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HomeMy WebLinkAbout7.1 MuncElectUtilityStudy CITY CLERK File #1020-40 AGENDA STATEMENT CITY COUNCIL MEETING DATE: May 21, 2002 SUBJECT: Municipal Electric Utility Feasibility Study - Technical Briefing Paper Report Prepared by: Christopher L. Foss Economic Development Director ATTACHMENTS: 1. Technical Briefing Paper RECOMMENDATION: Receive the report and provide staff with the appropriate direction. If the City Council is interested in pursing the creation of an Energy .Element in the City's General Plan, staff would recommend that this element be deferred and accomplished along with the update of the entire General Plan. FINANCIAL STATEMENT: If the Energy Element option were chosen, staff estimates that is would cost approximately $55,000 in Staff resources and consultant costs., DESCRIPTION: On February 5, 2002, the City Council approved a Consultant Services Agreement with Environmental Science Associates to complete a Municipal Electric Utility Feasibility.Study. The results of the Feasibility Study are found in the attached Technical Briefing Paper. As requested in the feasibility study, the Technical Briefing Paper includes a brief background on the restructuring of California's Electric Utilities (Assembly Bill 1890), provides a summary of California's electric industry, outlines the factors that led to the energy crisis of 2000 - 2001, and outlines three (3) potential electricity options for the City. The three options include: (1) the establishment of a municipal utility, (2) the aggregation of the community's energy needs, and (3) the consideration of an Energy Element to the City's General Plan. Due to the risks involved in municiPalization and the prohibition of aggregation at this time, ESA also evaluated the option of developing a City Energy Element as a method of assuring some measure of local control over energy matters in the future. The Energy Element could help to, among other things, increase energy efficiency, review energy use implications in land use decisions, provide documentation of the City' energy resources, and provide alternatives which encourage exceeding the State's energy regulations for new construction. It has been estimated that a draft Energy Element would require 90-150 days to prepare at a cost of approximately $55,000. At this time, there is no available staff in the Planning Division to manage this project. COPIES TO: ITEMNO. I~.~ H/cc-forms/agdastmt. doc RECOMMENDATION: It is recommended that the City Council receive the report and provide Staff with the appropriate direction. If the City Council is interested in pursing the creation of an Energy Element in the City's General Plan, staff would recommend that this element be deferred and accomplished along with the update of the entire General Plan. State of Energy in California A Technical Briefing Paper April 2, 2002 Prepared for: City of Dublin 1 O0 Civic Center Plaza Dublin, CA 94568 STATE OF ENERGY IN CALIFORNIA A TECHNICAL BRIEFING PAPER Executive Summary INTRODUCTION Thc effects of electric utility industry deregulation in California and the energy crisis of 2000-2001 has sparked interest in possible roles for the City of Dublin in the electric industry. The City engaged Environmental Science Associate's (ESA) Energy and Information Utility Group to prepare a Technical Briefing Paper intended to provide information to the City on the current condition of electric utility service in thc state and to allow the City of Dublin to make informed decisions regarding its own energy future. The Technical Briefing Paper has been completed and includes the following: · An overview of Assembly Bill 1890 (Electric Utility Industry Restructuring Act); · A summary o£thc California electric system; · A summary of thc 2000-2001 energy crisis and Pacific Gas and Electric Company's bankruptcy proceedings; · Important strategies and considerations with regard to the formation of a municipal utility; Local power purchasing aggregation options; · Policy-level options to assist thc City in controlling its own energy future; and · Strategic recommendations relevant to the CiVy of Dublin. CALIFORNIA ELECTRIC UTILITY RESTRUCTURING (AB 1890) As a result of a number of factors leading to instability in the private utility system, including increased rates as a result of stricter environmental regulations and a backlash against nuclear power, the Federal Government began to rcanalyze the existing electric system. This reconsideration of the electric utility industry resulted in the Federal Energy Regulatory Commission (FEP, C) Orders 888 and 889, which were put in place in 1996. These regulations allowed for the wholesale trading of electricity between generators and customers nationwide, and were the stepping-stones for electric utility restructuring in California. In reaction to the FERC Orders, the California Public Utilities Commission (CPUC) issued a Rulcmaking proceeding on Restructuring California's Electric Services (also known as the "Blue Book"). The Blue Book looked primarily at the market and at the private sector to achieve the goals and benefits identified by the FERC Orders. The "Blue Book" and a preferred restructuring policy were subsequently adopted and as a result, in late 1996, the California Legislature adopted the Electric Utility Industry Restructuring Act (AB 1890), Which introduced competition into the California energy market. CALIFORNIA'S cURRENT ELECTRIC SYSTEM The California electric system consists of three components: generating plants, transmission lines, and local distribution systems. The transmission system is a network o£ lines providing multiple paths from electricity suppliers (generators) to load centers (distribution substations). Distribution lines connect the substations to the consumer. Distribution voltage is stepped down to the service voltage, then enters the business or residence. Transmission systems are generally considered the bulk transfer systems, between generating plants and distribution substations. Operation o£ the generation stations in conjunction with the transmission system requires careful coordination and control to. accommodate multiple suppliers and customers simultaneously. TI=IE CALIFORNIA ENERGY CRISIS 2000-2001AND PG&E BANKRUPTCY PROCEEDINGS California's new wholesale power market and customer choice program functioned with relative efficiency for about a year and a half. Then in the summer of 2000, retail electricity prices in southern California reached all time highs, while generation capacity shortages in northern California forced rolling blackouts (an involuntary curtailment of electricity usage). These new phenomenons marked the advent of the full-scale energy crisis. More specifically, California's energy crisis can be broadly grounded into three interrelated problems including, an abrupt increase in wholesale electricity prices, intermittent power shortages during peak demand periods, and the £mancial destabilization of California's three investor-owned utilities (IOU's). The price of wholesale electricity sold on California's newly created California Power Exchange (PX) started to rapidly increase in June 2000, reaching unprecedented levels throughout the remainder of the year. Between June 2000 and July 2000 wholesale prices increased an average of 270% over the same period in 1999 (California Public Utility Commissi°n, 2000). By December 2000 the price of wholesale electricity on the PX cleared at $376.99 per megawatt hour (mwh), over 11 times greater than the average clearing price of $29.71 per mwh in December 1999 (Califomia Power Exchange, 2000). These high wholesale prices resulted in a steep, but temporary increase in retail electricity prices in southern California in the summer of 2000. In July 1999, San Diego Gas and Electric's (SDG&E) retail price freeze was eliminated as called for in California's Industry Deregulation Plan, and SDG&E customers were for the first time exposed to unregulated retail electricity prices (PG&E and Southern California Edison's (SCE) retail customers were, at that time, still protected from high retail prices by rate freezes imposed by the restructuring plan). As a result, SDG&E passed along these high wholesale prices to retail customers, and by July 2000 residential electricity rates had increased to approximately 16 cents per kilowatt hour, up from about 11 cents per kilowatt hour a year earlier. To stOP the increase in retail prices, the California legislature established a ceiling of 6.5 cents per kilowatt-hour on the energy component of electric bills for residential, small commercial, and lighting customers of SDG&E. (California Public Utilities Commission, 2000) In addition to the increase in wholesale prices, IOU customers all over California also experienced a significant increase in intermittent power shortages during peak demand periods. These shortages lead to emergency conditions that in some instances necessitated rolling blackouts. Stage 3 emergency notifications, which may necessitate rolling blackouts, increased from 1 in 2000 to 38 through May 22, 2001. Stages 1 and 2 notifications increased from 91 in 2000 to 127 through May 22, 2001. (California Independent System Operator, 2001) The impact of the energy crisis was compounded by the third interrelated problem, the financial instability of California's IOU's. Due to high wholesale power prices and the imposition of retail price caps restricting recovery of these costs, California's three major IOUs experienced severe financial problems. PG&E experienced the worst of these financial troubles, and as a result on April 6, 2001, the IOU filed for protection under Chapter 11 of the U.S. Bankruptcy Code, the largest-ever banla'uptcy involving a utility (SF Gate, 2001). PG&E estimated that since June 2000 they had spent $9 billion for wholesale power with no reimbursement for those expenditures (Pacific Gas and Electric, 2001). On September ii 20, 2001, Pacific Gas and Electric Company (Utility) and its parent company, PG&E Corporation, jointly filed with the U.S. Bankruptcy Court for the Northern District of California its fn'st proposed plan of reorganization (Plan) of the Utility under Chapter 11 of the U.S. Bankruptcy Code and their proposed disclosure statement describing the Plan. Following the filing of the proposed Plan and disclosure statement, the Utility and PG&E Corporation sought an order of the Bankruptcy Court (1) approving the disclosure statement, (2) setting the date, time and place for a hearing to consider confirmation of the Plan, and (3) setting the voting deadline with respect to the Plan. POTENTIAL ELECTRICITY OPTIONS The City of Dublin theoretically has a number of options available to them which provide some level of local control over the City's electricity future. These options include the City as a municipal utility, the City as an aggregator of electric loads through the formation of an Electric Service Provider (ESP), and the City as policy-makers through the implementation of a General Plan Energy Element. Each of these options provide the City with varying degrees of autonomy from PG&E, with the maximum autonomy, the formation of a municipal utility, resulting in both the highest cost and risk. MUNICIPAL UTILITY The establishment of a municipal utility allows local communities to own and operate their own electric system, independent of the IOU's. In general terms this requires a city and/or county to take over or condemn the IOU's transmission system and build an independently owned and operated municipal system. Private utilities, which are directly accountable to shareholders and not customers, are in all cases vehemently opposed to this municipalization process. In addition to being a very contentious proposition, municipalization is also extremely costly and very time consuming. For example, the Long Island Power Authority, Long Island, New York's municipal utility was created in 1998, but took twelve years to establish and cost over $7 billion. AGGREGATION Aggregation is another option theoretically available to the City, however at this time direct access is currently prohibited by the CPUC. In simple terms, aggregation means taking .advantage of group buying power. California Public Resources Code § 366 (b) states, "Aggregation may be accomplished by private market aggregators, cities, counties, special districts or on any other basis made available by market opportunities and agreeable by positive written declaration by individual consumers". One potential customer aggregation option for the City of Dublin could be the formation of an Electric Service Provider (ESP). Under AB 1890 any entity, including a municipality, could establish itself as an ESP and provide power to retail customers that signed up for its service. However, as mentioned above, as of September 20, 2001, the CPUC suspended the right of retail end-users to acquire direct access electric service from ESPs. In addition, the execution of any new contracts, or the entering into, or the verification of any new arrangements for direct access after September 20, 2001, is prohibited. However, new legislation is expected to partially reopen this opportunity at some point in the future. Until then, implementation of this aggregation option is not feasible. POLICY-LEVEL OPTIONS One realistic option for the City of Dublin, which would allow the city some autonomy over its energy furore, is the creation and implementation of a General Plan Energy Element or an energy overlay zone. In the broadest sense an Energy Element will act as a "yardstick" for measuring 'and monitoring a community's overall economic efficiency and environmental quality. The purpose of an Energy Element is to: 1) increase energy efficiency in the City; 2) provide policy guidance regarding the 111 energy use implications of land use decisions; 3) document the City's energy resources and opportunities; 4) determine land use and environmental criteria for evaluating future energy projects; and, 5) provide alternatives which encourage exceeding the state's energy regulations for new construction. A local energy plan is the primary means for communities to influence and plan their energy futures. Many local government decisions, ranging from land use and zoning to transportation planning and air quality regulation, affect energy use and supply, and these, in turn, are all prime factors in local economic growth and development. cONcLusION As a result of the uncertainty in California's energy system many communities, including the City of Dublin, are looking at ways to take control of their energy futures. The Technical Briefing Paper, presents three options that are theoretically available to the City of Dublin, which each provide varying levels of risk, control, and reliability. Forming a municipal electric utility system offers an effective defense against price spikes, an unstable market, and the negative effects of the California energy market and the deregulation process. However, the process of municipalization is a complex, expensive, time-consuming, and risky endeavor. It is recommended that the municipalization process not be undertaken without full City Council and public support. The. second option available to the City, the formation of an ESP, while theoretically feasible, is not currently an option that is legally available to the City and has therefore at this time has been eliminated from further consideration..If at some point in the future, legislation is adopted re-instating direct access, it could provide the City with a means of providing stable, lower-cost electric rates to its residents and businesses. The third option is the establishment of a General Plan Energy Element. An energy element will provide the City with a low cost risk-free means oflassuring some measure of local control over its energy future, while promoting a cohesive community that supports both the environment and public involvement. An energy element will help the City prepare for future unforeseen occurrences in California's energy future. iv STATE OF ENERGY IN CALIFORNIA A TECHNICAL BRIEFING PAPER INTRODUCTION The following memorandum is a Technical Briefing Paper, which addresses the current state of electrical energy service in California and provides strategic recommendations relevant to the City of Dublin, in its effort to gain some level of local control over its utility future. This memorandum addresses all of the items of interest to the City as identified in our January 16, 2002 scope of work, including (1) an overview of AB 1890; (2) a summary of the Califomia electric system; (3) a summary of the 2000-2001 energy crisis and Pacific Gas and Electric Company's bankruptcy proceedings; (4) important strategies and considerations with regard to the formation of a municipal utility. In addition, this memorandum includes information on (5) local power purchasing aggregation options; and (6) policy-level options to assist the City in controlling its own energy future. Each of these topics is intended to provide a summary of options theoretically available to the City. Should the City be interested in selecting any of these choices for further evaluation, more detailed information directly relevant to the City can be provided. If, after review of this memorandum City staff have other concerns, we can pay particular attention to any discussion of such issues and report back to the City. CALIFORNIA ELECTRIC UTILITY RESTRUCTURING (AB 1890) The electric utility industry in the United States has historically been a regulated monopoly. At the mm of the twentieth century, the United States government passed regulations that created a system of electric monopolies that would be regulated by state public utility commissions. This legislation came out of a belief that competition was not in the best interest of the electric business or the populous and that competition in the system would result in higher electricity costs. As result, state regulations were established which provided a stable legal and economic structure of private electric utility monopolies. This system of regulated private monopoly in the electric industry has dominated in the United States with few challenges over the past 100 years. Only recently has this historic monopoly begun to be challenged by advocates of free-market competition.1 As a result of a number of factors leading to instability in the private utility system, including increased rates as a result of stricter environmental regulations and a backlash against nuclear power, the Federal Government began to reanalyze the existing electric monopoly system. This reconsideration of the electric utility industry resulted in the Federal Energy Regulatory Commission (FERC)2 Orders 888 and 889, that were put in place in 1996. These regulations allowed for the wholesale trading of electricity between generators and customers nationwide, and were the stepping-stones for electric utility restructuring in California. In reaction to the FERC Orders, the California Public Utilities Commission (CPUC) issued a Rulemaking proceeding on Restructuring California's Electric Services (also known as the "Blue Book"). The Blue Book looked primarily at the market and at the private sector to achieve the goals and benefits identified by the FERC Orders. The "Blue Book" and a preferred restructuring policy were subsequently adopted and as a result, in late 1996, the California Legislature adopted the Electric Utility Industry Restructuring Act (AB 1890), which introduced competition into the California energy market. In addition to the FERC Orders, another key factor behind the restructuring legislation ~ Smeloff, Ed and Asmus, Peter 1997. Reinventing Electric Utilities: Competition, Citizen Action, and Clean Power. Island Press, Washington D.C., 1997. 2 See Appendix A for a complete list of acronyms used in this Technical Briefing Paper. City of Dublin April 2, 2002 Page 2 in California was the disproportionate revenues of the California investor-owned utilities (San Diego Gas and Electric, Southern California Edison, and Pacific Gas and Electric) as compared to the remainder of the United States. By 1996 the average revenue per kilowatt-hour of electricity sold in California was 9.48 cents, the tenth highest among all of .the other 50 States and the District of Colombia. The United States average during this same time period was 6.86 cents per kilowatt-hour.~ As a result of FERC Order 888 and the subsequent, AB 1890, after March 1998 the new system allowed customers in most existing electric utility service areas to choose their electric generation supplier. Restructuring also brought changes to the transmission of electricity. Previously restricted transmission facilities were opened to power generators on a fair and equitable basis, overseen by the newly created California Independent System Operator (CAISO). The CAISO was established to assure reliability of the transmission system and to ensure that the owners of the transmission system did not favor their own generation facilities over competing generators in providing transmission access. (Department of Energy, 2001) More specifically, AB 1890 among other things: · Required Investor-Owned Utilities (IOUs), such as Pacific Gas and Electric (PG&E), to sell a substantial portion (at least 50%) of their fossil fuel generation. · Required IOU customers to be able to purchase their energy from electric service providers (ESPs) other than from their Utility Distribution Company (UDC), such as PG&E. · Required IOUs to collect their stranded cost investment through a Competitive Transition Charge (CTC), or fixed energy component, on all customers' bills, even those under a new ESP. · Established the CAISO and the California Power Exchange (PX) for transmission management and market trading. · Required the IOUs to sell all output into the PX. · Required the IOUs to purchase all needs from the PX day-ahead market and the CAISO's hourly real-time market. CALIFORNIA'S CURRENT ELECTRIC SYSTEM As previously mentioned, the California electric system consists of three components: generating plants, transmission lines, and local distribution systems (See Figures 1-3). The transmission system is a ne~,vork of lines providing multiple paths from electricity suppliers (generators) to load centers (distribution substations). Distribution lines connect the substations to the consumer. Distribution voltage is stepped down to the service voltage, then enters the business or residence. Transmission systems are generally considered the bulk transfer systems, between generating plants and distribution substations. Operation of the generation stations in conjunction with the transmission system requires careful coordination and control to accommodate multiple suppliers and customers simultaneously. Electric Generation The California electric system is comprised of in-state power plants and transmission lines as well as out-of-state resources importing electricity into the state. Approximately 90% of the electricity consumed in California is generated by power plants located within the state, while the remaining 10% United States Department of Energy, 2001. United States Department of Energy - Energy Information Administration website http ://www.eia. doe. gov City of Dublin April 2, 2002 Page 3 Insert Figure 1 City of Dublin April 2, 2002 Page 4 Insert Figure 2 City of Dublin April 2, 2002 Page 5 Insert Figure 3 City of Dublin April 2, 2002 Page 6 is imported from out-of-state power plants4. Table 1 shows the amount of electrical energy in gigawatt- hours, generated in California by power plant type in 2000. TABLE 1 CALIFORNIA ELECTRICAL ENERGY GENERATION FOR 2000, TOTAL PRODUCTION, BY RESOURCE TYPE Resource Type ' Gigawatt-Hours Percentage Hydro 42,053 14.80% Nuclear 43,533 15.32% Coal * 36,804 12.95% Oil 449 0.16% Natural Gas 106,878 37.62% Geothermal 13,456 4.74% Biomass & Waste 6,086 2.14% Wind 3,604 1.27% Solar 860 0.30% Imports - NW 18,777 6.61% Imports - SW 11,633 4.09% TOTAL 284,133 100.00% Note: To convert fi:om gigawatt hours into megawatts, divide the number of gigawatts by 8,760 then multiply by 1,000 to get megawatts. · Amount o£electricity generated from coal includes out-of-state power plants that are either owned by California utilities or have long term contracts to supply electricity solely to California. This electricity generated from these coal- fired plants is not designated as an "import" even though the plants are located outside the state. The 15 small coal-fired power plants located within California have a name plate capacity of only 550 megawatts; less than one percent of total state capacity. Source: CEC, 2002. Natural gas power plants generated the largest amount of energy in the State (37.62%), followed by nuclear and hydroelectric power plants with 15.32% and 14.80%, respectively. Figure 1 illustrates the location of power plants (100 mega-watt and greater) by type within California. Transmission California's transmission system consists of alternating current (AC) power lines operating at 220 or 230 kilovolt (kV), 287 kV, and 500 kV. It also consists of some 500-kV direct current (DC) power lines. The 500-kV (both AC and DC) lines are used for transmitting long distance bulk power and are both generally referred to as extremely high voltage (EHV) transmission lines. The 220/230-kV and the 287-kV lines are generally referred to as the transmission level. Systems below the 220-kV level, are generally referred to as the subtransmission levels. The EHV transmission system allows California to import and exchange power with hydroelectric power sources in the Pacific Northwest and to import power from coal and nuclear sources in the Southwest. The major transmission lines have been constructed to facilitate major transfers into California. California's transmission system is illustrated in Figure 1, below. ' 4 California Energy Commission, 2001. Califomia Energy Commission website http://www.energy, ca.gov 5 Greystone, 1997. Electric Restructuring in California: An Informational Report. California Public Utilities Commission, March 1997. City of Dublin April 2, 2002 Page 7 In 2001, there was 31,7216 miles of transmission wires in California7. Pacific Gas and Electric Company owns 58.3% of these transmission lines (See Figure 2), followed by Southern California Edison (SCE), and San Diego Gas and Electric (SDG&E) with 16.2% and 6.0%, respectively. The state's publicly-owned municipal utilities and the federal government own the remainder of the transmission lines, with 16.5% and 3.0% respectively. Distribution Utilities own and maintain the electric lines that distribute electricity to end-use customers. PG&E is responsible for distributing energy to end-users within the City of Dublin. Figure 3 shows the service areas of all of California's electric utilities, including IOU's and publicly-owned utilities. Transmission lines go to distribution substations located near demand areas. Here, transformers reduce (step-down) the high voltage to a lower voltage, for distribution to the final step-down transformer's located within a few hundred feet of the end-user. Distribution transformers step the voltage down to 240 V, so that it can be used by residential and other customers. This 240 V voltage is the standard voltage brought to the service entrance of homes and commercial users. High capacity loads at large commercial and industrial users are often served at a higher voltage. AB 1890 intended the restructured generation, transmission and distribution system to operate in a coordinated manner to ensure reliability ina competitive market environment to drive prices down. The shortcomings of the restructured system were made evident by the California energy crisis of 2000- 2001. TI-IE CALIFORNIA ENERGY CRISIS 2000-2001 At the outset of deregulation, the supply of generation available to California exceeded the demand by a fairly wide margin. Rather than selling the required 50% of thermal generation assets, the IOUs divested all of their thermal resources at prices up to five times their value. Wholesale electric prices were low but retail customers saw little difference in their bills due to the Competitive Transition Charge (CTC), the ratemaking mechanism to recover utility stranded costs and to protect utility employees during the transition. Stranded costs occur when a utility is unable to sell its power and recover its fixed investment costs incurred while the utilities were regulated. They recognized that they were bailing the utilities out of their stranded investments, but they had the prospect of future reductions in rates to look forward to. Few residential or small commercial customers made use of their ability to switch providers, since the CTC prevented them from achieving any real savings on their bills. Consequently, many new Electric Service Providers (ESPs) initially entered and eventually exited the market. A substantial number of industrial customers, about one-third, exercised their option to switch ESPs. Through their buying power they managed to reduce their energy bills despite the CTC. Prices in 1998 and 1999 were relatively stable, $28.53 and $30.14 per MWh, respectively.8 In addition, between 1996 and 2000, the economy in California had rebounded. New energy-intensive industry (such as computer and chip manufacturers, communications providers, dot-com companies, 6 Includes only transmission lines that are under the control of the Independent System Operator (ISO). These numbers do not include distribution lines. ? California Energy Commission, 2001. California Transrrdssion Line Ownership. June 7, 2001. California Energy Commission website http://www.energy.ca.gov. s East Bay Municipal Utility District, 2002. Potential Roles as an Electric Utility. R.W.Beck. Oakland California. February 2002. City of Dublin April 2, 2002 Page 8 and intemet service providers) created new load growth that was not forecasted. Beyond that, there no longer was any responsible party to ensure that the future balance between loads and resources would be maintained. The market was expected to regulate the supply and demand of power. Power plant developers were reluctant to build because of low market prices and the myriad state siting and Permitting regulations. Those developers that did attempt to build facilities were frequently stopped on a local level by parties that did not want power plants or transmission lines sited in their communities. Growth in other Western states that California had come to rely on for generation also accelerated. Nevada and Arizona in particular experienced tremendous growth in the 1990s. Some new owners of facilities in California sold 'output from their facilities into those states, since the IOUs in California relied almost entirely on spot markets because there was no rate recovery guarantee on longer-term bilateral contracts. When coupled with drought conditions in the pacific north west limited hydroelectric energy imports, the availability of power was severely limited. Problems inherent in the implementation of deregulation, as prescribed by AB 1890, began to surface in the summer of 2000. In May 2000, Sempra (SDG&E.) was the first IOU to recover its stranded cost, eliminate the CTC from its bill, and allow retail rates to reflect spot-market (PX and CAISO) prices. Just after this happened, wholesale prices began a dramatic increase. Table 2 below contains the weighted average unconstrained hourly market clearing prices in the PX on a monthly basis, in 2000, showing the extreme volatility of the market. TABLE 2 WHOLESALE PRICES IN 2000 Month $/MWh January $31.78 February $30.40 March $29.28 April $27.37 May $50.39 June $132.38 July $115.32 August $175.22 September $119.62 October $103.23 November $173.11 December $385.60 Source: EBMUD, 2002. Ratepayers in San Diego had their monthly bills double and triple literally overnight. State legislators passed legislation that limited the generation component in San Diego's rates to $65 per MWh. The CAISO experimented with price caps that varied anywhere from $150 to $750 per MWh. The price caps failed to hold since the CAISO, on a real-time basis, had to purchase power at almost any price in order to avoid blackouts. In the meantime, the debt of the other IOUs mounted rapidly. With their rates April 2, 2002 Page 9 still frozen by AB 1890, they were not able to recover the cost of the power they purchased from the PX/CAISO. Today, that debt purportedly stands at $12 billion. As summer turned to fall, the IOUs extended credit agreements and increased borrowing in order to cover their growing shortfalls. Angry San Diegans demanded refunds from the generators, who they believed were demanding payments that they considered to be usury. California turned to the FERC for help. On December 15, 2000, FERC instituted several changes, such as ordering changes to PX bidding, permitting the IOUs to enter into bilateral contracts, and trade through markets other than the PX. FERC refused to act on refunds or establish a price cap for the Western U.S. They instituted a "soft cap" on prices for power sold to the CAISO that required generators to document sales above $150 per MWh. If FERC did not challenge the price within 60 days, it had no recourse for instituting refunds if it found the prices to be unjust or unreasonable. Prices continued to rise not only in California but also in Oregon, Washington, and other Western states. On January 16, 2001, SCE did not make payments owed to power suppliers, bondholders, and creditors. This placed them in default. Despite orders from the U.S. Energy Department, sellers were reluctant to sell both electric and gas supply into California for fear of not being paid. A record amount of generation was unavailable for one reason or another (such as planned maintenance, etc.), and, for the first time since World War II, power in California was involuntarily curtailed on two days in January in order to hold the grid together as the state's demand exceeded the available supply. This caused Governor Davis to declare a State of Emergency and to authorize the California Department of Water Resources (CDWR) to purchase power for delivery to the PX/CAISO. This stopgap measure was designed to buy 7 to 10 days to continue to work on the problem. By the end of January 2001 the PX announced that it was suspending its operations and subsequently CDWR, on behalf of the State, became the predominant buyer of the State's electricity.9 The credit crisis of the IOUs and the assignment of responsibility to the CDWR for purchasing power to cover the shortage in California created a fundamental change in the industry structure.' The "Obligation to Serve" was transferred from the IOUs to the state. Aside from the difference between investor and public ownership, there are now two very different types of utilities in California. The IOUs are non-integrated and no longer have the obligation to serve. The publicly-owned utilities retained their generation, retained control of their transmission (with the exception of the City of Vernon), and are not only fully integrated but still have the obligation to serve. Although some publicly owned utilities had to raise rates to recover the high costs of market power or to pay off stranded investments in higher cost generating plants, almost all have rates substantially below those charged by the IOUs. The two largest IOUs, including PG&E, had rate increases or surcharges averaging 4 cents per kWh. They have suffered several days of rotating blackouts and, because of Interconnection Agreements, required municipal utilities to participate in these blackouts. Most complied even though the municipals had more than enough generation to cover their loads. During the summer of 2001, when most utility experts were expecting the worst, a number of factors converged to mitigate the problem, avoiding additional blackouts. These factors included an economic downturn and aggressive conservation in California that reduced load by 10 to 15%, the lack of extreme temperatures, price mitigation measures adopted by the FERC, the signing of long-term power supply 9 California Energy Commission, 2001. Wholesale Electricity Price Review, January 2001. California Energy Commission website http://www.energy.ca.gov. April 2, 2002 Page 10 contracts by the state, substitution of state credit for the IOU's lack of credit, and completion of new generation facilities. After the state signed long-term power supply contracts for a reported $43 billion, the California Public Utilities Commission (CPUC) abolished Direct Access until assurances could be put in place or a dedication of the energy sales revenue stream could be guaranteed to serve as security for up to $13.5 billion in prospective debt. The debt would be used to reimburse the state for power already purchased and delivered and a portion of future power delivery costs. In summary, the new industry environment is as follows: IOUs: · Are no longer vertically integrated. · Are in debt for up to $12 billion caused by wholesale power costs, which exceeded frozen retail revenues. · Are no longer responsible to acquire sufficient power supply to serve load (no obligation to serve). · Are relieved of new retail competition, as new Direct Access contracts are, at least temporarily, prohibited. · Have continuing debt obligations for rate reduction bonds through 2007. · Have continuing CTCs for power purchase contracts and nuclear decommissioning. · Have to bill customers for power provided by CDWR, with excess costs estimated at 1.65¢ per kWh by CDWR. . Publicly-Owned Utilities: · Are still vertically integrated and control generation, transmission, and distribution. · Most have collected reserves to pay for any stranded generation costs. · Still haVe the obligation to serve. · Have no commitments for high cost CDWR power supply contracts. Can offer Direct Access if they want (some took the option and still do). · Some are preparing to reduce rates in 2002 using stranded investment reserves. There are a number of issues in California that need to'be resolved before a stable electric service environment can be expected. These include: · The role of the CAISO and its survival is in question. FERC is pushing for Regional Transmission Organizations. (RTOs). Some California publicly-owned utilities, in an attempt to avoid unfair and escalating CAISO charges, are seeking to form their own control areas. FERC ruled on January 29, 2002, that the governance structure of the CAISO was not satisfactory in that it was sufficiently independent and that it would have to be modified. · Upgrade and mitigation of numerous transmission line bottlenecks on state, federal, and municipal facilities in key points connecting northern and southern California, which would allow for the rapid dispatch of power to areas of the state experiencing increased demand. · The status of Direct Access is uncertain. The date by which a Direct Access customer had to be signed up for Direct Access may be revised to July 1, 2002 (now September 20, 2001), because of concerns about the amount of load that is purported to be exempt from nonbypassable charges (14%). Additionally, Direct Access may be reinstated for certain types of customers, for City of Dublin /d~ April 2, 2002 Page 11 some percent of all customer loads, or made available if.Direct Access customers pay a surcharge to compensate for the stranded cost portion of CDWR power purchase commitments · The CPUC is scheduled to investigate the return of the obligation to serve to the IOUs. · There will need to be a resolution of how and to what extent the IOU debts, high cost of CDWR power supply purchases and bonds issued to repay this debt, and remaining stranded investment and AB 1890 transition costs will be recovered. PACIFIC GAS AND EIJECTRIC COMPANY'S BANKRUPTCY PROCEEDINGS The impact of the energy crisis was compounded by the financial instability of California's IOU's. Due to high wholesale power prices and the imposition of retail price caps restricting recovery of these costs, California's three major IOUs (Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric) experienced severe financial problems. PG&E has experienced the worst of these financial troubles, and as a result on April 6, 2001, PG&E filed for protection under Chapter 11 of the U.S. Bankruptcy Code, the largest-ever bankruptcy involving a utility. PG&E estimated that since June 2000 it had spent $9 billion for wholesale power with no reimbursement for those expenditures~°. On September 20, 2001, Pacific Gas and Electric Company (Utility) and its parent company, PG&E Corporation, jointly filed with the U.S. Bankruptcy Court for the Northern District of California its first proposed plan of reorganization (Plan) of the Utility under Chapter 11 of the U.S. Bankruptcy Code and their proposed disclosure statement describing the Plan. Following the filing of the proposed Plan and disclosure statement, the Utility and PG&E Corporation sought an order of the Bankruptcy Court (1) approving the disclosure statement, (2) setting the date, time and place for a hearing to consider confirmation of the Plan, and (3) setting the voting deadline with respect to the Plan. The proposed Plan provides for a disaggregation and restructuring of the Utility's business into four lines of business: gas and electric distribution, electric transmission, gas transmission, and electric generation. The intent of PG&E's Plan is to enable the Utility to successfully reorganize its business and accomplish the objectives of Chapter 11 of the Bankruptcy Code. PG&E believes that acceptance of the Plan is in the best interests of the Utility, its creditors and all parties in interest. Throughout the process of developing the Plan, PG&E Corporation and the Utility have been working closely with the Official Committee of Unsecured Creditors (Committee) and the Committee has endorsed the Plan.~ Pursuant to the Plan the Utility would create three new California limited liability companies and separate its operations into four lines of business: retail gas and electric distribution; electric transmission; interstate gas transmission; and electric generation (these companies are referred to as the reorganized Utility, ETrans, GTrans and Gen, respectively). Under the Plan, the majority of the assets and liabilities associated with the Utiiity's electric transmission business would be transferred to ETrans or its subsidiaries or affiliates. The majority of the assets and liabilities associated with the Utility's gas transmission business would be transferred to GTrans or its subsidiaries or affihates, and the majority of the assets and liabilities associated with the Utility's generation business (including the conventional l0 Pacific Gas and Electric, 2001. Pacific Gas & Electric Company Press Release. April 6, 2001. n United States Securities and Exchange Commission, 2001. Form 8-K- Current Report, September 20, 2001. Washington, D.C. Apdl 2, 2002 Page 12 hydroelectric generating plants, the Helms Pumped Storage Plant, the Diablo Canyon nuclear power plant, beneficial interests in the Diablo Canyon Nuclear Facilities Decommissioning Master Trust, and the irrigation district power purchase contracts) would be transferred to Gen or its subsidiaries or affiliates. The Plan further contemplates that the Utility would create a separate holding corporation (Newco) to hold the membership interests of each of ETrans, GTrans and Gen, and that the Utility would be the sole shareholder of Newco. After the transfer of Utility assets to the newly-formed entities or their subsidiaries or affiliates, PG&E would distribute the outstanding common stock of Newco to PG&E Corporation, and each of ETrans, GTrans and Gen would thereafter be an indirect wholly-owned subsidiary of PG&E Corporation. As of February 1, 2002, PG&E had filed plan supplement documents for their plan of reorganization. However, on February 27, 2002, U.S. Bankruptcy Judge Dennis Montali ruled that the CPUC may file an alternative plan of reorganization in PG&E's bankruptcy case. Judge Montali terminated PG&E's exclusive fight to propose a plan and solicit creditor support, and gave the Commission until April 15, 2002 to file its plan and a draft disclosure statement. Earlier in February, Judge Montali agreed with the CPUC and ruled that PG&E's proposed plan was not confirmable as a matter of law. PG&E was expected to file a new plan on March 6, 2002.~2 Like PG&E, Southern California Edison (SCE) has also found itself in a similar situation to PG&E with respect to power purchase costs. In November 2000, SCE estimated their unrecovered power purchase costs at $2.6 billion~3 while SDG&E estimated their unrecovered power costs at $447 million by December 2000TM. Since then SCE has also threatened bankruptcy, and the state has examined various options to take over the utilities transmission system as collateral, but to date this action has not occurred. since 2000, the California energy crisis and its compounding factors have been widely covered on television and in newspapers around the Country. The complexity of problems, as well as the contrasting views and often conflicting solutions .offered by politicians, government officials, and other stakeholders has left many consumers and communities wondering what they can do to remedy the situation. This desire for a more stable and reliable electric system has forced many communities, including the City of Dublin, to pursue potential alternatives to the existing electric system, in order to ensure that their own citizens and businesses have adequate electrical and gas supplies. POTENTIAL ELECTRICITY OPTIONS The City of Dublin theoretically has a number of options available to them which provide some level of local control over the City's electricity future. These options include the City as a municipal utility, the City as an aggregator of electric loads through the formation of an Electric Service Provider (ESP), and the City as policy-makers through the implementation of a General Plan Energy Element. Each of these oPtions provide the City with varying degrees of autonomy from PG&E, with the maximum autonomy, the formation of a municipal utility, resulting in both the highest cost and risk. 12 California Public Utilities Commission, 2002. Court Rules PUC May File Bankruptcy Plan for PG&E. PUC Press Office. Sacramento, CA. February 27, 2002 ~3 Southern California Edison, 2000. Southern California Edison Press Release. November 17, 2000. ~4 San Diego Gas and Electric, 2001. San Diego Gas and Electric Press Release. February 6, 2001. April 2, 2002 Page 13 MUNICIPAL UTILITY The establishment of a municipal utility allows local communities to own and operate their own electric system, independent of the IOU's. In general terms this requires a city and/or county to take over or condemn the IOU's transmission system and build an independently owned and operated municipal system. Private utilities, which are directly accountable to shareholders and not customers, are in all cases vehemently opposed to this municipalization process. In addition to being a very contentious proposition, municipalization is also extremely costly and very time consuming. For example, the Long Island Power Authority, Long Island, New York's municipal utility was created in 1998, but took twelve years to establish and cost over $7 billion~5. However, if successful, the benefit to local communities of this municipalization process can lead to lower rates, service improvements, and local autonomy. For example, in January 2001, a typical PG&E residential customer paid approximately $59.40 for 500 kilowatt-hours of electricity, compared to $36.89 for customers of Sacramento's municipal utility, SMUD, while average electric bills for SDG&E customers in southern California almost tripled under restructuring from $51.60 for 500 kilowatt-hours in August 1999 to $138.50 in August 200016. Furthermore, in 1999, as illustrated in Table 3, public power customers paid an average of 7.2 cents per kilowatt-hour for residential electric service, compared to 8.5 cents per kilowatt-hour paid by residential customers of IOUs nationwide. TABLE 3 1999 RETAIL ELECTRIC PRICES IN THE UNITED STATES  · Publicly-owned ?-:.~ ' Residential Conunercial Industrial Source: American Public Power Association, 2001 ~5 Pender, Kathleen, 2001. Municipal utilities, customers shielded from state's energy crisis, deregulation roles don't apply, allowing district to prosper. San Francisco Chronicle. San Francisco, California. January 5, 2001. 16 San Diego Gas and Electric, 2001. San Diego Gas and Electric Press Release. February 6, 2001. City of Dublin April 2, 2002 Page 14 The 1999 data presented above is based on information reported to the Department of Energy, Energy Information Administration (EIA)'s, "Annual Electric Utility Report" in which 2,008 publicly owned electric utilities and 239 IOUs operating in the 50 states and District of Columbia reported data.~7 Specifically, there are two types of community owned electric utilities. The first is a Municipal, Utility District (i.e. Sacramento Municipal Utilities District), and the second is a Municipal Utility (i.e., Los Angeles Department of Water and Power, Colton Municipal Electric Utility, and Riverside Public Utilities). Further, there are two main differences between a Municipal Utility District (MUD) and a Municipal Utility (Muni). The first is in the structure of the public utility. A MUD consists of any public agency (i.e., city, county water district, county sanitation district, or sanitary district (§11504, California Public Utilities Code)) together with unincorporated territory, or two or more public agencies, with or without unincorporated territory (§ 11561, California Public Utilities Code). A Muni consists of a city or municipality which owns all or part of a utility, primly the distribution system. The Muni provides energy and related services to all customers within its service territory. The second difference is in the regulation of a MUD versus a Muni. A MUD is regulated by the Municipal Utilities District Act (§ 11504, California Public Utilities Code), while a Muni is regulated solely by the City Council of the city in which it is located.~8 However, both types of utilities can provide all necessary services to its ratepayers; including purchase power on the wholesale market, transmission and distribution service, billing and metering, customer service, maintenance, and repair. A Muni can also arrange for related services, such as conservation and load management programs. For pUrPoses of this memorandum, it is assumed that the City of Dublin is primarily interested in investigating the establishment of a Municipal Utility and not a Municipal Utility District. Requirements ora Municipal UtiliO, As a Municipal Utility, the City of Dublin would have the right to generate, distribute, and sell electric power to the residents within the city. The city would have to identify a service area and would then negotiate an agreement with the Pacific Gas and Electric Company (PG&E) for the severance of the electrical distribution from the rest of the PG&E system. The service area agreement would need to be approved by the California Public Utilities Commission and possibly the Local Area Formation Commission (LAFCO). One of the key features of this agreement would be the transfer of the obligation to service all customers within the service area from the regulated utility to the municipal utility. This obligation includes the need to obtain power to meet all the electrical needs of all the customers within the service area. In order to meet this obligation, municipal utilities either purchase the power on the wholesale market or generate the power themselves. Most existing municipal utilities own a share of existing low cost power generating facilities or have long-term contracts with federal power agencies that provide them with low cost power from hydroelectric facilities. Some existing utility districts generate power from within their boundaries; others own portions of projects out of this jurisdiction (and frequently out of state). These utilities wheel (the use of a third party's transmission lines to obtain power from another entity) the power into the district on their own transmission lines or under agreements with the public or private utility owners of these lines. Under Federal Energy Regulatory Commission (FERC) rules, 17 American Public Power Association, 2001. 2001 Annual Directory & Statistical Report. Public Power Weekly, Number 42. October 22, 2001. is Fargen, Bernie, 2001. Roseville Electric. Personnel Communication with Public Relations Director, Bernie Fargen. Roseville, California. April 4, 2001. City of Dublin April 2, 2002 Page 15 all owners of interstate transmission lines provide wheeling service for available capacity on their transmission lines at the same rates that they would charge themselves. The FERC regulations have helped open up the transmission system to new players, but have not. been as effective where the existing transmission lines are at or near capacity. Further regulatory action and legislation seems to be needed to establish the responsibilities and financial arrangements for planning and constructing new transmission lines. In the meantime, significant bottlenecks have developed in the existing transmission system in the state, making it very difficult to obtain power through wheeling from non- local areas. In the current extraordinary circumstances surrounding the wholesale energy market, the existing long- term contracts for the supply and transmission of electrical power have proved extremely advantageous to some municipal utilities and their customers. If a municipal utility cannot meet the demand of its customers though its existing contracts, it has to purchase power on the wholesale market, where rates have spiked as much as ten or more times higher than historic averages, however some better deals are currently available. The municipal utility also has to arrange for transmitting this power to the local area. In order to avoid the current high wholesale rates and transmission bottlenecks, many municipal utilities are planning to construct new power plants within their jurisdiction. Feasibilit~ of Establishing a Municipal Utilit~ The following section explains the circumstances under which it may be beneficial for the City of Dublin to investigate the possibility of establishing a non-profit municipal electric system to serve its residents and businesses. Several basic considerations related to a Muni feasibility study are identified as well as some thoughts on strategy and implementation assuming that the study concludes that establishing a municipal electric system is economically, technically, and legally feasible. The focus of this approach assumes municipalization represents a method to providing lower cost electric service and gaining local control. Under current market conditions, PG&E's rates are still essentially frozen by the CPUC and are much lower than the wholesale rates being charged by generators. It is likely that if the city where to form a Muni today, it would have to buy at wholesale rates and could not compete with PG&E. However, in a few years this scenario will likely reverse and a city Muni could be highly competitive. The following key points for consideration have been extracted and modified from the Checklist For A Study To Determine The Feasibility Of Establishing A Municipal Utility, by Greg D. Ottinger of Duncan and Allen, Washington D.C. Forming a municipal utility may be beneficial to the City if any of the following conditions are present: A. A lower cost alternative wholesale supplier exists, such as: · Another investor-owned utility · Rural electric co-operative utility · Another municipal electric system or joint action agency composed of other municipal systems · A non-utility generator (e.g., industrial cogenerator) · A reliable wholesale power marketer April 2, 2002 Page 16 · A combination of the above; and B. If there is no obvious and insurmountable legal impediments, e.g. valid statutory ban on municipal buyouts; exclusive, long-term franchise (if legal, valid and enforceable). The current high rates, rate volatility, and potential system unreliability of PG&E, combined with the presence of the above conditions display the potential for significant savings by establishing a non- profit, municipally owned and operated electric utility, however this conclusion can only be reached after significant additional investigation and research has been conducted. In addition current PG&E rates are lower than wholesale rates due to the price cap which remains in place. If it is determined that these initial conditions exist, the next step in the evaluation process would be to conduct a detailed feasibility study, of which the key points are described below. TIlE FEASIBILITY STUDY The following steps constitute the major components of an initial feasibility study to determine if municipalization is feasible. A. Identify the City's electric load -- If PG&E records are not available, the number of water meters can be used as a proxy for the number of electric customers, unless better data is available. An assessment of residential, commercial and industrial power needs (current and future) is required. Industrial power utilization is also a very important component of the total load. The City will need to project the total annual power supply requirements for the city for the next 10 years. B. Project the cost of service and retail rates of PG&E for the City's customers for the next 10 years. This information may be very difficult to project because of the current state of flux of California's energy situation. Once projected, this information constitutes the base case. C. Identi_fy other wholesale power suppliers and project their costs of service and wholesale rates for the next 10 years. This is an important number, as wholesale power supply costs generally represent about 80% of the costs of a municipal electric utility. Also investigate arrangements for transmitting the wholesale power supply to the City, interconnection facilities or by wheeling through another utility or transmission organization (e.g., Regional Transmission Organization). All investor-owned utilities currently have "open access" transmission tariffs on file with the FERC. Utilities that do not currently offer transmission service can be ordered to do so by the FERC under the provisions of the Energy Policy Act of 1992. D. Evaluate and appraise the existing distribution facilities that serve the City. The City must be prepared to purchase these distribution facilities by eminent domain or even, as a last resort, to construct a parallel system. The initial estimate should include severance costs and, if necessary, the cost of re-routing SCE around or through the City. There are several appraisal methods. From lowest to highest, the most common are: · Original cost less depreciation (This'is probably the value of the facilities on the utility's books for ratemaking purposes.) · Original cost April 2, 2002 Page 17 · Replacement cost (new), less depreciation · Replacement cost (new) E. Evaluate financing alternatives - The City will need to estimate the total cost of buying or rebuilding the distribution system. The City should include other capital and start-up costs, such as bucket tracks and equipment in this estimate. If the City needs to build a transmission line to its wholesale supplier, include the cost of the line and the right-of- way in the estimate. Once it is known how much money the City will need, the annual debt service on that amoUnt of debt, issued as mortgage revenue or general obligation bonds, should be estimated. Tax-exempt financing should not be assumed until the City checks w/th bond counsel. F. Estimate and proiect the annual costs of operation and maintenance Under municipal ownership. This will include (a) wholesale power supply, (b) transmission service (possibly including stranded costs), distribution, and other facilities, (c) billing and accounting, (d) administration and salaries, (e) insurance, (f) capital improvements, (g) annual debt service, and (h) reserves. Once totaled, this figure represents the revenue requirement of the municipal utility. If this figure is less than the base case (item B above), the establishment and operation of a municipal system is economically feasible. In the case of Dublin, it is likely that the above referenced feasibility study will be highly scrutinized by PG&E and its representatives, as well as by the entire investor-owned utility community. Therefore, every projection and estimate must be made by an independent party and be highly defensible without the appearance of conflicts of interest. It is advisable that calculations of costs be estimated conservatively high, with a similar approaches to estimating revenues on the low side. MAJOR CONSIDERATIONS AND STRATEGIES TO FORMING A MUNICIPAL UTILITY The following paragraphs describe some basic strategies and likely outcomes that should be carefully considered by Dublin prior to embarking on the effort to form of a mUnicipal utility. This information is based on general principals outlined in Greg D. Ottinger's Checklist For A Study To Determine The Feasibility Of Establishing A Municipal Utility. PG&E's Loss of Business - If the City is able to establish a mUnicipal utility and save money for its citizens, then so can others. If PG&E loses the City's business and fails to cut costs proportionately, it may need to spread its fixed costs over fewer customers. This raises rates and makes municipalization by other cities even more attractive. Therefore, it is likely that PG&E will provide significant resistance to any attempt by the City to form a municipal utility. It can be assumed that PG&E will also use the CPUC to protect its ratepayers and the change in service area will require CPUC approval. In addition PG&E will probably assess a fee (Wholesale Distribution Tariff) for the use of its distribution lines to wheel power into the city. For example, in 2001, the City of San Francisco in conjunction with the nearby City of Brisbane attempted to form its own MUD. The San Francisco Board of Supervisors voted 9 to 2 in favor of placing a citizens initiative on the November 2001 ballot. This initiative (MUD Campaign), known as Measure I, would give citizens the chance to decide whether the City should take over the PG&E system (a loss to PG&E of 365,000 customers) and form its own municipal utility district that would be run by an elected board of directors. PG&E in response to this initiative established the Coalition for Affordable Public Services (CAPS), a non-profit community organization whose main objective was to City of Dublin April 2, 2002 Page 18' stop the MUD campaign from gaining popular support. According to September 2001 filings with the San Francisco Department of Elections, PG&E had, as of September 2001, spent $597,413 to fight the MUD initiative. Those expenditures were at the time of filing, almost six times the expenditures of the Measure I proponents. In addition, to the almost $600,000 committed by PG&E, an additional $100,000 had been spent by an AT&T-funded group, bringing the opposition's total, at the time of the September filing, to nearly $700,000. SBC Pacific Bell had also joined the campaign against Measure I. Ultimately, the commitment and financial resources of PG&E led to the defeat of the MUD initiative at the November 2001 election.~9 Industrial Incentives - Additionally, when news of a municipalization becomes public, PG&E may offer special incentive rates to the large industries within the City, tied to long term contracts. If enough industrial users are interested, and these contracts preclude those industries from taking municipal electric service, the feasibility of municipalization would need to be re-evaluated. If this is the case, the City's industries nonetheless have received a benefit that probably would not have been available if the City had not raised the idea of municipalization. Public Advisory Vote - The City Council may consider the possibility of a call for a public Vote on municipalization. PG&E will try to overturn any ordinance or city legislation related to the formation of a Muni. Benefits of a public vote include the fact that a favorable decision is supported by a majority of citizens, and that a favorable vote will enhance the marketability and value of the mortgage revenue or general obligation bonds in the eyes of the financial community. Public Relations Campaign - Whether the issue is placed before the voters or not, the City must expect that PG&E will attempt to create doubt and concem on the part of citizens on the viability of a municipal utility. It will be difficult for the City to match this effort and therefore, a strong, dependable grass roots campaign of citizens, consumers and industry must be organized. Legal Challenges - Challenges to the' City's proposal should be expected, again primarily by PG&E. If the City's feasibility study has been thorough and its actions are based on legal authority, the City will probably win either because there is no merit to claims or because PG&E will look to settle at the last minute, fearing and not willing to risk a result that sets bad precedent, but there will be substantial costs in both time, and money. PG&E's goal will not be necessarily to win the lawsuit, but'to run the City out of money or scare the Council and civic leaders into abandoning the idea of municipalization. For example, PG&E tied up the City of Sacramento's SMUD effort for twenty-three years before losing its battle in 194620. It should be noted that no large-scale municipal utility has been established since SMUD, although many cities have attempted municipalization. FinanCing - As an investment, a municipal electric system generally has a significant payback potential, however it is not an inexpensive undertaking. If the City is going to undertake a municipalization, it should be sure that it has the dedication and funding to commit to the effort, which will represent a significant drain on City funds. t9 Gordon, Rachel, 2001. Utility district plan going to voters despite city attorney's wamings and lawsuit threat, measure passes. San Francisco Chronicle. San Francisco, California. February 13, 2001. 20 Smeloff, Ed and Asmus, Peter 1997. Reinventing Electric Utilities: Competition, Citizen Action, and Clean Power. Island Press, Washington D.C., 1997. April 2, 2002 Page 19 The cost to acquire, operate and maintain a municipal electric system fall into three main categories: (1) purchase power costs; (2) operation and maintenance costs; and, (3) costs to acquire and build the necessary distribution system. Estimating these costs to any level of accuracy, prior to conducting a detailed economic feasibility study is highly speculative due to the variability of factors for any given location. However, as a means of comparison the municipalization feasibility study for the City of Dunedin, FL, a city of 36,000, determined that it would cost Dunedin between $2.3 and $3.1 million for operation and maintenance costs and between $25 and $44 million for total acquisition and start up costs. Stranded costs were not included in the acquisition cost estimates2~. Although extremely risky and expensive, once completed, the potential for an increased revenue stream and replenishment of City funds is high. AGGREGATION As previously described the formation of a municipal utility requires a city to face a number of legal, political, and technical challenges and can require a number of years to accomplish. There are, however, other options that can be pursued under existing regulatory structures. Current laws allow a city to construct a new power plant without forming a municipal utility, and there are existing options for selling power to city residents and businesses without building or acquiring the utility distribution lines. Aggregation is one option available to the City. In simple terms, aggregation means taking advantage of group buying power. California Public Resources Code § 366 (b) states, "Aggregation may be accomplished by private market aggregators, cities, counties, special districts or on any other basis made available by market opportunities and agreeable by positive written declaration by individual consumers". As indicated in Table 4, there are a variety of forms of buyer aggregation available to the City of Dublin. Geographic aggregation offers the best opportunity for efficiency and benefits. The efficiency results from proximity, use of existing, familiar structures, economies of scale, and uniformity of market conditions and needs. The load factor of a geographic area will be more attractive to sellers than it would be if one class of customers shopped alone. The benefits of aggregation are increased because a geographic aggregate can more effectively coordinate the total energy service package with other needs, such as economic development, affordable housing, and use of renewable resources. The downside to geographic aggregation is that it limits individual customer choice. However, this still allows for more choice than provided by the current system. Moreover, it is important to note that 1,500 residential customers tends to be the recommended minimum necessary to cover overhead and transactions costs when establishing an aggregate. In addition, within each type of customer aggregation there is a variety of.options and functions from which to choose. These range from procurement of power supply to ancillary programs, asfollows: · Procurement of Power Distribution · Metering · Billing and Collection 2~ Strategic Energy L.L.C., 2000. City of Dunedin and Town of Belleair Municipalization Study. Pittsburgh, PA. February 22, 2000. City of Dublin April 2, 2002 Page 20 · Customer Service · Conservation Programs · Universal Service · Public Education · Community Service/Giving TABLE 4 - FORMS OF BUYER AGGREGATION Type~ Description Municipals and End-users of all classes jointly own distribution system, sometimes transmission and generating capacity, either Co-ops directly as.members of co-ops or indirectly as citizens of a municipality. Entity purchases energy for distribution to all customers in territory. "If a public agency seeks to serve as a community aggregator on behalf of residential customers, it shall be obligated to offer the opportunity to purchase electricity to all residential customers within its jurisdiction" [California Public Resources Code § 366 (c)]. Franchised A municipality does not own any part of the distribution system, but bids out the rights of way for poles, wires, Service etc., in exchange for fees, certain conditions of service. In retail competition scenario, the municipality can Territories either purchase energy for end-users within its boundaries and the fee it owes for distribution is offset by the franchise fee, or enter into an agreement to allow the distribution company to sell energy within its boundaries in exchange for a fee. Neighborhood End-users within a small geographic area, such as a city neighborhood or a rural section of a county, form a Groups group that jointly purchases energy on the wholesale market and paYs the owner(s) of transmission and distribution for moving power to them. Employment- An employer or labor union shops for energy supply on behalf of workers. Can be based at one site or scattered Based Groups sites served by the same company or union. Co-ops Existing agricultural, food, and other buyer co-ops can provide energy shopping services for their members as well. Members are generally scattered within a set area. Low-Income Low-income customers participating in financial assistance, energy efficiency, public housing, or other Groups programs serve as a group for energy shopping purposes. Institutions Schools, hospitals, government agencies, churches, nonprofit organizations, and similar institutions form a consortium to shop for energy supply. Power End-users jointly purchase wholesale energy and pay the owner(s) of transmission and distribution for moving Clubs/Co-ops power through. Co-op is a nonprofit. Cost to co-op member is wholesale price plus transmission and distribution fees and co-op administrative costs. Co-op membership is defined by nongeographic factors, i.e., membership in an association. Subsidiary As a service to its members, an association forms a subsidiary that purchases wholesale energy and arranges for Power Clubs transmission and distribution. The parent organization may or may not collect more than its administrative costs. Source: Guinane,' 199722 In addition, the aggregate, or buyer group, can serve a wide range of functions for its participants. The simplest is to act as a broker, matching the end-users in the group with the best possible deal on electric service. Once the option(s) has been selected, each end-user would have a direct relationship with the supplier of the services. The group would not purchase the power or perform related services, such as , billing. On the other end of the scale, the group could purchase the power on the wholesale market and resell it to its members at cost, including administrative costs. 22 Guinane, Kay, 1997. Group Buying Power; Meaningful Choices for Energy Consumers. Environmental Action Foundation. May 1997. City of Dublin April 2, 2002 Page 21 Providing Power as an Electric Service Provider (ESP) One potential customer aggregation option for the City of Dublin could be the formation of an Electric Service Provider (ESP). Under AB 1890 any entity, including a municipality, could establish itself as an ESP and provide power to retail customers that signed up for its service. However, as mentioned above, as of September 20, 2001, the CPUC suspended the right of retail end-users to acquire direct access electric service from ESPs23. In addition, the execution of any new contracts, or the entering into, or the verification of any new arrangements for direct access after September 20, 2001, is prohibited. However, new legislation is expected to partially reopen this opportunity at some point in the future. Until then, implementation of this aggregation option is not feasible. Just for informational purposes, an ESP would operate in some ways much as a municipal utility: it would have to purchase power on the wholesale market (or own power generating facilities), transmit the power over utility lines, and sell the power directly to its customers. An ESP is a marketing entity that offers power to retail customers as an alternative to the regulated utilities. ESPs do not have an obligation to serve all customers within a service area. Most ESPs pick and choose their customer market (concentrating or large industrial accounts, for example, or offering green power to environmentally conscious consumers). As a political entity, a city faces legal, and political impediments to devoting public funds that benefit only one segment of its population. As an ESP, a city could, however, offer its power to all residents and businesses within its city limits and only provide power to customers that chose the service. One significant regulatory restriction on ESPs is that a customer must choose to receive power from only one provider at a time. A customer cannot switch back and forth between a regulated utility and the ESP, depending on market conditions. POLICY-LEVEL OPTIONS One realistic option for the City of Dublin, which would allow the city some autonomy over its energy future, is the creation and implementation of a General Plan Energy Element or an energy overlay zone. In the broadest sense an Energy Element will act as a "yardstick" for measuring and monitoring a community's overall economic efficiency and environmental quality. The purpose of an Energy Element is to: 1) increase energy efficiency in the City; 2) provide policy guidance regarding the energy use implications of land use decisions; 3) document the City's energy resources and opportunities; 4) determine land use and environmental criteria for evaluating future energy projects; and, 5) provide alternatives which encourage exceeding the state's energy regulations for new construction. A local energy plan is the primary means for communities to influence and plan their energy futures. Many local government decisions, ranging from land use and zoning to transportation planning and air quality regulation, affect energy use and supply, and these, in turn, are all prime factors in local economic growth and' development. The benefits of having an Energy Element generally come in two categories: economic and environmental. In general, economic advantages may include: · Encouragement of development patterns that concentrate development in a central area and provides a mix of services and jobs near housing. Because jobs and/or services are closer, this 23 California Public Utilities Commission, 2002. Order Instituting Rulemaking Regarding Implementation of the Suspension of Direct Access. Rulemaking 02-01-001. San Francisco, CA. January 9, 2002. City of Dublin April 2, 2002 Page 22 -will result in fewer or shorter automobile trips and less money spent on automobile fuel and maintenance. · Energy efficiency and conservation measures can reduce residential utility bills which increase the household disposable income and purchasing power. Likewise, such measures can reduce operating costs for businesses, which will result in lower overhead expenses and increased profits. When disposable income and business profits increase, the local economy is stronger because more dollars are generally spent in the community and re-circulate to local businesses and residents. Energy efficiency and conservation measures can reduce the need to build large scale power plants. Such facilities are expensive and may cause utility rate increases. Encouragement of the development of local renewable resources. Such development could create local jobs and provides local sources of electricity. Also, an Energy Element could encourage the development of smaller power producing facilities if deemed necessary that meet local needs. Development of energy resources often raises environmental concerns related to air and water quality, resource use, and hazardous materials. In general, the environmental benefits of adopting an Energy Element can include: · Residents who live in a compact community tend to drive less (or at least drive shorter distances) because services are closer. Likewise, it is easier to establish convenient bus service in a: compact community. Both of these actions will lead to less traffic and enhance air quality. · Energy efficiency and conservation measures encourage residents and businesses to use less natural gas and electricity. Most power plants in California rely on natural gas or oil as fuel. With decreased electricity use, air quality will improve because less fossil fuels are burned. The need to build large power plants cab de deferred or avoided, thereby avoiding environmental impacts associated with those plants. ·Using renewable fuel resources, such as hydroelectric, solar, and cogeneration, will decrease fossil fuel consumption or improve energy efficiency. · Land use strategies that encourage a compact community in existing urban areas also act to preserve open space and agricultural land. The scope and content of a General Plan Energy Element is highly dependent upon the needs of the City of Dublin. However, because of its pervasiveness, energy is usually addressed comprehensively according to demands and supplies in all major sectors of the community. Table 5, below, lists some of the topics that an Energy Element may address. This is not an exhaustive list, but it gives an idea of the range of topics that an Energy Element may include. City of Dublin April 2, 2002 Page 23 TABLE $ ENERGY ELEMENT TOPICS Land-Use planning Renewable Energy Development · Compact development · Solar systems · Solar access protection · Geothermal district heating · Transit orientation · Wind Power Transportation · Biomass production · Alternative fuels · Distributed generation facilities · Ridesharing · Renewable energy development incentive · Pedestrian and bicycle facilities programs Construction Materials Building Efficiency · Low-energy materials · Day lighting · Indigenous materials · Heat recovery · Recycled and reused materials · Thermal storage Energy Facility Siting Local GOvernment Operations ::"· Resources extraction · Energy-efficient vehicle fleets ? Fuel production/storage/shipping · Public building retrofits · Electric generation/distribution · Water conservation Emergency Preparedness · Low-energy wastewater treatment · 'Emergency power generation Source: California Energy Commission, 199724. In addition, the development and research leading to an energy element for the City of Dublin should include: · Thorough analysis of past, current and projected local energy resources, demand, supply, and distribution patterns; · prOjected growth, future regional land use and anticipated energy requirements; · Identification of and background information on key energy issues affecting the City of Dublin; · Examination of the interaction among the various General Plan elements, zoning, and energy strategy and need to integrate energy planning into other General Plan elements, e.g. transportation, land use, air quality; 24 California Energy Commission, 1997. Energy-Aware Planning Guide. Chapter 3: Creating an Energy Action Plan. Sacramento, CA. July 1997 City of Dublin April 2, 2002 Page 24 Definition of the role of the City of Dublin in the energy strategy and energy infrastructure planning; Assessment of energy supply altematives for local energy users (e.g. Imports, Distributed Energy Generation, efficiency and Demand Side management); · Identification of preferred options, needs, opportunities, and priorities; and Effective communication and public participation strategies which will inform public constituencies, enlist public support and enable the City to gain popular acceptance of why sound energy planning is important for future economic growth, stability, and sound development. WHAT OTHER COMMUNITIES ARE DOING The City of Dublin is not alone in its interest in potential alternatives to its current electric system. Alan Richardson, executive Director of the American Public Power Association (APPA) stated in a 2001 interview with the San Francisco Chronicle, that APPA has "seen a considerable increase in interest" in public power options as a result of the energy crisis2s. Within cities and counties all across the State, city and county councils, Citizen action groups, and industry representatives are currently engaging in the public versus private power debate and attempting to reach solutions that afford greater local autonomy, service reliability, and rate stability. There are currently over thirty communities in Califomia which are in the process of examining various public power alternatives. Some of these communities include the cities of San Francisco/Brisbane (as previously mentioned), Davis, Berkeley, Corona, E1 Segundo, and Fresno. The Cities of San Francisco, Brisbane, and Davis have all conducted municipal utility feasibility studies and have taken the first steps towards establishing a municipal utility, while Berkeley, Hayward and E1 Segundo have only taken preliminary steps to explore the requirements of such an undertaking. Thus far, none of these communities has been successful in pursuit of public power. The legal threats/challenges of the IOUs and a lack of fiscal resources and commitment have contributed to the failure of these attempts. However, two Southern California Cities, Cerfitos and San Marcos, have both recently joined a group of Southern California cities (Anaheim, Burbank, Colton, Glendale, and Pasadena) who are taking action to provide for a clean and efficient electricity resource through development of the proposed 250-megawatt Magnolia Power Project. This new, natural gas-fueled generating unit will be sited in Burbank, and be available as soon as the second half of 2004 to provide local, reliable energy to these Southern California cities. These cities, except for Cerritos and San Marcos, currently are served by municipal utilities with their own electric generating resources. However, in 1994 the residents of San Marcos authorized the formation of a municipal utility when they approved its City Charter by an affirmative vote of 68%. In August 2000 the City declared its energy independence by implementing the formation of a municipal utility and in April 2001 adopted a four-part energy strategy which includes: conservation/public awareness; community aggregation; formation of strategic partnerships; and generation opportunities. In October 2001 the City named its municipal utility "Discovery Valley Utility" and is currently pursuing generation opportunities through 25 Burress, Charles, 2001. Public power is looking appealing cities starting to eye municipal ownership. San Francisco Chronicle. February 12, 2001. City of Dublin April 2, 2002 Page 25 'participation in the Magnolia Power Project. Discovery Valley Utility is currently without an established operating utility infrastructure and is not yet serving customers.26 The City of Cerritos is still in the beginning stages of forming a municipal utility, but the City is preparing to serve the electricity demands of its residential and business communities. To further these efforts, Cerritos is participating in the development of the Magnolia Power Project. With the goal of providing a stable and affordable supply of electricity, Cerritos intends on developing a diverse portfolio of power to be delivered as competitively and economically as possible. Other communities such as San Diego, San Luis Obispo, Sacramento County, San Jose, Emeryville, Siskiyou County, and Portland Oregon, have undertaken General Plan Energy Elements. Energy planning efforts in these communities have been successful in achieving increased energy efficiency goals as well as promoting the conscientious nature of these communities. CONCLUSION Most experts agree that the most critical stage of the ongoing energy crisis will subside within 2-3 years. In that period, a significant amount of new and highly efficient generation capacity will be coming on-line, certain transmission system bottlenecks will have been alleviated, and additional gas infrastructure improvements will be underway. In particular a large number of electrical generating facilities, both instate and in neighboring states (in fact in California and the neighboring states of Arizona, Nevada, New Mexico, Oregon and Washington some 85 large power plants are either under construction or proposed) will be on line or nearing completion. In fact nationwide generating capacity will increase by more than 30% by 2008. At the same time demand is expected to grow by only about 19%. This substantial growth in capacity would generally be expected to create the necessary slack capacity so that prices would remain competitive and customer demand can be met. However, there are three factors, which could still hamper free and competitive energy markets in the U.S. and particularly the West. Number one, given the number of power plant proposals and demand projections a large portion of the proposed plants might not be built. Number two, even if the interstate gas pipeline expansions occur in their entirety or in large part, both upstream demand and the continuation of intrastate pipeline bottlenecks could keep the gas delivery system from creating enough slack capacity so that pricing remains competitive. Third, the large number of plants being planned outside of California might not be able to send significant amounts of energy into the state due to major bottlenecks in the western and California electrical transmission system. Even with the 30+% growth in generating capacity to be online by 2008, during the same timeframe actual transmission capacity is expected to decrease by 12%. This decrease in transmission capacity is a result of the lack of current plans to upgrade the regional transmission grid and to remove local pathway bottlenecks in California. The system to plan and pay for transmission upgrades still resides with the electrical utility companies which have shown a great reluctance to support transmission upgrades due to costs and providing increased market access to competitors. So while energy availability looks considerably more promising in the future than it does today, with a concurrent reduction and stabilization of prices due to general slack capacity conditions, transmission bottlenecks could continue to keep available electrical supplies out of the state with the attendant volatility in prices and supply. As a result of the uncertainty in California's energy system many communities, including the City of Dublin, are looking at ways to take control of their energy futures. In this Technical Briefing Paper, 26 Southern California Public Power Association, 2002. www. scppa.org City ofDublin o'~/ ~ ~' April 2, 2002 Page 26 we have presented three options that are theoretically available to the City of Dublin, which each provide varying levels of risk, control, and reliability. Forming a municipal electric utility system offers an effective defense against price spikes, an unstable market, and the negative effects of the California energy market and the deregulation process. However, as previously discussed, the process of municipalization is a complex, expensive, time-consuming, and risky endeavor. It is our recommendation that the municipalization process not be undertaken without full City Council and public support. At this time, the City has already undertaken some of the initial steps of investigating municipalization and may wish to further explore its options by beginning the process of determining feasibility. This next step would involve a preliminary look at the technical, legal, and financial constraints of forming a municipal utility, but would not constitute a full feasibility study as described above. The results of the preliminary constraints analysis would help determine if a full feasibility study should be pursued. Should the City wish to pursue this next step, ESA would be happy to provide the City with additional technical assistance. The second option available to the City, the formation of an ESP, while theoretically feasible, is not currently an option that is legally available to the City and has therefore at this time has been eliminated from further consideration. If at some point in the future, legislation is adopted re-instating direct access, it could provide the City with a means of providing stable, lower-cost electric rates to its residents and businesses. The third option is the establishment and adoption of a General Plan Energy Element. An energy element will provide the City with a low cost risk-free means of assuring some measure of local control over its energy future, while promoting a cohesive community that supports both the environment and public involvement. An energy element will help the City prepare for future unforeseen occurrences in California's energy future. Should the City decide to pursue this option, ESA has a qualified staff of planner's and energy specialists who would be more than happy to assist the City in crafting a vision of its energy future (See Appendix B). We hope that the information presented in this memorandum is useful to City staff and decision-makers in evaluating electricity reliability options for its residences and businesses. Should you have any questions or require additional information, please do not hesitate to call. APPENDIX A LIST OF ACRONYMS APPENDIX A LIST OF ACRONYMS ' AB 1890 Assembly Bill 1890 AC Alternating current APPA American Public Power Association CAISO California Independent System Operator CAPS Coalition for Affordable Public Services CDWR California Department of Water Resources CEQA California Environmental Quality Act CPUC California Public Utilities Commission CTC Competitive Transition Charge · DC Direct current EHV Extremely high voltage EIA Energy Information Administration ESA Environmental Science Associates ESP Electric Service Provider FERC Federal Energy Regulatory Commission IOU Investor-Owned Utilities kV Kilovolt kWh Kilowatt hour LAFCO Local Area Formation Commission MUD Municipal Utility District Muni Municipal Utility MWh Megawatt hour PG&E Pacific Gas and Electric PX California Power Exchange RTO Regional Transmission Organizations SCE Southern California Edison SDG&E San Diego Gas and Electric SMUD Sacramento Municipal Utility District UDC Utihty Distribution Company APPENDIX B QUALIFICATIONS OFTHE PREPARERS APPENDIX B QUALIFICATIONS OF THE PREPARERS John E. Forsythe, AICP - Senior Project Manager. Mr. Forsythe is a technical specialist and senior project manager with over twelve years of progressively responsible experience in the management and preparation of CEQA and NEPA compliance documents for a wide variety, of projects throughout the west. In California, Mr. Forsythe has prepared all phases of CEQA and NEPA documentation for a variety of land development activities, recreational, residential, industrial, and commercial projects as well as energy, utilities, mining, and water resource projects. As a technical analyst, he has substantial experience in of land use planning and compatibility issues, and has completed numerous multi-faceted socioeconomic studies for large-scale projects. In his role as a project manager, Mr. Forsythe's strengths are focused on the abihty to scope, plan and implement comprehensive environmental planning projects, coordinate the efforts of technical teams and numerous subconsultants, and lead agency and stakeholder consultation efforts. Project work related to energy projects, including generation and transmission, has been one of the key focus areas for Mr. Forsythe in recent years. Prior and' subsequent to his involvement in 1996 with the evaluation of the CPUCs preferred policy for restructuring of the California electricity market, Mr. Forsythe has been involved in a number of merchant power plant proposals in response to deregulation of the industry. His involvement in energy projects has included strategic and technical advisement, siting studies, permitting, licensing, and impact assessment tasks for private interests, the Federal Energy Regulatory Commission (FERC), the California Energy Commission (CEC), the California Public Utilities Commission (CPUC), the Bureau of Land Management (BLM) and coordination with numerous other resource agencies. In addition, Mr. F°rsythe has been involved in a variety of energy-related policy level projects 'and support to local governments considering energy reliability issues. Examining preliminary feasibility of the formation of municipal utilities, in light of the energy crisis of 2000-2001 in California, has also recently become discipline area strength. Mr. Forsythe received a B.A. in Environmental Studies and Urban Planning from Sonoma State University, Rohnert Park, California; and a M.C.R.P. from California Polytechnic State University, San Luis Obispo. He is a member of the American Institute of Certified Planners, APA, AEP, Urban and Regional Information Systems Association, and Urban Land Institute. Dail Miller - Director. As the Director of ESA's Energy and Information Utilities Group, he has overseen several of ESA's largest and most complex projects including the analysis for the California Public Utility Commission (CPUC) of the divestiture of power plants and associated assets by San · Diego Gas and Electric Company (SDG&E). Mr. Miller is an economist and project manager specializing in socioeconomic and environmental analysis of energy and power generation projects, linear infrastructure projects, econometric modeling, environmental compliance, and public process. His expertise is derived from more than 19 years of experience in the U.S., Europe, Central America, the Caribbean, and the Pacific Rim. He has performed statewide wind energy assessments for the New Mexico Energy and Mining Department; siting of wind energy farms in California; managed various USAID wind turbine siting programs in Honduras, Panama, and Central America; and tested and evaluated vertical axis turbines for the U.S. Department of Energy's Sandia National Labs. Mr. Miller received a B.A. in Economics from Old Dominion University; and a M.A. in Latin American Studies and Economics from the University of New Mexico. He is a member of the American Planning Association, Association of Environmental Professionals, and the American Economic Development Council Sarah Yacitel - Associate Planner. Ms. Yackel is an Environmental Planner at ESA with 4 years of experience in environmental and land use planning. Ms. Yackel's comprehensive knowledge of development planning in California includes a solid understanding of city master plans and general plans; siting and environmental constraints analysis; and permitting pursuant to local, state, and federal agencies. She also has been involved in all phases of California Environmental Quality Act and National Environmental Policy Act documentation for a variety of land development activities including recreational, residential, redevelopment, port development, industrial, commercial, utilities, mining, and water resource projects. She understands the technical and regulatory issues and public concerns associated with many environmental projects in California. Ms. Yackel has been involved in a number of energy-related policy level projects and support to local governments considering energy reliability issues. Ms. Yackel has assisted in the preparation of preliminary feasibility assessments considering municipalization and power aggregation options. In addition, Ms. Yackel has assisted in the preparation of environmental documents for the CPUC. Ms. Yackel received a B.A. in environmental planning and political science from the State University of New York, Binghamton. She is a member of the Association of Environmental Planners, and the Association of Environmental Professionals.