HomeMy WebLinkAbout2018-01-18 Utilities Advisory Commission Agenda Packet
NOTICE IS POSTED IN ACCORDANCE WITH GOVERNMENT CODE SECTION 54954.2(a) OR 54956
I. ROLL CALL
II. ORAL COMMUNICATIONS
Members of the public are invited to address the Commission on any subject not on the agenda. A reasonable
time restriction may be imposed at the discretion of the Chair. State law generally precludes the UAC from
discussing or acting upon any topic initially presented during oral communication.
III. APPROVAL OF THE MINUTES
Approval of the Minutes of the Utilities Advisory Commission Meeting held on December 6, 2017
IV. AGENDA REVIEW AND REVISIONS
V. REPORTS FROM COMMISSIONER MEETINGS/EVENTS
VI. GENERAL MANAGER OF UTILITIES REPORT
VII. COMMISSIONER COMMENTS
VIII. UNFINISHED BUSINESS - None
IX. NEW BUSINESS
1. 2018 Cross-Bore Safety Program Update Discussion
2. 2018 Utilities Strategic Plan Action
3. Selection of Potential Topic(s) for Discussion at Future UAC Meeting Action
NEXT SCHEDULED MEETING: February 7, 2018
ADDITIONAL INFORMATION - The materials below are provided for informational purposes, not for action or discussion
during UAC Meetings (Govt. Code Section 54954.2(a)(2)).
12-Month Rolling Calendar
Informational Report
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UTILITIES ADVISORY COMMISSION
THURSDAY, JANUARY 18, 2018 – 7:00 P.M. – SPECIAL MEETING
DOWNTOWN LIBRARY, EL CAMINO REAL PROGRAM ROOM
270 FOREST AVENUE, PALO ALTO
Chairman: Michael Danaher Vice Chair: Arne Ballantine Commissioners: Lisa Forssell, A. C. Johnston, Judith Schwartz, Lauren Segal and Terry Trumbull Council Liaison: Eric Filseth
Utilities Advisory Commission Minutes Approved on: Page 1 of 10
UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF DECEMBER 6, 2017 MEETING
CALL TO ORDER
Chair Danaher called the meeting of the Utilities Advisory Commission (UAC) to order at 7:00 p.m.
Present: Chair Danaher, Commissioners Forssell, Schwartz, Segal, Johnston
Absent: Vice Chair Ballantine, Commissioner Trumbull
ORAL COMMUNICATIONS
None
APPROVAL OF THE MINUTES
Commissioner Johnston moved to approve the minutes from the November 1, 2017 meeting.
Commissioner Schwartz seconded the motion. The motion carried 5-0 with Chair Danaher and
Commissioners Forssell, Schwartz, Segal, and Johnston voting yes, Vice Chair Ballantine and Commissioner
Trumbull absent.
AGENDA REVIEW AND REVISIONS
None
REPORTS FROM COMMISSION MEETINGS/EVENTS
Commissioner Schwartz attended the annual meetings of the National Association of Regulatory Utility
Commissioners (NARUC) and the National Association of State Utility Consumer Advocates (NASUCA) in
November. These are good models for Commissioners to investigate in terms of educating themselves. At
these meetings she heard discussions regarding millennials and how they approach communication and
energy use and promoting partnerships between technology companies and utilities to provide more
electric vehicle charging stations. The City of Palo Alto can and should play a leadership role in promoting
partnerships to provide more charging stations. The fact that Palo Alto is a small municipal utility won't
matter because of the high concentration of EVs in Palo Alto. Commissioner Schwartz also attended a low
income energy issues forum, where she participated in a customer "journey mapping" exercise to map the
decision-making process of low-income customers when they realize they need assistance. It's easy to
forget that residents of Palo Alto struggle to make ends meet. A future agenda item on this topic would be
worthwhile.
Commissioner Segal reported she and Commissioner Schwartz met with staff to discuss outreach to the
community and mechanisms to reach different segments of the community. The discussion generated
ideas for a column in the Weekly. A small group of community members are active, but they may not
represent the general views of the community. Commissioner Schwartz added that outreach should be a
combination of technology and standard approaches. Staff has to be proactive in targeting constituencies
and inviting them to work with the City.
DRAFT
Utilities Advisory Commission Minutes Approved on: Page 2 of 10
UTILITIES GENERAL MANAGER REPORT
Ed Shikada, Utilities General Manager, delivered the General Manager’s Report.
SunShares Update: Registration for the Bay Area SunShares solar group-buy program ended on November
30. Palo Alto placed first among participating outreach-partner communities, with the highest number of
signed PV contracts (12 as of most recent reporting from BC3, the organization administering the program).
Palo Alto came in second to the City of San Francisco for number of people registered for the SunShares
program, with 150 registrants. In order to be eligible for program discounts, residents must sign solar
contracts by December 31. After that date, we will receive final numbers for PV capacity contracted for
installation through the program.
Transitioning NEM: Due to widespread solar adoption in the City, we are approaching the end of the
current Net Energy Metering (NEM) program in which customers receive retail credit for electricity their
solar system exports to the grid. The City will transition to a NEM "Successor" program once Palo Alto
reaches a capacity of 10.8 megawatts (MW) of cumulative solar installed for customers enrolled in the
current NEM program. This is expected to occur in the month of December. To provide some certainty to
people considering solar this year, staff is recommending that City Council extend current NEM program
eligibility to all solar applicants through January 2, 2018 (the first business day after December 31, which
falls on a Sunday), regardless of whether the 10.8 MW limit is reached before then. After January 2, all
customers would be served by the NEM Successor program. This change would ensure that all customers
currently evaluating solar can apply for the City's current NEM program this year, and it would also ensure a
smooth transition to the NEM Successor program. Based on known potential applications, it would have a
minimal impact on utility costs ($2,000-$5,000/yr.). Council will review staff's recommendations at the
December 11 Council date.
Georgetown University Energy Prize 10 Finalists Announced: Throughout 2015-16 the City of Palo Alto,
along with 49 other communities in the U.S., participated in the Georgetown University Energy Prize (GUEP)
competition. The stated $5M prize generated much enthusiasm, and Palo Alto worked to develop
innovative programs such as outreach at schools and collaboration with the Cool Block neighborhood
program, tracking and reporting on energy savings. In the end, the competition was a bit disappointing as
Georgetown officials announced in April that the prize was not a $5M cash prize but rather the opportunity
to secure $5M in financing. In November, a press release announced the top ten finalist communities as
well as six additional communities, which includes Palo Alto, that received special recognition for their
strong performance in the competition.
“Carbon Offsets” from Forestry Project in Mexico: On Monday, Dec. 4, the City Council adopted a
resolution approving an agreement to purchase “carbon offsets” associated with a forest near its sister city,
Oaxaca, Mexico, to help Palo Alto maintain its net zero carbon footprint. The City's investment of $136,000
will offset about 10% of the annual emissions caused by natural gas use in the City and will support
conservation and restoration activities within 5,900 acres of native forest as well as co-benefits for the
Oaxacan community including fire protection, tree care, fresh water spring recharge, and transportation
and equipment for local schools. The carbon offsets generated by the Oaxaca forestry project are similar to
those contemplated by the Carbon Neutral Natural Gas Plan that was adopted by the City in 2016. The
Mexican forestry project protocol was developed by Climate Action Reserve, one of the largest offset
registries in North America used by the California Air Resources Board.
Upcoming Events and Workshops
• December 7 – Utilities is hosting a community workshop for the residents of Utilities Underground
District 47, which spans parts of University South and Professorville neighborhoods. City Council
adopted an ordinance establishing Underground District 47 in January 2013. Utilities
undergrounding converts the utility lines from overhead to underground, removing poles and
overhead structures. The City completed its substructure work to underground the utilities in this
Utilities Advisory Commission Minutes Approved on: Page 3 of 10
area, and it is now time for residents and property owners to ready their existing services to be
connected to the new underground distribution system. This community meeting is intended to
help residents understand what is required to convert their utility services for completion of the
final phase of this undergrounding project. The meeting will be held the following day at Addison
Elementary School from 6 to 7:30 pm. Project details are available at
cityofpaloalto.org/utilityprojects.
UAC Meeting: The regularly scheduled meeting of January 3, 2018, has been cancelled. Staff will poll for a
new date in January.
COMMISSIONER COMMENTS
None.
UNFINISHED BUSINESS
None.
NEW BUSINESS
ITEM 1: DISCUSSION: Discussion of the Joint Council and UAC Study Session
Chair Danaher heard the Council's interest in resiliency, fiber, and transportation. The Council is open to
the UAC occasionally initiating topics of discussion with the Council. In addition, other modalities are
available to communicate with the Council.
Commissioner Johnston concurred with Chair Danaher's comments. He heard the Council's interest in
fiber, EVs, and resilience.
Commissioner Schwartz felt 45 minutes was not sufficient time to discuss necessary topics, particularly the
workforce issue. The Council was generally receptive to the UAC's comments.
ACTION: No action
ITEM 2. ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend Council Adopt
a Resolution Amending Utilities Rules and Regulation 11 "Billing, Adjustments and Payment of Bills" to
Update the City's Billing Adjustment Process
Tom Auzenne, Assistant Director of Utilities for Customer Support Services, presented revisions to Utilities
Rules and Regulation 11, Billing, Adjustments and Payment of Bills. He read the proposed language for
Section L.b.5, which no longer contains many of the bureaucratic requirements for proof of service and
proof of completion. Staff will accept the customer's word that the issue has been resolved. Customers
may continue to submit bills and paperwork if they wish. At the Commission's suggestion, staff retained
the undetermined or general high water consumption as not eligible for adjustment because it's
indeterminate as to how that occurred or where it occurred. Based on analysis, staff suggests a maximum
adjustment of $2,500, which will likely cover 95% of leaks that have occurred in the past. Excess water
consumption will be billed at the Tier 1 rate of $6.66 per ccf rather than the Tier 2 rate of $9.16. The Utility
Users Tax of 4.75% and any wastewater adjustment are not included in the $2,500 cap. Auzenne read the
proposed language for Section I.1, which corresponds to the current statute of limitations. Also, the
proposed language will allow staff to review overcharges on a case-by-case basis and forgive overcharges
that are not the fault of the customer. Staff does not have an anticipation of resulting financial impacts.
Staff will review the issue in a year.
Chair Danaher advised that the proposed language is more concise and clear and reflects the UAC's prior
discussion with staff.
Utilities Advisory Commission Minutes Approved on: Page 4 of 10
Commissioner Johnston offered a hypothetical situation of average water usage of 100 ccf and in a
particular period usage reached 300 ccf. In response to his question of how staff would calculate the 50%
amount, Auzenne explained that higher than average consumption is defined as the volume of water
greater than 100% of the customer's normal usage. Commissioner Johnston stated the higher than average
consumption would be 200 ccf in the hypothetical case, and the amount forgiven would be based on 100
ccf. Chair Danaher added that the charge would be based on the Tier 1 rate. Auzenne concurred.
ACTION: Commissioner Johnston moved to recommend Council approval of the staff recommendation.
Commissioner Schwartz seconded the motion. The motion passed (5-0) with Chair Danaher and
Commissioners Forssell, Schwartz, Segal, and Johnston voting yes, Commissioner Trumbull and Vice Chair
Ballantine absent.
ITEM 3. DISCUSSION: 2018 Utilities Strategic Plan
Ed Shikada, Utilities General Manager, presented the final component of the Strategic Plan and an overview
of the entire Strategic Plan. After receiving Commissioners' feedback, staff will return in January with a
recommendation for approval. Following UAC approval, staff will forward the Strategic Plan to City Council
for review. A core planning team comprised of two dozen employees focused on various dimensions of the
Strategic Plan and conferred with the larger staff along the way. Public meetings included check-ins with
the UAC and meetings with key customers and community advocates. The proposed Strategic Plan focuses
on key priority areas to reflect the needs of the organization and customers and to reflect the evolution of
the utilities industry. The priority areas are Workforce, Collaboration, Technology, and Finances and
Resources. The Mission Statement remains the same as in the prior Strategic Plan, and the Strategic
Destination balances the vision for tomorrow with the needs of today.
Chair Danaher requested Shikada elaborate on ways adoption of the Strategic Plan will change the
department's work.
Shikada referred to two strategies in the Workforce priority area. Employees will draft Individual
Development Plans (IDP) to look at how the Utility supports and provides career paths for individuals and
how the individual's interests and strengths impact the organization. The IDP is a framework to recognize
the value of employees at different stages of their careers. Collaboration is a new focus for the department
and is an opportunity to facilitate partnerships with the community, within departments, and across
departments. Collaboration will allow staff to recognize the breadth of customers' circumstances and to
design programs for all customers. The Finances and Resources priority area contains a significant work
plan, including implementation of performance indicators and metrics within operations.
Commissioner Schwartz noted a major barrier for many utilities has been the tendency for operations to
occur in silos and asked how the utility might break down silos. Shikada referred to the distributed energy
resources strategy of seeking two-way communication with customers and the Sustainability and Climate
Action Plan (S/CAP) where staff is working across departments. Taking a customer-focused approach in
assisting customers with the decision-making process around sustainability efforts is another way to break
down silos.
Commissioner Schwartz recommended using “journey-mapping” to help break down silos and to view
services from the customer’s standpoint.
Commissioner Forssell inquired about measurement of employee collaboration. Catherine Elvert,
Communications Manager, reported collaboration with external stakeholders can be measured through
customer participation or response to customer solicitation mechanisms. Employee satisfaction can be
used to measure internal collaboration. A number of survey methodologies will be used to explore
outreach with customers; assess customers' interest in and awareness of various technologies and
Utilities Advisory Commission Minutes Approved on: Page 5 of 10
initiatives we offer; and explore customer interest in engaging with staff. Shikada clarified that a survey
similar to a customer satisfaction survey but focused on employees may be used to measure collaboration.
Commissioner Johnston struggled with whether Priority 4, Finances and Resources, should be the last
priority, but he understood the logic to the sequence.
Commissioner Segal inquired about staff adding numbers or percentages to the key performance indicators
(KPI). Shikada explained that staff continues to develop KPIs. Data collected during the first year of
implementation will be used to establish a baseline.
Chair Danaher felt the Strategic Plan was very thoughtful and would involve a lot of work for staff. In
response to his question about staff presenting an annual report to the Commission regarding KPI, Shikada
replied yes.
Commissioner Schwartz asked about benchmarking criteria and utilizing benchmarking criteria published by
trade associations. Jonathan Abendschein, Assistant Director of Resource Management, indicated the
criteria depends on the focus of a benchmarking study. Past UACs and Councils often requested
benchmarking related to water utility rates and costs. Other forms of benchmarking center around
performance or specific initiatives. A narrowly defined benchmarking study can be performed more
quickly.
ACTION: No action
ITEM 4. DISCUSSION: Discussion of Sustainability and Climate Action Implementation Plan
Jonathan Abendschein, Assistant Director of Resource Management, presented the Sustainability and
Climate Action Implementation Plan, which will be presented to the Council for adoption on December 11.
The Plan focuses on four high profile areas, electric vehicles, water, mobility, and energy, for
implementation over the next three years. Data learned and developed over the next three years will serve
as a basis for achieving greater carbon reductions over the subsequent ten years. The City wants to be
viewed as having one of the most comprehensive programs in the nation to make owning and adopting an
EV as easy as possible. Greater adoption of EVs will require an enormous expansion of EV infrastructure.
Christine Tam, Senior Resource Planner, reported the goals in the energy area are to obtain all cost
effective energy efficiencies and to shift energy usage from natural gas to cleaner energy resources. The
City currently uses carbon offsets to compensate for the City's use of natural gas. To reduce the use of
natural gas, Utilities and Development Services are collaborating on achieving higher building efficiency
through voluntary incentive programs and mandates. Electrification's impact on electric supply and
resilience will be addressed in strategic planning efforts.
Karla Dailey, Senior Resource Planner, advised that the top priority is continued efficient use of water. Staff
wants to reduce reliance on imported water and move toward the concept of matching water quality with
use. Activities will be focused on recycled water from the Regional Water Quality Control Plant and on
nontraditional water sources.
Gil Friend, Chief Sustainability Officer, stated the strategy is to make not driving more convenient than
driving and to shift vehicles from fossil-fuel power to electric power. Over the next few years, mobility will
be carefully evaluated to understand options, costs, and impacts.
Abendschein reported the next steps are to talk with City Council on December 11 and in FY '19 return for
an updated plan for the following ten years.
Utilities Advisory Commission Minutes Approved on: Page 6 of 10
Commissioner Johnston questioned the utility's ability to meet load demands with non-fossil-fuel resources
if electrification is successful. Abendschein remarked that the Integrated Resource Plan will consider that
issue. The City's portfolio is diversified with solar comprising only 30%. Staff ensures incentive programs
incentivize heat pump technologies that are more efficient than gas technologies. Friend added that
energy storage will be another issue.
Commissioner Forssell inquired about the possibility of purchasing carbon offsets to neutralize greenhouse
gas emissions caused by methane leakage at the wellhead. Dailey advised that the amount of leakage is
extremely difficult to quantify. Abendschein added that the Cap and Trade system does not cover leakage
to the wellhead.
Commissioner Schwartz stated the City's goals for carbon reduction are too aggressive and not practical.
The City's energy usage has changed drastically since the baseline was taken in the 1990s. Building
electrification is a distraction because it provides only a tiny amount of carbon reduction. To prioritize
increased electrification before implementing a second transmission feeder is imprudent. The higher
priority should be purchasing transformers and switch gears to restore power in a disaster. The City should
focus on solar systems that provide some level of resiliency, can be paired with storage, or can be installed
as part of a microgrid. She supports electrification of transportation but not providing incentive programs
for EV purchases. Abendschein agreed that City efforts should focus on installation of residential
infrastructure for EVs rather than incentive programs for purchasing an EV.
Commissioner Schwartz felt solar canopies that can become low-cost charging stations is a good direction
to pursue. She had not heard any opinions that vehicle-to-grid solar power is viable.
In response to Council Member Filseth's inquiry of what prevents people from buying EVs, Ed Shikada,
Utilities General Manager, reported staff will be exploring that issue in a survey. There are many opinions
of why people don't purchase EVS, but his personal opinion is that the cost of infrastructure upgrades is
problematic for residential renters. Friend added that charging infrastructure in multifamily housing should
be a priority. Other barriers to EV purchases are price, performance, and public awareness. Commissioner
Schwartz commented that not everyone in Palo Alto places a higher priority on being green than on
comfort or cost.
Commissioner Forssell supported the emphasis on making charging infrastructure available for people who
rent, who live in multifamily, and who commute into Palo Alto.
Chair Danaher referred to the greenhouse gas abatement cost curve in Exhibit E and recommended staff
think about abatement measures with cost per unit of carbon. Not all abatement measures are contained
in the list but are available to the City, such as building denser housing. Staff should also consider other
goals that could be achieved with funds used to provide subsidies. If the City wants to be a model, it has to
have cost-effective solutions.
Friend reported cost effectiveness is the overarching goal of the S/CAP even though it's not stated
throughout the S/CAP and Implementation Plan. The City can deliver the best technology options available
and educate the public about those options. To Commissioner Schwartz's comments, carbon reduction
goals are reasonably aggressive goals. The S/CAP vetting exercise considers whether goals are achievable.
Commissioner Schwartz commented that the City has not adopted efficiency technologies that some other
cities have; therefore, the City cannot surpass those cities. Palo Alto's goals are not realistic when it has not
implemented the same technologies that other communities have.
Chair Danaher indicated cost efficiency has to be looked at cross-sector for everything. A goal of converting
from gas to electricity may not be the most effective use of carbon reduction dollars. A deeper
understanding of how carbon free the electrical load is at given points in time and how that drives policies
Utilities Advisory Commission Minutes Approved on: Page 7 of 10
would be good. Staff should consider infrastructure for and barriers to alternative modes of electric
transportation such as bikes and skateboards and consider charging networks and the utility's role in them.
Commissioner Segal noted a high percentage of children bike to school; yet, they stop biking once they
graduate high school. As a bicyclist, she finds the lack of secure bike parking and crosstown connectivity to
be small barriers to biking.
Commissioner Forssell appreciated the exploration of recycled water and non-potable sources of water.
She recalled public comment regarding basement dewatering and requested an update. Shikada indicated
the City Council has an item to codify requirements for basement dewatering on its agenda. Dailey noted
the requirements focus on reducing the amount of water rather than putting the water to use.
ACTION: No action
ITEM 5: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend Council Adopt
a Hydroelectric Generation Variability Management Strategy
Jim Stack, Senior Resource Planner, presented the Hydroelectric Generation Variability Management
Strategy. In an average year, the utility receives about 50% of its total power supply from hydroelectric
power, which is greater than the statewide average of 10% hydroelectric power. Hydroelectric supplies are
highly sensitive to weather conditions. In 2014-15, the utility received approximately 25% of its supply
from hydroelectric power. In 2017, hydroelectric power increased to approximately 85% of supply. The
amount paid for hydroelectric resources does not vary based on the amount of precipitation or the amount
of output. During a drought, the utility must purchase additional power supplies to fill the gap left by the
lack of hydroelectric power. In wet years, the utility has excess power to sell. In 2014-15, market purchase
costs totaled approximately $15 million. In 2017, market purchase costs will likely be negative.
Staff has investigated four main options to manage this financial variability: physical hedging, financial
reserves, a rate adjustment mechanism, and weather insurance. Physical hedging involves making physical
trades in times of surplus or deficit supply. Another option is a long-term layoff where a portion of the
utility’s hydroelectric resources are sold or exchanged. The utility has a hydroelectric stabilization reserve
as a cushion to financial swings caused by hydroelectric supply. Weather insurance is a fairly expensive
approach, and staff does not recommend it.
Staff's recommendation is a rate adjustment mechanism, which is a slight surcharge or discount added to
electric rates. It would appear as a separate line item on bills and would pass through additional
hydroelectric costs incurred in dry years and refund excess revenue received in wet years. The goal is to
maintain the rate stabilization reserve at a level between $3 million and $35 million and to mitigate severe
swings. If the Council enacts a rate adjustment in the spring, staff will have a good forecast of the
hydroelectric situation for the upcoming fiscal year. Staff proposes three levels of rate discounts and two
levels of adders. The rate adjustment would remain in place for a year and then be reevaluated for the
following year. If the UAC recommends approval, staff will present it to the Finance Committee in February
and the City Council thereafter with the idea of implementing it July 1, 2018.
Chair Danaher understood that rates were set high enough to create a reserve fund, which is intended to
stabilize rates. This adjustment mechanism will smooth fluctuations outside projections. In reply to his
question of who would be affected and by how much, Jonathan Abendschein, Assistant Director of
Resource Management, stated that the median residential bill would increase by $2.50-$5.00 per month
with the largest adder in place. Staff may need to think about some customers more carefully. But if the
adder is applied, a rate increase would have been needed as well. The adder is a temporary and
transparent increase as opposed to a permanent rate increase that accumulates reserves.
Utilities Advisory Commission Minutes Approved on: Page 8 of 10
Commissioner Schwartz asked if the utility has any control over the time of day it receives hydroelectric
resources, particularly if the utility could receive more hydroelectric supply at night. Stack responded that
the Northern California Power Agency (NCPA) schedules the utility's load and supplies. Staff could pursue
nighttime supply if market signals indicate that is the most effective strategy. Outside of market signals,
staff can pursue nighttime supply for environmental reasons if the Council directs. Abendschein clarified
that Commissioner Schwartz was referring to dispatching for carbon reasons. A discussion should be had
about whether dispatching resources at night actually saves carbon. Carbon dispatch, as Commissioner
Schwartz is using the term, may not save any carbon and could lose ratepayer value.
Councilmember Filseth calculated the average value of the reserve at approximately $16 million, the City's
cost to capital as 4%, and the cost of the adjustment at approximately $600,000. Abendschein noted that
the rate adjustment mechanism would actually enable the City to reduce the size of its hydroelectric
stabilization reserve, so the $600,000 cost would actually be a savings from a cost-to-capital perspective.
Filseth confirmed that the proposed reserve would be funded with existing funds rather than an additional
$16 million that cost ratepayers another $600,000.
ACTION: Commissioner Segal moved to recommend Council approval of the staff recommendation.
Commissioner Forssell seconded the motion. The motion passed (5-0) with Chair Danaher and
Commissioners Forssell, Schwartz, Segal, and Johnston voting yes, Commissioner Trumbull and Vice Chair
Ballantine absent.
ITEM 6. DISCUSSION: Renewable and Carbon Neutral Portfolio Strategy Discussion
Jim Stack, Senior Resource Planner, presented the Renewable and Carbon Neutral Portfolio Strategy (RPS).
Staff will return to the Commission in March or April with analyses of the different portfolios for the
Integrated Resource Plan (IRP) planning horizon, as first discussed at the September UAC meeting. Staff
requests Commissioners' feedback regarding portfolios to consider and how to weigh them against each
other. Stack reviewed the utility's and the state's targets for renewable energy purchases since 2002. In
2015, SB 350 increased the state’s target to 50% by 2030. The state and the utility have the same standard
for eligible renewable resources. The utility established a rate impact limit of 0.5₵ per kWh for its
renewable purchases. Under SB 350, in years in which the utility receives more than 50% of supply from
hydroelectric resources, the utility is exempt from the 50% RPS target. The utility now has five large solar
resources, resulting in a projected RPS level of 58% for 2017.
Within the RPS planning horizon, the largest variable is whether to renew the Western Base Resource
contract in 2025. Policy issues for discussion are the amount of the Base Resource in the portfolio beyond
2024; hydroelectric variability; solar concentration; seasonal exposure; potential load loss; and all current
renewable resources are Bucket 1 (in-state delivered energy). Policy changes revolve around pursuit of a
higher level of RPS or meeting carbon neutrality at the lowest cost and the value of resource diversity in the
portfolio.
The first potential strategy change is raising the RPS level to match or exceed the state's requirement of
50%. Increasing the target should be considered with renewing the Western Base Resource contract.
Chair Danaher felt the chief consideration is reliability and availability of supply rather than carbon issues.
In response to Chair Danaher's question regarding decisions the UAC needs to make in the next two years,
Stack requested Commissioners' preference for hydroelectric versus renewables. Jonathan Abendschein,
Assistant Director of Resource Management, clarified that staff is attempting to assess the market,
potential long-term decisions, and the community's policy preferences. Staff is preparing to launch an
analysis to develop a quantitative sense of different portfolios and risks and tradeoffs of those portfolios.
Staff requests Commissioners' preferences, questions, and concerns so they may consider them in the
quantitative analysis.
Utilities Advisory Commission Minutes Approved on: Page 9 of 10
Stack requested feedback concerning surplus supplies. The utility could retain all renewables to maximize
the RPS level and sell generic power or minimize supply costs by selling renewables. The current approach
is to retain all renewables supplies, banking as much of them as possible. Staff has no direction regarding
actions to take when the maximum amount of renewables is reached.
Chair Danaher preferred selling renewables for the best possible price. Abendschein reported that has not
been the approach of past UACs or past Councils. There is a cost benefit to selling some of the renewables.
Chair Danaher reiterated his preference for maximizing cash and retaining some RECs for future use.
Commissioner Johnston requested the rationale for large hydroelectric not being a part of the RPS
portfolio. Stack explained that the distinction was a political decision made when the state first adopted an
RPS. Commissioner Johnston felt the RPS standard is artificial, and the real goal is carbon neutrality.
Abendschein added that utilities have raised the issue.
Commissioner Schwartz preferred exploring geothermal energy in order to obtain nighttime renewables
instead of RECs. Carbon neutrality being equal among resources, she concurred with using less expensive
resources.
Commissioner Segal concurred with the direction to staff to minimize costs and questioned whether funds
from the sale of RECs could be used for energy storage or other power resources.
Chair Danaher reiterated the Commission's consensus to maintain carbon neutrality while obtaining
resources at the lowest possible cost.
Commissioner Segal asked if exceeding 50% of hydroelectric resources would cause the utility to lose its
exemption. Stack advised that establishing an RPS requirement above 50% could place the exemption at
risk. However, maintaining a commitment to hydroelectric will not affect the exemption and will allow the
utility to sell renewables.
Commissioner Forssell inquired about the potential amount of funds resulting from a sale of RECs and
whether those funds could be used for other projects. Stack indicated the utility could meet state
requirements for RPS and sell more renewables than stated in the staff report.
Commissioner Forssell requested clarification of banking RECs and buckets. Stack explained that the utility
can reduce the RPS level and swap high-value bucket 1 resources for lower-value bucket 3 resources. The
utility would sell bucket 1 RECs and energy and buy bucket 3 RECs with generic market power.
Commissioner Johnston asked if generic market power is hydroelectric or gas-fired. Abendschein advised
that it would not be hydroelectric but resources that have been around for 20-30 years, and it would be
carbon neutral assuming the utility purchases RECs as well.
Councilmember Filseth understood staff was saying hydroelectric is undervalued relative to other
renewables. He supported taking a profit from the sale of high-value RECs.
In answer to Commissioner Johnston's question about the RPS strategy's relationship to the S/CAP strategy,
Stack did not believe the utility has to maintain a higher than 50% RPS to meet the S/CAP strategy because
the S/CAP concerns carbon.
Commissioner Forssell requested clarification of hydroelectric being least preferred when it is renewable
and carbon free. Stack reported that bucket 3 is largely out-of-state resources. The state prefers in-state
resources. Others argue that RECs are not as valuable environmentally as in-state generation of resources.
Utilities Advisory Commission Minutes Approved on: Page 10 of 10
Commissioner Johnston inquired about strategies to reduce the amount of brown power purchased when
resources do not meet demand. Commissioner Schwartz stated the utility would need to purchase
geothermal energy or something that is renewable and deployed at night. Analyzing carbon content 24
hours a day is a different exercise. Abendschein added that the IRP analysis will include a discussion of the
cost to supply renewables during a 24-hour period.
Commissioner Forssell inquired about the need to lower rates should RECs be sold at a profit. Abendschein
advised that initiating new programs or reducing rates is a policy decision that will need to be considered.
Stack summarized the points of discussion. In procuring new resources, staff has opted to maximize value.
In the future, the UAC may consider thresholds for maximum levels or minimum levels of each resource.
Diversification could provide a hedge against changes in the market.
ACTION: No action
ITEM 7. ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting
Ed Shikada, Utilities General Manager, reported staff will set a new date for the January meeting, probably
in late January. Future agenda items include resilience and an update on the cross bore program
Jonathan Abendschein, Assistant Director of Resource Management, advised that items for distribution
systems assessment and recycled water project evaluation were postponed to March and February
respectively.
Commissioner Schwartz requested a discussion of low-income programs and customer segmentation and
surveys.
Chair Danaher requested a fiber discussion to address the Council's priority.
Commissioner Forssell requested an educational session regarding the existing fiber utility.
ACTION: No action
Meeting adjourned at 9:49 p.m.
Respectfully Submitted,
Marites Ward
City of Palo Alto Utilities
MEMORANDUM
TO: UTILITIES ADVISORY COMMISSION
FROM: UTILITIES DEPARTMENT
DATE: JANUARY 18, 2018
SUBJECT: Utilities Quarterly Update -4st Quarter of Fiscal Vear 2017
This update, on water, gas, electric, wastewater collection and fiber utilities, efficiency
programs, legislative/regulatory issues, utility-related capital improvement programs,
operations reliability impact measures and a utility financial summary, is for the Council and
Utilities Advisory Commission's {UAC's) information. This update has been prepared to keep
the UAC and Council apprised of the major issues that are facing the water, gas, electric,
wastewater collection and fiber utilities.
Attachment A: Utilities Fiscal year 2017 Fourth Quarter Report
REVIEWED BY: MONICA PADILLA, Senior Resource Planner~
~LMz-=~
ED SHIKADA T -:J
APPROVED BY:
Utilities General Manager
Utilities
Quarterly
Update
Fourth Quarter of
Fiscal Year 2017
January 2018
ATTACHMENT A
Quarterly Update for Fourth Quarter of FY 2017
January 2018
i
Utilities Quarterly Update
Table of Contents
I. Electricity ................................................................................................................... 1
Electric Supplies ............................................................................................................................................ 1
Electric Budget and Portfolio Performance Measures ................................................................................. 5
II. Natural Gas................................................................................................................. 8
Gas Supply Retail Rates ................................................................................................................................. 8
Gas Budget and Portfolio Performance Measures ....................................................................................... 9
III. Water ....................................................................................................................... 12
Water Availability ........................................................................................................................................ 12
Water Use Compared to Targets ................................................................................................................ 12
Recycled Water Strategic Plan .................................................................................................................... 12
Water Budget Performance Measures ....................................................................................................... 13
IV. Fiber Optics .............................................................................................................. 14
Commercial Dark Fiber Service ................................................................................................................... 14
Citizen Advisory Committee ........................................................................................................................ 15
V. Public Benefit, Demand Side Management Programs and Communications ............... 15
Energy Efficiency Program Achievements .................................................................................................. 15
Local Renewable Energy Programs ............................................................................................................. 17
VI. Research and Development and Innovation .............................................................. 20
Program for Emerging Technologies ........................................................................................................... 20
Electrification Activities .............................................................................................................................. 21
VII. Legislative and Regulatory Issues .............................................................................. 21
Summary ..................................................................................................................................................... 22
State Regulatory Proceedings ..................................................................................................................... 24
VIII. Utility Financial Summary ......................................................................................... 25
Electric Utility Overview .............................................................................................................................. 25
Gas Utility Overview.................................................................................................................................... 26
Wastewater Collection Utility Overview ..................................................................................................... 26
Water Utility Overview ............................................................................................................................... 27
Fiber Optic Utility Overview ........................................................................................................................ 27
Residential Bill Comparisons ....................................................................................................................... 29
Quarterly Update for Fourth Quarter of FY 2017
January 2018
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List of Figures
Figure 1: Solar Generation and Curtailment Summary, 2016-2017 ............................................................. 2
Figure 2: Electric Supply Resource Actual and Projection, 2016 to 2018 (as of Dec. 14, 2017) ................... 3
Figure 3: CY 2018 Monthly Electric Supply Resource Projection .................................................................. 4
Figure 4: Northern California Peak Electric Prices (as of December 5, 2017) ............................................... 5
Figure 5: FY 2017 Electric Load and Resource Balance ................................................................................. 6
Figure 6: FY 2017 Electric Market Purchase Costs and Market Prices .......................................................... 8
Figure 7: CPAU’s Gas Commodity Rates—July 2010 through June 2017 ..................................................... 9
Figure 8: Cumulative Redwood Pipeline Cost vs. Market Benchmarks ...................................................... 10
Figure 9: Natural Gas Consumption – Budget vs. Actual ............................................................................ 11
Figure 10: Natural Gas Supply Cost – Budget vs. Actual ............................................................................. 11
Figure 11: FY 2017 Natural Gas Prices ($/MMBtu) – Expected vs. Actual .................................................. 12
Figure 12: Water Consumption – Budget vs. Actual ................................................................................... 13
Figure 13: Water Cost – Budget vs. Actual.................................................................................................. 13
List of Tables
Table 1: FY 2017 Electric Utility Supply Cost Summary ................................................................................ 6
Table 2: FY 2017 Electric Load and Generation Compared to Budget Projections ....................................... 7
Table 3: Status to date of all applications to the Program for Emerging Technologies ............................. 20
Table 4: Financial Projections, FY 2017 ....................................................................................................... 28
Table 5: FY 2017 Operations Reserves ($000) ............................................................................................ 28
Table 6: Residential Electric Bill Comparison ($/month) ............................................................................ 29
Table 7: Residential Natural Gas Bill Comparison ($/month) ..................................................................... 29
Table 8: Residential Water Bill Comparison ($/month) .............................................................................. 29
Table 9: Residential Wastewater Collection (Sewer) Bill Comparison ($/month) ...................................... 29
Table 10: Median Residential Overall Bill Comparison ($/month) ............................................................. 30
Table 11: FY 2017 Q4 Reserve Report from the City’s Financial System .................................................... 31
Quarterly Update for Fourth Quarter of FY 2017
January 2018
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I. Electricity
Electric Supplies
Western Area Power Administration (Western) Issues
2017 was a historically wet year that resulted in very high reservoir levels. The current water
year, however, is off to a drier than average start. With a dry forecast for the next couple of
months, hydro operators may attempt to conserve water, resulting in average to below average
output in spite of the robust reservoir levels.
For the fourth quarter of FY 2017, Western delivered 189 GWh to the City (45 GWh above long-
term average levels for the quarter, but 80 GWh higher than in FY 2016). For FY 2017 as a
whole, Western supplied 494 GWh (36% above long-term average levels).
Calaveras Hydroelectric Project Issues
The watershed has benefited from well above average precipitation in the first half of 2017 and
New Spicer storage ended November at 88,000 acre-feet, which is just above the long-term
average for that date. For the fourth quarter of FY 2017, Palo Alto’s share of this project’s
generation was 95 GWh (more than twice the long-term average level, and nearly 2.5 times
greater than in the fourth quarter of FY 2016).
Renewable Energy Curtailment Summary
Due to the large amount of new renewable energy generating capacity being installed on the
grid in recent years to meet state Renewable Portfolio Standard mandates, negative wholesale
power prices are becoming increasingly common for renewable resources. This is particularly
true for solar generators in the middle of the day during periods where overall demand is low.
As a result, there are times when it is beneficial for the City to curtail the output of its
renewable energy projects, rather than be exposed to significantly negative prices.
Since the beginning of 2016 (a few months after the City’s first utility-scale solar projects came
online), the City has called for the curtailment of 15,005 MWh of generation (3.2% of the total
amount generated) from its solar projects due to negative market prices. (There was no
discretionary curtailment from the City’s other resources during this period.) However, in Q1 of
FY 2018, only 32 MWh of generation (0.03% of the total amount) was curtailed on a
discretionary basis. Figure 1 below summarizes the total monthly volumes of generation and
discretionary curtailment of the City’s solar resources since January 2016.
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January 2018
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Figure 1: Solar Generation and Curtailment Summary, 2016-2017
Electric Load and Resource Balance
The size of the committed and planned market purchases over the last calendar year (CY)
(shown in Figure 2 below) reflects an average level of hydroelectric output, while the current
year saw a huge energy surplus and hence, large quantities of sales, as a result of a much
higher-than-average level of hydroelectric output. For CY 2016, net fixed-price forward market
purchases represented 179 GWh, or 19% of the City’s total load. However, for CY 2017, due to
hydroelectric conditions and new solar projects coming online, the City was a net seller of 100
GWh of energy on a fixed-price forward basis. For CY 2018, above-normal hydro output is
projected, and long-term renewable resources (landfill gas, wind and solar) are projected to
provide 55% of the City’s total load. Overall electric supply resources were surplus to load by
about 27% for CY 2017 and this figure is expected to be 17% for CY 2018; however, some
periods are expected to see significant surplus positions while other periods see deficit
positions (see Figure below).
Some of the surplus positions will be sold as generic energy ahead of the prompt month while
the rest will be settled in the spot market through the California Independent System Operator,
thus allowing the City to retain full credit for the environmental attributes of our renewable and
hydroelectric generation.
Quarterly Update for Fourth Quarter of FY 2017
January 2018
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Figure 2: Electric Supply Resource Actual and Projection, 2016 to 2018 (as of Dec. 14, 2017)
Quarterly Update for Fourth Quarter of FY 2017
January 2018
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Figure 3: CY 2018 Monthly Electric Supply Resource Projection
Electric Market Price History and Projections
As of December 2017, the price for on-peak energy for January 2018 in Northern California was
$35.07 per megawatt-hour (MWh)1, while the prices for February 2018 and March 2018 were
$33.99/MWh and $29.56/MWh, respectively. These values are approximately $4.55/MWh
lower than they were at the time of the last quarterly report.2 On-peak prices for calendar year
strips are in the range of $35 to $38/MWh for 2017 through 2019. These prices are
approximately $1.00/MWh higher than they were at the time of the last quarterly report.
Figure below illustrates historical monthly on-peak prices and projected monthly forward
prices for Northern California from 2005 through 2023.
1 Note that $35 per megawatt-hour is equal to 3.5 cents per kilowatt-hour.
2 Market prices for the previous quarterly report were from February 21, 2017.
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January 2018
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Figure 4: Northern California Peak Electric Prices (as of December 5, 2017)
Electric Budget and Portfolio Performance Measures
Electric Supply Cost Summary Compared to Budget Estimates
Table 1 below shows the City of Palo Alto Utilities’ (CPAU’s) supply cost by cost category
through the fourth quarter of FY 2017. Supply costs were $17 million (24.6%) under budget
primarily due to significantly higher than expected market sales.
Electric Usage and Generation Summary Compared to Budget Estimates
Figure 5 and Table 2 below summarize the City’s electric supply sources through the fourth
quarter of FY 2017. Load was about 3.0% lower than budget. Solar generation was slightly
below budget (-5.6%), but the hydro generation from Calaveras and Western was significantly
above budget (+38%). Some spot market purchases were expected; however, the City ended up
selling power on the spot market due to significant surplus energy from the hydro projects. As a
result, total supply was below budget.
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January 2018
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Table 1: FY 2017 Electric Utility Supply Cost Summary
Figure 5: FY 2017 Electric Load and Resource Balance
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January 2018
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Table 2: FY 2017 Electric Load and Generation Compared to Budget Projections
Year To-Date
Month by Month Budget Variance
July through June
Generation Source Generation
Year To-Date
% of
Portfolio
Month by Month Budget Variance
July through June
52%
22%
11%
12%
26%
8%
-32%
TOTAL SUPPLY 945 GWh 100%
Calaveras Hydro 212 GWh +114
GWh
Amount Over (+) /
Under(-) Budget Projection
Load 945 GWh -28 GWh
Amount Over (+) /
Under(-) Budget Projection
Western Hydro 494 GWh +157
GWh
Landfill Gas 107 GWh -1 GWh
Wind 112 GWh -1 GWh
Forward Market 76 GWh -55 GWh
Solar 249 GWh -14 GWh
Spot Market -228
GWh
-28 GWh
-24 GWh
Quarterly Update for Fourth Quarter of FY 2017
January 2018
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Electric Market Prices and Costs Compared to Budget Estimates
Figure 6 shows monthly market prices and the cost of purchasing energy from the market.
Electric market prices experienced fluctuations around the third and fourth quarter of FY 2017.
The total cost of market purchases in the fourth quarter was lower than budget mainly due to
lower than expected load and higher than expected production from hydro resources.
Figure 6: FY 2017 Electric Market Purchase Costs and Market Prices
II. Natural Gas
Gas Supply Retail Rates
Since July 1, 2012, the commodity portion of CPAU’s retail gas rates for all customers varies
every month depending on the market price of natural gas. Figure below shows the actual
commodity rates charged from July 2010 through June 2017. These rates can also be found on
the web at: http://www.cityofpaloalto.org/civicax/filebank/documents/30399. Note that gas
commodity rates have risen from the low rates in the spring of 2016.
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January 2018
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Figure 7: CPAU’s Gas Commodity Rates—July 2010 through June 2017
Gas Budget and Portfolio Performance Measures
Value of CPAU’s Share of Redwood Pipeline Capacity
Figure 8 below shows the cost of the Redwood gas transmission line compared to the value at
month-ahead spot market prices as well as daily spot market prices. The Redwood pipeline
allows the City to buy gas at the receipt point of Malin, Oregon and transport the gas to “PG&E
Citygate”, which is normally a higher value receipt point. The City’s share of the Redwood
pipeline was a net benefit to the Gas Utility of approximately $327,000 through the fourth
quarter of FY 2017. This is the difference between the value of Redwood capacity of $1,074,000
(the difference of the monthly index prices at the ends of the Redwood pipeline in Malin,
Oregon and PG&E Citygate) and the transportation cost of using the Redwood pipeline of
$747,000.
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January 2018
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Figure 8: Cumulative Redwood Pipeline Cost vs. Market Benchmarks
Natural Gas Consumption and Costs: Budget vs. Actual
Figure 9 and Figure 10 compare actual natural gas use and supply costs with the FY 2017
budget. Natural gas use through the fourth quarter of FY 2017 was 2.4% lower than the budget
forecast, and costs were 7.9% higher than budgeted amounts.
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January 2018
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Figure 9: Natural Gas Consumption – Budget vs. Actual
Figure 10: Natural Gas Supply Cost – Budget vs. Actual
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January 2018
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Figure 11 shows actual gas prices at PG&E Citygate (CG) versus gas prices that were projected
at the time the FY 2017 budget was developed. During FY 2017, gas prices have been
significantly higher than budget.
Figure 11: FY 2017 Natural Gas Prices ($/MMBtu) – Expected vs. Actual
III. Water
Water Availability
By the next Quarterly Report, several months of precipitation data will be available, and the
Council will be updated regarding the water supply situation. System-wide storage for the
Region Water System is at about 73% of capacity due to above normal precipitation and water
available on Tuolumne River last year.
Water Use Compared to Targets
Palo Alto’s mandated water conservation target remains at zero. Water use this winter will
reveal the extent to which Palo Altans invested in permanent water use reducitons during the
drought.
Recycled Water Strategic Plan
Work continues on the Northwest County Recycled Water Strategic Plan (see Staff Report
6700). Ninety percent is being funded by the SCVWD (not to exceed $1.8 million) and the
remaining ten percent is being paid by all the partners of the Regional Water Quality Control
Plant. The feasibility study and risk assessment of expanding the existing recycled water
distribution system to the Stanford Research Park is nearly complete and will be presented to
Council in early 2018.
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January 2018
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Water Budget Performance Measures
Figure 12 and Figure 13 below compare actual water consumption and water supply cost to the
FY 2017 budget projections. Actual water use through the forth quarter of FY 2017 was 4.9%
higher than budget estimates. Actual supply costs through the forth quarter of FY 2017 were
4.4% above budget.
Figure 12: Water Consumption – Budget vs. Actual
Figure 13: Water Cost – Budget vs. Actual
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January 2018
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IV. Fiber Optics
Commercial Dark Fiber Service
The total number of commercial dark fiber customers remained at 108 in the fourth quarter of
FY 2017. The total number of active dark fiber service connections serving commercial
customers is 221 in the fourth quarter of FY 2017 (some customers have multiple connections).
Commercial customers generate 81% of the dark fiber license revenues.
Fiber Optic Network Rebuild Project
The rebuild project will install new aerial duct or substructure (conduit and boxes), in addition
to fiber backbone cable to increase capacity for sections of the dark fiber ring that are at or
near capacity. This project will allow CPAU to meet customer requests for services. The project
areas primarily cover the Stanford Research Park, Palo Alto Internet Exchange/Equinix at 529
Bryant, and Downtown areas. This project basically “overlays” new fiber over existing fiber
routes in the network. Existing fiber will continue to serve City facilities and commercial dark
fiber customers.
2017-2021 Capital Improvement Projects
The budget for the rebuild project was reduced by the City Council during the Fiscal Year 2016
budget process. The Fiscal Year 2017 budget reflects this adjustment from $2.4 million to $1.3
million. The rebuild is a CIP charged to system improvements.
Rebuild Work Completed
The route from PAIX at 529 Bryant to the Park Boulevard Substation has been completed. This
phase of the project included substructure work, fiber pulling and cabinet installation. The new
fiber installed for the backbone rebuild is 312-count single-mode fiber (2 x 144-count single-
mode fiber, plus 24-count single-mode fiber).
Upcoming work scheduled over the next 12 months:
• Route from Park Substation to Hansen Substation
• Route from Hansen Substation to Stanford Research Park
• Additional phases/routes to be determined.
The estimated cost for the rebuild is between $500,000 and up to $1,000,000 for substructure
work. Another $250,000 for the overhead portion of the work is allocated for the project. CPAU
crews are performing the equipment installation, cable pulling and terminations. CPAU’s
substructure contractor is installing the conduit and boxes.
Fiber-to-the-Premises Master Plan and Wireless Network Plan
Staff is currently working on the following tasks for the Fiber-to-the-Premises (FTTP) and
Wireless Plans:
FTTP: On August 21, 2017, the City Council directed staff to develop a business case for a
municipal-provided Fiber-to-the-Node (FTTN) network. The directive asked staff to:
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January 2018
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• Engage a Management Consultant (“Consultant”) to develop the business case, funding
plans, identify potential partners and/or service providers;
• Prepare a high level network design;
• Engage an engineering firm to design a FTTN network including an expansion option to
build a citywide Fiber-to-the-Premises (FTTP) network;
• Draft ordinances that will lower the City's fiber construction costs, such as a Dig Once,
String Once (a.k.a. One Touch Make Ready), Microtrenching and Multi-unit housing
access.
Staff is preparing a Request for Proposals ("RFP") to retain a consulting firm to complete the
above-noted items in the Council's directive. It is anticipated the RFP will be issued in the first
quarter of 2018.
Wireless
• On November 30, 2017, a Request for Proposals (RFP) was issued by the Office of
Emergency Services (OES) for a Mobile Broadband Network for Public Safety (“in-vehicle”
mobile broadband access). The Fiber/Wireless Core Team worked with OES staff and
wireless consultant to prepare the RFP. Final bids were due on December 18, 2017, but no
bids were submitted. Staff is evaluating next steps.
• Expansion of OES Point-to-Multi-Point Network. OES and the Fiber/Wireless Team are
working to finalize a site in the Montebello Reservoir area to locate a pole for additional
equipment to improve the coverage of the existing OES network.
• Based on a August 21, 2017 Council Motion, a project was initiated to expand the City’s
OverAir Wi-Fi Hotspots to specific unserved City facilities at portions of the Cubberley
Community Center, Lucie Stern Community Center, the café at the Golf Course and Lytton
Plaza.
Citizen Advisory Committee
Staff continues to meet on a regular basis with the committee regarding fiber and wireless
initiatives. The committee will review the above-noted RFP and provide feedback before it is
issued. The most recent meeting of the committee occurred on December 14, 2017.
V. Public Benefit, Demand Side Management Programs and
Communications
Energy Efficiency Program Achievements
Building Operator Certification Courses for Key Account Facilities Managers
The City sponsored a Building Operators Certification course for our Key Account facilities staff.
This was a series of classes designed to teach facilities management staff techniques to keep
their buildings operating as efficiently as possible. Sixteen customers attended the series of
classes, along with 4 utilities staff. The course was divided up into eight one-day classes that
Quarterly Update for Fourth Quarter of FY 2017
January 2018
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were offered over a five month span. The class was funded partially by the student’s admission
fee and partially from Utilities Public Benefits funds. Below is the class schedule and agenda.
BOC 1001A - Energy Efficient Operation of Building HVAC Systems
Tuesday, February 28, 2017 8:30 AM - 4:30 PM
BOC 1001B – Energy Efficient Operation of Building HVAC Systems
Wednesday, March 1, 2017 8:30 AM - 4:30 PM
BOC 1007 - Facility Electrical Systems
Tuesday, March 21, 2017 8:30 AM - 4:30 PM
BOC 1002 – Measuring and Benchmarking Energy Performance
Tuesday, April 11, 2017 8:30 AM - 4:30 PM
BOC 1003 - Efficient Lighting Fundamentals
Tuesday, May 2, 2017 8:30 AM - 4:30 PM
BOC 1004 - HVAC Controls Fundamentals
Tuesday, June 6, 2017 8:30 AM - 4:30 PM
BOC 1005 - Indoor Environmental Quality
Tuesday, June 27, 2017 8:30 AM - 4:30 PM
BOC 1006 - Common Opportunities for Low-Cost Operational Improvement
Tuesday, July 25, 2017 8:30 AM - 4:30 PM
Georgetown University Energy Prize Competition
Georgetown University Energy Prize 10 finalist announced: Throughout 2015-16 the City of Palo
Alto, along with 49 other communities in the U.S., participated in the Georgetown University
Energy Prize (GUEP) competition. The stated $5M prize generated much enthusiasm, and Palo
Alto worked to develop innovative programs such as outreach at schools and collaboration with
the Cool Block neighborhood program, tracking and reporting on energy savings. In the end, the
competition was a bit disappointing as Georgetown officials announced in April that the prize
was not a $5M cash prize but rather the opportunity to secure $5M in financing. In November a
press release announced the top ten finalist communities as well as six additional communities,
which includes Palo Alto, that received special recognition for their strong performance in the
competition.
The following 10 communities (appearing in alphabetical order) are advancing to the final phase
of the Georgetown University Energy Prize:
Bellevue, Washington Fort Collins, Colorado
Bellingham, Washington Oberlin, Ohio
Berkeley, California Montpelier, Vermont
Chula Vista, California Takoma Park, Maryland
Fargo, North Dakota Walla Walla, Washington
The following six communities (appearing in alphabetical order), are being given special
recognition for their outstanding efforts during the competition:
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January 2018
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Bend, Oregon Palo Alto, California
Columbia, Missouri Sunnyvale, California
Madison, Wisconsin Urbana, Illinois
Oxford University Collaboration
CPAU supported a project led by the University of Oxford to study the drivers of household
energy consumption, including correlations between consumption and three factors: energy
values, online portal use, and energy literacy. The researchers developed a survey that was sent
to CPAU’s residential email list of 13,300 customers who have elected to receive information
electronically, including newsletters, workshop and new program announcements, and other
notifications. A pilot version of the survey was sent first to a subset of the customer list to test
the effectiveness of incentives. Customers who were offered a free LED light bulb had the
highest response rate and so this incentive was used for the remaining larger group of 12,700
customers. Overall, the response rate for the survey was 10.4%, which is high given the length
and complexity of the survey, indicating the high level of engagement of the Palo Alto
community. Survey results were presented to staff by Oxford graduate student Aven Satre-
Meloy in mid-July. Results showed that “Expense” and “Environmental Stewardship and
Protection” were chosen most frequently—and roughly equally—when participants were asked
to select their values relating to energy. The survey also showed that respondents were well-
informed on matters relating to energy, and yet the vast majority (75%) did not know that Palo
Alto provides 100% carbon neutral electricity. In addition, Utility portal users showed a slightly
higher participation rate in energy savings programs and rebates than non-portal users.
Perhaps not surprising is the finding that home size is strongly correlated with electricity
consumption, with a much greater impact than, for example, behavior.
2017 Demand Response Program
CPAU called five Demand Response (DR) days during 2017, which include the annual peak load
day of the year. Five of the total six DR Program participants participated that day and
collectively achieved a combined load reduction of 276 kW (0.15% of City’s peak) and total
energy reduction of 1,106 kWh during the four hour Peak Load Reduction period. On average,
participants reduced their building’s energy usage by about 10%.
Local Renewable Energy Programs
Net Energy Metering Cap
On August 22, 2016 Council approved the Net Energy Metering (NEM) Successor Program and
revised the NEM cap to 10.8 MW. As of June 22, 2017, Palo Alto had 1,061 kW of local solar
photovoltaic (PV) capacity remaining – meaning around 90% of the cap had been claimed. Staff
launched a NEM Reservation program (Nov. 2016) to allow customers who have signed PV
purchase or lease contracts to apply for a reservation for the remaining NEM capacity. Once the
remaining NEM capacity is fully reserved, customers are placed in the NEM Successor program.
CPAU will maintain a NEM Reservation wait list in the event that a project with an approved
NEM Reservation is cancelled. At its December 11, 2017 meeting, Council voted to extend
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January 2018
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eligibility for the current NEM program through December 31, 2017, if the 10.8 AC-MW
capacity was reached before then, to accommodate customers who were poised to submit
projects into the NEM program . The 10.8 AC-MW NEM cap was reached and exceeded in mid-
December, and the NEM reservation program closed on December 31.
SunShares Solar Group-Buy Program
For the third year, the City of Palo Alto participated in Bay Area SunShares, a solar group-buy
program that offers discounted prices for rooftop solar installations from vetted solar
contractors. Program registration ran from August 7 through November 30. As of November 30
Palo Alto had the highest number of signed PV contracts amongst the 50 city and major-
employer outreach partners. In order to be eligible for pricing discounts, customers must sign
solar contracts by December 31, 2017. Final numbers for the SunShares program will become
available in January 2018.
Communications Highlights
This section summarizes communications highlights, updates on major campaigns and
noteworthy events. Copies of all current and past ads and bill inserts are available online at
cityofpaloalto.org/UTLbillinsert
Education, Workshops and Community Outreach Activities
CPAU hosted or participated in the following activities since the last quarterly report.
Saturday, April 01, 2017 BAWSCA Workshop: Graywater Reuse
Saturday, April 22, 2017 Earth Day Festival & Great Race for Saving Water
Saturday, April 29, 2017 BAWSCA Workshop: Maintaining Native Gardens
Wednesday, May 24, 2017 Heat Pump Workshop with Passive House California
Saturday, June 03, 2017 Green Building Workshop - Lighting Specialist and Air Quality
Monday, July 03, 2017 City of Palo Alto Utilities Open House at MSC
Tuesday, August 01,2017 Mitchell Park Library tabling
Monday, August 21,2017 Solar Eclipse Party
Saturday, September 23, 2017 Sunshares Workshop
Saturday, September 30, 2017
BAWSCA Workshop: Maintaining Native Gardens and Leak
Detection
Sunday, October 1, 2017 The Midtown Residents Association: Ice Cream Social
Wednesday, October 12, 2017 EV Ride and Drive and Workshop with Stanford
Saturday, November 4, 2017 BAWSCA Workshop: Designing Native Gardens and Rain
Wednesday, November 8, 2017 Girl Scout tour of Colorado Substation
2018 Utilities Strategic Plan Update
CPAU is in the final phases of developing and gaining the necessary approvals of the 2018
Utilties Strategic Plan. The plan focuses on four key priority areas around workforce,
collaboration, technology and finances and resources. The UAC will consider the 2018 Utilities
Strategic Plan in January 2018 and staff will seek Council approval in February or March 2018.
Quarterly Update for Fourth Quarter of FY 2017
January 2018
19
Mayor’s Green Business Leader Awards
At the March 6 City Council meeting, Mayor Greg Scharff recognized two businesses with the
Mayor’s Green Business Leader Award. Hudson Pacific Properties and Stanford Real Estate, the
latter of which is managed by Hines property management, oversee a total of eleven buildings
in Palo Alto. The businesses qualified for the award due to their leadership in energy efficient
building management, benchmarking their building energy use through the EPA’s Portfolio
Manager and receiving an ENERGY STAR certification.
Earth Day Report
On April 17, 2017, the Office of Sustainability delivered the City of Palo Alto's s annual Earth Day
Report to Council, detailing efforts on sustainability over the past year. Highlights for the
Utilities Department include energy efficiency that exceeded City goals, the fact that the City’s
contracted renewables came fully online, meaning the City’s Carbon Neutral Portfolio is now
being implemented using only carbon free hydroelectric power and RPS-eligible renewables,
excellent achievements in decreasing per-capita water consumption, and the approval of the
Carbon Neutral Gas Plan. This year’s report also included a draft of the City’s Sustainability and
Climate Action Plan Implementation Plan, focusing on key actions in various areas of
sustainability. Read the Sustainability and Climate Action Plan.
Rates Communication
Staff developed a comprehensive communication strategy for the fiscal year 2018 rate
adjustment proposals. The communications approach involved multiple opportunities for public
input via UAC, Finance and Council meetings in which the financial plans and rate adjustment
proposals were presented. Staff also developed outreach materials including handouts, bill
inserts, and website information to reach all stakeholders in the community. More at
www.cityofpaloalto.org/ratesoverview
Carbon Neutral Gas Portfolio
The Council-approved Carbon Neutral Gas Plan launched this past summer. Gas utility
customers will see a new line item on their utility bill reflecting the purchase of carbon offsets
to balance the carbon emissions associated with their natural gas consumption. CPAU is
prepared outreach to customers, including an updated website with a video explaining carbon
neutrality, and has briefed the Customer Service Center with talking points to answer questions
about the program. Visit www.cityofpaloalto.org/carbonneutral for details.
CPAU Takes First Place Award for Most Solar Watts Per Customer
In April, CPAU ranked first place on the Smart Electric Power Alliance (SEPA) Top 10 utility list
for solar watts per customer connected to the grid in 2016. SEPA’s 10th annual survey includes
figures from 412 utilities across the country. CPAU ranked number one with 2,753 watts per
customer installed in 2016. This is the fourth time Palo Alto has made SEPA’s Top 10 list of
utilities. Awards were announced at the Utility Solar Conference in Tucson, Arizona. Utilities
Quarterly Update for Fourth Quarter of FY 2017
January 2018
20
Resource Planner Lindsay Joye delivered a presentation to conference attendees about the
history of Palo Alto’s solar programs and accomplishments leading up to this first place award.
Read our news release here.
Earth Day Festival and Great Race for Saving Water
The City celebrated Earth Day on April 22 with the Great Race for Saving Water 5K fun run and
walk and festival. This is the fourth year the City has hosted this family-friendly event to
celebrate the environment, water resources, sustainability and climate action. This year saw the
biggest turnout and was perhaps most successful in terms of number and variety of activities. In
addition to partnering with the City of East Palo Alto, dozens of community and environmental
groups, non-profits, businesses and student organizations gathered together to share resources
for a healthy climate and healthy community. The City plans to host the event again on April 14
in 2018.
VI. Research and Development and Innovation
Program for Emerging Technologies
CPAU’s Program for Emerging Technologies, or PET, (www.cityofpaloalto.org/UTLInnovation)
provides the opportunity for local businesses and organizations to submit proposals for
innovative and impactful products to CPAU for review as a prospective partner. The goal is to
find and nurture creative products and services that will manage and better use electricity, gas,
water and fiber optic services. From the program’s inception in June 2012 through the fourth
quarter of FY 2017, the program has received a total of 61 applications. Table 3 below
summarizes the status of all applications through the first quarter of FY 2017.
Table 3: Status to date of all applications to the Program for Emerging Technologies
Deadline Total Received Under Review Declined/Closed Active Completed
FY 2013 13 0 11 0 2
FY 2014 15 0 11 1 3
FY 2015 15 0 11 2 2
FY 2016 14 0 9 0 5
FY 2017 10 4 3 2 1
TOTAL 67 4 45 5 13
PET Project Highlight from the fourth quarter of FY 2017:
• Intelligent Lighting Platform for LED Streetlights – A team from Verizon is working on a
proof-of-concept all-in-one smart street-lighting system through the Smart Cities
initiative. Their system provides on-demand LED lighting controls and multifunctional
communications. The service includes lighting hardware along with a wireless control
module in each luminaire, with these lights connected to a wireless gateway via a mesh
network. This allows for remote management of the lighting, real-time alerts, and an
intelligent lighting dashboard – all of which can cut energy consumption. The system is
Quarterly Update for Fourth Quarter of FY 2017
January 2018
21
now operational around City Hall, and CPAU staff are evaluating energy consumption
data to validate the project’s efficiency claims.
Electrification Activities
Heat Pump Water Heater Pilot Program
The City launched a Heat Pump Water Heater (HPWH) pilot program in late Spring 2016 to
encourage residents replace their gas water heaters with efficient HPWHS. The pilot program
website provides information such as rebate levels (up to $1,500), qualifying models that meet
the minimum efficiency standard required by the California Energy Commission and installation
considerations. With Development Center and Utilities collaboration, the City developed a
permit submittal check list for installing a HPWH. In May 2017, the program was expanded to
include rebates (at a lower rate) for new construction projects as well. As of December 2017, 39
residents have signed up for the program and the City has paid a rebate to 10 households. The
City is planning to host an Open House at an all-electric multifamily new construction project,
highlighting heat pump technology and other carbon free alternatives in February 2018. In April
2018 the City is also planning to host its second HPWH workshop.
EV Charger Rebate Program
The City began offering rebates in March 2017 for Electric Vehicle Charging Stations installed at
schools, multi-family complexes, and non-profit buildings with common area charging
accommodations using funds from Low Carbon Fuel Standard (LCFS) Credits. Rebates up to
$30,000 are available for schools and non-profits and up to $18,000 are available for multi-
family and mixed use buildings. As of December 2017 we have paid EV charger rebates out to 2
organizations (Palo Alto High School and Gunn High School). However, we have been working
with a number of multifamily complexes and non-profits and expect participation to be much
more robust in 2018. The Bay Area Air Quality Management District ia also running an incentive
program for EV Chargers for public and private entities, which we have been promoting to
those ineligible to participate in our rebate program at this time (such as hotels and
businesses). Additionally, the online PV and EV calculator is available to help customers
understand the costs associated with use of solar PV and electric vehicles in Palo Alto, using City
of Palo Alto Utility rates and taking into account customers’ roof exposures for solar generation.
We have also used LCFS funds to host an EV ride and drive event at the Great Race and co-host
an EV ride and drive and workshop with Stanford’s Healith Improvement Program and plan to
repeat both events during spring 2018. View our December 2017 utility bill insert.
VII. Legislative and Regulatory Issues
While the City operates on the Fiscal Year (July through June), the State legislature and
Congress operate on the Calendar Year, and federal agencies follow the Federal Fiscal Year
(October to September). In order to provide accurate information in this report, staff notes
here current issues, regardless of each entity’s operating year.
Quarterly Update for Fourth Quarter of FY 2017
January 2018
22
Summary
The State legislature ended its session in September after passing hundreds of the over 2,500
bills introduced. Of those, NCPA and CMUA together tracked over 300, and actively worked on
approximately 50 energy and water-related bills. CPAU staff worked closely with CMUA and
NCPA on tracking these bills, as well as others unrelated to water or energy. Staff paid
particular attention to the bills noted below, while also tracking federal legislation and the
regulatory progress of more than 15 items and their related sub-issues. All efforts are
summarized below.
State bills
AB 79 (Levine): Requires the ARB to update its methodology for the calculation of emissions of
GHG associated with electricity from unspecified sources. Requires POUs to incorporate the
methodology into programs addressing the disclosure of the GHG emissions (power content
labels) and electricity procurement. Vetoed.
SB 338 (Skinner): Requires Palo Alto and some other municipal utilities to consider, as a part of
the IRP process, the role of existing renewable generation, grid operational efficiencies, energy
storage, and distributed energy in helping to meet peak energy and reliability needs, while
reducing the need for new generation and new transmission. Signed into law.
SB 100 (De Leon): Sets state policy for eligible renewable energy resources and zero-
carbon electric resources to supply all electricity in the state no later than December 31, 2045.
Increases the Renewables Portfolio Standard requirement from 50% by 2030 to 60%. Failed.
AB 1405 (Mullin): Requires POUs to consider, as a part of the IRP process, the role of a variety
of energy technologies and resources in meeting energy and reliability needs during and around
the hour of peak demand while reducing the need for new generation and transmission
resources. Failed.
SB 71 (Wiener): Requires the CEC, prior to adopting rooftop solar energy generation system
requirements, to issue findings by climate zone jointly with the Department of Housing and
Community Development as to whether adoption of the requirements will or will not
unreasonably or unnecessarily impact the affordability of housing for Californians. Failed.
SB 356 (Skinner): Requires electric and gas utilities to provide to the owner of 2 or more
buildings on a single or adjacent parcel with 5 or more active utility accounts, upon request,
aggregate energy usage data for the buildings. Failed, will become a two year bill.
AB 1070 (Gonzalez Fletcher): Requires state agencies to make available a "solar energy system
disclosure document" for solar energy customers, compile an annual report documenting
consumer complaints relating to solar contractors and, develop standardized inputs and
Quarterly Update for Fourth Quarter of FY 2017
January 2018
23
assumptions to be used in the calculation and presentation of electric utility bill savings to a
consumer. Signed into law.
SB 623 (Monning): Imposes a temporary water fee onto all customers (with exceptions) of a
public water system. Fees depend of the size of the meter. Funding flows to the water systems
of disadvantaged communities. Two year bill.
SB 606 (Skinner) and AB 1668 (Friedman): Both bills impose requirements on water shortage
planning and water loss reporting for urban wholesale water suppliers. Both failed; might be
taken up in 2018.
AB 18 (Eduardo Garcia): Places on the June 2018 ballot a bond measure. If approved by the
voters, authorizes the issuance of $3.5 billion in GO bonds to finance a clean water, climate,
and coastal protection and outdoor access for all program. Failed; SB 5, its counterpart,
passed.
SB 5 (De Leon). Places on the June 2018 ballot a bond measure, authorizing $4 billion in bonds
to finance a drought, water, parks, climate, coastal protection, and outdoor access for all
program. Signed into law.
AB 196 (Bigelow): Specifies that water pump and water distribution systems are eligible for
GHG Reduction Fund money. Failed.
SB 210 (Leyva). Requires grant funding priority be given to drinking water projects for schools
that have tested their drinking water fixtures, and the results show that the water either does
not meet federal lead standards or is above the California maximum contaminant level for any
othercontaminant. Substantially amended to become a non-utlity bill.
SB 427 (Leyva): Makes clarifying changes to help implement last year’s SB 1398 regarding lead
service line identification and replacement requirements. Signed into law.
AB 1184 (Ting). As amended, requires the ARB, by January 1, 2019, to submit to the Legislature
a report on the operations of its vehicle incentive programs and to include information about
zero-emissions vehicles. Failed.
AB 797 (Irwin): Extends the current Solar Water Heating program, set to expire in August.
Changes the language from “water heating” to “solar thermal.” Signed into law.
SB 231 (Hertzberg): Defines “sewer” for purposes of Prop. 218, to exempt those fees from
Prop. 218’s election requirement and instead allow local governments to fund sewer-related
projects via the simpler and less costly majority protest process. Signed into law.
Quarterly Update for Fourth Quarter of FY 2017
January 2018
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AB 1414 (Friedman): Lowers a cap on local government permit fees for rooftop solar energy
systems and extends the cap to cover solar thermal systems; allows local governments to
charge higher fees if the cost is justified. Signed into law.
SB 49 (De Leon): Prevents state and local agencies from amending or revising rules
implementing a Water Quality Control Act, the Safe Drinking Water Act, and other acts to be
less stringent than baseline federal standards. Creates a legal pathway for enforcement. Failed.
SB 649 (Hueso): Provides that small cells are a permitted use in all public right-of-way and utility
easements in residential areas, subject to some restrictions. Wireless companies must comply
with an electric POU’s safety, reliability, and engineering policies. Doesn’t change the current
legal rules and compensation structure as they relate to utility poles, with exceptions. Vetoed.
Federal bills
S.1460 (Murkowski R-AK): The Energy and Natural Resources Act of 2017 (reintroduced from
last year) and H.R.3043 (McMorris Rodgers R-WA): Hydropower Policy Modernization Act of
2017.
• Both bills designate FERC as the lead agency to coordinate reviews and licensing.
• H.R.3043 was passed from its last committee; negotiations continue.
• S.1460 could receive a floor vote, but the Senate has other pressing issues to take up
first and as the author voted against the healthcare bill, she may face backlash on this
bill.
Two Senators have prepared draft legislation regarding small cells. While there is no bill yet, we
understand the draft would affect local governments.
State Regulatory Proceedings
California Air Resources Board
Issues CPAU is monitoring include regulations surrounding: Cap-and-Trade, the Low Carbon
Fuel Standard, Sulfur Hexafluoride emissions from gas insulated switchgear, and updates to the
climate scoping plan.
California Energy Commission
Issues CPAU is monitoring include regulations surrounding: AB 802 implementation (energy use
data), power source disclosure/power content labels, Integrated Resource Procurement
reports, and the Renewable Portfolio Standard.
State Water Resources Control Board
Issues include: Permanent water conservation regulations and Water Loss Audits/Water Loss
Control Reporting.
California Public Utilities Commission
Quarterly Update for Fourth Quarter of FY 2017
January 2018
25
While the CPUC regulates IOUs and not POUs such as Palo Alto, we engage in some of their
efforts. These include updating state fire maps, the possibility of a statewide utility pole
database, and commenting on certain IOU RPS proceedings, through CMUA.
On November 17, 2017 PG&E filed its 2019 Gas Transmission and Storage (GT&S) application,
requesting a rate increase. If adopted without changes, PG&E’s rate proposal would increase
Palo Alto’s costs by $1.8M per year or 13%. The proposed cost increases are largely due to the
2015 Aliso Canyon storage leak and the resulting storage field regulations effective in the near
future. Additionally, PG&E’s storage facilities will require significant upgrades. Part of PG&E’s
plan involves retiring older storage fields that will be too expensive to operate under the new
rules and relying heavily on Independent Storage Providers (ISPs) to provide the needed storage
services on the system. Palo Alto is a party to the proceeding; a pre-hearing conference was
held on January 4, 2018.
California Independent System Operator (CAISO)
The CAISO is embarked on a Transmission Allocation Cost (TAC) structure stakeholder initiative
that CPAU is tracking, primarily though our participation in the Bay Area MunicipalTransmission
Group (BAMx).
Federal Regulatory items
• For the first time since October 2015, FERC has a full complement of Commsisioners.
• The FCC is considering regulating pole attachments (small cells); we are tracking this
issue trhough NCPA and the National Leuge of Cities.
VIII. Utility Financial Summary
This section describes the audited actual financial results for FY 2017 for all Utilities funds. The
Council-adopted long-term Financial Plans for the Electric, Gas, Wastewater Collection, and
Water Funds will be updated for FY 2018 during the budget review process.
Electric Utility Overview
Sales through the end of FY 2017 were 4.7% lower than expected, although somewhat of a
recovery from what had been seen earlier in the year. Sales revenues were consequently lower
by about $7 million from budget. With the end of the drought, deliveries from Western and
Calaveras hydroelectric resources were larger than projected, which resulted in surplus energy
revenues. Lower renewables costs stemmed from a delayed start to the Elevation and Western
Antelope solar projects. Transmission Access Charges (TAC) continue to be higher than
originally budgeted. On the whole, net energy costs for FY 2017 were $7.96 million below
budget projections. CIP project spending ws $3.9 million lower, resulting from projects which
were cancelled (VA Hosptial )or from ongoing CIP projects which had less spending than
projected (Customer Connections and System Improvements). Lower Operations and
Maintenance expenses accounted for the remainder.
Quarterly Update for Fourth Quarter of FY 2017
January 2018
26
This combination of lower costs and lower revenues results in a decrease in the level of the
Electric Supply Operations Reserve of $2.8 million, and a slight increase to the Disribution
Operations Reserve of $814,000. Both the Electric Distribution and Electric Supply Operations
Reserves are below the FY 2017 reserve minimum guideline levels based on these figures. In
the FY17 Financial Plan, several proposed transfers from the Hydro Rate Stabilization (up to $9
million) and Rate Stabilization reserves (up to $5.5 million) were proposed and approved, as
well as an additional $10 million from the Electric Special Projects reserve as a short term loan.
The Electric Rate Stabilization Reserve also has an additional $3.6 million which could be used
for this purpose. Transfers will be performed in FY 2018 to bring these reserves back above
minimum levels.
The Electric Utility CIP Reappropriation and Commitment Reserves totaled $6.9 million at the
end of FY 2017, of which $1.5 million was under contract.
Gas Utility Overview
Gas Utility sales through the end of FY 2017 were lower than budget by 1.2%. As drought
conditions have eased and people start to use more household water, gas usage has also halted
much of its downward trend. Gas sales revenues and purchase costs came in very close to
budgeted levels.
Of greater impact to the gas fund at this time are gas main replacement (GMR) projects. GMR
23 has been delayed to FY 2019. This delay is the result of several factors: higher incoming bids
resulting in the need to redesign projects, in gas as well as water and wastewater collection,
and a shortage of qualified staff to perform the additional design work. This reduced costs in FY
2017 by $3.55 million. Lower Operations and Maintenance expenses, as well as lower CIP
spending, accounted for the remainder.
The Gas Operations Reserve is projected to be above the maximum reserve guideline range for
FY 2017. However, the University Avenue project, which has greater urgency, will require an
additional $6.3 million beyond budget in FY 2018, and surpluses this year will be quickly
depleted in FY 2018.
The Gas Utility CIP Reappropriation and Commitment Reserves totaled $4.2 million at the end
of FY 2017, of which $357,000 was committed to projects under contract.
Wastewater Collection Utility Overview
Sales revenues are projected to be slightly lower than forecast, mainly due to lower winter
water usage and thus lower commercial wastewater revenues. Similar to gas, Wastewater
Rehabilitation Project 28 has been pushed out until FY 2019, the net effect being a $3.8 million
reduction in expenses. In addition, wastewater treatment expenses came in $1.5 million below
budget. Lower Operations and Maintenance expenses, as well as lower CIP spending,
accounted for the remainder of savings.The Wastewater Collection Operations Reserve is
Quarterly Update for Fourth Quarter of FY 2017
January 2018
27
projected to be within the guideline levels for FY 2017. Should it be needed, the CIP reserve has
an additional $2.6 million that could be utilized in case of emergency.
The Wastewater Collection Utility CIP Reappropriation and Commitment Reserves totaled $1.8
million at the end of FY 2017, of which $1.8 million was committed to projects under contract.
Water Utility Overview
With what appears to be a break in the State’s long running drought, water sales have started
to increase, and sales through year end were 6.1% above projections. Purchases were also
commensurately higher. In addition, revenues from the drought surcharge (deactivated on July
1, 2017) have more than replenished reserves.
As with gas and wastewater collection, Water Main Replacement Project 27 has been delayed
until FY 2019, with a savings of $6.22 million in FY 2017. The Water Operations Reserve is
projected to be above the maximum guideline range, but should it be needed, the Rate
Stabilization and CIP Reserves have an additional $4.1 million and $2.7 million, respectively,
that could be utilized. It should also be noted that several major rehabilitation projects for the
City’s reservoirs and tanks will be coming in the future, and staff may request that amounts in
the Operations reserve above maximum be moved to the CIP reserve for these future
contingencies. $6.1 million should be earmarked for projects to be performed in FY 18 and 19.
The Water Utility CIP Reappropriation and Commitment Reserves totaled $13.3 million at the
end of FY 2017, of which $10.2 million was for projects under contract.
Fiber Optic Utility Overview
Fiber sales and expenses through the end of FY 2017 are $4.6 million and $2.2 million
respectively. Customer sales and investment income were $0.3 million and $0.4 million below
FY 2017 budget respectively. Both are in alignment with the FY 2017 budget. Expenses are
expected to increase by $1.6 million from FY 2015 to FY 2016, $2.4 million to $4.0 million
respectively, primarily due to the Fiber Optic System Rebuild CIP project. The dark fiber
network was constructed in the early 1990s. Several sections of the dark fiber system have
either reached capacity or are in need of repair, thus limiting the City’s ability to add new
customer connections. As shown in Table 5, the Fiber Optics Rate Stabilization Reserve was
$25.4 million as of the end of FY 2017.
Quarterly Update for Fourth Quarter of FY 2017
January 2018
28
Table 4: Financial Projections, FY 2017
Sales Volumes
Revenue
($000)
Expense
($000)
Net Reserve Change
($000)
Electric Utility
Financial Plan 963,034,720 kWh 151,761 (166,953) (15,192)
FY 17 Actuals 917,687,116 kWh 140,222 (142,160) (1,938)
Change from
Financial Plan
-45,347,604 kWh (11,539) 24,793 13,254
-4.7% (7.6%) (14.9%)
Gas Utility
Financial Plan 28,652,783 therms 35,938 (40,418) (4,480)
FY 17 Actuals 28,306,709 therms 36,428 (32,654) 3,744
Change from
Financial Plan
-346,074 therms 490 7,764 8,254
-1.2% 1.4% (19.2%)
Water Utility
Financial Plan 3,859,444 ccf 41,522 (46,454) (4,932)
FY 17 Actuals 4,094,893 ccf 42,922 (35,546) 7,376
Change from
Financial Plan
235,449 CCF 1,400 10,908 12,308
6.1% 3.4% 3.4%
Wastewater Collection Utility
Financial Plan 19,565 (20,968) (1,403)
FY 17 Actuals 17,745 (14,563) 3,183
Change from
Financial Plan
(1,820) 6,405 4,585
-9.3% (30.5%)
Fiber Optic Utility
Financial Plan 4,842 (3,785) 1,057
FY 17 Actuals 4,842 (3,958) 884
Change from
Financial Plan
0
0.0%
(173)
4.6%
(173)
Table 5: FY 2017 Operations Reserves ($000)
Electric
Supply
Electric
Distribution
Gas Water
Wastewater
Collection
Fiber
Optic *
Beginning 15,642 6,208 9,952 12,415 3,211 24,329
Change (2,752) 814 3,774 7,376 3,183 1,091
Transfers 4,911 4,500 - (6,116) - -
FY 2017 Ending 17,801 11,522 13,726 13,675 6,394 25,420
Reserve Minimum 16,241 8,866 5,618 6,232 2,715 895
Reserve Maximum 32,242 13,170 11,235 12,558 6,767 2,238
* For Fiber Optics, the Reserve is the Rate Stabilization (not the Operations) Reserve
Quarterly Update for Fourth Quarter of FY 2017
January 2018
29
Residential Bill Comparisons
Table 6: Residential Electric Bill Comparison ($/month)
As of June 1, 2017
Season Usage (KWh/mo) Palo Alto PG&E Santa Clara Roseville
Summer
(May -Oct)
300 33.09 55.06 35.18 55.67
365 (Median) 42.31 70.66 43.08 62.10
650 90.48 146.90 77.73 97.85
1200 183.43 368.59 144.59 179.96
Table 7: Residential Natural Gas Bill Comparison ($/month)
As of June 1, 2017
Season Usage (therms) Palo Alto
Menlo Park, Redwood City,
Mountain View, Los Altos, and
Santa Clara (PG&E Zone X)
Roseville
(PG&E Zone S)
Summer
(Jun-Oct)
15 23.24 20.62 21.26
18 (Median) 25.83 24.91 26.99
30 41.55 47.80 49.88
45 62.56 76.42 78.49
Table 8: Residential Water Bill Comparison ($/month)
As of June 1, 2017
Usage CCF/month Palo Alto Menlo Park
Redwood
City
Mountain
View
Santa
Clara Hayward
4 43.69 44.46 33.37 46.47 19.80 34.63
(Winter median) 7 67.18 63.03 45.20 65.43 34.65 53.68
(Annual median) 9 87.24 75.43 53.09 78.07 44.55 66.38
(Summer median) 14 137.39 107.95 73.81 119.47 69.30 98.13
25 247.72 180.33 119.91 229.94 123.75 206.08
Based on the FY 2013 BAWSCA survey, the fraction of SFPUC as the source of potable water supply
was 100% for Palo Alto, 95% for Menlo Park, 100% for Redwood City, 87% for Mountain View, 10%
for Santa Clara and 100% for Hayward.
Table 9: Residential Wastewater Collection (Sewer) Bill Comparison ($/month)
As of June 1, 2017
Palo Alto Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward
34.83 85.91 75.11 34.30 33.93 41.65 29.80
Quarterly Update for Fourth Quarter of FY 2017
January 2018
30
Table 10: Median Residential Overall Bill Comparison ($/month)
As of June 1, 2017
Utility and Usage Palo Alto
Menlo
Park
Redwood
City
Mountain
View Santa Clara Hayward
Electricity (365 kWh/mo) $ 42.31 $ 70.66 $ 70.66 $ 70.66 $ 43.08 $ 70.66
Gas (18 th/mo) 25.83 24.91 24.91 24.91 24.91 24.91
Wastewater 34.83 85.91 75.11 34.30 41.65 29.80
Water (9 CCF/mo) 87.24 75.43 53.09 78.07 44.55 66.38
TOTAL $190.21 $256.91 $223.77 $207.94 $154.19 $191.75
Quarterly Update for Fourth Quarter of FY 2017
January 2018
31
Table 11: FY 2017 Q4 Reserve Report from the City’s Financial System
Quarterly Update for Fourth Quarter of FY 2017
January 2018
32
MEMORANDUM
TO: UTILITIES ADVISORY COMMISSION
FROM: UTILITIES DEPARTMENT 1
DATE: JANUARY 18, 2018
SUBJECT: 2018 Cross-Bore Safety Program Update
REQUEST:
Staff requests that the Utility Advisory Commission (UAC) discuss and provide feedback on this
report. This report outlines progress on the City's cross-bore safety program, and is a follow-up
to the June 1, 2016 UAC presentation and discussion, and the June 2017 City Auditor's report.
SUMMARY:
Cross-bores occur when a pipe is installed by trenchless techniques and inadvertently
penetrates pre-existing pipe in its path. When the damaged pipe is a sanitary sewer lateral this
damage may not be discovered for years, until the sewer lateral becomes clogged. This has
become a recognized issue nationwide. In 2011, City of Palo Alto launched a proactive cross-
bore investigation of all of the active sanitary sewer laterals in the City. By December 2013,
contractor and staff determined that while 72% of the 18,000 laterals had been inspected,
approximately 5,900 laterals needed additional inspection (these laterals were inspected, but
the possibility of cross-bores could not be definitively ruled out due to pipe conditions). Based
on lessons learned from the initial investigation, staff recommended that subsequent
inspections be phased, with the highest risk laterals inspected first. Phase 2 of the Cross-Bore
Safety Program discussed in this report will address high risk laterals that were not completed
during the initial investigation, as well as the August 14, 2017 Audit recommendation timeline
(Exhibit A).
BACKGROUND:
Trenchless installation technology for utility mains and service lines has been employed
industry-wide since the 1970s. Trenchless installation techniques are less expensive and
require minimal surface disruption, compared to traditional open-cut construction methods.
However, when a pipe is installed by trenchless techniques, the new pipe may accidentally
penetrate existing pipe in its path. This occurrence is known as a 'cross-bore'. Of particular
concern is when gas pipes are inadvertently installed through wastewater laterals that later
cause a backup in the on-site wastewater system. Efforts to clear these wastewater lateral
blockages with mechanical equipment commonly used by plumbers may damage cross-bored
gas lines, potentially causing an explosion. To address this risk and investigate potential cross-
bores of sanitary sewer laterals in Palo Alto, Council awarded a contract to Hydromax USA, Inc.
Page 1of4
("Hydromax) for the Cross-Bore Investigation Project in July 2011, with a total budget of
$3,523,950, plus contingency of $276,050. The contract was later amended in 2013 to increase
the budget by $500,000 and extend the project duration through December 2013.
The scope of the contract included cross-bore investigations of all ("'18,000) active sanitary
sewer laterals within City of Palo Alto wastewater system. As the cross-bore investigation
progressed, the Contractor discovered that there were several aspects of the required work
that were unanticipated, including longer than average lateral lengths, an unexpected number
of branched laterals, an inability to inspect sanitary sewer main sizes of 6-inch and less due to
camera size, and poor conditions in some of the existing laterals. Some of these conditions
required digging, cutting into pipe, and repairing pipe to complete the video inspection. Some
of the additional conditions encountered were buried cleanouts, roots, debris, offset pipes, and
no access in the private and public parts of the laterals, preventing proper completion of
inspections.
By the end of the contract in December 2013, Hydromax had attempted to investigate 13,022
sanitary sewer laterals. This left approximately 28% (5,018) of laterals remaining to be
investigated. The 13,022 investigated sanitary sewer laterals were split into two categories:
1. "Completed": 7,166 sanitary sewer laterals in this category were fully investigated and
either gas cross-bores were not found, or were found, repaired and the lateral cleared.
(During the 2011-2013 period of the initial investigation 56 cross-bores were identified
of which 26 were found to be gas cross-bores.)
2. "Efforts Exhausted": 5,856 sanitary sewer laterals in this category were not fully
inspected due to either maintenance or construction issues. Laterals in this category
need additional investigation. To complete the inspection of these laterals, construction
or maintenance work is required to remove the impediments in the laterals that are
preventing inspection.
DISCUSSION:
Following the initial phase of cross-bore investigation the Utilities Department has instituted
techniques to minimize the risk of future cross-bores, and initiated a risk assessment to identify
the scope of a Phase 2 investigation for pre-existing cross-bores in the remaining laterals.
Current In-house Practices to Minimize Risk of Potential Cross-bores
Utilities Operations staff continues to directionally drill gas services from the street to the riser
near existing or future gas meters. Standard practice is to check CPAU records for existing
active and abandoned utilities prior to going on-site. Once on-site, the alignment of the future
gas service is checked in relation to above-ground features for water and sewer lines and USA
marks. The structure is also checked from the exterior for signs of different periods of
construction such as bathroom or kitchen additions. Wastewater lateral access points are then
identified for post-video assessment. The gas service line is then directionally drilled from the
main to the building structure, and air-tested. Prior to introducing gas into the service line, the
sewer lateral is video inspected for cross-bores.
Page 2of4
Current Requirements for Contractors to Minimize Risk of Potential Cross-bores
Contractors that are installing gas mains and services are required to locate underground
infrastructure on public and private property prior to construction. After installation has been
completed, the contractor must positively identify that all sewer laterals and mains that were
crossed by gas mains and services were not damaged.
Cross-bore Investigation Phase 2:
Based on experience gained during the initial cross-bore investigation, Utilities Engineering staff
estimated that fully investigating all sanitary sewer laterals would cost over $19 million. Given
this estimate, staff opted to address the remaining laterals in phases, with the highest priority
laterals to be completed in a Phase 2 cross-bore project. To determine which sanitary sewer
laterals were highest priorities, Utilities Engineering staff performed a risk analysis of the
laterals that were not completed during the initial cross-bore project, both those that had not
been investigated, as well as those in the "Efforts Exhausted" category. The prioritization was
based on criteria such as occupancy rates, whether safety devices were already installed,
service material, age of service, and distance from gas service. From this, staff developed a list
of 11 priority categories for potential inclusion in Phase 2, and for each category evaluated the
number of laterals included and cost estimates for inspections. This evaluation is the starting
point for the development of the Phase 2 project scope and budget. Initially, staff
recommended that Phase 2 include the top 4 priorities, which would include about 2,000
laterals at cost of $3 to 4 million dollars.
The overall goal is to select a consultant through an RFP (4-6 month) selection process who can
accomplish the following:
1) Propose a process that will ensure sewer laterals ·are inspected for cross-bores and
properly document the results.
2) Provide video that is traceable to the lateral location and checked through a multilevel
QA/QC process.
3) Perform construction activities, if necessary, to access laterals to complete the
inspections.
4) Integrate a quality management process for continuous improvement of the work
process.
5) Recommend an asset management process for tracking documentation from the
sanitary sewer lateral investigations, and for identification and correction of potential
system deficiencies.
Phase 2 Timeline
1. Review prioritization risk analysis and develop final list of phase 2 laterals and cost
estimate (Audit Finding 1.1): January 2018 to March 2018
2. Update missing laterals in GIS from existing data (Audit Finding 2.1): January 2018 to
June 2018
3. Review NASSCO (National Association of Sewer Service Companies) contract template
language and incorporate relevant, useful and enforceable provisions in the RFP (Audit
Finding 2.2): May 2018 to August 2018
Page 3of4
4. RFP Process
a. Issue RFP: June 2018
b. Proposals due date: September 2018
c. Announcement of shortlisted Proposers: September 2018
d. Interviews of shortlisted Proposers: September 2018
e. Select vendor/finalize contract: October 2018
f. Contract Approval by December 2018
5. Project Kick-off: January 2019
6. Project Completion: February 2022
RESOURCE IMPACT:
The funds for this project were originally included in the FY 2013 Utilities Operating Budget and
expenditures spread over a three year period starting FY 2016 and ending in FY 2019. No
additional City resources will be required to manage this project.
POLICY IMPLICATIONS:
Phase 2 does not represent a change to existing policies. This recommendation is consistent
with the existing Council-approved Utilities Strategic Plan (Staff Report 1880; current plan
scheduled for update in 2018), especially Strategic Objectives Cl and BP2, to deliver safe and
reliable services and operate utility systems safely.
ENVIRONMENTAL REVIEW:
The UAC's discussion of this project update does not meet CEQA's definition of a project under
Public Resources Code section 21085, thus no environmental analysis is required.
ATTACHMENT:
• Exhibit A: Appendix 1 to August 14, 2017 City Auditor Cross-Bore Inspection Contract
Audit
PREPARED BY:
REVIEWED BY:
APPROVED BY:
ROMEL ANTONIO, Senior Engine~r "~
ROBERT ITEM, Senior Engineer ~ 1
DEBRA LLOYD, Assistant Director, Engineering ~;J-
LOR, Chief Operating Officer
EDSHIKADA
General Manager of Utilities
Page 4of4
Exhibit A
Flndlna: 1. Hydram~ Inspected 10,791 (60 percant) of 18,028 l•tenils •nd could not complete nHrly IMllf of Its •ttempted Inspections
bec:liuse of •dverse conditions In sewer lines.
1.1 Identify sewer pipelines that Utilities Concurrence: Agree
Hydromax did not fully inspect or Target Date: Late 2018
attempt to inspect. Prioritize these Action Plan:
sewer pipelines for inspection under a Staff will review a previously generated future contract(s). To the extent prioritization list based on assessment of risk possible, based on past experience, for property classifications, review inventory of predict potential inspection
challenges, such as poor pipeline parcels that do not have an associated lateral,
and develop a final prioritization list and cost conditions, that may hinder future estimates based on expenence and data from inspections. Disclose these challenges the o riginal crossbore contract. in future contract solicitations. Implementation of next phase will proceed
based on available funding.
Flndln1: 2. City overslsht •nd NASSCO contnictlng 1uldellnes c.n help ensure •ccunite, complete, •nd cost effective future Inspections.
2.1 Identify missing data In its laterals Utilities Concurrence: Agree
database by comparing it with Target Date: Mid 2018
independent databases such as
Hydromax inspection data. Update its Action Plan:
laterals database to ensure it can Staff will utilize existing data to review and
effectively serve to track Inspection update the City's GIS to reflect missing active
progress. City-owned laterals . This will be done in
conjunction with the inventory of parcels
referenced in Finding 1.1.
2.2 Incorporate relevant and useful Utilities Concurrence: Agree
provisions from NASSCO's contract Target Date: Mid to Late 2018
template, such as linear foot pricing Action Plan:
and prior verification of Inspector Staff will review the NASSCO contract template
certifications, In future sewer and look for provisions to incorporate in a
inspection contracts. Consult with the future City contract, as applicable.
Administrative Services Department's
purchasing staff and the City
Attorney's Office to determine If City
can enforce NASSCO template
provisions that It plans to Incorporate.
2.3 Identify gaps In staff expertise needed Utilities Concurrence: Agree
to monitor and facilitate field Target Date: Late 2018 to Start of future
inspections and to review and track
inspection data. Develop a training contract
and certification plan for field staff Action Plan:
who should have the expertise to help Staff will continue to review staffing gaps for
meet the City's inspection goals and office and field personnel. If gaps are identified
objectives. and are not resolved by training, additional
expertise will be identified within the City or
via contract.
Page 1 of 6
2
MEMORANDUM
TO: UTILITIES ADVISORY COMMISSION
FROM: UTILITIES DEPARTMENT
DATE: JANUARY 18, 2018
SUBJECT: 2018 Utilities Strategic Plan
REQUEST
Staff request that the Utilities Advisory Commission (UAC) recommend Council approval of the
2018 Utilities Strategic Plan (Attachment A).
SUMMARY:
Over the past year, staff has been actively engaged with internal and external stakeholders in
updating its strategic planning document with a renewed focus on its strategic destination and
specific actions and/or initiatives to be carried out by staff over the next three to five years.
The proposed 2018 Utilities Strategic Plan (“Strategic Plan”) is intended to achieve the City of
Palo Alto Utilities’ (CPAU) mission to provide safe, reliable, environmentally sustainable and
cost effective services.
Four high priority focus areas were identified related to workforce, internal and external
stakeholder collaboration, technology and management of finances and resources. These four
priorities reflect the needs of the organization and customers and transformation of the utilities
industry. Multiple strategies and tactical actions were developed to effectively meet each
priority. Collectively, these priority focus areas along with the Utilities’ mission statement,
strategic destination, strategies, actions and key performance indicators (KPI) make up the 2018
Utilities Strategic Plan.
The goal of the Strategic Plan is to ensure maximum alignment between CPAU’s resources and
activities with the City Council’s policy direction and to guide CPAU in successfully advancing
the City’s vision and priorities over the next three to five years. The Strategic Plan is not
intended to be an exhaustive list of the activities undertaken by staff on a day-to-day basis to
provide electric, natural gas, water and fiber services to its customers, but rather a plan to
focus on key challenges and priorities. Approval of the Strategic Plan is necessary to provide
CPAU with a cohesive roadmap to better meet the needs of its community, customers and
employees now and in the future. Staff will provide the UAC and Council annual updates of the
strategic plan including status of actions and/or initiatives, KPI metrics, and recommended
changes.
Page 2 of 6
BACKGROUND
On July 18, 2011, Council approved the 2011 Utilities Strategic Plan (Staff Report #1880).
Council updated the Strategic Plan through approval in August 2013 (Staff Report #3950) and
May 2015 (Staff Report #5709). The latest version of the 2011 Utilities Strategic Plan is provided
for in Attachment B.
Recognizing that several internal and external factors have significantly changed since staff last
went through an extensive strategic planning process in 2011 and that the utility industry
continues to increase in complexity, staff felt the necessity to develop a new Strategic Plan
rather than an update of the existing plan. As such, in early 2017, staff began the process to
develop the 2018 Utilities Strategic Plan (“Strategic Plan”) and at its February 2017 UAC
meeting, staff officially kicked-off the process.
Staff retained the consulting services of NewGen Strategies and Solutions to facilitate the
development of the Strategic Plan including internal and external stakeholder engagement;
identification of strengths, weaknesses, opportunities and threats; and the development of
strategies, actions and key performance indicators. BluePoint Planning was also retained to
coordinate employee engagement which included an in-depth assessment of employee needs
and concerns. BluePoint also assisted in identifying values to better reflect the CPAU’s
organizational cultural and to align with the City’s stated values.
A core planning team comprised of over 25 CPAU employees representing various functions
and levels throughout the organization was formed to develop the Strategic Plan to address
various dimensions of utilities and to confer with the larger staff throughout the process.
Multiple meetings were held with employees, UAC, key customers and community advocates to
both inform of the process and solicit input.
Throughout the development process the UAC has had several opportunities to provide input
through regular UAC meetings and at a special UAC meeting held in October 2017, used to get
broad community feedback. Workshop participants were given an opportunity to speak
directly with staff and UAC members with respect to the department’s mission, strategic
destination and on the four priority areas.
Additionally, at its December 6, 2017 UAC meeting, staff presented a draft of the Strategic Plan
for discussion and feedback. In general, the UAC was supportive of staff’s proposal; however
raised concerns about the magnitude of initiatives identified. Included in the UAC’s January 18,
2018 packet are the draft minutes from the December 2017 UAC meeting.
Commissioner Schwartz noted a major barrier for many utilities has been the tendency for
operations to occur in silos and inquired how it can be addressed under the collaboration
priority focus area. In order to deliver high quality services, CPAU will take a customer-focused
and inter-departmental approach in designing the programs and assisting customers with the
decision-making process. Commissioner Schwartz recommended using “journey-mapping” to
help break down silos and to view services from the customer’s standpoint.
Page 3 of 6
Commissioner Forssell inquired about the measurement of collaboration. Staff will explore
various survey methodologies to assess employee satisfaction, internal collaboration,
customer’s interest and awareness, and customer engagement with staff.
Commissioner Johnston provided staff with written feedback with suggested changes and
questions related to the technology priority focus area. Most notably, Commissioner Johnston
raised concerns about the amount of time it will take to implement a smart grid. Staff
recognizes Commissioner Johnston’s desire to move up the deployment of automated metering
infrastructure (AMI) system; however the City is in the process of implementing a new
Enterprise Resource Planning (ERP) and Customer Information System (CIS). Both these
projects require significant planning, communication and extensive internal staffing. To ensure
a successful AMI deployment, both the ERP and CIS systems must be stable before integrating
with the AMI system and therefore the timeline identified in both the Strategic Plan and the
Technology Roadmap is necessary.
DISCUSSION
The proposed Strategic Plan is significantly different from the current strategic plan, which
focuses more on maintaining and/or improving operational and customer performance
measures where needed now and with less emphasis on future conditions such as
infrastructure replacement, workforce development and emerging technologies. The new plan
turns more attention to the future and the rapidly evolving market and what CPAU must do to
remain successful and meet customer evolving needs. Key elements of the Strategic Plan
include:
1. Mission Statement;
2. Strategic Destination Statement;
3. Organizational Culture and Values; and
4. Priority Focus Areas – Strategies, Actions and KPIs; and
The attached Strategic Plan provides a high level summary of the stakeholder process
undertaken to develop the plan, identification of key drivers, strengths weaknesses,
opportunities, threats and priorities along with detailed strategies and actions. The following is
a discussion of the key components of the Strategic Plan.
1. Mission Statement
The mission statement should be enduring and reflective of the manner in which core utilities
services are delivered to its customers. The current mission statement reads as follows:
The City of Palo Alto Utilities' mission is to provide safe, reliable, environmentally
sustainable and cost effective services.
Staff proposes no modifications to the current mission statement thus reaffirming the
significance of the statement in achieving CPAUs’ goals.
Page 4 of 6
2. Strategic Destination Statement
The strategic destination is a high level statement reflecting how staff will work together to
meet current and future community and stakeholder needs. The proposed statement is as
follows:
At CPAU, our people empower tomorrow's ambitions while caring for today's needs! We
make this possible with our outstanding professional workforce, leading through
collaboration and optimizing resources to ensure a sustainable and resilient Palo Alto.
The statement was developed after various iterations taking into consideration input from
employees and community stakeholders. The statement is intended to reflect the balance of
limited resources, environmental sustainability and the need to achieve core services with the
community’s desire for innovation and increasing levels of services.
3. Organizational Culture and Values
CPAU has an adopted a set of values which are intended to reflect key characteristics important
to individual employees, and if met, define the department’s culture. Additionally, the City has
its own set of defining values, which it promotes as part of an overall organizational culture.
Through surveys and small group meetings, employees were asked to identify specific work
characteristics and values that resonate most with them and should be included as part of
CPAU’s organizational values. CPAU’s new set of values, represent employee feedback and
align with the City’s values, as follows:
City’s Values Current CPAU Values New CPAU Values
Quality Honesty and Integrity Quality
Courtesy Teamwork Courtesy
Efficiency Accountability Efficiency
Integrity Quality of Service Integrity
Innovation Innovation
Respect
Teamwork
Accountability
Reliability
Safety
These values will define CPAU’s culture, be promoted throughout the organization through its
actions, and expected from each individual employee. Elements of meeting the values are
included throughout the Strategic Plan.
4. Focus Priority Areas
The four priorities – 1) Workforce; 2) Collaboration; 3) Technology; and 4) Resources and
Finances are the areas necessitating increased staff focus to achieve CPAU’s current and future
goals and objectives. Strategies and tactical actions have been identified for each priority and
those to be implemented in the next 12 to 18 months are highlighted. The Strategic Plan also
includes KPIs which are intended to track performance towards each priority and such
performance will be periodically reported to the UAC and Council. Attachment A contains the
Page 5 of 6
detailed strategies, actions and KPIs per priority focus area. The following is a summary of the
need for the four priority focus areas and CPAU’s needs.
Priority #1- Workforce
We must create a vibrant and competitive environment that attracts, retains, and invests in a
skilled and engaged workforce.
CPAU along with other utilities providers throughout the state and country struggle with
attracting and retaining a skilled workforce. For Palo Alto, this is even more complicated as the
cost of living and/or relocating to the Bay Area is among the highest in the nation. The
Workforce focus area reflects the need to improve retention and recruitment efforts to ensure
long-term CPAU has the staff and/or workforce solutions to meet its core service obligations
and customers’ expectations. The strategies and actions identified are intended to focus in the
areas of retention, recruitment, training and work-life balance needs.
Priority #2: Collaboration
We must collaborate with internal teams and external stakeholders to achieve our shared
objectives of enhanced communication, coordination, education and delivery of services.
Delivering high quality services to customers is a shared objective across all CPAU services. To
do so in an efficient and consistent manner requires an understanding of customer and
stakeholder needs along with the ability to effectively communicate and coordinate efforts with
customers and throughout the City. The strategies and actions identified highlight certain
projects and/or initiatives requiring a high level of collaboration, such as deployment of
distributed energy resources and electrification, to effectively implement. Additional
Collaboration strategies focus on promoting a culture of collaboration and a systematic process
to ensure two-way communication with customers, within CPAU and throughout the City.
Priority #3: Technology
We must invest in and utilize technology to enhance the customer experience and maximize
operational efficiency.
The increasing convergence of technology, utility services, and customer expectations is driving
significant change in the utility markets. CPAU must embrace technology to further enhance
internal operations and improve efficiency in this changing market. Customer adoption of new
technology applications is also dramatically changing utility - customer interactions and
demand for services. The Technology priority includes implementing a technology roadmap to
effectively guide CPAU’s customer and operational technology investments and programs.
Additional Technology strategies include AMI deployment, enhancing customer interaction,
improving field operations, and training employees to ensure effective use of existing and new
tools.
Priority #4: - Financial Efficiency and Resource Optimization
We must manage our finances optimally and use resources efficiently to meet our customers’
service priorities.
Facing an evolving utility business environment, aging infrastructure needs, and sustainability
objectives CPAU must maintain a competitive position in the market. Remaining financially
sustainable and competitive in the market while optimizing resources is key to maintaining and
enhancing value to customers. Strategies in this Priority focus on proactively r enewing and
managing CPAU's infrastructure, continuously improving financial processes, enhancing
infrastructure maintenance programs, defining CPAU's role in community resiliency, and
achieving sustainable energy resou rce and water supply plans.
NEXT STEPS
Staff will seek Council approval of the Strategic Plan in February or March 2018, pending UAC
support. Once the Strategic Plan is approved, staff will develop a detailed implementation plan,
and prioritize actions and tasks to carry out the specific initiati ves. Annual progress reports will
be provided on the KPls and status of implementi ng the Strategic Plan.
RESOURCE IMPACT
Approval of the Strategic Plan does not result in a direct resource impact for fiscal year (FY)
2018. Implementation of specific initiatives identified as part of the Strategic Plan may have a
resource impact for FY 2019 and beyond. As additional resource needs are identified, staff will
seek UAC and Council approval as necessary.
POLICY IM PACTS
The proposed Strategic Plan works in support of CPAU's curr ent mission and is consi stent with
Council approved policies related to the management and operation of CPAU. Approval of the
Strategic Plan will effectively replace the existing strategic plan. Staff will continue to track
existing KP ls through the end of FY 2018. The new KPls will be included for consideration in the
FY 19 operating budget.
ENVIRONMENTAL REVIEW
The UAC's support of the proposed Strategic Plan does not meet the definition of a project
under Public Resources Code 21065 and therefore California Environmental Quality Act (CEQA)
review is not required.
ATTACH M ENTS:
A. 2018 Utilities Strategic Plan
B. 2011 Utilities Strategic Plan
PREPARED BY:
REVIEWED BY:
APPROVED BY:
MONICA V. PAD IL LA, Senior Resource Planne(t?
DAVE YUAN, Utilities Strategic Bus i nes:Manager fJ'j
DEA N BATCHELOR, Chief Operating Officer
_J)~ ~lclek:; In
ED SH IKADA f..,, /
General Man ager of Utilities
Page 6of6
1
ATTACHMENT A
2018 UTILITIES STRATEGIC PLAN
The City of Palo Alto Utilities (CPAU or the Utilities) provides services across the electric, natural gas,
water, sewer, and fiber industries – many of which are in the midst of substantial changes. Many of
these changes are based on shifts in business models, price trends in renewable resources, technology
adoptions, an uncertain regulatory future, evolving workforce dynamics, and increasing customer
expectations. As these trends converge, they drive significant change for utilities in the services offered
to customers and operations. This convergence also amplifies the impacts and creates the potential for
a fundamental shift in the market and eventually, customer needs.
Industry trends and changing utility business models provide both challenges and opportunities that
require periodic updates in strategic planning. To maintain operational excellence and relevancy, CPAU
periodically reviews and revises its Strategic Plan and associated strategic initiatives. Awareness of
these market drivers and trends, as well as a need to understand the potential impacts to CPAU and its
customers, was the starting point and driver for the Strategic Plan development process. While CPAU’s
Strategic Plan is routinely updated, the Utility’s Mission remains unchanged.
CPAU Strategic Planning History and Progression
CPAU’s current Strategic Plan was originally developed and approved in 2011 with City Council
refinements and updates to Performance Measures and Strategic Initiatives in 2013 and 2015. The
current plan includes four Perspectives: Internal Business Process, People and Technology, Financial,
and Customer and Community. Across the four Perspectives, there are more than 25 performance
measures or goals that are tracked and reported for Plan progress. Recognizing that several internal and
external factors have significantly changed since the last update in 2011 and that the utility industry
continues to increase in complexity, CPAU staff felt the necessity to develop a new Strategic Plan rather
than an update of the existing plan.
The proposed Strategic Plan is significantly different from the current Strategic Plan, which focuses more
on maintaining and/or improving current operational and customer performance measures. Rather
than rewriting the existing plan, the proposed Strategic Plan starts from a blank page with a focus on
defining a Strategic Destination, or ‘stake in the ground’ defining where CPAU will be in 5-10 years. The
Strategic Plan also focuses efforts on reporting and tracking progress to a more representative and
strategic set of 12 Key Performance Indicators (KPIs), rather than more than 25 performance measures.
This will include defining new or refining existing initiatives and actions to achieve the CPAU’s future
goals and objectives. Key elements of the Strategic Plan include:
Mission Statement: A formal, enduring summary to focus and direct the organization;
communicate a shared understanding of the organization's intended purpose.
City of Palo Alto Utilities’ Mission Statement:
To provide safe, reliable, environmentally sustainable and cost effective services
CITY OF PALO ALTO UTILITIES STRATEGIC PLAN SUMMARY
2
Strategic Destination: Statement that provides a snapshot of where the organization should be
five to 10 years into the future.
Priority Areas: A problem, concern, challenge, or issue that the organization must address in
order to achieve its Strategic Direction.
Strategies and Actions: Strategies are the means by which the Priority is resolved, while Actions
are specific activities or tactics (achievable in approximately 12- to 18-months)
Key Performance Indicator (KPI): The means by which to measure, track, and report on
performance
Figure 1 illustrates the overall structure of the Plan and summarizes the relationship of the key elements
identified to realize the Strategic Direction and implement the Plan. While the Mission and Strategic
Direction are longer term, more enduring elements of the Plan, the Plan gets more detailed and tactical
with the Strategies and Actions. These detailed elements are focused on the near-term (e.g., one to
three years). As there are elements of the Plan that focus on the near-term, it is best practice to
periodically (e.g., every three years) refresh or update any strategic plan based on progress of the Plan
to date or significant changes in the organization or market.
Figure 1: Strategic Plan Structure and Elements
Strategic Planning Process
The planning process and development of the 2018 Strategic Plan were designed to engage staff and
stakeholders to ensure alignment with the Community and within the organization. Engaging internal
and external stakeholders throughout the development of the Plan also supports a successful
implementation.
2018 UTILITIES STRATEGIC PLAN
3
Stakeholder Engagement
Extensive internal and external stakeholder engagement was included in the Plan development to
ensure community and stakeholder insights were properly integrated. CPAU’s executive leadership
team invited a cross-section of employees to participate as members of the Core Planning Team (CPT) to
support the development of this Plan. The CPT was critical to the development of the Plan and will be a
key driver to the short- and long-term implementation. The CPT’s role included:
Driving the development of the updated Plan (e.g., Priorities, Strategies, Actions) through
participation in five facilitated planning meetings, completing ‘homework’ assignments, and
continued involvement to support Plan implementation.
Providing periodic communication within their broader work groups to explain the planning
process, communicate/discuss the draft elements of the Plan, and solicit feedback throughout
the process.
In addition to the internal CPAU CPT being
responsible for driving the development of the Plan,
the stakeholder engagement process included
additional employee feedback, a community
workshop, and three external stakeholder groups:
the Utilities Advisory Commission (UAC), a Utility
Stakeholder Panel, and City Management
stakeholders. CPAU’s executive leadership included
extensive organizational and employee engagement
as an early requirement of the Plan development. In
addition to the CPT, the internal or employee
engagement included:
10 group meetings to ensure employee
feedback from all levels and divisions within
CPAU.
Two “all-hands” meetings for the entire
organization communicating Plan progress and
soliciting feedback / introducing the Strategic
Direction and more tactical Plan elements.
Two large employee workshops to solicit
feedback on the Priorities, Strategies, and
Actions included in the Plan.
Including external stakeholders in the development of the Plan provided an opportunity to gain
important community feedback on CPAU’s overarching strategic direction while supporting targeted
insights in developing the Plan elements. Providing a mechanism for community engagement and
feedback throughout the planning process also helps to ensure future endorsement of the Plan.
Market Trends
As mentioned previously, one of the key drivers to developing the new Strategic Plan was recognizing
that several organizational and market trends have continued their rapid pace of change and in many
cases significantly accelerated or changed since the last update. The energy industry currently faces
CITY OF PALO ALTO UTILITIES STRATEGIC PLAN SUMMARY
4
many challenges and opportunities, as well as increasing uncertainty related to regulatory, resource
availability, security, technology, sustainability, and clean energy issues. As these trends converge, they
drive significant change in the services offered to customers and operations. This convergence also
amplifies the impacts and creates the potential for a fundamental shift in the market and eventually,
customer needs. To support the development of the Strategic Direction, Priorities, and eventual
Strategies and Actions, the planning process included discussion with stakeholders of the key trends or
issues influencing CPAU’s operations, market, and customers. Highlights of the stakeholder feedback on
trends and issues included:
Aging infrastructure / renewal and replacements
Climate change, adaptation, sustainability, and resiliency
Workforce (large portion of CPAU workforce retiring in next 10 years, how to attract new staff or
millennials)
Customer demands (retail customer pressure, connectivity, flexibility, unlimited options, overall
load is declining)
Community or customer collaboration opportunities (attracting new staff, technology
evaluation/adoption, energy resources)
Balancing goals, sustainability aspirations with competitive rates and affordability
Technology (CPAU operations, cyber security, big data management, Advanced Metering
Infrastructure (AMI), mobile apps/access)
California regulatory trends (CARB/Cap and Trade markets, new renewable energy requirements,
hydropower availability, efficient building codes)
Reducing regulatory barriers, more efficient regulatory process
Increased opportunities to collaborate with other City departments and external stakeholders
Distributed energy resources (e.g. customer or commercial energy resources)
Electric vehicle opportunities or incentives
Natural gas utility and potential for electrification; stranded assets for CPAU
Water resource availability, recycling, drought, and conservation
Communicate CPAU’s value and areas of leadership to stakeholders
The market trends and issues insights from stakeholders were directly integrated into the CPT
workshops and the subsequent Priorities, Strategies, and Actions. CPAU’s Strategic Direction and Plan
will help the Utility navigate these trends while remaining effective, valuable, and cost-effective to
customers.
CPAU’s 2018 Strategic Plan
Throughout these changing times and evolving markets, CPAU’s Mission remains the same, forming the
foundation for the utility’s enduring direction. The purpose of a mission statement is to focus and direct
the organization as well as to communicate a shared understanding of the organization's intended
purpose. The 2018 Strategic Plan aligns with and further advances CPAU’s Mission.
2018 UTILITIES STRATEGIC PLAN
5
The 2018 Strategic Plan provides an update to the efforts and initiatives outlined in the 2011 plan, taking
into consideration recent market trends, emerging priorities, and additional input from our
stakeholders. The Plan should act as the guide and context for utility resource, workforce, technology,
customer expectation, and market related decision making. The 2018 Strategic Plan provides a “line of
sight” from the organization’s broader strategy to more day-to-day activities by staff, thus aligning the
Utilities organization with the Plan. The Strategic Direction, defining a “stake in the ground” for the next
5-10 years is the first step in providing this “line of sight” from the Mission to day-to-day activities. As
the planning process was designed to engage staff and stakeholders in its development, the following
Strategic Direction was vetted with multiple internal and external stakeholder groups.
Through the planning process CPAU also embraced its position as a department of the City of Palo Alto
by integrating the City’s values, while incorporating several attributes tailored to some of the unique
aspects of the Utilities operations and market. These values and CPAU attributes were also tested
throughout the organization and at an all-hands employee workshop. There was support for adopting
the City values and CPAU attributes along with a desire to promote a culture at the Utility that reinforces
them. Due to the level of interest and importance of the values, the Plan includes a near term Action
item to begin developing tools promoting these values by mid-2018.
City Values Adopted for 2018 Plan:
Quality | Courtesy | Efficiency | Integrity | Innovation
Tailored CPAU attributes support culture of:
Respect | Teamwork | Accountability | Reliability | Safety
The next step in the process identified the critical or core challenges that CPAU must address to realize
the Strategic Direction. These critical issues are defined as Priorities in the Plan and include:
Workforce: We must create a vibrant and competitive environment that attracts, retains, and
invests in a skilled and engaged workforce.
CPAU along with other utilities providers throughout the state and country struggle with
attracting and retaining a skilled workforce. For Palo Alto, this issue is amplified as the cost of
living and/or relocating to the Bay Area is among the highest in the nation. The Workforce focus
area reflects the need to do improve retention and recruitment efforts to ensure long-term CPAU
has the staff and/or workforce solutions to meet its core service obligations and customers’
expectations. The strategies and actions identified are intended to focus in the areas of
retention, recruitment, training and work-life balance needs.
Collaboration: We must collaborate with internal teams and external stakeholders to achieve
our shared objectives of enhanced communication, coordination, education, and delivery of
services.
STRATEGIC DIRECTION
At CPAU, our people empower tomorrow's ambitions while caring for today's
needs! We make this possible with our outstanding professional workforce,
leading through collaboration and optimizing resources to ensure a sustainable
and resilient Palo Alto.
CITY OF PALO ALTO UTILITIES STRATEGIC PLAN SUMMARY
6
Delivering high quality services to customers is a shared objective across all CPAU services. To do
so in an efficient and consistent manner requires an understanding of customer and stakeholder
issues along with the ability to effectively communicate and coordinate efforts with customers
and throughout the City. The strategies and actions identify projects and/or initiatives requiring a
high level of collaboration to effectively implement as well as promoting a systematic framework
in which to ensure collaboration within CPAU and throughout the City.
Technology: We must invest in and utilize technology to enhance the customer experience and
maximize operational efficiency.
The increasing convergence of technology, utility services, and customer expectations is driving
significant change in the utility markets. CPAU must embrace technology to further enhance
internal operations and improve efficiency in this changing market. Customer adoption of new
technology applications is also dramatically changing utility – customer interactions and demand
for services. The Technology Priority includes implementing the Technology Roadmap to
effectively guide CPAU’s customer and operational technology investments and programs.
Additional Technology strategies include AMI deployment, enhancing customer interaction,
improving field operations, and training employees to ensure effective use of existing and new
tools.
Financial Efficiency and Resource Optimization: We must manage our finances optimally and
use resources efficiently to meet our customers’ service priorities.
Facing an evolving utility business environment, aging infrastructure needs, and sustainability
objectives CPAU must maintain a competitive position in the market. Remaining financially
sustainable and competitive in the market while optimizing our resources is key to maintaining
and enhancing our value to customers. Strategies in this Priority focus on proactively replacing
and managing CPAU’s infrastructure, continuously improving financial processes, enhancing
infrastructure maintenance programs, defining CPAU’s role in community resiliency, and
achieving sustainable energy resource and water supply plans.
To complete the Strategic Plan, more tactical Strategies and Actions were identified and developed to
complete the Tactical Action Plan. Strategies were developed within each Priority to resolve the issue or
challenge identified, while Actions include specific activities and tactics to implement the Strategy.
Reporting and Tracking Plan Progress
Successful strategic plans include the ability to track the Plan’s progress and report on performance
within the organization and to stakeholders. As an organization tracks performance, it can adjust
resources or the Plan, to better respond or act on Priority areas that may lag desired performance levels,
or learn from others that are exceeding expectations. KPIs are the primary tool in concisely
communicating and reporting on performance to stakeholders.
KPIs are a metric or measurable value that demonstrates how effectively the organization is achieving its
Priorities and Strategic Direction. The 2018 Strategic Plan includes 12 KPIs for periodic (e.g., quarterly)
reporting to governing bodies and stakeholders on the Plan performance. These KPIs may also be
applied and tailored throughout the organization to align CPAU divisions, work groups, and individual
contributors with the Strategic Plan. As some of the KPIs identified are dependent on new strategic
initiatives by Utilities, or include a near term completion date, they may require refinement or updating
as completed or the strategic initiatives are scheduled/completed (e.g. technology or system
implementations). The KPIs are included below.
2018 UTILITIES STRATEGIC PLAN
7
Priority 1: Workforce
Reduce employee turnover rates less than 10% by 2020 (calculated as a three-year rolling
average)
90% of all CPAU positions filled/staffed on annual basis; while 100% of critically identified
positions are filled within 90 days
100% of employees have implemented an individual development plan with updates every two
years
Priority 2: Collaboration
Maintain 85% or higher “excellent” or “good” performance ratings in annual customer
satisfaction survey
Maintain 50% or higher level of customer awareness for CPAU’s key programs, incentives, and /or
initiatives
Maintain 60% or higher level of agreement regarding employees who feel they contributed
and/or were involved with CPAU projects or decisions that directly affect their roles or work
Priority 3: Technology
Increase the number of My Utilities Account (MUA) registered users by 10% per year and
utilization by 5% per year (e.g., paying bill, reviewing consumption, etc.)
Provide 50% of field support staff with paperless workorder and maintenance documentation
tools by December 2018 and 90% by December 2019
100% of staff affected by new or upgraded technology receive / attend applicable training
Priority 4: Financial Efficiency and Resource Optimization
Identify/catalog 90% of critical assets or components in asset management system by 2022
Complete 80% of critical component planned replacement annually; and 90% critical component
planned maintenance annually
Maintain average (e.g. median) or below residential and commercial utility bills as compared to
surrounding utilities and communities
Tactical Action Plan
The comprehensive Tactical Action Plan including all Strategies and Actions by Priority is included below.
Please note, those Actions that are expected or scheduled for completion in 2018 are noted with bold,
italicized text.
CITY OF PALO ALTO UTILITIES STRATEGIC PLAN SUMMARY
8
Priority 1: Workforce
We must create a vibrant and competitive environment that attracts, retains, and invests in a skilled and engaged
workforce.
Strategy 1. Establish CPAU as an organization where employees are proud to work and recruit other strong performers.
Action 1. Support pilot rollout of annual professional/journeyman individual development plans (IDP) and
rollup to department training priorities, to develop internal talent. Complete by December 2018.
Action 2. Review and expand training/education and certificate programs that emphasize mastery of trade, profession, or management position and promote development and longevity in areas of expected need.
Complete by June 2018.
Action 3. Update Divisional Succession Plans to prepare staff for promotional opportunities and to retain
institutional knowledge within the organization (update existing 5-year succession plan). Complete by
December 2019.
Action 4. Promote a culture that reinforces City and Department values. Complete by June 2018.
Strategy 2. Create a workplace that attracts and retains skilled employees.
Action 1. Prioritize resolution of collective bargaining issues and finalize an agreement that ensures CPAU
will attract and retain high caliber skilled employees that will advance the Department’s Mission.
Complete by December 2018.
Action 2. Reduce processing time to hire new staff to ensure potential candidates are offered positions in a reasonable time frame. Complete by December 2018.
Action 3. Support CPAU staff communication outreach in recruitment strategy for hiring utilities
employees. Complete by December 2018.
Strategy 3. Evaluate and consider alternative workforce solutions to achieve organizational business objectives.
Action 1. Create opportunities to empower and support individual employees and work groups to offer a
work-life balance through alternative work schedules or other options. Complete by December 2018.
Action 2. Determine the potential for projects and/or functions to be effectively outsourced while continuing to meet
organizational needs and objectives. Complete by December 2019.
Action 3. Consider developing a hybrid workforce of full time employees and non-benefitted staff. Complete by
December 2020.
Action 4. Create an internal labor pool from within the City to fill temporary business needs. Complete by
June 2019.
2018 UTILITIES STRATEGIC PLAN
9
Priority 2: Collaboration
We must collaborate with internal teams and external stakeholders to achieve our shared objectives of enhanced
communication, coordination, education and delivery of services.
Strategy 1. Increasing communication with the community enhances customer satisfaction and community trust and will help
us deliver programs and content based on community desires.
Action 1. Establish a routine practice of involving stakeholders on strategic projects and initiatives to
support customer satisfaction, customer choice, and program outcomes. Ongoing.
Action 2. Proactively communicate about capital improvement projects to mitigate the impacts of
construction, while maximizing public support and the allocated financial resources. Ongoing.
Action 3. Identify and develop proactive strategies and customer education that allows CPAU to support
customer needs for Distributed Energy Resources (DER), including storage, solar, EVs, energy efficiency.
Ongoing with DER plan timeline; phase 1 to be complete by December 2018.
Action 4. Partner with community stakeholders to facilitate large scale residential building electrification (beyond
rebate scale). No timeline; beginning conversations and research now.
Action 5. Enhance customer service through deployment of technology such as upgraded online bill
payment, account access system and advanced metering infrastructure (AMI). Ongoing with Utilities
technology roadmap.
Action 6. Build customer support for programs and understanding of how we provide cost-effective services. Ongoing.
Action 7. Create interdepartmental work groups to identify and resolve ongoing workflow and priorities
involving permitting, procurement and legal. Ongoing.
Strategy 2. Strengthening coordination and integration across City departments aligns Utilities and City goals while improving
performance and efficiency
Action 1. Enhance current coordination of scheduling, synchronization and communication of capital
improvement, maintenance, operations projects and other Utilities programs and services with other
departments to improve implementation and efficiency. Ongoing.
Action 2. Explore opportunities to improve City processes, policies and information sharing that allows the
community to easily understand and implement DER opportunities such as EVs, solar, storage, energy
efficiency, and building electrification. Ongoing with DER timeline; phase 1 to be complete by December 2018.
Action 3. Share information and opportunities across departments to expand outreach about CPAU
employment. Ongoing.
Action 4. Promote regular interdepartmental information sharing throughout the City to assist employees
understand City (and common) goals. Ongoing.
CITY OF PALO ALTO UTILITIES STRATEGIC PLAN SUMMARY
10
Priority 2: Collaboration
We must collaborate with internal teams and external stakeholders to achieve our shared objectives of enhanced
communication, coordination, education and delivery of services.
Strategy 3. Fostering a culture of cooperative work within Utilities improves productivity and awareness, and understanding of
our common goals.
Action 1. Support the implementation of the Utilities’ technology roadmap with comprehensive communication of:
technological advancements and the department's short-term and long-term goals; how these advancements reflect
customer and operational needs; how projects are prioritized; and how decisions are made. Ongoing with timeline
of Utilities technology roadmap; full implementation scheduled for completion by December 2022.
Action 2. Strengthen existing tools for intradepartmental communication to ensure transparency and
informed staff that understand the Strategic Plan and other key CPAU issues and how they directly relate to
the work of our employees. Ongoing; some tasks by April 2018 with completion of the Strategic Plan.
Action 3. Collaborate with staff involved in deployment of AMI and develop a comprehensive outreach plan
to communicate AMI and supporting technologies, impact to staffing resources, staff responsibilities, and
how the customer engagement platform operates. Ongoing with timeline of Utilities technology roadmap;
AMI full deployment scheduled to be complete by October 2018.
Action 4. Support upgrade of MUA by communicating the customer and utility operational benefits and
functionalities. Ongoing with timeline of MUA; phase 1 complete by July 2018.
Action 5. Establish intradepartmental team to evaluate and determine best practices for an outage management
system (OMS), including communication across divisions to reduce restoration time and provide customers with
more real-time outage information. Integrate with Technology S3, A4. Complete by June 2019.
Action 6. Support the workforce priorities by aligning organizational values and reiterating employee roles
within the framework of the Utilities Strategic Plan. Ongoing.
Strategy 4. Collaborating with government, trade, and regional agencies enhances our sphere of influence, allows us to
identify common ground, and leverage economies of scale.
Action 1. Continue to work with Industry/trade/regional groups (NCPA, League of Cities, CMUA, BAWSCA,
E Source etc.) to collaborate on shared objectives. Ongoing.
Action 2. Coordinate on regional utility programs to streamline processes, achieve mutual objectives, and realize
greater impacts. Ongoing; some tasks can be completed by December 2019.
Action 3. Communicate our public awareness efforts and resources with government agencies (DOE, EPA,
CEC, etc.) to improve public and stakeholder awareness of utility issues, programs, and shared goals.
Ongoing.
Action 4. Collaborate with educational institutions and companies to attract local candidates for CPAU positions.
Ongoing; some tasks can be completed by December 2019.
2018 UTILITIES STRATEGIC PLAN
11
Priority 3: Technology
We must invest in and utilize technology to enhance the customer experience and maximize operational
efficiency.
Strategy 1. Finalize and implement technology road map to clearly identify CPAU’s short-term and long-term goals, reflect
customer and operational needs, prioritize projects and guide decisions.
Action 1. Identify, align and prioritize customer-focused and operational technologies to improve customer
satisfaction and operational efficiency. Ongoing.
Action 2. Implement Technology Road Map including project prioritization, 10-year timeline, and co-dependencies.
2018 through 2022.
Strategy 2. Deploy advanced metering infrastructure (AMI) to increase reliability, enhance customer service, and improve
response time.
Action 1. Finalize Business Case including cost and benefit analysis, scenarios, and staffing impacts.
Complete by June 2018.
Action 2. Develop AMI/MDM System Requirements to identify functional and system requirements. Complete by
June 2019.
Action 3. Evaluate Multi-Agency AMI/MDM with NCPA to pool resources, share ideas and increase purchasing
power. Complete by June 2019.
Action 4. Proof of Concept Phase to deploy 2,000-5,000 meters, install all network infrastructure, establish system
integrations, , develop future state business processes, provide testing and training, and pilot customer
engagement. Complete by September 2021.
Action 5. Citywide AMI/MDM Deployment of 73,000 electric, gas and water meters. Complete by September 2022.
Strategy 3. Invest in technology infrastructure to enhance customer engagement and satisfaction.
Action 1. Upgrade Utilities customer portal: My Utilities Account (MUA 2.0) to provide customers additional
24/7 self-services and customer information to better manage their consumption and choices. Complete by September 2018.
Action 2. Leverage City’s mobile app (Palo Alto 311) to provide residents, businesses and visitors more access to
City services and information. Complete by December 2019.
Action 3. Implement a Street Work Notification customer portal for long-term construction projects that may result in
traffic, parking or other impacts to neighborhoods. Complete by December 2019.
Action 4. Evaluate and upgrade Outage Management System (OMS) to reduce restoration time and provide
customers near real-time outage information. Complete by June 2019.
Strategy 4. Implement technologies to improve response time, security and operational efficiency.
Action 1. Deploy Mobile/Field Technologies (devices and software) to reduce operational costs and
improve service delivery. Complete by December 2018.
Action 2. Upgrade Customer Information/Billing System (CIS) to improve responsiveness and ensure customer
data is accurate and secure. Complete by September 2020.
Action 3. Maintain Supervisory Control and Data Acquisition (SCADA) system to ensure a safe, reliable,
and efficient distribution system. Ongoing.
Action 4. Integrate with new GIS System (ESRI) to ensure accurate infrastructure information for customer service
and infrastructure improvements. Complete by June 2019.
Action 5. Ensure that CPAU systems keep pace with customer adoption of new technologies to enhance
the customer experience and choice. Ongoing.
CITY OF PALO ALTO UTILITIES STRATEGIC PLAN SUMMARY
12
Priority 3: Technology
We must invest in and utilize technology to enhance the customer experience and maximize operational
efficiency.
Strategy 5. Ensure and empower employees with current Technologies to perform work efficiently.
Action 1. Streamline business processes to facilitate adoption of new technological solutions that improve
performance in targeted priority functions. Complete by December 2018.
Action 2. Implement continuous education and evaluation of new technology applications and related utility trends to ensure CPAU maintains an effective, competitive, and optimal use of technology
applications. Ongoing.
Action 3. Train employees to adopt and maximize utilization of new technologies. Ongoing.
2018 UTILITIES STRATEGIC PLAN
13
Priority 4: Financial Efficiency and Resource Optimization
We must manage our finances optimally and use resources efficiently to meet our customers’ service priorities.
Strategy 1. Establish a proactive infrastructure replacement program, based on planned replacement before failure to support
reliability and resiliency.
Action 1. Initiate a program to update data in the utility asset management system to establish
infrastructure replacement programs and support maintenance plans. Complete by December 2018.
Action 2. Develop, prioritize, and propose planned infrastructure replacement programs based on currently
available key asset information for implementation in FY 2020 and begin reporting of planned infrastructure replacement status. Complete by September 2018.
Action 3. Establish a system of regular reporting on planned replacement progress, including management
reports appropriate to every level of the organization. First report by September 2018.
Action 4. Develop a plan to fill data gaps and ensure data accuracy identified in A1 and implement collection
process. Complete by September 2019.
Action 5. Use updated data in comprehensive asset management system and database to improve planned
replacement programs and status reporting. Start implementation in July 2020.
Strategy 2. Develop financial planning processes that provide stability and clear communication of service priorities and the
cost of achieving those priorities.
Action 1. For FY 2019 budget process, collaborate between Rates, Admin, and Water-Gas-Wastewater
Engineering to pilot an infrastructure budget development process for one utility (Water, Gas, or Wastewater Collection) that coordinates CIP budget development with planning for funding sources and
reserves management. Complete by March 2018.
Action 2. Starting with the FY 2020 budget process, implement an integrated and replicable CIP budgeting
process with Admin, Rates, and Water-Gas-Wastewater Engineering to develop a CIP reserve and an annual
CIP contribution amount for one utility. Complete by September 2018.
Action 3. For FY 2021 budget process, expand and apply the integrated CIP budgeting process to at least one
other utility (Electric, Water, Gas, or Wastewater Collection) with remaining funds in FY 2022. Complete by
September 2019.
Action 4. In 2019, update benchmark study for one utility. Begin a process of regular benchmarking of one utility
per year going forward. Complete by December 2019.
Strategy 3. Enhance planned maintenance programs for all utilities through clearly defined maintenance plans, improved
management reporting, and developing innovative ways to ensure efficient completion of all maintenance.
Action 1. Develop an inventory of existing maintenance programs and a reporting framework to monitor
progress. Identify areas where planned maintenance is not being completed and areas where more data is
needed to design maintenance plans. Complete by December 2018.
Action 2. Identify and evaluate asset data requirements and accuracy to develop and monitor proactive
maintenance programs and identify any data gaps. Complete by December 2018.
Action 3. Identify staffing, software, and other resources required to implement and monitor maintenance
programs, identify gaps in existing resources, identify alternative ways to implement the programs and the
costs and benefits of different approaches. Complete by September 2018.
Action 4. Establish a system of regular reporting on maintenance progress, including management reports
appropriate to every level of the organization. Provide first report by September 2018.
Action 5. As additional asset data becomes available from data collection efforts identified in S1 A1 and S1 A4,
update and improve applicable maintenance plans. Implementation to be determined.
CITY OF PALO ALTO UTILITIES STRATEGIC PLAN SUMMARY
14
Priority 4: Financial Efficiency and Resource Optimization
We must manage our finances optimally and use resources efficiently to meet our customers’ service priorities.
Strategy 4. Achieve a sustainable and resilient energy and water supply to meet community needs.
Action 1. Work with other City Departments to establish an implementation plan through FY 2020 to
achieve the City’s carbon reduction and water management goals while assessing utility operational risks
and mitigations associated with electrification. Complete by June 2018.
Action 2. Establish and implement a Distributed Energy Resources plan to ensure local generation
(e.g. solar), storage, electric vehicles (EVs), and controllable loads (like heat pump water heaters) are integrated into the distribution system in a way that benefits both the customer and the broader
community. Complete by December 2018.
Action 3. Evaluate recycled water, groundwater, and other non-potable water sources and integrate the results and
outcomes with water supply plans. Complete by December 2018.
Action 4. Incorporate a review of the changing competitive landscape (such as low-cost local solar and storage, the
rise of Community Choice Aggregators, and the potential for competition and Direct Access) into routine electric
supply planning processes. Complete by December 2020.
Action 5. Adopt and implement for the Electric utility an integrated resource plan for 2018 through 2030.
Complete by December 2018.
Strategy 5. Engage stakeholders and define CPAU’s role in supporting and facilitating community resiliency.
Action 1. Engage in community outreach to identify what aspects of resiliency are important to the
community for each utility to support development of a resiliency work plan. Complete by December 2018.
Action 2. Define minimum emergency service commitments and targeted full system recovery times in case of a
major disaster(s) and communicate general guidance on recovery times to the public. Implementation to be
determined and dependent on A1.
Action 3. Develop an outreach and education program to facilitate individual customer resiliency efforts.
Implementation dependent on A1.
Action 4. Identify high priority issues that could interfere with emergency service commitments and recovery times
and develop a plan to improve resiliency in these areas. Implementation dependent on A1.
Action 5. Complete evaluation of redundant/backup transmission service to CPAU and communicate to
stakeholders. Complete by December 2018.
2018 UTILITIES STRATEGIC PLAN
15
Appendix A
Stakeholder Groups
Core Planning Team
Leadership Team
Tom Auzenne, Customer Service Richard Simms, Operations
Monica Padilla – Resource
Management/ Strategic Plan Project
Manager
Debbie Lloyd, Engineering Rick Baptist, Operations
Ed Shikada, General Manager Jimmy Pachikara, Engineering Rui Silva, Operations
Dean Batchelor, Chief Operating
Officer
Lynn Krug, Engineering Ryan Johnson, Operations
Catherine Elvert, Communications Silvia Santos, Engineering Scott Williams, Operations
Dave Yuan, Administration Heather Dauler, Legislative
Regulatory
Bruce Lesch, Resource Management
Sushma Tappetla, Administration Althea Carter, Operations Jonathan Abendschein, Resource
Management
Joshua Wallace, Resource
Management
Mike Haynes, Operations Lisa Benatar, Resource Management
Crystal Jensen, Customer Service Anna Vuong, Administration Sonika Choudhary, Resource Mgmt
Utility Advisory Commission
Michael Danaher, Chair Judith Schwartz
Arne Ballantine, Vice Chair Lauren Segal
Lisa Forsell Terry Trumbull
A.C. Johnston
Utility Stakeholder Panel
Name Affiliation
Annette Glanckopf Palo Alto Neighborhood (PAN)
Sheri Furman Palo Alto Neighborhood (PAN)
Sandra Slater Cool Block & Palo Alto Forward
Lisa Altieri Carbon Free Palo Alto
Debbie Mytels Silicon Valley Climate Action Alliance & Acterra
Peter Drekmeier Tuolumne River Trust & Bay Area Action
Julianne Frizzell Landscape Architect
Andy Robin Active Citizen - UPS programs
David Coale Carbon Free Palo Alto, Acterra, Sun Works, SV Bike Coalition
CITY OF PALO ALTO UTILITIES STRATEGIC PLAN SUMMARY
16
Name Affiliation
Tess Byler San Francisquito Creek
Judy Kleinberg Palo Alto Chamber
Russ Cohen Business Improvement District & Downtown PA
Roxy Rapp Developer & Property Manager
Sven Thesen Climate One & EV advocate
Jon Foster former UAC member
John Melton former UAC member
Citywide Management
James Keene – City
Manager’s Office
Lalo Perez – Administrative
Services
Kenneth Deuker– Emergency
Services
Rumi Portillo – Human
Resources
Jonathan Reichental–
Information Technology
Peter Pirnejad– Development
Services
Gil Friend - Sustainability Mike Sartor – Public Works
Utilities Strategic Plan – Strategic Objectives
Approved by Council July 18, 2011 (Staff Report 1880)
Updated by Council August 5, 2013 (Staff Report 3950)
Updated by Council May 11, 2015 (Staff Report 5709)
1
Strategic
Objective
Objective Statement Performance
Measure
2015 Target Strategic
Initiative
Customer and Community Perspective
C1. “I receive
safe and reliable
service.”
Customers expect that Utilities services are provided on a continuous basis,
without interruption. In addition, customers expect that the Utilities
delivery systems are safe and will not harm them or put them in any danger.
We will listen to our customers and seek to understand their reliability and
safety concerns and implement programs and projects to address them.
Average time to
restore service per
interrupted
customer
Less than 90
minutes
Number of electric
system interruptions
per year for average
customer
Ranks in the top
quartile
nationwide (less
than 0.9)
C2. “Be
responsive to all
my utilities‐
related service
needs.”
We understand that the customer wants clear, accurate bills with easy
methods of payment; access to usage history and enough understanding to
efficiently manage usage; to feel quickly and completely “taken care of”
when they have concerns, questions or requests and to be communicated
with effectively both as individuals and as CPAU’s owners. One of the ways
to achieve this is to elicit feedback from customers to help improve service.
Customer
satisfaction scores
on annual surveys
for overall value.
Residential and
commercial surveys
alternate every other
year.
Ranking in the top
two utilities
statewide
Establish
mechanisms to
elicit customer
feedback on their
satisfaction with
all interactions
with CPAU.
C3. “I expect to
pay a reasonable
bill”
We understand that customers expect their bills to be comparable to those
in surrounding communities and do not expect to pay more than PG&E
customers. Customers believe it is reasonable to pay slightly more in
exchange for increased reliability, safety and protection of the environment.
However, customers’ overall bills for Utilities services must remain
reasonable and be reasonably stable and should not increase significantly in
any one year. Customers also want their bills to provide useful information
about their consumption of resources in addition to the rate so that they can
The average
combined residential
customer bill for
electricity, water,
gas, and wastewater
services
Less than the
average of bills for
comparable
services in nearby
communities (MP,
MV, SC, Hayward,
RC, Roseville, and
Alameda).
Improve the
electronic bill
presentment,
payment
functionality and
enhance the
utility’s online
capabilities.
ATTACHMENT B
Utilities Strategic Plan – Strategic Objectives
Approved by Council July 18, 2011 (Staff Report 1880)
Updated by Council August 5, 2013 (Staff Report 3950)
Updated by Council May 11, 2015 (Staff Report 5709)
2
Strategic
Objective
Objective Statement Performance
Measure
2015 Target Strategic
Initiative
understand how they can influence their total cost for Utilities services. For
natural gas service, Palo Alto’s supply cost has been relatively stable due to a
laddered gas portfolio purchasing strategy; however, this strategy needs to
be re‐evaluated as gas prices are currently low and are projected to stay low
for the foreseeable future. Although, the average bill for all services should
be comparable to those in surrounding communities, staff will continue to
monitor and report the bills for each service separately on a quarterly basis.
Annual rate change Maximum of 10%
per year for
electric and
wastewater
services.
Maximum of 20%
per year for water
service.
C4. “Care for
our
environment”
Our community wants its customer‐owned utility to offer choices for them
to manage their resource use in ways that reflect their environmental
values. Utilities will improve existing programs and develop new programs
to meet customer needs and allow customers to manage their own
environmental footprint.
Percentage of
customers
participating in the
PaloAltoGreen Gas
program
20% of customers
Re‐evaluate the
cost‐effectiveness
of electrification
especially for new
construction and
evaluate whether
new programs or
incentives can or
should be offered,
consistent with all
applicable legal
requirements.
Percentage of
Greenhouse gas
reductions
10% GHG
reductions
Internal Business Process Perspective
Safety and Reliability
BP1. Ensure a
reliable supply of
utility resources
We will implement strategies that ensure the reliable supply of utility
resources to meet present and future needs. To provide opportunities for
economic development within Palo Alto, we must provide sufficient
resources that meet the short and long‐term needs of our customers. To
achieve this we will maintain the utility system components, and provide for
Duration of electric
system interruption
per year for average
customer
Ranks in the top
quartile
nationwide (less
than 60 minutes
per customer)
Develop a plan to
complete a new
electric
transmission
interconnection.
Utilities Strategic Plan – Strategic Objectives
Approved by Council July 18, 2011 (Staff Report 1880)
Updated by Council August 5, 2013 (Staff Report 3950)
Updated by Council May 11, 2015 (Staff Report 5709)
3
Strategic
Objective
Objective Statement Performance
Measure
2015 Target Strategic
Initiative
adequate utility resource supplies to our current and future customers. We
will also develop new management practices and organizational structure to
ensure compliance with regulatory requirements.
Response time to all
emergency calls
Under 30 minutes Complete the
Water Integrated
Resource Plan
(WIRP) including a
comprehensive
evaluation of the
use of
groundwater by
end of CY 2015.
BP2. Operate
the utility
systems safely
We will continue to ensure the safety of our customers, employees and the
community by the ongoing implementation of a safety programs. Protecting
customers and employees from injury and customer’s property from
damage is essential for delivering quality utility services to our customers.
The safety programs will be implemented by updating safety procedures,
educating customers via outreach materials and workshops, correcting
system deficiencies, operating in accordance with existing safety rules, and
ensuring that products delivered to customers are safe.
AGA (American Gas
Association)
Incidence Rate
Zero reportable
incidents
Customer awareness
of gas safety issues
90% of customers
responding to
annual gas
customer safety
awareness survey
BP3. Replace
infrastructure
before the end
of its useful life
We will continue to implement a long‐term strategy for replacing
infrastructure before the end of its useful life. Reliable delivery of utility
services to our customers is critical for the success of business and the
quality of life for our residents. To accomplish this, we will focus on
reducing any backlog of infrastructure work and replace infrastructure
systems in a manner that spreads the expense across multiple years
resulting in program with even expenditures patterns in future years when
possible.
Backlog of
infrastructure
elements whose
ages are beyond
their useful lives.
Zero Complete long
range Gas and
Water master
infrastructure
plans by end of
CY2015.
Customer Service Excellence
BP4. Serve
customers
promptly and
We will provide customers with the highly responsive service they desire.
We will do this by reviewing and improving our processes for managing
accounts, handling payments, resolving billing issues, responding to
Average phone wait
time
Less than 90
seconds
Utilities Strategic Plan – Strategic Objectives
Approved by Council July 18, 2011 (Staff Report 1880)
Updated by Council August 5, 2013 (Staff Report 3950)
Updated by Council May 11, 2015 (Staff Report 5709)
4
Strategic
Objective
Objective Statement Performance
Measure
2015 Target Strategic
Initiative
completely information and field service requests and notifying customers during
service disruptions. We will identify ways to streamline these processes and
implement changes. Specifically, we will review, document and improve
business processes that have been identified as having long customer
response times.
Number of billing
adjustments
10% reduction
from number in
2009.
BP5. Communic
ate clearly and
pro‐actively with
all our
stakeholders
We will proactively communicate with all our stakeholders, including all
customer groups, civic leaders, community groups and the press. To achieve
this objective we will provide the information needed for our stakeholders
to effectively access, understand and utilize all utilities services and
programs. In addition, we will design communication vehicles and
dissemination processes that will enable our residents to be educated
owners of their municipal utilities system.
Time until informing
the public and local
media of a disruption
affecting all sensitive
major customers
Less than 60
minutes after
becoming aware
of a disruption
BP6. Offer
programs to
meet the needs
of customers
and the
community
We will assist customers to lower their cost of utilities services and support
the environment. We will assist customers facing economic hardship by
offering bill payment assistance programs. We will educate customers on
the reasons for and their means of compliance with our safety and
regulatory requirements. We will also identify all customer groups, identify
any gaps in service provision to those customers, and propose new
programs or changes to existing programs to close those gaps.
Participant*
satisfaction with
Utilities programs
(*rebate recipients,
workshop attendees,
callers, etc.)
At least 90% of
program
participants
satisfied with their
experience
Utilities Strategic Plan – Strategic Objectives
Approved by Council July 18, 2011 (Staff Report 1880)
Updated by Council August 5, 2013 (Staff Report 3950)
Updated by Council May 11, 2015 (Staff Report 5709)
5
Strategic
Objective
Objective Statement Performance
Measure
2015 Target Strategic
Initiative
Reduce Costs
BP7. Negotiate
supply contracts
to minimize
financial risk
We will continue to negotiate supply contracts to acquire supply resources
while managing supply portfolio cost uncertainty to meet rate and reserve
objectives and following sound risk management practices. To ensure that
we are buying commodities at as competitive prices as possible, we will
negotiate contracts with new counterparties to continue to have a sufficient
set of credit‐worthy trading partners. We will continue to develop long‐
term acquisition policies and plans (LEAP) and update those plans at least
every three years. We will also determine all that is necessary to execute a
gas prepay transaction as that is one clear way to lower the cost of gas
supply resources.
Number of
competitive bids
received for each
fixed‐price
transaction.
Minimum of three
bids for electric
power
Participate
actively in
Northern
California Power
Agency’s (NCPA)
on‐going
allocation of cost,
including new cost
allocation studies
if undertaken, to
ensure that the
City’s costs are
fair. Evaluate
alternative
providers for
services provided
by NCPA as
appropriate.
BP8. Reduce
cost of delivering
service through
best
management
practices
We will reduce the cost of delivering service to customers. We will identify
opportunities to better coordinate between Utilities and other City
departments to improve efficient delivery of services. We will perform
benchmarking studies to identify potential modifications to procedures,
practices, materials, and plans and to ensure that we are following best
practices. One best practice is to increase calibration and replacement
schedules for gas and water meters since the meters slow over time causing
actual usage to be under‐recorded, resulting in lost revenue.
“lost and
unaccounted for”
volumes of gas and
water
80% of 2009
levels.
Complete Water
benchmarking
study by end of FY
2015.
Utilities Strategic Plan – Strategic Objectives
Approved by Council July 18, 2011 (Staff Report 1880)
Updated by Council August 5, 2013 (Staff Report 3950)
Updated by Council May 11, 2015 (Staff Report 5709)
6
Strategic
Objective
Objective Statement Performance
Measure
2015 Target Strategic
Initiative
BP9. Maximize
value of existing
generation
assets
Palo Alto owns significant supply resource assets including a portion of the
Calaveras Hydroelectric Project, a contract with the Western Area Power
Administration, a permanent allocation of water from the regional water
system managed by San Francisco, and allocated capacity on a gas
transportation pipeline. We will seek out both daily and operational and
long‐term opportunities to optimize the value of these assets to enhance
revenue and/or to reduce costs. We will work with joint‐owners of our
resource assets to leverage those resources and advocate to maintain or
improve the value of existing resources into the future (LEAP and GULP
strategies).
Value harvested
from Redwood gas
pipeline capacity
100%
BP10. Manage
implementation
of strategic plan
Completing the strategic plan is only the beginning of getting value from the
strategic planning process. Ongoing management of the strategies and
initiatives and reporting on progress of those initiatives is essential to
achieving positive results from the strategy. We will report to the UAC and
Council on this plan’s progress twice annually and we will review and revise
the objectives and develop new initiatives on an annual basis.
Number of strategic
initiatives completed
100%
Environmental Sustainability
BP11. Increase
the
environmental
sustainability of
all Utilities
activities
Adding sustainable resources to the supply portfolios will help the City meet
its Climate Protection Plan goals by reducing the carbon footprint of the
utility services provided to our customers. We will achieve this by acquiring
renewable resources and promoting the development of local renewable
resources within the rate objectives in the Long‐term Electric Acquisition
Plan (LEAP). Sustainable practices will be pursued not just for the supply
portfolios, but across all the Utilities day‐to‐day operations.
Meet the state’s
20% per capita water
use reduction by
2020 target
20% by 2020
Complete EIR and
financial plan for
expanding
recycled water
system
BP12. Promote
efficient use of
resources
Resource efficiency programs meet our customers’ desire for environmental
solutions that save money as well as contributing towards the Climate
Protection Plan goals. We will promote resource efficiency by dedicating the
tactical staffing and budgetary resources necessary to reach maximum
Actual electric
energy efficiency
achievement
At least as high as
goals Council set in
December 2012
Include all cost
effective water
efficiency
measures in 2015
Utilities Strategic Plan – Strategic Objectives
Approved by Council July 18, 2011 (Staff Report 1880)
Updated by Council August 5, 2013 (Staff Report 3950)
Updated by Council May 11, 2015 (Staff Report 5709)
7
Strategic
Objective
Objective Statement Performance
Measure
2015 Target Strategic
Initiative
deployment of economically feasible resource efficiency. We will revise and
document our long‐term efficiency strategies by updating our 10‐year
Energy Efficiency goals every three years and updating our water efficiency
goals every five years in the Urban Water Management Plan. To maximize
the savings potential for new development, coordinate with the City’s
Economic Development Manager to ensure that new developments
incorporate energy saving features in the design phase.
Actual gas energy
efficiency
achievement
At least as high as
goals Council set in
December 2012
Urban Water
Management Plan
(UWMP).
People and Technology Perspective
PT1. Be an
attractive place
to work
We will create a positive values‐based work environment which attracts and
retains qualified staff. To achieve this objective we will try to better
understand employees desires and incentives, and will articulate our values
both internally and as we recruit.
Employee
satisfaction rating
Improvement
from prior year’s
level
PT2. Obtain,
develop and
train employees
to ensure an
adequate and
qualified
workforce
A properly sized, trained and certified workforce is essential to our
effectiveness. We will identify skill and staffing gaps at the individual and
organizational levels and seek to fill those gaps through the effective use of
opportunities including hiring, mentorship programs, role rotations,
knowledge transfer opportunities, long‐term developmental assignments
and both internal and external training opportunities. We will plan for
workforce succession and provide cross‐training opportunities for
employees to improve employee satisfaction and build a more robust work
force.
Percentage of
operations personnel
that has appropriate
certification and
training required for
working in all areas
they may be
assigned
100% Update the 5‐year
succession plan
for each division.
PT3. Ensure
employees have
adequate tools
to perform job
duties
As major users of technology assets, we must have access to quality and
timely delivered IT services. We must build and maintain an effective
relationship with the City’s IT division that includes clear, frequent
communication as well as productive coordination. We will collaborate with
IT to identify barriers to providing support for technology projects and
remove them. In those instances in which our immediate technology needs
cannot be addressed by the City’s IT division in a timely or sufficiently‐
comprehensive fashion, we will utilize external expertise.
Employees have
adequate tools and
training to perform
their jobs
100% of
employees
Develop a
Utilities‐specific
smart grid and IT
strategic plan.
Utilities Strategic Plan – Strategic Objectives
Approved by Council July 18, 2011 (Staff Report 1880)
Updated by Council August 5, 2013 (Staff Report 3950)
Updated by Council May 11, 2015 (Staff Report 5709)
8
Strategic
Objective
Objective Statement Performance
Measure
2015 Target Strategic
Initiative
PT4. Investigate
and adopt
innovative
technologies
Our customers value Utilities embracing new technologies that will help
reduce costs and/or meet Climate Protection Plan goals. We will innovate
by researching technologies and cultivating relationships with entrepreneurs
and academics to identify new cost‐effective and environmentally
sustainable technologies to consider adopting. New technologies, programs,
and projects identified in the smart grid strategic plan will be implemented.
Number of new
technologies
evaluated per year
by an in‐depth study
or pilot project
Three
Financial Perspective
F1. Maintain
financial
strength
Maintaining a high credit rating reduces the cost of borrowing if needed for
capital projects. We will continue best practices for financial management,
adhere to energy risk management policies and guidelines to minimize
financial risk, and maintain sufficient reserves to cover debt obligations as
required to retain CPAU’s current favorable bond rating so that the cost of
capital is low for any bond funded capital projects.
Credit rating At least AA as
determined by
Fitch Ratings or
Standard and
Poor’s or at least
Aa3 as determined
by Moody’s
F2. Maintain
adequate
reserves
Maintaining adequate cash reserves contributes to maintaining our overall
financial health and retaining our current favorable bond rating. We will
maintain Rate Stabilization Reserves levels within Council‐approved
guidelines and sufficient to provide rate stability as desired by ratepayers.
During the annual budget and rate setting process, the risks that each
Utilities fund is exposed to will be identified along with the trajectory of
costs and revenues to allow Council to determine appropriate reserve levels
and rate adjustments.
Operations Reserve
levels
Within guidelines
in Council‐adopted
long‐term
Financial Plans
Utilities Strategic Plan – Strategic Objectives
Approved by Council July 18, 2011 (Staff Report 1880)
Updated by Council August 5, 2013 (Staff Report 3950)
Updated by Council May 11, 2015 (Staff Report 5709)
9
Strategic
Objective
Objective Statement Performance
Measure
2015 Target Strategic
Initiative
F3. Implement
rate structures
that balance cost
of service and
resource
conservation
Retail rates should be designed so that the revenues from a customer group
match the cost to serve those customers. Rates consist of fixed charges and
volumetric charges, which are based on usage. Fixed costs consist of
customer‐related costs (meter reading, billing, etc.) and costs related to
capital projects and operations while variable costs include the cost of
buying supplies (water, gas, or electricity). When fixed costs are recovered
through charges based on usage, costs will not be recovered if customers
reduce usage more than projected. To address this problem we will
examine alternate rate structures that strike a balance between the two
competing objectives (cost of service and resource efficiency) to ensure that
certain fixed costs are recovered with a fixed charge, but other costs are
recovered with charges that vary depending on usage (volumetric charges).
Complete Electric
cost of service
analysis (COSA) by
end of CY 2015.
10
Maintain adequate
reservesMaintain financial
strength
Implement rate structures that balance cost of
service and resource conservation
Fi
n
a
n
c
i
a
l
Re
s
o
u
r
c
e
s
Pe
o
p
l
e
a
n
d
Te
c
h
n
o
l
o
g
y
Be an attractive
place to work
Obtain, develop and train
employees to ensure an
adequate and qualified workforce
Ensure employees have
adequate tools to
perform job duties
Values: Honesty and Integrity Teamwork Accountability Quality of Service
“Be responsive to all
my Utilities services-
related needs”
“I receive safe and
reliable service”
“I expect to pay a
reasonable bill”
“Care for our
environment”
Vision: We Deliver Extraordinary Value to Our Customers
Strategic Destination: We will earn the high satisfaction of our customers with our cost-
competitive provision of safe, reliable and environmentally sustainable utility services
Cu
s
t
o
m
e
r
Operate the
Utilities systems
safely
Reliability and Safety Customer Service
Excellence
Manage Cost Environmental
Sustainability
Serve customers
promptly and
completely
Offer programs to meet
the needs of customers
and the community
Communicate clearly and
proactively with all our
stakeholders
Negotiate supply contracts
to minimize financial risk
Reduce cost of delivering
service through best
management practices
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
e
s
Increase the
environmental
sustainability of all
Utilities operations
Promote efficient
use of resources
Investigate and
adopt innovative
technologies
Ensure a reliable
supply of utility
resources
Replace infrastructure
before the end of its
useful life
Maximize value of existing
generation assets
Manage implementation
of strategic plan