HomeMy WebLinkAbout2023-11-01 Utilities Advisory Commission Agenda PacketUTILITIES ADVISORY COMMISSION
Regular Meeting
Wednesday, November 01, 2023
Council Chambers & Hybrid
6:00 PM
Remote Call In Location: 832 Santa Fe Avenue, Stanford, 94305
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 to 6:05 pm
AGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 pm to 6:10 pm
The Chair or Board majority may modify the agenda order to improve meeting management.
PUBLIC COMMENT 6:10 pm to 6:25 pm
Members of the public may speak to any item NOT on the agenda.
APPROVAL OF MINUTES ‐ (Draft Minutes of October 11, 2023 will be Heard on December 6,
2023)
UTILITIES DIRECTOR REPORT 6:25 pm to 6:40 pm
NEW BUSINESS (there will be a 10 minute break during this section)
1.Discussion of Utilities Annual Report for FY23 (DISCUSSION 6:40 pm – 7:10 pm) Staff:
Eric Wong
2.Winter 2023‐24 Natural Gas Price Uncertainty Management Council Decision
Implementation (DISCUSSION 7:10 pm – 8:10 pm) Staff: Karla Dailey
COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS
FUTURE TOPICS FOR UPCOMMING MEETING ‐ December 6, 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
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.
1 Regular Meeting November 01, 2023
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are
available for public inspection at www.CityofPaloAlto.org.
UTILITIES ADVISORY COMMISSIONRegular MeetingWednesday, November 01, 2023Council Chambers & Hybrid6:00 PMRemote Call In Location: 832 Santa Fe Avenue, Stanford, 94305Pursuant 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 to 6:05 pm
AGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 pm to 6:10 pm
The Chair or Board majority may modify the agenda order to improve meeting management.
PUBLIC COMMENT 6:10 pm to 6:25 pm
Members of the public may speak to any item NOT on the agenda.
APPROVAL OF MINUTES ‐ (Draft Minutes of October 11, 2023 will be Heard on December 6,
2023)
UTILITIES DIRECTOR REPORT 6:25 pm to 6:40 pm
NEW BUSINESS (there will be a 10 minute break during this section)
1.Discussion of Utilities Annual Report for FY23 (DISCUSSION 6:40 pm – 7:10 pm) Staff:
Eric Wong
2.Winter 2023‐24 Natural Gas Price Uncertainty Management Council Decision
Implementation (DISCUSSION 7:10 pm – 8:10 pm) Staff: Karla Dailey
COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS
FUTURE TOPICS FOR UPCOMMING MEETING ‐ December 6, 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
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.
2 Regular Meeting November 01, 2023
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are
available for public inspection at www.CityofPaloAlto.org.
UTILITIES ADVISORY COMMISSIONRegular MeetingWednesday, November 01, 2023Council Chambers & Hybrid6:00 PMRemote Call In Location: 832 Santa Fe Avenue, Stanford, 94305Pursuant 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 to 6:05 pmAGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 pm to 6:10 pmThe Chair or Board majority may modify the agenda order to improve meeting management.PUBLIC COMMENT 6:10 pm to 6:25 pmMembers of the public may speak to any item NOT on the agenda.APPROVAL OF MINUTES ‐ (Draft Minutes of October 11, 2023 will be Heard on December 6,2023)UTILITIES DIRECTOR REPORT 6:25 pm to 6:40 pmNEW BUSINESS (there will be a 10 minute break during this section)1.Discussion of Utilities Annual Report for FY23 (DISCUSSION 6:40 pm – 7:10 pm) Staff:Eric Wong2.Winter 2023‐24 Natural Gas Price Uncertainty Management Council DecisionImplementation (DISCUSSION 7:10 pm – 8:10 pm) Staff: Karla DaileyCOMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTSFUTURE TOPICS FOR UPCOMMING MEETING ‐ December 6, 2023ADJOURNMENTSUPPLEMENTAL INFORMATIONThe materials below are provided for informational purposes, not for action or discussion during UAC Meetings (Govt. CodeSection 54954.2(a)(3)).
INFORMATIONAL REPORTS
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.
3 Regular Meeting November 01, 2023
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are
available for public inspection at www.CityofPaloAlto.org.
Page 1 of 66
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: November 1, 2023
Staff Report: 2307-1738
TITLE
Discussion of Utilities Annual Report for FY23
RECOMMENDATION
Staff recommends that the Utilities Advisory Commission review and comment as appropriate.
EXECUTIVE SUMMARY
This report for the Utilities Advisory Commission is an informational update on water, gas, electric,
wastewater collection and fiber utilities, efficiency programs, legislative/regulatory issues, utility-related
capital improvement programs, operations, reliability impact measures and a utility financial summary.
This updated report has been prepared to keep the Utilities Advisory Commission apprised of the major
issues that are facing the water, gas, electric, wastewater collection and fiber utilities. A separate quarterly
report on the financial position is prepared consistent with when the City closes its books.
Items of special interest in this report are summarized below:
Vacancies and Staffing – Appendix B
•The Utilities Department has 49 vacant positions out of 253 authorized positions or a 19% vacancy
rate at the end of June 2023 compared to 58 vacancies in March 2023.
•The highest number of vacancies are in Electric Operations (21 FTEs compared to 24 FTEs in
March) and Electric Engineering (6 FTEs compared to 8 FTEs in March).
•Due to HR staffing constraints, Utilities has designated three HR liaisons from Utilities
Administration to assist HR with some of the recruitments. Since then, the number of vacancies
has decreased, and the recruitment timeline has shortened.
Electric Utility:
•Hydroelectric generation conditions have improved significantly. Total hydropower generation for
FY 2022 was 230 GWh, which was 250 GWh (52%) below the long-term average. FY 2023 is
projected to provide 95% of generation compared to the long-term average. (Section 1.1.2)
•Sales of renewable energy credits (RECs) for CY 2023 have resulted in $2.8M in net revenue.
(Section 1.1.3)
•A number of construction projects are in progress or have been recently completed. (Section 1.2)
•A summary chart of quarterly electric outages is included in the report. (Section 1.4)
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•FY 2023 actual electric sales were about 1% higher than forecasted, while actual sales revenues
were about 16% higher than budgeted. The higher sales revenues were due to revenue from the
Electric Hydro Rate Adjuster. (Section 1.5.1)
Gas Utility:
•High gas prices in December and January impacted customer bills. Prices decreased significantly
starting in February and are expected to remain low through summer and fall. 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 voted
in February 2023 to offer rebates to residential customers for high bills. Customers are asked to
contact Utilities Customer Service Call Center for high bill assistance. (Section 2.1 and 7)
•Two gas main replacement projects are in progress (GS-14003 and GS-14003). (Section 2.2)
•Gas utility demand in FY 2023 was 7.9% higher than forecasted, while actual sales revenues were
about 71.6% higher than budgeted. The higher revenue was due to increases in the market prices
of gas commodity which were mostly passed through to customers and offset with higher supply
costs. (Section 2.5.1)
Water Utility:
•As a result of the above average precipitation in December 2022 and January 2023, storage in the
San Francisco Regional Water System filled. (Section 3.1)
•Palo Alto’s two-day per week watering restriction expired in June with the expiration of the State’s
Emergency Regulation. (Section 3.1)
•The UAC received an update on the One Water planning effort in February. 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.
More stakeholder engagement meetings will be scheduled as the work progresses and the
community can still weigh in on the evaluation criteria. (Section 3.1)
•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 2023. (Section 3.6)
•Water demand in FY 2023 2023 was about 12.3% lower than forecasted and water sales revenues
were about 11.3% lower than budgeted. Sales were lower due to the water conservation efforts
made throughout the drought periods, coupled with rainy weather during the winter and spring
seasons. (Section 3.6.1)
•Construction is underway on a water main replacement in the Crescent Park, Barron Park, and
Charleston Meadows neighborhoods. (Section 3.2)
Wastewater Utility:
•An overview of the status of the Regional Water Quality Control Plant (RWQCP) rehabilitation
projects is provided, including an overview of the financing plan for the projects. The first project
to begin construction will be the primary sedimentation tank rehabilitation. (Section 4.1)
•A sewer system rehabilitation project (SSR 30) was completed and replaced pipes in the Ventura,
Research Park, Fairmeadow, and Midtown West neighborhoods. (Section 4.2)
•Actual wastewater sales revenues in FY 2023 were the same as expected. (Section 4.4.1)
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Fiber Utility:
•On May 1, 2023, City Council approved Amendment Number 4 with Magellan for Fiber program
management, organizational change management, network operations and technical support, and
utility pole electric make-ready engineering (Staff Report: 2303-1215)1 to support phase one
construction of fiber-to-the-premises (FTTP).
•Although the phased build approach to FTTP will decrease the City’s financial risk and increase
Council’s control over the speed of the buildout, the City does not have the inhouse staffing to fully
pursue the fiber backbone project and first phase of FTTP while coordinating with electrification
grid modernization efforts. These projects require significant staffing and specialized skill sets over
the next few years. The City will continue utilizing internal staffing resources when available,
however the City must also strategically invest in external resources for a successful roll-out.
•The new Heat Pump Water Heater 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. Both programs, the rebate program and the full service program are
running more smoothly and customers are being served more quickly.
•The City continues to promote its multi-family and workplace EV charger programs.
•20 large customer projects are in process with 2,000,000 kWh savings. The Key Account
Representatives have been actively reaching out to engage customers through direct email and
setting up face to face meetings.
•The city was able to provide 26 site assessments for small and medium business customers through
the Business Energy Advisor program.
•15% of all water customers have utilized the City’s new WaterSmart online water management
tool.
•A digest of major outreach efforts is provided in Section 7, including extreme energy prices and
high utilities bills, new EV chargers at Stanford Health Care, and water supply and conservation
updates.
•Major legislative, regulatory and Industry Activity items are summarized in Section 8.
1 Staff Report 2303-1215 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-
reports/reports/city-manager-reports-cmrs/2023/05-01-2023-id-2303-1215.pdf
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OVERVIEW
Utilities Annual Report
FY 2023
Fiscal Year 2023
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Table of Contents
1 ELECTRIC UTILITY..........................................................................................................................................8
1.1 ELECTRICITY SUPPLY AND TRANSMISSION ...............................................................................................................8
1.1.1 Forecasted Supply Costs ..........................................................................................................................8
1.1.2 Hydroelectric Conditions..........................................................................................................................9
1.1.3 REC Exchange Program............................................................................................................................9
1.1.4 Renewable Energy Procurement..............................................................................................................9
1.2 CAPITAL IMPROVEMENT PLAN STATUS ................................................................................................................10
1.3 RATE AND BILL COMPARISONS...........................................................................................................................11
1.4 RELIABILITY ....................................................................................................................................................11
1.5 FINANCIAL HEALTH ..........................................................................................................................................12
1.5.1 Sales Forecasts vs. Actuals.....................................................................................................................12
1.5.2 Financial Position...................................................................................................................................13
2 GAS UTILITY................................................................................................................................................14
2.1 GAS SUPPLY AND TRANSMISSION .......................................................................................................................14
2.1.1 Actual and Forecasted Supply Costs......................................................................................................15
2.1.2 Carbon Neutral Gas Program ................................................................................................................16
2.1.3 Cap and Trade Program.........................................................................................................................17
2.1.4 Gas Transmission Line Capacity Valuation............................................................................................18
2.1.5 Gas Prepay Valuation............................................................................................................................18
2.2 CAPITAL IMPROVEMENT PLAN STATUS ................................................................................................................19
2.3 RATE AND BILL COMPARISONS...........................................................................................................................19
2.4 RELIABILITY ....................................................................................................................................................19
2.5 FINANCIAL HEALTH ..........................................................................................................................................20
2.5.1 Sales Forecasts vs. Actuals.....................................................................................................................20
2.5.2 Financial Position...................................................................................................................................20
3 WATER UTILITY...........................................................................................................................................22
3.1 WATER SUPPLY AND TRANSMISSION ...................................................................................................................22
3.2 CAPITAL IMPROVEMENT PLAN STATUS ................................................................................................................25
3.3 RATE AND BILL COMPARISONS...........................................................................................................................25
3.4 RELIABILITY ....................................................................................................................................................26
3.5 FINANCIAL HEALTH ..........................................................................................................................................26
3.5.1 Sales Forecasts vs. Actuals.....................................................................................................................26
3.5.2 Financial Position...................................................................................................................................27
4 WASTEWATER UTILITY ...............................................................................................................................28
4.1 WASTEWATER TREATMENT UPDATES AND CAPITAL PLANNING STATUS .....................................................................28
4.1.1 Treatment Cost Trends ..........................................................................................................................28
4.1.2 Regional Water Quality Control Plant Capital Planning Status.............................................................29
4.2 COLLECTION SYSTEM CAPITAL IMPROVEMENT PLAN STATUS....................................................................................30
4.3 RATE AND BILL COMPARISONS...........................................................................................................................30
4.4 FINANCIAL HEALTH ..........................................................................................................................................31
4.4.1 Sales Forecasts vs. Actuals.....................................................................................................................31
4.4.2 Financial Position...................................................................................................................................31
5 FIBER UTILITY.............................................................................................................................................32
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5.1 FIBER UTILITY STRATEGIC PLANNING ...................................................................................................................32
5.2 CAPITAL IMPROVEMENT PLAN STATUS ................................................................................................................32
5.3 RELIABILITY ....................................................................................................................................................33
5.4 FINANCIAL HEALTH ..........................................................................................................................................33
5.4.1 Fiber Sales..............................................................................................................................................33
5.4.2 Financial Position...................................................................................................................................33
6 CUSTOMER PROGRAMS (EFFICIENCY AND SUSTAINABILITY).......................................................................34
6.1 CUSTOMER PROGRAMS UPDATES.......................................................................................................................34
6.1.1 Energy and Water Efficiency..................................................................................................................34
6.1.2 Building Electrification...........................................................................................................................36
6.1.3 Electric Vehicle Programs ......................................................................................................................37
6.2 INNOVATION AND PILOT PROGRAMS...................................................................................................................39
6.2.1 Academic Collaborations.......................................................................................................................39
6.2.2 Completed Projects................................................................................................................................40
7 COMMUNICATIONS....................................................................................................................................41
8 LEGISLATIVE, REGULATORY AND INDUSTRY ACTIVITY.................................................................................44
9 APPENDIX A: ENERGY RISK MANAGEMENT PROGRAM...............................................................................47
9.1 OVERVIEW OF HEDGING PROGRAMS...................................................................................................................47
9.2 OVERVIEW OF ENERGY RISK MANAGEMENT PROGRAM ..........................................................................................47
9.3 FORWARD DEALS ............................................................................................................................................48
9.4 MARKET EXPOSURE .........................................................................................................................................48
9.5 TRANSACTION COMPLIANCE ..............................................................................................................................49
10 APPENDIX B: STAFFING AND VACANCIES....................................................................................................50
11 APPENDIX C: WATER UTILITY ANNUAL INFRASTRUCTURE MAINTENANCE AND REPLACEMENT REPORT.....51
12 APPENDIX D: UTILITIES CUSTOMER PROGRAM DESCRIPTIONS ...................................................................58
12.1 CUSTOMER PROGRAMS OVERVIEW ....................................................................................................................58
12.1.1 Energy and Water Efficiency .............................................................................................................58
12.1.2 Building Electrification.......................................................................................................................59
12.1.3 Electric Vehicles.................................................................................................................................59
12.1.4 Funding Sources for Emissions Reductions........................................................................................61
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Figures
FIGURE 1: FY 2023 FINANCIAL PLAN SUPPLY COST FORECAST VS. ACTUALS ..................................................................................8
FIGURE 2: HYDRO GENERATION: FY 2022 AND FY 2023 ACTUALS, FY 2024 PROJECTED (GWH)....................................................9
FIGURE 3: RESIDENTIAL MONTHLY ELECTRIC BILL COMPARISON (EFFECTIVE 1/1/2023, $/MO.)....................................................11
FIGURE 4: ELECTRIC OUTAGE RELIABILITY, FY 2022 TO FY 2023..............................................................................................12
FIGURE 5: ELECTRIC SALES VOLUME (KWH), FY 2023............................................................................................................12
FIGURE 6: ELECTRIC SALES REVENUE ($), FY 2023.................................................................................................................13
FIGURE 7: PALO ALTO GAS COMMODITY RATES .....................................................................................................................15
FIGURE 8: GAS SUPPLY COSTS ($), ACTUAL VS BUDGET, FY 2023.............................................................................................15
FIGURE 9: OFFSET PORTFOLIO COMPOSITION ........................................................................................................................16
FIGURE 10: OFFSET PROJECT DESCRIPTIONS ..........................................................................................................................17
FIGURE 11: ESTIMATED CAP AND TRADE COSTS .....................................................................................................................18
FIGURE 12: RESIDENTIAL NATURAL GAS BILL COMPARISON ($/MONTH).....................................................................................19
FIGURE 13: GAS SERVICE INTERRUPTIONS, FY 2023...............................................................................................................19
FIGURE 14: GAS SALES VOLUME (THERMS), FY 2023 ............................................................................................................20
FIGURE 15: GAS SALES REVENUE ($), FY 2023.....................................................................................................................20
FIGURE 16: REGIONAL WATER SYSTEM STORAGE ...................................................................................................................23
FIGURE 17: SFPUC WATER DELIVERIES ...............................................................................................................................24
FIGURE 18: RESIDENTIAL WATER BILL COMPARISON ($/MONTH)..............................................................................................26
FIGURE 19: WATER SERVICE INTERRUPTIONS, FY 2023..........................................................................................................26
FIGURE 20: WATER SALES VOLUME (CCF), FY 2023.............................................................................................................27
FIGURE 21: WATER SALES REVENUE ($), FY 2023.................................................................................................................27
FIGURE 22: PALO ALTO’S SHARE OF ESTIMATED WASTEWATER TREATMENT EXPENSES (PROJECTION AND PLANNED CIP)....................29
FIGURE 23: CURRENT RWQCP CAPITAL WORK IN-PROGRESS (BASED ON RWQCP JUNE 2023 COUNCIL REPORT) ...........................29
FIGURE 24: RESIDENTIAL WASTEWATER BILL COMPARISON ($/MONTH).....................................................................................30
FIGURE 25: WASTEWATER SALES REVENUE ($), FY 2023 .......................................................................................................31
FIGURE 27: ENERGY EFFICIENCY PROGRAM ENERGY SAVINGS ...................................................................................................36
FIGURE 29: STATUS TO DATE OF ALL APPLICATIONS TO THE PROGRAM FOR EMERGING TECHNOLOGIES .............................................40
FIGURE 28: ELECTRIC ENERGY DEALS ...................................................................................................................................48
FIGURE 29: ELECTRIC RESOURCE ADEQUACY DEALS ................................................................................................................48
FIGURE 30: GAS DEALS .....................................................................................................................................................48
FIGURE 30: ELECTRIC LOAD RESOURCE BALANCE, 2023 - 2025...............................................................................................49
FIGURE 31: UTILITIES VACANCIES AND POSITION MOVEMENTS BY DIVISION, UP TO Q4 FY 2023....................................................50
FIGURE 32: POTENTIAL EMISSIONS REDUCTION FUNDING SOURCES ...........................................................................................61
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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 through FY 2023 was $97.8 M. This represents a $2.5 M (2.7%) increase over
FY 2022 actuals and $14.1 M (17%) over the FY 2023 Adopted Budget amount, with the increase primarily
driven by higher than historical energy prices, higher transmission costs, and much lower than historical
average hydro generation levels (particularly in the first half of the fiscal year). The cost increase relative
to budget was partially offset by greater than projected revenue from resource adequacy (RA) capacity
sales. With hydroelectric generation conditions improving significantly in recent months, the electric net
supply cost for FY 2024 is projected to be $80.9 M.
Figure 1: FY 2023 Financial Plan Supply Cost Forecast vs. Actuals
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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.2 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 2022 was 230
GWh, which is 250 GWh (52%) below the long-term average.3
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 August 15th,
total precipitation was 159% of average for the Central Sierras and 122% of average for the Northern
Sierras. Reservoir levels began the water year extremely low, but most reservoirs are now at or above
average level for this time of year. As a result, hydro generation levels have improved dramatically, with
total output recovering to 95% of the long-term average level for FY 2023 and projected to be 124% of
the long-term average level for FY 2024.
Figure 2: Hydro Generation: FY 2022 and FY 2023 Actuals, FY 2024 Projected (GWh)
Under the REC Exchange Program, which was approved by Council in August 2020 (Staff Report #11556)4,
for CY 2023 staff has contracted to sell 160 GWh worth of in-state renewable energy (for $4.0M) and
purchased 200 GWh worth of out-of-state renewable energy credits (RECs) costing $1.2M. The net
revenue thus far in CY 2023 was $2.8M. The spread between in-state versus out-of-state REC prices have
widened in CY 2023, due to the rise in value of in-state products. Additional REC Exchange transactions
are planned for this fall.
2 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.
3 The 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.
4 Staff Report 11556 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-
reports/reports/city-manager-reports-cmrs/year-archive/2020-2/id-11566.pdf
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1.1.4 Renewable Energy Procurement
Utilities staff has been working with staff from the Public Works Department, the City of Santa Clara, and
NCPA to negotiate a new power purchase agreement (PPA) to buy a small amount of electrical output
(about 3 GWh/year in total) from an anaerobic digester facility, in order to satisfy the requirements of
Senate Bill (SB) 1383. Similar to the recently approved Calpine Geothermal PPA, NCPA would be the
counterparty to the PPA with the anaerobic digester facility, and the Cities of Palo Alto and Santa Clara
would each receive a share of the output via Third Phase Agreements with NCPA. Contract negotiations
between the parties are now at a fairly advanced stage, and staff plans to take these agreements to the
City Council for consideration in the coming months.
Utilities staff also continue to regularly review new renewable energy generation proposals that NCPA
receives through its ongoing Request for Proposals (RFP) process. Staff will present any contracts that it
recommends for approval to the UAC at the appropriate time.
1.2 Capital Improvement Plan Status
The following capital projects are currently in progress or have been recently completed:
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 but is delayed due to staffing shortages.
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 design phase and scheduled to be completed in Dec 2024.
EL-16000 (Rebuild Underground 26)
•This engineering design for this project is currently in progress.
EL-19004 (Wood Pole Replacement)
•50 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. Substructure for 7 of the 9 substations will be completed by September
2023.
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 was completed in June
2023. Phase 3 substructure installation is currently in progress and Phase 4 design is in progress.
EL-14005 (Reconfigure Quarry Feeders)
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•Staff completed the design phase this year. Construction has been Completed.
EL-02011 (Electric Utility Geographic Information System (GIS))
•The project scope includes on-going 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. Electric data migration from AME to UNM is
completed.
EL-16002 (Capacitor Bank Installation)
•This project is completed.
1.3 Rate and Bill Comparisons
For the median consumption level, the annual residential electric bill based on current rates is $1,000,
about 37% lower than the annual bill for a PG&E customer with the same consumption and approximately
42% higher than the annual bill for a City of Santa Clara customer. The bill calculations for PG&E customers
are based on PG&E Climate Zone X, which includes most surrounding comparison communities.
The figure below presents sample median residential bills for Palo Alto, PG&E, and the City of Santa Clara
(Silicon Valley Power) for several usage levels. Rates used to calculate the monthly bills shown below were
in effect as of January 1, 2023. The rates for Palo Alto include the current Electric Hydro Rate Adjuster (E-
HRA) of $0.048/kWh to mitigate the high power costs cited above.
In an application submitted December 2022, PG&E has requested that the California Public Utilities
Commission (CPUC) approve rate increases that would increase the PG&E residential bill by 19% in 2023.
A CPUC decision is anticipated by June 2023. Also, over the next several years low-usage customers in
PG&E territory are expected to continue to see higher percentage rate increases than high-usage
customers, as PG&E compresses its tiers from the highly exaggerated levels that have been in place since
the energy crisis. This is likely to make the bill for the median Palo Alto consumer look even more favorable
compared to most PG&E customers. Even with the compressed tiers, bills for high usage Palo Alto
consumers are projected to remain substantially lower than the bills for high usage PG&E customers.
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.
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Figure 4: Electric Outage Reliability, FY 2022 to FY 2023
FY 2022Outage Reliability Q1 Q2 Q3 Q4 Total
System Average Interruption Duration Index (SAIDI)5 1.71 7.32 6.72 1.35 18.93
System Average Interruption Frequency Index (SAIFI)6 .01 .02 .16 .02 0.23
Customer Average Interruption Duration Index (CAIDI)7 180.18 323.65 41.48 88.70 81.91
FY 2023Outage Reliability Q1 Q2 Q3 Q4 Total
System Average Interruption Duration Index (SAIDI)3 81.69 7.38 111.90 1.09 198.60
System Average Interruption Frequency Index (SAIFI)4 0.61 .04 1.00 0.01 1.64
Customer Average Interruption Duration Index (CAIDI)5 134.77 190.12 110.80 121.48 121.15
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 in FY 2023 were about 2.2% higher than forecasted, while actual sales
revenues were about 16% higher than budgeted in the FY 2023 Financial Plan. The higher sales revenues
were due to additional revenue from the Electric Hydro Rate Adjuster (E-HRA) rate of $0.013/kwh, which
was implemented effective on April 1, 2022, then increased to $0.048/kwh, effective January 1, 2023.
Figure 5: Electric Sales Volume (kWh), FY 2023
5 System Average Interruption Duration Index (SAIDI) - Measure of the total duration of an interruption for the average customer
during a given time frame. SAIDI = (Sum of Customer Minutes Interrupted) / (Total Customers Served)
6 System Average Interruption Frequency Index (SAIFI) - the average number of times a customer will experience an interruption
during a given time frame. SAIFI = (Total Customers Interrupted) / (Total Customers Served)
7 Customer Average Interruption Duration Index (CAIDI) - the average time to restore service. CAIDI = (Sum of Customer Minutes
Interrupted) / (Total Customers Interrupted)
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Figure 6: Electric Sales Revenue ($), FY 2023
1.5.2 Financial Position
The Electric Operations Reserves were at the minimum guideline level at the end of FY 2022 and were
expected to drop below minimum in FY 2023, given higher than budgeted purchase costs resulting from
low hydro conditions (necessitating more expensive market purchases) as well as increasing transmission
costs. During Q4 FY23, the electric utility won litigation along with NCPA against the Bureau of
Reclamation and was paid $23.9 million for overcharges related to the Central Valley Project Improvement
Act (CVPIA). In addition to the litigation payment, the utility generated higher net income in June 2023
due to lower supply costs driven by strong hydro generation. Combined, these two changes have
increased the operations reserve above minimum level. At the time of this report writing, the Operations
Reserves are expected to end FY 2023 at approximately $55 million. The target reserve level (90 days of
non-capital expenses) is $45 million, while the minimum is $31 million, and the maximum is set at $59
million. While the operations reserve is expected to finish the fiscal year in a strong position, $15 million
was taken from the hydro stabilization reserve and $10 million was borrowed from the electric special
projects reserves to stabilize the operations reserves over the past 2 years. Transfers back to these
reserves are planned for FY 2024 and will bring the operations reserve back to the minimum level.
Supply purchase costs for FY 2023 were roughly 17% over budget, $97.7 million vs. $83.6 million budgeted.
As a result of the multi-year drought, the City's hydro generation resources produced below average
energy over the 9-month period, however, significant precipitation through the winter led to substantially
more hydro generation during Q4 FY 2023, bringing the annual generation amount in line with historical
average. Market prices have remained about 25% above the budget, averaging around $100/MWh, vs.
$75/MWh in the budget.
FY 2023 sales volumes and revenues have exceeded the budget, largely driven by increased sales volumes
and an increase to the hydroelectric rate adjuster.
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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 capital
improvement 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 huge volatility during FY 2023, especially in January 2023 when the gas
commodity bidweek monthly price at the PG&E Citygate hub peaked of $49.5/mmbtu, 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 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 letter8 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 articles9 on our city website, sending email
newsletters/bill inserts, featuring an opinion column10 in Palo Alto Online, and utilizing social media
channels. The City instituted a "Winter Rebate"11 on customers’ utility bills to offset the extraordinarily
high gas and electric utility costs that the region experienced this winter. This rebate was approved by
8 Letter from Mayor Kou https://www.cityofpaloalto.org/files/assets/public/v/1/city-
manager/legislation/letter-to-ggn-on-natural-gas-prices.pdf
9 Gas Articles https://www.cityofpaloalto.org/News-Articles/Utilities/Changes-to-the-City%E2%80%99s-
Natural-Gas-Purchasing-Strategy
10 Palo Alto Online February 8, 2023 https://www.paloaltoonline.com/news/2023/02/08/opinion-why-
energy-prices-are-so-high-this-winter--and-how-to-get-help
11 Winter Rebate https://www.cityofpaloalto.org/News-Articles/Utilities/Rebates-for-High-Winter-
Energy-Costs
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City Council in early April 2023 to provide needed financial relief to residents. The rebate was calculated
based on a customer’s January electric and/or gas utility bill costs. Prices fell dramatically heading into the
summer to as low as $3.8/mmbtu in June 2023. The chart below shows Palo Alto’s gas commodity rates
from 2021 to present.
Figure 7: Palo Alto Gas Commodity Rates
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 #1009012, 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 $4.95/therm
or approximately $0.95/therm higher than the updated price cap. Therefore, the gas utility was not able
to fully recover the pass-through rates from customers, which led to $1.8 million negative impact on gas
reserves.
2.1.1 Actual and Forecasted Supply Costs
Actual gas demand in FY 2023 was the same forecasted, while actual supply and transportation costs were
about 171% higher than budgeted in the FY 2023 Financial Plan. Gas commodity prices were substantially
higher than predicted in the FY 2023 financial plan due the unprecedented spike in gas commodity prices
during the winter of 2022/23.
12 Resolution 10090 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=61583
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Figure 8: Gas Supply Costs ($), Actual vs Budget, FY 2023
2.1.2 Carbon Neutral Gas Program
In December 2020, Council adopted Resolution #993013 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 the approval of new Verified Emission Reduction (carbon offset)
counterparties and has delayed its regular winter purchase while staff assesses the process change. Staff
delayed offsets procurement in the first half of 2023 due to shifting staffing responsibilities but intends to
procure 60,000 – 120,000 offsets in Fall 2023.
13 Resolution 9930 https://www.cityofpaloalto.org/files/assets/public/v/1/city-
clerk/resolutions/resolutions-1909-to-present/2020/reso-9930.pdf
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Figure 9: Offset Portfolio Composition
The following table provides a description of the projects.
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Figure 10: Offset Project Descriptions
2.1.3 Cap and Trade Program
The gas utility has been regulated under California’s greenhouse house (GHG) regulations since January
2015 with a GHG emissions cap that declines over time. The gas utility receives carbon allowances equal
to the emissions allowed under the cap and is required to auction off a portion of the allowances (55% in
2022, increasing by 5% annually) through the state Cap and Trade Program. To meet its annual GHG
compliance obligation, the City must purchase allowances based on actual gas use.
The auction floor price to either purchase or sell allowances increases annually by 5% plus inflation.
Historically, allowances have traded at or near the floor price, but the clearing prices for allowances in the
auction have increased significantly. The cost of compliance is anticipated to increase from $2.3 million in
FY 2023 to $5.6 million in FY 2030, about an 18% increase per year on average, as shown in the following
table:
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Figure 11: Estimated Cap and Trade Costs
Revenues from the auction sale of gas utility allowances (currently about $2.3 million per year) must be
used exclusively for the benefit of the ratepayers in that utility in accordance with California Code of
Regulations (CCR Title 17, section 95893). Approved uses are 1) the funding of certain energy efficiency
rebates, retrofits, and demand reduction programs, 2) funding for programs with demonstrated GHG
reductions, 3) non-volumetric return to ratepayers, either on or off bill, and 4) certain administrative,
outreach and educational costs related to items 1-3 above. Council adopted a policy on the use of
allowance proceeds (Resolution #9487)14, generally mirroring the regulations and requiring additional
Council approval for rebates. Per the current regulations, the utility must either spend or rebate the funds
received in any given year within 10 years (for example, funds received in 2020 must be spent by 2030,
etc.).
As of the end of FY 2021, unspent funds related to Cap and Trade revenues were placed in a Cap and Trade
reserve, until such time as they can be utilized per the dictates of applicable regulations. There was $6.7
million in this reserve available for use at the end of FY 2023.
2.1.4 Gas Transmission Line Capacity Valuation
Palo Alto contracts for capacity on the Redwood pipeline, the path from the California-Oregon border to
PG&E’s mid-pressure transmission system, at a cost lower than the market value. During the summer
months, Palo Alto does not need all of the capacity to serve demand. The excess capacity is monetized by
purchasing gas at the California-Oregon border and selling an equal amount of gas at the terminus of the
pipeline. The variable cost of transporting the gas is much less than the gas price difference between the
two points. The net benefit to the Gas Utility in FY 2023 was $307K, or a reduction of about 0.8% of the
total gas commodity costs in FY 2023.
14 Resolution 9487 - https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-
9487.pdf
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2.1.5 Gas Prepay Valuation
On September 15, 2014, Council adopted Resolution #9451,15 authorizing the City’s participation in a
natural gas purchase from Municipal Gas Acquisition and Supply Corporation (MuniGas) for the City’s
entire retail gas load 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 $877K, or 2.4% of the total gas commodity costs in FY 2023.
2.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
GS-14003 – GMR 24A (Gas Main Replacement 24A)
•The GMR 24A project is completed and 2,450 linear feet of gas main was replaced along Shopping
Center Way and Orchard Lane in Stanford Shopping Center. Easement documents are being
finalized and submitted to the County for recording.
GS-14003 – GMR 24B (Gas Main Replacement 24B)
•The GMR 24B project will include gas pipes on University from Webster to Hwy 101 and
surrounding streets, as well as Geng Rd and Town & Country Village. Staff received a notification
from PHMSA on 3/31/23 that the City was not selected to receive a federal grant award, although
the project was “Highly Recommended” and funding was provided to other “Highly
Recommended” projects. The funding source for this project will be the remaining available
budget under GS-14003. However, the City intends to submit another grant application as part of
the next round of federal grants issued by PHMSA. The project was competitively solicitated and
construction is expected to begin in February 2024.
2.3 Rate and Bill Comparisons
The figure below shows the bills for residential customers in Palo Alto and PG&E, at different levels of
usage and rates, both on an annual basis. The PG&E bills are based on their Climate Zone X, which includes
Menlo Park, Redwood City, Mountain View, Los Altos and Santa Clara. In FY23, the median residential
customer in Palo Alto paid an annual gas bill of $1,064, which was 9% higher than what a PG&E customer
with the same usage would pay, mainly due to unusually high gas commodity prices in January 2023 for
Palo Alto.
Figure 12: Residential Natural Gas Bill Comparison ($/month)
Year/Month
Median Usage16
(therms)Palo Alto PG&E Zone X
% Difference
FY 2022 402 $ 732 $ 807 (15%)
FY 2023 402 1,064 930 9%
15 Resolution 9451 - https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-
9451.pdf
16 Based on Palo Alto G-1 monthly median usage.
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2.4 Reliability
The City of Palo Alto tracks all gas service interruptions. A summary chart of these interruptions can be
found below. Gas service interruptions are usually due to repairs of broken or damaged gas services and
mains. This kind of damage is often caused by excavation by outside parties digging in the City.
Figure 13: Gas Service Interruptions, FY 2023
Gas Q1 Q2 Q3 Q4
Number of Breaks 9 4 3 7
Total Minutes 643 330 240 1560
Customers Affected 20 5 7 60
Below is a summary of the financial position for the gas utility.
2.5.1 Sales Forecasts vs. Actuals
Actual gas sales volumes in FY 2023 were about 7.9% higher than forecasted, while actual sales revenues
were about 71.6% higher than budgeted in the FY 2023 Financial Plan. The higher gas sales revenues were
due to high gas market commodity prices, which are pass-through in nature and generally offset
commensurately higher gas commodity purchase costs, although January 2023 gas prices were not fully
passed through to customers.
Figure 14: Gas Sales Volume (Therms), FY 2023
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Figure 15: Gas Sales Revenue ($), FY 2023
2.5.2 Financial Position
The FY 2023 ending Operations Reserve balance was $14.4 million. The gas commodity charge is a pass-
through of market costs, typically, increased revenue offsets the increased cost; In January 2023, due to
unprecedented and extreme gas prices, the revenue was not enough to offset the increased costs because
the actual gas commodity price exceeded Palo Alto’s price cap. This has put pressure on reserves in FY
2023. The Operations Reserve was 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, therefore
$3.8 million were transferred from the CIP to the Operations Reserve to keep the reserve at a healthy
level. Staff provided financial forecast projections, including reserve transfers, in April 2023 to Council
(Staff Report 2303-1219)17.
17 Staff Report 2303-1219 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-
reports/reports/city-manager-reports-cmrs/2023/04-17-2023-id-2303-1219.pdf
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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 the City. 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 (SWRCB) as an alternative to the adopted Bay-Delta Plan. The
SWRCB’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. On May 18, 2023, the SWRCB
held a scoping meeting for a Notice of Preparation for development of an environmental document
related to the proposed Tuolumne River Voluntary Agreement. The scoping meeting initiates the SWRCB’s
evaluation of the proposed Tuolumne River Voluntary Agreement as an amendment to the adopted Bay
Delta Plan.
In August 2018, Palo Alto’s City Council voted to support the SWRCB’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, SFPUC, and other stakeholders.
In order to plan for future reductions to existing water supply from climate change and regulatory
uncertainties, the SFPUC is undertaking the Alternative Water Supply Plan. This plan will recommend
projects to develop supplemental sources to improve long-term water supply reliability. The SFPUC is
currently accepting comments on the draft plan.
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Thirty-one atmospheric rivers from mid-December 2022 to the end of March 2023 meant higher than
average precipitation and snow in the Sierras. As of July 1, 2023, the Regional Water System total storage
operated by the San Francisco Public Utilities Commission (SFPUC) was at 98% of maximum storage and
Water Bank was 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 months. Regional Water System Storage is 1.44 Thousand
Acre Feet (TAF) as of July 1, 2023.
Figure 16: Regional Water System Storage
th 2023, Governor Newsom issued Executive Order N-5-23 that eliminated
the directive for Stage 2 of the Water Shortage Contingency Plans. The SWRCB’s Emergency Regulation
requiring Stage 2 Water Shortage Contingency Plan actions expired on June 10, 2023. On April 11, SFPUC
rescinded the water shortage emergency declaration. The SFPUC’s system-wide water use reduction of
11% expired along with the SWRCB’s Emergency Regulation on June 10th. Palo Alto’s water use restrictions
track both the State’s regulation and SFPUC’s water use reduction request.
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share from the Tier One Plan is then allocated among Wholesale Customers based upon a formula in a
negotiated and adopted “Tier Two Plan.” 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
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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
logged and followed-up on water waste reports. Palo Alto kicked off the WaterSmart Customer Portal and
Residential Home Water Report Program and also re-engaged with Waterfluence software to target water
efficiency for large landscape customers. Staff continues to promote water conservation rebate programs
and resources through online outreach, bill inserts, and newsletters. After Palo Alto implemented water
use restrictions in June 2022, for the billing months July 2022 through June 2023, compared with the same
period from July 2019 to June 2020, the Palo Alto community reduced water usage by 13.7%.
18) and staff plans to return to
the UAC in the fall to provide an update and share initial results.
3.2 Capital Improvement Plan Status
WS-14001 - WMR 28 (Water Main Replacement 28)
•The WMR 28 project replaced 18,210 linear feet of water main, 230 water services, and 38 fire
hydrants in the Crescent Park, Barron Park, and Charleston Meadows neighborhoods.
Construction of this project was substantially completed in July 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 delayed due to supply chain issues on the valves. Construction is anticipated to start in March
2024 after all material is delivered. The project duration is about 3 months.
3.3 Rate and Bill Comparisons
18 Staff Report #14974 – https:/www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-
reports/reports/uac-informational-reports/2023-informational-reports/02-01-2023-id-14974.pdf
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Figure 18: Residential Water Bill Comparison ($/month)
As of August 2023
Usage CCF/month Palo Alto Menlo Park
Redwood
City
Mountain
View Santa Clara Hayward
4 $53.20 64.31 $54.04 $46.95 $31.88 $41.03
(Winter median) 7 80.60 89.79 76.09 72.69 55.79 63.23
(Annual median) 9 103.68 106.78 90.79 89.85 71.73 78.03
(Summer median) 14 161.38 153.13 138.94 132.75 111.58 123.48
25 288.32 267.84 267.39 278.63 199.25 223.47
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 Q3 Q4
Number of Breaks 10 12 6 2
Combined Minutes 1007 1050 690 100
Customers Affected 46 249 63 19
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 in FY 2023 were about 12.3% lower than forecasted, and actual water sales
revenues were about 11.3% lower than budgeted in the FY 2023 financial plan. Sales were lower due to
the water conservation efforts made throughout the drought periods, coupled with rainy weather during
the winter and spring seasons.
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Figure 20: Water Sales Volume (CCF), FY 2023
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. 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 2024 and
FY 2026). Due to the drought and water conservation efforts, staff projects the water utility’s sales
revenue to decline in FY 2023 by approximately $5.4 million compared with the prior year’s Financial Plan
projection, as shown above. In June 2023, the Council approved the FY 2024 Water Financial Plan19 that
included transfers of up to $3.746 million from the CIP Reserve to the Operations Reserve and $3 million
from the Rate Stabilization Reserve to the Operations Reserve to address reduced sales revenue and
19 FY 24 Water financial Plan - https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-
reports/reports/city-manager-reports-cmrs/attachments/06-19-2023-id-2302-0939-water-financial-
plan-fy24-cc.pdf
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capital needs of the water utility in FY 2023. Staff estimates that with expected revenues and expenses
together with transfers from the CIP Reserve, the Operations Reserve will be within the guideline range
at year end FY 2023 and each of the subsequent 5 years. Final FY 2023 reserve balances will not be
available until Fall 2023.
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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 RWQCP 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 32% 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 conduct 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 4.8% 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 11.5% 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 2026 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 2025)
•1900 Embarcadero Road Purchase (FY 2024)
•Primary Sedimentation Tank Rehabilitation (FY 2025)
•Outfall Line Construction (FY 2027)
•Operations Building Remodel (FY 2028)
•Secondary Treatment Upgrades, Headworks Facility (FY 2029)
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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
is planning to begin an update to the Long-Range Facilities Plan in 2023. 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.
Project Status Expense
(million $)
Primary Sedimentation Tanks Rehabilitation
and Equipment Room Electrical Upgrade
Construction $19.4
New Outfall Pipeline 100% Redesign/ Re-evaluation for
Future Levee Height
$17.8
Secondary Treatment Upgrades Construction $193
Advanced Water Purification System 90% Design $55.9
New Laboratory and Environmental Services
Building
Planning in Long Range Facilities
Plan Update
$47.4
Horizontal Levee Pilot 60% Design $2.1
Headworks Facility Replacement Consultant Proposal Evaluation $51.7
Joint Interceptor Sewer Rehabilitation 90% Design $6.0
Other Projects in Progress Various $12.5
Subtotal $406
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One of the largest projects listed above is the Headworks Facility Replacement, which involves
replacement or rehabilitation of the parts of the facility that pump raw sewage to the main treatment
works (the headworks), and rehabilitation of primary sedimentation tanks that separate out primary
sludge. Additionally, the RWQCP anticipates regulations to limit nutrient discharges (on total nitrogen)
into the San Francisco Bay. The current secondary treatment design cannot remove nitrogen and the
Secondary Treatment Upgrades will address this regulatory change as well as address aging mechanical
and electrical equipment that must be replaced.
4.2 Collection System Capital Improvement Plan Status
WC-17001 - SSR 30 (Sanitary Sewer Replacement 30)
•The SSR 30 project was completed in April 2023 and replaced approximately 9,649 linear feet of
wastewater main and 195 sewer laterals in the Ventura, Research Park, Fairmeadow, and Midtown
West neighborhoods.
WC-19001 - SSR 31 (Sanitary Sewer Replacement 31)
•The SSR 31 project replaces approximately 11,000 linear feet of wastewater main, sewer laterals,
and manholes on El Camino Real and Page Mill Road. This project was approved by Council on
5/8/23. Construction has started on 7/31/23. The project duration is 10 months. Approximately
40% of the work will be performed during nighttime due to Caltrans’ restriction to close 2 traffic
lanes during daytime. Staff coordinated the schedule with Caltrans and County of Santa Clara to
stay ahead of their street improvement/paving projects. The SSR 31 contractor is expected to work
both day and night shifts during some months of the project duration to expedite the sewer
replacement and avoid digging into Caltrans or County’s newly paved streets.
4.3 Rate and Bill Comparisons
Figure 24: Residential Wastewater Bill Comparison ($/month)
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4.4 Financial Health
Below is a summary of the financial position for the wastewater utility.
4.4.1 Sales Forecasts vs. Actuals
Actual wastewater sales revenues in FY 2023 were the same as forecasted in the FY 2023 Financial Plan.
Figure 25: Wastewater Sales Revenue ($), FY 2023
4.4.2 Financial Position
The Wastewater Collection Operations Reserve was within the guideline range and the CIP Reserve had a
balance of approximately $3.2 million at year end FY 2022. In June 2023, the Council approved the FY 2024
Wastewater Collection Financial Plan20, which approved the transfer of up to $3.2 million from the CIP
Reserve to the Operations Reserve and $0.34 million from the Rate Stabilization Reserve to the Operations
Reserve to maintain the Operations Reserve at the minimum guideline level. Rising main replacement
costs as well as the need to accelerate main replacement to prudently manage the City’s infrastructure
together with rising wastewater treatment costs is placing pressure on the wastewater utility’s reserves.
Final FY 2023 reserve balances will not be available until Fall 2023.
20 FY24 Wastewater Collection Financial Plan -
https://www.cityofpaloalto.org/files/assets/public/v/3/agendas-minutes-reports/reports/city-manager-
reports-cmrs/attachments/03-07-2023-id-2302-0944-ww-financial-plan-lisa.pdf
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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 May 1, 2023 the Council approved the contract amendment with Magellan through March 2025 for
the continued provision of consulting services for a multi-phased fiber optic network expansion plan,
which includes program management of construction of the fiber backbone and phase 1 of Fiber-to-the-
Premises (FTTP), network operations and technical support, and electrical make ready engineering in an
amount not to exceed $2,473,600 (Staff Report #2303-121521). Although the phased build approach to
FTTP will decrease the City’s financial risk and increase Council’s control over the velocity of the buildout,
the City does not have the in-house staffing to fully deploy the fiber backbone project and first phase of
FTTP. These projects will require significant staffing and specialized skill sets over the next several years.
Fiber backbone construction includes an estimated 28 miles of underground construction and 10 miles of
aerial construction. Phase 1 for FTTP includes an estimated 18 miles of underground construction and 63
miles of aerial construction. In addition to construction, the City will be starting up a new internet service
provider (ISP) business.
As the City solidifies staffing plans in parallel with contracted services, the Director of Information
Technology, Darren Numoto, will take on the responsibilities of an Assistant Director for Palo Alto Fiber
on an interim basis. As part of the FY 2024 proposed budget, staff will be bringing forward a
recommendation to add four (4) new FTE positions for the dark fiber expansion and implementation of
FTTP. 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. The scope of services provided by Magellan and the associated
compensation under the new amendment may decrease when the City hires internal FTEs and/or
outsources specific activities.
5.2 Capital Improvement Plan Status
CPAU has initiated efforts to coordinate electrification grid modernization projects with fiber network
expansion and fiber-to-the-premises (FTTP) projects to reduce construction costs, minimize community
21 Staff Report 2303-1215 – https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-
reports/reports/city-manager-reports-cmrs/2023/05-01-2023-id-2303-1215_1.pdf
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disruption, and optimize internal staffing resources. In the FY 2024 Fiber CIP budget, $20 million will be
budgeted in the new Fiber-to-the-Premises (FO-24000) CIP and an additional $13 million will be budgeted
in the Fiber Optics Network – System Rebuild (FO-16000) CIP for the new fiber backbone.
5.3 Reliability
5.4 Financial Health
5.4.1 Fiber Sales
5.4.2 Financial Position
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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. Summary descriptions of Utilities Customer
Program are provided in Appendix D.
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), offers
landscape education classes throughout the year to introduce residents to the concepts of water-efficient
and sustainable landscaping. Workshop topics include rain gardens, how to water trees, steps to take to
convert lawns into drought-tolerant landscapes, and available rebates. During FY 2023, we held 5
webinars and 2 in-person workshops; attendance was strong, with 197 residents participating over the
course of the year.
Please visit the BAWSCA website for a complete list of available classes and events at:
https://bawsca.org/conserve/programs/classes22. All past Landscape Class Videos are available online at:
https://bawsca.org/conserve/landscaping/videos/23. For updates on future events and workshops, please
visit http://cityofpaloalto.org/workshops24
With collaboration from the Palo Alto City Library, City Manager's Office, Public Works, and the Utilities
Department, an Earth Day event25 was held on Saturday, April 22 at Rinconada Library. Over 100 attendees
learned about different climate-friendly choices they can make in their home, including water saving
landscaping and the advantages of going all electric.
22 BAWSCA Programs and Classes - https://bawsca.org/conserve/programs
23 BAWSCA Landscaping Videos - https://bawsca.org/conserve/landscaping/videos/
24 City of Palo Alto Workshops - https://www.cityofpaloalto.org/Departments/Utilities/Utilities-
Workshops-and-Webinars
25 Earth Day - https://www.cityofpaloalto.org/News-Articles/City-Manager/Celebrate-Earth-Day-and-
Earth-Month-this-April
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Residential Energy Efficiency and Water Conservation Advisory Service
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 including
guidance on home electrification options. During FY 2023, the Genie performed 47 comprehensive in-
home assessments, 38 Home Electrification Readiness Assessments (HERA) and 26 virtual assessments.
CPAU partners with Valley Water to offer a robust portfolio of water conservation programs and rebates26
for residents and businesses. On June 25, 2023, the City entered into a new cost-sharing agreement with
Valley Water which includes $1.4M over 7 years to help the City deploy Advanced Water Metering
Infrastructure and home water conservation reports.
The WaterSmart customer portal, an online water management tool, launched in November 2022.
Through this program, home water reports are sent to most single-family customers on a quarterly basis.
A control group of single-family customers currently do not get the reports. To date, 15% of all water
customers have accessed the portal which provides information about their water consumption and
personalized water conservation recommendations. The home water reports will be sent out on a
monthly basis starting in July 2023. As water supply conditions have improved CPAU is focusing outreach
on water conservation being a way of life and reducing water waste and continues to encourage
participation in rebates and resources.
The Waterfluence program provides large commercial customers a monthly water budget that compares
actual irrigation use to an ideal benchmark irrigation budget. Customers that are exceeding their
suggested budget are eligible for a free landscape irrigation field survey. CPAU continues to engage Key
Accounts on this resource to help them improve irrigation efficiency. During FY 2023, 47% of eligible
customers, have accessed the Waterfluence portal.
As of August 1, 2023 , 2023, Enovity has 20 projects in process with 2,114,518 kWh savings. Key Account
Representatives have been proactively engaging customers through direct email and face-to-face
meetings. Key Account Managers are planning another Facility Managers Meeting on Zoom for November
7, 2023, following the high attendance of previous meetings on Zoom.
The key account program is increasingly focused on reengaging key accounts that have not historically
partnered with the city on energy efficiency and electrification, especially commercial property owners.
Identifying customer pain points and creating action plans to address them will help us develop a roadmap
for better serving our key accounts and increasing their ESG commitment in the community.
The Enovity program total value is trending behind schedule due to higher commercial vacancy in the
market. Many employers have remained fully remote and hybrid. This has led to a pause in facilities
reinvestment and upgrading. In the short term, we expect this pattern to continue. Conversely, there are
commercial customers that continue to expand their footprint, including Stanford, Google and Tesla. As
26 Rebates - https://valleywater.dropletportal.com/overview/
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they repurpose available space, some of the facilities may require retrofitting that coincide with
electrification. Our next contract with Enovity will include a reevaluation of these market conditions.
Figure 26: Energy Efficiency Program Energy Savings
Business Energy Advisor
6.1.2 Building Electrification
Full-Service Heat Pump Water Heater Program
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financing option is available for customers who choose to pay a lower upfront cost with a monthly
payment of $20 for 5 years. As of June 30, 2023, we have received high interest level from customers,
with 440 interest forms submitted; 147 site assessments and 16 installations were completed. The Home
Efficiency Genie team has been serving as a single contact point for customers, from sending the site
assessment agreement, to following up with customers on the project cost proposal and installation
agreement. Customer site assessments and HPWH installations are provided by Synergy, and they have
been ramping up their team of technicians to meet the program demands. CPAU staff have also
coordinated with the City’s Chief Building Official and Building Inspection Team to streamline the
permitting of HPWHs installed through this program. So far, the program has come across a number of
challenging HPWH installations that includes long circuit runs, electrical panels without additional
capacity, complex condensate management, and water heater relocation requirements. The program
team (CPAU staff, Synergy staff and Home Efficiency Genie program team) have been working closely to
address these challenges and come up with solutions to facilitate future project installations.
Business Electrification Technical Assistance Program (BE TAP)
6.1.3 Electric Vehicle Programs
Financial Overview
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FY 2023 EV program related expenses were $1.1M, of which $465k was for the second installment of the
CALeVIP program, $272k in EV charger customer rebates, $45k for EVTAP (Electric Vehicle Technical
Assistance Program) management by CLEAResult, $105k for customer education programs, and $193k for
program management expenses. Revenues for the year is $0.935M. The LCFS funds is estimated to have
a reserve balance of ~$7.05M at the end of FY 2023.
EV Technical Assistance Program (EVTAP)
•Goal: Offer technical assistance for the installation of EV chargers at nonprofits, schools, multifamily
properties and small medium businesses. Facilitate the installation of 180-360 ports @ 60-90 sites (By
2024)
•Progress: EVTAP is a high touch program, that includes a series of site visits, technical evaluations,
engineering reviews, designs, support with hardware selection and cost estimates that culminate in
the landlord receiving contractor bids and assistance submitting a building permit, applying for
incentives and project management of the installation. Projects going through EVTAP have been
taking two years or more to reach completion.
10 permit applications were submitted, and 2 installations were completed for a total of 15
new ports installed. Since program inception in 2019, 120+ sites have expressed interest in EVTAP and are
working through the program, potentially translating into the installation of 500+ Level 2 ports and 300+
Level 1 ports. However due to each project taking much longer to complete than expected, staff is working
to extend the contract to complete installations in the pipeline to hit original goals.
EV Charger Rebate Program
•Goal: Incentivize the installation of EV chargers at Non-Profits and Multifamily properties.
•Progress: Since the launch of this program in 2017, CPAU has facilitated the installations of 144 new
EV charging ports/connectors at 19 sites. The breakdown of the installation sites: 8 MF and 11 non-
profits (including 4 schools and 2 medical facilities). The average cost of each port was $10k and
projects have averaged 12 months to complete. Now that more properties, especially multifamily
properties are expressing more interest in installing EV chargers, there are 114 applicants to this
program. With increased demand, staff is in the process of updating program participation
requirements and terms and conditions, to lower rebate levels and put time limitations on rebate
fund reservations.
California Electric Vehicle Infrastructure Project27 (CALeVIP)
•Goal: Facilitate and Incentivize the installation of EV chargers at commercial sites.
27 CALeVIP -https://calevip.org/
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than expected. Staff is working actively with the program administrator to fully reserve any available
outstanding funds, and to encourage installations to materialize.
EV Awareness and Outreach
•Goal: Raise awareness about electric modes of transportation and their benefits
•Progress: Using the NCPA contracts and LCFS funds, CPAU contracted with Acterra28 and Ride &
Drive Clean29 and during FY 2023, CPAU hosted 32 EV events including 20 virtual EV educational
workshops and 12 in-person EV expos, totaling 998 and 1,645 participants in attendance, respectively.
The contract with Ride and Drive Clean also included an EV discount campaign which offered limited
time discounts on certain EV models, as well as an e-Bike discount campaign with Palo Alto Bicycles.
We also offered bilingual Financial Incentive Clinics targeted towards lower income customers with
one on one consultations. CPAU anticipates continuing this robust effort in FY 2024 with plans to offer
over 30 online and in-person workshops.
City-Owned EV Chargers
•Goal: Install EV Charging Infrastructure for the public as well as City-fleet.
•Progress: As of the End of June 2023:
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.
•Progress: Many older properties in Palo Alto, especially multifamily buildings, have limited electric
capacity to accommodate EV chargers and building electrification. However, there has been an
ongoing nationwide transformer supply shortage, 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. To date, uptake has been slow, however with many active EVTAP projects in the
pipeline, we know that roughly half of the sites will require new transformers and Utilities is planning
accordingly.
6.2 Innovation and Pilot Programs
30) provides
the opportunity for local businesses and organizations to submit proposals for innovative and impactful
28 Acterra - https://www.acterra.org/
29 Rida & Drive Clean - https://rideanddriveclean.org/
30 Utilities Innovations - https://www.cityofpaloalto.org/Departments/Utilities/Business/Business-
Programs/Program-for-Emerging-Technologies
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products to CPAU for review as a prospective partner. The goal is to find and nurture creative products
and services that will improve customer value, save natural resources, or reduce carbon emissions. From
the program’s inception in June 2012 through today, the program has received a total of 107 applications.
The figure below in 6.2.2 summarizes the status of all applications through FY 2023.
6.2.1 Academic Collaborations
6.2.2 Completed Projects
Figure 27: Status to date of all applications to the Program for Emerging Technologies
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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/UTLbillinsert31.
Storms and Power Outages: From December 31, 2022 through March 2023, the Bay Area experienced
an unprecedented number of storms and over the course of a few weeks in January, more than 30
atmospheric rivers. The City activated its Emergency Operations Center (EOC) and mobilized teams for
response to flooding, traffic control needs, emergency rescues, power outages, and other storm-related
impacts. Utilities staff communicated reports of outages throughout the city during the multiple storm
surges, providing continuous coverage and updates as information became available. Most power outages
were caused by tree damage due to heavy winds and rain, causing trees or branches to fall on power lines
or power poles, and lightning strikes. February and March also brought many exceptionally heavy
windstorms, causing power outages for thousands of CPAU customers. Other utilities in the Bay Area did
not fare as well as CPAU. In most cases, CPAU crews were able to restore service very quickly to all
customers while hundreds of thousands of others in the Bay Area were without power for days to weeks.
The response by CPAU staff demonstrates the dedication to safe, reliable, quality service, and the benefits
of a locally-owned and operated public utility.
Rebates for High Winter Energy Costs: CPAU credited residential utility customer accounts with a “Winter
Rebate” for the extraordinarily high gas and electric utility costs that the region experienced in the 2022-
2023 winter. This rebate was approved by City Council in early April 2023 to provide needed financial relief
to residents and was calculated based on a customer’s January electric and/or gas utility bill costs. The
fixed rebate for gas services ranges from $70 to $100 and the fixed rebate for electric services ranges from
$20 to $65. Additional relief of $100 for electric and $100 for gas service was provided to residents
enrolled in the Utilities Rate Assistance Program (RAP) and/or have a past due balance of greater than 180
days. An additional flat rate rebate is available through the end of October 2023 to residents who do not
currently qualify for the utilities rate assistance program but have experienced financial hardship during
this time. Those residents may apply for our “High Bill Financial Assistance” program. Information on all
utilities financial assistance resources is available at cityofpaloalto.org/utilitiesassistance32.
31 Utilities Bill Inserts - https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service/Utilities-
Bill-Pay/Bill-Inserts
32 Utilities Financial Assistance -
https://www.cityofpaloalto.org/Departments/Utilities/Residential/Utilities-Assistance
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Utilities Rates Outreach: The City presented financial plans for fiscal year 2024 that included proposals
for rate changes across all utilities except refuse service. The main reasons for rate increases this fiscal
year were due to inflation and cost increases for construction, operations, energy, and water supplies; the
City’s delay of utility rate increases during the pandemic; revenues and reserves falling below minimum
guidelines; and aging infrastructure. Effective July 1, 2023, the bill change for an average residential
customer with six utility services is estimated at around $11 per month. The overall residential bill changes
included a 5% decrease for electric, 8% increase for gas, 9% increase for wastewater, 5% increase for
water, 5% increase for stormwater management, and no change for refuse service. Additionally, the San
Francisco Public Utilities Commission (SFPUC) increased the wholesale water rate it charges the City from
$4.75 to $5.21 per hundred cubic feet (CCF), effective July 1, 2023. The City automatically passes this
commodity rate increase on to its customers. The City notified customers of this pass-through rate directly
in accordance with government codes and the City’s water utility rate schedule rules. Staff implemented
a robust outreach initiative to inform customers of these rate changes and the reasons for the cost
increases. This included conversations with the local media and direct communication with customers
through utility bill inserts, email newsletters, website, social media, neighborhood, and business groups.
CPAU reinforced the many programs and resources available to help customers use energy and water
efficiently to keep utility bill costs low. www.cityofpaloalto.org/ratesoverview33
New Outage Management System: Staff began outreach about the new Outage Management System
(OMS), scheduled for launch in late summer 2023. This will offer customers the ability to receive alerts
and updates through text messages, phone calls and emails about power outages and other emergency
notifications. Part of the outreach campaign involved encouraging people to ensure their contact
information is up to date in our records to receive notifications. The new OMS will provide benefits such
reduced outage durations, faster response time, web outage viewer, customer account log in for updates,
hosted Integrated Voice Response (IVR), phone capacity rollover, no busy signals, streamlined field
communications, and situational awareness for both employees and customers.
www.cityofpaloalto.org/outages34
Advanced Metering Infrastructure (AMI) Project: CPAU began deploying Advanced Metering
Infrastructure (AMI) meters in January 2023. The beta phase rollout included approximately 1,800 electric,
gas and water meters. A phased rollout approach allows the City to test and validate the quality assurance
of AMI meters and systems. Full deployment of AMI for residential customers is estimated in early 2024.
Some AMI meters will be installed at all-electric homes with EV chargers and/or energy storage systems,
allowing CPAU to gather data about EV customer charging patterns, all-electric home load shapes, and
transformer loading which is essential for the grid modernization project. CPAU has been communicating
directly with customers who will receive the meters to share resources and help with any questions or
concerns. www.cityofpaloalto.org/ami35
33 Utilities Rates - https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service/Utilities-
Rates
34 Outages - https://www.cityofpaloalto.org/Departments/Utilities/Utilities-Services-Safety/Outages
35 AMI - https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service/Meter-Reading-Info-
Schedule/Advanced-Metering-Infrastructure-and-Smart-Grid
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Home Water Reports Launch: Since the launch of the WaterSmart program, staff have embarked on a
robust outreach campaign to encourage customers to log into their account and take advantage of the
features such as leak alerts and access to water efficiency programs. The City began sending Home Water
Reports to single-family residential customers in March 2023. The Home Water Reports include
information on a customer’s water use and comparisons to similar-sized Palo Alto households. Water
savings from these reports will be evaluated through an efficiency study.
www.cityofpaloalto.org/watersmart36
Full-Service Heat Pump Water Heater Pilot Program: The Palo Alto community has been rallying support
for the City’s new heat pump water heater installation program, including through organizing volunteer
neighborhood canvassing campaigns. Early in the program’s inception, CPAU began gathering contact
information from residents expressing interest in participating or receiving more information on the
program’s full-service installation service once it fully launched. In the spring and summer of 2023, the
City began working with a marketing consultant to expand outreach and further drive participation. The
consultant is assisting staff in developing and implementing a broad communications and marketing plan
for electrification which involves facilitating collaboration with staff, stakeholders, policymakers, and
community partners. www.cityofpaloalto.org/switch37
Water Supply and Drought: Staff have been proactive about communicating current water supply
conditions following heavy precipitation in early 2023, which effectively ended the State’s historic
drought. CPAU continues outreach about water supply conditions, water use restrictions, and resources
for water use efficiency regardless of rain or drought. A key slogan is that “conservation is a California way
of life.” Staff work with the Bay Area Water Supply and Conservation Agency (BAWSCA), Valley Water,
and other partners such as Canopy, to coordinate public education events throughout the year.
www.cityofpaloalto.org/water38
Water Quality Report: Each year, CPAU publishes an annual Consumer Confidence Report on water
quality conditions for the previous year. The 2022 report update is available in English, Spanish, and
Chinese online at cityofpaloalto.org/WaterResources and in print upon request by contacting
UtilitiesCommunications@cityofpaloalto.org or (650) 329-2479.
Gas Safety Outreach: Throughout the year, CPAU delivers a variety of outreach materials to the
community about utility safety. An important element of our public awareness program is the annual
distribution of our gas safety awareness brochure. Per Federal Department of Transportation regulations,
we directly mail this information to all customers, non-customers living near a gas pipeline, public officials,
36 WaterSmart - https://www.cityofpaloalto.org/Departments/Utilities/Sustainability/Water-
Efficiency/WaterSmart
37 Heat Pump Water Heater Pilot Program -
https://www.cityofpaloalto.org/Departments/Utilities/Sustainability/Water-Efficiency/WaterSmart
38 Water Supply and Drought -
https://www.cityofpaloalto.org/Departments/Utilities/Sustainability/Water-Efficiency/WaterSmart
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emergency responders, excavators, contractors, and locators working in Palo Alto. Gas safety brochures
are typically delivered in the fall. www.cityofpaloalto.org/safeutility39
Program and Event Support: CPAU hosted many events and workshops in 2022 and 2023 to spread
awareness about customer programs for energy and water efficiency, electric vehicles (EV), electric bikes
(including special discount campaign for EVs and eBikes), heat pump water heaters, and beneficial
electrification. The communications team supported these efforts through comprehensive outreach via
website, email newsletters, advertisements, and social media campaigns.
40
39 Safety - https://www.cityofpaloalto.org/Departments/Utilities/Utilities-Services-Safety/Safety
40 Utilities Workshops and Webinars - https://www.cityofpaloalto.org/Departments/Utilities/Utilities-
Workshops-and-Webinars
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8 Legislative, Regulatory and Industry Activity
California Municipal Utilities Association's (CMUA) CY 2022 Legislative Report41 provides a summary of
California’s legislative activities during CY 2022. The CY 2023 activity summary report will be available in
October 2023 and will be provided in the next UAC quarterly report.
California Grid Reliability for the Summer of 2023
The California Independent System Operator’s (CAISO) 2023 Summer Loads and Resources Assessment42
shows considerable improvement in resource availability this summer, driven by accelerated resource
development and high hydro conditions within California. The summer 2022 assessment was less
optimistic about conditions for the then approaching summer.
The 2023 assessment notes, the CAISO is approaching the summer of 2023 with a moderate surplus for
meeting that 1-in-10 standard, even as demand for electricity continues growing. The 1-in-10 standard
peak loads are projected to be 50 to 52 GW. A primary reason for the improved conditions is the
substantial amount of new capacity that has been added to the grid in the past year, including just under
3 GW of 4-hour lithium-ion batteries, which have helped enhance reliability. Palo Alto’s loads are expected
to peak at 170 MW or 0.17 GW.
Though unlikely to be called upon, Palo Alto is part of the CAISO emergency load shedding program. In
the event there are insufficient resources to meet loads on a hot day and CAISO needs to call a EEA3 load-
shedding emergency, Palo Alto is obligated to shed part of its load. With a 0.34% share of CAISO’s peak
load, if CAISO triggers a 1000 MW state-wide load curtailment, Palo Alto will be obligated to shed 3.4 MW
of load within the City.
California Electric Supply
•Energy Storage Systems (ESS) continue to take on a greater role in meeting the state’s electrical needs.
As of July 2023, more than 5 GW of battery storage capacity have been fully integrated into the
electrical grid and are available for dispatch.
41 CMAU CY 22 Legislative Report -
https://www.cityofpaloalto.org/files/assets/public/v/1/utilities/cmua_2022_legislative_session_report.
pdf
42 2023 Sumer Loads and Resources Assessment - http://www.caiso.com/Documents/2023-Summer-
Loads-and-Resources-Assessment.pdf
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•ESS capacity has increased from 500 MW in 2020 to 5,000 MW in 2023, and the capacity will have to
increase to 50 GW to support an additional 79 GW of new renewable generation needed to meet the
state’s 2045 greenhouse gas reduction goals (CAISO's Special Report on Battery Storage -July 202343).
•Much of the additional renewable supplies are projected to come from out-of-state resources and
offshore wind. Palo Alto also expects to contract for additional renewable and energy storage systems
in the coming years to satisfy its anticipated load growth.
•The wholesale cost of serving the CAISO area load in CY 2022 rose by ~70% compared to CY 2021 due
to substantially higher natural gas prices. The total cost for the CAISO footprint in CY 2022 was $21.6
billion, or about $95/MWh. After adjusting for natural gas price increases, the wholesale costs
increased by 10% (July 2023 CAISO Report on Market Performance44). Palo Alto’s costs were also
substantially higher in CY 2022, but this was driven primarily by low hydroelectric supply.
CAISO Transmission and Electricity Markets
•Large investments in new transmission lines would be needed to access new renewable electric supply
from out of state. If these investments are recovered through the CAISO transmission access charge
(TAC), TAC rates would increase rapidly from the current 4 cents/kWh. To contain these transmission
delivery costs, CAISO is exploring the implementation of a Subscriber Participating Transmission
Owner (SPTO) model, whereby California load serving entities who contract for such out-of-state
supplies will pay for the new transmission to deliver those resources to California, without the cost
being borne by all loads through the CAISO-wide TAC rate.
•CAISO continues to successfully operate the Western Energy Imbalance Market (WEIM) whereby
participants can buy and sell power close to real time on a west-wide basis (CA, OR, WA, BC, NV, AZ,
NM, UT, WY, ID, MT). The incremental value harvested by WEIM in CY 2022 is estimated at $1.5 billion.
Building on the success of operating the WEIM, the CAISO is working to implement an Extended Day
Ahead Market (EDAM) on a west-wide basis. Palo Alto, through Northern California Power Agency
(NCPA), participates in these forums to expand the electricity supply markets to optimally meet loads
and the achieve the state’s carbon reduction goals.
Electric Vehicles
•The California Air Resources Board (CARB) adopted the Advanced Clean Fleets regulation April 2023.
The regulation will go into effect on January 1, 2024, starting with a 50% purchase requirement for
public agency fleets. Starting on January 1, 2027, 100% of public agency fleet purchases will be
required to be ZEV. There are a number of exemptions to address unavailability of vehicles, duty cycle,
infrastructure delays, and mutual aid needs - but they are limited in scope and are unlikely to address
every issue faced by utility fleets.
43 CAISO Special Report on Battery Storage - http://www.caiso.com/Documents/2022-Special-Report-on-
Battery-Storage-Jul-7-2023.pdf
44 CAISO 2022 Annual Reports on Market Issues & Performance -
http://www.caiso.com/Documents/2022-Annual-Report-on-Market-Issues-and-Performance-Jul-11-
2023.pdf
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•NCPA and CMUA are leading an effort to advocate for AB 1594 (Garcia), which removes restrictions
within the Advanced Clean Fleets (ACF) regulation that could restrict public utilities’ purchase of
necessary vehicles.
Hydrogen Initiative
•NCPA is actively engaged in exploring the feasibility of producing hydrogen with renewable electricity
and then using the hydrogen to blend with natural gas to produce electricity using its current fleet of
natural gas combustion turbines. A hydrogen production facility using electrolyzers is being planned
at the Lodi natural gas combined cycle plant if federal grants could be obtained for such a project.
NCPA is part of the state’s ARCH2ES initiative to seek federal grant money to develop a regional
hydrogen hub to build a self-sustaining hydrogen economy of producers, infrastructure, and users.
•Palo Alto is not a participant in NCPA’s natural gas electricity generation fleet and hence not a direct
beneficiary of this initiative.
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Appendices
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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 #1224045).
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.
45 Staff Report 12240 – https://www.city of paloalto.org/files/assets/public/v/3/agendas-minutes-
reports/reports/city-manager-reports-cmrs/year-archive/2021/06-21-21-id-12240.pdf
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9.3 Forward Deals
Palo Alto executed the following Electric and Gas transaction in Q4 of FY 2023.
Figure 28: Electric Energy Deals
Delivery Month Deal Type Total Energy
(MWh)
Price
($/MWh)
Oct’23-Jan’24 Purchase 19,815 97
Figure 29: Electric Resource Adequacy Deals
Delivery Month Deal Type Avg RA
(MW-mo)
Price
($/kW-mo)
Aug’23-Sep’23 Sale 18.58 63
Jan’24-Dec’24 Sale 57.01 24.5
Figure 30: Gas Deals
Delivery Month Deal Type Total Volume
(MMBtu)
Price
($/MMBtu)
May’23-Oct’23 Purchase 868,400 Malin Bidweek + Adder
May’23-Oct’23 Purchase 231,920 3.65
May’23-Oct’23 Sale 231,920 5.85
9.4 Market Exposure
The chart below shows the City’s market exposure and committed purchases and sales to cover exposed
positions. Additional purchases and sales will be executed for FY 2024 and FY 2025 in the coming months.
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Figure 31: Electric Load Resource Balance, 2023 - 2025
9.5 Transaction Compliance
There are no transaction exceptions or violations to report.
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10 Appendix B: Staffing and Vacancies
As of Q4 FY 2023, the Utilities Department has 49 vacant positions out of 253 authorized positions or a
19% 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 27 vacancies or 30% vacancy percentage which is an
improvement from the Q3 report of 32 vacancies or 36% vacancy rate. The City is actively recruiting for
38 vacant positions. Some positions are not designated for recruitment due to HR staffing constraints and
other higher priority recruitments. Utilities has designated three HR liaisons from Utilities Administration
to assist HR with some of the recruitments. With the three HR liaisons, CPAU will be able to post positions,
schedule interviews, and make job offers at a faster pace after they are fully trained. 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 Q4 FY 2023
D
A
F
V
F
A
R V
A 2 4 3 2
C 2 5 1 2
R 2 5 4 2
E 6 2 1 3
E 2 6 6 2
W 7 5 5 7
W 2 3 3 1
T 2 4 3 1
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11 Appendix C: Water 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 Water and Electric Utilities were scheduled for
this report, but the Electric annual report will be rescheduled to next quarter’s report.
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Water Utility Overview - 2022
Executive Summary
•The City continues to meet water quality standards and
regulatory requirements
•Water Main Replacement program continues as planned
•Corte Madera Reservoir Replacement Project completed
in April 2022
•Advanced Metering Infrastructure (AMI) program
preparation started in 2022
Infrastructure Overview
Key infrastructure replacement efforts in the next five years
include:
●Regular mains, services, hydrants, and valve replacement
●Seismic upgrade of California Ave Turnout
●Repair and seismic retrofit of Dahl and Park Reservoirs
System Operations and Maintenance
There are 17.2 Total FTE’s working on Water System O&M.
●Water Quality (2.4 FTE):
o *Monitoring: Weekly, monthly, quarterly, annual water
quality sampling
o *System Flushing: Flushing dead ends in the system to
prevent bacterial accumulation
o Backflow Prevention (BFP) Program: Ensuring water
from easily contaminated end-uses does not enter water system
●*System Monitoring (1 FTE): 24-hour monitoring and management of the system to ensure
it is operating safely, moving water in and out of reservoirs to preserve water quality
●System Inspections (1.3 FTE): Periodic field inspections of pump stations and other key
system components
●Planned Maintenance (2.4 FTE): Test and maintain distribution system equipment required
for operations such as station mechanical equipment, valves, and meters, and non-
Water Utility Goals
What are our goals and objectives?
-Minimize system failures
-Prevent property damage
-Protect the health and safety of staff and the
community
-Maintain adequate storage and fire flow for
fighting fires
-Meet or exceed Industry Best Management
Practices for maximizing asset life and
minimizing maintenance cost
-Meet or exceed regulatory requirements
How do we achieve those goals?
-Perform routine monitoring and inspections
and respond with timely repairs
-Replace or repair assets as they reach the
end of their useful life
-Perform hydraulic modeling analysis and
test system performance
-Train and implement new techniques, tools,
and procedures to increase productivity
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emergency repair and replacement of degraded or damaged assets (e.g. hydrants, valves,
mains, and services).
●*Unplanned Maintenance (6.4 FTE): Emergency response and infrastructure repairs and
replacements requiring immediate attention.
●New Construction (3.8 FTE): Installation of new water services, valves, and meters for
construction projects.
*Priority programs critical to daily operation
Maintenance Status:
●Critical maintenance programs running smoothly
●BFP inspection program meets state requirements, needs evaluations as growth continues.
●Adapt Valve exercise program to enable digital data capture in the field.
●Large meter testing program is being created and will be implemented by 2024.
Table 1: Status of Drinking Water System Operation and Maintenance Programs
System
Operation or
Maintenance
Program
Status
Green = good
Yellow = room
for improvement
Comments
Water quality
monitoring
City has a regular testing program to meet all regulatory
requirements. This includes tests of disinfection
effectiveness, water quality, and water physical
characteristics.
System flushing Flushing is performed to prevent stagnation of water in
rarely used outlets like hydrants and blowoff valves. This
flushing is done on a regular seasonal schedule. City is
maintaining flushing requirements while being mindful of
water conservation where possible.
Backflow
prevention
Backflow Prevention Devices (BFDs) protect water quality
by preventing water in a customer’s system from flowing
back into the City system. The City owns about 400 BFDs
which are tested annually. Private BFD owners are
required to test annually and submit results to the City. The
City then reports this data to the State Water Resources
Board. The City continues to work with customers to
improve compliance and reporting rates have increased
this year. This program continues to grow as more water
services require backflow prevention, increased staffing
and support would allow the program to look at more
efficient testing protocols for both the City and our
customers.
System
monitoring
The City maintains 24-hour system monitoring. Sufficient
staff have the experience, training, and certifications
required to handle this function and ensure uninterrupted
oversight in the event of an emergency.
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Valve Exercise Valves are being operated on a multi-year cycle and
broken valves are repaired as they are discovered.
Currently, valve exercising records are marked and
maintained on physical utility grid map sheets, and records
are submitted and digitally recorded when all valves on a
particular grid have been exercised. On occasion, records
for specific grids will take longer to submit for recordation,
if the valving is difficult to access or requires additional
traffic controls and/or staffing. The data presented in this
scorecard lags actual field performance. WGW Operations
is working to improve our ESRI interfaces to facilitate
digital collection of data in the field. This will allow for real-
time data and remove the current lags that can occur in
data entry.
Meter
Maintenance
Multiple one-time sampling projects have shown that most
meters are in good shape. There are many meters due for
replacement, and the mass replacement of older, small
water meters with new advanced metering infrastructure
(AMI) is in preparation. Meter exchanges for AMI will begin
in 2023. Meter testing was performed by a third-party
contractor.
Unplanned
Maintenance
There are no backlogs of leaks or assets in need of repair.
The City maintains an emergency on-call program to
respond to and control water leaks or other system
emergencies at any hour of the day or night.
Table 2: Condition of Drinking Water System Assets
Asset Class Quantity Maintenance Asset Condition
Water Receiving
Stations
(Turnouts)
5 Meter testing (every 2
years)
Annual Maintenance
(calibrate pressure
transducer and analog
gauges, exercise
isolation valves and
PRV’s, clean out cover)
Most receiving stations currently
require only minor and routine
maintenance and are in good condition
overall. Some minor improvement
projects may be required in the next
few years. California Ave turnout is
scheduled for pipe replacement and
rehabilitation in CY24. Page Mill
Turnout is scheduled for valve restraint
work in CY23, which will allow the
completion of some annual
maintenance items that have been
deferred for two years, due to safety
concerns.
Booster Stations /
Pressure
7 / 6 Annual maintenance
(calibrate upstream /
downstream pressure
Most booster stations and pressure
reduction stations require only minor
and routine maintenance and are in
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Reducing
Stations
transducer, analog
gauges, check
pressure switches,
exercise isolation
valves and PRV’s,
cleaning). Mayfield and
El Camino PS have
VFD’s which are
maintained by Tesco.
Weekly monitoring
good condition overall. Maintenance
work for the five booster stations in the
Foothills portion of the system was on
hold to maintain full operation while
Corte Madera Reservoir Construction
was underway. Maintenance will
continue in the Foothills booster
stations now that Corte Madera is back
in operation, including repainting all
five of the booster stations in CY24.
Minor improvement projects may be
required in the next few years.
Reservoirs 7 Annual maintenance
(climb tank, take
physical reading of
water level, check
altitude valve, check
screens, calibrate tank
pressure transducer,
analog gauges)
Water quality
monitoring
Several reservoirs have had recent
seismic upgrades and general
rehabilitation. The new Corte Madera
Reservoir has been constructed and
brought into service in CY2022. Dahl
and Park Reservoirs are scheduled for
repair and seismic retrofit in CY 2024-
2028.
Emergency Wells 8 Annual maintenance,
inspection, and testing
of wells by Tesco, third
party contractor.
Routine inspection and
water quality monitoring
and monthly
maintenance of
systems performed by
staff.
City wells were rehabilitated in 2013,
but some maintenance is needed. City
has begun evaluating adding
generators for wells.
Water Valves ~6,500
valves
Operate every valve at
least once every five
years (1200 valves per
year), repair / replace
as needed
Operate 120 critical
valves in foothills
annually
Valves are replaced on failure, or
proactively when water mains in the
area are replaced.
Water Mains and
Services
~230
miles of
main,
~20,000
services
Repair leaks as
identified
Monitor water quality
Water Main Replacement program
continues as planned, prioritizing leaky
pipes and seismically vulnerable pipes.
Asbestos-Cement Pipe testing
program is underway to help update
replacement program as needed.
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Water Meters ~20,000
small
meters,
380 large
meters
Sample test small
meters, test / repair
large meters annually
Replacement of oldest small water
meters continues, informed by small
meter testing. Large meter testing will
begin in CY2023, which will help
identify large meters in need of
replacement. AMI meter upgrade
project is currently under way in 2022
to replace many older small water
meters.
Fire Hydrants ~2000
public
hydrants
Maintenance Hydrants are replaced upon failure.
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Figure 2: Water Maintenance and Inspection Charts
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12 Appendix D: Utilities Customer Program Descriptions
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.
12.1 Customer Programs Overview
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.
12.1.1 Energy and Water Efficiency
Residential Energy Efficiency and Water Conservation Programs
The Home Efficiency Genie program provides 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. During FY 2023 the Genie team provided 47 comprehensive
in-home assessments and 26 virtual assessments. Those assessments also included 38 HERA to help residents
evaluate their homes for electrification upgrade planning.
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. Multiple projects are being scheduled for REAP
customers to take advantage of the free efficiency upgrades, with projects including building envelope
improvements, furnace replacements with high efficiency models, and lighting upgrades to LEDs. Recently a new
measure for high-efficiency toilets (HETs) was added.
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. Recently a new measure for high-efficiency toilets (HETs) was
added.
CPAU partners with Valley Water to offer a robust portfolio of water conservation programs and rebates for
residents and businesses.
Commercial & Industrial Energy Efficiency Program
The Commercial and Industrial Energy Efficiency Program (CIEEP) offers free energy audits to businesses. These
audits help businesses identify areas where they can save energy, such as improving lighting, controls, occupancy
sensors, refrigeration systems, HVAC systems, and other equipment. Furthermore, CIEEP’s can help provide
technical assistance to businesses to help them implement energy efficiency measures. This can include
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suggestions that help customers develop energy efficiency plans, provide information on energy-efficient
technologies, and connecting businesses with contractors.
Business Customer Rebates, formerly Commercial Advantage Program
Business Energy Advisor
12.1.2 Building Electrification
Full-Service Heat Pump Water Heater Program
Business Electrification Technical Assistance Program (BE TAP)
12.1.3 Electric Vehicles
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.
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•Why: Most middle-income and low to moderate-income residents in Palo Alto live in MF housing. Of the
11,000 households living in MF, 23% have annual income levels which are under 400% Federal Poverty Levels.
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, Homeowners 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.
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.
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.
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 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.
California Electric Vehicle Infrastructure Project
•Goal: Facilitate and incentivize the installation of EV chargers at commercial sites.
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.
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City-Owned EV Chargers
: Install EV Charging Infrastructure for the public as well as City-fleet.
•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
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.
12.1.4 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:
•Low Carbon Fuel Standard (LCFS) Program: The City participates in the California Air Resources Board
(CARB) LCFS program, receiving credits for the provision of low-carbon fuels (such as clean electricity and
compressed natural gas) and must use the revenues from the sale of these credits for programs and other
efforts promoting low-carbon vehicle adoption.
•Cap and Trade Program: The City’s electric and gas utilities are required to participate in the State’s cap
and trade program, but these utilities receive some of the revenue from the auction of allowances for the
program. The revenue must be used for emissions-reducing activities.
•Public Benefits Funds: Locally owned municipal utilities must collect a surcharge from their electric utility
customers under section 385 of the Public Utilities Code (there is a similar requirement for gas utilities)
to be used on cost-effective energy efficiency and conservation, low-income programs, renewable energy,
and research and development.
The amount of revenue currently held in reserve for each revenue source and the projections for future revenue
are shown below.
Figure 33: Potential Emissions Reduction Funding Sources
Reserves ($000) Projected Revenues ($000)
(July 1, 2023)FY
2023
FY
2024
FY
2025
FY
2026
LCFS Program 7,000 935 1,200 1,400 1,600
Cap and Trade (Electric)1,189 3,027 3,016 2,992 2,999
Cap and Trade (Gas)6,731 2,102 3,074 3,487 3,898
Public Benefits 3,890 3,841 4,780 5,076 3,729
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Expenditures for each revenue source are as follows:
•LCFS revenues have been used primarily to facilitate the installation of EV chargers in multi-family
buildings and are expected to be used that way in the future unless the City’s priorities shift. Some has
been used for general promotion of EVs.
•Cap and Trade revenues have been used to purchase renewable energy and for the Advanced Heat Pump
Water Heater pilot. More use of these revenues for electrification programs is expected in the future,
though no specific approvals have been sought yet.
•Public Benefit funds are used for energy efficiency (including low-income programs) and building
electrification.
APPROVED By:
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Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: November 1, 2023
Staff Report: 2310-2144
TITLE
Winter 2023-24 Natural Gas Price Uncertainty Management Council Decision Implementation
RECOMMENDATION
This is an informational item. No action is requested.
EXECUTIVE SUMMARY
Palo Alto City Council (Council), at its regular meeting on September 18, 2023, adopted a
resolution which modified the City’s gas purchasing strategy for this upcoming winter. Council’s
decision was in response to the high energy prices that occurred last winter which resulted in
dramatically high bills for Palo Alto customers.
The gas commodity charge is based on a monthly market-based index. This purchasing strategy
change involves purchasing price caps, limiting the price of gas cost $2 per therm for a portion of
City’s anticipated gas needs. The impact on customers of what is, in essence, an insurance policy
to mitigate the potential for a repeat of high winter gas prices, was limited by the Council action
to a maximum 15 cents per therm.
Per Council’s decision, staff implemented the capped-price winter natural gas purchasing
strategy in October 2023 for the gas year November 2023-October 2024. Within the constraints
set by Council, staff was able to purchase $2 per therm price caps for about half of Palo Alto’s
expected load for the months of December 2023, January 2024 and February 2024.
The cost of the price caps was $0.275 per therm and a total cost of $1.5 million. Spread out over
the entire year, an adder of $0.055 per therm will be applied to the gas commodity charge passed
through to customers. This represents approximately $1.81 on a typical residential customer’s
bill or an approximate 2.8% increase, not taking into account changes in the underlying
commodity price which is still based on a market index.
The amended rate schedules associated with this implementation will be effective November 1,
2023. The website and rate schedules have been updated to reflect this change.
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ATTACHMENTS
Attachment A: 09-18-2023 Staff Report 2306-1660
Attachment B: Presentation
Approved by:
Dean Batchelor, Director of Utilities
Staff: Karla Dailey, Acting Assistant Director of Utilities
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City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Utilities
Meeting Date: September 18, 2023
Report Staff:2306-1660
TITLE
Public Hearing: Adoption of a Resolution Approving Capped-Price Winter Natural Gas Purchases
for Winter 2023-24 and Amending the FY 2024 Gas Fund Budget to Fund These Purchases;
Amending the Gas Utility Long-term Plan Objectives, Strategies and Implementation Plan; and
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); CEQA status: not a project under Public Resources Code 15378(b)(5) and exempt
under Public Resources Code 15273(a)
RECOMMENDATION
The Finance Committee recommends that City Council (Council) adopt a resolution (Attachment
A):
1. Implementing capped-price winter natural gas purchases for winter 2023-24 with a
maximum commodity rate impact of 15 cents per therm;
2. Amending the FY 2024 Budget Appropriation in the Gas Fund (requires 2/3 approval) by:
a. Increasing the Gas Operating Budget for Commodity Purchases by $2,000,000;
and
b. Increasing the Gas Operating Retail revenue estimate by $2,000,000
3. Amending the Gas Utility Long-term Plan (GULP) Objectives, Strategies and
Implementation Plan (Attachment B) to implement the capped-price winter gas
purchases intended to manage potential winter 2023 gas price spikes; and
4. 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) (Attachment C), effective November 1, 2023.
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EXECUTIVE SUMMARY
1), staff is seeking Council approval to implement capped-price winter natural gas
purchasing for winter 2023-24.
2. Under this strategy, the City purchases baseload gas at prices
tied to a published gas market monthly index, adjusted to account for delivery losses to the
customer’s meter and a municipal purchase discount.
1 https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=12741
2 https://www.cityofpaloalto.org/files/assets/public/from-archive/agendas-minutes-reports/reports/city-manager-
reports-cmrs/2012/final-staff-report-id-2552_gas-utility-long-term-plan-revisions.pdf
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Plan most recently in 2017 (Staff Report #7967)3. Council adoption of staff’s proposed capped
price winter natural gas purchases to manage potential winter 2023 natural gas price spikes
requires conforming changes to GULP which are reflected in Attachment B. Since 2017, there
have been a number of other Council-approved changes to policies and operations that require
conforming changes to GULP. For simplicity, those changes will be addressed in a separate future
staff report.
BACKGROUND
DISCUSSION
Winter 2022-23 Gas Prices
3 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports-
cmrs/year-archive/2017/id-7967-6-5-17-ccm.pdf
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unusually low regional gas storage levels, (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. Though fundamental
conditions were influencing the increase in prices, those factors alone do not explain the
unprecedented price spike. January natural gas prices were five times greater than November
prices. In December 2022, Council increased the maximum allowed commodity rate passed
through to customers from $2 per therm to $4 per therm, but the City’s price to purchase January
gas was $5 per therm, resulting in a $1.8M shortfall discussed in more detail below. The sudden
and extreme increase in natural gas prices is under investigation by Federal Energy Regulatory
Commission (FERC) and California Public Utilities Commission (CPUC). The preliminary timeline
for these investigations to yield findings is in the spring of 2026, subject to change.
Figure 1
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rate and market purchase price. Even so, the impact on customer bills was significant, and the
City received a large number of customer inquiries. The City responded by offering resources to
help customers with higher than anticipated utility bill costs, including access to free home
efficiency assessments through the Home Efficiency Genie and payment arrangements. In April
2023 Council approved gas and electric (Staff Report 2303-1209)4 rebates of $2.4 million, funded
by the City’s General Fund, to compensate residential customers for the high energy bills they
experienced.
Recommended Capped-Price Winter Gas Purchase
5, which are listed in the City’s gas rate schedules and shown by month.
4 https://cityofpaloalto.primegov.com/Portal/viewer?id=1954&type=0
5 https://www.cityofpaloalto.org/files/assets/public/utilities/rates-schedules-for-utilities/residential-utility-
rates/monthly-gas-volumetric-and-service-charges-residential.pdf
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If approved by Council, the capped-price winter purchasing strategy will be implemented in
accordance with the Energy Risk Management Policy6, Guidelines, and Procedures. The City
solicit bids from a list of pre-approved counterparties (Staff Report 14551)7 for all natural gas
purchases to ensure competitive pricing and consistent, robust contract terms. The amended
rate schedules associated with this change will be effective November 1, 2023.
Finance Committee Review
Staff presented the two alternatives to the Finance Committee on August 15, 2023, seeking their
recommendation on whether to maintain the current market-price-based gas purchasing and
pass-through commodity rate strategy or implement the capped-price winter gas purchasing
alternative for winter 2023-24. Their recommendation (by a vote of 3-0) for Council approval was
to implement capped-price winter gas purchasing for winter 2023-24.
Alternative Strategies Not Recommended
The default alternative is to maintain the current market-price-based gas purchasing and pass-
through commodity rate strategy for this upcoming winter 2023-24 with no price spike mitigation
measures. Considerations for maintaining the current policy include: 1) energy market prices are
inherently unpredictable and volatile, but gas prices (including for the upcoming winter) have
come down significantly and stabilized since March 2023; 2) Palo Alto’s commodity rates are
generally less than PG&E’s; and 3) this policy yields the lowest average supply cost over many
years of implementation.
Considerations for revising the current strategy and implementing capped-price winter gas
purchasing include: 1) reserve levels will be protected, protecting against the need for future rate
increases; 2) customer costs will be higher if implemented over many years; 3) this acts as an
insurance policy that adds cost but may not be used; 4) this is an uncommon strategy in gas
markets, and thus the capped-price product may not be readily available from suppliers; and 5)
this may result in an additional cost that is even greater than staff’s estimate, if the market is very
volatile, or lower than staff’s estimate if the market is relatively stable.
Staff is presenting the capped-price winter gas purchasing alternative because it could be
implemented in time for this upcoming winter. There are also other alternatives that could
potentially be considered for the future. These alternatives, which would take additional
resources and time to evaluate, plan, and implement, include: 1) establishing an additional
special reserve to manage gas price spikes; 2) making a limited volume of fixed-price gas
purchases; 3) reverting to a full laddering strategy; 4) investing in gas production assets; and 5)
investing in gas storage.
6 https://www.cityofpaloalto.org/files/assets/public/sustainability/policies-and-plans/attachment-c-energy-risk-
management-policy-2018.pdf
7 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=81980
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Changes to GULP Needed if Council Adopts Capped Price Winter Gas Purchase Strategy
The 2017 GULP update included the change from a hedged portfolio to market-based retail
gas rates. Those commodity rates have been in effect since 2013. Cost containment applied to
winter 2023 gas purchases, if adopted, requires changes to GULP as shown in Table 1
below. The GULP Objectives, Strategies and Implementation Plans are attached. While some
other items also need updates, staff is not proposing changes other than those associated with
the gas purchasing strategy at this time for the sake of simplicity. Administrative updates will
be brought to Council in a separate staff report.
Pass a market cost signal
through to customers.
Pass a market supply cost signal through
to customers with measures to protect
against price spikes applied during
winter months.
a. Purchase natural gas at
monthly and daily market index
prices.
b. Change gas supply rate
monthly to reflect market
prices.
a. Purchasing natural gas at monthly
and daily market index prices;
b. Changing gas supply rates monthly to
reflect market prices; and
c. Purchasing physical capped-price gas
for some or all forecasted natural gas
volumes for December through
February, provided that the cost of
the price caps results in no more
than a 15 cents per therm impact on
retail commodity gas rates.
a. Continue to implement
market-based supply purchases
and commodity rates.
Implement market-based supply
purchases and commodity rates with
measures to protect against price spikes
applied during winter months by:
a. Developing a new purchasing plan
to be approved by the Director of
Utilities; and
c. Conducting customer
communication and outreach.
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FISCAL/RESOURCE IMPACT
Table 2
STAKEHOLDER ENGAGEMENT
8 meeting and voted unanimously to recommend the capped
price gas purchasing strategy to Council. If adopted by Council, the website will be updated to
reflect the change in the commodity rate calculation in the Monthly Gas Volumetric and Service
Charges9 document. In addition, customers will be notified via bill inserts and social media.
8 Finance Committee Staff Report
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=12741
9 Monthly Gas Volumetric and Service Charges https://www.cityofpaloalto.org/files/assets/public/utilities/rates-
schedules-for-utilities/residential-utility-rates/monthly-gas-volumetric-and-service-charges-residential.pdf
M
S T B $$$$
W 5 9$3$5$4 6
S 1 4$1$1$3 5
A 3 6$2$3$4 6
C C
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ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
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Attachment A
* NOT YET APPROVED *
1
6056774
Resolution No.
Resolution of the Council of the City of Palo Alto Approving Capped-Price Winter
Natural Gas Purchases for Winter 2023-24 and Amending the FY 2024 Gas Fund
Budget by $2,000,000 to Fund These Purchases; Amending the Gas Utility Long-
term Plan Objectives, Strategies and Implementation Plan; and 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)
R E C I T A L S
A. On March 7, 2011, the Council adopted Resolution No. 9151, which approved the
Gas Utility Long-term Plan Objectives, Strategies and Implementation Plan (the “Plan”).
B. On April 23, 2012, the Council adopted Resolution No. 9244, which amended the
Gas Utility Long-term Plan Objectives, Strategies and Implementation Plan (the “Plan”).
C. The Council’s Finance Committee has recommended the Council approve
implementation of capped-price winter natural gas purchases for Winter 2023-24, which requires
Council’s approval of certain amendments to the Plan, which are attached and incorporated by
reference as Exhibit A to this Resolution.
D. Resolution No. 9244 is intended to be amended to reflect the current version
of the Plan.
E. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the
City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and
charges.
F. Implementing capped-price winter natural gas purchasing requires amending the
FY 2024 Gas Fund Budget by $2,000,000 to fund these purchases.
G. Implementing capped-price winter natural gas purchasing requires amending the
Commodity Charge cost component of 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); attached and incorporated as Exhibits B through E
to this Resolution.
H. On September 18, 2023, the City Council heard and approved the proposed gas
rate increases at a noticed public hearing.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
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Attachment A
* NOT YET APPROVED *
2
6056774
SECTION 1. The Council hereby approves the amendments to the Gas Utility Long-
term Plan Objectives, Strategies and Implementation Plan (GULP), attached to this Resolution
as Exhibit A.
SECTION 2. Resolution No. 9244 is hereby amended in so far as the Plan, as amended,
is hereby approved.
SECTION 3. The Council hereby approves increasing the FY 2024 Gas Fund budget
and gas operating revenues by $2,000,000.
SECTION 4 Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-1 (Residential Gas Service) is hereby amended to read as attached and
incorporated to this Resolution as Exhibit B. Utility Rate Schedule G-1, as amended, shall
become effective November 1, 2023.
SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-2 (Residential Master-Metered and Commercial Gas Service) is hereby
amended to read as attached and incorporated to this Resolution as Exhibit C. Utility Rate
Schedule G-2, as amended, shall become effective November 1, 2023.
SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-3 (Large Commercial Gas Service) is hereby amended to read as attached and
incorporated to this Resolution as Exhibit D. Utility Rate Schedule G-3, as amended, shall
become effective November 1, 2023.
SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-10 (Compressed Natural Gas Service Service) is hereby amended to read as
attached and incorporated to this Resolution as Exhibit E. Utility Rate Schedule G-10, as
amended, shall become effective November 1, 2023.
SECTION 8. The City Council finds as follows:
a. Revenues derived from the gas rates approved by this resolution do not exceed
the funds required to provide gas service.
b. Revenues derived from the gas rates approved by this resolution shall not be
used for any purpose other than providing gas service, and the purposes set
forth in Article VII, Section 2, of the Charter of the City of Palo Alto.
SECTION 9. The Council finds that the fees and charges adopted by this resolution
are charges imposed for a specific government service or product provided directly to the payor
that are not provided to those not charged, and do not exceed the reasonable costs to the City
of providing the service or product.
Item #2
Packet Pg. 82
Attachment A
* NOT YET APPROVED *
3
6056774
SECTION 10. The Council finds that approving the changes to the FY 2024 Gas Fund
budget appropriation and Plan does not meet the California Environmental Quality Act’s (CEQA)
definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section
15378(b)(5), because these actions are administrative governmental activities which will not
cause a direct or indirect physical change in the environment, and therefore, no environmental
assessment is required. The Council finds that changing the Commodity Charge cost component
of gas rates to meet operating expenses, purchase supplies and materials, meet financial
reserve needs and obtain funds for capital improvements necessary to maintain service is not
subject to the California Environmental Quality Act (CEQA), pursuant to California Public
Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec.
15273(a). After reviewing the staff report and all attachments presented to Council, the Council
incorporates these documents herein and finds that sufficient evidence has been presented
setting forth with specificity the basis for this claim of CEQA exemption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
Item #2
Packet Pg. 83
Exhibit A
Proposed Gas Utility Long-term Plan (GULP)
Objectives, Strategies and Implementation Plan
Adopted by Council on _____________ via Resolution No. _____.
GULP Objectives:
1. Market price transparency – Pass a market supply cost signal through to customers with
measures to protect against price spikes applied during winter months.
2. Supply Cost Management – Lower delivered gas cost over the long term.
3. Energy Efficiency – Ensure the deployment of all feasible, reliable, cost-effective energy
efficiency measures.
4. Climate Protection – Reduce the carbon intensity of the gas portfolio in accordance with
the Sustainability and Climate Protection Plan.
5. Parity with PG&E – At a reasonable cost, protect the City’s interests and maintain access
to transportation on par with PG&E’s core customers.
GULP Strategies:
1. Pass a market supply cost signal through to customers with measures to protect against
price spikes applied during winter months by:
a. Purchasing natural gas at monthly and daily market index prices;
b. Changing gas supply rates monthly to reflect market prices; and
c. Purchasing physical capped-price gas for some or all forecasted natural gas volumes
for December through February, provided that the cost of the price caps results in no
more than a 15 cents per therm impact on retail commodity gas rates.
2. Lower delivered gas cost over the long term by:
a. Acquiring pipeline assets that yield supply costs below market and meet operational
needs;
b. Taking advantage of the City’s low cost of capital to acquire gas supply and assets;
and
c. Optimizing existing assets.
3. Ensure the deployment of all feasible, reliable, cost-effective energy efficiency measures
by:
a. Developing a ten-year gas efficiency plan every four years maintaining consistency
with the electric energy efficiency goals update schedule; and
b. Considering the impacts of electrification on gas demand.
4. Reduce the carbon intensity of the gas portfolio in accordance with the Climate
Protection Plan by:
a. Terminating the PaloAltoGreen Gas program established by Resolution 9405; and
b. Designing and implementing the Carbon Neutral Gas Plan to achieve carbon
reduction with no more than a 10 cent per therm rate impact.
5. At a reasonable cost, protect the City’s interests and maintain access to transportation
on par with PG&E’s core customers by:
a. Participating in the regulatory and legislative arenas when the potential impact on
the City is aligned with the cost to intervene and the probability of success;
a. Negotiating with PG&E for fair access to transportation and storage; and
b. Exploring potential joint action with other public agencies.
Item #2
Packet Pg. 84
ATTACHMENT A
GULP Implementation Plan:
1. Implement market-based supply purchases and commodity rates with measures to protect
against price spikes applied during winter months by:
a. Developing a new purchasing plan to be approved by the Director of Utilities; and
b. Conducting customer communication and outreach.
2. Pursue below-market assets available through the Gas Transportation and Storage
Settlement by:
a. Evaluating the pipeline capacity reservation options available; and
b. Contracting with PG&E for any pipeline capacity with an estimated cost below the
forecasted market value.
3. Monitor the prepay market and prepare for implementation in preparation for a future
MuniGas transaction.
4. Implement gas efficiency programs to meet the gas efficiency goals.
5. Track and report on gas efficiency by:
a. Providing quarterly updates to the UAC about the gas efficiency programs; and
b. Providing annual updates to Council on gas efficiency achievements compared to the
goals and overall cost effectiveness.
6. Continue evaluating new gas efficiency technologies and undertake pilot studies where
appropriate.
7. Pursue potential modifications to the Carbon Neutral Gas Plan by:
a. Determining an acceptable premium, if any, to be paid for a local offset project if
and when a certified project is identified; and
b. Investigating alternatives to offsets, including methods involving voter approval.
Item #2
Packet Pg. 85
RESIDENTIAL GAS SERVICE
UTILITY RATE SCHEDULE G-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-1-1 Sheet No G-1-1
dated 71-1-2023 Effective 117-1-2023
A. APPLICABILITY:
This schedule applies to the following Customers receiving Gas Service from City of Palo Alto
Utilities:
1. Separately-metered single-family residential Customers;
2.Separately-metered multi-family residential Customers in multi-family residential
facilities.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides Gas Service.
C. UNBUNDLED RATES:Per Service
Monthly Service Charge: ........................................................................................................$14.01
Tier 1 Rates: Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) .......................................... $0.10-$4.00
2. Cap and Trade Compliance Charge ............................................ $0.00-$0.25
3. Transportation Charge ................................................................. $0.00-$0.25
4. Carbon Offset Charge .................................................................. $0.00-$0.10
Distribution Charge:....................................................................................... $0.6807
Tier 2 Rates: (All usage over 100% of Tier 1)
Supply Charges:
1.Commodity (Monthly Market Based) .......................................... $0.10-$4.00
2. Cap and Trade Compliance Charge ............................................. $0.00-$0.25
3. Transportation Charge ................................................................. $0.00-$0.25
4. Carbon Offset Charge .................................................................. $0.00-$0.10
Distribution Charge:............................................................................................. $1.7406
D.SPECIAL NOTES:
1.Calculation of Cost Components
EXHIBIT B Item #2
Packet Pg. 86
RESIDENTIAL GAS SERVICE
UTILITY RATE SCHEDULE G-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-1-2 Sheet No G-1-2
dated 71-1-2023 Effective 117-1-2023
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, adjusted to account for delivery losses to the Customer’s
Meter. The Commodity Charge also includes adjustments to account for Council-
approved programs implemented to reduce the cost of gas, including a municipal
purchase discount 1, and a maximum $0.15/per therm cost for capped price winter natural
gas purchases 2.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter.
The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance
with the state’s Cap and Trade Program, including the cost of acquiring compliance
instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap
and Trade Compliance Charge will change in response to changing market conditions,
retail sales volumes and the quantity of allowances required.
The Carbon Offset Charge reflects the City’s cost to purchase offsets for greenhouse
gases produced in the burning of natural gas. The Carbon Offset Charge will change in
response to changing market conditions, changing sales volumes and the quantity of
offsets purchased within the Council-approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto,
accounting for delivery losses to the Customer’s Meter.
1 Adopted via Resolution 9451, on September 15, 2014.
2 Adopted via Resolution XXXX, on September 18, 2023.
Item #2
Packet Pg. 87
RESIDENTIAL GAS SERVICE
UTILITY RATE SCHEDULE G-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-1-3 Sheet No G-1-3
dated 71-1-2023 Effective 117-1-2023
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges
will fall within the minimum/maximum ranges set forth in Section C. Current and historic
per therm rates for the Commodity, Cap and Trade Compliance, Carbon Offset and
Transportation Charges are posted on the City Utilities website.3
1.2. Seasonal Rate Changes:
The Summer period is effective April 1 to October 31 and the Winter period is effective
from November 1 to March 31. When the billing period includes use in both the Summer
and the Winter periods, the usage will be prorated based on the number of days in each
seasonal period, and the charges based on the applicable rates for each period. For further
discussion of bill calculation and proration, refer to Rule and Regulation 11.
2.3. Calculation of Usage Tiers
Tier 1 natural gas usage shall be calculated and billed based upon a level of 0.667 therms
per day during the Summer period and 2.0 therms per day during the Winter period,
rounded to the nearest whole therm, based on meter reading days of service. As an
example, for a 30 day bill, the Tier 1 level would be 20 therms during the Summer period
and 60 therms during the Winter period months. For further discussion of bill calculation
and proration, refer to Rule and Regulation 11.
{End}
3 Monthly gas and commodity and volumetric rates are available here, or by visiting
https://www.cityofpaloalto.org/files/assets/public/utilities/rates-schedules-for-utilities/residential-utility-rates/monthly-gas-
volumetric-and-service-charges-residential.pdf
Item #2
Packet Pg. 88
RESIDENTIAL MASTER-METERED AND COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-2-1 Effective 117-1-2023
dated 71-1-2023 Sheet No G-2-1
A. APPLICABILITY:
This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto
Utilities:
1. Commercial Customers who use less than 250,000 therms per year at one site;
2. Master-metered residential Customers in multi-family residential facilities.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides Gas Service.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: ......................................................................................................$129.78
Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) ......................................... $0.10-$4.00
2. Cap and Trade Compliance Charges ........................................... $0.00-$0.25
3. Transportation Charge ................................................................. $0.00-$0.25
4. Carbon Offset Charge .................................................................. $0.00-$0.10
Distribution Charge: ................................................................................................. $0.8941
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, adjusted to account for delivery losses to the Customer’s
Meter. The Commodity Charge also includes adjustments to account for Council-
approved programs implemented to reduce the cost of gas, including a municipal
purchase discount 1, and a maximum $0.15/per therm cost for capped price winter natural
1 Adopted via Resolution 9451, on September 15, 2014.
Item #2
Packet Pg. 89
RESIDENTIAL MASTER-METERED AND COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-2-2 Effective 117-1-2023
dated 71-1-2023 Sheet No G-2-2
gas purchases 2.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter.
The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance
with the state’s Cap and Trade Program, including the cost of acquiring compliance
instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and
Trade Compliance Charge will change in response to changing market conditions, retail sales
volumes and the quantity of allowances required.
The Carbon Offset Charge reflects the City’s cost to purchase offsets for greenhouse gases
produced in the burning of natural gas. The Carbon Offset Charge will change in response to
changing market conditions, changing sales volumes and the quantity of offsets purchased
within the Council-approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto,
accounting for delivery losses to the Customer’s Meter.
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges
will fall within the minimum/maximum ranges set forth in Section C. Current and
historic per therm rates for the Commodity, Cap and Trade Compliance, Carbon Offset
and Transportation Charges are posted on the City Utilities website.3
{End}
2 Adopted via Resolution XXXX, on September 18, 2023
3 Monthly gas and commodity and volumetric rates are available here, or by visiting
https://www.cityofpaloalto.org/files/assets/public/utilities/business/business-rates/monthly-gas-volumetric-and-service-
charges-commercial.pdf
Item #2
Packet Pg. 90
LARGE COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-3-1 Effective 117-1-2023
dated 71-1-2023 Sheet No G-3-1
A. APPLICABILITY:
This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto
Utilities:
1. Commercial Customers who use at least 250,000 therms per year at one site;
2. Customers at City-owned generation facilities.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides Gas Service.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: $593.79
Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) .................................................... $0.10-$4.00
2. Cap and Trade Compliance Charges .................................................... $0.00-$0.25
3. Transportation Charge .......................................................................... $0.00-$0.25
4. Carbon Offset Charge ........................................................................... $0.00-$0.10
Distribution Charge: .............................................................................................................$0.8852
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as calculated
under Section C.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, adjusted to account for delivery losses to the Customer’s
Meter. The Commodity Charge also includes adjustments to account for Council-
approved programs implemented to reduce the cost of gas, including a municipal
Item #2
Packet Pg. 91
LARGE COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-3-2 Effective 117-1-2023
dated 71-1-2023 Sheet No G-3-2
purchase discount 1, and a maximum $0.15/per therm cost for capped price winter natural
gas purchases 2.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter.
The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance
with the state’s Cap and Trade Program, including the cost of acquiring compliance
instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap
and Trade Compliance Charge will change in response to changing market conditions,
retail sales volumes and the quantity of allowances required.
The Carbon Offset Charge reflects the City’s cost to purchase offsets for greenhouse gases
produced in the burning of natural gas. The Carbon Offset Charge will change in response
to changing market conditions, changing sales volumes and the quantity of offsets
purchased within the Council-approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto,
accounting for delivery losses to the Customer’s Meter.
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges
will fall within the minimum/maximum ranges set forth in Section C. Current and historic
per therm rates for the Commodity, Cap and Trade Compliance, Carbon Offset and
Transportation Charges are posted on the City Utilities website.3
2. Request for Service
A qualifying Customer may request service under this schedule for more than one account
or meter if the accounts are located on one site. A site consists of one or more contiguous
parcels of land with no intervening public right-of- ways (e.g. streets).
3. Changing Rate Schedules
1 Adopted via Resolution 9451, on September 15, 2014.
2 Adopted via Resolution XXXX, on September 18, 2023.
3 Monthly gas and commodity and volumetric rates are available here, or by visiting
https://www.cityofpaloalto.org/files/assets/public/utilities/business/business-rates/monthly-gas-volumetric-and-service-
charges-commercial.pdf
Item #2
Packet Pg. 92
LARGE COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-3-3 Effective 117-1-2023
dated 71-1-2023 Sheet No G-3-3
Customers may request a rate schedule change at any time to any applicable City of Palo
Alto full-service rate schedule.
{End}
Item #2
Packet Pg. 93
COMPRESSED NATURAL GAS SERVICE
UTILITY RATE SCHEDULE G-10
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-10-1 Effective 117-1-2023
dated 71-1-2023 Sheet No. G-10-1
A. APPLICABILITY:
This schedule applies to the sale of natural gas to the City-owned compressed natural gas (CNG) fueling
station at the Municipal Service Center in Palo Alto.
B. TERRITORY:
Applies to the City’s CNG fueling station located at the Municipal Service Center in City of Palo Alto.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: ........................................................................................................$87.77
Per Therm
Supply Charges:
Commodity (Monthly Market Based) ................................................................ $0.10-$4.00
Cap and Trade Compliance Charges.................................................................. $0.00-$0.25
Transportation Charge ....................................................................................... $0.00-$0.25
Carbon Offset Charge ........................................................................................ $0.00-$0.10
Distribution Charge ...............................................................................................................$0.0145
D. SPECIAL CONDITIONS
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and adjusted
for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill statement, the bill
amount may be broken down into appropriate components as calculated under Section C.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for delivery at
PG&E Citygate, adjusted to account for delivery losses to the Customer’s Meter. The
Commodity Charge also includes adjustments to account for Council-approved programs
implemented to reduce the cost of gas, including a municipal purchase discount 1, and a
1 Adopted via Resolution 9451, on September 15, 2014.
Item #2
Packet Pg. 94
COMPRESSED NATURAL GAS SERVICE
UTILITY RATE SCHEDULE G-10
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-10-2 Effective 117-1-2023
dated 71-1-2023 Sheet No. G-10-2
maximum $0.15/per therm cost for capped price winter natural gas purchases 2.
The Commodity charge is based on the monthly natural gas Bidweek Price Index for delivery at
PG&E Citygate, accounting for delivery losses to the Customer’s Meter.
The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the
state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to
cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will
change in response to changing market conditions, retail sales volumes and the quantity of
allowances required.
The Carbon Offset Charge reflects the City’s cost to purchase offsets for greenhouse gases produced
in the burning of natural gas. The Carbon Offset Charge will change in response to changing market
conditions, changing sales volumes and the quantity of offsets purchased within the Council-
approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto, accounting for
delivery losses to the Customer’s Meter.
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges will fall
within the minimum/maximum range set forth in Section C. Current and historic per therm rates
for the Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges are
posted on the City Utilities website.3
{End}
2 Adopted via Resolution XXXX, on September 18, 2023.
3 Monthly gas and commodity and volumetric rates are available here, or by visiting
https://www.cityofpaloalto.org/files/assets/public/utilities/business/business-rates/monthly-gas-volumetric-and-service-
charges-commercial.pdf
Item #2
Packet Pg. 95
2
2
6
4
Proposed Gas Utility Long-term Plan (GULP)
Objectives, Strategies and Implementation Plan
(applicable if Council approves winter gas cost containment alternative)
GULP Objectives:
1. Market price transparency – Pass a market supply cost signal through to customers with
measures to protect against price spikes applied during winter months.
2. Supply Cost Management – Lower delivered gas cost over the long term.
3. Energy Efficiency – Ensure the deployment of all feasible, reliable, cost-effective energy
efficiency measures.
4. Climate Protection – Reduce the carbon intensity of the gas portfolio in accordance with
the Sustainability and Climate Protection Plan.
5. Parity with PG&E – At a reasonable cost, protect the City’s interests and maintain access
to transportation on par with PG&E’s core customers.
GULP Strategies:
1. Pass a market supply cost signal through to customers with measures to protect against
price spikes applied during winter months by:
a.Purchasing natural gas at monthly and daily market index prices;
b. Changing gas supply rates monthly to reflect market prices ; and
c. Purchasing physical capped -price gas of for some or all forecasted natural gas
volumes for December through February, provided that the cost of the price caps
such capped-price gas purchases results in with no more than a 15 cents per therm
impact on retail commodity gas ratesrates.
2. Lower delivered gas cost over the long term by:
a. Acquiring pipeline assets that yield supply costs below market and meet operational
needs;
b. Taking advantage of the City’s low cost of capital to acquire gas supply and assets;
and
c. Optimizing existing assets.
3. Ensure the deployment of all feasible, reliable, cost-effective energy efficiency measures
by:
a. Developing a ten-year gas efficiency plan every four years maintaining consistency
with the electric energy efficiency goals update schedule; and
b. Considering the impacts of electrification on gas demand.
4. Reduce the carbon intensity of the gas portfolio in accordance with the Climate
Protection Plan by:
a. Terminating the PaloAltoGreen Gas program established by Resolution 9405; and
b. Designing and implementing the Carbon Neutral Gas Plan to achieve carbon
reduction with no more than a 10 cent per therm rate impact.
5. At a reasonable cost, protect the City’s interests and maintain access to transportation
on par with PG&E’s core customers by:
a. Participating in the regulatory and legislative arenas when the potential impact on
the City is aligned with the cost to intervene and the probability of success;
a. Negotiating with PG&E for fair access to transportation and storage; and
b. Exploring potential joint action with other public agencies.
Item #2
Packet Pg. 96
GULP Implementation Plan:
1. Continue to iImplement market-based supply purchases and commodity rates with
measures to protect against price spikes applied during winter months by:
a. Developing a new purchasing plan to be approved by the Director of Utilities; and
b. Conducting customer communication and outreach.
1.2.Pursue below-market assets available through the Gas Transportation and Storage
Settlement by:
a. Evaluating the pipeline capacity reservation options available; and
b. Contracting with PG&E for any pipeline capacity with an estimated cost below the
forecasted market value.
2.3.Monitor the prepay market and prepare for implementation in preparation for a future
MuniGas transaction.
3.4.Implement gas efficiency programs to meet the gas efficiency goals.
4.5.Track and report on gas efficiency by:
a. Providing quarterly updates to the UAC about the gas efficiency programs; and
b. Providing annual updates to Council on gas efficiency achievements compared to the
goals and overall cost effectiveness.
5.6.Continue evaluating new gas efficiency technologies and undertake pilot studies where
appropriate.
6.7.Pursue potential modifications to the Carbon Neutral Gas Plan by:
a. Determining an acceptable premium, if any, to be paid for a local offset project if
and when a certified project is identified; and
b. Investigating alternatives to offsets, including methods involving voter approval.
Item #2
Packet Pg. 97
November 1, 2023 www.cityofpaloalto.org
Winter 2023-24 Natural Gas Price Uncertainty Management Council Decision Implementation
Utilities Advisory Commission
Item #2
Packet Pg. 98
TITLE 40 FONT BOLD
Subtitle 32 font
2 www.cityofpaloalto.org
In 2012, Council approved a monthly market-price-based natural gas purchasing and
pass-through commodity rate strategy (Resolution 9244) due to falling market natural
gas prices and resulting non competitiveness with PG&E
City purchases gas at prices tied to a published market monthly index
Customer gas rates include the commodity charge based on the published monthly
index (commodity charge has a maximum per the customer gas rates schedule)
Monthly prices remained under the previous Council-approved $2/therm maximum
commodity charge until January 2023
Background
Item #2
Packet Pg. 99
TITLE 40 FONT BOLD
Subtitle 32 font
3 www.cityofpaloalto.org
In late November 2022, gas prices started rising
dramatically in CA
Staff communicated to customers about the expected
higher prices and in December 2022 Council increased the
$2/therm maximum commodity charge to $4/therm
Monthly index price for January 2023 settled at just below
$5/therm
Reserves ($1.84 million) were utilized to cover a portion of
the price increase
Winter 2022-23 Price Surge
Item #2
Packet Pg. 100
TITLE 40 FONT BOLD
Subtitle 32 font
4 www.cityofpaloalto.org
Gas Monthly Index Prices
0
1
2
3
4
5
6
Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Jul-23
Gas Monthly Index Prices ($/Therm)
PG&E Citygate
Item #2
Packet Pg. 101
TITLE 40 FONT BOLD
Subtitle 32 font
5 www.cityofpaloalto.org
Continue purchasing gas at prices tied to a published market monthly index
For some winter months, CPAU can also purchase gas with a price cap in place, which
functions as an insurance premium and caps the price paid at $2/therm
If the monthly index settles below $2/therm, the price paid is the monthly index
If the monthly index settles at or above $2/therm, the price paid is $2/therm
Commodity charge will continue to be tied to monthly market price plus an increase
that spreads out the total Dec-Feb price cap cost over 12 months
Alternative: Capped-Price Winter Gas
Purchasing (Recommended by Finance Committee)
Item #2
Packet Pg. 102
TITLE 40 FONT BOLD
Subtitle 32 font
6 www.cityofpaloalto.org
Will protect reserves from price spikes
Will protect customers from price spikes
Will be higher cost to customers if implemented over many years
May be an insurance policy that adds cost and is not used
Capped price product is uncommon and may not be readily available from
suppliers
Cost of product may be higher if market is very volatile or lower if market is stable
Considerations for Alternative: Capped-
price Winter Gas Purchasing
Item #2
Packet Pg. 103
TITLE 40 FONT BOLD
Subtitle 32 font
7 www.cityofpaloalto.org
Price cap $2/therm
December 2023, January 2024 and February 2024
$0.275/therm, 50% of baseload volumes (estimate was $0.175-$0.275/therm)
$1.5M total cost (estimate was $2M-$3M)
$0.055/therm increase applied to gas sales (estimate was $0.07-$0.11/therm)
About $1.81 increase median monthly residential bill (estimate was $2.31-$3.63)
About 2.8% increase (estimate was 4%-6%)
Implementation and Resulting Cost of Price
Cap/Customer Bill Impact
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Establish special reserve to manage gas price spikes
Fixed-price gas purchases
Full laddering strategy
Gas production assets
Gas storage
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Other Alternatives –Potentially Considered
for the Future
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•Gas tariffs uploaded November 1 https://www.cityofpaloalto.org/files/assets/public/v/6/utilities/rates-schedules-
for-utilities/residential-utility-rates/g-1-effective-2023-07-01.pdf,
https://www.cityofpaloalto.org/files/assets/public/v/6/utilities/rates-schedules-for-utilities/commercial-utility-
rates/g-2-effective-2023-07-01.pdf, https://www.cityofpaloalto.org/files/assets/public/v/6/utilities/rates-
schedules-for-utilities/commercial-utility-rates/g-3-effective-2023-07-01.pdf
•Rates page (explanation of the rate components)
https://www.cityofpaloalto.org/files/assets/public/v/7/utilities/rates-schedules-for-utilities/residential-utility-
rates/monthly-gas-volumetric-and-service-charges-residential.pdf
•Rates page https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service/Utilities-Rates
•Planning a website news item
Communication
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Council-adopted Motion
City Council (Council) adopts a resolution (Attachment A):
•Implementing capped-price winter natural gas purchases for winter 2023-24 with a maximum commodity
rate impact of 15 cents per therm;
•Amending the FY 2024 Gas Fund Budget Appropriation (requires 2/3 approval) by:
•Increasing the Gas Operating Budget by $2,000,000; and
•Increasing the Gas Operating Revenues by $2,000,000
•Amending the Gas Utility Long-term Plan (GULP) Objectives, Strategies and Implementation Plan
(Attachment B) to implement the capped-price winter gas purchases intended to manage potential winter
2023 gas price spikes; 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) (Attachment C), effective November 1, 2023
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Date: November 1, 2023
FORECAST 12-MONTH ROLLING CALENDAR
November 2023 - Utilities Annual Report FY23
- Recommendation on California Oregon Transmission
Project
- Winter 2023-24 Natural Gas Price Uncertainty
Management Council Decision Implementation
* Palo Alto Fiber Project Study Session (FCM)
* Solid Dieletric Switches RFQ (C)
* WWMP Consulting Services WGW Engineering (C)
* Ameresco PPA (C)
* Update on the Palo Alto Fiber Plan Study Session (C)
* Recommendation on California Oregon Transmission Project (FCM)
- Discussion and Update on Projects from 2015 to 2020
in WGW and Electric
- Preliminary Financial Forecast
- Cross Bore Phase 3
* Recommendation on California Oregon Transmission Project (C)
* Approval of Consultant Contract for Reliability and Resiliency
Strategic Plan (C)
* Adoption of Resolutions and Ordinances for Three Building
Electrification Programs (C)
* Tesla and Capacity PPP Project (C)
To be Scheduled
- Educational Update on any Type of New Technology or Terminology
- Projects with a Resiliency Component
- Quarterly Reports (Q1-3 Info Rpts)(Q4 Discussion Summary of the year)
Financial Report
Utilities Programs Update
Informational EV Charger Installation Updates
Informational Bucket 1 REC Sales Updates
Informational Fiber Updates
- Recycled Water Purple Pipe
- GM Update: Fiber Hut Count (update December 2023)
- DER discussion
- Second transmission line update
- 24/7 load following
- Distributed energy resources
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