1. Energy and Electricity Markets 101
Community Choice Energy Advisory Committee
June 25th,2015

2. About Pacific Energy Advisors
50+ Years of collective experience w/in California’s electric utility industry
Leading advisors for all technical matters related to the Community Choice Aggregation service model
CCA feasibility assessments for over 40 municipalities since 2003
Exclusive professional focus on “non-IOU” service models
Current Clientele (sample):
Marin Clean Energy (CCA)
Lancaster Choice Energy (CCA)
City and County of San Francisco (CCA)
City of Moreno Valley, Electric Utility Division (POU)
School Project for Utility Rate Reduction (Direct Access)
Primary service offerings: resource planning and procurement, financial and economic analysis, contract negotiation and administration, legislative and regulatory analysis/compliance, rate-setting, utility operations support
Formed in 2013; based in Folsom, CA (PEA principals engaged in CCA since 2003)

3. PEA’s CCA EXPERIENCE
Unique, unparalleled experience with CCA evaluation, implementation and operation
PEA has provided key technical consulting services in support of ALL California CCA’s, which have filed certified Implementation Plans with the CPUC
CCA
Key Activities/Responsibilities
Analytical Highlights
Sample of Work Products
Marin Clean Energy
Examined costs/benefits of CCA formation
Proposed program structure and governance
Developed retail product options/rates
Created Implementation Plan and Joint Powers Agreement (“JPA”)
Drafted supply agreements/contracts and assisted in supplier negotiations
Cost-benefit analysis
Risk scenario analysis
Load study analysis
Rate analysis
Supply portfolio evaluation
Marin Clean Energy Implementation Plan(s)
Rate and Load Studies
Customized Confirmation Agreements and Exhibits
Sonoma Clean Power
Developed procurement strategies
Sonoma County CCA Feasibility Study
SCP Implementation Plan
Lancaster Choice Energy
Recommended retail product options and developed related rate structure
Developed Net-Energy Metering Program
Implementation advisory services
Net-Energy Metering Tariff

4. How “The Grid” Works

5. How “The Grid” Works (continued)
How does power get to CCA/PG&E customers?
California residents and businesses receive their power from a networked grid: Western U.S. + parts of Canada and Mexico.
Physically, all electricity is the same – the energy received by customers is determined by power flows rather than contract rights.
A utility’s power mix is determined by the amount of electricity injected into the grid from generation resources it owns or controls (under contract).

6. Who Manages the Grid?
Various “Balancing Authorities” (BAs) are responsible for real-time balancing of supply (generating resources) and demand (load)
BAs are responsible for ensuring grid reliability.
There are five BAs in California, with the largest being the California Independent System Operator (CAISO). A CCA serving San Mateo County and surrounding areas would be operating within the CAISO BA.

7. Hourly CAISO Electricity Pricing
Within CA, prices are established for over 5,000 “nodes” every 5-minutes.
The difference in price between two nodes is referred to as “congestion”.

8. California’s Generating Fleet
More than 1,000 electric generating units over 1 MW in CA.
A typical 1 MW generator will serve the annual energy needs of approximately 1,000 homes.
79,000 MW of generating capacity.
≈58% of capacity is natural gas.
70% of CA’s energy is produced in-state.
≈20% of CA’s generating capacity uses renewable fuel sources.
2,400 MW of distributed solar has been installed in CA.

9. Energy Products & Services for CCAs
Scheduling Coordinator Services (“SC” services)
Electric Energy
Renewable Energy
Resource Adequacy Capacity
Other Specified Energy Products

10. Electricity Contracting
Bilateral Contracts
Contracting parties – Buyer/Seller
Term length
Price
Product(s)
Delivery parameters/schedules
Credit terms
Market Purchases

11. Renewable Energy Procurement
Mandatory renewable energy (RE) procurement:
California’s Renewables Portfolio Standard (RPS) Program
Specified renewable energy (RE) procurement mandates through 2020
RPS mandates apply to all Load Serving Entities (LSEs), including CCAs
Only California Energy Commission-certified generators are RPS-eligible
Various RE products are procured to demonstrate compliance
Compliance is demonstrated via retirement of RECs
Compliance measured over multi-year periods

12. Renewable Energy Procurement (cont.)
Voluntary RE procurement:
Responsive to local goals and objectives
Accommodates green pricing programs
Not subject to RPS rules
General Information:
ALL renewable energy production is substantiated via REC ownership
RECs are created, tracked, transferred and retired through WREGIS

13. Renewable Energy Products
Various RE contracting mechanisms/products under RPS:
Bucket 1 – In-state or dynamically scheduled into CA (RECs delivered contemporaneously with electric energy)
Bucket 2 – Firmed/shaped imports into CA (delivered REC and energy quantities are balanced annually)
Bucket 3 – Unbundled RECs (RECs are sold separately from energy)
Increasing interest in maximizing Bucket 1 product use
Variety of contracting options are available
Voluntary RE products (example: Green-e)

14. Resource Adequacy Capacity
Reserve capacity promotes grid reliability
LSEs must secure/procure capacity at 115% of peak demand
Reserve capacity is referred to as “Resource Adequacy” or “RA”
Additional RA requirements: generator location and operational flexibility
RA capacity is transacted bilaterally (i.e., no organized market)

15. Sources of Power Generation – Hydro
In California, < 35MW = RPS-eligible; > 35 MW = “large hydro”
Drought conditions have reduced hydropower production (and increased natural gas generation):
During the first half of 2014 ~ 10% of CA’s total electricity generation
Average 2004 – 2013 ~ 20%

16. Sources of Power Generation – Wind
In CA, highest installed capacity amongst all renewable resource types
Intermittent power supply
Relatively low cost resource

17. Sources of Power Generation – Biogas
Power produced through the anaerobic digestion of biodegradable materials
Uses material that is already part of the carbon-cycle
Power production process results in overall decrease in emissions

18. Sources of Power Generation – Solar
Rapidly growing and “preferred” renewable resource
Different technologies: photovoltaic, thermal
Power supply is intermittent with predictable near-term delivery profile

19. Sources of Power Generation – Geothermal
Very low-carbon emitting generating process
Electricity generated using heat from the earth’s core
Generating potential is regionally isolated
Typically requires considerable water use

20. California CCA Overview
CCA provides for:
Local control/accountability
Competitive rates (based on current market conditions)
Customized power supply
Locally focused energy programs
Economic development benefits
Opt-out model
CCA’s are self-regulating entities
Three operating CCA’s in California:
Marin Clean Energy (2010)
Sonoma Clean Power (2014)
Lancaster Choice Energy (2015)

21. Pertinent California Regulatory Agencies
California Public Utilities Commission (CPUC): Regulates the investor owned utilities (i.e., PG&E, SCE, and SDG&E), but also regulates capacity reserve requirements of CCA’s
California Energy Commission (CEC): Primary energy policy and planning agency in California – long-term forecasting, planning for energy emergencies, generator permitting and certification as well as promoting energy efficiency and renewable technologies
California Air Resources Board (ARB): Objectives are to maintain healthy air quality and to promote approaches for compliance with air pollution rules/regs