Resolution No. 2015-054RESOLUTION NO. 2015-54
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND ADOPTING THE NATURAL GAS
REBATE PROGRAM FOR CUSTOMERS CONNECTED TO THE
CITY'S GAS DISTRIBUTION SYSTEM
WHEREAS, the City of Vernon ("City") is a chartered
municipal. corporation of the State of California that owns and
operates a system for the generation, purchase, transmission,
distribution and sale of electric capacity and energy; and
WHEREAS, on March 17, 2015, the City Council of the City of
Vernon adopted Resolution No. 2015-12 approving, establishing and
implementing 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; and
WHEREAS, 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 in 1990; and
WHEREAS, by memorandum dated July 21, 2015, the Director of
Gas & Electric has recommended the establishment of the Natural Gas
Rebate Program, which would reward energy efficiency measures taken by
connected natural gas customers and would be consistent with the goals
of AB 32; and
WHEREAS, the City Council desires to adopt the Natural Gas
Rebate Program.
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: The City Council of the City of Vernon hereby
approves and adopts the Natural Gas Rebate Program (the "Program"), a
copy of which is attached hereto as Exhibit A.
SECTION 4: The City Council of the City of Vernon hereby
instructs the City Administrator, or his designee, to take whatever
actions are deemed necessary or desirable for the purpose of
implementing and carrying out the purposes of this Resolution and the
transactions herein approved or authorized, including but not limited
to, any non -substantive changes to the Program attached herein.
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SECTION 5: 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 4th day of August, 2015.
ATTEST:
A
amity CT c� F`Deputy City Clerk
APPROVED AS TO FORM:
Brian Byan, Depu City Attorney
Name: W. Michael McCormick
Title: Mayor /: Mayor—Pr-o--v,TeT6f--
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STATE OF CALIFORNIA
) ss
COUNTY OF LOS ANGELES
I, Ana Barcia/ Deputy City Clerk of the City
of Vernon, do hereby certify that the foregoing Resolution, being
Resolution No. 2015-54, 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, August 4, 2015, and thereafter was duly
signed by the Mayor or Mayor Pro-Tem of the City of Vernon.
Executed this j> day of August, 2015, at Vernon, California.
(SEAL)
Bari'
Gat} C�ee_G' Deputy City Clerk
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I �WIi�>>r71
PROGRAM DESCRIPTION: This natural gas project rebate program is intended to encourage
customers to reduce gas consumption, and thereby reduce greenhouse gas emissions. This
can be accomplished by upgrading to high efficiency equipment, but also by an operational
change that requires some investment. The City shall be open to any project or process change
that can increase gas efficiency. The City shall also engage with customers to promote projects
that qualify. The program will be administered through Vernon's natural gas and the customer
service departments.
POLICY STATEMENT: The City of Vernon shall allocate revenues to a natural gas rebate
program derived from the CA Greenhouse Gas Surcharge approved in Resolution 2015-12,
dated March 17, 2015, and effective April 1, 2015. These revenues are from the sale of "freely
allocated greenhouse gas allowances," less the reasonable cost to administer the program.
Rebates shall be allocated in a fair and equitable manner, and consistent with Assembly Bill 32
such that funds can be rebated to eligible customers that verifiably reduce greenhouse gas
emissions to the atmosphere.
PROGRAM FUNDING: Funding for this gas rebate program is exclusively from greenhouse
gas allowances sold at each of the California Air Resource Board (CARB) cap -and -trade
auctions. However, allowances sold must be replaced to fulfill the City's allowance requirement.
Accordingly, the cost of all allowances purchased is covered by Vernon's gas customers
through the CA Greenhouse Gas Surcharge on monthly natural gas billing statements effective
April 1, 2015. The surcharge account balance is growing each month to reach a total of
approximately $340,000 after the first 12 months. Administrative costs are expected to be 15
percent or less, which will include staff time to process applications and rebate evaluation, third -
party technical verification when needed, and marketing of the program.
PROGRAM OBJECTIVES: The objectives of the gas rebate program are to:
• Support the statewide goal of reducing greenhouse gas emissions
• Provide proceeds from the sale of freely allocated greenhouse gas allowances to Vernon
gas customers for the purpose of reducing greenhouse gas emissions
® Actively promote the program to Vernon's gas customers in an equitable manner
® Design rebates such that rebate dollars are in proportion to benefit gained
® Provide support to customers to facilitate qualifying projects, including application and
verification
0 Maintain a reasonable cost to administer the program
BACKGROUND: The Global Warming Solution Act of 2006, also known as Assembly Bill 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 cap -and -trade program, an overall limit on GHG emissions from capped sectors of the
state's economy was set, 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 cap -and -trade program started 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 AB 32.
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. A set percentage of those allowances must
be sold in the open market, and the total of allowances is insufficient to cover Vernon's obligation
to CARB. Consequently, Resolution 2015-12 was passed by City Council March 17, 2015,
effective April 1, 2015, implementing Rate Schedule G-CARB, to begin collecting the California
Greenhouse Gas Surcharge from all Vernon gas customers. The purpose of the surcharge is to
collect additional funds necessary to cover the cost of allowances sold at auction, and also
purchase additional allowances necessary to meet the City's compliance requirement for 2015,
and beyond.
Proceeds from all auction sales 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.
The following specific language is from Section 95893, Part (d), of the Final Regulation Order
(as of January 2015) issued by the California Air Resources Board.
(3) Auction proceeds and allowance value obtained by a natural gas supplier shall
be used exclusively for the benefit of retail ratepayers of each natural gas
supplier, consistent with the goals of AB 32, and may not be used for the benefit
of entities of persons other than such ratepayers. Any revenue returned to
ratepayers must be done in a non -volumetric manner.
(4) Public utility gas corporations shall ensure equal treatment of their procurement
and delivery customer and delivery -only customers.
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(5) Prohibited Use of Allocated Allowance Value. Use of the value of any allowance
allocated to a natural gas supplier, other than for the benefit of retail ratepayers
consistent with the goals of AB 32, is prohibited.
Consequently, this necessitates the implementation of an energy efficiency program for natural
gas, which is specified in detail as follows.
REBATES:
Pipe Insulation: Minimum pipe diameter must be one-half inch. Pipe must transport
hot water or steam directly from gas -fired equipment. A minimum of one inch of
insulation must be added to the existing bare pipe. Manufacturer's specifications must
be included.
Pipe Insulation, Hot Water: $2 /linear foot
Pipe Insulation, Steam: $3 /linear foot
Tank Insulation: One or two inches of fiberglass or foam insulation must be added to
existing bare liquid tanks.
One -inch insulation: $2 /square foot
Two-inch insulation: $3 /square foot
Process Boilers: Boiler must replace an existing boiler. Application must include the
manufacturer's name and model name/number for the new boiler. New boilers must
have combustion test under full load conditions to document achieving the specified
minimum combustion efficiency. The predefined rebates below are only for boilers with
input less than or equal to 20,000 MBtuh. Larger boiler improvements may be eligible to
receive rebates based on the customized rebate calculation, but must have a
professional Flue Gas Analysis before, and then after, to determine the improvement in
Combustion Efficiency (CE).
Water Boilers: $2 /MBtuh (> 84% CE)
Steam Boilers: $2/ MBtuh (> 83% CE)
MBtuh = 1,000 Btu per hour. CE = 100% - Stack loss in %
Steam Traps: Must replace, on a one -for -one basis, existing steam traps that fail to
open. Application must include manufacturer's specification sheet for the steam trap
that replaces the existing trap, as well as the invoice for the purchase.
Steam Traps: $100 per trap
Customized Rebates: Energy savings projects can be customized beyond the
predefined rebates. Customized rebates may be used for equipment replacements and
improvements of existing processes.
Customized Rebate: $1 per each annual Therm saved
3
Customized projects require load history, performance calculations, and a detailed
engineering review. Vernon's gas customers must consult with Vernon Gas Division to
validate projects that meet the program objectives, depending on funding available.
Lease projects may qualify dependent upon the term of the lease requiring a minimum
5 years.
SPECIAL PROVISION FOR OTHER GREENHOUSE -GAS REDUCING REBATES:
The first priority of funding associated with this program shall be to qualified projects that
result in more efficient combustion of natural gas; however, rebate funds may also be
used to support projects that reduce greenhouse gas emissions in other ways that are
consistent with AB 32 and CARB guidelines. Subject to funding availability and
compliance with the Rebate Conditions identified below, non -gas projects may be
considered except the rebate will be based directly on the metric ton equivalent
reduction of carbon dioxide or other greenhouse gas as defined by CARB. The rebate
amount shall be developed based on the merits of the proposed project and shall be
consistent in contribution level with rebate levels otherwise used for customized gas
projects.
REBATE CONDITIONS:
1. Applicant must allow City of Vernon to be involved from the beginning of the applicant's
process, such that Vernon can inspect and audit the equipment to be replaced prior to it
being removed.
2. Rebates are contingent upon applicant being an active customer in good standing
connected to the City of Vernon gas system and paying the G-CARB surcharge.
3. Rebates are contingent upon customers obtaining the necessary permits from the City of
Vernon for all work done associated with the rebate application.
4. All rebates will be paid directly to the customer of record at a given Vernon location.
5. Natural gas savings must be quantified using reasonable engineering assumptions and
calculations, except for the predefined rebate categories.
6. Equipment or systems installed must be expected to operate for at least five years from
the date of installation.
7. Projects that receive incentives from other sources (excluding tax -related incentives) are
not eligible.
8. The maximum amount of rebate shall not exceed fifty percent of the project cost overall.
9. Available rebate funding shall be allocated based on the timing of application
acceptance and approval.
10, The maximum rebate amount is planned at $100,000 per customer per year subject to
funds availability, however City may allow higher rebates on a case -by -case basis,
subject to the amount of total rebate funding accumulated in the City's rebate balancing
account.
11. Rebate program is not for new construction, nor is it for replacement, nor for installation
where otherwise required by California Building Code or employee safety laws.
PROGRAM APPLICATION AND CONFIRMATION:
1. Pre -Installation Application
Applicants must submit a pre -installation application before beginning project work.
Customer initiated installations prior to City acceptance of the pre -installation application
will be rejected. The pre -installation application must contain the information necessary
to determine the savings and shall be the basis for the rebate. Subject to availability of
funds, the City reserves money for the project, pending timely completion of installation.
The pre -installation application shall consist of the following:
Customer and project site information
A technical description of the project
Documentation of the savings estimated (an engineering calculation)
New/old equipment specification (if applicable)
2. Post -Installation Confirmation
The post -installation confirmation shall be coordinated by the applicant after the project
is installed. The confirmation shall be the basis for the actual rebate paid, and shall
consist of the following.
® Any changes from the pre -installation application
m Documentation showing actual Therms saved
® Original, itemized, paid proof of purchase (sales slip or invoice)
® Scheduled site visit(s) for City to verify energy efficiency equipment
modifications, installations, and overall efficiency impact
MARKETING:
Upon approval of the program, staff will notify all customers by letter or direct email including the
details of the program.
However, staff anticipates that the bulk of rebate funds will go to larger projects focused on
customized rebates for boilers or controls upgrades. This is because statistically 90 percent of
all gas consumed is by only 30 percent of customer accounts, 19 of 65 total customers, not
including Owens or MGS. Essentially all of the gas is consumed in boilers. Consequently, staff
will personally contact each of these largest customers to explain the program in detail,
including availability of technical resources and funds. These customers are already aware the
program is coming based on the initial meetings explaining the Greenhouse Gas Surcharge
they are now paying. Accordingly, successful implementation of this program will be highly
dependent on targeting promotion to Vernon gas customers.
PROGRAM ADMINISTRATION:
The Natural Gas Division of Vernon Gas & Electric will lead program administration. The
Division will be responsible for developing and distributing promotional materials, setting
5
appointments with customers to explain the program, following up with customers, and
facilitating the application, construction, and completion process.
The Customer Services Division will process the actual paper work and rebate check requests
similar to the electric rebate program. The amount of time required by Customer Services will be
minimal. Applications are anticipated at a rate of one per month, much less than the electric
rebate program.
As -needed rebate evaluation and audit support will be provided by IGService, already under
contract with City of Vernon for natural gas support services.
A reasonable proportionate cost for each person/department supporting the program will be
allocated as administrative cost to the program.
6
CITY OF VERNON
Natural Gas Project Rebate Pro;rana
Pre -Installation Application
To be eligible for rebates, this application must be submi¢ed to the City of Vernon and approved by Vernon before be¢inninL
Project work.
Customer Name/Payee:
Mailing Address:
Installation Address in Vernon:
Customer Contact:
Phone:
Email:
DBA:
Federal'fax ID:
Please describe the energy savings and/or qualifying replacement equipment of your proposed project. For customized projects
please provide detailed calculations of expected Therms saved Include attachments, as needed.
Measure Description
Units Installed
Therms Saved
Rebate :.
$/Unit
Rebate Amount
$
Total Rebate Requested:
AGREEMENT CLAUSE.: I/We agree as follows: [)To begin the project within 90 days of initial Vernon inspection and approval
and finish within one year of project commencement 2) To allow the Vernon Utilities Department to conduct scheduled site visits
to verity installation ofthe hardware specified in this application; 3)'I'o provide the original, itemized, paid proof of purchase (sales
slip or invoice), complete a post -installation confirmation form, and worksheet showing actual installed equipment (as applicable)
all at completion of project; 4) Unless a written exception is provided by City of Vernon, this rebate shall not to exceed one hundred
thousandI (lo l tars of Clay percent of the paid proof of purchase (sales slip or invoice), whichever is less; S) Rebate will be calculated
Pei the rebate schedule in effect at the time of approval of this application; 6) Rebates are subject to availability of funds; 7) That
the City of Vernon may withhold payment of any rebate until satisfaction of any and all of the above listed conditions are met.
Customer Signature: Title:
Print Name: Date:
Vernon Utilities Department only
Date Pre -Inspection:
Inspected by:
Approved by:
CITY OF VERNON
Natural Gas Project Rebate Program
Post -Installation Confirmation
This Post -Installation Confirmation is associated with Pre -Installation Application with Customer dated:
Customer Namc/Payec:
DBA Business Name:
Mailing Address:
Installation Address in Vernon:
Customer Contact:
Phone:
Ismail:
Please describe any variations from the Pre -Installation Application:
Federal Tax ID:
Measure Description as Installed
Units Installed
oi•
Therms Saved
Rebate
$/Unit
Rebate Amount 1
S
Total Rebate Requested:
Attachments to be included with this form:
A) Installer's statement ofnctual equipment installation (size and specifications) and/or finalized "therm savings
computation
B) Copies of manufacturer's specifications and performance data
C) Original, itemized, paid proof of purchase (sales slip or invoice)
Customer Signature: Title:
Print Name: Date:
Vernon Utilities Department Only
Date Post -Inspection:
Inspected by:
Approved by:
CITY CLERK'S OFFICE
INTEROFFICE MEMORANDUM
DATE: August 6, 2015
TO: Carlos Fandino, Director of Gas & Electric
FROM: Deborah Juarez, Records Management Assistant
RE: Resolution No. 2015-54 — A Resolution of the City Council of the City of Vernon
Approving and Adopting the Natural Gas Rebate Program for Customers Connected to the
City's Gas Distribution System
Transmitted herewith is a copy of Resolution No. 2015-54 referenced above, which was approved by City
Council on August 4, 2015.
Thank you.
Attachment
c: Ali Nour
Anthony Serrano
Resolution No. 2015-54
a
`s �i ry a M `
Rat 1 smk r)�h:
1j 9 I II I Y) }
CITY WHK's OFICE STAFF REPORT
VERNON GAS & ELECTRIC DEPARTMENT
DATE: August 4, 2015
TO: Honorable Mayor and City Council
FROM: Carlos Fandino Jr., Director of Vernon Gas & Electric Department
Originator: Ali Nour, Utilities Engineering Manager
RE: Establishment of a Rebate Program for Retail Ratepayers Connected to
City's Gas Distribution System Pursuant to California Air Resources Board
("CARB") Requirements to Develop and Implement Emissions Reduction
Measures
Recommendation
A. The City Council find that the approval of a CARB Rebate Program 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
B. Adopt a resolution approving, establishing and implementing a natural gas CARB Rebate
Program to customers connected to City's gas distribution system. The Program will be
funded through rate schedule, "G-CARB" covering the cost of greenhouse gas emission
allowances associated with the "cap -and -trade" program initiated by the California Air
Resources Board ("CARB"); and
C. Find that the Natural Gas Rebate Program as attached to the resolution be approved with
an effective date of September 1, 2015.
Background
The Global Warming Solution Act of 2006, also known as Assembly Bill ("AB") 32, requires
that California Greenhouse Gas ("GI-IG") emissions in 2020 be at the same levels as that of the
year 1990. California Air Resource Board ("CARB") was authorized by the statute to develop
regulations to reach this goat, 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 GI G
emissions from capped sectors is established and covered facilities subject to the cap are able to
trade permits or allowances to emit GlIGs up to the capped amount.
Page 1 or 3
In 2012, CARB's cap -and -trade program compliance obligations only covered electric utilities.
Starting January 2015, the scope of the cap -and -trade program has expanded such that natural
gas suppliers, including the City's gas utility, are covered entities with a compliance obligation
based on retail gas sales and transportation. Similar to the City's electric utility, the gas utility
will receive free allowances from GARB annually at least until 2020.
On March 17, 2015, the City Council approved Resolution No. 2015-12 approving, establishing
and implementing a natural gas surcharge to fund participation in the (GARB) cap -and -trade
allowance program, for gas distributed and supplied by the City within boundaries. CARB
requires that proceeds from auction sales of any of City's freely allocated allowances must be
used for the benefit of retail gas ratepayers and may not be volumetrically refunded. As such, it
is staff's recommendation to implement a rebate program that rewards energy efficiency
measures taken by connected natural gas customers is consistent with the goals of AB 32.
The Rebate Program
The Natural Gas Rebate Program is intended to encourage eligible customers to reduce gas
consumption, and thereby reduce greenhouse gas emissions. This can be accomplished by
upgrading to high efficiency equipment, but also by an operational change that requires some
form of investment. The Program is open to any project or process change that can increase gas
consumption efficiency. 'the Program will be administered through the City's Natural Gas
Utility and the Utilities Customer Service Department.
The City shall allocate revenues to a natural gas rebate program derived from the CA
Greenhouse Gas Surcharge approved in Resolution 2015-12 date March 17, 2015. These
revenues are from the sale of "finely allocated greenhouse gas allowances," less the reasonable
cost to administer the program. Rebates shall be allocated in a fair and equitable manner, and
consistent with Assembly Bill 32 such that funds can be rebated to eligible customers that:
verifiably reduce greenhouse gas emissions to the atmosphere.
Funding for this gas rebate program is exclusively from greenhouse gas allowances sold at each
of the California Air Resource Board (GARB) cap -and -trade auctions. However, allowances
sold must be replaced to fulfill the City's allowance requirement. Accordingly, the cost of all
allowances purchased is covered by City's gas customers through the CA Greenhouse Gas
Surcharge on monthly natural gas billing statements effective April 1, 2015. The surcharge
account balance is growing each month to reach a total of approximately $340,000 after the first
12 months. Administrative costs are expected to be 15 percent or less, which will include staff
time to process applications and rebate evaluation, third -party technical verification when
needed, and marketing of the program.
The rebates cover energy efficiency measures including, but not limited to, pipe insulation, hot
water heater tank insulation, boiler replacements, steam traps or any special project that the
energy savings can be quantifiable, depending on funding availability, as fully described in the
attached Natural Gas Rebate Program description.
Page 2 of 3
Fiscal Impact
The net fiscal impact of the cap and trade program to the City's gas utility, 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 the Natural Gas Rebate Program. Some funds will also be used to cover
administrative and overhead costs.
Attachment(s)
1. Resolution No. 2015-12 and Supporting Documentation (for reference)
Page 3 of 3
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
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 ("CARD") 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 CARD 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 CARD; 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-CARB") 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 17Ch day of March, 2015.
Name: W. Michael McCormick
Title: Mayor /
ATTEST:
aria Z . Ayala
City Clerk /
APPROVED AS TO FORM:
Zay oh oussa, Deputy City Attorney
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STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
I, Maria E' Ayala, City Clerk / __rw r � r� � 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 1&� day of March, 2015, at Vernon, California.
(SEAL)
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Maria E. Ayala
City Clerk /
[mmullial,•..
CITY OF VERNON
NATURAL GAS (DEPARTMENT
Schedule G-CARB
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.
Page 1 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
CITY CLERK'S OFFICE
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
RECEIVED
MAR I D 2015
CITY ADMINISTRATION
Del il KOL, 1-7 ;, U."MIN1,I
DATE: March 17, 2015
TO: Honorable Mayor and City Council j
FROM: Carlos R. Fandino, Jr., Director of Vernon Gas & Electric I C�i
RE: Establishment of Natural Gas Surcharge to Fund Participation m the
California Air Resources Board ("CARS") 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 fiords
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
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 pF.PT -CUSTOMER SERVICE DIVISION
Re ular Bill
g
PREVIOUS BALANCE
$23,050.02
4305 SAN iA FE AVE,
BILLING ADJUSTMENTS
$0.00
VFi;NON, CALIFORNIA 90058
BILLING DATE
01/07/2015
PAYMENTS AND PAYM. ADJ.
$23,050.02CR
BILLING NUMBER
2679321
DEPOSIT REFUNDS
$0,00
ACCOUNT NUMBER 00006015
CYCLE
58
SPECIAL CHARGES
$0.00
CUSTOMER NUMBER 00004663
BOOK NUMBER
01
CURRENT CHARGES
$28,853.28
SERVICE ADDRESS 1946 E 46TH ST
OUTAGE BLOCK N
TOTAL AMOUNT 0UE
$28,853.28
Current Charges
Due By: January 27, 2015
PLEASE ENTER AMOUNT PAID
ROYAL. PRINTER INC
GAS CUSTOMER ��� �URGHAn C7E
ATTN: BRIAN HUH f,
1946 E 46TH ST
VERNON CA 90058
010000486300006D152679321002885326201501277 V
PLEASE RETURN THIS PORTION WITH YOUR PAYMENT
BILLING DATE
01107/2015
PREVIOUS BALANCE
$23,050.02
BILLING NUMBER
2579321
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
SERVICE ADDRESS 1946 E 46TI-I ST
OUTAGE BLOCK #
SPECAL CHARGES
$0.00
Service Type Meter Read Date
Read Date Days
Previous
Present Consumption BTU Cenv
Number From
To
Read
Read
Factor
Transaction Description
Billing
Payment - Thank You
Balance Forward
Monthly Service Charge
Total Therms
Transportation Charge Tier 1
Transportation Charge Tier 2
Commodity Charge
Commodity Admin. Fee
�TTotat Charges for Meter - 00811417
J Vernon Utility user Tax (1%)
Total Current Bill
Total Amount Due
CA fire AW50- Ge", S v7 ,ry—
Regular Bill
Usage
Rate
Charge
23,050,02
23,050.02CR
0.00
50,00
9910
51557
G32 - Gas G-2 Small
4187
0.17312
724.85 Commerclal Smaller
47370
0.07736
3,664.07
51557
0.46500
23.974.01
51657
0.00300
154.67
.---.................I...----
28, 567.60
285,68
2a,853.28
28,853,28
�Ir55? 0,01S00 11Z,da,g3
C1T,CLEA Is oF�ICE:
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 of 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 Halt, City Clerk Department, 4305 Santa Fe Avenue, Vernon,
California 90058, Monday through Thursday, 7:00 a.nt, to 5:30 p.m. and
on the City's website at: httna/www.citvofv_ernotl,or / )overnment/otiblic-
meetings/city-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 public mg.
Dated:
Carlos F'andino, Jr., Director o non Gas & Electric