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ESA Memo to City of Pleasanton:June 13,2016 Our review of the Technical Study leads us to conclude that there is value for Pleasanton in joining a County-wide CCA based on the City's existing energy and climate goals;however,joining the CCA presents risks that should be thoroughly assessed by the Technical Study.We find shortcomings in the Study's rate forecasting and its assessment of hydropower risks (availability and cost)and the risk of high-cost renewables creating a competitive and rate disadvantage for the CCA.Further,we suspect that some of the load forecasting and GHG savings estimates may be overly optimistic.We recommend that the City of Pleasanton be cautious about joining the CCA without further study of rate design,utility exit fees (Power Charge Indifference Assessment,or PCIA),and the cost premium for local (in County) renewable energy projects and the ability of the CCA to finance those projects.We further recommend benchmarking the Alameda CCA against existing Bay Area CCAs to evaluate the strategies and approaches used to provide their customers with a cost competitive and cleaner energy alternative to PG&E power. Findings 1. Risk Assessment The Study reviews the key relevant risks to the formation of a CCA;namely the financial risks to CCA members,energy procurement related risks,legislative and regulatory risks,uncertainty around exit fees imposed by PG&E (also known as Power Charge Indifference Adjustments,or PCIA),rates charged by PG&E,and Bonding Risk. The Study accurately highlights the key risks facing the CCA as a financially viable organization:low power prices offered by PG&E,future high renewable prices and costs,and PCIA charges.It should be noted that these risks are identical to those faced by other CCAs,notably MCE,Sonoma Clean Power,Lancaster Choice Energy, CleanPowerSF and Peninsula Clean Energy. However,we believe that the Study could have provided a more robust assessment of these key risks,and how they impact customer retention and the financial viability of the CCA: Low PG&E Rates. The study notes"it is critical that wholesale power market and price assumptions are consistent between the CCA and PG&E." While access to energy markets is regionally on an equal footing between a CCA and PG&E,there are significant economies of scale which PG&E can utilize,which a CCA does not necessarily have available. The cost advantage of these economies of scale can be somewhat minimized by a smaller organization through collaborative purchases with other smaller load serving entities. For example municipal utilities in the Bay Area have regularly made long-term purchases of renewable energy at competitive prices by joining in with other municipal utilities or by purchasing a portion of the output of a specific renewable asset,such as a wind farm under development. In Scenario 3 of the Study,low PG&E rates create a competitive and rate disadvantage for the CCA. High renewable prices and costs. We believe that the Study could develop a more robust analysis of the risks and impacts of high renewable prices and costs. The Study's scenarios focus on two local renewable resources-wind and solar-as supplies for the CCA. Costs for these two sources have declined dramatically over the last decade,and in addition Alameda County does have the potential for repowering(i.e.,upgrading with more powerful modern units)its portion of the Altamont Pass wind project. 2