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Home My WebLink About2004-04-07 Utilities Advisory Commission Summary MinutesUAC Minutes Page 1 of 38 UAC MINUTES APRIL 7, 2004 Approved May 5, 2004 Call to Order Dawes: Is, are there any other additional Commissioners expected? Ulrich: No. And Mr. Beecham will not be here this evening. Dawes: Then I will call the meeting to order. The April 7th Utility Advisory Committee Commission is called to order at 7:05. And we’ll call the role starting on my left. Bechtel: Commissioner Bechtel, present. Dawes: Commissioner Dawes, present. Dahlen: Commissioner Dahlen, present. Dawes: We have a quorum just barely and we’ll proceed. Are there any oral communications? I see no chits in front of me and see no citizens rising to put their name on one. I will proceed to the minutes, which we had quite a package of. I will take them, I guess, as a group. We have the special meeting, March 17 and 18, which was devoted to fiber to the foam – Fiber to the Home, and also the regular meeting of March 3rd. Are there any corrections or additions to these? I personally spent about five hours on the March 17th package, so I’m quite happy with that. Any other items? Bechtel: Mr. Chairman, I would like to point out on the agenda notices the meetings of March 3rd, February 17th, and February 18th, that those are, as you indicated, March dates. And I move approval of the minutes March 3rd, March 17th and March 18th. Dahlen: And I’ll second that. Dawes: All in favor. All (in unison): Aye. Ulrich: May I make a comment at this point? UAC Minutes Page 2 of 38 Dawes: Mr. Ulrich. Ulrich: A couple of things. As you know, these are verbatim minutes and they represent probably at least on March 17th and 18th probably six hours worth of word for word verbatim minutes. And I know several of you took a lot of time and there was a lot of time on part of our staff, and we’ve also had comments from members of the public. Some of the comments, request to make changes, we of course did not make because we’re required to put down verbatim minutes. So I’d like to indicate in one sense an apology to those that have attempted to make improvements to what was said, but we had to not include those so that they’re true to what people said. I will also get back to you at a later time to go through alternatives to the minutes in a way to improve them, but to reduce cost and to reduce the amount of time that it takes to put together verbatim minutes. It’s clear that we’re, besides Utility Advisory Commission, there’s only one other commission in the City that takes verbatim minutes. And I need to be looking at and making recommendations to you on ways to make improvements in that – in this particular area. Dawes: Mr. Ulrich, could I clarify that comment about modifications, in going through and editing the rough drafts, I found some sections were impossible to understand, given the way they were transcribed. And I made the best sense that I could in terms of minimal editing, but certainly had to make sentences where none existed. And I’ll have to plead guilty to some of this myself. But does your sentence mean that some of the edits, for instance, that I included in the March 17th ones were not included in the final draft? Ulrich: Now, as you can tell, it’s an interesting process, because the people that are taking the listening and typing out, many times do not quite understand some of the words. So they write down, in the case you’ve cited, something that’s incorrect. And if you found, you know, the obvious, appropriate word, then those -- that would be put in its place. The ones I refer to would be the ones where let’s say for example a sentence is incomplete and adding another word to it might make it complete. In those cases, those words would not be inserted because the individual that did the talking actually didn’t say that additional word. So we have the ability to go back and listen to the tape again. So it’s an attempt to be as accurate as possible about what was actually said, regardless of whether it was a correct sentence or not. Dawes: Okay, actually I had some ideas that might involve modifying the way we do minutes. I think we need to hold that discussion until we have a full set of Commissioners here. Commissioner Rosenbaum certainly has some specific ideas in this regard. And want to be sure that he is present when we talk about any changes. But certainly after a lengthy and difficult editing process, this vice chairman was amenable to some modifications. Let’s put it that way. UAC Minutes Page 3 of 38 Ulrich: This is perfect time then to bring up the subject. But thank you very much. And that’s the whole intent here is to thank everybody for the amount of hard work and recognize how much it costs to do. Dawes: I also wanted to thank you for copying the Commissioners on the – your response to Mr. Martin’s query about the source of the numbers of the transfers in the utility to the General Fund. And I see there has been a graph made of that, which is also very interesting. So I’ve printed them out for myself for further study. I think it’s an eye opening set of numbers and is more variable than I had thought that they were over time. So it’s an interesting table and one that will be useful when we talk about transfers at some point in the future. Agenda Review and Revisions The next item is Agenda Review and Revisions. John, do you have any suggestions? Ulrich: Only if it – if there’s an item that you believe will take a considerable length of time, I might suggest ones that are quicker to be done earlier. But without that feedback from you, I’d suggest we continue with the way it is. Reports From Commissioners Dawes: Fine, I hope it will be an expeditious session tonight. I don’t see any thorny issues in front of us, but one never knows. Reports from commissioner meetings and events. And there were two Commissioners that were in Monterey at the CCMUA session along with Mr. Ulrich and other members of the staff. And perhaps we could have a quick summary of that from the commissioner's standpoint. And then if you have anything to add we can do that. Dahlen: Okay, I will just make some comments about the meeting in Monterey. This was the California Municipal Utilities Association meeting, which was a very nicely done meeting. I certainly enjoyed it. Some of the high points that I noted at the meeting were, from our standpoint for Palo Alto, the energy bill is up in the air is the best we can say on that. It’s passed the House and it’s sitting in the Senate. It seems to be hung up due to the MTBE liability issues, which are a part of that package. And that seems to be holding it up inevitably at least was sort of my take on that. Thought there was very positive feedback and positive feelings all around with regards to Schwarzenegger and the job that he’s doing right now in Sacramento. He is blowing up boxes, as he described, and seems to be keeping everybody apprised of what’s going on and people seem genuinely pleased with his performance so far. UAC Minutes Page 4 of 38 Probably one of the most rousing and interesting talks that was given was given by our own local Professor Jim Sweeney, from Stanford. He gave a very interesting talk about California energy issues and transmission issues as well. Some other two members that were on that panel, there was a speaker from the CAL ISO, Mr. Miller, and a speaker from the CEC in California, Mr. Geisman. That was a very interesting panel discussion. There might be something – do you want to make any comments on that Commissioner Dawes? Dawes: The CAL ISO fellow, Mr. Miller, was pitching MD02, which he alleged was no change in the transmission philosophy that is currently being pursued, although marginal pricing in transmission costs seem to escape his notice. I couldn’t quite figure that one out. Mr. Geisman talked about the number of power plants which have been approved in the last five years after the prices, but talked about the issues of getting a finance there now approved, but a lot of the money has dried up and we could very easily be back in the soup in terms of generating capacity within the next year or two, depending upon the growth of energy usage, exacerbated by the transmission difficulties, which we experienced before. John, do you have any other comments about it? Ulrich: Only in general. I’ve been to a number of CMUA meetings and others and I thought this was probably one of the most rewarding and beneficial to go to because of the dynamics around looking at the energy issues and the problems. And I think all the people recognized that there’s no one in charge of energy policies in the state, but they’re all trying to do some good. The ISO, while we’ve discussed that before and I have significant concerns about how they’re doing something that’s good for municipalities, I think Jim Sweeney in particular is understanding the issues that we have in a municipal utility surrounded by Pacific Gas & Electric and how important the transmission system is to us and congestion issues. And so I thought that the theme of the sessions were quite good. They were really on point. And I think the presentation that was made by Jerry Jordan, the director of CMUA, to give us all an interesting view of the budget and the financial conditions of California is one that I had not heard quite that way before and I’m not going to – obviously we won’t elaborate on it, but I think it was important for all utility people, and these are all municipal utilities throughout California, and these were the largest from Los Angeles Department of Water and Power and SMUD, all the way to the smallest districts, really got a good, good view of what’s going on. So I think this is a very good example of how joint action can work and how well we can communicate and learn from each other. So and I do appreciate you taking your time, while it sounds like going to Monterey can be fun, it’s also a lot of work of your time to do that. And want to thank you for doing that. UAC Minutes Page 5 of 38 Director of Utilities Report Dawes: Thanks. Turn next to the Director of Utilities Report. John. Ulrich: I do not have a prepared report, because of the topics that we’ve talked about, plus what’s on the agenda tonight. Do you have any questions or things that you’d like to ask me at this point, or would you like me to just move on? Dawes: Please to move on. Is there any unfinished business that we have? I’m not aware of any. New Business Final Report Wastewater Collection System Master Plan Dawes: New business. We’ll turn to the Waste Water Collection System Master Plan. Scott, are you going to orchestrate this? Turn it on please. Ulrich: Just a second, Scott. Have to turn that on. I think you will -- this is a time when you normally don’t hear from our operation and engineering organization. And this is all about them and what they’ve been working on for a number of years in the waste water collection system, and I think this would be a great time for you to hear that. Also you should have received a copy of the full report. And while it’s rather detailed, we’re going through the executive summary and then have a presentation about the results. And, Scott. Bradshaw: Okay. I’d like to just be – basically introduce the folks responsible for this report. Roger Cwiak is our manager of Water Gas and Waste Water engineering. He’s here with his staff. Edward Wu is our senior engineer and Sylvia Santos is our project engineer. And they were responsible for coordinating this. So I’d like to turn them – turn this over to them so that they could introduce the consultant and we can move on with the presentation. Thank you. Dawes: Thanks, Scott. For some reason the speakers up here don’t seem to be functioning. I don’t know if your machine is on or not, but it looks like it’s not coming through here. Ulrich: It’s not quite as loud. Your speakers are welcome to come and sit down here if you’d like. That would work. Whatever you’re comfortable with. You don’t have to stand. UAC Minutes Page 6 of 38 Bradshaw: It’ll take us a couple seconds to set up here. Wu: Just wanted to introduce our consultant who is retained to perform the study for us. They're Deza Ju and Simon from Montgomery Watson Harza, who embarked in this study about a year and a half ago. And so they will give you a short presentation. Ju: Is it working? Thank you. This presentation is on the waste water collection system master plan update, the capacity assessment portion of it that we recently completed for the Utilities Department. Oops. Dawes: Excuse me. Is it possible to use that other mike? We're just not getting it up here at all. Very dif -- either that or hold it very close. Ju: Does that -- is that better? Okay. I'll do that. Dawes: That's great. Yeah, thank you. Ju: Why is this not working? Oh yeah. Excuse me a moment. I’m on the last slide that’s why. Okay. There we go. The purpose of this project was to evaluate the capacity needs of the waste water collection system, specifically with regard to the latest comprehensive plan of the City, and then to update the capacity augmentation portion of the waste water collection system capital improvement program. I’d like to start by giving you just some background on the collection system. The system includes about a – 207 miles of 4- through 42-inch diameter pipe, which conveys waste water generated by residences and businesses in the City to the regional water quality control plant. Palo Alto’s sewer system is a separate sanitary sewer system. It’s designed to convey only waste water and as such it’s distinct from the storm drainage system which is designed to convey surface run off. There -- the key issues that we look at when we plan for the collection system are providing sufficient capacity for existing and future development, controlling infiltration inflow, or what we call INI. INI is extraneous water, ground water and storm water that gets in through the ground and infiltrates into sewer pipes through defects like cracks and open joints in sewer lines, manholes, and service laterals. And during wet weather periods, INI can increase the flow in the sewer system significantly. And then the final issue is maintaining the sewers in good structural and operational condition. The City’s last waste water collection system master plan was completed in 1988. And also in the 1980’s the City conducted an infiltration inflow study and sewer system evaluation to identify specific areas of the system that had excessive infiltration. And as UAC Minutes Page 7 of 38 a result of these two studies, a number of construction projects were completed in the period since 1988. Flow diversions that better equalize the flow within the system were constructed. A number of relief sewers, capacity relief sewers were constructed. And the City has conducted about 200,000 feet of sewer rehabilitation, primarily on smaller diameter sewers. And that represents probably almost 20% of the collection system, so quite a bit of work has been done. This map shows the rehabilitation work in green. All the lines that are green have been rehabilitated, and the relief sewers, which are primarily these larger red lines, and the flow diversions are these dots on the map. This is the work that's been completed since the last master plan. The scope of this master plan was to update land use projections based on the 1998-2010 comprehensive plan, verify current wet weather flows in the system by installing flow meters in the sewers, developing a new hydraulic model, and I'll talk more about that in a moment, and then using the model along with the updated land use and flow information to evaluate the capacity needs of the system and update the capacity projects in the CIP. This map shows the planning area for our master plan. In addition to the City of Palo Alto, the cities collection system also receives flows from Stanford University and from the northern portion of Los Altos Hills. So those areas needed to be counted for in our master plan. The hydraulic model that we developed for the study is the basic tool we used to analyze capacity. The model we used was a new state of the art program that replaced a previous model that was used in the 1988 study. This model is what we call a dynamic model, as opposed to the older model technology where you could only see one point in time, one -- basically one flow in time. The dynamic model allows you to see a period of time, say you could -- you can see what the system is doing over a one day, or a multi day period, and how the system's performing as flow varies over time. And we calibrate this model to flow monitoring data so that we have confidence that it's giving us accurate results. The model was developed from the City’s geographic information system, GIS database and it's a fairly detailed program. We develop flows on a parcel-by-parcel basis and then aggregated them for loading into the model. We also incorporated development projects that were planned as identified by the Planning and Community Environment Department. What I'd like to do now is just give you a taste of what this model does. Hold on a minute. Now this is a graphic depiction of the City sewer system. These are not all the pipes. This is about 30, 35% of the sewers in the system. Typically we only model the larger lines. The treatment plant is down here on the northern end and this is the foothill area, and flow generally is flowing south to north and east to west. UAC Minutes Page 8 of 38 We can zoom in on any area of this system. I'm going to do that. And this is a line in Loma -- unfortunately we can't bring a background map into this program, but this is a sewer line in Loma Verde Avenue discharging to this line in Louis Road. And what I'm going to do here is bring up a profile of that pipe. So looking from this point down to this point, we're going from here to here, this is a 15-inch line and it discharges into this larger trunk down here, which is a 36-inch line. Oops. The -- this is a pipe, of course. These vertical lines are the manholes. And you can see connections of side lines coming into that pipe. And then the green is the ground surface. And what I'm going to do here is run an actual simulation of a 24-hour period where we have imposed a large rainfall event. This is a six hour storm, what we call a five year frequency design storm. So it's a large storm. Like this. And now you can see in blue the water level in the pipe at the beginning of the simulation. And just keep your eye on that water level as we -- and this is basically a clock. So keep your eye on the water level as we play through 24 hours. And you'll see it going up during the morning and coming back down. The storm was set to coincide with the morning -- the typical morning peak flow, which usually occurs about 8 -- 7 to 9 in the morning. And then we can show the maximum water level here. And as you can see it's above the top of the pipe. That means this pipe is what we call surcharged, the water is rising up into the manholes. And if the pipe was more deficient, or if the ground level was lower, it could potentially overflow. So this is a situation we want to avoid at all costs. Our goal is to keep the water level within the pipe at all time. So any place in the model where we see the water level above the pipe that is identified as a capacity deficiency. Okay. Going back here now. What we've concluded from this analysis is that the sewer rehabilitation that the City has done over the past 15 years has been affective if reducing wet weather infiltration inflow into the system. In general, the system now does have adequate capacity to handle the projected peak wet weather flows that we would expect for a five year frequency design storm. That's a storm of such magnitude that we would expect it to occur on the average of no more than once every five years. So it's a large rainfall event. There still are a few small capacity improvements still needed. And in the future, if flows from Los Altos Hills, or the Stanford campus increase substantially, there could be a need for additional improvements. This map shows the location of the improvements. I'm not sure how well you can see that from here, but there are nine projects -- nine small projects. These ones that are at the southern end of the system, again are primarily needed if in the future Los Altos Hills has a significant increase in flow. In that case, there would -- clearly they -- Los Altos Hills would be responsible for at least funding those projects. UAC Minutes Page 9 of 38 What we have found is that the City’s capital improvement needs for capacity augmentation have been substantially reduced from the 1988 master plan. This graph depicts the $41.8 million of improvements that were identified 1988 master plan. This is in current dollars now that we've adjusted this. About 17 and a half million dollars of projects have already been completed, but about 21.6 million are no longer needed. So we've been able to eliminate those from the CIP. Of the total 41.8, 2.7 million still remain to be completed. And we've identified an additional few projects, primarily on some smaller lines that were not addressed in the last master plan. So the current and future CIP needs total about 4.3 million. Again this is just for capacity augmentation. The reasons why the CIP reduction -- for the CIP reductions, the flow diversions that I talked about, have optimized the use of existing system capacity. Critical relief projects have already been constructed and the sewer rehabilitation, as I mentioned, has reduced infiltration inflow. And also the better hydraulic model and the new flow monitoring data allow us to make more accurate, and therefore less conservative projections of wet weather flows. So we feel we have confidence in the -- in the results of these -- of this analysis. Some recommendations from the study in four general areas, and I'll go through each of these separately. First of all, to implement in a priority order the recommended capacity improvement projects. We grouped these into three priorities based on urgency of need. The priority group A, there's three projects that should be constructed now, or very soon. Priority group B includes two projects that are somewhat marginal and we recommend that the City monitor those to determine when or if they're actually needed. And then priority group three are three projects again that are primarily needed for potential future flows from Los Altos Hills. Given that the capacity needs in the system have largely been met, our recommendation is to shift focus to system condition assessment. This is something the utilities department is already starting to do. And looking at condition assessment involves a number of components. One is keeping your mapping up to date in GIS, a system-wide TV inspection program to determine the condition of the sewers and allow you to get -- to gather the data you need to prioritize your rehabilitation needs. And along with that come data management tools and standards for conducting the TV inspection, as well as developing a systematic approach for using that data and for prioritizing the work. The third recommendation deals with flow monitoring and coordination with the City’s regional water quality control plant partners on tracking flows in the system and flows going to the plant. The plant maintains several permanent flow meters, four of which monitor flows from the City’s collection system. And it's important that those meters be kept in good condition and upgraded as needed so that the City has that continuous data to monitor the flows coming out of the system. UAC Minutes Page 10 of 38 We recommend that some targeted wet weather flow monitoring be done to continue to verify the effectiveness of the capacity and rehabilitation projects, and finally to coordinate with Stanford and Los Altos Hills and the plant on future flows. The final recommendations are some general recommendations dealing with long term optimization of overall management of the sewer system, basically just good management practices. The first is to implement a new computerized maintenance management system. This is a software that utilities department staff - field staff use on a day-to-day basis to track the performance, maintenance activities, generate work orders and maintenance history. And I know they're now in the process of looking into new software to replace the old system they now have. The second recommendation is to conduct a collection system self audit to prepare for upcoming, potential upcoming regulations that may come either out of the federal government or at the state level. The federal regulations are called Capacity Management Operation and Maintenance, or CMOM program. Now these regulations have -- are still in draft form. We don't anticipate that anything will come out for at least several years, if they do come at all. What we're more likely to see are requirements coming out of the state and the regional water quality control board for performing, or for preparing what they call sewer system management plans. And we'll probably be seeing these within the next year or so. And basically these are just requirements that utilities have good management and operations and maintenance practices in place and that they document those practices. The overall goal of both of these sets of regulations is to minimize sanitary sewer overflows. That's the driving force here. The self audit would basically just give the utilities department a head start on making sure they've got the necessary practices in place. And from what I have seen working with your staff over the past two years, you already have done most of this. It's just again a matter of documenting it at this point. The final recommendation is to look into -- to consider implementing a long term asset management program. And asset management is a way of monitoring the performance of your system so that you're continually comparing your performance against your levels -- level of service goals. It allows you to plan for the long term capital and O and M needs so you can do long term budget planning. And just -- I forgot I added this slide. To summarize, Palo Alto collection system is well managed. It has adequate capacity for current and future flows. The capacity related , the refined needs that we have developed in this master plan represent a $20 million savings from previously projected needs. And the focus now is shifting from capacity to the condition of the system and from major construction to optimizing and rehabilitating the collection system. UAC Minutes Page 11 of 38 I just want to note before I finish here, this project has been very much a team effort between MWH and the staff of the Utilities Department, the collection system group there. And I've been very impressed with the, you know, the capability and the dedication that they've given to this project. It's really been a pleasure working with them. I want to thank them for their help. Dawes: Well thank you for that very excellent and clear presentation. Delighted. John, do you have any other comments before questions by the Commissioners? Ulrich: No. I think from this summary, I think that could lead you to questions that you'd like to ask in more detail and the staff is here to assist. Dawes: Okay. Commissioners, are there questions to the consultant, or to staff regarding sewer issues? Elizabeth. Dahlen: I just wanted to point out that waste water is a passionate topic for me and I thought this was an excellent report. And I think the work is excellent. I'm really glad that this study was undertaken. I always like it if we're saving money on capital projects. And $20 million, $21 million is not insignificant certainly. So this was outstanding. In fact, I'd really like to see the same thing be done on the storm drain issue. The one question that I had was with regards to preparing for state level reviews, the CMOM, etcetera, are -- is your feeling, I take it, is that we are fully prepared to be able to meet with any of the requirements coming, well specifically from the state in the coming years. Ju: Yeah. I would agree, definitely agree with that. You're certainly taking steps now, replacing your maintenance management system and doing the system-wide rehabilitation program. The purpose of the audit would be just simply to verify that, you know, there -- that you've got everything covered and there aren't any gaps that need to be filled. Dahlen: And specifically with regards to the asset management plan, I think this is a very important topic. Is that something that is already underway within Palo Alto, or is that something that we may have to modify or change in some way? Ju: Did you wonder about that, John, or did you want to -- we could also provide. Ulrich: You might want to comment, and then maybe Roger or Scott may want to answer it. I think she's probably interested in your perspective about what you think. Ju: Well, I -- you -- I mean, as I say, the City has a lot of the programs in place. Asset management really is just a way of providing some more structure to that and being able UAC Minutes Page 12 of 38 to get a better handle on projecting for the long term. And, you know, you're now shifting again, you've addressed your capacity needs. You're in the -- in process of addressing the rehabilitation needs. And now it's a question of being able to maintain that over the long term and make sure you're operating your system to minimize risk and to -- and to plan for whatever future budget needs that you may have. Dahlen: I guess just to follow up on that specifically, these are actions that are being undergoing right now. Is there anything, any sort of special software, any special integration that we would need to purchase, or integrate into our system to better show our asset management structure? Cwiak: I'm Roger Cwiak, engineering manager for Water Gas Waste Water. In the CIP last year, the council approved new video equipment for the City, a state of the art truck. It hasn't been delivered yet, but that'll be part of our strategy. We also have a Project 17, where we'll start videotaping and cataloging the sewer system, all of our assets in the sewer so that we'll have that. Hopefully we'll be able to get a digital video retrieval system that will be able to classify defects as our consultant goes through the system and videotapes. We'll take that information, look at all the defects, and then prioritize the ones we find and come up with a future CIP that will address our rehabilitation needs in the collection system. Dahlen: Along those lines, I noticed in the report there was some time devoted to managing the data. Is that -- do we have the system set up to be able to take all of that video data, for example, store it, track it, so that we can over years be able to identify? Cwiak: We are looking for that piece of equipment. And we will buy it if we find it as part of our Project 17. Dahlen: Very good. Does the consultant have any recommendations on software or the equipment that was being referred to there? Cwiak: We've looked at some software but we haven't found one that totally meets our needs, or anyone else's needs at the moment. So we're looking. Dahlen: Oh, great. I thought it was terrific. Dawes: Commissioner Bechtel. Bechtel: Roger, while you're up there, what is the general condition of our sewer system, the pipes? And what I'm thinking of, I know that you're replacing those in my neighborhood. And are we in good shape in general in this -- in the City? Have we completed, for example, refurbishment, 50%? Can you give me some feel of the general status of the underground assets, or asset? UAC Minutes Page 13 of 38 Cwiak: From my knowledge of about 23 years of looking at it, it's in generally good condition. We have through this study verified that the work that we've done on the CIP in the last few years has helped quite a bit on the capacity management. I don't know if you remember the large diameter line that was put in near Greer Park and through, up Colorado and Louis. That tremendously helped the performance of the system and problems that we had and would have had with the CMOM or state regulations that that project really helped improve the system, the diversions that we built over the last 10 years, took advantage of capacity that was in the system but in basins where really the capacity we had in pipes but it wasn't in the locations that we needed it. We diverted flows into different parts of the system, and the system is performing much better. Now as far as the condition of some of our 80 to 100 year old sewers, we know we have cracks and root problems. Palo Alto is the tree City. Trees have roots, roots get into your sewer system. Structurally, they may not be in the best shape, but we know that the size is there. So we'll be able to use a lot of trenchless technology that we've used in the past and hope in the future we'll be able to pipe bursting and slip lining so we'll have less effect on the streets, but we know that there's problems out there that we do need to address. By videotaping the entire system and cataloging and prioritizing, we hope to be able to come up with CIP's we're thinking something that's probably in the 25 to 30% less dollars than we've been spending say over the last 10 years. Bechtel: About how much do we spend annually on, let's say not the capacity side, but on just basically repair or replacement? Cwiak: The augmentation projects that we've had over the last few years have been in something like the 2 to 4 million dollar range, depending on the length of the project and the diameter of the pipes. Bechtel: So in general, we will continue to see those sorts of things much as we do in the other City infrastructure, for example, electric, gas, and so on. So just to keep our City, keep things flowing we're looking at 2 to 4 million dollars a year. Is that roughly? Cwiak: I would think you would be seeing project in that range. Not for a couple of years. It'll take that long to go out. And we'll videotape and catalogue and prioritize and then come back with projects. Bechtel: Is there new technology out there on the horizon that would make, you know, that's going to change? For example, I know we've changed on the gas side, water side, from say metal to plastic or so on. Is on the sewer side, is there similar sorts of things that could make the kind of -- the replacements last even longer with less root incursion? UAC Minutes Page 14 of 38 Cwiak: Yes. And we've been using new technology as it's been developed. We've used inversion lining and slip lining and those are about the state of the art for rehabilitation. Pipe bursting, we can do some larger diameter lines. You'd maybe go from a 6- to an 8- inch line, or something like that, but without digging the entire line out and replacing it, just at the lateral connections we'd have to dig. Bechtel: Yes, I was very impressed by the write up on that. And some of the things that you are doing are just incredible. And because I watch them, I see two manholes open, you know, some hundreds of yards, hundreds of feet apart, no trench. And then they just keep moving along. So you've done a terrific job of incorporating everything. Thanks very much. Cwiak: You're welcome. Dawes: Couple of additional questions. About a year ago, maybe 18 months, Stanford wrestled through the county a very significant increase in their square footage, both in the retail and in their academic activities, about 2 million square feet as I recall. Is this included in the CIP expectations, Roger. Or is this what was referred to up in the summary slides which is what -- may have to revisit this as we gain experience in what the capacity needs really are? Cwiak: As each of the projects that Stanford wants to contribute to the collection system comes online, we'll be requiring them to study the system, the portion of the system that would be affected and we would meter it, take their flows, run it through the model. If there's some problem that shows up somewhere along on that part of the trunk line, they would be required as a developer to make those improvements so that the City didn't have a potential problem in a future from an overflow. Dawes: So actually it's their nickel if their development causes us to have to increase our pipe capacities and so forth. Cwiak: That's the way the current utilities rules are written. Dawes: Has the model been tested in real major storm situations with the meters that you -- flow meters that you have, or is this still pretty theoretical? I'm wondering how real this capacity reduction information is, whether it's based on theory or actual measurements in the field. Cwiak: It is made on the -- it's based on the measurements that we've made over the last couple of years of metering. Now there hasn't been a huge major storm in that time, but I think that other items were included from around the Bay Area. UAC Minutes Page 15 of 38 Ju: Let me just comment on that. We -- when we did our flow monitoring, we unfortunately did not have a very wet winter. But we did have data from previous wet winters that we were able to use. And what we can do with this model is actually run a real rainfall event through and compare what the model predicts to what we actually measured with the flow meter. And that's the process of calibrating the model. So we definitely did do this for some of the, I think they were the 1997 storms? I believe it was 1997 there were some large storms in January of '97 that we used in addition to the data that we collected for this project. Dawes: And the meters are still in place and will be constantly checked, particularly in major storm situations so that this is a living thing, or have these been removed and not expected to be? Ju: Well, we had 20 temporary meters in during out two month flow monitoring period for the project. Those are no longer in the ground. But the City does have the permanent meters. There are again four of them measuring flow from the City’s collection system. Those are still in the ground. And I certainly would recommend that they be monitored and that that data be reviewed on a continuous basis. Dawes: Great. I have no other questions. Any, Elizabeth? Dahlen: Is 4 meters enough for the City? Or would you recommend additional meters too? Because it's clear from the report how useful the modeling was. Ju: Unfortunately flow monitoring is a -- it's a very labor intensive process. You have to visit those meters almost on a weekly basis to make sure that they are free of debris. They do get clogged, they get fouled. So it's a lot of work to have meters, you know, multiple meters in the system. We would recommend that you, you know, maintain your permanent meters and supplement that by, you know, targeted tampering meters as you need them, but not necessarily have them in there on a continuous basis. Dawes: Fine. One last comment. This is a separate enterprise fund. We'll be talking about the finances of it a little bit later in the long range plan and be interesting to talk about whether this major change in capital budget has any long range implications for things like transfers to the City and so forth. Thank you for the excellent presentation. And we'll go on. Ju: Thank you very much. UAC Minutes Page 16 of 38 Budget Highlights and Revised 10-Year Financial Forecast Dawes: Item number two is budget highlights and revised 10-year financial forecasts. Ulrich: Thank you. Dawes: Do you have a summary or a -- any presentation to deal with this subject? Ulrich: No. The presentation material is the -- in the form of the attachments. The staff is here to go through it. As you recall, we started this a couple of years ago where we came early in the -- fairly early in the budget process to point out the major changes that we would recommend in our budget so that you can get a sense of highlights without having to through line by line of the budget. So that will help us focus at the next meeting on the entire budget, prior to us going through the finance committee. Meetings are scheduled in May for our individual budgets and then onto the City Council in early June. So the intent this evening is to give you that overview so you can get an idea of the changes from last year and what we plan to do this year and then also get a forecast of our rate projections and where we think we're going to be financially over the next few years. Before we start, I'd just would like to make one comment. I guess it's probably in the form of a correction to make sure you understand that the waste water does not have a transfer to the General Fund as the other utilities do. So we won't be going into that area on waste treatment. Would you -- would you like to go through this -- go through the highlights first, which are the first couple of pages in the report. We can do that by utility and then move onto the -- to the financial forecast which is in the later part of the report. Dawes: Fine. Ulrich: The significant changes are shown on page one and the first page has the electric fund. And what we -- what we are following -- well, we've changed the format a little bit and thank you, Rosemary, for continuing to try to make this report look better all the time. We put the revenue and expenses, to give you an idea of what they are, in the left hand column, the adjustments, the proposed budget, and then the increase or decrease, and from -- the different between the two columns. And then there are four columns that relate to the strategic objectives as it involves customer satisfaction, reliability, financial performance, or municipal character. Then the last column is a little bit more details of what -- of what and why we're doing that particular project. So you'd be welcome to go UAC Minutes Page 17 of 38 down and some of them I think are very self-explanatory. Others you might like a little more detail on it. Dawes: Do you want questions as we go along, or do you want to go through this summary and then we'll do questions later? Ulrich: I do not propose to go through the summary. It -- items I would suggest you ask questions. Dawes: Very good. Commissioners. Elizabeth. Dahlen: Do you want to do this by utility, like electric first and then .. Dawes: I think that would make the most sense. We'll do questions on one utility at a time then move onto the next. Dahlen: Okay. With that, I just had one question on the electric utility. There's a comment on the Calaveras and tank debt service. This is in regards to the City of Roseville's expiration of their contract. I wonder if -- if the staff could just comment on the City of Palo Alto assuming the debt service payment on that and what that impact will be. You've given me your -- a look. So I'm just referring to the comment here with the expiration of the contract, CPAU will soon assume the debt service payment. Balachandran: Right. Just to give you -- how's this. Good. Okay. To give you some history, we laid off a portion of the Calaveras hydro project, about 15 megawatts or so to Roseville. And it was all the debt service. Everything was laid off. And so when we get it back in January 2005, you'll have to assume the debt service. So right now we own 23% of the project and we've laid off about 6 and ½% to them. So we're going to get that back. Dahlen: And the increased cost for us is the -- just over half a million dollars. Is that -- is that correct? Balachandran: That's correct. And it’s a little -- well, let me strip it. We've also changed the debt service structure. So in future years, and actually when you go to the 10 year financial forecast, you'll see the Calaveras debt service actually increasing quite a bit. So they changed the structure of the debt service payments where they lowered the payment through I think 2004, 2005, and then there's a -- it spikes back up. So in future years you'll see an even greater delta. Dahlen: Why was that done? UAC Minutes Page 18 of 38 Balachandran: It was actually done in the late 1990's when we thought there was going to be intense retail competition. And it was a refinancing strategy to keep our rates low, taking some interest savings, etcetera. But basically we thought PG&E was going to be very competitive and have rates and set in an 8 cent range, something really low. And so this was a way to get past a kind of transition phase and still stay competitive. Dahlen: Thanks. Dawes: George. Bechtel: Girish, I'm just looking at that last comment that you made about Calaveras. I guess according to -- on the 10 year financial it looks like we're going up about 3 million dollars a year in '05-'06. So that's the impact you're referring to? Balachandran: That's correct. So that's the first full year impact, '04-'05 is six months of the existing contract where they have it all. And then there's only six months worth of the new contract. Sorry, I should say the lay off coming back to us. So that combined with the new debt service schedule basically results -- the 10 year financial forecast is clearer on the debt service change. Bechtel: Okay. Thank you. Well, I like the -- I like the format that you have, because the explanation, because it means that I don't have to ask any questions, but I have sort of a simple question, and maybe I know what the answer is. Why is the General Fund transfer shown on the utility presentation as a revenue? It’s a revenue to the City. Am I missing something there? Ralston: Right, it isn't. That is an error. I think that should be as an expense. Bechtel: Okay. I'd put -- of course, if I were Frank, I would say that's a revenue, of course, so I was -- it didn't impact any numbers because all of these numbers are more or less stand alone. And I guess another question is, on rent, we seem to always harp on the rents. There's nothing we can do about those rents, absolutely nothing we can do about those rents? Ulrich: Excuse me, would you like the same answer I've given every year that you ask that. Bechtel: No, I don't think so. Ulrich: But it is built into the municipal code and it -- that's why it's in quotations here on highest and best use. And that is memorialized and that's the way we follow it. UAC Minutes Page 19 of 38 Bechtel: Can't we find maybe some places outside of residential areas? I noticed -- I have not seen that comment before, but. Ulrich: That's the way its -- that is the way it's written. And if you look at the -- if you look at the areas in which the property is located, they're utilizing what the properties highest and best use would be in that particular geography for that piece of property. Bechtel: And then, the last question. I'm assuming that legal services is going down because we will be spending -- we're spending less on the bankruptcy and some issues, at least that's my assumption, or is there some other reason? Are we being maybe foolish and saying that our legal expenses are going to go down? Particularly on the electric side, if we go forward, and I'm not sure where the Fiber to the Home project would fall, but whether it would be a stand alone legal, or would it be under the electric fund, but I hope that's taken into account here as well. Ulrich: Well there are no legal expenses in that legal services related to Fiber to the Home. They would be part of whatever decision is made going forward, or based on what has already been agreed to in past trials and work. I would not want to characterize that we would do anything foolish or make recommendations to changes these legal services. This is our best estimate and it's not based on one item, it's based on all the services that we receive related to, in this case, the electric fund. Bechtel: But is it fair to say the bankruptcy is going to -- that any costs we might have associated with the bankruptcy would be going down? Ulrich: I guess I'd just like to repeat what I just said, these are based on estimates of what we believe is an accurate forecast for legal services going forward. Bechtel: Thank you. Dawes: Elizabeth. Dahlen: Just a question on legal services. Is that just outside attorneys? That's not our own City attorney's? Ralston: It is, it's outside legal. We pay through the cost plan for the services of the City Attorney. Dawes: I'll follow up on that. Is that a net number we get -- do get help on the PG&E legal costs from NCPA and other municipals, because we're sort of representing all of the Muni's in that respect. Is that a net number that shows up in this budget? Ulrich: Yes, that's just related to City of Palo Alto electric fund only. UAC Minutes Page 20 of 38 Dawes: So if we get a contribution from NCPA that is not -- that's deducted from that total? Ulrich: Yes. Dawes: Okay. Let me ask a couple questions here. As is my habit, I try to get a little comparison going and I looked at the March 3rd projections that we talked about briefly a meeting or so ago, and was particularly intrigued that in March we didn't expect, or didn't project a rate increase for the electric fund. We are now doing so. As I went through the numbers, it was clear that the rate of draw down of the supply RSR appeared to be getting the staff nervous and wanted to move up the pricing so that it would not be drawn down as far as fast. I did note, however, that even under the old scenario in which the prices increases kicked in, in '05-06, rather than '04-05, that we never got -- the projection was we never got below the minimum supply RSR. In this, where we pull rate increase ahead a year, and I also admit that the cumulative rate change over four years is now projected at 37 ½% rather than 44%, but we're doing it a year earlier so we get that much more cumulative money in our coffers. And I also know that we'll be look at the rate proposal specifically, either the next meeting or the meeting thereafter for the July 1 cut off, or start date, I wanted to press a bit on the need for the increase in this forthcoming fiscal year and whether or not, if that is the case, the amount is still under review, the 8 ½%. Auzenne: Thank you, sir. Yes, you are correct. The problem with dealing with a dynamic document is that you usually take your best shot with the information that you have. We, in fact, did go back and revisit all of our numbers. We took a look at our two major tools to control utility costs. One is rates and the second is utilization of the rate stabilization reserves. We are in the process of transitioning from a fairly low base of system average costs, around 7.3 cents per kilowatt hour to a little over 10 cents by the end of the decade. That is going to necessitate rate increases no matter how we utilize our rate stabilization reserves and rate increases. It's still a zero sum game. So we took a look at what we were -- what our opportunities were, our latest opportunities, and we were looking at a variety of system improvements that might be coming down the road that were still in the developmental phase that hadn't been identified previously. We also looked at where the rate stabilization reserves are for both distribution and supply. You're right. We took a look at it and we decided that it would probably be more financially prudent to, rather than sit there and try and manage our overall revenues by the rates, to take a look at what our reserves will be. And if you take a look at line, I believe, 79, you'll find that we're trying to keep our rate stabilization reserves fairly constant. UAC Minutes Page 21 of 38 Dawes: Yeah, but that includes the Calaveras which is a whole different animal. And I try to look at these things individually. The supply RSR's, the -- other than the Calaveras is the biggy. Auzenne: Yes, this is the major driver. Dawes: Of course, now we're on the order of double what our maximum guideline is and we're properly expecting to have that come down as our purchase costs go up. But I'm a little skeptical that we need as much as an 8 ½% increase given the figures that I see. We have historically always underestimated what that RSR is going to be, the supply RSR. And I'd -- while I was very aggressive in pushing for gas increases during the time we were draining off our gas reserves a couple years ago, I now am taking a more cautious stance on how quickly we anticipate our purchase cost increases in terms of our retail rate increases. Auzenne: Part of the problem that we're facing is that we're in a transition year from '04- 05, '05-06, '03-04 where we're having half a year of basically old western, half a year of new western and market pricing. So that's going to skew that '04-05 number and that's what -- why that looks that way. After that things tend to remain fairly stable. If you take a look at '05-06, the -- excuse me, the supply rate stabilization reserve pretty much hits midpoint of where the reserve should be. Ulrich: Right. Mr. Dawes, I think it'd be helpful to look at line 85, supply RSR, which on that particular line is the reserve maximum guideline. And you can see it's going from 37 to 37.8, up to 52, stays pretty much that for awhile, and then ends up back up in '10, '11, around 61 million. And you can see with the 8 ½% rate increase that the actual supply RSR is somewhere in the -- about in the middle between the maximum and the minimum when you consider those increases in the maximum guideline for the supply RSR going forward. If you remove the 8½%, what you're doing is putting off a much higher percentage rate increase to a future time. Dawes: No, I'm well aware of that. I wrote down the old rate increases versus the currents. And for instance, the current is 8½ next year, 17 the next. The earlier forecast was zero and 15. And then in '05 -- '06-7, the earlier forecast was 17% versus 12 in this current one, but then it had '07 and 8 on the old one at 12% versus zero for this one, so basically pulled in. And my point was, and we'll probably debate this in much greater length when we have a rate proposal specifically, but I just maybe to telegraph some thinking to you as you, you know, mull it over some more, is how quickly we raise the rates in anticipation of higher costs and because these things are quite murky. And I also have to say that part of the issue is the volume projection. You're showing a pretty substantial, almost 10% drop in volume in '04-5 and, you know, I just don't know how you came up with that figure. If the volume was different these rate increase proposals would be I think quite a lot different, because you'd have much more of a financial UAC Minutes Page 22 of 38 resource to play with. I mean, we should've went up from 956 kilowatt hours in 2-3 to roughly 1,000 in '03-4, and then you're projecting a drop to 940 in 4-5, and then 952. So everyone was flat in 5-6. Now clearly we made -- spent a lot of money on demand side management things and hopefully that's, you know, part of this, but given the economic times we're in, frankly I think we're through the worst of it and I don't understand a 10% reduction in electrical volume. That's a really huge number. Auzenne: Well we'll have to come back to you with more detail as to what that is. Over time we've seen that kind of change periodically. It's not necessarily surprising to me right now. I think what you're seeing though is not so much an affect of sales, but rather an affect of supply prices. That what the -- that's the large driver in this. Those costs, the costs that we project that we build into our models are also always changing over time, given the best available information. Dawes: That I understand and I computed my own purchase cost average kwh and I might add that I think a wonderful addition to this in your sort of data box area, which is line 70 to 72, if you put in -- you have the total average rate on -- which we charge. If you added a line which says total average cost of supply would be very useful there. It just is a data item. It doesn't go into the computation, but it does -- would give a clearer picture of what those dynamics, I mean, from my computation showed going from 2.87 cents in 2-03 to 5.31 in '05-6. Is it doubling due to the -- all the things you mentioned, Tom. Auzenne: One of the things that we'll have to -- and I think that's a splendid idea. We'll have to take a look and see how to do that, because we would have to roll all of the supply related expenses into that and sit there and perhaps use “Ocham's razor” to define what all those supply related expenses might be, unless you want to just use just a single number. And I don't know.. Dawes: I'd take the number of kilowatts sold, that's what we buy, and I'd add in our costs for Western, any outside purchases, and Calaveras, I mean, just is fairly straightforward. It's not going to be something that is auditable, but it does give a very good summary of what that economic driver is all about. Auzenne: Sure. We do that on everybody's bill right now as far as supply and distribution costs. Dawes: Right. And those were my questions. Commissioners, any other electric questions? Elizabeth. Dahlen: Yeah, I thought we were only covering the first part. I didn't realize we were also -- we are covering … UAC Minutes Page 23 of 38 Dawes: All electric issues. Dahlen: Maybe if you could just clarify the Shasta rewind loan, excuse me, I wasn't sure what that was. Balachandran: This is a long standing -- this is a long standing agreement with Western bureau or reclamation. Essentially we along with a bunch of other customers, I think its about 20 other customers, provide money to allow for funding of efficiency improvements in CVP projects and then it gets returned to us through a credit in our power bill the next month. So that's essentially -- it's a rolling expense and credit. And it essentially nets out to zero. The advantage to us is efficiency improvements actually get made. And the reason we've entered into this kind of arrangement is because of certain decisions made during the federal budget process on how the bureau of reclamation is actually going to get funded. So this is a way to actually improve the efficiency of the project and that's how we get benefits. Dawes: If I could characterize it, the feds didn't have the money and the Muni's loaned it to them and we get more electricity by virtue of it and we get the money back as well through credits. Is that a fair characterization? Ulrich: Okay. I mean, the whole point of this, I mean, is that you advance the money at the beginning of the month and you get it back. So they have a fund of money that they can fund these efficiency improvements, we get the direct benefit of the efficiency improvements, and we'll learn how to follow the federal budget process in the same way. So it is really a win, win process. The more two cent power you get the better. Dahlen: And does this win, win process end in '04-05? Is that -- you see zeros after that? Balachandran: Yes, end of 2004. There are other mechanisms that are being contemplated to be put in place to basically do similar kind of advance fundings. This is a Shasta rewind, then there's a CVP O&M governance board, sorry, agreement where we do something very similar. Ulrich: I would expect we would do this as much as we -- as much as we can, going forward. Dawes: Mr. Bechtel, any further electric questions? That said, we will move to the gas fund. Questions by the Commissioners. George. Bechtel: I just have a question. I'm not again on the legal services under gas, I notice that the completion of the NAESB contract. So again I see legal services going down. Hope I'm assuming that that's good. I just was curious why -- what that contract was all about? UAC Minutes Page 24 of 38 Balachandran: These are the gas master agreements that we signed. And it took a lot of outside legal help to do that. Bechtel: Thank you, Girish. That answers the question. And I guess, one other question, and I would -- I'm turning to the 10 year forecast, is that I noticed that operations and maintenance and other administration costs were high, had gone up a million dollars in '03-04. I'm looking at line number 24 on the spreadsheet, is staying at 1.38 million for the coming year and stays up then falls off again. What's the nature of the higher charges in this three year period? Balachandran: Four Bechtel: Yes, line number 24, Girish. Balachandran: I believe this is some of the transportation costs that have been included over here. In answer to your question why is it decreasing by about $400,000, I'm at a loss at this point. What I will do is just get the answer to you at the next meeting. Bechtel: That's fine. Thank you. I notice it was same as last year. I know the gas -- the 10 year forecast, there were no changes accordingly to my comparison in -- of the last months and this months. So it showed up last month, but I didn't see any notes from our discussion we had last month on that item. So this … Auzenne: Now that stayed the same. I should make note down in the footnotes for basically all the commodities that there are certain items, certain expenses that still have not shown up here. So you're going to probably see yet another -- yet another version once all the allocated charges and salaries get rolled into this as well. This is a function of the new enterprise accounting system they're trying to get information out of. Ulrich: Excuse me. Mr. Bechtel, the answer for line 24, it’s a bit of a misnomer in the case of Girish's budget where it says operation and maintenance. Those costs are his salaries. It's in the category of other admin costs, or included there where his -- the line above under purchases is the actual commodities. So these are the expenses related to his salary in his organization. Bechtel: Well that makes me wonder. In other words it's gone up a million dollars and then we're going to go back down again. Ulrich: But that includes the other expenses like the legal and the outside contractors. Bechtel: I don't know -- I'm not sure I understand, but we -- you'll probably let me know at sometime in the next -- over the end of budget process. So thank you. UAC Minutes Page 25 of 38 Auzenne: Well, one of the things, excuse me, one of the things that Rosemary and I had talked about earlier this evening is that we're -- this -- the two different documents, although they certainly utilize numbers, draw from different sources of numbers. So sometimes they don't exactly match up one to one. Its just the nature of the City’s budgeting system versus the utility accounting system, versus FERC accounting and a number of other way to combine information. And .. Ulrich: Well, it really is never intended that the spreadsheet that you have of the major changes and increase would match up with the 10 year financial forecast. It's intended to who you the highlights and then we'll go into the details when we get to the operation and CIP budget. Dawes: Elizabeth. Dahlen: Sorry. I just wanted to -- I was wondering if there's some moving of numbers with the allocated charges, which shows zero, and then bump in '04-05. And then they go positive from there. I thought perhaps that's where some of the balance is. Ulrich: Could you mention the line its on that you're referring to? You talking in the gas utility? Dahlen: Right, lines 26 and 27. Ulrich: I think we're going to have to look at that, because it looks, you know, without any more information than just staring at this sheet, it looks like the -- some of those allocated charges got moved up to the admin area up in 24, but that's just a guess at this point. I think it’s a zero sum game, but I think they're on the wrong lines. Dawes: I wanted to probe a little bit. The numbers, I’m the type who likes to see the broad strokes. I notice that the -- our basic sales revenue drops 27% year over year, '03- 04 to '04-5 on line three, and yet when you look down on line 56, the therms sold are physical sales, the projection is down 5%, from 34 million to 32 million. And I don't understand why there would be such a dramatic reduction in sales dollars when our physical volume is not that much changed. Auzenne: There a number of our large customers that are on fixed term, fixed price contracts. So the volumes will not be the same as the revenue. We're showing total sales, but we're not necessarily having those volumes as part of our base portfolio. Dawes: You mean the volume -- under the terms, the volume in therms, that includes these industrial sales, but the sales dollars do not? Is that? UAC Minutes Page 26 of 38 Auzenne: I believe so. Dawes: Okay. Second question is, my recollection is that the laddering strategy has locked in the purchase prices for '04-05 either in total or in a very high percentage. Is that correct, Girish, so that what we're looking at here is really a pretty firm other than the actual -- what the actual volume might prove out to be, is a good set of numbers? Balachandran: Okay. It is a good set of numbers. There are going to be variations, depending on whether and we buy spring gas from month to month to balance our load every month. And in winter that could be close to 30% of the -- of that month's costs. That's pretty much, I'd say as much as we can do today. We've locked in, based on the average the expected load for the next fiscal year, we're basically locked in supply and demand for that. Dawes: And presumable this 9.9% rate increase is based on the locked in figures. Balachandran: Correct. Dawes: So that that is what we'll be seeing. Just parenthetically, I find it sort of amusing that out in year 2013-14 that you're able to project a 25% rate reduction. I thought that was terrific, but perhaps a little speculative. Balachandran: No instant gratification here. Dawes: Any other questions by Commissioners, or comments by staff on gas, before we move to the next. Ulrich: We have nothing else. I'm pleased to see that you check every box, no matter how far out it is. Dawes: John, these are wonderful schedules. You know I like them a lot. Ulrich: I know. I can tell from the smile on your face. Dawes: The next one is our water fund. Questions by Commissioners. Dahlen: Yes. I had a question with regards to the new projects. This is the significant change chart. The new projects to fund the costs of design, is that -- which project is that? If you could just explain that. That is item WS05001. And could you also answer for item number two, the sampling -- construction of sampling stations. What projects are those? UAC Minutes Page 27 of 38 Bradshaw: Water main project 19 is a replacement project for a deteriorated water line. And we're going to be doing the design work in '04-05 and the construction work in the next year. So that is strictly a real representation of an existing water main system. The water system sampling is because of the new chloramine conversions that we've had, we have to increase the sampling that we do throughout the system. And so this is additional sampling stations and sampling equipment that goes along with that. That what that's for. Dahlen: I have a question on that. How many additioning -- additional sampling stations do we have to have with the conversion to chloramine, and for how long will we have to maintain? Is that an indefinite -- we simply have to do more sampling in the distribution system? Bradshaw: That's correct. We have -- the sampling has to be increased. We're going to be sampling at all of our reservoirs, which we weren't doing previously at quite the extent that we've been doing it, plus we have additional sampling sites throughout the system. And previous under chlorine system, we had about I believe, and this is just a rough guess, about 10 sampling systems throughout the system. We've increased that to about 25 sampling stations throughout the system where we actually go out and take weekly samples to monitor our chlorine residuals. And those will have to be indefinitely maintained. We'll have to continue that process indefinitely. Dahlen: Why? Bradshaw: Well, chlor -- we have to maintain and monitor chloramines much closer. The system is -- the chlorine system we could manage in a not quite as tightly as we have to manage chloramines, because there's less margin for error under chloramines. If you allow the chloramines, or the chlorine residual to get out of line to quickly on chloramines -- under chloramines, you could have a situation where you lose control of your system and you have to go and super chlorinate the whole system, shut down parts of the system. So we have to monitor it much closer to make sure that our residuals are maintained much closer. It's a factor of safety that basically we want to make sure that we lower the risk of losing control of our system. Dahlen: Thanks. The capital projects that I asked about, that's covered in the financial plan under the capital improvements, I assume. Is that what those numbers are in there? Ulrich: Yes. Dahlen: And the funding for the emergency water, which is still up in the air, is that built into the 10 year plan as well? Ulrich: Yes. That's the -- that's allowed us to mitigate some of the rate increases. You can see it demonstrated there in the projects listed on the page. UAC Minutes Page 28 of 38 Dawes: I want to follow up on the issue of rates and CIP and the emergency supply situation. We had a series of studies done, spent a lot of money on it, we are supposedly under pressure from the state health board, I believe is the agency involved, to step up the capacity of our emergency reserves. I know that there are significant problems, as Elizabeth mentioned, in citing our emergency reserve, and dealing with some of the political economic problems that a project like that has, but my recollection, and I checked our previous long range plan, has the same rate increases here. I can't remember frankly going back a year, whether these rate increases shown here, which include 10% this forthcoming year and 15% thereafter are in fact lower than what we had expected when we had fully scheduled our emergency water supply CIP. Could you refresh my memory, John or Tom, on those rate increases and why they are not moderated more than they appear to be? Ulrich: Well there's a couple parts to that, that actually we were forecasting just a couple months ago, before we went back and looked at the actual spending on the CIP's, because previous rate increases assumed that we were going to spend the money on the emergency water in a more expedient way. And that I think is about 16 million dollars minus the amount of money that was spent for the chloramine conversion. So probably around 14 million was built in for the CIP for emergency water. Dawes: And it was bonded too. Ulrich: Part of it was, but it's very -- we've been able to -- we're going to use that money for the -- for this work. The problem is, or it think the important thing is, is that we don't -- when we see that we're not able to spend it, we have money encumbered in the budget, but since we're not spending it that fast, we thought it was more appropriate not to include that in the rate adjustment coming forward. But it was actually a higher rate adjustment than the 10%. I don't -- we were just looking back and forth at each other, but that was the reason we went back and looked at it and reduced the rate request accordingly. We're probably I'd say six months to a year, probably more like a year behind in the spending and that will pick up as soon as we've finished the EIR work and settle on the location where the reservoir will go, because the money that was in the plan, and as you recall in the budget last year, which was not approved by the council, included money for the design and for the part of the construction of the reservoir. So that's a pretty big ticket item. So that's all forthcoming and that of course will be paid for out of the -- out of the rates and in the reserve in the bond. Dawes: But the well rehabs are also been moved out. They don't -- they were not necessarily related to the reservoir issue. I mean it was a part of the whole package, but I’m sort of surprised that we're not going ahead with the well rehab. UAC Minutes Page 29 of 38 Ulrich: Well, as you recall, part of -- and Scott can probably give you more of the details of the specific project plan, but part of this is that we need to put a well in at the location where the reservoir is going to go. And we also need to consider how much, if any its going to cost for moving the water from this reservoir location to the turnout so that water can be mixed with the Hetch Hetchy supply. If the reservoir ends up going in Roth Park, its going to increase the cost of the piping to bring it back to Liden turnout, probably about a million less dollars. So those -- those things are still yet to come. So the plan is still moving along. Do you have any more comments about the rehab, Scott? Bradshaw: I think it needs to be clear that the well rehab and the reservoir work are all intertwined and all part of one major system. And its -- it doesn't really work very well just to do it piece meal. So we're trying to do this all in one project that flows together, so to speak. It's not that easy to make the whole thing work just by doing the rehabs now and waiting to do the wells. That's necessary to do with the reservoir. They need to be done at the same time. That's what I'm trying to say. Dawes: Thanks, Scott. Any other questions, George? Bechtel: Well, Dexter, I thought you were going to ask a question, or at least were going to get some information. If in fact we're doing the emergency water supply because we don't follow -- we're not following state guidelines, when do we have to comply, or is there any hard compliance, or is it strictly a guideline? Ulrich: No, I should have stated something a minute ago when Mr. Dawes said about requirements. It's not a requirement. It's a recommendation. And as you recall, the whole concern is that we have an area of the water system that does not have enough storage to be able to handle this contingency when there's a fire on the hottest day of the year when the Hetch Hetchy line breaks. So it’s a matter of how much tolerance we have for not having that emergency supply in place as opposed to a law saying we have to do it. Bechtel: Thank you. Dawes: I misspoke. I should have said recommendation. Elizabeth. Dahlen: John, the cost for Corolla to do their continuing study, how does that factor into everything as I assume that that's an additional cost that we hadn't planned for? Ulrich: Yes, the actual modification to the contract and the CMR did not come back for your review. We made the modifications based on trying to figure out how the best way to make this work, because we had a contract with Corolla that we've talked about. And we negotiated with them on the planning by interjecting this additional EIR work moving it ahead and basically expanding it a little bit. So we negotiated a change in the contract UAC Minutes Page 30 of 38 and then went back to the City Council a few weeks ago to get their approval to do it. It was rather complex. I -- we still believe it was easier to do that than to go and start all over again. But those other changes have been included and had -- you're absolutely right. Its increased the cost. Dahlen: By how much and where's the money coming from? Ulrich: Well, of course, money always comes from the customers ultimately. But do you recall what the difference is? It's up in the million range I think, isn't it? Bradshaw: It's right about a million dollar increase. And it's carry -- it's included in all -- in several projects that are listed here. It's -- their contract with Corolla is the design work and the design work is for several of these projects that are listed here on the -- on this sheet. Dahlen: Is there any benefit that we're going to get from the work that they're doing with the next phases of work, or is just an additional million dollars that we're spending on the study? Ulrich: I believe that when Scott and I mentioned a million dollars, it increases the contract now, but that doesn't mean it -- the overall project cost from start to finish is going to be a million dollars more. I'd think I'd have to -- I'd have to go back and look at that. It's changing the contact with them, but most of it is doing -- a good part of is work they would have done later on, with the addition of probably looking at a number of more sites to do the evalu -- EIR evaluation. So I don't think you should leave thinking this is all going to cost a million dollars more, but that particular contract has gone up by that much. Bradshaw: Yeah, that's correct. The EIR work that was going to be done on phases throughout the full projects is being done up front now. So those -- a significant amount of that money that would have been spent on EIR work later on is being spent up front. But there is an additional, like John mentioned, there are additional sites that are being looked at which are adding some incremental costs to it. Ulrich: You can get an idea of the -- Rosemary points out on the significant change page under water. You can see it under WS01010 reservoir booster station. That hasn't changed. It's the -- it mentions project added to phase one of water enhancement construction, expected to start November '04 and that 3.3 million dollars. So that – it’s just moving it forward. Dawes: That covers some of that EIR? UAC Minutes Page 31 of 38 Ulrich: Correct. Final Report Wastewater Collection System Master Plan Dawes: Any other water questions? We will move to Waste Water Collection. Commissioners. Bechtel: Well on waste water, I was looking at the rate increase forecast for '05-06 of 17% and then 5%. And it seems like that the -- that the reserves in '07-08 build to seven million dollars, about 2 million dollars. So I would at least plan to ask questions about whether at least in the outline here is whether that's really justified. Particularly then we have a rate reduction 9-10 of 10%. So seems to me a little -- we need to do a little more regression analysis on some of the numbers on the long range plan. But otherwise I don't have any questions specifically for this next budget year in waste water. Dawes: I wanted to return to the question that I asked earlier about the General Fund. John, you indicated there is no General Fund transfer. Line 23 says, CIP to General Fund and other, I guess that capital improvement projects and General Fund transfers don't seem to make sense on the same line, but I just wanted to verify that there is no General Fund transfer? Auzenne: No, there is no General Fund transfer, but what we do is some of our enterprise funds co-mingle with General Fund projects in their CIP's. Like for computers, example. So its -- that's where its our portion of that expense. Dawes: Is there a reason why we don't have a General Fund transfer from waste water? And, Tom, you are vigorously nodding your head. So there obviously is. Auzenne: It's illegal. Dawes: Why? Auzenne: State law. Dawes: Only with respect to waste water, not with respect to electricity, gas, or drinking water. Dahlen: And I might add to that, storm water. UAC Minutes Page 32 of 38 Dawes: Exactly. Ulrich: Rosemary can explain the projects that you were referring to and we do not transfer money to the General Fund. Rosemary: Tom is exactly right. That's the Wastewater Collection Fund’s share of other projects, some in the General Fund. These are multi funded projects. If you look a little bit at the last page, we added this year our reimbursements to the Technology Fund. And there's a list of some projects that we -- the Enterprise Fund share with the General Fund for ongoing technology projects, telephones, the SAP system, a variety of projects. And you can see in the last column the Wastewater Fund’s share. So we brought this to you this year as a budget highlight of a significant expense. Dawes: Given the rate, or given the CIP reduction that we talked about earlier, it would seem as though it would obviate rate increases, in fact might lead to rate decreases because we're moving into a steady state, sort of maintenance mode, and we do have this 17% and 5%, as Elizabeth mentioned, in two of the out years. It's not of critical importance now because we won't be entertaining any rate increases for the fund, but just in general thought, it would seem to me that with the CIP projected, the long range CIP down, that we would see some certainly not anything in the way of rate increases. Ulrich: I think we have to go back and look at that. You know, the study that we talked about earlier, we need to correlate that with years, the $21 million going forward, when was that planned to be spent, and make sure that's been reduced from the forecast that we have on the sheet. Dawes: May not be baked in the cake. Ulrich: Well, I don't think any of the three of here want to --we don't have the spreadsheet in front of us so we'll have to go back and look at it. But it’s a point well taken. We'll look at it. Dawes: Any other questions. Elizabeth? Dahlen: Yeah, I had some questions on the proposed significant changes. I also had noted where is the $21 million reduction. But with regards to the water reclamation line that we've talked about in previous meetings, the half million dollars does show up as a change. When will that be confirmed? And it's my understanding that project is not necessarily yet going forward. That's going to come up in the City Council's finance review. Ralston: It's included. It's in the Wastewater Treatment Fund, managed by the staff at the Water Quality Plant, which is the other enterprise fund in the Public Works UAC Minutes Page 33 of 38 Department. And it is a project in their budget and it is coming up for review by the Finance Committee. Those charges there are rolled in actually for the next two years for $500,000. Ulrich: As you recall, we made the commitment based on your -- on your conditioning that we would fund up to a million dollars. So we thought it was appropriate to put it in the budget. But anything could happen and it may not come to pass. Dawes: Other questions. Thank you, Rosemary, Tom, John, any other staff. Comments with respect to the 10 year plan. Tom. Auzenne: To answer one of your questions, although I'll be back answering the others, looking at the gas utility as one example for cost plan charges and utilities administration, you'd asked about it being zero. And I see under our 2 point type footnote that for '03 -- '02-03, excuse me, '02-03 and '03-04, those costs were rolled up into operations, maintenance and other administrations. So like line 26 and 27 are zero for those two years, but those costs have been captured in line 24. So I will find a way to asterisk the footnotes in future. Long-Term Water Demand Projections Dawes: Thanks. I think we're ready for item number three, long term water demand projections. Ulrich: Yes, I might mention that also on the topic we just talked about, if you have any recommendations or ideas on how to improve the material we give you on these projects that are -- that are significant, I'd appreciate that. As you can recall, we've made some changes about every year in that chart. The next two items, long range water demand projection, Jane Ratchye is here, able to answer questions. We thought it was -- that it'd be interesting and valuable for you to see the water long term demand projection which we provide to the City Council so you can see what that is. And then following one on desalinization is based up questions that you asked some time back. So these are both reports for your review and questions. Dawes: Any discussion by staff before questions? Jane, do you have any intro to talk about? Then let me start off. Probably the thing that concerns me most about these kinds of numbers is whether or not our rather favorable drought year allocation with SFPUC hopefully will not be changed in any major way. When I see long range forecasts like this, I worry about it because we have been so thrifty in our water use and its come down over the years, our drought allocation is quite high based on our sort of years ago consumption. Where do we stand on that, Jane, with respect to this forecast? UAC Minutes Page 34 of 38 Ratchye: Well the forecast doesn't change our draw allocation and as you may recall, the interim water shortage allocation plan is the plan you may be referring to that set this drought time allocation. And the -- it's called interim because it expires at the end of the contract, which is mid 2009. And we really don't know what is going to happen after 2009 and whether the idea of the supply assurance that's in the current contract will continue on after that, or whether we have a different type of structure going forward in the contract, or even prior to 2009. It's certainly possible and perhaps even preferable to actually have an allocation of water from San Francisco, a true allocation. And that may happen as a result of us financing some of this -- these capital improvements. Again, this won't -- I don't know what the relationship between that and our long term forecast will be. I think it's going to be more based on how much we're willing to pay as a fraction of the capital improvement program and how much we're going to get from the system. If we have some true entitlement, I think it'll be based on what we're willing to pay. And so it won't be a free thing like we have now that's because of historically high usage, a very high supply assurance, but that's our allocation under this interim water shortage allocation plan is free. We don't pay at all for that allocation. We pay for how much water we use. And I think that probably will change. Dawes: Sounds like a straw in the wind. I hope you'll fight hard for our interests. But we shall see how that turns out. I -- just a comment, rather than a question. I was fascinated on page 3, the very detailed description of their long term water use model and probably about the number of toilets and showers and urinals and all this sort of stuff. And I mean, it's all outside watering that drives water use, in the suburbs anyway, not so much in San Francisco. And of course that be analyzed like this. And seems like spent a lot of time worrying about something that really doesn't make a whole lot of difference when it comes to the suburban water users. But .. Ratchye: Well, it is a -- it is an end use model and they certainly did take into account the irrigation , or the outside water use. And that's a big piece of all the suburban water users. The next step in this project is to look at, I think there's 33 candidate water efficiency, or water conservations measures that will be evaluated using this end use forecast. And so -- and that's coming up fairly soon. We're going to have a meeting with the consultation. We should be getting next weeks the results of that analysis that shows what these different measures are and what sort of penetration we can expect in each of our cities, in Palo Alto for us, and what they recommend, you know, even the cost effectiveness of all these different measures for each of the different cities. So that's going to be based on -- they'll be using this model for that analysis. Dawes: Questions by Commissioners? Thanks, Jane. Dahlen: I just wanted to follow up on the issue with our contract ending in 2009 and what steps are your taking, Jane, in terms of negotiations or plans to get us a true UAC Minutes Page 35 of 38 allocation if possible? What is the process that you're going forward with, or if there is one? Ratchye: I don't have a process laid out. This has been my issue that I've mentioned to this commission over many, many years, and I've brought in up in –inaudible- with San Francisco, beginning with the water supply master plan that San Francisco completed probably six or seven years ago, and started probably over 10, maybe 12 years ago. And I was on the steering committee of that. And that was where this idea came up, to have these allocations. And that was in fact one of the recommendations from that study that was supposedly going to be carried forward and worked on by San Francisco. But not much has happened on it. I bring it up a lot. The attorney for BAWSCA also has written some -- done some work on it. And it's a live issue. I just don't think its going to ever happen and unless we actually have to -- we finance these capital improvements. I think that's the opportunity where something like that can happen. But then its not going to be, as I say, it's not going to be a free thing so people aren't going to want as they did in the interim water shortage allocation plan as much as he can possibility get.. And so you would have to decide, you know, what really is our long term forecast? What do we really want to commit to? But once we have those allocations, if we do, I hope we do, then they're essentially a tradable asset so that we could lay off some if our demand didn't materialize. And so it does come up. It's come up in this particular project. I've mentioned it in just the last meeting we had. So. Dahlen: And the reason I ask is I think it's very interesting and it's obviously very beneficial for us. And I have heard of your passion on this. I was speaking with Patrick Sweetland recently from Daly City, and he made a specific point of talking about his issue and Jane Ratchye in Palo Alto fighting for it. So. Regional Desalination Project Information Dawes: There being no more questions, we'll move onto item four, Regional Desalinization Project Information. I'd say that this is probably Commissioner Rosenbaum's favor subject. Ulrich: As you can see, it's, you know, it's rather detailed and -- but it is not specific for Palo Alto. It gives you an idea of the region. And you may wish to study this, or ask some broad questions. Dawes: Actually I was interested to see that Palo Alto as a location sort of made the top four. It was sort of interesting. And then the other thought was, depending on how these things are designed, this is probably a pretty interesting CO-GEN opportunity. You got a lot of heat being generated and heat can be used to evaporate water. And I didn't know if UAC Minutes Page 36 of 38 there was any linking of these to things in any way. Not necessarily for just us, but even in the preferred sites up in Crockett and so forth. Ulrich: For a number of reasons, we haven't made any linkage in this area. The desalination has not been one that we've looked at closely at this point. You know, you know our kind of long term plans, something we could sure consider with other ways to have a more efficient power plant operation. This could be something of interest. Dawes: Other questions. Dahlen: Do you know where the site was in Palo Alto that they were considering? Ratchye: Yeah, it's the water quality control plant. Dawes: There being no other questions, I will entertainment a call for adjournment. Bechtel: Mr. Chairman, maybe we can -- can I clarify this -- or talk about the schedule, our next schedule. Dawes: Yes, actually I do have a question about scheduling as well. This is beyond what is shown under future highlights. All dates tentative, May 11th, 18th, and June 14th. Ulrich: I have one other .. Bechtel: Yes, I guess I was interested in the agenda for May 5. You list, oh, what the Council is doing, but I'm assuming that the next meeting that we will see your -- your budget package for the first time? Ulrich: Correct. I don't have the list in front of me. Do you recall, Girish, what we were having on the May 5th? Balachandran: Let me just sit. I was just leaving. Ulrich: I have eyes in the back of my head. Items that would be for the May 5th. I didn't bring my .. do you recall, besides the budget? Balachandran: I think there was going to be –inaudible- final results, renew –inaudible-, we were going to give an update on that. Ulrich: The two we recall is GULP, the gas plan, and renewables. The other item I'd like to mention while you're thinking of that is that on April 13th, next Tuesday evening, we're going to the Policy and Services Committee for the draft, or for the study on the local UAC Minutes Page 37 of 38 generation, the one that you reviewed last month. And it'd be helpful, I think, if a member of the UAC could attend the meeting. Dawes: Volunteers for that? I intend to be at the April 17th session, along with Commissioner Rosenbaum for the fiber situation, sort of a .. Ulrich: I think that's the 19th, Monday night the 19th. Dawes: Oh, it's the 19th. Okay. I was going from memory. So, Elizabeth, could you represent the commission at April 13th? Will you be around? Dahlen: Yeah, I should be there. I'm also planning to go to the meeting on the 19th as well. John, where is this meeting? Ulrich: It'll be in the conference room next door. Dahlen: Okay. 7:00 p.m? Ulrich: Yes. I believe there is another item just before it, but I'll send you the agenda and also send you a copy of the item that's in the packet for the council. It's essentially what you already have, but I'll get that to you. Dahlen: Very good. Dawes: As far as the 19th is concerned, you had sent an e-mail, John, to the Commissioners regarding that scheduling and suggested that any Commissioners that wanted to attend could. Commissioner Rosenbaum had talked to me about perhaps formally scheduling he and I to present the two sides of the vote that we had the other night. Certainly the other Commissioners are welcome. Elizabeth, you indicated that you were intending to be there as well. I don't know, and, George, yes as well. So perhaps we'll have a full house and a spirited conversation. Any other questions about scheduling? Bechtel: I guess I -- I still didn't hear when talking about budget for the May 5th meeting, we're talking about GULP and renewables, but you didn't include in your list budget. Ulrich: I'm sorry. I thought I mentioned that earlier. But that .. Bechtel: But that was Ulrich: Right. UAC Minutes Page 38 of 38 Bechtel: So these two items plus budget will be .. Ulrich: Right. Now you should have copies of the draft CIP. It was delivered. It's got a gray cover on it. You have copy of it? Bechtel: I haven't. Ulrich: It's the one that goes to the Planning Commission. So you should -- alright I'll get that to you too so you have some. The problem with the budget process is that it goes rather fast. And we only have one meeting scheduled between now and the time that we make our formal presentations to the finance committee in May. And you can see those listed here as highlights for those meetings. Adjournment Dawes: Any other scheduling questions? Is there a motion to adjourn? Bechtel: Move to adjourn. Dahlen: Second. Dawes: Let us adjourn. Thank you.