HomeMy WebLinkAboutItem 7.1 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:
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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
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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
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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
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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
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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.