EBMUD WaterSmart PAYS

“Pay as You Save”

On-Bill Financing Pilot Concept

Finance-Administration Committee

January 28, 2014

Presentation Outline

• Bay Area Regional Energy Network (BayREN)

“PAYS” Offer and Concept

• Other Utility Programs/Pilots

• EBMUD Pilot and Evaluation

• Next Steps

2

BayREN PAYS Development

Funding

• $650,000 in CPUC funding to expand PAYS to

water utilities

• Established consultant team (BayREN, Energy

Efficiency Institute Inc., Bevilacqua-Knight,Inc.)

• 1-3 water utility jurisdictions

– Up to 2,000 projects per utility

– Program launch January 2014

– Design development Spring 2014

3

PAYS Financing Framework

Added fixed surcharge

on water bill

Pay as You Save (PAYS)

Concept

Intended as RISK FREE offer for customer

• No upfront payment

• Utility bills are immediately lower

• No loan, no lien, and no debt

• If customer leaves, payment obligation stays

with property (and meter)

• Contractor bonding ensures problems found

will be fixed

• General program design to cover cost of

implementation 5

PAYS Financing Framework

Capital

Provider

Program

Operator

Certified

Contractors

and Suppliers

Customer

Utility

6

- Provides funds to pay

contractors

- Pays for

completed

work

- Provides/installs

program measures

- Pays surcharge

with water bill

• Sends amount

billed in program

Self-

Sustaining

System

• At least 50% of customers accept “PAYS Offer”

• 11 Pilots in 5 states over 15 years

• California: toilets & showerheads, landscaping,

appliances

• Hawaii: solar hot water

• Kansas & Kentucky: weatherization and heating

systems

• New Hampshire: street lighting, indoor lighting,

HVAC, CFLs

PAYS Success To Date

• Windsor – Multifamily residential, commercial

landscaping

• Hayward – Multifamily residential

• EBMUD – Multifamily residential, landscaping,

food services

• SFPUC – Multifamily Residential

Bay Area PAYS Pilots

• ~5% of all residential units increased

participation in conservation program

• Average single family savings of:

– 10% of energy use

– 20% of indoor water use

– $15 per month in net utility costs

• Enrolled >50% of eligible multifamily units

1st year w/30% indoor water savings

Windsor Efficiency PAYS

Green Hayward PAYS

• A water and energy efficiency program:

– multifamily goal: retrofit 2,000 housing units

– landscaping goal: up to 100 controllers for

multifamily, commercial, institutional

• Procurement of Contractors and Suppliers in

process

• February City Council approval date

• Target March launch of $1M

11

EBMUD WaterSmart PAYS

On-Bill Financing Approach

• Assess feasibility of conservation revolving fund

– Self-sustaining program model

– Stretch District’s conservation budget

– Repurpose rebate funds

• Increase customers participation for

conservation improvements

– Target hard to reach sectors

– Target multiple conservation measures

• Achieve water supply reliability goals

EBMUD WaterSmart PAYS Pilot

Efforts To Date

Concept Introduction

Discovery Phase

Concept Paper

• Pilot Design

• Pilot Implementation

13

Proposed EBMUD PAYS Ph. 1

Pilot Candidates (e.g. 25 Accts.)

Market Sector Business Classification Candidate Water-Efficient

Products

MF Residential

(6) Accts

(60) units

5 or more units on one meter, and mobile home parks

• high-efficiency toilets

• high-efficiency washers

• faucets

• turf conversion

• drip irrigation

• submetering

• sprinkler retrofit

• weather-based controller

• graywater systems

• boilerless steamers

• waterless wok ranges

• air-cooled ice machines

• pre-rinse spray valves

• commercial dish machines

Landscape

(12) SF Resid.

(4) Comm.

planter strips, median strips, golf

and country clubs, botanical

gardens, aquariums

Food Service

(1) General

(1) Franchise

(1) Institution

commercial eating places, restaurants; commercial eating places, fast food; commercial food sales

Pre-Screened & Pre-Approved

PAYS Measure Calculation Tool

14

EBMUD Efficiency PAYS® Multi-Family Basic Measures Performance Screen

PAYS®

Charge Calculation

Baseline Conditions Default

Apartment Units in this Property: 30

Average Residents per Occupied Apartment: 2 2.3

Average Vacancy: 8% 7.3%

Interest Rate (per annum): 8%

Payment Term for Baseline Measures (years): 10

Billing Frequency (per year) 6

Retrofit Assumptions

Percentage of Existing Toilets flushing at 3.5 gpf: 45% 0-100%

Toilet Replacement Strategy:Replace all

except HETs

Drop-down

box

Average Number of Toilets per Apartment: 1.0 1.2

Average Number of Showerheads per Apartment: 1.0 1.1 Parameter

Avg Showerhead Flowrate measured onsite (existing): 2.0 2.2 Rate:

New Showerhead Nominal Flowrate: 1.5 1.5 Unit Cost:

Water Heater Thermal Efficiency: 75% 80%

Water Heater Setpoint: 125 135

Per Capita Consumption as % of National Average: 100% 75%

per Apt per Bldg gl Th kWh Water Gas Electricity Total

Basic Measures

Installed Toilet $270.00 1.0 30 $8,100 164,322 0 0 $1,564 $0 $0 $1,564

1.5 gpm Showerhead $59.56 1 30 $1,787 57,825 270 0 $550 $266 $0 $817

Kitchen & Bath Aerators w/ shwrhd 40,296 198 0 $384 $195 $0 $579

LEDs $15.00 5 150 $2,250 0 0 0 $0 $0 $0 $0

Rebates ($1,400)

Subtotal $10,737 262,443 469 0 $2,498 $462 $0 $2,960

Annual Cost SavingsAnnual Resource SavingsItem Delivered

QuantityUnit Cost Cost

APPLICABLE UTILITY RATE FACTORS

METER TYPE

Residential: 5+ units

ELEVATION BAND

Band 1 Oakland

SEWER AGENCY

Indoor Water (CCF) Outdoor Water (CCF) Natural Gas (Th)

ENERGYWATER & WASTEWATER

Electricity (kWh)

Utility Rates at Which Savings are Valued

Existing Rebate ScheduleEBMUD: Select Rebate Protocol:

Basic Measure Contractor to Complete Yellow-shaded Cells

select factor from list in each yellow-shaded cell above

select rate from list in yellow cells aboveunit costs above are auto populated

PG&E Rate Class

Regular

$0.99 $0.31$7.12 $3.36

Baseline Tier 3Water & Sewer Peak Water

15

EBMUD WaterSmart PAYS Pilot

Eligibility Criteria

Property owner

– application/agreement

– demonstrate financial stability

– good payment history of water bills

– agrees to repayment through on-bill surcharge

– works directly with certified contractor

Water Conservation Staff

– completes site audit

– confirms proposed measures meet criteria

– certifies contractor work and payment

16

Pilot Program Evaluation:

What we want to measure/setup

• Process and procedures

• Roles and responsibilities (internal/external)

• Target water savings

• Customer interest, satisfaction

• Are there sufficient certified contractors to

perform work?

• Program cost-effectiveness

Next Steps:

Proposed Phased Pilots

Phase One (FY14Q3/Q4)

• Develop pilot w/budget of approx. $125K (w/grant funds)

• Approximately 25 accounts

• Manually enter surcharge on water bill

• Pilot evaluation to inform larger second phase

Phase Two (FY15)?

• Increased budget of $500,000-$750,000 (pending grant

funding from Prop. 84 Round 3)

• 100 - 200 accounts

• Manual processing or consider automation

• Evaluation to inform standard program in FY16 17

EBMUD WaterSmart PAYS

“Pay as You Save”

On-Bill Financing Pilot Concept

Finance-Administration Committee

January 28, 2014

Presentation Outline

• Bay Area Regional Energy Network (BayREN)

“PAYS” Offer and Concept

• Other Utility Programs/Pilots

• EBMUD Pilot and Evaluation

• Next Steps

2

BayREN PAYS Development

Funding

• $650,000 in CPUC funding to expand PAYS to

water utilities

• Established consultant team (BayREN, Energy

Efficiency Institute Inc., Bevilacqua-Knight,Inc.)

• 1-3 water utility jurisdictions

– Up to 2,000 projects per utility

– Program launch January 2014

– Design development Spring 2014

3

PAYS Financing Framework

Added fixed surcharge

on water bill

Pay as You Save (PAYS)

Concept

Intended as RISK FREE offer for customer

• No upfront payment

• Utility bills are immediately lower

• No loan, no lien, and no debt

• If customer leaves, payment obligation stays

with property (and meter)

• Contractor bonding ensures problems found

will be fixed

• General program design to cover cost of

implementation 5

PAYS Financing Framework

Capital

Provider

Program

Operator

Certified

Contractors

and Suppliers

Customer

Utility

6

- Provides funds to pay

contractors

- Pays for

completed

work

- Provides/installs

program measures

- Pays surcharge

with water bill

• Sends amount

billed in program

Self-

Sustaining

System

• At least 50% of customers accept “PAYS Offer”

• 11 Pilots in 5 states over 15 years

• California: toilets & showerheads, landscaping,

appliances

• Hawaii: solar hot water

• Kansas & Kentucky: weatherization and heating

systems

• New Hampshire: street lighting, indoor lighting,

HVAC, CFLs

PAYS Success To Date

• Windsor – Multifamily residential, commercial

landscaping

• Hayward – Multifamily residential

• EBMUD – Multifamily residential, landscaping,

food services

• SFPUC – Multifamily Residential

Bay Area PAYS Pilots

• ~5% of all residential units increased

participation in conservation program

• Average single family savings of:

– 10% of energy use

– 20% of indoor water use

– $15 per month in net utility costs

• Enrolled >50% of eligible multifamily units

1st year w/30% indoor water savings

Windsor Efficiency PAYS

Green Hayward PAYS

• A water and energy efficiency program:

– multifamily goal: retrofit 2,000 housing units

– landscaping goal: up to 100 controllers for

multifamily, commercial, institutional

• Procurement of Contractors and Suppliers in

process

• February City Council approval date

• Target March launch of $1M

11

EBMUD WaterSmart PAYS

On-Bill Financing Approach

• Assess feasibility of conservation revolving fund

– Self-sustaining program model

– Stretch District’s conservation budget

– Repurpose rebate funds

• Increase customers participation for

conservation improvements

– Target hard to reach sectors

– Target multiple conservation measures

• Achieve water supply reliability goals

EBMUD WaterSmart PAYS Pilot

Efforts To Date

Concept Introduction

Discovery Phase

Concept Paper

• Pilot Design

• Pilot Implementation

13

Proposed EBMUD PAYS Ph. 1

Pilot Candidates (e.g. 25 Accts.)

Market Sector Business Classification Candidate Water-Efficient

Products

MF Residential

(6) Accts

(60) units

5 or more units on one meter, and mobile home parks

• high-efficiency toilets

• high-efficiency washers

• faucets

• turf conversion

• drip irrigation

• submetering

• sprinkler retrofit

• weather-based controller

• graywater systems

• boilerless steamers

• waterless wok ranges

• air-cooled ice machines

• pre-rinse spray valves

• commercial dish machines

Landscape

(12) SF Resid.

(4) Comm.

planter strips, median strips, golf

and country clubs, botanical

gardens, aquariums

Food Service

(1) General

(1) Franchise

(1) Institution

commercial eating places, restaurants; commercial eating places, fast food; commercial food sales

Pre-Screened & Pre-Approved

PAYS Measure Calculation Tool

14

EBMUD Efficiency PAYS® Multi-Family Basic Measures Performance Screen

PAYS®

Charge Calculation

Baseline Conditions Default

Apartment Units in this Property: 30

Average Residents per Occupied Apartment: 2 2.3

Average Vacancy: 8% 7.3%

Interest Rate (per annum): 8%

Payment Term for Baseline Measures (years): 10

Billing Frequency (per year) 6

Retrofit Assumptions

Percentage of Existing Toilets flushing at 3.5 gpf: 45% 0-100%

Toilet Replacement Strategy:Replace all

except HETs

Drop-down

box

Average Number of Toilets per Apartment: 1.0 1.2

Average Number of Showerheads per Apartment: 1.0 1.1 Parameter

Avg Showerhead Flowrate measured onsite (existing): 2.0 2.2 Rate:

New Showerhead Nominal Flowrate: 1.5 1.5 Unit Cost:

Water Heater Thermal Efficiency: 75% 80%

Water Heater Setpoint: 125 135

Per Capita Consumption as % of National Average: 100% 75%

per Apt per Bldg gl Th kWh Water Gas Electricity Total

Basic Measures

Installed Toilet $270.00 1.0 30 $8,100 164,322 0 0 $1,564 $0 $0 $1,564

1.5 gpm Showerhead $59.56 1 30 $1,787 57,825 270 0 $550 $266 $0 $817

Kitchen & Bath Aerators w/ shwrhd 40,296 198 0 $384 $195 $0 $579

LEDs $15.00 5 150 $2,250 0 0 0 $0 $0 $0 $0

Rebates ($1,400)

Subtotal $10,737 262,443 469 0 $2,498 $462 $0 $2,960

Annual Cost SavingsAnnual Resource SavingsItem Delivered

QuantityUnit Cost Cost

APPLICABLE UTILITY RATE FACTORS

METER TYPE

Residential: 5+ units

ELEVATION BAND

Band 1 Oakland

SEWER AGENCY

Indoor Water (CCF) Outdoor Water (CCF) Natural Gas (Th)

ENERGYWATER & WASTEWATER

Electricity (kWh)

Utility Rates at Which Savings are Valued

Existing Rebate ScheduleEBMUD: Select Rebate Protocol:

Basic Measure Contractor to Complete Yellow-shaded Cells

select factor from list in each yellow-shaded cell above

select rate from list in yellow cells aboveunit costs above are auto populated

PG&E Rate Class

Regular

$0.99 $0.31$7.12 $3.36

Baseline Tier 3Water & Sewer Peak Water

15

EBMUD WaterSmart PAYS Pilot

Eligibility Criteria

Property owner

– application/agreement

– demonstrate financial stability

– good payment history of water bills

– agrees to repayment through on-bill surcharge

– works directly with certified contractor

Water Conservation Staff

– completes site audit

– confirms proposed measures meet criteria

– certifies contractor work and payment

16

Pilot Program Evaluation:

What we want to measure/setup

• Process and procedures

• Roles and responsibilities (internal/external)

• Target water savings

• Customer interest, satisfaction

• Are there sufficient certified contractors to

perform work?

• Program cost-effectiveness

Next Steps:

Proposed Phased Pilots

Phase One (FY14Q3/Q4)

• Develop pilot w/budget of approx. $125K (w/grant funds)

• Approximately 25 accounts

• Manually enter surcharge on water bill

• Pilot evaluation to inform larger second phase

Phase Two (FY15)?

• Increased budget of $500,000-$750,000 (pending grant

funding from Prop. 84 Round 3)

• 100 - 200 accounts

• Manual processing or consider automation

• Evaluation to inform standard program in FY16 17

Refunding Wastewater General Obligation Bonds

Finance/Administration Committee

January 28, 2014

Proposed Financings for FY14

Description Issue/Approximate Size Date of

Board Action Pricing or

Issuance Date

1 Replace Royal Bank of Canada and Barclays Bank as remarketing agents for the District’s outstanding Water Series 2008A-1, 2008A-2 and 2008A-3 Bonds

W 2008A-1: $61.7 million W 2008A-2: $46.3 million W 2008A-3: $46.3 million

9/24/2013 12/2013

2 Authorization for Opportunistic Water and Wastewater Restructurings for De-Risking and Fixed Rate Refundings

Based on Market Opportunities 9/24/2013 TBD

3 Remarket the Water Series 2009A-1 and Series 2009A-2 Securities Industry and Financial Markets Association (SIFMA) Index Bonds to establish a new interest rate period

W 2009A-1: $41.04 million W 2009A-2: $41.04 million

10/22/2013 12/2013

4

Renew or replace Bank of America (BofA) and JPMorgan Chase Bank (JPM) as liquidity providers for Water Series 2008A-4, Water Series 2008B-3 and Wastewater Series 2008C Bonds and extend term

W 2008A-4: $46.3 million W 2008B-3: $15.1 million WW 2008C: $51.7 million

10/22/2013 12/2013

5 Competitive Sale Refunding of Wastewater Series F (2003) G.O. Bonds

WW $18.6 million 1/28/2014

2/2014 (price)

2/26/14 (close)

6 Remarket the Water Series 2011A-1 and A-2 SIFMA Index Bonds to establish a new interest rate period or refund with another product

W 2011A-1: $74.1 million W 2011A-2: $74.1 million

1st Q 2014 5/2014

7 Renew or replace Wells Fargo Bank (WFB) as liquidity provider for Water Series 2008A-1 Bonds and extend term

W 2008A-1: $61.7 million 10/22/2013 12/2013

8 Issue additional “New Money” Water Revenue Bonds $170.0 million 4/2014 5 – 6/2014

2

General Obligation Bonds

•Wastewater System General Obligation Bonds, Series F

– $18,555,000 outstanding

– maturing in 2018

– District’s only G.O. Bonds

– Voter approved

– Repaid from property tax levy

3

Wastewater G.O. Issuance

G.O. Bond History

1970: voters authorized $60 million

1971-1993: entire amount issued

1993: refunding Series E

2003: refunding Series F

2014: proposed refunding Series G

4

Refunding Plan

• $15.4 million to be refunded by Proposed Series G

• G.O. Bonds will be sold by Competitive Sale

• Savings estimated at $1.27 million net present value

• Lower annual property tax levy by estimated 6%

5

Cost of Issuance

Costs of Issuance Co-Bond Counsels $127,500 Co-Financial Advisors 83,000 Rating Fees 32,500 Tax Counsel 30,000 Printer 10,000 Reimbursable Expenses & Contingency 10,000 Other* 4,750

$297,750

Underwriter's Discount $75,000

*paying agent, refunding escrow agent, verification agent

6

Requested Action

7

• Adopt resolution providing for issuance of Wastewater G.O. Bonds Refunding Series G

Dodd-Frank Protocol Amendment of Interest Rate

Swap Policy

Finance/Administration Committee January 28, 2014

2 2 2 2 2 2 2 2 2 2 2

Agenda

•Debt and swap portfolio

• Swap policy

•Dodd-Frank Protocol

2

3 3 3 3 3 3

Variable14.3%

Synthetic Fixed17.2%

Fixed68.5%

Water System $2.60 Billion

Wastewater System $463.7 Million

Variable3.2%

Synthetic Fixed24.3%

Fixed72.5%

District Debt Portfolio

4 4 4 4 4 4 4

District Swap Portfolio

Water Swap Portfolio Wastewater Swap Portfolio

Bond Series Counterparty

Outstanding Balance

($million)

Bond Series Counterparty Outstanding

Balance

2011A Bank of NY Mellon 98,780,000 2011A Dexia

Credit Local 61,725,000

2011A JP Morgan Chase 49,390,000 2008C Citigroup, Inc. 25,845,000

2008A JP Morgan Chase 70,965,000 2008C JP Morgan Chase 25,845,000

2008A Bank of America 70,965,000

2008A Merrill Lynch 30,850,000

2008A Bank of NY Mellon 27,770,000

2009/ 2008B Deutsche Bank 61,050,000

2009 Citibank, N.A. 15,675,000

2009 Merrill Lynch 20,350,000

445,795,000 113,415,000

5

District Swap Policy

Interest Rate Swap Policy 4.23

• Created and adopted by the Board in April 2007

• Contains guidelines for use and ongoing monitoring of swaps:

– Considerations for evaluating use of swaps

– Permitted uses of swaps

– Counterparty credit standards

– Method of procurement

– Documentation guidelines

6

Dodd-Frank Act

• Dodd—Frank Wall Street Reform and Consumer Protection Act—July 2010

• Title VII—Wall Street Transparency & Accountability

– Regulates swap dealers – Commodity Futures Trading Commission (CFTC) – Securities and Exchange Commission (SEC) – Finalized rules which are effective May 1, 2013

• “External business conduct” of swap dealers

– Duty to determine suitability of swap recommended to a counterparty

– Obligation to report information on counterparties – Municipal agencies considered “special entity” – “Safe harbor” if special entity exercises independent

judgment regarding swap transaction

7

Dodd—Frank 2012 Protocol

•Dealers will not execute, modify or terminate swaps without safe harbor

•DF Protocol is a standard way to disclose and exchange information to meet safe harbor provisions, primarily:

– We have not relied on the dealer

– We have a qualified, independent advisor

8

Dodd—Frank 2013 Protocol

•DF 2013 Protocol allows District to make elections minimizing burdensome administrative requirements: – Choose not to transfer swaps to clearing facility,

eliminating such requirements as receiving and reviewing daily mark-to-market and collateral posting reports

– Opt out of a periodic portfolio review process that would be burdensome without material offsetting benefits

Requested Action

9

• Adopt a resolution:

i. authorizing the District to adhere to the Dodd-Frank March 2013 Protocol and subsequent protocols, and

ii. approving an amendment to the Interest Rate Swap Policy 4.23 to provide for compliance with the the August 2012 Dodd-Frank Protocol, the March 2013 Protocol, and any subsequent protocols and similar agreements to be adhered to by the District

• Accept the annual report for the District’s swap portfolio.

Viridis Project Update

Finance/Administration Committee

January 28, 2014

Agenda

• Project Background

• Key Project Issues

– Building Demolition

– Power Service

– Rail access

•Next Steps

2

Project Background

Timeline

3

2013 2011

Execution of

Lease

Agreement

(Oct)

Current Lease

Commencement

Date

(May 1, 2014)

2014 2015

Execution of

Lease Agreement

Amendment

(Sep)

Building

Demo

(Jan-May)

Original Lease

Commencement Date

(July 1, 2013)

PG&E Application

(Sep ‘13 – May ‘14)

Biodiesel Production Facility

Construction/Operation

Project Background

Site Location

4

Key Project Issues

Building Demolition

• Building Demolition

– 8 buildings/structures

– Hazardous materials removal – paid by

District

– Building demolition – paid by Viridis

• If Viridis does not proceed with lease

commencement, these improvements

would increase revenue from other

future lessees

Key Project Issues

Building Demolition (cont’d)

Building demo

Parcel A

Parcel B

Key Project Issues

Power Service

7

• Power to West End property was originally supplied

through an agreement with City/Port

– City to disconnect power in early February

• Per lease agreement, Viridis is responsible for

furnishing all utilities and paying associated costs

• Viridis has requested that the District coordinate its

application to accommodate the biodiesel facility

• District is proceeding with a PG&E application to

provide power to the lease area

– Supports Viridis facility (reimbursed by Viridis), or

– Adds additional revenue from future land lessees

Key Project Issues

Rail Access

8

• Viridis is interested in constructing a new rail spur to

provide site access

• Per lease agreement, Viridis is responsible for securing rail

access to its proposed site

• Viridis has not received support during initial

discussions with the rail operator

• Staff has raised the issue with City of Oakland staff

and will continue to support discussions going

forward

Next Steps

9

• Staff will continue to implement the

building demolition and new electrical

service work

– Prepare the site for occupancy on May 1, 2014

• Continue to support project development

– Respond to information and coordination

requests

– Execute lease agreement amendment to

address power service cost reimbursement

– Assist in coordinating with City on rail issue