SR-11-13-1979-11CSanta Monica, California, November 5, 1y9�79
i I
TO: Mayor and City Council
FROM: City Staff
SUBJECT: A Recommendation to Approve a Joint Powers Agreement for
a California Solar Utility Development Authority
NOV
Introduction
This report provides information regarding a proposed Joint Powers Agreement for
a California Solar Utility Development Authority, and recommends that the
Council approve the agreement.
Background
The California Energy Commission has received a grant from the Federal Department
of Energy for providing assistance for the establishment of Municipal Solar
Utilities. A Municipal Solar Utility is described in the attachment. The City
of Santa Monica has the opportunity to be one of six cities to participate in the
feasibility study for such an enterprise.
The City staff, as a move toward partial fulfillment of its conservation goals
in the budget, sought this opportunity with the California Energy Commission.
The staff believes this'is an opportunity to take an active rather than a passive
role in developing alternative energy sources.
The Joint Powers Agreement is between the Cities of Ukiah, Palo Alto, Bakersfield,
San Dimas, Oceanside, and Santa Monica. The Agreement is designed to provide an
instrument and a method of fulfilling the requirements of the grant contract
ffl'�
MOv , '3 1979
Mayor and City Council -2- November 5, 1979
Background (cont)
between the California Energy Commission and the various cities mentioned.
The purpose of the Joint Powers Agreement is to enable the six Cities to pool
the grant resources and to jointly contract with a consultant to study the economic
feasibility, legal and marketing aspects of developing a municipal solar utility.`
The City Attorney's staff has reviewed the Joint Powers Agreement and has
approved it.
The Agreement provides that the Authority shall have the power to "acquire such
information as may be necessary and required for the installation of solar utility
facilities" and to contract for services for development of solar utility
implementation plans. The Authority will have no power to bind any of the cities
to any monetary obligation whatsoever other than that expressly authorized by
the mutual consent of all member cities.
Santa Monica will consider the possible development of a solar utility which will
be specifically addressed to multi - family residential housing.
Recommendation
It is recommended that the City Council approve the Joint Powers Agreement and
authorize the Mayor to sign the Agreement.
It is also recommended that the City Council designate Charles K. McClain as
Director and Stanley E. Scholl as Alternate Director of the California Solar Utility
Development Authority.
Prepared by: Stan Scholl
Attachment: Joint Powers Agreement
California Energy Commission
Solar Office
MUNICIPAL SOLAR UTILITIES
October 1979
Principal among California's energy goals is the maximum feasible implementation of
solar energy in the state by 1990. Yet, several major barriers must be overcome
before the rapid commercialization of solar technologies can be realized. Two of the
most significant barriers are:
(1) the high initial costs of solar technologies relative to conventional energy
forms, and
(2) the inadequate protection of the public from the risks associated with
establishment of a new solar industry.
Of the mechanisms proposed to overcome these obstacles, the Municipal Solar Utility
(MSU) concept is among the most promising, particularly as it relates to the
residential retrofit market. Until recently, MSUs have been confined conceptually to
the Santa Clara model. Originally, the City of Santa Clara, as described on page 2.2-
2 of the Solar Handbook for Local Government Officials, introduced the concept of
MSUs through its solar pool heating leasing program. Beginning in 1976, Santa Clara
addressed the above barriers by reducing the first costs of system purchase to the
level of installation costs alone, by spreading the purchase costs over system
lifetimes on customers' monthly water utility bills, and by insuring system reliability
through a program of continued maintenance of the solar systems after installation.
However, there are some limitations to the program. Neither the city of Santa Clara
nor its customers have been able to utilize the State's 55% tax credit. Moreover, the
city retains ownership of the system; therefore, added value is not conferred to the
customer's property. Recent legislation (SB 995 - Alquist, 1979), just signed by the
Governor, will enable customers of the municipal solar utility who partially lease and
partially own solar systems, to receive the tax credit on the owned part, of the
system.
The Department of Energy has recently awarded grants to the California Energy
Commission and the City of Los Angeles to develop and implement broader
mechanisms by which the above barriers may be overcome. The Energy Commission
will provide its share of the federal monies, supplemented by State funds, to six other
California cities to develop MSUs: Bakersfield, Oceanside, Palo Alto, San Dimas,
Santa Monica and Ukiah. Together, the seven case studies will provide a range of
alternatives that local jurisdictions can use as models for their own solar utility
programs.
Broadly defined, the municipal solar utility is a chartered organization which
performs one or more "services" to the community. The services may include the
billing, owning, installation and maintenance of solar systems, job training, consumer
protection, system financing, and electricity generation. How these services are
delivered depends on the purposes for which a local jurisdiction establishes an MSU.
For instance, MSUs may vary by jurisdiction in terms of markets served, services
provided, financing and /or ownership arrangements, system costs, and the form of
utility management.
Ideally, a
municipal solar utility is one means by
which a community can
begin
to
develop a
total energy package for its citizens.
The flexibility gained
from
a
broadened
definition of municipal solar utility is
reflected in the wide
range
of
options from which a jurisdiction may select, and the purposes the utility can serve.
Practically, MSU's provide an important mechanism by which municipalities may
retrofit their existing housing stock without relying on mandating ordinances to do so.
Municipal Solar Utility Models
At least five conceptual models of municipal solar utilities are briefly presented here.
As each of the seven cities involved begin to develop their implementation plans
these ideas will be formed into more concrete models of solar utilities.
"Traditional" Utility Models - such models have already been put into practice by
existing utilities. Options may include: installation and leaseback of solar
systems, weatherization programs, construction of centralized generation
facilities utilizing photovoltaics, wind, solar - thermal electric, or other renewable
energy sources, distribution of solar information, or offering of low- interest loans
for solar installations.
Community Development Corporation /Redevelopment Agency Model - such
mo e�are aimed at closer ties between user groups and the municipalities.
Directions and money would come from jurisdiction policy makers whereas
implementation would reside in an independent community based agency. Options
may include: community development corporations that utilize solar system
installation to provide job training and upgraded housing, redevelopment agencies
that incorporate solar into redeveloped areas, self -help training programs that
allow neighborhood groups to build their own solar installations and joint
partnerships between municipalities and private investors.
Private Firm /Public Bank Model may range from the initial funding of private
firms to offers of expertise or the firm's business start -up plans. Financing of
solar installations through local banks or utilities would be possible as well.
Emphasis in these models is on the jurisdiction's leverage of private capital to
promote solar rather than the direct installation of solar systems themselves.
Options may include the use of loan guarantees, consumer protection and
education programs, provision of community - generated fuels for transportation,
and brokerage of power.
Free Market - Governmental Regulation Model - would use a variety of incentives
and disincentives to attract private consumers to solar installations. Options may
include tax incentives, mass purchasing, joint power authorities, land -use and
development policies and transportation and circulation alternatives. The
emphasis here is on the private sector, but the market is manipulated through a
package of regulations and benefits for each of the target sectors.
Strict Public Function Model - where the utility is set -up solely to operate the
local jurisdiction's governmental operations (for instance buildings, product
purchasing, training of staff). This results in the reduction of costs of municipal
operations. Options may include the use of solar on municipal facilities, provision
of fuels such as gasohol, methane, or hydrogen for municipal vehicles, and
provision of street lighting with photovoltaic collectors and storage batteries.
Municipal Solar Utility Case Studies
The six cities working with the CEC to develop MSU concepts will complete their
implementation plans 10 to 12 months after the State's program begins in early
November. The City of Los Angeles' programs should be completed some six months
after this time. It should be recognized that none of the approaches described below
may be adopted, but these approaches are simply the current thinking of these
communities. Distribution of the city's workplans will be state -and nationwide at the
time of their completion. Some 10 -15 new jurisdictions will be selected for
participation in the second phase of the State's solar utility program.
City of Bakersfield - will utilize the community's existing redevelopment authority
and will explore se- f help" options.
City of Los Angeles - will explore a non - profit corporation loosely connected to the
city, and fika—ncing packages that would rely on private equity financing utilizing
existing tax advantages rather than profit on capital investments.
City of Oceanside - will focus on the governmental sector in addition to a residential
program similar to Santa Clara's model.
City of Palo Alto - will consider an MSU along the lines of a "brokering" model.
ervtees brokered may include the provision of money, staff expertise, time,
information, housing and education for the residential as well as commercial and
industrial sectors.
City of San Dimas - will explore the use of a joint powers authority with neighboring
communities as at least one possible option for a solar utility.
City of Santa Monica - will focus a solar utility on its high level (80%) of multi - family
> sing, and will look at a community development corporation or other similar
organizational format.
City of Ukiah - will integrate its plans for conservation and other alternative energy
programs, being contemplated in conjunction with the Northern California Power
Authority and funded by the Energy Commission, into its municipal solar utility
concept.
The six participants in the Energy Commission's programs will develop their solar
utility concept in accordance with each city's needs. Consultants from within and
without the Commission will assist the cities through the implementation plan
development stage. Similar to the Los Angeles plan, the six cities will develop their
own plans which, at the time of their adoption, will be sufficiently complete to begin
implementation. To facilitate the interaction among the Commission cities, the
consultants and the State, a joint powers authority specifically aimed towards the
development of the implementation plans is currently being considered, although as
yet not approved by all the participating jurisdictions.
Conceptual models are not sufficient to answer questions about the daily operation of
a municipal solar utility, whatever format it might take. Case studies, however, will
answer questions about financing options, community impacts, legal barriers, product
reliability, marketing, and organizational structure of municipal solar utilities.
Answers to these types of questions will be the tasks of the consultants to both the
Energy Commission and the City of Los Angeles. Yet, perhaps the most important
question is why local governments and local utilities should be involved at all. The
answer lies in the potential benefits from municipal solar utilities, among which are:
the possibility of low cost, tax exempt financing; increased access to the private solar
market by low and moderate income groups; provision of local jobs and /or job
training; reductions in the costs of public services; increased consumer confidence in
solar; and the ability on the part of the municipality to have more energy
independence and better serve the community's energy needs.
Agenda Item 11 -C: Presented at this time was a recommendation for
approval of joint powers agreement for the establishment of Municipal
Solar Utilities. Councilmember Reed moved the approval of the recommen-
dation, i.e. approve t e joint powers agreement by award oE'Con£ract
No. 3416(CCS.)?and authorization for the Mayor to sign the agreement with-
Councilmember Rhoden appointed as Director and the City 'Manager to appoint a City
staff member, as alternate Director. Second by Councilmember Rhoden.
-Counc -il Vote :-- una-nimously- approved_6. -0
.absent: Councilmember van den Steenhoven
CITY COUNCIL MEETING - NOVEMBER 13, 1979