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HomeMy WebLinkAbout2018-08-01 Utilities Advisory Commission Summary MinutesUtilities Advisory Commission Minutes Approved on: September 5, 2018 Page 1 of 11 UTILITIES ADVISORY COMMISSION MEETING FINAL MINUTES OF AUGUST 1, 2018 REGULAR MEETING CALL TO ORDER Chair Danaher called the meeting of the Utilities Advisory Commission (UAC) to order at 7:04 p.m. Present: Chair Danaher, Commissioners Ballantine, Forssell, Johnston, Segal, and Trumbull Absent: Vice Chair Schwartz ORAL COMMUNICATIONS Nicole Sandkulla, Bay Area Water Supply and Conservation Agency (BAWSCA) Chief Executive Officer, advised that the draft Bay-Delta Plan update could seriously reduce water supply during the next drought. BAWSCA's analysis indicates during a drought most water users could be required to reduce their average per person water use to 41 gallons per day and for some persons 25 gallons per day. The severe water reduction could threaten jobs and delay community development. The San Francisco Public Utilities Commission (SFPUC) has proposed and BAWSCA supports a science-based alternative that strikes a reasonable and sustainable balance between water supply reliability and increased salmon population on the Tuolumne River. BAWSCA and water providers in the area have advocated for a voluntary, negotiated settlement to resolve these issues. Governor Brown has expressed support for the approach. Commissioner Trumbull disagreed with Ms. Sandkulla's comments regarding the implications of the Bay- Delta Plan update. APPROVAL OF THE MINUTES Commissioner Trumbull noted that in the minutes of the June 6, 2018 meeting the person calling the meeting to order was Vice Chair Ballantine , not Chair Danaher. Commissioner Trumbull moved to approve the minutes from the June 6, 2018 regular meeting as amended. Commissioner Segal seconded the motion. The motion carried 3-0 with Commissioners Ballantine, Segal, and Trumbull voting yes, Chair Danaher and Commissioners Forssell and Johnston abstaining, and Vice Chair Schwartz absent. AGENDA REVIEW AND REVISIONS None REPORTS FROM COMMISSIONER MEETINGS/EVENTS None UTILITIES GENERAL MANAGER REPORT Ed Shikada, Utilities General Manager, delivered the General Manager’s Report. Utilities Advisory Commission Minutes Approved on: September 5, 2018 Page 2 of 11 Carr Wildfire Impacts on Hydroelectric Resources - Staff have been working closely with the Northern California Power Agency (NCPA) to monitor impacts of the Carr Fire on hydroelectric resources in the area around Redding. Hydroelectric resource deliveries from the Western Area Power Administration and Bureau of Reclamation projects were interrupted for several days until crews were able to access the facilities and restore power deliveries to about 40% of what would be expected without the fire. They will continue restoration efforts to return to full electric delivery capability. It does not appear that the California Independent System Operator (CAISO) is suffering operational issues as a result, but we will monitor and respond to any requests from CAISO for an energy conservation Flex Alert. Wildfire Mitigation Plan - Utilities has a consent item on the August 20 City Council agenda which will satisfy a new state law regarding wildfire preparedness for electric utilities. The law mandates that a utility's governing body adopt wildfire mitigation plans after determining that an area within its jurisdiction, if any, is at “significant risk of catastrophic wildfire” resulting from electric lines or equipment. The staff report requests that Council designate the Foothills area as potentially high risk for wildfires, and accept mitigation measures already contemplated by staff. To be clear, there is no new or enhanced risk. We present this purely administrative item only to comply with the law. Fiber to the Node RFP - The City received six responses to the Fiber to the Node RFP and we are now entering phase two of the evaluation by inviting the top 5-ranked proposers for demonstrations during the week of August 13. If one or two members of the UAC are interested in participating on the evaluation panel and are able to attend all five 90 minute interviews, please contact Dave Yuan. SunShares 2018 Solar Group-Buy Program - For the fourth year in a row, the City is participating in Bay Area SunShares, a solar and zero-emissions vehicle group-buy program administered by the Building Council for Climate Change, BC3. Beginning today, August 1, Bay Area residents can take advantage of discounts on rooftop solar and zero-emission vehicles from vetted contractors. The program runs for a limited time only through November 15. Visit www.cityofpaloalto.org/sunshares for details and join us for a free workshop on September 29. Utilities Awarded Two Climate Protection Grants from the Bay Area Air Quality Management District (BAAQMD). Utilities was awarded two grants from the Bay Area Air Quality Management District, which will enable the City to offer a refrigerator recycling program and conduct a pilot study on gas furnace replacements in multi-family buildings. Each program is designed to help the City save energy and reduce greenhouse gas emissions. We will provide more details upon official launch of the programs. Draft Bay Area Plan – The draft Bay Area Plan is tentatively scheduled for City Council discussion on August 20. COMMISSIONER COMMENTS Chair Danaher announced Commissioners are invited to attend presentations from the five proposers for the Fiber to the Node project. However, Commissioners must attend all or none of the presentations in accordance with instructions from the City Attorney's Office. The presentations are scheduled for the morning of August 13, the afternoon of August 14, and the morning of August 15. UNFINISHED BUSINESS None NEW BUSINESS ITEM 1: ACTION: Staff Request for Direction and Feedback on Utility Rules and Regulations Requiring Pad- Mounted Equipment in All Underground Electric Construction, Including Green Acres. Chair Danaher advised that the City began undergrounding power lines about 45 years ago. Currently, approximately 25% of power lines in the City has been undergrounded. Staff is starting to replace Utilities Advisory Commission Minutes Approved on: September 5, 2018 Page 3 of 11 transformers in chronological order of installation. In the early years of undergrounding power lines, neighborhoods paid 25% of the installation cost. The pace for undergrounding power lines is one neighborhood every 3-5 years because of the high cost of projects. He invited the public to opine as to whether their neighborhoods would agree to share in the cost of undergrounding. Ed Shikada, Utilities General Manager, acknowledged the anxiety caused by the topic of undergrounding power lines. Staff's proposal is based on the City of Palo Alto Utilities' (CPAU) commitment to deliver safe, reliable, and cost-effective utility services. Staff does not wish to proceed over the objections of the community. Nina Bell believed the 4-foot aboveground transformer would be a desecration. The Comprehensive Plan states that the City will strive to preserve and complement neighborhood character when installing streets or public-space improvements. She wanted to review and understand financial information before deciding to share in the installation costs. Jeff Hoel noted the City Council approved placing transformers aboveground in 1996. He inquired regarding staff's plans to re-use the existing conduit and the expected lifetimes of conduit installed in 1973 and in 2018. If replacing the infrastructure requires digging, then the project should include installation of conduit for fiber. Implementing Supervisory Control and Data Acquisition (SCADA) for transformers could be interesting. Alice Sklar remarked that aging utility facilities are in danger of breaking down, causing damage, injuring citizens, and interrupting service. She preferred utilities be located entirely underground. Green Acres residents have discussed and researched the issues. The Green Acres Improvement Association Board wants to review the evidence supporting assertions that fully underground utilities are dangerous to residents or the community. She would be willing to share the costs of installation if the financial information can convince her that the amount is $3,600. Eugene Lee expressed concerns about the effects of electromagnetic fields (EMF) generated by transformers on human health. The proposed plan shows a transformer located within 20 feet of a bedroom in his home. Jenning Chee felt the proposed plan would modify his home without his agreement. There was no compelling reason for the proposed action. The City should have budgeted for maintenance when it originally undergrounded the equipment. Garbo Lee indicated a transformer would be placed less than 20 feet from her bedroom if the project is approved. The current location of utilities should be maintained. In March, she received notice of Staff's proposal only a few days before the UAC meeting. She would not agree to share the cost of installation as property owners paid for the original installation. Yu Fang wanted all facilities placed underground. The City required his home remodel to maintain the character of the neighborhood, and CPAU should be subject to the same requirement. Technology should be available so that all facilities can be placed underground. Residents received notice of the matter only a few days before the hearing. CPAU staff promised pad-mounted transformers would not be forced upon residents. Lin Lui requested staff provide their data, research, and analysis to residents. She expressed concerns about the safety of aboveground transformers. She would not consider paying for installation until residents' questions are answered. Stuart Kreitman wished to obtain staff's information and verify it for accuracy. Residents do not understand the technical aspects and safety of pad-mounted transformers. The Special Facilities fee does not appear to apply to transformers or shared infrastructure. Utilities Advisory Commission Minutes Approved on: September 5, 2018 Page 4 of 11 Frankie Farhat advised that any change to the current situation would have a negative impact on the neighborhood. She suggested the upgrades be implemented in other neighborhoods before Green Acres. CPAU should underground all facilities in Green Acres or delay the project until residents could review staff's data. Michael Maurier commented that the proposal was poorly presented to residents. Residents are overwhelmingly opposed to pad-mounted transformers because they have not received requested information. He understood the general trend in Palo Alto was to underground all components. Staff has not offered a rationale for not placing all components underground. The proposal is contrary to the Comprehensive Plan policy to preserve the neighborhood character. He suggested facilities in Green Acres not be replaced until there is a problem, until the City can pay for it, or until residents can find a way to pay for it. Residents have not seen any justification for the stated amounts. Debbie Tasso [phonetic] concurred with Mr. Maurier's comments. Underground utilities have not caused any health problems and have provided excellent and reliable service. She could not find any data regarding the safety of pad-mounted transformers. The safest location of transformers is underground. She may be willing to pay for installation after reviewing a cost analysis. Debra Lloyd, Acting Assistant Director of Utilities Engineering, reported the undergrounding program began in 1965. Underground utilities have been installed in 43 districts. Work on Underground Districts 46 and 47 is underway. Staff coordinates projects to underground electric, fiber, cable, and telephone systems with AT&T and Comcast projects. Property owners pay the costs for connecting to underground utilities and may share the costs for undergrounding the system. In response to Commissioner Forssell's request for the cost to property owners, Lloyd indicated the cost to property owners in District 47 is $3,000-$5,000 for service connection alone. District 47 property owners did not share in the cost for undergrounding the system. Property owners share in the cost for undergrounding the system when undergrounding is deemed a public benefit rather than a local benefit. Lloyd continued by stating residents of Green Acres petitioned the City to underground utilities in 1972 and paid $300 for a service connection and $310.25, 25% of the total cost, for undergrounding the system. The original equipment is still in use in Green Acres. Based on the total number of primary electric distribution lines, 62% have been undergrounded, the majority of which is located in commercial areas. Approximately 2,500 residences are located in districts where overhead service has been converted to underground. All new housing developments are constructed with underground facilities. Approximately 14,000 residences remain to be undergrounded. In reply to Commissioner Johnston's query regarding the use of pad-mounted or underground transformers in new developments, Lloyd related that transformers are pad-mounted. In commercial areas, transformers are placed underground when space is not available for pad-mounted transformers. In answer to Commissioner Ballantine's question regarding installation of a concrete vault for underground facilities in commercial areas, Gregory McKernan, Senior Engineer, explained that transformers are pad- mounted with conductors located in underground vaults. Commissioner Ballantine understood a large concrete vault is placed underground to house the transformer and other equipment. Dean Batchelor, Chief Operating Officer, clarified that large transformers are pad-mounted in commercial areas such as Stanford Research Park because ground space is available for the transformer. In Downtown where ground space is not available, transformers are placed in large concrete vaults under the street. Commissioner Ballantine suggested concrete vaults in 2018 are much larger than those installed in the 1970s to address safety concerns. Batchelor reported vaults can measure from 4 feet by 6 feet up to 10 feet by 13 feet. Utilities Advisory Commission Minutes Approved on: September 5, 2018 Page 5 of 11 Lloyd continued with her presentation, indicating the expected lifespan of the 1970s equipment is 35-40 years for the cable and 15 years for the transformers. Staff begins planning replacement projects before system failures occur. Commissioner Ballantine suggested staff provide the average lifespan of an underground transformer compared to the average lifespan of a pad-mounted or pole-mounted transformer. He was fairly certain transformer lifespan and failure was proportional to the load it bears. The increasing use of electric vehicles (EV) adds to the load on transformers. Consequently, the current statistics for transformer lifetime may change in the very near future. Lloyd added that the load on transformers located in Green Acres likely contributed to their long life. The probability of failure increases each year a system remains in service beyond the expected lifespan. Engineering experience suggests multiple outages will occur when system failure begins. Commissioner Ballantine recalled that the average lifespan for a pole-mounted transformer is 50 years and for an underground transformer is 15 years. If those numbers are correct, the transformers in Green Acres have lasted because the load on them has been less than they are capable of handling. Pole- mounted transformers in the same circumstances could last even longer. Perhaps the transformers' lifespans have been extended because the size of the transformers was larger than required or the locations have not been flooded. That type of data would be useful. Lloyd reported staff shared a table comparing underground, pad-mounted, and pole-mounted transformers at the community meeting. Lloyd further advised that replacement projects begin in 1995. The replacement project for Districts 6 and 7 converted underground transformers to pad-mounted transformers. In response to Commissioner Johnston's inquiry about the number of underground districts that have been rebuilt, Lloyd stated two residential districts, Districts 6 and 7, and at least a dozen commercial districts have been rebuilt. District 6 is geographically close to District 15. Transformers were converted to pad-mounted in rebuild projects except in commercial districts where space was not available. In reply to Commissioner Forssell's question regarding the date of rebuilding the system in District 6, Lloyd answered 2003 or 2001. The number of pad-mounted transformers installed in District 6 should be similar to the number proposed for Green Acres. Technology has not changed significantly since 2003 to require a different configuration. Lloyd continued with information about rebuild projects. Staff has identified 13 districts for rebuild because the equipment's expected lifespan will expire by 2024. Many of the 1,700 properties located in the 13 districts are residential. Approximately 270 transformers in the 13 districts will be replaced. The Capital Improvement Program (CIP) contains rebuild projects for seven districts, which will affect approximately 860 properties and approximately 120 subsurface transformers. Currently, projects are in design for Districts 15, 16, 20, 23, and 30, which will involve 785 properties and approximately 100 subsurface transformers. McKernan reported in designing projects for underground districts, staff considers employee safety, the reliability of the system, the purchase and maintenance of equipment, the capacity and flexibility of the system, and industry standard. In answer to Commissioner Forssell's query regarding the locations of pad-mounted transformers, McKernan explained that staff can locate a pad-mounted transformer within 50-100 feet of the existing subsurface vault depending on the load on the transformer. Staff has some flexibility to relocate transformers shown in the plans for Green Acres. Because existing vaults are located beneath sidewalks in Green Acres, the pad- mounted transformers would not be placed over the vaults. Commissioner Ballantine noted the Occupational Safety and Health Association (OSHA) has issued clearance requirements for electrical equipment. Existing vaults may not comply with OSHA requirements. Utilities Advisory Commission Minutes Approved on: September 5, 2018 Page 6 of 11 McKernan continued, reporting that water and heat cause metals to corrode, which increases maintenance costs for subsurface vaults. Water and debris must be removed and disposed of prior to staff repairing equipment in subsurface vaults. In reply to Councilmember Filseth's question regarding placing pumps in underground vaults, McKernan indicated CPAU does not place pumps in subsurface vaults. Ed Shikada, Utilities General Manager, added that portable pumps are used to evacuate water. In response to Commissioner Forssell's inquiry regarding damage to electrical equipment from submersion in water and oil, McKernan clarified that water and oil corrodes the tank on the transformer. Transformers located in Green Acres have required repairs. Commissioner Ballantine remarked that water breaching the transformer tank will cause the transformer to fail and a significant power outage. That would be a significant safety hazard for people working on it. In reply to Chair Danaher's question regarding waterproof vaults, McKernan explained that a waterproof vault would not have vents that allow air circulation. The buildup of heat would cause failure. McKernan presented pad-mount design options that include placement and screening of the transformer. In answer to Chair Danaher's query, McKernan advised that staff will find locations for transformers such that the transformers are screened and less noticeable. McKernan reported additional design options are to separate the equipment into different locations to increase safety and to utilize larger transformers to minimize outages. In response to Commissioner Johnston's question regarding the black squares on the map provided by Shikada, McKernan explained that the squares represent underground boxes that connect service to residences and carry conductors to the transformer. The top of the box will be flush with the street to provide access. Lloyd added that the map is not Green Acres. In reply to Commissioner Forssell's question regarding the symbol representing pad-mounted transformers, McKernan answered the box with the triangle inside it. In answer to Commissioner Segal's question regarding the size of the pad-mounted transformers in Green Acres, McKernan indicated some transformers proposed for Green Acres have dual functions and, consequently, are approximately 15 inches wider than the transformers installed in District 6. If smaller transformers are used in Green Acres, then an additional piece of equipment will be installed. In reply to Commissioner Ballantine's query regarding the configuration inside the transformer, McKernan advised that transformers have a primary and a secondary winding. Commissioner Ballantine had seen a winding in a hexagon pattern, which cost more but was half the size of a traditional transformer. Lloyd continued with the presentation, advising that staff had not considered placement, size, and screening of transformers in the preliminary design. McKernan added that staff considered future load when recommending the size of transformers. Lloyd reported maintaining all underground structures in Green Acres would require a policy change. Issues for consideration are paying for the more costly rebuild project, whether through cost-sharing with property owners or implementing a Special Facilities fee; the size and duration of outages; and the impacts to staff in planning and implementing projects. McKernan advised that underground transformers cost approximately $345,000 more than pad-mounted and will require a second vault to separate the transformer from cables. The number of transformers would be the same for underground and pad-mounted installations. With some pad-mounted transformers, switches can be eliminated, which means lower maintenance and operation costs. The primary difference in cost is the second vault. Utilities Advisory Commission Minutes Approved on: September 5, 2018 Page 7 of 11 In response to Chair Danaher's inquiry regarding the source of cost estimates, McKernan indicated equipment costs are based on quotes from manufacturers. The cost estimate to install a vault is approximately $25,000. In answer to Commissioner Forssell's query regarding safety concerns with a potential subsurface design, McKernan indicated staff would design a subsurface project that was safe for employees; however, subsurface transformers will always be hazardous in a catastrophic event. PG&E and Southern California Edison transformers have exploded while undergoing repairs. Batchelor added that a PG&E incident involved a fatality and related an incident that occurred in San Francisco. Commissioner Ballantine remarked that water in an underground vault increases the probability of a transformer explosion. Data regarding the effectiveness of EMF shielding could be useful. Placing transformers in the safest possible location is important. Chair Danaher recalled the Green Acres residents' requests for data regarding costs, safety, and alternative sizes. Shikada reported staff searched for published reports and statistics regarding safety but was unable to locate any. Commissioner Ballantine remarked that discovering a solid solution is less of a solution is frustrating. Everyone is concerned about the safety, aesthetics, and the value of their homes, but safety is probably the primary concern. He probably would not pay for an underground transformer near his house because of worries that the transformer would fail or explode. More and more people rely on consistent power for their health and safety. Perhaps the size of aboveground transformers can be reduced. There are federal standards for EMF strength from transformers. The EMF from a shielded transformer is probably quite a bit lower than a field from most devices commonly found in homes. Contemplation of casualties from transformer failures and explosions is sobering. Staff is attempting to figure out how to provide electricity to homes in the safest possible manner. Commissioner Johnston was persuaded that pad-mounted transformers are logical, but more work with the community is needed for design alternatives. Pad-mounted transformers are common, and after a while people do not notice them. Answering the community's questions could facilitate future rebuild projects. If CPAU offers fully undergrounded rebuilds as an option, asking residents to pay for the additional cost is reasonable. Commissioner Forssell continued to struggle with the size of pad-mounted transformers. Accurate sizes are needed for proposed and alternative transformers. Shikada clarified that the transformers shown on Donald Drive, which are 34 inches tall by 44 inches wide by 33 inches deep, are smaller than the proposed Green Acre transformers, which are 38 inches tall by 48 inches wide by 39 inches deep. Because of the perspective, Ms. Bell's photographs give the impression that the boxes are larger than they are. Commissioner Forssell noted that the 1996 City Council did not expect to rebuild the underground districts. Therefore, the City Council likely did not consider the current situation in its decision. She inquired regarding the mechanism by which the City has the right to place equipment on residents' property and any limits to that right. McKernan explained that the City owns the real property beneath a right-of-way. Through an easement, a property owner grants the City access to real property to place equipment on the property. In the rebuild project, equipment would be placed in the public right-of-way, not on private property. Shikada clarified that 5-feet on the home side of a sidewalk is owned by the City, and that's where the equipment would be placed. Commissioner Segal was disappointed that much of the factual information presented during the meeting was not disclosed during the community meeting. Shikada reported residents were not interested in discussing minimizing the size of transformers at the community meeting. The conversations pertained mainly to options that did not involve aboveground cabinets. Commissioner Segal expressed interest in options and sizes for pad-mounted transformers. Hopefully, aesthetics can be accommodated without compromising safety. Utilities Advisory Commission Minutes Approved on: September 5, 2018 Page 8 of 11 Commissioner Trumbull hoped staff would work with the residents to address residents' concerns. Chair Danaher commented that residents would likely share in the cost of installing transformers underground if cost and aesthetics are the only considerations and if they have a long-term payment plan. If safety requires it, transformers should be pad-mounted with consideration of size, placement, screening, and decoration of transformers. If residents raise similar concerns in future rebuild projects, then the issue may need to return to the Council. Shikada advised that staff will continue searching for information to share with the UAC and community and will work with residents regarding options for location, size, and aesthetics. Chair Danaher requested staff research the safety, aesthetics, and health concerns of pad-mounted transformers. Councilmember Filseth reported he has a better understanding of the situation after hearing public comments and Commissioner questions. The chances of a catastrophic event were remote; however, a casualty would be terrible. No matter the amount of data available for review, the decision will be qualitative. ACTION: No action ITEM 2. DISCUSSION: Discussion of Natural Gas Capital Improvement Plan. Ed Shikada, Utilities General Manager, reported the item is informational for the UAC because the Finance Committee requested the report as a follow-up to its discussion of the City budget. Given the late hour it was staff’s preference to postpone this item. Chair Danaher agreed to postpone the item. ACTION: No action ITEM 3. DISCUSSION: Discussion of Recycled Water Distribution System Business Plan. Karla Dailey, Senior Resource Planner, reported the Regional Water Quality Control Plant (RWQCP) produces more recycled water than is used. Recycled water is high-quality, drought-proof, locally controlled, and non- potable. The Phase 3 expansion was originally proposed in the 1992 Recycled Water Master Plan. In September 2015, the City Council certified an Environmental Impact Report (EIR) for Phase 3 and stated staff should not present any proposal to build Phase 3 without exploring a broad range of alternatives uses for recycled water. Phase 3 will not be possible without an advanced water purification system to reduce the salinity of recycled water. The Northwest County Recycled Water Strategic Plan includes the Phase 3 pipeline, which includes 30% pre-design, a business plan, and funding ; the feasibility of indirect potable water reuse; assessment of direct potable water reuse; and a regional overview of potential recycled water demands. In the Northwest County Recycled Water Strategic Plan, potable water supply resource planning refers to the Water Integrated Resources Plan; the plan will be updated once staff has a better picture of recycled water alternatives. The study of the Mountain View recycled water distribution expansion and Sunnyvale tie-in has been completed but not the actual tie-in. The RWQCP provides most of the recycled water supply to Mountain View; however, recycled water is also supplied to the golf course, Greer Park, and some other City facilities. The route of the Phase 3 pipeline has been adjusted since the original 1992 plan to meet customer demands and to supply the Baylands Athletic Center. In reply to Commissioner Trumbull's query regarding Stanford University's use of recycled water, Dailey advised that Stanford University is not an enthusiastic supporter of recycled water use. Because of Stanford University's concerns around use of recycled water in Stanford Research Park, CPAU commissioned the EIR and agreed to reduce the salinity of recycled water. Utilities Advisory Commission Minutes Approved on: September 5, 2018 Page 9 of 11 Dailey continued, stating the Phase 3 plans show a connection to the Phase 2 transmission main, 10 miles of transmission and distribution pipelines, two pump stations, and 200 customer connections. Demand for recycled water is approximately 1,000 acre feet per year, which is approximately 10% of Palo Alto's potable water demand. The estimated cost of Phase 3 is around $3,000 per acre foot. The construction cost estimate is $36.8 million with a total capital cost estimated at $45 million. One benefit of the Phase 3 project is system reliability enhancement, which is the concept that every water customer benefits from the use of recycled water whether or not a customer has access to or uses recycled water. Potential sources of funding for the project are the State Revolving Funds and state and federal grants. The use of recycled water is consistent with the City's sustainability goals. The project will provide benefits by reducing the demand for potable water, reserving potable water for appropriate uses, enhancing landscaping for recreation and aesthetics, allowing the City to retain local control, and alleviating pressure on the Tuolumne River. Currently, CPAU does not charge a rate for recycled water because recycled water is used by City facilities only. With the pipeline expansion to Stanford Research Park adding 200 customers, recycled water would be treated as a utility with a rate schedule. Staff has not conducted a cost-of-service study but will do so. Typically, California recycled water rates are 60-90% of potable water rates. Because of the cemetery located at the terminus of the Phase 3 pipeline, staff will investigate a reduced project that does not extend to the cemetery. Staff attempted to quantify a rate of reliability enhancement under various funding scenarios. With no external funding for the project, the reliability rate is in the range of $150-$200 per acre foot. With all external funding for the project, the rate is approximately $50 per acre foot. The most likely reliability rate in 2030 would be approximately $100 per acre foot. In response to Commissioner Forssell's request for the definition of reliability rate, Dailey indicated the reliability rate is the amount of money that potable water users pay towards the recycled water pipeline project. Conceptually, the reliability of potable water increases with a reduction in pressure on imported water supplies. Chair Danaher clarified that the use of recycled water increases the supply of potable water. Dailey restated the concept as use of recycled water decreases the demand for potable water. In answer to Commissioner Ballantine's query about the effect of decreasing demand on rates, Jonathan Abendschein, Assistant Director of Resource Management, advised that decreased demand can result in increased rates in the short term. Over the long term and with efficiency, ratepayer bills tend to decrease. A future task for staff is to determine the impact on potable water rates. The amount that potable water rates would increase is the reliability rate. Carrie Del Boccio, Woodward and Curran, added that revenues lost from declining sales of potable water would be shown initially as a loss but would eventually be included in rates for potable water. Councilmember Filseth suggested the concept is paradoxical as the primary use of recycled water is landscape irrigation. During a drought, irrigation of landscape should be the first reduction. Abendschein commented that some irrigation of landscape, such as playing fields and trees, was a community concern during the recent drought. The use of recycled water could protect those assets in a future drought. In reply to Commissioner Ballantine's query regarding the cost of raising the quality of recycled water to potable water, Dailey reported staff continues to assess alternatives for water reuse and cannot make a recommendation for the Phase 3 project without the assessments. In response to Commissioner Forssell's question regarding the possibility of increased usage or decreased conservation due to lower rates or the perception of recycled water as "guilt-free," Dailey did not know whether the availability of recycled water would affect usage or conservation. Commissioner Forssell assumed commercial facilities would have little incentive to conserve recycled water in a drought because there was no storage facility for recycled water. In answer to Commissioner Ballantine's query regarding regulations for use of evaporative chillers in drought conditions, Del Boccio advised that industrial cooling towers and other facilities use more water if the salinity of the water is higher than potable water. Dailey advised that there were no restrictions on the use of Utilities Advisory Commission Minutes Approved on: September 5, 2018 Page 10 of 11 evaporative chillers in the last drought. Commissioner Ballantine suggested a commercial customer could purchase recycled water at a lower cost, reduce the salinity onsite, and utilize the chiller as much as necessary in a drought. In reply to Chair Danaher's question regarding alternative uses of project funding that would conserve water, Dailey indicated the Recycled Water Strategic Plan will identify the best alternatives for water reuse, and alternatives will be incorporated into the Water Integrated Resources Plan. Regardless of the amount of conservation, staff is interested in reducing dependence on imported water supplies. Additional restrictions on water the RWQCP discharges into the Bay are an incentive for staff to identify a beneficial use of the water. Abendschein added that the Recycled Water Strategic Plan will determine the most cost-effective method to use recycled water. Water supply planning looks at conservation and other ways to save water. In answer to Commissioner Segal's inquiry regarding a less direct pipeline route possibly connecting to more customers, Dailey explained that staff planned the route to serve as many customers as possible. Del Boccio remarked that the goal has been to optimize the number of customers with the shortest route while addressing the most challenging crossings within Palo Alto. Dailey continued the presentation with potential mitigation strategies. Staff has not conducted a full cost-of- service study. Perhaps CPAU could increase the recycled water rate to more than 60% of potable water rate. In addition, staff is looking for alternative uses of the project facilities. Next steps are to evaluate a project that does not extend to the cemetery; In reply to Commissioner Johnston's query regarding a price for recycled water without the 60% cap, Dailey indicated staff's assessment would include that. Dailey further reported that the evaluation would identify opportunities to expand distribution beyond the current terminus of the pipeline. Next steps are to prepare a full cost-of-service study; refine projections for revenue and costs versus benefits; evaluate additional uses that could utilize recycled water; evaluate incorporation of facilities into a future direct potable reuse project; complete the Northwest County Recycled Water Strategic Plan to determine how the project compares to alternatives for use of recycled water. In answer to Commissioner Segal's question regarding minimizing the risk of a stranded asset, Dailey advised that minimizing risk plays into use of the pipeline in a future indirect potable water reuse project Commissioner Johnston believed the primary question is the amount of the reliability enhancement fee charged to all potable water users. A 3-4% increase of existing rates would be acceptable; however, ratepayers could take issue with a higher rate. Commissioner Ballantine commented that a solar-powered upgrading station for recycled water could provide a benefit for local solar. In response to Commissioner Forssell's inquiry about a net present value calculation, Del Boccio referred her to Tables 3.1 and 3.2 in the Business Plan. Chair Danaher recommended staff provide the percentage of water saved over total use in normal and drought conditions in future reports. Dailey hoped to present an item to the UAC in October for broader alternatives. In reply Commissioner Forssell's questions around potential rates per acre foot and a positive net present value, Dailey stated all rates will need to be based on cost of service. The common practice is to include some costs for recycled water borne by potable water ratepayers within the service territory. Abendschein clarified that the range for the reliability rate is $0-$700 per acre foot. The rate that would likely achieve a zero or slightly positive net present value is $150 per acre foot, which is equivalent to an increase of 3-4%. Utilities Advisory Commission Minutes Approved on: September 5, 2018 Page 11 of 11 Chair Danaher remarked that in a drought with a 40% reduction, the marginal value of having an extra 10% of water is high. The value depends on scarcity. Councilmember Filseth felt users rather than ratepayers should pay for recycled water If most of the recycled water is used to irrigate landscape in a drought. The 60% cap on the recycled water rate seems artificial. Dailey clarified that a recycled water rate above 60% of potable water rates would adversely impact the cemetery. Del Boccio noted use of recycled water for Irrigation outweighs industrial uses of recycled water. Councilmember Filseth added that turning recycled water into potable water has a high value. Given that the uses of recycled water are limited, staff has to look at the appropriateness of charging all ratepayers for recycled water. Commissioner Ballantine suggested the City could require the use of recycled water in swimming pools, but it would change the economics of the project. Dailey advised that the use of recycled water in swimming pools is against the law. Abendschein added that staff had not considered the use of recycled water for swimming pools, which is an onsite direct potable reuse. Staff could explore whether it plays into the Recycled Water Strategic Plan. First, staff needs to complete the Recycled Water Strategic Plan to identify the most cost-effective use of recycled water. Second, staff may be able to find other funding sources. ACTION: No action ITEM 4. ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting. Commissioner Trumbull confirmed that the resiliency workshop is scheduled for August 28. Commissioners requested agenda items for the new California law about solar for new homes and BAWSCA's comments regarding the Bay-Delta Plan update. NEXT SCHEDULED MEETING: September 5, 2018 Meeting adjourned at 10:23 p.m. Respectfully Submitted Rachel Chiu City of Palo Alto Utilities