renewable
- The time frame in which to meet the �goal� of the defined standard

Discussion points:

The City of Gridley�s Electric Utility currently has a number of resources that would meet the CPUC definition of �Renewable� for IOU purposes. The utility�s participation in the NCPA geothermal plants is an eligible renewable resource. Of the approximate 32,000 MWH of electricity delivered to the City of Gridley annually, approximately 3,200 MWH are from the City�s ownership percentage in the two NCPA geothermal plants; or approximately 10% of our required power.
Although excluded for the purposes of the IOU�s requirements under SB1078, the City�s share in �large� hydroelectric projects is a valuable and critical component of the energy needs of the community. Of the approximately 32,000 MWH of electricity delivered to the City of Gridley annually, fully 28,618 MWH or 89% of the electricity needs of the City of Gridley�s customers is delivered under a long term contract with the Department of Energy�s Western Area Power Administration (WAPA). Much of this power is generated at Shasta, Folsom and New Melones Dams. None of these dams meet the CPUC�s eligibility requirements for IOU�s. However, due to the nature of the management of these facilities by the Federal Government for power, reclamation and environmental concerns, staff believes that a separation of large and small hydroelectric projects at a 30 MW level is arbitrary and ignores the unique nature of the resources provided by WAPA and the Department of Interior�s Bureau of Reclamation.
Although excluded from consideration, the City of Gridley�s contract with WAPA includes a capacity factor of 9.4MW. At no time during the existing contract has the City�s peak load exceeded this �maximum� capacity under our contract. In other words, the City has a built in growth potential through the end of the current contract (which ends on December 31, 2004) without any obligation to identify specific new resources to serve additional growth. Our average months (fall, winter and spring) currently have a maximum capacity rate of about 4MW to 4.5MW. Summer months have recently had a maximum capacity rate of 9.0MW. Any growth until December 31, 2004 will be contractually available to the City from resources provided by WAPA.
Also for consideration, the City recognized during 2001 that resources currently available from WAPA would be substantially reduced beginning January 1, 2005. Because of this, prior to the passage of SB1078, the City secured a long-term supply of power that will sustain any growth projections for several years. The contract for this long-term power expires in 2012.
The legislation encourages the use of �eligible� renewable resources when developing additional resources for our community�s needs. Although the �load� of our community will generally increase due to growth and expansion, the City has planned for this growth well before the introduction of SB1078 and secured resources in excess of our current demand that should sustain any reasonable growth for the next 5 to 7 years.

POLICY:

The renewable portfolio standard of the City of Gridley will be as follows:

� Qualifying RPS resources are defined as non-fossil fueled electric generating resources, including all hydroelectric resources:

Geothermal
Hydroelectric
Solar
Wind
Biomass and waste
Fuel cell

� RPS Target:

Gridley Municipal Utilities� (GMU) resource mix will have a minimum of 20% of renewables
At such time that projected resources do not exceed projected demand, GMU will strive to include qualifying resources to meet projected demand.
Any purchase or construction of qualifying resources will be accomplished primarily with accumulated public benefit funds. Due to the expected magnitude of incremental resource requirements it is highly unlikely that GMU can secure qualifying resources at reasonable rates (i.e. 100 kw of demand is a very small unit of delivery). There is a potential within NCPA that GMU will be able to obtain a percentage ownership in a qualifying facility but probably not at the time that the projected resources are required.

� Strategies for meeting RPS objectives:

GMU is in the process of implementing solar and geothermal demonstration projects utilizing public benefit funds. Housing stock is expected to increase 25% in the next 10 years. Demonstration and production solar and geothermal projects installed at a small percentage of the expected 450 new homes will provide ample RPS qualifying resources.
Public benefit funds, when available, will be used to implement the demonstration projects and may be used to supplement the production projects.

� Reporting RPS performance

GMU will continue to report to its customers the annual power content label.
GMU will report the amount of public benefit funds expended for the development of qualifying RPS resources in conjunction with the annual power content label reporting

RESOLUTION NO. 2003-71

A RESOLUTION OF THE LODI CITY COUNCIL APPROVING THE RENEWABLE ENERGY PORTFOLIO STANDARD (RPS) FOR THE CITY OF LODI ELECTRIC UTILITY

==================================================================

WHEREAS, Senate Bill 1078 was signed into law September 12, 2002; and

WHEREAS, this law defines qualified renewable energy resources and sets forth the following RPS for retail electric sellers other than municipal utilities:

(A) 20% of retail sales must be supplied by renewable resources by December 31, 2017; and

(B) Retail sellers must increase renewable supply by at least 1% per year until the 20% target is reached.

WHEREAS, as a municipal electric utility, the Lodi Electric Utility is excluded from the Senate Bill, although the following requirements are mandatory:

1) Each municipal governing board is responsible for implementing and enforcing a local RPS that recognizes the Legislature�s intent to encourage renewable resources, taking into consideration the effect on rates, reliability, financial resources, and the goal of environmental improvement.

2) Each municipal utility must report annually to its customers:

A) Expenditure of public benefits funds collected for renewable energy resource development; and

B) The resource mix by fuel type including each type of renewable resource.

WHEREAS, each municipal utility governing board must define the terms of its RPS. This would include determination of:

A) What qualifies as a renewable resource (whether or not to include large hydro projects); and

B) The percentage of the total energy resources that are to be renewable; and

C) How quickly you plan to meet that goal.

WHEREAS, the City of Lodi currently receives approximately 48% of its power from renewable resources. More than 25% comes from the Northern California Power Agency (NCPA) geothermal plants, which are �eligible� renewable resources as defined in the California Public Utilities Code. Approximately 21% of Lodi�s power supply comes from �large� hydroelectric facilities. The large hydroelectric projects combine water usage and electric power production in an environmentally sound manner. Hydroelectric power generation is certainly a renewable resource, and to the extent that environmental impacts are minimized and/or mitigated, staff believes that this resource should be included as contributing to a renewable portfolio. Staff also feels that the 30 MW limitation on hydro adopted by the State of California is arbitrary. For these reasons, it is recommended that Lodi�s RPS be established to include large hydroelectric generation; and

WHEREAS, the stated intent of the subject legislation is to �encourage renewable resources.� Staff believes that Lodi has already more than met that goal: it has succeeded in the development of renewable resources, supplying approximately 48% of its power from such resources while retaining competitive rates; and

WHEREAS, because of the uncertainty associated with the development of new generating sources, staff recommends that the renewable portfolio standard adopted by the City Council not be unduly restrictive or aggressive. It is recommended that the renewable portfolio goal be to provide in excess of 20% of Lodi�s power supply mix from renewable resources, including large hydroelectric facilities.

NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby approve the City of Lodi�s Electric Utility Renewable Portfolio Standard (RPS), attached hereto marked Exhibit �A.�

Dated: April 16, 2003

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I hereby certify that Resolution No. 2003-71 was passed and adopted by the City Council of the City of Lodi in a regular meeting held April 16, 2003, by the following vote:

AYES: COUNCIL MEMBERS � Beckman, Hansen, Howard, Land, and Mayor Hitchcock

NOES: COUNCIL MEMBERS � None

ABSENT: COUNCIL MEMBERS � None

ABSTAIN: COUNCIL MEMBERS � None

SUSAN J. BLACKSTON

City Clerk

2003-71

RESOLUTION NO. 5085(03)

A Resolution Of The Council Of The City Of Lompoc

County Of Santa Barbara, State of California,

Renewable Energy Portfolio Policy

WHEREAS, the State of California requires the City to establish a Renewable Energy Portfolio Policy; and

WHEREAS, The City Council wishes to encourage use of Renewable Energy sources,

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LOMPOC, CALIFORNIA, DOES HEREBY RESOLVE AS FOLLOWS:

SECTION 1. The City will seek to add 1% per year of new renewable generation to the City�s generation portfolio until a total of 20% has been reached through plant ownership or contract. However, the City�s annual renewable generation investment will not be required to exceed the available Public Benefit Funds collected on an annual basis. Additionally, the City�s renewable generation investment will be limited to purchasing generation projects needed to meet actual and forecast City load. This policy does not require the City to purchase resources beyond the reasonable generation needed to meet City�s electric loads.

SECTION 2. In the event the City fails to procure sufficient renewable resources in a given year, the City will in later years endeavor to procure sufficient additional renewable resources to cover the missed years.

SECTION 3. New Renewable Generation will consist of projects that became available after 1996, or incremental improvements to renewable projects after 1996. Investments into older projects may be counted, if the investment extends the life of a project or slows the decline of the output of the project.

SECTION 4. Renewable Generation Projects include, but are not limited to, biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric of 30MW or less, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, or tidal current, and any additions or enhancements to an existing facility using that technology.

SECTION 5. Preference may also be given to renewable energy generators based on location. Priority of any such preference is given to renewable energy generators located in Lompoc, Santa Barbara County, and in the State of California.

SECTION 6. This Resolution is effective on the day of its adoption.

The above and foregoing Resolution was proposed by Councilmember _________,

seconded by Councilmember ________, and was duly passed and adopted by the Council of the City of Lompoc at its regular meeting on May 6, 2003 by the following vote:

AYES: Council member:

NOES: Council member:

ABSENT: Council member:

______________________________

Dick DeWees, Mayor

City of Lompoc

ATTEST:

________________________________

Jane C. Green

City Clerk, City of Lompoc

Roseville

California Legislative Mandates for Renewable Portfolio Standards

SB 1078 was signed into law September 12, 2002. This law defines qualified renewable energy resources and sets forth the following renewable portfolio standard (RPS) for retail electric sellers other than municipal utilities:

20% of retail electric sales must be supplied by renewable resources by 12/31/17.
Retail sellers must increase renewable supply by at least 1% per year until the 20% target is reached.

As a municipal electric utility, Roseville Electric is excluded from the bill, however the following requirements are spelled out in SB 1078 for municipal electric utilities

� Each municipal governing board is responsible for implementing and enforcing a local RPS that �recognizes the Legislature's intent to encourage renewable resources, especially wind and photovoltaic, taking into consideration the effect on rates, reliability, financial resources and the goal of environmental improvement�

� Each municipal utility must report annually to its customers

Expenditure of public benefits funds collected for renewable energy resource development; and,
The resource mix by fuel type including each type of renewable resource

� Each municipal utility governing board must define the terms of its RPS. This would include the determination of:

what qualifies as a renewable resource (whether or not to count large hydro projects) and
the percentage of the total energy resources that are to be renewable, and
how quickly you plan to meet that goal.

The Roseville Electric Renewable Portfolio Standard as described in the enclosed was approved by Roseville City Council on February 19, 2003

Roseville Electric RPS Objectives

Meet the intent of SB 1078 to encourage renewable resources, especially wind and photovoltaics
Maintain reliable overall energy supply portfolio
Strive for environmental improvement
Minimize adverse impact of acquiring new renewable energy resources on customer electric rates

Roseville Electric Qualified RPS Resources

� Renewable resources are defined as non-fossil fueled electric generating resources, including hydroelectric. These would include but may not be limited to any resource that meets the definition of �Eligible renewables� pursuant to section 398.4(h)(1) of California SB 1305, which sets for the requirements for power content labels:

Biomass and waste
Geothermal
Hydroelectric
Solar
Wind

Roseville Electric RPS Target

� Roseville Electric resource mix will have a minimum of 20% of renewable resources. Renewable resources are defined as non-fossil fueled electric generating resources, including hydroelectric.

Strategies for Meeting Roseville�s RPS Objectives

� Increase renewable resources in Roseville during the next five years by 5 megawatt, one of which may be sited locally as a component to the proposed Roseville Energy Park.

Reporting RPS Performance

� Roseville Electric will report in the annual power content label to be distributed to all Roseville Electric customers to its customers:

Expenditure of public benefits funds collected for renewable energy resource development
The resource mix by fuel type including each type of renewable resource.

Ongoing Review of Roseville Electric RPS

� An ongoing five-year review standard of the RPS will address changes in the Roseville Electric power portfolio including local generation versus market power purchases and potential changes in the renewable energy technologies

City of Santa Clara

Silicon Valley Power

Environmental Stewardship and

Renewable Portfolio Standard

Policy Statement

Introduction

Section 387 of the Public Utilities Code of the State of California was amended by SB1078 in September 2002. This change in the Public Utility Code took affect on January 1, 2003. Section 387 requires each governing body of a local publicly owned electric utility to implement and enforce a Renewables Portfolio Standard (RPS). This standard is state-mandated to support the development of a diverse mix of energy for the state, including encouraging renewable resources. The RPS approved by the governing board is also to take into consideration the effect of the standard on rates, reliability, and financial resources and the goal of environmental improvement. In addition, publicly owned electric utilities are required to report on their fuel mix, including eligible renewable resources, and programs to customers on an annual basis. The full definitions of the standards for the renewables portfolio standard, reporting requirements and eligible renewable resources are detailed in Appendix A.

It is the policy of the City of Santa Clara to support a broad range of energy conservation, energy efficiency, electric technology, low income, and renewable generation programs, as described in the Public Benefits Program Policy Statement approved by City Council on May 12, 1998. The City of Santa Clara intends on continuing its support of this broad range of programs, thus encouraging wise use of energy resources, especially renewable energy generation.

It is also the policy of the City of Santa Clara, operating as Silicon Valley Power, to support the purchase and delivery of renewable generation as a part of its planned business for purchasing power for supply to all customers. Renewable generation shall be included in the utility portfolio of power provided to customers. These resources shall be cost-effective, reliable, sustainable, and part of the ongoing power purchase operations. SB1078 requires investor owned utilities to maintain a minimum of 20% of their power from eligible renewable resources by 2017 with 1% annual increases until that requirement is reached. More than 65% of SVP resources is currently derived from renewable resources including large hydropower facilities and 26% from eligible renewable (all renewable sources excepting large hydropower facilities). It is the intent of the City of Santa Clara to continue to support renewable resources. Generally, eligible renewable power supplies shall be available to Silicon Valley Power customers and not resold to other electric utilities or companies.

Environmental Stewardship in Santa Clara

The City of Santa Clara supports wise use of resources that effectively enhance environmental stewardship. In Silicon Valley Power environmental stewardship includes encouraging customers to use energy efficiently and without waste, as well as providing renewable generation resources through as many options as reasonable and economical. When given a choice between purchasing and or developing energy supply options, staff will give emphasis to all economic options that enhance environmental stewardship. This includes providing programs for customers to save energy at home and at work, as well as options for customers to opt-in to the purchase of renewable energy. Finally, this requires that when economic and reliability factors are equivalent, staff shall to choose to purchase renewable energy for Silicon Valley Power customers.

Energy Efficiency and Conservation Programs

In promoting an ethic of environmental stewardship, avoiding waste of resources is vital. In the electric utility, energy efficiency and conservation are clearly the most cost-effective methods to achieve this goal. The cost of avoiding a kilowatt of energy is significantly less than the cost of producing new, renewable resources. Therefore, staff shall first make every effort to implement cost-effective programs to encourage the wise use of energy by all customer classes. This effort will be primarily implemented through the Public Benefits Charge program under the guidelines approved by City Council on May 12, 1998.

Renewable Energy

Since 1975, the City of Santa Clara has taken a leading role in the development and promotion of the use of solar energy. That year, the City established the nation's first municipal solar utility. Under this program the City will supply, install and maintain solar water heating systems for residents and businesses within Santa Clara. The City has also installed solar energy equipment for its own facilities. The Community Recreation Center and the International Swim Center, both in Central Park, use solar heated water.

Silicon Valley Power shall also make every effort to provide a diverse mixture of energy resources that include renewable energy. When making new purchase power and facility construction decisions, renewable energy resources that are economic and reliable shall be given a priority. In addition, customers shall be provided with the option to install and/or purchase renewable energy at their home or business locations.

Definition of Renewable Power

For purposes of the City of Santa Clara, renewable energy generation shall be defined to include the following:

Hydroelectric resources , including energy efficiency improvements at existing hydroelectric projects
Geothermal electric generation
Solar Electric (photovoltaic)
Wind generation
Solar hot water heating
Solar thermal generation
Any facility meeting the definition of "in-state renewable electricity generation technology" in State of California law, Section 383.5.

Current Power Mix and Customer Programs

Silicon Valley Power will continue take positive steps toward providing Santa Clara with the cleanest power possible. The Silicon Valley Power 2002 power mix includes more than twice the renewable energy resources as the state average, and continues to be one of the utilities with the most environmentally friendly energy in California.

The City of Santa Clara will continue to support renewable energy resources and a diverse electric supply mix. Programs that support the retail installation of renewable energy resources, such as the Neighborhood Solar Program or rebates for the installation of Solar Electric generation systems, will continue to be supported by the customers through the Public Benefits Program. In addition, the purchase and development of renewable power resources will be included in the utility�s purchased power strategic program.

Reporting on Power Purchases and Customer Programs

Silicon Valley Power shall report on its energy efficiency and retail renewable generation programs and its power mix on an annual basis to customers, as outlined in Section 387 of the Public Utilities Code. These reports will be included in the already developed Annual Public Benefit Charge Status Report to City Council and as a part of the power content label. Included in the annual report to City Council shall be the following items:

� a description of all energy efficiency and renewable generation retail projects in the Public Benefit Program, including a summary of customer involvement, energy savings, and cost by program

� a listing of all power supplies, aggregated by fuel source and renewable eligibility status

� a summary of power by fuel types (by percentage and by total kilowatt hours sold)

� a discussion of the impact on customer rates and utility costs if additional eligible generation supplies are required

� an update to forecasts of future sources of fuel supply and recommended plans to increase the percentage of power from renewable sources.

Appendix A

The following requirements on publicly owned electric utilities are made in Section 387:

(b) Each local publicly owned electric utility shall report, on an annual basis, to its customers, the following:

(1) Expenditures of public goods funds collected pursuant to Section 385 for renewable energy resource development. Reports shall contain a description of programs, expenditures, and expected or actual results.

(2) The resource mix used to serve its customers by fuel type. Reports shall contain the contribution of each type of renewable energy resource with separate categories for those fuels considered eligible renewable energy resources as defined by Section 399.12.

Section 399.12 defines renewable energy resources as follows:

399.12. For purposes of this article, the following terms have the following meanings:

"Eligible renewable energy resource" means an electric generating facility that is one of the following:

(1) The facility meets the definition of "in-state renewable electricity generation technology" in Section 383.5.

"In-state renewable electricity generation technology" is defined in utility code 383.5 to mean biomass, solar thermal, photovoltaic, wind, geothermal, small hydropower of 30 megawatts or less, waste tire, digester gas, landfill gas, and municipal solid waste generation technologies, as described in the report, defined in paragraph (2), including any additions or enhancements thereto, that are produced in facilities located in this state and placed in operation after September 26, 1996, or that were operational prior to that date, and that are also certified under Section 292.2904 of Title 18 of the Code of Federal Regulations as a qualifying small power production facility either located in California, or that began selling electricity to a California electrical corporation prior to September 26, 1996, under a Standard Offer Power Purchase Agreement authorized by the commission.

(2) A geothermal generation facility originally commencing operation prior to September 26, 1996, shall be eligible for purposes of adjusting a retail seller's baseline quantity of eligible renewable energy resources except for output certified as incremental geothermal production by the Energy Commission, provided that the incremental output was not sold to an electrical corporation under contract entered into prior to September 26, 1996. For each facility seeking certification, the Energy Commission shall determine historical production trends and establish criteria for measuring incremental geothermal production that recognizes the declining output of existing steamfields and the contribution of capital investments in the facility or wellfield.

(3) The output of a small hydroelectric generation facility of 30 megawatts or less procured or owned by an electrical corporation as of the date of enactment of this article shall be eligible only for purposes of establishing the baseline of an electrical corporation pursuant to paragraph (3) of subdivision (a) of Section 399.15. A new hydroelectric facility is not an eligible renewable energy resource if it will require a new or increased appropriation or diversion of water under Part 2 (commencing with Section 1200) of Division 2 of the Water Code.

(4) A facility engaged in the combustion of municipal solid waste shall not be considered an eligible renewable resource unless it is located in Stanislaus County and was operational prior to September 26, 1996. Output from such facilities shall be eligible only for the purpose of adjusting a retail seller's baseline quantity of eligible renewable energy resources.

RIVERSIDE PUBLIC UTILITIES

Board Memorandum

�People Serving

People�

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BOARD OF PUBLIC UTILITIES DATE: June 6, 2003

AGENDA ITEM: 9

SUBJECT: RENEWABLE PORTFOLIO STANDARD

BACKGROUND:

The City of Riverside (City) must formally adopt a Renewable Power Portfolio Standard (RPS) to comply with Senate Bill 1078. SB 1078 expanded the Public Utilities Code to require Investor Owned Utilities (IOUs) to adhere to a legislated standard but enabled governing bodies of municipal utilities to determine their own RPS.

IOUs are required to obtain 20 percent of their power from renewable resources by 2017. However, the IOUs are only required to spend up to the total of their public benefit surcharge revenues on renewable resources. This amounts to 2.85 percent of each IOUs� customer charges. Large hydropower is excluded from the definition of renewable resources for the IOUs. Also, the IOU�s are required to purchase their renewable energy from resources within California.

RPU fails to see the logic in the exclusion of large hydropower, as it comes from existing facilities built to harness the power of water. Furthermore, Hoover Dam, a large hydropower facility of which Riverside is a part owner, only produces power when sufficient water can be released from the Dam. Water management is the first priority of the Hoover Dam project; renewable power production is secondary. Also, the restriction to purchasing power within California only causes renewable energy prices to increase. Expanding resources to transmission interconnections throughout the western region allows Utilities to purchase environmentally sensitive renewable energy without being gouged by unreasonable market restrictions.

The City of Riverside Public Utilities Department (RPU) annually receives about $5,000,000 of public benefits revenues. Riverside commits two-thirds of that amount to low income assistance, conservation programs and research projects. (Almost 3,000 low-income customers were assisted last year by this locally funded program.) Between $1.5 million and $1.75 million per year of Public Benefits Funds are already committed to supporting local renewable energy projects.

The philosophy is that renewable projects will be constructed within the City of Riverside and provide not only renewable energy, but also customer education and awareness. Renewable projects constructed, in development, or discussion include the Utilities Operations Center, La Sierra Metrolink Station, Autumn Ridge (Indiana) Apartments, Shamel Park, Islander Park, Hunt Park, the Casa Blanca Energy Demonstration Center, the 7^th floor patio, another low-income housing project, Cal-Baptist University, and one in the Orangecrest area.

Currently, 12 percent of Riverside�s resources come from renewable resources. Most of these power purchases are funded directly from rates. The current renewable resource mix includes hydro, wind, landfill gas, photovoltaic, and green tags. The Utility spends $12.8 million annually to reach that level. If large hydropower is included Riverside�s 2003 power portfolio, the level reaches 14.75 percent in renewable energy purchased and total costs are $14.0 million. As can be seen, Riverside does not

limit itself to the level of Public Benefits funds to reach the renewable commitment. RPU spends more than is required by SB 1078, while still retaining rates significantly below the IOUs. One can see that Riverside is committed to renewables, or green power, by spending more than our Public Benefits Funds.

The RPS proposes adopting a goal to reach a 20 percent level of renewable power in our energy portfolio by 2015, a more aggressive goal than that required of the IOUs. We will continue to report renewable efforts by presenting the �power content label� on the reverse side of the utility bill and on the web site. By statute, RPU does not include large hydro on the power content label, but it is cited narrative form when room permits. Furthermore, this information is described in more detail in the annual Public Benefits Program report direct mailed to all customers each fall.

This policy will be reviewed bi-annually and revised as necessary. As always, Riverside Public Utilities will continue to strive for beyond what is minimally required to show the commitment to green power, while maintaining low rates, high power quality, and providing exceptional service.

Renewable energy is usually more expensive than conventional resources. However, RPU has incorporated these costs into its long-term financial projections. Rates in Riverside, even with this level of renewable resources, should continue to be lower than rates in surrounding areas served by Southern California Edison.

The City could choose not to adopt a Renewable Portfolio Standard but would then not be in compliance with state regulations. Or, a different RPS could be developed. However, since the RPS will be reviewed every two years, it can be adjusted as necessary to meet the needs of Riverside customers.

That the Board of Public Utilities approve and recommend that the City Council adopt the Renewable Portfolio Standard proposed in this report.

City of Riverside

This Renewables Power Portfolio Standard (RPS) represents Riverside Public Utilities� (RPU) commitment to renewable resource procurement consistent with the provisions of SB 1078 (2002), an act to add Sections 387, 390.1 and 399.25 to, and to add Article 16 (commencing with Section 399.11) to Chapter 2.3 of Part 1 of Division 1 of, the Public Utilities Code. SB 1078 provides that each governing body of a local publicly owned electric utility shall be responsible for implementing and enforcing a RPS that recognizes the intent of the Legislature to encourage renewable resources, while taking into consideration the effect of the standard on rates, reliability, and financial resources and the goal of environmental improvement.

The public policy goal stated in the SB 1078 includes increasing California�s reliance on renewable energy resources up to 20% to promote stable electricity prices, protect public health, improve environmental quality, stimulate sustainable economic development, create new employment opportunities, and reduce reliance on imported fuels.

In furtherance of SB 1078�s expressed goal, RPU will increase its supply of electricity from �eligible� renewable resources until a target portfolio level of 20% is reached by December 31, 2015 (�Goal Target Date�), measured by the amount of energy procured for making retail sales of electricity. RPU�s 2003 renewable resources baseline is equal to 14.75% of its retail energy needs comprised of resources including large hydro, which provides many of the tangible demonstrable benefits mentioned above. However, in the spirit of SB 1078, energy procurement from large hydro projects will be measured separately, therefore changing the 2003 baseline to 12%. By December 31, 2010, RPU will reach 15% and by December 31, 2015 will reach 20% eligible renewable resources contingent upon ongoing biannual reviews that address, but are not limited to, changes in RPU�s power portfolio, changes in renewable energy technologies, legislative activities, and all other relevant issues.

Electricity produced from the following technologies constitute �eligible� renewable resources for purposes of this RPS: biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, hydroelectric generation (including large hydro), digester gas, municipal solid waste, landfill gas, ocean wave, ocean thermal, tidal current, renewable components of system sales from other parties, green tags and renewable distributed generation on the customer side of the meter. Eligible renewable resources facilities can be located anywhere in the interconnected transmission system located in the west.

RPU will report annually to its customers (1) expenditures of Public Benefits funds collected for renewable energy resources development along with a description of programs, expenditures and expected or actual results, (2) the resource mix used to serve its retail customers by fuel type, including the contribution of each type of renewable energy resource through an annual Public Benefit Programs Report, and (3) total expenditures for renewable resources funded by Electric revenues due to ongoing support by our customer-owners for renewable power.

RPU will continue to provide a quarterly Power Content Label Report and Annual Report to its customers as required by SB 1305 (1997) to disclose information about energy resources used to generate retail electricity.

Renewable resources will be procured to the extent they fulfill unmet needs identified in RPU's long-term resource procurement plan and RPU will not terminate, abrogate, or otherwise end any existing long-term non-renewable contract in order to meet the renewable target portion of its energy portfolio.

The addition of renewable energy resources shall not cause RPU�s system wide rates to increase by more than 5% from 2003 to the Goal Target Date.

Council Agenda - City of Burbank

Tuesday, November 25, 2003