HomeMy WebLinkAbout2023-05-03 Utilities Advisory Commission Agenda PacketUTILITIES ADVISORY COMMISSION
Regular Meeting
Wednesday, May 03, 2023
Council Chambers & Hybrid
6:00 PM
Remote Call In Location:160 S Lakeside, Dr Piscataway NJ 08854
Pursuant to AB 361 Palo Alto City Council meetings will be held as “hybrid” meetings with the
option to attend by teleconference/video conference or in person. To maximize public safety
while still maintaining transparency and public access, members of the public can choose to
participate from home or attend in person. Information on how the public may observe and
participate in the meeting is located at the end of the agenda. Masks are strongly encouraged if
attending in person. The meeting will be broadcast on Cable TV Channel 26, live on
YouTube https://www.youtube.com/c/cityofpaloalto, a n d s t r e a m e d t o M i d p e n M e d i a
Center https://midpenmedia.org.
VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)
Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833
PUBLIC COMMENTS
Public comments will be accepted both in person and via Zoom for up to three minutes or an
amount of time determined by the Chair. All requests to speak will be taken until 5 minutes
after the staff’s presentation. Written public comments can be submitted in advance to
UACPublicMeetings@CityofPaloAlto.org and will be provided to the Council and available for
inspection on the City’s website. Please clearly indicate which agenda item you are referencing
in your subject line.
PowerPoints, videos, or other media to be presented during public comment are accepted only
by email to UACPublicMeetings@CityofPaloAlto.org at least 24 hours prior to the meeting. Once
received, the Clerk will have them shared at public comment for the specified item. To uphold
strong cybersecurity management practices, USB’s or other physical electronic storage devices
are not accepted.
TIME ESTIMATES
Listed times are estimates only and are subject to change at any time, including while the
meeting is in progress. The Commission reserves the right to use more or less time on any item,
to change the order of items and/or to continue items to another meeting. Particular items may
be heard before or after the time estimated on the agenda. This may occur in order to best
manage the time at a meeting or to adapt to the participation of the public.
CALL TO ORDER 6:00 pm ‐ 6:05 pm
AGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 pm ‐ 6:10 pm
The Chair or Board majority may modify the agenda order to improve meeting management.
PUBLIC COMMENT 6:10 pm ‐ 6:25 pm
Members of the public may speak to any item NOT on the agenda.
APPROVAL OF MINUTES 6:25 pm ‐ 6:30 pm
Approval of the Minutes of the Utilities Advisory Commission Meeting Held on March 01,
2023
Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 12, 2023
UTILITIES DIRECTOR REPORT 6:30 pm ‐ 6:45 pm
NEW BUSINESS 6:45 pm ‐ 8:35 pm
1.Approval of UAC Chair and Vice Chair to Serve a Short Term of May 3, 2023 to March 31,
2024 (ACTION 6:45 pm – 6:55pm)
2.Approval of UAC Budget Subcommittee Members to Serve a Short Term of May 3, 2023 to
March 31, 2024 (ACTION 6:55 pm – 7:05 pm)
3.Discussion and Presentation of Utilities Strategic Plan Implementation (DISCUSSION
7:05 pm – 7:35 pm)
4.Staff Recommendation That the Utilities Advisory Commission Recommend the City
Council Adopt the Proposed Operating and Capital Budgets for the Utilities Department
for Fiscal Year 2024 (ACTION 7:35 pm – 8:35 pm)
COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS
FUTURE TOPICS FOR UPCOMMING MEETING ‐ June 07, 2023
ADJOURNMENT
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
Utilities Quarterly Report Update for Q2 of FY 2023
Informational Update on Background and Options for California Oregon Transmission Project
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. W r i t t e n p u b l i c c o m m e n t s m a y b e s u b m i t t e d b y e m a i l t o
UACPublicMeetings@cityofpaloalto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
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.
You may 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.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a 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.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
UTILITIES ADVISORY COMMISSIONRegular MeetingWednesday, May 03, 2023Council Chambers & Hybrid6:00 PMRemote Call In Location:160 S Lakeside, Dr Piscataway NJ 08854Pursuant to AB 361 Palo Alto City Council meetings will be held as “hybrid” meetings with theoption to attend by teleconference/video conference or in person. To maximize public safetywhile still maintaining transparency and public access, members of the public can choose toparticipate from home or attend in person. Information on how the public may observe andparticipate in the meeting is located at the end of the agenda. Masks are strongly encouraged ifattending in person. The meeting will be broadcast on Cable TV Channel 26, live onYouTube https://www.youtube.com/c/cityofpaloalto, a n d s t r e a m e d t o M i d p e n M e d i aCenter https://midpenmedia.org.VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833PUBLIC COMMENTSPublic comments will be accepted both in person and via Zoom for up to three minutes or anamount of time determined by the Chair. All requests to speak will be taken until 5 minutesafter the staff’s presentation. Written public comments can be submitted in advance toUACPublicMeetings@CityofPaloAlto.org and will be provided to the Council and available forinspection on the City’s website. Please clearly indicate which agenda item you are referencingin your subject line.PowerPoints, videos, or other media to be presented during public comment are accepted onlyby email to UACPublicMeetings@CityofPaloAlto.org at least 24 hours prior to the meeting. Oncereceived, the Clerk will have them shared at public comment for the specified item. To upholdstrong cybersecurity management practices, USB’s or other physical electronic storage devicesare not accepted.TIME ESTIMATES
Listed times are estimates only and are subject to change at any time, including while the
meeting is in progress. The Commission reserves the right to use more or less time on any item,
to change the order of items and/or to continue items to another meeting. Particular items may
be heard before or after the time estimated on the agenda. This may occur in order to best
manage the time at a meeting or to adapt to the participation of the public.
CALL TO ORDER 6:00 pm ‐ 6:05 pm
AGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 pm ‐ 6:10 pm
The Chair or Board majority may modify the agenda order to improve meeting management.
PUBLIC COMMENT 6:10 pm ‐ 6:25 pm
Members of the public may speak to any item NOT on the agenda.
APPROVAL OF MINUTES 6:25 pm ‐ 6:30 pm
Approval of the Minutes of the Utilities Advisory Commission Meeting Held on March 01,
2023
Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 12, 2023
UTILITIES DIRECTOR REPORT 6:30 pm ‐ 6:45 pm
NEW BUSINESS 6:45 pm ‐ 8:35 pm
1.Approval of UAC Chair and Vice Chair to Serve a Short Term of May 3, 2023 to March 31,
2024 (ACTION 6:45 pm – 6:55pm)
2.Approval of UAC Budget Subcommittee Members to Serve a Short Term of May 3, 2023 to
March 31, 2024 (ACTION 6:55 pm – 7:05 pm)
3.Discussion and Presentation of Utilities Strategic Plan Implementation (DISCUSSION
7:05 pm – 7:35 pm)
4.Staff Recommendation That the Utilities Advisory Commission Recommend the City
Council Adopt the Proposed Operating and Capital Budgets for the Utilities Department
for Fiscal Year 2024 (ACTION 7:35 pm – 8:35 pm)
COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS
FUTURE TOPICS FOR UPCOMMING MEETING ‐ June 07, 2023
ADJOURNMENT
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
Utilities Quarterly Report Update for Q2 of FY 2023
Informational Update on Background and Options for California Oregon Transmission Project
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. W r i t t e n p u b l i c c o m m e n t s m a y b e s u b m i t t e d b y e m a i l t o
UACPublicMeetings@cityofpaloalto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
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.
You may 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.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a 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.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
UTILITIES ADVISORY COMMISSIONRegular MeetingWednesday, May 03, 2023Council Chambers & Hybrid6:00 PMRemote Call In Location:160 S Lakeside, Dr Piscataway NJ 08854Pursuant to AB 361 Palo Alto City Council meetings will be held as “hybrid” meetings with theoption to attend by teleconference/video conference or in person. To maximize public safetywhile still maintaining transparency and public access, members of the public can choose toparticipate from home or attend in person. Information on how the public may observe andparticipate in the meeting is located at the end of the agenda. Masks are strongly encouraged ifattending in person. The meeting will be broadcast on Cable TV Channel 26, live onYouTube https://www.youtube.com/c/cityofpaloalto, a n d s t r e a m e d t o M i d p e n M e d i aCenter https://midpenmedia.org.VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833PUBLIC COMMENTSPublic comments will be accepted both in person and via Zoom for up to three minutes or anamount of time determined by the Chair. All requests to speak will be taken until 5 minutesafter the staff’s presentation. Written public comments can be submitted in advance toUACPublicMeetings@CityofPaloAlto.org and will be provided to the Council and available forinspection on the City’s website. Please clearly indicate which agenda item you are referencingin your subject line.PowerPoints, videos, or other media to be presented during public comment are accepted onlyby email to UACPublicMeetings@CityofPaloAlto.org at least 24 hours prior to the meeting. Oncereceived, the Clerk will have them shared at public comment for the specified item. To upholdstrong cybersecurity management practices, USB’s or other physical electronic storage devicesare not accepted.TIME ESTIMATESListed times are estimates only and are subject to change at any time, including while themeeting is in progress. The Commission reserves the right to use more or less time on any item,to change the order of items and/or to continue items to another meeting. Particular items maybe heard before or after the time estimated on the agenda. This may occur in order to bestmanage the time at a meeting or to adapt to the participation of the public.CALL TO ORDER 6:00 pm ‐ 6:05 pmAGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 pm ‐ 6:10 pmThe Chair or Board majority may modify the agenda order to improve meeting management.PUBLIC COMMENT 6:10 pm ‐ 6:25 pmMembers of the public may speak to any item NOT on the agenda.APPROVAL OF MINUTES 6:25 pm ‐ 6:30 pmApproval of the Minutes of the Utilities Advisory Commission Meeting Held on March 01,2023Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 12, 2023UTILITIES DIRECTOR REPORT 6:30 pm ‐ 6:45 pmNEW BUSINESS 6:45 pm ‐ 8:35 pm1.Approval of UAC Chair and Vice Chair to Serve a Short Term of May 3, 2023 to March 31,2024 (ACTION 6:45 pm – 6:55pm)2.Approval of UAC Budget Subcommittee Members to Serve a Short Term of May 3, 2023 toMarch 31, 2024 (ACTION 6:55 pm – 7:05 pm)3.Discussion and Presentation of Utilities Strategic Plan Implementation (DISCUSSION 7:05 pm – 7:35 pm)4.Staff Recommendation That the Utilities Advisory Commission Recommend the CityCouncil Adopt the Proposed Operating and Capital Budgets for the Utilities Departmentfor Fiscal Year 2024 (ACTION 7:35 pm – 8:35 pm)COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTSFUTURE TOPICS FOR UPCOMMING MEETING ‐ June 07, 2023ADJOURNMENT
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
Utilities Quarterly Report Update for Q2 of FY 2023
Informational Update on Background and Options for California Oregon Transmission Project
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. W r i t t e n p u b l i c c o m m e n t s m a y b e s u b m i t t e d b y e m a i l t o
UACPublicMeetings@cityofpaloalto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
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.
You may 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.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a 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.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
UTILITIES ADVISORY COMMISSIONRegular MeetingWednesday, May 03, 2023Council Chambers & Hybrid6:00 PMRemote Call In Location:160 S Lakeside, Dr Piscataway NJ 08854Pursuant to AB 361 Palo Alto City Council meetings will be held as “hybrid” meetings with theoption to attend by teleconference/video conference or in person. To maximize public safetywhile still maintaining transparency and public access, members of the public can choose toparticipate from home or attend in person. Information on how the public may observe andparticipate in the meeting is located at the end of the agenda. Masks are strongly encouraged ifattending in person. The meeting will be broadcast on Cable TV Channel 26, live onYouTube https://www.youtube.com/c/cityofpaloalto, a n d s t r e a m e d t o M i d p e n M e d i aCenter https://midpenmedia.org.VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833PUBLIC COMMENTSPublic comments will be accepted both in person and via Zoom for up to three minutes or anamount of time determined by the Chair. All requests to speak will be taken until 5 minutesafter the staff’s presentation. Written public comments can be submitted in advance toUACPublicMeetings@CityofPaloAlto.org and will be provided to the Council and available forinspection on the City’s website. Please clearly indicate which agenda item you are referencingin your subject line.PowerPoints, videos, or other media to be presented during public comment are accepted onlyby email to UACPublicMeetings@CityofPaloAlto.org at least 24 hours prior to the meeting. Oncereceived, the Clerk will have them shared at public comment for the specified item. To upholdstrong cybersecurity management practices, USB’s or other physical electronic storage devicesare not accepted.TIME ESTIMATESListed times are estimates only and are subject to change at any time, including while themeeting is in progress. The Commission reserves the right to use more or less time on any item,to change the order of items and/or to continue items to another meeting. Particular items maybe heard before or after the time estimated on the agenda. This may occur in order to bestmanage the time at a meeting or to adapt to the participation of the public.CALL TO ORDER 6:00 pm ‐ 6:05 pmAGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 pm ‐ 6:10 pmThe Chair or Board majority may modify the agenda order to improve meeting management.PUBLIC COMMENT 6:10 pm ‐ 6:25 pmMembers of the public may speak to any item NOT on the agenda.APPROVAL OF MINUTES 6:25 pm ‐ 6:30 pmApproval of the Minutes of the Utilities Advisory Commission Meeting Held on March 01,2023Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 12, 2023UTILITIES DIRECTOR REPORT 6:30 pm ‐ 6:45 pmNEW BUSINESS 6:45 pm ‐ 8:35 pm1.Approval of UAC Chair and Vice Chair to Serve a Short Term of May 3, 2023 to March 31,2024 (ACTION 6:45 pm – 6:55pm)2.Approval of UAC Budget Subcommittee Members to Serve a Short Term of May 3, 2023 toMarch 31, 2024 (ACTION 6:55 pm – 7:05 pm)3.Discussion and Presentation of Utilities Strategic Plan Implementation (DISCUSSION 7:05 pm – 7:35 pm)4.Staff Recommendation That the Utilities Advisory Commission Recommend the CityCouncil Adopt the Proposed Operating and Capital Budgets for the Utilities Departmentfor Fiscal Year 2024 (ACTION 7:35 pm – 8:35 pm)COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTSFUTURE TOPICS FOR UPCOMMING MEETING ‐ June 07, 2023ADJOURNMENTSUPPLEMENTAL INFORMATIONThe materials below are provided for informational purposes, not for action or discussion during UAC Meetings (Govt. CodeSection 54954.2(a)(3)).INFORMATIONAL REPORTSUtilities Quarterly Report Update for Q2 of FY 2023Informational Update on Background and Options for California Oregon Transmission Project
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. W r i t t e n p u b l i c c o m m e n t s m a y b e s u b m i t t e d b y e m a i l t o
UACPublicMeetings@cityofpaloalto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
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.
You may 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.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a 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.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
Item No. . Page 1 of 2
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: May 3, 2023
Staff Report: 2303-1207
TITLE
Approval of the Minutes of the Utilities Advisory Commission Meeting Held on March 01, 2023
RECOMMENDATION
Staff recommends that the UAC consider the following motion:
Commissioner ______ moved to approve the draft minutes of the March 01, 2023 meeting as
submitted/amended.
Commissioner ______ seconded the motion.
ATTACHMENTS
Attachment A: 03-01-2023 DRAFT UAC Minutes
AUTHOR/TITLE:
Jenelle Kamian, Program Assistant I
Item No. . Page 2 of 2
Utilities Advisory Commission Minutes Approved on: Page 1 of 19
UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF MARCH 1, 2023 SPECIAL MEETING
CALL TO ORDER
Chair Segal called the meeting of the Utilities Advisory Commission (UAC) to order at 4:32 p.m.
Present: Chair Segal, Vice Chair Johnston, and Commissioners Bowie, Forssell, Metz, Scharff and
Smith
Absent:
AGENDA REVIEW AND REVISIONS
None
ORAL COMMUNICATIONS
None
APPROVAL OF THE MINUTES
Chair Segal invited comments on the February 1, 2023 UAC draft meeting minutes.
Commissioner Forssell suggested changing the wording under Future Topics to read, “...simplifying the
topic to not discuss what the process should be but simply have a quick report on how much
undergrounding has happened in the last five years.”
Vice Chair Johnston moved to approve the draft minutes of the February 1, 2023 meeting as amended.
Commissioner Metz seconded the motion.
The motion carried 7-0 with Chair Segal, Vice Chair Johnston and Commissioners Bowie, Forssell, Metz,
Scharff, and Smith voting yes.
UNFINISHED BUSINESS
None
UTILITIES DIRECTOR REPORT
Dean Batchelor, Utilities Director, delivered the Director's Report.
Power Outages During Wind Storm: In Palo Alto, crews managed six power outages from the afternoon
of February 21 through 3 a.m. on February 22 caused by last week’s heavy winds. The outages were
caused by downed trees or branches and affected approximately 4,200 customers. Utilities staff
Utilities Advisory Commission Minutes Approved on: Page 2 of 19
provided continual communication via Twitter accounts, our outage management maps were updated
and the website was live during this timeframe.
Water Supply Update: The City’s water supplier, San Francisco Public Utilities Commission (SFPUC),
projected a preliminary rate increase of 11.6% from the current wholesale water rate of $4.75/ccf.
SFPUC will determine the final rate increase in May, which would be effective July 1, 2023. SFPUC
provided an initial water supply estimate. Final numbers will be released in April. SFPUC is not making
any changes to our reduction requests. SFPUC continues to monitor water supply conditions and State
actions regarding its emergency drought declaration.
Hydroelectric Update: As of February 27, precipitation totals are about 16% and 50% above average for
this time of year in Northern California and Central California, respectively. Snowpack levels are about
45% and 85% above average in Northern and Central California, respectively, so we should see some
late runoffs. The City’s hydro resources are projected to produce around 79% of the long-term average
level of output this fiscal year and 96% of our long-term average level in FY 2024.
Full-Service Heat Pump Water Heater Pilot Program: Residents have been completing interest forms to
participate or receive more information on the program’s full-service installation once it fully launches.
As of February 27, we have received almost 360 program sign-ups and completed five site assessments.
A group of community volunteers coordinated by 350 Palo Alto recently began door-to-door canvassing
to promote the program, so more sign-ups are expected. To drive further participation, the City is hiring
a marketing consultant to work with staff, stakeholders, policymakers and community partners on an
electrification marketing plan to launch later this year.
Home Water Reports Launch: The City recently launched WaterSmart, an online water management
tool open to all City of Palo Alto Utilities (CPAU) customers. WaterSmart provides access to water use
charts and recommendations for water efficiency to help residents and businesses save water and
money. Starting in March, the City will send Home Water Reports containing information on a
customer’s water use and comparisons to similar-sized Palo Alto households. Water savings from those
reports will be evaluated through efficiency studies.
E-Bike and EV Discount Campaigns: CPAU is proud to offer two new campaigns in March offering
discounts on electric bicycles (e-bikes) and electric vehicles (EVs). The e-bike program is available from
March 1-22 in partnership with Palo Alto Bicycles and includes a discount on select models and free
lifetime tune-ups for e-bikes purchased during the campaign. The EV discount campaign is available
from March 6-31.
Upcoming Events: Details and registration at cityofpaloalto.org/workshops
•March 5: CPAU staff will host a booth at the Palo Alto Art Center Family Day event to
talk with residents about the heat pump water heater offering and other programs.
•March 8 and 28: “E-Bike 101” webinars.
•March 15: CPAU hosts an “EVs for Backup Power” webinar. Ride and Drive Clean will talk
about resiliency and bidirectional charging.
•March 16: In-person community engagement sessions to talk with residents at Palo Alto
Gardens about installing EV chargers at their property. This project is in partnership with
MidPeninsula Housing Authority.
•July 15: Open House at MSC from 9:30 to 2:30 is being planned.
Utilities Advisory Commission Minutes Approved on: Page 3 of 19
Chair Segal inquired if the trees that caused power outages were in areas where we planned to or had
done tree maintenance and if we need to increase tree maintenance. Mr. Batchelor replied that two
outages were in areas where trees were trimmed last year, so there was clearance but the fallen trees
took out some of the secondary portions. The large tree that broke the pole was a private tree, not on
the list to be trimmed. It fell and snapped the primary and secondary wires.
NEW BUSINESS
ITEM 1: ACTION: Staff Recommend the Utilities Advisory Commission Recommend the Finance Committee
Recommend that the City Council Adopt a Resolution Approving the FY 2024 Wastewater Collection Utility
Financial Plan Including Reserve Transfers and Increasing Wastewater Rates by Amending Rate Schedules
S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and
Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7 (Commercial Wastewater
Collection and Disposal – Industrial Discharger)
Utilities Advisory Commission Minutes Approved on: Page 4 of 19
The drought has continued. In April, we will know the impacts on electric and water utilities. We have not
reached average annual precipitation in the Northern Sierras where most of the state’s water and most
of our hydropower comes from. The biggest reservoirs in the state are below historical average. Drought
regulations and environmental regulations govern flows and allocation of water between water users and
power users. An increase in capital investment is needed due to aging wastewater and electric system
infrastructure. The treatment plant needs to be upgraded. We need to increase our rate of investment in
the sewer system. We need to modernize the grid to accommodate community electrification.
Construction inflation and other types of inflation continue to affect utility costs, including increases in
general expenses, salary and benefit costs.
Utilities Advisory Commission Minutes Approved on: Page 5 of 19
Silvia Santos, Engineering Manager, Water Gas Wastewater, addressed Commissioner Smith’s query as to
the reason for moving main replacement to FY 2023. The FY 2023 project was planned at a rate of 1
mile/year. The 2024 project had to move to 2023 to replace sewer mains on El Camino Real because our
work has to coordinate with the Caltrans repaving project on El Camino. The bids came in 107% higher
than the last sewer project, which is a couple million dollars more than our engineering estimate.
Commissioner Smith remarked that if construction costs are increasing from 9.9% to 11.3% per year, we
are not asking for enough money because we are bringing in less revenue than we need on a yearly basis.
Mr. Batchelor explained that it cost an additional $2M because the mains were deep, about 15 to 17 feet
at El Camino. When the engineering estimate was done, we did not realize how deep the mains were.
Mains are usually found between 5 to 8 feet.
Commissioner Forssell asked if the 6.2% and 3.7% cost increases should be added to total 9.9% or a
weighted average of cost increases to determine the actual cost increase. Ms. Bilir responded that they
are not additive because they are different components of costs going up at different rates (6.2%, 3.7%
and 1.4%). It would be within that range, not as much as 9% or 11%. Commissioner Smith expressed his
concern that we are not charging enough.
Commissioner Smith requested the calculation be verified on Page 11 of 15 regarding the rate increase
resulting in residential rates to be 26% lower than the current average neighboring community.
Ms. Bilir confirmed Commissioner Smith’s understanding that the $3.2M transfer was primarily to bring
FY 2024 into FY 2023 and the replenishment of the CIP Reserves between 2026 and beyond pays for the
acceleration of wastewater pipe replacement to within 100 years. If the CIP Reserve goes down to zero,
Commissioner Smith advised a 10% increase because money needs to accumulate before FY 2026.
Regarding the alternative scenarios on Slide 7 for delaying implementation of the 2½ mile/year
replacement, Vice Chair Johnston asked how to predict which pipes were most in need of replacement.
Ms. Santos replied that the best way to evaluate conditions is by CCTV. Operations was asked to include
a CCTV inspection when they do maintenance to capture the image and rate the defects to help prioritize
the replacement program. Vice Chair Johnston stated that the replacement timeframe was beyond the
projected useful life of the pipes. Unless there was a reliable way of assessing the condition of those pipes,
he was reluctant to push replacement out any further and risk a catastrophic failure. He preferred starting
main replacement at a rate of 2½ per year in FY 2026 or before.
Commissioner Scharff supported Commissioner Johnston’s comments. He preferred staff’s
recommendation of getting it done in 2026. Ms. Bilir remarked that the financial plan was written using
staff’s recommendation. If the UAC and Finance Committee recommended an alternative, staff would
rewrite the financial plan and update the tables and figures.
In response to Commissioner Scharff’s understanding that revenues would match costs and we would
have the right reserve amounts over a five-year period, Ms. Bilir confirmed that was correct and expressed
staff’s confidence in their proposal. The overall average cost increase was 6.8%. With a 9% rate increase,
revenues would match costs. Commissioner Scharff supported staff’s recommendation.
Commissioner Forssell thinks we need to replenish our reserves, cover our costs and replace our sewer
mains to prevent future incidents. She supported staff’s recommended proposal.
Utilities Advisory Commission Minutes Approved on: Page 6 of 19
Chair Segal pointed out that the difference between 9% and 6% was 50 cents/month. She supported staff’s
recommendation. She wondered whether we were paying the proper share to maintain the plant, how
the allocation was determined, when it was last determined and whether it was time to reconsider if our
cost allocation was correct. Karin North, Assistant Director Public Works, responded that the cost
allocation for the facility was discussed during meetings with the Finance Committee and Council when
we looked at upgrading our secondary treatment plant. The long-range facility plan needed to be updated
as well as looking at cost allocation across the partners. An RFP is being crafted to go out to bid for a
consultant but it is anticipated it will take a few years to get that completed. James Allen, Manager, Water
Quality Control Plant Manager, said they will look at the cost allocation methodology for fixed allocated
capacity in the treatment plant, how that was determined in the past and whether it was worthy of being
changed. The annual operating cost fluctuates based on flow and strength of wastewater measured with
various instruments and billed annually.
ACTION: Commissioner Forssell moved Staff request the Utilities Advisory Commission (UAC) recommend
the Finance Committee recommend the City Council:
Utilities Advisory Commission Minutes Approved on: Page 7 of 19
Motion carried 7-0 with Chair Segal, Vice Chair Johnston, and Commissioners Bowie, Forssell, Metz,
Scharff, and Smith voting yes.
ITEM 2: ACTION: Staff Recommend the Utilities Advisory Commission Recommend the Finance Committee
Recommend that City Council Adopt a Resolution Approving the Fiscal Year 2024 Water Utility Financial
Plan, Including Reserve Transfers, and Increasing Water Rates by Amending Rate Schedules W-1 (General
Residential Water Service), W-2 (Water Service From Fire Hydrants), W-3 (Fire Service Connections), W-4
(Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential
Irrigation Water Service)
Utilities Advisory Commission Minutes Approved on: Page 8 of 19
In reply to Commissioner Smith’s query if they considered in their financial model an alternative of flat-
line increases of 4.8 to 5, Ms. Bilir answered yes but it led to a higher rate increase in FY 2024, so one of
the benefits of taking this approach was reducing the overall impact on customers.
Utilities Advisory Commission Minutes Approved on: Page 9 of 19
ACTION: Vice Chair Johnston moved Staff request that the Utilities Advisory Commission (UAC)
recommend the Finance Committee recommend the City Council:
1. Adopt a resolution (Attachment A):
a. Approving the Fiscal Year (FY) 2024 Water Utility Financial Plan (Linked Document); and
b. Approving a transfer of up to $3.746 million from the Capital Improvement Program (CIP)
Reserve to the Operations Reserve in FY 2023; and
c. Approving a transfer of up to $3.0 million from the Rate Stabilization Reserve to the
Operations Reserve in FY 2023; and
d. Increasing Water Utility Rates Via the Amendment of Rate Schedules W-1 (General
Residential Water service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service
Connections), W-4 (Residential Master-Metered and General Non-Residential Water
Service), and W-7 (Non-Residential Irrigation Water Service).
Seconded by Commissioner Smith.
Motion carried 7-0 with Chair Segal, Vice Chair Johnston, and Commissioners Bowie, Forssell, Metz,
Scharff, and Smith voting yes.
The UAC took a break from 6:08 p.m. to 6:17 p.m.
ITEM 3: ACTION: Staff Recommends That the Utilities Advisory Commission Recommend that the Finance
Committee recommend that the City Council Adopt a Resolution Approving the Fiscal Year 2024 Gas Utility
Financial Plan, Including the Proposed Reserve and General Fund Transfers, and Amendment to the Gas
Utility Reserve Management Practices, and Increasing Gas Rates by Amending Rate Schedules G-1
(Residential Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), G-3 (Large
Commercial Gas Service), and G-10 (Compressed Natural Gas Service)
Jonathan Abendschein, Assistant Director, Utilities Resource Management, delivered a slide presentation
on the Gas Utility Financial Plan and Proposed Rate Changes for FY 2024. We had extreme gas prices this
winter but prices were coming down over the next few months, which would reflect in the March utility
bills. Distribution revenues are currently below costs, so rates need to be increased in July. Gas supply
rates are composed of commodity (the cost of gas purchased at market prices), transmission (the cost to
transport gas to Palo Alto), the Cap and Trade program (mandated participation in the State program) and
our City of Palo Alto Carbon Neutral Gas Portfolio charge for buying offsets. These rates pass through the
actual costs the utility incurs for these components. Distribution rates represent the costs for the City to
maintain its gas distribution system to transport gas to customers and to run our customer service center.
Distribution rates are 20% below cost. Reserves are very low. Staff requests a 21% distribution rate
increase on July 1, which results in an approximately 8% increase in the overall bill. Overall gas supply
costs were projected to be about 36% lower in FY 2024, so the net effect is customers would pay about
13% less in utility bills in FY 2024 than FY 2023. Measure L changed the methodology for General Fund
transfers to a percentage of revenues, transfers are 18% of the gas utility gross revenues but Council can
choose to transfer less. A chart was displayed demonstrating the amount of General Fund transfers if 18%
of revenues was transferred each year. The significant increases in gas market prices and gas supply costs
could lead to significant increases in the transfer amounts over the next few years. Alternative 2 was to
transfer 15.5% for FY 2024. If the City continued to transfer less than 18% over the future years, it would
yield a growth in the General Fund transfer that matched CPI (Consumer Price Index), similar to the growth
Utilities Advisory Commission Minutes Approved on: Page 10 of
19
rate prior to the passage of Measure L. Staff is requesting the UAC and Finance Committee to make a
recommendation to Council on which alternative to pursue.
Utilities Advisory Commission Minutes Approved on: Page 11 of
19
Vice Chair Johnston commented on the various alternatives. With Alternative 2, he would support having
increases equal to CPI. Commissioner Scharff supported transfers closer to CPI. He does not think it was
the intent of the voters to provide windfalls when commodity price spike. He recommended that the UAC
choose 15.5%.
Commissioner Scharff asked if staff would come to the UAC with the hedging strategy before going to
Council. Mr. Abendschein responded yes, that would be a UAC discussion item. Commissioner Scharff
remembered there was a three-year hedging strategy that Council voted to get rid of it because our prices
were higher over the long term. You can buy less volatility but pay more for gas. We are not energy
traders, so it takes luck to hedge in a way that beats the market. We have to be careful that we do not
lock in high prices. His recollection on laddering was we were consistently higher than PG&E over the long
run because they did not use our same hedging strategy. Mr. Abendschein remarked that PG&E was
underinvesting in their system at the time and as they started to ramp up investment it was more
competitive because we were ahead on system investment. However, they also did not have a laddering
strategy so when gas prices dropped around 2008, PG&E passed those savings through to customers. Palo
Alto prices were higher than PG&E’s for several years because of the long-term hedges.
Mr. Abendschein showed a chart on Page 20 of the staff report, Winter 2022/2023 Price Spike. Prices for
the last few years were between 30 cents to 50 cents/therm up until 2022 when they started to rise,
reaching $5/therm in January 2023. The chart is in $/MMBTU, which is the price per therm multiplied by
10.
Commissioner Forssell stated that a concerned customer asked her about the relationship between an
individual customer’s billing cycle and the variability of gas rates. Mr. Abendschein explained that people
were billed for their usage at the price for that month. If somebody has a billing cycle with half of it in
January and half in February, half of their consumption would be billed at the January rate and half at the
February rate. How much you pay for gas was based on when your meter was read and the consumption
was split between the two months. Commissioner Forssell commented that the Utility does not know
whether consumption was largely weighted toward January or February for that hypothetical customer
and Mr. Abendschein confirmed that was true.
In reply to Commissioner Forssell’s question if the transfer amounts to the General Fund prior to Measure
L were about 18% of gas revenue at the time. Mr. Abendschein replied yes. Looking back five or six years,
the transfer amount varied but it was roughly 18%. Commissioner Forssell supported staff’s
recommendation of 15.5%, as she did not think it was the intent of voters to create a windfall when
commodity prices increased.
Commissioner Forssell asked about the timeline for the Miriam Green settlement to return funds to
customers from the General Fund. Dean Batchelor, Utilities Director, replied that he was waiting to hear
back from City Attorney Molly Stump on when those funds (about $15M) would be released.
Commissioner Forssell requested further explanation on the Cap and Trade program and its effect on the
financial state of the Utility. The City received allowances but she did not know if we were required by law
to sell them on the marketplace and buy allowances back to cover our usage. She wondered if we bought
and sold at the same price, if it was a net cost, net revenue or if it varied. Mr. Abendschein stated he could
not talk about our bidding or consignment strategies because of regulations to prevent market
manipulation. The money we receive from auctioning off allowances has to be held aside for the specific
Utilities Advisory Commission Minutes Approved on: Page 12 of
19
purposes in the regulation; we cannot net it against our purchases. We have to purchase a certain amount
and pass that cost directly through to customers to provide a price signal related to the price of carbon in
the capturing program. The regulation allows revenues to be used for carbon-reducing activities or
returned to customers in the form of a climate credit but they cannot be tied to consumption. Local
policies adopted by Council in 2014 for the gas utility specified the uses, which include emissions-reducing
activities and gas efficiency. Staff spoke with Council last fall about amending the list to include building
electrification. Another policy stated these funds have to be used for the benefit of gas ratepayers. Our
local regulations state that climate credits require Council approval.
Utilities Advisory Commission Minutes Approved on: Page 13 of
19
Regarding the commodity price spike, Commissioner Metz commented that City Council and ratepayers
were very concerned and it required a visible and transparent analysis to address what happened and
what we were doing to improve it.
Commissioner Metz wondered why we were depleting the distribution reserve to pay for commodity
costs. He questioned whether that was wise because it masked the true drivers of costs and impeded our
ability to make decisions on cost control and price structure. A 21% distribution rate increase was
proposed. According to Page 7, 49% of the proposed distribution rate increase was to replenish the
distribution reserve that was depleted to pay for high gas commodity costs. Commissioner Metz thought
it was a bad business practice to move money between reserve funds that were not related, such as CIP
to Operations or Commodities. Mr. Abendschein stated that Commissioner Metz’s ideas were worth
investigating, especially as they assess what can be done differently to more accurately and closely track
the drivers of our different costs over the next year. But also, practically, when you have separate reserves
for different purposes and one of them is wiped out, you need to tap into other reserves to keep your
utility healthy.
Commissioner Metz expressed his concern that transfers between supply and distribution reserves
misrepresents where our costs are coming from and could be subject to challenge. Mr. Abendschein
responded that he could not speak to it being subject to challenge but said staff made a conscious effort
to minimize transfers this year.
Council Member Lauing asked what staff’s plan was if Finance did not think that citizens should tolerate
an 8% increase and he requested that the Commission discuss this topic. Mr. Abendschein commented
that alternatives were limited in the gas utility, which is one of the utilities with the highest regulatory
obligations, best-practice safety obligations and moral obligations. There were opportunities to cut costs
but that would require cutting back on safety-related capital investment in the gas utility, slowing down
projects such as the cross-bore program or significant cuts to operational staff. Mr. Batchelor reiterated
that the City would have to cut out or reduce the CIP program. There was about $800,000 in the four-year
cross-bore program, for example. Staff would have to explain to Council what the safety factors were and
see if Council was willing to take on those risks. Other options would be to look at other sources, perhaps
cut some O&M expenses, but there was not many opportunities in those areas.
Commissioner Forssell remarked she would tread very carefully on trying to cut utility costs. Council could
take a different direction and cut the carbon offset program, although she does not think it would save a
lot of money. Cutting the General Fund transfer could reduce the rate increase and would not hurt the
gas utility’s ability to operate safely and reliably, though she did not want to set a precedent of having
Measure L but not utilizing it.
Chair Segal worried that Council would focus on percentage numbers, so she thought it was important to
speak of the increase in terms of dollar amounts. It was important for the community to understand that
they benefitted from rate increases being held down for two years during COVID, and the utilities were
catching up from operating at a deficit. It was important to emphasize the programs to help people who
are struggling. The utilities are below the risk assessment in our reserves. She advised staff to look for
ways to combine projects or give a contractor multiple projects, being more creative on how to save on
projects. She suggested more creativity in compensating staff besides raising comp every year, maybe
providing housing stipends, to alleviate some of the costs that go up every year.
Utilities Advisory Commission Minutes Approved on: Page 14 of
19
Commissioner Smith echoed the comments of his fellow commissioners. COVID put us on hold. The REC
exchange program was approved because we were in need of money. It was recently agreed that money
from the REC exchange would go to decarbonization efforts. He thinks we need to be more creative with
how we spend that revenue. We put rates below our cost for two years but we need to pay for it. We
need to bring things up to code and we have an old system. The conversation about replacing our old
infrastructure will continue into the next several years. We need to turn to electrification. We have an
older electrical grid. These will cost massive amounts of money. He cautioned that we are not in a position
to offer rate discounts.
ACTION: Commissioner Scharff moved Staff request that the Utilities Advisory Commission (UAC)
recommend the Finance Committee recommend the City Council adopt a resolution (Attachment A):
Utilities Advisory Commission Minutes Approved on: Page 15 of
19
Commissioner Metz believed the issues of transfers between supply and distribution reserves needed to
be addressed before he could support the proposal.
The motion carried 6-1 with Chair Segal, Vice Chair Johnston, and Commissioners Bowie, Forssell, Scharff,
and Smith voting yes, Commissioner Metz voting no.
The UAC took at break at 7:27 p.m. and resumed at 7:48 p.m.
ITEM 4: ACTION: Staff Recommends the Utilities Advisory Commission Recommend that the Finance
Committee Recommend that the City Council Adopt a Resolution Approving the Fiscal Year 2024 Electric
Financial Plan and Proposed Reserve Transfers, and Amending Rate Schedules E-HRA (Hydro Rate
Adjuster), E-1 (Residential Electric Service), E-2 (Residential Master-Metered and Small Non-Residential
Electric Service), E-2-G (Residential Master-Metered and Small Non-Residential Green Power Electric
Service), E-4 (Medium Non-Residential Electric Service), E-4-G (Medium Non-Residential Green Power
Electric Service), E-4 TOU (Medium Non-Residential Time of Use Electric Service), E-7 (Large Non-
Residential Electric Service), E-7-G (Large Non-Residential Green Power Electric Service), E-7 TOU (Large
Non-Residential Time of Use Electric Service), E-NSE (Net Metering Net Surplus Electricity Compensation),
and E-EEC (Export Electricity Compensation)
Micah Babbitt, Resource Planner, delivered a slide presentation on the Electric Utility Financial Plan and
Proposed Rate Changes for FY 2024. Staff’s proposal resulted in no change to average system rates. Staff
recommended reducing the Hydroelectric Rate Adjuster (HRA) by 50% and increasing base rates by 14%,
so on net this should have little change to customer bills. Rates were kept flat during the pandemic. In
April 2022, the HRA was activated. On July 1, 2022, the base rates were increased by 5%. Council voted to
increase the HRA effective January 1, 2023. Costs have exceeded revenues since FY 2021. Costs were
projected to be above revenues for FY 2023. The Operations Reserve was about $20M lower than
projected. It will drop slightly below the minimum guidelines but will be above the risk assessment level.
There were multiple contributing factors driving our costs higher. We have had multiple years of drought.
Hydro projections were reduced by 20% to be more conservative with the hope that we will not have to
activate the HRA as frequently. The current level of precipitation was about 43.5 inches including the
Northern Sierra Watershed, the main watershed that drives a lot of our hydro. The watershed’s average
yearly precipitation is about 53 inches. Reservoirs started from a very low point, so we likely will not start
realizing some of this value for the next 12 to 24 months. There have been significantly higher electric
prices, which have increased 300% from 2020 to 2022. The financial plan included about $200M of grid
modernization investments that start as soon as this fiscal year and those debt service costs start showing
up in FY 2025 and grow to about $9.5M in FY 2028.
Regarding the HRA that was recently increased and was now being proposed to be cut in half,
Commissioner Metz asked if there was a plan to have something that more accurately reflected our actual
cost of electricity supply in real time without requiring City Council input when there was a big change in
energy prices. Mr. Babbitt responded that increasing the base rates was an attempt to bring our revenues
in line with costs. The primary reason for the proposed change in the HRA rate was a change in the cost
of replacement power we have to buy. Staff is working on a cost-of-service study for the electric utility.
One of staff’s work tasks is to look at transitioning the rate to a Power Cost Adjustor indexed to the market
prices we pay and adjusted on a quarterly or monthly basis.
Utilities Advisory Commission Minutes Approved on: Page 16 of
19
In reply to Commissioner Metz’s query as to why the NEM-2 solar payment had an approximately 60%
increase, Mr. Babbitt replied it was tied to our weighted cost of electricity. Chair Segal and Commissioner
Forssell had the same question about NEM-1 and NEM-2 because the methodology for both was a
weighted cost but one was about 14 cents and the other was 15 cents. Mr. Babbitt explained that one
was backward looking at what our actual costs were and one was forward looking at what costs were
expected to be. Jonathan Abendschein, Assistant Director, Utilities Resource Management, added that
these two Net Energy Metering (NEM) programs were different ways of compensating for solar. NEM-2
was current. NEM-1 was looking back over a year and balancing surpluses against deficits. NEM-1 was
governed by a set of regulations while NEM-2 was not.
Utilities Advisory Commission Minutes Approved on: Page 17 of
19
design time-of-use rates. By 2024, they are targeting to have pilot rates for AMI customers as well as an
electric-only rate for those who have electrified so they are not penalized with a higher tier.
ACTION: Commissioner Smith moved Staff request that the Utilities Advisory Commission (UAC)
recommend the Finance Committee recommend the City Council adopt a Resolution (Attachment A):
Utilities Advisory Commission Minutes Approved on: Page 18 of
19
3. Approving the following transfers at the end of FY 2024:
a. Up to $3 million from the Supply Operations Reserve to the Cap and Trade Program
Reserve; and
4. Approving the following rate actions for FY 2024:
a. A decrease to the retail electric rate schedule E-HRA (Hydroelectric Rate Adjuster) of 50%
effective July 1, 2023;
b. An increase to retail electric rates E-1 (Residential Electric Service), E-2 (Small Non-
Residential Electric Service), E-4 (Medium Non-Residential Electric Service), E-4 TOU
(Medium Non-Residential Time of Use Electric Service), E-7 (Large Non-Residential Electric
Service), and E-7 TOU (Large Non-Residential Time of Use Electric Service) of 14% effective
July 1, 2023;
c. An increase to the Export Electricity Compensation (E-EEC-1) rate to reflect 2022 avoided
cost, effective July 1, 2023;
d. An increase to the Net Surplus Electricity Compensation (E-NSE-1) rate to reflect current
projections of FY 2023 avoided cost, effective July 1, 2023; and
e. An update to the Residential Master-Metered and Small Non-Residential Green Power
Electric Service (E-2-G), the Medium Non-Residential Green Power Electric Service (E-4-G),
and the Large Non-Residential Green Power Electric Service (E-7-G) rate schedules (Linked
Document) to reflect modified distribution and commodity components, effective July 1,
2023.
Seconded by Commissioner Forssell.
The motion carried 7-0 with Chair Segal, Vice Chair Johnston, and Commissioners Bowie, Forssell, Metz,
Scharff, and Smith voting yes.
COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS
Commissioner Smith stated this was his last meeting. He had a delightful three years on the UAC. He has
loved working with staff. He thanked his fellow UAC commissioners.
Vice Chair Johnston remarked this was his last meeting also. He enjoyed the seven years he spent on the
UAC. He appreciated how fortunate Palo Alto was to have a Utility staff that was hard working,
knowledgeable, creative and did a great job.
It was Commissioner Bowie’s last meeting as well. He thanked staff for the hard work that goes into
keeping the lights on and everything running and for allowing citizens to participate in the Utility. He
thanked Council for the opportunity to sit on the UAC as well as thanks to the people of Palo Alto.
Chair Segal thanked Commissioners Smith, Bowie and Vice Chair Johnston and wished them luck on their
next endeavors. We are all volunteers and it takes a lot of time and effort. They were prepared and
brought thoughtful comments and passion. She enjoyed working with them.
Commissioner Scharff commented it was a loss for the UAC to lose Vice Chair Johnston and Commissioners
Smith and Bowie at the same time. He enjoyed working with them.
FUTURE TOPICS FOR UPCOMING MEETINGS
Utilities Advisory Commission Minutes Approved on: Page 19 of
19
Commissioner Metz noted the 12-month rolling calendar was four months long. He suggested adding
dates going out 12 months to the items that need to be scheduled. It does not have to be next month but
he proposed discussing staffing problems. Discussion ensued.
NEXT SCHEDULED MEETING: April 5, 2023
Item No. . Page 1 of 1
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: May 3, 2023
Staff Report: 2304-1334
TITLE
Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 12, 2023
RECOMMENDATION
Staff recommends that the UAC consider the following motion:
Commissioner ______ moved to approve the draft minutes of the April 12, 2023 meeting as
submitted/Amended.
Commissioner ______ seconded the motion.
ATTACHMENTS
Attachment A: 04-12-2023 UAC DRAFT Minutes
AUTHOR/TITLE:
Jenelle Kamian, Program Assistant I
UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF APRIL 12, 2023 SPECIAL MEETING
CALL TO ORDER
Chair Segal called the meeting of the Utilities Advisory Commission (UAC) to order at 6:02 p.m.
Present: Chair Segal and Commissioners Croft, Forssell, Mauter, Metz, Phillips and Scharff
Absent:
Chair Segal welcomed new Commissioners Rachel Croft, Meagan Mauter and Robert Phillips.
AGENDA CHANGES, ADDITIONS AND DELETIONS
None
PUBLIC COMMENT
None
NEW BUSINESS
ITEM 1: ACTION: Staff Recommends the Utilities Advisory Commission Review and Approve the Utilities
Advisory Commission's FY 2023-2024 Annual Work Plan, and Recommend the City Council Review the
Work Plan and Provide Feedback
Chair Segal invited comments on the Annual Work Plan. The Current Commissioners section needs to be
updated.
Mission Statement:
Suggestions included adding resource acquisition in the third line after wastewater collection. In the top
line of Packet Page 7, change energy efficiency to efficiency (delete energy). In first item of bulleted list,
change any major utility to any utility (delete major).
Prior Year Accomplishments:
Commissioner Forssell noted that fiber was not included. Mr. Batchelor agreed. Staff will add fiber.
Standing Topic 1:
Commissioner Metz commented that fair treatment of ratepayers, compliance with laws and regulations,
especially regarding equitable rates and CPAU financial solvency are the main ingredients of budgets. He
suggested that the Measure of Success could note some impact beyond getting our plan approved.
Commissioner Phillips thought Commissioner Metz’s wording could fall under Beneficial Impacts and tie
a specific goal to it. If the goal is the community having a better understanding, there should be a way of
measuring it.
Standing Topic 5:
Chair Segal suggested deleting “discuss the” from the title and start the sentence with launch and
deployment.
Commissioner Mauter remarked that as Palo Alto considers moving toward a stronger water reuse
component, it is incredibly important to be proactive about communicating the benefits or changes in
water quality associated with water reuse plans. She would like to include that in the One Water Plan
discussion or the water quality topic. Mr. Batchelor stated that One Water discusses recycling. Topic 7 is
about testing at different points throughout the system.
ACTION: Commissioner Scharff moved to approve the UAC 2023-2024 annual work plan as amended.
COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS
None.
None.
Tabatha Boatwright, Utilities Administrative Assistant, reminded the UAC that in May the agenda will
include selecting the chair, vice chair and subcommittee members in addition to the usual full agenda.
May 3, 2023
Commissioner Metz moved to adjourn.
Commissioner Phillips seconded the motion.
The motion carried 7-0 with Chair Segal and Commissioners Croft, Forssell, Mauter, Metz, Scharff and
Phillips voting yes.
Meeting adjourned at 8:08 p.m.
Item No. 1. Page 1 of 2
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: May 3, 2023
Staff Report: 2304-1317
TITLE
Approval of UAC Chair and Vice Chair to Serve a Short Term of May 3, 2023 to March 31, 2024
RECOMMENDATION
Recommended Motion
Commissioner ____ moved to approve Commissioner ____ as Chair.
Motion seconded by Commissioner ___.
Commissioner ___ moved to approve Commissioner ___ as Vice Chair.
Motion seconded by Commissioner ___.
EXECUTIVE SUMMARY
Annually the Chair and Vice Chair are selected at the beginning of the new recruitment term for
a period of one year, from the first meeting in April through March of the following year.
This matter is agendized so Commissioners can appoint a Chair and Vice Chair for a short term
from May 3, 2023 through March 31, 2024.
Item No. 1. Page 2 of 2
AUTHOR/TITLE:
Jenelle Kamian, Program Assistant I
Item No. 2. Page 1 of 1
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: May 3, 2023
Staff Report: 2304-1316
TITLE
Approval of UAC Budget Subcommittee Members to Serve a Short Term of May 3, 2023 to
March 31, 2024
RECOMMENDATION
Recommended Motion
Commissioner ___, Commissioner ___, and Commissioner ___ volunteered to be on the Budget
Subcommittee for a short term of May 3, 2023 to March 31, 2024.
EXECUTIVE SUMMARY
Historically, two or three Commissioners serve on a UAC Budget Subcommittee and will meet
with Utilities Staff outside of the regular UAC monthly meetings to learn about and review the
Utilities budget. The budget item(s) will come to the full UAC for additional discussion and action.
This matter is agendized so the UAC can approve member appointments to the UAC’s Budget
Subcommittee.
AUTHOR/TITLE:
Jenelle Kamian, Program Assistant I
Item No. 3. Page 1 of 3
1
6
1
2
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: May 3, 2023
Staff Report: 2301-0857
TITLE
Discussion and Presentation of Utilities Strategic Plan Implementation
EXECUTIVE SUMMARY
This meeting is part of an ongoing discussion on the implementation of the 2018 Utilities
Strategic Plan (Staff Report No. 9022)1. The Utilities Strategic Plan identified four high priority
focus areas:
1. Workforce;
2. Collaboration;
3. Technology; and
4. Financials
DISCUSSION
The Utilities Strategic Plan provides a map for implementing priorities, strategies, and actions
which aligns with the Palo Alto Utilities’ Mission of Providing Safe, Reliable, Environmentally
Sustainable and Cost-Effective Services. The plan is comprised of four priorities reflecting the
needs of the organization and customers, and steps to help meet these needs. Each of the four
priorities contain multiple strategies and detailed actions.
Priority #1- Workforce
We must create a vibrant and competitive environment that attracts, retains, and invests in a
skilled and engaged workforce.
The City of Palo Alto Utilities (CPAU), along with other utilities providers throughout the state
and country, struggle with attracting and retaining a skilled workforce. For Palo Alto, this is even
more complicated as the cost of living and/or relocating to the Bay Area is among the highest in
the nation. The Workforce priority reflects the need to improve retention and recruitment efforts
1 Staff Report 9022 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-
manager-reports-cmrs/year-archive/2014/final-staff-report-id-4547_amendment-no-1-to-cotp-long-term-
layoff.pdf
Item No. 3. Page 2 of 3
1
6
1
2
to ensure CPAU has the staff and/or workforce solutions to meet its core service obligations and
customers’ expectations on a long-term basis. The strategies and actions identified are intended
to focus in the areas of retention, recruitment, training and work-life balance.
Priority #2: Collaboration
We must collaborate with internal teams and external stakeholders to achieve our shared
objectives of enhanced communication, coordination, education and delivery of services.
Priority #3: Technology
We must invest in and utilize technology to enhance the customer experience and maximize
operational efficiency.
Priority #4: - Financial Efficiency and Resource Optimization
We must manage our finances optimally and use resources efficiently to meet our customers’
service priorities.
Item No. 3. Page 3 of 3
1
6
1
2
sustainable and competitive in the market while optimizing resources is key to maintaining and
enhancing value to customers. Strategies in this Priority focus on proactively renewing and
managing CPAU’s infrastructure, continuously improving financial processes, enhancing
infrastructure maintenance programs, defining CPAU’s role in community resiliency, and
achieving sustainable energy resource and water supply plans.
ATTACHMENTS
APPROVED By:
May 3, 2023 www.cityofpaloalto.org
UTILITIES STRATEGIC PLAN
FY23 Progress Update
(07/01/22-12/31/22)
Staff: Anna Vuong; Catherine Elvert,
Dave Yuan and Jonathan Abendschein
.CITY OF
-PALO ALTO
IMPLEMENTATION
2
The Utilities Strategic Plan (USP) was adopted in 2018 to meet Palo Alto Utilities’ Mission of providing (S)afe, (R)eliable, (E)nvironmentally sustainable and (C)ost-effective services.
Implementation of the plan was organized by
Four priority focus areas (workforce, collaboration, technology, & finance/resources)
Specific strategies for each priority
Individual actions for each strategy (if any)
Priority 1: Workforce
Priority 2: Collaboration
Priority 3: Technology
Priority 4: Finance
Strategy 1.1
Strategy 1.2
Strategy 4.1
Strategy 4.2
Action 1.1.1
Action 1.1.2
Action 1.1.3
Action 4.1.1
Action 4.2.1
Action 4.2.2
Mission:
(S)afe;
(R)eliable;
(E)nvironmentally
Sustainable;
(C)ost-Effective
~CITY OF
~PALO ALTO
HIGHLIGHTS FOR FY 2023
3
•Changes
•Tags for mission and strategies
•(S) = Safety
•(R) = Reliability
•(E) = Environmental sustainability
•(C) = Cost-effective services
•Other updates (KPI, new strategies or initiatives)
•Ongoing: Updates for each fiscal year to be provided to UAC annually
~CITY OF
~PALO ALTO
PRIORITY 1
WORKFORCE
May 3, 2023 www.cityofpaloalto.org
PRIORITY 1:WORKFORCE MISSION & STRATEGIES
5
Mission
Create a vibrant & competitive environment that attracts, retains, & invests in a skilled & engaged
workforce.
Strategies
•S1: Establish CPAU as an organization where employees are proud to work & recruit other strong performers.
(S, R, E)
•S2: Create a workplace that attracts & retains skilled employees. (S, R, E)
•S3: Evaluate & consider alternative workforce solutions to achieve organizational business objectives. (R)
~CITY OF
~PALO ALTO
PRIORITY 1: WORKFORCE ACCOMPLISHMENTS
6
Accomplishments
•Established a system operators training program (S1)
•Developed training & career progression path for water/gas/wastewater engineering (S3)
•Created position vacancy tracking system to assist HR. Established HR Department Liaisons to help
speed up recruitments.(S2)
•Developed extensive list of places to advertise, an outreach strategy guide, & timeline for hiring
managers. (S2)
•Executed engineering & construction contracts to augment Engineering, Electric Operations (S3)
•Hired four new Electric Engineers from Cal Poly San Luis Obispo (S2)
•Implemented remote work schedule for specific workgroups (S3)
•Conducted employee satisfaction survey (S2)
~CITY OF
~PALO ALTO
PRIORITY 1: WORKFORCE INITIATIVES
7
Initiatives in Progress
•Apply training & career path template to other divisions (S1)
•Complete promotion readiness evaluations (S2)
•Explore digital recruitment ads (S2)
•Work on ways to share team-building ideas (S3)
•Continue exploring daycare options (S3)
•Continue exploring retention options (S3)
~CITY OF
~PALO ALTO
PRIORITY 1:KPIs
8
Key Performance Indicator Goals
•Employee turnover rate < 10% by 2020 (3-yr average of filled positions, 197)
•90% of all positions filled annually; 100% of critical positions filled within 90 days
Turnover CY 2020 CY 2021 CY 2022
Separations 25 21 25
43 45 57
Turnover Rate 13%11%13%
Percentage Filled CY 2020 CY 2021 CY 2022
Filled 201 200 191
244 245 248
Positions Filled 82%82%77%
~CITY OF
~PALO ALTO
PRIORITY 1: WORKFORCE STATISTICS
9
25
20
15
10
10
5
5
3 3
0 I I 2 2
I I
Administration
I
Electric Engineering
~CITY OF
~PALO ALTO
23
22
Electric Operations WGW Engineering
9
WGW Operations Resource Management Customer Service &
Support
■ CY2020
■CY2021
■ CY2022
PRIORITY 2
COLLABORATION
May 3, 2023 www.cityofpaloalto.org
PRIORITY 2: COLLABORATION MISSION & STRATEGIES
11
Mission
Collaborate with internal teams & external stakeholders to achieve our shared objectives of
enhanced communication, coordination, education, & delivery of services.
Strategies
•S1: Increasing communication through active listening & engagement with the community enhances
customer satisfaction & community trust & will help us deliver programs & content based on community
desires. (E, C)
•S2: Strengthening coordination & integration across City departments aligns Utilities & City goals while
improving performance & efficiency. (S, R, E, C)
•S3: Fostering a culture of cooperative work within Utilities improves productivity & awareness &
understanding of our common goals. (S, R, E, C)
•S4: Collaborating with government, trade, & regional agencies enhances our sphere of influence, allows us
to identify common ground, & leverage economies of scale. (S, R, E, C)
~CITY OF
~PALO ALTO
PRIORITY 2: COLLABORATION ACCOMPLISHMENTS
12
S1: Community focus
•Began the Advanced Heat Pump Water Heater (HPWH) program as a key priority in the S/CAP to meet community greenhouse gas
(GHG) emissions reductions (contract approval, work with marketing consultant). (Fall-Winter ’22)
•Hosted a community workshop on home electrification alternatives, focused on HPWH, plus EV/E-bike alternatives. (Oct ‘22)
•Hosted community workshops for the One Water Plan. (Fall-Winter ’22)
•Implemented enhancements to MyCPAU to make it easier for customers to pay their bills online, access energy, water, &
electrification tools (EV & solar cost estimators, WaterSmart) with a single sign-on. (Summer-Winter ’22)
•Refashioned website navigation and page flows to streamline customer entry & experience in accessing programs on website =
“one-stop shop.” (Winter ’22)
S2: Interdepartmental focus
•Utilities & Planning/Development Services collaborated to develop new Green Building (Reach Code)requirements for the 2023-
2025 building code cycle.Council approved in November 2022, effective January 2023. (Fall ‘22)
•*Note, held a series of community stakeholder meetings for involvement & feedback.
•Utilities & Planning/Development Services (PDS) collaborated to create an instant HPWH permitting process. PDS staff time to
process a HPWH permit application decreased from 0.5 hour (hr)/permit to 0 hr/permit for at least 50% of permit applications.
(Winter ‘22)
~CITY OF
~PALO ALTO
PRIORITY 2: COLLABORATION ACCOMPLISHMENTS
13
S3: Intradepartmental focus
•Initiated beta phase installation of Advanced Metering Infrastructure (AMI) for electric, gas, & water meters
in residential areas of the City. Collaboration between Utilities engineering, operations, billing, customer
service,communications, & customer programs to facilitate customer outreach, operational efficiency. Installed
1,100 meters to-date. (Fall ‘22)
•Implemented single sign-on to MyCPAU for programs such as WaterSmart involved collaboration between customer
service, customer programs (UPS), billing. (Fall ‘22)
S4: Government & outside agencies focus
•Fall-Winter 2022: Participated in ongoing statewide Reach Codes Team meetings. Leadership positions &speaking
engagements with local government coalitions, non-profit organizations, & advocacy groups to facilitate ease of
adoption & implementation of new Reach Codes. (Fall-Winter ’22)
•Collaborated with educational institutions such as Cal Poly San Luis Obispo, Sacramento State and San Jose State for
recruitment purposes.Successful in hiring four Electric Engineers from Cal Poly. We actively post our jobs to external
sites including Indeed, Jobs Available, Handshake (29 Colleges), Climatebase Jobs, Energy Central, and through
agencies such as the Northern California Power Agency (NCPA), Northwest Public Power Association (NWPPA) and
American Public Power Association (APPA). (Fall-Winter ’22)
~CITY OF
~PALO ALTO
PRIORITY 2: COLLABORATION INITIATIVES
14
Initiatives in Progress
•S1: Community focus
•Engage customers with new Outage Management System for enhanced notification & communication.
•Spread awareness about the customer benefits of Advanced Metering Infrastructure (AMI) such as improved
efficiency for energy and water usage, leak detection & other anomalies.
•S2: Interdepartmental focus
•Continue collaboration with Planning & Development Services on Reach Codes development.
•Working with Public Works Department to identify electrification potential in City facilities.
•S3: Intradepartmental focus:
•Coordinating customer service & outreach efforts for launch of Advanced Metering Infrastructure (AMI)
program & new Outage Management System (OMS).
•S4: Government & outside agencies focus
•Collaborating with educational institutions & companies to attract local candidates for CPAU positions.
•Regional coordination for response to climate change including drought, wildfires, shift from fossil fuels.
•Continued collaboration on legislative and regulatory items with NCPA, CMUA, and other industry partners.
~CITY OF
~PALO ALTO
PRIORITY 2: COLLABORATION KPIs
15
Key Performance Indicator Goals
•Revising KPIs since 2018 adoption.
•Note:could not compare results to previous years due to change in CMUA/survey consultant. Recalibrating metrics for success.
•(S1)50% or higher customer awareness for customers affected by CPAU’s key programs/initiatives
•CMUA Key Account & Business Customer Survey results = 66.7% reported "very likely" would recommend City's energy & water
efficiency programs to colleague or friend
•Last survey of residential customers (2021) “Usage of Customer Programs" = 53% for consulting home audits
•(S1)85% or higher “excellent/good” rating in annual customer satisfaction survey
•CMUA Key Account & Business Customer Survey results = 78.7%
•8.5 % point increase compared to statewide municipal customers surveyed (70.2%)
•Over one-half (58.3%) believe their utility is either "among the best" or "above average" compared to other service providers they use.
•2% higher compared to statewide municipal customers surveyed (56.3%)
•Among the 19.6% CPAU commercial customers assigned an account manager, the majority (85.7%) reported satisfaction with business
customer management.
•Nearly ¾ respondents (71.4%) provided "excellent" ratings on overall job key account advisors do for their organization.
•(S2, S3)80% or more actions which were initiated under Collaboration complete or are in progress this Fiscal Year.
•Close to 100% of actions complete or in progress. Updating action items to reflect new and ongoing priority initiatives.
~CITY OF
~PALO ALTO
PRIORITY 3
TECHNOLOGY
May 3, 2023 www.cityofpaloalto.org
PRIORITY 3: TECHNOLOGY MISSION & STRATEGIES
17
Mission
Invest in & utilize technology to enhance the customer experience & maximize operational efficiency.
Strategies
•S1: Finalize & implement technology road map to clearly identify CPAU’s short-term & long-term goals,
reflect customer & operational needs, prioritize projects & guide decisions. (R, E)
•S2: Deploy AMI to increase reliability, enhance customer service, & improve response time. (R, E, C)
•S3: Invest in technology infrastructure to enhance customer engagement & satisfaction.(S, R, E, C)
•S4: Implement technologies to improve response time, security & operational efficiency.(S, R, E, C)
•S5: Ensure & empower employees with current technologies to perform work efficiently. (S, R, C)
~CITY OF
~PALO ALTO
PRIORITY 3: TECHNOLOGY ACCOMPLISHMENTS, INITIATIVES, KPIs
18
Accomplishments from 2019 thru FY 2022
•Implemented MyCPAU-new customer engagement & account management website -Apr’20 (S3)
•Completed phase 1 of SAP ERP upgrade –Dec ‘21 (S1)
•Installed AMI base stations & meter data collectors –Aug ’22 (S2)
Initiatives in Progress
•Complete engineering design for fiber backbone & fiber-to-the premise –Jun’23 (S3)
•Implement S/CAP initiatives: EV infrastructure, Heat Pump Water Heaters –Jan’23 (S3)
•Implement Phase 2 of SAP upgrade including on-bill financing & business process automation –Jun’23 (S1)
•Deploy 2,000 advanced electric, gas & water meters during beta phase - May‘23(S2)
•Train Customer Service & Meter Shop Groups on AMI tracking systems (RNI & Compass) Apr'23 (S2)
•Implement new outage management system with enhanced notifications –Jun’23 (S3)
•Migrate Electric Utility to new ESRI GIS system –Jun’23(S4)
~CITY OF
~PALO ALTO
PRIORITY 3: TECHNOLOGY KPIs
19
Key Performance Indicator Goals
•Increase MyCPAU customer website users 10% utilization by 5% each year
•Paperless tools for field support staff: 50% by Dec 2018 / 90% by Dec 2019
MyCPAU FY 2020 FY 2021 FY 2022 Y/Y % Goal
1. Utilities Accounts Registered (Active)19,604 22,618 23,828
Y/Y % Change -15.4%5.3%5%
2. # of Paperless Utilities Accounts 5,096 6,696 7,195
Y/Y % Change -31.4%7.5%10%
Division FY 2019 FY2020 FY 2021 FY 2022
Engineering 25%33%40%50%
Operations 50%65%65%75%
~CITY OF
~PALO ALTO
PRIORITY 3: TECHNOLOGY ROADMAP
20~CITY OF
~PALO ALTO
2025+
Customer Informat ion System
Fi1ber-to-tlhe-Premi1ses
GIS IESR I
202.4-2025
Advanced !Metering Infrastructure, Time of Us,e Rat,e·s
De 1mand Energy H,esponse: EV, HPWH, IPV
M CPAU -Interval Data; Water Smart -Leak Detection
2023,
Outage Management Syste m1
Mobi1lle Too lls for Operati ons
Fiber Manage 1ment System
PRIORITY 4
SUSTAINABILITY, FINANCE, AND INFRASTRUCTURE
May 3, 2023 www.cityofpaloalto.org
PRIORITY: SUSTAINABILITY, FINANCE, AND INFRASTRUCTURE
22
Important changes to this priority
•Update outdated strategies and actions from 2018 plan to reflect current utility
objectives
•Change name of priority itself to better reflect current utility objectives
•Add new strategies and actions to replace those completed from 2018 plan
~CITY OF
~PALO ALTO
PRIORITY: SUSTAINABILITY, FINANCE, AND INFRASTRUCTURE
23
Mission
We must manage our finances optimally & use resources efficiently and sustainably to meet our customers’ service priorities.
Strategies (Deleted)
Deleted obsolete or completed Strategies
•S1: Review & update (as needed) Water/Gas/Wastewater infrastructure maintenance & replacement program & establish regular reporting for senior management & policy makers
•S2: Develop financial planning processes that provide stability & clear communication of service priorities & the cost of achieving those priorities.
•S3: Review & update (as needed) Electric infrastructure maintenance & replacement program & establish regular reporting for senior management & policy makers
•S4: Achieve a sustainable & resilient energy & water supply to meet community needs
•S5: Engage stakeholders & define CPAU’s role in supporting & facilitating community resiliency
~CITY OF
~PALO ALTO
PRIORITY: SUSTAINABILITY, FINANCE, AND INFRASTRUCTURE
24
Strategies (New)
New Strategies added to better reflect current Utility objectives
•S1 (New): Maintain and enhance infrastructure maintenance and investment programs (S, R, C)
•S2 (New): Create and implement an efficient, sustainable energy supply plan, including accounting for load growth related to Sustainability and Climate Action Plan (S/CAP) goals (S, R, E)
•S3 (New): Create and implement an efficient, sustainable water supply plan for a changing climate (S, R, E)
•S4 (New): Develop and implement cost-efficient, electric and gas infrastructure transition plans to manage load shifts related to S/CAP goals and to modernize infrastructure to manage and use new technologies (S, R, E, C)
•Includes the following action, among others: Complete and implement an electric reliability and resiliency strategic plan
•S5 (New): Develop and implement a gas utility financial transition plan to manage potential rate impacts and equity issues related to S/CAP goals (R, E, C)
•S6 (New): Partner on an inter-departmental assessment of S/CAP funding needs and potential funding sources, including assessing utility rate impacts and other related utility impacts (E, C)
~CITY OF
~PALO ALTO
PRIORITY: SUSTAINABILITY, FINANCE, AND INFRASTRUCTURE
25
Strategies (New) ...continued from prior page
Replaced/New Strategies to better reflect current Utility objectives
•S7 (New): Partner on implementation of S/CAP Work Plan. (R, E)
•Includes the following actions, among others:
•Complete an electric vehicle strategic plan to guide infrastructure investment
•Partner with other Departments to establish customer-friendly programs to help residents and businesses electrify their buildings
and vehicles
~CITY OF
~PALO ALTO
PRIORITY 4: ACCOMPLISHMENTS
26
Accomplishments July 2022 through December 2023
•(S2) –Kicked off initial Electric Integrated Resource Plan discussions with UAC
•(S3) –Held two community workshops on the OneWater Plan, plan currently in development
•(S4) –Initiated discussions of gas infrastructure transition plan study, added budget requests to FY 2024 budget
•(S4) –Completed grid modernization study
•(S5) –Initiated discussions of gas financial transition plan study, added budget requests to FY 2024 budget
•(S6) –Wrote first draft of scopes and began building internal consensus on study approach
•(S7) –Partnered on drafting S/CAP Work Plan for review by S/CAP Committee
~CITY OF
~PALO ALTO
PRIORITY 4: FINANCE INITIATIVES, & KPIs
27
Initiatives in Progress
•(S2) –Analysis supporting the Electric Integrated Resource Plan is in progress
•(S3) –Consultant analysis to complete OneWater Plan currently in progress
•(S4) –FY 2024 budget requests under consideration, developing staffing plan for study
•(S4) –Preparing for upgrade and modernization of first neighborhood under electric grid modernization plan
•(S4) –Engaging S/CAP Committee on scoping for Reliability and Resiliency Strategic Plan
•(S5) –FY 2024 budget requests under consideration, developing staffing plan for study
•(S6) –Drafted S/CAP Funding Study scope, continuing internal review and preparing for S/CAP Committee review
•(S7) –Partnering with other departments to get Council approval of S/CAP and S/CAP Work Plan, launch Advanced
Heat Pump Water Heater Pilot Program, develop new building electrification programs, and enhance existing
programs.
Key Performance Indicator Goals
•To be updated, still in development
~CITY OF
~PALO ALTO
Presenters
Intro: Dean Batchelor
P1 Workforce Lead: Anna Vuong
P2 Collaboration Lead: Catherine Elvert
P3 Technology Lead: Dave Yuan
P4 Sustainability, Finance and Infrastructure Lead: Jonathan Abendschein
CITY OF
PALO
ALTO
Item No. 4. Page 1 of 2
1
6
9
6
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: May 3, 2023
Staff Report: 2302-0949
TITLE
Staff Recommendation That the Utilities Advisory Commission Recommend the City Council
Adopt the Proposed Operating and Capital Budgets for the Utilities Department for Fiscal Year
2024
RECOMMENDATION
Staff recommends the Utilities Advisory Commission recommend the City Council adopt the
Proposed Operating and Capital Budgets for the Utilities Department for Fiscal Year 2024.
EXECUTIVE SUMMARY
Linked and referenced below are the FY 2024 Proposed Operating and Capital budgets for the
Utilities Department. Due to the number of pages of the CIP budget, staff only printed the CIP
overview and five year forecast of each utility for FY 2024– FY 2028.
The entire Utilities CIP budget for FY 2024 – FY 2028 with the individual project pages can be
downloaded and viewed in full from the links below:
Preliminary Proposed Utilities Capital Budgets for FY 2024 - FY 2028:
➢Electric CIP1
➢Fiber Optic CIP2
➢Gas CIP3
➢Water CIP4
1 Proposed FY24 Electric CIP https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/attachments/electric_cip_8987.pdf
2 Proposed FY24 Fiber Optic CIP https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/attachments/fiberoptics_cip_9000.pdf
3 Proposed FY24 Gas CIP https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/attachments/gas_cip_8997.pdf
4 Proposed FY24 Water CIP https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/attachments/water_cip_8988.pdf
Item No. 4. Page 2 of 2
1
6
9
6
➢Wastewater CIP5
The entire Utilities Operating budget for FY 2024 can be downloaded and viewed in full from the
link below:
➢Preliminary Proposed Utilities Operating Budgets for FY 2024 6.
City Council will not be receiving their copies of the Operating and Capital Budgets until
Monday, May 01, 2023. Please refrain from discussing the preliminary proposed budget
materials with Council or the public until Tuesday, May 02, 2023.
ATTACHMENTS
Attachment A: UAC – FY24 Budget Presentation
APPROVED By:
Dean Batchelor, Director of Utilities
Staff: Alexandra Harris, Senior Business Analyst
Anna Vuong, Senior Business Analyst
Catherine Elvert, Communications Manager
Dave Yuan, Strategic Business Manager
Jonathan Abendschein, Assistant Director of Utilities
5 Proposed FY24 Wastewater Collection CIP https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/attachments/wastewatercollection_cip_8998.pdf
6 FY24 Preliminary Utilities Operating Budget https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/attachments/utilities_operating_8991.pdf
MAY 3, 2023 www.cityofpaloalto.org
Utilities Advisory CommissionPreliminary Proposed FY 2024 UtilitiesOperating and Capital Budgets
BUDGET REQUEST PROCESS
2
Submits
Request
DEPT HR OMB CMO UAC FC
Approves
Request
Council
Preliminary Requests Recommended Requests
General review process for staffing, budget, and project changes
PROPOSED NEW PROJECTS
3
•New Infrastructure projects•Electric Grid Modernization -$25M in FY 2024;
•$200M -$300M total estimated cost •Fiber-to-the-Premises (FTTP) -$20M in FY 2024;
•Dec 19, 2022 Council Approval (ID#14800)
•$100M -$120M total estimated cost
•Grants update
•Natural Gas Distribution Infrastructure Safety and Modernization (NGDISM) Program
•Gas Main Replacement Project “GMR25” (application in progress) ~$9M•Electric Grid Resilience and Innovation Partnership (GRIP) Program
•Smart Grid AMI project (application submitted) ~ $11M
•Grid modernization project (application in progress) ~ $100M –$150M
Projected Change in Residential Median Bill
4
ELECTRIC
MAY 4, 2022 www.cityofpaloalto.org
ELECTRIC ACCOMPLISHMENTS & INITIATIVES
6
Accomplishments
•Launched the Advanced Heat Pump Water Heater (HPWH) Program
•Implemented on-bill financing program for HPWH
•Installed over 700 electric advanced metering infrastructure (AMI) meters as part of the beta phase of the
AMI rollout.
•Completed high-level grid modernization study.
•Construction started for new physical security and lighting at nine electric substations.
Initiatives
•Apply for Department of Energy’s Grid Resilience and Innovation Partnerships (GRIP) grants
•Develop and implement an electric grid modernization plan
•Complete cost of service study
•Launch new outage management system (Go Live June/July 2023)
ELECTRIC PRELIMINARY OPERATING BUDGET EXPENSES
7
Allocated Charges
$12.05 M
4%
Contract Services
$12.98 M
5%
Equity Transfer
$15.12 M
6%
Other Expenses
$7.05 M
3%
Rent & Debt Service
$15.36 M
6%
Salary & Benefits
$33.74 M
13%
Utility Purchase
$118.31 M
45%
Capital Improvement
Program
$47.57 M
18%
ELECTRIC FUND FY 2024
$262.19M EXPENSES
ELECTRIC PRELIMINARY CAPITAL BUDGET EXPENSES
8
FY 2023 Estimates
$32.3M Total
FY 2024
$54.9M Total
FY 2025
$45.1M Total
FY 2026
$63.8M Total
FY 2027
$65.9M Total
FY 2028
$60.7M Total
523 - Electric Fund - Underground Districts (Rebuild)$3.3M $5.8M $6.8M $2.2M $2.0M $1.8M
523 - Electric Fund - Underground Districts $0.2M $0.0M $0.0M $0.1M $3.0M $0.0M
523 - Electric Fund - Grid Modernization $0.0M $25.0M $25.0M $50.0M $50.0M $50.0M
523 - Electric Fund - System Improvements $20.6M $9.9M $6.3M $4.8M $4.9M $5.2M
523 - Electric Fund - Substation Improvements $2.8M $11.5M $4.4M $4.0M $3.3M $1.1M
523 - Electric Fund - Customer Connections $5.5M $2.7M $2.7M $2.7M $2.7M $2.7M
$0.0M
$10.0M
$20.0M
$30.0M
$40.0M
$50.0M
$60.0M
$70.0M
Current Year Estimates & 5-Yr Capital Improvement Plan 2024-28
ELECTRIC FUND HIGHLIGHTS
9
•Revenues of $265.0M; increase $79.1M or 43%
•$30M Retail Sales (21% base increase offset by deactivation of hydroelectric
rate adjuster)
•$25M Debt Financing for Grid Modernization
•$24M Central Valley Project Settlement
•Expenses of $262.2M; increase $42.5M or 19%
•$21M Capital Improvement including $12.5M Reappropriated Funds to FY24
•$3.8M Substation Physical Security; $1.5M Foothills Fire Mitigation; $1.1M Substation
Breaker Replacement; $1.0M Coleridge/Cowper/Tennyson 4/12kV Conversion
•$17M Commodity Purchases
Residential Electric Bill Comparison
10
Season Usage (kwh) Palo Alto PG&E Santa Clara
Winter
300 57.74 94.11 39.31
453 (Median) 94.42 143.32 60.09
650 143.94 221.07 86.85
1200 282.18 438.13 161.54
Summer
300 57.74 97.76 39.31
(Median) 365 72.31 123.41 48.14
650 143.94 235.88 86.85
1200 282.18 452.94 161.54
Palo Alto Residential Median is 49% below PG&E
FIBER
MAY 4, 2022 www.cityofpaloalto.org
FIBER ACCOMPLISHMENTS & INITIATIVES
12
Accomplishments
•Completed detailed engineering design of City’s fiber backbone and fiber-to-the-premises network.
•Over 3,600 residents and businesses completed the Palo Alto Fiber internet survey and over 700 residents submitted a $50 deposit.
•Council approved construction of a new fiber backbone for the Electric Utility and a phased buildout of the FTTP network supporting City departments, dark fiber leasing customers, and a new internet service provider (ISP) business.
Initiatives
•Add fiber in the Foothills to improve City communications and community internet
•Identify additional funding sources such as federal and state grants, debt-financing, and cost sharing construction with other CIP projects.
•Issue construction bids and proposals related to fiber backbone expansion and FTTP ~ July 2023
FIBER PRELIMINARY OPERATING BUDGET EXPENSES
13
Allocated Charges
$0.88 M
3%
Contract Services
$0.24 M
1%
Other Expenses
$0.12 M
0%
Rent & Debt Service
$0.08 M
0%
Salary & Benefits
$2.35 M
Capital Improvement
Program
$33.07 M
90%
FIBER FUND FY 2024
$36.75M EXPENSES
FIBER FUND HIGHLIGHTS
14
•Revenues of $4.6M; increase $0.2M or 5.1%
•$0.2M Return on Investment
•Projected investment percentage increasing from 2.2% to 2.4%
•Expenses of $36.7M; increase $32.2M or 707.5%
•$31M Capital Improvement Program
•$20M Fiber-to-the-Premises
•$13M Fiber Backbone Rebuild (estimated total costs $26M)
•$0.7M Salaries and Benefits
•4 new FTEs (Assistant Director, Fiber; Senior Network Engineer; Outside
Plant Manager; Sales and Marketing Manager)
FIBER EXPANSION PLAN
15
•Council Approved Fiber Expansion Plan in Dec 2022
•Build new fiber backbone for Electric Utility ~ $26M
•Phase buildout of FTTP –Phase 1 ~ $20M
•City Staff
•California Environmental Quality Act (CEQA) study
•Issue and award construction and service RFPs
•Hire internal staff to execute project and manage vendor contracts
•Magellan Contract Amendment
•Program Management
•Network Operations and Technical Support
•Electrical Make Ready Engineering
GAS
MAY 4, 2022 www.cityofpaloalto.org
GAS ACCOMPLISHMENTS & INITIATIVES
17
Accomplishments
•Completed inspection of 1,480 sanitary sewer laterals for the presence of a natural gas crossbores
in two years,under the Phase III Crossbore Gas Safety Program. Found 1 crossbore.
•Completed construction for Gas Main Replacement 23
•Completed construction of Gas Main Replacement 24A (Stanford Shopping Center)
•Finalized designs of the Gas Main Replacement 24B
Initiatives
•Gas decommissioning study
•Evaluate natural gas commodity hedging strategies for winter rates
•Apply for Natural Gas Distribution Infrastructure Safety and Modernization grant
GAS PRELIMINARY OPERATING BUDGET EXPENSES
18
Allocated Charges
$5.84 M
9%
Contract Services
$2.63 M
4%
Equity Transfer
$7.71 M
12%
Other Expenses
$2.97 M
4%
Rent & Debt Service
$1.5 M
2%Salary & Benefits
$12.9 M
19%
Utility Purchase
$29.95 M
44%Capital Improvement
Program
$4.01 M
6%
GAS FUND FY 2024
$67.50M EXPENSES
GAS PRELIMINARY CAPITAL BUDGET EXPENSES
19
FY 2023 Estimates
$14.8M Total
FY 2024
$6.9M Total
FY 2025
$7.2M Total
FY 2026
$5.8M Total
FY 2027
$7.8M Total
FY 2028
$5.8M Total
524 - Gas Fund - Gas Main Replacements $12.2M $4.7M $5.3M $4.0M $6.0M $4.0M
524 - Gas Fund - System Improvements $1.3M $1.4M $1.1M $1.1M $1.1M $1.1M
524 - Gas Fund - Customer Connections $1.3M $0.8M $0.8M $0.7M $0.7M $0.7M
$0.0M
$2.0M
$4.0M
$6.0M
$8.0M
$10.0M
$12.0M
$14.0M
$16.0M
Current Year Estimates & 5-Yr Capital Improvement Plan 2024-28
GAS FUND HIGHLIGHTS
20
•Revenues of $66.9M; increase $19.6M or 43%
•$19.8M Retail Sales (8% overall rate increase includes 21% distribution rate
increase)
•Fund ongoing capital and operating expenses
•Replenish reserves
•Projected bill impact of -13% compared to FY 2023
•Natural gas commodity price is a monthly pass-through to customers
•Forecast of -36% decrease of commodity price
•Expenses of $67.5M; increase $6.2M or 10%
•$9.8M Natural Gas Commodity Purchases
•($5.9M) Capital Improvement –alternating Gas Main Replacement CIP year
Residential Gas Bill Comparison
21
Palo Alto median residential bill is about 11% below PG&E’s median bill (based on CY 2022 data)
WASTEWATER
MAY 4, 2022 www.cityofpaloalto.org
WASTEWATER ACCOMPLISHMENTS & INITIATIVES
23
Accomplishments
•Completed design and construction bid for Wastewater Collection Replacement
Project 31
Initiatives
•Sewer Master Plan Study
•Replace overflow monitoring units at 39 manhole locations throughout the City
•Complete Wastewater Collection Replacement Project 30
•Begin construction on Wastewater Collection Replacement Project 31
WASTEWATER PRELIMINARY OPERATING BUDGET EXPENSES
24
Allocated Charges
$3.27 M
13%
Contract Services
$0.25 M
1%
Other Expenses
$0.75 M
3%
Rent & Debt Service
$0.53 M
2%
Salary & Benefits
$6.55 M
26%
Utility Purchase
$12.43 M
49%
Capital Improvement
Program
$1.61 M
6%
WWC FUND FY 2024
$25.38M EXPENSES
WASTEWATER PRELIMINARY CAPITAL BUDGET EXPENSES
25
FY 2023 Estimates
$12.6M Total
FY 2024
$2.2M Total
FY 2025
$3.2M Total
FY 2026
$5.2M Total
FY 2027
$3.3M Total
FY 2028
$5.2M Total
527 - Wastewater Collection Fund - System Improvements $12.2M $1.8M $2.8M $4.7M $2.8M $4.8M
527 - Wastewater Collection Fund - Customer Connections $0.5M $0.5M $0.5M $0.5M $0.5M $0.5M
$0.0M
$2.0M
$4.0M
$6.0M
$8.0M
$10.0M
$12.0M
$14.0M
Current Year Estimates & 5-Yr Capital Improvement Plan 2024-28
WASTEWATER COLLECTION FUND HIGHLIGHTS
26
•Revenues of $23.8M; increase $2.1M or 9.6%
•$2.0M Retail Sales (9% rate increase)
•Acceleration of Sewer Main Replacement from 1 mile to 2.5 miles
beginning in FY 2026 to stay within 100 year life expectancy of main pipes
•Maintain reserves above minimum guideline of $3.3M (60 days of
operations and maintenance and commodity expense)
•Expenses of $25.4M; increase $0.7M or 2.9%
•$0.6M Treatment Plant Charges
•Rehabilitation of Regional Water Quality Control Plant ~ $300M
Sewer Bill Comparison
27
Palo Alto
Residential Menlo Park Redwood
City Santa Clara Mountain
View Los Altos Hayward
44.62 106.67 89.28 46.82 50.1 42.05 38.58
Palo Alto Residential Median is 28% below comparison city average
Non-Residential Palo Alto Menlo Park Redwood
City Santa Clara Mountain
View Los Altos Hayward
Commercial 116.62 144.34 117.74 75.74 156.66 72.23 87.92
Restaurant 696.08 1,216.88 1,128.40 718.48 718.48 288.90 660.80
Palo Alto Commercial Median is 7% above comparison city average
Palo Alto Restaurant Median is 12% below comparison city average
WATER
MAY 4, 2022 www.cityofpaloalto.org
WATER ACCOMPLISHMENTS & INITIATIVES
29
Accomplishments
•Began community engagement and development of OneWater Plan
•Complete cost/benefit analysis of replacement or rehabilitation of Park Reservoir
(June 2023)
Initiatives
•Start construction for Park Reservoir (capacity of one million gallons)
•Replace overflow monitoring units at 39 manhole locations throughout the City
•Complete construction of Water Main Replacement Project 28
WATER PRELIMINARY OPERATING BUDGET EXPENSES
30
Allocated Charges
$6.09 M
8%
Contract Services
$0.73 M
1%
Other Expenses
$1.83 M
2%
Rent & Debt Service
$6.91 M
9%
Salary & Benefits
$11.62 M
15%
Utility Purchase
$25.35 M
33%
Capital Improvement
Program
$24.89 M
32%
WATER FUND FY 2024
$77.41M EXPENSES
WATER PRELIMINARY CAPITAL BUDGET EXPENSES
31
FY 2023 Estimates
$14.4M Total
FY 2024
$26.2M Total
FY 2025
$4.3M Total
FY 2026
$18.9M Total
FY 2027
$4.8M Total
FY 2028
$13.1M Total
522 - Water Fund - Water Main Replacements $9.1M $10.3M $0.4M $8.9M $0.9M $8.9M
522 - Water Fund - System Improvements $4.2M $15.0M $2.9M $9.0M $2.9M $3.1M
522 - Water Fund - Customer Connections $1.1M $0.9M $1.0M $1.0M $1.0M $1.1M
$0.0M
$5.0M
$10.0M
$15.0M
$20.0M
$25.0M
$30.0M
Current Year Estimates & 5-Yr Capital Improvement Plan 2024-28
WATER FUND HIGHLIGHTS
32
•Revenues of $53.6M; increase $3.0M or 6%
•$2.2M Retail Sales (6%/5% overall rate increase)
•11.6% SFPUC commodity rate increase/ revised down to 9.6% as of April 6, 2023
•2% distribution rate increase
•$0.6M Other Revenue
•Technical budget alignment: Customer Connection and Capacity fees ~ $1.0M
•Expenses of $77.4M; increase $13.1M or 20%
•$9.4M Capital Improvement Reappropriatons
•$6.9M Seismic Rehabilitation; $3.3M Water System Improvement (Emergency
Generators and Facilities Lighting)
•$2.0M SFPUC commodity rate increase
Single-Family Residential Water Bill Comparison
33
Palo Alto is 14%
above comparison
city average
Commercial Water Bill Comparison
34
Palo Alto is 5%
above comparison
city average
STAFFING
MAY 4, 2022 www.cityofpaloalto.org
STAFFING -Vacancies and Recruitments
Division Authorized FTE Vacancies Active
Recruitments % Vacancy
Administration 19.5 5 3 26%
Customer Support Services 22 2 2 9%
Electric Engineering 28 8 6 29%
Electric Operations 74 23 13 31%
Resource Management 25 5 2 20%
WGW Engineering 22 4 3 18%
WGW Operations 63 10 5 16%
Grand Total 253.5 57 34 22%
36
STAFFING (continued)
Movement by Calendar Year (CY)
CY 2022 JAN -MAR 2023
Hires 24 6
Promotions 15 8
Retirements 5 0
Separations 23 8
37
STAFFING RECRUITMENT AND RETAINMENT STRATEGIES
38
•Continue benchmark market alignment
•Flexible and Remote Work Schedule –in place
•New Apprentice and Training Programs –ongoing
•Cross Training –ongoing (Meter Reading)
•Succession Planning
•Career Fairs
•Hiring and Retention bonus
•Flexibly Staffed recruiting
Not started
•Employee or Subsidized Housing
•Childcare
PROPOSED STAFFING REQUESTS
39
FY 2024 STAFFING REQUESTS (Net Change +4.5 regular FTEs and +.04 hourly FTEs)
•Assistant Director, Palo Alto Fiber (+1.0 FTE)
•Manager Information Technology (Sr. Network Engineer/Architect) (+1.0 FTE)
•Manager Utilities Telecommunications (Outside Plant Mgr, Palo Alto Fiber) (+1.0 FTE)
•Manager Utilities Telecommunications (Sales and Marketing Mgr, Palo Alto Fiber) (+1.0 FTE)
•Senior Fiber Market Analyst (+1.0 FTE)
•Utilities Program Assistant II (+0.5 FTE)
•Journey Level Laborer (+0.04 FTE)
•Reclassify Utility System Operator to Senior Utility System Operator (Net 0.0 FTE)
•Meter Reader (-1.0 FTE)
*New Classifications
STAFF RECOMMENDATION TO UAC FOR APPROVAL
40
Staff requests that the Utilities Advisory Commission (UAC) recommend that the Council
approve proposed FY2024 Utilities Operating Budget.
Staff requests that the Utilities Advisory Commission (UAC) recommend that the Council
approve proposed FY2024 Utilities Capital Budget.
PROPOSED FY 2024 RATES –RESIDENTIAL BILL IMPACT
42
1 User Tax is additional 5 percent of electric, gas, and water bill
Utility
FY 2023 Bill
(Rates Effective
Jan 1, 2023)
FY 2024 Bill
(Projected)Change Change %
Electric $83.09 $78.89 -$4.20 -5%
Gas $64.86 $70.06 $5.20 8%
Wastewater $44.62 $48.62 $4.00 9%
Water $98.46 $104.36 $5.90 6%
Refuse $50.07 $50.07 $0.00 0%
Storm Drain $15.98 $16.78 $0.80 5%
Utility User Tax¹$12.32 $12.67 $0.35 3%
Total Monthly Bill $369.40 $381.49 $12.04 3%
Utilities Quarterly Update
Second Quarter of Fiscal Year 2023
1Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Table of Contents
1 ELECTRIC UTILITY 4
1.1 ELECTRICITY SUPPLY AND TRANSMISSION 4
1.1.1 Forecasted Supply Costs 4
1.1.2 Hydroelectric Conditions 5
1.1.3 REC Exchange Program 6
1.1.4 Renewable Energy Procurement 6
1.2 CAPITAL IMPROVEMENT PLAN STATUS 6
1.3 RATE AND BILL COMPARISONS 7
1.4 RELIABILITY 8
1.5 FINANCIAL HEALTH 8
1.5.1 Sales Forecasts vs. Actuals 8
1.5.2 Financial Position 9
2 GAS UTILITY 11
2.1 GAS SUPPLY AND TRANSMISSION 11
2.1.1 Actual and Forecasted Supply Costs 12
2.1.2 Carbon Neutral Gas Program 12
2.1.3 Cap and Trade Program 14
2.1.4 Gas Transmission Line Capacity Valuation 15
2.1.5 Gas Prepay Valuation 15
2.2 CAPITAL IMPROVEMENT PLAN STATUS 16
2.3 RATE AND BILL COMPARISONS 16
2.4 RELIABILITY 16
2.5 FINANCIAL HEALTH 17
2.5.1 Sales Forecasts vs. Actuals 17
2.5.2 Financial Position 18
3 WATER UTILITY 19
3.1 WATER SUPPLY AND TRANSMISSION 19
3.2 CAPITAL IMPROVEMENT PLAN STATUS 22
3.3 RATE AND BILL COMPARISONS 22
3.4 RELIABILITY 23
3.5 FINANCIAL HEALTH 23
3.5.1 Sales Forecasts vs. Actuals 23
3.5.2 Financial Position 24
4 WASTEWATER UTILITY 25
4.1 WASTEWATER TREATMENT UPDATES AND CAPITAL PLANNING STATUS 25
4.1.1 Treatment Cost Trends 25
4.1.2 Regional Water Quality Control Plant Capital Planning Status 26
4.2 COLLECTION SYSTEM CAPITAL IMPROVEMENT PLAN STATUS 27
4.3 RATE AND BILL COMPARISONS 27
2Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
4.4 FINANCIAL HEALTH 28
4.4.1 Sales Forecasts vs. Actuals 28
4.4.2 Financial Position 28
5 FIBER UTILITY 29
5.1 FIBER UTILITY STRATEGIC PLANNING 29
5.2 CAPITAL IMPROVEMENT PLAN STATUS 29
5.3 RELIABILITY 30
5.4 FINANCIAL HEALTH 30
5.4.1 Fiber Sales 30
5.4.2 Financial Position 30
6 CUSTOMER PROGRAMS (EFFICIENCY AND SUSTAINABILITY) 31
6.1 CUSTOMER PROGRAMS UPDATES 31
6.1.1 Energy and Water Efficiency 31
6.1.2 Building Electrification 34
6.1.3 Electric Vehicles 35
6.2 FUNDING SOURCES FOR EMISSIONS REDUCTIONS 38
6.2.1 Low Carbon Fuel Standard (LCFS) Program 38
6.2.2 Cap and Trade Program, Revenue from Allocated Allowances 38
6.2.3 Electric Public Benefit Funds 39
7 COMMUNICATIONS 40
8 LEGISLATIVE AND REGULATORY ACTIVITY 41
8.1 STATE LEGISLATION 41
8.2 STATE REGULATORY PROCEEDINGS 41
8.2.1 Energy Commission 42
8.2.2 State Water Resources Control Board 42
8.2.3 Air Resources Board 42
8.2.4 Natural Resources Agency 42
8.2.5 California Public Utilities Commission 42
8.2.6 California Independent System Operator 42
9 APPENDIX A: ENERGY RISK MANAGEMENT PROGRAM 44
9.1 OVERVIEW OF HEDGING PROGRAMS 44
9.2 OVERVIEW OF ENERGY RISK MANAGEMENT PROGRAM 44
9.3 FORWARD DEALS 44
9.4 MARKET EXPOSURE 45
9.5 TRANSACTION COMPLIANCE 46
10 APPENDIX B: STAFFING AND VACANCIES 47
11 APPENDIX C: WASTEWATER UTILITY ANNUAL INFRASTRUCTURE MAINTENANCE AND REPLACEMENT REPORT 48
3Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Figures
FIGURE 1: FY 2022 FINANCIAL PLAN SUPPLY COST FORECAST VS. ACTUALS ................................................................................................5
FIGURE 2: HYDRO GENERATION FY 2022 ACTUALS, FY 2023-24 PROJECTED (GWH)..................................................................................6
FIGURE 3: RESIDENTIAL MONTHLY ELECTRIC BILL COMPARISON (EFFECTIVE 1/1/2023, $/MO.).....................................................................8
FIGURE 4: ELECTRIC OUTAGE RELIABILITY, FY 2022 TO FY 2023-Q2........................................................................................................8
FIGURE 5: ELECTRIC SALES VOLUME (KWH), UP TO FY 2023-Q2..............................................................................................................9
FIGURE 6: ELECTRIC SALES REVENUE ($), UP TO FY 2023-Q2..................................................................................................................9
FIGURE 7: PALO ALTO GAS COMMODITY RATES, COMMODITY RATE CAPS, AND CITYGATE ACTUAL PRICES ......................................................12
FIGURE 8: GAS SUPPLY COSTS ($), ACTUAL VS BUDGET, UP TO FY 2023-Q2............................................................................................12
FIGURE 9: OFFSET PORTFOLIO COMPOSITION ......................................................................................................................................13
FIGURE 10: OFFSET PROJECT DESCRIPTIONS ........................................................................................................................................14
FIGURE 11: ESTIMATED CAP AND TRADE COSTS ...................................................................................................................................15
FIGURE 12: RESIDENTIAL NATURAL GAS BILL COMPARISON ($/MONTH)...................................................................................................16
FIGURE 13: GAS SERVICE INTERRUPTIONS, FY 2023.............................................................................................................................17
FIGURE 14: GAS SALES VOLUME (THERMS), UP TO FY 2023-Q2............................................................................................................17
FIGURE 15: GAS SALES REVENUE ($), UP TO FY 2023-Q2.....................................................................................................................17
FIGURE 16: REGIONAL WATER SYSTEM STORAGE .................................................................................................................................20
FIGURE 17: SFPUC WATER DELIVERIES..............................................................................................................................................21
FIGURE 18: RESIDENTIAL WATER BILL COMPARISON ($/MONTH)............................................................................................................22
FIGURE 19: WATER SERVICE INTERRUPTIONS, FY 2023.........................................................................................................................23
FIGURE 20: WATER SALES VOLUME (CCF), UP TO FY 2023-Q2.............................................................................................................23
FIGURE 21: WATER SALES REVENUE ($), UP TO FY 2023-Q2................................................................................................................24
FIGURE 22: PALO ALTO’S SHARE OF ESTIMATED WASTEWATER TREATMENT EXPENSES (PROJECTION AND PLANNED CIP)..................................26
FIGURE 23: CURRENT RWQCP CAPITAL WORK IN-PROGRESS (BASED ON RWQCP NOVEMBER 2022 PARTNERS MEETING).............................27
FIGURE 24: RESIDENTIAL WASTEWATER BILL COMPARISON ($/MONTH)...................................................................................................28
FIGURE 25: WASTEWATER SALES REVENUE ($), UP TO FY 2023-Q2.......................................................................................................28
FIGURE 26: SCHEDULE OF CPAU WORKSHOPS SEPTEMBER - NOVEMBER 2022.........................................................................................31
FIGURE 27: ENERGY EFFICIENCY PROGRAM ENERGY SAVINGS .................................................................................................................33
FIGURE 27: TENTATIVE SCHEDULE OF CPAU EV WORKSHOPS AND EVENTS, FEBRUARY - APRIL 2023............................................................37
FIGURE 29: ELECTRIC RESOURCE ADEQUACY CONTRACTS .......................................................................................................................45
FIGURE 30: GAS DEALS (FY2023-Q2)...............................................................................................................................................45
FIGURE 31: ELECTRIC LOAD RESOURCE BALANCE, 2023 - 2025 .............................................................................................................46
FIGURE 32: UTILITIES VACANCIES AND POSITION MOVEMENTS BY DIVISION, UP TO Q2 FY 2023..................................................................47
4Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
1 Electric Utility
The City’s electric utility serves all residential and non-residential electric demands in Palo Alto at a lower cost
than PG&E in surrounding communities. Its electric supply portfolio is 100% carbon neutral. The City maintains
and operates an electric distribution system and one small natural gas generator but does not operate any
transmission lines or any significant generating capacity on its own. Instead, the City belongs to Northern
California Power Agency (NCPA) which operates its Calaveras hydroelectric generating plant and provides power
scheduling services for its other generating resources. This carbon free power is supplied through power purchase
agreements with various generation operators.
1.1 Electricity Supply and Transmission
Below is an update on electricity supply and transmission services.
1.1.1 Forecasted Supply Costs
The actual net supply cost for FY 2022 was $95.2 M. This represents a $11.9 M (14%) increase over FY 2021 actuals
and $17.3 M (22%) over the FY 2022 Adopted Budget amount, with the increase primarily driven by higher than
historical forward energy prices, higher resource adequacy requirement levels and market prices, and much lower
than historical average hydro generation levels.
The projected net supply cost for FY 2023 is $106.1 M, which is $22.5 M (27%) greater than the Adopted Budget
amount, and $10.9 M higher than the actual net supply cost for FY 2022. This increase in cost relative to the
Adopted Budget is due to the same factors noted above that explain the deviation in supply cost for FY 2022.
5Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Figure 1: FY 2022 Financial Plan Supply Cost Forecast vs. Actuals
1.1.2 Hydroelectric Conditions
The City receives power from two hydroelectric projects, the Calaveras project and the Western Base Resource
contract for Federal hydropower from the Central Valley Project.1 The watershed for Western hydropower is
primarily in the northern end of California, while the watershed for the Calaveras project is in the Central Sierras.
For water year 2021 to 2022 (October 2021 to September 2022), total precipitation was 63% of average for the
Central Sierras watershed and 81% of average for the Northern Sierras watershed—the third straight year of well
below average precipitation levels. Total hydropower generation for FY 2021 was 295 GWh, which is 183 GWh
(38%) below the long-term average. Total hydropower generation for FY 2022 was 230 GWh, which is 250 GWh
(52%) below the long-term average.2
However, water year 2022 to 2023 is on track to be one of the best precipitation years in memory, following the
record storms across the state in December 2022 and early January 2023. As of February 13th, total precipitation
was 153% of average for the Central Sierras and 125% of average for the Northern Sierras, and reservoir levels
have returned to near average levels for this time of year. The current hydro forecasts have begun to reflect this
1 The Calaveras project is a hydropower project located in Calaveras County that is maintained and operated by the Northern
California Power Agency on behalf of the City and other project participants. The City is also one of several public entities
with contracts with the Western Area Power Administration for “Base Resource” electricity, which is the hydroelectric power
available from the Federal Government’s Central Valley Project (operated by the Bureau of Reclamation) after accounting for
power used for Central Valley Project operations and power delivered to certain “preference” customers.
2The long-term average forecast levels for both Western and Calaveras have been revised downward (about 10% each) in
recent years to reflect the impact of climate change. These values may need to be revisited again in the coming years.
6Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
improved outlook, with total output projected to be 62% of the long-term average level for FY 2023, and 79% of
the long-term average level for FY 2024.
Figure 2: Hydro Generation FY 2022 Actuals, FY 2023-24 Projected (GWh)
1.1.3 REC Exchange Program
1.1.4 Renewable Energy Procurement
1.2 Capital Improvement Plan Status
•EL-17001 (East Meadow Circles 4/12kV Conversion): This project is scheduled to be completed in several
phases. Phase 1 design is complete. Phase 2 & 3 (of 6) engineering design is currently in progress.
•EL-11003 (Rebuild Underground 15): This project is in the preliminary stages of engineering design. Project is
delayed due to staffing shortage. This project has been put on hold due to other priorities.
•EL-10006 (Rebuild Underground 24): This project is in construction phase and scheduled to be completed in
Dec 2023.
•EL-16000 (Rebuild Underground 26): This project is in the preliminary stages of engineering design. Project is
delayed due to staffing shortage.
F F F
C 6 1 1
W 1 1 2
T 2 2 3
%4 6 7
L 4 4 4
7Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
•EL-19004 (Wood Pole Replacement): 34 poles have been replaced since July 2022. CPAU staff and contract
consultants are continuously working on pole replacement designs for construction although the output is
delayed this year because of staffing shortages.
•EL-16003 (Substation Physical Security): This project is scheduled to be completed in several phases.
Substation Security lighting contract was awarded in June 2022. The installation will be completed over a 2-
year period. Construction is currently in-progress.
•EL-17002 (Substation 60kV Breaker Replacement): This project is in the preliminary stages of engineering
design. Project is delayed due to staffing shortage.
•EL-21001 (Foothills Rebuild): This project will rebuild the approximately 11 miles of overhead line in Foothills
Park, as necessary to mitigate the possibility of wildfire due to overhead electric lines. Staff has completed
7,000 feet of substructure work and design which will eliminate the corresponding 26 poles. Substructure for
Phase 1 was completed in Spring 2022 and the substructure for Phase 2 is currently in progress. Phases 3 and
4 are currently in design phase.
•EL-14005 (Reconfigure Quarry Feeders): Staff completed the design phase this year. Construction has been
Completed.
•EL-02011 (Electric Utility Geographic Information System (GIS)): The project scope includes
maintenance/technical support of the existing GIS system and implementation of the new GIS platform (ESRI).
Staff has completed the ESRI ArcGIS Portal, which is a web service for staff to view data and are currently
working on final phase of the electric data migration to ESRI’s Utility Network model.
•EL-16002 (Capacitor Bank Installation): This project is a multi-year effort for the procurement, design and
installation of capacitor banks at several substation. Hanson Way and Park Blvd substation work is complete;
Two capacitor banks at Hanover remain to be completed and will be completed in December 2023. The
capacitor banks at Maybell have been installed and will be commissioned in the coming months.
1.3 Rate and Bill Comparisons
8Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Figure 3: Residential Monthly Electric Bill Comparison (Effective 1/1/2023, $/mo.)
Season Usage (kwh)Palo Alto PG&E Santa Clara
300 57.74 94.11 42.45
(Median) 453 94.42 143.32 64.89
650 143.94 221.07 93.78Winter
1200 282.18 438.13 174.44
300 57.74 94.11 42.45
(Median) 365 72.31 123.41 51.98
650 121.19 233.16 86.65Summer
1200 282.18 438.13 174.44
1.4 Reliability
CPAU tracks electric outages. A summary chart of these outages can be found below.
FY 2022Outage Reliability Q1 Q2 Q3 Q4
System Average Interruption Duration Index (SAIDI)3 1.71 7.32 6.72 1.35
System Average Interruption Frequency Index (SAIFI)4 .01 .02 .16 .02
Customer Average Interruption Duration Index (CAIDI)5 180.18 323.65 41.48 88.70
FY 2023Outage Reliability
Q1 Q2
System Average Interruption Duration Index (SAIDI)3 81.69 7.38
System Average Interruption Frequency Index (SAIFI)4 0.61 .04
Customer Average Interruption Duration Index (CAIDI)5 134.77 190.12
1.5 Financial Health
Below is a summary of the financial position for the electric utility.
1.5.1 Sales Forecasts vs. Actuals
Actual electric sales volumes through Q2 of FY 2023 were about 2% lower than forecasted, while actual sales
revenues were about 3% higher than budgeted in the FY 2023 Financial Plan. The higher sales revenues were due
3 System Average Interruption Duration Index (SAIDI) - Measure of the total duration of an interruption for the average
customer during a given time frame. SAIDI = (Sum of Customer Minutes Interrupted) / (Total Customers Served)
4 System Average Interruption Frequency Index (SAIFI) - the average number of times a customer will experience an
interruption during a given time frame. SAIFI = (Total Customers Interrupted) / (Total Customers Served)
5 Customer Average Interruption Duration Index (CAIDI) - the average time to restore service. CAIDI = (Sum of Customer
Minutes Interrupted) / (Total Customers Interrupted)
9Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
to additional revenue from the Electric Hydro Rate Adjuster (E-HRA) rate, which was implemented effective on
April 1, 2022.
Figure 5: Electric Sales Volume (kWh), up to FY 2023-Q2
Figure 6: Electric Sales Revenue ($), up to FY 2023-Q2
1.5.2 Financial Position
10Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
purchase replacement market power. Market prices in Q1 of FY 2023 were roughly 165% of the previous three
year average leading to much higher supply costs. In late November and through December, natural gas prices
skyrocketed and were the primary driver for higher electricity prices, which were 457% higher than the prior
three year average for the month of December. Total supply costs through December 2022 were $58.2 million vs
a budgeted amount of $42.8 million, for a total variance of $15.4 million over budget.
11Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
2 Gas Utility
The City’s gas utility serves all residential and non-residential gas demand in Palo Alto. The City maintains and
operates a system of low-pressure gas lines for delivering gas but does not operate any transmission lines. Costs
for the gas utility are split approximately two thirds for the operation, maintenance and one third for the cost of
the gas commodity, PG&E gas transmission, compliance with the State’s Cap and Trade Program and the City’s
Carbon Neutral Gas Program.
2.1 Gas Supply and Transmission
The gas market experienced substantial price increases in December 2022 and January 2023. The gas commodity
monthly price at the PG&E Citygate hub was $14.1/mmbtu in December, and it skyrocketed to $49.5/mmbtu in
January. Gas market prices rose dramatically across the western United States due to a confluence of factors,
including: (a) the historically cold weather in this region in December, (b) unusually low gas storage levels across
the region, (c) constraints on the availability of natural gas supplies flowing into California, and (d) an increased
reliance on natural gas in the electric power sector as a result of the ongoing drought’s impact on hydroelectric
supplies. The monthly price decreased to $12.5/mmbtu in February.
The extreme market conditions this winter impacted most utilities throughout the Pacific and Rocky Mountain
regions of the United States and were not unique to Palo Alto. Palo Alto’s Mayor Lydia Kou sent a letter to
Governor Newsom in support of the request for a federal investigation of high natural gas prices. From December
2022 to February 2023, our communications team utilized various channels to inform our customers about high
gas prices and resources to help customers with higher than anticipated bills, and to promote gas conservation
and home electrification. These channels included publishing articles on our city website, sending email
newsletters/bill inserts, featuring an opinion column in Palo Alto Online, and utilizing social media channels.
Gas Commodity Cap Increase
In early December, staff noticed the trend of rapidly increasing gas prices and suspected that the monthly market
index price might surpass the gas commodity price cap of $2/therm. Staff recommended and the Council passed
Resolution #10090, which doubled the gas commodity price cap to $4/therm, effective January 1, 2023. However,
the actual January 2023 gas market commodity monthly price was approximately $0.95/therm higher than the
updated price cap. Therefore, the gas utility will not be able to fully recover the pass-through rates from
customers, which will have a negative impact on gas reserves. The figure below illustrates the actual and projected
Palo Alto gas commodity rates and the Citygate price settled in January 2023. It is expected that the projected
commodity rates beyond February 2023 will return to levels below $1/therm.
12Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Figure 7: Palo Alto Gas Commodity Rates, Commodity Rate Caps, and Citygate Actual Prices
2.1.1 Actual and Forecasted Supply Costs
Actual gas demand through Q2 of FY 2023 was about 3% lower than forecasted, while actual supply and
transportation costs were about 114% higher than budgeted in the FY 2023 Financial Plan. Gas commodity prices
were much higher than predicted in the FY 2023 financial plan due to reasons mentioned in section 2.1 above.
2.1.2 Carbon Neutral Gas Program
In December 2020, Council adopted Resolution #9930 maintaining the Carbon Neutral Natural Gas Plan to achieve
carbon neutrality for the gas supply portfolio using high-quality carbon offsets with a cost cap of $19 per ton CO2e.
Offsets are purchased to neutralize emissions equal to those caused by natural gas usage in Palo Alto. Staff
purchased 60,000 carbon offsets for FY 2022 in January 2022 from a mixture of forestry and livestock projects at
an average purchase price of $12.26 per metric ton, nearly double the price of historical average transaction
prices. Staff purchased an additional 60,000 carbon offsets in June 2022 at an average price of $14.51 per ton
CO2e. As a result of the higher offset purchase costs, staff has updated the billing charge for offsets from
$0.04/therm to $0.07/therm. The average purchase price of offsets purchased for the program is $7.66 per ton
CO2e. The figure below shows the composition of offset purchases. Staff is evaluating a process change to expedite
13Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
the approval of new Verified Emission Reduction (carbon offset) counterparties and has delayed its regular winter
purchase while staff assesses the process change. Staff will issue an RFP to purchase offsets before the end of FY
2023.
Figure 9: Offset Portfolio Composition
14Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
The following table provides a description of the projects.
Figure 10: Offset Project Descriptions
2.1.3 Cap and Trade Program
P P D
G L G
G U
G
h
S M
P
M
T
B U B
P U
T
p
r
f
w
R O
T
9
w
T
a
a
M M
T
A
n
t
V
C
F U
T
i
m
P
h
C
R
A L
R
d
l
m
C
B
C U
T
o
C
q
15Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
increased significantly. The cost of compliance is anticipated to increase from $1.5 million in FY 2022 to $5.6
million in FY 2030, about an 18% increase per year on average, as shown in the following table:
Figure 11: Estimated Cap and Trade Costs
2.1.4 Gas Transmission Line Capacity Valuation
2.1.5 Gas Prepay Valuation
16Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
for a period of at least 10 years. The MuniGas transaction includes a mechanism for municipal utilities to utilize
their tax-exempt status to achieve a discount on the market price of gas. The program has reduced about $385K,
or 3.2% of the total gas commodity costs through Q2 of FY 2023.
2.2 Capital Improvement Plan Status
•GS-14003 - GMR 24A (Gas Main Replacement 24A): The GMR 24A project will replace approximately 2,450
linear feet of gas main along Shopping Center Way and Orchard Lane in Stanford Shopping Center. The City
coordinated the schedule with Simon Property Group Inc. (shopping center’s management) for construction
work to occur between 6 AM and 3 PM. The project had a delayed start due to the significant weather events
that occurred around the beginning of 2023; therefore, the revised completion date has been extended
commensurately from 3/31/23 to 4/13/23.
•GS-14003 - GMR 24B (Gas Main Replacement 24B): The GMR 24B project will include gas pipes on University
from Webster to 101 and surrounding streets, as well as Geng Rd and Town & Country Village. Staff is waiting
for the final federal grant award determination, which will be available in February 2023.
2.3 Rate and Bill Comparisons
Figure 12: Residential Natural Gas Bill Comparison ($/month)
Year/Month
Median Usage6
(therms)Palo Alto PG&E Zone X
% Difference
2.4 Reliability
6 Based on Palo Alto G-1 monthly median usage.
17Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Figure 13: Gas Service Interruptions, FY 2023
Gas Q1 Q2
Number of Breaks 9 4
Total Minutes 643 330
Customers Affected 20 5
2.5 Financial Health
Below is a summary of the financial position for the gas utility.
2.5.1 Sales Forecasts vs. Actuals
Actual gas sales volumes through Q2 of FY 2023 were about the same as forecasted, while actual sales revenue
was about 39% higher than forecasted in the FY 2023 Financial Plan, due to high gas market commodity prices.
Much of the revenue is pass-through in nature and offsets commensurately higher gas commodity purchase costs.
18Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
2.5.2 Financial Position
The FY 2022 ending Operations Reserve balance was $11.3 million, above the minimum guideline level of $7.8
million. The Operations Reserve is expected to drop below the minimum guideline level in FY 2023, given higher
than budgeted gas commodity prices that could not be passed through to customers. Through FY 2023 Q2, therm
sales volume was approximately the same as budgeted, but sales revenues were almost 39% higher than budget.
Because the gas commodity charge is a pass-through of market costs, typically, increased revenue offsets the
increased cost; this year in January the revenue was not enough to offset the increased costs because the actual
gas commodity price exceeded Palo Alto’s price cap. This will put pressure on reserves in FY 2023. Staff will provide
financial forecast projections in March 2023.
19Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
3 Water Utility
The Water Utility serves water to virtually all Palo Alto residential and non-residential customers. All potable water
in the City is from the San Francisco Public Utilities Commission (SFPUC) Hetch Hetchy Water System. This system
delivers high quality water from the Sierra Nevada and uses no pumping to deliver water to Palo Alto. Palo Alto
uses a small amount of recycled water for irrigation of the Municipal Golf Course and a few other sites near the
Regional Water Quality Control Plant. The City also maintains a system of reservoirs and wells that enable Palo
Alto to serve water during an interruption of the Hetch Hetchy system. Costs for the Water Utility are split
approximately half for the operation, maintenance and periodic replacement of Palo Alto’s water system and half
for the costs of the water purchased.
3.1 Water Supply and Transmission
On November 10, 2022, Governor Newsom’s senior Water-Policy Officials, the San Francisco Public Utilities
Commission (SFPUC), and the Modesto and Turlock Irrigation Districts reached agreement on a Memorandum of
Understanding to provide greater water flows and increased habitat for the Tuolumne River. The Bay Area Water
Supply and Conservation Agency (BAWSCA) anticipates that this MOU will become a part of a larger voluntary
agreement for the Sacramento-San Joaquin Delta. The agreement includes investments of $64M for habitat
restoration. The next step is for the MOU signatories and others to work out the implementation details of a Bay-
Delta-wide voluntary agreement for evaluation by the State Water Resources Control Board as an alternative to
the adopted Bay-Delta Plan. The State Water Resource Control Board’s schedule indicates development of the
Tuolumne Specific Addendum Scientific Basis Report by fall 2023 and the Phase 1 Final Water Quality Control Plan
by summer 2024.
In August 2018, Palo Alto’s City Council voted to support the State Water Resources Control Board’s Bay-Delta
Plan to have 40 percent of natural water in the Central Valley to enter the Delta from February to June and
associated Southern Delta salinity objectives; and send a letter expressing this policy position to BAWSCA,
California State Water Resources Control Board, San Francisco Public Utilities Commission (SFPUC), and other
stakeholders.
As a result of the above average precipitation in December 2022 and January 2023, storage in the San Francisco
Regional Water System is above normal for this time of year. As of January 30, 2023, the Regional Water System
total storage operated by the San Francisco Public Utilities Commission (SFPUC) was 90.8% full (normal system
storage for this time of year is 80.3%). As of January 30, 2023, Water Bank was 99.2% full. In the figure below, the
solid black line shows storage in the Regional Water System for the past 12 months (color bands show
contributions to total system storage) and the dashed black line shows total system storage for the previous 12
20Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
months. Regional Water System Storage increased in December 2022 and January 2023 to 1.33 Thousand Acre
Feet (TAF) as of February 1, 2023.
Figure 16: Regional Water System Storage
21Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Palo Alto’s current water budget is based upon the results of the current Tier One and Tier Two Plans. Since
January 2022, staff have been participating in a negotiation with the other Wholesale Customers to update the
Tier Two Plan. Staff expects to finalize the updated Tier Two Plan in 2023.
Figure 17: SFPUC Water Deliveries
22Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
to avoid confusion as much as possible. As such, the City’s messaging will continue to emphasize the wise use of
water rather than specific water usage targets. Palo Alto staff is continuing to focus on education and outreach
and providing resources to eliminate water waste and achieve efficient water use and completed the process of
hiring a Water Waste Coordinator in October. The Water Waste Coordinator is logging and following-up on water
waste reports. Palo Alto is kicking off the WaterSmart Customer Portal and Residential Home Water Report
Program and also re-engaging with Waterfluence software to target water efficiency for large landscape
customers. Staff continues to promote rebate programs and resources through online outreach, bill inserts, and
newsletters.
Palo Alto launched the One Water Plan with the goal of Council adoption of a One Water supply plan that is a 20-
year adaptable roadmap for implementation of water supply and conservation portfolio alternatives. In June the
City Council approved a contract for this work with Carollo Engineers, Inc. In September and December 2022, staff
conducted stakeholder engagement meetings with community members and City staff focusing on One Water
community needs and priorities and water supply and conservation options and draft evaluation criteria. The
community can still weigh in on the evaluation criteria via this survey. Additional stakeholder engagement
meetings are planned with City staff, community members, and regional partners in spring 2023 to share initial
results. The UAC received a status update in February 2023 (Staff Report #14974) and staff plans to schedule a
joint meeting with the UAC and Stormwater Oversight Committee in Q2 of 2023 to provide an update and share
initial results.
3.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
•WS-14001 - WMR 28 (Water Main Replacement 28): The WMR 28 project replaces approximately 18,763
linear feet of water main and 256 water services in the Crescent Park, Barron Park, and Charleston Meadows
neighborhoods. Construction of this project started during April 2022 and the anticipated completion date is
in December 2023.
•WS-07000 – California Avenue and Page Mill Road Turnouts: The California Avenue and Page Mill Turnouts
project upgrades the California Avenue Turnout and adds seismic restraints to the pressure reducing valve at
Page Mill Road Turnout. The construction is anticipated to start in March 2023 and be completed by June
2023 (before water demand increases during the summer).
3.3 Rate and Bill Comparisons
The figure below shows the water bills for single-family residential customers compared to what they would be
under surrounding communities’ rate schedules as of October 2022. CPAU is among the highest monthly bills of
the group. Palo Alto’s water bills at 9 CCF per month are 17% higher than the comparison group average.
Figure 18: Residential Water Bill Comparison ($/month)
As of October 2022
Usage CCF/month Palo Alto Menlo Park
Redwood
City
Mountain
View Santa Clara Hayward
4 $50.74 62.83 $54.04 $43.47 $29.32 $41.03
(Winter median) 7 76.54 87.32 76.09 67.29 51.31 63.23
(Annual median) 9 98.46 103.65 90.79 83.17 65.97 78.03
23Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
(Summer median) 14 153.26 148.02 138.94 122.87 102.62 123.48
25 273.82 257.41 267.39 257.81 183.25 223.47
3.4 Reliability
The City of Palo Alto tracks all water service interruptions. A summary chart of these interruptions can be found
below. Water service interruptions are usually due to repairs of broken or damaged water services and mains.
Figure 19: Water Service Interruptions, FY 2023
Water Q1 Q2
Number of Breaks 10 12
Combined Minutes 1007 1050
Customers Affected 46 249
3.5 Financial Health
Below is a summary of the financial position for the water utility.
3.5.1 Sales Forecasts vs. Actuals
Actual water sales volumes through Q2 of FY 2023 were about 9% lower than forecasted, while actual water sales
revenues were about 11% lower than forecasted in the FY 2023 financial plan. Sales were lower likely due to the
water conservation efforts made throughout the drought periods, coupled with rainy weather during the winter.
Staff will continue to promote drought-related and water savings communication through the rest of FY 2023.
Figure 20: Water Sales Volume (CCF), up to FY 2023-Q2
24Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Figure 21: Water Sales Revenue ($), up to FY 2023-Q2
3.5.2 Financial Position
The Water Operations Reserve was filled to the maximum guideline level at the end of FY 2022 as higher bid costs
and delays in project schedules resulted in deferred main replacement projects over the past few years. There are
additional funds in the Operations Reserve above the maximum guideline level that will continue to be used to
cover water utility operational and capital costs in FY 2023. At year end FY 2022 there was approximately $12.2
million in Water CIP Reappropriations and Commitments reserves. The FY 2023 Water Utility CIP includes a main
replacement (WMR 28) as well as one-time seismic reservoir upgrades (one upgrade is complete and a second
and third are planned in FY 2023 and FY 2026). At year end FY 2022, there was also $10.7 million in the CIP Reserve
and $9.07 million in the Rate Stabilization Reserve. Due to the ongoing drought and water conservation efforts,
the water utility’s sales revenue declined in FY 2022 by approximately $3.4 million compared with sales revenue
in FY 2021. The water utility used reserves to cover costs in FY 2022 and plans to continue to use reserves in FY
2023 while ongoing drought or drought recovery continues to reduce sales revenues. Staff’s preliminary projection
of expected revenues and expenses together with transfers from the CIP Reserve, estimates the Operations
Reserve will reach approximately target levels by the end of FY 2024. Staff will continue to monitor drought
conditions and respond to calls for voluntary or mandatory conservation. Staff will evaluate and propose reserve
transfers between the Rate Stabilization Reserve, CIP Reserve, and Operations Reserve in the annual Financial
Plans in March 2023.
25Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
4 Wastewater Utility
The Wastewater Utility includes the system of sewer pipes that collect and transport wastewater to the Regional
Water Quality Control Plant (RWQCP) operated by the City of Palo Alto under a partnership agreement with
several surrounding communities, as well as Palo Alto’s share of the cost of operating the RWQCP. The RWQCP
provides treatment and disposal of wastewater for Palo Alto. Costs for the Wastewater Utility are split
approximately half for the operation, maintenance and periodic replacement of Palo Alto’s sewer collection
system and half for the costs of wastewater treatment at the RWQCP.
4.1 Wastewater Treatment Updates and Capital Planning Status
The Regional Water Quality Control Plant is operated by Palo Alto’s Public Works Department and provides
wastewater treatment to Palo Alto, Mountain View, Stanford, Los Altos, East Palo Alto and Los Altos Hills. The Palo
Alto Wastewater Collection Utility pays its share (approximately 30% projected in FY 2024) of the costs for
wastewater treatment and disposal. Capital costs for wastewater treatment are a major driver for cost increases
for the Wastewater Treatment Utility and by extension for the Wastewater Collection Utility. The RWQCP is facing
the need for major upgrades in coming years, due to aging equipment and changing environmental regulations.
Rehabilitation and replacement of plant equipment that has been in use for over 40 years is necessary to ensure
the city can continue to provide wastewater treatment operations safely and in compliance with regulatory
requirements for the discharge of treated wastewater 24 hours a day.
4.1.1 Treatment Cost Trends
RWQCP staff project treatment costs paid for by Palo Alto’s Wastewater utility to increase by approximately 4.5%
annually on average from FY 2024 through FY 2033. A key driver of the increases are capital projects, parts,
materials and debt. The treatment capital expenses, including debt service costs, are increasing at an average of
about 9.5% per year from FY 2024 through FY 2033 to keep up with ongoing replacement of aging equipment.
Larger increases to capital expenses are expected to begin in FY 2024 in the form of new debt service for major
projects to implement the Plant’s capital program. The figure below shows Palo Alto’s share of each component
of estimated treatment costs. Major upcoming capital projects and estimated years for debt service to begin are
reflected in the “Planned Debt Service” bar in the figure below and include:
•Joint Interceptor Sewer Rehabilitation (FY 2024)
•1900 Embarcadero Road Purchase; Primary Sedimentation Tank Rehabilitation (FY 2025)
•Outfall Line Construction, Operation Center and Laboratory (FY 2028)
•Secondary Treatment Upgrades, Headworks Facility (FY 2029)
26Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Figure 22: Palo Alto’s Share of Estimated Wastewater Treatment Expenses (Projection and Planned CIP)
The figure above shows the ongoing annual CIP reinvestment (“Recurring/Minor CIP” and “Existing Debt Service”)
as well as treatment operations costs, which make up the majority of the treatment costs but are not growing as
quickly as the planned debt service. Factors that are contributing to cost increases for treatment operations are
rising salary and benefits costs, allocated charges for centralized city services needed to support wastewater
treatment fund operations, increased water and air permitting fees from the Regional Water Quality Control
Board and Bay Area Air Quality Management District, commodity rates to operate the facility, and chemical
expenses.
4.1.2 Regional Water Quality Control Plant Capital Planning Status
The Long-Range Facilities Plan, completed in 2012, guides the capital plans for the RWQCP. The RWQCP’s current
capital work in-progress includes an estimated $398 million in projects. The following table summarizes these
ongoing projects and provides their status and costs.
27Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Figure 23: Current RWQCP Capital Work In-Progress (based on RWQCP November 2022 Partners Meeting)
Project Status Expense (million $)
Primary Sedimentation Tanks Rehabilitation and
Equipment Room Electrical Upgrade
Construction $19.4
New Outfall Pipeline 90% Redesign $17.4
Secondary Treatment Upgrades Awarding Construction $193
Advanced Water Purification System 90% Design $56
Technical Services Building/Lab Building, Ops
Building Remodel
Advanced Planning $41.4
Buy 1900 Embarcadero Road Planning $6.0
Headworks Facility Replacement Budgeted $48.6
Joint Interceptor Sewer Rehabilitation 30% Design $5.6
Projects in Progress Various $10.6
Subtotal $398
The largest projects listed above include the Headworks Facility Replacement which involves replacement or
rehabilitation of the parts of the facility that pump raw sewage to the main treatment works (the headworks), and
rehabilitation of primary sedimentation tanks that separate out primary sludge. Additionally, the RWQCP
anticipates regulations to limit nutrient discharges (on total nitrogen) into the San Francisco Bay. The current
secondary treatment design cannot remove nitrogen and the Secondary Treatment Upgrades will address this
regulatory change as well as address aging mechanical and electrical equipment that must be replaced.
The RWQCP plans to fund these capital projects through a combination of mechanisms including State Revolving
Fund loans, and revenue bonds. In addition, Valley Water will be providing $16 million of funding for the Advanced
Water Purification System. Additionally, Palo Alto was awarded a $12.9 million grant for the Advanced Water
Purification System from the United States Bureau of Reclamation’s WaterSMART program, which allocates Title
XVI Program funding under the Water Infrastructure Improvements for the Nation (WIIN) Act .
4.2 Collection System Capital Improvement Plan Status
The following capital projects are currently in progress:
•WC-17001 - SSR 30 (Sanitary Sewer Replacement 30): The SSR 30 project replaced approximately 9,649 linear
feet of wastewater main and 195 sewer laterals in the Ventura, Research Park, Fairmeadow, and Midtown
West neighborhoods. The construction will be substantially completed in early February 2023.
•WC-19001 - SSR 31 (Sanitary Sewer Replacement 31): The SSR 31 project replaces approximately 11,000
linear feet of wastewater main, sewer laterals, and manholes on El Camino Real and Page Mill Road. The bids
are due in early February and construction is anticipated to start in July of 2023. 40% of the work will be
performed during nighttime due to Caltrans’ restriction to close 2 traffic lanes during daytime. Staff is
coordinating with Caltrans and County of Santa Clara to stay ahead of their street improvement/paving
projects. The SSR 31 contractor is expected to work 2 shifts during the day and night to expedite the sewer
replacement and avoid digging into Caltrans or County’s newly paved streets.
4.3 Rate and Bill Comparisons
The figure below shows the wastewater monthly bill for residential customers in Palo Alto compared to what they
would be under surrounding communities’ rate schedules as of November 2022. Palo Alto’s monthly sewer bill is
28Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
lower than four of the six neighboring communities. Menlo Park in this table refers to the West Bay Sanitary
District. Staff will report on future rate increases once they are adopted by the wastewater utilities.
Figure 24: Residential Wastewater Bill Comparison ($/month)
4.4 Financial Health
4.4.1 Sales Forecasts vs. Actuals
Figure 25: Wastewater Sales Revenue ($), up to FY 2023-Q2
4.4.2 Financial Position
29Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
5 Fiber Utility
The City offers a "Dark" fiber service providing a fiber connection from Palo Alto businesses to the downtown
Internet Exchange. At the exchange businesses select an internet service provider (ISP) for bandwidth and
connection speed.
5.1 Fiber Utility Strategic Planning
On December 22, 2022 the Council approved construction of the fiber backbone and Fiber-to-the-Premises (FTTP)
under a phased approach without debt financing (Staff Report #14800, Packet Pg. 268). Utilities will allocate
approximately $34M from the Fiber Fund and $13M from the Electric Fund to build the fiber backbone and build
phase one of the FTTP distribution network under a phased approach. Under this approach the City can build a
dedicated fiber backbone for the Electric utility to enhance reliability, security, redundancy, and future electric-
related initiatives such as automated SCADA sensors. The City will also be able to provide internet access to
approximately 20% - 30% of homes and residents who prefer to switch to City-owned ISP. Council can decide
whether to accelerate or decelerate the FTTP expansion plan in one or two years based on the results of phase
one. In addition, the City will evaluate the feasibility of integrating FTTP expansion into future capital improvement
projects such as electric grid modernization, electrification and undergrounding.
Staff recommends amending the contract with Magellan to provide professional consulting and technical services
for construction of the fiber backbone build, construction of phase one of FTTP, and provisioning of City-owned
ISP business. However, due to procurement conflict-of-interest rules, Magellan is precluded from offering services
for construction and construction management.
Utilities will be bringing forward a recommendation to add four (4) new FTE positions for the dark fiber expansion
and implementation of FTTP as part of the FY 2024 Utilities Proposed Budget. The titles of these positions are
Assistant Director, Outside Plant Manager, Marketing and Sales Manager and Network Architect/Senior Engineer.
These positions will be recruited and filled as needed during the various stages of the project
5.2 Capital Improvement Plan Status
Given Council’s approval of construction of phase one of FTTP, CPAU will create a new FTTP CIP project under the
fiber utility in the FY 2024 Fiber CIP Budget. Staff will return to UAC and Council to determine potential areas for
phase one construction. Staff will identify synergies to reduce construction costs and minimize community
disruption between the fiber FTTP and electric Grid Modernization CIP projects.
30Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
5.3 Reliability
There were no unplanned fiber outages or events to report in Q3 of FY 2023.
Below is a summary of the financial position for the fiber utility.
5.4.1 Fiber Sales
Actual dark fiber revenues for Q1 FY 2023 were $1.6 million, which is within the FY 2023 revenue forecast of $3.6
million. Based on the number of new dark fiber applications, staff projects annual fiber revenues will return to
pre-pandemic level of $4.5 million by end of FY 2024. To expand the dark fiber business, CPAU has a hired a full-
time Fiber Market Analyst to promote dark fiber and reduce fulfillment time for new applications. In addition,
CPAU is recruiting for a dedicated Fiber Engineer to support the fiber expansion project.
Actual fiber expenses for Q1 FY 2023 were $1.3 million which is comprised of salaries and benefits ($0.7 million),
contract expenses ($0.1 million), administration overhead ($0.4 million), and transfers to other utilities ($0.1
million).
5.4.2 Financial Position
The projected ending FY 2022 Fiber Optic Utility Rate Stabilization Reserve is $34.0 million.
31Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
6 Customer Programs (Efficiency and Sustainability)
The City’s Utilities Department maintains a number of programs to help customers save money, use energy and
water efficiently, and reduce carbon emissions. These programs are funded through a variety of funding sources,
some of which are summarized below.
6.1 Customer Programs Updates
Below is a summary of the City’s energy and water efficiency programs, as well as programs to encourage building
electrification and adoption of electric vehicles.
6.1.1 Energy and Water Efficiency
Energy & Water Efficiency Workshops
The City in partnership with the Bay Area Water Supply and Conservation Agency (BAWSCA) held three landscape
efficiency workshops in fall 2022. The workshops covered topics on harvesting rainwater, steps to take to design
and convert lawns into drought-tolerant landscapes, and available rebates. Attendance was strong, with more
than 91 residents total participating in the workshops.
Figure 26: Schedule of CPAU Workshops September - November 2022
Event #Date Event
1 9/24/2022 Rain Barrel Workshop
2 10/18/2022 Landscape Design 101
3 11/1/2022 Lawn Conversion 101
Please visit the BAWSCA website for a complete list of available classes and events at:
https://bawsca.org/conserve/programs/classes. All past Landscape Class Videos are available online at:
https://bawsca.org/conserve/landscaping/videos/. For updates on future events and workshops, please visit
http://cityofpaloalto.org/workshops
With collaboration from the City Manager's Office, Planning and Development Services and the Utilities
Department, a Making Better Choices in Your Home Workshop was held on Saturday, October 15 from 10 a.m. –
1 p.m. at Mitchell Park Community Center. Over 200 attendees learned about different climate-friendly choices
they can make in their home, including displays of heat pump water heaters, and experts answering questions
about induction cooktops, electric vehicles, e-bikes, water saving and the advantages of going all electric.
32Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Residential Energy and Water Programs
The Home Efficiency Genie program continues to provide residents with professional advice and information to
improve their home’s efficiency and comfort, lower their energy and water usage and get guidance on home
electrification options. Even with the Genie returning to in-home comprehensive and diagnostic assessments in
the fall of 2021, the virtual option developed during COVID continues to be a service that residents are interested
in. The Home Electrification Readiness Assessment (HERA) was also amended to include a virtual version during
COVID. Both the in-home and virtual versions continue to help residents assess home electrification upgrades that
their home can accommodate and provide actionable next steps. Between October and December of 2022, the
Genie performed 14 comprehensive in-home assessments, 11 HERAs and 3 virtual assessments.
CPAU’s Residential Energy Assistance Program (REAP) for income-qualified customers continues to reach our most
vulnerable population offering energy and water efficiency improvements at no cost to the customer. Residents
who are newly qualified for CPAU’s Rate Assistance Program (RAP) are notified each month of their eligibility for
these free upgrades installed by CPAU’s vendor, Synergy. Between October and December of 2022, 6 new REAP
customers have taken advantage of the free efficiency upgrades, with projects including building envelope
improvements, furnace replacements with high efficiency models, and lighting upgrades to LEDs.
For our multifamily (MF) property owners, CPAU continues to offer the Multi Family Plus (MF+) program which
offers free energy efficiency upgrades installed by our vendor, Synergy. These upgrades include lighting upgrades
to LEDs and whole building envelope upgrades.
CPAU partners with Valley Water to offer a robust portfolio of water conservation programs and rebates for
residents and businesses. On July 1, 2022, the City entered into a new cost-sharing agreement with Valley Water
which increases rebate amounts for converting turf into drought-tolerant landscapes and includes a new Lawn to
Mulch rebate program for commercial customers. As drought conditions continue, CPAU is focusing outreach on
reducing outdoor water use and continues to encourage participation in rebates and resources.
For the seventh year in a row, the City of Palo Alto is an outreach partner for Bay Area SunShares, a solar and
battery storage group-buy program administered by Building Council for Climate Change (BC3). Palo Alto’s
participation as an outreach partner helps CPAU customers receive information and discounted prices from vetted
contractors. Three solar installers (Solar Technologies, SkyTech Solar, and Infinity Energy) have been vetted and
selected through an RFP process. CPAU Palo Alto had the highest number of SunShares registrations with 161
registered residents and number of solar and storage contracts signed (32 contracts). Of the 32 contracts signed,
23 contracts were for solar only, 8 for solar and storage, and 1 for storage only.
As of February 3, 2023 the Business Advantage Program (BAP) has ended. The decision to sunset the program was
based on lower customer participation, long lead times of installers, growing customer complaints and key staff
turnover. During the last full quarter of the program only two installations were completed. In contrast, the
program’s monthly average in first three quarters was 9 installations. Also, the BAP customer implementor
Gridpoint had an ongoing issue with program installers. During the second and third quarter of CY 2022 the
installer resigned and then renegotiated the install fee causing long lead times for installation and equipment
commissioning. The program received a steady stream of customer dissatisfaction with the Honeywell provided
thermostat. Customers complained of the lack of functionality and frustration with interface. Customer
33Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
dissatisfaction in the last quarter of CY 2022 caused several businesses to request uninstalls. Lastly, key program
staff, lead salesperson and program manager, left the company. The new sales staff was 100% remote with no
plans for face-to-face sales. Despite CPAU’s decision not to continue offering the HVAC system controller, the
program was a success. The program was designed for relief during the COVID 19 pandemic. Seventy-five small
business customers took advantage of the GridPoint Energy Management system (GEM). Staff is considering
replacement program with stricter alignment of S/CAP goals and electrification.
Commercial & Industrial Energy Efficiency Program
Figure 27: Energy Efficiency Program Energy Savings
Business Customer Rebates, formerly Commercial Advantage Program
Business Energy Advisor
34Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
program with the CLEAResult call campaign reaching over 600 customers, direct emails to 115 past CPAU program
participants, and 2 e-newsletters sent to 8,073 subscribers. We have continued in person outreach, making
numerous visits to businesses on California Ave., University Ave., and San Antonio Rd. The next steps for this
program include more outreach via a direct postcard mailer, resuming in person outreach and implementing this
program into the EECP database system for tracking and reporting.
6.1.2 Building Electrification
rd party program administrator for the implementation of
a full-service heat pump water heater (HPWH) installation program. The program aims to retrofit 1,000 gas water
heaters in single family homes in a year; customers can choose to pay for the project upfront or select an on-bill
financing option with 0% interest rate. The program contract with 3rd party vendor Synergy was approved by
Council on October 3, 2022. Enthusiasm in this program has been high with 382 residents having signed up on
the online interest list as of March 6, 2023. Synergy began site assessments for HPWH installation in late February
and have scheduled 12 assessments through March 9, 2023. Lessons learned from this program will include
understanding challenges with deploying a large-scale electrification effort, which will be used to inform the
development of future electrification programs.
•All-electric design for new construction projects; this applies to low-rise residential buildings,
detached ADUs, multifamily buildings, and nonresidential buildings.
•Addition/alteration projects that meet the “Substantial Remodel” definition will trigger the all-electric
requirements. For the purposes of electrification, substantial remodel shall mean the alteration of any
structure, including cumulative projects or additions to the existing structure within any three (3) year
period, that affects the removal or replacement of 50% of the linear length of the exterior weight-
bearing walls of the building, 50% of the wall plate height is raised, and/or 50% of the roof structural
framing.
•Prohibit the extension of gas infrastructure in existing buildings to outdoor amenities such as pools,
spas, fireplaces and grills in order to minimize the carbon footprint of these equipment.
•Require heat pump water heater when the existing water heater is replaced, or new water heater is
added as part of a residential addition or alteration project.
35Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Collectively these proposed requirements will avoid over 3,420 MT CO2-e per year, about 1% to 1.5% of the
remaining emissions reductions needed to achieve the 80x30 goal (about 1.5% to 2% when upstream emissions
from fuel use are included).7
Business Electrification Technical Assistance Program (BE TAP)
For commercial customers, staff partnered with CLEAResult in the launch of the Business Electrification Technical
Assistance Program (BE TAP) in August 2022. This program offers free electrification assessment and technical
assistance to implement building electrification projects to a variety of business types including but not limited to
hotels, restaurants, churches, and office buildings. To date, program outreach activities include call campaigns, e-
newsletters, and utility bill inserts. A total of 5 site assessments have been completed in Q2 FY 2023.
6.1.3 Electric Vehicles
Palo Alto continues to facilitate the installation of EV charging infrastructure throughout the City to support mass
EV adoption, with equitable access for multifamily and income-qualified residents, as well as workplaces, public
parking lots and retail areas. Correspondingly, cross-departmental work is progressing on proposals for fleet
electrification.
Financial Overview
FY 2022 EV program related expenses were $1.3M, of which $0.465M was for the second installment of the
CALeVIP program, $286k was contribution to the Clean Fuel Rebate (CFR) program, $121k for EVTAP (Electric
Vehicle Technical Assistance Program) management by CLEAResult, and $170k in customer rebate payments.
Revenues for the year is $1 M, lower than anticipated a year ago due to declining market prices for LCFS credits.
As of 6/30/2022, the LCFS program fund had a reserve balance of $7.23M.
Summary of All EV Programs for Multi-family (MF) Properties and Workplaces
•Mission: The EV team’s mission is to facilitate the installation of EV chargers to support increased EV adoption
with a priority on MF properties. To reach 80 by 30 S/CAP goals, it is imperative that there is enough charging
infrastructure for residents, commuters and visitors. For residents, the priority is to close the MF EV access
gap, as only 13% of EVs in Palo Alto are registered at MF buildings, while MF makes up 42% of households.
•Goal of EV Programs: Expand EV charging accessibility to 10% of MF households (about 1,100 homes) by 2025.
•Why: Most middle-income and low to moderate-income residents in Palo Alto live in MF housing. EVs provide
significant lifetime household savings, and yet those who most need those savings have the hardest time
gaining EV charging access due to the challenges associated with installing chargers at MF properties. Private
industry is not adequately serving this market, whereas the City is well-positioned to support this hard to
reach and slower to move customer segment, making meaningful use of available City funding sources for EV
promotion.
•Target Customer Segment: MF property owners, Home Owners Associations (HOAs), nonprofits, owners of
small medium businesses and buildings, as well large C&I customers.
•What CPAU can provide:
o Trusted, neutral advisory services (rather than vendor sales services) with a direct connection to
internal City staff to facilitate problems.
Using 20-year global warming potentials.
36Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
o Technical assistance (site evaluation, including electrical capacity, business case development,
project design, obtaining bids, preparing permit packages)
o Incentives (both for charging equipment and distribution upgrades)
•Strategy: Facilitate development of shared Level 2 chargers in multi-family buildings as well as, as many Level
1 chargers as can be installed. Size electrical infrastructure to enable the building owner to add more EV
charging ports in the future. Also, encourage the installation of low-power Level 2 chargers when appropriate
as a grid-friendly strategy to increase EV charging options for as many EVs as possible.
Aggregated Results to-Date for All EV Programs Targeting Multi-family (MF) Properties and Workplaces
•Program Commencement: December 2017 (multi-family rebates), October 2019 (multi-family/nonprofit
technical assistance), December 2019 (workplace charging rebates)
•Leads: Over 130 sites have enrolled in the programs, of which 86 are multi-family properties representing
over 3400 units
•Results: When the active projects are completed, the City will have:
o Facilitated access to EV charging for over 1500 multi-family housing units. Without accessible
charging facilities these residents are unlikely to consider an EV.
o Access to EV charging for employees of several non-profits and workplaces.
•Marketing Strategy: Of Palo Alto’s 803 multi-family (MF) buildings, focus on the largest 5% (44 sites) which
represent 32% of total MF units (about 3800 households). Also, partner with affordable housing providers
which represent over 1600 low-income households at 35 sites of which 5 properties have 100 units or more.
Outreach consists of direct outreach to property owners via call campaigns, with marketing done by the 3rd
party program provider, CLEAResult.
Updates by EV Program
•EV Technical Assistance Program (EVTAP)
Goal: Facilitate the installation of 180-360 ports @ 60-90 sites (By 2024)
Offer technical assistance for the installation of EV chargers at Non-Profit and MF properties, involving a series
of site visits, technical evaluations, engineering reviews, and design proposals, culminating in the landlord
receiving contractor bids, followed by assistance submitting a building permit, applying for incentives and
project management of the installation. Completed projects have taken up to 2 years to reach completion.
As of the end of February 2023:
o 85 signed Program Participation Agreements sites enrolled and working through the program
o 34 sites with contractor bids
o 11 permit applications submitted
o 3 installations complete
o 35 new EV charging ports installed
o Currently proposed EVSE installations
o 208 Level 1 charging ports
o 505 Level 2 charging ports
•EV Charger Rebate Program
Goal: Incentivize the installation of EV chargers at Non-Profits and Multifamily properties. CPAU currently
offers up to $8,000 per port for up to 10 ports. Currently looking into lowering rebate levels due to
37Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
increased demand for rebates and a decreased income from Low Carbon Fuel Standard credits (see 6.2.1).
The program is also considering putting a time limitation on fund reservations, to accelerate projects
reaching completion.
As of the end of February 2023:
o 32 ports installed in CY2022
o Since the launch of this program in 2017, CPAU has facilitated the installations of 126 new EV charging
ports/connectors at 16 sites. The breakdown of the installation sites: 7 MF and 9 non-profits (including
3 schools). Avg. cost of each port: $10k and projects have averaged 12 months to complete.
•California Electric Vehicle Infrastructure Project (CALeVIP)
Goal: Facilitate and Incentivize the installation of EV chargers at commercial sites.
As of January 2023, a total of $1.6M (out of $2M) has been reserved by 10 site owners through CALeVIP, a
commercial EV charging, matching grant program sponsored by the California Energy Commission (CEC). The
proposed installations could lead to the installation of 165 Level 2 ports and 12 DC Fast Chargers.
o 0 installations completed
o 10 sites enrolled and working through the program (1 hotel, 7 office sites, 1 retailer and 1 multi-unit
dwelling)
o 6 Permit Applications Submitted
o 5 Permits Issued
o Potential for 165 Level 2 ports and 12 DC Fast Chargers
•EV Awareness and Outreach
Goal: Raise awareness, answer questions and encourage residents to consider transitioning to electrified
modes of transportation, including electric cars, e-Bikes and other modes of clean transportation. CPAU is
offering a wide array of EV classes and events, partnering with multiple vendors and organizations. In 2022,
CPAU hosted over 30 EV and electrification online workshops and in-person events with over 2,000
attendees. From January through mid-February 2023, CPAU hosted three virtual EV educational workshops
with a total of 264 participants in attendance. CPAU anticipates offering over two dozen online and in-person
workshops and events during calendar year 2023.
January – mid-February 2023:
o 3 EV education and outreach events completed
Figure 28: Tentative Schedule of CPAU EV Workshops and Events, February - April 2023
Event #Date Event
1 2/28/2023 E-Bike 101 (online workshop)
2 3/8/2023 E-Bike 101 (online workshop)
3 3/15/2023 EVs for Backup Power (online workshop)
4 3/26/2023 EVSpecial EVent: EV ScaEVenger Hunt @ Cal Ave. Farmers’
Market
5 3/28/2023 EVs for Backup Power (online workshop)
6 4/5/2023 Trilingual EV Financial Incentives Clinic (online workshop)
38Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
7 4/15/2023 E-Bikes in the Park w/ EV Expo @ Mitchell Park
8 4/30/2023 EV Expo @ Congregation Etz Chayim
Visit http://www.cityofpaloalto.org/workshops for information on upcoming classes.
•City-Owned EV Chargers
Goal: Install EV Charging Infrastructure for the public as well as City-fleet.
As of the End of December 2022:
o 124 - City-Owned Ports
o 120 - Publicly accessible EV Charging ports
o Newest chargers: 6 ports at renovated Junior Museum on 1451 Middlefield Rd.
•Transformer Upgrade Rebate Program
Goal: Provide discounts to defray the cost of utility distribution system upgrades triggered by EV
applications, costs that would otherwise be borne by the customers. With this program we are offering up
to $100K for MF & non-profits and up to $10K for Single Family Homes
As of the End of December 2022:
Many older properties in Palo Alto, especially multifamily buildings, have limited electric capacity to accommodate
EV chargers and building electrification. Yet, there is a nationwide transformer supply shortage, potentially
delaying customer EV projects. In the meantime, the EV team is working closely with Engineering and is conducting
a pre-screening of transformer loading for all commercial EV projects enrolled in EVTAP as well as proposing
designs utilizing existing electric capacity.
6.2 Funding Sources for Emissions Reductions
Energy efficiency and water efficiency programs have traditionally been funded by electric, gas, and water rate
revenues. To fund emissions reduction programs, the City has developed multiple alternative funding sources
6.2.1 Low Carbon Fuel Standard (LCFS) Program
LCFS base credits are allocated by the California Air Resources Board (CARB) to CPAU, based on the number of EVs
registered in Palo Alto, the estimated miles travelled and the difference in carbon intensity of transportation fuels
and electricity. Credits are also allocated based on CNG dispensed and electricity dispensed at city owned EV
chargers. The sales proceeds of these credits are the source of funds for CPAU’s customer programs related to
EVs. In CY2022, Palo Alto received approximately 15,000 credits and is expected to result in a revenue of about
$0.9M. LCFS credit prices have declined substantially in in 2022 compared to 2021, down from approximately
$130/credit to $60/credit.
6.2.2 Cap and Trade Program, Revenue from Allocated Allowances
The Global Warming Solutions Act of 2006, also known as Assembly Bill (AB) 32, authorized CARB to develop
regulations to lower the state’s greenhouse gas (GHG) emissions to 1990 levels by 2020. CARB developed a cap-
and-trade program as one of the strategies to achieve the 2020 goal. Under the cap-and-trade program, an overall
limit on GHG emissions from capped sectors is established and facilities subject to the cap are able to trade permits
(allowances) to emit GHGs. Senate Bill 32 (2016) expanded upon AB 32 by requiring a 40% reduction in GHG
emissions below the 1990 levels by 2030.
39Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
In 2012, CARB’s cap-and-trade program commenced and certain covered entities, such as electricity generators
and other stationary sources of GHGs, had a compliance obligation under the new program. The City of Palo Alto
Utilities’ (CPAU’s) electric utility does not own or operate fossil fuel-based electricity generation covered by the
cap-and-trade regulations. CPAU also received free allowances from CARB to mitigate the costs of reducing its
GHG emissions. Since CPAU’s electric utility is carbon neutral and typically has no need to use the allowances for
compliance, it must sell them into the cap-and-trade auction.
6.2.3 Electric Public Benefit Funds
40Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
7 Communications
This section summarizes communications highlights, updates on major campaigns and noteworthy events. Copies
of ads and bill inserts are available online at http://cityofpaloalto.org/UTLbillinsert.
Winter Storms and Power Outages: In January, the Bay Area experienced a series of storms and atmospheric
rivers over the course of a few weeks. The City of Palo Alto responded to flooding and other storm-related impacts,
including power outages for City of Palo Alto Utilities (CPAU) customers. Director Batchelor shared slides during
the Utilities Director report to the UAC in February with an overview of the storm impacts and response. It is
important to note that CPAU is currently working with a vendor to launch a new Integrated Voice Response (IVR)
and Outage Management Service (OMS) to improve customer communications for outages.
Extreme Energy Prices and High Utility Bills: As discussed with the UAC in December, utilities across the region
were impacted by extremely high natural gas prices during the FY 2022-2023 winter. Gas market prices can
fluctuate greatly from month to month due to factors such as national weather, gas production, storage levels, as
well as national and international trade and demand. Since learning of these higher prices in late November and
early December, CPAU has been attempting to inform customers in advance to take action and save energy to try
to avoid surprisingly high utility bills in January and February. The City is offering resources to help customers with
high utility bill costs, including free energy assessments through the Home Efficiency Genie, bill payment
arrangements, and efficiency tips. City Council also recently voted in February to offer rebates to customers for
high bills. Customers are asked to contact Utilities Customer Service Call Center for bill assistance.
Ribbon-Cutting for Stanford Health Care EV Chargers: Stanford Health Care recently installed 15 new electric
vehicle (EV) charging stations at the Hoover Pavilion garage through participation in the City’s Electric Vehicle
Technical Assistance Program. Stanford is also in the permitting phase for installing EV chargers at two other
garages. The facility held a ribbon-cutting ceremony on February 9 to celebrate this sustainability milestone.
Water Supply and Drought: Staff have been proactive about communicating the current situation of water supply
conditions and ever-changing water shortage emergency declarations. While recent storms throughout the Bay
Area provided some relief from dry conditions, the state’s water supply and snowpack are still below average for
this time of year. As a result of the ongoing drought conditions, CPAU continues a robust outreach campaign about
water supply conditions, water use restrictions, and resources for water use efficiency. Staff are working with the
Bay Area Water Supply and Conservation Agency (BAWSCA) and Valley Water to coordinate public education
events. Updates are available at cityofpaloalto.org/water
41Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
8 Legislative and Regulatory Activity
8.1 State legislation
At the time of this writing, the 2023 legislative session began six weeks ago and the deadline to introduce new
bills is a few days away. Thus far, the legislature has introduced some potentially relevant spot bills, which count
as an introduced bill for deadline purposes, while allowing a legislator time to develop substantive language. We
are also tracking some fully developed bills that will undergo amendments as part of the regular process. Tracked
bills as of February 2023 include those listed below.
Additionally, CPAU partnered with the California Municipal Utilities Association (CMUA) to successfully request
that Assemblyman Berman author a bill related to increasing the utility workforce. (Reference Utilities
Department Legislative Guideline number 13, “Support government action to expand the workforce in trades and
technical disciplines necessary to support building and vehicle electrification and grid modernization.”) The bill is
in development now and should be formally introduced shortly.
•AB 9 (Muratsuchi) and SB 12 (Stern) |California Global Warming Solutions Act of 2006: emissions limit. Both
bills, repeats of prior failed bills, set the state’s 2030 GHG reduction goal from 40% below 1990 levels to at
least 55% below 1990 levels.
•AB 65 (Mathis) | Energy: nuclear fission thermal powerplant. Allows for the development of new nuclear
energy facilities in California by removing the current legal prohibition.
•AB 66 (Mathis) | Natural Resources Agency: water storage projects: permit approval. A spot bill creating a
'water project shot clock' by requiring timely state permitting decisions for water supply projects.
•AB 249 (Holden) | Water: school sites: lead testing: conservation. Requires a water system serving a public
or private school with a building constructed before January 1, 2010 to test for lead by January 1, 2027, and
to prepare a sampling plan.
•SB 48 (Becker) | Building performance standards. Spot bill to create building performance standards for
improvements in energy efficiency and GHG reductions in large buildings
•SB 49 (Becker) | Tax incentives: solar canopies. A spot bill to provide tax incentives for the construction of
solar canopies over large parking lots to boost the local generation of clean electricity.
8.2 State Regulatory Proceedings
Below are issues currently before state regulatory bodies that CPAU is monitoring, primarily through our work
with CMUA and NCPA.
42Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
8.2.1 Energy Commission
A 2022 bill required the California Energy Commission to produce a report in January 2023 evaluating how the
state, load-serving entities, publicly-owned utilities (POUs), and balancing authority areas managed summer
reliability during 2022. In advance of the report’s release, CMUA submitted comments related to challenges and
opportunities moving forward.
The federal EPA anticipates drafting proposed updates to the federal Lead & Copper Rule Standards this fall; the
Water Board may develop proposed state standards once the draft federal rule is released.
CARB released the final version of the 2022 Scoping Plan update here, with an associated press release here.
Staff is currently working on our 2023 Wildfire Mitigation Plan, due by July 1. Staff expects to present the draft
plan to the UAC in June.
The CPUC has a pole database proceeding that CMUA is following, with CPAU participating on workgroup calls.
The Administrative Law Judge in the proceeding asks if POUs should be included in possible mandates for
development of a pole database, providing information about pole loading and assets to pole attachers.
As mandated by a 2022 Assembly Resolution, CAISO developed a draft report summarizing possible impacts of
regionalization. CPAU participated in a stakeholder call discussing the report.
43Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Appendices
44Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
9 Appendix A: Energy Risk Management Program
This appendix provides a quarterly update on the City’s Energy Risk Management Program.
9.1 Overview of Hedging Programs
The City’s Utilities Department maintains a hedging program for its Electric and Gas Utilities. In the Gas Utility the
program protects against short-term (intra-month) price spikes caused by weather or major incidents on the
Western gas system. However, the City does not hedge its gas supply more than one month in advance, choosing
instead to protect the Gas Utility’s financial position by passing gas supply costs through to customers via a charge
that varies monthly based on gas market prices. As a result, the Gas Utility’s only market exposure is the amount
by which gas demand deviates from forecasts within the month. This exposure is relatively small and can be
managed using Gas Utility Operating Reserves. A risk assessment is performed each year as part of the Gas Utility
financial planning process to ensure adequate reserves to cover all risks. The most recent Gas Utility Financial Plan
was adopted June 21, 2021 (Staff Report #12240).
The City has entered into long-term contracts for its Electric Utility to ensure that the City has carbon free
electricity supplies equal to 100% of Palo Alto’s annual electric demand. However, the output from these
generating sources does not match Palo Alto’s electric load. In the summer, the City has a surplus of carbon free
energy and it has a deficit in the winter. This exposes the City to market risk, and staff maintains a hedging program
to protect against this risk. In addition, hydroelectric generators make up approximately half the City’s energy
supply. During dry years these resources do not generate as much energy, creating an additional market exposure
that must be hedged. Unlike the gas hedging program, which is operated by City staff, the electric hedging program
is operated by the Northern California Power Agency (NCPA), a joint powers agency the City formed in partnership
with several other California publicly owned electric utilities, with oversight by City staff.
9.2 Overview of Energy Risk Management Program
The hedging programs described above are conducted in accordance with the City’s Energy Risk Management
Program, which includes a set of Program Policies adopted by the City Council, Guidelines adopted by the City’s
Utilities Risk Oversight Coordinating Committee (UROCC), and Procedures approved by the Utilities Director. In
addition, for the electric hedging program, NCPA maintains its own Risk Management Program. The City is able to
provide policy level oversight of this program through its seat on the NCPA Risk Oversight Committee, which is
held by the City’s Risk Manager.
Per the Energy Risk Management Policies, the City Council must receive quarterly reports on the City’s forward
contract purchases, market exposure, credit exposure, counterparty credit ratings, transaction compliance, and
other relevant data.
9.3 Forward Deals
Below is a table of forward Electric Resource Adequacy deals and Gas Commodity deals made in Q2 of FY 2023.
Palo Alto did not transact any Electric Energy deal in Q2 of FY 2023.
45Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Figure 29: Electric Resource Adequacy Contracts
Delivery Month Deal
Type
Avg Capacity
(MW/Mo.)
Avg Price
($/kW/Mo.)
Amount ($)
Jan - Dec '23 Sale 21.15 12.67 $ 3.2M
Jan - Apr, Oct - Dec ‘23 Sale 14.57 3.79 $0.4M
Jan - Dec ‘23 Sale 29.29 10.50 $3.7M
Delivery Month Deal Type Delivery
Location
Total Volume
(MMBtu)
Price ($/MMBtu)Amount ($)
Nov '22 - Apr '22 Baseload Purchase Malin 1,081,656 Bidweek Index Varies
Nov '22 - Apr '22 Baseload Purchase PG&E Citygate 731,800 Bidweek Index Varies
Nov '22 - Oct '23 Swing Purchase Malin 2,181,2408 Daily Index Varies
Nov '22 - Oct '23 Swing Purchase PG&E Citygate 7,300,0008 Daily Index Varies
Nov '22 - Oct '23 Swing Sale Malin (2,181,240)8 Daily Index Varies
Nov '22 - Oct '23 Swing Sale PG&E Citygate (1,630,900)8 Daily Index Varies
9.4 Market Exposure
The chart below shows the City’s market exposure and committed and planned purchases and sales to cover
exposed positions.
8 Maximum allowed volume
46Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
Figure 31: Electric Load Resource Balance, 2023 - 2025
9.5 Transaction Compliance
There are no transaction exceptions or violations to report.
47Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
10 Appendix B: Staffing and Vacancies
As of Q2 FY 2023, the Utilities Department has 50 vacant positions out of 253 authorized positions or a 20%
vacancy rate. Below is a breakdown of the vacancies by division. The Electric Engineering and Operations (E&O)
division continues to have the highest number and hardest positions to fill. Electric Engineering and Operations
has a total of 26 vacancies or 29% vacancy percentage (compared to 32% vacancy rate in Q1 2023). The City is
actively recruiting for 40 vacant positions. Due to HR staffing constraints, Utilities has designated three HR liaisons
from Utilities Administration to assist HR with some of the recruitments. CPAU have attended or will be attending
engineering career fairs at Sacramento State University, Cal Poly San Luis Obispo, and San Jose State University.
Figure 32: Utilities Vacancies and Position Movements by Division, up to Q2 FY 2023
D
A
F
V
F
A
R V
A 2 3 1 1
C 2 3 1 1
R 2 4 1 1
E 6 1 1 2
E 2 8 8 3
W 7 1 9 1
W 2 4 4 1
T 2 5 4 2
48Utilities Quarterly Update: Second Quarter of Fiscal Year 2023
April 2023
11 Appendix C: Wastewater Utility Annual Infrastructure Maintenance and
Replacement Report
In each Quarterly Update the Utilities Department will provide a detailed overview of a single utility’s investment
and maintenance activity. An update on the wastewater utility was scheduled for this report, it is presented as
Attachment B.
Wastewater Utility
Management Overview - 2022
Executive Summary
• The City continues to implement scheduled routine preventive
maintenance
• Emergency standby team is responding to fewer calls for after-hours
activities
• Sanitary Sewer Replacement program continues as proposed in the 5-year
CIP budget
• Proposing an improved sanitary sewer replacement program in the
FY 2024 Financial Plan to replace aging sewer infrastructure before
reaching the end of its useful life
Infrastructure Overview
See Table 2 in this report for an overview of all assets. Infrastructure
replacement and maintenance efforts in the next five years include:
● Completion of SSR 31 to replace deteriorated and failed sewer mains and
laterals along El Camino Real
● Finalize scope and start design of SSR 32
● As-needed manhole rehabilitation/replacement
● Replacement of problematic laterals with structural defects or recurring
issues
● Routine maintenance program for main, laterals, siphons, and lift station
● Routine testing/maintenance of SCADA overflow monitoring devices
System Operations and Maintenance Overview
Main
Maintenance
[3.55]
44%
Construction
[0.45]
6%
Emergency
Standby
[1.0]
12%
Main/Lateral
Inspection [1.0]
13%
Lateral
Maintenance
[2.0]
25%
Distribution of Staff Time
Across O&M Tasks
(Full -Time Equivelent [FTE] and % of total)
Main Maintenance Construction
Emergency Standby Main/Lateral Inspection
Lateral Maintenance
Asset Management Goals
What are our goals?
▪Properly manage, operate, and maintain
the wastewater collection system
▪Maintain our ability to reliably deliver
service to our community
▪Repair, rehabilitate, replace, and
upgrade system components as needed
▪Minimize Inflow and Infiltration (I/I) that
takes up system capacity
▪Minimize preventable sanitary sewer
overflows (SSO) in dry and wet weather
▪Maintain an effective SSO response time
to reduce overflow impact to public
health and the environment
▪Provide relevant training for City of Palo
Alto Utility staff and contractors in
wastewater collection system
maintenance, operations, and
emergency response
How do we achieve the goals?
▪Regularly inspect and maintain the
collection system to make sure sewage is
flowing properly
▪Perform necessary repairs in a timely
manner
▪Analyze and evaluate historical SSOs to
provide recommendations to reduce
future risk
▪Identify system blockages due to fats, oil,
and grease (FOG) and develop strategies
to decrease sewer blockages and
backups
▪Replace assets as they reach end of
service life or as their condition
deteriorates
▪Identify capacity constraints and risks to
our collection system and mitigate these
issues promptly through appropriate
capital improvement projects
▪Seek ways to increase our productivity
and control costs by completing the work
more efficiently
Wastewater Utility
Management Overview – 2022
Page 2 of 5
● Main Maintenance* (3.55 FTE):
o Hydro-flushing: High-velocity hydroflushing/vacuum truck.
o Root/Grease Treatment: Herbicides, along with grease emulsifying agents are used to control
root and Fat, Oils, and Grease (FOG) issues.
● Lateral Maintenance* (2.0 FTE):
o SOAP (Sewer Overflow Alternative Program): Using an electric power rodder to clear the roots.
o AJAC (Advanced Jetting and Cleaning): Using a hydrojetting tool to clear sewer blockages.
● Main/Lateral Inspections (1.0 FTE): Routine field inspections of mains, laterals, siphons, manholes,
and other sewer components (e.g., lift station) using remote Closed-Circuit Television (CCTV)
cameras and visual inspections.
● Emergency Response Team (1.0 FTE): The emergency response team (ERT) of 2 installers and 1
heavy equipment operator is on standby at all times. The ERT responds promptly to investigate and
mitigate sewer issues when calls are received from the City’s Dispatch.
● Construction (0.45 FTE): Installation of new laterals, pipe repairs, and manhole replacements.
*First priority programs, critical to daily operation
Maintenance Status:
● Essential maintenance programs continue as Operation’s primary routine daily task.
● Main/lateral inspection program continues to provide Engineering Division with valuable data from
pipe assessment for CIP project prioritization.
● Aging monitoring devices in 39 sewer manholes, used to monitor sewer overflows remotely, are
being replaced with new reliable units for accuracy and performance.
Wastewater Maintenance and Construction Charts
In the past 10 years, sanitary sewer overflows (SSO) have noticeably decreased due to annual
maintenance programs and biennial sewer main/lateral replacement projects.
118 133
102 81
121
70 64 67
43 43 55
10 11 17 23 23 23 22 11 9 17 25
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
SSO'S
(By Year)
SSO's Median SSO Volume (gallons)....... -
■ ■ ■ ■ ■ ■ ■ ■
Wastewater Utility
Management Overview – 2022
Page 3 of 5
*See Table 1 for explanation.
Note: The tasks shown include as-needed repair work performed on sewer mains or laterals, as well
as new laterals installed or replaced for development services projects.
43,169 42,457
97,694
22,534 20,627 29,825
78,449 57,365
31,918 52,330 31,607 33,184
J F M A M J J A S O N D
Main Maintenance
Flushing (Linear Feet)Goal (32,120)
366
282 294
217 146 217 202
274
225 226
245
211
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
LATERAL MAINTENANCE COMPLETED*
Lateral Tags Goal (275)
4 3
6
4
1
6
4
8 7
3 4
2
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
CONSTRUCTION TASKS COMPLETED
--
--
I I I I -I I I I I I ■ I I I I I I I I I I I I I
Wastewater Utility
Management Overview – 2022
Page 4 of 5
Table 1: Status of Collection System Operation and Maintenance Programs
System
Operation or
Maintenance
Program
Status
Green = good
Yellow = room
for improvement
Comments
Lateral
Maintenance
SOAP/AJAC tags are completed daily throughout the year. The monthly goal
of 275 tags was not consistently met due to staffing issues and scheduling
inefficiency. Management continues to make efforts to fill vacant positions.
The monthly goal of performing maintenance on 275 laterals per month is
also being evaluated to ensure the goal is appropriate and achievable. In
addition, staff is evaluating potential opportunities to improve efficiency by
scheduling lateral maintenance work by drainage basin to reduce travel
time/mobilization between neighborhoods.
Main
Maintenance
Flushing of the sewer mains is performed on a regular schedule throughout
the year and the City is consistently achieving its overall flushing goal. The
monthly goal was not met on three occasions during 2022, but the annual
goal of 385,440 L.F. of mains was surpassed this year with City completing
541,159 L.F. of main flushing.
Main/Lateral
Inspections
(CCTV)
Operations typically implement a scheduled inspection program, however
there are times when scheduled work was postponed to focus on special
requests in support of capital or development service projects.
Emergency
Standby
Wastewater Operations maintains continuous system monitoring program to
respond emergency events. A wastewater ERT is assigned to be ready for any
on-call emergencies and responds promptly to mitigate any wastewater
issues during office and non-office hours.
Construction
(Repair
main/laterals,
new laterals)
An Operations crew is assigned the task to perform construction work for
new Development Services installations and emergency repair work for our
sewer mains and lower laterals, when work is needed and not included in our
Capital Improvement Projects (CIP).
Table 2: Overview of Collection System Assets
Asset Class Quantity Maintenance Asset Condition
Manholes 3,870 Hydro-vacuuming manhole
bases for excessive debris and
visually inspecting manhole
walls for I & I, report to
Engineering with
recommendations for future
replacement.
Old brick manholes are typically replaced with
more reliable pre-cast concrete structures. Over
time brick manholes introduce groundwater via
cracks in bases or wall structures.
0
•
• •
•
Wastewater Utility
Management Overview – 2022
Page 5 of 5
Mains and Lateral
service
~ 140
miles of
mains,
~2,988
services
Most mains/laterals are flushed
annually, where as some less
severe areas are flushed every
36 months. For high frequency
lines, flushing happens every 6
months.
With routine maintenance, our mains and lateral
services can be easily assessed by our Operations
crew for remaining useful life of our aging sewer
assets.
Lift Station / Force
main
1 station
/ ~900
linear
feet of
10-inch
force
main
Wastewater Operations perform
routine operational checks of the
station once a month and the wet
well is cleaned quarterly.
Preventive maintenance for
mechanical and electrical
equipment is done annually by
WGW Operations. The station has
an audible alarm and is connected
through a SCADA system to the
Utilities Dispatch Center. The
station serves approximately 25
homes and a portable generator is
available in the event of power
outages.
The Foothill Lift Station currently requires only
minor and routine maintenance and is in good
condition overall.
Item No. . Page 1 of 4
1
5
4
7
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: May 3, 2023
Staff Report: 2301-0795
TITLE
Informational Update on Background and Options for California Oregon Transmission Project
EXECUTIVE SUMMARY
This report is for information only; no action is required. This report provides background on the
approximately 54 MW of the City of Palo Alto Utilities (CPAU) ownership share of the California Oregon
Transmission Project (COTP). Palo Alto laid off its entire 54 MW share of the COTP in 2009. The current
layoff may be extended another five years, but with no action the current layoff will end January 31, 2024.
CPAU has the option to extend the layoff, negotiate a new layoff, receive the resource back, or sell the 54
MW share permanently. This report is to provide background on the resource, as well as benefits and
drawbacks of different potential future arrangements. Staff is currently in discussions with potential
interested parties and will bring a recommendation back to the Utilities Advisory Commission, Finance
Committee, and Council summer of 2023.
BACKGROUND
The Transmission Agency of Northern California (TANC) is a California Joint Powers Agency, whose
member owners include MID, TID, SMUD and the Cities of Alameda, Biggs, Gridley, Healdsburg, Lodi,
Lompoc, Palo Alto, Redding, Roseville, Santa Clara, and Ukiah. TANC currently owns and operates
approximately 87 percent of the COTP, a 1600 MW, 340-mile electric transmission line from the California-
Oregon Border (COB) to the 500 kilovolt Tracy substation in Northern California. The City is a signatory to
TANC’s 1990 Project Agreement No. 3 (PA3) (Resolution No. 6877, adopted March 26, 1990). PA3 provides
the City a share of approximately 54 MW, or 3.6815%, of TANC’s entitlement on the COTP.
The COTP is one of three lines that brings power from the Pacific Northwest to Northern and Central
California. It runs from Bonneville Power Administration’s (BPA) Captain Jack Substation in Southern
Oregon to the Tracy Intertie with Western Area Power Administration (WAPA) to the Tesla Substation in
Central California. The COTP was planned, designed, and built by a coalition of public utilities, private
utilities, and federal agencies and was first energized in 1993. The City of Palo Alto was one of the original
Publicly Owned Utilities (POUs) in northern California that led the project. The project was built to ensure
transmission to BPA which was independent of PG&E transmission lines.
Item No. . Page 2 of 4
1
5
4
7
Figure 1 Simple Map of COTP transmission line and substations
http://www.caiso.com/Documents/City-VernonPTOApplicationMap-page3.jpg
The 1993 COTP line predates competitive energy market formation of the California Independent System
Operator (CAISO) in 2000. The CAISO is both the Regional Transmission Operator (RTO) for the majority
of the transmission system in California, and operates a competitive wholesale energy market. Upon
formation of the CAISO several POUs opted to keep their transmission assets separate and apart from the
CAISO balancing authority. Even though Palo Alto sits in the CAISO, the COTP is owned mostly by POUs,
who can choose to allow the CAISO to use this transmission or not.
The energy crises of 2000-2001 led to CAISO’s 2008 Market Design and Technology Upgrade (MRTU). The
market redesign led to decreased energy prices as well as a decrease in the value of the line to CPAU,
while it had higher value to utilities which sit in the adjacent balancing authority, the Balancing Authority
of Northern California (BANC). BANC members include the Sacramento Municipal Utility District, Modesto
Irrigation District, Roseville Electric, Redding Electric Utility, Trinity Public Utilities District, City of Shasta
Item No. . Page 3 of 4
1
5
4
7
Lake, and the sub-BA control area of Western Area Power Administration - Sierra Nevada Region. With
the market redesign of the MRTU Palo Alto elected to layoff its entire share of 54 MW of the COTP in an
at-cost layoff for 15 years, terminating January 31, 2024 (Staff Report #4547)1.
DISCUSSION
FISCAL/RESOURCE IMPACT
POLICY IMPLICATIONS
ENVIRONMENTAL REVIEW
NEXT STEPS
1 Council Staff Report 4547 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/year-archive/2014/final-staff-report-id-4547_amendment-no-1-to-
cotp-long-term-layoff.pdf
Item No. . Page 4 of 4
1
5
4
7
Staff will continue with ongoing discussions with POUs including the current recipients of the layoff -
Turlock Irrigation District, Sacramento Municipal Utilities District, and Modesto Irrigation District. Staff
will continue to pursue all available avenues to negotiate the best value possible for CPAU customers.
Staff will bring final recommendation to UAC, Finance Committee and Council.
Approved By:
Dean Batchelor, Director of Utilities
Lena Perkins, Senior Resource Planner, Utilities