Resolution No. 7511RESOLUTION NO. 7511
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND ADOPTING THE CITY OF VERNON
UTILITIES DEPARTMENT PUBLIC BENEFITS PROGRAMS
WHEREAS, the intent of AB 1890, which was signed into law on
September 23, 1996, was to lower the price of electricity for
consumers by opening California's electric utility industry to
competition; and
WHEREAS, AB 1890 included a state -mandated Public Benefits
Charge to be collected from all of Vernon's customers with the
intended purpose of funding the following Public Benefits Programs
• Energy Efficiency
0 Research, development and demonstration
• Low-income assistance
• Renewable resource technologies;
and
WHEREAS, by Resolution No. 7062 adopted on December 16, 1997,
and amended by Resolution No. 7497, adopted on February 15, 2000, the
City Council of the City of Vernon minimized the impact of the Public
Benefits Charge on its customers by approving a customer credit to
offset the state -mandated charge from its commencement on January 1,
1998 through March 31, 2000; and
WHEREAS, the Utilities Department has assessed customers'
needs and interests and has determined that programs in the area of
energy efficiency would be of benefit to electric customers at this
I time and is still studying and evaluating the option of purchasing
2 renewable energy to augment Vermon's power resource mix; and
3 WHEREAS, the City's proposed Public Benefits Programs consist
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of the following five projects in the area of energy efficiency, the
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6 first two of which are completed for implementation at this time with
7 the remaining three to be implemented when they are completed at a
8 later time:
9 1. Energy Audits
10 2. Energy Education and Demonstration Workshops
11 3. Equipment Loans
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4. Customer Incentive
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5. Customer Directed Projects;
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16 WHEREAS, on March 20, 2000, the Finance Committee approved
17 the recommendation of Bruce V. Malkenhorst, the Director of Finance,
18 dated March 15, 2000, that the Public Benefits Programs be approved
19 and the first two programs, Energy Audits and Energy Education and
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Demonstration Workshops be authorized for implementation now; and
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WHEREAS, in order to satisfy the requirements of AB 1890 and
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23 Section 385 of the Public Utilities Code of the State of California,
24 the City Council desires to approve and adopt the Public Benefits
25 Programs and authorize for implementation at this time two of the
26 projects contained therein, namely, the Energy Audits and Energy
27 Education and Demonstration Workshops.
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NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
SECTION 1: The City Council of the City of Vernon hereby
finds and determines that the recitals contained hereinabove are true
and correct.
SECTION 2: The City Council of the City of Vernon hereby
approves and adopts the City of Vernon Utilities Department Public
Benefits Programs, a copy of which is attached hereto and made a part
hereof as Exhibit "A," and authorizes for implementation at this time
two of the five projects contained in said Programs, the Energy
Audits, a copy of which is attached hereto and made a part hereof as
Exhibit "B," and the Energy Education and Demonstration Workshops, a
copy of which is attached hereto and made a part hereof as Exhibit
U C."
SECTION 3: The City Clerk of the City of Vernon shall
certify to the passage of this resolution, and thereupon and
thereafter the same shall be in full force and effect.
APPROVED AND ADOPTED this 21s` day of March, 2000.
ATTEST: /
BRUCE V. MALKENHORST, City Clerk
LEONIS C. LBURG, Mayor
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I STATE OF CALIFORNIA )
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2 COUNTY OF LOS ANGELES )
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4 I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do
5 hereby certify that the foregoing Resolution, being Resolution No.
6 7511, was duly adopted by the City Council of the City of Vernon at a
7 regular meeting of the City Council duly held on Tuesday, March 21,
8 2000, and thereafter was duly signed by the Mayor of the City of
9 Vernon.
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11 BRUCE V. MALKENHORST, City Clerk
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EXHIBIT A
EXHIBIT "A"
City of Vernon
Utilities Department
Public Benefits Programs
BACKGROUND
Deregulation of the electric utility industry in California dramatically changed the regulated market system
that was in place for more than eighty years. This is one result of the passage of Assembly Bill 1890 (AB
1890). AB 1890 was passed by the State Legislature in August 1996 and signed into law by former
Governor Pete Wilson on September 23, 1996. Fundamentally, the intent of this bill was to lower the
price of electricity for consumers by opening California's electric utility industry to competition. Although
most of AB 1890 does not apply to publicly owned utilities such as the City of Vernon, Vernon customers
are subject to certain provisions of the law, including a mandated Public Benefits Charge.
AB 1890 provides, in part, that the City of Vernon collect a Public Benefits Charge from all its customers.
The intended purpose of this charge is to fund Public Benefits Programs. The mandated charge is 2.85
percent of customers' total monthly electric bill before any special fees or charges for years 1998, 1999,
and 2000. The charge will be 2.7 percent of the total monthly electric bill before any special fees or
charges for the year 2001. Approximately $1.6 million will be collected annually for programs until the
year 2001. Refer to Exhibit A for an itemization of the Public Benefits Budget for 1999-2000. To
minimize the impact of this charge on its customers, Vernon City Council approved a customer credit to
offset the state -mandated charge from its inception January 1, 1998 through March 31, 2000. In this
period, City Council approved credits benefited City of Vernon electric customers by approximately $3.6
million.
AB 1890 establishes four main categories of Public Benefits Programs that may be funded by the Public
Benefits Funds. These are: 1.) energy efficiency; 2.) research, development and demonstration; 3.)
low-income assistance; and 4.) renewable resource technologies. Based on an assessment of Vernon
customers' needs and interests, the Utilities Department is recommending programs in the area of energy
efficiency. In addition, the Utilities Department is evaluating and may recommend the purchase of
renewable energy to augment Vernon's power resource mix.
IL POLICY STATEMENT
Section 385 of the Public Utilities Code of the State of California requires every municipal electric utility to
establish a non-bypassable usage -based Public Benefits Charge to fund a minimum level of investments
by the utility and other parties in any or all of the following:
1. cost-effective demand side management services to promote energy efficiency and
energy conservation,
2. new investment in renewable energy resources and technologies consistent with existing
statutes and regulations which promote those resources and technologies,
3. research, development, and demonstration programs to advance science or technology
which is not adequately provided by competitive and regulated markets, and
4. services provided for low-income electricity customers, including but not limited to,
targeted energy efficiency service and rate discounts.
It is the policy of the City of Vernon to allocate revenues derived from Public Benefits Charges, minus the
cost to administer programs, in a fair and equitable manner, consistent with Section 385. Revenues from
Public Benefits Charges will be allocated to programs benefiting the commercial and industrial customer
classes generally in proportion to the total revenues received from each such class. Program
administration costs should not exceed 10% of annual revenues in those years where Public Benefits
Charges create revenues.
A - 1
The Public Benefits Programs shall consist of projects conducted by the Utilities Department and
approved projects conducted by other entities under the supervision of the Utilities Department. Specific
projects and expenditures will be determined according to the following criteria:
1. consistency with Section 385 of the Public Benefits Utilities Code,
2. input and recommendations by electric utility customers,
3. other public input, and
4. cost -benefit analysis.
Entities conducting approved projects shall maintain appropriate records to document project -related
expenditures and project -related benefits. These records shall be available to the Utilities Department
upon request. The Director of Utilities shall periodically report to the City Council on the Public Benefits
Programs including the status of projects and the level of funds available.
The rapid growth in demand for electric energy is in part due to wasteful, uneconomic, and inefficient
uses of power. The energy efficiency programs recommended by the Utilities Department may provide
opportunities for participating Vernon customers to reduce energy usage and costs. As customers
become more conversant in energy management, they may discover new ways to save energy and
improve their bottom line. Low energy costs can improve the competitive position of businesses. All
Vernon electric utility customers may benefit from energy efficiency programs, as energy efficiency may
control rising energy demands, assisting the City of Vernon to maintain its low energy prices.
III. PROGRAM DESCRIPTIONS
Utilities Department staff is recommending five projects in the area of energy efficiency intended to
benefit participating customers.
A. Energy Audits
The Department is continuing its energy audit project for interested commercial and industrial customers.
The energy audits are an excellent starting point for customers interested in developing a broader energy
management strategy. The focus is on customized audits. Customers receive detailed analyses of
energy usage and suggestions for energy efficiency efforts which can lead to measurable energy and
cost savings. The audit recommendations frequently will encourage participation with other projects of
the Public Benefits Program.
B. Energy Education and Demonstration Workshops
A fundamental and necessary first step to promoting customer participation in energy efficiency projects
is creating a heightened awareness for energy efficiency opportunities. Utilities Department staff can
serve as a catalyst for reducing information barriers. The Utilities Department proposes to increase
access to educational materials through channels that reach all customer segments. The Utilities
Department will provide an array of information resources to accommodate customers' varying levels of
knowledge and experience with energy efficiency. The focus of these resources will be to encourage the
undertaking of energy efficiency measures within business operations. Electric utility customers can then
make informed business decisions leading to measurable energy and cost savings.
The Department proposes to host several energy efficiency workshops with presentations and
discussions on various topics led by industry experts. These workshops will provide training and
demonstration efforts needed for "market transformation" and will further complement other energy
efficiency programs.
C. Equipment Loans
This element of the Department's program funds the loan of approved equipment to electric utility
customers through a third party. Approved equipment would include devices used to measure and record
such items as illumination, voltage and current levels, and power quality parameters. The loan project
A — 2
may also fund demonstrations of energy efficient equipment for interested customers. The Utilities
Department will develop and monitor loan agreements and schedules for the equipment loan project. It is
proposed that all equipment be owned, stored, and secured by a third party.
D. Customer Incentive
Financial incentives (rebates) may be offered to customers who replace lighting and motors with efficient
equipment and technologies. Rebates for energy efficient equipment may help shift the customers'
decision -making process by lowering the first cost concerns and bringing energy costs into consideration.
Although rebates are primarily for replacement of lighting and motors with higher efficiency models,
replacement of other technologies may qualify for rebates as well. Participants will be required to submit
detailed specifications and proof of replacement. Department staff will monitor the implementation of the
proposed efficient equipment.
E. Customer Directed Proiects
The portfolio of energy efficiency public benefits programs established by the Utilities Department does
not exhaust all energy efficiency opportunities. Funds are proposed to support customers with the
implementation of self -designed energy efficiency projects. These Customer Directed Projects are
intended to encourage customers to self -design energy efficiency measures that produce a public benefit.
Electric Utility customers can incorporate their plant specific knowledge and business expertise to
positively impact energy usage patterns and processes.
Customer Directed Projects will receive matching funds for expenditures that lead to demonstrable
energy savings. Project funds may assist in the purchase of energy efficient equipment or new
construction, for example. Demonstrated energy savings will be a requirement for project approval..
IV. TARGET MARKETS
The proposed Public Benefits Programs will be available to all interested Vernon industrial and
commercial customers. Available funds will be distributed among all participating businesses based on
specific program and evaluation criteria. In designing program criteria, Utilities staff may consider that
Vernon's industrial customers comprise approximately 75% of Vernon's system energy and total revenue,
while representing approximately 40% of all customers in Vernon. The City's largest 100 customers
(above 500 kW peak demand) represent approximately 61% of the peak load and 71% of the total energy
usage. Vernon has a total of approximately 2,200 industrial and commercial customer accounts.
V. COSTS
According to AB 1890 legislative mandates, the Public Benefits Funds Charge will be collected through
the year 2001. The monthly charge for the years 1998 through 2000 is 2.85 percent of customers'
monthly electric utility bill. During the year 2001, the monthly Public Benefits Funds Charge will be 2.7
percent of customers' monthly electric utility bill. Vernon City Council approved a monthly credit to offset
this charge from January 1998 through March 2000. To -date, approximately $3.6 million is available for
Public Benefits Programs. The proposed budget allocates these funds among all suggested programs
and customer classes. The Public Benefits Funds budget will be monitored by Utilities Department staff.
The proposed budget is attached as Exhibit A and itemizes the programs and their estimated costs.
VI. MEASUREMENT AND VERIFICATION
The Public Benefits Programs will be evaluated through three aspects: process execution, customer
acceptance, and program effectiveness.
Process Execution
A process will be developed and will evolve continually with time. Suggested areas of the process that
will need to be monitored are:
• adequate allocation of resources for program implementation
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• inter -departmental activities and identifiable obstacles hindering the progress of the programs, and
• the timeliness of deliverables.
These areas will be assessed on a quarterly basis, and any problems identified will have a corrective
plan.
Program Effectiveness
Customer input will be a key indicator of program success. Market surveys consisting of one-on-one
meetings, telephone calls, mailers, or fill-in forms may be used to help evaluate customer acceptance of
the programs. A sampling of customers who have participated in the programs will be asked for their
general impressions. In addition, a random sample of customers will be selected, as their awareness of
the programs may help determine the adequacy and effectiveness of marketing efforts. Any resistance to
participation may also be identified. Customers may be interviewed for awareness and input.
A key measure of successful Vernon programs will be customer participation. Programs that are
underutilized may be revised or replaced with more effective alternatives. Programs with participation
levels greater than those proposed in the budget may be considered for expansion to accommodate the
demand.
The Public Benefits Programs will be evaluated on the actual overall customer participation rate, a cost -
benefit analysis to implement the programs, and a comparison of customers' energy usage patterns
before and after program participation.
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u
EXHIBIT B
EXHIBIT "Bn
Energy Audits
Introduction
The concept of the energy audit has progressed for the past twenty-five years. Energy costs, government
regulations, new technologies, environmental concerns, and emerging business services are now
intertwined to focus on the cost-effectiveness of energy efficiency. It is advantageous for companies to
conduct energy studies of facilities in order to identify opportunities for energy and cost savings. Vernon's
Energy Audit Program is designed to identify opportunities for energy and costs savings. The audit
findings are interfaced with funding opportunities through the
Through Vernon's Energy Audit Program, ten energy audits were successfully completed during the
calendar year 1999. In order to identify energy efficient alternatives, Vernon Utilities partnered with a
consultant to analyze customers' energy usage patterns. An energy audit report is prepared and
delivered to participating customers approximately thirty days after the facility review. Utilities staff
delivers and reviews the audit findings with participating customers and promotes the interface between
the audit findings and the other Public Benefits Programs. Fundamentally, the intent of the audit is to
identify energy and cost savings for businesses in Vernon.
Vernon Utilities recommends distributing funds to customers who propose energy efficiency measures as
identified in the audit reports. An interface between the energy audits and other Public Benefits Programs
has been designed. Examples of fundable projects include equipment upgrades and lighting retrofits.
The primary goal is to facilitate energy conservation,�waste reduction, and operational cost savings.
How the Energy Audit Program Meets the Intent of Assembly Bill 1890
The Energy Audit Program provides interested Vernon utility customers with the initial energy usage
analyses needed to develop a broader energy management plan. Informed decision -making is a critical
first step to implementing energy efficiency and conservation measures, which are key objectives of the
Public Benefits Programs required by AB 1890.
Expected Costs and Timeline
Ten energy audits were completed during the 1999 calendar year. Based on the successful rate of
participation in the Energy Audit Program to -date, it is recommended that twenty-five energy audits be
completed throughout the 2000 calendar year. This audit schedule would allow the completion of
approximately two audits per month. Based on the successful completion of audits during 1999, a target
of twenty-five audits is feasible and in tandem with the high level of interest expressed by Vernon
customers.
Target Customer Groups
The Energy Audit Program currently in place has been successful. To -date, all ten participants have
been industrial manufacturing companies, as this comprises the majority of Vernon's customer base and
energy load. Vernon staff will continue to identify customers with high energy usage and schedule at
least half of the energy audits with this customer base. Certainly, the Energy Audit Program is intended
to benefit both commercial and industrial customers, and a significant increase in participation among
both groups is expected for the calendar year 2000.
Utilities staff and consultants meet with interested customers and provide an overview of energy audits.
Definitions and descriptions are intended to provide Vernon customers with an understanding of the
concepts which shape the energy audit process.
Background
Audits can be conducted on all facility types, such as residential, commercial, and industrial buildings.
Vernon Utilities is currently conducting audits for interested commercial and industrial customers. Audits
may include the entire facility or can focus on a targeted area of the structure, identified equipment, or
specific processes and systems. Energy audits can provide groundwork for greater equipment and
B — 1
structural retrofits, certification of compliance to governmental laws and regulatory codes, corporate
energy planning, and as documentation for financing of projects.
Basic Definitions
Energy audits include three key parts:
data gathering: identification of where and how a structure, process or equipment uses energy,
along with the costs and utility uses affecting the energy consumption;
data analysis: identification of energy conservation measures that when implemented, will make the
energy usage more efficient, less expensive or more environmentally friendly; and
recommendations: a final report detailing the findings, areas for improvement and recommended
actions accompanied by some type of economic justification.
Vernon's energy audits are neither too general, nor too complex. A site audit requires that a detailed
analysis of the data be performed with usage patterns and evaluated against established norms and
guidelines. A model of energy usage will be developed to assist in predicting energy conservation and
potential savings opportunities. A financial analysis will be performed on each energy conservation
measure deemed financially viable.
The audit will usually identify and quantify energy conservation measures that can meet reasonable
investment justification. The report will provide sufficient detail and documentation for most firms to act
on the recommendations without additional study. This audit is normally sufficient for most applications
where completeness and cost effectiveness is desired without excessive detail or unnecessary depth.
The site audit always involves the services of professional engineers or certified energy professionals.
The cost is based on the size of the facility, the quantity and complexity of equipment, and the scope of
the technical and financial analyses required. The auditor will provide ongoing support services for the
implementation and monitoring of the installed energy conservation measures.
Final Considerations
Instead of ignoring energy costs, customers can take steps to start controlling costs and increasing
profits. The quality control adage "you can't control what you don't measure" applies to energy as well.
Creating an energy management plan stating goals and objectives is a critical starting point. Determining
the embedded energy cost of a final product allows customers to quantify the importance of energy
reductions their bottom line. By realigning our approach to energy management, customers can greatly
improve your ability to get energy efficient projects implemented.
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EXHIBIT C
EXHIBIT "C"
ENERGY EDUCATION AND DEMONSTRATION WORKSHOPS
Background and Legislative Compliance
A necessary first step to promoting energy efficiency measures among utility customers is creating
heightened awareness for the existing opportunities. The "market transformation" intended by Assembly
Bill 1890 (AB 1890) begins with imparting the knowledge and tools crucial for customers to become active
participants and beneficiaries of the Public Benefits Programs. "Market transformation" programs have a
goal of nurturing energy efficiency services and products such that they stand on their own in the open
market and become fully competitive with other options.
Public Benefits Funds may be utilized to ensure that energy consumers have information about managing
energy consumption. To this end, it is recommended that Energy Education and Demonstration
Workshops be an integral component of the Public Benefits Programs.
The information can be tailored to each customer class, and it is appropriate under 1890 provisions to
have public resources available for educating customers.
Expected Costs and Timeline
It is projected that a total of 120 Vernon utility customers will participate in the Energy Education and
Demonstration Workshops during the year 2000. On average, twenty participating customers are
expected to attend each of six seminars. The presentations will be scheduled to last approximately two
and a half hours, including time allocated for questions, answers, and demonstrations.
A total of $47,000 has been budgeted for the six seminars during the year 2000. This budget reflects the
costs for speakers' fees, presentation material for participants, refreshments, and program design and
marketing.
Basis of Design
The seminars will cover a variety of topics relative to energy efficiency and current technologies. It is
intended that the range of topics suggested will meet the interests and needs of Vernon's broad business
base.
Industry experts will lead seminars providing end -user information, technical assistance, and
demonstrations on recent technologies. It is expected that presentations will heighten the awareness of
Vernon customers by focusing on several of the following suggested topics:
• Financing energy efficiency projects
• Selling energy efficiency projects internally
• Benefits of an energy audit
• Motor retrofits
• Lighting technologies
• Chiller technologies
• Waste management
• Heat recovery technologies
• Energy accounting
• Preventative maintenance
• Asset management
The suggested list does not exhaust all seminar topics that may be offered to customers. The suggested
topics are based on an energy efficiency customer survey, discussions with a cross section of Vernon's
electric utility customers, and the projected needs of Vernon's customer base.
C - 1
Workshop Location
Currently, there is inadequate space within Vernon City Hall to appropriately host the Energy Education
and Demonstration Workshops. In the past, the Vernon Chamber of Commerce has allowed Utilities staff
to host workshops in the Chamber Board Room. Vernon Utilities will co-sponsor the workshops with the
Chamber and therefore, one suitable location for the workshops is the Vernon Chamber of Commerce
Board Room, located at 3801 Santa Fe Avenue. Other possible locations include a restaurant or banquet
room within the City of Vernon, the City of Vernon Council Chambers (parking is limited), or a conference
room at the facilities of a Vernon customer.
Target Customer Group
All commercial and industrial utility customers with a valid Vernon customer account are eligible to
participate in the workshops. Utilities staff will aggressively outreach to Vernon customers in order to
generate awareness and encourage participation in the Energy Education and Demonstration
Workshops. Outreach to customers will be accomplished through various channels, among them:
informational packets, customer on -site visits, postcards, brochures, monthly bill inserts, Vernon Utilities'
web site, telemarketing, and other channels.
Presenters
Utilities staff will compile a group of industry experts and accept proposals for the workshops.
Government agencies, trade organizations, and other utilities will be contacted as sources to provide
valuable energy efficiency information.
Program Measurement and Verification
Energy and/or cost savings are expected due to customers' increased awareness and subsequent
implementation of energy efficiency measures. Although this awareness may be gained through the
Energy Education and Demonstration Workshops, such a relationship cannot be reasonably documented.
The presentations will provide useful information, however, other factors unrelated to the workshops may
impact customers' behavior. The workshops are designed to stimulate customers' interest in
implementing energy efficiency measures.
Feedback from participating customers will serve as an indicator of program success. The feedback
customers provide will gauge the effectiveness of the workshops and the level of customer interest.
Customer support for the energy education seminars should be the overriding indicator of program
success.
Aggressive efforts will be made to efficiently expend the Public Benefits Funds in order to inform and
educate customers about energy efficiency. It is the intent of AB 1890 to "transform the market", and
utilizing the Public Benefits Funds to defray the costs of educational energy efficiency programs are a
way of meeting this goal.
Quarterly progress reports will be generated. The reports will capture the level of participation for each
workshop and the associated expenditures, in addition to a brief narrative regarding the seminars'
success. An annual report with this information will also be generated. To maximize the success of each
workshop, any suggested corrective actions would be included in the progress reports.
C — 2
SUPPORTING
DOCUMENTS
CITY COUNCIL
LEONIS C. MALBUR
Mayor
THOMAS A. YBAR
Mayor Pro -Tern
Wm. 'BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL McCORMICK
Councilman
BRUCE V. MALKENHORST
City Administrator / City Clerk
FAX (323) 581-7924
CITY HALL
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (323) 583-8811
March 15, 2000
Finance Committee
City of Vernon
Honorable Members:
DAVID B. BREARLEY
City Attorney
FAX: (626) 330-5818
KEVIN WILSON
Director of Community Services & Water
FAX: (323) 588-2761
KENNETH J. DeDARIO
Director of Municipal Utilities
FAX: (323) 583-1983
DAVE TELFORD
Fire Chief
FAX: (323) 581-1385
BRUCE W. OLSON
Police Chief
FAX: (323) 583-5236
The Utilities Department has prepared a Public Benefits Program
that consists of five components related to energy efficiency.
As you are aware, there is a Public Benefits (in accordance with
AB 1890) charge on all of our utility bills, and if this program
is approved, the programs will be funded by those charges.
Submitted herewith is an overview of the program and detailed
description of the Energy Audits program and the Energy
Education and Demonstration Workshops program as prepared and
submitted by the Director of Utilities. It is hereby
recommended that the Public Benefits programs be approved; and
that the first two programs, Energy Audits and Energy Education
and Demonstration Workshops, be authorized for implementation
now.
Very truly yours,
Bruce V. Malkenhorst
Director of Finance
BVM:rcm
March 15, 2000
TO: Bruce V. Malkenhorst, City Administrator
FROM: Kenneth J. DeDario, Director of Utilities
SUBJECT: Public Benefits Programs
I recommend approval of the attached City of Vernon Utilities Department Public Benefits
Programs. This document is a generic description of five programs that are all in the area of
energy efficiency and are funded by the Public Benefits Charge collected directly from the
customers. I intend to have a detailed description of each of the five programs approved when
they are ready for implementation. The first two are ready for implementation at this time.
Therefore, I also recommend approval of the attached Energy Audits and Energy Education And
Demonstration Workshops Programs, respectively.
If you have any questions or comments, please contact me. Thank you for your consideration.
KJD:dm
Attachments
a
City of Vernon
Utilities Department
Public Benefits Programs
BACKGROUND
Deregulation of the electric utility industry in California dramatically changed the regulated market system
that was in place for more than eighty years. This is one result of the passage of Assembly Bill 1890 (AB
1890). AB 1890 was passed by the State Legislature in August 1996 and signed into law by former
Governor Pete Wilson on September 23, 1996. Fundamentally, the intent of this bill was to lower the
price of electricity for consumers by opening California's electric utility industry to competition. Although
most of AB 1890 does not apply to publicly owned utilities such as the City of Vernon, Vernon customers
are subject to certain provisions of the law, including a mandated Public Benefits Charge.
AB 1890 provides, in part, that the City of Vernon collect a Public Benefits Charge from all its customers.
The intended purpose of this charge is to fund Public Benefits Programs. The mandated charge is 2.85
percent of customers' total monthly electric bill before any special fees or charges for years 1998, 1999,
and 2000. The charge will be 2.7 percent of the total monthly electric bill before any special fees or
charges for the year 2001. Approximately $1.6 million will be collected annually for programs until the
year 2001. Refer to Exhibit A for an itemization of the Public Benefits Budget for 1999-2000. To
minimize the impact of this charge on its customers, Vernon City Council approved a customer credit to
offset the state -mandated charge from its inception January 1, 1998 through March 31, 2000. In this
period, City Council approved credits benefited City of Vernon electric customers by approximately $3.6
million.
AB 1890 establishes four main categories of Public Benefits Programs that may be funded by the Public
Benefits Funds. These are: 1.) energy efficiency; 2.) research, development and demonstration; 3.)
low-income assistance; and 4.) renewable resource technologies. Based on an assessment of Vernon
customers' needs and interests, the Utilities Department is recommending programs in the area of energy
efficiency. In addition, the Utilities Department is evaluating and may recommend the purchase of
renewable energy to augment Vernon's power resource mix.
POLICY STATEMENT
Section 385 of the Public Utilities Code of the State of California requires every municipal electric utility to
establish a non-bypassable usage -based Public Benefits Charge to fund a minimum level of investments
by the utility and other parties in any or all of the following:
1. cost-effective demand side management services to promote energy efficiency and
energy conservation,
2. new investment in renewable energy resources and technologies consistent with existing
statutes and regulations which promote those resources and technologies,
3. research, development, and demonstration programs to advance science or technology
which is not adequately provided by competitive and regulated markets, and
4. services provided for low-income electricity customers, including but not limited to,
targeted energy efficiency service and rate discounts.
It is the policy of the City of Vernon to allocate revenues derived from Public Benefits Charges, minus the
cost to administer programs, in a fair and equitable manner, consistent with Section 385. Revenues from
Public Benefits Charges will be allocated to programs benefiting the commercial and industrial customer
classes generally in proportion to the total revenues received from each such class. Program
administration costs should not exceed 10% of annual revenues in those years where Public Benefits
Charges create revenues.
m
03/15/00
T The Public Benefits Programs shall consist of projects conducted by the Utilities Department and
approved projects conducted by other entities under the supervision of the Utilities Department. Specific
projects and expenditures will be determined according to the following criteria:
1. consistency with Section 385 of the Public Benefits Utilities Code,
2. input and recommendations by electric utility customers,
3. other public input, and
4. cost -benefit analysis.
Entities conducting approved projects shall maintain appropriate records to document project -related
expenditures and project -related benefits. These records shall be available to the Utilities Department
upon request. The Director of Utilities shall periodically report to the City Council on the Public Benefits
Programs including the status of projects and the level of funds available.
The rapid growth in demand for electric energy is in part due to wasteful, uneconomic, and inefficient
uses of power. The energy efficiency programs recommended by the Utilities Department may provide
opportunities for participating Vernon customers to reduce energy usage and costs. As customers
become more conversant in energy management, they may discover new ways to save energy and
improve their bottom line. Low energy costs can improve the competitive position of businesses. All
Vernon electric utility customers may benefit from energy efficiency programs, as energy efficiency may
control rising energy demands, assisting the City of Vernon to maintain its low energy prices.
III. PROGRAM DESCRIPTIONS
Utilities Department staff is recommending five projects in the area of energy efficiency intended to
benefit participating customers.
A. Energy Audits
The Department is continuing its energy audit project for interested commercial and industrial customers.
The energy audits are an excellent starting point for customers interested in developing a broader energy
management strategy. The focus is on customized audits. Customers receive detailed analyses of
energy usage ,and suggestions for energy efficiency efforts which can lead to measurable energy and
cost savings. The audit recommendations frequently will encourage participation with other projects of
the Public Benefits Program.
B. Energy Education and Demonstration Workshops
A fundamental and necessary first step to promoting customer participation in energy efficiency projects
is creating a heightened awareness for energy efficiency opportunities.. Utilities Department staff can
serve as a catalyst for reducing information barriers. The Utilities Department proposes to increase
access to educational materials through channels that reach all customer segments. The Utilities
Department will provide an array of information resources to accommodate customers' varying levels of
knowledge and experience with energy efficiency. The focus of these resources will be to encourage the
undertaking of energy efficiency measures within business operations. Electric utility customers can then
make informed business decisions leading to measurable energy and cost savings.
The Department proposes to host several energy efficiency workshops with presentations and
discussions on various topics led by industry experts. These workshops will provide training and
demonstration efforts needed for "market transformation" and will further complement other energy
efficiency programs.
C. Equipment Loans
This element of the Department's program funds the loan of approved equipment to electric utility
customers through a third party. Approved equipment would include devices used to measure and record
such items as illumination, voltage and current levels, and power quality parameters. The loan project
ED Page 2 03/15/00
may also fund demonstrations of energy efficient equipment for interested customers. The Utilities
Department will develop and monitor loan agreements and schedules for the equipment loan project. It is
proposed that all equipment be owned, stored, and secured by a third party.
D. Customer Incentive
Financial incentives (rebates) may be offered to customers who replace lighting and motors with efficient
equipment and technologies. Rebates for energy efficient equipment may help shift the customers'
decision -making process by lowering the first cost concerns and bringing energy costs into consideration.
Although rebates are primarily for replacement of lighting and motors with higher efficiency models,
replacement of other technologies may qualify for rebates as well. Participants will be required to submit
detailed specifications and proof of replacement. Department staff will monitor the implementation of the
proposed efficient equipment.
E. Customer Directed Projects
The portfolio of energy efficiency public benefits programs established by the Utilities Department does
not exhaust all energy efficiency opportunities. Funds are proposed to support customers with the
implementation of self -designed energy efficiency projects. These Customer Directed Projects are
intended to encourage customers to self -design energy efficiency measures that produce a public benefit.
Electric Utility customers can incorporate their plant specific knowledge and business expertise to
positively impact energy usage patterns and processes.
Customer Directed Projects will receive matching funds for expenditures that lead to demonstrable
energy savings. Project funds may assist in the purchase of energy efficient equipment or new
construction, for example. Demonstrated energy savings will be a requirement for project approval..
IV. TARGET MARKETS
The proposed Public Benefits Programs will be available to all interested Vernon industrial and
commercial customers. Available funds will be distributed among all participating businesses based on
specific program and evaluation criteria. In designing program criteria, Utilities staff may consider that
Vernon's industrial customers comprise approximately 75% of Vernon's system energy and total revenue,
while representing approximately 40% of all customers in Vernon. The City's largest 100 customers
(above 500 kW peak demand) represent approximately 61 % of the peak load and 71 % of the total energy
usage. Vernon has a total of approximately 2,200 industrial and commercial customer accounts.
V. COSTS
According to AB 1890 legislative mandates, the Public Benefits Funds Charge will be collected through
the year 2001. The monthly charge for the years 1998 through 2000 is 2.85 percent of customers'
monthly electric utility bill. During the year 2001, the monthly Public Benefits Funds Charge will be 2.7
percent of customers' monthly electric utility bill. Vernon City Council approved a monthly credit to offset
this charge from January 1998 through March 2000. To -date, approximately $3.6 million is available for
Public Benefits Programs. The proposed budget allocates these funds among all suggested programs
and customer classes. The Public Benefits Funds budget will be monitored by Utilities Department staff.
The proposed budget is attached as Exhibit A and itemizes the programs and their estimated costs.
VI. MEASUREMENT AND VERIFICATION
The Public Benefits Programs will be evaluated through three aspects: process execution, customer
acceptance, and program effectiveness.
Process Execution
A process will be developed and will evolve continually with time
will need to be monitored are:
• adequate allocation of resources for program implementation,
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Page 3
Suggested areas of the process that
03/15/00
• inter -departmental activities and identifiable obstacles hindering the progress of the programs, and
• the timeliness of deliverables.
These areas will be assessed on a quarterly basis, and any problems identified will have a corrective
plan.
Program Effectiveness
Customer input will be a key indicator of program success. Market surveys consisting of one-on-one
meetings, telephone calls, mailers, or fill-in forms may be used to help evaluate customer acceptance of
the programs. A sampling of customers who have participated in the programs will be asked for their
general impressions. In addition, a random sample of customers will be selected, as their awareness of
the programs may help determine the adequacy and effectiveness of marketing efforts. Any resistance to
participation may also be identified. Customers may be interviewed for awareness and input.
A key measure of successful Vernon programs will be customer participation. Programs that are
underutilized may be revised or `replaced with more effective alternatives. Programs with participation
levels greater than those proposed in the budget may be considered for expansion to accommodate the
demand.
The Public Benefits Programs will be evaluated on the actual overall customer participation rate, a cost -
benefit analysis to implement the programs, and a comparison of customers' energy usage patterns
before and after program participation.
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Page 4
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Energy Audits
Introduction
The concept of the energy audit has progressed for the past twenty-five years. Energy costs, government
regulations, new technologies, environmental concerns, and emerging business services are now
intertwined to focus on the cost-effectiveness of energy efficiency. It is advantageous for companies to
conduct energy studies of facilities in order to identify opportunities for energy and cost savings. Vernon's
Energy Audit Program is designed to identify opportunities for energy and costs savings. The audit
findings are interfaced with funding opportunities through the
Through Vernon's Energy Audit Program, ten energy audits were successfully completed during the
calendar year 1999. In order to identify energy efficient alternatives, Vernon Utilities partnered with a
consultant to analyze customers' energy usage patterns. An energy audit report is prepared and
delivered to participating customers approximately thirty days after the facility review. Utilities staff
delivers and reviews the audit findings with participating customers and promotes the interface between
the audit findings and the other Public Benefits Programs. Fundamentally, the intent of the audit is to
identify energy and cost savings for businesses in Vernon.
Vernon Utilities recommends distributing funds to customers who propose energy efficiency measures as
identified in the audit reports. An interface between the energy audits and other Public Benefits Programs
has been designed. Examples of fundable projects include equipment upgrades and lighting retrofits.
The primary goal is to facilitate energy conservation, waste reduction, and operational cost savings.
How the Energy Audit Program Meets the Intent of Assembly Bill 1890
The Energy Audit Program provides interested Vernon utility customers with the initial energy usage
analyses needed to develop a broader energy management plan. Informed decision -making is a critical
first step to implementing energy efficiency and conservation measures, which are key objectives of the
Public Benefits Programs required by AB 1890.
Expected Costs and Timeline
Ten energy audits were completed during the 1999 calendar year. Based on the successful rate of
participation in the Energy Audit Program to -date, it is recommended that twenty-five energy audits be
completed throughout the 2000 calendar year. This audit schedule would allow the completion of
approximately two audits per month. Based on the successful completion of audits during 1999, a target
of twenty-five audits is feasible and in tandem with the high level of interest expressed by Vernon
customers.
Target Customer Groups
The Energy Audit Program currently in place has been successful. To -date, all ten participants have
been industrial manufacturing companies, as this comprises the majority of Vernon's customer base and
energy load. Vernon staff will continue to identify customers with high energy usage and schedule at
least half of the energy audits with this customer base. Certainly, the Energy Audit Program is intended
to benefit both commercial and industrial customers, and a significant increase in participation among
both groups is expected for the calendar year 2000.
Utilities staff and consultants meet with interested customers and provide an overview of energy audits.
Definitions and descriptions are intended to provide Vernon customers with an understanding of the
concepts which shape the energy audit process.
Background
Audits can be conducted on all facility types, such as residential, commercial, and industrial buildings.
Vernon Utilities is currently conducting audits for interested commercial and industrial customers. Audits
may include the entire facility or can focus on a targeted area of the structure, identified equipment, or
specific processes and systems. Energy audits can provide groundwork for greater equipment and
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structural retrofits, certification of compliance to governmental laws and regulatory codes, corporate
energy planning, and as documentation for financing of projects.
Basic Definitions
Energy audits include three key parts:
data gathering: identification of where and how a structure, process or equipment uses energy,
along with the costs and utility uses affecting the energy consumption;
data analysis: identification of energy conservation measures that when implemented, will make the
energy usage more efficient, less expensive or more environmentally friendly; and
recommendations: a final report detailing the findings, areas for improvement and recommended
actions accompanied by some type of economic justification.
Vernon's energy audits are neither too general, nor too complex. A site audit requires that a detailed
analysis of the data be performed with usage patterns and evaluated against established norms and
guidelines. A model of energy usage will be developed to assist in predicting energy conservation and
potential savings opportunities. A financial analysis will be performed on each energy conservation
measure deemed financially viable.
The audit will usually identify and quantify energy conservation measures that can meet reasonable
investment justification. The report will provide sufficient detail and documentation for most firms to act
on the recommendations without additional study. This audit is normally sufficient for most applications
where completeness and cost effectiveness is desired without excessive detail or unnecessary depth.
The site audit always involves the services of professional engineers or certified energy professionals.
The cost is based on the size of the facility, the quantity and complexity of equipment, and the scope of
the technical and financial analyses required. The auditor will provide ongoing support services for the
implementation and monitoring of the installed energy conservation measures.
Final Considerations
Instead of ignoring energy costs, customers can take steps to start controlling costs and increasing
profits. The quality control adage "you can't control what you don't measure" applies to energy as well.
Creating an energy management plan stating goals and objectives is a critical starting point. Determining
the embedded energy cost of a final product allows customers to quantify the importance of energy
reductions their bottom line. By realigning our approach to energy management, customers can greatly
improve your ability to get energy efficient projects implemented.
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ENERGY EDUCATION AND DEMONSTRATION WORKSHOPS
Background and Legislative Compliance
A necessary first step to promoting energy efficiency measures among utility customers is creating
heightened awareness for the existing opportunities. The market transformation" intended by Assembly
Bill 1890 (AB 1890) begins with imparting the knowledge and tools crucial for customers to become active
participants and beneficiaries of the Public Benefits Programs. "Market transformation" programs have a
goal of nurturing energy efficiency services and products such that they stand on their own in the open
market and become fully competitive with other options.
Public Benefits Funds may be utilized to ensure that energy consumers have information about managing
energy consumption. To this end, it is recommended that Energy Education and Demonstration
Workshops be an integral component of the Public Benefits Programs.
The information can be tailored to each customer class, and it is appropriate under 1890 provisions to
have public resources available for educating customers.
Expected Costs and Timeline
It is projected that a total of 120 Vernon utility customers will participate in the Energy Education and
Demonstration Workshops during the year 2000. On average, twenty participating customers are
expected to attend each of six seminars. The presentations will be scheduled to last approximately two
and a half hours, including time allocated for questions, answers, and demonstrations.
A total of $47,000 has been budgeted for the six seminars during the year 2000. This budget reflects the
costs for speakers' fees, presentation material for participants, refreshments, and program design and
marketing.
Basis of Design
The seminars will cover a variety of topics relative to energy efficiency and current technologies. It is
intended that the range of topics suggested will meet the interests and needs of Vernon's broad business
base.
Industry experts will lead seminars providing end -user information, technical assistance, and
demonstrations on recent technologies. It is expected that presentations will heighten the awareness of
Vernon customers by focusing on several of the following suggested topics:
• Financing energy efficiency projects
• Selling energy efficiency projects internally
• Benefits of an energy audit
• Motor retrofits
• Lighting technologies
• Chiller technologies
• Waste management
• Heat recovery technologies
• Energy accounting
• Preventative maintenance
• Asset management
The suggested list does not exhaust all seminar topics that may be offered to customers. The suggested
topics are based on an energy efficiency customer survey, discussions with a cross section of Vernon's
electric utility customers, and the projected needs of Vernon's customer base.
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Workshop Location
Currently, there is inadequate space within Vernon City Hall to appropriately host the Energy Education
and Demonstration Workshops. In the past, the Vernon Chamber of Commerce has allowed Utilities staff
to host workshops in the Chamber Board Room. Vernon Utilities will co-sponsor the workshops with the
Chamber and therefore, one suitable location for the workshops is the Vernon Chamber of Commerce
Board Room, located at 3801 Santa Fe Avenue. Other possible locations include a restaurant or banquet
room within the City of Vernon, the City of Vernon Council Chambers (parking is limited), or a conference
room at the facilities of a Vernon customer.
Target Customer Group
All commercial and industrial utility customers with a valid Vernon customer account are eligible to
participate in the workshops. Utilities staff will aggressively outreach to Vernon customers in order to
generate awareness and encourage participation in the Energy Education and Demonstration
Workshops. Outreach to customers will be accomplished through various channels, among them:
informational packets, customer on -site visits, postcards, brochures, monthly bill inserts, Vernon Utilities'
web site, telemarketing, and other channels.
Presenters
Utilities staff will compile a group of industry experts and accept proposals for the workshops.
Government agencies, trade organizations, and other utilities will be contacted as sources to provide
valuable energy efficiency information.
Program Measurement and Verification
Energy and/or cost savings are expected due to customers' increased awareness and subsequent
implementation of energy efficiency measures. Although this awareness may be gained through the
Energy Education and Demonstration Workshops, such a relationship cannot be reasonably documented.
The presentations will provide useful information, however, other factors unrelated to the workshops may
impact customers' behavior. The workshops are designed to stimulate customers' interest in
implementing energy efficiency measures.
Feedback from participating customers will serve as an indicator of program success. The feedback
customers provide will gauge the effectiveness of the workshops and the level of customer interest.
Customer. support for the energy education seminars should be the overriding indicator of program
success.
Aggressive efforts will be made to efficiently expend the Public Benefits Funds in order to inform and
educate customers about energy efficiency. It is the intent of AB 1890 to "transform the market', and
utilizing the Public Benefits Funds to defray the costs of educational energy efficiency programs are a
way of meeting this goal.
Quarterly progress reports will be generated. The reports will capture the level of participation for each
workshop and the associated expenditures, in addition to a brief narrative regarding the seminars'
success. An annual report with this information will also be generated. To maximize the success of each
workshop, any suggested corrective actions would be included in the progress reports.
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