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HomeMy WebLinkAbout2014-05-07 Utilities Advisory Commission Summary MinutesUtilities Advisory Commission Minutes Approved on: June 4, 2014 Page 1 of 9 UTILITIES ADVISORY COMMISSION SPECIAL MEETING FINAL MINUTES OF MAY 7, 2014 CALL TO ORDER Chair Cook called to order at 12:05 p.m. the meeting of the Utilities Advisory Commission (UAC). Present: Commissioners Cook, Foster, Eglash, Melton and Waldfogel Absent: Commissioners Chang, Hall and UAC Liaison Scharff ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES The minutes from the March 26, 2014 UAC special meeting were approved as presented. AGENDA REVIEW AND REVISIONS None. REPORTS FROM COMMISSION MEETING/EVENTS None. UTILITIES DIRECTOR REPORT Utilities Director Valerie Fong provided the following report: 1. Communications Update:  Not surprisingly, most outreach in April focused on water, either giving drought status updates or information on water-related programs, rebates etc. Outreach ranged from media alerts and social media posts to email to neighborhood groups and of course, events like our Great Race for Saving Water.  We gave a nod to Earth Day with our “Keep Green and Carry On” campaign focusing on all the City programs that help support a more sustainable lifestyle.  Behind the scenes, we have lots of communications planning going on as we prepare for the many new initiatives in the works that will be coming out in the summer and fall, Utilities Advisory Commission Minutes Approved on: June 4, 2014 Page 2 of 9 including the new Palo Alto Green Gas program, new solar programs and new residential and commercial efficiency programs. 2. Community Outreach Events—April is always a big month for events, with Earth Day and the associated focus on environmental issues. Some examples:  Key Account Customer Employee Events—many of our corporate customers held events for their employees where CPAU staff provided efficiency program materials.  Going “back to school” big-time---we made presentations to hundreds of children in recent weeks about energy efficiency, water efficiency, electric safety and utility career options during events at El Carmelo, Barron Park and Walter Hays elementary schools.  April 19 Great Race For Saving Water—this year was even bigger and better than last year’s already successful event, with more racers, more involvement from community organizations and businesses, plus more delicious food and lively music!  April 24 Greenlight Film Festival and Eco-Fashion Show—CPAU played a pivotal role at this regional event honoring the film-making and outfit-designing talents of local youth. This year’s event had a record number of high-quality entries.  April 27 JCC Sustainable Food Event and Presbyterian Church Earth Day Fair—staff tabled at both events, focusing on efficient garden water at the JCC and covering renewable resources in general at the church fair.  May 3 May Fete Parade—our table at this event was strategically located near the Lytton Plaza recirculating water fountain since the focus was water conservation and drought issues.  May 7 Gray to Green Workshop (coming up tonight!)—the dramatic response to this opportunity to learn about installing a laundry to landscape graywater system (sold out at 140 attendees), tells us we will need to offer it again in the months ahead. UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt the Proposed Utilities Operating and Capital Budgets for Fiscal Year 2015 Business Analyst Anna Vuong provided a brief overview of the budget. Vuong thanked the UAC budget subcommittee (Commissioners Melton and Waldfogel) for its participation and review of the FY 2015 proposed budget. She stated that there are no proposed rate changes for FY 2015 except for rates for the Fiber Fund which continues to have a CPI increase of 2.58% for the EDF-1 rate (approved by Council as part of the Dark Fiber Licensing Agreement back in 2006). The overall department highlights for Fiscal Year (FY) 2014 includes Council approved carbon neutral plan, completing the El Camino Park Reservoir and Wells portion of the emergency water supply project, SAIC organizational assessment was presented to the Finance Committee, soft launched the new Outage Management System; revamped financial plans and reserves Utilities Advisory Commission Minutes Approved on: June 4, 2014 Page 3 of 9 policy, and are using overstrength positions as part of succession planning to train and ease transition. The FY2015 Initiatives include focusing on Utilities-specific IT roadmap, assessing Utilities SCADA and IT security, updating the Water System Master Plan, working in coordination with Planning on the California Avenue Streetscape project; implement the Local Solar Plan, and working with West Valley College to mitigate the aging workforce issue. For the Electric Fund, the FY 2014 highlights include implementation of the carbon neutral plan, launching the CustomerConnect pilot program, completing underground district 45, and continuing discussions with various parties for the second transmission line. For FY 2015, no rate changes are proposed, revenue is expected to decrease by $800,000, some major highlights include a cap and trade increase, decrease in customer sales, and a decrease in interest income. Expenses are expected to decrease by $300,000, notable changes include a cancellation of a couple of renewable power purchase agreements as the projects didn’t pan out, increasing the CIPs by $1.1M, and expanding our solar rebate program as the state- mandated SB1 solar program winds down in 2016. Chair Cook asked why interest income has decreased. Vuong stated that the bond rates are still low. The City is forecasting an 8% decrease in interest income. The electric CIP increase of $1.1 million includes new customer connections, various underground rebuild projects, and continuation of security upgrades at various utility sites. The fund will carry over about $14M from prior year budgets. The prior year projects are available in the back of the “Proposed CIP” budget book. The projected reserve balance at the end of FY 2015 is $126M. The projected reserves do not reflect the new proposed reserve policy as the new policy is not yet adopted by Council. For the Fiber Fund, the FY 2014 highlights included completion of the construction build out to all 18 Palo Alto school district sites, collaboration with Information Technology & Public Works Departments to bring Wi-Fi to Cogswell Plaza, and work with the Citizen Advisory Committee on the scope for both the Fiber-To-The-Premise and the Wireless Network Plan Study. Fiber EDF1 rate will increase by the CPI index of 2.58%. Revenue is expected to increase by $200,000 and expenses are expected to increase by $500,000. There are no changes to the Fiber CIP; the proposed CIP budget is $400,000 with carry-over of about $600,000 from prior year budgets. The projected reserve balance at the end of FY 2015 is $19.8 million. For the Gas Fund, the FY 2014 highlights included an update to the crossbore program; in which Utilities have inspected 62% of total laterals. Of that, 9,640 have passed inspection and over 4,000 have not passed due to blockages, roots, water or equipment breakdown. Commissioner Melton said that, regarding crossbores, it is more interesting to know how many crossbores were found than how many were inspected. Assistant Director Tomm Marshall stated that about 25 crossbores have been found and resolved so far. He explained that there Utilities Advisory Commission Minutes Approved on: June 4, 2014 Page 4 of 9 is still some uncertainty about how many crossbores exist since some parts of the laterals are impossible to video due to defects in the lines, particularly in the customer-owned sections on the lines. Vuong stated the gas fund highlights included the completion of program design for the PaloAltoGreen Gas program and gas receiving station #3 rebuild, currently under construction. For FY 2015, no rate changes are proposed; and revenue is expected to decrease due to a lower load projection. Vuong also noted the omission of a $2.5M reduction in customer sales in the proposed budget. The revised figure is based on our most recent financial forecast. Expenses are staying relatively flat. Commodity purchases are expected to decrease due to lower load projections. The gas CIP will increase by $500,000 due to design costs for GMR 22. The fund will carry-over $15 million from prior year budgets. The projected reserve balance for the Gas Fund at the end of FY 2015 is $19 million. Commissioner Foster asked how much gas is “lost” in the distribution system annually. Senior Resource Planner Jon Abendschein said true gas losses are fairly minimal, but there is gas that is unaccounted for. The total of lost and unaccounted for gas is roughly 2%. For the Wastewater Collection Fund, FY 2014 highlights include completion of sanitary sewer rehabilitation projects 22 and 23 and installation of 20 smart cover manholes in areas with the highest incidence rate of sewer overflows. The installation of the manholes at the specific 20 locations has reduced the overflows to zero. For FY 2015, no wastewater rate changes are proposed, no expected changes in revenues are projected and expenses are expected to increase mainly due to sewer system rehabilitation project #26. The proposed CIP budget is $4 million and the fund will carry over $9 million from prior year budgets. The projected reserve balance at the end of FY 2015 is $4.6 million. Chair Cook asked if it is a problem that the fund’s reserve is at the low end of the reserve guideline. Senior Management Analyst Dave Yuan said we are expecting a one-time positive accounting adjustment of $1.5 million in FY 2014 reserves which is not reflected in the slide and he does not think the level of reserves is a concern in FY 2015. For the Water Fund, the FY 2014 highlights include a fully operational reservoir, pump, and well at El Camino Park, completion of water main replacement projects 23 and 24, receipt of the 2014 Silicon Valley Water Conservation Award, and receipt of a $100,000 grant from Santa Clara Valley Water District to develop business water reports and expand the commercial Real- Time Water Use Monitoring pilot. For FY 2015, no rate change is proposed for Water. Revenues are expected to increase by $1.1 million, which includes revenues from new fire service requirements and customer connection fees. Expenses are expected to increase by $2.8 million; this includes an increase from the SFPUC for commodity purchase; rents, and allocated charges. Utilities will be initiating a Master Water Plan study to evaluate the current state of the distribution system and determine the necessary rate of main replacement in future years. The Master Water Plan study will include a seismic evaluation of the water transmission line. The Utilities Advisory Commission Minutes Approved on: June 4, 2014 Page 5 of 9 proposed CIP budget for FY 2015 is $5.3 million and the fund will carry over about $14 million from prior year budgets. The projected reserves balance at the end of FY 2015 is $10.7 million. Vuong discussed the new position requests of 3.0 full-time equivalents (FTEs). The first request is a meter technician for the electric meter shop. Commissioner Melton asked about the implication of a having 1,000 unsealed meters. Assistant Director Dean Batchelor said the seals could be compromised by customer tampering, exposure to the elements, or from City staff not following the proper procedure when resetting a new meter. Unsealed meters can lead to theft of electricity, unsafe conditions, or fires. Batchelor added that Utilities needs a program to re-seal and fix these meters. Commissioner Waldfogel asked how much revenue loss has occurred due to this issue. Batchelor replied that he doesn’t know yet. Commissioner Melton asked if the seals are broken mostly from tampering by customers. Batchelor replied that not all is from tampering; it could be employees not properly resealing the meters after the meters were changed out. Furthermore, the new seals will be more durable and difficult to break. The second position is for a Utility Safety Officer. This position is responsible for health and safety programs across all utilities to ensure we are in compliance with workplace safety and federal regulations. This position will also conduct emergency preparedness training. The third position is the Principal Management Analyst which is needed to support and enhance key Utilities business systems and applications across the department. This request is supported by the recent organizational assessment as well as preliminary findings of the department's IT assessment. Commissioner Eglash asked what has happened to resolve the issue raised in prior year when CIP projects were not able to be completed on time due to staff vacancies. Assistant Director Marshall stated that they have been able to fill most vacant positions, but have an ongoing problem retaining experienced staff, especially in the face of looming retirements of experienced staff. Director Fong added that the new employees lack experience and there have been some issues that customers may have noticed. For example, when CIP projects are being completed, sometimes the customer notifications have not been completed according to standards. Commissioner Waldfogel asked how many vacancies Utilities has at this point. Yuan said that Utilities currently has 23 vacancies and last year there were 38, so there has been an improvement. On behalf of the UAC budget committee (Commissioners Melton and Waldfogel), Commissioner Melton reported that the subcommittee reviewed the budget package, including operating, Utilities Advisory Commission Minutes Approved on: June 4, 2014 Page 6 of 9 capital, and personnel. He said that the committee recommends adoption of the budgets and personnel plans as presented. The committee did not find anything to recommend in this year's budget different from staff's proposal. However, the committee has some recommendations looking forward. Commissioner Melton noted that about half the costs for each fund are related to commodity costs with the rest of the costs fixed. Given the business model of encouraging a reduction in the usage of commodities, the fixed costs are spread over fewer units of commodity, which causes the rates to increase. The City of Palo Alto Utilities (CPAU) cannot increase commodity volumes to spread these fixed costs. The committee recommends that this issue get more focus in the future. One suggestion is to share common work activities over multiple organizations or outsourcing some activities. For example, CPAU should examine joining with the Sacramento Municipal Utilities District, Alameda Municipal Power and/or Silicon Valley Power (Santa Clara) for some activities such as dispatch, customer service, billing, and stores and inventory management. CPAU needs to determine if there are opportunities to reduce the fixed costs by cooperating with nearby municipal utilities. Many of the new programs that are already being undertaken or contemplated might be good candidates for such cooperation including administration of the innovation program, smart grid programs, remote metering, and the fiber to the premises project. Investments in technologies and cooperation with others can reduce CPAU’s operating costs. Commissioner Eglash noted that the issues raised by the budget committee are real issues for the utility industry as a whole, which sees its business model result in fewer sales of commodities. He stated that the utility of the future is being discussed widely and that competitors could be non-traditional utilities such as Amazon or Google. Commissioner Eglash agrees with Commissioner Melton that innovation is the right approach to this issue, but he feels that CPAU employees are the best positioned to find these solutions. Commissioner Eglash agreed that he would like to see a staff focused effort to define the utility of the future. Commissioner Waldfogel stated that he does work with innovation and notes that outside help is needed for such an examination and that solely staff-driven initiatives cannot get where we need to go. Guidance from outside CPAU is more likely to produce any breakthrough, innovative ideas for the utility of the future. ACTION: Commissioner Eglash made a motion that the UAC recommend that Council approve the proposed FY 2015 Utilities operating and capital budgets. Vice Chair Foster seconded the motion. The motion carried unanimously (5-0) with Commissioners Chang and Hall absent. Utilities Advisory Commission Minutes Approved on: June 4, 2014 Page 7 of 9 ITEM 2: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution Terminating PaloAltoGreen’s Full Needs Program for Residential Electric Customers and Reinstating the Full Needs Program for Commercial and Master-Metered Multi-Family Electric Customers by Repealing Rate Schedule E-1-G and Amending Rate Schedules E-2-G, E-4-G, E-7-G, and E-18-G Assistant Director Jane Ratchye explained that staff now recommends terminating the suspended Full Needs part of the voluntary PaloAltoGreen (PAG) program for residents. She said that Council suspended the Full Needs program for both residential and commercial customers in September 2013 primarily because the electric supply portfolio is 100% carbon neutral as of 2013. Ratchye said that the Block program for commercial customers is still active and has customers who value it for attaining and maintaining LEED certification and for recognition under the EPA’s Green Power Partnership program. Ratchye noted that Council approved the PAG Gas program to be launched in July so that customers can reduce or eliminate the greenhouse gas emissions associated with their use of natural gas. She said the remaining question is what to do with suspended Full Needs program. Staff recommends terminating the Full Needs program for residential customers, but reactivating it for commercial customers since staff has heard they like the 100% green option. Commissioner Eglash asked if there were any unspent funds to deal with. Ratchye replied that, consistent with UAC recommendation, Council approved the plan to return those funds for the Full Needs program. She added that the communications are being coordinated so that PAG participants will receive a letter thanking them for participation, advising them that the program has been terminated and to expect a bill credit for accumulated net revenue, and, finally, inviting them to participate in the new PAG Gas program being launched in July. Commissioner Eglash asked if there was no good alternative to returning the money such as redirecting the unspent funds elsewhere. Ratchye replied that these alternatives were evaluated, but that redirecting the funds to another use would have been administratively burdensome. Ratchye added that staff also evaluated redesigning the program to one that would collect donations for solar systems to be installed on local schools and non-profits and a solar donation program is part of the recently adopted Local Solar Plan, but that program was delayed. Commissioner Waldfogel asked if we had made an affirmative decision to not simply move the funds and customers into a successor program such as PAG Gas. Ratchye replied that, on advice from the City Attorney, it was not a viable option. Commissioner Waldfogel stated that the City of Palo Alto Utilities (CPAU) should retain the PaloAltoGreen brand as an umbrella brand for all of CPAU’s sustainability programs. Chair Cook agreed with his colleagues and noted that it is a bittersweet moment to shut down a very successful program. He added that he is glad that the PAG Gas program is launching in July and sees it as a good follow-on program. Utilities Advisory Commission Minutes Approved on: June 4, 2014 Page 8 of 9 ACTION: Commissioner Eglash made a motion that the UAC recommend that Council approve staff’s recommendation to terminate the suspended PaloAltoGreen Full Needs program for residential customers and reinstate the suspended PaloAltoGreen Full Needs program for commercial customers by repealing and amending the appropriate rate schedules. Commissioner Melton seconded the motion. The motion carried unanimously (5-0) with Commissioners Chang and Hall absent. ITEM 3: DISCUSSION: Discussion of Impact of Statewide Drought on Water and Hydroelectric Supplies Assistant Director Jane Ratchye provided an overview of the impact of the drought on both water and hydroelectric supplies. She presented graphs showing snowpack at only 25% of the April 1 median amount (compared to 70% in a normal year) and precipitation at only 57% of the annual average at the end of the rainy season. Ratchye noted that while the stored water supplies are relatively healthy, the trajectory is downward. She noted that San Francisco is still calling for 10% voluntary usage reductions, but it is concerned with the lack of reductions in its service area so far. San Francisco may increase the target to 20% or make the reduction targets mandatory, instead of voluntary if region-wide reductions don’t materialize. Ratchye stated that Palo Alto is doing its part and has reduced usage compared to last year, but we can't let up on the water conservation messaging. Ratchye stated that the Santa Clara Valley Water District has increased its contributions for rebates for water conservation measures through September so it is a good time for customers to take advantage of those cost savings. Commissioner Eglash stated that lots of water can be saved through the use of swimming pool covers and that a rebate may be in order for that since the water loss through evaporation is huge. He stated that swimming pool covers that look like bubble wrap can be very effective at reducing evaporation. Commissioner Waldfogel asked if there was a pointer for these programs and expanded rebates on the City’s website. Ratchye stated that the website is www.cityofpaloalto.org/water. Ratchye stated that the drought impacts the City’s electric supply resources and will cost significantly more if the drought persists. She said that the costs for the City’s two hydroelectric resources (Western Base Resource and the Calaveras Hydroelectric Project) are fixed and don’t change regardless of the output from the projects. This means that in a drought, when the generation is reduced from these hydro resources, more power must be purchased from the market to replace the reduced generation. Ratchye stated that the expected additional cost for market power and Renewable Energy Certificates for FY 2015 due to the drought is $9.4 million and, if the year turns out even drier, the increased cost could be as high as $13.6 million. Utilities Advisory Commission Minutes Approved on: June 4, 2014 Page 9 of 9 ITEM 4: ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting Public Comment Jeff Hoel stated that during the budget presentation, staff stated that the fiber to the premises (FTTP) plan will achieve a milestone by June 2014. He asked if these plans can be provided to the UAC. Chair Cook indicated that the UAC would like to see the results of the study. Director Fong said FTTP is being led by IT, not Utilities, but a presentation can be made to the UAC. Commissioner Waldfogel stated that the UAC does have responsibility under the Municipal Code, for the Fiber Optics Fund, and requested that the City Attorney advise the UAC on what their role is on providing advice to Council on the project. ACTION: None. COMMISSIONER COMMENTS None. Meeting adjourned at 1:38 p.m. Respectfully submitted, Marites Ward City of Palo Alto Utilities