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2018-05-02 Utilities Advisory Commission Agenda Packet
AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. 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 Special Meeting held on April 12, 2018 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. Staff Recommendation that the Utilities Advisory Commission Recommend that Action Council Accept the Utilities Smart Grid Assessment and Utilities Technology Implementation Plan, Including Advanced Metering Infrastructure-Based Smart Grid Systems to Serve Electricity, Water, and Natural Gas Utility Customers 2. Staff Recommendation that the Utilities Advisory Commission Recommend that Action the City Council Adopt the Proposed Operating and Capital Budgets for the Utilities Department for Fiscal Year 2019 3. Selection of Potential Topic(s) for Discussion at Future UAC Meeting Action NEXT SCHEDULED MEETING: June 6, 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)). Informational Report 12-Month Rolling Calendar Public Letter(s) to the UAC UTILITIES ADVISORY COMMISSION WEDNESDAY, MAY 2, 2018 – 4:00 P.M. – SPECIAL MEETING COUNCIL CHAMBERS Palo Alto City Hall – 250 Hamilton Avenue 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 9 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF APRIL 12, 2018 SPECIAL MEETING CALL TO ORDER Vice Chair Ballantine called the meeting of the Utilities Advisory Commission (UAC) to order at 7:00 p.m. Present: Chair Danaher (arrived at 7:02 p.m.), Vice Chair Ballantine, Commissioners Forssell, Johnston, Schwartz Absent: Commissioners Segal, Trumbull ORAL COMMUNICATIONS Beth Minor, City Clerk, announced recruitment is underway for positions on the Historic Resources Board and the Human Relations Commission. APPROVAL OF THE MINUTES Commissioner Johnston moved to approve the minutes from the March 7, 2018 regular meeting. Vice Chair Ballantine seconded the motion. The motion carried 5-0 with Chair Danaher, Vice Chair Ballantine, and Commissioners Forssell, Johnston, and Schwartz voting yes. AGENDA REVIEW AND REVISIONS None REPORTS FROM COMMISSIONER MEETINGS/EVENTS Commissioner Schwartz attended the second meeting of the low-income community solar working group. Although community solar was not the cheapest form of electricity, she continued to be impressed with the other reasons to do community solar, such as building familiarity among utility and emergency services staff of having local solar. The community engagement benefits were key, and it was worth discussing ideas such as including solar installations as part of public buildings on publicly owned land. She requested time to share ideas from the meeting during relevant UAC discussions. Vice Chair Ballantine reported on the discussions he and Commissioner Schwartz had with Utilities and Emergency Services staff to discuss resiliency from the emergency perspective. There was a productive exchange of ideas including a plan to create a workshop related to resiliency with some problems that could be presented for attendees to brainstorm. Commissioner Schwartz suggested inviting local corporations and entrepreneurs to attend the workshop as they could raise useful issues and ideas for discussion. She had found it very helpful to have direct conversations with staff on topics like resiliency. UTILITIES GENERAL MANAGER REPORT Ed Shikada, Utilities General Manager, delivered the General Manager’s Report. DRAFT Utilities Advisory Commission Minutes Approved on: Page 2 of 9 NCPA Expanding Relationships with Community Choice Aggregation (CCA) Providers: Northern California Power Agency (NCPA) recently won a contract to provide energy scheduling and related services to the City of San Jose’s newly formed Community Choice Aggregation (CCA) provider, San Jose Clean Energy. As more CCAs are formed throughout California, NCPA has successfully competed to provide these services to four of them, including large providers like East Bay Clean Energy. These contracts allow NCPA to use its existing power scheduling infrastructure to raise additional revenues to the benefit of its members. NCPA is on track to receive $1.8 million in revenue this year that directly offsets its $11.3 million power management budget, a 16% decrease that will reduce Palo Alto’s costs for power scheduling. This is one of several efforts underway in collaboration with our partners to contain electric utility costs for Palo Alto consumers. Utilities Strategic Plan: City Council approved the Utilities Strategic Plan on March 19. Thanks again to Commissioner Schwartz for her attendance at both the originally scheduled Council review date on February 26 as well as Council meeting on March 19. The Department is now moving into the implementation phase of the Strategic Plan. Our management team and core planning group will remain involved in the execution of the Strategic Direction and Priorities, engaging staff within the Department, as well as other stakeholders, for our collective success. We appreciate the input and guidance from the entire Commission throughout this process. Upcoming Events: (Details and registration are available at cityofpaloalto.org/workshops) • Great Race for Saving Water and Earth Day Festival: The fifth annual Great Race for Saving Water and Earth Day Festival is this Saturday, April 14, from 9 a.m. to 1 p.m. at the Palo Alto Baylands. We invite you to join us and other Bay Area organizations for a 5 kilometer run and walk and kids 1 kilometer fun run to celebrate healthy living, healthy communities, and a healthy environment. The day starts off at 9 a.m. at the Baylands Athletic Center with the Great Race for Saving Water 5K. The fun continues through 1 p.m. with an Earth Day Festival offering live music, food trucks, raffle drawings, electric vehicle (EV) ride & drive, nature activities, arts & crafts, community booths, environmental and public safety resources. More event information can be found at cityofpaloalto.org/earthday. • Electric Vehicle (EV) Ride and Drive at the Earth Day Festival with Acterra: The City is partnering with Acterra to offer the EV Ride and Drive at the Earth Day Festival on Saturday. At last year’s Earth Day Ride and Drive, 166 people test drove an EV! Studies show that 75% of people who drive an EV will likely consider making their next vehicle purchase electric. • Mini Sustainable Landscape Workshops at Earth Day Festival: We are also hosting mini workshops on sustainable landscaping at the Earth Day Festival in partnership with BAWSCA and Santa Cruz Permaculture. Topics include: Lawn Replacement 101, Permaculture, and Easy-to-Grow Native Plants. • Heat Pump Water Heater Workshop: Join us April 24 as we co-host a Heat Pump Water Heater (HPWH) workshop with Passive House California, inviting residents, manufacturers, other public agency representatives, and decarbonization groups to learn about the technology. • Municipal Services Center (MSC) Open House: Back by popular demand – the City is hosting an open house at the Municipal Services Center on May 12! As part of Public Service Employee Recognition week, which is May 6-12 this year, the City is hosting a series of activities to celebrate our employees and connection with the community. In addition to an employee appreciation picnic and service awards for staff, we are inviting the public to join us on Saturday, May 12, at the MSC for a behind- the-scenes look at the City services that keep our community running. The MSC will be open to the public from 9 a.m. to 1 p.m., with project demonstrations, displays, and fun activities from Utilities, Public Works, Facilities, Police, Fire, and Community Services. We invite the UAC to join us! Utilities Advisory Commission Minutes Approved on: Page 3 of 9 COMMISSIONER COMMENTS Commissioner Schwartz, after attending the recent Council meeting, thought a disconnect existed between Commissioners' and the City Council's priorities. The study session the UAC and Council had several months prior had clearly not surfaced these differences. For example, some Council members seemed more concerned about keeping Palo Alto’s rates competitive with other utilities, even if rates ended up not fully recovering costs, while the UAC had focused on raising rates to cover costs, with the understanding that in some cases the utility might not be as competitive. She requested guidance regarding ways to align the two viewpoints. Ed Shikada, Utilities General Manager, remarked that a question or topic posed in a joint study session may not contain sufficient specificity for the Council to provide a substantive response. Specific proposals elicit more thorough reactions from the Council. The Council's upcoming consideration of utility rates will be a good opportunity to obtain more specific information regarding the Council's viewpoint. He also suggested a UAC representative address the Council at pertinent meetings to convey the UAC's deliberations and areas of concern. UNFINISHED BUSINESS None NEW BUSINESS ITEM 1: ACTION: Staff recommendation that the Utilities Advisory Commission recommend the City Council adopt 1) a Resolution approving the Fiscal Year 2019 Electric Financial Plan, and 2) a Resolution increasing Electric Rates by 9% by amending the E-1, E-2, E-2-G, E-4, E-4-G, E-4 TOU, E-7, E-7-G, E-7 TOU, and E-14 Rate Schedules. Ed Shikada, Utilities General Manager, noted a revision in the proposed rate increase. Staff originally recommended a 9% rate increase but is now proposing a 6% rate increase. Erik Keniston, Senior Resource Planner, reported that the recommended rate increase for the Electric Utility is 6% in fiscal year 2019 followed by a 3% increase in fiscal year 2020 and a 2% increase in fiscal year 2021. With the recommended rate increase, revenue projections should match cost projections. Last year, staff projected a 7% rate increase. In the short term, staff is projecting a slight increase in Capital Improvement Program (CIP) expenditures related to one-time projects, but then costs decrease after 2021. Some of the capital investments are related to Smart Grid improvements. In current models, staff assumes funding for Smart Grid improvements will come from the Electric Special Projects Reserve Fund. The majority of the change in expenses between fiscal year 2016 and fiscal year 2022 is driven by the supply portfolio. Between fiscal year 2019 and fiscal year 2022, costs will be about the same overall. Supply reserves remain relatively healthy. At this time, staff projects a withdrawal from the Hydroelectric Stabilization Reserve Fund of approximately $1 million. If drought or a dry hydroelectric year occurs, having more money in the Reserve Fund will be critical to the financial health of the Electric Utility. In response to Chair Danaher's query asking whether the utility was receiving less hydroelectric power than expected, Jonathan Abendschein, Assistant Director of Resource Management, explained that March storms helped alleviate the dry year through February. The City will receive less than average hydroelectric generation, but it is not extremely low. Keniston continued his presentation. The Distribution Operations Reserve Fund was below the minimum guideline level in 2017, but staff will transfer funds so that the balance falls within guideline levels. The Supply Operations Reserve Fund should meet the target level during the forecast period. The Distribution Operations Reserve Fund is expected to remain at the target level. Utilities Advisory Commission Minutes Approved on: Page 4 of 9 In answer to Chair Danaher's question about reasons for the Supply Operations Reserve Fund rising and falling in 2018, 2019, and 2020, Keniston indicated it was a result of staff's proposed transfers of funds between supply and distribution reserve funds. In reply to Commissioner Johnston's inquiry regarding a way to spread the proposed rate increases over five years, Keniston advised that the 6% rate increase was needed to keep fund balances within guideline ranges given the cost projections. Even with the increase, staff planned to withdraw funds from the Electric Special Projects Reserve Fund as a temporary loan. Abendschein clarified that the Utility has only limited control over supply costs because they are influenced long term rather than year-to-year, so it was difficult to make short- term adjustments to reduce the rate increases. Costs could be controlled over the long term. For example, the Utility works with partner agencies to intervene in transmission cases, which can achieve significant savings. One short-term cost containment measure is Northern California Power Agency's (NCPA) recent refinancing of debt on the Calaveras resource. Palo Alto's share of that savings will be a few hundred thousand dollars. Noting the Commissioners comment on Silicon Valley Power having lower rates, he said that Silicon Valley Power, which is the City of Santa Clara's utility, has lower rates than Palo Alto because it ended its final coal contract in December, has an in-town gas plant on which there is little debt, and seeks data center and manufacturing customers. Shikada added that the location of the gas plant allows Santa Clara to avoid the transmission access charge. Chair Danaher proposed staff include reasons for the rate increase in the staff report to the Council. In response to his question regarding the cost of a bad drought year to the Utility, Keniston indicated the Utility could easily exhaust all funds in the Hydroelectric Stabilization Reserve Fund. Abendschein stated the estimated cost of a drought year is $8-$10 million. Chair Danaher did not believe the Utility has sufficient reserve fund balances to delay a rate increase. In reply to Commissioner Forssell's question about whether the hydroelectric rate adjuster would help the Utility in drought years, Abendschein reported the adjuster will be helpful. When reserve fund balances are low and the year is dry, the effective percentage increase for the rate adjuster is in the ballpark of 8%-10% on the bill. If the Council chooses to reduce reserve funds in order to spread rate increases over future years, the risk of going from no rate adjuster to a full rate adjuster in one year increases. Higher reserve balances would allow the rate adjuster to be implemented at a lower level (about 5% bill impact) in the first year and perhaps 10% in the second year. In response to Vice Chair Ballantine's question about the impact of the Cost of Service Study on the use of tiered rates, Keniston advised that one tier of rates was eliminated due to the Cost of Service Study. The existing tier structure will not change. ACTION: Vice Chair Ballantine moved to recommend the City Council adopt 1) a Resolution approving the Fiscal Year 2019 Electric Financial Plan, and 2) a Resolution increasing Electric Rates by 6% by amending the E-1, E-2, E-2-G, E-4, E-4-G, E-4 TOU, E-7, E-7-G, E-7 TOU, and E-14 Rate Schedules. Commissioner Johnston seconded the motion. The motion carried 5-0 with Chair Danaher, Vice Chair Ballantine, Commissioners Forssell, Johnston, and Schwartz voting yes. ITEM 2. ACTION: Staff recommendation that the Utilities Advisory Commission recommend that the City Council adopt 1) a Resolution approving the Fiscal Year 2019 Gas Utility Financial Plan, and 2) a Resolution increasing Gas Rates by 4% by amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed Natural Gas Service). Eric Keniston, Senior Resource Planner, reported staff recommends a 4% rate increase in fiscal year 2019 followed by increases of 8% and 7%. Again, a projected increase in capital investment costs drives the rate increase. Currently, gas supply is projected to remain relatively flat; although, the projection can change at any time. Gas supply and operations are expected to increase by approximately the rate of inflation. Over the long term, operations, distribution, and capital improvements are major cost drivers. Commodity costs Utilities Advisory Commission Minutes Approved on: Page 5 of 9 decreased overall between fiscal year 2013 and fiscal year 2022. The Operations Reserve Fund is projected to decrease. The proposed rate increases anticipate staff reducing the Rate Stabilization Reserve Fund to zero by fiscal year 2020. Costs for commodity, Cap-and-Trade, carbon neutrality, and transmission will continue to pass through to customers. Reserve funds are quite healthy at the current time; however, staff anticipates cost increases for capital spending will reduce reserve fund balances to the minimum guideline level in approximately 2022. Larger subsequent rate increases will be necessary to retain reserve fund balances at the minimum level. For the Operations Reserve Fund, the risk assessment level is slightly below the minimum guideline level, which is only $6 million. The change to most customers' bills will be about 4%. Palo Alto residential bill amounts during winter months are well below PG&E's bill amounts and slightly higher than PG&E's during summer months. Commercial bill amounts are about the same as PG&E's commercial bills. In answer to Commissioner Johnston's question regarding Tables 1 and 2 in the staff report about what parts of the bill were being increased, Keniston explained that staff increased the distribution component by 6% such that the net effect on the overall bill is 4%. The distribution component is not a pass-through cost. Distribution is comprised of all operations within the City system, maintenance of mains, and capital improvements for mains. Distribution is driving the overall increase in the short-term. The gas main replacement project will drive the increase in 2019, and meters compatible with advanced metering infrastructure (AMI) will drive the increase in 2020 and 2021. Ed Shikada, Utilities General Manager, reported the cost for the gas main replacement project is $7 million in fiscal year 2020 and beyond. Staff is beginning to explore the possibility of spreading the cost of AMI through debt financing. Commissioner Schwartz suggested staff frame the increase in terms of safety and emissions control and talk about the benefits of capital improvements rather than merely the projects. Staff should include in the staff report historical data refuting the concept that maintenance should be deferred to the future when costs will be less. In reply to Commissioner Forssell's query about the impact of higher-than-expected bids for capital improvement projects on the health of the Gas Utility if reserves declined, Keniston indicated staff would withdraw money from reserve funds to cover the increased costs if the utility received higher than expected bids. Currently, reserve funds can absorb higher-than-expected bids, but in later years it could result in a higher rate increase. In response to Chair Danaher's request for an explanation of the structure of the minimum and maximum reserve guidelines, why those guidelines were not increasing despite costs increasing, and of the elimination of the Rate Stabilization Reserve Fund, Keniston stated the minimum guideline level for the Operations Reserve is calculated as 60 days of operating and commodity expenses. The maximum guideline level is 120 days of operating and commodity expenses. The other reserve funds, like the Rate Stabilization Reserve, were used for specific purposes. Jonathan Abendschein, Assistant Director of Resource Management, clarified that most of the cost increases were related to capital improvement costs, which were not used to calculate the minimum and maximum guideline levels, and therefore the minimum and maximum guideline levels were not increasing significantly. In answer to Commissioner Forssell's asked a follow-up question, noting that operational costs were increasing at the rate of inflation and the guideline levels should increase. Abendschein explained that there were near-term one-time operational costs that increased the guideline levels in the near term. When those costs were removed from the budget in later years, it ended up offsetting inflationary increases for the purpose of guideline calculation. In answer to Chair Danaher's query about capital costs and the Operations Reserve Fund, Keniston advised that the Capital Improvement Program (CIP) budget covers capital costs. Dave Yuan, Strategic Business Manager, reported that staff doubled the budget for capital projects. Abendschein added that staff uses the Operations Reserve Fund for capital cost variances but ensures the balance remains within the guidelines. Utilities Advisory Commission Minutes Approved on: Page 6 of 9 ACTION: Commissioner Johnston moved to recommend the City Council adopt 1) a Resolution approving the Fiscal Year 2019 Gas Utility Financial Plan, and 2) a Resolution increasing Gas Rates by 4% by amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed Natural Gas Service). Vice Chair Ballantine seconded the motion. The motion carried 5-0 with Chair Danaher, Vice Chair Ballantine, and Commissioners Forssell, Johnston, and Schwartz voting yes. ITEM 3. DISCUSSION: Local Solar Plan Progress Update and Next Steps Sonika Choudhary, Resource Planner, reported on CPAU’s implementation efforts related to the Local Solar Plan (LSP) and sought commissioner’s feedback on revisiting the LSP goal and program priories. In 2014, the Council adopted the LSP, which integrated existing programs and set strategies to reduce soft costs and barriers to adoption of solar. In addition, the Council directed staff to consider new program initiatives such as the Community Solar Program, Solar Donations, and the Group Buy Program. Palo Alto has seen considerable local solar growth over past two decades. SB-1 in 2006 set a goal to install solar on 1 million roofs and required Palo Alto to provide $13 million in rebates over the next ten years. From 2006 to 2013, local solar development in Palo Alto was mainly incentivized through the PV Partners rebate program. In 2014, the LSP was developed when PV Partners rebate was about to be fully reserved. LSP guided staff to develop cost-effective local solar programs. Since the adoption of LSP, the Group Buy program has been offered for three consecutive years now. This program has been successful in providing clarity on the price of local solar through turnkey solution providers. Under the LSP guidance, staff also developed the Net Energy Metering Successor Program (NEM 2). CPAU is one of the first utilities in the state to provide compensation to solar customers based on the value of solar and not to provide a 100% retail offset. Other new programs envisioned under the LSP, such as the Community Solar program, are still in the evaluation phase. Staff is not considering a new Solar Donation program, given the challenge of finding a suitable nonprofit. If all significant solar projects in the pipeline in 2018 were constructed, over 2% of Palo Alto's energy would come from local solar. However, given current projections for 2023, CPAU likely will not achieve the 4% goal of the LSP. Choudhary further discussed two alternatives to revisit the LSP 2023 goal and program priorities. Alternative 1 continues efforts to achieve the 4% goal by 2023 through new solar programs and attracting new customers. Alternative 2 directs staff to facilitate customers' conversion to solar, to revisit or discontinue program goals for local solar penetration, and to evaluate new solar programs within the Distributed Energy Resources (DER) framework. Commissioner Schwartz sought clarity on the source of the 4% goal. In response to Commissioner Schwartz's question, Monica Padilla, Senior Resource Planner, advised that the goal of 4% by 2023 was an acceleration of a forecast for achievements by 2030. It was suggested by the community advocates at the time of developing the LSP. Commissioner Schwartz questioned the lack of enthusiasm for rooftop solar in comparison to electric vehicles (EV). Vice Chair Ballantine did not understand how the LSP makes delivering utility service to customers more reliable or more carbon neutral. In contrast, everyone understands the benefit of driving an EV. Commissioner Schwartz suggested fewer people may be willing to be green than expected. Choudhary indicated staff directs customers to energy efficiency and electrification programs when residents contact staff about solar. Vice Chair Ballantine remarked that endorsing LSP programs is effectively deciding that solar panels should be located inside the City instead of in a large solar farm because residents want higher rates. He much preferred Alternative 2. Choudhary explained that local solar helps hedge against increasing transmission access charges in the future. Vice Chair Ballantine noted the last time the UAC discussed local solar, it was still more expensive than transmission charges. Jonathan Abendschein, Assistant Director for Resource Management, indicated the City set its rates so that it is indifferent to people putting solar on the roof. The potential driver of increased costs and, therefore rates is the amount of staff time spent on promoting a program to achieve the 4% goal by 2023 rather than the cost of the energy. Staff works on programs that customers want because that enhances the public's perception of the City as a trusted advisor regarding energy use. Utilities Advisory Commission Minutes Approved on: Page 7 of 9 Commissioner Schwartz suggested coincident and non-coincident supply and demand be considered in whichever alternative is chosen. With Alternative 2, programs can be placed in the context of providing a benefit to the entire community. In answer to Commissioner Johnston's question of why local solar does not provide the benefits of local generation, Vice Chair Ballantine explained the problem of the conventional solar inverter, which is a grid-tie only solar inverter. There is a way to make such an inverter act in a standalone fashion, but it is awkward. By adding energy storage to solar, solar can stand alone. Commissioner Johnston commented that given the way local solar generation would tie into the grid, the only benefit from local generation is reduced transmission charges. Choudhary reported that storage is needed for solar to operate when the grid is down. Commissioner Forssell felt the LSP goal was adopted from a desire to do the right thing and to be green. The 4% goal was laudable in 2014, but so much has been learned since 2014. Now, the aspirational goal for a program is sustainability and resiliency. She too favored Alternative 2. Hopefully staff is hearing the UAC's interest in a new aspirational policy direction that incorporates storage with solar. Chair Danaher suggested staff revisit the 4% goal and quantify different choices in terms of the amount of staff time devoted to the program. Commissioner Schwartz commented that developing community solar microgrid applications that work in an emergency would be something to explore. Chair Danaher thought the UAC supported Alternative 2. ACTION: No action ITEM 4. DISCUSSION: Assessment of CPAU's Distribution System to Integrate Distributed Energy Resources Sonika Choudhary, Resource Planner, reported in November the UAC heard strategies for developing a Distributed Energy Resource (DER) Plan, which will inform integrated resource planning. The purpose of this item is to share results of the system assessment and understand potential system capabilities, constraints, and mitigations. Benefits of well-integrated DERs include the potential for intentional islanding or creating a microgrid and peak shaving of the system or the potential for investment deferral. Challenges of integrated DERs include overloading of system components, voltage fluctuations, and protection issues. An integration capacity analysis has been conducted to understand how much the system can handle without needing any significant upgrades. Palo Alto receives power from the PG&E transmission line at the Colorado Power substation. From there, power is distributed to nine substations throughout the City. Ed Shikada, Utilities General Manager, announced Monica Padilla is retiring from the City and thanked her for 31 years of service to the City of Palo Alto. Choudhary continued, stating the system is designed with radial flow of power from high voltage to lower voltage to end customers. The main components of the system are substations, feeder lines, and local neighborhood distribution transformers. Larger components of the system are visible through the Supervisory Control and Data Acquisition (SCADA) monitoring system. Smaller components include distribution transformers and end meters, which are not visible because the City does not have advanced metering infrastructure (AMI). The peak load is close to 200 MW, and commercial customers consume 80% of energy sales. Most DERs come from the customer side and have the potential to interfere with the radial flow of electricity from high voltage to low voltage. Choudhary shared an illustrative CPAU system peak day load profile in 2030, where the system peaks between 3:00 and 5:00 p.m. in the summer time mainly dominated by commercial customers energy use. Staff is assuming a typical generation profile of local solar occurring from 10:00 a.m. to 5:00 p.m.; the electric Utilities Advisory Commission Minutes Approved on: Page 8 of 9 vehicle (EV) peak occurring during the night with some usage during the day for workplace charging; and the energy efficiency impact reflected in the system throughout the day. Some technologies (such as Demand Response and Energy Storage) are being dispatched in the middle of the day to decrease the peak load. Overall, the cumulative impact of DERs is to flatten the load profile at the system level. However, the impact of DERs will look different for the sub-components of the system. In residential neighborhoods, staff anticipates a 30% load increase by 2030 mainly driven by EV growth. Vice Chair Ballantine asked what assumptions for EVs staff has assumed for these projections. Choudhary replied that Palo Alto residents owned almost 3,000 EVs at the end of 2017. Staff expects the number of EVs will almost double to 5,000 or 6,000 by 2020, depending on when long-range EVs become available. By 2030, staff expects 40% of residential customers will own EVs and almost an equal number of commuters will use EVs to travel into Palo Alto. Another assumption is a majority of EV charging occurs at home. In reply to Vice Chair Ballantine's query regarding whether staff’s models differentiated between today's plug-in hybrid EV and the future long-range EV, Choudhary indicated the current model is too simplistic to differentiate the two. In response to Commissioner Schwartz's inquiry into the small amount of capacity projected to be needed for commuters driving EVs into Palo Alto, Choudhary explained that the assumption is that charging for incoming commuters will be part of the commercial load. Because commercial customers consume 80% of energy sales, the impact of EVs in addition to commercial consumption will be small. Vice Chair Ballantine voiced concern that the model does not adequately account for the size of EV batteries and the potential impact of simultaneous charging of EVs. He described a situation in which several neighbors returned home from a long road trip and tried to charge their high-range vehicles simultaneously overnight, creating an unusually large impact on the system. Jimmy Pachikara, Senior Electrical Engineer, disclosed that there is load diversity and load factor with EV charging similar to other home appliances. The connected load may be X watts, but a load factor is applied because the charger will not run constantly. Vice Chair Ballantine stated a heavier battery may require charging less often but for a longer time. Again, he was worried that the model does not accurately consider these variables in usage patterns. Choudhary described that larger components of CPAU’s system, such as substation transformers, are designed to operate at 50% of the rated capacity, and have room to accommodate unusual spikes in usage. However, neighborhood distribution transformers are most vulnerable to increased electrification load growth. The electric Utility is currently conducting case-by-case upgrades. One mitigation option is installing more pole- top transformers so that one 25 kVA transformer serves three to four homes rather than eight homes. Another option could be managed or intelligent charging so that neighborhood distribution transformers do not peak at the same time. Vice Chair Ballantine liked the idea of building in sufficient capacity in neighborhood distribution to handle increased load in the future. Jonathan Abendschein, Assistant Director for Resource Management, agreed it was important to consider the impact of unusual situations in addition to routine situations. Shikada related one neighborhood's preference for not increasing transformer capacity proactively if increased capacity means the transformers would have to be located above ground with the attendant aesthetic impacts. Commissioner Schwartz remarked that predictive analytics could be useful in determining the likely locations of EV concentrations. Choudhary reported that next steps include a study of distribution transformers, consideration of aesthetic impacts, review of fees charged for home upgrades, and exploration of smart inverter capabilities. Utilities Advisory Commission Minutes Approved on: Page 9 of 9 ITEM 5. ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting Commissioner Johnston requested a future agenda item for the Cool Block Program. Ed Shikada, Utilities General Manager, noted the budget will be a topic of discussion for the UAC. The May meeting will begin at 4:00 p.m. Chair Danaher advised Commissioners that the July and August meetings will be combined into one meeting, which will likely be scheduled in July. Dean Batchelor, Chief Operating Officer, reported the City Attorney's Office is reviewing the Request for Proposals (RFP) regarding Fiber to the Premises. Staff will provide Commissioners a copy when the RFP is ready for release. The next meeting is scheduled for May 2, 2018. Meeting adjourned at 9:08 p.m. Respectfully Submitted, Marites Ward City of Palo Alto Utilities Page 1 of 17 1 MEMORANDUM TO: UTILITIES ADVISORY COMMISSION FROM: UTILTIES DEPARTMENT DATE: May 2, 2018 SUBJECT: Staff Recommendation that the Utilities Advisory Commission Recommend that Council Accept the Utilities Smart Grid Assessment and Utilities Technology Implementation Plan, Including Advanced Metering Infrastructure- Based Smart Grid Systems to Serve Electricity, Water, and Natural Gas Utility Customers RECOMMENDATION Staff requests that the Utilities Advisory Commission (UAC) recommend that the City Council accept the Utilities Smart Grid Assessment and Utilities Technology Implementation Plan (Utilities Technology Plan), including the timeline and resources for the implementation of an Advanced Metering Infrastructure (AMI)-based smart grid system to more effectively serve electricity, natural gas and water utility customers. EXECUTIVE SUMMARY City of Palo Alto Utilities Department (CPAU) staff, along with consultants, developed a strategic technology roadmap over a five-year horizon and identified major critical technology investments such as a replacement for the utilities customer information and billing system (CIS), deployment of AMI, and in coordination with the City’s IT department, the implementation of a new citywide enterprise resource planning system (ERP). All of these projects require significant planning, financial and staffing resources and system integration. To ensure a successful AMI deployment, the new CIS system must be stable before integrating with the AMI system. The Utilities Technology Implementation Plan sets out a coordinated implementation approach for these projects. AMI is a foundational technology that will improve customer experience and enable CPAU to operate more effectively, and is becoming a standard in the utilities industry. An AMI-based smart grid system will empower customers to more efficiently utilize utility supplies, facilitate customer adoption of distributed energy resources (DER) such as solar photovoltaics (PV) and electric vehicles (EV), and enable more efficient detection of water leaks. AMI will also enable CPAU to optimize operations and improve reliability by reducing time to restore outages. Given the large investments required to implement an AMI system, a cost-benefit analysis was undertaken to determine financial viability of AMI, and assess staffing requirements, technological dependencies, project risks, and CPAU’s operational readiness. Page 2 of 17 The consultant found that the overall net-present-value (NPV) of the investment over the 18- year life of the system was close to break-even,1 considering only the costs and benefits that can be quantified. This effectively means that there will be little or no impact on utility cost to customers over the 18-year life of the project. Upon including non-quantifiable benefits such as enhanced customer experience, improved system reliability, and better distribution asset utilization, the analysis suggests that this strategic investment would be a net benefit to all utility customers, particularly for the electricity and water utility customers. The estimated capital cost related to the AMI system installation is $16 to 18 million 2 with an investment life of 18 years. An additional $1.5 million to $2 million in internal staffing-related costs will also need to be allocated to implement the project. The evaluation also analyzed the operational impact and found that the investment will require a number of staffing changes to implement and maintain the AMI infrastructure to maximize the value of the investment. The annual operating cost of the AMI system is estimated to be $1.9 million, which would be offset by $3.3 million in benefits, resulting in the net benefit of $1.4 million per year on an ongoing basis. The allocation of the $19 million in initial capital and staffing costs among the three utility funds is expected to be as follows: Electric Fund ($10M), Water Fund ($5.5M) and Gas Fund ($3.5M). The Electric Special Projects (ESP) is available to fund the electric portion of the investment, which eliminates the need for rate changes in the Electric Fund. The Gas and Water Funds will cover the up-front costs from reserves rates, and may consider financing options as well to minimize rate impacts. Given the favorable results of the cost-benefit analysis, CPAU staff recommends proceeding with AMI and has included the capital costs of the new AMI system in the Electric, Gas, and Water Utility Financial Plans and the Proposed FY 2019 – FY 2023 Capital Budget. Operational costs (consultant costs and staffing requests) needed to begin work on the CIS, ERP, and AMI projects are included in the FY 2019 budget, and additional staffing to continue the project will be included in subsequent year budgets. Staffing and other operational needs in future years are forecasted in the Utilities Technology Implementation Plan and firm proposals will be submitted in future budget years. 1 See Figure 2. NPV is based on a discount rate of 3.5% over the 18-year life of the project. However, the NPV could range from negative $14.7 million to positive $7.8 million, depending on possible range of outcomes over the life of the project. The NPV value is highly sensitive to operational staffing synergies that could be achieved and customer energy/water conservation that could be spurred by the AMI investments. If such benefits are not achieved, the annual operational savings will diminish, but are still likely to be positive on an annual on-going basis. 2 This include costs to replace all utility customer electric meters, add radio modules on all existing natural gas and water meters, deploy a mesh network to communicate with the meters, integrate the AMI with CPAU’s Customer Information and Billing system (CIS), provide customers with access to hourly utility consumption patterns and enable customers to more efficiently use utility supplies. This investment will also enable CPAU to have visibility into the utility distribution system network to more optimally manage the system. It should be noted that the cost of replacing aging water and gas meters will continue under the ongoing capital improvement project for meter replacement, and is not included under the AMI budget, but efforts will be coordinated with the AMI project. Page 3 of 17 BACKGROUND In 2012, City of Palo Alto Utilities (CPAU) completed an assessment of smart grid applications based on AMI for Palo Alto. The study estimated the capital cost associated with AMI implementation for electric, natural gas and water utility services at $15 million to $20 million, and the cost-benefit assessments found the costs outweighed benefits over the 15 year to 20 year life of such an investment. Based on these findings, the study recommended, and City Council approved, deferring major investments in smart grid for several years until technologies mature and implementation costs decline. While deferring the investment, Council also approved a number of pilot scale smart grid projects to evaluate Palo Alto-specific applications (Staff Report 3330, 12/10/2012) at a cost of $0.45M over five years. In 2013, the Customer Connect pilot project provided electricity, natural gas and water AMI meters to 300 interested single family residential customers and provided time-of-use electric rates to interested customers, including electric vehicle owners. It also provided the capacity to monitor distribution system voltages. The pilot phase of the program ended in 2017 but staff is planning to maintain the program for current participants until full AMI deployment. A report summarizing the lessons learned and findings from the pilot was discussed with the UAC (UAC Report dated 09/06/2017). During the five year period, staff has also extensively engaged with other utilities that have deployed AMI and learned from their experiences. A CPAU staff team, with cross divisional participation, has also closely collaborated with industry experts and stakeholders to learn about the smart grid technologies and their applications in Palo Alto.3 To implement many of these applications, Palo Alto would need the foundational AMI system in place. DISCUSSION In May 2017, CPAU retained Utiliworks Consulting (UWC) as consultants to re-evaluate the cost and benefits associated with AMI investments and to develop an overarching technology roadmap including an implementation plan (Staff Report 7836, 5/8/2017). The Smart Grid Assessment & Utilities Technology Plan (Attachment A) is the result of the consultant’s efforts. The positive cost-benefit assessment presented in the plan is guiding staff’s recommendation to proceed with AMI investments and the roadmap in the plan will roughly guide staff’s activities and proposals to Council over the next five years. Staff is asking the UAC to recommend that Council accept this report and approve its use as a high-level roadmap for AMI-related activities over the next five years, with the understanding that various parts of the plan (such as budgets and staffing actions) would require separate and additional approval by Council at the appropriate time, with modification as needed. The financial and staffing impacts are summarized in the Resource Impact section. 3 Palo Alto is a member of Smart Electric Power Association, NCPA Smart Grid Group, Bay Area Water AMI Group, California Electric Transportation Coalition, Building Decarbonization Working group; and participates in forums hosted by EPRI, Emerging Technology Coordinating Council, CEC/EPIC forum, California Energy Storage Alliance, and regional conferences. Through CPAU’s Emerging Technology program and engagement through Stanford, staff also engages with technology vendors to find suitable opportunities for Palo Alto. Page 4 of 17 The content of the report is summarized in the following sections: A. Components of AMI Technology and Associated Capital Investment Cost B. AMI System Operating Benefits C. AMI System Operating Cost D. Summary of Cost-Benefit Analysis & Sensitivity Analysis of AMI Investment E. Policies and Procedures to Implement and Operate AMI based Utility System F. Coordinated Implementation with Technology Projects – Technology Roadmap G. Change Management & Staffing Resource Needs H. Community and UAC Input I. AMI Project Implementation/Operating Risks and Risk Mitigation Strategies A. Components of AMI Technology and Associated Capital Investment Cost Implementation of an AMI-based smart grid system will require a number of major components. These major components and their related costs are tabulated below. The total cost of the project is estimated at $18 million to $19 million, which includes costs related to equipment and software purchases, systems integration, contract services and internal staffing requirements. Table 1 lists these cost categories. All of these costs are included in the FY 2019 Proposed Capital Budget that extends through FY 2023. Table 1: Components of AMI Investment Cost (Equipment, Services, Staffing to Implement) AMI Components Purpose Cost ($M) Electric Meters & Installation To record electricity consumption and voltage at customer premises every 15 minutes and make consumption information available to customers the next day.4 $5.5 Radios, dials & installation to mount on existing water meters To record water meter consumption every hour and make consumption information available to customers the next day. $4.2 Radios & installation to mount on existing gas meters To record gas meter consumption every hour and make consumption information available to customers the next day. $2.3 Mesh network radios and meter head-end database Mesh radios to receive and transmit meter readings to the head-end database for storage $0.7 Meter data management System (MDMS) & Integration with billing and customer portal MDMS validates the 15-min interval consumption and voltage reads, estimates missing interval reads through a validation process, and stores the information in a database for utility billing and display on customer web portal $2.7 Meter Installation Services Approximately 73,000 meters and/or radios will be installed and provisioned by third party installers $0.4 4 Real time reads could be made available to customer via the meter’s Zigbee wireless radio, if customer owns a compatible in-home-display (IHD). Page 5 of 17 Project management and software integration services Professional AMI project management consultants would be hired to oversee software integration/testing and coordinate the implementation of the project $0.9 TOTAL COST OF EQUIPMENT AND PROJECT IMPLEMENTATION SERVICES $16.7 Internal CPAU staffing Cost 3-4 FTE staff needed over the 2-3 year period to plan and implement the project $1.5M to $2M ESTIMATED TOTAL PROJECT COST $18M to $19M The equipment and software components of the AMI system and their interfaces with the Meter Data Management (MDM) and CIS systems are illustrated in Figure 1. Figure 1: Illustration of AMI Mesh Network, MDM System, Interface with CIS/Billing System B. AMI System Operating Benefits Electric distribution systems are transitioning away from their original purpose of delivering energy from the utility to the customer. The new distribution system is evolving into a complex network that will allow integration of widely distributed energy generation, storage, and energy management systems owned by customers. The widespread adoption of DER systems 5 by 5 DERs are defined as distributed renewable generation resources such as solar photovoltaics (PV), energy efficiency (EE), energy storage (ES), electric vehicles (EV), and demand response (DR) technologies. The emphasis on customer DER adoption from the State level is because DERs as key enabling technologies to both lower greenhouse gas emissions (GHG) and to help electric grid reliability with increased penetration of intermittent Page 6 of 17 electricity consumers and the increasing reliance on intermittent renewable electric supply resources to lower greenhouse gases associated with the state’s electric supply are fundamentally transforming the way electric utilities operate. These changes will require the utility to implement time-dependent electric customer rates, provide more timely and relevant information to customer about electric consumption patterns, and to gain greater visibility of the electricity flows in the distribution system for reliable utility operations. In addition to meeting these needs of the electric customer and utility, an AMI system could also provide greater visibility of water and natural gas usage for customers. AMI sensors will enable faster detection and repair of water leaks, and provide tools for CPAU and customers to implement additional customer energy efficiency and conservation initiatives. If customers opt to participate in these initiatives, the commensurate reduction in consumption will lower CPAU’s costs to purchase electricity, natural gas and water supplies. Voltage sensing on the electric distribution feeders is estimated to result in 0.5% Conservation Voltage Reduction (CVR) related energy saving. Table 2 provides an estimate of AMI-related conservation savings based on estimates of customer participation after 5 years of AMI implementation. AMI will also largely eliminate the need for manual meter reading function6. The new technology will also largely eliminate the need for manual ‘check-reads’ currently undertaken in the event the manual read is incorrectly entered into the handheld meter reading device. The total AMI related operating benefits are estimated at $3.3 million/year in year 5 after installation. renewable energy supplies. Locally, CPAU considers energy efficiency and demand reduction as the highest priority resource and Palo Alto’s Sustainability and Climate Action Plan (S/CAP) also identified several DERs as key technologies for achieving the community’s greenhouse gas (GHG) emission reduction goals, particularly EVs, high- efficiency heat-pump water heaters (HPWH), and heat-pump space heaters (HPSH) which displace fossil fuel combustion. 6 CPAU is engaged with meter reading staff for them to train and transition to other roles with the City in the 2022 timeline. Page 7 of 17 Table 2: Listing of AMI Related Operating Benefit Estimates ($3.3 million/year) C. AMI System Operating Cost Incremental operating costs related to AMI investments are primarily related to new staffing roles needed to: a) monitor and maintain hardware/software associated with the wireless network established to read advanced meters, b) analyze and utilize the large amounts of data that will become available through the AMI system, and c) optimally operate the electric, gas and water distribution systems. These staffing and other O&M costs are estimated at $1.9 million per year, in year 5 after installation. Cost Category Key Assumptions(s)Annual Benefit (M$) Subtotal 95% reduction on staffing load $ 1.26 Subtotal 12.7% reduction on staffing load $ 0.35 Subtotal 0.5% CVR savings $ 0.47 Subtotal $ - Electric Conservation 0.5% conservation for residential customers, ramping up to 1.5% in 5 years; 0.25% for commercial customers $ 0.38 Water Conservation 1.00% conservation, ramping up to 2.5% in 5 years $ 0.55 Gas Conservation 1.00% conservation, ramping up to 2.0% in 5 years $ 0.26 Subtotal $ 1.19 Subtotal $ - Solar Meter Installation Cost Avoidance 100% reduction $ 0.02 Subtotal $ 0.02 GRAND Total $ 3.30 Asset Management Meter Reading Customer Service & Field Service Operations CVR Savings & Operations Improved Meter Accuracy Customer Conservation Savings & Avoided Purchase Cost Avoided CIP Page 8 of 17 Table 3: Listing of AMI Related Operating Cost ($1.9 million/year) D. Summary of Cost-Benefit Analysis & Sensitivity Analysis of AMI Investment The business case employs a net present value (NPV) analysis methodology to compare the costs with monetized benefits. The NPV approach translates planned annual capital investments, ongoing annual operations and maintenance expenditures, and ongoing annual benefits into today’s dollars. The analysis computed the net present value (NPV) associated with the AMI investment over an 18 year period and found the investment, based on the cost and benefit assumptions shown in Tables 2 and 3 and described in more detail in the consultant’s full report, to be near break- even over the life of the project. The analysis computed present value (PV) of operating cost and operating benefits over an 18 year period, and compared it with the initial capital cost, as shown in Table 4 below. The annual incremental operating cost in Year 5 after project completion was estimated at $ 1.9 million, and the corresponding PV of this cost over 18 years was estimated at $27 million. Similarly, the annual operating benefits associated with the AMI project were estimated at $3.3 million and PV over 18 years was estimated at $43.8 million. If these assumptions prove to be accurate, the resulting PV of net operating benefit of $16.8 million is close to the capital expenditure, making this project near breakeven on a NPV basis. This result is shown in Table 4 and illustrated in Figure 2. Cost Category Annual O&M Cost ($ Million) AMI Network Infrastructure, Software, and Professional Services $ 0.12 MDMS and Professional Services $ 0.23 Subtotal $ 0.34 Staffing $ 0.41 Subtotal $ 0.41 Staffing $ 0.41 Subtotal $ 0.41 Staffing $ 0.64 Subtotal $ 0.64 Staffing & Professional Services $ 0 Subtotal $ 0 GRAND Total $ 1.9 AMI Network, MDM Related Cost Electric Deployment/Maintenance Water Deployment/Maintenance Gas Deployment/Maintenance Conservation Voltage Reduction Page 9 of 17 Table 4: Summary Cost – Benefit Assessment for AMI Investment (NPV Analysis over 18 yrs) Figure 2: Present Value of Costs & Benefit of AMI Investment is Close to Break Even (PV over 18-years, $M) *staff cost to be shared by water and natural gas funds, but shown here as allocated to gas Financial Metric Base Case Results ($Million) [A] Capital Expenditure $ (16.74) [B] Annual Operational Expense - Year 5 $ (1.90) [C] Annual CPAU/Customer Operating Benefit - Year 5 $ 3.30 [D] Present Value of Operating Expenses (over 18 years) $ (27.08) [E] Present Value of Operatng Benefits (over 18 years) $ 43.83 [F] Net Present Value (over 18 years) ([F]=[A]+[D]+[E]) $ 0.01 Page 10 of 17 The NPV result of $0.01 million is dependent on numerous estimates7 made in the analysis, particularly those related to staffing levels required to operate the AMI system, operational savings related to reduced manual meter reading process, and incremental customer energy/water efficiency and conservations savings achieved. As illustrated in the table 5 the NPV could range from an adverse $14.7 million to favorable $7.8 million over 18 years depending on whether the operational savings and efficiency estimates are achieved over multiple years. The base case estimates staffing synergies are achieved and 100% of the conservation goals (~2% reduction in utility consumption reduction over 5 years) are achieved. Table 5: Sensitivity of NPV of AMI Investment ($M over 18 years) Besides offering the potential to provide operational and conservation savings, AMI is a strategic investment that is critical to meet customer expectations, enable new applications, and optimize utility operations. The following benefits were difficult to quantify and were not included in the financial model. Improved Customer Experience Improved Reliability Improved System Planning Capabilities Improved Asset Utilization Improved Water Resource Management Timely and Accurate Meter Reading New advanced retail rates Meter Right-Sizing Unauthorized Use and Tampering Detection Improved Safety and Reduced Workman’s Compensation Compliance with Future Legislative Requirements Potential Grants to implement AMI Overall, given the strategic nature of the investment, and including these intangible benefits, the analysis suggests that CPAU should plan, prepare and invest in an AMI based smart grid system. 7 This investment analysis related estimates include the following: discount rate (3.5%), life of project (18 years), operating cost increase (3%), operational savings increase (1%), customer water use conservation (2.5%), customer natural gas use conservation (2%), customer electricity use conservation (1.5% residential, 0.25% commercial), conservation voltage reduction related energy conservation (0.5%), meter reading related staffing reduction (5 to 6 FTE), AMI related staffing increase (3 to 4 FTE). These estimates were based on industry experience and Palo Alto specific situations. 50%100%150% Achieved ($7.8)$0.0 $7.8 Not Achieved ($14.7)($7.0)$0.8 Conservation Goals Achieved Staffing Synergy Status Page 11 of 17 E. Policies and Procedures to Implement and Operate AMI based Utility System Implementing AMI will impact many facets of the CPAU organization and customer interactions. In addition to early stage communication and feedback from CPAU staff and customers, operational policies and procedures must be evaluated and updated with UAC and Council input. A brief description of these operational areas and the corresponding sections under the current Rules and Regulations are listed below. 1. Discontinuance, Termination and Restoration of Service (RR 09): Need to include policy and procedure to remotely disconnect for electric meters. These policy changes will coincide with business process changes and the potential for allowing same-day and after-hours disconnects/reconnects. 2. Meter Reading (RR 10): CPAU will need to revisit the billing period of 27-33 days during re-engineering of business processes. If desired, this window can be condensed with AMI reads available daily. Also, abnormal conditions and bill estimation techniques may change with AMI/MDMS systems in place. CPAU must also consider whether the “Customer Reads Own Meter” Program will continue under AMI. New rules and fees related to customers who opt-out of the AMI meter installations on their premises will also have to be developed. In the event meter reads are not available over an extended period of time due to technology malfunction or cyberattack, an alternative customer billing process will also have to be defined. 3. Billing, Adjustments, and Payment of Bills (RR 11): Language related to theft needs to be reviewed and updated to accommodate AMI. Language related to water leaks at customer premises will have to be reviewed given that AMI has the ability to alert customers and CPAU about potential water leaks. 4. Meter Installation (RR 15). Sections related to meter seals, tampering, and meter testing will also have to be reviewed and updated. Some policies may not be fully defined until AMI systems are selected and business process re- engineering are completed. These exercises will help inform which direction the policies will shift. F. Coordinated Implementation with Technology Projects – Technology Roadmap The technology road map is about CPAU’s future technological capabilities and ensures that technology investments are aligned with CPAU’s strategic plan. It sets the expectations for deliverables, time frames for development, complexity of the system, and the level of integration required. Several large scale technology projects are expected to be implemented in the 2018-2022 period, namely CIS, ERP and AMI. Proper planning and coordinated execution is critical for the successful implementation and operation of these projects. Management focus is required to ensure projects are properly sequenced and sufficient expert resources are made available to effectively execute on projects. In addition to numerous CPAU and IT department Page 12 of 17 staff involvement, the AMI project is expected to outsource meter installation, system integration and project management services to industry experts in their respective areas. The current AMI implementation timeline, developed in coordination with CIS and ERP project implementation timeline, is shown below. • Develop AMI/MDM system specification & issue RFP to select vendor Fall 2018 • AMI/MDM system vendor selection and procurement Spring 2019 • MDM system implementation and integration with CIS completion Spring 2021 • AMI meter installation completion Summer 2022 • System Testing and Going Live with AMI based billing system Fall 2022 • Leverage AMI system to enable other utility and customer programs 2023+ Table 6 provides a coordinated timeline for implementing AMI, along with the CIS and ERP systems implementation. Table 6: Timelines for Coordinated Implementation of AMI, with CIS and ERP Systems Key: Q4-2017 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Energy Efficiency Program Optimization (EEO) (TBD) Technology Systems (Est. Capital Cost) Year 1 - 2018 Year 2 - 2019 Year 3 - 2020 OMS & AMI Integration Distribution System Optimization, CVR Customer Time-of- Use Rates Expansion New EE Programs, DR programs Utility Strategic Plan Development R e - a s s e s s m e n t P h a s e AMI/MDMS ProcurementAMI/MDMS System Spec Data Cleansing - field checks, master data clean-up CIS Stabilization Issue ERP RFP and Retain Vendor Implement New ERP HR Module Implement New ERP Finance Module Develop Technology Roadmap Note: Early selection of AMI vendor allows meter replacements to resume as planned, ahead of mass installation of AMI meters. Future Programs that are dependent on AMI Dates and $ TBD Integrate CIS to SAP & MUA Data Conversion: Create existing Customers in CIS Implement CIS + Integration with existing SAP/ERP systemCIS Design PhaseIssue CIS RFP and Retain Vendor 300 Home Customer Connect / TOU Rate Pilot Program - Maintenance Phase Full Deployment (by route/cycle) Improvement of Energy Efficiency Program Promotions based on new CIS/AMI - Planning and Pilots, on going Technology Deployment Advanced Metering Infrastructure (AMI) & Meter Data Management System (MDMS) ($17 to $19 M) Future ProjectIn Progress Alpha Phase AMI/MDMS Implementation Beta Phase AMI/MDMS Implementation Integrate MDMS to CIS, MUA, AMI Head End System (HES), OMS & GIS Enterprise Resource Planning (ERP) (UTL share $1 to $2 M) Customer Information System (CIS) ($4-5M) In Planning Flexible Billing & Payment Solution Year 5 - 2022Year 4 - 2021 ERP Design Phase Integrate new ERP with CIS Years 6+ Dependent on CIS Coordination Dependent on CIS/MUA Dependent on AMI Dependent on AMI Dependent on AMI Coordination Dependent on AMI Page 13 of 17 While the mechanics of AMI implementation well understood 8, staff is particularly aware of the workload and coordination challenges related to implementing three major technology projects within five years. The timeline presented would be evaluated by the end of CY 2018 as the CIS project implementation makes progress. G. Change Management & Staffing Resource Needs Since AMI will transform many facets of utility operations and impact the customer communication channel and utility customer programs, proper planning and communication must be undertaken within the organization and with the community. AMI involves advanced applications, complex system integrations, and new business processes. It could impact hundreds of business processes at CPAU and will require staff to perform new tasks and develop different skill sets. Utilities will need to make adjustments to its hiring and training programs to ensure proper staffing with the right knowledge to deploy and operate the AMI network. Communicating the changes and helping staff understand the value of the new system is critical to a successful AMI deployment. During the Utilities Strategic Planning (USP) engagement process in 2017, open conversations took place among staff members and the community which identified the need for an AMI system; hence, there is a high level awareness of the importance of AMI. CPAU and Human Resources have begun the process of identifying new training programs and evaluating alternate career path options within the organization for meter reading staff whose roles may largely be eliminated if AMI is implemented. The analysis also identified the need for new staffing roles. These 3-4 new staffing roles include an AMI system technician, a data analyst, an AMI infrastructure maintenance technician, a CVR program maintenance engineer/tech, and an AMI program manager. Several of these roles are part-time roles that can be combined with other existing roles. The new roles will evolve and be defined at various stages of the project. During the 2-3 year implementation and system stabilization phase, temporary staff will be hired in the Utilities Customer Service center to temporarily backfill customer service reps that will be assisting on the project. Utilities will seek UAC and Council approval for these new positions during the annual budget process. H. Community and UAC Input During the USP development process in 2017, many community members and UAC Commissioners expressed the need for CPAU to invest in an AMI system. The 2018 USP identified the implementation of an AMI system as a key strategy under the Technology Priority to “Invest in and utilize technology to enhance customer experience and maximize operational efficiency.” 8 CPAU’s consultant UWC has served as project manager on behalf of numerous utilities which have successfully implemented AMI. CPAU staff has also gained experience through the implementation of Palo Alto’s AMI pilot project and by learning from the experience of other utilities. Page 14 of 17 Staff presented the preliminary findings of UWC analysis at the November 1, 2017 UAC meeting9. The analysis concluded that AMI investment was essential for effective utility operations in the coming decade. In addition, the UAC Commissioners voted 5-1 to proceed with planning an AMI investment. This memo and accompanying consultant report seeks a formal recommendation from the UAC to Council to make the necessary investment to implement AMI. Upon formal approval by Council, staff will begin a concerted effort to engage CPAU staff and the community to identify and address any lingering concerns they may have regarding such investment and resulting changes. I. AMI Project Implementation/Operating Risks and Risk Mitigation Strategies AMI systems are well proven technologies. They have been operating successfully in most California-based utilities and throughout the United States for about a decade. Hence, with many vendors offering AMI system products, the operating reliability risk associated with AMI technology is relatively low. As of this assessment, 36 risks have been identified and categorized into 8 different types: budget, community, organizational change management, resources, schedule, scope, security, and technology. Each risk is assigned a risk impact (representing the potential impact of the risk, should the risk come to fruition) and a risk probability (representing the likelihood of the risk ever occurring during the course of the project), each of which is rated as “high”, “medium”, or “low”. The combination of these two vectors generates a risk map, illustrating the priority of said risk. Outlined below are five of the top Palo Alto-specific risks, along with the associated mitigation steps: 1. Upcoming technology projects, particularly the CIS project, may compete for resources with the AMI project. Ensure adequate planning and resources so that the AMI project implementation and integration with the CIS happens well after the implementation of the CIS and after the new CIS system begins stable operations. 2. Poor staff engagement and communication, and lack of focused change management plans; external stakeholder communication will also be paramount. Communication will be made key area of focus during implementation. 3. Ill-defined vendor contracts will lead to improper level of configuration or missing integration. Consultant assistance will be sought in this area to minimize the risk. 4. Poor system integration to existing and future utility IT applications such as GIS, CIS, ERP, Asset management, OMS, etc. Organizational requirements gathering, planning and procurement management will be key to mitigate this risk. Clear vision of project milestone and key performance indicators need to be developed and accepted within organization. 9 The preliminary analysis in November 2017 showed a NPV of negative $7 million. The updated analysis outlined here included additional efficiency/conservation benefits and synergies related to staffing AMI operations and maintenance, resulting in the NPV being estimated at $0.01 million. Currently this is the consultant’s and staff’s best estimate, within the uncertainty band outlined. Page 15 of 17 5. Lack of Council approved policies and protocols to effectively respond in the new technology environment. Examples include policies covering billing disruption, remote meter turn on/off, and mitigation of impacts caused by cyber-attacks. Ensure such policies are drafted with community input for Council approval. NEXT STEPS Upon UAC consideration and recommendation, staff will seek approval from Council. A tentative capital budget has been included in the FY19 budget for Council discussion and approval in June. The report would be brought for Council discussion in the summer. If approved, consultants would be retained to assist with AMI system procurement (2018-19) and AMI implementation (2020-22). RESOURCE IMPACT The costs of these investments have been included in the proposed FY 2019 Capital Budget (Project EL-11014, Smart Grid Installation). The funding and major activities for the five years are outlined below. AMI Budgets & Spending Timeline: A Pause in New Funding Needs in FY 2020 Assumed 10 Fiscal Year Funding Major Activities FY 2019 $1,000,000 Consultant assisted development of AMI/MDM system specifications in preparation for an RFP, issue RFP, sign contracts with MDM and AMI vendors for delivery in 2021 and 2022, respectively. In parallel, CIS implementation is beginning. FY 2020 $0 Smart grid implementation on hold pending completion of CIS implementation. Assuming no additional funding needed in FY 2020. Water meter replacement project will be undertaken. FY 2021 $3,000,000 MDMS system and AMI head-end software delivered; begin integration with CIS in January 2021. Alpha and Beta phase of testing with AMI meters. FY 2022 $10,000,000 AMI meters delivered and mass installation begins. Complete integration with CIS. FY 2023 $5,000,000 Complete meter installation, integrated system testing, go live. TOTAL $19,000,000 10 The schedule in Table 1 is based on the Technology Roadmap and assumes most funding is needed in FY 2021, FY 2022, and FY 2023. No additional funds would be needed in FY 2020 while CIS implementation is completed. The FY 2019 Capital Budget does not reflect this updated schedule, but it will be reflected in the FY 2020 Capital Budget. Page 16 of 17 The impact of these costs on each utility for the next 5 years is shown below.11 The cost responsibility for the water and gas utilities is implemented through scheduled fund transfers to the electric fund, where the capital funds are budgeted. While the Electric Special Projects (ESP) reserve is available to fund the electric portion of the investment, the Gas and Water Funds will have to cover their associated costs through reserves and rate adjustments. If the natural gas and water AMI investment funds are collected from retail rates in the short term, it may result in an adverse impact on customer retail rates. An alternate arrangement of funding the cost could be through an inter-fund loan from the ESP to the water and natural gas fund, with a loan repayment including interest over time. This alternate funding mechanism will be further investigated by staff and brought forward for UAC and Council consideration if feasible. During the implementation and system stabilization phase, project management support would be provided by a consultant with experience in managing AMI project implementations. Collaboration with Northern California Power Agency (NCPA) is also under consideration. The series of major IT projects (CIS, ERP, and AMI) will require extensive staff time over the five year implementation period. At the peak of the project, nine to twelve FTE may be dedicated to the project. About half of the staff members focusing on the project will be business analysts whose full-time job is to implement IT projects. This means that any other major IT efforts aside from the ERP, CIS, and AMI systems will be deferred. Other staff focused on the project will be drawn from various Divisions of the Utilities Department, such as Customer Service, Operations, and Engineering to manage aspects of the project specific to their area of expertise. To minimize service impacts in those Divisions, some temporary staff will be brought on using the capital project budget listed above to reduce the service impacts resulting from redirecting staff who normally do not focus on IT implementation. The project may also result in increases in overtime, deferral of discretionary projects (for example, lower priority process changes or significant new rate designs might be deferred), and there may occasionally be some service impacts, such as small increases in call times or meter replacement times. Service levels will be 11 Half of the common fixed costs of the project were allocated based on meter count, and the other half of the fixed costs were allocated to the electric utility, in recognition of the electric utility being the main driver for this investment. Based on the above allocation methodology, it is recommended that the $4.4 million in common cost related to project management, network installation and MDM/CIS integration be allocated to electricity, water and gas funds on a 70%, 14%, 16% basis respectively. Capital Budget Projections for AMI Project Electric Gas Water Total FY 2019 0.53 0.18 0.29 1.00 FY 2020 0.00 0.00 0.00 0.00 FY 2021 1.59 0.54 0.87 3.00 FY 2022 5.30 1.80 2.90 10.00 FY 2023 2.65 0.90 1.45 5.00 Total 10.07 3.42 5.51 19.00 Page 17 of 17 monitored, and if there are significant decreases in service quality, additional temporary staffing or consultant help would be used to reduce service impacts. Post-implementation, three to four new permanent roles would be needed to operate and leverage the AMI system. This additional headcount would be off-set by the reduction in meter reader staff headcount. CPAU and Human Resources have begun the process of identifying new training programs and evaluating alternate career path options within the organization for meter reading staff whose roles may largely be eliminated with AMI implementation. Upon implementation of all three projects, the expectation is that there will be a net of one to two position reductions – though the overall staffing cost is projected to be higher due to the higher skill levels needed to manage the AMI system. POLICY IMPLICATIONS The recommendation conforms with the 2018 Utilities Strategic Plan (USP) that has identified implementation of AMI system as a key strategy under USP Priority#2 to “Invest in and utilize technology to enhance customer experience and maximize operational efficiency.” A number of policies to implement and operate an AMI system must be considered and approved at a later time. Such policies and procedures include fees that CPAU may need to charge customers that opt not to allow the installation of advanced meters at their homes, a backup customer billing process in the event AMI meters are cannot be read remotely due to a cyber-attack or a communication network interruption, as well as ways of managing other potential AMI operating issues. ENVIRONMENTAL REVIEW The Utilities Advisory Commission’s recommendation to approve the investment in AMI system does not meet the definition of a project under Public Resources Code 21065; therefore, the California Environmental Quality Act (CEQA) review is not required. ATTACHMENTS •Attachment A: Smart Grid Assessment & Utilities Technology Plan - UWC Full Report •Attachment B: Excerpts of the UAC Meeting Discussions on November 1, 2017 PREPARED BY: TAHA FATTAH, Business Analyst SHIVA SWAMINATHAN, Senior Resource Planner DAVE YUAN, Utilities Strategic Business Manager REVIEWED BY: TOM AUZENNE, Assistant Director, Customer Support Services DEAN BATCHELOR, Utilities Chief Operating officer JONATHAN ABENDSCHEIN, Assistant Director, Resource Management APPROVED BY: _____________________________________ ED SHIKADA General Manager of Utilities Smart Grid Assessment & Utilities Technology Implementation Plan January 23, 2018 FINAL DRAFT ATTACHMENT A Page 2 of 84 © 2018 UtiliWorks Consulting, LLC Table of Contents Table of Contents ................................................................................................................................................................. 2 List of Tables ......................................................................................................................................................................... 4 List of Figures ........................................................................................................................................................................ 4 Executive Summary .................................................................................................................................... 5 Introduction ............................................................................................................................................... 7 1. Purpose ......................................................................................................................................................................... 7 2. Utility Background ...................................................................................................................................................... 7 3. Scope of Work.............................................................................................................................................................. 9 Discovery Findings ..................................................................................................................................... 10 1. Goals & Objectives ................................................................................................................................................... 10 A. City of Palo Alto Utilities Strategic Plan ............................................................................................................ 10 B. Departmental Visions and Strategies ....................................................................................................................... 11 C. Sustainability & Climate Action Plan (SCAP) Goals .......................................................................................... 12 D. City IT Vision .......................................................................................................................................................... 12 2. Risks and Mitigation .................................................................................................................................................. 12 3. Current State Operational Review ......................................................................................................................... 13 Utilities Technology Roadmap ................................................................................................................... 15 1. Technology Maturity at CPAU ................................................................................................................................. 15 2. IT System Gap Analysis and Planning .................................................................................................................... 16 A. Customer Information System and AMI Project Coordination ........................................................................ 16 B. Systems Integration ............................................................................................................................................... 16 C. Data Communications ........................................................................................................................................... 17 D. Enterprise Service Bus .......................................................................................................................................... 18 E. Utilities IT Team .................................................................................................................................................... 18 F. Information and Cyber Security .......................................................................................................................... 18 G. Planning for Technology Obsolescence .............................................................................................................. 20 3. Utilities Technology Roadmap ................................................................................................................................ 21 Cost-Benefit .............................................................................................................................................. 23 1. Results ........................................................................................................................................................................ 23 A. Sensitivity ............................................................................................................................................................... 25 2. Assumptions ............................................................................................................................................................... 26 3. Cost Estimate............................................................................................................................................................. 26 4. Benefits Estimate ...................................................................................................................................................... 29 5. Quantitative Benefits ............................................................................................................................................... 32 6. Qualitative Benefits.................................................................................................................................................. 33 Implementation Roadmap ........................................................................................................................ 35 1. Project Phasing – Scope & Schedule ...................................................................................................................... 35 A. AMI Proof of Concept ............................................................................................................................................ 36 B. Full Deployment ..................................................................................................................................................... 37 2. Implementation-Readiness Gap Analysis .............................................................................................................. 38 Operational Impacts .................................................................................................................................. 40 1. Personnel / Human Resources ................................................................................................................................ 40 Page 3 of 84 © 2018 UtiliWorks Consulting, LLC 2. Business Process Re-Engineering ............................................................................................................................ 42 A. Impacted Core Business Processes ...................................................................................................................... 43 B. Policy Considerations ............................................................................................................................................ 44 3. Data / Information Processing and Reporting ...................................................................................................... 45 Change Management & Communications ................................................................................................. 46 1. Change Management ................................................................................................................................................ 46 2. Communications ........................................................................................................................................................ 47 Recommendations .................................................................................................................................... 48 1. Recommendations ..................................................................................................................................................... 48 Appendices ................................................................................................................................................ 49 Appendix A – Project Risk Register .............................................................................................................................. 49 Appendix B – Current State Operations ....................................................................................................................... 60 1. Meter Reading & Field Services .............................................................................................................................. 60 2. Billing .......................................................................................................................................................................... 60 3. Customer Service ...................................................................................................................................................... 61 4. Electric Meters/Meter Shop .................................................................................................................................... 61 5. Electric Operations ................................................................................................................................................... 62 6. Water Meters/Meter Shop ....................................................................................................................................... 62 7. Water Operations/Water Conservation ................................................................................................................. 63 8. Gas Meters/Meter Shop ............................................................................................................................................ 64 9. Gas Operations .......................................................................................................................................................... 64 10. IT Support/Systems .................................................................................................................................................. 65 Appendix C – IT Considerations for AMI/MDMS Procurement ................................................................................... 67 1. Security Assessment ................................................................................................................................................. 68 2. Disaster Recovery and Continuity .......................................................................................................................... 69 Appendix D – AMI Implementation Methodology ........................................................................................................ 70 Appendix E – Utility Operational Technology ............................................................................................................. 71 1. Advanced Metering Infrastructure ......................................................................................................................... 71 A. AMI System Details ................................................................................................................................................ 71 B. Meter Interface Units ............................................................................................................................................ 75 C. Data Collection Units and Backhaul ................................................................................................................... 78 2. Meter Data Management System ............................................................................................................................ 78 3. Volt/VAR Optimization............................................................................................................................................. 79 4. Water Leak Detection and Pressure Monitoring .................................................................................................. 80 Appendix F – Glossary .................................................................................................................................................... 83 Page 4 of 84 © 2018 UtiliWorks Consulting, LLC List of Tables Table 1: Major Utilities Technology Projects Planned and Capital Cost Estimates: 2018 -2022 ................................................ 6 Table 2: CPAU Divisional Objectives .................................................................................................................................................. 11 Table 3: Risk Map Matrix ...................................................................................................................................................................... 13 Table 4: Internal Factors ..................................................................................................................................................................... 15 Table 5: External Factors .................................................................................................................................................................... 16 Table 6: Estimated Major Technology Project Expenditures ......................................................................................................... 22 Table 7: Summary Base Case Results ................................................................................................................................................. 24 Table 8: NPV Sensitivity Matrix ($MM) ............................................................................................................................................... 25 Table 9: General Assumptions ............................................................................................................................................................ 26 Table 10: Project Cost Summary: Capital and Annual O&M Cost ................................................................................................. 27 Table 11: Cost Allocation by Service ($MM) ..................................................................................................................................... 28 Table 12: Annual Project Benefits Summary .................................................................................................................................... 29 Table 13: Implementation-Readiness Gap Analysis ......................................................................................................................... 39 Table 14: Palo Alto Staffing ................................................................................................................................................................ 42 Table 15: Electric Meters by Type ..................................................................................................................................................... 62 Table 16: Water Meter Types by Age ................................................................................................................................................. 63 Table 17: Gas Meter Types by Age ..................................................................................................................................................... 64 Table 18: IT/OT Systems...................................................................................................................................................................... 65 Table 19: Point-to-Multi Point vs. Mesh Network ............................................................................................................................ 75 Table 20: Glossary................................................................................................................................................................................. 83 List of Figures Figure 1: City of Palo Alto Utilities Organizational Chart ................................................................................................................ 8 Figure 2: AMI/MDMS Architecture ...................................................................................................................................................... 17 Figure 3: Cyber Security Life Cycle .................................................................................................................................................... 20 Figure 4: Utilities Technology Roadmap (Simplified) ..................................................................................................................... 22 Figure 5: Base Case AMI Cash Flow .................................................................................................................................................... 24 Figure 6: Base Case AMI Cost-Benefit ................................................................................................................................................ 25 Figure 7: Capital Outlay ....................................................................................................................................................................... 28 Figure 8: Cumulative Operating Expenses ........................................................................................................................................ 29 Figure 9: Cumulative Expenses and Benefits .................................................................................................................................... 32 Figure 10: AMI Deployment Plan ......................................................................................................................................................... 35 Figure 11: Change Management Approach ........................................................................................................................................ 46 Figure 12: Full View, Utilities Technology Roadmap ...................................................................................................................... 68 Figure 13: UtiliWorks Advantage ........................................................................................................................................................ 70 Figure 14: Sample AMI System Diagram (Point to Multipoint Network) ....................................................................................... 72 Figure 15: AMI Mesh Network Illustration ......................................................................................................................................... 74 Figure 16: Under-the-Glass AMI Electric Meter Bank ...................................................................................................................... 76 Figure 17: AMI Water Meter Pit Install .............................................................................................................................................. 76 Figure 18: Gas Meter and AMI MIU ..................................................................................................................................................... 77 Figure 19: AMI/MDMS Data Flow Diagram ......................................................................................................................................... 79 Figure 20: Illustration of VVO ............................................................................................................................................................. 80 Figure 21: Acoustic Leak Detection Technology .............................................................................................................................. 81 Figure 22: Water Burst Detection with Pressure Monitoring Technology .................................................................................... 82 Page 5 of 84 © 2018 UtiliWorks Consulting, LLC Executive Summary UtiliWorks Consulting, LLC (UWC, UtiliWorks) was engaged by the City of Palo Alto Utilities (CPAU, Utilities, City, Palo Alto) to evaluate the merits of investing in an Advanced Metering infrastructure (AMI) based smart grid system and to develop a comprehensive Utilities Technology Roadmap for a five- to ten-year horizon. AMI is a foundational technology that will enable the implementation many other customer programs to enhance customer experience, empower customers to more efficiently utilize utility supply, enable CPAU to operate more effectively and allow more advanced smart grid options to be considered. Given the large investment required to implement an AMI system, a cost-benefit analysis (CBA) was undertaken to determine financial viability and cash flow impacts on CPAU. Over a six-month period, UtiliWorks engaged with a cross-section of CPAU and IT staff to undertake discovery work around current state operations, and it reviewed several CPAU internal reports and a previous cost-benefit analysis performed in 2012. The new cost-benefit analysis presented in this report takes this information into consideration, includes flexibility to account for analysis of all three utility services, and further defines the system and business requirements for Palo Alto in line with the state of the utility industry in 2017. The analysis estimated the capital cost related to the AMI system installation and integration with the Billing System to be $16 to 18 million1. The investment is expected to have an 18-year life. The evaluation also analyzed the impact on the operational costs and found that the project will require many staff role changes and modification of organizational structure to maximize the value of the investment. The annual operating cost of the AMI system is estimated to be $1.9 million, but this increase in cost would be offset by $3.3 million in benefits, resulting in the net benefit of $1.4 million per year. Based on the assumptions employed in the analysis, the overall net-present-value (NPV) of the investment was found to be near to break-even over the 18-year life of the investment2. If one includes the non-quantifiable benefits such as improved customer experience, reliability, and better distribution asset utilization by CPAU, the strategic investment in AMI system appears to be prudent choice for Palo Alto at this time. In addition to the AMI investment, UtiliWorks also reviewed other Utilities technology projects that are in the planning phase or currently underway. It is clear from this assessment and resulting technology roadmap and implementation plan recommendations that staffing resources and budgets need to be carefully planned to successfully execute on these projects. The timelines and budget estimates for the major projects planned are outlined in Table 1: Major Utilities Technology Projects Planned and Capital Cost Estimates: 2018-2022. 1 This includes the cost to replace all utility customer electric meters, install radio modules on all natural gas and water me ters, deploy a mesh network to communicate with the meters, integrate the AMI system with CPAU’s Customer Information and Billing system (CIS), provide customers with access to hourly utility consumption patterns and enable programs for customers to more efficiently use utility resources. 2 NPV is based on a discount rate of 3.5% over the 18-year life of the project. The NPV value is highly sensitive to operational staffing synergies that could be achieved, as well as customer-side energy/water conservation that could be spurred by the AMI investments. If such benefits could not be achieved, the annual operational savings would diminish but still be positive on an on- going basis. The NPV value could range from negative $15 million to positive $8 million depending on the variability of the above assumptions. Page 6 of 84 © 2018 UtiliWorks Consulting, LLC Table 1: Major Utilities Technology Projects Planned and Capital Cost Estimates: 2018-2022 Project Est. Capital Cost Timeline Completion Date Upgrade Utility Customer Information Portal $100k Underway Fall 2018 Customer Information System (CIS) System Design and Implementation $4 to $5M Vendor selection 2018; implementation 2019-20 Fall 2020 AMI system implementation $16 to $18M Vendor selection 2019; implementation 2021-22 Fall 2022 Enterprise Resource Planning System (Finance and HR) $1 to $2M3 Vendor selection 2018; implementation 2019-22 2021-22 A detailed technology project roadmap and implementation plan is provided in Section F. Also refer to Section F for a suggested implementation timeline for AMI, which accounts for operational impacts of other CPAU technology projects and staffing requirements. After identifying 36 areas of project risk, five project risks rose to the top. These five risk areas need management focus to manage them to ensure project success. These risks are: 1) ongoing or upcoming infrastructure projects that may compete for resources; 2) poor staff engagement/communication and lack of focused change management plans/implementation; 3) ill-defined contracts that lead to improper levels of configuration or missed integrations; 4) poor system integration to existing and future applications (i.e. Geographic Information System (GIS), Enterprise Resource Planning (ERP), CIS, Asset Management); and 5) lack of Council-approved policies and protocols to effectively respond in a new technology environment (e.g. billing disrupted through a cyber-attack, cyber hack that results in remote-turn off of customer meter). For each of these risks, a mitigation and response strategy has been developed. Additional risks identified and respective mitigation measures are outlined in Appendix A. In addition to the Technology Roadmap outlined in Section D and cost-benefit analysis in Section E, UtiliWorks provides several related recommendations throughout the report. These recommendations are for CPAU to consider during implementation of AMI if the City Council decides to approve the investment. 3 The full cost of the ERP system replacement project is expected to cost $4 to $5 million; cost shown is the anticipated CPAU portion of the cost. Page 7 of 84 © 2018 UtiliWorks Consulting, LLC Introduction 1. Purpose CPAU requires a well-thought-out plan prior to implementing an AMI program that provides enhanced metering functionality and supports future distribution system applications. A strategic assessment is needed to identify which platforms may be worth pursuing, how existing systems and assets can best be utilized for the long term, which technologies offer a best fit with the utility’s footprint, and how to best develop a plan going forward. Palo Alto first completed a cost-benefit analysis of an AMI system in 2012, which resulted in consensus not to proceed with the technology investment at the time due to prohibitive costs and uncertainties of AMI technology; however, the consultant who completed the study recommended that CPAU deploy an AMI pilot system and revisit the cost-benefit analysis in later years. In the years following, an Elster AMI system for electricity, natural gas and water was deployed at 300 homes in Palo Alto’s service territory. CPAU contracted with UtiliWorks Consulting, LLC in May 2017 to develop a comprehensive Utilities Technology Roadmap and conduct a thorough assessment to refine, revise, and build upon the previously completed cost-benefit analysis, adding in flexibility to account for multiple service types, while further defining the system and business requirements at Palo Alto. The analysis and timeline for the AMI deployment contained within this assessment accounts for operational impacts of other Palo Alto technology projects, staffing requirements, and project risk-mitigation measures. The goal of this assessment is to provide Palo Alto with an updated cost-benefit assessment for the AMI investment; outline the quantitative and qualitative benefits that can be realized with an AMI program; and chart out the proposed implementation roadmap, which includes the impact of other projects on the Technology Roadmap on the AMI project. If the City decides to proceed with an AMI project, this foundation will prepare Palo Alto for the subsequent Advanced Metering Infrastructure/Meter Data Management (MDM) Systems Specifications & Procurement Phase (Phase 2). 2. Utility Background The City of Palo Alto is an incorporated city with a population of more than 64,000 residents, located in Santa Clara County. Palo Alto was incorporated in 1894 and formally established via municipal charter in 1909. In 1950, the city formed a council-manager government headed by the mayor, vice mayor, and seven council members. Today, as the economic center of Silicon Valley, Palo Alto is home to many high-profile technology headquarters and start-ups, as well as parts of Stanford University, placing it among the most affluent and most highly-educated municipalities in the country. The Utilities Department provides electric, water, and gas services to the city (except for some rural, outlying areas with over 30,000 electric connections, over 20,000 water connections, and over 24,000 gas connections across nearly 26 square miles. CPAU is managed by the General Manager of Utilities, at the discretion of the City Manager. Broadly, the organization is comprised of the following divisions: Operations, Engineering, Customer Support Services, Resource Management and Administration. CPAU employs over 240 full-time equivalent staff across these divisions. A complete breakdown of Utilities by division and number of positions is illustrated in Figure 1: City of Palo Alto Utilities Organizational Chart. Page 8 of 84 © 2018 UtiliWorks Consulting, LLC Figure 1: City of Palo Alto Utilities Organizational Chart IT for the CPAU is managed by the City’s Information Technology Department, which contains shared resources and represents a source of strategic direction. Some Utilities applications have a system Page 9 of 84 © 2018 UtiliWorks Consulting, LLC owner designated from the Administration division. The current state of CPAU operations and a list of all IT applications at Palo Alto are provided in Appendix B. 3. Scope of Work Under the direction of the Professional Services Agreement executed on May 8, 2017, UtiliWorks has performed this Phase 1 assessment to baseline CPAU operations and assess readiness to successfully implement Advanced Metering Infrastructure and a Meter Data Management System. To further understand the context of an AMI (or Smart Grid) program relative to other CPAU technology projects, UtiliWorks developed a strategic Technology Roadmap and AMI implementation plan contained within this assessment report. The assessment report and associated cost-benefit analysis effectively provides CPAU management the information required to decide whether to proceed with the AMI Project. To effectively assess complex technology, UtiliWorks employs a proven delivery mechanism called the UtiliWorks Advantage™ detailed in Appendix D. Our assessment approach facilitates the identification of the business drivers motivating the effort to undertake an AMI project. It also identifies the critical success factors to support implementation and risks that could undermine success. The outcome of all Phase 1 tasks is reflected in this report and includes the following: State of the Industry – Personalized, onsite presentation outlining the current state of the AMI industry and discussing important design considerations unique to CPAU based on technology maturity within the organization. Discovery – Identification of the success factors, gaps, risks, and opportunities to be addressed to prepare for AMI. o Goals and objectives identification o Risk identification o Current state discovery and data collection o IT system gap analysis Utilities Technology Roadmap – Comprehensive view of CPAU technology project initiatives, including precedence and sequencing. Cost-Benefit – Provision of a current cost-benefit analysis underlying the AMI project, including water, gas and electric deployment. Operational Impacts – Identification and analysis of the key operational areas/functions that will be impacted so to minimize risk during and after deployment. AMI/MDMS Implementation Roadmap – Further detail on a proposed AMI/MDM project schedule, recommended project phasing, and staffing from Proof of Concept (POC) through full deployment and beyond. Final Recommendations – Summarized in the report and presented to the Utility Advisory Commission and City Council as required. If the Council elects to proceed with the project, Phase 2 tasks will involve development of AMI/MDM system specifications and procurement. Page 10 of 84 © 2018 UtiliWorks Consulting, LLC Discovery Findings 1. Goals & Objectives The Palo Alto City Council, Utility Advisory Council (UAC) and CPAU have been assessing smart grid technologies since 2009. To better understand the current drivers for re-considering AMI technology in 2017, UtiliWorks evaluated the city’s project goals and objectives from several perspectives. This approach involved a review of the CPAU Strategic Plan (in progress), Sustainability & Climate Action Plan (2016), and Utilities IT Systems Review (2014). During the discovery phase of this assessment, UtiliWorks obtained direct input from key stakeholders across the CPAU organization to identify project objectives specific to the AMI program from within the Utilities organization. Key goals from the report review and stakeholder discovery are summarized here. A. City of Palo Alto Utilities Strategic Plan CPAU’s strategic planning initiative in 2017 maintains the organization’s mission statement, but developed a new statement of strategic destination and four strategic priorities for 2018 as outlined below. Mission Statement The City of Palo Alto Utilities' mission is to provide safe, reliable, environmentally sustainable and cost- effective services. Strategic Destination 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. Strategic Priorities We must create a vibrant and competitive environment that attracts, retains, and invests in a skilled and engaged workforce. We must collaborate with internal teams and external stakeholders to achieve our shared objectives of enhanced communication, coordination, education and delivery of services. We must invest in and utilize technology to enhance the customer experience and maximize operational efficiency. We must manage our finances optimally and use resources efficiently to meet our customers’ service priorities. As outlined above, the strategic plan has identified “investments and utilization of technology to enhance the customer experience and operational efficiency” as one of four strategic priorities. In the 2014 Utility Technology Review, technology goals and drivers were identified as follows: Technology Goals and Drivers I. Enable Customer to optimally use Utility services and communicate effectively with the City II. Enable Workforce with IT tools to effectively perform on the job III. Utility Technology for operational optimization IV. Effectively manage and maintain assets for the Electric, Gas, Water, Wastewater utilities V. Effectively manage Utility financial/supply assets & optimize the CIS/ERP configuration to effectively serve customers VI. Design and manage business process optimally VII. Optimally manage energy efficiency and conservation programs; enable customers to reduce bills VIII. Utility Systems and Solutions governance optimization Page 11 of 84 © 2018 UtiliWorks Consulting, LLC B. Departmental Visions and Strategies In July 2017, UtiliWorks met with a wide range of utility stakeholders across the organization during the project kickoff meeting and onsite workshops to solicit Utilities IT and AMI project objectives and identify pain points. UtiliWorks presented to each department on key concepts and marketplace trends of AMI, how the functionality and the data might assist with their respective job, and asked that they provide their ideas of what defines project success. This list was categorized into how each objective was related to one of the eight overarching CPAU Technology Goals, as shown in Table 2: CPAU Divisional Objectives. UtiliWorks recommends that CPAU work to quantify and measure these objectives wherever possible, as the AMI project progresses toward deployment in 2020. Table 2: CPAU Divisional Objectives # Division Project Success Measure (Objective) Priority (Hi/Med/Lo) Related UTL Technology Goal 1 RMD Better understanding of customer consumption data by AMI to better tailor our programs (e.g. efficiency/conservation, DER/DR, electrification) to better serve our customers Hi (VII) 2 RMD Provide Virtual metering toolkit to assist with customer profiling, budget billing, analysis of EVs, PVs, energy storage, and meet CA net metering requirements. Hi (V) 3 RMD Insight into and alert thresholds for high consumption at city parks, customer water leakage detection (with option for remote shut-off for irrigation meters) Med (VII) 4 RMD Ability to implement retail rates in the billing system that can further influence customer utility usage patterns (e.g. TOU rates or CPP) Hi (I) 5 Elec Ops. /Eng. Improve service reliability with timely and accurate information (OMS) to respond to outages Hi (IV) 6 Elec Ops. /Eng. Incorporate information gained from AMI with distribution system design and operation (for switching and restoration, distribution transformer and line segment loading calculations). Hi (III) 7 WGW Ops. /Eng. Near real-time, interval data used for analysis, conservation enforcement, leak detection and overflow alerts Hi (VII) 8 WGW Ops. /Eng., CSS Meter tamper alerts Med (IV) 9 All Benefit/cost ratio of greater than 1.0 for AMI investments Hi (VI) 10 CCS, Admin Increased meter/billing accuracy Hi (VI) 11 CCS, Admin Instituting remote turn on/off Med (III) 12 CCS Less high bill complaints and reduction in phone calls Med (I) 13 CSS, EWWGW Ops. /Eng. Better equipment information and GIS locations for meters Hi (IV) 14 CSS, Admin Improved meter reading accuracy/efficiency (timely read) Hi (III) Page 12 of 84 © 2018 UtiliWorks Consulting, LLC 15 CSS, Admin Improved safety for meter reading and operations staff; reduction in workers compensation Med (VI) 16 CSS, Admin Improve meter to cash flow and improve cycle time from read to bill Hi (VI) 17 CSS, Admin Access to interval meter data to perform analytics for customers and staff (including leak detection) Hi (VII) C. Sustainability & Climate Action Plan (S/CAP) Goals The City envisions building the “Utility of the Future.” The foundation of such a program is a two-way communication system that supports an awareness and command/control capabilities for Utility assets in real time. AMI serves as the foundation to attain this vision. This assessment report provides an updated view of the marketplace for AMI and related programs, as well as an updated cost-benefit analysis, which will help CPAU to realize a key goal relevant from the City’s SCAP “Goal 8.1 Advance smart grid strategies.4” Gaining access to increased granularity of data will also help inform the other strategies outlined in Goal 1.2 (Evaluate and adapt the CPAU business model) and Goal 1.3 (Continue to advance carbon neutrality) from the SCAP. D. City IT Vision Goal 8.1 is closely tied to the more broadly defined, City IT Department vision, “To Build and Enable a Leading Smart and Digital City.5” While AMI can contribute to the goals that are discussed in this section, to achieve these goals significant planning and strong project governance/oversight are critical to success. This is discussed in more detail in Section F – Implementation Roadmap. 2. Risks and Mitigation Like any large-scale technology investment, the transition to AMI is not immediate and not without obstacles. The complexity involved with bridging multiple departments, integrating with a live billing system, and sustaining critical utility operations will no doubt lead to challenges. However, many project hurdles can be planned for and addressed as part of a proper risk management approach. As part of the City’s consideration for an AMI deployment, UtiliWorks commenced early identification, prioritization and development of mitigation strategies for risks that may be inherent to the project. To this end, a risk register has been developed that documents potential risks, respective priorities, and respective response strategies. For the purposes of planning, risks have been categorized into eight (8) distinct types: budget, community, organizational change management, resources, schedule, scope, security, and technology. Each risk is assigned a risk impact (representing the potential impact of the risk, should the risk be realized) and a risk probability (representing the likelihood of the risk ever occurring during the course of the project), each of which is rated as “high,” “medium,” or “low.” The confluence of these two vectors generates a risk map, illustrating the priority. The matrix used to generate the risk map is illustrated in Table 3: Risk Map Matrix, where green represents a low priority, yellow represents medium priority, and red represents a high priority. 4 City of Palo Alto: Sustainability and Climate Action Plan 2016 Framework, Nov. 2016. 5 http://www.cityofpaloalto.org/gov/depts/it/city_it_strategy.asp. Page 13 of 84 © 2018 UtiliWorks Consulting, LLC Risks can be addressed by one of four (4) responses: Accept - Acknowledging the existence of a particular risk and making a deliberate decision to accept it without engaging in special efforts to control it. Avoid - Adjusting program requirements or constraints to eliminate or reduce the risk). Mitigate - Implementing actions to minimize the impact or likelihood of the risk. Transfer - Reassigning organizational accountability, responsibility, and authority to another stakeholder willing to accept the risk. As of this assessment, 36 risks have been identified, including: 25 implementation phase risks, and 11 post-implementation phase risks. Of these risks, eight (8) are coded green, 18 are coded yellow, and ten (10) are coded red. Of the ten (10) risks coded red, CPAU has identified five (5) that warrant high- level consideration: Resources - Ongoing or upcoming infrastructure projects may compete for resources. Resources - Poor staff engagement/communication and lack of focused change management plans/implementation. Scope - Ill-defined contracts lead to improper level of configuration or missing integrations. Technology - Poor system integration to existing and future applications (i.e. GIS, ERP, CIS, Asset Management). Community - Lack of Council-approved policies and protocols to effectively respond in a new technology environment (e.g. billing disrupted through a cyber-attack, cyber hack that results in remote turn-off of customer meter). Mitigation strategies for each of the risks listed can be found in Appendix A, but specific actions have already taken place to mitigate these risks. For instance, the Utilities Technology Roadmap (Appendix C) has been developed to ensure that current and future project needs do not overlap and create financial friction within the organization. Moreover, CPAU has been proactive about involving different areas of the organization to develop awareness and buy-in to the AMI project. See Appendix A for the full risk register. Risks are sorted based on risk type then risk map. Risks have also been delineated between implementation and post-implementation phases. As a living document, this risk register should be actively managed by the Project Manager as Palo Alto proceeds with its smart grid effort. Table 3: Risk Map Matrix Risk Probability Low Medium High Risk Impact Low Green Green Yellow Medium Green Yellow Red High Yellow Red Red 3. Current State Operational Review UtiliWorks has provided support and guidance to several multi-service utilities as they plan, design, develop, deploy, train, test, and accept an AMI system. A key step in this process is to assess readiness and identify potential operational gaps that could pose a challenge during implementation and with ongoing system maintenance and support. Across multiple departments, UtiliWorks examined current Page 14 of 84 © 2018 UtiliWorks Consulting, LLC utility operations, meter hardware and equipment, systems and software, reporting capabilities, and personnel. The information was acquired via data requests and a series of workshops in July 2017. A narrative of findings resulting from the discovery effort related to the current state of operations are included in Appendix B. UtiliWorks’ findings are divided into the following categories: Meter Reading & Field Services Billing Customer Service Electric Meters/Meter Shop Electric Operations Water Meters/Meter Shop Water Operations/Water Conservation Gas Meters/Meter Shop Gas Operations IT Support/Systems The discovery effort allowed team members across the organization to discuss potential constraints in their operations which could impact the implementation of an AMI system. This information was reviewed and analyzed to establish Palo Alto’s divisional goals, to help identify gaps in implementation planning, and to establish the necessary assumptions behind the cost-benefit analysis. Review of these functions also provides a baseline for the current state business process design so that required process changes can be identified and discussed. In general, CPAU appears well equipped and well-informed for AMI deployment. UtiliWorks also conducted a state-of-the-industry presentation to a large cross-section of the organization. CPAU has considered the project staffing needs, along with the new opportunities that will be available. Within Section F, Table 13: Implementation-Readiness Gap Analysis provides details on key areas specific to implementation readiness at Palo Alto. Page 15 of 84 © 2018 UtiliWorks Consulting, LLC Utilities Technology Roadmap An AMI system provides capabilities related to advanced analytics for a utility. The level of technical maturity of a utility impacts the readiness to make use of these capabilities. CPAU has made use of business intelligence tools and has identified uses of AMI data to support utility goals and objectives, such as distributed energy generation. Areas of concern for the utility organization include the timely implementation of a new CIS, including a large data cleanup effort, and conversion of GIS to an ESRI format with all meters and infrastructure assets properly identified. UtiliWorks emphasizes that these systems are key for integrating with an MDMS and impact the system analytical capabilities available after full deployment. 1. Technology Maturity at CPAU Given that the technologies Palo Alto plans to implement are fundamentally transformative to daily operations, it is important that Utilities recognize its readiness to proceed with planned technology projects. Here we address readiness, both in terms of Palo Alto’s own organizational ability to implement new technology (“internal factors”), as well as the market’s maturity to deliver on solutions that address Utilities’ needs (“external factors”). To evaluate each area, UtiliWorks has developed a model for appraising the maturity level. This methodology has been adapted from similar models used to evaluate Smart Grid maturity. Table 4: Internal Factors and Table 5: External Factors score each readiness area and outline the corresponding rationale for each score. Internal factors are scored on a 1-5 scale: 1. Base Capability/Default 2. Expanded Capabilities 3. Integrated Capabilities 4. Early Adopter 5. Bleeding Edge Table 4: Internal Factors Readiness Area Score Rationale Org Structure 3 • Project Management Office (PMO) • Utility-owned IT systems Strategy, Management 3 • Coordination between city-wide projects Technology Capabilities 2 • Elster pilot (including Home Area Network) • MUA 2.0 to begin November 2017 • CIS replacement in progress - Fall 2017 • Business Intelligence reporting tools Grid/Distribution Operations 2 • Conservation Voltage Reduction assessment completed 2015 • Distributed Energy Resources assessment underway • Gas model completed • Water model being evaluated Work Order and Asset Management 2 • Utility Asset Management System to be deployed in conjunction with ERP • Pilot mobile workforce app • Planned migration to new GIS platform, ESRI Page 16 of 84 © 2018 UtiliWorks Consulting, LLC External factors are scored on a 1-5 scale: 1. Base Capability/Default 2. Expanded Capabilities 3. Some Integration Capabilities 4. Fully Integrated Capabilities 5. Fully Matured Table 5: External Factors Readiness Area Score Rationale Technology Market 5 • AMI has fully matured over past 5 years • MDMS has fully matured over past 5 years • Customer portals can vary from vendor to vendor, but Smart Energy Water is a mature platform Community 4 • Community engagement through Strategic Plan • Educated customer-base, with high adoption of EV and portal technology Regulatory (State, Federal) 4 • Rapidly evolving market for all commodities • CEC, CPUC, FERC, NERC, DOE Because external factors are well-matured, Palo Alto possesses relatively little functional, social, or political risk in moving forward with technology projects, but Utilities must be careful to not be organizationally or technologically hindered because of controllable internal factors. 2. IT System Gap Analysis and Planning Findings related to IT Systems planning can be found in italics at the end of each section below. Additional considerations for these systems as they relate to the procurement stage of the AMI project are included in Appendix C. A. Customer Information System and AMI Project Coordination CPAU is implementing a new Customer Information System (CIS), with current plans to deploy at the end of Q2 2020. The CIS will have requirements related to AMI, including storing interval billing data and Meter data, reporting on interval billing and meter data, validating the data and processing exceptions, and integrating with the new MDMS. CPAU issued an RFP to replace its CIS in September 2017, with responses received at the end of October 2017. As the CIS vendor proposals are reviewed, both CPAU and the AMI advisors should assess the CIS vendor’s capabilities around AMI functionality and integration. B. Systems Integration AMI introduces new integrations between software systems. An example of MDMS integration is shown in Figure 2: AMI/MDMS Architecture. The MDMS will integrate with the AMI Head End System (HES), CIS, MyUtilitiesAccount (MUA), and GIS, and eventually the Outage Management System (OMS). In choosing an MDMS, CPAU should consider whether it has prebuilt integrations with the CIS, AMI HES, GIS, and OMS, and whether the pre-built integrations can be customized without vendor assistance. Page 17 of 84 © 2018 UtiliWorks Consulting, LLC The AMI/MDMS interfaces will be implemented using web services and may also include secure flat file transfers. CPAU is currently using MultiSpeak version 3.0 in the integration between the Outage Management System (NISC) and SCADA (ACS). In choosing an MDMS and CIS vendor, CPAU should ensure that each system support integration standards, such as MultiSpeak (version 4.1 or higher), or the Common Information Model (CIM). Figure 2: AMI/MDMS Architecture C. Data Communications Backhaul communications for an AMI system is up to the utilities’ discretion. CPAU is considering deploying a municipally-owned fiber-to-the-node (FTTN) network. This network is being considered as a platform for Public Safety and Utilities wireless communication in the field, Smart Grid and Smart City applications, and new dark fiber licensing opportunities. Benefits associated with a fiber network include: 1. Reliability – Fiber is exceptionally resilient for data communications with a low failure rate. The equipment used to connect fiber has improved over time. Many cable and network providers use fiber due to its reliability, performance, and relatively low maintenance costs. 2. Network optimization – Since the owner has total control over the backhaul communications network, advanced IP V6 capabilities can be provided to devices that connect to nodes (which can have multiple access capabilities). Fiber networks can provide very high bandwidth data communications that can support multiple video streams, high data volumes, and enhanced network response times. The same network backbone could easily support a wide variety of “Smart City” applications including street light optimization and control and even parking meters. It should be noted that the data volume related to AMI systems is relatively small and does not require such high bandwidth channels. 3. Security - Private fiber networks are routinely used for high-security environments and systems such as SCADA and can be configured to meet all state, federal and utility requirements. AMI Head- End MDMS Event Files Meter Events Meter Commands Measurement Data Interval & Register Files Meter Commands CISOMS SCADA IVR GIS Base Maps, Selected Layers Meter Events Data Synchronization, Billing Reads MDMS Customer Portal MWM SSO Integration Layer Integration Layer MUA Portal SSO Page 18 of 84 © 2018 UtiliWorks Consulting, LLC If fiber is in place for the AMI backhaul, it can be used. If not, the existing city network and or a private, cellular network can be utilized for backhaul communications of AMI data. A cellular network is managed by a public access carrier, such as Verizon or AT&T, and requires monthly payment for service. The initial capital cost associated with setting up a communication channel through a public carrier is likely lower than capital costs associated with accessing the fiber network. UtiliWorks recommends that CPAU explore all backhaul options that will be available prior to 2020 deployment and update the AMI Implementation Plan accordingly. D. Enterprise Service Bus An Enterprise Service Bus (ESB) is a robust system integration platform that supports the communication between multiple software applications. With this architecture, each application transmits the necessary data directly with the ESB. The ESB routes that data to one or more applications that is connected to the Bus. When an ESB is not in place, integration is commonly achieved using point-to-point web services. CPAU does not currently have an ESB. This platform may be used, but is not required, to integrate AMI/MDMS with other applications. Implementing an ESB in conjunction with AMI will increase the timeline, budget and complexity for the project; however, if the city wants to move toward an ESB as an integration platform, then it can be leveraged for necessary interfaces with the AMI and MDMS. Since an ESB is not currently in place, it is recommended that CPAU implement a Service Oriented Architecture (SOA) using web services and MultiSpeak. UtiliWorks does not recommend that CPAU implement an ESB solely for AMI, as point-to-point integration is sufficient for AMI/MDMS integration. E. Utilities IT Team CPAU is undertaking many large-scale IT projects over the next five years, including a new CIS, newly designed MUA, ERP and AMI. These systems will be tightly integrated and dependent on each other. CPAU and the city IT Department’s technology preference is to purchase software-as-a-service, which is hosted by the vendor and may be cloud-based. In this model, certain system development and administration duties are shifted away from the city. Still, some city IT resources are necessary to act as a liaison between the city and the vendors, to support utility employees who use the system and to take ownership of the systems. UtiliWorks recommends that the CPAU organization maintain ownership of ongoing planning, development and support of Utility software systems, with ongoing input from city IT staff on security and support agreement. F. Information and Cyber Security The reliable availability of critical infrastructure−such as the electric grid and water/natural gas supply infrastructure−is essential to the well-being and security of the country and the Palo Alto community. Utilities are making concerted efforts to identify and address security risks across electric, water, and gas utility system assets and their connectivity points. With the implementation of advanced metering infrastructure, these industrial control systems (ICSs) can be vulnerable to cyber- attacks. This includes attacks to steal customer personal information/energy consumption behavior and the utility infrastructure controls. Due to their increasing deployment at utilities across the country, smart meter hacking has become a popular topic among security professionals and ethical hackers, with many talks given annually on the penetration-testing of these devices at popular conferences such as Defcon, Black Hat, and Shmoocon. Page 19 of 84 © 2018 UtiliWorks Consulting, LLC Though no catastrophic actions have yet occurred, a few isolated incidents have resulted in the theft of utility services and limited access to back-end data. Utilities can reduce vulnerabilities from cyber-attacks or events by following these steps: 1. Identify systems that need to be protected. 2. Separate systems into functional groups. 3. Implement tiered defenses around each system. 4. Control access into and between each group. There are various standards that utilities can refer to regarding cyber security. In January 2016, the North American Electricity Reliability Corporation (NERC) issued revised Critical Infrastructure Protection (CIP) reliability standards for electric utilities. The updated standards provide guidance in preparing for cyber security, including quarterly cyber security training for large utilities, closing unnecessary networking ports, and developing procedures for the storage of information. Water utilities can refer to American Water Works Association (AWWA)’s Water Security Roadmap. Another useful resource for all utilities is the Department of Homeland Security (DHS)’s Industrial Control Systems Cyber Emergency Response Team (ICS-CERT, https://ics-cert.us- cert.gov/). The ICS-CERT works to reduce risks within and across all critical infrastructure sectors by partnering with law enforcement agencies and the intelligence community and coordinating efforts among federal, state, local, and tribal governments and control systems owners, operators, and vendors. The Department of Energy (DOE) has developed DataGuard as a framework for utilities to use in developing their data privacy policies, to protect the access, use, and sharing of customer data. Page 20 of 84 © 2018 UtiliWorks Consulting, LLC Figure 3: Cyber Security Life Cycle UtiliWorks recommends that CPAU explore these resources and adopt a life cycle approach to build cyber security knowledge for key staff involved with the project. UtiliWorks also recommends that the CPAU project team liaise with an Information Security Officer (ISO) from City IT for the AMI and MDM systems. The ISO will define Information Security requirements for the RFP, review the vendors’ proposals from a security perspective, review and sign off project designs from a security perspective, and plan for ongoing security audits and penetration testing. Additional IT security recommendations are included in Appendix C. G. Planning for Technology Obsolescence Technology Obsolescence occurs “when a technical product or service is no longer needed or wanted even though it could still be in working order."6 Since AMI is part of an evolving industry with multiple types of technologies, the risk of technology obsolescence must be considered and mitigated. The risk of technology obsolescence can be mitigated by the following: 6 http://www.businessdictionary.com/definition/technological-obsolescence.html. Page 21 of 84 © 2018 UtiliWorks Consulting, LLC 1. Choose vendors that conform to industry standards such as the MultiSpeak or API integration standards. 2. Prioritize interoperability and flexibility in the AMI system design and vendor selection. a. As a multi-commodity utility, CPAU needs to ensure that water, gas, and electric meters all communicate with installed systems. In choosing gas and water meter vendors, it is critical to consider their track record in supporting modules/communications with a variety of AMI systems. 3. Choose widely-adopted technology types. 4. Choose vendors with strong financial viability and that invest in innovation and product improvement. AMI technologies continue to evolve, so it is important to architect a solution that is flexible and adaptable, and one that can be upgraded and enhanced as technologies change. The system design should also be scalable, to accommodate projected growth in number of meters. For more factors to consider during procurement, see Appendix C. 3. Utilities Technology Roadmap UtiliWorks created a Technology Roadmap (Figure 4: Utilities Technology Roadmap) of the projects that CPAU plans to undertake in the next five (5) years. Estimated costs for major projects included are itemized in Table 6: Estimated Major Technology Project Expenditures. To create the roadmap, UtiliWorks reviewed the progress and current state of 40 technology projects that resulted from the 2014 Utilities IT Systems Review, along with CPAU’s input on new projects. The City of Palo Alto is currently planning the implementation of a new ERP system, starting with the HR module, continuing with the Finance module and Utility Asset Management. This will occur in lock- step with the deployment of a new CIS. The CIS deployment is expected to be complete by the end of Q2 2020 and will be followed by a six-month stabilization period. There are several projects dependent on the CIS, which include: AMI, new MUA Phase II, Mobile Workforce Management, and a flexible billing and payment solution. CPAU plans to implement an AMI system following the first three (3) months of the CIS stabilization period, with full deployment of AMI estimated to conclude by the end of Q2 2022. Several longer-term projects are dependent on the AMI system being in place, including an integrated Outage Management System, Distribution System Optimization and an expanded Demand Response Management System. CPAU started a Smart Grid Pilot project in 2013, which is still operational and administered by Utilismart/Elster. Roughly 300 meters each of electric, water, and gas are included in the pilot, with a mix of both opt-in customers and regular customers. During the pilot, CPAU assessed the impact of TOU rates on Electric Vehicle (EV) charging, as well as use of HAN devices using ZigBee protocol. As a result of the pilot, CPAU has decided not to proceed with deployment of HAN devices at this time. CPAU will continue to offer opt-in Time of Use (TOU) rates, since the rate structure has proven to be cost-effective for EV owners. Palo Alto has one of the highest EV adoption rates in the country. The pilot project’s data is expected to be migrated to the new MDMS, once available in 2021. UtiliWorks recommends that the Utilities Technology Roadmap presented in this section be reviewed and revised on an annual basis by the Utilities IT team. There is a longer-term Reassessment Phase identified after Year 5. This period will be a strategic, cross-cutting review of all technology in place and will set the direction for future projects at CPAU. Page 22 of 84 © 2018 UtiliWorks Consulting, LLC Figure 4: Utilities Technology Roadmap (Simplified) Table 6: Estimated Major Technology Project Expenditures Project Estimated Cost ($Million) Enterprise Resource Planning $1.5 Customer Information System $4.0 Energy Efficiency Programming Optimization TBD Advanced Metering Infrastructure and Meter Data Management System $16.3 Conservation Voltage Reduction $0.4 My Utilities Account $0.2 Data Cleansing $0.4 Outage Management System TBD Note that for the purposes of this report, the Technology Roadmap illustrated here is a simplified version. A comprehensive roadmap can be found in Appendix C. Key: Q4-2017 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Energy Efficiency Program Optimization (EEO) (TBD) Technology Systems (Est. Capital Cost) Year 1 - 2018 Year 2 - 2019 Year 3 - 2020 OMS & AMI Integration Distribution System Optimization, CVR Customer Time-of- Use Rates Expansion New EE Programs, DR programs Utility Strategic Plan Development R e - a s s e s s m e n t P h a s e AMI/MDMS ProcurementAMI/MDMS System Spec Data Cleansing - field checks, master data clean-up CIS Stabilization Issue ERP RFP and Retain Vendor Implement New ERP HR Module Implement New ERP Finance Module Develop Technology Roadmap Note: Early selection of AMI vendor allows meter replacements to resume as planned, ahead of mass installation of AMI meters. Future Programs that are dependent on AMI Dates and $ TBD Integrate CIS to SAP & MUA Data Conversion: Create existing Customers in CIS Implement CIS + Integration with existing SAP/ERP systemCIS Design PhaseIssue CIS RFP and Retain Vendor 300 Home Customer Connect / TOU Rate Pilot Program - Maintenance Phase Full Deployment (by route/cycle) Improvement of Energy Efficiency Program Promotions based on new CIS/AMI - Planning and Pilots, on going Technology Deployment Advanced Metering Infrastructure (AMI) & Meter Data Management System (MDMS) ($17 to $19 M) Future ProjectIn Progress Alpha Phase AMI/MDMS Implementation Beta Phase AMI/MDMS Implementation Integrate MDMS to CIS, MUA, AMI Head End System (HES), OMS & GIS Enterprise Resource Planning (ERP) (UTL share $1 to $2 M) Customer Information System (CIS) ($4-5M) In Planning Flexible Billing & Payment Solution Year 5 - 2022Year 4 - 2021 ERP Design Phase Integrate new ERP with CIS Years 6+ Dependent on CIS Coordination Dependent on CIS/MUA Dependent on AMI Dependent on AMI Dependent on AMI Coordination Dependent on AMI Page 23 of 84 © 2018 UtiliWorks Consulting, LLC Cost-Benefit The foundation of the Palo Alto cost-benefit analysis is implementation of a comprehensive AMI solution. This includes an AMI system, an MDMS, a Customer Portal, and the necessary integration of these systems to produce an accurate bill. As part of this effort, the city will need to replace all electric meters and some natural gas and water meters, and retrofit all water and gas meters with an AMI radio, or endpoint. The meter replacement determinations are discussed in greater detail within the Assumptions section below. Palo Alto also requested that an add-on program for Conservation Voltage Reduction (CVR), be included to the base cost-benefit. This program leverages the AMI technology and would therefore not be feasible without the implementation of AMI in Palo Alto’s service area. UtiliWorks developed a comprehensive financial model, which represents the deployment of these various technologies. There are three primary areas that comprise the cost-benefit: Capital Costs (i.e., AMI infrastructure, equipment, installation, professional services, etc.). Ongoing Operation and Maintenance (O&M) Costs (i.e., annual fees related to software hosting and licensing, staffing, etc.). Anticipated Benefits (i.e., potential operational savings, revenue enhancement, reduction of water leaks, conservation/efficiency programs for customers, better asset utilization, etc.). UtiliWorks’ general approach when developing the model is to review the assumptions with the respective Utility staff and ultimately arrive at a conservative base case. This section provides the cost-benefit results summary, project assumptions, and a breakdown of costs and benefits used in the calculations. The detailed model inputs provided by Palo Alto along with assumptions underlying the cost and benefit calculations are provided in the Excel-based financial model. The model can facilitate further changes to the underlying assumptions and examine various scenarios with relative ease in the event Palo Alto wishes to explore other scenarios. 1. Results The model provides a variety of financial metrics for Palo Alto to evaluate the financial viability of the AMI project, including the Net Present Value (NPV) and capital expenditure. See Table 7: Summary Base Case Results for the summary of Cost-Benefit results based on deployment of AMI, MDMS, Customer Portal, and CVR technologies. This table displays the results of the so-called “base case.” The base case involves full AMI deployment endpoints, with 100% electric meter replacement, and retrofitting of all water and gas meters (with no meter replacements). For purposes of analysis, the purview of this assessment report and proceeding sections reflect the base case results. Despite the relatively low NPV that has been assessed for the project, net annual cash flow is positive post-AMI deployment (2023), with a payback period of 15 years. Net and cumulative cash flow across the project lifespan is illustrated in Figure 5: Base Case AMI Cash Flow, while relative costs and benefits are illustrated in Figure 6: Base Case AMI Cost-Benefit. Page 24 of 84 © 2018 UtiliWorks Consulting, LLC Table 7: Summary Base Case Results Financial Metric Base Case Results ($Million) Capital Expenditure - $16.74 Annual Operational Expense - Year 5 - $1.9 Annual CPAU/Customer Benefit - Year 5 + $3.3 Present Value of Expenses (over 18 years) - $27.08 Present Value of Benefits (over 18 years) + $43.83 Net Present Value (over 18 years) + $0.01 In addition to the metrics outlined, the estimated capital outlay can be expressed on a per-meter basis. For the base case, this cost is estimated to be $224.26 per meter to deploy AMI. By comparison, this per-meter expenditure is substantially lower than those of industry peers (of about $300.00 per meter, based on other CBAs conducted by UtiliWorks). This differential is primarily driven by Palo Alto’s preference not to exchange any water or gas meters within the scope of the AMI project. Figure 5: Base Case AMI Cash Flow $(2 0 ,0 0 0 ) $(1 5 ,0 0 0 ) $(1 0 ,0 0 0 ) $(5 ,0 0 0 ) $- $5 ,0 0 0 $1 0 ,0 0 0 CAS H FLOW ($000; 18 Years) Cumulative Cas h Flow Net An n ual Cas h Flow Page 25 of 84 © 2018 UtiliWorks Consulting, LLC Figure 6: Base Case AMI Cost-Benefit A. Sensitivity It should be noted that the base case results represent only one possible scenario, and that projections of NPV are highly dependent upon the operational and benefits assumptions used, due to length the project lifespan. Herein, we discuss the NPV’s relative sensitivity related to potentially higher operating costs as a result of failing to realize the staffing synergies assumed in the CBA and the extent to which the AMI system can facilitate conservation savings. The effect of these variables on NPV is illustrated in Table 8: NPV Sensitivity Matrix. Table 8: NPV Sensitivity Matrix ($MM) Conservation Goals Achieved 50% 100% 150% Staffing Synergy Status Achieved ($7.76) $0.01 $7.77 Not Achieved ($14.7) ($6.96) $0.80 Here, 100% conservation goals are defined as: 1.5% reduction in electric consumption; 2.5% reduction in water consumption; and 2.0% reduction in gas consumption. Achievement of staffing synergy is defined as the sun-setting of the program manager position at the close of AMI deployment and the absorption of electric and water AMI meter-related duties into the current meter technician staffing pool. For a more detailed discussion on staffing, see Section G. In addition to those savings outlined, further conservation savings can be realized as a result of CVR. In the base case, energy reduction related to a CVR program is assumed to be 0.5%. Assuming a 1.0% reduction, the NPV over an 18-year lifespan increases by $5.34 million. $(2 0 ,0 0 0 ) $(1 5 ,0 0 0 ) $(1 0 ,0 0 0 ) $(5 ,0 0 0 ) $- $5 ,0 0 0 $1 0,0 0 0 2 0 2 0 20 2 1 2 0 2 2 2 02 3 2 0 2 4 202 5 2 0 2 6 20 2 7 2 0 2 8 20 2 9 2 0 3 0 20 3 1 2 0 3 2 2 0 3 3 2 0 3 4 2 0 3 5 2 0 3 6 20 3 7 2 0 3 8 203 9 2 0 4 0 Co st -Ben efit ($000; 18 Years) Benefits OpEx CapEx Cumulative Cas h Flow Page 26 of 84 © 2018 UtiliWorks Consulting, LLC Should CPAU choose to proceed with gas and water meter replacement within the scope of the AMI project, incremental costs can also be assessed for the scenario of replacing water or gas meters. For each service, we can consider replacement of all meters 20-years or older from the start of deployment. For gas meters under this condition, an additional capital cost of $3.96 million is incurred; for the water meters under this condition, an additional capital cost of $3.64 million is incurred. Note that, for the purposes of this CBA, we do not account for revenue recovery that may occur as a result of improved meter accuracy. 2. Assumptions UtiliWorks incorporated several informed assumptions into the cost/benefit model. Key assumptions include: CPAU plans to utilize the services of third-party installation vendor, but may consider self- install if resources are available. Pricing includes the cost of using a third-party installation contractor, except for a small number of 3S, 5S, and 9S electric meters. CPAU will seek out third-party services to host the AMI Headend, MDMS, and Customer Portal applications. Software hosting and maintenance fees have been applied as future operating expenses. Electric Operations is the only department that will proceed with meter change-out; however, Electric, Water and Gas will be AMI-equipped with a concurrent deployment. All residential electric meters will be equipped with remote disconnect capability. Deployment of the AMI system is expected to take place over a period from Q3 2020 to Q3 2022 including 12 months of proof of concept (POC) testing. Full deployment is estimated to take approximately one year with the use of a third-party installation contractor. General model assumptions are listed in Table 9: General Assumptions. Table 9: General Assumptions Assumption Metric Annual Meter Growth Rate 0.0% Deployment Period 2 Years Total Electric Meters 30,076 Total Water Meters 20,581 Total Gas Meters 24,002 Discount Rate 3.5% Project Lifespan 18 Years Annual Operational Expense Growth Rate 3.0% Annual Benefits Growth Rate 1.0% 3. Cost Estimate UtiliWorks utilizes up-to-date vendor pricing when modeling-the cost estimate. Figures are obtained based on recent market quotes from manufacturers and suppliers, as well as a vendor database that reflects pricing obtained for recent projects at other utilities. Whenever conflicting pricing is noted, UtiliWorks presents a blended rate or upper estimate in the financial model cost assumptions. This method is used to ensure that Palo Alto is provided with a conservative estimate. As an exception, pricing for meters and meter installation are based on Palo Alto CIP budgetary projections. These prices are considerably higher than what would be expected when buying meters in bulk from a vendor and after obtaining the necessary California Department of Industrial Relations (DIR) special wage determination. Actual pricing for Palo Alto is anticipated to be slightly lower than the results presented; however, until proposals are received, actual costs cannot be verified. Page 27 of 84 © 2018 UtiliWorks Consulting, LLC In addition to ordinary expenditures on equipment and professional services, the financial model includes an overall contingency of 10% of capital costs, and 9% sales tax on materials. Based on the assumptions used, the total capital outlay is estimated to be $16.74 million for the base case. Table 10: Project Cost Summary shows a summary of all estimated project costs, including capital and annual operations and maintenance (O&M) costs. Table 10: Project Cost Summary: Capital and Annual O&M Cost Cost Category Total Capital Cost ($) Annual O&M Cost ($) AMI/MDMS Network Deployment + PM AMI Network Infrastructure, Software, and Professional Services $780,000 $115,000 MDMS and Professional Services $550,000 $225,000 Program Management Services and CIS Integration $2,825,551 $0 Planning $200,000 $0 Subtotal $4,355,551 $340,000 Electric Deployment/Maintenance Electric Meters and Sales Tax $4,028,406 $0 Electric Meter Installation Services and Equipment $950,463 $0 Contingency $528,112 $0 Staffing $0 $406,079 Subtotal $5,506,981 $406,079 Water Deployment/Maintenance Water Meters Endpoints, Equipment, and Sales Tax $3,392,732 $0 Water Meter Installation Services and Equipment $411,620 $0 Contingency $352,421 $0 Staffing $0 $406,079 Subtotal 4,156,775 $406,079 Gas Deployment/Maintenance Gas Endpoints, Equipment, and Sales Tax $1,648,217 $0 Gas Meter Installation Services and Equipment $472,570 $0 Contingency $198,469 $0 Staffing $0 $640,401 Subtotal $2,319,257 $640,401 Conservation Voltage Reduction Software License $200,000 $0 Professional Services $204,505 $133,161 Subtotal $404,505 $133,161 GRAND Total $16,743,069 $1,925,720 Note that the annual O&M cost is somewhat higher than the Year 5 projected O&M cost outlined in Table 7: Summary Base Case Results, as some staffing costs are transient to support project deployment. Also, note that not all capital costs will be incurred in the first year, but rather over the Page 28 of 84 © 2018 UtiliWorks Consulting, LLC designated deployment period discussed in the Assumptions section. Figure 7: Capital Outlay illustrates this projected capital cost outlay from 2020 through 2022. Figure 7: Capital Outlay A tabular display of overall costs by service is provided in Table 11: Cost Allocation by Service, where AMI/MDMS Network Deployment and PM costs can be allocated by one of two methods: (I), with electric as a driver and all AMI/MDMS Network Deployment and PM costs allocated to that service; or (II), with AMI/MDMS Network Deployment and PM allocated based on proportion of the total meter population across all three services (40% electric, 28% water, and 32% gas). An average of the two allocation method is also presented for CPAU consideration. Table 11: Cost Allocation by Service ($MM) Category Electric Water Gas Total Cost Allocation Method (I) $10.27 $4.16 $2.32 $16.74 Cost Allocation Method (II) $7.65 $5.38 $3.71 $16.74 Average of (I) and (II) $8.96 $4.77 $3.02 $16.74 In addition, the annual O&M costs presented in Table 10: Project Cost Summary is inclusive of: two (2) temporary positions staffed during AMI deployment—a half-time AMI program manager and a customer service representative, accounting for annual costs $167,280 and $196,371, respectively. Figure 8: Cumulative Operating Expenses illustrates the PV of all operating expenses, considering the phasing-in and phasing-out of staff over the deployment timeline for the project. $2 ,7 6 6 $8 ,7 45 $5,2 3 3 $- $1 ,0 0 0 $2 ,0 0 0 $3 ,0 0 0 $4 ,0 0 0 $5 ,0 0 0 $6 ,0 0 0 $7 ,0 0 0 $8 ,0 0 0 $9 ,0 0 0 $1 0 ,0 0 0 2 0 2 0 2 0 21 2 0 2 2 P r og ram CapEx ($000) AMI/MDMS Network D eployment + P M Electric D eployment Water Deployment Gas D ep loyment Conservation Vo ltage Reduction Page 29 of 84 © 2018 UtiliWorks Consulting, LLC Figure 8: Cumulative Operating Expenses To clarify, the O&M costs illustrated in this CBA represent only the incremental costs that would be incurred by the AMI project and are not inclusive of any operating expenditures that are currently incurred by CPAU. 4. Benefits Estimate Palo Alto completed an initial financial data request, followed by the model assumptions and results review with UtiliWorks. All benefits used in the financial model are based on the annual operating expenses and capital budget costs for FY16. Table 12: Annual Project Benefits Summary summarizes all benefits areas, their value driver with key calculation assumptions, and annual value for the first year of full operation. Table 12: Annual Project Benefits Summary Cost Category Key Assumptions(s) Annual Benefit ($) Meter Reading Electric Meter Reading 95% reduction overall $507,799 Water Meter Reading 95% reduction overall $347,487 Gas Meter Reading 95% reduction overall $405,247 AMI Head End, $1.80 Cellular Backhaul, $0.27 MDMS + Customer Portal, $4.04 Electric Staff Subtotal, $5.64 Water Staff Total, $5.36 Gas Staff Total, $9.33 Annual Maintenance - CVR, $0.65 $- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 PV OpEx - Lifetime ($MM) 18-yr. Present Value of Cumulative OpEx ($MM) Page 30 of 84 © 2018 UtiliWorks Consulting, LLC Subtotal 95% reduction in staffing load $1,260,533 Customer Service Outstanding Payment Reduction 10% late payment reduction on remote disconnect meters $11,700 Electric Customer Call Reduction 5% reduction $13,278 Electric Customer-Generated Service Order Reduction 90% reduction on service checks $48,356 Electric Billing Expense Handling Expense 25% reduction $13,426 Water Customer Call Reduction 5% reduction $26,557 Water Customer-Generated Service Order Reduction 90% reduction on service checks $96,711 Water Billing Expense Handling Expense 25% reduction $9,188 Gas Customer Call Reduction 5% reduction $26,557 Gas Customer-Generated Service Order Reduction 90% reduction on service checks $96,711 Gas Billing Expense Handling Expense 25% reduction $10,715 Subtotal 12.7% reduction in staffing load $353,199 Operations Non-Pay Disconnect Labor 99% reduction $15,345 Outage Management 10% response-time reduction $1,366 CVR 0.5% reduction in electricity purchases $397,348 Electric Theft Identification 0.05% reduction of total consumption impact $469 Water Theft Identification 0.1% revenue recovery $38,000 Gas Theft Identification 0.05% revenue recovery $19,000 Subtotal 10.1% reduction in staffing load $471,528 Improved Meter Accuracy Electric Revenue Capture Negligible meter inaccuracy benefit $0 Water Revenue Capture No meter replacement $0 Gas Revenue Capture No meter replacement $0 Subtotal $0 Conservation Savings & Avoided Cost Electric Conservation 0.5% conservation for residential customers, ramping up to 1.5% in 5 years; 0.25% for commercial customers $377,481 Water Conservation 1.00% conservation, ramping up to 2.5% in 5 years $550,067 Page 31 of 84 © 2018 UtiliWorks Consulting, LLC Gas Conservation 1.00% conservation, ramping up to 2.0% in 5 years $264,000 Subtotal $1,191,548 Avoided CIP Water Annual Meter Replacement Budget 0% inaccurate meters (no meter replacement) $0 Gas Annual Meter Replacement Budget 0% inaccurate meters (no meter replacement) $0 Subtotal $0 Asset Management Solar Meter Installation Cost Avoidance 100% reduction $20,000 Subtotal $20,000 GRAND Total $3,296,808 A graphic representation of benefits across the project lifespan is depicted in Figure 9: Cumulative Expenses and Benefits, and cumulative expenses are also shown for comparison. As is evidenced by this graph, a major factor is increased conservation by customers, which alone accounts for over one-third of total annual benefits. On a PV-basis, total conservation savings is estimated to be $15.5 million. This PV estimate scales proportionally to conservation goals, accounting for $7.75 million in benefits for half of conservation goals met, and $31 million in benefits for doubling conservation goals met. AMI implementation makes demand-side conservation goals significantly easier to attain due to the abundance of data available to customers, and this effect is magnified due to the highly-educated, environmentally-conscious populace of Palo Alto. Page 32 of 84 © 2018 UtiliWorks Consulting, LLC Figure 9: Cumulative Expenses and Benefits It is important to remember that, while the cost-benefit results provide a fairly accurate estimate of the expected project costs and payback, this model represents a conservative estimate of the cost and value of an AMI project. AMI technology fundamentally changes the meter-to-cash process. What is not easily recognized is that, depending on the supporting technology and business process changes employed, a utility can realize even greater benefits through the proactive use of the data and information now available. Leveraging AMI technologies will significantly improve the measurement and management of utility resources and will bring direct benefit and value to customers. 5. Quantitative Benefits The following section will outline the potential benefits that can be realized with the data yielded from an AMI system along with add-on technologies, such as remote disconnect and leak detection. UtiliWorks worked with staff at Palo Alto to derive the necessary data and assumptions to calculate the potential benefits and factored those conclusions into the cost-benefit analysis in Section E. Meter Reading Reduction – Elimination of on-cycle manual meter reading expenses, including staff time, fuel, and vehicle maintenance costs. Customer Call Reduction – Reduction of cost related to decreased number of customer calls. This reduction occurs from a combination of online usage information now available to a CSR to better respond to inquiries, in addition to customers having access to their information via Page 33 of 84 © 2018 UtiliWorks Consulting, LLC Customer Portal. Customers will also now have the ability to configure usage notifications via text or email. Customer Generated Service Order Reduction – Elimination of most check-read/skip/no-read field activities and expenses in reviewing skips report, creating the work orders and rolling a truck to collect the re-read. New billing routines will have a range of dates a read may be pulled to use on bill (e.g. read date or two days prior) and/or a read may be collected via on- demand read functionality. Move-In / Move-Out Read Reduction – Elimination of most off-cycle read field activities when customers move in and out of a premise. This savings will result from new presentation of daily AMI reads and the ability to collect on-demand reads. Non-Pay Disconnect Labor – Reduction in collections labor and field activities for non-paying customers. The majority of trips to a premise can be avoided due to remote disconnect/connect capability of electric AMI meters. Billing Exception Handling Expense – Reduction in billing service expenses associated with increased efficiencies. The new MDMS will contain advanced Validation, Editing, and Estimation (VEE) routines and accurate real-time and historical meter information. This can translate to fewer bill estimations, billing errors, and adjustments. Electric Distribution System Asset Performance Improvement – Reduction in O&M costs from utilizing real-time AMI data to assist with operational decisions. Manual adjustments or integration with a SCADA system can result in performance improvements via electrical distribution system controls. Ability to monitor distribution transformer loading, particularly given the wide spread adoption of Electric vehicles and other distributed energy resources. Theft Identification Revenue – Alarms triggered in the AMI software can identify both electric and water meter tampering and product diversion. This is a valuable tool for any utility to identify theft in near real time as compared to monthly when the meter reader puts eyes on a meter. Electric Improved Meter Accuracy – Electromechanical electric meters degrade over time. According to a study performed by the Electric Power Research Institute (EPRI), electromechanical meters register at a slower rate if not calibrated ranging from 0.5% after five years to 2.75% after 20 years. Given the societal perspective of this analysis, this benefit was not included in the CBA. Meter Scrap Revenue – Added revenue from scrap of old meters during replacement. Local market pricing is utilized for all scrap values and weight is determined by the number and size of meters to be replaced as part of the project. Annual Meter Replacement Budget – Elimination of current annual meter replacement spending for faulty meters by installing new AMI ready meters with long-term warranties. Any capital cost for new meters will be accounted for in the capital costs of the financial model, so this is added as a benefit to avoid any double counting of the meter replacement budget. Unaccounted-for Water Loss Savings – A significant savings of unaccounted for losses may be recovered via acoustic leak detection. This technology allows the Utility to identify leaks through remote devices that piggyback on the AMI network. The devices are placed in strategic locations throughout the water distribution system to provide full system monitoring. 6. Qualitative Benefits In addition to those benefits that can be quantified and included in the cost-benefit analysis, Palo Alto can realize numerous intangible/soft benefits. While many of these benefits are not easily measurable, they are certainly real and achievable with the successful deployment of an AMI system. Improved Customer Experience - Using interval consumption data (consumption, power factor, voltage, etc.), customers can more effectively manage their energy usage. Page 34 of 84 © 2018 UtiliWorks Consulting, LLC Improved Reliability - The AMI system will detect electrical outages and enable Palo Alto to model the overall system(s) demand to facilitate proactive management and improve reliability. Improved System Planning Capabilities - Information that can be produced and analyzed from an AMI system can facilitate the improved management and monitoring of electric, gas, water, and wastewater system performance leading to better informed capital investment decisions. System engineering and maintenance programs can be supported with better, more frequent access to the more granular data that will be provided by the AMI system. Improved Asset Utilization – Reduction in O&M costs from utilizing real-time AMI data to assist with operational decisions. Manual adjustments or integration with a SCADA system can result in performance improvements via distribution system controls. Improved visibility of distribution transformer loading. Improved Water Resource Management - Using interval consumption data, customers can more proactively and effectively manage their water consumption. The AMI system will enable CPAU to model the overall system demand, identify customer leaks and facilitate proactive management of the industrial and residential customer base. Timely and Accurate Meter Reading – Beyond simply the fully burdened costs of meter readers, this activity involves coordination across a variety of staff within CPAU. AMI reads will alleviate the strain on staff to deliver timely and accurate meter reads. Implementing Advanced Retail Rates – Interval consumption data and advanced MDMS reporting options will assist Rates Analyst in developing and evaluating advanced rate structures such as TOU or rebate for participating in Demand Response programs. Meter Right-Sizing – Data and alarms produced by an AMI system will provide the Utility with the ability to detect if a water meter is over or undersized. Unauthorized Use Detection - Current generation AMI Systems provide flag or high priority alerts or reports for reverse water flow and tamper detection. This information could be of significant benefit to CPAU and should also facilitate reduction of unauthorized usage or theft. Improved Safety/Reduced Workers’ Compensation - Ensuring safety for both utility employees and customers is essential. With the introduction of automated meter reading, Palo Alto will have the ability to remotely read meters, initiate on-demand meter reads, and remotely disconnect/reconnect customers. This will dramatically reduce exposure to risky conditions on the road and at a customer premise, such as weather conditions, unfriendly pets, physically hard to access meters, and theft. Compliance with Future Legislative Requirements - The Energy Policy Act of 2005 placed a requirement on states and non-regulated utilities to investigate and consider AMI for its customers. With the introduction of AMI, Palo Alto will better prepare itself to address all legislative and/or CA state requirements regarding conservation, time based rates and other energy-related issues. Potential Grants from Water District – The implementation of AMI places CPAU in the advanced group of utilities that may be eligible for grants from the water district. Page 35 of 84 © 2018 UtiliWorks Consulting, LLC Implementation Roadmap 1. Project Phasing – Scope & Schedule With an enterprise project of this scope, it is important to track the effectiveness of the implementation and how it meets the pre-established acceptance criteria. Project phasing is a critical aspect of implementing AMI given the multi-faceted nature of the technology. This approach divides the project work into specific phases, each with its own measurable outcome which builds from the previous phase. Performing work in this manner reduces the risk that the effort does not get off-track or otherwise proceed without the prerequisite steps successfully completed. Following contract execution (and to the extent possible overlapping with contract negotiation), UtiliWorks recommends that Palo Alto start pre-deployment planning. Figure 10: AMI Deployment Plan provides a visual representation of the project deployment phasing, from proof of concept to full deployment. Note that the full deployment phase of this timeline spans 12 months, but may be accelerated depending on CPAU preference and budget. Figure 10: AMI Deployment Plan UtiliWorks recommends that Palo Alto undertake and document the following planning efforts at the appropriate time during the AMI project: Project Execution Plan Proof of Concept Implementation Plan Test Plan Change Management & Training Plan Page 36 of 84 © 2018 UtiliWorks Consulting, LLC Communications (Public Relations, Education, and Outreach) Plan Mass Meter Change-Out Plan Field/Data Quality Assurance Plan The cost-benefit analysis, as presented, estimates a two-year deployment period that can be adjusted depending on project financing, resource availability and other variables specific to Palo Alto. The following sections describe UtiliWorks’ recommended deployment approach in more detail. A. AMI Proof of Concept Within the last few years, AMI as a technology has matured. There was a transition period from the time two-way communications with the meter was introduced. During this transition, utilities were more apt to explore AMI through a working “Pilot.” The intent was to test the technology to confirm it worked with the utility’s service area configuration/topology/meter population. UtiliWorks advises our clients to take a different approach to AMI design and deployment. Specifically, we recommend a “Proof of Concept” (POC) as a lead in to full deployment. The underlying philosophy of a POC Phase is to minimize risk and commit as little project funding as possible, while reaching basic system functionality as early as possible. This approach allows Palo Alto to work with each vendor to identify and address issues, to test the necessary interfaces with other systems, and to design, develop and test the future state business processes prior to full deployment. Based on our experience in deploying AMI technology, UtiliWorks recommends the POC be split into an Alpha and Beta phase. The intent of the Alpha Phase is to establish and test basic connectivity and a cross-section of the meter population in a controlled environment (i.e., meter shop). The goal, at a minimum, is to ensure connectivity between the meter, the collector(s), the AMI Headend and the MDMS. For a more comprehensive Alpha, you can go the extra step to integrate with a test instance of the CIS and produce a bill from automated meter data. UtiliWorks recommends the use of a dedicated meter test bench, if available, during Alpha. If not, a limited amount of metering hardware can be field-deployed during this phase if it is easily accessible for troubleshooting purposes. The team will also commence the work to deploy a limited number of collectors that are able to communicate with the Alpha meters. It is also advised that any work required to deploy the backhaul infrastructure is coordinated and completed during Alpha in preparation for the Beta phase of deployment. At this time, the vendors will install and configure the software, most typically the AMI headend and MDMS. The vendors will also meet with the Palo Alto team to gather the necessary software/configuration requirements. Systems integration requirements will also be captured. Interfaces that need to be in place for Alpha will proceed through design/develop/test. Beta interface design and development will proceed once Alpha is complete. Business process re-engineering can start in the early phases of Alpha. UtiliWorks suggests that Palo Alto map out the current state processes as soon as possible and overlap the mapping of future state business processes with the MDMS requirements/configuration. POC test plans and training plans will be produced by the vendors for Palo Alto to review and comment. It is advised that each vendor specify what will be required to satisfy Alpha and Beta, respectively. Page 37 of 84 © 2018 UtiliWorks Consulting, LLC UtiliWorks estimates a six-month Alpha phase. A “quality gate” or hold point is established at the end of the Alpha phase, with specific acceptance criteria that must be satisfied by each vendor thereby signaling completion. The Beta phase begins with field deployment of a pre-determined quantity of metering hardware and the remaining backhaul network infrastructure. Since the Beta phase cannot be entered without a successful completion of the Alpha phase, basic meter-reading and billing functionality is available immediately, allowing routes to be moved to automated billing immediately upon route acceptance (if desired). The balance of systems interfaces, included work order management, are developed and fully tested. If Palo Alto elects to use a third-party installation contractor, it will be necessary to configure and test the interface(s) with their work order management system. It is advised that this is completed prior to the Beta field deployment so to have an opportunity to troubleshoot and resolve issues prior to full deployment. If Palo Alto chooses to self-deploy, it will be necessary to assess the in-house work order management system and determine if configuration changes are required to support the full deployment. Business process changes are finalized and tested, so that they can also be debugged prior to a production deployment. This provides the users time to adjust to new processes and procedures and builds a familiarity with the new systems and methods to be employed. Additional functionality is added and tested in stages, with the goal to complete system integration and documentation activities prior to user training and system-acceptance testing. User training runs in parallel with the end of the Beta phase, typically beginning approximately two months before the end of Beta. The respective users/system owners and system administrators are trained on full use of the AMI Headend software, MDMS software, and Customer Portal. Much of the field training has been completed (OTJ – On the Job) for the Palo Alto staff, given the work performed during both Alpha and Beta. There is a comprehensive quality assurance (QA) effort that must be planned during the Beta phase. Beta is also the time to plan for parallel testing and the desired timing to “go-live” with AMI meter reads for billing. The Beta phase is complete with Palo Alto user acceptance of the entire system. This serves as the quality gate to move forward to full deployment. UtiliWorks estimates a six-month Beta phase. B. Full Deployment With all the planning, preparation, testing, and training complete, full deployment is managed more like a construction project in contrast to the POC. The assumption is that full-system functionality is available, with route acceptance to switch a meter from manual to AMI reads for billing. This approach has several advantages, including pushing back warranty start dates until functionality can be used, and the ability to realize the full benefit of deployed devices from the moment they are installed. Keys to project success include the accurate recording and timely delivery of serial numbers, out reads, various meter characteristics, geographic co-ordinates, digital pictures, and install notes to the appropriate departments and systems. Palo Alto staff must play an active role in monitoring data and equipment installation quality throughout full deployment. Page 38 of 84 © 2018 UtiliWorks Consulting, LLC Full deployment is estimated to take approximately one year with the use of a third-party installation contractor. C. Supplemental Technology In addition to updating IT infrastructure to leverage the data generated in an AMI system, Palo Alto has expressed interest in several technologies to improve efficiency. Given the strong push to enhance sustainability and reliability, Palo Alto will look at deploying Conservation Voltage Reduction (CVR) equipment/functionality, in conjunction with this project. UtiliWorks recommends that Utilities include this technology in the RFP and indicate intent to deploy during the Beta POC to leverage the AMI Communications network. The outcome of this testing will assist Utilities in the program design and conclude how best and when to deploy this technology across the system. Distribution automation refers to a wide range of hardware-software solutions that remotely sense and control service delivery. Distribution automation gives rise to outage location and automatic service restoration for electric service, and leak detection optimization for water service. By employing schemes to increase uptime, a utility may see benefits through reduced operating costs and increased revenue. These benefits, in turn, result in improve service quality and customer satisfaction. CVR is predicated on controlling the upstream voltage of a distribution circuit to conform to the low- end of a tolerance band set by the utility. Prior to this assessment, Palo Alto conducted an evaluation on CVR potential, with promising results. Although Palo Alto has a low base voltage (relative to other utilities), the City’s density and short primary feeders make CVR viable and financially-justifiable. Isolated testing of a Palo Alto transformer with three feeders could demonstrate a 0.5%-1% decrease in real power demand for a 1% voltage change, in accordance with industry findings. This change in power demand serves as the basis for the CVR program implemented in the cost-benefit conducted by UtiliWorks. For a comprehensive overview of CVR (and other AMI technologies), see Appendix E. 2. Implementation-Readiness Gap Analysis UtiliWorks has identified several factors that will help facilitate POC success. The team analyzed Palo Alto’s ability to meet these criteria based on current-state discovery and project planning done to date, and findings are itemized in Table 13: Implementation-Readiness Gap Analysis. Page 39 of 84 © 2018 UtiliWorks Consulting, LLC Table 13: Implementation-Readiness Gap Analysis Potential Gap Palo Alto State Designated AMI Project owner Palo Alto has a designated Project Manager and Project Sponsor, and it has identified key stakeholders and representatives from across divisions. A project manager position has been allocated to support deployment. Staff to support communications infrastructure Existing Engineering/SCADA personnel equipped to fill this role. Gas meter test bench Palo Alto possesses multiple gas meter test benches. All test benches are currently stationary, but the large meter test bench can be made mobile. A formal meter testing program is in place. This test bench is expected to support POC testing. Water meter test bench Palo Alto possesses a water meter test bench and has implemented a formal water meter testing program. Though Palo Alto noted unreliability for e -series meters, this test bench should be able to support POC testing. Electric meter test bench Palo Alto possesses an electric meter test bench that is calibrated annually; however, there is no formal testing program in place. This test bench is expected to support POC testing. Physical space/warehouse to support large scale deployment Utilities do not have adequate space available (approximately 2,500 sq. ft.) to host/stage deployment on its property and will have to lease a substantial area for deployment, capable of supporting worker parking, inventory storage, office space use, and disposal. Well-maintained gas meter characteristics in a database Yes, gas meter characteristics are maintained in SAP as the system of record. Well-maintained water meter characteristics in a database Yes, water meter characteristics are maintained in SAP as the system of record. Well-maintained electric meter characteristics in a database Yes, electric meter characteristics are maintained in SAP as the system of record. Out-of-the-ordinary gas meter access issues Some gas meters are in high-security areas that will require substantially higher than ordinary time to access due to the necessity of requisitioning an escort. Most curb meters are also difficult to access. Out-of-the-ordinary water meter access issues Some water meters are behind gates, but there are no other noteworthy access issues. Out-of-the-ordinary electric meter access issues Some electric meters are behind gates, but there are no other noteworthy access issues. Communications From experience with past projects, Palo Alto expects some push-back from the public on AMI RF, due to security, privacy, and health -related concerns, and will require outreach and education assistance. Staffing Electric operations and engineering currently expresses that current staffing is working at capacity, and additional AMI workload be untenable. CPAU would need to ensure that CIS implementation is successfully implemented and stable before embarking on the AMI implementation. This is very important to ensure staff resources are not stretched. See Section G for projected staffing- related project impacts. Integration Due to the number of overlapping IT and technology projects currently underway at Palo Alto, comprehensive identification of all integration points is key, which may be difficult depending upon IT workload. CIS stabilization will be critical to deployment of AMI. Page 40 of 84 © 2018 UtiliWorks Consulting, LLC Operational Impacts AMI technology has the potential to touch the entire organization. As the Utility transitions, there will be numerous operational impacts that require identification, definition and planning. The volume of data that will be available to Palo Alto will be substantially larger than the norm. This increased granularity and sheer volume of data is what opens new value streams, but these areas must be properly managed. Determining the operational impacts inherent to an AMI deployment is an extremely important process that can have material impacts on the realization of cost-benefit benefits. The operational impacts can be broadly categorized in the following areas: Personnel/Human Resources Business Process Re-Engineering Data/Information Processing Some -benefits depend on a relatively quick deployment of features. For example, decreasing the time required to deploy AMI endpoints can accelerate the ROI. Even in the largest utility, rapid deployment can place tremendous strain on internal staff already dedicated to existing business functions. UtiliWorks recommends that Palo Alto actively engage staff from customer service to billing, engineering, IT, meter shop, operations/maintenance, and field services throughout the effort. Buy-in and support is needed from the top-down to ensure an efficient discovery process and smooth deployment. Staff augmentation is also a consideration given the added strain on resources already dedicated to existing business functions. In addition, the creation of a formal Steering Committee that meets periodically to address issues that are unresolved or blocked is critical, given the multiple participants and organizations involved. For a full description of tasks involved in Procurement through to Full Deployment phases, refer to the detailed staffing planning documents which include project task estimates. This was delivered to CPAU as an Excel workbook, titled “CPAU AMI Staffing Plan.” Each of these areas needs to be well defined to maximize ROI. The following sections will provide a high- level outline of the types of changes and planning that should occur within each area as Palo Alto moves forward with the project. 1. Personnel / Human Resources Based on UtiliWorks’ experience with the deployment of AMI technology and staff availability within CPAU, the following roles have been identified to facilitate project success: Program Manager - The Program Manager will have on-going responsibilities as the “AMI Project” transitions into an “AMI Program.” This manager will ensure proper system oversight and that all QA functions are occurring as expected. The Program Manager will also keep his or her finger on the pulse of the AMI system at a global level, which includes benefits verification and tracking key performance indicators (KPIs) that may be monitored as part of future state operations. AMI System Tech - UtiliWorks recommends the utility identify staff to fill the role of an AMI System Tech, along with a cross-trained backup. It is not necessary to hire to fill this role if utility can identify internal staff who are interested and capable of fulfilling the responsibilities. UtiliWorks recommends a resource who will work to understand the communications network, metering technology, systems and software to train and lead other staff members in daily use and oversight. It is best to include the people identified during project planning and deployment. Upon completion of deployment, the AMI System Tech will continue as a full-time staff member focused on identifying, troubleshooting, and dispatching staff to resolve issues in the field. Page 41 of 84 © 2018 UtiliWorks Consulting, LLC Data Analyst(s) - UtiliWorks recommends utility identify staff to be dedicated as Data Analysts to support, administer and use the AMI and MDMS system data and reports. Like the AMI System Tech role, it is not necessary to hire to fill this role if the utility can identify internal staff that is available, interested and capable of fulfilling the responsibilities. It is also recommended that utility involve these team members throughout project planning and deployment so they are actively involved in the system configuration and training. AMI Infrastructure O&M - New equipment in the field for network communications and AMI related equipment such as collectors and backhaul will need to be monitored and maintained. This is commonly performed by staff already responsible for the Communications network or SCADA and may be split between departments. AMI Meter Tech (Gas) - Troubleshoot issues related to gas AMI meters in the field. This person should have extensive field experience at the utility, and the position can be filled from the Meter Technician team. AMI Meter Tech (Water) - Troubleshoot issues related to water AMI meters in the field. This person should have extensive field experience at the utility, and the position can be filled from the Meter Technician team. AMI Meter Tech (Electric) - Troubleshoot issues related to electric AMI meters in the field. This person should have extensive field experience at the utility, and the position can be filled from the Meter Technician team. CVR Oversight - The Conservation Voltage Reduction (CVR) program will help CPAU monitor real-time voltage data and optimize voltage across the distribution network. Automated devices will be installed to ease the oversight and maximize the benefits of such technology; however, a 0.25 FTE is anticipated to be required for hardware and software oversight to maintain operations. Table 14: Palo Alto Staffing illustrates the project resource requirements assumed for purposes of the CBA. A total number of positions are presented by phase for Current, Deployment and Future State Operations, and these figures have been modified from the UtiliWorks suggested staffing to fit Palo Alto’s anticipated needs. Total costs for each position are derived from a base wage, plus benefits, with a 3.0% annual escalation rate. Page 42 of 84 © 2018 UtiliWorks Consulting, LLC Table 14: Palo Alto Staffing Note that AMI Meters Technicians are not called out as a separate line-item but have instead been bundled into traditional meter technician roles, whose positions will absorb additional responsibilities (as others decrease) as a result of AMI. Because Palo Alto’s meter readers are higher educated than those employed by other utilities, Palo Alto has expressed an opportunity to fill additional roles (Gas Meter Technician; AMI System Technician; Data Analyst; and AMI infrastructure Operations & Maintenance) from its current human resource pool as a first resort. Also note that the 0.25 FTE required for CVR oversight does not inherently necessitate CPAU create a new position to perform this role. CVR oversight duties may be absorbed by current engineering staff or contracted out entirely, pending further determination by CPAU. 2. Business Process Re-Engineering Advanced utility technology is highly integrated and especially sensitive to variances in the quality of data input, which requires adopters to practice strong discipline regarding data integrity and maintenance processes. Due to the potential for disruption of business processes by technology, Business Process Engineering should commence in the design phase of the project and continue through project completion following a continuous improvement process. Initial efforts during this Assessment to describe and quantify the current state business processes are a baseline for future business process re-design efforts. The gaps and pain points identified in the current state workshops Page 43 of 84 © 2018 UtiliWorks Consulting, LLC will provide an initial glimpse of how future state operations can be re-designed to meet the Utility’s needs. Adoption of AMI technology requires significant re-design of current utility business processes to fully satisfy acceptance criteria and expected payback. This exercise provides a common understanding of the business process it represents for all impacted stakeholders, no matter the level of technical expertise they possess. The process is also useful to capture and memorialize decisions made during the design and development of the AMI system. It is often overlooked in terms of how critical business process design is to the success of any project. Once fully developed, the documents can be used as training material for all internal and external resources involved in the business process. A. Impacted Core Business Processes UtiliWorks recommends that the following business processes, at a minimum, undergo a complete current state process definition and mapping to provide the basis for future state process design: 1. Meter Reading & Billing The meter reading process will be impacted the most of any business process in that it will require the development of an entirely new process. The management of the consumption data and its quality will become a daily responsibility. Resources will have to be assigned to monitor and manage exception reports to ensure the quality of the data that the billing function depends. The reassignment and training of resources will be crucial for the transition to a network based reading system. New processes will need to be developed for exception investigation and handling. The consumption validation process will change by having quality-assurance processes set up in the MDM system for meter reads before the CIS receives the meter reads for billing. The AMI and MDM systems will be used earlier on in the data flow to identify missing reads, investigate, and resolve issues. Billing will continue to run its quality assurance processes and will remain as the last line of validation against inaccurate bills going to customers. 2. Customer Inquiry and Response (High Bills) Assuming Palo Alto elects to implement a fully integrated Customer Portal, CS Rs will be able work with customers to help them learn how to access detailed information on their own pertaining to bills, consumption and rates. Even without the deployment of a customer portal, the role of the CSR will move toward education and coaching, which will pay dividends for both the Customer and the Utility over time. 3. Single Meter Change-out/Retrofit After deployment of the metering project, Palo Alto will need to adhere to proper process and procedures to maintain data integrity within the systems. Single meter exchanges, new installations, and retrofits will include additional data tracking which will require workflow alterations. 4. Move In/Move Out CSRs will be able to provide a higher level of customer service by scheduling the start and stop of service for customers. Remote meter reading and disconnect/connect capabilities will allow CSRs to capture the out/in read and disconnect/connect electric service with the push of a button. Existing business processes will need to be maintained along with development of new processes to manage remote reads. Decisions and permissions will need to be set up to support the personnel who will be authorized to perform this process from the office. 5. Service Disconnect for Non-Payment Like the changes in Move-In/Out, CSRs will have the ability to use the capabilities of the system to remotely disconnect/connect service for non-paying customers. Process and Page 44 of 84 © 2018 UtiliWorks Consulting, LLC policy development will be required to determine the best methodology for performing this activity, the workflow alterations, policy shifts and any other changes will be required for the process. B. Policy Considerations There are several policy impacts that CPAU should consider as they undertake a business process re- engineering initiative related to the AMI deployment. Many changes will affect internal policies, which do not require changes to official Rules and Regulations, but do require consensus from those in the organization. In addition to the internal changes, there are others that will likely require changes to official Rules and Regulations. CPAU estimates that it could take up to six to nine months to make changes, and as such, should begin assessing these policy impacts as soon as possible. Some policies will not be able to be fully defined until systems are selected and BPR future state sessions have taken place. This exercise will help inform which direction the policies will shift. Specific policies that may be impacted include: RR09 – Discontinuance, Termination and Restoration of Service Procedures for CPAU-Initiated Termination of Service – Review the procedures and include anything applicable to remote disconnect for electric meters. CPAU may also consider remote disconnect for water meters. These policy changes will coincide with business process changes around whether to allow same-day and after-hours disconnects/reconnects. RR10 – Meter Reading Billing Period – CPAU will revisit the billing period of 27-33 days during re-engineering of business processes. If desired, this window can be condensed with AMI reads available daily. Also, abnormal conditions and bill estimation techniques may change with AMI/MDMS systems in place. These cannot be fully determined until selection has taken place. CPAU must also consider whether the “Customer Reads Own Meter” Program; will this program continue under AMI? RR11 – Billing, Adjustments, and Payment of Bills Theft of Service – The language in this section is a great start, but should be reviewed. See Meter Seals section under RR15. Leak Credits – There is clear language that leaks beyond the meter are the customer’s responsibility. However, CPAU may consider including additional language about automatic leak alerts or proactive notification by Customer Service whenever a leak event seems likely. RR15 – Meter Installation Meter Seals – There is a solid definition of and language to enforce tamper and theft scenarios in the current rules and regulations. However, this should be reviewed to make sure all cases are properly accounted for. This could include cost to replace certain new AMI materials, such as endpoint-only for water meter. CPAU may choose to add specific definitions of tamper, theft and illegal consumption. Meter tamper (unauthorized interference with equipment, e.g. cut lock) Meter theft (illegal use of electricity, water or gas, e.g. bypass) Illegal consumption (no account tied to consumption, e.g. new customer). Also, CPAU can choose to set increasing charges based on repeat incidents of theft or tamper. Page 45 of 84 © 2018 UtiliWorks Consulting, LLC Meter Tests – Current rules and regulations state that all meters will be tested prior to installation. This policy may need to be changed for mass deployment, which often rely on factory meter accuracy tests, rather than testing all new meters. This policy is only indicated for electric meters currently. Also, CPAU should increase the meter-testing fee and consider implementing a maximum number of meter tests allowed per customer per year (or per service lifetime). Both changes can be justified, since inaccurate meters and testing is expected to be reduced with daily meter read data now readily available to the utility staff and customers. New Policy for “Opt Out” Program - CPAU should consider eligibility for this program, who will administer it within the Utility, charges to be applied for meter reading activity, charges for meter replacement of a new customer moving into an AMI-equipped premise, charges/program eligibility for disconnect for non-payment. 3. Data / Information Processing and Reporting It is important to focus on the data and information that will be captured by the AMI system and stored in the MDMS to make the most of the investment. Decisions regarding what to do with the resulting expansion of data available to Utility staff is a key driver regarding the design and configuration of the system. Both the AMI and MDM systems will offer more robust exception, troubleshooting, and diagnostic reporting options, along with alarms and alerts. However, it will be necessary for Palo Alto to invest the time and effort up front to clearly define business requirements and understand the respective reporting capabilities of each system to maintain a manageable workload. The AMI system will provide expansive amounts of data that must be converted to useful information, or business intelligence, before it can be meaningfully used by CPAU. To fully use this functionality, it is important to define the integrations, especially with the CIS and the GIS, which facilitate business intelligence to support CPAU goals and strategic direction. Business intelligence reports also need to be specific to the users’ needs, and they, for the most part, do not come out of the box. They need to be developed with the tools provided by the MDMS. The ability of individuals users to use these tools to build the strategic information needed will vary within departments and sometimes a “superuser” resource is needed to facilitate report customization. As part of a procurement process, UtiliWorks recommends that Palo Alto investigate thoroughly the underlying data retention, notifications, reporting and alarm functionality of all considered systems, request for samples of any preconfigured reports, and verify that the system will facilitate customized development at the user level, if so desired. Page 46 of 84 © 2018 UtiliWorks Consulting, LLC Change Management & Communications 1. Change Management A "one-size-fits-all" approach is not effective for Change Management. Every new project has a distinctly different scope for change, with varying impacts to stakeholders. UtiliWorks employs the basic Change Management approach depicted in Figure 11: Change Management Approach. As part of an onsite exercise in November 2017, UtiliWorks met with the CPAU project team to discuss the aspects related to developing a Change Management strategy. Figure 11: Change Management Approach The November 2017 Organizational Impacts onsite workshop included dialogue on change scope, readiness of the organization, stakeholder analysis, and internal messaging for the project moving forward. In large part, implementation has been driven by interest from the Palo Alto community, with the expectation that Utilities is forward-thinking and technologically-progressive. However, there has been some criticism as to the relatively late adoption AMI. To alleviate resource constraints and mitigate risks associated with too radical a change, the AMI/MDM system is not scheduled to begin deployment until Q4 2020 due to the impact of other projects as outlined in Section D. The staff at Palo Alto is largely well-informed about the upcoming implementation of the AMI project. Though Utilities already started to implement other technologies, such as a customer engagement portal, CIS and ERP, an AMI/MDM system is needed to realize the full potential of current and future projects. 3. Supporting Change Implement Corrective Actions and Reinforcement Review Change Management Plan 2. Administering Change Establish Change Plan Manage Communications Plan Administer Training Respond to Resistance 1. Priming for Change Assess Change Scope & Objectives Evaluate Readiness of Organization Conduct Stakeholder Analysis Develop Key Change Messages Page 47 of 84 © 2018 UtiliWorks Consulting, LLC The implementation of AMI poses substantial change for Utilities. Operationally, Palo Alto’s data stream will grow from 12 reads per meter per year to over 8,760 reads per meter per year, affecting not only individual departments, but the public generally. For some departments, which are well- keyed-into the ongoing project planning process, the changes that come with AMI implementation will be expected, and negative consequences or potential risks will be substantially mitigated. For other groups, such as the meter readers whose current responsibilities will be phased out, the operational impacts will represent radical change, especially if there is an inability to meet new staffing needs dues to a skills gap. Palo Alto possesses relatively higher-educated staff than other utilities—both academically and professionally. Most meter readers are tech-savvy, with at least an associate’s degree, which positions them to make the switch to AMI-related positions. In addition, a number of those persons working in Customer Support/Administration/Resource Management have been involved with the Palo Alto pilot smart meter program. Customer Support is already accustomed to using multiple applications aside from CIS as a part of daily operations and would likely readily adopt additional Customer Portal and MDMS software into their current workflow. To manage concerns and expectations of the upcoming changes, Palo Alto management has expressed a need for clear and concise messaging that AMI will enhance and empower employees to more effectively perform their roles. Palo Alto has identified three primary stakeholders moving forward—the AMI/MDM project team; UAC and City Council; and the Palo Alto community—all of whom have substantial buy-in to the project. A small, but vocal resistance is expected within the community once deployment begins. However, Utilities plans to offer educational town halls and an “opt-out” option from the AMI program to address this group’s concerns. UtiliWorks emphasizes that identification of stakeholders’ needs and leveraging their influence is invaluable to project progress. To prime stakeholders for change, the Palo Alto team has developed a few key change messages, which communicate the vision for AMI implementation and the future of Utilities: On AMI & CPAU Strategic Direction: CPAU must invest in technology to enable customer adoption of new technology applications and improve operational efficiency. CPAU will utilize AMI as a foundational technology for operations as it continues to invest in value-add projects for the customers it serves. To Meter Readers: Meter Readers will be provided with opportunities to cross-train with Meter Technicians, Field Service Representatives and Customer Support to explore new career paths. On AMI Project Timing: AMI project must be carefully sequenced around CIS and ERP deployment to minimize disruption to operations and maximize benefits from the AMI infrastructure. 2. Communications Communications planning will become increasingly important, both internally and externally, as the AMI project progresses. CPAU has a dedicated Communications Manager who is also involved in the Strategic Planning initiative currently underway. The AMI project planning team should continue to check-in with the communications group to ensure all CPAU communications are on point. The majority of project-related communications planning is not expected to occur until the procurement phase is underway in 2019-2020. However, the stakeholders identified and key messages developed as part of initial Change Management preparations should be used to help inform internal messaging between now and the beginning of procurement. See Section H.1. Page 48 of 84 © 2018 UtiliWorks Consulting, LLC Recommendations 1. Recommendations As a “next step” for this project, UtiliWorks has presented the following recommendations to CPAU: 1. Based upon the cost-benefit analysis outcome and readiness assessment contained in this report, CPAU recommends seeking approval for AMI investment. 2. If approved, CPAU will proceed with Phase 2 (Procurement) for the AMI project. UtiliWorks will stay engaged with CPAU to assist with the system specifications and procurement process. 3. Deployment preparations should follow the AMI Implementation Plan and Technology Roadmap presented in Section F and Section D, respectively. Activities include refinement of the CPAU staffing plan, development of requirements specification, and completion of CIS data cleansing and meter audit. 4. During deployment planning, UtiliWorks recommends that Palo Alto undertake and document the following planning efforts at the appropriate time during the project: a. Project Execution Plan b. Proof of Concept Implementation Plan c. Test Plan d. Change Management & Training Plan e. Communications (Public Relations, Education, and Outreach) Plan f. Mass Meter Change-Out Plan g. Field/Data Quality Assurance Plan. 5. UtiliWorks recommends that the Utilities Technology Roadmap be reviewed and revised on an annual basis by the Utilities IT team to assess project progress and reprioritize Utilities projects. A full reassessment should be completed after five years. Page 49 of 84 © 2018 UtiliWorks Consulting, LLC Appendices Appendix A – Project Risk Register PALO ALTO SMART GRID RISK MANAGEMENT LOG Project Name: Smart Grid Assessment Project Manager Name: Kara Truschel ID Current Status Risk Impact Probabilit y of Occ. Risk Map Risk Description Project Impact Risk Type Threat / Opportunity Risk Response Mitigation & Response Strategy Description Implementation Phase 1 Open Medium Low Green Insufficient project funding Could lead to project delays or work stoppage. Grid modernization is capital intensive and faces problems imposed by the utilities’ constrained balance sheets. Budget Threat Avoid Pursue grant opportunities through California Financing Coordinating Committee (CFCC), Department of Energy (DOE), Department of the Interior (DOI), and United States Bureau of Reclamation (USBR). 2 Open High Low Yellow A lack of public awareness and education concerning the AMI program Could lead to some public concerns and hostility within the community. Customer buy-in is extremely important for an AMI/MDM system. Community Threat Mitigate Launch a public awareness campaign to build support within the community and educate consumers on AMI/Smart Meter technology. Consumer education is needed regarding the merits of AMI and the societal benefits of grid modernization. If appropriate, host town halls to engage the customer community at grass-roots level. 3 Open High Low Yellow Poor community engagement/opt-out program planning/customer opt-out first and ongoing costs This risk poses a threat to the perceived value and success of the project. Community Threat Mitigate Well-defined communication and stakeholder management plans will be critical to success and the control of this risk. Risk response plans for a variety of potential scenarios are recommended. Page 50 of 84 © 2018 UtiliWorks Consulting, LLC 4 Open Medium Medium Yellow Customer concerns of EMF safety and privacy This risk poses a threat to the customer confidence and sentiment regarding the implementation of an AMI system. Community Threat Mitigate The stakeholder and communication management plans must address these enterprise environmental factors to mitigate this risk and allay fears the customer community may have regarding these details. Opt-out program will be offered. 5 Open Medium Low Green Lack of customer- specific FAQs and CPAU contact information for all subjects related to their new AMI service This risk poses a threat to the perceived value and success of the project. Community Threat Mitigate This risk is somewhat similar and related to Risk ID #3, in that communication and stakeholder management are keys to controlling this threat. Risk response plans for a variety of potential scenarios are recommended. 6 Open Low Low Green Lack of meter maintenance/meter reading plan for opt- out customers This risk of alienating customers, who may already be reticent to "buy in" to the "new" AMI technology. Loss of customer confidence would be a concern. Community Threat Mitigate This risk is somewhat similar and related to Risk ID #3 and #5. One meter reader will remain to perform manual reads. 7 Open Medium Low Green No identification of staffing and other resource requirements needed to continue to provide non-AMI meter reading services to opt-out customers This risk of alienating customers who may already be reticent to "buy in" to the "new" AMI technology. Loss of customer confidence would be a concern. Community Threat Mitigate This risk is somewhat similar and related to Risk ID #3, #5 and #6. This risk can be mitigated by identifying and planning for staffing and other resource requirements needed. Risk response plans for a variety of potential scenarios are recommended. Page 51 of 84 © 2018 UtiliWorks Consulting, LLC 8 Open High Medium Red Poor re-engineering of business processes, documentation and training This risk poses a threat to the perceived value and success of the project. Organizational Change Management Threat Avoid 1) A continuous improvement project should be written into the AMI implementation program to provide post live auditing of business processes and knowledge transfer to ensure the complete utilization and maximize the benefits of the technology investment. 2) Including a PM with AMI implementation experience can reduce the probability of developing poor processes and training. 3) Institute a Change Management Plan. 9 Open Medium Medium Yellow Shifting politics and organizational changes Could disrupt project progress or halt it altogether. Overlapping federal, regional, state, and municipal agencies sometimes create an impediment. Organizational Change Management Threat Accept 1) Build support from neighboring utilities, City Council, and Utility Boards. 2) Participate in AMI industry workshops and conferences to stay abreast of best practices and industry standards. Page 52 of 84 © 2018 UtiliWorks Consulting, LLC 10 Open High Medium Red Ongoing or upcoming infrastructure projects may compete for resources Competing projects/departments may require the same SMEs or project leads. Resources Threat Mitigate 1) Dedicate a Project Manager within the organization to keep the project on track and escalate any resource issues. Dedicate a Project Sponsor within the organization to work with and assist the PM with internal politics and to escalate any resource issues. 2) Establish a Steering Committee to provide the project team with an escalation point for issues that are unresolved or blocked. 3) Minimize the large team meetings to only include kickoff, major review sessions, final presentations, and training to avoid burnout from too many meetings. 4) Dedicate one key process owner for each of the following functions: billing, customer service, IT, meter reading, field support, and operations. This resource should be experienced, available for individual deep-dive sessions, and able to participate in the project from beginning-to- end. 5) Perform Annual Review of the Technology Roadmap to ensure that project needs don't overlap and precedent projects stay on schedule. 11 Open High Medium Red Poor staff engagement/ communication and lack of focused change management plans/ implementation This risk has the potential to cause delays to the project schedule if not addressed. Resources Threat Mitigate This risk is somewhat related to Risk ID # 13. Well-defined communication and stakeholder management plans will be critical to success and the control of this risk. Risk response plans for a variety of potential scenarios are recommended. Page 53 of 84 © 2018 UtiliWorks Consulting, LLC 12 Open High High Red Lack of adequate warehousing and receiving space for deployment This risk poses a threat to the deployment pace desired by CPAU. It is anticipated no suitable facility will be provided by CPAU. Resources Threat Transfer This risk can be mitigated during the Procurement Phase through incorporation of a requirement that vendors identify their own warehousing and storage space. Transferring the risk to a third- party installation contractor will increase the overall cost of the project. 13 Open High Low Yellow Lack of project team and internal stakeholder buy-in Could lead to project delays, cost overruns, and project failure. Resources Threat Mitigate 1) Leadership should demonstrate a strong understanding of project goals and develop an “elevator pitch” that shows project support. 2) Internal project staff should be fully educated on the technical components of an AMI system and undergo thorough training prior to the Go-Live date. 14 Open High Low Yellow Insufficient staffing to deploy and integrate systems This risk has the potential to cause delays to the project schedule if not addressed. Resources Threat Mitigate Resource requirement planning and projections must be well- defined and a component part of risk analysis to avoid this threat. 15 Open High Medium Red Cost overruns due to unforeseen deployment risks Cost overruns can contribute to a variety of undesirable results including schedule delays and loss of both internal and external stakeholder confidence which are difficult to rebuild and recover from. Schedule Threat Accept 1) Rigorous project risk management must be applied to identify, analyze, and plan responses for all known risks to reduce to the degree possible the amount of unforeseeable risks that might be encountered during the monitor and control phase of the project. 2) A possible risk response strategy is to plan a management reserve or contingency budget for areas of concern. 3) Including a PM with AMI implementation experience can reduce the amount of unforeseen deployment risks. Page 54 of 84 © 2018 UtiliWorks Consulting, LLC 16 Open High Medium Red Ill-defined contracts lead to improper level of configuration, or missing integrations This risk poses the potential for significant impacts to project scope, schedule, and budget resulting in a variety of undesirable issues. Scope Threat Mitigate Project scope and procurement management planning will be critical to mitigating risks that will increase scope and project duration after implementation and installation has begun. The components of these two plans must be well-defined. 17 Open Medium Medium Yellow Meter pits/lids in poor condition or undersized, preventing installation Failure to address this risk when scoping the project would result in the need for a change request to expand scope during the installation phase and would increase the budget and schedule of the project Scope Threat Mitigate 1) Accurately defining hardware requirements will be critical to mitigating the risk of change requests during the installation phase of a project leading to delays. 2) Meter survey will help inform pit and lid replacement strategy. Meter lid replacement will be in scope for AMI project. 18 Open Medium Low Green Overlapping deployment of IT projects leads to inadequate identification of all integration points with AMI/MDMS This risk has the potential to cause delays to the project schedule if not addressed during the planning phase of the project. Scope Threat Mitigate 1) Accurately defining integration requirements will be critical to mitigating change requests during the implementation phase of the project leading to delays. Scope definition and management are key and will begin during the Procurement Phase. 2) Including a PM with AMI implementation experience can reduce the amount of unforeseen integration risks. 19 Open Medium Low Green Lack of AMI meter testing plans, schedules, protocols and customer charges Failure to address testing, schedules, and protocols would result in a critical failure and must be spoken for in risk analysis. Scope Threat Mitigate The planning for quality management as it relates to testing activities will be critical to the mitigation of issues that can arise when not thoroughly testing systems. Scope definition and planning are key. Page 55 of 84 © 2018 UtiliWorks Consulting, LLC 20 Open Medium Medium Yellow Lack of customer notification plan for cybersecurity breach This risk poses a threat to customer confidence and sentiment regarding the implementation of an AMI system. Security Threat Mitigate 1) This risk can be mitigated by developing a customer notification plan for a cybersecurity breach. Process to be developed and incorporated into Rules and Regulations changes. 2) The stakeholder and communication management plans must address this public relations threat to mitigate risk and potential loss of customer confidence. 3) Coordinate with City IT to inform planning on this risk. 21 Open High Medium Red Incorrect/incomplete meter data in CIS for mass meter deployment Could lead to inaccurate vendor proposals/pricing, and eventually cost overruns and delays. Technology Threat Mitigate Plan and implement CIS data- cleansing and meter surveys prior to AMI procurement. 22 Open High Medium Red Poor system integration to existing and future applications (i.e. GIS, ERP, CIS, Asset Management) Attention must be given to this critical requirement to prevent high costs, delays and the risk of incompatible technologies in the future. Technology Threat Mitigate Requirements gathering, planning, and procurement management will be key to mitigate the potential for system and technology incompatibilities. 23 Open High Low Yellow Existing customer meter incompatibility with AMI communication module selected (mainly related to water and gas meters) Will require full meter replacement. Technology Threat Mitigate Meter changeout should be pursued for all locations that do not have AMI-compatible encoder register. Full electric meter replacement anticipated. Page 56 of 84 © 2018 UtiliWorks Consulting, LLC 24 Open Low Low Green Immaturity of technology (e.g. new meter types such as ultrasonic/electronic water meters) Choosing immature technology can lead to issues that may not be fully understood by the vendors supplying these software and hardware materials. Technology Threat Mitigate Exposing the utility to the risk of immature and unreliable technology must be considered when balancing reliability and future proofing in the technology selection process. This risk should be mitigated by thorough and rigorous research into the available technologies to support well-informed selection decisions during Procurement Phase. 25 Open Medium Low Green Improper equipment specification/selectio n leading to operational and/or billing problems The impact of improper hardware or software selection would negatively impact the project cost and schedule. It has the potential to negatively impact project team morale as well. Technology Threat Mitigate Requirements gathering and procurement management will be key to mitigate the potential for improper equipment selection. Post-Implementation Phase 26 Open High Medium Red Lack of Council- approved policies and protocols to effectively respond in a new technology environment (e.g. billing disrupted through a cyber- attack, cyber hack that results in remote turn-off of customer meter) Could lead to some public concerns within the community. Protecting customers from the exposure of unwanted impacts from the implementation of an AMI/MDMS system must be treated with a very high priority. Community Threat Mitigate The creation or revision of policies related to day-to-day operations should be identified during business process design and development. These policy requirements must be treated with sufficient urgency and priority to ensure that they're approved by the time the impacted processes are ready to be released to the production business environment. Revisit on an annual basis. 27 Open Medium Medium Yellow Poor utilization of data supplied by AMI headend and MDMS This risk poses a threat to the perceived value and success of the project. Organizational Change Management Threat Avoid A continuous improvement project should be written into the AMI implementation program to ensure complete utilization of the technology investment. Page 57 of 84 © 2018 UtiliWorks Consulting, LLC 28 Open Medium Medium Yellow Failure of delivery/realization of cited benefits and functionalities This risk poses a threat to the perceived value and success of the project. Organizational Change Management Threat Avoid A continuous improvement project should be written into the AMI implementation program to provide post live auditing of business processes and benefits verification to ensure the complete utilization and maximization of the technology investment. 29 Open High Medium Red Technology obsolescence and vendor instability over project life cycle Changing vendors of the type and variety required for an AMI project could cause major disruption to cost, schedule and quality. Resources Threat Mitigate This risk can be mitigated through a careful vendor selection process. This risk should be mitigated by thorough and rigorous research into the vendors to support well-informed selection decisions during Procurement Phase. 30 Open High Low Yellow Inadequate resources to support the ongoing operations, maintenance, and data analytics of the AMI system With the implementation of AMI, there will be new tasks related to system monitoring, reporting, and exception handling. It is expected that a dedicated technical resource that is familiar with Palo Alto processes will be required for this work. Additional resource(s) may be required to support the data analytics for both the water and electric departments. Resources Threat Avoid 1) Hire or reallocate technical resource(s) to the AMI project. Failing to build and/or attract the needed technical talent would be a barrier to the full realization of system potential. 2) Revisit operational staffing plan on an annual basis. 31 Open Medium Medium Yellow Cost overruns related to maintenance and staffing for operational support Cost overruns can contribute to a variety of undesirable results including loss of both internal and external stakeholder confidence, which is difficult to rebuild and recover from. Resources Threat Mitigate Resource planning and management will be key to mitigate the potential for cost overruns. Page 58 of 84 © 2018 UtiliWorks Consulting, LLC 32 Open Medium Medium Yellow Data encryption and cyber security risks The risk of insufficient cyber security protection in new systems being implemented has the potential to cause unplanned costs and project delays as well as loss of customer confidence and sentiment. Security Threat Mitigate Requirements gathering, planning and procurement management will be key to mitigate the potential for system and technology security vulnerabilities (AES 256-bit encryption). 33 Open High Low Yellow Inability to manually read meter routes if the AMI system should go down As meter data collection is a critical function, any issue here must be mitigated. Technology Threat Mitigate 1) System design will be key to durability and resilience which will reduce the need to manually read meters. A well-planned risk response regarding any potential threat should be prepared. 2) Decide what the alternative data collection method would be in event of a failure (i.e., drive-by or manual collection) and choose a relevant AMI system that supports the alternative method. 3) Include in warranty language for contract(s). 34 Open High Low Yellow Inability to use AMI data and existing rates to calculate debits, credits, and charges in the billing system The inability to use AMI data for these critical-to- success business requirements would be perceived as a failure of the project and the investment. Technology Threat Mitigate The selection of a compatible AMI system that can be successfully integrated to the CIS system is key to controlling this risk. 35 Open High Low Yellow Inability to update software and/or firmware for meters and ancillary equipment over the air Inability to update software or firmware over the air has the potential to cause significant costs in the future and reduce or limit product lifecycle. Technology Threat Mitigate Requirements gathering, planning, and procurement management will be key to mitigating the potential for the reduction in the utility's ability to "future proof" its technology investments. Page 59 of 84 © 2018 UtiliWorks Consulting, LLC 36 Open Medium Medium Yellow Inaccurate connectivity/distribu tion models and GIS data prevent full AMI capabilities from being utilized This risk poses a threat to performing timely meter work and can lead to confusion in field activities. Technology Threat GIS project scope should encompass defining asset relationships in GIS (such as meter to transformer, and meter to pressure zone) so that full AMI analytics may be utilized. Page 60 of 84 © 2018 UtiliWorks Consulting, LLC Appendix B – Current State Operations For the purposes of this report, current state operations data that was discovered during the initial stages of this assessment is categorized and presented in a narrative format herein. This data served as the background for this assessment and is presented to provide a holistic, rather than technical, overview of operations at CPAU. 1. Meter Reading & Field Services The City of Palo Alto services over 30,000 electric connections, over 20,000 water connections, and over 24,000 gas connections. There are formal meter-testing programs in place for both water and gas meters, but none for electric meters. Utilities have a replacement program in place for gas meters and small (2” and under) water meters, following AWWA/AGA standards of a 17-20-year replacement cut-off. Larger water meters are not slated for replacement, but most deployed units have been monitored and calibrated appropriately. In general, meter technicians maintain and install all meters, excluding large water meters, which are serviced by a combination of contractors and city crew. Customer Support Services oversees the meter readers, while the Water-Gas-Wastewater operations group oversees the field service personnel that address meter-related issues. The Utility service area covers approximately 25 square miles. There are 17 reading cycles and 109 routes. Between 3,000 and 4,000 meters are read daily by six regular and three temporary meter readers, using nine vehicles consuming unleaded gas. In addition to the meter readers, there are other personnel that support the meter reading process—among these, one lead customer service specialist, six customer service representatives, two customer service specialists and two credit and collections specialists. Meters are read on a formalized schedule, every business day, using Itron FC300 handheld units to interface with Itron FCS and Itron MCLite reading systems. A small proportion of the customer base (approximately 700 customers) participates in a self-read program. Meter-reading exceptions are triggered in the billing system by one of several flags: zero consumption, meter roll-over, higher-than-expected read, or lower-than-expected read. Customer service will then review the read, send a service order to the meter reader, and manually enter a corrected value into the system the following day. For the case of move-out, only electric service is terminated, while water and gas service is left on. Only after usage is detected will the remaining services be switched off. In the case of delinquency, service will be terminated after notification of a door hanger notice. These turn-offs can take place on any business day and are scheduled. Same-day turn-on is offered, except for Fridays and days preceding a holiday. Service Notifications for the services enumerated above are handled via SAP. 2. Billing The CIS system and meter-to-cash billing process is supported by six full-time equivalents consisting of one project coordinator, two business analysts, two senior business analysts, and one principal business analyst. The number of days in a billing cycle ranges from 27-33 days. It usually takes two business days from the time the meter is read to when a bill is generated, and bills are printed daily. Bills are seldom estimated, except in the case of meter damage or inaccessibility. Re-reads are flagged in the system and prompt manual investigation, requiring a customer service specialist to review usage history, Page 61 of 84 © 2018 UtiliWorks Consulting, LLC before a service notification is generated to dispatch a meter reader to confirm the read. Precursory exceptions are outlined in the previous subsection. Utilities customers have 20 days to pay their bill from the day of invoicing. If payment is not remitted, Utilities will mail a delinquent notice to the customer 10 days following the bill due date. After 13 additional days, a service disconnect may occur. For service disconnects, Palo Alto notifies customers via a door hanger 48 hours prior. If Utilities detects water or gas usage after electric disconnect, Palo Alto will disconnect water, but is required to leave a door hanger notice prior to disconnection, in compliance with the California Health and Safety Code. Gas is never disconnected. For these disconnects, a manual disconnection notice must be created by staff and sent to field service. Billing assesses late fees of 2% of the total bill, with approximately $279,000 in late fees collected in fiscal year 2016. 3. Customer Service Utilities customer service is staffed by eight customer service representatives (one of whom is part- time), two customer service specialists, and two lead customer service specialists, responsible for setting up accounts, responding to inquiries, and providing account maintenance. Though Utilities no longer tracks call type, a holistic estimation of the top three call topics includes: 1. High bill 2. Move-in/move-out 3. Efficiency advice The average call length is three minutes, 45 seconds. In addition to calls, Utilities offers a walk-in service for customer inquiries, which assists about 3,600 customers per year. In addition to traditional billing, customers can submit payments via walk-in, over-the-phone, interactive voice response system, or My Utilities Account web portal. The customer portal supports one-time credit card and recurring bank draft payments. Approximately 18,000 customers are actively registered, and though distinct logins are tracked, no other metrics are available. The web portal allows customers to view statements online, view payment and usage history, process one- time credit card or recurring bank draft payments, and manage billing notifications. 4. Electric Meters/Meter Shop The electric meter shop purchased a WECO meter test bench in 2014. This system is calibrated annually. To date, no formal periodic meter testing and/or replacement program has been implemented for electric meters. Meters are tested and calibrated (only mechanical meters are calibrated) when removed from service if they are to be reused. The estimated lead time when ordering new meters is six to eight weeks, and there is no preferred make or model. Upon receipt of meters from a supplier, about 10% are tested before installation. Palo Alto has neither the space, equipment, nor manpower to facilitate AMI deployment and will require vendors to locate off-site staging and warehousing. Utilities has expressed interest in using in-house personnel to deploy commercial and industrial meters, however. UtiliWorks reviewed and analyzed the electric meter inventory (summarized in Table 15: Electric Meters by Type) to populate the cost-benefit model with an accurate count of meter replacements. Page 62 of 84 © 2018 UtiliWorks Consulting, LLC In addition, we review the meter population to identify exceptions or anything that would be useful so that a proposing vendor can provide a more accurate response to an RFP. Table 15: Electric Meters by Type Electric Meter Type Count Single Phase - 1S w/ Remote Disconnect 110 Single Phase - 2S w/ Remote Disconnect 19,806 Single Phase - 2SE 695 Single Phase - 3S 81 Single Phase - 4S 3 Single Phase - 9S 1 Poly Phase - 5S, CL20 80 Poly Phase - 9S (8S), CL20 991 Poly Phase - 12S, CL 200 w/ Remote Disconnect 7,131 Poly Phase - 16S (14S, 15S), CL200 1,178 5. Electric Operations Power is supplied to the city by Western Hydro, NCPA Hydro, solar, wind, and LFG. CAISO serves as the transmission provider, and all marginal power supply is bought and sold through the CAISO market. The average load factor of the distribution system is approximately 63%, with a downward trend since 2000. The system peak demand is 170-175 MW, with 940 GWh having been billed in 2016. Utilities maintain 304 miles of electric lines across Palo Alto, with 96 service connections per line mile. Utilities also maintain (but does not own) streetlights throughout the City. Average annual line losses are estimated at 3%. The electrical system interfaces with an outage management system (OMS) that indirectly predicts outages by phone call logs. A geographic information system (GIS) system is also used to map equipment for OMS and maintenance, as well as distribution facilities. The Supervisory Control and Data Acquisition (SCADA) system in place controls a series of nine substations across the city. In its current design, Utilities has no control over substation voltage from the control center, nor does it have the ability to control individual phase voltage on feeders, voltage regulators, or capacitor banks. These functions can only be controlled at the substation- level. Utilities currently has an opt-in demand-side management program in place, with enrollment numbering in the hundreds and savings achieved of .44%-1.31% over the past decade. 6. Water Meters/Meter Shop Utilities makes use of a water meter test bench and a mobile test platform that is two years old and capable of testing meters 2” and smaller. Utilities has expressed interest in drought management tools, virtual metering, and remote shut-off for parks and irrigation meters. UtiliWorks reviewed and analyzed the water meter database to populate the cost-benefit model with an accurate count of meter replacements versus meter retrofits. Less than half of water meters at Page 63 of 84 © 2018 UtiliWorks Consulting, LLC Palo Alto will be greater than 20 years old prior to deployment. A summary of meter types by install date is shown in Table 16: Water Meter Types by Age. Table 16: Water Meter Types by Age Pre- 2002 200 2 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1" 1,272 71 70 76 69 64 202 171 163 174 274 196 221 153 142 134 61 5/8" x 3/4" 5,670 324 281 302 374 268 546 515 1,23 6 1353 1728 732 791 418 240 80 36 Hydran t 29 20 5 2" 383 40 14 16 24 19 26 29 23 45 37 30 24 50 42 29 6 1-1/2" 277 19 13 15 28 17 34 28 30 63 31 11 14 21 27 26 7 3" 37 4 2 3 3 6 2 4 2 8 6 12 2 1 1 4" 32 4 1 2 2 1 2 2 1 2 3 7 2 4 3 2 6" 20 1 1 2 1 2 1 2 3 2 8" 6 2 2 3 2 1 3/4" x 9" 364 3 5 3 3 2 2 5 1 3 31 15 21 2 2 In addition, we reviewed the meter population to identify exceptions or anything that would be useful so that a proposing vendor can provide a more accurate response to an RFP. The radio device that is the means of communication with the AMI network is a separate piece of equipment that must be connected to an encoded register. This allows a utility to keep the existing meter body and replace a register only if it is not currently compatible with AMI. 7. Water Operations/Water Conservation Palo Alto’s water is stored in five above-ground and two below-ground storage tanks. The total distribution storage capacity is 13.5 million gallons. Distribution of water across the 236 miles of water mains is facilitated through nine water pressure zones, with seven pump stations. Operational technology is overseen through a SCADA system, with pressure monitoring capabilities at all pump stations. In addition, SCADA is capable of monitoring and controlling PRV zones, tower levels, and pump pressure. The distribution system is metered via SFPUC transmission meters, but these meters have not been calibrated since inclusion within the system. A calibration plan will be implemented for all service meters by 2019. In 2016, 86 total breaks were reported, with daily production loss per break of .50% for mains breaks and .005% for hydrant breaks. Only large breaks are reported by SCADA where pressure drops are recognized in current operations; small customer breaks are not reported. Hydrant flushing occurs with mains breaks, but the distribution system is rarely flushed outright due to drought and water conservation efforts. Severe drought conditions in California led to a State of Emergency declaration by the governor in January 2014. In April 2015, the governor followed up with Executive Order B-29-15, which mandated the State Water Resources Control Board (SWRCB) impose water use restrictions. With this mandate, every water utility in the state was ordered to reduce water usage by a percentage relative to 2013 levels. Palo Alto residents have taken great strides in water conservation. With annual savings goals of .91% since 2013, Palo Alto has achieved savings of 1.54% and 1.96% in 2015 and 2016, respectively. Page 64 of 84 © 2018 UtiliWorks Consulting, LLC Conservation was achieved through a combination of programs targeted at both residential and commercial consumers. Conservation programs include: landscape conversion and hardware rebates, outdoor water auditing, and indoor self-auditing. At this time, however, Palo Alto has no specialized conservation dashboard on its web presentment service. 8. Gas Meters/Meter Shop Utilities maintains stationary gas meter test benches, though the Model 5 (used for larger meters) can be made mobile. A formal testing program has been implemented. Though no meters are pressure-compensated, some (fewer than 10) are temperature-compensated and are easily-identifiable in CIS. All gas meters are located outdoors; though some are behind gates or other enclosures, none have noteworthy access issues. UtiliWorks reviewed and analyzed the gas meter database to populate the cost-benefit model with an accurate count of meter replacements versus meter retrofits. In addition, we reviewed the meter population to identify exceptions or anything that would be useful so that a proposing vendor can provide a more accurate response to an RFP. About half of Palo Alto’s gas meter population will be greater than 20 years of age prior to deployment. A summary of meter types by install date is shown in Table 17: Gas Meter Types by Age. Table 17: Gas Meter Types by Age Pre- 2002 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 CNG 1 Curb (175-275) 115 5 10 12 6 9 13 17 8 19 22 8 13 21 14 18 9 Curb (310-630) 8 1 5 10 12 6 8 7 17 3 2 2 9 6 2 Curb (675+) 1 House (175-275) 10,568 583 421 479 479 405 438 611 530 746 693 718 811 674 590 712 304 House (310-630) 268 57 75 80 108 153 205 288 180 157 168 260 219 204 205 189 69 House (675+) 1 1 3 7 17 13 27 14 20 23 5 LDM 14 1 1 4 11 5 6 2 2 1 1 Rotary 107 44 35 36 33 65 40 24 33 28 34 39 49 46 62 63 11 Turbine 1 1 1 Ultrasonic 1 1 3 After discussions with Palo Alto, UtiliWorks was also able to identify that 50% of the meter population will require filter replacement and Grunsky tee installation during deployment. 9. Gas Operations Currently, Utilities measures natural gas purchases via SCADA, which monitors PG&E inlets; however, this method is neither accurate, nor reliable, and Palo Alto does not have separate inlet meters past the PG&E metering for cross-check purposes. Across its distribution lines, Utilities estimates losses of 2.2%-2.5%. Gas distribution is monitored through several vectors. As with purchase measurements, SCADA is relied upon heavily for gas operations and acts as a remote monitoring system for gas system pressure, temperature, and flow at key distribution locations. SCADA is also capable of real-time alarming and reporting on the four pressure regulator stations. Natural gas temperature Page 65 of 84 © 2018 UtiliWorks Consulting, LLC compensation is accounted for in the meter and, for high usage, is also factored into billing. Leaks are discovered via leak detection surveys. Unmetered gas consumption is usually the result of broken piping, and, although common on small services, it is not common on mains. Additionally, though a theft detection and prevention program is in place, theft does not pose a significant issue to operations. 10. IT Support/Systems A detailed analysis of IT systems and recommendations is provided in Section D. See Table 18: IT/OT Systems for a record of IT/OT systems in use at Palo Alto. Table 18: IT/OT Systems Function Name of Application Manufacturer System Interfaces Hosted / In House? System Owner Accounting/Financial/Purchasing SAP SAP Varies In House IT/Admin Services Department AMI (Pilot) Energy Axis Elster/ Honeywell Hosted Utilismart, Inc. Asset Management SAP SAP Topobase In House IT/Admin Services Department Automatic Vehicle Location (AVL) NASPO ValuePoint Verizon Portal Hosted Utilities BI/Reporting Software SAP BI SAP Anticipated: MDMS IT BI – Visualization Tableau Various Departments CIS/Billing/Service Orders SAP SAP SAP In House IT/Utilities Call Center Software Avaya Call Center Elite Avaya City phone system In House IT/Utilities Customer Web Portal MUA SAP SAP In House IT/Utilities Customer Web Bill Pay Portal MUA SAP SAP In House IT/Utilities Customer Web Portal MUA 2.0 SEW SAP Hosted Utilities GIS AME (Topobase) Autodesk GIS, SAP, and OMS In House Electric Engineering (AME) GIS (City) Homegrown - Geodesy IT Electric Estimating Software Autodesk Utility Design (AUD) Spatial Business Systems Utilities Page 66 of 84 © 2018 UtiliWorks Consulting, LLC Interactive Voice Response (IVR) IVR Vocantas SAP Hosted Customer Support Meter Reading - Water, Gas & Electric FCS Itron SAP In House Customer Support/Meter Reading Outage Management (OMS) NISC NISC Multispeak 3.0 to ACS; NISC IVR and ArcGIS In House Electric Ops/ Electric Engr. SCADA - Water/Wastewater ACS ACS In House Electric Ops/ Electric Engr. SCADA - Natural Gas ACS ACS In House Electric Ops/ Electric Engr. SCADA – Electric ACS ACS Multispeak 3.0 to NISC In House Electric Ops/ Electric Engr. Work Order Management System SAP SAP SAP In House IT/Utilities Page 67 of 84 © 2018 UtiliWorks Consulting, LLC Appendix C – IT Considerations for AMI/MDMS Procurement In addition to the vendor selection criteria to be decided by CPAU during Procurement, the following are considerations when selecting vendors for the AMI and MDMS systems, with regard to “future-proofing” the AMI selection. These areas should be incorporated both in the RFP and in the written contracts with the vendors wherever possible: 1. Financial viability. 2. Number of years in business. 3. Client list – Does the vendor have clients similar to CPAU in size and services offered? 4. Upgradability – AMI technologies continue to evolve, and so it is important to choose a vendor whose solution can be upgraded and enhanced without significant cost. 5. Innovation – What is the percent of annual revenues invested in research and development? 6. Data retention – How long is data maintained, for each type of data? 7. Application monitoring – What application monitoring capabilities are built in, and how they are presented to the client? 8. Reporting – Ask to see samples of preconfigured reports. 9. Service Level Agreements (SLAs) – What are the vendor’s SLAs for responding to and resolving system issues? Page 68 of 84 © 2018 UtiliWorks Consulting, LLC Figure 12: Full View, Utilities Technology Roadmap 1. Security Assessment As part of the AMI RFP process, CPAU should require MDMS and AMI system vendors to complete a Security Assessment. The Security Assessment will ask for the vendor’s approach to cyber security, including: Meters: o Limiting access to meters. Ke y : Q4- 2 0 1 7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 En e r g y E f f i c i e n c y Pro g r a m O p t i m i z a t i o n (E E O ) (T B D ) Te c h n o l o g y S y s t e m s (E s t . C a p i t a l C o s t ) Ye a r 1 - 2 0 1 8 Ye a r 2 - 2 0 1 9 Ye a r 3 - 2 0 2 0 OM S & A M I In t e g r a t i o n Dis t r i b u t i o n S y s t e m Opt i m i z a t i o n , C V R Cu s t o m e r T i m e - o f - Use R a t e s E x p a n s i o n New E E P r o g r a m s , D R pro g r a m s Util i t y S t r a t e g i c P l a n Dev e l o p m e n t Re-assessment Phase AM I / M D M S P r o c u r e m e n t AM I / M D M S S y s t e m S p e c Dat a C l e a n s i n g - f i e l d c h e c k s , m a s t e r d a t a c l e a n - u p CIS S t a b i l i z a t i o n Is s u e E R P R F P an d R e t a i n V e n d o r Im p l e m e n t N e w E R P HR M o d u l e Im p l e m e n t N e w E R P Fin a n c e M o d u l e Dev e l o p T e c h n o l o g y Ro a d m a p Not e : E a r l y s e l e c t i o n o f A M I v e n d o r a l l o w s met e r r e p l a c e m e n t s t o r e s u m e a s p l a n n e d , ah e a d o f m a s s i n s t a l l a t i o n o f A M I m e t e r s . Fu t u r e P r o g r a m s t h a t a r e de p e n d e n t o n A M I Dat e s a n d $ T B D In t e g r a t e C I S t o S A P & M U A Dat a C o n v e r s i o n : C r e a t e e x i s t i n g Cu s t o m e r s i n C I S Im p l e m e n t C I S + I n t e g r a t i o n w i t h ex i s t i n g S A P / E R P s y s t e m CIS D e s i g n P h a s e Is s u e C I S R F P an d R e t a i n V e n d o r 30 0 H o m e C u s t o m e r C o n n e c t / T O U R a t e P i l o t P r o g r a m - M a i n t e n a n c e P h a s e Fu l l D e p l o y m e n t ( b y r o u t e / c y c l e ) Im p r o v e m e n t o f E n e r g y E f f i c i e n c y P r o g r a m P r o m o t i o n s b a s e d o n n e w C I S / A M I - P l a n n i n g a n d Pil o t s , o n g o i n g Te c h n o l o g y D e p l o y m e n t Ad v a n c e d M e t e r i n g In f r a s t r u c t u r e ( A M I ) & Met e r D a t a Man a g e m e n t S y s t e m (M D M S ) ($ 1 7 t o $ 1 9 M ) Fu t u r e P r o j e c t In P r o g r e s s Alp h a P h a s e AM I / M D M S Im p l e m e n t a t i o n Be t a P h a s e AM I / M D M S Im p l e m e n t a t i o n In t e g r a t e M D M S t o C I S , M U A , A M I H e a d En d S y s t e m ( H E S ) , O M S & G I S En t e r p r i s e R e s o u r c e Pla n n i n g ( E R P ) (U T L s h a r e $ 1 t o $ 2 M ) Cu s t o m e r I n f o r m a t i o n Sy s t e m ( C I S ) ($ 4 - 5 M ) In P l a n n i n g Fle x i b l e B i l l i n g & Pa y m e n t S o l u t i o n Ye a r 5 - 2 0 2 2 Ye a r 4 - 2 0 2 1 ER P D e s i g n P h a s e In t e g r a t e n e w E R P w i t h C I S Ye a r s 6 + Dep e n d e n t on CIS Co o r d i n a t i o n Dep e n d e n t on CIS / M U A Dep e n d e n t on A M I Dep e n d e n t on A M I Dep e n d e n t on A M I Co o r d i n a t i o n Dep e n d e n t on A M I Page 69 of 84 © 2018 UtiliWorks Consulting, LLC o Physical security of the meter – Locks and/or mechanisms that disable or alert if a meter is tampered with. o Encrypting Personally Identifiable Information (PII) at rest and in transit using government- and industry-approved encryption standards. o The ability to remotely and securely upgrade firmware to patch for security threats. o Not allowing firmware to be read from the meter. Field Area Network infrastructure: o Hardwired network security. o Wireless network security. o Software security. o Hardware security, including limiting access to Field Area Network devices. o Intrusion detection. o Encrypting Personally Identifiable Information (PII) at rest and in transit using government and industry approved encryption standards. o Regular security audits and penetration-testing. AMI HES and MDMS hardware and software: o Data center physical security. o Network interface security. o Encrypting Personally Identifiable Information (PII) at rest and in transit using government- and industry-approved encryption standards. o Regular security audits and penetration-testing. In addition to reviewing security practices during the RFP and vendor selection, UtiliWorks recommends that CPAU include security in the procurement contract language, including requiring the vendors to take responsibility for security and vulnerability mitigation over the full product life cycle. 2. Disaster Recovery and Continuity As part of an RFP process, UtiliWorks recommends that CPAU assess the AMI and MDMS vendors’ disaster recovery and continuity plans. The review should include: What is the Recovery Time Objective (RTO)? This is how long it takes before major systems are back online after a disaster. What is the Maximum Tolerable Downtime (MTD)? This is how long systems can be down before it is deemed unacceptable and impacting the business. Are redundant data centers used? What are the geographical locations of the data centers? What is the frequency of data backups? Do the data centers follow security best practices for physical security and data security? Does the vendor perform annual disaster recovery and failover testing? Are the test scenarios and test results provided to customers? Page 70 of 84 © 2018 UtiliWorks Consulting, LLC Appendix D – AMI Implementation Methodology To effectively deploy complex technology, such as an AMI system, it is critical to have a well-devised implementation plan. UtiliWorks has developed a proven delivery mechanism for complex, technology implementations called the UtiliWorks Advantage™. This approach was specifically designed to clearly identify the project steps and highlight the inherent dependencies between technology and business process. The steps in this process are outlined in Figure 13: UtiliWorks Advantage. Figure 13: UtiliWorks Advantage This report is designed to meet the requirements of Step One – Assess. The feasibility study effectively provides the first go/no-go decision point on whether to proceed with future project development. Page 71 of 84 © 2018 UtiliWorks Consulting, LLC Appendix E – Utility Operational Technology Historically, Operation Technology (OT) and Information Technology (IT) have been managed as two different domains by most industries, including utilities. However, as connectivity and real-time data became more prominent in the last few years, OT has started to adopt IT-like technologies. This convergence of IT and OT is expected to enhance performance and operational flexibility with the better optimization of data. Utilities, can gain the most benefits in converging IT and OT, with most of its operational assets−transmission equipment, substations and meters−can be increasingly connected with intelligence while the performance data can be collected in real time. For example, utility metering was traditionally part of the OT world, while utility billing was traditionally part of the IT world. Now with advanced metering infrastructure, these two functions can be connected, bringing an end-to-end smart metering (meter-to-bill) where bills are produced based on exact meter readings, no longer on estimates. This section provides a description of the relevant technologies that potentially will transform utility operations and improve their performance and service to its customers. 1. Advanced Metering Infrastructure AMI is a transformational technology. This technology provides an excellent data collection platform, a bi- directional control network, and automates a very expensive and at times challenging business function. The deployment of an AMI system opens the door to a wealth of data previously unavailable to utilities and their customers. Previously, a customer’s meter consisted of a simple read once/month. Once the data was collected, all but the largest customers with specially designed meters generated a single-data element per month: a billing read. In contrast, AMI provides a steady stream of meter-reading and diagnostic data at regular intervals, as well as event-driven urgent messages. More granular usage data and system information can be transmitted digitally over the AMI network. If managed properly, this data can be used by many different applications, ranging from customer presentation of consumption profiles to usage of the data by engineering and operations to monitor system health and predict where upgrades to the system will have the most favorable return on investment. An AMI system can be configured so that a customer service representative can request an on-demand meter read. By relaying that information to the customer immediately (over the phone or at the billing and collection location), issue resolution can be accelerated. An AMI system, along with the data it delivers, can facilitate numerous improvements; however, a solid plan to design and deploy the system and business process changes is essential to project success. AMI implementation must be approached wisely in preparation for drastic changes in data volume, variety, and velocity. A successful path to AMI includes careful advanced planning and preparation regarding data distribution to all stakeholders involved. A. AMI System Details AMI systems allow meters to be read remotely from a central location through a fixed communications network. There are various AMI network designs available, including radio-frequency based, powerline carrier, or via broadband powerline. Today’s AMI systems suitable for Palo Alto are radio-frequency based. Radio-based products operate on either licensed or unlicensed frequencies. A license covers the use of a specific frequency in each area. The licensed band normally permits a higher power signal, which enables greater distance between the transmitter and receiver units. Unlicensed radio frequency systems operate under greater Federal Communications Commission (FCC) imposed frequency and power level constraints but with increased channel width and thus higher bandwidth capabilities. The same band can be shared by other devices using specialized modulation and frequency-hopping techniques, which make the systems inherently more interference-tolerant. Page 72 of 84 © 2018 UtiliWorks Consulting, LLC The most advanced metering systems use one-way or two-way communications to get the data to and from the meter through a transmit/receive endpoint or meter interface unit (MIU) connected to the meter encoder/register. These MIUs talk to nearby collectors, also known as gateways or data concentrator units (DCUs). It is not uncommon for AMI systems to also use a series of network repeaters to ensure adequate communications. The collectors are then networked to the utility head-end system through a fixed communication backhaul network. This backhaul network typical uses an Ethernet transport and can leverage city fiber, radio systems, cellular modems or any combination. Communications between the meter and the collectors are specific to each vendor and use proprietary protocols. The components of an advanced metering infrastructure system are illustrated in Figure 14: Sample AMI System Diagram (Point to Multipoint Network). *The diagram above illustrates a point to multipoint communication network, utilizing a radio frequency system. Although there are instances where the communication systems for electric and water are different and communicates to separate base stations/DCUs, in this diagram, both electric and water MIUs are presented communicating to the same base stations/DCUs. In future AMI network design, the network can be leveraged to support additional applications such as: distribution automation, demand response, SCADA “lite,” street-lighting management, plug-in hybrid electric vehicles, etc. Figure 14: Sample AMI System Diagram (Point to Multipoint Network) Many AMI systems collect interval (e.g., hourly or sub-hourly) data. Two-way systems enable the system to collect on-demand reads, send control signals, firmware updates and time synchronization signals to the MIU at the meter. Other sensors, such as acoustic leak detectors, can passively gather information and send it along periodically. Actuators, such as remote shut-off valves, can be triggered in response to commands from the head-end software. Typically, at pre-programmed intervals, MIUs at the customer premise transmit meter readings to nearby permanently positioned DCUs, which in turn relay the readings back to the head-end. Fixed Page 73 of 84 © 2018 UtiliWorks Consulting, LLC network MIUs typically collect readings from the meter several times per day and transmit them at least once per day. Most AMI systems rely on a relatively large number of low cost DCUs closely spaced on power poles or rooftops. The distance between the MIU and the data collector might be less than one mile. Other systems (sometimes referred to as “tower-based” AMI) use fewer more expensive collectors located on tall towers or buildings. These systems operate at higher power and the signals can propagate farther. The use of repeaters between MIUs and data collection units is common to fill in gaps and create a more uniform communications network. Point-to-Multipoint Networks A point-to-multipoint connection refers to a type of architecture for fixed wireless data communications, as described in the previous figure. A point-to-multipoint network configuration has a communication link between an “access point” radio and associated “remote” endpoints at the meter level. All meters can talk to the collector in this scenario, and the collector can talk back to the individual meters. Thus, this scenario is classified as two-way communication architecture. However, the meters cannot communicate to each other. In this setup, only data packets sent to the access point are acknowledged. Point-to-multipoint networks are licensed-spectrum networks and are classified as private. Mesh Networks Another variant of fixed network AMI uses a mesh network. In mesh networks, MIUs (“nodes”) themselves serve as relaying devices for data and instructions. Information “hops” from MIU to MIU until the head-end destination is reached. These mesh networks are generally self-forming and self- healing. Since the City of Palo Alto’s system will encompass electric and water, the combination network will allow meters to be routed to hop through the closest meter of any type. Most mesh networks use low power transmissions in the unlicensed bands, and MIUs must be reasonably close together (typical ranges up to 1,000 feet). Using the relaying scheme, a data collector can cover greater distances than some networks that rely on local data collectors. However, each hop adds latency to the network, thus avoiding excessive hops with good planning of DCU locations is important. Typically, AMI mesh network design is not recommended for a water-only utility, as the power required for the daily multiple hops may cause the meter interface unit battery (at the water meter) to drain quicker. It can be considered for utilities such as Palo Alto, which is a combination of electric and water, as the water meter interface unit can communicate only to the nearest electric meter and have the electric meter interface unit (which does not require battery) perform the multiple hops to send data, thus prolonging the battery life of the water-meter interface unit. Page 74 of 84 © 2018 UtiliWorks Consulting, LLC Figure 15: AMI Mesh Network Illustration Page 75 of 84 © 2018 UtiliWorks Consulting, LLC Table 19: Point-to-Multi Point vs. Mesh Network Characteristic Point-to-MultiPoint Network Mesh Network Spectrum Operates on a private licensed spectrum. Requires annual licensing fee Interference less likely because of licensing, but systems are more susceptible to interference if there is source. Operates on a public unlicensed spectrum. Does not require annual licensing fee. Higher chance of interference but systems are also more interference-tolerant. Signal-to-Noise Ratio Has a low noise floor. Signal-to-noise ratio can be maintained at a high level. Has a high noise floor. Signal-to-noise ratio can rapidly reduce when high noise levels are generated in shared frequencies Signal Range (Coverage) Can use higher level of output (US) to extend range. Range is limited due to one watt of power output limit (U.S.); remediated by locating points close together. Latency Signal moves through few or no mid-point nodes; latency is minimal. Signal must go through multiple “hops,” which increases latency. Hops can be reduced by adding more backhaul. Communicated Data Retrieval Higher risk of losing communication with endpoint due to relying on one communication path. AMI network needs to be designed carefully to ensure full coverage. “Self-forming” and “Self-healing” capability; network can re-route information to an alternative communication path. Infrastructure Higher cost of collectors (base stations). Less complex/requires less equipment. Lower cost of collectors (gateways). More complex/requires more equipment. B. Meter Interface Units The MIU either interrogates the encoded register of the meter, or accumulates electronic pulses corresponding to consumption from the meter, and transmits this and other information (such as identification numbers or tamper flags). Most MIUs are equipped with some tamper resistant features and may generate electronic “flags” if tampering occurs, such as a cut wire, a tilted meter, a tilted register, etc. Most of the leading electric meter vendors have their own electric meters designed with their MIUs incorporated in its meter casing (“under-the-glass”). See Figure 16: Under-the-Glass AMI Electric Meter Bank for an illustration. Page 76 of 84 © 2018 UtiliWorks Consulting, LLC Figure 16: Under-the-Glass AMI Electric Meter Bank Water meter registers are connected to stand-alone MIUs using a cable. Stand-alone MIUs are sometimes square or rectangular boxes, a few inches on each side and usually not more than two inches thick. The circuitry is usually encased to resist corrosion. A cast iron lid and supporting ring of a water meter pit will diminish transmission signal strength. For fixed AMI systems, the MIU should be mounted with its antenna protruding through the iron lid, or a composite lid may be used. A water meter being installed inside a pit is illustrated in Figure 17: AMI Water Meter Pit Install. AMI ready meter lids can be purchased or a hole can be drilled in a current cast iron or concrete lid so the MIU can fit. Likewise, gas meters can also be retrofitted with stand-alone MIU units (Figure 18: Gas Meter and AMI MIU). Figure 17: AMI Water Meter Pit Install Page 77 of 84 © 2018 UtiliWorks Consulting, LLC Figure 18: Gas Meter and AMI MIU MIUs are equipped with lithium (lithium-thionyl chloride or Li-SOCl2) batteries designed to last 10-20 years, depending on the MIU model and its frequency of transmission. If the MIU is set to transmit above certain design parameters, the battery will wear out prematurely. For example, an MIU designed to transmit a simple reading twice per day will run down its battery quickly if reprogrammed to transmit every 15 minutes. MIU batteries are generally not field replaceable. MIU warranties are typically tied to battery life. For an initial period, manufacturer’s warranties will replace the MIU with a new MIU for no cost (equipment only). Past a certain age, manufacturers will Page 78 of 84 © 2018 UtiliWorks Consulting, LLC replace the MIU under a pro-rated warranty at a cost based on the “list” price. All AMI/AMR manufacturers use batteries from the same few providers and have generally comparable life and warranty periods. C. Data Collection Units and Backhaul Data collectors are typically mounted on light or utility poles, rooftops, or on top of water tanks. Depending on the vendor and local operating conditions, they may be configured to use AC electrical power or DC solar cells. Transferring information from data collectors to the AMI head-end requires a wide area network (WAN). AMI vendors do not typically provide the WAN. Instead, they work with the utility to identify and use locally provided telecommunications facilities. Backhaul may be accomplished over fiber, radio frequency systems or cellular networks. Cities will sometimes develop in-house multi-function wireless communications systems (e.g. SCADA, AMI, Workforce Management, etc.) to further leverage investment. Backhaul over commercial networks such as cell phone service or private, proprietary, or dedicated networks will generally require monthly service charges. 2. Meter Data Management System It is advised for utilities to have MDMS implemented in conjunction with the implementation of AMI. With AMI, utilities will receive endless amount of data; however, without a proper data management system the data will be rendered meaningless as no appropriate action can be taken. An MDMS will be responsible for AMI data cleansing, calculating, providing data persistency and disseminating metered-consumption data. The partitioned data will then can be utilized by different utility technology functions (i.e. billing, customer service, operational, outage management, water leak detection, etc.) to inform and make better decisions. This is where the true business value of an AMI system is realized. MDMS is an essential technology for AMI if predicted benefits outlined in the cost-benefit are to be realized. AMI systems generate an amount of data that exceeds both the capacity and analytical capabilities of both CIS and AMI system environments, which are not designed for this function. Typically, the MDMS requirements are shaped by needs in the electric power utility, as it has a higher complexity in managing the commodity (as electricity can rarely be stored), while MDMS requirements for the water utility are subsets of the MDMS requirements for the electric utility, from functional and performance/scalability standpoints. If Palo Alto is to proceed with an AMI implementation, it is recommended to compliment that implementation with an MDMS. This is taken under consideration of the size and complexity of Palo Alto’s AMI implementation with over 30,000 electric connections, over 20,000 water connections, and over 24,000 gas connections, and the availability of dedicated IT staff in both the electric and water department. Currently available AMI headend systems typically store data for one to thirteen months. The MDMS database, analytics and complex event-processing (CEP) engines provide functionality, bridging the gap between the AMI headend and other business systems within the utility. The MDMS is designed to analyze and manage the large data volumes generated by AMI, and to serve this data to other systems as needed. By design, it will become the system of record for meter-consumption data. The storage and capability of the analytic engine of the MDMS also makes it an ideal nexus for combination of SCADA and Meter Data. Data can be extracted from SCADA historians for offline queries and used in other analytic tools, or read-only views into SCADA Historian databases can be created for real-time queries to Page 79 of 84 © 2018 UtiliWorks Consulting, LLC avoid data replication. This is optional but highly recommended, as the value is quite high and the incremental cost to implement is quite low. The MDMS provides tiered data storage for multiple years of interval data, and provides advanced analytics, reporting, and complex event processing based on meter interval data. In addition, the MDMS: Validates meter-reading data based upon utility configured validation rules. The reporting engine provides preconfigured and ad-hoc reports to users. Provides validated billing determinants to CIS Certain functionality offered by MDM systems can overlap with functionality offered by AMI systems. During the RFP and requirements definition phase of the project, it is necessary to establish the specifics of what that functionality is for each system and why the use of one system would be more advantageous than the other. To provide customers with access to their historical consumption data, configurable alerts, and push notifications, a web-based portal should be procured as a companion product to the MDMS. It is common for the MDMS vendor to offer this functionality; however, the underlying requirements definition along with a design effort will be necessary. Figure 19: AMI/MDMS Data Flow Diagram below provides a detailed look at the data flow throughout the resulting AMI/MDMS system. Figure 19: AMI/MDMS Data Flow Diagram 3. Volt/VAR Optimization The traditional Voltage/VAR management technologies have been used by the power industry for over 30 years and are utilized to reduce electric line losses and increase grid efficiency. This technology has been improved today to include sophisticated VVO sensors, equipment and software and claimed to be capable to reduce overall distribution line losses by 2% - 5% through tight control of voltage and current fluctuations. However, these VVO systems have not been widely deployed in the U.S., as traditional utility fee structures Page 80 of 84 © 2018 UtiliWorks Consulting, LLC fail to provide revenue recovery or ROI to pay the investment needed. Thus, in November 2012, the National Association of Regulatory Utility Commissioners (NARUC) encouraged the State Public Service Commissions to evaluate the energy efficiency and demand reduction opportunities that can be achieved with the deployment of VVO technologies and encouraged them to consider appropriate regulatory cost recovery mechanisms. Voltage regulation refers to the management of voltages on a feeder with carrying load conditions, as the utility needs to deliver power to consumers within a predefined voltage range. VAR is reactive power that is unused and can result in voltage drop and losses due to increased current flow. VAR regulation is achieved by switching capacitors on when demand is high (higher VAR during heavy load conditions) and off when demand is low. Both voltage and VAR affects one another, positively and negatively, and they can be best managed if their regulation is well integrated. The advent of widely deployed sensor technology, including AMI systems and advanced software algorithms has opened the possibility to maximize VVO at the feeder, substation or utility level. This is possible thanks to the development of microprocessor-based controls and computing platforms, pervasive and high- performance communication technologies. Utilities now have higher visibility of their system and control, resulting in the possibility of peak demand reduction, energy loss minimization by targeting power-factor levels, or Conservation Voltage Reduction (CVR). *Graphics adopted from Utility Case Study: Volt/VAR Control at Dominion Voltage Inc. (2012). Graphic on the right, illustrati on with VVO controls in place, presents a lower starting customer voltage required compared to the traditional design on the lef t. This is achieved by optimizing voltage profiles and VAR flow, thus lowering overall system voltage and increasing efficiency. Figure 20: Illustration of VVO 4. Water Leak Detection and Pressure Monitoring It is estimated by the City of Palo Alto that distribution water system losses are approximately 7-10%. In past years, the City has been attempting to target older neighborhoods for leaks using “leak noise correlator,” which resulted in the discovery of some water leaks. A leak noise correlator is an electronic device that is used to detect the presence of water/gas leak and pinpoint the location of the leak. It utilizes acoustic sound sensors to record the sound that is produced by the leak. Using mathematical algorithms, the location of the leak can be estimated/pinpointed by translating the time delta it takes for the noise to travel (from the leak site to the sound sensors in between) into distance. This current method takes a great deal of manual “trial and error” in guessing where a water leak may occur in the distribution of the system. Alongside with an AMI network implementation, a sophisticated acoustic water leak-detection and pressure- monitoring system will improve the water leak-detection efforts. The implementation of advanced/smart meters will provide granular real-time data to the utility with information which will indicate potential Page 81 of 84 © 2018 UtiliWorks Consulting, LLC customer-side leaks, illustrate high water use translating to possible waste, and identify theft of water use for accounts that are not considered active by the utility. The ability to produce and analyze interval data by the AMI and MDMS will also allow the utility to proactively identify leaks or water mismanagement. The two technologies that the utility can leverage for water leak detection are: 1) Acoustic Sensors - By attaching an acoustic sensor to the AMI or AMI endpoint, the City's utility will be able to monitor its distribution system along with customer-service lines to get complete system coverage. The acoustic sensor will monitor pipe conditions, looking for changes in the sound that travels down the pipe. The sensor has been designed to listen for a certain frequency range that represents the frequency a leak would produce. The sensors will leverage the AMI communications network to provide a snapshot of its system as often as it obtains the network reads. This leak- detection system should be integrated with the AMI utility-management-platform established by the utility. (a) (b) (c) *Images adopted from National Institute of Standards and Technology (NIST)’s Case Study – Las Vegas Valley Water District Water Leak Detection. Figure (a) illustrates location of acoustic sensor/node in the distribution, (b) illustrates multiple acoustic nodes monitored in real time, (c) presents a detected increase of acoustic signal compared to the normal acoustic noises in the water main, indicating potential water leak. Figure 21: Acoustic Leak Detection Technology The acoustic nodes/loggers are deployed throughout the areas of the water distribution system and provide continuous monitoring of leakage. There are logger types that can be permanently fixed on the main pipe and loggers that can be repositioned/moved around, retained in a place with a strong magnet. Leak detection using acoustic method is straightforward: sound waves detected by the sensors is converted to electric signals and are sent to the management software. An increase of voltage levels compared to the baseline indicates a potential leak in the system. The position of the leak can be estimated from the time delay when the sound wave arrives to the two sensors in between. The time delay, correlated with other information such as distance between sensor, pipe material, velocity of the sound wave, enables the leak detection software to pinpoint the location of potential leak in the system. 2) Flow or Pressure Change - This technique relies on the assumption that an abnormally high rate of change of flow or pressure at the inlet or outlet of a distribution section is indication of the probably the occurrence of a new leak. If the flow or pressure rate of change is higher than a predefined limit within a specific period, then a leak alarm is generated and further investigation and subsequent repairs are triggered. Page 82 of 84 © 2018 UtiliWorks Consulting, LLC A remote pressure monitoring system can be deployed in parallel with an AMI network deployment – leveraging the communication infrastructure. The pressure sensors are installed throughout the distribution area, typically two sensors per district metering area or pressure zone−ideally at high pressure and low-pressure zones. They can either be installed into the distribution main or placed inside a meter vault. The pressure sensors can typically measure pressure from 0 to 200 psig and transmitted securely to the utility office, where it is monitored. Pressure-monitoring technology goes beyond just water leak detection. An accurate, real-time pressure monitoring allows the water utility to optimize the system operation and reduce the duration and disruptions of repairs and maintenance. Accurate pressure data and management allows water utilities to: Reduce leakage, which in turn reduces cost (supply and energy). Reduce customer complaints. Reduce unaccounted for non-revenue water. Prevention of potential infrastructure failures related to pressure fluctuations. Improve public health and safety (loss of pressure can allow ground water to contaminate distribution system). *Graphic and illustration adopted from Whittle et. al., 2013, Sensor Networks for Monitoring and Control of Water Distributio n Systems. Graphic on the left side presents the pressure vs travel time from three points of the system, t1, t2, and t3 as described in the figure on the right. Meanwhile tb indicates a potential burst/water leak which was detected by a drastic loss of pressure as can be seen in the graph. Using the same principals as acoustic leak detection, location of potential leak can be pinpointed by correlating the travel time, wave speed and pipe properties. Figure 22: Water Burst Detection with Pressure Monitoring Technology By leveraging the AMI communications network, water leak-detection technology can be monitored in close to real time and allow utilities to proactively locate and fix leaks before they go on for years, causing significant water and revenue loss. Page 83 of 84 © 2018 UtiliWorks Consulting, LLC Appendix F – Glossary Table 20: Glossary Term Definition Admin Administration Division AMI Advanced Metering Infrastructure BPR Business Process Re-Engineering CBA Cost-Benefit Analysis CEC California Energy Commission CIS Customer Information System CPAU City of Palo Alto Utilities CPUC California Public Utilities Commission CSS Customer Support Services CVR Conservation Voltage Reduction DER Distributed Energy Resources DIR Department of Industrial Relations DOE Department of Energy Elec. Ops. /Eng. Electrical Operations and Engineering ERP Enterprise Resource Planning ESB Enterprise Service Bus FERC Federal Energy Regulatory Commission GIS Geographic Information System HES Head-End system ICS Industrial Control System IVR Interactive Voice Response KPI Key Performance Indicator MDM(S) Meter Data Management (System) MUA MyUtilitiesAccount NERC North American Electric Reliability Corporation O&M Operations & Maintenance OMS Outage Management System PMO Project Management Office RFP Request for Proposal RMD Resource Management Division SCADA Supervisory Control and Data Acquisition SCAP Sustainability & Climate Action Plan SUS Smart Utility Systems UAC Utility Advisory Commission WGW Ops. /Eng. Water, Gas, and Wastewater Operations and Engineering Page 84 of 84 © 2018 UtiliWorks Consulting, LLC ATTACHMENT B Excerpts of Meeting Minutes from the Utilities Advisory Commission Meeting of 11-01-2017 ITEM 4. DISCUSSION: Smart Grid Assessment and Developing Utility Tech Roadmap Update Shiva Swaminathan, Senior Resource Planner, presented the City’s Smart Grid Assessment and Utility Technology Roadmap. The City is developing a customer portal and app, which will be able to display AMI data. The portal should be available in the summer of 2018. Staff has received six responses to a Request for Proposals to upgrade the customer information system (CIS). The upgrade will be available by 2020 with enterprise resource planning (ERP) software implemented thereafter. Through advanced metering infrastructure (AMI), electric meters will be replaced, but devices will be attached to water and gas meters to transmit data to the meter data management system (MDMS), which feeds data to CIS. The customer portal will obtain data directly from MDMS. Capital expenditures are estimated at $16.5 million, which includes electric meters, devices for water and gas meters, network integration, MDMS, and implementation. The electric portion of capital expenditures is approximately half of the total expenditure. Operational benefits are projected at approximately $3.3 million and incremental costs up to $0.3 million for an ongoing operational savings of approximately $1 million. The net present value (NPV) calculated over 18 years results in a loss of approximately $7.3 million. The NPV is a conservative number that does not include benefits that are difficult to quantify. Expenditures include additional staff to manage the system, hardware, and software. Benefits include elimination of the meter reader positions, reduced calls for customer service, and conservation savings. In reply to Chair Danaher's question if the operating costs were escalating over time, Swaminathan advised that ongoing cost savings include 3% inflation of costs and 1% annual increase in value. The consultant's prior experience with smart meter evaluation and implementation was considered in projections. In response to Commissioner Schwartz's query about future role of meter readers, Swaminathan indicated that employees currently filling meter reader positions can be retrained for other positions within the City. Swaminathan reviewed a long list of benefits that are difficult to quantify. In answer to Chair Danaher's inquiry if the demand reduction due to DERs was quantified, Swaminathan reported that demand reduction and DER flexibility was not quantified. Commissioner Schwartz commented on the enormous value of being able to detect outages and leaks. Swaminathan concurred and indicated this topic is part of reliability. Additional value streams could be quantified, but the calculations require too many assumptions. Swaminathan summarized the findings by saying, based on the consultant’s experience with this type of project, staff is confident the estimates of capital expenditure are reasonable. However, the operational costs and benefits are estimates that can vary widely. Non-quantifiable values can be also large. With community engagement, this project can be better utilized in Palo Alto than in other communities because of the penetration of distributed energy resources and sustainability goals. Since AMI is a strategic and enabling technology, staff recommended the implementation of AMI over the next 5 years. Councilmember Filseth commented that elimination of meter reader positions will result in additional cost savings. Commissioner Schwartz expressed enthusiasm for this project. This is fundamental technology for many other projects. She encouraged Commissioners to support it. ACTION: Commissioner Danaher moved to recommend Council approval of the staff recommendation. Commissioner Forssell seconded the motion. The motion passed (5-1) with Chair Danaher and Commissioners Forssell, Schwartz, Segal, and Johnston voting yes, Commissioner Trumbull voting no and Vice Chair Ballantine absent. Commissioner Trumbull advised that he is not prepared to spend $7 million of City money after his poor experience with a smart meter at his home the prior year. The smart meter was useless and poorly constructed. Page 1 of 1 2 MEMORANDUM TO: UTILITIES ADVISORY COMMISSION FROM: UTILITIES DEPARTMENT DATE: MAY 2, 2018 SUBJECT: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt the Proposed Operating and Capital Budgets for the Utilities Department for Fiscal Year 2019 Attached are the FY 2019 Proposed Operating and Capital budgets for the Utilities Department. Due to the size of the CIP budget, staff only printed the summary pages of each utility for FY 2019– FY 2023. The entire Utilities CIP budget for FY 2019 – FY 2023 with the individual project pages can be downloaded and viewed in full from the link: Utilities Proposed CIP Budget for FY 2019 – FY 2023 City Council will not be receiving their copies of the Operating and Capital Budgets until Monday, April 30. Please refrain from discussing the proposed budget materials with any of the Council Members until Monday. ATTACHMENTS A. FY 2019 Proposed Operating Budget for Utilities B. FY 2019 Proposed Capital Budget Summary for Utilities PREPARED BY: DAVE YUAN, Strategic Business Manager DEPARTMENT HEAD: ______________________________ ED SHIKADA General Manager of Utilities UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 1 UTILITIESMission Statement The City of Palo Alto Utilities' mission is to provide safe, reliable, environmentally sustainable and cost- effective services. Purpose The purpose of the City of Palo Alto Utili- ties is to provide high quality, cost-effec- tive electric, gas, fiber optics, water and wastewater collection services; promote effective energy and water effi- ciency programs; proactively manage infrastructure needs and replace deterio- rated or aging facilities with new technolo- gies to ensure safe and reliable delivery of services; and ensure the City's utilities are in sound financial condition. ATTACHMENT A UTILITIES GENERAL MANAGER Edward K. Shikada UTILITIES ADMINISTRATION 1.00 Administrative Assistant 1.00 Administrative Associate II 2.00 Business Analyst 1.00 Compliance Manager 1.00 Coordinator, Utilities Projects 0.50 Program Assistant 1.00 Manager Communications 1.00 Manager Utilities Telecom 1.00 Principal Business Analyst 3.00 Senior Business Analyst 1.00 Senior Resource Planner 1.00 Strategic Business Manager 1.00 Chief Operating Officer CUSTOMER SUPPORT SERVICES 1.00 Assistant Director Utilities Customer Support Services 2.00 Customer Service Specialist-Lead 7.00 Customer Service Representative 2.00 Customer Service Specialist 1.00 Manager, Utilities Credit and Collections 6.00 Meter Reader 1.00 Meter Reader-Lead 1.00 Manager Customer Service 2.00 Credit and Collections Specialist ELECTRIC & WGW OPERATIONS 3.00 Administrative Associate II 1.00 Assistant Director Utilities Operations 1.00 Business Analyst 1.00 Cathodic Techician 1.00 Cathodic Protection Tech-Asst 2.00 Cement Finisher 5.00 Coordinator Utilities Projects 3.00 Electrician Assistant I 1.00 Electric Equipment Technician 7.00 Heavy Equipment Operator 4.00 Heavy Equipment Operator / Installer Repairer 2.00 I nspector, Field Services 11.00 Lineperson / Cable Splicer 4.00 Lineperson / Cable Splicer-Lead 2.00 Maintenance Mechanic Welding 1.00 Metering Technician- Lead 3.00 Metering Technician 1.00 Manager Electric Operations 1.00 Manager WGW Operations 2.00 Overhead/Underground Troubleman 1.00 Program Assistant 1.00 Restoration Lead 2.00 SCADA Technologist 1.00 Senior Mechanic 1.00 Senior Utilities Field Service Rep 2.00 Senior Water System Operator 5.00 Street Light, Traffic Signal & Fiber Technician 2.00 Street Light, Traffic Signal & Fiber Technician-Lead 6.00 Substation Electrician 2.00 Substation Electrician-Lead 2.00 Underground Inspectors 1.00 Underground Inspector-Lead 2.00 Utilities Comp Tech 1.00 Utilities Comp Tech-Lead 5.00 Utilities Field Service Rep 11.00 Utilities Installer/Repairer 5.00 Utilities Install/Rep-Lead 3.00 Utilities Install/Rep-Welding 2.00 Utilities Install/Rep-Welding-Lead 1.00 Utilities Safety Officer 5.00 Utilities System Operator 12.00 Utilities Supervisor 3.00 Utilities Locator 4.00 Water Systems Operator II 1.0 Gas & Water Meter Measurement and Control Technician-Lead 4.0 Gas & Water Meter Measurement and Control Technician ELECTRIC & WGW ENGINEERING 1.00 Administrative Associate II 1.00 Assistant Director Utilities Engineering 2.00 Business Analyst 2.00 Electric Project Engineer 4.00 Engineer 1.00 Engineering Manager – Electric 1.00 Engineering Manager – WGW 3.00 Engineer Technician III 3.00 I nspector, Field Services 3.00 Power Engineer 5.00 Project Engineer 4.00 Senior Electrical Engineer 5.00 Senior Project Engineer 1.00 Supervisor, Electric Project Engineer 5.00 Utilities Engineer Estimator 1.00 Utilities Engineer Estimator-Lead RESOURCE MANAGEMENT 1.00 Assistant Director, Resource Management 2.00 Administrative Assoc II 1.00 Business Analyst 3.00 Key Account Representative 1.00 Manager, Utility Program Services 6.00 Resource Planner 5.00 Senior Resource Planner 3.00 Marketing Program Administrator FY 2019 POSITION TOTALS 244.5 - Full-time 11.38 - Hourly This organizational chart represents citywide Full-Time Equivalents (FTEs) for this department. The Department Summary tables summarize FTEs by position allocation. UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 3 Description Palo Alto is the only city in California that offers a full array of utility services to its citizens and businesses. Because of this, the City has a unique opportunity to partner with the Palo Alto community to enjoy the benefits and achievements of reliable, home-grown, and environmentally-focused utilities. Palo Alto has a tradition of over 100 years of successful public utility operations. It is a tradition that continues to provide the Palo Alto community with safe and reliable utilities service, local decision-making over policies, utility rate-making, environmental programs, and customized services. The City of Palo Alto Utilities (CPAU) continues to focus on customer service, infrastructure reliability, regulatory compliance and cost containment. CPAU also supports the City's sustainability goals by building a low-carbon energy supply through the use of renewable energy and offsets and by promoting programs to help customers use energy and water more efficiently, reduce their carbon footprint, and help them integrate new technologies. 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. ADMINISTRATION Utilities Administration is responsible for the overall management of the CPAU including com- munication, regulatory compliance, strategic planning, budget coordination, legislation and reg- ulatory policy analysis, and personnel and administrative support to the entire Department. CUSTOMER SUPPORT SERVICES This group annually bills $250 million for the City's electric, natural gas, water, commercial fiber optic, wastewater collection (operated by CPAU), storm drain, and refuse (operated by Public Works) services; operates the Customer Service Call Center with 75,000 annual customer inter- actions; reads 90,000 utility meters per month; implements Credit and Collection policies and financial assistance programs. UTILITIES 4 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET ENGINEERING Engineering is responsible for managing all phases of CPAU's capital improvement projects including providing new or upgrading existing service to customers, and replacing and rehabili- tating the City's electric, fiber, water, gas, and wastewater distribution systems. OPERATIONS Utilities Operations is responsible for the operations, maintenance, and emergency response for the electric, fiber, water, gas, and wastewater distribution systems. RESOURCE MANAGEMENT Resource Management is responsible for: the long-term resource acquisition plan, including electricity, natural gas, and water; contract negotiations to acquire renewable resources; finan- cial planning; rate development; energy efficiency and water conservation programs; and man- agement of key accounts. Accomplishments Awarded Platinum Level Beacon Award by the Institute for Local Government for efforts and leadership in addressing climate change. Awarded first place for the fourth time by the Smart Electric Power Alliance (SEPA) for the Solar Watts-per-Customer Top Ten list of utilities that integrated the most solar to the grid. Received Special Recognition for Participation in Georgetown University's Energy Prize Competition. Accomplished the City's Natural Gas Supply Goes Carbon Neutral. In July 2017, provided 100% carbon neutral natural gas for the entire Palo Alto community. Entered agreement to buy Carbon Offsets from Palo Alto's Sister City, Oaxaca, Mexico. On December 4, City Council approved a resolution to purchase carbon offsets from a forestry project in Oaxaca, Mexico, to offset carbon dioxide emissions associated with natural gas use in the Palo Alto community. The agreement is part of the City's Carbon Neutral Natural Gas Plan with goals to reduce overall community Greenhouse Gas (GHG) emissions in an effort to combat climate change. Unveiled new solar panels installed atop parking carports of two public garages and electric vehicle (EV) charging stations that are powered by the renewable energy generated on- site. Provided rebates for Electric Vehicle Charging Stations installed at schools, apartment complexes, and non-profit buildings with common area charging accommodations. Awarded first place for Amount of Solar Through Bay Area SunShares Program. The City participated for the third year in a row in Bay Area SunShares, a solar group-buy program that offers discounts on rooftop solar by pooling the buying power of a group of residents. Completed and presented eight month process to update the Utilities Strategic Plan. UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 5 Initiatives Implement Council approved 2018 Utilities Strategic Plan to focus resources towards meeting priority initiatives related to workforce, technology, collaboration, and finances and resource optimization. Assist Development Services to verify final street addresses are assigned prior to account activation and billing of Utilities account-holders. Continue Downtown Upgrade, which provides critical, preventative upgrades to core infrastructure so we can continue to provide safe, reliable and cost effective services to our community. Construction work includes utility pipe replacements, road repaving, traffic signal enhancements and a new downtown parking garage. Update Divisional Succession Plans for the next five years. Evaluate and upgrade Outage Management System to reduce restoration time and provide customers near real-time outage information. Develop Advanced Metering Infrastructure (AMI)/Meter Data Management System (MDM) Requirements to identify functional and system requirements. Evaluate Multi-Agency AMI/MDM with Northern California Power Association (NCPA) to pool resources, share ideas and increase purchasing power. Upgrade Utilities customer account portal to provide customers additional 24/7 self- services and customer information to better manage their consumption and choices. Integrate new Geographical Information System (GIS) to ensure accurate infrastructure information for customer service and infrastructure improvements. 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. 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. UTILITIES 6 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Key Performance Measures COMPARABLE AND COST-EFFECTIVE SERVICES Goal Ensure fiscally sound and cost-effective services Objective Reduce the cost of delivering services through best management practices. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Palo Alto's average residential monthly utility bill above/below the median of neighboring cities (6.80)%(10.40)%(6.80)%(14.00)%(14.00)% Description This compares the average residential monthly utility bill which includes electricity, gas, water, and wastewater services to the nearby communities (Santa Clara $188.66, Hayward $233.38, Los Altos $236.40, Mountain View $242.04, Redwood City $294.07, and Menlo Park $311.12). Purpose This measure compares the City's average utility rates charged to residents to other comparable cities (e.g., similar size, similar commodity purchase options, similar geography). Status Palo Alto's electric rates are significantly lower than PG&E and slightly higher than Santa Clara. Natural gas rates are lower than surrounding communities due to PG&E increasing its distribution rates for capital improvement and maintenance. Water rates are higher than many neighboring communities primarily because of differing system characteristics and levels of infrastructure investment, but also because some communities have different sources of supply. Palo Alto's water supply comes from the San Francisco Public Utilities Commission, which is in the middle of a $4.6 billion improvement project, and Palo Alto is investing more than other areas in improving local distribution pipelines and enhancing emergency water supply system. Despite fee increases, CPAU rates remain lower than neighboring cities. UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 7 Workload Measures CUSTOMER SATISFACTION Goal Provide excellent customer service Objective Maintain a high level of customer satisfaction, equal to or greater than 83 percent of Palo Alto citizens rating satisfaction of utility services as "Excellent" or "Good" in the National Citizen Survey. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Percent rating services (electric, gas, wastewater, and water) "Good" or Excellent" 83.25%86.00%85.00%85.00%86.00% Description The National Citizen Survey (NCS) is a collaborative effort between National Research Center, Inc. (NRC) and the International City/County Management Association (ICMA). The NCS was developed by NRC to provide a statistically valid survey of opinions about community and services provided by local governments. The survey results may be used by staff, elected officials and other stakeholders for community planning and resource allocation, program improvement, and policy-making. There are ten California communities participating in the survey. Purpose The best way to get feedback on whether our customers are satisfied with the nature, extent and delivery of services we provide them is to ask outright, using random-selection survey processes that include a good cross-section of our customer base. Status Results are statistically weighted to reflect the proper demographic composition of the entire community. A total of 614 completed surveys were obtained, providing an overall response rate of 21 percent. Typically, response rates obtained on citizen surveys range from 25 percent to 40 percent. From Fiscal Year 2012 to Fiscal Year 2017, Utilities has met its target of 83 percent. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Total cost of Capital Improvement Program annually (Millions)$22.20 $20.40 $26.20 $27.20 $35.40 Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % Dollars by Fund Electric Fund - Operating 53,504,506 50,471,721 69,158,197 66,792,512 (2,365,685)(3.4)% Electric Supply 85,918,737 93,975,231 107,008,613 104,740,510 (2,268,103)(2.1)% Fiber Optics 2,574,599 2,385,108 4,144,473 4,180,199 35,726 0.9% Gas Fund - Operating 19,079,098 19,025,805 26,768,899 26,810,849 41,951 0.2% Gas Supply 9,061,954 14,246,460 17,157,301 16,707,790 (449,511)(2.6)% Wastewater Collection - Operating 19,271,590 24,361,592 19,173,803 23,935,539 4,761,736 24.8% UTILITIES 8 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Water Fund - Operating 42,098,850 38,572,014 47,487,138 58,154,512 10,667,374 22.5% Total 231,509,334 243,037,933 290,898,423 301,321,910 10,423,488 3.6% Revenues Charges for Services 438,985 588,350 270,000 270,000 ——% Charges to Other Funds 985,530 716,165 518,662 504,525 (14,138)(2.7)% From Other Agencies 636,666 512,301 576,632 576,632 ——% Net Sales 197,161,475 229,843,108 234,641,566 249,171,992 14,530,426 6.2% Operating Transfers-In 481,233 2,922,786 3,977,536 4,203,098 225,562 5.7% Other Revenue 11,260,334 9,701,750 14,251,610 11,953,278 (2,298,332)(16.1)% Other Taxes and Fines 420,867 —————% Property Taxes 76 39 ————% Rental Income —5,000 ————% Return on Investments 3,969,933 3,794,136 4,442,200 4,442,200 ——% Total Revenues 215,355,098 248,083,635 258,678,207 271,121,725 12,443,519 4.8% Positions by Fund Electric Fund 116.38 113.32 111.23 111.33 0.10 0.09% Fiber Optics Fund 6.76 6.82 7.60 7.60 ——% Gas Fund 52.16 52.55 53.11 53.67 0.56 1.06% Wastewater Collection Fund 29.74 29.17 29.00 29.16 0.16 0.56% Water Fund 46.15 47.99 47.90 47.08 (0.82)(1.72)% Total 251.19 249.84 248.84 248.84 ——% Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 9 ELECTRIC FUND Description On January 16, 1900, the City of Palo Alto began operation of its own electric system. A steam engine was the initial source of the City's electricity and was replaced by a diesel engine in 1914. As demand for electricity and the population continued to grow, the City of Palo Alto Utilities (CPAU) connected to the Pacific Gas and Electric distribution system and purchased power from additional sources. The integrity of the infrastructure required for achieving a high level of reliability and value for our customers is of paramount importance to CPAU. The Electric Fund plans to enhance the customer service connection experience, increase energy efficiency participation, and increase the percentage of electric supply obtained from renewable energy supplies. The City has entered into a number of contracts with producers of wind, landfill gas, and solar energy for more than 15-year terms. Accomplishments Completed installation of the utility underground electric system for Utility Underground District 47 (area bounded by Middlefield Road; Homer Avenue; Webster Street; Addison Avenue). Completed installation of fiber optic cables between Adobe Creek/East Meadow/Maybell substations to assist in substation protection and monitoring systems. Completed a substation security assessment and currently prioritizing recommendations. Completed coordination of Utilities interconnection requirements at two of the City Garage Solar Projects (Bryant, Webster). Participated in and completed the California Public Utilities Commission Fire Map development process for the state of California. Assisted the Regional Water Quality Control Plant with assessment of their onsite 12kV electric system, including maintenance on switchgear and infrared inspection of equipment. Replaced one 60kV circuit breaker with one more in construction. UTILITIES 10 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Customer-sited solar installations (projects in progress or completed), increased to nearly 14 megawatts in total by the end of 2017, equal to roughly 2% of load if all applications are completed. This included the commitment of nearly all of the capacity from the City's Palo Alto Clean Local Energy Accessible Now (CLEAN) program. Palo Alto was also recognized by the Solar Electric Power Association for installing the most solar per customer in the nation (both utility-scale and customer-sited). Fully-powered the carbon neutral electric portfolio with carbon-free energy from long-term contracted generating sources, without the need for short-term renewable energy credits, for the first time in 2017. Initiatives Bring remaining solar projects online to bring Renewable Portfolio Standard (RPS)-eligible renewable energy share of portfolio to 60% of retail sales from 2017 forward, with remaining energy supplied by carbon-free hydroelectric power. Establish new ten-year energy efficiency goals and new efficiency programs, including new behavioral savings and facility management training programs. Increase uptake for commercial efficiency programs. Seek Council approval of an Electric Integrated Resource Plan for the 2019 through 2030 planning period. Continue to reduce barriers to building electrification and electric vehicle adoption, build on existing electrification programs, and evaluate new programs. Expand effort to lower greenhouse gas emissions through electrification of the transportation sector such as encouraging adoption of electric vehicles. Revisit strategy for promoting solar energy. Bring Palo Alto CLEAN projects online, evaluate sites for the community solar program, and complete a smooth transition from net metering to the replacement local generation compensation program once the net metering cap is reached. Continue to offer electric safety education presentations to school and community groups. Continue discussions on building a second transmission line to provide electric service to Palo Alto. Replace aging substation facilities and increase electric system capacity in the Colorado/ Hopkins/Quarry load areas to meet projected load growth. Improve efficiency of Utility Electric System with installation of Power Factor correction capacitor banks. Add new facilities to meet the electric loads proposed by the Veteran's Affairs Hospital for their site upgrades. Relocate/reconstruct City's electric and communication facilities as necessary to facilitate the electrification of the Caltrain system. Complete General Order 95,128 and 174 Inspection and Maintenance related to electrical overhead, underground and substation facilities. UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 11 Rebuild underground facilities in District 20 (near Channing, Center, Hamilton, Lincoln) Complete the connection of new underground customer service conversions in Utility Underground District 47. Complete utility electric work for Utility Underground District 46 (near Charleston and El Camino Real). Complete the pole inspection and replacement program for each fiscal year. Continue to plan and replace electric facilities before they reach the end of their useful life to maintain high system reliability. Develop plans to ensure safe operation of the overhead electric system in the western foothills area. Goals and Objectives GOAL 1 Provide safe and reliable delivery of electric services to our customers. Objectives: Develop a plan to complete a second electric transmission line source to improve service reliability. Provide exceptional system reliability. Reduce the backlog of infrastructure assets whose ages are beyond their useful lives. GOAL 2 Increase environmental sustainability and promote efficient use of resources. Objectives: Achieve the ten-year goal for electric energy efficiency of 5.7 percent of the electric load by 2027. Measure actual electric energy efficiency achievement. Continue to facilitate voluntary local solar installations through education and programs. UTILITIES 12 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Key Performance Measures ENVIRONMENTAL SUSTAINABILITY Goal Support environmental sustainability and promote efficient use of resources Objective Achieve Renewable Portfolio Standard (RPS) of at least 52 percent by 2017. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Percent of retail electric sales volume provided by renewable supply resources under long-term PPAs 31.80%51.00%60.00%51.00%51.00% Description This measures the fraction of the City's retail electric sales volume that is provided by renewable supply resources that are under long-term agreement. Purpose The California Renewable Energy Resources Act (SBX1-2) requires that utilities supply 33 percent of their total retail electric sales volume with eligible renewable energy resources by 2020. The City's internal target, established by the Long- term Electric Acquisition Plan (LEAP), was to meet at least 33 percent by 2015. In March 2013, the City also adopted a 100 percent carbon neutral electric supply portfolio target. Status The City fully-powered the carbon neutral electric portfolio with carbon-free energy from long-term contracted generating sources, without the need for short- term renewable energy credits, for the first time in 2017. SYSTEM RELIABILITY Goal Provide safe and efficient delivery of electric services to our customers. Objective Provide exceptional system reliability. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Average duration of customer outages in minutes as reported using industry guidelines 39.48 63.76 60.00 60.00 60.00 Description System Average Interruptible Duration Index (SAIDI) is a measure of outage duration. It measures the number of minutes over the year that the average customer is without power. Purpose Reliability indices were introduced in order to keep track of utility performance. This information will help Utilities prioritize capital and operating spending so that reliability can be improved without increasing costs. Status Despite continuous lineperson and system operator vacancies, the Electric Utility continues to meet the goal of average customer outages being 60 minutes or less in duration for the average customer by minimizing the number of outages and customers directly affected. This can be attributed to the Department's ongoing efforts for infrastructure replacement, outage isolation improvements, system maintenance, and improved response times. UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 13 Workload Measures ENVIRONMENTAL SUSTAINABILITY - SOLAR Goal Support environmental sustainability and promote efficient use of resources. Objective Increase the penetration of local solar installations. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Cumulative installed capacity of photovoltaic (PV) systems measured in megawatts (MW) 7.70 8.70 13.50 11.40 14.90 Description This represents the cumulatively installed capacity of PV systems in Palo Alto, measured in MW. It includes PV systems installed prior to the passage of Senate Bill 1 (SB1), which enacts the Million Solar Roofs Initiative and expands upon the current California Solar Initiative (CSI) and the Energy Commission's New Solar Homes Partnership (NSHP). Purpose The California Million Solar Roofs Bill (SB1) requires an expanded funding commitment by all California electric utilities, with a Statewide goal to add 3,000 MW of new PV systems over ten years. In addition to complying with state law, PV installations will benefit the environment and expand flexibility to Palo Alto's electric generation portfolio. This measure also supports the City achieving a 100 percent carbon neutral electric supply portfolio and meeting 4 percent of the City's electricity needs through solar by 2023. Status Rebate funds for residential and commercial solar have been fully reserved well before the 2017 goal set by SB1. With the costs of PV systems steadily decreasing, along with the added incentive of available rebates, staff anticipates more residential and commercial construction projects to include installation of these systems. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Number of Customer Accounts (Electric)29,304 29,616 29,300 29,600 29,600 Number of momentary outages 26 1 0 1 1 Percent of residents surveyed who rate the quality of the Electric Utility as "Good" or "Excellent" 86 87 88 88 88 Total Number of Outages 26 20 19 19 17 UTILITIES 14 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % Dollars by Division CIP Electric Fund 14,087,807 11,558,306 21,175,750 17,898,284 (3,277,466)(15.5)% Electric Administration 22,014,672 21,628,408 26,286,978 25,239,910 (1,047,068)(4.0)% Electric Customer Service 2,110,437 2,190,933 2,300,532 2,474,150 173,618 7.5% Electric Demand Side Management 3,724,006 4,393,262 6,992,874 6,962,177 (30,697)(0.4)% Electric Engineering (Operating)1,592,025 1,656,522 1,980,111 2,029,395 49,284 2.5% Electric Operations and Maintenance 11,523,884 11,834,348 13,522,822 15,174,255 1,651,434 12.2% Electric Resource Management 84,370,412 91,185,173 103,907,742 101,754,850 (2,152,892)(2.1)% Total 139,423,243 144,446,952 176,166,809 171,533,021 (4,633,788)(2.6)% Dollars by Category Salary & Benefits Healthcare 1,767,659 1,897,689 2,270,685 2,403,978 133,293 5.9% Other Benefits 325,666 234,198 323,575 329,347 5,771 1.8% Overtime 978,506 946,401 492,003 504,795 12,792 2.6% Pension 2,674,415 2,869,831 3,529,404 3,643,765 114,361 3.2% Retiree Medical 1,417,176 1,537,263 1,617,277 1,555,185 (62,093)(3.8)% Salary 10,639,784 10,743,153 12,696,026 12,997,024 300,998 2.4% Workers' Compensation 254,447 138,287 405,828 292,351 (113,477)(28.0)% Total Salary & Benefits 18,057,652 18,366,822 21,334,799 21,726,445 391,646 1.8% Allocated Charges 4,708,298 2,905,159 9,120,926 9,029,051 (91,875)(1.0)% Contract Services 3,670,436 4,445,291 6,849,914 7,743,680 893,766 13.0% Debt Service 8,889,294 8,857,193 8,782,300 8,722,300 (60,000)(0.7)% Equity Transfer 11,659,000 12,035,000 12,754,000 12,709,000 (45,000)(0.4)% Facilities & Equipment 2,190 —44,475 64,155 19,680 44.2% General Expense 1,826,521 2,040,146 3,380,080 3,456,870 76,790 2.3% Operating Transfers-Out 177,323 317,573 400,940 127,819 (273,121)(68.1)% Rents & Leases 5,301,644 5,449,402 5,603,447 5,893,136 289,688 5.2% Supplies & Material 665,283 639,238 871,207 924,207 53,000 6.1% Transfer to Infrastructure 273,476 189,972 ————% Utility Purchase 73,439,746 80,511,136 91,705,000 89,712,000 (1,993,001)(2.2)% UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 15 Capital Improvement Program 10,752,379 8,690,020 15,319,720 11,424,359 (3,895,361)(25.4)% Total Dollars by Expense Category 139,423,243 144,446,952 176,166,809 171,533,021 (4,633,788)(2.6)% Revenues Charges for Services 320,308 455,040 230,000 230,000 ——% Charges to Other Funds 290,667 306,268 308,566 294,362 (14,204)(4.6)% Net Sales 110,604,293 129,124,526 136,139,180 145,448,843 9,309,663 6.8% Operating Transfers-In 259,400 2,678,768 3,465,100 3,663,820 198,720 5.7% Other Revenue 8,808,047 7,652,336 11,029,000 8,660,000 (2,369,000)(21.5)% Other Taxes and Fines 420,867 —————% Property Taxes 76 39 ————% Rental Income —5,000 ————% Return on Investments 2,039,748 1,800,584 2,507,700 2,507,700 ——% Total Revenues 122,743,405 142,022,560 153,679,546 160,804,725 7,125,179 4.6% Positions by Division CIP Electric Fund 32.14 32.14 31.90 31.90 ——% Electric Customer Service 13.54 12.07 11.70 12.00 0.30 2.56% Electric Demand Side Management 6.61 6.85 6.17 6.17 ——% Electric Engineering (Operating)5.73 4.98 4.98 4.98 ——% Electric Operations and Maintenance 48.36 48.36 48.10 48.10 ——% Electric Resource Management 10.00 8.92 8.38 8.18 (0.20)(2.39)% Total 116.38 113.32 111.23 111.33 0.10 0.09% Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary Account Specialist 0.26 0.33 0.31 0.31 —22,475 Administrative Associate II 4.10 4.00 3.90 3.90 —303,162 Assistant Director Administrative Services 0.15 0.20 0.20 0.20 —40,227 Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % UTILITIES 16 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Assistant Director Utilities Customer Support Services 0.40 0.40 0.40 0.40 —68,632 Assistant Director Utilities Engineering 0.40 0.40 0.40 0.40 —77,958 Assistant Director Utilities Operations 0.60 0.60 0.60 0.60 —115,228 Assistant Director Utilities/Resource Management 0.50 0.50 0.50 0.50 —88,296 Business Analyst 2.89 2.04 1.94 1.60 (0.34)244,375 Contracts Administrator 0.10 0.10 0.10 0.10 —11,771 Coordinator Utilities Projects 1.80 1.55 1.55 1.55 —147,139 Customer Service Representative 1.86 1.62 1.87 1.87 —144,067 Customer Service Specialist 0.62 0.66 0.66 0.66 —55,914 Customer Service Specialist-Lead 0.62 0.58 0.58 0.58 —52,553 Electric Project Engineer 1.95 1.95 1.95 1.95 —288,517 Electric Underground Inspector 2.00 2.00 2.00 2.00 —206,984 Electric Underground Inspector- Lead 1.00 1.00 1.00 1.00 —110,682 Electrical Equipment Technician —1.00 1.00 1.00 —94,483 Electrician Assistant I 4.00 3.00 3.00 3.00 —246,313 Engineering Manager - Electric 0.55 0.55 0.55 0.55 —99,459 Engineering Technician III 2.40 2.40 1.40 1.40 —136,796 Heavy Equipment Operator 2.00 2.00 2.00 2.00 —196,497 Inspector, Field Services —0.25 0.25 0.25 —26,361 Lineperson/Cable Specialist 11.00 11.00 11.00 11.00 —1,439,554 Lineperson/Cable Specialist-Lead 4.00 4.00 4.00 4.00 —560,213 Manager Customer Service 0.33 0.33 0.33 0.33 —44,019 Manager Electric Operations 1.00 1.00 1.00 1.00 —155,792 Manager Treasury, Debt & Investments —0.30 0.30 0.30 —43,181 Manager Utilities Compliance 0.15 0.15 0.15 0.15 —25,091 Manager Utilities Credit & Collection 0.15 0.15 0.15 0.15 —20,205 Manager Utilities Marketing Services 0.40 ————— Manager Utilities Program Services —0.40 0.40 0.40 —52,957 Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 17 Marketing Engineer 1.00 ————— Meter Reader 2.41 1.99 1.99 1.99 —144,002 Meter Reader-Lead 0.40 0.33 0.33 0.33 —25,547 Metering Technician 3.00 3.00 3.00 3.00 —370,131 Metering Technician-Lead 1.00 1.00 1.00 1.00 —132,023 Offset Equipment Operator 0.48 0.48 0.48 0.48 —33,140 Overhead Underground Troubleman 2.00 2.00 2.00 2.00 —274,975 Power Engineer 2.30 2.30 2.30 2.30 —320,856 Principal Business Analyst 0.34 0.34 0.34 0.34 —49,122 Project Manager 0.75 0.75 0.75 0.75 —76,315 Resource Planner 3.95 3.65 3.85 3.65 (0.20)510,945 SCADA Technologist 1.00 1.00 1.00 1.00 —149,972 Senior Business Analyst 0.68 0.68 0.68 1.02 0.34 139,580 Senior Electrical Engineer 3.95 3.95 3.95 3.95 —649,217 Senior Management Analyst 0.45 0.10 0.10 0.10 —13,275 Senior Resource Planner 4.08 3.80 3.06 3.06 —460,275 Senior Utilities Field Service Representative 0.10 0.10 0.10 0.10 —11,417 Street Light, Traffic Signal & Fiber Technician 3.00 3.00 3.00 3.00 —354,045 Street Light, Traffic Signal & Fiber- Lead 1.00 1.00 1.00 1.00 —126,276 Substation Electrician 5.50 5.50 5.50 5.50 —708,065 Substation Electrician-Lead 2.00 2.00 2.00 2.00 —275,540 Supervising Electric Project Engineer 1.00 1.00 1.00 1.00 —138,445 Tree Maintenance Person 1.00 1.00 1.00 1.00 —87,402 Utilities Compliance Technician 2.00 2.00 2.00 2.00 —252,552 Utilities Compliance Technician- Lead 1.00 1.00 1.00 1.00 —135,102 Utilities Credit/Collection Specialist 2.00 2.00 2.00 2.00 —186,663 Utilities Engineer Estimator 3.25 3.25 3.25 3.25 —396,797 Utilities Field Services Representative 0.50 0.50 0.50 0.50 —53,364 Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary UTILITIES 18 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Utilities Key Account Representative 1.90 1.60 1.35 1.35 —160,793 Utilities Locator 1.95 1.95 1.95 1.95 —191,027 Utilities Marketing Program Administrator 2.25 1.90 1.60 1.90 0.30 214,977 Utilities Safety Officer 0.55 0.55 0.55 0.55 —62,531 Utilities Supervisor 5.00 5.00 5.00 5.00 —689,874 Utilities System Operator 5.00 5.00 5.00 5.00 —701,469 Utility Engineering Estimator - Lead ——1.00 1.00 —131,470 Sub-total: Full-Time Equivalent Positions 112.02 108.18 107.12 107.22 0.10 13,346,083 Temporary/Hourly 4.37 5.15 4.11 4.11 —361,475 Total Positions 116.38 113.32 111.23 111.33 0.10 13,707,558 Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 19 Budget Reconciliation Positions Expenditures Revenues Net Electric Fund Prior Year Budget 111.23 176,166,809 153,679,545 22,487,264 One-time Prior Year Budget Adjustments Supplemental Pension Trust Fund Contribution — (353,620) — (353,620) One-time Prior Year Budget Adjustments —(353,620)—(353,620) Base Adjustments Adjustments to Costs of Ongoing Activities Salaries and Benefits Adjustments — 508,152 — 508,152 Net-zero Utilities Staffing Realignment (increase of 0.3 FTE Utilities Marketing Program Administrator positions; decrease of 0.2 FTE Resource Planner position) 0.10 — — — Electric Commodity Purchases Expenditure — 2,053,001 — 2,053,001 Rents & Leases Expenditure — 169,119 — 169,119 Bank Card Transaction Fee — 80,000 — 80,000 Silicon Valley Regional Communications Systems (SVRCS) Radio Subscription (CMR #8658)— 36,855 — 36,855 Palo Alto Green Gas Program Sales Revenue — — (17,491) 17,491 Custodial Contract Funding — (2,923) — (2,923) Management Development Funding — (5,350) — (5,350) Equity Transfer to the General Fund (FY 2019 Projected)— (45,000) — (45,000) Aerial Trucks Leasing — — 120,569 (120,569) Transfer to Technology Fund (TE-05000 Radio Infrastructure Replacement)— (149,626) — (149,626) Transfer from the General Fund (for Traffic Signal and Streetlight Electric Costs)— — 208,151 (208,151) Capital Improvement Funding — (7,841,136) (2,499,000) (5,342,136) Electric Customer Sales Revenue (8% Rate Increase)— — 9,312,951 (9,312,951) General Fund Cost Allocation Plan — (764,220) — (764,220) Engineering & Inspection Service Allocated Charges — 197 — 197 General Liability Insurance Allocated Charges — 41,774 — 41,774 Ground Maintenance Allocated Charges — 2,826 — 2,826 Print & Mail Allocated Charges — (13,708) — (13,708) Storm Drain Allocated Charges — 451 — 451 UTILITIES 20 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Utilities Administration Allocated Charges — 676,479 — 676,479 Utilities Allocated Charges — (21,398) — (21,398) Vehicle Replacement & Maintenance Allocated Charges — 18,927 — 18,927 General Liability Savings (one-time FY 2019 Savings)— (29,753) — (29,753) Workers' Compensation Savings (one-time FY 2019 Savings)— (116,506) — (116,506) Adjustments to Costs of Ongoing Activities 0.10 (5,401,839)7,125,180 (12,527,019) Total FY 2019 Base Budget 111.33 170,411,350 160,804,725 9,606,625 Budget Proposals 1 Electric Overhead Maintenance Contract — 937,814 — 937,814 2 Supplemental Pension Trust Fund Contribution — 183,857 — 183,857 3 Reclassification of Business Analyst to Senior Business Analyst — 6,797 — 6,797 Budget Changes —1,121,671 —1,121,671 Total FY 2019 Proposed Budget 111.33 171,533,021 160,804,725 10,728,296 Budget Reconciliation Positions Expenditures Revenues Net Electric Fund UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 21 Budget Adjustments Budget Adjustments Positions Expenditures Revenues Net Electric Fund 1 Electric Overhead Maintenance Contract 0.00 937,814 0 937,814 This action augments funding to allow capacity for an electric overhead maintenance contract. In recent years, the Electric Operations Division has experienced staffing shortages in lineman positions due to retirements, employee disabilities, and a lack of qualified candidates to fill vacant positions. In FY 2015, the City entered into a contract to provide support for both maintenance and capital improvement projects; however, this contract ended prematurely. With the staffing shortage issue persisting, the department will work to seek Council approval of a multi-year contract until staffing stabilizes. Additional funding of $938,000 will increase appropriated funds when combined with vacancy savings to support $1.5 million contract services support annually. With the need for the contract primarily driven by staffing shortages, the department will reassess the situation for FY 2021 to determine if this contract will continue to be needed. (Ongoing costs: $937,814) Performance Results This contract will allow the department to ensure necessary maintenance work is performed to avoid potential costly fixes down the road and ensure the electric utility service remain reliable. 2 Supplemental Pension Trust Fund Contribution 0.00 183,857 0 183,857 This action transfers $183,857 from the Electric Funds to the General Benefits Fund on a one-time basis to contribute to the City’s supplemental pension trust fund. This amount represents approximately 5% of the Electric Funds' annual pension contribution. Contributing to the Pension Trust Fund will further bolster the City’s resilience to variability associated with pension forecasting, including rate of return changes and increases associated with the unfunded accrued liability. (Ongoing costs: $0) Performance Results Proactively contributing to the supplemental pension trust will allow the City to prefund pension costs and continue to address the GASB 68 Net Pension Liabilities (NPL). 3 Reclassification of Business Analyst to Senior Business Analyst 0.00 6,797 0 6,797 This action reclassifies 1.0 Business Analyst to 1.0 Senior Business Analyst in the Utilities Department to align with current staffing levels and assignments. Duties assigned to this position were evaluated through the appropriate processes with the Employee Relations Division in the Human Resources Department and a settlement was reached in February 2018. This action aligns authorized staffing levels with this settlement agreement which determined the Senior Business Analysts was more commensurate with the duties assigned. (Ongoing costs: $6,597) Performance Results This action ensures the table of organization is adjusted to reflect the employee relations settlement action. UTILITIES 22 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET FIBER OPTICS FUND Description In 1996, the City built a dark fiber ring around Palo Alto that would be capable of supporting multiple network developers and service providers with significant growth potential. The fiber backbone network was routed to pass by and provide access to key City facilities and the Palo Alto business community, including research centers and commercial properties. Dark fiber optics service consists of providing the fiber optics cabling, splice points, service connections, and other infrastructure providing high-capacity bandwidth needed to transport large quantities of data. It does not include the transmitters, receivers, or data itself, which are owned and operated by each customer. Accomplishments Continued the rebuild of the City's dark fiber-optic network to improve network performance and enable future expansion opportunities for licensing dark fiber to commercial firms and anchor institutions. Rebuild work completed: The fiber route from Palo Alto Internet Exchange at 529 Bryant Street to the Park Boulevard Substation. This phase of the project included substructure work, fiber pulling and cabinet installation. Completed installation of fiber optic service connections for the Department of Public Works to monitor pump stations and creek levels at 17 locations. Completed project design to install approximately 3,020 linear feet of fiber-optic conduit and 4 pull boxes on University Avenue. Issued a request for proposal to develop a business case for a Fiber-to-the-Node (FTTN) network for fiber and broadband expansion, including an expansion option to build citywide Fiber-to-the-Premises (FTTP). Initiatives Provide high-quality and competitively-priced fiber optic utility services to City departments and commercial customers in the City of Palo Alto. UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 23 Continue Capital Improvement Projects to upgrade the City's dark fiber network to enhance network capacity to enable future expansion opportunities for licensing dark fiber for commercial purposes. Evaluate new opportunities to expand the existing commercial dark fiber customer base in other business sectors (e.g. licensing dark fiber to the mobile service operator for network backhaul links for small cell deployments). Develop a plan to ensure the retention of commercial dark fiber customers due to anticipated changes in the market for business broadband services. Retain a management consultant to develop a business case for a FTTN network and prepare a high-level network design. Based on the findings and recommendations in the business case, engage an engineering firm to design a FTTN network, including an expansion option to build a citywide FTTP network. Develop policies and ordinances to support the expansion of broadband in Palo Alto and to preserve City street conditions and other critical infrastructure (e.g. Dig Once, Microtrenching and One Touch Make Ready). Install public Wi-Fi to unserved City facilities at Cubberley, Lucie Stern, and Golf Course. Goals and Objectives GOAL 1 Increase the value of fiber utility services to customers. Objectives: Provide high-quality and competitively-priced fiber optic utility services to City departments and commercial customers in the City of Palo Alto. Manage costs and add new dark fiber license agreements with commercial customers. GOAL 2 Improve capacity and reliability of the Dark Fiber system. Objectives: Ensure sufficient fiber optic cables are available to meet future customer needs. Make system enhancements to prevent damage from outside sources and improve reliability. UTILITIES 24 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Key Performance Measures Workload Measures CUSTOMER SATISFACTION Goal Provide excellent customer service. Objective Provide high-quality and competitively-priced fiber optic utility services to City Departments and commercial customers in the City of Palo Alto. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Number of commercial fiber connections completed 219.00 228.00 223.00 233.00 238.00 Description This measure shows the growth of the Fiber Enterprise based on customers and connections. Some customers have multiple fiber connections at various locations. Purpose The purpose of this measure is to add value to companies doing business in Palo Alto by providing a cost-effective, world class telecommunications system. The goal is to build out and fully leverage the fiber network to add value to the business and other communities as needed. Status The Fiber Enterprise continues to build out its network to provide more service options to the ever-expanding customer base. For example, a network was completed for the Palo Alto Unified School District (PAUSD) that will not only serve the schools, but provide fiber access to previously unserved areas. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Number of customer accounts 108 110 105 108 110 Number of Wholesale re-sellers 10 12 14 13 14 UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 25 Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % Dollars by Division CIP Fiber Optics Fund 634,258 458,664 1,652,838 1,650,000 (2,838)(0.2)% Fiber Optics Administration 177,369 174,885 788,590 763,546 (25,044)(3.2)% Fiber Optics Customer Service 402,806 515,324 1,128,287 1,170,484 42,197 3.7% Fiber Optics Operations and Maintenance 1,360,167 1,236,236 574,757 596,169 21,412 3.7% Total 2,574,599 2,385,108 4,144,473 4,180,199 35,726 0.9% Dollars by Category Salary & Benefits Healthcare 129,998 150,743 159,128 163,151 4,023 2.5% Other Benefits 20,292 18,999 24,978 26,007 1,029 4.1% Overtime 7,863 11,593 24,244 24,874 630 2.6% Pension 168,158 209,591 231,718 251,105 19,387 8.4% Salary 805,524 825,396 893,674 955,812 62,138 7.0% Workers' Compensation —1,166 26,440 19,047 (7,393)(28.0)% Total Salary & Benefits 1,131,834 1,217,489 1,360,182 1,439,997 79,814 5.9% Allocated Charges 475,985 438,939 616,772 590,597 (26,175)(4.2)% Contract Services 193,240 134,006 458,300 454,646 (3,654)(0.8)% Facilities & Equipment ———2,457 2,457 —% General Expense 3,982 3,161 14,000 13,900 (100)(0.7)% Operating Transfers-Out 103,818 103,915 122,837 113,684 (9,152)(7.5)% Rents & Leases 71,650 73,038 76,914 79,326 2,412 3.1% Supplies & Material 6,323 —9,000 9,000 ——% Transfer to Infrastructure 17,141 13,756 ————% Capital Improvement Program 570,626 400,805 1,486,468 1,476,592 (9,877)(0.7)% Total Dollars by Expense Category 2,574,599 2,385,108 4,144,473 4,180,199 35,726 0.9% Revenues Charges for Services 25,702 28,052 ————% Charges to Other Funds 5,300 —————% Net Sales 4,474,071 4,526,098 4,890,810 4,989,512 98,702 2.0% UTILITIES 26 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Other Revenue 1,417 1,181 200,000 200,000 ——% Return on Investments 443,557 499,412 366,400 366,400 ——% Total Revenues 4,950,048 5,054,743 5,457,210 5,555,912 98,702 1.8% Positions by Division CIP Fiber Optics Fund 0.79 0.79 0.79 0.79 ——% Fiber Optics Customer Service 2.84 2.90 3.68 3.68 ——% Fiber Optics Operations and Maintenance 3.13 3.13 3.13 3.13 ——% Total 6.76 6.82 7.60 7.60 ——% Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary Administrative Associate II —0.10 0.20 0.20 —15,547 Assistant Director Utilities Customer Support Services 0.20 0.20 0.20 0.20 —34,316 Assistant Director Utilities Engineering 0.05 0.05 0.05 0.05 —9,745 Business Analyst 0.10 0.20 0.30 0.30 —45,820 Electric Project Engineer 0.05 0.05 0.05 0.05 —7,398 Manager Utilities Compliance 0.10 0.10 0.10 0.10 —16,727 Manager Utilities Credit & Collection 0.40 0.40 0.40 0.40 —53,880 Manager Utilities Marketing Services 0.20 ————— Manager Utilities Program Services —0.20 0.20 0.20 —26,478 Manager Utilities Telecommunications 1.00 1.00 1.00 1.00 —137,488 Power Engineer 0.40 0.40 0.40 0.40 —55,801 Senior Electrical Engineer 0.05 0.05 0.05 0.05 —8,146 Street Light, Traffic Signal & Fiber Technician 2.00 2.00 2.00 2.00 —236,030 Street Light, Traffic Signal & Fiber- Lead 1.00 1.00 1.00 1.00 —126,276 Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 27 Utilities Key Account Representative 0.60 0.70 0.80 0.80 —95,285 Utilities Locator 0.03 0.03 0.03 0.03 —2,939 Sub-total: Full-Time Equivalent Positions 6.18 6.48 6.78 6.78 —871,877 Temporary/Hourly 0.58 0.34 0.82 0.82 —78,071 Total Positions 6.76 6.82 7.60 7.60 —949,948 Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary UTILITIES 28 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Budget Reconciliation Positions Expenditures Revenues Net Fiber Optics Fund Prior Year Budget 7.60 4,144,473 5,457,210 (1,312,737) One-time Prior Year Budget Adjustments Supplemental Pension Trust Fund Contribution — (22,250) — (22,250) Transfer to Technology Fund (TE-10001 Utilities Customer Billing Software Replacement)— 350 — 350 One-time Prior Year Budget Adjustments —(21,900)—(21,900) Base Adjustments Adjustments to Costs of Ongoing Activities Salaries and Benefits Adjustment — 87,404 — 87,404 Fiber Optics Revenue — — (101,298) 101,298 Silicon Valley Regional Communications Systems (SVRCS) Radio Subscription (CMR #8658)— 2,457 — 2,457 Rents and Leases Expenditure — 2,412 — 2,412 Management Development Funding — (100) — (100) Custodial Contract Funding — (3,654) — (3,654) Capital Improvement Funding — (9,857) 200,000 (209,857) General Fund Cost Allocation Plan — (69,977) — (69,977) General Liability Insurance Allocated Charges — 2,722 — 2,722 Utilities Administration Allocated Charges — 43,086 — 43,086 General Liability Savings (one-time FY 2019 Savings)— (1,938) — (1,938) Workers' Compensation Savings (one-time FY 2019 Savings)— (7,590) — (7,590) Adjustments to Costs of Ongoing Activities —44,964 98,702 (53,738) Total FY 2019 Proposed Budget 7.60 4,167,537 5,555,912 (1,388,375) Budget Proposals 1 Supplemental Pension Trust Fund Contribution — 12,661 — 12,661 Budget Changes —12,661 —12,661 Total FY 2019 Proposed Budget 7.60 4,180,199 5,555,912 (1,375,713) UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 29 Budget Adjustments Budget Adjustments Positions Expenditures Revenues Net Fiber Optics Fund 1 Supplemental Pension Trust Fund Contribution 0.00 12,661 0 12,661 This action transfers $12,661 from the Fiber Optics Fund to the General Benefits Fund on a one-time basis to contribute to the City’s supplemental Pension Trust Fund. This amount represents approximately 5% of the Fiber Optics Fund's annual pension contribution. Contributing to the Pension Trust Fund will further bolster the City’s resilience to variability associated with pension forecasting, including rate of return changes and increases associated with the unfunded accrued liability. (Ongoing net costs: $0) Performance Results Proactively contributing to the supplemental Pension Trust Fund will allow the City to prefund pension costs and continue to address the GASB 68 Net Pension Liabilities (NPL). UTILITIES 30 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET GAS FUND Description The municipal natural gas system began operations in 1917 when Palo Alto acquired a privately-owned gas business. During the early years, gas was manufactured from coal tar. This was replaced in the 1920s by natural gas from Pacific Gas and Electric. Today, gas is purchased from several sources. The Gas Utility services include Crossbore Safety, Gas Main Replacements, and Home Energy Audits. The Gas utility infrastructure and its crews maintains an excellent safety record. The gas fund is responsible for planning, designing, budgeting, and constructing major capital improvements to the City's gas distribution system. Accomplishments Adopted a Carbon Neutral Gas Plan to buy carbon offsets equal to Palo Alto's annual gas use as a transitional measure while we focus on reducing natural gas use. Established a partnership with a non-governmental organization in the City of Palo Alto's Sister City of Oaxaca, Mexico to fund forestry carbon offsets to fulfill some of the program's offset needs. Purchased the remaining needed offsets from a U.S. forestry and U.S. dairy waste digester project. Completed the design of a Gas Main Replacement (GMR) 22 project for the downtown area to replace approximately 19,500 linear feet of gas main pipelines and 1,400 service pipelines. Completed the gas pipe coating project for exposed pipe at bridge crossings. Completed the security camera project at Gas Receiving Stations 1, 2, and 4. Started on the design of the Acrylonitrile Butadien Styrene (ABS)/tenite service replacement project to replace approximately 160 gas service pipelines at various locations. Initiatives Complete design and start construction of the ABS/tenite service replacement project to replace approximately 220 gas service pipelines at various locations. Install 19,440 linear feet of gas main pipelines and 367 service pipelines on University Avenue and various streets in the Downtown District for the Upgrade Downtown and Gas Main Replacement (GMR) 22 projects. UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 31 Implement Phase II of the Crossbore Gas Safety Program to inspect high priority sanitary sewer laterals. Complete the gas cost of service study; the previous study was conducted in 2012. Goals and Objectives GOAL 1 Provide safe and efficient delivery of natural gas to our customers. Objectives: Continue repairing 100 percent of laterals damaged by crossbore within 24 hours. Remove and replace the remaining ABS pipe from the gas system. Complete a walking gas leak survey for 50 percent of the City and a mobile gas leak survey of services in business districts and 100 percent of the City's gas mains on an annual basis. GOAL 2 Increase environmental sustainability and promote efficient use of natural gas resources. Objectives: Ten-year goal for natural gas efficiency is a reduction in expected gas use of 2.85 percent by 2023 (base year 2013). Reduce the carbon intensity of the gas portfolio in accordance with the Sustainability and Climate Action Plan (S/CAP) using offsets. Key Performance Measures GAS LEAKS REPAIRED Goal Provide safe and efficient delivery of natural gas to customers. Objective Respond to and repair all Grade 1 gas leaks immediately. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Percentage of Grade 1 leaks responded to within 24 hours 100.00%100.00%100.00%100.00%100.00% Description This measures the total response time to Grade 1 leaks found during the walking and mobile (vehicle) surveys and any reported leaks classified as Grade 1. The City's policy is to respond and repair Grade 1 leaks within 24 hours. Grade 1 leaks are hazardous leaks that pose an immediate hazard to persons or property and require continuous action until conditions are no longer hazardous. Purpose Leaks are assigned priority gradings according to location, extent of migration, gas concentration, potential for concentration, ignition sources, and potential hazard to the public and property. These priority grades are intended only as guidelines. Status Utilities Operations responds immediately to Grade 1 leaks. The average repair time can vary depending on the size and location of the gas leak. UTILITIES 32 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET GAS SAFETY Goal Provide safe and efficient delivery of natural gas to our customers. Objective Complete a walking gas leak survey for 50 percent of the City and a mobile gas leak survey of services in business districts and 100 percent of the City's gas mains on an annual basis. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Percentage of gas system surveyed by walking 100.00%0.00%100.00%100.00%100.00% Percentage of gas system surveyed by mobile (vehicle)100.00%100.00%100.00%100.00%100.00% Description A walking survey is conducted to check for gas leaks on service/gas meters and covers one-half of the City (approximately 105 miles of gas mains and 36 miles of service lines) every year, so that the entire City's gas service system can be reviewed in a two-year period. The Federal Department of Transportation (DOT) regulations require a survey of the entire City once every five years. In addition to a walking survey, a mobile (vehicle) survey of all gas mains and some gas service lines (services in the business district) are conducted annually. Purpose To ensure the safety of all who live and work in Palo Alto and to comply with Federal DOT requirements. Status The department is meeting the requirements and repairing all discovered gas leaks in a timely manner. The department did not perform a walking survey in 2017. INCREASE ENVIRONMENTAL SUSTAINABILITY AND PROMOTE EFFICIENT USE OF NATURAL GAS RESOURCES Goal Support environmental sustainability and promote efficient use of natural gas resources. Objective Ten-year goals for natural gas are a reduction in expected gas use of 2.85 percent by 2023 (2013 base year). FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Natural gas savings achieved annually through efficiency programs 286,317.00 228,707.00 287,000.00 287,000.00 301,000.00 Description The department measures specific savings achieved from the installation of natural gas efficiency improvements, which are tracked through energy efficiency incentive programs. The Department can also track overall savings by customer class. Much of the non-residential savings were achieved through third party contractors who help large customers give their buildings a tune-up known as retrocommissioning. Purpose The carbon intensity of the natural gas portfolio is a function of where and how the gas is acquired and how much of it is burned in use. Improving gas efficiency directly reduces the gas-related carbon footprint in Palo Alto. Status FY 2017 gas efficiency savings were above the annual target for the tenth year in a row. As the cost of gas decreases, the Department anticipates a decline in the type of large commercial gas savings projects that made up the majority of this year’s savings. UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 33 Workload Measures FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Number of Customer Accounts (Gas)23,467 23,637 23,460 23,460 23,637 Number of gas leaks repaired 109 82 50 24 50 UTILITIES 34 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % Dollars by Division CIP Gas Fund 3,298,187 2,694,478 6,052,844 5,417,183 (635,661)(10.5)% Gas Administration 9,729,505 10,476,335 12,283,724 12,182,201 (101,524)(0.8)% Gas Customer Service 1,364,272 1,440,930 1,693,417 1,779,485 86,067 5.1% Gas Demand Side Management 565,553 855,204 1,593,290 1,547,073 (46,217)(2.9)% Gas Engineering (Operating)425,602 354,827 567,176 561,931 (5,245)(0.9)% Gas Operations and Maintenance 4,158,721 4,321,176 5,550,022 6,632,739 1,082,717 19.5% Gas Resource Management 8,599,212 13,129,316 16,185,726 15,398,027 (787,699)(4.9)% Total 28,141,053 33,272,265 43,926,200 43,518,639 (407,561)(0.9)% Dollars by Category Salary & Benefits Healthcare 819,155 905,632 1,053,572 1,089,891 36,320 3.4% Other Benefits 136,962 94,385 149,353 153,760 4,407 3.0% Overtime 325,581 241,406 188,249 193,144 4,894 2.6% Pension 1,116,780 1,234,331 1,511,446 1,571,349 59,903 4.0% Retiree Medical 543,452 594,708 625,662 667,617 41,955 6.7% Salary 3,603,977 3,484,177 5,406,444 5,569,839 163,395 3.0% Workers' Compensation 64,978 101,734 173,330 124,864 (48,466)(28.0)% Total Salary & Benefits 6,610,886 6,656,373 9,108,056 9,370,463 262,407 2.9% Allocated Charges 2,550,031 2,771,186 3,938,355 4,441,226 502,871 12.8% Contract Services 573,304 896,927 1,446,000 2,463,313 1,017,313 70.4% Debt Service 248,930 226,747 802,615 802,615 ——% Equity Transfer 6,194,000 6,726,000 6,733,000 6,563,000 (170,000)(2.5)% Facilities & Equipment ——19,790 19,039 (751)(3.8)% General Expense 348,019 465,031 780,274 769,134 (11,140)(1.4)% Operating Transfers-Out 375,638 457,658 899,639 640,642 (258,997)(28.8)% Rents & Leases 688,649 713,115 728,615 759,870 31,254 4.3% Supplies & Material 445,378 324,485 497,216 488,816 (8,400)(1.7)% Transfer to Infrastructure 100,119 71,969 ————% Utility Purchase 8,127,485 12,562,932 15,586,773 14,671,556 (915,217)(5.9)% UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 35 Capital Improvement Program 1,878,613 1,399,844 3,385,866 2,528,965 (856,901)(25.3)% Total Dollars by Expense Category 28,141,053 33,272,265 43,926,200 43,518,639 (407,561)(0.9)% Revenues Charges for Services 20,982 24,303 20,000 20,000 ——% Charges to Other Funds 216,628 219,023 95,587 98,072 2,486 2.6% Net Sales 29,021,397 35,214,383 34,740,465 36,160,635 1,420,170 4.1% Other Revenue 984,314 957,753 1,060,510 1,091,935 31,425 3.0% Return on Investments 448,615 506,216 526,300 526,300 ——% Total Revenues 30,691,936 36,921,679 36,442,861 37,896,942 1,454,080 4.0% Positions by Division CIP Gas Fund 17.10 17.10 15.80 15.80 ——% Gas Customer Service 8.41 8.78 9.03 9.13 0.10 1.11% Gas Demand Side Management 0.34 1.34 1.94 1.54 (0.40)(20.62)% Gas Engineering (Operating)1.15 1.40 1.40 1.40 ——% Gas Operations and Maintenance 22.38 22.43 23.98 24.14 0.16 0.67% Gas Resource Management 2.77 1.50 0.96 1.66 0.70 72.99% Total 52.16 52.55 53.11 53.67 0.56 1.06% Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary Account Specialist 0.26 0.23 0.23 0.23 —16,675 Administrative Associate II 0.65 0.75 0.85 0.85 —66,074 Assistant Director Administrative Services 0.10 0.05 0.05 0.05 —10,057 Assistant Director Utilities Customer Support Services 0.20 0.20 0.20 0.20 —34,316 Assistant Director Utilities Engineering 0.20 0.20 0.20 0.20 —38,979 Assistant Director Utilities Operations 0.15 0.15 0.15 0.15 —28,807 Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % UTILITIES 36 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Assistant Director Utilities/Resource Management 0.25 0.25 0.25 0.25 —44,148 Business Analyst 0.83 1.28 1.48 1.15 (0.33)175,644 Cathodic Protection Technician Assistant 1.00 1.00 1.00 1.00 —105,001 Cathodic Technician 1.00 1.00 1.00 1.00 —128,908 Cement Finisher 0.25 0.25 0.68 0.68 —64,093 Contracts Administrator 0.10 0.10 0.10 0.10 —11,771 Coordinator Utilities Projects 1.51 1.26 1.26 1.26 —142,864 Customer Service Representative 1.50 1.62 1.87 1.87 —144,067 Customer Service Specialist 0.50 0.68 0.68 0.68 —57,608 Customer Service Specialist-Lead 0.50 0.58 0.58 0.58 —52,553 Engineer 2.00 2.00 2.00 2.00 —261,350 Engineering Manager - Electric 0.15 0.15 0.15 0.15 —27,125 Engineering Manager - WGW 0.33 0.33 0.33 0.33 —51,885 Engineering Technician III 0.70 0.70 0.70 0.70 —68,398 Equipment Operator 0.43 0.43 ———— Gas and Water Meter Measurement and Control Technician ——3.20 3.20 —335,418 Gas and Water Meter Measurement and Control Technician - Lead ——0.80 0.80 —89,730 Gas System Technician 2.00 ————— Gas System Technician II 0.90 2.90 ———— Heavy Equipment Operator 2.57 2.52 2.52 2.52 —247,586 Heavy Equipment Operator - Install/Repair —0.65 0.65 0.65 —67,355 Inspector, Field Services 1.17 1.42 1.42 1.42 —149,730 Maintenance Mechanic-Welding 1.00 1.00 1.00 1.00 —104,895 Manager Customer Service 0.33 0.33 0.33 0.33 —44,019 Manager Treasury, Debt & Investments —0.10 0.10 0.10 —14,394 Manager Utilities Compliance 0.25 0.25 0.25 0.25 —41,818 Manager Utilities Credit & Collection 0.15 0.15 0.15 0.15 —20,205 Manager Utilities Marketing Services 0.20 ————— Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 37 Manager Utilities Operations WGW 0.20 0.20 0.20 0.20 —31,683 Manager Utilities Program Services —0.20 0.20 0.20 —26,478 Meter Reader 1.92 1.98 1.98 1.98 —143,278 Meter Reader-Lead 0.32 0.33 0.33 0.33 —25,547 Principal Business Analyst 0.33 0.33 0.33 0.33 —47,677 Program Assistant I 0.33 0.33 0.33 0.33 —26,026 Project Engineer 1.00 1.00 1.00 1.00 —140,646 Resource Planner 0.95 0.65 (0.05)0.65 0.70 90,990 Restoration Lead 0.43 0.43 0.43 0.43 —44,063 SCADA Technologist 0.20 0.20 0.20 0.20 —29,994 Senior Business Analyst 0.66 0.66 0.66 0.99 0.33 135,475 Senior Engineer 2.70 2.70 2.70 2.70 —390,235 Senior Management Analyst 0.05 ————— Senior Mechanic 0.33 0.33 0.33 0.33 —36,343 Senior Resource Planner 0.77 0.30 0.46 0.46 —67,898 Senior Utilities Field Service Representative 0.41 0.41 0.41 0.41 —46,808 Substation Electrician 0.10 0.10 0.10 0.10 —12,874 Supervisor Inspection Services 0.29 ————— Utilities Engineer Estimator 0.85 0.85 0.85 0.85 —102,036 Utilities Field Services Representative 1.75 1.75 1.75 1.75 —186,774 Utilities Install Repair-Lead-Welding Certified 1.30 1.30 1.30 1.30 —151,109 Utilities Install Repair-Welding Certified 1.95 1.95 1.95 1.95 —195,343 Utilities Install/Repair 4.45 3.85 3.85 3.85 —400,676 Utilities Install/Repair Assistant 0.65 0.65 0.65 0.65 —57,374 Utilities Install/Repair-Lead 1.98 1.98 1.98 1.98 —208,183 Utilities Key Account Representative 0.35 0.45 0.50 0.50 —59,553 Utilities Locator 0.29 0.29 0.29 0.29 —28,409 Utilities Marketing Program Administrator 0.35 0.70 1.00 0.70 (0.30)79,202 Utilities Safety Officer 0.20 0.20 0.20 0.20 —22,739 Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary UTILITIES 38 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Utilities Supervisor 2.08 2.37 2.37 2.37 —273,403 Water System Operator II 0.66 0.66 0.66 0.66 —64,818 Sub-total: Full-Time Equivalent Positions 49.03 49.68 51.14 51.54 0.40 5,771,109 Temporary/Hourly 3.13 2.88 1.97 2.13 0.16 125,669 Total Positions 52.16 52.55 53.11 53.67 0.56 5,896,778 Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 39 Budget Reconciliation Positions Expenditures Revenues Net Gas Fund Prior Year Budget 53.11 43,926,200 36,442,862 7,483,338 One-time Prior Year Budget Adjustments Supplemental Pension Trust Fund Contribution — (148,937) — (148,937) One-time Prior Year Budget Adjustments —(148,937)—(148,937) Base Adjustments Adjustments to Costs of Ongoing Activities Salaries and Benefits Adjustments — 312,167 — 312,167 Net-zero Utilities Staffing Realignment (increase of 0.7 FTE Resource Planner and 0.16 FTE Journey Level Laborer - H positions; decrease of 0.3 FTE Utilities Marketing Program Administrator positions) 0.56 — — — Rents & Leases Expenditure — 19,254 — 19,254 Silicon Valley Regional Communications Systems (SVRCS) Radio Subscription (CMR #8658)— 17,199 — 17,199 Transfer to Water Fund (WS-02014 - Water, Gas, Wastewater Utility GIS Data)— 13,421 — 13,421 Management Development Funding — (3,470) — (3,470) Custodial Contract Funding — (5,037) — (5,037) Transfer to Technology Fund (TE-05000 Radio Infrastructure Replacement)— (58,311) — (58,311) Transfer to Electric Fund (EL-11014 - Smart Grid Technology Installation)— (120,000) — (120,000) Equity Transfer to General Fund (FY 2019 Projected)— (170,000) — (170,000) Capital Improvement Funding — (889,344) 31,425 (920,769) Gas Commodity Purchases Expenditure — (915,217) 189,751 (1,104,968) Gas Customer Sales Revenue (4% Rate Increase) — — 1,232,904 (1,232,904) General Fund Cost Allocation Plan — 123,078 — 123,078 Engineering & Inspection Services Allocated Charges — 119 — 119 General Liability Insurance Allocated Charges — 17,842 — 17,842 Ground Maintenance Allocated Charges — 1,871 — 1,871 Print & Mail Allocated Charges — 12,696 — 12,696 Storm Drain Allocated Charges — 8 — 8 Street Cut Allocated Charges — 1,034 — 1,034 Utilities Administration Allocated Charges — 351,528 — 351,528 UTILITIES 40 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Utilities Allocated Charges — 56 — 56 Vehicle Replacement & Maintenance Allocated Charges — 9,042 — 9,042 General Liability Savings (One-time FY 2019 Savings)— (12,708) — (12,708) Workers' Compensation Savings (One-time FY 2019 Savings)— (49,760) — (49,760) Adjustments to Costs of Ongoing Activities 0.56 (1,344,531)1,454,080 (2,798,611) Total FY 2019 Base Budget 53.67 42,432,732 37,896,942 4,535,790 Budget Proposals 1 Crossbore Gas Safety Program - Phase II Contract — 1,000,000 — 1,000,000 2 Supplemental Pension Trust Fund Contribution — 79,311 — 79,311 3 Reclassification of Business Analyst to Senior Business Analyst — 6,597 — 6,597 Budget Changes —1,085,908 —1,085,908 Total FY 2019 Proposed Budget 53.67 43,518,639 37,896,942 5,621,698 Budget Reconciliation Positions Expenditures Revenues Net Gas Fund UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 41 Budget Adjustments Budget Adjustments Positions Expenditures Revenues Net Gas Fund 1 Crossbore Gas Safety Program - Phase II Contract 0.00 1,000,000 0 1,000,000 This action increases funding in contract services for Phase II of the Crossbore Safety Program. Launched in FY 2012, this program ensures that there are no natural gas lines inadvertently installed or cross bored through sewer laterals as these setups can lead to potentially hazardous situations. In Phase I, approximately 40% of total laterals (7,000 out of 18,000) were inspected and cleared. Phase II of the program will inspect and repair approximately 2,000 sewer laterals that have been categorized as high-risk cross bores. Phase II is expected to cost between $3 million to $4 million and will take 3 to 4 years to complete. (Ongoing costs: $1,000,000) Performance Results Proactively examining and repairing crossbores will prevent potentially hazardous situations such as gas leaks in the future. 2 Supplemental Pension Trust Fund Contribution 0.00 79,311 0 79,311 This action transfers $79,311 from the Gas Funds to the General Benefits Fund on a one-time basis to contribute to the City’s supplemental Pension Trust Fund. This amount represents approximately 5% of the Gas Funds' annual pension contribution. Contributing to the Pension Trust Fund will further bolster the City’s resilience to variability associated with pension forecasting, including rate of return changes and increases associated with the unfunded accrued liability. (Ongoing costs: $0) Performance Results Proactively contributing to the supplemental Pension Trust Fund will allow the City to prefund pension costs and continue to address the GASB 68 Net Pension Liabilities (NPL). 3 Reclassification of Business Analyst to Senior Business Analyst 0.00 6,597 0 6,597 This action reclassifies 1.0 Business Analyst to 1.0 Senior Business Analyst in the Utilities Department to align with current staffing levels and assignments. Duties assigned to this position were evaluated through the appropriate processes with the Employee Relations Division in the Human Resources Department and a settlement was reached in February 2018. This action aligns authorized staffing levels with this settlement agreement which determined the Senior Business Analysts was more commensurate with the duties assigned. (Ongoing costs: $6,597) Performance Results This action ensures the table of organization is adjusted to reflect the employee relations settlement action. UTILITIES 42 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET WASTEWATER COLLECTION FUND Description In 1898, Palo Alto approved $28,000 in bond money to fund construction of the City's first sewer network, which was completed in 1899. Private cesspools and privies were banned, and the City Health Officer had residents connected to the sewer system within a few years. Wastewater Collection's staff is responsible for design, construction, operation, and maintenance of approximately 216 miles of sewer mains and over 18,000 City-owned laterals. Staff continues overlapping the design and construction elements of rehabilitation and augmentation projects. Wastewater Collection's priorities are: maintaining infrastructure reliability; identifying problems in mains and service laterals through expanded use of video technology; complying with all regulatory requirements; and maintaining its excellent safety record. Accomplishments Substantially completed two major capital improvement projects for the sanitary sewer system (Sanitary Sewer Replacement (SSR) projects 24, 25, 26 and 27). This accounts for approximately 42,485 linear feet of sanitary sewer mains, 659 sewer laterals and 114 manholes in University South, Professorville and Old Palo Alto neighborhoods for SSR 24/ 25/26; and approximately 15,151 linear feet of wastewater main pipelines, 247 lateral pipelines and 42 manholes in Downtown North, Crescent Park, Community Center and Duveneck/St. Francis neighborhoods for SSR 27. Initiatives Conduct a cost of service study for wastewater collection; the previous study was completed in 2011. UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 43 Implement Phase II of the Crossbore Gas Safety Program to inspect high priority sanitary sewer laterals. Begin design of SSR project 28 to replace approximately 21,000 linear feet of sewer main pipelines in the Charleston Meadows and Leland Manor/Garland neighborhoods. Acquire and deploy proven systems management technologies and replace a legacy sewer and sanitary overflow tracking software. Goals and Objectives GOAL 1 Maintain and provide reliable and cost-effective wastewater services to customers. Objectives: Clean and maintain sewer mains in commercial areas on a quarterly basis. Clean and video a minimum of 17%, or 3,060, of the City-owned laterals annually to comply with City's Sewer Overflow Reduction Plan. Maintain a low level of inflow and infiltration of saltwater into the City's wastewater system. Maintain the integrity of the City's wastewater collection system by replacing mains and laterals as identified in the Wastewater Collection System Rehabilitation/Augmentation Capital Improvement Project plan. Minimize Sanitary Sewer Overflows and stoppages. Maintain a fleet of dependable vehicles to provide high quality cleaning and servicing of the sewer system. UTILITIES 44 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Key Performance Measures Workload Measures MAINTAIN AND PROVIDE RELIABLE SERVICES Goal Maintain and provide a reliable wastewater system to customers. Objective Inspect and clean 100 percent of the sewer mains in commercial areas on a quarterly basis. Clean and video a minimum of 17 percent of the City-owned laterals annually to comply with the City's Sewer Overflow Reduction Plan. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Number of miles of sewer lines cleaned/treated in a fiscal year 133.00 61.00 145.00 132.00 75.00 Percentage of sewer laterals inspected annually 17.00%19.00%18.00%19.00%18.00% Description The purpose of the Sewer System Management Plan (SSMP) is to maintain and improve the condition of the collection system infrastructure; control infiltration and provide appropriate sewer capacity; and minimize the number and impact of sanitary sewer overflows. The goal is to perform sewer main cleaning of the entire collection system every 30 months (81.6 miles per year). This measures inspections and maintenance of 17 percent of City-owned laterals annually using closed-circuit television (CCTV) inspection data, including results of the on-going crossbore lateral inspection program, to target sewer mains and lower laterals for rehabilitation and replacement. Purpose To prevent blockage, sewer overflows, and to comply with the City's SSMP, all the City's sewer mains must be cleaned within 30 months. Status The City is meeting the objectives of its SSMP; through the implementation of an aggressive sewer main cleaning, the number of blockages and overflows has decreased. The division is on target to complete inspection of 19%, or 3,447, laterals of 18,141 in the City. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Number of Customer Accounts (Wastewater)22,016 22,216 22,010 22,010 22,010 Number of sewage overflows in a fiscal year 95 100 65 80 63 Percent of sewage spill responses within two hours 100.00%94.00%100.00%98.00%100.00% Percent of surveyed residents rating the quality of the Sewer Service as good/excellent 88.00%88.00%88.00%88.00%89.00% Percent of miles of sewer lines replaced 1.50%1.20%1.50%1.50%1.50% UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 45 Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % Dollars by Division CIP Wastewater Collection Fund 5,300,945 10,265,576 2,188,157 6,631,085 4,442,928 203.0% Wastewater Collection Administration 1,962,889 2,379,821 2,847,999 2,708,907 (139,092)(4.9)% Wastewater Collection Customer Service 255,586 274,932 301,679 332,034 30,354 10.1% Wastewater Collection Engineering (Operating)347,062 291,893 480,976 479,537 (1,439)(0.3)% Wastewater Collection Operations and Maintenance 11,405,108 11,149,370 13,354,992 13,783,976 428,984 3.2% Total 19,271,590 24,361,592 19,173,803 23,935,539 4,761,736 24.8% Dollars by Category Salary & Benefits Healthcare 519,724 541,581 667,936 621,177 (46,759)(7.0)% Other Benefits 67,991 50,285 76,568 78,258 1,690 2.2% Overtime 271,686 250,958 147,159 150,985 3,826 2.6% Pension 606,146 673,275 838,155 867,095 28,940 3.5% Retiree Medical 124,755 136,521 143,626 259,629 116,003 80.8% Salary 2,332,607 2,741,131 2,968,946 3,050,134 81,188 2.7% Workers' Compensation 22,645 31,589 95,475 68,779 (26,697)(28.0)% Total Salary & Benefits 3,945,556 4,425,340 4,937,866 5,096,057 158,191 3.2% Allocated Charges 936,248 918,413 2,607,743 2,600,579 (7,163)(0.3)% Contract Services 171,722 114,936 247,640 248,986 1,346 0.5% Debt Service 46,777 42,568 129,001 129,001 ——% Facilities & Equipment —214 3,000 12,828 9,828 327.6% General Expense 47,240 59,133 122,160 125,420 3,260 2.7% Operating Transfers-Out 338,264 414,853 393,160 294,055 (99,105)(25.2)% Rents & Leases 373,180 396,092 399,647 419,562 19,915 5.0% Supplies & Material 320,224 272,399 385,618 380,618 (5,000)(1.3)% Transfer to Infrastructure 57,499 50,002 ————% Utility Purchase 8,769,780 8,390,646 9,915,579 10,276,371 360,792 3.6% UTILITIES 46 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Capital Improvement Program 4,265,100 9,276,997 32,389 4,352,062 4,319,672 13,336.7% Total Dollars by Expense Category 19,271,590 24,361,592 19,173,803 23,935,539 4,761,736 24.8% Revenues Charges for Services 20,972 20,955 10,000 10,000 ——% Charges to Other Funds 30,107 30,107 30,107 30,890 783 2.6% Net Sales 16,296,938 18,237,556 17,957,112 19,835,873 1,878,760 10.5% Other Revenue 511,434 245,565 1,057,820 1,069,995 12,175 1.2% Return on Investments 299,684 215,909 266,500 266,500 ——% Total Revenues 17,159,136 18,750,093 19,321,539 21,213,257 1,891,718 9.8% Positions by Division CIP Wastewater Collection Fund 12.52 12.52 12.52 12.52 ——% Wastewater Collection Customer Service 3.06 2.19 2.22 2.22 ——% Wastewater Collection Engineering (Operating)1.15 1.40 1.40 1.40 ——% Wastewater Collection Operations and Maintenance 13.02 13.06 12.86 13.02 0.16 1.26% Total 29.74 29.17 29.00 29.16 0.16 0.56% Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary Account Specialist 0.25 0.23 0.23 0.23 —16,675 Administrative Associate II 0.40 0.40 0.40 0.40 —31,094 Assistant Director Utilities Engineering 0.15 0.15 0.15 0.15 —29,234 Assistant Director Utilities Operations 0.10 0.10 0.10 0.10 —19,205 Associate Engineer 0.50 ————— Business Analyst 0.50 0.75 0.75 0.75 —114,551 Cement Finisher 0.50 0.50 0.76 0.76 —71,633 Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 47 Contracts Administrator 0.05 0.05 0.05 0.05 —5,885 Coordinator Utilities Projects 1.35 1.10 1.10 1.10 —124,722 Customer Service Representative 1.38 1.20 1.45 1.45 —111,710 Customer Service Specialist 0.46 ————— Customer Service Specialist-Lead 0.46 0.25 0.25 0.25 —22,652 Engineer 1.00 1.00 1.00 1.00 —130,675 Engineering Manager - Electric 0.15 0.15 0.15 0.15 —27,125 Engineering Manager - WGW 0.34 0.34 0.34 0.34 —53,457 Engineering Technician III 0.45 0.45 0.45 0.45 —43,970 Equipment Operator 0.26 0.26 ———— Heavy Equipment Operator 2.13 0.23 0.23 0.23 —22,597 Heavy Equipment Operator - Install/Repair —3.15 3.15 3.15 —300,957 Industrial Waste Investigator —0.50 0.50 0.50 —54,257 Inspector, Field Services 1.43 1.68 1.68 1.68 —177,145 Maintenance Mechanic-Welding 0.20 0.20 0.20 0.20 —20,979 Manager Utilities Credit & Collection 0.15 0.15 0.15 0.15 —20,205 Manager Utilities Operations WGW 0.30 0.30 0.30 0.30 —47,524 Program Assistant I 0.34 0.34 0.34 0.34 —26,815 Project Engineer 2.00 2.00 2.00 2.00 —281,293 Restoration Lead 0.26 0.26 0.26 0.26 —26,643 Senior Engineer 1.30 1.30 1.30 1.30 —190,307 Senior Mechanic 0.33 0.33 0.33 0.33 —36,343 Supervisor Inspection Services 0.42 ————— Utilities Engineer Estimator 0.47 0.47 0.47 0.47 —55,366 Utilities Field Services Representative 1.25 1.25 1.25 1.25 —133,410 Utilities Install Repair-Lead-Welding Certified 0.24 0.24 0.24 0.24 —27,897 Utilities Install Repair-Welding Certified 0.36 0.36 0.36 0.36 —36,063 Utilities Install/Repair 5.50 4.25 4.25 4.25 —442,305 Utilities Install/Repair-Lead 2.00 2.00 2.00 2.00 —227,162 Utilities Locator 0.39 0.39 0.39 0.39 —38,205 Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary UTILITIES 48 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Utilities Safety Officer 0.10 0.10 0.10 0.10 —11,369 Utilities Supervisor 1.30 1.72 1.72 1.72 —183,671 Sub-total: Full-Time Equivalent Positions 28.77 28.15 28.40 28.40 —3,163,103 Temporary/Hourly 0.98 1.02 0.60 0.76 0.16 50,669 Total Positions 29.74 29.17 29.00 29.16 0.16 3,213,772 Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 49 Budget Reconciliation Positions Expenditures Revenues Net Wastewater Collection Fund Prior Year Budget 29.00 19,173,803 19,321,540 (147,737) One-time Prior Year Budget Adjustments Supplemental Pension Trust Fund Contribution — (83,380) — (83,380) One-time Prior Year Budget Adjustments —(83,380)—(83,380) Base Adjustments Adjustments to Costs of Ongoing Activities Salaries and Benefits Adjustments — 185,600 — 185,600 Net-zero Utilities Staffing Realignment (increase of 0.16 FTE Journey Level Laborer - H position)0.16 — — — Capital Improvement Funding — 4,315,432 12,175 4,303,257 Wastewater Treatment Expenses — 360,792 — 360,792 Bank Card Transaction Fee — 15,100 — 15,100 Transfer to Water Fund (WS-02014 Water, Gas, Wastewater Utility GIS Data)— 13,421 — 13,421 Rents and Leases Expenditure — 9,915 — 9,915 Silicon Valley Regional Communications Systems (SVRCS) Radio Subscription (CMR #8658)— 9,828 — 9,828 Engineering and Inspection Services Allocated Charges — 242 — 242 Management Development Funding — (1,840) — (1,840) Custodial Contract Funding — (3,654) — (3,654) Transfer to Technology Fund (TE-05000 Radio Infrastructure Replacement)— (70,013) — (70,013) Wastewater Collection Customer Sales Revenue (11% Rate Increase)— — 1,879,542 (1,879,542) General Fund Cost Allocation Plan — (200,968) — (200,968) General Liability Insurance Allocated Charges — 9,828 — 9,828 Print & Mail Allocated Charges — (935) — (935) Street Cut Fee Allocated Charges — 2,067 — 2,067 Survey Fee Allocated Charges — 534 — 534 Utilities Administration Allocated Charges — 182,942 — 182,942 Utilities Allocated Charges — 293 — 293 Vehicle Replacement & Maintenance Allocated Charges — 7,091 — 7,091 UTILITIES 50 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET General Liability Savings (one-time FY 2019 Savings)— (7,000) — (7,000) Workers' Compensation Savings (one-time FY 2019 Savings)— (27,409) — (27,409) Adjustments to Costs of Ongoing Activities 0.16 4,801,267 1,891,717 2,909,550 Total FY 2019 Base Budget 29.16 23,891,690 21,213,257 2,678,433 Budget Proposals 1 Supplemental Pension Trust Fund Contribution — 43,849 — 43,849 Budget Changes —43,849 —43,849 Total FY 2019 Proposed Budget 29.16 23,935,539 21,213,257 2,722,282 Budget Adjustments Budget Adjustments Positions Expenditures Revenues Net Wastewater Collection Fund 1 Supplemental Pension Trust Fund Contribution 0.00 43,849 0 43,849 This action transfers $43,849 from the Wastewater Collection Fund to the General Benefits Fund on a one-time basis to contribute to the City’s supplemental Pension Trust Fund. This amount represents approximately 5% of the Wastewater Collection Fund's annual pension contribution. Contributing to the Pension Trust Fund will further bolster the City’s resilience to variability associated with pension forecasting, including rate of return changes and increases associated with the unfunded accrued liability. (Ongoing costs: $0) Performance Results Proactively contributing to the supplemental Pension Trust Fund will allow the City to prefund pension costs and continue to address the GASB 68 Net Pension Liabilities (NPL). Budget Reconciliation Positions Expenditures Revenues Net Wastewater Collection Fund UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 51 WATER FUND Description From 1895 until 1928, the City's water supply came from deep wells. When the groundwater supply started to decline, water was purchased from the San Francisco Regional Water System to supplement the local water system. Since 1962, when Palo Alto's wells were discontinued as the primary water system, 100 percent of the water has come from the Regional Water System: 85 percent derived from snow melt flowing into the Hetch Hetchy Reservoir and the balance from runoff stored in San Francisco Bay Area reservoirs. The Water Fund focuses on increasing infrastructure reliability and responsiveness to meet the City's water supply needs during an emergency; maintaining high-quality and reliable sources of water; updating water efficiency goals; and implementing water efficiency programs and services. Additionally, the engineering division is implementing a seismic upgrade to the existing reservoirs, wells and receiving stations to increase supply reliability during catastrophic emergencies. Accomplishments Collaborated with Public Works and Santa Clara Valley Water District to begin the Recycled Water Strategic Plan, a comprehensive evaluation of all potential recycled water supply options including non-potable and potable reuse options. Woodward & Curran were contracted to complete the plan. Started construction of a Water Main Replacement project (WMR 26) to replace approximately 11,000 linear feet of water main pipelines, 200 service pipelines, and 40 fire hydrants with approximately 29% completed this year. Completed design of water main replacement for Upgrade Downtown to replace approximately 3,155 linear feet of water main pipelines, 52 service pipelines, and 10 fire hydrants. Completed the construction of Montebello Reservoir steel water tank rehabilitation and seismic upgrade, including a new roof, interior and exterior coatings, a new control valve, and paving. Completed the remaining roof coating portion in the construction of Boronda Reservoir concrete water tank rehabilitation project. UTILITIES 52 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Retained a consultant to review storage and operational needs. Consultant will develop a water model that will assist in the storage and operational recommendations. Engaged a consultant to perform a geological investigation of the foundation leaks at the Mayfield Tank to provide a report containing results of the subsurface explorations and laboratory testing and recommend repair alternatives. Completed two transmission main repairs in the foothills area west of Highway 280. Completed the first annual water loss audit (SB 555) to the State Water Resource Control Board (SWRCB). Completed over 70 customer service projects. Initiatives Complete the geological study of Mayfield tank site to assess the stability of the reservoir and begin repairs based on the findings. Continue construction of Water Main Replacement (WMR) 26 and Upgrade Downtown projects to replace approximately 14,000 linear feet of water main pipelines, 250 service pipelines, and 50 fire hydrants. Complete design for WMR project 27 in Oak Creek and University Avenue neighborhoods. Start and complete the preliminary design report for the Corta Madera tank replacement project. This will include a topographic survey and a geotechnical report for the site. Start and complete the transmission main repair and valve installation at the intersection of Page Mill and Old Page Mill Road. Complete collaboration with Public Works and Santa Clara Valley Water District on evaluation of recycled water options, including evaluating the economic potential of a Palo Alto recycled water system. Goals and Objectives GOAL 1 Provide safe and clean drinking water for customers. Objectives: Ensure drinking water meets all regulatory standards. Maintain and update water infrastructure to ensure reliable service. Educate customers about backflow prevention as part of the City's Cross Connection Control Program. Ensure adequate water supplies are available to meet existing and future water demands. Complete seismic upgrades to water system (e.g. reservoirs, receiving stations and wells). GOAL 2 Increase environmental sustainability of the water supply system. UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 53 Objective: Increase water conservation and efficiency participation. Develop updated long-term water efficiency goals as part of the 2015 Urban Water Management Plan update. Evaluate expanding the recycled water delivery system to help drought-proof the system, reuse local water supplies, and reduce the City's dependence on the Tuolumne River. Key Performance Measures PROVIDE SAFE AND CLEAN DRINKING WATER FOR OUR CUSTOMERS Goal Provide safe and clean drinking water for customers. Objective Ensure drinking water meets all regulatory standards. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Percentage of customer-owned water backflow prevention devices in compliance 90.00%91.00%94.00%91.00%92.00% Description Customer-owned and maintained backflow devices are an integral part of the City's Cross Connection Control Program which began in early 2010. The devices help to ensure that no contaminants of any kind (e.g., chemicals, debris, reclaimed water) enter the potable water system. Purpose The California Department of Public Health provides regulations for the City and its customers through California Code of Regulations, Title 17. These regulations specify the types of hazards that require backflow devices. Status The City is achieving a compliance rate of up to 90-95 percent on an annual basis. There are 3,856 backflow devices. This number is growing every year as current codes require backflow installation for residences as well as commercial properties. UTILITIES 54 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET WATER EFFICIENCY Goal Increase environmental sustainability of the water supply system. Objective Increase water conservation and efficiency participation. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Annual savings achieved through water efficiency programs as a percentage of total sales 1.96%1.91%0.91%1.91%1.94% Description The department measures specific savings achieved by the installation of water efficiency improvements through the programs that the City offers through the Santa Clara Valley Water District. The California Drought greatly affected the City's water savings numbers with the largest amount of savings attributed to the non- residential installation of drought tolerant landscapes and water efficient irrigation hardware. Purpose Improving water efficiency for homes and businesses can result in water supply, water operations and wastewater processing savings. This measure supports the Water Fund's ten-year goal to reduce expected water use by 20 percent by 2020. Status Water efficiency program savings were significantly higher starting FY 2015 through FY 2017 compared to previous years due to the California drought and the Governor's Executive Order mandating water conservation. Program marketing and general drought awareness helped to achieve acceptable levels of program participation; however, staff expects program participation to decrease after the current rainy winter. WATER QUALITY Goal Ensure the provision of safe and clean drinking water for customers. Objective Safe testing of drinking water to meet all regulatory standards. FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Percentage of samples passed from all sampling stations 100.00%100.00%100.00%100.00%100.00% Description The City of Palo Alto (CPA) regularly collects and tests water samples from connection points between the San Francisco Public Utilities Commission/City of Palo Alto (SFPUC/CPA), storage reservoirs, emergency wells, residential, and sample station locations within the distribution system to ensure that the water quality meets all California Department of Public Health (CDPH) and U.S. Environmental Protection Agency (EPA) prescribed regulations that limit the amount of contaminants in the drinking water. The City has 18 sampling stations and collects 84-105 samples monthly to test levels of chlorine residual, coliform and pH levels are within regulatory guidelines. All sample results are reported to CDPH on a monthly basis. Purpose Complying with regulations guarantees the City maintains its high standards of water quality and avoids fines. Status Palo Alto drinking water continues to be in complete compliance with all existing county, state, and federal standards for water quality. UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 55 Workload Measures FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted FY 2018 Estimated FY 2019 Proposed Percent of miles of water mains replaced 0.70%0.20%0.70%1.00%1.00% Number of Customer Accounts (Water)19,994 20,213 20,000 20,213 20,213 Percent of surveyed rating the quality of the Drinking Water (Water) as "Good" or "Excellent" 87.00%88.00%88.00%88.00%88.00% UTILITIES 56 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % Dollars by Division CIP Water Fund 9,082,022 3,453,732 6,127,567 15,072,824 8,945,257 146.0% Water Administration 6,871,823 7,038,937 8,884,495 8,879,778 (4,717)(0.1)% Water Customer Service 2,082,194 1,488,960 2,201,670 2,282,720 81,051 3.7% Water Engineering (Operating)409,183 355,852 538,106 537,839 (267)(0.0)% Water Operations and Maintenance 5,433,991 5,291,117 7,531,885 7,681,920 150,035 2.0% Water Resource Management 18,219,637 20,943,416 22,203,416 23,699,431 1,496,015 6.7% Total 42,098,850 38,572,014 47,487,138 58,154,512 10,667,374 22.5% Dollars by Category Salary & Benefits Healthcare 750,434 822,738 957,649 958,317 669 0.1% Other Benefits 114,286 94,370 140,523 142,932 2,409 1.7% Overtime 250,524 231,860 267,963 274,930 6,967 2.6% Pension 1,025,830 1,165,780 1,397,443 1,428,203 30,760 2.2% Retiree Medical 260,618 285,198 300,042 427,827 127,784 42.6% Salary 4,949,770 4,627,885 5,117,401 5,154,784 37,383 0.7% Workers' Compensation 89,580 225,163 164,608 118,581 (46,027)(28.0)% Total Salary & Benefits 7,441,043 7,452,994 8,345,630 8,505,574 159,944 1.9% Allocated Charges 2,867,207 3,212,511 4,410,152 4,613,901 203,749 4.6% Contract Services 806,550 155,818 827,806 819,002 (8,804)(1.1)% Debt Service 1,813,658 1,757,088 3,222,606 3,222,606 ——% Facilities & Equipment ——2,000 16,711 14,711 735.6% General Expense 443,919 417,045 666,070 667,170 1,100 0.2% Operating Transfers-Out 251,541 317,220 649,055 486,353 (162,702)(25.1)% Rents & Leases 1,803,087 1,862,485 2,931,563 3,003,388 71,825 2.5% Supplies & Material 544,371 413,824 609,982 610,982 1,000 0.2% Transfer to Infrastructure 112,692 84,211 ————% Utility Purchase 17,626,020 20,075,377 21,090,000 22,620,000 1,530,000 7.3% Capital Improvement Program 8,388,762 2,823,442 4,732,275 13,588,826 8,856,551 187.2% Total Dollars by Expense Category 42,098,850 38,572,014 47,487,138 58,154,512 10,667,374 22.5% UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 57 Revenues Charges for Services 51,021 60,000 10,000 10,000 ——% Charges to Other Funds 442,829 160,766 84,403 81,201 (3,202)(3.8)% From Other Agencies 636,666 512,301 576,632 576,632 ——% Net Sales 36,764,774 42,740,545 40,913,999 42,737,130 1,823,131 4.5% Operating Transfers-In 221,833 244,018 512,436 539,278 26,842 5.2% Other Revenue 955,122 844,915 904,280 931,348 27,068 3.0% Return on Investments 738,329 772,015 775,300 775,300 ——% Total Revenues 39,810,575 45,334,560 43,777,050 45,650,889 1,873,839 4.3% Positions by Division CIP Water Fund 9.05 9.05 8.03 8.03 ——% Water Customer Service 9.01 9.68 9.66 9.66 ——% Water Engineering (Operating)1.12 1.37 1.35 1.35 ——% Water Operations and Maintenance 25.44 25.44 25.34 25.01 (0.32)(1.28)% Water Resource Management 1.53 2.44 3.52 3.02 (0.50)(14.19)% Total 46.15 47.99 47.90 47.08 (0.82)(1.72)% Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary Account Specialist 0.25 0.23 0.23 0.23 —16,675 Administrative Associate II 0.85 0.75 0.65 0.65 —50,527 Assistant Director Utilities Customer Support Services 0.20 0.20 0.20 0.20 —34,316 Assistant Director Utilities Engineering 0.20 0.20 0.20 0.20 —38,979 Assistant Director Utilities Operations 0.15 0.15 0.15 0.15 —28,807 Assistant Director Utilities/Resource Management 0.25 0.25 0.25 0.25 —44,148 Business Analyst 1.68 1.73 1.53 1.20 (0.33)183,281 Cement Finisher 0.25 0.25 0.56 0.56 —52,782 Contracts Administrator 0.10 0.10 0.10 0.10 —11,771 Budget Summary FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change $ FY 2019 Change % UTILITIES 58 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Coordinator Utilities Projects 1.34 1.09 1.09 1.09 —123,588 Customer Service Representative 1.26 1.56 1.81 1.81 —139,444 Customer Service Specialist 0.42 0.66 0.66 0.66 —55,914 Customer Service Specialist-Lead 0.42 0.59 0.59 0.59 —53,459 Engineer 1.00 1.00 1.00 1.00 —130,675 Engineering Manager - Electric 0.15 0.15 0.15 0.15 —27,125 Engineering Manager - WGW 0.33 0.33 0.33 0.33 —51,885 Engineering Technician III 0.45 1.45 0.45 0.45 —43,970 Equipment Operator 0.31 0.31 ———— Gas and Water Meter Measurement and Control Technician ——0.80 0.80 —83,855 Gas and Water Meter Measurement and Control Technician - Lead ——0.20 0.20 —22,432 Gas System Technician II 0.10 0.10 ———— Heavy Equipment Operator 2.00 1.95 1.95 1.95 —191,584 Heavy Equipment Operator - Install/Repair —0.20 0.20 0.20 —20,523 Inspector, Field Services 1.40 1.65 1.65 1.65 —173,982 Maintenance Mechanic-Welding 0.80 0.80 0.80 0.80 —83,916 Manager Customer Service 0.34 0.34 0.34 0.34 —45,353 Manager Utilities Compliance 0.50 0.50 0.50 0.50 —83,637 Manager Utilities Credit & Collection 0.15 0.15 0.15 0.15 —20,205 Manager Utilities Marketing Services 0.20 ————— Manager Utilities Operations WGW 0.50 0.50 0.50 0.50 —79,206 Manager Utilities Program Services —0.20 0.20 0.20 —26,478 Meter Reader 1.67 2.03 2.03 2.03 —146,896 Meter Reader-Lead 0.28 0.34 0.34 0.34 —26,321 Power Engineer 0.30 0.30 0.30 0.30 —41,851 Principal Business Analyst 0.33 0.33 0.33 0.33 —47,677 Program Assistant I 0.33 0.33 0.33 0.33 —26,026 Project Engineer 2.00 2.00 2.00 2.00 —281,293 Resource Planner 0.10 0.70 1.20 0.70 (0.50)97,989 Restoration Lead 0.31 0.31 0.31 0.31 —31,766 Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 59 SCADA Technologist 0.80 0.80 0.80 0.80 —119,977 Senior Business Analyst 0.66 0.66 0.66 0.99 0.33 135,475 Senior Engineer 1.00 1.00 1.00 1.00 —141,922 Senior Mechanic 0.34 0.34 0.34 0.34 —37,444 Senior Resource Planner 0.55 1.10 1.68 1.68 —255,845 Senior Utilities Field Service Representative 0.49 0.49 0.49 0.49 —55,941 Senior Water Systems Operator 2.00 2.00 2.00 2.00 —222,769 Substation Electrician 0.40 0.40 0.40 0.40 —51,496 Supervisor Inspection Services 0.29 ————— Utilities Engineer Estimator 0.43 0.43 0.43 0.43 —50,453 Utilities Field Services Representative 1.50 1.50 1.50 1.50 —160,092 Utilities Install Repair-Lead-Welding Certified 0.46 0.46 0.46 0.46 —53,469 Utilities Install Repair-Welding Certified 0.69 0.69 0.69 0.69 —69,121 Utilities Install/Repair 2.05 1.90 1.90 1.90 —197,736 Utilities Install/Repair Assistant 0.35 0.35 0.35 0.35 —30,893 Utilities Install/Repair-Lead 1.02 1.02 1.02 1.02 —107,246 Utilities Key Account Representative 0.15 0.25 0.35 0.35 —41,687 Utilities Locator 0.34 0.34 0.34 0.34 —33,307 Utilities Marketing Program Administrator 0.40 0.40 0.40 0.40 —45,258 Utilities Safety Officer 0.15 0.15 0.15 0.15 —17,054 Utilities Supervisor 2.62 2.91 2.91 2.91 —360,684 Water Meter Cross Connection Technician 2.00 ————— Water System Operator I —1.00 ———— Water System Operator II 3.34 3.34 3.34 3.34 —328,016 Sub-total: Full-Time Equivalent Positions 42.95 45.26 45.29 44.79 (0.50)5,134,228 Temporary/Hourly 3.21 2.73 2.61 2.29 (0.32)186,165 Total Positions 46.15 47.99 47.90 47.08 (0.82)5,320,393 Staffing Job Classification FY 2016 Actuals FY 2017 Actuals FY 2018 Adopted Budget FY 2019 Proposed Budget FY 2019 Change FTE FY 2019 Salary UTILITIES 60 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Budget Reconciliation Positions Expenditures Revenues Net Water Fund Prior Year Budget 47.90 47,487,138 43,777,050 3,710,089 One-time Prior Year Budget Adjustments Supplemental Pension Trust Fund Contribution — (140,385) — (140,385) One-time Prior Year Budget Adjustments —(140,385)—(140,385) Base Adjustments Adjustments to Costs of Ongoing Activities Salaries and Benefits Adjustments — 207,201 — 207,201 Net-zero Utilities Staffing Realignment (decrease of 0.5 FTE Resource Planner and 0.32 FTE Journey Level Laborer - H positions) (0.82) — — — Capital Improvement Funding — 8,830,458 (875,438) 9,705,896 Water Commodity Purchases Expenditure — 1,530,000 — 1,530,000 Rents and Leases Expenditure — 56,825 — 56,825 Silicon Valley Regional Communications Systems (SVRCS) Radio Subscription (CMR #8658)— 15,561 — 15,561 Bay Area Water Supply & Conservation Agency Fee — 12,000 — 12,000 Engineering & Inspection Service Allocated Charges — 119 — 119 Management Development Funding — (1,230) — (1,230) Custodial Contract Funding — (3,654) — (3,654) Transfer to Electric Fund (EL-11014 - Smart Grid Installation)— (10,000) — (10,000) Transfer to Technology Fund (TE-05000 Radio Infrastructure Replacement)— (65,433) — (65,433) Water Customer Sales Revenue (4% Rate Increase)— — 2,749,277 (2,749,277) General Fund Cost Allocation Plan — (163,676) — (163,676) General Liability Insurance Allocated Charges — 16,944 — 16,944 Ground Maintenance Allocated Charges — 258 — 258 Print & Mail Allocated Charges — (5,191) — (5,191) Storm Drain Allocated Charges — 40 — 40 Street Cut Allocated Charges — 1,034 — 1,034 Utilities Administration Allocated Charges — 251,843 — 251,843 Utilities Allocated Charges — 104,733 — 104,733 UTILITIES UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET 61 Vehicle Replacement & Maintenance Allocated Charges — 10,651 — 10,651 General Liability Savings (one-time FY 2019 Savings)— (12,068) — (12,068) Workers' Compensation Savings (one-time FY 2019 Savings)— (47,256) — (47,256) Adjustments to Costs of Ongoing Activities (0.82)10,729,157 1,873,839 8,855,318 Total FY 2019 Base Budget 47.08 58,075,910 45,650,889 12,425,022 Budget Proposals 1 Supplemental Pension Trust Fund Contribution — 72,005 — 12,661 2 Reclassification of Business Analyst to Senior Business Analyst — 6,597 — 6,597 Budget Changes —78,602 —19,258 Total FY 2019 Proposed Budget 47.08 58,154,512 45,650,889 12,444,280 Budget Reconciliation Positions Expenditures Revenues Net Water Fund UTILITIES 62 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2019 PROPOSED BUDGET Budget Adjustments Budget Adjustments Positions Expenditures Revenues Net Water Fund 1 Supplemental Pension Trust Fund Contribution 0.00 72,005 0 12,661 This action transfers $72,005 from the Water Fund to the General Benefits Fund on a one-time basis to contribute to the City’s supplemental Pension Trust Fund. This amount represents approximately 5% of the Water Fund's annual pension contribution. Contributing to the Pension Trust Fund will further bolster the City’s resilience to variability associated with pension forecasting, including rate of return changes and increases associated with the unfunded accrued liability. (Ongoing costs: $0) Performance Results Proactively contributing to the supplemental Pension Trust Fund will allow the City to prefund pension costs and continue to address the GASB 68 Net Pension Liabilities (NPL). 2 Reclassification of Business Analyst to Senior Business Analyst 0.00 6,597 0 6,597 This action reclassifies 1.0 Business Analyst to 1.0 Senior Business Analyst in the Utilities Department to align with current staffing levels and assignments. Duties assigned to this position were evaluated through the appropriate processes with the Employee Relations Division in the Human Resources Department and a settlement was reached in February 2018. This action aligns authorized staffing levels with this settlement agreement which determined the Senior Business Analysts was more commensurate with the duties assigned. (Ongoing costs: $6,597) Performance Results This action ensures the table of organization is adjusted to reflect the employee relations settlement action. CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET ELECTRIC FUND ATTACHMENT B ELECTRIC FUND ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET ELECTRIC FUND Overview The City of Palo Alto is the only municipality in California that operates a full suite of City- owned utility services. The municipal electric power system began operation in 1900 and con- tinues to provide safe, reliable, cost effective electric service to residents and customers of Palo Alto. For the 2019-2023 Capital Improvement Program (CIP), approximately $80.0 million is programmed, with $17.9 million budgeted in Fiscal Year 2019, of which $6.3 million is reappropri- ated funds from Fiscal Year 2018. Overall, a total of 40 projects are programmed over the 5- year CIP. Major projects funded in the 2019-2023 CIP include Electric Customer Connections ($12.0 million), Electric System Improvements ($7.5 million), Smart Grid Technology Installa- tion ($19.0 million), Caltrain Elec- trification Facility Relocation ($2.6 million), various Under- ground system rebuild projects ($5.4 million), 4/12kV conver- sion projects ($7.5 million), and Overhead to Underground Con- version ($5.1 million). The budget for the Electric Fund CIP is bro- ken into three separate categories: Customer Connections, System Improvements, and Under- grounding Projects. Infrastructure Inventory CLASSIFICATION QUANTITY ines 18 miles apacity)9 aintained 101 6,600 117 miles on 187 miles n 94 miles ution 74 miles $0 $4,000,000 $8,000,000 $12,000,000 $16,000,000 $20,000,000 $24,000,000 2015 Actuals 2017 Actuals FY 2019 Proposed FY 2021 Projected FY 2023 Projected Electric Fund Capital Expenditures ELECTRIC FUND ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET Customer Connections As customers continually change their electric power needs due to equipment additions, new construction, building expansions, building remodels, teardowns and rebuilds, and new building occupancy types, the electric system must evolve to meet these needs. The Electric Customer Connections Project, which is the largest project within the Electric Fund ($2.4 million in Fiscal Year 2019, $12.0 million over the 2019-2023 CIP), is accounted for within this category. Projects can range from new buildings associated with Stanford Hospital to upgrades of residential elec- tric panels. Also in this category is work for the VA Hospital load increase ($0.6 million). These projects allow for the completion of work required to meet the needs of customers who have applied for new or upgraded electric service, need temporary power for construction, or require other services. The Electric Fund pays for a portion of these projects, while remaining costs are supported by reimbursements from customers for project work performed by the City. Recent Accomplishments In Fiscal Year 2017 the Utilities Electric Division completed over 350 customer service projects with a total cost of $2.5 million and revenue of $2.0 million. 2019-2023 Capital Improvement Program Recurring Projects The Electric Customer Connections project, described above, is the only recurring project in this category. Non-Recurring Projects Funding for the VA Hospital Load Expansion was approved in Fiscal Year 2018. Utilities is work- ing with the VA on their plans and awaits a decision from VA on what alternative they will imple- ment to ultimately serve their facility over the foreseeable future. System Improvements Necessary elements in ensuring reliable electric service to City of Palo Alto residents and cus- tomers include the replacement of electric system components before they reach their end of life and the installation of protective equipment to minimize the impact of system problems. Projects in the System Improvements category allow for a variety of improvements, including the replacement/upgrade of old cables and equipment and bringing designs up to current stan- dards, installation of protective equipment and switches, conversion of the electric system from 4,160 Volts (4kV) to 12,470 Volts (12kV), and installation of capacitors to improve efficiency. The 2019-2023 CIP includes total funding of $62.3 million in this category, with $14.0 million allocated in Fiscal Year 2019. Significant projects in this category include Electric System Improvements ($7.5 million), Smart Grid Technology Installation ($19.0 million), Wood Pole Replacements ($7.5 million), 60 kV Circuit Breaker Replacements ($0.4 million), and various projects to rebuild underground districts and substation components. In the past, funding ELECTRIC FUND ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET for wood pole replacements was included in the Electric System Improvements project. To facil- itate completion of a backlog of pole replacements, a new project specifically for pole replace- ments is recommended in FY 2019. Recent Accomplishments Added security cameras at one electric substation Completed replacement of one 60kv circuit breaker. Completed the construction of a distribution tie-line that will improve system operations in the Stanford Shopping Center area. Completed other miscellaneous system improvement projects dealing with replacement of deteriorated facilities or to improve system operation and reliability. 2019-2023 Capital Improvement Program Recurring Projects A total of $39.9 million is programmed for System Improvements recurring projects in the 2019- 2023 CIP, with $5.2 million allocated in Fiscal Year 2019. Recurring projects in this category include the following: Communication System Improvements (Fiscal Year 2019: $0.1 million; 5-Year CIP: $0.5 million) Electric Distribution System Improvements (Fiscal Year 2019: $1.5 million; 5-Year CIP: $7.5 million) Electric Utility Geographic Information System (Fiscal Year 2019: $0.2 million; 5-Year CIP: $0.8 million) SCADA System Upgrades (Fiscal Year 2019: $0.1 million; 5-Year CIP: $0.3 million) Smart Grid Technology Installation (Fiscal Year 2019: $1.0 million; 5-Year CIP: $19.0 million) Substation Facility Improvements (Fiscal Year 2019: $0.3 million; 5-Year CIP: $1.1 million) Substation Protection Improvements (Fiscal Year 2019: $0.5 million; 5-Year CIP: $1.7 million) Underground System Rebuild (Fiscal Year 2019: $0; 5-Year CIP: $1.4 million) Wood Pole Replacements (Fiscal Year 2019: $1.5 million; 5-Year CIP: $7.5 million) Non-Recurring Projects A total of $22.4 million is allocated in the 2019-2023 CIP for non-recurring System Improvement projects. Much of the funds for the projects were approved by the City Council in prior years. New projects include: Colorado Power Station Equipment Upgrades (Fiscal Year 2019: $0.9 million) Colorado Substation Site Improvements: (Fiscal Year 2019: $0.1 million; 5-Year CIP: $0.5 million) Rebuild Underground District 25: (Fiscal Year 2019: $0.1 million; 5-Year CIP: $0.6 million) Rebuild Underground District 30: (Fiscal Year 2019: $0.1 million; 5-Year CIP: $1.3 million) ELECTRIC FUND ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET Undergrounding Projects The City of Palo Alto began a program to underground overhead electric, telephone, and cable TV facilities in 1965 with a project along Oregon Expressway. Since that time 45 Underground Districts have been formed. The undergrounding of electrical lines is a joint process between the City and AT&T, due to joint ownership of the poles, and Comcast which leases pole space from AT&T. All three Utilities share in the cost of the installation of underground conduit and boxes necessary to enclose and protect wires and equipment. The City typically takes the lead in the design, bidding, and construction processes with AT&T and Comcast reimbursing the City for construction and administrative costs. During the 2019-2023 CIP, $5.1 million is allocated for Undergrounding Projects, with $0.9 million allocated in Fiscal Year 2019. Recent Accomplishment Underground District 47 – Completed the installation of underground electric utility system in the area bounded by Middlefield Road/Addison Avenue/Cowper Street/Homer Avenue. Fiscal year 2019 will see completion of customer service conversions and connection of new services to the underground system. Underground District 46 - Started installation of underground substructures (conduits and boxes) in the area at the intersection of El Camino Real and Arastradero Road/West Charleston Road. 2019-2023 Capital Improvement Program Non-Recurring Projects A total of $5.1 million is allocated in the 2019-2023 CIP for non-recurring Undergrounding proj- ects, with $0.9 million allocated in Fiscal Year 2019. Significant projects in this category include the following: Underground District 42 ($2.1 million), which will underground overhead utility facilities in the area near Embarcadero Road/Emerson Street/Middlefield Road. Underground District 43 ($2.2 million) which will underground overhead utility facilities in the area along Alma Street and Embarcadero Road. Summary of Capital Activity ELECTRIC FUND Project Number Project Title FY 2017 Actuals FY 2018 Estimate FY 2019 Proposed FY 2020 FY 2021 FY 2022 FY 2023 5-Year Total Source of Funds Transfers from Other Funds Gas Fund EL-11014 Smart Grid Technology Installation 136,335 0 180,000 0 540,000 1,800,000 900,000 3,420,000 Total Gas Tax Fund Transfers 136,335 0 180,000 0 540,000 1,800,000 900,000 3,420,000 ELECTRIC FUND ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET Water Fund EL-11014 Smart Grid Technology Installation 136,335 0 290,000 0 870,000 2,900,000 1,450,000 5,510,000 Total Water Fund Transfers 136,335 0 290,000 0 870,000 2,900,000 1,450,000 5,510,000 Total Transfers from Other Funds 272,670 0 470,000 0 1,410,000 4,700,000 2,350,000 8,930,000 Reimbursement from Customers, Telephone, and Cable Television Companies EL-98003 Electric System Improvements 134,291 0 210,000 210,000 210,000 210,000 210,000 1,050,000 EL-89028 Electric Customer Connections 1,607,133 0 1,700,000 1,700,000 1,700,000 1,700,000 1,700,000 8,500,000 EL-08001 Underground District 42 - Embarcadero Road, Emerson, Middlefield 0 0 0 0 0 300,000 0 300,000 EL-11009 Underground District 43 - Alma/Embarcadero 0 0 0 0 0 300,000 0 300,000 Reimbursement from Customers, Telephone, and Cable Television Companies Total 1,741,424 0 1,910,000 1,910,000 1,910,000 2,510,000 1,910,000 10,150,000 Total Sources 2,014,094 0 2,380,000 1,910,000 3,320,000 7,210,000 4,260,000 19,080,000 Use of Funds Customer Connections EL-89028 Electric Customer Connections 2,445,562 3,204,769 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 12,000,000 EL-17003 VA Hospital Customer Load Requirements 46,231 100,000 600,000 0 0 0 0 600,000 Customer Connections Total 2,491,793 3,304,769 3,000,000 2,400,000 2,400,000 2,400,000 2,400,000 12,600,000 System Improvements EL-06001 230 Kv Electric Intertie 745 1,000 177,481 0 0 0 0 177,481 EL-16002 Capacitor Bank Installation 0 0 350,000 0 0 0 0 350,000 EL-14000 Coleridge/Cowper/Tennyson 4/12Kv Conversion 0 50,000 470,000 0 0 0 0 470,000 EL-19001 Colorado Power Station Equipment Upgrade 0 0 900,000 0 0 0 0 900,000 EL-19002 Colorado Substation Improvements 0 0 100,000 400,000 0 0 0 500,000 EL-15000 Colorado/Hopkins System Improvement 0 0 50,000 1,750,000 0 0 0 1,800,000 EL-89031 Communications System Improvements 82,686 10,000 100,000 100,000 100,000 100,000 100,000 500,000 EL-17001 East Meadow Circles 4/12Kv Conversion 0 50,000 0 0 800,000 0 0 800,000 EL-13000 Edgewood/Wildwood 4Kv Tie 0 0 0 0 50,000 400,000 0 450,000 EL-20000 Hopkins Substation 4/12kV Conversion 0 0 0 100,000 2,000,000 1,975,000 1,675,000 5,750,000 EL-13006 Sand Hill.Quarry 12kV Ties 82,982 0 0 0 0 0 0 0 EL-13008 Upgrade Estimating Software 37,440 0 0 0 0 0 0 0 EL-98003 Electric System Improvements 1,352,420 3,100,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 7,500,000 EL-02011 Electric Utility Geographic Information System 55,235 225,000 165,000 165,000 165,000 165,000 165,000 825,000 Project Number Project Title FY 2017 Actuals FY 2018 Estimate FY 2019 Proposed FY 2020 FY 2021 FY 2022 FY 2023 5-Year Total ELECTRIC FUND ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET EL-17007 Facility Relocation for Caltrain Modernization Project 0 400,000 2,600,000 0 0 0 0 2,600,000 EL-17005 HCB Pilot Wire Relay Replacement 51,503 190,000 167,000 0 0 0 0 167,000 EL-14004 Maybell 1&2 4/12Kv Conversion 172 50,000 50,000 0 0 0 0 50,000 EL-10006 Rebuild Underground District 24 20,008 0 0 0 0 0 0 0 EL-11003 Rebuild Underground District 15 0 100,000 380,000 0 0 0 0 380,000 EL-13003 Rebuild Underground District 16 0 0 400,000 0 0 0 0 400,000 EL-14002 Rebuild Underground District 20 8,634 20,000 1,380,000 0 0 0 0 1,380,000 EL-17000 Rebuild Underground District 23 0 0 150,000 550,000 0 0 0 700,000 EL-19000 Rebuild Underground District 25 0 0 50,000 500,000 0 0 0 550,000 EL-16000 Rebuild Underground District 26 981 0 50,000 650,000 0 0 0 700,000 EL-19003 Rebuild Underground District 30 0 0 50,000 1,200,000 0 0 0 1,250,000 EL-14005 Reconfigure Quarry Feeders 169,279 75,000 506,616 0 0 0 0 506,616 EL-13002 Relocate Quarry/Hopkins Substation 60Kv Line (A & B)0 0 100,000 0 750,000 0 0 850,000 EL-02010 SCADA System Upgrades 70,402 240,805 65,000 65,000 65,000 65,000 65,000 325,000 EL-15001 Substation Battery Replacement 21,991 0 0 0 0 0 0 0 EL-11014 Smart Grid Technology Installation 17,240 350,000 1,000,000 0 3,000,000 10,000,000 5,000,000 19,000,000 EL-17002 Substation 60Kv Breaker Replacement 22,513 0 250,000 150,000 0 0 0 400,000 EL-89044 Substation Facility Improvements 304,419 318,384 300,000 200,000 200,000 200,000 200,000 1,100,000 EL-89038 Substation Protection Improvements 266,296 685,000 540,000 300,000 300,000 300,000 300,000 1,740,000 EL-16003 Substation Security 46,992 75,000 500,000 500,000 0 0 0 1,000,000 EL-16001 Underground System Rebuild 0 275,000 0 350,000 350,000 350,000 350,000 1,400,000 EL-17008 Utility Control Center Upgrades 2,813 400,000 97,186 0 0 0 0 97,186 EL-04012 Utility Site Security Improvements 14,040 105,080 50,000 50,000 50,000 0 0 150,000 EL-19004 Wood Pole Replacement 0 0 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 7,500,000 System Improvements Total 2,628,789 6,720,269 13,998,283 10,030,000 10,830,000 16,555,000 10,855,000 62,268,283 Undergrounding Projects EL-13007 Underground Distribution System Security 889 0 300,000 0 0 0 0 300,000 EL-08001 Underground District 42 - Embarcadero Road, Emerson, Middlefield 0 0 0 50,000 1,750,000 250,000 0 2,050,000 EL-11009 Underground District 43 - Alma/Embarcadero 0 0 0 0 0 150,000 2,000,000 2,150,000 EL-12001 Underground District 46 - Charleston/El Camino Real 76,862 2,921,978 600,000 0 0 0 0 600,000 El-11010 Underground District 47 - Midd/Homer/ Webster/Addi 632,835 0 0 0 0 0 0 0 Undergrounding Projects Total 710,586 2,921,978 900,000 50,000 1,750,000 400,000 2,000,000 5,100,000 Total Uses 5,831,169 12,947,016 17,898,283 12,480,000 14,980,000 19,355,000 15,255,000 79,968,283 Project Number Project Title FY 2017 Actuals FY 2018 Estimate FY 2019 Proposed FY 2020 FY 2021 FY 2022 FY 2023 5-Year Total ELECTRIC FUND ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET FIBER OPTICS FUND FIBER OPTICS FUND FIBER OPTICS FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET FIBER OPTIC Overview The City of Palo Alto is the only municipality in California that operates a full suite of City- owned utility services. The most recent addition to this list of services provided to City of Palo Alto residents and customers is the leasing of ‘dark‘ fiber on a fiber optic loop, built by the City in 1996. For the 2019-2023 Capital Improvement Program, expenditures of $4.1 million are pro- grammed, with $1.7 million allocated in Fiscal Year 2019. Major projects funded in the 2019-2023 CIP include the Fiber Optics Customer Connections ($1.3 million) and Fiber Optics Network System Improvements ($1.0 million). The budget for the Fiber Optics CIP is broken into two sep- arate categories: Capacity Improvements and Customer Connections. Capacity Improvements With the advance in technology, increase in online services, and increase in data transmission needs to meet consumer demand, the capability afforded by fiber optic cables is increas- ingly in demand. To ensure reli- able fiber optic service to City of Palo Alto residents and cus- tomers, fiber optic system components (fiber optic cable and splice cabinets) need to be upgraded or added to increase capacity; replaced or protected from damage by animals; and rerouted away from hazardous conditions. Recent Accomplishments Upgraded the downtown backbone between a number of splice points to improve fiber infrastructure and efficiency for customer connections and free up fibers. Upgraded AutoCAD fiber maps to include Advanced Modeling Extension module for the Geographic Information System. Upgraded the dark fiber network from University Avenue to Lytton Avenue at Bryant Street to add capacity and improve efficiency for downtown businesses. Infrastructure Inventory CLASSIFICATION QUANTITY Cable 42 able 25 c Cable 60 $0 $400,000 $800,000 $1,200,000 $1,600,000 $2,000,000 FY 2015 Actuals FY 2017 Actuals FY 2019 Proposed FY 2021 Projected FY 2023 Projected Fiber Optics Fund Capital Expenditures FIBER OPTICS FUND FIBER OPTICS FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET Completed upgrade of fiber maps to Utilities GIS system, enabling a single view of multiple utility infrastructures. Conducted a physical audit of the dark fiber network to improve network performance and add capacity. 2019-2023 Capital Improvement Program Recurring Projects There is one recurring project in the Capacity Improvements Category: the Fiber Optics Net- work System Improvements. This project extends the “dark“ fiber optic network around Palo Alto through the development of fiber sub-rings and completion of general improvements to the fiber system. The annual funding for this project remains at $0.2 million throughout the CIP. Non-Recurring Projects As part of the 2019-2023 Capital Improvement Program, one project is included within this cat- egory: Fiber Optic System Rebuild (Fiscal Year 2018: $1.2 million; total cost: $1.8 million). This project is expected to extend through Fiscal Year 2021 and will rebuild portions of the “dark“ fiber optics network. Certain sections of the system have reached capacity limiting the City’s ability to provide fiber optics service to all potential customers. Rebuilding portions of the “dark“ fiber optic network includes installation of additional fiber optic cables in the Stanford Research Park area and replacement of several below ground splice closures with pad-mounted pedestals. Customer Connections As customers continually change their fiber optic needs due to equipment additions, new con- struction, building expansions, building remodels, teardowns and rebuilds, and new building occupancy types, the fiber optics system must evolve to meet these needs. Projects in this cat- egory include work required to meet the needs of customers who have applied for new or upgraded fiber optic service. The connection costs associated with new or upgraded connec- tions are offset by charges to the customer. Recent Accomplishments Several services installed for Stanford University offsite facilities and other customers in the Stanford Research Park area. New service to 17 Public Works storm water/creek monitoring system locations. 2019-2023 Capital Improvement Program Recurring Projects In the Customer Connections category there is one recurring project: Fiber Optics Customer Connections. In the 2019-2023 Capital Improvement Program, recurring funding in this project FIBER OPTICS FUND FIBER OPTICS FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET remains at $0.3 million. This project provides funding for the installation of fiber optic infrastruc- ture for new service connections. Non-Recurring Projects There are no non-recurring projects in this category. Summary of Capital Activity FIBER OPTICS FUND Project Number Project Title FY 2017 Actuals FY 2018 Estimate FY 2019 Proposed FY 2020 FY 2021 FY 2022 FY 2023 5-Year Total Source of Funds Other Revenues FO-10000 Fiber Optics Customer Connections: Connection Charges 119,466 412,941 200,000 200,000 200,000 200,000 200,000 1,000,000 Other Revenues Total 119,466 412,941 200,000 200,000 200,000 200,000 200,000 1,000,000 Total Sources 119,466 412,941 200,000 200,000 200,000 200,000 200,000 1,000,000 Use of Funds Capacity Improvements FO-10001 Fiber Optics Network System Improvements 155,478 411,557 200,000 200,000 200,000 200,000 200,000 1,000,000 FO-16000 Fiber Optic System Rebuild 20,636 1,200,000 300,000 300,000 0 0 1,800,000 Capacity Improvements Total 176,114 411,557 1,400,000 500,000 500,000 200,000 200,000 2,800,000 Customer Connections FO-10000 Fiber Optics Customer Connections 185,385 412,941 250,000 250,000 250,000 250,000 250,000 1,250,000 Customer Connections Total 185,385 412,941 250,000 250,000 250,000 250,000 250,000 1,250,000 Total Uses 361,499 824,498 1,650,000 750,000 750,000 450,000 450,000 4,050,000 CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET GAS FUND GAS FUND GAS FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET GAS FUND Overview The City of Palo Alto is the only municipality in California that operates a full suite of City- owned utility services. The municipal gas distribution system began operation in 1917. It pro- vides safe, reliable, and cost effective gas service to residents and customers of Palo Alto. For the 2019-2023 Capital Improvement Program (CIP), approximately $44.9 million is pro- grammed, with $5.4 million allocated in Fiscal Year 2019. Overall, a total of 14 projects are pro- grammed for the 5-year CIP. Major projects funded in the 2019-2023 CIP include Gas Main Replacements (cumulative total of $30.2 million), Gas System Customer Connections ($6.9 mil- lion), and Gas Meters and Regulators ($2.0 million). The budget for the Gas Fund CIP is broken into three separate categories: Customer Connections, Gas Main Replacements, and System Improvements. Customer Connections As customers continually change their gas needs due to equip- ment additions, new construc- tion, building expansions, building remodels, tear-downs and rebuilds, and new building occupancy types, the gas system must evolve to meet these needs. The Gas System Cus- tomer Connections project, which is the largest project within the Gas Fund ($1.3 million in Fis- cal Year 2019, $6.9 million over the 2019-2023 CIP), is accounted for within this category. This project allows for the completion of work required to meet the needs of customers who have applied for new or upgraded gas service. The Gas Fund pays for a portion of this project, while remaining costs are supported by reimbursements from customers for project work performed by the City. Infrastructure Inventory CLASSIFICATION QUANTITY on system 210.31 miles ion to residents and businesses 205.55 miles s 4 $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 FY 2015 Actuals FY 2017 Actuals FY 2019 Proposed FY 2021 Projected FY 2023 Projected Gas Fund Capital Expendiures GAS FUND GAS FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET Recent Accomplishments In Fiscal Year 2017 the Utilities Gas Division completed approximately 168 customer service projects, at a cost of $1.3 million. 2019-2023 Capital Improvement Program Recurring Projects A total of $9.2 million is programmed for Customer Connection recurring projects in the 2019- 2023 CIP, with $175 million allocated in Fiscal Year 2019. Recurring projects in this category include the following: Gas System Customer Connections (Fiscal Year 2019: $1.3 million; 5-Year CIP: $6.9 million) System Extensions - Unreimbursed (Fiscal Year 2019: $0.4 million; 5-Year CIP: $2.2 million) Gas Main Replacements The Gas Main Replacements category accounts for the replacement of inadequately-sized and structurally deficient gas mains that are subject to corrosion or reaching the end of their expected life. The Utilities Department coordinates with the Public Works Department’s street maintenance projects to minimize damage to the City’s pavement and maximize cost efficiency. In the next five years, it is anticipated that 90,391 linear feet of gas mains, or 8 percent of the entire system, will be replaced. The 2019-2023 CIP includes $30.2 million in funding for projects within this category. Recent Accomplishments Completed the design and started construction of gas main replacement project GMR 22 to replace approximately 19,440 linear feet of gas main pipelines and 367 service pipelines. 2019-2023 Capital Improvement Program Non-Recurring Projects Six Gas Main Replacement (GMR) projects are included in the 2019-2023 CIP (Fiscal Year 2019: $1.2 million; 5-Year CIP: $30.2 million). System Improvements To ensure reliable gas services for the City of Palo Alto residents and customers, gas infrastruc- ture must be replaced upon reaching the end of its expected life. The System Improvements category includes six projects during the 2019-2023 CIP at a total cost of $5.6 million, with $2.5 million allocated in Fiscal Year 2019. GAS FUND GAS FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET 2019-2023 Capital Improvement Program Recurring Projects There are three funded recurring projects in the System Improvements category in the 2019- 2023 CIP: Gas Distribution System Improvements (Fiscal Year 2019: $0.2 million, 5-Year CIP: $1.3 million), Gas Equipment and Tools (Fiscal Year 2019: $0.4 million, 5-Year CIP: $0.8 million), and Gas Meters and Regulators (Fiscal Year 2019: $0.4 million, 5-Year CIP: $2.0 million). Non-Recurring Projects There are two one-time projects in the System Improvements category in the 2019-2023 CIP: ABS/Tenite Replacement (Fiscal Year 2019: $1.5 million, 5-Year CIP: $1.5 million), Gas Distribution System Model (Fiscal Year 2019: $0.02 million, 5-Year CIP: $0.06 million). Please refer to the City of Palo Alto Utilities webpage to confirm project details: http:// www.cityofpaloalto.org/gov/depts/utl/projects/default.asp Summary of Capital Activity GAS FUND Project Number Project Title FY 2017 Actuals FY 2018 Estimate FY 2019 Proposed FY 2020 FY 2021 FY 2022 FY 2023 5-Year Total Source of Funds Other Revenues GS-80017 Gas System, Customer Connections 955,081 0 1,078,935 1,111,303 1,144,642 1,178,981 1,200,000 5,713,861 Other Revenue Total 955,081 0 1,078,935 1,111,303 1,144,642 1,178,981 1,200,000 5,713,861 Total Sources 955,081 0 1,078,935 1,111,303 1,144,642 1,178,981 1,200,000 5,713,861 Use of Funds Customer Connections GS-80017 Gas System, Customer Connections 1,155,768 1,100,000 1,303,315 1,342,415 1,382,688 1,424,169 1,466,894 6,919,481 GS-03009 System Extensions - Unreimbursed 96,796 100,000 421,180 433,816 446,830 460,234 474,042 2,236,102 Customer Connections Total 1,252,564 1,200,000 1,724,495 1,776,231 1,829,518 1,884,403 1,940,936 9,155,583 Gas Main Replacements GS-12001 Gas Main Replacement - Project 22 383,432 1,070,000 800,000 0 0 0 0 800,000 GS-13001 Gas Main Replacement - Project 23 42,500 350,000 400,000 6,500,000 0 0 0 6,900,000 GS-14003 Gas Main Replacement - Project 24 0 0 0 804,525 6,500,000 0 0 7,304,525 GS-15000 Gas Main Replacement - Project 25 0 0 0 0 650,000 6,500,000 0 7,150,000 GS-16000 Gas Main Replacement - Project 26 0 0 0 0 0 650,000 6,500,000 7,150,000 GS-20000 Gas Main Replacement - Project 27 0 0 0 0 0 856,180 856,180 Gas Main Replacements Total 425,932 1,420,000 1,200,000 7,304,525 7,150,000 7,150,000 7,356,180 30,160,705 GAS FUND GAS FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET System Improvements GS-18000 Gas ABS/Tenite Replacement Project 0 0 1,500,000 0 0 0 0 1,500,000 GS-11002 Gas Distribution System Improvements 91,322 200,000 246,036 253,417 261,020 268,851 276,916 1,306,240 GS-14004 Gas Distribution System Model 0 19,574 20,000 20,000 20,000 0 0 60,000 GS-13002 Gas Equipment and Tools 0 0 350,000 100,000 100,000 100,000 100,000 750,000 GS-80019 Gas Meters and Regulators 0 130,000 376,652 387,952 399,591 411,579 423,926 1,999,700 GS-15001 Security at City's Gas Receiving Stations 69,358 0 0 0 0 0 0 0 System Improvements Total 160,680 349,574 2,492,688 761,369 780,611 780,430 800,842 5,615,940 Total Uses 1,839,177 2,969,574 5,417,183 9,842,125 9,760,129 9,814,833 10,097,958 44,932,228 Project Number Project Title FY 2017 Actuals FY 2018 Estimate FY 2019 Proposed FY 2020 FY 2021 FY 2022 FY 2023 5-Year Total GAS FUND GAS FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET WASTEWATER COLLECTION FUND WASTEWATER COLLECTION FUND WASTEWATER COLLECTION FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET WASTEWATER COLLE Overview The City of Palo Alto is the only municipality in California that operates a full suite of City- owned utility services. The municipal wastewater collection system began operation in 1898 and continues to provide safe, reliable, and cost effective services to residents and customers of Palo Alto. For the 2019-2023 Capital Improvement Program (CIP), approximately $31.6 million is programmed, with $6.6 million allocated in Fiscal Year 2019. Overall, a total of 10 projects are programmed for the 5-year CIP. Major projects funded in the 2019-2023 CIP include Wastewa- ter Collection System Rehabilitation/Augmentation projects (cumulative total of $24.3 million), Sewer Lateral/Manhole Rehabilitation and Replacement ($3.5 million), and Sewer System Cus- tomer Connections ($2.3 million). The budget for the Wastewater Collection Fund CIP is broken into two separate categories: Customer Connections and System Improvements. Customer Connections As customers continually change their wastewater needs due to equipment additions, new con- struction, building expansions, building remodels, teardowns and rebuilds, and new building occupancy types, the wastewa- ter collection system must evolve to meet these needs. The Sewer System Customer Connections project is the only project within this category and includes work required to meet the needs of customers who have applied for new sewer later- als. The Wastewater Collection Fund pays for a portion of this project, while remaining costs are supported by reimbursements from customers for project work performed by the City. Recent Accomplishments In Fiscal Year 2017 the Utilities Wastewater Division completed over 79 customer service projects with a total cost of $0.4 million. Infrastructure Inventory CLASSIFICATION QUANTITY es 217 miles 18,141 $0 $4,000,000 $8,000,000 $12,000,000 FY 2015 Actuals FY 2017 Actuals FY 2019 Proposed FY 2021 Projected FY 2023 Projected Wastewater Collection Fund Capital Expenditures WASTEWATER COLLECTION FUND WASTEWATER COLLECTION FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET 2019-2023 Capital Improvement Program Recurring Projects There is only one project within this category, the Sewer System Customer Connections project with funding of $2.3 million over the 5-year CIP. This project funds changes to customer con- nections and costs are partially offset by reimbursements from customers requesting the ser- vice. System Improvement To ensure reliable wastewater services for the City of Palo Alto residents and customers, infra- structure must be replaced upon reaching the end of its useful life. The infrastructure replace- ment program includes projects that will rehabilitate or replace deteriorated pipelines. In the next five years, it is estimated that approximately 92,300 linear feet of wastewater mains will be replaced. Recent Accomplishments Completed construction of multi-year CIP projects for Wastewater Collection System Rehabilitation/Augmentation Projects 24, 25, 26, and 27 which included replacement of 58,151 linear feet of wastewater mains and 1,038 sewer laterals. 2019-2023 Capital Improvement Program Recurring Projects A total of $5.1 million is programmed for System Improvement recurring projects in the 2019- 2023 CIP, with $1.0 million allocated in Fiscal Year 2019. Recurring projects in this category include the following: Wastewater System Improvements (Fiscal Year 2019: $0.3 million; 5-Year CIP: $1.3 million) Wastewater General Equipment and Tools (Fiscal Year 2019: $0.1 million; 5-Year CIP: $0.3 million) Sewer Lateral/Manhole Rehabilitation and Replacement (Fiscal Year 2019: $0.7 million; 5- Year CIP: $3.5 million) Non-Recurring Projects The majority of funding within this category is allocated towards Wastewater Collection System Rehabilitation/Augmentation Projects (cumulative total of $24.3 million). These projects imple- ment high priority rehabilitation, augmentation, and lateral replacement work which reduces inflow of rainfall and ground water into the collection system. The Utilities Department coordi- nates with the Public Works Department’s street maintenance projects to minimize damage to the City’s pavement and maximize cost efficiencies. Linear footage and locations are subject to change, please refer to the City of Palo Alto Utilities webpage to confirm project details: http://www.cityofpaloalto.org/gov/depts/utl/projects/ default.asp. WASTEWATER COLLECTION FUND WASTEWATER COLLECTION FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET Summary of Capital Activity WASTEWATER COLLECTION FUND Project Number Project Title FY 2017 Actuals FY 2018 Estimate FY 2019 Proposed FY 2020 FY 2021 FY 2022 FY 2023 5-Year Total Source of Funds Other Revenues WC-80020 Sewer System, Customer Connections 1,051,089 0 417,995 430,534 443,450 456,754 470,457 2,219,190 Other Revenue Total 1,051,089 0 417,995 430,534 443,450 456,754 470,457 2,219,190 Total Sources 1,051,089 0 417,995 430,534 443,450 456,754 470,457 2,219,190 Use of Funds Customer Connections WC-80020 Sewer System, Customer Connections 325,114 325,000 420,000 445,000 463,000 480,000 497,000 2,305,000 Customer Connections Total 325,114 325,000 420,000 445,000 463,000 480,000 497,000 2,305,000 System Improvements WC-99013 Sewer Lateral/Manhole Rehabilitation and Replacement 899,035 900,000 655,636 675,305 695,564 716,431 737,924 3,480,860 WC-11000 Wastewater Collection System Rehabilitation/ Augmentation Project 24 1,265,999 0 0 0 0 0 0 0 WC-12001 Wastewater Collection System Rehabilitation/ Augmentation Project 25 1,383,387 0 0 0 0 0 0 0 WC-13001 Wastewater Collection System Rehabilitation/ Augmentation Project 26 1,672,424 0 0 0 0 0 0 0 WC-14001 Wastewater Collection System Rehabilitation/ Augmentation Project 27 2,988,313 0 0 0 0 0 0 0 WC-15001 Wastewater Collection System Rehabilitation/ Augmentation Project 28 0 250,000 4,842,600 0 0 0 0 4,842,600 WC-16001 Wastewater Collection System Rehabilitation/ Augmentation Project 29 0 0 409,849 4,098,490 0 0 0 4,508,339 WC-17001 Wastewater Collection System Rehabilitation/ Augmentation Project 30 0 0 0 421,684 4,209,845 0 0 4,631,529 WC-19001 Wastewater Collection System Rehabilitation/ Augmentation Project 31 0 0 0 0 465,185 4,408,150 0 4,873,335 WC-20000 Wastewater Collection System Rehabilitation/ Augmentation Project 32 0 0 0 0 0 448,249 4,482,495 4,930,744 WC-13002 Wastewater General Equipment and Tools 0 22,854 50,000 50,000 50,000 50,000 50,000 250,000 WC-15002 Wastewater System Improvements 128,927 185,453 253,000 260,000 269,000 276,875 285,181 1,344,056 System Improvements Total 8,338,085 1,358,307 6,211,085 5,505,479 5,689,594 5,899,705 5,555,600 28,861,463 Total Uses 8,663,199 1,683,307 6,631,085 5,950,479 6,152,594 6,379,705 6,052,600 31,166,463 CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET WATER FUND WATER FUND WATER FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET WATER FUND Overview The City of Palo Alto is the only municipality in California that operates a full suite of City- owned utility services. The municipal water distribution system began operation in 1896 and continues to provide safe, reliable, and cost effective water service to residents and customers of Palo Alto. For the 2019-2023 Capital Improvement Program (CIP), approximately $57.4 mil- lion is programmed, with $14.6 million allocated in Fiscal Year 2019. Overall, a total of 16 proj- ects are programmed for the 5-year CIP. Major projects funded in the 2019-2023 CIP include Water Main Replacements (cumulative total of $35.2 million), Water System Customer Connec- tions ($3.9 million), Water Meters ($3.1 million) and Water, Gas, and Wastewater Utility GIS Data ($2.4 million). The budget for the Water Fund CIP is broken into three separate categories: Cus- tomer Connections, System Improvements, and Water Main Replacements. Customer Connections As customers continually change their water needs due to equip- ment additions, new construc- tion, building expansions, building remodels, teardowns and rebuilds, and new building occupancy types, the water sys- tem must evolve to meet these needs. The Water System Customer Connection Project is the only project in this category and includes work required to meet the needs of customers who have applied for new or upgraded water service. The Water Fund pays for a portion of this project, while remaining costs are sup- ported by reimbursements from customers for project work performed by the City. Recent Accomplishments In Fiscal Year 2017 the Utilities Water Utility completed over 70 customer service projects with a total cost of $0.7 million. Infrastructure Inventory CLASSIFICATION QUANTITY 235.58 miles 1 active standby and 7 emergency standby 4 steel and 3 reinforced concrete 0 6,000,000 12,000,000 18,000,000 24,000,000 FY 2015 Actuals FY 2017 Actuals FY 2019 Proposed FY 2021 Projected FY 2023 Projected Water Fund Capital Expenditures WATER FUND WATER FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET 2019-2023 Capital Improvement Program Recurring Projects The Water System Customer Connections project is the only project within this category. Over the course of the 2019-2023 CIP, $3.9 million is programmed, with $0.7 million allocated in Fiscal Year 2019. System Improvements To ensure reliable water services for the City of Palo Alto residents and customers, infrastruc- ture must be replaced upon reaching the end of its expected life. The System Improvements category includes 8 projects during the 2019-2023 CIP at a total cost of $18.3 million, with $5.6 million allocated in Fiscal Year 2019. Recent Accomplishments Completed the remaining roof coating portion of the construction of Boronda Reservoir seismic upgrade and rehabilitation project. Completed the construction of the Montebello Reservoir seismic upgrade and rehabilitation project, including a new roof, interior and exterior coatings, a new control valve, and paving. Engaged consultant to review water storage and operational needs. Consultant will develop a water model that will assist in the storage and operations recommendations. Engaged a consultant to perform a geotechnical investigation of the subgrade of the Mayfield Reservoir. Completed two transmission main repairs in the foothills west of Interstate 280. Completed the first annual water loss audit (SB 555) and submitted to the State Water Resource Control Board. 2019-2023 Capital Improvement Program Recurring Projects A total of $10.7 million is programmed for System Improvement recurring projects during the 2019-2023 CIP, with $2.4 million allocated in Fiscal Year 2019. Recurring projects in this category include the following: Water Distribution System Improvements (Fiscal Year 2019: $0.4 million; 5-Year CIP: $1.4 million) Water Fusion and General Equipment/Tools (Fiscal Year 2019: $0.1 million; 5-Year CIP: $0.3 million) Water Meters (Fiscal Year 2019: $0.9 million; 5-Year CIP: $3.1 million) Water Service Hydrant Replacement (Fiscal Year 2019: $0.4 million; 5-Year CIP: $2.3 million) Water System Supply Improvements (Fiscal Year 2019: $0.3 million; 5-Year CIP: $1.3 million) WATER FUND WATER FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET Water, Gas, Wastewater Utility GIS Data (Fiscal Year 2019: $0.4 million; 5-Year CIP: $2.3 million) Non-Recurring Projects A total of $7.6 million is programmed for non-recurring projects during the 2019-2023 CIP, with the $3.2 million allocated in Fiscal Year 2019. Non-recurring projects in this category include the following: Seismic Water System Upgrades (Fiscal Year 2019: $3.0 million; 5-Year CIP: $7.0 million) Water Recycling Facilities (Fiscal Year 2019: $0.2 million; 5-Year CIP: $0.2 million) Water Main Replacements The Water Main Replacements category accounts for the replacement of inadequately-sized and structurally deficient water mains. In the next five years, it is estimated that approximately 55,000 linear feet of water mains will be replaced. The annual replacement totals were reduced by approximately 15% due to significant increases in labor and material costs. Based on the last two water main replacement projects bid the engineer’s estimate was increased and a budget augmentation was necessary last year to cover construction costs. The annual replacement footage was reduced to compensate for some of the market changes that forced a rebid and a single bid in the past. Water main replacement project (WMR) 26B - Upgrade Downtown did not receive any bids. Rebids and the reduction of total footage com- pleted annually will extend to overall system replacement time. However, since most of the pipe scheduled for replacement is based on our recent water study with seismic considerations being the critical element, the impact is dependent on a seismic event. Recent Accomplishments Completed design and started construction of a water main replacement project (WMR 26) to replace approximately 11,000 linear feet of water main pipelines, 200 service pipelines and 40 fire hydrants, with approximately 29% of construction completed in 2017. Completed design and started of water main replacement for Upgrade Downtown to replace approximately 3,155 linear feet of water main pipelines, 52 service pipelines and 10 fire hydrants. 2019-2023 Capital Improvement Program Recurring Projects There are no recurring projects in this category. Non-Recurring Projects The 2019-2023 CIP includes $35.2 million in funding for seven non-recurring projects within this category, with $8.2 million approved for Fiscal Year 2019. Fiscal Year 2019 includes the increased budget to cover the Upgrade Downtown project cost escalation. The Utilities Depart- WATER FUND WATER FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET ment coordinates with the Public Works Department’s street maintenance projects to minimize damage to the City’s pavement and maximize cost efficiencies. Summary of Capital Activity WATER FUND Project Number Project Title FY 2017 Actuals FY 2018 Estimate FY 2019 Proposed FY 2020 FY 2021 FY 2022 FY 2023 5-Year Total Source of Funds Transfer from Other Funds Gas Fund WS-02014 Water Gas Wastewater GIS Data 122,009 0 147,630 152,059 156,621 161,320 166,160 783,790 Total Gas Fund Transfers 122,009 0 147,630 152,059 156,621 161,320 166,160 783,790 Wastewater Collection Fund WS-02014 Water Gas Wastewater GIS Data 122,009 0 147,630 152,059 156,621 161,320 166,160 783,790 Total Wastewater Collection Fund 122,009 0 147,630 152,059 156,621 161,320 166,160 783,790 Total Transfer from Other Funds 244,018 0 295,260 304,118 313,242 322,640 332,320 1,567,580 Other Revenues WS-80014 Water Service Hydrant Replacement 657 0 0 0 0 0 0 0 WS-80013 Water System, Customer Connections 1,895,431 0 929,348 957,228 985,946 1,015,524 1,045,990 4,934,036 Other Revenue Total 1,896,088 0 929,348 957,228 985,946 1,015,524 1,045,990 4,934,036 Total Sources 2,140,106 0 1,224,608 1,261,346 1,299,188 1,338,164 1,378,310 6,501,616 Use of Funds Customer Connections WS-80013 Water System, Customer Connections 646,071 650,000 732,021 753,981 776,601 799,899 823,896 3,886,398 Customer Connections Total 646,071 650,000 732,021 753,981 776,601 799,899 823,896 3,886,398 System Improvements WS-19000 Mayfield Reservoir Subgrade and Venting Repair 0 0 200,000 200,000 200,000 0 0 600,000 WS-09000 Seismic Water System Upgrades 747,065 2,786,154 3,000,000 2,000,000 2,000,000 0 0 7,000,000 WS-11003 Water Distribution System Improvements 6,770 510,000 354,000 261,620 269,469 277,553 285,880 1,448,522 WS-13002 Water Fusion and General Equipment/Tools 0 50,000 50,000 50,000 50,000 50,000 50,000 250,000 WS-02014 Water, Gas, Wastewater Utility GIS Data 165,706 0 442,890 456,177 469,862 483,958 498,477 2,351,364 WS-80015 Water Meters 78,195 100,000 900,000 515,000 530,450 546,364 562,755 3,054,569 WS-80014 Water Service Hydrant Replacement 387,512 300,000 424,360 437,091 450,204 463,710 477,621 2,252,986 WATER FUND WATER FUND • CITY OF PALO ALTO FISCAL YEAR 2019 CAPITAL BUDGET WS-11004 Water System Supply Improvements 74,897 303,000 254,000 261,620 269,469 277,553 285,880 1,348,522 System Improvements Total 1,460,145 4,049,154 5,625,250 4,181,508 4,239,454 2,099,138 2,160,613 18,305,963 Water Main Replacements WS-12001 Water Main Replacement - Project 26 218,686 6,553,048 600,000 0 0 0 0 600,000 WS-13001 Water Main Replacement - Project 27 42,500 150,000 7,025,000 0 0 0 0 7,025,000 WS-14001 Water Main Replacement - Project 28 0 0 585,107 5,851,070 0 0 0 6,436,177 WS-15002 Water Main Replacement - Project 29 0 0 0 602,660 6,026,602 0 0 6,629,262 WS-16001 Water Main Replacement - Project 30 0 0 0 0 620,740 6,207,400 0 6,828,140 WS-19001 Water Main Replacement - Project 31 0 0 0 0 0 639,362 6,396,320 7,035,682 WS-20000 Water Main Replacement - Project 32 0 0 0 0 0 0 658,820 658,820 Water Main Replacements Total 261,186 6,703,048 8,210,107 6,453,730 6,647,342 6,846,762 7,055,140 35,213,081 Total Uses 2,367,402 11,402,202 14,567,378 11,389,219 11,663,397 9,745,799 10,039,649 57,405,442 Project Number Project Title FY 2017 Actuals FY 2018 Estimate FY 2019 Proposed FY 2020 FY 2021 FY 2022 FY 2023 5-Year Total