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ESA Memo to City of Pleasanton:June 13,2016 The Study might be strengthened by additional review of the potential high costs of these sources, either procured from wholesale providers or through local renewable projects. The Study found an average price of$49/Mwh for solar contracts and$55/Mwh for wind power contracts paid by municipal utilities in California in 2015. While the Study assumed a 15%premium for projects in Alameda County,it is not clear if this premium sufficiently takes into account the high land values and costs in the Bay Area in general and Alameda County specifically. In a recent example,the City of Palo Alto utilities purchased both renewable power from a utility scale project in Southern California and simultaneously developed opportunities for local renewable generation projects. While the utility scale projects will cost approximately 3.7 cents per kWh,the City will pay 16.5 cents per kwh for local generation projects (Source:City of Palo Alto Utilities website and City Council meeting notes,2016). High renewable costs will directly impact the price differential the CCA can offer. In Scenario 2,for example,a renewable cost of 4.5 cents per kWh is roughly 50%of the total generation costs. This price range will likely only be possible by purchasing power from large utility scale solar generation assets located outside of Alameda County. If local generation comprises a larger portion of the renewable mix,these prices cannot be maintained. Additionally,with the rapid development of CCAs within the Bay Area and California,the demand for renewable energy may increase rapidly,at least in the short term,as these CCAs seek to purchase energy from operating renewable assets while developing lower cost long-term assets. Until long-term projects are financed and come on- line,the short term prices for renewable energy may increase,thus significantly impacting the rate estimates contained in the Study. PCIA Charges. The Power Charge Indifference Assessment(also known as an exit fee) is assessed by PG&E on an annual basis on all customers who do not opt out of the CCA program. The PCIA charges by PG&E represent a significant cost to CCA customers. The PCIA charges and associated Franchise Fee PG&E has assessed its residential customers over the past 8 years are listed below. While these fees increased by 13.4%between 2009 and 2012,they have stabilized in recent years. The underlying study by Peninsula Clean Energy does note that they expect these PCIA charges to increase by 8%in the 2016-2018 period. The methodology used by PG&E for computing these fees is currently under review. Other CCAs have expressed the view that the PCIA is a critical risk for CCAs in maintaining a price differential to PG&E. One CCA Chief Executive expressed concern that PCIA charges could increase at a much faster rate than has historically occurred. Indeed,on June 1, 2016 PG&E proposed a 2017 Vintage PCIA charge of$0.0286,up from$0.02323,which would increase the average residential monthly PCIA charges to approximately$16.00.2 Some CCAs are working together in an attempt to manage upcoming risks associated with future PCIA charges. The future Alameda CCA should collaborate with the other CCAs in the Bay Area in ensuring that PCIA charges do not damage the competitive position of the new organization. 2 Assuming the average residential consumption of 562 kwh per month(El A,Average Monthly Residential Consumption,2014). 3