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NOTICE IS POSTED IN ACCORDANCE WITH GOVERNMENT CODE SECTION 54954.2(a) OR 54956
I.ROLL CALL
II.ORAL COMMUNICATIONS
Members of the public are invited to address the Commission on any subject not on the agenda. A reasonable time
restriction may be imposed at the discretion of the Chair. State law generally precludes the UAC from discussing or
acting upon any topic initially presented during oral communication.
III.APPROVAL OF THE MINUTES
Approval of the Minutes of the Utilities Advisory Commission Meeting held on April 9, 2019
IV.AGENDA REVIEW AND REVISIONS
V.REPORTS FROM COMMISSIONER MEETINGS/EVENTS
VI.GENERAL MANAGER OF UTILITIES REPORT
VII.COMMISSIONER COMMENTS
VIII.UNFINISHED BUSINESS - None
IX.NEW BUSINESS
1.Discussion of Carbon Emissions Accounting Options for the City’s
Electric Supply Portfolio Discussion
2.Staff Recommendation that the Utilities Advisory Commission Recommend that the City
Council Adopt: 1) a Resolution Approving the Fiscal Year 2020 Gas Utility Financial Plan;
and 2) a Resolution Increasing Gas Rates by Amending Rate Schedules G-1 (Residential
Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), G-3 (Large
Commercial Gas Service), and G-10 (Compressed Natural Gas Service)Action
3.Staff Recommendation that the Utilities Advisory Commission Recommend that the City
Council Adopt the Proposed Operating and Capital Budgets for the Utilities Department
for Fiscal Year 2020 Action
4.Update and Discussion of Fiber and AMI Planning Discussion
NEXT SCHEDULED MEETING: June 5, 2019
ADDITIONAL INFORMATION - The materials below are provided for informational purposes, not for action or discussion
during UAC Meetings (Govt. Code Section 54954.2(a)(2)).
Informational Reports 12-Month Rolling Calendar Public Letter(s) to the UAC
UTILITIES ADVISORY COMMISSION – SPECIAL MEETING
WEDNESDAY, MAY 1, 2019 – 5:00 P.M.
COUNCIL CHAMBERS
Palo Alto City Hall – 250 Hamilton Avenue
Chairman: Michael Danaher Vice Chair: Judith Schwartz Commissioners: Arne Ballantine, Lisa Forssell, A. C. Johnston, Lauren Segal and Terry Trumbull Council Liaison: Tom DuBois
Utilities Advisory Commission Minutes Approved on: June 5, 2019 Page 1 of 11
UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF MAY 1, 2019 SPECIAL MEETING
CALL TO ORDER
Chair Danaher called the meeting of the Utilities Advisory Commission (UAC) to order at 5:00 p.m.
Present: Chair Danaher, Vice Chair Schwartz, Commissioners Forssell, Johnston, and Segal
Absent: Commissioner Trumbull
ORAL COMMUNICATIONS
Tom Kabat, Carbon Free Silicon Valley, shared the history of the gas utility in Palo Alto and historical fuel
switching from town gas to natural gas. He emphasized that the Gas Utility could help the City meet City and
State climate goal by evolving from delivering heat by chemical delivery to delivering thermal services directly
through measures like district heating; and whether it could pivot once again to become a heating utility
rather than a gas utility.
APPROVAL OF THE MINUTES
Chair Danaher noted Commissioner Ballantine had resigned from the Commission prior to the April meeting.
Vice Chair Schwartz requested the second paragraph on page 7 state "Commissioner Segal believed the
Council should decide whether anybody pays for the additional costs." In the next paragraph, "Vice Chair
Schwartz appears to be less inclined to allow a choice" should be deleted. The following sentence should be
"Vice Chair Schwartz clarified that while it is important to listen to community concerns, it would be a better
choice to find eight to ten households that are willing to host pad-mounted equipment."
Commissioner Johnston moved to approve the minutes of the April 9, 2019 meeting as amended.
Commissioner Segal seconded the motion. The motion carried 5-0 with Chair Danaher, Vice Chair Schwartz,
and Commissioners Forssell, Johnston, and Segal voting yes, and Commissioner Trumbull absent.
AGENDA REVIEW AND REVISIONS
None.
REPORTS FROM COMMISSIONER MEETINGS/EVENTS
Commissioner Segal reported she attended the Recycled Water Strategic Plan public meeting. The meeting
laid out the current possible options for recycled water use, both potable and non-potable. She encouraged
everyone to review the informative slides. There are many opportunities, economics, and timelines for use
of recycled water, both potable and non-potable and within the City and beyond the City.
Catherine Elvert, Communications Manager, reported the slides would be shared with the Commission. The
slides are valuable information to share with the community.
FINAL
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Commissioner Johnston advised that he attended a presentation by Stanford Professor Richard Luthy, who
spoke about recycling treated water and stormwater runoff. Commissioners may be interested in hearing
about options people are trying.
Vice Chair Schwartz indicated she attended the Energy Thought Leadership Summit. She was pleased that
utilities are talking about customer engagement and implementing people-first programs. After hearing
discussions about data privacy and data governance in relation to automated metering infrastructure (AMI),
she suggested City of Palo Alto Utilities (CPAU) should understand data privacy and governance in order to
ensure legacy systems are aligned. The Department of Energy (DOE) has produced a document that shows
the benefits of AMI exceed the original business cases. Vice Chair Schwartz also attended the Low Income
Energy Issues Forum, where she presented information regarding low-income community solar. Community
solar projects become part of microgrids and other applications around sustainability and community buy-in
that may be issues for Palo Alto. When combined with other things, local solar can be valuable at the local
level.
GENERAL MANAGER OF UTILITIES REPORT
Jonathan Abendschein, Assistant Director of Resource Management, delivered the General Manager’s
Report.
Recycled Water Strategic Plan Public Meeting - Utilities, Public Works, and Valley Water hosted a public
meeting yesterday to request input on possible projects the City could explore for expanding use of recycled
water from the Regional Water Quality Control Plant. The information presented was similar to the material
provided to the UAC in October 2018 and to City Council at a December 2018 study session. The discussion
included options for both non-potable and potable uses of recycled water. The City should be able to follow
up with interested stakeholders after reviewing public feedback.
Utilities Rates Adjustments – Staff has been developing a communication strategy and public outreach
materials for the utilities rate changes proposed to take effect on July 1, 2019. You will see some of the key
messages that will be incorporated into our outreach in the draft document before you tonight. This will be
further refined for public circulation. In an effort to provide clear and transparent information to all affected
stakeholders, we will communicate through a variety of outreach channels including web, utility bill inserts,
social media, digital and print announcements. All water and wastewater customers will receive a printed
letter in the mail within the next one to two weeks with details on those rates, per our notification
requirements through Proposition 218.
Update on Crossbore Program – The City’s Crossbore Verification Program investigates privately-owned and
City-owned sewer lines to ensure that there are no natural gas lines accidentally crossbored through them.
Utilities video-inspects sanitary sewer laterals and makes repairs free of charge to customers if a crossbore
is found. Phase 1 of the program was completed in 2013. At that time, we identified 26 gas crossbores which
were subsequently repaired, and verified that more than 7,000 other parcels were clear of a potential
crossbore. Phase 2 of the program will include a 2-year contract to inspect remaining sewer laterals at various
locations that have been determined to be a higher priority for inspection. The City received four bids from
qualified contractors for the phase 2 contract. A bid submitted by AIMS Companies came in 45% lower than
our staff’s initial engineering estimate. Since this leaves available funding in our budget, we recommend
taking this opportunity to increase the number of sewer laterals inspected in this phase of the program from
1,200 to 2,500 locations. The Council approval date is scheduled for June 24. The total not-to-exceed contract
amount is about $1.7 million.
Media Coverage of Palo Alto’s Energy Resources – A local reporter for the Palo Alto Weekly has recently
been publishing blog posts about our Utilities energy resources portfolio. After speaking with
communications and resource planning staff, she is now writing a series of well-informed, educational articles
which help share with the public more about what we do for environmental sustainability. This media
Utilities Advisory Commission Minutes Approved on: June 5, 2019 Page 3 of 11
coverage provides an insightful look at how we procure energy resources, what is considered renewable
versus non-renewable energy, what is Consumer Choice Aggregation (CCA), related legislation that could
impact publicly owned utilities and CCAs, and what it means to be carbon neutral. We encourage you to take
a look at this blog titled, “A New Shade of Green,” in Palo Alto Online.
Mayor’s Green Business Award – Join us at the Mayor’s Green Business Leader Awards presentation on May
20. This award program recognizes property managers whose buildings earn an EPA Energy Star, LEED Gold
or Platinum status. This year we will be honoring 27 buildings, representing over 2 million square feet of
commercial space, which were Energy Star rated in 2018. We also have six properties that became LEED Gold
certified and one property that obtained the elite LEED Platinum status. The awards ceremony will take place
at the beginning of the May 20 City Council meeting.
COMMISSIONER COMMENTS
None.
UNFINISHED BUSINESS
None.
NEW BUSINESS
ITEM 1: DISCUSSION: Discussion of Carbon Emissions Accounting Options for the City's Electric Supply
Portfolio.
Lena Perkins, Acting Senior Resource Planner, reported the UAC has discussed the definition of carbon
neutrality many times. The Palo Alto Carbon Neutral Electric Supply Plan was established in 2013 and called
for carbon neutral supplies to match load on an annual basis. That made sense at the time because the
emissions of the grid did not vary much throughout the course of the year. It was also consistent with the
Climate Registry Protocol. The duck curve first appeared in 2013. Now, carbon emissions vary tremendously
throughout the course of the day and throughout the course of the year. Over a year, CPAU has excess power
in the summer months and power deficits in the winter months. In a 24-hour period, CPAU has power deficits
throughout the day in January and excess power during parts of the day in July. In July, CPAU has excess
power in the evening hours because CPAU dispatches its hydroelectric during peak evening hours. Currently,
the accounting methodology for calculating the portfolio’s carbon emissions is an annual basis. An average
(as opposed to marginal) hourly basis is most appropriate for a portfolio inventory. 2020 changes relate to
unbundled Renewable Energy Certificates (REC). These RECs currently show up as zero carbon on CPAU's
power content label but will show up as carbon emitting on CPAU's 2020 power content label.
In response to Commissioner Forssell's question about the California Energy Commission (CEC) reaching a
decision regarding the accounting methodology, Perkins replied the CEC has not made a decision. Over the
past year, the CEC has been consistent that carbon emissions will be associated with bucket 3 RECs. CPAU
buys bucket 3 RECs in a below-average hydroelectric year in order to green up market purchases. CPAU buys
unspecified market power because CPAU does not have sufficient energy on an annual basis. The UAC
previously expressed a preference for lowering costs, which means procuring as many bucket 3 RECs as
allowed under a minimally compliant Renewable Portfolio Standard (RPS). Each year, 10% of load would be
bucket 3 RECs, which would look dirty on the power content label under the CEC’s methodology, which would
be a communications challenge to explain.
Vice Chair Schwartz remarked that using the word “dirty” to refer to fossil-fueled generation is simplistic
when reliability and having lights and heat at night are also considerations. Perkins said that she was
attempting to use the simplest words possible and suggested the use of "carbon emitting" in place of "dirty."
In reply to Commissioner Forssell's inquiry regarding unbundled RECs and bucket 3 RECs being equivalent,
Perkins advised that they are the same. Commissioner Forssell clarified that the carbon emissions were going
to show up on the power content label only in a dry hydroelectric year. Perkins stated the previous feedback
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from the UAC was to maximize unbundled REC bucket 3 purchases in order to have the cheapest electricity
portfolio possible. Staff had not implemented that because the accounting methodology change was being
considered by the CEC. Jonathan Abendschein, Assistant Director of Resource Management, explained that
CPAU currently has about 10% more carbon-free energy than its load in an average hydroelectric year, a
surplus on an annual basis. The current definition of carbon neutrality is on an annual basis. CPAU is exceeding
its Carbon Neutral Portfolio goals in an average hydroelectric year and could sell energy while still complying
with the current policy. In a significantly below-average hydroelectric year when CPAU's renewable and
carbon-free energy drops below 100%, CPAU would buy unbundled RECs under the current policy. Staff heard
the UAC's interest in reducing costs as much as possible. If the City retained an annual accounting
methodology, CPAU could eliminate the 10% surplus and reduce renewable energy to match load, while still
reporting no carbon emissions in an average year. CPAU could also sell even more of the renewable energy
from long-term contracts, and buy unbundled RECs instead. That would be the cheapest possible portfolio
that is compliant with CPAU and State policies, but it would appear carbon-emitting under the CEC’s power
content label methodology. In reply to Commissioner Forssell's question about selling bundled RECs and
buying unbundled RECs in an average hydroelectric year in order to arbitrage the bundle/unbundled financial
opportunity, Abendschein commented that that policy option is a possibility. Perkins added that there is a
difference between what the power content label shows and RPS eligibility. She corrected an earlier
statement in that 10% of CPAU's RPS compliance would be potentially unbundled RECs or bucket 3 RECs. If
CPAU's RPS mandate is 40% in this period, then 4% of the portfolio would appear dirty.
Perkins continued the presentation, stating if CPAU continues with annual accounting, a change from the CEC
would cause CPAU's portfolio to appear dirtier. Average emissions are calculated as total emissions of the
grid divided by total energy generation. Marginal emissions are the emissions intensity of the last unit called
upon to deliver the last unit of electricity. Marginal emissions are useful for thinking about an individual
action, especially load shifting. When reviewing the carbon emissions of the entire portfolio on an inventory
basis, marginal emissions would not be appropriate.
Vice Chair Schwartz remarked that changing the methodology would demonstrate leadership in the industry.
From a positioning standpoint, she proposed Commissioners look at this as measuring true decarbonization
and to define decarbonization as a process. Commissioners should emphasize that the process is ongoing. In
answer to Vice Chair Schwartz's query regarding staff's ability to use marginal emissions to analyze the effect
of everybody in Palo Alto switching to heat pump space and water heating, Perkins indicated the analysis was
possible because staff had a new reporting tool for energy efficiency into which staff has incorporated
electrification measures. Staff is using marginal emissions for that tool.
Chair Danaher commented that the goal is to be as accurate as possible regarding the carbon load. Hourly
accounting appears to be much more accurate than annual accounting. CPAU is an average user, and average
emissions makes more sense than marginal emissions. Marginal overstates things. He asked Commissioners
to nod if they agreed with that comment. He noted that all the Commissioners were nodding. Commissioners
agree that average is the right methodology rather than marginal. Perkins remarked that CPAU's
methodology could be more accurate, but noted the portfolio would still appear to be emitting carbon under
the CEC regulations. Vice Chair Schwartz indicated CPAU's leadership is part of what caused the dilemma in
the first place. CPAU owes it to everybody to be leaders and to be more accurate.
Commissioner Forssell felt it would be useful to consider the goal of communications when discussing
communication challenges. The communications challenge has a lot of complexity. She had heard two
Mayors refer to CPAU as 100% renewable. Perkins noted that it was unnecessary to have every customer
receive only carbon-free electricity at all hours, treating Palo Alto as an island. In fact, it could be argued that
a bucket 3 REC outside of California could be more impactful than buying a California REC to ensure Palo Alto
customers received only carbon-free electricity at all hours. For example, an unbundled or bucket 3 REC could
help make a coal plant less economical relative to wind and offset more carbon, even though it's cheaper
than an in-state REC.
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In response to Chair Danaher's inquiry regarding the CEC's rationale to exclude unbundled RECs, Perkins
reported there was concern about customer confusion and accurately representing that the power is not
100% carbon free even if it appears 100% renewable on the power content label.
Vice Chair Schwartz stated Palo Alto and the Community Choice Aggregators (CCA) are relying on PG&E and
other entities to provide the electrons at night. In order to tackle this problem as a society, society needs to
know what it's dealing with.
Chair Danaher understood CPAU could buy offsets for times when CPAU did not have clean energy. The
question is does it matter whether the offsets come from Wyoming or California. He favored using unbundled
RECs rather than offsets.
In reply to Commissioner Johnston's query regarding RECs acceptable to the CEC, Perkins advised that bucket
1 RECs will continue to appear as carbon neutral. Bucket 1 RECs are projects connected to the California
Independent System Operator (CAISO) and scheduled and bid into the CAISO. When those projects show up,
they back down natural gas generators. Bucket 2 RECs are strips of power imports to the CAISO. They may or
may not have carbon associated with them. Bucket 1 RECs cost about $22 per MWh, bucket 2 RECs cost
around $9 per MWh, and bucket 3 RECs cost approximately $1.50 per MWh. Offsets are separate and cost
about the same as bucket 2 RECs.
In answer to Vice Chair Schwartz's question about REC purchases covering a geothermal baseload supply,
Perkins indicated that gets into portfolio rebalancing. In portfolio rebalancing, CPAU could buy baseload
renewables or other higher cost renewables. Rebalancing to perfectly match renewable generation to load
would be the most expensive option. CPAU could also look at solar with storage, which staff is evaluating.
Supply funds could pay for a baseload renewable resource or solar with storage resource, but CPAU would
have to eliminate some existing contracts to do that. It would be substantially more expensive than using in-
state RECs or out-of-state RECs.
In response to Vice Chair Schwartz's inquiry regarding whether CPAU sold RECs with their surplus energy or
the surplus energy only, Perkins indicated CPAU holds the RECs and sells the energy in the market.
Abendschein noted that the discussion of carbon accounting has three phases. The current discussion is
informational or educational explaining what it would meant to have hourly accounting as a standard. The
next discussion with the UAC would be about the most cost-effective rebalanced portfolio possible under the
new policies. The most complementary and cost-effective way to achieve these low-carbon objectives will be
the third discussion. Perkins added that committing to an hourly accounting would narrow CPAU's options to
some extent and increase the amount of either RECs or additional renewable generation needed to match
load on an hourly basis.
In reply to Vice Chair Schwartz's query regarding the Council's preference for low-cost or carbon-free power,
Councilmember DuBois reported the Council will likely express both positions based on Council Members'
level of understanding. The communications challenge is almost a separate issue that should be discussed.
Abendschein clarified that discussions will be phased so that the Council understands the accounting
methodology and its impacts.
Commissioner Johnston commented that knowing the cost impacts will be important because there is a
tension between being cost effective and carbon free. Abendschein advised that staff has run some initial
models about costs but is not ready to share those with the UAC yet. He noted staff did not intend to make
portfolio decisions based on hourly accounting until the UAC and Council had a full understanding of the costs
of adopting an hourly accounting methodology.
Perkins noted the marginal price of electricity is correlated with the carbon due to the Cap and Trade system.
The last unit to come online in California sets the price for the five-minute interval. Because the price of
carbon is included in that price of generation and by dispatching hydroelectric for the maximum value, CPAU
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dispatches the hydroelectric to displace the most carbon. CPAU does that deliberately to maximize the value
of hydroelectric resources. By generating the most revenue from those hydroelectric resources, CPAU is also
displacing the most carbon. In the CAISO, which embeds a cost of carbon, CPAU hydroelectric resources
displace a lot of carbon in the worst hours of carbon intensity of the grid. In following the marginal price
signal, the price of carbon is actually increasing over time in the price signal. Following the price will be more
closely aligned with following the carbon over time as the price of carbon elevates.
Commissioner Forssell favored thinking of CPAU's emissions in the context of the western interconnect or at
least the CAISO rather than trying to think of Palo Alto as an island. She expressed interest in studies showing
CPAU how CPAU could displace more carbon using out of state RECs. There could be an opportunity not to
make a hard tradeoff. Displacing more carbon at a much lower price is worth learning about. In answer to
Commissioner Forssell's question regarding the 6 a.m. peaklet and 8:00 a.m. peaklet on the Calaveras for the
typical January day, Perkins suggested the peaklets could result from following the price signal because there
are morning and evening peaks. The graph is probably generated using actual dispatches for a month
averaged on a 24-hour basis so she wouldn't read too much into the 7:00 a.m. dip. Abendschein advised that
staff will provide additional information.
Commissioner Johnston stated being able to explain what CPAU receives when buying an unbundled REC and
the ecological value of that would be very important if the decision is to continue buying unbundled RECs.
Chair Danaher commented that if CPAU has to report both, CPAU should state the methodology is to measure
on an hourly basis and to buy RECs.
Vice Chair Schwartz suggested the issues can be communicated simply without necessarily having everybody
in town become an expert on bundled versus unbundled RECs. Communications can be both accurate and
accessible. Perkins explained that staff wants to understand the UAC's and Council's preferences for being
carbon free every hour of every day or carbon free on the power content label.
Commissioner Segal viewed communications as having two pieces, carbon emissions of the portfolio and
impacting behaviors.
ACTION: None
ITEM 2: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City
Council Adopt: 1) a Resolution Approving the Fiscal Year 2020 Gas Utility Financial Plan, and 2) a Resolution
Increasing Gas Rates by Amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master-
Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed Natural
Gas Service).
Eric Keniston, Senior Resource Planner, reported staff will present the gas cost of service adjustment (COSA)
study when it is complete. Constructions costs have been escalating. Generally, natural gas market prices are
trending up. Transmission costs continue to increase. The cost of environmental programs continues to
increase. Operations and maintenance (O&M) costs are increasing by 3%-4% per year. Salaries and benefits
are increasing by 13%-24%. However, the total utility bill remains lower than utility bills for neighboring cities.
Staff recommends an 8% rate increase for residential customers and a 2%-3% increase for commercial
customers. About 65% of costs relate to distribution. About half of that relates to maintenance of the pipes
in the ground. About 14% of costs relate to capital investment. Gas supply costs are pass-through costs. The
rate increase is a distribution rate increase. The 8% rate increase on distribution will translate to about a 5%
overall utility rate change. Of the distribution rate increase, about 4.6% relates to Capital Improvement
Program (CIP) expense increases, about 3% relates to O&M expenses, and a little bit is due to load loss. Gas
supply cost drivers are generally volatile and follow market prices, rising PG&E gas transmission rates, and
rising Cap and Trade costs. The Carbon Neutral Gas Plan is saving a little bit of money from initial projections.
Operations and capital cost drivers are a regular rate of main replacement, increasing underground
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construction cost, temporary funding for the gas crossbore program, and increasing health, retirement and
associated overhead costs.
In response to Vice Chair Schwartz's inquiring regarding difficulty recruiting staff for the Gas Utility, Dave
Yuan, Strategic Business Manager, indicated recruiting for management positions is difficult, but overall
recruiting for the Gas Utility is not as difficult as for the Electric Utility.
Keniston continued the presentation, stating generally residential gas bills are lower in the winter and higher
in some of the summer months. The overall annual bill is lower than PG&E's bill. Commercial gas bills for
customers at the lower end of the spectrum compare favorably to PG&E's bills, but bills for customers at the
higher end of the spectrum are higher than PG&E's bills.
In reply to Commissioner Johnston's inquiry regarding the reason for bills being higher than PG&E bills in the
summer, Keniston explained that Palo Alto has a monthly customer charge that PG&E does not have. Yuan
added that the fixed meter charge is approximately $13 per month, which is approximately 65% of the
summer charge.
Keniston further stated most commercial customers will see a bill increase.
In answer to Vice Chair Schwartz's question regarding the potential effect on customer responses of
expressing a rate increase as dollars versus percentages, Catherine Elvert, Communications Manager,
reported the Assistant Director of Customer Support Services vehemently believes a dollar amount is the best
way to communicate a rate increase. Keniston added that many utilities report dollar amounts only.
Keniston concluded the presentation by relaying goals of aligning rates with costs, using reserves to smooth
rate increases, and replenishing and maintaining reserve health over the forecast horizon.
In response to Commissioner Johnston's inquiry regarding residential customers bearing the brunt of the rate
increase, Keniston explained that the current COSA study and the 2012 COSA study both recommended the
Gas Utility collect 42% of distribution costs from residential customers. Because residential customers are
more spread out, they represent a higher share of distribution costs than their load. In answer to
Commissioner Johnston's question about flexibility in the COSA study, Jonathan Abendschein, Assistant
Director of Resource Management, reported staff has really no flexibility to deviate from the COSA study.
Commissioner Johnston noted more of the monthly expense has shifted to a service charge rather than the
volumetric charge. Keniston advised that growth in costs since the 2012 study can be attributed to the
customer charge. Costs increase, but the number of customers does not; therefore, the charge per customer
grows. Vice Chair Schwartz remarked that this has an implication for residential electrification. More fixed
costs will be pushed onto a smaller number of customers who can't pay as much.
In answer to Commissioner Forssell's query regarding the Carbon Neutral Gas Plan saving money, Keniston
clarified that the gas pre-pay option is saving money, not the Carbon Neutral Gas Plan. Approximately half of
gas environmental costs are attributable to the Carbon Neutral Gas Plan. Yuan reported the actual carbon
offset for fiscal year 2018 was $1.3 million.
ACTION: Commissioner Forssell moved to recommend that the City Council adopt a Resolution approving the
Fiscal Year 2020 Gas Utility Financial Plan and a Resolution increasing gas rates by amending Rate Schedules
G-1 (Residential Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), G-3 (Large
Commercial Gas Service), and G-10 (Compressed Natural Gas Service). Commissioner Johnston seconded the
motion. The motion carried 5-0 with Chair Danaher, Vice Chair Schwartz, and Commissioners Forssell,
Johnston, and Segal voting yes and Commissioner Trumbull absent.
Commissioner Johnston hoped Staff would look for ways to ameliorate the burden on residential customers
and low-volume customers. Keniston reiterated that staff cannot change the COSA study. Staff ensures the
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methodology is consistent across COSA studies. Abendschein added that staff will look for cost-control
measures and other ways to contain rate increases.
Commissioner Segal remarked that customers are punished for focusing on conservation because their bills
increase as conservation increases. Methods to reward conservation would be great.
Vice Chair Schwartz suggested the rate assistance program could be renamed as an income-qualified program
to remove the stigma of an assistance program.
ITEM 3: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City
Council Adopt the Proposed Operating and Capital Budgets for the Utilities Department for Fiscal Year 2020.
Anna Vuong, Senior Business Analyst, reported key performance indicators include a 12% reduction in sewer
overflows; 75 miles of sewer lines cleaned and flushed; 65 wood utility poles replaced; 92% compliance for
backflow devices; an average outage duration of 70 minutes per customer; achieved gas efficiency savings;
surpassed the State goal of achieving 50% of RPS savings by 2030; repair of 90 gas leaks; and total residential
bill average 12% lower than neighboring cities' bills. Overall, the customer satisfaction rating is 86%. The fiscal
year (FY) 2020 Proposed Budget totals $317 million, 46% of which is commodity purchases.
In response to Chair Danaher's inquiry regarding debt service, Vuong indicated CPAU has debt service for
bond repayment. Dave Yuan, Strategic Business Manager, added the Central Valley project.
Vuong continued the presentation, stating salaries and benefits are increasing approximately 12% due to
recently approved contracts with Service Employees International Union (SEIU) and Utilities Management
and Professional Association of Palo Alto (UMPAPA) and proactive pension funding. Commodity costs have
increased approximately 6%. Ongoing costs reflect the reclassification of the Assistant City Manager/Utilities
General Manager position to the Utilities General Manager position, the Power Engineer position to the
Electric Project Engineer position and reorganization of the Resource Management Division. One-time
operating costs include improvements to the Elwell Court office, the gas crossbore safety program, and a
contract for electric overhead maintenance. The FY 2020 CIP Budget totals $49.6 million or $20 million for
the electric fund, $16 million for the water fund, $3.7 million for the gas fund, $1.5 million for the fiber, and
$8 million for the wastewater fund. Initiatives for FY 2020 are gas and wastewater cost of service studies,
electric vehicle (EV) charger installations, a Recycled Water Strategic Plan, Fiber-AMI design, upgrade of the
Colorado Power Station, water main replacement project 27, transmission repair at Old Page Mill,
replacement of the Corte Madera Reservoir, replacement of sanitary sewer 28B, and extension of fiber from
Dahl to Montebello. Within the electric fund, staff proposes an 8% rate increase, revenues of $169 million,
expenses of $182 million, an operations reserve of $32 million, and a CIP budget of $20 million. Within the
fiber fund, staff proposes a Consumer Price Index (CPI) increase of 4.5% for EDF-1 rates for pre-September
2006 customers, revenues of $5.5 million, expenses of $4 million, operations reserves of $33 million, and a
CIP budget of $1.5 million.
Chair Danaher noted reserves are five to six times annual revenues. Yuan advised that reserves are growing
approximately $4 million a year, but growth will drop to $2 million a year because of plans for more CIP
projects.
In reply to Commissioner Segal's question about half the fiber employees being allocated for customer
service, Yuan explained that a portion of customer service staff is allocated to fiber because each fiber
customer is billed manually. Customer service staff includes operations and engineering staff. The
contribution for unfunded liabilities and allocated charges has been budgeted to the fiber customer service
cost center rather than distributed across all divisions.
In answer to Councilmember DuBois' query about flat fiber revenues year to year, Yuan indicated fiber has
not gained any new customers, and rates have not changed.
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Vuong further advised that within the gas fund, staff proposes a 5% rate increase, revenues $49 million,
expenses of $44 million, operations reserves of $19 million, and a CIP budget of $3.7 million.
In response to Councilmember DuBois' inquiry regarding gas reserves not increasing, Yuan clarified that the
revenues should be $39 million rather than $49 million.
Vuong continued the presentation, stating within the wastewater fund, staff proposes a 7% rate increase,
revenues of $23 million, expenses of $27 million, and operations reserves of $4 million.
In reply to Vice Chair Schwartz's query about increasing reserves, Jonathan Abendschein, Assistant Director
of Resource Management, reported the figures are retrospective while plans are prospective. Some reserve
funds are increasing. Commissioner Johnston remarked that the budget shows expenses exceeding revenues
in all funds except fiber. Yuan explained that staff used reserve funds to reduce the rate increases.
In answer to Commissioner Forssell's question about pension and OPEB reserves, Abendschein indicated the
reserves represent the unfunded pension and other benefit liability for retirees. Pension issues for Utilities
are different from issues for the General Fund because Utilities salaries are a much lower percentage of
overall costs.
Vuong further stated within the water fund, staff proposes a rate increase of 1%, revenues of $50 million,
expenses of $59 million, operations reserves of $34 million, and a CIP budget of $16 million.
Commissioner Forssell commented that slide 9 and page 81 show different electric fund operations reserves.
Yuan clarified that one is composed of operations and hydroelectric. With hydroelectric, operations reserves
fall within the guideline range.
Vuong further reported since January the number of vacant positions has decreased from 44 to 31 positions.
Staff is developing recruiting strategies and attending career fairs. In addition, the new SEIU contract
increases compensation for difficult to fill positions.
In response to Commissioner Forssell's inquiry regarding the timing of the SEIU contract with the UAC
workforce discussion, Yuan advised that terms of the contract were not public knowledge at the time of the
discussion.
Vuong concluded the presentation by reporting staff is working on the My Utilities Account portal, the AMI
business plan, and Geographical Information System (GIS) and Enterprise Resource Planning (ERP) upgrades.
Staff has implemented several tasks of the Utility Strategic Plan.
Vice Chair Schwartz understood the Customer Information System (CIS) had to be upgraded before the ERP.
Yuan indicated ERP will be upgraded first because the vendor no longer supports it. The CIS upgrade has been
delayed by three to four years, and staff is looking at moving AMI forward a couple of years.
In reply to Commissioner Segal's question about retention of commercial dark fiber customers due to
anticipated changes in the market, Yuan advised that the statement refers to retaining customers as Comcast
and AT&T upgrade their networks. Staff is working on strategies to retain and attract commercial customers.
In answer to Commissioner Johnston's query regarding displacing cheap power with more expensive
renewable power, Abendschein reported the conversion from less expensive fracked gas to more expensive
renewable power concluded in 2018. One more contract will come online, but it will be offset by the
expiration of other contracts. Major drivers for the rate increase are revenues have not caught up to cost
increases, capital investment, load decreases, and transmission cost increases.
Utilities Advisory Commission Minutes Approved on: June 5, 2019 Page 10 of 11
In response to Chair Danaher's inquiry regarding electric initiatives that were subject to discretion and that
have a budget impact, Yuan indicated new initiatives are EV adoption to meet Sustainability and Climate
Action Plan (S/CAP) goals and the upgrade of the Colorado Power Station. Abendschein added that other
initiatives with a budget impact are rebalancing the electric portfolio and a number of sustainability and
efficiency measures.
In reply to Commissioner Segal's question about CIP projects planned for FY 2020 that were delayed because
of budgetary constraints, Yuan reported staff deferred underground rebuild projects.
In answer to Chair Danaher's query regarding a second transmission line, Yuan advised that a second
transmission line is not a part of the FY 2020 budget, but funds for it have been set aside in reserves.
In response to Vice Chair Schwartz's inquiry about using the existing transformer from the Colorado Station
as a spare part, Yuan stated staff decommissioned it because it was badly broken.
Abendschein reported discretionary items that are actionable on a short timeline are relatively small. Items
with larger impacts happen over a longer period of time, such as replacing aging infrastructure and
rebalancing the electric portfolio. The UAC will discuss those over the next year. Chair Danaher believed
discretionary items should be discussed during the year before they are included in the budget. Abendschein
related that staff has accelerated rates forecasting so that Assistant Directors have information to prepare
their budgets. The UAC focus on workforce had a lot of impact. The SEIU contract will have a budget impact,
but the contract is a positive and important investment.
Herb Borock commented that crossbore projects appear to be funded from the gas fund when only 1% of gas
mains are affected by crossbores. With respect to the AMI project, it would make more sense to make
decisions on the project as a whole instead of piecemeal.
In reply to Chair Danaher's inquiry about the UAC discussing rates more accurately reflecting pension
accruals, Councilmember DuBois stated the enterprise funds are covering additional contributions to
pensions. The Council is discussing pension contributions, and it may not be worth UAC discussion.
Chair Danaher noted the fiber reserve at $36 million is either too big or a source for funding fiber to the node.
In answer to Chair Danaher's queries regarding discretionary items for the gas and water funds the UAC
should have considered, Yuan indicated the crossbore program, the pace for replacing mains, and the
reservoir tank replacements. In reply to Chair Danaher's question of whether recycled water initiatives would
be in the water fund, Abendschein replied most likely.
In answer to Commissioner Segal's inquiry regarding the goal to reduce water usage by 20% by 2020, Yuan
explained the 1% is a single-year accomplishment while the 20% reduction is cumulative. Abendschein added
that the staff achieved the 20% reduction by 2020 goal a few years ago. The State is establishing a new set of
efficiency goals and regulations, which staff will review. Commissioner Segal cautioned staff to be sensitive
to the disproportionate impact to residents who pay more even though they comply with water conservation
measures, should new conservation measures be promulgated.
Vice Chair Schwartz remarked that leak detection, as a function of AMI, will eliminate unexpectedly high
water bills for customers.
Chair Danaher noted the UAC did not form a subcommittee to review the proposed budget, which should be
done annually.
In response to Councilmember DuBois' query regarding handling of the refuse and wastewater funds, Yuan
reported Public Works handles those.
Utilities Advisory Commission Minutes Approved on: June 5, 2019 Page 11 of 11
ACTION: Commissioner Johnston moved to recommend that the City Council adopt the Proposed Operating
and Capital Budgets for the Utilities department for Fiscal Year 2020. Vice Chair Schwartz seconded the
motion. The motion carried 5-0 with Chair Danaher, Vice Chair Schwartz, and Commissioners Forssell,
Johnston, and Segal voting yes and Commissioner Trumbull absent.
ITEM 4: DISCUSSION: Update and Discussion of Fiber and AMI Planning.
Dave Yuan, Strategic Business Manager, reported a Council update is scheduled for June. Staff is expanding
the scope of work for the Request for Proposal (RFP) for cross-utility integration.
ACTION: None
In response to Mr. Borock's comments, Chair Danaher advised that the UAC reviewed AMI comprehensively
in 2018. Vice Chair Schwartz added that utilities have implemented AMI with backend systems installed first
and with meters installed first. Installing the backend system first can provide benefits from day one, but
replacing aging equipment has benefits.
Commissioners and Councilmember DuBois requested agenda items for the DOE document regarding AMI
benefits; a joint meeting with the Council; revising the strategy for promoting solar energy; expanding the
Carbon Neutral Gas Plan to account for methane leakage; an update regarding revisions to regulations for
undergrounding districts; Regional Water Quality Control Plant vulnerability to sea level rise; a presentation
from Professor Luthy regarding storm water recycling; and an analysis of the cost effectiveness of energy
efficiency spending programs.
NEXT SCHEDULED MEETING: June 5, 2019
Meeting adjourned at 7:44 p.m.
Respectfully Submitted
Tabatha Boatwright
City of Palo Alto Utilities
Utilities Advisory Commission Minutes Approved on: Page 1 of 11
UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF APRIL 9, 2019 SPECIAL MEETING
CALL TO ORDER
Chair Danaher called the meeting of the Utilities Advisory Commission (UAC) to order at 7:00 p.m.
Present: Chair Danaher, Vice Chair Schwartz, Commissioners Forssell, Johnston, and Segal
Absent: Commissioners Ballantine and Trumbull
ORAL COMMUNICATIONS
Esther Nigenda, Save Palo Alto's Groundwater, shared information regarding the effects of sea level rise on
groundwater level rise. Groundwater level rise has the potential to impact communities as much or more
than sea level rise. Solutions other than not building underground where the water table is high are unknown.
The public is invited to attend a lecture by Dr. Hill, an urban planner and climate mitigation expert.
APPROVAL OF THE MINUTES
Vice Chair Schwartz corrected her comments under Reports from Commissioner Meetings/Events in that
"staff's approach to AMI implementation should prevent future problems" should be "staff's approach to the
systemwide meter audit should reduce future problems."
Commissioner Segal moved to approve the minutes of the March 6, 2019 meeting as amended.
Commissioner Johnston seconded the motion. The motion carried 5-0 with Chair Danaher, Vice Chair
Schwartz, and Commissioners Forssell, Johnston, and Segal voting yes, and Commissioners Ballantine and
Trumbull absent.
AGENDA REVIEW AND REVISIONS
None
REPORTS FROM COMMISSIONER MEETINGS/EVENTS
Vice Chair Schwartz had attended the Western Energy Institute (WEI) consumer and corporate symposium
and Smart Energy Water (SEW) and Zpryme's WE3 conference, where she heard quite a bit of discussion
about problems utilities are having in recruiting staff. To attract experienced staff, City of Palo Alto Utilities
(CPAU) needs to review its compensation. Sacramento Municipal Utility District (SMUD) is willing to host a
team from CPAU to share information about SMUD activities.
Chair Danaher reported costs to store electric power continue to decrease such that pairing solar and storage
is becoming more economical. This could be a factor in CPAU's long-term planning.
DRAFT
Utilities Advisory Commission Minutes Approved on: Page 2 of 11
GENERAL MANAGER OF UTILITIES REPORT
Dean Batchelor, Utilities General Manager, delivered the General Manager’s Report.
The Council will interview 13 applicants for the four open positions on the UAC on April 29. Commissioners
are invited to participate in the May Fete Parade on May 4.
Palo Alto Utilities Earns 5th Consecutive Tree Line USA Award - For the fifth year in a row, CPAU has been
recognized with the Tree Line USA award by the National Arbor Day Foundation. Tree Line USA promotes the
dual goals of delivering safe and reliable electricity while maintaining healthy community trees. Tree Line USA
recognizes CPAU for training employees in quality tree-care practices, educating the public about planting
trees for energy conservation and helping homeowners plant appropriate trees near utility lines. Palo Alto is
among an elite group of communities that are recognized as a Tree City USA, designated as a Tree Line USA
Utility, and also a Tree Campus USA with Stanford University. This trio of honors is testament to our
community's commitment to preserving the health of our urban canopy, as well as the collaborative
management approach that exists among City staff. Congratulations to our entire team working toward these
mutual goals!
Upgrade Downtown Project on the Home Stretch - The Upgrade Downtown project is near the final stages
of construction along University Avenue. Utility infrastructure work on the last block of University was
completed at the end of March. After all traffic signal, sidewalk and curb ramp work is complete, University
Avenue will be repaved. Stay tuned for a community appreciation event later this spring! We want to thank
everyone for their patience and cooperation as we replaced critical infrastructure as part of our goal to ensure
safe, reliable utility services. An updated paving schedule and map will be available at
upgradedowntownpa.com.
Visit from the Chinese Wuhan Environmental Protection Bureau - On March 13, a delegation from the
Wuhan Environmental Protection Bureau in China visited the City to learn about our climate action and
sustainability initiatives. Utilities staff met with the delegates for a couple of hours to share information on
past, current and future programs for energy and water efficiency services, renewable energy, carbon neutral
electric and gas portfolios, as well as long-term plans for sustainable utility resource management. The
delegates appreciated the opportunity to learn best practices for their region from a proactive agency such
as CPAU.
AMI Workshop - On March 27, CPAU hosted an advanced metering infrastructure (AMI) workshop in
partnership with BAWSCA and Valley Water. The goals of the workshop were to support member agency
efforts to advance the implementation of AMI within their respective service areas, provide guidance on
using AMI data to improve water use efficiency, and identify potential opportunities for regional coordination
on AMI planning and implementation. It was a very successful event by all measures. More than 70 people
were in attendance. There was great interest in collaborating moving forward.
Great Race for Saving Water and Earth Day Festival - This Saturday, April 13, join us for the City’s Great Race
for Saving Water and Earth Day Festival! This 6th annual event offers a 5K, 10K and Kids Dash fun run and walk
at the Palo Alto Baylands. We will host a special ribbon-cutting ceremony immediately before the race begins
to celebrate completion of a major flood control project with Valley Water and the San Francisquito Creek
JPA. After the race, enjoy a free festival with electric vehicle expo plus EV test drives, live music, “green living”
vendors, food, prizes, outdoor games, community booths with activities and demonstrations, environmental
and public safety resources. No ticket or entry fee is required to attend the Earth Day Festival itself. Come
join us for the fun from 9 am to 1 pm! Details at cityofpaloalto.org/earthday.
Utilities Advisory Commission Minutes Approved on: Page 3 of 11
In response to Commissioner Johnston's query regarding the recent power outage, Batchelor advised that
approximately 3,400 customers were without power between 12:30 and 4:30 p.m. and 51 customers were
without power until 7:30 p.m. The repair crew had difficulty locating the issue, which was moisture in an
elbow.
Vice Chair Schwartz noted Comcast suffered an outage the same day. Batchelor clarified that the outages
were separate in that a Comcast contractor damaged a cable line.
COMMISSIONER COMMENTS
None
UNFINISHED BUSINESS
None
NEW BUSINESS
ITEM 1: ACTION: Utilities Advisory Commission Recommendation that the City Council Adopt a Resolution
Amending Utility Rule and Regulation 20 to Allow Neighborhood Funding of Certain Subsurface Equipment.
Michael Maurier clarified that attorney Kent Mitchell is representing 35-40 residents of Green Acres. The
residents appreciate Commissioners' attentiveness and responsiveness to their concerns.
Chair Danaher advised that undergrounding issues deserve careful study and consideration because the
issues will affect all neighborhoods located within underground districts.
Debra Lloyd, Assistant Director of Utilities Engineering, reviewed the history of undergrounding in the Green
Acres neighborhood. Pad-mounted equipment in underground areas is an industry and CPAU standard. CPAU
grants an exception to the standard if a customer pays a special facilities fee and added construction costs.
The exception typically applies to a single customer rather than a community. Staff proposes amending Rule
and Regulation 20 to allow a community to request underground utilities if the community pays the
additional costs for undergrounding. Amendments to Rule and Regulation 20 will require staff to send a
notice to residents or property owners about CPAU's intention to replace equipment. A request for a petition
form, signed by at least five property owners, must be filed with CPAU. CPAU will prepare a petition form
describing the proposed project. Residents will have 45 days following receipt of the petition form to obtain
signatures from at least 60% of property owners and to submit it to CPAU. Residents must submit with the
petition form a payment sufficient to fund CPAU's costs of developing an engineering estimate for the project.
Gregory McKernan, Senior Engineer, added that the typical advance engineering fee is $5,000. Lloyd
continued, stating CPAU will develop the engineering estimate and provide it to the residents. Residents will
have 60 days to pay CPAU the full estimated cost difference between subsurface and standard installation.
In the future, CPAU may have to respond to new safety rules and regulations promulgated by the State and
Federal Government. Future capacity requirements in the underground districts may change with conversion
to all-electric homes, use of electric vehicles, and general neighborhood load increases.
In response to Chair Danaher's request for recent design changes to mitigate safety issues, Lloyd explained
that each vault will contain only one piece of equipment and the size of the vault is larger. Dean Batchelor,
Utilities General Manager, added that a second vault, which will likely be located in the sidewalk area, will
house secondary equipment.
In reply to Commissioner Johnston's query regarding adding secondary switches to isolate outages regardless
of whether equipment is underground or pad-mounted, Batchelor indicated secondary switches will be a part
of the redesign. The redesign will include predicted increases in load.
Utilities Advisory Commission Minutes Approved on: Page 4 of 11
In answer to Commissioner Johnston's request for information about the difference in reliability between
underground facilities and pad-mounted, Batchelor reported he could not find any information about the
difference in reliability.
Commissioner Johnston requested the number of districts with fully underground utilities and with pad-
mounted utilities. McKernan believed two districts have been rebuilt such that subsurface equipment was
changed to pad-mounted equipment. Approximately seven districts have fully underground equipment.
In response to Commissioner Segal's query about the differential between underground and pad-mounted
equipment in relation to locating the source of an outage, Batchelor related that including electronics in
equipment will make finding the source of an outage easier. McKernan clarified that access to equipment
determines the difficulty of locating an outage source. Underground vaults are sometimes filled with water
that has to be removed before the equipment can be checked for a fault. Pad-mounted equipment does not
fill with water.
Vice Chair Schwartz remarked that standards have evolved to increase safety. Putting people in small spaces
where they risk electrocution is no longer considered safe. In walking through many neighborhoods over the
weekend, she observed neighborhoods with and without pad-mounted equipment. Pad-mounted equipment
does not detract from the beauty of neighborhoods. In Capitola, the transformer boxes are painted. If pad-
mounted equipment is deemed necessary, perhaps neighborhoods could hold art competitions and select
artwork for the transformer boxes. Some residents do not object to pad-mounted equipment and, if
technically feasible, maybe the equipment could be located on those residents' properties.
Commissioner Johnston appreciated the desire for fully underground equipment; however, current safety
rules prevent CPAU from undergrounding utilities in the same manner utilized in the past. Fully underground
equipment is a benefit to the specific neighborhood in that all ratepayers do not share in the benefit.
Neighborhoods should pay the additional cost of undergrounding.
Commissioner Forssell commented that CPAU did not grant the Green Acres neighborhood a right to
underground utilities by installing the underground equipment in the 1970s. Equipment has a useful life, and
the useful life of underground equipment in Green Acres has passed. Given that the benefit of underground
equipment accrues to the particular neighborhood, it would be appropriate for the neighborhood to pay. Mr.
Mitchell's letter seems to imply that the entire underground system will be placed aboveground. Much of
the equipment will be underground, but the transformer boxes will be aboveground.
Commissioner Segal had not heard anything suggesting aboveground equipment does not meet CPAU's
mission to provide safe, reliable, and cost-effective utilities. Belowground equipment may meet the safe and
reliable components of the mission, but it does not meet the cost-effective component. An alternative design
does meet the cost-effective component.
Vice Chair Schwartz felt asking all ratepayers to pay for removal of transformer boxes in a few neighborhoods
is not reasonable. Staff proposes at least 60% of property owners must support the request to underground.
The remaining 40% of property owners may be unfairly burdened with paying their portion of the cost. She
did not wish to create divisiveness among neighbors.
Chair Danaher remarked that only a small portion of Palo Alto's population has access to fully underground
utilities. Imposing the cost of undergrounding on the entire population is unfair. Neighborhoods should have
the choice to pay for undergrounding utilities. If the majority of property owners want to underground
utilities, CPAU should provide ways to spread the cost over time.
Vice Chair Schwartz could not believe an aboveground transformer would result in a loss of property value,
give the high demand for property in Palo Alto.
Utilities Advisory Commission Minutes Approved on: Page 5 of 11
Commissioner Johnston expressed concern regarding residents receiving a mailed notice of the project. The
ten-day period for five property owners to submit a request for petition form seems short. The petition form
should state the cost of developing an engineering estimate. The 45-day period and requirement for 60%
support are fine. The 60-day period for full payment of the cost difference makes the proposal unworkable.
Property owners should be able to pay over time, perhaps with interest. He was unsure whether property
owners who want underground utilities or all property owners should pay the additional cost. Staff proposes
all property owners contribute to the additional cost. Lloyd explained that the requirements mirror those for
special facilities. When overhead facilities are undergrounded, each property owner pays for a service
connection. If undergrounding is determined to provide a general benefit, CPAU shares the cost of
undergrounding overhead wires and installing equipment with Comcast and AT&T. If undergrounding
provides a local benefit, up to 75% of the cost could be allocated to property owners.
Commissioner Segal agreed that the 60-day period is not long enough. In response to her question about
adding the cost to property owners' utility bills, Lloyd advised that would require a different process. To keep
the process simple and to mirror the special facilities process, a collection mechanism other than the utility
bill is needed. Batchelor clarified that the current billing system cannot process special charges. Staff would
have to add a charge for undergrounding to each bill by hand.
Commissioner Segal was struggling with the approach to amending Rule and Regulation 20 being driven by
the limitations of the billing system. The approach should be driven by what makes sense for a district.
Vice Chair Schwartz commented that allowing a neighborhood to determine the details of CPAU projects sets
a bad precedent. In answer to Commissioner Johnston's query of whether Vice Chair Schwartz felt pad-
mounted equipment should be required in all districts, Vice Chair Schwartz believed allowing neighborhoods
to make engineering decisions is problematic. Commissioner Johnston asked if Vice Chair Schwartz was saying
no neighborhood should have an option to underground. Vice Chair Schwartz replied no. Amending Rule and
Regulation 20 is a policy change that could be applied to any project in the City. Chair Danaher did not believe
the amendments to Rule and Regulation 20 have to be applied to other projects. Whether to apply the policy
direction to other projects would be a future decision. Vice Chair Schwartz stated meeting with residents and
discussing residents' preferences is appropriate, and staff should do that. That is not the same as changing
Rule and Regulation 20. Commissioner Johnston noted Rule and Regulation 20 is specific to replacement of
subsurface equipment. Any district in the same situation as Green Acres I would have the option to pay for
underground facilities. Vice Chair Schwartz reiterated that amending Rule and Regulation 20 would set a bad
precedent.
Chair Danaher believed the 10-day period should be at least 30 days. There should be an option for property
owners to host a staff presentation about the project. The main issue is distributing the cost among property
owners. Property owners could contribute based on household square footage or some property owners
could pay more than their share. The default position could be a pro rata distribution of the cost with an
option for property owners to voluntarily pay more than their portion of the cost. Property owners should
be allowed to pay over a five, eight, or ten-year period.
Commissioner Forssell suggested property owners be allowed to determine the distribution of the cost
among property owners. Property owners should be allowed to pay the special facilities fee over time but
the cost of materials and labor upfront. Lloyd advised that a special assessment district may be needed. To
provide property owners with the amount they need to pay would require another process.
Vice Chair Schwartz assumed the new billing system would support on-bill financing.
At Chair Danaher's request for a brief update regarding Computer Information System (CIS) implementation,
Batchelor reported the Information Technology (IT) Department wants to delay the CIS upgrade by two years
because of limitations on resources and the need to determine the desired features of a CIS. It appears SAP
will be upgraded to the most recent version.
Utilities Advisory Commission Minutes Approved on: Page 6 of 11
In answer to Commissioner Segal's inquiry regarding the Green Acres project being on hold, Batchelor
indicated it is on hold. Special fees are typically used for commercial accounts. CPAU does not have a rule
and regulation that allows it to charge a district for work and provide on-bill financing for the work.
Chair Danaher clarified the recommendation as the City Council permitting neighborhoods to elect to retain
underground transformers provided that the district absorbs the marginal cost. If the Council approves the
recommendation, staff will return with a proposed process for neighborhoods to request retention of
underground transformers.
Commissioner Johnston inquired whether staff prefers to present the Council with a concept that
neighborhoods can elect to retain their facilities completely underground or with a detailed draft regulation.
Batchelor preferred to present the Council with a proposed regulation.
Vice Chair Schwartz interpreted the attorney's letter as indicating Green Acres residents want fully
underground facilities but do not want to pay for them.
[Comments made off camera and off microphone by a member of the public are inaudible.]
Commissioner Johnston stated Vice Chair Schwartz wants to know if the neighborhood's position is CPAU
pays for the project or the neighborhood is not interested. In which case, Commissioners may not have to
agonize about a payment procedure.
Vice Chair Schwartz suggested staff determine alternative placements for pad-mounted devices and ask
property owners around the alternative placements if they are willing to host the devices.
Commissioner Segal noted the Council had not provided an opinion regarding undergrounding. The UAC
should recommend a district pay the differential cost of pad-mounted versus underground equipment. If the
Council approves the recommendation, the UAC can propose a mechanism for payment of the differential
cost.
In reply to Chair Danaher's request for the number of households in the Green Acres district, McKernan
indicated approximately 100 households.
Chair Danaher preferred to allow property owners to pay over time so that the charge would be less of a
burden for residents.
An unidentified member of the public remarked that property owners have no information about the
undergrounding project. Property owners are waiting for an opportunity to review alternative designs.
Chair Danaher suggested staff share alternative designs with residents so that residents can determine who
might agree to bear the cost and whether an upfront payment or payments over time are preferable.
Lloyd reported that she had attempted to find less visible locations for pad-mounted equipment and
presented information to the Green Acres Board. The Green Acres Board was not willing to discuss pad-
mounted equipment, only fully underground equipment. Staff needs to know where equipment can be
located in order to prepare an engineering study. Staff has prepared a design for a subsurface solution.
Commissioner Johnston believed the Council should determine before staff does further work whether CPAU
will pay 100% of costs for fully underground equipment; whether the neighborhood will have an option to
pay the cost of keeping equipment underground; or whether pad-mounted equipment will be required in all
districts.
Utilities Advisory Commission Minutes Approved on: Page 7 of 11
Batchelor concurred with presenting a concept to the Council and returning to the UAC to develop details as
directed by the Council.
Vice Chair Schwartz believed the Council should decide whether anybody pays for the additional costs.
Commissioner Forssell proposed Commissioners indicate their support for CPAU paying 100% of costs, the
district sharing in the costs, or CPAU requiring pad-mounted equipment in all districts.
Chair Danaher understood a number of Commissioners would support a choice for property owners with the
property owners bearing the additional cost. Vice Chair Schwartz appears to be less inclined to allow a choice.
Vice Chair Schwartz clarified that additional choices are available to property owners, such as finding eight
to ten households who are willing to host pad-mounted equipment.
Commissioner Segal proposed a recommendation that a utility district pay the differential in expense to
maintain transfers underground. Chair Danaher amended the recommendation to a utility district will have
the option by supermajority vote of the residences to maintain transformers underground provided that the
extra cost is borne by the district.
ACTION: Commissioner Segal moved to recommend to City Council that an underground utility district have
the option with a supermajority vote of district customers to pay the differential in expense to maintain
transformers underground. Commissioner Forssell seconded the motion. The motion carried 4-1 with Chair
Danaher and Commissioners Forssell, Johnston, and Segal voting yes, Vice Chair Schwartz voting no, and
Commissioners Ballantine and Trumbull absent.
Chair Danaher requested staff provide residents of Green Acres with the alternative designs for the
undergrounding project.
Mr. Maurier stated the residents' main concern is the lack of information about proposed designs. Without
information, residents cannot make any decisions.
Commissioner Johnston clarified that residents would receive information about the project along with the
notice.
ITEM 2: DISCUSSION: Electric Supply Portfolio Carbon Accounting Analysis.
Chair Danaher announced this item is continued to the May meeting, and the UAC will hear item 4 followed
by item 3.
ITEM 3: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City
Council Adopt: 1) a Resolution Approving the Fiscal Year 2020 Electric Financial Plan, and 2) a Resolution
Increasing Electric Rates by 8% by Amending the E-1, E-2, E-2-G, E-4, E-4-G, E-4 TOU, E-7, E-7 TOU, E-14, E-
EEC and E-NSE Rate Schedules.
Eric Keniston, Senior Resource Planner, reported rates are generally updated every four or five years with
cost of service studies. Electricity generation and transmission and water supply from the Hetch Hetchy
system are the two largest supply-related costs. Construction costs have increased. Electric costs have
increased mainly due to rising transmission-related expenses. At this time, the San Francisco Public Utilities
Commission (SFPUC) does not anticipate a rate change for Fiscal Year (FY) 2020, but that could change with
SFPUC's final recommendation. Market prices and transmission costs for natural gas have increased slightly.
Wastewater costs are increasing due to extensive Capital Improvement Program (CIP) work at the Regional
Water Quality Control Plant. Operations and maintenance costs are increasing approximately 3-4% per year.
Salaries and benefits comprise 13-24% of CPAU's budget. Palo Alto's total utility bill continues to be lower
than bills for neighboring agencies. The balance of most operational reserve funds fall at the low end of the
guideline range. For FY 2020, electric and water rates will increase approximately 4% for residential
customers while wastewater rates will increase 7%, and gas rates will increase 9%. The overall bill impact will
Utilities Advisory Commission Minutes Approved on: Page 8 of 11
be approximately 5% or $15 per month. For FY 2020, electric rates will increase 5-9% for commercial
customers, water rates will increase between -1% to 3%, wastewater rates will increase 7%, and gas rates
will increase 9%. Electric costs are comprised of approximately 40% distribution costs and 60% supply costs.
Transmission costs are growing significantly. Approximately half of the electric rate increase can be attributed
to increases in electric supply costs. Expenses exceed revenues, and staff is attempting to balance the two.
Over the last several years, loads have been decreasing faster than expected. As usage decreases and fixed
costs increase, rates have to rise faster.
In response to Commissioner Segal's query regarding the reason for decreasing usage, Keniston indicated
commercial and industrial customers have increased energy efficiency and decreased their usage. Supply cost
drivers include decreasing overhead costs and dramatically increasing transmission costs.
In answer to Vice Chair Schwartz's inquiry about a decline in gas usage, Keniston indicated the decrease in
electric usage has been greater than the decrease in gas and water usage. He had not anticipated the extent
of the electric usage decrease.
Keniston further reported operations and capital cost drivers include medical and retirement benefit costs,
capital investment in the electric distribution system, and additional contract expenses for a line crew.
Residential customers will see a 4% rate increase. Commercial customers will see a 4-8% rate increase. With
the proposed rate increases, Palo Alto's bills are considerably lower than PG&E's bills. Operations Reserve
Funds are projected to reach or fall slightly below minimum guidelines. The balance of the Hydroelectric
Stabilization Reserve Fund is $7.4 million, which should be closer to $17 million. The Electric Special Projects
Reserve Fund balance is approximately $41 million. Staff plans to repay a loan from the Electric Special
Projects Reserve Fund by FY 2023. The 8% rate increase will not increase reserve fund balances, but it will
prevent further losses in the funds.
Vice Chair Schwartz believed CPAU should prepare for sea level rise by acquiring equipment that may be
needed in an emergency and that requires a long lead time to acquire. She asked if the budget could
accommodate the $3-$4 million needed to purchase this equipment. Keniston indicated purchasing all the
equipment at one time would be difficult. Purchasing the equipment over a four or five -year period could
raise problems with storing the equipment. He would need to analyze various scenarios. Staff could request
Council approval to purchase the equipment with monies from the Special Projects Reserve Fund as a
resiliency measure. Commissioner Johnston suggested other things could have a higher priority than spare
equipment in terms of resilience.
Chair Danaher requested a future agenda item for the topic so that staff could prepare information. Dean
Batchelor, Utilities General Manager, reported staff could explore the equipment needed for an emergency.
If equipment is needed immediately, staff with Council approval could utilize the Special Projects Reserve
Fund and plan to repay the monies.
In answer to Commissioner Forssell's questions regarding the large percentage increase in the summer
demand charges for nonresidential customers and the modest increase for Tier 2 residential customers,
Keniston explained that the cost of service study determined the amount of demand-related costs that should
be allocated to summer-related demand and winter-related demand. The model indicated most of the cost
should be allocated to summer-related charges. Much of the cost increase pertains to distribution costs, and
distribution costs affect Tier 1 customers more than Tier 2 customers. The non-residential customer usage of
2 gigawatt hours is provided for comparison. Two CPAU customers do consume that amount of energy.
Utilities Advisory Commission Minutes Approved on: Page 9 of 11
ACTION: Commissioner Johnston moved to recommend that the City Council adopt (1) a Resolution
approving the Fiscal Year 2020 Electric Financial Plan, and (2) a Resolution increasing electric rates by 8% by
amending the E-1, E-2, E-2-G, E-4, E-4-G, E-4 TOU, E-7, E-7 TOU, E-14, E-EEC and E-NSE Rate Schedules.
Commissioner Forssell seconded the motion. The motion passed 5-0 with Chair Danaher, Vice Chair Schwartz,
and Commissioners Forssell, Johnston, and Segal voting yes, and Commissioners Ballantine and Trumbull
absent.
ITEM 4: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City
Council Adopt: (1) a Resolution Approving the Fiscal year 2020 Water Utility Financial Plan; and (2) a
Resolution Increasing Water Rates by 1% by Amending Rate Schedules W-1 (General Residential Water
Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-
Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service).
Lisa Bilir, Resource Planner, reported costs are divided approximately half to water supply and half to water
distribution. In FY 2019, approximately 30% of overall costs are attributed to operations, 13% to capital
investment, and 7% to debt service. Water supply costs are projected to remain stable over the next few
years; however, in FY 2023 and beyond, the primary driver of water supply costs will be the SFPUC Water
System Improvement Project. Drivers of operations and capital costs include the installation of backup
generators at pumping stations and seismic upgrades for emergency water supply and reservoir
rehabilitation. In FY 2020, rates and revenues are projected to remain fairly steady. The overall rate increase
is 1%. The 1% increase has an impact closer to 4-6% on residential bills. Staff is preparing a cost of service
analysis update, and it affirms that the methodology for allocating costs and calculating rate structures is
fundamentally sound. The analysis update recommends some rebalancing of rates in FY 2020. Rate design
changes will separate the commodity rate for SFPUC supply so that SFPUC rate changes are quickly and
accurately reflected in Palo Alto's water rates and standardize the 5/8", 3/4", and 1" residential meter charges
to ensure costs are allocated equitably and consistent with the cost of service analysis.
In reply to Vice Chair Schwartz's inquiry regarding the need for a larger meter, Eric Keniston, Senior Resource
Planner, explained that the customer may need a larger meter due to special circumstances or to increase
water pressure. The size of the meter is not based on water usage. Bilir added that standardizing to the 1"
meter size will reduce CPAU's cost for procuring meters.
Bilir further reported the bill impact for residential customers with a 5/8" meter and usage at the annual
median is 4%. As the usage level increases, the bill impact could be higher. The bill impacts for commercial
and irrigation customers range from -1% to 3%. Certain projects originally planned for FY 2019 are being
shifted to FY 2020. The Financial Plan will replenish the CIP Reserve Fund with a $5 million transfer in FY 2020.
The CIP numbers are higher in FY 2022 and 2024 because main replacement projects will be planned for every
other year and will be larger projects.
In answer to Commissioner Johnston's query about using reserve funds to have consistent rates, Bilir
indicated that is part of the plan. Keniston clarified that excess funds will be transferred to the CIP Reserve
Fund to smooth the flow of the Operations Reserve and to fund the following year's higher CIP costs.
In reply to Commissioner Segal's inquiry regarding the impact of a two-year cycle on the desired range for
reserve funds, Keniston explained that the CIP Reserve Fund balance will rise and fall, but the Operations
Reserve Fund balance should fall within the desired range each year.
Bilir continued the report, stating Palo Alto's residential bill is not the highest compared neighboring cities,
but Palo Alto's residential bill is higher than the average of residential bills. Staff will conduct a study to
understand why Palo Alto's rates are higher than neighboring cities.
In response to Vice Chair Schwartz's question about neighboring cities purchasing Hetch Hetchy water, Bilir
advised that Hetch Hetchy water comprises a portion of the water supplies for Redwood City, Menlo Park,
Mountain View, and Hayward.
Utilities Advisory Commission Minutes Approved on: Page 10 of 11
In reply to Commissioner Forssell's inquiry about the impact of the 1% average increase, Bilir indicated some
customers will see a 4-6% bill impact, and other customers will see a -1% impact.
In answer to Commissioner Johnston's request for an explanation of residential rates increasing and other
rates decreasing, Bilir advised that the rates are affected by the standardization of the meter charges and the
cost of service study analysis that recommends rebalancing the rates. The analysis is almost complete.
Herb Borock recalled that Palo Alto's rate structure at one time consisted of the commodity charge and a
pressure zone charge. If staff has a recent report concerning the pressure zone concept, they should present
it to the UAC or Council. Staff may want to review the past rate structure for pressure zones as well. The
effect of chloramine on the reservoirs should be factored into a decision regarding pressure zones.
In reply to Commissioner Forssell's query regarding some bills increasing by 10% and others decreasing as
much as 46%, Bilir reported the monthly service charge will change by those percentages. The total bills will
not change by those percentages.
In answer to Commissioner Segal's inquiry regarding 13.5 miles of water pipe replacement over ten years,
Silvia Santos, Senior Engineer, advised that the City's consultant recommends replacement of 13.5 miles of
water pipe over the next decade. The 13.5 miles of water pipe consists of 2 miles of pipe in deteriorated
condition, 10 miles of pipe within seismically sensitive areas, and 1.5 miles of pipe that will deteriorate over
the next ten years. The plan to replace water mains every other year will accomplish replacement of 13.5
miles of pipe within ten years. Staff will continue to assess the conditions of water mains and replace them
if necessary.
ACTION: Commissioner Johnston moved to recommend that the City Council adopt (1) a Resolution
approving the Fiscal Year 2020 Water Utility Financial Plan and transferring up to $5 million from the
Operations Reserve Fund to the CIP Reserve Fund and (2) a Resolution increasing water rates by 1% by
amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants),
W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water
Service), and W-7 (Non-Residential Irrigation Water Service). Vice Chair Schwartz seconded the motion. The
motion carried 5-0 with Chair Danaher, Vice Chair Schwartz, and Commissioners Forssell, Johnston, and Segal
voting yes, and Commissioners Ballantine and Trumbull absent.
ITEM 5: DISCUSSION: Update and Discussion of Fiber and AMI Planning.
Dean Batchelor, Utilities General Manager, reported a Council update regarding fiber could occur in June or
July. Staff anticipates the UAC having a larger role in fiber discussions and the Community Advisory
Committee sunsetting.
In response to Commissioner Johnston's inquiry about issuing the Request for Proposals (RFP), Batchelor felt
the RFP could be issued in June.
ACTION: None
Chair Danaher noted Item 2 has been continued to the May meeting. A discussion of resiliency and purchasing
equipment should be scheduled. The UAC usually cancels one summer meeting. He requested an update of
the CIS upgrade.
Vice Chair Schwartz suggested scheduling the cancellation of one summer meeting wait until new
Commissioners join the UAC.
Utilities Advisory Commission Minutes Approved on: Page 11 of 11
Batchelor advised that staff is working on resiliency but has not determined a date to present it to the UAC.
A discussion of purchasing equipment could be scheduled for September or October.
Debra Lloyd, Assistant Director of Utilities Engineering, reported the repaving of University Avenue will not
be complete prior to the May Fete Parade. The work will occur on May 13, 14, and 15, and crews will work
both day and night.
NEXT SCHEDULED MEETING: May 1, 2019
Meeting adjourned at 10:00 p.m.
Respectfully Submitted
Tabatha Boatwright
City of Palo Alto Utilities
Page 1 of 17
1
MEMORANDUM
TO:
FROM:
DATE:
UTILITIES ADVISORY COMMISSION
UTILITIES DEPARTMENT
May 1, 2019
SUBJECT: Discussion of Carbon Emissions Accounting Options for the City’s Electric Supply
Portfolio
______________________________________________________________________________
REQUEST
Staff seeks UAC feedback on the accounting methodology to use in assessing the electric supply
portfolio’s annual carbon emissions. No action is required at this time. A follow-up report will
be presented in the next few months, and an action will be requested at that time.
EXECUTIVE SUMMARY
In the City’s 2018 Electric Integrated Resource Plan (EIRP), approved by Council in December
2018, Initiative #4 of the Work Plan called for staff to evaluate the carbon content of the electric
supply portfolio using hourly grid emissions intensity data, to consider the merits of buying
carbon offsets to ensure the carbon content of the cumulative hourly portfolio is zero on an
annual basis, and to reevaluate the manner in which the City communicates with customers
about the carbon content of the electric portfolio. This report satisfies the first objective of
Initiative #4, while beginning a discussion of the second and third objectives that will continue
in the coming months.
This report calculates the carbon content of the City’s actual 2018 electric portfolio under a
total of six different carbon accounting methodologies: two different annual accounting
methodologies (which differ in the way they treat unbundled renewable energy certificate (REC)
purchases), and four different hourly accounting methodologies (which employ two different
types of hourly carbon emissions intensity values, and again, two different treatments of
unbundled REC purchases).
For 2018, although the City’s portfolio had significant surpluses of carbon neutral power (from
long-term contracts) in some hours and significant deficits of carbon neutral power in others,
staff’s analysis shows that the City’s electric portfolio was 99.6% covered by carbon neutral
resources: out of a net load of 906,251 MWh the City had net purchases of short-term (and
carbon emitting) market power of 3,638 MWh. Despite this, depending on the emissions
accounting approach chosen, the City’s electric portfolio can be found to contribute anywhere
from -2,038 mT to +17,675 mT of net CO2 emissions over the course of the year.
BACKGROUND
In 2013, City Council approved the Carbon Neutral Electric Supply Plan (Staff Report 3550,
Resolution 9322). The accounting methodology adopted in that Plan simply required that the
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City’s annual net purchases of carbon neutral supply resources equal its annual load at Citygate.
At the time, this was a fair and reasonable approach—since the carbon emissions intensity of
the overall electric grid didn’t vary significantly at the time, it didn’t matter very much whether
(or when) the City had periodic surpluses or deficits of carbon neutral power, so long as the
City’s portfolio was balanced on an annual basis. But more recently, with the surge of solar PV
installations in the state, it has become apparent that the emissions intensity of grid power
varies significantly on both an hourly and a seasonal basis. See Figure 1 below for a
representative graph of the emissions associated with energy delivered across the California
Independent System Operator (CAISO) footprint for one recent day.
Figure 1: Hourly Average Carbon Emissions Rates of CAISO Electricity for March 6, 2019
Given that the City receives a significant fraction of its electricity supplies from solar and other
summer-peaking resources, it routinely has excess power (during the middle of the day and in
the summer months) as well as periods with large deficits of power (at night and in the winter
months). (See Attachment A for more details on the City’s daily and monthly load and resource
balances.) Given this seasonal imbalance and the changing emissions profile of grid electricity
(as shown in Figure 1), it is a good time to re-evaluate the City’s assessment of the carbon
impact of its electricity supply, as the UAC has noted several times over the past few years.
Most recently this issue was discussed in June and September 2018, when staff presented
reports related to the EIRP. Those discussions occurred in the context of considering whether to
rebalance the City’s portfolio of long-term electric supply resources in order to better match
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the City’s electric supplies with its load.1 At these meetings, UAC Commissioners also touched
on the need for staff to be clear and accurate in public messaging related to the carbon content
of the electric supply portfolio.
Another relevant discussion on this topic occurred in December 2017, when staff delivered a
report to the UAC on potential changes the City could make to its strategy for complying with
its Renewable Portfolio Standard (RPS) and Carbon Neutral Plan objectives. In that discussion,
UAC Commissioners made clear that they feel the City should focus on minimizing the cost and
the carbon content associated with the electric supply portfolio, and not to focus on its RPS
level.
DISCUSSION
Carbon Accounting Methodologies
This report will assess the total carbon content of the City’s actual electricity supplies over the
past two calendar years under six different accounting methodologies. Two of these are annual
accounting methodologies, and two utilize hourly carbon accounting. In addition, the two
hourly accounting methodologies can utilize two different types of carbon emissions intensity
data—a distinction that will be discussed further below. The four major carbon accounting
methodologies are the following:
1.The City’s Current Method (Method A) – This approach, which is based on The Climate
Registry’s (TCR’s) Electric Power Sector (EPS) protocol, entails a comparison of annual
electric supplies and load. If the annual quantity of carbon neutral resources is at least
as great as the annual load, then the portfolio is deemed carbon neutral for the year. In
addition, unbundled Renewable Energy Certificates (RECs) can be purchased in order to
make generic market energy purchases effectively carbon neutral.
2.The Proposed Power Content Label (PCL) Method (Method B) – The California Energy
Commission (CEC) has proposed an accounting methodology, in order to implement
Assembly Bill (AB) 1110,2 that is similar to the City’s current method (it involves an
annual summation of resource supplies and load). Except under the CEC’s proposal,
unbundled REC purchases would not be allowed to neutralize the carbon content of
generic market energy purchases.
3.Hourly Accounting Method #1 (Method C) – This approach entails an hourly comparison
of the City’s supplies and load, rather than an annual one. Each hourly net energy value
would be assigned an hourly carbon emissions intensity (in metric tonnes of CO2 per
megawatt-hour, mT CO2/MWh) to convert it to an hourly emissions total. These hourly
emissions totals would then be summed across the hours in a year. In addition,
1 This topic has been a focus for others in the electricity sector recently as well. Google, for example, announced its
intentions in October 2018 to match its global data center load with carbon-free energy supplies on a 24x7 basis.
https://www.blog.google/outreach-initiatives/sustainability/internet-24x7-carbon-free-energy-should-be-too/
2 AB 1110 (2016) requires that every load-serving entity (LSE) include an annual average carbon emissions intensity
factor associated with its electricity supplies on its Power Content Label, starting with the 2019 PCL (which will be
published in 2020). For details on the CEC’s proposed accounting methodology, see the latest draft regulations and
rulemaking documents here: https://www.energy.ca.gov/power_source_disclosure/16-OIR-05/.
Page 4 of 17
unbundled REC purchases would be allowed to neutralize the carbon content of generic
market energy purchases.
4.Hourly Accounting Method #2 (Method D) – This approach is the same as Hourly
Accounting Method #1, except that unbundled REC purchases would not be allowed to
neutralize the carbon content of generic market energy purchases. This is essentially the
hourly accounting analog of the Proposed Power Content Label Method discussed
above.
5.Hourly Accounting Method #1a (Method E) – Identical to Method C, except that it uses
marginal instead of average hourly emissions factors, as discussed below.
6.Hourly Accounting Method #2a (Method F) – Identical to Method D, except that it uses
marginal instead of average hourly emissions factors, as discussed below.
Marginal versus Average Hourly Emissions Factors
In addition to deciding whether to use annual or hourly accounting approach, another
important consideration in this discussion (if the City opts for the hourly approach) is whether
to use hourly average or hourly marginal emissions factors. Average emissions factors look at
the total carbon emissions occurring in an entire system (in this case, the CAISO balancing area)
in an hour, and the total amount of electricity generated in that time—the ratio of the two is
the hourly average emissions rate. Marginal emissions factors are a measurement of how the
grid’s emissions change with a small change in electricity load. In other words, if one were to
add one MWh of load to the grid during a given hour, the marginal emissions factor would be
the emissions factor of the power plant whose output would increase to serve that one MWh.
Marginal emissions rates take into account the operating cost of different types of power
plants, telling you that when total demand is low the units with the lowest operating costs
(which are typically the most efficient and least polluting units) are the ones that stay online;
and as demand ramps up, the grid operator calls on increasingly costly (and higher polluting)
units to meet the incremental demand.
Although the distinction may appear inconsequential, the two values often differ greatly and
therefore the choice of which one to use has a large effect on the total emissions calculation.
Figure 2 below depicts the hourly marginal CO2 emissions rates3 in CAISO for 2018 (with each
line representing the average value for a given quarter), while Figure 3 depicts the hourly
average values.4 Clearly, both the shape and the overall emissions levels differ significantly
between the two sets of data. The hourly marginal emissions rates, shown in Figure 2, are not
only higher overall than the average rates, but much flatter as well. (Although, this being an
average of all emissions rates in a given hour for each quarter, this representation masks a
significant amount of variability in the dataset.) This indicates that, no matter the month or the
3 Marginal emissions data was obtained from WattTime, a nonprofit that uses software to track marginal emission
rates across the US power grid every five minutes. They have developed an Automated Emissions Reduction (AER)
tool that allows utilities and other end users to reduce emissions from energy by shifting the timing of flexible
electricity use to sync with times of cleaner energy and avoid times of dirtier energy.
4 Average emissions data was obtained, also on a five-minute basis, directly from CAISO:
http://www.caiso.com/TodaysOutlook/Pages/emissions.aspx.
Page 5 of 17
time of day, for the most part combined-cycle natural gas units tend to be the marginal
resources in CAISO, being turned up or down depending on fluctuations in overall demand.5
Figure 2: Hourly Marginal CO2 Emissions Rates for CAISO in 2018
The hourly average emissions rates shown in Figure 3, on the other hand, more clearly
demonstrate the impact of all of the solar generation on the grid—resulting in a lower overall
value, and a huge dip in the middle of the day when the sun is out.
5 The middle-of-the-day dip in the lines for Q1 and Q2 in Figure 2 indicates that once in a while during these
quarters it is the solar units that are the marginal units on the grid. In these instances, demand is likely so low that
market prices across the grid are negative, resulting in some solar units voluntarily curtailing their output, even
though they have zero marginal cost to operate. Similarly, the hump in the Q3 line for the evening hours indicates
that this tends to be a time of stress on the grid—when demand is rather high and solar production is in decline—
and therefore less efficient “peaking” generators are brought online.
Page 6 of 17
Figure 3: Hourly Average CO2 Emissions Rates for CAISO in 2018
For the purpose of calculating the City’s total emissions over the course of a year, staff
recommends that average CO2 emissions rates should be used. Although marginal emissions
values are a useful indicator for an individual to use in deciding when to use electricity—say,
when to charge their electric vehicle or turn on their air conditioner—or for regional energy
planning purposes, they are less useful in this situation. The City cannot simply switch its entire
load on or off, and it certainly cannot do so for periods in the past; therefore staff will primarily
use hourly average emissions data throughout the remainder of this report. For determining
the contribution of a portion of the grid to the overall emission occurring on the grid—
particularly for a period of time in the past—average emissions intensities are a much more
appropriate indicator.
Carbon Accounting Analysis Results
The City’s current electric supply portfolio is comprised of the following major types of
resources:
•Hydroelectric resources (both federal hydro and City-owned hydro);
•RPS-eligible resources (solar, wind, and landfill-gas resources);
•Distributed energy resources (DERs), including energy efficiency and rooftop solar; and
•Market power purchases, matched with RECs, for monthly/hourly portfolio balancing.
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For purposes of this analysis, DERs will not be explicitly considered. The analysis focuses on
resources that are delivered to the Citygate meter; DERs are considered behind-the-meter and
simply reduce the City’s load as measured at Citygate. The 2017 and 2018 net annual volumes
(in MWh) of each of these types of resources are summarized in Table 1 below.
Table 1: Palo Alto Electric Supply Resources in MWh (2017-2018)
CY 2017 CY 2018
Hydroelectric 667,772 342,419
Solar 329,938 342,640
Wind 97,239 107,414
Landfill Gas 107,495 110,140
Net Market Power (255,795) 3,638
Total Load 946,649 906,251
Carbon Neutral Supplies
(% of Total Load) 127.0% 99.6%
2017 was an extremely wet year, with hydroelectric generation totals far above average levels.
As a result, the City sold 255,795 MWh of surplus electricity in the market. 2018 saw much
closer to average hydroelectric conditions, so this analysis will focus primarily on data from that
year. In 2018 the City bought 3,638 MWh (net) in the market over the course of the year, and
needed to buy 3,638 MWh in unbundled RECs to meet the requirements of the Carbon Neutral
Plan.
Table 2 below summarizes the total emissions (and emissions intensities) calculated for the
City’s 2018 electric portfolio (including a hypothetical purchase of 3,638 additional unbundled
RECs to neutralize the net market power purchases) under each of these different approaches.
Depending on the accounting approach taken, the City’s portfolio can be found to contribute
anywhere from -2,038 mT to +17,675 mT of net CO2 emissions over the course of the year.
Table 2: Annual Net CO2 Emissions and Emissions Intensity for the Electric Portfolio in 2018
under Six Accounting Methodologies, with Purchase of 3,638 Unbundled RECs
Unbundled RECs
= Carbon Neutral
Unbundled RECs
= Market Power
Method
Net
Emissions
(mT)
Emissions
Intensity
(lb/MWh)
Method
Net
Emissions
(mT)
Emissions
Intensity
(lb/MWh)
Annual Accounting A 0 0 B 1,557 3.8
Hourly Accounting
(Average Emissions Factors) C 16,118 39.2 D 17,675 43.0
Hourly Accounting
(Marginal Emissions Factors) E (2,038) (5.1) F (526) (1.3)
For 2018, based on the generation and load data in Table 1, under the City’s current carbon
accounting method, the supply portfolio would be considered carbon neutral if 3,638 RECs (a
Page 8 of 17
volume equal to the number of MWh of net market power purchased that year) are procured.
This corresponds to “Method A” in Table 2 above. However, under the CEC’s proposed PCL
methodology—which does not permit unbundled RECs to be counted as carbon-neutral
resources—the City’s portfolio would not be considered carbon neutral (“Method B”). Under
the CEC’s current draft regulations, an emissions factor of 0.428 mT CO2/MWh would be applied
to the City’s net market power purchases for this year, resulting in an annual average emissions
intensity of 3.8 lb CO2/MWh (and total emissions of 1,557 mT CO2) for the overall supply
portfolio.
Using hourly metered generation and load data for 2017 and 2018, along with the five-minute
interval emissions data described above, staff also calculated the City’s total annual emissions
under the hourly accounting approaches. Staff first acquired hourly load data at Citygate and
subtracted from that the hourly generation data for all resources in the City’s portfolio. The
result—the net load at Citygate—is plotted in Figure 4 below for 2018, with each line
representing the average hourly net load profile for a given quarter of the calendar year.
Figure 4: Average Hourly Net Load Profile at Citygate in 2018 (MW)
In this data, a positive value reflects an energy deficit, with the City being a net purchaser of
market power from the CAISO grid; conversely, a negative value represents the City have a
surplus of carbon neutral energy that is sold into the CAISO grid. Here one can clearly see the
distinct mid-day dip in net load created by the generation from the City’s solar resources, as
well as a second, sharper dip in the evening hours. The latter is the product of the City’s
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dispatchable hydroelectric generation being shaped into these high-value hours, when market
prices tend to surge with the decline in daily solar output and the rise of system-wide net
demand.
Each of these hourly net position values—whether deficit (positive net load) or surplus
(negative net load)—was then weighted by the average CAISO emissions intensity factor
(graphed in Figure 3 above) for that particular hour. The result—the hourly carbon emissions
impact of the City’s electric supply and load profiles—is shown below in Figure 5 for 2018. For
the most part, the net emissions profiles in this graph closely mirror the profiles of the City’s
net load, in Figure 4 above. The primary difference is that in the summer months when the bulk
of the City’s solar generation occurs (Q2 and Q3), the major mid-day dip is blunted significantly
due to the much lower average emissions intensities in this period. This means that the City’s
portfolio is not receiving as much of an emissions reduction benefit from this excess generation
as it would during other periods, because the overall grid is so much cleaner during this period
when the City’s major surpluses of energy are occurring.
Figure 5: Average Hourly Emissions Profile at Citygate in 2018 (mT CO2)
For the year as a whole, Figure 6 below presents a combination of the two datasets discussed
above (net Citygate load, in MW, and net CO2 emissions, in mT CO2), for the “average day” in
2018.
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Figure 6: Annual Average Hourly Net Load and Net CO2 Emissions for 2018
Summing across all hours in the year, this calculation shows that under this accounting
approach the City’s electric supply portfolio is responsible for 17,675 mT of CO2 emissions for
2018 (which translates to 43 lb of CO2 emissions per MWh consumed). This corresponds to
“Method D” in Table 3 above. For comparison, Table 3 below shows that if marginal hourly
emission factors were used in this calculation, rather than average emissions factors, the City’s
electric supply portfolio was responsible for slightly reducing emissions across the grid—despite
the fact that the City was a net purchaser of market power for the year. This corresponds to
“Method F” in Table 3 above. This reflects the fact that hourly marginal emissions factors
(shown in Figure 2 above) are much flatter, and therefore do not discount the emissions
benefits of the City’s excess solar generation. Marginal emissions factors also peak in the
summer evening hours, when a significant amount of the City’s hydroelectric generation occurs.
So under this accounting treatment, the City’s hydroelectric generation is credited with
displacing dirtier grid power, while the City on average uses more energy in somewhat lower
carbon hours.
Table 3: Hourly Total Emissions and Emissions Intensities under Average and Marginal
Emissions Factors for 2018 (mT CO2 and lb CO2/MWh) Average Marginal
Total CO2 Emissions
(mT CO2) 17,675 (526)
Page 11 of 17
CO2 Emissions Intensity
(lb/MWh) 43.0 (1.3)
Treatment of Unbundled RECs
The final issue to address in selecting a carbon accounting methodology is how to treat
purchases of unbundled RECs in the calculation. As discussed above, the City’s current
accounting framework treats purchases of generic market power, when matched with an equal
volume of unbundled RECs, as equivalent to a purchase of carbon-free renewable energy.
However, the approach proposed by CEC staff for calculating a utility’s average annual
emissions intensity would not credit these REC purchases with any emissions benefit at all.
Staff firmly believes that the CEC’s proposed approach of discounting the emissions benefits of
unbundled RECs is flawed and will create confusion for customers—and staff has submitted
formal comments (through the Northern California Power Agency) to the CEC expounding on
this argument.6 Among other reasons, the CEC’s proposed approach is problematic because it
fails to recognize that the state legislature has specifically authorized utilities to use RECs and
imported renewable energy to meet their renewable energy compliance mandates. This
approach also ignores industry practices that recognize that unbundled RECs represent all of
the environmental attributes—including the emissions profile—of the underlying resource that
produced them, and are acquired at a premium for that reason.
Still, staff recognizes that if the CEC formally adopts their proposed accounting methodology
when the AB 1110 implementation regulations are finalized later this year, it could present
customer communications challenges if the City adopts a different accounting approach that
recognizes the full environmental benefits of unbundled RECs.
The alternatives to treating purchases of unbundled RECs as carbon neutral resources in a
carbon accounting framework are: (1) authorize the purchase of an alternative type of
resource, such as carbon offsets, for neutralizing whatever net positive emissions the City’s
resources are found to be responsible for, (2) purchase bundled RECs and energy, on a short-
term basis, to offset any net market power purchases, or (3) simply accept that in some years,
particularly dry hydro years, the City’s electric supply portfolio will not be carbon neutral.
However, using the carbon offset approach—just as the City’s natural gas utility currently
does—would lead to the same types of communications challenges as the unbundled REC
approach does. For example, in a dry hydro year a customer would likely receive a Power
Content Label informing them that their electricity supply for the prior year had a net positive
emissions profile, even though the utility’s public messaging indicated that the electricity supply
was carbon neutral.7 And the bundled REC purchase approach would be logistically challenging,
6 “NCPA Comments re: Revised Staff Proposal on AB 1110 Implementation,” submitted February 23, 2018.
https://efiling.energy.ca.gov/GetDocument.aspx?tn=222716&DocumentContentId=25474.
7 Additionally, the CEC has strict guidelines on the language that may be included on Power Content Labels, and
would likely prevent the City from displaying any messaging on the PCL that attempted to provide context for the
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because the precise volume of bundled energy and RECs that would be needed to eliminate the
portfolio’s carbon emissions would not be known until a couple of months after the end of the
year, while bundled energy and REC purchases need to be executed during the year. As a result,
the City would almost certainly over- or under-buy on these purchases. This method would also
be rather expensive, as bundled energy and REC purchases carry a large premium (about
$18/MWh) compared to unbundled RECs and generic power.
With the City’s existing electric supply portfolio, the issue of how to treat unbundled RECs in
carbon accounting is of relatively low importance, except in very dry hydro years. As shown in
this analysis, in a normal year the City has enough generation from renewable and hydroelectric
resources under long-term control to achieve carbon neutrality (or get very close to it) without
the use of unbundled RECs. However, if the City elects to change its current RPS compliance
strategy—for example, by selling off some of its surplus renewable resources, and/or swapping
some of its more valuable in-state renewable resources for less costly unbundled RECs—this
issue will become much more important.
CONCLUSION
Based on the analysis results, it is clear that in the era of the Duck Curve, the choice of carbon
accounting methodology makes a significant difference in whether the City’s electric supply
portfolio can be considered carbon neutral or not. Altogether staff evaluated six different
carbon accounting methodologies in this report—an annual accounting approach and two
hourly accounting approaches, each with two different ways of treating unbundled REC
purchases.
Staff’s preferred carbon accounting approach is Method C—hourly carbon accounting using
average emissions factors and allowing unbundled REC purchases to count as carbon neutral—
because it is more accurate than an annual approach, given the current grid power mix, and
therefore bestows greater validity on the City’s carbon neutral supply claims. This method also
treats unbundled RECs in a manner that conforms to both logic and standard industry practice.
However, staff recognizes that, depending on the direction ultimately taken by the CEC in the
AB 1110 rulemaking process (which we may not know until early 2020), adopting this
accounting methodology could lead to messaging consistency issues and customer confusion.
And finally, all of these issues may become much more apparent and take on greater import if
the City alters its RPS compliance strategy, selling excess renewable supplies and relying more
on unbundled RECs in order to reduce costs.
NEXT STEPS
Staff is seeking feedback from the UAC on the carbon accounting analysis presented in this
report. Staff anticipates returning to the UAC this summer to present a follow-up report that
provides more detail on the options for mitigating any emissions associated with the City’s
electric portfolio, and that addresses the financial impacts to the utility associated with the
non-zero emissions intensity figure.
various carbon accounting methodologies and emissions mitigation options. This follow-up
report will also look in more detail at the impact of changing the City's RPS compliance strategy
on the carbon accounting results, and present a forecast of CAISO emissions intensities in 2030
prepared for the City by WattTime.
Staff will also continue to closely follow (and comment upon) the CEC's AB 1110 rulemaking
process. Depending on the accounting methodology the CEC finally adopts, staff will work to
understand how the City's methodology can be aligned with the CEC approach, and, to the
degree that it cannot, determine how to explain this difference to customers.
RESOURCE IMPACT
Staff will develop a full assessment of the resource impact of changing the City's carbon
accounting methodology in a subsequent report to the UAC. Preliminary indications are that
switching to an hourly carbon accounting methodology, using average hourly emissions
intensity factors, could result in an increase in supply costs on the order of $5,000 to $10,000 in
an average hydrological year, if the City chooses to recognize the emissions reduction benefits
of unbundled RECs. If the City were to choose to use carbon offsets rather than unbundled RECs
to neutralize its net emissions, the increase in annual supply costs would likely be on the order
of $25,000 to $50,000.
POLICY IMPLICATIONS
This report satisfies Initiative #4 of the EIRP Work Plan . This report is _also in line with the
Sustainability and Climate Action Plan goals of continuing to lower the carbon footprint of the
community.
ENVIRONMENTAL REVIEW
The Utilities Advisory Commission's discussion of the City's carbon accounting methodology
does not meet the definition of a project under Public Resources Code 21065 and therefore
California Environmental Quality Act (CEQA) review is not required.
ATTACHMENTS
A. Details of the City's Load and Supply Resource Balance
PREPARED BY: JIM STACK, Senior Resource Planner
LENA PERKINS, Acting Senior Resource Planner
REVIEWED BY: JONATHAN ABENDSCHEIN, Assistant Director, Resource Management r
APPROVED BY:
Page 13 of 17
Page 14 of 17
APPENDIX A: Details of the City’s Load and Supply Resource Balance
Figure A-1 below presents the City’s load and supply resources on a monthly basis for a year
with average hydrological conditions, demonstrating the significant net deficit positions that
exist in the winter months and the significant surplus positions that exist in the summer
months.
Figure A-1: Monthly Total Load and Supply Resource Balance for an Average Hydro Year
And for a more granular look at this data, shown below are two daily/hourly load and resource
balance graphs from an average hydro year—for a typical day in January (Figure A-1), when
hydro and solar output are both minimal, and for a typical day in July (Figure A-2), when hydro
and solar are both in abundance.8
8 These graphs include only the City’s hydro and long-term PPA resources; not shown are DERs (which reduce the
City’s load) and market purchases (which make up the differences, positive or negative, between the City’s total
purchases and its load).
Page 15 of 17
Figure A-2: Daily Load and Hydro/PPA Supplies for a Typical January Day in an Average Year
Page 16 of 17
Figure A-3: Daily Load and Hydro/PPA Supplies for a Typical July Day in an Average Year
Note that as hydro is a dispatchable resource, it is currently dispatched to optimize the financial
value of the resource, rather than to balance the City’s load and supply resources. This explains
the odd shape of the July supply profile: market prices tend to peak in the evening hours (when
solar output is declining and evening loads are increasing), so the bulk of the hydro generation
is concentrated in this period. However, this dispatch pattern could be modified if the City
wanted to reduce its reliance on the greater electric grid; for example, the hydro resources
could be scheduled like “baseload” resources, which have a steady output level across the day.
(However, this output level would still vary seasonally, based on snowpack levels, runoff
conditions, and streamflow requirements.) Figure A-3 presents a daily load and resource
balance graph for a typical July day where the hydro resources are dispatched in a
baseload/load-following manner.
Page 17 of 17
Figure A-4: Load and Resources for a Typical July Day with Hydro as a Baseload Resource
However, it should be noted that although dispatching the City’s hydro resources in this
manner will likely result in lower net GHG emissions, it would likely result in higher cost to the
electric rate payer – preliminarily estimated at a retail rate increase of 1 to 2 percent, or an
annual supply cost increase of $1 to $2 M.
Page 1 of 11
2
MEMORANDUM
TO: UTILITIES ADVISORY COMMISSION
FROM: UTILITIES DEPARTMENT
DATE: May 1, 2019
SUBJECT: Staff Recommendation that the Utilities Advisory Commission Recommend
that the City Council Adopt: 1) a Resolution Approving the Fiscal Year 2020 Gas
Utility Financial Plan; and 2) a Resolution Increasing Gas Rates by Amending
Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master-Metered
and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10
(Compressed Natural Gas Service)
RECOMMENDATION
Staff requests that the Utilities Advisory Commission (UAC) recommend that the Council:
1. Adopt a resolution (Attachment A) approving the fiscal year (FY) 2020 Gas Utility
Financial Plan (Attachment B) and reserve transfers; and
2. Adopt a resolution (Attachment C) increasing gas rates by amending Rate Schedules G-1
(Residential Gas Service), G-2 (Residential Master-Metered and Commercial Gas
Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed Natural Gas
Service) (Attachment D).
EXECUTIVE SUMMARY
The FY 2020 Gas Utility Financial Plan includes projections of the utility’s costs and revenues for
FY 2020 through FY 2024. Gas utility costs are made up of supply-related costs (35 percent of
costs) and distribution-related costs (65 percent of costs). Supply-related costs (and customer
rates) vary monthly with the gas markets, but customer rates for gas distribution are evaluated
annually and set by Council action like other utility rates. Gas rates related to distribution costs
were last increased by 6 percent on July 1, 2018. The proposed FY 2020 Gas Utility Financial
Plan includes an 8 percent increase in distribution rates on July 1, 2019. Because distribution
accounts for only 65 percent of the average customer’s bill, this is projected to increase system
rate revenues (and billings) by approximately 5 percent overall. Further distribution increases of
5 to 12 percent are projected over the following four years (with a 4 to 8 percent increase in
overall gas rates).
Page 2 of 11
In addition, the plan proposes transfers to the Operations Reserve of $6.3 million from the Rate
Stabilization Reserve and $6 million to the CIP Reserve from the Operations Reserve, to ensure
that there are appropriate financial reserves for contingencies. The Rate Stabilization Reserve is
projected to be zero by the end of FY 2020.
With the completion of the 2019 Natural Gas Cost of Service and Rates Study, staff and the
consultants have identified a realignment in cost allocations required for the gas customer rate
classes. While the distribution rate increase across all customer classes is proposed to be 8
percent, the residential (G1) class will see a larger increase of 13.25 percent, while the
commercial classes (G2 and G3) will see between a 2. 87 and 5.07 percent increase respectively,
as detailed below. These correspond to an overall rate increase (including supply) of 8.1
percent for residential and of 3.0 and 1.5 percent for the two commercial classes. These cost
shifts between customer classes are a result of increased fixed costs, declining customer usage
and shifts to how customers use the gas system.
Figure 1 below shows the primary drivers for the proposed rate change: first, Capital
Improvement (CIP) costs are increasing, followed by increases in Operations expenses, and
finally, a portion of the increase can also be attributed to an anticipated decrease in usage,
which is consistent with long term trends. These increases will be discussed in greater depth
below:
Figure 1: Allocation of Distribution Rate increase
Supply-related costs (the cost of the natural gas itself, gas transmission, and gas environmental
charges) are the most volatile component of the Gas Utility’s expenses, and recent gas market
spikes and proposed transmission rate hikes have led staff to project supply cost increases of
around 4 percent annually for the forecast horizon. Market prices, however, are monitored
from month to month and automatically incorporated into monthly supply rate adjustments.
Therefore, it is not possible to exactly predict what supply rates will be during the planning
horizon. However, if staff’s forecast holds, it would result in a further 1 to 2 percent increase to
customer bills. Where overall rate increases (supply plus distribution) are referenced in this
Page 3 of 11
report, the figures do not attempt to predict or include any supply rate increase that will occur
as a result of the monthly supply rate adjustments.
BACKGROUND
Every year staff presents the UAC with Financial Plans for its Electric, Water, Gas, and
Wastewater Collection Utilities and recommends any rate adjustments required to maintain
their financial health. These Financial Plans include a comprehensive overview of the utility’s
operations, both retrospective and prospective, and are intended to be a reference for UAC and
Council members as they review the budget and staff’s rate recommendations. Each Financial
Plan also contains a set of Reserves Management Practices describing the reserves for each
utility and the management practices for those reserves.
The City’s gas is purchased from a variety of marketers who source gas from throughout the
Western United States. The City then pays Pacific Gas and Electric (PG&E) to transmit that gas
across its gas transmission system to Palo Alto, and the gas is then delivered to customers
through the system of gas mains and services that make up the City’s gas distribution system.
The Gas Utility’s costs can be divided into two main categories: gas supply costs (which includes
the cost of the gas itself, the cost of transmitting the gas to Palo Alto, and environmental
costs 1) and the costs of running the enterprise and operating the distribution system. As noted,
gas supply costs vary with the market, and the costs are passed through to customers through a
gas supply rate component that varies monthly.
The UAC reviewed preliminary financial forecasts at its February 6, 2019 meeting. At that
meeting, staff projected a 15% distribution rate increase (or a 10% overall gas rate increase).
After revising its schedule for gas utility capital investment, staff has revised that projection
downward.
DISCUSSION
Staff’s annual assessment of the financial position of the City’s gas utility is completed to ensure
adequate revenue to fund operations and to document that the City’s rates do not exceed the
level permitted under California Constitution (Proposition 26). The assessment includes making
long-term projections of market conditions, of costs associated with the physical condition of
infrastructure, and of other factors that could affect utility costs. Rates are then proposed that
will be adequate to recover projected costs.
Proposed Actions for FY 2020
The FY 2020 Gas Utility Financial Plan includes the following proposed actions:
1. Amend gas rate schedules (see Attachment D) to increase distribution rates by
approximately 8 percent (a 5 percent increase on overall rates).
1 This is primarily the cost of complying with the State’s Cap and Trade system and procuring offsets under the
City’s Carbon Neutral Gas program.
Page 4 of 11
2. Transfer up to $6.3 million from the Rate Stabilization Reserve (RSR) to the Operations
Reserve, and up to $6 million from the Operations Reserve to the CIP Reserve.
The reserve transfers will enable staff to both maintain sufficient funds in the Gas Operations
Reserve while providing funds for CIP projects which will be occurring every other year, as
discussed below. These proposed actions are described in more detail in the FY 2020 Gas
Financial Plan (Attachment B).
Proposed Gas Rates and Cost of Service Update
The Gas Utility’s rates are evaluated and implemented in compliance with cost of service
requirements. The Gas Utility’s proposed rates are based on the methodology from the draft
April 2019 Natural Gas Cost of Service and Rates Study. The final study will be included as part
of the Staff Report going to either the Finance Committee or Council. The methodology used
was similar to the prior study performed in April 2012 by Utility Financial Solutions2, utilizing
the average and excess method for allocating costs, and updated to reflect current
infrastructure asset values, annual utility costs, and some changes in consumption patterns
between customer classes seen in the post drought era. Because the majority of gas costs are
fixed, the consultant recommended (and staff accepted) shifting a share of costs currently
included in the volumetric (per them) rate over to the base (per account per month) rates. This
increases base rates by 22 percent (for G-1), 26.6% (for G-2) and 72.6% (for G-3), while creating
savings in the volumetric rates. The study was performed in conformance with the scope
previously discussed with the Utilities Advisory Commission in October 2016, and the Council in
November 2016 3.
The COSA estimates a net distribution revenue requirement of $24,098,000 for FY 2020. It
further estimates that the existing rates would generate $22,313,072 in distribution revenues
for FY 2020. An 8 percent increase in distribution rates is necessary to recover this deficiency.
Figure 2: Cost of Service Summary
2 Staff Report 2812, 5/17/ 2012 http://archive.cityofpaloalto.org/civica/filebank/blobdload.asp?BlobID=31395
3 Staff Report 7416 11/14/2016 http://www.cityofpaloalto.org/civicax/filebank/documents/54576
Page 5 of 11
Figure 2 above outlines how these revenue requirements and distribution charges are allocated
amongst the three gas customer classes.
The updated COSA allocates $10,111,795 of the net distribution revenue requirement to the
Residential (G1) customer class. This is 42 percent of the total net distribution revenue
requirement; a similar percentage to that found in the 2012 COSA. Under the current rate
structure, however, G1 customers would provide only about 40 percent of overall distribution
rate revenue. This is because energy consumption per G1 customer has decreased by roughly
10 percent since the 2012 COSA, while fixed costs allocated to the customer class have not
decreased at the same rate. Resetting G1 distribution revenues to comprise 42 percent of
systemwide distribution revenues requires that G1 distribution revenues be increased by 13.25
percent.
For Small Commercial (G2) customers, per customer usage has also decreased by roughly 10
percent, but because of the higher usage of G2 customers their fixed costs are a smaller share
of total costs, and the increase in the per-unit cost for the class is smaller than for the
Residential class. The Large Commercial (G3) group has seen a growth in the relative number of
customers from the prior study, and has both the highest use per customer and the highest
load factor, resulting in a lower average cost than the G1 and G2 groups.
The growth in the costs has also had an impact to the cost of service by class. Compared to the
2012 COSA, costs related to Customer Service, Accounts and Sales have increased by about 30
percent, compared with 36 percent for O&M and under 30 percent for other cost components.
An increase in Customer Service-related costs shifts more costs to the residential class because
it has a higher number of customers. It also leads to higher customer charges for all three of
the classes.
Staff proposes to adjust gas rates as shown in Table 1 and Table 2 below, effective July 1, 2019.
These changes, are projected to increase the system average gas rate (total of supply and
distribution) by roughly 5 percent and residential rates by 8 percent. These rate changes are
included in the proposed amended rate schedules in Attachment D.
Table 1: Current and Proposed Monthly Service Charges
Rate Schedule
Monthly Service Charge
($/month)
Change
Current (as of
7/1/18)
Proposed for
FY 2020
($) (%)
G-1 (Residential) $10.94 $13.35 $2.41 22.0%
G-2 (Small Commercial) 82.92 104.95 22.03 26.6%
G-3 (Large Commercial) 400.08 690.45 290.37 72.6%
G-10 (CNG) 56.11 70.98 14.87 26.5%
Page 6 of 11
Table 2: Current and Proposed Gas Distribution Charges
Change
Current (as of
7/1/18)
Proposed
for FY 2020
($) (%)
G-1 (Residential)
Tier 1 Rates $0.4239 $0.4835 $0.0596 14.1%
Tier 2 Rates 0.9948 1.0426 0.0478 4.8%
G-2 (Residential Master-Metered and Small Commercial)
Uniform Rate 0.6183 0.6102 (0.0081) (1.3%)
G-3 (Large Commercial)
Uniform Rate 0.6098 0.6056 (0.0420) (0.7%)
Bill Impact of Proposed Rate Changes
Table 3 shows the impact of the proposed July 1, 2019 rate changes on various levels of
residential bills. The average increase for the residential class is roughly 8 percent based on last
year’s commodity prices, but some customers may see slightly higher or lower increases due to
slight changes in the composition of the utility’s costs, as well as prevailing market prices in the
months displayed.
Table 3: Impact of Proposed Gas Rate Changes on Residential Bills
Usage
(Therms/month)
Bill under
Current Rates
Bill under
Proposed Rates
Change
$/mo. %
Winter (Using December 2018 commodity prices)
30 $ 48.38 $ 52.58 $ 4.20 8.7%
54 (median) 78.33 83.96 5.63 7.2%
80 122.19 129.14 6.94 5.7%
150 249.51 259.80 10.29 4.1%
Summer (Using July 2018 commodity prices)
10 $ 20.04 $ 23.05 $ 3.01 15.0%
18 (median) 27.32 30.81 3.48 12.7%
30 43.96 48.04 4.08 9.3%
45 66.17 70.97 4.80 7.2%
Table 4 shows the impact of the proposed July 1, 2019 rate changes on various representative
commercial customer bills.
Page 7 of 11
Table 4: Impact of Proposed Gas Rate Changes on Commercial Bills
(Using December 2018 commodity prices)
Usage
(Therms/month)
Bill under Current
Rates
Bill under
Proposed Rates
Change
%
500 804 822 2.2%
5,000 7,295 7,276 (0.3%)
10,000 14,506 14,447 (0.4%)
50,000 72,092 72,172 0.1%
FY 2020 Financial Plan’s Projected Rate Adjustments for the Next Five Fiscal Years
Table shows the projected rate adjustments over the next five years and their impact on the
annual median residential gas bill.
Table 5: Projected Rate Adjustments, FY 2020 to FY 2024
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
Gas Utility 8% 8% 8% 6% 4%
Estimated Bill Impact ($/mo)* $4.38 $3.72 $4.02 $3.25 $2.30
* estimated impact on median residential gas bill, which is currently $42.12 for CY 2018.
One of the main drivers for the increase in the Gas Utility’s short-run costs (and therefore rates)
over the next several years are increases in capital improvement costs to maintain a safe and
reliable system. In FY 2014, FY 2015 and FY 2017, costs for the gas utility were unusually low as
new main replacements were not planned. The gas, water and wastewater utilities generally try
to perform a main replacement annually in each utility, but in the gas utility beginning new
projects was not feasible in those years. In FY 2014 and FY 2015, this was due to the fact that
staff was completing a prior major gas main replacement project, the largest in utility history,
which completed replacement of all ABS gas mains in Palo Alto. Then, FY 2017 included
replacements of gas mains on University Avenue, a project that has evolved into the Upgrade
Downtown project involving a coordinated replacement of several different types of
infrastructure to avoid multiple disruptions to the business district. This has been a multi-year
planning effort that did not allow for design of other new projects. This allowed the Gas Utility
to temporarily keep rates lower than they would typically have been needed to be to fund
future operations and capital replacement. These future capital replacement costs will be
higher, as well. As the emphasis on infrastructure improvement has taken hold both regionally
and nationally, contractor bids for new projects have risen greatly from where they were during
the last recession.
This current financial plan works to address these challenges in a way that will allow the City of
Palo Alto Utilities (CPAU) to meet its gas main replacement (GMR) needs. The next focus of the
Page 8 of 11
GMR program will be the replacement of all Polyvinyl Chloride (PVC) mains with Polyethylene
(PE) mains. CPAU installed PVC pipes from the early 1970s to mid-1980s. Some of the City’s PVC
pipe is approaching 50 years of service, and according to industry data, PVC pipes have a much
higher leakage rate than PE mains after 20 years of service due to potential disbondment of
fittings and joints. This financial plan includes approximately $11 million every other year for
main replacement construction instead of $6.5 million annually, starting in FY 2021. This shift
to larger main replacement construction projects every other year will slightly lengthen the
amount of time needed to replace all PVC pipes in the system, but will attract more contractors
to bid on the larger projects. Additionally, this main replacement project schedule for gas will
be staggered with water and wastewater (water and wastewater construction every even year
and gas construction every odd year), which will ease scheduling difficulties for inspection
coverage due to shared inspection staff across water, wastewater, gas, and large development
services projects. This arrangement is likely to be a short-term solution (3-5 years) until project
capacity can be increased and upward pressure on utility rates has eased.
Because of this staggered CIP approach, and from a budgeting standpoint, there will be a
pattern of revenues being higher than cost one year and lower the next. To avoid a ‘sawtooth’
pattern in reserves because of this, the funds which would otherwise have gone to pay for CIP
expenditures in the even year will be placed in the CIP reserve, to be used in the following year
when the CIP expense occurs. Therefore, staff is requesting a $6 million transfer from the
Operations Reserve to the CIP reserve in FY 2020.
Over the longer term, gas commodity costs are the most variable factor in customer gas bills,
being subject to market forces, and are currently projected to grow by about 4 percent per
year. Increases to Operations costs are projected to be 3 to 4 percent annually, although there
is a near term increase in cost to pay for phase two of a cross-bore safety verification program.
During trenchless installation, a natural gas pipeline can cross through a segment of lateral via
boring. The project will be to video inspect, determine and repair any unintended conflicts
between natural gas service pipelines and sanitary sewer laterals. Phase two of this program is
estimated to require $1 million per year for the next three years.
Figures 1 below illustrates the projected long run changes in the Gas Utility’s costs. Cost
increases over the FY 2016 to FY 2024 time period are mainly from Commodity costs, followed
by Operations and Capital.
Figure 1: FY 2016, FY 2019 and FY 2024 costs
Page 9 of 11
* Note that FY 2024 Capital Investment cost is displayed as an average of two years cost,
as FY 2023 has an $11 million main replacement project while FY 2024 does not.
Gas usage was trending downward over the last several years, most likely due to relatively
warm winter heating seasons, as well as lower hot water usage during the drought, but a cooler
winter and the end of drought restrictions has brought increased usage. Gas usage has nearly
recovered to levels seen back in 2013, but as with water, it is difficult to determine whether or
when long run usage will resume the declining trend seen over the last few decades.
Changes from Preliminary Financial Forecast
After presenting the preliminary financial forecast to the UAC on February 6, 2019, staff update
its CIP plan as described above, based upon both projected system needs and current staffing
capacity. The impact on rates was that the preliminary projection of a 15 percent distribution
rate increase for FY 2020 (a 10 percent overall bill impact) was reduced to 8 percent (a 5
percent overall bill impact).
Gas Bill Comparison with Surrounding Cities
Table 6 presents winter and summer residential bills for Palo Alto and PG&E at several usage
levels for commodity rates in effect as of July 2018 (to illustrate a summer month bill) and
February 2019 (to illustrate a winter month bill). The annual gas bill for the median residential
customer for calendar year 2018 was $469.94, about 14 percent lower than the annual bill for a
PG&E customer with the same consumption. PG&E’s distribution rates for gas have increased
substantially to collect for needed system improvements for pipeline safety and maintenance.
Page 10 of 11
The bill calculations for PG&E customers are based on PG&E Climate Zone X, an area which
includes the surrounding communities.
Table 6: Residential Monthly Natural Gas Bill Comparison ($/month)
Season
Usage
(therms) Palo Alto PG&E Zone X
%
Difference
Winter
(February 2019)
30 39.55 46.31 -14.6%
(Median) 54 62,43 83.49 -25.2%
80 100.93 139.13 -27.5%
150 207.64 288.94 -28.1%
Summer
(July 2018)
10 $ 20.04 12.48 63.4%
(Median) 18 27.32 24.56 13.8%
30 43.96 46.26 -3.6%
45 66.17 73.38 -8.3%
Table 7 shows the monthly gas bills for commercial customers for various usage levels for rates
in effect as of February 2019. Bills for CPAU customers at the usage levels shown are around 3
percent lower to 12 percent higher for commercial customers than for PG&E customers. This is
a substantial improvement over the calendar year 2013 bill comparison, when commercial gas
bills for CPAU customers were 27 to 44 percent higher than for PG&E customers. This is
primarily attributable to PG&E’s increased distribution rates as the commodity rates for CPAU
and PG&E are very similar, both being based on spot market gas prices.
Table 7: Commercial Monthly Average Gas Bill Comparison
(for Rates in Effect February 2018)
Usage (therms/mo)
Gas Bill ($/month) %
Difference Palo Alto PG&E
500 657 681 -3%
5,000 5,823 6,257 -1%
10,000 11,563 11,139 4%
50,000 57,374 51,414 12%
NEXT STEPS
The Finance Committee is scheduled to review the FY 2020 Gas Financial Plan in May 2019. The
City Council will consider adopting the Financial Plan and rate amendments as part of the FY
2020 budget review and adoption process. If Council approves the proposed rate changes, they
will become effective July 1, 2019.
RESOURCE IMPACT
Normal year sales revenues for the Gas Utility are projected to increase by roughly 4 percent
($1.2 million) as a result of the proposed rate increases, not including fluctuations in
commodity revenue/cost. The FY 2020 Budget is being developed concurrent with these rates
and, depending on the final rates, adjustments to the budget may be necessary at a later time.
and, depending on the final rates, adjustments to the budget may be necessary at a later time.
See the attached FY 2020 Gas Financial Plan for a more comprehensive overview of projected
cost and revenue changes for the next five years.
POLICY IMPLICATIONS
The proposed gas rate adjustments ar.e consistent with Council-adopted Reserve Management
Practices that are part of the Financial Plan, and were developed using a cost of service study
and methodology consistent with industry-accepted cost of service principles.
ENVIRONMENTAL REVIEW
The UAC's review and recommendation to Council on the FY 2020 Gas Financial Plan and rate
adjustments does not meet the California Environmental Quality Act's definition of a project,
pursuant to Public Resources Code Section 21065, thus no environmental review is required.
ATTACHMENTS
A. Resolution of the Council of the City of Palo Alto Approving the FY 2020 Gas Utility
Financial Plan and Proposed Transfers
B. Proposed FY 2020 Gas Utility Financial Plan
C. Resolution of the Council of the City of Palo Alto Adopting a Gas Rate Increase and
Amending Rate Schedules G-1, G-2, G-3, and G-10
D. Amended Rate Schedules G-1, G-2, G-3, and G-10 (proposed changes shown in in
redline/strikeout)
PREPARED BY:
REVIEWED BY:·
APPROVED BY:
ERIC KENISTON, Senior Resource Planner (~ ?· "JL---
JONATHAN ABENDSCHEIN, Assistant Director, Resource Managementfl
:D~e~
DEAN BATCHELOR
Interim General Manager of Utilities
Page 11 of 11
Attachment A
* NOT YET APPROVED *
MM001
Resolution No. _________
Resolution of the Council of the City of Palo Alto Approving the
FY 2019 Gas Utility Financial Plan
R E C I T A L S
A. Each year the City of Palo Alto (“City”) regularly assesses the financial position of
its utilities with the goal of ensuring adequate revenue to fund operations. This includes
making long-term projections of market conditions, the physical condition of the system, and
other factors that could affect utility costs, and setting rates adequate to recover these costs. It
does this with the goal of providing safe, reliable, and sustainable utility services at competitive
rates. The City adopts Financial Plans to summarize these projections.
B. The City uses reserves to protect against contingencies and to manage other
aspects of its operations, and regularly assesses the adequacy of these reserves and the
management practices governing their operation. The status of utility reserves and their
management practices are included in Reserves Management Practices attached to and made
part of the Financial Plans.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council hereby adopts the FY 2020 Gas Utility Financial Plan.
SECTION 2. The Council hereby approves the transfer of up to $6.3 Million from the
Rate Stabilization Reserve to the Operations Reserve, and up $6 Million from the Operations
Reserve to the CIP Reserve, as described in the FY 2020 Gas Utility Financial Plan approved via
this resolution.
//
//
//
//
//
//
//
//
//
Attachment A
* NOT YET APPROVED *
MM001
//
//
SECTION 3. The Council finds that the adoption of this resolution does not meet the
California Environmental Quality Act’s (CEQA) definition of a project under Public Resources
Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative
governmental activity which will not cause a direct or indirect physical change in the
environment, and therefore, no environmental assessment is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
Assistant City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative Services
Attachment B
Proposed FY 2020 Gas Utility Financial Plan
Due to the Size of the Report, it has been uploaded to the web.
Follow the Link Below:
https://cityofpaloalto.org/civicax/filebank/blobdload.aspx?BlobID=70902
Attachment C
* NOT YET APPROVED *
MM002
Resolution No. _________
Resolution of the Council of the City of Palo Alto Increasing Gas Rates
by Amending Rate Schedules G-1 (Residential Gas Service), G-2
(Residential Master-Metered and Commercial Gas Service), G-3
(Large Commercial Gas Service), and G-10 (Compressed Natural Gas
Service Service)
R E C I T A L S
A. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of
the City of Palo Alto may by resolution adopt rules and regulations governing utility services,
fees and charges.
B. On ____, 2019, the City Council heard and approved the proposed rate increase
at a noticed public hearing.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-1 (Residential Gas Service) is hereby amended to read as attached and
incorporated. Utility Rate Schedule G-1, as amended, shall become effective July 1, 2019.
SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-2 (Residential Master-Metered and Commercial Gas Service) is hereby
amended to read as attached and incorporated. Utility Rate Schedule G-2, as amended, shall
become effective July 1, 2019.
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-3 (Large Commercial Gas Service) is hereby amended to read as attached and
incorporated. Utility Rate Schedule G-3, as amended, shall become effective July 1, 2019.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-10 (Compressed Natural Gas Service Service) is hereby amended to read as
attached and incorporated. Utility Rate Schedule G-10, as amended, shall become effective
July 1, 2019.
SECTION 5. The City Council finds as follows:
a. Revenues derived from the gas rates approved by this resolution do not exceed the
funds required to provide gas service.
b. Revenues derived from the gas rates approved by this resolution shall not be used
for any purpose other than providing gas service, and the purposes set forth in
Article VII, Section 2, of the Charter of the City of Palo Alto.
Attachment C
* NOT YET APPROVED *
MM002
SECTION 6. The Council finds that the fees and charges adopted by this resolution are
charges imposed for a specific government service or product provided directly to the payor
that are not provided to those not charged, and do not exceed the reasonable costs to the City
of providing the service or product.
SECTION 7. The Council finds that the adoption of this resolution changing gas rates
to meet operating expenses, purchase supplies and materials, meet financial reserve needs and
obtain funds for capital improvements necessary to maintain service is not subject to the
California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec.
21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing
the staff report and all attachments presented to Council, the Council incorporates these
documents herein and finds that sufficient evidence has been presented setting forth with
specificity the basis for this claim of CEQA exemption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
Assistant City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative Services
Attachment D
Due to there being multiple attachments to this item they have been linked to the web.
Follow the link(s) below:
Attachment D-1: Residential Gas Services Rate G-1
Attachment D-2: Residential Master-Metered Rate G-2
and Commercial Gas Service
Attachment D-3: Large Commercial Gas Service Rate G-3
Attachment D-4: Compressed Natural Gas Service Rate G-10
TO:
FROM:
DATE:
MEMORANDUM
UTILITIES ADVISORY COMMISSION
UTILITIES DEPARTMENT
MAY 1, 2019
3
SUBJECT: Staff Recommendation that the Utilities Advisory Commission Recommend
that the City Council Adopt the Proposed Operating and Capital Budgets for
the Utilities Department for Fiscal Year 2020
Attached are the FY 2020 Proposed Operating and Capital budgets for the Utilities Department.
Due to the size of the CIP budget, staff only printed the summary pages of each utility for
FY 2020-FY 2024.
The entire Utilities CIP budget for FY 2020 -FY 2024 with the individual project pages can be
downloaded and viewed in full from the link:
Utilities Proposed Capital Budget for FY 2020 -FY 2024
ATIACHMENTS
A. FY 2020 Proposed Operating Budget for Utilities
B. FY 2020 Proposed Capital Budget Summary for Utilities
PREPARED BY:
DEPARTMENT HEAD:
ANNA VUONG, Senior Business Analys1°'\J·
DAVE YUAN, Strategic Business Manager {/ I
Dean Batchelor
Interim General Manager of Utilities
Page 1 of 1
PROPOSED
OPERATING
BUDGET
FISCAL YEAR 2020
Attachment A
• CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET 71
ENTERPRISE FUNDS
Enterprise Funds
ENTERPRISE FUNDS
OVERVIEW
ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET 73
ENTERPRISE FUNDS OVERVIEWOverview
The City of Palo Alto’s Utility and Public Works operations are comprised of the Airport, Elec-
tric, Fiber Optics, Gas, Refuse, Stormwater Management, Wastewater Collection, Wastewater
Treatment, and Water Funds. A financial summary of the funds follows this overview along with
discussion and pertinent information in each fund section.
REVENUES
The total budgeted revenue of the Enterprise Funds for FY 2020 is $388.0 million, which is
$32.9 million or 9.3 percent, higher than FY 2019. This overall increase is largely due to FY 2020
revenues in the Wastewater Treatment Fund expected to increase by approximately $24.1 mil-
lion from FY 2019 as a result of changes to funding sources programmed for FY 2020 - FY 2024
capital improvement expenditures. Utility services with rate increases for FY 2020 include Elec-
tric, Fiber Optics, Gas, Stormwater Management, Wastewater, and Water. Refuse rates will
remain the same for FY 2020. Details on these changes are discussed below.
EXPENDITURES
The total budgeted expenditure of the Enterprise Funds for FY 2020 is $ 423.4 million, which is
$31 million, or 7.9 percent higher than FY 2019. The primary driver for this year over year change
is the rising costs for commodities, capital improvement projects, and maintaining or updating
the infrastructure.
UTILITY RATE CHANGES
FY 2020 Budget includes utility rate adjustments for Electric, Gas, Stormwater Management,
Wastewater Collection, and Water charges. The average monthly residential utility bill is
expected to increase by 5 percent or $15.65 from $312.15 to $327.80.
In general, the size and timing of rate adjustments take into account current and future revenue
requirements, capital projects and reserve levels. They may also smooth the impacts on cus-
tomer bills by spreading rate adjustments during consecutive or alternate years.
Q Electric Fund - Scheduled rate increase is 8.0 percent overall to fund rising transmission
costs, new renewable projects coming online, reduction in customer usage, and substantial
capital investment and replacement in the electric distribution system.
Q Gas Fund - Scheduled rate increase is 5.0 percent due to increasing construction costs for
gas main replacements and the Crossbore Safety Program.
ENTERPRISE FUNDS OVERVIEW
74 ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET
Q Water Fund - Scheduled rate increase is up to 1.0 percent due to rising capital costs for
water main replacements and seismic improvements for reservoirs.
Q Wastewater Collection Fund - Scheduled rate increase is 7.0 percent due to significant
increase in wastewater collection system capital project costs, as well as increases in
treatment costs due to rehabilitation of the aging Regional Water Quality Control Plant.
Q Fiber Optics Fund - Scheduled rate increase is 4.5 percent, based on Consumer Price Index
(CPI) for All Urban Consumers in the San Francisco Bay Area, for customers on the EDF-1
rate.
Q Stormwater Management Fund - Scheduled rate increase of 4.5 percent, or $0.63 per
Equivalent Residential Unit (ERU) per month based on CPI for All Urban Consumers in the
San Francisco Bay Area.
Q Refuse Fund - No rate adjustment is scheduled for FY 2020.
RENT
Enterprise Funds pay market-based rental fees for the sites needed to conduct their business
operations. The rent paid for City-owned sites was adjusted at an annual CPI increase of 3.9 per-
cent. As a result, the rents and leases category for FY 2020 will increase by approximately $0.6
million compared to FY 2019.
EQUITY TRANSFERS
In FY 2009, the City Council adopted a change to the methodology, beginning in FY 2010, used
to calculate the equity transfer from Utilities Funds to the General Fund. Under this methodol-
ogy, the equity transfers are based on the asset base in the Electric and Gas Funds, along with
the rate of return for each utility, which is based on Pacific Gas and Electric’s (PG&E) rate of
return on equity as approved by the California Public Utilities Commission (CPUC). For FY 2020,
the equity transfers from the Electric and Gas Funds are projected to increase by approximately
$0.9 million from $19.3 million in the FY 2019 Adopted Budget to $20.2 million.
RESERVES
The financial revenue and expense forecasts are estimates at a single point in time. Some Utili-
ties reserves serve as ’balancing accounts’ which mitigate the risk of commodity price swings
and insure against default by the City’s wholesale suppliers. Other reserves are used to provide
cash for replacement parts during an emergency infrastructure failure or serve as temporary
’parking’ for planned expenditures. Reserve levels that are above guidelines are returned to cus-
tomers in the form of lower future rates or used to pay for expenses, which also result in lower
future rates.
Based on a new practice established in FY 2016, the reappropriation of capital budgets for con-
tinuing projects previously approved and appropriated by the City Council in prior fiscal years is
shown as expenditures in the operating budget for each Enterprise Fund. The inclusion of these
costs impacts the fund balance of the respective Enterprise Fund.
Based on the actions included in this budget, the total Enterprise Fund Reserve Balances are
estimated to decrease by $35.3 million from FY 2019 to FY 2020.
ENTERPRISE FUNDS OVERVIEW
ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET 75
UTILITIES ENTERPRISE FUNDS
The City of Palo Alto Utilities (CPAU) had to rely on its reserves more heavily over the past few
years to offset rate increases. In order for CPAU to cover its operating costs while maintaining
and continuing to provide safe and reliable utility services to customers, rate increases are pro-
jected beyond FY 2020. Rate increases will ensure CPAU has the ability to replenish depleted
reserves and provide sufficient funding for continued increasing expenses in commodity costs
and repair and replacement of the City’s aging utility infrastructure through various capital proj-
ects. Rate increases are described below are the general rate increases; the impact on Residen-
tial Bills, as seen at the end of this section, will vary depending on the commodity.
Electric
FY 2020 electric rates are scheduled to increase by 8.0 percent overall to recover costs for
increasing transmission costs, new renewable projects coming online, and substantial additional
capital investment in the electric distribution system. Electricity purchase costs have increased
substantially since FY 2013 as new renewable projects have come online to fulfill the City’s envi-
ronmental goals and as transmission costs have increased due to improvements being made to
the California grid. Projected capital expenses for FY 2020 through FY 2024 are higher in FY
2020 through FY 2021 due to relocation of overhead lines for Caltrain, completion of 4kV to
12kV conversion projects, the unexpected replacement of transformer 2 at Colorado Power Sta-
tion, as well as anticipated Advanced Metering Infrastructure (AMI) and smart grid implementa-
tion. Once these larger, one-time project cost increases are completed, annual Capital
Improvement Program (CIP) projects are anticipated to decline back to levels seen in recent
years. The forecast also assumes that smart grid costs are funded from the Electric Special Proj-
ects Reserves.
Gas
FY 2020 gas rates are scheduled to increase by 5.0 percent due to increasing capital and oper-
ation costs. Gas Utility expenses are projected to increase by roughly 9.0 to 7.0 percent annually
from FY 2020 to FY 2022 and 3.0 to 1.0 percent annually from FY 2023 through FY 2024. In the
short term, some increases in operations costs are related to the cross-bore inspection pro-
gram, but CIP costs have increased substantially as the economy has improved. Future CIP proj-
ect costs have been revised upwards from prior forecasts to reflect higher bids on gas CIP
projects. Commodity costs are the most volatile component of the Gas Utility’s expenses, and
recent market prices have been increasing steadily as supplies have become tighter and
demand has decreased and current forecasts project cost increases of around 4.0 percent
annually.
Water
FY 2020 water rates are scheduled to increase by 1.0 percent due to increasing capitals costs.
The main driver for the increase over the next several years is the large one-time capital costs in
FY 2020 through FY 2024 related to reservoir rehabilitation and additional costs required to
switch water meters to be read automatically with AMI.
ENTERPRISE FUNDS OVERVIEW
76 ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET
Wastewater Collection
FY 2020 wastewater collection rates are scheduled to increase by 7.0 percent. Capital and oper-
ating costs are anticipated to increase for the wastewater collection system. In addition, CPAU
anticipates treatment costs to rise over the forecast period due to increasing operating costs
and capital replacement needs at the Regional Water Quality Control Plant. As a result, pro-
jected rate increases range from 6.0 to 8.0 percent annually through FY 2024 and 3.0 to 4.0
percent annually for FY 2025 and beyond.
Fiber Optics
Fiber optics rates are scheduled to increase by 4.5 percent for customers on the EDF-1 rate
schedule in FY 2020. CPAU provides commercial dark fiber optic services within the boundaries
of the City. In September 2006, the City Council approved the Dark Fiber Licensing Agreement
allowing the commercial fiber optic fees charged under the EDF-1 and EDF-2 rate schedules to
be adjusted annually in accordance with CPI. EDF-1 was a promotional rate and was closed to
new Dark Fiber licenses in 2006. Customer expenses for engineering, construction and connec-
tion to the fiber optic backbone are charged under the EDF-2 rates. New fiber customers are
enrolled under the Dark Fiber Licensing Services Rate Schedule EDF-3. As CPI increases are
implemented for the EDF-1 rate, some customers may voluntarily choose to move from the
EDF-1 rate to the EDF-3 rate for cost saving purposes.
PUBLIC WORKS ENTERPRISE FUNDS
Refuse
FY 2020 refuse rates remain unchanged. FY 2021 rates are projected to increase at a rate based
on CPI, which is the end date for two Refuse Fund related agreements for waste processing and
disposal. The 2018 Zero Waste Plan was accepted by City Council which includes initiatives that
will help the City continue making progress on its Zero Waste goals to divert 90.0 percent or
more waste from landfills by 2021 and 95.0 percent by 2030.
Stormwater Management
FY 2020 Stormwater Management fee is scheduled to increase by 4.5 percent. The Stormwater
Management fee was approved by property owners through a ballot measure in April 2017. The
projects and infrastructure component of this fee has a sunset date of June 1, 2032 unless
extended through a subsequent ballot measure. The Stormwater Management fund maintains
activities that ensure adequate local drainage of the City’s storm drainage system. This fund
also provides litter reduction, urban pollution prevention programs, and flooding emergency
response services with the goals of reducing stormwater runoff and maintaining stormwater
quality protection for discharge to creeks and the San Francisco Bay.
Wastewater Treatment
The City’s Regional Water Quality Control Plant serves six communities including Palo Alto, East
Palo Alto, Mountain View, Stanford, Los Altos, and Los Altos Hills. The Wastewater Treatment
Fund works with the City and Partner Cities’ regional service area to protect the environment
and the public’s health while ensuring compliance with regulations protecting the San Francisco
Bay and the environment. FY 2020 revenues in the Wastewater Treatment Fund are expected to
increase by approximately $24.1 million or 69.8 percent compared to FY 2019. The majority of
ENTERPRISE FUNDS OVERVIEW
ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET 77
the increase resulted from changes to funding sources programmed for FY 2020 - FY 2024
capital improvement expenditures. The construction of the Dewatering and Loadout Facility
was completed in FY 2019, the incinerators are pending for retirement. The net result of this
change will increase operating expenses for utilities and contract services.
Airport
The City assumed airport operations from Santa Clara County in August 2014 for the Palo Alto
Airport, which ranks among the busiest general aviation airports in the country. Under previous
terms, the County exercised the right to sublease to Fixed Base Operators (FBOs) with agree-
ments that expired in April 2017 and the City worked on signing new lease agreements. As a
result of new lease agreements signed, Airport Fund revenues from rentals are projected to
increase to a total of $778,000 in FY 2020. The Airport’s fees and charges are scheduled to
increase by 4.5 percent. Expenses are also projected to increase due to major construction proj-
ects that incur costs which are 90.0 percent offset by grants from the Federal Aviation Admin-
istration. To ensure sufficient funding for operating costs and continued services with minimal
service delivery impact, the Airport Fund has received loans from the General Fund, totaling $3.1
million as of FY 2019 since the City took over operations. The Airport Fund will begin repayment
to the General Fund in FY 2020 in the amount of $272,000 annually for the next fifteen years.
ENTERPRISE FUNDS OVERVIEW
78 ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET
Enterprise Funds Summary
Fund Summary
($000)
Electric
Fund
Gas
Fund
Water
Fund
Refuse
Fund
Wastewater
Treatment
Fund
Wastewater
Collection
Fund
Stormwater
Management
Fund
Airport
Fund
Fiber
Optics
Fund Total
Revenues
Charges for
Services 380 20 10 34 —10 118 ——572
Charges to Other
Funds 140 101 83 161 54 32 ———569
From Other
Agencies ——577 ——————577
Net Sales 154,329 37,279 46,831 30,662 30,661 21,106 7,449 655 4,595 333,567
Operating
Transfers-In 2,616 —548 ——————3,164
Other Revenue 8,928 1,124 384 2,311 27,409 1,083 —1,009 200 42,448
Other Taxes and
Fines ————4 —3 ——7
Rental Income ———————778 —778
Return on
Investments 2,158 802 1,153 518 389 298 226 21 750 6,315
Total 168,550 39,326 49,586 33,685 58,517 22,528 7,795 2,463 5,544 387,995
Expenses
Allocated Charges 9,228 4,453 4,716 1,863 5,594 2,723 1,059 670 671 30,978
Contract Services 7,615 2,463 819 6,356 3,739 249 908 141 455 22,744
Debt Service 8,477 803 3,223 196 1,469 129 949 ——15,245
Equity Transfer 13,129 7,106 ———————20,235
Facilities &
Equipment 64 19 17 3 8 13 8 —2 133
General Expense 3,442 763 658 112 389 123 146 36 12 5,682
Operating
Transfers-Out —410 136 55 156 274 37 281 102 1,452
Rents & Leases 6,277 852 3,145 2,161 —480 50 12 82 13,058
Salary & Benefits 16,887 7,282 7,864 3,028 13,728 3,127 2,187 905 1,390 56,398
Supplies &
Material 924 489 611 143 2,070 381 95 56 9 4,777
Transfer to
Infrastructure ———73 —————73
Utility Purchase 95,678 16,012 22,178 24,611 —11,234 ———169,713
Capital
Improvement
Program
20,484 3,743 15,946 —28,437 7,965 4,506 346 1,525 82,953
Total 182,205 44,395 59,312 38,601 55,589 26,698 9,945 2,447 4,250 423,441
ENTERPRISE FUNDS OVERVIEW
ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET 79
Electric Fund $168.6/43.4%
Gas Fund $39.3/10.1%
Water Fund $49.6/12.8
Refuse Fund $33.7/8.7%
WW Treatment Fund $58.5/15.1%
WW Collection Fund $22.5/5.8%
Stormwater Management
Fund $7.8/2%
Airport Fund $2.5/0.6%
Fiber Optics Fund $5.5/1.4%
FY 2020 PROPOSED REVENUES/$388.0 MILLION
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
Electric Fund Gas Fund Water Fund Refuse Fund WW
Treatment
Fund
WW
Collection
Fund
Stormwater
Management
Fund
Airport Fund Fiber Optics
Fund
3 YEAR TREND -ENTERPRISE FUNDS REVENUES BY FUND ($THOUSANDS)
FY 2018 Actuals FY 2019 Adopted FY 2020 Proposed
ENTERPRISE FUNDS OVERVIEW
80 ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
Electric Fund Gas Fund Water Fund Refuse Fund WW
Treatment
Fund
WW
Collection
Fund
Stormwater
Management
Fund
Airport Fund Fiber Optics
Fund
3 YEAR TREND -ENTERPRISE FUNDS EXPENSES BY FUND ($THOUSANDS)
FY 2018 Actuals FY 2019 Adopted FY 2020 Proposed
Electric Fund
$182.2/43%
Gas Fund $44.4/10.5%
Water Fund $59.3/14%
Refuse Fund
$38.6/9.1%
WW Treatment Fund
$55.6/13.1%WW Collection Fund
$26.7/6.3%
Stormwater
Management Fund
$9.9/2.3%
Airport Fund $2.4/0.6%
Fiber Optics Fund
$4.3/1%
FY 2020 PROPOSED EXPENSES /$423.4 MILLION
ENTERPRISE FUNDS OVERVIEW
ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET 81
Enterprise Fund Reserves
Reserves ($000)
FY 2019
Projected Ending
Balance FY 2020 Changes
FY 2020
Projected Ending
Balance
FY 2020 Reserve
Guideline Range
Electric Fund
Rate Stabilization ---
Operations 37,969 (13,655)24,314 26,583 - 49,586
Hydro Stabilization 7,400 -7,400
Electric Special Projects 41,838 -41,838
Public Benefit ---
Underground Loan 730 -730
CIP Reserves 880 -880
GASB 68 Pension Reserve (29,511)-(29,511)
GASB 75 OPEB reserve (14,168)-(14,168)
Subtotal 45,138 (13,655)31,483
Gas Fund
Rate Stabilization 6,363 (6,363)-
Operations 7,381 1,294 8,675 6,062 - 12,124
CIP Reserves 3,820 6,000 9,820
GASB 68 Pension Reserve (13,277)-(13,277)
GASB 75 OPEB reserve (6,235)-(6,235)
Subtotal (1,948)(5,069)(7,017)
Wastewater Collection Fund
Rate Stabilization ---
Operations 7,353 (3,192)4,161 2,904 - 7,260
CIP Reserves 978 (978)-
GASB 68 Pension Reserve (7,449)-(7,449)
GASB 75 OPEB reserve (2,384)-(2,384)
Subtotal (1,502)(4,170)(5,672)
ENTERPRISE FUNDS OVERVIEW
82 ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET
Water Fund
Rate Stabilization 4,069 -4,069
Operations 36,574 (9,726)26,848 7,045 - 14,119
CIP Reserves 2,726 -2,726
GASB 68 Pension Reserve (12,455)-(12,455)
GASB 75 OPEB reserve (4,350)-(4,350)
Subtotal 26,564 (9,726)16,838
Refuse Fund
Rate Stabilization 16,891 (4,919)11,972 6,292 - 12,584
Landfill Corrective Action Reserve 741 3 744
CIP Reserves 268 -268
GASB 68 Pension Reserve (5,114)-(5,114)
GASB 75 OPEB reserve (2,653)-(2,653)
Subtotal 10,133 (4,916)5,217
Stormwater Management Fund
Rate Stabilization 2,412 (2,150)262
CIP Reserves ---
GASB 68 Pension Reserve (3,189)-(3,189)
GASB 75 OPEB reserve (1,158)-(1,158)
Subtotal (1,935)(2,150)(4,085)
Wastewater Treatment Fund
Rate Stabilization (10,123)2,928 (7,195)4,196 - 8,392
Emergency Plant Replacement 1,980 -1,980
Notes and loans 559 -559
CIP Reserves ---
GASB 68 Pension Reserve (18,584)-(18,584)
GASB 75 OPEB reserve (7,340)-(7,340)
Subtotal (33,508)2,928 (30,580)
Enterprise Fund Reserves
Reserves ($000)
FY 2019
Projected Ending
Balance FY 2020 Changes
FY 2020
Projected Ending
Balance
FY 2020 Reserve
Guideline Range
ENTERPRISE FUNDS OVERVIEW
ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET 83
Fiber Optics Fund
Rate Stabilization 30,626 1,294 31,920 431 - 862
Emergency Plant Replacement 1,000 -1,000
CIP Reserves ---
GASB 68 Pension Reserve (1,855)-(1,855)
GASB 75 OPEB reserve ---
Subtotal 29,771 1,294 31,065
Airport Fund
Rate Stabilization (2,597)16 (2,581)
CIP Reserves ---
GASB 68 Pension Reserve (493)-(493)
GASB 75 OPEB reserve (431)-(431)
Subtotal (3,521)16 (3,505)
TOTAL RESERVES 69,192 (35,448)33,744
Summary of Reserves
Emergency Plant Replacement 2,980 -2,980
Hydro Stabilization 7,400 -7,400
Rate Stabilization 47,641 (9,194)38,447
Operations 89,277 (25,279)63,998
CIP Reserves 8,672 (978)7,694
Electric Special Projects 41,838 -41,838
Public Benefit ---
Notes and loans 559 -559
Underground Loan 730 -730
Landfill Corrective Action Reserve 741 3 744
GASB 68 Pension Reserve (91,927)-(91,927)
GASB 75 OPEB reserve (38,719)-(38,719)
TOTAL RESERVES 69,192 (35,448)33,744
Landfill Postclosure Care Liability 6,825 150 6,975
TOTAL RESERVES AND FULLY-
FUNDED LIABILITY 76,017 (35,298)40,719
Enterprise Fund Reserves
Reserves ($000)
FY 2019
Projected Ending
Balance FY 2020 Changes
FY 2020
Projected Ending
Balance
FY 2020 Reserve
Guideline Range
ENTERPRISE FUNDS OVERVIEW
84 ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED BUDGET
Residential Monthly Utility Cost Information
Utility
Adjusted FY 2019
Bill FY 2020 Bill1 $ Difference % Difference
Electric $54.33 $57.31 $2.98 5.48%
Gas $58.48 $63.39 $4.91 8.40%
Water $86.59 $90.42 $3.83 4.42%
Wastewater $38.66 $41.37 $2.71 7.01%
Refuse $50.07 $50.07 --
Storm Drain $14.05 $14.68 $0.63 4.48%
User Tax $9.97 $10.56 $0.59 5.92%
Total Monthly Bill $312.15 $327.80 $15.65 5.01%
1. FY 2020 Rates are effective July 1, 2019.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 383
UTILITIESMission Statement
The City of Palo Alto Utilities’ mission is
to provide safe, reliable,
environmentally sustainable, and cost-
effective services.
Purpose
The purpose of the City of Palo Alto Utili-
ties is to provide high quality, cost-effec-
tive electric, gas, fiber optics, water and
wastewater collection services;
promote effective energy and water effi-
ciency programs; proactively manage
infrastructure needs and replace deterio-
rated or aging facilities with new technolo-
gies to ensure safe and reliable delivery of
services; and ensure the City’s utilities are
in sound financial condition.
UTILITIES
384 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
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UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 385
Description
Palo Alto is the only city in California that offers a full array of utility
services to its citizens and businesses. Because of this, the City has a
unique opportunity to partner with the Palo Alto community to enjoy the
benefits and achievements of reliable, home-grown, and
environmentally-focused utilities. Palo Alto has a tradition of over 100
years of successful public utility operations. It is a tradition that
continues to provide the Palo Alto community with safe and reliable
utilities service, local decision-making over policies, utility rate-making,
environmental programs, and customized services.
The City of Palo Alto Utilities (CPAU) continues to focus on customer
service, infrastructure reliability, regulatory compliance, and cost
containment. CPAU also supports the City’s sustainability goals by
building a low-carbon energy supply through the use of renewable
energy and offsets and by promoting programs to help customers use
energy and water more efficiently, reduce their carbon footprint, and
help them integrate new technologies.
At CPAU, our people empower tomorrow’s ambitions while caring for
today’s needs. We make this possible with our outstanding professional
workforce, leading through collaboration, and optimizing resources to
ensure a sustainable and resilient Palo Alto.
ADMINISTRATION
Utilities Administration is responsible for the overall management of the CPAU including com-
munication, regulatory compliance, strategic planning, budget coordination, legislation and reg-
ulatory policy analysis, and personnel and administrative support to the entire Department.
CUSTOMER SUPPORT SERVICES
This group annually bills $250 million for the City’s electric, natural gas, water, commercial fiber
optic, wastewater collection (operated by CPAU), storm drain, and refuse (operated by Public
Works) services; operates the Customer Service Call Center with 75,000 annual customer inter-
actions; reads 90,000 utility meters per month; and implements Credit and Collection policies
and financial assistance programs.
UTILITIES
386 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
ENGINEERING
Engineering is responsible for managing all phases of CPAU’s capital improvement projects
including providing new or upgrading existing service to customers and replacing and rehabili-
tating the City’s electric, fiber, water, gas, and wastewater distribution systems.
OPERATIONS
Utilities Operations is responsible for the operations, maintenance, and emergency response for
the electric, fiber, water, gas, and wastewater distribution systems.
RESOURCE MANAGEMENT
Resource Management is responsible for the long-term resource acquisition plan, including
electricity, natural gas, and water; contract negotiations to acquire renewable resources; finan-
cial planning; rate development; energy efficiency and water conservation programs; and man-
agement of key accounts.
Accomplishments
Q Completed the Upgrade Downtown project in collaboration with Public Works and
Transportation, including utility pipe replacements, road repaving, and traffic signal
enhancements.
Q Received Council approval for the Utilities Smart Grid Assessment and Utilities Technology
Implementation Plan, which lays out a roadmap for Advanced Metering Infrastructure and
other major software projects including the Utilities customer information and billing system
replacement.
Q Positioned in first place for the number of solar contracts and electric vehicle sign-ups in the
Bay Area SunShares program, a regional solar group-buy program.
Q Launched new Electric Vehicle Charging Station rebate program for schools, apartment
complexes, and non-profit buildings with common area charging accommodations.
Q Collaborated with Public Works and Santa Clara Valley Water District to begin the Recycled
Water Strategic Plan, a comprehensive evaluation of all potential recycled water supply
options including non-potable and potable reuse options.
Q Completed construction of a Sanitary Sewer Replacement Project for the Jr. Museum and
Zoo (JMZ).
Q Received the Tree Line USA Award for the fifth year in a row by the National Arbor Day
Foundation for delivering safe and reliable electricity while maintaining healthy community
trees.
Q Won Voice of the People Award for Excellence in the Natural Environment, from the
National Research Center and International City/County Management Association (ICMA)
Q Received the Diamond Level Award as a Public Power Provider - the highest honor - for
proficiency, sound business practices, and a utility-wide commitment to safe and reliable
delivery of electricity, system improvement, energy efficiency and workforce development,
from the American Public Power Association (APPA).
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 387
Q Launched the new Utilities customer engagement portal to provide customers additional
24/7 self-services and customer information to better manage their consumption and
choices.
Initiatives
Q Continue to implement the 2018 Utilities Strategic Plan to focus resources towards meeting
priority initiatives related to workforce, technology, collaboration, financial efficiency, and
resource optimization.
Q Develop and issue a request for proposal for Advanced Metering Infrastructure (AMI)/Meter
Data Management System (MDM) functional and system requirements.
Q Integrate new Geographical Information System (GIS) to ensure accurate infrastructure
information for customer service and infrastructure improvements.
Q Conduct a comprehensive utility meter survey for 75,000 electric, gas, and water meters in
the field in preparation of new AMI, GIS and utility billing systems.
Q Explore a partnership with VMware to develop a microgrid at its campus which could
provide a charging site for the City’s emergency command vehicles during major
emergencies.
Q Implement the Distributed Energy Resources plan to ensure local generation (e.g. solar),
storage, electric vehicles (EVs), and controllable loads (like heat pump water heaters) are
integrated into the distribution system in a way that benefits both the customer and the
broader community and support City’s efforts to meet greenhouse gas reduction goals.
Q Expand the fiber network to support AMI and internal wireless communication networks
and enhance infrastructure resiliency.
Q Develop a near and long term succession planning strategy including professional
development, recruitment, and market-based compensation.
Q Engage in community outreach to identify what aspects of resiliency are important to the
community for each utility to support development of a resiliency work plan.
Q Collaborate with Public Works and Santa Clara Valley Water District to complete the
Recycled Water Strategic Plan, a comprehensive evaluation of all potential recycled water
supply options including non-potable and potable reuse options.
Q Develop and launch new energy and water efficiency programs and services for customers
to adopt energy and water saving measures, reduce their utility bills, and improve
sustainability.
UTILITIES
388 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Key Performance Measures
COMPARABLE AND COST-EFFECTIVE SERVICES
Goal Ensure fiscally sound and cost-effective services.
Objective Reduce the cost of delivering services through best management practices.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Palo Alto's average residential
monthly utility bill above/below the
median of neighboring cities
(10.40)%(8.25)%(14.00)%(12.00)%(12.00)%
Description
This compares the average residential monthly utility bill which includes electricity,
gas, water, and wastewater services to the nearby communities (Santa Clara
$188.66, Hayward $233.38, Los Altos $236.40, Mountain View $242.04,
Redwood City $294.07, and Menlo Park $311.12).
Purpose
This measure compares the City's average utility rates charged to residents to
other comparable cities (e.g., similar size, similar commodity purchase options,
similar geography).
Status
Palo Alto's electric rates are significantly lower than PG&E and slightly higher than
Santa Clara. Natural gas rates are lower than surrounding communities due to
PG&E increasing its distribution rates for capital improvement and maintenance.
Water rates are higher than many neighboring communities primarily because of
differing system characteristics and levels of infrastructure investment, but also
because some communities have different sources of supply. Palo Alto's water
supply comes from the San Francisco Public Utilities Commission, which is in the
middle of a $4.6 billion improvement project, and Palo Alto is investing more than
other areas in improving local distribution pipelines and enhancing emergency
water supply system. Despite fee increases, CPAU rates remain lower than
neighboring cities.
Rates for neighboring cities are not yet available for FY 2020.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 389
Workload Measures
CUSTOMER SATISFACTION
Goal Provide excellent customer service.
Objective
Maintain a high level of customer satisfaction, equal to or greater than 83 percent
of Palo Alto citizens rating satisfaction of utility services as "Excellent" or "Good" in
the National Citizen Survey.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Percent rating services (electric,
gas, wastewater, and water)
"Good" or Excellent"
86.00%84.75%86.00%86.00%86.00%
Description
The National Citizen Survey (NCS) is a collaborative effort between National
Research Center, Inc. (NRC) and the International City/County Management
Association (ICMA). The NCS was developed by NRC to provide a statistically
valid survey of opinions about community and services provided by local
governments. There are ten California communities participating in the survey.
Purpose
To get feedback on whether customers are satisfied with the nature, extent and
delivery of services provided, using random-selection survey processes that
include a good cross-section of the customer base.
Status
Results are statistically weighted to reflect the proper demographic composition
of the entire community. A total of 614 completed surveys were obtained,
providing an overall response rate of 21 percent. Typically, response rates
obtained on citizen surveys range from 25 percent to 40 percent. From FY 2012
to FY 2017, Utilities has met its target of 83 percent and anticipates this
continuing through FY 2019 and FY 2020.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Total cost of Capital Improvement
Program annually (Millions)$20.40 $24.10 $35.40 $35.40 $51.50
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
Dollars by Fund
Electric Fund - Operating 50,350,245 51,443,024 70,081,759 71,470,449 1,388,690 2.0%
Electric Supply 94,096,708 108,624,454 104,723,604 110,734,779 6,011,176 5.7%
Fiber Optics 2,385,108 3,377,476 4,165,484 4,249,641 84,157 2.0%
Gas Fund - Operating 19,025,805 23,120,579 26,851,951 26,179,525 (672,427)(2.5)%
Gas Supply 14,246,460 14,110,302 16,704,380 18,215,277 1,510,897 9.0%
Wastewater Collection - Operating 24,361,592 17,880,581 23,875,272 26,697,743 2,822,471 11.8%
Water Fund - Operating 38,572,014 46,737,022 59,028,147 59,312,068 283,921 0.5%
Total 243,037,932 265,293,438 305,430,596 316,859,482 11,428,885 3.7%
UTILITIES
390 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Revenues
Charges for Services 588,350 459,431 270,000 420,000 150,000 55.6%
Charges to Other Funds 716,165 841,410 504,525 354,717 (149,808)(29.7)%
From Other Agencies 512,301 500,773 576,632 576,632 ——%
Net Sales 229,843,108 248,735,959 246,383,948 264,139,740 17,755,792 7.2%
Operating Transfers-In 2,922,786 3,977,536 4,203,098 3,163,724 (1,039,374)(24.7)%
Other Revenue 9,701,750 9,785,634 11,953,278 11,719,065 (234,213)(2.0)%
Property Taxes 39 —————%
Rental Income 5,000 5,000 ————%
Return on Investments 3,794,136 4,131,918 4,442,200 5,160,700 718,500 16.2%
Total Revenues 248,083,635 268,437,661 268,333,681 285,534,578 17,200,897 6.4%
Positions by Fund
Electric Fund 113.32 111.23 111.33 110.95 (0.38)(0.34)%
Fiber Optics Fund 6.82 7.60 7.60 7.50 (0.10)(1.32)%
Gas Fund 52.55 53.11 53.83 53.83 ——%
Utilities Administration 18.22 19.21 19.21 19.46 0.25 1.30%
Wastewater Collection Fund 29.17 29.00 29.16 29.16 ——%
Water Fund 47.99 47.90 46.92 46.94 0.02 0.04%
Total 268.06 268.05 268.05 267.84 (0.21)(0.08)%
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 391
ELECTRIC FUND
Description
On January 16, 1900, the City of Palo Alto began operation of its own
electric system. A steam engine was the initial source of the City’s
electricity and was replaced by a diesel engine in 1914. As demand for
electricity and the population continued to grow, the City of Palo Alto
Utilities (CPAU) connected to the Pacific Gas and Electric distribution
system and purchased power from additional sources.
The integrity of the infrastructure required for achieving a high level of
reliability and value for customers is of paramount importance to CPAU.
The Electric Fund strives to enhance the customer service connection
experience, increase energy efficiency participation, and increase the
percentage of electric supply obtained from renewable energy supplies.
The City has entered into a number of contracts with producers of wind,
landfill gas, and solar energy for more than 15-year terms.
Accomplishments
Q Completed installation of underground substructure for Underground District 46 near the
intersection of El Camino Real and Arastradero Road.
Q Updated long-term electric supply portfolio strategic document (Electric Integrated
Resource Plan).
Q Adopted a hydroelectric rate adjuster to manage hydroelectric cost variability during
drought seasons.
Q Began operations for all solar projects on parking garages. Added new solar rooftops for
two City garages (Bryant and Webster). Continued work on remaining projects that were
initiated as part of the Palo Alto Clean Local Energy Accessible Now (CLEAN) Programs
(aka Feed-In Tariffs).
Q Completed 1.2 megawatt Solar System at Hewlett Packard campus which will provide about
20% of the facility’s electricity usage.
Q Approval of the advanced metering infrastructure (AMI) plan and technology roadmap to
install advance/smart meters by 2023.
UTILITIES
392 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Q Surveyed residents on new technologies such as electric vehicles, solar, and energy storage.
Results of survey were used to inform planning for these new technologies.
Q Developed a plan (the Distribution System Assessment) for integrating new energy
technologies like electric vehicles, solar, and energy storage into the electric distribution
system.
Q Smoothly transitioned from existing net energy metering (NEM) program to NEM 2.0
successor program as of December 2018.
Q Completed Phase I of the Veterans Affairs Hospital upgrade including relocation of 60kV
equipment.
Q Created online calculator to help residents calculate energy storage when they evaluate
Electric Vehicles (EV) and photovoltaic (PV) solar panels.
Q Increased participation in EV and building decarbonization rebate programs.
Q Completed feeder relay coordination review and testing of relays at nine city substations.
Q Completed phase one of supervisory control and data acquisition (SCADA) cybersecurity
upgrade.
Q Engineered and completed replacement of 65 wood utility poles.
Q Sponsored a successful EV ride and drive event and participated in a successful solar/EV
group buy program.
Q Processed over 600 customer requests for new electric services.
Q Completed the Utilities Control Center room upgrade including new video screens and
consoles.
Initiatives
Q Continue to reduce barriers to building electrification and electric vehicle adoption, build on
existing electrification programs, and evaluate new programs. Begin program to assist multi-
family customers with EV charger installations as a complement to existing rebate program.
Q Complete the installation of the failed 115/60kV transformer and breaker to improve the
electrical fault at City’s main electric receiving station.
Q Effectively advocate with the Federal Government to preserve and enhance value of Federal
hydropower contract in advance of 2020 contract renewal.
Q Continue to assist customers with their energy use and promote efficiency. Launch new
energy efficiency programs and resources for residents and small businesses.
Q Expand effort to lower greenhouse gas emissions through electrification of the
transportation sector such as encouraging adoption of electric vehicles.
Q Implement updated electric supply strategies embodied in Electric Integrated Resource
Plan.
Q Revisit strategy for promoting solar energy. Bring remaining Palo Alto CLEAN projects
online.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 393
Q Continue to offer electric safety education presentations to school and community groups.
Q Continue discussions on building a second transmission line to provide electric service to
Palo Alto.
Q Replace aging substation facilities and increase electric system capacity in the Colorado/
Hopkins/Quarry load areas to meet projected load growth.
Q Improve efficiency of Utility Electric System with installation of power factor correction
capacitor banks.
Q Add new facilities to meet the electric loads proposed by the Veterans Affairs Hospital for
their site upgrades.
Q Relocate/reconstruct City’s electric and communication facilities as necessary to facilitate
the electrification of the Caltrain system.
Q Develop plans to ensure safe operation of the overhead electric system in the western
foothills area.
Goals and Objectives
GOAL 1
Provide safe and reliable delivery of electric services to customers.
Objectives:
Q Develop a plan to complete a second electric transmission line source to improve service
reliability.
Q Establish a proactive infrastructure replacement program based on planned replacement
before failure to support reliability and resiliency.
Q Enhance planned maintenance programs for all utilities through clearly defined
maintenance plans, improved management reporting, and developing innovative ways to
ensure efficient completion of all maintenance.
GOAL 2
Increase environmental sustainability and promote efficient use of resources.
Objectives:
Q Achieve the ten-year goal for electric energy efficiency of 5.7 percent of the electric load by
2027.
Q Accelerate Electric Vehicle (EV) penetration for both Palo Alto-based and inbound vehicles
by providing more charging infrastructure.
Q Expand effort to lower greenhouse gas emissions through electrification of the
transportation sector such as encouraging adoption of electric vehicles.
UTILITIES
394 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Key Performance Measures
ENVIRONMENTAL SUSTAINABILITY
Goal Support environmental sustainability and promote efficient use of resources.
Objective Achieve Renewable Portfolio Standard (RPS) of at least 50 percent by 2030.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Percent of retail electric sales
volume provided by renewable
supply resources under long-term
PPAs
51.00%61.00%58.20%61.00%60.00%
Description This measures the fraction of the City's retail electric sales volume that is provided
by renewable supply resources that are under long-term agreement.
Purpose
The Clean Energy and Pollution Reduction Act (SB 350) of 2015 raised the state’s
renewable portfolio standard (RPS) to 50 percent by 2030 and required a
doubling of energy efficiency savings by 2030.
Status
The City continues to meet both its RPS and carbon neutrality objectives, and has
achieved an RPS level of greater than 60 percent in 2017 – 13 years earlier than it
is required to achieve that level under state law.
SYSTEM RELIABILITY
Goal Provide safe and efficient delivery of electric services to customers.
Objective Provide exceptional system reliability.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Average duration of customer
outages in minutes as reported
using industry guidelines
63.76 87.98 60.00 70.09 60.00
Description
System Average Interruptible Duration Index (SAIDI) is a measure of outage
duration. It measures the number of minutes over the year that the average
customer is without power.
Purpose
Reliability indices were introduced in order to keep track of utility performance.
This information will help Utilities prioritize capital and operating spending so that
reliability can be improved without increasing costs.
Status
The goal to attain 60 minutes or less in overall response time to restore outages
was impacted in FY 2019 due to staffing vacancies and abnormally stormy
weather causing a cluster of outages that resulted in longer response times. The
Electric Utility had 27 sustained outages affecting a range of customers from 48 to
3,365 customers. Of the 27 outages, 19 were storm related and 8 non-storm. The
non-storm outages were contributed to various types of equipment failure
throughout the distribution system.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 395
Workload Measures
ENVIRONMENTAL SUSTAINABILITY - SOLAR
Goal Support environmental sustainability and promote efficient use of resources.
Objective Increase the penetration of local solar installations.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Cumulative installed capacity of
photovoltaic (PV) systems
measured in megawatts (MW)
8.70 11.80 14.90 13.30 14.00
Description
This represents the cumulative installed capacity of PV systems in Palo Alto,
measured in MW. It includes PV systems installed prior to the passage of
California Senate Bill 1 (SB1), which enacted the Million Solar Roofs Initiative and
expands upon the current California Solar Initiative (CSI) and the Energy
Commission's New Solar Homes Partnership (NSHP).
Purpose
This measure supports the City's goal of achieving a 100 percent carbon neutral
electric supply portfolio, meeting 4 percent of the City's electricity needs through
local solar by 2023, and complying with California Senate Bill 1 (SB1) to increase
PV installations. Increasing the cumulative installed capacity of PV systems will
also benefit the environment and expand the flexibility of the City's electric
generation portfolio.
Status
California Senate Bill 1 (SB1) became effective in 2006 and required all California
electric utilities to achieve a Statewide goal of adding 3,000 MW of new PV
systems over ten years. The City of Palo Alto's portion of this statewide goal was
to hit 3.0 MW cumulative installed capacity of PV systems by FY 2016. The City
has exceeded the goal set by the state and was at 7.70 MW in FY 2016. With the
costs of installing PV systems steadily decreasing, along with additional incentives
such as rebates, staff anticipates an increase of PV installations to 14.00 MW in
FY 2020 primarily from residential and commercial construction projects.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Number of Customer Accounts
(Electric)29,616 29,475 29,600 29,600 29,746
Number of momentary outages 1 2 1 1 0
Percent of residents surveyed who
rate the quality of the Electric Utility
as "Good" or "Excellent"
87%88%88%88%88%
Total Number of Outages 20 35 17 30 28
UTILITIES
396 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
Dollars by Division
CIP Electric Fund 11,558,306 10,315,316 21,400,284 20,484,366 (915,918)(4.3)%
Electric Administration 21,628,408 24,586,157 25,010,251 25,969,882 959,632 3.8%
Electric Customer Service 2,190,933 2,292,027 2,474,150 2,665,595 191,445 7.7%
Electric Demand Side Management 4,393,262 3,958,743 6,962,177 6,991,511 29,334 0.4%
Electric Engineering (Operating)1,656,522 1,790,943 2,029,395 2,415,964 386,569 19.0%
Electric Operations and
Maintenance 11,834,348 11,664,339 15,174,255 16,103,804 929,549 6.1%
Electric Resource Management 91,185,173 105,459,953 101,754,850 107,574,106 5,819,256 5.7%
Total 144,446,952 160,067,478 174,805,362 182,205,228 7,399,865 4.2%
Dollars by Category
Salary & Benefits
Healthcare 1,897,689 1,949,617 2,403,978 2,475,451 71,473 3.0%
Other Benefits 234,198 304,713 329,347 373,996 44,649 13.6%
Overtime 946,401 929,360 504,795 517,920 13,125 2.6%
Pension 2,869,831 3,103,244 3,643,765 5,290,653 1,646,888 45.2%
Retiree Medical 1,537,263 1,617,277 1,555,185 1,601,840 46,656 3.0%
Salary 10,743,153 10,816,735 12,997,024 13,384,300 387,277 3.0%
Workers' Compensation 138,287 123,558 292,351 441,673 149,322 51.1%
Total Salary & Benefits 18,366,822 18,844,505 21,726,445 24,085,834 2,359,389 10.9%
Allocated Charges 2,905,159 5,506,903 8,799,392 9,227,612 428,221 4.9%
Contract Services 4,445,291 3,096,678 7,743,680 7,615,180 (128,500)(1.7)%
Debt Service 8,857,193 8,770,695 8,722,300 8,476,576 (245,724)(2.8)%
Equity Transfer 12,035,000 12,887,000 12,709,000 13,129,000 420,000 3.3%
Facilities & Equipment —2,174 64,155 64,155 ——%
General Expense 2,040,146 2,135,223 3,456,870 3,441,967 (14,903)(0.4)%
Operating Transfers-Out 317,573 560,572 127,819 —(127,819)(100.0)%
Rents & Leases 5,449,402 5,612,918 5,893,136 6,276,636 383,501 6.5%
Supplies & Material 639,238 474,977 924,207 924,207 ——%
Transfer to Infrastructure 189,972 —————%
Utility Purchase 80,511,136 94,659,116 89,712,000 95,678,373 5,966,373 6.7%
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 397
Capital Improvement Program 8,690,020 7,516,715 14,926,359 13,285,687 (1,640,672)(11.0)%
Total Dollars by Expense
Category 144,446,952 160,067,478 174,805,362 182,205,228 7,399,865 4.2%
Revenues
Charges for Services 455,040 310,863 230,000 380,000 150,000 65.2%
Charges to Other Funds 306,268 460,890 294,362 139,712 (154,650)(52.5)%
Net Sales 129,124,526 145,962,397 143,040,068 154,329,190 11,289,122 7.9%
Operating Transfers-In 2,678,768 3,465,100 3,663,820 2,615,588 (1,048,232)(28.6)%
Other Revenue 7,652,336 7,508,222 8,660,000 8,928,000 268,000 3.1%
Property Taxes 39 —————%
Rental Income 5,000 5,000 ————%
Return on Investments 1,800,584 1,941,997 2,507,700 2,158,000 (349,700)(13.9)%
Total Revenues 142,022,560 159,654,470 158,395,950 168,550,490 10,154,540 6.4%
Positions by Division
CIP Electric Fund 32.14 31.90 31.90 31.90 ——%
Electric Customer Service 12.07 11.70 12.00 11.90 (0.10)(0.83)%
Electric Demand Side Management 6.85 6.17 6.17 5.59 (0.58)(9.40)%
Electric Engineering (Operating)4.98 4.98 4.98 4.98 ——%
Electric Operations and
Maintenance 48.36 48.10 48.10 48.10 ——%
Electric Resource Management 8.92 8.38 8.18 8.48 0.30 3.67%
Total 113.32 111.23 111.33 110.95 (0.38)(0.34)%
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
Account Specialist 0.33 0.31 0.31 0.31 —20,526
Administrative Associate II 4.00 3.90 3.90 3.30 (0.60)234,254
Assistant Director Administrative
Services 0.20 0.20 0.20 0.20 —35,397
Assistant Director Utilities
Customer Support Services 0.40 0.40 0.40 0.40 —78,025
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
UTILITIES
398 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Assistant Director Utilities
Engineering 0.40 0.40 0.40 0.40 —77,958
Assistant Director Utilities
Operations 0.60 0.60 0.60 0.60 —130,366
Assistant Director Utilities/Resource
Management 0.50 0.50 0.50 0.50 —100,391
Business Analyst 2.04 1.94 1.60 1.60 —223,161
Contracts Administrator 0.10 0.10 0.10 0.10 —11,754
Coordinator Utilities Projects 1.55 1.55 1.55 1.55 —134,364
Customer Service Representative 1.62 1.87 1.87 1.87 —131,557
Customer Service Specialist 0.66 0.66 0.66 0.66 —51,059
Customer Service Specialist-Lead 0.58 0.58 0.58 0.58 —47,991
Electric Project Engineer 1.95 1.95 1.95 3.25 1.30 439,118
Electric Underground Inspector 2.00 2.00 2.00 2.00 —189,016
Electric Underground Inspector-
Lead 1.00 1.00 1.00 1.00 —101,074
Electrical Equipment Technician 1.00 1.00 1.00 1.00 —86,281
Electrician Assistant I 3.00 3.00 3.00 3.00 —224,931
Engineering Manager - Electric 0.55 0.55 0.55 0.55 —113,084
Engineering Technician III 2.40 1.40 1.40 1.40 —124,921
Heavy Equipment Operator 2.00 2.00 2.00 2.00 —179,439
Inspector, Field Services 0.25 0.25 0.25 0.25 —24,073
Lineperson/Cable Specialist 11.00 11.00 11.00 11.00 —1,314,588
Lineperson/Cable Specialist-Lead 4.00 4.00 4.00 4.00 —511,582
Manager Customer Service 0.33 0.33 0.33 0.33 —50,052
Manager Electric Operations 1.00 1.00 1.00 1.00 —176,238
Manager Treasury, Debt &
Investments 0.30 0.30 0.30 0.30 —44,703
Manager Utilities Compliance 0.15 0.15 0.15 0.15 —28,386
Manager Utilities Credit &
Collection 0.15 0.15 0.15 0.15 —22,973
Manager Utilities Program Services 0.40 0.40 0.40 0.40 —59,912
Meter Reader 1.99 1.99 1.99 1.99 —131,501
Meter Reader-Lead 0.33 0.33 0.33 0.33 —23,329
Metering Technician 3.00 3.00 3.00 3.00 —338,001
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 399
Metering Technician-Lead 1.00 1.00 1.00 1.00 —120,562
Offset Equipment Operator 0.48 0.48 0.48 0.48 —30,263
Overhead Underground
Troubleman 2.00 2.00 2.00 2.00 —251,105
Power Engineer 2.30 2.30 2.30 1.00 (1.30)127,393
Principal Business Analyst 0.34 0.34 0.34 0.34 —60,013
Program Assistant II ———0.60 0.60 46,450
Project Manager 0.75 0.75 0.75 0.75 —78,234
Resource Planner 3.65 3.85 3.65 2.85 (0.80)364,298
SCADA Technologist 1.00 1.00 1.00 1.00 —136,953
Senior Business Analyst 0.68 0.68 1.02 1.02 —151,320
Senior Electrical Engineer 3.95 3.95 3.95 3.95 —736,251
Senior Management Analyst 0.10 0.10 0.10 0.10 —13,130
Senior Resource Planner 3.80 3.06 3.06 3.36 0.30 563,779
Senior Utilities Field Service
Representative 0.10 0.10 0.10 0.10 —10,426
Street Light, Traffic Signal & Fiber
Technician 3.00 3.00 3.00 3.00 —323,311
Street Light, Traffic Signal & Fiber-
Lead 1.00 1.00 1.00 1.00 —115,314
Substation Electrician 5.50 5.50 5.50 5.50 —646,599
Substation Electrician-Lead 2.00 2.00 2.00 2.00 —251,621
Supervising Electric Project
Engineer 1.00 1.00 1.00 1.00 —156,624
Tree Maintenance Person 1.00 1.00 1.00 1.00 —79,815
Utilities Compliance Technician 2.00 2.00 2.00 2.00 —230,629
Utilities Compliance Technician-
Lead 1.00 1.00 1.00 1.00 —123,374
Utilities Credit/Collection Specialist 2.00 2.00 2.00 2.00 —170,447
Utilities Engineer Estimator 3.25 3.25 3.25 3.25 —362,352
Utilities Field Services
Representative 0.50 0.50 0.50 0.50 —48,732
Utilities Key Account
Representative 1.60 1.35 1.35 1.35 —146,841
Utilities Locator 1.95 1.95 1.95 1.95 —174,444
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
UTILITIES
400 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Utilities Marketing Program
Administrator 1.90 1.60 1.90 2.70 0.80 278,966
Utilities Safety Officer 0.55 0.55 0.55 0.55 —70,653
Utilities Supervisor 5.00 5.00 5.00 5.00 —759,429
Utilities System Operator 5.00 5.00 5.00 5.00 —640,575
Utility Engineering Estimator - Lead —1.00 1.00 1.00 —120,058
Sub-total: Full-Time Equivalent
Positions 108.18 107.12 107.22 107.52 0.30 12,849,966
Temporary/Hourly 5.15 4.11 4.11 3.43 (0.68)322,602
Total Positions 113.32 111.23 111.33 110.95 (0.38)13,172,568
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 401
Budget Reconciliation
Positions Expenditures Revenues
Net
Electric Fund
Prior Year Budget 111.33 174,805,362 158,395,950 16,409,412
One-time Prior Year Budget Adjustments
Supplemental Pension Trust Fund Contribution — (183,857) — (183,857)
General Liability Savings (one-time FY 2019
Savings)— 29,753 — 29,753
Workers' Compensation Savings (one-time FY
2019 Savings)— 116,506 — 116,506
One-time Prior Year Budget Adjustments —(37,598)—(37,598)
Base Adjustments
Adjustments to Costs of Ongoing Activities
Salary and Benefits Adjustments — 1,066,833 — 1,066,833
Proactive Contributions to City's Unfunded
Pension Liability — 579,551 — 579,551
FY 2019 Catch-Up Proactive Contributions to
City's Unfunded Pension Liability — 578,300 — 578,300
Electric Customer Sales Revenue (8% Rate
Increase)— — 11,152,304 (11,152,304)
Electric Consultant Services Contract (sunset in
FY2019)— (128,500) — (128,500)
Communication Maintenance and Utilities
Payment Adjustments — — (154,650) 154,650
Rents & Leases Expenditure Alignment — 212,710 — 212,710
Return on Investments — — (349,700) 349,700
Equity Transfer to the General Fund — 420,000 — 420,000
Transfer from the Water and Gas Fund (EL-11014
Smart Grid Installation)— — (470,000) 470,000
Transfer from the General Fund (Traffic Signal and
Streetlight Electric Costs)— — (578,232) 578,232
Electric Commodity Purchases Expenditure — 5,720,649 — 5,720,649
Capital Improvement Program — (1,593,175) (60,000) (1,533,175)
General Fund Cost Allocation Plan — 117,210 — 117,210
Grounds Maintenance Allocated Charges — 1,896 — 1,896
Printing & Mailing Services Allocated Charges — 16,776 — 16,776
Public Works Services Engineering & Inspection
Allocated Charges — 122 — 122
Stormwater Management Allocated Charges — 1,409 — 1,409
Utilities Administration Allocated Charges — 193,275 — 193,275
UTILITIES
402 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Utilities Allocated Charges — 113,629 614,818 (501,189)
Vehicle Replacement & Maintenance Allocated
Charges — (37,310) — (37,310)
Adjustments to Costs of Ongoing Activities —7,263,376 10,154,540 (2,891,164)
Total FY 2020 Base Budget 111.33 182,031,140 168,550,490 13,480,649
Budget Proposals
1 Resource Management Administrative Staffing
Realignment (0.68) (33,943) — (33,943)
2 Resource Management Program Administration
Staffing Realignment — (29,784) — (29,784)
3 Administrative Services Staffing Vacancies — (19,968) — (19,968)
4 Engineering Staffing Alignment 0.00 14,286 — 14,286
5 Resource Management Resource Planning
Staffing Realignment 0.30 72,707 — 72,707
6 Elwell Court Improvements — 170,791 — 170,791
Budget Changes (0.38)174,088 —174,088
Total FY 2020 Proposed Budget 110.95 182,205,228 168,550,490 13,654,738
Budget Reconciliation
Positions Expenditures Revenues
Net
Electric Fund
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 403
Budget Adjustments
Budget Adjustments Positions Expenditures Revenues
Net
Electric Fund
1 Resource Management Administrative Staffing
Realignment -0.68 (33,943)0 (33,943)
This ongoing action will eliminate 0.60 FTE Administrative Associate, 0.68 FTE Project Specialist, and add 0.60 Program
Specialist in this fund as a part of the Resource Management Division department-wide realignment to ensure staffing
levels commensurate with current workload needs and meet the City's sustainability goals. This action will add one 1.0
FTE Program Assistant II position; eliminate one 1.0 FTE Administrative Associate II position, one 0.48 FTE Project
Specialist position, and one vacant 0.48 FTE Project Specialist position in the Utilities Department. Currently the Utilities
Sustainability and Efficiency programs rely on hourly employees to provide regular customer program support; however,
the hourly positions have been difficult to fill on an extended basis. This action will allow more continuity of internal and
external support for the Sustainability and Efficiency programs and will enable staff development for succession planning
purposes throughout the Resource Management Division. (Ongoing savings: $32,900)
Performance Results
The full-time Program Assistant II position will streamline customer support and service delivery, while providing
administrative support for these programs.
2 Resource Management Program Administration
Staffing Realignment 0.00 (29,784)0 (29,784)
This ongoing action will eliminate 0.80 FTE Resource Planner positions and add 0.80 FTE Utility Marketing Program
Administrator positions in this fund as a part of the Resource Management Division department-wide realignment to
ensure staffing levels commensurate with current workload needs and meet the City's sustainability goals. This action
will eliminate one 1.0 FTE Utility Marketing Program Administrator and eliminate two vacant 0.5 FTE vacant Resource
Planner positions in the Utilities Department. Adding 1.0 FTE Utility Marketing Program Administrator will facilitate overall
energy program management; this need has grown since the City adopted energy efficiency requirements beyond the
State minimums. Since the City is now utilizing 100% renewable energy for electricity commodity purchases, the focus
for carbon reduction efforts has shifted from electric commodity purchases to expanding the use of electrification
throughout the City from other utility sources. (Ongoing savings: $32,500)
Performance Results
This action will help streamline energy program management.
3 Administrative Services Staffing Vacancies 0.00 (19,968)0 (19,968)
This one-time action recognizes vacancy savings for the equivalent of 1.0 FTE Senior Management Analyst and 1.0 FTE
Account Specialist during FY 2020. Currently the Administrative Services Department is experiencing a vacancy factor
of nearly 15%, including positions at these levels. Due to the priority of other staffing recruitments of a more urgent need,
such as Purchasing Division staffing, it is anticipated that these recruitments will not be addressed until further through
FY 2020 and therefore savings can be anticipated. The functions of these positions are currently being absorbed
temporarily by the Chief Financial Officer, Assistant Director, and additional administrative assistance, primarily on
overtime. This diminishes staff's ability to continue to make progress on service delivery evolutions and requires staff to
rely more heavily on contractual assistant and status quo business processes. (Ongoing savings: $0)
Performance Results
This action is anticipated to help contain costs for FY 2020.
UTILITIES
404 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
4 Engineering Staffing Alignment 0.00 14,286 0 14,286
This ongoing action will reclassify 1.30 FTE Power Engineer to an Electric Project Engineer for a net zero FTE change in
this fund as a part of the Utilities Department engineering staff alignment. The department-wide reclassification of two
1.0 FTE Power Engineer positions to two 1.0 FTE Electric Project Engineers will align with current workload needs to
meet the City's sustainability goals. These positions are partially funded in the Electric, Fiber, and Water funds. The
Electric Project Engineer position requires a Professional Engineering (PE) license and is qualified to work independently
on electric engineering projects with minimal guidance from concept through design, construction and closeout of the
project. The Power Engineer position does not require a PE and works under the supervision of a Senior Electrical
Engineer. This action facilitates retention of engineering staff and enhances succession planning. (Ongoing costs:
$14,700)
Performance Results
This action assists the Utilities Department’s Strategic Plan goal to recruit and retain high performing employees,
preventing loss of institutional knowledge, and mitigating service impact to customers.
5 Resource Management Resource Planning
Staffing Realignment 0.30 72,707 0 72,707
This ongoing action will add 0.30 FTE Senior Resource Planner position in this fund as a part of the Resource
Management Division department-wide realignment to ensure staffing is commensurate with current workload needs
and meet the City's sustainability goals. This action will increase one vacant 0.5 FTE Senior Resource Planner position
to 1.0 FTE Senior Resource Planner. The Resource Management Division manages the City’s electric, water, and gas
supply contracts, which included annual utility commodity purchases of approximately $90 million for electric, $22
million for water, and $15 million for gas. Attracting and retaining experienced high-level talent across multiple utilities is
important; the City competes with other Community Choice Aggregators (CCAs) in the Electricity industry to recruit in
the Bay Area. Adding a full-time Senior Resource Planner will enable the team to implement tasks under the
Sustainability and Climate Action Plan while preparing for anticipated Senior Resource Planner retirements expected in
the next few years. (Ongoing costs: $75,800)
Performance Results
The full-time Senior Resource Planner will enhance the City's ability to pursue the City’s sustainability and carbon
reduction goals, without diverting staffing resources from core functions.
6 Elwell Court Improvements 0.00 170,791 0 170,791
This one-time action will increase rental expenses for one year on office space rented and occupied by staff from the
Utilities Department at Elwell Court. This increase will fund the costs of renovation and associated moving expenses.
Under the current lease agreement, the tenant, the City of Palo Alto, is responsible for improvements and repairs within
the rented space. While minor improvements have been performed on an as-needed basis, renovations are needed to
address the worn out interior and to bring the space in compliance with the American Disability Act (ADA) requirements.
Elwell has been rented for over 20 years and provides more than 16,000 square feet of office space for 45 full time
employees. (Ongoing costs: $0)
Performance Results
Updating the rented space at Elwell Court will provide employees with a safe and comfortable environment while also
complying to the American Disability Act (ADA) requirements.
Budget Adjustments
Budget Adjustments Positions Expenditures Revenues
Net
Electric Fund
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 405
FIBER OPTICS FUND
Description
In 1996, the City built a dark fiber ring around Palo Alto that would be
capable of supporting multiple network developers and service
providers with significant growth potential. The fiber backbone network
was routed to pass by and provide access to key City facilities and the
Palo Alto business community, including research centers and
commercial properties.
Dark fiber optics service consists of providing the fiber optics cabling,
splice points, service connections, and other infrastructure providing
high-capacity bandwidth needed to transport large quantities of data.
This service excludes the transmitters, receivers, and data itself, which
are owned and operated by each customer.
Accomplishments
Q Added new fiber conduit on University Avenue as part of the Upgrade Downtown project.
Q Installed new services for Stanford University offsite facilities and other customers in
Stanford Research Park.
Q Installed public Wi-Fi to unserved City facilities, including community areas in Cubberley,
Lucie Stern, and Baylands Golf Links.
Q Reviewed bid proposals to develop a business case for a Fiber-to-the-Node (FTTN) network
for fiber and broadband expansion, including an expansion option to build citywide Fiber-
to-the-Premises (FTTP).
Initiatives
Q Provide high-quality and competitively-priced fiber optic utility services to City
departments and commercial customers in the City of Palo Alto.
Q Continue Capital Improvement Projects to upgrade the City’s dark fiber network to enhance
network capacity to enable future expansion opportunities for licensing dark fiber for
commercial purposes.
UTILITIES
406 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Q Evaluate new opportunities to expand the existing commercial dark fiber customer base in
other business sectors (e.g. licensing dark fiber to the mobile service operator for network
backhaul links for small cell deployments).
Q Develop a plan to ensure the retention of commercial dark fiber customers due to
anticipated changes in the market for business broadband services.
Q Develop a new dedicated fiber ring for city substations to enhance reliability and security.
Q Retain a management consultant to develop a business case for a FTTN/FTTP network and
prepare a detailed engineering design of fiber expansion to support AMI, internal wireless
communication network, and other city services.
Q Develop policies and ordinances to support the expansion of broadband in Palo Alto and to
preserve City street conditions and other critical infrastructure (e.g. Dig Once, Multi-unit
Dwelling and One Touch Make Ready).
Q Install fiber from Dahl Reservoir to Montebello Reservoir to enable full remote-control valves
at Montebello and improve radio coverage in the foothills area for emergency response.
Goals and Objectives
GOAL 1
Increase the value of fiber utility services to customers.
Objectives:
Q Provide high-quality and competitively-priced fiber optic utility services to City
departments and commercial customers in the City of Palo Alto.
Q Manage costs and add new dark fiber license agreements with commercial customers.
GOAL 2
Improve capacity and reliability of the Dark Fiber System.
Objectives:
Q Ensure sufficient fiber optic cables are available to meet future City and customer needs.
Q Make system enhancements to prevent damage from outside sources and improve
reliability.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 407
Key Performance Measures
Workload Measures
CUSTOMER SATISFACTION
Goal Provide excellent customer service.
Objective Provide high-quality and competitively-priced fiber optic utility services to City
departments and commercial customers in the City of Palo Alto.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Number of commercial fiber
connections completed 228 198 238 207 215
Description
This measure shows the growth of the Fiber Enterprise based on customers and
connections. Estimates are based on analyzing the number of upcoming
developments, anticipating how many customers would sign on for Fiber, and
taking into account how many existing connections may result in disconnections
such as companies leaving. Some customers may also have multiple fiber
connections at various locations.
Purpose
The purpose of this measure is to add value to companies doing business in Palo
Alto by providing a cost-effective, world class telecommunications system. The
goal is to build out and fully leverage the fiber network to add value to the
business and other communities as needed.
Status
The Fiber Enterprise continues to build out its network to provide more service
options to the ever-expanding customer base. Based on seven connections
currently in the pipeline and the anticipation for Stanford to increase their Fiber
connections (new hospital, housing units, etc.) the estimated connections for FY
2020 is 215.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Number of Customer Accounts
(Fiber)110 93 110 110 98
Number of Wholesale re-sellers 12 13 14 14 15
UTILITIES
408 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
Dollars by Division
CIP Fiber Optics Fund 458,664 1,047,968 1,650,000 1,525,441 (124,559)(7.5)%
Fiber Optics Administration 174,885 188,357 748,831 843,079 94,248 12.6%
Fiber Optics Customer Service 515,324 678,580 1,170,484 1,241,621 71,136 6.1%
Fiber Optics Operations and
Maintenance 1,236,236 1,462,572 596,169 639,500 43,331 7.3%
Total 2,385,108 3,377,476 4,165,484 4,249,641 84,157 2.0%
Dollars by Category
Salary & Benefits
Healthcare 150,743 163,825 163,151 171,660 8,508 5.2%
Other Benefits 18,999 24,736 26,007 29,786 3,778 14.5%
Overtime 11,593 21,055 24,874 25,521 647 2.6%
Pension 209,591 242,846 251,105 358,230 107,125 42.7%
Salary 825,396 1,007,041 955,812 967,733 11,921 1.2%
Workers' Compensation 1,166 666 19,047 30,967 11,920 62.6%
Total Salary & Benefits 1,217,489 1,460,169 1,439,997 1,583,895 143,899 10.0%
Allocated Charges 438,939 542,597 575,882 671,131 95,249 16.5%
Contract Services 134,006 161,241 454,646 454,646 ——%
Facilities & Equipment ——2,457 2,457 ——%
General Expense 3,161 2,430 13,900 12,000 (1,900)(13.7)%
Operating Transfers-Out 103,915 129,531 113,684 102,176 (11,508)(10.1)%
Rents & Leases 73,038 75,375 79,326 82,360 3,034 3.8%
Supplies & Material —8,738 9,000 9,000 ——%
Transfer to Infrastructure 13,756 5,700 ————%
Capital Improvement Program 400,805 991,695 1,476,592 1,331,975 (144,616)(9.8)%
Total Dollars by Expense
Category 2,385,108 3,377,476 4,165,484 4,249,641 84,157 2.0%
Revenues
Charges for Services 28,052 37,224 ————%
Charges to Other Funds —135,895 ————%
Net Sales 4,526,098 4,356,872 4,989,512 4,594,824 (394,687)(7.9)%
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 409
Other Revenue 1,181 66,032 200,000 200,000 ——%
Return on Investments 499,412 582,095 366,400 749,500 383,100 104.6%
Total Revenues 5,054,743 5,178,117 5,555,912 5,544,324 (11,587)(0.2)%
Positions by Division
CIP Fiber Optics Fund 0.79 0.79 0.79 0.79 ——%
Fiber Optics Customer Service 2.90 3.68 3.68 3.58 (0.10)(2.72)%
Fiber Optics Operations and
Maintenance 3.13 3.13 3.13 3.13 ——%
Total 6.82 7.60 7.60 7.50 (0.10)(1.32)%
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
Administrative Associate II 0.10 0.20 0.20 0.20 —14,197
Assistant Director Utilities
Customer Support Services 0.20 0.20 0.20 0.20 —39,012
Assistant Director Utilities
Engineering 0.05 0.05 0.05 0.05 —9,745
Business Analyst 0.20 0.30 0.30 0.30 —41,843
Electric Project Engineer 0.05 0.05 0.05 0.45 0.40 60,801
Manager Utilities Compliance 0.10 0.10 0.10 0.10 —18,924
Manager Utilities Credit &
Collection 0.40 0.40 0.40 0.40 —61,260
Manager Utilities Program Services 0.20 0.20 0.20 0.20 —29,956
Manager Utilities
Telecommunications 1.00 1.00 1.00 1.00 —150,072
Power Engineer 0.40 0.40 0.40 —(0.40)—
Senior Electrical Engineer 0.05 0.05 0.05 0.05 —9,262
Street Light, Traffic Signal & Fiber
Technician 2.00 2.00 2.00 2.00 —215,541
Street Light, Traffic Signal & Fiber-
Lead 1.00 1.00 1.00 1.00 —115,314
Utilities Key Account
Representative 0.70 0.80 0.80 0.80 —87,017
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
UTILITIES
410 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Utilities Locator 0.03 0.03 0.03 0.03 —2,684
Sub-total: Full-Time Equivalent
Positions 6.48 6.78 6.78 6.78 —855,628
Temporary/Hourly 0.34 0.82 0.82 0.72 (0.10)73,587
Total Positions 6.82 7.60 7.60 7.50 (0.10)929,215
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 411
Budget Reconciliation
Positions Expenditures Revenues
Net
Fiber Optics
Fund
Prior Year Budget 7.60 4,165,484 5,555,912 (1,390,428)
One-time Prior Year Budget Adjustments
Supplemental Pension Trust Fund Contribution — (12,661) — (12,661)
General Liability Savings (one-time FY 2019
Savings)— 1,938 — 1,938
Workers' Compensation Savings (one-time FY
2019 savings)— 7,590 — 7,590
One-time Prior Year Budget Adjustments —(3,133)—(3,133)
Adjustments to Costs of Ongoing Activities
Salary and Benefits Adjustments — 64,370 — 64,370
Proactive Contributions to City’s Unfunded
Pension Liability — 39,265 — 39,265
FY 2019 Catch-Up Proactive Contributions to
City’s Unfunded Pension Liability — 38,500 — 38,500
Return on Investments — — 383,100 (383,100)
Rents & Leases Expenditures — 3,034 — 3,034
Fiber Optics Revenue (Rate Increase of 4.5% for
EDF-1)— — (394,687) 394,687
Capital Improvement Program — (149,688) — (149,688)
General Fund Cost Allocation Plan — 83,150 — 83,150
Liability Insurance Allocated Charges — 2,261 — 2,261
Utilities Administration Allocated Charges — 8,065 — 8,065
Adjustments to Costs of Ongoing Activities —88,955 (11,587)100,543
Total FY 2020 Base Budget 7.60 4,251,306 5,544,324 (1,293,018)
Budget Proposals
1 Resource Management Administrative Staffing
Realignment (0.10) (6,061) — (6,061)
2 Engineering Staffing Alignment — 4,396 — 4,396
Budget Changes (0.10)(1,665)—(1,665)
Total FY 2020 Proposed Budget 7.50 4,249,641 5,544,324 (1,294,683)
UTILITIES
412 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Budget Adjustments
Budget Adjustments Positions Expenditures Revenues
Net
Fiber Optics
Fund
1 Resource Management Administrative Staffing
Realignment -0.10 (6,061)0 (6,061)
This ongoing action will eliminate 0.10 FTE vacant Project Specialist position in this fund as a part of the Resource
Management Division department-wide realignment to ensure staffing levels commensurate with current workload
needs and meet the City's sustainability goals. This action will add one 1.0 FTE Program Assistant II position; eliminate
one 1.0 FTE Administrative Associate II position, one 0.48 FTE Project Specialist position, and one vacant 0.48 FTE
Project Specialist position in the Utilities Department. Currently the Utilities Sustainability and Efficiency programs rely on
hourly employees to provide regular customer program support; however, the hourly positions have been difficult to fill
on an extended basis. This action will allow more continuity of internal and external support for the Sustainability and
Efficiency programs and will enable staff development for succession planning purposes throughout the Resource
Management Division. (Ongoing savings: $6,500)
Performance Results
The full-time Program Assistant II position will streamline customer support and service delivery, while providing
administrative support for these programs.
2 Engineering Staffing Alignment 0.00 4,396 0 4,396
This ongoing action will reclassify 0.40 FTE Power Engineer to an Electric Project Engineer for a net zero FTE change in
this fund as a part of the Utilities Department engineering staff alignment. The department-wide reclassification of two
1.0 FTE Power Engineer positions to two 1.0 FTE Electric Project Engineers will align with current workload needs to
meet the City's sustainability goals. These positions are partially funded in the Electric, Fiber, and Water funds. The
Electric Project Engineer position requires a Professional Engineering (PE) license and is qualified to work independently
on electric engineering projects with minimal guidance from concept through design, construction and closeout of the
project. The Power Engineer position does not require a PE and works under the supervision of a Senior Electrical
Engineer. This action facilitates retention of engineering staff and enhances succession planning. (Ongoing costs:
$4,500)
Performance Results
This action assists the Utilities Department’s Strategic Plan goal to recruit and retain high performing employees,
preventing loss of institutional knowledge, and mitigating service impact to customers.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 413
GAS FUND
Description
The municipal natural gas system began operations in 1917 when Palo
Alto acquired a privately-owned gas business. During the early years, gas
was manufactured from coal tar. This was replaced in the 1920s by
natural gas from Pacific Gas and Electric. Today, gas is purchased from
several sources. The Gas Utility services include Crossbore Safety, Gas
Main Replacements, and Home Energy Audits. The Gas utility
infrastructure and its crews maintain an excellent safety record. The gas
fund is responsible for planning, designing, budgeting, and constructing
major capital improvements to the City’s gas distribution system.
Accomplishments
Q Continued to implement Carbon Neutral Gas Plan by buying carbon offsets equal to Palo
Alto’s annual gas use as a transitional measure while focusing on reducing natural gas use.
Q Began a prepaid natural gas purchase program with Munigas that will save gas consumers
over $1M per year.
Q Advocated for Palo Alto’s interests in PG&E Gas Transmission and Storage rate case,
achieved savings in certain transmission costs.
Q Completion of the construction of approximately 19,500 linear feet of natural gas mains and
370 natural gas service pipelines under the Gas Main Replacement (GMR) 22 and Upgrade
Downtown project.
Q Completed design of the Acrylonitrile Butadiene Styrene (ABS)/Tenite natural gas service
replacement project to replace approximately 130 natural gas service pipelines at various
locations within the city.
Q Completed design on Phase II of the Crossbore Gas Safety Program to inspect sanitary
sewer laterals of potential damage during natural gas pipeline installation.
Q Began design of the Gas Main Replacement 23 project within business districts to replace
approximately 20,000 linear feet of natural gas mains and 350 natural gas service pipelines
made of Polyvinyl Chloride (PVC).
UTILITIES
414 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Initiatives
Q Complete construction of the Acrylonitrile Butadiene Styrene (ABS)/Tenite natural gas
service replacement project to replace approximately 130 natural gas service pipelines at
various locations within the city.
Q Begin construction of Gas Main Replacement 23 project within business districts to replace
approximately 20,000 linear feet of natural gas mains and 350 natural gas service pipelines
made of Polyvinyl Chloride (PVC).
Q Begin work on Phase II of the Crossbore Gas Safety Program to inspect high priority
sanitary sewer laterals for the presence of natural gas pipelines.
Q Complete an updated natural gas utility cost of service study; the previous study was
conducted in 2012.
Q Explore local carbon offset project (refrigerant recycling).
Q Launch new gas efficiency programs and resources for residents and small businesses.
Goals and Objectives
GOAL 1
Provide safe and efficient delivery of natural gas to customers.
Objectives:
Q Continue repairing 100 percent of laterals damaged by crossbore within 24 hours.
Q Remove and replace the remaining PVC pipe from the gas system.
Q Complete a walking gas leak survey for 50 percent of the City and a mobile gas leak survey
of services in business districts and 100 percent of the City’s gas mains on an annual basis.
GOAL 2
Increase environmental sustainability and promote efficient use of natural gas resources.
Objectives:
Q Ten-year goal for natural gas efficiency is a reduction in expected gas use of 2.85 percent by
2023 (base year 2013).
Q Reduce the carbon intensity of the gas portfolio in accordance with the Sustainability and
Climate Action Plan (S/CAP) using offsets.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 415
Key Performance Measures
GAS LEAKS REPAIRED
Goal Provide safe and efficient delivery of natural gas to customers.
Objective Respond to and repair all Grade 1 gas leaks immediately.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Percentage of Grade 1 leaks
responded to within 24 hours 100.00%100.00%100.00%100.00%100.00%
Description
This measures the total response time to Grade 1 leaks found during the walking
and mobile (vehicle) surveys and any reported leaks classified as Grade 1. The
City's policy is to respond and repair Grade 1 leaks within 24 hours. Grade 1 leaks
are hazardous leaks that pose an immediate hazard to persons or property and
require continuous action until conditions are no longer hazardous.
Purpose
Leaks are assigned priority gradings according to location, extent of migration,
gas concentration, potential for concentration, ignition sources, and potential
hazard to the public and property. These priority grades are intended only as
guidelines.
Status Utilities Operations responds immediately to Grade 1 leaks. The average repair
time can vary depending on the size and location of the gas leak.
GAS SAFETY
Goal Provide safe and efficient delivery of natural gas to our customers.
Objective
Complete a walking gas leak survey for 50 percent of the City and a mobile gas
leak survey of services in business districts and 100 percent of the City's gas
mains on an annual basis.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Percentage of gas system surveyed
by walking 0.00%100.00%100.00%50.00%50.00%
Percentage of gas system surveyed
by mobile (vehicle)100.00%100.00%100.00%100.00%100.00%
Description
A walking survey is conducted to check for gas leaks on service/gas meters and
covers one-half of the City (approximately 105 miles of gas mains and 36 miles of
service lines) every year, so that the entire City's gas service system can be
reviewed in a two-year period. The Federal Department of Transportation (DOT)
regulations require a survey of the entire City once every five years. In addition to a
walking survey, a mobile (vehicle) survey of all gas mains and some gas service
lines (services in the business district) are conducted annually.
Purpose To ensure the safety of all who live and work in Palo Alto and to comply with
Federal DOT requirements.
Status
The department did not perform a walking survey in 2017 due to staffing
constraint.
The department is meeting the requirements and repairing all discovered gas
leaks in a timely manner.
UTILITIES
416 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Workload Measures
INCREASE ENVIRONMENTAL SUSTAINABILITY AND PROMOTE EFFICIENT
USE OF NATURAL GAS RESOURCES
Goal Support environmental sustainability and promote efficient use of natural gas
resources.
Objective Increase gas efficiency participation.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Natural gas savings achieved
annually through efficiency
programs (therms)
228,707 249,725 301,000 301,000 316,000
Description
The department measures specific savings achieved from the installation of
natural gas efficiency improvements, which are tracked through energy efficiency
incentive programs. The Department can also track overall savings by customer
class. Much of the non-residential savings were achieved through third party
contractors who help large customers give their buildings a tune-up known as
retro-commissioning.
Purpose
The carbon intensity of the natural gas portfolio is a function of where and how the
gas is acquired and how much of it is burned in use. Improving gas efficiency
directly reduces the gas-related carbon footprint in Palo Alto.
Status
FY 2017 gas efficiency savings were above the annual target for the tenth year in
a row. As the cost of gas decreases, the Department anticipates a decline in the
type of large commercial gas savings projects that made up the majority of this
year’s savings.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Number of Customer Accounts
(Gas)23,637 23,395 23,664 23,664 23,665
Number of gas leaks repaired 82 81 50 90 80
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 417
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
Dollars by Division
CIP Gas Fund 2,694,478 5,504,869 5,567,183 3,742,737 (1,824,446)(32.8)%
Gas Administration 10,476,335 11,065,620 12,069,893 12,602,068 532,176 4.4%
Gas Customer Service 1,440,930 1,529,936 1,779,485 1,911,680 132,195 7.4%
Gas Demand Side Management 855,204 828,561 1,547,073 1,567,605 20,532 1.3%
Gas Engineering (Operating)354,827 350,902 561,931 670,487 108,556 19.3%
Gas Operations and Maintenance 4,321,176 4,673,257 6,632,739 7,101,687 468,948 7.1%
Gas Resource Management 13,129,316 13,277,736 15,398,027 16,798,537 1,400,510 9.1%
Total 33,272,265 37,230,881 43,556,331 44,394,802 838,471 1.9%
Dollars by Category
Salary & Benefits
Healthcare 905,632 883,093 1,089,891 1,143,407 53,515 4.9%
Other Benefits 94,385 120,687 153,760 176,172 22,412 14.6%
Overtime 241,406 200,797 193,144 198,165 5,022 2.6%
Pension 1,234,331 1,333,372 1,571,349 2,310,105 738,756 47.0%
Retiree Medical 594,708 625,662 667,617 687,645 20,028 3.0%
Salary 3,484,177 4,151,790 5,569,839 5,832,855 263,016 4.7%
Workers' Compensation 101,734 90,119 124,864 186,916 62,052 49.7%
Total Salary & Benefits 6,656,373 7,405,521 9,370,463 10,535,265 1,164,802 12.4%
Allocated Charges 2,771,186 2,690,914 4,328,918 4,453,179 124,262 2.9%
Contract Services 896,927 617,044 2,463,313 2,463,313 ——%
Debt Service 226,747 203,683 802,615 802,615 ——%
Equity Transfer 6,726,000 6,699,000 6,563,000 7,106,000 543,000 8.3%
Facilities & Equipment —2,027 19,039 19,039 ——%
General Expense 465,031 421,873 769,134 762,991 (6,143)(0.8)%
Operating Transfers-Out 457,658 972,491 640,642 410,403 (230,239)(35.9)%
Rents & Leases 713,115 735,359 759,870 851,539 91,669 12.1%
Supplies & Material 324,485 344,184 488,816 488,816 ——%
Transfer to Infrastructure 71,969 5,700 ————%
Utility Purchase 12,562,932 12,921,050 14,671,556 16,012,329 1,340,773 9.1%
UTILITIES
418 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Capital Improvement Program 1,399,844 4,212,033 2,678,965 489,312 (2,189,653)(81.7)%
Total Dollars by Expense
Category 33,272,265 37,230,881 43,556,331 44,394,802 838,471 1.9%
Revenues
Charges for Services 24,303 28,560 20,000 20,000 ——%
Charges to Other Funds 219,023 115,229 98,072 100,622 2,550 2.6%
Net Sales 35,214,383 35,794,564 36,160,635 37,278,530 1,117,895 3.1%
Other Revenue 957,753 1,109,304 1,091,935 1,124,303 32,368 3.0%
Return on Investments 506,216 568,475 526,300 802,300 276,000 52.4%
Total Revenues 36,921,679 37,616,132 37,896,942 39,325,755 1,428,813 3.8%
Positions by Division
CIP Gas Fund 17.10 15.80 15.80 15.80 ——%
Gas Customer Service 8.78 9.03 9.13 9.03 (0.10)(1.10)%
Gas Demand Side Management 1.34 1.94 1.54 1.54 ——%
Gas Engineering (Operating)1.40 1.40 1.40 1.40 ——%
Gas Operations and Maintenance 22.43 23.98 24.30 24.30 ——%
Gas Resource Management 1.50 0.96 1.66 1.76 0.10 6.03%
Total 52.55 53.11 53.83 53.83 ——%
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
Account Specialist 0.23 0.23 0.23 0.23 —15,229
Administrative Associate II 0.75 0.85 0.85 0.60 (0.25)42,592
Assistant Director Administrative
Services 0.05 0.05 0.05 0.05 —8,849
Assistant Director Utilities
Customer Support Services 0.20 0.20 0.20 0.20 —39,012
Assistant Director Utilities
Engineering 0.20 0.20 0.20 0.20 —38,979
Assistant Director Utilities
Operations 0.15 0.15 0.15 0.15 —32,592
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 419
Assistant Director Utilities/Resource
Management 0.25 0.25 0.25 0.25 —50,196
Business Analyst 1.28 1.48 1.15 1.15 —160,397
Cathodic Protection Technician
Assistant 1.00 1.00 1.00 1.00 —95,886
Cathodic Technician 1.00 1.00 1.00 1.00 —117,717
Cement Finisher 0.25 0.68 0.68 0.68 —58,529
Contracts Administrator 0.10 0.10 0.10 0.10 —11,754
Coordinator Utilities Projects 1.26 1.26 1.26 1.26 —130,462
Customer Service Representative 1.62 1.87 1.87 1.87 —131,557
Customer Service Specialist 0.68 0.68 0.68 0.68 —52,606
Customer Service Specialist-Lead 0.58 0.58 0.58 0.58 —47,991
Engineer 2.00 2.00 2.00 2.00 —238,662
Engineering Manager - Electric 0.15 0.15 0.15 0.15 —30,841
Engineering Manager - WGW 0.33 0.33 0.33 0.33 —64,597
Engineering Technician III 0.70 0.70 0.70 0.70 —62,460
Equipment Operator 0.43 —————
Gas and Water Meter Measurement
and Control Technician —3.20 3.20 3.20 —325,012
Gas and Water Meter Measurement
and Control Technician - Lead —0.80 0.80 0.80 —86,944
Gas System Technician II 2.90 —————
Heavy Equipment Operator 2.52 2.52 2.52 2.52 —226,093
Heavy Equipment Operator -
Install/Repair 0.65 0.65 0.65 0.65 —61,508
Inspector, Field Services 1.42 1.42 1.42 1.42 —136,732
Maintenance Mechanic-Welding 1.00 1.00 1.00 1.00 —95,789
Manager Customer Service 0.33 0.33 0.33 0.33 —50,052
Manager Treasury, Debt &
Investments 0.10 0.10 0.10 0.10 —14,901
Manager Utilities Compliance 0.25 0.25 0.25 0.25 —47,310
Manager Utilities Credit &
Collection 0.15 0.15 0.15 0.15 —22,973
Manager Utilities Operations WGW 0.20 0.20 0.20 0.20 —35,427
Manager Utilities Program Services 0.20 0.20 0.20 0.20 —29,956
Meter Reader 1.98 1.98 1.98 1.98 —130,840
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
UTILITIES
420 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Meter Reader-Lead 0.33 0.33 0.33 0.33 —23,329
Principal Business Analyst 0.33 0.33 0.33 0.33 —58,248
Program Assistant I 0.33 0.33 0.33 0.33 —23,767
Program Assistant II ———0.25 0.25 19,354
Project Engineer 1.00 1.00 1.00 1.00 —128,437
Resource Planner 0.65 (0.05)0.65 0.45 (0.20)57,521
Restoration Lead 0.43 0.43 0.43 0.43 —40,238
SCADA Technologist 0.20 0.20 0.20 0.20 —27,391
Senior Business Analyst 0.66 0.66 0.99 0.99 —146,869
Senior Engineer 2.70 2.70 2.70 2.70 —438,539
Senior Mechanic 0.33 0.33 0.33 0.33 —33,189
Senior Resource Planner 0.30 0.46 0.46 0.56 0.10 89,696
Senior Utilities Field Service
Representative 0.41 0.41 0.41 0.41 —42,745
Substation Electrician 0.10 0.10 0.10 0.10 —11,756
Utilities Engineer Estimator 0.85 0.85 0.85 0.85 —93,179
Utilities Field Services
Representative 1.75 1.75 1.75 1.75 —170,561
Utilities Install Repair-Lead-Welding
Certified 1.30 1.30 1.30 1.30 —137,991
Utilities Install Repair-Welding
Certified 1.95 1.95 1.95 1.95 —178,386
Utilities Install/Repair 3.85 3.85 3.85 3.85 —365,894
Utilities Install/Repair Assistant 0.65 0.65 0.65 0.65 —52,393
Utilities Install/Repair-Lead 1.98 1.98 1.98 1.98 —190,111
Utilities Key Account
Representative 0.45 0.50 0.50 0.50 —54,386
Utilities Locator 0.29 0.29 0.29 0.29 —25,943
Utilities Marketing Program
Administrator 0.70 1.00 0.70 0.90 0.20 92,989
Utilities Safety Officer 0.20 0.20 0.20 0.20 —25,692
Utilities Supervisor 2.37 2.37 2.37 2.37 —345,536
Water System Operator II 0.66 0.66 0.66 0.66 —59,193
Sub-total: Full-Time Equivalent
Positions 49.68 51.14 51.54 51.64 0.10 5,627,779
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 421
Temporary/Hourly 2.88 1.97 2.29 2.19 (0.10)122,813
Total Positions 52.55 53.11 53.83 53.83 —5,750,591
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
UTILITIES
422 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Budget Reconciliation
Positions Expenditures Revenues
Net
Gas Fund
Prior Year Budget 53.83 43,556,331 37,896,942 5,659,390
One-time Prior Year Budget Adjustments
Supplemental Pension Trust Fund Contribution — (79,311) — (79,311)
General Liability Savings (one-time FY 2019
Savings)— 12,708 — 12,708
Workers' Compensation Savings (one-time FY
2019 Savings)— 49,760 — 49,760
One-time Prior Year Budget Adjustments —(16,843)—(16,843)
Adjustments to Costs of Ongoing Activities
Salary and Benefits Adjustments — 587,962 — 587,962
Proactive Contributions to City’s Unfunded
Pension Liability — 253,748 — 253,748
FY 2019 Catch-Up Proactive Contributions to
City’s Unfunded Pension Liability — 248,700 — 248,700
Gas Customer Sales Revenue (5% Rate Increase) — — 1,117,895 (1,117,895)
Return on Investments — — 276,000 (276,000)
Transfer to the Electric Fund — (180,000) — (180,000)
Connection Charge (GS-80017) — — 32,368 (32,368)
Charges to Other Funds — — 2,550 (2,550)
Transfer to the Water Fund — 4,429 — 4,429
Rents & Leases Expenditure Alignment — 24,217 — 24,217
Equity Transfer to the General Fund — 543,000 — 543,000
Gas Commodity Purchases Expenditures — 1,340,774 — 1,340,774
Capital Improvement Program — (2,165,638) — (2,165,638)
General Fund Cost Allocation Plan — 58,942 — 58,942
Landscape Maintenance Contract — 254 — 254
Liability Insurance Allocated Charges — 8,612 — 8,612
Printing & Mailing Services Allocated Charges — 3,925 — 3,925
Public Works Services Allocated Charges — 122 — 122
Stormwater Management Allocated Charges — 13 — 13
Utilities Administration Allocated Charges — 51,718 — 51,718
Vehicle Replacement & Maintenance Allocated
Charges — (8,035) — (8,035)
Adjustments to Costs of Ongoing Activities —772,743 1,428,813 (656,070)
Total FY 2020 Base Budget 53.83 44,312,232 39,325,755 4,986,477
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 423
Budget Proposals
1 Resource Management Program Administration
Staffing Realignment — (7,446) — (7,446)
2 Resource Management Administrative Staffing
Realignment (0.10) (1,672) — (1,672)
3 Resource Management Resource Planning
Staffing Realignment 0.10 24,236 — 24,236
4 Elwell Court Improvements — 67,452 — 67,452
Budget Changes 0.00 82,570 —82,570
Total FY 2020 Proposed Budget 53.83 44,394,802 39,325,755 5,069,047
Budget Adjustments
Budget Adjustments Positions Expenditures Revenues
Net
Gas Fund
1 Resource Management Program Administration
Staffing Realignment 0.00 (7,446)0 (7,446)
This ongoing action will eliminate 0.20 FTE Resource Planner positions and add 0.20 FTE Utility Marketing Program
Administrator positions in this fund as a part of the Resource Management Division department-wide realignment to
ensure staffing levels commensurate with current workload needs and meet the City's sustainability goals. This action
will eliminate one 1.0 FTE Utility Marketing Program Administrator and eliminate two vacant 0.5 FTE vacant Resource
Planner positions in the Utilities Department. Adding 1.0 FTE Utility Marketing Program Administrator will facilitate overall
energy program management; this need has grown since the City adopted energy efficiency requirements beyond the
State minimums. Since the City is now utilizing 100% renewable energy for electricity commodity purchases, the focus
for carbon reduction efforts has shifted from electric commodity purchases to expanding the use of electrification
throughout the City from other utility sources. (Ongoing savings: $8,000)
Performance Results
This action will help streamline energy program management.
Budget Reconciliation
Positions Expenditures Revenues
Net
Gas Fund
UTILITIES
424 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
2 Resource Management Administrative Staffing
Realignment -0.10 (1,672)0 (1,672)
This ongoing action will eliminate 0.25 FTE Administrative Associate II, 0.10 FTE Project Specialist, and add 0.25
Program Assistant II in this fund as a part of the Resource Management Division department-wide realignment to ensure
staffing levels commensurate with current workload needs and meet the City's sustainability goals. This action will add
one 1.0 FTE Program Assistant II position; eliminate one 1.0 FTE Administrative Associate II position, one 0.48 FTE
Project Specialist position, and one vacant 0.48 FTE Project Specialist position in the Utilities Department . Currently the
Utilities Sustainability and Efficiency programs rely on hourly employees to provide regular customer program support;
however, the hourly positions have been difficult to fill on an extended basis. This action will allow more continuity of
internal and external support for the Sustainability and Efficiency programs and will enable staff development for
succession planning purposes throughout the Resource Management Division. (Ongoing savings: $600)
Performance Results
The full-time Program Assistant II position will streamline customer support and service delivery, while providing
administrative support for these programs.
3 Resource Management Resource Planning
Staffing Realignment 0.10 24,236 0 24,236
This ongoing action will add 0.10 FTE Senior Resource Planner position in this fund as a part of the Resource
Management Division department-wide realignment to ensure staffing is commensurate with current workload needs
and meet the City's sustainability goals. This action will increase one vacant 0.5 FTE Senior Resource Planner position
to 1.0 FTE Senior Resource Planner in the Utilities Department. The Resource Management Division manages the City's
electric, water, and gas supply contracts, which included annual utility commodity purchases of approximately $90
million for electric, $22 million for water, and $15 million for gas. Attracting and retaining experienced high-level talent
across multiple utilities is important; the City competes with other Community Choice Aggregators (CCAs) in the
Electricity industry to recruit in the Bay Area. Adding a full-time Senior Resource Planner will enable the team to
implement tasks under the Sustainability and Climate Action Plan while preparing for anticipated Senior Resource
Planner retirements expected in the next few years. (Ongoing costs: $25,300)
Performance Results
The full-time Senior Resource Planner will enhance the City's ability to pursue the City's sustainability and carbon
reduction goals, without diverting staffing resources from core functions.
4 Elwell Court Improvements 0.00 67,452 0 67,452
This one-time action will increase rental expenses for one year on office space rented and occupied by staff from the
Utilities Department at Elwell Court. This increase will fund the costs of renovation and associated moving expenses.
Under the current lease agreement, the tenant, the City of Palo Alto, is responsible for improvements and repairs within
the rented space. While minor improvements have been performed on an as-needed basis, renovations are needed to
address the worn out interior and to bring the space in compliance with the American Disability Act (ADA) requirements.
Elwell has been rented for over 20 years and provides more than 16,000 square feet of office space for 45 full time
employees. (Ongoing costs: $0)
Performance Results
Updating the rented space at Elwell Court will provide employees with a safe and comfortable environment while also
complying to the American Disability Act (ADA) requirements.
Budget Adjustments
Budget Adjustments Positions Expenditures Revenues
Net
Gas Fund
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 425
WASTEWATER
COLLECTION FUND
Description
In 1898, Palo Alto approved $28,000 in bond money to fund construction
of the City’s first sewer network, which was completed in 1899. Private
cesspools and privies were banned, and the City Health Officer had
residents connected to the sewer system within a few years.
Wastewater Collection’s staff is responsible for design, construction,
operation, and maintenance of approximately 216 miles of sewer mains
and over 18,000 City-owned laterals. Staff continues overlapping the
design and construction elements of rehabilitation and augmentation
projects. Wastewater Collection’s priorities are: maintaining
infrastructure reliability; identifying problems in mains and service
laterals through expanded use of video technology; complying with all
regulatory requirements; and maintaining its excellent safety record.
Accomplishments
Q Completed construction of Sanitary Sewer Replacement Project (SSR 28) Part A to replace
approximately 477 linear feet of sewer main pipelines the Jr. Museum and Zoo.
Q Completed design and solicitation package of Sanitary Sewer Replacement Project (SSR
28) Part B to replace approximately 6,000 linear feet of sewer main pipelines on Oregon
Avenue and rehabilitate 2,000 linear feet of sewer main pipelines on lower Page Mill Road
and Colorado Avenue.
Q Started design of Sanitary Sewer Replacement Project 29 (SSR 29) to replace
approximately 16,000 linear feet of sewer main pipelines in the Charleston Meadows
neighborhood.
Q Updated Utility Standards for wastewater specifications and details.
UTILITIES
426 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Initiatives
Q Complete construction of Sanitary Sewer Replacement Project SSR 28 Part B to replace
approximately 6,000 linear feet of sewer main pipelines on Oregon Avenue and rehabilitate
2,000 linear feet of sewer main pipelines on lower Page Mill Road and Colorado Avenue.
Q Complete design of Sanitary Sewer Replacement Project 29 (SSR29) to replace
approximately 16,000 linear feet of sewer main pipelines in the Charleston Meadows
neighborhood.
Q Solicit proposals and perform evaluation of replacement software for Wastewater Enterprise
Asset Management System.
Q Update the wastewater utility’s cost of service study
Goals and Objectives
GOAL 1
Maintain and provide reliable and cost-effective wastewater services to customers.
Objectives:
Q Clean and maintain sewer mains in commercial areas on a quarterly basis.
Q Clean and video a minimum of 17%, or 3,060, of the City-owned laterals annually to comply
with the City’s Sewer Overflow Reduction Plan.
Q Maintain a low level of inflow and infiltration of saltwater into the City’s wastewater system.
Q Maintain the integrity of the City’s wastewater collection system by replacing mains and
laterals as identified in the Wastewater Collection System Rehabilitation/Augmentation
Capital Improvement Project plan.
Q Minimize sanitary sewer overflows and stoppages.
Q Maintain a fleet of dependable vehicles to provide high quality cleaning and servicing of the
sewer system.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 427
Key Performance Measures
Workload Measures
MAINTAIN AND PROVIDE RELIABLE SERVICES
Goal Maintain and provide a reliable wastewater system to customers.
Objective
Inspect and clean 100 percent of the sewer mains in commercial areas on a
quarterly basis. Clean and video a minimum of 17 percent of the City-owned
laterals annually to comply with the City's Sewer Overflow Reduction Plan.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Number of miles of sewer lines
cleaned/treated in a fiscal year 61.00 134.00 75.00 75.00 75.00
Percentage of sewer laterals
inspected annually 19.00%19.00%18.00%18.00%18.00%
Description
The purpose of the Sewer System Management Plan (SSMP) is to maintain and
improve the condition of the collection system infrastructure; control infiltration
and provide appropriate sewer capacity; and minimize the number and impact of
sanitary sewer overflows. The goal is to perform sewer main cleaning of the entire
collection system every 30 months (81.6 miles per year). This measures
inspections and maintenance of 17 percent of City-owned laterals annually using
closed-circuit television (CCTV) inspection data, including results of the on-going
crossbore lateral inspection program, to target sewer mains and lower laterals for
rehabilitation and replacement.
Purpose To prevent blockage, sewer overflows, and to comply with the City's SSMP, all the
City's sewer mains must be cleaned within 30 months.
Status
The City is meeting the objectives of its SSMP; through the implementation of an
aggressive sewer main cleaning, the number of blockages and overflows has
decreased. The division is on target to complete inspection of 19%, or 3,528,
laterals of 18,141 in the City.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Number of Customer Accounts
(Wastewater)22,216 21,979 22,010 21,979 22,010
Number of sewage overflows in a
fiscal year 100 65 63 61 58
Percent of sewage spill responses
within two hours 94.00%98.00%100.00%100.00%100.00%
Percent of surveyed residents rating
the quality of the Sewer Service as
good/excellent
88.00%85.00%89.00%86.00%86.00%
Percent of miles of sewer lines
replaced 1.20%0.04%1.50%1.00%1.00%
UTILITIES
428 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
Dollars by Division
CIP Wastewater Collection Fund 10,265,576 2,948,288 6,631,085 7,965,240 1,334,155 20.1%
Wastewater Collection
Administration 2,379,821 2,024,750 2,648,640 2,719,148 70,508 2.7%
Wastewater Collection Customer
Service 274,932 283,291 332,034 355,693 23,660 7.1%
Wastewater Collection Engineering
(Operating)291,893 345,136 479,537 560,183 80,645 16.8%
Wastewater Collection Operations
and Maintenance 11,149,370 12,279,116 13,783,976 15,097,480 1,313,504 9.5%
Total 24,361,592 17,880,581 23,875,272 26,697,743 2,822,471 11.8%
Dollars by Category
Salary & Benefits
Healthcare 541,581 530,834 621,177 659,170 37,993 6.1%
Other Benefits 50,285 65,624 78,258 88,978 10,720 13.7%
Overtime 250,958 204,273 150,985 154,911 3,926 2.6%
Pension 673,275 748,942 867,095 1,271,815 404,720 46.7%
Retiree Medical 136,521 143,626 259,629 267,418 7,789 3.0%
Salary 2,741,131 2,238,681 3,050,134 3,192,081 141,947 4.7%
Workers' Compensation 31,589 19,139 68,779 104,473 35,695 51.9%
Total Salary & Benefits 4,425,340 3,951,119 5,096,057 5,738,846 642,789 12.6%
Allocated Charges 918,413 1,173,511 2,540,312 2,723,456 183,143 7.2%
Contract Services 114,936 95,622 248,986 248,986 ——%
Debt Service 42,568 38,190 129,001 129,001 ——%
Facilities & Equipment 214 —12,828 12,828 ——%
General Expense 59,133 67,985 125,420 122,900 (2,520)(2.0)%
Operating Transfers-Out 414,853 442,062 294,055 274,068 (19,987)(6.8)%
Rents & Leases 396,092 432,531 419,562 480,121 60,558 14.4%
Supplies & Material 272,399 270,575 380,618 380,618 ——%
Transfer to Infrastructure 50,002 —————%
Utility Purchase 8,390,646 9,559,183 10,276,371 11,233,922 957,551 9.3%
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 429
Capital Improvement Program 9,276,997 1,849,801 4,352,062 5,352,998 1,000,937 23.0%
Total Dollars by Expense
Category 24,361,592 17,880,581 23,875,272 26,697,743 2,822,471 11.8%
Revenues
Charges for Services 20,955 22,450 10,000 10,000 ——%
Charges to Other Funds 30,107 30,107 30,890 31,693 803 2.6%
Net Sales 18,237,556 18,026,146 19,835,873 21,106,047 1,270,174 6.4%
Other Revenue 245,565 229,212 1,069,995 1,082,534 12,539 1.2%
Return on Investments 215,909 169,663 266,500 297,700 31,200 11.7%
Total Revenues 18,750,093 18,477,578 21,213,257 22,527,974 1,314,716 6.2%
Positions by Division
CIP Wastewater Collection Fund 12.52 12.52 12.52 12.52 ——%
Wastewater Collection Customer
Service 2.19 2.22 2.22 2.22 ——%
Wastewater Collection Engineering
(Operating)1.40 1.40 1.40 1.40 ——%
Wastewater Collection Operations
and Maintenance 13.06 12.86 13.02 13.02 ——%
Total 29.17 29.00 29.16 29.16 ——%
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
Account Specialist 0.23 0.23 0.23 0.23 —15,229
Administrative Associate II 0.40 0.40 0.40 0.40 —28,394
Assistant Director Utilities
Engineering 0.15 0.15 0.15 0.15 —29,234
Assistant Director Utilities
Operations 0.10 0.10 0.10 0.10 —21,728
Business Analyst 0.75 0.75 0.75 0.75 —104,607
Cement Finisher 0.50 0.76 0.76 0.76 —65,415
Contracts Administrator 0.05 0.05 0.05 0.05 —5,877
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
UTILITIES
430 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Coordinator Utilities Projects 1.10 1.10 1.10 1.10 —113,895
Customer Service Representative 1.20 1.45 1.45 1.45 —102,009
Customer Service Specialist-Lead 0.25 0.25 0.25 0.25 —20,686
Engineer 1.00 1.00 1.00 1.00 —119,331
Engineering Manager - Electric 0.15 0.15 0.15 0.15 —30,841
Engineering Manager - WGW 0.34 0.34 0.34 0.34 —66,555
Engineering Technician III 0.45 0.45 0.45 0.45 —40,153
Equipment Operator 0.26 —————
Heavy Equipment Operator 0.23 0.23 0.23 0.23 —20,636
Heavy Equipment Operator -
Install/Repair 3.15 3.15 3.15 3.15 —274,831
Industrial Waste Investigator 0.50 0.50 0.50 0.50 —49,547
Inspector, Field Services 1.68 1.68 1.68 1.68 —161,768
Maintenance Mechanic-Welding 0.20 0.20 0.20 0.20 —19,158
Manager Utilities Credit &
Collection 0.15 0.15 0.15 0.15 —22,973
Manager Utilities Operations WGW 0.30 0.30 0.30 0.30 —53,140
Program Assistant I 0.34 0.34 0.34 0.34 —24,487
Project Engineer 2.00 2.00 2.00 2.00 —256,874
Restoration Lead 0.26 0.26 0.26 0.26 —24,330
Senior Engineer 1.30 1.30 1.30 1.30 —199,706
Senior Mechanic 0.33 0.33 0.33 0.33 —33,189
Utilities Engineer Estimator 0.47 0.47 0.47 0.47 —50,559
Utilities Field Services
Representative 1.25 1.25 1.25 1.25 —121,829
Utilities Install Repair-Lead-Welding
Certified 0.24 0.24 0.24 0.24 —25,475
Utilities Install Repair-Welding
Certified 0.36 0.36 0.36 0.36 —32,933
Utilities Install/Repair 4.25 4.25 4.25 4.25 —403,909
Utilities Install/Repair-Lead 2.00 2.00 2.00 2.00 —207,443
Utilities Locator 0.39 0.39 0.39 0.39 —34,889
Utilities Safety Officer 0.10 0.10 0.10 0.10 —12,846
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 431
Utilities Supervisor 1.72 1.72 1.72 1.72 —233,206
Sub-total: Full-Time Equivalent
Positions 28.15 28.40 28.40 28.40 —3,027,682
Temporary/Hourly 1.02 0.60 0.76 0.76 —50,662
Total Positions 29.17 29.00 29.16 29.16 —3,078,344
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
UTILITIES
432 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Budget Reconciliation
Positions Expenditures Revenues
Net
Wastewater
Collection
Fund
Prior Year Budget 29.16 23,875,272 21,213,257 2,662,015
One-time Prior Year Budget Adjustments
Supplemental Pension Trust Fund Contribution — (43,849) — (43,849)
General Liability Savings (one-time FY 2019
Savings)— 7,000 — 7,000
Workers' Compensation Savings (one-time FY
2019 Savings)— 27,409 — 27,409
One-time Prior Year Budget Adjustments —(9,440)—(9,440)
Adjustments to Costs of Ongoing Activities
Salary and Benefits Adjustments — 334,287 — 334,287
Proactive Contributions to City’s Unfunded
Pension Liability — 139,883 — 139,883
FY 2019 Catch-Up Proactive Contributions to
City’s Unfunded Pension Liability — 136,900 — 136,900
Wastewater Collection Customer Sales Revenue
(7% Rate Increase)— (72) 1,270,174 (1,270,247)
Return on Investments — — 31,200 (31,200)
Utility Payment Processing — — 803 (803)
Transfer to Water Fund (WS-02014 Water, Gas,
Wastewater Utility GIS Data)— 4,429 — 4,429
Rents & Leases Expenditure Alignment — 12,471 — 12,471
Wastewater Treatment Expenses — 957,551 — 957,551
Capital Improvement Program — 1,019,046 12,539 1,006,507
General Fund Cost Allocation Plan — 129,009 — 129,009
Liability Insurance Allocated Charges — 3,430 — 3,430
Printing & Mailing Allocated Charges — 688 — 688
Public Works Services Allocated Charges — 670 — 670
Utilities Administration Allocated Charges — 63,348 — 63,348
Vehicle Replacement & Maintenance Allocated
Charges — (17,815) — (17,815)
Adjustments to Costs of Ongoing Activities —2,783,825 1,314,717 1,469,108
Total FY 2020 Base Budget 29.16 26,649,656 22,527,974 4,121,682
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 433
Budget Proposals
1 Elwell Court Improvements — 48,087 — 48,087
Budget Changes —48,087 —48,087
Total FY 2020 Proposed Budget 29.16 26,697,743 22,527,974 4,169,769
Budget Adjustments
Budget Adjustments Positions Expenditures Revenues
Net
Wastewater
Collection
Fund
1 Elwell Court Improvements 0.00 48,087 0 48,087
This one-time action will increase rental expenses for one year on office space rented and occupied by staff from the
Utilities Department at Elwell Court. This increase will fund the costs of renovation and associated moving expenses.
Under the current lease agreement, the tenant, the City of Palo Alto, is responsible for improvements and repairs within
the rented space. While minor improvements have been performed on an as-needed basis, renovations are needed to
address the worn out interior and to bring the space in compliance with the American Disability Act (ADA) requirements.
Elwell has been rented for over 20 years and provides more than 16,000 square feet of office space for 45 full time
employees. (Ongoing costs: $0)
Performance Results
Updating the rented space at Elwell Court will provide employees with a safe and comfortable environment while also
complying to the American Disability Act (ADA) requirements.
Budget Reconciliation
Positions Expenditures Revenues
Net
Wastewater
Collection
Fund
UTILITIES
434 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
WATER FUND
Description
From 1895 until 1928, the City’s water supply came from deep wells.
When the groundwater supply started to decline, water was purchased
from the San Francisco Regional Water System to supplement the local
water system. Since 1962, when Palo Alto’s wells were discontinued as
the primary water system, 100 percent of the water has come from the
Regional Water System: 85 percent derived from snow melt flowing into
the Hetch Hetchy Reservoir and the balance from runoff stored in San
Francisco Bay Area reservoirs. The Water Fund focuses on increasing
infrastructure reliability and responsiveness to meet the City’s water
supply needs during an emergency; maintaining high-quality and reliable
sources of water; updating water efficiency goals; and implementing
water efficiency programs and services. Additionally, the engineering
division is implementing a seismic upgrade to the existing reservoirs,
wells and receiving stations to increase supply reliability during
catastrophic emergencies.
Accomplishments
Q Updated the business plan to explore the economic feasibility of installing Phase III of the
recycled water irrigation pipeline to serve the Stanford Research Park.
Q Completed construction of Water Main Replacement project (WMR 26) project in University
Park and Downtown North to replace approximately 13,000 linear feet of water main
pipelines, 200 service pipelines, and 40 fire hydrants.
Q Completed construction of the Water Main Replacement project as part of the Upgrade
Downtown project to replace approximately 3,155 linear feet of water main pipelines, 52
service pipelines, and 10 fire hydrants.
Q Started design of Water Main Replacement project (WMR 27) in the Oak Creek and
Greenmeadow neighborhoods to replace approximately 10,000 linear feet of water main
pipelines.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 435
Q Completed the geological investigation of the foundation leaks at the Mayfield Tank and
provided a report containing results of the subsurface explorations and laboratory testing
and recommended repair alternatives.
Q Completed a survey and geotechnical investigation of the Corte Madera reservoir site.
Q Completed two transmission valve replacements on Arastradero Road.
Q Completed the Conceptual Engineering Report (CER) and 25% of the Drawings and
Specification for the Corte Madera Reservoir.
Q Completed seismic work and upgrades for Arastradero, Page Mill, and California Avenue
turnouts.
Q Implemented a water leak policy, applying financial credits to residential and commercial
accounts experiencing high bills due to unforeseen leaks.
Q Completed the second annual water loss audit (SB 555) to the State Water Resource
Control Board (SWRCB).
Initiatives
Q Collaborate with Public Works and Santa Clara Valley Water District to complete the
Recycled Water Strategic Plan, a comprehensive evaluation of all potential recycled water
supply options including non-potable and potable reuse options.
Q Update Water Integrated Resources Plan and consider future role of recycled water in water
supply portfolio.
Q Update the water utility’s cost of service and benchmark studies.
Q Complete Water Main Replacement project (WMR 26) and Upgrade Downtown project in
University Park and Downtown North.
Q Begin construction of Water Main Replacement project (WMR 27) in the Oak Creek and
Greenmeadow neighborhoods to replace approximately 10,000 linear feet of water main
pipelines.
Q Design Water Main Replacement project (WMR 28) in Duveneck, Barron Park, and
Charleston Meadows neighborhoods to replace approximately 13,000 linear feet of water
main pipelines.
Q Begin construction of the Corte Madera Reservoir Replacement.
Q Complete the water system improvement evaluation study and emergency plan study.
Q Plan for the next reservoir replacement project based on the water system improvement
findings of the consultant.
Q Complete the Old Page Mill transmission main repair and valve installation in the foothills
area west of Highway 280.
Q Begin design of the Mayfield Reservoir Screen Replacement project.
UTILITIES
436 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Q Enhance supervisory control and data acquisition (SCADA) system for the El Camino Real
Pump Station and Mayfield Pump Station to improve operational flexibility and system
resiliency.
Goals and Objectives
GOAL 1
Provide safe and clean drinking water for customers.
Objectives:
Q Ensure drinking water meets all regulatory standards.
Q Maintain and update water infrastructure to ensure reliable service.
Q Educate customers about backflow prevention as part of the City’s Cross Connection
Control Program.
Q Ensure adequate water supplies are available to meet existing and future water demands.
Q Complete seismic upgrades to water system (e.g. reservoirs, receiving stations, and wells).
GOAL 2
Increase environmental sustainability of the water supply system.
Objective:
Q Increase water conservation and efficiency participation.
Q Develop programs to facilitate the use of non-traditional, non-potable water resources (e.g.
storm water, recycled water, gray water).
Q Collaborate with the Regional Water Quality Control Plant and the Santa Clara Valley Water
District to evaluate multiple water reuse opportunities to meet both near and long-term
water demands.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 437
Key Performance Measures
PROVIDE SAFE AND CLEAN DRINKING WATER FOR OUR CUSTOMERS
Goal Provide safe and clean drinking water for customers.
Objective Ensure drinking water meets all regulatory standards.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Percentage of customer-owned
water backflow prevention devices
in compliance
91.00%90.00%92.00%92.00%92.00%
Description
Customer-owned and maintained backflow devices are an integral part of the
City's Cross Connection Control Program, which began in early 2010. The
devices help to ensure that no contaminants of any kind (e.g. chemicals, debris,
reclaimed water) enter the potable water system.
Purpose
The California Department of Public Health provides regulations for the City and
its customers through California Code of Regulations, Title 17. These regulations
specify the types of hazards that require backflow devices.
Status
The City is achieving a compliance rate of up to 90-95 percent on an annual
basis. There are 3,979 backflow devices. This number is growing every year as
current codes require backflow installation for residences as well as commercial
properties.
WATER EFFICIENCY
Goal Increase environmental sustainability of the water supply system.
Objective Increase water conservation and efficiency participation.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Annual savings achieved through
water efficiency programs as a
percentage of total sales
1.40%1.07%0.91%0.91%0.91%
Description
The department measures specific savings achieved by the installation of water
efficiency improvements through the programs that the City offers through the
Santa Clara Valley Water District. The California drought greatly affected the City's
water savings numbers with the largest amount of savings attributed to the non-
residential installation of drought tolerant landscapes and water efficient irrigation
hardware.
Purpose
Improving water efficiency for homes and businesses can result in water supply,
water operations, and wastewater processing savings. This measure supports the
Water Fund's ten-year goal to reduce expected water use by 20 percent by 2020.
Status
Water efficiency program savings were significantly higher from FY 2015 through
FY 2017 compared to previous years due to the California drought and the
Governor's Executive Order mandating water conservation. However, after the
drought ended and rainy seasons resumed, program participation decreased in
FY 2018 and leveled off in FY 2019. As program marketing and general drought
awareness effort continues, FY 2019 levels are anticipated to to be maintained at
acceptable levels of program participation.
UTILITIES
438 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Workload Measures
WATER QUALITY
Goal Ensure the provision of safe and clean drinking water for customers.
Objective Safe testing of drinking water to meet all regulatory standards.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Percentage of samples passed
from all sampling stations 100.00%100.00%100.00%100.00%100.00%
Description
The City of Palo Alto (CPA) regularly collects and tests water samples from
connection points between the San Francisco Public Utilities Commission/City of
Palo Alto (SFPUC/CPA), storage reservoirs, emergency wells, residential areas,
and sample station locations within the distribution system to ensure that the
water quality meets all California Department of Public Health (CDPH) and U.S.
Environmental Protection Agency (EPA) prescribed regulations that limit the
amount of contaminants in the drinking water. The City has 18 sampling stations
and collects 84-105 samples monthly to test levels of chlorine residual, coliform
and pH levels are within regulatory guidelines. All sample results are reported to
CDPH on a monthly basis.
Purpose Complying with regulations guarantees the City maintains its high standards of
water quality and avoids fines.
Status Palo Alto drinking water continues to be in complete compliance with all existing
county, state, and federal standards for water quality.
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
FY 2019
Estimated
FY 2020
Proposed
Percent of miles of water mains
replaced 0.20%2.00%1.00%0.10%1.00%
Number of Customer Accounts
(Water)20,213 20,000 20,213 20,213 20,219
Percent of surveyed rating the
quality of the Drinking Water (Water)
as "Good" or "Excellent"
88.00%87.00%88.00%88.00%88.00%
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 439
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
Dollars by Division
CIP Water Fund 3,453,732 8,504,410 16,043,824 15,945,834 (97,990)(0.6)%
Water Administration 7,038,937 7,639,414 8,782,413 8,538,901 (243,513)(2.8)%
Water Customer Service 1,488,960 1,625,334 2,282,720 2,443,155 160,435 7.0%
Water Engineering (Operating)355,852 354,598 537,839 641,946 104,107 19.4%
Water Operations and Maintenance 5,291,117 5,732,995 7,681,920 8,371,072 689,153 9.0%
Water Resource Management 20,943,416 22,880,271 23,699,431 23,371,160 (328,271)(1.4)%
Total 38,572,014 46,737,022 59,028,147 59,312,068 283,921 0.5%
Dollars by Category
Salary & Benefits
Healthcare 822,738 821,267 958,317 1,021,133 62,815 6.6%
Other Benefits 94,370 119,660 142,932 164,802 21,870 15.3%
Overtime 231,860 199,089 274,930 282,078 7,148 2.6%
Pension 1,165,780 1,246,740 1,428,203 2,091,774 663,571 46.5%
Retiree Medical 285,198 300,042 427,827 440,662 12,835 3.0%
Salary 4,627,885 4,959,173 5,154,784 5,372,634 217,850 4.2%
Workers' Compensation 225,163 92,187 118,581 181,202 62,621 52.8%
Total Salary & Benefits 7,452,994 7,738,159 8,505,574 9,554,284 1,048,710 12.3%
Allocated Charges 3,212,511 3,702,043 4,516,536 4,716,493 199,957 4.4%
Contract Services 155,818 190,454 819,002 819,002 ——%
Debt Service 1,757,088 1,697,010 3,222,606 3,222,606 ——%
Facilities & Equipment ——16,711 16,711 ——%
General Expense 417,045 511,796 667,170 658,077 (9,093)(1.4)%
Operating Transfers-Out 317,220 698,113 486,353 136,335 (350,018)(72.0)%
Rents & Leases 1,862,485 1,906,700 3,003,388 3,144,502 141,114 4.7%
Supplies & Material 413,824 451,691 610,982 610,982 ——%
Transfer to Infrastructure 84,211 5,700 ————%
Utility Purchase 20,075,377 21,957,711 22,620,000 22,177,643 (442,357)(2.0)%
Capital Improvement Program 2,823,442 7,877,646 14,559,826 14,255,434 (304,393)(2.1)%
Total Dollars by Expense
Category 38,572,014 46,737,022 59,028,147 59,312,068 283,921 0.5%
UTILITIES
440 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Revenues
Charges for Services 60,000 60,334 10,000 10,000 ——%
Charges to Other Funds 160,766 99,288 81,201 82,690 1,488 1.8%
From Other Agencies 512,301 500,773 576,632 576,632 ——%
Net Sales 42,740,545 44,595,981 42,357,861 46,831,149 4,473,288 10.6%
Operating Transfers-In 244,018 512,436 539,278 548,136 8,858 1.6%
Other Revenue 844,915 872,864 931,348 384,228 (547,120)(58.7)%
Return on Investments 772,015 869,689 775,300 1,153,200 377,900 48.7%
Total Revenues 45,334,560 47,511,365 45,271,620 49,586,035 4,314,415 9.5%
Positions by Division
CIP Water Fund 9.05 8.03 8.03 8.03 ——%
Water Customer Service 9.68 9.66 9.66 9.58 (0.08)(0.83)%
Water Engineering (Operating)1.37 1.35 1.35 1.35 ——%
Water Operations and Maintenance 25.44 25.34 24.85 24.85 ——%
Water Resource Management 2.44 3.52 3.02 3.12 0.10 3.31%
Total 47.99 47.90 46.92 46.94 0.02 0.04%
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
Account Specialist 0.23 0.23 0.23 0.23 —15,229
Administrative Associate II 0.75 0.65 0.65 0.50 (0.15)35,493
Assistant Director Utilities
Customer Support Services 0.20 0.20 0.20 0.20 —39,012
Assistant Director Utilities
Engineering 0.20 0.20 0.20 0.20 —38,979
Assistant Director Utilities
Operations 0.15 0.15 0.15 0.15 —32,592
Assistant Director Utilities/Resource
Management 0.25 0.25 0.25 0.25 —50,196
Business Analyst 1.73 1.53 1.20 1.20 —167,371
Cement Finisher 0.25 0.56 0.56 0.56 —48,200
Contracts Administrator 0.10 0.10 0.10 0.10 —11,754
Budget Summary
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change $
FY 2020
Change %
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 441
Coordinator Utilities Projects 1.09 1.09 1.09 1.09 —112,860
Customer Service Representative 1.56 1.81 1.81 1.81 —127,336
Customer Service Specialist 0.66 0.66 0.66 0.66 —51,059
Customer Service Specialist-Lead 0.59 0.59 0.59 0.59 —48,818
Electric Project Engineer ———0.30 0.30 40,534
Engineer 1.00 1.00 1.00 1.00 —119,331
Engineering Manager - Electric 0.15 0.15 0.15 0.15 —30,841
Engineering Manager - WGW 0.33 0.33 0.33 0.33 —64,597
Engineering Technician III 1.45 0.45 0.45 0.45 —40,153
Equipment Operator 0.31 —————
Gas and Water Meter Measurement
and Control Technician —0.80 0.80 0.80 —81,253
Gas and Water Meter Measurement
and Control Technician - Lead —0.20 0.20 0.20 —21,736
Gas System Technician II 0.10 —————
Heavy Equipment Operator 1.95 1.95 1.95 1.95 —174,953
Heavy Equipment Operator -
Install/Repair 0.20 0.20 0.20 0.20 —18,742
Inspector, Field Services 1.65 1.65 1.65 1.65 —158,879
Maintenance Mechanic-Welding 0.80 0.80 0.80 0.80 —76,632
Manager Customer Service 0.34 0.34 0.34 0.34 —51,569
Manager Utilities Compliance 0.50 0.50 0.50 0.50 —94,619
Manager Utilities Credit &
Collection 0.15 0.15 0.15 0.15 —22,973
Manager Utilities Operations WGW 0.50 0.50 0.50 0.50 —88,566
Manager Utilities Program Services 0.20 0.20 0.20 0.20 —29,956
Meter Reader 2.03 2.03 2.03 2.03 —134,144
Meter Reader-Lead 0.34 0.34 0.34 0.34 —24,036
Power Engineer 0.30 0.30 0.30 —(0.30)—
Principal Business Analyst 0.33 0.33 0.33 0.33 —58,248
Program Assistant I 0.33 0.33 0.33 0.33 —23,767
Program Assistant II ———0.15 0.15 11,613
Project Engineer 2.00 2.00 2.00 2.00 —256,874
Resource Planner 0.70 1.20 0.70 0.70 —89,477
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
UTILITIES
442 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Restoration Lead 0.31 0.31 0.31 0.31 —29,009
SCADA Technologist 0.80 0.80 0.80 0.80 —109,562
Senior Business Analyst 0.66 0.66 0.99 0.99 —146,869
Senior Engineer 1.00 1.00 1.00 1.00 —158,541
Senior Mechanic 0.34 0.34 0.34 0.34 —34,195
Senior Resource Planner 1.10 1.68 1.68 1.78 0.10 304,190
Senior Utilities Field Service
Representative 0.49 0.49 0.49 0.49 —51,085
Senior Water Systems Operator 2.00 2.00 2.00 2.00 —203,431
Substation Electrician 0.40 0.40 0.40 0.40 —47,025
Utilities Engineer Estimator 0.43 0.43 0.43 0.43 —46,073
Utilities Field Services
Representative 1.50 1.50 1.50 1.50 —146,195
Utilities Install Repair-Lead-Welding
Certified 0.46 0.46 0.46 0.46 —48,828
Utilities Install Repair-Welding
Certified 0.69 0.69 0.69 0.69 —63,121
Utilities Install/Repair 1.90 1.90 1.90 1.90 —180,571
Utilities Install/Repair Assistant 0.35 0.35 0.35 0.35 —28,212
Utilities Install/Repair-Lead 1.02 1.02 1.02 1.02 —97,936
Utilities Key Account
Representative 0.25 0.35 0.35 0.35 —38,070
Utilities Locator 0.34 0.34 0.34 0.34 —30,416
Utilities Marketing Program
Administrator 0.40 0.40 0.40 0.40 —41,328
Utilities Safety Officer 0.15 0.15 0.15 0.15 —19,269
Utilities Supervisor 2.91 2.91 2.91 2.91 —437,920
Water System Operator I 1.00 —————
Water System Operator II 3.34 3.34 3.34 3.34 —299,554
Sub-total: Full-Time Equivalent
Positions 45.26 45.29 44.79 44.89 0.10 5,053,791
Temporary/Hourly 2.73 2.61 2.13 2.05 (0.08)172,182
Total Positions 47.99 47.90 46.92 46.94 0.02 5,225,974
Staffing
Job Classification
FY 2017
Actuals
FY 2018
Actuals
FY 2019
Adopted
Budget
FY 2020
Proposed
Budget
FY 2020
Change FTE
FY 2020
Salary
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 443
Budget Reconciliation
Positions Expenditures Revenues
Net
Water Fund
Prior Year Budget 46.92 59,028,147 45,271,620 13,756,527
One-time Prior Year Budget Adjustments
Supplemental Pension Trust Fund Contribution — (72,005) — (72,005)
General Liability Savings (one-time FY 2019
Savings)— 12,068 — 12,068
Workers' Compensation Savings (one-time FY
2019 Savings)— 47,256 — 47,256
One-time Prior Year Budget Adjustments —(12,681)—(12,681)
Adjustments to Costs of Ongoing Activities
Salary and Benefits Adjustments — 511,620 — 511,620
Proactive Contributions to City’s Unfunded
Pension Liability — 229,724 — 229,724
FY 2019 Catch-Up Proactive Contributions to
City’s Unfunded Pension Liability — 225,700 — 225,700
Water Customer Sales Revenue (1% Rate
Increase)— — 3,898,119 (3,898,119)
Water Commodity Purchases Expenditure — (442,357) — (442,357)
Return on Investment — — 377,900 (377,900)
Transfer to Electric Fund (EL-11014 - Smart Grid
Installation)— (290,000) — (290,000)
Revenue from Water System Customer
Connections (WS-80013)— — 27,880 (27,880)
Transfer From Wastewater and Gas Fund (WS-
02014 Water, Gas, Wastewater Utility GIS Data)— — 8,858 (8,858)
Utilities Payment Processing — — 1,658 (1,658)
Rents & Leases Expenditure Alignment — 71,471 — 71,471
Capital Improvement Program — (294,527) — (294,527)
General Fund Cost Allocation Plan — (65,240) — (65,240)
Liability Insurance Allocated Charges — 9,822 — 9,822
Printing & Mailing Services Allocated Charges — 3,898 — 3,898
Public Works Services Allocated Charges — 122 — 122
Stormwater Management Allocated Charges — 60 — 60
Utilities Administration Allocated Charges — 49,987 — 49,987
Utilities Allocated Charges — 111,642 — 111,642
Vehicle Replacement & Maintenance Allocated
Charges — 79,719 — 79,719
UTILITIES
444 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
Adjustments to Costs of Ongoing Activities —201,641 4,314,415 (4,112,774)
Total FY 2020 Base Budget 46.92 59,217,107 49,586,035 9,631,072
Budget Proposals
1 Resource Management Administrative Staffing
Realignment (0.08) (2,215) — (2,215)
2 Engineering Staffing Alignment — 3,297 — 3,297
3 Resource Management Resource Planning
Staffing Realignment 0.10 24,236 — 24,236
4 Elwell Court Improvements — 69,643 — 69,643
Budget Changes 0.02 94,960 —94,960
Total FY 2020 Proposed Budget 46.94 59,312,068 49,586,035 9,726,033
Budget Reconciliation
Positions Expenditures Revenues
Net
Water Fund
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET 445
Budget Adjustments
Budget Adjustments Positions Expenditures Revenues
Net
Water Fund
1 Resource Management Administrative Staffing
Realignment -0.08 (2,215)0 (2,215)
This ongoing action will eliminate 0.15 FTE Administrative Associate II, 0.08 Project Specialist, and add 0.15 Program
Assistant II in this fund as a part of the Resource Management Division department-wide realignment to ensure staffing
levels commensurate with current workload needs and meet the City's sustainability goals. This action will add one 1.0
FTE Program Assistant II position; eliminate one 1.0 FTE Administrative Associate II position, one 0.48 FTE Project
Specialist position, and one vacant 0.48 FTE Project Specialist position in the Utilities Department Currently the Utilities
Sustainability and Efficiency programs rely on hourly employees to provide regular customer program support; however,
the hourly positions have been difficult to fill on an extended basis. This action will allow more continuity of internal and
external support for the Sustainability and Efficiency programs and will enable staff development for succession planning
purposes throughout the Resource Management Division. (Ongoing savings: $1,700)
Performance Results
The full-time Program Assistant II position will streamline customer support and service delivery, while providing
administrative support for these programs.
2 Engineering Staffing Alignment 0.00 3,297 0 3,297
This ongoing action will reclassify 0.30 FTE Power Engineer to an Electric Project Engineer for a net zero FTE change in
this fund as a part of the Utilities Department engineering staff alignment. The department-wide reclassification of two
1.0 FTE Power Engineer positions to two 1.0 FTE Electric Project Engineers will align with current workload needs to
meet the City's sustainability goals. These positions are partially funded in the Electric, Fiber, and Water funds. The
Electric Project Engineer position requires a Professional Engineering (PE) license and is qualified to work independently
on electric engineering projects with minimal guidance from concept through design, construction and closeout of the
project The Power Engineer position does not require a PE and works under the supervision of a Senior Electrical
Engineer. This action facilitates retention of engineering staff and enhances succession planning. (Ongoing costs:
$3,400)
Performance Results
This action assists the Utilities Department's Strategic Plan goal to recruit and retain high performing employees,
preventing loss of institutional knowledge, and mitigating service impact to customers.
3 Resource Management Resource Planning
Staffing Realignment 0.10 24,236 0 24,236
This ongoing action will add 0.10 FTE Senior Resource Planner position in this fund as a part of the Resource
Management Division department-wide realignment to ensure staffing is commensurate with current workload needs
and meet the City's sustainability goals. This action will increase one vacant 0.5 FTE Senior Resource Planner position
to 1.0 FTE Senior Resource Planner in the Utilities Department. The Resource Management Division manages the City's
electric, water, and gas supply contracts, which included annual utility commodity purchases of approximately $90
million for electric, $22 million for water, and $15 million for gas. Attracting and retaining experienced high-level talent
across multiple utilities is important; the City competes with other Community Choice Aggregators (CCAs) in the
Electricity industry to recruit in the Bay Area. Adding a full-time Senior Resource Planner will enable the team to
implement tasks under the Sustainability and Climate Action Plan while preparing for anticipated Senior Resource
Planner retirements expected in the next few years. (Ongoing costs: $25,300)
Performance Results
The full-time Senior Resource Planner will enhance the City's ability to pursue the City's sustainability and carbon
reduction goals, without diverting staffing resources from core functions.
UTILITIES
446 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED OPERATING BUDGET
4 Elwell Court Improvements 0.00 69,643 0 69,643
This one-time action will increase rental expenses for one year on office space rented and occupied by staff from the
Utilities Department at Elwell Court. This increase will fund the costs of renovation and associated moving expenses.
Under the current lease agreement, the tenant, the City of Palo Alto, is responsible for improvements and repairs within
the rented space. While minor improvements have been performed on an as-needed basis, renovations are needed to
address the worn out interior and to bring the space in compliance with the American Disability Act (ADA) requirements.
Elwell has been rented for over 20 years and provides more than 16,000 square feet of office space for 45 full time
employees. (Ongoing costs: $0)
Performance Results
Updating the rented space at Elwell Court will provide employees with a safe and comfortable environment while also
complying to the American Disability Act (ADA) requirements.
Budget Adjustments
Budget Adjustments Positions Expenditures Revenues
Net
Water Fund
PROPOSED
CAPITAL
BUDGET
FISCAL YEAR 2020
Attachment B
CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 337
ELECTRIC FUND
ELECTRIC FUND
338 ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
ELECTRIC FUND Overview
The City of Palo Alto is the only municipality in California that operates a full suite of City-
owned utility services. The municipal electric power system began operation in 1900 and con-
tinues to provide safe, reliable, cost effective electric service to residents and customers of Palo
Alto. For the 2020-2024 Capital Improvement Program (CIP), approximately $79.9 million is
projected, with $20.5 million budgeted in Fiscal Year 2020, of which $7.0 million is recom-
mended to be reappropriated from Fiscal Year 2019. Overall, a total of 37 projects are planned
over the 5-year CIP.
Major projects funded in the
2020-2024 CIP include Electric
Customer Connections ($12.5
million), Smart Grid Technology
Installation ($12.3 million), total
4/12kV conversion projects ($7.9
million), Wood Pole Replace-
ment ($7.5 million), Electric Sys-
tem Improvements ($7.5 million),
various underground system
rebuild projects ($6.5 million),
Overhead to Underground Con-
version ($4.5 million),
and Facility Relocation for Cal-
train Modernization ($2.9 mil-
lion). The budget for the Electric Fund CIP can be categorized into three types of projects:
Customer Connections, System Improvements, and Undergrounding Projects.
Infrastructure Inventory
CLASSIFICATION QUANTITY
Miles of 60kV sub transmission lines 18 miles
Substations (w/300 MVA total capacity)9
Traffic Signals (intersections) maintained 101
Streetlights maintained 6,600
Overhead Primary Distribution 117 miles
Underground Primary Distribution 187 miles
Overhead Secondary Distribution 94 miles
Underground Secondary Distribution 74 miles
$0
$4,000,000
$8,000,000
$12,000,000
$16,000,000
$20,000,000
$24,000,000
2016
Actuals
FY 2018
Actuals
FY 2020
Proposed
FY 2022
Projected
FY 2024
Projected
E le ctr i c Fu n d C apit al E x p endi tu res
ELECTRIC FUND
ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 339
Customer Connections
As customers’ electric power needs continually change due to equipment additions, new con-
struction, building expansions, building remodels, teardowns and rebuilds, and new building
occupancy types, the electric system must evolve to meet these needs. The Electric Customer
Connections Project, which is the largest project within the Electric Fund ($2.4 million in Fiscal
Year 2020, $12.4 million over the 2020-2024 CIP), is accounted for within this category. Projects
can range from new buildings associated with Stanford Hospital to upgrades of residential elec-
tric panels. These projects allow for the completion of work required to meet the needs of cus-
tomers who have applied for new or upgraded electric service, need temporary power for
construction, or require other services. The Electric Fund pays for a portion of these projects,
while remaining costs are supported by reimbursements from customers for project work per-
formed by the City.
Recent Accomplishments
In Fiscal Year 2018 the Utilities Electric Division completed over 350 customer service projects
with a total cost of $2.5 million and revenue of $1.8 million.
Q 1.2 MW Solar System at Hewlett Packard (HP) due to be completed by April 2019.
Q Two City garages with new solar rooftops under the Clean Local Energy Accessible Now
(CLEAN) program producing approximately 0.65 MW.
Q Completed phase one of the Veterans Affairs (VA) Hospital upgrades with the relocation of
the North electric substation in February 2019.
2020-2024 Capital Improvement Program
Recurring Projects
The Electric Customer Connections project, described above, is the only recurring project in this
category. Electric Engineering has received close to 200 applications for small cell attachments
to Electric utility streetlight and wood poles. The Electric Utility has about 6,500 wood poles
and 6,500 streetlight poles citywide which are of interest to the mobile phone companies. This
trend of small cell applications is anticipated to increase rapidly in the next few years which
would increase both the workload and associated revenue in the Electric Customer Connections
project.
Non-Recurring Projects
VA Hospital - Customer Load Requirements Project: This project has been reduced in scope and
folded into the Electric Customer Connections project. Utilities is working with the VA on their
plans and awaits a decision from VA on the interim electric feeder enhancement solution until
the new 60kV VA substation is built.
ELECTRIC FUND
340 ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
System Improvements
Key elements for ensuring reliable electric service to City of Palo Alto residents and customers
include replacing electric system components before they reach their end of life; ensuring there
is adequate capacity for the projected electric load; and installing protective equipment to min-
imize the impact of system problems. Projects in the System Improvements category allow for a
variety of improvements, including the replacement/upgrade of old cables and equipment and
bringing designs up to current standards, installation of protective equipment and switches,
conversion of the electric system from 4,160 Volts (4kV) to 12,470 Volts (12kV), and installation
of capacitors to improve efficiency.
The 2020-2024 CIP includes total funding of $62.3 million in this category, with $17.0 million
allocated in FY 2020. Significant projects in this category include Smart Grid Technology Instal-
lation ($12.3 million), 4/12kV conversion projects ($7.9 million), Electric System Improvements
($7.5 million), Wood Pole Replacements ($7.5 million), 60kV Circuit Breaker Replacements
($3.0 million), and various projects to rebuild underground districts and substation
components.
Recent Accomplishments
Q Added security cameras at two electric substations.
Q Completed replacement of one of twenty-five 60kV circuit breaker.
Q Completed installation of new line relays and relay cabinets for protection of Adobe Creek
to East Meadow and East Meadow to Maybell 60kV lines.
Q Completed feeder relay coordination review and testing of relays at nine city substations.
Q Completed other miscellaneous system improvement projects dealing with replacement of
deteriorated facilities or to improve system operation and reliability.
Q Completed phase I of Supervisory Control and Data Acquisition (SCADA) cybersecurity
upgrade.
Q Completed the Utilities Control Center room upgrade including new video screens and
consoles.
Q Engineered and completed replacement of 65 wood utility poles.
Q Facility Relocation for Caltrain Modernization Project engineering is scheduled to be
completed in June 2019 and construction will start in Fiscal Year 2020.
2020-2024 Capital Improvement Program
Recurring Projects
A total of $33.8 million is programmed for System Improvements recurring projects in the
2020-2024 CIP, with $14 million allocated in Fiscal Year 2020. Recurring projects in this cate-
gory include the following:
Q Communication System Improvements (Fiscal Year 2020: $0.1 million; 5-Year CIP: $0.5
million)
ELECTRIC FUND
ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 341
Q Electric Distribution System Improvements (Fiscal Year 2020: $1.5 million; 5-Year CIP: $7.5
million)
Q Electric Utility Geographic Information System (Fiscal Year 2020: $0.2 million; 5-Year CIP:
$0.8 million)
Q SCADA System Upgrades (Fiscal Year 2020: $0.2 million; 5-Year CIP: $0.9 million)
Q Substation Facility Improvements (Fiscal Year 2020: $0.2 million; 5-Year CIP: $1.0 million)
Q Substation Protection Improvements (Fiscal Year 2020: $0.3 million; 5-Year CIP: $1.5 million)
Q Underground System Rebuild (Fiscal Year 2020: $0.4 million; 5-Year CIP: $1.8 million)
Q Wood Pole Replacements (Fiscal Year 2020: $1.5 million; 5-Year CIP: $7.5 million)
Non-Recurring Projects
A total of $28.6 million is allocated in the 2020-2024 CIP for non-recurring System Improve-
ment projects. Significant projects include:
Q Facility Relocation for Caltrain Modernization (Fiscal Year 2020: $2.9 million)
Q Rebuild Underground District 20 (Fiscal Year 2020: $1.5 million)
Q Rebuild Underground District 23 (Fiscal Year 2020: $0.1 million; 5-Year CIP: $1.2 million)
Q Colorado/Hopkins System Improvement (Fiscal Year 2020: $0.2 million; 5 years CIP: $3.2
million)
Q Smart Grid Technology (Fiscal Year 2020: $0.3 million; 5 years CIP: $12.3 million)
Undergrounding Projects
The City of Palo Alto began a program to underground overhead electric, telephone, and cable
TV facilities in 1965 with a project along Oregon Expressway. Since that time, 45 Underground
Districts have been formed. The undergrounding of electrical lines is a joint process between
the City and AT&T, due to joint ownership of the poles, and Comcast, which leases pole space
from AT&T. All three entities share in the cost of the installation of underground conduit and
boxes necessary to enclose and protect wires and equipment. The City typically takes the lead
in the design, bidding, and construction processes with AT&T and Comcast reimbursing the City
for construction and administrative costs.
Recent Accomplishments
Q Underground District 46 - Completed installation of underground substructures (conduits
and boxes) near the intersection of El Camino Real and Arastradero Road/West Charleston
Road.
Q Underground District 47 – Completed the installation of underground electric utility system
in the area bounded by Middlefield Road/Addison Avenue/Cowper Street/Homer Avenue.
Eighty percent of customers have completed the service conversions and connection to the
underground system.
ELECTRIC FUND
342 ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
2020-2024 Capital Improvement Program
Non-Recurring Projects
A total of $5.1 million is allocated in the 2020-2024 CIP for non-recurring Undergrounding proj-
ects, with $1.0 million allocated in FY 2020. Significant projects in this category include the fol-
lowing:
Q Underground District 42 ($2.0 million), which will underground overhead utility facilities in
the area near Embarcadero Road/Emerson Street/Middlefield Road.
Q Underground District 43 ($2.1 million), which will underground overhead utility facilities in
the area along Alma Street and Embarcadero Road.
Summary of Capital Activity
ELECTRIC FUND
Project
Number Project Title
FY 2018
Actuals
FY 2019
Estimate
FY 2020
Proposed FY 2021 FY 2022 FY 2023 FY 2024
5-Year
Total
Source of Funds
Transfers from Other Funds
Gas Fund
EL-11014 Smart Grid Technology Installation 300,000 180,000 0 0 0 0 410,000 410,000
Total Gas Fund Transfers 300,000 180,000 0 0 0 0 410,000 410,000
Water Fund
EL-11014 Smart Grid Technology Installation 300,000 290,000 0 0 0 0 610,000 610,000
Total Water Fund Transfers 300,000 290,000 0 0 0 0 610,000 610,000
Total Transfers from Other Funds 600,000 470,000 0 0 0 0 1,020,000 1,020,000
Reimbursement from Customers, Telephone, and Cable Television Companies
EL-98003 Electric System Improvements 32,965 0 0 0 0 0 0 0
EL-89028 Electric Customer Connections 1,823,010 2,830,070 1,700,000 1,700,000 1,700,000 1,700,000 1,700,000 8,500,000
EL-08001 Underground District 42 - Embarcadero Road,
Emerson, Middlefield 0 0 0 0 300,000 0 0 300,000
EL-11009 Underground District 43 - Alma/Embarcadero 0 0 0 0 0 300,000 0 300,000
EL-12001 Underground District 46 - Charleston/El
Camino Real 0 319,257 0 0 0 0 0 0
EL-17003 VA Hospital Customer Load Requirements 66,000 0 0 0 0 0 0 0
EL-19004 Wood Pole Replacement 0 0 150,000 150,000 150,000 150,000 150,000 750,000
Reimbursement from Customers,
Telephone, and Cable Television
Companies Total
1,921,975 3,149,327 1,850,000 1,850,000 2,150,000 2,150,000 1,850,000 9,850,000
Total Sources 2,521,975 3,619,327 1,850,000 1,850,000 2,150,000 2,150,000 2,870,000 10,870,000
ELECTRIC FUND
ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 343
Use of Funds
Customer Connections
EL-89028 Electric Customer Connections 2,408,545 2,830,070 2,400,000 2,550,000 2,700,000 2,400,000 2,400,000 12,450,000
EL-17003 VA Hospital Customer Load Requirements 33,929 0 0 0 0 0 0
Customer Connections Total 2,442,474 2,830,070 2,400,000 2,550,000 2,700,000 2,400,000 2,400,000 12,450,000
System Improvements
EL-06001 230 kV Electric Intertie 508 15,000 162,481 0 0 0 0 162,481
EL-16002 Capacitor Bank Installation 889 320,000 29,111 0 0 0 0 29,111
EL-14000 Coleridge/Cowper/Tennyson 4/12Kv
Conversion 0 50,000 1,280,000 0 0 0 0 1,280,000
EL-19001 Colorado Power Station Equipment Upgrade 10,656 2,700,000 0 0 0 0 0 0
EL-19002 Colorado Substation Improvements 0 50,000 450,000 0 0 0 0 450,000
EL-15000 Colorado/Hopkins System Improvement 0 0 568,000 2,000,000 1,000,000 0 0 3,568,000
EL-89031 Communications System Improvements 199,216 993,757 100,000 100,000 100,000 100,000 100,000 500,000
EL-17001 East Meadow Circles 4/12kV Conversion 995 48,000 800,000 166,000 0 0 0 966,000
EL-13000 Edgewood/Wildwood 4kV Tie 0 0 0 50,000 400,000 0 0 450,000
EL-20000 Hopkins Substation 4/12kV Conversion 0 0 100,000 1,950,000 2,100,000 1,543,000 0 5,693,000
EL-98003 Electric System Improvements 1,678,836 2,378,586 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 7,500,000
EL-02011 Electric Utility Geographic Information System 32,369 282,241 165,000 165,000 165,000 165,000 165,000 825,000
EL-17007 Facility Relocation for Caltrain Modernization
Project 20,299 100,000 2,869,701 0 0 0 0 2,869,701
EL-17005 Inter-Substation Line Protection Relay 159,057 120,000 162,501 150,000 150,000 0 0 462,501
EL-14004 Maybell 1&2 4/12kV Conversion 0 55,000 0 0 0 0 0 0
EL-11003 Rebuild Underground District 15 7,040 50,000 419,609 0 0 0 0 419,609
EL-13003 Rebuild Underground District 16 7,587 50,000 340,667 0 0 0 0 340,667
EL-14002 Rebuild Underground District 20 1,336 130,000 1,400,000 0 0 0 0 1,400,000
EL-17000 Rebuild Underground District 23 0 50,000 164,000 1,100,000 0 0 0 1,264,000
EL-10006 Rebuild Underground District 24 1,475 170,000 579,651 0 0 0 0 579,651
EL-19000 Rebuild Underground District 25 0 50,000 200,000 0 0 0 0 200,000
EL-16000 Rebuild Underground District 26 0 149,000 650,000 0 0 0 0 650,000
EL-19003 Rebuild Underground District 30 0 0 356,000 1,200,000 0 0 0 1,556,000
EL-14005 Reconfigure Quarry Feeders 0 75,000 506,616 0 0 0 0 506,616
EL-13002 Relocate Quarry/Hopkins Substation 60kV Line
(A & B)0 0 0 750,000 0 0 0 750,000
EL-02010 SCADA System Upgrades 209,945 65,000 215,000 320,000 120,000 120,000 130,000 905,000
EL-11014 Smart Grid Technology Installation 162,505 200,000 300,000 2,000,000 0 0 10,000,000 12,300,000
EL-17002 Substation 60kV Breaker Replacement 140,667 250,001 600,000 600,000 600,000 600,000 600,000 3,000,000
EL-89044 Substation Facility Improvements 156,533 523,534 200,000 200,000 200,000 200,000 200,000 1,000,000
EL-89038 Substation Protection Improvements 475,589 689,522 300,000 300,000 300,000 300,000 300,000 1,500,000
Project
Number Project Title
FY 2018
Actuals
FY 2019
Estimate
FY 2020
Proposed FY 2021 FY 2022 FY 2023 FY 2024
5-Year
Total
ELECTRIC FUND
344 ELECTRIC FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
EL-16003 Substation Security 75,779 150,000 715,118 750,000 200,000 200,000 0 1,865,118
EL-16001 Underground System Rebuild 85,496 149,000 350,000 350,000 350,000 350,000 350,000 1,750,000
EL-13008 Upgrade Estimating Software 52,750 23,148 0 0 0 0 0 0
EL-17008 Utility Control Center Upgrades 0 497,187 0 0 0 0 0 0
EL-04012 Utility Site Security Improvements 26,614 45,000 50,000 50,000 0 0 0 100,000
EL-19004 Wood Pole Replacement 0 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 7,500,000
System Improvements Total 3,506,141 11,928,976 17,033,455 15,201,000 8,685,000 6,578,000 14,845,000 62,342,455
Undergrounding Projects
EL-08001 Underground District 42 - Embarcadero Road,
Emerson, Middlefield 0 0 50,000 1,750,000 250,000 0 0 2,050,000
EL-11009 Underground District 43 - Alma/Embarcadero 0 0 0 0 56,000 2,000,000 0 2,056,000
EL-12001 Underground District 46 - Charleston/El Camino
Real 214,263 2,500,000 566,191 0 0 0 0 566,191
El-11010 Underground District 47 - Midd/Homer/
Webster/Addi 31,960 50,000 434,622 0 0 0 0 434,622
Undergrounding Projects Total 246,223 2,550,000 1,050,813 1,750,000 306,000 2,000,000 0 5,106,813
Total Uses 6,194,838 17,309,046 20,484,268 19,501,000 11,691,000 10,978,000 17,245,000 79,899,268
Project
Number Project Title
FY 2018
Actuals
FY 2019
Estimate
FY 2020
Proposed FY 2021 FY 2022 FY 2023 FY 2024
5-Year
Total
CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 429
FIBER OPTICS FUND
FIBER OPTICS FUND
430 FIBER OPTICS FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
FIBER OPTIC Overview
The City of Palo Alto is the only municipality in the State of California that operates a full suite
of City-owned utility services. The most recent addition to this list of services provided to City
of Palo Alto residents and commercial customers is the leasing of ‘dark‘ fiber service connec-
tions on a dark optical fiber backbone system “fiber system”, originally designed and built by
the City in the mid to late 1990s.
For the 2020-2024 Capital
Improvement Program (CIP),
expenditures of $3.6 million are
programmed, with $1.5 million
allocated in Fiscal Year 2020.
Major projects funded in the
2020-2024 CIP include Fiber
Optics Customer Connections
($1.3 million), Fiber Optics Net-
work System Improvements ($1.3
million) and Fiber Optics System
Rebuild ($1.1 million). The budget
for the Fiber Optics CIP can be
categorized into two types of
projects: Capacity Improvements
and Customer Connections.
Capacity Improvements
With the advance in technology, increase in online services, and increase in data transmission
needs to meet consumer demand, the capability afforded by fiber optic cables is increasingly in
demand. To ensure reliable fiber optic service to City of Palo Alto residents and commercial cus-
tomers, fiber optic system components (fiber optic cables and splice cabinets) need to be
upgraded or added to increase capacity; replaced or protected from damage by animals; and
rerouted away from hazardous conditions.
Infrastructure Inventory
CLASSIFICATION QUANTITY
Route Miles of Backbone Fiber Cable 49
Route Miles of Overhead Backbone Fiber
Optic Cable
16
Route Miles of Underground Backbone Fiber
Optic Cable
33
$0
$400,000
$800,000
$1,200,000
$1,600,000
$2,000,000
FY 2016
Actuals
FY 2018
Actuals
FY 2020
Proposed
FY 2022
Projected
FY 2024
Projected
Fiber Optic s Fun d C a pital Expen d i ture s
FIBER OPTICS FUND
FIBER OPTICS FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 431
Recent Accomplishments
Q Added new fiber conduit on University Avenue as part of the Upgrade Downtown project.
Q Completed field investigation and design of new fiber backbone from Park Boulevard
Substation to Stanford Research Park area.
2020-2024 Capital Improvement Program
Recurring Projects
There is one recurring project in the Capacity Improvements category in the 2020-2024 CIP:
Q Fiber Optics Network System Improvements (Fiscal Year 2020: $0.5 million; 2020-2024 CIP:
$1.3 million)
Non-Recurring Projects
There is one non-recurring project in the Capacity Improvements category in the 2020-2024
CIP:
Q Fiber Optics System Rebuild (Fiscal Year 2020: $0.8 million; 2020-2024 CIP: $1.1 million)
The Fiber Optics System Rebuild project is expected to extend through Fiscal Year 2021 and will
rebuild portions of the fiber system that have reached capacity, limiting the City’s ability to pro-
vide dark fiber optic service connections to all potential customers. Rebuilding portions of the
fiber system includes installation of additional fiber optic cables in the Stanford Research Park
area and replacement of several below ground splice closures with pad-mounted pedestals.
Rebuild work scheduled for Fiscal Year 2020 includes installing substructure and dark fiber for
the new fiber path from Park Boulevard Substation to the Stanford Research Park area.
Customer Connections
As customers continually change their fiber optic needs due to equipment additions, new con-
struction, building expansions, building remodels, teardowns and rebuilds, and new building
occupancy types, the fiber optics system must evolve to meet these needs. Projects in this cat-
egory include work required to meet the needs of customers who have applied for new or
upgraded fiber optic service connections. The connection costs associated with new or
upgraded connections are offset by non-recurring charges (NRC) to establish the connections
and monthly recurring charges (MRC) or dark fiber license fees.
Recent Accomplishments
Q Installed public Wi-Fi to unserved City facilities, including community areas in Cubberley
Community Center, Lucie Stern Community Center, and Baylands Golf Links.
2020-2024 Capital Improvement Program
Recurring Projects
In the Customer Connections category there is one recurring project: Fiber Optics Customer
Connections. In the 2020-2024 Capital Improvement Program, recurring funding in this project
FIBER OPTICS FUND
432 FIBER OPTICS FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
remains at $0.3 million annually. This project provides funding for the installation of fiber optic
infrastructure for new service connections.
Non-Recurring Projects
There are no non-recurring projects in this category.
Summary of Capital Activity
FIBER OPTICS FUND
Project
Number Project Title
FY 2018
Actuals
FY 2019
Estimate
FY 2020
Proposed FY 2021 FY 2022 FY 2023 FY 2024
5-Year
Total
Source of Funds
Other Revenues
FO-10000 Fiber Optics Customer Connections:
Connection Charges 236,972 45,000 200,000 200,000 200,000 200,000 200,000 1,000,000
FO-10001 Fiber Optics Network System Improvements 4,795 0 0 0 0 0 0 0
Other Revenues Total 241,767 45,000 200,000 200,000 200,000 200,000 200,000 1,000,000
Total Sources 241,767 45,000 200,000 200,000 200,000 200,000 200,000 1,000,000
Use of Funds
Capacity Improvements
FO-10001 Fiber Optics Network System Improvements 400,928 1,327,635 500,000 200,000 200,000 200,000 200,000 1,300,000
FO-16000 Fiber Optics System Rebuild 5,656 50,000 775,000 300,000 0 0 0 1,075,000
Capacity Improvements Total 406,584 1,377,635 1,275,000 500,000 200,000 200,000 200,000 2,375,000
Customer Connections
FO-10000 Fiber Optics Customer Connections 270,213 160,000 250,000 250,000 250,000 250,000 250,000 1,250,000
Customer Connections Total 270,213 160,000 250,000 250,000 250,000 250,000 250,000 1,250,000
Total Uses 676,797 1,537,635 1,525,000 750,000 450,000 450,000 450,000 3,625,000
CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 445
GAS FUND
GAS FUND
446 GAS FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
GAS FUND Overview
The City of Palo Alto is the only
municipality in California that
operates a full suite of City-
owned utility services. The
municipal natural gas distribu-
tion system began operation in
1917 and provides safe, reliable,
and cost effective gas service to
residents and customers of Palo
Alto. For the 2020-2024 Capital
Improvement Program (CIP),
approximately $35.9 million is
projected, with $3.7 million allo-
cated in Fiscal Year 2020. Over-
all, a total of 8 projects are
planned for the 5-year CIP.
Major projects funded in the 2020-2024 CIP include Gas Main Replacements (cumulative total
of $23.9 million), Gas System, Customer Connections ($7.1 million), and Gas Meters and Regula-
tors ($1.3 million). The budget for the Gas Fund CIP can be categorized into three separate
types of projects: Customer Connections, Gas Main Replacements, and System Improvements.
Infrastructure Inventory
CLASSIFICATION QUANTITY
Total miles of gas main distribution system 210 miles
Total miles of gas service extension to resi-
dents and businesses
176 miles
Number of gas receiving stations 4
Natural Gas System
MATERIAL TYPE MILES OF MAINS IN SYSTEM NUMBER OF SERVICES IN SYSTEM
MILES OF SERVICES IN SYSTEM (AVG 53’/
SERVICE)
Steel 63.14 1,784 17.91
Plastic, PVC 34.12 708 7.107
Plastic, PE 113.38 14,071 141.24
Plastic, ABS 0.38 82 0.82
Plastic, Other 0.01 67 0.67
Other 0 817 8.20
TOTAL 210.75 17,529 175.96
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
FY 2016
Actuals
FY 2018
Actuals
FY 2020
Proposed
FY 2022
Projected
FY 2024
Projected
G a s Fun d C a p i t a l E x p en d i ures
GAS FUND
GAS FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 447
Customer Connections
As customers continually change their gas needs due to equipment additions, new construc-
tion, building expansions, building remodels, tear-downs and rebuilds, and new building occu-
pancy types, the gas system must evolve to meet these needs. The Gas System, Customer
Connections project, which is one of the largest recurring projects within the Gas Fund ($1.3
million in Fiscal Year 2020, $7.1 million over the 2020-2024 CIP), is accounted for within this cat-
egory. This project allows for the completion of work required to meet the needs of customers
who have applied for new or upgraded gas service. The Gas Fund pays for a portion of this proj-
ect, while remaining costs are supported by reimbursements from customers for project work
performed by the City.
Recent Accomplishments
Q In Fiscal Year 2018, the Utilities Gas Division completed approximately 95 customer service
projects, at a cost of $1.0 million.
2020-2024 Capital Improvement Program
Recurring Projects
A total of $7.1 million is programmed for Customer Connections recurring projects in the 2020-
2024 CIP, with $1.3 million allocated in Fiscal Year 2020. Recurring projects in this category
include the following:
Q Gas System, Customer Connections (Fiscal Year 2020: $1.3 million; 5-Year CIP: $7.1 million)
Gas Main Replacements
The Gas Main Replacements (GMR) category accounts for the replacement of inadequately-
sized and structurally deficient gas mains that are subject to corrosion or reaching the end of
their expected life. The Utilities Department coordinates with the Public Works Department’s
street maintenance projects to minimize damage to the City’s pavement and maximize cost effi-
ciency. In the next five years, it is anticipated that 90,391 linear feet of gas mains, or 8 percent of
the entire system, will be replaced. The 2020-2024 CIP includes $23.9 million in funding for proj-
ects within this category.
Recent Accomplishments
Q Completion of the construction of approximately 19,500 linear feet of natural gas mains and
370 natural gas service pipelines under the Gas Main Replacement (GMR) 22 and Upgrade
Downtown projects.
Q Began design of the Gas Main Replacement 23 project within business districts to replace
approximately 20,000 linear feet of natural gas mains and 350 natural gas service pipelines
made of Polyvinyl Chloride (PVC).
GAS FUND
448 GAS FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
2020-2024 Capital Improvement Program
Non-Recurring Projects
Four GMR projects are included in the 2020-2024 CIP (Fiscal Year 2020: $0.9 million; 5-Year
CIP: $23.9 million).
System Improvements
To ensure reliable gas services for the City of Palo Alto residents and customers, gas infrastruc-
ture must be replaced upon reaching the end of its expected life. The System Improvements
category includes four projects during the 2020-2024 CIP at a total cost of $5.0 million, with
$1.6 million allocated in Fiscal Year 2020.
Recent Accomplishments
Q Completed design of the Acrylonitrile Butadiene Styrene (ABS)/Tenite natural gas service
replacement project to replace approximately 130 natural gas service pipelines at various
locations within the city.
Q Completed design of Phase II of the Crossbore Gas Safety Program to inspect sanitary
sewer laterals for potential damage during natural gas pipeline installation.
Recurring Projects
There are three funded recurring projects in the System Improvements category in the 2020-
2024 CIP:
Q Gas Distribution System Improvements (Fiscal Year 2020: $0.5 million, 5-Year CIP: $2.5
million)
Q Gas Equipment and Tools (Fiscal Year 2020: $0.1 million, 5-Year CIP: $0.5 million)
Q Gas Meters and Regulators (Fiscal Year 2020: $0.3 million, 5-Year CIP: $1.3 million).
Non-Recurring Projects
There is one one-time project in the System Improvements category in the 2020-2024 CIP
Q Gas ABS/Tenite Replacement (Fiscal Year 2020: $0.7 million)
Please refer to the City of Palo Alto Utilities webpage to confirm project details: http://
www.cityofpaloalto.org/gov/depts/utl/projects/default.asp
GAS FUND
GAS FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 449
Summary of Capital Activity
GAS FUND
Project
Number Project Title
FY 2018
Actuals
FY 2019
Estimate
FY 2020
Proposed FY 2021 FY 2022 FY 2023 FY 2024
5-Year
Total
Source of Funds
Other Revenues
GS-80017 Gas System, Customer Connections 1,067,979 775,000 1,111,303 1,144,642 1,178,981 1,200,000 1,236,000 5,870,926
Other Revenue Total 1,067,979 775,000 1,111,303 1,144,642 1,178,981 1,200,000 1,236,000 5,870,926
Total Sources 1,067,979 775,000 1,111,303 1,144,642 1,178,981 1,200,000 1,236,000 5,870,926
Use of Funds
Customer Connections
GS-80017 Gas System, Customer Connections 1,035,755 900,000 1,342,415 1,382,688 1,424,169 1,466,894 1,510,901 7,127,067
GS-03009 System Extensions - Unreimbursed 44,706 40,000 0 0 0 0 0 0
Customer Connections Total 1,080,461 940,000 1,342,415 1,382,688 1,424,169 1,466,894 1,510,901 7,127,067
Gas Main Replacements
GS-12001 Gas Main Replacement - Project 22 1,186,940 9,433,799 0 0 0 0 0 0
GS-13001 Gas Main Replacement - Project 23 22,082 150,000 850,000 10,000,000 0 0 0 10,850,000
GS-14003 Gas Main Replacement - Project 24 0 0 0 0 2,000,000 9,000,000 0 11,000,000
GS-15000 Gas Main Replacement - Project 25 0 0 0 0 0 0 2,000,000 2,000,000
Gas Main Replacements Total 1,209,022 9,583,799 850,000 10,000,000 2,000,000 9,000,000 2,000,000 23,850,000
System Improvements
GS-18000 Gas ABS/Tenite Replacement Project 0 800,000 700,000 0 0 0 0 700,000
GS-11002 Gas Distribution System Improvements 135,825 200,000 500,000 500,000 500,000 500,000 500,000 2,500,000
GS-14004 Gas Distribution System Model 732 29,357 0 0 0 0 0 0
GS-13002 Gas Equipment and Tools 50,000 350,000 100,000 100,000 100,000 100,000 100,000 500,000
GS-80019 Gas Meters and Regulators 77,968 50,000 250,000 250,000 250,000 250,000 250,000 1,250,000
GS-15001 Security at City’s Gas Receiving Stations 6,167 41,534 0 0 0 0 0 0
System Improvements Total 270,692 1,470,891 1,550,000 850,000 850,000 850,000 850,000 4,950,000
Total Uses 2,560,175 11,994,690 3,742,415 12,232,688 4,274,169 11,316,894 4,360,901 35,927,067
CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 501
WASTEWATER
COLLECTION FUND
WASTEWATER COLLECTION FUND
502 WASTEWATER COLLECTION FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
WASTEWATER COLLE Overview
The City of Palo Alto is the only municipality in California that operates a full suite of City-
owned utility services. The municipal Wastewater Collection System began operation in 1898
and continues to provide safe, reliable, and cost effective services to residents and customers of
Palo Alto. For the 2020-2024 Capital Improvement Program (CIP), approximately $29.0 million
is projected, with $8.0 million allocated in Fiscal Year 2020. Overall, a total of 9 projects are
programmed for the 5-year CIP.
Major projects funded in the
2020-2024 CIP include Waste-
water Collection System Rehabil-
itation/Augmentation projects
(cumulative total of $20.8 mil-
lion), Sewer Lateral/Manhole
Rehabilitation and Replacement
($4.2 million), and Sewer Sys-
tem Customer Connections
($2.4 million). The budget for
the Wastewater Collection Fund
CIP is categorized into two sepa-
rate types of projects: Customer
Connections and System
Improvements.
Customer Connections
As customers continually change their wastewater needs due to equipment additions, new con-
struction, building expansions, building remodels, teardowns and rebuilds, and new building
occupancy types, the Wastewater Collection System must evolve to meet these needs. The
Sewer System, Customer Connections project is the only project within this category and
includes work required to meet the needs of customers who have applied for new sewer later-
als. The Wastewater Collection Fund pays for a portion of this project while remaining costs are
supported by reimbursements from customers for project work performed by the City.
Infrastructure Inventory
CLASSIFICATION QUANTITY
Total miles of sanitary sewer lines 216.0
Total number of sanitary laterals 18,031
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
FY 2016
Actuals
FY 2018
Actuals
FY 2020
Proposed
FY 2022
Projected
FY 2024
Projected
Wastewater C o l l e ction Fu nd
Cap i tal E x p en dit ures
WASTEWATER COLLECTION FUND
WASTEWATER COLLECTION FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 503
Recent Accomplishments
Q In Fiscal Year 2018 the Utilities Wastewater Division completed over 33 customer service
projects with a total cost of $0.3 million.
2020-2024 Capital Improvement Program
Recurring Projects
There is only one project within this category, the Sewer System, Customer Connections proj-
ect, with funding of $2.4 million over the 5-year CIP. This project funds changes to customer
connections and costs are partially offset by reimbursements from customers requesting the
service.
System Improvement
To ensure reliable wastewater services for the City of Palo Alto residents and customers, infra-
structure must be replaced upon reaching the end of its useful life. The infrastructure replace-
ment program includes projects that will rehabilitate or replace deteriorated pipelines. In the
next five years, it is estimated that approximately 90,000 linear feet of wastewater mains will be
replaced.
Recent Accomplishments
Q Completed construction of Sanitary Sewer Replacement Project (SSR 28) Part A to replace
approximately 477 linear feet of sewer main pipelines at the Jr. Museum and Zoo (JMZ).
Q Completed design and solicitation package of Sanitary Sewer Replacement Project (SSR
28) Part B to replace approximately 6,000 linear feet of sewer main pipelines on Oregon
Expressway and rehabilitate 2,000 linear feet of sewer main pipelines on lower Page Mill
Road and Colorado Avenue.
Q Started design of Sanitary Sewer Replacement Project 29 (SSR29) to replace approximately
16,000 linear feet of sewer main pipelines in the Charleston Meadows neighborhood.
2020-2024 Capital Improvement Program
Recurring Projects
A total of $5.8 million is programmed for System Improvement recurring projects in the 2020-
2024 CIP, with $1.1 million allocated in Fiscal Year 2020. Recurring projects in this category
include the following:
Q Wastewater System Improvements (Fiscal Year 2020: $0.3 million; 5-Year CIP: $1.4 million)
Q Wastewater General Equipment and Tools (Fiscal Year 2020: $0.1 million; 5-Year CIP: $0.3
million)
Q Sewer Lateral/Manhole Rehabilitation and Replacement (Fiscal Year 2020: $0.8 million; 5-
Year CIP: $4.2 million)
WASTEWATER COLLECTION FUND
504 WASTEWATER COLLECTION FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
Non-Recurring Projects
The majority of funding within this category is allocated towards Wastewater Collection System
Rehabilitation/Augmentation Projects (cumulative total of $20.8 million). These projects imple-
ment high-priority rehabilitation, augmentation, and lateral replacement work which reduces
inflow of rainfall and groundwater into the collection system. The Utilities Department coordi-
nates with the Public Works Department’s street maintenance projects to minimize damage to
the City’s pavement and maximize cost efficiencies.
Linear footage and locations are subject to change, please refer to the City of Palo Alto Utilities
webpage to confirm project details: http://www.cityofpaloalto.org/gov/depts/utl/projects/
default.asp.
Summary of Capital Activity
WASTEWATER COLLECTION FUND
Project
Number Project Title
FY 2018
Actuals
FY 2019
Estimate
FY 2020
Proposed FY 2021 FY 2022 FY 2023 FY 2024
5-Year
Total
Source of Funds
Other Revenues
WC-80020 Sewer System, Customer Connections 548,864 447,286 430,534 443,450 456,754 470,457 484,571 2,285,766
Other Revenue Total 548,864 447,286 430,534 443,450 456,754 470,457 484,571 2,285,766
Total Sources 548,864 447,286 430,534 443,450 456,754 470,457 484,571 2,285,766
Use of Funds
Customer Connections
WC-80020 Sewer System, Customer Connections 295,652 447,286 445,000 468,000 480,000 497,000 511,910 2,401,910
Customer Connections Total 295,652 447,286 445,000 468,000 480,000 497,000 511,910 2,401,910
System Improvements
WC-99013 Sewer Lateral/Manhole Rehabilitation and
Replacement 494,877 825,724 750,000 945,000 800,000 825,000 850,000 4,170,000
WC-11000 Wastewater Collection System Rehabilitation/
Augmentation Project 24 121,353 129,256 0 0 0 0 0 0
WC-12001 Wastewater Collection System Rehabilitation/
Augmentation Project 25 346,954 186,531 0 0 0 0 0 0
WC-13001 Wastewater Collection System Rehabilitation/
Augmentation Project 26 166,536 261,594 0 0 0 0 0 0
WC-14001 Wastewater Collection System Rehabilitation/
Augmentation Project 27 741,531 73,015 0 0 0 0 0 0
WC-15001 Wastewater Collection System Rehabilitation/
Augmentation Project 28 47,557 3,435,000 1,610,043 0 0 0 0 1,610,043
WC-16001 Wastewater Collection System Rehabilitation/
Augmentation Project 29 0 80,000 4,428,339 0 0 0 0 4,428,339
WC-17001 Wastewater Collection System Rehabilitation/
Augmentation Project 30 0 0 421,684 1,000,000 5,500,000 0 0 6,921,684
WASTEWATER COLLECTION FUND
WASTEWATER COLLECTION FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 505
WC-19001 Wastewater Collection System Rehabilitation/
Augmentation Project 31 0 0 0 0 0 1,650,000 5,500,000 7,150,000
WC-20000 Wastewater Collection System Rehabilitation/
Augmentation Project 32 0 0 0 0 0 0 650,000 650,000
WC-13002 Wastewater General Equipment and Tools 24,204 50,000 50,000 50,000 50,000 50,000 50,000 250,000
WC-15002 Wastewater System Improvements 0 253,001 260,000 269,000 276,875 285,181 293,737 1,384,793
System Improvements Total 1,943,012 5,294,121 7,520,066 2,264,000 6,626,875 2,810,181 7,343,737 26,564,859
Total Uses 2,238,664 5,741,407 7,965,066 2,732,000 7,106,875 3,307,181 7,855,647 28,966,769
Project
Number Project Title
FY 2018
Actuals
FY 2019
Estimate
FY 2020
Proposed FY 2021 FY 2022 FY 2023 FY 2024
5-Year
Total
CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 557
WATER FUND
WATER FUND
558 WATER FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
WATER FUND Overview
The City of Palo Alto is the only municipality in California that operates a full suite of City-
owned utility services. The municipal Water Distribution System began operation in 1896 and
continues to provide safe, reliable, and cost-effective water service to residents and customers
of Palo Alto. For the 2020-2024 Capital Improvement Program (CIP), approximately $48.4 mil-
lion is projected, with $15.9 million allocated in Fiscal Year 2020. Overall, a total of 15 projects
are planned for the 5-year CIP.
Major projects funded in
the 2020-2024 CIP include
Water Main Replacements
(cumulative total of $25.8 mil-
lion), Water System Customer
Connections ($4.0 million),
Water Meters ($3.6 million) and
Water, Gas, and Wastewater Util-
ity GIS Data ($2.7 million). The
budget for the Water Fund CIP
can be categorized into three
types of projects: Customer
Connections, System Improve-
ments, and Water Main Replace-
ments.
Infrastructure Inventory
Classification Quantity
Miles of water main 235.58
Number of wells 1 active standby and 7 emergency standby
Number of reservoirs 4 steel and 3 reinforced concrete
0
4,000,000
8,000,000
12,000,000
16,000,000
FY 2016
Actuals
FY 2018
Actuals
FY 2020
Proposed
FY 2022
Projected
FY 2024
Projected
Water Fu n d C a pital
E xp en d i t ures
WATER FUND
WATER FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 559
Customer Connections
As customers continually change their water needs due to equipment additions, new construc-
tion, building expansions, building remodels, teardowns and rebuilds, and new building occu-
pancy types, the water system must evolve to meet these needs. The Water System Customer
Connections is the only project in this category and includes work required to meet the needs
of customers who have applied for new or upgraded water service. The Water Fund pays for a
portion of this project, while remaining costs are supported by reimbursements from customers
for project work performed by the City.
Recent Accomplishments
In Fiscal Year 2018 the Water Utility completed over 59 customer service projects with a total
cost of $0.8 million.
2020-2024 Capital Improvement Program
Recurring Projects
The Water System Customer Connections is the only project within this category. Over the
course of the 2020-2024 CIP, $4.0 million is forecasted, with $0.8 million allocated in Fiscal Year
2020.
System Improvements
To ensure reliable water services for the City of Palo Alto’s residents and customers, infrastruc-
ture must be replaced at the end of its expected life. The System Improvements category
includes 10 projects as part of the 2020-2024 CIP at a total cost of $18.6 million, with $8.1 million
allocated in Fiscal Year 2020.
Water Distribution System Main Materials
MATERIAL TYPE TOTAL LENGTH PERCENT
Asbestos Cement Pipe 131.65 mi 55.84%
Concrete Cylinder Pipe 16.72 mi 7.09%
Cast Iron Pipe 18.54 mi 7.86%
Copper 0.24 mi 0.1%
Ductile Iron Pipe 6.93 mi 2.94%
Polyethylene 17.78 mi 7.54%
Polyvinyl Chloride 42.57 mi 18.05%
Steel 0.7 mi 0.3%
Total:235.77 mi
WATER FUND
560 WATER FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
Recent Accomplishments
Q Started the design to replace the Corte Madera tank. The Conceptual Engineering Report
(CER) has been completed and the work is currently about 30% complete.
Q Started the El Camino Real Pump Station and Mayfield Pump Station modifications to the
system and control programs to improve operational flexibility and system resiliency.
Q Completed seismic work and upgrades for Arastradero, Page Mill, and California Avenue
turnouts, and currently working on project closeout.
Q Continued reviewing water storage and operational needs citywide, and worked with a
consultant to develop a steady state water model that will assist in the storage and
operational recommendations.
Q Completed the geological investigation of the foundation leaks at the Mayfield Tank and
provided a report containing results of the subsurface explorations and laboratory testing
and recommended repair alternatives.
Q Completed a survey and geotechnical investigation of the Corte Madera tank site.
Q Completed two transmission valve replacements on Arastradero Road.
2020-2024 Capital Improvement Program
Recurring Projects
A total of $11.3 million is programmed for System Improvement recurring projects during the
2020-2024 CIP, with $3.3 million allocated in Fiscal Year 2020. Recurring projects in this cate-
gory include the following:
Q Water Distribution System Improvements (Fiscal Year 2020: $0.4 million; 5-Year CIP: $1.6
million)
Q Water Fusion and General Equipment/Tools (Fiscal Year 2020: $0.1 million; 5-Year CIP: $0.3
million)
Q Water, Gas, Wastewater Utility GIS Data (Fiscal Year 2020: $0.8 million; 5-Year CIP: $2.7
million)
Q Water Meters (Fiscal Year 2020: $1.3 million; 5-Year CIP: $3.6 million)
Q Water Service Hydrant Replacement (Fiscal Year 2020: $0.4 million; 5-Year CIP: $2.0 million)
Q Water System Supply Improvements (Fiscal Year 2020: $0.3 million; 5-Year CIP: $1.4 million)
Non-Recurring Projects
A total of $7.1 million is programmed for non-recurring projects during the 2020-2024 CIP, with
the $4.9 million allocated in Fiscal Year 2020. Non-recurring projects in this category include
the following:
Q Mayfield Reservoir Subgrade and Venting (Fiscal Year 2020: $0.2 million; 5-Year CIP: $0.4
million)
Q Water Recycling Facilities (Fiscal Year 2020: $0.4 million)
Q Water Reservoir Coating Improvements (Fiscal Year 2020: $0.2 million; 5-year CIP: $0.2
million)
WATER FUND
WATER FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 561
Q Water Tank Seismic Water System Upgrades (Fiscal Year 2020: $4.1 million; 5-year CIP: $6.1
million)
Water Main Replacements
The Water Main Replacements category accounts for the replacement of inadequately sized
and structurally deficient water mains. In the next five years, it is estimated that approximately
50,000 linear feet of water mains will be replaced. The annual linear feet replacement totals
were reduced by approximately 23% due to significant increases in labor and material costs.
Based on the last two water main replacement project bids, the engineer’s estimate was
increased and a budget augmentation was necessary in FY 2020 to cover construction
costs. City staff has proposed a new replacement schedule of water & wastewater construction
every even year and gas construction every odd year to reduce the amount of construction
when prices are high and allow staff to focus on other priorities such as ABS/Tenite gas services
replacement and cross-bore inspections.
The annual replacement footage was reduced to compensate for some of the market changes
that forced a rebid and a single bid in the past. Water main replacement project (WMR) 26B -
Upgrade Downtown did not receive any bids. Rebids and the reduction of total footage com-
pleted annually will extend to overall system replacement time; however, a recent study indi-
cated that the City has already replaced many of the most leak-prone and deteriorated pipes
from the past water main replacement projects 1 through 26. This study recommended replac-
ing 13.5 miles of mains within the next decade, and proposed every-other-year construction
program still allows staff to replace these 13.5 miles of water mains within the next 10 years, as
recommended in the study.
Recent Accomplishments
Q Completed construction of Water Main Replacement project (WMR 26) to replace
approximately 13,000 linear feet of water main pipelines, 200 service pipelines, and 40 fire
hydrants. Currently working on project closeout.
Q Started construction of water main replacement for Upgrade Downtown (WMR 26B) to
replace approximately 3,155 linear feet of water main pipelines, 52 service pipelines, and 10
fire hydrants. Currently the work is about 80% complete.
Q Started design of Water Main Replacement project (WMR 27) to replace approximately
10,000 linear feet of water main pipelines in the Sand Hill Road area.
2020-2024 Capital Improvement Program
The 2020-2024 CIP includes $25.8 million in funding for 4 non-recurring projects within this
category, with $7.1 million appropriated for Fiscal Year 2020. The Utilities Department coordi-
nates with the Public Works Department’s street maintenance projects to minimize damage to
the City’s pavement and maximize cost efficiencies when replacing water mains.
WATER FUND
562 WATER FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET
Summary of Capital Activity
WATER FUND
Project
Number Project Title
FY 2018
Actuals
FY 2019
Estimate
FY 2020
Proposed FY 2021 FY 2022 FY 2023 FY 2024
5-Year
Total
Source of Funds
Transfer from Other Funds
Gas Fund
WS-02014 Water Gas Wastewater GIS Data 134,209 147,630 152,059 156,621 161,320 166,160 166,160 802,320
Total Gas Fund Transfers 134,209 147,630 152,059 156,621 161,320 166,160 166,160 802,320
Wastewater Collection Fund
WS-02014 Water Gas Wastewater GIS Data 134,209 147,630 152,059 156,621 161,320 166,160 166,160 802,320
Total Wastewater Collection Fund 134,209 147,630 152,059 156,621 161,320 166,160 166,160 802,320
Total Transfer from Other Funds 268,418 295,260 304,118 313,242 322,640 332,320 332,320 1,604,640
Other Revenues
WS-80014 Water Service Hydrant Replacement 6,365 0 0 0 0 0 0 0
WS-80013 Water System, Customer Connections 1,404,420 765,995 957,228 985,946 1,015,524 1,045,990 1,195,819 5,200,507
Other Revenue Total 1,410,785 765,995 957,228 985,946 1,015,524 1,045,990 1,195,819 5,200,507
Total Sources 1,679,203 1,061,255 1,261,346 1,299,188 1,338,164 1,378,310 1,528,139 6,805,147
Use of Funds
Customer Connections
WS-80013 Water System, Customer Connections 763,694 765,995 750,000 775,000 800,000 825,027 850,000 4,000,027
Customer Connections Total 763,694 765,995 750,000 775,000 800,000 825,027 850,000 4,000,027
System Improvements
WS-19000 Mayfield Reservoir Subgrade and Venting
Repair 0 200,000 200,000 200,000 0 0 0 400,000
WS-11003 Water Distribution System Improvements 172,466 400,000 446,620 269,469 277,553 285,880 294,456 1,573,978
WS-13002 Water Fusion and General Equipment/Tools 0 20,000 50,000 50,000 50,000 50,000 50,000 250,000
WS-02014 Water, Gas, Wastewater Utility GIS Data 97,106 514,000 736,399 469,862 483,958 498,477 513,431 2,702,127
WS-80015 Water Meters 114,853 75,000 1,340,000 530,450 546,364 562,755 579,638 3,559,207
WS-07001 Water Recycling Facilities 0 0 395,649 0 0 0 0 395,649
WS-07000 Water Regulation Station Improvements 97,777 871,578 0 0 0 0 0 0
WS-08001 Water Reservoir Coating Improvements 224,549 693,271 213,032 0 0 0 0 213,032
WS-80014 Water Service Hydrant Replacement 296,913 79,000 400,000 400,000 400,000 400,000 400,000 2,000,000
WS-11004 Water System Supply Improvements 165,015 289,744 261,620 269,469 277,553 285,880 345,131 1,439,653
WATER FUND
WATER FUND • CITY OF PALO ALTO FISCAL YEAR 2020 PROPOSED CAPITAL BUDGET 563
WS-09000 Water Tank Seismic Water System Upgrades 602,721 2,952,575 4,068,532 2,000,000 0 0 0 6,068,532
System Improvements Total 1,771,400 6,095,168 8,111,852 4,189,250 2,035,428 2,082,992 2,182,656 18,602,178
Water Main Replacements
WS-12001 Water Main Replacement - Project 26 4,547,950 5,626,718 0 0 0 0 0 0
WS-13001 Water Main Replacement - Project 27 862 675,000 6,499,138 0 0 0 0 6,499,138
WS-14001 Water Main Replacement - Project 28 0 0 585,107 0 8,500,000 0 0 9,085,107
WS-15002 Water Main Replacement - Project 29 0 0 0 0 850,000 0 8,500,000 9,350,000
WS-16001 Water Main Replacement - Project 30 0 0 0 0 0 0 850,000 850,000
Water Main Replacements Total 4,548,812 6,301,718 7,084,245 0 9,350,000 0 9,350,000 25,784,245
Total Uses 7,083,906 13,162,881 15,946,097 4,964,250 12,185,428 2,908,019 12,382,656 48,386,450
Project
Number Project Title
FY 2018
Actuals
FY 2019
Estimate
FY 2020
Proposed FY 2021 FY 2022 FY 2023 FY 2024
5-Year
Total
CITY OF