DEPARTMENT Power Enterprise
AGENDA NO.
9 MEETING DATE
January 23, 2024
AGENDA ITEM
Public Utilities Commission
City and County of San Francisco
Approve and Authorize the General Manager to Seek Approval from the Board of Supervisor s to Increase the Administrative Code Section 21.43 Power Sales Revenue Limit: Regular Calendar
Project Manager: Julia Olguin, Director of Origination and Power Supply
Approve and A uthorize the General Manager to Seek Approval from the Board of Supervisors to Increase the Administrative Code Section 21.43 Power Sales Revenue Limit
Summary of
Proposed
Commission Action:
Approve and authorize the General Manager to seek approval from the Board of Supervisors to execute power sales contracts, with anticipated revenue in excess of $1 million or more subject to an annual revenue limit of $20 million per year, through July 1, 2025.
Background: The Power Enterprise operates two power supply programs: Hetch Hetchy Power, the City’s full service public power utility, and CleanPowerSF, the City’s Community C hoice Aggregation (CCA) program. Both Hetch Hetchy Power and CleanPowe rSF purchase and sell electricity in the wholesale markets to serve their respective retail customers.
San Francisco owns and operates 388 megawatts of hydroelectric and renewable generation facilities and through Hetch Hetchy Power has provided clean electricity for more than 100 years.
In 2016, CleanPowerSF initiated service to eligible customers within the City in multiple phases until c itywide mass enrollment of all eligible customer accounts was completed in June 2020.
While Hetch Hetchy Power serv es its customers primarily with electricity generated by City- owned generation resources , CleanPowerSF serves its customers primarily with electricity purchased through wholesale market transactions. Both Hetch Hetchy Power and CleanPowerSF comply with state law and California Independent System Operator market rules, including requirements to procure renewable energy, Resource Adequacy capacity, energy storage resources, and to contribute to statewide grid reliability. A s a CCA, CleanPowerSF is subject to numerous additional energy procurement requirements under state law and California Public Utilities Commission regulation.
Hetch Hetchy Power and CleanPowerSF also engage in procurement efforts through competitive bidding processes, as necessary, for short - and medium- term contracts for energy and electricity -related products, to manage the Contract: Approve and Authorize the General Manager seek Approval from the Board of Supervisor to Increase the Administrative Code Section 21.43 Power Sales Revenue Limit Commission Meeting Date: January 23, 2024
programs’ power supply portfolios consistent with best utility practice. As the Power Enterprise manages fluctuations in supply and demand and navigates the constantly changing regulatory requirements of multiple agencies, it also sells electricity products that are in excess of its power supply requirements .
Sales of such excess electricity products allow the SFPUC to maximize the value of the assets entrusted to us by our ratepayers.
Chapter 21.43 of the Administrative Code
To support the need of the Power Enterprise to conduct business at a commercial pace in competitive electricity markets, the Commission adopted Resolution No. 22- 0109, conditionally authorizing the General Manager to execute energy supply contracts using specified form agreements and to seek Board of Supervisors approval, as necessary. Contracts executed pursuant to this authority were subject to the following conditions:
i. the total cost of the executed contracts may be recovered by Hetch Hetchy Power and CleanPowerSF in adopted rates and is consistent with the programs' 10-year Financial Plans adopted by the Commission; ii. the total cost of all energy supply contracts executed under this authorization shall not exceed $150 million per year (increased to $200 million per year in June 2023 by Ordinance No. 95-23);
iii. the total revenue from contracts to sell electricity products executed under this authorization shall not exceed $10 million per year; iv. the duration of any contract shall not exceed 25 years, unless the Commission approves a contract extension; and
v. the authority granted under this Resolution shall expire July 1, 2025 unless the Commission approves an extension.
Subsequently, i n July 2022, the Board of Supervisors and Mayor approved Ordinance No. 176- 22 adding Chapter 21.43 to the Administrative Code, approving form electricity purchase and sales contracts, grant ing Administrative and Environment Code waivers for these contracts, and delegating authority to the General Manager under Charter Section 9.118 to execute certain contracts with terms in excess of 10 years, or requiring expenditures of $10 million or more, or having anticipated revenues exceeding $1 million, for a period of three years through July 1, 2025. The annual revenue for all agreements entered under Chapter 21.43 may not exceed $10 million per year. This annual revenue cap may be increased by a Resolution of the Board of Supervisors.
Need to Increase Annual Revenue Cap
Wholesale prices for electricity products have been significantly higher than expected since Chapter 21.43 of the Administrative Code was established. Such increases reflect several facto rs, including global energy shortages caused by trade disruptions and armed conflict . In addition, new California energy Contract: Approve and Authorize the General Manager seek Approval from the Board of Supervisor to Increase the Administrative Code Section 21.43 Power Sales Revenue Limit Commission Meeting Date: January 23, 2024
facilities have not come online as expected due to supply chain disruptions and delays to project permitting and g rid interconnection. As a result, our power programs are experiencing significant price increases for all energy products, creating both higher costs and higher revenue s when Hetch Hetchy Power or CleanPowerSF solicit offers to purchase excess power supply resources. Staff anticipates this high price market environment will continue for the next two to five years.
Staff seeks the Commission’s approval to increase the delegated sales revenue cap from $10 million per year to $20 million per year and to authorize the General Manager to seek Board of Supervisors approval under Chapter 21.43 of the Administrative Code. Increasing the annual sales cap to $20 million will allow Staff to continue to make timely sales of excess energy supplies to the benefit of Hetch Hetchy Power and CleanPowerSF ratepayers.
Result of Inaction: CleanPowerSF and Hetch Hetchy Power may lose out on opportunities to sell excess electricity supplies and secure the best possible prices and terms for such sales for the benefit of our ratepayers.
Schedule: The proposed Resolution would take effect following approval by the Board of Supervisors and would expire by operation of law on July 1, 2025.
Environmental
Review:
Adoption of this Resolution does not constitute a “project” under the California Environmental Quality Act (CEQA) Guidelines section 15378 because it does not involve any commitment to any specific contract or project that may result in a physical change in the environment. The contracts that would be executed pursuant to this Resolution are for the purchase and sale of electricity and related products from existing facilities or with suppliers that are in the process of developing new facilities. Any new facilities would undergo environmental review in the jurisdictions where they are located. The form contracts approved by the Commission in the attached Resolution require Sellers to comply with the law and, for to-be-constructed projects, to complete environmental review and obtain all n ecessary permits prior to commercial operation and commencing delivery of electricity.
Recommendation: SFPUC staff recommends that the Commission adopt the attached resolution.
PUBLIC UTILITIES COMMISSION
City and County of San Francisco
RESOLUTION NO.
WHEREAS, The San Francisco Board of Supervisors (“Board”) established a Community Choice Aggregation ( “CCA”) program in 2004 (Ordinance 86- 04) and has implemented the program, called CleanPowerSF, through the work of the San Francisco Public Utilities Commission (“SFPUC” or “Commission”) in consultation with the San Francisco Local Agency Formation Commission (Ordinances 146-07, 147-07, and 232-09); and WHEREAS, Hetch Hetchy Power serves its customers primarily with electricity generated by City-owned generation resources; CleanPowerSF serves its customers entirely with electricity purchased through wholesale market transactions; and
WHEREAS, Hetch Hetchy Power and CleanPowerSF must comply with state law and California Independent System Operator market rules, including requirements to procure renewable energy, Resource Adequacy capacity , and energy storage, and to contribute to grid reliability; and
WHEREAS, The SFPUC needs to engage in a continual process of buying and selling power and simultaneously negotiating a mix of short -, medium-, and long- term contracts for a diverse supply of energy and energy- related products with multiple suppliers, all in an expedited time frame consistent with regulatory deadlines in order to meet regulatory requirements, secure the best possible prices and terms, keep rates affordable and competitive, and manage portfolio risk; and
WHEREAS, To support the need of the Power Enterprise to conduct business at a commercial pace in competitive electricity markets, the Commission adopted Resolution No. 22- 0109, conditionally authorizing the General Manager to execute energy supply contracts using specified form agreements and to seek Board of Supervisors approval, as necessary; and WHEREAS, The Board of Supervisors and Mayor approved Ordinance No. 176-22 adding Chapter 21.43 to the Administrative Code, approving form electricity purchase and sales contracts and delegating authority to the General Manager under Charter Section 9.118 to execute power sales contracts having anticipated revenues exceeding $1 million, subject to an annual revenue cap of $10 million, for a period of three years through July 1, 2025; and WHEREAS, Wholesale prices for electricity products have been significantly higher than expected since Chapter 21.43 of t he Administrative Code was established due to several factors including armed conflict , supply chain disruptions , and delays to project permitting and grid interconnection, causing the value of sales contracts executed for the benefit of Hetch Hetchy Power and CleanPowerSF ratepayers to increase; and
WHEREAS, To facilitate timely and beneficial sales of excess power supplies, Staff seeks Commission approval to increase the annual revenue cap for use of the delegated authority to the General Manager to make sales of electricity products in excess of $1 million, from $10 million to $20 million, and to seek approval from the Board of Supervisors, as necessary; and WHEREAS, Adoption of this Resolution does not constitute a “ project” under the California Environmental Quality Act (CEQA) Guidelines s ection 15378 because it does not involve any commitment to any specific contract or project that may result in a physical change in the environment; the form contracts require Sellers of electricity products to comply with the law and, for to -be-constructed projects, to complete environmental review and obtain all necessary permits prior to commercial operation and commencing delivery of electricity; now, therefore, be it
RESOLVED, Th at this Commission authorizes the General Manager to execute energy sales contracts using approved form agreements, and to seek Board of Supervisors approval, as necessary, to increase the $10 million annual revenue cap for power sales contracts with revenues of $1 million or more by $10 million, for a total revenue cap of $20 million per year, until July 1, 2025.
I hereby certify that the foregoing resolution was adopted by the Public Utilities Commission at its meeting of January 23, 2024.
Secretary, Public Utilities Commission