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HomeMy WebLinkAbout2006-03-01 Utilities Advisory Commission Summary MinutesApproved April 19. 2006 Utilities Advisory Commission Draft Minutes from 3/1/06 Page 1 of 8 UTILITIES ADVISORY COMMISSION DRAFT MINUTES OF MARCH 1, 2006 CALL TO ORDER The Meeting was called to order at 1:00 p.m. and those in attendance were; George Bechtel, Dick Rosenbaum, Dexter Dawes, and John Melton. Marilyn Keller absent. Also present were Frank Benest, Emily Harrison, and Carl Yeats. ORAL COMMUNICATIONS No communications from the public. MINUTES Commissioner Melton moved to approve minutes from the February 1, 2006 UAC meeting. Commissioner Dawes seconded. Motion approved unanimously. AGENDA REVIEW No changes to the agenda. REPORT FROM COMMISSION MEETINGS/EVENTS Last week ground breaking – electricity from landfill. Commissioner Rosenbaum commented that he attended the ground breaking ceremony with Commissioner Melton. Commissioner Rosenbaum commended staff and everyone involved in this project. He remarked that methane is a very powerful global warming gas so landfills are required to collect the methane and then burn it to carbon dioxide. Gas is being used to generate electricity. Commissioner Melton said that in our contract with Ameresco, the price we are paying and the fact that it is green and less expensive than the current market should be commended. Chairman Bechtel thanked the Commissioners for attending and for their comments. NEW BUSINESS ITEM 1: UTILITY DEPARTMENT RESTRUCTURING Frank Benest distributed a ‘talking outline’ and informed the Commission that Emily Harrison and Carl Yeats will share various parts of the presentation. Benest began by saying after receiving staff input, executive examination and consultations with other utilities, the decision has been made to not divide but to keep a unified utilities department. Benest stated the City gains synergy and efficiencies by keeping all of the divisions together. The effort will continue on discovering other streamlining opportunities. Everyone involved in this Approved April 19. 2006 Utilities Advisory Commission Draft Minutes from 3/1/06 Page 2 of 8 project agrees there is a need to provide better management oversight of operations and engineering. A Utilities Oversight Committee has been formed to provide long-range strategic oversight for all Utilities and Public Works enterprises and will work with the City Manager and the Director of Utilities. The Utilities Oversight Committee will consist of the Assistant City Manager, Administrative Services Director, Public Works Director and the Utilities Director. Emily Harrison gave the Commissioners a brief overview of some of the Utilities strengths which include excellent customer service by our staff and managers who have strong work ethics. Harrison said the synergy with our multiple utilities will be to our advantage since we have an aggressive infrastructure replacement program and a strong commitment to sustainability. By maintaining local control we not only have lower utility rates but we are also prepared to respond to a crisis or emergency . Emily Harrison said some of the organizational improvements made to date include: ƒ Monthly Operations and Engineering meetings are held regularly to more effectively coordinate work. In addition, weekly Assistant Directors meetings bring ASD and Utilities Departments together to coordinate issues. Much better communication. ƒ With the reallocation of assignments and the addition of an Assistant Director in both the Engineering Division and Operations Division, all staff, including line staff, has better access to the higher level managers. ƒ A lot of training has been going on. All Managers and Supervisors in Operations and Engineering completed two days of training on Policy and Procedures and Work Rules. The same classes will be scheduled for the two remaining divisions in the Utilities Department (Resource Management and Administration). Operations Division supervisors and managers are training line-level employees in those Policy and Procedures and Work Rules. ƒ Training needs for the managers, supervisors and crew members have been identified, a training schedule was established and classes by both in-house trainers and qualified outside companies such as PG&E and Heath Consultant Group have been scheduled and completed. Cross training criteria for crews have been developed and implemented. We’ve made a commitment to all employees to give them training into the future. ƒ Qualified water system operators were hired to fill in the vacancies that were created as the result of disciplinary actions. Water Solutions was hired to assist the new supervisor in training the operators, and to provide certification coverage to comply with the regulatory requirements. ƒ Employees were trained to use computer to access maps and documents while working in the field. Maps, documents and new program were installed on 10 laptops for use by field staff. ƒ Coordination has been improved between the Public Works’ street resurfacing and utility projects. All non-emergency maintenance projects are being reviewed and coordinated with other scheduled construction projects. Operations staff has addressed the significant backlog of trenches awaiting paving and concrete. ƒ In response to the regulatory requirements, operation manuals and emergency response plans were updated. By July 2006, all employees will be trained to conduct field exercises. Plan to take to Council in the next several weeks. ƒ Engineering and Operations Divisions are now working together more effectively. Examples include recent successful Department of Transportation audit for gas, completion of Gas Operations Manual, and the completion of Emergency Water Response Manual update. Approved April 19. 2006 Utilities Advisory Commission Draft Minutes from 3/1/06 Page 3 of 8 ƒ Administrative divisions’ budgets were zero-based. Emily thanked Rosemary Ralston for her help in building the budget for Engineering. ƒ Long-Term Electric Acquisition Plan (LEAP) has been updated. Commissioner Dawes asked why is Field Services being moved from Customer Service to Operations and Telecommunications Marketing being moved to the Administration area. Why separate these services? Emily Harrison said from the standpoint of operations, the field service people are the first to go out. It was a natural move to have all operational, first line contacts together. Telecommunications is really marketing and has been moved to Marketing. Telecom engineering (one engineer) will be placed in Engineering. Chairman Bechtel asked if the training program led by Human Resources for all employees in the City is sufficient for Utilities. Harrison said in the past few years there has been a City-wide training in management issues but this was at a very high level and did not get into specific needs for the utilities operations. We needed training on SEIU matters, counseling, overtime, and specific training focused just on those needs for that particular division. We now know we need to give all our managers this same training. Benest said previously there has not been the focus that utilities had to get trained in certain areas and did not get us where we need to go. Chairman Bechtel asked if the Public Works Department has the same training problems? Harrison did not comment on Public Works problems but said we will begin training cross- departmentally and we will be bringing these departments closer together. Frank Benest outlined the Utilities Department goals. They are to : 1. Preserve the strengths of the existing Utilities Department. 2. Enhance better management control of Operations and Engineering as well as other parts of Department. 3. Ensure that Utilities is fully integrated into the total City organization in respect to policies, financial controls, human resource guidelines, and operational procedures. 4. Provide long-range strategic oversight of Utilities as well as Public Works Enterprises regarding long-term finances, risk management, rates, commodities, capital improvements, and environmental stewardship. 5. Rationalize the placement of certain administrative and customer-service functions so that we better achieve staff collaboration and effectiveness. Carl Yeats went over the restructuring strategies. We will recruit and hire a new Director to oversee and manage the department. We also need to relieve this new Director of some external duties, especially legislation, by shifting some external responsibilities to the existing Assistant Director of Resource Management and Legislation. The Utilities Director needs to be here to provide leadership for this very important organization. We split the position of Assistant Director of Operations and Engineering into two Assistant Director positions, one for Operations and one for Engineering. We are in the process of moving field services staff from Customer Services to the Operations Division and the Fiber Optic marketing staff to Marketing/Customer Services so we can add this as a tool when we talk with our larger customers. We will reorganize Customer Service functions to improve effectiveness and backup. By transferring Utilities Communications Manager Approved April 19. 2006 Utilities Advisory Commission Draft Minutes from 3/1/06 Page 4 of 8 to the City Manager’s Office we will improve support for utilities and other enterprise funds as well as provide support for sustainability efforts and backup for general communications and emergency response functions. The creation of the Utilities Oversight Committee will provide long- range strategic oversight for all Utilities and Public Works enterprises (including issues such as long-term finances, risk management, rates, commodities, capital improvements and environmental stewardship) and ensure coordination between Utilities and Public Works Departments and all their functions. Members of this Utilities Oversight Committee will consist of both the Utilities Director and the Public Works Director acting as alternating chairs, along with the Assistant City Manager, the Administrative Services Director, the City Attorney and the City Auditor both acting in an advisory role. Benest reviewed what remains to be done. We need to conduct recruitment for a Utilities Director and hire that person. ASD staff will be working with Utilities to develop a Long-Range Financial Plan for all utilities and enterprises. We need to update the Utilities Strategic Plan regarding key trends (such as telecom, sustainability, green power, and zero waste), long-range financial outlook, new market conditions and the like. This will be done by the new director. We need to meet and confer with SEIU regarding any changes to working conditions. We plan to incorporate organizational changes into the 07-09 Budget. We plan to hire an executive recruiter by March 31, 2006. We will be reviewing the restructuring plan with Council in a Study Session in April 2006 and incorporate its feedback in the 2007-09 Budget (May 2006). Once we have Council approval, we will begin recruitment for the Utilities Director, including development of profile (UAC, Council and staff input). Council will consider and approve Utilities Department budget in June 2006. We plan to finalize candidates for Director position in July and August and hire the new Utilities Director in September 2006. Commissioner Rosenbaum commented that he is pleased the Executive Staff have found that the utility department by and large works very well. Our utilities have been around for 100 years and the procedures that have been adopted for the most part have worked. He asked what went wrong and how will we prevent this from happening in the future. Benest said there was clearly a lack of management oversight in Operations. There were 19 disciplinary actions based on the lack of oversight. Most of our employees are to be commended but there was a lack of oversight. Benest said when he came on board he sent the new Utilities Director out to attend to legislative matters but by doing so, this didn’t provide proper oversight to such a large department. We found some opportunities – bringing Public Works and Utilities enterprises together. No disagreement, there was some problems, we will fix it and move up to the next level. Harrison added that an organization of this size (E&O) is composed for the most part of people who are used to having clear rules set; if rules are not set the organization will suffer if management does not make those rules clear and makes sure employees know there is a system of accountability. It is critical to have the structure of rules and following-up on the rules and make sure people know that is the environment. If people do not want to follow , they do not need to work for the City of Palo Alto. Approved April 19. 2006 Utilities Advisory Commission Draft Minutes from 3/1/06 Page 5 of 8 Dawes praised the coordination between Utilities and Public Works. He praised the 10-Year plan: scheduled twice a year – each utility which is totally integrated in terms of units sold, cost of units purchased, revenues, wholesale out, capital expenditures, bonding dollars in and out, reserves, is an excellent integrated financial plan for each of the utilities. Emily agreed and said she thinks Carl envisions adding what is out there in the future in terms of challenging our utilities. The public will gain information from the narrative. Commissioner Dawes asked about the Director’s search and commented he would like to see one of the Commissioners on committee. Commissioner Melton commented the most encouraging part of the plan is pulling together the enterprise funds throughout the city. They are all businesses and need to be managed like businesses. Chairman Bechtel asked if we went into this at all trying to look at removing levels of management/supervision between the Assistant Directors and the person in the back yard? Harrison said from the Operations standpoint, there is not as much latitude with the crews structure. The main key was ensuring all levels communicate with each other and even more, that Engineering and Operations communicate. Carl said we have looked at span of control. Short term, medium term, and long term – evaluating if current vacancies need to be filled and planned retirements. Benest said the General Fund is back to staffing levels of 1988. It is time to turn our attention to our enterprises. Harrison said in terms of E&O, the size of staff has been relatively constant. With a 100 year old infrastructure, it has been difficult to maintain the level of service at that level. Benest said there are very important issues in the entire government sector in the United States regarding future retirements and succession planning. The retiring Baby Boomers provide some opportunities since a great majority are at the mid and upper levels in the organization. The problem is the knowledge we lose is immense. We had better prepare the people in middle and lower ends of the organization to move up. The average age of Department Head is 54 and the average age of our Division Managers is 52. In the next five years, the entire management team will be eligible to retire. This is a tremendous threat to the organization. Harrison added we are already experiencing that we cannot fill our lineman staff vacancies. The cost of housing in this area is prohibitive for someone who wants to start their career. It is a critical problem and a lot of our staff live outside of the optimal response area. She urged the Commissioners to not lose site of the line people because this will be a big issue. Commissioner Dawes stated it might be wise to have a published list of the top people in the organization and their eligible retirement dates. Commissioner Rosenbaum asked about relieving the new Director of external duties – how doable is that? Benest said you can not have a Director out of the office 50% of the time but at the same time, it will not work if you ignore these legislative bodies. We need a Director who knows how to manage a large organization and to be involved in major external bodies and to share to outside with others. We will need to decide what meetings the Director must be at and what meetings can be delegated to the Assistant Director. Commissioner Rosenbaum stated there may be great Approved April 19. 2006 Utilities Advisory Commission Draft Minutes from 3/1/06 Page 6 of 8 difficulty in balancing this new approach. Yeats said it will be a process of developing over time. He has been attending key meetings but not all the meetings. Commissioner Rosenbaum asked about the Utilities Oversight Committee saying it sounds a little awkward. He suggested having second Assistant City Manager who is responsible for Public Works and Utilities. Benest said this has been suggested to him but have tried to minimize expenses with one Assistant City Manager. After reducing staff by 10% and having $20 million in growing expenditures, Benest is not in a position where he can or wants to hire another Assistant City Manager. Chairman Bechtel thanked staff for the promptness in this report. ITEM 2: DIRECTOR OF UTILITIES REPORT Beginning with the May 2006 UAC meeting, quarterly financial reports to the UAC will be developed utilizing SAP standardized reports that will generate only actual data and not provide estimates of balance of year financials. Girish Balachandran displayed two recognitions Palo Alto recently received. They are: ƒ Assembly member Ruskin’s Certification of Recognition commemorated the City’s innovative partnership with the County of Santa Cruz and Alameda Power and Telecom to provide our community with clean, sustainable energy. ƒ The US EPA recognized the City’s efforts to reduce greenhouse gas emissions, improve air quality, encourage economic development and create a local source of energy. Chairman Bechtel thanked the staff and recognized their efforts. ITEM 3: LONG-TERM ELECTRIC ACQUISITION PLAN UPDATE (LEAP) –ACTION Girish Balachandran gave a presentation on LEAP. We will not continue investigating a power plant in Palo Alto. Commissioner Melton said in the original plan, which included investigating generation in Palo Alto, his impression was that we made it through Phase I and based on that are cutting it off. Melton asked Girish to talk about what staff found out. Balachandran said based on what we found out doing our studies in Palo Alto, the infeasibility of siting large but efficient power plants given that park lands are not available, the conclusion reached was to terminate studying mid-size to large-size power plants in Palo Alto. Dawes said he is surprised we are dumping NCPA opportunities. It seemed as though the conditions were favorable. Dawes asked if this is related to the issue of having to contract within the Greater Bay Area? Balachandran said the regulatory rules on capacity are not defined yet The economics of getting power to the ISO and then to us is unknown. There are problems of how transmission allocation costs get distributed. Commissioner Dawes was surprised that NCPA Approved April 19. 2006 Utilities Advisory Commission Draft Minutes from 3/1/06 Page 7 of 8 would be making these decisions when these costs are not known and asked why are they pursuing this so rapidly if we don’t have facts at our disposal to know to participate or not? Balachandran said it’s all about risks. Timing is also a problem. Better timing would possibly be 2 years from now. Greater Bay Area capacity issue: could be looking at a $6- $10 million hit on our resource costs. We are fully resourced now, this would be additional capacity we would be expected to sell off on the market. If everybody does it, there would be a lot of surplus on the market. How does this impact our decision on siting and timing of our power plant? Balachandran said we have generation split off from transmission. The rules could affect Palo Alto disproportionately. Balachandran said we should be lobbying the people who make the rules to make Lodi part of our local area and are being worked on right now. We do it through NCPA, TANC and Bay Area municipal utilities. Given the alternatives we have right now, it does not make sense for us to enter into a 30-year commitment given the uncertainties of the rules. You have to tag your energy back to a defined area, the unknowns are where most of the capacity is not going to be counted. There is no one in charge of actually building the California energy infrastructure. This continues to be a dysfunctional market. There are different proceedings in place to deal with the situation and rules today are better than they were 5 years ago but still not what they should be. The result is we are going to delay on the plant investment and instead fill in the energy gap with contracts and issue an RFP for local bay area resources. Commissioner Dawes thinks we should be more pro-active. This is what we have to do given our situation. Chairman Bechtel said we do have a proposal to deal with energy, the 2006 LEAP implementation task. Commissioner Melton asked if we are going to participate within the Greater Bay Area – how much is there? Balachandran replied in the Greater Bay Area load is approximately 10,000 MW with about 6,000 MW capacity in the Greater Bay Area. Together with the City of Santa Clara, we have been looking at the feasibility of acquiring the Los Esteros plant . Chairman Bechtel stated we should a better job of using Public Benefit monies to lobby in government (through NCPA or CMUA) maybe have a position that does this. Chairman Bechtel mentioned the Utilities web site needs a lot of improvement. He said he is hoping this information will also get on the web site and talk about what Palo Alto is doing energy wise. It should be a big deal as opposed to a bunch of links. His concern is we do not get saddled with extra costs just because the legislature does not think we are doing enough. Yeats said part of the Oversight Committee and the Long Range Plan will be a public communication program – it is not free but we take on the responsibility of doing these projects. Balachandran said at meetings this month both Simitian and Ruskin recognized us by name, saying they do not have an issue with Palo Alto, we are doing a great job. There is a great threat in removing local control in public benefits. We continue to work public relations, will continue to improve the web and work with other agencies. Commissioner Dawes asked about Item 3, Efficiency Portfolio, Rocky Mountain Institute. The Executive Summary has trotted out the same old list of stuff we have been working on for years. We should not hang our hat on these very general things, we should be looking more seriously at obtaining more supply generation capacity. Balachandran said efficiency is just a part of our strategy. Commissioner Dawes said he does not see the meat in their report. Balachandran said Approved April 19. 2006 Utilities Advisory Commission Draft Minutes from 3/1/06 Page 8 of 8 actual realistic targets will be set and will be brought back to the UAC in the Long Range Plan. Chairman Bechtel referred to page 17 – we want low rates, sometimes if you can lower your bill with a higher rate that is what we should push. Efficiency programs should include everyone - including low income customers. LADWP is largest in state and may not be the best model for us. Commissioner Rosenbaum made the Motion to recommend that City Council approve the Local Generation Feasibility Study Phase I recommendation to redirect the feasibility study efforts to focus on local small-scale distributed cogeneration and potential power plant alternatives outside of Palo Alto. Commissioner Dawes seconded. Motion passed: Unanimous. Balachandran recognized everyone who contributed to this report. ITEM 4: LEGISLATIVE AND REGULATORY UPDATE - INFORMATION No formal presentation, questions entertained from the Commissioners. Chairman Bechtel said the role of CMUA, has to do with what is greenhouse reduction. Where is CMUA in some of these things? Debra Lloyd commented February 24th was the last date to officially comment. Legislative side will coordinate with CMUA members at that level. The increasing attacks on publicly owned utilities say Munis are falling short of the statewide efficiency targets but Chairman Bechtel commented that he knows that is not true. Palo Alto Utilities are held in high esteem in Northern California. He urged that we keep pressure on them. Lloyd said there is no victory. Every year there is a constant fight against local control. ADJOURNMENT Chairman Bechtel spoke of the Special Scoping Meeting on March 8th to gain public comments about the 8-hour emergency water project. Yeats will send the Commissioners the budget schedule. Yeats said the Commission will review the Rates in April and the budget documents in early May. Commissioner Rosenbaum Motioned for adjournment. Commissioner Dawes Seconded. Motion approved unanimously. Meeting adjourned at 3:03 p.m. Respectfully submitted, Dee Zichowic City of Palo Alto Utilities