MUNICIPAL CODE AND
ENERGY RISK
MANAGEMENT POLICY
AMENDMENTS
San José City Council
May 2, 2023
Lori Mitchell, Director of Community Energy
Zach Struyk, Assistant Director of Community Energy
Jeanne Sole, Deputy Director of Power Resources
Prachi Avasthy, Division Manager of Risk Management and Contracts Administration
BACKGROUND
• Title 26, San José Municipal Code (approved in November 2017) establishes requirements for operating San José Clean Energy (SJCE) including:
• Rate-setting
• Procurement of power products for SJCE
• SJCE's Energy Risk Management Policy (approved in May 2018) sets requirements and mitigation strategies to manage risks from participation in the energy markets
• SJCE’s Energy Risk Management Regulations set the risk management roles, strategies, controls, and authorities to form a comprehensive risk management program
1 PROPOSED AMENDMENTS
• Staff recommends several amendments
to Title 26 of the San José Municipal
Code, and Energy Risk Management
Policy to:
• Align with utility best practices to
purchase power in forward markets
• Improve efficiency
• Reduce risks
• Timely recover costs
• Maintain competitive rates
2 PROPOSED PROCUREMENT AUTHORITY CHANGES
• Main Changes:
1. Removes authority of CED Director of Community to enter into short-term agreements for power for up to $500,000 per day (never used)
2. Requires City Council to approve all agreements ten years or more (65% of power portfolio)
3. Authorizes City Manager to enter into short-term agreements (3 years or less) and medium- term agreements (more than 3 years and less than 10 years) for power
4. Authorizes the City Manager to enter into Master Power Purchase and Sale Agreements:
• Defines terms for future transactions, does not obligate the Department to buy or sell power
5. Authorizes the Director of Community Energy to enter into short-term agreements for power • Consistent with electric utility best practices of forward procurement • Improves operational efficiency & reduces risks
• Ensures the department always has authority to purchase power 3 RATE-SETTING
• SJCE rates compete with PG&E
• CPUC does not limit IOUs (PG&E) on number of rate changes per year • PG&E adjusted rates 5 times in 2022
• Cost-of-service approved in Dec 2022
• Set rates to cover cost of providing service and build financial reserves • SJCE may need a rate that is pegged with PG&E in the future • Example: GreenValue
• Need flexibility to maintain financial stability and provide competitive rates 4 PROPOSED RATE AND NOTICING CHANGES
1. Remove provisions limiting
the number of rate increases
2. Amend requirements for
sending notice of rate hearing
from 45-30 days to 15 days
3. Adds requirement to post rate
increases on SJCE's website
and City Hall no less than 15
days before rate hearing
Improves financial stability and
timely cost recovery while
maintaining transparency in rate-
setting process
5 November 2022 trilingual rate notice
PROPOSED BILLING AND PAYMENT CHANGES
• Make late charges and returning
customers to Investor-Owned Utility
(i.e., PG&E) discretionary, instead of
mandatory
• Provide customers 90 days, instead
of 30 days, to bring their accounts
current
• Gives customers more flexibility as
they recover from economic impacts
of the pandemic
6 QUESTIONS?
7 Recommendations:
A. Approve an ordinance amending Section
2.04.4620 of Chapter 2.04 of Title 2, and Title
26 of the San José Municipal Code to provide
the Community Energy Department the
authority to efficiently procure and contract for
the purchase and sale of power products and
to ensure timely collection of revenues.
B. Adopt a resolution approving revisions to
Council Policy 1-23, “Energy Risk Management
Policy” to specify the delegated contract
authority for the purchase and sale of power
products; and establish the procurement
procedures for the purchase of power products.
Staff:
Lori Mitchell, Director of Community Energy
Zach Struyk, Assistant Director of Community Energy
Jeanne Sole, Deputy Director of Power Resources
Prachi Avasthy, Division Manager of Risk Management
and Contracts Administration