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HomeMy WebLinkAbout2024-05-01 Utilities Advisory Commission Agenda PacketUTILITIES ADVISORY COMMISSION Regular Meeting Wednesday, May 01, 2024 Council Chambers & Hybrid 6:00 PM Utilities Advisory Commission 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. T h e   m e e t i n g   w i l l   b e   b r o a d c a s t   o n   C a b l e   T V   C h a n n e l   2 6 ,   l i v e   o n 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. Signs and symbolic materials less than 2 feet by 3 feet are permitted provided that: (1) sticks, posts, poles or similar/other type of handle objects are strictly prohibited; (2) the items do not create a facility, fire, or safety hazard; and (3) persons with such items remain seated when displaying them and must not raise the items above shoulder level, obstruct the view or passage of other attendees, or otherwise disturb the business of the meeting. 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 to adapt to the participation of the public, or for any other reason intended to facilitate the meeting. CALL TO ORDER  6:00pm – 6:05pm AGENDA CHANGES, ADDITIONS AND DELETIONS  6:05pm – 6:10pm The Chair or Board majority may modify the agenda order to improve meeting management. PUBLIC COMMENT   6:10pm – 6:25pm Members of the public may speak to any item NOT on the agenda. APPROVAL OF MINUTES  6:25pm – 6:30pm 1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 3, 2024   UTILITIES DIRECTOR REPORT 6:30pm – 6:45pm NEW BUSINESS  (a 10 minute break will be imposed during this section) 2.Recommendation to Retain the Current WAPA Hydroelectricity Base Resource Contract Allocation From 2025‐2030  (ACTION 6:45 PM – 7:15 PM) Staff: Lena Perkins, PhD 3.Discussion of the Northern California Power Agency Issuing Bonds to Prepay for the Energy Received Under the 2025‐2037 Geysers Power Purchase Agreement  (DISCUSSION 7:15 PM – 7:45 PM) Staff: Shiva Swaminathan 4.Utilities Advisory Commission Recommendation to Adopt a Resolution Amending the Gas Utility Long‐term Plan (GULP) Objectives, Strategies and Implementation Plan, Amending the Gas Utility Reserves Management Practices, Amending the FY 2025 Gas Fund Budget, 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).  (ACTION 7:45 PM – 8:30 PM) Staff: Jason Huang 5.Staff Recommends That the Utilities Advisory Commission Recommend the City Council Adopt the Proposed Operating and Capital Budgets for the Utilities Department for the Fiscal Year 2025  (ACTION 8:30 PM – 9:30 PM) Staff: Anna Vuong COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS FUTURE TOPICS FOR UPCOMMING MEETING 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 May 01, 2024 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, May 01, 2024Council Chambers & Hybrid6:00 PMUtilities Advisory Commission meetings will be held as “hybrid” meetings with the option toattend by teleconference/video conference or in person. To maximize public safety while stillmaintaining transparency and public access, members of the public can choose to participatefrom home or attend in person. Information on how the public may observe and participate in themeeting is located at the end of the agenda. Masks are strongly encouraged if attending inperson. T h e   m e e t i n g   w i l l   b e   b r o a d c a s t   o n   C a b l e   T V   C h a n n e l   2 6 ,   l i v e   o nYouTube 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.Signs and symbolic materials less than 2 feet by 3 feet are permitted provided that: (1) sticks,posts, poles or similar/other type of handle objects are strictly prohibited; (2) the items do notcreate a facility, fire, or safety hazard; and (3) persons with such items remain seated whendisplaying them and must not raise the items above shoulder level, obstruct the view orpassage of other attendees, or otherwise disturb the business of the meeting.TIME ESTIMATESListed 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 to adapt to the participation of the public, or for any other reason intended to facilitate the meeting. CALL TO ORDER  6:00pm – 6:05pm AGENDA CHANGES, ADDITIONS AND DELETIONS  6:05pm – 6:10pm The Chair or Board majority may modify the agenda order to improve meeting management. PUBLIC COMMENT   6:10pm – 6:25pm Members of the public may speak to any item NOT on the agenda. APPROVAL OF MINUTES  6:25pm – 6:30pm 1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 3, 2024   UTILITIES DIRECTOR REPORT 6:30pm – 6:45pm NEW BUSINESS  (a 10 minute break will be imposed during this section) 2.Recommendation to Retain the Current WAPA Hydroelectricity Base Resource Contract Allocation From 2025‐2030  (ACTION 6:45 PM – 7:15 PM) Staff: Lena Perkins, PhD 3.Discussion of the Northern California Power Agency Issuing Bonds to Prepay for the Energy Received Under the 2025‐2037 Geysers Power Purchase Agreement  (DISCUSSION 7:15 PM – 7:45 PM) Staff: Shiva Swaminathan 4.Utilities Advisory Commission Recommendation to Adopt a Resolution Amending the Gas Utility Long‐term Plan (GULP) Objectives, Strategies and Implementation Plan, Amending the Gas Utility Reserves Management Practices, Amending the FY 2025 Gas Fund Budget, 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).  (ACTION 7:45 PM – 8:30 PM) Staff: Jason Huang 5.Staff Recommends That the Utilities Advisory Commission Recommend the City Council Adopt the Proposed Operating and Capital Budgets for the Utilities Department for the Fiscal Year 2025  (ACTION 8:30 PM – 9:30 PM) Staff: Anna Vuong COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS FUTURE TOPICS FOR UPCOMMING MEETING 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 May 01, 2024 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, May 01, 2024Council Chambers & Hybrid6:00 PMUtilities Advisory Commission meetings will be held as “hybrid” meetings with the option toattend by teleconference/video conference or in person. To maximize public safety while stillmaintaining transparency and public access, members of the public can choose to participatefrom home or attend in person. Information on how the public may observe and participate in themeeting is located at the end of the agenda. Masks are strongly encouraged if attending inperson. T h e   m e e t i n g   w i l l   b e   b r o a d c a s t   o n   C a b l e   T V   C h a n n e l   2 6 ,   l i v e   o nYouTube 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.Signs and symbolic materials less than 2 feet by 3 feet are permitted provided that: (1) sticks,posts, poles or similar/other type of handle objects are strictly prohibited; (2) the items do notcreate a facility, fire, or safety hazard; and (3) persons with such items remain seated whendisplaying them and must not raise the items above shoulder level, obstruct the view orpassage of other attendees, or otherwise disturb the business of the meeting.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 to adapt to the participation of the public, or for any other reasonintended to facilitate the meeting.CALL TO ORDER  6:00pm – 6:05pmAGENDA CHANGES, ADDITIONS AND DELETIONS  6:05pm – 6:10pmThe Chair or Board majority may modify the agenda order to improve meeting management.PUBLIC COMMENT   6:10pm – 6:25pmMembers of the public may speak to any item NOT on the agenda.APPROVAL OF MINUTES  6:25pm – 6:30pm1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 3,2024  UTILITIES DIRECTOR REPORT 6:30pm – 6:45pmNEW BUSINESS  (a 10 minute break will be imposed during this section)2.Recommendation to Retain the Current WAPA Hydroelectricity Base Resource ContractAllocation From 2025‐2030  (ACTION 6:45 PM – 7:15 PM) Staff: Lena Perkins, PhD3.Discussion of the Northern California Power Agency Issuing Bonds to Prepay for theEnergy Received Under the 2025‐2037 Geysers Power PurchaseAgreement  (DISCUSSION 7:15 PM – 7:45 PM) Staff: Shiva Swaminathan4.Utilities Advisory Commission Recommendation to Adopt a Resolution Amending the GasUtility Long‐term Plan (GULP) Objectives, Strategies and Implementation Plan, Amendingthe Gas Utility Reserves Management Practices, Amending the FY 2025 Gas FundBudget, and Amending Rate Schedules G‐1 (Residential Gas Service), G‐2 (ResidentialMaster‐Metered and Commercial Gas Service), G‐3 (Large Commercial Gas Service), andG‐10 (Compressed Natural Gas Service); CEQA status: not a project under PublicResources Code 15378(b)(5) and exempt under Public Resources Code15273(a).  (ACTION 7:45 PM – 8:30 PM) Staff: Jason Huang5.Staff Recommends That the Utilities Advisory Commission Recommend the City CouncilAdopt the Proposed Operating and Capital Budgets for the Utilities Department for theFiscal Year 2025  (ACTION 8:30 PM – 9:30 PM) Staff: Anna Vuong COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS FUTURE TOPICS FOR UPCOMMING MEETING 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.  3 Regular Meeting May 01, 2024 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, May 01, 2024Council Chambers & Hybrid6:00 PMUtilities Advisory Commission meetings will be held as “hybrid” meetings with the option toattend by teleconference/video conference or in person. To maximize public safety while stillmaintaining transparency and public access, members of the public can choose to participatefrom home or attend in person. Information on how the public may observe and participate in themeeting is located at the end of the agenda. Masks are strongly encouraged if attending inperson. T h e   m e e t i n g   w i l l   b e   b r o a d c a s t   o n   C a b l e   T V   C h a n n e l   2 6 ,   l i v e   o nYouTube 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.Signs and symbolic materials less than 2 feet by 3 feet are permitted provided that: (1) sticks,posts, poles or similar/other type of handle objects are strictly prohibited; (2) the items do notcreate a facility, fire, or safety hazard; and (3) persons with such items remain seated whendisplaying them and must not raise the items above shoulder level, obstruct the view orpassage of other attendees, or otherwise disturb the business of the meeting.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 to adapt to the participation of the public, or for any other reasonintended to facilitate the meeting.CALL TO ORDER  6:00pm – 6:05pmAGENDA CHANGES, ADDITIONS AND DELETIONS  6:05pm – 6:10pmThe Chair or Board majority may modify the agenda order to improve meeting management.PUBLIC COMMENT   6:10pm – 6:25pmMembers of the public may speak to any item NOT on the agenda.APPROVAL OF MINUTES  6:25pm – 6:30pm1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 3,2024  UTILITIES DIRECTOR REPORT 6:30pm – 6:45pmNEW BUSINESS  (a 10 minute break will be imposed during this section)2.Recommendation to Retain the Current WAPA Hydroelectricity Base Resource ContractAllocation From 2025‐2030  (ACTION 6:45 PM – 7:15 PM) Staff: Lena Perkins, PhD3.Discussion of the Northern California Power Agency Issuing Bonds to Prepay for theEnergy Received Under the 2025‐2037 Geysers Power PurchaseAgreement  (DISCUSSION 7:15 PM – 7:45 PM) Staff: Shiva Swaminathan4.Utilities Advisory Commission Recommendation to Adopt a Resolution Amending the GasUtility Long‐term Plan (GULP) Objectives, Strategies and Implementation Plan, Amendingthe Gas Utility Reserves Management Practices, Amending the FY 2025 Gas FundBudget, and Amending Rate Schedules G‐1 (Residential Gas Service), G‐2 (ResidentialMaster‐Metered and Commercial Gas Service), G‐3 (Large Commercial Gas Service), andG‐10 (Compressed Natural Gas Service); CEQA status: not a project under PublicResources Code 15378(b)(5) and exempt under Public Resources Code15273(a).  (ACTION 7:45 PM – 8:30 PM) Staff: Jason Huang5.Staff Recommends That the Utilities Advisory Commission Recommend the City CouncilAdopt the Proposed Operating and Capital Budgets for the Utilities Department for theFiscal Year 2025  (ACTION 8:30 PM – 9:30 PM) Staff: Anna VuongCOMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTSFUTURE TOPICS FOR UPCOMMING MEETINGADJOURNMENTSUPPLEMENTAL 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.  4 Regular Meeting May 01, 2024 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.   Item No. 1. Page 1 of 1 Utilities Advisory Commission Staff Report From: Dean Batchelor, Director Utilities Lead Department: Utilities Meeting Date: May 1, 2024 Staff Report: 2404-2902 TITLE Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 3, 2024 RECOMMENDATION Recommended Motion Staff recommends that the UAC consider the following motion: Commissioner ______ moved to approve the draft minutes of the April 3, 2024 meeting as submitted/amended. Commissioner ______ seconded the motion. ATTACHMENTS Attachment A: 04-03-2024 DRAFT UAC Minutes AUTHOR/TITLE: Jenelle Kamian, Program Assistant I Item #1     Packet Pg. 5     Utilities Advisory Commission Minutes Approved on: Page 1 of 8 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF APRIL 3, 2024 REGULAR MEETING CALL TO ORDER Chair Segal called the meeting of the Utilities Advisory Commission (UAC) to order at 6:03 p.m. Present: Chair Segal, Vice Chair Scharff, Commissioners Forssell, Mauter and Phillips Absent: Commissioners Croft and Metz AGENDA CHANGES, ADDITIONS AND DELETIONS None PUBLIC COMMENT John Kelley encouraged the UAC to consider at a future meeting the topic of allowing ADUs to have separate electrical and water service. Lisa Madden thought AB 1944 was great and could be a good example for other items in Section 54954.3. APPROVAL OF MINUTES ITEM 1: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on March 6, 2024 Chair Segal invited comments on the March 6, 2024 UAC draft meeting minutes. ACTION: Commissioner Phillips moved to approve the draft minutes of the March 6, 2024 meeting as submitted. Vice Chair Scharff seconded the motion. The motion carried 5-0 with Chair Segal, Vice Chair Scharff, Commissioners Forssell, Mauter and Phillips voting yes. Commissioners Croft and Metz absent. ITEM 2: ACTION: Approval of the Minutes of the Special Utilities Advisory Commission Meeting Held on March 14, 2024 Chair Segal invited comments on the March 14, 2024 UAC draft meeting minutes. Item #1     Packet Pg. 6     Utilities Advisory Commission Minutes Approved on: Page 2 of 8 ACTION: Chair Segal moved to approve the draft minutes of the March 14, 2024 meeting as submitted. Commissioner Phillips seconded the motion. The motion carried 4-0 with Chair Segal, Vice Chair Scharff, Commissioners Mauter and Phillips voting yes. Commissioner Forssell abstained. Commissioners Croft and Metz absent. UTILITIES DIRECTOR REPORT Utilities Director Dean Batchelor delivered the Director's Report. April 1 through April 8, San Francisco Public Utilities will perform an inspection project of one of the drinking water transmission pipelines along El Camino at California Avenue. This work will result in closure of two lanes of traffic on El Camino from Cambridge Avenue to California Avenue. Vehicle and pedestrian crossings at the intersection of California Avenue and El Camino may be restricted. On March 12, the City began posting refunds to utility customers who were members of the Green case. The City will disburse funds in three payments of approximately $156. Active gas utility customers who had service between September 23, 2015 and June 30, 2022 will receive credits on their next utility bill, in March 2025 and in March 2026. The City will reach out to non-active customers. Hydro update: As of March 28, levels in Northern and Central California are above average. Snowpack levels are slightly above average. The City’s hydro resources were projected to produce about 108% of the long-term average output for this fiscal year and 109% of the long-term average for 2025. On February 26, 2024, Council suspended enforcement of the all-electric requirement for new buildings and substantial remodels. Staff was working on a new set of local energy Reach Codes to present to Council for consideration before their break. As of the end of March, 29 sites have received rebates for EV chargers. Recent participants in the program include Stanford Healthcare, Children’s Hospital, a school and three condominiums. The City in partnership with nonprofit Cool the Earth Ride and Drive extended the EV discount campaign through March to provide residents with savings up to $11,500 on EVs from Audi, Ford, Hyundai and Kia. In April or May, there will be a limited-time rebate campaign. Upcoming events: •April 4 WaterConservationShowcase.com •April 13 Tips and Tricks for Successful Turf Conversions •April 21 Earth Day Festival •May 4 The UAC will have a couple tables at the May Fete parade. Commissioners were invited to host with staff and talk to community members who stop at the table. Item #1     Packet Pg. 7     Utilities Advisory Commission Minutes Approved on: Page 3 of 8 In response to Chair Segal’s request for further explanation, Mr. Batchelor stated the City suspended the Reach Code. Utilities, Public Works and the Development Center were working together on new standards for staff to present to Council before they go on break. Staff’s report to Council will include models of higher efficiency standards in San Jose, San Luis Obispo and a couple other cities. Staff will provide more information by June 2024. NEW BUSINESS ITEM 3: ACTION: Approval of Chair and Vice Chair to Serve a Short Term of April 3, 2024 through April 2, 2025 ACTION: Commissioner Mauter moved to approve Vice Chair Scharff as Chair. ACTION: Commissioner Segal moved to approve Commissioner Mauter as Vice Chair. ITEM 4: ACTION: Continuation of Staff’s Request for Utilities Advisory Commission’s Recommendation for City Council to Approve the Phase IV Cross-Bore Verification Program Item #1     Packet Pg. 8     Utilities Advisory Commission Minutes Approved on: Page 4 of 8 inspection. An EFV failed to prevent an incident in Chicago because EFVs require a certain amount of flow to trigger. ACTION: Chair Scharff moved the Utilities Advisory Commission recommend the City Council approve FY25 funding in the amount of $676,200 to complete the Cross Bore Phase IV inspections of Group 1 and Item #1     Packet Pg. 9     Utilities Advisory Commission Minutes Approved on: Page 5 of 8 inspections of the sewer laterals within proximity of 15ft or less to the gas service in Groups 2 through 6, for a total of 495 inspections. ITEM 5: ACTION: Recommendation to Adopt a Resolution Authorizing the City Manager or Their Designee to Execute an Amendment to the Power Purchase Agreement with Ameresco Half Moon Bay LLC for the Purchase of up to 60,000 Megawatt-Hours per Year of Biogas Energy over a Term of up to 20 Years for a Total Not to Exceed Amount of $147.2 Million; CEQA Status: Not a Project under CEQA Guidelines Section 15378 Item #1     Packet Pg. 10     Utilities Advisory Commission Minutes Approved on: Page 6 of 8 Commissioner Phillips commented he was very strongly in support. Landfills were not going away anytime soon. It was great economically and for the environment. ACTION: Commissioner Phillips moved Staff recommendation that the Utilities Advisory Commission (UAC) recommend that the City Council adopt a Resolution (Attachment A) to: ITEM 6: ACTION: Utilities Advisory Commission FY 2024 - 2025 Work Plan Item #1     Packet Pg. 11     Utilities Advisory Commission Minutes Approved on: Page 7 of 8 Chair Scharff believed the scope of work plans should be as broad and flexible as possible so the UAC could take up any matter they choose. Vice Chair Mauter wanted to define the relationship between the UAC and S/CAP. A RACI table to clarify who is responsible, who has decision-making authority, who to consult and who to inform as these efforts get underway would be very conducive to helping S/CAP and the UAC collaborate more effectively and more effectively work with Council to move some of these actions forward. The Commission discussed changes to Standing Topics. ACTION: Commissioner Forssell moved to approve Staff recommendation the Utilities Advisory Commission Review and Approve the Amended Utilities Advisory Commission's 2024-2025 Annual Work Plan, and Recommend the City Council Review the Work Plan and Provide Feedback Commissioner Segal seconded the motion. The motion carried 5-0 with Chair Scharff, Vice Chair Mauter, Commissioners Forssell, Phillips and Segal voting yes. Commissioners Croft and Metz absent. COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS Commissioner Phillips attended a power conference at Berkeley. He learned it takes 8000 hours of training to become an authorized electrician but authorized electricians can only have one trainee working for them at a time according to California State Law. In Alberta, Canada, 210 people who had EVs were assigned into three groups. One group monitored their behavior on charging, the second group received gave a $0.035/kWh reward for off-peak charging at home, and an optimization program managed when the third group could charge. The time-of-use group changed their behavior so much, the spike moved to later in the evening. Commissioner Phillips asked staff to send slides to the commissioners. Commissioner Segal stated this is likely her last meeting. She expressed her gratitude for having been a part of the UAC and the pleasure of working with her fellow commissioners. The quality of staff impressed her. She believed Palo Alto residents were in good hands. Commissioner Forssell expressed gratitude to staff, commissioners and the public who comment at UAC meetings. She felt it was an honor and a pleasure to serve as commissioner. Going forward, she will watch the UAC meetings on video. If new commissioners were not appointed within the next month, Commissioner Segal and Commissioner Forssell would be back for the next UAC meeting. FUTURE TOPICS FOR UPCOMING MEETINGS Commissioner Segal suggested a topic on ADUs having their own meter as the public commenter requested. Chair Scharff agreed. Utilities Director Dean Batchelor pointed out that Utilities Rules and Regulations only allow one set of services to any parcel. Utilities staff needed to have more conversations and talk to Jonathan Lait’s group about permitting. Chair Scharff asked staff to put it on Item #1     Packet Pg. 12     Utilities Advisory Commission Minutes Approved on: Page 8 of 8 the topic list and staff can address the UAC to say if rules and regulations will or will not change. Commissioner Forssell thought it was a compelling topic and remarked that ADUs need separate meters to allow for EV chargers and electrification. NEXT SCHEDULED MEETING: May 1, 2024 ADJOURNMENT Item #1     Packet Pg. 13     Item No. 2. Page 1 of 10 Utilities Advisory Commission Staff Report From: Dean Batchelor, Director Utilities Lead Department: Utilities Meeting Date: May 1, 2024 Staff Report: 2401-2564 TITLE Recommendation to Retain the Current WAPA Hydroelectricity Base Resource Contract Allocation From 2025-2030 RECOMMENDATION Staff recommends that the UAC recommend that the City Council keep the City of Palo Alto’s full share of its allocated hydroelectric resource under the current hydroelectricity supply contract, the 2025 Base Resource Contract from Sierra Nevada Region of the Western Area Power Administration (2025 WAPA Contract), as approved by Council in February of 2021 (Staff Report #11679).1 No action from City Council is required to remain in the contract at the current resource allocation percentage. Staff will revisit project financial impact in 2029 and make a recommendation for the period of 2030 through 2034. The decision to reduce the contract allocation or terminate the contract will be revisited every five years until the last termination opportunity in 2049. EXECUTIVE SUMMARY In 2021 Council approved the 2025 WAPA Contract, which allocates to the City a 12.06299%2 share of the WAPA contract’s base resource generation from 2025-2055. As negotiated, the City has the option to reduce its allocation or terminate the 2025 WAPA Contract until June 30, 2025. The current decision is whether to recommend that Council maintain, decrease, or exit our hydroelectricity supply contract with WAPA for the years 2025 – 2030. If the City chooses to keep this contract in the electricity supply portfolio at the current allocation percentage, there will be an opportunity to reduce or eliminate the City’s resource allocation share again in 2029, and every five years until the contract terminates in 2054. Exiting the contract or reducing the contract allocation share is a permanent decision through the remaining duration of the contract (2054). 1 Staff Report 11679 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes- reports/reports/city-manager-reports-cmrs/year-archive/2021/id-11679.pdf 2 This percentage is 98% of the City’s current share of the WAPA Base Resource generation. 98% of the current contract from 2005-2024 is the maximum available to the City for 2025-2054. Item #2     Packet Pg. 14     Item No. 2. Page 2 of 10 Staff performed extensive analysis supporting its recommendation to extend the full share of contract, which will continue to provide approximately 40% of the City’s current electricity supply. The recommendation to keep the hydroelectric contract is driven by high market electricity prices, improved project cost control, and greatly improved operational flexibility of the project. CPAU staff is working alongside WAPA staff to increase flexibility of the hydroelectric resource, to mitigate risks to the project, and to improve value in the rapidly changing electricity markets of the Western U.S. Staff would like to highlight exceptional efforts over the last eight years by federal staff at both WAPA and U.S. Bureau of Reclamation (USBR) who have worked with power customers to increase project flexibility while lowering costs. This continued partnership with power customers helps to mitigate the risks and uncertainties inherent in the contract. BACKGROUND The City of Palo Alto Utilities (CPAU) has been a power customer of the USBR and WAPA since 1960. The City signed the current contract in 2000 (CMR 378:00, Resolution 80073) which began delivering hydroelectric power to the City in 2005 and would terminate if not extended by December 31, 2024. City Council approved the 2025 WAPA Contract extension in 2021 after nearly seven years of negotiation (Staff Report #116794). This 2025 WAPA Contract extension runs from 2025-2055 unless the City decides to reduce its resource allocation percentage or exit the contract. The City can choose to reduce its resource allocation or exit the contract before June 30, 2024, and then may reconsider every five years thereafter for duration of the 30-year extension, assuming the City remains in the contract through the full extension term. Therefore, while this is potentially a 30-year extension, any decision to remain at the City’s current resource allocation percentage is only binding for the next five years from January 1, 2025 to December 31, 2029. Most renewable and hydroelectricity contracts require a ten to twenty-year commitment, so the opportunity to reduce or end the contract every five years is a somewhat rare flexibility. No action will be required to keep the current allocation percentage, but as noted above, a decision to reduce the City’s allocation percentage or terminate the agreement will be permanent for the remainder of the 30-year extension period. In 2020 WAPA completed a cost-of-service study which found that power customers such as the City have overpaid over the lifetime of the project since 1930. WAPA has been returning overpaid funds to the City and other power customers since 2021 and that will continue through 2030,5 and if the City exits the contract in 2025 then overpaid funds will not be reimbursed to the City. The contractual costs have been estimated by WAPA and USBR to be about $9M in 2025 3 Resolution 8007 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso8007.pdf 4 Staff Report 11679 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes- reports/reports/city-manager-reports-cmrs/year-archive/2021/id-11679.pdf 5 WAPA’s financial limitations do not allow return of funds by 2025. Item #2     Packet Pg. 15     Item No. 2. Page 3 of 10 escalating to about $11.5M in 2030. Contractual costs are not fixed, but WAPA and USBR aim for cost stability year to year. Item #2     Packet Pg. 16     Item No. 2. Page 4 of 10 Figure 1. USBR Map of Central Valley Project- By Shannon1 - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=47015188 Item #2     Packet Pg. 17     Item No. 2. Page 5 of 10 Figure 2.Simplified diagram of the Central Valley Project (CVP). A few State Water Project (SWP) units are shown when they are closely integrated or shared with the CVP. Credit: Cary Fox, USBR 2024 ANALYSIS To determine whether or not to recommend keeping the status quo under this contract extension, staff performed detailed modeling with Ascend Analytics as well as a broader uncertainty and sensitivity analyses. The modeling with Ascend Analytics was very thorough and granular, but staff performed supplemental sensitivity and uncertainty analysis to illustrate the magnitude of the uncertainties as well as to verify the Ascend model results with more conservative assumptions. Ascend Analytics Analysis Staff worked closely with the Ascend Analytics team to complete an extremely robust analysis of the energy value under the 2025 WAPA Contract, using hundreds of Monte Carlo simulations comparing WAPA to other resources and variable forward-market prices. Several large community choice aggregators use Ascend Analytics tools for valuation of electricity supply contracts as it is considered one of the best-in-class tools currently available. Ascend uses current market prices along with planned transmission projects and generation projects to create a custom market price forecast for the California ISO area. These price forecasts by region within the California ISO are then used to generate project-specific price forecasts at each ISO node. This nodal price granularity provides improved accuracy for project revenue projections. Item #2     Packet Pg. 18     Item No. 2. Page 6 of 10 Staff worked alongside the Ascend Analytics team to ensure the model dispatched the hydropower from the 2025 WAPA Contract realistically, respecting hourly maximum and minimum constraints (which change daily but, but were modeled by a representative day per month) and then shaping the output around the highest priced hours. Staff ensured Ascend implemented monthly and annual total energy constraints which were tied to the precipitation of that year. Staff also worked with Ascend to sweep a broad modeling space with large variations precipitation each year and a large range of forward-market electricity prices to reflect the current unpredictable conditions. Supplemental Sensitivity and Uncertainty Analysis Supplemental Costs Included in Analysis o In 2022 CPAU received about 20% of long-term average generation expected o In 2021 CPAU received about 50% of long-term average generation expected Item #2     Packet Pg. 19     Item No. 2. Page 7 of 10 precipitation variability through the Hydroelectric Stabilization Reserve. CPAU limits the self- insurance costs by accepting some level of volatility in electricity rates, as CPAU passes through to customers some costs in Hydro Rate Adjustment surcharge. Cost of seasonal mismatch with CPAU electric portfolio: - WAPA delivers electricity mostly in the Spring and Summer, when CPAU’s electric portfolio already has a surplus, requiring CPAU to sell power from other projects during low price seasons, and purchase market power during higher priced Fall and Winter to comply with risk management guidelines. The seasonal mismatch to CPAU’s electric portfolio is quantified and included additional cost to capture the full cost of keeping the 2025 WAPA Contract. Cost of month-ahead forecast errors: - Poor forecasts add cost and exposure to the day-ahead market if the energy is not delivered as expected for the current month. The month-ahead forecasts from WAPA have been shown to have persistent inaccuracies to due to the operational complexity of the project and the reservoir, streamflow, temperature, dissolved oxygen, and pumping requirements. This cost is quantified and included in staff’s analysis. Supplemental Uncertainties Included in Analysis - Exploring a broader range of low power prices similar to 2019 power price levels as an additional conservative sensitivity analysis - Additional environmental costs which could be added to the contract cost analysis in the future under some interpretations of the Central Valley Improvement Act - Lower generation from the project from both climate change and additional environmental constraints which would lower absolute generation which could be implemented as part of federal and state proceedings - Lower value generation from more generation being shifted into spring months with lower value from both reduced snowpack and additional environmental constraints being considered at the state and federal level RESULTS Overall, the 2025 WAPA Contract competed favorably under the large majority of scenarios explored, due to the dispatchable nature of the hydroelectricity. The improved dispatchability allows the project to generate in the late evening hours of the summer and even to some extent year-round as the overbuild of solar generation causes shortfalls of dispatchable power in the evening hours. The new flexibility of the project benefits from the increasing seasonal and hourly volatility from surplus solar in California. USBR operators are currently cycling pumped storage within the day to capture additional power revenues, backing down generation and spilling water over dams to capture negative prices, and pumping during the middle of the day to capture negative prices. These operational improvements are new in the last few years and are saving millions of dollars per year to CPAU and other power customers. Item #2     Packet Pg. 20     Item No. 2. Page 8 of 10 Results of Analysis with Ascend Analytics The WAPA contract was chosen over competing resources in nearly every scenario of hundreds designed by staff and run by Ascend Analytics. The WAPA contract also had a positive net energy value in nearly every scenario. Some important caveats to these Ascend results are that the forward-market energy prices were very high last year, and that the supplemental cost of the inaccuracy of the month-ahead forecast were not explicitly added to the cost of the WAPA electric product. The results of the additional uncertainty and sensitivity analysis are shown in Figure 3. Key takeaways are that the uncertainties are large especially in the latter years, but overall, the 2025 WAPA Contract will likely have a positive net value to CPAU. The largest drivers of the positive net value are high market electricity prices and the higher likelihood of better than average generation in 2025 and 2026. The probability of relatively high hydroelectricity generation in 2025 and 2026 is due to the very high precipitation in 2023 and the average precipitation 2024. The primary drivers of the decreasing value over time are the increasing chance of dry years over the next five years, increasing costs, and decreasing power market prices. Current market price forecasts expect prices to decline from today through 2030, and each forecast for several months has slightly accelerated this projected decline. The largest drivers of uncertainty are the variability of power prices, variability of precipitation, and regulatory risks to the amount and timing of generation. The magnitude of uncertainty one year out into the future is approximately $7-$15M. With climate change increasing the likelihood of multiyear droughts in the future, CPAU may need to consider increasing the hydro reserve fund to ensure rate stability. Item #2     Packet Pg. 21     Item No. 2. Page 9 of 10 Figure 3 Results of the supplemental uncertainty and sensitivity analysis for years 2025-2029. FISCAL/RESOURCE IMPACT Although there is a great deal of uncertainty due to regulatory risks and precipitation uncertainty, CPAU is expected to save money in aggregate over the next five years by retaining the resource. The annual costs are estimated to be $9M in 2025 and escalate to approximately $11.5M in 2029. Alternatives to continuing with the 2025 WAPA Contract are likely substantially more expensive in the next two to three years. There are larger risks and uncertainties associated with the project in the latter two to three years of the period analyzed (2027-2029). Staff is engaged with federal staff partners to mitigate those risks as much as possible by operational improvements and facility upgrades. POLICY IMPLICATIONS Keeping the current resource allocation under the 2025 WAPA Contract is consistent with the 2023 Electric Utilities Integrated Resource Plan, the Utilities Strategic Plan, the Sustainability Implementation Plans, and the City’s Sustainability and Climate Action Plan (S/CAP). ENVIRONMENTAL REVIEW The City Council’s approval regarding remaining in this contract extension does not require California Environmental Quality Act review, because it does not meet the definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), as an administrative governmental activity which will not cause a direct or indirect physical change in the environment. WAPA’s 2025 Power Marketing Plan authorizing the contract has a Categorical Exclusion from National Environmental Policy Act (NEPA) review since WAPA is reallocating its existing resources and is not planning to increase its generation or transmission. Item #2     Packet Pg. 22     Item No. 2. Page 10 of 10 ATTACHMENTS Attachment A: Presentation AUTHOR/TITLE: Dean Batchelor, Director of Utilities Staff: Lena Perkins, PhD, Senior Resource Planner Item #2     Packet Pg. 23     Utilities Advisory Commission: May 1, 2024 www.cityofpaloalto.org Presentation of Recommendation to Retain the Current Resource Allocation under the 2025 WAPA Hydroelectric Contract Lena Perkins, PhD, Utilities Dept., Senior Resource Planner Tim Hall, Karl Knapp Stanford Energy Graduate Summer Fellow 1 Item #2     Packet Pg. 24     Federal organizational structure involved in WAPA contract 2 •Palo Alto has 12% share of the CVP Base Resource power •20 dams, 10 power plants, 3 pumping stations & transmission •Palo Alto’s share is about 350 GWh/yr (40% of electricity supply) •1 of 4 Federal Power Marketing Admin. under Dept. of Energy •Sell & transmit power of 57 federal hydro (USBR, etc…) •WAPA has 10.5 GW of capacity •Owns and runs dams & turbines of Central Valley Project •Federal Division under Dept. of Interior •Manages 53 power plants (40 TWh, 1% of US power) U.S. Bureau of Reclamation (USBR) Western Area Power Administration (WAPA) Central Valley Project (CVP) •Palo Alto’s Contract for CVP Power is with SNR of WAPA •1 of 5 Regions of WAPA, 2.25GW/5.20 TWh/yr •Primarily the Central Valley Project Sierra Nevada Region (SNR of WAPA) Item #2     Packet Pg. 25     -Central Valley Project (CVP) mostly built in 1930s & 1940s -Federal water storage and conveyance project: 20 reservoirs, 10 generating power plants, 3 pump stations, 643 miles of canals -Generates up to 2,000 MW, delivers ~7MAF/yr of water 500 miles south (primarily to agriculture) -Palo Alto has been purchasing power from CVP since 1960s -Base Resource electricity is ~ 65% of the total generation of the CVP power (extra power not needed for pumps) -City currently purchases ~ 12% of the Base Resource hydroelectricity, (~ 40% of City’s electricity supply) -Current Base Resource contract (2005-2024) has option to extend 98% of current share through 2054 -City has option to exit or reduce 2025-2054 share until June 30, 2024 -If extended, City will also have option to exit or reduce contract in 2030 CVP Background & CPAU History 3 Item #2     Packet Pg. 26     WAPA and City have worked hard to increase value & flexibility 4 -City staff has worked with WAPA and USBR since 2008 to increase flexibility -Increased revenue from better flexibility has lowered our costs -WAPA has also worked with staff to contain costs and is returning money to power customers 2019-2030 -Staff is in active collaborations with WAPA and USBR to: -Improve the forecasts -Add flexibility, potentially via pumped storage, curtailing pumps, and batteries -Optimize real-time emissions of operations Item #2     Packet Pg. 27     Recommend keeping 100% of 2025 WAPA Contract Extension through 2030 Positive net value driven by: -Increased flexibility from hardware & software improvements -High market electricity prices in evening hours -Above average generation likely 2025 & 2026 Decreasing value over time driven by: -decreasing power market prices -Increasing chance of dry years from present -Increasing cost projections Uncertainty driven by: -Electricity market price uncertainty & volatility -Variability of precipitation -Regulatory risks of lower generation & higher costs 5 Item #2     Packet Pg. 28     Recommendation •Staff recommends that the UAC recommend the City Council extend full share of 2025 WAPA Base Resource hydroelectric contract Questions? 6 Item #2     Packet Pg. 29     Item No. 3. Page 1 of 7 3 7 7 2 Utilities Advisory Commission Staff Report From: Dean Batchelor, Director Utilities Lead Department: Utilities Meeting Date: May 1, 2024 Staff Report: 2312-2469 TITLE Discussion of the Northern California Power Agency Issuing Bonds to Prepay for the Energy Received Under the 2025-2037 Geysers Power Purchase Agreement RECOMMENDATION Staff is seeking the Utilities Advisory Commission’s (UAC’s) input prior to staff completing the evaluation of the merits and risks of issuing bonds to prepay for the energy received under the 2025-2037 Geysers Power Purchase Agreement. EXECUTIVE SUMMARY The difference between tax-exempt and taxable bond yields offers the opportunity for tax- exempt entities like Palo Alto and other Northern California Power Agency (NCPA) members to structure prepay transactions to lower the cost of electric supply purchases. The current high interest rate environment and the 2025-2037 Geysers Power Purchase Agreement (Geysers PPA) provide a unique opportunity for NCPA members to authorize NCPA to issue non-recourse bonds, to take advantage of this Internal Revenue Service-approved prepayment mechanism. Such a prepay transaction is expected to yield a 5% to 8% savings on the cost of energy over the 12-year contract term of the PPA. This staff report introduces the topic of NCPA issuing bonds to prepay the Geysers PPA and discusses the merits and risks of such a transaction. Staff is seeking UAC input on this topic as we complete the evaluation and prepare for a possible City Council recommendation in the Fall. BACKGROUND Geysers Power Purchase Agreement In April 2023 Palo Alto City Council approved the purchase of geothermal energy from Calpine Corporation’s Geysers Power Company LLC (GPC) over a term of up to 12 years (2025-2037) for Item #3     Packet Pg. 30     Item No. 3. Page 2 of 7 3 7 7 2 a total cost of up to $76.2 Million1. Palo Alto’s purchase was a 10% share of a larger PPA executed by NCPA with the GPC on behalf of its members. Other NCPA member participants in the PPA are City of Santa Clara (70%), City of Lodi (10%), City of Alameda (5%), Cities of Biggs, Gridley, Lompoc, and the Port of Oakland (5%). Energy Prepay Transactions 1 Staff Report: 2301-0706 of April 17, 2023 Packet Item 5 https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=1115 Item #3     Packet Pg. 31     Item No. 3. Page 3 of 7 3 7 7 2 Figure 1: Illustration of a Pre-Payment Transaction Flows Legality Prepayment transactions are legal and codified in US Tax Law. Initially, the Internal Revenue Service (IRS) issued rules allowing tax-exempt natural gas prepayments and Congress enacted legislation specifically allowing the transactions under the National Energy Policy Act of 2005; Section 13272. Impact on Balance Sheets of the Utility Energy prepayment transactions are not viewed as debt of the public power utility participants because the utility’s only obligation is to pay for energy received. There is no claim on a municipal utility by the energy prepayment bondholders who purchase non-recourse municipal tax-exempt bonds; bondholder recourse is only with the Counterparty that received the prepayment, an entity that is typically a highly rated major commercial bank. Historical Gas and Electric Prepay Transactions Over the past two decades, 100+ municipal gas prepayment bonds have been issued with a value totaling over $70 billion. More recently, prepaid electricity transactions have dominated the market with 10 energy prepayment transactions totaling almost $10 billion completed in the last few years with several Northern California Community Choice Aggregators (CCAs) leading this effort. 2National Energy Policy Act of 2005; Section 1327 https://www.congress.gov/109/plaws/publ58/PLAW- 109publ58.pdf Item #3     Packet Pg. 32     Item No. 3. Page 4 of 7 3 7 7 2 On September 15, 2014, Palo Alto City Council adopted Resolution #94513, 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 is a gas prepay that has reduced the Palo Alto community’s natural gas bills by about $1M per year since then. ANALYSIS Merits The 12-year Geysers PPA entered into by NCPA, on behalf of participating members, offers a unique opportunity for participating members to benefit from a prepaid structured transaction. The benefit is preliminarily estimated at ~$6/MWh discount, equivalent to ~$60+ million in retail ratepayer savings over the 12-year term of the PPA. Palo Alto share of savings is ~$6 million or ~$0.5 million per year. Risks & Mitigation of Risks The risks associated with a prepay transactions to NCPA and its members fall into three categories: Bond holder recourse if the prepaid counterparty defaults, volumetric energy delivery risk, and regulatory risk. Default by Pre-Paid Counterparty The proposed deal structure, utilizing a financing conduit of NCPA (Issuer) to issue non-recourse municipal bonds, significantly minimizes the risks to the Participants. Non-recourse means the bonds are not secured or guaranteed by the Issuer (NCPA or the Project Participants). If the prepaid Counterparty experiences distress and fails to service the bondholder repayment obligation, bondholders have recourse only to the Counterparty that received the prepayment. Issuing non-recourse bonds reduces the discount Participants would receive through the prepayment transaction compared to issuing bonds that provide bondholders recourse to NCPA, but this loss of value is worth the risk mitigation provided by non-recourse bonds. In the event of a default by the Counterparty, followed by termination, the prepaid Counterparty is obligated to make a termination payment which will be used to repay the bondholders. This is the only source of repayment funds available to bond investors in the event of a termination event. The revenues of the Participants are not pledged to repay the bond investors and rating agencies do not count prepay transactions as debt or fixed costs of NCPA or the Participants. During the 2008 financial crisis, Lehman Brothers was the counterparty of several prepayment transactions. Upon Lehman’s bankruptcy, the bondholders settled directly with Lehman as opposed to the Issuer of the bonds. The issuer of the transaction(s) was not liable to the bondholder but rather lost the benefit of the discount or savings when reverting to the original terms of the PPA. The Counterparty default risk is further reduced by selecting the Counterparty through a rigorous RFP process and by hiring a seasoned investment bank with demonstrated experience in the 3 Resolution #9451 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-9451.pdf Item #3     Packet Pg. 33     Item No. 3. Page 5 of 7 3 7 7 2 commodity business and prepay transactions. Contractual provisions will also be put in place such that if the Counterparty fails, the PPA rights assigned by NCPA to the Counterparty revert back to NCPA. Volumetric Risk Regulatory Risk Proposed Prepay Structure 4 and Commodity Swap5 providers to achieve savings of ~10% and require replacing the original PPA with a similar-sized PPA (or PPAs) upon expiration to match the maturity length of the outstanding bonds. 4 A put bond is a debt instrument that allows the bondholder to force the issuer to repurchase the security at specified dates before maturity. 5 A commodity swap is a type of derivative contract where two parties agree to exchange cash flows dependent on the price of an underlying commodity. Item #3     Packet Pg. 34     Item No. 3. Page 6 of 7 3 7 7 2 30-year prepay transaction. In addition, the short transaction allows for it to be sold as an amortizing structure rather than a put bond structure eliminating premiums to investors. This removes significant third-party expenses, the potential need for commodity swap counterparties, and future market uncertainty. NCPA Member Interest & NCPA Commission Approval Next Steps th. Other participating NCPA members are also discussing this transaction with their governing bodies. Based on member input and NCPA staff analysis, NCPA Finance Committee and Commission is expected to discuss findings and recommendations in June. Potential Future Steps FISCAL/RESOURCE IMPACT Item #3     Packet Pg. 35     Item No. 3. Page 7 of 7 3 7 7 2 STAKEHOLDER ENGAGEMENT ENVIRONMENTAL REVIEW ALTERNATIVE ACTIONS ATTACHMENTS AUTHOR/TITLE: Item #3     Packet Pg. 36     Item #3     Packet Pg. 37     Item #3     Packet Pg. 38     Item #3     Packet Pg. 39     Item #3     Packet Pg. 40     Item #3     Packet Pg. 41     Item #3     Packet Pg. 42     Item #3     Packet Pg. 43     Item #3     Packet Pg. 44     Item #3     Packet Pg. 45     Geysers PPA and Prepay Opportunity Monty Hanks, CFO NCPA Michael Berwanger, Managing Director PFM Item #3     Packet Pg. 46     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 2 §California Joint Powers Agency established in 1968 §15 Members and 1 associate Member serving 700,000 residents in communities throughout Northern California (city-owned / special districts) §Builds and operates jointly- owned power plants and operates a power pool for Members §Represents Members before legislative and regulatory bodies §Provides Power Management Services to non-members, including Community Choice Aggregators (CCAs) NCPA Overview Item #3     Packet Pg. 47     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 3 Power Management •Schedule/Dispatch loads and resources •Ensures reliability and stability •Creates market opportunities •Provides aggregation savings •Helps procure green energy Generation Services •Operate and maintain generation resources •Proactive asset management •Resource optimization •Savings for plant owners •Ensures reliable capacity Legislative & Regulatory •Represents member interests in the legislative and regulatory arena •Credible solution-oriented leader in policy debates •Preserves local control •Represents needs of consumers •Protects agency assets Administrative Services •Financial administration and IT services •Manage significant industry complexity for Members •Optimize debt service and ratings •Recruitment of human capital •Risk oversight of electric and gas contracts •Financing and Debt Management Value of NCPA Functions Item #3     Packet Pg. 48     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 4 §December 2022 – NCPA’s Commission approved the PPA and Third Phase Agreements with Geysers Power Company •Palo Alto’s UAC recommended Council approval in Feb 2023 •Palo Alto’s City Council approved in April 2023 Background Item #3     Packet Pg. 49     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 5 Geysers Power Company PPA Item #3     Packet Pg. 50     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 6 Geysers Power Company PPA Item #3     Packet Pg. 51     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 7 Financing Assumptions and Results Item #3     Packet Pg. 52     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 8 §Goal – Reduce cost of power purchases by 5% to 8% §How – Leverage the use of tax-exempt bonding capacity to secure long- term supply Background §Codified in the U.S. tax law §Used since the 1990s largely for natural gas transactions §Over 100 transactions totaling over $70 billion completed in the U.S. – mostly for gas §Ten energy prepayment transactions totaling $9.8 billion were completed last few years for five California Community Choice Aggregators: Prepayment Transaction Background Ø East Bay Community Energy Ø Pioneer Community Energy Ø Silicon Valley Clean Energy Ø Clean Power Alliance Ø Marin Clean Energy Ø Central Coast Community Energy Item #3     Packet Pg. 53     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 9 History of Completed Prepayments by CA Utilities Item #3     Packet Pg. 54     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 10 History of Completed Prepayments by CA CCAs Item #3     Packet Pg. 55     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 11 §PPA assignment and prepayment – will represent a percentage of power (~90- 95%) to account for maintenance or unplanned outages §Investment Bank’s Credit Rating – bonds are non-recourse to the Issuer and Participating Members meaning if the Prepayment Counterparty fails, they are responsible for a termination payment which would cover the bondholders §Timing is key – interest-rate sensitive meaning prepaid energy transactions rely on the relationship between the tax-exempt market and the taxable market to provide benefits to both the municipal utility and the counterparty §Savings – driven by interest-rate spreads, term of prepay, and size §Potential counterparties – Goldman Sachs, RBC, JPM, Morgan Stanley Prepayment Transaction Overview Item #3     Packet Pg. 56     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 12 Entities Involved in an Energy Prepayment Transaction §Participants/NCPA – Have an existing Power Purchase Agreement for clean energy. §Prepay Counterparty – Typically a financial institution with a commodity presence or a financial institution partnered with a commodity market participant §Issuer – A bond issuing entity formed for the sole purpose of selling the prepayment bonds, typically a Joint Powers Authority (“JPA”). §Existing Power Supply Counterparty – Agrees to partial assignment of the existing PPA §Bond Investors – Purchase the non-recourse prepayment bonds Item #3     Packet Pg. 57     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 13 Summary of an Energy Prepayment Structure Mechanics 1)NCPA partially assigns PPA to Counterparty 2)NCPA and Issuer execute a Clean Energy Purchase Contract 3)The Counterparty delivers power to Issuer via a Master Power Supply Agreement 4)Issuer delivers power to NCPA 5)The Issuer issues non-recourse tax-exempt bonds 6)The Issuer makes a prepayment to the Counterparty for power supply 7)NCPA makes payments to the Issuer net of savings 8)Issuer makes debt payments with payments from NCPA 1 Non- Recourse Tax- exempt DebtDebt Service Bond Proceeds NCPA Counterparty MWhs Prepayment $$$ PPA Price less Discount MWhs Issuer Clean Energy Purchase Contract 2 3 4 5 6 7 8 PPA to be “Partially Assigned” Item #3     Packet Pg. 58     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 14 Favorable Risk Allocation – “Take and Pay” Structure Worst Case –> Transaction terminates and NCPA/Participants no longer receive expected savings Counterparty default on energy delivery NCPA receives too much energy and is unable to have Qualified Use and/or has to meet new renewable mandates in the future Debt obligation could obligate NCPA over long-term Rating agency treatment of prepay debt Debt is non-recourse to NCPA, and NCPA’s obligation is take and pay. Rating agencies do not count prepay transactions as debt or fixed costs of NCPA Counterparty will remarket the energy to qualified entities to ensure NCPA compliance with Qualified Use NCPA only pays for energy if/when Counterparty delivers the energy Counterparty assumes debt obligations in the event of Supplier default Risk Mitigation Item #3     Packet Pg. 59     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 15 Why this is a Unique Opportunity? §Non-Recourse Bonds •Prepay Counterparty will owe a termination payment which is what secures bondholders should the transaction terminate before PPA expiration •Ratings are of the Prepay Counterparty •Does not impact Participating Members’ balance sheet •If terminated, reverts to the original terms of the PPA (no savings) §12y Term vs. 30y Term •This transaction ends with the expiration of the Geysers PPA •No need to “replace” the Geysers PPA with other liked-sized PPA(s) §Bond Issuance •~$450m to cover prepayment and cost of issuance §Estimated Savings •Approximately ~$45-50m in savings (~7%) subject to interest-rate sensitivity •Palo Alto share ~$4-5m over PPA term (12y) Item #3     Packet Pg. 60     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 16 Next Steps §Education of a prepayment transaction to the staff, advisory boards, and/or councils of the Geysers PPA Participating Members •Seek feedback/guidance if NCPA should keep the process moving forward §Continue discussions with the California Energy Commission (CEC) •CEC has not provided official guidance on prepays and RPS but stated: -It’s still a long-term contract -The product is unchanged -No substitution -RECs are not unbundled and still posted in the participants’ WREGIS account(s) §NCPA’s Finance Committee / Commission in May 2024 •Seek recommendation/approval to form the financing team •Determine “Bond Issuer” options with bond counsel •Solicit RFP for prepayment counterparty Item #3     Packet Pg. 61     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y 17 Next Steps §Palo Alto – Finance Committee Input – June 4th §NCPA – August 2024 for an informational update •Status of CEC discussions, Anaheim Electric prepay transaction •Status of bond financing docs, update of est. savings, market conditions, and review of the schedule §Fall/Winter 2024, seek Geysers PPA Participants’ City Council approvals and NCPA’s Commission approval to issue bonds •Finalize legal documents, obtain ratings •Seek approval for a target and minimum savings -e.g. target 7%, 4% minimum •Issue bonds at an opportune time to maximize savings (above minimum target approved) Item #3     Packet Pg. 62     N O R T H E R N C A L I F O R N I A P O W E R A G E N C YN O R T H E R N C A L I F O R N I A P O W E R A G E N C Y Questions 18 Item #3     Packet Pg. 63     2 5 3 1 Utilities Advisory Commission Staff Report From: Dean Batchelor, Director of Utilities Lead Department: Utilities Meeting Date: May 1, 2024 Staff Report: 2401-2505 TITLE Utilities Advisory Commission Recommendation to Adopt a Resolution Amending the Gas Utility Long-term Plan (GULP) Objectives, Strategies and Implementation Plan, Amending the Gas Utility Reserves Management Practices, Amending the FY 2025 Gas Fund Budget, 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 Staff recommends that the Utilities Advisory Commission (UAC) recommend the City Council (Council) adopt a resolution (Attachment A): (1) Amending the Gas Utility Long-term Plan (GULP) Objectives, Strategies and Implementation Plan which includes collecting funds via a gas price mitigation adder (Adder) to manage potential future short-term natural gas price spikes; (2) Amending the Gas Utility Reserves Management Practices; (3) Amending the FY 2025 Gas Fund Budget Appropriation by Increasing the Gas Operating Revenues by $2,200,000; 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), effective November 1, 2024. EXECUTIVE SUMMARY The proposed amendments to the GULP Objectives, Strategies and Implementation Plan will provide a mechanism for the City to mitigate the impact on customers and the Gas Utility of future short-term natural gas commodity price spikes such as the one that occurred in the winter of 2022-23. Item #4     Packet Pg. 64     2 5 3 1 The proposal maintains the practice of basing gas commodity charges on the monthly market index. In addition, funds collected via a gas price mitigation adder (Adder) to the Gas Commodity Charge will accumulate in the Gas Rate Stabilization Reserve, to mitigate the impact of future short-term natural gas market price spikes. Staff recommends an Adder of 10.3 cents per therm (estimated 5.2% increase on an annual bill). As this funding accumulates, the City would gradually reduce the maximum Gas Commodity Charge from the current $4 per therm. The funding collected over four years with a 10.3 cent Adder is estimated to be $11.3 million. This is estimated to be sufficient to maintain the Commodity Charge at $2 per therm for a single month even if the market prices spike to as high as $5 per therm in that month. BACKGROUND The Shift to Market Price-Based Commodity Charges In 2012, Resolution 92441 changed the gas purchasing strategy from one in which gas commodity rates2 changed about once per year to one in which a monthly market price-based charge was passed through to customers. In the 10 years prior to that change, the majority of Palo Alto’s natural gas needs were met through fixed-price gas purchases. This strategy succeeded in achieving relatively stable gas supply costs, and hence, relatively stable commodity rates. In times of declining market prices, however, Palo Alto’s costs and resulting commodity rates were higher than the market and higher than Pacific Gas & Electric’s (PG&E) rates which change on a monthly basis and generally mirror the market. Council’s approval of monthly market price-based commodity rates reduced the need for financial reserves and reduced the need for staff resources to manage the gas portfolio. Gas Commodity Price spike of Winter 2022-23 During winter 2022-23, natural gas prices rose dramatically across the western United States. Entering that heating season, there was upward pressure on prices due to a confluence of factors including: (a) historically cold December temperatures, (b) 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. However, those fundamental market conditions alone did not explain the sudden and extreme increase in natural gas prices which is currently 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. Figure 1 shows the published gas market monthly indexes from November 2018 through March 2024 for the PG&E Citygate hub in Northern California, including the winter 2022-23 price surge. 1 Resolution 9244 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-9244.pdf 2 Gas Commodity Rates https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes- reports/reports/city-manager-reports-cmrs/year-archive/2011/id-2106-110111.pdf Item #4     Packet Pg. 65     2 5 3 1 January 2023 natural gas prices were five times greater than November 2022 prices. The PG&E Citygate hub is a delivery point for Palo Alto’s gas purchases and the index on which Palo Alto’s gas commodity rates are based. Figure 1 – Gas Market Prices 3, Council adopted Resolution 100904 which increased the maximum allowed Gas Commodity Charge from $2 per therm to $4 per therm. Because the January 2023 gas market monthly index of nearly $5 per therm exceeded the higher maximum Council- approved Gas Commodity Charge, the full cost of January gas was not recovered through rates; instead, about $1.84 million was withdrawn from the Gas Operations Reserve to cover the shortfall. 5 rebates of $2.4 million, 3 December 19, 2022 https://www.cityofpaloalto.org/Departments/City-Clerk/Citys-Meeting-Agendas/Meeting- Agendas-and-Minutes 4 Resolution 10090 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/resolutions- 1909-to-present/2022/reso-10090.pdf 5 Staff Report 2303-1209 https://cityofpaloalto.primegov.com/Portal/viewer?id=1954&type=0 Item #4     Packet Pg. 66     2 5 3 1 funded by the City’s General Fund, to compensate residential customers for the high energy bills they experienced. Capped-Price Winter Natural Gas Purchasing Strategy through October 2024 In response to the dramatic and unprecedented price spike, Council approved a capped-price winter natural gas purchasing strategy in September 20236 for the gas year November 2023- October 2024 by adopting Resolution 101267. The Gas Commodity Charge continues to be based on a monthly market index price. The capped-price winter natural gas purchasing strategy involved purchasing price caps on the City’s cost of gas for December-February, limiting the price the City paid for gas to $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 to a maximum 15 cents per therm (estimated 7.6% increase to annual bill) applied for 12 months to customer usage through the Gas Commodity Charge. Within the cost constraints approved 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 total cost of the price caps, or insurance, was $1.5 million. Spread out over the entire year, an adder of $0.055 per therm is currently applied to the Gas Commodity Charge through October 2024. This represents approximately $1.81 per month 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 monthly market index price remained under $2 per therm for the December 2023, January 2024, and February 2024 months, so the City did not make use of the contracted price caps it had purchased. In addition to approving the capped-price winter natural gas purchasing strategy, Council directed staff to explore other alternatives for managing potential commodity price spikes in the future. ANALYSIS Establishing a New Strategy for Mitigating Short-term Gas Price Spikes Beginning November 2024 Staff’s proposal maintains the practice of purchasing gas based on a monthly market index price. A gas price mitigation adder (Adder) will be included in the Gas Commodity Charge. The funds will accrue in the Gas Supply Rate Stabilization Reserve. Funds in the reserve can be utilized to offset potential future short-term price spike impacts. Staff recommends an Adder of 10.3 cents per therm (estimated 5.2% increase on an annual bill). Based on this recommendation, an estimated $2.8 million per year will accumulate each year with a total estimated balance of $11.3 million after 4 years if no funds are withdrawn to mitigate short-term market price spikes in the interim. This is in line with the maximum adder approved by Council for the current winter capped price strategy. Historically, PG&E’s gas commodity rates 6 September 2023 https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=13026 7 Resolution 10126 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=61970 Item #4     Packet Pg. 67     2 5 3 1 have been about 6% higher than Palo Alto’s Gas Commodity Charge; the proposed Adder is comparable to this difference. Table 1 – Gas Commodity Charges and Market Price Protection ($ per therm) 8, which are listed in the City’s gas rate schedules and shown by month. If approved by Council, the strategy will be implemented effective November 1, 2024. Changes to the rate schedules are shown in Attachment A and include the changes proposed in the FY 2025 Financial Plans which will be considered by Council in June 2024. . 8 https://www.cityofpaloalto.org/files/assets/public/utilities/rates-schedules-for-utilities/residential-utility- rates/monthly-gas-volumetric-and-service-charges-residential.pdf M M M M A $$$$ A $$$$ A $$$$ A $$$$ A $$$$ A $$$$ A $$$$ A $$$$ Item #4     Packet Pg. 68     2 5 3 1 GULP Revisions The September 20239 GULP update modified the purchasing strategy to include the capped- price winter natural gas purchases. The new strategy, if adopted, requires changes to GULP as shown in Table 1 below. 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 for consideration in a separate staff report. Table 2 – Gas Utility Long-term Plan Revisions GULP Current Proposed Objective 1 Pass a market supply cost signal through to customers with measures to protect against price spikes applied during winter months. Pass a market supply cost signal through to customers with measures to mitigate the impact of short-term natural gas market price spikes. Strategy 1 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. Purchasing natural gas at monthly and daily market index prices; b. Changing gas supply rates monthly to reflect market prices; c. Collecting funds in the Gas Rate Stabilization Reserve to manage potential short-term price spikes; and d. Utilizing those funds if a short- term natural gas market price spike occurs. 9 September 2023 https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=13026 Item #4     Packet Pg. 69     2 5 3 1 Implementation Plan Item 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. Implement market-based supply purchases and commodity rates with measures to protect against price spikes by: a. Adding 10.3 cents per therm to the Gas Commodity Charge from November 2024 through October 2028; and b. Conducting customer communication and outreach. Revisions to the Gas Utility Reserves Management Practices Staff recommends modifying Section 7 in the Gas Utility Reserves Management Practices, which are the guidelines followed in the Utility’s financial planning process, to reflect the new reserve and strategy: Section 7. Rate Stabilization Reserve Funds may be added to the Rate Stabilization Reserve by action of the City Council and held to manage the trajectory of future year rate increases and to mitigate the impact of short-term gas market price spikes. Withdrawal of funds from the Rate Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization Reserve at the end of any fiscal year, any subsequent Gas Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period, except gas price mitigation revenues that may be held in the Rate Stabilization Reserve until needed. The Gas Utility Reserves Management Practices, including the changes proposed to that document in the FY 2025 Financial Plan is included in Attachment A. Fixed Price Purchases Alternative An alternative to staff’s proposal is to purchase some portion of winter gas needs (winter is the most likely time period when a market price spike could occur) at fixed prices. The downside of this strategy is that the City’s cost of gas could deviate significantly from the market price, either higher or lower. This alternative would require structural changes in the way the Gas Commodity Charge is established for the months during which fixed-price purchases are included in the portfolio, as well as a significant amount of staff resources to implement. Continuation of the Capped Price Winter Natural Gas Purchasing Strategy A second alternative is to continue the strategy of purchasing insurance against high market prices. The cost of that insurance varies, and the product is not commonly traded and is expected to be costly. Like familiar types of insurance, premiums are not refunded if the insurance is not Item #4     Packet Pg. 70     2 5 3 1 used. The cost would occur every year and may or may not provide value to Palo Alto’s rate payers. Return to Pass-through without Short-term Price and Cost Protection Variations of Staff Recommendation Table 3 – Summary of Staff Recommendation and Alternatives Alternative Description Consideration Staff Recommendation (self-insured) 10.3 cents per therm Adder; four years; decrease max Commodity Charge to $2 per therm; Estimated $11.3 million reserve balance Variation Higher/lower Adder Larger/smaller reserve balance = more or less price protection Variation Longer/Shorter collection period Larger/smaller reserve balance = more or less price protection Variation Leave max Commodity Charge high/reduce max Commodity Charge faster More price protection for the Gas Utility/more price protection for the customer Fixed-Price Purchases Purchase some fixed-price gas for the winter months Commodity Charges will be higher or lower than the market price and PG&E’s rates Capped Price Winter Purchases (Insurance from the market) Replicate the winter 2023-2024 strategy Cost and availability of insurance is uncertain; cost is sunk whether insurance is needed or not Return to previous strategy Pass through market price with no price mitigation Customers pay market price in all scenarios, may consider higher maximum Commodity Charge Item #4     Packet Pg. 71     2 5 3 1 FISCAL/RESOURCE IMPACT Table 3 STAKEHOLDER ENGAGEMENT 10 document. In addition, customers will be notified via utility outbound communications and marketing updates. ENVIRONMENTAL REVIEW 10 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 B B W 5 9$5$5 S 1 4$1$4 A 3 6$3$5 Item #4     Packet Pg. 72     2 5 3 1 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. ATTACHMENTS AUTHOR/TITLE Item #4     Packet Pg. 73     6056828 1 Resolution No. Resolution of the Council of the City of Palo Alto Amending the Gas Utility Long-term Plan Objectives, Strategies, and Implementation Plan, Amending the Gas Utility Reserves Management Practices, Amending the FY 2025 Gas Fund Budget, 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, approving the Gas Utility Long-term Plan Objectives, Strategies and Implementation Plan (the "Plan"), amended on April 23, 2012 via Resolution No. 9244 and on September 18, 2023 via Resolution No. 10126. B. On May 1, 2024 staff presented the Utilities Advisory Commission and the Council information proposing a third amendment to Resolution No. 10126, to further amend the Plan to include a gas price mitigation strategy, which will collect funds to mitigate the impact of short-term gas price spikes on customer rates. C. 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. D. On June _, 2024, the Council adopted Resolution ____, approving the Fiscal year 2025 Gas Utility Financial Plan including the Gas Utility Reserves Management Practices. E. Implementing the gas price mitigation strategy requires amending the FY 2025 Gas Fund Budget revenue by $2,200,000. F. Implementing the gas price mitigation strategy 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 C through F to this Resolution. The Council of the City of Palo Alto does hereby RESOLVE as follows: 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. The Council hereby approves the amendments to the Gas Utility Reserve Practices, attached to this Resolution as Exhibit B. Item #4     Packet Pg. 74     6056828 2 SECTION 3. Resolution No. 10126 is hereby amended in so far as the Plan, as amended, is hereby approved. SECTION 4. The Council hereby approves increasing the FY 2025 gas operating revenues by $2,200,000. SECTION 5. 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 C. Utility Rate Schedule G-1, as amended, shall become effective November 1, 2024. SECTION 6. 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 D. Utility Rate Schedule G-2, as amended, shall become effective November 1, 2024. SECTION 7. 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 E. Utility Rate Schedule G-3, as amended, shall become effective November 1, 2024. SECTION 8. 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 F. Utility Rate Schedule G-10, as amended, shall become effective November 1, 2024. SECTION 9. 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. B. SECTION 10. 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 #4     Packet Pg. 75     6056828 3 SECTION 11. 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. The Council finds that changing the Commodity Charge cost component of gas rates to meet operating expenses and financial reserve needs 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 #4     Packet Pg. 76     Adopted April 23, 2012 via Resolution 9244 4 0 4 5 Proposed Gas Utility Long-term Plan (GULP) Objectives, Strategies and Implementation Plan GULP Objectives: 1.Market price transparency – Pass a market supply cost signal through to customers with measures to mitigate the impact of short-term gas market price spikes.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 mitigate the impact of short-term gas market price spikes by: 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. Collecting funds in the Gas Rate Stabilization Reserve to manage potential short-term price spikes; and d. Utilizing those funds if a short-term gas market price spike occurs. 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 Item #4     Packet Pg. 77     Adopted April 23, 2012 via Resolution 9244 4 0 4 5 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 #4     Packet Pg. 78     GULP Implementation Plan: 1. Implement market-based supply purchases and commodity rates with measures to mitigate the impact of short-term gas market price spikes by:protect against price spikes applied during winter months by: a.Adding 10.3 cents per therm to the Gas Commodity Charge from November 2024 through October 2028Developing 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 #4     Packet Pg. 79     Attachment A: Exhibit 2 4 0 4 6 APPENDIX C: GAS UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices shall be used when developing the Gas Utility Financial Plan: Section 1. Definitions a) “Financial Planning Period” – The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, if the Financial Plan delivered in conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015 to FY 2019 would be the Financial Planning Period. b) “Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to the Utility’s Unrestricted Net Assets. c) “Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets as the difference between its assets and liabilities. d) “Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Supply Fund Reserves The Gas Utility’s Supply Fund Balance is reserved for the following purposes: a) For existing contracts, as described in Section 4 (Reserve for Commitments) b)For operating and capital budgets re-appropriated from previous years, as described in Section 5 (Reserve for Re-appropriations) Section 3. Distribution Fund Reserves a) For existing contracts, as described in Section 4 (Reserve for Commitments) b) For operating and capital budgets re-appropriated from previous years, as described in Section 5 (Reserve for Re-appropriations) c) For cash flow management and contingencies related to the Gas Utility’s Capital Improvement Program (CIP), as described in Section 6 (CIP Reserve) d) For rate stabilization, as described in Section 7 (Rate Stabilization Reserve) e) For operating contingencies, as described in Section 8 (Operations Reserve) f)For tracking unspent or unallocated revenues from the sale of carbon allowances freely allocated by the California Air Resources Board to the gas utility under the State’s Cap and Trade Program, as described in Section 11 (Cap and Trade Program Reserve) g) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 9 (Unassigned Reserves) Item #4     Packet Pg. 80     Attachment A: Exhibit 2 4 0 4 6 Section 4. Reserve for Commitments Item #4     Packet Pg. 81     Attachment A: Exhibit 2 4 0 4 6 Section 7. Rate Stabilization Reserve Item #4     Packet Pg. 82     Attachment A: Exhibit 2 4 0 4 6 If the Operations Reserve reaches its maximum level, any further additions to the Gas Utility’s Fund Balance will be held in the Unassigned Reserve. If there are any funds in the Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them to the Gas Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016 through FY 2020, the Financial Plan shall include a plan to return or assign any funds in the Unassigned Reserve by the end of FY 2016. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. Section 10. Intra-Utility Transfers Between Supply and Distribution Funds The Gas Utility records costs in two separate funds: the Gas Supply Fund and the Gas Distribution Fund. At the end of each fiscal year staff is authorized to transfer funds between the Gas Supply Fund and Gas Distribution Fund if consistent with the purposes of the two reserves involved in the transfer and an amount in order to balance gas utility reserves to avoid negative balances. For example, Gas Distribution revenues are needed to pay for certain supply-related costs such as administration of the Gas Supply Fund. equal to the difference between Gas Supply Fund costs and Gas Supply Fund Revenues, from the Gas Distribution Fund Operations Reserve to the Gas Supply Fund, or vice versa. Such transfers shall be included in the ordinance closing the budget for the fiscal year. Section 11. Cap and Trade Program Reserve This reserve tracks holds revenues from the sale of carbon allowances freely allocated by the California Air Resources Board to the gas utility, under the State’s Cap and Trade Program. Funds in this Reserve are managed in accordance with the City’s Policy on the Use of Freely Allocated Allowances under the State’s Cap and Trade Program (the Policy), adopted by Council Resolution 9487 in January 2015. At the end of each fiscal year, the Cap and Trade Program Reserve will be adjusted by the net of revenues and expenses associated with the Cap and Trade program.At the end of each fiscal year staff is authorized to transfer all revenues from the sale of allocated carbon allowances to this reserve. Item #4     Packet Pg. 83     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 11711-1-20243 dated 11-1-20237-1-2024 Sheet No G-2-1 4 0 4 8 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. This schedule applies anywhere the City of Palo Alto provides Gas Service. Per Service Monthly Service Charge:.............................................................................................$149.2429.78 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: ..................................................................................................$1.02820.8941 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 Ggas, including a municipal purchase discount1, and $0.103 per therm to mitigate the impact of short-term market 1 Adopted via Resolution 9451, on September 15, 2014. Item #4     Packet Pg. 84     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 11711-1-20243 dated 11-1-20237-1-2024 Sheet No G-2-2 4 0 4 8 price spikes2.and a maximum $0.15/per therm cost for capped price winter natural gas purchases3. 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 when Gas is burnedin 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.4 {End} 2 Adopted via Resolution XXXX on _____, 2024 3 Adopted via Resolution 10126, on September 18, 2023. 4 Monthly gas and commodity and volumetric rates are available herehere, or by visiting https://www.cityofpaloalto.org/files/assets/public/utilities/business/business-rates/monthly-gas-volumetric-and-service- charges-commercial.pdf Item #4     Packet Pg. 85     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 11711-1-20243 dated 117-1-20237-1-2024 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. This schedule applies anywhere the City of Palo Alto provides Gas Service. Per Service Monthly Service Charge: $682.85593.79 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: ..................................................................................................$1.01790.8852 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 #4     Packet Pg. 86     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 11711-1-20243 dated 117-1-20237-1-2024 Sheet No G-3-2 purchase discount1, and $0.103 per therm for mitigating the impact of short-term natural gas market price spikes2and a maximum $0.15/per therm cost for capped price winter natural gas purchases3. 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.4 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 Customers may request a rate schedule change at any time to any applicable City of Palo Alto full-service rate schedule. 1 Adopted via Resolution 9451, on September 15, 2014. 2 Adopted via Resolution XXXX on _____, 2024 3 Adopted via Resolution 10126, on September 18, 2023. 4 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 #4     Packet Pg. 87     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 11711-1-20243 dated 117-1-20237-1-2024 Sheet No G-3-3 {End} Item #4     Packet Pg. 88     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 11711-1-20243 dated 7-1-2024 Sheet No. G-10-1 4 0 4 9 A. APPLICABILITY: This schedule applies to the sale of natural gasGas to the City-owned compressed natural gas (CNG) fueling station at the Municipal Service Center in Palo Alto. Applies to the City’s CNG fueling station located at the Municipal Service Center in City of Palo Alto. Per Service Monthly Service Charge:.............................................................................................$100.9387.77 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...........................................................................................................$0.016645 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 discount1, and $0.103 per therm for mitigating the impact of short-term natural gas market price spikes2.and a maximum 1 Adopted via Resolution 9451, on September 15, 2014. 2 Adopted via Resolution XXXX on _____, 2024 Item #4     Packet Pg. 89     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 11711-1-20243 dated 7-1-2024 Sheet No. G-10-2 4 0 4 9 $0.15/per therm cost for capped price winter natural gas purchases3. 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 when Gas is burnedin 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.4 {End} 3 Adopted via Resolution 10126, on September 18, 2023. 4 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 #4     Packet Pg. 90     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 117-1-20237-1-2024 Effective 11711-1-20243 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. This schedule applies anywhere the City of Palo Alto provides Gas Service. Per Service Monthly Service Charge:.................................................................................................$16.114.01 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:....................................................................................... $0.78286807 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:............................................................................................. ............................................................................................................$2.00161.7 406 Item #4     Packet Pg. 91     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 117-1-20237-1-2024 Effective 11711-1-20243 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 discount1,and $0.103 per therm for mitigating the impact of short-term natural gas market price spikes2 and a maximum $0.15/per therm cost for capped price winter natural gas purchases3. 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 1 Adopted via Resolution 9451, on September 15, 2014. 2 Adopted via Resolution XXXX on _____, 2024 3 Adopted via Resolution 10126, on September 18, 2023. Item #4     Packet Pg. 92     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 117-1-20237-1-2024 Effective 11711-1-20243 per therm rates for the Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges are posted on the City Utilities website.4 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. 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} 4 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 #4     Packet Pg. 93     May 1, 2024 www.cityofpaloalto.org Recommendation to Amend the Gas Utility Long-term Plan and the Gas Utility Reserves Management Practices Utilities Advisory Commission Item #4     Packet Pg. 94     TITLE 40 FONT BOLD Subtitle 32 font 2 www.cityofpaloalto.org §Prior to 2012, most of Palo Alto’s gas was purchased at fixed prices resulting in  relative rate stability §In 2012, Council approved a market price pass-through strategy (with a maximum  Commodity Charge)  §Market prices remained under the previous Council-approved $2/therm maximum  Commodity Charge until Winter 2022-23 Background Item #4     Packet Pg. 95     TITLE 40 FONT BOLD Subtitle 32 font 3 www.cityofpaloalto.org §November 2022: western U.S. gas prices started rising §Staff communicated to customers about the expected  higher prices §December 2022: Council increased the $2/therm maximum  Commodity Charge to $4/therm §Monthly index price for January 2023 was nearly $5/therm §Reserves ($1.84 million) were utilized to cover a portion of  the price increase  Winter 2022-23 Price Surge Item #4     Packet Pg. 96     TITLE 40 FONT BOLD Subtitle 32 font 4 www.cityofpaloalto.org Gas Monthly Index Prices Item #4     Packet Pg. 97     TITLE 40 FONT BOLD Subtitle 32 font 5 www.cityofpaloalto.org §Continued purchasing gas at prices tied to a market monthly index §Council-approved $0.15/therm maximum impact to Commodity  Charge in order to purchase price cap “insurance” §For December, January and February, about half of anticipated gas  demand purchased with $2/therm price cap §Cost for winter 2023-24 price cap: §$1.5 million §$0.055/therm applied to Commodity Charge November 2023 – October  2024 §About $1.80/month for typical residential customer §Gas prices remained under $2/therm Council Approved a Capped-Price Winter Gas Purchasing Strategy for Winter 2023-24 Item #4     Packet Pg. 98     6 www.cityofpaloalto.org §Fund Gas Rate Stabilization Reserve for gas price mitigation purposes §Include $0.103/therm in Commodity Charge for 4 years to fund reserve §Target $11.3 million in funding, full protection of one month price spike up to  $5/therm (winter 2022-23 peak) or lower peaks for more months §Gradually lower maximum Commodity Charge from $4/therm to $2/therm by end  of year 4 Staff Recommends Funding Reserve to Self- insure Against Future Short-term price Spikes Item #4     Packet Pg. 99     TITLE 40 FONT BOLD Subtitle 32 font 7 www.cityofpaloalto.org Levels of Market Price Protection Item #4     Packet Pg. 100     8 www.cityofpaloalto.org Customer Bill Impact Item #4     Packet Pg. 101     TITLE 40 FONT BOLD Subtitle 32 font 9 www.cityofpaloalto.org Reserve Funds Collected – Different Adder Scenarios Item #4     Packet Pg. 102     10 www.cityofpaloalto.org Comparison of Alternatives This Photo by Unknown Author is licensed under CC BY-NC-ND Alternative Description Consideration Staff Recommendation (self-insured) 10.3 cents per therm Adder; four years;  decrease max Commodity Charge to $2  per therm;  Estimated $11.3 million reserve balance  Variation Higher/lower Adder Larger/smaller reserve balance = more or less  price protection Variation Longer/Shorter collection period Larger/smaller reserve balance = more or less  price protection Variation Leave max Commodity Charge  high/reduce max Commodity Charge  faster More price protection for the Gas  Utility/more price protection for the  customer Fixed-Price Purchases Purchase some fixed-price gas for the  winter months Commodity Charges will be higher or lower  than the market price and PG&E’s rates Capped Price Winter Purchases (Insurance from the market) Replicate the winter 2023-2024 strategy Cost and availability of insurance is uncertain;  cost is sunk whether insurance is needed or  not Return to previous strategy Pass through market price with no price  mitigation Customers pay market price in all scenarios,  may consider higher maximum Commodity  Charge Item #4     Packet Pg. 103     TITLE 40 FONT BOLD Subtitle 32 font 11 www.cityofpaloalto.org Proposed Changes to GULP Item #4     Packet Pg. 104     TITLE 40 FONT BOLD Subtitle 32 font 12 www.cityofpaloalto.org Proposed Changes to Gas Utility Reserves Management Practices Amend Section 7 Funds may be added to the Rate Stabilization Reserve by action of the City Council and  held to manage the trajectory of future year rate increases and to mitigate the impact of  short-term gas market price spikes. Withdrawal of funds from the Rate Stabilization  Reserve requires Council action. If there are funds in the Rate Stabilization Reserve at  the end of any fiscal year, any subsequent Gas Utility Financial Plan must result in the  withdrawal of all funds from this Reserve by the end of the Financial Planning Period,  except gas price mitigation revenues that may be held in the Rate Stabilization Reserve  until needed. Item #4     Packet Pg. 105     TITLE 40 FONT BOLD Subtitle 32 font 13 www.cityofpaloalto.org •Finance Committee Consideration June 4, 2024 •Council Consideration August 2024 •Implement Council-approved strategy in October 2024  for gas year November 2024-October 2025 Next Steps Item #4     Packet Pg. 106     TITLE 40 FONT BOLD Subtitle 32 font 14 www.cityofpaloalto.org Recommended Motion Utilities Advisory Commission Recommends Council  Approve a Resolution  (1) Amending the Gas Utility Long-term Plan (GULP) Objectives, Strategies and  Implementation Plan which includes collecting funds via a gas price mitigation Adder  to manage potential future short-term natural gas price spikes;  (2) Amending the Gas Utility Reserves Management Practices;  (3) Amending the FY 2025 Gas Fund Budget Appropriation by Increasing the Gas  Operating Revenues by $2,200,000; 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), effective November 1, 2024 Item #4     Packet Pg. 107     Item No. 5. Page 1 of 2 Utilities Advisory Commission Staff Report From: Dean Batchelor, Director Utilities Lead Department: Utilities Meeting Date: May 1, 2024 Staff Report: 2403-2756 TITLE Staff Recommends That the Utilities Advisory Commission Recommend the City Council Adopt the Proposed Operating and Capital Budgets for the Utilities Department for the Fiscal Year 2025 RECOMMENDATION Staff recommends the Utilities Advisory Commission recommend the City Council adopt the Proposed Operating and Capital Budgets for the Utilities Department for Fiscal Year 2025 BACKGROUND Linked and referenced below are the FY 2025 Proposed Operating and Capital budgets for the Utilities Department. Due to the number of pages of the CIP budget, staff only printed the CIP overview fand five year forecast of each utility for FY 2025 – FY 2029. The entire Utilities CIP budget for FY 2025 – FY 2029 with the individual project pages can be downloaded and viewed in full from the links below: Preliminary Proposed Utilities Capital Budgets for FY 2025 – FY 2029 ➢Electric CIP ➢Fiber Optic CIP ➢Gas CIP ➢Water CIP ➢Wastewater CIP The entire Utilities Operating budget for FY 2025 can be downloaded and viewed in full from the link below: ➢Preliminary Proposed Utilities Operating Budget for FY 2025 Please refrain from discussing the preliminary proposed budget materials with Council or the public until after Monday, April 29, 2024 when the budget is published. Item #5     Packet Pg. 108     Item No. 5. Page 2 of 2 ATTACHMENTS AUTHOR/TITLE: Item #5     Packet Pg. 109     UTILITIES ADVISORY COMMISSION Preliminary Proposed FY 2025 Utilities  Operating and Capital Budgets MAY 1, 2024 www.cityofpaloalto.org Item #5     Packet Pg. 110     2 BUDGET REQUEST PROCESS Submits Request DEPT HR OMB CMO UAC FC Approves Request Council Preliminary Requests Recommended Requests General review process for staffing, budget, and project changes Item #5     Packet Pg. 111     3 PROJECTED CHANGE IN RESIDENTIAL MEDIAN BILL - SFPUC 1)FY 2025 projection incorporates results of cost-of-service analysis 2)Based on general fund transfer of 11.9% of gross revenue in FY25; gas rate changes shown with commodity rates held constant; actual gas commodity rates vary monthly 3)Storm Drain fees increase by CPI index annually per approved 2017 ballot measure (2.6% in FY 2025) 4)Based on an FY 2023 monthly residential bill of $369 Item #5     Packet Pg. 112     4 •Public/private partnership with Tesla for Hanover Substation  •Approval of the Reliability and Resiliency Strategic Plan for the Electric Utility •AMI Meters: approximately 30,000 or 40% installed •Established pilot area boundaries for Grid Modernization (Grid Mod) and Fiber-to- the-Premise (FTTP) projects. •New OMS for improved outage communications DEPARTMENT FY 2024 ACCOMPLISHMENTS Item #5     Packet Pg. 113     5 FY 2024 STAFFING REPORTAuthorized 258 FTE Separations •5 Retirements  •5 Voluntary Recruitment and retention strategies •Department Human Resource Liaisons •Childcare assistance •PAUSD K-12 enrollment Hires and Promotions •17 External •9 Promotions Item #5     Packet Pg. 114     ELECTRIC FUND MAY 1, 2024 www.cityofpaloalto.org Item #5     Packet Pg. 115     7 FY 2024 ACCOMPLISHMENTS •Launched the Advanced Heat Pump Water Heater (HPWH) Program •Completed Phase 1 and 2 of Foothills Fire Mitigation  •Completed electric cost of service study FY 2025 INITIATIVES •Electrification related business processes, efficiency programs, and TOU rates •Rebalance the electric supply portfolio •Design and identify pilot area for whole residential home electrification and gas  decommissioning. •Enhance and accelerate HPWH installations ELECTRIC - ACCOMPLISHMENTS AND INITIATVES Item #5     Packet Pg. 116     8 ELECTRIC – FUND HIGHLIGHTSpages 9-22 EXPENSES $272M YoY Increase $5.0M or 1.9% •Capital improvements •Salaries & Benefits, increase 6.04 FTE •Contracts and General expenses REVENUES $261M YoY Increase $20.1M or 8.4%  •Bond financing •Net sales •Return on investments  Item #5     Packet Pg. 117     9 ELECTRIC – CAPITAL IMPROVEMENT CIP Category FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Customer Connections $2.7M $2.7M $2.7M $2.7M $2.7M System Improvements $23.7M $10.0M $8.3M $5.7M $5.8M Grid Modernization $40.0M $50.0M $50.0M $50.0M $50.0M Grand Total $66.4M $62.7M $61.0M $58.4M $58.5M Item #5     Packet Pg. 118     10 Multi year one-time project, FY 2024 – FY2030 Overhead - Years 1 through 4, purchase and construction to upgrade all overhead areas Substation - Years 5 and 6, construction to upgrade substation transformers, purchase equipment in Year 3 Underground - Years 6 and 7, construction to upgrade all underground areas, purchase equipment in Year 5 (1) EL-14000 Coleridge/Cowper/Tennyson 4/12kV,  (2) EL-17001 East Meadow Circles 4/12 kV,  (3) EL-11003 Rebuild Underground District 15,  (4) EL-13003 Rebuild Underground District 16,  (5) EL-14002 Rebuild Underground District 20,  (6) EL-17000 Rebuild Underground District 23, (7) EL-16000 Rebuild Underground District 26, (8) EL-19003 Rebuild Underground District 30 (9) EL-08001 Underground District 42, and  (10) EL-08001 Underground District 43 ELECTRIC – GRID MODERNIZATION Item #5     Packet Pg. 119     FIBER FUND MAY 1, 2024 www.cityofpaloalto.org Item #5     Packet Pg. 120     12 FY 2024 ACCOMPLISHMENTS •Finalized pilot area for Fiber-to-the-Premise (FTTP) •Allocated internal resources for FTTP business FY 2025 INITIATIVES •Expand the fiber backbone network •Conduct cost and benefit analysis study •Launch Palo Alto Fiber Internet in the pilot area FIBER - ACCOMPLISHMENTS AND INITIATVES Item #5     Packet Pg. 121     13 FIBER – FUND HIGHLIGHTSpages 23 - 29 EXPENSES $25.3M YoY Decrease $3.8M or 13.1% •Capital Improvement   REVENUES $4.5M YoY Decrease $0.02M or 0% •Increase in Return on Investments •Offset by decrease in Net Sales   Item #5     Packet Pg. 122     14 FIBER – CAPITAL IMPROVEMENT CIP Category FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Fiber Optics – System Improvement $0.2M $0.2M $0.2M $0.2M $0.2M Fiber Optics – System Rebuild $12.5M $13.0M Fiber-to-the-Premises (FTTP)$8.0M $13.0M Fiber Customer Connections $0.2M $0.3M $0.3M $0.3M $0.2M Grand Total $20.9M $13.5M $0.5M $0.5M $0.4M Item #5     Packet Pg. 123     GAS FUND MAY 1, 2024 www.cityofpaloalto.org Item #5     Packet Pg. 124     16 FY 2024 ACCOMPLISHMENTS •Federal grant award for Natural Gas Distribution Infrastructure Safety and  Modernization •Gas commodity mitigation purchase strategy •Gas Main Replacement 24A FY 2025 INITIATIVES •Complete construction of Gas Main Replacement 24B •Cross-bore Phase IV •Conduct study and identify proof of concept area for downsizing gas system GAS - ACCOMPLISHMENTS AND INITIATVES Item #5     Packet Pg. 125     17 GAS – FUND HIGHLIGHTSPages 30 - 43 EXPENSES $68.5M YoY Decrease $7.5M or 9.9%  •Capital Improvement •Utility Purchases  •S&B, add 1.24 FTE REVENUES $70.4M YoY Increase $3.4M, 5.2% •Net sales •Return on investments Item #5     Packet Pg. 126     18 GAS – CAPITAL IMPROVEMENT CIP Category FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Customer Connections $0.8M $0.7M $0.7M $0.7M $0.7M Main Replacements $6.6M $4.2M $6.7M $4.7M $7.4M System Improvements $2.1M $1.1M $1.1M $1.1M $1.1M Grand Total $9.5M $6.0M $8.5M $6.5M $9.2M Item #5     Packet Pg. 127     WASTEWATER FUND MAY 1, 2024 www.cityofpaloalto.org Item #5     Packet Pg. 128     20 FY 2024 ACCOMPLISHMENTS •Sanitary Sewer Replacement Project 31 (WC-19001) FY 2025 INITIATIVES •Complete Sewer Master Plan Study WASTEWATER - ACCOMPLISHMENTS AND INITIATVES Item #5     Packet Pg. 129     21 WASTEWATER – FUND HIGHLIGHTS pages 45 - 54 EXPENSES $25.1M YoY Decrease $0.2M  •Capital Improvement REVENUES $26.0M YoY Increase $2.3M, 9.7% •Net sales Item #5     Packet Pg. 130     22 WASTEWATER – CAPITAL IMPROVEMENT CIP Category FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Customer Connections $0.5M $0.5M $0.5M $0.5M $0.5M Sewer Replacements $1.0M $2.0M $3.0M 8.0M $3.5M System Improvements $1.1M $1.1M $1.2M $1.8M $1.2M Grand Total $2.6M $3.6M $4.6M $10.3M $5.2M Item #5     Packet Pg. 131     WATER FUND MAY 1, 2024 www.cityofpaloalto.org Item #5     Packet Pg. 132     24 FY 2024 ACCOMPLISHMENTS •Water Main Replacement Project 28 (WS-14001) •Water Regulation Stations (WS-07000) •Started the One Water Plan FY 2025 INITIATIVES •Water Main Replacement Project 29 (WS-15002) •Water Seismic Project – Park and Dahl Reservoirs •Complete alternative water resources for One Water Plan WATER - ACCOMPLISHMENTS AND INITIATVES Item #5     Packet Pg. 133     25 WATER – FUND HIGHLIGHTSpages 55 - 65 EXPENSES $58.1M YoY Decrease $18.6M or 24.2% •Capital Improvement •Tank Non WMR year REVENUES $56.5M YoY Increase $2.9M or 5.4% •Net sales •Return on investments Item #5     Packet Pg. 134     26 WATER – CAPITAL IMPROVEMENT CIP Category FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Customer Connections $0.9M $1.0M $1.0M $1.1M $1.1M Main Replacements $0.4M $9.4M $0.5M $10.4M $0.6M System Improvements $2.5M $2.0M $2.1M $2.2M $2.3M Water Tank Seismic Upgrade $3.5M $7.0M $7.0M 0.9M $1.0M Grand Total $6.8M $19.4M $10.6M $14.6M $5.0M Item #5     Packet Pg. 135     POSITION CHANGES New and reclassifications MAY 1, 2024 www.cityofpaloalto.org Item #5     Packet Pg. 136     28 RECOMMENDED POSITION REQUESTS Cross Connection Control Program, +2.0 FTE -1.0 FTE Project Coordinator -1.0 FTE Meter Technician Grid Modernization, +6.0 FTE -2.0 FTE Electric Project Engineers -1.0 FTE Heavy Equipment Operator/IR -1.0 FTE Utilities Installer Repairer -1.0 FTE Cement Finisher -1.0 FTE Electrician – Lead Customer Support, +1.0 FTE -    1.0 FTE Project Coordinator Item #5     Packet Pg. 137     29 RECOMMENDED POSITION RECLASS Water Transmission - Reclassifications -4.0 FTE Water System Operator II to Utilities Installer  Repairer -2.0 FTE Sr. Water System Operator to Utilities Installer  Repairer - Lead  Item #5     Packet Pg. 138     30 STAFF RECOMMENDATION TO UAC FOR APPROVAL Staff requests that the Utilities Advisory Commission (UAC) recommend that the  Council approve proposed FY 2025 Utilities Operating Budget. Staff requests that the Utilities Advisory Commission (UAC) recommend that  the Council approve proposed FY 2025 Utilities Capital Budget. Item #5     Packet Pg. 139     Item #5     Packet Pg. 140