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HomeMy WebLinkAbout2025-02-05 Utilities Advisory Commission Agenda Packet 2 Regular Meeting February 05, 2025 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 COMMISSION Regular Meeting Wednesday, February 05, 2025 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. The meeting will be broadcast on Cable TV Channel 26, live on YouTube https://www.youtube.com/c/cityofpaloalto, and streamed to Midpen Media 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 UAC@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 UAC@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.  1 Regular Meeting February 05, 2025 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.   2 Regular Meeting February 05, 2025 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. 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.  2 Regular Meeting February 05, 2025 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.   3 Regular Meeting February 05, 2025 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. CALL TO ORDER 6:00 pm – 6:05 pm AGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 pm – 6:10 pm The Chair or Board majority may modify the agenda order to improve meeting management. PUBLIC COMMENT 6:10 pm – 6:25 pm Members of the public may speak to any item NOT on the agenda. APPROVAL OF MINUTES 6:25 pm – 6:30 pm 1. Approval of the Minutes of the Utilities Advisory Commission Meeting Held on January 7, 2025 UTILITIES DIRECTOR REPORT 6:30 pm – 6:45 pm NEW BUSINESS (a 10 minute break may be imposed during this section) 2. Reliability and Resiliency Strategic Plan: Update on Studies (Discussion 6:45pm – 9:00pm) Staff: Jonathan Abendschein and Karla Dailey 2A) Supply and Resiliency Cost/Benefit Analysis and Program Ideas (Buro Happold) (6:45pm – 8:05pm) 2B) Airport Microgrid (Burns McDonnell) (8:05pm – 8:35pm) 2C) Distribution Cost/Benefit Analysis (E3) (8:35pm – 9:00pm) FUTURE TOPICS FOR UPCOMMING MEETING and REVIEW OF THE 12 MONTH ROLLING CALENDAR: March 5, 2025 COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS 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 Information Report: Utilities Quarterly Report for FY25-Q1 Results of the Business and Key Account Customer Electric and Water Utility Satisfaction Survey  3 Regular Meeting February 05, 2025 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.   3 Regular Meeting February 05, 2025 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. 12-Month Rolling Calendar Public Letter(s) to the UAC  4 Regular Meeting February 05, 2025 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.   4 Regular Meeting February 05, 2025 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. PUBLIC COMMENT INSTRUCTIONS Members of the Public may provide public comments to teleconference meetings via email, teleconference, or by phone. may be submitted by email to UAC@CityofPaloAlto.org. 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. 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. 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. 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.  5 Regular Meeting February 05, 2025 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.   4 Regular Meeting February 05, 2025 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. Attachments not included. Attachments cannot be added to a DOCX compile.  6 Regular Meeting February 05, 2025 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 6 2 8 4 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Utilities Director Lead Department: Utilities Meeting Date: February 5, 2025 Report #: 2501-3992 TITLE Approval of the Minutes of the Utilities Advisory Commission Meeting Held on January 7, 2025 RECOMMENDATION Staff recommends that the UAC consider the following motion: Commissioner ______ moved to approve the draft minutes of the January 7, 2025 meeting as submitted/amended. Commissioner ______ seconded the motion ATTACHMENTS Attachment A: 01-07-2025 UAC Minutes AUTHOR/TITLE: Kaylee Burton Item #1     Packet Pg. 7     Utilities Advisory Commission Minutes Approved on: Page 1 of 20 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF JANUARY 7, 2025 SPECIAL MEETING CALL TO ORDER Chair Scharff called the meeting of the Utilities Advisory Commission (UAC) to order at 6:03 PM. Present: Chair Scharff, Vice Chair Mauter; and Commissioners Croft, Gupta, Metz, Phillips, and Tucher Absent: AGENDA REVIEW AND REVISIONS None ORAL COMMUNICATIONS Dave Warner encouraged commissioners to read his November 25 letter for further details. If the Tuolumne was flowing at 35 percent below its average, the SFPUC’s water rights were enough to fully supply the region for a year. Spending more money to improve reliability would increase the cost of water. The SFPUC’s Long-Term Vulnerability Analysis goes in depth into the many risks to costs. Tree rings in the last 1100 years do not show a drought close to the severity of the design drought. Shortening the design drought by a year would result in a return period of once over 1000 years. Table 4.6 in the One Water Plan showed 35% weight on reliability, 30% weight on environmental benefits, and 20% weight on unit cost; therefore, half the weight was on unit cost and environmental benefits. Mr. Warner believed the regional water system supply, longer drought duration, and climate change were not issues of concern. Mr. Warner thought the focus should be on the cost of water. Peter Drekmeier recommended that BAWSCA be invited to return to the UAC to explain how BAWSCA was addressing the December 2024 SFPUC performance audit commissioned by the Board of Supervisors of San Francisco. Mr. Drekmeier’s concern was change orders. At almost every meeting there were votes to add costs to contractors/consultants’ contracts. In the recent budget, the Regional Water Program costs were $330 million over budget, of which BAWSCA was responsible for two-thirds ($220 million). Palo Alto was responsible for 7 percent of BAWSCA’s portion ($15 million). An approximately 10-year-old SFPUC survey showed that protecting the environment was the number one motivator (84 percent) for people to conserve Item #1     Packet Pg. 8     Utilities Advisory Commission Minutes Approved on: Page 2 of 20 water or support alternative water supplies, higher than having a drought-proof or reliable water supply. A few years ago, over 70 percent of bay-wide voters approved Measure AA to fund wetland restoration in the bay. Conserved water was impounded behind dams. Previously, the unimpaired flow averaged 12 percent in the lower Tuolumne but it was 79 percent in 2017. For a week in 2017, the reservoir was full and up to 15,000 cfs of water was spilled. If the Bay Delta Plan was in place, the unimpaired flow would have been 40 percent for five years, 44 percent in 2017, providing full storage and a much healthier Tuolumne River. Mr. Drekmeier opined that alternative water supply was not needed for water supply reasons, it does not benefit the environment, and it costs a lot of money. APPROVAL OF THE MINUTES ITEM 1: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on December 4, 2024 Chair Scharff asked for a motion on the December 4, 2024 UAC draft meeting minutes. Kaylee Burton proposed a change in the first paragraph on Packet Page 9 to read: To facilitate identification, high-density polyethylene mains were color-coded yellow for gas, black with a blue stripe for water, and black with a green stripe for wastewater. Gas laterals are yellow, and water and wastewater services and laterals are black. ACTION: Commissioner Croft moved to approve the draft minutes of the December 4, 2024 meeting as amended by Ms. Burton. Vice Chair Mauter seconded the motion. The motion carried 6-1 with Chair Scharff, Vice Chair Mauter; and Commissioners Croft, Metz, Gupta, and Tucher voting yes. Commissioner Phillips abstained. UTILITIES DIRECTOR REPORT Assistant City Manager Kiely Nose stated that the Council inducted two new members last night. Ed Lauing was elected as mayor and Vicki Veenker as vice mayor. Assignments for boards, committees, and commissions were expected in the coming month. Staff will keep the UAC apprised of who their representative is and any changes impacting the UAC. Dean Batchelor retired at the end of 2024. On behalf of the City Manager’s Office, Ms. Nose assured the Commission there was continuity within the department and the City organization. Ms. Nose and Mr. Kurotori were overseeing the department. This week, the City Manager will notify the UAC about the transition plans and status. The Utilities Director position will be posted shortly. Utilities Chief Operating Officer Alan Kurotori delivered the Director's report. SF Chronicle Article about Drinking Water: Recently, the San Francisco Chronicle published an article titled, “Popular Bay Area foods contain high levels of plastic chemicals, study finds.” The Item #1     Packet Pg. 9     Utilities Advisory Commission Minutes Approved on: Page 3 of 20 article stated that a high level of BPA was found at a Palo Alto business, Boba Guys. The article mentioned a treated water sample was taken but did not mention Aquatabs was added. The study separately tested Palo Alto’s tap water and did not find any of the 18 monitored constituents. Staff brought this to the Chronicle food reporter’s attention in the hopes they would publish a clarification. Utilities Wildfire Mitigation and Undergrounding in the Foothills: The undergrounding project of overhead powerlines in the wildfire-urban interface was scheduled to be completed in June 2025. An emergency preparedness report will come to Council on February 11. Staff is reviewing the draft report and will provide responses to the findings and action plan. Staff will bring the report to the UAC after it is finalized. Water Supply Update: As of December 1, 2024, Hetch Hetchy was at approximately 114 percent of median for the water year. The regional water system total storage operated by the San Francisco Public Utilities Commission (SFPUC) was about 88 percent of maximum storage and the water bank was full. NEW BUSINESS ITEM 2: DISCUSSION: Purpose & Duties of the Utilities Advisory Commission (UAC) with Key Staff Roles & Responsibilities Assistant City Manager Kiely Nose delivered a slide presentation on the UAC’s purpose as governed by the City’s Municipal Code. The UAC was tasked with advising the Council on present and long-term planning, policy, and major programs for any matters related to gas, electric, water, wastewater, and fiber utilities. Examples of long-range policy and planning include projects related to grid modernization, One Water Plan, and fiber-to-the-premises. Utilities master agreements with partner agencies come before the UAC; examples include the NCPA and Valley Water. The UAC provided feedback on conservation, energy efficiency, and environmental programs such as demand-side management and WaterSmart Home Water Reports. The UAC reviewed and made recommendations to the City Council on the consistency with adopted and approved plans, policies, and programs of the Utilities. The UAC reviewed the Utilities budgets, schedules, rates and packages, and assistance programs. The City’s largest department was Utilities. Utilities Chief Operating Officer Alan Kurotori stated that the Utilities Department had almost 270 employees. The Utilities Department had the largest amount of capital projects. More than two-thirds of the City budget was associated with Utilities. Focus was on actively recruiting for near-term vacancies in the electric utility. A liaison from the Utilities Department provided resources to Human Resources to expedite recruitments for Utilities. Last year, 6 to 10 positions were added in Utilities. The Utilities Department Management organizational chart was shown. The Utilities Director was legally responsible for the department and oversees the entire department including Item #1     Packet Pg. 10     Utilities Advisory Commission Minutes Approved on: Page 4 of 20 human resources and advocacy, as well as working with the UAC as the lead staff member. As Chief Operating Officer, Mr. Kurotori will work at the municipal operations center and with the engineers at Elwell. Mr. Kurotori was responsible for engineering and operations as well as the associated capital projects, worked on regulatory and legislative advocacy issues, and emergency response. Strategic Business Manager Dave Yuan’s current focus was on technology and fiber-to-the-premises projects, including the outage management system and utilities billing system. Assistant Director of Resource Management Karla Dailey was in charge of staff related to businesses and residential customer programs and in support of the S/CAP program. Ms. Dailey worked with large commercial customers to meet their needs, address any concerns, and act as their advocate. Assistant Director of Customer Support Services Tom Auzenne was the point of contact for customers on utility billing, account management, and credit and collections. Utilities Communications Manager Catherine Elvert worked on media relations, emergency operations procedures, outreach materials, and updating CPAU’s social media. Matt Zucca was the Assistant Director of Water, Gas, and Wastewater. Due to a recent retirement of a staff member, Jorge Silva was the Acting Assistant Director of the Electric Utility. Ms. Nose and Mr. Kurotori were the point of contact for the UAC during the transition to a new Utilities Director. For future meetings, Vice Chair Mauter asked staff to bring items before the UAC that staff was seeking input and discussion on, and ensure there was follow-through after the meetings on those items where the UAC provided input. The UAC may ask staff to provide informational updates in the packet but not to present on them. Commissioner Tucher noted there was a lot of transition with the recent departures of Dean Batchelor, Micah Babbitt, and Tomm Marshall. Commissioner Tucher learned informally about Mr. Marshall’s departure and felt it should have been announced at a UAC meeting. Ms. Nose remarked that December was a common transition period. Across the organization, there were a number of retirements in December. Ms. Nose stated that departmental operations were not part of the UAC’s purview. Chair Scharff asked for an explanation of daily operations from the staff’s perspective. Ms. Nose responded that daily operations included hiring, firing, staff assignments, tools used, schedules, and RFP and procurement processes. The UAC was an advisory body to the Council. The UAC’s feedback on policies, programs, and rate structures helped inform the Finance Committee and the Council in their decision-making processes. Mr. Kurotori stated that personnel, deployment of resources, and work priorities was under the purview of the Utility operations. The UAC looked at major programs and projects, the budget, and CIP. Mr. Kurotori was reticent to talk about an individual’s retirement as it was each employee’s personal choice. Commissioner Tucher was curious about the UAC’s advisory function. Commissioner Tucher noted that UAC meetings do not include a discussion about what happened at Council or what was scheduled to come before the Council that was relevant to Utilities. Commissioner Phillips remarked that the Planning and Transportation Commission had a representative attend Council meeting when there were relevant items. Chair Scharff asked Mayor Lauing if it was useful to have a commissioner attend Council meetings to explain the UAC’s position. Mayor Item #1     Packet Pg. 11     Utilities Advisory Commission Minutes Approved on: Page 5 of 20 Lauing replied that he was on the PTC before he was on Council. The PTC met two times a month. As part of the Assistant Director’s report, a recap was provided on what happened at Council that was related to the PTC. At the beginning of the year, one PTC commissioner was assigned every month as liaison. In addition, PTC commissioners could opt to attend a Council meeting if there was a complicated or controversial topic. For agenda setting, the commissions have a shared responsibility with staff. Mayor Lauing stated that the deliberation and expertise of commissioners sitting at the UAC dais was essential for the Council’s decisions and the Finance Committee. Commissioner Croft asked how the UAC’s feedback was relayed to Council. Mayor Lauing replied that the UAC’s recommendations were included in the Council’s packet and former Director Batchelor was always attentive about including the UAC’s feedback in his presentations to Council. Commissioner Croft recalled times when Council’s action differed from the UAC’s recommendation. Mayor Lauing stated that the liaison should provide an explanation to the UAC. Mayor Lauing mentioned there were times when he told the Council they needed to take into consideration that the UAC strongly believed in their recommendation. Mayor Lauing thought it was excellent that the Council was informed in their packet if there was a difference of opinion between staff’s conclusion and the PTC or if commissioners did not unanimously agree. Ms. Nose said that anytime an item was brought before the Council, a board, committee, or commission, staff included a summary of what occurred and links to minutes, videos, or other helpful information. If the UAC recommended an alternative approach, staff will state their recommendation and the alternative approach. Staff takes the responsibility of transmitting any information in totality to the next governing body, including the UAC’s recommendation and vote as well as pros and cons addressed in the discussion; however, it was up to the Commission whether they felt it was necessary to have a UAC representative present. Chair Scharff asked if commissioners were willing to attend Finance Committee and Council meetings. Chair Scharff emphasized that the UAC representative needed to speak on behalf of the UAC, even though the commissioner may have a different opinion, and if there was a majority/minority opinion to advise Council on both. The 12-month rolling calendar was the final UAC agenda topic and Vice Chair Mauter suggested that include discussion and decision on whether an upcoming item warranted UAC representation. Chair Scharff agreed with Vice Chair Mauter’s suggestion. Commissioner Croft was willing to provide UAC representation at Finance meetings if the Commission decided it was necessary for a certain item. Ms. Nose stated that if the UAC wanted representation on an item, staff could coordinate the date with the Finance Committee. Discussion ensued on which Council actions should be included in the Utilities Director report. Chair Scharff thought the UAC wanted a report on items the UAC heard. Chair Scharff wanted staff to say if Council’s decision on an item was in alignment or deviated from the UAC’s recommendation. Commissioner Gupta thought it was useful to have a list of RFPs that appeared on the City Council’s consent calendar particularly with respect to grid modernization Item #1     Packet Pg. 12     Utilities Advisory Commission Minutes Approved on: Page 6 of 20 and the fiber utility for the UAC to stay apprised about how money was being spent on large capital-intensive projects. Ms. Nose pointed out that Council approval was needed for any contract over $85,000. Commissioner Gupta wondered if commissioners were interested in being informed about RFPs above a certain dollar threshold, he suggested above $5 million. Commissioner Tucher was less concerned about lists of contracts. Ms. Nose will begin adding the UAC’s requested information into the director’s report every month. Ms. Nose will express to the new Council liaison the UAC’s desire for the liaison to discuss the Council dialogue. Commissioner Croft would like more detailed information on grid modernization because it involved a huge investment. Commissioner Croft wanted to know what was being done on grid modernization and what technologies were being evaluated. Vice Chair Mauter mentioned it was helpful if at the end of presentations it be made clear what were the outstanding commissioner questions needing to be addressed in the next presentation on that topic. Commissioner Tucher agreed with Vice Chair Mauter. The Commission read the packets, so Vice Chair Mauter suggested that staff keep their presentations very short. Mr. Kurotori acknowledged the feedback and welcomed further feedback on future presentations. In the next few months, Commissions will prepare their annual work plan, which is then brought to the Council. Ms. Nose requested that the Commission pay particular attention to the work plan because the UAC will serve as advisory to the Council on the items in the work plan. ACTION: None ITEM 3: DISCUSSION: Discussion on the Progress of the Grid Modernization Project Public Comment: David Coale mentioned that he sent an email to the UAC regarding the grid modernization program. Mr. Coale stated that the whole-home electrification pilot program was a great opportunity to explore technologies that could substantially reduce the cost of grid modernization. Mohammad Fattah, Electric Engineer Manager, provided an update on the grid modernization project. The objective of the small-scale pilot project was to test the feasibility, time, cost, risk, and performance of various materials, products, services, and processes prior to undertaking a full-scale rollout. The pilot consisted of about 1000 homes. Phase 1 of the 10-year plan included about 7000 homes and was a citywide project to replace power poles, transformers, and secondary wires. The estimated completion for Phase 1 is 2026. Phase 1 aligned with the current efforts with the fiber-to-the-premise as cables would be attached to the same pole, thereby benefitting from synergies. When clearance was done of the 12 kV, the communication space was also cleared to make everything ready to string the fiber cable so it could be done much quicker and at less cost. Item #1     Packet Pg. 13     Utilities Advisory Commission Minutes Approved on: Page 7 of 20 The 10 phases of the grid modernization project timeline was shown. Phase 1, 2, and 3 focused on overhead distribution. Updating substation infrastructure started in Phase 4. The 4 kV grid was unable to support some of the additional loads being added to the network. Updating from 4 kV to 12 kV would provide higher levels of efficiency and voltage stability. The East Meadow Substation and Colorado Substation will be mirror images of the upgraded Hanover Substation. In 2027, a pilot project will test some new technologies currently coming in the market. Staff hoped to learn from other utilities about the efforts they have undertaken. Then, work will be done on the Hansen Way substation. Then, a couple of substations running on 4 kV will be retired. In five years, staff will look at areas to improve feeder optimization, including distribution automation as well as using devices to reduce outage time and implement quick restoration of services. Staff would deliver a presentation and seek the Council’s approval before moving into any of the phases. To date, 400 homes have been prepared for electrification in the pilot project, meaning the ability to support 8 kVA of power. Power pole wooden cross-arms were replaced with fiberglass cross-arms that had a longer lifespan, were more resilient with weather, and more visually appealing. The use of triplex cable eliminated the need for another cross-arm for secondary wire. The use of strong poles extended the lifetime by 30 to 50 years. CPAU communicated with customers in the construction area through U.S. mail and email. No complaints from impacted customers had been received. The estimated pilot project completion date was February/March of 2025. The infrastructure, transformers, cables, and wire sizes were being standardized. One challenge had been the supply chain for electric utility materials. It takes two years to get transformers, one year or more to get wire, and six months or more to get poles. Staff was developing relationships with vendors to help overcome this obstacle. Construction contracts have been reviewed. The supplier pool was being diversified. Strong contracts were being negotiated to eliminate change orders. Change requests were minimized through detailed scopes of work that were peer reviewed to ensure nothing was missed. A distribution system planning effort was being undertaken to understand load flows. The flow of electricity becomes bidirectional when batteries connect to the grid, so a robust system was being designed to try to support the efforts. Design and Engineering will finalize the scope of work for each phase. Consultants and in-house engineering experts will be leveraged for the complex substation work. Engineering and construction firms are selected through a public bid construction process. Construction inspectors will be assigned to ensure everything is built to State of California and IEEE standards. Staff will communicate project updates to the UAC and at the completion of each phase of the project. Utilities Chief Operating Officer Alan Kurotori stated that replacing aging infrastructure and adding new capacity to the system was the foundational first phase of the Reliability and Resiliency Strategic Plan. Secondary objectives and strategies included evaluation of our implementation of best practices and how we manage outages effectively. The third part of the strategy was looking at flexible and efficient technologies, such as SPAN Panels, distributed energy resources, and potentially vehicle-to-grid. Upcoming activities that will be pursued by staff and going to the UAC for input include looking at low-profile aboveground transformers Item #1     Packet Pg. 14     Utilities Advisory Commission Minutes Approved on: Page 8 of 20 and seeing how they can best fit in within the neighborhoods in the community. The S/CAP Ad Hoc Committee will look at various technologies and find the best fits. Commissioner Croft asked the following questions: What is the process for evaluating technologies? Was a consultant engaged to help us understand vehicle to grid or microgrids? How are we planning for those technologies? Do we need to contract people to help us or do we have in-house people to do research? Can you describe the timeline including when the UAC can expect to hear about it and when resources will be brought in? Mr. Kurotori will have an update on the Resiliency and Reliability Plan coming to the UAC and offered to bring some timelines. Mr. Kurotori stated that there were internal resources but outside consultants will be leveraged to provide a greater level of detail. Several consultants were under contract and staff could bring back some of those scopes of work. Microgrids at the airport were being actively looked at and potentially at Cubberley, as well as any private entities that wanted to move forward with microgrids. Expertise was being leveraged from neighboring utilities that are integrating larger solar storage systems into their distribution grid with regard to their control schemes, the equipment being used, and system protection. Staff will bring back to the UAC further information on vehicle to grid and pushing power from stationary batteries into our system. Commissioner Croft spoke about the Utility’s role in advising customers on how they create their systems that interface with our grid. With the upcoming time-of-use rates, staff should have the knowledge to make recommendations to customers on systems or panels to shift loads to another time or prioritize certain appliances. Mr. Kurotori remarked that he was an early adopter and was very familiar with some of those technologies. Mr. Fattah stated they were collaborating with Palo Alto residents who apply for permits to bring grid-connected devices online to see what was plausible in the meantime until a standard was developed to interconnect those devices to the grid. Staff was working with consultants on what devices could be supported and using expertise within Engineering to analyze those devices. Commissioner Croft requested the next presentation on grid modernization to include what kinds of technologies were being explored because of customer interest. Commissioner Metz was concerned that new technologies were in the third phase because he believed it ought to be in pilots now. It was likely that those technologies, new regulations and laws, and implementation of S/CAP would have a big impact on the design of the grid. By the next UAC meeting, Commissioner Metz urged staff to provide a list of grid modernization subtopics and the dates they will come before the UAC. Mr. Kurotori explained that Strategies 1, 2, and 3 in the Reliability and Resiliency Strategic Plan were not in priority order and there were some overlaps. The first part of grid modernization was to ensure the baseline infrastructure could accommodate those technologies. Staff could bring back to the UAC the studies and their timing. Commissioner Metz voiced his concern that the impact of technologies needed to be analyzed to determine the baseline infrastructure Item #1     Packet Pg. 15     Utilities Advisory Commission Minutes Approved on: Page 9 of 20 needed because the required capacity for homes may be less than was estimated, as per Mr. Coale’s public comment. Mr. Kurotori explained that distribution system design and optimization needed to take into consideration many factors, such as homes that are electrifying, EVs and the number of chargers put in the home because some customers were highly optimizing their home and had higher capacity needs. The replacement of poles to meet new standards, upgrading transformers, and standardizing capacities and the number of homes served were foundational. Underground there was more opportunity for optimization but some of those technologies are not implemented yet. Vehicle to grid is not fully implemented. Several manufacturers were working on the potential of vehicles to backup homes. Infrastructure to serve new developments coming in with a higher number of residential units was also part of the plan. Commissioner Phillips asked if there was a coordinated plan with the Reliability and Resiliency Strategic Plan to address vehicle to grid, storage, and microgrids. Commissioner Phillips questioned what investment was being made in the dispatch capability of the Utility to handle these technologies as they come in. Commissioner Phillips wanted to know if microgrids were being encouraged or discouraged. Commissioners Phillips and Metz agreed that one coordinated plan was needed instead of having two different plans. Commissioner Metz commented that the Utility could influence how customers implement vehicle to grid or other technologies by pricing and other techniques. Commissioner Gupta recalled a discussion during his orientation about how voltage drops might be introduced by some of these new technologies and how it might affect some of the new components we are using in grid modernization. Commissioner Gupta thought that having alignment on what technologies we would like to use was important when deciding what infrastructure to invest in and install. Vice Chair Mauter inquired what fractions of the 30 percent vacancy rate in staffing were in planning and construction and if it might affect the ability to concurrently evaluate new technology, plan, and do grid modernization hardware upgrades. Mr. Kurotori responded that positions were filled in Engineering, not including the recent retirement of Mr. Marshall. Engineering consulting firms were doing the design. A lot of young engineers were hired from programs in California that work on power systems. The most recent engineer was on-boarded on December 30, a recent graduate from San Jose State. Jorge Silva, Acting Assistant Director of Electric Engineering and Operations, remarked that lately quite a few people were hired in Operations, including linemen, journeymen, and substation journeymen. Contractors were also used. Staffing did not slow down the pilot project. Assistant City Manager Kiely Nose stated that Mr. Silva and Mr. Fattah were working with electric operations and the engineers who were designing and building the infrastructure. Karla Dailey in partnership with Public Works and Jonathan Abendschein were working on strategic studies and evaluating the technologies. Mr. Abendschein was working with Public Works and Item #1     Packet Pg. 16     Utilities Advisory Commission Minutes Approved on: Page 10 of 20 Utility staff to implement new technologies, new customer programs, and sharing those learnings with the operational staff to ensure coordination. Another set of resources was working on S/CAP and collaborating internally. Vice Chair Mauter inquired if the seven-year plan was adaptable to delay or modify projects if microgrids and other technologies were successful. Mr. Fattah replied that the plan was adaptive. Work was being done on several microgrids but it was highly confidential as the customers did not want to identify themselves. Various technologies were being evaluated. It was anticipated that the feeder work be interspersed. As the substations become ready to accept the new load, devices would be placed across the grid to sense voltage variations because electrons flowing in two directions could have adverse effects. Vice Chair Mauter recommended strong communication between resource management and Mr. Fattah’s team. Vice Chair Mauter wondered whether more personalized outreach to the largest or most peak customers may result in significant savings in capital expenses. Mr. Fattah stated his team worked with Ms. Dailey’s team every week. Ms. Dailey’s team identified the opportunities and Mr. Fattah’s team implemented them. Commissioner Tucher asked what were the lessons learned on microgrids, how staff was communicating to customers in the pilot and Phase 1 areas, and whether anything was learned from the pilot. Commissioner Tucher wondered if customers in the pilot area realized they were benefitting from the infrastructure upgrade. Mr. Kurotori responded that customers were notified about construction work, impacts, and outages. Mr. Fattah stated that communication on grid modernization in general was not part of the outreach. Catherine Elvert, Utilities Communication Manager, said that feedback surveys had not been conducted yet but no negative complaints were received about the construction from customers in the pilot area. The plan was to follow up with customers once various construction phases were completed. Staff was working on the communication and outreach strategy on the costs and benefits of grid modernization as well as benefits to customers as a result of incorporating new technologies. Ms. Nose mentioned that the pilot was expected to be completed in February or March of 2025. Once the pilot area is done, surveys will be sent as well as notifications of additional benefits to customers from the upgraded infrastructure, and customers who were waiting to upgrade will be told the process to do so. Commissioner Gupta asked if there was a list of the technologies being explored. The next time grid modernization comes before the UAC, Commissioner Gupta wanted more information about how expected demand was modeled, what were the underlying assumptions, and how capacity was being built up to meet anticipated demand. Commissioner Gupta wanted to understand the cost component of grid modernization because he previously heard it was a $300 million project but now heard it might be closer to $500 million. Item #1     Packet Pg. 17     Utilities Advisory Commission Minutes Approved on: Page 11 of 20 Ms. Nose’s former role was the City’s Chief Financial Officer. The City’s largest CapEx project was rebuilding the Regional Water Quality Control Plant with a cost over $300 million. The debt associated with grid modernization was significant but spread over a long period of time. As in previous rate presentations, staff proposed pay-go with a combination of money on hand, incorporated in the rates, and debt financing. In the next 18 to 24 months, an initial issuance of no more than $100 million of revenue-backed bonds was expected to be necessary to help fund further investment in grid modernization. Prior to the debt issuance, staff will come forward with a financial plan and analysis to the UAC and the Finance Committee, and the Council’s authorization was needed. Debt issuance had time limitations on the use of funds; therefore, financing will be done in increments and using whatever financing method was most cost effective. Regarding load projections, Mr. Kurotori stated that getting a second connection to our system was one of the Utility’s priorities for the last several years and progress was being made. When staff had that information, it will be brought back to the UAC along with their projections. In response to Commissioner Gupta asking if it was still the long-term vision to underground all powerlines, Chair Scharff answered it would never happen. When Commissioner Croft first joined the UAC, she recalled there was reference to a report estimating how much capacity was required per household that was the basis for determining how much capacity to build into the new grid. Commissioner Croft thought several commissioners requested access to that report but were told it was not to be shared with the UAC. Commissioner Croft wondered if staff could at least share the details on the analysis and how the capacity was estimated per household. Mr. Kurotori will take it back as an action item. ACTION: None The UAC took a break at 8:29 PM and reconvened at 8:44 PM. ITEM 4: ACTION: Recommendation to Council to Accept the City of Palo Alto One Water Plan Karla Dailey, Assistant Director of Utilities, Resource Management Division, delivered a slide presentation. The One Water Plan was a framework for staff and Council to make future decisions about Palo Alto’s water supply and conservation portfolio. Many external factors impact water supply and reliability, such as climate or regulations. Water was a regional resource and the activities of our neighbors, supplier, and other agencies in the county affect Palo Alto’s water supply resiliency. The One Water Plan was a forward-looking planning exercise to look at potential water supply alternatives the City may want to consider in the future if reliability became a concern or to start the evaluation process of a regional partnership. Developing the One Water Plan was a key action in the S/CAP water chapter that the Council directed staff to complete. The time horizon for this One Water Plan was 20 years, from 2025 to 2045, although the time horizon could be modified as appropriate. Item #1     Packet Pg. 18     Utilities Advisory Commission Minutes Approved on: Page 12 of 20 One Water portfolios were labeled A through G. Baseline was the current supply of 100 percent SFPUC water. Enhanced conservation was an attractive resource in Portfolio B, so Portfolios C through G included enhanced conservation in addition to another large project. Staff provided the following responses to the questions and comments made by commissioners when staff came to the UAC with the preliminary results of the One Water Study: • What problem are we trying to solve? We are comprehensively looking at various potential water supply alternatives and the relative merits of those alternatives compared to each other, including the ease of implementation, environmental benefits, reliability impacts, and cost. The One Water Plan provided a common understanding of how different water supply alternatives could be evaluated and measured. The One Water Plan identified the project types most likely to be attractive but was not intended to be a detailed feasibility analysis of all alternative water supplies. The project costs were at planning level. • In response to a commissioner comment that rate impact should be a consideration, a table was shown of capital costs and differences in residential monthly bill for Portfolios A through G. • Staff agreed with the suggestion to consider the use of groundwater during drought. Groundwater was not a long-term daily water supply. There was no capital project to get the work done to be able to use a couple higher producing emergency groundwater wells but a capital project was in the planning horizon. Staff was trying to keep water rates low. Staff thought this was a valuable project and hoped to incorporate it in the financial plans in the relatively near future as well as other capital improvements the system needed on a regular basis. SFPUC water was treated with a different chemical than Palo Alto had the capability to treat, so a project was needed to blend groundwater with SFPUC water. • Is the One Water Plan trigger based? Yes, a couple triggers could cause reevaluation of whether we want to consider adding alternative water supplies. The biggest trigger was reliability, which could be caused by climate change or regulatory impacts. In 2019, the City signed an effluent transfer agreement with Valley Water that gave Valley Water the option to take about half of the treated effluent from the Regional Water Quality Control Plant for use in other parts of the county. The option expires at the beginning of 2033/end of 2032. If Valley Water exercised their effluent transfer option, there was not enough water left at the Regional Water Quality Control Plant to do a significant project. If Valley Water does not exercise their effluent transfer option, it opened up possibilities should the City decide to use that water. • Are contaminants a concern for some of the water supply alternatives? Increased risk of contaminants was an important consideration and would be evaluated before recommending any project. • In response to a commissioner comment that linear weighting of the evaluation criteria was not ideal, staff was unable to spend additional budget to go back and do additional Item #1     Packet Pg. 19     Utilities Advisory Commission Minutes Approved on: Page 13 of 20 types of evaluations but staff would consider other methodologies in the One Water Plan iteration. • Staff agreed with the commissioner comment about the community not being ready for direct potable reuse. Outreach and education were crucial to public acceptance of new water supplies. As this was a regional issue, Palo Alto will coordinate with the rest of the region, the SFPUC, and Valley Water to take a regional approach to outreach and education about direct potable reuse. • In response to a commissioner comment that tiered water rates should be considered, staff believed that water rates were an important part of managing a water utility and rate structures would be considered in the next cost-of-service analysis. • What are the impacts of drought on the tree canopy and vegetation? Any recommendation of a water supply or conservation alternative would include an assessment of the impact on the tree canopy and other vegetation. Staff will implement ongoing/planned conservation, evaluate and possibly recommend enhanced conservation measures identified in the One Water Plan, and monitor the available funding opportunities for water-related projects. Events and dates that may warrant revisiting the One Water Plan include: SFPUC’s alternative water supply plan update in 2027, Valley Water’s effluent transfer agreement option expiration in 2032, State decisions regarding implementation of the Bay Delta Plan, if new water supply technologies or partnership opportunities arise, and other events or conditions that could impact our water supply reliability. Staff asked the UAC to recommend that the City Council accept the One Water Plan scheduled to go before Council in March of 2025. There was no recommendation to proceed with any specific project. There was no resource impacted by accepting the One Water Plan. The One Water Plan gives the City a basis to evaluate water supply alternatives in the future. In response to Chair Scharff’s question, Utilities Chief Operating Officer Alan Kurotori explained that if the UAC did not approve the plan, staff would move forward for consideration by City Council; if the Council did not accept the plan, then the plan would not be implemented. Public Comment: Peter Drekmeier, Policy Director for the Tuolumne River Trust, believed that SFPUC claimed the Bay Delta Plan could lead to 50 percent rationing as a way to justify their opposition. Mr. Drekmeier spoke about the collapse of the Tuolumne River’s salmon-based ecosystem and commented on the increase in water rates. Urban water management plans require the water agency to analyze their driest five-year sequence and show that they have enough water for proposed development. The SFPUC could manage their driest six-year sequence (1987-1992) with the Bay Delta Plan in place with no rationing. Instead of looking at different scenarios, SFPUC’s Alternative Water Supply Plan only looked at the highest level, 92- 122 MGD of water at a price of $17-$25 billion. Item #1     Packet Pg. 20     Utilities Advisory Commission Minutes Approved on: Page 14 of 20 Referring to Slide 11, Chair Scharff assumed that staff could refer to the One Water Plan for its information if there was a triggering event. Chair Scharff wondered about the public policy implications of accepting or not accepting the One Water Plan and if acceptance would be interpreted as the UAC thinking the plan had good projects. Ms. Dailey replied that the formal acceptance of the plan was administrative because it was an S/CAP item for staff to do and it was a public document that the Council acknowledges was done. Staff would rely on some of the work that had been done in this plan if and when there was a need to consider alternative water supply plans. Ms. Dailey did not think there were any policy implications. Assistant City Manager Kiely Nose stated that staff recommended acceptance of the report; however, the Council had the authority to accept the report and provide a referral to staff on additional direction as a result of the information in the report. Commissioner Phillips agreed with the recommendations but he thought the linear methodology was fatally flawed. Commissioner Phillips did not think it was an appropriate framework to be used in the future for evaluating options and there was no clarity around the weighting. If approving the plan meant the UAC was approving its use for future decisions, Commissioner Phillips would vote against it. Commissioner Gupta drafted a motion for the UAC’s consideration. Commission discussion ensued. Commissioner Croft saw it as a framework or a tool, not a plan that was being acted on now, so she did not want to sign on to it if it was called a plan. Commissioner Croft would like to know what could be implemented quickly if the need arose but the plan did not have a section on implementation timelines. Commissioner Phillips and Chair Scharff were concerned with the plan being a framework. Commissioner Phillips could support the approach shown on Slide 8, as long as different evaluation criteria were used in the future. Chair Scharff asked Commissioner Gupta to read the first paragraph of his motion again: The Utility Advisory Commission (UAC) is forwarding the One Water Plan report to the City Council for reference only, recommending no action at this time. The UAC thanks staff and the consultant for their work on finalizing the report and bringing these alternative water supply options forward for consideration. While the UAC recognizes the plan’s focus on water supply sustainability and resilience, additional analysis is needed, given the complexity and long-term implications of these decisions. Commissioner Metz stated that the evaluation approach using a linear scale was inappropriate and it was his biggest issue. Reuse and desalination options were rated the highest reliability, which seemed counterintuitive to be more reliable than conservation. Commissioner Metz thought some of the conservation actions should be done now, and he agreed with moving forward with wells if it was low cost. Item #1     Packet Pg. 21     Utilities Advisory Commission Minutes Approved on: Page 15 of 20 Commissioner Tucher was unable to support the One Water Plan because the underlying premise for this report was to accelerate this planning because of SFPUC and BAWSCA. Commissioner Tucher sensed a lot of concern around BAWSCA not putting enough oversight on CapEx and cost overruns. Commissioner Tucher wanted a better understanding of change orders and the $15 million impact on Palo Alto as our share of BAWSCA that Mr. Drekmeier spoke about in his public comment. Commissioner Tucher urged following through on last month’s suggestion that Council Member Greer Stone meet with BAWSCA’s new director on these topics. Commissioner Tucher suggested sending a letter (from the Utility Director, Mayor, or whoever was the appropriate person) to SFPUC with questions and requests for more information, including the construct of the design drought, drought return timeframe, and the discrepancy in demand forecasts between SFPUC Finance Bureau and Enterprise. Commissioner Tucher offered to help with the drafting of the letter or the formulation of those questions and information requests. Commissioner Gupta wondered if staff could use the Excel tool, if they liked it, if it fit everything that was asked for, or if additional follow-up was needed with the consultant. Ms. Dailey responded that acceptance of the One Water Plan did not affect staff’s ability to use the Excel tool. Staff was happy with the consultant’s work on it. There were a lot of Excel skills in-house, so staff could make modifications as appropriate. Staff was not recommending moving forward with any of the projects now, so there was no conflict between the motion language that Commissioner Gupta put forth and what staff was recommending. Commissioner Gupta noted several issues with the report. Most importantly, none of the proposed portfolios in the One Water Plan met the projected demand if you accept SFPUC’s assumption of a 50 percent cut in a drought condition. Even if millions of dollars was spent, additional cutbacks or investments were required to fill the unplanned gap. Commissioner Gupta thought the primary assumption in this report of a 50 percent cutback in a drought condition needed to be vetted because there was conflicting information. The plan relied on that assumption but if you take away that assumption, the plan loses its primary purpose. Senior Resource Planner Lisa Bilir explained that the unplanned shortage across the portfolios was provided as a mathematical tool for comparison. Commissioner Gupta’s was concerned about thinking of spending significant CapEx if the plan did not have a purpose, presuming the 50 percent assumption does not hold. Ms. Dailey pointed out that staff was not recommending spending significant CapEx right now. Ms. Dailey agreed that it was unknown if a 50 percent cutback would come to fruition. There is the possibility of a 50 percent cutback according to the analysis by our supplier who runs the regional water system, so staff used it as a worst case scenario in testing the portfolios. Commissioner Tucher asked the Commission if they were in support of following up with the new BAWSCA head and sending a letter to the SFPUC from the City. Commissioner Tucher offered to formulate a one-page list of follow-up questions and the Commission could discuss whether to proceed. Chair Scharff instructed Commissioner Tucher to send his request for Item #1     Packet Pg. 22     Utilities Advisory Commission Minutes Approved on: Page 16 of 20 additional information to staff. The UAC could ask BAWSCA Representative Greer Stone to come to the UAC if he was willing to explain what was going on at BAWSCA and his views on this. Ms. Nose stated that staff could review Commissioner Tucher’s list of asks with the UAC Chair and Vice Chair in a preparation meeting, and in collaboration with Council Member Stone. Commissioner Tucher agreed. Vice Chair Mauter had a deep concern methodologically and also noted some issues may not have been adequately addressed by the consultant. Because the plan may be revisited by Utilities or Council in the future, Vice Chair Mauter felt it was important to have a clear record of all the deficiencies in the plan and that there was a decision made not to spend more money to fix those deficiencies. Vice Chair Mauter thought it was essential to prepare now for regional water reuse. The regional water supply system had regional political problems and regional financing problems. Vice Chair Mauter wanted it clarified that that the primary problems were political and those were the triggers, and the decisions were also political. Identifying where those holes were would help us address them in the future and determine what needed to be done now to be prepared for a stronger trigger-based plan. Vice Chair Mauter pointed out that the One Water Plan was a decision tree, not a trigger-based plan. Vice Chair Mauter thought the implementation plans included in the slides were important. In addition to SFPUC’s rate increases, Vice Chair Mauter noted that the water utility had rate increases due to infrastructure maintenance within our city. Being thoughtful about how conservation efforts would impact the cost of maintenance needed to be well understood by Council. Mayor Lauing said this was a perfect example of a time when a UAC commissioner should be present when this item comes to Council. Mayor Lauing instructed staff to be very precise about what they were asking from Council and to tell Council what will be done next. Council needed to be alerted to Vice Chair Mauter’s comments that this was a regional problem that needed action now. Vice Chair Mauter thought there needed to be a much better assessment of future demands and supply projections, under what future climate scenarios might there be a change and how far into the future. It was imperative that the BAWSCA demand study come before the UAC and the study needed to be done well. Relying only on SFPUC’s future drought condition metrics or the design drought was problematic. Regional coordination as well as a local trigger-based planning approach was needed. For example, if there was a drought of X length, reservoir capacities of X amount, and curtailment of X amount, then we would start to think about an X- year timeline to build out a groundwater supply system. Commissioner Phillips agreed with Vice Chair Mauter and emphasized that a static linear weighting methodology was incorrectly applied. It had to be based on reasonable demand assumptions. Commissioner Phillips did not believe that BAWSCA separated tests and training sets in demand assumptions in their 2022 report, which was not good model hygiene, and the number of variables in it made him think it was highly overfit. It was important to get this right because important decisions needed to be made. In addition, how we do this regionally is a question we need to think about and talk to Greer Stone as the BAWSCA representative. Item #1     Packet Pg. 23     Utilities Advisory Commission Minutes Approved on: Page 17 of 20 Chair Scharff would appreciate it if Vice Chair Mauter attended the Council meeting on behalf of the UAC when this topic is presented. Chair Scharff said that a letter could be sent to Council if the Commission chooses. Commissioner Phillips will put his concerns about the One Water Plan in writing and send them to staff. Ms. Nose stated that a list from each commissioner would not help Council understand where alignment was on the issues; however, a letter on behalf of the UAC identifying the areas of issue was helpful for the Council. The UAC could articulate in the letter that it was the Commission’s recommendation to make the One Water Plan an action item for discussion with UAC representation. Vice Chair Mauter recommended that staff provide a letter that highlighted their perceived deficiencies in the report. Staff worked with the consultant, knows the water system well, and had insights and rationales for why some of these assumptions were made. Staff could include in the letter what they would ask to be done differently if they had the budget to have the report redone. Chair Scharff stated it was appropriate to have a subcommittee of three UAC commissioners draft a letter from the UAC after obtaining feedback from staff. The letter will be agendized for the UAC to review and vote to send it to Council. Mayor Lauing did not think it was necessary to ask for an action item. Mayor Lauing recommended that staff say they think this needed to be investigated, redone, or budgeted to make some progress. Mayor Lauing believed a letter from the UAC was a good idea. Vice Chair Mauter, Commissioner Phillips, and Commissioner Tucher will be on the UAC Subcommittee. ACTION: Chair Scharff motioned to establish a UAC Subcommittee tasked with drafting a letter to the City Council addressing UAC concerns regarding the One Water Plan. The drafted letter will be presented to the UAC for approval at the February UAC meeting. Commissioner Metz seconded the motion. The motion carried 7-0 with Chair Scharff, Vice Chair Mauter; and Commissioners Croft, Gupta, Metz, Phillips, and Tucher voting yes. FUTURE TOPICS FOR UPCOMING MEETING ON FEBRUARY 5, 2025, AND REVIEW OF THE 12- MONTH ROLLING CALENDAR As mentioned in Agenda Item 2, advising on grid modernization was one of the UAC’s key roles. Commissioner Metz said that grid modernization needed to be added the calendar soon and he wanted the following questions addressed: What is the detailed plan to spend $500 million in Item #1     Packet Pg. 24     Utilities Advisory Commission Minutes Approved on: Page 18 of 20 CapEx for grid modernization? What are the underlying assumptions behind the expenditures and are we able to test whether those assumptions make sense? What are the impacts of new technologies, S/CAP, as well as new regulations and laws? Commissioner Metz proposed adding electric and water resilience to the calendar, which were also mentioned in Agenda Item 2. Resilience should be addressed in the contexts of business as usual, minor interruptions/disruptions, and emergency situations. For grid modernization, Commissioner Phillips believed that staff should provide progress reports to the UAC. Commissioner Phillips was extremely interested in having a discussion on how technical developments would be coordinated with the ability to accommodate technologies that customers were interested in. Commissioner Phillips would be satisfied if staff sent the budget to the UAC as he was less interested in those details. Chair Scharff was curious how the grid modernization cost increased from $300 million to $500 million. Assistant City Manager Kiely Nose had not heard it was $500 million until tonight, so she will look into it. Commissioner Metz did not think there had ever been a detailed grid modernization budget presented to the UAC. Knowing the budget details, the discussion could include how costs could be cut by X amount if certain technologies were used. Commissioner Metz mentioned that he spoke with Commissioner Gupta about emergency preparedness. Commissioner Metz proposed adding a topic to the calendar regarding the definition of the design emergency and what role CPAU should take. CPAU defined an emergency as 48-72 hours of electricity disruption but the Office of Emergency Services defined emergency as a much longer period. Chair Scharff suggested that Commissioners Metz and Gupta have an informal discussion with staff. Commissioner Metz thought our low rates could attract more datacenters and suggested adding large datacenters to the rolling calendar. Commissioner Metz was concerned how large datacenters would impact CPAU’s ability to procure the required percentage of renewable electricity. Chair Scharff suggested that Commissioner Metz have a discussion offline with staff. Commissioner Phillips wanted to have a discussion scheduled on our commercial electric strategy and include the following: Do we want more large datacenters? Commercial represents more than 80 percent of our load but only one customer has accepted tiered pricing. Should we make commercial tiered pricing mandatory? Do we want to attract commercial? Commissioner Gupta mentioned that CPAU’s rates were not competitive against Santa Clara’s rates, which is why there were several more commercial customers in Santa Clara but agreed that commercial was a valuable topic to explore further. Chair Scharff stated it was a good topic to discuss the commercial strategy and if we want to become competitive with Santa Clara. Utilities Chief Operating Officer Alan Kurotori suggested that staff address it with their load projections because it had an economic development component as well. Mr. Kurotori pointed out that datacenters ranged from 9-12 megawatts, 100 megawatts, up to hyperscalers. Mr. Kurotori explained that if we sell incrementally more power, as long as it does Item #1     Packet Pg. 25     Utilities Advisory Commission Minutes Approved on: Page 19 of 20 not trigger a large capital expenditure, we are generally able to leverage some of our infrastructure. Ms. Nose remarked that commercial included economic development, zoning, and the Utility. Ms. Nose suggested that staff reach out to Commissioner Metz or Phillips on this topic before staff returns to the UAC. Commissioner Gupta saw fiber on next month’s agenda and hoped to have a detailed conversation about the progress, budget, phases, approach, and fiber network design. Commissioner Tucher wanted an agenda item on the general communication strategy, including soliciting customer feedback, community relations, PR, and how we work with local media. Chair Scharff asked Commissioner Tucher to talk to staff offline. Utility rate increases were coming, there was coverage in the local press about our big investment in CapEx programs such as grid modernization, and Commissioner Tucher was concerned that he had not seen much UAC discussion about communication. Vice Chair Mauter asked if staff would appreciate UAC input on community relations. Mr. Kurotori replied that communication and notifications were embedded in a lot of staff’s work operationally. Mr. Kurotori thought it might be helpful to define some of the strategies or higher level items that staff was pursuing, so he will talk to Commissioner Tucher to see if that would meet his needs and then staff could express it to the entire Commission. Ms. Nose offered to talk with Commissioner Tucher. Ms. Nose recalled that Mayor Lauing identified communication and community engagement as a priority in his comments on Monday night, so she expected it would be part of the broader Council priorities in 2025 when Council has their retreat in January. Commissioner Tucher agreed to discuss the topic of Utilities communication with staff. Vice Chair Mauter saw four items on the February agenda and asked what was being covered on the commercial customer survey. Ms. Nose replied that staff went through the agenda today and was not certain if some of the scheduled items would be ready. Staff will work with the Chair and Vice Chair on what topics would be ready for the February meeting. Utilities Communications Manager Catherine Elvert explained that Utilities regularly conducts customer satisfaction surveys of its various customer groups to assess perceptions of the Utility and satisfaction with various things such as rates, programs, and environmental initiatives. In partnership with the California Municipal Utilities Association, a survey was conducted of our business and key account customers. In the past, staff brought the survey results as a presentation for the UAC’s information and discussion on the key findings, takeaways, and action items. Vice Chair Mauter wanted to be conscious about the number of items on the agenda out of concern for the length of UAC meetings. Vice Chair Mauter expected there to be a significant amount of conversation on fiber because it had not been talked about since she arrived on the UAC and there may also be a lot of discussion on the Tier 2 water allocation during drought. COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS None Item #1     Packet Pg. 26     Utilities Advisory Commission Minutes Approved on: Page 20 of 20 ADJOURNMENT Vice Chair Mauter moved to adjourn. Commissioner Metz seconded the motion. The motion carried 7-0 with Chair Scharff, Vice Chair Mauter; and Commissioners Croft, Gupta, Metz, Phillips, and Tucher voting yes. Meeting adjourned at 10:19 PM. Item #1     Packet Pg. 27     Item No. 2. Page 1 of 1 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Utilities Director Lead Department: Utilities Meeting Date: February 5, 2025 Report #: 2501-4058 TITLE Reliability and Resiliency Strategic Plan: Update on Studies RECOMMENDATION This is a discussion item and no recommendation is requested. EXECUTIVE SUMMARY On April 15, 2024 the City Council approved the Reliability and Resiliency Strategic Plan, which the Utilities Advisory Commission (UAC) had recommended for approval after reviewing in December 2023. The UAC received a status update on the plan in September 2024, including an overview of three studies staff intended to complete to implement the plan. At that meeting various UAC members noted the value of a check-in with the UAC when the studies were in progress. The attached presentation includes status updates on all three studies, some initial insights from the early work already completed, and requests for feedback from the UAC on the methodology for two of the studies. ATTACHMENTS 2A) Supply and Resiliency Cost/Benefit Analysis and Program Ideas (Buro Happold) (6:50pm – 8:05pm) 2B) Airport Microgrid (Burns McDonnell) (8:05pm – 8:35pm) 2C) Distribution Cost/Benefit Analysis (E3) (8:35pm – 9:00pm) AUTHOR/TITLE: Kiely Nose, Interim Utilities Director Staff: Jonathan Abendschein, Assistant Director of Sustainability Staff: Karla Dailey, Assistant Director of Utilities Resource Management Item #2     Packet Pg. 28     February 5, 2025 www.cityofpaloalto.org Reliability & Resiliency Strategic Plan: Update on Studies Utilities Advisory Commission Item #2     Packet Pg. 29     2 Studies to be discussed •Item 2A) Supply and Resiliency Cost/Benefit Analysis and Program Ideas (Buro Happold) •Item 2B) Airport Microgrid Study (Burns-McDonnell) •Item 2C) Distribution Benefit Analysis (E3) Item #2     Packet Pg. 30     Studies and Timeline 20252024 Mar 1 Oct 1Jul 1 Supply/Resiliency Cost/Benefit Analysis and Program Ideas (Buro Happold) Distribution Cost/Benefit Analysis (E3) Airport Microgrid Analysis (Burns- McDonnell) 2026 3 Item #2     Packet Pg. 31     4 Objectives for Today •Confirm updated technology list for cost/benefit analysis •Item 2A) Updates and Feedback on Supply and Resiliency Cost/Benefit Study and Program Ideas (Buro Happold) •Share insight on energy market structures that affect supply cost benefits •Share preliminary results from survey of CA and national programs •Identify program models you believe are examples the City should consider for implementation •Confirm methodology for valuing resiliency •Item 2B) Airport Microgrid Study (Burns-McDonnell) •Confirm airport microgrid scenarios to be analyzed •Item 2C) Distribution Study (E3) •Review scope. No feedback requested – study not started Item #2     Packet Pg. 32     Technologies to be Studied 5 Consultant: (Buro Happold)(E3)(Buro Happold) Benefits to be analyzed:Supply Distribution Resiliency Solar + Storage x x x EV Managed Charging x x V2H (explore)(explore)x V2G x X x Thermal Storage x X x Time of Use Rates x X Demand Response x (explore) Efficient electrification x Related studies •RRSP microgrid study (Burns-McDonnell) – RRSP Strategy 5, Action 4 •Energy Efficiency (EE) – CMUA-run EE Potential Study by GDS (not an RRSP study) RRSP Cost/Benefits Studies (Strategy 4) Item #2     Packet Pg. 33     Next Steps •February / March 2025: Complete supply & resiliency cost/benefit study components (Buro Happold) •February / March 2025: Develop list of potential programs (Buro/Happold) •April / May 2025: Tentative UAC / Council review of cost/benefit results, programs •Summer 2025: Complete microgrid study (Burns-McDonnell) •Summer 2025: Complete distribution benefit analysis (E3) •Fall 2025: Integrate distribution benefit results into cost/benefit study, develop final list of recommended programs, final report •Fall 2025: UAC / Council review of full study results 6 Item #2     Packet Pg. 34     Supply and Resiliency Cost/Benefit Analysis and Program Ideas (Buro Happold) Scope •Characterize various resiliency technologies •Calculate their costs, compare to benefits (utility supply savings, utility distribution savings, and customer resilience) •(Distribution savings calculated separately, Buro Happold to integrate) •Generate ideas for resiliency programs and estimate resource needs Preliminary Timeline •April 2025: UAC presentation of utility supply and customer resiliency benefits, program ideas •May 2025: Possible Council study session •Fall 2025: Integrate distribution benefits into study, issue final report •Fall 2025: UAC/Council review of final report 7 Item #2     Packet Pg. 35     www.cityofpaloalto.org Supply and Resiliency Cost/Benefit Analysis and Program Ideas (Buro Happold) Buro Happold Resiliency Methodology Overview Item #2     Packet Pg. 36     PART 1 AVOIDED SUPPLY COSTS 9 Context: A supply cost model is being developed to help inform program development, the model will provide the cost impacts from the various technologies (on absolute and a per kWh basis). This section summarizes the methodology being adopted. Item #2     Packet Pg. 37     Modeling cost of energy on a monthly and hourly basis per year to determine avoided supply cost for various technologies, forecasted to lifetime of each technology These charts only show the benefits, not the cost of the distributed, flexible technology itself Benefits: Supply Cost Reduction 10 Methodology City’s avoided cost model differs from State avoided cost model This is due to market design. Markets as designed do not pass through all statewide avoided costs to Palo Alto – primarily due to the way capacity and transmission is handled Impact of this on each technology TBD – City benefit may be higher or lower than statewide Insight re Market Design Item #2     Packet Pg. 38     Benefits: Supply Cost Reduction 11 2025 Cost per Hour and Month Statewide ModelCity Avoided Costs Item #2     Packet Pg. 39     PART 2 RESILIENCE BENEFITS 12 Context: A methodology to evaluate resilience benefits is determined by collating and summarizing available research, which is used to identify and evaluate quantitative and qualitative costs and benefits for selected technologies from Part 3. A model is being developed to quantify the economic impacts based on likely outage patterns. Item #2     Packet Pg. 40     ResilienceReliability Maintaining power delivery to customers in the face of routine uncertainty in operating conditions Fluctuating load and generation, fuel availability, outage of assets under normal operating conditions. Duration: seconds to hours Scale of impact: facilities, campuses, or neighborhoods Resilience Benefits | Defining Resilience Preparing for, absorbing, adapting to, and recovering from low-probability, high- consequence disruptive events. Duration: hours, and days to months Scale of impact: states, regions •Cascading impacts in other critical infrastructures and parts of the economy 13 Resilience and reliability are interrelated concepts, with resilience including and extending to reliability. Item #2     Packet Pg. 41     Quantifying ResilienceValuing Resilience Understand these numbers in terms of human impact – how much is the risk reduction worth relative to other solutions Resilience Benefits | Defining the Resilience Framework Apply numbers to the amount of risk reduction a given measure (or bundle of measures) achieves and the cost of that risk reduction, i.e. projects, events, and outcomes 14 Resilience Metrics Customer outage time (hours) Load not served (kilowatt-hours) # or % of customers experiencing an outage # of critical services without power Time to recovery (hours) Avoided Outage Cost Metrics Loss of utility revenue ($) Cost of grid damages ($) Cost of recovery ($) Residential & Commercial interruption costs ($) Loss of assets and perishables ($) Part 2 Scope Part 4 Integration Item #2     Packet Pg. 42     Long Duration Outages (> 24 hours)Economy-WideShort Duration Outages (< 24 hours)Bottom-Up Stated Preference Surveys – Residential Customers Customer damage functions (CDFs) •Outage costs to commercial & industrial customers Resource Adequacy Assessment •Value of Lost Load (VOLL) •Loss of Load Probability (LOLP) Interruption Cost-Estimate Calculator •Meta-analysis and econometric model by Energy Markets & Berkeley Lab Resilience Benefits | Methodologies Stated Preference Surveys – Limited Studies Available Input-Output (IO) models •Estimate direct and indirect economic losses in supply chains •Adaptive behavior not captured, better as an upper bound Computer General Equilibrium (CGE) Models Hybrid Models •CGE models calibrated by surveys Macro-Econometric Models •Primarily focused on GDP, unemployment, inflation, etc. 15 Focus of Study Item #2     Packet Pg. 43     The value of resilience as the present value of •(1) avoided costs from disruptive events over the investment’s lifetime •(2) avoided cost of alternative investments (diesel generators, PV-battery systems) Resilience Benefits | CPAU Focus Short Duration Outage Impacts (<24 hours) 16 Tool Developer Methodology Outputs Interruption Cost Estimator (ICE) Lawrence Berkeley National Laboratory Based on aggregated customer survey data between 1989-2012 in 10 utilities on the West Coast and Southeast U.S $ estimate of power outages lasting 24 hours or less (per event, per avg kw, per avg kwh, total annual cost) Item #2     Packet Pg. 44     34 datasets from surveys fielded by 10 utility companies from 1989-2012, totaling over 105,000 observations •Survey-based methods from representative samples of customers to estimate costs experienced in a number of hypothetical outage scenarios & characteristics •Characteristics include duration, season, day of week, time of day, cause of outage, etc. •All costs updated to 2023 dollars for the CPAU study Customer damage functions applied to calculate interruption costs per event by season, time of day, day of week, and geographical regions •Output: weighted average of customer interruption costs Updated ICE Calculator 2.0 is in development, scheduled for release in early 2025 •Consists of 10 distinct surveying efforts from 2023 with over 7,000 new responses •May be able to integrate into current study Resilience Benefits | Interruption Cost Estimator (ICE) Methodology Overview 17 Item #2     Packet Pg. 45     Resilience Benefits | Integration 18 Value of Resilience / Reliability ($) Resilience Technology / Approach Avoided Outage (kWh, Event, % annual)X ICE Model Benefits Costs Avoided Supply Costs Avoided Outage Costs Capital Expenditures Operations & Maintenance Program / Technology Assessment Methodology Qualitative Benefits Avoided outage costs determined by scenarios for avoided outage costs associated with a given program & technology Avoided Distribution Costs* *Evaluated in separate study (#2) done by E3 Item #2     Packet Pg. 46     Commission Feedback •Does this resiliency framework reflect the quantitative and qualitative benefits you believe would be reflected by deploying these technologies in the community? 19 Item #2     Packet Pg. 47     PART 3 PRELIMINARY PROGRAM RESEARCH 20 Context: The supply, distribution, and resiliency cost and benefit analyses are meant to support City policy decisions on whether to operate programs to encourage flexible energy technologies and efficient electrification. Buro Happold will provide a list of potential programs and their resource needs for consideration based on research of similar programs in California and nationally. Item #2     Packet Pg. 48     Preliminary Program Research | CA, Nationwide, and POU Peers* 21 *Reflects research results to date; will continue to add based on CPAU feedback California Programs, by utility type California POU Peers P rog rams P ilots P olicies P rog rams P ilots P olicies P rog rams P ilots P olicies T OT A L T otal 10 0 0 12 4 3 8 2 9 48 Battery 3 1 0 4 2 0 2 0 0 12 T hermal S torag e 1 0 0 0 0 0 2 0 0 3 G enerator 0 0 0 0 0 0 3 0 0 3 S olar + S torag e 1 0 0 3 1 0 0 0 0 5 Manag ed E V Charg ing 1 0 0 3 0 0 0 0 1 5 V2H & V2G 0 1 0 0 0 0 0 1 0 2 E V T OU R ates 0 0 3 0 0 3 0 0 5 11 Microg rid 0 0 0 0 0 0 2 1 0 3 R esilience Hub 2 0 0 3 1 0 1 0 0 7 S mart P anels 1 0 0 0 0 0 0 0 0 1 Meter S ocket Adapters 0 0 2 0 0 0 0 0 4 6 Other 2 1 0 0 0 0 1 0 0 4 POU's CCA 's IOU's Prog ram totals by type w/DA C Component T otal 2 Battery 1 T hermal S torag e 0 G enerator 0 S olar + S torag e 0 Manag ed E V Charg ing 0 V2H & V2G 0 E V T OU R ates 0 Microg rid 0 R esilience Hub 0 S mart P anels 1 Meter S ocket Adapters 0 Other 0 2 1 0 2 1 1 0 0 0 Prog rams, Pilots and Policies 17 4 1 0 Item #2     Packet Pg. 49     Commission Feedback •Are there specific programs you want to make sure we include in the research? 22 Item #2     Packet Pg. 50     Airport Microgrid (Burns McDonnell) Scope •Estimate solar and storage capacity of the airport and Golf Course parking lot •Complete studies for airport FAA regulatory purposes •Evaluate three potential solar and battery storage microgrid designs under varied operational scenarios Tentative Timeline •Study in progress, aiming for completion by early summer 2025 1 Item #2     Packet Pg. 51     Airport Microgrid (Burns McDonnell) Scenario Definitions 2 Critical Loads Outage Type #1 Outage Type #2 Outage Type #3 (tentative) 1.Airport •September outage •6-hour outage •September outage •3 days To be determined 2. Airport + Regional Water Quality Control Plan (RWQCP) •September outage •3 days (airport) •6 hours (RWQCP) •December outage •3 days (airport) •6 hours (RWQCP) 3. Airport + EV Charging Hub (10 Level 3 chargers) •September outage •3 days (airport) •200 vehicles /day •December outage •3 days (airport) •200 vehicles /day Feedback requested •Will these critical load scenarios provide adequate insight on microgrid costs, benefits and operational characteristics to inform future consideration of microgrid opportunities in Palo Alto? Item #2     Packet Pg. 52     Distribution Cost/Benefit Analysis (E3) Scope •Estimate existing system capacity for electrification •Update and validate impact of full electrification on line-transformers •Evaluate benefit of distributed, flexible technologies and efficient electrification in making better use of capacity and reducing investment cost Timeline •Detailed timeline still in development. Aiming to complete by summer 2025 for incorporation into Buro Happold cost benefit study and final report in fall 2025 1 Item #2     Packet Pg. 53     Staff Report: 2411-3830 – Page 1 of 43 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Utilities Director Lead Department: Utilities Meeting Date: February 5, 2025 Staff Report: 2411-3830 TITLE Information Report: Utilities Quarterly Report for FY25-Q1 RECOMMENDATION This is an informational report, and no action is requested. EXECUTIVE SUMMARY This report has been prepared to keep the Utilities Advisory Commission (UAC) apprised of the major issues that are facing the water, gas, electric, wastewater collection and fiber utilities including legislative/regulatory issues, utility-related capital improvement programs, operations, reliability impact measures and a utility financial summary. This updated report does not include information about energy efficiency and water conservation programs; that information will be provided in an annual Demand Side Management Report attached to the Q2 Utilities Quarterly Report. The UAC will be provided copies of a separate quarterly climate report containing information about greenhouse gas reduction programs such as electric vehicle charger installations and heat pump water heater replacements. Items of special interest in this report are summarized below: Vacancies and Staffing – Appendix B •The Utilities Department has 48 vacant positions out of 269 authorized positions or a 18% vacancy rate at the end of September 2024 compared to 37 vacancies or 14% as of June 2024. •Utilities added 10 new positions in FY 2025 to support grid modernization (6 FTEs), S/CAP (1 FTE), water backflow prevention (2 FTEs) and customer support (1 FTE). Five of these new positions are actively in recruitment and the remaining 5 are under meet and confer with the labor group for the new programs. Electric Utility: •Supply cost for FY 2025 is currently projected to be $86.8 M, a 12% increase compared to budget primarily driven by lower surplus energy revenue and higher market purchase costs. (Section 1.1.1) •Utilities staff has tentatively expressed an interest in one standalone battery energy storage system (BESS) and one standalone solar project. (Section 1.1.3) •Electric sales volumes in Q1 were 7.3% higher than forecasted, driven by new data center load and increased summer cooling. (Section 1.4.1) Gas Utility: •Gas prices have been relatively low and stable. (Section 2.2) •One gas main replacement project is in progress, and one is in the design stage. (Section 2.2) •Gas sales in Q1 were 18% lower than forecasted due to a late start to the heating season. (Section 2.4.1) Item #{{item.number}}     Packet Pg. 54     Staff Report: 2411-3830 – Page 2 of 43 Water Utility: •As of December 1, precipitation at the Hetch Hetchy weather station was about 114% of median. (Section 3.1) •Water sales for Q1 were close to the forecast. (Section 3.5.1) Wastewater Utility: •Actual wastewater sales revenues through Q1 are tracking with the budget. (Section 4.3.1) Fiber Utility: •The fiber hut is anticipated to be installed by the end of calendar year Q1 2025. Electric pole-make ready work such as pole replacements and hanging messenger wire is in progress and on track to be completed by Q1 2025. Fiber cable may be strung once electric pole-make ready work is completed. •The RFP for the operating support system and business support system (OSS/BSS) software is in progress. Utilities is also seeking consulting and external support for marketing, installation, and network operations for Palo Alto Fiber internet service. Item #{{item.number}}     Packet Pg. 55     Staff Report: 2411-3830 – Page 3 of 43 OVERVIEW Utilities Quarterly Report FY 2025-Q1 Fiscal Year 2023 Item #{{item.number}}     Packet Pg. 56     Staff Report: 2411-3830 – Page 4 of 43 Table of Contents 1 ELECTRIC UTILITY.....................................................................................................................................................................7 1.1 ELECTRICITY SUPPLY AND TRANSMISSION ...........................................................................................................................................7 1.1.1 Forecasted Supply Costs.......................................................................................................................................................7 1.1.2 Hydroelectric Conditions......................................................................................................................................................8 1.1.3 Renewable Energy Procurement..........................................................................................................................................8 1.2 CAPITAL IMPROVEMENT PLAN STATUS ...............................................................................................................................................8 1.3 RELIABILITY ..................................................................................................................................................................................9 1.4 FINANCIAL HEALTH ......................................................................................................................................................................10 1.4.1 Sales Forecasts vs. Actuals.................................................................................................................................................10 1.4.2 Financial Position...............................................................................................................................................................11 2 GAS UTILITY...........................................................................................................................................................................12 2.1 GAS SUPPLY AND TRANSMISSION ....................................................................................................................................................12 2.1.1 Actual and Forecasted Supply Costs...................................................................................................................................12 2.2 CAPITAL IMPROVEMENT PLAN STATUS .............................................................................................................................................13 2.3 RELIABILITY ................................................................................................................................................................................13 2.4 FINANCIAL HEALTH ......................................................................................................................................................................14 2.4.1 Sales Forecasts vs. Actuals.................................................................................................................................................14 2.4.2 Financial Position...............................................................................................................................................................14 3 WATER UTILITY .....................................................................................................................................................................16 3.1 WATER SUPPLY AND TRANSMISSION ...............................................................................................................................................16 3.2 CAPITAL IMPROVEMENT PLAN STATUS .............................................................................................................................................18 3.3 RELIABILITY ................................................................................................................................................................................18 3.4 FINANCIAL HEALTH ......................................................................................................................................................................18 3.4.1 Sales Forecasts vs. Actuals.................................................................................................................................................18 3.4.2 Financial Position...............................................................................................................................................................19 4 WASTEWATER UTILITY ..........................................................................................................................................................20 4.1 WASTEWATER TREATMENT UPDATES AND CAPITAL PLANNING STATUS ..................................................................................................20 4.1.1 Treatment Cost Trends.......................................................................................................................................................20 4.1.2 Regional Water Quality Control Plant Capital Planning Status..........................................................................................21 4.2 COLLECTION SYSTEM CAPITAL IMPROVEMENT PLAN STATUS ................................................................................................................23 4.3 FINANCIAL HEALTH ......................................................................................................................................................................23 4.3.1 Sales Forecasts vs. Actuals.................................................................................................................................................23 4.3.2 Financial Position...............................................................................................................................................................23 5 FIBER UTILITY........................................................................................................................................................................25 5.1 FIBER UTILITY STRATEGIC PLANNING ...............................................................................................................................................25 5.2 CAPITAL IMPROVEMENT PLAN STATUS .............................................................................................................................................25 5.3 RELIABILITY ................................................................................................................................................................................26 5.4 FINANCIAL HEALTH ......................................................................................................................................................................26 5.4.1 Fiber Sales..........................................................................................................................................................................26 5.4.2 Financial Position...............................................................................................................................................................26 6 COMMUNICATIONS...............................................................................................................................................................27 7 LEGISLATIVE, REGULATORY AND INDUSTRY ACTIVITY............................................................................................................28 7.1 STATE LEGISLATIVE ACTIVITY ..........................................................................................................................................................28 Item #{{item.number}}     Packet Pg. 57     Staff Report: 2411-3830 – Page 5 of 43 7.2 STATE REGULATORY ACTIVITY ........................................................................................................................................................28 7.2.1 California Air Resources Board (CARB)...............................................................................................................................29 8 APPENDIX A: ENERGY RISK MANAGEMENT PROGRAM..........................................................................................................31 8.1 OVERVIEW OF HEDGING PROGRAMS ...............................................................................................................................................31 8.2 OVERVIEW OF ENERGY RISK MANAGEMENT PROGRAM.......................................................................................................................31 8.3 FORWARD DEALS.........................................................................................................................................................................31 8.4 ELECTRIC MARKET EXPOSURE ........................................................................................................................................................32 8.5 TRANSACTION COMPLIANCE ..........................................................................................................................................................32 9 APPENDIX B: STAFFING AND VACANCIES...............................................................................................................................33 10 APPENDIX C: PALOALTOGREEN GAS PROGRAM.....................................................................................................................34 11 APPENDIX D: GAS UTILITY ANNUAL INFRASTRUCTURE MAINTENANCE AND REPLACEMENT REPORT.....................................36 Item #{{item.number}}     Packet Pg. 58     Staff Report: 2411-3830 – Page 6 of 43 Figures FIGURE 1: FY 2025 Q1 FINANCIAL PLAN SUPPLY COST FORECAST VS. ACTUALS .........................................................................................................7 FIGURE 2: HYDRO GENERATION: FY 2025-2027 ACTUALS & PROJECTIONS (GWH)...................................................................................................8 FIGURE 3: ELECTRIC OUTAGE RELIABILITY, FY 2018 TO FY 2022............................................................................................................................9 FIGURE 4: ELECTRIC OUTAGE RELIABILITY, FY 2023 TO FY 2025..........................................................................................................................10 FIGURE 5: ELECTRIC SALES VOLUME (KWH), UP TO FY 2025-Q1..........................................................................................................................10 FIGURE 6: ELECTRIC SALES REVENUE ($), UP TO FY 2025-Q1 ..............................................................................................................................10 FIGURE 7: PALO ALTO GAS COMMODITY RATES .................................................................................................................................................12 FIGURE 8: GAS SUPPLY COSTS ($), ACTUAL VS BUDGET, UP TO FY2025-Q1...........................................................................................................13 FIGURE 9: GAS SERVICE INTERRUPTIONS, FY 2024 TO FY 2025............................................................................................................................13 FIGURE 10: GAS SALES VOLUME (THERMS), UP TO FY2025-Q1...........................................................................................................................14 FIGURE 11: GAS SALES REVENUE ($), UP TO FY 2025-Q1...................................................................................................................................14 FIGURE 12: REGIONAL WATER SYSTEM STORAGE ...............................................................................................................................................17 FIGURE 13: SFPUC WATER DELIVERIES ............................................................................................................................................................17 FIGURE 14: WATER SERVICE INTERRUPTIONS, FY 2024 TO FY 2025.....................................................................................................................18 FIGURE 15: WATER SALES VOLUME (CCF), UP TO FY 2025-Q1...........................................................................................................................19 FIGURE 16: WATER SALES REVENUE ($), UP TO FY 2025-Q1...............................................................................................................................19 FIGURE 17: PALO ALTO’S SHARE OF ESTIMATED WASTEWATER TREATMENT EXPENSES (PROJECTION AND PLANNED CIP)................................................21 FIGURE 18: CURRENT RWQCP CAPITAL WORK IN-PROGRESS (BASED ON NOVEMBER 2024 PARTNERS MEETING) ........................................................22 FIGURE 19: WASTEWATER SALES REVENUE ($), UP TO FY 2025-Q1.....................................................................................................................23 FIGURE 20: ELECTRIC RESOURCE ADEQUACY DEALS.............................................................................................................................................32 FIGURE 21: ELECTRIC LOAD RESOURCE BALANCE, FY 2024 - 2026.......................................................................................................................33 FIGURE 22: UTILITIES VACANCIES AND RECRUITMENTS BY DIVISION, AS OF Q1 FY 2025............................................................................................34 FIGURE 23: OFFSET PORTFOLIO COMPOSITION ...................................................................................................................................................35 FIGURE 24: OFFSET PROJECT DESCRIPTIONS ......................................................................................................................................................36 Item #{{item.number}}     Packet Pg. 59     Staff Report: 2411-3830 – Page 7 of 43 1 Electric Utility The City’s electric utility serves all residential and non-residential electric demands in Palo Alto at a lower cost than PG&E in surrounding communities. Its electric supply portfolio is 100% carbon neutral. The City maintains and operates an electric distribution system but does not operate any transmission lines or any generating capacity on its own. Instead, the City belongs to Northern California Power Agency (NCPA) which operates its Calaveras hydroelectric generating plant and provides power scheduling services for its other generating resources. This carbon free power is supplied through power purchase agreements with various generation operators. 1.1 Electricity Supply and Transmission Below is an update on electricity supply and transmission services. 1.1.1 Forecasted Supply Costs The electric net supply cost for FY 2025 is currently projected to be $86.8 M, which represents a 12% increase from the Adopted Budget level of $77.0 M. The increase is primarily driven by lower surplus energy revenue and higher market purchase costs. For FY 2026, electric net supply cost is projected to increase slightly to $92.2 M. During Q1 of FY 2025, net supply cost was about $1.0 M lower than budget, driven largely by greater than projected revenue from sales of resource adequacy (RA) and renewable energy credit (REC) products, and lower RA purchase costs. Figure 1: FY 2025 Q1 Financial Plan Supply Cost Forecast vs. Actuals Item #{{item.number}}     Packet Pg. 60     Staff Report: 2411-3830 – Page 8 of 43 1.1.2 Hydroelectric Conditions The City receives power from two hydroelectric projects, the Calaveras project and the Western Base Resource contract for federal hydropower from the Central Valley Project.1 The watershed for Western hydropower is primarily in the northern end of California, while the watershed for the Calaveras project is in the Central Sierras. Following the wet water year of 2023 to 2024, reservoir levels across the state began this water year at above average levels. As of December 8, precipitation in northern California is about 28% above average for that time of year, meanwhile central California is 41% below average. Snowpack levels are 18% above the historical average. As a result of these conditions, hydro generation levels are projected to be slightly above average this year but reverting to roughly average next year, with total output of about 104% of the long-term average level for FY 2025 through FY 2027. Figure 2: Hydro Generation: FY 2025-2027 Actuals & Projections (GWh) After evaluating all of the proposals received under NCPA’s Request for Proposals (RFP) for new renewable energy and storage projects,2 Utilities staff has tentatively expressed an interest in one standalone battery energy storage system (BESS) and one standalone solar project. NCPA staff has begun contract negotiations with these suppliers, and Utilities staff will provide additional updates as these discussions progress. If these negotiations conclude successfully, staff will present these contracts to the UAC and City Council for review and approval. 1.2 Capital Improvement Plan Status The following capital projects are currently in progress or have been recently completed: EL-17001 (East Meadow Circles 4/12kV Conversion) •This project is scheduled to be completed in several phases. Phase 1 is completed. Phase 2 engineering design is in progress and to be completed by January 2025. Phase 2 construction will be completed June 2025. EL-10006 (Rebuild Underground 24) •This project is in the design phase and scheduled to be completed in April 2025. Construction will be completed by December 2025. EL-16000 (Rebuild Underground 26) •The engineering design for this project is currently in progress. The project will be completed in multiple phases and will take additional years to complete. All engineering design phases are expected to be completed by December 2025. Construction to be completed by summer 2026. EL-19004 (Wood Pole Replacement) •CPAU staff and contract consultants are continuously working on pole replacement designs for construction. Replacement of poles in the Grid Modernization – Pilot area is the top priority. 1 The Calaveras project is a hydropower project located in Calaveras County that is maintained and operated by the Northern California Power Agency on behalf of the City and other project participants. The City is also one of several public entities with contracts with the Western Area Power Administration for “Base Resource” electricity, which is the hydroelectric power available from the federal government’s Central Valley Project (operated by the Bureau of Reclamation) after accounting for power used for Central Valley Project operations and power delivered to certain “preference” customers. 2 NCPA’s RFP yielded a total of 29 proposals – nine for standalone solar projects, nine for standalone battery energy storage systems (BESS), and 11 for solar-plus-storage projects. F F F C 1 1 1 W 2 2 2 T 4 3 3 %1 1 1 L 3 3 3 Item #{{item.number}}     Packet Pg. 61     Staff Report: 2411-3830 – Page 9 of 43 EL-16003 (Substation Physical Security). •This project is scheduled to be completed in two phases. Substation Security lighting and camera contract was awarded in June 2022. The installation for the first phase was completed for 7 of the 9 substations in December 2024. The bid package for the 2nd phase and final two substations is being prepared for solicitation. Construction to be completed by summer 2026. •This project funds the purchase and replacement of both 60kV and 12kV substation circuit breakers that are reaching the end of their useful life expectancy. Council approved the purchase request for the sixteen 12KV circuit breakers and seven 60kV breakers. The installation of the 12kV breakers is complete. The project to purchase the seven 60KV breakers was approved by City Council on May 20, 2024. The engineering design and installation of the 60kV breakers will begin in FY 2025 and is expected to be completed in FY 2026. •This project will rebuild the approximately 11 miles of overhead line in Foothills Park, as necessary to mitigate the possibility of wildfire due to overhead electric lines. Staff has completed 7,000 feet of substructure work and design which will eliminate the corresponding 26 poles. Substructure for Phase 1 was completed in Spring 2022 and the substructure for Phase 2 was completed in June 2023. Phase 3 substructure installation is currently in progress. Phase 4 construction is currently paused for an easement relocation from Mid-peninsula Open Space. Will resume construction early next year when the easement paperwork is completed. Phase 5 substructure installation along Arastradero road is currently in progress. •The project scope includes on-going maintenance/technical support of the existing GIS system and implementation of the new GIS platform, ESRI. •Engineering design and construction is in progress. 55 (73%) poles out of the 75 targeted for replacement have been replaced in the Grid Modernization Pilot area, with the remaining 20 poles slated for replacement by March 2025. Additionally, 428 (47%) of the 908 homes in the Pilot area are ready for electrification, with another 480 homes inline to be connected to the upgraded infrastructure by the end of April 2025. 1.3 Reliability Figure 3: Electric Outage Reliability, FY 2018 to FY 2022 Outage Reliability FY18 FY19 FY20 FY21 FY22 3 4 5 3 System Average Interruption Duration Index (SAIDI) - Measure of the total duration of an interruption for the average customer during a given time frame. SAIDI = (Sum of Customer Minutes Interrupted) / (Total Customers Served) 4 System Average Interruption Frequency Index (SAIFI) - the average number of times a customer will experience an interruption during a given time frame. SAIFI = (Total Customers Interrupted) / (Total Customers Served) 5 Customer Average Interruption Duration Index (CAIDI) - the average time to restore service. CAIDI = (Sum of Customer Minutes Interrupted) / (Total Customers Interrupted) Item #{{item.number}}     Packet Pg. 62     Staff Report: 2411-3830 – Page 10 of 43 Figure 4: Electric Outage Reliability, FY 2023 to FY 2025 Outage Reliability FY 2023 Q1 Q2 Q3 Q4 Annual System Average Interruption Duration Index (SAIDI)3 81.69 7.38 111.90 1.09 198.60 System Average Interruption Frequency Index (SAIFI)4 0.61 0.04 1.00 0.01 1.64 Customer Average Interruption Duration Index (CAIDI)5 134.77 190.12 110.80 121.48 121.15 Outage Reliability FY 2024 FY 2025 Q1 Q2 Q3 Q4 Annual Q1 System Average Interruption Duration Index (SAIDI)3 n/a 37.75 67.03 16.01 120.80 42.76 System Average Interruption Frequency Index (SAIFI)4 n/a 0.18 0.36 0.19 0.73 0.25 Customer Average Interruption Duration Index (CAIDI)5 n/a 213.82 183.33 83.76 164.73 170.21 1.4 Financial Health Below is a summary of the financial position for the electric utility. 1.4.1 Sales Forecasts vs. Actuals Actual electric sales volumes in Q1 of FY 2025 were 7.3% higher than forecasted, driven by new data center load and increased cooling demand due to an extended summer weather pattern. As a result, actual sales revenues exceeded the FY 2025 Financial Plan by 10.5%. Item #{{item.number}}     Packet Pg. 63     Staff Report: 2411-3830 – Page 11 of 43 1.4.2 Financial Position The Electric Operations Reserves FY 2024 at $32.3 million, below the target of $44 million, but above the minimum guideline of $30.7 million. In June 2024, Council approved the FY 2025 Electric Utility Financial Plan6 , that approved a residential system average rate increase of 9% and a transfer of $17 million from the Electric Operations Reserve to the Hydroelectric Stabilization reserve. This transfer was completed in FY 2024 and will enhance the utility's ability to manage supply cost volatility in the future. Staff will provide financial forecast projections in Spring 2025. 6 FY 2025 Electric Utility Financial Plan https://www.cityofpaloalto.org/files/assets/public/v/2/agendas-minutes-reports/reports/city-manager- reports-cmrs/attachments/2024-rates/electric-utility-financial-plan-fy25.pdf Item #{{item.number}}     Packet Pg. 64     Staff Report: 2411-3830 – Page 12 of 43 2 Gas Utility The City’s gas utility serves all residential and non-residential gas demand in Palo Alto. The City maintains and operates a system of low-pressure gas lines for delivering gas but does not operate any transmission lines. Costs for the gas utility are split approximately two thirds for the operation, maintenance, and capital improvement and one third for the cost of the gas commodity, PG&E gas transmission, compliance with the State’s Cap and Trade Program and the City’s Carbon Neutral Gas Program. 2.1 Gas Supply and Transmission After experiencing a notable price spike during winter 2022-2023, natural gas prices have seen a significant decline, returning to more typical ranges. This shift can be attributed to several factors, including milder temperatures and above average gas storage levels nationwide. The combination of these factors has put downward pressure on natural gas prices, and we do not expect an extreme price spike to occur in the near future. The chart below shows Palo Alto’s gas commodity rates from July 2021 to September 2024. Figure 7: Palo Alto Gas Commodity Rates 2.1.1 Actual and Forecasted Supply Costs Actual supply costs in FY 2025 Q1 were approximately 22% lower than budgeted in the FY 2025 Financial Plan. This variance was primarily driven by historically low natural gas prices, which remained well below initial expectations for more typical market conditions. Item #{{item.number}}     Packet Pg. 65     Staff Report: 2411-3830 – Page 13 of 43 Figure 8: Gas Supply Costs ($), Actual vs Budget, up to FY2025-Q1 2.2 Capital Improvement Plan Status The following capital projects are currently in progress: GS-14003 – GMR 24B (Gas Main Replacement 24B) •The GMR 24B project construction has started. Gas pipelines on University from Webster to Hwy 101 and surrounding streets, as well as Geng Road and Town & Country Village, are scheduled to be replaced. Construction on University is completed from Hwy 101 to Hale Street, Geng Road area, and Town & Country Village. Construction is anticipated to be completed in March 2025. GS-15000 – GMR 25 (Gas Main Replacement 25) •The GMR 25 design drawings are being finalized and will include the replacement of pipes on Ross Road from Colorado Avenue to East Meadow Drive and surrounding streets, as well as North and Southampton Drive and surrounding streets, and Walter Hays Drive and surrounding streets. The project is expected to replace approximately 26,000 linear feet of gas mains as full federal grant funding was approved. The City received a $16.5 million grant from the Pipeline and Hazardous Material Safety Administration for this project and construction is anticipated to begin in FY26 due to federal grant funding requirements. 2.3 Reliability The City of Palo Alto tracks all gas service interruptions. A summary chart of these interruptions can be found below. Gas service interruptions are usually due to repairs of broken or damaged gas services and mains. This kind of damage is often caused by excavation by outside parties digging in the City. In FY25 Q1 we recorded higher numbers in our gas service interruption tracking due to the division allocating more resources to resolve existing gas leaks. These leaks are small and are monitored, however expected changes in gas legislation will require them to be resolved more quickly. The gas division has been proactively working to meet upcoming compliance goals before the new rules go into effect. FY 2024 FY 2025 Gas Q1 Q2 Q3 Q4 Q1 Number of Breaks 5 1 5 6 13 Total Minutes 540 120 570 270 1860 Customers Affected 51 1 41 14 135 Item #{{item.number}}     Packet Pg. 66     Staff Report: 2411-3830 – Page 14 of 43 2.4 Financial Health Below is a summary of the financial position for the gas utility. 2.4.1 Sales Forecasts vs. Actuals Actual gas sales volumes in Q1 of FY 2025 were approximately 18.4% below forecast, while actual sales revenues were 20.9% lower than budgeted in the FY 2025 Financial Plan. The decline was primarily driven by reduced heating demand from residential customers due to an extended summer weather pattern. Figure 10: Gas Sales Volume (Therms), up to FY2025-Q1 Figure 11: Gas Sales Revenue ($), up to FY 2025-Q1 2.4.2 Financial Position The FY 2024 ending Operations Reserve balance for the Gas Utility was $4.2 million, which is below the minimum guideline of $9.1 million and below the short-term risk assessment value of $5.3 million. This was due to one-time expense items deferred from FY 2023 to FY 2024, such as carbon offset purchases and Cap and Trade revenue transfers, together with the impact on reserves from the unprecedented gas price spike in FY 2023. In June 2024, Council approved the FY 2025 Item #{{item.number}}     Packet Pg. 67     Staff Report: 2411-3830 – Page 15 of 43 Gas Utility Financial Plan7 that included a 12.5% increase in gas rates in FY 2025 to gradually restore reserves to within guideline levels and cover rising costs. Staff will provide financial forecast projections in Spring 2025. 7 FY 2025 Gas Utility Financial Plan https://www.cityofpaloalto.org/files/assets/public/v/2/agendas-minutes-reports/reports/city-manager-reports- cmrs/attachments/2024-rates/gas-financial-plan-fy25.pdf Item #{{item.number}}     Packet Pg. 68     Staff Report: 2411-3830 – Page 16 of 43 3 Water Utility The Water Utility serves water to virtually all Palo Alto residential and non-residential customers. All potable water in the City is from the San Francisco Public Utilities Commission (SFPUC) Hetch Hetchy Water System. This system delivers high quality water from the Sierra Nevada and uses no pumping to deliver water to the City. Palo Alto uses a small amount of recycled water for irrigation of the Municipal Golf Course and a few other sites near the Regional Water Quality Control Plant. The City also maintains a system of reservoirs and wells that enable Palo Alto to serve water during an interruption of the Hetch Hetchy system. Costs for the Water Utility are split approximately half for the operation, maintenance and periodic replacement of Palo Alto’s water system and half for the costs of the water purchased. 3.1 Water Supply and Transmission Cumulative Hetch Hetchy Weather Station precipitation for October and November 2024 is 114% of median. As of December 1, 2024, the Regional Water System total storage operated by the San Francisco Public Utilities Commission (SFPUC) was at 88% of maximum storage and Water Bank was full. In the figure below, the solid black line shows storage in the Regional Water System for the past 12 months (color bands show contributions to total system storage) and the dashed black line shows total system storage for the previous 12 months. Regional Water System Storage is 1,291 Thousand Acre Feet (TAF) as of December 1, 2024. Item #{{item.number}}     Packet Pg. 69     Staff Report: 2411-3830 – Page 17 of 43 Figure 12: Regional Water System Storage The figure below shows water usage for the South Bay/East Bay (including Palo Alto) compared to several benchmarks including 2015 and 2023 and a five-year average. For the South Bay/East Bay region as well as systemwide, demand for 2024 has been similar to the average of the last five years but higher than the same months in 2023, which had historically wet weather, until this November. Item #{{item.number}}     Packet Pg. 70     Staff Report: 2411-3830 – Page 18 of 43 3.2 Capital Improvement Plan Status The following capital projects are currently in progress: WS-15002 – WMR 29 (Water Main Replacement 29) •The WMR 29 project will replace approximately 8,000 linear feet of water main on Park Boulevard from Mariposa Avenue to Lambert Avenue, on College Avenue from Park Boulevard to El Camino Real, and on Birch Street from College Avenue to Sherman Avenue. The project started in November 2023 and was completed in September 2024. WS-16001 – WMR 30 (Water Main Replacement 30) •The WMR 30 project is currently in the design phase and will replace approximately 7,000 linear feet of water main on Towle Way, on Stanford Avenue and Lambert Avenue from El Camino Real to Park Boulevard, and on Christine Drive. The anticipated project construction start date is in August 2025. The City of Palo Alto tracks all water service interruptions. A summary chart of these interruptions can be found below. Water service interruptions are usually due to repairs of broken or damaged water services and mains. Figure 14: Water Service Interruptions, FY 2024 to FY 2025 FY 2024 FY 2025WaterQ1Q2Q3Q4Q1Q2Q3 Q4 Number of Breaks 8 9 8 6 8 Combined Minutes 1086 880 1230 475 510 Customers Affected 147 96 164 75 127 Below is a summary of the financial position for the water utility. 3.4.1 Sales Forecasts vs. Actuals Actual water sales volumes in FY 2025 Q1 were about 0.9% higher than forecasted, and actual water sales revenues were about 2.9% lower than budgeted in the FY 2025 Financial Plan, which aligns with the anticipated recovery in water usage following periods of drought. Item #{{item.number}}     Packet Pg. 71     Staff Report: 2411-3830 – Page 19 of 43 Figure 15: Water Sales Volume (CCF), up to FY 2025-Q1 3.4.2 Financial Position At the end of FY 2024, the Water Operations Reserve balance was $7.1 million, which is below the minimum guideline range of $8.4 million. Additionally, the rate stabilization reserve had $4 million remaining at the end of FY 2024. In June 2024, Council approved the FY 2025 Water Utility Financial Plan8, which approved a 9.5% rate increase in FY 2025 to pay for rising costs and offset decreased sales revenues. Staff will provide financial forecast projections in Spring 2025. 8 FY 2025 Water Utility Financial Plan https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager- reports-cmrs/attachments/2024-rates/water-financial-plan-fy25.pdf Item #{{item.number}}     Packet Pg. 72     Staff Report: 2411-3830 – Page 20 of 43 4 Wastewater Utility The Wastewater Utility includes the system of sewer pipes that collect and transport wastewater to the Regional Water Quality Control Plant (RWQCP) operated by the City of Palo Alto under a partnership agreement with several surrounding communities, as well as Palo Alto’s share of the cost of operating the RWQCP. The RWQCP provides treatment and disposal of wastewater for Palo Alto. Costs for the Wastewater Utility are split approximately half for the operation, maintenance and periodic replacement of Palo Alto’s sewer collection system and half for the costs of wastewater treatment at the RWQCP. 4.1 Wastewater Treatment Updates and Capital Planning Status The RWQCP, operated by Palo Alto's Public Works Department, provides wastewater treatment to Palo Alto, Mountain View, Stanford, Los Altos, East Palo Alto, and Los Altos Hills. The Palo Alto Wastewater Collection Utility contributes about 32% of the costs (projected for FY 2025). Capital costs, driven by necessary upgrades to aging equipment and changing environmental regulations, are a major factor in cost increases. With plant equipment over 40 years old, significant rehabilitation and replacement are required to maintain safe, compliant wastewater treatment operations. 4.1.1 Treatment Cost Trends RWQCP staff project a 4.3% annual increase in treatment costs paid by Palo Alto’s Wastewater Utility from FY 2025 to FY 2035. The main drivers are capital projects, materials, and debt service (including loan repayments). Treatment capital expenses, including debt service, are expected to rise by about 26% per year on average to fund equipment replacement and major upgrades. Larger increases in capital expenses are anticipated starting in FY 2030 due to new debt for major projects. The figure below outlines Palo Alto’s share of estimated treatment costs, with upcoming capital projects and planned debt service payments shown in the "Planned Debt Service" bar. •Joint Interceptor Sewer Rehabilitation (FY 2024) •Building Purchase (FY 2025) •Primary Sedimentation Tank Rehabilitation and Equipment Room Electrical Upgrade (FY 2025) •Outfall Line Construction (FY 2027) •Headworks Facility (FY 2029) •Secondary Treatment Upgrades (FY 2030) Item #{{item.number}}     Packet Pg. 73     Staff Report: 2411-3830 – Page 21 of 43 Figure 17: Palo Alto’s Share of Estimated Wastewater Treatment Expenses (Projection and Planned CIP) The figure above shows annual CIP reinvestment ("Recurring/Minor CIP" and "Existing Debt Service"), one pay-as-you-go project (the Joint Intercepting Sewer in FY 2025), and treatment operations costs. While operations costs make up the bulk of treatment expenses, they are growing more slowly than planned debt service. Additional factors, such as debt expenses from slow State Revolving Fund loan reimbursements and costs for an acquired property, could further increase costs. Key drivers of rising treatment costs include higher salaries, sludge hauling price increases, commodity cost hikes, and Palo Alto’s increased flow share (from 32% in FY 2022 to 36.6% in FY 2024). RWQCP is updating its Long Range Facilities Plan, including cost of service analysis and capital cost allocation. Not included in Figure 22 is the remaining unencumbered and authorized amount for the future pay-as-you-go capital. This amount is $3.5 million in FY 2025 and approximately $1.4 million in each future year. The wastewater collection utility needs to hold this amount in reserves until it is needed by the treatment plant. In June, the Council approved a Cost-Sharing Agreement with the Santa Clara Valley Water District for the Guiding Principle 5 grant program, which funds future RWQCP9 projects. The program supports communities like Palo Alto, where taxpayers pay State Water Project property taxes but rely on non-Valley Water supplies for most of their water. In FY 2025, staff will factor in an estimated $11.2 million in grant funding for Palo Alto’s share of approved RWQCP projects, directly benefiting local customers. Four upcoming projects are eligible for this funding: •Outfall Line Construction •Headworks Facility Replacement •12kV Electrical Power Distribution Loop Improvements •Joint Intercepting Sewer Rehabilitation 4.1.2 Regional Water Quality Control Plant Capital Planning Status The Long-Range Facilities Plan, completed in 2012, guides the capital plans for the RWQCP. The RWQCP has begun work on the Long-Range Facilities Plan update. The findings from the Plan update will direct additional/future CIP. The RWQCP’s 9 RWQCPhttps://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82864 Item #{{item.number}}     Packet Pg. 74     Staff Report: 2411-3830 – Page 22 of 43 current capital work in-progress includes an estimated $422.9 – 467.6 million in projects. The following table summarizes these ongoing projects and provides their status and costs. Figure 18: Current RWQCP Capital Work In-Progress (based on November 2024 Partners Meeting) Project Status Planned Expense (million $) Primary Sedimentation Tanks Rehabilitation and Equipment Room Electrical Upgrade 12kV Electrical Loop Upgrades New and Rehabilitated Outfall Pipeline Secondary Treatment Upgrades Advanced Water Purification System Headworks Facility Replacement Joint Interceptor Sewer Rehabilitation Staff Buildings Long Range Facility Plan Update Valley Water Purified Drinking Water Regional Plant at Former Los Altos Treatment Plant Item #{{item.number}}     Packet Pg. 75     Staff Report: 2411-3830 – Page 23 of 43 4.2 Collection System Capital Improvement Plan Status The following capital project is currently in progress: WC-15002 – Sewer Master Plan Study •The Master Plan Study will evaluate the City’s existing wastewater collection system, flows, and flow patterns to determine the adequacy of the system’s hydraulic capacity to meet current and anticipated future wastewater flow demands. The project kicked off in December 2023 and is anticipated to be completed in June 2025. WC-20000 - SSR 32 (Sanitary Sewer Replacement 32) •The WMR 32 project is currently in the design phase and will replace approximately 26,000 lineal feet of sewer mains, laterals, and manholes including Middlefield Road and Webster Street between Seale and Oregon Ave; and various street in Crescent Park, Old Palo Alto, Midtown, Palo Verde, Fair Meadows, Marron Park, and Green Acres neighborhoods. The anticipated project construction start date has been delayed from FY26 to FY28 due to an unanticipated reduction in revenue and additional costs. Below is a summary of the financial position for the wastewater utility. 4.3.1 Sales Forecasts vs. Actuals Wastewater sales revenues through Q1 FY 2025 was 0.9% higher than forecasted, which is consistent with the FY 2025 Financial Plan. Figure 19: Wastewater Sales Revenue ($), up to FY 2025-Q1 4.3.2 Financial Position The Wastewater Collection Operations Reserve dropped to negative $1 million at the end of FY 2024. Costs were higher than forecasted in FY 2023 and FY 2024. Additionally, Palo Alto began Sanitary Sewer Replacement project 31 with an earlier start date in FY 2023 instead of FY 2024. This project was completed in FY 2024. Completing this sewer replacement earlier than previously anticipated was necessary in order to coordinate with Caltrans to limit or avoid digging into newly- paved street on El Camino Real. In June 2024, Council approved the FY 2025 Wastewater Collection Financial Plan10 that 10 FY 2025 Wastewater Collection Financial Plan https://www.cityofpaloalto.org/files/assets/public/v/2/agendas- minutes-reports/reports/city-manager-reports-cmrs/attachments/2024-rates/wastewater-financial-plan-fy25.pdf Item #{{item.number}}     Packet Pg. 76     Staff Report: 2411-3830 – Page 24 of 43 included a 15% rate increase in FY 2025 and a short-term loan of $3 million from the Fiber Optics Fund Reserve for FY 2024 to cover the cash needs of the Wastewater Collection Utility. The utility’s overall cash balance was positive $0.34 million at the end of FY 2024 due to the $3 million short-term loan. The short-term loan is expected to be paid in FY 2026. Staff expects revenues to cover rising costs in FY 2025 and begin to replenish the utility’s reserves. Staff will provide financial forecast projections in Spring 2025. Item #{{item.number}}     Packet Pg. 77     Staff Report: 2411-3830 – Page 25 of 43 5 Fiber Utility The City offers a "Dark" fiber service providing a fiber connection from Palo Alto businesses to the downtown Internet Exchange. At the exchange, businesses select an internet service provider (ISP) for bandwidth and connection speed. 5.1 Fiber Utility Strategic Planning Below are highlights and status updates of the Fiber-to-the-Premises (FTTP) Project: •Staff is in the process of securing permits for the fiber hut near Colorado substation. The fiber hut is a pre-cast concrete building (11’ x 20’) which will house the networking equipment including electrical system, cable entry, HVAC, lighting, fire suppression system, alarms, and racks. After the permit is approved, we will begin the foundation and substructure work for the required utilities. •City is evaluating the RFP responses for the operating support system and business support system (OSS/BSS) software. OSS supports infrastructure and network management by monitoring operations and provisioning service. BSS supports customer-facing activities such as billing, scheduling, and customer experience. Contract award and implementation is expected to begin in calendar year Q1 2025. •CPAU will be recruiting for two FTTP manager positions. The Fiber Systems Manager will manage fiber-optic network architecture, infrastructure upgrades, and support field construction for outside plant projects to achieve FTTP rollout and optimize network performance. The Fiber Operations Manager will be responsible for day-to-day operations including installations, scheduling, vendor management and customer service. 5.2 Capital Improvement Plan Status The following capital projects are currently in progress: •FO-16000 – Fiber Optic System Rebuild o The new fiber backbone will be built in segments in alignment with the phased FTTP. CPAU is extending the fiber backbone in the foothills to provide dark fiber service to those customers. In addition, CPAU is replacing and undergrounding fiber in the foothills as part of the City’s wildfire mitigation plan. CPAU does not have the internal or external resources to work simultaneously on grid modernization, FTTP, and the new fiber backbone. Activities include engineering design, construction management, inspections, and procurement of materials and construction services. •FO-24000 – Fiber-to-the-Premises o The pilot area has been identified, which is bounded by Embarcadero Road, Louis Road, Colorado Avenue, Greer Road and West Bayshore Road, to determine the best approach at integrating FTTP and grid modernization. Some criteria that will be used to analyze alignment include shared construction costs, reductions to community disruptions, internal staffing, and project timelines. Construction of the FTTP pilot is scheduled to begin in calendar year Q1 2025. Item #{{item.number}}     Packet Pg. 78     Staff Report: 2411-3830 – Page 26 of 43 5.3 Reliability There were no unplanned fiber outages or events to report in Q1 of FY 2025. Below is a summary of the financial position for the fiber utility. 5.4.1 Fiber Sales Actual dark fiber licensing sales in Q1 FY 2025 were $0.9M which is in line with the revenue forecast. Fiber expenses were $0.8M which is also in line with expense forecast. The City added two dark fiber services, one for the new Public Safety building and another one for a storm water pump station. The City is also receiving more dark fiber inquiries and quotes from commercial businesses and value-added resellers. 5.4.2 Financial Position At the end of FY 2024, the Fiber Reserve balance was $5.8 million with an additional $29.4 million of CIP commitments and reappropriations for fiber-to-the-premises and new fiber backbone. The Fiber Fund loaned the Wastewater Collection Fund $3 million in FY 2024. The Wastewater Collection utility will repay the short-term loan in FY 2026 at a rate equal to the City’s portfolio rate plus 0.25%. Staff will provide financial forecast projections in Spring 2025. Item #{{item.number}}     Packet Pg. 79     Staff Report: 2411-3830 – Page 27 of 43 6 Communications This section summarizes communications highlights, updates on major campaigns and noteworthy events. Copies of ads bill inserts, and brochures are available online at www.cityofpaloalto.org/UTLbillinsert Annual Consumer Confidence Report: Every year, CPAU produces a consumer confidence report on water quality conditions for the previous calendar year. The 2023 water quality report is available online at cityofpaloalto.org/waterresources in English, Spanish and Traditional Chinese. Please contact us at UtilitiesCommunications@cityofpaloalto.org or (650) 329-2479 to request a printed copy, and read more about Palo Alto’s water supply and water quality at cityofpaloalto.org/waterresources Utilities Rates Changes: The Palo Alto City Council approved fiscal year 2025 Capital and Operating Budgets, Utilities financial plans and utility rate changes, effective July 1, 2024. Staff communicated these changes with customers, including these key points: the reasons for rate increases; value of our investment in infrastructure; how CPAU’s rates are generally lower than utilities in neighboring communities; what CPAU is doing to contain costs; and resources provided by the City to help customers keep utility bill costs low. Community outreach involves work with the local media to publish articles on the subject, utility bill inserts, website, email newsletters, social media, neighborhood and business group meetings. Details are available at cityofpaloalto.org/ratesoverview Gas Price Spike Mitigation: In August, Council approved a plan to apply a gas price mitigation adder of 5.5 cents per therm for three years generating about $4.5 million in revenues. The funds will be used to offset the impact of a gas market price spike above the maximum Gas Commodity Charge of $4 per them. The policy was effective November 1, 2024. Beware of Scams: We are continually on the lookout for potential utility scams and warn the public to be wary of anyone pretending to fraudulently represent the City of Palo Alto Utilities (CPAU). CPAU reminds community members to beware and be safe. Scammers may advertise a false CPAU phone number online, try to solicit personal info and/or demand utility payments. We encourage customers to contact Utilities Customer Service Call at UtilitiesCustomerService@cityofpaloalto.org or (650) 329-2161 with any questions about their account. 811 Day: August 11 was 8/11, Call Before You Dig Day, which is a helpful reminder to always call 811 before any digging or excavation work to avoid hitting underground utilities and a potentially dangerous situation. In September, CPAU mailed gas safety awareness brochures to all postal patrons within the zip codes of Palo Alto, as well as to emergency responders, locators, excavators, contractors, public officials, and non-customers living near a gas pipeline. CPAU provides gas safety outreach to customers throughout the year. Visit cityofpaloalto.org/safeutility for more tips on gas and other utilities safety. GOAL Surveys: In the fall, CPAU surveyed residents about gas safety through the Gas Overall Awareness Level (GOAL) survey. This survey is one of the methods used to evaluate the effectiveness of our outreach activities as mandated by the Federal Department of Transportation through our Gas Safety Public Awareness Plan. Business and Key Account Customer Satisfaction Surveys: As a member of the California Municipal Utilities Association (CMUA), CPAU actively participates in customer satisfaction surveys for residents, small and medium businesses, as well as key account customers. In summer 2024, CMUA’s contractor, GreatBlue Research, conducted a statewide survey of municipal and investor-owned business and key account utility customers. This survey aims to benchmark and analyze customer satisfaction. Following the statewide survey, Palo Alto initiated an “oversample” survey specifically targeting Palo Alto business customers. This additional survey help us gain deeper insights into areas of particular interest in Palo Alto while retaining similar questions to those used in the statewide survey for effective comparison. Utilities at a Glance: Find our latest update to this handout which provides an overview of our utilities services, programs, and financial information. More details are available at cityofpaloalto.org/utilitiesataglance Item #{{item.number}}     Packet Pg. 80     Staff Report: 2411-3830 – Page 28 of 43 7 Legislative, Regulatory and Industry Activity 7.1 State Legislative Activity The final weeks of the 2023 – 2024 legislative session saw trends that are expected to continue into 2025. The legislature introduced several bills aimed at addressing electricity affordability in the state but were ultimately pulled without being voted upon, setting the stage for further action designed to reduce electric bills. Additionally, the Governor vetoed slightly more bills than average, mainly due to negative impact on the State’s budget. While the State’s financial situation is expected to improve, the budget will still be tight, and that reality will be reflected in the legislature and Governor’s support of future bills. Several key pieces of legislation are anticipated in 2025: reauthorization of the California Air Resources Board’s (CARB) Cap-and-Trade program beyond 2030, authorization for the creation of a new entity independent of CAISO to operate the real-time and soon-to-be day-ahead markets, and extension beyond 2030 of the large hydroelectric exemption in the RPS program. CPAU staff will work closely with NCPA and CMUA to support these legislative efforts and monitor and intervene in other bills as necessary. Chaptered Bills •AB 2037 (Papan) | Weights and measures: electric vehicle chargers. Authorizes county sealers to test and verify as correct any electric vehicle charger operated by a public agency or local publicly owned electric utility. Exempts electric vehicle chargers that are tested every six months to specified requirements. •AB 2427 (McCarty) | Electric vehicle charging stations: permitting: curbside charging. Requires local agencies to develop a comprehensive permitting checklist for electric vehicle charging stations within the public right-of-way. The City of Palo Alto would have to comply by January 1, 2029. •AB 2561 (McKinnor) | Local public employees: vacant positions. Requires public agencies to present on the status of vacancies and recruitment efforts and if vacancy rates are high, include additional specified information at the request of the recognized employee organization. •SB 1210 (Skinner) | New housing construction: electrical, gas, sewer, and water service: service connection information. Requires a utility to post online the estimate fee schedule and timeframes for completion for typical service connections for new housing constructions. •SB 1251 (Stern) | Mosquito abatement inspections. Requires an electrical utility to enter a vector control agreement with a vector control district, upon their request, to allow supervised access to electrical vaults for mosquito abatement. Data disclosed pursuant to this agreement shall be kept confidential. Vetoed Bills •AB 1834 (Garcia) | Resource adequacy: Electricity Supply Strategic Reliability Reserve Program. Requires the CEC to consider mitigating factors when determining capacity payments. •SB 366 (Caballero) | The California Water Plan: long-term supply targets. A CMUA-sponsored bill that revises the California Water Plan to establish a stakeholder advisory committee to coordinate with various California water agencies in the development of a long-term water supply plan. 7.2 State Regulatory Activity In the state regulatory sphere, the first quarter of FY25 saw continued activity focused on accelerating emissions reductions. Amendments to the Low Carbon Fuel Standard (LCFS) regulation were approved in November after years of rulemaking, freeing up CARB staff to switch their focus to Cap-and-Trade amendments. CPAU has been actively involved in these proceedings, and others, and has weighed in when prudent. Item #{{item.number}}     Packet Pg. 81     Staff Report: 2411-3830 – Page 29 of 43 7.2.1 California Air Resources Board (CARB) Low Carbon Fuel Standard (LCFS) CARB approved amendments to the LCFS regulation on November 8, 2024 despite some public objections. Much of the disagreement focused on the amendments’ potential to increase gas prices and the description of the benefits of dairy methane as a fuel source. The amendments will not require CPAU to make significant changes. While the lower annual carbon intensity benchmarks will decrease CPAU’s LCFS credit generation, increased EV adoption could offset those reductions. Furthermore, fewer credits in the market could result in increased credit prices. The regulations still give CARB the option to give LCFS credits to EV automakers, but those credits would have otherwise gone to the Clean Fuel Reward, which will not affect CPAU under the new amendments. The amendments are not expected to cause significant changes in CPAU’s LCFS revenue. CPAU staff will continue to work with CMUA and NCPA to monitor how these changes are implemented and will engage where needed. Cap-and-Trade CARB initially planned to release a first draft of the changes to Cap-and-Trade regulations at the end of 2024, but CARB now expects to release the draft in the beginning of 2025. This will preserve CPAU’s 2025 allowances, which may be cut in future amendments. CPAU staff are working closely with CMUA and NCPA working groups to advocate for maintaining allowance allocations to utilities by highlighting how the Cap-and-Trade auction proceeds directly result in emissions reductions while keeping costs low. Item #{{item.number}}     Packet Pg. 82     Staff Report: 2411-3830 – Page 30 of 43 Appendices Item #{{item.number}}     Packet Pg. 83     Staff Report: 2411-3830 – Page 31 of 43 8 Appendix A: Energy Risk Management Program This appendix provides a quarterly update on the City’s Energy Risk Management Program. 8.1 Overview of Hedging Programs The City’s Utilities Department maintains a hedging program for its Electric and Gas Utilities. In the Gas Utility, the program protects against short-term (intra-month) price spikes caused by weather or major incidents on the Western gas system. However, the City does not hedge its gas supply more than one month in advance, choosing instead to protect the Gas Utility’s financial position by passing gas supply costs through to customers via a charge that varies monthly based on gas market prices. As a result, the Gas Utility’s only market exposure is the amount by which gas demand deviates from forecasts within the month. This exposure is relatively small and can be managed using Gas Utility Operating Reserves. A risk assessment is performed each year as part of the Gas Utility financial planning process to ensure adequate reserves to cover all risks. The most recent Gas Utility Financial Plan was adopted June 21, 2021 (Staff Report #1224011). The City has entered long-term contracts for its Electric Utility to ensure that the City has carbon free electricity supplies equal to 100% of Palo Alto’s annual electric demand. However, the output from these generating sources does not match Palo Alto’s electric load. In the summer, the City has a surplus of carbon free energy and it has a deficit in the winter. This exposes the City to market risk, and staff maintains a hedging program to protect against this risk. In addition, hydroelectric generators make up approximately half the City’s energy supply. During dry years these resources do not generate as much energy, creating an additional market exposure that must be hedged. Unlike the gas hedging program, which is operated by City staff, the electric hedging program is operated by the Northern California Power Agency (NCPA), a joint powers agency the City formed in partnership with several other California publicly owned electric utilities, with oversight by City staff. 8.2 Overview of Energy Risk Management Program The hedging programs described above are conducted in accordance with the City’s Energy Risk Management Program, which includes a set of Program Policies adopted by the City Council, Guidelines adopted by the City’s Utilities Risk Oversight Coordinating Committee (UROCC), and Procedures approved by the Utilities Director. In addition, for the electric hedging program, NCPA maintains its own Risk Management Program. The City is able to provide policy level oversight of this program through its seat on the NCPA Risk Oversight Committee, which is held by the City’s Risk Manager. Per the Energy Risk Management Policies, the City Council must receive quarterly reports on the City’s forward contract purchases, market exposure, credit exposure, counterparty credit ratings, transaction compliance, and other relevant data. 8.3 Forward Deals Palo Alto executed the following Electric and Gas transaction in Q1 of FY 2025. Figure 20: Electric Resource Adequacy Deals Delivery Month Deal Type Avg RA (MW-mo) Price ($/kW-mo) Jan’24-Dec’25 Purchase 3.35 5.46 11 Staff Report #12240 https://www.cityofpaloalto.org/files/assets/public/v/3/agendas-minutes-reports/reports/city-manager-reports-cmrs/year- archive/2021/06-21-21-id-12240.pdf Item #{{item.number}}     Packet Pg. 84     Staff Report: 2411-3830 – Page 32 of 43 Jun’26-Oct’26 Sale 50 55.00 Jun’26-Oct’26 Purchase 50 56.00 8.4 Electric Market Exposure The chart below shows the City’s electric supply market exposure and committed purchases and sales to cover exposed positions. Additional purchases and sales will be executed for FY 2025 and FY 2026 in the coming months. Figure 21: Electric Load Resource Balance, FY 2024 - 2026 8.5 Transaction Compliance There are no transaction exceptions or violations to report. Item #{{item.number}}     Packet Pg. 85     Staff Report: 2411-3830 – Page 33 of 43 9 Appendix B: Staffing and Vacancies As of Q1 FY 2025, the Utilities Department has 48 vacant positions out of 269 authorized positions or a 18% vacancy rate. The increase in the number of vacant positions and vacancy rate is due to new positions added in FY 2025. Utilities added 10 new positions in FY 2025 to support grid modernization (6 FTEs), S/CAP (1 FTE), water backflow prevention (2 FTEs) and customer support (1 FTE). Five of these new positions are actively in recruitment and the remaining five are under meet and confer with the labor group for the new programs. Below is a breakdown of the vacancies by division. Utilities has designated three HR liaisons (HRL) from Utilities Administration to assist HR with some of the recruitments. With the three HR liaisons, CPAU will be able to post positions, schedule interviews, and make job offers at a faster pace after they are fully trained. CPAU staff have been attending engineering career fairs at Sacramento State University, Cal Poly San Luis Obispo, and San Jose State University. Since the inception of the HRL team, Utilities has closed over 40 requisitions over the past two years. This program continues to gain momentum and is being replicated in other departments within the City. Figure 22: Utilities Vacancies and Recruitments by Division, as of Q1 FY 2025 A D A F V F A R V A 2 0 0 0 C 1 2 4 2 1 F 7 5 3 7 R 2 1 1 4 E 7 2 1 3 E 2 5 5 2 W 7 8 6 1 W 2 3 3 1 T 2 4 3 1 1 Item #{{item.number}}     Packet Pg. 86     Staff Report: 2411-3830 – Page 34 of 43 10 Appendix C: PaloAltoGreen Gas Program In December 2020, Council adopted Resolution #993012 maintaining the Carbon Neutral Natural Gas Plan to achieve carbon neutrality for the gas supply portfolio using high-quality carbon offsets with a cost cap of $19 per ton CO2e. Offsets are purchased to neutralize emissions equal to those caused by natural gas usage in Palo Alto. Staff procured 290,000 tons of offsets during Winter 2023/24 to cover FY23 and FY24 usage. The figure below shows the composition of offset purchases. Figure 23: Offset Portfolio Composition The following table provides a description of the projects. 12 Resolution #9930 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/resolutions-1909-to-present/2020/reso-9930.pdf Item #{{item.number}}     Packet Pg. 87     Staff Report: 2411-3830 – Page 35 of 43 Figure 24: Offset Project Descriptions P P D G L G G U G h S M P M T B U B P U T p p t b R O T p U T r s M M T R a w V C F U T i m P h C R A L R m f a a B C U T r C f H S U L f s S v Item #{{item.number}}     Packet Pg. 88     Staff Report: 2411-3830 – Page 36 of 43 11 Appendix D: Gas Utility Annual Infrastructure Maintenance and Replacement Report Gas Utility Asset Management Overview Executive Summary •The City provides safe and reliable gas service to residents and businesses •The City meets or exceeds minimum federal safety standards for the transportation of natural gas by pipeline (examples: Accelerated leak survey program and Cathodic Protection (CP) maintenance requirements). •The Gas Main Replacement program continues to replace Polyvinyl Chloride (PVC) gas mains, corroded steel pipeline material, and services that have exceeded operational life expectancy. •The City has replaced approximately 40,000 LF of gas main pipeline and approximately 1,500 gas services in the last five (5) years. •The City annually inspects and maintains gas distribution assets. •The City is actively transitioning all gas meters to Advanced Metering Infrastructure (AMI) and Meter Data Management (MDM). Infrastructure Planning Key infrastructure replacement efforts in the next five years include: •Replace PVC and corroded steel pipelines with polyethylene pipes for gas mains and services through the awarded $16.5M Natural Gas Distribution Infrastructure Safety Modernization (NGDISM) federal grant •Upgrade the VA hospital meter set •Upgrade security system cameras at the four (4) natural gas receiving stations. •Maintain and inspect gas assets for regulatory compliance •Replace inoperable or leaking large-diameter emergency valves •Implement a calibrated hydraulic gas system model •Transition to an ESRI-based Geographical Information System (GIS) •Upgrade utility fleet, equipment, and tools -Build a calibrated hydraulic gas system model and utilize the calibrated gas model to prioritize future pipeline replacement projects. -Minimize gas service interruption during planned repairs, tie-ins, and installation by following gas handling procedures. -Invest in CIP replacements to reduce maintenance costs and extend gas system life. -Increase routine maintenance on aging pipelines to maximize asset life to keep costs down Asset Management Goals What are our goals? Item #{{item.number}}     Packet Pg. 89     Staff Report: 2411-3830 – Page 37 of 43 Gas System Overview Table 1: Condition of Gas System Assets Asset Class Quantity Maintenance Asset Condition Gas Receiving Stations (City Gate Station) 4 Annual maintenance One (1) station undergoes maintenance each quarter. The City's meter technicians perform standard maintenance. •Visual inspection and regulator alternating is performed annually •Paint is inspected quarterly and replaced as needed •Equipment and parts are maintained quarterly and are in good condition. •Station enclosure and safety headers are adequate and in good condition. •Station regulators are re-rebuilt once every three years. Pressure Monitoring Stations Six (6) system testing points and 4 Gate Stations Annual calibration and maintenance •The pressure monitoring points in the City are maintained regularly by Operations. •The pressure monitoring systems in all 4 City gate gas stations were updated in 2016 when the stations were rebuilt. •Five (4) of the six (6) pressure monitoring points at the outer ends of the City are over 20 years old. They should be upgraded from conduit to fiber optic, and additional pressure monitoring stations should be added. Cathodic Protection 577 test stations Annual maintenance •158 test stations, on average, are read monthly throughout the year to meet and exceed the yearly maintenance regulation. Rectifier and Galvanic 40 Rectifiers & 10 Galvanic systems Monthly maintenance •Rectifier systems are in good condition and monitored through Elecsys for power interruptions or low readings. •Anode-based systems are suggested for an upgrade to rectifiers due to poor performance during the ongoing drought. Meter Regulators Gas Meter Audit Project Once every two years for the entire system •Program exchanges regulators on a 20-year program. Large regulators are visually inspected and maintained every two years. •The City plans to establish a program to replace large orifice regulators with properly sized regulators. Gas Meters ~24500 •Program exchanges large meters (630cfh & larger) every ten years and smaller meters every 17-20 years. •Maintenance of curb meters and residential meters is in good standing. •Maintenance for large commercial gas meters will continue. •The City will be completing the Advanced Metering Infrastructure (AMI) with Sensus to transition to smart meters. Item #{{item.number}}     Packet Pg. 90     Staff Report: 2411-3830 – Page 38 of 43 Risers ~14800 Atmospheric Survey Maintenance The survey is performed every two years. •The risers are in good condition. They are inspected during the biennial leak survey. •As part of the biennial leak survey responsibilities, they are visually inspected. Maintenance & atmospheric corrosion protection are performed on an as-needed basis. EFV (Excess Flow Valve) ~8600 No routine maintenance is required for the EFVs in the system. The City is planning to perform an EFV trip-test when replacing gas meters. Gas Valves 110 Emergency Valves ~3400 regular valves Annual emergency valve maintenance Regular valve maintenance is performed once every 5 years Maintenance of emergency gas valves and regular valves is in good standing. Maintenance activities include exercising valves, greasing valves, cleaning the valve boxes, and ensuring the valve nut is accessible. Gas Main and Services ~211 miles of main ~17,500 services Mobile and Walking Leak Survey •The ongoing Gas Main Replacement program, prioritizing leak-prone seismically susceptible PVC and corrosion-prone steel pipelines, continues as planned. •The single Gas Service Replacement project replaced the majority of ABS and tenite gas services in the City. The only remaining ABS and tenite services are on streets with active street-cutting moratoriums. City crews will replace these remaining services as their moratoriums expire. •Once ready, the calibrated hydraulic gas system model will prioritize future pipeline replacement projects. SCADA Software NA Quarterly updates for the system and everyday troubleshooting for the 4 City gate stations The City's SCADA system is structured for Electrical Utilities but also handles all needed functions for the gas system. Quarterly patches and updates ensure the system is in proper working order. Several gas operations staff are trained to monitor the SCADA system but must be trained to perform repairs handled by the City's SCADA tech or third-party contractors. Item #{{item.number}}     Packet Pg. 91     Staff Report: 2411-3830 – Page 39 of 43 Table 2: Status of Gas System Operation and Maintenance Programs System Operation or Maintenance Program Status Green = Good Yellow = In Progress Comments Emergency Valve Inspection and Exercise Emergency valves are exercised annually. At the time of inspection, valves are inspected, cleaned, exercised, and greased. These valves are brass-tagged for identification in the event they are needed in an emergency. There are 110 emergency valves throughout the system. Non-Emergency Valve Inspection and Exercise Non-emergency valves are exercised once every five years. At the time of inspection, valves are inspected, cleaned, exercised, and greased. The City is behind on the maintenance schedule of non- emergency valve inspections. System Monitoring SCADA provides continuous system monitoring and alerts. Gas Operations staff monitors the gas system and are qualified to operate the system. On-call staff respond to emergency alerts through SCADA after hours. System updates are done regularly. City Gate Station Maintenance The four City gate stations' regulators are annually maintained, and the aboveground piping and fences are visually inspected quarterly. Every station has dual runs with two regulators per run for redundancy and alternat each year. Each station has an aboveground station emergency valve that can be controlled remotely through the City’s SCADA system and is exercised annually. Gas Supply Monitoring The monthly gas meter revenue reports are generated for each station from PG&E's monitoring module. The City's SCADA technician monitors and reviews the reports. Whenever a discrepancy is detected, the SCADA technician requests maintenance and repair from PG&E. Installation of the City flow meters and gas quality monitoring equipment for each station allows the City to double-check PG&E's gas volumes and quality. Currently the City does not have their own meters at each station. Pressure Monitoring There are currently ten pressure monitoring points around the City of Palo Alto, one at each of the 4 City gate stations and six at the outer edges of the system. They are inspected and maintained by City staff. Additional pressure transducers for pressure monitoring would improve response and awareness in emergencies. Item #{{item.number}}     Packet Pg. 92     Staff Report: 2411-3830 – Page 40 of 43 Large Commercial Gas Meter Maintenance (Includes VA Hospital) Large commercial gas meters consist of rotary, turbine, and ultrasonic meter types. These meters are replaced on a 10-year cycle, with some being replaced sooner due to non-compatibility with AMI. Additional tasks include verification of all information and performing maintenance. Gas Curb Meter Maintenance Gas curb meter assemblies are visually inspected once every three years. Curb meter assemblies are located in belowground utility boxes. The curb meters and utility boxes are inspected for corrosion, leaks and damage. Residential and Commercial Gas Meter Maintenance Gas meters are inspected every two years during the City’s leak survey of gas mains and services. If maintenance is required, maintenance includes repainting as needed and identification of abnormal operating conditions. Gas Inspection Along Bridges The City performs quarterly inspections on gas main crossings at bridges, waterways, and railways. It includes a leak survey and visual inspection of pipeline markers, pipeline support condition, wrap condition, and emergency contacts. Unplanned Maintenance There are no backlogs of leaks or assets in need of repair. The City maintains an emergency on-call program to respond to and control gas leaks or other system emergencies after hours. To remain in compliance, the staff is pulled to respond to emergencies, resulting in planned work delays. The City is currently experiencing extended lead times for material. Cathodic Protection Maintenance and Monitoring Cathodic protection rectifiers are monitored 24/7 and alerts are provided to the City's cathodic technicians in the event troubleshooting is required. Rectifiers and galvanic anodes are regularly inspected and are in good condition. Anodes are replaced as needed and require more frequent replacement during droughts. Cathodic protection test points are inspected annually or bi- monthly. The readings are stored in the Paradigm software to generate annual DOT reports. Paradigm is currently being replaced by the City’s IT Department. The new database will be managed through the City’s ESRI software. An apprenticeship program for the cathodic protection crew is suggested to ensure a sufficient supply of trained staff. Item #{{item.number}}     Packet Pg. 93     Staff Report: 2411-3830 – Page 41 of 43 Gas Utility Maintenance and Inspection Data Item #{{item.number}}     Packet Pg. 94     Staff Report: 2411-3830 – Page 42 of 43 Item #{{item.number}}     Packet Pg. 95     Staff Report: 2411-3830 – Page 43 of 43 APPROVED By: Kiely Nose, Interim Utilities Director Staff: Tim Denterlein, Resource Planner Item #{{item.number}}     Packet Pg. 96     Item No. . Page 1 of 5 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Utilities Director Lead Department: Utilities Meeting Date: February 5, 2025 Report #: 2412-3949 TITLE Results of the Business and Key Account Customer Electric and Water Utility Satisfaction Survey RECOMMENDATION This item is an informational report and no action is requested. EXECUTIVE SUMMARY This report presents the findings from the recent business and key account customer survey conducted for the City of Palo Alto Utilities (CPAU) from August through October 2024. The survey aimed to assess customer knowledge and satisfaction on the following topics: organizational trust, service reliability, utility rates, infrastructure, customer programs, sustainability practices, and overall engagement with CPAU's services. The results provide valuable insights into customer perceptions, highlighting strengths for CPAU and opportunities for improvement. Two versions of the survey were administered; one version focused on water as a commodity. This version was distributed to key accounts with dedicated irrigation meters and higher water consumption. Another version focused on electricity was distributed to both business and key account (larger business) customers. The surveys were conducted in collaboration with the California Municipal Utilities Association (CMUA) and administered by GreatBlue Research Inc., who also partnered with other utilities for a statewide survey of business customers. This is the second survey of business and key account customers through GreatBlue Research, following an initial survey of this sector in 2022. The 2022 survey included water and electricity questions, with 48 completed responses, but did not have a dedicated water component specific for key account customers. As a result, some water-related questions in the 2024 survey do not have a benchmark comparison to 2022. The 2024 survey expanded data collection on water-related topics with a strong focus on water conservation. In total, 87 completed surveys were collected (30 on water, 57 on electricity). Future surveys will continue to assess water-related topics with dedicated questions for key account customers to provide a comparative analysis. Item #{{item.number}}     Packet Pg. 97     Item No. . Page 2 of 5 ANALYSIS Electric Services: 61.5% of customers reported positive satisfaction ratings with CPAU’s electric services, which is a decline from 2022 (80.0%). Water Services: Satisfaction with CPAU’s water services was significantly higher, with 86.7% of customers scoring a positive satisfaction rating, compared to 68.0% for all municipal-owned utilities (municipal) statewide. The weighted average for the satisfaction scores, between both survey versions, calculates to 70.3%, which presents a 9.7% decrease from CPAU’s 2022 results. Electric Customers: 39.2% of electric customers view CPAU as "a valued energy partner," which is consistent with 2022, but lower than the statewide municipal customer benchmark (64.1%). Water Customers: Conversely, 80.0% of water customers consider CPAU "a valued energy partner." 90.0% of water customers trust CPAU’s water supply meets drinking water standards, while 86.7% are confident CPAU would act swiftly to resolve water supply issues. Electric customers provided CPAU with an 82.1% average positive rating when evaluating CPAU on several power delivery characteristics, outperforming the 2024 statewide municipal average (69.6%). Similarly, 86.7% of water customers rated CPAU positively for providing reliable water service. Satisfaction with electric rates was lower than expected, scoring 46.8%, compared to the statewide municipal score of 62.8% and CPAU’s 2022 score of 50%. Water rate satisfaction was higher at 70.4%, compared to 52.8% for statewide municipal utility customers, and 55% for Investor-Owned Utilities (IOU) customers. Only 49.1% of electric customers and 56.7% of water customers understood how CPAU’s rates are determined, falling below scores of municipal (66.4% for electric and 64.1% for water) and IOU customers (73.2% for electric and 75% for water) on both surveys. 46.7% of water customers support infrastructure upgrades funded by CPAU rate increases, compared to 39.8% and 45% for municipal and IOU customers, respectively. 73.3% of water customers support such efforts if funded by the state, a score that finished up 12.9% higher than municipal, and 10.3% higher than IOU customers. Item #{{item.number}}     Packet Pg. 98     Item No. . Page 3 of 5 Electrification and Conservation Engagement in electrification is limited; 24.6% of electric customers are actively electrifying their buildings, and 14.0% are electrifying their fleets. Both of these figures trail behind municipal and IOUs for building and fleet electrification. The top barriers to commercial electrification include high upfront costs (42.1%), retrofit challenges for existing buildings, including space constraints (26.3%), and complex permitting processes and code requirements (24.6%). Interest in efficiency programs is strong, with 35.1% expressing interest in On-Bill-Finance options. 73.3% of water customers are likely to recommend water efficiency programs. Moreover, 43.4% of respondents reported being satisfied with CPAU’s water conservation rebates and audits, and 40% reported satisfaction with the Waterfluence Landscape Budget Program. However, two-fifths of water customers desire more guidance on these conservation and rebate programs, specifically the Waterfluence Landscape Budget Program. However, almost a quarter are are aware of but have not used the Waterfluence Landscape Budget Program, with another 30% unaware. Satisfaction with recent interactions is high; 82.8% of electric customers and 95.8% of water customers were satisfied with their most recent contact with CPAU. Among the water customers with key account managers (63.3% of all water respondents), CPAU received positive ratings across all six (6) key account manager characteristics, with three (3) characteristics receiving scores of 100%. The key account program satisfaction was rated in the following six areas: key account representative responds promptly, provides money-savings advice, performs as a valued partner, is easy to reach, understands what your organization does and how commodities are involved in your business, acts as a source of information about emerging technologies and how they benefit you. The average score for the criteria listed above was very strong at 92.5%, which represents a 28.2 percentage point improvement from CPAU’s 2022 results (64.3%). CPAU water customers achieved an impressive 96.7% NP+S (advocates + loyal + satisfied customers), indicating strong loyalty and advocacy, while electric customers achieved a 70.1% NP+S. Item #{{item.number}}     Packet Pg. 99     Item No. . Page 4 of 5 1. Strong water utility performance: Business and key account customers score CPAU with a strong performance in water utility services. CPAU’s water utility outperforms municipal benchmarks in customer satisfaction, reliability, and trust, but faces challenges in raising infrastructure awareness. 2. Electric satisfaction decline: Satisfaction with CPAU’s electric service has decreased, particularly around rates and trust in affordability efforts. 3. Education and awareness gaps: Customers of both utilities lack sufficient understanding of rate structures and awareness of conservation and efficiency programs. 4. Interest in efficiency programs: Significant interest exists in programs supporting energy and water efficiency, but financial barriers persist for energy upgrades, while water customers seek more guidance on conservation and rebate programs. 5. Infrastructure support varies: While most customers back state-funded water infrastructure investments, support is reduced if tied to rate increases. Sentiments for infrastructure support is significantly higher for CPAU versus municipal and IOU customers. 6. Positive engagement and service: Customer satisfaction with CPAU interactions remains high for both utilities, providing a strong foundation for increased engagement. 7. Engaging key accounts program: The program is a strategic and successful service that fosters relationship building and trust, as demonstrated by the strong engagement with CPAU’s largest commercial customers. Action Items 1. Enhance education on rates and programs: Develop educational resources about rate structures and affordability initiatives for electric services. Launch campaigns to inform water customers about efficient usage and rebate opportunities. For the electric utility, develop webinars, FAQs, and interactive guides on rate structures and affordability initiatives. For the water utility, launch campaigns educating customers on efficient water use and rebate opportunities like the Waterfluence Landscape Budget Program. 2. Expand awareness and participation: Promote CPAU’s energy and water efficiency programs through email, newsletters, social media, webinars, in-person meetings, and utility bill inserts. Use testimonials from satisfied participants to drive broader engagement and education. Item #{{item.number}}     Packet Pg. 100     Item No. . Page 5 of 5 3. Implement financing options: Offer On-Bill Financing for electrification and efficiency upgrades to address financial barriers. Provide personalized water and energy consultations to help businesses identify cost-saving opportunities and navigate rebate programs. 4. Improve communication on infrastructure: Regularly update customers on water and energy infrastructure projects to showcase reliability improvements and conservation benefits. Clearly articulate how these investments align with CPAU’s mission and customer priorities. 5. Leverage high satisfaction ratings: Use positive interaction ratings to foster greater trust among customers. Highlight CPAU’s high satisfaction ratings for recent customer interactions as a foundation to build greater trust and loyalty. 6. Establish targeted outreach cadence: Establish a quarterly communication schedule to reinforce key messages and promote relevant programs. Expected Outcomes CPAU plans to implement the identified action items and address key takeaway results to improve customer satisfaction, trust, awareness, and engagement. Survey results indicate that an improved understanding of rates and the value of what goes into those investments, including program benefits, will lead to increased satisfaction and trust. Dedicated efforts to raise awareness among customers about programs and resources will lead to higher participation in energy and water efficiency initiatives, as well as accelerate adoption of electrification solutions and conservation practices. Expanding educational outreach and awareness will build greater support for infrastructure investments. Customer relationships will be strengthened, solidifying CPAU’s reputation as a reliable utility provider focused on community needs. This report serves as a foundational document for the Utilities Advisory Commission to consider strategic actions based on customer feedback and insights gained from results of the survey conducted in 2024. AUTHOR/TITLE: Kiely Nose, Interim Utilities Director Staff: Catherine Elvert, Utilities Communications Manager Item #{{item.number}}     Packet Pg. 101