Resolution No. 2015-012RESOLUTION NO. 2015-12
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON TO APPROVE, ESTABLISH AND IMPLEMENT A
NATURAL GAS SURCHARGE TO FUND PARTICIPATION IN THE
CALIFORNIA AIR RESOURCES BOARD ("CARB") CAP -AND -
TRADE ALLOWANCE PROGRAM, FOR GAS DISTRIBUTED AND
SUPPLIED BY THE CITY WITHIN ITS BOUNDARIES
WHEREAS, in connection with the operation of the Vernon
natural gas system, the City owns, operates and maintains a gas
distribution system, which includes not only mains and appurtenances
but also meters, laterals and other connection infrastructure; and
WHEREAS, the California Air Resources Board ("CARB") has been
authorized by California Assembly Bill 32 ("AB 32") to develop
regulations, including the Cap -and -Trade Program to reduce California's
greenhouse gas ("GHG") emissions to 1990 levels by 2020; and ; and
WHEREAS, under the terms of the CARB cap -and -trade program,
an overall limit on GHG emissions from capped sectors of the state's
economy was established and covered facilities subject to the cap are
able to trade permits, or allowances, to emit GHGs up to the capped
amount; and
WHEREAS, by memorandum dated March 17, 2015, the Director of
Gas & Electric has recommended that the City Council approve, establish
and implement a new natural gas rate schedule, Surcharge for Greenhouse
Gas Emissions ("G-CARB")," that will collect funds needed to cover the
cost of greenhouse gas emission allowances associated with the "cap -
and -trade" program created by CARB; and
WHEREAS, the City Council of the City of Vernon desires to
approve, establish and implement the new natural gas rate schedule,
Surcharge for Greenhouse Gas Emissions ("G-CARB"), effective April 1,
2015; and
WHEREAS, the City Council of the City of Vernon held a
public hearing on March 17, 2015, to consider evidence to establish
and implement a new natural gas rate schedule that will take effect on
April 1, 2015 to collect funds needed to cover the cost of greenhouse
gas emission allowances associated with the "cap -and -trade" program
created by GARB; and
WHEREAS, the City Council of the City of Vernon has heard and
considered all evidence, both written and oral, presented in
consideration of the proposed rate schedule.
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 above recitals are true and correct.
SECTION 2: The City Council of the City of Vernon finds
that this action is exempt under the California Environmental Quality
Act (CEQA), in accordance with Section 15061(b)(3), the general rule
that CEQA only applies to projects that may have an effect on the
environment.
SECTION 3: Effective April 1, 2015, the City Council of the
City of Vernon hereby approves the Surcharge for Greenhouse Gas
Emissions ("G-GARB") natural gas rate schedule, a copy of which is
attached hereto as Exhibit A.
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SECTION 4: The City Clerk, or Deputy City Clerk, of the
City of Vernon shall certify to the passage, approval and adoption of
this resolution, and the City Clerk, or Deputy City Clerk, of the City
of Vernon shall cause this resolution and the City Clerk's, or Deputy
City Clerk's, certification to be entered in the File of Resolutions
of the Council of this City.
APPROVED AND ADOPTED this 17th day of March, 2015.
Name: W• Michael McCormick
Title: Mayor / -
ATTEST:
-)4� C4��� -
aria E . Ayala
City Clerk /
APPROVED AS TO FORM:
Zay *k4oussa, Deputy City Attorney
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STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
I Maria E . Ayala City Clerk / f the City
of Vernon, do hereby certify that the foregoing Resolution, being
Resolution No. 2015-12, was duly passed, approved and adopted by the
City Council of the City of Vernon at a regular meeting of the City
Council duly held on Tuesday, March 17, 2015, and thereafter was duly
signed by the Mayor or Mayor Pro-Tem of the City of Vernon.
Executed this � day of March, 2015, at Vernon, California.
(SEAL)
- 4 -
Maria E. Ayala
City Clerk /
EXHIBIT A
CITY OF VERNON
NATURAL GAS DEPARTMENT
0M-711TIfXeafl;\.7;�
SURCHARGE FOR GREENHOUSE GAS EMISSIONS
PURPOSE
This surcharge is to cover costs associated with the cap -and -trade program implemented by the
California Air Resources Board (CARB) for natural gas utilities in California beginning in the
year 2015. This program is a result of Assembly Bill 32, "The California Global Warming
Solutions Act of 2006." The purpose of the statewide cap -and -trade program is to reduce
greenhouse gas emissions.
APPLICABILITY
This schedule applies to all City of Vernon gas utility customers, except any customer with
greenhouse gas emissions large enough to require them to participate independently in the
CARB cap -and -trade program.
DETERMINATION OF SURCHARGE
The surcharge shall be determined based on the formula shown below.
CA Greenhouse Gas Surcharge =
Cost of Greenhouse Gas Emission Allowances Purchased
Total Therms Transported
The Cost of Greenhouse Gas Emission Allowances Purchased will vary during each year. A
representative average cost may be used for the purpose of setting the surcharge.
Total Therms Transported are Therms transported to Vernon customers that are either
purchased commodity service or transportation -only service. Total Therms Transported shall
not include Therms delivered to Vernon customers participating independently in the CARB
cap -and -trade program.
Cap -and -trade auction proceeds and limited use holding account emission allowance value
shall be used for the benefit of retail ratepayers consistent with the goals of Assembly Bill
32. Accordingly, the volumetric surcharge shall not be reduced by the value of auction
proceeds or by the value of limited use holding account emission allowances.
Pagel of 2
City of Vernon Council Resolution 2015-XX effective April 1, 2015
A Surcharge Fund Balancing Account shall be established to track all revenue and
expenditures associated the Vernon's participation in the cap -and -trade program. The
Surcharge Fund Balance Account may be positive or negative. True up of the Fund Balance
shall be achieved by adjusting the surcharge slightly from time to time, and shall be done in a
manner that avoids spikes in the surcharge.
Page 2 of 2
City of Vernon Council Resolution 2015-XX effective April 1, 2015
TRANSMITTAL COMMUNICATION
CITY CLERK'S OFFICE
INTEROFFICE MEMORANDUM
DATE: March 19, 2015
TO: Carlos Fandino, Director of Gas & Electric
William Fox, Finance Director/City Treasurer
FROM: Deborah Juarez, Records Management Assistant
RE: Resolution No. 2015-12 — A Resolution of the City Council of the City of Vernon to
Approve, Establish and Implement a Natural Gas Surcharge to Fund Participation in the
California Air Resources Board ("CARB") Cap -And -Trade Allowance Program, for Gas
Distributed and Supplied by the City within its Boundaries
Transmitted herewith is a copy of Resolution No. 2015-12 referenced above, which was approved by City
Council on March 17, 2015.
Thank you.
Attachment
c: Anthony Serrano
Resolution No. 2015-12
STAFF REPORT
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C\� C4��KgCFF\C�
STAFF REPORT
VERNON GAS & ELECTRIC DEPARTMENT
RECEIVED
MAR 10 2015
CITY ADMINISTRATION
DATE: March 17, 2015
TO: Honorable Mayor and City Council
FROM: Carlos R. Fandino, Jr., Director of Vernon Gas & Electric
RE: Establishment of Natural Gas Surcharge to Fund Participatiofie
1
California Air Resources Board ("CARB") Cap -and -Trade Allowance
Program, for Gas distributed and supplied by the City within its boundaries
Recommendation
It is recommended that:
1. The City Council find that the approval requested in this staff report is exempt under the
California Environmental Quality Act (CEQA) in accordance with Section 15061(b)(3),
the general rule that CEQA only applies to projects that may have an effect on the
environment; and
2. The City Council conduct a public hearing and adopt a resolution approving, establishing
and implementing a new natural gas rate schedule, "G-CARB," that will collect funds
needed to cover the cost of greenhouse gas emission allowances associated with the "cap -
and -trade" program created by the California Air Resources Board ("CARB"); and
3. The City Council find that the cost adjustment tariff as attached to the resolution be
approved with an effective date of April 1, 2015.
Background
The Global Warming Solution Act of 2006, also known as Assembly Bill ("AB") 32, requires
that California Greenhouse Gas ("GHG") emissions in 2020 be at the same levels as that of the
year 1990, or an estimated 15% reduction compared to what emissions might otherwise have
been in 2020. CARB was authorized to develop regulations to reach this goal, and the cap -and -
trade program is one of several tools designed by CARB to do so. Under the terms of the CARB
cap -and -trade program, an overall limit on GHG emissions from capped sectors of the state's
economy was established and covered facilities subject to the cap are able to trade permits, or
allowances, to emit GHGs up to the capped amount.
CARB's implementation of the cap -and -trade program started in November 2012. The program
was designed to phase in covered entities' participation over three compliance periods. The first
period (calendar years 2013 and 2014) included electric distribution companies. CARB has
freely allocated allowances to Vernon for its electric utility. Vernon utilizes the proceeds from
the sale of any allowances not used to meet its compliance obligation exclusively for the benefit
of retail electric ratepayers, and consistent with the goals of AB32.
The City's gas utility cap -and -trade compliance obligations are distinct from those made for the
electric utility. For Vernon's electric system, the Council previously approved Resolution No.
2011-184, dated November 15, 2011, to implement a surcharge for the electric system.
In 2015, as the second compliance period has begun, the scope of the cap -and -trade program has
expanded such that natural gas suppliers have become covered entities with a compliance
obligation based on retail gas sales and transportation. As was the case with the electric utility,
Vernon has been given freely allocated allowances for the gas utility for the purpose of
mitigating the cost impact of cap -and -trade to retail customers. The volume of allowances
provided by CARB that are available to be used directly to meet compliance obligations is not
enough to cover all of Vernon's gas utility GHG emissions for two reasons. The first reason is
program design, and the second is because of load growth on the Vernon gas system over the
past three years.
Finally, proceeds from auction sales of any of Vernon's freely allocated allowances must be used
for the benefit of retail gas ratepayers, may not be volumetrically refunded, and must be
consistent with the goals of AB 32. This necessitates the implementation of an energy efficiency
program for natural gas, which will be addressed in a separate request from this one for a CARB
Surcharge.
Resources Needed
Implementation of this surcharge will require modification to Vernon's utility billing software
that must be done by Vernon's outside vendor. The cost for the modifications will not be
significant, and administration time of the surcharge, once in place, will be minimal.
Customer Communication
Because implementation of the surcharge will be significant to some larger customers, the gas
department has strategically prioritized customers into three categories for proactive contact: 1)
Customers that will receive a visit from staff explaining the surcharge, 2) Customers that will
receive a phone call from staff explaining the surcharge, and 3) All customers will receive a
letter of explanation. Customers are being told about the surcharge, and also informed that an
incentive program will follow that will enable them to receive rebate money to help pay for gas
efficiency measures.
Rate Schedule G-CARB
VG&E's proposed Schedule G-CARB is attached as Exhibit A to the resolution. The rate
schedule shows a formula for the determination of the surcharge. Administratively, the intent is
that the surcharge would be adjusted annually, but it can also be adjusted more often if needed to
keep the account from getting too far out of balance. The overall design of the cap -and -trade
program will cause the surcharge to increase over the next several years. It is requested that this
new rate schedule be effective April 1, 2015.
Billing Presentation of Surcharge
The surcharge is proposed to show on the billing statement below "Total Charges for Meter" and
above "Vernon Utility User Tax." The surcharge will be labeled "CA Greenhouse Gas
Surcharge." An example billing presentation is attached.
Accounting
A new natural gas "sub -department" has been named "5610 AB-32." This sub -department will
track all revenue and expenditures associated with the cap -and -trade program, including a
reasonable level of administrative and overhead costs, and future expenditures for natural gas
rebates to Vernon's gas customers. Establishment of this sub -department will also enable
ongoing monitoring of the surcharge fund balance for the purpose of adjusting the level of the
surcharge. All AB-32 cap -and -trade activities in the natural gas department will be kept separate
from similar activities in the electric department. Presently, the initial surcharge is estimated to
be $0.025 per Therm. Based on current delivered gas prices (commodity and transportation) of
approximately $0.50 per Therm, the surcharge represents about a five percent overall increase in
cost.
Fiscal Impact
The net fiscal impact of the cap and trade program to the Gas Division, by design, will be zero.
Revenue during the first year is estimated to be approximately $600,000. Of that amount,
approximately half will be used to pay for purchased emission allowances, and half will be
reserved for funding a natural gas rebate program. Some funds will also be used to cover
administrative and overhead costs.
Attachments:
1. Example gas bill
LIGHT & POWER DEPT. - CUSTOMER SERVICE DIVISION
Regular Bill
4305 SAN A FE AVE.
VEi.NON, CALIFORNIA 90058
BILLING DATE
01/07/2015
BILLING NUMBER
2679321
ACCOUNT NUMBER 00006015.
CYCLE
55
CUSTOMER NUMBER 00004863
BOOK NUMBER
01
SERVICE ADDRESS 1946 E 46TH ST
OUTAGE BLOCK #
Current Charges Due By: January 27, 2015
ROYAL PRINTEX INC
GAS CUSTOMER
ATTN: BRIAN HUH
1946 E 46TH ST
VERNON CA 90068
PREVIOUS BALANCE
BILLING ADJUSTMENTS
PAYMENTS AND PAYM. ADJ.
DEPOSIT REFUNDS
SPECIAL CHARGES
CURRENT CHARGES
TOTAL AMOUNT DUE
PLEASE ENTER AMOUNT PAID
$23,050.02
$0.00
$23,050.02CR
$0.00
$0.00
$28,853.28
l.j I TH
GRrR8 SuR6)4AP%&E
0100004863000060152679321002885328201501277
PLEASE RETURN THIS PORTION WITH YOUR PAYMENT
BILLING DATE
01/07/2015
PREVIOUS BALANCE
$23,050.02
BILLING NUMBER
2679321
BILLING ADJUSTMENTS
$0.00
ACCOUNT NUMBER .00006015 CYCLE
58
PAYMENTS AND PAYM. ADJ.
$23,050.02CR
CUSTOMER NUMBER 00004863 BOOK NUMBER
01
DEPOSIT REFUNDS
$0.00
1
SERVICE ADDRESS 1946 E 46TH ST OUTAGE BLOCK #
SPECAL CHARGES
$0.00
Service Type Meter Read Date Read Date Days Previous Present Consumption BTU Conv
Number From To Read Read Factor
Gas 00811417 12/01/2014 01/01/2015 31 472729 477720 49910 1.03300
Regular Bill
Transaction Description Usage Rate Charge
Billing
23,050.02
Payment - Thank You
23,050.02CR
Balance Forward
0.00
Monthly Service Charge
50.00
Rate
Total Therms
51557
GS2 - Gas G-2 Small
Transportation Charge Tier 1
4187
0.17312
724.85 Commercial Smaller
Transportation Charge Tier 2
47370
0.07735
3,664.07
Commodity Charge
51557
0.46500
23,974.01
Commodity Admin. Fee
51657
0.00300
154.67
.... _.................... .....
�TTotal Charges for. Meter - 00811417
J Vernon Utility User Tax (1 %)
Total Current Bill
Total Amount Due
CA Great 4uof'e.. GdS so(ZI-AS5e-
51)55-1 0, 02.5,00
28,567.60
285.68
28,853.28
28,853.28
I I z%,93
�{IE�`'oirnon
M
CIYY CLERK S OFFICE'.
NOTICE OF PUBLIC HEARING
4305 Santa Fe Avenue
Vernon, CA 90058
(323)583-8811
The City Council of the City of Vernon will conduct a public hearing, which you may attend.
PLACE: Vernon City Hall
City Council Chambers
4305 Santa Fe Avenue
Vernon, CA 90058
DATE & Tuesday, March 17, 2015 at 9:00 a.m.
TIME: (or as soon thereafter as the matter can be heard)
SUBJECT: Consider evidence to establish and implement a new natural gas rate
schedule that will take effect on April 1, 2015 to collect funds needed
to cover the cost of greenhouse gas emission allowances associated
with the "cap -and -trade" program created by the California Air
Resources Board ("CARB")
REQUEST: All parties are invited to be present and to submit statements orally or in
writing before or during the applicable public hearing
REVIEW OF Subject documents are available for inspection by the public at
THE FILE: Vernon City Hall, City Clerk Department, 4305 Santa Fe Avenue, Vernon,
California 90058, Monday through Thursday, 7:00 a.m. to 5:30 p.m. and
on the City's website at: http:/hvww.citvofvernon.org/�)overnment/public-
meetin gsE%ity-council
PROPOSED Staff plans to recommend that the Vernon City Council determine
CEQA that the proposals will not have a significant effect on the environment and
FINDING: are exempt from the California Environmental Quality Act (CEQA)
If you desire to challenge the actions taken by the City Council or any portion thereof in
court, you may be limited to raising only those issues you or someone else raised at the
applicable hearing described in this notice or in written correspondence delivered to the City of
Vernon during, or before, the hearing.
The hearing may be continued or adjourned or cancelled and rescheduled to a stated time
and place without further official notice of the publichcRing.
Dated: 2 - Z S" 1 �- 4 d
Carlos Fandino, Jr., Director o non Gas & Electric