(a) Findings.
(1) The Power Enterprise (“Power Enterprise”) of the Public Utilities Commission (“PUC”) operates a municipal utility, Hetch Hetchy Power, and a community choice aggregation (“CCA”) program, CleanPowerSF. Both Hetch Hetchy Power and CleanPowerSF purchase and sell electricity in the wholesale markets to serve their respective retail customers in San Francisco.
(2) In May 2016, the City launched CleanPowerSF to provide San Francisco residents and businesses the option to receive cleaner, more sustainable electricity at rates comparable to PG&E’s rates. See Ordinance Nos. 86-04, 147-07, 232-09, 45-10, 200-12, 78-14 and 75-15 and Resolution Nos. 348-12 and 331-13.
(3) 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. 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 (RA), and energy storage. In addition, as a CCA, CleanPowerSF is subject to numerous energy procurement requirements under state law and California Public Utilities Commission decisions.
(4) The PUC is in a unique market position because both Hetch Hetchy Power and CleanPowerSF directly compete with PG&E and private power providers for retail electricity customers and with other load serving entities for supplies of electricity and electricity-related products in the highly competitive wholesale markets. This competitive environment heightens the need to maintain prices at a level that is competitive with PG&E despite the many regulatory burdens and costs placed on CCAs and the unique challenges faced by Hetch Hetchy Power due to its reliance on PG&E for wholesale distribution service.
(5) To meet regulatory requirements, secure the best possible prices and terms, keep rates affordable and competitive, and manage procurement risk, the PUC engages in a continual process of procuring 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.
(6) The PUC is engaged in a number of procurement efforts to fulfill the City’s goals for a carbon-free future, energy independence, equity in access to 100% renewable energy supply; ensure stable and affordable rates, meet Hetch Hetchy Power’s and CleanPowerSF’s regulatory obligations; and contribute to the reliability of the state’s energy grid and resource supply.
(7) These efforts include CleanPowerSF programs to secure a significant number of long-term agreements to purchase electricity from new renewable and energy storage projects, including from small renewable projects located in disadvantaged communities under the Disadvantaged Communities (“DAC”) Green Tariff and the Community Solar (“CS”) Green Tariff programs, and renewable and energy storage projects located on City reservoirs within the City. The DAC and CS Green Tariff programs will provide 100% renewable energy at discounted rates to residents of disadvantaged communities within the City. The costs expended on procuring energy for Hetch Hetchy Power and CleanPowerSF are fully recovered by PUC through customer billing.
(8) Hetch Hetchy Power and CleanPowerSF will also engage in procurement efforts through competitive bidding processes as necessary for short- and medium-term agreements for energy and energy-related products. As the PUC manages fluctuations in supply and demand and navigates the constantly changing regulatory requirements of multiple agencies, it also engages in the sale of excess energy.
(9) In Ordinance Nos. 75-15, 223-15, 08-18, and 11-20 (collectively, the “Procurement Ordinances”), the Board of Supervisors authorized the PUC to use two commonly used industry form contracts and PUC pro forma contracts with terms that deviated from the City’s standard contract terms, and authorized modifications to the form agreements so long as such modifications, in the judgment of the General Manager and the City Attorney, did not materially decrease the City’s rights or materially increase its liabilities. These agreements were:
(A) Western System Power Pool (“WSPP”) Agreement;
(B) Edison Electric Institute (EEI) Master Agreement;
(C) PUC Renewable Power Purchase Agreement; and
(D) PUC Energy Purchase and Sale Master Agreement.
The Procurement Ordinances approved the use of these contracts and certain waivers for specific energy and related product procurements starting in 2015.
(10) For three years, ending in 2025, the PUC will continue to enter into contracts to meet the energy requirements for Hetch Hetchy Power and CleanPowerSF, and for this purpose has developed three new form contracts. Each of these form agreements is on file with the Clerk of the Board of Supervisors, in File No. 220652 and is incorporated herein by reference as though fully set forth:
(A) PUC Renewable Power and Energy Storage Purchase Agreement;
(B) PUC Energy Storage Purchase Agreement; and
(C) PUC Small Renewable Power Purchase Agreement.
(11) The PUC will also enter into contracts to meet the energy requirements for CleanPowerSF, with the Joint Powers Authority California Community Power and will use form contracts developed by California Community Power with terms that deviate from the City’s standard contract terms. These form agreements are on file with the Clerk of the Board of Supervisors, in File No. 220652 and are incorporated herein by reference as though fully set forth:
(A) Buyer Liability Pass Through Agreement;
(B) Project Participation Share Agreement; and
(C) Coordinated Operations Agreement.
(12) In order for CleanPowerSF and Hetch Hetchy Power to meet State law requirements for RA, electricity-related products that ensure sufficient electric generation resources are available to meet unusually high levels of demand, and the Renewable Portfolio Standard (RPS), the state’s program for continuously increasing purchases from renewable energy facilities, the PUC purchases RA and RPS from a variety of suppliers, but on occasion must rely on purchases from Investor Owned Utilities (IOUs) in California. The IOUs in California, PG&E, Southern California Edison, and San Diego Gas & Electric, all require RA and RPS buyers to agree to binding arbitration when purchasing these products.
(13) In Ordinance No. 227-18, the Board of Supervisors authorized binding arbitration provisions in certain limited circumstances and approved three PG&E agreements with binding arbitration provisions. In order to reliably meet the State’s legal requirements for RA and RPS compliance, it is imperative to authorize the PUC to include binding arbitration provisions in agreements for RA and/or RPS with California IOUs.
(b) Approval of Form Agreements. The Board of Supervisors approves the use of the pro forma contracts and substantially similar agreements described in subsections (a)(9), (a)(10) and (a)(11))1
for the purchase and sale of power and related products, including the indemnification and limitation of liability provisions therein, notwithstanding that the terms of those agreements may deviate from the City’s standard contract terms. Further, the Board of Supervisors approves hold harmless agreements for the purchase of power and related products. The Board of Supervisors also authorizes modifications to these form agreements so long as such modifications, in the judgment of the General Manager of the PUC, the City’s Risk Manager, and the City Attorney, do not materially decrease the City’s rights or materially increase its liabilities.
(c) Delegation of Approval Authority under Charter Section 9.118. Pursuant to its authority under Charter Section 9.118, the Board of Supervisors delegates to the General Manager of the PUC authority to enter into purchases of power and related products using contracts with terms in excess of 10 years or requiring expenditures of 10 million dollars or more including amendments to such agreements with an impact of greater than $500,000, so long as the contract term, including any amendments, does not exceed 25 years. The annual expenditure for all agreements entered under this subsection (c) may not exceed 200 million dollars per year per year.2
This annual expenditure cap may be increased by Board of Supervisors Resolution.
(d) Delegation of Approval Authority under Charter Section 9.118. Pursuant to its authority under Charter Section 9.118, the Board of Supervisors delegates to the General Manager of the PUC authority to enter into contracts for the sale of power and related products having anticipated revenue in excess of one million dollars or more. The annual revenue for all agreements entered under this section (d) may not exceed 10 million dollars per year. This annual revenue cap may be increased by Board of Supervisors Resolution.
(e) Reporting. The PUC shall quarterly report to the Board of Supervisors the duration, product purchased, and cost of contracts entered into pursuant to subsection (c). The PUC shall also annually report to the Board the program costs, the rates charged to CleanPowerSF customers to recover those costs, and a comparison of those rates to PG&E rates.
(f) Waiver of Certain Contract-Related Requirements. The Board of Supervisors finds the waivers identified below to be reasonable and in the public interest, for individual contracts or an entire procurement process, where the General Manager of the PUC finds and documents in writing both that the agreement or solicitation represents the best opportunity available to the City to obtain essential services and products in a manner beneficial to the City, and that it is not feasible to add all standard City contract provisions to the agreement or solicitation; these waivers apply to agreements procured through competitive bidding processes that include language requiring compliance with all applicable federal, state, and local laws:
(1) Nondiscrimination in contracts (Lab. and Emp. Code );
(2) MacBride Principles (Admin. Code Chapter 12F);
(3) Local business enterprise utilization and non-discrimination in contracting ordinance (Admin. Code Chapter 14B);
(4) Consideration of criminal history in hiring (Lab. and Emp. Code );
(5) Consideration of salary history in hiring (Lab. and Emp. Code );
(6) Prohibition on contracting in certain states (Admin. Code Section 12X);1
(7) First source hiring (Admin. Code Chapter 83);
(8) Competitive bidding requirements (Admin. Code Section 21.1); and
(9) Tropical hardwood and virgin redwood ban (Environ. Code Chapter 8).
(10) Minimum Compensation Ordinance (Lab. and Emp. Code );
(11) Health Care Accountability Ordinance (Lab. and Emp. Code );
(12) Public access to meetings and records of non-profit organizations (Admin. Code Section 12L.2);
(13) Sweatfree contracting (Lab. and Emp. Code Section ); and
(14) Food service waste reduction (Environ. Code Section 1605).
(g) Delegation of Approval of Binding Arbitration for RA and/or RPS Agreements with IOUs. The Board of Supervisors finds it is reasonable and in the public interest to delegate to the General Manager of the PUC the authority to enter into contracts for RA and/or RPS from California IOU’s with binding arbitration provisions, and hereby delegates said authority to the General Manager of the PUC.
(h) Power and Related Products and Services. For purposes of the delegation, authorizations, and waivers in this Section 21.43, power and related products and services shall include power supplies, RA, the conveyance or transmission of same, or ancillary services such as spinning reserve, voltage control, as required for assuring reliable services in accordance with good utility practices and applicable laws.
(i) Projects on City Property. The delegation, authorizations, and waivers in Section 21.43 shall not apply to projects being constructed on City property.
(j)(i)2
Sunset Date. This Section 21.43 shall expire by operation of law on July 1, 2025. Upon expiration of this Section, the City Attorney is authorized to remove this Section from the Administrative Code.
(Former Sec. 21.43 added as Sec. 15.104 by Ord. 29-97, App. 2/7/97; amended by Ord. 337-99, File No. 992043, App. 12/30/99; redesignated and amended by Ord. 176-14
, File No. 140596, App. 8/7/2014, Eff. 9/6/2014; redesignated as Sec. 21A.2 and amended by Ord. 142-15
, File No. 150567, App. 8/6/2015, Eff. 9/5/2015)
CODIFICATION NOTES
1. So in Ord. 176-22.
2. So in Ord. 95-23.