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HomeMy WebLinkAbout2003-01-15 Utilities Advisory Commission Summary MinutesAPPROVED 2/12/03 Page 1 of 22 Utilities Advisory Commission January 15, 2003 Approval of Previous Meeting Minutes __________________________________________ 2 Director of Utilities Report____________________________________________________ 2 Water Implementation _______________________________________________________ 6 Utilities Legislative Priorities_________________________________________________ 20 Adjournment______________________________________________________________ 22 City of Palo Alto APPROVED 2/12/03 Page 2 of 22 Approval of Previous Meeting Minutes Carlson: I don’t see any cards, so Approval of Minutes [November Fiber-to-the-Home Study Session and Regular December 2002 UAC Meeting]. Anybody have changes for these wonderfully done minutes? Move to accept? Rosenbaum, Second, Dawes. All in favor. Minutes approved. Agenda Review -- any revisions? I have one tiny change I want to do. Does anybody else have anything? In action on the Water Legislation, I want to call separately the issues of joining and representation. Those are separable and we should talk about them separately. Anybody have any trouble with that? Okay. Any meetings and events in this wonderful holiday period that we just survived? John, Director of Utilities Report? Director of Utilities Report Ulrich: Thank you. Good to see all of you, and Happy New Year. We are off to an excellent start in the Utility business. The storms that occurred in Palo Alto have not been as devastating, as you can tell by reading in the newspaper reports, as Pacific Gas and Electric. I think it is an important difference. They have such an extremely large service territory. It is very difficult for them to provide high quality service in storm conditions. That again --the benefits of being here in Palo Alto. Crews are focused on working here and getting the job done. We are putting together a brief report that will go in Frank’s Memo to outline the kind of service reliability differences and response times that we have had in Palo Alto versus Pacific Gas and Electric. My report is broken down into a number of areas and I will move through them. First one is called the Redesign of our Green Rate Program previously known as Future Green. Key features of the proposed Redesign will be aimed at improving customer participation rates in lowering costs and will include the renaming as I mentioned a single choice for each customer class will reduce the number of Green Rate Schedules from 12 to 5. And those of you who have looked through those we gave look like ultimate choices, “ultimate” meaning large numbers and we are changing that. Charges will be based on actual total consumption for Residential and Commercial Customers. Industrial and Institutional Customers may purchase over calling thousand-kilowatt-hour blocks. Product that qualifies is a 100 percent new eligible renewable content as defined by the CEC. It is proposed to be basically a one-and-a-half cents premium for one hundred percent new renewables. It will be a standalone program -- separate from renewable energy purchases to meet the renewable portfolio standards adopted in the LEAP Program Guidelines. Obviously it will be voluntary participation where you may join or withdraw anytime, and that’s unchanged. Staff plans to provide more details to the UAC in the Electric Quarterly Report which will be at the February 12th meeting and to review with the Finance Committee as well, on February 19th. The goal is to roll up the new program on Earth Day, April 22, 2003. I want to give you a kind of preview of it, and give you some opportunity to think about the participation level -- a program that will truly get people moved towards acceptance of the higher costs of renewables. APPROVED 2/12/03 Page 3 of 22 The next area is a jump. But it is one that we have been talking about for some time, and that’s FERC’s Standard Market Design better known as SMD. Then a kind of parallel path with California’s ISO called MD02. I don’t think they are going to change it to MD03. The NCPA pool -- which we are a member of -- filed a strong opposition to the Standard Market Design proposed by FERC. Its January 10th filing distinguishes the Western grid design from that in the Eastern US and raises serious questions regarding suitability of FERC’s SMD proposal in the Western United States. Did you know that they are trying to have a design that covers each and every entity? Concerns of implementing provisions of SMD when there is considerable market power by generators were also raised. NCPA and also Zack David on the legislative front in DC tried to ensure proper implementation of SMD. There is considerable opposition from most parties in the West. I participated with several other NCPA members back in Washington DC early last month when we met with several FERC Commissioners and members of their staff to talk very pointedly about this, and the impact it would have on the Municipal Utilities. Basically FERC’s raising costs without what we could see as significant benefits. The ISO has also filed a postponement of implementing MD03 -- the California version as I mentioned of the SMD -- until 2004, citing software development troubles. That is a very scary proposition. We spent and the State of California has spent a considerable amount of money on software development for the ISO for managing the loads in the entire energy crisis that we all went through. A good example of why the prices of ISO continued to go up. Thankfully we are not a part of this at this time. During the NCPA Strategic Planning meeting next week this topic will be discussed further. I want to just point out that we are on top of this and working quietly and diligently with NCPA. Operations under the MSS framework with ISO. All things considered, the transition from the interconnection agreement to operating under MSS framework has been satisfactory. I think we all had some concerns about that. NCPA has added staff to adequately manage this operation. With Santa Clara having joined NCPA’s MSS (sorry about the jargon “Mastermetered Sub System”) Operations costs have been spread to Santa Clara while reducing the increased cost impact on Palo Alto. By safeguarding the 2948A Dispatch Flexibility, the City and NCPA have adequate resources to follow load and avoid ISO penalties. However, most of such dispatched flexibilities is expected to disappear in 2005, and NCPA is exploring generation options to follow the load. Big change when we move from the meter connection agreement with PG&E. Couple of other areas that are important in exploration of generation options in Post-2004. We will be bringing our LEAP proposal to you soon. In our studies, market prices have been creeping back up since hitting a low of around 3 cents in January of 2002. Hard to believe. Year 2005 through 2010 prices now range in the 4-½ to 5 cent range. That’s what the forward market is pricing it now. Despite discussions with various merchant generators and incentives initiatives within NCPA, Palo Alto has yet to find any promising generation resource to pursue to meet the LEAP Guidelines. NCPA’s discussion with Calpine to acquire the Los Esteros Project has not been fruitful. We have also discussed with them directly ideas for using that Plant and it did not come to a sound decision. An initiative by the NCPA staff to build an additional unit at the facilities that we own out in Lodi for Palo Alto and other members of NCPA also did not generate sufficient interest within the pool. APPROVED 2/12/03 Page 4 of 22 NCPA is pursuing preliminary interest in applying for license to be the operator of a interesting hydro facility called POE. This is one where PG&E by one day failed to turn in their renewal application for the hydro plant whose license expired after 50 years. Several entities including NCPA are filing on that to see if we can prepare and have that hydro plant come to us. That is something I would like to count on, but it is an area we are pursuing. As you know we have had discussions in our LEAP Guidelines and discussions about from where some of our resources would come from. One of the proposals that we have been looking at is local generation. We have looked at sites within Palo Alto near the airport and the waste treatment plant San Antonio Road and also locations over in East Palo Alto. The cost for building and all of the restrictions related to that may result in costs that are significantly higher for that kind of local generation. We will be able to obtain using our Stanisclaus commitments and our premier transmission capacity to get to Palo Alto. So we are actively trying continue to try to pursue that. Also this avoidance of prior transmission and congestion cost -- that’s pre-2004 -- with favorable FERC rulings that PG&E cannot pass on congestion RMR (reliability must-run) related cost under contract 2948A. Palo Alto expects about a 2.1 million dollar refund for past charges from PG&E, and that will be passed on through Western and NCPA. It also lowers our cost projections until December 2004 by approximately 2 million dollars a year. In addition Western Transmission wheeling rate -- again this is under 2948A -- is expected to continue to remain about 2 ½ dollars per megawatt hour. Despite the corresponding transmission rate to use the PG&E ISO grid. It’s higher at 5-5 ½ dollars megawatt an hr. This once again lowers Palo Alto’s previous budget estimate by close to 3 million dollars a year. So there is good news there in the short run. The other really good news is we can say is hydro conditions so far this year have been about 150 percent of normal. If the rest of the season is normal, Calaveras production is expected to be about 125 percent of normal. Due to hydro conditions Western may make energy surplus available to existing long term contracts and make them available to us and other Western members. There could be some considerable good news there too. Another front in the City’s annual budgeting process, to give you a kind of head start on that. We are in the process of developing the budget as mentioned above. The electric supply cost this year and until the end of 2004 is expected to be relatively stable. There are some large cost uncertainties -- that is why we have our reserves. Natural gas prices have also gone up over the last couple of months reflecting what some people believe is a war premium. Prices for approximately 70 percent of our supplies are locked in at rates of around $4.00 in mmbtu range for FY 03-04. We may be well-positioned to provide a future rate decrease in the coming year, and there will be more discussion about that. Utilities -- all of us -- are actively participating in the City-wide effort to reduce cost including re-evaluating staff levels, consulting costs, and overhead costs where they are controllable. There is very serious issue with the general fund. We will have a presentation next month from ASD on the budget issues. But suffice at this point to say, there is probably about a 9 million dollar shortfall. It looks to be a permanent ongoing shortfall that will affect the City’s general fund. So there is active work now to look for ways to get budgets to meet anticipated revenues. APPROVED 2/12/03 Page 5 of 22 Very briefly, an area that I am actively involved right now is the PG&E bankruptcy. A brief update on that. The trial of PG&E’s plan of reorganization has started. Palo Alto and NCPA staff -- for Palo Alto, primarily myself and Tom Kabat -- are participating along with several members of NCPA staff to protect the viability of our Stanislaus commitments that provide cost- based access to transmission for wheeling our Western and our NCPA members resources to our loads. This is extremely important to us, and apparently extremely important to PG&E. PG&E unfortunately continues to downplay the value of the Stanislaus commitments that we estimate by NCPA to exceed a billion dollars, present value. This is important. We believe that we have some of the Stanislaus commitments and we will be working on that. This probably sounds like a rather long report -- more than you normally hear from me. But it is important that you understand and see the depth and breadth of things that we have been working on. Of course later on you will see the interesting dynamics, and the significant progress that has been made in water as we move into that area, Mr. Chairman. Carlson: Thank you. Any questions for John? Go ahead, Dexter. Dawes: Unfortunately I will not be here in February to listen more about the Green Power situation. The concerns I have are the cost increase -- is that the expected retail cost to our customers? Ulrich: I think that’s the retail? Is that right Tom? That’s approximately what customers would see. I am sorry, is that right Girish? Balachandran: Yes. Dawes: And we are just simply passing that cost through? Or do we have a small overhead allocation in there as well? Balachandran: That is why we have used the word ‘approximate’ and ‘estimate’ because that will be refined in the rate proposal that will be brought to you later. It is going to be in that ballpark. The reason why we bring this to you over here is the timing for the Finance Committee Meeting. This will go to the Finance Committee on February 19th and you will get to see it February 12th. There will not be much time between what you see and basically the same proposal is going to the Finance Committee. You will see a bunch of stuff in the UAC Quarterly Report. We plan to obtain this file. Actually an RFP just went out that we ourselves be the provider that provides us the tag. We estimate the cost to be about this much. Ulrich: We were taking the initiative here to have this all done so that we can roll it out on April 22nd for Earth Day. If you have any concerns about moving too quickly on this where you do not get enough information, let us know. We want to give you that as a kind of an overview of it. It is very important to get the message out and to get moving out on Green rates, because as we move into more renewables for our portfolio on the future, customers need to see that as a viable option -- an opportunity to purchase (at a higher price) renewables. Dawes: One another John. When you were talking about PG&E bankruptcy, you mentioned the word ‘trial’ which I had not heard before in connection with the Stanislaus commitments. Could you elaborate? Is there in fact a trial where PG&E is attempting to avoid those or deny that they APPROVED 2/12/03 Page 6 of 22 exist? Or what have you or NCPA and associated folks are doing on the other side. How is that working? Ulrich: I have to be careful on using words in the legal sense because I am not an attorney. But the Bankruptcy Court Judge has decided to set aside several days to hear testimony from parties about the Stanislaus commitment and that’s what I am defining as a ‘trial’. Dawes: Does that mean our position or NCPA’s position is that it is in effect a permanent ongoing situation, and is not a contractual thing that ends in a particular year? So that if we in effect win on that, this is a win for all time if you will, and one that has as you mentioned that dollar-discounted value. I would guess that goes over quite a long time horizon. Ulrich: Yes. And whether it goes to infinity or I cannot tell you. But it is a long period of time. Dawes: Is the price differential to us similar to 50 percent? When you talked about transmission rates it was 5 bucks versus $2.50 or something. Is that what we are looking at if we lose this? Ulrich: the simplest term would be that we and other members simply have rights through this Stanislaus commitment for moving our load across transmission lines without additional charge. That capacity has been set aside or should be set aside for us to move our energy. Dawes: I understand that. I was just trying to get at the economic. If we lose or NCPA loses it’s like 5 bucks and if we win it is like $2.50. Is it that 50 percent spread that you mentioned? Ulrich: I do not have that number. It is because the calculation is also done for other members. That’s how we got to the billion dollars. Dawes: It’s in that order of magnitude – Thank you. Carlson: Any more questions? I believe we do not have any unfinished business, so let’s go ahead to the first new item – Implementation of the Water Legislation. Water Implementation Ulrich: Thank you. Before I do that, since you have to go through a number of pages to get to that item, it is indicative of the amount of time and effort that’s put into getting together the summary, the minutes and also the Study Session on Fiber to the Home. All of that material is here. A lot of time, effort and work went into putting that together. I want to thank everybody including Mr. Ferguson for his time spent to do the editing. The report this evening -- I would hope you had an opportunity to read it. This evening is a good opportunity to ask questions about how the implementation of this Water Legislation would take place. I am pleased that Art Jensen who is in charge of BAWUA is here this evening. He is one of the people that we would look at as a hero. His staff and others in the City and around the State have gone forward to make this all happen. Now he gets the interesting opportunity to help implement it and to see this all be put together. Art is here this evening to give you his insights, from his studies, looking at this feedback from attorneys and from legislators on how this will APPROVED 2/12/03 Page 7 of 22 take place. We should be able to relate that to what we are going to do here in Palo Alto. So we welcome your questions. Or if you’d like to do it some other way Mr. Chairman, we would be glad to do that. Carlson: Let’s split it two ways and just start with questions and discussions on everything except the Board membership issue. Do we have any questions? Should we join or should we not join? What it means to join or how it is implemented? Go ahead, George. Bechtel: Actually I do have one question. But I want to compliment Jane and the others who put this together because I went back -- since December was a long time ago -- and flipped through the minutes of the last meeting and this one. The answers in the Q&A at the back was very really helpful. It appears that you took our questions and put them in there, too. So it is a good document to go forward to the Council with, and that’s all I have to say. Ulrich: Thank you for that comment and I will tell Jane who is on vacation today. But I too went through in detail, reading it and quizzing her on this. I do think she has covered those areas that you brought up before. It is an excellent document and we appreciate some feedback, because we are going to be moving this to the Finance Committee and then of course the Council for approval. The decisions we are going to made are far reaching. We have a good perspective on what’s here. Bechtel: I do have a question. On one of the tables in the back where is a comparison of the Financing Authority and again the prospective BAWSCA. Where is the Table? Ulrich: What page are you? Ferguson: Page 9. Bechtel: Page 9 -- the Board of Directors. Seems to me the Board of Directors BAWSCA would only come from the members. The way it is written here that the appointees could come from the 26 public entities. Well, that is a total pool, is that not right? And that the Board of Directors would only be appointed by those people who actually elect to join BAWSCA. So there is a distinction between the Board of Directors of the Financing authority and BASWCA-- potentially a difference in membership. Jensen: That’s correct. It can be anyone other than someone from those appointed by the 26 entities, but it would be the ones that elected to join. Beecham: I would suggest that they ought to read together that there are no differences. It’s unlikely the same organization would appoint someone to represent them to vote at the Financing Authority and not the same for the other organization. Ulrich: Did that answer your question? Bechtel: It did answer the question that I had. I do not have any other questions. APPROVED 2/12/03 Page 8 of 22 Carlson: I have got a technical question just brought up. I did not read it that closely initially, but by the Board of Directors it says “Appointees from”. I think it should be “Appointees by”. Am I correct? Ulrich: Where are you? Be specific. Carlson: I see I am correct. Dexter, go ahead. Dawes: I too would like to echo Commissioner Bechtel’s congratulations to the staff -- and Jane specifically as the author here -- for a very lucid presentation of the evolution and the policy issues that these bills give only the agencies. Just having that background is an excellent way to lay it out. As I went through it one of the comments I noted: are there any reasons not to vote to join BAWSCA? Lots of very positive reasons for it. The one that I am a little bit fuzzy about -- and I will just digress a little bit on it -- is “following the money.” It is unclear whether or not the funds are actually the bonds the Financing Authority are passing through BAWSCA. I guess the basic improvement bonds are going to be through the Financing Authority. Any new sources or so forth will be BAWSCA. But it is laid out that if people do not elect to join BAWSCA that they will not in effect be liable for bond repayment. I assume that the repayment will actually flow through some sort of billing arrangement for the water itself. So that if the people are getting the water from resources that were put in place through a bond issue which they are not technically liable for, they in fact would still pay through the water purchase process. But it certainly has its implications for ratings of the various cities that Palo Alto was a very significant player. If many others chose not to be, we would have a much larger penalty, I guess, put on by Moody’s and others for our larger proportional share -- even though others would pay through the ratemaking process. That was one area of concern that I’d like Art or John to address. Jensen: Thank you. First I will respond to those questions. They are good questions. You would pleased to know that you have some options. Nobody gets away free. I would like to start, though, by complimenting you folks for your significant support of the effort we went through. By you I mean both the Staff, Management, Commission and the Council. From the very beginning you were there, your Mayor was there pressing for the adoption of the capital improvement program which is the basic first step for getting anything done, including the legislation and now its implementation. I thank you again for your kind words at the beginning John. Thank you. You thought of myself as a superhero. So I will take that home and I will purchase a cake. With respect to Commissioner Dawes’s questions, there were many comments. I will try to go back and try to reconstruct. One of the comments/questions was that it appears that the Financing Authority would finance the capital projects if they relate to reconstruction of the existing system and the BAWSCA would take on financing of other types of improvements or endeavors. It is not required. Again if you look back at the history of the legislation, we didn’t know which if either bill would survive. It is your election of these future elected boards which controls the mechanism you want to choose to finance the improvements to the San Francisco system. Certainly the Reform Financing Authority has some advantages to it. But as the staff report suggests, trying to make that determination now would be something premature, something for the deliberation for the board and appropriate analysis. APPROVED 2/12/03 Page 9 of 22 With respect to who pays. There is a distinction between who pays, depending upon which mechanism is used. First of all for the Financing Authority: everyone is a member. There is no election. By law if it is to use bonds to finance projects on the regional system then the bills go out and everyone pays. There is no opting out of that. There is of course a decision as to whether you want to fund a project, or programs of projects. But there is no escaping repayment. With the BAWSCA however, non-members, public agencies that elect not to join could not be forced to pay. Although if they were to receive benefits surely the attempt will be made to negotiate a contract with them to pay for their share of the benefits. If they could be excluded from benefits, then the negotiation process would be that much better. If they cannot be excluded from benefits, it would be harder. But those are the basic repayment obligations. Again the important thing is that the Financing Authority is an outstanding mechanism, at your disposal to decide to use. One of the advantages of it is that all beneficiaries pay. I hope I have been responsive to your questions. Dawes: The first one was, are there any reasons not to join? Jensen: I can’t think of one. Dawes: Neither could I. But I wanted to know if anybody else could. Jensen: Honestly, if I could think of one, I would suggest one. Basically, if there is an opportunity to be a part of the decision making process, it would outplace anything else. Carlson: Commissioner Ferguson. Ferguson: Thanks again. I commend Jane on the briefing document here. We have seen some really nice briefing documents in the last year or two. I have commented on that work from the staff before. It is just terrific. It is A-plus. This one has a particularly articulate omission, though, the dog that didn’t bark. In the long recitation of how we got here, there is no mention of the UAC. The only acronym that has capital letters U, A, and C together is “UCLA” -- we give credit to the UCLA researcher for his report but not the UAC. Since you plan to distribute the document -- I mean, Dexter and I were here in 1999, we’ve kicked this around officially as an Agenda item probably 8 or 10 times, and unofficially another 6. We did make a few contributions along the way -- you might splice in a line or two about the UAC. Carlson: Art, I want to add to the kudos. As I recall the legislative history, if a number of members of the legislature had followed through on their promises on what would happen if this passed there would be substantial mortality in the legislature. So congratulations. But what you just said for the first time the _______________ in my mind the difference between the two. BAWSCA has broader authority to directly build and operate projects, but less authority to force sporadic sharing of expenditures. Is that the fundamental difference here? Jensen: First of all, with respect to cost sharing by members those agencies that elect to join. Once the critical mass of public agencies join, then it will be formed. Then the two counties will necessary name representatives for Cal Water and Stanford. Cal Water being a large purchaser of water from San Francisco, you certainly have a significant percentage of the agencies [measured] by water use. It will be a substantial organization once formed. With respect to allocation of cost, the legislation has in it the ratios for apportioning operating costs, if you APPROVED 2/12/03 Page 10 of 22 would, administrative overhead, or in any other programs that the agency elects to undertake -- unless it chooses to make them a menu-driven cafeteria program. With respect to capital financing, again it gets back to the question -- if you are not a member you can obtain the benefits through a contract, so you consider that a weakness. BAWSCA is like a special district. It lives until it would dissolve itself in the manner any other special district might dissolve, which is not an automatic process. The financing authority exists for the one purpose only. It would dissolve after a certain period of time, could issue no more bonds after a certain period of time. It is 20/20. It ceases to exists all together after the bonds are paid off. Carlson: Any more questions? Mr. Bechtel. Bechtel: Art, you triggered some thought about the financing authority. You said the legislation sets down how each pays. Particularly in repaying the bonds with something like this -- and this perhaps is part of the implementation later on -- but I am curious. Is each entity who is a member given a monthly invoice, a quarterly invoice annual payment or what they are to do? Are there guarantees that they will pay on time and so on so? That the flows are equal between all of the entities that are there? Is there an administrative rule to be set up that govern how the cash flows? Jensen: First of all to clarify: it is for BAWSCA the new agency that the overhead and operating costs are provided/allocated by provisions in the law. The capital costs for repayment of bonds - - that formula is not specified and that could be done on a basis selected by the governing body. So the allocation of costs for the capital projects is made is at your future election. With respect to guarantees of people, how the process will be done, is it monthly billing and or quarterly billing. That would be at the election of the body. I suspect that they would bill monthly so they would control the flow and make more interest. With respect to an obligation to pay, it’s the agencies that are billed that have an obligation under state law to pay the bills. In that sense it would be no different than their tendency to pay San Francisco their water bills which is a pretty routine and regular function. I wouldn’t suspect an issue. The legislation does not deal with what if they don’t, and I don’t believe in H2 -- I think that’s handled elsewhere in law. Bechtel: Thank you. Carlson: Mr. Ferguson, ready for a motion? Ferguson: Exactly. I move that the UAC recommend staff recommendation number 2, namely, that the City of Palo Alto form and become a member of the Bay Area Water Supply and Conservation Agency. Dawes: Second. Carlson: Any discussion of this motion. With no discussion, all of in favor say Aye. Ulrich: Excuse me. I may have not heard it well. Did you say form and join both? Ferguson: The staff recommendation about joining anything is only on item 2. Items 1 and 3 relate to board membership. The Finance Authority is automatically formed. APPROVED 2/12/03 Page 11 of 22 Carlson: Any more discussion on the motion. All in favor. Opposition: None. Okay, unanimously carried. Now, we are automatically in one, and we recommend joining the other. I guess we now get down to the representation issue where we had the beginning of discussion at our last meeting. Who wants to start.? Thanks, Commissioner Ferguson. Ferguson: Look, let me just complete my comments from last time. I understand completely, I’m sympathetic, and I am happy to accept the staff recommendations about appointing a Council member. I get it. It just seems to me that that is Grade-C among the 3 options that this Commission can deal with it. We can do better, as a Commission action. Appointing a Council member or an elected official is kind of the NCPA model, what we usually do with a regional organization. It is the same old same old. We’re faced with a March 1 deadline. Might as well pick someone that we are already comfortable with. Lots of political reasons for doing that -- it is a passable option. The Grade-B option is an acknowledgement by the UAC that we are not a political body. The decision to use a political character with political skills and spend political currency is a decision for the elected body. It is a little bit cowardly -- but it is more appropriate -- for this techno- economic Commission to take a pass on that. My Grade-B option is to say, thanks but no thanks, let’s just put this in the hands of the Council. The right thing to do is the Grade-A option. It is for us to have a meaningful conversation -- particularly with Art here tonight -- about what the characteristics of board members of this 4- billion-dollar project operator are going to be. This is a four-billion-dollar construction project. It is a difficult joint venture created by the legislature starting out, and it is overlaid on a continuing operating water-supply agency. It presents fascinating institutional design questions. I know we have a March 1 deadline for the Finance Authority, and it is awfully convenient to have the same character serve both those roles. But this is an interesting design question, and we’ve got some people here on this panel that have some relevant experience, one way or another. My own observation, as a student of technology policy and things, is that political governance is almost always a bad thing for big technology projects. I remember BART in the early 70’s, as a young engineer. We hired some people from Westinghouse who had just left the BART project team. They regaled us with stories about how they wasted two years kludging together demonstration projects for the political board membership -- instead of just finishing BART. It took another two years after BART started running for them to disassemble all the kludges, and build the system that was so supposed to be there. Not because they were bad engineers, or bad politicians. It was the wrong institutional design, looking back on it. The decision that launched the Challenger was a decision driven by short-term political pressures, and commentary by Dan Rather. It was just the wrong kind of pressure brought to bear on a technical project. We could go on and on about that. But since we have done so well in getting the legislation in place, we have played the political game as correctly as any human being can, it just breaks my heart -- now, at the inception -- to miss an opportunity to recommend the correct institutional design to run this wonderful creature. I would like to kick around what those characteristics are, APPROVED 2/12/03 Page 12 of 22 and deliver to the Council that list of characteristics, the UAC’s Top-Ten recommendations. Being a politician may not disqualify you -- although if you read the papers lately, you might think maybe it does. I just think we have some more things to say about that. I understand completely all the arguments for putting the elected officials to work. I get it. But I don’t think that they are the only people that can sell a bond issue. I don’t think they are the only people to conduct a successful negotiation with San Francisco. And, to extract one correct lesson from our recent local dust-ups, it may just be that an elected member of the Palo Alto City Council or the Redwood City Council has a Brown Act limitation -- on the number of council members he or she can lobby on one of these issues -- that a person from the outside doesn’t have. A person from the outside is lobbying up. A person from the outside can talk to all 9 Council members without a serious violation of the Brown Act. This is our little window here to kick this around. Maybe the staff decision is correct, and it is a political, elected-official appointment. Or maybe we can add some additional qualifications to the criteria. Carlson: Thank you, Commissioner Ferguson. I would be very interested in starting out from hearing from Art whether you think it makes much difference. Or John, or both. Ulrich: Actually I would just reach over and recommend to Art that we let all of you discuss and debate this a little bit, as opposed to getting his opinion. What you are talking about is what you prefer to do in Palo Alto -- which may not be something Art would want, to be able to second guess what it is you guys want to do. I will let him speak, but that was my suggestion to him at this point. Carlson: Mr. Dawes Dawes: Actually, I would be very interested to hear from Commissioner Rosenbaum on this issue. He has been a Council elected politician on the NCPA Board, knows the ins- and-outs of being an elected politician on a Regional Board, is a sitting UAC member, and is very knowledgeable about utility situations. Rick’s point is well taken, to debate what are the characteristics of an ideal Board Member here. It’s very appropriate and I think we have maybe one of the world’s experts right here. Rosenbaum: Well, I will be hesitant to say that. While listening to Rick I was reminded of the statement generally attributed to Winston Churchill when he said that our form of government is probably the worst -- except for all the rest. I think the model that NCPA uses with the elected official supported by staff -- that’s really the key -- is as good a model as any. You mentioned BART and the political difficulties. There were decisions to be made there that favored one community or another. It was understandably going to be a political situation. I do not know any other way to handle that except the way it was done. I don’t except those problems with water. So I really don’t see any reason not to go along with the staff recommendation. Carlson: Any more discussion? Commissioner Bechtel. Bechtel: I was prepared to go along with the staff recommendation that our representative be a City Council member. But I think Rick has brought up a good point, and triggered some thoughts about what the process might be. It seems to me that a representative would be really focused on a spending plan to be submitted by the City of San Francisco. Is that correct, Art? That’s basically it -- or would there be a debate over the approach taken by the city, city staff, APPROVED 2/12/03 Page 13 of 22 engineers they hire about a project? Would you or I as a member of this body be able to have some input as to exactly how and who they hired? Or how particular subproject of the overall refurbishment would be done? Jensen: I would say that the breadth and depth of that conversation is open to creation. There is nothing that obligates you to fund a plan that San Francisco puts before you -- without question. As a matter of fact the agreement between either entity and San Francisco -- for the use of the funds that you might indebt yourself to bondholders for -- has got to be something that is satisfactory to you. And we fully expect that you’ll want to have some assurance from technical experts that the projects proposed for particular funding at a particular time are in your interests are good projects, good solutions to the problems -- and that you should put your money into them. So to that extent that discussion with San Francisco could be as short as this is a no- brainer. Let’s get down to the business of who pays how much. Or it could be a discussion of “we are not so sure those are the projects we want to form, so let us have a broader discussion.” Again that is to take form over time, and it will reflect in large part the quality of the product that San Francisco delivers to you. They are certainly employing the people to generate those recommendations. Is that responsive to you? Bechtel: Yes. Let me probe a little bit deeper then, or at least put out a leading question. Therefore someone who might be in the business of building water systems -- let’s say they are well-experienced at founding a company or -- and these are all “ors”-- are well-experienced in finance matters. Actually that might be an advantage over a City Council member who has none of those experiences? Jensen: I am going to tread softly here. But I will articulate as best I can. I have been employed by a number of policy boards of elected officials -- both water districts, cities, appointed commissions. They are generally lay people that find themselves in those positions because they get elected or appointed. Sometimes they brought with them experience from the outside world that establishes their portfolio before the electric or before the mayor who appointed them. But there were no requirements under law. In general what I found is, I serve a very diverse lay board. There are advantages and disadvantages to that. I suppose one could argue that on one hand they know nothing about the business that they are in. On the other hand, they were elected to represent the people and to make sure that the people with their expertise were offered up in such manner that they can be understood. And then create as a matter of policy implementation. So I could argue that, yes it is great to know what you are dealing with. On the other hand I could argue that is not the task the electorate asked you to perform. It is the matter of policy issues in serving the public. Again I am not going to advocate any particular position for you. But you posed a question, and I tried to provide the greatest possible interpretation of that. Bechtel: You are doing a great job of answering the question as I posed it. One other question, one final question. One other point that was raised, that was used as an argument for appointing a member of a city council, was their stature and so on. They could speak for the city. Now, this is definitely true. They clearly, by being elected, have demonstrated that they represent a good portion -- if not all -- of the city. What about their stature, as between small cities and large cities? In working with your “lay board,” have you found that the large cities -- the more important politicians if you will -- dominated the meetings? Or were they some where a lesser, smaller size perhaps had more weight and so on? Any issues along those lines? APPROVED 2/12/03 Page 14 of 22 Jensen: In terms of who dominates meetings, it is really a matter of personality and not where they grew up or where they are from. My own personal experience -- I worked for San Francisco and I worked for Contra Costa Water District. I went from one of the largest entities, organizations in the Bay Area -- that is literally known around the world by people in back woods -- to an organization that most of the people in Bay Area never heard about. I found that being the only difference in the quality that you are going to get out there. The theatre was different. The quality was extremely high in small organizations. So there are differences about the quality. Bechtel: Thank you. Carlson: Commissioner Dawes. Dawes: A query on longevity and turnover. Elected officials turn over more rapidly than let’s say, a citizen who might be appointed and in effect make a career out of it. This may be good or may be bad, but certainly builds a lot of background and familiarity with the issues. Any comments on that score, Art? Jensen: It is an interesting question. The legislation attempted to deal in the way it typically can in situations with longevity, by having a provision to stagger the terms. That does not provide longevity, but it provides some greater continuity as time goes on. Beyond that, the term is only four years. So longevity would come from repeat appointments of whoever that is. One of the things also that is very important to say is, Palo Alto is unique amongst the potential members of BAWSCA and amongst all but one of the members of the Financing Authority -- and that is, you have an appointed [Utilities] Commission. The other entities don’t function the same way. The only other one that does it is San Francisco. I am not sure at this point who they may appoint or who they may elect to appoint to the Finance Authority. But you are unique. So I respect the fact that the considerations that you and your Council have will be different from those of other agencies. Some of the same concerns will exist as you know. How does that appointed individual relate to the council? In what way are they accountable if not directly answerable, but at least politically or otherwise accountable, to the entity that appoints them. That is perhaps one of the vital considerations for you. It is possible, as the legislation is written, for an individual to continue on the board of BAWSCA even if they are no longer an elected official, an appointee, an employee. They need to be a resident and a registered voter [and not] someone convicted of felony. [But they] can no longer attend those meetings if they move out of the area, or if they pass away, or if they resign. Those are the processes for turnover, in the legislation as written. Carlson: Go ahead, Commissioner Rosenbaum. Rosenbaum: I just wanted to have some discussion with Rick. I made the point that staff support -- of the City Council member or the Council-appointed person -- is very important. I think you have the idea of an outside expert, somebody who is quite knowledgeable. Would you see them being dependent on the staff, or exercising more of their own judgment? APPROVED 2/12/03 Page 15 of 22 Ferguson: Actually, I see the city staff supporting the elected member in the same way that the city staff supports us Commissioners as appointees. It works very well. The definition of the task is there. It is as available to one person as it is to the next, and the staff would come through. I do want to come back to this question about the terms of the electeds. Let’s accept the premise for the moment that the magical qualities of being elected really are the right prescription for the job here. Again, it is not a disqualifier to me at all. I am just looking to see if we have optimized this or not. If we take that as a given -- we have a mix of electeds on this board, and these electeds in turn have their own, effectively staggered, terms. Some of them will be term-limited out over the course of their four years on the BAWSCA Board. Some of them will lose elections. Some of them will get caught up in difficult election fights based on the peculiarities of the politics in each of their cities. I am concerned that either (a) they lose their political qualifications sometimes in an embarrassing way and become less-than-average reps because they are elected - - rather than the expected level for their job. Or (b) in the course of retaining their political roles over the course of this four-year term they get held as political hostage in their local campaigns. Strange things happen. I want to be honest about it now, because we have seen how that unfolds. We have seen how good people get pasted because of political events. We’ve come so close to getting this big new creature formed. I just want to be sure that we are not stepping into that, without having thought through the potential. We are talking about something like 15 maybe as many as 26 -- well, minus the Stanford and the Cal Water -- something on the order of 15 to 20 people. All of which have a political life which may end in a year, or which might be tortured in the course of a four-year term. How are we going to deal with that risk? Especially in the formative years of this thing. NCPA has been here for a long time. NCPA has a practiced procedure. People know the rules. Perhaps with the exception of Commissioner Rosenbaum, we were not around in the late fifties when [NCPA] was first cobbled together and the first WAPA contracts were signed in the sixties. Perhaps there were a couple of difficult brushes with death early in NCPA history. I am just trying to get this one right; we are so close. Carlson: Anything else? Mr. Bechtel. Bechtel: Yes. I would like to get some clarifications on the questions that are being asked here. As I read Recommendation #1, we appoint a member of the City Council as a Director, etc. As I read this, it does not say necessarily that we are recommending City Council appoint someone -- or do you have to be a member of the City Council to fill Palo Alto’s position -- forever? Ulrich: No. Since staff wrote this and thought it through, our recommendation on #1 is that Utilities Advisory Commission recommend through your actions that you ask the City Council to appoint a member of the Council as Director of the San Francisco Bay Area Regional Water System Financing Authority. Our recommendation is that you recommend to the City Council that they select one of their own members for that position and then also under #3 that same appointed member also become a Director of the Bay Areas Water Supply and Conservation Agency. APPROVED 2/12/03 Page 16 of 22 Bechtel: I don’t think you have answered my question. I am saying that as I read this either they are recommending City Council appoint a member of the Council. But it doesn’t say anything about that’s the only person that could be appointed. For example what I am coming around to is, make a recommendation for the Palo Alto initial term. It be recommended to the City Council one of its own members to be Palo Alto’s representative, and that in the future for example it could be revisited, that it could change their mind and appoint someone else, and so on. But I am gathering that the intent here is that when we make this recommendation that the Palo Alto representative will always be a member of the City Council. Is that the intent? Ulrich: No, I didn’t say that. I said our recommendation articulated at this point is the Council appoint one of its own current members to this particular Director. I did not, we did not, foresee that they would make a different kind of a decision later on for some succeeding Director. We did not attempt to go that far. Lots of things could change and make recommendation for somebody subsequent to the first Director somebody different. Bechtel: OK. Thank you, John. Carlson: Commissioner Rosenbaum. Rosenbaum: I do think that’s the wrong way to look at it. I think the policy issue is whether the appointee to this body should always be a City Council member. That’s what you ought to be asking us. Do you really see it differently? Ulrich: Well, you can give that feedback to us. I was just trying clarify that our brains didn’t move as far along as you are suggesting. I am not saying that we are in disagreement with that. I just want to be honest and say that when we wrote that we were talking about this [initial] time. You haven’t asked the opinion for further clarification from staff. I would say, that would be our philosophical intent not only now, but later on. Not for the reason of the individual, but for the fact the person is an elected individual, elected by the residents, voters of Palo Alto in the area. The reason we are making this recommendation at this point is that, that’s the closest person to the people that elected them, to put them into that position. This particular person that votes is going to commit all the residents of Palo Alto, through their rates, to pay for something. So it has always been my opinion -- since I have been now a member of Municipal Utility and not in the Private Sector -- that the body that makes the decision about what utility customers make are not only made in public but it is based on this elected organization. Nobody higher, nobody lower in the organization. That’s really some substance of our reason for this -- not trying to get in that there may be somebody better to do it, but I don’t think that’s really the argument. I think they are in the position to represent the elected, the people that elected them into that position. They would get the same staff support regardless of who was that Director. But I think there is a check-and-balance there. Just like when I come to you. I know what your role is, and what you are able to recommend to the City Council. I would look at a Council member as a role they have to play. Carlson: Commissioner Ferguson. APPROVED 2/12/03 Page 17 of 22 Ferguson: Just to address that one point. One of the lessons that we have learned lately in Palo Alto -- and our local experience is more relevant to our decision -- is that one Council member doesn’t “bind” the city. One Council member never binds the city. It is a no-no. We are not supposed to do that. One Council member “represents” us as a member in a discussion and in a decision. And the Council member is presumed to have discussed it behind the scenes with no more than three compatriots and in front of the scenes with the entire Council. And then he goes into the meeting and conducts discussions within the negotiating parameters, brings back the decision -- and there is a discussion in public by 9 people. Then it’s “binding” on the city. Ulrich: Well, we are moving into an area where I’m hardly a scholar in the local government process. However, I can tell you and I think you will agree with me, that the person I describe while maybe not bound by everybody, has a fiduciary responsibility back to the people that elected that person, and has to come back and describe their actions to the rest of the Council. If you took it the other way and you had somebody that didn’t have that kind of position, what you have is the staff making recommendation to that individual they go the way they want. Who are they beholden to or who do they really work for? I’ve probably not articulated the way a government or local government scholar would do, but that seems more logical to me, that way. Ferguson: The point I was making is that when it comes to the calculus of who can actually bind the city, the formality is, either human being suffers the same limitations. An elected can’t bind. Jensen: Again, this case is not an authority that is being established, at least in BAWSCA. In fact, the access established by the legislation is the same for the Financing Authority. The individual is appointed by the governing body of the city or water district and they are the representatives and they vote. They are not charged to come back and see that it’s OK. They have the authority to vote their own mind. They take an oath of office and that establishes their credentials and portfolios under that organization. We would certainly expect that they are voting the conscience of the entity. But they can't “bind” the city in the sense that if they vote for bond measure then the city must pay its portion of the bonds. I say that, in that the issue it raises might raise concerns. Your baseline for comparison is the status quo where you have no representations, issues are never brought to you, and you don’t have representation of any kind. One thought I felt I would share, because Commissioner Ferguson has raised some interesting and appropriate questions, who is providing the expertise? Also he raised questions about the changeability of political climate and so forth. On the matter of the expertise, it is important that the body however it is composed attain for itself expertise in which it has confidence. When it loses its confidence then it gets different expertise. As someone would like to see the job through and leave this organization, I don’t relish at all the idea of sitting before a board of 26 experts -- because their job is not to provide their expertise, their job is to make policy level decisions on behalf of their communities that appoint them. What I would expect them to do is to demand of me -- if I am so honored -- to provide expertise that they approve of, and also to go back and ground-test things at their home base. For instance, I would expect these large issues to come back before this Commission and you folks with your expertise review those things or contractual matters, the funding matters, financial issues to financial plans and so forth and have that linkage, that liaison, through the representative for Palo Alto. Some people have asked me how sane I am to want to sit before a panel of 26 elected officials. But without going there, I would say that actually, personally I envisioned that as a simpler process than trying to serve 26 experts. Said another way if one wanted to bring expertise into the process one would not APPROVED 2/12/03 Page 18 of 22 establish a committee of 26 experts. One would ensure that the expertise was there and the best financial and other expertise you could get without question. Very important aspect to get the job done. Ferguson: I don’t mean to imply that an elected official has no technical expertise, nor do I mean to imply that technical expertise is the primary qualification here. All I am suggesting is that there is a Top-Ten list of things that all of us would like to see at the governance level of this wonderful new creature. I would like to see that Top-Ten list presented to the Council -- with the caveat that political experience is not a disqualification. That’s all. Jensen: I like that concept. What are the criteria that you would want for your participant? Carlson: Councilman Beecham had a comment on this. Beecham: I have to step into this very gingerly. But I do want to provide some information, responses to some of the issues that you have raised. I am now going to work kind of backwards on time here. Rick, you raised a question about whether whoever the director would be, whether they can bind the city. The Director I presume when he casts a vote, or she casts a vote, casts a binding vote. That vote cannot be rescinded later on, based on whatever the Council or any other body might say -- “we didn’t mean to go that way.” So the vote casts are in fact binding. There had been a recent discussion in Council about the ability of the city’s appointed commissioners to make votes based on their assessment of what ought to be done. Questions have been raised about whether or not commissioners need to come back as representatives and get the approval or clarification of the Council. The city attorney’s advice on that point was, that would be greatly dysfunctional [since it is important that the representative ] to the city have an effective voice on the various bodies. That is, to have your representative go there and find out who is taking a vote this week or next week and say “I have got to go back and talk to my folks and I will let you know in a month” or whenever you can get it agendized. So the city attorney strongly advised that was not appropriate, to have an active voice on this organization. You also talked earlier about this is a formative time for this organization coming up in water, and that NCPA is well established and it is bad not to have not necessarily expertise, or whatever in your opinion that ought to be. I would remind you of the fact that early on NCPA had significant difficulties and it was an elected shopkeeper Fred Eyerly who stepped in, and took control of the agency, ran the agency and helped turn it into what it is today, which I think in fact is quite successful. The third factor I would just like to bring up, I guess it is in terms of accountability. And this perhaps goes to what the public expects of who represents it and who makes decisions for the public. About two years ago, there had been a modest Measure in front of our citizens to give a bit more authority to our Planning and Transportation Commission, to let them have a little more voice and decision making. I was in support of that. I had been on the Planning Commission before and I thought it was a reasonable thing to do. Nonetheless, the public decided that they wanted their elected officials to make even that modest level of decision. Carlson: Mr. Rosenbaum. APPROVED 2/12/03 Page 19 of 22 Rosenbaum: Yeah, I am ready to make a motion but before that I did want to make one comment. Rick mentioned the short political careers of elected officials and I do remember, I think it was 1993 at NCPA. They used to at their September meeting elect a new Chair and a Vice Chair and they did that. And in November both of these people would be up for election. Following my theory that working on utility matters is really not good for your political career, they were both defeated. The organization was forced to find a new Chair and Vice Chair, which they were able to do. But that all worked out. So what I would like make a motion that the UAC recommend to the City Council that (1) Palo Alto’s Director of the Financing Authority be a Council member and (2) if the Bay Area Water Supply and Conversation Agency is formed, the City Council appoint the same member as the Director of that Agency. Carlson: Dawes seconds. Is there some more discussion of the motion? I certainly want to, but go ahead George. Bechtel: I just have a question of Dick. Are you recommending the wording as we say here or because I did not hear it the same way as it is written here. Rosenbaum: No, it’s different. I am making it clear that we recommend to the Council the Director be a City Council member, and that is intended to be for all times. Bechtel: Thank you. Carlson: Let me put my two bits in here. I guess I am bending towards giving the Council more flexibility on this for two reasons. (1) This is going to be by far the most time-consuming assignment that any Council member representative will have -- much more so than NCPA or any of the others. So I at least would allow them to consider to be merciful upon themselves and let somebody else do this for a while. And the other thing (2) is that I remember the Constitutional Convention where the Constitution basically passed with a strong presidency because it was chaired by George Washington. Everybody knew that was the person who was going to be the President, and they could trust him to be the President. And you know, we can all envision people, Council members or former Council members, with the capabilities and dedication of Commissioner Rosenbaum and Council Member Beecham. That’s a lot of depth on this specific type of subject that is not necessarily always going to be there. I spent a very substantial chunk of my professional life picking up the pieces of a situation where that depth was not there. It was the great WPPS disaster, where there was a board -- my lord, I think it was 30 or 40 people -- completely snookered by some very powerful staff people into the worst investment ever made by state or local government in the history of local government. They blew 25 billion dollars, most of which was paid for by the federal taxpayer. But a big chunk of it was paid by the local ratepayer. I know how badly things can go on this kind of project. That is why my feeling is, at least keep the question open, both currently and in the future. So any more comments or should we go ahead and have a vote? Mr. Ferguson. Ferguson: I will not support the motion, and will be happy to come back with an alternative. But I just want to be clear -- I want to be sure to depersonalize this. I am a fan of Bern’s. I would love to see Bern do this job. Let’s be clear about that. I am not going to apply for it, and APPROVED 2/12/03 Page 20 of 22 if drafted, I will run to Canada. (everybody laughs) So let’s be clear about the personalities here. This is an opportunity to get the institutional design correct. It is going to be a decision by the Council -- I don’t see where we have the correct kind of wisdom here to narrow it down to a member of the Council. At least we should leave it open, and I’ll make a motion to that effect unless this one passes. Thanks. Carlson: Any more comments? Or should we go ahead and vote? All in favor of this one. [Aye - 3 in favor]. Opposed. [Nay- 2] So it passes three to two, and I will go ahead on this basis. Thank you, and we have one more Agenda Item. Utilities Legislative Priorities Ulrich: Thank you very much for the debate and ultimately the approval of our recommendation. We will get back to Chairman Carlson about the date and time when this will go to the Finance Committee. We appreciate your assistance and support when we go there, and your availability to answer questions. I am not sure if Art will be willing to come to that meeting but we will ask him. I do thank you very much Art for your time for this evening. Item #2 I believe is self explanatory and for those that don’t have a copy in front or for the people in the audience (1) this is available and can be looked at on the website. This is the Utilities Legislative Priorities for 2003. Mr. Kabat has joined me, and as appropriate, Girish Balachandran will participate in the discussion if you have questions about these priorities. We have broken them into water, gas, electric and have looked at what are the important issues that we will be following through the year. We are members as you know of BAUWA, members of NCPA, we monitor things with Western and we’re also members of the California Municipal Utilities Association and members of the American Public Power Association. This is an attempt to reflect our support for priorities that each of these agencies, organizations, and associations that we belong -- where we believe they are in the best interest of Palo Alto to support. And to help either get them passed or to keep them from going too far. You’ve probably had a chance to look over them. Feel free to ask some questions or give us some comments. Thank you. Carlson: Any questions on these items? Comments, whatever? Ferguson: Two recommendations. First I see a global legislative priority that I couldn’t even find between the lines here, and it is important. We have got this monster state budget shortfall, and something similar at the Federal level. As a legislative theme to pursue over the coming year -- for all purposes, water, gas and electric -- we may want to monitor and deter efforts to divert utility revenues directly or indirectly to cover somebody else’s budget shortfall. This is going to take many different shapes and forms. But I can see a number of games played in the legislature and regulatory agencies. It’s the idea that we detect competition by the giant sucking sounds coming from other programs and budgets, and protect ourselves and our utilities against that. APPROVED 2/12/03 Page 21 of 22 Ulrich: Are you referring to something similar to the governor’s attempt to have all taxpayers in California pay for the energy bonds and all those costs even though they live in a place like Palo Alto. Ferguson: There are an infinite number of things that elected officials will do here to accomplish this goal. Ulrich: I was just curious, as an example? Ferguson: We want to be alert. I suggest that as a global addition. And just as a cleanup action, we can probably delete items 1, 2, and 3 and combine them into item 4: “continue to work with the state legislature to ensure prompt implementation and adequate resources for AB 1823 and 2058 to make needed repairs and improvements to the water system.” Everything is kind of rolled up into that one. Carlson: Commissioner Rosenbaum you had a comment. Rosenbaum: Just one. If that was a real proposal? You mentioned the governor wanting everybody to pay for the energy? Ulrich: Oh, maybe I jumped to a conclusion. But with the shortfall, all the tax increases to pay for that are universal. They do not carve out municipal utility territory to be exempt from those. So one way or the other, people in Palo Alto would pay for that form of shortfall. It could go in your sales tax or any other form of tax increase. Rosenbaum: No, I thought the issue was only whether PG&E or the IOU customers were going to have pay of the state bonds, or everybody. I didn’t think there was an issue there. Ulrich: Well, that’s correct. They are supposed to. I am just saying that if the one that he has come out with -- the proposals for taking care of the shortfall -- he has been general in his sweep of increases. I hypothesize -- if he did not have those energy bonds and have that kind of debt, there would not be the same tax increase impact on residents in Palo Alto. All in better perspective. Rosenbaum: Thank you. Carlson: Any other comments or questions? This is pretty thoughtful. Good job. But we definitely in broader discussions want to include Commissioner Ferguson’s issue. We have just seen the beginning of this budget disaster and its ramifications. Our school district is certainly going to see it, and so is the city. The utility is also going to have some issues to. It will be gigantic and will not be over within the next 12 months. Bechtel: Mr. Chairman. Carlson: Mr. Bechtel. APPROVED 2/12/03 Page 22 of 22 Bechtel: Two things. Looking down for example, Water Priorities 5 says: “Support allocation of funds for increasing the security of infrastructure.” I definitely support that. Then it occurred to me, I am not sure that I know what our current local plan is, for security of infrastructure. We have talked about it in past. We have used terms like, well, we don’t want to say what we have in place because we don’t want to give people a notion of how they could destroy things. But I am just wondering. Shouldn’t we be talking about a plan in future meetings of how we are going to deal with security of our own local infrastructure? Which is not a legislative issue, but what you folks decide what to do. Ulrich: Sure. Bechtel: I think that would apply to all. You have the same bullet for the same point in all of them, so I would say, have some future discussions at some appropriate point. Then the other one was, we don’t have a fourth utility but we do have Telecom and Fiber to the Home. There are definitely legislative opportunities there. You know, in discussions last month it could be written on some stone tablet that Municipalities shall never compete with SBC and AT&T, and that of course we should be lobbying the FCC perhaps, or whatever it is. So in the next draft of legislative priorities, we include some items that deal with some general Telecom issues, both our dark fiber and as well as fiber to the home or consumer products. Otherwise I think it’s a fine list of priorities. Adjournment Carlson: Okay, further comments? Looks pretty good with some comments to add. Any other business that we need to cover? Adjourn? Ulrich: Just thought I might point out for the next meeting. It’s not a normal night, it’s February the 12th. Unfortunately Mr. Dawes is not going to be there. I think several other people will not be here for that meeting. Is everybody else going to be here? Dawes: The regular meeting I would have a problem with, but this one works great. Ulrich: Probably it is limited to Mr. Beecham and myself. We are going to be in Washington DC for the APPA Legislative meeting. But the staff has considerable depth, so we will be here. Carlson: That’s one of the real strengths of this organization. We have a seconded motion. Meeting is adjourned.