Loading...
HomeMy WebLinkAbout2000-09-06 Utilities Advisory Commission Summary MinutesAGENDA Wednesday, September 6, 2000 City Council Chambers MINUTES Item Page ROLL CALL ______________________________________________________________ 2 ORAL COMMUNICATIONS: ________________________________________________ 2 APPROVAL OF MINUTES ______________________________________________ 2 a. Approval of Minutes: August 2, 2000 ________________________________________ 2 b. Utility Policy Advisories ___________________________________________________ 3 AGENDA REVIEW AND REVISIONS _____________________________________ 3 UNFINISHED BUSINESS _______________________________________________ 6 1. Strategic Planning Process Update __________________________________________ 6 2. Water Quarterly Issues Update ____________________________________________ 10 NEW BUSINESS ______________________________________________________ 14 3. Long-Term Water Study Work Plan _______________________________________ 14 4. Northern California Power Agency (NCPA) Report ___________________________ 19 5. Bay Area Water Users Association (BAWUA) Report _________________________ 19 6. Transmission Agency of Northern California (TANC) Report. __________________ 20 City of Palo Alto Utilities Advisory Commission Chairman Ferguson called to order the meeting of the Utilities Advisory Commission on Wednesday, September 6, 2000 at 7:30 p.m. in the City Council Chambers, 250 Hamilton Avenue, Palo Alto, California. ROLL CALL PRESENT: Commissioners Carlson, Dawes and Ferguson ABSENT: Commissioners Bechtel and Rosenbaum COUNCIL MEMBER PRESENT: None ORAL COMMUNICATIONS: None APPROVAL OF MINUTES a. Approval of Minutes: August 2, 2000 Chairman Ferguson: I have a couple of introductory comments before we consider action on this item. I was pleased to get electronic versions of the minutes in some of the package contents this time. That was a good experiment. Commissioner Rosenbaum did not get either a full set of electronic minutes nor paper materials. Commissioner Dawes: I received the paperwork but not electronically. Mr. Ulrich: The intent was for you to get both. I realize that Commissioner Rosenbaum may not get the full electronics because he has limited attachment capability on his Internet. I am surprised that he did not receive the hard copies, which were supposed to be hand delivered to each member. Chairman Ferguson: I promised him that I would mention it, and you could look into it and see if we have the right distribution lists. On the electronic versions, the Word documents are typically 100 K. When you put the City of Palo Alto logo into the final, it turns into a 2-megabyte file transfer. It does not take more than a couple of those to kill a dial-up connection. If you could strip out the logo and give us a heads-up about how big the files are as they come in, I really appreciate the electronic delivery. I think it is great, and double-sided copies for those getting hard copy. It makes it more manageable. Mr. Ulrich: We felt it was a significant improvement, because our distribution list exceeds 30 people. Now most people are going to be satisfied with the electronic version. Chairman Ferguson: John, could you double check with each of the commissioners and see what their individual preferences are? Any improvement there is helpful. Thanks for the experiment, and let's keep at it. Any comments or a motion to approve the minutes? MOTION: Commissioner Dawes: I move approval of the minutes of August 2, 2000. SECOND: By Commissioner Carlson. MOTION PASSES: Chairman Ferguson: All in favor of the motion, say aye. That passes unanimously on a vote of 3-0 in favor, with Commissioners Bechtel and Rosenbaum absent. b. Utility Policy Advisories Chairman Ferguson: Let's have a vote on that. (The commissioners all vote in favor) The Utility Policy Advisories are approved 3-0. Commissioner Bechtel generated a one-page summary before his travels, and it is a great start. I thank him very much. That is an information item, and did not go out with the packet, but it is distributed to the commissioners here, and we will include a copy with the packet next month, as well. AGENDA REVIEW AND REVISIONS Chairman Ferguson: I would like to have the commission consider a generic change. We did a little general cleanup of the agenda at the last meeting. Particularly with the headlines every week on electric power shortages and rate changes and legislation and the like in other jurisdictions, there is a fair bit of news. It might be helpful if, at the top of each meeting, we gave the Utilities Director an opportunity to give us a little summary on all of the utility operations in the jurisdiction of the UAC. He can explain things of high priority or things that popped up in the news in the week preceding the meeting. We would have a very short but regularly agendized recap by the Utilities Director. If I could have a motion to that effect, we could have a little discussion around it. MOTION: Commissioner Carlson: I so move. SECOND: By Commissioner Dawes. Chairman Ferguson: Thank you. Any comments, John? Mr. Ulrich: It will be my pleasure to do that. With the quick changing energy market, it would give a good opportunity for me and our staff to let you know what is breaking news and what is of interest. These may be very short, and depending upon how interesting they are, we can keep on going. I will start next month with that. Commissioner Dawes: Were there any unusual situations or incidents that occurred over the last 30 days since our August meeting that are worthy or illustrative of problems? You mentioned earlier that there had been an extraordinary number of Stage One and Stage Two alerts, but no requests for rotating blackouts. Were there any lessons learned here? Did things get smoother as time went on? How did our customers react? Maybe give us a little summary of how we are coping with these issues. Mr. Ulrich: Very briefly, at the top of the pile of things that have been going on, as you mentioned, is the energy shortage. The good news is that we did not have any Stage Three rolling blackouts. The bad news is that we continue to have Stage One and Stage Two on a very regular basis up until last week, when the weather cooled down. The downside of this continuation of Stage One and Stage Two is that it becomes more and more difficult for our customers to comply on a voluntary basis without jeopardizing their business and their employee relationships. While our customers in the large-use area, the ones using large quantities of electricity, have been extremely helpful and supportive, and in a sense have been carrying the burden of these power outages, it becomes more and more difficult for them to comply. We are starting to see less and less compliance. An interesting note is that we are having a special meeting here tomorrow with our largest customers that are willing and have the time to come in and spend an hour with us. We are going to go over what has happened in the past, also listen to them on the needs and concerns that they have, and try to change, if we can, our curtailment plan so that it can focus on their best interests, and, as Commissioner Dawes said, try to fine-tune this so that it is supportive of our customers. It is also a good way to let them know what is currently happening. So that is the information at the moment. I am sure you all read about the recent Public Utilities Commission decision about capping the rates in San Diego. That will apply, as we understand it, to the other investor-owned utilities as soon as their CTC is completed. That could be later this year or next year. It would take the cap off but limit the amount that customers would pay on their bill. It does not forgive them nor eliminate the right of the utility company to collect in some form, whether now or later, the lost revenue from the cap. It is to be seen whether this is a real benefit in the long run, or if it is just putting off to a later date a significant increase for the customers. As you know, we have gone through and raised our gas rates in an attempt to mitigate the impact of those increases, and rolled it out in a smaller increase, with a larger one as time goes on. We have also completed our purchase of gas for the remainder of the year for the winter, so we will be able to lock it in and have a clearer understanding of what those costs would be. We are also finishing up, as you recently reviewed, a change in our contract so that we would be able to negotiate with customers on a custom basis with approval from the City Council in a range of prices so that we could focus on whatever competition came to town. That will give us more leverage and more options for competition. That has gone to the finance committee and will soon go back to the full council, requesting their approval. So you can see where we are going. We are trying to stay ahead of the price increases, communicate with our customers, trying to mitigate those and be far reaching and try to prepare for those changes, along with the competition. Commissioner Dawes: John, when we recommended the gas increase a couple of months ago, there was a Step 2, as you mentioned, in January of a stipulated amount. You say now you have locked in the cost structure for the balance of the winter season. I do not want to get into specifics here, but does it appear as though the price increase that was identified in January will fully accommodate the actual cost you have now negotiated? Mr. Ulrich: I believe so. I could ask Mr. Balachandran to come forward and be a little more specific about the price, because I do not have that with me. We plan to come to the November 1 meeting, looking at the future agenda, with every intent of increasing the gas to correspond with the prices we are paying. We would also then be able to replenish the reserve fund. So there is not that much difference in what our anticipated costs were when we reported to you previously. We have locked it in so that we have a ceiling on the price. Commissioner Carlson: John, what can you tell us about next year? I understand that there is potential for significant new generation coming on stream. I do not know the exact timing. If we have the same weather next year, will things be just as bad? Better? Worse? Mr. Ulrich: My understanding is probably some of the same information that you have read. We are going to be in a shortage for at least three summers. It is going to take that long before the planned and anticipated new capacity comes on. There are some additions next year and the year after, and you have read about some that are CalPine going in at Contra Costa County. We will not be out of the shortage situation for three summers, probably. For your interest, the ISO has gone out and made a request for proposals or request for bids for 3,000 megawatts during the summer for the next three summers. They are looking for people to come in with proposals to provide the short-term capacity in that period of time. Commissioner Dawes: Is there any request by the ISO for additional transmission lines to be built specifically into the Bay Area to alleviate the congestion issues? Mr. Ulrich: I do not know the answer to that. There are some upgrades that are being considered. Do you have any information, Girish? Mr. Balachandran: Yes, that is right. There are no specific lines into the peninsula that have been approved, but there have been a couple of lines in the East Bay that have been approved for fast track construction. It is planned to be on line by next summer, which is extremely fast. Commissioner Dawes: Will those lines assist Palo Alto in elevating the assurance of supply? Mr. Balachandran: Definitely. The June 14th incident was a voltage problem with the entire Bay Area. This is definitely going to help it. Chairman Ferguson: The motion on the floor is to adopt a regular change in our agenda to give the Utility Director an opportunity to give us a quick overview and to bring up late breaking news. We have just had an opportunity to rehearse it. Mr. Ulrich: I like this idea. This is going to go well. MOTION PASSES: Chairman Ferguson: All those in favor of the motion, say aye. That passes unanimously on a vote of 3-0, with Commissioners Bechtel and Rosenbaum absent. We will slot that in after the Agenda Review and Revisions item before proceeding to Unfinished Business, and spend 5-10 minutes on that. UNFINISHED BUSINESS 1. Strategic Planning Process Update Chairman Ferguson: This is an information item. Are there any comments or a presentation by staff? Mr. Ulrich: We do not have a planned presentation. Blake Heitzman had planned to be here, but had to go home due to illness. I am prepared to answer questions. As you can imagine, we have had virtually every member of our staff, plus others, working on this item in order to build an appropriate strategic plan. You have all had a chance to look at it in draft form. We listened to your comments, and the attachment to Document One is the draft of the comments on our strategic plan that you gave us on May 31st. The other attachment is the comments that we received back from the council workshop that we had on June 26th. We are awaiting some additional refinements. The two specific areas are some legal review of our items, and which ones may require municipal code changes or charter changes. Those are listed under Item 5 of the Executive Summary. We have also been working with Home Town Connections and consulting firm Navigant Consulting to develop a business model for the strategic plan. We want to make sure that we cover the economics and the finance side of it so that we are not just reorganizing or making changes just to do it. We would be prepared to discuss any of those items. The next step would be to come back either at a special meeting at the end of September, or include it with one of our other meetings. Our intent is to try and move this ahead so that if there is a charter amendment change that would have to take place, we would have sufficient time to do the public announcement, get the public input, and be able to put it on the ballot probably March of next year. Hopefully, that would not be a make-or-break proposition, and whatever we conclude can be rolled out in a step-by-step fashion in phases so that some of it which may require changes in the charter or municipal codes can come along as they get approved. Commissioner Dawes: In looking through the comments from the UAC and the council and the staff responses, etc., I wanted to revisit, under Strategy 3B, [UAC COMMENT: Investigate the possibility of spinning off the utilities as a separate "utility district." Propose a city charter change that would make the strategic plan fully implementable. STAFF RESPONSE: In order to accomplish some of the strategic goals, it may be necessary to change the governance structure of the utilities, however, this is an investigation which must be done under the jurisdiction of the City Council."] where the idea was that there should be an investigation of a reorganization into a utility district, or I think we talked about any other form which would be something other than the utility district could be a public benefit corporation, or what have you. The staff response to that seemed to be a little unclear in my mind. As I envision this as a strategic plan, it is put together and honed, leading to a natural conclusion of directions in which we should go. I have always felt that it is highly likely that it would be some sort of a reorganization simply to increase the nimbleness with which the utility group can respond to a much more rapidly changing business environment. This staff response seems to basically say, well, if the City Council wants it, then we will do something about it. To me, it would seem more appropriate to indicate that from the general strategic plan process and study would come a natural conclusion. That would then, of course, need to be approved by the City Council, no question about that. I would just have a slightly different spin on it. Mr. Ulrich: Are you implying that the way it reads to you is that we would not do anything or that we would wait until we received instructions from the City Council? Commissioner Dawes: Yes. Rather than being proactive and saying, this is our conclusion, and would you authorize this to go forward. Mr. Ulrich: I would characterize this more as the latter. We would finish our investigation and analysis and make a recommendation. Ultimately something as significant as changing the governance to having a utility district or something different from our current structure would have to be approved by the City Council. So we may have tied the approval together with the implication that we wait for them to give us direction. We would attempt to give our recommendation and our benefits so that council had the benefit of what our investigation discovered. Commissioner Dawes: Thanks. Under "D" of Strategy 3, [UAC COMMENT: Institute a rigorous benchmarking program. STAFF RESPONSE: This will be addressed in the implementation plan. However, currently Rates, Operations and Engineering are using industry- accepted metrics to measure costs, safety reliability and other important aspects of the business. Competitive Assessment has an ongoing program to measure customer satisfaction at points of contact between the customers and the utilities. When these efforts are combined, it forms a fairly comprehensive benchmarking program. However, Competitive Assessment will work with a consultant to see how this program could be made more comprehensive.] I had hoped that as we moved along in a benchmarking project, the results of that would be available to the UAC and the City Council, in other words, sort of a scorecard of efficiency and staffing, etc. This staff response does not seem to me to say that the results of the benchmarking are going to be made available to others. I think that would be helpful. Mr. Ulrich: Benchmarking is perhaps an overly used word. It can cover a lot of broad areas from distribution and efficiency of work forces to benchmarking how others purchase their energy or some other measure. We have to make sure that if we are going to benchmark, we are benchmarking against something that is appropriate for where we are going, and not benchmark against where we are at now or where we have been. So we have to be careful of that. And we are going to have to find something to benchmark. It may not necessarily be a utility. It may be something that we are trying to emulate that runs its business in a competitive way, making us better than we are. We have not found all of those, so it may appear to be vague in that area. In the area of safety and reliability and costs, there are plenty of areas that we can look at, and we are doing that. In fact, we are initiating a new benchmarking, along with other members of NCPA, which is going to look at this in a little bit different way than we have historically. It also is going to allow us to be specific, in this benchmarking area, on which company that we can go out and look at, once we get the benchmarking back. The problem with some benchmarking is that you can tell who the excellent performers are, but you cannot find out specifically who they are, because the material is held in confidence. They have to do that in order to get people to participate. So we are working on that, and it will open the door to allow us to at least go and see and discuss with the ones that are considered to be excellent so that we can get that information. Commissioner Dawes: Just as an example, in the graphs that are shown for this month for water, if it had a reference point in terms of, say, total number of breaks per year in the system or breaks per mile on average, and compare ours to other utilities on the peninsula, it would be useful. And ditto for parameters that we measure on the electrical side, just giving an example of the type of benchmarking that gives a relationship here. Whenever a failure line jumps up, it is not a good thing, but is very useful to have in relation to other specific districts. Chairman Ferguson: I would like to echo Commissioner Dawes' comments on Strategy 3B. [UAC COMMENT: Investigate the possibility of spinning off the utilities as a separate "utility district." Propose a city charter change that would make the strategic plan fully implementable. STAFF RESPONSE: In order to accomplish some of the strategic goals, it may be necessary to change the governance structure of the utilities, however, this is an investigation which must be done under the jurisdiction of the City Council."] I read that as pulling back and going slower, waiting for someone else to take the lead. I thought we were already in a proactive mode on that - develop a business plan, a good strategy, and then put together the laundry list of things that need to be changed, whether they are inside the government or require charter changes, and proceed on ahead. I also want to stress again that is indeed part of the express charter of the UAC to recommend changes in legislation and ordinance, and recommend that up to council. I am looking forward to working with staff on making such changes to implement a good competitive business plan strategy. I have one more comment, actually a correction, on Strategy 4D. [UAC COMMENT: Establish an ombudsman for residential customers. STAFF RESPONSE: Current point of contact surveying indicates high residential satisfaction in their interacts with utilities. Also the residential class is more heavily surveyed now than in the past, therefore, we believe an ombudsman is an unnecessary additional cost. We will reconsider the idea if residential customer satisfaction begins to slip.] I believe I was responsible for uttering the word "ombudsman" in the same sentence or paragraph as the words "residential customers." I think they got attached here in the wrong way. Certainly, we do not need anything new or special to handle service complaints and the like from residential customers. We do a good job, and I understand the answer you gave when we first talked about this. The point I was trying to make at the earlier meeting, which I would like rescue here since it has survived as Item 4D, is that to the extent that residential customers suggest improvements, not so much problems, but improvements or changes in service or entirely new categories of service that the utility might offer, we need to have a welcoming presence in the utility, an identified presence, to accept those ideas, the brainstorming activity that might occur among residents. We have seen it in fiber to the home, but it may occur in other areas as well. Let's just create an open-ended acceptance, a good listening post, for residential innovations; that's where I was headed, not so much to the problem solving role of an ombudsman. I hope we can craft that, because we do have an awful lot of bright people in this town. To the extent that they put in the time and energy to think up something new or make a recommendation for an improved or enhanced service by the utility, they should have a smiling face ready to meet and talk with them. Mr. Ulrich: We may need to discuss that in more detail. On one side of it, I believe from watching and seeing how we react with our customers, that we do have an open door for a residential or industrial or commercial customer. Because of our size, we are easily accessible, either through E-mail or the telephone or coming in to the office. What we may not be aware of is whether there is a pent-up demand or interest to communicate with us their good ideas, and someone out there feels that there are some barriers or obstacles in getting to us to explain what they might want to do or to suggest new ideas. That one I would be very interested in discussing further, because I have a personal feeling, because I answer phone calls and talk to customers, as many of us do, that we are easily accessible, whether at the grocery store or somewhere else. So I would be interested in hearing more of those ideas. I would like to report in this area is that probably one of the finest improvements that I have seen recently is correspondence by E-mail. We have a place where a customer can E-mail directly to us. Most of those, if not all of them, come right to my computer, so as long as I am staring at the screen, there is almost an instant communication with the director. Just in recent weeks, we have had half a dozen questions, and people typically get an answer back within just a few minutes or a very short period of time. It is just another way to communicate. I would be interested in going into more detail on that with you, Chairman Ferguson, and seeing what else we could do. 2. Water Quarterly Issues Update Chairman Ferguson: Do commissioners have any questions? Commissioner Dawes: In the discussion of the CalFed situation, it does not make any reference to whether or not it looks as though the CalFed activities, as they unfold, will directly affect our supply situation, either through the Hetch Hetchy system or through future backups which we may have in the future. We have under discussion such things as hooking into the San Jose system, and they are probably much more directly impacted by CalFed. Jane, is there anything that you know of currently in what has been published out of that whole situation that looks as though it could be a hit on our supply ability? Ms. Ratchye: I do not know about a hit on our supply ability, but I think we will be -- Commissioner Dawes: My question was very poorly phrased. "Affected" would be a better term. Ms. Ratchye: I think we will be affected by the outcome of CalFed in the water area. I think we will be in the electric area, too, by the way. Certainly, I think that some of the things that are conservation-oriented will become mandatory. We will be expected to do a lot more there to get, for example, access to state water bank water if that happens in a similar way to the last drought. Kirk Miller may know more about some of the ways in which we may be directly affected by CalFed. At least, that is one way. San Francisco is trying to have things resolved outside of CalFed on their particular water rights, because they are not under the jurisdiction of the State Board, because they are pre-1914 rights. There are certain things that the project will fund, if it gets funded in whatever way it gets funded. San Francisco is cooperating with a bunch of other utilities in the bay area. I think there are seven big utilities in the bay area, or seven big groups -- East Bay MUD, Santa Clara Valley Water District, Zone 7, and BAWUA, which is actually an entity, and San Francisco PUC. I am probably forgetting some. Also ACWD, which is a big one. They are getting together, trying to characterize some of the projects that they would like to do partially for other reasons, even seismic upgrades, as contributing to water quality improvements in the area. So they are trying to get those projects somehow into the process as something that could potentially receive funding in the next stage. It would not be an early stage thing. So there is potential that some of these various CIP projects could somehow be funded in the whole CalFed process. I think a lot of it is going to be a general, "You've got to do the minimum. You've got to look at conservation very seriously. You've got to look at any local supply sources. You've got to look at any groundwater potential that you have. You've got to look at any recycled water potential that you have." Commissioner Dawes: As an example, if there is a need to have more water flow through the delta, and part of that comes from the Tuolumne River situation, and since the Tuolumne Water District has superior rights to San Francisco on the water that comes down there, as I understand it, San Francisco gets first dibs on the amount over a certain flow, but if that flow is now diverted, in part, to the delta, does this, as an example, mean that San Francisco would be eligible to get, in aggregate, less water out of that system than previously? Ms. Ratchye: I am not an expert on this. It is possible. San Francisco is trying to maintain their pre-1914 water right in its entirety, which is not under the jurisdiction of the State Water Resources Control Board. So they will try to tightly retain as much of that right as they can, and to date, they have been successful doing that. So they are hoping not to be hit there, but they may have to show that they are, as a region, doing the best they can with the water that they do import. I think it is clearly understood in the state that San Francisco is an importer of water. It is not water largely found here in the bay area. Commissioner Carlson: Jane, I am not sure if it was in there, but my understanding is that key state legislation for CalFed failed at the last minute. How much does that affect things? Does it just slow it down, or what? Ms. Ratchye: It just causes them to look harder at other funding sources, as I understand it. I am not that that familiar with it. I heard about the legislation that you are talking about that was in it. I think that was an unexpected setback that is kind of being viewed as a challenge. It may slow things down somewhat. Commissioner Carlson: What about the purchasing of the water rights side of the issue? Is that an area where there is any possibility for us and BAWUA? I would think that for some BAWUA members, it would have significant potential, because some parts of the agency need more water because they are growing. Ms. Ratchye: All of San Francisco's firm yield does not meet today's demand, so you can say that already, we are in a deficit situation, so we all need more water. I think that one of the outcomes of CalFed has been, just in terms of the years they have been meeting and talking about this, has been an elevating of the value of trading of water with the willing sellers and the willing buyers. So I think the opportunities there will increase and have increased. Whatever barriers there are in the way of that, and I think there are quite a few in the form of just water rights, Western states water law, I think they are trying to get around some of those things. I think it will be easier. For us, there will still be the problems of water quality and how we are going to get a different water quality from whatever the source, even if we bought some water from some valley farmer. How are we going to get that water or some substitute water, if it is not Tuolumne River water from Turlock or Modesto, how are we going to get that water wheeled to us through the San Francisco system? They will likely claim that there are very few hours in the year that there is actually space in that pipeline, even if it is of the proper quality. But there are certainly ways that San Francisco, as a regional entity, they do have ties to their state water project, so they can get that water delivered to their East Bay reservoirs. It will be treated at Sunol, and we could get that water. We could probably figure out a way somehow, even as BAWUA or as a single or some group of BAWUA agencies, to try to make some deal and have it brought in that way. So I think there are ways, and there will be more examples of it. There are companies now whose whole business plan is to try and get water transfers to occur, then the brokering of those types of deals. We have already spoken to some of those. Chairman Ferguson: I have a question on CalFed, as well. It has been such a battle of the Titans for decades, ever since the peripheral canal. It is an interesting topic, but in a way, you do not want to spend a lot of time tracking it, because it may never get solved. On the other hand, if we get a Democratic administration at the federal level, there may be a window where the stars align for some kind of action between Year Two and Year Three out, for the next Congressional election. They did a lot of good spade work to get it to this point this year. My guess is that it is getting into the zone where it is worth one more iota of monitoring attention. My question is, what is the right entity to do that? Is there someone at BAWUA specifically attached to that? Ms. Ratchye: Yes, there is someone at BAWUA who does keep close track of this. One of the BAWUA staff members, Nicole _____________, and also Art Jensen, the General Manager of BAWUA, are deeply aware of all of these issues. If you really want to know a lot more than I can answer, I would either have to study up on it or invite one of these people to answer your more in-depth questions. Chairman Ferguson: Good. At some point, maybe at our next meeting with BAWUA, we can raise it up and make it more than a five-minute item on the agenda. I think we're finally seeing some predictable meat on the CalFed bones. It would be good to take a closer look at it. Mr. Ulrich: If you would like to have a special guest or focus on a particular item or issue like CalFed, we would be pleased to plan a meeting around that, bringing in the appropriate people for an open discussion. Chairman Ferguson: That would be great. Are we going to have a regular appearance by Art Jensen? Does he make annual visits? Ms. Ratchye: He would at our request. Chairman Ferguson: I know that he likes to make appearances, but do we have a regular time for a BAWUA update? Ms. Ratchye: No, it is as requested. Chairman Ferguson: I do not see anything imminent there, but I do see kind of a change occurring. Mr. Ulrich: As you recall, annually, we have three trips scheduled to go and look at the physical facilities of Hetch Hetchy. There is always an opportunity at that time to discuss things with Mr. Jensen. He uses that time to get up and talk about his favorite subjects. Some of you are going on those trips, and it would be a good time to do it. We would also be pleased to have him back here. He would be very happy to come to Palo Alto and discuss water. Chairman Ferguson: Thank you. NEW BUSINESS 3. Long-Term Water Study Work Plan Chairman Ferguson: Is there a presentation on this next item? Mr. Miller: No, we have not prepared a presentation. We simply have this description of what we are planning to do. The next phase is to work with the consultant and develop a Scope of Work. What we would like to do, at this point, is to get your feedback on the general direction, seeing if it is answering the questions you are looking for as far as connecting the dots, and then move on from there. Commissioner Dawes: I guess I would call this the Paul Johnston Memorial Question. I had a great deal of respect for his line of thinking when it came to the KISS approach -- Keep It Simple, Stupid, for essentially a gravity-based system, a major reservoir in the hill. I did not really detect that in these five scenarios that were laid out. Item 3 [Increased Storage Alternative -- same as budget alternative with an additional 10 MG of covered tank storage] seems to come the closest, as it adds a large tank, but it includes new wells, as well as rehabbing the existing wells. My impression was that we had talked about a system that relied much more on simply a large storage facility filled with Hetch Hetchy water, and keep it rotating through, having it large enough to cover our emergency needs, and not having to deal with multiple pumping systems, that sort of thing. Any comments on that? Mr. Miller: Yes, we talked about that with the engineering folks at the meeting where you were present, and I think it is a balancing act between having lots of storage which will work for a short duration emergencies, and having more supply in the forms of wells locally available to provide water on a longer-term basis, particularly if anything happened to the reservoirs. We have a significant amount of storage up in the hills, but it is quite a long ways from where the water is needed, so as you heard in the presentations that have been made and the analyses that have been done for the 8-hour emergency work that Carollo Engineers did, there are some significant advantages to having the wells as part of the overall system. We will be looking at some longer-term needs, longer than the 8-hour period, and that will change the usefulness of storage as you move out a couple of days, etc. The storage, if you have that, assuming it is in the millions of gallons area, as opposed to acre feet, would be used up in 8 hours in one day. Then what do you do when it is longer than that. Commissioner Dawes: At the engineering briefing you referred to earlier, there was a discussion about what I will term the Stanford interconnection to I believe it was Zone One, the existing gate valves that are right around the Stanford Hospital. One of our major problems is a backup supply for the shopping center area, that tongue that goes up basically along the creek there, which is quite separate from the rest of the Palo Alto system, because the campus intervenes between there and the balance of our system. It seems as though, if we could work out an arrangement with Stanford where we did not have to base a very expensive part of our backup system, particularly in terms of putting reservoirs under that El Camino field, turned on getting emergency supplies into that Area One, at that meeting, there was a conclusion that there should be some discussion with Stanford to see whether this was a path that we could at least go down. Has there been any progress on that? Is that going to be investigated in any of these five alternatives? Mr. Miller: It is my understanding that we have not discussed that with Stanford, but we are looking at that possibility as one of the alternatives available. Based on what that looks like then, we will be talking with the Utility Director about how to pursue that, if it made sense. So it is on the table, and Carollo Engineers is looking at that. Commissioner Dawes: So there will be follow-up on that? Mr. Miller: Yes, I believe there will be. Chairman Ferguson: Just a related question. I thought that Item 4, Page 2, the Reservoir Alternative, [same as budgeted alternative, plus new, uncovered storage reservoir(s) providing emergency supply (e.g., 3 days, 10 days, 20 days). This alternative would require a treatment plant to treat the reservoir water.] I thought this was your attempt to address the Paul Johnston memorial question. Am I misreading that? Ms. Ratchye: Yes, I think it is. I just wanted to add to what Kirk said in answer to Commissioner Dawes. When you look at all of the different things we could do, there are wells. We could rehabilitate the existing wells, add new wells, and we could add treatment to either of those. We could do a smaller covered reservoir, or a big covered reservoir, like 8 or 10 MG, or a huge uncovered reservoir that would need a treatment plant. You could connect to the Santa Clara Valley Water District line. If you think of it as a matrix of all of those things going across and see where they add value, if you have the rows of the matrix being the different emergency scenarios you could think of, you can see when those particular elements add value. In what emergency do they have value? We may approach this problem that way, rather than as written here, five discrete alternatives, because you were saying why have all eight wells, all five existing plus three new plus a big reservoir. Wouldn't the big reservoir replace some of the need for some of those others? So I think that we will look at what you are saying. The approach we will ultimately take in this may not be represented here, but I think we understand what you are asking here. I think we are going to look at it more in that matrix approach to look at, for example, wells. What do they do in a mild or moderate drought, a 25% drought? They produce some amount of water. Depending upon whether you add treatment or not, they produce higher quality to the extent that you add whatever kind of treatment. Then the three new wells are the same thing. How do wells help or not in a 50% drought? Well, quite a bit. We are talking about a three- or four-year-long severe drought. Wells would hopefully be on at least the sustainable yield of the groundwater, and could produce that every day. How do wells help in an 8-hour emergency? Again, they produce some amount of water. So wells look fairly good in most of the emergencies we can think of except the emergency where the well breaks. Then you look at a big huge reservoir. That is probably going to look good in a 3-day, maybe even a 30-day outage of San Francisco, which is hopefully not that likely, and considering that San Francisco is looking to spend billions of dollars to improve their system so that that likelihood will diminish. A reservoir is a very expensive and difficult thing to site, and you have to have treatment there, too, so there are operational costs. Then you have covered reservoirs. How do they look? A 10-million gallon reservoir is probably not going to do you a whole lot of good in a 25% drought, a 50% drought, a 30-day outage and a 3-day outage, not a whole lot, maybe. So I think one approach we may take when we start doing this study is looking at the different elements that make up these. We came up with these five discrete alternatives. They may need to be modified, as you said. Why have everything plus a huge reservoir? It seems like overkill and would shoot that alternative out without looking at the fundamental issue of just the reservoir, which is really what that alternative ought to be. So we can understand that, and we will probably expand beyond here, especially given your feedback tonight. Also the Stanford interconnection needs to be examined, because again, that may obviate the need for some well and/or storage to serve that zone, to serve the hospital. Commissioner Carlson: I want to say that I was very impressed with the thoughtfulness of the outline. It certainly hit the major issues. It is a significant step forward. Chairman Ferguson: I have a couple more comments on Jane's questions. You postulated some emergencies or some shortages here. They are all focused on our being cut off from SFPUC supplies. There are a couple of variations on that, and I want to ensure that we have thought it through logically. There is Palo Alto being cut off by some kind of emergency while San Francisco is still alive and while Santa Clara County is still alive. That is what we sometimes think about as a short-term or 8-hour emergency, but it might be longer. Then consider the emergencies when everybody is down. The Bay Area is down; Santa Clara is out, and San Francisco is cut off, as well. I want to be able to think through both of those options when we think through our emergency scenario. A second comment goes to this $50,000 versus $1,000,000 distribution system vulnerability study. I think we have a great set of new data in the pieces that you and Carollo have generated so far, so I am very sure we are on the right track here, and we are trying to assemble these different levels of analysis here so that we can make the right package decision overall. I am not sure that it is entirely crazy that a million dollars worth of distribution system vulnerability studies might not be worth it. If we get to a decision, a choice between two attractive packages, and the price for Package A is $30 million and for Package B is $25 million, and there is a lot of sensitivity in that $5 million differential to the distribution system vulnerability, then it might well be worth spending a million to sort that out. That is a decision we could get to later when we are bubbling up the surviving two package approaches for a decision. So I do not want to dismiss out of hand a thorough look at distribution system vulnerabilities just because it might cost a megabuck to study it. It might make sense. We are just not at a point to decide that. Ms. Ratchye: If I might comment on that, what I understand is that San Francisco's facility reliability study was thinking to do that approach where you look at every particular item in your system and do some probabilistic assessment of its failure and under some huge array of potential emergencies with each one of those emergencies also having a probabilistic distribution on them. That was phenomenally expensive, and they backed away from that approach. They went, instead, with more of a facility-by-facility, saying, well, if there is an earthquake, this would probably go out. What would we do if it went out? What is the redundancy? How would we operate the system if that is gone from it? How long would it take us to fix that thing in the system? How vulnerable is the system to an outage of that item? They went to each item, and they found they could make a lot of really good decisions and discover a lot about the vulnerabilities of their facilities with that approach. That may be a fairly good way for us to also go about it. What would we do? What are the biggest vulnerabilities that we have in our system? What if that big pipeline that comes down the hill that basically connects us in the flatlands to all of the storage that we have is gone? What do we need to do if that is the biggest vulnerability? Chairman Ferguson: I understand that, and I rather thought that we had gotten some of that buried in the Carollo studies to date. Somebody must have thought about that at some rudimentary level to get us the data that we have so far. All I am saying is that I do not want to dismiss out of hand something that started to look like a million-dollar expenditure. I cannot see drawing probability failure curves for every piece of equipment in the system. That is definitely overkill. But stepping logically through the key breakpoints in the system is worth doing. It would be nice to have a 10- or 20-minute presentation on that sometime in the next year at the $50,000 level. That is a useful piece of data. My guess is that we will know how much that is worth when we get a little deeper into examining the surviving two-package approach, long term versus short term. Mr. Miller: That is specifically the thought. Once we do this level of analysis as described here, we will know a lot more about the various dots and connecting those dots. Then we can look at the value of information that we would get from a different level of study, depending upon how in-depth we want to go, and make a decision at that point. Chairman Ferguson: Okay. Again, one of the agreements we made in our early discussions on budgets is that decisions among reservoir sites, spending decisions -- I think we approved one project, funding the examination requisition of a reservoir site in the coming year's budget -- we wanted to have a good look at comparative costs for comparative sites, rather than settling on just one, such as El Camino. I am not sure whether the timing on that still works, but let’s not lose that informal understanding that we have. One last comment. I think Commissioner Carlson mentioned several meetings back that we look at the devaluation approach here. As we look at different supplies and supply tradeoffs, that we look for the synergistic effects. There were some kinds of alternative supplies which themselves have a string of assumptions behind them, such as, is there electric power available, to make sure we are comparing apples with apples here, and that we have not traded one set of synergistic effects or pre-conditions for the system to work for a completely different chain of events. Thank you for the presentation, and we are looking forward to the next bite into that apple. 4. Northern California Power Agency (NCPA) Report Chairman Ferguson: Are there any comments on this item? There was a meeting in Murphys. Councilman Beecham is on vacation, and our two Murphys attendees are not with us tonight. Mr. Ulrich: The meeting went quite well. It is handled once a year at Murphys, which is just above Angels Camp. It is a location where our headquarters for hydro maintenance and operation facilities is located. So it is an opportunity for commissioners and elected officials to come and meet the staff that keeps the hydro facilities working. As you know, we have partial ownership in the Calaveras project. Bern Beecham and George Bechtel accompanied me, along with Scott Bradshaw. We had a chance to go and see the hydro generation facilities. Dick Rosenbaum accompanied us, and he went to the commission meeting. The agenda was not a very detailed one. We went through a little bit on legislation, and it was most of the issues we have discussed in the past. The Trinity River diversion was still a very hot topic. It frankly looks like it has a lot more people in favor of diverting the water than keeping it the way it is. So we are going to continue to fight on this. It would send more water down the Sacramento River without benefit of hydro generation in the Central Valley Project, which, of course, would affect our amount of energy that we get here. Other issues involved the renegotiated contract for the general manager of NCPA. We had some discussion in that area. Those were the highlights of the meeting. Chairman Ferguson: Is the Trinity River flow decision imminent? Is that a post- election decision? Is there really time to work that issue anymore? Mr. Ulrich: No, I think the problems are that the key legislators are polarized on their views, and will probably not be changed. The power, so to speak, is on the side of diversion of the water. 5. Bay Area Water Users Association (BAWUA) Report Chairman Ferguson: Are there any comments on this item, Jane? Ms. Ratchye: We have no presentation. There is a separate BAWUA report. Commissioner Dawes: Does our friend, Mr. Papan, have his fingers in this one, as well, or is he not as active as he seemed to be at the hearing at the BAWUA meeting a few months ago? Ms. Ratchye: Actually, I do not know. It certainly looks like his fingerprints. I tend to doubt that they suddenly came up with this on their own. Commissioner Dawes: Is this the professor doing the heavy lifting? Ms. Ratchye: I know that Papan was seeking all kinds of different ways to have someone look at the issue of governance of the San Francisco system. I am not sure what his role was in getting this off the ground. Commissioner Dawes: It seems like a fairly short time to December to get it all put together, but more power to them. I think it is exactly the right thing to do, and hopefully, he is the right person to do it. Chairman Ferguson: I agree. I know that the professor teaches a course in water district reform and governance. Maybe there is a quid pro quo for spending staff time with BAWUA on the study. Maybe we can get his course outline or reading list, and bone up on some of the background information ourselves. It does look like a good idea, and I think it will be a helpful product, so let's proceed. 6. Transmission Agency of Northern California (TANC) Report. Mr. Ulrich: There is nothing to report. Chairman Ferguson: Next, we have a tentative layout of topics for the next several meetings. John, any comments? Mr. Ulrich: Just to reiterate something I said earlier. We may want to have a special meeting on the strategic plan at the end of September. I will have to get back to you on that a little later. We are trying to schedule the strategic plan into the City Council agenda. That will foretell when we need to get together. Listed under October 4th is the Fiber Plan. As you recall, that will probably be quite in- depth, and it may be beneficial to have either a separate study session or later in the evening to work on that. I think you will find this to be quite interesting. Commissioner Dawes: I am going to have to leave on October 3. If we are going to have a late September meeting for the strategic planning situation, I would be delighted if that fiber plan could also be incorporated into that same time. I think that would be most interesting. Chairman Ferguson: Let me add that Commissioner Rosenbaum will be traveling if his doctor is willing, and will miss the October 4th meeting. I would have a strong preference to have a full complement of commissioners here. It is pretty interesting, basic stuff, so I hope you can juggle that. Mr. Ulrich: Part of the balance is that many of you are attending the NCPA annual meeting in previous week, so from around September 27, we will be tied up in Monterey. We may have to do it a week or so earlier, by the 27th. I am reluctant to wait until sometime in November. We will see how we can put everyone's calendar together. Chairman Ferguson: And again, maybe the way to divide that baby is to have a substantial study session leading up to the fiber business plan, linking that to the strategic plan. Mr. Ulrich: We have everything in motion to have that completed, but it will not be completed much earlier than that. Leo Creger is working on the fiber plan, and we want to mix some of that with the results that we get from the fiber to the home and have this well done. It also requires the business plan side of it. So I think it depends upon what your expectations are. We can bring it out, little by little, where you would not have the complete decision. That may be another way of doing it, giving you part of the information, and have you hold your breath for a little while. Chairman Ferguson: We have been getting that, and it is good as we all climb the learning curve together. But I think we are getting to a place where telecom is worth a good healthy dose of quality time. So let's work that out off line. ADJOURNMENT: The meeting was adjourned at 8:45 p.m.