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ESA Memo to City of Pleasanton:June 13,2016 Additionally,each of these CCAs operates on similar goals,which are not explicitly presented or discussed in the Study. The following six goals are the foundation of nearly all CCAs in California. These include: 1. Revenue sufficiency: rates must recover all program expenses,including debt service requirements and reserves. 2. Rate competitiveness:rates must allow the CCA to compete in the marketplace to retain and attract customers in all classes. 3. Rate stability: rates should be stable to reduce volatility of customer bills. 4. Customer understanding: rates should be simple,transparent and easily understood by customers. 5. Equity among customers:rate differences between customers are justified by differences in usage characteristics and cost of service. 6. Efficiency:rates should encourage energy conservation and efficient use of electricity(e.g., off-peak vehicle charging). 2. Develop Rate Design Strategy One of the key risks of a new CCA is the initial development of its rates. The RFP and the Study do not reference any specific goals or strategies around rate design. The approach to rate design should be included as it drives much of the operational and procurement decisions of the CCA. All similarly situated customers should pay equivalent delivery charges whether taking service from the Alameda CCA or PG&E. The primary basis for rate comparison/competition should be focused on generation charges(energy,demand and related adjustments) and exit fees. Offering a generally similar rate structure would facilitate comparability,ensure alignment with PG&E delivery rates, and ensure smooth service transition without significant bill impacts. Rates are designed on a forecast"test year"initially,using projects of energy sales and other billing amounts by the proposed rate structure. The total revenue collected from the proposed rates includes all program expenses for the test year including power supply costs,administrative costs, debt servicing and reserves. Rates can be designed in a variety of ways to generate the same total revenue but which can impact costumer segments quite differently. While rate design was not part of the SOW of the feasibility report,it is an important consideration for Pleasanton and the other CCA members as they evaluate their participation in the Alameda CCA. Basic strategies for rate design could include: • Establish initial generation rates that are a specified percentage below currently applicable PG&E generation rates. • Evaluate rates annually for possible adjustment. • Ensure rates remain competitive over time. Well-designed rates are important for the success of the Alameda CCA and directly impact two key areas of performance: • Financial Performance. Alameda CCA should be entirely funded through the electric rates charged to its customers.The selected rate structure will impact cash flows,capital financing requirements and Peninsula Clean Energy's credit profile among other considerations. • Customer Satisfaction. Customers have the freedom to choose whether or not to participate in Peninsula Clean Energy,and rates are a primary driver of customer 11