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HomeMy WebLinkAbout2003-08-06 Utilities Advisory Commission Summary Minutes - APPROVED – UAC Minutes August 6, 2003 Page 1 of 38 Utilities Advisory Commission August 6, 2003 Minutes Call to Order Carlson: Calling the roll Starting to my left. Mr. Carlson Present, Commissioner Rosenbaum Present, Commissioner Dawes Present Council Member Beecham Present. Commissioner Dahlen present via telephone. Carlson: Okay. Any oral communications? I do not have any cards. Nobody is raising their hand. Approval of Minutes Carlson: Anybody wants to make changes in the minutes? Ulrich: One of the Commissioners would like to speak first. I do have an Agenda change. Carlson: Okay. Let me finish of with the approval of the minutes. Second. Okay second. Carlson: Are you all in favor of approving the minutes? Unanimously approved. Changes to the Agenda Carlson: Okay the minutes are approved and we are going to change the Agenda. What are we doing John? Ulrich: I need to bring your attention to a couple of things. (1) Listed under Item 3 which is the Utilities Quarterly Report. Back in the document which refers to the Electric Fund and also to Fiber. There are notes in there that they were going to have the Final Report this evening and a presentation and I received several calls from people that saw the item on the website and I had to apologize that we changed the Agenda and duly noted that and we have moved the Fiber to the Home Business Plan Final Report to the Wednesday, September 10th meeting so there will be no discussion in the Quarterly Report on the Fiber to the Home. Also it was brought to my attention by Commissioner Dahlen that the bottom half of the attachment on Water couple of inches - APPROVED – UAC Minutes August 6, 2003 Page 2 of 38 apparently due to printing error is left off. I will have that section reprinted and sent to you. So those are my changes. Carlson: Okay. Any reports or any meetings? I don’t know of any but go ahead if there are. Okay no meetings to report on and that means it is your turn John. Utilities Director Report Ulrich: Thank you. My report this evening covers four items. Item 1. I wanted to mention the items that have been approved by the City Council since our last UAC meeting. As you know we took the LEAP Implementation Plan, and the block purchases approved by the Finance Committee on July 15th and the Council voted 9-0 to approve LEAP at their August 4th meeting. The GULP for the Gas Plan, Long Term Plan and Objective and Guidelines approved by the Finance Committee on July 15th, the council voted 9-0 approved GULP at their August 4th meeting. The Western O & M Contract Amendment No.3 was approved on July 14th by 8-1 vote and the Western O&M Contract Fiscal Year 06 Funding CMR was approved on July 14th by 10, pardon me, by 7-2 vote. The Second Item is item scheduled for Council coming up. And of course the dates that I will give you are subject to potential change. The master enabling business agreements both electric and the gas are scheduled for the Finance Committee on September 16th and then the Council on October 7th. The next item of the Energy Risk Manager in the Utilities and the ASD will have a study session on energy risk management scheduled for the City Council on October 6th. All UAC Commissioners and the public are invited to attend. This will be an early session and will start at 6:00pm and will run up to 7:00pm. I will send you a note on that as a reminder. Couple of other items we participate in every year as part of our analysis to look at Customer Satisfaction as part of our Strategic Plan. This year we participated with other Municipal Utilities to look at relationships with our business customers and we sampled one hundred business customers in Palo Alto as part of the bigger sampling throughout the state so that we could get a good cross section and a good statistical conclusion what our customers think and this year we are extremely satisfied with the results and the customers provided us with excellent feedback to show that they were very satisfied with the majority of the services. Particularly the account representatives for the large customers and gave us high marks for effective and consistent communications about utility operations, our competitive prices and our high service reliability. It turns out that on a scale of 1 to 10 our overall is like 8 ½ and that number is significantly higher than most of the other utilities and is in fact one of the highest in the state whereas Western or other utilities for the same question is in the 6th range. So I report that as our other Strategic Plan Measures. Carlson: John, can I ask a question before you move on? Did you ask questions for example along the lines of ‘if you like to see improvements what would they be?’ I am also curious about where they always find satisfaction or dissatisfaction if that is all relevant? - APPROVED – UAC Minutes August 6, 2003 Page 3 of 38 Ulrich: I believe the recipient of the ..these were telephone interviews had an opportunity to make comments so they are all listed. I do not have these with me this evening. We broke the group down into three categories so that we can measure the satisfaction level of the very large customers, medium size customers and those that we all define as small business. The last item is a report, a little bit of publicity about the significant enrollment that we have seen in Palo Alto Green which as you recall and approved innovative and asking our customers to pay premium in their utility bill in exchange for us being able to take that money and purchase green tags, our new renewable energy that is produced outside of Palo Alto and that energy that they purchase reduce and eliminate to burn the need to burn an equivalent amount of electricity. And we are charging a 1-½ cent premium on it. It turns out that we received 940 residential and business customers have already signed up and that turns out to be 3.4 percent of our entire customers by number not by load and we have had encouraging results particularly with some businesses and in the past we have not made that as an option for businesses to participate. As you know we have set a goal of 5 percent sign up and we already have 3.4. Our brief analysis tells us that we have already one of the highest sign up rates for this type of service anywhere we can find in California for sure. So more to come on that. That is the end of my report Mr. Chairman. Carlson: John, do you want to say anything now about the El Camino Park Reservoir or wait until we get to the Quarterly Report? Ulrich: Let’s wait until that point. There will be contacts around that if you don’t mind. Carlson: You mentioned in the report that LEAP and GULP; that it was not a unanimous vote to adopt those. Is there any feedback from, or was there any debate, which would indicate what the misgiving issues, problems that some of the City Council people had with that clarification? Ulrich: Frankly, I don’t recall. I went to the meeting the other night when we did on water. I can give you a report on that. Carlson: Maybe Council Member Beecham might have some clarification on that. Balachandran: LEAP and GULP were approved 9-0. WAPA CMR Amendment No.3 O&M Contract and the customer funding of the O&M Agreement those were voted on 8-1 and 7-2. Ulrich: I am sorry. I thought you were referring to the Western O&M which did have a split vote. Carlson: The issues that were discussed in that regard. Ulrich: As you know these were on consent and there is no discussion. Do you recall anything Council Member Beecham? Beecham: There maybe a comment or two at the end of the meeting during Council Comments at which time Council members do speak to consent calendar items. They may have objected to other comments. There may have been some concerns on Western because of issues raised by UAC member or so on CO, which may have caused some confusion and regarding also the issue on the reservoir on Palo Alto Park. There is some concern expressed over sometime by - APPROVED – UAC Minutes August 6, 2003 Page 4 of 38 colleagues that project may be growth inducing and some of my colleagues have concerns about that. Ulrich: I should mention that since the matter of water on El Camino Park came up. At the Commission meeting on the 4th, the Council did approve on consent calendar the Phase I contract amendment for doing the environmental study and doing the engineering and construction for work related to the chroming conversion. It is about 1.6 million-dollar contracts. It is specifically eliminated construction and detail design for any of the new reservoirs or for the new wells. Those will come in as subsequent CMR after the environmental review has been done and we can evaluate that and make recommendations for the final location for the wells and the reservoirs. Election of Commissioners Carlson: Okay is that it? Anymore? Okay is there any unfinished business? So we get to elect a Chair and a Vice Chair. Traditionally we have elevated the Vice Chair to the Chair but that is certainly not mandatory. So I think nominations are open for the Chairperson. Dexter. Dexter: I nominate Vice Chair Dick Rosenbaum for the Chairmanship for the next fiscal year. Carlson: Do I hear second? Bechtel: Second. Carlson: Okay. Is there any discussion of this? Elevation to this lofty position. Okay we may as well vote. Favor of this nomination? (All Ayes) Carlson: Okay. Ulrich: Mr. Chairman except for the process but since one of our commissioners is at a remote location, I think it would be appropriate to have a roll call vote on this so that we can record it. Carlson: Okay. Let us do a roll call. Start with our distant member Dr. Dahlen. Dahlen: Aye. Carlson: To my left Mr. Bechtel. Bechtel: Aye. Carlson: I from the chairman and Mr. Rosenbaum Rosenbaum: Aye. Carlson: Far right Dawes. Dawes: Aye. - APPROVED – UAC Minutes August 6, 2003 Page 5 of 38 Carlson: Okay. We have unanimous. So Dick why don’t you go ahead and chair the rest of the meeting? Rosenbaum. Thank you Rich. I want to begin by thanking you for your exemplary services this past year and I do mean that this was the first year that I believed that the UAC had an issue before that excited a lot of public comment. We had rooms full of people and I think you handled that situation with greater calm and efficiency and you should be commended for that. Carlson: Thank you. Rosenbaum: Next order of business is the election of a vice chair. Do we have nominations? Carlson: I would like to nominate Commissioner Dawes. Rosenbaum: Do we have a second? Carlson: I would be glad to second that. Rosenbaum: Do we have any other nominations? If not let us vote on the position of vice-chair. All those in favor. Or we will do the roll call once again. The motion is to elect Dexter Dawes as Vice-Chair. We will start with you Elizabeth. Dahlen: Aye. Rosenbaum: George? Bechtel: Commissioner Bechtel votes aye. Rosenbaum: Dick. Carlson: Commissioner Carlson votes aye. Rosenbaum: Commissioner Rosenbaum votes aye and Dexter Dawes: Aye. Rosenbaum: All right congratulations. Dexter Dawes has been elected our Vice Chair. Let’s proceed on to the next item, which is the Water Integrated Resource Plan Guidelines. Water Integrated Resource Plan Guidelines Ulrich: Thank you Mr. Chairman, congratulations. You have the guideline report. We will have a brief presentation and we will walk through that so that Commissioner Dahlen will get a word picture of what we are doing. I will introduce Jane Ratchye who will make the presentation. - APPROVED – UAC Minutes August 6, 2003 Page 6 of 38 Balachandran: Let me make some introductory remarks over here. I am Girish Balachandran and the general structure of the analysis that Jane is going to make, we are trying to model it similar to what we have done with LEAP and with GULP, that’s the Electric Resource Plan and Gas Resource Plan where we provided a lot of background analysis to the UAC, and the Council in the months and years past. We are trying to distill that into a set of guidelines for approval in front of you today similar to what we did with LEAP and Gulp objectives we have approved and then the actual implementation plan and specific recommendations would be brought to the UAC and Council. So that is the general structure and our plan for the future also with the water IRP recommendations. So with that basic outline I am going to give it to Jane. Ratchye: Unfortunately we seem to be having some technical problems here so I am not able to bring up my presentation for some reason. But I was able to handle the slides. Carlson: Jane do you want the questions as you go or hold them to the end? Ratchye: As I go would be good. That would be fine. What I’d like to go over is mostly found in the report for your benefit Commissioner Dahlen. I am going to just touch on what reports the UAC or the Council has seen today that support the conclusions that we are making today on the water IRP. Go back over the results briefly that I showed last time I was here in this topic which was in June and the basic conclusion and the evaluations, and the proposed guidelines that are in this report and I sort of previewed those with you in June and then I will go over the next steps. You have seen many reports so to support where we are today. Starting from the bottom of the slides, you have seen many reports that are primarily driven by engineering, the reports done by Carollo beginning with 1999 study where they identified the capital improvement program to respond to the need to improve reliability water distribution system. That was followed by the 2000 study we called it which looked at using the ground water for longer-term use and what issues might come by that including what alternatives were there for treating ground water. The 2001 study looked at subjecting the water distribution system to different kinds of shortages than in the 1999 study which focused on a 8 hour outage and it looked at a longer term shortage including a 30 day outage which is what we think 30-60 day outage which might be what the San Francisco PUC water might be out and other outages including longer term outages such as year long drought and that study concluded that the CIP recommendations from the 1999 study were indeed the best solution for many different kinds of outages. Looking back at the top we have come to you with different updates. I didn’t report here on this slides all the different times we have come to the UAC with updates But we began coming with it in October or in August 2002 with a preliminary assessment and that was sought of laying out all the different characteristics or attributes of all the possible water resources alternatives. In May of this year we showed you another report that was done by Carollo Engineers. The ground water feasibility study that determined that we were only able to use ground water for 500 acre feet a year at most on a continued basis or up to 1500 acre feet a year during times of a drought. In June, the report referred to you earlier, which was the basic conclusions of the water IRP analysis, and then last month you heard about the Santa Clara Valley Water District. Their study, their conceptual study on the extension of their west pipeline to serve Palo Alto and/or extending it even further to an interconnection with the SFPUC Bay Divisions Pipeline III and IV. Just to review the alternatives that we looked at are obviously the water that we get from the San Francisco Public Utility Commission, which is a 100 percent of what we get now. Using the - APPROVED – UAC Minutes August 6, 2003 Page 7 of 38 ground water either in droughts only as we have had in the past droughts or in a continuous basis also we had to look at the treatment of the ground water. Looking at the Santa Clara Valley Water District treated waterline and also looking again at recycle water which we looked at depth in 1993 and then looking at demand side management Program that would be expanded from what is on the books or scheduled now. And I have a graphic here Commissioner Dahlen of our historic water consumption and then the forecasted load and also aligned at about a little lower than 12000 acre feet a year what is about probably what we get from the SFPUC at drought times. Our forecasted load is about 15000 acre feet a year or so and in a drought year if we rely entirely on SFO we can look forward to cutbacks of about 3000 acre feet a year. The next one is extremely hard to see on the overhead. I am glad every one who cares has… Carlson: For reference purposes our allotment from SFPUC my recollection is about 18 or 19000 is it? Ratchye: Yeah. It is 19,000. Carlson: So we are well under that. Ratchye: Yeah. That is correct. Dahlen: And in drought years Jane is it dropped to 12,000? Ratchye: What was that? Dahlen: Did our allotment drop during drought years? Ratchye: Well, in the drought years the amount we get is established at least through 2009 according to the Interim Water Shortage Allocation Plan. That is the plan they calculate how much you are going to get using three factors. One of them is our supply assurance, which is a big number for us relative to our current forecasted load. Another third of it is how much we actually used in a particular year and I think it was 2000-2001 just that number. So that is just a fixed number. Then the third component is how much you used the year before the drought and so two-thirds the ways they calculate how much you get is based on fixed numbers and one-third based on the year right before the drought. So that is how it is calculated. So only a third of it we get to rely on this large number – this 19000 number. So for a system wide cut back I think we would get about 12000, which is about a 15 percent cutback for Palo Alto for a 20 percent system wide cutback. There are many other cities obviously in BAUWA that have to take cutbacks of far greater than 20 percent so that we on an average take about 20 percent. Many cities are using very near or even more supply assurance and so this interim water allocation plan is a good thing for Palo Alto. Carlson: Jane that was one thing that confused me on this. On Table II, which is in our packet, but not on your slides it shows the availability from SFPUC normal years it is about 17000 and in drought years it was 11-8 almost a 5000 acre feet shortage. But yet in the Table III it shows 2167 acre-feet shortage and I was confused what the actual and you just mentioned that cutting back to 15000 acre feet rather than 11-8 shown on Table II. Is that what you.. Actually in the - APPROVED – UAC Minutes August 6, 2003 Page 8 of 38 slide up here you show 11-8 numbers is that what you expect us to be cutback to or is it …so the shortage is not 2167 it is almost like 5,000. Ratchye: No. But our load is not. Let me make a correction to something I earlier said. The 17000 number I believe that is our supply assurance. Dawes: Okay Dahlen: It is not 19,000 Ratchye: It is something that I have to double check. I believe that it is 17,000 we are significantly below it. That is the number I have on my desk. But to answer your question Commissioner Dawes our usage is around 15000 and so if you are only able to get about 12000 in a drought you have to cutback about 3000. Dahlen: Jane while we are in Table II report I am sure you have mentioned this many times in the meetings in the past. Could you please give me a short description of what the DSM Program is all about? Ratchye: Okay. Well there were mostly two DSM programs that were assumed. The first one was assumed in three scenarios. We looked at about 2-½ percent long-term cutback from implementing DSM programs that are enhanced from what we do now. To meet all the current DMPs. We do not currently meet all the DMPs. The best management practices according the California Urban Conservation Consul. So we are assuming, as a base case we will be at least be achieved 2 ½ percent long-term cutback. Those consisted of programs like ultra low flush toilet programs, landscape audits for large customers, about every type of water conservation program you can actually think of. A little bit here and a little bit there all those things. Then we also looked at if an enhance program or fairly aggressive program to try to get 5 percent of our load as a long term cutback and that was sort of an alternative that we looked at. Does that answer your question? Dahlen: Well. For that one, I understand these are basically to reach out to the Public, educate the public or to provide programs where you can get people to cut back on their water usage. For the projected cost of water for the enhanced DSM Program what is involved in that? Where would the cost be coming from? Ratchye: Okay. That cost is the entire cost what I would call from the societal prospective so that is the cost of the measure itself whatever it is. It is burying an ultra low cost toilet. The actual measure installing the program and everything. That does not mean that the Utilities Department would incur all of those costs but they are costs to the community. So that is how they were calculated. So as you see that Table II in that report the costs is quite large relative to the other water supply. It is more likely that Utilities would pay for some fraction of that and not the entire thing. For example we would offer some rebate that would be a partial payment for the measure or we would administer an audit program and then the customer would incur the cost to install for whatever measures were recommended if it made sense from the customer perspective. Those cost there are the entire costs and they are not attributed to a particular party who would pay whether it is the utility or the participant. - APPROVED – UAC Minutes August 6, 2003 Page 9 of 38 Dahlen: Thank you. That clarified my question. Ratchye: We are looking at some DSM programs and tried to come up with how much the utility should pay or need to pay to illicit a response and what would be the impact on both participants and non-participants but we are not there as yet. Right now just for this water IRP we are looking at the total societal cost. In Table II and also I think Table III in the report those numbers looks quite high for DSM Programs and that is why. Dawes: Excuse me Jane. Could I ask another question on Table II? Did the projected cost of water include the capital required to implement them? I am assuming on what you said on the DSM that a count a toilet as a capital goods it would count that. But what for example on the Santa Clara Valley Water District the 467dollars and the 760 dollars for acre foot I am assuming that does not include any capital or if it does. Those are the projected rates. Those are directly from the Santa Clara Valley Water District itself and certainly they are those increases in the future are primarily due to capital expenditures that they expect to incur, comply with new water quality standards and implement other programs that they are doing to increase their reliability of their whole system and maintain an upgrade of the system that they do have. So I am not sure how to answer your question. Those are their projected rates. Their projected rates are based on large future capital expenditures. But they are not expenditures but capital cost we would incur directly. But if we are connected to that line we would be paying the rates that they expect to see that it included those costs. When we discussed this before. When they came back with 50-60 million dollars a total program then our share – we were estimating our share to be fairly high. Then we looked at the potential and it ended at looking at another plan and scaled those back but those dollars that was trying to get at. These would be the rates we would pay but we would still have some millions of dollars to even be able to pay these rates. Is that correct? Ratchye: Right. Let me explain that again because that is unusual. Dawes: Actually I thought that was take or pay basis. In order words these rates that we pay obligated to take a certain number of acre-feet, which amounts to the 29 million dollars over 10 or 20 years whatever the number is. It is a contingent liability based on volume consumed. If we didn’t take those acre-feet we would pay substantially more because we would have a shortfall on our volume. Ratchye: That is exactly right. The way this works is they will build the pipeline. Let us say Palo Alto was going to connect to it and the numbers are all over the place. But we have seen a number just to connect to us for about 15 million dollars. They would look at the current rate and establish a mortgage payment essentially on the 15 million dollars and they finance that over 20 – 30 years and come up with an annual payment and divide it by their current rate and say hey guess what you now have to pay for whatever that number turned out to be maybe 15 acre feet a year just like Commissioner Dawes on a take or pay basis. And that they estimate the payback capital cost on the pipeline and so we just end up paying whatever the retail rate is but we would have take or pay pick commitment. And in their contracts there are flexibility around that but I believe you will have to take about 90 percent of the amount. You can elect each year you say - APPROVED – UAC Minutes August 6, 2003 Page 10 of 38 how much you are going to schedule. But you cannot schedule lower than 90 percent or something like that of the volume when you signed the contract. Bechtel: I guess what I am concerned about is if you look at Table II isolated from this report and the discussion we just had it clearly says that Water District water is cheaper than SFPUC water and in the current years, the near term years and in the out years yet I am not sure that is really going to be the case. We have a contract that is desirable and we hope that somehow when you are displaying this it is the caviar to go with that are important. Also pointed out. Excuse me. Ratchye: Well. In fact that is true. If the projections that the SFPUC has set out about their future cost comes true and that the Valley Water District their projections for their costs for water came true. It would be cheaper to go that way. The question is we want to trade of the water quality for that. I guess that is the question for the community. The other part that is not included in Table II and not included in the analysis but I see coming down the line from San Francisco is some sort of take or pay commitment from San Francisco. Right now we just pay basically almost entirely a volumetric base chart and so we are lucky. Someone just brought down from my desk the number for supply assurance. It is a little more than 19000 acre-feet a year. So if we were to have to pay for our water based on our supply assurance of around 19000 and only use 15000 I do not know what we would do. Maybe we want to sell it or we might want to save it. I am not sure. We are faced with that decision right now. But I see that coming down the line and if we are ever faced with that decision about how much we want to sign up for and what we want to pay and actually get in a real allocation not like this supply assurance that we currently had but a real some sort of an entitlement to their system, we want to think really hard how much we want o sign up. Because then I would think we would have a demand charged component. Take or pay whatever you call that a fixed cost. This analysis does not assume that that’s going to happen during the analysis period. It just assumes that whatever we pay either their average rate cost based rate as we do now. So it is little more complicated. It is hard to collapse into that table but you are right you think… let us go with district waterline. You just have to… Bechtel: You actually go with wells. Ratchye: The wells number though does not include the treatment cost, which we could, chose not to treat it. Dahlen: Jane can you give us an idea of how that treatment cost might impact some of these numbers here if possible. Double them? Ratchye: If you look at the next… Dahlen: I see that. Ratchye: If you turn to Table III in the report which is on your slide number 6 here. These numbers are also probably worthy of some additional explanation because it is hard to conclude things just by casual look at this table. If you look right away. Using the groundwater during droughts and you are saying that if you don’t treat the water you pay 4.4 million dollars the cost - APPROVED – UAC Minutes August 6, 2003 Page 11 of 38 there is largely because you are buying water in a drought rather than not buying water. If that makes sense. The first line assumes you are only going to use San Francisco water and in a drought you will be cut back and it in a drought it is also assumed the cost for San Francisco goes even above and beyond what their projected rates are. They increase by about 20-40 percent. That is because they need their same revenue requirement in a drought even though they are selling only 75-80 percent of their water. They have the same almost entirely the same fixed cost and they need to recover that some amount. Dawes: Jane, in another words, is that the drought premium? That 4 million dollars is a drought premium? Is that what you are talking about? Ratchye: Here is a couple of what this calculation is. The model looked at a Load and Resource Balance, of dispatching all these resources whatever I had in the portfolio there over time in two different types of years a normal year and a draft year. So it calculated the cost if the year was a normal year and it said this is your cost. Then it assumed what is the draft year and then your availability of San Francisco and your availability of treated water and things like that were limited during a drought although you were able to get 1500 acre feet a year of well water if you had that in your particular portfolio you were evaluating so in a drought if you look at the two different scenarios of just relying on San Francisco versus plus San Francisco using the wells then it is actually costing you more because you are buying water. Because you are not having to live with the cutback that you would have only San Francisco water. You would have to cut back as shown on Table III 14 percent. If you are using ground water you are using 1500 acre feet so you are only cutting back 5 percent so that 10 percent you are getting from the wells you have actually to pay for it via the pump tax so that the groundwater extraction fee to the Santa Clara Valley Water District. So it is costing you more but you get more water. And so it is kind of not a total apples types comparison. In one case you are living with big cutback and in the other case you are living with a shorter cutback. It is costing you more money. The no water treatment alternative does not cost very much. Because you have already put these wells in presumably. They are sitting there. This is an existing well, so you are already going to pay for the rehabilitation presumably if we go forward with the capital improvement program. So you are ready to go. So the incremental capital cost is virtually nothing to operate this well during a drought if you don’t put any treatment on it. So this 4.4 million is somewhat deceiving. I think in the last report I gave you in June I showed you a draft. But what is more interesting to look at in Table III I think is the incremental cost of treatment in this case to your question Commissioner Dawes if you have no treatment you could essentially say zero cost.. If you treat for manganese and iron the next line down you are paying another million 1.1million. Do you see that? Dahlen: Okay yeah. Ratchye: And so if you blend you are paying another 1 ½ million. And that if you put reverse Osmos on you are paying about 5 ½ million more just for the treatment. This chart is trying to get at the question this community is saving. The questions of cost, quality and reliability. Essentially how much cutback are you going to take in a drought? - APPROVED – UAC Minutes August 6, 2003 Page 12 of 38 Dawes: Jane could you explain the third item down. Blend with SFPUC water to meet all standards. My recollection was you had to put new pipes in to mix the well water with the SFPUC water but the thing I don’t understand is to meet all standards. What does that mean? You mean that the other wells don’t meet all the standards. I thought with these initial treatments in fact they did meet the standards. Ratchye: Yeah. They were with all of these treatment options. But you can blend San Francisco water to get to whatever quality you want right? You could put in one drop of well water and you can essentially be it San Francisco water quality. You could blend the tiniest fraction you can of San Francisco water into it just to meet the standards. Dawes: So that essentially a capital cost those 6 million dollars because I assume once you put the pipes in the blending system is all set up. There is no incremental cost per say. Ratchye: That is true. It is the capital cost. But let me talk to you again that it is not six million. It is about million point six. It is the difference between having to buy the water at the pump tax versus it is not getting any water. Dawes: That’s right. Is there an option which says we pump the water which is going to cost us 4.4 for the pump tax that is our incremental cost for the 1500 acre feet then if we simply blended that the capital cost be no incremental operating cost does that capital cost is the difference between 44 and 60 or between 55 and 60? Ratchye: It is 44 and 60. Dawes: So it does not assume that we treat for manganese and iron. Ratchye: No. It does end up meeting the manganese and iron standards. But it is through blending and not treating at the well. Dawes: The manganese and iron that supports to be capital and operating cost because of chemicals and filters and other stuff that we have to Ratchye: Yes. Dawes: Thanks. Ratchye: Then the reverse osmoses the big component is the capital but there are also operating cost associated with that. Dahlen: And that would assume that you are not blending it. Ratchye: That is right. There is Carollo I believe in the 2001 study did look at blending it to a greater degree than to just meet the standards and that was quite expensive and it didn’t use so much well water. It used so much relatively so much Hetch Hetchy water to well water that it would only use about 500 acre feet at a particular well and the rest would be San Francisco water and so if you want to get your full availability, safe availability of ground water in a drought you - APPROVED – UAC Minutes August 6, 2003 Page 13 of 38 would have to put that type of right treatment on three wells then it became more expensive than doing Osmoses to get your 1500 acre feet and putting the treatment only in one well. So that was not the best option to get 1500 treated to a very high water quality. That is why I didn’t put that one in. Dahlen: Jane, if I can ask one last question in Table II. We are talking about blended water. This question deals with the Santa Clara Valley water district treated waterline. There would we be looking at blending with the SFPUC water? Ratchye: If we were really really going to do this. The engineering group will have to look at this very closely. Because it is different water quality and many cities that do take both segregate their distribution system so they don’t mix the water and you end of with different kinds of problems. So I didn’t look into that. I don’t know that we can just take it directly and use it. Dahlen: The reason I asked that question because you mentioned we have to take a large amount based on the contracting and it is not something that is turned on during the drought years but something that we would have constant annual usage that we would have to pull from that line. Is that correct? Ratchye: We don’t have to. We just have to pay for it. Dahlen: We could conceivably pay the cost for tapping that line and use it only during drought years. Ulrich: I think it is important to make sure that when we consider this word blending when we talk about it. These cost do not include blending in such a way that it would uniformly blend the water throughout the city. If you take the water from a pipeline or from the well the customers that are closest to these locations are going to get a different quality of water than those that are elsewhere. So if you want to have everybody same equal blending you will have to consider a significantly different distribution system that would allow for that to take place. So the current plan for the emergency water is one where you are going to start pumping the water and putting it into the reservoirs and then distribute it as you can and there is no consideration for blending in a way that everybody would be equal. That is a far different situation in an emergency than it might be considered for other usage. Dawes: The chlormine situation is not had issue whatever the options here we would have water that was treated similarly to the new regime of SFPUC. Ulrich: It is going to change a lot of our operations practices but you are correct that once the chlormine conversion program is complete later this year additional changes in pumps and in some of the reservoirs flow which is all part of this CIP which was approved by the Council the other night then we would have the conversion take place and everybody would be getting chlormine rather than chlorine in their water. Dawes: So the wells will have the chlormine injection system in effect. - APPROVED – UAC Minutes August 6, 2003 Page 14 of 38 Ulrich: Initial emergency water plan would not. Dawes: Would be untreated in terms of disinfectant. Ulrich: No. You would be able to do that on a limited basis. But it would not be a full operational you would have to bring in those facilities to do it. Dawes: I am a little confused. We are spending a lot of money on wells; we are going to use them in droughts presumable. Ulrich: No. The plan we are talking about is emergency water only. Not drought water. I do not want to get these two things confused. Dawes: In emergency it is okay to have treated water? Ulrich: That is correct. If at some later time through the analysis of how much water we could use and how we would do it in a drought situation if ever it comes to pass we would put in more permanent facilities depending upon what kind of a treatment you would want to do. Dawes: Let me add something. As I understand ground water is basically safe so you don’t have to disinfect it. But the quality issue that you were talking about the treatment is the taste issue that you would want to use for a longer term. I am getting head nods. Ulrich: We do not have verbal communication particularly for Ms. Dahlen’s purpose. But that is correct. Plenty of people have wells serve their homes and others that if they don’t put the chlorine into their water before they drink it. But any of our plans for emergency water or otherwise would include whatever is appropriate to have safe water deliver to their homes. The issue that I just want to make sure you were aware of this when we are talking about is this blending whether it is emergency or otherwise would not give us the quality of water to every resident in Palo Alto. Carlson: You need two completely parallel distribution systems to do that? Ulrich: Not necessarily. You ought to have large enough storage where you could move all the water into the storage, mix it and then blend it and move it out. I do not know what all that would cost. Carlson: Too much. Ulrich: I just want to point out these analysis, the dollars we are talking about would include those. Carlson: Okay. Dahlen: John just this one last question. When you talked about this emergency water needs versus the drought years, I thought this analysis was looking at drought years. Could you clarify the different type? - APPROVED – UAC Minutes August 6, 2003 Page 15 of 38 Ulrich: Yes. That is correct and I apologize for mixing that with the emergency water plan that we have been working on sometime in the CIP’s and environmental analysis being done is just for emergency water. And what Jane is talking about is the drought analysis. Dahlen: Okay. Thanks. Rosenbaum: Do we have any other questions for Jane? Dick. Carlson: Yes. I have one question since we were on it for a while and it is this long-term issue. Because to do the improvements at the SFPU their capital improvement plan inevitably must require either to take a pay contracts to finance the bond issue or are borrowing money through BAUWA and guaranteeing a payment stream. One way or the other we have to put some guarantees out there to borrow our share of million plus dollars correct? Ratchye: No. That is yet to be seen. But it is certainly the occasion that we have to put up money that we could ask for something like that. I do not know whether Mr. Beecham wants to comment on that. I think this is not decided yet and we are not still not near the funding the first part of the capital improvements. Carlson: But we have to do something like that to finance those funds. Bern have you got any plan? Beecham: At the BAWSCA - Bay Area Water Supply and Conservation Agency - we have had some initial meetings. I am on the main policy committee of that group. In my opinion it is likely we need to discuss those kinds of options. But the agency to this point has not had any substantial discussions on it. But certainly looking forward to the issue. If San Francisco and/or the Bay Area but San Francisco is a mass agent puts in several million dollars to upgrade a system there has to be a guarantee way for covering that cost and I expect that they and we will look at. take a pay contracts. But we have had no real discussion on that. Ratchye: BAWSCA does have a financial consultant who is looking into all the options there. But we are just not ready with any conclusion. I think bondholders may want something like that. Rosenbaum: Dexter. Dawes: I have thought the purpose of this integrated water plan was to look at obviously in the study stage that we were going to use the PUC water and the cost was going to go up and absolute drought that we would do what we have done for the last twenty years or so. Basically in my mind this study is primarily at the drought situation and some emergency situation. We are spending a lot of money on our wells to rehabilitate them. As I look through the alternatives and guidelines nothing is mentioned about using the wells in drought even though there is a great deal of analysis put on them under the examination of resource alternatives Item I using ground water during droughts only goes on and talks about using ground water in droughts but it does not say that that alternative is rejected but as you look at the guidelines I mean there is nothing that says about ground water. So apparently that alternative is rejected and to me it looks like a - APPROVED – UAC Minutes August 6, 2003 Page 16 of 38 fairly attractive financial alternative. We spend the money, it is here, it is local we do not have to depend on anybody else. It is something under our control. We just turn the valves, and press that and we have got water and I am a little confused as to why this alternative has been rejected because it is not explained here. Ratchye: It wasn’t rejected but it wasn’t made recommendation either. For that particular one and I agree with you that is the key thing. Everything else is easy. Most of the guidelines that you see here are really non controversial. Dawes: There are seven of them and it touches almost every other item that you have looked at. Ratchye: I agree with you Commissioner Dawes. I think it has neither been decided that it is a good thing or bad thing. We sort of wanting to defer that to get some reaction from the community and that is the biggest conclusion of this and I think that we have tried in the past to get customer opinion about how much they value water quality versus availability in a drought things like that. I think you can ask a better question when you have numbers behind it and I don’t know if you want to jump to that. Let me go through the rest of this and I think we will get to your question that is indeed a vital and a key one. But I think that particular question has not – there has been no decision to never use the drought or to use the wells in a drought. But that is such a big decision that we need more information from the public, from the UAC and the Council. Dawes: I thought that that was what we were doing. I mean the purpose of planning is to set forth a plan of action in the event that you need to do it and essentially it looks like we are punting this deal you know that a drought say starting next year we don’t have a plan because we don’t know what we are doing with the wells. It seems to me that it should be top of our list to decide are we going to turn on the wells, are we going to spend some more money on treatment so that we can turn on and spend some more money on connecting it up to blending it with PUC but this does not answer the question of what is the plan. Ratchye: Right. Ulrich: We agree with what you are saying. We are taking step by step. It is important that we move ahead with the urgency water plan and the way to do that is to put of the decision that the drought plan until we have done more evaluation particularly the impact review. So when we made a recommendation whether to use the well or otherwise we would have backup information, we would be able to say the impact of that. Dawes: We now have that. The last Carollo study we dug into that so we know. Ulrich: We really don’t and we have been asked to do a more thorough closer, those are my words, but a more thorough environmental impact review and the City Council approve expenditure of money to do that evaluation. That was just approved the other night. Carlson: So let me get this right. The CIP for well improvement is then deferred too much in order to do additional environmental impact study. - APPROVED – UAC Minutes August 6, 2003 Page 17 of 38 Ulrich: That is correct. The budget recommendation that we made and you approved in our budget calls for taking those steps. But this City Council did not approve the CIP in their budget so we went back to them to do environmental work so that we can then come back with that information for approval in that CIP. Dawes: That is news to me. I was not aware of that and my assumption was that the study was in a fact an environmental impact of running the wells continuously or inadvertently and I am taking it back. Beecham: If I could add a little of the council background on this The CIP involved Stanford land because of the Palo Alto Park because Stanford land is being involved two of the council members could not participate Council member Mayor Mossar and Council Member Kleinberg that left the council with 7 members to make a decision on this. The CIP is a budget item. Budget item requires 5 votes regardless of how many people are able to participate. The vote, I believe, was 2 to 3. Three members opposing, as I recall council members are Lytle, Freeland and Kishimoto. Dawes: My understanding is that vote was with respect to digging up El Camino Park not whether or not to proceed with rehabilitating the wells. Am I mistaken? Ulrich: I don’t want to complicate it. Commissioner Beecham gave you the result of the vote the way we had set up the project plan the city council had earlier approved the overall emergency water plan and then as we put together the capital improvement projects the first one is the one we are talking about included detailed engineering and design of the new reservoirs including the one on El Camino. But when the council members voted for the CIP it failed because there was not enough votes for the CIP project as it was defined so we felt that the way to satisfy that concern was to go back and modify our current contract with Carollo to include much more environmental work, reduce the capital or the design and capital improvement to a later date until the environmental report was done and that is what the council approved the other night. Dawes: I am not still clear in my mind the environmental issue was only the part digging up the park and the use of the wells or only use of the wells. Ulrich: I think it was all of those to some extent. Let me try this again. Included because the budget item called for land acquisition, called for detail design, I believe it was felt that we were making decisions and putting our money behind it to actually physically do those. The concern is that there was not enough environmental review included in the CIP to be able to satisfy the concern whether these were the appropriate place to do it. So in order to be able to move forward logical to me I think it was let us do the environmental work and then we have the basis to come back to the council. That allows us to continue with the time sensitive work on the chlormine and some additional study work that will ultimately help us get these projects completed. Dawes: And the environmental work was both on well rehabilitation and digging up the park? You just say environmental work. I want to know what environmental work it was. Ulrich: Sorry. I am not trying to be evasive. I am saying let me take this step at a time. You do not want to make a commitment to suck water out of the ground and you don’t want to make a - APPROVED – UAC Minutes August 6, 2003 Page 18 of 38 commitment where those reservoirs are going to go and start spending money unless (1) you are going to know you want to pump water and how much and where so that you can have a integrated design. So when I say environmental work it is the whole analysis of all of the reservoir sites and the locations for the plans for the well and you recall there is a whole list of priority locations and while we come to the conclusion we think there is one, two and three priorities we are going to go back and do the environmental. Dawes: Just a little sensitive. I thought that the environmental work on the wells had been done. It sounds as though the council thinks that wasn’t done and what I am complexed about. Ulrich: I think we all have an objective of finding right locations and doing the right work to be able to establish where those wells would go and get the reservoirs in. We have the emergency water and the fire protection in our plans so we are working towards that. I hope I answered your questions about the process. Dawes: I think you did totally. Carlson: Can I ask another part of that? What makes me nervous here is if you had to do this environmental work anyways that is fine but we are really at risk in a major earthquake and is the availability of water in an emergency being held up for a significant time? Or just doing the paper work you had to do anyway before you started picking dirt? Ulrich: Well you are asking the questions that we said we are staying away tonight thinking about. Carlson: Amen Ulrich: When you talk emergency what it means it is water to take care of the deficiencies we believe that we have in our distribution system. As you recall you got the study going back in 1999 and recommendation from the DHS have eight hours of emergency of water supply. Well there are sections of the city that don’t have that. When you put these multiple contingencies together fighting a fire on the hottest day of the year and a high demand for water. So that is what led to the final report. I think we are probably behind in schedule because of this change but ultimately you are going to think ahead that you want to come back sometime after we finish the water study that we are going to use the same wells, storage to take care of drought as part of the plan could be one of the alternatives. Let us go ahead and do the environmental work and then you wont have to go back and repeat it later on. So I guess you could consider this as slow down but ultimately all of it comes out right. Beecham: I would suggest that the staff is working in the best possible way to find a way to present proposals and information to the council to that required by high votes on a project. What has been presented to the CIPs that you saw did not go into the high votes? Carlson: What I am thinking about having seen these situations is that the first thing is the second thing is after emergency is pointing fingers at who delayed the natures that would have avoided some of the cost of emergency. I sure hope people are thinking about it. - APPROVED – UAC Minutes August 6, 2003 Page 19 of 38 Rosenbaum: Do you have more to present? Ratchye: I do. Let me just quickly go through the conclusions of the water IRP and that is sort of what Commissioner Dawes said. We would like to continue to just rely on San Francisco supplies, which are adequate during normal years. We don’t recommend to the Santa Clara Valley Water District waterline. We don’t recommend using ground water time basis. One conclusion we can draw now is San Francisco rates are planning to be increased automatically, that recycled water is looking attractive for the first time I should say. The other thing gets to us is what Commissioner Dawes said too is that the decision to use ground water possibly in a drought is a big one for the community and the community needs to be uphold or be brought into that decision making process. So those are the main conclusions here. Since it is a change or would be an additional thing. We need to make sure what people want to do. So let me go over the guidelines quickly. They are new reports the things we are asking you to approve tonight Hopefully they are not controversial. Maybe they are not extensive, as you would like to see Commissioner Dawes. The first one is preserve and enhance the San Francisco supplies. That is basically working with BASCA and trying to make sure that they are going to complete their capital improvements to increase their overall reliability for the region. We would like Santa Clara Valley Water District to make secondary connection with San Franciscan near Palo Alto and the Bay Division Pipelines that is also our reliability and without making a direct connection make that water available in an emergency. To see that we want to actively participate in the guideline number 3 in the development of cost-effective regional water plan and we are talking pretty closely with our regional water quality control plant going forward with Phase 1 of a project down to Mountain View at the current time. The 4th is to expand the DSM programs to ensure that they comply with the DMPs.and this is the 2 ½ percent goal. Number 5 is to maintain the emergency water conservation measures that would be activated in case of a drought. This is something that is already on the books. The 6th one gets a little bit of what you were talking about Commissioner Dawes. Retain the ground water supply options in case of change of future conditions and I think that is the fundamental reason of going through this fundamental review now on the wells that we currently plan to use for emergency only. Dawes: I would like us to consider changing our guideline number 6 to actively use ground water supply in case of a drought rather than facilitating and being wishy-washy. We should go on record and plan for that. Frankly, the idea of asking the public what they want. The public is going to respond we want the highest quality water at the current price or lower and that is the answer I can tell you what it is going to be right now. It seems to me that the policy makers have to be the ones to decide how close to that can we come. I think the idea that the 20 percent drought rule back by SFPUC if we could stay away clear to recover half of that in extra supplies in wells and the other add through conservation measures, DSM, recycle water and so forth which I would come under classification. Basically you are splitting the pain between conservation measures and additional supplies and as I say it is coming upon the policy makers starting with the UAC and floating up to the various levels of policy making to create a plan that includes the use of this ground water and my belief is that there should be some minimal capital put in to treating that water either through blending or manganese and iron and get on with it. - APPROVED – UAC Minutes August 6, 2003 Page 20 of 38 Ratchye: Well just as a response to that. I think that we do need to come up with some kind of recommendation but I think staff proposal at this time we defer that until we do some sort of outreach to the council possibly and to the community to find out about their preferences. The drop could be done next year. Well it won’t be next year as you can see in the Water Quality Quarterly Report. But I agree we do need to answer that questions we cant leave these guidelines so vague about that major decision. We do need to make a decision. No we are not going to use it or certainly not going to use it. It is a punch. It is not a punch very far from now. Dawes: Last drought we ended up using some ground water after a struggle and it seems to me we should have the struggle before the drought comes rather than plough in the drought. Ratchye: I agree with you. I think we should have this struggle before but I don’t think we had the struggle yet and I don’t think we are ready yet to make that decision. I mean you can propose what you want tonight but the staff proposal at this time is to look at this again and bring something back to you and add that is a major part. I think you identified this. Dawes: Is staff prepared to make a date to revisit this? In other words there will be a recommendation by the summer of 04 to use ground water in times of drought. Ratchye: We are saying vaguely in winter. Dawes: Winter of 03 or 04? Ratchye: Winter of 03 Dawes: So six months. Ratchye: Sooner the better. Dawes: That suits me just fine. Thank you Jane. Ulrich: I bet you like that Time Table. Ratchye: Do you have a question Commissioner Dahlen? Dahlen: I did. When you read the report it sort of looks like we are going a little bit from ground water to recycle water. Now are these comparables? Are these comparing apples to apples where would be putting recycled water into public use would be the same as ground water or are they different? Ratchye: I think that is a very good question. Unfortunately we wont be ready to act on recycled water as soon as winter but it certainly addresses the cut back in the drought question very well. To me recycled water looks like a good alternative. I have a chart here unfortunately Commissioner Dahlen you are not able to see it on my slide number 9 that shows. Essentially the different options that we are facing and hopefully we wouldn’t have a survey question like Do you like quality water? Or do you like low prices? Answer those questions. But if you were to propose questions that had numbers beside it you get a better action. If you told people you - APPROVED – UAC Minutes August 6, 2003 Page 21 of 38 could either rely on Hetchy supplies alone and if you did that you would have the best water quality and you would be subjective to about 15 percent cut back. The next alternative is to use ground water and then your cut back would be only 5 percent and you could either pay either about 3.50 cents a year, 10 dollars a year depending on what sort of treatment level you want to pay for or you could do recycled water and that gets to a drought time cut back to 6 percent and that would also have the best water quality for portable water usage for you would be still getting 100 percent San Francisco water and that cost is less than 5.50 cents per resident and the number there is not a good number because it is complicated because some of it would be paid by sewer rate payers as water rate payers. So if we split somehow between water and sewer and the other person who would pay for it would be federal and the state governments through grants that are available for this type of projects. And so that alternative we don’t have, that is not characterized as well as the other ones in the water RFP right now. So that merits in my opinion a lot of more work, a lot more looking and that may tell you No we probably don’t want to put in expensive treatment at the wells yet because we may want to go the other way, go recycled water instead. So the next step the final slide I have shown the time that I was talking about which said this Fall we will survey customers and I will try to develop a good enough survey to actually get answers that we can use and I think we need to make presentation maybe a workshop to the council to get their reaction on this too. And hopefully come back and complete these guidelines to have some sort of definitive statement on how to use or whether to use ground water. Rosenbaum: Dexter. Dawes: The numbers shown in Table III under level three project for the Recycled Water the same set of numbers that you had in the next last slide which is the 200 percent dollars a year equates to 100 hundred thousand dollars. Ratchye: Yes. Dawes: Thanks. Rosenbaum: George Bechtel: Jane on the survey basically first let me say the summary. Thank you for putting this together. I think there is lot of issues that we have to look at and I guess I am of the opinion that at least we wish that we don’t have a drought in the next year or two because I think some of these issues are going to take a while to work out particularly convincing three members of the council that we are doing the right thing with our water CIP and so on but we probably wont have a drought and work out these issues. I think the CIPs we worked on over the last three years addresses almost everything. It does not address recycled water because I know we didn’t do that and that is something that has come up most recently but maybe my concern now is the survey. I think that Dexter talked about earlier and we have to frame it well as you said. What kind of water do you want? We have to put this survey in a way and ask the right question and we get the right information. We tried to do that with Fiber to the Home and it worked out. They had to do two surveys in that case and more. On this one I am not sure that people will understand that the Hetch Hetchy Water is going to grow automatically over the next twenty years. And when you look at the survey you have for example ground water 3.50 cents increase I think people should understand that are basis is going to increase automatically. I am not sure - APPROVED – UAC Minutes August 6, 2003 Page 22 of 38 whether these additions for ground water and all that are on the top of the base or some of the stuff that SFPUC is going to do or we are going to do will take some of those numbers down. I think we need to frame it in such a way that people in town know that the water is going to cost us lot more every year from here on and that should be part of our survey. Let people know that do some education so that they don’t get surprised when they look at their bill and so if you could put something like that in the survey I would be a lot happier so we can begin our educational process. I think this is a guideline and I think the guidelines need to be reviewed. Maybe they will be reviewed every year. I think we are putting this to the council. I am prepared to go ahead and recommend approval of all the guidelines after some more discussion tonight. Rosenbaum: Are there any questions for Jane? Dawes: Let me just make one comment with you. Mr. Carlson mentioned the possibility that San Francisco is likely or may well want to go to take or pay contracts in order to finance the bond and I strongly suspect that would be the case and that our water from Hetch Hetchy would have a fixed component or a variable component and that when you look at your Table II where it says water from the SFPUC at 1100 dollars what I would call the marginal cost to the variable cost might be half left. Half of the 1100 dollars might be to pay the debts service where upon all the comparisons change completely. That is if recycled water cost a 1000 dollars acre a foot then you have to compare that to the 500 dollar variable cost Hetch Hetchy and it no longer looks attractive. I guess I got a little nervous when you talked about the attractiveness of the recycled water and there is no discussion in the report about this possibility fixed and variable cost for Hetch Hetchy water. Do you have any comment on all that? Ratchye: I agree with you and I did not include it on purpose. Because I think if you go to some sort of take or pay that we have to have an entitlement or some sort of a guarantee but some sort of assurance number where we get some access to particular amount of water unlike now and in addition that would be tradable and so if we really did do recycled water we could sell that allocation to someone else and in reality the average cost would be a 1000 dollars or the 1100 dollars in that chart. It is a big decision that would face us. I believe we could get to that same cost if we made another commitment to some other capital project that recycled water we would like to couple that with selling of and getting some relief from take or pay or the fixed cost component. Dawes: I am not sure that we ever want some relief from getting some water from Hetch Hetchy water as we can get.. Rosenbaum: All right. If there are no other comments or questions. I think we are ready for motion and I will have some language to add to the staff recommendation to speak to the decision. Any further comments or do we have a motion? Bechtel: I am prepared to recommend that as long as with along with the recommendation that the staff has made on Page 1 of the agenda item II is we advise the council to approve the 2002- 2003 Integrated Water Resource guidelines to be used as direction to staff for pursuing new water supplies and protecting existing supplies. - APPROVED – UAC Minutes August 6, 2003 Page 23 of 38 Rosenbaum: We have a motion? Dawes: I will second it. Motion by Bechtel and second by Carlson. Any further discussion. Dexter. Dawes: I would like to amplify the motion to incorporate the language staff has included in the next steps so that it becomes a part of our recommendation that it seem to me that the previous discussion is disclosed and this is only a partial step. I almost called it a draft report because the most important part to me is missing so I would consent to Commissioner Bechtel to add to his motion that the Integrated Resource Plan guidelines will be reviewed during the ensuing fiscal year 2003-04 to incorporate the policy with respect to the use of ground water during droughts. Side step the issue of surveys but incorporates the end results of the surveys is to have a policy back to the ground water use. Ulrich: Let me clarify. Are you including the results of the EIR? Dawes: To the extent that the EIR impacts the ability to use well water during droughts and certainly we are not able to recondition the well till the EIR is completed. It is my understanding from the last discussion separate from the reservoir issue. The Reservoir issue is emergency that is the way my mind calibrates it. The wells are emergencies well as some of these used during droughts. So yes I would include it in the completion of the EIR, which I assume is in the same timeframe during the next 12 months. Rosenbaum: Is that motion clear to staff? Ulrich: I think so. Rosenbaum: Commissioner Bechtel? Commissioner Carlson Will you accept that? Bechtel: I will accept it. Let me put this on the table that may be as guideline. May be to capture what Dexter was trying to say is. We review the guidelines again at a specific date. Six says retain ground water supply option. For example that is included but what is not included in the guidelines is the other point you mentioned Dexter is we want to talk about this again six months or year perhaps we may ought to add that definitely these guidelines need to be reviewed every year and then we know they will come back to us and look at it in a year. Dawes: I was just trying to foreclose the issue of punting again in six months. If you do it once you can do it twice. So I am trying to put it a little more definitive so it will be acceptable to the makers of the motion. Bechtel: It is acceptable to me. Carlson: Fine. I think we should review before the end of the fiscal year. Sure we should be able to do it by then. - APPROVED – UAC Minutes August 6, 2003 Page 24 of 38 Beecham: I believe that the staff indicated they would come back in the winter with the plan for the wells is that correct? And if that is the primary intent of the UAC to get the wells their decisions made on the wells I expect that to have it on your table in a couple of months. Rosenbaum: I would like to add some language so this is not a guideline but a statement that would read as follows: With the proviso that when determining the economic feasibility of alternative water sources relative to SFPUC water, consideration will be given to the possibility that SFPUC water may have a fixed cost component independent of usage. Beecham: Would you consider adding to that all analysis should contain assessments of present value based on any kind of a _________probability of drought year for the next twenty years? Ratchye: That is actually included in the analysis now. Rosenbaum: So the question is whether this language is an additional proviso is acceptable to the maker and the secondary. Dawes: This is a pointer. Are you going to edit to the guideline for example 1A for example or something like that? Rosenbaum: No this is just a statement after the guidelines to overcome what I regard as a shortcoming in the report where this factor was not mentioned. The comparisons don’t indicate that there might be some difficulty because of the fixed cost component. Bechtel: That is acceptable to me. Rosenbaum: I have the language written out here. Ulrich: We can take it from the minutes. Rosenbaum: That is fine. We can take it from the minutes. Is the staff recommendation plus an amendment by Commissioner Dawes, which has been accepted asking that the staff come back within a short time with some recommendation with respect to the ground water in drought and than the provision, which I suggested. Any further questions or comments? All right let us vote. All in favor. Aye, Aye, Aye. Rosenbaum: I believe Elizabeth you voted Aye. So that passes unanimously. And thank you Jane. This has been a great deal of work on your part and of the staff. Ulrich: Thank you commissioner. Carlson: Carry right on. Rosenbaum: I think we have a recommendation of a break for 5 mins. We will come back in five minutes Comeback in two sessions and consider the next item. - APPROVED – UAC Minutes August 6, 2003 Page 25 of 38 Ulrich: All the members are here? Dahlen: I am here. Rosenbaum: Going to the Quarterly Report John: Ulrich: Thank you. Obviously this is what we bring to you on quarterly basis. We made the change as you requested to look at all the utilities at one time rather than stagger it. There is quite a bit of information in her. Members of the staff that prepared this and have the expertise are here to answer questions and if you would like to focus on you’re questions rather than us going through the report that would be beneficial. For those commissioners that are here, Commissioner Dahlen we were able to pass a full copy of Attachment, A which included all the printout on the bottom two inches of the report, and you get my apologies that you don’t have it. If there are questions in that area we will talk it as we go through the report. Dahlen: Thank you. Rosenbaum: Let us start with water. Do we have questions? Dawes: I am in the wrong place. Rosenbaum: Anybody else? Dawes: I have no questions. We killed water very good before. Will you do the financial thing at the end? Rosenbaum: John I have the question that I raised earlier. That the staff is being going out into the community seeking another reservoir site. What is going on then besides all this EIR business? Ulrich: Thank you for asking. I mentioned to some of you. Perhaps read the newspaper articles or talk to people. What we are talking about is the siting of one of the reservoirs is one of the emergency water plan and we have had considerable discussions and priority analysis done on where those reservoirs would go. The ideal spot from looking at locations where we would be able to supply large volumes of water downtown area and to the Stanford shopping center area which is part of the city was to ideally place reservoir in El Camino Park and that plan is still very much alive and we have had discussions and negotiations with Stanford for placing the reservoir there. They have some I call them restrictions about placement of that reservoir based on some future expected use of the land and our thought was while we are doing that discussion we started to hear about the idea of placing Park over near the side of the old Palo Alto Medical Center south of that area. So we thought this could be an opportunity to look at whether at the same time we are doing the analysis of El Camino is to look at whether we could, should place the reservoir within the new Park. The new Park is not being developed and rather than spend the money purchasing, or requiring or developing land where the El Camino would be is to use the CIP funds for the development of the reservoir and also some development of the Park that would go over on the top of it. As you know all the land that the utility uses in most cases is - APPROVED – UAC Minutes August 6, 2003 Page 26 of 38 another rental agreement with the City. The city if so chose could use the money for the development and use it for the Park. I am speaking hypothetically. I am just saying you could do those things. In addition there would be on going rent for the use of the land for the reservoir and also the placement of a well. So another idea was to go back and develop the well that was at the Middlefield property would be to have the reservoir and well at Ross Park it is now a Sofa Park. So these are the ideas we are talking about. But there will be a significant difference of what we are doing now so why not go out and talk to the people that would be impacted by this before we pursue it so that led to meetings of people in the neighborhood. We got a lot of good information and we are going back and as part of the CIP I described that the council approved on Monday night included rather detailed description of the analysis we would do environmental work and do some preliminary studies and how much it would cost the differential between putting the reservoir there and El Camino well versus over at Middlefield and additional piping and configuration changes would be required. So all that do diligence that way we would have another alternative to look at so it would have to be conversions of economics conversions of the development opportunity that is going on for that park. Rosenbaum: You suggested we would have to pay rent. That the utility would have to pay rent to the city for the use of city land. Ulrich: Of course you know we do that now. Rosenbaum: What would be the situation as far as to the end of our annual cost if we build it at El Camino? Ulrich: Well an example might be any other land that city owns that utility utilize for example substation location we pay in our budget an annual rent to the city for the city owned land and the municipal code calls for the methodology and you know how that is done. So there would be a similar arrangement of for the use of city land for the utility purposes. Rosenbaum: I think we understand that and each year we always question the rents. Ulrich: I do recall all those questions. Rosenbaum: My next question would be. Would there be a corresponding rental annual cost if the reservoir goes on the leased Stanford land or would that come for free. Ulrich: No I don’t think that there would be anything free. I think there would be similar calculations that are made because the land is leased to the city by Stanford to the City of Palo Alto. We have other facilities on similar situated land. Rosenbaum: We already lease it and we have an agreement. Whether or not that lease calls for digging a big hole and putting a reservoir without additional payment might be uncertain. All right, I appreciate your answer this question, which had some public exposure, but the UAC had not heard anything officially. Bechtel: Mr. Chairman. - APPROVED – UAC Minutes August 6, 2003 Page 27 of 38 Rosenbaum: George. Bechtel: That triggers a thought about the other site. The other day I happen to see in the paper the discussion I believe it is 800 High that we are going to – there is a transformer site on Alma and those transformers are going to be relocated so is that underground space useable for water storage as well. It is smaller I believe but I do not remember now what is that site planned for. Ulrich: Well a little bit of background. I think most of you now know that we have a substation on Alma and we are looking at whether it is appropriate to relocate that substation in the next couple of years from that location and move it to another location and be able to connect and bring energy back into downtown by way of transmission or distribution lines rather than having a substation where it is. So we are doing that evaluation and if it can be moved that land can be used by the City for other purposes. That is a little bit of background on it. I can’t say we looked seriously or thought about seriously about putting a reservoir at that location. One it is very small piece of property as compared with the other size of reservoir tanks. Bechtel: Thanks John. Rosenbaum: As there are no further questions on water, we move on to the quarterly gas issue update. Do we have any questions on Gas? Dahlen: This is Elizabeth Dahlen. I have a question on the Gas Table. Could you explain what we are looking at that Table? I had trouble figuring out what was going on there. Procurement Program for customers. Page B 2. Ulrich: Ah! Yes. Walking up to the microphone is Karla Dailey who will explain this. It is at the bottom of Page B 2. Dailey: Do you have a specific question? Dahlen: Could you tell what the goal is? What the actual is and what is being plotted in the solid line and in the dash line. Dailey: Let me step back for just a minute. We had some confusion of how we communicated on how our goal is. So let me start out with that a little bit. Loosely, we have this goal of locking in about 75 percent of the expected needs for the pools for the near 12 months and 50 percent for the near 12 months and 25 percent for the 3rd 12 months and that is the dotted line you see. The blue line is the expected load. Is yours colored? Dahlen: No it is not but I am assuming that when you say the blue load that is the expected customer load. Dailey: That is right and the dotted line corresponds to those 75 50 25 numbers and the other solid line which is pretty close to the dotted lines and in most of the graph is what we actually purchased for the customers. The way the lattering strategies actually worded is up to a 100 percent to the near 12 months even though we typically shoot for 75. So we have gone ahead and bought a 100 percent of our expected pool load for the months of December and January - APPROVED – UAC Minutes August 6, 2003 Page 28 of 38 next winter. December of 03 and January of 04 and actually since this graph was generated we also bought a 100 percent for February of 04. So this is outdated by a date. Does that answer your question? Dahlen: It does and then it generates another question. Are we looking to purchase a 100 percent of our expected load or looking to purchase 75 percent and then float and do the market rate for the remaining 25? Dailey: We are planning to buy 100 percent of the expected load for the winter months and those months are November through March. Dahlen: Is that our policy now? Dailey: The policy is that we can lock up to 100 percent for any or all of the months that are near the 12 months. Management has made a decision to go ahead at this point and lock in a 100 percent for just the winter months and leave the level at 75 percent for the other months. Dahlen: Okay. Thank you. Rosenbaum: Dexter. Dawes: Just a follow up. Was that decision made in conjunction with the Risk Management individual that we hired a year ago? Or is it driven by his analysis. Ulrich: A combination of that is that is the strategy we agreed on and candidly the idea of having lattering is that we are not putting all our eggs in one basket. Dawes: I know that. I just meant the decision of not to buy a 100 percent. Was that done with the Risk Manager on board with that decision? And to depend on the spot market balance of the.. Ulrich: Yes Dailey: One interesting about the lateral is that. If you are looking at just the number of the mmbtus that are just exposed to the market price, that 25 percent in the winter has many many more mmbtus than the 25 percent less exposed in the summer. So over an annual basis even deciding to do 100 percent for the winter months and leave the other months at 75 percent that ends up being much more than the average of those two for the months over the year. Does that make any sense? Dawes: Really you have committed to 90 or 93 percent of the total year. But the 75 percent is only of that volume during the low period. Ulrich: Commissioner Dahlen. Do you want to come and spend a little time with us? and sit through this rather complex and interesting strategy and we can give you more details and get together. Dahlen: That would be great. Thanks. - APPROVED – UAC Minutes August 6, 2003 Page 29 of 38 Rosenbaum: Anything on Gas. If not let us move to electricity and fiber issues. Bechtel: I have a question on Page C6 one of which is the Central Valley Project Transition Series Service Alternative. It said something about that there is a Federal public process initial meeting held on July the 10th and Palo Alto expects to file this comment by August 8th which is real soon. Is there an update on that particular issue right there close to August 8th? Can you or is there an update on a particular issue since we are right there close to August 8th? Balachandran: We plan to file comments on Friday and the comments would be supportive of Western efforts to explore transmission alternatives to minimize cost of delivery of Western Power to all its customers both direct connect and non direct connect. We made verbal comments to that effect. Shiva Swaminathan represented Palo Alto at the July 31 hearing where verbal comments were allowed. We will be basically providing similar comments in our filing in the next day or two. Bechtel: Along the same lines PG& E has dropped of Path 15 project, as I understand the comment is that Okay? It sounds to me that in your description that was desirable that we have Western sort of lead in that? Is that our consensus? Balachandran: Yes. Bechtel: The other question I had is the next page on C 7 forward prices for Northern California and we talk here about Block 1, 2 and 3. One thing I quite didn’t understand was the cost per kilowatt-hour. It says Block 1. If I understand the chart, Block 1 is the average cost is lower about of 4 ½ cents this year and in Block 2 both of them seem high. I am just wondering why? My note was when I looked at this the other night was explain why Block 2 equals to Block 3 and I didn’t’ quite understand that because it seems to me that Block 3 is all year long and Block 2 was just the winter months. Balachandran: I am going to have Shiva answer that question. Ulrich: We are trying to get our eyes focused on this. You got colored charts. No I don’t. Swaminathan: Block 1 is on and off peak. Bechtel: Block 1 is on and off peak. So that is it would be cheaper. Swaminathan: That is correct. And the other two non-peaks. So that explains why they were the same. Okay Shiva Thanks. And I guess the only comment I had was had to do with Pole and the dollars down the drain. If I remember the cost that is Page C 9 on the top of that I guess the fact is that the Feds are allowing them back in the card game and so we at this point consider that to be a dead issue. We are not going to be able to buy something or take over our license. Is that right? Rosenbaum: No comments. - APPROVED – UAC Minutes August 6, 2003 Page 30 of 38 Ulrich: Yes I would say. I have no comment at this point. Carlson: Nice try. Bechtel: The next is near and dear to my heart, which was at the bottom of the page. This is how I feel about with Fiber to the Home and this is the root of the issue neither the case nor the plan advocate or recommend the construction of a Fiber to the Home Project but rather there was sufficient merit to continue to investigate. We have to get of the time guys. Next month. We just can’t continue to investigate forever but I thought that it would seem to be a sort of where we are in this Fiber to the Home Project. Ulrich: Our well warned Telecommunications Manager is walking up to the microphone but I did want to reintegrate what I said at the beginning that we purposely moved the final to next month and the comments having to do with the Fiber to the Home here are out of date from the standpoint from what we expect to accomplish and we are taking into account the need to get on with this but based on the questions and much of the analysis that we have already done, I think it is important to conclude it in a way can be very confident that what are recommendation is made that we have done all the analysis. Bechtel: So what is going to happen is in September we will have your recommendations along with the final report from the consultant. May be I am prejudging or talking about next month’s agenda. Rosenbaum: Why don’t we put of that discussion until we get to next month’s agenda. See with what we are going to be provided with. Other questions? Bechtel: One final question is. The Brown Bag lunchtime efficiency a workshop. I thought that was a good idea. I have been getting it in the mail. I would like to attend it. How is the attendance going? Are those going to be productive? Are people showing up? Ulrich: Tom Auzenne, our Manager responsible for this area is now walking up to the podium. Auzenne: Thank you. Commissioner Dahlen I look forward to meeting you sometime. It is actually we are getting fairly good response from those. We seem to be averaging about 35- 55 attendees per workshop depending upon the subject matter. Bechtel: I would say that is great Tom. That is terrific. Beecham: I was at the more recent one on Selection. I would say good Presentation and people attending do participate. Ask lots of questions to make sure that they understand what the advantages and the disadvantages of the various options are being discussed. Bechtel: Good I have one last question and one last comment too and probably maybe directed to you too is Sunflower Public Art on California Ave. You had a very nice write up on that congratulations combining solar plus art. I mean that is terrific. - APPROVED – UAC Minutes August 6, 2003 Page 31 of 38 Auzenne: I should make mention that project was primarily the responsibility of Randy Baldschun, resident of Barron Park and he is very much interested in Public Art and taking an aggressive approach in working with the Local Art Commission and some of the City Commissions on bringing a message of efficiency out of this building out into the Public. Rosenbaum: Anything else on electricity. Dexter. Dawes: Follow-up on Commissioner Bechtel’s item on Path 15. Western basically does not even have the money to maintain a system without taxing its participants and it turns out somehow they have copious amounts of money to spend on Path 15. I think it is wonderful. But from where did the money come from. Uncle Sugar? Balachandran: I believe those Tran select is a big funder. Carlson: Who is Tran select? Balachandran: They are I believe for profit transmission company. I can get you more information on their background. I don’t have it. I cannot recollect it at this point. Dawes: So Western is a straw man in this deal? Balachandran: No Western actually does all the construction. Western and the Project Manager can actually build this. Dawes: The Ravens would think it seems to me a very important situation for us to longer term to control our destiny on transmission cost and particularly on marginal pricing, congestion and all that stuff. Are we putting good people, good resources, are we pushing that? Do you have anything more very short write up here on how or whether this is eventually going to work out for the cities? Balachandran: First clarification. It will eventually reduce our transmission cost. It won’t have any impact on our exposure to congestion costs. It is just going to reduce, it is going to avoid a certain PG&E charge, that is a local distribution charge, local transportation charge. Bechtel: It doesn’t give us higher capacity outside the Bay Area World? Balachandran: No. It is just from here to Ravenswood. Bechtel: I thought that we were in bed with Alameda and Santa Clara on a Transbay thing. Balachandran: That is the next thing. That is what is called the BAMx Group. The ideas we will be looking at that is way out in the future. I mean that is a long-term project and BAMx is basically created to Bay. Hardware alternatives like Transmission lines and also advocate at PG&E the transmission plan in process to build more high voltage to achieve that same goal. So you get much more transmission belt into the Bay Area. - APPROVED – UAC Minutes August 6, 2003 Page 32 of 38 Bechtel: You have excluded your comment on Ravenswood. They are really not related? Balachandran: There is some connection in the sense that latest PG&E transmission plan. They have indicated that there maybe some upgrades made in their transmission system from Ravenswood to Coolie Landing and this was their latest plan. So to the extent that they are actually going to make some upgrades anyway. Through BAMx we could advocate for that to be done earlier and there may be some synergies with the book that we are dealing with PG&E to connect up to Ravenswood in 230 KV. Bechtel: So it is long long way. Balachandran: No the Ravenswood project itself. Bechtel: No. I meant the next step. Balachandran: We are devoting resources to it. We do need to actually get this project to having set momentum. We need to be devoting quite a bit. We are doing what we can right now and we are going to be attempting to get additional resources. Bechtel: Last question of the Sun, the Moon and the Stars and the price of gas and the price of electricity come into the lines so that our 2 million dollar COBUG is up and fired up or is it still waiting its time to shine as it were. Ulrich: As you know we tested it and made sure it operates well but its time is not in at our end. Bechtel: It is a good idea that whose time has not yet come. Is that what you are saying? Ulrich: It was an excellent investment for its intended use. Bechtel: It is a great insurance policy but we have not cashed any of the cash values as yet. Dawes: And with luck we won’t Ulrich: I don’t think you want to hear it running for any extended period of time. Dawes: It would run if we could make money. In another words if the price of gas versus the price of power was in the right hotel we would be there but we are not. Ulrich: Correct. Rosenbaum: Anything else on electricity? Elizabeth? Dahlen: No I do not have any specific questions. Rosenbaum: All right. Let us move on. - APPROVED – UAC Minutes August 6, 2003 Page 33 of 38 Dawes: One more. There is no mention on the issues with over the Enron Contract so that any closer to settlement or is it something that you cannot come up on it at this time. Ulrich: I cannot comment on it. Rosenbaum: Lets move on to the Quarterly Financial Information Update. Consider Electricity first. Any questions on the electrical numbers. Dexter Dawes: Commissioner Bechtel has a saying that I think it is very appropriate. He talks about blue birds flying in the window and as you look at the supply rates stabilization reserves we had a whole block of blue birds. The thing that is chilling to me is that instead of blue birds, which are positive upsides, it could have been the other way. I mean from the Financial Planning standpoint to be 75 percent or 83.6 percent of no that is not the right one. But the reserves are very substantially higher than we thought that they were going to be. In fact we had made an increase in the price of electricity to booster our reserves but we had these surprises here, which are just really astonishing. We have a flee of reserves. Is rethinking going on about our electrical rates? And will we be seeing a mid-year correction or mid-year recommendation for rates based on what we see here or are we going to have a little savings plan for an investment in Fiber to the Home. How is that going to work? Or we don’t know. Ulrich: We haven’t thought about the later year. We liked the idea. But I think I mentioned this earlier at our meeting that we are going back and looking at the reserves and the whole idea of how much should be there based on known and potential unknown things that have come along. I do have to tell you that my bias is never seen a reserve that was high enough. But that is a sort of conservative idea and I do remind you that any money that we have is ratepayer’s money and could be used as appropriate. So we will be back I believe in October to discuss that again. Rosenbaum: I would only comment that I have to assume that these were all for ___ for what is happening but not be predicted because we would be unhappy with setting an electrical rate that was going to produce an increase in the reserves of 27 million dollars but I have assurance that these were all unpredictable that lead to this 27 million dollars. Balachandran: We try and budget on expected values. And some of these were just not predictable like at the time we set the budget on what FIRK was going to do on certain rulings on how reliability service cost would be allocated and then order PG&E to issue refunds to Western and then come to us. So some of this had to do with the timings of the budget. When the budget assumption are created are put into the budget and put into place and some of the changes we have seen in this year we didn’t corporate it into the current 03-04 budget. Ulrich: It is also possible that in our recommendation analysis that we had the assumption that some of these costs would occur sooner than they actually have. So just because the reserves is at this level doesn’t mean that those costs will not happen. It will be a little more delayed. I think you will be pleased with the thoroughness of this analysis because there are a number of things that either will come along individually or together that may impact how much is in our reserves - APPROVED – UAC Minutes August 6, 2003 Page 34 of 38 Rosenbaum: I guess I can’t help commenting John that this is really the ratepayers’ money. I think you have to try making that argument in a room full of ratepayers. And see if they would prefer to have the money or to let PG&E have it. Ulrich: Frankly Mr. Rosenbaum I would be very pleased to do that. I am very passionate about this. This is not something I think about freviously. It is very important area to protect the utility and therefore the ratepayers are in some kind of a shock that would come along that is why I would take those very seriously. Beecham: Let me add that the Utilities Director makes recommendation to the Council. The Council is the body that sets the guidelines of the maximum and the minimum and I think I have heard the Utility Director indicate that he will come with recommendations on this whether it is the Council that sets the policy. Rosenbaum: Other questions on the Electrical Tables. George. Bechtel: On the same Table I noticed that there is 9 million dollar wholesale revenue. Is that something that is going to continue as well? Girish Balachandran: I am going to defer to Shiva . Swaminathan: The net is the relevant number for wholesale purchases and wholesale sales. What I tried to do here is incorporate both NCPA’s daily balancing activity. In other words certain times buy and sell on the same dates, maximize transmission values and so on and so forth. This analysis essentially includes inter-month balancing. So yes there will be a but the net as you see is 5 million dollars. So the net number is expected to be close to zero close to 4. But his coming year depending on what they hydro condition is and what the availability of the Western capacity is that is what drives the number. Bechtel: Okay. Thank you Shiva. So it is really the net number is 5 million, which is about 20 percent how the ending balance is not much a larger number. Okay. Thank you. Rosenbaum: Anything else Dexter? Dawes: On the Fiber Report, which is a terrific report. In the past it has shown the capital expenditure outline both the initial CAPx and how the operating cash flow has essentially paid back the initial capital expenditure and also the year-by-year BAMx requirements to keep the system upgraded and so forth. But they appeared to be missing from the C 18 chart. How we if we include the capital expenditures how are we doing? Heitzman: Yeah. We are doing along the same line as we have been going. Before what you had an income statement and cash flow statement sheet and the reason why we only have income statement this time is because the change over of the IFASA system to the SAP system we are unable to get all the data to build the other two sheets. But I must say that there is not much deviation from the process that has been going on this regard. I do have one bit of information that I need to let you know about on this Income Sheet. There is a 500,000 dollar error in the income and that error is basically 1725. There is a million dollars take in between January and - APPROVED – UAC Minutes August 6, 2003 Page 35 of 38 end of July the last in 02. That million dollar needs to be allocated not only to the fiscal year 02- 03 but also to 03-04. So there is million dollars taken in as income. The way they do this sheet it has to be divided between fiscal years 02-03, 03-04. What I am saying this $500, 000 has to be deducted from this last June and added into this current year. The good news is that we got $500,000 dollars this year. Dawes: So what you are saying though. As you look at the licensing line it appears that the licensing line is continuing to grow even through 6/30/03 but in fact it dropped of in 03 from 02. So it certainly seems logical given the bust and the dot com business that our license revenues would be down in fact they are. Heitzman: In fact the correct number would be 977, 000 and some odd numbers. Dawes: So the operation cash flow is more or less like 600K. Heitzman: 653K Ulrich: The appropriate way to say is that the approximate $500,000 should be removed from the 1.4 5 6 and it will appear in the license this current quarter. Dawes: Are the licenses still trending down? In other words I think in July we are losing customer revenues. Heitzman: I think we are hopefully we are going through a levellling and actually an increase in the period right now. It has been pretty dead for quite a while. Bankruptcy and so forth have washed out and now we seem to be at a steady stage. Dawes: Have you purged any numbers of these accounts receivable from the bankruptcy and so forth? Heitzman: I won’t say they are totally purged. The large amount of them has converged. What happens is when there is a settlement we get washed of the books basically. So they aren’t in here. There may be 50,000 or so but most of it has been washed out. So these numbers are pretty solid at this point. They are actual received numbers. As you are talking about the conditions. Some of the companies getting some money and making some investments in routes and we don’t see anybody coming back to us for the last three to four months or so coming back to say to us they want to decrease route. So I think we are leveling and hope we are starting to move up slowly. It is not going to go up the way it did. Sure, but they may move up slowly. Dahlen: I am not seeing a chart. Can I ask why or what is the explanation for the operating expenses going up in 2002 and 2003? Heitzman: It is a very simple explanation about 2002 we begin to staff people and so that is largely a staffing cost Dahlen: Okay. - APPROVED – UAC Minutes August 6, 2003 Page 36 of 38 Heitzman: Initially we used to have just a Manager, Technician I believe. Now we actually a salesperson and so forth. Rosenbaum: Anything else in electric? Bern did you have something to say? Beecham: No. Rosenbaum: Lets move on to the Gas Tables. Any questions? George Becthel: Mr. Chairman. On the Gas – First Table looks as if there are margins are falling of. At least the difference between budget and actual is about 1.6 million and we drop the rate in this past I think effective July 1st perhaps. Is there any anticipation that this margin is going to get worst with a lower revenue and so that I am assuming purchase cost will be about I don’t think we are forecasting will go down so we need some electric reserves move towards the gas line. In any event my comment was is this going to be a potential problem to us on the gas side in terms of margin? Hirmina: This is Lucie Hirmina. I am the Manager of Rates and as of now we are watching it and if you look at the two other Tables, there is an increase in the reserves from the beginning adopted budget. However, we are really watching it seriously the weather also worked against us last winter so the sales were not as high as what we projected. Dawes: So I assume then that we have to be taking a look at the gas rate. And certainly within the next six months if any trend continues or at least so because even though the reserves may be good I am assuming that we would like our margins to hold a reasonable margin for the Gas side. Hirmina: Of course yes. Rosenbaum: Any other questions? Lets move to water. I don’t see any questions on water. I think that completes our Agenda except for discussion on the next regularly scheduled meeting, which we have moved to Wednesday, September 10th and I guess that the question is what are we going to be presented with? And perhaps what are you going to expect from us. Mr. Heitzman. Dawes: Due to the change in plans I will be flying east on that day and will have to participate by telephone. So I will need the agenda mailed properly as is usually is so that I can post it on my door. Ulrich: Just give me the details of that. One thing about the schedule is that our commitment is been and want to continue on that is to have this material to you much earlier than we normally do instead of getting it the Friday before we would like to have to you as we did with the last report about a week earlier than that. Of course the difficulty with that is that any type of report is got to be put together in a format that is similar to the same kind of report that we make to the City Council. So besides being very thorough in answering all the questions you might have it is time consuming and rather staff intensive work so trying to be sensitive to that but at the same time a number of issues continue need to be worked on. We are doing one right now the financial part of it. We are out talking to people that could provide the bonds or the financing for - APPROVED – UAC Minutes August 6, 2003 Page 37 of 38 this. Also to complete the legal and the business part of it what changes would be required in the Charter in the Municipal Code and what steps we would have to take. Also we will be looking at taking this and making recommendation that it goes to the Advisory Board of the community so that we get additional input. Obviously those are the things that you would make recommendations on it and we would communicate those to the City Council and of course we want to anticipate the kinds of questions and interests and concerns the remainder of the community would have and also the City Council. So it is a big deal and while we think most of us want to get this completed. I hear it loud and clear that it is taking an awful long time. I think it is important that the final product be one that we all become very proud of and thorough enough to stand considerable scrutiny I am sure it will have. So given all of that our expectation is to have this report soon enough and we are talking probably right around 2nd or 3rd of September to have it out and about which is not a lot of time. Rosenbaum: That would be the report from the consultant plus a staff report with recommendations. Correct? Dawes: That’s fine. Ulrich: If we can’t do that I will be back giving you an update on where we are at. Whether we recommend moving out a little bit further. Rosenbaum: Any other question on this item. Dawes: Is that the only item of business in September? Rosenbaum: John is that the only item that we anticipate? Ulrich: Yes at this time. We have other items but that is all I have at this point. Is there anything you would like us to consider in September? Dawes: I am just thinking ahead. I think we will have public comments if we have the report. I don’t think we need another item. I am just wondering if that item might not actually, and practically up and over in two days or two meetings or something. Whether we might want to think about that Public Hearing and then some discussion. _______: I have appreciated the emails with respect to the technology that this total is sent round to the Commissioners. I think it has certainly offered food for thought. And how the system is configured in the questions he is asking about voice over IP and just the conventional stuff and I assume that the ground has been wild. I assume that the staff report will address that and address the reason why the input that we have add is how it has impacted the decision. Heitzman: There is a section in the consultant report on voice over IP, which is in our office right now. We can’t say that it is the greatest thing in the world. The television issues of whether you want to go with something that is innovative that is well proven or whether you want to go with something that is pretty much standard well proven methodology and in case those are discussed in the report. - APPROVED – UAC Minutes August 6, 2003 Page 38 of 38 Rosenbaum: Okay any other questions about the next meeting. Elizabeth do you have anything? Dahlen: Everything that I have has been addressed. Dick. Carlson: I move for Adjournment. Dawes: Second. Rosenbaum: This meeting has been adjourned. Aye, Aye, Aye. Dahlen: Goodnight. Rosenbaum: Goodnight. Ulrich: Thank you.