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Home My WebLink About2021-12-01 Utilities Advisory Commission Agenda PacketMATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE COMMISSION AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE UTILITIES DEPARTMENT AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. NOTICE IS POSTED IN ACCORDANCE WITH GOVERNMENT CODE SECTION 54954.2(a) OR 54956 Supporting materials are available online at https://www.cityofpaloalto.org/gov/boards/uac/default.asp on Thursday, 5 days preceding the meeting. ****BY VIRTUAL TELECONFERENCE ONLY**** Join Zoom Webinar Here Meeting ID: 966 9129 7246 Phone: 1 (669) 900-6833 Pursuant to the provisions of California Governor’s Executive Order N-29-20, issued on March 17, 2020, to prevent the spread of COVID-19, this meeting will be held by virtual teleconference only, with no physical location. The meeting will be broadcast on Cable TV Channel 26, live on Midpen Media Center at https://midpenmedia.org. Members of the public who wish to participate by computer or phone can find the instructions at the end of this agenda. I.ROLL CALL II.AGENDA REVIEW AND REVISIONS III.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. IV.APPROVAL OF THE MINUTES Approval of the Minutes of the Utilities Advisory Commission Meeting held on November 3, 2021 V.UNFINISHED BUSINESS - None VI.UTILITIES DIRECTOR REPORT VII.NEW BUSINESS 1.Discussion and Update on the Fiscal Year 2023 Preliminary Utilities Financial Forecast Discussion and Rate Projections Action 2.Adoption of a Resolution Authorizing Use of Teleconferencing for Utilities Advisory Commission Meetings During Covid-19 State of Emergency UTILITIES ADVISORY COMMISSION – SPECIAL MEETING WEDNESDAY, December 1, 2021 – 5:00 P.M. ZOOM Webinar Chairman: Lisa Forssell  Vice Chair: Lauren Segal  Commissioners: John Bowie, A.C. Johnston, Phil Metz, Greg Scharff, and Loren Smith  Council Liaison: Eric Filseth REVISED MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE COMMISSION AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE UTILITIES DEPARTMENT AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. VIII. COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS IX. FUTURE TOPICS FOR UPCOMING MEETINGS: January 05, 2022 SUPPLEMENTAL INFORMATION - The materials below are provided for informational purposes, not for action or discussion during UAC Meetings (Govt. Code Section 54954.2(a)(3)). Informational Reports 12-Month Rolling Calendar Public Letter(s) to the UAC • Informational Update on the Utilities' Quarterly Report for Q3 of Calendar Year 2021 (Q1 of FY 2022) • Informational Report on the Annual Review of the City’s Renewable Procurement Plan, Renewable Portfolio Standard Compliance, and Carbon Neutral Electric Supplies for 2020 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE COMMISSION AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE UTILITIES DEPARTMENT AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. PUBLIC COMMENT INSTRUCTIONS Members of the Public may provide public comments to teleconference meetings via email, teleconference, or by phone. 1. Written public comments may be submitted by email to UACPublicMeetings@CityofPaloAlto.org. 2. Spoken public comments using a computer will be accepted through the teleconference meeting. To address the Commission, click on the link below for the appropriate meeting to access a Zoom- based meeting. Please read the following instructions carefully. A. You may download the Zoom client or connect to the meeting in-browser. If using your browser, make sure you are using a current, up-to-date browser: Chrome 30+, Firefox 27+, Microsoft Edge 12+, Safari 7+. Certain functionality may be disabled in older browsers including Internet Explorer. B. You will be asked to enter an email address and name. We request that you identify yourself by name as this will be visible online and will be used to notify you that it is your turn to speak. C. When you wish to speak on an agenda item, click on “raise hand.” The Attendant will activate and unmute speakers in turn. Speakers will be notified shortly before they are called to speak. D. When called, please limit your remarks to the time limit allotted. E. A timer will be shown on the computer to help keep track of your comments. 3. Spoken public comments using a smart phone use the telephone number listed below. When you wish to speak on an agenda item hit *9 on your phone so we know that you wish to speak. You will be asked to provide your first and last name before addressing the Council. You will be advised how long you have to speak. When called please limit your remarks to the agenda item and time limit allotted. Join Zoom Webinar Here Meeting ID: 966-9129-7246 Utilities Advisory Commission Minutes Approved on: Page 1 of 8 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF NOVEMBER 3, 2021 SPECIAL MEETING CALL TO ORDER Chair Forssell called the meeting of the Utilities Advisory Commission (UAC) to order at 5:01 p.m. Present: Chair Forssell, Vice Chair Segal, Commissioners Bowie, Johnston, Metz, Scharff (arrived at 5:22 pm) and Smith (arrived at 5:02 pm) Absent: Commissioner Bowie ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES Vice Chair Segal mentioned the Motion to Adjourn listed the prior UAC Commissioners Danaher and Jackson and listed Commissioner Scharff in attendance. Replace prior Commissioners with Bowie and Metz and remove Commissioner Scharff as he had left the meeting at 6:46 pm. Commissioner Johnston moved to approve the draft minutes of the October 6, 2021, special meeting as corrected. Commissioner Metz seconded the motion. The motion carried 5-0 with Chair Forssell, Vice Chair Segal, and Commissioners Johnston, Metz, and Smith voting yes. Commissioner Bowie and Scharff absent AGENDA REVIEW AND REVISIONS None. REPORTS FROM COMMISSIONER MEETINGS/EVENTS None. UTILITIES DIRECTOR REPORT Dean Batchelor, Utilities Director, delivered the Director's Report. Public Safety Power Shutoff (PSPS): On October 19, CPAU shut off power to customers in the Foothills as a safety precaution due to gusty wind conditions that presented a risk for wildfire around our utility lines. When power lines are shut off during a PSPS, crews must patrol the lines before reenergizing electricity. Since this PSPS occurred around midnight, crews had to wait until daylight to patrol the approximately 15 miles of power lines. Power was restored around noon the next day. Staff are updating PSPS communications plans and protocols to ensure that we proactively communicate with customers about potential PSPS events and provide updates as situations evolve. The City recommends that people be prepared for unexpected emergencies and utilize resources at www.cityofpaloalto.org/preparedness For more information about PSPS, please visit www.cityofpaloalto.org/outageinfo DRAFT Utilities Advisory Commission Minutes Approved on: Page 2 of 8 Smart Energy Provider (SEP) Award: CPAU was recently awarded the Smart Energy Provider designation from the American Public Power Association for the third year in a row. The Smart Energy Provider award recognizes public power utilities for demonstrating leading practices in four key disciplines: smart energy program structure; energy efficiency and distributed energy programs; environmental and sustainability initiatives; and the customer experience. CPAU is proud to be recognized and will continue to strive for excellence in these areas. Advanced Water Purification Plant Tours: Palo Alto is collaborating with Valley Water on potential siting of a regional purified water treatment facility at the former Los Altos Treatment Plant site in Palo Alto (near San Antonio Road). The facilities will include a pump station to transfer effluent from the Regional Water Quality Control Plant to Los Altos Treatment Plant site. Valley Water is currently designing the facilities, working on preparing the EIR and working with Palo Alto staff on a lease agreement, outreach, and permitting for Reverse Osmosis Concentrate. Valley Water has offered to take UAC members on an in-person tour of the Silicon Valley Advanced Water Purification Center in San Jose or you can take an online self-guided tour. Water Supply Update: The State Water Resources Board imposed curtailments for the San Francisco Public Utilities Commission’s (SFPUC) Tuolumne River diversions on August 20. SFPUC is complying with those curtailments, but also has filed a lawsuit and requested a health and safety exception for its entire service area. SFPUC was able to capture and store water, in accordance with its water rights, during the big October storm because the State Board temporarily lifted the curtailments. The Category 5 atmospheric river provided significant precipitation but is not a “drought buster.” Typically the Regional Water System needs 6 to 7 atmospheric rivers a year to fill the system. SFPUC plans to declare a water supply emergency later this year requesting 10% voluntary water use reductions system-wide for the Regional Water System. This level of reduction would bring total Regional Water System deliveries close to 2015 levels (the lowest water use year of the last drought). Palo Alto reduced water use by 6.7% for the period of July 1 through October 31, 2021 compared to 2020. July through October bills show residential customers reduced usage by 9.3%, while non- residential customers increased water usage 5.1% compared to 2020. Non-residential increases may be linked to COVID recovery. For example, non-residential customers reduced usage by 4.4% from the same months in 2019, prior to the COVID-19 shelter in place order. Drought Outreach: The City continues its public outreach about the importance of taking measures that can result in immediate water savings to assist with our conservation efforts. CPAU and Valley Water offer a variety of free services, tools, and rebate programs to help consumers use water efficiently. Visit watersavings.org and cityofpaloalto.org/water for information on these resources. Water waste can be reported through PaloAlto311 or drought@cityofpaloalto.org Gas Safety Awareness Phone Surveys: Beginning this month, CPAU will participate 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 answer some questions 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, will be randomly selected for this poll. We thank you in advance for helping us meet our “GOAL” for safety awareness by responding to the survey if you receive the call. Gas Safety Outreach: Per our Public Awareness Plan for gas safety, every year CPAU mails gas safety awareness brochures to every customer in Palo Alto, plus other stakeholder living near and working in Palo Alto. These brochures were distributed in late August and early September 2021. Genie In-Home Assessments Resuming: The City’s Home Efficiency Genie in-home visits were suspended in 2020 due to the COVID-19 shelter-in-place health orders, then offered in 2021 through a virtual format. Utilities Advisory Commission Minutes Approved on: Page 3 of 8 Technicians are now available again and prepared with COVID safety protocols to resume in-home efficiency assessments. The Genie also provides free over the phone energy and water efficiency advice for all Palo Alto residents. Genie advisors provide expert and impartial guidance to help residents save money on utility costs and keep you comfortable. Visit cityofpaloalto.org/efficiencygenie to schedule an appointment. SunShares – For the sixth year in a row, the City is an outreach partner for Bay Area SunShares, a solar and battery storage discount program administered by Building Council for Climate Change (BC3). Residents must register for the discounts by November 30 and sign installation contracts by December 31, 2021. As part of its role as an outreach partner, CPAU hosted a free virtual webinar on Tuesday, October 26 from 6:30 – 7:30 pm. With 90 participants, the event was well attended, including presentations followed by an active Q&A session. As of October 22, Palo Alto leads all outreach partners in signed contracts. Six (6) residents have committed to installing solar and/or battery storage systems. Upcoming Event: Lawn Conversion, Native Trees and Plants Workshop. Wednesday, November 17, 6 - 7:30 PM. Learn how converting your lawn to native trees and plants can help save water and money while benefiting the planet. Plus, learn about landscape rebates to help convert your lawn and care for trees during the drought. NEW BUSINESS ITEM 1: ACTION: Adoption of a Resolution Authorizing Use of Teleconferencing for Utilities Advisory Commission Meetings During Covid-19 State of Emergency. Dean Batchelor, Director of Utilities, remarked with the state and county have an Emergency Order in place and Council recommends that all City Boards, Commissions and Committees approve the resolution to continue virtual meetings through January 2022. If the Commission decides not to approve the resolution, the December 2021 and January 2022 meetings will be canceled. In answer to Chair Forssell’s query regarding the January 2022 meeting, Batchelor recalled that the Council mandated that all City Boards, Commissions and Committees were not to return to in-person meetings until after January 2022. Council Member Filseth explained that Council is having hybrid meetings to allow Staff to work through any technological difficulties. He could not recall any specific date of when City Boards, Commissions and Committees could begin hybrid meetings. He noted that the intent is to have hybrid meetings with in-person attendance optional as long as mask mandates are in place. Batchelor restated that the UAC can conduct its meetings via Zoom. Commissioner Johnston supported the resolution if it allowed for the UAC to meet in December 2021 and January 2022. In reply to Commissioner Johnston’s query regarding if the City can hold hybrid meetings, Council Member Filseth restated that Council has successfully held a hybrid meeting. David Coale stated that the Zoom meetings are very convenient because of the 5:00 pm meeting start time. In answer to Chair Forssell’s inquiry regarding if the Commission does not adopt the resolution, Batchelor explained that he thought the Council had mandated all Boards, Commissions, and Committees not to meet in a hybrid meeting until Council has gone through the process. Chair Forssell commented that the intent is that the Commission will hold its meeting virtually until Council says otherwise. Dave Yuan, Strategic Business Manager, added that the resolution only addresses the December 2021 meeting. Chair Forssell predicted that the UAC will hold its first hybrid meeting in January 2022 and Batchelor confirmed that is correct. Commissioner Scharff joined the meeting. Chair Forssell mentioned that the UAC meeting start time will change to 6:00 pm in January 2022. Utilities Advisory Commission Minutes Approved on: Page 4 of 8 ACTION: Commissioner Metz moved Staff recommendation that the Utilities Advisory Commission (UAC) Adopt a Resolution (Attachment A) authorizing the use of teleconferencing under Government Code Section 54953(e) for meetings of the Utilities Advisory Commission (UAC) and its committees due to the Covid-19 declared state of emergency. Seconded by Commissioner Johnston. Motion carries 6-0 with Chair Forssell, Vice Chair Segal and Commissioners Johnston, Metz, Scharff and Smith voting yes. Commissioner Bowie absent ITEM 2: ACTION: Staff Recommends the UAC Recommend the City Council Accept a Presentation on Current and Pending State Legislation and Approve the Continued use of the 2021 Legislative Guidelines Through 2022 Heather Dauler, Acting Compliance Manager summarized several, but not all, legislation that the City has been tracking: Senate Bill (SB) 556, wasabout wireless facilities on City-owned poles and utility poles. CMUA and NCP opposed the vetoed bill . SB 378 is a bill that was signed into law and it requires local governments to allow micro trenching for the installation of underground fiber. Micro trenching is not a preferred method of the City. The Publicly Owned Utility (POU) community was successful in amending in language that stated that a locality may prohibit micro trenching if it is determined that it it will specifically affect public health or safety. . Assembly Bill (AB) 758 allows electric POU to utilize rate reduction bonds and the City did submit letters of support. AB 242 was a cleanup bill that aligned the Power Source Disclosure Deadline with the deadline for data verification. SB 323 established certainty in the water rate-setting process by establishing a statute of limitations on judicial challenges to water or sewer rate increases. SB 427 allows water agencies to adopt an ordinance to enhance penalties for water theft.Senate Concurrent Resolution (SCR) 49 formally recognizes the first full week of October as Public Power Week, a previously informal observation. In reply to Commissioner Metz’s query regarding if the City tracks non-utility-specific bills such as SB 9, Dauler explained that the state lobbyist who works through the City Manager’s Office does track bills outside of utility bills. Dauler moved to the arrearage programs that are available to the City. Arrearage programs are programs where the state and the federal government have allocated money for unpaid utility bills. The state is implementing two arrearage programs to help pay for any accrued debit that was obtained between March 4, 2020, and June 15, 2021. The electrical and natural gas utility program is called the California Arrearage Payment Program (CCAP) Program and for the water and wastewater utility, the program is called California Water and Wastewater Arrearage Payment Program (CWWAP). The California Municipal Utilities Association (CMUA) has established a working group that works directly with the agency that is developing the arrearage programs. City staff will be submitting to the state data, that is based on a survey and the utility application, that indicates the number of arrearages the City has. After submittal, the City will receive an allocation amount which will be received by the City’s Utility Department with customers receiving a credit on their bill. Dauler mentioned that the current legislativeguidelines have been working very well to support the collaborative involvement with Customer Support Services and workings with CMUA. Concerning what can be expected in the 2022 legislative session, Staff identified several key areas as possible legislative topics next year. Those areas are: grid reliability, wildfire and vegetation management, advancing clean energy, electric vehicles (EV), drinking water and lead, and COVID recovery. Senator Becker introduced SB 67 in January 2021 which would have established a 24/7 clean energy standard program with a goal of 100 percent of electric load being supplied by eligible clean energy resources by year 2045. Dauler noted that 2045 is the year by which the State of California aspires to have 100 percent clean energy being delivered to residents and businesses. The bill would have required significant increases in storage across the state, a Utilities Advisory Commission Minutes Approved on: Page 5 of 8 sharp increase in supply costs, a restructuring of the supply portfolio, and a significant change in how hydro is dispatched across the state. Many agencies spoke with Senator Becker’s policy advisors expressing concerns about impacts and the bill was shelled very early in the legislative session. There are indications that Senator Becker will bring the bill back in the 2022 legislative session but with a focus on a 2030-2045 compliance mechanism . Senator Becker has been appointed as Chairmen to the new Senate Subcommittee on Clean Energy. The goal of the subcommittee is to achieve a 100 percent clean electrical grid. Staff recommended that the Commission recommend the City Council approve the 2022 Utilities Legislative Policy Guidelines. In reply to Commissioner Metz’s inquiry regarding what the definition is for cost-effective in Guideline Number Ten, Dauler explained that the City normally opposes any legislation that is not cost-effective. The definition of cost-effective depended upon what the policy objective is and the definition is subjective. The City strives to deliver reliable services at a cost-effective approach for customers. Commissioner Metz stated that Renewable Energy Credits (REC) should be included in the discussion when determining if legislative action is cost-effective. Dauler added that Staff reviews the legislative action in a holistic approach. Commissioner Scharff remarked that the guidelines have worked well in the past and that it has been beneficial to give Staff board direction. He could not recall an instance when Staff has taken direction on legislation that Council did not support. He noted that Staff does check in with Council if they are unsure about a specific bill, but Staff does need the ability to act quickly. Chair Forssell agreed that the guidelines are working. In reply to her question regarding the local control guideline, Dauler clarified that just because the guidelines allow Staff to support or oppose a bill, that does not always happen. She noted that there is a fair amount of Staff discretion where Staff considers several components before deciding on the best approach. In answer to Chair Forssell’s query regarding why the City opposed SB 67, Dauler disclosed that the City did not take a position on SB 67. Staff expressed to Senator Becker’s office that the City supports the policy’s objections, but the mandates, deadlines and compliance dates were unreachable. ACTION: Commissioner Scharff moved Staff recommendation that the Utilities Advisory Commission (UAC): 1) Accept the staff presentation regarding current and pending state legislation, and 2) Recommend the City Council approve the continued use of the 2021 Utilities Legislative Policy Guidelines through 2022 Seconded by Vice Chair Segal. Motion carries 6-0 with Chair Forssell, Vice Chair Segal and Commissioners Johnston, Metz, Scharff and Smith voting yes. Commissioner Bowie absent. The UAC recessed at 6:02 p.m. and returned at 6:10 p.m. ITEM 3: DISCUSSION: Discussion and Presentation on the Impact of Decarbonization on the Resiliency of Single Family Homes in Palo Alto David Coale found the report very interesting and appreciated that the City conducted the analysis. He remarked that his home can function on 3 kilowatt hour (kWh) per day, not including space heating. He concluded that the amount of energy to get by in an emergency is much less than what was indicated in the report for a long-period outage. He appreciated that the report stated that bicycles are a more reliable way to travel around the City. Utilities Advisory Commission Minutes Approved on: Page 6 of 8 Lena Perkins, Sr. Resource Planner introduced the City’s Fellow from Stanford Shoja Jahangard-Mahboob who drafted the report. She noted that the report is the first step in understanding the impacts and opportunities for the resiliency of all-electric single-family homes in Palo Alto. Shoja Tanner Jahangard-Mahboob reported that the City has the Sustainability and Climate Action Plan (S/CAP) which has a goal of achieving an 80 percent reduction in greenhouse gas emissions (GHG) by the year 2030. To achieve this goal, the City must increase building energy efficiencies, reduce natural gas in homes and electrify the vehicle fleet. The objective of the report was to assess the resiliency consequences of fully electrifying single-family residential homes in the City, and any additional vulnerabilities caused by switching from multiple fuels sources to a single source. The framework for the analysis was first to access the resiliency of electricity, natural gas and gasoline systems within the City, then evaluate three major disasters or outage scenarios, then assess existing mixed-fuel homes resiliency, then assess the resiliency of all-electric homes and then lastly, investigate options for all-electric homes which are more resilient than existing homes. The three disasters and/or outage scenarios that were used in the report were a major earthquake, a Palo Alto only power outage and a cyberattack. The results of the analysis concluded that current mixed fuel homes and current all-electric homes have similar resiliency ranging from extremely moderate to low impacts during an outage. All-electric with solar and storage homes, and all-electric with natural gas generator homes would experience low to no impacts during an outage. There are several options available to homeowners to increase their home’s resiliency. These options included rooftop solar and storage systems, mobile power stations, building insulation and higher-efficiency appliances and many others. The City also has several initiatives underway to increase resiliency such as adding a second set of electric transmission lines to the City and undergrounding lines in the Palo Alto Foothills. Key takeaways from the report included of all-natural gas appliances, only stoves and gas tank water heaters work when power is out, all-electric homes resiliency could be enhanced with a wide array of products, the resiliency of EV is equal or better than gas-powered cars in a major disaster and a 7.6 kilowatt (kW) solar panel system and 13.5 kWh battery is enough to generally meet most the energy needs of an all-electric home. Commissioner Smith stated that this was an excellent report and he was thrilled that the City of Palo Alto initiated this exploration. In answer to his’s question regarding the recommended size of a solar array that is needed during a disaster, Jahangard-Mahboob answered that the first step was to investigate the average appliance energy use across the State of California and then that was compared to Palo Alto specific energy uses. Perkins added that based on the Rocky Mountain Institute Study conducted for the City of Oakland, the most economical size of a solar array for an all-electric home was 7 kW. Commissioner Johnston found the report interesting and encouraging for folks who are nervous about converting their home to all-electric. An important point of the analysis shows that folks are better off with an all-electric home with solar and storage. In reply to his prediction that it is not enough to have solar panels if the home does not have storage, Jahangard-Mahboob answered that is partially right. He noted that there is a solar inverter system, which is cheaper than solar storage, and those allow rooftop solar to be routed directly to appliances, but it can only go up to 2 kilowatts (k) of electricity. In response to Commissioner Johnston’s query regarding why it is not feasible to route power from the solar panels to the home directly, Jahangard-Mahboob explained that most solar power systems are wired to the grid and not directly to the home. Perkins added that if the solar panels are not wired directly to the grid, the system will not generate power. If the system is wired to a transfer switch to the home, then it can function as a backup generator. Shiva Swaminathan, Senior Resource Planner, added that there would be no energy from the system at night. In answer to Commissioner Johnston’s question regarding if the City should make the permitting process easier for inverters to be installed, Perkins mentioned that if there is a transfer switch in the home, that switch can be permitted similar to a whole-house natural gas back generator. She agreed that folks should know that if a solar panel system is installed in the cheapest easiest fashion, that they will not be able to power their home in the case of a grid outage. Commissioner Johnston agreed and encouraged Staff to Utilities Advisory Commission Minutes Approved on: Page 7 of 8 educate the community on what they need to do if they do want their solar panel system to provide power in an emergency. Chair Forssell called on Mr. Coale to provide comments. Mr. Coale confirmed that when the power goes out, the inverter disconnects to keep the lineman safe who may be repairing the line. He mentioned that there is one inverter on the market that when the power goes out. It supplies a separate outlet with 2,000 watts of power, but only during the day. Commissioner Johnston found that information very intriguing and encouraged Staff to promote that inverter more as the City moves forward with electrification. Vice Chair Segal found the presentation very informative. In response to her question regarding the cost of a backup system, Jahangard-Mahboob disclosed that a natural gas backup generator is between $8,000 to $10,000 and a solar and storage system is between $15,000 to $20,000. Vice Chair Segal encouraged the City to implement ways to make permitting easier as well as explore initiatives to reduce the cost for solar panel systems. Perkins confirmed that Staff will be exploring cost and ways to reduce the cost. In reply to Commissioner Smith’s query regarding if the report looked at what the average monthly usage of electricity for a single-family home is in Palo Alto and what was the average, Jahangard-Mahboob answered that the information was part of the study and that he would forward the full report to Commissioner Smith. Commissioner Metz recalled that the average was around 800 kWh a month for mixed energy and 1,200 kWh for all-electric homes. In answer to Chair Forssell’s query regarding air conditioners, Perkins confirmed that new construction will often have air conditioning and some homeowners of existing homes are installing air conditioning units to mitigate smoke. Staff has been encouraging folks to install heat pumps. In response to Chair Forssell’s inquiry regarding smart control panels, Jahangard-Mahboob explained that folks can specify on a smart panel where power should go during a power outage. Perkins added that one smart grid on the market allows folks to differentiate loads by using specific circuit breakers. There is a pilot program available to utilities who are interested in using the smart panels without solar or storage as a means to avoid upgrading the existing electrical service as well as an emergency application. ACTION: None COMMISSIONER COMMENTS Commissioner Scharff announced that he is now Chairmen of the Northern California Power Agency (NCPA) Legislative and Regulatory Affairs Committee. Commissioner Metz announced that he has continued to investigate neighborhood-level emergency preparedness and response. He requested that on a future agenda that the UAC discuss his findings. Chair Forssell explained that the official mechanism for Commissioners to put an item on the agenda is to do a Commissioner Memo with another Commissioner. Commissioner Metz thanked Director Batchelor and Utility Staff for their time. FUTURE TOPICS FOR UPCOMING MEETINGS: December 01, 2021 Commissioner Johnston requested an update regarding the second transmission line, with an emphasis on security. Commissioner Metz proposed a follow-up discussion on resiliency and emergency preparedness. Chair Forssell mentioned that there was an article in the paper that discussed a cybersecurity audit that took place within the City. She asked if there was any interest from the Commission to hear from Staff about their position regarding the article and to frame the discussion more towards utility cybersecurity. Utilities Advisory Commission Minutes Approved on: Page 8 of 8 Vice Chair Segal wanted to bring back cybersecurity for discussion. Dean Batchelor, Utilities Director, mentioned that Staff plans to bring cybersecurity back to the UAC at the January 2022 meeting. NEXT SCHEDULED MEETING: December 01, 2021 Commissioner Scharff moved to adjourn. Commissioner Johnston seconded the motion. The motion carried 6-0 with Chair Forssell, Vice Chair Segal, and Commissioners Johnston, Metz, Scharff, and Smith voting yes. Commissioner Bowie absent. Meeting adjourned at 7:02 p.m. City of Palo Alto (ID # 13659) Utilities Advisory Commission Staff Report Meeting Date: 12/1/2021 City of Palo Alto Page 1 Title: Discussion and Update on the Fiscal Year 2023 Preliminary Utilities Financial Forecast and Rate Projections From: Director of Utilities Lead Department: Utilities This item is for discussion and no action is requested. Staff seeks input from the Utilities Advisory Commission (UAC) on its preliminary rate projections for the Electric, Gas, Water and Wastewater Collection utilities to guide and update its recommended FY 2023 Financial Plans and proposed rate changes. The attached presentation described staff’s preliminary rate projections for the various utilities; staff will continue to update and refine these estimates in light of changing economic conditions and supply trends, in order to ensure continued cost-based rate offerings. Staff plans to return to the UAC with proposed Financial Plans and rates in March of 2022. Attachments: •Attachment A: Preliminary FY 2021 Rate Changes •Attachment A: Prelim rates (PDF) Staff: Eric Keniston December 1, 2021 www.cityofpaloalto.org PRELIMINARY FY 2023 RATE CHANGES Staff: Eric Keniston • C I TY OF PALO ALTO R 2 PRELIMINARY SYSTEM AVERAGE RATE PROJECTIONS *Gas rate changes shown with commodity rates held constant. Actual gas commodity rates vary monthly ** Storm Drain fees increase by CPI index annually per approved 2017 ballot measure *** Based on an FY 2021 monthly bill of $321.39 FY 2022 (Took effect July 1, 2021) FY 2023 (Proposed for July 1, 2022)FY 2024 FY 2025 FY 2026 FY 2027 $0.00 $4.60 $3.70 $2.00 $0.70 $0.00 0%8%6% 3% 1% 0% $1.60 $2.60 $2.70 $2.80 $3.00 $2.30 3%4%4% 4% 4% 3% $2.00 $1.30 $2.20 $2.30 $2.50 $2.60 3%3%5% 5% 5% 5% $0.00 $2.70 $3.70 $4.80 $5.10 $4.30 0%3%4% 5% 5% 4% $0.00 $1.50 $1.50 $1.60 $1.60 $1.70 0%3%3% 3% 3% 3% $0.30 $0.40 $0.40 $0.40 $0.40 $0.40 3%3%3% 3% 3% 3% $3.90 $13.10 $14.20 $13.90 $13.30 $11.30 1% 4% 4% 4% 4% 3% Monthly Bill Change ** Electric Utility Gas Utility * Wastewater Water Utility Refuse Storm Drain • C ITV 01 PALO ALTO 3 ONGOING COST CONTAINMENT •Consistent with the Utilities Strategic Plan, cost containment is being instituted as an ongoing priority and annual cycle •Fall completion of preliminary out-year rate forecasts •Review by all Divisions for alignment of multiyear strategies •Ongoing management review of personnel actions •Review/revision of position classifications to match evolving needs •Addition/Deletion of positions to reflect organizational priorities •Review/approval to fill individual position vacancies in conjunction with ASD Budget Office and Human Resources •Regular review of performance metrics and expenditures ~CITY OF ~PA ILO ALTO 4 RECENTLY IMPLEMENTED COST CONTAINMENT •Established renewable energy exchange program (~$3M/year for FY 2021 and FY 2022, $1M/year in subsequent years) •Agreement with Valley Water -$250K to $1M/year + up to $16 million in funding for reverse osmosis facility •Negotiated improvements to Western contract (~$2.18 million/year) •Implemented outsourcing of hedging and risk management to NCPA, first transactions to occur this spring •Established a cross-functional field crew to install water, gas, and sewer services simultaneously at new construction sites, reducing hours spent in the field. Staff time freed up to be reallocated to sewer replacements. •Implemented mobile workforce applications, reducing administrative data entry time, freeing up staff for other work •Scheduled larger CIP projects every other year to achieve efficiencies in project management and also better bids / lower construction costs •Expanding use of bank draft to reduce credit card fees, particularly for large accounts ~CITY OF ~PA ILO ALTO 5 FUTURE POTENTIAL COST CONTAINMENT •Switch to new customer information system with reduced support costs •Explore adding batteries to solar resources to improve value •Increased water and energy end use technical training for Customer Service reps, reducing transferred phone calls •Working to cluster gas main replacements to reduce mobilization costs for construction contractors •Evaluating buying materials for pipeline replacement in-house rather than having contractors buy them –goal is to reduce construction markups •BAWSCA water bond refunding to achieve lower debt service payments for wholesale customers, including Palo Alto beginning in 2023 ~CITY OF ~PA ILO ALTO WASTEWATER COLLECTION www.cityofpaloalto.org 7 WASTEWATER PROJECTIONS •FY 2023 proposal: •3% overall revenue increase •Annual capital program contribution to CIP Reserve •Transfer $1 million from Operations Reserve to Rate Stabilization Reserve FY 2025 -FY 2026 to prepare for increasing treatment debt service costs in FY 2027 •COVID non-residential revenue impacts $1 million estimated in FY 2022 with recovery by FY 2026 •Future projections •5% annually FY 2024 –FY 2027 ~CITY OF ~PA ILO ALTO 8 WASTEWATER UTILITY BASICS •Five partners: Stanford, East Palo Alto, Los Altos Hills, Los Altos, and Mountain View •Wastewater drains from partner systems through the City of Palo Alto Collection System, and into the City of Palo Alto Regional Water Quality Control Plant (RWQCP) for treatment •City of Palo Alto Utilities Department manages collection system, Public Works manages the RWQCP ... V I • C ITV 01 PALO ALTO 9 WASTEWATER UTILITY COST STRUCTURE Palo Alto’s share of the cost to treat sewage at Palo Alto’s Regional Water Quality Control PlantCost to collect sewage within Palo Alto, including: maintaining and replacing sewer infrastructure, customer service, billing, administration, etc. • C ITV 01 PALO ALTO Collection $10,626 M (48%} ~ Treatment ■ Collection Treatment $11,610 M (52%) 10 LONG TERM COST TRENDS Annualized Increase FY 17-23: Treatment: 5.6%/yr Collection: 3.4%/yr Annualized Increase FY 23-27: Treatment: 9.0%/yr Collection: 2.4%/yr * 2017 Collection Capital is average of FY 2016 to FY 2018 • C ITV 01 PALO ALTO ----u, C 0 ,,_ --,,_ ~ ....... 30 25 20 15 10 5 ..................... '1,•"o•'l,•"o•'l,•"o•'I,• ..................... 'l.•"o•'l.•"o•'l.•"o•'I.• ..................... 'l,•"o•'l,•"o•'l,•"o•'I,• ..................... ............. -i..-. .... ..................... '1,•"o•'l,•"o•'l,•"o•'I,• ..................... 'l.•"o•'l.•"o•'l.•"o•'I.• ..................... '1,•"o•'l,•"o•'l,•"o•'I,• ..................... ............ 11\. ...... . . .................. .. '1,•"o•'l,•"o•'l,•"o•'I,• I ■--■,/■--■--■--■-- FY 2017* FY 2023 FY 2027 tm Treatment 11 TREATMENT COST DRIVERS •Regional Water Quality Control Plant needs rehabilitation •Long Range Facilities Plan completed in 2012 •Near Term Major Projects: •Sedimentation Tank ($19M) •Outfall Pipeline ($14M) •Laboratory/Operations Center ($48.5M) •Secondary Treatment Upgrades ($148M) ~CITY OF ~PA ILO ALTO 12 WASTEWATER COLLECTION COSTS • C ITV 01 PALO ALTO Capital & Debt Service $ 3,451 Million (32%) □ Operations Operations $7,175 Million (68%) Capital & Debt Service 13 OPERATIONS/CAPITAL COST DRIVERS Operational Costs •Salary and benefit costs for existing staff •2-3% annual inflation for other operating costs •One-time revenue loss due to COVID-19 $1 Million in FY 2022, with recovery by FY 2026 Capital Costs •Underground construction cost increases •Sanitary Sewer Replacements •Includes cost reductions and deferrals adopted in FY 2022 Financial Plan ~CITY OF ~PA ILO ALTO 14 FY 2023 PRELIMINARY WASTEWATER PROJECTIONS Fiscal Year -VI $35 $30 $25 § $20 ~$15 '<I'). • C ITV 01 PALO ALTO $10 $5 $0 11% 700 0% 9% 0% 9% 1..0 r-,.. 00 0) 0 ~ ~ f""'I f""'I f""'I N N C C C 0 0 0 N N N N N N Actua ll D IColllection Capital •1Colllection Deb t Se,rvice L ---□1 Colll ectio n Op ,erations •mreaitme nt Capita I & Debt □!Treatment Operations -Revenue N ,m ':::t LO lD r-,.. 00 O'\ ,o , ~I N N ,N I N N N N N N ,m, ,m , m o , ,o C C C 0 0 0 o , ,o , C N ,N I N N N N N N ,N ,N I N Projected 15 WASTEWATER COLLECTION COST TRENDS Annualized Increase, FY17 - 23: Annualized Increase, FY23 - 27: Collection Capital: 2.4%/yr Operations: 4.2%/yr Collection Capital: 2.2%/yr Operations: 2.6%/yr * 2017 Collection Capital is average of FY 2016 to FY 2018 • C ITV 01 PALO ALTO ----.,, C 0 ·--·-~ -----cl).. 14 12 10 8 6 4 2 FY 2017* □ Operations FY 2023 (Projected) FY 2027 (Projected) ~ Capital & Debt Service 16 WASTEWATER OPERATIONS RESERVE PROJECTIONS $14 $12 $10 -V, $8 C 0 ·--·-$6 ~ -$4 $2 $0 • C ITV 01 PALO ALTO -Reserve (Year-End) -Reserve Min/Max -----.,,,. -.,,,. ---.... ---- -Reserve Target -··-··-··-··-··----.. -.. -.... -.... --_ .. _ .. _ _...... .. -.. --Risk Assessment 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 ctual Pro j ected Fiscal Year 17 WASTEWATER CIP RESERVE PROJECTIONS • C ITV O, PALO ALTO V') 5,000 4,500 4,000 3,500 3,000 ""'O C ro V') 5 2,500 ..c r-2,000 -<I). 1,500 1,000 500 ----------------------------------- N ("'(") ,i;::t-LI) N N N N 0 0 0 0 N N N N ---------------------------------------------- lO r-,... 00 0) 0 N N N N ("'(") 0 0 0 0 0 N N N N N Fiscal Vear ------------ M ("'(") 0 N ------------ N ("'(") 0 N ~CIP Reserve (Year- End) -Reserve Min/Max WATER UTILITY www.cityofpaloalto.org 19 WATER PROJECTION AND ALTERNATE SCENARIO •Proposal FY 2023 -3% overall rate increase •FY 2023 1% distribution rate increase & 5.4% SFPUC commodity rate increase •FY 2021 year-end Operations Reserve above guideline levels; projected to be at target levels by year end FY 2023 •FY 2022 10% voluntary rationing, FY 2023 recovery year •Future projections 4% / 5% / 5% /4% FY 2024 through FY 2027 •Alternate Scenario –Drought Worsens, 4% overall rate increase •FY 2023 3% distribution rate increase & 5.4% commodity rate increase (may be higher) •FY 2022 10% voluntary rationing, FY 2023 20% mandatory rationing FY 2024 recovery year •Future projections 5% / 5% / 5% / 4% FY 2024 through FY 2027 •Rate Stabilization Reserve funding• C ITV 01 PALO ALTO 20 WATER UTILITY COST STRUCTURE Cost to bring the water to Palo Alto Cost to distribute water within Palo Alto, including: maintaining and replacing water infrastructure, customer service, billing, administration, etc. • C ITV 01 PALO ALTO Distribution $27 .6 million 58% ■ Supp ly ■ Distr i bution Supply $20.0 mil ll ion 42% 21 LONG TERM COST TRENDS Annualized Increase, FY17-FY23: Annualized Increase, FY23-FY27: Supply: 1.3%/yr Distribution: 7.1%/yr Supply: 5.1%/yr Distribution: 2.9%/yr • C ITV 01 PALO ALTO ..-.. 70 60 50 ~ 40 0 ·-= 30 ~ ----v,. 20 10 FY2017 FY 2023 (Projected) Supply FY 2027 (Projected) 22 WATER DISTRIBUTION COSTS • C ITV 01 PALO ALTO Capital Investment $8 .0 million 26% ___. -,J Debt Service ----------$3.2 mil llion 11% ____ ~ Operations I ~~---,$19.1 million 63% j 23 WATER DISTRIBUTION COST TRENDS Annualized Increase, FY17-FY23: Capital: 9.3%/yr Operations: 5.3%/yr Debt Service: 0.0%/yr Annualized Increase, FY23-FY27: Capital: 6.5%/yr Operations: 5.8%/yr Debt Service: 0%/yr • C ITV 01 PALO ALTO 40 35 30 _.__ 25 u, C 20 0 :: 15 __ , ~ 10 FY2017 FY 2023 FY 2027 (Projected) (Projected) Debt Serv i ce D Operations [:;] Capital Investment 24 WATER OPERATIONS & CAPITAL COST DRIVERS Operating •Health, retirement, and associated overhead costs continue to increase •Planned increase in costs for rental of generator backup at pumping stations and for emergencies •Drought water sales reductions Capital •Construction costs have not declined •Large one-time costs for reservoir rehabilitation ~CITY OF ~PA ILO ALTO 25 WATER COST AND REVENUE PROJECTIONS Cost/Revenue • C ITV 01 PALO ALTO $70 ·Ill, $60 C O· , .... -$50 -~ $40 $30 $20 $10 $0 1% r-,.. 00 0) 0 rl ~ ~ ~ N N 0 0 0 0 0 N N N N N >-G: >->->-LL u.., LL u.. Actuals 4% Rate Changes c=J Capital □Operations ml Wat er Supp ly •Debt S,e·irvice -Revenue N rn q-U") U), r-,.. N N N N N I N 0 0 ,o 0 o , 0 N N N N N I N ct >->-r;: >->-LL u.. LL LL Pr o j ec t ed 26 WATER OPERATIONS RESERVE PROJECTIONS • C ITV 01 PALO ALTO (I') C 0 ·---·-~ $18 ---------------------------------------------------------------------------------------------------------------------------------------- $16 $14 $12 $10 $8 $6 $4 $2 $0 ---------------------------------------------------------------.~---------;;___.---------~---------~---------=---------=------------------ -----------------------,_ ---_-.,_ ~ ------------------------------------------------------------------------------------------------------- IFY 2021 A.ctual -• I --■ ·--··-·,ii FY 2022 Pr ,oj ,ect ,ed FY 2023 FY 2024 .. - FY 2025 FY 2026 FY 2027 !Reserve Target -IReserv ,e IMln'mum -!Reserve (Year-End) Risk Assessm1e nt 27 WATER CIP RESERVE PROJECTIONS • C ITV 01 PALO ALTO $12,000,000 ---------------------------------------------------------------------------------------------------- $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 r?Z!Capital Reserve Ending Balance -Min/Max Guideline 28 ALTERNATE: WATER COST AND REVENUE PROJECTIONS Cost/Revenue • C ITV 01 PALO ALTO $70 V) $60 C 0 ~,-$50 --,.,_ ~ $40 $30 $20 $10 $0 r--. """"' 0 N > LL 00 ,0) ,..-1 ~I 0 ,o N 1N I >-> LL ILL Actu alls 0 N 0 N > LL -i N 0 N >-LL > 11.L ~ rl'•,I•--........... ~t~ ... ,I~ .. "' .... .:gt ~,I,:: .,..,, . .,. ~)'j~f .,. . ., ... ~t~f .,. . ., .• .,. J:~r-~ .,.., .• .,. .,.. .... ., >~~>~ m "d" !/"I N N N 0 0 0 N N N > >-it LL LL Pr oj ectiions l..:O N I 0 N > LL 4% Rate Changes r--. N 0 N >-LL □Capi t al l nv,estment □Ope ra t ions m Wa t er Supply •Debt Service -Rev ,en ue 29 ALTERNATE: WATER OPERATIONS RESERVE PROJECTIONS • C ITV 01 PALO ALTO $18 ----------------------------------------------------------------------------------------------------------------------------------------------· $16 $14 $12 fl) $10 C 0 ~ $8 ~· --.... __ __ __________________________ .,... ~----_ __, __ ---------------------------------------------------------------------------------; -------------------------------------------~ _ _...__ --~ ---------------------------------------. -------_ ... ____________________ _ -!Reserve Maximum --Reserve Target -Reserve Minimu m $6 ----------------------------------------------------------------------------------------------------------------------------------------------• -Res eir ve 1( Ye .a r -E n,d ) $4 -Ri sk Assess ment ,.,,_,. .. -.. -........... ,_.. $,2 -----------. -. --. -·---. -~---•--· ---._. --_· -. ---------------------------------------------------------------· $0 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Actua l Pr o j,ection ELECTRIC UTILITY www.cityofpaloalto.org 31 FY 2023 proposal: •8% to 11% overall increase •Lower revenues from rates and interest income; Higher purchase costs, contract line crew costs •Reserve margins are minimal. Some combination of reserve withdrawals, cost reductions, or rate increases will be necessary. Future years: •6% rate increase in FY 2024 •Electric Special Project Reserve loan repayments rescheduled to FY 2025/2026. Electric Rate Proposal ~CITY OF ~PA ILO ALTO 32 Electric Utility Cost Structure Electric Distribution costs (in green): $62 million 42% Electric Supply: The cost to buy electricity and transport it to Palo Alto, including operational overhead (e.g. energy scheduling) Electric Supply costs (in blue): $86 million 58% Electric Distribution: The cost to distribute electricity within Palo Alto, including: maintaining and replacing electric infrastructure, customer service, billing, administration, etc. ~CITY OF ~PA ILO ALTO 31% ~ Generation ■ Operati ons 38% 11% 5% 15% ~ Transm i ssion □ Supp ly Overhead ~ Capita l Investment 33 LONG TERM COST TRENDS Annualized Increase, FY18-FY23: Annualized Increase, FY23-FY27: Supply: -0.3%/yr Distribution: 4.0%/yr Supply: 0.2%/yr Distribution: -0.1%/yr • C I TV 01 PALO ALTO ,...._, U'J C: 0 ·--·-~ ......... 11). 180 160 140 120 100 80 60 40 20 FY 2018 FY 2023 Fy 2027 (Projected) (Projected) Electric Distribution Electric Supply 34 LONG TERM COST TRENDS: SUPPLY Annualized Increase, FY18-FY23: Annualized Increase, FY23-FY27: Transmission: 10.6%/yr Generation: -3.6%/yr Transmission: 7.5%/yr Generation: -4.5%/yr Overhead: 1.4%/yr Overhead: 2.6%/yr • C I TV 01 PALO ALTO -(/) C: 0 100 80 60 40 20 ............... ................ "i ............... ................. ~ ............... ............... "i ............... .............. •"i :.-":..-":-":.-":.-". -~■:-:,.;..~I ................... ~ ............... ............... "i ............... .. ...... .. •"I,• .. ·~ ............... .. ..... .. ...... .. . ~ ............... .. .... •• ...... ••1 ... . ..•... ... .. .. .... •• .... .. ■"i ............... ............... "i ............... ............... "i ............... .. •"I,• .. •"I,• .. ·~ ............... .. ...... .. ...... .. . ~ ............... ................. ~ ............... ._ •"-• ._ _..__ ._ ... FY 2018 ~ Generation ............... . ................ .. ............... ................ .. ............ . ................. .. ............ . ................ .. ............ . ................. .. ............ . .................. .. ............ . .................. .. ............ . ................ .. ............ . ................ .. ............ . ... •"I,• .. •"I,• .. .. ............ . ................ .. ............ . ................... .. ............ . -._ _..__ ._ •"-• ._ . ............ .. .. ... •"I,• .. •"I,• . ............ .. .. ................ . . ............ .. .. .............. . . ............ .. .. .............. . . ............ .. ... .............. . . ............. . ... ............... . . ............ .. ... .............. . . ............ .. ... .............. . . ............ .. "I,• ........ •"I,• . ............ .. ... .............. . . ............ .. .... ............ . . ............ .. ..... ._ •"-• ._ ..... . FY 2023 Fy 2027 (Projected) (Projected) Transmission ~ Overhead 35 LONG TERM COST TRENDS: DISTRIBUTION Annualized Increase, FY18-FY23: Annualized Increase, FY23-FY27: Capital: 3.4%/yr Operations: 4.3%/yr Capital: -8.4%/yr Operations: 2.2%/yr • C I TV 01 PALO ALTO -V) t: 0 ~ ._. -u,. 80 70 60 so 40 30 20 10 FY 2018 IDebt Service FY 2023 (Projected) Fy 2027 (Projected) □ Operations E:1 Capital Investment 36 Supply Cost Drivers •Low hydroelectric conditions and high market prices due to increased natural gas costs have dramatically increased electric supply costs •Overhead costs have decreased as NCPA has sought revenue by providing services to more agencies •Transmission costs have increased dramatically –system replacement, new lines to integrate new generators. CPA partners with others to advocate for cost control. •Renewable projects have come online. In the longer term, generation costs should stay fairly stable due to CPA’s long- term fixed price contracts ~CITY OF ~PA ILO ALTO 37 Distribution Cost Drivers •Medical/retirement benefit costs and associated overhead costs continue to increase •Increased capital investment in the electric distribution system needed due to system age •Underground construction costs have increased substantially •Additional contract expense for line crew until internally staffed ~CITY OF ~PA ILO ALTO 38 Monthly Residential Electric Bill Comparison Palo Alto is 34% below PG&E average s.2so s.200 s.1so s.100 $50 $- PG&E Palo Alto Su mer Summe r -Lo w [190 kWh! -'1 e d i an (365-kW h) -High (755 kWh! -Aver age (460 k W h) ~CITY OF ~PA ILO ALTO PG&E Pa lo Al o W i n ter W i ter -Low (230 11::Wn) -Med ia n (453 kWh) -Higln (880 kWln) -Average (540 kWh) 39 FY 2023 Updated: Electric Cost and Revenue Projections Co s t / R e v e n u e Ill C .52 ~ ~CITY OF ~PA ILO ALTO $200 $150 $100 $50 $0 11% 14% 6% 8% 0% 0% 8% RA TE CHANGES: ____________________________________________________________ _ r--- .-i 0 N >-L.1.. 00 .-i 0 N >-L.1.. en .-i 0 N >-L.1.. 0 N 0 N >-L.1.. .-i N 0 N >-L.1.. N N 0 N >-L.1.. ("/') N 0 N >-L.1.. 6% q- N 0 N >-L.1.. ~u'¾~---1-%---99 % L.t'l N 0 N >-L.1.. '-0 N 0 N >-L.1.. r--- N 0 N >-L.1.. ~Electric Commodity ~Cap ital Investment CIJ Transfers □Operations ---• Debt Service -Revenue 40 Electric Supply Operating Reserve Projections U') $45 C 0 ·-$40 ·-~ $35 $30 $25 $20 $15 $10 $5 $0 ~CITY OF ~PA ILO ALTO ------ ------------------------------------------------------------------------------------------ --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- ese r ve ---------- Maxi mum ese r ve Ta r ge ese r ve M i n i mum FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 41 Electric Supply Reserve Adequacy Ill C: .2 $60 $50 $40 $30 $20 $10 $0 ~CITY OF ~PA ILO ALTO ~Hydro Stabilizat ion Reserve (Year- End) ~~:.~:.~1operations Reserve (Year-End) -Risk Assessment FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 42 Electric Distribution Operating Reserve Projections "'$18 C: g 'i $16 $14 $12 $10 $8 - ~ -,_ ....... --..... ---,_ ------------....... ------------------------------------------------------------------.. -------------------------------------------------...... .-...... ....... --- • + ....- ~ -----· -.,.... ~ •• ___,. •• ...._, __ ....,_,_♦-·. ,_. •• .--■ ■ ...... $6 -------------------------------------------------------------------------------------------------------------------------------------------------------------- ~CITY OF ~PA ILO ALTO -Reserve Maxi mum $4 ~---------------------------------------------------------------------------------------------------------------------_ -Reserve Targe t _______ _ . -Re.se r ve Min imum $2 -Risk A.ssessme n,t $0 IFY 2 0 21 FY 2022. FY 2023 FY 2024 FY 2025 IFY 2 0 26-FY 2027 GAS UTILITY www.cityofpaloalto.org 44 •Rate Design: •About one-third of the rate is “supply-related:” gas supply, transmission, and environmental charges. These rates vary monthly according to market-driven costs that are passed directly to customers •About two-thirds of the rate is set based on the City’s costs for maintaining its gas distribution system (gas mains, services, related equipment). These rates are being discussed here tonight. Gas Rate Design ~CITY OF ~PA ILO ALTO 45 •FY 2023 Proposal: •4% increase for FY 2024 with no cost reductions. •Maintains sales decline of 10% through 2022. •Future Years: •4% increases each year for FY 2024 through FY 2026 Gas Rate Options ~CITY OF ~PA ILO ALTO 46 Gas Utility Basics City of Palo Alto gas distribution system: •20,000 meters •205 miles of mains •18,000 service lines ~CITY OF ~PA ILO ALTO Inters tate Intras tate Map of Western natu ra l gas transmissiion Une·s 47 Gas Utility Cost Structure Gas Distribution (in green): The cost to distribute gas within Palo Alto, including: maintaining and replacing gas infrastructure, customer service, billing, administration, etc. *Gas Supply (in blue): All pass-through * * * ~CITY OF ~PA ILO ALTO Capital Investment $5.6 million 13% Distribution $19.1 million 46% ~Gas Supply ■ Distribution -- Gas Supply $10.4 million 25% Gas Environmental $2.4 million 6% Gas Transmission $4. 7 million 11% ~ Gas Environmental ■ Gas Transmission I;;! Capital Investment 48 Long Term Cost Trends Annualized Increase, FY18-FY23: Annualized Increase, FY23-FY27: Supply, Transmission, Environmental: 4%/yr Supply, Transmission, Environmental: 1%/yr* Distribution: 4%/yr Distribution: 1%/yr Capital: -3%/yr Capital ** 4%/yr * Forecast is uncertain and will vary with the markets ** FY 2025 CIP is an average of two years due to staggered main replacement schedule. -V') 60 so C 4Q 0 = 30 ~ - -V). 20 10 ~CITY OF ~PA ILO ALTO FY 2018 FY 2023 (Projected)* Fy 2027 (Projected)* Gas Supply, Environmental, and Transmission Costs □ Capital Investment** Gas Operations 49 Gas Distribution Cost Trends Annualized Increase, FY18-FY23: Gas Capital: -2.9%/yr* Gas Operations: 3.8%/yr Annualized Increase, FY23- FY27: Gas Capital: 3.7%/yr* Gas Operations: 1.4%/yr * Due to staggered main replacement projects, costs are averaged over two years - 35 30 25 ~ 20 0 ·-15 ~ -V). 10 s FY 2018 FY 2023 (Projected)* Fy 2027 (Projected)* ■ Debt Service □ Operations ~ Capita Investment ~CITY OF ~PA ILO ALTO 50 Gas Supply Cost Drivers* •Gas supply –some volatility in gas market prices. Gas prices have risen in recent years as supplies have become tighter, demand has increased •PG&E gas transmission rates continue to rise to fund safety investments •Cap and trade costs continue to rise (as intended by design) •Carbon Neutral Gas Plan * All of the above costs are pass-through and not included in rate increase ~CITY OF ~PA ILO ALTO 51 Gas Distribution Cost Drivers •Health, retirement, and associated overhead costs continue to increase •Underground construction costs have increased substantially as well •Temporary funding ($1.07M/yr) for two years for crossbore investigations (FY 22 & FY 23) •Increases in overhead transfers ~CITY OF ~PA ILO ALTO 52 Monthly Residential Bill Comparison Palo Alto median was 14.4% below PG&E (FY 2021 data) $180 $160 $140 $120 $100 $80 $60 $401 $20 $- PG&E Palo Alto Sum mer Summer -Low (8 Thm) -Medi an (18Thm) -High (28 Thm) -Average (22 Thm) ~CITY OF ~PA ILO ALTO PG &E Pa lo Al t o -Lov.r (25 Thm} -M edian (54 Thm) -Hi gh (93 Thm) -Ave -rage (68Thm) 53 FY 2023 Preliminary Gas Cost and Revenue Projections Co s t / R e v e n u e $60 $50 $40 $20 $10 ~CITY OF ~PA ILO ALTO $0 Rate changes (excluding supply-related rate changes) 8% 0% 4% 5% 2% 3% 4% 4% 4 % r---co 0) 0 y-C'\11 ("j') v LO ~ "I'""" ~ N ,N N N N C\I 0 0 0 0 ,o o , 0 0 0 N N N N 'N N N N N Actualls Pr ojections 4% 3% -Revenue □ Capital II nvestme nt □ Gas Supply □ Operations ■ Transfers ■ Debt Service (0 It--- N ,C',J 0 ,o N ,N 54 Projected Gas Operating Reserve Projections $16 $14 $12 $10 ~$8 C: 0 ·- - $4 $2 ---. . --------. . .. ___. .. FY 2021 FY 2022 ~CITY OF ~PA ILO ALTO ------ . . --- __.-. • • -· · -· · ---. ----. . ----___.,, . .......... .-- FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 -Reserve (Year-End) -Reserve Maximum - -Reserve Target -Reserve Minimum -Risk Assessment City of Palo Alto (ID # 13809) Utilities Advisory Commission Staff Report Meeting Date: 12/1/2021 City of Palo Alto Page 1 Title: Adoption of a Resolution Authorizing Use of Teleconferencing for Utilities Advisory Commission Meetings During Covid -19 State of Emergency From: Director of Utilities Lead Department: Utilities Recommendation Adopt a Resolution (Attachment A) authorizing the use of teleconferencing under Government Code Section 54953(e) for meetings of the Utilities Advisory Commission (UAC) and its committees due to the Covid-19 declared state of emergency. Background In February and March 2020, the state and the County declared a state of emergency due to the Covid-19 pandemic. Both emergency declarations remain in effect. On September 16, 2021, the Governor signed AB 361, a bill that amends the Brown Act, effective October 1, 2021, to allow local policy bodies to continue to meet by teleconferencing during a state of emergency without complying with restrictions in State law that would otherwise apply, provided that the policy bodies make certain findings at least once every 30 days. AB 361, codified at California Government Code Section 54953(e), empowers local policy bodies to convene by teleconferencing technology during a proclaimed state of emergency under the State Emergency Services Act in any of the following circumstances: (A) The legislative body holds a meeting during a proclaimed state of emergency, and state or local officials have imposed or recommended measures to promote social distancing. (B) The legislative body holds a meeting during a proclaimed state of emergency for the purpose of determining, by majority vote, whether as a result of the emergency, meeting in person would present imminent risks to the health or safety of attendees. City of Palo Alto Page 2 (C) The legislative body holds a meeting during a proclaimed state of emergency and has determined, by majority vote, pursuant to subparagraph (B) (B), that, as a result of the emergency, meeting in person would present imminent risks to the health or safety of attendees. (Gov. Code § 54953(e)(1).) In addition, Section 54953(e)(3) requires that policy bodies using teleconferencing reconsider the state of emergency within 30 days of the first teleconferenced meeting after October 1, 2021, and at least every 30 days thereafter, and find that one of the following circumstances exists: 1. The state of emergency continues to directly impact the ability of the members to meet safely in person. 2. State or local officials continue to impose or recommend measures to promote social distancing. City of Palo Alto Page 3 Discussion At this time, the circumstances in Section 54953(e)( 1)(A) exist. The Santa Clara County Health Officer continues to recommend measures to promote outdoor activ ity, physical distancing and other social distancing measures, such as masking, in certain contexts. (See August 2, 2021 Order.) In addition, the California Department of Industrial Relations Division of Occupational Safety and Health (Cal/OSHA) has promulgated Section 3205 of Title 8 of the California Code of Regulations, which requires most employers in California, including in the City, t o train and instruct employees about measures that can decrease the spread of COVID -19, including physical distancing and other social distancing measures. Accordingly, Section 54953(e)(1)(A) authorizes the City to continue using teleconferencing for public meetings of its policy bodies, provided that any and all members of the public who wish to address the body or its committees have an opportunity to do so, and that the statutory and constitutional rights of parties and the members of the public attend ing the meeting via teleconferencing are protected. To comply with public health directives and promote public safety, Palo Alto policy bodies have been meeting via teleconference since March 2020. On September 27, 2021, the City Council considered the format for future Council, committee, and Board and Commission meetings. Council determined that beginning November 1, 2021, Council meetings would be conducted using a hybrid format that allows Council Members and the public to decide whether to attend in person, following masking and distancing protocols, or participate via teleconference. Council directed that Council standing and ad-hoc committees and Boards and Commissions would continue meeting via teleconference through January 2022. Adoption of the Resolution at Attachment A will make the findings required by Section 54953(e)(3) to allow the continued use of teleconferencing for meetings of the Utilities Advisory Commission (UAC) and its committees. Attachments: • Attachment A: Resolution NOT YET APPROVED Resolution No. ____ Resolution Making Findings to Allow Teleconferenced Meetings Under California Government Code Section 54953(e) R E C I T A L S A. California Government Code Section 54953(e) empowers local policy bodies to convene by teleconferencing technology during a proclaimed state of emergency under the State Emergency Services Act so long as certain conditions are met; and B. In March 2020, the Governor of the State of California proclaimed a state of emergency in California in connection with the Coronavirus Disease 2019 (“COVID-19”) pandemic, and that state of emergency remains in effect; and C. In February 2020, the Santa Clara County Director of Emergency Services and the Santa Clara County Health Officer declared a local emergency, which declarations were subsequently ratified and extended by the Santa Clara County Board of Supervisors, and those declarations also remain in effect; and D. On September 16, 2021, the Governor signed AB 361, a bill that amends the Brown Act to allow local policy bodies to continue to meet by teleconferencing during a state of emergency without complying with restrictions in State law that would otherwise apply, provided that the policy bodies make certain findings at least once every 30 days; and E. While federal, State, and local health officials emphasize the critical importance of vaccination and consistent mask-wearing to prevent the spread of COVID-19, the Santa Clara County Health Officer has issued at least one order, on August 2, 2021 (available online at here), that continues to recommend measures to promote outdoor activity, physical distancing and other social distancing measures, such as masking, in certain contexts; and F. The California Department of Industrial Relations Division of Occupational Safety and Health (“Cal/OSHA”) has promulgated Section 3205 of Title 8 of the California Code of Regulations, which requires most employers in California, including in the City, to train and instruct employees about measures that can decrease the spread of COVID-19, including physical distancing and other social distancing measures; and G. The Utilities Advisory Commission has met remotely during the COVID-19 pandemic and can continue to do so in a manner that allows public participation and transparency while minimizing health risks to members, staff, and the public that would be present with in-person meetings while this emergency continues; now, therefore, NOT YET APPROVED The Utilities Advisory Commission RESOLVES as follows: 1. As described above, the State of California remains in a state of emergency due to the COVID-19 pandemic. At this meeting, the Utilities Advisory Commission has considered the circumstances of the state of emergency. 2. As described above, State and County officials continue to recommend measures to promote physical distancing and other social distancing measures, in some settings. AND BE IT FURTHER RESOLVED, That for at least the next 30 days, meetings of the Utilities Advisory Commission and its committees will occur using teleconferencing technology. Such meetings of the Utilities Advisory Commission and its committees that occur using teleconferencing technology will provide an opportunity for any and all members of the public who wish to address the body and its committees and will otherwise occur in a manner that protects the statutory and constitutional rights of parties and the members of the public attending the meeting via teleconferencing; and, be it FURTHER RESOLVED, That the Utilities Advisory Commission staff liaison is directed to place a resolution substantially similar to this resolution on the agenda of a future meeting of the Utilities Advisory Commission within the next 30 days. If the Utilities Advisory Commission does not meet within the next 30 days, the staff liaison is directed to place a such resolution on the agenda of the immediately following meeting of the Utilities Advisory Commission. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: Staff Liaison Chair of Utilities Advisory Commission APPROVED AS TO FORM: APPROVED: City Attorney Department Head City of Palo Alto (ID # 13707) Utilities Advisory Commission Staff Report Meeting Date: 12/1/2021 City of Palo Alto Page 1 Title: Informational Update on the Utilities' Quarterly Report for Q3 of Calendar Year 2021 (Q1 of FY 2022) From: Director of Utilities Lead Department: Utilities Recommendation This report is for information only. No action is required. Executive Summary Attached is an update on water, gas, electric, wastewater collection and fiber utilities, efficiency programs, legislative/regulatory issues, utility-related capital improvement programs, operations reliability impact measures and a utility financial summary, and is for the Utilities Advisory Commission’s information. This update Attachment A has been prepared to keep the Council and Utilities Advisory Commission apprised of the major issues that are facing the water, gas, electric, wastewater collection and fiber utilities. A separate quarterly report on the financial position of each utility will be delivered going forward whenever the City closes its books for FY 2022. Attachment B contains the Gas Utility Annual Infrastructure Maintenance and Replacement Report. Items of special interest in this report are summarized below: COVID-19 Impacts: The COVID-19 shelter in place order significantly affected utility loads and sales in FY 2021: •Electric utility demand for CY 2021 to-date (January through September) was 10% below the average of CY 2018 and CY 2019 loads, primarily due to lower commercial electric use. Lower electric loads were accounted for in FY 2021 and FY 2022 financial forecasts. (Section 1.6.2) •Gas utility demand for CY 2021 to-date (January through September) was 11% below the average of CY 2018 and CY 2019. Gas use has been lower in the commercial sector, though not as low as in 2020. (Section 2.5.2) •Water utility demand for CY 2021 to-date (January through September) was 6% above the average of CY 2018 and CY 2019 loads, primarily due to dry conditions. Commercial water use has not decreased the same way electric and gas use decreased. Staff expects this to Staff: Eric Wong CITY OF PALO ALTO City of Palo Alto Page 2 change as the City and other agencies promote water conservation in the face of the current drought. (Section 4.5.2) • Wastewater revenues were not significantly affected by the pandemic in FY 2021, as discussed below. • Fiber revenues were 15% below average due to a high number of disconnections in FY 2021. (Section 5.4.1) Electric Utility: • Output from the City’s hydroelectric resources is low. Precipitation was less than 50% of average in the watersheds feeding these resources. Generation was 61% of long -term average in FY 2021 and is projected to be 59% of long-term average in FY 2022. (Section 1.1.2) • REC sales revenue net of Bucket 3 REC purchases from the REC Exchange program for calendar year 2021 is $3.7 million to-date. Additional REC purchases and sales may be made before the end of the calendar year depending on supply conditions. (Section 1.1.3) • An undergrounding construction project was completed in October 2021. Several other projects are either recently completed or in the design phase with construction due to begin later in 2021 or in 2022. (Section 1.2) • Vacancies remain high for the electric utility, particularly for electric linespeople. Due to a shortage of linespeople across the industry and challenges in hiring journey level linespeople, CPAU is expanding the linespeople apprenticeship program to develop in - house talent. The apprenticeship program takes approximately four years for an employee to become a journey level linesperson. During this period, CPAU will supplement existing crews with contractors for overhead and underground maintenance, emergency response, capital improvement projects, and customer connections. (Section 1.4) • Reliability goals include being in the first quartile of utilities nationally for System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI), which indicate the frequency and total duration of outages experienced by all customers, and in the second quartile f or Customer Average Interruption Duration Index (CAIDI), which indicates the average restoration time, the amount of time customers actually affected by an outage in a given year are out of power. Year -end numbers are expected to be close to the goals. (Section 1.5) • Electric sales for the first quarter of FY22 were about 4% lower than projected, and revenue was about 2% lower. If this trend continues, greater rate increases may be needed in FY23, and/or the Hydro Rate Stabilization may need to be used. (Section 1.6) Gas Utility: • Gas sales were slightly higher than forecasted for Q1 of FY22. Cost and revenue were significantly higher due to increasing natural gas market prices. (Section 2.5) • The total gas supply cost passed through to customers, including t he commodity charge, transmission charge, and environmental charges (Cap and Trade Program costs and Carbon Neutral Gas Program cost) have increased 20% since January of 2021. This equates to roughly a 9% increase in the system average gas rate. (Section 2.1.1) City of Palo Alto Page 3 • A gas main replacement project is currently in progress (GS -13001) and the City is in the midst of a two year inspection project to find cross bores. (Section 2.2) Wastewater Utility: • An overview of the status of the Regional Water Quality Contro l Plant (RWQCP) rehabilitation projects is provided, including an overview of the financing plan for the projects. The first project to begin construction will be the primary sedimentation tank rehabilitation. (Section 3.1) • A sewer system rehabilitation project (SSR 30) is scheduled for Council consideration in December of 2021. (Section 3.2) • Wastewater Utility revenue for Q1 FY22 was 4% lower than budget. (Section 3.4) Water Utility: • The 2020-2021 water year was one of the hottest and driest in the last 60 years. Total storage in the Hetch Hetchy system (Hetch Hetchy Reservoir, “Water Bank” at Don Pedro Dam, and other reservoirs) was 68% full as of October 1, 2021 (normal is about 82%). The SFPUC operates its storage to handle a multi-year drought. (Section 4.1) • In August the state curtailed diversions on the Tuolumne River. In response, the SFPUC filed a lawsuit and is applying for a health and safety exemption from curtailment because per capita use on the system is extremely low. The SFPUC is expected to declare a water shortage emergency, a required step to apply for the health and safety exemption and is expected to continue to ask for voluntary water use reductions. (Section 4.1) • Water sales are higher than forecasted due to the drought, but this is e xpected to change as more calls for voluntary water conservation are made. Drought, capital projects, and other cost increases are expected to reduce reserves to target level by FY 2023. (Section 4.5) • A rebuild of the City’s Corte Madera Reservoir is in pr ogress to improve seismic safety. Construction is expected to be complete in April 2023. A water main replacement project is currently being designed, and construction is expected to start in June 2022. (Section 4.2) Fiber Utility (Section 5): • Magellan Advisors has completed 30% of the engineering design for the fiber backbone and fiber-to-the-home (FTTH) which includes designs for running overhead and underground lines and route optimization. Staff is identifying potential sites for three fiber huts whi ch will be strategically located (i.e. north, south, west) to serve the entire city. (Section 5.1) • The City launched the Palo Alto Fiber Engagement Portal. The goal of the online platform is to inform the community about the Palo Alto Fiber initiative and encourage engagement around the community. The website explains what fiber is, the benefits of fiber, how to get involved, resources that may be useful to the community, and how to contact the City for more information. (Section 5.1) • As of September 2021, fiber revenues for FY 2022 are projected to be $3.6 million, which is 18% below the budget forecast of $4.4M. The decrease in FY 2022 fiber sales is due to a higher number of disconnections than projected as a result of the pandemic. Commercial City of Palo Alto Page 4 customers are consolidating office buildings in Palo Alto, moving out of California, or closing their business. (Section 5.4) Customer Programs (Section 6): • The City launched its Business Advantage Program in March 2021 to help local businesses tune their HVAC units for efficiency. Businesses also got an HVAC inspection, a new MERV 13 filter, and advice on tuning the HVAC to increase indoor air flow in line with ASHRAE recommendations for reducing airborne infectious aerosol exposure . 53 systems have been installed, and 11 additional businesses have been approved for installation. (Section 6.1.1) • The City continues to promote its multi-family and workplace EV charger programs. See Section 6.1.2 for more detail. • Funding for EV charger programs is provided by the Low Carbon Fuel Standard (LCFS) program. Revenues for this program fell significantly during the pandemic, as summarized in Section 6.2.1. Communications: A digest of major outreach efforts is provided in Section 7, including outreach related to drought, the public safety power shutoff program in the Foothills, and utility scams. Legislative and Regulatory: Major legislative and regulatory items are summarized in Section 8. City of Palo Alto (ID # 13753) Utilities Advisory Commission Staff Report Meeting Date: 12/1/2021 City of Palo Alto Page 1 Council Priority: Climate/Sustainability and Climate Action Plan Title: Informational Report on the Annual Review of the City’s Renewable Procurement Plan, Renewable Portfolio Standard Compliance, and Carbon Neutral Electric Supplies for 2020 From: Director of Utilities Lead Department: Utilities Executive Summary Like all electric utilities in California, Palo Alto is subject to the state’s Renewable Portfolio Standard (RPS) mandate of 60% by 2030. The City has also adopted a Carbon Neutral Plan, which led to the achievement of a carbon neutral electric supply portfolio starting in 2013 (and which was updated by Council in August 2020). In 2011, in compliance with state RPS regulations, the Council also formally adopted an RPS Procurement Plan and an RPS Enforcement Program that recognize certain elements of the state’s RPS law applicable to publicly-owned utilities. The RPS Enforcement Program requires the City Manager, or their designee, the Utilities Director, to conduct an annual review of the Electric Utility’s compliance with the procurement targets set forth in the City’s RPS Procurement Plan. This staff report satisfies the reporting requirements of the City’s RPS Enforcement Program, while also providing an update on the City’s compliance with the Carbon Neutral Plan. The City continues to meet both its RPS and Carbon Neutral Plan objectives—even after selling over 348,000 MWh of renewable energy in 2020. Background The City currently has two independent procurement targets related to renewable and carbon neutral electricity: •RPS Procurement Plan (60% by 2030): The City’s official renewable electricity goal is contained in the RPS Procurement Plan that the City was required to adopt under Section 399.30(a) of California’s Public Utilities Code. This was adopted in December 2011 (Staff Report 2225, Resolutions 9214 and 9215) and updated in November 2013 (Staff Report 4168, Resolution 9381), December 2018 (Staff Report 9761, Resolution 9802), and December 2020 (Staff Report 11650, Resolution 9929). The last update to the Staff: Jim Stack CITY OF PALO ALTO City of Palo Alto Page 2 RPS Procurement Plan brought it into alignment with the state’s 60% RPS requirement (SB 100), which was signed into law in 2018. The RPS Procurement Plan and RPS Enforcement Program complement each other: the Procurement Plan establishes official procurement targets, while the Enforcement Program specifies the reporting and monitoring that is required of the Utilities Director while working to achieve those targets. The procurement requirement in the current version of the City’s RPS Procurement Plan is that the City acquire renewable electricity supplies equal to 60% of retail sales by 2030, which is in line with the state’s current RPS mandate. The RPS Procurement Plan also contains an escalating set of targets for six interim Compliance Periods (2011-2013, 2014-2016, 2017-2020, 2021-2024, 2025-2027, and 2028-2030), as well as subsequent 3-year compliance periods beginning in 2031. • Carbon Neutral Plan (100% Carbon Neutral Electricity by 2013): The Carbon Neutral Plan was adopted in March 2013 (Staff Report 3550, Resolution 9322) and updated in August 2020 (Staff Report 11556, Resolution 9913), and requires that the City procure a carbon neutral electric supply portfolio starting in calendar year (CY) 2013. In general, this goal is expected to be achieved primarily through purchases made under the City’s long-term renewable power purchase agreements (PPAs) and output from its hydroelectric resources. However, when the City Council approved an update to the Carbon Neutral Plan in August 2020, they also approved a new procurement strategy wh ereby the City does not keep all of the output of its long-term, in-state PPAs, but instead exchanges that output for less expensive out-of-state renewable generation (with the net proceeds used to offset electric utility operational costs and fund local decarbonization programs). Discussion The City continues to meet its objectives under the RPS Procurement Plan and the Carbon Neutral Plan, and achieved an RPS level of 20.8% in 2020. Although this value fell short of the state’s 33% RPS procurement “soft target” for the year, the City remained compliant with state law because the RPS procurement mandate is evaluated over a multi -year horizon (2017-2020 in this case), and the City far exceeded the state’s soft target levels in the earlier years of the four-year compliance period. Below is a summary of CPAU’s progress toward satisfying its renewable energy and carbon neutral procurement targets, with additional detail provided in Attachment A. RPS Procurement Plan Compliance In CY 2020, the City initially received 525,242 MWh of renewable energy through its long-term contracts for wind, solar, landfill gas, and small hydro resources (which represents 64.5% of the City’s total retail sales for that period). Additionally, the City received 410,885 MWh of large hydroelectric generation (representing 50.4% of the City’s total retail sales), which is not classified as eligible renewable generation by the state. Based on the Council’s decision in City of Palo Alto Page 3 August 2020 to pursue the “REC Exchange Program” (Staff Report 11556, Resolution 9913) the City sold 348,700 MWh of in-state renewable energy supplies, yielding $4.04 million in sales revenue, while purchasing 325,186 MWh of out-of-state renewable energy, at a cost of $1.10 million. Figure 1 below depicts the City’s load and supply resources for CY 2020, before and after the REC Exchanges described above. Accounting for these transactions, the City’s net renewable energy supplies totaled 501,728 MWh, which represents 61.6% of the City’s total retail sales for 2020. However, under the state’s RPS regulations the majority of the out -of- state renewable energy purchases were not able to be applied to the City’s RPS requirement, hence the City’s official RPS level was only 20.8%. Figure 1: CY 2020 Electric Load and Supply Resources, With and Without REC Exchanges For CY 2021, staff has contracted to sell about 287,000 MWh of in-state renewable generation, and purchased about 339,000 MWh of out-of-state renewable generation (Figure 2 below depicts the City’s load and supply resources for CY 2021, before and after the REC Exchanges described above. Note that much of the decrease in REC sales volume and revenue, compared to CY 2020, is due to the much lower volume of hydro generation the City expects to receive in 2021 due to the current drought.) Once these transactions are accounted for, they will yield a total of about $2.25 million in net revenue, and an official RPS level of 35.75% (equal to the state’s RPS soft target for 2021). However, if the additional out-of-state renewable supplies that cannot be applied to the City’s RPS requirements are included, the City’s total renewable electricity supplies are projected to be approximately 75% of retail sales. 1 ,000,000 900,000 800,000 700,000 .c ;: :a:: 600,000 "C .,, _9 500,000 oil > j 400,000 ::J V') u E 300,000 u QI iii 200,000 100,000 Sola r Wind CY 2020 Total Load ,,/ (844,205 MWh) --- ---------------~-· 1--------~~:~{~;:~~:ed ~---~ (Market Power+ ~ ~ Unbundled RECs) W CY 2020 w/ REC Exchanges City of Palo Alto Page 4 Figure 2: CY 2021 Electric Load and Supply Resources, With and Without REC Exchanges In accordance with the state’s RPS Program requirements, CPAU’s Procurement Plan develops a renewable electric supply portfolio that balances environmental goals with system reliability while maintaining stable and low retail electric rates. The state RPS program requires retail electricity suppliers like CPAU to procure progressively larger renewable electricity supplies across a series of separate multi-year Compliance Periods. CPAU’s procurement targets, as well as its actual/projected procurement volumes and RPS levels, for the first three Compliance Periods are summarized in Table 1 below. Table 1: RPS Compliance Period Procurement Targets and Actual Procurement RPS Compliance Period Years Retail Sales (MWh) Procurement Target (MWh) Actual Procurement (MWh) % of Retail Sales 1 2011-2013 2,837,773 567,555 607,740 21.4% 2 2014-2016 2,801,056 605,949 826,855 29.5% 3 2017-2020 3,487,686 1,043,424 1,619,303 46.4% TOTALS 9,126,515 2,216,928 3,053,898 33.5% Carbon Neutral Plan In CY 2020, CPAU achieved its goal, set forth in the Carbon Neutral Plan, of an elec tric supply portfolio with zero net greenhouse (GHG) emissions for the sixth consecutive year. Carbon neutrality was achieved in CY 2020 through existing hydro and renewable generation (wind, 1,000,000 900,000 800,000 700,000 ..c :1: ~ 600,000 "C "' _g 500,000 oil > C. c. 400,000 ::J VI u ·.5 300,000 u Cll jjj 200,000 100,000 Total Load +-----------------------{819,548MWh) --- ✓ -------------------------------~-· +-------1 1------~~t:::ecified ~--~ Power" ~ ~ (Market Power+ ~ ~ Unbundled RECs) ~ Solar 1----------~ ---- Solar Wind Wind CY 2021 CY 2021 w/ REC Exchanges City of Palo Alto Page 5 solar, and landfill gas). As discussed above, due to the Council’s adoption of the REC Exchange Program in August 2020, the City sold 348,700 MWh of in -state renewable energy supplies, yielding $4.04 million in sales revenue, while purchasing 325,186 MWh of out-of-state renewable energy, at a cost of $1.10 million. Accounting for these transactions, the City’s net renewable energy supplies totaled 501,728 MWh, which represents 61.6% of the City’s total retail sales for 2020. The remainder of the City’s needs were supplied by large hydroelectric resources. When the City Council approved an update to the Carbon Neutral Plan in August 2020, the primary change was to adopt an hourly carbon accounting methodology as the basis for determining whether the City has met its carbon neutrality objective. Using an annual accounting approach, the City had an overall surplus of 68,407 MWh of carbon neutral generation compared to its load (equal to 8.1% total load), and thus substantially exceeded the carbon neutrality standard. Meanwhile, under the hourly carbon accounting approach,1 the City’s electric supply portfolio also exceeded the carbon neutrality standard, being responsible for a net negative amount of GHG emissions: -25,104 metric tonnes of CO2 equivalent. See Figure 3 below for a depiction of the City’s monthly total net CO 2 emissions for 2020, as well as the monthly average emissions intensity for the California electric grid. Figure 3: CY 2020 Monthly Net Electric Supply Emissions and CAISO Emissions Intensity 1 The City’s hourly carbon accounting methodology entails calculating the City’s net surplus or deficit carbon neutral supply position relative to its load in every hour of the year. The grid average electricity emissions intensity for each hour is then applied to each of these hourly surpluses or deficits to yield a net emissions contribution (or reduction) that the City’s electric supply portfolio is responsible for in that hour. These hourly emissions totals are then summed across the entire year to yield the City’s annual emissions total for the year. 800 80 ~ 600 60 N 3: 0 ~ u I-....... ~ N -CAISO Emissions Intensity (lb CO2/MWh) 0 400 40 "' u C: .0 -Palo Alto Net Emissions (MT CO2) 0 'iii > "' OJ -Palo Alto Cumulative Net Emissions (MT CO2) ·e 'iii C: UJ CII 200 20 ~ OJ ~ -= OJ "' C: C: 0 0 ~ 'iii OJ "' CII ·e 0 0 z UJ Jan Feb 0 CII OJ tll) <( ni .5! ... CII ni ~ -200 -20 C. 0 II) 5 -400 -40 City of Palo Alto Page 6 For CY 2021, significantly below average hydro conditions are expected to result in about 30% of the City’s electric supply needs being supplied by hydroelectric resources compared to an annual average of about 55%, with the remainder coming from non-hydro renewable energy resources (including purchases of out-of-state unbundled renewable energy certificates, or RECs). Policy Implications This report implements Sections 4 and 5 of the City’s RPS Enforcement Program, which require an annual review of the Electric Utility’s compliance with the CPAU RPS Procurement Plan to ensure that CPAU is making reasonable progress toward meeting the compliance obligations established in the CPAU RPS Procurement Plan. Environmental Review The Utilities Advisory Commission’s review of this report does not meet the definition of a “project” pursuant to Public Resources Code Section 21065, thus California Environmental Quality Act review is not required. Attachments: • Attachment A: 2020 Renewable and Carbon Neutral Electricity Supply Procurement Details Renewable and Carbon Neutral Electricity Supply Procurement Details Renewable Energy Procurement Efforts Table 1 shows the renewable resources currently under contract, the status of the projects, their annual output in Gigawatt-hours (GWh), and the rate impact of each resource that was calculated at the time it was added to the electric supply portfolio. Table 1: Summary of Contracted Renewable Electricity Resources Resource Delivery Begins Delivery Ends Annual Generation (GWh) Rate Impact (¢/kWh) Small Hydro Before 2000 N/A 10.0 0 High Winds Dec. 2004 Jun. 2028 42.7 0.012 Shiloh I Wind Jun. 2006 Dec. 2021 57.3 (0.041) Santa Cruz Landfill Gas (LFG) Feb. 2006 Feb. 2026 9.0 0.003 Ox Mountain LFG Apr. 2009 Mar. 2029 42.5 (0.040) Keller Canyon LFG Aug. 2009 Jul. 2029 13.8 (0.020) Johnson Canyon LFG May 2013 May 2033 10.4 0.064 San Joaquin LFG Apr. 2014 Apr. 2034 27.5 0.127 Kettleman Solar Aug. 2015 Aug. 2040 53.5 0.099 Hayworth Solar Dec. 2015 Dec. 2042 63.7 0.026 Frontier Solar Jul. 2016 Jul. 2046 52.5 0.011 Elevation Solar C Dec. 2016 Dec. 2041 100.8 (0.044) W. Antelope Blue Sky Ranch B Dec. 2016 Dec. 2041 50.4 (0.002) CLEAN Program Projects Varies Varies 5.0 0.027 Total Operating Resources 539.0 0.223 Golden Fields Solar III Jan. 2023 Dec. 2047 75.0 (0.056) Total Non-Operating Resources 75.0 (0.056) Total Committed Resources 614.0 0.168 RPS Procurement Plan Compliance Annually, the Utilities Director reviews CPAU’s RPS Procurement Plan to determine compliance with the state’s RPS Program. Under the state RPS Program, the California Energy Commission (CEC) developed portfolio balancing requirements, which dictate what percentage of renewable procurement must come from resources interconnected to a California Balancing Area (as opposed to an out-of-state transmission grid balancing area). These requirements also determine the eligibility criteria for renewable resource products as determined by their eli gible Portfolio Content Categories1, found in the CEC Enforcement Procedure RPS (CA Code of Regulations, Title 20, Section 3203). The CEC Enforcement Procedures apply to publicly owned utilities (POUs), such as CPAU. 1 RPS Portfolio Content Categories are defined as follows: Category 1 is energy and RECs delivered to a California Balancing Authority (CBA) without substituting electricity from another source, Category 2 is energy and RECs that cannot be delivered to a CBA without substituting electricity from another source, and Category 3 is unbundled RECs. ATTACHMENT A In accordance with the state’s RPS Program requirements, CPAU’s Procurement Plan develops a renewable electric supply portfolio that balances environmental goals with system reliability while maintaining stable and low retail electric rates. The state RPS program requires retail electricity suppliers like CPAU to procure progressively larger renewable electricity supplies across three separate Compliance Periods, as outlined below. 1. Compliance Period 1 (2011 – 2013) For Compliance Period 1 (2011-2013) retail electricity providers were required to procure renewable electricity supplies equaling 20% of total retail sales, which CPAU did. In this period, CPAU supplied 21.4% of the City’s retail electricity sales volumes from renewable energy sources. The procurement results for Compliance Period 1 are displayed in Table 2 below: Table 2: Compliance Period 1 RPS Procurement Details Year Retail Sales (MWh) Procurement Target (MWh)* Actual Procurement (MWh) % of Retail Sales 2011 949,517 189,903 207,974 21.9% 2012 935,021 187,004 200,621 21.5% 2013 953,235 190,647 199,145 20.9% TOTAL 2,837,773 567,555 607,740 21.4% * Annual procurement targets are “soft” targets. The RPS Procurement Plan requires that the target be met for the compliance period as a whole, not in each year of the compliance period. All of the renewable energy procured in Compliance Period 1 came from resources whose contracts were executed before June 1, 2010. The RPS Procurement Plan considers these contracts “grandfathered,” and since all of the renewable energy procurement for Compliance Period 1 was from these types of contracts, there was no need to meet the Portfolio Balancing Requirements included in Section B.4 of the RPS Procurement Plan. 2. Compliance Period 2 (2014 – 2016) In Compliance Period 2, renewable procurement must equal or exceed the sum of the three annual RPS procurement targets described by the following equations: 2014 RPS Target = 20% × (Retail Sales in 2014) 2015 RPS Target = 20% × (Retail Sales in 2015) 2016 RPS Target = 25% × (Retail Sales in 2016) As shown in Table 3 below, CPAU easily exceeded this mandated procurement level as well. Renewable electricity procurement equaled 29.5% of retail sales for Compliance Period 2 overall. Table 3: Compliance Period 2 RPS Procurement Details Year Retail Sales (MWh) Procurement Target (MWh)* Actual Procurement (MWh) % of Retail Sales 2014 953,386 190,677 210,250 22.1% 2015 932,922 186,584 241,262 25.9% I I 2016 914,748 228,687 375,343 41.0% TOTAL 2,801,056 605,949 826,855 29.5% * Annual procurement targets are “soft” targets. The RPS Procurement Plan requires that the target be met for the compliance period as a whole, not in each year of the compliance period. Also in Compliance Period 2, the RPS Portfolio Balancing Requirement s applied to the procurement levels described above. The specific requirements are: (1) CPAU must procure at least 65% of its renewable supplies from Portfolio Content Category 1, and (2) no more than 15% from Portfolio Content Category 3 (unbundled RECs). CPAU easily met the Compliance Period 2 overall procurement requirement and the RPS Portfolio Balancing Requirement, as five new solar projects came online in 2015 and 2016, and all of these projects are considered Portfolio Content Category 1 resources. 3. Compliance Period 3 (2017 – 2020) For Compliance Period 3, CPAU is subject to “soft” targets to supply at least 27% of its retail sales volume from renewable resources in 2017, with that level increasing by 2% each year until reaching 33% in 2020, as described by the following four equations: 2017 RPS Target = 27% × (Retail Sales in 2017) 2018 RPS Target = 29% × (Retail Sales in 2018) 2019 RPS Target = 31% × (Retail Sales in 2019) 2020 RPS Target = 33% × (Retail Sales in 2020) The overall Compliance Period 3 target is equal to the sum of these four annual soft targets. Despite falling short of the soft target for 2020, CPAU easily exceeded the Compliance Period 3 overall procurement requirement, as well as the Portfolio Balancing Requirement that at l east 75% of the renewable electricity supplies come from Portfolio Content Category 1 and no more than 10% come from Portfolio Content Category 3. Table 4: Compliance Period 3 RPS Procurement Details Year Retail Sales (MWh) Procurement Target (MWh)* Actual/Projected Procurement (MWh) % of Retail Sales 2017 912,623 246,408 554,206 60.7% 2018 888,033 257,530 574,475 64.7% 2019 861,561 267,084 319,035 37.0% 2020 825,469 272,405 171,587 20.8% Total 3,487,686 1,043,426 1,619,303 46.4% * Annual procurement targets are “soft” targets. The RPS Procurement Plan requires that the target be met for the compliance period as a whole, not in each year of the compliance period. Finally, as required by the CEC RPS Enforcement Procedures and Section D of the City’s Procurement Plan, staff reported all of the above information to the California Energy Commission in June 2021.