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HomeMy WebLinkAbout2025-03-21 Climate Action and Sustainability Committee Summary MinutesCLIMATE ACTION & SUSTAINABILITY COMMITTEE SUMMARY MINUTES Page 1 of 13 Special Meeting March 21, 2024 The Climate Action & Sustainability Committee of the City of Palo Alto met on this date in the Community Meeting Room and by virtual teleconference at 12:00 P.M. Present In-Person: Veenker (Chair), Burt, Lu Absent: Call to Order Vicki Veenker, Vice Mayor, called the meeting to order. The clerk called the roll and declared all were present. Public Comments 1. David C. was interested in knowing what the Committee and City was doing to realize the increase from 19% to 40% of bike/ped mode share in the next 5 years. He alleged the last bike/ped plan had only been 30% implemented and it would not happen if they relied on the Transportation Bike/Ped Plan. He advised more attention to bike/ped infrastructure was required in order to meet the goals in S/CAP. Standing Verbal Reports A. Staff Comments B. Committee Member Comments and Announcements Brad Eggleston, Director of Public Works, noted the Committee was continuing work that had been done Council ad hoc committees addressing climate change and sustainability beginning in 2021. As they firmly progressed into implementation of the S/CAP, the Committee would follow Brown Act procedures. He indicated in general the meetings would be held the first Friday of each month at 1:30 PM. He stated the next meeting would be April 4 at 1:30 PM and SUMMARY MINUTES Page 2 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 they would discuss the preliminary findings of the S/CAP funding study. He said their staff team looked forward to ongoing engagement with the working group members and the public as they worked toward the City’s 80 x 30 greenhouse gas goal and the many climate and sustainability related priority objectives that City Council had approved. Pat Burt, Councilmember, shared that the MTC had worked on its legislative agenda for the year. A primary focus was the renewal of the cap and trade dollars. Their recommendations were a greater focus in the utilization of those dollars to supporting operations of transit agencies in the region. They also recommended advocating that a greater portion of the 25% of the cap and trade dollars that currently go to high-speed rail be allocated to the projects in the bookends of that system. He thought the public commenter made an important point that they had not reconciled. He announced they would be having a bike and ped community outreach meeting on that on April 2 at 6:00 at Mitchell. Vice Mayor Veenker reported at the Bay Area Air District’s Policy Grants and Technology Committee meeting, they received an update on the Bay Area Regional Climate Action Plan. She thought it was interesting Palo Alto to not was that the Air District was the lead agency on that plan. It was a million dollar grant they got a couple years ago from EPA for all the counties around the Bay Area, except Santa Clara County. The report was on how they would work together and integrate the climate action regionally. Santa Clara got its own million dollar grant to do its own climate action plan. She asked that they provide them with a more integrated the report the next time. She wanted people to be aware if they saw a Santa Clara County plan, there was a broader regional plan and the leaders were in communication on that. They also went through a review of a lot of bills active in the state capitol. There was one with a perceived tension in prescribed burns they do to avoid out of control fires. There was concern over whether that should continue to have Air District Public Health involvement. There had been discussion about how to monitor and permit those. She mentioned integrated planning going on with NCPA on an interagency resource plan that gets updated every two years for renewable procurement needs, transmission planning and interconnection resources. She reported that Palo Alto was on track to meet California's Renewable Portfolio Standards (RPS) that would be increasing in 2027 and 2030. Of all 13 NCPA member agencies, Palo Alto had the lowest carbon footprint. NCPA was also highly cognizant of wildfire risks and there was a Utilities Wildfire Mitigation Plan 2025 update that would incorporate the newly published State Fire Marshal’s Severity Zone Maps. They were discussed at Council the prior Monday. They had just come out for the northern part of the state and they would be adapting to them. Councilmember Pat Burt asked if there was a methodology the Air District used to compare the risks from the controlled versus uncontrolled burns. Vice Mayor Veenker explained their role was to work on the timing of when they had the least health impact on neighboring cities and communities. There were others that would look at when, where and how the prescribed burns should happen. The question was whether they leave that to local authorities or keep them public health aspect. SUMMARY MINUTES Page 3 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 Agenda Items 1. Recommendation to Council to Direct Staff to Develop an Affordable Multi-Family Housing Electrification Grant Program and to Approve a Budget Amendment in the Gas Utility Funds; CEQA Status: Under CEQA Guidelines section 15183, projects consistent with an existing general or comprehensive plan do not require additional CEQA review Jonathan Abendschein, Assistant Director, Climate Action, provided a slide presentation about the Affordable Multi-Family Housing Electrification Grant Program proposal including context and prior Council direction, affordable multifamily electrification opportunity, program design, program’s role in overall S/CAP strategy, funding source availability, program alternatives, program alternatives – budgets and staff recommendation. Director Eggleston added the fiscal resource impact section in the staff report talked about the Finance Committee considering potential uses of the funding which related to how the gas cap and trade funding could be used for various things. Since that report was published, they had continued to discuss that. The current plan was to bring this topic to the full Council in April before they had the Finance Committee budget hearings. Councilmember George Lu queried if they had a sense of ROI in terms of greenhouse gas reductions per dollar for central versus in-unit and how that might compare to other programs. He asked if there was a sense of what percent of the funding would be from the state and what would be from the City for a typical project. He assumed none of the in-unit programs applied to inclusionary zoning. Director Abendschein commented the affordable housing grants ranged significantly depending on the individual project. Some projects were better set up to accommodate a central heat pump water heater so the costs were lower. In other places, there was a lot of extra building modifications that needed to be made. In their S/CAP funding study, the biggest cost was around in-unit space heating and central water heating. There was also some potential cooktop installations they might consider. The in-unit space heating and the gas water heating was on the more expensive side of all of the different potential emissions reduction opportunities in Palo Alto. That was the challenge of working with multifamily. In order to achieve the 80% reduction goal, it would be all hands on deck and these were more on the expensive side. He said there was a difference between the ROI and the ROI on Palo Alto-specific investments. For some of these projects, the investment would be small and for others it would be large. Rachel DiFranco, Utilities Program Services Manager, explained the low-income weatherization program funding coming out of the California Climate Investments Fund could cover a range of the project costs. It was based off the emissions reductions of a project. They did not have each of these projects fully scoped but did have some ballpark figures from the assessment done as SUMMARY MINUTES Page 4 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 part of the building sector study. Based on that, the assumptions for LIWP funding came in at somewhere between a quarter to half of the project costs on average but it did vary depending on the type of measures that were involved in the project. They were also making assumptions about the project costs and the LIWP funding because the projects had not been fully scoped yet. She confirmed the LIWP and the design for the HEEHRA funding designated eligibility on the basis of deed-restricted affordable housing or a percentage of units that fell within a specific income threshold. There could be some properties that had mostly affordable units that were Section 8 housing or below market rate that would also qualify. It would be based on the percentage of total units that fell within certain income thresholds. They wanted to make sure they were able to leverage those state funding sources to be able to make the incentive dollars go as far as possible. They were currently looking at the REAP program, which served low-income households and exploring ways to support renters in how refreshing that program. The challenge in multifamily was a combination of central systems and then in-unit systems. They had come across a number of renters or owners of properties in multifamily that were interested in doing an in-unit measure. They way their program was designed did not serve them very well and they were actively looking to figure out ways to serve. For this specific program design, they were looking at working with the property management company and doing the measures either in-unit or central through that larger property management. Councilmember Burt wanted to understand why inclusionary housing would not quality for the in-unit, especially if there was a partner agency managing them. He asked what the argument was for which of the four bullets of qualifying uses this fell under. He asked if the anticipation was that they would be retiring the hookups. He assumed they would be staying current with what might be increased electric demand either to the project itself, their panels, their feeds, or how it fit with the grid mod. He queried if part of this program was looking at and integrating the smart systems. He questioned if induction cooking was part of the appliance upgrade. He wanted to ensure that they were including a deliberate educational component to this. He wanted to know if retiring gas distribution would start integrating trimming branches off the tree and have significant impact on the ability to gradually reduce the gas distribution heater system as a result of these. He inquired why this would go to Council ahead of the Finance Committee. Director Abendschein asked Ms. DiFranco if it went down to the definition of inclusionary housing the state was using for delivery of its grant funds. He stated in 2015 Council was unsure whether this fell under greenhouse gas reducing activities but in 2022 they came to the conclusion that it did. CARB staff agreed with that and in Council’s guidance they said fuel switching from natural gas to electricity reduces greenhouse gas emissions and was a valid use of these funds. He said there would be potential opportunity to retire the hookups but it would depend on the project. He remarked that the electric demand was another reason this grant program would be helpful because it would help them understand the challenges with any grid upgrades associated with these multifamily buildings. The grid modernization project was addressing transformers that serve multiple buildings but a lot of times those buildings had their own transformer. As the grid was upgraded around these properties, there would be adequate feeder and substation capacity. Other equipment would be up to scale but the SUMMARY MINUTES Page 5 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 individual transformer for an individual building required such a specific analysis that those were not mass upgraded as part of the grid modernization project so they would need a solution for that. They did not have an established citywide policy on how to deal with those. It was assumed in this program that utility upgrades would be part of the grants if needed. He commented nothing about these projects jumped out as lending themselves to reducing the gas distribution heater system but they expected to learn something from these projects with respect to gas retirement. If they saw opportunities for retirement of an entire segment, they would take advantage of that if it were feasible. Ms. DiFranco confirmed it was about the property in its entirety and then having a percentage of units that were below market rate within that property and that percentage needed to be above a certain threshold in order for the property to qualify for the funding under LIWP. For below market rate units in a market rate complex, they would need to design a program that would serve them as a single-family unit. It would be in-unit in a multifamily complex but working directly with that unit rather than with the property management. She added they had been trying to figure out solutions to this question in the multifamily EV program. They had been working with a few affordable housing providers to install EV charging where main panel upgrades and transformer upgrades had come into question. As they looked at EV charging installations, if there were electric service upgrades necessary, they wanted to factor in the load that building electrification would bring so when they support those service upgrades, it was done right from the start. This would be an opportunity to work with the affordable housing providers to come up with the right load calculation so if they had to do a service upgrade with these projects, the incentives would help to cover that because and they would be able to look at building electrification load and EV charging load to ensure they were right sizing from the beginning. It was her goal to make sure that when they were putting in EV charging and building electrification systems they were evaluating load management strategies to the greatest extent possible and incorporating them in. That added an additional cost, which was another reason their incentive is so important. That would ensure they were not oversizing their systems potentially causing a challenge at the transformer level or beyond. They were looking at EV load management and encouraging it. She explained the in-unit measure option would include electrification of all equipment. Director Eggleston explained the way this was framed was if they got the Committee's unanimous recommendation, they would plan to bring approval of this program to the Council on consent. In the context of the budget process this year, as they started to look at some of the larger scale pilot programs that had a more significant cost than what they had been doing, looking at significant rate increases and the City’s overall budget situation they wanted to have a bigger picture discussion with the full Council about the tradeoffs of priorities and the different ways of spending this funding before asking the Council to make that commitment. Vice Mayor Veenker observed a need to talk to the state legislators about including those BMR units in the same provision as affordable projects for the in-unit upgrade to electric. She asked if providing an opportunity to electrify equipment serving about 20% of the dedicated affordable units in Palo Alto was because it was the size of the pilot or because it would be SUMMARY MINUTES Page 6 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 limited to those sites that were surveyed. She wondered if there was a sense of to what degree maintenance and replacement costs would be absent the program and electrification, if the appliances were getting to end of life and they could help with the delta of whatever they were planning to spend anyway. She queried if there was any sense of when HEEHRA would be available. Director Abendschein replied the program was sized to be able to serve a little more than the projects that were surveyed. The 20% was based off their entire inclusionary population but this program would only apply to those that the LIWP program standards would include. It was offered to any on a first come first serve basis but they thought those were the most likely. Director Eggleston asked if the way this was proposed to size was meant to cover all the projects they were aware of that fell within the criteria to meet the state grant program. Director Abendschein answered it was sized to allow another project or so in addition to those the idea being that just because those people let their consultant onsite to do a site survey did not mean they were the only ones able to enter the program. He shared they sent out communications to all multifamily property owners they could find and these were the people that responded. He had heard that different providers would have different amounts of capital. They were managing an entire portfolio and trying to prioritize a whole different range of maintenance issues all at once and so capital availability for these specific projects was a little bit mixed. Ms. DiFranco confirmed Director Abendschein’s comments. What she heard in conversations with the different affordable housing property managers she had been dealing with is was they had a certain amount of budget available for annual maintenance and replacement as issues come up with specific in-unit equipment but none of the larger capital budgets for a comprehensive project had that ready to go for any of these projects. They were highly dependent on outside funding sources and financing. A lot of them were looking toward the HEEHRA program as a way to be able to do some of these projects at a larger scale. With that funding frozen at the federal level, the opportunity they had was to release funding to help them be able to act on those projects that they want to do but did not have that upfront capital to do them at this comprehensive level. The trade-off would be if they were to scale back the amount of funding being put toward this program, they would see fewer projects be able to participate because they did not have the ability to add in that extra capital. They might see only the centralized equipment get electrified and not necessarily the in-unit measures because that would be a much larger and more expensive type of project. Her understanding was that the state was expecting a massive influx of funding. There was a certain amount that was already released. Most of that had already been claimed through the single family HEEHRA program. There was some funding flowing but only to projects that were preapproved in the single family program. The California Tech program that manages HEEHRA said they would provide more information about HEEHRA multifamily soon. Her pulse was that there was not going to be any money for multifamily HEEHRA and if there was it would probably be limited to disadvantaged communities under CalEnviroScreen which would eliminate Palo Alto. She added there were plans for some additional California Tech funding in multifamily, although that would not be to the scale they would have seen out of HEEHRA. SUMMARY MINUTES Page 7 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 Director Eggleston added they had a lot of equipment at the end of its life and should be replaced. That did not mean they had saved up and immediately do that across the board. They had annual funding and end up replacing things as they fail. Director Abendschein added that could result in a situation where they accumulated capital over the years, miss out on funding opportunities and just go with gas. Councilmember Lu questioned if refurbishing affordable housing had been a part of the conversation or a potential useful part of the funding stack they could condition off of or request that people also apply for and things like that. He thought the general direction of the program made sense. The hard part was the carbon accounting, relative contribution to 80 x 30 and the opportunity cost. He felt it was okay to be less ROI efficient for affordable and multi- family units since they needed to learn more about them. He supported asking for some form of contribution that might be mitigated with a loan but would capture some of the grant funding and money that would already be applicated. He assumed they did not know the emissions reductions per individual project and that would be sized when they go through the state process. Director Abendschein explained CDBG and any other program for rehabilitation of housing was listed as something in some of these projects, whether that meant bringing something up to code based on code having changed since installation or whether it was a rehabilitation issue. If something were eligible for one of these rehabilitation programs and was not just screened for disadvantaged communities, he wondered if they would want them to take advantage of that as well and look for those programs for them. He clarified they did have estimates on all of the projects they had surveyed and it was between 800 and 1000 metric tons of greenhouse gas emissions reduction per year, which was on the same scale as the entire 1000-unit advanced heat pump water heater pilot program they launched a few years back. The cost of the heat pump water heater program was about $7 million total and it included about $1.2 million in expected payments from the participants. Ms. DiFranco’s response was she would want them to leverage whatever funding was available. They had been talking with their housing planner who works closely with the affordable housing providers about other ways he engages with these properties. CDBG did come up as a potential opportunity. She had heard from the providers that a lot of the time that money would be in the form of a loan. It was often a forgivable loan but it did provide challenges on the books for them because they were taking on financing. She thought there were ways they could continue to have conversations with affordable housing providers about those opportunities alongside this program and even make it a requirement that they work closely with their planning division as part of this. For properties to qualify for LIWP, it was 80% AMI so 66% of the units in a property would need to be at that 80% AMI or lower and there needed to be documentation of that. LIWP did require that and they would be requiring the same in their eligibility in order to approve the funding for any of these properties. SUMMARY MINUTES Page 8 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 Vice Mayor Veenker asked how the required provider contribution of $4.7 million was calculated. She opined it did not need to be all or nothing if they could ballpark what their cost would be in the normal course if they did not electrify to incentivize them not to delay. Director Abendschein explained they would have to do some kind of an engineering estimate or get a quote on a gas system. That would cost money but less than it would not to have a provider contribution. In this case, they had their consultant look at one of the sites they surveyed and give a rough estimate of the percentage they thought a gas equivalent unit would be for the water heating and the space heating. It was 20% to 40% and they applied that across the board. It did not represent what capital the provider had and it was very uncertain. Councilmember Burt suggested if they were looking for the nonprofit providers to have a minority share of the contribution aligned with their normal replacement costs they could be getting a lower operating costs and would be a stronger case. He asked if there were estimates on how much savings they would receive. He wanted to know if there was any data on the savings from the pilot project they did several years ago. He questioned how they would go about engaging with organizations like Silicon Valley Community Foundation, Sobrato or others. He suggested getting Alta’s thoughts. Director Abendschein agreed with Councilmember Burt’s comments and added that pointed toward something like an on-bill financing repayment program. They would have to talk to the Utilities team about the practicalities of that. He remarked they had the savings in the individual site analyses but he had no aggregate number at that time. He commented they did have some data from the pilot project they did several years ago and there were savings directly to residents because they were in-unit measures. He would have to do some research on how the City would engage with philanthropic organizations. Ms. DiFranco responded in order to zero in on the savings they would need to get a contractor quote for the actual products they would recommend and be able to do some calculations from there. They would need an engineering level analysis for that. She added if they were replacing the heating systems with heat pump, one caveat was they could be adding some additional load for air conditioning but that would add an important resiliency component to those units. She stated they had seen the Friends of the Library model where they were able to bring in foundation money for other social benefits. It was a big question for them to consider as they look at pulling in more money for the S/CAP in a broader context but for this specific project she agreed some conversations with Alta and the other providers would be where they could go with it. Director Eggleston remarked a lot of the instances where they received philanthropy tended to be through friends groups who would take on a project and do that outreach or people who come forward on their own. Vice Mayor Veenker asserted the question of life of appliances costs and lower power usage was tricky in multifamily doing on-bill financing because the tenant pays the bill but the SUMMARY MINUTES Page 9 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 property manager putting in the central unit. She asked if there was a way they could view a recommendation to Council with an understanding that they would talk to the providers to see if there was some level at which they would still be incentivized to do this but it was not zero. Director Abendschein confirmed that was a common issue especially in the commercial space. The additional bill impacts reduced the bill savings for low-income residents. MOTION: Vice Mayor Veenker moved, seconded by Councilmember Burt, to recommend the City Council: 1. Direct staff to develop a program to provide grants to replace existing affordable multifamily housing central and in-unit gas equipment with electric-only equipment; 2. Authorize staff to use up to $6.6 million in Gas Utility Cap and Trade Revenues for the program, with the understanding that staff will explore cost sharing with providers and; 3. Amend the FY 2025 Budget Appropriation (requires a 2/3 vote) by: a. For the Gas Utility Funds: i. Increase Gas Resource Management Operating Expenses for Contract Services by $6.6 million; and ii. Decrease the Cap and Trade Reserve by $6.6 million MOTION PASSED: 3-0 2. Recommendation to Council to Approve a Professional Services Contract with Franklin Energy to Administer a Full-Service Whole home Electrification Program, Pending Final Negotiations; CEQA Status: Under CEQA Guidelines 15183, projects consistent with an existing general or comprehensive plan to not require additional CEQA review Christine Tam, Senior Resource Planner, and Director Abendschein provided a slide presentation about the Full-Service Whole Home Electrification Program proposal including S/CAP context for whole home electrification, Whole Home Program strategy, timelapse of residential electrification program services, phase 1 (rebates + tech assistance) results to-date, proposed contract with Franklin Energy, contract scope and proposed program budget, breakdown of customer rebate budget, phase 2 turnkey home electrifications economics, the program’s role in overall S/CAP strategy, funding source availability, program alternatives and the staff recommendation. Item 2 Public Comment 1. David C. commented that this would rely on City outreach. He opined that had not been the City’s strong point and it had been brought up through the heat pump water heater program. He realized there had been attempts to get outside the contractors for real SUMMARY MINUTES Page 10 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 marketing on these programs and hoped those lessons learned would be applied to this program. 2. Bruce H. found it strange that only 100 people per year would get a payout for the water heater given that replacing gas-fired water heaters with efficient heat pump water heaters would no longer be voluntary in 2027. He wondered if it made sense to offer a rebate for disconnecting the gas meter. He was curious as to how this was envisioned working in conjunction with the Air District rule. He suggested zero percent financing as an approach that could be helpful starting in 2027. Director Abendschein indicated they had just wrapped up RFP and were in the process of contract negotiations for an outreach consultant. They had also been brainstorming some new approaches. Ms. Tam stated the Air District Rules mandated that any water heater needing to be replaced must be replaced with a zero NOx appliance. They preferred having people replace their gas appliances before they reach the end of life so thought it was important to provide that incentive to the customers. In terms of the rebate amounts, she thought Staff might revisit the level of rebates depending on what the market uptake looked like and the contractor competition. Regarding the gas meter disconnection incentive, they offered an incentive for gas meter disconnection in order to incentivize homeowners to switch out gas cooktops and the gas dryers. Director Abendschein added as they were heading into a mandated environment, it was not just about reconsidering the amount of the rebates but whether they were even issuing rebates at all. The full service program starting in 2027 may become focused entirely on HVAC, which regulations would not apply until 2029. If there were the addition of other programs such as 0% financing or other low-income incentives would likely continue in that scenario. If there were other programs to help people transition, having a full service provider might also allow them the ability to provide guidance to people on how to access those programs when the mandates go into effect. Councilmember Lu wanted to know about the time period to get started. He asked if there was any applicability to multifamily homes for HVAC systems and if that would be different if an individual unit wanted to replace their AC and furnace. He wanted to know the total number of greenhouse gas emissions reduction was projected for this program. He wanted elaboration about the marketing plan. He inquired how quickly Franklin could come in and execute on one of these projects. She indicated Franklin had three subcontractors and would be adding more. She was confident they could provide the installation services on a timely basis. Ms. Tam replied the plan was to bring the contract to Council in April 2025. Year one would start in April in theory. They anticipated it would take six to eight months to launch the program. The goal was January 2026. She stated they estimated the greenhouse gas emissions SUMMARY MINUTES Page 11 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 reduction for three years, about 450 homes, to be 4650 metric tons over the lifetime of the measure. Director Abendschein explained they just got back their multifamily electrification opportunity study. It appeared the costs in many cases would be similar for multifamily in-unit upgrades to single family upgrades. Some of the program design dimensions were similar. With multifamily, there were commercial water heaters or space heaters that had to be treated as if nonresidential. They were working this year on figuring out how to structure that organizationally and programmatically. They were not ruling out the possibility of incorporating them into a single family program. Ms. Tam stated they were piggybacking on the contract that had already been negotiated in terms of the pricing and terms negotiated by PCE and SVCE and in the current language they were serving primarily single-family homes. She did not know whether their subcontractors could serve multifamily properties. Based on their previous pilot to replace the gas wall furnaces in a multifamily property with heat pump units, it was a little bit different in terms of the permitting process, the treatment of the condensate and the electrical wiring in a multifamily property was more complicated than a single family home so. She felt the pricing in the Franklin contract would only apply to single-family homes. Director Abendschein explained they were continuously doing water heater program marketing. Since they launched whole home electrification program rebates already, they started shifting that outreach to be more inclusive of whole home. This program would incorporate into that. Councilmember Burt queried what analysis was available on the operating cost savings with the utility rate structure. He questioned how they determine how much subsidy they should provide without understanding how much savings the homeowners was going to get over the life of that piece of equipment. He asked if they were envisioning that this program would be a bridge to acceleration the adoption of the Air Board mandates and once they kick in they might provide incentives but not at the same level because they were mandated. He asked what the additional criticality was of them having their own local data gathering and program modeling versus being able to piggyback off of what PCE and SVCE were learning. He advised being clear on what the contractor was and what was embedded in the other parts. He they that they and others were underemphasizing the health aspects as a compelling argument to the customers. He recommended engaging with the county health department about it. He wanted to ensure that consumers were aware of the major brands providing combination washer dryers and heat pump washer dryers that have considerable water savings. He stated they had to make sure that when looking how to market it, they look at what would cause the consumer to act. He wanted to make everyone aware of a book called How Big Things Get Done and encouraged to get it in everyone’s hands. Director Abendschein replied savings vary home by home because 40% of gas usage was from water heaters and 40% from space heating. They were continuing to work on operating cost savings as part of the funding study. They were doing more analysis on operating cost savings. Because the operating savings were similar to the water heater and the rebates were similarly sized to the water heater, the cost differentials in many cases were similar to the water heater program. They had incentives that were fairly similar to the water heater program and similar SUMMARY MINUTES Page 12 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 to what others in the region were doing to make it simple for contractors. It was their sense it would be in the right ballpark but they would get some data from this program to decide what to do in the longer term. He remarked these were 2026 through 2027 workplan discussions. This was a strategy discussion they would need to have over the course of this year about what to do once mandates were in place. They could cut back on the rebates entirely and provide other sorts of services like financing. The purpose of this program with respect to the Air District regulations was gathering data, creating some momentum in the market so contractors were ready for when the mandates come into effect and creating a critical mass of people who have already gone through it as a reference point. It would also give them the information they need about how people choose to move or not move on programs to help them design the services that will be needed under a mandate scenario. They also have to keep in mind that the mandates would not get them to 80 x 30. He shared that in their role as a public agency, making statements about health was not within their regulatory purview so wherever they could find statements from other public or health agencies about those specific benefits they could point to would be helpful. Ms. Tam explained it was difficult to determine the exact savings for HVAC. It would depend on how much cooling they would be using in the summer. With the previous multifamily gas furnace pilot, they were able to determine that if someone switched from a gas furnace to a mini split system, over the course of the year they would save a little bit of money even if they used AC in the summer. If they use a lot of AC in the summer, there would be no savings. She remarked a lot of Palo Alto homes were unique because it was an older community and they had to understand what some of those challenges might be in terms of electrical conduits or placement of compressors, making sure they meet noise ordinance setback, etc. She thought there was value in having Palo Alto having their own program and gathering that data to learn what the challenges were. Director Abendschein added permit streamlining was something the water heater program helped them with. He also stated the PCE and SVCE programs were very small relative to their populations. The results would not all be completely relevant to Palo Alto. Vice Mayor Veenker agreed with Councilmember Burt on the public health thing and thought they could solve for that. She assumed the Air District would have a lot of public health and other facts, data and public statements they could cite as the source of health benefits with the program. She wondered if the marketing contract would accelerate the marketing activity and if there would be a plan put forward to go in parallel with these plans or whether they would just start implementing right away. She asked if talking about the life of appliance costs and factoring in the air conditioning aspect was apples to apples or apples to oranges. She was curious if the January 2026 launch date could be accelerated if they signed the contract in April. She inquired if the 150 homes in the proposed contract was what they thought the uptake would be. Director Abendschein replied they would just start implementing. He remarked the life of appliance costs and factoring in the air conditioning aspect was not apples to apples if there was no air conditioning. That was a sticky thing they were wrestling with in this program and in the funding study. He stated with this program they would see a lot of variability and find out SUMMARY MINUTES Page 13 of 13 Sp. Climate Action & Sustainability Committee Meeting Summary Minutes: 3/21/2024 how many people have air conditioning and when they did not, how they would process this decision and it would be important as the 2029 mandates come on. He said they assumed they would get a similar uptake around 20% of the turnover as they did in the water heater program and if so would result in about 150. Ms. Tam indicated it was Staff’s intention to launch the program sooner if they could get everything in place. For the PCE and SVCE program, it took Franklin close to a year to launch. She opined they may have learned some lessons and could streamline all the processes. They wanted to avoid launching at the end of November or December because it was a busy time for everyone. MOTION: Councilmember Burt moved, seconded by Councilmember Lu, to recommend the City Council: 1. Approve a 3-year contract with a not-to-exceed amount of $7,055,000 with Franklin Energy to administer a Full-Service home electrification program targeting single family homes, provided it includes the City’s standard Professional Services Agreement terms, conditions and scope requirements; 2. Authorize staff to use up to $1.43 million in Gas Utility Cap and Trade Revenues for the program; and 3. Amend the FY 2025 Budget Appropriation (requires a 2/3 vote) in the Gas Fund by: a. Increasing Gas Resource Management Operating Expenses for Contract Services by $1.43 million; and b. Decreasing the Cap and Trade Reserve by $1.43 million MOTION PASSED: 3-0 Future Meetings and Agendas Vice Mayor Veenker announced the next meeting would be April 4 at 1:30 PM. Adjournment: The meeting was adjourned at 2:25 P.M.