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HomeMy WebLinkAbout2010-07-28 Utilities Advisory Commission Summary MinutesFINAL UTILITIES ADVISORY COMMISSION - SPECIAL MEETING MINUTES OF JULY 28, 2010 CALL TO ORDER Chair Waldfogel called to order at 7:05 p.m. the meeting of the Utilities Advisory Commission (UAC). Present: Chair Waldfogel, Commissioners Berry, Cook, Eglash, Keller, Melton and Council Member Yeh Absent: Commissioner Foster Additional Council Members Present for Unfinished Business Item #1: Mayor Burt, Vice Mayor Espinosa, and Council Member Scharff ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES None. AGENDA REVIEW No changes to the agenda were requested. REPORTS FROM COMMISSION MEETINGS/EVENTS None. UTILITIES DIRECTOR REPORT Utilities Director Valerie Fong delivered an oral report on the following items: 1. Property Assessed Clean Energy (PACE) Loans: Staff has drafted a letter to Palo Alto’s Congressional reps (Senators Boxer and Feinstein and Representative Eshoo) supporting legislation to prevent Fannie Mae and Freddie Mac from stifling California’s Property Assessed Clean Energy (PACE) program. The letter is planned to go out under the mayor’s signature before the end of the month. 2. Council’s Ad Hoc Subcommittee on the Role of the UAC: Council Member Yiaway Yeh, the chair of the Council Ad Hoc Subcommittee, has called a wrap-up meeting of the subcommittee next week (August 2 at 8 am). 3. May UAC meeting is typically a budget workshop … need to do a quick poll on which day of the week works best for folks. In the past, the workshop has been on the same day (but during the day) as the May UAC meeting. If it’s a day meeting, is there a better day of the week where we can be sure you will all be able to attend? 4. Joint Study with the Council and UAC (an annual event) … tentative dates, Oct 4th (Monday) or October 18th (Monday). Please check your calendars and look for an e-mail from Marites as she will check to see which day works best of the two days. Utilities Advisory Commission Minutes Approved on: September 1, 2010 Page 1 of 6 UNFINISHED BUSINESS ITEM 1: DISCUSSION: Informational Update to Support the Utilities Advisory Commission’s Response to the Council Colleagues’ Memo Regarding the Development of a Comprehensive Energy Efficiency and Renewables Procurement Strategy Chair Waldfogel opened the discussion by asking the four City Council members present to comment on the Colleagues’ Memo. Council Member Yeh began by pointing out that at the previous UAC meeting on July 20; the UAC had agreed that the upcoming review of the Long-term Electric Acquisition Plan (LEAP) and the Gas Utility Long-term Plan (GULP) and the update of the Utilities Strategic Plan will answer many of the issues raised in the Colleagues’ Memo. Vice Mayor Espinosa asked the UAC if parts of the memo were confusing. He stated that the words in the memo were chosen intentionally, and he didn’t want to add to the words agreed to by the entire City Council. Espinosa also stated that the entire Council approved the Colleagues’ Memo and that a subset of the Council should not attempt to provide direction any different from a close reading of the memo. He added that it would be inappropriate to expand from the script of the memo or to ask individual Council Members for their points of view. Commissioner Melton said that the memo contained two directives, but that there are many bulleted items discussed in the body of the memo that aren’t included in the action item. He asked what is expected from these other items and stated his belief that the UAC’s response should be broader than would seem to be the case from the two directives. Vice Mayor Espinosa agreed that there should be a broad reading in that sense and that the UAC should look at all policy issues addressed in the memo. Chair Waldfogel reminded the group that the memo came from the discussion of the two Ameresco contracts and that the issues raised when that went forward are also relevant. Council Member Scharff added that he feels it would be important for the UAC to look at cost benefit analyses of the two recommendations and that all the questions in the memo are appropriate to respond to. He would like the UAC to look at questions around how to meet our green goals and what the rate objectives are while keeping in mind what has happened with the refuse fund with falling revenue due to rapid customer response to incentives and pricing policies. Scharff stated that the UAC should look at how to integrate green goals with rates and budgets and the potential negative consequences to different policy initiatives. Mayor Burt agreed that the whole memo should be addressed and that the two recommendations in the memo were meant to summarize the overall intent. He pointed out that the memo asks for a lot of analysis. He is interested in the UAC’s feedback on whether too much is being requested in this one memo. Commissioner Eglash said that the UAC wants to be helpful to the Council and support Utilities staff. Eglash observed that the Council would like information, particularly as the costs of green power have gone up since the Renewable Portfolio Standard (RPS) was approved, and that the Council would like more feedback on how to balance environmental goals and low rates. He added that the UAC and staff are and will be spending a lot of time on LEAP, GULP and the Strategic Plan. The UAC could hold the Colleague’s memo aside until these other three long-term plans are complete or it could look to see if some of the memo’s questions will not be addressed by the three plans and respond to these issues in a helpful fashion. Eglash asked for the best way to communicate with the Council on these issues. Vice Mayor Espinosa indicated that communications would be written or provided in a study session and that the method may depend on the recommendations. He added that Council needs ongoing education on utility matters from the experts on the UAC. Eglash stated that the UAC could either provide recommendations or provide information for the Council’s decision-making process. Espinosa said that it is best to have a full analysis with options for the recommendations that differ by what policy drivers are most important. Eglash said that the policy implications and balance could be shown between, for example, cost, greenhouse gas (GHG) emissions, and rates. Espinosa concluded that the UAC has a powerful role since the commission will have done a more in-depth analysis than the Council has time for. Utilities Advisory Commission Minutes Approved on: September 1, 2010 Page 2 of 6 Chair Waldfogel pointed out that the RPS is not the same as a goal to reduce GHG emissions. He said that there is currently no state mandated RPS goal for Palo Alto, only Council-imposed goals. He suggested that the focus maybe should shift from RPS to GHG emissions. Waldfogel said that the UAC should keep this fact in mind with the caveat that mandates will probably change in the future. Council Member Scharff agreed and said that the City should be looking outside the box for meeting GHG goals and that the City should attempt to get the biggest bang for the dollars that are spent to further green goals. Commissioner Keller pointed out that the questions in the memo are appropriate, but it is important to keep in mind that the scenarios, regulations, and costs will change during the time that the questions are being answered. She stated that it might be helpful to have more defined goals in moving toward these moving targets. Mayor Burt agreed that it might be good to narrow the questions through multiple iterations in information and feedback to the Council. For example, he is interested in looking at how the cost of energy efficiency and renewable energy compare as cost of renewable energy increases —what is the benefit for each per dollar spent? He would like the Council to have assistance in framing the question on how reduction in usage, for example in water or in garbage collection, results in long-term revenue impacts. Council Member Scharff agreed with this analysis and with looking at how fixed costs will influence rates during lowered consumption. He stated that the Refuse Fund is a cautionary tale with “put-or-pay” contracts. Commissioner Eglash asked whether the Council had the appetite to address these issues abstractly or in specific actionable items. Commissioner Cook added that the UAC is looking for context. Mayor Burt suggested that the UAC provide recommendations to the Council and anticipate areas where the long-term plans might have to be modified in the future. Chair Waldfogel asked what a timely response to the Colleagues’ memo might be and recommended that the Colleagues’ memo response be wrapped into the Strategic Plan. Commissioner Melton pointed out that the LEAP, GULP, and Strategic Plan would probably be completed next calendar year. Commissioner Berry suggested that all of these plans are ongoing processes. He added that included in the Strategic Plan development are interviews with current and former Council and UAC members, and that these interviews could inform the UAC in developing responses to Council on the memo. Vice Mayor Espinosa noted that the Colleagues’ Memo did not contain a timeline. Council Member Scharff stated that the issues are appropriately addressed in the LEAP, GULP, and Strategic Plan, but that if something comes up in the meantime, these should be addressed and brought forward to the Council. The other Council members in attendance agreed. Mayor Burt commented that the Council’s appetite is bigger than its stomach and that the UAC will need to help manage the “diet.” Vice Mayor Espinosa agreed that most issues could be folded into the Strategic Plan, LEAP, and/or GULP, but that there could be some items that don’t fit there or are too detailed. Commissioner Keller then asked the Council members if they have any burning questions that should be answered first, but Burt responded that he did not have any sense that that was the case. Mayor Burt noted that he’s unclear on the depth and granularity of the Strategic Plan. Commissioner Melton suggested that Electric Vehicles (EV’s) might be a question that would be too granular to be included in the Strategic Plan, but that the Council may appreciate an information memo on the topic. Melton also suggested an approach that if EV penetration exceeds a certain threshold, then come back to Council, or return to the issue in, say, two years. Vice Mayor Espinosa said that maybe it would be appropriate to have an information memo about certain topics, but that it would be best to put the item in context as to when the policy questions would emerge. Mayor Burt and Vice Mayor Espinosa agreed that this is a dynamic process and rules established five years ago may no longer apply. There may need to be a more dynamic Strategic Plan to avoid being handcuffed to outdated discussions. Burt also noted prior to Utilities Advisory Commission Minutes Approved on: September 1, 2010 Page 3 of 6 Council action on LEAP, GULP and the Strategic Plan, the Colleagues’ memo should be used to provide guidance to staff. Mayor Burt, Vice Mayor Espinosa, and Council Member Scharff then left the meeting. Commissioner Keller asked how the current Strategic Plan has been used. Director Fong pointed out that it is used when making recommendations to the UAC and City Council for decisions. Commissioner Berry said that it is best to revisit a strategic plan every year even if it has a five- to ten-year planning horizon. Council Member Yeh also added that the UAC should be aware that the Council is looking to modify the liaison process and might have two liaisons to the UAC in the future, due to the activity and budget included in the Utilities operations. He added that a white paper for the Council on what will be developed in the LEAP, GULP, and the Strategic Plan might be helpful. Summarizing the discussion, Chair Waldfogel stated that it seemed that all agreed that the issues would be tied in to the strategic plan. Commissioner Berry asked if the UAC should appoint members to work on issues that won’t be in the strategic plan. Commissioner Eglash added that he heard less that the UAC should specifically respond to each point in the Colleagues’ Memo, but to reflect back the policies to Council and take all issues in context. Council Member Yeh noted that staff has indicated that most issues would fall within LEAP, GULP, and the Strategic Plan, but the UAC could map out the issues and see if anything falls outside of that and, then, determine how to respond. The Commission discussed the best way to respond to the memo and whether a separate subcommittee on this issue is necessary, or if the work should be folded into the UAC’s Ad Hoc Subcommittee on the Strategic Plan. Commissioner Melton suggested that the work on the Strategic Plan be done and then the UAC can see how that works and what recommendations emerge. The UAC could then assess if additional recommendations need to be made. Commissioner Keller agreed to work on the broad issues before getting to the specifics. The Commissioner agreed to agendize the Strategic Plan in future UAC meetings, so that all commissioners could discuss the pertinent issues. In the meantime, the Strategic Plan subcommittee will consider the issues raised in the Colleague’s memo when developing the Strategic Plan. ITEM 2: DISCUSSION: Gas Asset and Supply Management Plan (GASMP formerly known as GULP) Draft Objectives and Strategies Assistant Director Ratchye indicated that the UAC seemed to get through this item at the UAC’s July 20 meeting, but that the item was re-agendized in case there was further discussion. Commissioner Eglash referred to GULP Strategy 5: Protect the Climate “Acquiring non-fossil fuel alternatives for the portfolio when the total cost is less than traditional gas supplies including a reasonable carbon adder.” Eglash indicated that before supporting the strategy, he would need to understand the cost of implementing the strategy, what the definition of “reasonable” is for the carbon adder, and what would be the rate impact. He wanted to see the implications of the proposed strategy. Chair Waldfogel asked if GULP should address the substitutability of electricity and gas, and deferred to staff for analysis. In the short term, he noted that he is not convinced that there’s much opportunity for substitution, although this could be covered in a long-term plan. Director Fong suggested moving this to the Strategic Plan. Commissioner Melton agreed that this is a long-term issues and must be viewed in a long- term context. Referring to the voluntary green gas program, Commissioner Keller suggested that further study on this topic may be helpful. Council Member Yeh added that staff should list all relevant existing policies that CPAU is operating under and identify any that may need to be revisited. Utilities Advisory Commission Minutes Approved on: September 1, 2010 Page 4 of 6 ITEM 3: DISCUSSION: Long-Term Electric Acquisition Plan (LEAP) Draft Objectives and Strategies As a follow-up to the UAC meeting on July 20, 2010, Senior Resource Planner Monica Padilla provided a brief presentation of the impacts on supply cost over ten years associated with alternative CPAU profiles. The alternatives presented included: Profile #1: Status quo (energy efficiency = 7.2% by 2020; RPS = 33% by 2015; no local generation) Profile #2: Cost minimization – delay implementation of a 33% RPS to 2020 (energy efficiency = 7.2% by 2020; RPS = 33% by 2020; no local generation); and Profile #3: Green maximization – aggressive energy efficiency plan and procurement of 100% carbon free resources (energy efficiency = 18% by 2020; RPS = 33% by 2015; local renewable generation, carbon-free market resources). Padilla presented the results of the high level analysis, noting that the analysis did not take into account uncertainties. Profile #3 was the most expensive alternative, but was 100% carbon-neutral. Profile #2 was the lowest cost with Profile #1 in between. Padilla stressed that the analysis was for illustrative purposes only and that it should not be used to make hard conclusions. More time and a thorough review of sensitivity to various variables and scenarios would improve the analysis. Commissioner Eglash commended staff’s effort in providing analysis to aid in making policy level decisions and recognized that delaying RPS goals to 2020 did not have a significant cost savings over the current RPS goal of 33% by 2015. Eglash said he would like to see more of this type of analysis and offered to meet with staff to help frame the policy decisions. Commissioner Melton noted that Profile #3, green maximizer, significantly increased costs and rates; however, he would like to see impacts on rates and customer bills from various strategies. Chair Waldfogel noted that in comparing the status quo to the cost minimization alternatives the impacts on carbon reductions compared to the cost of achieving the reduction in dollars per ton would be an interesting metric. Commissioner Keller expressed her support for additional analysis and recommended this level of analysis be presented to the City Council to provide context in making policy decisions. Council Member Yeh observed that some Council Members do like data, but qualitative conclusions are also beneficial. Assistant Director Ratchye requested feedback from the UAC as to whether or not staff should recommend delaying the RPS to 33% by 2020 in an effort to line up with the anticipated state mandate. Commissioner Eglash opined that he is not supportive of going back on our RPS goals and supports retaining the goal to achieve 33% renewable supplies by 2015. He noted that a quick scan of the graph comparing the different profiles indicates that the current course is a good compromise between the extremes of the profiles. Commissioner Berry would like to see a projection of CPAU’s electric rates compared to PG&E, Silicon Valley Power and other competitors to see whether or not an aggressive RPS erodes the City’s competitive price advantage. ITEM 4: ACTION: Appointment of Members to Prepare the Utilities Advisory Commission Response to Colleagues’ Memo The Chair declined to take any action on this matter as the response to the Colleagues’ memo is to be folded into the efforts of the Ad Hoc Subcommittee on the Strategic Plan. Utilities Advisory Commission Minutes Approved on: September 1, 2010 Page 5 of 6 Utilities Advisory Commission Minutes Approved on: September 1, 2010 Page 6 of 6 NEW BUSINESS ITEM 1: ACTION: Appointment of Additional Member to the Ad Hoc Subcommittee on Strategic Planning ACTION: Commissioner Eglash made a motion to appoint Chair Waldfogel to the Ad Hoc Subcommittee on Strategic Planning. Commissioner Berry seconded the motion. The motion passed unanimously (6-0). ITEM 2: ACTION: Potential Topic(s) for Discussion at Future UAC Meetings Commissioner Cook asked whether a potential topic might be a review of the energy efficiency goals and achievements of other municipal utilities since some utilities had much higher goals (Burbank, Glendale) than Palo Alto’s. Commissioner Eglash suggested that a first step might be for Commissioner Cook to meet with staff off-line to obtain existing information (previously distributed to the Commission) to be able to assess the need to do such a review. Cook agreed to meet with staff offline. COMMISSIONER COMMENTS Council Member Yeh mentioned the low carbon cities initiative and his recent trip to Beijing. He noted the effort in China to demolish the eastern section of Beijing and to replace it with housing for 1 million people in what will be a carbon neutral section of the city. Yeh noted the fascinating discussions which involve Stanford University and businesses in the Stanford Research Park in looking at initiatives to reach carbon reduction goals. Yeh also pointed to the long time horizon involved to achieve some of the goals and invited any interested Commissioners to let him know of a desire to participate in the dialog. Meeting adjourned at 9:15 p.m. Respectfully submitted, Marites Ward City of Palo Alto Utilities