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NOTICE IS POSTED IN ACCORDANCE WITH GOVERNMENT CODE SECTION 54954.2(a) OR 54956
I.ROLL CALL
II.ORAL COMMUNICATIONS
Members of the public are invited to address the Commission on any subject not on the agenda. A reasonable time
restriction may be imposed at the discretion of the Chair. State law generally precludes the UAC from discussing or
acting upon any topic initially presented during oral communication.
III.APPROVAL OF THE MINUTES
Approval of the Minutes of the Utilities Advisory Commission Meeting held on December 4, 2019
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
Action
Presentation Action
Discussion
Discussion
1.Staff Recommends the Utilities Advisory Commission (UAC) Recommend That Council
Accept the Northwest County Recycled Water Strategic Plan Report
2.Staff recommends that the Utilities Advisory Commission (UAC) recommend that the
Council adopt an amendment to the Carbon Neutral Plan
3.Presentation of the Utilities 2019 Year in Review
4.Presentation Looking Forward Into the 2020 Year to Come
5.Selection of Potential Topic(s) for Discussion at Future UAC Meeting Action
NEXT SCHEDULED MEETING: March 5, 2020
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 Reports 12-Month Rolling Calendar Public Letter(s) to the UAC
UTILITIES ADVISORY COMMISSION – REGULAR MEETING
WEDNESDAY, February 5, 2020 – 7:00 P.M.
COUNCIL CHAMBERS
Palo Alto City Hall – 250 Hamilton Avenue
Chairman: Michael Danaher Vice Chair: Lisa Forssell Commissioners: Donald Jackson, A.C. Johnston, Greg Scharff, Lauren Segal, and Loren Smith Council Liaison: Alison Cormack
Utilities Advisory Commission Minutes Approved on: March 05, 2020 Page 1 of 8
UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF FEBRUARY 5, 2020 REGULAR MEETING
CALL TO ORDER
Chair Danaher called the meeting of the Utilities Advisory Commission (UAC) to order at 7:00 p.m.
Present: Chair Danaher, Vice Chair Forssell, Commissioners Jackson, Johnston, Segal, and Smith
Absent: Commissioner Scharff
ORAL COMMUNICATIONS
None.
APPROVAL OF THE MINUTES
Commissioner Jackson clarified his comments under Reports from Commissioner Meetings/Events noting
that the data from the online customer portal is not computer readable, where the draft minutes said “easily
readable.” He was referring to the need for the data to be available in a CSV or similar format.
Commissioner Jackson moved to approve the minutes of the December 4, 2019 meeting as amended.
Commissioner Segal seconded the motion. The motion carried 6-0 with Chair Danaher, Vice Chair Forssell
and Commissioners Jackson, Johnston, Segal, and Smith voting yes, and Commissioner Scharff absent.
AGENDA REVIEW AND REVISIONS
None.
REPORTS FROM COMMISSIONER MEETINGS/EVENTS
None.
GENERAL MANAGER OF UTILITIES REPORT
Jonathan Abendschein, Assistant Director of Resource Management, delivered the General Manager’s
Report.
Gridshift Hackathon - Our Utilities team partnered with Bay Area clean energy providers including Silicon
Valley Clean Energy, Peninsula Clean Energy, East Bay Clean Energy, and an early-stage venture firm,
Powerhouse, to co-sponsor a "hackathon" January 31 through February 1. Over a 24-hour period of time, the
“Gridshift Hackathon” brought together teams of software developers, energy experts, and others to develop
code to reduce or eliminate the carbon footprint in the building, transportation, and utility sectors. Over 120
participants registered, and 16 teams completed apps to compete for prizes. $16,000 in cash prizes were
awarded to the three winning teams. The submissions, code, video and photos are available online and can
be sent out. Lena Perkins represented Palo Alto on the judging panel as she manages the Program for
Emerging Technologies. You can reach her for further details at Lena.Perkins@cityofpaloalto.org.
Utilities Advisory Commission Minutes Approved on: March 05, 2020 Page 2 of 8
Nissan Leaf Rebates for Public Power Customers - Thanks to a partnership with the American Public Power
Association (APPA), City of Palo Alto Utilities customers are eligible for special rebates on Nissan Leaf electric
vehicles for a limited time. The rebates were originally available through the beginning of January but have
been extended to March 31, 2020. This is a great opportunity to consider making the switch to an electric
vehicle and help support the City and Utilities Department’s sustainability and climate action goals. Details
at cityofpaloalto.org/EV.
Soft Launch of the MyCPAU New Online Customer Site - CPAU is starting a soft launch roll out for our new
online utility account management service, called MyCPAU. This improved customer website will replace the
existing online My Utilities Account. MyCPAU offers a fast and secure way to pay your bill online and set up
automatic or recurring payments. Customers will be able to view monthly utility usage, learn about
opportunities to lower their bills, set notification preferences and alerts, and receive direct digital support
from Customer Service staff. Commissioners have been invited to participate in the soft launch and help us
beta test the new service. We are excited about this much-needed upgrade to our online utility customer
services and thank you in advance for any feedback you care to share. Visit cityofpaloalto.org/MyCPAU for
more information.
The Great Race for Saving Water and Earth Day Festival – We are excited to announce that this year's Earth
Day Festival and Great Race for Saving Water will be held on Saturday, April 25 at the Palo Alto Baylands
Athletic Center. Join us for a day of fun with community partners for a 5K, 10K fun run and walk plus kids
dash. Following the race is an expo celebrating the 50th anniversary of the first Earth Day, including live
music, food trucks, EV ride & drive, nature activities, raffle drawings, and more! Come join the fun while
learning as we raise awareness, build education, and community engagement for climate action and
protection of Earth's natural resources. To register and learn more, please visit cityofpaloalto.org/earthday.
Fiber to the Home Update – Staff has received five proposals in response to the Request for Proposals (RFP)
and interviewed three proposers. Staff is conducting background checks on the three proposers. A contract
will be presented to the Council in March. Thanks to Commissioners Smith and Jackson for their assistance in
reviewing the proposals.
In response to Vice Chair Forssell's query, Councilmember Cormack indicated the Nissan Leaf rebates range
from $1,500 to $3,500.
COMMISSIONER COMMENTS
Commissioner Smith noted that MyCPAU is a tremendous improvement over My Utilities Account.
Vice Chair Forssell added that usage data can be downloaded through MyCPAU.
UNFINISHED BUSINESS
None.
NEW BUSINESS
ITEM 1: ACTION: Staff Recommends the Utilities Advisory Commission (UAC) Recommend that Council Accept
the Northwest County Recycled Water Strategic Plan Report.
Karla Dailey, Acting Utility Program Services Manager/Senior Resource Planner, reported acceptance of the
Northwest County Recycled Water Strategic Plan Report (Report) will not result in approval of any projects.
Negotiating the regional water reuse project agreement among the City, Valley Water, and the City of
Mountain View would have been difficult without the Report. The Report lays the foundation for future
regional decisions and projects. Projects contained in the Report should be incorporated into a Water
Integrated Resources Plan and may be included in a broader “One Water” report that covers all flows of
water into and out of Palo Alto and their various uses within Palo Alto.
Utilities Advisory Commission Minutes Approved on: March 05, 2020 Page 3 of 8
In reply to Commissioner Johnston's inquiry regarding a timeframe for the local salt removal facility, Dailey
advised that an RFP will be released any day now. Staff anticipates construction will begin in early 2021 and
be completed in 2023. With respect to Commissioner Johnston's query about the options in Table 1 of the
staff report, Dailey indicated the options will not be viable if Valley Water exercises its option. At this time,
Valley Water has not made a decision about its option, and Valley Water has ten years to make the decision.
Alternatively, Valley Water can pay the City $1 million a year for ten years without taking the water, but at
the end of ten years Valley Water does not have any rights to the water. Commissioner Johnston commented
that it could be 10 or 20 years before the viability of some options are known.
In answer to Commissioner Smith's question regarding planning for a worst-case scenario in the context of
the Valley Water Transfer, Dailey related that options not consistent with the Valley Water Transfer will not
be included in concept options in a One Water Report. Commissioner Smith inquired whether Options A1,
A2, and A3 described in the staff report are unaffected by the new plant and the sale of effluent, to which
Dailey replied yes. Commissioner Smith requested any reasons, excluding funding, for not implementing
Options A1, A2, and A3. Dailey stated funding is the main issue.
In response to Commissioner Segal's inquiry about installing pipelines for Option A1 during construction of
other underground projects, Dailey explained that installing trunk lines without Council approval would be
quite expensive, even during construction of other projects. Jonathan Abendschein, Assistant Director of
Resource Management, added that a trench would be needed for the trunk lines, which would be a large
additional cost.
Councilmember Cormack noted the Cubberley Draft Concept Plan discusses the potential use of recycled
water.
Chair Danaher suggested the idea of how much insurance the community would buy to ensure sufficient
water is available for gardens and tree canopy be incorporated into the requirements for options, and
suggested staff combine Tables 1 and 3 in the staff report, placing Options C1, C2, and C3 at the bottom as
potential future options, and add a column for years to complete. In response to his question about the
analysis of needs and an incremental amount to protect tree canopy and gardens, Dailey advised that the
Report and a decision about the overall portfolio overlap with actions taken in a drought. Drought resilience
will be an attribute incorporated into the One Water evaluation of the full supply portfolio.
ACTION: Commissioner Johnston moved to recommend the Council accept the Northwest County Recycled
Water Strategic Plan Report. Vice Chair Forssell seconded the motion. The motion carried 6-0 with Chair
Danaher, Vice Chair Forssell and Commissioners Jackson, Johnston, Segal, and Smith voting yes, and
Commissioner Scharff absent.
ITEM 2: ACTION: Staff Recommends that the Utilities Advisory Commission (UAC) Recommend the Council
Adopt an Amendment to the Carbon Neutral Plan.
Jonathan Abendschein, Assistant Director of Resource Management, recalled that the UAC has discussed
hourly accounting for evaluating the carbon content of the Electric Supply Portfolio. Staff will present a
proposal to memorialize the policy. The item could be considered as having two primary components:
choosing whether or not to amend the Carbon Neutral Plan to move to hourly accounting, and discussing the
exchange of California renewables for out-of-state renewables and using the funds for a variety of carbon-
reducing activities. He recommended the UAC focus on the first component and consider the second if it
resolves the first component.
Chair Danaher noted one policy issue is the sale of excess renewables. The UAC has reached consensus that
excess resources should be sold to capture the economic benefit. The discussion should address a definition
of excess and whether to fill a shortfall in accounting with a more costly or less costly approach.
Utilities Advisory Commission Minutes Approved on: March 05, 2020 Page 4 of 8
Jim Stack, Senior Resource Planner, reported the two major changes staff proposes are (1) to move from an
annual carbon accounting methodology to one based on hourly average emissions factors and (2) to permit
the use of Renewable Power Supply (RPS)-eligible, unbundled RECs (Renewable Energy Certificates), also
known as Bucket 3 RECs, to neutralize any residual emissions resulting from the change in carbon accounting
methodology. The cost impact is relatively small at approximately $150,000 per year. Staff proposes these
changes because the grid has changed dramatically since 2013; the emissions intensity of grid electricity
varies dramatically by hour and season; and periods of surplus energy generally align with periods when
electricity on the grid is relatively clean. The community, organizations, and regulators have raised questions
of whether the City of Palo Alto Utilities (CPAU) can credibly and accurately claim to be a carbon neutral
utility on the basis of an annual accounting approach. Shifting to an hourly accounting framework will provide
additional credibility to CPAU's claim to be a carbon-neutral utility. Additional community engagement on
the proposed changes may be needed. Under Alternative 1, the UAC would adopt hourly accounting without
the use of Bucket 3 RECs, in which case a certain amount of surplus supplies would need to be maintained.
Alternative 1 would save approximately $1.7 million per year over ten years. Under Alternative 2, the UAC
would adopt hourly accounting with the use of Bucket 3 RECs. Alternative 2 would save an additional
$500,000-$600,000 per year. Staff recommends Alternative 2. Alternative 3 is to retain the annual
accounting approach. In this case, staff sees no reason to maintain any of the surplus supply. Alternative 3
would save approximately $2.4 million per year total (approximately $100,000 more than Alternative 2).
Chair Danaher clarified that the $2.4 million savings is actually the earnings from the sale of surplus RECs.
The cost of offsetting hourly accounting with Bucket 1 RECs is $700,000. The cost of offsetting hourly
accounting with Bucket 3 RECs is $100,000. Stack confirmed this understanding.
Stack continued the presentation, stating Alternative 4 is business as usual with the UAC reconsidering hourly
accounting in a year. Staff would sell surplus Bucket 1 supplies down to load in 2020; report emission totals
under an hourly accounting framework; and consider using the hourly accounting framework to evaluate
supply and demand resources.
In response to Vice Chair Forssell's request for additional information about using hourly accounting
internally to evaluate supply and demand resources, Abendschein explained that staff evaluates the cost of
energy efficiency programs against the cost of buying new electric supply. This concept could also be applied
to carbon. Staff may be able to use hourly accounting for carbon to evaluate demand-side measures and
supply resources to determine the dollars-per-ton of carbon savings for each measure. If the UAC chooses
not to adopt hourly accounting, staff will continue to explore internal uses of hourly accounting. Under the
hourly accounting methodology, a supply resource that generates a lot of energy in the summer hours would
have a lower carbon impact than a resource that generates the same amount of energy in off-season periods.
Two resources that do not compare favorably on price per kWh may compare favorably in dollars-per-ton
savings. Stack added that staff does not currently evaluate supply resources in terms of dollars per ton of
carbon. With this concept, staff could look at grid emissions that are avoided by bringing new supply
resources online.
In reply to Commissioner Jackson's query regarding the severability of the two issues (the adoption of hourly
accounting and the use of Bucket 3 RECs for compliance), Stack advised that the two issues are independent,
and a decision on the first component will not affect a decision on the second component.
In answer to Commissioner Johnston's comparison of the options in the presentation and in the staff report,
Stack indicated Option A corresponds to Alternative 1, Option B to Alternative 2, and Option C to Alternative
2a about additional swapping.
Vice Chair Forssell related that she is inclined to support hourly accounting because it is a more accurate
reflection of carbon emissions. CPAU can make the biggest difference in the City's carbon footprint by
obtaining long-term contracts for carbon-free energy. She expressed concern that CPAU has taken on more
and more solar power when it is not clear that solar helps the grid. She expressed interest in Alternative 4c
Utilities Advisory Commission Minutes Approved on: March 05, 2020 Page 5 of 8
shown in the presentation (the use of hourly accounting for internal decision making), but any of the
alternatives are acceptable if they drill down on Alternative 4c and have the most impact.
Commissioner Segal remarked that hourly accounting information should be disclosed because ratepayers
have misperceptions about it and may make different decisions if they know their decisions will have an
impact.
Bret Andersen, Carbon Free Palo Alto, remarked that using hourly accounting to drive decisions about supply
purchases and demand management will reduce local greenhouse gas emissions. The definition of carbon
neutrality is directedly contracted renewable power in California, which may be Bucket 1 RECs. The real
action is to have 100-percent renewable contracts that cover power needs. If one is convinced that a Bucket
1 REC is the same as a Bucket 3 REC, then a lot of money is available. Carbon Free Palo Alto proposes staff
include a social cost of carbon in decision-making and engage the community regarding Bucket 3 RECs.
Moving to hourly accounting would be great.
Chair Danaher indicated under hourly accounting, residual emissions will have to be covered with $700,000
of the $2.4 million or with the purchase of Bucket 3 RECs at a cost of $100,000. Purchasing Bucket 3 RECs
has some benefit.
In answer to Commissioner Jackson's query regarding adopting Alternatives 1 or 2 (the adoption of hourly
accounting with and without Bucket 3 RECs for the electric portfolio) and pursuing Alternative 4c at the same
time, Stack indicated the UAC could do that. Chair Danaher noted staff is already working on Alternative 4c.
Commissioner Johnston agreed that adopting hourly accounting is logical because it would provide a more
accurate picture of carbon and the energy portfolio.
Commissioner Jackson commented that adopting hourly accounting and incurring a cost of $100,000 through
Alternative 2 is acceptable.
Stack presented part 2 of the item. Option 1 is the sale of some surplus renewables, which will generate $1.7
million per year in savings. Option 2 is the sale of all surplus renewables and the purchase of a small amount
of Bucket 3 RECs, which will generate $2.3 million in savings. Option 3 is the sale of all surplus renewables
and a trade of in-state renewables for out-of-state renewables, which will generate $3.3 million in savings.
However, the RPS level will decrease to 50 percent, 45 percent, and 39 percent for Option 1, Option 2, and
Option 3 respectively. The emissions intensity, using hourly accounting, will be 0 for Option 1, 42 for Option
2, and 131 for Option 3. Emissions intensity for Option 2 would be 0 with the purchase of unbundled RECs.
The emissions intensity shown on the Power Content Label (PCL) will be 10, 9, and 65 for Options 1-3
respectively.
In answer to Commissioner Jackson's question regarding the total savings, Stack indicated Option 3 would
generate about $37 million, Option 2 about $25 million, and Option 1 about $18 million.
Vice Chair Forssell noted the retail rate impact would be a 2-percent rate savings when rate increases over
the past few years have been 4-9 percent. Abendschein related that staff equates a $1.2 million per year
cost increase with a 1-percent rate increase.
Stack further reported the emissions intensity shown on the PCL would be a small number for each option,
but the numbers for the options would be considerably less than the grid average. Next steps include Council
approval and community engagement.
In reply to Commissioner Jackson's inquiry about use of the savings, Abendschein advised that savings may
be directed to carbon-reducing activities such as electric vehicle (EV) charging, promoting EVs, building
Utilities Advisory Commission Minutes Approved on: March 05, 2020 Page 6 of 8
electrification, and demand response or flexible loads. Chair Danaher added that savings may be used to
purchase energy storage for the grid.
Commissioner Johnston did not favor the concept of selling all surplus renewables because it feels like CPAU
is taking the minimum action to comply with RPS. With respect to Options 1 and 2, he expressed difficulty in
understanding the difference between the environmental qualities of Bucket 1 and Bucket 3 RECs. He would
feel better if the Option 3 savings would support a program that led to further carbon neutrality of the
community. Abendschein advised that staff could return with guidelines for use of that set of savings.
Commissioner Jackson commented that after learning about Bucket 3 RECs, he could consider them rather
than dismiss them out of hand. The concept should be marketed as a $37 million program to electrify and
green Palo Alto that is funded by the use of Bucket 3 RECs.
Commissioner Smith added that this is a substantial amount of money that can be used to benefit the
community. He preferred allocating funds to programs that electrify California. If the utility moves to hourly
accounting, it should capture the savings and use it for the community.
Vice Chair Forssell recalled a discussion of hourly accounting showing the utility to be browner than
anticipated and the need to purchase RECs to offset the carbon emissions. She did not understand how
switching accounting and purchasing RECs would save money. Chair Danaher explained that the utility has
approximately $2.4 million in surplus that can be sold. Vice Chair Forssell asked if banked RECs would be
sold. Stack clarified that 10 percent of supply is surplus to the load and can be sold. The surplus is worth
about $2.4 million in savings. Under hourly accounting, the utility would purchase some number of RECs to
cover residual emissions. If Bucket 1 RECs are purchased, the utility has to pay $700,000 to cover the
emissions. The $2.4 million savings less the $700,000 purchase results in a $1.7 million savings. Vice Chair
Forssell stated excess RECs would be sold rather than banked.
Commissioner Segal indicated the difference between Bucket 1 and Bucket 3 RECs seems to be local carbon
savings versus carbon savings elsewhere, but the amount of carbon savings is equal. Stack advised that staff
held that opinion, even though it is not widely held in the industry. Abendschein added that the exchange of
a California REC for an out-of-state REC is a wash with respect to carbon. The discussion of Bucket 3 RECs
often occurs in the context of requiring local agencies and utilities within California to build more renewable
energy rather than purchasing out-of-state RECs. If these agencies are able to buy lower cost out of state
RECs from existing renewable resources to fulfill their mandates, less new renewable energy will be built in
California. That critique is not applicable to CPAU. CPAU has helped build new renewable energy sources in
California with enough output to fulfill any mandate currently in effect or that is scheduled to come into
effect in the future, and does not plan to release its contracts. Staff does not believe these short-term
exchanges of California for out of state renewables will have a carbon impact; although, it does have a public
perception impact.
In reply to Chair Danaher's question about Option 3, Stack explained that to obtain the Bucket 1 REC
premium, the REC has to be sold with the energy. The purchase of an unbundled REC would have unspecified
power. Chair Danaher advised that the UAC seems to support hourly accounting as being more honest.
Covering residual emissions with Bucket 1 or Bucket 3 RECs would cost $100,000 or $700,000. The Council
would be more likely to support moving to hourly accounting if the extra cost is covered with Bucket 3 RECs
and CPAU continues to produce sufficient power to cover the load under the annual accounting basis. The
more difficult and controversial decision is whether to sell to the RPS level.
Vice Chair Forssell favored moving conservatively and slowly. She supported Option 1, hourly accounting
without Bucket 3 RECs. More aggressive actions can be taken in the future with an understanding of the use
of savings and the programs they can fund.
Utilities Advisory Commission Minutes Approved on: March 05, 2020 Page 7 of 8
Council Member Cormack commented that the way the information is presented to the Finance Committee
will be important. The Council may find the nuances difficult to absorb and consequently focus on the dollars.
The presentation will be important to prevent the discussion from focusing on finances alone.
Chair Danaher noted consensus for hourly accounting and inquired whether Commissioners support the sale
of $2.4 million in surplus and purchase of $100,000 of Bucket 3 RECs or the sale of $1.7 million in surplus and
not use Bucket 3 RECs.
Commissioner Smith supported Column 2 (hourly accounting using Bucket 3 RECs).
Commissioner Johnston supported Column 1 (hourly accounting using Bucket 1 RECs). If that proves feasible,
Bucket 3 RECs can be reconsidered.
Commissioner Jackson supported Column 2 (hourly accounting using Bucket 3 RECs).
Commissioner Segal supported Column 2 (hourly accounting using Bucket 3 RECs).
Vice Chair Forssell supported Column 1 (hourly accounting using Bucket 1 RECs).
Chair Danaher supported hourly accounting using Bucket 3 RECs for the marginal amount.
Abendschein reported staff will sell any surplus above the 104.5-percent level during the year regardless of
this action.
Chair Danaher requested the next staff report include an update regarding the charging program.
ACTION: A straw poll was taken to continue the item to the March meeting. The motion carried 6-0 with
Chair Danaher, Vice Chair Forssell and Commissioners Jackson, Johnston, Segal, and Smith voting yes, and
Commissioner Scharff absent. By acclamation, the UAC continued the item to the March meeting.
ITEM 3: DISCUSSION: Presentation of the Utilities 2019 Year in Review.
Catherine Elvert, Communications Manager, highlighted 2019 accomplishments including Upgrade
Downtown, Stanford Hospital expansion, Colorado Substation upgrades, installation of new customer service
lines, leak repairs, reducing sanitary sewer overflows, flushing miles of sewer mains, Water Reuse Agreement
with Valley Water and the City of Mountain View, customer survey regarding distributed energy resources
and energy efficiency and resulting programs, continued use of the Strategic Plan and the Sustainability and
Climate Action Plan, an Energy Reach Code, Municipal Services Center open house, HP solar project, home
electrification expo, Great Race for Saving Water and Earth Day Festival, EV ride and drive events, and
resiliency workshop. CPAU received the National Energy Innovator Award and the Smart Energy Provider
Designation from APPA and the Treeline USA Award. Innovations include the automated metering
infrastructure (AMI) project, MyCPAU, and mobile workforce applications.
ACTION: None.
ITEM 4: DISCUSSION: Presentation Looking Forward into the 2020 Year to Come.
Catherine Elvert, Communications Manager, highlighted 2020 priorities, goals, and plans, including MyCPAU,
expansion of the fiber network, Phase II of AMI, meter survey, SAP upgrades, new home energy and water
reports, update of the Water Integrated Resource Plan and the Urban Water Management Plan, review of
the Western Area Power Administration contract, evaluation of RPS options, update of the Sustainability and
Climate Action Plan, evaluation of the impact of electrification on the gas and electric utilities, wastewater
cost of service analysis, water main replacements, rehabilitation of the Mayfield and Corte Madera
Reservoirs, replacement of ABS services, gas and sewer line safety inspections, replacement of wastewater
mains in the Charleston-Meadows neighborhood, a new GIS system, substation upgrades, wildfire mitigation
Utilities Advisory Commission Minutes Approved on: March 05, 2020 Page 8 of 8
practices, recruitment and succession planning, monitoring of legislative actions, and continued application
of the Strategic Plan.
ACTION: None
ITEM 5: ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting.
Commissioner Segal requested an update regarding findings for the fatal accident involving a City employee
and information about the permitting of electrification projects. Jonathan Abendschein, Assistant Director
of Resource Management, advised that staff discusses permitting issues with Development Services and
engineers. Resolution of issues may be slow due to limited staff and competing priorities. Staff is working
on resolving issues related to electrical panel upgrades and energy storage systems.
In reply to Commissioner Jackson's inquiry regarding an electric-only rate plan, Abendschein indicated the
billing system and Proposition 26 limitations on rate design are challenges to implementation of an electric-
only rate. Commissioner Jackson shared questions regarding AMI and asked that they be addressed at an
appropriate time.
Commissioner Johnston wanted to discuss the resiliency workshop prior to discussing a second transmission
line.
Vice Chair Forssell wished to better understand the outages profile as part of the educational update.
Chair Danaher requested a discussion of RPS and Bucket 3 RECs in the next several months, an update on the
charging network, a report about vehicle-to-home discharging, and a review of the AMI schedule.
ACTION: None
NEXT SCHEDULED MEETING: March 5, 2020
Meeting adjourned at 9:15 p.m.
Respectfully Submitted
Tabatha Boatwright
City of Palo Alto Utilities
Utilities Advisory Commission Minutes Approved on: Page 1 of 10
UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF DECEMBER 4, 2019 REGULAR MEETING
CALL TO ORDER
Chair Danaher called the meeting of the Utilities Advisory Commission (UAC) to order at 7:00 p.m.
Present: Chair Danaher, Vice Chair Forssell, Commissioners Jackson, Johnston, Segal, and Smith
Absent: Commissioner Scharff
Dean Batchelor, Utilities Director, shared information regarding the death of City of Palo Alto Utilities (CPAU)
employee Donatus Okhomina and City activities to honor Mr. Okhomina. The UAC observed a moment of
silence in memory of Mr. Okhomina.
ORAL COMMUNICATIONS
None.
APPROVAL OF THE MINUTES
Commissioner Segal moved to approve the minutes of the October 2, 2019 meeting as presented.
Commissioner Jackson seconded the motion. The motion carried 6-0 with Chair Danaher, Vice Chair Forssell
and Commissioners Jackson, Johnston, Segal, and Smith voting yes, and Commissioner Scharff absent.
AGENDA REVIEW AND REVISIONS
None.
REPORTS FROM COMMISSIONER MEETINGS/EVENTS
Commissioner Jackson reported he toured the Regional Water Quality Control Plant on October 5 and
attended the Bay Area Electrification Expo on October 10. After obtaining an energy assessment of his home
and a home electrification readiness report, he began researching his home energy use and found the data
for electricity usage was not easily readable. He hoped MyCPAU or future updates to MyCPAU would include
legible data for detailed electricity usage. He suggested staff include photos or brochures of all types of
induction cooktops at demonstrations of the cooktop as a way to motivate homeowners to purchase them.
Staff also may want to speak with businesses that offer cooking classes about utilizing induction cooktops in
the classes. He suggested staff distribute definitions of significant terms and concepts, such as smart grid and
micro grid, at future workshops. At future workshops, a facilitator should be partnered with a person who
has deep technical knowledge. At the November 4 Council meeting, he and other members of the community
encouraged the Council to require all-electric new construction immediately, which the Council did.
Chair Danaher advised that at the time of the October meeting, he was meeting with European utilities
regarding drive electrification and electric charging networks. The utilities expressed interest in vehicle-to-
home or vehicle-to-grid distributed energy.
DRAFT
Utilities Advisory Commission Minutes Approved on: Page 2 of 10
GENERAL MANAGER OF UTILITIES REPORT
Dean Batchelor, Utilities Director, delivered the General Manager’s Report.
Media Coverage of Utility Rate Increases – Commissioners have likely read or heard about recent media
attention surrounding our preliminary utility rate changes for next fiscal year. The local papers have
highlighted the surplus revenues some of the utility funds generated this past year and have been trying to
incorrectly suggest that these surplus funds were transferred to the General Fund rather than used to reduce
rate increases. Staff are working to correct any inaccurate information reported in the press and clear up the
confusion. We wanted to address this with the Commission so you aware that we are taking action to clarify
misrepresentation of how the City and Utilities generates and allocates funds across business activities. A few
key points:
• Recent surpluses in the utility funds were one-time, unexpected windfalls related to unusually good
hydroelectric conditions and some capital projects that were delayed;
• These one-time surpluses are being used to replenish utility contingency funds including Operating,
Capital, and Hydroelectric Stabilization reserves, that were either below or near their minimum
recommended and guideline levels (for example, due to previous year droughts);
• None of the surpluses were transferred to the General Fund. No unusual or extraordinary transfers were
made to the General Fund;
• Any surpluses related to capital project spending will be held in reserve for future capital spending;
• Because these were one-time surpluses, they cannot be used to reduce long-term rates – the utility’s
ongoing costs have not decreased and are expected to rise in coming years;
• The intention behind rate stabilization funds and reserves is to prevent wide fluctuations and large
increases in rates year over year;
• The preliminary rate increases proposed for FY 2021 are currently lower than what we projected last
year, and in some cases, an increase may not be necessary for specific utility funds. We are still evaluating
these options based on the health of each fund.
Water Reuse Partnership Agreement - On November 18, City Council approved a partnership agreement
with the City of Mountain View and Valley Water to advance water reuse in Santa Clara County. The
agreement provides funding for a small salt removal plant to improve the quality of existing recycled water
used in Palo Alto and Mountain View and enable expanded use of that resource. The agreement will also help
Palo Alto meet its sustainability goals by expanding water reuse regionally, keeping more treated wastewater
out of the San Francisco Bay. The partnership agreement, scheduled for approval by the Valley Water Board
of Directors on December 10, is a first step towards more water sustainability work between Palo Alto,
Mountain View, and Valley Water. Staff are coordinating a joint press event around 1 pm on December 10 at
the Valley Water headquarters. Please join us if available to celebrate this unique long-term agreement!
Gas Safety Awareness Phone Surveys - Over the next couple of weeks, CPAU will be participating in the
federally mandated Gas Overall Awareness Level, or GOAL, survey, which is a nationwide program to assess
public awareness about gas safety. Residents will receive an automated phone call with a request to take a
few minutes to answer some questions. The goal is to ensure that people have adequate information about
gas safety protocols, such as Call Before You Dig, to help us prevent gas emergencies. Palo Alto Utilities
customers and non-customers, including emergency responders, public officials, and excavators in the area
will be selected randomly for polling through this survey. We thank you in advance for helping us meet our
“GOAL” for safety awareness by responding to the survey if you receive the call.
Coming Soon! The MyCPAU New Online Customer Site - CPAU’s new online utility customer site, MyCPAU,
will go live in early 2020. This improved utility account management system offers a fast and secure way to
pay your bill online and set up automatic or recurring payments. MyCPAU will allow customers to view
monthly utility usage, identify opportunities to lower bills, set notification preferences and alerts, and receive
direct digital support from our Customer Service staff. We are excited to roll out this newly improved online
Utilities Advisory Commission Minutes Approved on: Page 3 of 10
service for all our utility customers sometime in the New Year. Stay tuned for your introductory registration
email.
SunShares Program Update - As of November 22, Palo Alto was the number one outreach partner in the Bay
Area SunShares program, with ten contracts signed for rooftop solar installations. The last day for customers
to sign a contract is December 31. Various rebates and discounts on electric vehicles are still available to Bay
Area residents through programs with the American Public Power Association and Drive Clean Bay Area. Find
more information at cityofpaloalto.org/EV.
All-Electric Reach Code - On December 2, City Council approved an all-electric mandate for low-rise
residential new construction projects, effective beginning April 2020. The all-electric mandate was a
proposed motion from the November 4 City Council meeting, when staff proposed a local building reach code
that would incentivize all-electric new construction projects by requiring additional energy efficiency and
electrification readiness for mixed-fuel projects. The staff proposal also would establish an all-electric
mandate by 2022. Requiring all-electric new construction of labs and life science buildings is challenging in
the near term due to technology and energy modeling challenges. During the November 4th hearing, 22
members of the public provide comments, with 21 speakers advocating an immediate mandate for all-electric
new construction projects, and one opposed to such a mandate. In addition to the all-electric mandate for
residential new construction projects, Council also adopted the following motions at the November 4th
meeting: (i) return with a subsequent ordinance in 2020 to require all-electric service for new construction
projects, including accessory dwelling units; (ii) engage the UAC to explore scalable, cost-effective rebates for
retrofitting existing homes to promote more electric utility service. Staff plans to present future customer
rebates and outreach activities targeting existing homes, along with funding sources, to the UAC in the first
quarter of 2020.
Events and Workshops
• On Saturday, November 23, over 100 residents attended a plant pruning and propagation workshop.
Survey results demonstrated very positive feedback.
• This Saturday, December 7, we will host a rainwater harvesting workshop. This class will teach
attendees how to capture rainwater on their property with rain gardens, rain barrels, and cisterns to
help conserve water and reduce runoff volume.
In response to Commissioner Johnston's queries regarding the fiber Request for Proposals (RFP) and follow-
up actions for the Resilience Workshop, Batchelor reported the fiber team is reviewing proposals from four
vendors. Interviews will likely be scheduled in January. If the UAC is interested, a workshop should be
scheduled every year. Staff will prepare and share a report of the Resilience Workshop. Catherine Elvert,
Communications Manager, advised that the RFP was sent to Commissioners in a media update.
In reply to Commissioner Jackson's inquiry about the number of structures that would be affected by a
requirement for electrification during significant remodel projects, Batchelor indicated staff had not
determined a definition of significant remodel. The number of structures affected by an electrification
requirement would depend on the definition.
Vice Chair Forssell requested the raw data from the feedback form completed at the workshop, if available.
In answer to her question about beta testing MyCPAU, Batchelor related that beta testing would begin in
January.
Commissioner Segal requested a report of information from the electrification survey.
COMMISSIONER COMMENTS
None.
Utilities Advisory Commission Minutes Approved on: Page 4 of 10
UNFINISHED BUSINESS
ITEM 1: DISCUSSION: Utilities Strategic Plan Update.
Dave Yuan, Strategic Business Manager, reported staff has created a workgroup for each Strategic Plan
priority. The groups meet regularly and append or amend the Strategic Plan as needed. CPAU employees
receive newsletters quarterly or semiannually and opportunities to provide feedback and volunteer for
specific tasks. Each employee has an individual development plan. Staff is exploring opportunities to provide
group-wide or department-wide training. The recent SEIU contract includes significant pay increases for
critical positions. The City now offers paid paternity leave. CPAU is piloting telecommute schedules and
participating in job fairs and will conduct an employee satisfaction survey. The Human Resources (HR)
Department has dedicated an employee to CPAU recruitment. Since February 2019, the number of vacancies
has decreased by 27 percent. As of December 3, 29 positions are vacant. In the past 12 months, 44 employees
have been hired or promoted. Thirty-nine employees are eligible for retirement, but less than a handful have
submitted retirement notices.
In reply to Vice Chair Forssell's inquiries about paternity leave, Jonathan Abendschein, Assistant Director of
Resource Management, advised that State mandates do not apply to municipal employees. The terms of
maternity and paternity leave may be the same. Yuan added that employees are paid for maternity and
paternity leave.
Yuan continued his presentation, stating staff has conducted customer awareness and interest surveys, which
revealed that customers are interested in electric vehicles (EV), photovoltaics (PV), and smart appliances but
less interested in home energy storage and heat pump water heaters because of their high cost. CPAU staff
participated in development of the Energy Reach Code. CPAU values and priorities are showcased through
posters and photos and useful giveaways. Staff has hosted EV ride and drive events, EV workshops, and the
Municipal Services Center open house and co-hosted with HP a ribbon-cutting ceremony for the largest solar
project in Palo Alto.
In response to Commissioner Johnston's query regarding progress on key performance indicators (KPI), Yuan
related that staff has not collected sufficient data to report on KPIs.
In answer to Commissioner Jackson's comment regarding the KPI statement in the memorandum, Yuan
indicated he would gather KPI data and send it to the UAC. Catherine Elvert, Communications Manager,
added that staff assesses the KPI for collaboration periodically and agreed to provide information to the UAC.
Yuan further reported staff has developed a seven-year roadmap of key critical technology systems. The
second phase of the Automatic Metering Infrastructure (AMI) project is underway. Staff will issue an RFP in
February or March for three critical systems. Vice Chair Forssell will be included in the beta test of MyCPAU;
however, all Commissioners are requested to provide feedback.
In response to Commissioner Smith's query regarding 90 percent of field support staff utilizing paperless tools
by December 2019, Yuan advised that staff would not meet the KPI.
In answer to Commissioner Segal's question of whether CIS and GIS system projects are on schedule, Yuan
indicated the CIS project has been delayed slightly, the GIS project is underway. Commissioner Segal felt the
schedule for the AMI project is aggressive. Yuan explained that AMI could be deployed by 2022 with
completion anticipated in 2023.
Yuan continued the presentation, indicated staff is preparing new reports to prioritize infrastructure needs
and to enhance communications for budget requests and rate adjustments. Staff has created a Capital
Improvement Program (CIP) Reserve Fund so that funding for CIP projects that are deferred does not return
to the Rate Stabilization Reserve Fund.
ACTION: None
Utilities Advisory Commission Minutes Approved on: Page 5 of 10
NEW BUSINESS
ITEM 2: DISCUSSION: Discussion of Utility Pole Attachment Agreements and Operations.
Jim Bujtor, Utilities Engineering, reported the City and AT&T jointly own and maintain the majority of utility
poles in Palo Alto under a Joint Pole Agreement dated 1918. There are slightly less than 6,000 poles Citywide,
and the City individually owns 600 of them. AT&T purchases space for its facilities in the communication zone,
which is roughly the middle of the pole. The City owns the safety clearance zone and the power zone, which
are located at the top of the pole. The City jointly owns with PG&E 100 poles in the Foothills area. Some poles
are not tall enough for new attachments. The average pole age is around 40-50 years. Poles located in
backyard easements are usually shorter. The City abides by the overhead line construction regulations
contained in General Order 95. CPAU replaces approximately 100 poles per year, using poles that are 5 feet
taller when possible. The parties that benefit from pole replacement share proportionately in the cost of
replacement, based on the share of the pole owned. Inspection and maintenance costs are shared
proportionately as well.
In answer to Vice Chair Forssell's inquiry regarding calculation of the proportionate share, Bujtor explained
that the calculation is based on the footage owned.
Jim Fleming, Senior Management Analyst, advised that commercial wireless carriers use City-controlled
spaces on utility poles primarily for the attachment of wireless communication facilities (WCF). In 2010, the
City Attorney's Office developed a Master License Agreement (MLA) for use of City-controlled space on utility
poles, streetlight poles, and in conduit. The Council approved the MLA template in 2011. Six companies have
executed an MLA, and three of those companies are in various stages of processing applications to install
facilities. In 2011, Utility Rate Schedule E-16 was amended to include an annual license fee for mounting
communications equipment on poles. The license fee is $270 per pole per year in addition to energy use
charges. Fleming summarized the key terms and provisions of the MLA. In September 2018, the Federal
Communications Commission (FCC) issued an Order and additional regulations that govern local review of
applications for WCF. The FCC order declared permit fees, rights-of-way use, application fees and attachment
fees unlawful unless they are strictly cost-based and no higher than fees charged to similarly situated
competitors. The FCC Order defined a new subset of WCF called small wireless facilities, and the City must
act on applications for small wireless facilities within 60 days; and determined local aesthetic regulations are
preempted unless they are reasonable, nondiscriminatory, and published in advance. On April 15, 2019, the
Council defined objective design standards for small cell installations. Municipalities have challenged the FCC
Order in federal court, and a decision is anticipated in 2020.
In answer to Commissioner Johnston's inquiry regarding limits on the number of attachments that can be or
have to be approved, Fleming advised that there is no limit. The City can dictate the time, place, and manner
of where facilities are located.
In reply to Commissioner Smith's question about the anticipated number of facilities, Fleming related that
there could be 120 sites, with the majority being owned by Verizon Wireless.
In response to Commissioner Jackson's query regarding carriers' use of City conduits and carriers installing a
second conduit for City use, Fleming advised that carriers may use City conduit if space is available. Conduit
is included in the MLA, and the carriers have to pay a license fee. Most of the time, carriers do not want to
use City conduit. The City does not have a "dig once" policy; therefore, carriers do not have to install conduit
for City use when they are installing conduit for their own projects.
In answer to Commissioner Segal's question about staff planning for fiber to the home when installing new
utility poles, Bujtor clarified that the backbone fiber system is in place, but fiber to the home may use a
different system. The length of the pole determines whether there will be space for additional facilities on
the pole. Dave Yuan, Strategic Business Manager, added that new poles are usually 5 feet longer than the
Utilities Advisory Commission Minutes Approved on: Page 6 of 10
existing poles. In response to Commissioner Segal's question about pole attachments in underground
districts, Fleming explained that an empty communication conduit is installed in new underground districts.
In response to Vice Chair Forssell's query regarding use of the 2 feet of the communication zone not owned
by AT&T, Fleming stated a third party can buy the space for attachments. In addition, AT&T can license a
portion of its 3 feet to other vendors. Based on the length of the pole, the communication zone may not be
5 feet in length.
In reply to Chair Danaher's inquiry about a potential shortage of pole space or conduit with implementation
of 5G technology, Fleming indicated 5G facilities probably will not be installed on all poles. Dean Batchelor,
Utilities Director, noted a large number of poles will have to be replaced If fiber to the home is implemented.
Fleming added that most of the City fiber is attached to the pole in the safety zone. If a carrier wants to build
a new network across the City, the carrier and staff will evaluate each pole to determine whether it can
accommodate new attachments.
In answer to Commissioner Segal's question about installing fiber facilities in the safety zone, Fleming related
that the City controls the safety zone and does not have to work with AT&T to install facilities in the safety
zone.
ACTION: None
ITEM 3: DISCUSSION: Discussion of Preliminary Rate Change Projections for the Electric, Gas, Water and
Wastewater Collection Utilities for Fiscal Year 2021.
Eric Keniston, Senior Resource Planner, reported a wastewater cost of service study is underway and should
be complete in time for staff to utilize it in calculating new wastewater rates to meet the expected July 1st
date for new rates. Fiscal Year (FY) 2021 preliminary rate projections are a 3% increase for the Electric Utility,
a 5% increase for the Gas Utility, a 6% increase for the Wastewater Utility, a 0% increase for the Water Utility,
and a 0% increase for Refuse. In water, gas, and wastewater collection, staff is planning to stagger main
replacement projects but to allocate funds periodically to the CIP Reserve so that the CIP Reserve reflects
project expenditures and fluctuations caused by main replacement projects occurring every other year.
Beginning this year in the Water Fund, there will be a level amount of funding going to the CIP Reserve to
begin establishing this process.
In response to Commissioner Smith's request for cost containment measures provided in the agreement with
Valley Water, Jonathan Abendschein, Assistant Director of Resource Management, explained that Valley
Water's $16 million payment will fund construction of the reverse osmosis facility. If there was no $16 million
payment, sewer and water ratepayers would have to fund the construction. The cost containment measure
is ratepayers not having to fund construction of the plant. In reply to Commissioner Smith's question of
whether the listed cost containment measures apply to the rate projections, Abendschein indicated most of
them do. Almost any of the cost containment measures directly reduce the cost associated with the individual
utility.
Keniston continued the presentation, stating Electric Utility Operations Reserves are projected to fall within
the guideline ranges. FY 2019 was a good year for hydroelectric power, and CPAU was able to sell its surplus
energy, which reduced purchase costs.
In answer to Commissioner Johnston's inquiry about disposition of surplus funds, Keniston advised that
initially surplus funds are deposited into the Operations Reserve and then transferred to the other Reserve
Funds. Staff proposes to repay the $10 million loan from the Special Projects Reserve and increase the
Hydroelectric Stabilization Reserve Fund to the target level.
Utilities Advisory Commission Minutes Approved on: Page 7 of 10
Keniston further reported 40% of electric costs are related to distribution and 60% to supply. Transmission
costs continue to grow rapidly because of the cost to expand the statewide system. Generation costs should
remain stable.
In reply to Vice Chair Forssell's inquiry regarding increased costs from renewable projects coming online,
Abendschein indicated newer contracts for renewable projects are generating some savings. Between 2009
and 2015, many renewable projects were not online, and CPAU benefited from low gas prices. As CPAU
increased its renewable contracts, it was no longer exposed to low gas prices, which raised the cost of the
electric supply.
In response to Commissioner Johnston's noted between FY 2021 and 2022 revenues decrease even though
rates increase. Keniston stated revenue includes hydroelectric revenues, Renewable Energy Certificate (REC)
sales, and other projected revenues. Staff anticipates REC sales will decrease in FY 2022 and less hydroelectric
revenue; revenue will be more normalized by FY 2022. Abendschein clarified that FY 2019 and FY 2020
revenues exceed costs because of the sale of surplus hydroelectric. Staff has questions about the FY 2021
forecast from the Western Area Power Administration. Chair Danaher added that CPAU will not have surplus
hydroelectric power to sell, which will decrease revenue.
Keniston continued the presentation by listing the distribution cost drivers of medical and retirement
benefits, capital investment, and underground construction. Staff projects a 3% rate increase in FY 2021 and
4-5% rate increase thereafter. The main drivers of the rate increase are increased supply costs, increased
operations costs, increased CIP expenses, increased non-retail revenues, and decreased sales. Also, without
the additional hydroelectric revenues a larger rate increase would have been needed. The Electric Supply
Operations and Distribution Operations Reserves are above target levels and projected to remain above
target levels.
In response to Commissioner Segal's query about the rationale for a rate increase if reserve funds are healthy
and revenues exceed costs, Keniston explained that without a rate increase, the balances will begin to fall
below the minimum reserve level. Abendschein added that a one-time surplus can be used to defer rate
increases for a year or two, but a rate increase will be needed eventually. By deferring rate increases, the
reserves decrease such that few funds are available for adverse situations, and greater rate increases are
needed.
Keniston further reported staff projects a 5% rate increase for the Gas Utility in FY 2021 due to decreases in
distribution and increases in CIP cost projections.
In answer to Vice Chair Forssell's inquiry about the impact of reach codes on gas sales, Abendschein indicated
all-electric construction would affect 100-150 projects.
Keniston continued his presentation, advising that 50% of overall gas costs are related to distribution.
Abendschein clarified that the main driver for rate increases over the next five years is investment in the gas
distribution system. Of the 5% rate increase, 3.7% is related to CIP expenses and 1.3% is related to operations
and maintenance (O&M) expenses. Staff has transferred funds from the Rate Stabilization Reserve Fund to
the Gas Operations Reserve Fund. Projected rate increases will slowly increase the Reserve Fund to the target
level.
Lisa Bilir, Acting Senior Resource Planner, reported staff projects a 6% rate increase in FY 2021 for the
Wastewater Collection Utility because of increases in treatment and collection costs. The largest expense
increase is CIP projects. Wastewater costs are divided 50% for treatment and 50% for collection. 2.4% of the
6% rate increase is related to treatment expenses, 1.2% to O&M expenses, and 2.4% to an existing revenue
shortfall. The Wastewater Operations Reserve is projected to remain within target levels.
Utilities Advisory Commission Minutes Approved on: Page 8 of 10
In reply to Commissioner Johnston's question about partner agencies utilizing Palo Alto pipelines for
wastewater, Keniston indicated Los Altos Hills utilizes Palo Alto's collection system starting in the foothills,
and Stanford University enters the collection system along Embarcadero Road.
Bilir further reported staff's projection for a 0% rate increase for the Water Utility. The Operations Reserve
Fund is currently above the maximum guideline but should fall to the target level by the end of FY 2021.
In answer to Vice Chair Forssell's query regarding the cause of the reserve being above target level, Bilir
explained that the chart shows the Operations Reserve but does not show the balances of all the reserves.
When the Operations Reserve reaches the maximum guideline level, the additional funds above that level
are reflected in the unassigned reserve, which can be seen in the stacked bar chart.
Chair Danaher remarked that CPAU cannot change gas commodity prices or PG&E's transmission costs. The
only thing CPAU can do is defer or accelerate construction projects or manipulate reserve fund balances to
fall within target levels.
In response to Commissioner Segal's inquiry about gas billing and cost fluctuations, Keniston advised that the
policy is to reflect the bid week price plus any expected loss or shrink. Reserve funds should absorb the extra
cost. Collecting the extra cost the following month would not be appropriate.
In reply to Vice Chair Forssell's question of customer backlash in response to the gas bill increases, Catherine
Elvert, Communications Manager, did not recall any customer comment.
Commissioner Johnston remarked that explaining the rate increases in light of projected revenues exceeding
projected costs could be a challenge. Abendschein indicated the challenge would be explaining wastewater
and gas rate increases because of the plan to alternate years of CIP projects.
Chair Danaher commended staff for maintaining fund balances within target levels and averaging rate
increases over time.
In answer to Vice Chair Forssell's question about the cost of service study, Bilir reported a consultant is
conducting the study.
ACTION: None
ITEM 4: ACTION: Staff Recommendation that the Utilities Advisory Commission Accept a Staff Presentation
on 2019 and 2020 State Legislation and Recommend that the City Council Adopt the 2020 Utilities Legislative
Guidelines.
Heather Dauler, Senior Resource Planner, reported no landmark or impactful bills were proposed in 2019.
Assembly Bill (AB) 1054 created a new Wildfire Safety Advisory Board and required publicly owned utilities
(POU) to provide the Board with a copy of their Wildfire Mitigation Plans. The Board may offer comments
and an advisory opinion on the Plans but cannot require modifications of the Plans. A Senate bill created a
new Wildfire Forecast Center, which becomes effective January 1. The Center will collect, assess, analyze,
and share fire weather data. A representative of POUs will participate in the Center. PFAS is a group of human-
made chemicals that have been synthesized for heat, water, and lipid resistance. A bill expanded the Water
Board's authority to mandate that water systems test for PFAS; however, the bill does not mandate testing.
Bills that did not pass in 2019, the first year of the two-year legislative cycle, will be carried forward to 2020.
A bill would authorize an existing state entity to procure energy on behalf of independently owned utilities
(IOU) and community choice aggregation (CCA) in order to fill gaps in procurement. As originally written, the
bill included POUs, but that language was deleted from the bill. An Assembly bill would create an enforceable
80% clean energy standard and would make hydroelectric power eligible for Renewable Portfolio Standard
(RPS)in 2030. A Senate bill would require the California Independent System Operator (CAISO) by 2022 to
complete a competitive solicitation for the procurement of pumped hydroelectric and allow cost recovery
Utilities Advisory Commission Minutes Approved on: Page 9 of 10
from all ratepayers in the CAISO grid. The bill did not define ratepayers in the CAISO grid. An analysis noted
the bill would cost ratepayers billions of dollars. A consumer privacy bill would authorize but not require
government agencies to disclose the name, utility usage data, and home address of utility customers to
another government agency when the disclosure is used for scientific research or educational purposes and
when the receiving entity guarantees confidentiality. In 2020, staff anticipates legislation about wildfires,
Public Safety Power Shutoff events, grid hardening, energy storage, distributed energy resources (DER), micro
grids, procurement, decarbonization, transportation electrification. The Guidelines provide direction for Staff
to advocate on behalf of the City without first obtaining Council approval. Staff proposes to revise the existing
Guidelines by adding more information to the advocacy methods and to add the final item.
In response to Commissioner Jackson's inquiry about staff reporting to the UAC, Dauler advised that staff
provides a quarterly information item about the status of bills.
Commissioner Segal suggested revising Number 10 to consider cost but not require cost effectiveness. Dauler
explained that cost effective reductions to an IOU may not be cost effective to a POU. The existing language
allows staff to support the intent of a bill while seeking modifications to it.
In reply to Vice Chair Forssell's question about staff's position on the bill about pumped hydroelectric, Dauler
could not recall staff's exact position. At the time, staff did not know whether mandating CAISO to do this
was the appropriate action or whether costs would be passed onto CPAU.
ACTION: Commissioner Johnston moved to approve staff's recommendation regarding the Legislative
Guidelines. Commissioner Jackson seconded the motion. The motion carried 6-0 with Chair Danaher, Vice
Chair Forssell and Commissioners Jackson, Johnston, Segal, and Smith voting yes, and Commissioner Scharff
absent.
ITEM 5: ACTION: Appointment of Commissioners to an Ad Hoc Budget Committee for FY 2021.
Chair Danaher advised that Commissioners Jackson and Smith have agreed to serve on the committee. Other
Commissioners are welcome to participate in the committee.
Dean Batchelor, Utilities Director, added that Vice Chair Forssell has volunteered to serve on the committee.
ACTION: None
ITEM 6: ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting.
Chair Danaher requested agenda items for a report on the Resilience Workshop and staff's evaluation of
responses to the fiber RFP. Dean Batchelor, Utilities Director, indicated February would be the appropriate
time for an item about the RFP responses because interviews would not be complete before the January
meeting. Commissioner Smith felt sharing the initial results of staff's review with the UAC in January could
be helpful to staff. Batchelor advised that he would prepare an informational report for the UAC. Chair
Danaher noted that Commissioner Jackson has expressed interest in reviewing the RFP responses.
Commissioner Smith agreed that he also would like to review them.
Commissioner Segal requested an update regarding the second transmission line. Batchelor reported
Stanford University is negotiating with SLAC regarding the transmission line. Personally, he preferred to notify
Stanford University that CPAU would pursue a partnership with another entity.
Vice Chair Forssell suggested the discussion of the Resilience Workshop include probability of occurring and
impact.
Commissioner Smith reiterated the need for a discussion of selling surplus renewable energy. Vice Chair
Forssell noted the topic would be part of the February discussion of RPS Compliance Strategy.
Utilities Advisory Commission Minutes Approved on: Page 10 of 10
ACTION: None
NEXT SCHEDULED MEETING: January 8, 2020
Meeting adjourned at 9:38 p.m.
Respectfully Submitted
Tabatha Boatwright
City of Palo Alto Utilities
City of Palo Alto (ID # 11003)
Utilities Advisory Commission Staff Report
City of Palo Alto Page 1
Report Type: Agenda Items Meeting Date: 2/5/2020
Council Priority: Climate/Sustainability and Climate Action Plan
Summary Title: Carbon Neutral Plan Update & RPS Compliance Strategies
Title: 2. Staff recommends that the Utilities Advisory Commission (UAC)
recommend that the Council adopt an amendment to the Carbon Neutral Plan
From: City Manager
Lead Department: Utilities
RECOMMENDATION
Staff recommends that the Utilities Advisory Commission (UAC) recommend that the City
Council adopt an amendment to the Carbon Neutral Plan (as shown in Attachment A) to
1) switch to an hourly carbon emissions accounting methodology using average hourly grid
emissions factors to define “carbon neutrality” rather than the current annual accounting
methodology, and 2) if needed, permit the use of unbundled RECs to neutralize any emissions
resulting from the difference between emissions calculated under an annual accounting and
hourly accounting methodology.
REQUEST
Staff seeks additional UAC feedback on a staff proposal to pursue a portfolio management
strategy of selling CPAU’s California-based renewable energy (i.e., Bucket 1 RECs) which is not
needed for RPS compliance, and replacing it with lower-cost renewable energy generated
outside of California (Bucket 3 RECs)1. Staff will refer to this strategy in the report as the
“Renewable Exchange” strategy. Staff estimates that this policy could free up over $3M per
1 State law has established three different categories or “buckets” of renewable energy products —and sets limits
on the degree to which a utility can rely on the less preferred categories to fulfill their RPS requirements. The first
category (Bucket 1), the most preferred one, encompasses all renewable energy that is delivered into the
California grid as it is generated. The second type of renewable energy (Bucket 2) consists of renewable energy
generated out-of-state that is used by the out-of-state grid as it is generated, and then later an equal amount of
energy from a different resource is delivered into the California grid. This type of arrangement is referred to as
“firming and shaping” the resource’s output. The third category of renewable energy (Bucket 3) is the state’s least
preferred one, and also the least expensive to procure. Bucket 3 encompasses a ll sales of RECs without any
associated energy. In these “unbundled REC” transactions, the energy is generated and consumed (usually out -of-
state) but the RECs are sold separately to a California utility. Technically Bucket 3 RECs can be located in Califor nia,
but virtually all Bucket 3 RECs are generated outside the state.
Item No. 2
City of Palo Alto Page 2
year for sustainability efforts that benefit electric ratepayers, without raising rates or increasing
carbon emissions of the electric portfolio. The UAC was interested in continuing to explore this
proposal when it was discussed at its August 2019 meeting, and staff wishes to continue this
discussion and provide an update based on the feedback it has since received on the idea from
community stakeholders.
EXECUTIVE SUMMARY
This report is a follow-up to reports presented on the same topics in August 2019, June 2019,
and May 2019. Together, these reports satisfy Initiatives #4 and #5 of the City’s 2018 Electric
Integrated Resource Plan (EIRP)2, which Council approved in December 2018.
This report goes into some detail on the background behind the adoption of the City’s current
policies related to carbon accounting and RPS procurement. It then summarizes the UAC’s
recent discussions on carbon emissions accounting methodologies and describes the hourly
accounting approach that the UAC unanimously supported in August 2019 and the implications
of switching to this approach for the Carbon Neutral Plan.
The report then describes several different RPS procurement strategies that the UAC has
discussed in recent months—along with the financial impact to the utility of changing from its
current RPS compliance strategy. Also presented are the implications for the City’s carbon
emissions reporting obligations associated with these RPS compliance strategy options. For now,
staff recommends the approach where the City sells all renewable energy supplies that exceed
its load (even if this yields a small residual emissions total under the hourly carbon accounting
methodology), while seeking additional feedback and discussion on selling even more
renewable energy than that and replacing it with Bucket 3 RECs (the Renewable Exchange
strategy). The recommended strategy results in an average annual savings of $2.3 million per
year over the next eleven years (or about 0.27 cents/kWh, equivalent to a 1.5% rate change).
The Renewable Exchange strategy, selling renewable energy in excess of state RPS
requirements, merits more discussion and analysis, but could free up an additional $1.0 million
per year to devote to carbon reduction programs that benefit electric ratepayers over the next
twelve years without increasing portfolio carbon emissions.
BACKGROUND
Over the past two years, staff has shared numerous presentations with the UAC related to the
electric supply portfolio in the course of developing and implementing the 2018 Electric
Integrated Resource Plan (EIRP). In the course of these discussions, UAC commissioners have
clearly articulated two points. First, the UAC would like staff to pursue a supply portfolio that
2 Initiative #4 of the Work Plan called for staff to evaluate the carbon content of the electric supply portfolio using
hourly grid emissions intensity data, to consider the merits of buying carbon offsets to ensure the carbon content
of the cumulative hourly portfolio is zero on an annual basis, and to reevaluate the manner in which the City
communicates with customers about the carbon content of the electric portfolio. Initiative #5 of the Work Plan
called for staff to investigate the merits of monetizing the City’s excess renewable energy supplies in order to
minimize the cost of maintaining an RPS compliant and carbon neutral electricity supply portfolio.
City of Palo Alto Page 3
minimizes total cost to customers, while also minimizing carbon emissions. While in the past
the City’s goal was to increase the amount of renewable energy in its portfolio (its RPS level),
the fact that City has reached carbon neutrality has led the UAC to recommend pursuing a
policy of maintaining carbon neutrality while calculating the portfolio’s carbon impact based on
hourly and seasonal grid emissions.
And second, the UAC wants staff to communicate with the public about the supply portfolio in a
manner that is both accurate and accessible. Initial discussion on this topic occurred in June and
September 2018 during discussions of the EIRP. A more in -depth discussion of this topic also
occurred in May 2019 during discussion of carbon accounting methodologies for the City’s
electric portfolio.
The May 2019 report also described a new accounting methodology being proposed by
California Energy Commission (CEC) staff for quantifying emissions on Power Content Labels
(PCLs) starting in 2021.3 Staff described the communications challenges that could result if the
City adopts an accounting methodology that is at odds with the methodology used on the PCLs
that are sent to customers every year. However, the UAC expressed a clear preferen ce for
employing an accounting methodology that most accurately represents the carbon emissions of
the electric portfolio, even if it results in the reporting of two different portfolio emissions
totals in some years.
When the Carbon Neutral Plan (Attachment A) was approved by Council in March 2013 (Staff
Report 3550, Resolution 9322), carbon neutrality was defined as a portfolio that “will
demonstrate annual net zero greenhouse gas (GHG) emissions, measured at the Citygate, in
accordance with The Climate Registry’s Electric Power Sector protocol for GHG emissions
measurement and reporting.” In effect, this means that the City’s carbon neutral supplies (in
megawatt-hours (MWh)) would be compared with the City’s total load on an annual basis, and
if they equal or exceed the load then the City’s electric supply would be deemed to be carbon
neutral. At the time, this accounting methodology was considered to be the most accurate
accounting methodology that could be achieved—or needed. This was in part because in 2013
there was very little solar generation connected to the California Independent System Operator
(CAISO) grid, and therefore the grid’s average emissions factors did not vary in the extreme
manner that they do today—for example, as in the emissions rate chart shown in Figure 1
below, for CAISO emissions on March 16, 2019. But, more practically, CAISO did not begin to
publish grid emissions factor data with sub-annual granularity until 2018, and therefore a more
granular accounting methodology was not feasible at that time.
3 The modifications to the Power Content Label were originally supposed to take effect in 2020, for the PCLs that
report on 2019 supplies. However, in late 2019 the CEC announced a one-year delay in this implementation
schedule.
City of Palo Alto Page 4
Figure 1: CAISO Average CO2 Emissions Rates for March 16, 2019
The City also has an RPS procurement policy separate from the Carbon Neutral Plan —the City
first adopted an RPS target in 2002, and has updated its procurement policies numerous times
since then, most recently in response to state RPS mandates. In pursuing these RPS
procurement policies, the City has achieved its current RPS levels, which substantially exceed
state-mandated levels. In fact, due to the procurement of long-term renewable supplies and
long-term permanent load reductions experienced in recent years, RPS-eligible energy supplies
(all supply sources other than large hydroelectric) currently represent more than 60% of retail
energy sales, and combined with the City’s large hydro generation, total renewable and carbon
free energy is approximately 111% of load in an average hydro year.
DISCUSSION
At the May and June 2019 UAC meetings, staff and the UAC discussed a wide range of potential
changes to the City’s carbon accounting methodology and renewable energy procurement
strategy. Subsequently, at the August 2019 meeting, staff and the UAC held a more thorough
discussion of a narrower set of RPS compliance strategy options. At the August meeting,
Commissioners expressed a consensus opinion that the City should switch its carbon accounting
methodology to one based on hourly average emissions factors, and that the City should begin
to sell some of its excess RPS supplies. The objective of this report is to seek a formal
recommendation that Council codify the carbon accounting methodology change, and to seek
further clarification around the recommended magnitude of RPS supplies to sell.
Carbon Neutral Plan Amendment: Carbon Accounting Methodology Change
In the May and June 2019 UAC reports on carbon accounting, staff presented six potential
accounting methodologies. After thorough discussion of these options, a consensus among
Commissioners emerged at the August 2019 meeting around one of them: Hourly Accounting
City of Palo Alto Page 5
Method #1 (Method C). This approach entails an hourly comparison of the City’s supplies and
load, with each hourly net load/supply value assigned the average hourly carbon emissions
intensity of the CAISO grid to convert it to an hourly emissions total that the City’s electric
portfolio is responsible for. These hourly emissions totals (which can be positive or negative,
depending on whether or not the City’s load exceeds its carbon neutral supplies for that hour)
would then be summed across the hours in a year. In addition, unbundled REC purchases would
be permitted under this approach as a means to neutralize the carbon content of generic
market energy purchases made to satisfy the City’s load.
To codify this change, staff requests that the UAC recommend that Council amend the Carbon
Neutral Plan definition of carbon neutrality such that the electric portfolio “demonstrate annual
net zero greenhouse gas (GHG) emissions, measured at the Citygate, by applying the average
hourly carbon emissions intensity of the electricity on the CAISO grid to the City’s net load for
each hour of the year.” The Plan would be further amended to note that unbundled RECs may
be purchased to neutralize residual emissions that result from the use of an hourly carbon
accounting methodology, and to make other minor updates. (See Attachment A for the
proposed edits to the Carbon Neutral Plan.)
While this methodology will hold the City’s supply portfolio up to the strictest standard of
emissions reporting (and would differ from the annual accounting methodology being proposed
by the CEC for use in reporting emissions totals on a utility’s annual Power Content Label), the
cost impact will be relatively small. Staff estimates that the impact of switching to this hourly
carbon accounting methodology would result in an increase in supply costs of approximately
$60,000 in an average hydrological year due to the use of unbundled RECs to maintain carbon
neutrality under the hourly accounting methodology. This approach corresponds to Strategy (b)
described in the following section, below. Use of California-based, Bucket 1 renewable supplies
(instead of unbundled RECs) would increase annual supply costs by roughly an additional
$700,000 per year in an average hydrological year. This approach would correspond to Strategy
(a) in the following section, below.
Sales of Surplus RPS Supplies
Since the adoption of its first RPS target in 2002, the City has consistently maintained an RPS
procurement goal that exceeds the statewide RPS mandate level, all while remaining under the
City’s $0.5 cent/kWh rate impact limit for renewables purchases. Figure 2 illustrates the growth
in the City’s RPS supplies over the past 15 years and how these supplies compare to the
statewide RPS requirements.4 For calendar year (CY) 2018, the City’s actual RPS level was
63.9%—more than twice the state’s RPS requirement for that year of 29%.
4 Note that the state’s RPS procurement legislation, Sen ate Bill 100, includes a provision that exempts municipal
utilities from meeting the RPS requirement level in years when the utility has received greater than 40% of its retail
sales from large hydro generation contracts that were effective as of January 1 , 2018. Thus Figure 2 includes a
“hydro-adjusted RPS requirement” line, showing the volume of renewable supplies that the City would need to
comply with SB 100 if it retains its existing hydro supplies, including renewing the Western contract in 2025.
City of Palo Alto Page 6
Figure 2: Palo Alto's RPS Supplies and Procurement Requirements
In addition to exceeding statewide RPS procurement requirements, the City’s renewable supply
portfolio is also composed entirely of higher-value in-state resources—where the environmental
attribute (a Renewable Energy Certificate or “REC”) is “bundled” with the energy produced by
the resource. In contrast, the state’s RPS regulations5 allow utilities to satisfy a portion of their
procurement requirement (up to 10% of it) with lower cost out-of-state resources.
The June 2019 UAC report presented a fairly broad range of potential RPS strategies that the
City could pursue—some of which would significantly increase the City’s electric supply costs,
and others that would significantly decrease it. After a thorough discussion of these options at
the June and August UAC meetings, a consensus opinion emerged among Commissioners that
the City should begin selling some of its excess RPS supplies—although there was still significant
debate about the extent to which the City should pursue such sales. At this point there appear
to be three different options under consideration:
a) Sell Supplies That Exceed Load—and That are Not Needed to Maintain Carbon
Neutrality: Under this approach, staff has been selling off the renewable resources that
exceed the City’s annual load—provided that those resources would not be needed to
maintain a carbon neutral supply portfolio as determined using an hourly accounting
5 See Sec. 399.16(c)(2) of Public Utilities Code, and Sec.B(4) of the City’s Renewable Portfolio Standard
Procurement Plan (2018).
City of Palo Alto Page 7
methodology. Staff’s carbon accounting analysis for calendar year 2018 indicates that
the City will likely need to maintain an overall surplus of about 40,000 Bucket 1 RECs
(4.5% of the City’s total load) in order to maintain a Carbon Neutral portfolio under an
hourly carbon accounting approach, without resorting to purchasing additional Bucket 3
RECs. Staff ’s analysis of this approach shows that it will generate cost savings while
maintaining carbon neutrality (based on hourly carbon accounting), and there was
unanimous support at the August meeting for pursuing this option.
b) Sell Supplies Exceeding Load: This approach is similar to the first approach, except staff
would sell off all renewable resources that exceed the City’s annual load—even if doing
so would result in a supply portfolio with net positive annual emissions, as determined
using an hourly accounting methodology. (The resulting residual emissions—which staff
estimates would be roughly 16,000 MT CO2, or 42 lb CO2/MWh, on average over this
period—would then be neutralized using the Carbon Neutral Plan provision enabling
staff to purchase unbundled RECs.) Staff recommends pursuing this slightly more
aggressive procurement strategy, given that it is expected to yield a savings of an
additional $0.62 million per year relative to the first approach. Like the first option, this
approach would also yield a Power Content Label that shows only RPS-eligible and
hydroelectric supplies.
c) Sell Supplies Exceeding RPS Requirement (the “Renewable Exchange” strategy): Under
this approach, the City would sell off all of its currently contracted renewable resources
that exceed the state’s RPS requirement level (not just those that exceed its load).6 The
City would also “bucket swap,” essentially trading its California-based renewable energy
(associated with Bucket 1 RECs) for out of state renewable energy (associated with
Bucket 3 RECs), to the extent allowable under the state’s RPS regulations. This approach
is similar to the “Minimally Compliant” approach discussed at the June 2019 UAC
meeting, except the City would not apply its stock of excess RPS supplies that it has built
up since 20107 toward its RPS requirements in future years. The Renewable exchange
strategy is expected to yield a savings of an additional $1.70 million per year relative to
the first approach. The residual emissions that this approach would yield (which would
need to be neutralized with additional unbundled RECs) are estimated to be roughly
50,000 MT CO2, or 131 lb CO2/MWh.
At the August 2019 UAC meeting, Commissioners confirmed that the “Carbon Neutral Every
Hour” approach and the “Minimally Compliant” st rategy should no longer be considered.
However, there appeared to be a fair amount of interest in pursuing the “Renewable Exchange”
approach, in spite of the fact that this approach would result in having to report "Unspecified
6 Purchases and sales of RECs with or without bundled energy are expressly permitted by Section 2.30.225 of the
City’s Municipal Code and Section G of the City’s Energy Risk Management Policy. The City would not, however, be
purchasing any additional in-state renewable resources with the intent to sell them in exchange for out -of-state
renewable resources. In addition to likely being a money-losing strategy, this approach would violate the anti-
speculation policy in Section C of the City’s Energy Risk Management Policy.
7 This refers to the “Excess Procurement” and “Historic Carryover” provisions of the City’s Renewable Portfolio
Standard Procurement Plan, which was last updated and approved by Council in December 2018 as part of the
EIRP approval process: https://www.cityofpaloalto.org/civicax/filebank/documents/67789.
City of Palo Alto Page 8
sources of power" and positive net emissions on the City’s Power Content Label. This interest in
the “Renewable Exchange” approach, in spite of its drawbacks, was due to the fact that it would
yield significantly greater cost savings, and if these savings are applied toward electrifi cation or
other decarbonization efforts, the result could be a greater overall emissions reduction.
Figure 3 below displays the annual supply cost savings (through 2030) of the three procurement
strategy options described above, relative to the current portfolio. Attachment B shows these
cost projections (and staff’s estimates of REC costs) in more detail.
Figure 3: Supply Cost Savings under Various RPS Compliance Strategies (2020-2030)
Note that the downward trend in supply cost savings over time, as well as the dip in supply cost
savings for 2022, is due to the timing of existing wind and landfill gas contracts expiring during
that period (combined with a new solar contract coming online in 2023), along with the
increases in the state’s RPS requirement (which ultimately reaches 60% in 2030). As these
existing contracts expire over time and the RPS requirement rises, the City would have fewer
excess renewable supplies to sell.
This analysis indicates that simply selling the City’s RPS supplies that exceed 104.5% of its
annual load (thus maintaining enough surplus supplies so the portfolio remains carbon neutral
under an hourly accounting standard) would reduce supply costs by an average of $1.7 million
per year, while selling all of the supplies that exceed the City’s load would reduce costs by an
additional $0.62 million per year. Finally, utilizing the “Renewable Exchange” approach would
reduce supply costs by an average of $3.3 million per year over this 12-year period—or about $1
million per year more than the “Sell Supplies Exceeding Load” approach.
City of Palo Alto Page 9
Figure 4 below depicts the trajectory that the City’s annual RPS level is expected to take
between now and 2030 under the three different RPS compliance strategies listed above, as
well as the RPS level for the current portfolio, with no excess supplies being sold. Note that
under state law, the City’s RPS compliance requirement is equivalent to the line shown for the
“Renewable Exchange Strategy.”
Figure 4: RPS Level under Various RPS Compliance Strategies (2020-2030)
Emissions Reporting Implications
The City’s current portfolio, because of its significant surplus of carbon neutral r esources
relative to load, is expected to be responsible for net negative carbon emissions over the next
12 years (under average hydro conditions), under either the City’s existing annual carbon
accounting methodology or an hourly carbon accounting methodology.8 However, staff recently
learned that the CEC’s currently proposed Power Content Label carbon accounting methodology
will result in the City having to report positive net emissions for all RPS compliance strategies
under consideration, or even for the City’s current portfolio. (This is because the CEC’s PCL
methodology ignores supplies that exceed a utility’s retail sales, and assigns a positive emissions
value to landfill gas generation.) This is contrary to what staff reported to the UAC in August.
However, it also means that the City will face a communications challenge related to the
emissions intensity value reported to customers on its PCL regardless of the RPS procurement
strategy option the City follows. And counterintuitively, it also means that if the City pursues
either of the two “Sell RPS Supplies Exceeding Load” options, the emissions intensity reported
8 Based on the analysis of the City’s portfolio that staff presented in the May 2019 UAC report, a carbon accounting
methodology using average hourly emissions factors yielded an annual carbon emissions total about 16,100 mT
CO2 greater than an annual accounting approach.
City of Palo Alto Page 10
on the City’s PCL will actually decrease relative to the current portfolio (assuming that a portion
of the RPS supplies sold are from the City’s landfill gas generation volumes).
Beginning in 2021, the City will be required to report the emissions associated with its electric
supply on a Power Content Label every year (per AB 1110). Although the state’s Power Content
Label regulations related to emissions reporting are still being finalized, it is expected that they
will require utilities to report emissions associated with the purchase of out-of-state (Bucket 3)
RECs. However, staff feels that Bucket 3 RECs have significant environmental value and merit
when used as a carbon mitigation tool in the City’s Carbon Neutral Plan. (For a full discussion of
this topic, please see Attachment B of the August 2019 UAC report.) Figure 5 below depicts the
average supply portfolio carbon emissions intensities that the City would be required to report
on its annual PCL between now and 2030 under the three different RPS compliance strategies
listed above (assuming the state’s draft PCL regulations are adopted).
Figure 5: PCL Emissions Intensities under Various RPS Compliance Strategies (2020 -2030)
Note that while in all cases the City will be required to report a positive emissions intensity
value on its future Power Content Labels, even the approach with the highest emissions
intensity (the “Renewable Exchange” approach, with an average emissions intensity of 65 lb
CO2/MWh over this period) would be far lower than the California-wide average emissions
intensity of 528 lb CO2/MWh.9 So regardless of the RPS procurement option that the City elects,
9 U.S. Environmental Protection Agency’s eGRID 2016 data for the “CAMX” region:
https://www.epa.gov/sites/production/files/2018-02/documents/egrid2016_summarytables.pdf
City of Palo Alto Page 11
staff will need to carry out a focused public relations and engagement effort to help the public
and the City’s most active stakeholders understand the environmentally beneficial intent of the
strategy and how CPAU’s portfolio remains carbon neutral.
And finally, Figure 6 below illustrates how customers would see the portfolio supply mix
depicted on their annual Power Content Label for the year 2020, for the three primary RPS
compliance strategy options listed above. (Note that the “Sell Supplies That Exceed Load —and
That are Not Needed to Maintain Carbon Neutrality” approach is not shown below, beca use its
Power Content Label would be nearly identical to that of the “Sell Supplies that Exceed Load”
Power Content Label.)
Figure 6: Power Content Label Supply Charts for Various RPS Compliance Strategies in 2020
The information in the figures above, comparing the three major RPS compliance strategy
options discussed in this report, along with the current portfolio, is summarized in Table 1
below.
Table 1: Summary Comparison of Various RPS Compliance Strategy Options
Status
Quo
Sell Supplies > Load
(While Remaining
Carbon Neutral)
Sell Supplies
> Load
Renewable
Exchange Strategy
Supply Cost Savings
($M/year) --- $1.7M +$0.6M
($2.3M total)
+$1.0M
($3.3M total)
Retail Rate Savings
(%) --- 1.1% +0.5%
(1.5% total)
+0.7%
(2.2% total)
RPS Level (%)* 63% 50% 45% 39%
Hourly Accounting
Emissions Intensity
(lb CO2/MWh)
(125) 0 42 (w/o RECs)
0 (with RECs)
131 (w/o RECs)
0 (with RECs)
City of Palo Alto Page 12
(Average Impacts over 2020-2030 Timeframe)
*The average annual RPS level required under state RPS regulations during this period is 45.4%. The average RPS
level for the “Renewable Exchange” approach is less than this due to the SB 100 exemption for mun icipal utilities
with high concentrations of large hydro resources, as described above.
**The average emissions intensity for market power in California is assumed to be 944 lb CO 2/MWh, while the
average emissions intensity of the state’s overall fuel mix is 528 lb CO2/MWh.
CONCLUSION
In previous meetings, the UAC has expressed a preference for adopting a lower-cost RPS
procurement strategy and for employing a carbon accounting methodology that uses hourly
average emissions factors. The analysis in this report indicates that opting for those two
approaches would yield significant supply cost savings, particularly if the City also chooses to
continue the use of unbundled RECs to neutralize the residual emissions associated with the
portfolio’s reliance on wholesale market power purchases in dry years.
As for what balance to strike between maintaining the City’s existing portfolio of in -state
resources versus reducing supply costs and relying on out-of-state resources, staff feels that
increasing the City’s reliance on out-of-state Bucket 3 RECs is justifiable on an environmental
value basis. And initial conversations that staff has held with community stakeholders indicate
some level of support for this position from them as well. However, before recommendin g a
more aggressive RPS sales approach in order to reduce supply costs, staff is interested in
receiving feedback from both the UAC and other members of the community (particularly the
environmental community) on that issue. Staff plans to sell the City’s renewable resources that
exceed 104.5% of its load for 2020 (as it did for 2019) while awaiting a final decision on whether
to sell additional resources.
NEXT STEPS
In the coming weeks, staff will take the UAC’s recommendation regarding amendments to th e
Carbon Neutral Plan to the City Council for approval. Meanwhile, staff intends to continue to
seek feedback from community stakeholders with respect to the environmental value of in-state
versus out-of-state renewable resources, and the extent to which the City should swap the
former for the latter in its supply portfolio. Staff expects to return to the UAC with a final
recommendation on that matter in the next two months. After that, staff will take the UAC
recommendation to the Finance Committee and the City Council. Although the details of the
City’s resource procurement strategy are not currently codified (beyond the City’s Renewable
Portfolio Standard Procurement Plan, which is designed to demonstrate compliance with the
state’s RPS requirements ), staff will still discuss the current approach with Council and seek
validation of any significant changes, given the level of financial implications associated with this
decision. If the Council supports selling some of the City’s excess renewable supplies, staff
PCL Emissions
Intensity
(lb CO2/MWh)**
13 10 9 65
City of Palo Alto Page 13
would then begin soliciting interest from Community Choice Aggregation entities (CCAs) and
others in short- or long-term acquisition of these resources.
In addition, in the next couple of years staff plans to carry out a broader and longer-term
analysis of potential options for rebalancing the City’s electric supply portfolio. This analysis will
be presented in the context of making a decision on whether to renew the City’s Western Base
Resource hydro contract after the current one expires at the end of 2024. It will also take into
account options for utilizing the City’s share of the California -Oregon Transmission Project, after
that resource reverts to the City’s control at the end of 2023.
Staff will also continue to closely follow (and provide input on) the CEC’s AB 1110 rulemaking
process. Depending on the carbon accounting methodology the CEC finally adopts, staff will
work to understand how the City’s methodology can be aligned with the CEC approach, and, to
the degree that it cannot, determine how to explain this difference to customers.
RESOURCE IMPACT
Staff estimates that switching to an hourly carbon accounting methodology, using average
hourly emissions intensity factors, will result in an increase in supply costs of approximately
$60,000 in an average hydrological year. However, staff estimates that switching to a more
aggressive sales approach to RPS compliance could result in a decrease in supply costs of about
$3.3 million per year through 2030 (equivalent to a rate reduction of about 2%, or 0.37
cents/kWh). But if the City instead chooses to sell only its renewable energy supplies that
exceed 104.5% of its annual load (and thus are not needed to maintain an overall carbon
neutral supply portfolio), the average supply cost savings are estimated to be about $1.7 million
per year through 2030 (equivalent to a rate reduction of about 1%, or 0.19 cents/kWh).
POLICY IMPLICATIONS
This report satisfies Initiatives #4 and #5 of the EIRP Work Plan. This report is also in line with
the Sustainability and Climate Action Plan goals of continuing to lower the carbon footprint of
the community.
ENVIRONMENTAL REVIEW
The Utilities Advisory Commission’s discussion of the City’s RPS procurement strategy and
carbon accounting methodology does not meet the definition of a project under Public
Resources Code 21065 and therefore California Environmental Quality Act (CEQA) review is not
required.
Attachments:
• Attachment A: Revised Carbon Neutral Plan
• Attachment B: RPS Portfolio Detail and Financial Opportunities Associated with Various
Alternative Strategies (2020-2030)
ATTACHMENT A
1
Adopted by City Council on March 4, 2013
Revised by City Council on _______________
City of Palo Alto Utilities
Electric Supply Portfolio Carbon Neutral Plan
1. Carbon Neutral Definition
A carbon neutral electric supply portfolio will demonstrate annual net zero greenhouse gas
(GHG) emissions, measured at the Citygate1, in accordance with The Climate Registry’s Electric
Power Sector protocol for GHG emissions measurement and reporting. by applying the average
hourly carbon emissions intensity of the electricity on the CAISO grid to the City’s net load for
each hour of the year.
2. Carbon Neutral Plan Objective
Reduce the City of Palo Alto’s overall community GHG emissions by achieving carbon neutrality
for the Electric Supply Portfolio starting in calendar year 2013 within an annual rate impact not
to exceed 0.15 cents per kilowatt‐hour (₵/kWh) primarily through the: 1) engagement of
customers to increase energy efficiency; 2) expansion of long‐term renewable resource
commitments; 3) promotion of local renewable resources; 4) continued reliance on existing
hydroelectric resources; and 5) meeting short‐term balancing requirements and/or neutralizing
residual carbon through the use of short‐term purchases of renewable resources and/or
renewable energy certificates (RECs).
3. Resource Strategies
a. Energy Efficiency
i. Continue to pursue energy efficiency strategies as identified in the Council‐
approved ten‐year Energy Efficiency Plan.
b. Long‐term Renewable Resources
i. Continue to pursue the City’s Renewable Portfolio Standard (RPS) goal to
purchase renewable energy to supply at least 3360% of retail sales by 2015 2030
while ensuring that the retail rate impact of these purchases does not exceed 0.5
₵/kWh.
ii. Continue to pursue local renewable resources through the Palo Alto CLEAN and
PV Partners programs.
iii. Pursue additional RPS‐eligible, long‐term renewable resources (beyond the RPS
goals) to achieve a target of 100% carbon‐free resources based on average year
hydroelectric generation.
1 Citygate is the location of the City’s main meter where the City interconnects to the Pacific Gas and Electric
transmission system. Emissions associated with of the output of the locally sited fossil gas fired combustions units
(COBUG), while not measured at Citygate, will be neutralized.
ATTACHMENT A
2
c. Short‐term Renewable Resources and Renewable Energy Certificates
i. For calendar years 2013 through 2016, pProcure short‐term renewables, if the
price is comparable to that of an un‐bundled REC;
ii.i. For calendar years 2013 through 2016, procure or RPS‐eligible, un‐bundled RECs
as needed to achieve carbon neutrality based on actual load and resources;
iii.ii. Neutralize anthropogenic GHG emissions associated with renewable resources
with RPS‐eligible unbundled‐RECs, which may or may not be RPS‐eligible.
d. Banking and Truing Up
i. In the event that there are surplus renewables beyond the load in a particular
year, bank as many RECs as allowable under the TCR EPS protocol from
qualifying renewables from that year to minimize the need for purchasing RECs
in subsequent years.
ii. Neutralize emissions associated with market purchases resulting from deviations
between expected and actual load and renewable and hydroelectric generation
resources with RPS‐eligible unbundled‐RECs, which may or may not be RPS‐
eligible.
ii.iii. Neutralize residual emissions that result from applying an hourly emissions
accounting methodology, rather than a net annual generation methodology,
with RPS‐eligible unbundled‐RECs.
4. Hydroelectric Resources
a. Continue to preserve and advocate for existing carbon‐neutral hydroelectric generation
resources that provide approximately 50% of average year resource needs.
b. Plan for and acquire carbon neutral resources assuming average hydroelectric
conditions going forward.
c. Under adverse hydroelectric conditions, procure RPS‐eligible unbundled‐RECs, which
may or may not be RPS‐eligible, to achieve carbon neutrality up to the 0.15 ₵/kWh rate
impact limit and seek Council direction if carbon neutrality cannot be achieved within
the rate impact limit.
d. Under favorable hydroelectric conditions, where carbon neutral resources are expected
to be surplus to needs, even after allowable banking, then pursue selling short‐term
renewable energy, or the renewable attributes, associated with one or more carbon‐
neutral resources in the portfolio.
5. Financial and Rate Payer Impacts
a. In addition to the RPS annual rate impact limit of 0.5 ₵/kWh, the cost of achieving
carbon neutrality shall not exceed 0.15 ₵/kWh based on an average hydro year.
b. Revenues collected from surplus energy sales related to hydroelectric resources under
favorable conditions (e.g. wet years), will be maintained within reserves to adjust for the
cost of achieving carbon neutrality under adverse hydroelectric years.
c. To the extent available and allowable, revenues from the auction of cap‐and‐trade
allowances may be used to fund resources acquired to meet the carbon neutrality goals.
ATTACHMENT A
3
6. Reporting and Communication
a. Develop a communication plan for stakeholders to inform them of the City’s efforts
towards achieving a carbon neutral electric supply.
b. Submit an annual, verified report of the carbon content of the electric supply portfolio
to The Climate Registry.
c. Provide customers a report of the electric supply portfolio’s carbon content to
supplement the mandated Power Content Label.
d. Inform large commercial and/or corporate customers of the City’s carbon neutral
portfolio and its relevance to their individual corporate sustainability goals.
d.b.
7. Implementation Plan
The tasks that need to be completed in the next two years pending Council approval of the
Carbon Neutral Plan in February 2013 are listed in the table below.
Item Timeframe
1. Modify electric supply portfolio models and Energy Risk
Management Policies, Guidelines and Procedures to account for
Carbon Neutral objectives, balancing, banking of renewable
attributes, reporting and financial impacts.
By April 2013
2. Modify the Long‐term Electric Acquisition Plan (LEAP) to include
the carbon neutral objective
By June 2013
3. Develop communication plan to inform customers and
stakeholders of Carbon Neutral Plan and efforts.
February to April
2013
4. Based on response to the Fall 2012 request for proposals, seek
approval of new renewable power purchase agreements to meet
the City’s RPS up to approximately 100% of the long‐term resource
needs in average hydro years.
December 2012 to
June 2013
5. Determine resource needs for CY 2013 through CY 2016 and
develop plan to acquire short‐term renewable resources.
By June 2013
6. Determine long‐term renewable purchase volumes for beyond CY
2016 and develop plan to acquire long‐term renewable resources.
By September 2013
7. Procure RECs as needed to neutralize carbon emissions based on
actual load and resources for CY 2013.
By May 2014
8. Along with annual Power Content Label, produce and report to
customers the carbon intensity of the electric supply portfolio.
May/June 2014 and
annually thereafter
9. Produce and submit Electric Power Sector (EPS) and Local
Governments Operation Protocol (LGOP) reports to The Climate
Registry (TCR) for CY 2013.
July and October
2014 and annually
thereafter
10. Get independent verification of TCR reports and submit audited
reports to TCR.
By December 2014
and annually
thereafter
11. Redesign the PaloAltoGreen program according to Council
direction.
By December 2013
ATTACHMENT B: RPS Portfolio Detail and Financial Opportunities Associated with Various Alternative Strategies
CY: 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Projected Load MWh 884,038 878,070 862,820 856,136 840,781 833,916 823,597 810,971 804,070 795,754 792,068
Projected Retail Sales MWh 853,097 847,338 832,621 826,171 811,354 804,728 794,772 782,587 775,928 767,902 764,346
Total RPS Requirement %33%35.75% 38.50% 41.25%44%47%50% 52%54.67% 57.33%60%
Bucket 1 Min %75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75%
Bucket 3 Max %10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%
Total RPS Requirement MWh 281,522 302,923 320,559 340,796 356,996 378,222 397,386 406,945 424,174 440,264 458,607
Bucket 1 Min MWh 211,141 227,192 240,419 255,597 267,747 283,667 298,039 305,209 318,130 330,198 343,956
Bucket 3 Max MWh 28,152 30,292 32,056 34,080 35,700 37,822 39,739 40,695 42,417 44,026 45,861
Current Portfolio by Type
Large Hydro MWh 521,960 496,168 470,638 470,638 470,638 463,352 463,352 463,352 463,352 463,352 463,305
Small Hydro MWh 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Solar MWh 320,149 318,574 317,006 390,072 388,045 386,029 384,024 382,030 380,046 378,073 376,111
Wind MWh 100,178 100,087 42,708 42,672 42,672 42,672 42,672 42,672 21,336 - -
Landfill Gas MWh 103,773 103,489 103,489 103,489 103,489 103,489 95,275 94,528 94,528 56,922 38,242
Total Renewables MWh 534,100 532,150 473,203 546,232 544,206 542,190 531,971 529,230 505,910 444,996 424,353
Bucket 0 MWh 213,951 213,576 156,197 156,161 156,161 156,161 147,946 147,200 125,864 66,922 48,242
Bucket 1 MWh 320,149 318,574 317,006 390,072 388,045 386,029 384,024 382,030 380,046 378,073 376,111
RPS Level % 62.6% 62.8% 56.8% 66.1% 67.1% 67.4% 66.9% 67.6% 65.2% 57.9% 55.5%
Large Hydro Level % 61.2% 58.6% 56.5% 57.0% 58.0% 57.6% 58.3% 59.2% 59.7% 60.3% 60.6%
Hydro-Adjusted RPS Requirement % 33.0% 35.8% 38.5% 41.3% 42.0% 42.4% 41.7% 40.8% 40.3% 39.7% 39.4%
Total RECs Available MWh 534,100 532,150 473,203 546,232 544,206 542,190 531,971 529,230 505,910 444,996 424,353
Total RECs to Sell (Bucket 1) MWh 280,731 259,519 184,700 239,516 237,561 234,951 233,693 241,918 224,592 170,901 153,416
Total Bucket 3 to Buy MWh 28,152 30,292 32,056 34,080 34,072 34,138 33,142 31,923 31,258 30,455 30,104
Bucket 1 Premium $/MWh 16.00$ 16.00$ 16.00$ 16.00$ 15.50$ 15.50$ 15.50$ 15.50$ 15.00$ 15.00$ 15.00$
Bucket 3 Premium $/MWh 1.50$ 1.60$ 1.70$ 1.80$ 1.90$ 2.00$ 2.10$ 2.20$ 2.30$ 2.40$ 2.50$
Total Financial Opportunities CY: 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Sell RPS Supplies > Load (Stay CN)$M (2.1)$ (1.8)$ (0.7)$ (1.9)$ (2.1)$ (2.0)$ (2.0)$ (2.2)$ (1.9)$ (1.1)$ (0.8)$
Sell RPS Supplies > Load $M (2.8)$ (2.4)$ (1.3)$ (2.6)$ (2.7)$ (2.7)$ (2.7)$ (2.8)$ (2.5)$ (1.7)$ (1.4)$
Sell RPS Supplies > RPS Req. Total $M (4.3)$ (4.0)$ (2.8)$ (3.7)$ (3.5)$ (3.5)$ (3.5)$ (3.6)$ (3.2)$ (2.4)$ (2.1)$
Bucket Swapping $M (0.4)$ (0.4)$ (0.5)$ (0.5)$ (0.5)$ (0.5)$ (0.4)$ (0.4)$ (0.4)$ (0.4)$ (0.4)$
Residual Emissions Cleanup $M 0.1$ 0.1$ 0.1$ 0.1$ 0.1$ 0.1$ 0.1$ 0.1$ 0.1$ 0.1$ 0.1$
Sell RPS Supplies > RPS Req.$M (4.0)$ (3.7)$ (2.4)$ (3.3)$ (3.2)$ (3.1)$ (3.1)$ (3.3)$ (2.9)$ (2.1)$ (1.8)$
City of Palo Alto (ID # 10915)
Utilities Advisory Commission Staff Report
Report Type: Agenda Items Meeting Date: 2/5/2020
City of Palo Alto Page 1
Summary Title: Northwest County Recycled Water Strategic Plan Report
Title: Staff Recommends the Utilities Advisory Commission (UAC)
Recommend That Council Accept the Northwest County Recycled Water
Strategic Plan Report
From: City Manager
Lead Department: Utilities
Recommended Motion
Staff recommends The Utilities Advisory Commission (UAC) consider the following motion:
Recommend Council accept the Northwest County Recycled Water Strategic Plan Report.
Recommendation
Staff recommends the UAC recommends that City Council (Council) accept the Northwest
County Recycled Water Strategic Plan Report (Report) and Appendices.
Executive Summary
The Regional Water Quality Control Plant (RWQCP) is a local source of drought-proof,
sustainable water, only a small fraction of which is currently being used for irrigation and toile t
flushing. The Council-adopted Sustainability Implementation Plan (Staff Report #8487) included
direction to investigate expanded uses of this resource. To that end, in Decemb er 2016, Council
approved a contract with RMC Water and Environment (now Woodard & Curran) for the
development of the Northwest County Recycled Water Strategic Plan Report in collaboration
with the Santa Clara Valley Water District (Valley Water) (Staff Report #7024). City staff from
the Public Works and Utilities Departments worked closely with the consulting team and Valley
Water to evaluate the most effective water reuse options within Palo Alto as well as within the
RWQCP service area.
The Report contains a summary and ranking of the water reuse alternatives or “Concept
Options” based on cost and non-cost criteria. No specific projects are recommended at this
time. A Council-approved agreement with Valley Water and the City of Mountain View
(Partnership Agreement) (Staff Report #10627) gives Valley Water an option to acquire about
half of the treated wastewater produced by the RWQCP, which would render some local water
reuse options infeasible. Water reuse alternatives identified in the Report and compatible with
City of Palo Alto Page 2
the Partnership Agreement will be considered as part of an overa ll water resource portfolio in a
2020 Water Integrated Resource Plan.
Background
Council Policy
In November 2016 Council adopted the Sustainability and Climate Action Plan (S/CAP)
Framework (Staff Report #7304) including four water-specific goals, all of which have
implications for water reuse:
1. Utilize the right water supply for the right use;
2. Ensure sufficient water quantity and quality;
3. Protect the Bay, other surface waters, and groundwater; and
4. Lead in sustainable water management.
Two relevant strategies identified in the S/CAP are:
1. Verify ability to meet Palo Alto’s long-term water needs; and
2. Investigate all potential uses of recycled water.
Palo Alto’s Current Potable Water Supply
Palo Alto receives 100% of its potable water (about 11,000 AF per year or approximately 10
million gallons per day (MGD)) from the City and County of San Francisco’s Regional Water
System (RWS), operated by the San Francisco Public Utilities Commission (SFPUC). About 85%
of the supply on the RWS is from the Tuolumne River with the other 15% sourced from local
reservoirs. The City of Palo Alto is subject to water supply reductions during droughts.
Shortages are expected to become more frequent and more severe in the future as a result of
climate change and other changes to the California water system.
Description of the RWQCP Water Resource and Palo Alto’s Current non-potable Water Supply
The RWQCP treats and discharges wastewater collected from the communities of Palo Alto,
Mountain View, Stanford University, Los Altos, Los Altos Hills, and the East Palo Alto Sanitary
District. In 2018, about 96% of the treated wastewater was discharged to the Lower South San
Francisco Bay and about 4% was treated further to produce recycled water for non-potable
reuse in Palo Alto and Mountain View. Most of the recycled water used in Palo Alto is for
irrigation at the municipal golf course and Greer Park. An increase in the amount of recycled
water used, particularly in Mountain View, is expected once a small salt removal facility is
constructed at the RWQCP. The Concept Options identified in the Report assume the salt
removal project is implemented.
Treatment Options
One of Palo Alto’s water-specific goals as outlined in the S/CAP is to utilize the right water
supply for the right use. Recycled water can be used for various demands based on its level of
treatment. Non-potable reuse, such as that for irrigation or toilet flushing, requires more
treatment than wastewater that is treated for discharge to the Bay; similarly, potable reuse
City of Palo Alto Page 3
requires significantly more treatment than non -potable reuse to ensure public safety when
ingesting the water.
Partnership Agreement to Advance Resilient Water Reuse Programs in Santa Clara County
On November 18, 2019, Council approved a Partnership Agreement that gives Valley Water an
option to acquire about half of the treated wastewater produced by the RWQCP. Valley Water
has approximately 20 years to take delivery of the treated effluent which would likely be used
in the county south of Mountain View. If Valley Water exercises the option to take delivery of
the treated effluent, some of the concept options within the report will not be viable; these
options are described below in Table 3.
Previous UAC, Council and Community Feedback
Water Reuse has been discussed publicly at the following meetings:
• August 2018 UAC meeting: Discussed a business plan for expansion of Palo Alto’s non -
potable reuse irrigation network
• October 2018 UAC meeting: Discussed wastewater reuse expansion opportunities
• November 2018 Council (Staff Report #9731): Study session on high-level wastewater
reuse expansion opportunities
• April 2019 Community Engagement Event: Feedback solicited on water reuse
opportunities
• September 2019 UAC meeting: Discussed water reuse options and the Partnership
Agreement with Valley Water
• September 2019 Council meeting: Study session regarding water reu se opportunities
and the Partnership Agreement with Valley Water
• October 2019 Community Engagement Event: Provided information and answered
questions regarding the Partnership Agreement with Valley Water
• November 2019 Council meeting: Council approved the Partnership Agreement with
Valley Water
Discussion
Non-potable Reuse (NPR) Concept Options
Non-potable reuse Concept Options included extensions of the current recycled water
transmission system to various locations for toilet flushing, irrigation, and industrial process
water demands within the RWQCP service area, including south Palo Alto, Los Altos, Los Altos
Hills, Mountain View, and East Palo Alto. Concept Options evaluated specifically for Palo Alto
were:
• The Phase 3 Pipeline that would provide recycled water to south Palo Alto (Concept
Option A1), and
• The Phase 3 Pipeline expanded to provide recycled water to south Palo Alto and
additional users in the Palo Alto foothills (Concept Options A2 and A3). Expansions to
City of Palo Alto Page 4
users in the Palo Alto foothills included pipeline extensions to users in Los Altos Hills
(Concept Option A2) and Los Altos (Concept Option A3).
Satellite Non-potable Reuse Concept Option
A satellite treatment Concept Option (Concept Option B1) was evaluated, consisting of a new
wastewater treatment facility located in south Palo Alto that would collect and treat
wastewater from the surrounding community to provide approximately 900 AFY of recycled
water for non-potable reuse in adjacent facilities throughout south Palo Alto and Los Al tos. The
report suggests that satellite treatment is cost prohibitive.
Indirect Potable Reuse (IPR) Concept Options
Three indirect potable reuse Concept Options were evaluated; all consist of injecting purified
wastewater into the aquifer below Palo Alto, extraction of that purified water mixed with
groundwater, and blending with the Palo Alto potable water supply. IPR Concept Options would
require a purification facility at the RWQCP, transmission pipeline, injection wells, and the
routine use of groundwater. The IPR Concept Options differ in their pipeline alignments,
amount of purified water injected, and whether or not the pipeline offers non -potable reuse
connections. Because IPR requires very large capital investments in treatment, injection wells,
and conveyance, IPR on a large scale will not be viable if Valley Water exercises its option to
take delivery of the treated effluent from the RWQCP.
• Concept Option C1 involves using groundwater augmented with purified water for
potable needs only.
• Concept Options C2 and C3 combine indirect potable reuse with meeting non -potable
reuse demands.
Direct Potable Reuse (DPR) Concept Option
Lastly, the Strategic Plan evaluated one Concept Option (D1) for direct potable reuse within
Palo Alto. Concept Option D1 consists of a purification treatment plant, engineering storage, a
short transmission pipeline, and injection of purified water directly into the Palo Alto potable
water supply. DPR on a large scale will not be viable if Valley Water exercises its option under
the Partnership Agreement.
The Report indicates that multiple water reuse opportunities are feasible for Palo Alto to meet
both near-term and long-term water demands. Near-term opportunities, those that could be
implemented within five years, include non-potable reuse program expansion projects and
satellite treatment for non-potable reuse projects. In contrast, long-term opportunities that
could be implemented include indirect potable reuse within 10 -20 years and direct potable
reuse implementation within 20-40 years. It should be noted that the opportunities are not all
explicitly distinct from each other; it is possible to pursue a combination of near term and long -
term opportunities. For example, non-potable reuse pipeline expansion Concept Options can be
constructed in the near term while subsequent phases of potable reuse Concept Options can be
planned and designed for future implementation.
City of Palo Alto Page 5
The Concept Options and cost estimates are summarized in Table 1; cost estimates represent
the cost for individual Concept Options and do not account for any efficiency that may result
from combining Concept Options. These preliminary cost estimates are offered to facilitate
discussion of various project options. They are separate and distinct from a cost of service
study, which will determine the amount of project costs to be allocated system -wide, as well as
a constitutionally compliant recycled water rate.
Table 1: Northwest County Recycled Water Strategic Plan Concept Option Cost Estimatesa,b
Concept
Option
Number
Brief Description Project
Yield
(AFY)
Capital
Cost
($M)
Operations &
Maintenance
Cost
($M/year)
Unit
Cost
($/AF)
Non-potable Reuse (NPR) Concept Options
A1 Phase 3 Pipeline serving south Palo
Alto
800 $47.8 $0.3 $3,400
A2 Phase 3 Pipeline Extended to
Foothills
1,100 $63.0 $0.5 $3,400
A3 Phase 3 Pipeline Extended to
Foothillls & Los Altos
1,200 $85.1 $0.7 $4,000
A4 Mountain View Long Term
Expansion Pipeline
200 $6.2 $0.1 $2,100
A5 Mountain View Long Term
Expansion Pipeline Extended to Los
Altos
900 $72.6 $0.4 $4,600
A6 East Palo Alto Pipeline 500 $20.7 $0.2 $2,400
Satellite Non-potable Reuse Concept Option
B1 Serving south Palo Alto & Los Altos 900 $129.6 $1.4 $8,900
Indirect Potable Reuse (IPR) Concept Optionsc
C1 IPR serving Palo Alto 5,900 $92.2 $14.8d $3,300
C2 IPR & NPR serving Palo Alto 6,100 $152.1 $16.9d $4,000
C3 IPR & NPR from Phase 3 Pipeline
serving Palo Alto
5,900 $198.4 $15.8d $4,400
- Palo Alto Groundwater Usage
without IPR
2,500 $37.7 $5.5d $3,000
Direct Potable Reuse Concept Option
D1 DPR serving Palo Alto 5,300 $104.6 $8.0 $2,500
aFor comparison, SFPUC (imported water) is currently $1,948/AF and is projected to be
$3,000/AF in 2030.
bCost estimates are AACE Class 5 for a project definition of 0 – 2% and have an expected
accuracy of -20 to 50%. Capital costs are amortized at 3% over 30 years.
cProject yield for IPR Concept Options represents half purified water, half groundwater.
City of Palo Alto Page 6
dOperations and maintenance cost estimates include the Valley Water Groundwater
Production Charge.
Cost was not the only criterion considered in the evaluation. The Concept Options were scored
on a variety of qualitative characteristics such as water supply resiliency, public acceptance and
regulatory complexity. The rankings after weighting both cost and non-cost criteria are shown
in Table 2.
Table 1: Ranking Considering Cost and Non-cost Evaluation Criteria
Concept Option Viability with Partnership Agreement
If Valley Water exercises its option to receive treated wastewater from the RWQCP, the
capability for some Concept Options to be fully implemented is reduced while other Concept
Options could be implemented in parallel with a transfer. Table 3 indicates which projects are
and are not mutually exclusive with an effluent transfer to Valley Water. Generally, a transfer
would not preclude non-potable reuse expansion projects. Indirect potable reuse requires
expensive pipeline construction and, therefore, a significant amount of water for economies of
scale, so those Concept Options would be excluded for the proposed 76 -year term of the
transfer. Direct potable reuse, on the other hand, could be developed on a pilot scale.
Table 3: Summary of Concept Option Viability with Effluent Transfer
Concept
Option
Number
Brief Description Project
Yield
(AFY)
Unit
Cost
($/AF)
Implement in
Addition to
Treated Effluent
Transfer
A1 Phase 3 Pipeline serving south Palo
Alto
800 $3,400 Yes
A2 Phase 3 Pipeline Extended to
Foothills
1,100 $3,400 Yes
A3 Phase 3 Pipeline Extended to 1,200 $4,000 Yes
City of Palo Alto Page 7
Foothills & Los Altos
A4 Mountain View Long Term
Expansion Pipeline
200 $2,100 Yes
A5 Mountain View Long Term
Expansion Pipeline Extended to Los
Altos
900 $4,600 Yes
A6 East Palo Alto Pipeline 500 $2,400 Yes
B1 Satellite NPR serving south Palo Alto
& Los Altos
900 $8,900 Yes
C1 IPR serving Palo Alto 5,900 $3,300 No
C2 IPR & NPR serving Palo Alto 6,100 $4,000 No
C3 IPR & NPR from Phase 3 Pipeline
serving Palo Alto
5,900 $4,400 No
- Palo Alto Groundwater Usage
without IPR
2,500 $3,000 Yes
D1 DPR serving Palo Alto 5,300 $2,500 Small scale project
possible but cost
estimates may vary
Next Steps
The Concept Options will be evaluated within the context of a potable and non -potable water
supply portfolio as part of a Water int egrated Resources Plan. Staff intends to return to the UAC
and Council with more information in 2020.
Policy Implications
While there is no recommendation to proceed with any specific project at this time, expanding
the use of recycled water would be consistent with the Sustainability Climate Action Plan
Framework (Staff Report #7304) and the Sustainability Implementation Plan (Staff Report
#8487).
Community Engagement
Palo Alto hosted a community meeting on April 30, 2019 to solicit input on the preliminary
Strategic Plan results. Approximately 30 members of the public attended, and many attendee s
asked questions and made comments. During the meeting Palo Alto staff requested feedback
on whether attendees were interested in expanded non -potable reuse and potable reuse
options. Community members expressed interest in reducing reliance on imported w ater and
enhancing water conservation and efficiency to save water for the environment. Community
members also expressed concern with the use of the Measure E site for a Valley Water regional
purification facility. The Strategic Plan was also discussed at the public meetings listed above.
Environmental Review
Acceptance of the Northwest County Recycled Water Strategic Plan Report is not subject to
City of Palo Alto Page 8
review under the California Environmental Quality Act because it does not meet the definition
of a project under Public Resources Code 21065.
City of Palo Alto (ID # 10996)
Utilities Advisory Commission Staff Report
Report Type: Agenda Items Meeting Date: 2/5/2020
City of Palo Alto Page 1
Summary Title: Utilities 2019 Year in Review
Title: Presentation of the Utilities 2019 Year in Review
From: City Manager
Lead Department: Utilities
Recommended Motion
This is a summary presentation of highlights, milestones and major accomplishments
within the Utilities Department for the year 2019. No action is required.
Attachments:
• Attachment A: Utilities 2019 Year in Review
2019 Utilities Year In Review
Attachment A
Upgrade Downtown Project
Complete
Energizing Stanford Hospital Expansion
Colorado Substation Upgrades, New Transformer
Water-Gas-Wastewater
Engineering & Operations
Water Reuse
Agreement
with Valley
Water
Distributed Energy Resources
& Energy Efficiency
Policy Adoption & Implementation
Another Successful MSC Open House
Notable Events
National Energy Innovator Award -APPA
Smart Energy Provider Designation -APPA
Treeline USA Award
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Thanks for Another Successful Year in 2019!
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City of Palo Alto (ID # 11004)
Utilities Advisory Commission Staff Report
Report Type: Agenda Items Meeting Date: 2/5/2020
City of Palo Alto Page 1
Summary Title: Presentation Looking Forward Into the 2020 Year to Come
Title: Presentation Looking Forward Into the 2020 Year to Come
From: City Manager
Lead Department: Utilities
Recommended Motion
This is a summary presentation of key priorities, goals, and plans for the Utilities
Department in the year 2020. No action is required.
Attachments:
• Attachment A: Presentation 2020
LOOKING FORWARD INTO 2020
PRIORITIES -GOALS -PLANS
CUSTOMER SERVICE ENHANCEMENTS
•MyCPAU
•Interpretive Services
•Call Center Reporting
TECHNOLOGY
•Fiber Optics
•Advanced Meter Infrastructure
•Enterprise Resource
•Customer Information
•Re al -Time Interactions
RESOURCE MANAGEMENT
•Sustainability & Climate Action
•Water &Energy Supply Plans
•Renewable Portfolio Standard
•Efficiency Goals
•Long-term Contracts
•Electrification
OPERATIONS & ENGINEERING
•Water Distribution System
•Water Reservoirs
•Gas Distribution System
•Wastewater Collection
•GIS
OPERATIONS & ENGINEERING
•Customer Connections
•Substation Upgrades
•Fire Mitigation
•Undergrounding
•Recruitment
•Succession Planning
LEGISLATIVE ITEMS
•Advocacy
•Collaboration
•Public Utility Benefits
UTILITIES STRATEGIC PLAN
•Workforce
•Collaboration
•Technology
•Finances & Resources