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HomeMy WebLinkAbout2005-03-09 Utilities Advisory Commission Summary Minutes UAC Minutes from 3/9/05 Approved on 4/6/05 Page 1 of 7 MARCH 9, 2005 COUNCIL CONFERENCE ROOM PALO ALTO CITY HALL – 250 HAMILTON AVENUE 7:00 P.M. THIS NOTICE IS POSTED IN ACCORDANCE WITH GOVERNMENT CODE SECTION 54954.2(A) OR 54946 ROLL CALL Meeting was called to order at 7:02 p.m. and those in attendance were; Melton, Bechtel, Dawes, Rosenbaum. ORAL COMMUNICATIONS Members of the public are invited to address the Commission on any subject not on the agenda. A reasonable time restriction may be imposed at the discretion of the Chair. There were none. APPROVAL OF THE MINUTES MOTION: Rosenbaum moved approval of the February 2, 2005 minutes as written. SECOND: Melton seconded. MOTION PASSED UNANIMOUSLY. AGENDA REVIEW AND REVISIONS No changes were made to the agenda. REPORTS FROM COMMISSIONER MEETINGS/EVENTS Dawes represented the UAC by attending the CMUA meeting in San Diego this month. Some of the items discussed were: ƒ A presentation regarding Munis and Public Benefits. Dawes has noticed that there has been some movement towards planting trees using public benefit funds.. Dawes has suggested using some of our Public Benefit funds to donate to this cause. ƒ Climate change and the effect on water. Resolution was climate change could effect water. ƒ Legislative & regulatory session: the $1 Million solar roofs bill will probably pass. Dexter met a Managing Director of a small investment bank that specializes in municipal utilities and bonding. Dexter talked to him about our fiber program and financing ideas. He is interested City of Palo Alto Utilities Advisory Commission UAC Minutes from 3/9/05 Approved on 4/6/05 Page 2 of 7 in setting up an appointment . Dexter told him we would not be interested in setting up study sessions but we are interested in bonding options. DIRECTOR OF UTILITIES REPORT Scott Bradshaw is representing Utilities tonight for John Ulrich. ƒ FERC – Western has been presented with alleged cost liabilities of approximately $51,000,000. Western is litigating the validity of these costs and is currently trying to figure out how the cost would be distributed among their customers. We may have to pay our share of the back billing. (Potentially $10,000,000) ƒ Council approved city joining Central Valley Project. We will go to Council in April for the approval CBC seasonal exchange with Western. ƒ Cost base method to a recovery rate schedule. Senate appears to have deleted the proposals. We are monitoring closely. ƒ Will get budget highlights next month. We are looking at double digits rate increases. ƒ Reminded UAC to complete Forms 700 forms. ƒ Next month we will have a general discussion on rates . At that time, Auzenne will discuss alternative proposals for rate increases. UNFINISHED BUSINESS None. NEW BUSINESS Proposed Increase To Utility Service Call And Connection Fees…………. ACTION Auzenne and Roland Ekstrand were here to talk about this topic. Auzenne said this is an annual event where we adjust our costs and fees accordingly. The difference in this proposal today is we are now looking at a development fee to cover the cost of capacity adjustment as a result of hooking the customer up. That load has an impact on others. Other municipalities have this fee. Melton asked about what is our goal with these rates? Is it cost based rates, are we trying to recover our costs? Auzenne said this is a cost-recovery and not profit making. Costs should be to those coming new to the system instead of present customers paying for the new customer. Regarding Page 2: review every so often and adjust. Melton asked if these were salary or labor costs? Is it fully loaded labor costs? Auzenne said we are recovering everything except the cost of retirement. Melton referred to Page 4: comparison with other utilities. Our rates are based on our costs which are based on labor and materials. Other cities have different business models. Our rates are substantially less than other municipals. Ekstrand looked at what it would cost to buy into our system. We’re trying to get our foot in the door saying this is helpful, it is a useful fee. Staff said in a couple of years we will look at a more in-depth look at this. Auzenne said we are looking at what we think is a reasonable fee based on our anticipated growth. It will be probably low. UAC Minutes from 3/9/05 Approved on 4/6/05 Page 3 of 7 Rosenbaum said there are two issues, the new one is the capacity fee which we’ve never had before. Dawes said in the past we’ve required the last development to pay the fee. Ekstrand said politically it was not popular to charge individual customers. This is a “much more” fair way to recover costs. Dawes said we are low compared with other cities. Bechtel asked about this year a new service connection and if this fee goes through, what would the typical home connection fee be. Ekstrand said we charge them for us to install it and we are not increasing that fee very much. The new meter fee will be $151 and the service installation fee will be $3,648. New Capacity fee would be $2,250. Residential cost would not quite double. Melton asked what the fees would be for a larger user. Ekstrand referred to the new development at High Street. Our charge was $26,000. This is a 60 unit development at 25 fixture units per unit. Combined fee of 80 for water and sewer. It would be over $100,000 we would be charging for that size of customer. Bechtel asked what customer reaction will be? Ekstrand has been telling people about it in the development committee meetings. The comments he hears is that it is expected and we are about the only city that does not charge the connection fee. Dawes stated the fees would be quite different if the customer is starting on a vacant lot. If you are taking down a house, and putting up another, you would pay very little, you’d get credit for what is already there. Bechtel asked about the water impact fee. He doesn’t understand pricing model. What are the assumptions where these figures come from. Ekstrand explained that if a customer has an existing service and wants to upgrade the capacity of their service then a capacity credit will be given for the existing service. The customer will pay a capacity charge for the new service minus the credit for the existing service. Therefore, to upgrade from 5/8” water meter to 1” water meter the capacity charge would be $1,050. The calculation for the upgraded service would be: New Service Capacity Charge $2,250 minus Existing Service Capacity Credit $1,200 equals $1,050 Capacity Charge for the upgraded service. Ekstrand said you are actually letting people buy into our system. We have the total current value of our system and divided by the total number of customers. If someone wants to connect to our system, they have to pay for it on a proportional basis. Bechtel asked going forward what should we do with our capacity fees. Are we being somewhat short sided proposing a modest fee at this time rather than a fee that would cover our system? Has staff considered if we doubled the proposal. Ekstrand feels we have good justification for the fees we are proposing now. It would take another year to come up with the proposal justification for doubling this proposal. Auzenne said we’d like to be conservative now rather than coming up with an increase that would be difficult to justify. Bechtel said he was content with the proposal we’re making. Ekstrand said we’ve already sent the bill for High Street and he feels we’ve lost $100,000 on that job as a result of not having these fees in place. Rosenbaum talked about fees under Prop 13, the property fees you collect is no longer sufficient so you better collect them up front. New customers should be considered an asset, why do we feel it’s necessary to have a capacity charge. He stated this is not a business friendly proposal. Auzenne said he believes we are business friendly. He has discussions regularly. This will be a zero based recovery. We don’t try to take the last person on the system and try to make them pay for all upgrades on the system. All costs get spread across the rates and all customers pay for them. We are looking at doing this in a more fair manner . This proposal will help to keep rates lower. This seems to be a fair and equitable method of doing it. Rosenbaum compared the Utilities business to Toyota selling cars. When we have a new customer they are paying the regular rates that everyone else has. Why isn’t this new source of revenue enough to cover the capital costs. Auzenne said they would be paying the cost up front UAC Minutes from 3/9/05 Approved on 4/6/05 Page 4 of 7 rather than incrementally. We are trying to add value and lower the costs to customers rather than what they would have paid. This is one way we are moving forward in trying to improve our financial efficiency. Rosenbaum said Page 4 has no local districts. What goes on in Menlo Park, Mt. View, and Sunnyvale? Ekstrand has information about East Palo Alto but not the cities Rosenbaum suggested. Auzenne suggested in the future we benchmark with other cities. We will make it more localized before it goes to Council. Rosenbaum asked about coming up with the rational we had to come up with these fees. Fees can not be arbitrary. We could do on an arbitrary basis. Seems like other cities prices are exorbitant and how did they legally justify. Auzenne said that We come to the UAC first for wisdom and guidance. Dawes appreciates Rosenbaum questioning the philosophy for how to do this. Dawes said if everybody is doing it, expand our list to show it is universally extracted from developers in all the neighborhood, it would help defend the concern among Council. Bechtel will support because it is important to keep rates low. If you are an existing customer, keeping our rates low is very important. If this keeps us from having to spread capacity among all of the rates, all the customers, including the developer, will keep them satisfied. Dawes said capacity is for water and wastewater but why not electric. Ekstrand said we are in PG&E territory and they do not charge this fee. Melton asked under resource impact, he wants to verify accurate information. Increase is generating how much? Capacity fee is estimated at ½ million a year each for both water and wastewater.…. Dawes asked for a motion. Rosenbaum suggested making the motion into 2 parts. 1. First Motion Motion: Bechtel made the motion that the UAC approve the recommendation to the City Council that they approve Utility Connection Fee Rate Schedules E-15, W-5, G-5, S-5 and Utility Service Call Rate Schedule C-1 to be effective July 1, 2005 and direct staff to place the revenue from the collection of Water and Wastewater Collection system capacity fees in to special CIP accounts for capacity improvements in the Water and Wastewater funds as set in Government Code 66000. Melton seconded. Motion Passed: Unanimous 4-0 (with Dahlen absent) 2. Second Motion Motion: Bechtel moved that the UAC recommend City Council approve and authorize staff to impose a Utility Capacity Fee in Conformance with Government Code Section 6600 on new service demands or service upgrades in the Water and Wastewater Utilities. Melton seconded. Rosenbaum opposed the motion. He feels that in spite of Pal Alto being one of the few cities that do not impose a capacity fee, this is not a customer friendly action. Motion passed: Ayes 3 - Opposed 1(Rosenbaum) (Dahlen absent) UAC Minutes from 3/9/05 Approved on 4/6/05 Page 5 of 7 Gas Utility Long-Term Plan (GULP) Biannual Progress Update …………. INFORMATION Karla Dailey said when the Finance Committee reviewed the recommended plan, they wanted additional language and this is the first biannual update for GULP. Bechtel asked about Recommendation 5. Recommendation has no changes. What about LNG or new exploration, is there anything to look forward to? Dailey said LNG is interesting to watch but there is no compelling reason to go out and secure LNG for Palo Alto. There is nothing unique about LNG, gas is gas is gas. Dailey said there never will be a facility built in California using LNG. Mexico is securing their supplies in Russia and Nigeria. They are not looking to share their investments with CPA. Bechtel asked for details on what RMI (Rocky Mountain Institute) is doing. Balachandran answered that RMI is reviewing our resource plan and they are helping us in the development of energy efficiency goals. Nothing on implementation, we have an entire marketing group that will be involved in the implementation. Balachandran said we are getting a fabulous deal which is being funded through a grant which is saving us approximately $40,000. Long-Term Electric Acquisition Plan Implementation Update ……………. INFORMATION Balachandran said we will be giving bi-annual updates, this is our second update to the Commission. There has been progress made on several items. Pages 1 and 2 give a summary. We are open for questions. Both reports will be going to Council by the end of the month or beginning of April. No. 8 (Karl Knapp): RMI has been working with SFPUC and environmental groups on re- powering facilities. They are working more on local resources. With the local generation study getting started, are we doing everything we can with efficiency locally. We found out about the grant and how we could use it here. There is a wide range of actual deliverables in the contract. If you look at the specifics on the implementation plan, they are helping us to refine the local resources elements of our plan. We are looking at co-generation options in Palo Alto. We’ve interviewed four of the big companies and we’ve calibrated RMI’s models to their loads, and are they interested in this. We can get a lot of information from billing data. We’ll probably add on some of the clustering. What is the technical potential and what will it cost. RMI has access to a lot of good information on recent energy efficiency potential. Roche and R&D facilities have already done a lot of these things. We’ve looked at If everyone signed up.. here’s what you can expect in savings and costs. You can eventually get ½ to ⅔ of the potential but it takes about 10 years to get it. Co-Gen potential could be lower if you put in a more efficient electric chiller, but higher if you use an absorption chiller that uses the waste heat of the generator. This will be specific to our City. Bechtel asked about large housing projects in the City such as the Hyatt at Stanford or the Jewish Community Center is all going to have housing. Are they candidates for Co-Gen? Knapp said yes, we need to do more coordinating with them. It would be nice early on to ask if they’d like to hook up to this from the start. It usually has to be pretty big to make sense. Knapp said the RMI study is not being designed to flag what is coming through for development. That’s up to us to put that kind of detail into it. Melton commented on Item 6: PAGreen. Previously had asked for PAGreen goals. He sees they are established. 2% last year, 3% this year, and 4% this year. He is glad to see this is in the report. Dawes said a report says Palo Alto is doing poorly compared to other cities. This is one of his pet peeve and we will add to future communications. PAGreen – he feels the renewable UAC Minutes from 3/9/05 Approved on 4/6/05 Page 6 of 7 programs we can only count wind and solar as resources. Why is there such a difference between what is green and what is renewable. Knapp said this is what people want. There is no external criteria applied to Palo Alto Green as to what is Green and what is not. Balachandran said the people want these types. Dawes would like to add landfill gas to our portfolio Green. He suggested we broaden our scopes. Rosenbaum said there is no limit, the supply of solar and wind equals the demand. Knapp said we buy Green credits after the fact. Dawes said it’s clear that transmission issues are coming to a head. It’s a critical issue for Palo Alto. Is there any update on this? Balachandran answered that we continue to be involved in transmission matters. On the hardware side, we are working with BAMX (hardware side). This would be a totally new system but could be using existing towers. It would enable us to join the area SMUD has created. We want transmission to be built into the Bay Area. We are working with PG&E on 230 KV connections and connections to the West side of our system. Currently we pay PG&E $3,000,000 a year for this now for low voltage. Dawes asked how far away it is. We are looking at the economics long term. Numbers on how much it will cost to hook up to that system $20,000,000 to $30,000,000. Dawes hopes staff will be aggressive with this, it’s a very good idea. Balachandran said any transmission cost they have under $2,000,000 they just divide it by all the load who are taking transmission. People seem to favor undergrounding but it takes money. Melton commented on the gas-fired generation study, how does it play into distributed generation. Update requested. Knapp said it is 3-4 months behind due to resources. We found that once we put together a public participation plan, we needed to go to the public with the whole plan. We first need to vet the basic idea within this building since there are a lot of other people involved. It’s taken on a shift in emphasis and will take longer that we thought in going out to the public and to have all our ducks in a row. Melton said everyone in town will have their own idea of what to do. This report is going to give specifics about what is feasible and what is not. Balachandran said it’s looking at broader questions, why are you doing this, why do you need alternative: we must communicate in a broader context. We will get very detailed questions. We are taking the additional time to ensure we have all the details to provide to the public’s questions. Melton said we’ve learned two things: establish the need before you propose something and don’t plan on using any parklands. Bechtel asked if we are going to dig up the park to put a water tank underneath. Bradshaw said this will come out of this study. Dawes mentioned focus group on placement of water tank project. The group came up with several suggestions for placement of water tanks. Balachandran said we plan on getting the word out about these meetings; misunderstanding how much PA uses in a day. Charts need to be redesigned, Bradshaw agreed – we are working on the presentation for next time. Dawes spoke about the first venture with integration, we received zero from Western in January and now a 30% shortfall. How is LEAP dealing with this? Balachandran said it is a big issue but it’s working as planned. It’s not pleasant to plan for potential cost increases and then get them (even though you expected it). We have planned for increases, hydro risk is our greatest concern. There is a 12-month forecast, so soon as we receive information we purchase future supply. We knew in June that come January we weren’t going to get much from Western so we purchased future supply. Right now our costs are higher. Our reserves are taken care of. All work over last two years in setting our Risk Management has worked out for us. Balachandran said we don’t have a single exception to the risk Management. We work very closely with ROC and ASD, We’ve been working on our plans for several years. We have set up our resource plans so we can buy what we need. Our plan has gone very well. UAC Minutes from 3/9/05 Approved on 4/6/05 Page 7 of 7 NEXT REGULARLY SCHEDULED MEETING April 6, 2005 FUTURE HIGHLIGHTS ƒ Budget ADJOURNMENT The meeting was adjourned at 8:40 p.m. Rosenbaum moved to adjourn. Bechtel seconded. Motion passed unanimously. Respectfully submitted, Dee Zichowic CPAU Administrative Assistant