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sr-051110-1fCity Council Meeting: May 11, 2010 Agenda Item: 1-F To: Mayor and City Council From: Dean Kubani, Director, Office of Sustainability and the Environment Subject: Resolution opposing the Statewide Initiative "New Two-Thirds Requirement for Local Public Electricity Providers" Recommended Action Staff recommends that the City Council adopt a resolution opposing the proposed California Statewide Initiative "New Two-Thirds Requirement for Local Public Electricity Providers." Executive Summary Staff recommends adoption of a resolution opposing Proposition 16, a Statewide initiative that will appear on the November, 2010 ballot. If Proposition 16 is approved by voters, it will take atwo-thirds vote of the electorate before a public agency could enter the retail power business. This will make it more difficult than it currently is for local entities to form either municipal utilities or community-wide renewable electricity districts, also known as Community Choice Aggregation (CCA.) CCA formation became an option for cities with the enactment of AB 117 in 2002. CCA allows local governments to purchase blocks of electric power to sell to residents and/or construct municipal electricity generation facilities. Effectively, Cities and counties can become competitors to private utilities. Pacific Gas & Electric is the primary financial sponsor of the initiative and has contributed $28.5 million through March 26, 2010. Proposition 16 opponents have raised $40,000 through late March. Discussion PG&E claims that in difficult economic times local voters should have the right to decide who provides them with electrical service and whether local governments should be able to spend public money or incur public debt to provide electricity without the public's approval. PG&E's Board of Directors approved funding the initiative subsequent to Marin County's establishment of the Marin Energy Authority to operate a CCA that would deliver at least 51 % renewable energy to its customers by 2014. PG&E currently 1 delivers approximately 12% renewable energy to its customers and is unlikely to achieve State-mandated 20% renewable energy goal by 2010. When CCA became an option for cities in 2001, the City hired a consultant to explore the viability of establishing a Santa Monica CCA. In a June 27. 2006 staff report, it was reported to Council that the financial risk to the City was too great and that the City should focus on facilitating energy efficiency and solar rooftop installations throughout the community to achieve its energy and greenhouse gas emission reduction goals. The consultant recommended that CCA should remain an option for Santa Monica in the future and its viability reevaluated when other CCAs have been established such as Marin County's. If atwo-thirds supermajority vote is required to use public financing for formation of a CCA, then all cities would effectively be prevented from moving forward. Proposition 16 also would potentially establish a precedent to require atwo-thirds supermajority votes prior to issuing revenue bonds for other types of municipal projects. Opponents to Proposition 16 claim that PG&E is protecting its customer base by preventing communities from purchasing renewable energy at wholesale prices without a two-thirds supermajority. Proposition 16 will reduce people's ability to choose between privately-owned and publicly-owned utilities as local governments will be less likely to attempt formation of a CCA if an election is required. Opponents to Proposition 16 include 23 local governments, the California Association of Realtors, AARP, League of California Cities,. numerous non-governmental organizations and the League of Women Voters. A consortium of public utilities filed a lawsuit on March 18 to remove Proposition 16 from the ballot claiming the language is misleading. 2 Financial Impacts & Budget Actions No budgetary impact is anticipated from adoption of this resolution. Prepared by: Susan Munves, Energy and Green Building Programs Administrator Approved: ~~ Dean Kubani Director, OSE Attachment: Resolution Forwarded to Council: ". Rod Gould City Manager 3 Reference Resolution No. 10470 (CCS).