HomeMy WebLinkAboutORD-16-1368 (CCA-COMMUNITY CHOICE AGGREGATION)1
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ORDINANCE NO. 16-1368
AN ORDINANCE OF THE CITY OF HERMOSA BEACH, CALIFORNIA,
IMPLEMENTING A COMMUNITY CHOICE AGGREGATION
PROGRAM
WHEREAS, the City of Hermosa Beach ("City") adopted its Municipal Carbon Neutrality
Plan ("CNP") in February 2015; and
WHEREAS, the CNP identified the formation of a Community Choice Aggregation
Program by 2017 as a top priority for achieving its carbon neutrality goals; and
WHEREAS, Assembly Bill 117 and California Public Utilities Code Sections 218.3,
331.1, 366.2, 381.1, 394 and 394.25 permit the City of Hermosa Beach to establish a Community
Choice Aggregation Program.
WHEREAS, an initial feasibility study concluded that a Community Choice Aggregatiol3
Program would serve the City and provide benefits to include the use of renewable energy at or
above the required Renewables Portfolio Standard Level while achieving the goals of the CNP and
providing economic benefits to the City; and
WHEREAS, the City Council has determined that it is in the public interest and welfare to
establish a Community Choice Aggregation Program.
THE CITY COUNCIL OF THE CITY OF HERMOSA BEACH, CALIFORNIA,
DOES HEREBY ORDAIN AS FOLLOWS:
SECTION 1. The City of Hermosa Beach has been actively investigating options to
procure and provide electric power to its citizens with the intent of achieving greater local
involvement over the provision of electric services and promoting competitively priced renewable
energy.
SECTION 2. On September 24, 2002, the Governor signed into law Assembly Bill117
(Stat. 2002, ch. 838; see California Public Utilities Code section 366.2; hereinafter referred to as
the "Act"), which authorizes any California city or county, whose governing body so elects, to
combine the electricity load of its residents and businesses in a community -wide electricity
aggregation program known as Community Choice Aggregation.
SECTION 3. The Act expressly authorizes participation in a Community Choice
Aggregation (CCA) program through and by local city government.
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16-1368
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SECTION 4. Through Docket No. R.03-10-003, the California Public Utilities
Commission has issued various decisions and rulings addressing the implementation of
Community Choice Aggregation programs, including the issuance of a procedure by which the
California Public Utilities Commission will review "Implementation Plans," which are required to
be submitted under the Act as the means of describing the Community Choice Aggregation
program and ensuring compliance with various elements contained in the Act.
SECTION 5. Representatives from the City have developed an Implementation Plan
(attached here to as Exhibit A) that describes the formation of Hermosa Beach Clean Energy to be
implemented by the City.
SECTION 6. As described in the Implementation Plan, Community Choice Aggregation
by and through the City appears to provide a reasonable opportunity to accomplish all of the
following:
(a) To increase the amount of locally renewable energy available to Hermosa Beach citizens
and businesses.
(b) To meet the goals established in the Municipal Carbon Neutrality Plan.
(c) To provide greater levels of local involvement in and collaboration on energy decisions.
(d) To provide initial price stability, long-term electricity cost savings and other benefits for
the community.
SECTION 7. The Act requires Community Choice Aggregation program participants to
adopt an ordinance ("CCA Ordinance") electing to implement a Community Choice Aggregation
program within the jurisdiction of the local government agency.
SECTION 8. Based upon all of the above, the Council hereby approves the City
proceeding with the implementation of a Community Choice Aggregation program with the City's
jurisdiction, as described in the Implementation Plan in the form attached hereto as Exhibit A.
SECTION 9. If any section, subsection, sentence, clause, phrase or portion of this
Ordinance is held for any reason to be invalid or unconstitutional by the decision of any court of
competent jurisdiction, such decision shall not affect the validity of the remaining portions of this
Ordinance. The City Council of the City of Hermosa Beach hereby declares that it would have
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adopted this Ordinance and each section, subsection, sentence, clause, phrase or portion thereof,
irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases
portions be declared invalid or unconstitutional.
SECTION 10. This Ordinance shall take effect thirty days after the date of its passage.
SECTION 11. Prior to the expiration of fifteen (15) days after the date of its adoption,
the City Clerk shall cause the Ordinance to be published in the Easy Reader, a weekly newspaper
of general circulation, published and circulated in the City of Hermosa Beach.
SECTION 12. The City Clerk shall certify to the passage and adoption of this
Ordinance, shall enter the same in the book of original ordinances of said City; shall make minutes
of the passage and adoption thereof in the records of the proceedings of the City Council at which
the same is passed and adopted.
PASSED, APPROVED and ADOPTED this 13th day of September, 2016 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
City Clerk
Armato, Duclos, Massey, Mayor Fangary
Petty
None
None
of the City Councl R of the City of Hermosa Beach, California
APPROVED AS TO FORM:
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16-1368
Hermosa Beach Choice Energy
COMMUNITY CHOICE AGGREGATION
IMPLEMENTATION PLAN
51A,
STATEMENT OF INTENT
September 2016
Contents
1 INTRODUCTION................................................................................................................. 3
3
1.2 Statement of hilent.......................................................................................................................................5
1.3 Organization of this Implementation Plan......................................................................................5
2 AGGREGATION PROCESS............................................................................................... 7
2-,I Introduction... ............ ........................................... ................... ........................... __ ... ....................... _ ....... 7
2.Process of ASSgre(ation...............................................................................................................................8
2.3 Consequences of A grcgalion..................................................................................................................9
_.>.l Rat(' Inipacfs.............. ....... ....................... ................... ..,••.............................................. 9
2.3,2 kenctwable Energy 1nipacts..................................................................I....................9
2.3.3 Merry Ffficiency Impacls........................................................................................10
3 ORGANIZATIONAL STRUCTURE...............................................................................10
OrganizationalOvervic .................................................................
i,I C;cs.crnanc(�....................................................................................................I...........10
.i.1 2
maII'lgCIII e IIt... .,....... .............7.1
3,I.3
1'18C.IF C .................
.3.1.4
1�csour( E' Plar}nlllg and l'orccastin.................................................11
I'J'0('IriC Supi)ly rations... .... _ .................. ...... ................ ....... ...... .. � •
11
31,6
i.cic<ai E",nergy Proe;rarnq.......................................................•---•.... ......-.............. .....
12
3.1.7
budgut and Rate Setting.... . ........ -",+, .............. .................
12
�;.1. 8
ner Sera•ices.....................................................................................................
.13
I. J
k aI and I�ci;rllatOrt .................................................................
14
4 START-UP
PLAN AND FUNDING................................................................................14
4.1
Start-up Activities and Costs .......... ......................................................... -............................. .............
14
4.2
Staffing Repirernenls.............................................................................................................................15
4.3
Funding Requiremerr.ts................................
4.4
Financing Plan ............. ........................................................................................................... .....•.............
.15
4AJWorking
Capital ................. .................................................................... •.....................
15
4.4.12
Pro Forma .............. .............. ............. .... • • •............ .......................... ....
1.6
5 HBCE PHASE-IN.................................................................................................................16
5.1
Open Season Binding Notice of Intent..........................................................................................
16
5.2
CCA Enrollment Schedule....................................................................................................................
16
5.3
Customer Parlicipation Rates..............................................................................................................
16
5.4
Custorner Participation Forecast.........................................................................................................17
6 LOAD FORECAST AND RESOURCE PLAN...............................................................17
6.i Introduction ....................................................................................
6.2 Resource Adeg•aacy (Capacity) Requirements ......................... ....................... - ...................... ....... 18
6.3 Supply Requirements...............................................................................................................................19
6.31 1Zcjledvklk, Pori olio Strin(hird1�(�quirem(,,nls....................................................... 19
64 Resources-..................................................................................................................................................... 19
6.5 EnerXy Efficiency ............ ......... -..,.,....................... .....,..................... ,................. ..................... .................. 20
6.6
Demand Response.....................................................................................................................................20
6.7
Distributed Getlei-ation...........................................................................................................................21
7 FINANCIAL PLAN.............................................................................................................
21
7.1
Descril_rtion. of Cash. Flow Analysis .......................
7.1.I
Cost of CCA Program Operations ..........................................................................
22
7.1.2
Revenues from CCA Program Opergic)ns............................................................
22
7.1. 3
Cash Flow Aiialysis Results....................................................................................
22
7, i A
CC7A Program Impiernentation Pro C�orrna...........................................................
23
8 RATESETTING AND HBCE TERMS AND CONDITIONS ......................................
24
8.1
1"'n trodr r ctiun.............................................................................................................................. .............
24
8.2
Rate Policies.................................................................................................................................................24
8.2.1
Rate C ompetltnver-iess...............................................................................................
24
8.2.2
Irate Stabilih' and Reliabilit:l..................................... ......
25
8.2.3
FgLiitablc= Treatment of All Classes of Customers— ......................................... ...
25
8.2.4
CL15101nt I` Understanding................................................... —...... ........----.................25
8.2.5
RC'VC11L1 Sufficiencv.........................................................................I-- ..............
25
8.3
Net E7iLray Metering...............................................................................................................................2S
8.4
Disclosure and Due Process in Setting* Rates and Allocating Costs among
Pai-tict pants .............................................. ...................... --...............................................................................................
25
9 CUSTOMER RIGHTS AND RESPONSIBILITIES......................................................
26
9.1
Customer Notices......................................................................................................................................
26
9.2
Tertnirtation Fee—......................................................................................................................................27
9.3
Customer Reentry. ......................................................... ................................ - ......... ............... — ............
27
9.4
Customer Confidentiality ...................................................... ..................
27
9.5
Reslxnisibility for Pa ymcnt...................................................................................................................
27
9.6
Customer Deposit,,; ....................................................................................................................................28
10 PROCUREMENT
PROCESS.............................................................................................
28
10.1
Introduction .................................................................................................................................................
28
10.2
Procurement Methods.............................................................................................................................28
10.3
Kerb Contracts..............................................................................................................................................29
'I0.11
Electric Supply Contracts .........................................................................................
29
10.3.2
Data Management Contract.. .................... ....... ......... -- .... .......... ............
29
10,33
Electric Supply Procurement I'roces............................................. . . . . . .
30
11 CONTINGENCY PLAN FOR HBCE TERMINATION ...............................................
30
11.1
I rt.t i-od t1.cd on.................................................................................................................................................
30
11.1
Termittati.on bi/ the City.........................................................................................................................
30
12 APPENDICES......................................................................................................................
31
L
1 INTRODUCTION
1.1 Overview
The City of Hermosa Beach, California is a general law city within Los Angeles County. Hermosa
Beach Choice Energy ("HBCE") is a City of Hermosa Beach ("City") municipal service formed for the
purposes of implementing a Community Choice Aggregation ("CCA") serving the retail electric service
customers residing and doing business in the City. This Implementation Plan and Statement of Intent
describe the City's plan to implement a CCA program for retail electric service customers within the
jurisdictional boundaries of the City of Hermosa Beach.
In February 2015 the City adopted its Municipal Carbon Neutrality Plan ("CNP"), which identifies the
formation of a Community Choice Aggregation ("CCA") program as one of its top recommendations.
The CNP set a goal for Hermosa Beach to become carbon neutral for municipal operations by 2020, and
establish a CCA by 2017. The establishment of Hermosa Beach Choice Energy supports both of those
goals.
The majority of electric service customers in the City currently receive bundled retail electric service
from Southern California Edison (SCE). Bundled retail electric service includes the electric capacity
(kW) and the electric energy (kWh) consumed by the customer and the delivery of the electricity
utilizing the SCE transmission and distribution systems. Approximately 0.32 percent of 11,000 electric
service customers within the City have selected an alternative Electricity Service Provider (ESP) to
serve their power procurement and generation needs through Direct Access (DA)1. These DA
customers account for approximately 11% of the total electricity load for customers within the City.
HBCE will procure electricity from competitive suppliers to meet the City's retail electric service
customers' electricity demand while the electricity will continue to be delivered utilizing the SCE
distribution grid. The planned start date for service (subject to the final review and approval of the City
Council) is April 2017. Customer enrollment will be implemented in one phase.
Table 1: CCA Enrollment Schedulez
April 2017 I Municipal, Residential, Commercial & Industrial
All retail electricity service customers ("Customers") within the City (the HBCE's "service area") will
receive information describing HBCE. Participation in the CCA program is completely voluntary.
Customers will be provided with multiple "opt out" opportunities as specified in Assembly Bill 117
1 For additional information on Direct Access alternative Electric Service Providers, see
htt www.c uc.ca. ov PUC eiier Ret ii]+Electric+Markets+and+Finance
2 Dates subject to change at the discretion of the City. Implementation Plan will be updated and refiled with any
changes.
(AB 117) and related California Public Utilities Commission ("CPUC") rules and regulations. However,
without proactive selection of the opt -out option, customers will be automatically enrolled in the CCA
program, as provided by law.
HBCE's primary objective is to meet the goals established in the adopted Municipal CNP and enable
customers within its service area to take advantage of the opportunities granted by AB 117, the
Community Choice Aggregation Law3. The benefits to consumers include local control of the power
procurement, rate setting, and generation choices for residents of the city. Goals for HBCE include:
• Exceeding the California Renewable Portfolio Standard (RPS) requiring 33% of electricity used
within the City to be provided by renewable generation by 2020 and 50% by 2030;
• Offer a voluntary 100% renewable zero -emissions energy product;
• Reduce municipal and community Green House Gas Emissions and be 40% below 2015 levels
by 2020 for municipal emissions as set by the Municipal Carbon Neutral Plan;
• Simplified and stabilized electricity rate structures to assist customers in both understanding
and managing their electricity usage and spending; and
• Competitive electric energy rates with the potential to improve the local economy and growth
opportunities by providing economic incentive to live, work and do business within the City.
Because providing retail electric service can be a complex undertaking, and since HBCE has limited
operational experience in procuring electricity for retail customers, HBCE will contract with
experienced contractors and energy suppliers to provide electricity service to HBCE customers and will
operate HBCE utilizing a combination of internal staff, contractors and qualified Electric Service
Providers (ESPs). HBCE's Implementation Plan describes the partnership among HBCE, the City's
constituents and the private sector to bring the benefits of competitive electric supply and customer
choice to residents and businesses. By exercising its legal right to form a CCA program, Hermosa Beach
will enable its constituent customers to exert local control over its electricity supply.
The California Public Utilities Code provides the relevant legal authority for HBCE to become a CCA
and assigns the CPUC with the responsibility for:
• Certifying receipt of this Hermosa Beach Choice Energy Implementation Plan;
o The Public Utilities Code requires that an implementation plan be adopted at a duly
noticed public hearing and that the implementation plan be filed with the CPUC
• Establishing the cost recovery mechanism, if any, to reimburse SCE for any power procurement
or generation expenses already incurred on behalf of the City's constituents
o Any resulting Cost Responsibility Surcharge will be paid by HBCE customers in order to
prevent shifting of costs from HBCE Customers to SCE bundled customers.
• Ensuring compliance with basic consumer protection rules; and
• Ensuring compliance with the CPUC's resource adequacy program.
3 For more information on California State law and related regulation related to Community Choice Aggregation,
see htt www.c t c.ra. n PUC Lner r Retail+Eicctric+Markets+and+Finance 070#30 cca rc atioii.htm
On August 23, 2016 the Hermosa Beach City Council, at a duly noticed public hearing, introduced this
Implementation Plan through Hermosa Beach City Council Ordinance No. 16-1368 4 (a copy of which is
included as Appendix A). The Implementation Plan was then adopted together with the ordinance on
September 13, 2016 and the Implementation Plan was submitted to the CPUC shortly thereafter. The
CPUC has established the methodology that will be used to determine the SCE cost recovery
mechanism, and SCE has approved tariffs for imposition of the cost recovery mechanism.
As the Implementation Plan may be modified from time to time, HBCE will maintain a current version
on file with the CPUC.
1.2 Statement of Intent
The content of this Implementation Plan complies with the statutory requirements of AB 117. As
required by Public Utilities Code Section 366.2(c)(3), this Implementation Plan details the process and
consequences of aggregation and provides HBCE's statement of intent for implementing a CCA
program that includes all of the following:
• Universal access;
• Reliability;
• Equitable treatment of all customer classes; and
• All requirements established by state law and by the CPUC concerning aggregated service.
HBCE's primary objectives and intention in implementing this program are to achieve goals
established in the Municipal Carbon Neutrality Plan; reduce greenhouse gas emissions related to use of
power in the City of Hermosa Beach; implement energy efficiency and demand reduction programs;
provide cost competitive electric services; stimulate and sustain the local economy by developing local
jobs in renewable energy and energy efficiency; and develop long-term rate stability and energy
reliability for residents through local control. The prospective benefits to consumers include a
substantial increase in renewable energy supply, stable and competitive electric rates, public
participation in determining which technologies are utilized to meet local electricity needs, and
local/regional economic benefits.
1.3 Organization of this Implementation Plan
This implementation plan is organized as follows:
• Section 2: Aggregation Process
• Section 3: Organizational Structure
• Section 4: Start-up Plan and Funding
• Section 5: HBCE Phase -In
• Section 6: Load Forecast and Resource Plan
• Section 7: Financial Plan
• Section 8: Ratesetting and HBCE Terms and Conditions
4 Public posting of Hermosa Beach Ordinance and this Implementation Plan:
• Section 9: Customer Rights and Responsibilities
• Section 10: Procurement Process
• Section 11: Contingency Plan for HBCE Termination
The requirements of AB 117 are cross-referenced to Sections of this Implementation Plan in Table 2.
Table 2: AB 117 Cross -References
AB 117 •UIREMENT�r
IMPLEMENTATION PLAN SECTION
Section 1.2 Statement of Intent
Statement of Intent
Process and consequences of aggregation
Section 2 Aggregation Process
Section 3
Organizational structure of HBCE, its
Organizational Structure
operations and funding
Section 4 Start-up Plan and Funding
Section 7 Financial Plan
Section 8 Ratesetting and HBCE Terms and
Rate setting and other costs to
Conditions
participants
Section 9 Customer Rights and
Responsibilities
Disclosure and due process in setting
Section 8 Ratesetting and HBCE Terms and
rates and allocating costs among
Conditions
participants
Methods for entering and terminating
Section 10 Procurement Process
agreements with other entities
a
Section 9 Customer Rights and
Participant rights and responsibilities
Responsibilities
Section 11 Contingency Plan for HBCE
Termination of the HBCE
Termination
Description of third parties that will be
supplying electricity under HBCE,
Section 10 Procurement Process
including information about financial,
technical and operational capabilities
2 AGGREGATION PROCESS
2.1 Introduction
This section describes the background leading to development of this Implementation Plan and
describes the process and consequences of aggregation, consistent with the requirements of AB 117.
As mentioned above, in February 2015 the City adopted its Municipal CNP, which identifies the
formation of a CCA program as one of its top recommendations. The CNP set a goal for Hermosa
Beach to become carbon neutral for municipal operations by 2020, and establish a CCA by 2017. The
establishment of Hermosa Beach Choice Energy supports both of those goals.
Hermosa Beach became the first city to adopt a resolution to participate in the Los Angeles County
feasibility study to establish a county -wide CCA program. At the same time, Hermosa Beach City
Council directed staff to investigate the feasibility of establishing a stand-alone CCA program.
In June 2016 a draft technical feasibility study was completed. Based on the results, City Council
directed staff to continue pursuing establishment of HBCE.
The draft Implementation Plan was published on a public website and was made available at City
offices prior to introduction at the July 26, 2016 public hearing. Any person was able to view the draft
Implementation Plan and provide comments for consideration to be incorporated in the final version of
the Implementation Plan. The City of Hermosa Beach introduced an ordinance on August 23, 2016
declaring its election to implement a CCA program by and through the City's participation in HBCE as
described herein. The ordinance and associated Implementation Plan was adopted at a duly noticed
public hearing of the City Council on September 13, 2016.
A high-level overview and timeline for the CCA establishment steps the City is planning to follow is
shown in Table 3.
Table 3 CCA Establishment
Date
07/26/16
Action
City Council introduction of the CCA ordinance
08/23/16
City Council adoption of the CCA ordinance
September
2016
Submit (2 copies) Implementation Plan to CPUC
November
2016
CPUC Certifies Implementation Plan
January 2017
Complete Contracts with 3rd party Suppliers
2/15/2017
Submission of SCE Binding Notice of Intent (Optional)
2.2 Process of Aggregation
Prior to their enrollment in HBCE, customers will receive a minimum of two notices in the mail that
will provide the information needed to understand the terms and conditions of CCA electric service
and explain how customers can opt out of the CCA, if desired. All customers that do not follow the opt -
out process specified in the customer notices will be automatically enrolled with HBCE and will begin
receiving CCA electric service at their next regularly scheduled meter read date (following the date of
automatic enrollment). Subsequent to enrollment of customers that do not opt out, an additional two
notifications will be provided within the next two customers' billing cycles. This enrollment and
notification schedule will provide customer notifications at least twice within 60 days prior to
automatic enrollment and at least twice within two billing cycles after enrollment.
Table 4: Notification and Enrollment Schedules
Date
January 2017
Action
Notification #1
February 2017
Notification #2
April 2017
Enrollment
May 2017
Notification #3
June 2017
Notification #4
Customers automatically enrolled in HBCE will continue to have their electric meters read by SCE and
will continue to receive an electricity bill from SCE. After a customer's CCA enrollment, the SCE
electric bill will include charges for SCE electricity delivery (and other CPUC-authorized charges and
fees). In addition, a separate page will show the applicable HBCE charges for power procurement and
generation costs based on the customer's electricity use and the applicable HBCE rate.
After enrollment, customers will have approximately 60 days (two billing cycles) to opt out of HBCE
and return without penalty to their prior electricity service provider. HBCE customers will be advised
of these opportunities via the distribution of two additional enrollment notices provided within the
first two HBCE billing cycles. Customers that opt out between their enrollment date and the close of the
post -enrollment opt out period will be responsible for any HBCE charges incurred during the time they
were served by HBCE. However, the customer will not be subject to any other HBCE fees or penalties
for selecting post -enrollment opt out within sixty days of enrollment. Customers that have not opted
out within sixty days of enrollment in CCA service will be deemed to have elected to become a
participant in the HBCE program and to have agreed to HBCE's terms and conditions, including those
pertaining to requests to terminate service, as further described in Section 9.
s Dates subject to change at the discretion of the City. Implementation Plan will be updated and refiled with any
changes.
SE���l��risi7s>i lr=�
Subsequent to the enrollment period, new customers who establish service within the HBCE service
area will be automatically enrolled in HBCE and will have sixty days from the date of service activation
and enrollment to opt out of HBCE. Such customers will be provided with two opt -out notices within
their first two HBCE billing cycles.
2.3 Consequences of Aggregation
2.3.1 Rate Impacts
HBCE customers will see no obvious changes in their electric service other than the price and
composition of their electric bills. The only real change in service is which entity is purchasing and
generating electricity for the City's constituents and the expansion of customer choice, giving
customers the option to select between entities to procure their electricity. Customers enrolled in HBCE
will continue to pay SCE delivery charges, but will no longer pay the costs of SCE generation. Instead,
customers participating in HBCE will pay the power procurement and generation charges set by the
Hermosa Beach City Council. Customers enrolled in HBCE will also be subject to HBCE's terms and
conditions, including responsibility for payment of all HBCE charges as described in Section 9.
HBCE's rate -setting policies described in Section 8 establish a goal of providing rates that are
competitive to the generation rates offered by SCE and other ESPs for a given customer classification.
The Hermosa Beach City Council will establish, consider, and formally adopt rates sufficient to recover
all costs related to operation of the HBCE.
Initial HBCE rates will be established utilizing the estimated power procurement costs developed
within the scope of the CCA technical study and are subject to final approval by the Hermosa Beach
City Council. The electric rates will be adjusted periodically based on power procurement costs
reflecting prospective costs from HBCE's energy supplier(s) and any adjustments necessary to recoup
market and operational costs not covered under the prior year's rate. Information regarding final
HBCE rates will be disclosed, along with other terms and conditions of service, in the pre -enrollment
opt -out notices sent to potential HBCE constituent customers.
HBCE may submit a Binding Notice of Intent (BNI) to SCE in order to facilitate a smooth and lower -
cost CCA transition for the City's customers. The BNI will provide SCE with a detailed schedule of
CCA enrollment plans and enable SCE to remove HBCE customers from SCE's future load forecast and
related power procurement obligations. Certain pre-existing generation costs will continue to be
charged by SCE to CCA Customers through a separate rate component, called the Cost Responsibility
Surcharge (CRS). These charges are shown in SCE's electric service tariffs, which can be accessed from
the utility's website. These pre-existing costs are included in charges paid by both SCE bundled
customers as well as CCA and DA customers.
2.3.2 Renewable Energy Impacts
Hermosa Beach's Carbon Neutrality Plan, dated February 2015, established the goal to become carbon
neutral for municipal operations by 2020. One of the top recommendations for achieving this goal is
establishing an operating CCA in 2017. In support of these goals, HBCE will create an energy supply
portfolio that offers HBCE's customers a "greener" electricity product by ensuring that a large portion
of the supply portfolio includes energy generated and supplied by renewable resources. The resource
plan includes procurement of renewable energy that exceeds California RPS that requires 33% by 2020.
HBCE's initial energy supply portfolio target and retail rates are based on 50% renewable energy at
implementation, with 100% renewable energy sourced for all municipal operations. HBCE will also
offer a voluntary 100% renewable energy option to its customers. Upon launch of CCA service, all
Hermosa Beach municipal accounts will take service under the 100% renewable retail product.
2.3.3 Energy Efficiency Impacts
Another HBCE goal will be to increase energy efficiency program investments and activities for
HBCE's customers. The existing energy efficiency (EE) programs administered by SCE are still
expected to be available to HBCE customers. HBCE customers will continue to pay the Public Purpose
Program charges and Electricity Program Investment Charge (EPIC) to the distribution utility, which
provides funding for energy efficiency programs for all customers as well as funds to support the
Customer Alternate Rates for Energy (CARE) and Family Electric Rate Assistance (FERA) programs,
regardless of generation supplier. In addition and subject to CPUC approval, HBCE will be able to use
EE funds collected though the EPIC charge for additional EE programs targeted specifically to HBCE
customers.
The energy efficiency investments ultimately planned for HBCE, as described in Section 6.5, will be in
addition to the level of investment that SCE is making and will continue to make. Thus, through
expanding energy efficiency programs in the City, HBCE has the potential to drive increased energy
savings beyond that which might be achieved under the SCE programs alone.
3 ORGANIZATIONAL STRUCTURE
This section provides an overview of the proposed HBCE organizational structure that will be used for
implementation of its CCA program. The key agreements, governance, management, and
organizational functions of HBCE are outlined and discussed below.
3.1 Organizational Overview
3.1.1 Governance
The Hermosa Beach City Council is the local authority with jurisdiction over HBCE. The City Council
reviewed and approved this implementation plan prior to filing with the CPUC. In terms of HBCE, the
City Council's primary duties will be to:
• Establish HBCE policies and objectives;
• Authorize any subsequent changes to this implementation plan;
• Review and approve resource plans;
• Review and approve proposed rate changes; and
• Provide policy direction to the City Manager, who will have general accountability for HBCE
operations, consistent with the policies established by the City Council.
3.1.2 Management
The Hermosa Beach City Manager is accountable for overseeing HBCE and ensuring compliance with
the City Council approved implementation plan and other City policies, as well as compliance with
governing statutory regulations.
The City Council is responsible for evaluating the City Manager's performance in the management and
oversight of HBCE operations.
3.1.3 HBCE Organization
The City Manager will utilize a combination of internal Hermosa Beach staff and consultants. Certain
specialized functions needed for HBCE operations, for example the electric supply and customer
account management functions described below, will be performed by experienced and qualified third -
party consultants.
3.1.4 Resource Planning and Forecasting
HBCE must plan for meeting the electricity needs of its customers utilizing resources consistent with
City Council established policy goals and objectives as well as regulatory and statutory requirements.
Long-term resource planning includes load forecasting and supply planning on a 10- to 20-year time
horizon. HBCE consultants will develop integrated resource plans that meet HBCE supply objectives
and balance cost, risk and environmental considerations, in addition to meeting requirement
established by regulatory agencies. Integrated resource planning will consider distributed generation,
demand side energy efficiency and demand response programs as well as traditional supply options.
The HBCE program will require a resource planning function even if the day-to-day supply operations
are contracted to third parties. Resource planning will ensure that local preferences regarding the
future composition of supply and demand resources are planned for, developed, and implemented.
Updated resource plans will be reviewed and adopted by the City Council on an as needed basis.
The City Manager, or designee, will oversee development of both short (one- and two-year) and long-
term resource plans for the city's customers. HBCE will develop the resource plan under the policy
guidance provided by the City Council and in compliance with California Law and other requirements
of California regulatory bodies (CPUC and CEC), including any requirements established by state law
or by the CPUC concerning aggregated service and the application of the greenhouse gas emission
performance standards.
3.1.5 Electric Supply Operations
Electric supply operations encompass the activities necessary for procurement of electricity to serve
end -use customers. These activities include the following:
➢ Electricity Procurement — assemble a portfolio of electricity resources to supply the electric needs
of HBCE Customers.
➢ Risk Management — utilization of standard electric power industry risk management techniques
to reduce exposure to the volatility of electricity demand and energy markets.
➢ Load Forecasting — develop accurate, long-term resource planning and short-term electricity load
forecasts to maintain a balance between supply resources and expected customer load.
➢ Scheduling Coordination — schedule and settle wholesale electricity market transactions with the
CAISO.
HBCE is investigating a partnership with Lancaster Choice Energy to collaborate on services that
include procurement, load forecasting, scheduling coordination, and regulatory compliance. By
working together both Lancaster Choice Energy and HBCE have the opportunity to reap the benefits
and reduced costs of a Joint Powers Authority model, while also realizing the benefits that come with
operating a stand-alone CCA. In the event that the shared services model isn't implemented, HBCE
will contract with one or more experienced and financially sound third -party energy service providers
to perform most of the electric supply operations for the HBCE program. Contracted services will
include the procurement of energy and ancillary services, scheduling coordination services, short-term
load forecasting and day -ahead and real-time electricity scheduling and trading. Following a
competitive solicitation process and subsequent contract negotiations, qualified firms will be selected
for consideration as HBCE's initial primary energy services provider and Scheduling Coordinator. The
final ESP selection is anticipated to be made by the Hermosa Beach City Council in early 2017.
3.1.6 Local Energy Programs
A key focus of the HBCE program will be the development and implementation of local energy
efficiency and reliability programs, including distributed generation and storage functions, energy
efficiency programs and initiatives, and demand response programs that are responsive to community
interests. The City Manager, or designee, will be responsible for further development of these
programs, as these are likely to be implemented on a phased basis during the first several years of
operations. Within the early years of operations, HBCE will develop a long-term strategic policy and
plan for the evaluation and funding of local energy projects. This long-term strategic policy and plan
will be reviewed by the City Council.
An example of a local energy program is solar development which encourages both residential and
commercial constituents to invest in solar generation through available financing options, by taking
advantage of the California Solar Initiative (CSI) and through federal solar investment tax credits.
3.1.7 Budget and Rate Setting
The City Manager will have responsibility for developing the annual budget and projected revenue
requirements; proposing the annual budget and rates for approval by the City Council; and managing
and maintaining cash flow requirements. A combination of in-house staff and consultants may be
utilized for these functions.
The City Council will have the ultimate responsibility for setting the rates for HBCE customers. The
City Manager will have responsibility for developing proposed rates and options for the City Council
to consider before the finalization of the actual rates (subject to the notice requirements and process
described in Section 8). The final approved rates must, at minimum, meet the annual revenue
requirement, including any reserves or coverage requirements set forth in bond covenants or other
agreements. The City Council will have the flexibility to consider rate adjustments, provided that the
overall revenue requirement is achieved. HBCE will administer a standardized set of electric rates and
may offer optional rates to encourage policy goals.
HBCE's finance function will be responsible for arranging financing, if needed, for power procurement
and capital projects, preparing financial reports, and ensuring sufficient cash flow for HBCE
operations. The finance function will play an important role in financial risk management by
monitoring the credit of energy suppliers so that credit risk is properly understood and mitigated. In
the event that changes in a supplier's financial condition and/or credit rating are identified, HBCE will
take appropriate action as provided for in the electric supply agreement(s). The finance function also
establishes credit policies that HBCE must follow.
3.1.8 Customer Services
The customer services function includes general program marketing and communications as well as
direct customer interfaces ranging from management of key account relationships to call center and
billing operations. HBCE will conduct program marketing to raise consumer awareness of HBCE and
to establish the HBCE "brand" in the minds of the public, with the goal of communicating CCA
benefits in order to retain and attract as many customers as possible. Ongoing communications,
marketing messages, and information regarding the HBCE program to all customers will be critical for
the overall success of HBCE.
In addition to general HBCE communications and marketing, a significant focus on customer service
and key account representation will be necessary. HBCE will contract call center operations to a third -
party provider who will answer customer questions and perform routine interaction with customer
accounts.
The customer services function performs customer billing -related duties and manages customer
account data. This function also processes customer service requests, administers customer
enrollments and departures from HBCE, and maintains a current database of customers enrolled in
HBCE. This function will coordinate the issuance of monthly bills using SCE's billing process and will
track customer payments. Business -to -business data transactions with SCE will include the electronic
exchange of usage, billing, and payment data between SCE and HBCE. Additionally, customer services
will be responsible for tracking of customer account receivables and payments, issuance of late
payment and/or service termination notices (which would return affected customers to bundled
service), and administration of customer deposits (if any) in accordance with HBCE credit policies. It is
planned that the customer billing and other customer services functions will be contracted out to a
qualified third party with the necessary infrastructure and capability to bill and interface with the
electric service accounts in the City that are eligible to participate in HBCE.
3.1.9 Legal and Regulatory Representation
The HBCE program will require ongoing regulatory representation to manage various regulatory
compliance filings related to resource plans, resource adequacy compliance, compliance with
California's RPS program and overall representation on issues that will impact HBCE and its
customers. HBCE will be an active stakeholder with the CPUC, CEC, California Independent System
Operator (CAISO) and, as necessary, the Federal Energy Regulatory Commission (FERC) and the
California Legislature.
Under the direction of its General Counsel, HBCE will retain legal services, as necessary, to administer
HBCE, review contracts, and provide overall legal support to the activities of HBCE. Other third party
consultants may be used for the varied regulatory compliance filings.
4 START-UP PLAN AND FUNDING
This section presents HBCE's plans for the start-up period, including the necessary staffing and capital
outlays, which will commence once the CPUC certifies the Implementation Plan. As described in
Section 3, HBCE will utilize a mix of internal staff and third party consultants in its CCA program
implementation and operation.
4.1 Start-up Activities and Costs
The initial start-up funding is budgeted to fund the following activities and costs:
• Hiring of staff and/or contractors to manage implementation
• Identification of and negotiations of supplier/vendor contracts:
o CAISO Schedule Coordinator
o Energy supplier
o Data management provider
o Customer services
■ Customer call center
• Definition and execution of communications plan(s):
o Customer research/information gathering
o Media campaign
o Key customer/stakeholder outreach
o Informational materials and customer notices
• Post required CCA bond and completion of CCA registration
• Execution of SCE service agreement, notification and payment of any applicable fees
• Performance of customer notification, opt out and transfers
• Conduct of load forecasting
• Establishment of rates
• Legal and regulatory support
• General consulting costs
Other costs related to the startup of HBCE will be included with third -party contracted services,
including capital requirements needed for collateral/credit support for electric supply expenses;
customer information system costs; electronic data exchange system costs; call center costs; and billing
administration/settlements systems costs.
4.2 Staffing Requirements
Staff, in the form of in-house or contractors, will be added incrementally to match workloads required
to form the new program, manage contracts, and initiate customer outreach/marketing during the pre -
operations period. The initial staffing needed for start-up include in-house personnel to support
communications activities and contractors to support procurement, legal and regulatory activities.
4.3 Funding Requirements
The start-up of the CCA program will require working capital for the primary operating expenses:
(1) Salaries and Wages
(2) Deposits and Reserves
(3) SCE Services
(4) Power Procurement
(5) Third -Party Providers
(6) Professional Services
(7) Contingency Fund
The Finance Plan contained in Section 7 provides an overview of the working capital requirements.
Operating expenses for the initial feasibility and start-up period (through June 2018) are estimated at
$5.3M. Actual costs may vary depending on the actual cost of power. Operating revenues for the same
period are estimated at $S.OM. Included in operating expenses is the required $100,000 deposit bond to
be posted with CPUC and costs incurred to start-up service. The difference between projected
operating revenues and expenses are anticipated to be funded with a loan from the City's general fund.
4.4 Financing Plan
For the initial start-up funding, the City is considering a loan from the General Fund loan. Based upon
current assumptions and expected HBCE revenues, it is anticipated that the start-up costs will be fully
recovered within the first three years of HBCE operations through retail rates.
4.4.1 Working Capital
The nature of CCA business results in operating revenues from electricity sales being received by
HBCA approximately 60 days after the electricity is provided. This is caused by the 30 day meter read
cycle and 30 day billing/payment cycle. This lag results in a need to cover working capital. A loan
from the General Fund in the amount of $450,000 will provide the necessary funds to launch the HBCE
program. The City of Hermosa Beach will provide the working capital necessary to cover the day-to-
day operational cash flow requirements (i.e., HBCE paying its bills) and HBCE in return will pay the
City for the cost of capital.
i
4.4.2 Pro Forma
Ongoing operating expenses will be recovered, and reserves established, from revenues accruing from
sales of electricity to HBCE customers and, where applicable, sales of excess power to other entities. Pro
forma projections for the initial five years of HBCE operations are shown in Section 7 below.
5 HBCE PHASE -IN
HBCE shall provide universal access to all electricity customers within the city limits of Hermosa
Beach. Nothing in this section shall be construed as authorizing Hermosa Beach to restrict the ability of
retail electricity customers to obtain or receive service from any authorized electric service provider in a
manner consistent with law.
5.1 Open Season - Binding Notice of Intent
SCE Rule 23.2, Community Choice Aggregation Open Season, allows for a voluntary participation in
Open Season whereby a CCA may submit a Binding Notice of Intent (BNI) to SCE and the CPUC. The
BNI provides the number of customers, the customer class and specific dates that a CCA will begin
serving customers. If the BNI is filed, it will reflect the schedule for a single phase approach for CCA
service. SCE will then utilize the BNI to modify power procurement forecasts which will mitigate the
Cost Responsibility Surcharge (CRS) that HBCE customers could owe SCE for power already procured
on their behalf. While Open Season is optional, it can reduce customer costs by exempting customers
from the CRS for subsequent SCE power procurement contracts or generation capital expenses.
Open Season is available annually during January 1 through February 15 or as late as March 1 if the
California Energy Commission (CEC) Load Serving Entity (LSE) Load Forecasts are due on or after
May 1. HBCE may participate in SCE Open Season in February 2017.
5.2 CCA Enrollment Schedule
HBCE plans to launch its CCA program in one phase, during the month of April 2017. Customers will
transition throughout the month based on their meter read date.
Enrolling all eligible customers at one time is appropriate due to the size of the program, and given that
there is already an operating CCA in SCE territory. This approach results in decreasing confusion
among the citizens of Hermosa Beach as well as the administrative time and expense that a phased
approach would incur.
5.3 Customer Participation Rates
Customers will be automatically enrolled in HBCE unless they opt out during the customer notification
process that will be conducted during the 60-day period prior to enrollment, and which will continue
through the 60-day period following commencement of service. HBCE anticipates an overall customer
participation rate of 90%; 90% (10% opt out) for non-residential and 90% (10% opt out) for residential
customers. This rate is a bit more conservative than that experienced by Lancaster, which operates as a
stand-alone CCA within SCE territory. The assumed participation rates will be refined as the HBCE's
marketing and communications plan is executed.
1.•.k II . .
5.4 Customer Participation Forecast
Upon enrollment customers will be switched over to HBCE service on their next regularly scheduled
SCE meter read date over an approximately 30-day period. Because CCAs in California have a
relatively short history, in particular in Southern California, it is difficult to anticipate with any
precision the actual levels of customer participation. HBCE assumes that the same opt -out rates will
continue to apply to new customer accounts. The number of accounts forecast to be served by the
HBCE is shown in Table 5.
Table 5: HBCE Enrollments
It is assumed that HBCE customer growth will offset customer attrition (opt outs) over time, resulting
in a relatively stable customer base over the noted planning period.
6 LOAD FORECAST AND RESOURCE PLAN
6.1 Introduction
This section describes the planned mix of electric resources and demand reduction programs that will
meet the energy demands of HBCE's customers, using a diversified portfolio of electricity supplies
including a large proportion of renewable resources. As a CCA, HBCE is responsible for arranging the
scheduling of sufficient electric supplies to meet the hour -by -hour demands of its customers. HBCE
must also adhere to capacity reserve requirements established by the CPUC and the CAISO designed to
address uncertainty in load forecasts and potential supply disruptions caused by generator outages
and/or transmission contingencies. In addition, HBCE will be responsible for ensuring that its resource
mix contains sufficient production from renewable energy resources needed to comply with the
statewide renewable portfolio standards.
Several criteria will be used to guide development of the HBCE's resource plan. HBCE will develop a
supply portfolio that strives to achieve the following attributes:
• HBCE will manage a diverse resource portfolio to increase control over energy costs and
maintain competitive and stable electric rates;
• HBCE will seek to increase the use of renewable energy resources, including local resources,
and reduce reliance on fossil -fueled electric generation;
• HBCE will help customers reduce energy costs through investment in and administration of
enhanced customer energy efficiency, distributed generation and storage, and other demand
reducing programs;
• HBCE will benefit the area's economy through investment in local infrastructure, projects and
energy programs.
To meet the objectives outlined above as well as the applicable regulatory requirements, HBCE's
resource plan will include a diverse mix of generation, power purchases, renewable energy and
ultimately new energy efficiency programs. Similar to how diversification benefits an investment
portfolio by reducing risk and exposure to a particular market sector, the HBCE's diversified resource
plan reduces the risk and volatility that would occur from an over -reliance on a single resource type or
fuel source. The ultimate goal of the HBCE's resource plan is to source at least 50% of the resource mix
from renewable resources in 2017, increasing to 100% by 2030. The planned resource mix is comprised
primarily of power purchases from third -party electric suppliers and may also include renewable
generation assets (such as a solar resource) owned by the HBCE.
6.2 Resource Adequacy (Capacity) Requirements
The CPUC's Resource Adequacy Requirement ("RAR") applicable to HBCE requires a demonstration
one year in advance that HBCE has secured physical capacity for 90% of its projected peak loads for
each of the five months May through September, plus a minimum 15% reserve margin. On a month -
ahead basis, HBCE must demonstrate 100% of the peak load plus a minimum 15% reserve margin.
A portion of HBCE's capacity requirements must be procured locally, from the LA Basin area and Big
Creek/Ventura area as defined by the CAISO. HBCE would be required to demonstrate its local
capacity requirement for each month of the following calendar year. The local capacity requirement is a
percentage of the total (SCE service area) local capacity requirements adopted by the CPUC based on
the HBCE's forecasted peak load. Local capacity requirements are a function of the SCE area resource
adequacy requirements and HBCE's projected peak demand. HBCE will need to work with the
CPUC's Energy Division and staff at the CEC to obtain the data necessary to calculate HBCE's monthly
local capacity requirement. The formula is as follows:
HBCE Local Capacity Requirement = [HBCE Capacity Requirement/Total SCE Service Area Capacity
Requirement]*Total Local Capacity Requirement in SCE's Service Area
HBCE must demonstrate compliance or request a waiver from the CPUC requirement as provided for
in cases where local capacity is not available.
HBCE's resource adequacy filings take place at the end of October of each year, according to the
schedule established by the CPUC for evaluating statewide resource adequacy based on resource plans
filed by all load serving entities in the state.
HBCE will coordinate with SCE and appropriate state agencies to manage the transition of
responsibility for resource adequacy from SCE to HBCE during 2017. For system resource adequacy
requirements, HBCE will make required filings showing that HBCE plans to serve load and that load
migration issues would be addressed through the CPUC's approved procedures. HBCE will work with
the CEC and CPUC prior to commencing service to customers to ensure that it meets its local and
system resource adequacy obligations for 2017 through an agreement with its chosen electric supplier.
6.3 Supply Requirements
The starting point for HBCE's resource plan is a projection of participating customers and associated
electric consumption. Projected electric consumption is evaluated on an hourly basis and matched with
resources best suited to serving the aggregate of hourly demands or HBCE's "load profile." The electric
sales forecast and load profile will be affected by the degree to which customers choose to remain with
SCE during the customer enrollment and opt -out period.
6.3.1 Renewable Portfolio Standard Requirements
In October 2015, Governor Jerry Brown signed Senate Bill 350 (SB 350), the Clean Energy and Pollution
Reduction Act of 2015, into law which authorizes the CPUC to raise the required percentages of
renewable energy, known as the Renewable Portfolio Standard (RPS), to 50% by 2030. Details related
to implementation of SB 350 will be developed over time, however, it is assumed that the annual
renewable energy procurement targets will be imposed to facilitate progress towards the 50% by 2030
mandate. The RPS applies to all load serving entities, including investor -owned utilities, publicly
owned utilities, electricity service providers and community choice aggregators.
HBCE will work with third -party electric suppliers in pursuing the renewable resources to not only
meet the state's mandate, but to meet its own goal of exceeding the minimum mandated RPS.
6.4 Resources
HBCE will seek to maximize use of local, cost -based renewable generation resources in its resource
plan, subject to the HBCE's ability to finance such projects.
Power purchases from both renewable and non-renewable resources will make up the remainder of the
portfolio resource mix. HBCE's electric portfolio will be managed by a third -party electric supplier
under contract to HBCE. Through Power Services Agreements, the HBCE will obtain full requirements
electric service for HBCE's customers, including providing for all electric supply, ancillary services and
resource adequacy requirements in conjunction with the scheduling arrangements necessary to provide
delivered electricity to these customers.
HBCE's third -party electric supplier will be responsible for managing the overall supply portfolio.
Details of the electric supply portfolio and risk management practices that will be employed by HBCE's
electric supplier will be established consistent with the HBCE's internal risk management policies,
processes and procedures as part of the negotiated contract with the selected electric supplier. It is
anticipated that a mix of short- and long-term power purchases will be used to meet the hour -by -hour
demand requirements of HBCE's customers.
Power Purchase Agreements of various lengths and pricing terms will be explored during negotiations
with electric service providers and their suppliers in order to hedge price risk and avoid exposure to
adverse market conditions along the time horizon. The proportion of contracts or supply volumes
16
falling into long-term (> 1 year), medium -term (< 1 year) and near -term (< 1 month) time horizons will
reflect market conditions at any point in time. Specific price hedges can be executed as supply contracts
are negotiated and the mix may be adjusted frequently to optimize the supply portfolio and adhere to
risk management policies established by the HBCE. The remainder of the portfolio can be supplied by
index -priced (variable), load -following electricity products.
Power procurement offers can be considered from generation providers located virtually anywhere in
the Western Interconnection, as long as the electricity is deliverable to the CAISO control area. The
costs of transmission access and the risk of transmission congestion costs and line loss factors would
need to be considered in the bid evaluation process if the delivery point is outside of HBCE's load zone,
as defined by the CAISO.
6.5 Energy Efficiency
HBCE's energy efficiency goals will reflect a strong commitment to increasing energy efficiency within
the City of Hermosa Beach. HBCE will seek to maximize end -use customer energy efficiency by
facilitating customer participation in existing utility programs and by forming new programs that will
displace HBCE's need for traditional electric procurement activities.
6.6 Demand Response
Demand response (DR) programs provide incentives to customers to reduce demand upon request by
the load serving entity (i.e., HBCE), reducing the amount of generation capacity that must be
maintained as infrequently used reserves. Demand response programs can be cost-effective alternatives
to capacity otherwise needed to comply with the RAR. The programs also provide rate benefits to
customers who have the flexibility to reduce or shift consumption for relatively short periods of time
when generation capacity is most scarce. Like energy efficiency, demand response can provide
economic benefits to both the electricity supplier and to the customer.
In its ruling on Local Resource Adequacy Requirements (LRAR), the CPUC found that dispatchable
demand response resources as well as distributed generation resources should be allowed to be
counted for local capacity requirements in support of LRAR. SCE offers several demand response
programs to its customers, and HBCE is entitled to the local capacity credits associated with customers
within HBCE territory.
HBCE intends to expand on existing SCE DR programs with additional offerings for customers that
have shown a willingness to manage their electricity usage and save money. Consistent with statewide
targets, the goal for this resource plan is to meet 5% of the HBCE's total capacity requirements through
dispatchable demand response programs that qualify to meet LRAR. Achievement of this goal would
displace a portion of the HBCE's local capacity requirement.
HBCE intends to adopt a demand response program that enables it to request customer demand
reductions during times when capacity is in short supply or spot market energy costs are exceptionally
high. The level of customer payments will be associated with the cost of local capacity that can be
avoided as a result of the customer's willingness to curtail usage upon request and/or upon the CAISO
real-time market price signal for avoided energy procurement costs. Alternatively, HBCE may
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aggregate DR resources and participate in the CAISO Proxy Demand Resource (PDR) or Reliability
Demand Response Program (RDRP), in which case customer incentives would be derived from market
payments.
Appropriate limits on customer curtailments, both in terms of the length of individual curtailments and
the total number of curtailment hours that can be called, will be included in HBCE's demand response
program design. HBCE will likely utilize experienced third -party contractors to design, implement and
administer its demand response programs.
6.7 Distributed Generation
Consistent with HBCE's Carbon Neutrality Plan, environmental policies and the state's Energy Action
Plan, clean distributed generation is a significant component of the integrated resource plan. HBCE
intends to work with state agencies and SCE to promote deployment of photovoltaic (PV) systems,
with the goal of maximizing use of the available incentives that are funded through current utility
distribution rates and public benefits surcharges. These programs will primarily reduce the electricity
demand within the City and reduce power procurement requirements. Currently, Hermosa Beach
encourages both residential and commercial constituents to invest in solar generation through
financing and taking advantage of the California Solar Initiative (CSI) and the federal solar investment
tax credits. The City currently rebates building permit fees for photovoltaic installations.
HBCE plans to provide direct incentives for PV by offering a net metering rate to customers who install
PV systems so that customers will be able to sell excess energy to HBCE. Such a program would be
generally consistent with principles identified in Assembly Bill 920 (AB 920), which directed the CPUC
to establish and implement a compensation methodology for surplus renewable generation produced
by net energy metered facilities located within the service territories of California's large investor -
owned utilities, including SCE.
HBCE will work to ensure that customers within its jurisdiction take full advantage of available solar
incentives. Additional solar programs developed by HBCE will also increase use of solar in the city.
7 FINANCIAL PLAN
This section examines the monthly cash flows expected during the implementation period of the CCA
program and identifies the anticipated financing requirements for the overall HBCE program.
7.1 Description of Cash Flow Analysis
This cash flow analysis estimates the level of working capital that will be required during the startup
and customer implementation period of HBCE program. In general, the components of the cash flow
analysis can be summarized into three distinct categories:
(1) Cost of CCA program Operations;
(2) Revenues from CCA program Operations; and
(3) Reserves & Financing
The cash flow analysis identifies and provides annual estimates for each of these categories. A key
aspect of the cash flow analysis is to focus primarily on the costs and revenues associated with the CCA
program start-up period.
7.1.1 Cost of CCA Program Operations
The first category of the cash flow analysis is the cost of CCA program operations. To estimate the
overall costs associated with CCA program Operations, the following components were taken into
consideration:
• Electricity Procurement
• Ancillary Service Requirements
• Staffing and Professional Services
• Data Management Costs
• Administrative Overhead
• Billing Costs
• Scheduling Coordination
• Grid Management and other CAISO Charges
• CPUC Bond
• Pre -Startup Cost Reimbursement
• Debt Service
A key element of the cash flow analysis is the assumption that electricity will be procured under power
purchase arrangements managed by an electric service provider. The focus of this cash flow analysis is
during the start-up period when costs associated with start-up, implementation and operations are
incurred prior to the receipt of cash from revenues associated with electricity sales.
7.1.2 Revenues from CCA Program Operations
The cash flow analysis also estimates revenues generated from CCA operations and from electricity
sales to customers. In determining the level of revenues, the cash flow analysis assumes HBCE charges
a standard, default electricity rate similar to the generation rates of SCE for each customer class, with
an optional 100% renewable energy rate at a premium reflective of incremental renewable power costs.
7.1.3 Cash Flow Analysis Results
The results of the cash flow analysis provide an estimate of the amount of working capital required for
HBCE during the CCA start-up period. This estimated level of working capital is determined by
examining the monthly cumulative net cash flows (Revenues from CCA Operations minus Cost of
CCA Operations) based on assumptions for payment of costs by HBCE, along with an assumption for
when customer payments will be received. This identifies what level of cash flow is available in terms
of a surplus or deficit. With regard to the assumptions related to payments streams, the cash flow
analysis assumes that customers will make payments within 60 days of the service month, and that
HBCE will make payments to energy suppliers within 60 days of the service month.
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In terms of reviewing the results of the cash flow analysis, it is important to note that from a feasibility
standpoint, HBCE program is viable, meaning that HBCE program is feasible with revenues exceeding
expenditures within a few years of implementation while providing competitive rates to SCE, given the
stated assumptions.
With the assumptions regarding payment streams, the cash flow analysis itself identifies funding
requirements while recognizing the potential lag between payments received and payments made
during the implementation period. The estimated working capital needs for the startup period is
approximately $500,000. HBCE plans to finance the working capital needs through a loan from the
City's General Fund.
7.1.4 CCA Program Implementation Pro Forma
In addition to developing a cash flow analysis which estimates the level of working capital required to
cover the cash flow needs in the initial startup period, a pro forma was developed to evaluate the
financial feasibility of HBCE. The difference between the cash flow analysis and the pro forma analysis
is that the pro forma analysis does not take into account the timing differences associated with the lag
between when revenues are collected and when payments are due. Assumptions related to CCA
program operations and revenues remain the same.
The results of the pro forma analysis are shown in Figure 3 below.
Hermosa Beach Clean Energy
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
Year 1 Year 2 Year 3 Year 4 Year 5
$j1,000,000j
■ Revenue ■ Expenses i, Fund Balance
Figure 3: Financial Pro Forma
Under current operating cost assumptions and projected rates HBCE is anticipated to realize a shortfall
in year 1 due to the one time start-up costs. It is anticipated these costs will be financed through a loan
from the City's general fund, and repaid from future year net revenues. In subsequent years, revenues
are sufficient to cover operating expenses. The operating surplus will be available to HBCE to repay its
general fund loan and establish reserves to cover any short term cash flow needs and ensure long term
financial stability.
8 RATESETTING AND HBCE TERMS AND CONDITIONS
8.1 Introduction
This section describes the initial policies for HBCE in setting its rates for electric aggregation services.
Ratesetting includes policies regarding rate design, objectives, and due process in setting HBCE rates.
Final HBCE rates will be approved by the City Council and included in the initial customer opt -out
notices.
By adopting this Implementation Plan, the City Council will approve the rate policies and procedures
contained herein to be effective at HBCE initiation. The City Council retains authority to modify HBCE
policies from time to time at its discretion.
8.2 Rate Policies
HBCE shall establish rates sufficient to recover all costs required for HBCE operation, including any
reserves that may be required as a condition of financing and other discretionary reserve funds that
may be approved by the City Council. As a general policy, rates will be uniform for all similarly
situated customers enrolled in HBCE throughout the service area of HBCE.
The primary objective of the ratesetting plan is to establish rates that achieve the following:
• Minimum 50% renewable default energy supply with an optional 100% renewable energy
supply
• No use of Category 3 Renewable Energy Certificates
• Rate competitiveness
• Rate stability and reliability
• Equitable treatment of all classes of customers
• Customer understanding
• Revenue sufficiency
Each of these objectives is described below.
8.2.1 Rate Competitiveness
HBCE's goal is to offer competitive rates for the electric services it provides to participating customers
as compared to Southern California Edison. Competitive rates will be critical to attracting and retaining
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customers to provide HBCE's revenues. A premium, based on the additional cost, will be charged to
customers who voluntarily participate in the 100% renewable energy supply.
8.2.2 Rate Stability and Reliability
HBCE will offer stable and reliable rates by hedging its supply costs over multiple time horizons. Rate
stability considerations may mean that rates at any point in time may offer somewhat greater or lesser
savings than the general rate targets set for the HBCE. In comparison, SCE's rates typically fluctuate
based on energy market conditions such as natural gas prices, the utility's hedging strategies, hydro-
electric conditions, and rate impacts caused by periodic additions of generation to the utility rate base.
Local control of power procurement decisions will focus on sustainable rate stability.
8.2.3 Equitable Treatment of All Classes of Customers
HBCE's policy is to provide rate benefits to all customer classes relative to the rates customers would
otherwise pay to Southern California Edison (SCE). Rate differences between HBCE and SCE will be
affected by the variety of rates (including optional rates) offered by SCE to different customer classes.
8.2.4 Customer Understanding
The goal of customer understanding will be to consider rate designs that are relatively straightforward
so that customers can readily understand how their bills are calculated. HBCE plans to have fewer rates
than SCE with broader customer classifications and simplified rate structures in order to facilitate
customer understanding. Fewer and more straightforward rates not only help minimize customer
confusion and dissatisfaction, but will also result in fewer billing inquiries to HBCE's customer service
call center.
8.2.5 Revenue Sufficiency
HBCE's rates must collect sufficient revenue from participating customers to fully fund HBCE's annual
budget and required reserves. Rates will be set to collect the adopted budget based on a forecast of
electric sales for the budget year. Rates will be adjusted as necessary to maintain the ability to fully
recover all of HBCE's costs, subject to the disclosure and due process policies described in Section 8.4 of
this section.
8.3 Net Energy Metering
Net energy metering allows for customers with certain qualified solar or wind distributed generation to
be billed on the basis of their net energy consumption. Customers eligible for net metering from SCE
will be offered a net metering rate from HBCE.
8.4 Disclosure and Due Process in Setting Rates and Allocating Costs among Participants
Initial HBCE rates will be adopted by the City Council following the establishment of the first year's
operating budget, prior to initiating the customer notification process. Subsequently, HBCE's budget
will be incorporated into the City budget process. Considerations for the budgeting process will
include determining the cost of service and development of rates for the different customer categories
for consideration by the City Council. The budgeting process is open to the public and related HBCE
notices will be incorporated into the existing City Council public notification process. Additionally,
HBCE will initially follow public noticing requirements and consider any rate changes at a duly noticed
public hearing. This will enable affected customers to provide comments on the proposed rate changes
prior to them becoming effective.
9 CUSTOMER RIGHTS AND RESPONSIBILITIES
This section discusses customer rights, including the right to opt out of the HBCE program, as well as
obligations customers undertake upon agreement to enroll in the HBCE program. All customers that
do not opt out either 60 days prior to, or 60 days following enrollment in HBCE (after having received
at least four opt -out notices) will have agreed to become full -status HBCE participants and must adhere
to the obligations set forth below, as may be modified and expanded by the City Council from time to
time.
By adopting this Implementation Plan, the City Council is approving the customer rights and
responsibilities policies contained herein to be effective at HBCE initiation. The City Council retains
authority to modify HBCE policies from time to time at its discretion.
9.1 Customer Notices
A minimum of four notices will be provided to customers describing HBCE, informing them that they
will be automatically enrolled unless they exercise their opt -out rights to remain with SCE's bundled
generation service or their current ESP. The notice shall include information regarding the alternatives
for exercising their opt -out rights. The first notice will be mailed to customers approximately 60 to 90
days prior to the date of automatic enrollment. A second notice will be sent approximately 30 days
later. Customers who do not affirmatively opt out within this period shall be automatically enrolled in
HBCE. The City will either use its own mailing service for opt -out notices or include the notices in the
SCE monthly bills.
After enrollment, customers will have approximately 60 days (two billing cycles) to opt out of HBCE
and return without restrictions to their prior electricity service provider. HBCE customers will be
advised of these opportunities via the distribution of two additional enrollment notices provided
within the first two HBCE billing cycles. Opt -out requests made on or before the sixtieth day following
enrollment will result in customer transfer to utility service with no restrictions. Such customers will be
obligated to pay HBCE's charges for electric services provided during the time the customer took
service from the program, but will otherwise not be subject to any penalty or transfer fee from HBCE.
Customers who establish new electric service accounts within HBCE's service area will be
automatically enrolled in the HBCE program and will have 60 days from the start of HBCE service to
opt out if they so desire. Such customers will be provided with two enrollment notices within this 60-
day post -enrollment period. Such customers will also receive a notice detailing HBCE's privacy policy
regarding customer usage information.
9.2 Termination Fee
Customers who are automatically enrolled in HBCE can elect to transfer back to SCE without penalty
within the first two billing cycles of service. After this opt -out period, customers that terminate their
participation in HBCE will not be subject to a Termination Fee by HBCE.
Customers electing to terminate service will be transferred to the new electric service provider on their
next regularly scheduled meter read date if the termination notice is received a minimum of 15 days
prior to that date. Customers who voluntarily transfer back to SCE will be liable for any reentry fees
and conditions imposed by SCE as set forth in the applicable SCE-CCA tariffs.
9.3 Customer Reentry
If a customer that had opted out of CCA service elects to come back to HBCE service, the customer will
be locked in to CCA service for a period of one year and subject to conditions imposed by SCE as set
forth in the applicable SCE-CCA tariffs. However, HBCE will not impose a customer reentry fee for the
customer's change of service provider.
9.4 Customer Confidentiality
HBCE will establish policies covering confidentiality of customer data that are fully compliant with the
California Public Utilities Commissions required privacy protection rules for CCA customer energy
usage information, as detailed within Decision 12-08-045. Specifically, HBCE will maintain the
confidentiality of customer information, including customer names, service addresses, billing
addresses, telephone numbers, account numbers, and customer -specific billing, credit, or usage
information, unless the customer consents in writing. An exception may be made where reasonably
necessary to conduct business of HBCE or to provide services to customers, including but not limited to
where such disclosure is necessary to (a) comply with the law or regulations; (b) enable HBCE to
provide service to its customers; (c) collect unpaid bills; (d) obtain and provide credit reporting
information; or (e) resolve customer disputes or inquiries. HBCE will not disclose customer information
for telemarketing, e-mail, or direct mail solicitation. This requirement does not extend to disclosure of
generic information, or aggregate data, regarding the usage, load shape, or other general characteristics
of a group or rate classification, unless the release of that information would reveal customer -specific
information because of the size of the group, rate classification, or nature of the information. HBCE
will handle customer energy usage information in a manner that is fully compliant with the California
Public Utility Commissions required privacy protections for customers of Community Choice
Aggregators, as currently defined in Decision 12-08-045.
9.5 Responsibility for Payment
Customers will be obligated to pay HBCE charges for service provided through the date of transfer.
Pursuant to CPUC regulations, electricity service will not be shut off for failure to pay the HBCE's bill.
However, SCE has the right to shut off electricity to customers for failure to pay electricity bills, and
Rule 23 mandates that partial payments are to be allocated pro rata between SCE and HBCE. In most
circumstances, customers will be returned to utility service for failure to pay bills in full and customer
deposits, if collected, will be withheld in the case of unpaid bills. SCE would attempt to collect any
outstanding balance from customers in accordance with Rule 23 and the related CCA Service
Agreement. Consistent with the CCA tariffs, Rule 23, service cannot be discontinued to a residential
customer for a disputed amount if that customer has filed a complaint with the CPUC and that
customer has paid the disputed amount in to an escrow account.
9.6 Customer Deposits
Customers may be required to post a deposit to obtain service from HBCE under certain circumstances.
A deposit may be required for an applicant who previously has been a customer of SCE or HBCE and
whose electric service has been discontinued by SCE or HBCE during the last 12 months of that prior
service because of nonpayment of bills. Such customer may be required to reestablish credit by
depositing the prescribed amount. Additionally, a customer who fails to pay bills before they become
past due as defined in SCE Electric Rule #11 (Discontinuance and Restoration of Service) and who
further fails to pay such bills within five days after presentation of a discontinuance of service notice
for nonpayment of bills, may be required to pay said bills and reestablish credit by depositing the
prescribed amount. This rule will apply regardless of whether or not service has been discontinued for
such nonpayment. Failure to post a deposit as required will cause the account service transfer request
to be rejected, and the account will remain with the SCE.
10 PROCUREMENT PROCESS
10.1 Introduction
This section describes HBCE's initial procurement policies and the key third -party service agreements
by which the City will obtain operational services for the CCA program.
By adopting this Implementation Plan, the City Council approved the general procurement policies
contained herein to be effective at HBCE initiation. The City Council retains authority to modify HBCE
policies from time to time at its discretion.
10.2 Procurement Methods
The City anticipates entering into agreements for a variety of services needed to support HBCE
development, operation and management. The City will generally utilize competitive procurement
methods for services but may also utilize direct procurement or sole -source procurement, depending
on the nature of the services to be procured. Direct procurement, or sole -source procurement, is the
purchase of goods or services without competition when multiple sources of supply are available. Sole -
source procurement is generally to be performed only in the case of emergency or when a competitive
process would be an idle act.
The City will utilize a competitive solicitation process to enter into agreements with entities providing
electrical services for the HBCE. Agreements with entities that provide professional legal or consulting
services, and agreements pertaining to unique or time -sensitive opportunities, may be entered into on a
direct procurement or sole -source basis at the discretion of the City Manager or the City Council.
Authority for terminating agreements will generally mirror the authority for entering into the
agreements.
10.3 Key Contracts
10.3.1 Electric Supply Contracts
HBCE will initiate service using a multi -year electricity supply contract with one or more qualified
providers. The third party provider(s) will supply electricity and related services to customers under
contract(s) between the provider and HBCE. HBCE may complete additional solicitations to
supplement its energy supply and/or to replace contract volumes provided under the original contract.
HBCE would begin such procurement sufficiently in advance of contract expiration so that the
transition from the initial supply contract occurs smoothly, avoiding dependence on market conditions
existing at any single point in time. Under the initial supply contract, the supplier commits to serve the
composite electrical loads of customers in the program. The primary supplier is responsible for
ensuring that a certified Scheduling Coordinator schedules the loads of all customers in the HBCE
program, providing necessary electric energy, capacity/resource adequacy requirements, renewable
energy and ancillary services. The primary supplier is responsible for HBCE's day-to-day energy
supply operations and for managing the predominant supply risks for the term of the contract. The
primary supplier must meet the program's renewable energy goals. However, additional suppliers
may be identified to supplement requisite renewable suppliers of the HBCE program. The primary
supplier will also be responsible for ensuring HBCE's compliance with all applicable resource
adequacy and regulatory requirements imposed by the CPUC or FERC.
HBCE anticipates executing the electric supply contract for all load in early 2017.
10.3.2 Data Management Contract
A data manager will provide the retail customer services of billing and other customer account services
(Electronic Data Interchange (EDI) with SCE, remittance processing, and account management).
Recognizing that some qualified wholesale energy suppliers do not typically conduct retail customer
services whereas others (i.e., direct access providers) do, the data management contract will likely be
separate from the electric supply contract(s). A single contractor will perform all of the data
management functions.
The data manager is responsible for the following services:
• Data exchange with SCE
• Technical testing
• Customer information system
• Customer call center
• Billing administration/retail settlements
• Settlement quality meter data reporting
• Reporting and audits of utility billing
E
Utilizing a third party for the fulfillment of customer account services eliminates a significant expense
associated with implementing a customer information system. Such systems can impose significant
information technology costs and take significant time to deploy. A longer term contract is appropriate
for this service because of the time and expense that would be required to migrate data to a new
system. Separation of the account services contract from the energy supply contract gives the City
greater flexibility to change energy suppliers, if desired, without facing an expensive data migration
issue. It is anticipated that HBCE will execute a contract for data management services in late 2016.
10.3.3 Electric Supply Procurement Process
HBCE plans to issue a request for proposals for shaped energy, renewable energy and resource
adequacy capacity as part of a competitive solicitation process. The RFP will be released in late 2016
with responses due approximately two weeks thereafter. Contract negotiations will commence
immediately following proposal evaluation and short-list selection. Similar to the initial supplier
selection processes administered by California's currently operating CCA programs, HBCE intends to
identify a highly qualified pool of suppliers for further negotiations, which will be completed prior to
initiation of CCA service. Following the identification of short-listed energy services provider
candidates, HBCE will update the Commission regarding its selection process. Final supplier selection
is anticipated to be made in early 2017.
11 CONTINGENCY PLAN FOR HBCE TERMINATION
11.1 Introduction
This section describes the process to be followed in the case of HBCE program termination. In the
unexpected event that the City would terminate the CCA and return Customers to SCE service, the
proposed process is designed to minimize the impacts on its customers and on SCE. The termination
plan follows the requirements set forth in SCE's tariff Rule 23 governing service to CCAs. The City
Council retains the authority to modify program policies from time to time at its discretion.
11.2 Termination by the City
HBCE will offer services for the long term with no planned program termination date. In the
unanticipated event that the City Council decides to terminate HBCE and after any applicable
restrictions on such termination have been satisfied, notice will be provided to customers six months in
advance that they will be transferred back to SCE. A second notice will be provided the last 60 days in
advance of the transfer. The notice will describe the applicable distribution utility bundled service
requirements for returning customers then in effect, such as any transitional or bundled portfolio
service rules.
At least one year advance notice will be provided to SCE and the CPUC before transferring customers,
and the City will coordinate the customer transfer process to minimize impacts on customers and
ensure no disruption in service. Once the customer notice period is complete, customers will be
transferred en masse on the date of their regularly scheduled meter read date.
The City will post a bond or maintain funds held in reserve to pay for potential transaction fees
charged to HBCE for switching customers back to distribution utility service. Reserves will be
maintained against the fees imposed for processing customer transfers (CCASRS). The Public Utilities
Code requires demonstration of insurance or posting of a bond sufficient to cover re-entry fees
imposed on customers that are involuntarily returned to distribution utility service under certain
circumstances. The cost of re-entry fees are the responsibility of the energy services provider or the
Community Choice Aggregator, except in the case of a Customer returned for default or because its
contract has expired. HBCE will post financial security in the appropriate amount as part of its
registration materials and will maintain the financial security in the required amount, as necessary.
12 APPENDICES
Appendix A: City of Hermosa Beach Resolutions Adopting Implementation Plan
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES )
CITY OF HERMOSA BEACH )
I, Elaine Doerfling, City Clerk of the City of Hermosa Beach, California, do
hereby certify that the foregoing Ordinance No. 16-1368 was duly and regularly passed,
approved and adopted by the City Council of the City of Hermosa Beach at a regular
meeting held at the regular meeting place thereof on the 13th day of September, 2016,
and the Ordinance will be published in the Easy Reader newspaper on September 22,
2016.
The vote was as follows:
AYES: Armato, Duclos, Massey, Mayor Fangary
NOES: Petty
ABSENT: None
ABSTAIN: None
DATED: September 14, 2016
City Cler