HomeMy WebLinkAbout2001-07-11 Utilities Advisory Commission Summary MinutesUAC Minutes 7/11/01 Page 1 of 44
UAC MINUTES
July 11, 2001
Call To Order ____________________________________________________________________ 2
Oral Communications _____________________________________________________________ 2
Approval of Minutes ______________________________________________________________ 2
Utilities Director Report ___________________________________________________________ 3
Election of Officers _______________________________________________________________ 10
Streamlining UAC Procedures _____________________________________________________ 11
Quarterly Electric & Fiber Update _________________________________________________ 15
Quarterly Water Issues Update and Alternative Emergency Water Supply Options Study ___ 24
NCPA __________________________________________________________________________ 40
TANC _________________________________________________________________________ 41
Quarterly Water Issues & BAWUA _________________________________________________ 41
Adjournment ___________________________________________________________________ 44
UAC Minutes 7/11/01 Page 2 of 44
UAC Minutes July 11, 2001 Council Conference Room 7:30 p.m.
Call To Order
Ferguson: Good evening. I would like to call to order the 11 July 2001 Utilities Advisory
Commission meeting. Commissioners present, for the record please state your name: Dexter Dawes, George Bechtel, Dick Carlson, Dick Rosenbaum, and Rick Ferguson]. Thank you. We do have one slip for Oral Communications to start tonight: Ken Horowitz.
Oral Communications
Ken Horowitz: (525 Homer Ave) Thank you for your time. My name is Dr. Ken Horowitz, I am actually a dentist and a professor at Foothill College full time. I have been living in Palo Alto for the past 20 years. I am also a member of the Health Advisory Commission for the County having been appointed by Joe Simitian. I have seen in the newspaper that part of your role is to
evaluate the water quality in Palo Alto, so I wanted to address an advertisement lately in the Palo Alto Daily News which says the EPA classifies fluoride as an contaminant. You may get quite a lot of inquiries about this particular ad, or whatever you call it, from the Palo Alto Citizens for safe drinking water. I just want to assure you that the water in Palo Alto is safe. It prevents cavities. We are very fortunate to have it here in Palo Alto. Every day I look in mouths of Palo
Alto children. Compare them with other children in other parts of the County. We don’t have a lot of cavities here in Palo Alto. Part of the reason is because we have fluoride in the water. It’s safe, it is not a contaminant. None of these things that have been said in this article are true. So I want to assure you that you should feel good about Palo Alto and what we are doing here. So I just wanted to take a few minutes to tell you about that.
Ferguson: Thank you Mr. Horowitz.
Approval of Minutes
Ferguson: Next item is the approval of the minutes. Bechtel: Before approval, I have three little corrections to start it off. Dawes: I have a correction as well. At the very first sentence it lists the Commissioners present.
Mr. Dawes is not included in that august group, but yet he seconds the motion for approving the
minutes of the previous meeting. So I would like to be shown as present, please. Ferguson: I have two corrections. One on page 7, the second paragraph under Ulrich is a Ferguson comment. Second visitor is Michael Carlin from SFPUC. Is there approval with
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corrections? Motion by Bechtel. Second by Carlson. All those in favor? Accepted unanimously. Ferguson: Next item is agenda review and revisions. Any suggestions on how to scoot things
around?
Dawes: Mr. Chairman, you had prepared a very interesting memo concerning potential streamlining of UAC procedures and I don’t see that. Oh, I’m sorry.
Ferguson: It's there. We will go ahead with the agenda as written and begin with our Director of
Utilities report.
Utilities Director Report
Ulrich: Good evening. It has been a few months since we have gotten together. Many of you I
have talked to at various times over the months and tried to keep you posted on activities that are going on. Many of you saw the advertisement, the insert that we put into the Weekly several weeks ago. That was an attempt to give a very comprehensive view of rates, conservation programs, some of the issues around the energy situation as it relates to Palo Alto. We have
gotten very favorable response from customers. We have a number of those documents available
at libraries and other offices so that customers can pick them up. It is a continual communication to let people know about our aggressive conservation rebate programs and how our rates and costs stack up with surrounding communities. So, I am pleased that that has got out and if you have any comments or thoughts about that I would appreciate it.
A number of things that also occurred. Been trying to keep you posted as well as the public about how we are doing working with the bankruptcy of Pacific Gas & Electric. You know that we are on the official committee by way of Grant Kolling, the only Municipal utility that is in such a position and we are representing, as best we can, other municipal interests with the
objective of making sure that money that is owed to the City of Palo Alto and in particular, the
contract that we have through Western Area Power Administration, is honored. Also, a lot has gone on with the Federal Energy Regulatory Commission on Pacific Gas & Electric’s filing to change the price and terms on the 36 year old contract that they negotiated with Western on behalf of Palo Alto and other Western customers. The administrative law judge made a decision
a few weeks ago to bifurcate the case, so that the issue of whether it is appropriate for PG&E to
have this type of filing can be reviewed and ruled upon separately from other items in their filing. We are hoping that between now and sometime in early September there will be additional accelerated hearings so that our case and PG&E’s case can be heard by the administrative law judge and in turn, a decision could be made by FERC before the current
approved delay in granting the rate increase comes up and that is October 28th. So, if a decision
is not made by then, then the rates that PG&E has filed would then go into effect. We would then continue with the case, and as we expect Western would prevail, then we would be subject to refunding of that money. Our hope though, and we are being very aggressive on this working with Western, is to show that our case and our opinion of the contract is the one that would
prevail. But we spend a lot of time worrying about this in trying to bolster defenses, and make
sure that if it is unfavorable, we have other actions that we can take to keep the rate impact from affecting people in Palo Alto too dramatically.
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One of those areas is the contract that you all had a chance to review and give us recommendations on. Subsequently we received approval from the Strategic Oversight Committee and the City Council to go out and purchase 25 megawatts round-the-clock, 24 hours a day, 24 by 7 through January of 2005. The intent of that was to have power available in case
the contract with Western through 2948A did not turn out in our favor or bankruptcy had an
impact on it, we would have this level of insurance. We went out and purchased that and have had that contract in place since June 1st. Now with the termination in January 2005, just to correspond with the dates before 2948A expires. Since that time we have aggressively marketed that energy, because it is not needed. We received approval from the City Council to take that
kind of action, so we have been selling the energy and monitoring the market value of that
contract virtually every day. We have a good idea of how much we are selling it for. While we don’t have the information on a daily basis or even a weekly basis, we sell it at market and then in turn compare it with the liability that we have for the contract through the end of its term.
Now when we went out and purchased that, we were well aware, as you are, that buying this
kind of contract had a level of price risk to it. Whatever price we paid for it, we knew we were going to look like we made the wrong decision, because the price value of it would change over the life of the contract. The favorable part is that up until the last time we were able to look at the numbers we are selling it at, looking at the liability, there is about a five to ten million dollar
difference between the amount we are making versus our liability. So we are doing as well as
we expected, since we don’t make the market. We sell it at what the market will allow. I have received questions about who we made the contract with, and the terms and conditions. There is apparent feeling that since the State of California has released information about their
contracts, then maybe that is something that we should do. I need to point out that there is a
significant difference between the contracts of California and the one that we made in Palo Alto. When I say significant, I know the terms and conditions of our contract, but I don’t know what the State of California is, so there is no way to make a comparison. But in our case, as a means of getting the most favorable terms and conditions at that time in the marketplace, we agreed to
enter into a confidentiality agreement with the supplier. The terms and conditions of that
agreement I won’t go into details unless you would like some more about it. But essentially it says that neither party shall disclose the terms or conditions of a transaction under this master agreement to a third party, and agreed to keep such terms confidential except in order to comply with any applicable law regulation or any exchange control area or independent system operator
rule, or in connection with any court or any regulatory proceeding provided, however, such party
shall to the extent practicable use reasonable efforts to prevent or limit the disclosure. And there are other parts to it. So, in attempting to honor that contract, we have not disclosed any more terms and conditions except in the form of confidential discussions with the City Council in closed session and in other meetings on an individual basis. We are doing a very outstanding job
frankly in making sure that we are getting the best value out of that contract. I have belabored
that a little, because of this interest in how it compares with the State of California contracts. Bechtel: John, San Jose Mercury published several weeks ago, perhaps it was prior to the month of June, a list of contracts. Would you say that our contract terms fall somewhere near some of
these terms, particularly with respect to our supplier?
Ulrich: Yes, I have seen that list. I don’t know how to answer that. The term of our contract, if I read that correctly, those were ten year contracts. As you know, we made a point of going much shorter, because of so much uncertainty and all the concerns about taking a long-term risk
like that. So ours are basically 3 ½ years.
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Bechtel: Actually, on the list I am looking at now, there is a variety of terms. Dawes: Did Palo Alto’s ‘Triple A’ credit rating make a difference in negotiating this in your
opinion? Did it tend to improve the terms that we would have gotten otherwise, John?
Ulrich: I’ll ask Girish to give a more detailed answer to that. From what I saw of it we and our financial people spent significant time dealing with the creditworthiness of us and of the parties that we would accept bids from. They were far more thorough than if you had gone and tried to
buy this kind of contract some time ago. So I would suspect that it had some impact on
favorability. But I am not sure that in May the price we would we have gotten a contract for would be different if we have had only a couple of people offer to sell it to us versus a larger number that we received.
Dawes: One follow-up question, was the range of liabilities that you mentioned, on a discounted
basis or was that just a straight absolute dollar basis? Ulrich: That is looking at the forward curve of the …
Dawes: Total dollars without discount.
Ulrich: That is right. Carlson: Could I have clarification of that number? That 5 to 10 million dollars means that, out
of the grand total value of the contract which probably approaches 100 million dollars, we might
be behind 5 or 10 million dollars total, looking at the forward markets right now? Ulrich: Actually, we would be ahead.
Carlson: So we are ahead right now. Great. I am amazed.
Ulrich: Well, time moves on, and I am not sure it is going to stay that way. Carlson: The market has really dropped. Natural gas has dropped significantly and some of the
electric markets are falling.
Rosenbaum: The State of California gave out the contract terms only because the newspapers went to court. Are we waiting for the same thing to happen here in Palo Alto?
Ulrich: I don’t know what prompted the State or the court to make that decision. All I have is
the agreement that we signed, as I quoted about confidentiality. I don’t know if it would stand up in court. But it’s appropriate, if we understood that was going to be a requirement, that we attempt to honor it as best we can. The objective is not to try to hide anything, it is an attempt to respect the terms and conditions of the contract.
Rosenbaum: Well, they requested it as I recall. In the Public Power Weekly that I got yesterday, there was a little news item on the City of Roseville. Roseville Electric and California signed a nine year $140 Million dollar contract with Morgan Stanley Capital Group for approximately 3 million megawatt hours of electricity and 4.58 cents per kW hour. “Now the contract will
provide up to 50 megawatts from 2002 to 2005 and increases up to 100 megawatts from 2006 to
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2010”, said Tom Habashi, Electricity Utility Director. So, not only did Roseville make it public, they sent out a press release. Now how can we justify our position? Ulrich: Well, I am not trying to justify our position. In fact, I feel a bit uncomfortable with this
line of thought. We came to the UAC and the City Council and explained what we thought was
the best way to go, with a contract to get the power we were looking for. That was the market condition at that time, so we went ahead and agreed to that. It was the appropriate thing to do at that time, and the contract calls for that. It would be difficult for me to know the conditions under which Tom Habashi entered into it. I would suspect that today those kinds of things would
be different.
Beecham: Well I don’t at this point question whether or not the strategy at that time was the best one for obtaining the best price for the City. But I wonder if the City has talked to the vendor to ask them if, given the public interest in the contracts, if the vendor at this point would be willing
to modify the contract or to allow the City to…
Ulrich: We have sent them an e-mail and plan to follow it up with a letter asking that particular question. This is more of an interest on the part of the supplier, to keep this information confidential for whatever business purposes they have. It is not an objective of the City.
Beecham: So, from the City’s point of view, should the supplier say they have no objection if the City also has no objection to releasing this information? Ulrich: I would not believe so, but I would have to see what their response would be.
Beecham: When do you think you might hear a response? Ulrich: Don’t know. I have not got an official request to go to them. I made a point of bringing it up here, and Dick wrote me a note on that.
Rosenbaum: Well, this is going to come out eventually and we are going to look as though we have something to hide, when there is nothing to hide. So, I would encourage us to actively do whatever is necessary to do to make this contract -- it might be a 100 million dollars -- public as soon as possible. In the long run, it is going to be both good public policy and a lot better
politics, than to have it forced out by a newspaper request.
Ferguson: You have consulted with the City Attorney, so we are pretty clear on what is inside and what is outside the rules?
Ulrich: Yes. I would rather hear -- This sounds like we are trying to hide something, but I
discussed all of these terms and conditions with all of you and with the City Council and I did not hear at the time that this was a concern. That we should not go and enter into a contract like this. All of the information about the money we make in selling this versus the liability that we have, it all gets reported in our financial reports at the appropriate time -- of course, it is audited -
- to the members of the City Council. So I am a bit concerned that there would be a perception
by anybody that there is something to hide. I need to say that to you and make sure that you understand, and of course the U.A.C, that this is not a hide-and-go-seek business that we are in. Dawes: John, you sound a little bit defensive, in that you sense that people were questioning the
issue of entering into this contract, the length and the amount of this contract. Not the case at all.
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Only whether or not the details should be made public. That as I understand it, is the only question that I see. Ulrich: Well, I tied it together because those were the terms when we signed the contract and the
same terms are here today. Whether we feel it is appropriate, whether this information should be
made public, is part of the contract. That is my only point. I don't want to sound defensive. I want to convey the other side, that we made a very excellent decision because it involved many people and we did a lot of good debate about it and we started out at a much different point than we ended up at. Subsequently, it has turned out to be, so far, the right decision to make. I am
just trying to keep it on that high road and not assume anything different.
Ferguson: Let’s just look at the experience of the State with the disclosure issue and the purchase prices over time. What might make sense is to have a periodic disclosure of the various purchase prices that are under confidentiality agreements, in a batch, after you get successfully
through one negotiation season. While things are wild and woolly you don't want to be
constantly tipping your hand to other suppliers, but when things settle out, go ahead and report back on what went on. We will be back in another wild and woolly negotiating season sometime soon.
Ulrich: Well, I have every intention of doing that. I made this report because I received requests
from several of you to discuss that, and there was a question as to why it was not in the report from the Electric and Fiber Report for this evening. If there are any other questions on this? I don‘t want to leave anyone feeling there is something else out there that has not be reported.
Beecham: A comment. My understanding of what John is saying is that it was to the financial
benefit to the City to agree with the vendor to accept their confidentiality request. I understand from the agreement that it is not the City’s obligation to defend that confidentiality issue. I further understand that the City itself has no objection to releasing the contract. So in terms of anything being hidden, there is nothing being hidden by the City. There was a financial
advantage I presume -- if it was perceived valuable to the vendor -- to have that agreement in
there. We are asking the vendor if they intend to enforce it. I would suspect, at this point, given what is happening in the State, the vendor might well say “let’s forget about it. Let’s go ahead.” I hope that is the case, but in any case, I don’t think it is the City that is making any attempt to keep anything confidential at this point.
Bechtel: John, if I heard what you said, then we are pursuing releasing the information, or at least making inquiries into that. What is the nature of the request we made to the supplier at this point? Is it to release the information or is it asking only whether it could be released? In other words, how positive a statement could you make, the City make, we as Commissioners make,
that we are working with the supplier to release the information.
Ulrich: Well, I should be as clear as possible on this. I am not aware if the City is aggressively asking the supplier to allow it to be released. We entered into the contract. I believe that we have a mix of resources, assets, whether it is Western or Calaveras that we own and this is a
relatively small amount of energy. It has a different risk level to it than some of our other
resources. I had clear direction from all of you and the Council that when I buy this contract, we needed to aggressively find ways to get the best price for it, and to sell it -- we don’t make the market -- to sell it, to be able to hedge the whole other side of this, when we knew that in two or three or maybe a few months, the price in the spot market was going to be lower than what we
entered into the contract for. That is what we are doing. I believe that what we did meets what
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you expected us to do and that we are honoring it. So I have not taken an aggressive stance that said, “well now that we have signed the contract, it is now my obligation and the City’s to go back to the supplier” and now say, “well, okay, we want to release this.” But I have had inquiries. So we did make an oral call and an e-mail, and said, “what is your feeling about this,
we see the terms and conditions in the contract, what is your feeling about it?” That is the state
we have. I am pushing back, I made the report to you, and what I would like to hear from all of you is that we continue to do the right thing. We are not doing something that sounds like we are trying to do something that is different than our objective, and that was to get the best contract that we could at the time for 25 megawatts.
Ferguson: It is 8:00. Mr. Carlson. Carlson: I have no argument. I mean we got the best contract that we could. This contract is more important than anything else we have on the agenda, even though it is not really on the
agenda. But what I am wondering about is, I assume we are at least looking very carefully at
doing some more of these. And if we do, and if another such request… Ulrich: I can’t say we are actively looking at doing that. The situation with the 2948A and the FERC and the bankruptcy, in my opinion, are not at the same level of concern and risk that they
were at the time that we entered into this contract. Now I may be wrong about that, but it has not
led us to do the same kind of 24-hour-a-day looking that we were doing a few months ago. Carlson: But if we get back into it and if such a request is made, from the commercial perspective, combined with our need, a time limit would be pretty handy. From a commercial
perspective, ninety or one hundred twenty days after the contract is let, its provisions don’t have
very much commercial import because things change so fast. It would be very useful if we tell the public that, by some time certain, we will be able to release the details of the contract, if such a request is made again. You know, if people want it and it is worth money we should try and find a way to cooperate.
Ferguson: We're getting into our discussion of the Electric Report, but Mr. Dawes, go ahead. Dawes: This is my concluding comment. In my opinion the contract was about ideal, in terms of buying an insurance policy for our business. Keep in mind, we are double-ordering at this
point. My guess is that we are never going to need this, and to have double-booked 15-18% of
our needs on the average is perfect. It is probably going to cost us money, as all insurance policies cost us money, it should. We fully expected it to cost us money. But to me it looks like we are in a sweet spot. So congratulations!
Ferguson: Good. Thank you all. We are up to Unfinished Business, and there is none. We are
up to New Business, and that is Election of Officers time… Ulrich: I had a whole lot of other things on my report. Well, I did not think this would have that big of a discussion here. I can cover other areas. A couple of things that the Council did
approve. We went to the Council and asked for approval to implement Direct Access –to take
away in a sense- Direct Access options for some of our customers. Some of the reasons, we have already discussed, because we are out buying longer-term contracts. It was approved, and essentially customers in these classes of electric and gas have until the end of July to make a decision on whether they want to stay on the current rate schedule, or they would like to lock in.
There are certain size limits to lock in a contract. So once these decisions are made, they will not
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have the option to go back and forth. The idea here is to protect these contracts that we have, and give customers some opportunity for choice. In the fixed-term rates that are now allowed, we have three customers that have signed up, asked us to lock in contracts for them and we went to the market and did that in exchange for a signed contract. This is for gas. There are three
more in the pipeline. You all had approved this action a couple of months ago. Is there any
more, Girish, you want to say more on that issue? There has also been a lot of discussion, and you may want to ask more later, about the expenditure of our funds. We were authorized up to 5 million dollars for an aggressive,
accelerated energy conservation program. We have seen about a 12 ½% reduction in Palo Alto
in comparing month to month, June against June. That does not all come from this conservation --that is weather related -- but we believe that there is high interest on the part of the public and businesses to conserve energy. They are thinking about it. The 15,000 CFL’s that we gave away got this conservation in the minds of our residents. But we have encumbered now -- of the 5
million dollars -- 3.8 million of that, because the program is supposed to go through the end of
June. This will result in 5.7 megawatts of load reduction , 27 million kilowatt hours a year. That represents 25 miles of the most efficient fluorescent lamps available today; 8 miles of new lighting reflectors allowing the removal of lamps, 4500 tons of electric chillers and 2300 horse power of efficient electric motors.
That is a significant accomplishment. Some of those are in City facilities and we have had quite an aggressive program there. In residential, we have committed $1.7 million to reduce 3.6 million kilowatt hours, 35,000 therms and this is 6.2 acres of insulation and 2.3 acres of double glazing and 15,500 compact fluorescent lamps. Specifically about City facilities, we have
recovered $1.2 million, so that is in addition to the 3.8 replacement of over 3600 lamps in City
facilities saving $110,000 annually and replacement of incandescent lamps that 89 intersections with LED’s saving $120,000 annually and reducing our peak demand by 161 kW. Now, I am belaboring that because we spent a lot of money to get this reduction. It shows that if you put your focus on it, our customers are eager, willing and able to do these kinds of things. And to tie
it back to the previous discussion, (why I am doing this), that gave us additional contract
allocation capacity to sell back into the market, if we did not need it. The last area is just a little about the COBUG. We have not had an opportunity to use it, so our insurance policy is paying off. We are running about a month behind in getting the installation
of the natural gas units.
Ferguson: I guarantee that if we had not leased the COBUGs, we would have had rolling blackouts already.
Ulrich: And the summer is not over. That is my very brief, succinct report.
Rosenbaum: John, do you have anything to say about natural gas? The prices collapsed much more dramatically than electricity. What is going to happen this coming year?
Ulrich: Yes. If you all saw the article in the Wall Street Journal today, the little chart that is in
there, it really has gone down. Our purchase strategy -- we purchased our gas needs for customers, almost all of it, for next year and we have our three-year laddering purchase plan, so we have locked in prices higher than the current spot market. On the other hand, calculations look like we have saved Palo Alto residents and businesses about 15 to 17 million dollars by our
purchase strategy. The difficulty is that we are now going to have higher prices for longer period
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of time than if we were able to follow the spot market down. So the customers got the advantage of our forward purchases last year and parts of this year. Now they are going to pay a higher price than the spot market for the foreseeable future. We are hoping that the policy of having stable prices on long-term basis is the appropriate strategy to have.
Rosenbaum: The reason I raised the question is that, when we were setting the last gas rate increase, there was a lot of concern on the part of staff that the stuff we had yet to buy would cost more than what we have previously bought. I assume that has not come to pass. Then the natural question is, will it be possible, at some point this year, to have a rate decrease? We can’t
answer that now, but when we get our next gas quarterly report, it would be good to have
something on that. Ulrich: Looking at it at this point is subjective. I don’t think it is going to be going down because of that longer purchase, and we did lock in gas. Not the last couple of days, but it has
been some weeks ago when the prices were higher. Do you have any more you want to…
Baldschun: Well, the portion of the load that we have not locked into (Girish, you correct me if I am wrong) represents the non-core G-7 customer load. They have to make an election before July 1st whether to buy from us or buy from the market. As John mentioned, they pretty much all
unanimously elected to buy from the market. So we don’t have to go out and buy gas on their
behalf. The concern we had was, had they not done this and had market prices continued to climb, then our average cost of gas would have gone up from what we paid for the 75% we had already bought. Alternatively, we could have been favorably impacted had the gas prices gone down and lowered our prices. Then we could have enacted a rate decrease. So I don’t think we
are going to have any gas rate changes. We are basically at the adopted budget. We have our
costs set, we have our rates set. Costs are not going to change and the sales won’t dramatically change from what we forecast. Dawes: Does the change in transportation costs have an impact or did we bake in the
transportation when we did the forward purchasing?
Baldschun: We included the transportation.
Election of Officers
Ferguson: Let’s move on to Election of Officers. The City Code defines the Chairperson as having an annual term and this having been twelve months now, I want to thank you for the honor and privilege as serving as Chairman . It is time to do it again. Since our terms all seem to be designed to end in the month of June, July is the month to do these elections. Do I hear any
nominations for Chairman?
Dawes: As long as I have been on the Commission which has only been about three years, I guess, it has been traditional that we rotate the chairmanship to the Vice Chairman and I would like to propose that we follow that by nominating Mr. Bechtel, our current Vice Chair as
Chairman of the UAC for the ensuing year.
Ferguson: Is there a second to that?
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Rosenbaum: Second. Ferguson: Any other nominations? All those in favor say aye. It is unanimous. Thank you very much. Congratulations, Mr. Chairman. Would you like to conduct the election of Vice Chair?
Bechtel: Thank you Mr. Ferguson, and before I do so I should express my personal thanks to you for conducting all those meetings in a very smooth, streamlined fashion. You kept us on schedule. We got to the end of the issues, in a timely fashion. I would like to express my personal appreciation to you for the great job you have done in the last year.
Dawes: I second that motion. Ferguson: Thank you. It has been a busy year.
Bechtel: Do I hear nominations for Vice Chairman?
Rosenbaum: Yes, I would nominate Dick Carlson to be the Vice Chairman. Bechtel: Is there a second?
Dawes: Second. Bechtel: Seconded by Mr. Dawes. Any other nominations? Not hearing any other nominations I declare him elected. Welcome. I will give you the notes to do the summary each meeting.
Carlson: I was going to nominate Rick for the “herding cats” award for some of our meetings. Bechtel: Well, Rick I think set himself up as the senior statesman, because the next item is Item 2, Streamlining the UAC Procedures, described in his memo in the packet. I would like to ask
Rick to go over what he has in mind and having read it, I know we have talked a lot over the
years about governance, and he has some outstanding ideas, so Rick why don’t you go ahead and lead us through what you are talking about.
Streamlining UAC Procedures
Ferguson: Well, thank you Mr. Chairman. I am trying my level best to take our Strategic Plan
seriously, and one of our strategies is to Streamline Business Processes. The UAC is one of the business processes, and rather than expect the staff to critique us directly or wait for the Council to get angry and come down on us, I thought it might be useful for us to kick it around. I offered some general topics as a way of organizing that discussion: Are we delivering advice to Council
as we are supposed to? I suggested some of the ways I thought we were doing it and I thought
we could get some feedback from our Council member liaison here. The second topic is to think about our “seasonal topics”. We have a very important new recommendation which the Council has adopted which is that we do an annual review of the Strategic Plan and then twice-yearly review with the UAC -- how we should weave that into the budget process. I would like to sort
that out tonight if possible.
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Ulrich: I would just interrupt. When the City Council approved the implementation of the Strategic Plan they requested that we give them an update twice a year, rather than once a year, and that was one modification. So it corresponds with the same time period that you asked for.
Ferguson: Right. Third question, down closer to the detail level, is just how do we organize
these meetings? Can we improve on it? And the last one is to figure out how and why we are using Commissioners' time outside of the meetings. All of us get collared to go on trips, or volunteer to go on trips, or participate in the other regional associations. We do it; it is enjoyable, it certainly is educational, to assist us to do our job better. Maybe there is a more
interesting way to pull that information and roll it back into the work of the Commission. So
with those topical areas, I really wanted to throw it open for discussion to see if anything sorts out as an action item tonight. Or maybe we can ask for a motion to have a couple of us meet with you and put it in tighter form for action at the next month’s meeting.
Beecham: I do want to respond. The Council puts a tremendous amount of weight on what the
UAC advises, and your minutes. There is hardly a subject area for the City that the Council pays as much attention as they do to this Commission and this subject matter. They look heavily to your discussions, to the issues you raise and to your recommendations. So in that regard, you are quite effective. Part of what grabs me here in your memo is how to get other issues out. How to
formulate other issues, and I will leave that to you. In terms of what you say and how you say it
currently, the Council really does give a lot of credit to them. Bechtel: Other comments?
Dawes: Let me just touch on Rick’s, and I have another one that I would like to throw into the
pot as well. Number 2, the scheduling topics for review, is particularly a good idea. We have in general have a process for reviewing different things at different times. We could get a bit more formal about that, at least in terms of the basic skeleton, and have an annual meeting. Maybe mid-month meetings or doubling up in a certain months, during budget time are very appropriate
and I would like to see John come forward with a proposal of a fairly detailed annual cycle that
fits your needs. We are here to serve the Council but we are also here to optimize staff resources as well. My comment sort of relates to Number 3. I would like to really get a lot more information on the
financial side of the businesses that we operate. For instance, the report that we will deal with
later this evening, the quarterly electrical report, is what I term a three line report: Sales, Costs and Margin versus budget for the quarter. To me it does not really answer any questions other than a “how ya doin' guys” kind of a question. We are doing a little better in budget and that is about all you can answer. It does not provide enough detail for an educated financial statement
reader to see if there are emerging problems that should be addressed or underlying trends and
detailed line items of revenues and expenses. I frankly nominate my favorite report, which is the 10 year financial report for what I call “the stub” which is the left hand column line items, with just different time periods here, quarters. This is exactly the data that I find absolutely appropriate and needful for our deliberations and discussions. I noted with interest, John, that
you had a revised one at a recent meeting. I know you also place a lot of stock in this particular
set of numbers. I will also note that the fiber financial report is in substantially this level of detail, and is extremely informative in terms of numbers of the customers, revenues per mile, etc.,. that show the kinds of trends and enable us to do our job better. So, I will throw that in the hopper, as a way to make the UAC more effective in its procedures.
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And one last item, sort of a question. Should we be more proactive in our inquiry responding to issues that are either brought to us or that surface, but try to look beyond the immediate set of problems and discuss future policies? That’s all I have.
Rosenbaum: I have a number of thoughts. I appreciate you are the first chairman -- and I have
been sitting here as liaison for several years -- who has ever attempted to do something of this sort. This is very helpful. You do mention that the liaison brings our concerns and advice to some degree to Council, but I would say it is very unusual for a Commission for the liaison to attend Commission meetings. This is not something we can count on. It has been true for the
UAC but that is not generally the case. I also sense that you have some desire to focus on some
broader, larger issues rather than spending as much time as we do on detail and I guess I question that. The Council really wants somebody to look at the details and we do serve that purpose. And quite often we act as a sounding board for staff -- they don’t necessarily think of everything when they write a report -- we are quite helpful in that regard, so I would like to see us continue
doing that. But at the same time I recognize your concern, and on occasion we may just need an
extra meeting to do that. I thought the idea on the budget review, having that in two time periods was a very good one. The issue of Commission-initiated items and getting some staff support, as you might suspect,
every Commission has gone through this. People come up with ideas, they go to staff and they
want staff to provide support and the staff response is that we don't take direction from the Commission. We take direction from the City Council and so that is not totally satisfactory. So in the end, there is some sort of a balance which we try to achieve. That is if someone wants to pursue something you go to the chair and the chair talks to staff, and maybe staff will take it up
and maybe staff won’t take it up. If the Commissioners feel strongly enough about it, staff isn’t
providing support, we just have to find a Council member to put it on the Council agenda because Council members can put things on the Council agenda. As far as questions, individuals asking questions in advance so as to avoid going through a lot of questions at the meeting, e-mail really does help. The advantage of that is that everybody knows what the questions are and
everybody gets the same answer. At the Council level, this has often been missing where some
Council member will know something the other Council members don’t, and the other Council members will be very unhappy. So there is some advantage having everybody getting the same information as opposed to too many private conversations with staff. So, those are my general thoughts. I don’t know how we work this into something.
Bechtel: Any comments? Carlson: I really like what Rick has done here, and one especially was interesting. It was a sub-heading, but the idea of concentrating each meeting on one utility, have a water meeting, where
we get into each one and cycle through. We could get into much more depth in the details
instead of just reporting briefly on each one. That’s particularly appealing as a way of saving everybody’s time but getting into more depth at the same time. It is a good combination. Ferguson: I certainly meant that as a matter of emphasis. John pointed out that sometimes topics
just come up, and you have to take care of them.
Ulrich: Actually, that was a focus that Rick and I talked about when he put this together. We do in many cases run separate utilities. There are synergies between them, but we have staff that work in some areas and may not work in others, so it is not necessarily a problem for us to work
on multiple subjects at the same time, and bring a report on gas or a report on water to the same
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meeting. I would attempt very strongly not to bring two items that we felt were going to step on each other, or we had to take too many resources away from a main topic. I would always want to have the option of bringing more than one thing. We have to learn and be able to multi-task very well. So if you are interested in having a theme or an emphasis on a particular area, that
would be fine. I’m just trying to point that there is versatility here and I would not want you to
think that it can only be water this time, and next month, only gas. Carlson: I thought there were some interesting ideas. I don’t quite know how to organize them.
Bechtel: Let me make just one view of my reading on some of the comments. Then perhaps we
can move to a more specific action or at least direction or so because I see both ways working. Some might take a motion while some just direction. One of the things that I wondered about has been really more public participation at our meeting. I know that there are a few UAC followers but there are not a great number. I don’t know if that is good or if that is bad and I
guess that is my question. Perhaps it is a sign that people, at least the residents, don’t feel
strongly enough that there is something wrong that they need to come to the UAC meeting. Of course, when there is really an issue, the Council is more effective because you have a much more powerful audience. The meetings are televised and I know that among my friends, very few people watch but they do occasionally. They have talked about my shiny nose so, but I am
just wondering whether public participation should be encouraged or perhaps it is OK just the
way it is and that is fine. That was really my thought. Almost everyone has stated pretty much the way I feel too, Rick. I see several things. The first thing that comes out to me is perhaps the agenda, the monthly meetings. John, do you have enough input or do we need a more of a consensus or even a formal vote on whether we should devote certain meetings to strictly a
utility. Is that maybe the first item, because that seems to be a more straightforward issue to
address? Should we take the electric utility one month, the water utility, etc and if there happens to be some other issue, then we have other issues. Ferguson: As a process matter, I am thinking that a good thing to do is to surface the
Commissioners' views in this meeting, and then charge a couple of us to meet with John and
come back with, hopefully no more than a two-pager, with some specifics and things to do, and then declare it done for this Strategic Planning cycle . We will have made our heartfelt attempt to clean up our act here on the UAC.
Bechtel: Am I hearing a proposal of a subcommittee of this Commission to meet with John to
talk about an draft annual plan for presentation at the next UAC meeting? Ferguson: That might be more workable than sorting it out motion by motion tonight. I appreciate all the feedback.
Ulrich: I am sure we can do this. I am glad to work with you, Rick and whoever else you would like, George, too, to put together a subcommittee. Carlson: In terms of subcommittee maybe two is not a quorum.
Bechtel: I am not sure exactly what the rules are. Ferguson: Two at most meeting with you on this.
Bechtel: Rick and George.
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Dawes: I move that Rick Ferguson and George Bechtel form a subcommittee to meet with the Utility Director with the view of the streamlining UAC procedures, particularly with respect to individual Utility focus per meeting. (Seconded by Mr. Carlson).
Bechtel: Any discussion? Bechtel: I want to respond here to a point that Dick had made relative to focusing on detail versus an overview. The Council certainly does look and expect the UAC to look in detail of
what comes through here. The Council on the other hand does not independently look at an
overview of Utilities except for what is brought forth. If the Commission were to want to find a way to perform its own overview on an annual basis perhaps that could be a… Ferguson: Do I understand the motion to mean that the entire discussion is in the scope, with
emphasis on the single-utility focus?
Bechtel: Yes, I am assuming that in particular what would seem to come out is they were trying to have some perhaps more structure. We have a motion on the floor. All in favor? It passes unanimously. So, we Rick and I will meet with you, John, and we'll talk about a schedule so that
we can come back. I would say that a proposal to the Commission would be back by next
meeting.
Quarterly Electric & Fiber Update
Bechtel: Item three on the agenda is Quarterly Electric and Fiber Updates. It is an information
only item. John are you going to lead off the discussion on that?
Ulrich: Well, I covered some of the items earlier on and it may be appropriate for you to ask some questions. We could answer those or focus on a particular area and we can do that. I am reluctant to go through this item-by-item unless you would like that.
Bechtel: I know that several of the Commissioners had questions that they sent to you by e-mail, so I suspect they would have some questions. Ferguson: I suspect we got those questions asked and answered during the Director’s report. I
have no additional questions on the electrical topics. I have a couple of questions or comments
on fiber if you want to skip ahead. Rosenbaum: Just in terms of conservation, I did ask a question about whether we were going to match PG&E’s $200 refrigerator rebate.
Ulrich: Our rebate program is not quite the same as theirs because our rates and savings are a little different. Tom can give you some more specifics. Auzenne: PG&E’s $200 refrigerator program ran or is running from June 1st to July 30, so it is a
very small window of opportunity and they are specifying Energy Star rated refrigerators. We
are in the process of changing our $125 refrigerator rebate program to mirror all Energy Star appliances but we didn’t think it was worth it, that much adjustment, for that amount of time.
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Rosenbaum: So you are saying that at the moment we offer $125. Auzenne: Correct.
Rosenbaum: And that is an ongoing thing?
Auzenne: That is correct. Rosenbaum: And you have to buy an Energy Star refrigerator.
Auzenne: No, ours was based on the Federal Appliance Efficiency Standards so we are going to be upgrading that to the Energy Star level which is higher. The standards have changed a lot for us. Actually there is some confusion with PG&E customers as to which standard they can get their $200 for now, because the standards changes July 1st.
Rosenbaum: When the standard changed does that mean that all refrigerators made after July 1st are going to meet the Energy Star? Auzenne: No, not at all. It just means that their rebate level only applies to those that meet that
standard after July 1st.
Rosenbaum: Thank you. Bechtel: Other comments on the electrical and fiber update?
Carlson: I have an electric question. I am a little curious about what you see what the next several months are going to be like. My understanding is that because of the warm weather we actually had relatively good hydro for awhile. But that is pretty much gone, so does this mean that we were kind of lucky in June, but July and August could be really bad?
Ulrich: Well it is always difficult to forecast. We had this earlier discussion looking backwards at some of the things we had done. We are always a little better at looking backwards than looking forwards. The price has sure gone down a lot quicker than most of us expected. More supply has come out or the perception of it is. But the cooler weather and the real focus on
conservation, load management that has happened around the State has had a big impact on it.
We have not had the rolling blackouts, the weather has not been overly hot, at least over the entire state. Where you have the real problem is when you have multiple days, like three days plus of 100
plus degree weather throughout California. That’s when we are going to have real problems.
We have already gotten up into the low 40,000 megawatts in the peak. On really sustained days, it was up a little bit above 51-52,000 so we are still a ways from it. The issue is whether the supply is available. You keep hearing reports that the price caps are not working. They are still finding ways to divert energy or more importantly, they don’t turn their plants on because they
don’t think they are going to get enough money. That is still going on. If you look at day to day,
there are plants that are still not available to operate. Why, I don’t know. You can reach some sort of conclusions. You have also noticed that there have been new plants. The Governor is going to a new plant every few days to christen it and get it on board, so that’s coming on line.
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But I would suspect that if we have sustained hot weather we are still going to have trouble. Keep in mind the Pacific Northwest is at 50% of normal hydro. While we have a good exchange agreement, I sent you copies of a letter of the relationship between the California Munis and the BPA. We are attempting honorable exchanges -- not trying to sell power at one price and then
try to get them to sell it back to us at a lower price. We are trying to exchange energy at a time
when they need it versus the time when we need it. If we can keep that kind of cooperation going, that’s going to help. But the economy has cooled down. We have had cooler weather and we have had significant energy and conservation results. So we could end up with a much better year and summer than we ever expected. But I would still worry about it if we have some
sustained hot days.
Dawes: Two questions. You circulated some material that seemed to indicate that the Muni’s were going to be put in the same basket as the IOUs and others on rollbacks of prices of kW, megawatt hours that were sold in the market place. Certainly we have done a fair amount of that
with our excess power, some of it available when we were actually blacked out. Is there any way
to judge the likelihood of that happening or buy the dollar risk that we face in price rollbacks? Ulrich: Actually, we tried to look at that but that kind of changes day to day. We have seen the reports of it. The attempt to come up with a compromise between what the State thinks that the
power producers should pay back -- 9 plus billion dollars. It appears that the Judge believes that
it is more like 1 billion. Dawes: Could you put the pencil to the paper to say if Davis got everything he wanted, the 8.9 billion dollars, that that translates into a certain number of millions of dollars for Palo Alto
versus the other lower level of rollback, the billion rollback, how that translates into another
dollar amount? So we could bracket. Ulrich: I can’t say we are doing that on an analytical basis. We’re thinking about it. It is hard to put your arms around it. I still don’t know what the State alleges that the power producers have
done to get to the 9.8 billion and apparently the Judge and all the secret discussions that have
gone, they haven’t been able to show it. What it appears to be, if you look at our portfolio, is that you could have a risk on one side of having to refund money, but on the other side we also have a potential of collecting some more. I am not sure what that difference would be. But, yes there is a risk and that’s also part of the reason why I keep wanting to go back to the same
subject again. That is, whatever money we are making in sales of what may be surplus or excess
at the time, I have to assume that we may have to go and buy that later on, because we are much closer to being a net buyer than a continuing seller. I don’t know whether some of that money is going to be caught in some sort of a refund plan that the State comes up with. We are not in a position of making, affecting the market or being able to dictate or even influence how that is
going to come out. So I am husbanding whatever money we are able to sell because we cannot
sell energy at anything other than market. You would not allow it and I surely would not condone trying to sell something at less than what … Dawes: I am just saying that there is a potential liability out there and it is useful as a
Commission member to have an understanding of the potential magnitude of that liability. I
know we have reserves against these liabilities. Rather than just saying “well, we have liabilities out there and we have reserves,” you know, I worry about it. I would like to be able to get some sort of a handle on it.
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Ulrich: I do think about that all the time. I am trying to know what that scope would be. I though your question was about the letter that CMUA wrote that I sent you copies of. It appeared as though it was an attempt to “bash” Municipal Utilities. I reported to all of you that it had not been so successful or pleasant meeting that I and other Municipal Utility Directors had
with the Governor. To a large degree, he and some others are looking at “let’s have the
Municipal Utilities have some blame or responsibility for the problem that is in California”, even though we did not buy into and participate in the deregulation. And none of us, maybe one or two Municipal Utilities, have any way of controlling or having the market work in our favor. We are riding along with it. So the letter is an attempt in communication to put the utilities back
in the right perspective. We are here to help our customers, and we are taking a long view. We
are not out to try to gouge anybody in the sales. Part of it is public relations, that is what I am trying to convey here. Dawes: I heartily endorse it. I just want to mention it.
Rosenbaum: Well, I would just want to comment that the Governor would readily admit he was exhibiting political jargon. But he would say “look how successful it was” in terms of public relations. LAD signed a contract to provide excess energy at cost plus a small amount.
Ulrich: We have no idea what that is.
Rosenbaum: To do something from a public relations standpoint, the Governor could claim that this would not have happened had he not spoken the way he did. Dexter, you have mentioned several times that you thought our surplus energy occurred because of the blackouts. That really
is not the case at all.
Dawes: No. It occurred actually once when we could not get the congestion prevented. Rosenbaum: Really, to the degree that our supply costs were reduced, it all occurred last
summer when NCPA, on our behalf, or with all the other members of NCPA, was simply
submitting bids to the power exchange (when the power exchange existed). I have no idea what our bids were, but we got the same amount that everyone else did for the clearing price, which might have been very high. So to say that we were making extra money and should give something back is…
Dawes: I did not say that. Rosenbaum: No, I’m just saying it would be very difficult to make a computation.
Bechtel: Any other questions on the electric side of the utility? The telecommunications
paragraph, paragraph 3, any questions on that? Ferguson: Thank you. I was delighted to hear that, despite all the fall-off in the dot com business, we still had net user growth on the dark fiber. That is an unexpected surprise,
wonderful salvage work by the staff.
Ulrich: Well, it is an opportunity for us to say a little bit about what we are doing. There is some interest in having proforma reports, maybe more frequently than we have, and my caution on that is pretty much about the subject that Dexter alluded to with regard to availability in
having the 10 year forecast updated more frequently.
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Dawes: No, I said I would like financial reports in the same format. Ulrich: It’s me that wants those 10-year forecasts.
Dawes: That is fine but I don’t want to make extra work for the staff. Ulrich: The difficulty is, and I put it out in this context, it is not an easy process with the financial system we have, for us to update these as frequently as we might like. You can update
these, but the time and effort and the accuracy is not as good as I would like. So, we are not
trying to have less frequent or less accurate or less responsive reports, it is that the particular IFAS system or the accounting system that we have is very difficult to manage. Not like another business might be where you can get those reports out quite frequently. Blake is here and would be glad to answer some questions. You may be interested in how things are going with fiber to
the home and what the financial, the business climate in Palo Alto is for the dark fiber. So, we
will be glad to answer those questions. Heitzman: Just to go through and kind of give you an overview to start with. I did run a pro forma myself with my own data base which has accounts receivable but not what has been
received. And based on that, we are expecting to have a gross revenue of about 1.2 million
dollars this year. Now I have to caution that, in fact, there is this dot com thing that is going on. Some of our customers have been hit pretty hard, so we expect that we may have some of these accounts receivable "contested" so to speak. There is a possibility of that happening. So far we have been lucky that we have not had that problem. We have had some disconnection notices,
about $35,000 worth of revenue, and those people paid for this year but this is the last year for
those particular connections. That does not mean we are losing the customer, it means we are losing some connections for a few customers. They are being very judicious about what they disconnect so they are trying to keep as much going as they can. By the same token we have had $35,000 worth of new business, so it is offset thus far this year. And we see, even with our 4
new staff people, our net revenue will be about half million dollars this year based on those
accounts receivable that we have. The business community, particularly the people that we work with or have been focusing on the last several years have been hard hit by the economy. They are making a few judicious cutbacks but so far we have been real lucky and we are still growing. That is about a 50% growth actually if we reap all those revenues. And even if we look at the
ones that we think are at risk, we still have about a 25% growth this year. That is still pretty
good. So that is an overview. To talk about the fiber to the home project, we had a proposal meeting this morning. Marconi --who is building the network for us -- was there and we talked about how quickly we could roll
this out once we pick our service providers, our telephone video and our internet providers. I
was thinking it would be September. He said if we pick those in early August, we should have it rolled out by the end of August. He is much more optimistic than I was at the time. We do expect to have this up and running late August or early September. And we had several groups who came to the conference, several former old groups, PacBell being one of them.
Ferguson: My second point here has to do with fiber to the home. I just see this wonderful array of fiber optics suppliers and router suppliers out there flat on their backs. This is a wonderful time to be buying, to be in a position to buy and build out a fiber-based system. It is going to last for awhile. But we are never going to get there, until we get some kind of evaluation of the fiber
to the home trial. So, as a pacing measure, I am wondering if we can establish relatively soon a
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set of evaluation criteria, say, three major wins. Things like, was there a spectacular new idea that came out of the fact that fiber was in someone house? Something that someone had never thought of before? Just information on the cost of doing it, just the difficulties of doing it. If we could get those evaluation factors out there, it would speed the participation early on and
generate results for us, and get us closer to a decision as to whether it does make sense to build
out -- before there is competition for fiber supply again, and we are just another buyer. Heitzman: There are a lot of issues there. Of course, originally the proposal before Council was a year test and we are starting in August or September, a year later. We have the results of the
experiment to make a decision. We think we are going to make a decision faster than that, so
we don’t think we have to have the full year to understand the cost. Of course, the things we are looking at are cost of building, operating and maintaining the system. The technical difficulties, you know, how we might go about it obviously it seems we are either going to create a huge staff if you build this system yourself or you are going to hire somebody to do a lot of it for you. So
those are the kind of issues that will be resolved, in probably the early months, of actually having
built it and then operated it for awhile. Probably taking a little bit longer is finding out what the customers really want and we are looking, right now, at two kinds of surveys. One would be a random survey of the community as
a whole, talking about the various services and see how they respond to those services and see
how they respond to those services and kind of pricing they might want to pay for it. And then, what takes a little bit longer, is to do a direct survey of the participants and see how they felt about the services, etc. So all these things should be done within 6 months and that would be quickly going into discovering the business case and if the business is, yes, go ahead and do this,
then again going further into a business plan, a financial plan and a marketing plan.
One of the issues you brought up is the fact that a lot of businesses are flat on their backs right now. There are still people out there experimenting and validating equipment and what we hear is that well the next best thing that is coming along, something that can handle all these things
more efficiently and less costly. So, there is a reluctance to rush into something right now
because we just don’t know how the technology is going and we do have several people coming to us saying “well we know you are working with Marconi right now but you know what, when you get ready for the build-out, we are going to have something that is really superior. We listen to these people and as you know, it may happen. It is probably going to happen, whether we can
figure out exactly how to do it.
Probably the major cost is going to be stretching the fiber and doing the connections. The electronics that go on the end can be changed fairly economically compared to the whole system price. The one thing about single mode of fiber which is what we run, it is a proven technology
and it keeps being improved. For instance when this business first started here, some of our early
customers were asking for like 4 or 5 fiber rings. Today they could do all that business on one ring. Just because of the improvement of technology. So, there are those issues. I guess somewhere we are going to have to decide to commit and go. I am very positive about the whole thing and hopefully the experiment will prove us out. I have citizens calling me saying “gee,
why can’t you put my house on it right now. I can’t get DSL, I can’t get a cable modem, I can’t
get internet”. So there is a huge market for some of these services that we will be offering. Bechtel: I am happy to see that you have been here. Are you are looking for providers on phone and video? I am curious what you are envisioning for phone and video services.
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Heitzman: At this point, the only thing that we are looking for is to be a facilitator. So if PacBell wants to use our wires rather than copper wires, there would be some licensing agreement allowing them to serve the community. Even in a buildout, you may even have multiple providers of the same service, all having access to our head-end and being able to put
their equipment there. I don’t think we are looking, at least at this point, to offer the service
ourselves. To be candid, at least those of us who are looking at things, the video service is something that has a potential. If we operated a video, we would have the potential of paying off the system with that service. So that is something we are thinking about some day possibly, proposing some day to provide a video service ourselves.
Beecham: What does video service mean? Heitzman: Kind of cable TV. Essentially it is something to that effect.
Beecham: I would say that on cable TV if you looked at providing this versus other
infrastructure in the City, that if you can’t offer cable TV in the system, so someone has to go and get a cable cord, that takes away a lot of your customer base that might otherwise look at this option.
Heitzman: Well, I guess it is a high mark-up item and it would provide revenue to pay off the
system. So we are looking preliminarily at the idea of maybe the City should look into providing that particular thing. Dawes: Blake, do you have any reports from Alameda and how they are doing on their build-out
and roll-out?
Heitzman: I have not heard anything from them. But we have heard indirectly and we have heard from Manual Topete, who is managing this particular project, from some of the people up in Washington. In fact, some of them come down and talk with us, and in fact those who have
started before us are having their share of problems so to speak. It is good we are starting where
we are. There are people out there who have had some experiences which we have been able to learn from. Ulrich: Dexter, I was over in Alameda last week and they were just having their grand opening,
kick off, to provide video services and it looks like it is quite successful because the existing
service provider does not have a very good reputation. The biggest problem is that people want it, and they have a build-out throughout the City, but it is going to take some time before they can get to where everybody wants if.
Dawes: Where they are lit in passing homes, they are getting a good sign of rates on it.
Ulrich: Correct. The key problem can be: are people willing to pay this price for video service? That is what they are selling right now. How long will they pay that before they are going to expect something else, or will they find another alternative? There is huge competition in that
area and their pricing currently is about the same as we pay here in Palo Alto. It is in the mid-
thirty’s to low forty’s but they add on to all the services so you can get up to a hundred and some dollars. Many of those services, though, you can get at a much lower price from a DirectTV type of service, so they have to be careful that they stay ahead of the competition.
Dawes: How about their internet service, is that at a high rate of acceptance as well?
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Ulrich: The only thing they have up to this point is DSL so they are going to provide that. This is a co-ax system.
Dawes: It is a hybrid system.
Carlson: Do they actually have that up yet? I thought they were just trying the video part? Ulrich: They started the video part but the services they will offer are DSL. I am just giving you
a thumbnail of what we have heard. Did you hear more, Dick, when you were there?
Carlson: The day I was there, I don’t know if you were there afterwards or not, they were just celebrating their first half dozen customers.
Ulrich: July 4th was there first.
Dawes: Hats off to them in the “guts” department. See if the glory follows.
Carlson: I want to do a follow-up question on this because this is in many ways the big-buck
gamble part of fiber to the home. AT&T, TCI has these antiquated systems and has probably
taken over the antiquated system we had. Are they talking to you? Are we going to have two parallel things? Heitzman: We have not heard from AT&T. As I said, PacBell has been talking to us. Some
other providers of video services have been talking to us, but AT&T has not. There will
probably be an issue of franchising with regard to them, if we offer service. I don’t know if there will be a problem with that or not. That is something we will have to look into if we offer service parallel with theirs. One of the things to point out is that fiber to the home is probably the ideal route for delivering all these services and a lot of the other companies do not want to
invest in that infrastructure. It is expensive to do and some of the things we hear is “you guys
build it and we will be happy to lease it from you”. “We’ll give you a fee for leasing it and we will deliver all the services”. So I don’t think you are going to see AT&T trying to parallel us with an alternate system. They may come to us and say let us deliver our service over your system. That may happen.
Carlson: This is sounding like billion, multibillion-dollar players saying, you take the risk and we’ll make the profit. Heitzman: I am sure. That is exactly what I thought. It tells you though that once it is in place it
has value. Now whether, the idea of how we finance it, we can have a longer financial horizon
than they may be willing to take. Like they may be willing to take one or two years but we may be willing to take 10 years. So that is one of the advantages of our financing in our expectations as compared to theirs. But certainly their offer makes you wonder if we should consider upgrading this while it is making it.
Carlson: Well, you said something about franchising. I thought that there cannot be an exclusive franchise if the facilities are there. You can add competition. Am I right? Heitzman: I assume that is correct. I have not looked into the legality of it. I am assuming that
is correct but I feel I do need to look at it.
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Dawes: Didn’t the City get caught in a nasty lawsuit on that? Beecham: We need another direction. In the franchise we have given AT&T, there were some
costs they have had to pay. They may have the right to say that we cannot give anyone else
more favorable entrance to the City. Heitzman: It is my understanding, the issues that were brought to them about the conditions that they had, have not all been fulfilled at this time. So there may be a problem with them not
having met those conditions. I believe the conditions, and I am really stepping out here because
I have not really checked into it thoroughly, the conditions had to do with their physical system and the fact that it was antiquated. we would immediately be covering those same conditions and meeting those conditions.
Beecham: What if their contract required that within three years from the date which is now a
year ago they had three years to upgrade their system? Bechtel: So maybe we won’t be their bailout.
Rosenbaum: You mention the people in Washington. Was that Tacoma?
Heitzman: No. Grant PUD I believe is the one that started out with an Ethernet system that has been having some problems. There is a kind of competition between the types of systems that you would use for this type of network and there are a lot of components with Ethernet which
has a lot of advantages. But so far we have not heard of a system that works properly with
Ethernet. Rosenbaum: You have not talked with the people in Tacoma. They started three years ago.
Heitzman: No, we have not spoken with anyone there yet.
Rosenbaum: Just for clarity you mentioned phone and video but we really are not going to within the next few months enable people to have a new phone number?
Heitzman: Yes. That is when our service providers, over our fiber to the home project, will
offer separate phone numbers for those participants to try a fiber based phone system, up to 3 lines. So they will, if all of our providers come through and give us a proposal we expect someone to do that, PacBell specifically.
Rosenbaum: So the customer would pay that provider?
Heitzman: One of the things we want to do with the trial is ensure that the cost of the project is a true cost. In other words, we are asking them to keep their current phone and if they are going to keep their current phone and somehow we have to figure out where they get a single phone
charge so they don’t look like they are getting double billed for their phone services. Either the
provider is going to have to eat it or we will have to do something to work it out so they are only paying for one phone essentially. Rosenbaum: And the same for video?
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Heitzman: The video is by choice only, so we figure we don’t have to do anything there. They can subscribe to it if they want to and if they don’t they don’t. Rosenbaum: Thank you.
Bechtel: I have a question about service providers. I know that we have gone out with request for proposals before. We had poor response. Looking at your face and your smile, it tells me that you are having better success. People are getting interested in this. Is there something you have done to make these people more interested, or the market has changed or why are you
positive about us really being able to be a service provider or get several service providers?
Heitzman: The fact that PacBell has been at the table many times -- they came to the proposal meeting this morning -- is a good indicator that we have people who have the financial backing and who are interested. In the past we only went for Internet, and the company that we had did
not have the financial strength to stay in there. Marconi is putting a lot of effort giving us his
equipment on loan for the trial and a lot of training to our staff. They have already gone through a lot of training. When we get the equipment to install they will be out there helping our installers for the first ten or so homes. I was told by their representative today that once this thing starts they are going to have it done in a month. So they are dedicated to the project and
that makes a difference to the providers that will be using that thing. It makes the providers who
will be using that network feel very comfortable that it is going to happen and that they have something to rely on. So it is a little bit different this time. I hope I am not wrong about that. Bechtel: That is a great report Blake. Thanks very much. Any other questions? No more
questions on Item 3? So let’s take a five minute break.
Quarterly Water Issues Update and Alternative Emergency Water Supply Options Study
Bechtel: Please let’s reconvene the meeting. Dexter, can we restart the meeting. The next item
on the agenda is Item 4, the NCPA report. I understand that we have an interest in moving up
some of the water report. We have a consultant present who would like to make a presentation to us. I assume that that is both Items 6 and 8. So with the consent of the Commissioners, can we move Item 8 up at this point and deal with that and deal with the Quarterly Water Issues right at the end of this item? We can then finish with the electric items at the end of that, assuming
that they are short items.
Who is going to lead off on Item 8? Miller: In your packet is the report from Carollo Engineers. I have a brief set of overheads
which I will pass out to you. What I would like to do as far as an outline is first introduce a
member of the staff and the consultant, who are here to provide the overview of the past studies that we have done and an overview of the 2001 study. Then to discuss some of the next steps that we are planning and would like to get your feedback and input on that.
Here tonight we have Romel Antonio who is an engineer in the Water Distribution group, works
for Roger Cwiak and Chuck Borg and he has been involved in all these projects and is very knowledgeable about the system. We also have Dave Krasko who is from Corollo Engineering
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and has made presentations to you before and he has worked on all three of the studies. Both of them know the Palo Alto Distribution System extremely well. For some background, there are three studies: there is the 1999 study, the 2000 study and the
2001 study. They all have long names but we are using those numbers. It makes it a little easier.
The 1999 Study was the Water Wells, Regional Storage and Distribution Study which is that thick document that Dick has in front of him. It examines the ability of the cities Distribution System to withstand an eight hour cutoff from the San Francisco PUC system and that came from a request from the Department of Health Services to examine that question for all members
and agencies that are hooked up to the San Francisco system. There were recommendations for
approximately 15.5 million dollars of improvements which allowed the City to go through that eight hour period and meet water demands for both water usage and fire flow. All of the recommendations that were included in that are incorporated into the five year CIP, 2001-2005.
The recommendations that were included in the l999 study were presented to the UAC in
November 1999. They were in three areas: improvements for normal operations which were improvements of water mains , booster stations, reservoir and pressure reducing stations which was approximately 2.5 million dollars to improve the performance of the system. The second group was forming conversion improvements, approximately one half million dollars. The third
were emergency supply improvements which was a big number of 12.3 million dollars which
involved rehabilitating the five existing wells, constructing three new wells and building a reservoir at El Camino Park and some pump stations and pressure reducing station improvements. Those recommendations were brought to you and there was discussion about that. The Supply Resource Group looked at those recommendations and said if you are going to
be doing the work rehabilitating the wells does it make sense to examine the use of those wells
from a supply standpoint. So we then did the 2000 study which looked at various water supply options over a long period of time, either a continuous use or during drought only. We examined a number of options,
treatment of well water, connection to the Santa Clara Water District treated lime and use of non-
potable ground water for irrigation. The results from that were presented to the UAC in December of 2000 and they showed that there is value from the water supply standpoint, from some of these options. We were incorporating that into our other Integrated Resource Plan which is ongoing. The 2000 study also reinforced the need to proceed with the well
development.
Which then brought us to the 2001 study. Some questions that were left unanswered were how do the recommendations made in the 1999 study and the supply options evaluated in the 2000 study, how do they perform in emergencies other than eight hours? The 8 hour study that was
done in l999 was very in-depth. What happens if you have a three day outage, a thirty day
outage, a sixty day outage or a severe drought? How do these perform? What are the benefits? So the study looked at various lengths of outages, various water supply options and what the capacities were; did some financial analyses, looked at some other issues such as some other issues such as the ability to construct these items and provided some conclusions to us. The
analysis that was completed, we looked at various lengths of outages, eight hours to sixty days
and moderate and severe droughts. We looked at existing and new wells, potable reservoirs, various sizes and surface water storage of various sizes with associated treatment and again, the connection to the Santa Clara Valley treated line was the last thing we looked at. The next two slides are tables that are in the report. I would like to highlight some things from that. The first
one, table 2 looks at the water supply capacities which is what percentage of peak water supply
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can be met from these options during these various emergencies. For example, during a moderate drought you will see that rehabilitating the existing to 3600 gallons per minute provides 100 percent of what we need for that scenario. Looking at the 5 columns, they were all evaluated.
Dawes: None of these are added to this report. They all stand by themselves. Together -- then you can add them together? Miller: Yes. To a certain extent. There are some added problems with that but you can.
Looking at moderate drought, what you see is that the wells, the first 4 rows work quite well
during a moderate drought. Also, seven and eight, which is constructing very large reservoirs, work well and the connection the connection to the Santa Clara County Line works well. You will see that 5 and 6, the building potable reservoirs, basically large buckets of potable water, don’t work well because you run out of water quite quickly. Severe drought, the second column
is roughly the same as the first as far as performance. The eight hour cutoff, third column, was
what was evaluated in the 1999 study and in that you will see that items five and six work extremely well which is a large bucket of potable water and in the 1999 study, they suggest that a 2.5 million gallons reservoir and this one looked at an 8 million gallon and a 44 million gallon.
Dawes: So El Camino is 2.5.
Miller: That is correct. Rosenbaum: Does it work too?
Miller: It works well in conjunction with other things that were suggested in the 99 study. Dawes: Percentages would go down.
Rosenbaum: Well, it says here 8 million provides 100 percent of the requirement for eight hours.
Does 2.7 million gallons provide 100 percent? Miller: I don’t know. It doesn’t but in conjunction with the other recommendations, in the 1999 study does. Whereas this study looked at things in isolation, the 1999 study looked at a
combination of things.
Carlson: Which reservoir is the eight million one? Miller: It is a mythical eight million gallon reservoir.
Carlson: Okay. So what is the large one? Miller: More myth.
Carlson: More myth? But we are recommending this specific reservoir.
Miller: We are recommending a 2.5 million gallon reservoir underneath our El Camino Park. Carlson: So that is half of…
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Miller: It is one third of the water. Because that one had been evaluated in depth in the study we did not include here. The next column looks at a three-day cutoff from San Francisco and what you’ll see there is that
the Roman Number six, the very large bucket of water works well. That is where you get the 44
million gallons. That meets the needs. Dawes: How big is Stanford’s up there in the dish?
Miller: Six million gallons. What you’ll see in the 4th column, the three day cutoff, the wells
work fairly well. Items seven and eight work fairly well. The connection to Santa Clara Valley does not work as well just because the demands are quite high with a complete shut-off and there are capacity limitations on the pipe. Thirty to sixty day cutoff, the last column, you will see that the potable water reservoirs rows 5 and 6 don’t work very well at all because you basically run
out of water but that the wells work quite well and the large reservoir, seven and eight, work
quite well and the connection to Santa Clara Valley District works about the same. Rosenbaum: Just to clarify, I can certainly add two and three, the percentages. One is rehabilitating existing wells and number three is construct new wells to get 44% is the sum of
those.
Miller: I am not sure if we can exactly add those but … Rosenbaum: Why else would I do the new wells?
Miller: It is pretty close. A little explanation, what we mean by peak water demand, what we are taking into account is, can we maintain all of the system operation, all of the distribution systems operations, during any of these emergency situations. The system operations are not only meeting the normal demands, whether we are speaking maximum day or the average day
demands, but also meeting fire flow requirements and so the fire flow requirements are specific
peak events and so adding these numbers will get close but you are actually being a little conservative that the performance would actually be a little bit better than what you would see from just adding those numbers directly.
Rosenbaum: Oh, so it is a larger number than simply adding twenty nine and fifteen.
Miller: Yes. Dawes: You come up with specific recommendations but I would find it very useful if in table
two you add a line ten which is this is the percentages which result from adopting our
recommendation which is items two, three, and a variation of five. Miller: Yes.
Dawes: It would be helpful to see how that.
Miller: It would be very easy to include that. Carlson: And eight, are we proposing to do eight too?
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Miller: Santa Clara Valley Dawes: Number nine, sorry.
Miller: We will be suggesting that we examine that. There are a number of water quality issues
and engineering issues and price issues associated with that and one of our recommendations will be to take a closer look at that line because it works quite well, particularly in the droughts, but also it is a steady supply.
Carlson: Why does it work well in drought? They have a different water supply?
Miller: The reason it works well in a drought is because the cutback that we would get from San Francisco, we are assuming a similar percentage cutback from San Francisco, but it is a different source that we will be able to use.
Rosenbaum: Well, isn’t it more complicated than that? Suppose we are getting 16,000 acre feet a year from San Francisco. If we were to start taking 2,000 from Santa Clara on a regular basis we would then only be taking 14,000 from San Francisco and then I assume that if there were a drought, our percentage reduction from San Francisco would still be based on the 16,000 rather
than 14,000.
Miller: I’ll ask Dave Kraska of Carollo Engineers to answer this question. We have talked about this a number of times to make sure that we are not counting on Santa Clara to have no cutbacks so we did incorporate cutbacks and what is final.
Kraska: Basically, the assumption that we made is under a moderate drought that would be a 75% cutback and under a severe drought there would be a 50% cutback. Dawes: A 25% cutback to 75% cutback.
Kraska: Very good. Thank you. And so we assume a similar with Santa Clara that if we had to do a 25% cutback from San Francisco, it would be a 25% cutback from Santa Clara as well. But they do have different water sources as I am sure you know. But it is San Francisco being Hetch-Hetchy, Santa Clara being some local and Delta sources.
Dawes: It is highly correlated, isn’t it? Kraska: Absolutely. Yes, it would be very speculative to assume there is only going to be a drought in Hetch-Hetch watershed and not in other places.
Rosenbaum: Isn’t Dick’s question, I mean if you are going to get a 25% reduction from both suppliers? Carlson: It is really an additional supply.
Miller: That’s correct. Carlson: Sixteen plus two is eighteen and you cut back 25% from eighteen it gets into a bigger number.
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Rosenbaum: That’s the assumption. If we started taking fourteen instead of sixteen would we still be entitled to seventy five percent of sixteen from San Francisco rather than say “you guys only need fourteen, you are going to have a cutback relative to the fourteen.”
Miller: That brings up a topic that we will get to when Jane talks about the BAWUA monthly
report, which is the approval of the shortage allocation plan. It does provide some level of surety for near term water supplies through 2009. We will go into that some more but there are a number of assumptions in Santa Clara Valley supply as far as what’s available. Looking at those numbers, even conservatively, there appears to be sufficient value in that from a supply
standpoint, a cost standpoint and most importantly from a diversity of supply from a reliability
standpoint that it is worthwhile to look at, to examine further and that is part of our recommendation. So this chart is the water supply theme of what can these systems provide. The next chart on the next page is what would it cost? And here looking in the third column, we see approximate water cost per acre foot and we have made a number of assumptions that are
described in the report about how much water and how frequently we draw upon them and I
won’t go into that now but what you will see is that at seven and eight, the costs get prohibitive on the order of six to seven thousand dollars an acre foot for the reservoir, the non-potable reservoir with the treatment so that one from a cost standpoint we are not considering.
Beecham: I am going to ask what acre feet are you using here? Is it assuming complete use
during the year or for eight hours a year? Miller: In the version I have I have taken out the assumptions and I will ask Dave Kraska because he has memorized those assumptions.
Kraska: Pretty much. For all of these we try to figure out if any of them were to be implemented, how would they actually be operated in reality? For the wells, we assume that these would only be designated for only drought or for emergency operation so the numerical calculations are based on that. There are some costs in there for normal operation or maintenance
yearly but that actually water would only be produced only during these emergency scenarios.
Similarly, for the potable reservoirs, they can just go down the line here. Potable reservoirs storing, potable water. You cannot just store potable water and leave it in the reservoirs because it will eventually go bad, particularly so after the chlorine conversion. You would be cycling water through on a regular basis, and so the power quality operations costs associated with that
are in these numbers. The surface water impoundment -- we made the assumption that the
impoundment were constructed and the treatment plant were constructed but the treatment plant would only be operated in any of these emergency scenarios but there is still to be some maintenance costs and certainly the maintenance of the impoundment. On the Santa Clara supply, we assumed that the City would regularly take this 2000 acre feet per year, that would be
the case under that operation.
Dawes: Just remind me what we are now paying Hetch-Hetchy and what we expect to pay ten years hence per acre foot.
Miller: Jane would have those numbers off the top of her head.
Ratchye: It would be about $350 to $360 an acre foot. If you look in the water quarterly you will see that it is …
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Dawes: Jane, so about one thousand in ten years. So it is about $360 right now but it will hit a thousand with that ten year construction project. Ratchye: If they complete that.
Miller: Looking back at the water cost table, what we see in seven and eight is that is prohibitively expensive. The first four, the wells, are similar kinds of water cost that were included in the 1999 study, $700 to $1000 an acre foot for wells. So the cost is attractive and they perform well in a number of emergency scenarios.
Dawes: This does include the cost of manganese but not the dissolved solvents. Kraska: So it is partial treatment. Manganese treatment, disinfecting but not TDS removal.
Dawes: It means the really bad tasting stuff is out but the water hardness would go up
significantly. Kraska: Yes, currently the water hardness ranges around one hundred to two hundred milligrams per liter. The well water, based on the test results we have is around 500 to 700 milligrams per
liter and so certainly the areas in the immediate vicinity of the wells, there would be an increase
in hardness. Miller: Looking at five and six, the potable water reservoirs, the cost per acre foot seems reasonable and looking at number nine the Santa Clara Valley, the cost looks reasonable there.
The five and six, the large buckets of potable water, we don’t propose those because we don’t
need them if we are developing the wells as well. The two and a half million gallons appears to be sufficient for the eight hour need. Dawes: That would be on the order of a $1,000 an acre foot for the reasons we have discussed.
Miller: It is a little bit higher, just that you lose some economies of scale, is that right? But it is on the order of that. Beecham: On your pricing on that, between the two reservoirs versus the impoundment, if I
understood you, on the reservoirs because you need to flow water through there to keep it fresh
you count that as acre feet usage. Even though they are not contributing anything. Whereas for the impoundment because you don’t flow water, you don’t count it until it is actually contributing something. For the purposes of the evaluation they both are used on what is the value they provide as opposed to just because water goes through, just count the water, that is
not a value to us.
Bechtel: If you were to do it that way, would it change conclusions? Kraska: Well, I did run the numbers if we were to run the treatment plant continuously and the
treatment plant and the impoundment and the treatment plant came up to about $1400 per acre
foot. That was the cost of that project. And one of things we have not spoken to is really the ability to implement any of these projects. Just trying, as you are well aware, trying to find a place to put 2.7 million gallons of potable water storage. It is quite a feat. But yes, is that the kind of number you are looking for?
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Beecham: The number I would be looking for is on five and six. The fact that we have to run water through it does not make any difference in the value so don’t count that water flow which gives us a lowered total cost per acre foot. Only count the water flow that you are going to get when you actually have to use it for the emergency. And that is going to draw the price way up,
I expect.
Rosenbaum: I guess I would take an opposite view on that because you build the reservoir for reliability purposes essentially and it adds a certain cost to the basic water product. I mean that is the way I would look at it. Because we are doing this, our water is going to cost thirty cents a
unit more -- that is a more reasonable approach. And with respect to the Santa Clara Valley
Water District, this is too complex to answer now, but we are going to be getting back together again. The computation of the water cost for the water district to a layman did not make any sense. We would spend $1.4 million dollars a year you said to get 2000 acre feet so that is clearly $700 per acre foot but the methodology you used is to take that 1.4 million and compute
the present value of that over twenty years so instead of it being twenty times 1.4 million that
was only sixteen million and then divide sixteen million by the amount of water we would get. I assume you did that to be consistent with the others. But people might look at that and compare that to the $1,000 that we were talking about for Hetch-Hetchy when $700 would be about a more proper comparison. I see this is a draft report that you have so you might try to clarify that.
Carlson: Now just a minute. A one-time cost of five million dollars is more costly than something that costs you a million dollars a year for five years. So I am not sure your present value is the right comparison. We’re comparing it to big capital projects. They have made the proper comparison, because the rest of this stuff is a one-time, big up-front cost.
Miller: Santa Clara Valley one is a bit of a difficult animal to get your hands around because the large up-front cost is paid for by Santa Clara Valley District and then incorporated into a rate where you have to buy a certain amount of water to pay back that amount.
Rosenbaum: And that rate is $700 an acre foot. So, I don’t doubt that you had a sound reason
for doing it that way. But to the layperson it is a little hard to understand. Carlson: The other comparison could be just how much would you add to residential rates? That might be another way of giving people a feel for the projects.
Miller: Right, more of a melded rate of what we just… that is useful measure to add. Kraska: There are a number of ways of looking at it. The other interesting thing I would like to add about Santa Clara is that whether we contract for 2000 acre feet per year or 5000 acre feet
per year, that contract costs may not differ very much because they are talking about n in the
range between 14 to 16 million dollars to build the pump station and pipeline to get the water from the Mt. View-Los Altos area out to Palo Alto here. The cost of constructing that pipeline and pump station won’t differ much, depending on the flow rate, but the cost per acre foot could differ quite a bit.
Carlson: Do they add that much water? They have surplus capacity projected. Kraska: For the water district?
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Kraska: Believe so. The current treatment capacity is allocated, it is sold out, but they have basically this water would be coming from the Rinconada Water treatment plant and which does have additional space for additional construction. They have room for more process units to build more water. That I know. On the raw water side, as far as their ability, there are water
contracts, I am not too sure about that.
Carlson: But are they are willing to sell it to us? Miller: My understanding is that they are obligated to provide it to us because we are in the
County.
Kraska: They would rather the City would take that water than to pump ground water. That is one of their main points of interest. They don’t want the City to operate the wells on a continuous basis. They would rather have the surface water supply.
Bechtel: Could you say something about the pipeline and the pump. I mean, what is the distance we are talking about? Are we talking about one mile, two miles. Kraska: It is four and a half miles, if I am not mistaken, straight down foothill expressway from
Miramonte Road in Los Altos, Foothill Expressway to Arastradero but it gets into, how do we
implement this in the City? Where would the Santa Clara water go and there are some interesting issues there? Do we take it generally into the City or to one particular zone but generally up to Arastradero Road.
Miller: Let’s stay on the issue here. Cost. The best description we have so far of the Santa
Clara Valley District connection is included in the 2000 study. It is a section in there. If you do not have a copy of that I can get a copy to you. Other issues that were examined in the 2001 study; one was operational maintenance issues.
Some of the options, the treatment system for the reservoir have significant operational
maintenance issues and costs associated with them. The other issue is the ability to implement significant question of whether we would face severe or extreme opposition in citing the large reservoir. Based on the staff recommendations, which are the 2000 and 2001 studies both clearly reinforce the recommendations that were made in the 1999 study. The recommendations are
already included in the 5-year CIP and we feel should be implemented; rehabilitating the five
wells, constructing the three new wells, constructing the reservoir at El Camio Park and in constructing the wells, retaining the option to install treatment equipment at the well sites. Don’t do anything that precludes the option of adding treatment – treatment requires space.
Dawes: Dissolved solids and stuff.
Miller: It is included in the costs that we have done but it is not included in the present CIP. Present CIP is to rehabilitate them for emergency use. The decision to add treatment is somewhat dependent on whether or not we want to connect to the Santa Clara Valley line. It
impacts that choice. And that is something we can look at.
Dawes: You will come forward with the recommendation on that in due course of time? In other words whether we put that equipment in with the CIP that is in the current budget versus just making a place for it.
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Miller: It appears that that is a decision that we can put off until the future with little impact. The next slide is related to the El Camino Park and I know there are a lot of questions about that. Recommended in the 1999 study that facilities critical to the area include fire protection.
Subsequent to the 1999 study or the 2000 study there was a recommendation from Mr.
Rosenbaum and Mr. Dawes that we talk with Stanford about direct connect between Palo Alto systems and Stanford System that could possible eliminate or reduce the need for the underground reservoir. The staff has had discussions based on those. It does not appear that this is a reasonable option right now so there is no change in the l999 study recommendations at this
point. We suggest proceeding with the development of the reservoir and staff would meet with
Stanford to do three things. One is to discuss the benefits of the underground reservoir. Second, to determine the steps to move forward. Third, then move forward. Dawes: Did we offer to pay them for the connection? In other words instead of spending several
million dollars on the El Camino Park, split the difference and give them a million dollars for
permitting this connection to be made? Miller: I was not part of those conversations. I will leave them to John or Scott.
Ulrich: No offer of money or some kind of an idea like that was made but I have one meeting to
discuss, not only this, but a number of other things. Stanford, nor do we, look at our relationship as one issue. We always, when we meet, discuss other things because there are tradeoffs and benefits and all that. Without going into a number of other things, they did not seem interested, in a sense, sharing the capacity of their reservoir in a way, because it is paid for, they did not
share with me, because it has been designed for a long-term plan and that connection was
something that was in their thoughts. Now, that is about as long as the discussion was held on it, not going into “we offer this” or “we do something else”, because I listened to a number of other things that they had in mind.
Rosenbaum: Yes, I did ask the question of how high up these discussion had gone because I had
a discussion with Stanford’s Director of Community Relations and he had never heard of this issue and so I assumed it had not gone very far. Now, we have had in the past, the Stanford liaison committee involving several Council members and the senior staff people. Does that still exist, Bern?
Beecham: It does. I don’t know how active they are. Rosenbaum: I would think that this is something that really ought to be pushed and it is going to require some higher level participation. Now it may be that there are sound reasons to not talk.
Ripping up El Camino Park, that is not going to be in Stanford’s interest. As we know it is
Stanford land and we have a lease to lease us a finite term. We assume it will remain open space indefinitely but if you take a very long range view, putting a reservoir under part of the land, sharply limits what we can do with that land, move as a reservoir and there just has to be some quid-pro-quo to them. You have got to offer them something.
Ulrich: I am not sure that isn’t true. I am just reporting to you what we have done so far. If we were firm and we had evaluated all the alternatives and this was the best and we put a price on it and all that, then that would be the time to go. We need to be satisfied that we have looked at a number of alternatives because that may not be the very best, particularly after you have gone
though some additional negotiations. It is appropriate to have these alternatives that are pointed
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out here because they may be in also the best interest of, like the reservoir, the best interest of Stanford because of fire protection needs and water supply because they do all Stanford shopping center and adjacent housing and all of those would be benefited in having the reservoir down in El Camino Park because they are obviously that close to it. So, it is important to understand
which of these alternatives to pursue.
Bechtel: It seems to me that since we are going to presumably some sort of discussion with him over citing the reservoir there anyway, the meetings are going to occur anyway.
Ulrich: Well, yes they are and we are evaluating the lease and interpreting it as to what we
believe we can and can’t do. But, I also believe that once we know those things, we are far better in a situation for a long term relationship to sit down and discuss those alternatives, particularly looking at it from the point of view of what’s in it for Stanford from each of those options rather than just say, “this is what we want”. I would never suggest doing that and I know
you are not either, but it is important to in with something that benefits all the parties. That is
what we plan to do. Rosenbaum: You know as a former politician, we used to go in and say, “this is what we want” and then somehow it will either work out or it won’t. But, this is a 5.6 million dollar project. I
would really walk around the block a number of times before abandoning the idea of getting
Stanford, coming up with some satisfactory arrangement for Stanford to take a serious look at this. Digging up the park is almost certainly going to require a public vote because of the Park Dedication Ordinance. It may require an EIR. When you do an EIR, you have to look at alternatives. The obvious alternative will be for Stanford to supply this area. People are going to
wonder just how seriously we have looked at that alternative. I would think you would want to
have a letter from a very high official at Stanford saying that this absolutely cannot be done before we go forward. Ulrich: Well, we have to be clear about what it is that we want and have good information
because I sure do not want to say something or get them to form an opinion and write us a letter
and then that makes it far more difficult to change it. Rosenbaum: Well, no I am saying….
Ulrich: I believe as you do that the best way is to sit down and try to work out something that is
in the best interest of everybody as opposed to saying, “well, we read this contract and we think we can do this and that is what we are going to go do”. Rosenbaum: I will rely on you for the proper amount of diplomacy. Stanford is very difficult to
negotiate with, time consuming. You know, as I read this it said that it did not appear we could
work out in the near term. It may just take the medium term to work out something. Kraska: Could I just offer a couple of things about how we got to this point? Basically in the 1999 study, in evaluating the system, we found a pretty significant deficiency in meeting, not
only the normal demands of supply but also the fire demands which would be the peak demands.
And, so we looked at each pressure area, how we were going to support those demands. Area 3 is out there by itself and without any elevated room for building storage that became a hard problem to solve. Constructing a reservoir in El Camino Park, right near the Lytton turnoff, where they receive their water normally just rose to the top in terms of the best engineering
solution, fixing the problem. As well, we were able to bolster the supply for additional water to
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area 1, but the largest component really is for Area three. So the Stanford area, area three benefits tremendously from that particular project. Also, the improvements that we came up with in the 1999 study make the best use of the City’s current, existing infrastructure and only add capacity in order to meet that level of supply, the eight hour component and the fire demands
during that period. And that is the way most systems are master-planned. My one concern, but
this certainly could be investigated with Stanford, is whether there is excess capacity essentially in their system to take in fire suppression abilities for Area three and that is something that would have to be investigated with Stanford.
Commissioner: And where is Area three?
Kraska: Area three is Stanford Shopping Center, Stanford Medical Center, it is the area of Sand Hill Road, the other side of El Camino.
Ulrich: It is a large area and they also have some interest in some long-term plan for El Camino
Park. It is not something, our preliminary discussions is that it would necessarily stay as a park for a long period of time because the lease does not go very much longer in time. Bechtel: It is only dedicated park land while it is under lease?
Ulrich: Well, we have to take all this into account. Dick has some points here. We have got to look at, but the study as it keeps coming back to El Camino Park is a very preferable location for this reservoir. We need to pursue that to see what are the risks and rewards of trying to get that put together.
Bechtel: How do we proceed then with Stanford? It seems as if we have the Study, what does it take to keep this on the table so that the discussions proceed with Stanford. Does it require some endorsement by the UAC and then the Council for the overall plan?
Ulrich: You can do that. We have enough direction to proceed to try to do that unless you don’t
believe that one part of this plan should be pursued, we need to go after it. Dawes: Mr. Chairman, do you think a motion would be in order to recommend to the City Council that the Stanford Liaison Committee take an active interest in this because, given the
size of the project, the destruction to the City, our recommendation would be for them to become
involved? Bechtel: A motion to that effect certainly is in order. My question might be, should we finish this report first? There is one last slide you have Kirk, and then wrap up our reviews on this
report.
Miller: The last slide is next steps. The first one is El Camino Park and we’ll wait to see what you suggest on that. The second is seismic analysis of the distribution system. A companion part to the to the 2001 Carollo Study is looking at the impact of outages in the local distribution
system. The 1999 and 2000 studies both assumed that the Palo Alto Distribution System was in
tact. What we’ll be looking at, and what has already been started and will be completed in draft in August is : what are the local impacts of certain key facilities being out? We will be looking at that and that may provide some additional input to staff. The last one is treated water lines. We would like to develop a work plan for investigating this. There are a lot of aspects to it. We
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don’t yet have our hands around it but we would like to develop a work plan and bring it back to you in a couple of months, get your feedback on this. That concludes my presentation. Dawes: Those $2 million dollars Cap Ex in our CIP for land acquisition $400,000 was for this
year. Is this addressed?
Miller: I am not sure what you are referring to. I’ll ask Scott. Dawes: The Water Utility and part of the fifty million dollar expenditure of the ’99 report there
was a two million dollar land acquisition and we accelerated $400,000 in this year but I don’t see
any land acquisition required in here except for the new wells. Bradshaw: That is exactly what it is for.
Dawes: They are in the City parks, are they?
Bradshaw: I am not sure where they are all at. They may or may not be in the City Parks. Dawes: Have we gone ahead with that site acquisition yet?
Bradshaw: I do not know for sure. I believe that we are waiting for some further action on this before we much further on that. Bechtel: Other questions?
Rosenbaum: A general question. I remember Paul Johnston used to have some interest in this and I have forgotten all his issues. I was not on the UAC at that time. There are a number of us who are new. There is not anything in the staff report.
Miller: We have responded to Paul’s concerns. I don’t remember all of them but the 2000 study,
part of what we did in that was try to respond to the questions that were brought up as a result of the 1999 study and I believe that those were incorporated in part, or in whole, in that analysis. Ferguson: One of his questions was, he thought that there was another reservoir site uphill
which provided some of the benefits of gravity feed. Whether or not there was one, he thought a
much more public discussion of this was needed. These are the five reservoir sites we thought hard about, Mr. and Mrs. Public, and these are the two that survived the cut, and we are investing in one of the two.
Dawes: And in the 2000 study, the most appropriate one was on the knoll of the old Syntex
property which is now Roche, I guess, there was the possibility, that has been dismissed. Ulrich: These are points we could go back and look at that again. I also had a recollection that one of his interests was in filling these reservoirs in a way that connected in either current
turnouts or a place where they could easily fill without pumping so he had a different idea, , on
how the design would take place. Do you recall that. Kraska: Yes, I apologize, I was not attending to what was taking place up here. But as far as an alternate to building this below ground reservoir with pumping, I know there was a big interest in
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getting something simpler basically, and there is a potential for citing a reservoir on Coyote Hill. Is everyone familiar with that? Dawes: That is behind the Roche area.
Kraska: Yes, a reservoir could be located on there. It could be buried for esthetic reasons if needed. One of the challenges associated with that site is there would be a fairly long inlet/outlet pipe line which adds considerably to the cost of the project. Also, a reservoir in that area would do little for Area three. Area three remains still a problem that we would have to solve some
other way which would be through Stanford so if Stanford were to be able to supply Area three,
the fire suppression water then perhaps building a reservoir someplace else, like on Coyote Hill, would be a better option. There are a couple of other options but for gravity storage, Coyote Hill is about it.
Ulrich: It would probably be better if we went back and looked at his questions and we would
probably be in a better position to answer them more. Bechtel: As I recall, none of these issues had to do with “use it or lose it”. It had to do with the groundwater. I don’t know who brought that up.
Ferguson: We were going to hear from Ariel at some point. Ulrich: Yes, there was some level of issue about it, you’re right, if you don’t pump it you don’t have rights to that water and it had a period of time. We have either passed it or are awful close
to it. It’s if you don’t pump it in a five year or ten year period of time, it is questionable about
whether you have the right to do that. And, we of course, have not pumped in a long time. Rosenbaum: A very general question, has the UAC ever made a recommendation to the City Council on this project?
Ulrich: In the form of budget requests. Ferguson: We did. But I am sure we have a proviso in there that says something to the affect that we expected this $400,000 allocation for land acquisition to go to some kind of explication
of the alternatives that have been considered, and to provide one more forum for the public to
comment on. This is a big real estate issue. Not that it is terribly complex but it deserves to surface. Ulrich: If you recall a criticism, which happens very infrequently, and that is that we went off
and did this report and it took some time and there were no interim reports along the way. It was
done, delivered, got a draft, and then all sorts of questions surfaced about it. Our commitment was after that to come back more frequently as we are doing now, so that there is a chance to make changes and take into account things that we have learned. Maybe what we are not doing well enough is bringing or resurrecting what we talked about before, so that we are not sitting
here trying to guess what it is that we have forgotten.
Ferguson: However we got to this pass, the short answer to the missing piece in the cluster of Paul Johnston questions is, somebody please lay out for us a fifteen minute meeting, a one hour meeting, what five sites you looked at.
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Ulrich: We have done that and to some degree, we need to go back and pull out those if that is what you think necessary. Carlson: I recall at the last meeting there were at least three or four alternate small sites.
Dawes: Coyote was it though in terms of, Ulrich: We put together this study, we took into account all those things and this was the report and recommendation. It does not mean that you can’t go back and do these but we cut through
all of the previous analyses and discussions and what we thought was the probability of getting
those reservoirs built and as you recall, we talked about it, if only some decisions that could have been made back in the 80’s had been made we would have been a lot further along in reservoir construction because when you go back and look at the past on this, those items did come up and for various reasons decided not to go ahead with the reservoirs or additional capacity. Now we
are at a point, we have evaluated all those past actions and have come up with this report. It does
not mean we can’t go back and look at some of them but I just want to say that we have done a lot of that. Dick has not been on the UAC and some of this may need to be returned to and look at it again.
Rosenbaum: We have talked about devoting meetings to a single topic and I have a bunch of
questions but it is getting too late. I would like to defer those and assume that we will have an opportunity to take a closer look at this. Dawes: My question is still to reiterate whether a motion was called for at this time about
recommending that the Council reconvene its Stanford Liaison Committee to specifically address
the El Camino reservoir issue with Stanford and whether or not there was a way to a win-win situation for both town and gown by doing some other process, namely an inter-connect system. Bechtel: Well, we are running late. It seems to me as I look at the next steps here, I see a couple
of items in the last slide which said draft report for Seismic Analysis August 2001. Was the
intent there to make a presentation to us in 2001 or just submit or just submit it to the staff in August? Ulrich: In the report it says staff will bring the results of investigation in early 2002 for review
and comment.
Bechtel: I was looking at the Seismic Analysis and Distribution System and the date of August 2001, and the last bullet says UAC comments in September 2001 so it seems to me that it is the intent of you, the staff, to talk to us some more about this.
Miller: Yes, both of those issues we believe, have policy impacts or issues that we would like to bring to you and then we will get the draft report in August and then try to schedule it soon after that for the Seismic and for the work plan. It is reasonable that in September or October that we could have a reasonable thought out work plan to bring to you to show you an approach to
analyzing this question.
Bechtel: Let’s take that issue. Fellow Commissioners, Kirk is talking about either September or October a work plan and presumably the work plan will be specific recommendations about actually what actions to take. Are you comfortable waiting to that point Mr. Rosenbaum to deal
with it or should we have something in between this time to give more input to the work plan?
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Rosenbaum: Well, I assume that the work plan that is presented to us will not be in concrete. There may be other questions. That time frame is fine with me. We might pursue Dexter’s proposal tonight.
Bechtel: It seems to me that we can take some specific action tonight. Dawes: Since the next step is dealing with the development with the El Camino site and this appears to be a concern to this group, it would be useful to get this recommendation out at the
earliest possible moment. So, I will submit a motion that the UAC recommend to the City
Council that the Stanford Liaison Committee be convened to specifically address the issue of the reservoir underneath El Camino Park and an interconnection between the Stanford and the Palo Alto water system which would accomplish the same technical objectives.
Bechtel: Do I hear a second?
Rosenbaum: Seconded. Bechtel: Discussion. All in favor – aye. Passes.
Ulrich: I guess I would just like to ask a process question. How do you propose doing this? Do you want us to prepare a document to send to the City Council, put it on the agenda, or do you want us to approach the Council informally and discuss that. I am not quite sure of the protocol for this.
Beecham: One way to do it would be to modify your motion to advise the Utility Director to coordinate through the Mayor with the Advisory Committee to use them as appropriate in the process.
Rosenbaum: Would the Advisory Commission be the liaison?
Beecham: The Council Liaison Committee to Stanford. Dawes: I will accept that modification.
Bechtel: So, I will add to the motion a preface that the Utility Director meet with the Mayor to convene the Committee. Beecham: And so the motion turns out to be a recommendation to the Director as opposed to a
recommendation to the Council?
Bechtel: Yes, that is correct. John will you step forward to accept the burden of this? Ulrich: Absolutely!
Bechtel: Other specific items or otherwise is what I hear is that on this particular item, we are going to hear it again in about two months. Ulrich: Are you comfortable with it being ready in September?
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Bechtel: Yes. That concludes Item 8. I guess we still have the Quarterly Water Issues Update, Item six and the BAWUA Item seven. We also have the NCPA and the TANC report yet. Beecham: Mr. Chairman, I am going to depart early for a commitment elsewhere, anticipating a
shorter meeting tonight.
Ulrich: Number four. Bechtel: Why don’t we just deal with the NCPA report at this time.
NCPA
Beecham: Two things to mention, both financial, on the NCPA report. When Dick was still there, they began a process of going to a variable rate, a rate swap. They took about 107 million dollars and converted it to a variable rate versus the fixed 5.05 percent. That proved very
lucrative and we have now unwound that and taken an early payment from those who were
partners with us. One thing we had also done after your departure was to allow them to pay us one million dollars insurance so they could terminate in two years if the so desired. With these rates, we anticipate they would terminate in two years. In any case, we have allowed them to buy us out or swap it back for another one or two million dollars. So, when this is finished, we
are back at the 5.05 percent interest on it and we are richer by about 4.5 million dollars for the
effort. So that turned out well and I to certainly thank Dick for his involvement early on for getting this going. Rosenbaum: The $4.5 million did not all come to Palo Alto did it?
Beecham: Not all for Palo Alto. Beecham: The second thing is that I am also Chair of the Finance Committee at NCPA and had an opportunity, as Dick has in the past, to go to New York and talk with the bond rating
agencies since we have a significant number of bonds. We talked with Standard & Poor, Fitch,
Moody’s. Given today’s environment, that went quite well. Muni’s are doing well. Fitch already had a fairly high rating for us. We expect that to stay. Standard & Poor had a moderately good rating. We hope we can get that to come up and Moody’s has been, we thought, inadequately low. They quite recognize the situation as now what it was previously and
so we hope NCPA’s bond rating for them might up by two points perhaps. Palo Alto’s rating
does not much affect NCPA’s rating. They way they look at it is, they look how far down the line to the next worse member, if they default would that put NCPA finances at risk. There is a step up procedure so that if the very worse member fails, it bumps up to the next member, the next member to about a 25% bond. They also look at the assets we have and one good aspect
this last year, we are not a member, but for Geothermal, NCPA is doing water injection and
greatly extending the economic life of their Geothermal sight. And that was one of the issues, for the Fitch in the past, and it has turned around too. Ulrich: I would just like to add on NCPA, Dick Carlson participated in a Congressional staff
tour and spent three days with the group looking at the NCPA facilities and spending time with
each of these members which represent some very significant congressional elected officials. Being able to go over the benefits of Municipal ownership and specifically what NCPA is doing.
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I want to thank Dick for going and doing that. It may sound like it is an easy trip but doing that 24 hours a day with those folks is a lot of time. Carlson: That was a very impressive group. The only saving grace was that they were still on
East Coast time, so they dropped before we did.
Bechtel: Is there a TANC report?
TANC
Balachandran: Thank you. Really not much to report. One issue which came up was Western
had put out a request for interest on Path 15. So we put in a response on nonbinding heavily caveated response to Western, and so did several other members. TANC is going to consolidate this request and send a response to Western. The number of megawatts that came in were not as much as we expected so that letter should be going out now. TANC has just been active in
protecting our interest in many cases.
Dawes: Is it because the volume of electricity flowing from the Pacific Northwest to California is substantially reduced from what it had been, has this created a reduction in income for TANC or reduction in usage at all?
Balachandran: You mean on the COTP line? Yes the basis differential has collapsed from where it was last, just a few months ago. Palo Alto own about 40 megawatts of this line, so we are getting much less revenue than we were just a few months ago.
Bechtel: Any other questions. Thank you Girish.
Quarterly Water Issues & BAWUA
Bechtel: We still have two more items to go, the Quarterly Water Issues and the BAWUA
report. We could spend some time to do it, or maybe we should do that.
Ratchye: There is no presentation. Just the report. Are there any questions? Ferguson: What is the plan for one-on-one or group lobbying the PUC before the 31st?
Ratchye: It is actually going to be the 24th. We are hoping that the PUC will take action on the 24th. I spoke with our Mayor today and she has already indicated to you John that she will be attending that meeting and Bern may also. I don’t know if any Commissioners would like to go to that meeting too.
Carlson: This is the San Francisco PUC. Ratchye: The long term CIP and their strategic plan.
Bechtel: That is to be the 24th of July?
Ulrich: At 1:30 p.m.
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Ferguson: I would be interested to hear whether anyone thinks it make sense to do one-on-one meetings with commissioners or Supervisors.
Ratchye: We are expecting them to adopt the plans. There is a lot of instability right now at the
PUC. There are some proposals from the Supervisors to dissolve the PUC and replace it with some sort of different structure. So they feel the need to do something noteworthy and to get something done to prove that they in their current structure can get something done. But we do think there is a need for some one-on-one with, we’re proposing the Mayor of SF. I talked today
with our Mayor about and she and Redwood City Mayor, Ira Ruskin is interested in organizing a
group of mayors to have a meeting with the SF mayor to urge them to complete these projects and fund them and get going. We think that is necessary and are proceeding to do that. Bechtel: So that is likely to happen, those one-on-ones before the 24th?
Ratchye: No, I don’t think it will. Bechtel: So the expectation is that there will be some action by the PUC , probably a positive recommendation and then after that is a question of getting everyone else in the City on board:
Ratchye: Right. It is implementing. The stuff they have to do is to get their voters to approve the about two billion dollar bond issue which they are going to be asking their voters in March 2002. That will be the first part of their financial plan.
Bechtel: That is the really big step.
Ratchye: The PUC asked for BAWUA’s unconditional support for this two billion dollar bond issue.
Dawes: What does that mean? Does that mean signing a guarantee at the bottom?
Ratchye: I don’t know if it means political support, I don’t think it was outlined exactly what that meant.
Ferguson: You seem to be more negative now than you were three to six months ago about the
probability that this would come to pass. Is there any reason for this? Ratchye: Well, they were supposed to adopt these plans in November. It has taken them a very long time to get to the point where they are now but the plan is much improved. It has taken
long time to get the plan to something that the Commission thinks it can approve. That’s taken a
lot of staff work, communication. It has been interesting to watch because the Commission has ordered their staff to make changes to the document in line with the recommendations from the BAWUA general Manager. They have often asked the BAWUA general manager what do you think, or what changes would you make, and then they tell the staff to make those changes.
Many of the recommendations BAWUA has made did get incorporated. When we first saw it, it
looked like “yikes, I hope they don’t adopt this.” They have changed it a lot and I am positive and hopeful that they will adopt the plans. But the big step is are they going to get everyone in the City lined up politically, the Supervisors, to get their voters to support this very large bond issue -- and the two billion is not all for the regional water system. They have significant clean-
water, sewer that needs capital funding.
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Carlson: This is such a huge issue for us. Is there any thought of BAWUA contributing to the Political campaign, working with them or is it better for us to stay out of that place?
Ulrich: I don’t think you want to stay out but you cannot get in a position of the City funding
political money. Some of the strongest things we could do is to work with elected officials of other BAWUA members and have a coalition more and work with them in getting this done. It would be very difficult for us to come up with funds of money and use that.
Carlson: Dollars to doughnuts that would be one of the Mayor’s first questions. Am I right?
Rosenbaum: He would ask that question – what the legalities are. Bechtel: Other questions? Anything else you need to add.
Ratchye: The BAWUA report is at your places. It said that at yesterday’s PUC meeting the BAWUA presented twenty-nine resolutions from the twenty-nine BAWUA agencies so the interim water allocation is adopted. We beat the July 31st deadline.
Dawes: What is our position on Redwood City’s request. If we went into this deal with Santa
Clara would we have ability to sell them water, at a nice markup? Ratchye: It is possible.
Ulrich: Would that be a confidential agreement?
Ratchye: It is just way too early to say that we are interested in this now. At this point we are not interested in letting go any of our allocation.
Bechtel: Any questions?
Carlson: What if Redwood City were willing to finance part of the line from Redwood to Mountain View, Los Altos: We are already connected with them.
Ulrich: You can always charge them and then use the one.
Ratchye: But the transfers they are talking about are contemplated in the interim shortage plan. And the word interim ends in 2009 -- and that is only in water shortages.
Bechtel: Is there some reason that Redwood City feels more threatened by the water shortage?
Ratchye: Yes. They are near the limit or maybe even beyond their allocation plan, so they still get hit harder and they are uncomfortable being near the allocation insurance right now. It was a little hard for them to agree to this. They were told they would have to contact other agencies.
Bechtel: We are complete now, except for the next meeting scheduled on the 8th. Dexter is out of the country. I have a problem with either the 1st or the 8th. Let’s go back to our original time which is the first Wednesday in the month, August 1st.
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Adjournment
Bechtel: We are adjourned.