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HomeMy WebLinkAbout2011-11-02 Utilities Advisory Commission Summary Minutes _______________________________________ City of Palo Alto FINAL UTILITIES ADVISORY COMMISSION MEETING MINUTES OF NOVEMBER 2, 2011 CALL TO ORDER Chair Foster called to order at 7:05 pm the meeting of the Utilities Advisory Commission (UAC). Present: Commissioners Berry, Cook, Foster, Keller, Melton and Waldfogel Absent: Council Member Liaison Scharff and Commissioner Eglash ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES The minutes from the October 5, 2011 UAC meeting were approved as presented. AGENDA REVIEW No changes. REPORTS FROM COMMISSION MEETING/EVENTS Commissioner Melton reported that he attended the groundbreaking ceremony for the new emergency storage reservoir at El Camino Park and was thankful that work was finally beginning on that project. UTILITIES DIRECTOR REPORT In the absence of Director Valerie Fong, Assistant Director Jane Ratchye delivered an oral report on the following items: 1. Marketing and Efficiency Program Update – Staff proposed amending contracts with Ecology Action to add funding for the Right Lights+ program and with OPOWER to continue the program for one year beyond its original end date of May 2012. Both programs have had good energy efficiency results, and the Right Lights+ program had reserved nearly all of its annual funding in the first two years of the program with more businesses lined up to participate in lighting and sensor retrofits. On November 1, the Finance Committee unanimously recommended approval of the amendments. 2. Residential Programs – The LED holiday light exchange will continue again this year in December. Residents will be encouraged to exchange a working strand of incandescent holiday lights for a strand of colored or white LED holiday lights. The new residential LED lighting rebate will begin in January with a contest to find the “ugliest” lighting in Palo Alto. The winning participant will get up to $400 in free LED lights. Utilities Advisory Commission Minutes Approved on: December 7, 2011 Page 1 of 6 3. PG&E Pipeline Testing Update – We have verified with PG&E that the “first segment” of the T-30 transmission pipeline (along Page Mill Road up to Foothill Expressway) passed its test last Sunday without incident. The second and final segment of the T-30 pipeline is scheduled for testing tomorrow (Nov 3) and assuming it completes without incident, the PG&E testing in Palo Alto will then be finished. All that will remain is for PG&E to “tie-in” the lines back into the transmission system and restore the various test sites to their previous condition (fill holes, repave, etc.)---scheduled to be done by November 11th. 4. Visitors from Hunan Province, China (Oct 19) – Utilities staff hosted 25 top managers from various government agencies within the Hunan Province who wanted to learn about how to operate successful sustainability programs, particularly in the area of providing utilities services. Staff made presentations and answered questions about our Climate Protection Plan, our renewable resources portfolio and purchase strategies and our energy and water efficiency programs for all customer classes. Special kudos to Dixon Yee from our UMS group who is fluent in Mandarin and translated beautifully. 5. Feed-in Tariff Program Documents Made Public – The preliminary program documents for the feed- in tariff program have been made public on the City’s website at www.cityofpaloalto.org/RenewableFIT. The City has received questions and comments from several solar vendors and other organizations. Staff has also been raising awareness about the program with potential host customers. 6. RPS Enforcement Program – California’s new RPS law (Senate Bill X1-2) applies, for the first time, to municipal utilities like Palo Alto in addition to investor owned utilities. With respect to the enforcement of the law, SB X1-2 requires that “[t]he governing board of the local publicly owned electric utility shall adopt a program for the enforcement of this article on or before January 1, 2012.” In order to meet this deadline, staff plans to request Council approval in December 2011 of an enforcement program that contains pro forma language on how the City will enforce its RPS regulations. The enforcement provisions will comply with the state law, but will not necessarily be the same as the RPS strategy adopted in the Long-term Electric Acquisition Plan (LEAP). 7. Update on Utilities Emerging Technology Demonstration Program – The City Manager requested that the program reviewed by the UAC in October be reviewed by the Policy and Services Committee on November 29. Council will review in December or January and staff plans to move forward with implementation by February. 8. Halloween, Utilities Style – Utilities staff participated in the City Hall Halloween Contest with a group costume featuring electric transmission lines and renewable resources (solar, wind and hydroelectric). The project, which was completed on a budget of $25 (not from ratepayers!) using reused and recycled materials, demonstrated how Utilities always works as a team to identify the lowest cost options! 9. Large Customer Load Growth – We recently learned of HP’s plans to move several of its operations from other areas of California to re-occupy several of its buildings on its Palo Alto campus and to build a data center here in an existing building on its campus. The re-occupation may amount to 3 MW of Utilities Advisory Commission Minutes Approved on: December 7, 2011 Page 2 of 6 returning load (about 1.5% of our energy load). The data center may build up to 8 MW of new load in an existing building and add 7-12% to our energy load over the next 3 years. UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: ACTION: Update of Palo Alto Renewable Portfolio Standard (RPS) Policy Resource Planner Dr. Jim Stack presented a summary of the written report, focusing on the policy options for making adjustments to the Long-term Electric Acquisition (LEAP) strategy that concerns the Renewable Portfolio Standard (RPS) in light of the new state RPS law. Commissioner Keller asked if the City will have difficulties meeting the 33% RPS goal in the future—when some existing contracts expire—under the rate impact limit, and whether there is an opportunity to save money now and use it later. Stack noted that the rate impact limit is an annual limit and that “banking” is not allowed with the rate impact limit budget. Commissioner Cook asked for clarification on what is meant by “short-term” REC purchases? Stack responded that any REC purchases would be intended to fill a short-term gap—up to about three years—in the event that some resources would not come on line as planned or experience long-term outages. Commissioner Cook noted that the state law allows utilities to establish reasonable cost containment mechanisms and asked whether the 0.5 ¢/kWh rate impact limit would serve as Palo Alto's cost containment measure? Stack answered that it would. Commissioner Cook stated that his preference would be to pick a more aggressive RPS target than 33%, especially if it could be achieved within the existing rate impact limit, and that perhaps a 40% target would be appropriate. Commissioner Waldfogel noted that the UAC is about to review the City’s greenhouse gas (GHG) emissions policy, and that we should consider capping the RPS level at 33% and using the balance of the money to taking a leadership position in reducing GHG emissions, going beyond what the state requires us to do. Commissioner Melton noted that all of our renewable energy is currently in Bucket 1, but inquired about PaloAltoGreen RECs and whether they can be counted towards the RPS requirements. Stack and Ratchye responded that the RECs purchased for PaloAltoGreen are not CEC-certified RECs, so they would not be eligible for RPS compliance. Also, those RECs would not be eligible for RPS compliance even if they were CEC-certified because they're part of a voluntary program. Commissioner Melton noted that the $20 million staff identified as potential revenue from selling or swapping excess bucket 1 resources is a lot of money and that if staff was planning to recommend against pursuing this strategy, it should beef up its case for passing up this opportunity when going before Finance Committee. Chair Foster asked what could be done with the revenue from selling excess bucket 1 resources. Ratchye responded that the money would stay in the electric fund, but could be used for any purpose in the electric fund. Utilities Advisory Commission Minutes Approved on: December 7, 2011 Page 3 of 6 Commissioner Waldfogel commented that striving for a higher RPS goal made sense when the 33% goal was set, but now we've achieved our goal so perhaps we can use the remaining money for other goals such as GHG emission reductions or energy efficiency and stake out a leadership position there. Commissioner Melton commented that the idea of increasing the RPS goal to 40% has been floated at the state level and asked whether there was any support in Sacramento for that idea. Stack responded that the 40% goal was mentioned in the governor's signing statement for SB X1-2, but the idea doesn't seem to have taken off yet. Commissioner Melton noted that in an average year the supply portfolio is roughly 50% hydro and if we had a 40% RPS he wonders whether that is too much of the portfolio to have locked in. Stack responded that there will be less and less room for market purchases as we buy more long-term resources, particularly in wet years. He also noted that this will mean we will be net sellers in more months and buy less energy in the spot markets. But he noted that this just means we'll have a greater level of market price risk. Chair Foster asked about how we should balance spending more on efficiency vs. RPS vs. any other program. Ratchye responded that the information to compare the costs or benefits of those alternatives has yet to be provided to the UAC and that staff will be back next month with more information on the other alternatives in the context of a discussion on whether to pursue a carbon-neutral electric portfolio. Commissioner Waldfogel suggested approving staff recommendations numbers 1 (retail sales), 3 (interim targets), and 4 (bucket sale/swap). (Referring to recommendation numbers in the presentation, not the report.) Chair Foster indicated that the proposed language needs to clarify which limit takes precedence: the rate impact limit OR the 33% RPS level. Chair Foster noted that the language will be interpreted to mean that 33% is a minimum RPS level and staff will continue pursuing new renewables until the 0.5 cent limit has been reached. Ratchye confirmed that this was the intent of staff's proposed language, but would prefer that the language be as clear as possible. Vice Chair Berry stated his belief that the current policy language sets the 0.5 cent rate impact limit, but does not direct staff to use all of that money. He indicated that it is the customers' money, and there is not a clear reason why all of the money needs to be spent. Commissioner Melton said that the right policy decision is to recommend a 33% floor and a 0.5 cent limit, retaining the ambiguity about what to do once the 33% level is reached if there is still additional money to be spent under the rate impact limit. Commissioner Keller asked what would happen if the 33% target cannot be met without exceeding the rate impact limit. Ratchye responded that at that point the Council could choose to stop pursuing additional renewables—because the 0.5 cent rate impact limit is the City's cost containment measure—or approve additional funds to be spent to achieve the 33% level. Commissioner Waldfogel asked what the impact is of not mentioning policy update #5 (selling or swapping bucket 1 resources) – can staff do this type of transaction, or are they prohibited? Ratchye responded that staff can not currently do this type of transaction without receiving approval to do so from the Council. Commissioner Melton said he does not think we need to address something staff can't currently do. Ratchye also indicated that while staff does not currently intend to pursue this type of transaction, there is Utilities Advisory Commission Minutes Approved on: December 7, 2011 Page 4 of 6 nothing precluding it from considering such transactions. Vice Chair Berry indicated that these potential transactions may make sense to do, so we should not limit staff from acting on these opportunities. Ratchye offered that staff return with further discussion of this topic in the context of the scheduled report for the UAC’s December meeting on whether or not to pursue a carbon-neutral electric portfolio. Chair Foster said he is not in favor of selling or swapping bucket 1 resources, but thinks there is interest from members of the UAC to have more discussion on that topic. Vice Chair Berry said that this option may not work for a variety of reasons, but that it could be beneficial and we should examine that in more detail since there is significant money on the table for this. He would like to see the possibilities laid out in detail, with numbers presented. Commissioner Melton agreed with Vice Chair Berry, saying that while staff has indicated it does not think it should pursue these opportunities he wants to understand the options in more depth. Chair Foster said he thinks there is consensus on the desire to have this issue brought back to the UAC for further discussion in the future. ACTION: Commissioner Melton moved the staff recommendation. Chair Foster seconded the motion. Chair Foster offered an amendment to add “with a target of 40%” to provide clarity that the direction is to get as much renewable energy as possible under the 0.5 cent/kWh rate impact limit. Commissioner Melton accepted the amendment. The motion is that the UAC recommend that Council approve the proposed modifications to the Long-term Electric Acquisition Plan (LEAP) related to Strategy number three, Renewable Portfolio Standard (RPS), to read as follows: Renewable Portfolio Standard (RPS) Reduce the carbon intensity of the electric portfolio by acquiring renewable energy supplies by: a. Pursuing a minimum target level of renewable purchases of at least 33%, with a target of 40%, of retail sales by 2015 with the following attributes: (1) The contracts for investment in renewable resources shall not exceed 30 years in term. (2) Pursue only renewable resources deemed to be eligible by the California Energy Commission (CEC). (3) Evaluate use of Renewable Energy Certificates (RECs) to meet RPS. b. Ensuring that the retail rate impact for renewable purchases does not exceed 0.5 ¢/kWh on average; and c. Evaluating a Feed-In Tariff (FIT) The motion carried by a vote of 4-2 with Vice Chair Berry and Commissioner Waldfogel opposed. Commissioner Waldfogel stated that he opposed the motion since he believes that the entire 0.5 cent rate impact limit does not need to be spent on renewables and it could be put to better use for efficiency, other ways to reduce GHG emissions, or simply reduced rate impact. Vice Chair Berry said that he agreed with Commissioner Waldfogel. ITEM 2: PRESENTATION: Preliminary Results From Fall 2011 Renewable Energy Project Request Proposals Resource Planner Dr. Jim Stack presented a high-level summary of the responses received to the City’s Request for Proposals (RFP) for renewable energy supplies. Chair Foster indicated that he does not recommend pursuing additional landfill gas (LFG) projects due to difficulties getting the last ones approved by Council. He also asked how the different technologies Utilities Advisory Commission Minutes Approved on: December 7, 2011 Page 5 of 6 Utilities Advisory Commission Minutes Approved on: December 7, 2011 Page 6 of 6 compared with each other on cost. Stack responded that solar prices have fallen significantly since staff's last renewable energy RFP two years ago – previously solar had been the most expensive technology, but in this RFP the solar and wind proposals were the least expensive ones. Commissioner Melton inquired about the size of the solar projects that were proposed. Stack responded that most solar projects that were proposed were around 20 MW size, but some were proposals of small pieces of larger projects. Vice Chair Berry asked whether any proposals were for local solar projects. Stack responded that there were no proposals for projects located in Palo Alto, but there were a couple of projects located in the Bay Area. Commissioner Waldfogel commented that this is amazing feedback from the market. He also asked whether this information would be used in evaluating a carbon emissions policy. Ratchye responded that one way of getting to a carbon neutral portfolio is through additional purchases of renewables, so this information will be used to estimate the cost of carbon reduction measures that are based on increased use of renewable energy. Ratchye noted that staff's proposed Feed-in-Tariff rate is value-based and one component of the value assessment is the cost of renewable energy, so these results will cause staff's Feed-in-Tariff rate proposal to be lower than the one initially presented to the UAC. Chair Foster asked when staff plans to come back to the UAC with the next step in this process. Stack responded that, depending how contract negotiations go, staff could return to the UAC as early as April or May with contracts ready for approval. ITEM 3: ACTION: Potential Topic(s) for Discussion at Future UAC ACTION: None. COMMISSIONER COMMENTS None. Meeting adjourned at 9:12 p.m. Respectfully submitted, Marites Ward City of Palo Alto