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Council Meeting October 13, 1998 Santa MOnica, California
TO Mayor and City Council
FROM City Staff
SUBJ ECT Recommendation to Approve Green Electricity Purchasing Policy for City
FaCIlities and Approve a Community Assessment on Energy Issues
INTRODUCTION
This report recommends that the City Council approve a green electricity purchasing policy
(electriCity whIch has been generated from renewable resources) for all City faCIlities, and
approve a community assessment on energy procurement and energy services Issues
ThiS report also presents findmgs from the draft report prepared by Henwood Energy
Services, I nc as the first phase of the development of a comprehenSive energy
management plan for the City and community
BACKGROUND
On March 31, 1998, Callforma's electriC Industry was restructured and traditional electriC
utility functions, Ie, generation faCIlities, distribution and transmiSSion Infrastructure,
metering and billing services were "unbundled" Only the generation function, '7
j
approximately 25 percent of an average consumer's utility bill, was opened to competition i
/
The City'S and other local governments' consumer protection and environmental concerns
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OCT 1 3 ..
were partially addressed by the Legislature In AS 1890 which mandates a 10 percent
reduction from 1996 rates for small utility customers and allocates over $500 million through
the year 2002 for energy efficiency, renewable energy projects, research and development,
and low Income prog rams AS 1890, however, also allows the Investor-owned utilities
(Southern California Edison, San Diego Gas & Electric, and Pacific Gas & Electnc) to
recover billions of dollars In "stranded" Investments through a special surcharge levied on
all utility customers After the transition penod ends In 2002, the drafters of AS 1890
project that the cost of energy will drop significantly
On January 13, 1998, City Council approved a professional services agreement with
Henwood Energy Services, Inc for technical analysIs and evaluation of the energy
management options available to the City and community as a result of the electnc Industry
restructuring The draft report from the first phase of this evaluation IS attached as Exhibit
One DUring the first phase of the project, the consultant analyzed energy consumption and
energy usage patterns for City facIlities and for the residential, commerCial, institutional, and
industrial sectors of Santa MOnica Similar data was collected from various large electnclty
consumers In Santa MOnica who expressed Interest In combining energy loads with the City
to obtain the maximum benefits and cost savings available The consultant was also
directed to address the environmental and economic benefits and costs for the purchase
of electricity generated from renewable resources (often called "green" energy) such as
solar, wind, biomass, and geothermal for the City and commumty
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DISCUSSION
To date, CIty staff and the City's consultant have completed a significant quantity of data
collection and analYSIS pertaining to energy Issues The remaining major tasks for the
completion ofthe comprehensIve energy management plan for the City are an assessment
of the community's awareness of energy deregulation Impacts, Identifying speCIfic
Information and services that the City could provIde to residents, businesses and others,
and an evaluatIon of the community's mterest In purchasing green electricity Once this
additional data has been collected and analyzed, staff and the City's consultant Will
determine potentIal aggregation opportunities for CIty electricity procurement With
residential, commercial and institutional consumers In Santa MOnica Other Issues whIch
Will be addressed In the comprehenSive energy management plan Include energy effiCiency
and other demand Side management optIons for the entIre community, CIVIC Center energy
management opportunities, local renewable energy generation strategies, and mitIgation
of potentIal Utility Users Tax Impacts It IS projected that final recommendatIons Will be
presented to CounCil for conSideration In approximately four months
The next phase In the development of a comprehenSive energy management plan IS a
community needs assessment It IS estimated that a telephone survey of approximately 400
resIdents and small to medium commercial customers In the CIty would cost approximately
$15,000 Currently budgeted funds are available to cover the cost of the proposed survey
3
The results of this survey will be presented to City Council with the final recommendations
of the proposed final energy management plan
At present, about 11 percent of California's electricity IS generated from renewable
resources such as solar, wmd, geothermal, biomass, and small hydroelectric plants The
rest IS produced from large hydroelectnc projects and fossil or nuclear fuels In the Umted
States, electnc power generation accounts for one-third of the country's emiSSions of carbon
dioxide (which causes global climate change), two-thirds of the sulfur dioxide (whIch causes
smog), and over half of our nuclear waste It IS estimated that In the U S approximately
64,000 people die annually from particulate air pollution from vanous sources Including
electriCity-generating plants Renewable energy resources are less pollutlng because they
do not rely on burning fossIl fuels and are regularly replemshed uSing the earth's own
natural resources The purchase of green electriCity therefor represents one of the most
significant single actIons that a consumer can take to protect and preserve the envIronment
Dunng the current transition to a competitive electriCity market, green electnclty suppliers
are struggling to mamtaln theIr market share Some of the challenges faCing green
electnclty suppliers Include a lack of public awareness as to what green electnclty [S and a
limited level of awareness among many consumers as to why paymg more for green
electriCity makes sense The support of an environmentally aware purchaser such as the
City of Santa Momca IS Important for the contmued and expanded generation of renewable
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electricity Such a policy decIsion by the City would be consistent with several City Council
adopted envIronmental policy goals, has been unanimously endorsed by the Task Force
on the Environment and would pOSition Santa MOnica as a leader In the regIon, state and
nation
The current electricity demand for City faCIlities IS approximately 5 MW per year That
results In payments of approximately $23 million per year to Southern California Edison
It IS estimated that purchaSing green electricity for all City faCIlities could cost an additional
$110,000 to $215,000 per year, based on a one half to one cent per kWh premium over
current market rates (5 to 10 percent Increase over current costs) The Implementation
process for the purchase of green electriCity would also require a one-time Installation cost
of $15,000 to $35,000 for conversion of approximately 26 City electriCity meters DUring the
first year, total Incremental costs for purchaSing green electriCity could therefore amount to
$250 I 000 spread among all departments and all funds
There are many competing opinions as to what green energy IS The Green-e Renewable
ElectriCity Branding Project, established by the nonprofit Center for Resource Solutions In
San FranCISco, was created to encourage consumer confidence when purchaSing green
electnclty They have formed a Green Power Board which has established standards for
what constitutes a renewable electriCity product and a voluntary venflcatlon process for
green power supphers To be Green-e certIfied, at least 50 percent ofthe electriCity product
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must be generated from renewable energy resources with the balance of the generation
from sources less polluting than fossil fuels Approximately seven companies, Including
Southern California Edison, offer a range of certified Green-e logo electricity products Staff
.
proposes that any potential supplier of green energy, at a minimUm, be Green-e certified
By chOOSing to purchase green electriCity, the City would be redlrectmg $2 3 million
annually to companies that contract directly With renewable generators who Will put enough
power mto the electriC power gnd to match the City'S electnclty needs.
Upon CounCil approval of the recommendations In thiS staff report, a request for proposal
Will be Issued to all Interested green electriCity suppliers Staff Will then return to CounCil
With an award recommendation based upon the best proposal received It IS anticipated that
the proposal soliCitation, review and selection process Will take approximately three (3)
months Staff Will also qUickly Implement the community needs assessment surveYing as
descnbed above
In consultation With the City Attorney's Office, It has been determined that the green
electriCity procurement process should be pursued via an RFP rather than formal bids
ThiS process encourages a broad response from qualified suppliers and IS consistent With
the competitive bid prOVISions of the Municipal Code In that pricing, reliability, and
performance conslderatlons associated With the selection of a green electriCity supplier
makes It infeaSIble to adhere strictly to a lowest bid
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BUDGET/FISCAL IMPACT
Approximately $2 3 million IS currently budgeted for electricity purchases by the City In
various departments and funds The net Impact of a full conversion to green electnclty would
be a full first year cost Increase of approximately $250,000 The relative Impact of thIs cost
Increase on any Individual department or fund would not be significant Any necessary
budget adjustments to enter Into a green electnclty purchase agreement Will be Identified
when staff returns to CounCil for final award
RECOMMENDATION
It IS recommended that City CounCil approve a green electricity purchasing policy for City
facIlities, and approve a community needs assessment on energy procurement and energy
servIces Issues
Prepared by CraIg Perkms, Director of EnvIronmental and Public Works Management
Susan Munves, Conservation Coordmator
Exhibit Report prepared by Henwood Energy Services, Inc
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ELECTRICITY RESTRUCTURING OPPORTUNITIES _
FOR THE CITY OF SANTA l\IONICA
~ ....
Pl'~pared for
Susan Munves
ConservatIon Coord'nator
Envlronmentai Proararns DIVISIon
...
C!ty 0: Santa MC!1.ca
200 Santa Mon:ca Pier, SUite C
Santo Monica. CA 90401
Phone' 310 458.8229
Fax. 310.393.1279
D!lte Sllbmitted
SePtember 30, 1998
Submitted by
Henwood Energy Sen/ices. Inc.
271 0 Gat~way Oal<..s Dr
SUlte 300 North
Sacramento, CA 25833
Phone: 916.569 0985
Fax 9165690999
E-mai! Jda\'le@~hesmet com
J-la"ager in Charge
Douglas E. Davie
<
City of Santa Monica
Energy Cost Reduction Opportunities
In a Restructured Competitive Marketplace
1. EXECUTIVE SUl\D1AR Y ........... .................... .......................................... ......................................... I
2. INTRO D U en 0 N ............................................ ................................................................................... 2
3. D A TARE VIE W .................................................................................................................................. 2
4. o P PO R TUNITIES AND 0 PTI 0 NS ......................... ......................................................................... 6
4 1 DIRECT ACCESS 6
41/ Alternatzve Energy Service ProVIders 7
412 Utlilty DlstnbutlOn Company (UDe; - Default ProvIder 8
4/3 ,\{unzclpal Ulllltles 9
414 Utility Users' Tax Revenues /0
42 AGGREGA TION . 10
421 Aggreganon of All Customer Classes 11
422 Other AggregatIOn Scenarros II
423 EXlSnng AggregatIOn Programs 14
424 Fmancmg Opportunities 15
43 GREEN POWER OPTIONS 15
44 DEMAND SIDE OPTIONS 19
441 F aCI/llles OwnershlpiT ariff Shifting /9
442 Energy EffiCIency/Conservation 20
5. RE C 0 l\11\1END A TI 0 NS........................................................................................ .......... ................ 20
Understandmg that the CIty may WIsh to pursue optIons on Its own, Its savmgs potential through
dIrect access IS estImated at $22,000 to 568,000 wIth metenng costs between $13,000 and
S39,000 and monthly recumng metenng fees of S500 to Sl,500 per month The cost to procure
green electnclt)'.resources for the CIty'S own loads IS esllmated at 5107,000 to $214,000 plus the
before mentlOned metenng costs.
In addl110n to procunng energy supplIes from competmve supplIers, other cost reductIon
opporturulles that also create economIC and envIronmental benefits should be conSIdered These
could be aclueved by pursumg demand sIde management options such as faclhtIes ownershtp,
tanff shIftmg and energy efficIency/conservatIOn servIces These measures often bnng more
substantlve savmgs than dIrect access can currently offer Demand SIde management has always
been aVaIlable and IS not a new benefit of electnclty restmctunng What has changed due to
restmctunng, IS that there are new programs and processes that proVIde financIal mcentIves for
the purchase and mstallatlOn of envIronmentally fnendly power supphes and energy effiCIent
eqUIpment The CIty could aSsIst Its commumty 10 the faclhtatIOn of these addItIonal optIons by
promot1Og awareness as well as access to techrucal 1Oformatlon to help customers IdentIfy new
sources of assIstance/fundmg/programs and evaluate the opportunIty cost, ImtIal mvestments and
the potentIal savmgslbenefits.
2. Introduction
The Clty IS well aware that energy costs are a sIgmficant and unaVOIdable expense In the
prOVISIon of munICIpal servIces. However, thIs does not mean that energy costs cannot be
managed to achIeve mearungful savIngs AdditIonally, the CIty recognIzes that energy resources
have a sIgmficant Impact on the enVIrOIunent, and the fundamental changes bemg made to the
electncIty mdustry have opened the doors for proactIve consumers to dIrect resources towards
more envIronmentally sensItIve power supphers. The CIty has recognized these potentIal
opportumtIes not only for It'S own munIcIpal loads, but also enVISIons bnngmg these
opportumtles to the entIre commumty. In addlt1on, It recogmzes the need to strategIcally
pOSl110n the commumty dunng the restructunng tranSItIon penod.
The CIty retamed Henwood Energy ServIces, Inc. (HESI) to reVIew the CIty'S current energy
reqUIrements and IdentIfy the best strategles for it to pursue In hght of the eleetnc utIhty mdustry
restructunng Pnor to adnumstenng the comprehensIve outreach program, the CIty held two
semmars to gauge mterest m a CIty led aggregatlon program Select agenCies and busmesses
were mVIted and asked to submtt energy usage data if there was an Interest III JOlllmg the
program Of the SIxteen groups that attended, seven compames - m addItlon to the CIty -
prOVIded usage mformatIon to date.
3. Data Reviewl
When consldenng new opporturutles to secure relIable, cost-effectIve electncal servIce, It IS
cntIcal to have a thorough understandmg of end use energy consumpt10n patterns. ThIS report
contams energy usage mformatIOn for mumcIpal accounts In the CIty of Santa Monica and other
] Note that usage amounts are based on data received from Southern CahfOIDJa EdlSon as of 7/29/98 Amounts may
change as additIonal mformatIon 15 receIVed
Page 2
Interested Entities in City led A
Clty'S O\l,TI loads 485 21,395,642 $2,243,020 $ 104
PublIc agencles 31 7,867,767 5790,066 $ 100
Commercla1 20 11,924.526 $1.105,585 $ 092 I
Estabbshments
Total 536 41,188,205 $ 4,144,671 $ 100
The demand levels of the City'S own accounts approach five MW, a relatively small portIon of
the entire usage amount for all customers m the City of Santa MOnica
Due to the meter requIrements set forth for dIrect access partIcIpatlOn, the CIty'S own load was
segmented by meter SIze These categones help IdentIfy potential addItional costs that may be
reqUired to partIcIpate In direct access Further explanatIon on metenng costs IS outlIned In
SectiOn 4 1 The maJonty of the mumcIpal meters, approXImately 95%. would be classIfied as
under 50 kW or between 20 kW and 50 kW and would not need to be replaced to partIcIpate In
dIrect access Of the 485 mUniCIpal meters. 26 would need to be replaced WIth hourly mterval
meters to partiCIpate In dIrect access
I
, Greater than 50 kW meters 26 8,978,793 $941,321 $ 105
20 kW to 50 kW meters 12 6,791,003 5611,246 S090
Less than 20 kW meters 447 5,625,846 S690,453 $ 123
Total7 485 21,395,642 $2,243,020 $.105
The table on the follOWIng page shows the load shapes for the entlre resldentlalload In the City
of Santa MOnICa, the City'S own accounts, and the loads from the mterested entItles segmented
by commercIal and publIc agency sector WIth the exceptlon of the residentIal load shape, the
load shapes are based on specIfic customer usage mformatIon receIved to date. These load
shapes are subject to change as addItIOnal companIes express mterest m a CIty led aggregation
program .:md provIde detaIled mformatlon. Due to the homogeneity of the resIdentlal sector, the
resIdentIal load shape was based on the aggregate usage mformatIon provIded by SCE Because
of the diversIty of commerCIal and mdustnal loads and the need for specIfic account data by
company, an aggregate load shape for the enl1re CIty'S commerCIal and mdustnalloads was not
estlmated.
~ Based on detailed monthly usage mformanon received from Southern Cahforma Edison
Page 4
4. Opportunities and Options
Cahfomla's electnc utllity rates have Increased dramatlcally over the last 15 to 20 years and are
currently 30% to 50% higher than US average and by far the highest of any state outslde of the
~ortheastem US8 Because of the teclullcal feaslblhty of mdustry restIUctunng and customer
resentment over the hlgh rates, Assembly BLiI 1890 was passed In September 1996 by the
CahfomIa leglslature ThIS blll was deslgned to restructure the electnc Industry Into a
competitive marketplace It IS Important to note that through tlus legIslatlOn, resldentIal and
small commerclal accounts are already guaranteed a 10% reductIon from 1996 rates, and those
reduced rates cannot mcrease for four years or untIl the mvestor owned utllItles (lQUs) collect
thelr stranded Investments The state mandated all electnclty customers of the lOUs to pay a
competition tranSItion charge (CTe) to allow the 10Us to recoup then stranded costs
Of the group that has expressed an Interest m a Clty led aggregatIon program (the City and seven
other entltles), 128 meters meet the reqUlrement for the 10% discount for automatIc saVIngs of
over S 15,0009 The resldentIal sector should realIze automatic annual savmgs on the order of
$2 5 mIlhon ThlS dlscount IS guaranteed and will be provlded even If a customer chooses dIrect
access Any savIngs aclueved through competItive supphes are In addltlon to tlus dlscount.
\Vlllle the new legIslatlOn presents opportumtIes for savmgs, It IS Important to understand that
not all of a customer's electnc supply costs are subject to competltlOn. The dlstnbutlOn and
transmISSIon functions of the electnc uuhty mdustry remaIn regulated and generally under
monopoly control Only the generatIon functIon was opened to competltIon and It is that portlon
that IS referred to as dIrect access By recognIzIng that the generatlon portIOn accounts for as
lIttle as 20% to 25% of the total energy costs a customer sees on the uuhty bill, It is easy to
understand why many new cost saving optlOns lrntlally have hmIted potentIal
Customers can also InVestlgate alternatlve cost savmg measures that prOVIde more slgmficant
short-term savIngs than solely choosmg a competltIve energy suppher These options mc1ude
implementmg mdIvldual measures to reduce transnussion and dlstnbutIon charges (wluch may
account for 20% to 40% of a customer's total energy bill), makIng use of efficlency servIces that
- will reduce the total amount of energy consumptIon, and shlftmg energy usage to more
advantageous tlme penods. These strategIes often have larger savmgs potential than dIrect access
and are descnbed m greater detaIl below
4.1. Direct Access
Under the new market structure, electnclty customers In Cahfonua have two options for
obtaInmg electnc generatIon (power supply) services pursumg dlrect access by purchasmg
energy from a competitIve energy servlce suppher (ESP) or relymg on the local utIhty
dlstnbutlon company (UDC) to purchase electnclty for them from the Power Exchange (PX).
· Based U S Department of EnergylEnergy Informanon AdnurustratIon data
9 Southern Cahfomla EdIson'!; Rule 22 states all reSIdentIal customers and those small commercIal customers on
GS-1, TOU-GS-l and TOU-EV.3 are ehgIble for the 10% dISCOunt The S15,OOO IS based on 10% off of 1997
blllmgs
Page 6
As Cahforma prepared to open up to electnc cornpetltlon at the end of 1997 and the begmnmg of
1998, there were close to 300 regIstered ESPs Tllis number has decreased sIgrnficantly smce
then due to the recently passed stnngent requInllents to enter the marketplace along WIth hIgher
than antICIpated capItal and time reqUlrements for the ESPs to fund theIr start up penod In the
deregulatmg market Currently there are 49 "regIstered" ESPs and 140 "mactIve" ESPs, WhICh
have chosen thIS mtenm status untIl they are able to fulfill the new CPUC regIstration
reqUIrements Of the 49 regIstered ESPs, 26 have establIshed servIce agreements with SCE (one
of the reqUIrements for servIng electnc retaIl customers WIthIn SCE's temtory)
Due to market constramts, many competItIve supplIers are findmg It dIfficult to offer addItIonal
savmgs beyond the state mandated 10% reductlon ThIS IS causmg ESPs to follow mche-
marketmg strategIes m purSUIt of revenues and market share. Some ESPs are targetmg
commerCIal chams In hopes of addmg 10catlOns across the country as soon as IS pOSSIble. Other
ESPs are targetIng only large mdustnal customers because of that segment's relatively large and
stable energy usage. StIll other ESPs are concentratmg on CIty and muniCIpal aggregation
groups There are few ESPs targetmg reSldentIal customers due to the dIfficultIes In glvmg thiS
segment any sIgmficant addltlonal savmgs beyond the state mandated rate cut Those reSIdential
and small commercIal customers who have purchased power through dIrect access have found
savmgs to generally range from under 1 % to 3% off of theIr total utIlIty bIll ESPs are havmg
more success offenng green power to the reSIdential segment due to the hIgher profit margIns
aVaIlable wnh theses products and the relatlvely mmor addltlonal costs reSIdentIal customers
mcur when choosmg thIS optlOn Larger customers are often more reluctant to purchase power
from renewable sources due to theIr emphasIS on bottom lIne cost reductIon over supportmg
envIronmental efforts.
It IS lmportant for any customer consldenng an offer from an ESP to understand the structure of
the proposal. Contracts can be proposed m any number of formats including dIscounts to the PX
pnce, dlscount to the PX credIt (WhICh IS based on the PX pnce), dIscount to the total default
LTIC tanff, shared savmgs plans, fixed fee and any combmatIon thereof A customer must
compare proposals In the proper context to truly understand the benefits of one offer versus
another.
4.1 2 Utility Distribution Company (UDC) - Default Provider
Even If a customer has an alternatIve energy proVIder, the customer wIll sull receIve transmISSIon
and dIstnbutlOn servIce through ltS regulated UDC. It is pOSSIble for a customer to stay WIth the
local UDC and purchase electrICIty on a rate schedule that more closely reflects that customers'
actual usage m real tune or tIme-of-use Increments based on the market pnce Tllis optlOn IS
known as VIrtual duect access Under SeE's Schedule PX, a customer's energy cost wIll equal
SCE's total hourly cost of procunng energy from the Califorma Power Exchange (PX) TIns
optlOn wIll gIve the customer the opporturuty to receIve power at market-deternuned pnces
rather than a pre-deh::flnmed rate that has been approved by the CPUe. TIus optlOn WIll reward
the customer when PX pnces are low but wIll also expose the customer to any lngh hourly pnces
deternuned by supply and demand. Tllis option requITes the customer to Install an mterval meter
to record hourly usage. If such a meter IS not currently m place, It must be Installed at the
customer's expense. VIrtual drrect access may be a beneficial optIon for a customer that uses a
greater percentage of energy In off-peak (lower pnced) hours In the day, when compared to other
customers m the same rate class.
Page 8
4.1.4 Utility Users' Tax Revenues
As electnclty deregulatIon unfolds, an lssue of importance to the CIty IS the Impact of the
changmg market on revenues from utIhty users' taxes. CIty attorneys who have studIed thIS
issue suggest the abIhty of a CIty to collect utIlity users' taxes In a competitIve market should not
be negatIvely Impacted as long as the City'S utIlIty users' tax ordmance IS properly drafted to
reflect the new competItive market It IS important for the CIty to reVIew Its ordmance to ensure
that the dIfferent energy servIce proVIders do not receIve dIsparate treatment
One factor that could mdlrectly impact the amount of revenue collected through the utthty users'
tax is a reductIOn m electncIty pnces SpeCIfically, If electncIty pnces drop sIgmficantly after
the collectIon of CTCs, CIty revenues from utlhty users' taxes could declme when the Impact of
lower electnclty pnces due to competltlon and the end of the competltIve tranSItIon charge come
mto 0 lay Because competition IS intended to allow total energy costs to declme by as much as
40% for certam customers after the end of the tranSItIon penod, the CIty should be plannmg for
that revenue reductIon
4.2. Aggregation
To Increase the potentIal for saVIngs and environmental benefits resultmg from duect access,
customers can Jom together (1 e, aggregate). The benefits to aggregatmg loads IS to mcrease
buymg power and negotiatmg leverage when procunng competltIve electnclty supply and other
ener~,y servIces. AddItionally, aggregatmg loads can take advantage of the synergism created
when combmmg dIssnmlar customer load profiles and delIvery reqUIrements, WhIch may further
add "alue Furthermore, muruclpal aggregatIons may be able to take advantage of tax exempt
fmancmg arrangements that WIll mcrease savmgs amounts for the group.
Pursuant to AB 1890, aggregatlon programs may be conducted by c1tles, countIes, speCIal
dlStncts or other entItles on a basIS that IS agreeable to all members of the aggregatIon All
aggregatIOn programs are deSIgned around the presumptIon that mdIvIdual organIZatIons or
custerner loads WIll only opt to partICIpate If the benefits receIved from JOlrung the aggregatIOn
are better than the benefits that could be achieved actmg on theIr own. TIns premIse is key,
because customers whose loads are hIghly attractIve WIll more than lIkely opt out of an
aggrt'gatIon program if they can aclueve greater saVIngs on theIr own However, the process of
procunng such benefits IS full of compleXItIes and uncertamtIes. A CIty led effort could help
lesson the IndIVIdual burden of evaluatIng optIons and acluevmg true benefits
GUidelInes for developmg a successful aggregation mvolve meetmg the mdlvldual needs of
partIGIpants whIle creating the most deSIrable load charactenstlcs and maxImum econOmIC
bene 5ts for the group. The most favorable load charactenshcs that can bnng sIgruficant value to
an a~gregated group mclude'
. EIgh Load Factors
. SIgnificant Differences between Non-COInCIdent and ComcIdent Peak Demand
. low Peak Penod Demand and Usage (hourly, daIly, seasonal)
. FleXIbIlIty for IntenupttonlCyclmglControl of Usage
\Vlule some of these charactenstics may not be feasIble for mdlvidual electric accounts, it IS
pOSSible for a carefully deSigned aggregatIOn to aclueve a more deSIrable load profile wlule also
Page 10
aggregatlOn program. Competitive supphes could render the resIdentIal sector m aggregate
5250,000 to 5750,000 m savings per year, or cost an additIonal $1 to $2 IDIlhon per year for
green power
A CIty led aggregatIon program seelGng green power for the resIdentIal customer segment IS
more hkely to garner mterest from ESPs than other anempts to seek power for aggregated
reSIdential loads based solely on a low pnce basIS. The Cove CommumtIes Semces
COIrumsslOu's11 efforts IS one example ofa CIty led effort that mcluded the reSIdentIal sector In IS
solICItation for lower cost power supplIes (an envIronmental option was not the focus of that
solIcitauon) The Cove ComnllsslOn found that it was not able to aclueve addItional savmgs
through an aggregated SOlICitatlOn of itS resIdentlal customers beyond what mdlvIdual reSIdents
could SIgn up for on theIr own. The pnmary reason was that ESPs were not willmg to offer
addItlOnal benefits to that sector due to the uncertainty of the number of customers that would
actually SIgn up
The Ctty's reSIdential sector would hkely pay a premIUm for green power that would bnng the
pnce per kWh to 13 3 to 13 8 cents for green power. There are vanous green power supply
optlons avaIlable for thIS segment descnbed m SectIon 43
4.2.2.2. Non-Residential (Excluding City'S Own Loads)
The total non-reSIdentIal loads of the City of Santa MOllica IS estlmated at approXImately 130 to
140 MW and conSIst of commercIal, mdustnal and publIc agencIes not mcludmg the City'S own
loads Competltlve supphes could render the non-reSIdentIal sector m aggregate $525,000 to
51,600,000 m savmgs per year mmus metenng costs, or cost an addItIOnal $2.8 to 556 m1lbon
per year plus metenng costs for green power
ThIS segment makes an attractlve part of an aggregatIon program from a supplIer's perspective
based on ItS relatIvely large usage amounts per customer and the more d.1verse load shapes
generally found m the commerCIal customer segment The large usage per customer often
necessItates mterval meters to measure energy usage on an hourly basIS In order to partICIpate m
dIrect access The followmg text refers only to the customers that have proVIded detaIled data to
the City. Non-reSIdential customers With loads totalmg approxunately seven MW have thus far
submItted mformatIon to be mcluded m a CIty led aggregatIon program. The load factors for
mdIVIdual customers range from 63% to 74%
These non-reSIdential accounts have 27 meters that are clasSIfied as greater than 50 kW meters.
Due to speCIfic rate classes, two of those meters should not have to be replaced to meet mterval
meter requIrements. The other 25 meters must be replaced WIth CPUC approved mterval meters
Replacmg all 25 meters would mean a one-tlme meter and mstallatIOn cost of$13,OOO to $38.000
for the meters dependmg on the type of meter mstalled. Monthly meter fees could run from 5500
to 51,500 per month 12 By companson, gross annual savmgs realIzed by thIS group couid be
expected to range from $4,000 for one percent off of the tanff to $11,000 for three percent off of
the tanff Metenng costs must be subtracted for net savmgs. If tlus mterested group sought
II The Cove CommUnIties ServIces Comrmsslon 15 compnsed of the clUes of Inman Wells. Palm Desert, and Rancho
MlIage They conducted a sundar effort between August 1997 and May 1998
l! Meter costs used for calculatmg total amounts shown m Footnote 16
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537,000 to 5111,000 Once the meters are paId for, then the gross savmgs would only be
reduced by the monthly meter fees.
If the aggregatIon decIded to procure green power for all meters, additIonal annual energy costs
of $200,000 to $400,000 should be expected for electnclty, based on a one half to one cent per
k\Vh premIUm over current UDC rates. In addItIon there would be metenng costs SImIlar to
those calculated above
423 EXisting AggregatIon Programs
BeSIdes developmg Its own aggregatIon program, the Cay should be aware of eXlstmg programs
It and Its commumty can Jom Programs such as the Department of General Services/Office of
Energy Assessment (DGS/OEA) and the ASSOCIatIon of Caltfonua Water AgenCies-UtilIty
ServIce Agency (ACW A-USA) are examples of aggreganon programs available to the City,
pubhc agenCIes and schools
The DGS/OEA program 15 open to state agencies, pubhc sector hIgher education, countIes,
school dlStnCtS, CItIes and murnclpahnes The program IS deSigned to offer a full range of
electncal supply and related servIces as well as optIonal energy servIce offenngs from the ESPs.
The followmg table lllustrates the offers currently avaIlable through the program
I
J
Supplier Savings Offered Term of Metering Costs Price Quote
contract Ex iration Date
II Commonwealth . 275% off oftanff One to five August 31, 1998
j En".y for meters less than years
50 kW and 37501)
off of tan
~ meters abo .
. W
, EdIson Source Green power pnced Approxunately $400 to December 1, 1998
at one half to one $1,500 dependmg on type
cent per kWh over of meter With monthly fees
the tanff from $7 to $20
~ ew Energy Shared savmgs off Rangmg from One nIne charge of $836 Shared savmgs untll
Ventures of PX pnce With one to three for meter and mstallanon 12/31198 Fixed tanff unnl
customer recelVmg years wnh monthly fees of 8/27/98
: 75% and NEV $51 50
I keepm.25% OR.
fixed tanff discount
detemuned on an .
mmvldual basIS
Can run from 5%
and less Additional
value added Options
I With these base
deals
As of mId July, three addItIOnal supphers; LG&E Energy Marketmg, Enron Energy Services and
Modesto ImgatIon Dlstnct were m the process of becommg quahfied. Smce the WIthdrawal of
the Commonwealth Energy offer m September of 1998, DGS is attemptmg to procure a
replacement deal. DetaIls Will be avaIlable in October 1998.
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The followmg are a few examples of renewable products and pnces avaIlable for resIdentIal and
small commercial customers'
. Green Mountain Energy Resources IS offenng rooftop solar electnc systems to mdlvIdual
homeowners m CalIfornia. These systems are deSigned to allow customers to produce
between 20% to 50% of their own electnclty Rebates can cut the costs of thIS product to
under $5,000 Green Mounta.J.n IS also offenng power generated from varymg percentages of
renewable resources
. The 75% Renewable Power optIon generates 75% of ItS power from hydroelectnc.
bIomass and geothennal sources and IS pnced at 1.2 cents per k\Vh over the applIcable
tanff(10 8% over utIlIty rate) There IS a one year tenn for thIs offer
. The Wznd for the Future offenng uses at least 75% renewable power from small scale
hydro, bIOmass and geothennal sources Green Mountam WIll begm to develop wmd
turbmes based on revenues from tlus program. Tlus option IS pnced at 2 1 cents per kWh
over the applIcable tanff (19% over the utIhty rate). There IS a three year contract tenn
for thIS offenng.
. The Water Power option denves 90% of Its power from large and small scale
hydroelectnc facIlItIeS WIth a pnce of almost one cent per kWh over the applIcable tanff
(8% over the utIhty rate)
. Keystone Energy IS another company offenng power produced from varymg degrees of
renewable resources:
. EarthCholce 100 IS a product offenng power generated from 100% renewable resources.
. EarthChOlce 50 offers power WIth 50% commg from renewable resources and the other
50% commg from non-renewable resources.
. EarthchOlce 25 IS a product for commerCial and mdustnal customers and contams 25% of
the power generated from renewable resources and 75% from non-renewable resources
PublIshed reports have shown Keystone products to be approxImately one cent per kWh over the
applIcable tanff.
. Edison Source. an unregulated affilIate of Southern CalIforma EdIson offers two renewable
products
. EarthSource 50 IS a product WIth 50% of us power frOID renewable resources and the
other 50% from non-renewable resources ThIS product IS pnced at 1 3 cents per kWh
over the apphcable tanff (12% over the utlhty rates) There IS no mlmIDUIn contract
length With the offer.
. EarthSource 100, which offers power generated entirely from renewable resources. Tlus
optIon IS pnced at 3 cents over the apphcable tanff(28% over the utilIty rate). There IS no
mmImum contract length WIth the offer
.
DGS also has obtamed a deal from Edison Source that IS detalled on page 17.
. PG&E Energy Services. an unregulated affiltate of PacIfic Gas & Electric is also offenng
three renewable products
Page 16
. Green Power 1 - Power from 75% renewable sources, 15% large hydroelectnc sources
and 10% form non-renewable sources.
. Green Power 2/J - Power from 75% renewable sources, 15% large hydroelectnc sources
and 10% form non-renewable sources.
Although the pnces of the green power offenngs for large customers vary, an addmonal 10% to
20% on a MWh basIS or SO 005 to $0.03 per kWh has been seen for these products
Benefits an aggregation enJoys by choosmg thIs option mclude the posItIve public relatlOns
aspects of bemg associated WIth the promotlon of envIronmentally senSitive generatlon sources.
Another benefit would be the ablhty to take advantage of energy bIll credIts the Cahforrua
Energy COITUTIlSSlOn (CEC) offers to those customers who purchase green power These credits
are avallable from the Cahfornla Energy Cormmsslon's Renewable Resource Trost Fund from
the start of open access untIl year end 2001 The Trost Fund IS made up ofmorues collected from
ratepayers of the three large Cahfomla uhhhes from 1998 to March 31,2001 The funds wIll be
dlstnbuted on a cents per kWh basiS to registered renewable prOViders that delIver power from
regIstered In state renewable supphes The suppher IS expected to turn the rebate over to the
customer who Will see It as a credit on theIr electnclty blll. There IS no addItIonal admImstratlon
necessary on the part of the end user to quahfy for these credIts
There are, however, Issues to conSider If choosmg a green power optlon. As stated, ESPs often
charge a premIUm for power from renewable resources smce the cost to generate or acquIre the
green power IS usually higher Additionally, whIle there IS a CEC credit avaIlable to end users
that Will offset the more expensive power, there are hmlts to the credit The cred1t IS set at 1 5
cents per kWh for the first SIX months of the program There IS also a cap of$1,000 that anyone
non-reSIdential or non-small commerCial customer may receIve In one year The CEC IS
scheduled to reVISIt the credIt level and cap at the end of the year. The present hmltatIons and
uncertamty over future credIt levels may dIctate whtch customers wlthm an aggregatIon would
- hkely conSIder thiS optIOn.
The CEC IS adnumstenng other programs In an attempt to develop renewable resources and
technologIes III Cal1forrua. The Pubhc Interest Energy Research (pIER) Program Will award up
to $61 8 mllhon a year for four years to research, development and demonstratIon (RD&D)
stakeholders to conduct the most promismg public mterest energy research. There may be ways
for members of the CIty'S program to dIrectly or mduectly benefit from these research efforts m
areas such as dlstnbuted generanon, end-use energy effiCIency, envIronmentally-preferred
advanced generatIon, renewable energy technologies, energy-related environmental Issues and
strategic cross-cuttmg research, development and demonstratIon.
l~ HESI IS currently researchmg the difference between the Green Power 1 and 2 optlons The web sIte reported
both optIOns wlth the same descnpbon as wntten above (www green-e orglcaprod html)
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.
Often these optIons are not well known to the customer. The CIty of Santa Momca could help
facIlItate an awareness as well as provIde access to techrucal mformatlon to help the customer
evaluate the OppOrtunIty cost, mItial mvestment amounts, and the potential savings.
4.4.2. Energy EfficIency/Conservation
Implementmg energy effiCIency and conservatIOn measures IS another method to reduce energy
costs This strategy IS focused on reducmg total energy costs by decreasmg the amount of energy
that is used for any partIcular purpose These measures rely stnctly on achons a consumer
voluntanly chooses to take and could result In sIgruficant energy cost savmgs
Pnor to competItIon, many utilItIes devoted SIgnIficant fundmg and resources to customer
aSSIstance programs for energy effiCiency and conservatIon For the past decade, these
mvestments, WhICh allowed eXistmg power supplIes to serve more customers, were less
expensIve than constructmg new power supply projects. AB1890 mandates a mIntmum level of
contmued Investment In these programs through March of 2002 The responsIbIlIty for managmg
the ImplementatIOn of energy effiCIency fundmg by regulated utlhhes (approxImately $220
millIon per year) lIes WIth the CahfornIa Energy COIrnmssIOn There is no guarantee that hIstone
off-the-shelf programs (such as rebate programs for hghtmg retrofits or financmg of more
effiCIent eqUipment) Will be readIly avaIlable through the local power utIhty as before -
espeCIally if electncIty IS procured from non-utIlIty sources. Customers can also fund and
Implement these energy effiCIency measures themselves In many cases, customers find that the
payback through lower energy costs IS only a few years.
A typical way to Implement energy effiCIency measures IS through the use of perfonnance
contractors These types of energy servIce proYlders help customers establIsh programs and
Implement measures, whIch are paId for through the energy savmgs aclueved. Another strategy
would be to Internally deSIgn programs for the partICIpants m the aggregation.
Examples of energy effiCIency and conservatIOn measures mclude:
. Convert eXIstIng hghtmg fixtures to more energy effiCIent hghtmg.
. Convert HV AC systems to vanable aIr volume systems.
. Install occupancy sensors to turn IIghtmg systems off when an area 15 vacant.
. Incorporate dayhghtmg to proYlde natural Il1ummatlon where pOSSIble
. Install van able speed dnves for electnc motor loads
. Replace mefficient process technology WIth new more effiCIent technology.
. Reqwre the use of these measures m new construcllon projects.
5. Recommendations
Initiate Outreach Program. Pnor to any concrete recommendatIon, the CIty needs to conduct
11S outreach program to detemllne local support and potentIal partIcipation m a CIty led
aggregatIon program. RESI recommends Imtlatmg an outreach survey immediately and
suggests the follOWing tasks and tlmelme.
I Review CIty MailIng Lists (ResIdentlal and non-resIdentIal)
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.
energy effiClenCYJ envIronmentally- preferred advanced generatIonJ renewable energy
technologIes, energy-related envIronmental Issues and strategIc cross-cuttmg research,
development and demonstratIon should be further explored Wlule opportumtIes for the CIVIC
Center can be explored under thIS option, there also may be potentIal for the City to enter mto the
followmg optIon through the CIVIC Center
Incremental Establishment of City Municipal Utility through New Development. ThIS IS one
way for the City to become a competItIve mumclpal electnc retaIl provIder WIthout
condemnatIon There may be some CIrcumstances where SIgnIficant savmgs and economIes may
be created through the constructIon of energy dlstnbutIon facIlIties not owned by the loca11.JDC
ThIs can be most easlly accomplIshed through the new development sector CommurncatIons
WIth the appropnate people regardmg the new CIVIC Center should be Iwtiated to explore thts
OppOrtunIty.
Review/Update Utility User's Fee. In order to mitIgate the negative Impact on the City'S
revenues, Its utIlIty users' tax ordmance should be carefully reviewed and re-deslgned (If
necessary) to address the condItIOns and new players WithIn the competitIve electnclty market
The CIty should make certam that new supplIers do not aVOId applicable utIlity user fees
Page 22
.
-~- -
.
.
Dispatcbable load Load whIch IS the subject of an adjustment bId.
Direct Access (DA) A servIce electlOn whIch allows customers to purchase competitIve energy
services from non-utlhty entItIes regIstered With the State of CalIfornIa known as ESPs
Direct Access Service Request (DASR)' A servIce request form submitted to the UDC by the
customer's authonzed ESP requestmg participatIOn in DIrect Access
Electric Service Provider (ESP) An entity whIch provides electnc servIce to a retail or end-use
customer, but which does not fall WIthIn the defimuon of an electncal corporanon under Pubhc
Unhtles Code Sectlon 218
Kilowatt (k\V) Often referred to as electnc demand, kW IS the amount of energy drawn by a
customer at a specific tIme.
Kilowatt-hour (kWh) Electnc energy expressed m kIlowatt-hours IS measured by multlplymg
the amount of electnc power delivered (measured In watts) by the amount of time over which the
energy was consumed (measured In hours) Kilowatts equal one thousand watt-hours
Megawatts equal a mIllion watt-hours or one thousand kIlowatt-hours.
Load Factor: Load factor mdlcates to what degree a customer's actual energy consumption
(kWh) dunng a given time penod to the consumptIOn that would have occurred had consumption
been fully sustained at the customer's maximum demand (kW) level. Load factors are expressed
In percentages, and higher load factors represent a more even distnbutIOn of load.
Independent System Operator (ISO) The ISO IS responsIble for the operation and control of
the statewIde transmISSion gnd.
Load The amount of power consumed by a meter at a specific time Load IS often referred to as
demand.
Load Profiling The process of graphIng a customer's demand for energy over a penod of time,
typically a day, season or year.
Marketer: Any entIty that buys electnc energy, transrmsslon, and other servIces from traditlOnal
utIhtIes and other supphers, and then resells those serviCes at wholesale or to and end-use
customer.
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