HomeMy WebLinkAbout2025-03-05 Utilities Advisory Commission Agenda PacketUTILITIES ADVISORY COMMISSION
Regular Meeting
Wednesday, March 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. T h e m e e t i n g w i l l b e b r o a d c a s t o n C a b l e T V C h a n n e l 2 6 , l i v e o n
YouTube https://www.youtube.com/c/cityofpaloalto, a n d s t r e a m e d t o M i d p e n M e d i a
Center https://midpenmedia.org.
VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)
Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833
PUBLIC COMMENTS
Public comments will be accepted both in person and via Zoom for up to three minutes or an
amount of time determined by the Chair. All requests to speak will be taken until 5 minutes
after the staff’s presentation. Written public comments can be submitted in advance
to 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.
TIME ESTIMATES
Listed times are estimates only and are subject to change at any time, including while the
meeting is in progress. The Commission reserves the right to use more or less time on any item,
to change the order of items and/or to continue items to another meeting. Particular items may
be heard before or after the time estimated on the agenda. This may occur in order to best
manage the time at a meeting to adapt to the participation of the public, or for any other reason
intended to facilitate the meeting.
CALL TO ORDER 6:00PM – 6:05PM
AGENDA CHANGES, ADDITIONS AND DELETIONS 6:05PM – 6:10PM
The Chair or Board majority may modify the agenda order to improve meeting management.
PUBLIC COMMENT 6:10PM – 6:25PM
Members of the public may speak to any item NOT on the agenda.
APPROVAL OF MINUTES 6:25PM – 6:30PM
1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on February
5, 2025
UTILITIES DIRECTOR REPORT 6:30PM – 6:45PM
NEW BUSINESS
2.Staff Recommends the Utilities Advisory Commission Recommend that the City Council
Adopt a Resolution Approving the Fiscal Year 2026 Water Utility Financial Forecast
including Reserve Transfers, and Amending Rate Schedules W‐1 (General Residential
Water Service), W‐2 (Water Service From Fire Hydrants), W‐3 (Fire Service Connections),
W‐4 (Residential Master‐Metered and General Non‐Residential Water Service), and W‐7
(Non‐Residential Irrigation Water Service) 6:45PM – 7:30PM
3.Staff Recommends the Utilities Advisory Commission Recommend that the City Council
Adopt a Resolution, Approving the Fiscal Year 2026 Wastewater Collection Utility
Financial Forecast, and Amending Rate Schedules S‐1 (Residential Wastewater Collection
and Disposal), S‐2 (Commercial Wastewater Collection and Disposal), S‐6 (Restaurant
Wastewater Collection and Disposal) and S‐7 (Commercial Wastewater Collection and
Disposal – Industrial Discharger), and Repealing Rate Schedules S‐3 (Industrial Waste
Laboratory and Analysis Charges) and S‐4 (Hauled Liquid Waste Charges) 7:30PM –
8:00PM
4.Consideration of the Utilities Advisory Subcommittee’s One Water Advocacy Letter and a
Commissioner’s Proposed Bay Area Water Supply & Conservation Agency (BAWSCA)
Advocacy Letter and Potential Recommendation to City Council 8:00PM – 8:30PM
5.Review and Recommend Utilities Advisory Commission FY 2025 – 2026 Work Plan for
City Council Approval8:30PM – 9:00PM
FUTURE TOPICS FOR UPCOMMING MEETING
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
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. Written public comments may be submitted by email to UAC@CityofPaloAlto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
You may download the Zoom client or connect to the meeting in‐ browser. If using
your browser, make sure you are using a current, up‐to‐date browser: Chrome 30 ,
Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in
older browsers including Internet Explorer.
You may be asked to enter an email address and name. We request that you
identify yourself by name as this will be visible online and will be used to notify you
that it is your turn to speak.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a phone use the telephone number listed below. When
you wish to speak on an agenda item hit *9 on your phone so we know that you wish to
speak. You will be asked to provide your first and last name before addressing the
Council. You will be advised how long you have to speak. When called please limit your
remarks to the agenda item and time limit allotted.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
1 Regular Meeting March 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 COMMISSIONRegular MeetingWednesday, March 05, 2025Council Chambers & Hybrid6:00 PMUtilities Advisory Commission meetings will be held as “hybrid” meetings with the option toattend by teleconference/video conference or in person. To maximize public safety while stillmaintaining transparency and public access, members of the public can choose to participatefrom home or attend in person. Information on how the public may observe and participate in themeeting is located at the end of the agenda. Masks are strongly encouraged if attending inperson. T h e m e e t i n g w i l l b e b r o a d c a s t o n C a b l e T V C h a n n e l 2 6 , l i v e o nYouTube https://www.youtube.com/c/cityofpaloalto, a n d s t r e a m e d t o M i d p e n M e d i aCenter https://midpenmedia.org.VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833PUBLIC COMMENTSPublic comments will be accepted both in person and via Zoom for up to three minutes or anamount of time determined by the Chair. All requests to speak will be taken until 5 minutesafter the staff’s presentation. Written public comments can be submitted in advanceto UAC@CityofPaloAlto.org and will be provided to the Council and available for inspection onthe City’s website. Please clearly indicate which agenda item you are referencing in yoursubject line.PowerPoints, videos, or other media to be presented during public comment are accepted onlyby 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 strongcybersecurity management practices, USB’s or other physical electronic storage devices are notaccepted.Signs and symbolic materials less than 2 feet by 3 feet are permitted provided that: (1) sticks,posts, poles or similar/other type of handle objects are strictly prohibited; (2) the items do notcreate a facility, fire, or safety hazard; and (3) persons with such items remain seated whendisplaying them and must not raise the items above shoulder level, obstruct the view orpassage of other attendees, or otherwise disturb the business of the meeting.TIME ESTIMATESListed times are estimates only and are subject to change at any time, including while the
meeting is in progress. The Commission reserves the right to use more or less time on any item,
to change the order of items and/or to continue items to another meeting. Particular items may
be heard before or after the time estimated on the agenda. This may occur in order to best
manage the time at a meeting to adapt to the participation of the public, or for any other reason
intended to facilitate the meeting.
CALL TO ORDER 6:00PM – 6:05PM
AGENDA CHANGES, ADDITIONS AND DELETIONS 6:05PM – 6:10PM
The Chair or Board majority may modify the agenda order to improve meeting management.
PUBLIC COMMENT 6:10PM – 6:25PM
Members of the public may speak to any item NOT on the agenda.
APPROVAL OF MINUTES 6:25PM – 6:30PM
1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on February
5, 2025
UTILITIES DIRECTOR REPORT 6:30PM – 6:45PM
NEW BUSINESS
2.Staff Recommends the Utilities Advisory Commission Recommend that the City Council
Adopt a Resolution Approving the Fiscal Year 2026 Water Utility Financial Forecast
including Reserve Transfers, and Amending Rate Schedules W‐1 (General Residential
Water Service), W‐2 (Water Service From Fire Hydrants), W‐3 (Fire Service Connections),
W‐4 (Residential Master‐Metered and General Non‐Residential Water Service), and W‐7
(Non‐Residential Irrigation Water Service) 6:45PM – 7:30PM
3.Staff Recommends the Utilities Advisory Commission Recommend that the City Council
Adopt a Resolution, Approving the Fiscal Year 2026 Wastewater Collection Utility
Financial Forecast, and Amending Rate Schedules S‐1 (Residential Wastewater Collection
and Disposal), S‐2 (Commercial Wastewater Collection and Disposal), S‐6 (Restaurant
Wastewater Collection and Disposal) and S‐7 (Commercial Wastewater Collection and
Disposal – Industrial Discharger), and Repealing Rate Schedules S‐3 (Industrial Waste
Laboratory and Analysis Charges) and S‐4 (Hauled Liquid Waste Charges) 7:30PM –
8:00PM
4.Consideration of the Utilities Advisory Subcommittee’s One Water Advocacy Letter and a
Commissioner’s Proposed Bay Area Water Supply & Conservation Agency (BAWSCA)
Advocacy Letter and Potential Recommendation to City Council 8:00PM – 8:30PM
5.Review and Recommend Utilities Advisory Commission FY 2025 – 2026 Work Plan for
City Council Approval8:30PM – 9:00PM
FUTURE TOPICS FOR UPCOMMING MEETING
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
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. Written public comments may be submitted by email to UAC@CityofPaloAlto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
You may download the Zoom client or connect to the meeting in‐ browser. If using
your browser, make sure you are using a current, up‐to‐date browser: Chrome 30 ,
Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in
older browsers including Internet Explorer.
You may be asked to enter an email address and name. We request that you
identify yourself by name as this will be visible online and will be used to notify you
that it is your turn to speak.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a phone use the telephone number listed below. When
you wish to speak on an agenda item hit *9 on your phone so we know that you wish to
speak. You will be asked to provide your first and last name before addressing the
Council. You will be advised how long you have to speak. When called please limit your
remarks to the agenda item and time limit allotted.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
2 Regular Meeting March 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 COMMISSIONRegular MeetingWednesday, March 05, 2025Council Chambers & Hybrid6:00 PMUtilities Advisory Commission meetings will be held as “hybrid” meetings with the option toattend by teleconference/video conference or in person. To maximize public safety while stillmaintaining transparency and public access, members of the public can choose to participatefrom home or attend in person. Information on how the public may observe and participate in themeeting is located at the end of the agenda. Masks are strongly encouraged if attending inperson. T h e m e e t i n g w i l l b e b r o a d c a s t o n C a b l e T V C h a n n e l 2 6 , l i v e o nYouTube https://www.youtube.com/c/cityofpaloalto, a n d s t r e a m e d t o M i d p e n M e d i aCenter https://midpenmedia.org.VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833PUBLIC COMMENTSPublic comments will be accepted both in person and via Zoom for up to three minutes or anamount of time determined by the Chair. All requests to speak will be taken until 5 minutesafter the staff’s presentation. Written public comments can be submitted in advanceto UAC@CityofPaloAlto.org and will be provided to the Council and available for inspection onthe City’s website. Please clearly indicate which agenda item you are referencing in yoursubject line.PowerPoints, videos, or other media to be presented during public comment are accepted onlyby 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 strongcybersecurity management practices, USB’s or other physical electronic storage devices are notaccepted.Signs and symbolic materials less than 2 feet by 3 feet are permitted provided that: (1) sticks,posts, poles or similar/other type of handle objects are strictly prohibited; (2) the items do notcreate a facility, fire, or safety hazard; and (3) persons with such items remain seated whendisplaying them and must not raise the items above shoulder level, obstruct the view orpassage of other attendees, or otherwise disturb the business of the meeting.TIME ESTIMATESListed times are estimates only and are subject to change at any time, including while themeeting is in progress. The Commission reserves the right to use more or less time on any item,to change the order of items and/or to continue items to another meeting. Particular items maybe heard before or after the time estimated on the agenda. This may occur in order to bestmanage the time at a meeting to adapt to the participation of the public, or for any other reasonintended to facilitate the meeting.CALL TO ORDER 6:00PM – 6:05PMAGENDA CHANGES, ADDITIONS AND DELETIONS 6:05PM – 6:10PM The Chair or Board majority may modify the agenda order to improve meeting management.PUBLIC COMMENT 6:10PM – 6:25PMMembers of the public may speak to any item NOT on the agenda.APPROVAL OF MINUTES 6:25PM – 6:30PM1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on February5, 2025UTILITIES DIRECTOR REPORT 6:30PM – 6:45PMNEW BUSINESS2.Staff Recommends the Utilities Advisory Commission Recommend that the City CouncilAdopt a Resolution Approving the Fiscal Year 2026 Water Utility Financial Forecastincluding Reserve Transfers, and Amending Rate Schedules W‐1 (General ResidentialWater Service), W‐2 (Water Service From Fire Hydrants), W‐3 (Fire Service Connections),W‐4 (Residential Master‐Metered and General Non‐Residential Water Service), and W‐7(Non‐Residential Irrigation Water Service) 6:45PM – 7:30PM3.Staff Recommends the Utilities Advisory Commission Recommend that the City CouncilAdopt a Resolution, Approving the Fiscal Year 2026 Wastewater Collection UtilityFinancial Forecast, and Amending Rate Schedules S‐1 (Residential Wastewater Collectionand Disposal), S‐2 (Commercial Wastewater Collection and Disposal), S‐6 (RestaurantWastewater Collection and Disposal) and S‐7 (Commercial Wastewater Collection andDisposal – Industrial Discharger), and Repealing Rate Schedules S‐3 (Industrial WasteLaboratory and Analysis Charges) and S‐4 (Hauled Liquid Waste Charges) 7:30PM –8:00PM4.Consideration of the Utilities Advisory Subcommittee’s One Water Advocacy Letter and aCommissioner’s Proposed Bay Area Water Supply & Conservation Agency (BAWSCA)Advocacy Letter and Potential Recommendation to City Council 8:00PM – 8:30PM5.Review and Recommend Utilities Advisory Commission FY 2025 – 2026 Work Plan forCity Council Approval8:30PM – 9:00PM
FUTURE TOPICS FOR UPCOMMING MEETING
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
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. Written public comments may be submitted by email to UAC@CityofPaloAlto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
You may download the Zoom client or connect to the meeting in‐ browser. If using
your browser, make sure you are using a current, up‐to‐date browser: Chrome 30 ,
Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in
older browsers including Internet Explorer.
You may be asked to enter an email address and name. We request that you
identify yourself by name as this will be visible online and will be used to notify you
that it is your turn to speak.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a phone use the telephone number listed below. When
you wish to speak on an agenda item hit *9 on your phone so we know that you wish to
speak. You will be asked to provide your first and last name before addressing the
Council. You will be advised how long you have to speak. When called please limit your
remarks to the agenda item and time limit allotted.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
3 Regular Meeting March 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 COMMISSIONRegular MeetingWednesday, March 05, 2025Council Chambers & Hybrid6:00 PMUtilities Advisory Commission meetings will be held as “hybrid” meetings with the option toattend by teleconference/video conference or in person. To maximize public safety while stillmaintaining transparency and public access, members of the public can choose to participatefrom home or attend in person. Information on how the public may observe and participate in themeeting is located at the end of the agenda. Masks are strongly encouraged if attending inperson. T h e m e e t i n g w i l l b e b r o a d c a s t o n C a b l e T V C h a n n e l 2 6 , l i v e o nYouTube https://www.youtube.com/c/cityofpaloalto, a n d s t r e a m e d t o M i d p e n M e d i aCenter https://midpenmedia.org.VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833PUBLIC COMMENTSPublic comments will be accepted both in person and via Zoom for up to three minutes or anamount of time determined by the Chair. All requests to speak will be taken until 5 minutesafter the staff’s presentation. Written public comments can be submitted in advanceto UAC@CityofPaloAlto.org and will be provided to the Council and available for inspection onthe City’s website. Please clearly indicate which agenda item you are referencing in yoursubject line.PowerPoints, videos, or other media to be presented during public comment are accepted onlyby 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 strongcybersecurity management practices, USB’s or other physical electronic storage devices are notaccepted.Signs and symbolic materials less than 2 feet by 3 feet are permitted provided that: (1) sticks,posts, poles or similar/other type of handle objects are strictly prohibited; (2) the items do notcreate a facility, fire, or safety hazard; and (3) persons with such items remain seated whendisplaying them and must not raise the items above shoulder level, obstruct the view orpassage of other attendees, or otherwise disturb the business of the meeting.TIME ESTIMATESListed times are estimates only and are subject to change at any time, including while themeeting is in progress. The Commission reserves the right to use more or less time on any item,to change the order of items and/or to continue items to another meeting. Particular items maybe heard before or after the time estimated on the agenda. This may occur in order to bestmanage the time at a meeting to adapt to the participation of the public, or for any other reasonintended to facilitate the meeting.CALL TO ORDER 6:00PM – 6:05PMAGENDA CHANGES, ADDITIONS AND DELETIONS 6:05PM – 6:10PM The Chair or Board majority may modify the agenda order to improve meeting management.PUBLIC COMMENT 6:10PM – 6:25PMMembers of the public may speak to any item NOT on the agenda.APPROVAL OF MINUTES 6:25PM – 6:30PM1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on February5, 2025UTILITIES DIRECTOR REPORT 6:30PM – 6:45PMNEW BUSINESS2.Staff Recommends the Utilities Advisory Commission Recommend that the City CouncilAdopt a Resolution Approving the Fiscal Year 2026 Water Utility Financial Forecastincluding Reserve Transfers, and Amending Rate Schedules W‐1 (General ResidentialWater Service), W‐2 (Water Service From Fire Hydrants), W‐3 (Fire Service Connections),W‐4 (Residential Master‐Metered and General Non‐Residential Water Service), and W‐7(Non‐Residential Irrigation Water Service) 6:45PM – 7:30PM3.Staff Recommends the Utilities Advisory Commission Recommend that the City CouncilAdopt a Resolution, Approving the Fiscal Year 2026 Wastewater Collection UtilityFinancial Forecast, and Amending Rate Schedules S‐1 (Residential Wastewater Collectionand Disposal), S‐2 (Commercial Wastewater Collection and Disposal), S‐6 (RestaurantWastewater Collection and Disposal) and S‐7 (Commercial Wastewater Collection andDisposal – Industrial Discharger), and Repealing Rate Schedules S‐3 (Industrial WasteLaboratory and Analysis Charges) and S‐4 (Hauled Liquid Waste Charges) 7:30PM –8:00PM4.Consideration of the Utilities Advisory Subcommittee’s One Water Advocacy Letter and aCommissioner’s Proposed Bay Area Water Supply & Conservation Agency (BAWSCA)Advocacy Letter and Potential Recommendation to City Council 8:00PM – 8:30PM5.Review and Recommend Utilities Advisory Commission FY 2025 – 2026 Work Plan forCity Council Approval8:30PM – 9:00PMFUTURE TOPICS FOR UPCOMMING MEETINGCOMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTSADJOURNMENTSUPPLEMENTAL INFORMATIONThe materials below are provided for informational purposes, not for action or discussion during UAC Meetings (Govt. CodeSection 54954.2(a)(3)).
INFORMATIONAL REPORTS
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. Written public comments may be submitted by email to UAC@CityofPaloAlto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
You may download the Zoom client or connect to the meeting in‐ browser. If using
your browser, make sure you are using a current, up‐to‐date browser: Chrome 30 ,
Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in
older browsers including Internet Explorer.
You may be asked to enter an email address and name. We request that you
identify yourself by name as this will be visible online and will be used to notify you
that it is your turn to speak.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a phone use the telephone number listed below. When
you wish to speak on an agenda item hit *9 on your phone so we know that you wish to
speak. You will be asked to provide your first and last name before addressing the
Council. You will be advised how long you have to speak. When called please limit your
remarks to the agenda item and time limit allotted.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
4 Regular Meeting March 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
5
Utilities Advisory Commission
Staff Report
From: Kiely Nose, Interim Director of Utilities
Lead Department: Utilities
Meeting Date: March 5, 2025
Report #: 2501-3995
TITLE
Approval of the Minutes of the Utilities Advisory Commission Meeting Held on February 5, 2025
RECOMMENDATION
Staff recommends that the UAC consider the following motion:
Commissioner ______ moved to approve the draft minutes of the February 5, 2025 meeting as
submitted/amended.
Commissioner ______ seconded the motion
ATTACHMENTS
Attachment A: 01-07-2025 UAC Minutes
AUTHOR/TITLE:
Kaylee Burton
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UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF FEBRUARY 5, 2025 REGULAR MEETING
CALL TO ORDER
Chair Scharff called the meeting of the Utilities Advisory Commission (UAC) to order at 6:05 PM.
Present: Chair Scharff, Commissioners Croft, Gupta, Metz, Phillips, and Tucher (6:07 PM)
Virtual: Vice-Chair Mauter
AGENDA REVIEW AND REVISIONS
None
ORAL COMMUNICATIONS
None
APPROVAL OF THE MINUTES
ITEM 1: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on
January 7, 2025
ACTION: Commissioner Croft moved to approve the UAC meeting minutes for January 7, 2025.
Commissioner Metz seconded the motion.
The motion carried 6-0 with Chair Scharff, Vice Chair Mauter, and Commissioners Croft, Gupta,
Metz, and Phillips voting yes. Commissioner Tucher was absent.
UTILITIES DIRECTOR REPORT
Kiely Nose, Interim Director of Utilities, delivered the Director's Report.
On January 25, 2025, the City Council held its annual retreat to select their priorities for 2025 as
well as review community input and key accomplishments for 2024. Council established the
following four priorities: Implement housing strategies for social and economic balance, climate
action and adaptation, natural environment protection, economic development and retail
vibrancy; and public safety, wellness, and belonging. The Council approved the formation of the
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following four committees for the 2025 calendar year: Climate Action and Sustainability
Committee, Retail Committee, Rail Committee, and Cubberley. On February 24, 2025, the
Council will discuss the objectives, projects, and work plans associated with their four priorities
as well as the scope of the ad hoc committees. After February 24, 2025, committees and
commissions will work on their 2025 work plans. The UAC’s 2025 work plan will go to Council
for approval in March or April.
NEW BUSINESS
ITEM 2: DISCUSSION: Reliability and Resiliency Strategic Plan: Update on Studies
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Karla Dailey, Assistant Director of Utilities Resource Management Division, addressed the UAC.
The Reliability and Resiliency Strategic Plan (RRSP) was a collaboration between Utilities,
Engineering, and Resource Management and was part of a larger interdepartmental team led
by Jonathan Abendschein, Assistant Director of Climate Action. The Utilities leads on this part of
the project were Shiva Swaminathan from Resource Management and Mohammad Fattah from
Engineering. The RRSP goal was to improve reliability and resiliency for the community via
upgrading distribution equipment and strategies such as distributed energy resources. Council
approved the RRSP in April of 2024. In the fall of 2024, staff came to the UAC to obtain
feedback on the scope for consultants. Staff returned today to provide an update per the UAC’s
request and to request feedback on parts of the RRSP.
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those technologies could contribute benefit to the community. In September, staff was asked
whether energy efficiency could be included. Staff considered the idea but felt it was
duplicative to have Buro Happold analyze energy efficiency because CPAU partnered with other
publicly owned utilities (POU) throughout the California Municipal Utilities Association to do a
study on energy efficiency measures.
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Commissioner Tucher looked in September and December’s meeting materials and was unable
to easily find if an assessment has been performed to identify areas of weakness in reliability
and resiliency. Mr. Abendschein said the grid modernization study was a basic assessment that
identified areas needing work. Mr. Abendschein suggested watching the February 2024 Council
Study Session on reliability. Commissioner Tucher hoped to find a map showing the trouble
areas in Palo Alto or a document explaining how reliability and resiliency were assessed and
what the weak points were. Commissioner Tucher thought the grid was resilient, Palo Alto did
not have a lot of outages, the duration of outages was not bad, and customers were generally
satisfied. Mr. Abendschein encouraged Commissioner Tucher to email him so staff could share
further information.
Relative to the S/CAP and the list of technologies, Commissioner Phillips asked if climate change
impact was considered or if it would be looked at separately. Mr. Abendschein explained that
the carbon impact was integrated into the supply cost analysis because markets were
structured in California to have high costs when carbon emissions were high, so the supply cost
included the carbon benefits on the grid in avoided gas generation. Commissioner Phillips asked
if the cost was high because the marginal cost of gas generation was a proxy for or equaled the
cost we would assign to the carbon emission. Mr. Abendschein stated that the market cost of
carbon was included but staff will take Commissioner Phillips’s comment into consideration
when looking at the supply cost analysis. When staff comes back to the UAC, they will address
the question on whether a higher carbon cost should be allocated to avoided gas generation in
the electric system.
On Slide 5, Commissioner Phillips was surprised to see time-of-use rates and demand response
did not impact resiliency because he thought it would make the system more resilient. Outages
tend to happen at certain times of the day because of peaking, so charging higher prices for
that time of day would dampen local demand and possibly cause industrial to shift away from
those times to reduce the impact. Commercial was 85 percent of the load. Mr. Abendschein
clarified that the resiliency column on Slide 5 was about what happened when an outage
occurred. Demand response indirectly could contribute to reductions in outages, so it
qualitatively improved reliability and resiliency of the system.
Commissioner Gupta asked if the assessment of the technologies listed on Slide 5 might inform
how we approach grid modernization. Commissioner Gupta recalled a member of the public
commented about using meter socket adaptors as a means of reducing the need to increase
the capacity to a home because it bifurcated the circuit from your electric vehicle (EV) and the
rest of your house. Mr. Abendschein replied that meter socket adaptors would be talked about
in Buro Happold’s presentation. The E3 analysis was to assess whether technologies or efficient
electrification could allow for changes in the grid modernization implementation, which would
be talked about in depth in Item 2C.
Commissioner Gupta asked for definitions of the technologies listed on Slide 5. Mr.
Abendschein responded that EV managed charging was a technology used to limit the
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maximum draw from the distribution system at any one time. Demand response was when
people stopped EV charging in response to grid events. Vehicle to home was the ability to back
up a home using a vehicle. Vehicle to grid was the ability to have your EV discharge or charge in
response to grid signals.
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Commissioner Croft asked whether staff had looked at all the grids in Palo Alto, such as energy
generators and arrays on schools. Commissioner Croft looked on Google Maps to see which
companies or buildings had big solar arrays. Commissioner Croft inquired if there had been any
consideration to negotiating with the owners of those arrays to have them be a backup source
of energy to the City or perhaps connected to storage as part of the resiliency plan. Mr.
Abendschein made note of Commissioner Croft’s comment for staff to consider.
ITEM 2A: DISCUSSION: Supply and Resiliency Cost/Benefit Analysis and Program Ideas
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Commissioner Metz asked about capacity cost, RA cost, and other CPAU costs. Mr. Miramontes
replied that the cost per megawatt hour encompassed transmission and distribution but he
thought the RA was built in. Mr. Miramontes offered to follow up with the exact parameters
included. Commissioner Metz was interested in the financial cost beyond the kilowatt hour
energy cost and the benefits beyond financial benefits. Mr. Abendschein explained that supply
costs included energy costs and a renewable energy dimension, a greenhouse gas cost, losses,
as well as transmission, distribution, and generating capacity, which were costs based on
needing to meet a peak. Transmission was charged to Palo Alto on a kilowatt hour basis and
spread across the year, so the summer peak was not as steep as the statewide model. Palo Alto
buys generating capacity that other utilities do not need. Palo Alto does not build and own
large, new generators. Other utilities may put the cost of new generation into their peak
capacity value; however, that is not an economic value we can realize in Palo Alto. Statewide,
the zero value on the chart due to new generation was hours of solar over-generation. The
City’s avoided cost model did not show a zero cost because we pay to transmit energy and
transmission is on an hourly basis.
Commissioner Phillips inquired if it was possible to arbitrage, which would also capture some of
the social value. Mr. Abendschein will get back to Commissioner Phillips with a response. Shiva
Swaminathan, Senior Resource Planner, explained the disparity was primarily driven by
transmission constraints and the State needing to invest in transmission. Transmission capacity
was embedded into an easy-to-model framework but energy arbitrage was on an energy basis.
You cannot arbitrage capacity in the market. The difference was due to transmission and
generation capacity, not the energy component alone. Adding generation capacity through
technologies could avoid Utility costs. Palo Alto sells surplus generation into the market to
make money but has to buy from the market at a higher price when we are short. The capacity
was a transparent market. Mr. Abendschein remarked that the State’s valuation model looked
at the cost of building a new transmission line or generator, which was more costly than the
market value of capacity. Almost never was the price of building a new transmission line or
generator reflected in the market, so it made arbitrage difficult. Mr. Swaminathan agreed with
Mr. Abendschein’s explanation and added that the modeled results were for 2025, 2030, 2035,
2040, and 2045, which included new capacity needing to come online.
Vice Chair Mauter asked if it was the marginal cost of acquiring a new unit. Mr. Abendschein
answered yes for the long-term marginal cost, although the marginal price was not always
reflected in the market. Vice Chair Mauter thought it might help for the Commission to know
that this did not include local distribution avoided cost. For example, there could be a citywide
variation in costs for a microgrid. Mr. Abendschein agreed and stated that the set of studies
would capture supply, distribution, and resiliency benefits.
Commissioner Croft queried what was the difference between 2025 and 2030, and if batteries
coming online would reduce the statewide peak. Mr. Abendschein replied that the disparity
would remain but would probably change. Mr. Miramontes remarked that in the 2035 and
2040 models, the peaks tended to shift further toward nighttime hours likely due to more EV
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charging on the grid, so the pricing reflected additional demand. Different load shapes were
presented in the forecasted years. The modeling process incorporated technologies when
reflecting the current and future state of the grid and pricing structure. Mr. Abendschein asked
whether the divergence between the Palo Alto and statewide models narrowed, widened, or
stayed about the same. Mr. Miramontes thought it stayed about the same. Commissioner Metz
commented that Palo Alto had a diurnal load profile that peaked earlier in the day than other
parts of the state on average. Palo Alto could sell energy. Mr. Abendschein stated that Palo Alto
had generation from hydro to put into evening hours.
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On a scale from 1 to 10, Commissioner Gupta wanted to know the confidence level on the
assumptions made about costs, which would be helpful for the Commission to keep in mind
when assessing the benefits of these technologies at a later stage. Mr. Abendschein stated that
all inputs were reviewed, staff provided a lot of the inputs, and these were the best estimates
but there was always uncertainty. A change in market conditions could change the cost/benefit
assessment. Because of uncertainty, the quantitative analysis was not meant to be the only
consideration when deciding whether to run these programs.
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sector referred to low-probability, high-consequence, disruptive impacts with a duration of
hours to months, often had a much wider scale of regional or statewide impact, and often had
cascading impacts in other parts of the economy. For this study, the scope was focused on
outages in the range of two to eight hours, and the technologies typically provided outage
prevention within 24 hours.
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improve data accuracy. Depending on when it is released, Buro Happold can easily update it in
their model.
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however, the data in the current model was not recent. Commissioner Phillips asked for a list of
what was included, such as if median income was split between residential and commercial.
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much higher value of resiliency. Chair Scharff commented some qualitative benefits were
comfort, the ability to take a shower and flush your toilet if you do not have electricity.
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The C40 studies were quantitative but addressed financial and sustainability impacts.
Commissioner Metz recommended evaluating resilience using a scenario approach starting with
business as usual, a normal interruption from minutes or hours, and an emergency such as an
earthquake with days or weeks of disruptive interruption. The analysis of emergencies needed
to be coordinated with the Office of Emergency Services (OES). Commissioner Metz and
Commissioner Gupta had some discussions with Ken Dueker and other folks at the OES. The
OES had strong and well-informed opinions about design emergencies we should be preparing
for and Commissioner Metz did not see those reflected in this study. Commissioner Metz
believed it was important for CPAU and the City to coordinate its definition of and preparation
for an emergency with the OES.
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as low probability and the strategic plan was called Reliability and Resiliency yet it would not
study resilience in that context.
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found across the state. Programs with a component for Disadvantaged Communities (DACs)
were denoted, such as higher incentive rates for low-income customers or customers residing
in a DAC-designated area. The most common amongst Palo Alto’s peers was battery programs.
This research will be used to inform program design.
ACTION: None.
ITEM 2B: DISCUSSION: Airport Microgrid (Burns McDonnell)
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the airport and 200 vehicles/day, Outage Type 2 was a three-day December outage for the
airport and 200 vehicles/day.
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could be done as a behind-the-meter system, which he did not think was common when
crossing parcels, so a Utility Power Purchase Agreement (PPA) was probably more appropriate
for crossing parcels. Commissioner Tucher asked if staff was contemplating going to a partner
or customer and saying the City wanted to install a microgrid for you. Mr. Abendschein stated
that in Commissioner Tucher’s scenario it would be used fulfill part of the City’s energy
portfolio.
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outage and being able to run critical loads for a longer period. Mr. Abendschein stated he was
told by Shiva Swaminathan that the airport did not have backup generation.
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clear on their position on microgrids. Mr. Abendschein replied that a microgrid was a
combination of generation and loads that can run off-grid for some period of time. One house,
a small commercial building, and a campus can be run as a microgrid but Stanford University
was not. Mr. Abendschein thought there were maybe one or two microgrids in Palo Alto but he
was not aware of campuses or large facilities in Palo Alto being run as microgrids. Customers
can have a microgrid but CPAU had connection rules and regulations. CPAU did not have a
position for or against microgrids.
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Abendschein replied that after the study was completed, they will tell the UAC the economics
and whether it made sense. Chair Scharff was convinced cheaper EV charging could be done by
using garages with solar panels so people can charge in an emergency.
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delay using the available diesel through the use of solar and storage, although it had to provide
other economic benefits.
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Mayor Lauing, UAC Liaison, addressed Commissioner Tucher’s question about policies. There
were no policies in most cases, which was why the UAC and staff were working on this. There
were not a lot of climate policies in place, so the Climate Action Committee was working on
creating policies, programs, and financing for everything that has to be done. Commissioner
Tucher asked for an example of a microgrid policy. Mayor Lauing replied that they had a neutral
policy but an example of a policy could be to actively subsidize microgrids or an incentive
program to promote microgrids with a goal to have X number of microgrids or X megawatt
capacity through microgrids built within a specified amount of time. Some of this will be
addressed through the S/CAP committee to Council as well.
ACTION: None.
ITEM 2C: DISCUSSION: Distribution Cost/Benefit Analysis (E3)
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being launched to help people electrify efficiently. Low-power EV charging was encouraged on
our website and through our Qmerit service that helps people find contractors to install EV
charging.
ACTION: None.
FUTURE TOPICS FOR THE UPCOMING MEETING ON MARCH 5, 2025, AND REVIEW OF THE 12-
MONTH ROLLING CALENDAR
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not guaranteed because it depended on staff’s time and the UAC’s agenda. Staff planned to
present fiber rates and packages, and provide the UAC an opportunity to ask questions about
fiber-to-the-premise. It was a three-month process to go from the UAC to the Finance
Committee and then to Council. The goal was to have it done this fiscal year. The soonest that
rates could be adopted by the Council was June of 2025, which meant a program would be
instituted the following month. As part of the discussion with the UAC, staff will provide a
broader and more firm response on the timing.
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send a copy of Commissioner Tucher’s letter to the UAC and include it in the next UAC package.
Chair Scharff stated there could be an agenda item about whether the UAC wanted to agendize
it. Commissioner Croft pointed out there were four raised hands in response to the straw poll.
Commissioner Metz verbally stated he would like to agendize the letter. It was the consensus of
the Commission, so Chair Scharff asked staff to agendize it.
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was needed, and recommended using the Director’s Report as a way to respond and maintain
continuity going forward.
COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS
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download more than what she saw on the screen although it said you could. Commissioner
Croft had her feedback written out and she will send it to staff.
ADJOURNMENT
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Utilities Advisory Commission
Staff Report
From: Kiely Nose, Interim Director of Utilities
Lead Department: Utilities
Meeting Date: March 5, 2025
Report #: 2502-4193
TITLE
Staff Recommends the Utilities Advisory Commission Recommend that the City Council Adopt a
Resolution Approving the Fiscal Year 2026 Water Utility Financial Forecast including Reserve
Transfers, and Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water
Service From Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered
and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water
Service)
RECOMMENDATION
Staff recommends the Utilities Advisory Commission recommend that the City Council adopt a
resolution (Attachment A):
1. Approving the Fiscal Year 2026 Water Utility Financial Forecast shown in this staff report
and attachments and approving a reserve transfer of up to $3,000,000 from the Rate
Stabilization Reserve to the Operations Reserve in FY 2025; and
2. Amending Rate Schedules (Attachment B) effective July 1, 2025 (FY 2026):
a. W-1 (General Residential Water service)
b. W-2 (Water Service from Fire Hydrants)
c. W-3 (Fire Service Connections)
d. W-4 (Residential Master-Metered and General Non-Residential Water Service)
e. W-7 (Non-Residential Irrigation Water Service)
EXECUTIVE SUMMARY
The Water Utility has two main costs: water supply costs (primarily the cost of water delivered
to Palo Alto from the Regional Water System) and the costs of operating the distribution system
(the system of pipes, pumps, reservoirs, and other infrastructure that carries water to Palo Alto
customers). Both cost components have been increasing and are expected to continue to
increase. The FY 2025 Financial Plan projected a distribution rate increase in FY 2026 of 17%,
which is equivalent to a 9% overall system average increase when combined with the supply cost
increases. However, given lower reserves and higher expected ongoing costs going forward, this
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FY 2026 forecast reflects a 19% increase to the distribution rates, equivalent to a 10% overall
system average increase on customer’s water rates. This rate increase is necessary to pay for
inflationary cost increases and continued lower water sales, while funding performance of the
necessary infrastructure maintenance and replacement activities that contribute to the safe and
reliable provision of high-quality water to Palo Alto residents and businesses.
In December 2024, staff discussed a preliminary FY 2026 rate proposal of 14% with the Utilities
Advisory Commission and Finance Committee. Members from both committees expressed
concerns and asked staff to reassess the FY 2026 rate increase and reduce to 10% if feasible. Staff
took this feedback into consideration and made modifications to the rate proposals reflected in
this report.
At the end of FY 2024, the operations reserve was approximately $2 million below projected
levels with a balance of $7.1 million, which is below the minimum guideline level of $8.4 million.
Revenues were $2.3 million higher than forecasted last year in the FY 2025 Financial Plan (sales
revenue, capacity and connection fees). This is because water purchases were higher than
forecasted in the FY 2025 Financial Plan while purchases were still lower than in each of the pre-
drought years (FY 2018 through FY 2022). Additionally, operating and capital expenses were $4.4
million higher than forecasted. Many of the cost increases are ongoing annual expenses, as
discussed further in the Analysis section below. The rate stabilization reserve at the end of FY
2024 had a $4 million balance, and this financial forecast proposes to use all of that remaining
funding to cover the unexpected additional costs for FY 2025 and 2026.
The Water Utility needs to plan for large capital projects in the five-year budget, including two
reservoir replacements or rehabilitations and a large main replacement every other year. This
revised proposal defers the reservoir work by two years from FY 2027 and FY 2028 to FY 2029
and FY 2030, defers $4 million of main replacement work planned in FY 2026 and $3 million of
main replacement work planned in FY 2028 to beyond the 5-year forecast horizon. The Water
Utility has utilized or plans to use all available reserve funds to help offset higher costs and keep
rates below the utility’s actual expenses during both the pandemic and the drought, up through
the current drought recovery period. However, the reserves have now reached a point where
rate increases are needed to pay for distribution system costs. Staff is developing an alternative
financial model assuming debt financing (instead of pay-as-you-go) for the two reservoir capital
projects, summarized in the Alternative section below.
This forecast assumes no rate increase for the wholesale water rate in July 2025 from its current
level of $5.67/CCF (consistent with the April 12, 2024 rate notice from the City’s water supplier,
the San Francisco Public Utilities Commission (SFPUC)). This forecast also relies on the April 12,
2024 SFPUC wholesale rate increase projection of 3.4% in FY 2027, 7.5% in FY 2028, and 5.4% in
FY 2029. Staff assumed a 4% inflationary wholesale rate increase in FY 2030. However, SFPUC’s
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latest estimate is for a rate increase in July 2025 between 0.9% and 5.6%.1 SFPUC’s wholesale
rate projection is subject to change with high uncertainty. SFPUC typically decides on the final
wholesale rate increase in May. Staff plans to hold the proposed rate increase at 10% irrespective
of the final wholesale rate increase by deferring additional distribution system capital work to be
consistent with the Finance Committee and UAC Commissioner’s preference for a water rate
increase of no more than 10%. With a wholesale water rate increase of 0.9% to 5.6% this July,
additional capital deferrals of approximately $0.5 million to $1.5 million would be necessary to
maintain the overall water rate increase at 10%. Deferring capital work increases the cost to
complete the same capital work because of construction inflation, and deferring the work may
increase maintenance costs and emergency repairs as a result of older water mains. Table 1
shows the projected overall average system rate increase is 10% per year from FY 2026 through
FY 2030. As shown in Table 1, the Water Utility requires distribution rate increases between 12%
and 19% per year through FY 2030 to provide sufficient revenues to fund annual expenses for the
distribution system and capital improvements.
Table 1: Projected Water Rate Trajectory from FY 2026 to FY 2030
Table 2 shows the Water Utility rate trajectories with debt financing for the two tank
replacements/rehabilitations.
Table 2: Alternate Water Rate Trajectory from FY 2026 to FY 2030
BACKGROUND
This staff report provides the UAC with a financial forecast for the Water Utility and provides an
overview of the utility’s operating costs, capital costs, and debt and includes recommended rate
adjustments required to maintain the utility’s financial health. Attachment D contains a set of
Reserves Management Practices describing the reserves. This work is done annually as part of
the budget and rate-setting cycle.
Water usage and revenues declined in FY 2022 and FY 2023 as customers successfully conserved
1 January 21, 2025 Estimated Fiscal Year 2025-26 Wholesale Water Rate Range
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water in accordance with local, regional and state calls for water conservation. When the drought
ended in FY 2024, water usage and sales revenue began to increase gradually. Some of the water
conservation achieved during the drought will be permanent, and staff expects water sales will
continue to gradually rebound before resuming a long-term decline. The lower revenue has been
managed using $5 million from the water rate stabilization reserve in FY 2023 and FY 2024 and
approximately $7 million from the water operations reserve from FY 2022 through FY 2024 to
cover the utility’s costs. By drawing down reserves, the City has been able to keep the overall
water bill increase lower than 4% annually on average while wholesale supply rates increased
16% in FY 2023, 10% in FY 2024 and an additional 9% in FY 2025. The Finance Committee
reaffirmed its support for this approach on April 23, 2024 when it voted unanimously to limit the
overall system average water rate increase to 9.5% in FY 2025 while reducing reserve funds
available in FY 2026 and future years.2
Between FY 2019 and FY 2024, the Water Utility implemented average annual rate increases of
3.7% (bringing the average monthly bill for a residential customer using 9 CCF per month from
$86.59 in FY 2019 to $103.68 in FY 2024). However, sales revenue grew at an average rate of only
1.3% annually due to the drought, drought recovery period and other factors that contribute to
variability in customer water consumption such as weather, and water conservation programs.
The Water Utility’s operating costs during this time period grew by 8.2% annually while capital
costs fluctuated from year to year. This FY 2026 forecast projects increases in capital and
operational costs that average approximately 5% - 6% per year over the next five years. Water
Utility revenues are currently below costs and rate increases are necessary to increase the
utility’s revenues over time to bring revenues in line with costs as well as to recover costs that
are increasing over time.
ANALYSIS
Past Trends
Attachment C: Water Utility Financial Forecast Detail shows how costs have changed during the
last five years as well as how staff projects they will change over the next five years. Expenses for
the Water Utility rose by 3.8% annually on average between FY 2019 and FY 2024. The increases
were primarily related to operations costs. SFPUC held its wholesale water rate at $4.10 from
July 2016 to June 2022 and then increased the rate to $4.75 on July 1, 2022, to $5.21 on July 1,
2023, and to $5.67 on July 1, 2024. Operations costs other than purchased water and CIP
increased by about 10.4% annually from FY 2019 to FY 2024, due to increases across all categories
of operations cost including administration, resource management, engineering, operations and
maintenance, and customer service. CIP costs have generally risen, though they have decreased
in some years. At the end of FY 2024 there was $12.2 million of CIP Reappropriations and
2 Finance Committee April 23, 2024, Action Minutes
https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=15050&compileOutputType=1
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Commitments budgeted in previous years and carried over to FY 2025 due to multi-year
engineering design and construction projects.
Water system losses in FY 2024 were estimated to be 272,753 CCF or 6.2%. At $5.21 per CCF, this
is $1.4 million that is not passed through to customers through the commodity charge and is paid
for by distribution rates. Each year CPAU completes a water audit, validated through an external
auditor specialist, and submits this to the California Department of Water Resources. Palo Alto’s
baseline real water loss rate is 24.6 gallons per capita per day (based on the years 2017 – 2020),
which ranks within the top half of California’s urban water suppliers. Nevertheless, deferring
main replacement over time could increase Palo Alto’s water loss.
Table 3 shows the FY 2024 actual costs and revenues compared to the FY 2025 Financial Plan
forecast. Sales revenue was 1.7% ($0.85 million) higher than forecasted in last year’s financial
plan. Similarly, water purchase costs were 2.2% (or $0.26 million) higher than forecast. Other
revenues were nearly $0.9 million higher than forecasted in the FY 2025 Financial Plan due to
higher interest income ($0.17 million), higher service connection fees ($0.65 million), and higher
capacity fees ($0.12 million).
Operating expenses other than water purchases were higher than expected due to increased
allocated charges (general fund charges were $0.17 million higher than forecasted, utilities admin
fund charges were $0.59 million higher). Additionally, operations and maintenance costs were
$1.16 million higher, engineering (operating) costs were $0.1 million higher, and customer
service costs were $0.13 million higher than forecasted in the FY 2025 Financial Plan. The increase
in operations and maintenance costs is in part due to Lead and Copper Rule implementation work
that required additional staffing in FY 2024 on a temporary basis as well as equipment vehicle
purchase increases of $0.45 million. Additionally, the increases across operation cost categories
are a result of a lower number of vacancies in FY 2024 compared to FY 2023. As of June 30, 2024,
the Utilities Department filled 12 positions compared to FY 2023, which brought vacancies down
from 49 to 37.
Projected CIP costs for FY 2024, including CIP reappropriations and commitments, totaled $22.1
million in the FY 2025 Financial Plan. Actual spending in FY 24 was $11.13 million with $12.25
million in CIP reappropriations and commitments at year end, which totals $23.38 million, or an
increase of approximately $1.3 million or 5.7%.
Table 3 summarizes the variances from forecast.
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Table 3: FY 2024 Actual Results vs. Prior Year’s Forecast
Net Cost/
(Benefit) ($000)
Type of
change
Higher sales revenues $(853)Higher revenues
Higher other revenue $(863)Higher revenues
Capital-related costs including CIP
reappropriations/commitments $1,272 Cost increase
Water purchases higher than expected $268 Cost increase
Operating expense higher than expected $2,811 Cost increase
Net Cost / (Benefit) of Variances $2,635 Net cost increase
Projections
Overview
This forecast anticipates that water supply costs will increase 3% annually on average over the
forecast period FY 2025 – FY 2030. Staff projects operations costs other than debt service to
increase by 4% annually on average and capital contributions to the CIP Reserve to increase
17.1% on average each year. This increase is calculated based on an average of FY 2025 and FY
2026 compared to an average of FY 2030 and FY 2031. The increase in the capital contributions
to the CIP Reserve appear high because of the capital deferrals in the near term, together with
deferring the tank replacements to FY 2029 and FY 2030, making the capital costs high in those
years. While staff has revised future CIP costs upwards to reflect the higher construction costs
seen in recent projects, there is still uncertainty with regard to the utility’s future costs for water
main replacements. Debt service costs are declining during the FY 2025 – FY 2030 time period
because the 2011 Utility Revenue Refunding Bond, Series A, is scheduled to be retired in 2026.
The FY 2025 Financial Plan estimated a 5-year capital project budget for FY 2025 through FY 2029
of $54.2 million (not including carry-forward budgets from prior years). Staff currently projects a
higher capital project budget of $58.7 million is needed (an increase of $4.5 million or 8%) for
those same years. However, to maintain no more than a 10% rate increase in each year, this
forecast reduces the size of the next two upcoming main replacement projects in FY 2026 and FY
2028 by $4 million and $3 million, respectively. Additionally, this forecast defers the two reservoir
replacement/rehabilitations from FY 2027 and FY 2028 to FY 2029 and FY 2030 which increases
the total cost by $1.6 million or 10.4% due to construction inflation, but also lengthens the time
available to build reserves to pay for these replacements. Staff developed an Alternative section
in this staff report which describes an alternative funding model where the tank projects are
debt-financed rather than pay-as-you-go which would allow for the full main replacement budget
in FY 2028 as well as reducing the impact on customer rates during FY 2029 and FY 2030.
This forecast utilizes the full $4 million remaining in the Rate Stabilization Reserve at year-end FY
2024 by the end of FY 2026 to stabilize rates and cover operational and capital costs.
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100
90
80
70
60
50
40
30
20
10
0
Figure 1: Water Utility Expenses, Revenues, and Rate Changes:
Actual Expenses through FY 2024 and Projections through FY 2030
Rate Changes
Capital*
Operations
Water Supply
Debt Service
Revenue
Fiscal Year
* Note: in Figure 1, Capital in the projected years reflects one-time transfers from the
Operations Reserve to the CIP Reserve, the annual capital program contribution to the CIP
Reserve, as well as increases in the CIP Reappropriations and Commitments Reserve.
Load Forecast
Actual water sales in FY 2024 were 1.8% higher than forecasted in the FY 2025 Financial Plan.
Similarly, actual sales revenues for FY 2024 were approximately $0.8 million (1.8% higher) than
projected ($48 million vs. $47.2 million). The plan assumed an end to the drought by the end of
FY 2023 with water sales recovery from FY 2024 to FY 2026. The drought recovery in FY 2024 was
better than expected, and system losses slightly improved from 8.2% in FY 2023 to 6.2% in FY
2024.
The current forecast begins with the most recent water purchases from FY 2024 (a year with close
to average precipitation) and assumes a drought recovery over three years from FY 2024 to FY
2026, followed by a return to the pre-drought long-term decline trend of 1.3% annually based on
the average decline from FY 2005 to FY 2024. This forecast assumes a 3-year average water loss
for FY 2022 through FY 2024.
10%
10%10%
10%9.5%10%
5%5%
4%3%1%0%0%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actuals Projection
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Figure 2: Water Purchases Forecast
Revenues
Staff based the sales revenue projections on the load forecast and the projected rate changes
shown in Figure 2. Precipitation can vary substantially, and this can affect revenues substantially.
In dry, non-drought years customers use more water, increasing revenues, and in wet years they
use less. It is difficult to predict customer usage recovery from drought together with impacts
from weather from year to year. Staff will continue to monitor these patterns and adjust
projections accordingly in subsequent forecasts.
The Water Utility receives most of its revenues from sales of water. In FY 2024 the Water Utility
also received approximately 7% of total revenue from a combination of other sources including
service connection fee and capacity fee revenue, interest income, and grants (interest subsidy on
Build America Bonds). Other sources of revenue are projected to remain stable during the
forecast period.
Expenses
Water Purchase Costs
CPAU purchases all of its potable water supplies from the SFPUC, which owns and operates the
Hetch Hetchy Regional Water System (RWS). The RWS begins with a system of reservoirs and
tunnels in the high Sierra in Tuolumne County and water is transported by a gravity-fed pipeline
to the Bay Area. CPAU is one of 26 agencies that purchase water from the SFPUC, all of whom
are members of the Bay Area Water Supply and Conservation Agency (BAWSCA). These agencies,
including the City, are frequently referred to as the “wholesale customers” (as compared to the
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SFPUC’s “retail customers” in San Francisco). Palo Alto uses roughly 7% of the water delivered by
the SFPUC to BAWSCA member agencies.
For many years, the largest cost increases have been on the water supply side. This is due
primarily to major capital investments the SFPUC has made since 2010, which were undertaken
partly due to pressure from wholesale customers. The Water System Improvement Program
(WSIP) is a $4.8 billion capital improvement program, one of the largest in the country, to
rehabilitate and seismically strengthen the lower portions of the RWS. One of the goals is to
achieve the capability to return to service within 24 hours after a major earthquake. Although
much of the work is complete, some of the projects are still under construction and bond
financing of WSIP projects over the next several years will continue to drive wholesale rates up.
Parts of SFPUC’s system not included in the WSIP will also need rehabilitation as part of SFPUC’s
CIP program. Some of these projects are already included in the SFPUC’s rate projections, such
as additional Transmission, Supply, Storage and Treatment system upgrade projects, and dam
safety work.
SFPUC provides 30 days’ written notice to Palo Alto before its Commission meeting to increase
wholesale rates, which typically occurs in May. SFPUC also provides a wholesale rate increase
estimate in February. SFPUC’s latest rate forecast from January 2025 is for a rate increase in
January 2025 between 0.9% and 5.6%.
Operations
CPAU’s Water Utility operations include the following activities:
•Administration, a category that includes charges allocated to the Water Utility for
administrative services provided by the General Fund and for Utilities Department
administration, as well as debt service and other potential transfers.
•Customer Service
•Engineering work for maintenance activities (as opposed to capital activities)
•Operations and Maintenance of the distribution system; and
•Resource Management
From FY 2019 to FY 2024, overall operations costs increased 8.2% per year on average. Resource
Management costs increased 8.2% per year on average while customer service increased by
9.4% and administration increased 7.5%. Operations and Maintenance increased 8.9% annually
on average while Engineering (Operating) increased by 10.7% per year on average. Some of these
increases are due to one-time costs in FY 2024 including increased salaries and benefits to staff
lead and copper rule testing as well as a one-time transfer out true-up that occurred in FY 2024.
Staff anticipates inflationary increases for operations costs of 4% per year, on average, over the
forecast period. For salary and benefit assumptions, this forecast uses an assumption of 5%
annual average increase from FY 2024 actuals to FY 2030, which is consistent with the 3-year
average increase in salaries and benefits from FY 2021 to FY 2024 of 5% per year on average.
Additionally, the forecast includes an adjustment for new staff for cross-connection control from
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the FY 2025 budget. This forecast improves the method for allocated charges projections (shown
in the Administration category in Figure 3) by using adopted FY 2025 budgets and Long-Range
Financial Forecasts where possible. This forecast adjusts adopted numbers if there is a pattern of
under or over-spending by category.
Figure 3: Historical and Projected Operational Costs
35
30
Resource Management
25
Administration
20
Operations & Maintenance
15 (including Engineering)
Customer Service10
5 Debt Service andTransfers
0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actuals
Capital Improvement Program
The Water Utility’s CIP consists of the following types of projects.
•Non-recurring construction projects (One Time Projects) of large system assets, such as the
seismic retrofit projects, and the emergency water storage project. Currently there are no
alternative water supply projects included in the budget but if Council decides to move forward
with any such project in the future, it would fall within this project type.
•The Water Main Replacement Program, which represents the ongoing replacement of aging
water mains and main appurtenances.
•Ongoing projects:
o Water distribution system improvements are projects improving the reliability and
operations of the water distribution system. The projects include but are not limited to
engineering studies, hydraulic modeling, leak survey, hydrant maintenance, and pipe
strength sampling.
o Water supply improvements are projects maintaining and improving the water supply
within the City’s distribution network and to individual pressure zones. The projects
include but are not limited to emergency diesel generators, power supply projects,
communications and controls, water quality engineering, site security, and engineering
studies.
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o Water metering improvements are projects replacing water meters, testing, and
improving accuracy of the City’s water metering.
•New Development Improvements (customer connections) are projects funded or constructed
by private developers and property owners. The projects may include new services, hydrants,
and other water system improvements necessary to support new development and new water
demand.
Table 4 shows the FY 2025 projected current year budget and the five-year CIP spending plan, although
these figures are preliminary pending ongoing budget discussions.
Table 4: Budgeted Water Utility CIP Spending ($000)
The Ongoing Projects budget is larger in FY 2025 than in the other years because the budget includes
$0.7 million for a generator purchase and a 3-year maintenance plan as well as $2.8 million for security
cameras. Of the $7.3 million current budget for ongoing projects, $4.9 million is already reflected in the
reappropriations or commitments reserves. The CIP budget additionally includes allocated overhead,
estimated to be approximately $1.1 million in FY 2025 and escalating at 4% - 6% annually thereafter as
shown in the Table 5. Table 5 also shows the forecast for unallocated CIP-related salaries and benefits,
estimated to be $0.9 million in FY 2025. Allocated overhead and unallocated salaries and benefits are
added to the capital budget.
Table 5: Allocated Overhead and Unallocated CIP Salaries and Benefits ($000)
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030
Allocated Overhead 1,062 1,266 1,317 1,370 1,424 1,481
Unallocated CIP Salaries
and Benefits
894 1,066 1,108 1,153 1,199 1,247
The water system consists of over 231 miles of mains, approximately 2,000 fire hydrants, and over 20,000
metered service connections spanning 9 pressure zones over a 26 square mile service area. Since the
Water Main Replacement Program began in 1990, CPAU has replaced 61 miles or 26% of the most leak-
prone and deteriorated water mains. CPAU continues to pursue a pipe replacement program of mains
nearing the end of their useful life.
The water main replacement schedule in this forecast will require CPAU to defer $7 million in main
replacement work to beyond the 5-year planning period which will mean extending the timeline for
replacing water mains. Deferring capital work increases the cost to complete the same capital work
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because of construction inflation, and deferring the work may increase maintenance costs and emergency
repairs as a result of older water mains.
Additionally, costs for the water main replacement program are increasing for a variety of reasons:
•Construction costs in the San Francisco Bay Area have increased substantially, outpacing the
consumer price index for all urban consumers. Additionally, material, fuel, and labor costs have
escalated due to inflation, leading to higher bids.
•More stringent traffic control requirements have driven cost increases: requirements for
engineered traffic control plans, restricted working hours, maintaining pedestrian right of ways,
bike lanes during construction, and special street plating requirements.
•Street cut fees.
•Code changes to fire flow requirements requiring larger diameter mains.
•CPAU has switched to high-density polyethylene (HDPE) for its water mains for leak reduction
and seismic performance.
These factors have created some uncertainty in future water main replacement costs. As bids for recent
projects have consistently come in higher over the past decade, the scope of main replacement has been
reduced. In the 1990s, the City replaced on average two miles of pipe per year. The pipe replacement rate
in recent years has dropped to less than one mile per year. Future main replacement project budgets have
been increased to reflect cost inflation. Budgets will need to be revised further to replace the water
system’s pipes before the end of their useful life. From 1990 to 2000, the long-term water main
replacement program focused on replacing all 4” cast iron pipes, the smallest and most susceptible pipe
to corrosion, leakage, and failure. In 2000 the program was expanded to include other pipe materials. In
2015, CPAU completed a pipe replacement master planning process identifying and prioritizing
seismically vulnerable pipe. Preparing for the future, CPAU is preparing an RFP for a comprehensive
capital improvement plan and a new prioritization for the water main replacement program.
To maintain its current main replacement scope, CPAU needs approximately $8.5 million every other year
for water main replacement construction, assuming inflation of 5.4% annually on the main replacement
budget, which is derived from a linear trend of historical CIP cost increases. However, due to the need to
limit the overall water rate increase for FY 2026, this forecast reduces the next two main replacement
budgets by $4 million and $3 million, respectively. In the longer-term, CPAU will need to restore the main
replacement budgets and catch up on the main replacement projects in order to meet the main
replacement needs of the water system.
Included in the one-time project budget are seismic water system upgrades and/or replacement for the
Park and Dahl Tanks, two water distribution storage reservoirs located in the Palo Alto Foothills. This work
will improve protection from water loss and damage to these storage tanks during seismic events.
Significant earthquake damage could lead to a loss of water for firefighting, sanitation, and domestic and
commercial drinking water uses. A rupture and failure of the storage tanks during an earthquake could
cause property damage, mudslides, and environmental damage. Staff contracted with an engineering
specialist and investigated and analyzed the structural integrity and condition of the Park Tank Reservoir.
The engineering specialist recommended a full roof replacement of the Park Tank Reservoir in addition to
a seismic retrofit of the tank. Staff solicited proposals for an engineering firm to prepare plans and cost
estimates for the seismic retrofit and roof replacement of Park Tank and to perform a condition
assessment of Dahl Tank. If full tank replacement is needed for either Dahl or Park Tank, the estimated
cost for design and construction of Dahl and Park reservoirs is approximately $7 million each. This forecast
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defers this work from FY 2027 and FY 2028 to FY 2029 and FY 2030. The cost to replace tank roofs and
seismically retrofit the tanks is approximately $4 million per tank. Staff is evaluating the replacement or
rehabilitation needs of these two tanks. These tanks are part of Palo Alto’s water distribution system
located in the high fire threat area in the California Public Utilities Commission (CPUC) State Fire Map west
of Highway 280 in the foothills.
Ongoing projects are expected to cost approximately $2.0 and $2.3 million annually through the end of
the forecast period. Actual expenses vary each year based on operational needs. Customer connection
expenses vary each year based on the level of development and redevelopment, which drives the need
for water service replacements or upgrades. Property owners pay a fee for water distribution system
replacement or expansion during redevelopment, so when the number of projects go up (meaning higher
costs for this activity), so does fee revenue.
Aside from customer connections, the CIP plan for FY 2025 to FY 2030 is funded by revenue from utility
rates and capacity fees. Attachment C: Water Utility CIP Financial Table shows the details of the plan.
Figure 4 shows the projected CIP Reserve balances from FY 2025 through FY 2030. Figure 5 shows the
projected CIP expenditure fluctuating from year to year with the staggered main replacement schedule
and one-time reservoir replacements/rehabilitations, relative to the steadier capital program
contributions to the CIP Reserve. Additional one-time transfers from the operations reserve will fund the
tank rehabilitations/replacements. This forecast defers the tank rehabilitation/replacements from FY
2027 and FY 2028 to FY 2029 and FY 2030. The Water Utility may refine the timing of the tank projects to
space them out by at least one year to ensure one is fully operational before the second is
decommissioned and eliminate the spike in CIP spending shown below in Figure 5. Attachment C: Water
Utility Financial Table shows the amount of the capital program contributions under “Expenses” for FY
2025 through FY 2030.
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Figure 4: Projected CIP Reserve Balances FY 2025 to FY 2030
40
35
30
25
20
Reserve Maximum
15
10
5
Reserve Minimum
0
2018 2019 2020 2021 2022 2023 2024
Actuals
2025 2026 2027 2028 2029 2030
Projection
Fiscal Year
CIP Reserve (Year-End)
Figure 5: Projected CIP Expenditure,and Projected Capital Program Contribution, FY 2025 to FY 2030
Debt Service
$30
$25
$20
$15
$10
$5
$-
FY 25 FY 26 FY 27 FY 28 FY 29 FY 30
Capital Program Contribution Projected CIP Expenditure
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The Water Utility’s annual debt service is roughly $3.2 million per year, which is offset by a federal
subsidy of approximately $300K to $430K annually. The debt service is associated with two bond
issuances, one requiring payments through 2026, the other through 2035. CPAU is in compliance
with all covenants on both bonds.
The first bond is the 2009 Water Revenue Bond, Series A, issued for $35 million to finance
construction of the Emergency Water Supply and Storage project (the El Camino Reservoir, new
wells, and rehabilitation of existing wells and tanks) which will be retired by 2035. As part of the
‘Build America’ bond program, there is an interest payment subsidy from the Federal
Government of 33 to 35%.
The second bond issuance is the 2011 Utility Revenue Refunding Bond, Series A, which is to be
retired in 2026. This $17.2 million issuance refinanced an earlier Water and Gas Utility bond
issuance, the 2002 Utility Revenue Bonds, Series A, which was issued to finance various capital
improvements for both systems. The Water Utility’s share of the issuance was roughly $7.8
million.
Table 6 shows the cost of debt service for the Water Utility’s share of these bond issuances for
the financial forecast period:
Table 6: Water Utility Debt Service ($000)
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030
2009 Water Revenue Bond, Series A
(net of subsidy)2,181 2,201 2,225 2,251 2,280 2,316
2011 Utility Revenue Refunding Bond,
Series A 654 656 0 0 0 0
Total 2,835 2,857 2,225 2,251 2,280 2,316
Both the 2009 and 2011 Bonds include the following covenants: 1) net revenues plus Available
Reserves shall at least equal 125% of the maximum annual debt service, and 2) Available Reserves
shall be at least 5 times the maximum annual debt service. Note that “Available Reserves,” as
defined for both bonds, include the reserves for the Gas and Electric systems, not just the Water
system. This forecast maintains compliance with these covenants throughout the forecast period,
as shown in Attachment C: Water Utility Financial Forecast Detail.
Reserves
Staff expects the Water Operations Reserve, the main contingency reserve for the water utility,
to continue to fall further below the minimum guideline range in FY 2025 and FY 2026 and then
return to within the guideline range in FY 2028 and going forward (Figure 6). Staff projects the
Operations Reserve to exceed the short-term risk assessment level throughout the forecast
period (Figure 6). If additional funding is needed to address all identified risks discussed in the
risk assessment discussion, the water utility could investigate financing options, as described
later in this report, or explore other measures to address the funding needs. Figure 7 shows the
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Water Utility’s year-end reserve balances from FY 2024 through FY 2030 and Table 7 summarizes
the Water Utility’s reserve balances and transfers from FY 2025 through FY 2030.
Figure 6: Operations Reserve Adequacy
25
Reserve Maximum
20
Reserve Target
15
Reserve Minimum10
5 Risk Assessment
0
2018 2019 2020 2021 2022 2023 2024
Actuals
2025 2026 2027 2028 2029 2030
Projection
Fiscal Year
Reserve (Year-End)
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Figure 7: Water Utility Reserves
40
35
30
Unassigned
25 Reappropriations (Non-CIP)
20 Rate Stabilization Reserve
15 Capital Reserve
10 Operations Reserve
5
0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actuals
$
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Table 7: Operations & Unassigned, Rate Stabilization and CIP Reserves Starting and Ending
Balances, Revenues, Transfers To/(From) Reserves and Capital Program Contribution
To/(From) Reserves Projected for FY 2025 to FY 2030 ($000)
* Planned CIP (item 13) is reflected as an expense in the CIP Reserve and does not include CIP funded through
Reappropriations or Commitments reserves. This will be funded with the $6 million Capital Program Contribution
(item 11).
Table 8 summarizes the risk assessment calculation for the Water Utility through FY 2030. The risk
assessment includes the revenue shortfall of 14% that could occur due to lower than forecasted sales
revenue.
Table 8: Water Risk Assessment ($000)
FY 2026 FY 2027 FY 2028 FY 2029 FY 2030
Total Non-Commodity
Revenue
$35,221 $40,131 $44,449 $49,108 $54,581
Max. Revenue Variance,
Previous Ten Years
14%14%14%14%14%
Risk of Revenue Loss $3,374 $3,844 $4,258 $4,704 $5,228
Total Risk Assessment Value $3,374 $3,844 $4,258 $4,704 $5,228
Proposed Rates
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The Water Utility’s rates are evaluated and implemented in compliance with the cost-of-service
requirements and procedural rules set forth in Article XIII D of the California Constitution
(Proposition 218) and applicable statutory law. The City structured current rates based on staff’s
assessment of the financial position of the Water Utility, and updated current rates using the
methodology and rate structures developed by Raftelis Financial Consultants, Inc. (RFC).3 The
Water Utility’s rates are based on RFC’s 2019 update to the 2015 cost of service study, which
reviewed the City’s most recent cost of service methodologies and rate structures and declared
both fundamentally sound. Before conducting any new cost of service study, staff will review
current water rates and the scope of the study with the Utilities Advisory Commission (UAC) and
Council to determine the City’s policy priorities.
The current rates and surcharges became effective on July 1, 2024. CPAU has five water rate
schedules: separately metered residential customers (W-1), commercial and master-metered
multi-family residential customers (W-4), irrigation-only services (W-7), services to fire sprinkler
systems in buildings and private hydrants (W-3), and service to fire hydrant rental meters used
for construction (W-2). All customers pay a monthly service charge based on the size of their inlet
meter. This charge represents metering, billing, and other customer service costs, and also the
cost of maintaining the capability to deliver a peak flow for that customer based on their meter
size.
All customers are also charged for each CCF (one hundred cubic feet) of water used. Separately
metered residential customers are charged on a tiered basis, with the first 0.2 CCF per day (6 CCF
for a 30-day billing period) charged at the first-tier price per CCF, and all additional units charged
a higher tier price per CCF. Commercial customers, including most multi-family customers, pay a
uniform price for each CCF used. A separate rate per CCF exists for separately metered irrigation
service.
Water rates are composed of two general types of costs: commodity and distribution. For July 1,
2025, staff proposes to pass through any increase in the SFPUC wholesale water rate and to
increase distribution rates by 19%.
Customers have a separate commodity rate for purchased water from SFPUC relative to the rest
of the distribution-related portion of the volumetric rates. California Government Code Section
53756 (established by AB-3030) became effective January 1, 2009. This section of the Code
authorizes public agencies providing water, sewer, and garbage services to adopt automatic pass-
through rate adjustments to account for increases in wholesale water charges or wastewater
treatment charges, as well as inflation. Pass-throughs must be adopted via the Proposition 218
3 RFC has developed 3 cost studies for the City: a 2019 Memorandum analyzing the 2015 methodology and rate
structure, titled Proposed FY 2020 Water Rates
https://www.cityofpaloalto.org/civicax/filebank/documents/71892; a 2015 study reviewing the 2012
methodology and analyzing drought rates entitled, Memorandum: Proposed Water Rates,
https://www.cityofpaloalto.org/civicax/filebank/documents/48398 and a March 2012 Palo Alto Water Cost of
Service & Rate Study https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-
manager-reports-cmrs/year-archive/2012/id-2676-04-18-12-1.pdf
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process and can be effective for up to five years without additional Prop 218 authorization. In
2024, Palo Alto used the Prop 218 process and the Council adopted the pass-through process
effective July 1, 2024 through June 30, 2029 pursuant to Resolution 101764. The separate
commodity charge passed-through SFPUC rate increases to customers. All customers pay this
separate commodity rate, currently $5.67 per CCF, for each unit of water in addition to the
volumetric rate that is applicable for their customer class. The rates shown below are in addition
to the pass-through commodity rate charged to Palo Alto’s customers based on SFPUC supply
charges. For further information and details about the proposed commodity rate, see Water
Purchase Cost section above.
Distribution rates cover all the costs to deliver water within the City, such as operations,
maintenance, billing, and capital improvements. Through annual Council approvals, the water
utility provides steady funding to the CIP Reserve, which reflects actual fluctuations in CIP
expenditures (money spent on actual projects in a given year). Previously, CIP expenditures were
reflected in the Operations Reserve. In this way, although CIP expenditures fluctuate from year
to year, staff anticipates the capital program contribution to the CIP reserve to remain steady
over the next five years. However, due to the deferrals of CIP reflected in this forecast, the capital
program contributions are lower in FY 2025, FY 2026 and FY 2027. Additionally, the one-time
reservoir replacement costs will be partly funded through one-time transfers from the
Operations Reserve to the CIP Reserve. Once these reservoirs are replaced or rehabilitated, these
costs will no longer be included in the ongoing CIP budget needs for the water utility.
Table 9 shows the current and proposed consumption charges, which are distribution rates.
Table 9: Current and Proposed Water Distribution Charges
Current
(7/1/2024)
Proposed
(7/1/2025)
Change
($/CCF)Change (%)
W-1 (Residential) Volumetric Rates ($/CCF)
Tier 1 Rates 2.99 3.55 0.56 19%
Tier 2 Rates 6.96 8.28 1.32 19%
W-2 (Construction) Volumetric Rates ($/CCF)
Uniform Rate 4.21 5.00 0.79 19%
W-4 (Commercial) Volumetric Rates ($/CCF)
Uniform Rate 4.21 5.00 0.79 19%
W-7 (Irrigation) Volumetric Rates ($/CCF)
Uniform Rate 6.41 7.62 1.21 19%
4 Resolution 10176 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=62048
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Table 10 and Table 11 show the current monthly service charges for rate schedules W-1, W-4
and W-7. These monthly service charges are also considered distribution rates.
Table 10: Current and Proposed Monthly Service Charges for Residential W-1
Monthly Service Charge
($/month based on meter size)ChangeMeter
Size Current
(7/1/2024)
Proposed
(7/1/2025)$%
5/8”23.62 28.10 4.48 19%
3/4”23.62 28.10 4.48 19%
1”23.62 28.10 4.48 19%
1 ½”76.31 90.80 14.49 19%
2”118.05 140.47 22.42 19%
3”250.22 297.76 47.54 19%
4”445.01 529.56 84.55 19%
6”911.09 1,084.19 173.10 19%
8”1,676.31 1,994.80 318.49 19%
10”2,650.21 3,153.74 503.53 19%
12”3,485.00 4,147.15 662.15 19%
Table 11: Current and Proposed Monthly Service Charges for W-4 and W-7
Monthly Service Charge
($/month based on meter size)ChangeMeter
Size Current
(7/1/2024)
Proposed
(7/1/2025)$%
5/8”20.65 24.57 3.92 19%
3/4”27.62 32.86 5.24 19%
1”41.53 49.42 7.89 19%
1 ½”76.31 90.80 14.49 19%
2”118.05 140.47 22.42 19%
3”250.22 297.76 47.54 19%
4”445.01 529.56 84.55 19%
6”911.09 1,084.19 173.10 19%
8”1,676.31 1,994.80 318.49 19%
10”2,650.21 3,153.74 503.53 19%
12”3,485.00 4,147.15 662.15 19%
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Table 12 shows the current and proposed monthly service charges for rate schedule W-3.
Table 12: Current and Proposed Monthly Service Charges for Fire Services (W-3)
Monthly Service Charge ($/month
based on meter size)ChangeMeter
Size Current
(7/1/2024)
Proposed
(7/1/2025)$%
2”$4.86 5.78 0.92 19%
4”$30.11 35.83 5.72 19%
6”$87.46 104.07 16.61 19%
8”$186.39 221.80 35.41 19%
10”$335.21 398.89 63.68 19%
12”$541.46 644.33 102.87 19%
Table 1 shows the impact of the proposed July 1, 2025 rate changes on the median
residential bill. The system average increase is projected to be 10%, but some customers will
see higher or lower increases due to changes in the composition of the customer’s utilization of
the system over time.
Table 13: Impact of Proposed Water Rate Changes on Residential Bills
Usage (CCF/mo.)Bill under Current
Rates (7/1/2024)
Bill under Proposed
Rates (7/1/2025)Change
$/mo.%
4 $58.26 $64.98 $6.72 12%
(Winter median) 7 $88.21 $97.37 $9.16 10%
(Annual median) 9 $113.47 $125.27 $11.80 10%
(Summer median) 14 $176.62 $195.02 $18.40 10%
25 $315.55 $348.47 $32.92 10%
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Table 14 shows the impact of the proposed July 1, 2025 rate changes on the median
commercial bill.
Table 14: Impact of Proposed Water Rate Changes on Commercial Bills
ChangeUsage (CCF/mo.)Bill under Current
Rates (7/1/2024)
Bill under Proposed
Rates (7/1/2025)$/mo.%
Commercial (W-4) (5/8” meters)
(Annual median) 12 $139.21 $152.61 $13.40 10%
(Annual average) 64 $652.97 $707.45 $54.48 8%
Irrigation (W-7) (1 ½” meters)
(Winter median) 9 $185.03 $210.41 $25.38 14%
(Summer median) 37 $523.27 $582.53 $59.26 11%
(Winter average) 56 $752.79 $835.04 $82.25 11%
(Summer average) 199 $2,480.23 $2,735.51 $255.28 10%
Bill Comparisons/Competitiveness
Table 15 compares the current water bills for single-family residential customers in Palo Alto with
those of neighboring communities. While Palo Alto is among the highest monthly bills across
these communities, the difference between Palo Alto’s bills and those of the surrounding cities
has decreased in recent years as other agencies have increased their capital investments.
Additionally, bills for smaller water users in Palo Alto are lower than in some neighboring
communities. Palo Alto uses these comparison cities for benchmarking in its annual budget across
all utilities.
Table 15: Single-Family Residential Monthly Water Bill Comparison, Compared to Neighboring
Communities at Current Rates ($/Month), as of January 2025
* Based on the FY 2013 BAWSCA survey, the percentage of SFPUC as the source of potable water supply
Alternative
Staff developed an alternative assuming debt financing (instead of pay-as-you-go) to pay for the
two tank rehabilitations/replacements. This scenario still requires the deferral of $4 million
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from the Water Main Replacement project in FY 2026 but no further deferrals of necessary
capital work during the five-year forecast period. Table 2 in the Executive Summary shows the
Alternate water rate trajectory from FY 2026 through FY 2030.
Table 16 shows the existing debt service together with the additional assumed revenue bond for
financing the two tank replacements/rehabilitations. In order to minimize costs due to
construction inflation, this alternative model keeps the tank replacement construction in FY 2027
and FY 2028 with a total estimated cost of $15 million with bond repayment beginning in FY 2028.
Assuming a bond interest rate of 4.6% over 30 years, the annual debt service payment would be
approximately $0.9 million.
Table 16: Water Utility Debt Service ($000) (Alternative)
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030
2009 Water Revenue Bond, Series A
(net of subsidy)2,181 2,201 2,225 2,251 2,280 2,316
2011 Utility Revenue Refunding Bond,
Series A 654 656 0 0 0 0
Hypothetical New Bond for Tank
Replacement Costs 932 932 932
Total 2,835 2,857 2,225 3,183 3,212 3,248
Figure 8 shows the Water Utility’s expenses, revenues, and rate changes throughout the most
recent seven years and six projected years for the alternative. Note that the Operations Reserve
returns to target levels by FY 2030 under the alternative (see Figure 9) and this is different than
the main scenario where the Operations Reserve remains close to the reserve minimum by FY
2030. This is because rate increases in the main scenario are limited to 10% per year and tank
replacements are not debt financed. The Alternative could assume lower rate increases in the
outer years if the Council selects to keep reserves at similar levels as the main scenario, below
target levels or below guideline levels.
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Figure 8: Water Utility Expenses, Revenues and Rate Changes, Actual Costs through FY 2024
and Projections through FY 2030 (Alternative)
90
80
70
60
50
40
Rate Changes
Capital*
Operations
Water Supply
Debt Service
Revenue
30
20
10
0
Fiscal Year
Figure 9: Operations Reserve Adequacy (Alternative)
25
Reserve Maximum
20
Reserve Target
15
Reserve Minimum10
5 Risk Assessment
0
2018 2019 2020 2021 2022 2023 2024
Actuals
2025 2026 2027 2028 2029 2030
Projection
Fiscal Year
Reserve (Year-End)
Next Steps
10%8%7%
10%
9.5%10%
5%5%
4%3%1%0%0%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actuals Projection
$ Millions
$
M
i
l
l
i
o
n
s
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The City Council will consider adopting the Financial Forecast and rate adjustments as part of the
FY 2026 budget review and adoption process in June 2025. If Council approves the proposed rate
changes, the rates will become effective July 1, 2025.
FISCAL/RESOURCE IMPACT
Based on the rate increases as shown, the estimated revenue impacts in FY 2026 would be an
increase of $5.6 million in the Water Fund. Utility rate increases impact the general fund
because the City is a utilities customer. The impact to the general fund of these rate increases
is a $0.2 million expense increase.
POLICY IMPLICATIONS
The proposed water rate adjustments are consistent with Council-adopted Reserve Management
Practices that are part of the Financial Forecast and were developed using a cost-of-service study
and methodology consistent with the California Constitution and industry-accepted cost-of-
service principles.
STAKEHOLDER ENGAGEMENT
On December 3, 20245, staff discussed preliminary rate proposals at the Finance Committee
meeting. Finance Committee members asked questions including whether the reserve guidelines
levels are correct or whether we can have lower reserve levels and cautioned that messaging
around the water increase will be very important. A reserve study is not currently in staff’s work
plan. One Committee member requested a bill comparison to Bay Area agencies that rely 100%
on the Regional Water System for potable water, and staff has included that information in the
presentation for this item. One Committee member suggested making it clear that Palo Alto
customers benefit both from Regional Water System water reliability during droughts as well as
from the pristine water quality. Committee members cautioned that deferring water capital work
to a later year could cause more costs from price inflation. One Committee member expressed
concern that a 14% water rate increase (the cost recovery rate increase without deferring
maintenance or seismic rehabilitation projects) would not be palatable to the community.
On December 4, 20246, staff discussed the preliminary rate proposals at the UAC meeting. UAC
commissioners asked for the drivers behind the distribution rate increase as well as more detailed
information about cost categories (including allocated costs, vehicle replacement, salaries and
benefits, non-revenue water, electricity costs, and costs to comply with new regulations). In
response, staff has presented additional detail regarding the cost drivers in this report. One
5 December 3, 2024 Finance Committee Meeting, Staff Report
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=64761 , Minutes
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=39017 , Video
https://www.youtube.com/watch?v=-tshOdaDA3A%3Ffeature%3Dshare
6 December 4, 2024 Utilities Advisory Commission, Staff Report
https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=d7cd6030-1d05-412e-a96b-cabd33557bc1,
Minutes https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=41244 , Video
https://www.youtube.com/watch?v=tfznidSYXiU%3Ffeature%3Dshare
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Commissioner requested a plan to limit the rate increase to 10% and Commissioners also asked
for information about SFPUC’s planned wholesale rate increase. Staff took this feedback into
consideration and made modifications to the preliminary rate proposals reflected in this report.
Additional feedback from the UAC and Finance Committee meetings in 2025 will be incorporated
in the financial forecast and included in the proposal presented to City Council in June 2025
during the budget adoption process.
Attachment E contains examples of CPAU’s communication and outreach methods including the
use of the utilities website, utility bill inserts, messaging on utility bills and MyCPAU online
account management platform, email newsletters, print and digital ads in local publications,
social media, community messaging platforms, and through direct mailings of the Home Water
Reports and online WaterSmart portal.
ENVIRONMENTAL REVIEW
The UAC’s review and recommendation to Council on the FY 2026 Water Utility financial forecast
and rate schedule adjustments does not meet the California Environmental Quality Act’s
definition of a project, pursuant to Public Resources Code Section 21065, thus no environmental
review is required.
ATTACHMENTS:
Attachment A: Water Resolution FY26
Attachment B: Water Utility Rate Schedules FY26
Attachment C: Water Utility Financial and CIP Tables FY26
Attachment D: Water Reserves Management Practices
Attachment E: Water Utility Communications Plan and Samples
APPROVED BY:
Kiely Nose, Interim Director of Utilities
Staff: Lisa Bilir, Senior Resource Planner
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*NOT YET APPROVED*Attachment A
1
027021325
Resolution No.
Resolution of the Council of the City of Palo Alto Approving the FY 2026 Water
Utility Financial Forecast and Reserve Transfers, and Amending Rate Schedules
W-1 (General Residential Water Service), W-2 (Water Service from Fire
Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered
and General Non- Residential Water Service), and W-7 (Non-Residential
Irrigation Water Service)
R E C I T A L S
A. Each year the City of Palo Alto (“City”) assesses the financial position of its
utilities with the goal of ensuring adequate revenue to fund operations. This includes making
long-term projections of market conditions, the physical condition of the system, and other
factors that could affect utility costs, and setting rates adequate to recover these costs. The
City does this with the goal of providing safe, reliable, and sustainable utility services at
competitive rates. The City adopts Financial Plans or Forecasts to summarize these
projections.
B. The City uses reserves to protect against contingencies and to manage other
aspects of its operations, and regularly assesses the adequacy of these reserves and the
management practices governing their operation. The status of utility reserves and their
management practices are included in Reserves Management Practices attached to and
made part of the Financial Forecasts or Plans.
C. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of
the City of Palo Alto may by resolution adopt rules and regulations governing utility
services, fees and charges.
D. On June 16, 2025, the City Council held a full and fair public hearing
regarding the proposed rate increase and considered all protests against the
proposals.
E. As required by Article XIII D, Section 6 of the California Constitution and
applicable law, notice of the June 16, 2025 public hearing was mailed to all City of Palo Alto
Utilities water customers by May 2, 2025.
F. The City Clerk has tabulated the total number of written protests presented
by the close of the public hearing, and determined that it was less than fifty percent (50%)
of the total number of customers and property owners subject to the proposed water
rate amendments, therefore a majority protest does not exist against the proposal.
The Council of the City of Palo Alto does hereby RESOLVE, as follows:
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*NOT YET APPROVED*Attachment A
2
027021325
SECTION 1. The Council hereby adopts the FY 2026 Water Utility Financial Forecast.
SECTION 2. The Council hereby approves a transfer from the Rate Stabilization
Reserve to the Operations Reserve of up to $3,000,000 in FY 2025 as described in the FY 2026
Water Utility Financial Forecast.
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule W-1 (General Residential Water Service) is hereby amended to read as
attached and incorporated. Utility Rate Schedule W-1, as amended, shall become effective
July 1, 2025.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code,
Utility Rate Schedule W-2 (Water Service from Fire Hydrants) is hereby amended to read
as attached and incorporated. Utility Rate Schedule W-2, as amended, shall become
effective July 1, 2025.
SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule W-3 (Fire Service Connections) is hereby amended to read as attached and
incorporated. Utility Rate Schedule W-3, as amended, shall become effective July 1, 2025.
SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule W-4 (Residential Master-Metered and General Non-Residential Water
Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-
4, as amended, shall become effective July 1, 2025.
SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule W-7 (Non-Residential Irrigation Water Service) is hereby amended to read
as attached and incorporated. Utility Rate Schedule W-7, as amended, shall become
effective July 1, 2025.
SECTION 8. The City Council finds as follows:
a. Revenues derived from the water rates approved by this resolution do not exceed
the funds required to provide water service.
b. Revenues derived from the water rates approved by this resolution shall not be used
for any purpose other than providing water service, and the purposes set forth in
Article VII, Section 2, of the Charter of the City of Palo Alto.
c. The amount of the water rates imposed upon any parcel or person as an incident of
property ownership shall not exceed the proportional cost of the water service
attributable to the parcel.
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*NOT YET APPROVED*Attachment A
3
027021325
SECTION 9. The Council finds that the fees and charges adopted by this resolution are
charges imposed for a specific government service or product provided directly to the payor
that are not provided to those not charged, and do not exceed the reasonable costs to the City
of providing the service or product.
SECTION 10. The Council finds that the adoption of this resolution approving the FY
2026 Water Financial Forecast and Reserve transfers does not meet the California
Environmental Quality Act’s (CEQA) definition of a project under Public Resources Code
Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative
governmental activity which will not cause a direct or indirect physical change in the
environment, and therefore, no environmental review is required. The Council finds that
the adoption of this resolution changing water rates to meet operating expenses, purchase
supplies and materials, meet financial reserve needs and obtain funds for capital
improvements necessary to maintain service is not subject to the California Environmental
Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title
14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and
all attachments presented to Council, the Council incorporates these documents herein
and finds that sufficient evidence has been presented setting forth with specificity the
basis for this claim of CEQA exemption.
//
//
//
//
//
//
//
//
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*NOT YET APPROVED*Attachment A
4
027021325
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
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GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-1 Effective 7-1-20245
dated 7-1-20234 Sheet No W-1-1
A. APPLICABILITY:
This schedule applies to separately metered single-family residential dwellings receiving Water
Service from the City of Palo Alto Utilities.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Water Service.
C. RATES:
Per Meter
Monthly Service Charge: Per Month
For meters 5/8-inch to 1 inch .................................................................................... $ 23.6228.10
For 1 1/2 inch meter .................................................................................................. 76.3190.80
For 2-inch meter ........................................................................................................ 118.05140.47
For 3-inch meter ........................................................................................................ 250.22297.76
For 4-inch meter ........................................................................................................ 445.01529.56
For 6-inch meter ........................................................................................................911.091,084.19
For 8-inch meter ........................................................................................................1,676.311,994.80
For 10-inch meter ......................................................................................................2,650.213,153.74
For 12-inch meter .......................................................................................................3,485.004,147.15
Per Hundred
Cubic Feet
Volumetric Rates: (To be added to Service Charge, applicable to all pressure zones.) Per Month
Commodity Rate:
Water Delivery Charge from SFPUC ......................................................................... $ 5.67
Distribution Rate:
Tier 1 usage ........................................................................................................................$ 2.993.55
Tier 2 usage (All usage over 100% of Tier 1) .......................................................................6.968.28
Attachment BItem #2
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GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-2 Effective 7-1-20245
dated 7-1-20234 Sheet No W-1-2
Drought Surcharges (deactivated):
A drought surcharge will be added to the Customer’s applicable commodity rate for Tier 1 and Tier
2 Water usage when the City Council has determined that a Water reduction level is in effect for the
City as described in Section D.4. The drought surcharges in the table below are measured in dollars
per hundred cubic feet (ccf).
Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%)
Tier 1 0.20 0.43 0.64
Tier 2 0.58 1.21 1.85
Temporary Service – Developers
Temporary unmetered service to residential
subdivision developers, per connection ........................................................................ $ 6.00
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Commodity Rate
The Commodity Charge is based on the water delivery rate per the San Francisco Public
Utility Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term
Contract. The Commodity Charge will be passed through automatically via periodic rate
adjustments to account for increases in wholesale water charges, as well as inflation. The
pass-through period will be effective for fiscal years 2025 through 2029, inclusive.
Customers will be provided notice of any adjustments via their billing statements or by any
other mailing by CPAU to the customer’s regular billing address.
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GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-3 Effective 7-1-20245
dated 7-1-20234 Sheet No W-1-3
3. Calculation of Usage Tiers
Tier 1 Water usage shall be calculated and billed based upon a level of 0.2 ccf per day
rounded to the nearest whole ccf, based on Meter reading days of Service. As an
example, for a 30-day bill, the Tier 1 level would be 0 through 6 ccf. For further
discussion of bill calculation and proration, refer to Rule and Regulation 11.
4. Drought Surcharge
During period of Water shortage or restrictions on local Water use, the City Council may,
by resolution, declare the need for citywide Water conservation at the 10/15%, 20% or
25% level. While such a resolution is in effect, a drought surcharge will apply. The
purpose of the drought surcharge is to recover revenues lost as a result of reduced
consumption.
{End}
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WATER SERVICE FROM FIRE HYDRANTS
UTILITY RATE SCHEDULE W-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-2-1 Effective 7-1-20245
dated 7-1-20234 Sheet No W-2-1
A. APPLICABILITY:
This schedule applies to all Water taken from fire hydrants for construction, maintenance, and
other uses in conformance with provisions of a Hydrant Meter Permit.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Water Service.
C. RATES:
1. Monthly Service Charge.
METER SIZE
5/8 inch ........................................................................................................................... $ 50.00
3 inch ........................................................................................................................... 125.00
2. Volumetric Rate: (per hundred cubic feet)
Commodity Rate:
Water Delivery Charge from SFPUC ................................................................ $ 5.67
Distribution Rate: .................................................................................................................$ 4.215.00
4. Drought Surcharges (deactivated):
A drought surcharge will be added to the Customer’s applicable Commodity rate when the City
Council has determined that a Water reduction level is in effect for the City as described in
Section D.6. The drought surcharges in the table below are measured in dollars per hundred
cubic feet (ccf).
Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%)
Surchar e 0.26 0.53 0.77
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WATER SERVICE FROM FIRE HYDRANTS
UTILITY RATE SCHEDULE W-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-2-2 Effective 7-1-20245
dated 7-1-20234 Sheet No W-2-2
D. SPECIAL NOTES:
1. Monthly charges shall include the applicable monthly Service Charge in addition to usage billed at
the commodity rate.
2. The Commodity Charge is based on the water delivery rate per the San Francisco Public Utility
Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term Contract. The
Commodity Charge will be passed through automatically via periodic rate adjustments to account
for increases in wholesale water charges, as well as inflation. The pass-through period will be
effective for fiscal years 2025 through 2029, inclusive. Customers will be provided notice of any
adjustments via their billing statements or by any other mailing by CPAU to the customer’s regular
billing address.
3. Any person or company using a hydrant without first obtaining a valid Hydrant Meter Permit shall
pay a fee of $50.00 for each day of such use in addition to all other costs and fees provided in this
schedule. A hydrant permit may be denied or revoked for failure to pay such fee.
4. A Meter deposit of $750.00 may be charged any applicant for a Hydrant Meter Permit as a
prerequisite to the issuance of a permit and Meter(s). A charge of $50.00 per day will be added for
delinquent return of hydrant Meters. A fee will be charged for any Meter returned with missing or
damaged parts.
5. Any person or company using a fire hydrant improperly or without a permit, or who draws Water
from a hydrant without a Meter installed and properly recording usage shall, in addition to all other
applicable charges be subject to criminal prosecution pursuant to the Palo Alto Municipal Code.
6. During period of Water shortage or restrictions on local Water use, the City Council may, by
resolution, declare the need for citywide Water conservation at the 10/15%, 20% or 25% level.
While such a resolution is in effect, a drought surcharge will apply. The purpose of the drought
surcharge is to recover revenues lost as a result of reduced consumption.
{End}
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FIRE SERVICE CONNECTIONS
UTILITY RATE SCHEDULE W-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-3-1 Effective 7-1-20245
dated 7-1-20234 Sheet No W-3-1
A. APPLICABILITY:
This schedule applies to all public fire hydrants and private fire Service connections.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Water Service.
C. RATES:
1. Monthly Service Charges
Public Fire Hydrant .................................................................................................... $ 5.00
Private Fire Service:
2-inch connection .......................................................................................................$ 4.865.78
4-inch connection .......................................................................................................30.1135.83
6-inch connection ....................................................................................................... 87.46104.07
8-inch connection .......................................................................................................186.39221.80
10-inch connection .....................................................................................................335.21398.89
12-inch connection .....................................................................................................541.46644.33
2. Commodity (To be added to Service Charge unless Water is used for fire extinguishing or
testing purposes.)
Per Hundred Cubic Feet
All water usage ..........................................................................................................$ 10.00
D. SPECIAL NOTES:
1. Service under this schedule may be discontinued if Water is used for any purpose other
than fire extinguishing or testing and repairing the fire extinguishing facilities. Using
hydrants and fire Services for other purposes is illegal and will be subject to the
commodity charge as noted above, fines, and criminal prosecution pursuant to the Palo
Alto Municipal Code.
2. For a combination Water and fire Service, the Water Service schedule shall apply.
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FIRE SERVICE CONNECTIONS
UTILITY RATE SCHEDULE W-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-3-2 Effective 7-1-20245
dated 7-1-20234 Sheet No W-3-2
3. Utilities Rule and Regulation No. 21 provides additional information on Automatic Fire
Services.
4. Repairs and testing of fire extinguishing facilities are not considered unauthorized use of
Water if records and documentation are supplied by the Customer.
{End}
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RESIDENTIAL MASTER-METERED AND
GENERAL NON-RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-4
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-4-1 Effective 7-1-20254
dated 7-1-20234 Sheet No W-4-1
A. APPLICABILITY:
This schedule applies to Water Services to non-residential buildings, and multi-family residential
dwellings served through a Master-Meter.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Water Service.
C. RATES:
Per Meter
Monthly Service Charge Per Month
For 5/8-inch meter .................................................................................... $ 20.6524.57
For 3/4-inch meter .................................................................................... 27.6232.86
For 1-inch meter .................................................................................... 41.5349.42
For 1 ½-inch meter .................................................................................... 76.3190.80
For 2-inch meter .................................................................................... 118.05140.47
For 3-inch meter .................................................................................... 250.22297.76
For 4-inch meter .................................................................................... 445.01529.56
For 6-inch meter ....................................................................................911.091,084.19
For 8-inch meter ....................................................................................1,994.801,676.31
For 10-inch meter ....................................................................................3,153.742,650.21
For 12-inch meter ....................................................................................4,147.153,485.00
Per Hundred
Cubic Feet
Volumetric Rates: (to be added to Service Charge, applicable to all pressure zones) Per Month
Commodity Rate:
Water Delivery Charge from SFPUC ...................................................... $ 5.67
Distribution Rate: ........................................................................................... 5.004.21
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RESIDENTIAL MASTER-METERED AND
GENERAL NON-RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-4
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-4-2 Effective 7-1-20254
dated 7-1-20234 Sheet No W-4-2
Drought Surcharges (deactivated):
A drought surcharge will be added to the Customer’s applicable commodity rate when the City
Council has determined that a Water reduction level is in effect for the City as described in Section
D.3. The drought surcharges in the table below are measured in dollars per hundred cubic feet
(ccf).
Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%)
Surchar e 0.26 0.53 0.77
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Commodity Rate
The Commodity Charge is based on the water delivery rate per the San Francisco Public
Utility Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term
Contract. The Commodity Charge will be passed through automatically via periodic rate
adjustments to account for increases in wholesale water charges, as well as inflation. The
pass-through period will be effective for fiscal years 2025 through 2029, inclusive.
Customers will be provided notice of any adjustments via their billing statements or by any
other mailing by CPAU to the customer’s regular billing address.
3. Drought Surcharge
During period of Water shortage or restrictions on local Water use, the City Council may,
by resolution, declare the need for citywide Water conservation at the 10/15%, 20% or
25% level. While such a resolution is in effect, a drought surcharge will apply. The
purpose of the drought surcharge is to recover revenues lost as a result of reduced
consumption.
{End}
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NON-RESIDENTIAL IRRIGATION WATER SERVICE
UTILITY RATE SCHEDULE W-7
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-7-1 Effective 7-1-20242025
dated 7-1-20234 Sheet No W-7-1
A. APPLICABILITY:
This schedule applies to non-residential Water Service supplying dedicated irrigation Meters.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Water Services.
C. RATES:
Per Meter
Monthly Service Charge Per Month
For 5/8-inch meter .................................................................................... $ 24.5720.65
For 3/4-inch meter .................................................................................... 32.86 27.62
For 1-inch meter .................................................................................... 49.42 41.53
For 1 1/2 inch meter .................................................................................... 90.80 76.31
For 2-inch meter .................................................................................... 140.47 118.05
For 3-inch meter .................................................................................... 297.76 250.22
For 4-inch meter .................................................................................... 529.56 445.01
For 6-inch meter ....................................................................................1,084.19 911.09
For 8-inch meter ....................................................................................1,994.80 1,676.31
For 10-inch meter ....................................................................................3,153.74 2,650.21
For 12-inch meter ....................................................................................4,147.15 3,485.00
Per Hundred
Cubic Feet
Volumetric Rates: (to be added to Service Charge, applicable to all pressure zones) Per Month
Commodity Rate:
Water Delivery Charge from SFPUC ........................................................... $ 5.67
Distribution Rate: ..................................................................................................... 6.417.62
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NON-RESIDENTIAL IRRIGATION WATER SERVICE
UTILITY RATE SCHEDULE W-7
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-7-2 Effective 7-1-20242025
dated 7-1-20234 Sheet No W-7-2
Drought Surcharges (deactivated):
A drought surcharge will be added to the Customer’s applicable commodity rate when the City
Council has determined that a Water reduction level is in effect for the City as described in Section
D.3. The drought surcharges in the table below are measured in dollars per hundred cubic feet (ccf).
Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%)
Surchar e 0.53 1.25 2.02
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Commodity Rate
The Commodity Charge is based on the water delivery rate per the San Francisco Public
Utility Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term
Contract. The Commodity Charge will be passed through automatically via periodic rate
adjustments to account for increases in wholesale water charges, as well as inflation. The
pass-through period will be effective for fiscal years 2025 through 2029, inclusive.
Customers will be provided notice of any adjustments via their billing statements or by any
other mailing by CPAU to the customer’s regular billing address.
3. Drought Surcharge
During period of Water shortage or restrictions on local Water use, the City Council may,
by resolution, declare the need for citywide Water conservation at the 10/15%, 20% or
25% level. While such a resolution is in effect, a drought surcharge will apply. The
purpose of the drought surcharge is to recover revenues lost as a result of reduced
consumption.
{End}
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Attachment C
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Attachment C
Water Utility Capital Improvement Program (CIP) Financial Details
P P
R
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C
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F F F F F F
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W W -----
W W -----
W S 1 1 3 ---8 7
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W W 5 5 0 ---
W W 4 8 4 4 --
W W -4 4 6 -
W W 4 6 1
W W 8
S 7 7 4 5 4 7 6 1
P P
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F F F F F F
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W S -4 4 4 4 4 4 4
W W 2 3 3 3 4 4 4 4
W W 6 1 5 5 5 5 6 6
W E 5 1 5 5 5 5 5 5
W D 6 9 3 3 3 3 3 3
W S 3 4 7 3 3 3 4 4
W M -------
S 4 7 2 2 2 2 2 2
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W W 1 9 9 9 1 1 1 1
S 1 9 9 9 1 1 1 1
G 8 3 1 1 2
F
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O 3 3 3 3 4 4
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6
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6
7
1
5
ATTACHMENT D: WATER UTILITY RESERVES MANAGEMENT PRACTICES
The following reserves management practices shall be used when developing the Water Utility Financial Plan:
Section 1. Definitions
a) “Financial Planning Period” – The Financial Planning Period is the range of future fiscal years covered by the
Financial Plan. For example, for the Water Utility Financial Plan delivered in conjunction with the FY 2015 budget,
FY 2015 to FY 2021 is the Financial Planning Period.
b) “Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to the Utility’s
Unrestricted Net Assets.
c) “Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets as the difference
between its assets and liabilities.
d) “Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital assets (net of related
debt) or restricted for debt service or other restricted purposes.
Section 2. Reserves
The Water Utility’s Fund Balance is reserved for the following purposes:
a) For existing contracts, as described in Section 3 (Reserve for Commitments)
b) For operating and capital budgets re-appropriated from previous years, as described in Section 4 (Reserve for Re-
appropriations)
c) For cash flow management and contingencies related to the Water Utility’s Capital Improvement Program (CIP),
as described in Section 5 (CIP Reserve)
d) For rate stabilization, as described in Section 6 (Rate Stabilization Reserve)
e) For operating contingencies, as described in Section 7 (Operations Reserve)
f) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to
ratepayers or assigned a specific purpose as described in Section 8 (Unassigned Reserves).
Section 3. Reserve for Commitments
At the end of each fiscal year the Reserve for Commitments will be set to an amount equal to the total remaining
spending authority for all contracts in force for the Water Utility at that time.
Section 4. Reserve for Re-appropriations
At the end of each fiscal year the Reserve for Re-appropriations will be set to an amount equal to the amount of all
remaining capital and non-capital budgets, if any, that will be re-appropriated to the following fiscal year in accordance
with Palo Alto Municipal Code Section 2.28.090.
Section 5. CIP Reserve
The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for capital contingencies. Staff
will manage the CIP Reserve according to the following practices:
a) The following guideline levels are set forth for the CIP Reserve. These guideline levels are calculated for each fiscal
year of the Financial Planning Period and approved by Council resolution.
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7
1
5
Minimum Level 20% of the maximum CIP Reserve guideline level
Maximum Level Average annual (12 month)1 CIP budget, for 48
months of budgeted CIP expenses2
b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and the Reserve for
Commitments when funds are added or removed from to that reserve as a result of a change in contractual
commitments related to CIP projects. Any other additions to or withdrawals from the CIP reserve require Council
action.
c) Minimum Level: If, at the end of any fiscal year, the minimum guideline is not met, staff shall present a plan to the
City Council to replenish the reserve. The plan shall be delivered by the end of the following fiscal year, and shall,
at a minimum, result in the reserve reaching its minimum level by the end of the next fiscal year. For example, if
the CIP Reserve is below its minimum level at the end of FY 2017, staff must present a plan by June 30, 2018 to
return the reserve to its minimum level by June 30, 2019. In addition, staff may present, and the Council may
adopt, an alternative plan that takes longer than one year to replenish the reserve, or that does so in a shorter
period of time.
d) Maximum Level: If there are funds in this reserve in excess of the maximum level staff must propose in the next
Financial Plan to transfer these funds to another reserve, return the funds to ratepayers, or designate a specific
use of the funds for CIP investments that will be made by the end of the next Financial Planning Period. Staff may
also seek City Council to approve holding funds in this reserve in excess of the maximum level if they are held for
a specific future purpose related to the CIP.
Section 6. Rate Stabilization Reserve
Funds may be added to the Rate Stabilization Reserve by action of the City Council and held to manage the
trajectory of future year rate increases. Withdrawal of funds from the Rate Stabilization Reserve requires Council
action. If there are funds in the Rate Stabilization Reserve at the end of any fiscal year, any subsequent Water
Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the next Financial
Planning Period. The Council may approve exceptions to this requirement, when proposed by staff to provide
greater rate stabilization to customers.
Section 7. Operations Reserve
The Operations Reserve is used to manage normal variations in costs and as a reserve for contingencies. Any portion
of the Water Utility’s Fund Balance not included in the reserves described in Section 3-Section 6 above will be included
in the Operations Reserve unless this reserve has reached its maximum level as set forth in Section 7(d) below. Staff
will manage the Operations Reserve according to the following practices:
a) The following guideline levels are set forth for the Operations Reserve. These guideline levels are calculated for
each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and
commodity expense forecasted for that year in the Financial Plan.
1 Each month is calculated based upon 1/12 of the annual budget.
2 For example, in the Financial Plan for FY 2021, the 48 month period to use to derive the annual average is FY
2021 through FY 2024. In the FY 2022 Financial Plan, the 48 month period to use to derive the annual average
would be FY 2022 through FY 2025 etc.
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6
7
1
5
Minimum Level 60 days of O&M and commodity expense
Target Level 90 days of O&M and commodity expense
Maximum Level 120 days of O&M and commodity expense
b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations Reserve are lower than the
minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall
be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching
its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its
minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its
minimum level by June 30, 2015. In addition, staff may present, and the Council may adopt, an alternative plan
that takes longer than one year to replenish the reserve.
c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower than the target level, any
Financial Plan created for the Water Utility shall be designed to return the Operations Reserve to its target level
within four years.
d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no funds may be added to this
reserve. Any further increase in the Water Utility’s Fund Balance shall be automatically included in the Unassigned
Reserve described in Section 8, below.
Section 8. Unassigned Reserve
If the Operations Reserve reaches its maximum level, any further additions to the Water Utility’s Fund Balance will be
held in the Unassigned Reserve. If there are any funds in the Unassigned Reserve at the end of any fiscal year, the next
Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them
to the Water Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if
there were funds in the Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016
through FY 2021, the Financial Plan shall include a plan to return or assign any funds in the Unassigned Reserve by the
end of FY 2016. Staff may present an alternative plan that retains these funds or returns them over a longer period of
time.
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COMMUNICATIONS PLAN /SAMPLES
The Fiscal Year (FY) 2026 water utility communications strategy covers these primary areas: recently
implemented cost containment measures, cost drivers for rate increases, including operations and capital
improvement, commodity costs, reserve balances, utility bill comparisons, and efficiency programs and services
to help keep utility bill costs low. The City of Palo Alto Utilities (CPAU) communication methods include use of
the utilities website, utility bill inserts, messaging on utility bills, MyCPAU online account management platform,
email newsletters, print and digital ads in local publications, social media, community messaging platforms, and
through direct mailings of the Home Water Reports and online WaterSmart portal.
As a not for profit public utility, CPAU must recover its costs primarily through revenue generated by rates.
Any increased supply costs are passed through rates to CPAU customers, including for capital improvement.
The cost to deliver water supply to Palo Alto and for CPAU to distribute water to customers is high, as it
includes maintaining and replacing water infrastructure, customer service, billing, and administration.
CPAU’s communication about water utility rates will focus on the forecasted increase in costs passed down from
Palo Alto’s water supplier, the San Francisco Public Utilities Commission (SFPUC), ongoing capital improvement
and infrastructure upgrades, and what CPAU is doing to keep costs down. Maintaining water pipes, mains, and
service connections is necessary to prevent leaks, which cost the utility and rate payers money, and prevents
damage to infrastructure which could exacerbate safety and reliability concerns in the long term.
CPAU promotes water use efficiency programs and easy water-saving behaviors to aid in our water saving efforts
and help customers keep utility costs low. Messaging reinforces that although rates may increase, efficient
usage can help customers avoid seeing a significant water cost increase on the utility bill. The City is also
exploring opportunities to expand use of alternative water supplies and is working on a One Water Plan for that
purpose to further reduce demands on potable water supplies in the future.
Staff maintain a dedicated webpage at cityofpaloalto.org/ratesoverview to provide an overview on all utility
rates, costs to the utility, updates to financial forecasts and proposed rate changes. While print materials such
as bill inserts and ads feature prominently, CPAU is exploring additional ways to communicate directly to
customers utilizing unique programs like the relatively new WaterSmart portal and Home Water Reports, in
addition to the near real-time water usage data provided by new Advanced Metering Infrastructure (AMI) and
the ability to send customers alerts about high water usage. Staff continue to maintain an active presence in
social media and information sharing through citywide email newsletters. Staff attend community outreach
events and host educational workshops on these related topics.
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March 5, 2025 www.cityofpaloalto.org
Water Utility Financial Forecast and Proposed Rate Changes for FY 2026
Utility Advisory Commission
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Water Rate Projection FY 2026
Proposal: 10% rate increase in FY 2026, approximately $11.40/month increase for residential customers
Drivers
•Revenue below cost due to the use of $25 million of reserves over the past 3 years
•Personnel Cost-of-Living-Adjustment, merit increases, and filled vacancies
•Drought-related water sales reductions in recent years
Compared with Preliminary Rates
•Keep overall water rate increase to 10% by deferring $4.6 million of CIP from FY 2026 and $2.5 million of CIP from
FY 2028 to beyond the 5-year forecast period, based on SFPUC’s latest rate projection
•Deferring capital work increases costs (construction inflation, maintenance & emergency repairs)
Alternative: Seek to issue debt for major CIP tank replacements but maintain 10% rate increase for FY 2026
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Water Single-Family Residential Bill Comparisons ($/Month)
Single-Family
Residential Bill
Comparisons Over
Time With Other
Agencies with 100%
SFPUC Supply
Palo Alto water bills
are near the average
among agencies with
100% SFPUC supply
Source: Mid-Peninsula Water
District Staff, with Adjustments
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FY 2026 Rate Increase Drivers
Calculation Notes:
•Rate increases based on projected FY 2026 revenues
apportioned by 4-year average of actual costs
•Rate increases apply to sales revenue; Revenue includes some
non-rate revenue.
•Last year, a 9% overall rate increase was
forecasted compared to the currently
recommended 10% overall rate increase
•To maintain a 10% overall rate increase, the
following costs management strategies are
assumed:
•Use of $4 million from reserves
•Deferral of $1.8 million CIP replacement
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4%3%1%0%0%
5%5%
9.5%10%10%
10%10%10%
0
10
20
30
40
50
60
70
80
90
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actual Projected
$
Mi
l
l
i
o
n
s
Fiscal Year
Capital*
Operations
Water Supply
Debt Service
Revenue
Rate Changes
5
Water Cost and Revenue Projections
* Includes changes due to
commitments/reappropriations
and funds transferred to the CIP
Reserve
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Water Operations Reserve Projections
Reserve Maximum
Reserve Target
Reserve Minimum
Risk Assessment
0
5
10
15
20
25
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actual Projection
$
Mi
l
l
i
o
n
s
Fiscal Year
Reserve (Year-End)
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Recommendation
Staff Recommends the Utilities Advisory Commission Recommend that the
City Council Adopt a Resolution:
•Approving a Fiscal Year 2025 Reserve Transfer
•Approving the Fiscal Year 2026 Water Utility Financial Forecast including
Reserve Transfers; and
•Amending Rate Schedules (Attachment B) effective July 1, 2025:
•W-1 (General Residential Water Service)
•W-2 (Water Service from Fire Hydrants)
•W-3 (Fire Service Connections)
•W-4 (Residential Master-Metered and General Non-Residential
Water Service)
•W-7 (Non-Residential Irrigation Water Service)
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Utilities Advisory Commission
From: Kiely Nose, Interim Director of Utilities
Lead Department: Utilities
Meeting Date: March 5, 2025
Report #: 2411-3752
TITLE
Staff Recommends the Utilities Advisory Commission Recommend that the City Council Adopt a
Resolution, Approving the Fiscal Year 2026 Wastewater Collection Utility Financial Forecast, and
Amending Rate Schedules S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial
Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and
S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger), and Repealing Rate
Schedules S-3 (Industrial Waste Laboratory and Analysis Charges) and S-4 (Hauled Liquid Waste
Charges)
RECOMMENDATION
Staff recommends the Utilities Advisory Commission recommend that the City Council adopt a
resolution (Attachment A):
1. Approving the Fiscal Year 2026 Wastewater Collection Utility Financial Forecast shown in
this staff report and attachments; and
2. Amending Rate Schedules (Attachment B) effective July 1, 2025 (FY 2026):
a. S-1 (Residential Wastewater Collection and Disposal)
b. S-2 (Commercial Wastewater Collection and Disposal)
c. S-6 (Restaurant Wastewater Collection and Disposal)
d. S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger); and
3. Repealing Rate Schedules effective July 1, 2025:
a. S-3 (Industrial Waste Laboratory and Analysis Charges)
b. S-4 (Hauled Liquid Waste Charges)
EXECUTIVE SUMMARY
This financial forecast proposes a 20% rate increase for FY 2026, which is equivalent to
approximately $11 per residential customer per month. With this increase, Palo Alto’s rate will
remain approximately 5% below neighboring cities, conservatively assuming that neighboring
cities’ rates remain at current levels. This forecast also projects rate increases of 17% annually in
FY 2027, 15% in FY 2028 and 5% annually in FY 2029 and FY 2030. The additional funding
generated by this rate increase is required to pay for ongoing wastewater treatment costs,
wastewater utility operations, and capital improvement projects. This forecast reflects deferral
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of some capital costs to manage the magnitude of the rate increase.
Staff updated the utility’s cost projections for the FY 2025 to FY 2030 forecast period based on
the most recent recorded costs and rates of cost increases. Relative to last year’s financial
forecast, total expenses are expected to be about 14% higher over the forecast period, due to
higher treatment costs and salary and benefits and inflation assumptions. To address these
challenges, similar to last year’s forecast, this projection assumes deferral of the next sewer main
replacement project to FY 2028. This assumption defers the more accelerated replacement cycle
adopted in the FY 2024 financial plan to increase replacement from 1 miles to 2.5 miles of pipe
annually starting in FY 2026. In last year’s Financial Plan, staff planned for a smaller main
replacement in FY 2026 to replace 1 mile of sewer mains. This project is now deferred and
additionally, this forecast defers approximately $0.45 million of sewer lateral/manhole
rehabilitation and replacement work in FY 2025 to future years. This forecast reflects the minimal
number of high priority capital projects to allow the Wastewater Collection Operations Reserve
to return to within guideline range and avoid an even higher rate increase.
Table 1: Current Year (FY 2025) and Projected Rate Trajectory from FY 2026 to FY 2030
In the preliminary rate meetings with the Utilities Advisory Commission (UAC) on December 4,
2024 and with the Finance Committee on December 3, 2024, staff presented a rate trajectory of
18% in FY 2026, 15% in FY 2027 and FY 2028, and 9% in FY 2029 and FY 2030. This forecast
proposes higher rate increases. Key reasons for the change are that this forecast includes
additional vehicle replacement costs of $0.45 million in FY 2025, $0.4 million in FY 2026 and $0.1
million per year ongoing for based on staff’s latest projections. Additionally, this forecast adds
approximately $0.35 to $0.4 per year from FY 2027 through FY 2030 for the CCTV program to
assess pipe conditions and prioritize necessary sewer replacements.
Additionally, staff recommends Council repeal rate schedules S-3 (Industrial Waste Laboratory
and Analysis Charges) and S-4 (Hauled Liquid Waste Charges) as a clean-up item. These charges
moved to the municipal fee schedule in 2023.
BACKGROUND
This staff report provides the UAC with a financial forecast for the Wastewater Collection Utility
and provides an overview of the utility’s operating costs, capital costs, and debt and includes
recommended rate adjustments required to maintain the utility’s financial health. Attachment E
contains a set of Reserves Management Practices describing the reserves. This work is done
annually as part of the budget and rate-setting cycle.
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ANALYSIS
FY 2024 Costs and Revenues
At the end of FY 2024, the Wastewater Operations Reserve was about $1.3 million lower than
expected due to higher wastewater treatment and operating costs, partially offset by lower
capital improvement project (CIP) costs. The utility’s overall cash balance remained positive at
$0.34 million at the end of FY 2024, supported by the Council-approved $3 million short-term
loan from the Fiber Utility to the Wastewater Collection Utility. The loan is expected to be repaid
in FY 2026.
Actual revenues in FY 2024 were approximately $0.4 million (2%) higher than forecasted. This
was driven by a net increase in retail sales revenues and connection and capacity fees, partially
offset by lower interest income.
On the expense side, treatment costs were about $1.4 million (11%) higher than forecasted,
primarily due to higher operational expenses and an increase in Palo Alto’s flow share relative to
other treatment partner agencies, which increased Palo Alto’s share of the treatment costs.
Collection system operating costs were about $0.9 million (11%) higher than expected; $0.5
million of this was due to higher vehicle replacement costs and the remainder due to personnel
cost of living adjustments and filled vacancies. Lastly, CIP costs were lower than anticipated due
to a project deferral, by about $0.4 million. Table 232 below summarizes key reasons for the
variances from forecast.
Table 23: FY 2024 Actuals vs. Prior Year’s Forecast ($000)
Net Cost/
(Benefit)
Variance
Type of
Change
Higher retail sales, higher connection and capacity fees
revenues, lower interest income
(555)Revenue increase
Treatment expenses higher than expected 1,372 Cost increase
Higher vehicle replacement and operations and
maintenance salaries and benefits
888 Cost increase
Lower CIP (395)Cost decrease
Net Cost / (Benefit) of Variances 1,310 Net Cost Increase
Projections
Overview
In the current year (FY 2025), staff projects sales revenues will be about $0.6 million, or 2%,
higher compared to last year’s forecast, driven by a modest recovery in the commercial sector.
On the expense side, staff estimates treatment costs in FY 2025 to be about $0.9 million, or 7%,
lower than last year’s forecast, due to grant funding from Santa Clara Valley Water District’s
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“Guiding Principle 5” Program (GP5) 1. However, collection costs are projected to increase by
about $1 million, or 11%, in FY 2025, attributed to higher salaries and benefits, and vehicle
replacement expenses. Additionally, CIP costs are expected to decrease by about $1.2 million, or
29%, in FY 2025, reflecting the one-time deferral of a Sanitary Sewer Replacement/ Rehabilitation
(SSR) project.
Looking ahead, from FY 2025 to FY 2030, the forecasting period, treatment costs are projected
to rise by an average of 9% annually, while collection costs are expected to grow by 10% annually.
Over the forecast period, higher sales revenues are expected primarily due to rate increases,
though interest revenues are projected to be slightly lower than outlined in last year’s projection
due to low reserves. These rate increases are necessary to pay for rising treatment and collection
system operation costs.
Figure 1 illustrates actual revenues and expenses through FY 2024, along with projections
through FY 2030.
Figure 1: Wastewater Collection Utility Expenses, Revenues and Rate Changes
* FY25 Commitments and Reappropriations reserves balances for Operations and Capital Investment are anticipated to be utilized
in FY26 and FY27
Revenues
Staff anticipates a modest recovery in sales revenue for FY 2025, driven primarily by the rate
increase implemented in July 2024 and increased sales among non-residential customers and
restaurants. Other revenue sources include capacity and connection fees, which are cost-
recovery fees from new customers and service expansions, as well as income from interest and
1 GP5 https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=c7841814-4682-4e54-b1e7-
f48fe8292e5c
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transfers, which fluctuate annually. Due to higher expected expenses, staff is proposing higher
rate increases compared with the prior financial forecast, which are detailed in the sections
below. With the proposed rate increases, overall revenues are projected to grow by an average
of 12% annually from FY 2025 through FY 2030, which will gradually bring the Operations Reserve
back to within the guideline range by the end of FY 2028 and allow the CIP Reserve to also be
replenished gradually by FY 2030.
Expenses
Over the five-year forecast period, total expenses are expected to increase by 9% annually from
FY 2025 to FY 2030.2 This increase is primarily driven by rising costs for treatment (9% annual
average increase), shifting of sewer main replacements to FY 2028 (20% annual average
increase), construction inflation and operating costs including salaries and benefits (operating
costs are forecasted to increase 3% on average over the same time period). Table 3 below shows
the costs for treatment and collection expenses, which will be described in the sections below.
Table 3: Wastewater Utility Costs for FY 2024 to FY 2030 ($,000)
Actuals ProjectionExpenses ($000)FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030
Treatment 13,803 12,317 15,456 16,071 16,492 16,048 19,285
Treatment Operations 10,387 9,362 10,486 10,853 11,233 11,626 12,033
Treatment Capital & Debt
Service/Loan repayments
3,417 2,059 2,643 2,908 2,949 3,008 5,838
Treatment Authorized Amount
for Future Minor Capital
-896 2,327 2,310 2,310 1,414 1,414
Collection 20,111 12,980 15,846 18,714 23,617 25,790 27,020
Collection Operations *8,765 9,963 11,044 10,081 10,479 10,890 11,317
Collection Capital *11,217 3,221 5,187 9,000 13,000 15,000 16,000
Collection Debt**129 ------
TOTAL 33,915 25,501 31,688 35,152 39,970 41,938 46,602
*CIP and Operations Expenses in the projected years include changes due to commitments/reappropriations and funds
transferred to the Operations and CIP Reserves
** The Wastewater Collection Utility also borrowed $3 million from the Fiber Optics Utility through a short-term loan in FY 2024
and will be repaid in FY 2026. The Collection Operations row includes the estimated interest payment on the loan of $90K in FY
2025 and $90K in FY 2026.
Wastewater Treatment Costs
Treatment expenses represent the Wastewater Collection Utility’s share of the costs associated
with operating the Regional Water Quality Control Plant (RWQCP or Treatment Plant). These
charges are determined using a formula that considers the wastewater volume as well as the
organic material, ammonia levels, and total suspended solids that it contains.
2 Because CIP fluctuates from year to year, this calculation assumes a three-year average of CIP for FY 2025 - FY
2027 and a two-year average for FY 2030 – FY 2031 in order to provide a more accurate view of estimated CIP
costs over time.
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Based on detailed project cost projections from RWQCP staff, overall treatment costs are
expected to increase by an average of 9% annually from FY 2025 through FY 2030. The increases
in Wastewater Treatment costs are driven by major plant rehabilitation, rising salary and benefit
costs, and additional staffing to support capital and compliance programs. Other contributing
factors include higher costs for sludge hauling services, maintenance materials, rent, and
chemicals and utility rates. Additional key cost increases are described below.
In FY 2025, the Wastewater Collection Utility’s flow share of the RWQCP’s revenue requirement
was projected to be 35%, based on FY 2023’s actual flow share. However, FY 2024’s actual flow
share increased to 36.7%, raising treatment costs by about $0.4 million. To account for the recent
trend of Palo Alto’s increasing flow share, this forecast conservatively estimates a 38% flow share
annually, resulting in about an additional $0.5 million higher in yearly costs.
Under an agreement between partner agencies, the RWQCP is permitted to charge for pay-as-
you-go minor capital improvement projects (CIP) within authorized limits. Any unused amounts
are carried over annually. The RWQCP does not charge the Wastewater Collection Utility for
unused amounts each year. These unused amounts remain unencumbered but can be applied
towards future pay-as-you-go capital needs as necessary. These amounts are referred to as the
“remaining unencumbered & authorized amount for future pay-as-you-go capital (minor
capital)” or the “Treatment Authorized Amount for Future Minor Capital.” The Wastewater
Collection Utility may retain these amounts but must be prepared to pay them when needed. As
of FY 2025, the remaining unencumbered and authorized amount for future pay-as-you-go
capital for Palo Alto is approximately $3.5 million, up from $2.5 million at the end of FY 2024,
with an additional $1.3 million added annually. The Wastewater Collection Utility has not been
charging customers for the remaining unencumbered and authorized amounts for future pay-as-
you-go capital (Minor Capital) and planned to use reserves to pay for fluctuations in these costs.
The Wastewater Collection Utility’s risk assessment level for the operations reserve includes a
10% contingency for treatment costs to cover fluctuations such as these. However, due to the
low operations reserve levels, the operations reserve is below risk assessment levels, and there
are no reserve funds available to pay for remaining unencumbered and authorized amounts for
future pay-as-you-go capital (Minor Capital).
Going forward, Wastewater Collection rates need to be designed to include both the FY 2025
remaining unencumbered and authorized amount for future pay-as-you-go capital (Minor
Capital) from prior years as well as the estimated annual amount going forward. Staff
recommends collecting the FY 2025 remaining unencumbered and authorized amount for future
pay-as-you-go capital (Minor Capital) of $3.5 million in rates over 4 years starting in FY 2025. To
reflect this change, staff plans to include proposed revisions to the Wastewater Collection
Utility’s Reserve Management Guidelines in next year’s financial forecasts for Council approval.
Additionally, in the “Alternative” section below, staff presents an alternative that would achieve
a lower rate increase in FY 2026 by extending the period of time over which the remaining
unencumbered and authorized amount for treatment is recovered.
Lastly, starting in FY 2026, RWQCP will begin adding Section 115 Pension Trust expenses of
around $0.3 million annually to future forecasts. Personnel costs, such as salaries, benefits,
pensions, and other retirement benefits, are a component of treatment costs. The pension trust
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expense is a personnel cost intended to cover pension obligations to City of Palo Alto employees
working at the RWQCP. Palo Alto’s share of these operating expenses is estimated at about $1.24
million at the end of FY 2025.
Capital costs for treatment are also increasing because the Treatment Plant is facing the need for
major upgrades in coming years, due to aging equipment and changing environmental
regulations. Rehabilitation and replacement of plant equipment that has been in use for over 40
years is necessary to ensure the city can provide wastewater treatment operation safely and in
compliance with regulatory requirements for the discharge of treated wastewater 24 hours a
day. The costs of the Treatment Plant are shared among member agencies. The biggest increase
in Treatment costs is the addition of debt service (loan repayment) for the Secondary Treatment
Upgrades in FY 2030, which is a $193 million capital project funded through a low-interest State
Revolving Fund loan. Palo Alto’s share of this loan repayment is included in this financial forecast.
Palo Alto’s share of treatment capital projects and loan repayments (debt) is increasing at an
average of 20% per year from FY 2025 through FY 2030 including the offsetting GP5 grant funding
and remaining unencumbered and authorized amounts for pay-as-you-go capital. The
Wastewater Collection Utility will begin to pay for debt service for major projects beginning with
the Primary Sedimentation Tank in FY 2026 (financed through a low-interest State Revolving Fund
loan), Outfall Line Construction in FY 2027 (bond financed), Secondary Treatment Upgrades in FY
2030 and Headworks Facility in FY 2030 - FY 2034 (financing plan is still preliminary and may be
a combination of bond and State Revolving Fund loans). Palo Alto’s low-interest State Revolving
Fund loans for the Primary Sedimentation Tank and Secondary Treatment Upgrades are at fixed
interest rates. However, for future bond financing and future State Revolving Fund loans, the
rates of borrowing is uncertain and for the State Revolving Fund loans, availability of funds is also
uncertain.
GP5 Grant Funding
Santa Clara Valley Water District (Valley Water) is the groundwater manager for Santa Clara
County and provides water to most of the water retailers in the county. Valley Water developed
the “GP5 Program” grant program for communities and/or organizations, like the City of Palo
Alto, where property taxpayers pay State Water Project property taxes but receive on average
85% of their water supply from sources other than Valley Water-managed supplies. GP5 refers
to Guiding Principle 5, a principle of the Valley Water Board that awards grants to each
community at a dollar amount up to the State Water Project property taxes paid by property
owners in their respective service areas from FY 2019 - FY 2024 plus interest. The grants must
fund conservation programs, potable recycled water, non-potable recycled water (including
salinity reductions), options to purchase wastewater, purified water, wastewater treatment plant
environmental upgrades, Advanced Meter Infrastructure (AMI) updates, or dedicated
environmental focused activities.
On June 3, 2024, the City Council approved the cost-share agreement with Santa Clara Valley
Water District for GP5 funding for future projects at the RWQCP. The Wastewater Collection
Utility’s share of the following upcoming projects are eligible for the grant funding:
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•Joint Intercepting Sewer Rehabilitation
•Outfall Line Construction
•12kV Loop Electrical Improvements and
•Headworks
The estimated funding available to Palo Alto through this grant program is $11.8 million and
projects must be completed by June 30, 2033. This financial forecast assumes $6.6 million of the
funds offset projected costs during the 5-year planning period as shown in the following table.
However, there is a possibility that some grant reimbursements may be delayed which may
impact cash flow and reserve balances.
Table 4: GP5 Grant Funding Assumed to Offset Palo Alto’s Treatment Costs ($000)
Fiscal Year 2025 2026 2027 2028 2029 2030
GP5 Grant 2,453 1,139 417 417 417 1,810
The chart below illustrates a scenario without GP5 funding. Wastewater rates would need to
increase by 24% in FY 2026, followed by annual increases of 8% to 15% over the next four years,
as shown in blue texts in the chart below.
Figure 2: Wastewater Collection Utility Expenses, Revenues and Rate Changes
Actual Costs through FY 2024 and Projections through FY 2030 with and without GP5 Funding
* FY25 Commitments and Reappropriations reserves balances for Operations and Capital Investment are anticipated to be utilized
in FY26 and FY27
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Collection Operations
Operations costs include the Customer Service, Sewer Operations, Engineering, and Allocated
Charges categories. Debt service, rent, and transfers are also included in this category. The Sewer
Operations category includes preventative and corrective maintenance on sewer mains and
laterals, investigation of sewer overflows, regular cleaning of heavily impacted sections of the
sewer system, and services shared with other utilities. Allocated Charges include the costs of
accounting, human resources, information technology, purchasing, legal, and other
administrative functions provided by the City’s General and Internal Services Funds staff, as well
as shared communications services and Utilities Department administrative overhead and billing
system maintenance costs. A portion of these costs are allocated to operations costs and a
portion to capital costs.
Engineering, operations, and maintenance expenses combined are expected to increase by 3%
annually over the forecast period, largely driven by higher personnel cost of living and benefits,
filling of vacancies, and vehicle replacement allocations. Specifically, the salary and benefit
forecast includes an assumption of 6% annual average increase from FY 2024 actuals to FY 2030,
which is consistent with the 3-year average increase in salaries and benefits from FY 2021 to FY
2024 of 6% per year on average. Vehicle replacement allocation costs are forecasted to be a total
of $1.4 million higher over the 6 year period from FY 2025 through FY 2030 compared with last
year’s financial plan, due to the need to replace aging vehicles. There is also a need to electrify
vehicles in the future, however, these costs are still unknown and are not included in the forecast.
Other expense increases, include cross-bore project, tools and equipment upgrades, compliance
publishing, membership fees, construction materials, contract services, training, and
certification.
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2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actuals Projection
Figure 3: Wastewater Collection Utility Operational Costs
12
10
Debt Service
8 Allocated Charges
Collection Operations
6 (w/ Engineering)
Customer Service
Transfers
4
2
0
Fiscal Year
Capital Improvement Program
The Sanitary Sewer Replacement/Rehabilitation (SSR) Program funds the replacement of
deteriorating sewer mains to increase capacity or improve pipe condition in various parts of the
sewer system. The Wastewater Collection Utility completed SSR 31 in FY 2024 which replaced
and rehabilitated over two miles of sanitary sewer main, sewer laterals and manholes. Most of
the original clay pipes in Palo Alto were installed between 1950 and 1970. 136 miles of sewer
mains remain to be replaced before the end of their useful life. Under the current replacement
cycle of 2.5 miles of main replaced each year on average beginning in FY 2028, replacement of
the remaining mains would take approximately 60 years and the last main would be
approximately 111 years old before replacement. This rate of main replacement is based on
Staff’s experience, other nearby communities’ experience, and the National Clay Pipe Institute
Engineering Manual suggesting that clay pipe can last around 100 years in Palo Alto’s
underground conditions. Staff re-evaluates and prioritizes future projects based on a structural
rating system, feedback from Wastewater Operations and available budget. In addition, the City
is currently updating the Sewer Master Plan with anticipated completion in summer 2025. Results
from this plan will assist in identifying and prioritizing future SSR projects.
As part of the FY 2024 Financial Plan, the Council approved an accelerated CIP program to
increase the Sanitary Sewer Replacement (SSR) rate from 1 mile to 2.5 miles per year (from 2
miles to 5 miles per project constructed every other year) to fulfil the goal of replacing pipes near
their life expectancy. Due to unforeseen reductions in revenue and increases in operating
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expenses, the FY 2025 Financial Plan recommended deferring the first of the 5-mile main
replacement projects that had previously been scheduled for construction in FY 2026. The plan
recommended a reduced main replacement project, covering 1 mile instead of 5 miles, with
construction planned in FY 2026. Due to further increases in operating expenses and treatment
expenses, the current forecast defers the smaller 1 mile SSR which is proposed to be included in
the first 5-mile main replacement in FY 2028.
The budget for the 5-mile SSR scheduled for construction in FY 2028 increased from $12.7 million
to $13.5 million due to adjustments for construction inflation of 5.4% annually. Additionally, the
foothills lift station retrofit, originally scheduled for FY 2028 with a budget of $2 million, has been
postponed to FY 2029. Updated cost estimates and inflation adjustments increased the projected
total to $3.8 million. Lastly, staff recommends introducing a CCTV program to perform a sewer
collection system condition assessment in critical sections of the system. This initiative aims to
better assess pipe conditions and prioritize necessary sewer replacements. The program is
estimated to cost $0.3 to $0.4 million annually throughout the forecast period.
Table 5 provides an overview of projected CIP spending from FY 2025 to FY 2030.
Table 5: Projected CIP Spending, FY 2025 to FY 2030 ($,000)
Debt Service
The Wastewater Collection Utility paid the only outstanding debt for its share of the 1999 Utility
Revenue Bonds, Series A, at the end of FY 2024. However, Council approved a short-term loan up
to $3 million from the Fiber Optics Fund Reserve to cover the projected shortfall of cash in the
Wastewater Collection Utility, with the plan to repay the Fiber Utility in FY 2026. The Wastewater
Collection Utility borrowed the full $3 million at the end of FY 2024. The loan also included an
interest payment rate equal to the City’s portfolio rate each quarter plus 0.25%, or about $90K
per year, assuming a portfolio interest rate of 3%. Staff will continue to monitor the Wastewater
Collection Utility’s available funds and costs and will make recommendations on loan repayment
timing as appropriate.
Staff is also considering debt financing some of the future SSRs. This could be beneficial for the
Wastewater Collection Utility because it would allow needed construction work to move forward
on sewer main replacements before FY 2028. It would also reduce the risk of further deferrals of
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main replacements beyond FY 2028 if operational costs, construction costs and treatment costs
continue to inflate more than projected. The more that wastewater assets are operated past
their useful life, the greater the likelihood of substantial pipe failures resulting in additional repair
and maintenance costs, sanitary sewer overflows, sinkholes, or other catastrophic impacts. On
the other hand, debt financing is most appropriate for large one-time projects and would not be
able to be used as an ongoing financing method for regular main replacement projects that occur
annually or every other year. Tax-exempt bonds require the funds to be spent within three years
and so the funds could most likely be used to fund one large five-mile main replacement project.
Additionally, Wastewater Collection Utility customers would ultimately pay interest on the funds
borrowed that could add up to approximately a doubling of the total project cost compared to
pay-as-you-go financing. Customers would also pay the bond issuance costs of approximately
$0.25 – $0.28 million per bond issuance. The Wastewater Collection Utility does not have any
stand-alone debt and has never been rated so staff does not know what the true interest rate
would be on a bond. But the interest rate would depend on the nature of the investment, the
size of the bond issuance, duration of the repayment period and whether interest is capitalized
during construction.
Reserves
Given the low reserves and the projected levels of revenue and expenses over the forecasting
period, the Operations Reserve, which is the Wastewater Collection Utility’s primary contingency
reserve, is projected to be below risk assessment level in FY 2025 and FY 2026. Staff expects the
Operations Reserve to return to within the guideline range by the end of FY 2028 and increase to
target levels by FY 2029.
Figure 4 shows the Operations Reserve ending balances alongside the minimum, maximum, and
target guidelines and risk assessment levels.
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2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actuals Projection
Figure 4: Operations Reserve Adequacy
14
12
Reserve Maximum
10
Reserve Target
8
6
Reserve Minimum
4 Risk Assessment
2
0
Fiscal Year
Reserve (Year-End)
Note: Operations Reserve shown with a minimum balance of $0. The Wastewater Collection Utility borrowed $3 million in a
short-term loan from the Fiber Optics Utility in FY 2024 to cover cash needs and will repay the loan in FY 2026.
Table 6 summarizes the risk assessment calculation for the Wastewater Utility through FY 2030. The risk
assessment includes the revenue shortfall that could occur due to:
1. Lower than forecasted sales revenue; and
2. An increase of 10% of treatment costs for the budget year; and
3. An increase of 10% of planned system improvement CIP expenditures for the budget year. CIP
Contingency for FY 2027 and after is not needed due to resuming the use of the CIP reserve
Table 6: Wastewater Collection Risk Assessment ($,000)
Fiscal Year 2025 2026 2027 2028 2029 2030
Sales Revenue 25,652 30,736 35,994 41,418 43,640 45,822
Budget-to-Actual Risk @ 4%1,043 1,227 1,438 1,654 1,743 1,830
Treatment Budget 12,317 15,456 16,071 16,492 16,048 19,285
Treatment Cost Contingency @10%1,232 1,546 1,607 1,649 1,605 1,928
CIP Budget *2,464 4,431 ----
CIP Cost Contingency @10% *246 443 ----
Total Risk Assessment Value 2,521 3,216 3,045 3,304 3,348 3,759
Projected Operations Reserve Level 1,035 1,502 3,178 5,494 8,096 8,250
*CIP budget is excluded from FY 2027 onward
Reserve Balances
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The CIP Reserve is currently depleted, and in the short term, there are insufficient funds to
maintain the annual Capital Program Contribution to the CIP Reserve. Contributions will
resume in FY 2027 to ensure rate stability and consistent CIP expenditures. This will gradually
re-establish the CIP Reserve within the guideline range by FY 2029. The Wastewater Utility
Financial Table FY26 (Attachment D) shows the amount of the rate-funded CIP Reserve
contributions under “Expenses” for FY 2027 through FY 2030.
Figure 5 below shows the projected CIP Reserve balances from FY 2018 through FY 2030. The
projected CIP expenditures fluctuates from year to year with the staggered main replacement
schedule.
Figure 5: Projected CIP Reserve Balances, FY 2018 to FY 2030 ($000)
14
Reserve Maximum
12
10
8
6
4
2 Reserve Minimum
0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actuals
CIP Reserve (Year-End)
Figure 6 below shows year-end reserve balance levels for each reserve from FY 2018 through FY
2030. Table 7 shows reserve starting and ending balances, revenues, transfers expenses, capital
program contribution and operations reserve guideline levels from FY 2025 to FY 2030. The
Operations Reserve was depleted in FY 2023 and FY 2024 because the schedule for Sanitary
Sewer Replacement 31 was accelerated to complete the replacement prior to Caltrans’ street
improvement project on El Camino Real, to avoid digging into the newly-paved street;
additionally, costs were higher than forecasted (primarily CIP-related costs and transfers out to
capital projects) and revenue was lower than forecasted (primarily capacity fee revenue).
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Figure 6: Wastewater Collection Utility Year-End Reserves Levels, FY 2018 to FY 2030
$14
$12
$10 Rate Stabilization
$8
CIP Reappropriations &
Commitments$6
CIP Reserve
$4
Operations Reserve
$2
$0
Fiscal Year
Note: Operations Reserve shown with a minimum balance of $0. The Wastewater Collection Utility borrowed $3 million in a
short-term loan from the Fiber Optics Utility in FY 2024 to cover cash needs and will repay the loan in FY 2026.
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actuals Projection
$
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*
Table 7: Operations, Rate Stabilization and CIP Reserves Starting and Ending Balances,
Revenues, Transfers To/(From) Reserves, Expenses, Capital Program Contribution To/(From)
Reserves, and Operations Reserve Guideline Levels for FY 2025 to FY 2030 ($000)
* The Wastewater Collection Utility borrowed $3 million in a short-term loan from the Fiber Optics Utility in FY 2024 and this
covered the cash needs of the utility. The Wastewater Collection Utility will repay the loan in FY 2026.
Proposed Rates
The current rates were effective July 1, 2024, when the City increased sewer rates by 15%. To
align revenues with costs, CPAU proposes to increase overall rates by 20% in FY 2026, followed
by 17% in FY 2027, 15% in FY 2028, and 5% in both FY 2029 and FY 2030.
CPAU has three sewer rate schedules applicable to current customers: one for residential
customers (S-1), one for non-residential customers (other than restaurants) (S-2), and one for
restaurants (S-6). Table 8 below summarizes the current and proposed rates for all customer
classes.
Raftelis Financial Consultants, Inc. completed a cost of service (COS) study for the Wastewater
Collection Utility in 2021. Staff calculated the revenue increases needed for the Wastewater
Collection Utility based on projected revenue and expenses to determine the proposed rates
across customer classes.
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Table 8: Current and Proposed Sewer Rates
ChangeCurrent
(as of 7/1/2024)
Proposed
(effective 7/1/2025)$%
Monthly Service Charges ($/Month)
S-1 (Residential)Service Charge $ 55.93 $67.11 $ 11.18 20%
Water Quantity Rates ($/CCF)
S-2
(Commercial)
Quantity Rates 10.44 12.52 2.08 20%
S-6 (Restaurant)Quantity Rates 15.58 18.69 3.11 20%
The proposed rates for the S-7 (Industrial Discharger) rate schedule are:
1) Collection System Operation, Maintenance, and Infiltration Inflow: $6.21 per 100 cubic
feet of metered water use.
2) Advanced Waste Treatment Operations and Maintenance Charge: $2.48 per 100 cubic
feet of metered water use
3) $304.18 per 1000 pounds (lbs) of COD (Chemical Oxygen Demand)
4) $733.40 per 1000 lbs of SS (Suspended Solids)
5) $5,067.70 per 1000 lbs of NH3 (Ammonia)
6) $22,233.94 per 1000 lbs of toxics (chromium, copper, cyanide, lead, nickel, silver, and zinc)
Bill Impacts
In FY 2026, residential customers will experience an 20% increase in bills. Commercial and
Restaurant customers bill impacts will vary due to each customer’s utilization of the system. Table
9 below shows the bill impact of the proposed FY 2026 rate changes (effective 7/1/2025) for the
typical customers:
Table 9: Bill Impact of Proposed Sewer Rate Changes ($/Month)
ChangeCurrent
(as of 7/1/2024)
Proposed
(effective 7/1/2025)$%
S-1 (Residential)$ 55.93 $ 67.11 $11.18 20%
S-2 (Commercial) - 14 CCF 146.16 175.28 29.12 20%
S-6 (Restaurant) - 38 CCF 592.04 710.22 118.18 20%
Bill Comparisons/Competitiveness
Table 10 shows the monthly sewer bills for residential customers compared to what they would
be in surrounding communities. The average monthly sewer bill for a Palo Alto single family
residential customer is $55.93 at current rates, which is lower than four of the six neighboring
communities. These communities are the same six that Palo Alto compares itself to in the annual
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budget across Water, Wastewater, Gas, and Electric industries. In the following tables, “Menlo
Park” refers to the West Bay Sanitary District.
The cities of Mountain View and Los Altos are RWQCP partners. Sewage from Menlo Park and
Redwood City is treated by Silicon Valley Clean Water where some plant upgrades, have been
completed and others are yet to be implemented. Santa Clara customers are served by the San
Jose-Santa Clara Regional Wastewater Facility, which is still working on necessary facility
upgrades. In contrast, plant upgrades at the Hayward Water Pollution Control Facility have not
yet begun. Each of the plants are at different stages of rebuilding.
Table 10: Residential Monthly Equivalent Sewer Bill Comparison, Compared to Neighboring
Communities at Current Rates ($/Month)
Neighboring CommunitiesPalo Alto Neighboring
Community
Average
Menlo
Park
Redwood
City
Santa
Clara
Mountain
View
Los
Altos Hayward
55.93 70.40 114.25 97.74 52.37 54.60 59.23 44.19
Table 11 compares the sewer bills for two classes of non-residential customers to what they
would be under surrounding communities’ rate schedules. Note that other communities often
have specific rates for industrial customers that discharge high intensity wastewater, such as food
processors or chemical or electronics manufacturers, but Palo Alto does not currently have any
customers that require these special rates. The estimate of Palo Alto commercial and restaurant
monthly sewer bills are competitive against the neighboring community average, assuming
neighboring communities do not increase sewer rates. The monthly bill comparison assumes 14
CCF of water for general commercial customers and 38 CCF of water for restaurants.
Table 11: Non-Residential Monthly Equivalent Sewer Bill Comparison, Compared to
Neighboring Communities at Current Rates ($/Month)
Neighboring CommunitiesPalo Alto Neighboring
Community
Average
Menlo
Park
Redwood
City
Santa
Clara
Mountain
View
Los
Altos Hayward
General
Commercial 146.16 129.35 154.70 157.59 92.54 167.44 103.03 100.80
Restaurant 592.04 639.73 884.26 1065.51 608.38 538.08 279.67 462.46
Alternative
Staff developed an alternative rate trajectory of 16% annually in FY 2026 and FY 2027, 15% in FY
2028, 12% in FY 2029, and 8% in FY 2030. Under this alternative, the $3.5 million Treatment
Authorized Amount for Future Minor Capital for Palo Alto, described in detail in the Wastewater
Treatment Costs section, is collected from customers over ten years instead of the originally
proposed four years. This adjustment reduces the FY 2026 rate increase from 20% to 16%. The
added risk of this alternative is that the RWQCP could incur the costs up to the outstanding
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amount of Treatment Authorized Amount for Future Minor Capital and charge the Wastewater
Collection Utility at any time. By collecting these funds from customers over ten years instead of
over four years, there would be approximately $1 million less revenue available in FY 2026 to pay
for these charges. If the RWQCP charges the Wastewater Collection Utility for additional minor
CIP projects, the Operations Reserve, which is currently at a very low level, would need to absorb
these costs or the Wastewater Collection Utility would need to explore additional loan funding.
Additionally, the Operations Reserve is projected to be below the risk assessment level in FY 2026
and projected to be restored to above the risk assessment level by FY 2028 for the alternative,
one year later than the 20% proposal, thereby, carrying additional risks. To address this risk, if
Council prefers the alternate rate trajectory, staff recommends Council approve an additional
short-term loan in FY 2025 from the Fiber-Optics Utility of up to $2.5 million, the projected risk
assessment level (see Table 6). Staff would evaluate at the end of the fiscal year whether any
loan is necessary and re-evaluate next year depending on the actual results in FY 2025 and return
to Council with any new requests in for FY 2026.
Table 12, Figure 7, and Figure 8 show the rate increases, revenues and expenses, and operations
reserve level for the alternative from FY 2026 to FY 2030.
Table 12: Projected Rate Increases from FY 2026 to FY 2030 (Alternative)
Figure 7: Wastewater Collection Utility Expenses, Revenues and Rate Changes
Actual Costs through FY 2024 and Projections through FY 2030 (Alternative)
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20
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actuals Projection
Figure 8: Operations Reserve Adequacy (Alternative)
14
12
Reserve Maximum
10
Reserve Target
8
6
Reserve Minimum
4 Risk Assessment
2
0
Fiscal Year
Reserve (Year-End)
Next Steps
The City Council will consider adopting the financial forecast and rate adjustments as part of the
FY 2026 budget review and adoption process in June 2025. If Council approves the proposed rate
changes, the rates will become effective July 1, 2025.
FISCAL/RESOURCE IMPACT
Based on the proposed rate increase as shown, the estimated revenue impacts in FY 2026
would be an increase of $4.9 million in the Wastewater Collection Fund. Utility rate increases
impact the general fund because the City is a utilities customer. The impact to the general fund
from the proposed rate increases is a $0.02 million expense increase.
POLICY IMPLICATIONS
The proposed Wastewater Collection Utility rate adjustments are consistent with Council-
adopted Reserve Management Practice (Attachment E) and were developed using a cost-of-
service study and methodology consistent with the California constitution and industry-accepted
cost of service principles. As noted in the Reserves Management Practices, if reserves fall below
the minimum guidelines, Council approval is required for a rate plan that requires more than one
year to return reserves to within guideline levels. This staff report serves as the required plan.
STAKEHOLDER ENGAGEMENT
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21
On December 3, 20243, staff discussed the preliminary rate proposals at the Finance Committee
meeting. Finance Committee members expressed the importance of staff sharing information
about other treatment plants and other utility rate increases and one Committee member
questioned whether the reserve guideline levels are correct or whether we can have lower
reserve levels.
On December 4, 20244, staff discussed the preliminary rate proposals at the UAC meeting. UAC
Commissioners requested more information on how other cities bill wastewater, and on the debt
of the wastewater utility and the cost drivers of the rate increases, particularly in the collection
system. This report includes more detail regarding debt of the wastewater utility and the cost
drivers for the collection system. How other cities bill wastewater is a complex research project
that is not currently in staff’s workplan. UAC Commissioners requested an additional five years
of historical data on the charts. If time and resources permit, that information will be included in
the accompanying presentation. UAC Commissioners asked a question about the nitrogen
discharge requirements other Bay Area wastewater treatment plans are facing. Karin North,
Assistant Director of Public Works explained that all treatment plants have a new Nutrient
Watershed Permit adopted by the State this year.
Additional feedback from the UAC and Finance Committee meetings in 2025 will be incorporated
in the financial forecast and included in the proposal presented to City Council in June 2025
during the budget adoption process.
Attachment E contains examples of CPAU’s communication and outreach methods including the
use of the Utilities website, utility bill inserts, messaging on utility bills, and MyCPAU online
account management platform, email newsletters, print and digital ads in local publications,
social media, and community messaging platforms.
ENVIRONMENTAL REVIEW
The UAC’s review and recommendation to the Finance Committee on the FY 2026 Wastewater
Collection Utility financial forecast and rate adjustments does not meet the California
Environmental Quality Act’s definition of a project, pursuant to Public Resources Code Section
21065, thus no environmental review is required.
ATTACHMENTS:
3 December 3, 2024 Finance Committee Meeting, Staff Report
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=64761 , Minutes
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=39017 , Video
https://www.youtube.com/watch?v=-tshOdaDA3A%3Ffeature%3Dshare
4 December 4, 2024 Utilities Advisory Commission, Staff Report
https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=d7cd6030-1d05-412e-a96b-cabd33557bc1,
Minutes https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=41244 , Video
https://www.youtube.com/watch?v=tfznidSYXiU%3Ffeature%3Dshare
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22
Attachment A: FY26 Wastewater Resolution
Attachment B: FY26 Wastewater Rate Schedules
Attachment C: FY26 Wastewater Collection Utility and CIP Financial Details
Attachment D: FY26 Wastewater Reserve Management Practices
Attachment E: FY26 Wastewater Communications Plan and Samples
APPROVED BY:
Kiely Nose, Interim Director of Utilities
Staff: Lisa Bilir, Senior Resource Planner
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Attachment A
* NOT YET APPROVED *
6056919
Resolution No.
Resolution of the Council of the City of Palo Alto Approving the
FY 2026 Wastewater Collection Utility Financial Forecast, and Amending Rate
Schedules S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial
Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and
Disposal) and S-7 (Commercial Wastewater Collection and Disposal – Industrial
Discharger), and Repealing Rate Schedules S-3 (Industrial Waste Laboratory and
Analysis Charges) and S-4 (Hauled Liquid Waste Charges)
R E C I T A L S
A. Each year the City of Palo Alto (“City”) assesses the financial position of its utilities with the
goal of ensuring adequate revenue to fund operations. This includes making long-term
projections of market conditions, the physical condition of the system, and other factors
that could affect utility costs, and setting rates adequate to recover these costs. The City
does this with the goal of providing safe, reliable, and sustainable utility services at
competitive rates. The City adopts Financial Forecasts or Plans to summarize these
projections.
B. The City uses reserves to protect against contingencies and to manage other aspects of its
operations, and regularly assesses the adequacy of these reserves and the management
practices governing their operation. The status of utility reserves and their management
practices are included in Reserves Management Practices and Financial Forecast attached
to and made a part of the staff report presented to the City Council.
C. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the City of
Palo Alto may by resolution adopt rules and regulations governing utility services, fees and
charges.
D. On June 16, 2025, the City Council held a full and fair public hearing regarding the proposed
rate increase and considered all protests against the proposals.
E. As required by Article XIII D, Section 6 of the California Constitution and applicable law,
notice of the June 16, 2025 public hearing was mailed to all City of Palo Alto Utilities
wastewater customers by May 2, 2025.
F. The City Clerk has tabulated the total number of written protests presented by the close of
the public hearing, and determined that it was less than fifty percent (50%) of the total
number of customers and property owners subject to the proposed wastewater rate
amendments, therefore a majority protest does not exist against the proposal.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council hereby adopts the Reserves Management Practices and FY
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Attachment A
* NOT YET APPROVED *
6056919
2026 Financial Forecast attached to and made a part of the staff report presented to the
City Council.
SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule S-1 (Residential Wastewater Collection and Disposal) is hereby amended to
read as attached and incorporated. Utility Rate Schedule S-1, as amended, shall become
effective July 1, 2025.
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-2 (Commercial Wastewater Collection and Disposal) is hereby amended to read as
attached and incorporated. Utility Rate Schedule S-2, as amended, shall become effective July
1, 2025.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-6 (Restaurant Wastewater Collection and Disposal) is hereby amended to read as
attached and incorporated. Utility Rate Schedule S-6, as amended, shall become effective July
1, 2025.
SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger) is
hereby amended to read as attached and incorporated. Utility Rate Schedule S-7, as amended,
shall become effective July 1, 2025.
SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-3 (Industrial Waste Laboratory and Analysis Charges) is hereby repealed, effective
July 1, 2025.
SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-4 (Hauled Liquid Waste Charges) is hereby repealed, effective July 1, 2025.
SECTION 8. The Council finds that the revenue derived from the wastewater rates
approved by this resolution do not exceed the funds required to provide wastewater service,
and the revenue derived from the adoption of this resolution shall be used only for the
purposes set forth in Article VII, Section 2, of the Charter of the City of Palo Alto.
SECTION 9. The Council finds that the fees and charges adopted by this resolution are
charges imposed for a specific government service or product provided directly to the payor
that are not provided to those not charged, and do not exceed the reasonable costs to the
City of providing the service or product.
//
//
//
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Attachment A
* NOT YET APPROVED *
6056919
SECTION 10. The Council finds that the adoption of this resolution approving the FY 2026
Wastewater Collection Utility Financial Forecast and Reserve Management Practices does not
meet the California Environmental Quality Act’s definition of a project under Public Resources
Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative
governmental activity which will not cause a direct or indirect physical change in the
environment, and therefore, no environmental review is required. The Council finds that the
adoption of this resolution changing Wastewater collection rates to meet operating expenses,
purchase supplies and materials, meet financial reserve needs and obtain funds for capital
improvements necessary to maintain service is not subject to the California Environmental
Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14
of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all
attachments presented to Council, the Council incorporates these documents herein and finds
that sufficient evidence has been presented setting forth with specificity the basis for this
claim of CEQA exemption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
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RESIDENTIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-1-1 Effective 7-1-20254
dated 7-1-20243 Sheet No S-1-1
A. APPLICABILITY:
This schedule applies to each Occupied Domestic Dwelling unit.
B.TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wastewater Service.
C. RATES:
Per Month
Each Occupied Domestic Dwelling unit ................................................................................
$55.9367.11
D.SPECIAL NOTES:
1.Any dwelling unit being individually served by a Water, Gas, or Electric Meter will be
considered continuously occupied.
2.For two or more Occupied Domestic Dwelling units served by one Water Meter, the
monthly Wastewater charge will be calculated by multiplying the current Wastewater rate
by the number of dwelling units.
3.Each developed separate lot shall have a separate service lateral to a sanitary main or
manhole.
{End}
Attachment B Item #3
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COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-2-1 Effective 7-1-20254
dated 7-1-20243 Sheet No S-2-1
A. APPLICABILITY:
This schedule applies to all commercial establishments other than those served under Utility Rate
Schedule S-1 (Residential Wastewater Collection and Disposal), Rate Schedule S-6 (Restaurant
Wastewater Collection and Disposal) or Rate Schedule S-7 (Commercial Establishments
Wastewater Disposal – Industrial Discharger). B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides Wastewater Service. C. RATES:
Quantity Rate, per 100 cubic feet (See Section D.1) .......................................................... $12.520.44 D. SPECIAL NOTES: 1. The monthly charge for the quantity rate set forth in Section C of this rate schedule will be
based upon the average Water usage for the months of January, February and March, and
applied in the following July. If a Water Meter is identified as exclusively serving
irrigation landscaping, such Meter will be exempted from Wastewater charge calculations.
Customers without an applicable usage history will be rebuttably presumed to have usage
of 4.8 ccf per month until such time as such usage may reasonably be established by the
City of Palo Alto Utilities Department. 2. The City of Palo Alto Utilities Department may require Wastewater Metering facilities, in
which case Service will be governed by terms of a special agreement between the City and
the Customer.
{End}
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RESTAURANT WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-6
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-6-1 Effective 7-1-20254
dated 7-1-20243 Sheet No S-6-1
A. APPLICABILITY:
This schedule applies to all restaurants.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wastewater Service.
C. RATES:
Quantity Rates, per 100 cubic feet of monthly metered Water usage ...................................$
18.695.58
D. SPECIAL NOTES: 1. The City of Palo Alto Utilities Department may require Wastewater Metering facilities, in
which case Service will be governed by terms of a special agreement between the City and
the Customer.
{End}
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COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL
– INDUSTRIAL DISCHARGER
UTILITY RATE SCHEDULE S-7
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-7-1 Effective 7-1-20254
dated 7-1-20243 Sheet No S-7-1
A. APPLICABILITY:
This schedule applies to any establishment requiring sampling of industrial discharges in excess
of 25,000 gallons per day, or special discharge monitoring, as defined in Rule 23, Section C.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wastewater Service.
C. RATES:
1. Collection System Operation, Maintenance, and Infiltration Inflow:
$ 6.215.18 per 100 cubic feet of metered water use.
2. Advanced Waste Treatment Operations and Maintenance Charge:
$ 2.4807 per 100 cubic feet of metered water use
3. $304.18253.49 per 1000 pounds (lbs) of COD (Chemical Oxygen Demand)
4. $ 733.40611.17 per 1000 lbs of SS (Suspended Solids)
5. $ 5,067.704,223.09 per 1000 lbs of NHRR3RR (Ammonia)
6. $ 22,233.9418,528.29 per 1000 lbs of toxics (chromium, copper, cyanide, lead, nickel, silver,
and zinc) D. SPECIAL NOTES: 1. Water usage will be determined as defined in Rule 23, Section C. If a Water Meter is
identified as exclusively serving irrigation landscaping, such Meter will be exempted from
Wastewater charge calculations. 2. The City of Palo Alto Utilities Department may require Wastewater Metering facilities, in
which case Service will be governed by terms of a special agreement between the City of
Palo Alto and the Customer. 3. Charges for large discharges will be determined on the basis of sampling as outlined in
Utilities Rule 23, Section C. However, for purposes of arriving at an accurate flow
estimate, discharge Meters, if installed, can be utilized to measure outflow for billing
purposes. Annual charges will be determined and allocated monthly for billing purposes.
{End}
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Attachment C
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Attachment C
Wastewater Collection Utility Capital Improvement Program (CIP) Financial Details
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Attachment D
WASTEWATER COLLECTION UTILITY RESERVES MANAGEMENT PRACTICES
The following reserves management practices shall be used when developing the Wastewater
Collection Utility Financial Plan:
Section 1. Definitions
a) “Financial Planning Period” – The Financial Planning Period is the range of future fiscal
years covered by the Financial Plan. For example, if the Financial Plan delivered in
conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015
to FY 2019 would be the Financial Planning Period.
b) “Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers
to the Utility’s Unrestricted Net Assets.
c) “Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets
as the difference between its assets and liabilities.
d) “Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital
assets (net of related debt) or restricted for debt service or other restricted purposes.
Section 2. Reserves
The Wastewater Collection Utility’s Fund Balance is reserved for the following purposes:
a) For existing contracts, as described in Section 3 (Reserve for Commitments)
b) For operating and capital budgets re-appropriated from previous years, as described in
Section 4 (Reserve for Re-appropriations)
c) For cash flow management and contingencies related to the Wastewater Collection
Utility’s Capital Improvement Program (CIP), as described in Section 5 (CIP Reserve)
d) For rate stabilization, as described in Section 6 (Rate Stabilization Reserve)
e) For operating contingencies, as described in Section 7 (Operations Reserve)
f) Any funds not included in the other reserves will be considered Unassigned Reserves and
shall be returned to ratepayers or assigned a specific purpose as described in Section 8
(Unassigned Reserves).
Section 3. Reserve for Commitments
At the end of each fiscal year the Reserve for Commitments will be set to an amount equal
to the total remaining spending authority for all contracts in force for the Wastewater
Collection Utility at that time.
Section 4. Reserve for Re-appropriations
At the end of each fiscal year the Reserve for Re-appropriations will be set to an amount
equal to the amount of all remaining capital and non-capital budgets, if any, that will be re-
appropriated to the following fiscal year in accordance with Palo Alto Municipal Code
Section 2.28.090.
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Attachment D
Section 5. CIP Reserve
The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for
capital contingencies. Staff will manage the CIP Reserve according to the following
practices:
a) The following guideline levels are set forth for the CIP Reserve. These guideline levels are
calculated for each fiscal year of the Financial Planning Period and approved by Council
Resolution.
2
b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and
the Reserve for Commitments when funds are added or removed from to that reserve as
a result of a change in contractual commitments related to CIP projects. Any other
additions to or withdrawals from the CIP reserve require Council action.
c) Minimum Level:
i) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present
a plan to the City Council to replenish the reserve. The plan shall be delivered by the
end of the following fiscal year, and shall, at a minimum, result in the reserve reaching
its minimum level by the end of the next fiscal year. For example, if the CIP Reserve is
below its minimum level at the end of FY 2017, staff must present a plan by June 30,
2018 to return the reserve to its minimum level by June 30, 2019. In addition, staff
may present, and the Council may adopt, an alternative plan that takes longer than
one year to replenish the reserve, or that does so in a shorter period of time.
d) Maximum Level: If there are funds in this reserve in excess of the maximum level staff
must propose in the next Financial Plan to transfer these funds to another reserve, return
the funds to ratepayers, or designate a specific use of the funds for CIP investments that
will be made by the end of the next Financial Planning Period. Staff may also seek City
Council to approve holding funds in this reserve in excess of the maximum level if they
are held for a specific future purpose related to the CIP.
Section 6. Rate Stabilization Reserve
Funds may be added to the Rate Stabilization Reserve by action of the City Council and held
to manage the trajectory of future year rate increases. Withdrawal of funds from the Rate
Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization
Reserve at the end of any fiscal year, any subsequent Wastewater Collection Utility
Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the
Financial Planning Period.
1 Each month is calculated based upon 1/12 of the annual budget.
2 For example, in the Financial Plan for FY 2022, the 48 month period to use to derive the
annual average is FY 2022 through FY 2025. In the FY 2023 Financial Plan, the 48 month period
to use to derive the annual average would be FY 2023 through FY 2026 etc.
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Attachment D
Section 7. Operations Reserve
The Operations Reserve is used to manage normal variations in costs and as a reserve for
contingencies. Any portion of the Wastewater Collection Utility’s Fund Balance not included
in the reserves described in Section 3-Section 6 above will be included in the Operations
Reserve unless this reserve has reached its maximum level as set forth in Section 7(d)
below. Staff will manage the Operations Reserve according to the following practices:
a) The following guideline levels are set forth for the Operations Reserve. These guideline
levels are calculated for each fiscal year of the Financial Planning Period based on the
levels of Operations and Maintenance (O&M) and commodity expense forecasted for that
year in the Financial Plan.
b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations
Reserve are lower than the minimum level set forth above, staff shall present a plan to
the City Council to replenish the reserve. The plan shall be delivered within six months of
the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its
minimum level by the end of the following fiscal year. For example, if the Operations
Reserve is below its minimum level at the end of FY 2014, staff must present a plan by
December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In
addition, staff may present, and the Council may adopt, an alternative plan that takes
longer than one year to replenish the reserve.
c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower
than the target level, any Financial Plan created for the Wastewater Collection Utility shall
be designed to return the Operations Reserve to its target level within four years.
d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no
funds may be added to this reserve. Any further increase in the Wastewater Collection
Utility’s Fund Balance shall be automatically included in the Unassigned Reserve
described in Section 8, below.
Section 8. Unassigned Reserve
If the Operations Reserve reaches its maximum level, any further additions to the
Wastewater Collection Utility’s Fund Balance will be held in the Unassigned Reserve. If there
are any funds in the Unassigned Reserve at the end of any fiscal year, the next Financial Plan
presented to the City Council must include a plan to assign them to a specific purpose or
return them to the Wastewater Collection Utility ratepayers by the end of the first fiscal year
of the next Financial Planning Period. For example, if there were funds in the Unassigned
Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016 through FY
2020, the Financial Plan shall include a plan to return or assign any funds in the Unassigned
Reserve by the end of FY 2016. Staff may present an alternative plan that retains these funds
or returns them over a longer period of time.
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Attachment E
WASTEWATER COLLECTION UTILITY COMMUNICATIONS PLAN/SAMPLES
In FY 2026, the communications strategy for the Wastewater Collection Utility will address the
following primary areas: recently implemented cost containment measures, cost drivers for rate
changes including increasing wastewater treatment costs, maintenance and operations related
to safety, reserve balances, and how these necessary activities impact the rates this year.
Communication about wastewater rate adjustments will highlight the important infrastructure
upgrades that are occurring at the Regional Water Quality Control Plant (RWQCP) as well as
capital improvement projects (CIP) to improve our Wastewater Collection Utility services.
Financial reserves are also below minimum guidelines due to higher capital improvement
program costs, higher operating expenses, lower revenue than forecasted, and higher transfers
out to capital projects. Some projects will be deferred as the fund increases revenues to a
sustainable level.
The City of Palo Alto Utilities (CPAU) communication methods include use of the utilities website,
utility bill inserts, messaging on utility bills, MyCPAU online account management platform, email
newsletters, print and digital ads in local publications, social media, and community messaging
platforms. Staff update the utilities webpages with information on the progress of wastewater
projects to keep customers apprised of the status and accomplishments of capital improvement
projects. Customers can find project schedules, maps, overview of the work being done, and
project manager contact information at cityofpaloalto.org/utilityprojects.
An important communications topic for the Wastewater Collection Utility is avoiding sewer back-
ups due to FOG (fats, oil and grease), trash and other hazardous materials being dumped down
drains and toilets. These items can clog sewer lines, cause sewer overflows, and pollute San
Francisco Bay, and create a health and safety risk to humans. Safety topics are emphasized year-
round. Staff continue to educate customers about the utility’s gas-sewer line cross-bore
inspection program, including the importance of calling 811 before digging and contacting CPAU
prior to clearing sewer lines in the event of a sewer back-up.
While print materials and webpages feature prominently, CPAU is increasing the outreach
emphasis on more direct communication with customers, including through use of social
media, email newsletters, digital ads and videos. Staff attend community outreach events,
safety and emergency preparedness fairs, business and neighborhood meetings. CPAU
continually seeks out new opportunities to engage with the public to spread awareness about
important safety topics and inform the community about project improvements such as at the
RWQCP.
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Attachment E
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March 5, 2025 www.cityofpaloalto.org
Wastewater Collection Utility Financial Forecast and Proposed Rate Changes for FY 2026
Utilities Advisory Commission
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2
Wastewater Rate Projections
FY 2026 Projections
•Proposal: 20% rate increase in FY 2026, approximately $11/month increase for residential customers
•Alternative: 16% rate increase in FY 2026 scenario
Drivers
•Rebuild of regional treatment plant cost increases
•Personnel Cost-of-Living-Adjustment, merit increases, and filled vacancies
•Reserves depleted; need to restore reserves to within guideline range
Compared with Preliminary Rates
•Added additional vehicle replacement costs of about $100K to $450K annually
•Added about $0.35M-$0.40M annually beginning FY27 to the sewer CCTV program to perform condition
assessment in critical sections of the collection system and prioritize necessary sewer replacements
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3
From Silicon Valley Clean Water Long Range Financial Plan
With the proposed 20%
rate increase, Palo Alto’s
residential rate would
remain 5% below
neighboring community
average
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4.1%
-6.5%
11.1%
11.3%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Total 20% rate increase
Replenish Reserves $2.8 million
$2.3 million Treatment Authorized Amount for
Future Minor Capital (recover over 4 year span)
$0.5 million Collection Operations Reserve
Collection Operating Expenses $2.7 million
$1.3 million Salaries & Benefits more filled positions &
4% COLA and 5% merit step increases
$ 0.9 million Arastradero Creek Emergency Repairs
$ 0.6 million Vehicle Replacement
$ 0.2 million Allocated Charges
$ 0.1 million Crossbore & Mandatory Programs
-$0.4 million Debt Service & Other
Treatment $1.0 million
$ 0.7 million Planned Debt Service (Primary Sedimentation
Tank, Building Purchase Bond, Line of Credit)
$ 0.3 million Potential Increasein Flow Share,Chemicals,
Sludge Hauling, Lab Building Lease
Collection CIP -$1.6 million
Deferral of Lateral and Manhole Rehabilitations and Deferral
of 1 Mile Sewer Main Replacement in FY 2026
0%
4
FY 2026 Rate Increase Drivers
Calculation Notes:
•Rate increases based on projected FY 2026 revenues
apportioned by 4-year average of actual costs
•Rate increases apply to sales revenue; Revenue includes some
non-rate revenue.
•Last year, a 9% rate increase was forecasted
compared to this recommended 20% rate
increase
•11.3% of the recommended increase is to
replenish reserves (2% collection system,
9%) over a 4-year span
•Assumes deferral of 1 mile sewer main
replacement
•Reserve replenishment is a policy choice on
timing/risk
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5
Wastewater Cost and Revenue Projections
*FY25 Commitments and Reappropriations
reserves balances for Operations and Capital
Investment are anticipated to be utilized in
FY26 and FY27
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Reserve Minimum
Reserve Target
Reserve Maximum
Risk Assessment
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2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Actuals Projection
$
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Fiscal Year
Reserve (Year-End)
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Wastewater Operations Reserve Projections
Note: The Wastewater Collection Utility borrowed $3 million in a short-term loan from the Fiber Optics
Utility in FY 2024 to cover cash needs and will repay the loan in FY 2026 plus interest.
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Alternative FY 2026 Rate Projection
•Alternative: 16% rate increase in FY 2026, approximately $9/month increase for residential customers
•Assumes a 10-year reserve replenishment (instead of 4-year) for outstanding Treatment
Authorized Amount for Future Minor Capital
•Request Council approval of an additional loan of up to $2.5 million from the Fiber-Optics
Utility to cover the additional risk, this amount is equal to the risk assessment level of the
wastewater operations reserve
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Recommendation
Staff Recommends the Utilities Advisory Commission Recommend that the
City Council Adopt a Resolution:
•Approving the Fiscal Year 2026 Wastewater Collection Utility Financial
Forecast; and
•Amending Rate Schedules (Attachment B) effective July 1, 2025:
•S-1 (Residential Wastewater Collection and Disposal)
•S-2 (Commercial Wastewater Collection and Disposal)
•S-6 (Restaurant Wastewater Collection and Disposal), and
•S-7 (Commercial Wastewater Collection and Disposal – Industrial
Discharger); and
•Repealing Rate Schedules effective July 1, 2025:
•S-3 (Industrial Waste Laboratory and Analysis Charges)
•S-4 (Hauled Liquid Waste Charges)
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Page 1 of 2
Utilities Advisory Commission
Staff Report
From: Kiely Nose, Interim Director of Utilities
Lead Department: Utilities
Meeting Date: March 5, 2025
Report #: 2502-4139
TITLE
Consideration of the Utilities Advisory Subcommittee’s One Water Advocacy Letter and a
Commissioner’s Proposed Bay Area Water Supply & Conservation Agency (BAWSCA) Advocacy
Letter and Potential Recommendation to City Council
RECOMMENDATION
At the behest of UAC Commissioners, review two letters: 1) Utilities Advisory Subcommittee’s
One Water Advocacy Letter and 2) Commissioner Tucher’s Proposed Bay Area Water Supply &
Conservation Agency (BAWSCA) Advocacy Letter. Recommend any adjustments to the letters
and any potential direction on a recommendation to Council.
BACKGROUND/ANALYSIS
One Water UAC Letter
At the January 7, 2025 UAC meeting, staff recommended that the UAC recommend City Council
accept the One Water Plan. The UAC did not take any action. The UAC expressed a desire to
provide additional information to the City Council regarding water supply and conservation
planning. As a result, as discussed by the Commissioners, three commissioners (Gupta, Mauter
and Phillips) were appointed to draft the letter for the full commission’s consideration.
Upon further review and consideration, staff plans to present the One Water Plan to the
Council as an informational item rather than an action item. The One Water plan, a key action
item in the Council approved Sustainability & Climate Action Plan (S/CAP), studies the impacts
of severe water shortages including one that our water supplier (SFPUC) has identified as a
worst-case scenario. No investments in water supply alternatives are being recommended at
this time and completion of this analysis concludes the action item in the S/CAP. This One
Water analysis is a framework to evaluate all potential options for future water supply
alternatives including both local and/or regional projects.
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Page 2 of 2
Staff recommends that any communications from the UAC on this topic will be included as an
attachment to the information item transmitted to the City Council. The full One Water Report
may be found here1: https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=61727
Advocacy and Recommendation to the City Council regarding SFPUC and BAWSCA
On December 4, 2024, representatives from the Bay Area Water Supply and Conservation
Agency (BAWSCA) and the San Francisco Public Utilities Commission (SFPUC) presented to the
Utilities Advisory Commission (UAC) and addressed their questions. The UAC expressed interest
in receiving more details from the SFPUC on their water supply planning activities.
Consequently, Commissioner Tucher has drafted an additional letter specifically regarding
follow-up with BAWSCA and SFPUC for the full UAC’s consideration.
NEXT STEPS
A supplemental report will be published on March 3, 2025 with the two drafted letters.
1 UAC January 7, 2025, Staff Report 2407-3234;
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=61727
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City Council
Supplemental Report
From: Kiely Nose, Interim Director of Utilities
Meeting Date: March 5, 2025
Item Number: 4
Report #:2503-4253
TITLE
Supplemental Information: Consideration of the Utilities Advisory Subcommittee’s One Water
Advocacy Letter and a Commissioner’s Proposed Bay Area Water Supply & Conservation Agency
(BAWSCA) Advocacy Letter and Potential Recommendation to City Council
BACKGROUND/ANALYSIS
Staff report 2502-4139 was included in the UAC's packet for the meeting on March 5, 2025. This
report transmits the two letters discussed for review and consideration:
1) Utilities Advisory Subcommittee’s One Water Advocacy Letter (Attachment A) and
2) Commissioner Tucher’s Proposed Bay Area Water Supply Conservation Agency
(BAWSCA) Advocacy Letter (Attachment B).
ATTACHMENTS
Attachment A: Utilities Advisory Subcommittee’s One Water Advocacy Letter
Attachment B: Commissioner Tucher’s Proposed Bay Area Water Supply & Conservation Agency
(BAWSCA) Advocacy Letter
APPROVED BY:
Kiely Nose, Interim Director of Utilities
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Memorandum: One Water Plan Review and Recommendations March XX, 2025
City of Palo Alto – Utilities Advisory Commission DRAFT
Page 1 of 4
MEMORANDUM (DRAFT)
TO: City Council, City of Palo Alto
FROM: Utilities Advisory Commission
DATE: March XX, 2025
SUBJECT: One Water Plan Review and Recommendations
The Utilities Advisory Commission (UAC) has completed its review of the One Water Plan (OWP) and rec-
ommends against acceptance of the plan at this time. The following sections outline our key concerns and
recommendations for moving forward.
The UAC’s decision not to approve the study, despite acknowledging the considerable staff time and re-
sources invested, stems from fundamental concerns about its analytical framework. Specifically, the meth-
odology and assumptions used in the plan could lead to potentially misleading conclusions about Palo
Alto’s water security options. The UAC is happy to meet with Council to discuss its concerns in more detail,
which are various. However, to help guide future water planning efforts, this memo focuses on our most
critical concerns, which we believe must be addressed to develop a robust and actionable water security
framework for Palo Alto: (1) the premise of the report and its recommendations relies on a 50% cut back
scenario that seems highly unlikely and must be validated, particularly by engagement with BAWSCA and
SFPUC; and (2) the conclusions are based on a weighted scoring scheme that is potentially misleading—
instead, the underlying metrics, such as dollar cost per acre-foot, should be directly presented to decision-
makers. In addition, the UAC provides several strategic recommendations for the city’s future planning ef-
forts.
Staff has reviewed this letter and agrees that investments in local water supply alternatives are not prudent
nor recommended at this time. Staff agrees that evolving demand projects and SFPUC supply reliability as-
sessments will be critical for continued water planning efforts and that regional partnership may, indeed,
prove to be most cost-effective if water supply reliability becomes an issue. The tool developed as part of
the OWP effort may be modified in subsequent analysis to address the UAC’s concerns regarding the scor-
ing methodology.
REPORT ISSUES
In this memo, the UAC focuses on two critical issues with the OWP report: (1) the 50% cutback scenario
underlies the premise and recommendations of the report, but this scenario seems unlikely and should be
validated before using it for water supply planning; and (2) the weighted scoring scheme for the alternatives
is potentially misleading.
First, the OWP report plans for a case in which there is a 50% reduction in regional water supply, and it uses
this scenario as a key metric in its portfolio evaluation.1 This assumption warrants further scrutiny and
1 E.g., OWP Report at ES-8 (“Reliability is scored based on results of the dry year supply analysis for each portfolio
using the supply gap expressed in afy during a 50 percent reduction in water deliveries to Palo Alto from the RWS.”),
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Memorandum: One Water Plan Review and Recommendations March XX, 2025
City of Palo Alto – Utilities Advisory Commission DRAFT
Page 2 of 4
validation, particularly concerning demand across the broader system, implementation of Bay Delta Plan
regulations, and policy and management decisions about storage. Members of the public have noted that
historical analysis of Tuolumne River flows over the past 1100 years using tree ring data suggests that the
level of drought and demand growth that would require this level of cutback is extremely improbable. During
the recent 2001-2022 California mega-drought, SFPUC was able to add to its reservoirs in 15 of the 22 years
due to its robust water rights. Second, the Long Term Vulnerability Assessment (LTVA) cosponsored by the
SFPUC found no drought in 25,000 years of stochastic modeling that approached the severity of the design
drought scenario, and the assessment found no clear adverse impacts from climate change through 2070.
Third, the longest historical drought (1471-1483) would have left 40% of system storage remaining at cur-
rent demand levels. Fourth, probability analysis suggests the design drought scenario has an exceptionally
rare return period—potentially one in several hundred thousand years. The UAC also has concerns with the
demand forecasts, noting that BAWSCA’s forecasts have consistently over-estimated future regional water
demand, often by substantial amounts. Given that this 50% cut back assumption during drought drives
many of the report’s conclusions about needed infrastructure investments and policy changes, a val-
idated and nuanced analysis of potential supply scenarios informed by better planning targets from
BAWSCA and SFPUC would significantly strengthen the plan’s utility for decision-making.
While we understand Staff’s desire to ensure planning processes align with SFPUC’s policies and forecasts,
the 50% cutback scenario should not be used in the City’s planning framework without further validation.
We recommend that the City engage with SFPUC and BAWSCA to refine supply and demand projections so
that Palo Alto’s water planning incorporates realistic cutback assumptions. Better cutback assumptions
will provide actional guidance for both near-term and long-term decision-making.
Second, the OWP’s evaluation methodology also raises significant technical concerns about how different
water supply options are compared and ranked. The plan uses a weighting scheme that normalizes various
criteria (like unit cost, reliability, and environmental benefits) to a 1-5 scale and then applies weighted scor-
ing to compare portfolios. This approach, however, violates the Independence of Irrelevant Alternatives
principle—meaning that the relative ranking between two options can change based solely on the charac-
teristics of an unrelated third option, even when nothing about the two options being compared has
changed. For example, changes in the cost of one portfolio could artificially alter the scoring and perceived
relative merits of other portfolios, even though their underlying costs and benefits remain exactly the same.
Instead of using this potentially misleading scoring system, we recommend that future evaluations present
the actual underlying metrics (such as dollar cost per acre-foot) directly to decision-makers, allowing for
transparent analysis of tradeoffs between different options.
* * *
Overall, while the OWP found that some alternatives were infeasible, helping save the city analysis time in
the future, adopting the OWP appears premature given current regional developments. SFPUC is just begin-
ning its own alternative water supply planning process, with a focus on purified water projects. SFPUC’s
at 2-8 (“Based upon the City’s forecasted water demand presented in the City’s 2020 UWMP and projections of wa-
ter supply availability provided by SFPUC at the time, the City anticipates the need to implement water use reduc-
tions of approximately 50 percent from pre-drought usage levels in dry years post Bay-Delta Plan implementation.”).
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Memorandum: One Water Plan Review and Recommendations March XX, 2025
City of Palo Alto – Utilities Advisory Commission DRAFT
Page 3 of 4
recently approved 10-year capital improvement plan includes $260 million for alternative water supply pro-
grams within its $3.16 billion total budget, and much of this planning remains in early stages. Furthermore,
public comment indicates that even under a worst-case scenario combining the Bay-Delta Plan flows with
the worst recorded drought, SFPUC could manage without requiring rationing or new water supplies, which
requires further study. More fundamentally, as highlighted in recent Commission discussions, while no in-
vestments are being recommended at this time, Palo Alto should avoid rushing into major alternative water
supply planning and investments without first having robust data, transparent and robust modeling, and
clear understanding of assumptions. This is particularly important given historical patterns of overestimat-
ing water demand and the need to carefully evaluate the policy, affordability, and regional growth implica-
tions of various supply options. The city should instead focus on supporting and engaging with regional ef-
forts through SFPUC and BAWSCA to comprehensively assess future water supply needs and approaches.
Thus, the UAC believes addressing the strategic issues outlined below would significantly strengthen the
city’s water planning approach. We recommend working closely with BAWSCA and SFPUC to develop and
validate more accurate cutback assumptions based on updated demand projections, refined drought sce-
nario planning, and adaptive infrastructure approaches that reflect actual system performance and current
climate science.
STRATEGIC CONSIDERATIONS
Several strategic considerations emerge from this review.
First, Palo Alto’s water security planning should reflect its position within the broader regional water system,
recognizing our role as a small consumer in a complex network. A comprehensive approach would examine
regional supply and demand patterns while incorporating trigger-based adaptive planning strategies—par-
ticularly important given increasing uncertainty in water supply conditions. The OWP, while it should not be
adopted, at least provided a start at assessing local and regional alternatives. While local resilience
measures like groundwater wells serve an important role, larger-scale solutions such as water reuse and
brackish water desalination may be most effectively pursued through regional collaboration due to econo-
mies of scale in treatment cost and the pre-existence of a regional water conveyance network. Local initia-
tives such as on-site non-potable reuse for commercial, multifamily, and even single-family residential
properties could complement these regional efforts. The city could consider developing staged policies and
incentives to advance these objectives.
Second, the financial aspects of water management deserve careful attention. Recent rate increases reflect
both SFPUC wholesale costs and investment in Palo Alto’s distribution infrastructure. The latter represents
essential maintenance to ensure system reliability and safety. As conservation efforts progress, the propor-
tion of fixed costs in water bills may increase—a trend that warrants thoughtful policy consideration. Higher
water bills have incentivized more conservation which will likely drive demand lower. This creates a chal-
lenging communication issue, as customers find it counterintuitive that rates continue to rise faster than
inflation despite increased conservation efforts.
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Memorandum: One Water Plan Review and Recommendations March XX, 2025
City of Palo Alto – Utilities Advisory Commission DRAFT
Page 4 of 4
Third, the OWP’s assessed water sources face various implementation challenges that affect their viability.
Some options, such as a quarter-billion-dollar desalination plant on the bay, are simply not realistic and
need not be pursued further. The regional trend toward indirect and direct potable reuse (IPR/DPR) repre-
sents one pathway forward, though successful implementation typically requires sustained public engage-
ment and education spanning decades. Palo Alto could play a constructive role in encouraging BAWSCA
and SFPUC to begin foundational public outreach efforts now if these sources are anticipated to enter our
water supply in the next twenty years.
Finally, continued engagement with regional partners, particularly BAWSCA, remains important. Early co-
ordination with BAWSCA’s new leadership could help advance shared objectives, including refined demand
projections, stronger probabilistic assessment of appropriate design droughts under different climate sce-
narios, and development of adaptive infrastructure planning. The Council has a BAWSCA Director who can
ensure Palo Alto’s interests remain central to regional planning discussions, thereby reinforcing the need
for rigorous, data-driven approaches that align with the City’s strategic priorities. Furthermore, the UAC rec-
ommends that Council meet with the new BAWSCA CEO Thomas “Tom” Smegal as soon as possible to
emphasize these priorities.
CONCLUSION
The UAC encourages the City Council to consider these observations as it works with local and regional
partners to strengthen water security planning. The UAC stands ready to provide additional detail, clarifica-
tion, or support regarding any aspects of these recommendations. We would also like to thank Staff for their
thoughtful and supportive engagement on these issues.
Respectfully submitted,
Utilities Advisory Commission, City of Palo Alto
Greg Scharff, Chair
Meagan Mauter, Vice Chair
Rachel Croft
Utsav Gupta
Phil Metz
Robert Phillips
Chris Tucher
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DRAFT - UAC to Council
1 Both have been
consistently high, but what is the reason for using the higher Enterprise forecast in the projections you present and
use to determine water needs in the Alternative Water Supply Plan? We ask that SFPUC re-run its analysis based on
lower demand projections. One scenario we’d like to see would be based on the projections of SFPUC’s own Finance
Bureau, which we understand to be considerably lower than those of its so-called Water Enterprise. Another scenario
would be based on demand numbers that continue the downward trend of the last 25 years.
On the supply side, we understand that SFPUC projections are based on a “design drought” that is very conservative.
It’s our understanding that this design drought is based on the most severe six years of drought in recorded history,
then made more severe by grafting on data from the driest two-year period in recent history to create an eight-year
scenario that is much more severe than any drought over the past 1,000+ years based on observations and tree ring
data. We’d like to know SFPUC’s assessment of the likelihood of this design drought occurring? We’d like to
understand your projections based on different “design drought” scenarios. What if the SFPUC model assumes just
the most severe 6-year period? What if one year (the eighth year) is removed from the design drought?
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Regards ...
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Item No. 5. Page 1 of 2
Utilities Advisory Commission
Staff Report
From: Kiely Nose, Interim Utilities Director
Lead Department: Utilities
Meeting Date: March 5, 2025
Report #: 2501-4002
TITLE
Review and Recommend Utilities Advisory Commission FY 2025 – 2026 Work Plan for City
Council Approval
RECOMMENDATION
Staff recommends the Utilities Advisory Commission (UAC) to review, provide feedback, and
recommend City Council approval of the FY 2025 - 2026 Annual Work Plan.
BACKGROUND
In accordance with the 2020 City Boards, Commissions, and Committees Handbook, each Board
and Commission should prepare an annual work plan for proposal to the City Council by the
second quarter of the calendar year. The Council will review the work plan and provide
feedback annually at a dedicated City Council meeting. The annual report should include the
results of the prior year’s plan. When applicable, the City Council would like to see metrics of
community involvement and participation in meetings and activities included in the work plan.
Council expects Boards and Commissions to work on items in the approved workplan. In
addition, Council may refer additional items to the Boards and Commissions in response to new
developments. Boards and Commissions should refrain from expending their time and that of
the staff liaison on items that have not been approved by the City Council. If the Board or
Commission would like to add an issue for review after an annual workplan has been approved
by the City Council, a prompt request by the Board or Commission Chair to the City Council is
required and the item will then be addressed by the City Council as a whole.
ANALYSIS
Staff prepared attachment A, a draft UAC workplan for FY 2025-2026 based on standing items
for the Commission. In addition, Utilities Advisory Commissioners were surveyed for proposed
FY 2025-2026 priorities for the UAC to consider. Below are the responses received at the
publishing of this report, in no specific order. Upon development and approval of the UAC
workplan by the Commission, it will be brough forward to the City Council for review and
approval to ensure alignment of priorities and resources in Spring 2025.
Potential UAC Workplan Items received to date:
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Item No. 5. Page 2 of 2
•Emergency Preparedness: Examples that may be covered could include long term
power outages and wildfire mitigation plan
•Advocacy Letters: Examples that have been previously discussed: One Water Advocacy
Letter and Bay Area Water Supply & Conservation Agency Advocacy Letter [currently
agendized for March 2025 commission meeting]
Staff will issue an additional supplemental item with any additional feedback from
Commissioners by March 3, 2025 to support the UAC discussion and development of the
workplan.
City Council Priority Setting Process Status: On January 25, 2025, the City Council adopted its
priorities for 2025:
•Economic Development & Retail Vibrancy
•Climate Action and Adaptation & the Natural Environment Protection
•Implementing Housing Strategies for Social and Economic Balance
•Public Safety, Wellness & Belonging
As has been the City’s practice for the past few years, staff has followed the City Council
approval of its priorities by developing and recommending for City Council approval a set of
objectives to advance each priority throughout the calendar year. The City Council is scheduled
to review these objectives (68 recommended) and City Council workplans for 2025 at its
February 24, 2025 meeting, guiding and prioritizing resource allocation for 20251.
RESOURCE IMPACT
The UAC recommended workplan does not have an immediate fiscal impact; however,
resources may be needed to be allocated to implement workplan items the Commission wishes
to recommend. Opportunities to allocate resources to projects include the FY 2026 annual
budget process, with adoption scheduled for June 2025. In addition, the City Council may
amend the budget throughout the year.
ATTACHMENTS
Attachment A: DRAFT Utilities Advisory Commission FY 2025 – 2026 Workplan
AUTHOR/TITLE:
Kiely Nose, Interim Director of Utilities
Staff: Kaylee Burton, Utilities Administrative Assistant
1 City Council, February 24, 2025, Agenda Item #10;
https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=7064&meetingTemplateType=2&comp
iledMeetingDocumentId=13223
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Utilities Advisory Commission
2025-2026 Workplan
Staff Liaison: Kiely Nose, Interim Director of Utilities
Lead Department: Utilities
About the Commission The Utilities Advisory Commission (UAC) is charged with providing advice on long range planning and policy matters, acquisition,
development, and financial review of electric, gas and water resources; joint action projects with other public or private entities
which involve electric, gas or water resources; environmental implications of proposed electric, gas or water utility projects; and
conservation and demand management. Additionally, the UAC is charged with providing advice on the acquisition, development
and financial review of the dark fiber network and wastewater collection utilities. As a highly regulated industry, there may be
matters not listed below that will be presented to the UAC in accordance with current or future (local, state, or federal) legislative
requirements.
The Commission is composed of 7 members.
Terms are for 3 years and commence on the first meeting in April.
See Palo Alto Municipal Code (PAMC) Sections 2.23.010 (Membership), 2.23.030 (Term of Office), 2.23.040 (Officers),
2.23.050 (Purpose and Duties), and 2.23.060 (Meetings).
Current Commissioners •Greg Scharff (Chair)
•Meagan Mauter (Vice Chair)
•Phil Metz
•Rachael Croft
•Robert Phillips
•Utsav Gupta
•Chis Tucher
Mission Statement The purpose of the Utilities Advisory Commission shall be to advise the City Council on present and prospective
long-range planning, policy. major program, and project matters relating to the electric, gas, water, wastewater
collection, fiber optics utilities, and recycled water matters, excluding daily operations.
The Utilities Advisory Commission shall have the following duties:
•Advise the City Council on long-range planning and policy matters pertaining to:
Joint action projects with other public or private entities which involve, affect or impact the utilities;
Environmental aspects and attributes of the utilities;
•Water and energy conservation, energy efficiency, and demand side management; and Recycled water matters not
otherwise addressed in the preceding subparagraphs;
•Review and make recommendations to the City Council on the consistency with adopted and approved plans, policies, and
programs of any major utilities;
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•Formulate and review legislative proposals regarding the utilities, to which the city is a party, in which the city
has an interest, or by which the city may be affected;
•Review the utilities capital improvement programs, operating budgets and related reserves, rates, and the
recycled water program, budget, rate, and thereafter forward any comments and recommendations to the
finance committee or its successor;
•Provide advice upon such other matters as the City Council may from time to time assign.
The Utilities Advisory Commission shall not have the power or authority to cause the expenditure of city funds or to
bind the city to any written, oral, or implied contract.
The Utilities Advisory Commission may, subject to its City Council-approved bylaws and at the discretion of the City
Council, foster and facilitate engagement with the general public, not excluding representatives of commerce and
industry, in regard to the utility matters referred to in subsections above.
Prior Year
Accomplishments
Advanced Heat Pump Water Heater (HPWH) Pilot Program:
-Over 500 customers have installed a heat pump water heater using the City’s rebate, full service, or emergency replacement
program to-date, and the pace of installations is approximately 20% of annual water heater replacements.
Advanced Meter Infrastructure (AMI)
-21,492 gas customers have had completed installs
-18,035 water customers have had completed installs
-21,411 electric customers have had completed installs
Renewable Energy Credit (REC) Exchange Program
-Approved by Council on 12/12/2022 to continue the program and return to the UAC and Council in 2025
-Sold 161,900 PCC1 RECs and purchased 160,000 PCC3 RECs, yielding $10.86 million in net revenue for 2024
Fiber-to-the-Premises (FTTP)
-Began coordinating grid mod project with FTTP
-Identified and began addressing key challenges
-Pilot to align grid mod project with FTTP
-CEQA Initial Study for FTTP
Electric Grid Modernization (Grid Mod)
An Electrification Study was performed by a consultant with the goal of identifying any electric system upgrades needed
across the electric distribution system. The focus of the Study resulted recommendations for upgrades to line transformers,
feeder capacity, increasing the number of switches and connections on the system between feeders and substations, and
upgrading substation equipment.
Staff prepared plans and construction drawings to a Pilot area selected within the Phase 1 boundary, Construction on the
first modernization project is started in Q2 2024 in a 1200-home neighborhood pilot area bounded by Louis, Amarillo, 101,
and Embarcadero. The modernization projects will be coordinated with fiber to the premise (FTTP) construction. To
capitalize on synergies between GridMod and FTTP, a Pilot area combining both GridMod and FTTP project was identified,
and the joint Pilot project boundary was fixed. The GridMod design was contracted with consultant Entrust, and the
construction of the Pilot was started in Q3 of 2024, and completion of the construction work is anticipated at the end of Q2
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2025.As of January 9, 2025, , 60 of 74 poles have been replaced, 51 new transformers have been installed, and the service
to over 500 households in the Pilot area have been prepared and are ready for electrification. Engineering staff has started
the planning and design work for the remainder of the Phase 1 area, which Staff expects the construction of to be
completed by Q4 of 2025.
Sewer System Replacement 31 (SSR31)
-Conducted successful outreach meeting with Barron Square HOA residents who have been impacted by the activity at the
project’s laydown yard. The on-going communication has been effective to keep the Barron Square residents informed.
-The portion of the work requiring 2-lane closure on El Camino Real was performed at night. No more nighttime work is
anticipated on this project, unless unexpected condition dictates.
-Continue with daytime work. The remaining work will be performed on El Camino Real between Fernando and Sheridan and
on Page Mill Road between El Camino Real and Ramons Way.
-Project is currently on track to be completed in May 2024, before Caltrans and County of Santa Clara’s paving projects start.
Water main replacements
9,893 Feet of water main replaced
252 services replaced
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STANDING TOPIC 1:Annual Budget - Rate changes to Water, Gas, Electric, Wastewater collection, and Fiber services.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /
COUNCIL-APPROVED
The community will have a better
understanding of the rates and why they
are being charged.
Rates are reviewed annually and each rate
change is determined by the COSA reports.
UAC review is in March, FCM review is in
April and CCM approval is in June
Staff time, Legal team review time,
Consultant time to create the COSA report.
Council approval of budget N/A
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
Rates are always a high priority. The change has an impact on the community and economy.N/A N/A
STANDING TOPIC 2:Water Supply: Consider potential future sources of water supply. This includes recycled water, demand management programs, grey water, treatment efforts, and
use of effluent.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /
COUNCIL-APPROVED
The benefit to the community is to have
ample water source and supply when
needed in the event of a drought or for
basic uses
This is not a single effort or project;
however, a year-round effort
Staff time, Legal team review time,
Consultant time for development of the One
Water Plan which is a holistic 20-year water
portfolio
Council approval of the One Water Plan
which includes adaptable, dynamic, water
supply portfolios.
N/A
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
Having knowledge of where the City's water supply is coming from and how we maintain
that supply is a maintained priority..
N/A N/A
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7
1
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0
STANDING TOPIC 3:Electric Supply: Consider updates to the electric supply portfolio and issues relating there to.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /
COUNCIL-APPROVED
Reliability for customers, health benefits,
and clean energy responsible for the vast
carbon reduction the City has achieved
over the past decade
This is an ongoing regularly monitored
effort and does not have a start or
completion time
Approved budget, staff time, legal review
time, consultants as needed, and
technology
Release of RFP for more renewable
energy supply options in the Integrated
Resource Plan (IRP). Have the IRP near
completion to present to the UAC for
review and approval. Maintaining and
expanding the zero emissions portion of
the portfolio and carbon neutral plan.
N/A
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
The health and well being of the community is a high priority for Council and Utilities N/A N/A
STANDING TOPIC 4:Gas Supply: Consider aspects of the gas supply portfolio and issues relating thereto
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /
COUNCIL-APPROVED
Gas is a type of energy used to provide
some residences and businesses in Palo
Alto with heat for their facilities and some
cooking appliances.
This is not a single effort or project;
however, a year-round effort
Staff time, Legal team review time,
Consultant time when necessary
Utilities on average are 10% below
PG&E's rates year round
N/A
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
The health and well being of the community is a high priority for Council and Utilities N/A N/A
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STANDING TOPIC 5:Utilities CIP's: Discuss CIP projects.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /
COUNCIL-APPROVED
There are multiple CIP's throughout the
Utilities, each with their own benefits to the
City and the community from rebuilding
the water reservoirs, repairing and
replacing sewer lines or water mains,
maintaining street lights, building out the
fiber backbone, upgrading the meter
system to upgrading the outage
management system
Utilities has multiple projects in their Council
approved CIP budget. Most of these
projects are multi year based.
Staff time, Legal review time, Procurement
time for setting up contracts, contractors for
work completion
Utilities CIP success is completion of the
project within the timeline and budget that
was approved by Council.
N/A
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
Maintaining quality of life for the community creates the priority for Utilities projects N/A N/A
STANDING TOPIC 6:Reliability, Resiliency and adaptation: Ongoing discussions regarding the reliability and resiliency of the utilities.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /
COUNCIL-APPROVED
This matter encompasses a number of
situations including but not limited to the
S/CAP program. The benefit of any of the
reliability or resiliency projects is to
support the City and community now and
into the future with reliable, safe
connections, water, electricity, fiber and
natural gas
These programs and projects are year
round and do not have a beginning or an
end. For example the S/CAP is set to
accomplish the goal by 2030
Budget approval, staff time, additional staff,
and some use of consultants
Maintaining a high level of efficient, safe,
economic, and reliable services.
YES
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
The S/CAP is a Council priority and therefore a High priority for the Utilities Advisory
Commission to focus on
N/A N/A
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STANDING TOPIC 7:Legislative Initiatives: The Utility tracks many local, state and federal bills that touch on utilities. Should any new laws, regulations, or ordinances pass during the
year, the UAC may need to discuss the changes.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /
COUNCIL-APPROVED
Staff tracks the possible changes in laws
and regulations and presents the
proposed changes to the UAC for review
and consideration to the Council.
Legislature meets throughout the year and
possible changes can occur at any point
that effect utilities
Staff time, travel, and legal review time This is a non-measurable project State Mandated
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
N/A The level of priority is based on the particular legislation being proposed and how it
effects the regulated utilities
N/A
STANDING TOPIC 8:Council Driven Initiatives: The UAC will address any matter assigned by the City Council.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /
COUNCIL-APPROVED
The UAC is made up of a diverse group
with insight of the innerworkings of and
vast knowledge in the utilities arena.
Timeline will be addressed once assigned UAC, Staff and legal review time Council approval of completed task YES
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
Typically when Council requests a review of an item it is considered a priority N/A N/A
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Standing Topic 9:
S/CAP Support: Discuss community engagement, technology (current & emerging), finance, and community scaling of S/CAP plans to meet the City’s goals for
sustainability and climate action. This includes electrification efforts, possible code modifications, potential full or partial retirement of the gas distribution system,
and electrification of gas appliances. It also includes permitting and inspection processes for customers wishing to upgrade panels, electrify appliances, or install
solar PV, energy storage, and/or EV charging systems.
BENEFICIAL IMPACTS TIMELINE BENEFICIAL IMPACTS TIMELINE BENEFICIAL IMPACTS
UAC expertise will help the Council S/CAP
Committee make progress on achieving
S/CAP goals with benefits to reducing the
impacts of climate change.
In these areas:
Ongoing support to the S/CAP Committee UAC expertise will help the Council
S/CAP Committee make progress on
achieving S/CAP goals with benefits to
reducing the impacts of climate change.
In these areas:
Ongoing support to the S/CAP
Committee
UAC expertise will help the
Council S/CAP Committee
make progress on achieving
S/CAP goals with benefits to
reducing the impacts of
climate change.
In these areas:
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
Support S/CAP Committee goals to develop plans and improve processes for building
electrification
Discussions of other forms of emissions reduction besides building electrification Support S/CAP Committee
goals to develop plans and
improve processes for building
electrification
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Item No. 5. Page 1 of 5
Utilities Advisory Commission
Supplemental Report
From: Kiely Nose, Interim Director of Utilities
Meeting Date: March 5, 2025
Item Number: 5
Report #:2502-4220
TITLE
Supplemental Information: Review and Recommend Utilities Advisory Commission FY 2025 –
2026 Work Plan for City Council Approval
RECOMMENDATION
Staff recommends the Utilities Advisory Commission (UAC) to review, provide feedback, and
recommend City Council approval of the FY 2025 - 2026 Annual Work Plan.
This supplemental report transmits proposed workplan items submitted by UAC commissioners
subsequent to the release of the original staff report to assist in facilitation of the UAC
discussion and recommended workplan for Council consideration.
BACKGROUND
In accordance with the 2020 City Boards, Commissions, and Committees Handbook, each Board
and Commission should prepare an annual work plan for proposal to the City Council by the
second quarter of the calendar year. The purpose and duty of the UAC is outlined in the City of
Palo Alto Municipal Code Chapter 2.23.050.
“The purpose of the utilities advisory commission shall be to advise the city council on
present and prospective long-range planning and policy and major program and project
matters relating to the electric utility, gas utility, water utility, wastewater collection
utility, fiber optics utility and recycled water matters, excluding daily operations.”
ANALYSIS
The Commission is recommended to consider its purpose as defined in the Palo Alto Municipal
Code, the City Council Priorities, the City Council Priority objectives, and Council approved
workplans and strategic plans as some of the variables when deciding on recommended
workplan items to the work of the Commission for 2025. This will ensure alignment with the
City Council activities and resource allocation. The UAC may add a workplan topic, amend an
existing topic on the draft workplan to address a desired topic more explicitly, and may choose
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Item No. 5. Page 2 of 5
to consider items for future years. As a reminder, the workplan is intended to reflect activities
to be completed in a 12-month period, specifically identifying the UAC role and actions. This
workplan will be forwarded for City Council review and approval by recommendation of the
UAC.
UAC Commissioner Workplan Feedback
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Item No. 5. Page 3 of 5
13. Emergency Preparedness: Prepare CPAU and the Palo Alto community it serves for
emergencies, such as earthquakes, cyber-attacks, wildfires, and floods, in coordination
with Palo Alto’s Office of Emergency Services (OES).
14. Grid Modernization Strategy: successfully address the key issues that will affect the
design and cost of CPAU’s future distribution Grid. Annual update on project.
Proposed Topics and Current Status:
To assist the UAC in finalizing it’s recommended workplan, staff have provided the following
information to assist in identifying any existing alignment with standing UAC workplan topics
and or the current status or schedule of items suggested by various Commissioners.
Title
UAC Standing
Topic Current Status / Schedule
1. Long-Term
Strategy for
CPAU’s Natural
Gas Utility
Topics
8 & 9
Decommissioning of the CPAU natural gas utility is an action
item both in the Council 2025 priority objective and S/CAP
approved workplan and falls under these two standing
topics. Specifically, ‘Share preliminary analysis of strategies
for a physical and financial transition of the gas utility to
relevant policymakers and stakeholders’ is the expected
work for 2025.
2. Feasibility of
Purple Pipe
Expansion &
Establishment of
a Recycled
Water Utility
N/A New Workplan Item
Purple pipe has previously been explored in the Northwest
County Recycled Water Strategic Plan which included a
business plan for a system expansion1 with discussion at the
UAC2 and City Council3 in 2018. Information from this study
was recently updated for use in the One Water Plan. Current
Regional Water Quality Control Plant improvements are
focused on rehabilitation of the over 50-year-old regular
sewage treatment functions.
3. Universal Access N/A New Workplan Item
4. Regional
Collaboration on
Water Supply
N/A Advocacy letters both discussing the One Water Plan
framework and engagement with SFPUC and BAWSCA are
agendized for the March 2025 UAC meeting for
recommendation to City Council.
5. Credit Card Fees N/A New Workplan Item
This topic relates to Standing Topic 1, review of the annual
budget and rate changes for utility services though can be
considered off cycle by the Commission from the typical rate
setting process.
1 Northwest County Recycled Water Strategic Plan https://www.cityofpaloalto.org/files/assets/public/v/1/public-
works/water-quality-control-plant/recycled-water/2021/tm-6.5_30dec2020.pdf
2 UAC October 2018; https://cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=72210.49&BlobID=68055
3 City Council November 2018;
https://cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=72210.49&BlobID=68054
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Item No. 5. Page 4 of 5
Title
UAC Standing
Topic Current Status / Schedule
6. Fiber to the
Premises (FTTP)
Pilot & Phase 1
Topic 1 FTTP is an action item in the Council 2025 priority objectives
‘Complete build-out of fiber-to-the-premises (FTTP) pilot
Phase 1 with grid modernization…and work to establish
internet service provider operations’ in 3rd quarter (Q) of CY
2025. In alignment with the Standing Topic 1, rates for fiber
services are scheduled for UAC review in Q2 of CY 2025.
7. Federal Issues
and
Collaboration
Topic 7 Standing Topic 7 addresses legislative initiatives, tracking
local state and deferral bills that impact utilities operation
and regulations and review of changes needed with the UAC
to the extent needed. These actions support the real time
tracking of issues a recognize alignment with existing
legislative guidelines for City operations as adopted by the
City Council annually. Considering the recent federal
administrative actions, the City Council has taken action to
create a Council ad hoc committee to draft a resolution that
‘underscores the Council’s Commitment to Sustaining Palo
Alto Values and Interests’ in the face of the federal
administration.
8. Data Center
Competitiveness
N/A New Workplan Item
9. Microplastics
and Forever
Chemicals in
Water Supply
and Wastewater
N/A New Workplan Item
As part of the City’s operating activities, testing of
wastewater and water occur in accordance with state and
federal laws and regulations as well as with applicable
permits issued by regulatory agencies. During 2023, the City
tested for PFAS and all results were below reporting limits
and were presented in the City’s 2023 Water Quality
Report.4 During 2022, the State Water Board issued an
order for certain agencies to begin testing for microplastics.5
SFPUC is one of initial agencies required to monitor surface
water for microplastics and staff are waiting for the results
of the state’s investigation.
10.Time of Use
Rates
(Electricity)
Topic 1 In alignment with the Standing Topic 1, rates for electric
utility service pilot time of use rates are scheduled for UAC
review in 2025 including implementation plans and the rates
recommended for feedback and recommendation to the
Finance Committee and City Council.
11.Demand side
management
(DSM)
Topics 2, 3,
4, & 9
Standing Topics 2-4 facilitate discussion of demand side
management of utility commodities. Annually as part of the
2nd quarter Utilities Quarterly Report, the annual DSM report
is prepared and transmitted for the UAC review. In addition,
4 City’s 2023 Water Quality Report https://www.cityofpaloalto.org/files/assets/public/v/1/utilities/water-
quality/pal108cpauwaterannual2023.pdf
5 Water State Board Begin Testing for Microplastics
https://www.waterboards.ca.gov/drinking_water/certlic/drinkingwater/documents/microplastics/rs2022-
0032.pdf
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Item No. 5. Page 5 of 5
Title
UAC Standing
Topic Current Status / Schedule
the 10-year Energy Efficiency goals are scheduled to be
reviewed by the UAC in spring 2025. Discussion of
technologies to advance demand management are included
as part of the Reliability and Resiliency Strategic Plan
reviewed by UAC and approved by Council and part of the
approved S/CAP plan outlined in Standing Topic 9.
12.Stanford
Interconnection
N/A New Workplan Item
The City and Stanford have explored interconnection
between the agencies as recently as January 2021, however,
discussions concluded due to parties unable to reach
agreement on price and terms. Resources were refocused
and have continued to work on establishing a second
transmission corridor with PG&E.
13.Emergency
Preparedness
N/A New Workplan Item
The Office of Emergency Services is updating the City’s
Emergency Operations Plan (EOP) in 2025. The EOP will be
in alignment with the 2023 Santa Clara County
Multijurisdictional Hazard Mitigation Plan. Additionally, two
work initiatives are underway relating to this topic, an audit
by the City Auditor (as provided by Baker Tilly) regarding
wildfire preparedness and the recent wildfire maps as
released by the State of California Fire Marshall. Both are
scheduled to be reviewed by the Policy & Services
Committee and City Council by the conclusion of FY 2025.
14. Grid
Modernization
Strategy
Topics 5 & 6 The significant investments for Grid Modernization capital
improvements - in alignment with activities under Standing
Committee topics 5 and 6, Utilities Capital Improvement
Program and reliability and resiliency activities respectively -
are next scheduled to be reviewed by the UAC in early FY
2026 to support review of financing authorization for
issuance of debt including a project update. Studies recently
reviewed by UAC inform future implementation of grid
management systems to improve situational awareness,
operational efficiency and Distributed Energy Resources (e.g.
rooftop solar, battery storage, and electric vehicles).
ATTACHMENTS
Attachment B: Proposed Topics Submitted by UAC Commissioners
APPROVED BY:
Kiely Nose, Interim Director of Utilities
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Proposed Topic 1:
Long-Term Strategy for CPAU’s Natural Gas Utility - Develop a comprehensive 5–20 year plan to align the gas utility with climate
goals, financial stability, and regulatory changes, while evaluating options for electrification, biogas integration, and long-term
infrastructure strategy.
BENEFICIAL
IMPACTS
TIMELINE RESOURCES
NEEDED
MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /
COUNCIL-APPROVED
Provides a comprehensive,
future-focused plan for CPAU’s
natural gas utility over the next 5,
10, and 20 years.
Integrates climate impact,
regulatory environment, and
evolving market conditions (e.g.,
supply, building electrification
trends).
Ensures financial stability by
addressing costs, procurement
strategies, tariffs, revenues, and
the utility’s contribution to the
City.
Identifies how best to align the
gas utility with Palo Alto’s
sustainability goals and
community expectations over the
long term.
Short‐Term (6–12 mo.)
Define scope and objectives of the long‐term gas utility strategy.
Gather data and costs on externalities (supply constraints,
regulatory changes, climate impacts, cost of compliance).
Engage stakeholders (residents, businesses, environmental
groups) to identify concerns/goals.
Medium‐Term (12–24 mo.)
Develop draft plan outlining potential pathways (e.g., maintaining
gas utility with partial electrification incentives, exploring advanced
biogas/hydrogen blends, pricing in true cost of gas and its
externalities, or phasing down distribution).
Conduct financial analyses (cost, revenue, rates, capital
investment, utility payment to City) and regulatory feasibility.
Long‐Term (24+ mo.)
Finalize and adopt a formal strategy for the next 5–20 years.
Begin implementing policy, infrastructure, and rate changes as
approved by Council.
Staff analysis
(Utilities, Finance,
Sustainability) and
potential consultants
for policy,
engineering, and
market assessments.
Legal counsel for
evolving regulations
and potential litigation
(e.g., building
electrification
mandates).
Stakeholder outreach
resources for public
engagement.
Completion and Council adoption of
a 5–20 year gas utility strategy.
Clear articulation of how
externalities and climate goals are
addressed (e.g., cost of carbon,
supply reliability, how pricing of gas
rates should be adjusted to reflect
externalities).
Stable or well‐managed utility
finances, including City payment,
without undermining broader climate
goals.
Positive feedback from community
stakeholders on transparency and
alignment with City values.
Gas regulation intersects
with state and federal laws
(CPUC, etc.).
Local ordinances or
building codes may require
revision (Council approval).
Council likely to be
involved if new rate
structures, code changes,
or litigation decisions arise.
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
High Priority, but not urgent—designed for a 2–3 year planning horizon. N/A Likely, if changes to local
ordinances, building codes,
or rate structures are
proposed.
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Proposed Topic 2:Feasibility Study of Purple Pipe Expansion & Establishment of a Recycled Water Utility - Assess the potential for expanding Palo Alto’s
recycled water system
BENEFICIAL
IMPACTS
TIMELINE RESOURCES
NEEDED
MEASURE OF
SUCCESS
STATE MANDATED / LOCAL LAW
/ COUNCIL-APPROVED
Maximizes the City’s
significant capital
investment in the
wastewater
treatment/recycling plant.
Reduces reliance on potable
water by expanding the
purple pipe system and
usage within Palo Alto.
Creates potential for a
Recycled Water Utility to
govern, finance, and
manage distribution
effectively.
Enhances sustainability,
resilience to drought, and
local water independence.
Short‐Term (6–12 mo.)
Map and assess the existing purple pipe infrastructure, including the small system
running down East Bayshore to the golf course and Greer Park.
Quantify the volume of recycled water currently sent to Mountain View vs. local
use.
Initiate a feasibility study addressing technical, regulatory, and financial aspects of
expanding the purple pipe system within Palo Alto.
Medium‐Term (12–24 mo.)
Evaluate costs/benefits of expansion scenarios, including potential revenue
models or cost-sharing agreements.
Benchmark other cities’ successful recycled water programs to explore best
practices and potential governance structures.
Engage stakeholders (residents, businesses, other agencies) on feasible
expansion routes and priorities.
Long‐Term (24+ mo.)
If recommended, establish a formal Recycled Water Utility to govern distribution,
set rates, and manage infrastructure.
Begin phased construction of new pipelines or retrofits based on study findings
and Council approval.
Engineering/Consulting
services for
infrastructure
assessment and
expansion design
Financial analysis to
assess cost recovery,
potential rate
structures, or grants
Legal/regulatory review
to align with state
requirements on
recycled water
Stakeholder outreach
resources for
community
engagement
Completion of feasibility
study with clear
recommendations for
expansion
Increased local recycled
water usage within Palo
Alto, reducing reliance on
potable supply
Viable business model
for a Recycled Water
Utility (if pursued) that
covers O&M costs
Positive feedback from
City Council,
stakeholders, and
regulatory bodies on the
expansion plan
Council approval for capital
investments and new utility
formation.
Subject to state and regional
regulations.
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
High priority due to current, substantial capital investment in recycling plant, to ensure City
maximizes use of its investment. In addition, aligns with City’s sustainability goals. N/A Yes, major capital
expansions may require
formal Council action.
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Proposed Topic 3:Universal Access - Enhance CPAU accessibility beyond ADA compliance to ensure equitable service for all customers.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-
APPROVED
Ensures customers with
disabilities can fully access CPAU
services (billing portal,
communications, facilities).
Goes beyond minimum ADA
compliance to adopt best
practices in universal design.
Builds equity and trust among all
community members.
Short‐Term (3–6 mo.)
Conduct accessibility audit of
CPAU platforms (e.g., billing
portal, website, physical sites).
Launch customer surveys & focus
groups specifically for disabled
customers.
Medium‐Term (6–12 mo.)
Implement identified
improvements (e.g., user interface
changes, alternative format
billing).
Provide staff training on universal
design & inclusive communication.
Long‐Term (12+ mo.)
Ongoing monitoring & periodic
re‐evaluation via user feedback
surveys.
Internal staff time
Possible budget for any identified
changes
Higher user satisfaction among
disabled customers ADA compliance is
federally mandated but
these efforts go beyond to
provide universal access.
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
High priority given equity considerations. N/A May require council policy
changes (e.g., new design
standards).
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Proposed Topic4:Regional Collaboration on Water Supply - Advocate for accurate drought planning, strengthen regional partnerships, and
explore alternative water supply solutions to enhance resiliency, cost efficiency, and long-term water security.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED /
LOCAL LAW /
COUNCIL-
APPROVED
Enhanced drought resiliency &
diversified water supply.
Accurate design drought and cut
back scenarios to advise current
and future planning.
Stronger position in regional
decision‐making.
Potential cost savings via joint
projects.
Short‐Term (6–12 months):
Advocate for regional partners, e.g. BAWSCA and
SFPUC, to provide accurate design drought and
cut back scenarios. Seek to bolster BAWSCA to
advocate for accurate drought planning.
Work with regional partners to identify and study
feasibility of alternative water supplies.
Medium‐Term (12–24 months):
Work with regional partners to communicate to
public potential planning around alternative water
supply.
Staff time for
interagency
coordination
Possible consulting
studies (supply
forecasting, demand
modeling)
Incorporation of Palo Alto’s
interests in regional water
plans.
Tangible progress on
shared infrastructure or
alternative supply
solutions.
Improved drought planning
data.
N/A
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
High priority. BAWSCA has a new CEO/General Manager that the City and UAC
should work with. SFPUC has just begun its own alternative water supply planning
process, with a primary focus on purified water projects. Its recently approved 10-year
capital improvement plan allocates $260 million toward alternative water supply
programs within its $3.16 billion total budget, but much of this planning remains in the
early stages. The UAC recently considered and did not proceed with the city’s One
Water Plan, advising focusing on regional partnership to enhance our understanding
of the drought planning scenarios for future regional and local planning and to seek a
comprehensive regional strategy to alternative water supply.
N/A N/A
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Proposed Topic 5:Credit Card Fees - Implement a fee pass-through to reduce City costs, improve transparency, and allow larger credit card
payments while monitoring customer impact.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED /
LOCAL LAW /
COUNCIL-
APPROVED
Potential $1.2M/year savings for
the Utilities budget by shifting
transaction fees to customers
who choose credit cards.
Encourages cost transparency
and may incentivize lower‐fee
payment methods.
Allow for customers to charge
larger bill amounts (>$5,000) to
their credit cards, as fees are
transparently passed on.
Short‐Term (3–6 months):
Implement updated fee pass-
through structure and billing
system changes.
Develop communication plan for
customers.
Medium‐Term (6–12 months):
Monitor and review impact on
customer satisfaction and
payment behavior.
Billing software updates & staff
training
Customer
communication/outreach
Reduction in City’s
transaction‐fee costs (targeting
$1.2M savings).
Customer acceptance measured
by complaint levels or payment
method shifts.
Minimal negative impact on
delinquency rates.
N/A
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
N/A Lower priority but also low-hanging fruit that can save $1.2 million annually. May require policy
update.
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Proposed Topic 6:Fiber to the Premises (FTTP) – Pilot and Phase 1 - Review and evaluate pilot results, recommend to Council ISP rates, refine
business and operations plan for Phase 1 rollout, and inform decision on further investment after Phase 1.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED /
LOCAL LAW /
COUNCIL-
APPROVED
Enhances high‐speed internet
access for residents &
businesses.
Ensure equitable access to high-
speed and high-quality internet
across the City, its
neighborhoods, and its residents.
Future‐proofs City’s
communications infrastructure.
Short‐Term (6–12 mo.):
Complete pilot, begin marketing,
gather data on take‐rate.
- Medium‐Term (12–24 mo.):
Evaluate pilot results, refine
business and operations plan for
Phase 1 rollout.
Capital investment for fiber
deployment
Marketing budget
Ongoing operations &
maintenance funding
Demonstration of operational
success from pilot.
Meeting or exceeding pilot and
phase 1 goals
Positive customer feedback and
subscription growth.
Sustainable model to
cost‐recovery or revenue.
Likely needs Council
approval for budget
allocations, rate
structures, or bond
financing
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
High priority. The Council has approved a FTTP pilot and phase 1 to
study eventual build-out to the city. In the coming year, the pilot will
be started and studied.
N/A N/A
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Proposed Topic 7:Federal Issues and Collaboration - Monitor federal policy changes, informational item regarding impact, secure critical funding,
advocate for beneficial legislative or regulatory actions to protect City resources, and strengthen federal partnerships.
BENEFICIAL IMPACTS TIMELINE RESOURCES
NEEDED
MEASURE OF SUCCESS STATE MANDATED /
LOCAL LAW /
COUNCIL-
APPROVED
Helps the City mitigate negative
effects from federal policy
changes (e.g., budget cuts,
shifting regulations).
Identifies resources (e.g., federal
grants) that City utilities rely on,
ensuring continuity of funding &
compliance.
Positions the City to advocate
effectively for beneficial regulatory
or legislative changes.
Strengthens relationships with
federal representatives and
agencies.
Short‐Term (3–6 mo.)
Inventory federal resources/programs used by the
City (funding, permits, land, etc.).
Develop risk assessment of potential federal
cost‐cutting impacts.
Identify immediate federal legislative or regulatory
priorities for City advocacy.
Medium‐Term (6–12 mo.)
Engage regularly with federal representatives (e.g.,
staff briefings, letters, visits).
Develop strategies to safeguard critical grants or
programs.
Long‐Term (12+ mo.)
Propose any desired federal law/regulation
changes for long‐term City benefit.
Formalize ongoing mechanism for monitoring and
responding to federal actions.
Staff time to compile
inventories and
coordinate advocacy
Possible outside
lobbyist or legal
counsel for federal
issues
Budget for
travel/meetings in
Washington, D.C. or
regionally
Timely identification of potential
federal funding shortfalls or
policy changes.
Number of successful federal
grants retained or newly secured
despite cost‐cutting.
Positive engagement/feedback
from federal reps on City’s
positions.
Incorporation of City concerns
into relevant legislative
proposals or regulatory
rulemaking.
Council approval might
be required for formal
policy positions or
lobbying expenditures.
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
High priority given the potential budget or regulatory impacts. N/A May require council
policy changes,
including city resolutions
or official stances on
federal issues.
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Proposed Topic 8:Data Center Competitiveness - Review and recommend policies and incentives to attract data centers to Palo Alto
BENEFICIAL IMPACTS TIMELINE RESOURCES
NEEDED
MEASURE OF
SUCCESS
STATE MANDATED /
LOCAL LAW /
COUNCIL-
APPROVED
Potential to attract new data
center developments or
expansions, boosting local
economic activity and job
creation.
Leverages Palo Alto’s carbon-free
energy to market a more
sustainable data center
environment versus competitors.
Increases City revenue streams
(utility sales, property taxes, etc.)
Increased sales may lead to
reduced rates for our customers.
Builds on existing tech reputation
of Palo Alto/Silicon Valley.
Short‐Term (1–3 mo.)
Conduct market analysis comparing Palo Alto’s electricity
rates, real estate availability, permitting processes, and
data center–friendly policies to those of neighboring cities
(e.g., Santa Clara).
Identify key barriers or advantages (e.g., cost
competitiveness, clean energy, land use constraints).
Medium‐Term (3–9 mo.)
Develop targeted policy or rate options to attract data
centers (e.g., special electricity rate packages, expedited
permitting zones).
Collaborate with real estate developers and property
owners to address space constraints or lease structures.
Long‐Term (9+ mo.)
Implement pilot incentive programs or updated rates if
Council-approved.
Monitor outcomes, refine strategies, and continue
marketing Palo Alto’s advantages.
Staff time (economic
development, utilities,
planning) for market
research and policy
review.
Potentially consultant
to assess market if
needed.
Legal counsel if
changes to rates or
zoning require new
ordinances.
Budget for
outreach/marketing
materials.
Clear, data-driven
competitiveness report
identifying Palo Alto’s
position vs. neighbors.
If implemented, new or
expanded data center
developments within city
limits.
Revenue growth from
increased utility sales.
Favorable feedback from
the tech community
regarding Palo Alto’s data
center environment.
Council approval for new
electricity rates or zoning
changes.
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
High priority due to opportunity to compete in exploding data center market due to the
rise of artificial intelligence. N/A Yes, if altering utility rate
structures or
zoning/permitting
processes for data
centers.
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Proposed Topic 9:Microplastics and Forever Chemicals in Water Supply and Wastewater - Assess and mitigate forever chemical (PFAS etc.)
and microplastic contamination in drinking water and wastewater.
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED /
LOCAL LAW /
COUNCIL-
APPROVED
Improved public health and
environmental protection by
studying and reducing PFAS (and
other forever chemicals) and
microplastics in drinking water
and discharged wastewater.
Compliance with California and
federal regulations (keeps the
City ahead of regulatory curves).
Potentially reduced long‐term
infrastructure costs by addressing
contaminants early.
Builds community trust in water
quality.
Short‐Term (6–12 months):
Initiate sampling of wastewater
and water distribution system to
quantify microplastics and PFAS.
Conduct feasibility for solutions,
such as for installing filters on
residential/commercial laundry
machines.
Medium‐Term (12–24 months):
Evaluate pilot programs for
retrofitting or upgrading treatment
processes.
Assess whether plastic-based
service lines and mains contribute
microplastics to the water/soil, and
study alternative pipe materials.
Staff time for feasibility studies &
sampling
Funding for pilot mitigation
projects
Reduction in PFAS/microplastic
levels to target thresholds.
Subject to CA and
potential future federal
regulations on
PFAS/microplastics
May need Council
approval if new local
ordinances or major
capital investments are
required.
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
High priority in determining baseline microplastic and forever
chemical contamination and studying mitigation given increased
awareness of extent of contamination and detrimental health effects.
N/A May require policy
update (e.g., if requiring
certain filters or changing
procurement standards).
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Proposed Topic 10:
Time of Use Rates - bring TOU to UAC early to give us a chance to discuss and advise on options before they are rolled out.
Then, once TOU rates are in place, report out on how it is going at least once a year
BENEFICIAL IMPACTS TIMELINE RESOURCES
NEEDED
MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-
APPROVED
•Discuss what are our goals as
a city? Reduce GHG use within
PA? Minimize cost of
electricity? Reduce stress on
grid from vehicle charging?
•How many and what rate
structures would we consider?
•What rate structures are in use
in other comparable areas and
how are they performing?
Staff, Legal, •Suggestions for top level KPIs:
o Fraction or bar chart incorporating all
customer classes: __ signups / __
customers in customer class
o chart: % of customers uptake (cumulative
by quarter by customer class)- this would
reflect performance over time
o chart: % of total PA electricity on TOU
rates (cumulative by quarter)- this would
reflect performance over time
o Measures of GHG reduced / cost saved
(depending on what the goal was)
Cost-of-service
requirements set
forth in the California
Constitution and
applicable statutory
law
HIGH PRIORITY LOWER PRIORITY COUNCIL-
DIRECTED
POLICY
UPDATE
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Proposed Topic 11:Demand side management: annual update and discussion on programs and performance
BENEFICIAL IMPACTS TIMELINE RESOURCES
NEEDED
MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-
APPROVED
•What are the city's goals of demand side
management? Reducing load / water use?
Electrification? Load shifting?
•What are our strategies / programs and
how are they performing? (beyond TOU
rates)
•(this part may overlap with grid mod /
SCAP projects): What technologies does
CPAU recommend to customers to help
with these changes? What are the steps to
determine what these recommendations
will be? How will we communicate them?
(Examples: circuit sharing panels,
batteries, management of vehicle charging,
vehicle to grid)
Staff and Legal •Create KPIs and report against them (in a numeric
form, not in a paragraph description)
•Suggestions for top level KPIs
o Annual electric, gas, and water savings as a
percent of total load
o Pie charts breaking down annual electric and gas
savings by end use as a percent of total energy
savings
o Charts showing historical electric, gas, and water
savings over time
o Charts showing historical adoption of EVs, solar,
and storage over time
HIGH PRIORITY LOWER PRIORITY COUNCIL-
DIRECTED
POLICY
UPDATE
Item #5
Packet Pg. 169
Proposed Topic 12:CPAU – Stanford Interconnection
BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED /
LOCAL LAW /
COUNCIL-
APPROVED
Greater grid reliability/resilience if
either Palo Alto’s or Stanford’s
system fails.
Integrated emergency planning
for critical services.
Short‐Term (6–12 mo.):
Feasibility/engineering study on
interconnection points, cost
sharing.
Medium‐Term (12–24 mo.):
Implementation planning,
permitting, construction approach.
Joint technical consultants
Infrastructure investment funding
Coordination team (City &
Stanford)
Successful interconnection or
backup capability in actual or
simulated emergency.
Minimal downtime and rapid
recovery in a crisis.
Positive cost‐benefit compared
to not having interconnection.
Likely requires formal
agreement or MOU
between City and
Stanford.
Council approval for
major infrastructure
investments or
cost‐sharing
arrangements.
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
Stanford and CPAU each currently have only one transmission line.
CPAU has expressed concern over long-term power loss in the event
of an accident at this transmission line (e.g., airplane crash), or
upstream power loss due to disaster. CPAU power supports
residences, businesses, and three major hospitals, including Stanford
Hospital. Stanford has experienced power-loss events due to impacts
to their PG&E transmission line, most recently in March 21, 2023. An
interconnection between the grids will allow for greater grid reliability
and resilience if either Palo Alto’s or Stanford’s system fails.
N/A Possibly (for final
agreements, budget
approvals)
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Proposed Topic 13:CPAU Electrical Emergency Preparedness
BENEFICIAL IMPACTS TIMELINE RESOURCES
NEEDED
MEASURE OF SUCCESS STATE MANDATED /
LOCAL LAW /
COUNCIL-
APPROVED
CPAU emergency preparedness is essential
for the preparedness of the entire Palo Alto
community and a key aspect of CPAU’s
reliability / resilience activities.
This initiative is geared to prepare CPAU
and the Palo Alto community it serves for
emergencies, such as earthquakes, cyber-
attacks, wildfires, and floods, in coordination
with Palo Alto’s Office of Emergency
Services (OES).
2025-2026: Initial
assessment and
coordination with OES. (See
“Measures of Success”)
2027 & ongoing:
Implementation and regular
updating.
2025-2025: CPAU
staff time for
establishing initial
objectives and
planning with OES.
OES staff to work with
CPAU.
1. Determination of the “design emergencies”
to be used as the basis for CPAU
emergency preparedness.
2. Establishment of CPAU’s risk assessment
framework in coordination with OES.
3. Determination of CPAU’s roles and specific
actions in each such emergency.
4. Completion of action planning and
implementation in coordination with OES.
N/A
HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED
POLICY UPDATE
Highly important and urgent.
CPAU emergency preparedness is essential for the preparedness of
the entire Palo Alto community.
CPAU has invested to reinforce water system operation during an
emergency, for example water main upgrading and wells with
emergency power. But CPAU has focused its electrical reliability
efforts only on short-term interruptions. With the risk of earthquakes
and other events that could cause long-term disruption to CPAU’s
electricity delivery, it is essential that we develop equivalent plans for
electrical resilience and CPAU responsibility during a severe
emergency. CPAU needs to develop its emergency preparedness
consistent with the OES “design emergency” in collaboration with
OES.
N/A N/A
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Packet Pg. 171
Proposed Topic 14:
CPAU Grid Mod Strategy
BENEFICIAL IMPACTS TIMELINE RESOURCES
NEEDED
MEASURE OF SUCCESS STATE MANDATED
/ LOCAL LAW
/ COUNCIL-
APPROVED
Grid Mod represents an expenditure of $300M+.
Multiple technologies and other exogenous factors
will impact distribution grid design and
implementation in major ways. To address those
issues, the Grid Mod plan needs to include:
1. The goals that grid modernization is
intended to achieve and the strategy for
achieving those goals.
2. A detailed plan and roadmap articulating
what will be done, and when: Anticipated
“external environment” impacts over the
life of the plan; key milestones and
decision points for actions and
expenditures; which technologies will be
accommodated and when; estimated
capital and operating costs; and
opportunities to mitigate, reduce, or delay
expenditures.
With major Grid Mod
expenditures already
underway, CPAU
needs an intensive
strategic planning
focus starting
immediately and
continuing from 2025
through 2027.
2025-2027: CPAU
staff time and
external experts to
map out the CPAU
distribution grid
evolution and
impacts of key
exogenous factors.
(See “Measures of
Success.)
To succeed, Grid Mod must successfully address the key
issues that will affect the design and cost of CPAU’s future
distribution Grid:
1.New technologies: Technological advances mean
that the future grid will not be an incremental
extension of today’s grid. So, Grid Mod needs to
anticipate and incorporate those changes, for
example, local distributed energy resources (DER)
such as solar + storage; microgrids; active demand
side management (DSM); electric vehicles (EVs), and
advanced metering (AMI).
2.SCAP: How will the grid deliver the electricity called
for by the City’s SCAP plan?
3.Resilience: When the grid is operating (reliability, up
time, repairability) and during emergencies (as CPAU
does for water).
4.Other exogenous factors: Especially energy
supply, future regulations, and shifts in demand, such
as proliferation of large data centers.
N/A
HIGH PRIORITY LOWER PRIORITY COUNCIL-
DIRECTED
POLICY
UPDATE
Highly important and urgent.
With a planned expenditure of $300M+ Grid Mod is CPAU’s largest
capital investment. To succeed and employ this capital effectively
the Grid Mod plan and implementation must explicitly address and
incorporate key technological and other exogenous factors.
N/A N/A
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