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HomeMy WebLinkAbout2025-09-05 Climate Action and Sustainability Committee Summary MinutesCLIMATE ACTION & SUSTAINABILITY COMMITTEE SUMMARY MINUTES Page 1 of 8 Special Meeting September 5, 2025 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 3:00 PM Present In-Person: Veenker (Chair), Burt, Lu Present Remotely: None Absent: None Call to Order Chair Veenker called the meeting to order. The clerk called roll with all present. Public Comments 1. David C. talked about Bike Palo Alto on October 5, asked for someone from the Committee to speak to all departments in how to promote cycling as a way to reduce congestion and ease of travel to the City's main events. Standing Verbal Reports A. Staff Comments Brad Eggleston, Director, Public Works Department, announced new rebates covering electrification permit fees for residential heat pump water heater and residential heat pump HVAC projects. Implementation is expected to be as early as sometime in the current month. Councilmember Burt asked for an estimate on when the current rebates would run out. Director Eggleston replied it would likely be sometime the current month. Christine Tam, Senior Resource Planner explained there is still over 80 percent of funds available but will go quickly. The permit rebates are planned to launch October 2. There is coordination with Rock Rapids to get the software configurations in place. Waiting until the tech incentives run out would make it harder to launch the rebates. Councilmember Burt wanted explanation of the cutoff trigger. Ms. Tam answered it will be necessary to work with a tech certified contractor to access the tech incentives. When the contract is signed with the tech contractor, the funds will be reserved. SUMMARY MINUTES Page 2 of 8 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 9/5/2025 Councilmember Burt queried if there would be penalties for not getting the permit when legally required to do so. George Hoyt, Chief Building Official, stated the fee schedule does have penalties for not obtaining a permit. It is not proactively chased due to a lack of resources but are applied when noncompliance is known to occur. Councilmember Burt suggested there would be more impact in coupling the rebate with the negative consequences. Mr. Hoyt agreed to work with the Utilities Department on communicating that information. B. Committee Member Comments and Announcements Chair Veenker mentioned the annual NCPA conference coming up and a Commission meeting September 24-26 in Monterey that will include a legislative and regulatory committee meeting. Cap and trade reauthorization that will affect the City is being monitored. Agenda Items 1. Adoption of an Emergency Ordinance Amending Palo Alto Municipal Code (PAMC) Chapter 16.04 to Add Local Amendments Related to Permitting, Certificates of Occupancy, and Definitions to the 2022 California Building Code, and an Emergency Ordinance Amending PAMC Chapter 16.17 to Adopt the 2025 California Energy Code and Local Amendments Thereto. CEQA Status - Exempt Under CEQA Guidelines Section 15061(b)(3) and 15308 Timothy Scott, Resource Planner, provided a slide presentation including a background of the Reach codes, legislative updates and urgency, green building and energy amendment timeline, time of replacement: AC to heat pump, FlexPath proposal, FlexPath measure list, other jurisdictions adoption, community feedback, CASC working group feedback, Staff recommendation and next steps. Chair Veenker asked if the updated slides had been printed out. Unknown female agreed to print out the updated slides. Chair Veenker commented that AB 130 was well intentioned to get housing built in the wake of the California wildfires but was misguided to restrict the building codes in a way that eliminates the Reach codes. Councilmember Burt inquired what the deadline for adoption is based upon. Madeleine Salah, Deputy City Attorney, replied it is a new law and it is not known how the CBSC is going to interpret the mandate to reject amendments that do not comply with AB 130 beginning October 1. It could be interpreted to mean it must be passed by the City and submitted by October 1 or to mean it has to have had time to be approved before October 1. It is believed that there is a strong argument to adopt the local amendments under a separate exemption that allows for Reach codes that incentivizes all electric construction while permitting mixed fuel construction in alignment with the City's adopted general plan. Councilmember Burt queried if anyone has asked CBSC what the interpretation is. Deputy City Attorney Salah replied no position has been taken publicly by the CBSC. Councilmember Burt suggested the state senator could help get an answer. Councilmember Burt queried if AC to heat pump is looking at attic insulation or air sealing for the heat pump. Mr. Scott stated it would be replacing with another traditional AC and including both attic insulation and air sealing measures or alternatively installing a heat pump. Councilmember Burt advised clarifying the requirement. Councilmember Burt wanted to know if a point system could be established SUMMARY MINUTES Page 3 of 8 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 9/5/2025 to frame the requirements. Mr. Hoyt explained the requirements were established based on the cost effectiveness study for this measure and the energy efficiency of the different perspectives over time. The incentive is to move toward heat pump because it will be costly to hire multiple contractors to seal up ducts as well as hiring another insulating company separate from the mechanical contractor. Councilmember Burt questioned if the heat pump would have to cover the entire home and if so if one is replacing an AC system that does not cover the entire home, would it have to be replaced with a heat pump that does cover the entire home and if it would create a disincentive to go to the heat pump. Mr. Scott responded the requirement is that the heat pump would be sized in order to serve as the primary heating source for the home. There is an exemption in the requirement for if the installation of a heat pump would require installing a system over one ton larger than the current existing system. Councilmember Burt advised including that information and putting a rendering that is illustrative of the reality of the size of the heat pump compared to the traditional AC unit. Councilmember Burt wanted clarification and Staff response on the community feedback. Mr. Scott agreed to add more detail on the slide. There was a discussion about whether home size could be used as a measure that satisfied some number of points on the FlexPath. There were general questions about point value and whether it could be adjusted. An additional cost effectiveness study would be required to change the set of points that were assigned from the previous study. Staff does not have the resources to do it in this timeline. Director Eggleston pointed out the presentation slide gave a high level summary but the Staff report lays out the Staff responses. Councilmember Burt queried if there would be a prerogative to do the other options under AB 130 in the future. Mr. Scott replied that alludes to what was alluded to earlier on the exemption related to the general plan which is an option available to try to continue making that change. Councilmember Burt wanted to know the basis for why it was thought qualification for that exemption is possible. Deputy City Attorney Salah read the exemption language which is for changes or modifications that are necessary to implement a local code amendment that is adopted to align with the general plan approved on or before June 10, 2025, and that permits mixed fuel residential construction consistent with federal law, a reference to the CRA versus Berkeley case, while also incentivizing all electric construction as part of an adopted greenhouse gas emissions reduction strategy. The comp plan has strong language about greenhouse gas emissions reductions and specifically building electrification including references to the S/CAP. Local amendments that serve those goals are in the heartland of that exemption. Item 1 Public Comment 1. David C., Carbon Free Palo Alto, advised one other exemption should be added to the list of exemptions for homes that have a combination heat pump that does hot water heating and home heating. 2. Peter B. indicated Palo Alto should allow electric resistance water heating for all ADUs and this should be included in the local ordinance amendment. 3. Dashiell L. (zoom), conservation coordinator for the Sierra Club Loma Prieta Chapter who support the Staff recommendation for the Committee to recommend that the City Council adopt the ordinance presented. SUMMARY MINUTES Page 4 of 8 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 9/5/2025 Chair Veenker asked if Staff had responsive comments or thoughts on the suggestion about adding to additional exceptions or comments about electric resistance heaters. Jonathan Abendschein, Assistant Director, Climate Action, Public Works Department, explained the exemption for the AC systems where there is already a heat pump heating system was not on the radar. Staff is not prepared to write an exemption for that. It is a situation that can be learned about from the time it is adopted until the time it becomes effective. There may be other configurations in addition to this that may need exceptions. The expectation is that the exceptions will be able to be adopted before it becomes effective under exemption 5. With respect to electric resistance heating, there are challenges in the energy code. They are not prohibited in ADUs but the fact they use more electric energy than heat pumps makes it hard for them to pass energy code requirements. All the points made by the commenter are valid and those were not the only comments had in the outreach discussions about this. Staff will take those comments and dig into the resistance heaters to see if anything can be done to facilitate them one way or another. There is not a clear answer on what it would take to get them compliant with energy codes or if something can be done at the state level. Chair Veenker asked if there were many requests at the City wanted resistance water heating in larger structures. Assistant Director Abendschein did not know how many requests were received but comments are heard from people who have built a home with a gas tankless water heater or who need electric resistance due to having no room for a heat pump water heater. Mr. Hoyt added in some existing conditions the area is small. Some people are concerned about the hot and cold air a heat pump water heater creates in the home. The energy code does allow electric resistance water heaters in certain situations under the prescriptive measures. Ninety-five percent of all projects are based off the performance measures. It is difficult to achieve that. It had been suggested to talk to the Energy Commission to see what kind of exemptions could be outlined in the state code. Chair Veenker expressed support of the proposal. Councilmember Lu wanted clarification on how the state exemptions for ADUs or director's exemption would intersect or the practical realities of those exemptions would mean for something like an ADU that might want a tankless water heater. Mr. Hoyt responded that one option was that a tankless water heater is operated with gas. The exceptions referred to in the ordinance in the state code are exemptions that are applicable through those two different mechanisms. In the local ordinances, those exceptions can be granted on a local level and the state exemptions can be applied to state regulations as they come in for processing. Councilmember Lu asked to the extent there are state level exemptions for local objective standards for certain kinds of ADUs, what would it mean for an ADU that needs to install a water heating solution. Mr. Hoyt replied even though there are a lot of ADU regulations and exemptions regarding ADU laws and ordinances, they still have to comply with the state energy standards. Councilmember Lu asked what other options exist that Staff has or could consider. Mr. Scott answered there is feedback around adjustments to the EV readiness requirements or updated electric load calculations, potential passive housing standards, and gas/stove time replacement. Those have all been considered but there is a lack of needed materials to pursue them on this timeline. Assistant Director Abendschein added a lot of the feedback potentially falls under exemption 5 and can be adopted at a later date. Councilmember Lu asked about choices where there is material flexibility. Mr. Scott stated changes could theoretically be made to the FlexPath target scores. The point value to the measures are set by SUMMARY MINUTES Page 5 of 8 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 9/5/2025 the cost effectiveness study but the target score the buildings achieve is what will be chosen. It is set to meet the minimum fuel substitution electrification threshold. It can be adjusted if there is a need. Councilmember Lu was happy to move forward and consider any other changes to the points or dates. Councilmember Burt wanted to know why January 2027 was picked when some other jurisdictions have a earlier date. Assistant Director Abendschein responded the 2027 date was based around giving the rebate and whole home full services programs time to surface some of the issues. The full service program will not be up and running until early next year. The rebate program is already running and some information will be obtained from that. There is also permit streamlining effort going on around heat pumps. Six months does not give as much time to learn from the other jurisdictions. Councilmember Burt inquired why the hot water plus home heating system could not be folded in. Assistant Director Abendschein answered it is a matter of not knowing enough about the technologies that need exemptions to be prepared to write that requirement in the short time before getting the proposal adopted. Councilmember Burt questioned why not allow the electric resistance heaters up to 1000 square feet subject to the energy code. Mr. Hoyt explained the two ways to comply with the California Energy Code are the prescriptive measure pathway and the performance measure pathway. There are mandatory requirements for replacing a gas water heater. There is an exemption to replace it with an existing electric water heater or for an ADU up to 500 square feet. When building a new structure, almost 99 percent of applicants use the performance measure. Applying electric resistance water heater into the energy calculations creates a large hit that is difficult to rebound from. Councilmember Burt opined the City would need to have an exemption up to 1000 square feet. Mr. Hoyt did not believe that was permitted. Deputy City Attorney Salah clarified the City is permitted under certain circumstances to make local amendments to the statewide base codes only if they are more restrictive than the state codes. Councilmember Burt wanted that to be explored. MOTION: Vice Mayor Veenker moved, seconded by Council Member Burt to recommend that the City Council adopt the attached emergency ordinance amending PAMC Chapter 16.17 to incorporate the 2025 Edition of the California Energy Code with local amendments related to FlexPath and Air Conditioner Time-of-Replacement Requirements. MOTION PASSED: 3-0 2. Consideration of Alternatives for City's Role in Facilitating Compliance with Air District Zero NOx Requirements for Water Heaters; CEQA Status: Under CEQA Guidelines Section 15183, Projects Consistent with an Existing General or Comprehensive Plan to not Require Additional CEQA Reviewtatus Update on Studies Related to the Electric Utility’s Reliability and Resiliency Strategic Plan (RRSP) Strategies 4 and 5 and Request for Feedback on Draft Proposals for Implementation. CEQA Status: Not a Project SUMMARY MINUTES Page 6 of 8 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 9/5/2025 Assistant Director Abendschein provided a slide presentation including a background, potential forms of assistance, preliminary cost estimates – incentive financing, working group feedback, and Staff recommended approach/next steps. Item 2 Public Comment 1. Dashiell L (zoom), conservation coordinator for the Sierra Club Loma Prieta Chapter, voiced support for the implementation of these rules by the Air District. 2. David C., Carbon Free Palo Alto, suggested the City look at other ways besides incentives as incentives tweak the market and are handed to the contractor. 3. Stephen R (zoom) commended Staff for the proposals to comply with the Air District's rules, NOx emissions, and health issues from methane leakage from gas appliances. 4. Luke M. (zoom), energy consultant, indicated that it is always possible to do electric resistance water heating in any size of residence. The electric resistance tankless units are challenging to integrate into homes for electrical code reasons. Assistant Director Abendschein indicated the amperage requirements on resistance heating is very high and requires a lot of consideration. Chair Veenker asked if the preliminary cost estimates are for the life of appliance. Assistant Director Abendschein explained the term of financing is a 20-year loan. There are a lot of one-time changes that have to be made. When shortening the term, the monthly bill impacts go up. That needs to be considered when designing potential options for Council. Councilmember Lu inquired how low, middle, high, and all other income would be calculated. Assistant Director Abendschein replied it is based on census data. About 15 percent of Palo Altoans would be eligible for the rate assistance program. Middle income is about the middle of 50 percent. The low income is calculated at a county level. Councilmember Lu asked for a confirmation of the current level of incentives. Assistant Director Abendschein stated that is $3500 but actually 100 percent paid for low income. There is a separate incentive for low income that it 100 percent paid as opposed to $4500. Another consideration is that a lot of times low income people do not have the upfront capital to make the $2800 copay. Councilmember Lu asked about a cost curve for heat pump water heaters over the last several years. Assistant Director Abendschein answered increases were seen from supply chain disruptions, tariffs, and increasing costs and labor in the area. There is not a market volume to see the learning curve adjustments as higher volumes are seen in the Bay area. Councilmember Lu for discussion about streamlining. Assistant Director Abendschein stated there is not much more to do regarding streamlining for heat pump water heaters. There may be individual provisions or regulations in particular situations. There are some regional efforts to try and standardize around the region that Staff want to track. Councilmember Lu asked if this would only apply to the heat pump water heaters affecting single-family homes or small duplexes. Assistant Director Abendschein said it is any water heater under 75,000 BTU. It is in a range of places but mostly single-family homes. SUMMARY MINUTES Page 7 of 8 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 9/5/2025 Councilmember Lu expressed skepticism of long-term subsidies that go on multiple years except for low- income groups and preferred to keep capability to incentivize electrification of multifamily homes or apartment buildings. Councilmember Burt questioned if the incentive on a permitting fee waiver would tend to flow better to the resident than to a contractor and if applying the incentive as a permitting fee waiver would be any more effective at the resident receiving the incentive rather than contractor. David Coale, Bike Palo Alto member, answered that often the contractor pulls the permit so the cost is all at the contractor side. Councilmember Burt wanted to know if there was ability to negotiate the pricing structure in the turnkey program circumstance and if it would be a better way to build in the incentives. Assistant Director Abendschein replied working with a single contractor and trying to negotiate is challenging and competition is required to make it work. Councilmember Burt wanted to know how incentives would flow to the resident rather than contractor. Assistant Director Abendschein stated working competition into that is a necessity. Efforts are being made to come up with ideas to combine incentives and competition but nothing is ready to be publicly shared. Putting a standard incentive out poses a risk of creating price increases. Having incentives that only go into certain sectors implicitly creates a comparison. If Palo Alto had incentives for all but other regions do not would provide market information to be gathered. Mr. Coale described how Mountain View's program listed every contractor's price and whether they did an electric panel upgrade or not and the advantages the instant transparency gave. Councilmember Burt queried Silicon Valley Clean Energy's efforts could be explored, why they were able to list pricing, and if there is some reason Palo Alto could not do the same. Assistant Director Abendschein agreed that could be explored. Councilmember Burt encouraged combining the incentives with penalties in order to keep people from circumventing this and reinstalling gas hot water heaters themselves along with education on the health, environmental, and long-term economic benefits. Councilmember Burt asked where the $270,000 on the table come from. Assistant Director Abendschein said it would be worked up where the money comes from in the proposal. The Staff report listed a few sources that could be used. Building it into the electric rates would merit more discussion and would have legal dimensions. Chair Veenker wanted to know if there is a sense of what contractors should be charging to preclude them from taking advantage of the incentive. Assistant Director Abendschein replied contractors live in a world that is not predictable from job to job. There are a lot of ways of managing costs to make the money they need to make. It is hard to force contractors into a predictable pricing structure in that environment so a fixed pricing structure is not realistic. Figuring out competition and pricing transparency is a potential idea to let those that do it most efficiently find a way to get the business and will lower costs. Chair Veenker asked about what the Air District has in terms of fines or penalties. Assistant Director Abendschein understood that enforcement is likely to take place at the point of sale. Chair Veenker asked about the middle income cost estimate on the financing table. Assistant Director Abendschein said in the modeling about 15 percent of Palo Altoans are assumed to be low income and 45 percent middle income likely bringing it to 110 or 120 percent of AMI. Chair Veenker was inclined to include the middle income and thought more workup on this is warranted. There will be public workshops upcoming on the proposed changes this fall with opportunity for public comment. NO ACTION TAKEN SUMMARY MINUTES Page 8 of 8 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 9/5/2025 Future Meetings and Agendas Director Eggleston reported the next meeting will be September 19 with the One Water Plan and associated discussion from the Utilities Advisory Commission and reviewing and discussing design guidelines for the next iteration of the Multifamily Electric Vehicle Charging Program. The October 3 meeting was changed to October 17 at 2 PM to talk about the Advanced Rooftop HVAC Pilot Program recommendations and design guidelines as well as the preliminary results from the gas transition study. Councilmember Burt was interested in looking at the friction points for all the programs comprehensively. Director Eggleston stated a lot of the items being brought to the Commission are the next iteration of a program where they have learned from a pilot program, identified issues, and made improvement. Chair Veenker asked if the next stage of the S/CAP workplan goes to Council. Director Eggleston replied the workplan for the next two years is expected to go to Council in December. Councilmember Burt opined it is a valuable learning curve for everyone. Adjournment: The meeting was adjourned at 5:15 PM