HomeMy WebLinkAbout2018-10-16 Finance Committee Summary Minutes
Special Meeting
October 16, 2018
Chairperson Scharff called the meeting to order at 6:08 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California.
Present: Vice Mayor Filseth, Kou, Scharff (Chair), Tanaka
Absent:
Oral Communications
Nikhil Gard, Stanford Crowdsourced Democracy Team declared that his team helped build digital platforms that helped assist with civic engagement for roughly 30 countrywide local governments
on the topic of City budgets. He stated that his team was available to Palo Alto if City Council decided it was needed.
Agenda Items
Staff Recommendation That the Finance Committee Recommends the City Council Approve the Updated User Fee Cost Recovery Policy and Discuss Police and Community Services Department Fees.
Kiely Nose, Budget Manager announced that this was a referral that was coming back to the Finance Committee (Committee) per City Council’s (Council) direction.
Chris Yi, Senior Management Analyst stated that the first topic for the Agenda Item was an update to the User Fee Cost Recovery Policy. Last year the City Auditor’s Department conducted
an audit of the Community Services Department’s Fee Schedule. One of the results of that audit was that the current recovery level policy did not account for the fees that were exempt
from the state laws limiting to full cost recovery. These fees were fines, penalties, late charges, use of City facilities for rental or long-term lease, and using the Palo Alto (City)
golf course. Staff’s recommendation was to update the policy to include specific language defining what the specific types of fees that were exempted from the state laws. The second
topic for the Agenda Item was Police Department Fees and on May 16, 2018, the Committee had discussed if the police fees should be removed from the fee schedule. Staff reviewed the
fee, minus animals’ fees, and discovered that some of the fees were obsolete and/or outdated. Staff was not recommending any changes to the Police Department Fees at that time but they
wanted feedback from the Committee. Staff would come back to the Committee during the Fiscal Year 2020 Municipal Fee Schedule process with further recommendations.
Chair Scharff suggested that a Work Plan be put in place for the Municipal Fee Schedule and that the fee schedule be updated on a routine basis.
Paul Harper, Principal Management Analyst answered that would be a feasible Work Plan to go forward with. He explained that Staff was looking for direction from the Committee on if
Staff should be evaluating the removal or updating the fees. Also, which departments should be evaluated on an annual basis.
Chair Scharff recommended that Staff should aim to review and analyze one department per year in terms of the department’s fees. Once all departments have been reviewed, Staff should
review the department’s fees every year for maintenance purposes. He noted that Staff should remove the fees that the Police Department had determined obsolete.
Vice Mayor Filseth wanted to know what the process was that Staff performed to keep the fee schedule up to date currently. He asked if fees sunset and where phased out of the code.
Ms. Nose agreed with Chair Schariff’s suggestion that reviewing the fee schedule annually would be a good process for Staff to go through each year to keep it up to date and current.
In terms of fees sunsetting, that would only happen if that was included in the language when the fee was adopted.
Council Member Tanaka asked if the fees were indexed to inflation.
Ms. Nose stated that annually departments look at what costs were driving the fee and was the fee aligned with the workload associated with executing that work. Also, the departments
were provided an inflator to increase the department's fees annually and the inflator was based off annual increases in labor costs.
Council Member Tanaka agreed with Chair Scharff’s suggested idea of a Work Plan and an annual update to the fee schedule. He questioned if Staff knew what the cost was for every fee.
Ms. Nose answered that costs for every fee was always calculated and was not known until that fee was analyzed. It was the department's responsibility to review the workload and the
costs associated with the services that were delivered.
Council Member Tanaka wanted a spreadsheet of the fee schedule including one column for the fee amount, one column of what the cost was, and one column showing what other local City’s
charged. He suggested Staff look for any mistakes in the fee schedule like prices of electrical panels and school floats.
MOTION: Chair Scharff moved, seconded by Council Member Tanaka to recommend the City Council:
Adopt an update to the User Fee Cost Recovery Level Policy to include language clarifying certain types of fees are not subject to state laws limiting fees to cost recovery; and
Direct Staff to develop a work plan to evaluate all fees and decide which ones are still appropriate.
Chair Scharff voiced that he wanted Staff to review the fees and determine why the fees were put in place, if the fee was worth having, and if the fees were really being implemented.
Vice Mayor Filseth reiterated that Chair Scharff was telling Staff to develop a criterion to determine which fees made sense and which did not.
Council Member Tanaka wanted the information to be presented to the Committee in a spreadsheet.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to direct Staff to prepare this information on a spreadsheet, if feasible.
Michelle Flaherty, Deputy City Manager interjected that Staff could do a spreadsheet for some of the fees but to do all the fees would take some time.
Ms. Nose stated that she was not sure if the budgeting software could do a spreadsheet format but she stated she would investigate that.
MOTION AS AMENDED PASSED: 4-0
Approval of Contract Amendment Number 2 With Verizon Wireless Through June 30, 2019, Utilizing the Western State Contracting Alliance (WSCA) Contract, California Participating Addendum,
for Wireless, Voice and Broadband Services, Accessories and Equipment (Referred by City Council on October 1, 2018).
Jonathan Reichental, Chief Information Officer stated that on October 1, 2018, City Council (Council) had directed Staff to present the Verizon Wireless contract to the Finance Committee
(Committee) for their review. The contract had been in place since 2011 and was up for renewal. Through the Western State Contracting Alliance Agreement (WSCA) Palo Alto (City) was
receiving a 22 percent discount on City cell phones/tablets. On a case by case basis, the City provided 425 cell phones and 289 tablets/MiFi/Sims. The City spent $300,000 annually
on provided cell phone and tablet devices.
Chair Scharff asked Staff if the annual cost included purchasing all the devices.
Sherrie Wong, Senior Management Analyst confirmed that the annual cost did include purchasing costs and monthly usages charges.
Chair Scharff requested more information on where the extra cost went when a new device was purchased.
Mr. Reichental articulated that he could not answer that question but he would bring the answer back to the Committee later. He went on to state that Staff’s recommendation was to renew
the WCSA contract until June 30, 2019. During that time, with direction from the Committee, Staff would explore other contracts to determine if the best rate was being received with
the existing contract. In terms of employees using their personal phones, the stipend the City is awarded per employee would be considered a non-taxable fringe benefit, employees would
have to keep 2-years of bills to show proof of business uses to the City or IRS, the employee would be responsible for the purchase of the device, be responsible for complying to all
terms and conditions, the employee would be responsible for wiping their phone off all City data if they were to leave employment with the City, and other various security measures that
Staff would need to explore more before this idea of employees using their personal phone for work could be implemented.
Chair Scharff noted that public safety employees may not want to use their personal devices and that those devices should be looked at separately. He disclosed that when Staff said
security concerns, he thought that meant viruses in the City’s systems.
Mr. Reichental commented that there were three categories of security; confidentiality, integrity, availability. Viruses would impact all three security categories.
Chair Scharff announced that telling employees that Information Technology Staff could take control of their personal phones and wipe City data was too intrusive. He wanted to know
if the security risk was probable if employees used their personal phones for City business.
Mr. Reichental affirmed that the security risk was very real and Staff would need to monitor employees closely to make sure there were no breaches to any of the City’s critical systems,
non-critical systems, and data. He suggested employees who have top security clearance should use a City device but employees who have low security clearance could use their own devices.
Chair Scharff disclosed that letting employees use their personal phones instead of City issued devices would save money but that savings might not outweigh the amount of work, time
and effort Staff would need to take to implement and manage that type of change.
Mr. Reichental stated that it was more optimal to keep the existing contract then to implement the process of employees using their personal devices for City business.
Michelle Flaherty, Deputy City Manager restated that the Committee had voiced to Staff not to abandon the idea of employees using their personal phones but to bring it back to the Committee
when it was more feasible and logical.
Council Member Tanaka requested that Staff explain the discount percentage to the Committee because the existing contract compared to plans on Verizon’s website showed that the contract
did not have a good discount.
Ms. Flaherty cautioned the Committee on comparing the City’s prices to advertised prices because Staff had not been able to determine what the hidden costs were in the advertised price.
Chair Scharff restated Council Member Tanaka’s question of how does Staff know that the contract is a good deal.
Council Member Tanaka disclosed that in terms of any contract, Staff should be shopping around and looking for the best possible deal the City could acquire.
Ms. Flaherty advised that Staff did not know if the advertised price is comparable to the City’s existing discount. Staff would need to do more analysis to show the Committee where
the discounts were compared to consumer prices.
Mr. Reichental reported that the existing contract was an agreement between Verizon and the WSCA. He added that most Cities in California run off the same contract and accept the prices
that were stated in the contract.
Council Member Tanaka voiced that he wanted Staff to compare all contracts to make sure the City was receiving the best discount possible.
Ms. Flaherty interjected that Staff always compares contracts and that when contracts are chosen it was the best discount that Staff could find.
Council Member Tanaka asked Staff to show the Committee the comparisons between different phones companies.
Ms. Flaherty responded that she would be happy to show those to Council Member Tanaka offline.
Chair Scharff stated his agreeance with Ms. Flaherty that Council Member Tanaka was wrong to state that Staff does not compare contracts. He declared that he heard Staff say that they
had not fully investigated the contract to make sure that the City was receiving the best price possible. He announced that the Committee should approve the contract but Staff should
come back in June 2019 with evidence showing that the contract is the best discount the City could receive.
Council Member Tanaka inquired when the current contract expired.
Ms. Nose answered that when Council had approved the existing contract, it would expire on October 31, 2018. Staff was recommending an extension so that the contract would expire on
June 30, 2019.
Chair Scharff added that WSCA was negotiating a new contract with Verizon and that is the reason for the extension.
Ms. Wong confirmed that was correct.
Chair Scharff disclosed that when Staff comes back with the renegotiated contract, they needed to show why that contract was a good deal.
Vice Mayor Filseth declared that the current contract was probably not the best deal but it was not the worst deal either.
Council Member Kou wanted to know what the City did to become a member of the WSCA.
Ms. Wong reported that California was part of the WSCA and that the State had to be a part of it, not local jurisdictions.
Council Member Kou reported that the contract states that the City can use a variety of wireless carriers and wanted to know why the City was only using Verizon.
Mr. Reichental answered that Verizon had the best coverage.
Council Member Kou reported that Staff had eluded to adding an additional security program and she wanted to know how much money would be added to the existing cost of $300,000.
Mr. Reichental responded that the new security program was part of a larger package that had already been implemented.
Council Member Tanaka questioned why June 2019 was picked to extend the contract out to and not something sooner.
Ms. Wong responded that the existing contract between WCSA and Verizon was negotiated out till June 30, 2019. When that date comes then a new contract between the two agencies will
be settled and in place.
Council Member Tanaka wants to know if the City could request a date in December 2018 instead.
Ms. Wong answered it was a consortium.
Chair Scharff added that it made sense to analyze the contract when the new contract is available.
Ms. Wong confirmed that was correct.
Council Member Tanaka asked why Staff could not go to a local Verizon store and ask for price comparisons on plans.
Ms. Flaherty reiterated that the Committee had voiced that Staff review the new contract in June 2019 to make sure that the City was receiving the best price.
MOTION: Chair Scharff moved, seconded by Council Member Filseth to recommend the City Council:
Approve and authorize the City Manager or his designee to enter into a contract renewal with Verizon Wireless for wireless, voice, and broadband services, accessories and equipment,
through June 30, 2019, utilizing the Western States Contracting Alliance (“WSCA”) Master Service Agreement with Verizon Wireless, State of California Participating Addendum No. 7-11-70-16
(WSCA No.1907); and
Direct Staff to return to the Finance Committee prior to the execution of the next WSCA contract with an analysis of whether the contract is a good deal and, if not, provide the Committee
with other options
Ms. Nose interjected that the Committee was recommending to the Council that they approve the contract and that Council direct Staff to compare the next contract in June with other wireless
carrier plans.
Council Member Tanaka suggested that the wording be changed from what is a good deal to what would be the equivalent consumer plan.
Ms. Flaherty noted that Staff plans to do market research while the consortium is negotiating the new contract to make sure the City was receiving the best deal possible.
Mr. Reichental confirmed that was correct.
Council Member Tanaka announced that Council Members often receive confidential emails on their personal devices and he wanted to know how the City monitored that.
Mr. Reichental specified that in terms of security for Council Members personal phones, most of the phones were password protected when accessing City emails. Also, most Council Members
only use email and email had baked in security. Anything higher than email usage, Council Member would have to use a City-issued device.
Council Member Tanaka announced that he would vote yes on the item but he was voting no that the item be put on the Council’s Consent Calendar.
MOTION PASSED: 4-0
Utilities Advisory Commission Recommendation That the Finance Committee Recommend the City Council Adopt a Resolution Approving the 2018 Electric Integrated Resource Plan (EIRP), Updated
Renewable Portfolio Standard Procurement Plan and Enforcement Program, and Related Documents.
Dean Batchelor, Utilities Chief Operating Officer announced that Staff would be presenting the 2018 Electric Integration Resource Plan (EIRP). He announced that Staff’s recommendation
was to move the EIRP forward to City Council (Council) for approval. The current plan was adopted in April of 2012 and then in 2015 Senate Bill (SB) 350 was signed into law which required
that all Cities falling within a certain criterion come up with a new EIRP Plan. Once the EIRP Plan is adopted, Staff would present the plan to the California Energy Commission by January
2019.
Shiva Swaminathan, Senior Resources Planner stated that the plan was reviewed and implemented every 5 years. The proposed EIRP would be implemented between 2018 and 2030. Three reasons
the EIRP Plan is important is it included the Western Hydro Contract which met 38 percent of Palo Alto’s (City) energy needs and that contract was going to expire in 2024. The City
had ambitious goals for renewable supplies of energy and there was a rapid increase in distributed energy resources. SB 350 stated that City’s were to increase the renewable supply
of electric supply to 50 percent by 2030, reduce greenhouse gas and emissions by 40 percent, and then double the energy efficiency saving. There were two requirements for SB 350 that
the City needed to work on which were doubling the energy efficiency.
Chair Scharff interjected stating that could the City be having trouble doubling because it was so energy efficient.
Mr. Swaminathan confirmed that was correct.
Jonathan Abendschein, Assistant Director Utilities Resource Management noted that energy efficiency did not just refer to utility energy, it was a doubling of state-wide efficiency.
Mr. Swaminathan continued that the second area of focus for the City was to enhance the distribution system for demand-side management programs. Some accomplishments that the City was
successful achieved since 2012 was a Carbon Neutral Plan, increased the Renewable portfolio standard to 58 percent, a cumulative energy savings of 4.4 percent over 6 years, and several
other noteworthy accomplishments. On an annual basis, solar and Western energy took up most of the Cities energy.
Vice Mayor Filseth wanted to know why Calaveras was more expensive than Western when looking at the projections of where the City’s energy loads would be in 2025.
Mr. Swaminathan answered that the debt service for Calaveras would go away in 2032 and so the cost would go down after that.
Chair Scharff questioned if the City would then keep the Calaveras reserve account forever.
Mr. Swaminathan stated that the use of the reserve would need to be reviewed regularly.
Vice Mayor Filseth reiterated that Western was $.03 a kilowatt hour on average currently, not including transmission costs.
Mr. Swaminathan responded that was correct.
Vice Mayor Filseth wanted to know how active the City was when it came to looking at storage for solar energy.
Mr. Swaminathan explained that looking at solar energy storage was incorporated into the new EIRP Plan. Prices for solar energy storage was declining rapidly but still expensive.
Council Member Kou inquired about the licensing cost for Calaveras and what the approximate cost was.
Mr. Swaminathan stated Palo Alto was a 22 percent share owner of the project so it was roughly $10 million.
Mr. Abendschein restated that the City’s share was roughly $50 million for relicensing and that was amortized over many years. Annually, the City paid roughly $8 million for Calaveras.
Mr. Swaminathan continued that due to Distributed Energy Resources increasing, that was decreasing the electricity load by 2 percent. In the next 3 to 4 years Staff planned on implementing
seven new initiatives in the EIRP Plan. The new initiatives included being involved in the Western Contract decision, portfolio rebalancing analysis, California Oregon Transmission
Project (COTP) decision, carbon accounting, RPS compliance strategy, partner with external agencies, and competitive assessment and loading uncertainty.
Chair Scharff asked why the City would want to investigate and partner with external agencies.
Mr. Swaminathan explained that the City could learn about solar storage projects and customer programs. He explained that in terms of next steps Staff was looking for a recommendation
from the Finance Committee to the Council to approve the EIRP Plan. Once Staff received approval from the Council they would file the EIRP Plan with the State in April of 2019. In
2024 the contract between the City and Western will need to be renewed. Then a new EIRP Plan will be presented to the Committee and Council in the year 2024.
Council Member Kou questioned what stranding assets meant.
Mr. Swaminathan responded that it meant the cost of owning an asset was greater than the market value of the asset.
Chair Scharff requested more information about the California Oregon Transmission Project.
Mr. Swaminathan stated that the project had been in place for the past 25 years but it was not being used at the present time. He stated that when the contract with Western is up for
renewal in 2024, the COTP will again be utilized by the City. The debt associated with the COTP will be gone in 2024 so the project would be a good resource.
Council Member Tanaka wanted to know if there were any benefits to the City if it had energy storage.
Mr. Swaminathan articulated that if the price was right then energy storage could be valuable.
Council Member Tanaka questioned if it made sense for the City to invest money into pumped-hydro water dams as energy storage units.
Mr. Swaminathan explained that pumped hydro was not an open market and it could be very expensive. Also, the geography was not readily available to be able to achieve the pumping of
water backward to build up energy.
Mr. Abendschein added that pumped hydro could be one of the alternatives that Staff could explore in the next 5 years as an option for energy storage.
Council Member Tanaka articulated that the Cities of Springfield and Riverside were using derivatives to try to balance out the supply. He wanted to know if Staff had looked at that
idea further.
Mr. Abendschein voiced that Staff had investigated the idea thoroughly in 2017 with the Hydro-Electric Rate Adjuster. The energy portfolio was largely hedged because of the long-term
contracts that the City held. In the winter months, the City did use a hedging program.
MOTION: Vice Mayor Filseth moved, seconded by Council Member Kou to recommend the City Council:
Adopt a Resolution to approve the following:
The 2018 Electric Integrated Resource Plan (EIRP);
An updated Renewable Portfolio Standard (RPS) Procurement Plan;
An updated RPS Enforcement Program;
The following four standardized tables:
Capacity Resource Adequacy Table (CRAT);
Energy Balance Table (EBT);
Greenhouse Gas (GHG) Emissions Accounting Table (GEAT);
RPS Procurement Table (RPT); and
Approve the EIRP Objective and Strategies to guide future analysis and decisions; and
Approve the EIRP Work Plan outlining planned staff initiatives to implement the EIRP.
MOTION PASSED: 4-0
Staff and the Utilities Advisory Commission Recommendation That Finance Committee Recommend the City Council Accept the Utilities Smart Grid Assessment and Utilities Technology Implementation
Plan, Including Advanced Metering Infrastructure-based Smart Grid Systems to Serve Electricity, Water, and Natural Gas Utility Customers.
Dean Batchelor, Utilities Chief Operating Officer stated that the next item before the Finance Committee (Committee) was to discuss the smart grid assessment.
Jonathan Abendschein, Assistant Director Utilities Resource Manager disclosed that the increase of electric vehicles, solar and storage in the community presented opportunities to use
those resources at a decreased cost by using Advanced Metering Infrastructure (AMI). The increase also posed potential cost impacts if the City was not able to manage the integration.
Shiva Swaminathan, Senior Resources Planner reported that Staff’s recommendation was that the Committee accepts Staff findings. That would set the City on a path for the next 5 to 6
years to plan and implement the AMI Program. This program was one of the key programs defined in the Utility Strategic Plan that was approved in 2017. AMI was meant to digitally sense,
communicate and control technologies to monitor utility networks. The data that was collected from the smart meters would be stored in a meter data management system that could be accessed
by Staff and customers. The Investor Owner Utilities Smart Grid had been implemented throughout California starting in 2008.
Chair Scharff questioned how many non-investor owned utilities had natural gas.
Mr. Swaminathan stated three in the entire state. He continued that in 2012 City Council (Council) had directed Staff to investigate AMI. Staff had come back to Council stating that
a smart grid was not prudent at that time. Costs have not decreased since 2012 but the technology had matured to a point that would be beneficial to the City if a smart grid was implemented.
In 2013 a pilot program was implemented for 300 homes and it was successful. Potential capital costs that would be associated with an AMI Program would be roughly $18 million to $19
million. Benefits included a $3.3 million cost savings annually.
Council Member Tanaka stated that the operating costs were $27 million and there would be a recurring $43 million.
Mr. Abendschein explained this was the present value of the ongoing costs as well as the first initial cost.
Vice Mayor Filseth remarked that Staff was counting on large savings from conservation as a result of doing a smart grid.
Mr. Swaminathan confirmed that was correct.
Vice Mayor Filseth asked what the driver was for the conservation.
Mr. Swaminathan explained that Staff had the ability to manage voltages more on a narrow band and that in turn would save customers money. For electric and gas, there were customer
programs that could be implemented that would help customers be more aware of their usage.
Vice Mayor Filseth emphasized that those programs were contingent on having smart meters.
Mr. Swaminathan responded that was correct. He stated in summary that residential and commercial electric programs, greater awareness and using the technology, detections of water leakage,
and detecting gas leaks would come into play on how the conservation fund is formed.
Mr. Abendschein summarized that having the data available to people is the main reason to have a smart grid and with them knowing that data, it could potentially drive down energy consumption.
Vice Mayor Filseth voiced that after AMI is implemented customers will save 1-2 percent on their bills because of access to better data.
Chair Scharff stated that he was confused about how the conservation saving saved utility money.
Mr. Swaminathan explained that the conservation saving was every unit of energy or water a customer saves, the City would buy fewer units from an outside source.
Vice Mayor Filseth noted that was commodity cost from the 1-2 percent energy savings from customers.
Mr. Swaminathan responded that was correct.
Chair Scharff claimed that buying less did not mean that the City saved money. It may mean that it would cost the City more money because there were less fixed costs.
Vice Mayor Filseth corrected that commodity was what was consumed by a homeowner. Then fixed costs would be amortized over a smaller piece of the commodity thus in total everyone’s
bill would go down.
Mr. Abendschein stated that was correct.
Vice Mayor Filseth added that the cost of the fixed cost would be distributed unevenly depending on who saved more energy.
Chair Scharff reiterated that the utility was saving $43.83 million and the City was spending $43.82 million so it was a break-even proposition.
Mr. Swaminathan articulated that the break-even proposition was very sensitive to three things. The operational costs, operational savings the City was able to receive and the conservation.
Mr. Batchelor added that the key factor was around the savings in the workforce and the gains of efficiencies.
Council Member Tanaka asked what would happen to the employees that were out reading meters at the present time.
Mr. Batchelor disclosed that the nine-meter reading positions would be eliminated if the AMI program were implemented. Those employees would be retrained into positions that were equal
or one level up from their current position.
Council Member Tanaka inquired if the new four positions that Staff was proposing were City Staff or outside contractors.
Mr. Batchelor stated that one position could be an outside contractor but three would be City employees.
Council Member Tanaka voiced a concern that the four new positions would cost more together than the nine positions that would be eliminated. He wanted to know why new positions needed
to be added if they were not needed at the present time.
Mr. Swaminathan explained that one of the four new positions was an AMI Administrator and their job was to maintain the health of the network. That position could be contracted out
if the City chose to. Another position was a data analyst position.
Council Member Tanaka interjected to say that the City did not currently have a data analysis position and did not see why that position was needed.
Mr. Swaminathan stated the City needed that position so that the City could receive the value of customer engagement.
Council Member Tanaka asked if all the positions could be outsourced.
Mr. Swaminathan responded that other than the AMI Administrator position the other ones would not be efficient if filled with contracted vendor.
Council Member Tanaka questioned how the numbers would change if dynamic pricing were applied.
Mr. Swaminathan stated that Staff had not quantified that idea at the present time. In terms of time of use pricing, it would reduce customer’s behavior in terms of how efficient they
were with their energy. Also, the City could use the customer’s electric vehicle and storage system to maximize the time of use pricing.
Vice Mayor Filseth wanted to know if the City saved money if an electric vehicle charged during the day as opposed to at night.
Mr. Swaminathan confirmed that was correct. Staff could not quantify time of use pricing because it was determined by customers behavior changes.
Chair Scharff requested how the AMI system would impact rates.
Mr. Swaminathan explained that the Calaveras Fund could only be used for electric and if that fund were used then there would be no impacts on rates for electric. Gas and water would
have to be a loan and that would be spread over 18-years.
Chair Scharff articulated that if the Calaveras Fund were spent on electric, then electric rates would go down.
Mr. Swaminathan answered that was correct. He then went onto explain two different scenarios of costs and savings and how those would affect customer’s bills.
Vice Mayor Filseth rephrased that in the worst-case scenario there would be a 50 percent lower operating cost that would save 100 percent of the conservation savings. In that scenario,
the customer would see a 2 percent increase on their bill.
Chair Scharff wanted to know the numbers if the City decided not to use the Calaveras Fund for electric.
Mr. Swaminathan summarized that it would be an increase in the initial term and then less pressure in the outer years.
Chair Scharff stated that there was $40 million in the Calaveras Fund.
Mr. Swaminathan corrected that there was $50 million in the Calaveras Fund.
Chair Scharff continued to ask what the numbers would look like if the electric portion of the project were paid for with the Calaveras Fund.
Mr. Swaminathan declared if that was the case then customers would see a 1 percent savings on their electric bill. He gave some examples of things that Staff had a hard time quantifying
including implementing improved asset utilization, unauthorized use detection, maintain/enhance reliability, and several others.
Vice Mayor Filseth asked what the difference was between time-of-use and retail rates.
Mr. Swaminathan articulated that energy prices in 2017 on average were doubled between 5pm-10pm versus during solar hours.
Vice Mayor Filseth inquired what it was like in the middle of the night.
Mr. Swaminathan answered in the middle of the night it reduced. He continued to state that the Santa Clara County Water District was planning on implementing a program to incentives
utilities to make the change to a smart grid.
Chair Scharff wanted to know if the Santa Clara County Water District had plans to pay for the AMI system.
Mr. Swaminathan confirmed they were going to pay for some but Staff did not know the specifics at the time. He continued to articulate that in terms of funding Staff’s recommendation
was to use the Electric Special Projects (ESP) Reserves for electric and then receive a potential loan from ESP for water and gas. That loan would be recovered through retail rates
and because of other technology projects the completion of the AMI project if approved, would not be completed until 2023. In terms of next steps, if the Committee recommended approval
then Staff would present the project to the Council in December of 2018. Once other technology project’s timelines were finalized in the summer of 2019, Staff would come back to the
Committee in the fall of 2019 with a detailed implementation plan. Full deployment of the AMI project would take place in the years 2022-2023.
Judith Schwartz, Chair, Utilities Advisory Commission announced that she was one of the nationally recognized experts on customer engagement and how to adopt a smart grid. She wanted
to have an open discussion with the Committee and Staff on how to implement a smart grid in the City.
Chair Scharff explained that he wanted to know what the Utilities Advisory Commission (UAC) thought about the project. If Ms. Schwartz had suggestions that she wanted to share with
the Committee and Council, he suggested she share those during the public comment period.
Ms. Schwartz articulated that one of the benefits of doing AMI and other smart grid projects where the variability that could be given to different people in the community. She explained
that the City currently did not have good communication when it came to power outages and detection of leaks. AMI would help detect those faster and the community would be happier because
of it. Palo Alto was also one of the last cities to implement a smart grid and because of that, the City could learn from mistakes that other cities had encountered. Another idea that
the UAC discussed was to use rate design and rate incentives to help form the system so that the City could receive max efficiency from the system. The UAC also discussed an opt-out
option where folks could opt out of receiving a smart meter. The City would notify those folks how much it would be to have a meter reader come and read the meter and they would be
billed for that. She concluded that the UAC was not sure the best way to present information to the Committee and Council concerning AMI.
Chair Scharff explained that the typical way information was relayed to the Committee and Council was through Staff liaisons to the UAC meetings. Staff then would type up a Staff report
that was then presented to the Committee or Council.
Ms. Schwartz reiterated that AMI is complicated and cannot be explained or discussed in a 5-minute conversation between the UAC and Council.
Chair Scharff asked if the UAC recommended that the Committee recommend approval of the Smart Grid Assessment and Technology Implementation Plan.
Ms. Schwartz responded yes, the UAC recommended that. She restated that she was frustrated that she was not able to have an open conversation about AMI with the Committee. She was
frustrated that Staff had to relay so much complex information to the Committee in short summaries.
Council Member Tanaka wanted to know what Ms. Schwartz had seen in other cities in terms of four new Staff positions.
Ms. Schwartz stated that it made sense to her to have knowledgeable AMI Staff members employed in the City.
Council Member Tanaka rephrased his question to say would it be possible to have outside vendors take up those four positions.
Ms. Schwartz restated that typically some positions were contracted out but it was smart to have knowledgeable Staff members in-house.
Council Member Tanaka questioned if the City would receive multiple bids when the City did decide to put out a Request for Proposal (RFP).
Ms. Schwartz stated that there was an active market for smart grid contractors.
Council Member Kou asked if AMI was wireless.
Mr. Swaminathan confirmed that was correct.
Council Member Kou questioned why the City would not leverage the fiber network.
Mr. Swaminathan explained that Staff had no intention to use fiber to the home to send data back to the City. A device called the Gate Keeper would be deployed around town and their
job was to collect all the data from the electric meters.
Council Member Kou commented that this topic should be discussed among Council and not put on the Consent Calendar.
Mr. Batchelor noted that it would be put as an action item for the Council to review.
Vice Mayor Filseth restated that Staff wanted the Committee to validate that the project penciled out reasonably and it should not be canceled.
Mr. Batchelor responded that was correct.
Mr. Abendschein added that the UAC was emphasizing that there needed to be a lot of communication and outreach to the community about the project.
MOTION: Chair Scharff moved, seconded by Vice Mayor Filseth to recommend the City Council accept the Utilities Smart Grid Assessment and Utilities Technology Implementation Plan (Utilities
Technology Plan), including the estimated timeline and resources for the implementation of an Advanced Metering Infrastructure (AMI)-based smart grid system to more effectively serve
electricity, natural gas and water utility customers.
MOTION PASSED: 4-0
ADJOURNMENT: The meeting was adjourned at 9:11 P.M.
FINAL MINUTES
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Sp. Finance Committee Meeting
Final Minutes 10/16/18
FINANCE COMMITTEE
FINAL MINUTES
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