Recommendation to receive and file a presentation on the status of the Long Beach Community Choice Aggregation Feasibility Study.  (Citywide)
I'm sure that Nancy is is watching and a great honor I think for for for a great a great mayor. With that, we're moving up to item. 27. Report from Energy Resources Recommendation Receive and file a presentation on the status of the Long Beach Community Choice Aggregation Feasibility Study Citywide. Mr. Mayor, council members. This is a report for the. It will be provided by our energy resources director, Bob Dole, and also manager Tony Foster. Yes. Thank you, Pat. I'll turn it over to Tony Foster. He is our business operations manager for the department. Good evening. Mayor and Council Members. On October 23rd, 2019. Council authorized commencement of. A feasibility study for the establishment of Community Choice Aggregation, also known as K in the city of Long Beach. On that date. Council also requested. That we return to present a status report. On the study's progress, which is the purposes of our presentation this evening. This feasibility study is to evaluate the. Economic and technical. Components of cooperation to assist Council in making an informed decision of whether to proceed in the formation of K in Long Beach. To undertake this feasibility study, we have engaged three. Highly experienced consultancies and three. Subcontracted consultancies. Each specializing. In critical. Aspects of analysis. We have with us this evening Mr. Mark Fulmer, principal of M RW and Associates, the lead consultancy overseeing the methodology and integration of the analysis in our study. Mr. Former's expertize lies in a deep understanding of. Wholesale power markets. In California rate making at the California. Public. Utilities Commission and CCR formations. Mark and his teammates have completed feasibility studies for Alameda and Contra Costa counties. They have. Performed peer review and risk assessments for numerous counties. Cities. And towns as they consider CA formation. These include the City of San Diego. Santa Barbara County. San Mateo. County. Santa Cruz. County. Sonoma County. And numerous cities and towns considering. Joint joining marine clean energy. Furthermore, numerous active cases in the state. Including Marin Clean Energy. Sonoma, Clean. Power. Lancaster Energy Choice, Clean Power, S.F. and Redwood Coast Energy Authority, as well as the statewide K trade group Kalka, have been MWD clients and continue to rely on MMW for regulatory advice and insight. I present Mr. Mark former. There. Thank you, Tony. What I'm going to do tonight is quickly walk through the status of the report that we've been working on and some of the issues that we faced and how we're addressing them. First, a quick background on the Community Choice Aggregation program. It allows cities or other cities, counties or other jurisdictions to effectively buy power on behalf of all of the citizens in their jurisdiction. There are various motivations for doing this, including having a greener portfolio, working towards meeting climate action plans, as well as providing lower rates than they would with their host utility. To be clear on what exactly the Kia services are is shown here at the far left is the standard what we would call an investor owned utility would be Southern California Edison. They purchased and procure the power or generate it using some of their own power plants. They moved the power through their own distribution network. They own the wires and all those types of equipment and provide the basic customer service, which is often metering and billing and interface with the customer as they move and have other types of issues. A CCAR takes that takes over only that first part. They would purchase and procure the power from their chosen sources. Southern California Edison would remain the owner and the operator of the distribution and transmission systems, and they would provide the metering and billing. At the far end of the spectrum would be something like you have it, your neighbor to the north of Los Angeles, where the municipal agency does all of those services. So we're looking at that middle option. The primary goal of the study is to forecast the costs and identify up. Thank you. I turn my own page, but not yours to look at the costs and benefits and risks with forming a K program here in the city of Long Beach. So far there was a number of data type issues that are key to the modeling that we worked to overcome. And moving forward will be looking at some of the other key pieces that you all would be interested in. From the general macroeconomic benefits to how it may impact some of your key large customers. The bottom line is that we will be presenting the financial benefits and risks of CCR formation so that you, as the decision makers , can lead your community forward in whatever direction you feel is appropriate. A quick overview of our team. M RW As the prime contractor, we will be doing the financial modeling. We'll be getting input from the others here, including specialists in the wholesale power markets and predicting pricing at that level. Another group that's working with crunching the data that they can get from large customer. There are loads are a group that's looking at biggest that is looking at geographically what the city looks like for renewable energy options as well as a group that specializes in doing macroeconomic analyzes, in particular understanding what the impacts of public investment projects are on the local economy. Some of the big challenges that we're facing are here. The first couple are really addressing the low data. In order to know how much this thing may cost, you have to know what you're providing, the number of kilowatt hours and when those are used. And that can be a challenge. Southern California Edison provides some amount of data, but not enough to get a a precise idea of what is being served. There are ways it or working around that that I'll talk about later. There are the it's a complex process. There are lots of moving parts. The key changing both as more and more cities do it, that causes other regulatory changes. And we're effectively in a moving river here. So that adds a level of challenge to us in the analysis. The things that we've been working on over the last few months are particularly a deal dealing with the data issues as will going to a little bit more data a little bit more. In a moment, we have what they call the smart meter gap, though the there's lots of great information on how people use their electricity due to improved meters, but that doesn't flow down to us. So working around that, again, data integrated into a to a system where everything is considered consistently and works and as well as tracking what the many changes are to make sure that we're completely up to date on the kind of regulations and requirements that would be facing when it began in the next couple of years. As. The next the near-term activities after that is actually getting the financial models completely populated and run and to start quantitative the risks. Now, what can go wrong and how does that actually impact the bottom line? In addressing the data there are we have a couple helpful things that have happened. First of all, I've been in communication with the. Clean Power Alliance, which is the K Group in Los Angeles and the rest of Los Angeles County and Ventura County. And they kindly provided some high level, aggregated, low data. That's better than we could receive from Southern California Edison for the large accounts. This is particularly important here. Effectively, 1/10 of 1% of the customers consume nearly half of the load. So there's very few. There's a small number of very large customers. And knowing what they are interested in, what they want and how they use their electricity is critical in assessing the okay for Long Beach in particular. Other cities don't have this challenge. They're more balanced in their load. But here in Long Beach, we have that challenge and we were working to work around that. We're doing that by reaching out to these customers, talking with them, having them provide some of their. So that we can better incorporate their preferences and their loads into our analysis. Beyond that. Once we have a good eye, once we know what load is being served, we have to think about how that's going to change over time, in particular as more people put solar on their rooftops. That changes what has to be provided. From that, you have to figure out what type of electrical resources they will need to be buying, what type of car with, what type of resources. And then you have to add up those costs along with the cost of operations and compare that to what the service would cost if the customers remain with Southern California Edison. And that's the bottom line of the financial analysis, is that comparison. Now, in addition to that, we will undoubtedly have great uncertainty in a number of key factors, and we need to explore that to see how robust, whatever our results are and then where the risks in sensitivity analysis are. And then lastly, once we have a preferred scenario, we can provide that to the macroeconomic team to see what type of implications for economic development for the city that might mean. This just summarizes what we're doing. I will leave it to you to look at the individual boxes and not burden you now. But there's a lot of pieces going on and you can see. A team that had very specific expertize to be able to pull this off. So this is just a little preview of some of the load analysis. Is the load on a typical summer day? You can see along the bottom we have from our one two hour, 24, 24 hours in a day and the total amount of kilowatts that the city would be using with the different customer classes. And there's it's more this is more just to give you an idea of the kind of analysis we need. We have we will need to be doing these kind of charts for literally every hour of the year to understand what type of power we would need to be buying. A big piece that can impact the financial analysis, but very much impacts the risks. And some of the more or less quantifiable elements are some of the regulatory changes and the market changes, in particular. The first bullet there, the legislature and the other regulatory agencies, the California Public Utilities Commission and the California Energy Commission. Are changing the regulations and rules as we sit in as we go forward. Recent changes are to a particular fee that all customers have to pay. That's being reformed and is a subject of great analysis at the Public Utilities Commission. There's also requirements for kids to do some very specific type of planning and purchasing. And while that is helpful for the state and for the planning, it also puts a fair amount of constraints on the CCI as they think about how how the resources are going to be acquired and what type of resources. There's also various other things going on. While, for instance, the Pacific Gas, the PGE bankruptcy doesn't necessarily directly affect what's going on in Southern California, there could be precedents that are set in the bankruptcy court that could ripple through here that we have to be cognizant, cognizant of as we move forward on this. Some of the risks that we're that we're studying and we'll have to flesh out are listed here. In particular, we will we will undoubtedly not be able to precisely predict what the power markets are going to be in 2032. So we have to take that into account and run scenarios with different pricing to see how the costs change versus what the costs for Southern California Edison would change under those same scenarios. You have to have a certain amount of money to start up. That is, you have to make investments before you start providing any power. And before you start getting any revenue from any of the customers. For the most part, those moneys are generally provided by the agencies that are supporting the CCI. They are a short term loan that gets immediately repaid once revenues start coming in. So it's a risk to the organizations that are supporting the CCI, and it's not a not necessarily a trivial one. Can I point out that there was one group, the Desert Community Choice, which covers the Coachella Valley and Palm Springs. Were to the point where there were within weeks of launching and beginning to serve. When they chose to delay for 18 months. So effectively that loan that was made to get them up and going now has a pay gets paid back 18 months later, assuming that they do indeed move forward. So. It's it's something that can get glossed over. But there's a number of these things that are that that haven't really necessarily been a problem for a lot of kids, but can potentially be. And you have to keep that in mind. Another quick one that I want to highlight, Humoresque. That is, customers join and start taking service and then three years later leave for a normal car. That's probably not too big of a deal. But for here, because you have such a concentration of load among a small number of customers, that could be a significant risk. Again, 1/10 of 1% of the customers account for nearly half of the load. On the plus side, there are a lot of kids and they're getting smarter and working together. They're understanding what they need to do to manage the risk of energy procurement. They're doing a lot of innovative things that can be learned that we can learn from. And were you all to pursue this? You all would be able to learn from a lot of collaborate, a lot of collaborations between the keys and the utilities. They are not at all adversarial and can be can work hand in hand very well. An interesting point to also consider is. The fact that you're considering it now in the middle or early part of 2019 with implementation in the early 2020s is different than the large rush who formed KAS. And we're considering it five years ago and, you know, 2013, 2016 timeframe. There's a lot of changes. The one that I'll highlight is the second bullet, which is Senate Bill 100. Effectively, a lot of communities were excited about CCI because they had very aggressive climate action plan goals and said, this is a great way where we as a city can reduce our carbon output well beyond what the state is saying. Well, the state's noticing that people can do it and they are accelerating the whole the state's electricity GHG emissions mandates such that with the goal of being carbon free by 2045 and interim goals that are also very aggressive. Thus, if your goal was to reduce greenhouse gas via the formation of the K, you'll still do that. But it'll be four fewer years and the amount of savings is going to be reduced simply because the baselines moved. The other guys are going to be doing it well also. So things are things have changed. And when you're thinking and talking with people who were in cars that formed a couple of years ago, the landscape can be a bit different. Lastly here, this is a simplified chart showing the tasks that we're working on as well as the ones that we've completed. The first few tasks are generally data analysis and gathering, particularly the load data. You can see 1.2 is for getting the data from the large customers. That took a while to get underway, but we're now underway and getting good data. And then over the next few months, a lot of it will be the detailed financial modeling and with the final part being the macroeconomic analysis and the reporting, with respect to the reporting, I would envision that being an iterative process with the city staff as to make sure that we're providing the information that you all need to make a good decision for the city. At this point. I'm going to turn it back over to Tony for any questions. All right. Thank you, Mark, for the thorough presentation. This point, this concludes our status report and we're available for any questions. Great. Thank you for the great report, Councilmember Pearce. Thank you. I also want to thank you for the great report. I know that this was just a step to what you outline is coming back in August. I did have a question on the timeline. If if the city did decide to move forward with the car option, what is the timeline to do that for 2021? We would probably still be in line with that. If council did make the decision to move forward with this, the next step would be to conduct a business modeling effort because we still need to understand would it be more advantageous to develop our own form of JPA, join one of the existing ones? Or, you know, there's another handful of options. So the business model aspect would follow suit with that. It typically doesn't take as long as the feasibility study. So that would put you some time into early 2020. But that wouldn't preclude us if we made the decision to go forward with filing the initial implementation plan data with the CPC pending. You don't have to disclose at that time whether you're going to go forward with joining want or whatever. So it would still be feasible. Great. That's a pretty short process, as I understand it. I had a question just and I don't want to get into a lot of questions because we can do that at a later time. But I did have a question about the our users and understanding at San Diego seems like a similar city to me when I think about they have a port, an airport, things like that. Are we comparing usage to other large cities like that? Because it seems like they would have the same issues. Each city has a unique profile. I've done so. I did the work for the City of San Diego in reviewing their feasibility study and their while, they also have a number of large users. The situation is a bit different in that they are already taking power from someone other than their host utility. San Diego Gas and Electric and wouldn't be considered part of the CAA work to form so that risk of volume. Loss isn't an issue for San Diego because it's not there to begin with. Looked at also the city of San Jose. And again, they do not have. They've got some amount of industry, but not nearly what we see here in Long Beach. It's unique from the cities that I've examined and looked at. And if I if I could add really quick to that, too, the single largest consumer typically of electricity is the movement of water. We've got our esteemed colleague over here, Mr. Gardner, in his department. But I will tell you that the operations offshore move a lot more water than he does, and that is the single largest customer of Southern California Edison CRC. So we have two big users of moving water, which are the largest consumers of electricity. So that is really one of the unique features. And we also have the port. The port is moving to an all electric port and that load has to be built into this and and be part of the comprehensive study. And so there's there's three big consumers right there that most cities do not have. Right. Right. And I had assumed and I thank you for sending me the list. I mean, I know I've had conversations with the port as well. And, you know, I recognize that we're in the very early stages of this and there's going to be a lot of data that we can kind of pull over and look at . But I appreciate being able to compare our city to other cities and understanding what have they what have they done with those larger users? How can we, you know, exclude or make sure that we include them? And is there a timeline that we can do that in? And so I know you guys are doing all the work. I appreciate the report. I appreciate, you know, there's a goal of 2021 that I kind of have a mental cap on and that we're making those steps forward. So I appreciate this today. Thanks. Thank you. I was going to reserve my comments and allow Council Member Richardson to queue up. No, he had a couple of questions. Thanks, Councilman Austin. I think that was a way to tell Stacie to go back to her seat. You're not slick, so, you know, great presentation. Thank you so much. A lot of information will take some time to process. I guess my general sentiment is I support this generally. I need to have a clear understanding of when our decision point will be. And and and simply there was a lot of conversation about whether or not there were there are risks. And we're not at that point at that point yet. So at what point will we have a clear understanding of when we will have a risk? We will understand those risks. Yeah. Our hope is that when we make the final presentation to council that it would include a discussion of those risks, potentially what they could incur. I think it needs to be understood that forming a CSA is a long term financial obligation for a city. This is this is very serious because these contracts are 20 to 30 years out many times, and billions of dollars are involved. So those need to be understood because they are long term decisions. And I think that will be fleshed out with the pros and cons of of all that presented. And that will be enough, I believe, for you to make your decision. And when you bring that back, we'll have a recommendation. It is our intention to have a recommendation. Okay. And and what was the timeline one more time. When we get the report in late August? I would think there would take some time, probably a month to to formulate some things. And then I think what we need to do is have a discussion is should there be public outreach on this? We're making decisions that the taxpayers are on the hook for for the remainder of these contracts, but we really haven't involved them in the process. So I think that should be part of it as well, that we get out in front of them many times. They're not as informed about this. They they if you form associate they by default they go into it. But I think there probably needs to be some kind of communications effort. And so that would take probably a month if we scheduled those two. So now you're looking into the October-November timeframe, which still should give us enough time that should we make that decision to go forward, you would be able to we would make a decision whether we file the implementation plan to move forward from. Just, say, a month of public outreach. So I think all the rest of departments can learn from you if you can get that done. Well, that's a very aggressive. But if we start scheduling them in early August and getting them set, we might be able to do that. But I don't know. It may take longer. You're the best way to how we get in front of your constituents to present the data so that they are informed about what a case is , what it means to them, should we go forward with one and the ramifications for generations to come? Sure. So the last thing, two things I would say I would want to understand the other case that that was established, what level of public engagement those agencies did. And then secondly, you know, the big opportunity for me separately from being able to select and determine the level of clean energy your community utilizes is really the economic opportunity I'd like to see when this comes back, you know, some some real information on tangible examples of creating some economic inclusion opportunities by utilizing this. I know that some CCAS are looking at this, but I'm you know, I'm thinking about what San Francisco is doing around their utilities in general. They have a whole community benefits plan built out around their their water, their gas, their utility program. And so there's an opportunity here, given we have some of our own utilities. But separately, if we're going to begin this conversation about SCCA, really the driver should be how to create more economic opportunities here locally for the people who live here. But thanks a lot. Thank you for the report and thanks. Go. Tony Foster. Councilman Gonzalez. Yeah, Bob. Tony, and thank you to our consultant as well. I really appreciate this because I was given a briefing two weeks ago and this is a very thorough report, although it's we're still waiting for the full feasibility study. It's nice to get this update in the meantime. And specifically, I like, you know, obviously that we included everything in this, specifically the regulatory changes and state mandates because we know that, you know, they're hammering down hard on an it's apologies to get it together and create ambitious goals for greenhouse gas emission reductions. So I just wanted to say thank you for this. I know there will be a lot of questions. This is a very thoughtful report, and I know we have a lot more to come and I'm looking forward to more community input when we get to that point. If we get to that point. And also just continually speaking with each of you about any other updates that we have in the interim. So thank you again and thanks to our friends at IBEW and all of our community partners for being here. They've been a part of this process and we thank them as well and Jeanine Pearce for bringing this forward. You got it. Thank you. I just wanted to say I appreciate your information related to community outreach. It's really important to the neighbors of my district, and I would not feel comfortable going forward until community outreach was deployed because our neighborhoods have so much at stake. Thank you. Councilmember Pearce. Okay. Well, thank you. I just wanted to thank the staff for the great presentation. It's so really encouraging and gives us a lot of confidence knowing that we have a great consultant on the honor on the job here, an experienced consultant that has actually studied these and implemented these cases in other municipalities throughout the state . I'm looking forward to understanding the options in front of us. One of my questions is how is your Long Beach unique from from the other cities? And I think you guys have answered that. And I do recognize that that our uniqueness may, may present some challenges, but also some opportunities. I want to just point out that the city is committed to exploring CCAS. And, you know, the last several months and the staff resources that have come and gone into doing so is evident of that and this report as well. Just the question, Mr. West, what are we committing toward the feasibility study? What was the question? Well, in terms of financial resources, what is committed toward this feasibility study? Mr. Dow. Yeah. We had a slide that it showed that council authorized us a $300,000 amount with a $50,000 contingency. But our projections are at this point in time, that will come in at approximately $285,000. Okay. And just just really quickly understanding that that the cars are really a changing dynamic in terms of utilities in California. How are the the investor owned utilities adjusting and responding to to this change in dynamic in any way? Well, there's a couple of things. The big the big concern for them is the sharing of the cost. So you saw the power charge and indifference adjustment, the charge the commission has provided so that the financial impact for the fewer customers that remain on the IOUs don't get burdened with those longer term contracts. Those costs get pushed over to the case. So their concern is really on that side of it. They're kind of net neutral. There is a law also where they they have to hold back on any opposition. They really don't state opposition one way or the other from the IOUs. So you won't get any comments from them regarding that as well. Sempra down in San Diego did form a separate little unit that's funded entirely with shareholder moneys, no ratepayer monies. So they have a little campaign. But as you might know, both the county and city of San Diego made their decision to go to the next level with their case, and they have moved ahead with that. So the up in the PGA planning area, it remains to be seen. They're undertaking a lot of change right now. I will tell you that Edison, the service territory where we reside in with SoCal Edison is our provider, is very different than the other two. Edison has been more consumer friendly in that sense that their rates are tougher to beat. I believe the county's program, when they went through their difference in rates, was somewhere in the neighborhood of 1 to 1 and a quarter percent lower than what you could get from Edison. So they weren't as aggressive as some of the ones, the early ones, it all started up in PG territory because of the rate structure that was evident up there. So there are a lot of challenges, but most of the times the utilities are just taking a neutral position on this and it's really hard to read them one way or the other. So are they buying or pursuing different sorts of energy, different types of energy sources? They still have the same mandates that the state has put out there. And depending on how you describe the types of power that they get, there are well, they have to meet the established dates that have been set forth in the state laws. Okay. And then my last comment would be just I agree with my colleague's point that regarding the community outreach, I think that is going to be an essential part of this this process. Probably the most important part of this process, because I would venture to guess that most of our residents are are clueless about the the benefits or any relationships to AIDS. And so I think there's going to have to be an education process, but also a robust community outreach process. And so hopefully, you know, your budget savings can go toward toward that. All right. Thank you. Councilmember Pearce, you get the last word. Thank you. I just wanted to comment on the community outreach. I know before I agenda was this, that there was some community outreach done just by community organizations that were talking about what is a K. And so I know you're here and you don't plan on speaking tonight, but as much as we can before the feasibility comes out, just educating just on that basic what is a K and then whenever it gets here that staff can really make sure that we spend a month, maybe two, God forbid, a year, please know, just going out there and educating on the feasibility study itself and doing some workshops around that I think would be really fantastic. So one is educating just basic what is a K? And I think from the conversations I've had with with Edison, they've been good conversations, you know, and that they've said to me, look, we just deliver it, you know, and I don't expect to have any behind the scenes pushback. I know that that happens sometimes, but I want to apply done the work to get us to this place and think for your work. And thank you, counsel, as well. So appreciate it. So is there any public comment on this? Yeah. I'm sorry if you guys weren't wanting public comment, but at Children's Day USA this year we're launching an a comprehensive green energy initiative. One of our partners of the initiative is Greg Stewart. They've developed a a what is a geothermal energy system that as a second benefit, decontaminate water. We're actually proposing in the PGA territories and the recent fire damage is to help restore some of those cities. If you come to Children's Day, I would love to be able to has the engineer, the scientist that actually developed the Stirling engine will be actually I can have him be at Children's Day to talk to your people if you'd like to. Thank you. Please, can we have two more for public comment to close the speakers list? So we'll have our next two speakers. Then the speakers list is closed. Good evening, mayors, city council members and city staff. I'm Alan Stephens, resident of District four and a member of the Climate Action Group Long Beach 350. Thank you very much for tonight's presentation. We Long Beach 350 strongly believe in community choice aggregation because it allows for local control on energy issues. That means we as a community can have a say in energy priorities, such as building a portfolio of clean, renewable energy sources to reach net zero carbon emissions quickly. That has huge long term benefits. Renewable energy projects can provide good green and union jobs, allowing folks to live and work in their community, which is our city, and while strengthening our local green economy when implemented to serve our community rather than private investors, a CCE can address, assist and empower the vulnerable sectors of our city in which poor air quality is a fact of life for way too many residents when it shouldn't have to be. During this time when the city is working on its climate action and adaptation plan, I hope you'll consider implementing Community Choice Energy as a necessary part of the solution to reduce our carbon footprint on a grand and fully possible scale while providing local jobs and securing our city's economy well into the future. Thank you. Thank you so much. Next week. Hi. Good evening. My name is So Connie. I am one of the co-founders of Long Beach Environmental Alliance and one of our alliance partners is Long Beach 350. So thank you for inviting me to be here. Unfortunately, I don't have any jokes to tell tonight, so I know, I know. I'm just so pooped. So I just want to say that we support Kay. I think it will help achieve our sustainability goals. It will help improve jobs and financial benefits for our local economy and have us to use clean energy resources. Okay, we'll invest it. Well, if we invest it, it can provide local jobs programs and economic development and also improve the resiliency of the grid within our city. It is your job to improve our quality of life, so help us make the right decision by supporting CC. Thank you so much. Thank you. With that, we have a motion and a second. Please cast your votes. Motion carries.