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HomeMy WebLinkAbout2023-11-07 Finance Commitee Summary MinutesFINANCE COMMITTEE SUMMARY MINUTES Page 1 of 15 Regular Meeting November 7, 2023 The Finance Committee of the City of Palo Alto met on this date in the Community Meeting Room and by virtual teleconference at 5:32 PM. Present In Person: Burt, Stone Present Remotely: Lythcott-Haims Absent: None Call to Order Chair Burt called the meeting to order. Assistant City Clerk Vinh Nguyen called roll and declared three were present. Announcements Council Member Lythcott-Haims announced that she was invoking the just cause provision of Assembly Bill 2449 as she had been diagnosed with COVID a couple days ago. She indicated that she was at her home at 4135 Maybell Way in Palo Alto, and there were no adults 18 years of age or over in the room with her. Public Comments There were no requests to speak. Action Items 1. Utilities Advisory Commission Recommendation that the Finance Committee Recommend that the City Council Adopt a Resolution Approving the 2023 Electric Integrated Resource Plan SUMMARY MINUTES Page 2 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 Utilities Director Dean Batchelor stated that since about June 2022 they had made about five reports to the UAC, the Council, and the Finance group to set up the integration resource plan (IRP). They had previously laid out the context of the IRP and described the current City supply portfolio as well as the upcoming planning needs and decisions the City was facing, and staff felt public discussions were important. Senior Resource Planner James Stack shared slides and discussed IRPs, what was being projected in terms of the City’s load through 2045, the current portfolio resources, and some of the modeling work that had been done with the consultant. He provided the definition of an IRP and factors considered when creating such. He spoke of CPAU planning initiatives dating back to 1992, which included a LEAP. He discussed the state passing SB 350 and the requirements under it. He explained why the state instituted this utility requirement. He displayed a slide indicating what the City expected to accomplish over the next few years, but he noted that the plan would not be resolute going forward. It was required that a plan be approved and adopted by the end of 2023, and it would be submitted to the California Energy Commission (CEC) the beginning of 2024. He spoke of the objectives, which included compliance. In the next couple years, resource decisions needed to be made related to the Western Hydroelectric Resource and the COTB project. The community was to be engaged through a series of meetings. He discussed electric load projections through 2045, and he explained why they expected that to increase in the next few years. Chair Burt asked what proportion of the increased load would be due to data service centers versus electrification of buildings and transportation. Later in the discussion, he would address the anticipated cost of the additional renewables to meet the data center need and the electrification need versus the current portfolio average. He asked if the low scenario presented on the slide (not the former projection) was anticipated. It looked very low to him. Aside from the data centers, the low estimates surprised him based on electrification of transportation and buildings. Senior Resource Planner Stack outlined that some of the increased load information was contained in the slide. He commented that there was uncertainty around the projected load over the coming years, and they would be tracking it very closely. The data centers were about 200 gigawatt hours per year. He thought the anticipated low scenario on the slide was close to what had previously been projected. Senior Resource Planner Lena Perkins remarked that she developed the forecasts, and she explained that they had been in the middle of business as usual. She noted that the data center load was very uncertain and that it was yet to be determined how things would progress with one of the included projected customers. Engineering was aware there needed to be system upgrades, which was factored in. Vice Mayor Stone asked if part of the low scenario analysis was based on the two data centers not being in operation until 2045. SUMMARY MINUTES Page 3 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 Senior Resource Planner Perkins explained the assumption for the low scenario. Council Member Lythcott-Haims asked for the identity of the data center companies. Senior Resource Planner Perkins replied that the majority of the load was from Tesla’s Dojo Supercomputer, which some would be peak-year load, not just data center load and less energy and more demand from the superchargers and testing facilities. The other company was Google and was about 20% of the additional load, and Google had rolled back a number of other real estate endeavors in the Bay area. They were both delayed. She thought Google was paused for a longer period of time. Senior Resource Planner Stack continued to furnish slides and speak to the mid-scenario and high-scenario load projections. He supplied a chart and provided an overview of the current supply portfolio. They had assumed that upon expiration of a contract it would leave the portfolio, but there would most likely be an opportunity to negotiate an extension of a contract with a supplier, but the terms of the extensions were currently unknown, so they had not assumed a contract would continue. Chair Burt inquired if Collierville was previously called Calaveras and if Western had been renewed. He suggested there be an explanation of the column on the chart displaying the levelized cost of energy. He mentioned that net pricing was not included on the chart. He requested an explanation of levelized cost and net cost. He suggested trends be shown for solar, wind, etc. Senior Resource Planner Stack answered that Collierville was previously called Calaveras. He specified that Calaveras was one of the main generators in the Collierville system. The City signed the extension of the Western contract. He explained that the levelized cost was somewhat like the amortized cost of the resource over time. Senior Resource Planner Perkins added that up until July 2024 there was an opportunity to exit the Western contract, and there would also be an opportunity to exit it in 5 years. Although it was a 30-year contract, there were 5-year increments. Chair Burt He suggested using a kilowatt metric so everyone could understand the fraction of the total cost. Senior Resource Planner Stack provided details related to the retail rate and transmission cost per kilowatt hour. He voiced that there were costs associated with maintaining infrastructure. He thought about half the cost was the distribution system and the other half the supply cost. Supply cost included outside-the-city generation and grid transmission. SUMMARY MINUTES Page 4 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 Utilities Director Batchelor confirmed that about half the cost was the distribution system and the other half supply cost. Senior Resource Planner Stack discussed and displayed a graph showing the annual load- resource balance through 2045 and a slide with monthly energy balances for 2025 and 2035. Senior Resource Planner Perkins discussed there being benefit to having flexible resources – hydro, solar, etc. Chair Burt queried if the City shifting to [inaudible] being 24/7 would harm the grid versus the way it was currently done, which kept the grid cleaner. Senior Resource Planner Perkins answered there would be net positive carbon emissions. Chair Burt remarked that it made economic sense to use this curve and that it was better environmentally, but it reduced the City’s ability to get to 24/7. Council Member Lythcott-Haims requested Chair Burt speak more to that. Chair Burt explained that currently hydro was used more in summer and shoulder months, which was better for cost. He added that large hydro was non-GHG emitting but was not categorized as a renewable, although small hydro was. 24/7/365 renewable would mean renewables would not be purchased as much as electricity would be consumed for the months under the black line on the chart, and the bars on the chart could be leveled out, which would make the City look better in the accounting toward getting to 24/7/365, but he explained that it would cost more and have a detrimental impact on how green the state’s grid would be. Senior Resource Planner Perkins explained that Palo Alto shifting its hydro would cause gas turbines in other areas of the state to run more. Senior Resource Planner Stack spoke to and furnished a graph showing the capacity balance through 2045. He noted that there would be a need to add new capacity to the portfolio in the late 2030s and into the 2040s as contracts would start to expire. Chair Burt queried if rates being below the rates of PG&E was because the portfolio allowed Palo Alto to sell hydro at a higher rate than what the City paid for it and, if so, what portion of the lower rates was due to being able to sell surplus hydro at advantageous times versus the lower purchase price of hydro and renewables. Senior Resource Planner Perkins replied that Palo Alto had long-term energy contracts as a hedge against the market. The load paid basically the same energy cost as everyone else, and Palo Alto tried to have a flexible portfolio in the highest value hours to provide the greatest service to the grid at large. Flexible resources had been preserved in the form of hydro to SUMMARY MINUTES Page 5 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 provide the financial hedge. She explained that the market rewarded for paying a good price and getting flexible resources to adapt to changing market conditions. She described the duck curve related to solar energy. Googling “California duck curve” would direct one to an eia.gov report. Chair Burt expounded on the definition of a duck curve. Vice Mayor Stone questioned if that was why wind cut off after 2028. Senior Resource Planner Perkins answered that the wind rolled off after 2028 because the wind contracts would end. Council Member Lythcott-Haims asked if Palo Alto was selling excess capacity to others because others did not have the foresight to enter into these contracts. Chair Burt replied that Palo Alto had the foresight to enter into the contracts and also had a little luck. Senior Resource Planner Stack supplied slides and discussed the portfolio modeling work and results. Ascend Analytics had been consulted to help with the modeling work. He clarified that the plan represented a snapshot in time as of about six months ago. The model indicated that Palo Alto should enter into new solar contracts, but it did not mean new contracts would be signed immediately. He discussed the steps that would be taken to add new contracts to the portfolio. He remarked that slides showing new solar in the model could be thought of as new carbon-free resources of some variety. He displayed a slide showing the capacity that the model indicated should be added in the 2030s and 2040s. Council Member Lythcott-Haims inquired why there were recommendations for 2030 and 2031 and then none for 5 years after that and why have a 10-hour battery energy storage system (BESS) recommended and then 2 years later recommend an 8-hour BESS. Senior Resource Planner Stack thought it was because of contracts expiring and that nothing would be needed for the five years after 2031. He explained that the batteries accounted for different amounts of capacity and that the BESS recommendations could be due to varying capacity needs in the forecast or could be due to different assumptions for battery cost and the amount of energy that could be sold back to the market. He thought Palo Alto and the grid needed a mixture of different battery durations to meet the different demands. Senior Resource Planner Perkins added that this was 2040 technology, which was not currently commercially viable. The cost of future technology was being projected. Chair Burt queried when consideration should be given to purchasing the next contracts and if staff should have more latitude on when to fulfill them and if it should be done within a SUMMARY MINUTES Page 6 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 somewhat budgetary framework, which could mean buying a new contract before there was demand for it but then that electricity could then be sold. Senior Resource Planner Stack commented that was a good suggestion, and staff would love to have the latitude to purchase at an ideal time. He furnished a slide showing the assumption that the cost of renewables would decline over the course of this decade and bottom out around 2030/2031, which was why it was recommended solar be added to the portfolio at that time. He provided slides showing the long-term energy and capacity balances and the state’s renewable portfolio standard (RPS) requirements. The requirement would go up to 60% in 2030 and level off, and the plan would allow Palo Alto to stay above that except for 2035. Council Member Lythcott-Haims questioned why Palo Alto would not stay above the requirement in 2035. Senior Resource Planner Stack answered that 2035 looked to be the last landfill gas contract. The projects considered existing contracts, but when contracts expired, the decision could be made to extend the contracts or to purchase more landfill gas. They were currently in discussion with a supplier regarding extending one of the landfill gas contracts. Chair Burt indicated that some renewables were baseline power, but the state was struggling to find enough baseline power. He discussed new technologies in fundamentally different geothermal approaches. Senior Resource Planner Stack provided a graph showing monthly load resource balances (LRB) for 2025 and 2045. He remarked that they would look for opportunities beyond solar when purchasing new resources, such as wind and baseload resources. Senior Resource Planner Perkins voiced that flexible carbon-free resources would be pursued, like hydro. Chair Burt discussed the impact to climate change on hydro and the projections showing there would be more water but less snow, which would change the hydro production model. Senior Resource Planner Perkins remarked that a decrement had been modeled in the hydroelectricity generation. Senior Resource Planner Stack expressed there was a huge amount of uncertainty in doing a plan going out to 2045. He shared a scenario analysis slide showing a few variables primarily related to hydro, which included an extended drought, wet year conditions, and reduced hydro output. He explained that reduced hydro output would significantly impact Palo Alto’s portfolio but not the broader energy market. SUMMARY MINUTES Page 7 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 Council Member Lythcott-Haims questioned the difference between number two (reduced hydro output) and number three (dry year, high prices) on the slide. Senior Resource Planner Stack replied that number two was the impact of environmental regulations that different agencies were considering, and that would impact how existing hydro resources could be used. Senior Resource Planner Perkins commented that number two was a stress test case, a scenario that may cause Palo Alto to reconsider the 30-year contract that was to be decided on by June 2024. Number three and four were typical variations of hydro driving a lot of volatility in the California markets and the extent of Palo Alto’s financial risk being driven by natural variations and trying to understand how much more exposed Palo Alto would be than the portfolio as a whole. Chair Burt appreciated Senior Resource Planner Perkins’ last point. Council Member Lythcott-Haims asked if the contract had been entered into yet. She noted that the packet was somewhat contradictory and indicated in some places it needed to be decided if it would be renewed and other places indicated renewal had already been decided. Senior Resource Planner Perkins clarified that Palo Alto had until June 30, 2024, to back out of the contract that had already been signed, which was a no-cost option. Chair Burt questioned if there was a reason to back out of the contract. Senior Resource Planner Perkins replied that was what they were trying to stress test. There would be a follow-on report making the formal recommendation to stay, but the analysis and the working relationships with the current people at Western and the staff at the Bureau made it look fairly advantageous. Chair Burt addressed a past dispute that had been resolved after many years and asked if it now looked good ecomanically and if the people were better to work with. Senior Resource Planner Perkins expressed that she had built great relationships with the operators of the turbines even during the litigation, which was the US Bureau of Reclamation. Utilities Director Batchelor added that 100% of it would not be laid off, but they had discussed laying off a portion and not taking as much, but there was no baseload out there to pursue. In considering the scenarios and the analysis, it was telling Palo Alto to continue the course. They would still consider possible changes, but not everything would be laid off. The entire contract would not need to be disposed of. Chair Burt asked if Palo Alto should get as much hydro as possible at a reasonable price. SUMMARY MINUTES Page 8 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 Senior Resource Planner Perkins agreed that Palo Alto should get as much hydro as possible at a reasonable price. Senior Resource Planner Stack continued speaking about the scenario analysis. The model indicated that no more or less new resources should be purchased for the portfolio for the dry year and the wet year scenarios. It indicated more energy should be purchased from or sold into the market, which were the same recommendations as the base case. For the reduced hydro output scenario, it indicated solar and storage should be added to the portfolio sooner and that wind from New Mexico should be added in 2037. Senior Resource Planner Perkins clarified that it did not say to exit the hydro contract but to add more new resources earlier and to add some wind. Senior Resource Planner Stack shared slides showing projected annual load resource and annual capacity balances. Council Member Lythcott-Haims noted that the legend of the slide showing the long-term energy balance was missing the yellow for new solar. Senior Resource Planner Stack indicated he would correct that. He supplied a slide comparing results of the average supply cost in the different cases. He highlighted that the mark to market (MTM) line was essentially the net value of the portfolio in each case, and a positive number would mean resources were worth more than what was being paid for them. The risk premium line was a metric that tried to capture the uncertainty around the scenarios and reflected how broad a range of cost outcomes the model produced for each scenario, the bigger the number the wider the distribution of cost in the future. Senior Resource Planner Perkins noted that [inaudible] were error bars around the mark to market, not in dollar terms. Senior Resource Planner Stack stated that the overall findings of the modeling indicated the Western contract, which would renew for a 30-year term in 2025, looked competitive and attractive. He noted that Senior Resource Planner Perkins would return with a follow-up report to bring a formal recommendation to continue the contract or to reduce the share in the contract. The model used tended to pick the lowest cost resources, like solar as well as storage in later years to meet capacity needs. According to the model, solar was the cheapest and had a good amount of value. Loads were increasing, and they expected to do some new procurements and add new resources to the portfolio in the coming years, and those contracts would be presented for approval in the near future. As for next steps in the process, it would be presented to City Council for approval in early December and then it would be sent to the CEC early 2024. They would continue to monitor the city’s loads and hoped the increases would be SUMMARY MINUTES Page 9 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 forthcoming. They would continue to monitor the market and decide when to enter the market and add new resources to the portfolio as needed. Council Member Lythcott-Haims inquired if Ascend had been partnered with for some time or if they were a new partner; how staff selected a partnership; the value of the contract with Ascend; and concerning the RHNA requirement, if the 6,000 new units were included. Senior Resource Planner Stack answered that the partnership with Ascend was new. He explained why an intense modeling effort had not been done five years ago. He discussed why Ascend had been chosen to partner with. The value of the contract with Ascend was around $50K. Senior Resource Planner Perkins discussed Ascend’s good work and experience. Concerning the RHNA requirement and the 6,000 new units, she stated that she developed the load forecast last fall, and the additional housing was not included. They had the historical trends of housing included in it, which was possibly a shortcoming of the current load forecast. In the December 2022 UAC report, she had broken down the assumptions for how quickly the residential sector was being electrified, and her assumptions were extremely aggressive, which may mitigate the lack of the additional 6,000 units. She mentioned that multifamily units were less energy intensive overall. Vice Mayor Stone inquired if within the existing code there were requirements of commercial tenants, such as data centers, to mitigate impacts on the electric grid. Senior Resource Planner Perkins responded that in general, Palo Alto was overbuilt on the commercial side because the load used to be 30% higher, so in general there was capacity for additional load on the distribution system in the commercial side, not as much on the residential side. However, things still needed to be replaced. In general, a flat load, as the data center part of the load, was somewhat the ideal customer, and a data center customer would make energy cheaper from everyone else on the system, which she explained. They were being careful regarding the length of contracts entered into to serve the load on the supply side. Chair Burt questioned how much gross revenue per year was being projected from the data center and the gross in total electricity sales. He stated that he asked about that because of the impact on the General Fund and the Utility User’s Tax. He queried if there would be a negative impact on the electric utility itself through that increase in demand. Utilities Director Batchelor replied the gross revenue per year/total electricity sales being projected just for the Tesla project was about $17M to $20M a year. There would not be a negative impact on the electric utility itself through that increase in demand. Minor tweaks would have to be done to the system portion of it, but overall it was more than capable. They were upgrading the substation in that area, and the cost was being split with Tesla. The cost to Palo Alto would be around $12M. He outlined how that cost could have been double that. SUMMARY MINUTES Page 10 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 Chair Burt asked if storage outside the city or inside the city was part of tradeoff considerations. Utilities Director Batchelor answered that they had been considering that at the golf course area, and there may be some opportunities to put panels at the dump site location and putting some storage around the golf course or around the treatment plant. They were also discussing it with Tesla because Palo Alto wanted to help them and support that if they were going to get into the solar portion of it, but Palo Alto also wanted to build storage there. He thought there were city-bound internal opportunities that could be considered. Chair Burt spoke of the airport being another possible location for generation and storge. He stated that the airport had been approached by a group of companies involved in sustainable airport movement, primarily electrification, and they thought Palo Alto was a prime candidate for a model. He inquired if the CEC would have a problem with utilities like Palo Alto adding more central solar when the state might be in a position of entering surplus. He stated that the report noted that recs would be used to offset shortages in coming years, and he thought that should be brought forward as a policy discussion. He requested commentary on the report being structured in response to the SB 350 state mandates versus what Palo Alto was developing for a reliability and resiliency plan, which was more aggressive than what was contained in the report. Senior Resource Planner Stack did not think the CEC would have a problem with Palo Alto adding more central solar. A factor that might mitigate that concern was there being more and more integration of the California grid with the wider western grid and the markets around California, and it would possibly help Palo Alto sell surplus solar to markets outside California. Regarding the report structure, he specified that the plan was put together to show the state that minimum state requirements were being met more than a real reflection of how Palo Alto was hoping to progress and meet Palo Alto’s more ambitious internal targets. They were leery of putting in aggressive S/CAP goals for 2030 out of fear that the state could hold Palo Alto to those. Chair Burt suggested it be conveyed to Council and the UAC that the report was not a reflection of Palo Alto’s intended goals. Senior Resource Planner Stack remarked that that message would be incorporated. Public Comments Herb Borock claimed that remote participation of a Committee member should be published in the public agenda posting, which he did not observe to be the case. He addressed there being a relationship between this item and the next one. He opined that fiber predictions would depend in part on the accuracy of electricity uses, and if the predictions were not accurate, the use of the data in the fiber project would also not be accurate. SUMMARY MINUTES Page 11 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 Chair Burt suggested that Mr. Borock contact the City Clerk’s Department for an update on the changes in the state law related to remote participation by a Committee member. MOTION: Council Member Burt moved, seconded by Vice Mayor Stone to recommend the City Council adopt a resolution (Attachment A): 1. Approving the 2023 Electric Integrated Resource Plan (IRP)1, which includes the four standardized tables required under the California Energy Commission’s (CEC) IRP Guidelines; and 2. Approving the IRP Objective and Strategies to guide future analysis and decisions. MOTION PASSED: 3-0 Council Member Lythcott-Haims addressed the comment made by the public speaker related to her remote participation. She read from page 12 of the City Council Procedures and Protocols Handbook, which she hoped cleared up any confusion as to her just cause for participating remotely. [The Committee took a five-minute break]. 2. Discussion and Update of the Palo Alto Fiber Expansion Plan and Construction Alignment with Electric Grid Modernization. CEQA Status – Not a project. Chair Burt noted that this item said CEQA Status – Not a project, but he saw on the report there was a CEQA issue, so he would let Utilities Director Dean Batchelor explain that later. Utilities Director Dean Batchelor voiced that staff had researched what would be needed for each of the projects moving forward. There were resource capacity issues, and he thought the two projects should be combined. He explained that there may be synergies around saving dollars with pole replacements because many needed to be replaced. They were working with Entrust, an engineering firm that had purchased Magellan. Utilities Strategic Business Manager Dave Yuan provided an update to the Fiber-to-the- Premises (FTTP) project along with alignment to the electric grid modernization. Before construction of FTTP could begin, the CEQA initial study needed to be completed. The goal of project alignment was to minimize disruption within neighborhoods and to identify any construction, resource, and shared cost synergies. He displayed the agenda, which included a recap of the three major capital projects approved by Council and an update on some major milestones that needed to be achieved prior to construction, which he detailed. He outlined that City Council had approved the Fiber Expansion Plan, building and reinvesting in a new fiber backbone throughout the city, investing $20M in the first phase of FTTP, and the electric grid modernization project. He provided a summary of the three major projects that would be discussed at this meeting, which included the estimated cost, the funding source, and the SUMMARY MINUTES Page 12 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 benefits of each project. He provided details of the fiber backbone rebuild, FTTP, and grid modernization. Over the past several months, staff and consultants had discussed how to best align FTTP with grid modernization. Given there was a delay in FTTP due to CEQA, staff believed construction of the first phase of FTTP could be aligned with grid modernization to minimize community disruption, to provide joint pole savings, to better coordinate projects, and to better manage internal staffing. Rincon Consultants had been hired to perform the CEQA study. Based on the scope of the project, a negative declaration or mitigated negative declaration was anticipated. He detailed what would be included in the initial study, and the preliminary results of the CEQA initial study would be available in December. He noted that over 5,500 of 6,000 poles in the city were owned jointly with AT&T. Pole replacements would probably increase from approximately 100 a year to about 400 a year over the next 3 years. The Fiber Expansion Project would also require moving third-party facilities occupying the city’s communication space to accommodate for City fiber facilities. They were meeting with AT&T to discuss coordination efforts. A potential improvement was to identify a third party to work on AT&T and CPAU facilities for pole replacements, etc. They had evaluated becoming a member of the Northern California Joint Pole Association (NCJPA) to help coordinate activity and share utility pole cost. He discussed the City’s main objectives for joining NCJPA, but it did not seem as though becoming a member would achieve the objectives. He thought the City would continue to work with AT&T and amend the agreement. Staff recommended the existing on-call construction and engineering contracts to perform the design, overhead and underground construction, and installation for the pilot area, which was 7% of the total bill. It would reduce the construction timeline by six to nine months. The pilot area would be treated as a test bed to design and construct both projects in parallel. The pilot would also inform CPAU how to effectively bid out engineering, construction, and installation for both projects for the remaining Phase 1 area, which was an additional 5,500 customers. Staff was proposing amending the VIP Powerline, MP Nexlevel, Magellan/Entrust contracts, and Davey Tree Clearing (which was not included on Packet Page 106). He furnished slides showing an overlay map of the proposed pilot area and the expected timeline, although there were variables in the timeline. They hoped preconstriction would be done by the first quarter of 2024. As far as construction, they hoped to have power done by Q2 of 2024, but worst case would be October. Fiber would follow the completion of power, which would probably be Q3 at the earliest and hopefully done by the end of 2024. The timeline was dependent on conditions, materials, and supply chain issues. They were also working on [inaudible] system to support FTTP business, which included operating support and CRM systems, and there would be marketing events and town hall meetings. Public Comments Assistant City Clerk Vinh Nguyen announced there was a request to speak but that person was not currently available. Chair Burt declared that person would have an opportunity to speak if they returned to the meeting. SUMMARY MINUTES Page 13 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 Utilities Director Batchelor clarified why they had chosen this particular area to build. Vice Mayor Stone questioned how the new plan would change the previous timeline. Utilities Strategic Business Manager Yuan explained why the timeline had been slowed. Optimistically he thought the first customer could be lit up by the end of 2024, but it would not be completed until the middle of 2025. There would be a 6-month to 1-year delay by doing both projects at the same time. Vice Mayor Stone was comfortable with that. Council Member Lythcott-Haims praised staff for combining City projects. She was delighted that the City was moving to FTTP. She asked if those in the gray portion of the pilot map had to agree to participate, if they were being incentivized to participate, and what would occur if not enough agreed to participate. The terms of the agreement with AT&T seemed favorable compared to the NCJPA. She questioned how long the contract would last. Utilities Strategic Business Manager Yuan replied that the plan was to pass through all the homes in the beige area, and they would promote to all the households and MDUs to see if there was interest. They did not have to participate, but it would be offered to all in the area, and the City would do the installation for them. As for the contract with AT&T, there was no sunset date. There was discussion of amending it and [inaudible]. Chair Burt asked what would be the zone after Phase 1. As the brown area on the map extended to West Bayshore into commercial properties, he inquired if it all focused on FTTP or if it was also an expansion of the commercial dark fiber and if commercial was already served by dark fiber or if they were not able to take advantage of it. He queried if the East Meadow area was a priority and part of the next phase. He questioned the status of staffing increases. Given the lead time in getting requisitions out for hiring and doing the hiring and onboarding, he was concerned that the City may be waiting too long to bring those people on board. He inquired if there were estimates of expected efficiencies from combining the projects. He requested Council be provided a graph of the timeline. He inquired why the dark fiber profits were down and what was projected going forward versus historically. He requested an update on expanding the fiber capacity. He suggested there be more promotion of fiber capacity and utility rates to businesses, which may be worked on with the Economic Development Manager. Utilities Strategic Business Manager Yuan displayed slide 6, which showed a map of what would be built in parts 1 and 2 of Phase 1. He thought Phase 1 was mostly for FTTP, which was based on the location of the fiber distribution huts. He thought East Meadow had 4 kV distribution, so it would need an upgrade. As for staffing, Darren Numoto had been somewhat acting as the assistant director. He explained why the sales and marketing position would be delayed. They would soon be seeking a construction manager. The network architect was currently being SUMMARY MINUTES Page 14 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 filled by Darren Numoto and his team. He did not yet know the estimates of expected efficiencies from combining the projects, but he thought there was a cost estimate to build separately, so once combined, they could try to determine the difference. He explained why he thought dark fiber profits were down, and it had not improved as quickly as they had hoped. They were starting to see more new connections this year. At the current pace, the City would probably not get back to pre-COVID levels until 2025 or 2026. They had hired a fiber marketing analyst and a dedicated fiber engineer to help fill some of the orders and to promote dark fiber connections, and he hoped more could be done next year. Regarding promotion of dark fiber and eventually ISP, they were working with the Commercial Electrification team and promoting other programs, so folks would be informed. Utilities Director Batchelor clarified, regarding commercial dark fiber, that there was fiber in the area, but there were smaller businesses that were not interested in the dark fiber. They thought there was an opportunity to get into some of the smaller businesses. Regarding estimates of expected efficiencies, once the City was ready to do the actual build portion, they would know the savings once construction firms started to submit bids, which would be true numbers. Chief Information Officer Darren Numoto spoke about the network engineering and architectural positions, and he was comfortable with himself and staff fulfilling those roles. With the building out and onboarding of more customers, they would need resources. From an IT perspective, they had been able to hire people within six months, which was from the approval of the requisition to onboarding. Utilities Director Batchelor asked how to proceed in going to Council with this, if it should be an action item with a presentation or just an update. Vice Mayor Stone suggested there be an informational report and if there was sufficient interest from Council members to then agendize it for action. He queried whether it might delay it too much if there was concern with the informational report and then it having to be agendized. Assistant City Manager Kiely Nose did not think it would delay it too much. Utilities Director Batchelor also did not think it would delay it too much. He thought even if it had to go after the first of the year it would be okay. They could get it in this year’s packets as informational and see if Council would like to pull it for some reason. Council Member Lythcott-Haims discussed the local newspapers reporting frustration with a perceived failure to continue undergrounding electric and that needing to take place above ground, and fiber was being perceived as the new priority. As a matter of public relations, she opined it would be good to talk about FTTP in a public way and maybe provide an explanation why the undergrounding was an older priority that had yielded to present concerns. SUMMARY MINUTES Page 15 of 15 Finance Committee Meeting Summary Minutes: 11/07/2023 Utilities Director Batchelor voiced that he had heard the same concerns. He had spoken with the City Manager and the thought was that after the first of the year Utilities would bring a report to Council and discuss the undergrounding process. He stated that undergrounding was a priority, and they were working with AT&T and Comcast to locate funding areas, and they would bring a report to Council. Utilities Strategic Business Manager Yuan pointed out that Chair Burt made a good point about CEQA. The report said it was not a CEQA project, but they would probably bring a CEQA report to Council in the first quarter of 2024, so at that time, maybe they could present this and the approval of the CEQA. Chair Burt agreed and he suggested the City Manager comment on the status of first zone to supplement the informational item. Utilities Director Batchelor mentioned that Council had approved dollars for the brown area on the map, not just the tan and grayish areas, and the incorporation of about 6,500 homes was within Council’s guidelines. No action taken. Future Meetings and Agendas Assistant City Manager Kiely Nose declared there had been no change to the upcoming agendas. There would be a meeting on November 28 to go over ACFR and the year-end results for FY2023. The long-range forecast, Q1 of the current fiscal year, and a closeout on status of referrals would be on December 5. Adjournment: The meeting was adjourned at 8:00 P.M.