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HomeMy WebLinkAbout2025-05-07 Utilities Advisory Commission Agenda PacketUTILITIES ADVISORY COMMISSION Regular Meeting Wednesday, May 07, 2025 Council Chambers & Hybrid 6:00 PM Utilities Advisory Commission meetings will be held as “hybrid” meetings with the option to attend by teleconference/video conference or in person. To maximize public safety while still maintaining transparency and public access, members of the public can choose to participate from home or attend in person. Information on how the public may observe and participate in the meeting is located at the end of the agenda. Masks are strongly encouraged if attending in person. The meeting will be broadcast on Cable TV Channel 26, live on YouTube https://www.youtube.com/c/cityofpaloalto, and streamed to Midpen Media Center https://midpenmedia.org. VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246) Meeting ID: 966 9129 7246 Phone: 1(669)900-6833 PUBLIC COMMENTS Public comments will be accepted both in person and via Zoom for up to three minutes or an amount of time determined by the Chair. All requests to speak will be taken until 5 minutes after the staff’s presentation. Written public comments can be submitted in advance to UAC@PaloAlto.gov 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@PaloAlto.gov 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. 1 Regular Meeting May 07, 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.paloalto.gov/agendas CALL TO ORDER 6:00PM – 6:05PM   AGENDA CHANGES, ADDITIONS AND DELETIONS 6:05PM – 6:10PM The Chair or Board majority may modify the agenda order to improve meeting management.   PUBLIC COMMENT 6:10PM – 6:25PM Members of the public may speak to any item NOT on the agenda.   APPROVAL OF MINUTES 6:25PM – 6:30PM   1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 2, 2025 UTILITIES DIRECTOR REPORT 6:30PM – 6:45PM   NEW BUSINESS (a 10 minute break may be imposed during this section)   2.Approval of Chair and Vice Chair to Serve a Short Term of May 7, 2025 through April 1, 2026 ACTION 6:45PM – 6:55PM 3.Utilities Advisory Commission Finance Subcommittee Recommends the Commission Recommend City Council Approve the FY 2026 Fiber Rates and Packages ACTION 6:55PM – 7:35PM Staff: Dave Yuan, Utilities Strategic Business Manager 4.Utilities Advisory Commission Finance Subcommittee Recommends the Commission Receive the FY 2026 Utilities Department Budget and the Commission Recommend City Council Adoption ACTION 7:35PM – 8:05PM Staff: Anna Voung, Utilities Business Analys 5.2025 Annual Water Supply and Demand Assessment ACTION 8:05PM – 8:15PM Staff: Karla Dailey, Assistant Director of Utilities, Resource Management Division 6.Staff Recommendation That the Utilities Advisory Commission Recommend the City Council Approve 10 Year Energy Efficiency Goals for 2026-2035 ACTION 8:15PM – 8:45PM Staff: Tim Scott, Senior Resource Planner FUTURE TOPICS FOR UPCOMING MEETINGS June 4, 2025   COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS  2 Regular Meeting May 07, 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.paloalto.gov/agendas   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  3 Regular Meeting May 07, 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.paloalto.gov/agendas 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@PaloAlto.gov. 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@PaloAlto.gov. Requests for assistance or accommodations must be submitted at least 24 hours in advance of the meeting, program, or service.  4 Regular Meeting May 07, 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.paloalto.gov/agendas Item No. 1. Page 1 of 1 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Director of Utilities Lead Department: Utilities Meeting Date: May 7, 2025 Report #: 2504-4586 TITLE Approval of the Minutes of the Utilities Advisory Commission Meeting Held on April 2, 2025 RECOMMENDATION Staff recommends that the UAC consider the following motion: Commissioner ______ moved to approve the draft minutes of the April 2, 2025 meeting as submitted/amended. Commissioner ______ seconded the motion ATTACHMENTS Attachment A: 04-02-25 UAC Minutes AUTHOR/TITLE: Kiely Nose, Interim Director of Utilities Staff: Kaylee Burton, Utilities Administrative Assistant Item #1     Packet Pg. 5     Utilities Advisory Commission Minutes Approved on: Page 1 of 38 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF APRIL 2, 2025 REGULAR MEETING CALL TO ORDER Vice Chair Mauter called the meeting of the Utilities Advisory Commission (UAC) to order at 6:00 p.m. Present: Chair Scharff, Vice Chair Mauter, Commissioners Croft, Gupta, Metz, Phillips, and Tucher Absent: None Vice Chair Mauter announced that Chair Scharff may be joining remotely later. The clerk called roll. AGENDA REVIEW AND REVISIONS None ORAL COMMUNICATIONS There were no public comments. APPROVAL OF THE MINUTES ITEM 1: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on March 5, 2025 Vice Chair Mauter invited comments on the March 5, 2025, UAC draft meeting Minutes. Commissioner Croft commented that the water letter stated that the drought happened every hundreds of years, but it should have read hundreds of thousands of years, which was on Page 18 of 27. ACTION: Commissioner Philips moved to approve the draft minutes of the March 5, 2025 meeting as submitted. Item #1     Packet Pg. 6     Utilities Advisory Commission Minutes Approved on: Page 2 of 38 Commissioner Metz seconded the motion. The motion carried 7-0 with Chair Scharff, Vice Chair Mauter, Commissioners Croft, Metz, Phillips, Gupta, and Tucher voting yes. UNFINISHED BUSINESS None UTILITIES DIRECTOR REPORT Kiely Nose, Interim Utilities Director, delivered the Director's Report. She stated that Council had successfully gone through the 2025 Council Priority Objectives and Committee Objectives and work plans. The final list had not been approved and would return on consent, but they had set the goals and objectives. The City had hired 4 new Utilities employees in the Electric Operations Division. There were still positions open and others at various stages in the recruitment process. The department currently had 45 vacancies, which was good news. She provided information related to the Gas Main Replacement Project 24B moving locations. They expected the project to last about 6 weeks. The Utilities team had begun the annual walking and mobile leak surveys, which was routine. The walking survey would cover the southern section of Palo Alto. She provided an update on the Gas Utility Federal Grant, which had been awarded to the City. The City received a new contract from the Federal government on the grant, which staff was reviewing and any necessary actions would be brought to the UAC upon completing the review. The State legislative committees were reviewing bills for this year’s legislative session, and staff was tracking SB 282 and 540, which she detailed. A number of details related to upcoming events could be found at cityofpaloalto.org/[inaudible 18:14]. On April 12, there would be a Landscape Conversation 101. The City of Palo Alto Earth day would be on April 22. On May 1 there would be a facility managers meeting for key account customers. Commissioner Tucher asked how the search for the director was proceeding and the process for the interim director, which he wanted monthly updates on. He asked if staff was satisfied and impressed with the choice of candidates and if there were good recruits for the Electric and the Director positions. Ms. Nose answered that they were nearing the final steps to recruit the assistant director over the Utility’s Electric operations and the engineering team. She expected to announce something at the next UAC meeting. They were in the interview stage for the Utility’s Director, and she expected that it would be another month or two before there would be any additional information. As for the choice of candidates and recruits, she noted that it would be inappropriate for her to speak about personal transactions publicly. They had ran competitive recruitment processes, so a lot of attention and engagement had been attracted. Commissioner Gupta inquired if staff had an initial gut reaction as it related to the Gas Utility grant. Item #1     Packet Pg. 7     Utilities Advisory Commission Minutes Approved on: Page 3 of 38 Ms. Nose replied that they did not has a gut reaction at this time. There were new T’s and C’s referencing some of the new executive orders, so they needed to look at the details of the orders, the contract terms, and State law and reconcile all obligations. NEW BUSINESS ITEM 2: Approval of Chair and Vice Chair to Serve a Short Term of April 2, 2025 through April 1, 2026 ACTION 6:45PM – 6:55PM Vice Chair Mauter asked for motions to nominate a chair for the term. Commissioner Croft asked if the selection could be pushed to the future to remedy the situation of 2 commissioners being past their terms now. Mayor Lauing discussed why that made sense, and he suggested moving it to the next meeting. Commissioner Philips queried if procedurally the terms of Chair Scharff and Vice Chair Mauter needed to be extended to do that. Mayor Lauing responded that the terms of Chair Scharff and Vice Chair Mauter did not need to be extended. Commissioner Philips moved that this Item be moved to the next meeting. Commissioner Gupta seconded the motion. Commissioner Tucher questioned why it was called short term. Mayor Lauing responded that it was always a 1-year term and that a person could run again and again. Commissioner Tucher seconded the motion. Motion carried 7-0 ACTION: Item 2 was moved to the next meeting. ITEM 3: Staff Recommend the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution Approving the FY 2026 Gas Utility Financial Forecast and Reserve Transfers, the Natural Gas Cost of Service and Rate Study, and General Fund Transfer. And Amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed Natural Gas Service) ACTION 6:55PM – 7:55PM Item #1     Packet Pg. 8     Utilities Advisory Commission Minutes Approved on: Page 4 of 38 Lisa Bilir, Senior Resource Planner, displayed a slide summarizing the median bill projections. She noted that some of the rate increases were substantial, which staff did not take lightly. The proposals were the result of a detailed analysis balancing costs, safety, and maintenance risks. A Cost-of-Service Study had been completed in February, which led to significant increases for residential rates, particularly at the median usage levels, so staff was presenting an option for a 1-time climate credit, which she elaborated on. The overall system average rate increase would be 5 percent in FY2026, which would begin in July 2025. She outlined some of the drivers for the increase. They expected a Federal grant of $16.5M, which would in large part fund a main replacement project, Number 25. There would be a General Fund transfer of 18 percent of 2024 gross revenue, which was estimated at $9.735M in 2026. Since December, the gas increase had been reduced to 5 percent in this proposal, although the COSA meant a higher increase for the residential and large commercial customers. She furnished a chart comparing the amount of revenue that would be recovered in each of the categories based on the 4-year average in 2026 to what would be needed in 2026 to cover the estimated cost in the different categories and slides showing the costs and revenues for the Gas Utility and the Operations Reserve for the Gas Utility. She discussed the gas cost of service methodology. Prop 26 stated that gas and electric rates must represent the cost of service, and rates could not be established based on policy goals unless they were cost based and rates could not be phased in. She presented a slide focusing on the gas bill comparisons for residential and nonresidential customers as a way to represent the overall impact of the Cost-of-Service Study. She mentioned that the summer baseline usage for the seasonal rate would go from 20 to 23 therms for a 30- day billing period. Catherine Elvert, Utilities Communications Manager, highlighted the communications and outreach strategy for talking to the community about the utility rate changes. They wanted to ensure transparency and foster understanding about the reason why there would be increases and why it would be a benefit to customers, which she elaborated on. The goal was to manage the Utility services that would ensure safety and reliability. They wanted to communicate to customers what the City was doing to keep costs down and what the customer could do to keep their utility cost low. The City offered a number of programs and services for efficiency. The key messages would also focus on the competitiveness of the utility rates. They would reiterate happenings with the need to replenish the Utility’s financial reserves, rising supply costs, the program for safety and reliability, what would happen with the General Fund transfer, and the COSA. Ms. Bilir recapped that the Cost-of-Service Study resulted in reallocations across classes. They were asking the UAC to weigh in on the proposed strategies for replenishing reserves, the investment in the CIP, and the climate credit option. They included Council’s direction from last year regarding the General Fund transfer. They understood that the subcommittee had some ideas for discussion. Commissioner Philips noted that the Finance Subcommittee consisted Commissioners Gupta and Croft and himself. The residential rates would increase and the smaller G2 commercial rates would decrease primarily as a result of the reallocation of costs driven by COSA. They had Item #1     Packet Pg. 9     Utilities Advisory Commission Minutes Approved on: Page 5 of 38 not been able to review the COSA until after the meeting. The 22-percent increase in the median residential rates seemed excessive. The subcommittee wanted to find a way to limit that, but they had not converged on the best way to do it. Staff had presented an option, which was the Cap-and-Trade alternative, which had not been uniformly supported by the subcommittee, so they wanted to bring it to the UAC. The other possibility would not do much to replenish reserves and the third possibility was to recommend and do a smaller transfer to the General Fund. The second and third possibilities would impact residential and commercial rates through COSA. He understood that COSA was more or less fixed and there might be some ability to give guidance for future cost-of-service allocations. He did not know if the $16.5M Federal grant was on track. Commissioner Croft stated that the initial impression was that shifting more of the cost onto a fixed versus a usage cost seemed to give the wrong incentive and that ideally folks should reduce usage. However, she stated that a high fixed cost might be helpful in folks discontinuing service. It was not clear how much guidance the Commission could give the consultant doing the COSA study, but they understood that there was an ability to give some, which they wanted to discuss. She asked if this study guided to increase the fixed costs versus the usage costs and if in future cost-of-service assessments guidance toward the goal of having people eventually discontinue gas could be done. The fixed costs going up did not seem to be productive. Commissioner Gupta added that the COSA had not been available for discussion during the subcommittee meeting with staff. When it became available, each committee member reviewed it, and there were questions regarding the drivers behind shifting cost from customer class G2 to the residential class G1. Vice Chair Mauter asked if the committee had reviewed only the initial proposal and not the proposal that would take funds from the Cap-and-Trade Reserve. Commissioner Philips responded that it had been presented but the group did not have consensus on it, so they wanted to go in front of UAC. Public Comment There were no public comments. Commissioner Gupta stated that with the gas rates the Cost-of-Service Study would be approved and that the new Cost-of-Service Study was cost shifting a large amount from smaller commercial G2 class to the G1 class. He noted that residential rates were not going up just because of increases in system-wide costs but also because of decisions made by the consultant on how to allocate the costs. He referenced Packet Page 106 and the General Fund transfer allocation, which had been changed to a revenue-based allocation, so customer class G1 would bear a larger proportion of General Fund transfer costs. He also addressed the rate-based allocation of the distribution assets, which had been updated to use a revised average and excess calculations, which would shift asset value from G2 to G1. He asked if the prior COSA was compliant with Proposition 26 and why there were 2 changes being made to the proposed Item #1     Packet Pg. 10     Utilities Advisory Commission Minutes Approved on: Page 6 of 38 COSA. If the UAC did not agree with coding the General Fund transfer allocation, for example, he asked if such pieces could be returned to the consultant to obtain a revised rate schedule. Ms. Bilir answered that the prior COSA was compliant with Proposition 26. She explained why the 2 changes were being made to the proposed COSA. Concerning making changes, she outlined that the study was integrated and interlinked. It was possible to request that the consultant look at it, but they would most likely want to start fresh, which would require restarting the study and looking at the methods and reevaluating and taking an entirely new approach. She added that in that case the rates would not be available by July. Vice Chair Mauter asked how frequently cost-of-service studies were completed for Gas Utility and if there was guidance in Proposition 26 mandating the frequency of cost-of-service or if it was a Utility decision. Ms. Bilir answered replied that the last Cost-of-Service Study was in 2020, but there had been a few updates in 2021. The study would typically be done between 3 and 7 years. She did not believe that Proposition 26 mandated the frequency of cost-of-service, but it was typical do it every few years. Commissioner Metz asked if the CPAU had investigated operational expenses for the Gas Utility lately. Matt Zucca, Assistant Director of Utilities Water, Gas, and Wastewater Operations and Engineering, responded that operational costs would probably be largely driven by labor, which was split across 3 utilities. He was not aware of spending a lot of money on the operations side short of reducing the frequency of leak surveys performed in residential areas. They did the gas surveys more aggressively than required in order to be proactive and identify leaks earlier. They looked at the budget every year and tried to ensure that adjustments would be made accordingly. He did not know if there was a lot of opportunity to investigate operational expenses. Commissioner Tucher commented that the COSA was new to him. He asked what the consultant thought about Palo Alto financially and prudently managing the Gas Utility. He did not see a summary in the document. He could not get a sense for what the consultant was telling Palo Alto to do in assessing the utility. He added that it would be helpful to have a slide summarizing the high points of the COSA. Commissioner Gupta stated that he could not support cost shifting so dramatically from G2 to G1 residents. He moved to remand the COSA to look at cost shifting changes. Commissioner Philips inquired as to the potential legal risks of doing that. Karla Dailey, Assistant Director of Utilities Resource Management Division, stated that once a COSA was published, it would be the document defending how costs among customer classes Item #1     Packet Pg. 11     Utilities Advisory Commission Minutes Approved on: Page 7 of 38 would be allocated. She opined that the best course of action would be to explore methodologies that might address some of the concerns when doing the next COSA. However, the concerns could not drive the COSA. Vice Chair Mauter inquired if the primary driver of the cost increase was excess or peaky demand by residential users on the system. Ms. Bilir responded that the consultant’s findings related to excess or peaky demand by residential users on the system. Commissioner Gupta discussed why he had issues with attributing a larger portion asset value to G1 based on seasonal usage variability, which he thought could introduce more volatility in rate calculation. Chair Scharff found cost-of-service studies to be frustrating. He believed that assumptions made by the consultants would drive it certain ways, so he did not think Commissioner Gupta was wrong. He supposed the Cost-of-Service Study could be redone/amended, although he did not see that happening, but if it was done it would need to be a Council-driven initiative. He remarked that the cost-of-service studies were basically the framework of the rates being defensible, and he thought the City would be open to risks if the study were redone. Ms. Dailey noted that staff had offered an alternative that could help the residential G1 customers with the rate impacts. She pointed out that the smallest of the G2 customers were small, multifamily complexes and the results of the COSA provided some relief to those customers. Commissioner Tucher inquired if the UAC had ever had a discussion related to the choice of the consultant, the directions given to the consultant, and the City’s expectations or steering of the consultant. He understood that it would be perilous to change the study. Ms. Bilir responded that an RFP had been done in 2021 or 2022, which went to Council with the consultants as part of the on-call contract. The study had not been discussed with the UAC prior to that. She clarified that the COSA was an assessment of revenue requirement and the costs imposed on the system by different customer classes. It was not an assessment of how well the utility was run. Commissioner Tucher stated [inaudible 1:14:05] that these were the costs and the revenue requirements [inaudible 1:14:08]. He understood that no special directives had been given on some of the concerns regarding customer classes or guidance in moving from class to class. Ms. Dailey confirmed that was correct. Item #1     Packet Pg. 12     Utilities Advisory Commission Minutes Approved on: Page 8 of 38 Vice Chair Mauter understood that a Cost-of-Service Study was an effort to equitably split the pie. It would be unfair to any customer class if the rates did not reflect the cost a customer class was imposing on the system. Commissioner Tucher stated that he would have appreciated the recommendations being more explicitly spelled out in a slide. He queried if staff agreed with the COSA recommendations. Ms. Dailey said staff agreed with the COSA recommendations. Ms. Bilir stated that staff took the work very seriously and they reviewed in detail all the data and the assumptions made by the consultant. Vice Chair Mauter wanted to close the open motion, which could be done by Commissioner Gupta withdrawing the motion or the motion could be voted on if there was a second. Commissioner Gupta wanted to vote on the COSA looking at cost shifting changes. Chair Scharff asked if the motion included the direction that should be taken in remanding the COSA back to the consultant. Commissioner Gupta answered that the direction would be to revert the changes it made from a prior COSA with respect to cost shifting, specifically on Page 1 of 6. Chair Scharff stated that the assumptions in COSA led to the rate design, which led to cost shifting. He questioned if the motion was to remand the COSA to use the previous assumptions. He added that legally the outcome of a COSA study could not be directed. Commissioner Gupta wanted to reject the changes related to how it would allocate current charges and revert to the prior COSA. Vice Chair Mauter asked if there were any seconds for the motion. Hearing none, the motion did not move forward. She asked Commissioner Philips to review the 3 options the Finance Committee studied. Commissioner Philips stated that the subcommittee looked at 2 potential options – the Cap- and-Trade Reserve and to do a transfer to the General Fund of less than 18 percent. The third was the original rate. Vice Chair Mauter questioned the intended purpose of drawing down the Cap-and-Trade Reserve Fund as it related to the legality and the appropriateness of it, how much had been spent and the amount of the standing reserve, and if adopting it would imply that it would continue to be adopted in the future. Item #1     Packet Pg. 13     Utilities Advisory Commission Minutes Approved on: Page 9 of 38 Ms. Dailey answered that the revenue from Cap-and-Trade was the result of free allowances allocated to the Gas Utility as a compliance entity under the Cap-and-Trade Regulation. The State had restrictions on spending the money, and Council had adopted a list of allowable activities to use the money on, which not much of had been spent. Council preferred to use the funds for greenhouse gas reduction activities, but it could legally be returned to the customers on a nonvolumetric basis, and it could be returned to one customer class and not all customer classes, so money could be directed to just the residential customers who would feel the rate change more than others. She added that it was a use Council had approved. The full Cost-of- Service Study would be adopted this year, and it would be in place until the event of another Cost-of-Service Study. Staff’s proposed alternative was a 1-year credit that would be accompanied by encouragement to electrify. Council could decide to continue/increase/decrease a climate credit in future years. Staff was not presenting that alternative today and they were addressing next year, but it did not preclude using that money in the same way in future years. Vice Chair Mauter asked if it was likely that more would be spent than what was received, such that it would not be sustainable, and what was expected to be spent from the Cap-and-Trade Reserve. Ms. Dailey stated that the City was having discussions on climate action, 80 x 30 goals, and keeping rates low, and there was a study session scheduled (possibly for May 5) for Council to address the choice. At some point, the money would run out, but there was quite a lot in there currently. Ms. Bilir noted that Packet Page 196 had a table with all the reserve balances. It was expected that the climate credit of $1.6M would be spent from the Cap-and-Trade Reserve. Kiely Nose, Interim Utilities Director, thought consideration should be given to the fund being sustainable. She stated that there may be an opportunity to look at further incentivizing folks to move toward electrification. Vice Chair Mauter inquired if in any way these would be used as a policy. Ms. Nose answered that they would not be used as a policy. The COSA was strictly based on the cost of providing service to customers. In this instance, there might be a chance to further help the parallel goals. She thought these were levers for the Commission and Council to consider how to spend the Cap-and-Trade funds and how to deal with the cost of providing the service in balancing rate affordability and sustainability goals. Ms. Bilir referenced Packet Page 72 and noted that the Cap-and-Trade Fund had had $13.5M at the end of FY2024. The projected balance at the end of 2025 was $16.9M, and the balance would decline over time as the Climate Action Budget was reflected in it. Item #1     Packet Pg. 14     Utilities Advisory Commission Minutes Approved on: Page 10 of 38 Alan Kurotori, Utilities Chief Operating Officer, added that Cap-and-Trade for investor-owned utilities received about 98 percent of all Cap-and-Trade for natural gas. Besides compliance, the funds were used for residential climate credits. They programmed in for a long-term view for Council to consider a balance of the use of the money for S/CAP goals and to consider helping customers given the larger increase for the first year. The UAC and Council could recommend continuing the credit if desired. Commissioner Croft inquired if it would be appropriate to take funds from the General Fund to relieve customers and if the funds could be used for a single customer class. Ms. Dailey answered that staff felt it was appropriate to include the General Fund transfer that Council directed staff to plan for in last year’s financial planning cycle. It was within UAC’s purview to make a recommendation to Council. She thought funds from the General Fund would apply to the full Gas Utility and that it could not be targeted for different customer classes. Commissioner Philips stated that about 45 percent would go to residential. He queried what reduction from the $18M would result in a 9-percent increase for the median consumer. He was concerned that the 22 percent assumed no increase in the price of natural gas and that the forecast models were predicting increases. He voiced that the 22-percent increase was a best- case scenario and that it could be more. Ms. Bilir replied that they had not looked at the amount of reduction from the $18M that would result in a 9 percent increase. They looked at continuing the 14.5-percent General Fund transfer from last year, which they had determined would be about a 2- to 4-percent reduction in the median residential Gas Utility bill across residential and nonresidential customers. Commissioner Philips queried if more than a 14.5-percent transfer would keep the increase to 9 percent. Ms. Bilir clarified that if the General Fund transfer was 14.5 percent instead of 18 percent it could achieve an approximately 4-percent reduction, so instead of 22 percent for the median residential customer, it would be 18 percent. Chair Scharff wanted to suggest to Council that they use the Cap-and-Trade funds. He was also amenable to suggesting lower than 18 percent, but he noted that Council wanted 18 percent. Mayor Lauing, Utilities Advisory Commission Liaison, stated that they had to be very cautious in budgeting. He thought Council would consider using part of this in something other than the general plan if it would positively affect utility rates. He did not think that had been addressed by the Finance Committee. Vice Chair Mauter reiterated that Cap-and-Trade reserves were predicted to be $13.7M at the end of 2026, that they were currently at $16.9M, and that in 2027 they would be at $11M. She Item #1     Packet Pg. 15     Utilities Advisory Commission Minutes Approved on: Page 11 of 38 stated that a $3.5M increase was expected in the Cap-and-Trade reserves this year, and she queried how much of that would be proposed to be spent. Ms. Bilir clarified that the most recent recorded balance was at the end of FY2024 and was $13.5M. The other balances were projected. Of the $3.5M, the proposal would be to spend $1.6M. Vice Chair Mauter wanted to turn to potential recommendations, one of which was to use the Cap-and-Trade funds to offset, so increases to the G1 residential class. Vice Chair Mauter moved to give a 1-time credit, basically the $1.6M that would be spent, to the G1 customers on their bills. Commissioner Philips seconded the motion. Commissioner Gupta expressed that he would vote no on the proposal. He did not support the use of green funds to subsidize the use of fossil fuels. Commissioner Tucher asked what the downside would be in using the funds, what they had been used for in the past, and what they were hoped to be used for. Ms. Dailey stated that the downside was that Council had generally expressed a desire to use the funds for climate reduction activities, but staff felt it was a reasonable alternative given the rate increases. The funds were primarily used for electrification, such as for heat pump subsidies, etc. Commissioner Philips queried if the motion was to accept the recommendation at the level proposed. Chair Scharff affirmed that that was part of the motion. He added that it was important to note that the funds were accruing and being drawn down for the Climate Action Plan and that they were not all being used. He added that funds could be taken from the General Fund for the Climate Action Plan in the future. He thought the huge increases in rates should be mitigated. Commissioner Croft found the 11-percent residential increase to be striking. In principle, she did not agree with taking money from Cap-and-Trade. She stated that it was important to mitigate the increase. She would support it. Motion Carried 6-1, Commissioner Gupta Voted No Vice Chair Mauter asked if there were questions or comments related to General Fund expenditures in addition to Climate Reserve expenditures. Commissioner Gupta moved to adopt the rates as presented by staff in the Staff Report. Item #1     Packet Pg. 16     Utilities Advisory Commission Minutes Approved on: Page 12 of 38 Commissioner Metz questioned if there was a specific number moved. Vice Chair Mauter replied that there was not yet a specific number. She asked if there were questions on use of the General Fund and, if so, she requested a motion on a specific number to propose. She asked how last year’s proposal to reduce to 14.5 percent had been arrived at. Ms. Bilir detailed how the 14.5 percent gross gas revenue had been arrived at last year. Council had adopted the 14.5-percent transfer for FY2025 and had directed that in the future it return to 18 percent. Ms. Dailey recalled that staff had recommended a more gradual ramp to the full 18 percent and that Council did not adopt it. Vice Chair Mauter asked if there were questions related to the gas transfer. Commissioner Tucher remarked that there was strong opposition in the community to the structure in general, and he inquired how this would be defended. Commissioner Philips replied that the taxpayers voted for it. Commissioner Gupta commented that it would be useful to recommend to Council something lower than the full 18 percent, particularly given the high increase in gas prices for residents. He moved to maintain the 14.5 percent from last year, although the number could be amended. Commissioner Metz inquired what the 1-percent payout would equate to in terms of percent in increase in gas rate for residential. Commissioner Philips was not that interested in reducing commercial rates over where they would go with COSA. He expressed why he would probably not support a reduction. Although in general and in principle, he was against the tax on gas to support the General Fund. Chair Scharff was disappointed that Council had not followed what the UAC had recommended. He somewhat associated his comments with Commissioner Philips. He did not support the motion. Vice Chair Mauter invited a motion, which could be discussed. Commissioner Gupta motioned to recommend that Council keep the General Fund transfer to 14.5 percent. He thought the Cap-and-Trade allocation recommended by UAC would be a 1- time allocation, so it would not avoid the issues in the coming years. Holding the General Fund transfer to 14.5 percent might help with gas rates longer term. Commissioner Tucher seconded the motion. Item #1     Packet Pg. 17     Utilities Advisory Commission Minutes Approved on: Page 13 of 38 Motion: Keep GF Transfer to 14.5%, Commissioner Gupta moved Commissioner Tucher seconded the motion Commissioner Croft expressed that in general she did not support subsidizing gas from the General Fund. She only supported the Cap-and-Trade Reserve use for this purpose just to decrease hardship. Going forward, she thought the cost should be accepted and that perhaps it would incentivize people to electrify. She spoke of why she was disappointed that the fixed costs (not the usage costs) were going up. Commissioner Philips clarified that it was not a subsidy but a reduced tax. The Cap-and-Trade was subsidized. Vice Chair Mauter thought that the motion to reduce the transfer would further reduce bills for some customer classes and handicap the ability to use the transfer argument next year to further smooth rates going forward. She would not support the motion. Motion did not carry 3-4, Chair Scharff, Vice Chair Mauter, Commissioners Croft and Phillips voted no Vice Chair Mauter noted that she was looking for a motion to recommend to Council staff’s modified recommendation (Version 2) approving FY2026 Gas Utility. Commissioner Phillips moved to recommend to Council staff’s modified recommendation (Version 2) approving FY2026 Gas Utility. Commissioner Metz seconded the motion. Motion carried 5-1, Commissioner Gupta voted no, Commissioner Tucher abstained. ACTION: Recommend to Council staff’s recommendation approving FY2026 Gas Utility financial forecast, as modified to provide a one-time credit, of approximately $1.6M that would be spent from the Cap and Trade reserve, to the G1 customers on their bills. Break 7:50 p.m. Return from break 8:04 p.m. ITEM 4: Staff Recommends the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution, Approving the FY 2026 Electric Financial Forecast, including Transfers, Amending Rate Schedules E-1 (Residential Electric Service), E-2 (Residential Master-Metered and Small Non-Residential Electric Service), E-2-G (Residential Master-Metered and Small Non Residential Green Power Electric Service), E-4 (Medium Non-Residential Electric Service), E-4-G (Medium Non-Residential Green Power Electric Service), E-4 TOU (Medium Non-Residential Item #1     Packet Pg. 18     Utilities Advisory Commission Minutes Approved on: Page 14 of 38 Time of Use Electric Service), E-7 (Large Non-Residential Electric Service), E-7-G (Large Non Residential Green Power Electric Service), E-7 TOU (Large Non-Residential Time of Use Electric Service), E-14 (Street Lights), E-16 (Unmetered Electric Service), E-EEC-1 (Export Electricity Compensation), and E-NSE-1 (Net Metering Surplus Electricity Compensation) ACTION 7:55PM – 8:40PM Vice Chair Mauter declared that staff would present and then she would read the entire agenda item when asking for public comment. Lisa Bilir, Senior Resource Planner, provided a slide outlining the electric rate proposal. She stated that the Electric Utility would be doing large projects and debt financing for grid modernization over the next several years, and this proposal would ensure that the most economical financing cost would be achieved. A driver for the rate increase was a significant investment in grid modernization, which would be funded through revenues and bond financing with the first bond issuance in FY2026. The reserves in the Electric Utility were recovering from a drawdown in 2020 through 2022. Although the supply costs were lower in the current year, in the longer term, the transmission cost and the renewable energy targets would rise. Since December 2024, staff had made updates to the proposal, which she elaborated on. She explained that the General Fund transfer estimate had been increased. The Climate Action Budget was reflected in the reserves and the supply forecast had been updated. She noted that the projected number for FY2026 had not been increased, but they were potentially looking at increases between 6 and 8 percent per year in 2027 through 2030, and they would continue to refine those every year. She shared a slide showing electric bill comparison with PG&E and Santa Clara and a cost and revenue projection chart. She discussed the large fluctuations in the chart. She furnished a chart showing the supply operations reserve, which she discussed. She displayed a slide showing the bill impact of the proposal. Catherine Elvert, Utilities Communications Manager, stated that the primary objective of the communications strategy was to ensure transparency, foster understanding behind the reason for the rate increases, engage with stakeholders, address concerns, and encourage public participation in the decision-making processes. The primary goal was to manage the utility services to ensure the continuation of safety, reliability, sustainability, and cost effective operations. They had communicated the need for the rate increases being driven by infrastructure, maintenance, compliance, and maintaining adequate financial reserves. She outlined how they had communicated with people in a variety of ways, which included digital, mail, etc. Even though the rates were increasing, Palo Alto remained competitive with other utilities. They wanted to communicate what the City was doing and the services offered to customers to keep costs low. She spoke of the benefits of grid modernization. Commissioner Tucher queried which outreach strategies were most important and effective. Ms. Elvert replied that they used a variety of communications because people received and processed information differently. Information was online and they used email, newsletters, social media, community message boards, direct mail, and engagement through community Item #1     Packet Pg. 19     Utilities Advisory Commission Minutes Approved on: Page 15 of 38 outreach events. They provided a way for customers to communicate with them on a 2-way system, which she explained. Engagement with the local media was very effective, so their goal was to engage with media representatives. Commissioner Tucher mentioned that a future meeting he wanted to know the response from the local media and what goals or frustrations there might be and which digital communications were the most effective. Commissioner Philips stated that the Finance Committee’s conversation had been less extensive than the gas discussion. The forecasts had been revised slightly upward, but they were pretty flat and included EVs and electrification but not new housing from the Housing Element. There was a forecast that was much higher and included aggressive data center estimates. They were unanimous in considering the 5.1-percent increase reasonable. Commissioner Tucher asked if the subcommittee had looked at several growth forecast scenarios. Commissioner Philips responded that staff had presented several growth forecast scenarios to them. Commissioner Croft stated that the growth forecast scenarios could be found on Packet Page 123. Commissioner Metz questioned what the impact would be and what would be done about it. He referenced Packet Page 123 and stated there was a reservation for a 60 gigawatt hour per year increase, which was more than 6 percent of the total, and he wanted to know what it would do the grid, finances, and the load profile and what would happen to rates, stability, and RPS targets if the high forecast should be reached. Karla Dailey, Assistant Director of Utilities Resource Management Division, stated that those questions were not addressed in the financial forecast. They were in the process of looking at dramatic load growth possibilities and the financial and physical impacts. For this forecast, they were using a relatively conservative load growth scenario so there could be confidence in recovering the revenue requirement. They were not depending on load that had not yet shown up. Commissioner Metz did not consider the impact of much bigger growth to be financially benign, but he thought it was being said that it would be. Vice Chair Mauter asked how growth would impact the direction of rates. Ms. Dailey stated that it was not a simple answer. Growth up to some point would probably have a positive impact on rates, and there would probably be a tipping point where it would Item #1     Packet Pg. 20     Utilities Advisory Commission Minutes Approved on: Page 16 of 38 not, and staff did not know where that was exactly, but they were looking at those scenarios closely. Commissioner Gupta did not want to be concerned with the high part of the graph as the direction was not actually known. He thought it would continue to be studied and considered in the coming years. He wanted to stay the course in thinking through capacity. He did not consider growth through the Housing Element to be an issue in terms of capacity as he thought the capacity reservation would handle that. Commissioner Philips moved the staff recommendation. Commissioner Gupta seconded the motion. Motion carried 7-0 ACTION: The staff recommendation was moved. Public Comment There were no public comments. Chair Scharff declared that the Commission would have revoted if there had been public comment. ITEM 5: Review and Recommend Utilities Advisory Commission FY 2025 – 2026 Work Plan for City Council Approval ACTION: 8:40PM – 9:30PM Vice Chair Mauter recognized the tremendous effort and careful thought that had gone into the 14 recommendations provided by the Commission. She stated that there was a Work Plan and an agenda setting process and that it was important to not conflate the two. She understood that there were 2 options. One was approving the standing Work Plan and then turning individually to the 14 proposed items that would augment the Work Plan. As for the second option, Commissioner Croft had prepared alternative language to some of the standing topics and modified the description of those standing topics in such a way that they would mostly (with the exception of 4) include the proposed topics of the Work Plan under the existing standing topics, which did not mean they would not be agendized but they would not appear separately in the Work Plan. Staff prepared for Option 1, to approve all standing topics and then turn to each item individually. The Commission had a choice in the path to take. Commissioner Gupta asked which 4 work plans would not be included in Commissioner Croft’s proposal. Commissioner Croft answered that universal access (which she suggested discussing), regional collaboration on water supply, credit card fees, and, she thought, federal issues had not been specifically added to each item. Item #1     Packet Pg. 21     Utilities Advisory Commission Minutes Approved on: Page 17 of 38 Vice Chair Mauter confirmed that it was Work Plan topics 3, 4, 5, and 7. Commissioner Philips did not understand the proposal, and he asked what the advantage would be to doing this instead of what staff had proposed. Vice Chair Mauter stated that the proposal was to modify the language of the standing topics as opposed to adopting a subset or all of the 14 proposed topics submitted by commissioners. Commissioner Croft discussed why she had taken the approach she did. Commissioner Gupta found the approach to be efficient as long as there would not be a later argument that somehow a Work Plan that had been proposed was not included, other than the 4 exceptions. Chair Scharff found that it made it much cleaner and manageable. Kiely Nose, Interim Utilities Director, was not sure of the best approach. However, she felt there was a high likelihood for conflict in the future if taking the high-level approach, which she explained. She was not recommending going through a line-by-line list, but there were serious projects on the list of 14, outside of the 4 identified as exceptions, that would require a significant amount of resources and attention. She added that they were not in line with current direction from Council. She thought those items questioned whether to divert resources in those areas. She was concerned there may be tension in the coming 12 months due to not having the bandwidth to extensively discuss the 10 additional items. She explained that her department was in transition and that they were constrained in taking on new projects. As an example, Item 2, purple pipe, would be a new initiative to reinstate work. They did not have staff dedicated to data center competitiveness. She added that there were others. Vice Chair Mauter stated that several commissioners had not previewed Commissioner Croft’s modifications, and she suggested that they be displayed for the Commission. If there was general consensus to move forward with the modification to the existing standing topics, rather than the addition of new topics, then the proposed list could be used as an opportunity to discuss what the Commission wanted to agendize in the future, what staff did not have the capacity to handle, a Work Plan that may not align with the recommended direction of the Utility itself, and what there would not be time for in this year. She asked the Commission if that was a fair approach. Commissioner Metz wanted to see the list [inaudible 2:47:30]. Vice Chair Mauter stated that Commissioner Croft’s list was a modification of the existing standing topics. Modifications were noted in red, and the brackets indicated where she and Commissioner Croft believed some of the items submitted as proposed topics were being addressed. She suggested the Commission go through the proposed topics to ensure that they Item #1     Packet Pg. 22     Utilities Advisory Commission Minutes Approved on: Page 18 of 38 would all be addressed, and she noted that displayed on the screen was how they would be represented. Commissioner Metz queried what the box with the number 1 under gas supply represented. Vice Chair Mauter referenced the table on Packet Page 226, and she stated that number 1 related to long-term strategy for CPAU’s natural gas utility. Commissioner Metz questioned if it was a new topic that had been listed. Vice Chair Mauter responded that the revision to the standing topic would cover the proposed new topic. Commissioner Metz understood, but he disagreed. Commissioner Croft asked staff to comment on how they used the Work Plan and how it would affect their decisions on what to bring to the Commission. Ms. Nose answered that the Work Plan helped guide resource allocations and the items brought forward to the UAC and included routine items. It was also intended that the Work Plan would identify areas that Council had asked the UAC for further guidance on or advisory work. She thought many of the 14 proposals could be further clarified in the language. She thought a new initiative might be an area of tension. Chair Scharff asked if 3 things should be chosen to add to the Work Plan instead of 14 due to staff resources. Alan Kurotori, Utilities Chief Operating Officer, stated that staff had tried to describe which of the 14 items were included as standing topics and they tried to bifurcate that with new items. Some items could not be addressed in the 1-year work plan, such as the microplastics, which might be a better item for future years. Staff would have to get approval from Council for new items prior to doing work. They could work on the items in the existing Work Plan. He wanted to get clarity on items and issues already being addressed and to have a deeper dive into some of the new items and determining if it would be a priority item for this year. Chair Scharff understood that staff did not have the bandwidth to work on the 14 items. He wanted to know if staff should comment on the feasibility of putting each item in the Work Plan and if there should then be a vote to follow the staff recommendation or if staff should comment on what they had the bandwidth to do and the Commission could then vote on not doing the other ones. Ms. Nose thought staff could identify a list that they had concerns with, and if the Commission could focus on those, she believed staff could edit the Work Plan for the rest of them. She suggested focusing on the 5 items causing pause. Item #1     Packet Pg. 23     Utilities Advisory Commission Minutes Approved on: Page 19 of 38 Chair Scharff wanted to address each of those 5 items and decide whether they would be included. Vice Chair Mauter strongly agreed. She wanted to address all of them so it would be understood where they would be addressed in the revised language. The 5 that staff was suggesting not be included could be addressed first and then the others could be addressed in order to revise language to standing topics or determine if a separate topic would be needed. Ms. Nose suggested that Items 2, 3, 8, 9, and 12 be discussed and that staff work on the placement of the others. Vice Chair Mauter agreed to proceed in that manner. Public Comment Hamilton Hitchings hoped there would be strong oversight of geographic failure and residential fiber. Regarding geographic failure, he suggested partnering with Stanford, although there were also other alternatives. He discussed the City not having a monopoly on fiber. He stated that the City analysis indicated that an absolute minimum of 27 percent of all homes needed to adopt the City’s fiber service to break even, which would be hard because he understood that AT&T fiber covered 71 percent of the city and was expanding. He asked the Commission to read the University of Pennsylvania’s Municipal Fiber in the United States, a Financial Assessment by Christopher Yoo. He stated that he had AT&T fiber and loved it. Vice Chair Mauter declared that Topic 2 would be addressed. Commissioner Philips asked if there would be a vote on each one. Vice Chair Mauter suggested voting on each item and the Work Plan as a whole. Chair Scharff suggested that staff speak to each item first and then whoever added the item respond and that each item be voted on. At the end of the vote, staff could voice whether they had the bandwidth to do it. Ms. Nose requested that Item 12 not be specific to Stanford but to discuss the prioritization and a second transmission corridor, which was part of staff’s Work Plan. Staff would be concerned if the Commission wanted to specifically explore a Stanford interconnect. Vice Chair Mauter declared that staff would start the discussion with each of the 5 items of concern and then the Commission could discuss them. She addressed Number 2, Feasibility Study of Purple Pipe Expansion. Item #1     Packet Pg. 24     Utilities Advisory Commission Minutes Approved on: Page 20 of 38 Karla Dailey, Assistant Director of Utilities Resource Management Division, stated that it had been studied extensively and was found to be expensive and not feasible as a water supply alternative. They wanted to focus on different types of projects moving forward. Commissioner Gupta noted that he was one of the commissioners who submitted it, and he agreed with staff. Vice Chair Mauter asked for a show-of-hands to vote to eliminate it. [____] [inaudible 3:06:34]. Vice Chair Mauter stated [inaudible 3:06:38]. She addressed Item 3. Mr. Kurotori stated that the universal access was to enhance accessibility on ADA compliance to ensure equitable service for all customers. He opined that it would better fall under the purview of the HRC rather than the UAC. Commissioner Gupta commented that he was one of the commissioners who had submitted the topic. He noted that the Work Plan was about how customers with disabilities accessed CPAU’s services, and he asked if the HRC could review that. Mr. Kurotori responded that to the extent it would be involved with the billing system would be under the UAC, but if it was looking at access for the community as a whole, unless it was very narrowly defined for the utility bill, then it should go to HRC. Commissioner Gupta asked that the table be furnished. When he submitted it, it was supposed to be fairly specific to CPAU. Ms. Nose stated that it addressed the billing portal, communications, and facilities and looking at best practices and universal design, including community engagement. Even if specific to the Utility, engagement was a large undertaking. If the Commission wanted staff to embark on it as a priority, it would require resources and it was not necessarily on the current Work Plan. Commissioner Gupta asked if, being specific to CPAU, it could be addressed by the HRC. Vice Chair Mauter stated that it did not seem to be fully specific to CPAU, so it needed to go to the HRC, which was staff’s recommendation. [____ 3:09:52] [inaudible ] facilities, which the CPAU did not have full control over. Commissioner Gupta was happy to amend [out 3:10:01] the physical sites, which was a small portion of the proposal. The chief concern was how folks requiring accommodations would access and understand the services. Particularly as AMI was added, he was curious how well those features would be usable to disabled customers. He had read that up to 47 percent of Item #1     Packet Pg. 25     Utilities Advisory Commission Minutes Approved on: Page 21 of 38 residents across the Bay Area required accommodations, so he thought it was a significant issue and that it should be considered as a CPAU to ensure services would be available to all. Commissioner Croft inquired if the proposal was in response to complaints or if it was a proactive proposal. Commissioner Gupta responded that it was a proactive proposal, which he elaborated on. He understood that outreach had not been done to customers requiring accommodations. Vice Chair Mauter was concerned that the item did not fall under the purview of the UAC. She considered the timeline for conducting accessibility audits and launching customer surveys to be in the domain of staff rather than the UAC. She was struggling to understand what the Commission would do and where it would provide guidance. Given the limited bandwidth, she did not find the topic to be right for input from the Commission. Chair Scharff concurred with Vice Chair Mauter. He noted that he had not heard complaints regarding this, so he it was unclear why this would be launched at this time. Commissioner Gupta would be happy to remand it to the HRC if that was the consensus. His understanding of the Work Plan process was to help define where staff should spend their time. Vice Chair Mauter stated that the UAC would not and should not direct staff time and that the Work Plan was for the Commission, not staff. Ms. Nose stated that this was not intended for operations but for the UAC to help advise Council on policy items. Commissioner Gupta queried if the work plans would be advised forward to Council. He was trying to distinguish between the purpose of the Work Plan versus the direction of staff time. Mayor Lauing, Utilities Advisory Commission Liaison, stated that Council had to approve the Work Plan. Until approved, staff could not work on projects that had not been approved in the prior plan. Vice Chair Mauter understood that it was a Work Plan for the UAC in particular so the UAC could work on the topics only if approved by Council and that the Work Plan was not for the Utilities themselves but that the General Manager, Assistant General Manager, and the Utility’s Director direct work for the Utilities. Mayor Lauing confirmed that was correct. Item #1     Packet Pg. 26     Utilities Advisory Commission Minutes Approved on: Page 22 of 38 Ms. Nose stated that everyone was correct in their statements, that all things could be true, that there were nuances, that it was not one or the other, and that all helped funnel through at the direction of Council. Vice Chair Mauter stated that the UAC would not conduct an accessibility audit or launch customer surveys, so she wanted to know if it was a reasonable thing to have on the UAC Work Plan. Ms. Nose stated that staff would conduct accessibility audits and launch customer surveys, not the UAC. However, staff would bring forward policies or programs beyond ADA compliance to the UAC as a result of that work and then the UAC would recommend those programs or policies or adjustments to them to the full Council for their consideration. Staff’s work would be the inputs to get to those program or policy changes. She thought the question was whether this was an area that the Commission would like to recommend as a new area to dedicate resources to over the course of the next 12 months. Commissioner Gupta questioned if this should be remanded to the HRC because it would be a better place for the topic. Ms. Nose answered that if it was for universal access to the City’s programs, facilities, and systems, it would be an HRC topic. The UAC did not have authority to remand anything to another committee or commission. The UAC could identify additional important topics in the Work Plan, and the UAC could advise Council of it, but outside of an action by Council, it would not necessarily be remanded to HRC. She added that the HRC was also working on a Work Plan. Vice Chair Mauter requested that staff make a recommendation on the topic that the Commission could vote on. Ms. Nose thought the question was whether staff should spend time on analysis above and beyond what was required for ADA accessibility. She thought the vote by the UAC would be whether to recommend to Council spending time and resources to serve disadvantaged populations over the course of the next 12 months. Commissioner Gupta stated that the text of the proposal was more specific to the Utilities except for maybe the facilities point. He questioned if it could be requested that Council broadly view it and send it to HRC. Vice Chair Mauter asked if Commissioner Gupta was withdrawing the proposed topic and that it instead be submitted to Council separately for them to direct it the HRC. Commissioner Gupta confirmed that was correct but that maybe it be phrased that some commissioners were interested in the topic but maybe the more appropriate place would be to look at it citywide and that the HRC might be a better place to do that. Item #1     Packet Pg. 27     Utilities Advisory Commission Minutes Approved on: Page 23 of 38 Mayor Lauing suggested that the UAC staff liaison talk to the HRC staff liaison to see if there was interest in addressing it. Vice Chair Mauter recommended that Commissioner Gupta withdraw the proposed topic and that it be noted that the respective representatives would be in touch. Commissioner Gupta agreed to do that. Vice Chair Mauter addressed Number 8, Data Center Competitiveness. Mr. Kurotori voiced that they were very interested in exploring options for data centers to come to Palo Alto. However, he detailed why it was not a suitable item for a 1-year work plan, although there may be future discussion of incremental items related to it. He noted that the item may not be in the interest of daylighting, etc. Commissioner Philips mentioned that he was one of the sponsors for this. He understood that accommodating a large data center would be a substantial investment of staff time. He questioned if the City should be proactive in trying to attract data centers. He wanted to know at what point data centers would be good for rates and at what point they would not be. He understood that the City would work out the details if someone showed an interest, which he thought would put the City in an unprepared position. He asked if getting one would be good or neutral. Commissioner Metz understood that staff did not have the resources to address it at the speed portrayed. The solution may be to do the intro, and he questioned if that would be acceptable. He understood that there had not been preparation to deal with this. Vice Chair Mauter stated that data centers were one of many of future large loads that would come into the grid, and she thought there had been general and consistent interest by the UAC to have greater clarity of how load growth would likely impact rates, which would inform decisions about attracting load-consuming customers. Mr. Kurotori stated that it tied into the efforts the UAC were already engaged in. They were talking about the second transmission quarter bringing in additional capacity from theCAISO to Palo Alto. The City’s peak was around 170 megawatts, and the data centers on a smaller scale could be 10-20 megawatts, which would be a significant load, so staff would have to look at the transmission corridor and integrate it in the grid modernization. He thought it could be integrated as part of the grid modernization and looking at larger loads, not just data centers, which might be the size of impact they could evaluate as part of the workflow already occurring. Commissioner Tucher strongly supported Point 8, but he did not want to raise the bar too high. He voiced that data centers for the industry at large would drive electrification in America. On one hand, the UAC must be focused, knowledgeable, and fluent in the market potential of data Item #1     Packet Pg. 28     Utilities Advisory Commission Minutes Approved on: Page 24 of 38 centers to drive the business. On the other hand, the City did not have sub 10-cent electricity, which was an argument for data centers being a pie in the sky. He did not know if the City should drive hard to attract data centers or if the City would ever have the wherewithal to attract them. He wanted assessment studies and he wanted to know why those interested in data centers in Palo Alto were interested in them being in Palo Alto. Mr. Kurotori understood that the UAC wanted a feasibility analysis, which would have to involve transmission planners, to look at the system and the ability to expand and the capacity the City could build. He thought that would be helpful for the UAC to understand the available capacity. He discussed Palo Alto having limitations. If there were to be data centers with AI or advancements in autonomous vehicles, Palo Alto would have to be close to the data. He believed staff could do a feasibility analysis to look at the size and scale that would fit in Palo Alto. Commissioner Tucher felt that a market demand assessment should come before that to identify potential customers. He wanted to know who had interest. Commissioner Philips asked if data centers would be a good thing for residential customer rates and if it would be good to a point and what it would take to do it. If it would be good and it could be done at a reasonable price, he wanted to know if there would be a market for it. He did not want a detailed technical study, and he did not think individual customers needed to be identified. Vice Chair Mauter inquired if the submitting commissioners wanted a special agendized topic on data centers or if staff should comment on the items raised in the context of grid modernization, time-of-use rate, electricity rate setting over the coming year, etc. Commissioner Gupta requested that the language he submitted be displayed. The purpose of it was the market analysis and comparing competitive advantages more than the technical side. He wanted to know if there was a class of customer Palo Alto could attract. He thought capacity should be reviewed second. He wanted to see a dedicated agenda item on the topic related to the market analysis, the technical options, and at what point it would be advantageous and at what point would it not be. Chair Scharff stated that putting something in the Work Plan meant the UAC would have the authority to work on it but not that it would be worked on. He found that Commissioner Philips narrowed the topic to doing a first step this year. He wanted to know if data centers would lower the rates for Palo Alto customers and, if so, how many megawatts of data center would not lower rates or if data centers would always lower rates. He asked staff if it would be too much work to start the process Commissioner Philips spoke to. Ms. Nose replied that the proposed topic had a 12-month detailed plan, which she outlined, and before embarking on those activities, staff wanted to understand if it could be supported with the current system. She thought Chair Scharff’s proposal was feasible. Item #1     Packet Pg. 29     Utilities Advisory Commission Minutes Approved on: Page 25 of 38 Mr. Kurotori confirmed that Chair Scharff’s proposal was feasible. They could go through the process. He had worked with several data center developers and the first question was power availability and when could it be obtained, so staff needed to do that homework in order to have effective communications. Staff could look at resources, system limitations, and if it would be of value to the City and bring it back to the UAC. Commissioner Tucher stated that when the time was right he would move to do more than just answer the question of data centers being good for consumers but to also do the market analysis. If Mr. Kurotori had had conversations with potential customers, he suggested that he summarize what he knew. He wanted to soon have an agenda item on what was known about data centers, specifically the market potential and how it would affect consumer rates. Commissioner Gupta expressed that Commissioner Tucher’s proposal was adequate to vote on. Vice Chair Mauter remarked that she had heard 2 things – a market analysis and the impact on consumers as a separate agenda item and whether it would be a separate Work Plan item could be debated later. Chair Scharff had heard from staff that they would be amenable to determining whether data centers would make financial sense and the impact on rates and that they did not have time to do the broad process outlined on the screen. He felt that Commissioner Tucher wanted to make a motion to do the broad process. Commissioner Tucher responded that he did not want to do the broad process but just the market analysis, which may be summarizing what the Utility team already knew. He wanted to understand the demand potential for data centers. Chair Scharff questioned if staff had concerns with broadening it to what Commissioner Tucher voiced. Mr. Kurotori replied that staff could support determining whether data centers would make sense. In terms of market availability, a consultant may be needed, which they saw as a separate item. He wanted to answer first whether it would make sense and, if so, then bring it back to the UAC to do the next step of the market analysis. Commissioner Tucher wanted to know what potential customers had voiced to Mr. Kurotori or others, which should not require additional market research. Chair Scharff noted that there should be a vote. He thought it would be fine to put data center competitiveness in the Work Plan and for staff to tell the UAC at some point during the year whether data centers would raise or lower residential rates and at what megawatt levels it would make sense and not make sense, and after gathering that information, the UAC could Item #1     Packet Pg. 30     Utilities Advisory Commission Minutes Approved on: Page 26 of 38 determine whether staff should hire a consultant, etc. He would support that if that was what staff was referring to. Mr. Kurotori stated that staff could support the first and second one. It was necessary to determine whether it made sense to have data centers in Palo Alto and whether it would increase or decrease rates before pivoting to the short term. Commissioner Philips supported that and would love to put it in a motion. Vice Chair Mauter agreed. Chair Scharff wanted it to be put in a motion. Vice Chair Mauter called roll to get commissioners’ opinions, and all commissioners voted yes. She could not let the particular language move forward because there was a question as to how exactly it would be represented in the Work Plan. It was clear that an agendized item was desired. Information was displayed on the screen, and she asked if it was acceptable to everyone rather than trying to revise the Work Plan submission made and have it as a separate Work Plan item. Chair Scharff supported the language on the screen. Vice Chair Mauter suggested that while agendizing data centers, it would not include a separate data center competitiveness item in the Work Plan, so that proposal would be withdrawn. Commissioner Tucher asked if [inaudible 3:51:08]. Vice Chair Mauter answered yes. She addressed Number 9, Microplastics and Forever Chemicals in Water Supply. Matt Zucca, Assistant Director of Utilities Water, Gas, and Wastewater Operations and Engineering, stated that he shared the Commission’s interest in the topic, and it was being monitored carefully. They had sampled for PFAS, and PFAS had not been detected in any surface water, so there was no data to suggest that anything needed to be investigated. He explained that the microplastics topic was scientifically very much in its infancy. In 2022, the State of California issued an order for many of the Bay Area water suppliers to sample surface waters for microplastics, and the results were expected at the end of this calendar year. He thought information would be received within the next year that would inform what might need to be done going forward. Independent monitoring of the water would be redundant to San Francisco’s efforts and maybe premature. Staff suggested waiting for the data to come in and then to reevaluate. He would have to defer to Public Works regarding wastewater. Commissioner Gupta voiced that he had submitted it. He thought there was an interest in studying the issue. He believed the objective of the topic was to make sure the community Item #1     Packet Pg. 31     Utilities Advisory Commission Minutes Approved on: Page 27 of 38 understood the water supply and the wastewater. He wanted to do testing to be able to consider new information as it came in. He noted that a lot of the infrastructure upgrades were introducing plastic components in the water and wastewater lines and there was growing science with respect to that. He wanted to get in front of the issues and understand them before they potentially became an expensive concern. Mr. Zucca remarked that generally water quality data was collected when there was a defined public health goal. There was no current public health goal for microplastics, and there was not sufficient science to develop one. They could collect numbers, but there was no ability to interpret them. Staff recommended waiting for larger players to collect data and for the science to evolve. Vice Chair Mauter wanted to know if water quality broadly remaining to be a key priority would be acceptable to staff. Mr. Zucca stated that was acceptable. If more information was received, they would be happy to return and present the findings. Commissioner Gupta was happy with the broader topic. He thought water and wastewater testing should start in Palo Alto so there would at least be data. Vice Chair Mauter was not comfortable voting on a direction to start testing now, but she was happy to include water quality as an item on the Work Plan and to revisit the need for that and the science data when it came forward. She stated that Commissioner Gupta could withdraw it or there could be a vote to include it in the oversight of the Water Utility. Commissioner Gupta inquired if the topic was included in the general topic. Commissioner Croft answered that it was a compromise staff was comfortable with. Commissioner Gupta wanted to vote because he had spoken to many residents who wanted the information. Commissioner Croft queried if Palo Alto’s water would be different than the water that had been tested. Mr. Zucca replied that conceptually Palo Alto’s water would not be different than the water that had been tested. In the absence of knowing exactly where they were sampling, he could not provide a specific opinion, but he assumed San Francisco would collect a representative sample of the watershed. He thought it would be a good starting point. He discussed the sampling for microplastics not being simple, and he did not think the City had the internal technical skills to do it, and they would have to determine how to start the sampling. He thought the forthcoming data would give them a good idea and that they could evolve from there. Item #1     Packet Pg. 32     Utilities Advisory Commission Minutes Approved on: Page 28 of 38 Vice Chair Mauter took a vote to recommend that proposed Topic Number 9 be adopted in the Work Plan. Commissioner Gupta clarified that it would not include wastewater. Vice Chair Mauter stated that wastewater was not in the domain of the UAC. She voiced that following the accessibility recommendation, there could be a discussion with the Public Works liaison. Mr. Zucca would be happy to interface with Public Works and report back. Vice Chair Mauter took a straw vote on Work Plan Item Number 9, Microplastics and Forever Chemicals in Water Supply and Wastewater. A yes vote would indicate a desire for the distinct Work Plan as currently presented. If voting no, Commissioner Croft’s recommendation would move forward to include the water quality component only into the standing topic. She declared that there was 1 yes vote, so it would not be on the Work Plan for this coming year in distinct form but water quality would be included in the oversight of the Water Utility. She moved to Number 12, Stanford Interconnection. Ms. Nose suggested moving straight to a straw vote. Staff had suggested changing the language of Commissioner Croft’s proposal to read second transmission corridor instead of reading second transmission line. Commissioner Croft’s language was furnished on the screen. Vice Chair Mauter requested that the second transmission line be modified to read second transmission corridor. Commissioner Metz, as one of the authors, addressed the second transmission line/corridor. He was amenable to including it with the insertion of specifically the Stanford corridor. He discussed the important technical reason for doing that. He wanted to explicitly consider the option of [inaudible 4:04:45]. Vice Chair Mauter disclosed that she was a faculty member at Stanford and at SLAC where the interconnect laid, so she had a potential conflict. She announced that she would not vote, but she thought she could still Chair. Commissioner Croft questioned why the Stanford item was strongly [inaudible 4:05:56]. Mr. Kurotori replied that the Stanford item had been pursued for about 10 years with Stanford. The item had been returned to Council in terms of not being able to move forward, and it pivoted to looking at a second transmission corridor in connection with CAISO, so they had done some studies and they were moving forward. They hoped it would be scheduled to go to the CAISO in the next month or so and that they would have good information to bring back. The study gave diversity in terms of the connection points, which he elaborated on. Item #1     Packet Pg. 33     Utilities Advisory Commission Minutes Approved on: Page 29 of 38 Chair Scharff stated that staff had been talking with Stanford for at least 20 years and Council had looked at it, and there was no deal to be had for years. It would be great to get a deal with Stanford, but it did not appear that it would happen soon. He commented that it should not be a separate callout. If the situation changed, he thought staff would address it. He expressed it would be great to get a second line and that staff was already working on it. Mr. Kurotori stated that it could be brought back into the 1-year time frame of the Work Plan. Vice Chair Mauter called for a straw vote. A vote of yes would maintain the Item Number 12 proposal as it was. A no vote would support using the language in Commissioner Croft’s revisions to the existing Work Plan. Commissioner Gupta noted that he was one of the authors of the Work Plan. He had looked into the timing of negotiating with Stanford, and it seemed that they suffered a fairly major power outage afterward. He remarked that maybe it did not need to be a dedicated callout. He suggested that staff reach out again to see if there was any interest on Stanford’s side. Ms. Nose replied that staff would be happy to raise the UAC’s interest with the Stanford liaison. Other than that, she did not see any further work being fruitful. Vice Chair Mauter called for a hand vote. A vote of yes would be for a separate dedicated work plan. A no vote would move forward Commissioner Croft’s specific highlighting of a second transmission corridor. Commissioner Metz thought the first option was to have a callout within the language of the Croft document. Vice Chair Mauter asked if it was adequate. Commissioners Metz, Croft, and Gupta answered that it was adequate. Vice Chair Mauter withdrew Item Number 12 and declared that a vote would not be held. She stated that 9 other items were submitted as discrete proposed topics, and the majority of those had been included in Commissioner Croft’s revisions with the exception of Items 3, 4, 5, and 7. She noted that 3 had already been covered. She requested that staff comment on Item 4, Regional Collaboration on Water Supply. She stated that staff had not provided guidance on their sense of resource adequacy within staff employee time and/or interface between this proposed recommendation and the role of [Rosqua 4:13:09] and Council. Ms. Nose stated that it could not be worked in because it was part of the work underway, which she explained. Staff would be forwarding to Council the work done by the UAC last month, and she thought that accomplished the step that the UAC could make at this time in alignment with what short term 6 through 12 was. To go beyond that work, she thought the Item #1     Packet Pg. 34     Utilities Advisory Commission Minutes Approved on: Page 30 of 38 path direction the UAC had given to staff would be important, but otherwise that was why staff had said it was underway and why the UAC had taken the initial steps. Vice Chair Mauter inquired if it should be included on the Work Plan or if the UAC felt it was already adequately represented and could make its way onto the agenda through the general Water Utility topics. Commissioner Gupta mentioned that he was one of the commissioners who had put it together. He noted that there were longer-term elements that could be considered and discussed, but he was happy to wait to see how the current efforts progressed. Commissioner Tucher voiced that it would be interesting to hear Vice Chair Mauter comment on the importance of a regional approach. Vice Chair Mauter strongly believed in a regional approach. She opined that it was included by the Water Utility’s mission [space 4:16:14] and oversight. Responsible oversight over the Water Utility required taking the regional perspective. Calling it out separately was confusing, and she thought the letter by Commissioner Tucher and the letter by herself and Commissioners Philips and Gupta provided a nice set of action items that the UAC could continue to build on. She suggested that the topic be withdrawn, and she saw no objections, so the topic would not move forward. She addressed credit card fees. Ms. Nose recommended modifying the language provided by Commissioner Croft. When speaking about annual budget, it said to include time of use rates 10 and review credit card fees for FY2027. Vice Chair Mauter wondered if the time of use rates belonged under the electricity supply. She wanted to see time of use rates in water supply, but she did not think it would happen in her lifetime. Ms. Nose stated that they [could put 5 on that 4:18:13]. Vice Chair Mauter understood from the last meeting that there was a wholehearted embrace of opportunities to further pass along fees that were not helpful in rate setting. She wanted there to be, at least, a staff report on where they had gone with it. She asked if this was adequate coverage or if there should be a separate work item on credit card fees. Commissioner Croft inquired if there was an opportunity to do something sooner than 2027. Ms. Nose responded that the rates for FY2026 were being set now, which was why 2027 was referenced. Changes to the rate setting would likely not happen until the next cycle. Vice Chair Mauter thought off-cycle review was possible, and she questioned if a midyear review should be done. Item #1     Packet Pg. 35     Utilities Advisory Commission Minutes Approved on: Page 31 of 38 Ms. Nose answered that staff would likely do the analysis off cycle and return to the UAC for discussion, and then the UAC could choose to do an off-cycle rate change or roll it into the coming year. Commissioner Philips inquired if it would be a rate or a policy change. Ms. Nose replied that it could potentially be both. They could remove the dates. Chair Scharff understood that staff would do the work and that the UAC would vote on it at some point and possibly ask Council that people pay their own credit card fees. It made sense to add this separately since staff would do the work anyway, but he was not opposed to putting it in the way it had been done. Vice Chair Mauter wanted to take a straw vote, and she asked for expressions of strong opinions either way prior to the vote. Commissioner Gupta supported including it separately because it seemed to be a quick win and it was already being done. Vice Chair Mauter stated if it was to be included separately that it would be important to look at the language already in the Work Plan. In its current form, it suggested that it would be implemented in the next 3 to 6 months, although staff stated it was not feasible and, as a result, it was not possible to do the medium-term goal. She needed a proposal to revise it or to move forward with Commissioner Croft’s language. Chair Scharff proposed to revise it. He moved that it say staff would return and give an analysis with the necessary information to make a recommendation to Council that customers using credit cards pay their own credit card fees. Commissioner Philips argued for including it. It seemed unusual to have it singly called out. Chair Scharff agreed. He wanted it to return to the UAC. Vice Chair Mauter declared that it would be included. She trusted that staff, the Chair, and Vice Chair would make sure it would be agendized. She moved to Item 7, Federal Issues and Collaboration. Ms. Nose noted that it was Topic 7 in the UAC’s Work Plan. Vice Chair Mauter stated that it was specifically duplicated. She thought what the commissioners submitted contained more color. She requested that staff comment on the feasibility and appropriateness of the specific action items. Item #1     Packet Pg. 36     Utilities Advisory Commission Minutes Approved on: Page 32 of 38 Ms. Nose thought the additional information proposed was helpful feedback for staff to consider in the Federal and State legislative advocacy efforts. However, she thought it dipped into the operations of how business was done as opposed to the outcome, which was monitoring major federal items as they came down. A legislative session with the UAC may be helpful. She felt the topic as previously written was specific enough for the policy level work the UAC should do. Commissioner Gupta voiced that he had submitted it. He thought a legislative session with staff would handle the pursuits of the Work Plan. He would withdraw the topic unless commissioners felt it should be included. Vice Chair Mauter heard no requests to include it, so Item 7 was withdrawn. She did not believe Item 6 was subsumed, which was distinctly called out in Commissioner Croft’s proposed revisions. She requested that those proposed revisions be displayed. It appeared that the end of the document was a generalized version of the time line and priorities. Ms. Nose thought Commissioner Croft’s language was a better approach than wordsmithing the specific proposed topic. If the UAC chose that path, the only edit should be to specifically say metrics affecting City decision instead of details affecting City decision, which she elaborated on. She suggested using the higher-level one and staff filling out some of the additional details in the item to Council. Vice Chair Mauter commented that it was bizarre that there was not a specific Work Plan item for fiber. She appreciated the recommendation to have a specific standing topic for fiber, and she thought staff’s reflection on what that standing topic should include would be helpful. Commissioner Gupta was happy with the general language as long as it informed the approach moving forward. He noted that there was a lot of focus from the residents on the pilot and the metrics used to make a decision. Commissioner Metz asked when the Fiber Utility was last agendized. Ms. Nose did not recall when Fiber Utility was last agendized. The rates would be done in May or June. Commissioner Croft mentioned that fiber had been covered in the Budget Subcommittee meetings. They wanted to see the metrics from the pilot to justify it paying itself back. Vice Chair Mauter stated that she had heard from the Commission that staff should add a standing topic item related to Fiber Utility and that metrics from the pilot should be included to decide whether to move forward. She asked that the change in the wording be made on the other document. Item #1     Packet Pg. 37     Utilities Advisory Commission Minutes Approved on: Page 33 of 38 Ms. Nose stated that staff had 2 minor edits to what was before them. They would remove the second white section on the far right related to recycled water and the purple pipe. Ms. Nose suggested, under Reliability, Resiliency, and Adaptation under the CIP projects, that it specify that the emergency preparedness would be an emergency preparedness plan for Utilities as it would not be under the UAC’s purview to do the broader citywide EOC. Vice Chair Mauter requested that the section related to recycled water and the purple pipe section remain so they could be updated on recycled water but not purple pipe. She agreed with specifying that the emergency preparedness would be an emergency preparedness plan for Utilities. Vice Chair Mauter stated that the remaining items were 1, 10, 11, 13, and 14 and that many of the items were reflected in Commissioner Croft’s edits. She noted that staff had described Number 1 as being subsumed by Topics 8 and 9. Commissioner Metz felt that a detailed transition strategy and plan was needed for Topic 1, which should address a time line up to about 20 years. He considered it to be a small part of 2 other topics. Vice Chair Mauter asked if it should be a distinct item in a Work Plan as a separate topic or if it should be prioritized to be agendized in the next 12 months. Commissioner Metz considered this to be one of the top 2 or 3 strategic items facing the CPAU, which deserved focus. Commissioner Philips concurred because there was not a current strategy. Vice Chair Mauter requested that staff look at the language and some of the time line things. Related to the gas standing topic, she stated that there was an objective to be 10 percent below PG&E, which the City was not. Mr. Zucca stated, regarding the gas item, that staff planned to bring an item before the Commission in the late summer or fall. He explained that they were currently doing a model of the system, which needed to be the first step. It was at the front of what they were working on. There was an item on the agenda this year to at least bring back the modeling results to show the physical side of the infrastructure. Vice Chair Mauter asked if staff would be willing to develop a distinct Work Plan item that would align with the modeling topic and/or a couple of the things listed. She did not find it realistic to cover all on the list. Mr. Zucca did not believe staff would be able to address all the items on the list this year. He added that some of the elements tied into the S/CAP, Cap-and-Trade money, etc., which was complicated, so staff was trying to divide it and start with the physical part of it and the Item #1     Packet Pg. 38     Utilities Advisory Commission Minutes Approved on: Page 34 of 38 estimated cost to define different approaches. He thought staff planned to address all the items on the list but probably not on that timeline, at least not until there was more resolution of what the future system would look like and what the cost of it would be. It would be helpful to remove the time line. Commissioner Metz stated that there were important operational issues but that there were also important external forces that he did not hear addressed, and he found assessing such to be critical. Mr. Zucca agreed that it was a financial problem, not an engineering problem. He added that S/CAP and Finance would be involved in analyzing it. Ms. Nose noted that the UAC’s work should follow the S/CAP plan. She did not think staff had reconciled the necessary level of detail to see the congruencies or incongruencies between the S/CAP plan and this. Vice Chair Mauter asked if aligning it with the S/CAP plan could be deferred to staff. Commissioner Metz remarked that the long-term plan for the Gas Utility needed to take the S/CAP plan into consideration, although there were other important drivers that the City did not control, which were the worrisome ones in terms of the strategy. He did not agree with this being a subset of the S/CAP. Vice Chair Mauter wanted staff to determine if there was misalignment between the current text and the S/CAP goals. Commissioner Metz agreed with that with the understanding that the UAC and S/CAP could be aligned without the rest of the world liking what was being done. Vice Chair Mauter stated that in adding it to the Work Plan it could be more generally deferred to staff to populate it or all the detail could be included, minus dates, giving staff the liberty to align with S/CAP goals. Commissioner Metz would accept that or there could be a sidebar with staff in the next few weeks. He agreed with removing the dates. Commissioner Gupta suggested adding the text aligning with S/CAP and removing the time. Vice Chair Mauter suggested there be a vote while giving staff a little editing liberty. As yes vote would add it to the Work Plan, and a no vote would subsume it under topics 8 and 9. She declared that it passed as a distinct Work Plan item. She noted that Commissioner Croft had submitted Numbers 10 and 11 and incorporated it into her revised text. Item #1     Packet Pg. 39     Utilities Advisory Commission Minutes Approved on: Page 35 of 38 Commissioner Croft stated that she submitted the Time of Use rates suggestion. She suggested subsuming it. She voiced that it could read “Electric” Time of Use rates. She was interested in withdrawing Number 10. Vice Chair Mauter declared that Number 10 would be withdrawn. She addressed Number 11, Demand side management. Commissioner Croft stated that she submitted Number 11, and she was interested in putting clearer metrics around what was trying to be achieved with efficiency efforts and demand side management programs to handle peak rates. She wanted to see metrics and reports against metrics. She was amenable with subsuming the item under Reliability, Resiliency, and Adaptation, and she noted that she had included “and annual discussion of efficiency programs, demand side management, and performance against plan”. Vice Chair Mauter declared that the proposed revision to the standing topic was acceptable to staff and that it would be withdrawn. She addressed Number 13, Emergency Preparedness, which was included in Commissioner Croft’s proposed revisions. Commissioner Croft stated it was under Reliability, Resiliency, and Adaptation and that it had been edited to say “including Utility’s Emergency Preparedness Plan.” Ms. Nose preferred what Commissioner Croft identified and to include it as part of the Resiliency, Reliability, and Adaption item to appropriately align conversations and resources. Vice Chair Mauter asked for comments related to it being a distinct Work Plan item. Commissioner Metz explained why he was concerned with it falling through the cracks. He recommended that the CPAU work with the OEM on the EOP update and that the CPAU and UAC address CPAU preparedness as a separate topic, including getting on the same page with OES in defining an emergency and coming up with options for what CPAU’s response could be and letting Council decide what should be signed up for. He felt it was important to address it as its own topic. Vice Chair Mauter stated that it could be included as part of a reliability and resilience topic or separately included in the Work Plan. She wanted to vote on it being separately agendized if staff had no concerns with the language. Ms. Nose thought it was operational in how it was written. Ensuring that CPAU and OES were coordinating on the items was the responsibility of the City Manager, and different departments would have different plans to support different phases of an emergency. She thought interest in understanding the totality of the ecosystem bordered on not being within the UAC’s purview. As written, it provided a lens that dug into how the City worked operationally between departments. It was within the UAC’s purview to understand the plans, Item #1     Packet Pg. 40     Utilities Advisory Commission Minutes Approved on: Page 36 of 38 how they would fit into the broader context of the organization, and the areas of risks that further investments needed to be made in. Commissioner Metz understood from the City Charter that this was an important plan and program of CPAU and appropriate for the UAC. Vice Chair Mauter agreed. She thought the language in the item may be causing Ms. Nose some anxiety. She voiced that Commissioner Metz had repeatedly requested the topic be agendized, which she did not want to discount. She inquired if it would be possible to include it in Reliability and Resiliency while recognizing that it would be important to agendize it this year and that when agendized there should be reference points to ensure that that key features would be covered. She inquired if it should be subsumed into Reliability and Resiliency while making sure that Emergency Preparedness would be agendized in the coming 12 months. Commissioner Metz wanted measures of success incorporated in that. Vice Chair Mauter requested that staff refer back to this discussion when agendizing it. She wanted to hold a formal vote to have a separate agenda item or to move forward with Commissioner Croft’s recommendation to subsume it into Resiliency and Reliability. Commissioner Metz agreed to subsume it with the understanding that the measures of success 1 through 4 would be added to Commissioner Croft’s submission. Ms. Nose stated that the 4 measures of success could be included as topics and areas that would be measured as a successful conversation and outcome. Vice Chair Mauter expressed that the measures of success would be added to Commissioner Croft’s language. Commissioner Gupta, as a fellow sponsor, agreed with that. Vice Chair Mauter moved to Number 14, Grid Modernization Strategy, which was a separate topic. She voiced that Commissioner Croft suggested it be represented as part of the electric supply. Commissioner Croft read a few more things that she had added, which would ensure that the City would think about and talk to the UAC about innovations to enable a smarter grid. Commissioner Metz felt it needed to go further and that it was important to specifically address outside factors and the specifics in the plan and that the UAC needed to be able to address the forces driving grid mod and the strategic and financial details, which he did not feel were adequately addressed in the document. Item #1     Packet Pg. 41     Utilities Advisory Commission Minutes Approved on: Page 37 of 38 Commissioner Croft stated that it may warrant its own item, but she was concerned about being too specific in what was being asked for, so she wondered if the topic could be generalized as a separate item if subsuming it did not call it out enough. Vice Chair Mauter called a straw vote and asked commissioners to raise their hands if they wanted to separately agendize the item and to not raise their hands if moving forward with Commissioner Croft’s revised text was desired. Commissioner Tucher wanted to agendize it but he was happy with the text, and he questioned if that was at odds. Vice Chair Mauter stated that inclusion in the Work Plan was distinct from agendizing. She stated that the Work Plan was complete. Review of the Gas Utility and Fiber had been added, and many of the existing standing topics had been substantially revised. She stated that there was a complete and thorough description of the topics that the Chair, Vice Chair, and staff could agendize over the coming year. She requested that staff pay attention to the content in the Work Plan so that topics brought forward would address the core issues the UAC cared about. She took a vote to approve the final plan, which she declared was unanimous. ACTION: Item 2 [inaudible 3:06:38]. Item 3 was withdrawn and the respective representatives would be in touch. While agendizing data centers, it would not include a separate data center competitiveness item in the Work Plan. Work Plan Item 9 would not be on the Work Plan in distinct form for this coming year, but water quality would be included in the oversight of the Water Utility. Item Number 12 was withdrawn. Item 4 would not move forward. Item 5 would be included and return to the UAC. Item 7 was withdrawn. Staff would add a standing topic item related to Fiber Utility, and metrics from the pilot would be included to decide whether to move forward. Item 1 passed as a distinct Work Plan item. Numbers 10 and 11 were withdrawn. Regarding Topic 13, measures of success would be added to Commissioner Croft’s language. Item 14 [____ 5:05:48]. The Work Plan was completed. Review of the Gas Utility and Fiber had been added, and many of the existing standing topics had been substantially revised. The UAC unanimously voted to approve the final plan. FUTURE TOPICS FOR UPCOMING MEETINGS ON (May 7, 2025) AND REVIEW OF THE 12 MONTH ROLLING CALENDAR Vice Chair Mauter stated there were many topics for upcoming meetings. COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS Commissioner Tucher voiced that he had visited the Water Temple. Vice Chair Mauter commented that she would be in Sacramento tomorrow speaking on water desalination in the State of California. Item #1     Packet Pg. 42     Utilities Advisory Commission Minutes Approved on: Page 38 of 38 ADJOURNMENT Vice Chair Mauter moved to adjourn. Chair Scharff seconded the motion. The motion carried 7-0 with Chair Scharff, Vice Chair Mauter, Commissioners Croft, Gupta, Metz, Phillips, and Tucher voting yes. Meeting adjourned at 11:00 p.m. Item #1     Packet Pg. 43     Item No. 2. Page 1 of 1 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Director of Utilities Lead Department: Utilities Meeting Date: May 7, 2025 Report #: 2504-4546 TITLE Approval of Chair and Vice Chair to Serve a Short Term of May 7, 2025 through April 1, 2026 RECOMMENDATION Recommended Motion Commissioner ____ moved to approve Commissioner ____ as Chair. Motion seconded by Commissioner ___. Commissioner ___ moved to approve Commissioner ___ as Vice Chair. Motion seconded by Commissioner ___. BACKGROUND During the April 2, 2025 meeting, the Utilities Advisory Commission voted to bring this item back to the May 7, 2025 UAC for the selection of the Chair and Vice Chair. ATTACHMENTS Attachment A: Staff Report 2503-4248 AUTHOR/TITLE: Kiely Nose, Interim Director of Utilities Staff: Kaylee Burton, Utilities Administrative Assistant Item #2     Packet Pg. 44     Item No. 2. Page 1 of 1 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Director of Utilities Lead Department: Utilities Meeting Date: April 2, 2025 Report #: 2503-4248 TITLE Approval of Chair and Vice Chair to Serve a Short Term of April 2, 2025 through April 1, 2026 RECOMMENDATION Recommended Motion Commissioner ____ moved to approve Commissioner ____ as Chair. Motion seconded by Commissioner ___. Commissioner ___ moved to approve Commissioner ___ as Vice Chair. Motion seconded by Commissioner ___. BACKGROUND Annually the Chair and Vice Chair are selected at the beginning of the new recruitment term for a period of one year, from the first meeting in April through April of the following year. This item is included in the agenda for the purpose of Commissioners selecting a Chair and Vice Chair for a short term, spanning from April 2, 2025 through April 1, 2026. AUTHOR/TITLE: Kiely Nose, Interim Director of Utilities Staff: Kaylee Burton, Utilities Administrative Assistant Item #2     Packet Pg. 45     Item No. 3. Page 1 of 5 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Director Utilities Lead Department: Utilities Meeting Date: May 7, 2025 Report #: 2407-3228 TITLE Utilities Advisory Commission Finance Subcommittee Recommends the Commission Recommend City Council Approve the FY 2026 Fiber Rates and Packages RECOMMENDATION Staff recommends that the Utilities Advisory Commission (UAC) advance a recommendation that Council approve the Fiber Rates and Packages for the City of Palo Alto to provide fiber broadband internet. EXECUTIVE SUMMARY Staff is recommending the Utilities Advisory Commission (UAC) advance a comprehensive rate range and service package for Council to consider and authorize to support the continued implementation of the City’s Fiber-to-the-premises (FTTP) project pilot area of approximately 1,000 homes. The proposed broadband services and rates are based on extensive market research, evaluation f customer needs and competitive benchmarks. The rate range and service package allows flexibility to structure rates for special promotions, service packages, and other means to be competitive in offering fiber services to our pilot customers. A well-defined and adaptable rate structure for fiber internet services is essential for the success of the FTTP project. Recognizing the evolving and competitive marketplace, staff will continue to learn from this initial phase and incorporate new service delivery strategies. Staff continues to advance the City’s electrical grid modernization project and Palo Alto Fiber together, saving time, creating efficiencies and reducing costs. Staff presented the fiber rates and packages to the UAC Budget Subcommittee. The subcommittee unanimously approved the proposed fiber rates structure and product offerings. BACKGROUND On December 19, 2022 Council directed staff to proceed with the fiber backbone, a phased FTTP infrastructure build approach, and a hybrid business model for providing fiber internet services. Work continues to advance in several areas to launch a pilot service area including development and implementation of a new Operations Support System/Business Support Item #3     Packet Pg. 46     Item No. 3. Page 2 of 5 System (OSS/BSS)1, engineering design and construction planning, material procurement, marketing, service delivery, and the strategic allocation of staffing resources through either hiring external expertise or training and assigning internal personnel to support these efforts. On June 19, 2023, Council approved the FY 2024 CIP Budget with the new FTTP project “FTTP”, and Grid Modernization for Electrification Project “Grid Mod”. The approval of the Grid Mod project accelerated efforts to align electric and fiber construction, which impacted FTTP construction. Deployment continues to minimize utility engineering pole make-ready work, pole replacements, noise disruption, and construction activity in neighborhoods. Following the June 2023 Council approval of the FY 2024 CIP Budget for the FTTP project, staff has been actively laying the groundwork for implementation. Activities include leveraging existing contracts and resources, securing the necessary approvals and permits to install a new fiber data hut, and establishing the operational frameworks and workflows required to support future service areas. These efforts are proceeding in parallel with the ongoing pilot program aimed at optimizing the alignment of fiber deployment with the City’s grid modernization initiatives. ANALYSIS In February 2025, the City retained Brightscape Networks/GoMo, fiber industry experts, to analyze the residential broadband coverage, competitive landscape, and potential service offering with the pilot area along with an operational assessment. In March 2025, Brightscape provided a summary of their market review of the pilot area, which revealed a duopoly between two major wireline incumbent providers Xfinity and AT&T, with Xfinity holding 100% coverage via cable (offering speeds up to 2 Gbps with data caps and contracts) and AT&T covering 89% with symmetrical fiber (FTTH) options up to 5 Gbps without data caps or contracts. Brightscape recommended Palo Alto offer symmetrical speeds ranging from 500 Mbps to 1 Gbps, focusing on a few plans to offer at competitive, contract-free rates with no data caps. They highlighted the need to address challenges in serving multi-family residents where incumbents have a long-standing presence and partnerships which limit competition. With two major incumbent providers in the pilot area, the City would need to overcome the hurdles of new customer acquisition, such as switching aversion - when subscribers express dissatisfaction with their current internet service provider, the perceived hassle of switching may prevent them from taking action. To overcome challenges like this, through staff recommendations Palo Alto Fiber can provide basic services which are easy to understand and competitively priced, with marketing and outreach that differentiates our services from other providers, such as being a locally available municipality they can speak to in person. 1 Operations support systems (OSS) manage telecom network infrastructure, ensuring reliable operations through functions like fault management and service assurance. Business support systems (BSS) streamline customer-facing activities, such as billing, subscriptions, and customer relationship management, to improve customer experiences. Together, OSS and BSS enhance telecom operations by connecting efficient network management with seamless customer interactions. Item #3     Packet Pg. 47     Item No. 3. Page 3 of 5 To optimize deployment within this competitive landscape, staff recommends an initial offering focused on simple, easy to understand and fulfill service packages. Staff also recommends approval for a range of rates and packages which can be easily adapted. This strategic approach offers several key advantages. First, limiting the number of core packages simplifies the initial deployment and provisioning processes, allowing staff to grow in-house expertise while relying on contracted services to concentrate on efficient installations and customer onboarding. Second, it reduces complexity in our customer support efforts and marketing and outreach, enabling us to clearly communicate the value proposition of each plan and focus on providing services. In a market where customers are often overwhelmed by numerous offerings, simplicity and transparency can be a significant differentiator. With a well-defined range for the rates and packages, staff can quickly adapt offerings to target different customer segments. Staff recommends UAC adopt the following range of rates for Council consideration and approval the below range for the rates: Residential Service Plan Pricing Comments 500 Mbps - Rate Assistance Up to $30 Monthly; Free installation and router 500 Mbps Up to $75 Monthly; Free installation and router 1 Gbps Up to $95 Monthly; Free installation and router 2 Gbps Up to $175 Monthly; Free installation 5 Gbps Up to $265 Monthly; Free installation Commercial Internet Service Plan Pricing Comments 500 Mbps Up to $125 Monthly; Free installation and router 1 Gbps Up to $185 Monthly; Free installation and router 2 Gbps Up to $195 Monthly; Free installation 5 Gbps Up to $295 Monthly; Free installation Additional Equipment Pricing Comments Calix GigaSpire Up to $5 Monthly Calix Blast Mesh Extender Up to $5 Monthly Calix Gig Wan Port Up to $600 One time purchase Item #3     Packet Pg. 48     Item No. 3. Page 4 of 5 Other Service Offerings Pricing Comments Fixed Wireless - 100 Mbps Up to $75/Month Monthly; Free installation and router Protect IQ Up to $10/Month Network level security to protect against malicious threats and intrusions. Experience IQ Up to $10/Month Advanced parental controls with content access and usage schedules Smart Home - Calix Up to $10/Month Tools to manage and secure including features like network security, parental controls, and smart home automation. Smart Biz - Calix Up to $30/Month Suite of features to support small businesses. Smart MDU - Calix Up to $10/Month per subscriber Calix solution for MDU's that ads features like community wide managed Wi-Fi for the complex. Commercial Dedicated 1 Gbps Internet Access (DIA) Up to $1,500/Month 1 Gbps Dedicated Internet Access (DIA) service to deliver dedicated bandwidth, reliable, high- performance connectivity, and throughput consistency. Commercial Dedicated 10 Gbps Internet Access (DIA) Up to $7,500/Month 10 Gbps Dedicated Internet Access (DIA) service to deliver dedicated bandwidth, reliable, high- performance connectivity, and throughput consistency. Other Contract Terms Data Allowance - Unlimited Month to month contract term FISCAL/RESOURCE IMPACT This report is for discussion purposes so there is no resource impact. Based on UAC and Council input, staff will recommend Council approve fiber internet rate ranges and packages. With necessary approvals, rates would be included in the June 16, 2025 Council budget adoption. STAKEHOLDER ENGAGEMENT On November 2, 2022, the UAC unanimously recommended to build fiber backbone and FTTP under a phased approach with existing funds. The UAC expressed the goal of building FTTP is to provide ubiquitous or citywide high-speed internet access to all residents and businesses in Palo Alto. If financially self-sustaining, and deemed successful, the first phase of FTTP can become a springboard to a citywide FTTP deployment. Item #3     Packet Pg. 49     Item No. 3. Page 5 of 5 On December 19, 2022, City Council directed staff to proceed with the Fiber Expansion Plan to implement the Fiber Rebuild project and Phase 1 of the Fiber-to-the-Premises (FTTP) project without debt financing. Included in the Council’s motion was to a) maximize number of homes and businesses passed; b) consider promotional rates to increase take rate; c) define leading indicators and metrics to determine success; and d) recommend Council accelerate expansion if metrics are positive, including a potential bond to streamline construction and compress construction time as much as feasible. On June 19, 2023, the City Council approved the FY 2024 CIP Budget for the new FTTP project, and Grid Modernization for Electrification Project. The approval of the electrification project accelerated efforts to align electrification and fiber construction, which impacted the Fiber Expansion Plan. Staff is deploying a pilot to determine how to align the grid modernization project and projects under the Fiber Expansion Plan to help minimize utility engineering pole make-ready work, pole replacements, noise disruption, and construction activity in neighborhoods. The pilot design was recently modified to streamline construction, and is currently undergoing material purchasing before starting fiber construction. Since that time, staff has engaged UAC at their public meetings, and taken community input on various aspects of the staff’s work to date. Additionally, a project website is live and offers information and status updates on this effort. Project updates will continue to be provided at www.PaloAlto.gov/PaloAltoFiber ENVIRONMENTAL REVIEW The UAC’s recommendation for a rate and package is not a project requiring California Environmental Quality Act review, because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment. ATTACHMENTS Attachment A: Presentation AUTHOR/TITLE: Kiely Nose, Interim Director of Utilities Staff: Dave Yuan, Utilities Strategic Business Manager Item #3     Packet Pg. 50     Item #3     Packet Pg. 51     Item #3     Packet Pg. 52     Item #3     Packet Pg. 53     Item #3     Packet Pg. 54     Item #3     Packet Pg. 55     Item #3     Packet Pg. 56     Item #3     Packet Pg. 57     Item #3     Packet Pg. 58     Item #3     Packet Pg. 59     Item #3     Packet Pg. 60     Item #3     Packet Pg. 61     Item #3     Packet Pg. 62     Item #3     Packet Pg. 63     Item #3     Packet Pg. 64     Item #3     Packet Pg. 65     Item No. 4. Page 1 of 2 6 5 2 6 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Director of Utilities Lead Department: Utilities Meeting Date: May 7, 2025 Report #: 2504-4599 TITLE Utilities Advisory Commission Finance Subcommittee Recommends the Commission Receive the FY 2026 Utilities Department Budget and the Commission Recommend City Council Adoption RECOMMENDATION Staff recommends the Utilities Advisory Commission (UAC) recommend the City Council to adopt the Proposed Operating and Capital Budgets for the Utilities Department for Fiscal Year 2026 BACKGROUND Linked and referenced below are the FY 2026 Proposed Operating and Capital budgets for the Utilities Department. The entire Utilities Operating budget for FY 2026 can be downloaded and viewed in full from the link below: ➢Preliminary Proposed Utilities Operating Budget for FY 20261 Page 421 - 491 The entire Utilities CIP budget for FY 2026 – FY 2030 with the individual project pages can be downloaded and viewed in full from the link below: Preliminary Proposed Utilities Capital Budgets for FY 2026 – FY 20302 ➢Electric CIP – Page 397 - 456 1 Preliminary Proposed Utilities Operating Budget for FY 2026 https://www.paloalto.gov/files/assets/public/v/1/administrative-services/city-budgets/fy-2026-city- budget/proposed/fy-2026-proposed-operating-budget.pdf 2 Preliminary Proposed Utilities Capital Budgets for FY 2026 – FY 2030 https://www.paloalto.gov/files/assets/public/v/1/administrative-services/city-budgets/fy-2026-city- budget/proposed/fy-2026-proposed-capital-budget-book.pdf Item #4     Packet Pg. 66     Item No. 4. Page 2 of 2 6 5 2 6 ➢Fiber Optic CIP – Page 457 - 478 ➢Gas CIP – Page 479 – 512 ➢Wastewater CIP – Page 539 - 608 ➢Water CIP – Page 609 – 648 Staff met with the UAC Budget Subcommittee and explained the proposed FY 2026 Utilities Operating and CIP budget is mainly status quo from FY 2025. The Utilities Department is not requesting for any new Full Time Employees (FTEs) in their divisions. However, the City is proposing one new FTE to support Utilities and other departments. The Senior Management Analyst in the Office of Management and Budget will support financial functions as allocated charges, cash flow analysis, reserve balances, and infrastructure financing. An administration CIP project has been created in every fund to serve as a placeholder for estimated administrative costs, including salary and benefit costs of City staff assigned to the respective funds. In addition to these five administrative CIPs, Utilities is proposing two new CIPs in FY 2026: ➢Gas Main Replacement (GS-30000): FY 2026-2030 CIP: $5.2 million ➢Closed Circuit Television (CCTV) Sewer Main Inspection (WC-26001): FY 2026- 2030 CIP: $1.8 million ATTACHMENTS Attachment A: Capital and Operating Budget for FY 2026 Presentation AUTHOR/TITLE: Kiely Nose, Interim Director of Utilities Staff: Anna Vuong, Utilities Senior Business Analyst Item #4     Packet Pg. 67     UTILITIES ADVISORY COMMISSION Proposed FY 2026 Utilities Operating and Capital Budgets MAY 7, 2025 www.paloalto.gov Item #4     Packet Pg. 68     PURPOSE FOR PRESENTATION •Provide highlights of the Proposed FY 2026 Utilities Operating and Capital budget. •Answer questions about the proposed budgets. •Staff requests that the Utilities Advisory Commission (UAC) recommend that the Council approve proposed FY 2026 Utilities Operating and Capital Budget. 2 Item #4     Packet Pg. 69     FY 2026 BUDGET SUMMARY (UTILITIES DEPARTMENT) Community Impact The FY 2026 budget for Utilities is largely a status quo budget, with continued focus on upgrades for grid modernization, FTTP deployment, and rates stabilization. Major Proposed Changes in Utilities Department •Complete construction of the electric grid modernization pilot serving 1,000 residents; begin phase 1 to support electrification for an additional 5,000 residents •Continue to align construction of Palo Alto Fiber internet service with electric grid modernization; evaluate and refine service delivery strategies and product offerings in pilot •Develop a natural gas transition strategy •Replace aging gas, sewer, and water mains to enhance safety and reliability 3 Item #4     Packet Pg. 70     FY 2026 UTILITIES EXPENSE ALLOCATION BY CATEGORY Expense Categories FY 2025 Adopted Budget FY 2026 Proposed Budget FY 2026 Change $ FY 2026 Change % Capital Improvement Program $115,598,497 $133,401,173 $17,802,676 13% Utility Purchase $181,053,244 $193,977,930 $12,924,686 7% General Expense $10,119,369 $13,910,057 $3,790,688 27% Contract Services $16,108,486 $17,638,884 $1,530,398 9% Salary & Benefits $72,968,215 $74,105,360 $1,137,145 2% Equity Transfer $26,036,629 $27,142,000 $1,105,371 4% Allocated Charges $29,874,241 $30,651,794 $777,552 3% Supplies & Material $2,726,813 $3,171,529 $444,716 14% Rents & Leases $12,095,870 $12,359,871 $264,001 2% Operating Transfers-Out $454,776 $464,176 $9,400 2% Debt Service $9,028,522 $9,030,522 $2,000 0% Facilities & Equipment $87,966 $31,990 -$55,976 -175% Transfer to Infrastructure $500,000 $0 -$500,000 -100% Grand Total $476,652,629 $515,885,285 $39,232,656 8%4 Item #4     Packet Pg. 71     FY2026 COST INCREASE DETAILS 5 •Capital Improvement Program •Includes midyear addition of $15M for Hanover Substation Upgrade •Increased Grid Mod by $2.5M from $50.0M to $52.0M •Utility Purchase - $9.5M Electric, $1.8M Water, $0.6M Wastewater Collection •General Expense – Programmed an additional $3.0M customer efficiency programs funded from restricted reserves: •Multifamily EV chargers, •Commercial HVAC electrification, and •Heat pump water heater. •Contract Services and Supplies & Material – Programmed $1.6M to support FTTP •Operational and customer support, marketing, on-site installation services, etc. Item #4     Packet Pg. 72     ADMINISTRATIVE/GENERAL OPERATING EXPENSE INCREASES 6 Centralized City support (i.e.Administrative Services, Attorney,HR,Facilities) IT services for security,infrastructure replacement, and applications (i.e.AMI, FTTP,GIS, OMS, SAP) Rent for substations, reservoirs, MSC,and City Hall Electrification of fleet vehicles when feasible Higher salaries due to new FTE's, filled vacancies, and market adjustments Benefits including proactive funding of pension General liability and insurance premiums Item #4     Packet Pg. 73     COST CONTAINMENT MEASURES 7 IMPLEMENTED •Expanded use of bank draft to reduce commercial credit card fees •Scheduled larger CIP projects every other year achieving efficient project management and lower construction costs •Pre-ordered and secured pricing for long lead-time equipment (transformers and switches). FY 2026 •No requests for new FTEs •Issue new competitive IFBs and RFPs to get best value through prequalified vendors, economies of scale and detailed scope of work •Reduce billing costs through paperless billing and pass-through credit card fees •Update standard connection fees to reflect current costs,last updated in 2019 Item #4     Packet Pg. 74     FY 2026 UTILITIES - ELECTRIC FUND p.397 2026-2030 CIP Proposed Budget Summary 8 FY 2026 Proposed FY 2027 FY 2028 FY 2029 FY 2030 5-Year Total Revenues $40.4M $6.2M $17.1M $49.9M $37.9M $151.3M* Expenses $93.2M $30.3M $49.5M $71.7M $69.1M $313.8M FY 2026 – FY 2030 Electric Fund Outlook •$194.8M Grid Modernization for Electrification (EL-24000), total estimate $300M •Complete pilot area and remaining overhead areas •$5.4M Colorado Power Station Equipment Upgrades (EL-19001) •$4.5M Substation Breaker Replacement (EL-17002) •Implement Residential Time-of-Use rates *Revenues will be updated after bond tranches are determined and issued Item #4     Packet Pg. 75     Multi year one-time project, FY 2024 – FY2033 Estimated $300+ million •Pilot FY25 -103 Transformers,70 Poles and 23,000 Feet of Overhead Secondary Cable. Installed 46,000 feet steel messenger for FTTP. Distribution System Rebuild (Overhead) FY26 – FY27 Remaining 500 transformers, 600 poles, and 272,000 feet of secondary cable Due to long lead times, orders for these transformers have been placed, in advance of tariffs. Distribution System Rebuild (Underground) FY28 – FY30 Approximately 560 pad mount and submersible transformers, 370 switches, and 495,000 feet of primary and secondary cable Substation System Rebuilds FY25 – FY33 Colorado Power – order transformers and switchgear FY25, anticipate delivery and construction in FY28 East Meadow - order transformers and switchgear FY26, anticipate delivery and construction in FY29 Colorado – order transformers and breakers FY26, anticipate delivery and construction in FY29 Adobe Creek – order transformers and switchgear FY30, anticipate delivery and construction in FY33 ELECTRIC – GRID MODERNIZATION 9 Item #4     Packet Pg. 76     •Develop Realistic Project Schedules – Establish clear goals, realistic deadlines, and actively monitor progress. •Synchronize Project Phases – Identify and manage dependencies between tasks to prevent bottlenecks and delays. •Develop and Articulate Action Plans - Develop specific strategies and contingency plans to address each risk item, including alternative workflows, backup resources, or emergency protocols. •Formalize Materials Procurement Strategy – Standardize products and diversify supplier pool, pre- order long-lead items in advance of construction (transformers – 2 years, wire - 1 year, poles – 6 months) •Use Durable Materials - Use weather-resistant materials, such as insulated conductors and higher- class poles, to minimize damage from environmental stressors. •Manage Construction Contracts – Diversify supplier pool and negotiate strong contracts. •Reduce Change Requests – Minimize change requests through detailed scopes of work, thorough documentation, and contingency planning. ELECTRIC – GRID MOD LESSONS LEARNED 10 Item #4     Packet Pg. 77     FY 2026 UTILITIES - FIBER FUND p.457 2026-2030 CIP Proposed Budget Summary 11 FY 2026 Proposed FY 2027 FY 2028 FY 2029 FY 2030 5-Year Total Revenues $0.2M $0.2M $6.7M $6.7M $0.2M $14.0M Expenses $17.5M $5.5M $5.5M $5.5M $5.7M $39.7M FY 2026 – FY 2030 Fiber Fund Outlook •$24.7M New Fiber Backbone (FO-16000) •432 fiber strand for City, FTTP, and dark fiber customers •144 fiber strand for Electric (substations, SCADA relays, AMI base station collectors) •$10.9M Fiber-to-the-Premises (FTTP) (FO-24000) •Review key success measures, refine service delivery, and evaluate product offerings from pilot. •Cost of service study for Dark Fiber rates. Item #4     Packet Pg. 78     FY 2026 UTILITIES - GAS FUND p.479 2026-2030 CIP Proposed Budget Summary 12 FY 2026 Proposed FY 2027 FY 2028 FY 2029 FY 2030 5-Year Total Revenues $8.5M $0.5M $0.5M $0.5M $0.5M $10.5M Expenses $23.3M $12.8M $7.8M $13.6M $10.5M $68.0M FY 2026 – FY 2030 Gas Fund Outlook •Gas Line Repair at Arastradero Creek •Awarded $16.5M from DOT federal grant (PHIMSA) •GMR #25 (GS-15000) – approx. 26,000 LF in Palo Verde, Midtown, Evergreen, and Ventura neighborhoods •GMR #26 (GS-16000) – approx. 26,000 LF in University Park and Crescent Park neighborhoods •GMR #27 (GS-20000) – approx. 26,000 LF in Crescent Park and University South neighborhoods •Cross-bore Phase IV – approximately 1,000 laterals to be inspected Item #4     Packet Pg. 79     FY 2026 UTILITIES – WASTEWATER COLLECTION FUND p.539 2026-2030 CIP Proposed Budget Summary 13 FY 2026 Proposed FY 2027 FY 2028 FY 2029 FY 2030 5-Year Total Revenues $7.1M $2.8M $0.3M $0.3M $0.3M $10.7M Expenses $3.7M $5.9M $15.6M $6.2M $27.0M*$58.5M FY 2026 – FY 2030 Wastewater Collection Fund Outlook •2024 Sewer Master Plan Study to prioritize capital improvement projects and determine system’s hydraulic capacity •Sewer Main Video Inspection – recording of mains and laterals •SSR #32 (WC-20000), replace 10,650 LF in bounded by Middlefield Road, Webster Street, Santa Rita Avenue, and N. California Avenue •SSR #33 (WC-21000), replace 26,000 LF in bounded by Crescent Park, Old Palo Alto, Midtown, Palo Verde, Fair Meadow, Barron Park, and Green Acres * SSR #34 of $9.6M will begin in FY 2031 (not FY 2030) Item #4     Packet Pg. 80     FY 2026 UTILITIES - WATER FUND p.609 2026-2030 CIP Proposed Budget Summary 14 FY 2026 Proposed FY 2027 FY 2028 FY 2029 FY 2030 5-Year Total Revenues $7.8M $4.1M $1.5M $1.5M $1.6M $16.4M Expenses $12.4M $4.7M $10.8M $13.3M $24.1M $65.3M FY 2026 – FY 2030 Water Fund Outlook •Park and Dahl Reservoir Seismic Upgrade and Rehabilitation •WMR #30 (WS-16001) replaces 8,000 LF in Midtown, Charleston Terrace, Ventura, and University Park neighborhoods •WMR #31 (WS-19001) replaces 8,000 LF in Duveneck, Old Palo Alto, and Midtown neighborhoods •WMR #32 (WS-20000) replaces 15,000 LF neighborhoods TBD •Water System Master Plan (FY26/27): Comprehensive review of infrastructure. Last performed in 1999 Item #4     Packet Pg. 81     FY 2025 VACANCY REPORT - Authorized 267 FTE 15 Admin Customer Support Electric Engineering Electric Ops Fiber RMD WGW Engineering WGW Ops Budget FTE 19 22 23 77 5 26 23 73 Vacancies 3 1 4 13 2 3 4 8 Vacancy %16%5%17%17%60%8%17%11% 16%5%17% 17% 60% 8%17% 11% 0 10 20 30 40 50 60 70 80 90 Full Tim e Em p l o y e e s Utilities Vacancies – 38 FTE or 14% Item #4     Packet Pg. 82     STAFF RECOMMENDATION TO UAC FOR APPROVAL Staff requests that the Utilities Advisory Commission (UAC) recommend that the Council approve proposed FY 2026 Utilities Operating Budget. Staff requests that the Utilities Advisory Commission (UAC) recommend that the Council approve proposed FY 2026 Utilities Capital Budget. 16 Item #4     Packet Pg. 83     Item #4     Packet Pg. 84     Item No. 5. Page 1 of 3 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Director of Utilities Lead Department: Utilities Meeting Date: May 7, 2025 Report #: 2503-4360 TITLE 2025 Annual Water Supply and Demand Assessment RECOMMENDATION Staff recommends the Utilities Advisory Commission (UAC) recommend City Council adopt the 2025 Annual Water Shortage Assessment Report. EXECUTIVE SUMMARY Beginning in 2022, every urban water supplier in California must conduct an Annual Water Supply and Demand Assessment as required by California Water Code Section 10632 (a). Each urban water supplier must also submit an Annual Water Shortage Assessment Report to the Department of Water Resources (DWR) on or before July 1, as required by California Water Code Section 10632.1. The City’s Annual Water Shortage Assessment Report (Attachment A, Tables 1- 5) show that there is no water shortage anticipated for Fiscal Year 2026. On April 15, 2025, the San Francisco Public Utilities Commission (SFPUC), Palo Alto’s water supplier, provided Palo Alto with the Water Supply Availability Update indicating for the current water year, Hetch Hetchy watershed has experienced nearly average conditions for precipitation and snowpack. The City of Palo Alto encourages continued water conservation efforts and the City’s website contains more information about available water conservation programs.1 DISCUSSION To prepare the 2025 Annual Water Shortage Assessment Report, staff followed the procedures outlined in its Water Shortage Contingency Plan, contained in Section 7 of the City’s 2020 Urban Water Management Plan (UWMP).2 Palo Alto’s 2025 Annual Water Shortage Assessment Report uses the DWR-developed Optional Annual Assessment Tool format. This format includes the 5 tables shown in Attachment A. Staff will submit the standard tables to DWR by July 1, 2025. “Table 1. Annual Assessment Information” (Table 1) provides required overview information. The 1 Water Conservation Programs https://www.paloalto.gov/Departments/Utilities/Sustainability/Ways-to-Save 2 Urban Water Management Plan https://www.cityofpaloalto.org/files/assets/public/v/1/utilities/uwmp/2020- uwmp_final-submission-to-dwr.pdf Item #5     Packet Pg. 85     Item No. 5. Page 2 of 3 remaining tables project water supply and demand for FY 2026 under dry conditions, as required, and finds that there is no projected water shortage. Upon Council adoption, staff will submit the 2025 Annual Water Shortage Assessment Report to the Department of Water Resources. After Palo Alto and other urban water suppliers report to DWR on the 2025 Annual Water Shortage Assessment Reports, DWR will prepare a summary report on its review of the Annual Water Supply and Demand Assessment results and provide it to the State Water Resources Control Board (State Board) by September 30, 2025. The DWR report will include water shortage information at the supplier level, as well as regional and statewide analysis of water conditions as required by California Water Code Section 10644 (c)(1)(B). Potable Water Palo Alto receives 100% of its potable water supply from the SFPUC Regional Water System and staff used the SFPUC's April 15, 2025 Water Supply Availability Update to determine water supply. • “Table 2: Water Demands” (Table 2) provides a demand projection for each month of FY 2026; • “Table 3: Water Supplies” (Table 3) notes that there is sufficient supply to meet Palo Alto’s demand and projects supply equal to the demand projection since there is no projected water shortage in FY 2026; • “Table 4(P): Potable Water Shortage Assessment” (Table 4(P)) compares projected FY 2025 demand with supply and illustrates that there is no shortage projected for FY 2026; • “Table 5: Planned Water Shortage Response Actions” (Table 5) shows no triggered water shortage actions. Palo Alto’s eight permanent water use regulations remain in effect (see Palo Alto Municipal Code Section 12.32.010). Non-Potable Water For non-potable recycled water, Table 2 provides the demand projection and Table 3 notes that there is sufficient supply to meet Palo Alto’s non-potable recycled water demand in FY 2026. For that reason, the supply is set to equal demand and there is no shortage of non-potable water projected in Table 4(NP), “Non Potable Water Shortage Assessment”. FISCAL/RESOURCE IMPACT There is no fiscal impact from Council approving the 2025 Annual Water Shortage Assessment Report. STAKEHOLDER ENGAGEMENT Interested parties are encouraged to comment or provide feedback on the proposed 2025 Annual Water Shortage Assessment Report at the Council meeting where the report will be considered for approval, or to submit written comments prior to those meetings. Item #5     Packet Pg. 86     Item No. 5. Page 3 of 3 ENVIRONMENTAL REVIEW Adoption of the 2025 Annual Water Shortage Assessment Report is exempt from California Environmental Quality Act’s (CEQA) review pursuant to Water Code Section 10652. ATTACHMENTS Attachment A: 2025 Water Supply and Demand Assessment Tables AUTHOR/TITLE: Kiely Nose, Interim Director of Utilities Staff: Karla Dailey, Assistant Director of Utilities, Resource Management Division Item #5     Packet Pg. 87     Attachment A: 2025 Annual Water Shortage Assessment Report Tables Item #5     Packet Pg. 88     Table 1. Annual Assessment Information  Annual Assessment Information Year Covered By This Shortage Report (Required) Start: July 1,2025 End: June 30,2026 Volume Unit for Reported Supply and Demand: (Must use the same unit throughout)AF Supplier's Annual Assessment Planning Cycle (Required) Start Month:July End Month:June Data Interval: Monthly (12 data points per year) Water Supplier's Contact Information (Required) Water Supplier's Name:City of Palo Alto Contact Name:Karla Dailey Contact Title:Assistant Director of Utilities, Resource Management Street Address:250 Hamilton Avenue, Palo Alto ZIP Code:94301 Phone Number:(650)329-2523 Email Address:karla.dailey@cityofpaloalto.org Report Preparer's Contact Information (if different from above) Preparer's Organization Name: Preparer's Contact Name: Phone Number: Email Address: Supplier's Water Shortage Contingency Plan WSCP Title 2020 Water Shortage Contingency Plan of the City of Palo Alto WSCP Adoption Date 6/7/2021 Other Annual Assessment Related Activities Activity Timeline/ Outcomes / Links / Notes Annual Assessment/ Shortage Report Title:Optional  Annual Assessment / Shortage Report Approval Date:6/2/2025 Other Annual Assessment Related Activities: The 2020 Water Shortage Contingency Plan of the City of Palo Alto states that Palo Alto will utilize the BAWSCA Regional Reliability Model to evaluate water supply availability, however, the plan also permits the City to use SFPUC data since SFPUC is the City's sole supplier. Specifically, the 2020 Water Shortage Contingency Plan states: "Because Palo Alto relies on only one potable water supply source, SFPUC RWS water, the Annual Assessment will rely on key data inputs from the SFPUC." Palo Alto used the SFPUC's April 15, 2025 Water Supply Availability Update to determine water supply. (Add rows as needed) Item #5     Packet Pg. 89     = From prior tables = Auto calculated Use Type Start Year:2025 Volumetric Unit Used2:AF Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total by Water Demand Type All Demands 1310 1285 1307 1088 929 686 654 575 660 697 969 1135 112950000000001310128513071088929686654575660697969113511295 All Demands Tertiary 54 53 35 22 11 2 2 11 9 24 42 50 315 0000 54 53 35 22 11 2 2 11 9 24 42 50 315 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total 0 0 0 0 Table 2: Water Demands1 Projected Water Demands - Volume3 Total by Month (Non-Potable) 1Projections are based on best available data at time of submitting the report and actual demand volumes could be different due to many factors. 2Units of measure (AF, CCF, MG) must remain consistent. 3When opting to provide other than monthly volumes (bi-monthly, quarterly, or annual), please see directions on entering data for Projected Water Demand in the Table Instructions. Notes: Potable unconstrained customer demand determined using the end-use model described in the 2020 UWMP Section 4. Non-potable unconstrained customer demand determined based on 2020 UWMP projection. Total by Month (Potable) Additional Description (as needed) Level of Treatment for Non- Potable Supplies Drop-down list Drop-down list May select each use multiple times These are the only Use Types that will be recognized by the WUEdata online submittal tool (Add additional rows as needed) Demands Served by Potable Supplies Demands Served by Non-Potable Supplies Three years ago total demand Four years ago total demand Optional (for comparison purposes) Last year's total demand Two years ago total demand Item #5     Packet Pg. 90     = From prior tables = Auto calculated Water Supply Start Year:2025 Volumetric Unit Used2:AF Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total by Water Supply Type Purchased/Imported Water San Francisco Public Utilities Commission Regional Water Supply System 1310 1285 1307 1088 929 686 654 575 660 697 969 1135 11295 0000000001310128513071088929686654575660697969113511295 0 Recycled Water Recycled Water from the Regional Water Quality Control Plant 54 53 35 22 11 2 2 11 9 24 42 50 315 0000545335221122119244250315 0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total 0 Table 3: Water Supplies1 Projected Water Supplies - Volume3 Water Quality Drop-down List Total Right or Safe Yield* (optional) Additional Detail on Water Supply Drop-down List May use each category multiple times.These are the only water supply categories that will be recognized by the WUEdata online submittal tool (Add additional rows as needed) Potable Supplies Non-Potable Supplies eAR Reported Total Water Supplies Optional (for comparison purposes) 1Projections are based on best available data at time of submitting the report and actual supply volumes could be different due to many factors. 2Units of measure (AF, CCF, MG) must remain consistent. 3When opting to provide other than monthly volumes (bi-monthly, quarterly, or annual), please see directions on entering data for Projected Water Supplies in the Table Instructions. Notes: Palo Alto purchases 100% of its potable water from SFPUC; Palo Alto used the SFPUC's March 1, 2024 Water Supply Availability Update to determine water supply. Palo Alto supplies recycled water for irrigation of the municipal golf course, a park and some other minor applications. There is sufficient supply of both potable and recycled water to meet demand. Total by Month (Potable) Total by Month (Non-Potable) Item #5     Packet Pg. 91     = Auto calculated = From prior tables = For manual input Table 4(P): Potable Water Shortage Assessment1 Start Year: 2025 Volumetric Unit Used2: AF Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun3 Total Anticipated Unconstrained Demand 131 0 128 5 130 7 1088 929 686 654 575 660 69 7 969 113 5 112 95 Anticipated Total Water Supply 131 0 128 5 130 7 1088 929 686 654 575 660 69 7 969 113 5 112 95 Surplus/Shortage w/o WSCP Action 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0. 0 0.0 0.0 0.0 % Surplus/Shortage w/o WSCP Action 0% 0% 0% 0% 0% 0% 0% 0% 0% 0 % 0% 0% 0% State Standard Shortage Level 0 0 0 0 0 0 0 0 0 0 0 0 0 Planned WSCP Actions4 Benefit from WSCP: Supply Augmentation 0.0 Benefit from WSCP: Demand Reduction 0.0 Revised Surplus/Shortage with WSCP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0. 0 0.0 0.0 0.0 % Revised Surplus/Shortage with WSCP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0 % 0% 0% 0% 1Assessments are based on best available data at time of submitting the report and actual volumes could be different due to many factors. 2Units of measure (AF, CCF, MG) must remain consistent. 3When optional monthly volumes aren't provided, verify Tables 2 and 3 use the same columns for data entry and are reflected properly in Table 4 and make sure to use those same columns to enter the benefits from Planned WSCP Actions. Please see directions on the shortage balancing exercise in the Table Instructions. If a shortage is projected, the supplier is highly recommended to perform a monthly analysis to more accurately identify the time of shortage. 4If you enter any WSCP Benefits, then you must enter the corresponding planned Actions into Table 5. Item #5     Packet Pg. 92     = Auto calculated = From prior tables = For manual input Table 4(NP): Non-Potable Water Shortage Assessment1 Start Year: 202 5 Volumetric Unit Used2: AF Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun3 Total Anticipated Unconstrained Demand: Non- Potable 54 53 35 22 11 2 2 11 9 24 42 50 315 Anticipated Total Water Supply: Non- Potable 54 53 35 22 11 2 2 11 9 24 42 50 315 Surplus/Shortage w/o WSCP Action: Non- Potable 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0. 0 0.0 0.0 0.0 % Surplus/Shortage w/o WSCP Action: Non-Potable 0% 0% 0% 0% 0% 0% 0% 0% 0% 0 % 0% 0% 0% Planned WSCP Actions4 Benefit from WSCP: Supply Augmentation 0.0 Benefit from WSCP: Demand Reduction 0.0 Revised Surplus/Shortage with WSCP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0. 0 0.0 0.0 0.0 % Revised Surplus/Shortage with WSCP 0% 0% 0% 0% 0% 0% 0% 0% 0% 0 % 0% 0% 0% 1Assessments are based on best available data at time of submitting the report and actual volumes could be different due to many factors. 2Units of measure (AF, CCF, MG) must remain consistent. 3When optional monthly volumes aren't provided, verify Tables 2 and 3 use the same columns for data entry and are reflected properly in Table 4 and make sure to use those same columns to enter the benefits from Planned WSCP Actions. Please see directions on the shortage balancing exercise in the Table Instructions. If a shortage is projected, the supplier is highly recommended to perform a monthly analysis to more accurately identify the time of shortage. 4If you enter any WSCP Benefits, then you must enter the corresponding planned Actions into Table 5. Item #5     Packet Pg. 93     July 1,2025 to June 30,2026 Enter Amount (Drop-down List) Select % or Volume Unit Start Month End Month NOTES: Notes Section to be used only for clarifying details, and not for listing specific actions. Actions must be entred into table rows 1If you plan Supply Augmentation Actions then you must enter WSCP Benefits from Supply Augmentation Actions into Table 4. If you plan Demand Reduction Actions then you must enter WSCP Benefits from Demand Reduction Actions into Table 4. 2If an Action is planned to be implemented in multiple non-contiguous periods of the year, please make separate entries on multiple rows for the same action spanning the different implementation periods. Table 5: Planned Water Shortage Response Actions Add additional rows as needed How much is action going to reduce the shortage gap? (Optional) When is shortage response action anticipated to be implemented2?Is action already being implemented? (Y/N) ACTIONS1: Demand Reduction, Supply Augmentation, and Other Actions. (Drop-down List) These are the only categories that will be accepted by the WUEdata online submittal tool. Select those that apply. Anticipated Shortage Level Drop-down List of State Standard Levels (1 - 6) and Level 0 (No Shortage) Palo Alto currently inplements permanent water use restrictions according to the Palo Alto Municipal Code Section 12.32.010 https://codelibrary.amlegal.com/codes/paloalto/latest/paloalto_ca/0-0-0-69362#JD_Chapter12.32. There is currently no water shortage projected for FY 2026 in Table 4(P). Item #5     Packet Pg. 94     Item No. 6. Page 1 of 11 6 5 9 3 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Director of Utilities Lead Department: Utilities Meeting Date: May 7, 2025 Report #: 2503-4385 TITLE Staff Recommendation That the Utilities Advisory Commission Recommend the City Council Approve 10 Year Energy Efficiency Goals for 2026-2035 RECOMMENDATION Staff recommends that the Utilities Advisory Commission (UAC) recommend the City Council approve the proposed annual and cumulative Electric Efficiency Goals for the period 2026 to 2035 as shown in the summary table below. EXECUTIVE SUMMARY Palo Alto has long recognized cost-effective energy efficiency (EE) as the highest priority energy resource, given that EE typically displaces relatively expensive electricity generation, lowers energy bills for customers, and contributes to economic development and job creation. As required by state legislation, the City adopted its first set of 10-year energy efficiency goals in April 2007, and updated these goals in 2010, 2012, 2017, and 2021. EE savings that can be counted towards these goals are restricted to those savings directly attributable to utility programs that are funded by a mandated public benefits charge (2.85% of electric retail revenue). EE upgrades that customers undertake without participating in utility programs as well as EE savings achieved through federal and state appliance and building standards currently cannot be counted towards the City’s EE goals. The savings reported here and targeted by these goals represent a subset of the actual energy efficiency upgrades taking place in Palo Alto. Over the past decade, building and appliance efficiency standards have become increasingly stringent. As federal and state efficiency standards increase, the energy savings attributable to utility programs decline. For this current EE goals update, staff proposes annual EE savings targets of 0.24% in 2026, increasing to 0.55% in 2032 and holding stable through 2035, with a cumulative 10-year EE savings of 2.8% of the City’s projected electric load. These targets reflect the continued Item #6     Packet Pg. 95     Item No. 6. Page 2 of 11 6 5 9 3 decrease in traditionally available EE savings as electrification projects become an increasing focus for consumers as well as utility programs, and stricter state codes and regulations shrinking the amount of claimable EE savings. Much of the upward trend between the 2028 and 2032 targets can be attributed to the expectation of a future conservation voltage reduction (CVR) program once Advanced Metering Infrastructure is in place. Summary Table: Annual Electric Energy Efficiency Goals (% of total City customer usage) Electric (%) Electric MWh 2026 0.24%2,083 2027 0.24%2,105 2028 0.31%2,645 2029 0.36%3,105 2030 0.42%3,597 2031 0.48%4,082 2032 0.54%4,571 2033 0.55%4,558 2034 0.53%4,423 2035 0.53%4,426 Cumulative1 10-year EE Goal 2.80%23,230 BACKGROUND Council adopted the City’s first 10-year electric EE goals in April 2007. These goals targeted a cumulative reduction in the City’s electric usage of 3.5% by 2017. The goals met the state legislative requirements established by AB 2021 (2006) requiring publicly owned electric utilities to adopt annual electric efficiency savings goals over a 10-year period, with the first set of goals due by June 1, 2007 and every three years thereafter. These EE goals were used for the City of Palo Alto Utilities’ (CPAU’s) resource planning as well as for EE program budget planning. In May 2010 City Council updated the 10-year EE goals to reduce cumulative electric load by 7.2% between 2011 and 2020. In 2017, new EE goals were adopted with cumulative 10-year electric savings of 5.7% between 2018 and 2027. The most recent set of 10-year EE goals was adopted by City Council in 2021, with cumulative 10-year electric savings of 4.4% between 2022 and 2031. AB 2227 (2012) changed the triennial energy efficiency target-setting schedule to a 1 Cumulative EE savings are not equal to the sum of the annual incremental goals due to the differences in how long the electricity savings persist for different measures and different types of EE savings. For example, new hardware upgrades contribute savings over their expected lifetimes, perhaps 15 years, whereas electricity savings from changing thermostat set-points are assumed to contribute savings over a much shorter period of time. Item #6     Packet Pg. 96     Item No. 6. Page 3 of 11 6 5 9 3 quadrennial schedule, beginning March 15, 2013 and every fourth year thereafter. The next EE goals update is due to be submitted to the California Energy Commission by May 15, 2025. Figure 1 provides a summary of the annual EE goals and achievements since Fiscal Year (FY) 2008. The figure shows that actual CPAU EE achievements met or exceeded goals for most years until 2020, where COVID began a downward trend in electric efficiency savings that has also been influenced by stricter state codes and electrification efforts. Figure 1. Electric Efficiency Goals and Achievements for 2008-2024. In 2015 California passed a landmark piece of energy legislation called Senate Bill 350 (SB 350) the “Clean Energy and Pollution Reduction Act of 2015”. SB 350 reinforces California’s position as a leader in clean energy and greenhouse gas reduction and codified Governor Brown’s ambitious “50/50/50” plan to procure 50% of electricity from renewable resources, reduce petroleum use by 50%, and double building efficiency in both electric and natural gas end uses by 2030. The statute lists a variety of programs to achieve the doubling of efficiency savings, including: 1) appliance and building standards; 2) utility programs that offer financial incentives, rebates, technical assistance and support to customers to increase EE; 3) programs that achieve EE savings through operational, behavioral and retro-commissioning activities; and 4) programs 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Actual Savings 2008 - 2017 Goals 2011 - 2020 Goals 2014 - 2023 Goals 2018 - 2027 Goals 2022 - 2031 Goals Percentages represent EE savings Item #6     Packet Pg. 97     Item No. 6. Page 4 of 11 6 5 9 3 that save energy in final end uses through reducing distribution feeder voltage (i.e. conservation voltage reduction). In 2021, the City Council set more conservative 10-year energy efficiency (EE) goals, about 40% lower than the previous targets. These revised goals accounted for the expected effects of COVID and a contracting EE market on potential electric efficiency savings in the years ahead. With ongoing trends in electrification and increasingly stringent codes, even lower EE goals are now being proposed for the next 10-year cycle. ANALYSIS CPAU has offered energy efficiency programs since the 1970s. Its Long-term Electric Acquisition Plan (LEAP), approved by City Council in March 2007 and last updated in 2023 as the Electric Integrated Resource Plan (EIRP), affirmed cost-effective energy efficiency as the highest priority resource for serving load, with the goal of reducing average customer bills. The portfolio of EE programs has evolved over time. Originally the programs focused on rebates for customers administered by CPAU staff, but now include a combination of rebates and programs administered by third parties that provide EE audit and turnkey EE services to customers. CPAU has also been piloting multiple electrification programs over the last few years, including a full- service heat pump water heater program and a packaged rooftop heat pump HVAC program for commercial customers. These programs do not provide direct electric efficiency savings, but they do still provide overall energy efficiency savings as gas equipment is replaced by highly efficient heat pump technology. Palo Alto also has an ongoing Program for Emerging Technologies to evaluate, test and implement innovative emerging technologies that could help customers manage or reduce energy and water use. Besides utility programs, Palo Alto continues pursuing energy savings through its local green building code and energy reach code. In December 2022, City Council adopted new reach codes that initially required all-electric new construction during the 2023-2026 code cycle. In 2024, in response to a decision from the Ninth Circuit Court of Appeals invalidating the City of Berkeley’s all-electric reach code, the City Council replaced its all-electric reach code with one that requires newly constructed buildings to meet stricter energy saving standards than those imposed by state law. The energy reach code has been in place since 2008 and has continued to evolve with California’s Building Standards (Title 24). As a reach code specific to only the City of Palo Alto, energy savings from this code can be counted towards these EE goals. However, as California state codes have become increasingly more stringent on energy efficient equipment, the claimable savings for Palo Alto programs has continued to shrink. As an example, California enacted Assembly Bill 2208 (AB 2208) in 2022 mandating the phase-out of fluorescent lighting starting in 2024. This bill will have a significant impact on CPAU EE program savings since nonresidential lighting projects have made up as much as 60% of total reported EE savings in recent years. Item #6     Packet Pg. 98     Item No. 6. Page 5 of 11 6 5 9 3 From a supply resource planning perspective, CPAU has incorporated both historic EE savings as well as forecast EE savings (from Council-approved EE goals) when forecasting the aggregate customer loads for a 10-year planning period. Cumulative EE from utility programs over the past 15 years is estimated at 5.7% of 2024 loads, i.e. without such programs, Palo Alto’s electrical loads would have been 5.7% (49,777 MWh) higher in 2024. Proposed Electric Efficiency Goals Staff proposes new annual electric EE targets at 0.24% of forecast electric load beginning in FY 2026, increasing to 0.54% in FY 2032 when the conservation voltage reduction program is fully implemented. These proposed goals reflect staff’s anticipation that savings levels have been impacted by state codes. The proposed goals are based on the results of an EE potential model that takes into account planned program offerings, expenditures, market saturation of energy efficient technologies, load forecast, and a planned conservation voltage reduction program following the city-wide deployment of Advanced Metering Infrastructure (AMI). Overall, these goals are much lower than the previous goals set in 2021 or 2017 (see Figure 2). The goals adopted in previous years were developed when state codes were less stringent2. Figure 3. Historic EE Savings and Proposed Annual Electric EE Goals on an Energy Basis shows the actual historical EE savings and the proposed 2026 to 2035 EE goals. Further, the City’s EE potential model estimates a market potential lower than the adopted 2017 and 2021 goals with low-cost energy efficiency technologies approaching market saturation. The proposed EE goals are also projected to be cost-effective based on both the model projections and past EE program costs. Savings from EE can be reported on a net basis, meaning they exclude energy impacts from free-riders (program participants who would have installed EE in the absence of incentives), or on a gross basis, meaning they include impacts from program participants that are free-riders. The goals in Figure 4 are based on “net” EE savings rather than “gross” EE savings.3 This means they do not include the energy savings that would have occurred in the absence of utility incentives, and therefore most accurately reflect the EE savings attributable to CPAU’s programs. CPAU also excludes savings attributable to the state’s building and appliance standards. In order to allow comparison with other utilities that set goals on a gross basis, the proposed annual goals in Figure 2 are shown as proposed (on a net basis without including codes and standards), as well as on a gross basis. 2 EE savings attributed to state mandated codes and standards are excluded from the EE potential for CPAU, and therefore also cannot count toward meeting its EE goals. 3 The 2026 – 2035 Goals assumes free-ridership at the measure level using an average net-to-gross (NTG) ratio of 0.85 except for low income and conservation voltage reduction programs, where the assume is 1.0 (no free ridership). The NTG ratios are based on California statewide evaluation studies and are documented in Database of Energy Efficiency Results (DEER). Generally, mature, low-cost technologies tend to have higher free-ridership. Item #6     Packet Pg. 99     Item No. 6. Page 6 of 11 6 5 9 3 Figure 2. Comparison to Proposed 2021 Electric EE goals and 2017 Electric EE Goals. Below, Figure 3 shows the reported EE savings as well as the proposed annual electric EE goals expressed in MWh. The big jump in 2012’s reported savings was due to the completion of a significant EE project at a large commercial site, which is unlikely to be replicable. The sharp drop in savings in 2020 was a result of delays in launching the direct install EE program targeting small to medium businesses, closure of the Home Energy Report program, and challenges related to COVID that stopped or delayed EE projects. Impacts of the economic recession have continued through the years after 2020, with fewer nonresidential customers 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% 1.0% 201 8 201 9 202 0 202 1 202 2 202 3 202 4 202 5 202 6 202 7 202 8 202 9 203 0 203 1 203 2 203 3 203 4 203 5 2026 - 2035 Goals (Gross) 2026 - 2035 Goals 2022 - 2031 Goals (Gross) 2022 - 2031 Goals 2018 - 2027 Goals Percentages represent EE savings relative to load Item #6     Packet Pg. 100     Item No. 6. Page 7 of 11 6 5 9 3 pursuing efficiency projects. Figure 3. Historic EE Savings and Proposed Annual Electric EE Goals on an Energy Basis. On a cumulative basis, the total EE savings from the proposed 2026 to 2035 targets represent 2.8% of the forecasted electric load in 2035. The cumulative impact of the annual targets for this 10-year period is shown in Figure 4. Notably, some EE savings have a longer lasting effect than others, as different EE measures have different useful lifetimes. Measure life for Light Emitting Diode (LED) bulbs can be up to 12 years, whereas behavioral and retro-commissioning savings last only a few years. Due to the differences in EE savings persistence, the cumulative EE impact over the 10-year period is not equal to the sum of the annual EE goals for the 10 years. 0 2,500 5,000 7,500 10,000 12,500 2008 2009 20102011 20122013 2014 2015 2016 2017 2018 20192020 20212022 2023 2024 2025 2026 2027 20282029 20302031 2032 2033 2034 2035 MWh Actual Savings 2026 to 2035 Goals Item #6     Packet Pg. 101     Item No. 6. Page 8 of 11 6 5 9 3 Figure 4. Proposed 2026-2035 Cumulative Electric EE Goals. Strategies for Achieving the Proposed EE Goals Achieving these EE goals will require the deployment of new innovative program designs, increasing awareness of existing programs, and developing other program approaches to reach previously stranded sections of the energy efficiency market potential. While the proposed EE goals may appear lower than past goals and historical savings, the proposed goals will require tremendous program execution and successful AMI implementation prior to launching a conservation voltage reduction program. Staff will need to carefully evaluate how the florescent lighting regulations will impact the existing Business Customer Rebate and Commercial and Industrial Energy Efficiency programs. These programs have historically generated the bulk of energy efficiency savings, so understanding the future potential of lighting savings projects and exploring additional opportunities will be critical to the success of reaching these targets. In addition, once the City implements an Advanced Metering Infrastructure (AMI) backbone of a smart-grid system, staff plans to launch a conservation voltage reduction program using the 0 5,000 10,000 15,000 20,000 25,000 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Res Cumulative Market Potential Non-Res Cumulative Market Potential CVR Potential (If Claimed)Total Cumulative Potential as a % of Total Sales Cumulative Net Market Potential by Sector All Sectors Energy Potential (MWh) and % of Sales MW h % o f A n n u a l G W h S a l e s Item #6     Packet Pg. 102     Item No. 6. Page 9 of 11 6 5 9 3 AMI infrastructure on primary feeders. This program could generate savings of up to 1% of city’s annual electricity load, with implementation expected to start in 2028. These plans are subject to Council review and approval. CPAU will continue to evaluate the impact of electrification on future energy efficiency goals and reporting as it becomes an increasing priority for Palo Alto and other cities and utilities around the state. Staff anticipates continued discussions around how energy savings from building electrification projects will be measured and reported, and how these savings will contribute to the city’s EE goals. This evolution of CPAU’s EE portfolio is consistent with the general consensus among utilities that new approaches are needed to reach EE targets as traditional EE programs approach market saturation and code limitations. Projected Electric EE Program Costs Funding for EE programs comes from a mandated Public Benefit (PB)4 surcharge of 2.85% of the electric utility bill for all customers. To meet the proposed EE goals, staff estimates an annual EE budget of $1.5M to $1.7M per year from 2026 to 2035. This projected EE program budget is anticipated to be fully funded by the annual PB collections. Figure 5 shows the actual electric EE program expenditures for FY 2008 through FY 2024, an estimate for FY25, and the estimated annual EE budget between 2026 and 2035. 4 Locally owned municipal utilities like CPAU must collect Public Benefits funds as required by section 385 of the Public Utilities Code, to be used on cost-effective energy efficiency and conservation, low income programs, investments in renewable energy resources and technologies, and research and development. Item #6     Packet Pg. 103     Item No. 6. Page 10 of 11 6 5 9 3 Figure 5. Actual and Projected Electric EE Program Costs. Retail Rate & Average Customer Bill Impact of the Proposed Electric EE Goals EE programs impact retail rates in two ways. First, a lower electric load means that fixed costs (capital investments and fixed operating costs to run the electric utility) must be distributed over a lower electric sales volume, thereby increasing the average electric retail rate. Second, the use of funds to support EE programs increases the revenue requirements for the electric utility. Increased charging of electric vehicles, electrification of natural gas appliances, and other electric load growth could mitigate the retail rate impact of the EE programs. While rates increase, total bills are expected to be reduced over the lifetime of the EE savings. FISCAL/RESOURCE IMPACT This report contains preliminary estimates of the costs of achieving the proposed electric EE goals. The detailed budget plan and staffing needs to meet the annual EE goals will be part of the annual City budgeting process. The annual budget will present the costs for both internally administered, as well as contractor supported, efficiency programs. Adoption of the proposed electric 10-year EE goals will replace the 2021 10-year electric EE goals and will inform the EE program planning and load forecasting for the next four years. These goals will also be included in the Electric Utility Integrated Resource Plan, and the City’s Sustainability $- $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 200 8 200 9 201 0 201 1 201 2 201 3 201 4 201 5 201 6 201 7 201 8 201 9 202 0 202 1 202 2 202 3 202 4 202 5 202 6 202 7 202 8 202 9 203 0 203 1 203 2 203 3 203 4 203 5 Millions Actuals through 2024 Preliminary estimate 2025 Item #6     Packet Pg. 104     Item No. 6. Page 11 of 11 6 5 9 3 Implementation Plan. The proposed 2026 - 2035 electric EE goals are consistent with the Utilities Strategic Plan, and the City’s Sustainability and Climate Action Plan (S/CAP). STAKEHOLDER ENGAGEMENT Energy efficiency is included as a key action for the S/CAP, and stakeholder engagement has taken place as part of the development of that plan. Staff does not typically do stakeholder outreach when developing 10-year EE goals but instead evaluates market potential of various programs and consults with industry experts on available and emerging efficiency measures. ENVIRONMENTAL REVIEW The UAC’s recommendation that Council approve the 2026 10-year electric EE goals does not require California Environmental Quality Act review, because the plan does not meet the definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), as an administrative governmental activity which will not cause a direct or indirect physical change in the environment. ATTACHMENTS Attachment A - 10-yr EE Goals for 2026-2035 Presentation AUTHOR/TITLE: Kiely Nose, Interim Director of Utilities Staff: Timothy Scott, Resource Planner Item #6     Packet Pg. 105     10 Year Energy Efficiency Goals for 2026-2035 Utilities Advisory Commission May 7, 2025 Item #6     Packet Pg. 106     Background •AB 2021 (2006) required publicly owned electric utilities to adopt annual electric efficiency savings goals over a 10-year period •Council adopted the City’s first 10-year Electric Energy Efficiency (EE) Goals in April 2007 •These 10-year goals are only set for electric efficiency savings, not gas efficiency •New 10-year EE targets are established every 4 years •These goals are used for CPAU’s supply resource planning as well as EE program budget planning 2 Item #6     Packet Pg. 107     EE Goals and Achievements for 2008-2024 •CPAU was achieving EE goals until 2020 •COVID impacted participation rates •Other limiting factors include: •State codes becoming stricter •Increased focus on electrification 3 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Actual Savings 2008 - 2017 Goals 2011 - 2020 Goals 2014 - 2023 Goals 2018 - 2027 Goals 2022 - 2031 Goals Percentagesrepresent EE savings relative to load Item #6     Packet Pg. 108     Proposed 10 Year EE Targets •Targets are set based on achievable EE potential study •Decreasing EE potential due to: •State codes and standards •Nonres lighting in particular •Market saturation improvements •Anticipated Conservation Voltage Reduction (CVR) program drives the 2028-2032 increase in savings 4 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% 1.0% 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2026 - 2035 Goals (Gross) 2026 - 2035 Goals 2022 - 2031 Goals (Gross) 2022 - 2031 Goals 2018 - 2027 Goals Percentages represent EE savings relative to load Item #6     Packet Pg. 109     EE Savings and Goals on an Energy Basis •EE targets are often framed as percent of total load •Proposed EE targets are equivalent to around 2,000 to 4,500 MWh annually 5 0 2,500 5,000 7,500 10,000 12,500 MWh Actual Savings 2026 to 2035 Goals Item #6     Packet Pg. 110     Proposed 2026-2035 Cumulative EE Goals •Total EE savings from the 2026-2035 targets represent 2.8% of the forecasted electric load •Cumulative savings account for the assumed useful life of savings measures •For example, lighting measures could be up to 12 years while retro-commissioning changes only count for a few years •Nonresidential savings dominate the energy efficiency potential market 6 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 0 5000 10000 15000 20000 25000 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 % o f A n n u a l G W h S a l e s MW h Cumulative Net Market Potential by Sector All Sectors Energy Potential (MWh) and % of Sales Res Cumulative Market Potential Non-Res Cumulative Market Potential CVR Potential (If Claimed)Total Cumulative Potential as a % of Total Sales Item #6     Packet Pg. 111     Actual and Projected EE Program Costs •Future costs represent the expected budget needed to meet our targets •Based on program cost data including admin, marketing, etc. •Cost trend does not follow the 10-yr EE target trajectory because the CVR program is expected to be low cost 7 $- $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 Millions Actuals through 2024 Preliminary estimate 2025 Item #6     Packet Pg. 112     Next Steps •UAC feedback and questions •We are asking that the UAC recommend the proposed 10- year electric energy efficiency goals for council adoption •We will be bringing the proposed EE goals to city council for adoption in early June •Adopted EE goals will be shared with the California Energy Commission (CEC) 8 Item #6     Packet Pg. 113     Item #6     Packet Pg. 114     Date: May 7, 2025 FORECAST 12-MONTH ROLLING CALENDAR Utilities Advisory Commission City Council May 2025 • FY 2026 Utilities CIP and Operating Budget • 10 Year Energy Efficiency goals • Water Supply & Demand Assessment • Fiber Rates/Packages and FTTP Update • Appointment of Chair and Vice Chair • FY 2026 Utilities CIP and Operating Budget (FCM) • Affordable Multi Family Housing Electrification Incentive Pilot Program (CCM) • Whole Home Electrification Phase 2 (CCM) June 2025 • Wildfire Mitigation Plan / CPAU Emergency Preparedness • Electric Residential Time of Use (TOU) Rates • Aypa Energy Storage Services Agreement • Connection Fee Update • Rates and Financial Forecasts (CCM) • Fiber Rates/Packages (FCM) • Fiber Rate/Packages (CCM) • On Call Traffic Safety and Signage Services (CCM) • Professional Consulting Services for Electric Utility Engineering, Grid Mod (CCM) • FY 2026 Utilities CIP and Operating Budget (CCM) • 10 Year Energy Efficiency Goals (CCM) • Water Supply & Demand Assessment (CCM) • Sanitary Sewer Management Plan SSMP (CCM) July 2025 RECOMMEND CANCEL, SUMMER BREAK COUNCIL SUMMER BREAK August 2025 • FY25-Q3 Quarterly Informational Report • Preliminary Analysis of the Infrastructure Impacts Associated with Gas Decommissioning • Grid Modernization Bond Financing and Project Update • Tier 2 Water Allocation During Drought • Reliability and Resilience Strategic Plan Update • Water System Leak Detection Survey (CCM) • Gas Main Replacement 25 Project (CCM) • Aypa Energy Storage Services Agreement (FCM) • Tier 2 Water Allocation During Drought (FCM) • Utility Trench & Substructure Installation Contract (CCM) • MTC Grant (CCM) • Overhead Fiber Optic Service Drops to Customers Premises (FTTP) Contract (CCM) • Professional Engineering/Design Services for Electric Substations & Distribution System (CCM) • Grid Mod Bond Financing and Project Update (FCM) • Rules and Regs Update (CCM) • Connection Fee Update (FCM) • Connection Fee Updated (CCM) September 2025 • Second Transmission Corridor Update • Tier 2 Water Allocation During Drought (CCM) • Aypa Energy Storage Services Agreement (CCM) October 2025 • FY25-Q4 Annual Report • Electric Time of Use Rates Implementation Check-in • Grid Modernization Bond Financing and Project Update (CCM) November 2025 • Preliminary FY 2027 Rates December 2025 • Preliminary FY 2027 Rates (FCM) January 2026 • FY26-Q1 Quarterly Report • Q1 Fiber Pilot Report Out • Q1 Fiber Pilot Report Out (FCM) February 2026 • FY 2027 Utility Rates & 5 Year Forecasts • FY 2027 Utility Rates & 5 Year Forecasts (FCM) March 2026 • Water Quality Update – Regional sampling of microplastics (depending on release of information) April 2026 • Urban Water Management Plan • Sanitary Sewer 5-year CCTV (CCM) Reoccurring Items Items to Be Scheduled -Educational Update on any Type of New Technology or Terminology -Projects with a Resiliency Component -Quarterly Reports (Q1-3 Info Rpts)(Q4 Discussion Summary of the year) Financial Report Utilities Programs Update Informational EV Charger Installation Updates Informational Bucket 1 REC Sales Updates Informational Fiber Updates -Data Center Competitiveness -Credit Card Fees -Legislative Session -Grid Mod Strategy