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HomeMy WebLinkAbout2011-03-02 Utilities Advisory Commission Summary MinutesFINAL UTILITIES ADVISORY COMMISSION MEETING MINUTES OF MARCH 2, 2011 CALL TO ORDER Chair Waldfogel called to order at 7:05 p.m. the meeting of the Utilities Advisory Commission (UAC). Present: Commissioners Eglash, Foster, Keller, Melton, Chair Waldfogel and Council Member Scharff. Absent: Commissioners Berry and Cook ORAL COMMUNICATIONS Jaya Goswami said that at the last UAC meeting, the UAC supported a value-based Feed-in Tariff (FIT) for solar photovoltaic (PV) systems. However, she recommends a premium-based solar PV FIT. She said that the value-based approach used did not capture all of the values, such as economic development and the value of future energy, which will be much higher than current costs. David Coale supported an integrated approach to marketing by the City. He said that the OPower reports are good, but he wanted to see water added to the report. He also noted that the Public Works department has a report showing the fraction of the each neighborhood that use the smallest size garbage cans and suggested that Utilities use a similar map for PaloAltoGreen subscriptions. He recommended that marketing should be integrated across the whole city and not be put out by the department silos. APPROVAL OF THE MINUTES The Minutes from the February 2, 2011 UAC meeting were approved as amended. AGENDA REVIEW No changes to the agenda were requested. REPORTS FROM COMMISSION MEETING/EVENTS None. UTILITIES DIRECTOR REPORT Utilities Director Valerie Fong delivered an oral report on the following items: 1. BAWSCA Update: Council Member Larry Klein, Palo Alto’s representative on the BAWSCA Board of Directors, is the new chair of the BAWSCA Board Policy Committee. The committee vets the important policy and budget questions before presentation to the full BAWSCA Board of Directors. Staff thanks Council Member Klein for his engagement and participation in the water system issues. 2. SFPUC Update: On Friday, February 25 the annual meeting of the SFPUC management and the BAWSCA agencies was held. Staff received an update on the water supply conditions, wholesale rate projections and the status of the Water System Improvement Program (WSIP). Water supply conditions are favorable and the SFPUC reported that the reservoirs are expected to fill and spill based on current water in storage and the amount of snow on the ground. Utilities Advisory Commission Minutes Approved on: April 6, 2011 Page 1 of 6 Regarding wholesale water rates, the SFPUC is considering changes to the rate structure to provide more revenue certainty, which is critical for maintaining its AA bond rating since San Francisco will need to sell more bonds in the future to fund the WSIP. Since virtually all their costs are fixed and do not depend on water sales volumes, declining water sales has resulted in a significant under collection of revenues for the last two fiscal years. This fact has caught the attention of ratings agencies. SFPUC has proposed a fundamental change to collection of the revenue requirement from the BAWSCA agencies. The change would result in each agency paying a fixed portion of the total revenue requirement based on their portion of the total water usage in the prior full fiscal year. BAWSCA is evaluating the proposal and staff is participating actively in the evaluation. SFPUC’s manager of the WSIP was not able to be at the meeting, but provided a video presentation on the status of the WSIP. 3. Finance Committee Update … Chair Waldfogel and Vice Chair Foster were both present for the March 1 Finance Committee meeting to represent this Commission on the many Utilities issues. a. Water Rates Committee voted 3-1 on the following: (1) Increase the rates to reflect an overall increase in sales revenues of 12.5%; (2) Increase the fixed charge component of the rates from current levels to 50% of the fixed charges recommended in the Cost of Service Study (COSS) for the Water Fund; (3) Increase current number of tiers by 1 for all customers (so 3 tiers for the residential customer class rates and 2 tiers for commercial customer class rates); and (4) Modify the volumetric charges accordingly to maintain the revenues from the various customer classes at the COSS levels. b. Western GeoPower contract – the Committee voted unanimously to support the UAC’s recommendation to go forward immediately with being a part of this NCPA renewable project. Staff will change its recommendation to the Council to be consistent with the UAC’s and the Finance Committee’s. Vice Chair Foster added that Council Member Yeh referred to the Committee’s final water rate recommendation as the “compromise” between an earlier staff proposal to move immediately to 100% of the COSS fixed charges for all customer classes, and the UAC’s subsequent recommendations to mitigate rate impacts on the customers with the lowest usage. Council Member Scharff thanked the UAC for its bold recommendation on the Western GeoPower contract and stated that it helped the Finance Committee and showed the value of the independent thinking provided by the UAC. Fong shared with the Commission that Vice Chair Foster had informed the Finance Committee that the position taken by the UAC on the Western GeoPower contract was first initiated by Commissioner Eglash who framed the matter clearly and convincingly. UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: ACTION: Evaluation of Five-Year Electric Wholesale Power Block Purchase Resource Planner Dr. Jim Stack provided a presentation on the report summarizing staff’s conclusions, including: 1) the Electric Portfolio will continue to have a deficit in the Jan-Mar (Q1) and Oct-Dec (Q4) Utilities Advisory Commission Minutes Approved on: April 6, 2011 Page 2 of 6 periods; b) the amount of the deficit is highly uncertain and dependent on load and hydroelectric and renewable generation; c) market prices are currently low; however, forward prices are high compared to current spot prices; and d) staff will continue to implement the short-term laddering strategy within guidelines. Commissioner Melton commented that electric prices are influenced by gas prices, which are expected to remain low for a long period. Commissioner Eglash stated that, if staff doesn’t think that prices for the 5- year block in question will get to the $40/MWh price, then staff is essentially recommending no forward purchase at this time. Stack confirmed Commissioner Eglash understands. Commissioner Melton noted that the request to buy “up to” 25 MW contains the flexibility to buy less than 25 MW, if staff believes less is needed in certain months. Chair Waldfogel stated that the policy question this action poses is whether to follow the cost stability goal by making this purchase since it reduces uncertainty. Commissioner Eglash stated that another goal besides cost stability is low cost. He said that staff is suggesting that the insurance cost for this purchase to achieve cost stability appears too expensive. ACTION: Commissioner Melton made a motion to recommend that the City Council approve the purchase of up to a 25 megawatt (MW) block of energy at a fixed price of $40 per MWh or less to meet base load needs for January-March and October-December for a term of up to five years starting in January 2013. Vice Chair Foster seconded the motion. The motion carried unanimously (5-0). ITEM 2: DISCUSSION: Overview of Parameters to Consider when Implementing Feed-in-Tariffs for Cogeneration Systems and Non-Solar Renewables in Palo Alto Resource Planner Jon Abendschein gave a presentation on feed-in tariffs (FITs) for non-solar distributed generation. The intention of the night’s meeting was to get feedback from the Commission on whether they supported a FIT for non-solar distributed generation and to get their comments on the proposed draft guidelines for development of FITs. He described the differences and similarities between the PLUG-In program and a FIT. Abendschein described several types of eligible technologies such as wind and biogas-fueled generators. Biogas-fueled distributed generation had the most potential at 1.5-2.5 MW. The Public Works department is preparing studies to establish their cost effectiveness. Cogeneration was also eligible for the program, though it was not renewable. He described the emissions savings associated with cogeneration. Commissioner Eglash asked whether a FIT was preferable to an incentive program like the PLUG-In program. Abendschein responded that it may be in certain cases, but that in others it is possible that capital incentives are more effective. Having both programs provides CPAU another tool to encourage cogeneration systems. Commissioner Eglash asked whether a FIT reduces the risk of nonperformance, since there is no up front capital outlay for incentives. Abendschein responded that it does. Commissioner Melton asked whether any projects had been installed under the PLUG-In program, and if not, why not. Abendschein responded that no systems have been installed, though there have been interested customers. There have been a variety of obstacles, including lack of motivation of potential partners or unavailability of capital. Commissioner Melton then asked whether, given the lack of success of the PLUG-In program, it would make sense to abandon the PLUG-In program in favor of a feed-in tariff. Abendschein responded that he would hesitate to do that before doing further analysis on the PLUG-In program. Utilities Advisory Commission Minutes Approved on: April 6, 2011 Page 3 of 6 Commissioner Keller asked if there anything additional we can do to encourage waste heat recovery, such as considering it a renewable resource. Abendschein responded that California hadn’t taken that approach so far, but that staff will take that as a comment and investigate. Chair Waldfogel expressed support for the guidelines in the report. He asked about minimum project sizes. Abendschein responded that the low cost-effectiveness of small projects creates an effective minimum project size. If a cost-effective small project presented itself we would accept it. Chair Waldfogel suggested that staff be more explicit about minimum sizes. He then asked whether the City has marketing representatives qualified to work with customers on cogen projects. Abendschein responded that there are qualified account representatives for each large customer who have experience helping customers evaluate cogeneration. Commissioner Eglash expressed support for the guidelines in the report. He supported Commissioner Keller’s comments on waste heat recovery and suggested that staff consider that topic further. He also recommended that staff give some thought to small residential-sized fuel cells and whether minimum sizes should be set to include or exclude them. ITEM 3: DISCUSSION: Preliminary Results of the Energy/Compost Feasibility Study Resource Planner Jon Abendschein gave a presentation on the preliminary results of the Energy/Compost Feasibility Study. He described the history of the project, which was one of two studies being done on handling green waste in Palo Alto. He gave an overview of three primary alternatives being considered and four sub-alternatives. The project could generate 1.5-2.5 MW of biogas, which could be used to generate power or cleaned up and injected into the gas distribution system. He showed the electric utility’s progress toward the Renewable Portfolio Standard if power from this project was included. He showed the value of renewable power and gas used in the study and described some of the preliminary results of the study. The objective of the meeting was to answer Commissioner’s questions and take feedback on how this resource would fit into the renewable portfolio and the prices used in the study. Chair Waldfogel asked for Public Comment: 1. John Kelley commented on the costs of the various alternatives, the opportunity to obtain renewable gas, the incineration of sewage sludge, and the value of avoided carbon emissions. 2. David Coale commented on the time period used in the study and the value of avoided carbon emissions 3. Peter Drekmeier commented on the costs of the various alternatives, the value of avoided carbon emissions, the costs associated with incineration of sewage sludge, and the cost effectiveness of wet anaerobic digestion, and listed other specific concerns with the study alternatives. 4. Emily Renzel commented on the use of park land, the marketability of sewage sludge compost, and commented on some of the assumptions in the study. Commissioner Eglash asked about project implementation, project ownership, and what was expected of the Commission. Abendschein responded that staff was looking for comments on the assumptions used in the energy portion of the study before the initial results of the study went to the City Council. Many of the outstanding questions would be resolved by the Public Works department. In the scenario analyzed in the study the project would be privately owned and operated. Commissioner Melton said he was glad to hear that the City was not proposing to build and operate a generator. He asked whether the project had been analyzed in enough depth to determine whether it was economic or not. Abendschein responded that he was unsure whether the project was economic from a Utilities Advisory Commission Minutes Approved on: April 6, 2011 Page 4 of 6 waste management point of view. He said the energy component of the project was relatively small. The question was whether this was an appropriate resource for the utility if it was economic from a waste management point of view. Commissioner Melton asked whether the costs shown in the presentation represented the price at which the utility was indifferent between buying from the project and buying outside renewables. Abendschein said they were. Commissioner Melton said there was some additional value associated with having a generator in the city under the City’s control. Vice Chair Foster said the energy generation component of the project was valuable to the utility because it was local, renewable, and baseload. He thought the City should look at wet anaerobic digestion of yard and food waste. He said the City should move in a direction resulting in closure of the incinerator at the Water Quality Control Plant. He said a carbon adder should be included in the study, and that the full project lifetime should be considered. Commissioner Keller agreed with most of what had been said. She asked about the reliability of digesters as a fuel source. Abendschein said he was unsure about reliability. She asked about whether an alternative would be considered involving digestion of food and yard waste. Abendschein responded that he was unsure whether the Public Works department would proceed with an evaluation of that alternative. She commented on the rent and asked whether there were air emissions that should be included. Utility Director Valerie Fong replied that staff was focused primarily on its role as an energy purchaser rather than as a generator owner who would be focused on emissions. Commissioner Keller supported the idea of local generation. Chair Waldfogel asked whether a carbon adder was included in the renewable power price. Abendschein responded that it was. Chair Waldfogel asked whether an item related to local generation had been included in the Long-Term Electric Acquisition Plan (LEAP). Assistant Director for Resource Management Jane Ratchye replied that the LEAP Implementation Plan contained a work task related to local generation. Commissioner Waldfogel asked whether it was possible to incorporate this project into a larger local generation project, creating a multi-fuel plant. Abendschein responded that the project could supply a portion of the fuel for the plant. Director Fong said the value of that option could be captured by providing a value for renewable gas from the digester project. Commissioner Eglash recommended providing more focused, specific, and actionable information in the presentation to the City Council. He opposed paying higher than avoided cost for the energy from the project. Vice Chair Foster asked whether there were two studies in progress on anaerobic digestion. Abendschein said there were. Vice Chair Foster recommended combining the studies. Commissioner Melton said that the City’s utilities should not subsidize the project and should only pay avoided cost for the energy from the project. Commissioner Eglash said there was not enough information in the staff report to make a proactive proposal if that was what the Commission was being requested to do. Chair Waldfogel said the question being asked of the Commission was narrow: whether the Commission supported roughly 2 MW of local baseload generation, and he said the answer was yes. In addition, on the question of how much CPAU should pay for the renewable energy, staff is proposing to base these payments on the value of the generation, including renewable attributes such as the value of carbon emissions. Commissioner Eglash responded that the commission supports this approach, which is similar to what’s been done on other similar staff analyses. Utilities Advisory Commission Minutes Approved on: April 6, 2011 Page 5 of 6 Utilities Advisory Commission Minutes Approved on: April 6, 2011 Page 6 of 6 Director Fong stated that staff should have done a better job framing this issue and on what staff wished to receive the UAC’s feedback. She clarified that the report and presentation were meant to provide the UAC an update on the project and to inform the UAC of CPAU’s role. In this case, CPAU’s role is as buyer of energy (renewable gas or electricity) and the key point for UAC discussion should have been narrowed to whether it agreed with staff’s use of a value-based model for determining how much to pay for the renewable energy from the project. The sense of the commission was that it did agree with staff’s use of a value-based approach, including the value of renewable supplies with a carbon adder. Vice Chair Foster said he wanted the minutes to show his strong support for the following items: a) ending incineration of our biosolids; b) producing locally-generated baseload green energy; c) including a carbon adder in any analysis; d) considering the wet anaerobic digestion option, including both food waste and biosolids; and e) examining lifetime value when preparing financial analysis. ITEM 4: ACTION: Potential Topic(s) for Discussion at Future UAC Meetings Commissioner Melton saw that the smart grid special meeting has not yet been scheduled and urged the commission to settle on a date as it is an important topic. Chair Waldfogel asked if the commission believes that the quarterly update report should be discussed periodically, or if it should remain as an informational report without discussion. Commissioner Melton said he was happy to receive it as information only without discussion. Commissioners can always request an item from the report be discussed at a future meeting. Commissioner Keller agreed with Commissioner Melton, but said that the issue could be re-visited with new commissioners. ACTION: No action taken COMMISSIONER COMMENTS Vice Chair Foster was happy to receive the informational report on 3rd party proposals received in response to the Request for Proposals. Meeting adjourned at 9:45 P.M. Respectfully submitted, Marites Ward City of Palo Alto Utilities