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HomeMy WebLinkAbout2004-06-02 Utilities Advisory Commission Summary MinutesUAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 1 of 16 UTILITIES ADVISORY COMMISSION MEETING MINUTES JUNE 2, 2004 I. ROLL CALL Commissioner Rosenbaum called the meeting to order at 7:03 p.m. in the Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Dick Rosenbaum, Elizabeth Dahlen, George Bechtel, and John Melton Absent: Dexter Dawes, Mayor Beecham II. ORAL COMMUNICATIONS None III. APPROVAL OF MINUTES Motion: Commissioner Bechtel moved that the minutes from May 5, 2004 be approved as written with a second from John Melton. Motion Passed: 4-0 IV. AGENDA REVIEW AND REVISIONS No changes to agenda. V. REPORTS FROM COMMISSIONER MEETINGS/EVENTS None VI. DIRECTOR OF UTILITIES REPORT John Ulrich shared that Dee Zichowic will be preparing sense minutes from the meeting tonight. The intention is to move away from verbatim minutes in the future. We will keep copies of both the video and audio. Hopefully, this will be more productive and result in a cost saving. John asked for feedback from UAC. Ulrich mentioned tours or trips and reported Mayor Beecham participated at the NCPA congressional staff tour over Memorial Day weekend. John shared the event was very well attended by key senator and representative districts and states. The new generation facilities tours included tours of Turlock Irrigation, New Don Pedro Dam and Reservoir, Silicon Valley Power new power plant and travel extensively around the territory. John and Don Dame met the group in the East Bay at the end of the tour, gave insight about uniqueness of Palo Alto, MDO2, and locational marginal pricing. It was put together very well. It was Important-having key staff members meet with Senator Feinstein’s staff. Ulrich shared upcoming Council events including June 7th Council – expect resolution confirming prior contribution 2005 – 06, operations for CVP project which gives authority to the City Manager to execute the agreement. UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 2 of 16 Second reading of ordnance authorize WAPA Custom Product contract. First reading was May 10th, and passed 8-0 with Mayor being absent. There was information regarding the ISO in the newspaper stating Terry Winter, CEO, resigned from his position, as well as the Vice-President of Corporate & Strategic Development. This surprised everyone and there has not been much discussion on the topic. The past CEO from 1997-99 is in place – Jeff Trend. He will take the position on an interim basis. Expectations are that it will take up to 6 months to permanently fill the position. George Bechtel noticed Utilities is hosting meetings to explain the City’s undergrounding policy, on the local channel and asked for some background information. Ulrich will get dates and times of the viewings. The purpose of this video is to explain how the underground district works. For example, district number 38 has had a significant amount of questions surrounding the project. We would like to give people an idea of what we’re doing. We also plan to have some meetings with the goal to provide increased communications to the public. VII. UNFINISHED BUSINESS 1. Utilities Quarterly (May 6, 2004 Mtg) Ulrich shared we had agreed to supply quarterly reports which in the past had individually reported. At the request of the UAC we now bundle them together and the result is the Quarterly Reports. Due to agenda items at the last meeting, we moved this forward for questions and answers for the meeting tonight. We presented this information on the Utilities web site and at the main library. Our goal was to give everyone an opportunity to review and use tonight to ask questions, if any. Rosenbaum asked if there were any questions. Elizabeth Dahlen questioned item 2 and the use of chloramines; will this be a ballot measure in November and how does that affect us? Jane Ratchye answered there has been some resistance to the use of chloramines, including letters to the editor in local papers expressing serious opposition. Yesterday’s Examiner front page story told of a woman in Menlo Park claiming to have a very serious allergic reaction with medical back up and attorneys who will take action against SFPUC. Most questions have been directed to SFPUC, who came to the BAWSCA board meeting and they said they want to take responsibility since it is their issue. They have offered to pass information on to us. There is nothing we can do individually. Dahlen asked if this will be on our ballot. Ratchye stated no for our ballot but there have been many questions at council meetings in Millbrae. Jane hasn’t heard of any activity in Palo Alto to put on ballot. UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 3 of 16 Dahlen questioned what they’re putting on ballot, the question do they want chloramine? Ratchye stated yes but she didn’t know what effect they can have and is not sure what they want to do. Melton asked about the SFPUC new director, wondered what our take on the new person is and what impact, positive or negative, that might have on Hetch Hetchy. Ratchye stated that SFPUC’s new director Susan Leal, just took position yesterday. Since Leal is politically connected in SF and it will take political resources, it could be beneficial. The chairman of BAWSCA wrote a letter to Mayor Newsome asking for a meeting and expressing his expectation that a change in leadership not affect any project schedules. Leal has no water management experience at all, but has financial experience and is an elected official, City Treasurer. Bechtel asked about SFPUC issues, specifically the part of the report that interested him was that BAWSCA is monitoring the SFPUC CIP project process and have developed a method of showing progress, are we sharing this information and are they receiving gracefully? Ratchye agreed that we have shared information with San Francisco, BAWSCA’s consultant is there at any project meeting he wants to go to. Brown and Caldwell has made many recommendations and they have considered and SFPUC has followed some of them. They take his recommendations very seriously. The BAWSCA board could take action if they disregarded Brown and Caldwell. Bechtel’s second question referred to the SFPUC rehabilitated pipelines replacement costs being higher in the CIP than they thought. He wanted to know if there is any information on projected costs. Ratchye hasn’t seen any numbers yet so can’t help with that question. In a couple of weeks at another meeting, we will expect to hear more from San Francisco. San Francisco may be proposing schedule changes at that meeting. Bechtel: Cost wise and time wise changes. Rosenbaum moved on to gas and asked for questions. No questions except he received a call from a gentleman who thought it was dumb to build a gas fired generation plant since natural gas would run out before the end of the usefulness of the plant. Ulrich hadn’t heard of anyone asking that. At another meeting, someone asked how prudent it is to consider using natural gas but not in terms of gas running out but rather if this a smart type of fuel to use for a power plant. We recognize if you look at the energy policy of the U.S., that report said using natural has was not the proper fuel, they moved on to talk about using coal. Coal is not viable for California. Our analysis will take that into account; will also include the risk side for what the cost of natural gas will be. UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 4 of 16 Balachandran stated he has never heard anything about it running out. Rosenbaum mentioned that one of the other comments has to do with liquefied natural gas and difficulties companies have had in trying to site LNG plants because of the concerns about terrorism and other things and the possible impact this might have if indeed it might prove difficult to import as much LNG as people were contemplating importing. Ulrich said a recent article in the Wall Street Journal last week stated that there were a number of places proposed Mexico and the East Coast and down in Louisiana and I believe there is a high level of concern of terrorism and how prudent to put in. John thinks it is a much bigger matter since the price of oil has gone to an all-time record high. We’re talking about a $15 per barrel price built in as part of the fear factor of what could happen in the Middle East to our supply. We’re already seeing this happen in our prices. As oil prices go up, you’re going to see this happen to natural gas prices in lock step except to those that have contracts. Bechtel asked on chart gas meter exchanges. Long term plan monitoring. Two questions asked were do we have to do, do we do when providing new service, change out gas lines, and are we thinking about the future when we might have AMR meter reading? Are new meters adaptable? Bradshaw said we do think about doing this but we are not doing now. We are changing because meters tend to wear out every 10, 12, 15 years and we change to ensure accuracy. We target that number to keep a constant rotation to completely cycle through our system every 8-10 years. Bechtel agreed that we do spend a fair amount on changing out our meters and thanked Scott for explaining the process. Ulrich added that it’s necessary to obtaining accurate meter readings to ensure we are billing our customers accurately. Rosenbaum asked for questions on the electric quarterly report. Melton asked about Item 2, the regulatory issues update. The FERC items are both big-ticket items. We expect a ruling on May 6 and would like an update on the back charge issue. Balachandran stated that PG&E can actually bill us and we will be required to pay. We are in the process of determining if PG&E is billing us the correct amount. If too much, we’ll get refunds. Our attorneys In D.C. are preparing for the second phase and expect the decision from May by next week. Will be more that $8 million. Girish explained that PG&E is expected to back-bill and will also add interest. This continued exposure will carry on to the end of this year. Melton asked for an update on the FERC transmission cost dispute. UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 5 of 16 Balachandran expressed that the ruling came out and we’re not happy with it. Both Western & FERC have filed comments to the Commission stating that DOE ruling was made in error. Both cases are similar and will take about same time frame. Trying to consolidate and keep eyes on both. NCPA is charged by load, Western gets credits, we need to ensure no double accounting; if we pay for Western on the load side we need to make sure we get offsetting revenue on the other side. Two different judges will handle these cases. Money has not been accounted for at this time. Ulrich took this opportunity to repeat that one of the reasons for having the reserves levels up is to try to have enough money to take care of contingencies like this. Rosenbaum stated that the reserves contain $10 million for this very type of contingency. Balachandran said that while contingency risks were known and put aside it is only a fraction of the total bill from PG&E, we did not plan on this amount. One line item is for legislative and regulatory contingencies. Did not budget for this Rosenbaum repeated that there is money in the reserves. Balachandran said the money will be drawn down to pay bills. Dahlen questioned the feasibility study and status of the power plant. Balachandran is assembling staff teams and looking at different consultants to help but there is really nothing to report in results at this point. Public communication and participation are key at this point. Karl Knapp will be the Project Manager. Dahlen asked for the status of what they will be looking into? Ulrich stated that will be a decision of City Council. Melton shared information about an information conversation he had with a council member who asked why we are so focused on gas-fired plants. Specifically, why are we not looking at photo voltaic on a broad citywide scale? Why not put a panel on every roof of the city. John didn’t have an answer for the Councilmember. Ulrich stated that a Councilmember did ask about this at the Council meeting where we voted on the proposal. Part of the reason is cost and, if you look at long term energy plan, we’re trying to spread risk out and spread supply out into various areas. This is one component of it. We think it is a prudent addition, assuming a power plant is an appropriate resource to have in Palo Alto. Knapp stated that we are not ignoring photovoltaic, we have a $3 million project going on right now to install on public facilities. These cost 5-6 times what conventional generation provides. He assured the Commission that photo voltaic, is indeed, part of our portfolio. UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 6 of 16 Ulrich stated we are being aggressive but not in photovoltaic, considering the cost versus benefit. Moving ahead will have renewables up to 20% by 2015. John shared we will go through details since staff wants the Commission to be comfortable with the decision. GB acknowledged that this question will come up again. We will be completely prepared to answer. Information will be on the web site, FAQs for the public, entire process. Rosenbaum asked for questions on the fiber report. No questions asked. Question on rates? None Bechtel questioned the coordination of the utilities departments in public projects. He did not mean to deal with the issue tonight but wanted to mention that the Utilities had just completed a major rework of underground Utilities work in his neighborhood. He noticed streets get repaired along the route of the pipes but there still remain a lot of defects in our streets. George expressed his concern that Utilities and Public Works could better coordinate work that needs to be completed. Mr. Bechtel encouraged staff to look at the street improvement plan along with the Utilities improvement plan. He estimated there could be a possible saving of 20% by doing so. Bradshaw acknowledged that George had an interesting comment. He shared that the Utilities Department works very closely with Public Works on our projects, meeting quarterly and have developed both 5 and 10-year plans that are being worked on. Coordination efforts make it hard to do all at once but Utilities tries to get in ahead of Public Works on their street improvement programs. One problem is that they want to do an entire street at once, curb-to-curb so when they leave it doesn’t look patched and spotted. The goal is to be out of there for the long-term life of that pavement. We’ve made a commitment not to go back into it for at least five years. Working very closely with administration of the projects to make sure our staff work together very closely on these projects. Scott advised the Commissioners that they should expect to see major results. Bechtel stated that he was talking about nuisance things. He mentioned that it would seem a City contractor (sewer for example) could take care of a lot of the issues if someone authorized the work and he thought people would be happy with that. Mr. Bechtel encouraged the City to not try to be perfect but do what’s just good enough. Bradshaw cautioned that when talking about general funds, each Utilities has their own fund and we must be very careful of how to do work between the funds. Ulrich said that Utilities and Public Works spend a lot of time coordinating our projects and we think we are doing a wonderful job of coordination. He asked the Commission to give specifics if they know of a lack of coordination on our part. Trench fees used by the General Fund for use of our effort be the least amount of money, cutting fee is on graduated scale. After we do our work, we do not expect Public Works, if they have two more years of useful life on that street, to go out and UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 7 of 16 do more work on the street. The City is not doing a very good job of having a contractor who is doing work for city, stop and fix something they see. We don’t give them many options to do this on their own volition. John asked for a directive to this specifically if the Commissioners feel this is an area we need to improve, as we’d be happy to look at the possibilities. People of Palo Alto are paying for this work and any suggestions that are offered will be considered. Bechtel stated he was hoping to continue to figure interventive ways of doing double duty when contractors are doing business on our streets. 2. Energy Risk Management 3rd Quarter Report (May 6, 2004 Mtg) Ulrich had Karl Van Orsdol join him at the front table. Rosenbaum asked for questions on the Energy Risk Management Third Quarter Report. He stated that page 2 of 9 had a nice chart showing electric purchases going up. He said he has never seen what we paid for those contracts. He mentioned that the Commission was told a couple of years ago what we paid for the Coral contract. How about Duke and Sempra? Van Orsdol directed the Commissioners to look at Attachment A where there are transactions out through October 06 for purchases from Sempra and Coral according to month. To date, he has not listed overall fixed price as a lump sum. Rosenbaum thought they were all gas purchases. Van Orsdol agreed, as he hasn’t put figures together for electricity. Have not listed in this detail as yet, only begun to put transactions in database. Karl promised to have in-depth detail in next Quarterly Report. Rosenbaum asked for the figures. Balachandran stated that it varies from 5.1 to 5.5 cents. Rosenbaum would like to see these figures routinely listed starting with the next report. VIII. NEW BUSINESS 1. Water IRP Recommendations (Information) Ulrich stated that Jane Ratchye was here to discuss and go through the guidelines shown in the appendix. Ratchye recalled that earlier we had made recommendations that we have sufficient San Francisco water in all drought years, don’t need another supply for normal years and don’t need to connect to the Santa Clara Valley Water District. She cautioned that it is advisable to look more deeply into demand side measures and recycled water. Main undone thing is to determine if we want to use wells in drought and, if so, what level of water quality treatment do we want. This remains UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 8 of 16 an open question, but Jane stated she has some new recommendations at this time. CPAU’s CIP is currently undergoing the environmental review process. We have to wait until that process is complete to find the best place for any wells and/or reservoir. Jane cannot make a recommendation in advance of the completion of the environmental review process. Cost remains unknown. We do know that a well and reservoir at El Camino Park would be cheapest by far for using groundwater for drought. In addition, Jane does not recommend using reverse osmosis for treatment of the groundwater. She stated the best way to treat the groundwater is to mix it with San Francisco water and that the closer you are from a SFPUC turnout, the less expensive it is. In the last drought of 1988-1992, wells were used as a supplemental supply, but that the water was introduced directly into the distribution system near the wells. This system affected the people living closest to the wells. In addition, since water was introduced into the system in a different direction than normal water flows, sediment was stirred up from the bottom of the pipes that got mixed into the water. Therefore, many people associate using groundwater with very bad quality. Jane thinks that a mix of three-parts San Francisco water to one-part well water would be more acceptable to the community, especially if it were mixed in at a turnout so that the quality would be more uniform in the community. Jane repeated that her new recommendation is to not go with reverse osmosis as it is extremely expensive. We would be paying a large cost to just sit there and when you do use it, we would be paying a very high operation cost. Having lived through last drought in 80’s, Melton mentioned that we were able to do a terrific job on the demand management side. He mentioned that looking at the results of the poll, there seems to be strong support for no well water. Is it possible for the City to go through a drought similar to the 80’s with ‘just conservation?’ Ratchye replied that it is possible and in 1987 the community was able to cutback usage substantially. Our usage has never recovered to pre-drought levels. Asking people to cut back such a large amount now is different. It would be much more difficult at this point in time make those cutbacks. San Francisco has changed the way they run the system; when in 1988, it needed a 25% cutback, under the same hydrologic conditions, it would probably need only be a 20% cutback. We still could face a very serious drought with cutbacks of more than 20%. Not using wells in time of drought will be something we look at. Jane did not make a recommendation at this point. Cost will be a factor. If very cheap, the community may want to do it, while some may not want to do at all. When it becomes more and more expensive, people may want to cut back rather than extend a pipeline from a turnout to a well. We will have to look at the alternative of not using it. UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 9 of 16 Bechtel asked to be reminded of timeline of making decision. Ulrich stated this moves over to infrastructure side, which has been extended longer than he’d like. He reminded the commissioners that we must go through the EIR process, which is longer than we expected. It will probably be mid-2005 before the final EIR is completed and actual siting of where the reservoir will go will be made at that time and we can get started. Dahlen asked about the recommendation to participate in the development of long- term drought supplies with SFPUC and BAWSCA. Ratchye was referring to jointly purchasing water in dry years rather than severity of drought. Any agency that wished to participate in purchasing agreement could participate. San Francisco has always claimed they are working on these issues but we have never seen any results at all. Jane stated she doesn’t believe they have any incentive to work on the problem. BAWSCA now has authority to bring this issue to the forefront. We could do it independently. There are many sources of water, including Modesto and Turlock Irrigation Districts, with whom we could make some arrangement or exchange., Since they use Tuolumne River water, that would be easiest and the best quality. It is also possible to get water stored underground and pumped out for us in a dry year. We’ll look at these things at BAWSCA. Dahlen stated that is sounded exciting and pooling efforts sounds very promising. She questioned how this would impact Palo Alto activities and would it truly become option for drought supply? Ratchye stated that this topic is not high on BAWSCA’s agenda at this time. The CIP progress and negotiation of a water service contract will be their main focus in 04/05. But, Jane said, the issue is always there. She thought it could be worked out to address these issues in new contract. For example, to work to actually negotiate with farmers, there are no resources in 04/05 budget. We need to continue to push and this is an excellent opportunity to work on. Wouldn’t have to plan for droughts as much. Dahlen asked if other BAWSCA communities are also pursuing their options into looking at their own supplies. Ratchye assured the Commission that many communities are looking at alternatives. Redwood City is very aggressively pursuing recycled water and other communities are also looking at that option. As far as drought planning, all communities have to complete an Urban Water Management Plan every five years and the next is due to the State in 2005. BAWSCA facilitated a more regional approach to looking at opportunities. They have a regional look to get the most cost-effective project done in the region. She also noted that the Interim Water Shortage Allocation Plan has a mechanism to trade water in case of drought, but that this feature ends when the current contract ends in mid 2009. UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 10 of 16 Rosenbaum asked if this idea of blending groundwater with San Francisco by piping into turnout is a new concept? Ratchye said no. Carollo looked at this in the 2000 study when they looked at a number of options. Reverse osmosis, treatment for Manganese and Iron at well sites, blend at turnout. The report noted that treating for Mn and Fe at well sites still did not meet TDS guidelines, but that blending does. The report included cost estimates for each option at each of our well sites and possible future well sites. Rosenbaum stated that this makes the use of groundwater more attractive than putting into use at the well. He praised this very sensible report and stated he will look forward to the next iteration. Ulrich mentioned that with the options for Roth Park, increased cost would be piping back to turnout at Lytton so we could do that blending. 2. Short-term electric laddering strategy (Information) Ulrich remarked that we are at the very end of 40-year contract with Western. The LEAP with Risk Management Policies and Guidelines take care of longer and medium range, now we need to address guidelines and implementation from 0-35 months providing forecasts to make sure we are not purchasing more when we have a load. This is a very complex issue. Girish Balachandran stated that with STEAM, we have a 3-year window and will set a minimum and maximum of how we buy gas. This will be similar to what Council has approved for guidelines. We figure how to purchase power in a 3-year time frame. City Manager has the authority to purchase and has delegated authority to John. John approves strategy minimum and maximum month by month. Karl Knapp and Shiva Swaminathin both worked on developing the strategy. Rosenbaum asked about the numerators and denominators percent from Western and Calaveras. Our chart average hydro year, shows we expect 550 giga-watt hrs but pie chart percentages suggest about 45% of energy from those two sources, looks like closer to 55%. What is difference? Karl Knapp stated this must be a graphic distortion; the figures in the pie chart are the actual numbers. Karl promised to check the figures. Bechtel asked if we want to have a short end view of where energy coming from for the year and asked staff to look at the pie chart on page 7, figure 5. Knapp stated about 45% comes from Western and Calaveras. Bechtel asked if in the pie chart, to translate, if he wanted to see how it looks during the year, he’d look at monthly graph. UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 11 of 16 Knapp stated the pie chart only shows annual hydro variability. Chart in Fig 8 shows how much difference there can be from one wet year to another. is the monthly patterns are completely different, part of where seasonal variability comes in, to try to have enough for peak load. Bechtel mentioned that there is quite a bit of variation and it is difficult to follow. On 3-year program, we’re likely to see…. an effect on seasonality on hydro as we look forward three years out and we have a dry year we’re in trouble because that’s where we’re purchasing less. Wondering in contrast to gas, is the same timeframe still the right one or should we be looking at a different time span for laddering? Girish Balachandran said this is a rolling 3-year ladder and he believes it is a right time span. We buy based on the actual forecast. If we see 3-year ladder is not suitable, we’ll return to the UAC and Council and ask for a change. We believe it is appropriate at this time. Bechtel agreed that he hopes we are right and asked if from a market point of view, does the market match up with our ability to buy with this marketing strategy? Balachandran said with a power plant in place, it may be fixed. We are also looking at gas tolling options and may propose a contract outside of the 3-year window. Whatever resources we put in place, resources are variable so we need some type of guidelines. Knapp stated that staff doesn’t approve, this would be approved by council. We would come back to the Commissioners and Council for the decision. Bechtel wondered if this added too many levels of complexities to purchasing. Balachandran stated that staff will soon bring wind and gas coming to the Commission, 25-30 year deals. Our supply portfolio will change significantly. It is not possible to predict and it is getting more complex. We weren’t exposed to this level of vulnerability before. Bechtel asked if the strategy had been reviewed with risk management. Balachandran said Utilities has run through an independent risk overview. Future repots will give all purchases we make in a similar format. These will be presented to the UAC and Council on a quarterly basis. Bechtel remarked that this sounds good. Dahlen asked how the minimum and maximum targets were set and then the projected load. How do you set the minimum and maximum guidelines? Knapp summarized the combination of looking at the actual deviation, what year verses normal, deviation in actual load forecast and forecast already done for GULP, such as laddering versus dollar cost averaging strategies. The 20% number is primarily derived from the first six months of the year. In a wet year, you UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 12 of 16 haven’t taken on a lot of market risk and in a dry year you don’t have to buy so much. Dahlen asked when will we do an analysis doing some months prior to forecast? Not set up in advance based on actual … Knapp replied that will be based on what ends up to your financial reserves. Dahlen questioned when does projected load become part of that analysis. Knapp stated that you take projected load, since Palo Alto’s loads are actually pretty flat during year. Dahlen said we would shoot to have the projected load in the middle of minimum – maximum? Knapp replied yes. Rosenbaum asked about capacity. We were supposed to have between 15-17% capacity reserve, do we buy and where does it come from? Balachandran asked the Commission to look at chart figure 10, you’ll see that in several months we had adequate capacity. Also in figure 4; January 2006; before we get to January 06 we will be buying energy. Energy comes with capacity. If we need to buy to meet 15-17% reserve requirements we can buy from the market. In the past, when we had an inter-connection agreement with PG&E, we used to buy capacity in the power pool. For example, we had a contract with Washington Water Power to buy capacity. We can enter into contract buying combustion turban capacity (CT) paying a fixed price for the capacity with a strike price that you determine before hand and if you ever need to call on that, you call on it. The whole purpose is to maintain system reliability, we used to have this, it’s not just Palo Alto but the whole country had it. In 1998 when we had the new market system, it went to the fewer energy pay system. Now this is being re-introduced so we have adequate reliability. So if one or more large units go off-line there is enough capacity to keep the system up and all this capacity gets shared by the whole system. Rosenbaum asked if there really is not a cost to us? Balachandran said yes, there is a cost. During the energy crises there was a cost to us. The cost ended up being several blackouts. On a physical basis we didn’t have enough energy committed and the system operator did not have control of it. The cost to us may be more dollars. The benefit now will be greater reliability. IX. Gas Utility Long-Term Plan (GULP) Recommendation (Action) Girish Balachandran announced Karla, Bernard, and Shiva worked on this presentation. They will go through the change from the last recommendations UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 13 of 16 made to the Commission. Since then they have completed more analysis. Girish handed it over to Karla. Karla Daily began the presentation stating that the preliminary recommendation was made to the UAC in February. This presentation will include staff’s request, time line, recommendations highlighting changes from the preliminary recommendations and end with suggested next steps. Staff is requesting that the UAC recommend that City Council approve these six GULP recommendations. If the UAC does recommend approval, we will take this to Council in July and start implementing as soon as approved by Council. The first two recommendations are identical to what you saw in February. Do not contract for natural gas storage capacity at this time and do not acquire additional natural gas pipeline at this time. The third recommendation is in sprit not changed but is reworded. For the gas reserve acquisition part of GULP staff is asking that we can move forward to the extent that we identified. We have reworded the gas reserve acquisition part of GULP. We still are asking if the required reserve would be attractive to Palo Alto it would have to be part of a consortium. We are asking that staff be allowed to move ahead to identify a consortium and if we do find such a consortium, we could spend up to $65,000 in consultants to look for properties. This is not to say approving this recommendation approves in any way acquiring a reserve. This is just a step to take towards studying it further. This is a very preliminary step. We feel like this resource has enough potential, we’re not in a position to eliminate it from possibilities yet. The gas pre-pay deal, when we brought recommendation to you in February we proposed further investigation of gas pre-pays. Since that time, we’ve come to the conclusion that this doesn’t make sense for us right now. Possibly at some time in the future, it may become more attractive for us. We’ve changed the recommendation to not participate in a gas pre-paid deal at this time. We’ve added a new measure recommendation: pursue any low-cost high-value prospects resources that may arise from time to time. The last recommendation is for demand side management. The spirit of the recommendation has not changed, just the wording. There is some discomfort with having a goal of spending a certain amount of money as opposed to having a goal of making good decisions and coming up with reasonable management goals and an implementation plan. The recommendation was reworded that hopefully has more meaning and something that could be followed better than what was previously written. Rosenbaum asked for questions. Dahlen questioned on page 3 of 19, point 9. How did you come up with that percentage and isn’t that high? Dailey replied that the figure probably is high. Our base load in the summer is about 5,000 MMBtu per day and our average annual load is about 10,000 a day. UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 14 of 16 Given that production is a fairly steady resource, we would need to take it every day of the year and wouldn’t want it to be more than our base load which would be 50%. Karla didn’t believe we would actually look at anything that big. Dahlen asked if Karla thought it would be realistic to secure that much? Dailey said yes, definitely, but she is not sure Palo Alto would want to. Dahlen asked for Karla to give a more realistic percentage. Daily replied that her gut-feeling range would be 20-30% but quickly stated that figure might not be agreed on by everyone at the table. Ulrich confirmed that staff will do an in-depth review of this information. Melton asked on Item 3 he was wondering why we would limit to U.S. producing regions as opposed to any North American?. Daily asked on shore to off shore? Melton inquired why isn’t Canada there as a possibility? Dailey stated they wouldn’t have the tax exempt status which would make that option less attractive to us. The GULP recommendations would apply to any project. Staff is not asking Council to officially stamp these criteria. We would retain an opportunity if any project fell outside of these criteria and we could still move forward if we had reason to. U.S. production makes much more sense. Off- shore is very risky. MOTION: Bechtel moved to accept the staff recommendation that Council approve 6 GULP recommendations listed on page 1 of the staff report. Dahlen seconded. Rosenbaum commended our look at the options. Motion Passed: 4-0 Ulrich thanked everyone. X. Public Health Goals for Drinking Water (Information) Scott Bradshaw stated that he had no presentation but was here to answer questions on how we are prepared for goals set by the California Health and Safety. He asked for any questions regarding the report. Bechtel mentioned that the report says there were times we didn’t meet certain standards or guidelines or so on but he didn’t see any discussion of when or where. The table on A-5 didn’t follow that well. Mr. Bechtel asked for an explanation if we didn’t meet certain things. UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 15 of 16 Ulrich shared we worked on this quite extensively to try to make it clear. The word ‘exceed’ is good and sometimes the word is not good. In layman’s terms, there are public health goals adopted by the California EPA and then there are maximum contaminant goals (MCLGs) which are adopted by the U.S. Environmental Protection Agency. These PHGs and MCLGs are not enforceable standards and no actions to meet them are mandated. They are attempting to show a goal, similar to our goals for safety goals which is no accidents and no injuries is where you want to be but to get there is extremely difficult. In some cases, we deliver what we get. It’s important to be able to report information in the report that goes out to our customers annually. Every three years, we need to make this more detailed report about these PHGs and MCLGs so you can see we are trying to get down to the goals and to report where there is a discrepancy between meeting those goals and where we’ve not been successful in fluoride and chloroform to meet all the standards for each of these periods of time. Bechtel looked again at next to last paragraph and stated the following paragraph explains what happened. He had no further questions. He stated that the tables had so many columns he was unable to follow the “less-than” or “equals.” He is satisfied we’ve done what is expected. Dahlen commented that Table 1 is great and will use for her own resources. Bradshaw thanked Dahlen. Rosenbaum referred to the three bullets on page 2. He said these were exceedingly bureaucratic statements. He wanted to know how many times and why isn’t the information provided? Ulrich said we’re reporting what is expected to be reported. Part of this report is to give a summary of what occurred. We keep records of everything but we don’t put in a document and attach. Rosenbaum said that raises the question if the information is not available. Bradshaw made it clear that at no time did we ever exceed maximum levels. We did find when we went back and did recheck, in keeping track of them, since they did not exceed MCL's we would have to go back to gather information. We exceeded goals but at no time did we exceed MCL’s. Ulrich thought putting it any other way in the report would be going beyond what is expected and required. Melton followed up on Scott’s comment about retesting. He asked if the test says over goal and now when retesting it says not over goal, what does this imply? Is what you’re measuring that variable from day to day? What do you think is happening? Bradshaw used an example of a coliform test, if there is a gram of dirt it could show a hit. When we go back and test and find no problem we know it was some UAC Minutes of June 2, 2004 Final – Approved 7/7/04 Page 16 of 16 type of abnormality. It could also be a contaminant at test source or could be leaching lead at the homeowners property. We would go back in and retest. Dahlen asked if Palo Alto does any testing for legionella. Bradshaw stated no. Dahlen asked what legionella testing does SFPUC do? SB didn’t know. IX. ADJOURNMENT Regular business completed. Ulrich spoke of the follow up report for FTTH and stated staff will have a report before we go to City Council, which is scheduled for August 2nd. We will provide to you before the meeting. Budget adoption has recently been changed to June 28th. August 2nd Fiber to the Home is still an accurate date. Rosenbaum checked his schedule stating Council might have questions about the electric rate proposal so he will plan to attend the budget adoption meeting. In July we will decide who will attend when FTTH is presented. George Bechtel will review minutes that Dee is preparing. Meeting adjourned at 9:03 p.m.