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HomeMy WebLinkAbout2011-04-06 Utilities Advisory Commission Summary MinutesFINAL UTILITIES ADVISORY COMMISSION MEETING MINUTES OF APRIL 6, 2011 CALL TO ORDER Chair Waldfogel called to order at 7:05 p.m. the meeting of the Utilities Advisory Commission (UAC). Present: Commissioners Berry, Cook, Foster, Keller, Melton and Waldfogel Absent: Commissioner Eglash and Council Member Liaison Scharff ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES The Minutes from the March 2, 2011 UAC meeting were approved as presented. 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. Hydrologic Conditions Update: March brought significantly more precipitation to Northern California than forecasted by the La Nina conditions. All Western reservoirs have above average storage and the watersheds have above average snow packs. This year provided a faster than expected refill of large reservoirs after the recent drought. Small reservoirs like those associated with the Calaveras Hydroelectric Project are releasing water now to avoid future lost opportunity associated with possible spring spill. 2. Water Supply Conditions Update: San Francisco’s regional water system is in great shape for water supply and is clearing out space in its up-country reservoirs to accommodate the expected inflow of melting snow in the coming months. 3. Celebrating Earth day in Palo Alto: The City is planning a series of events and activities this month, to celebrate Earth Day on April 22. You should have all received a copy of the activity guide with your March Utility bills. A Council report on April 11 describing activities by the City is being coordinated by Debra Van Duynhoven, the City’s Sustainability Manager. 4. Reliable Power Award: The City of Palo Alto was one of 82 of the nation’s more than 2,000 public power utilities that received American Public Power Association’s (APPA’s) Reliable Public Power Utilities Advisory Commission Minutes Approved on: May 4, 2011 Page 1 of 8 Provider (RP3) designation this week. The awards were announced Monday at APPA’s Engineering and Operations Technical Conference in Nashville, and are intended to recognize utilities that demonstrate proficiency, sound business practices, and a utility-wide commitment to safe and reliable delivery of electricity, system improvement, and workforce development. Palo Alto was awarded the APPA designation at the Platinum level. 5. Spring Lighting Campaign: You should have received a coupon with your sustainability activity guide in the March utility bill. This coupon is for up to 4 free “globe” type compact fluorescent lights at either Palo Alto Hardware or Stanford Electric. All residents of the City will be able to receive up to 4 of this style of light, typically used in bathroom fixtures, during the months of April and May. 6. Alternatives to Lawn Workshop was held during the evening on Thursday, March 31. The workshop was well attended with 66 attendees, plus staff and the instructor. Another workshop will be held Saturday morning for additional water conservation information in landscaping. 7. On March 22, World Water Day, Utilities staff presented at the 8th Annual Water Conservation Showcase hosted by PG&E and the U.S. Green Building Council at the Pacific Energy Center. Staff discussed the City’s adoption of the new State Green Building Code (CALGreen) and the integration of multiple City ordinances including the Water Efficient Landscape, Recycled Water, Energy Efficiency, and Stormwater Pollution Prevention ordinances. 8. CPAU and Zilowatt jointly received a grant from the APPA’s innovation program (also called the Demonstration of Energy-Efficient Developments (DEED) Program). This $35,000 grant will assist in the development of the Zilowatt program to enhance sustainability curriculum, for schools and provide sustainability pledge activities for the Palo Alto Unified School District and its Sustainability Committee. 9. Urban Water Management Plan (UWMP): A public meeting was held on March 24 to discuss the preparation of the 2010 UWMP. Four members of the public attended. Staff presented an outline of the UWMP process and the major changes since the 2005 UWMP cycle. Members of the public were informed that the Draft 2010 UWMP should be posted to the City’s UWMP web page later this month and public participation and comment is encouraged. The UAC is scheduled to review the UWMP at its May meeting. 10. The Zero Interest Loan Program and website are now ready and available for Palo Alto Business and Non-Profit customers. The program offers zero interest loans from $5,000 to $50,000 to help pay for electric efficiency projects identified through selected CPAU commercial rebate programs. The loan will pay for the “after rebate” amount of the project and the loan repayment schedule will be based on the payback of the project. Initial funding for this $2M pilot program came from the Calaveras Reserve. 11. Legislative Update: Last week, following the Senate’s approval in February, the State Assembly passed SBX1 2, Senator Simitian’s 33% renewable portfolio standard bill. Because the bill was not amended in the Assembly, it required no concurrence vote from the Senate and was sent to the Governor this Monday. Governor Brown has indicated he will sign the bill, and we understand that his team is preparing a signing ceremony. Utilities Advisory Commission Minutes Approved on: May 4, 2011 Page 2 of 8 UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: ACTION: Proposed Policies and Guidelines for Renewable Energy Feed-In-Tariffs Utilities Resource Planner Jon Abendschein provided a presentation summarizing the key points in the development and approval process of a Renewable Feed-in-Tariff (FIT) program in Palo Alto to meet the Long-term Electric Acquisition Plan (LEAP) Objectives for Renewable Portfolio Standard (RPS) and Local Generation and requested that the UAC recommend Council approve the Proposed Policies and Guidelines for Renewable Energy Feed-In-Tariffs. During his presentation, Abendschein identified key policy and guidelines which would be used to guide the development of the Renewable FIT program, including:  Objective of the Renewable FIT program is to meet the City’s RPS of 33% by 2015.  Initial eligible technologies would be solar photovoltaic (PV), wind, and biogas-fueled generators.  A FIT rate based on the City’s avoided (value-based) cost and fixed for 20-years.  A standard, non-negotiable, Power Purchase Agreement (PPA). Abendschein also touched on several program design elements and details that staff is currently working on with other City departments and Utilities divisions related to program size and limits, development of power purchase agreements, fees and FIT rates, and program administration. Abendschein laid out the next steps including seeking Finance Committee and Council approval of the proposed policies and guidelines in June 2011 and July 2011, respectively. Upon Council approval of the policies and guidelines and development of the program details, staff will return to the UAC, Finance Committee and Council in the fall of 2011 for approval of the Renewable FIT Program including the PPA and FIT rate along with a request for delegation of authority to the City Manager to execute FIT contracts. Commissioner Melton asked why staff was pursuing a FIT for biogas-fuel generation and what opportunities exist. Abendschein explained that biogas-fueled generation is a CEC approved RPS technology and that it is essentially a fuel-cell that burns natural gas that has been injected into the gas system at a different location and nominated to the specific fuel-cell generator. Abendschein mentioned that there has been some interest in this technology in Palo Alto, but that it was not clear whether it would be economic in the near term. Commissioner Foster asked staff not to limit the program to the RPS of 33% by 2015, but rather use the ½ cent premium as the cap. He asked for clarification on the list of avoided costs in the proposed FIT policies. Abendschein clarified that the items listed were the ones staff expected to use in developing the feed-in tariff, but that future policy changes could result in additional items being added to the list. Additionally, Commissioner Foster asked if staff believed 4 MW of FITs could be achieved per year and why staff was limiting the FIT technologies to PV, biogas-fueled generators and wind. Abendschein explained that 4 MW is an optimistic projection for Palo Alto. With regards to technology to include within the program, Abendschein explained that staff is trying to keep the program simple in the first year of the program. Utilities Advisory Commission Minutes Approved on: May 4, 2011 Page 3 of 8 Commissioner Keller asked why staff was recommending that program be limited to a 20-year PPA. Abendschein responded that staff will look at what other utilities are doing during the design phase and may recommend alternative durations when staff returns for approval of the program. Utilities Director Fong emphasized that staff is trying to keep the program simple in the beginning and can expand features as we gain experience. Commissioner Cook clarified that he works in the solar industry for a manufacturer of larger-scale PV systems with the smallest size being 20 MW and therefore did not feel that there was any conflict of interest. He also asked why staff was considering a 25% phase-in per year of the program cap and why staff would develop different FIT rates by technology. Abendschein explained that staff has not developed a recommendation yet for the total program cap or the amount of capacity released each year, but merely cited 25% as an example. Abendschein mentioned that different technologies might have different FIT rates because of the different value each technology provides as a result of varying generation profiles. For example, PV generation generally coincides with higher market price conditions, whereas biogas-fueled generation is a base-load resource generating in all market price conditions. Commissioner Cook asked whether staff was talking to other municipalities about their FITs. Abendschein said that they were. Chair Waldfogel suggested staff work closely with the Building Department to ensure they understand the Renewable FIT program including how it differs from the City’s current PV Partners program. Abendschein mentioned that staff has reached out to key staff within the Building Department to develop a program design team. Commissioner Waldfogel asked whether system upgrades would be necessary and who would bear the cost. Abendschein said staff would be working with the Utilities Engineering Division to assess the need for upgrades and define who would bear the costs. ACTION: Commissioner Melton motioned to recommend Council approve the proposed Renewable FIT policies and guidelines. Commissioner Cook seconded the motion. The motion carried unanimously (6-0) with Commissioner Eglash absent. ITEM 2: DISCUSSION: Gas Long-Term Financial Projections and Revenue Requirements Senior Resource Planner Ipek Connolly provided a presentation summarizing the key points from the Gas long-term financial projections and revenue requirements report. Connolly explained that no rate increase was proposed for Fiscal Year (FY) 2012. Connolly presented the five-year projected costs and revenue streams, explaining they are provided for information and are subject to change. The Gas Utility Rate Stabilization Reserve balances are projected to be within minimum and maximum guidelines for the next five years with a projected 2% rate adjustment in FY 2013. Residential customer gas bills are currently 18% higher than PG&E’s. Commissioner Melton requested a brief explanation of the $3.8 Million capital improvement project (CIP) to evaluate the gas distribution system. Utility Director Fong stated that the CIP was for a review of the gas system, and promised to follow up with a brief. Commissioner Melton also noted that in FY 2013 the combined reserves were forecasted to fall below the short-term risk assessment level and asked that if this was still the case when staff was preparing the recommendations for FY 2013 rates that they propose a higher increase so that the reserves would not fall below the short term risk assessment. Commissioner Melton did not recommend an FY 2012 rate increase, but to wait and see what was needed next year. Commissioner Waldfogel asked when Palo Alto’s and PG&E’s rates would converge given the City’s three- year laddering strategy. Staff replied that they could not predict PG&E’s rates and there was more to the Utilities Advisory Commission Minutes Approved on: May 4, 2011 Page 4 of 8 total rate than the commodity cost, which may converge if Palo Alto and PG&E adopted the same natural gas procurement strategy. However, the other portion of the rates was the distribution costs and staff does not know how PG&E’s rates are going to change. ITEM 3: ACTION: Electric Long-Term Financial Projections and Revenue Requirements Senior Resource Planner Ipek Connolly provided a presentation summarizing the key points from the Electric long-term financial projections and revenue requirements report and the annual Calaveras Reserve stranded cost calculation report. Connolly explained that no rate increase was proposed for Fiscal Year (FY) 2012, and requested the UAC recommend to Council a transfer of $5.238 million from the Calaveras Reserve into the Electric Utility Operating Budget for FY 2012, which is the minimum transfer amount established by the Council approved Calaveras Reserve Guidelines. Connolly presented the five-year projected costs and revenue streams, explaining they are provided for information and are subject to change. The Electric Utility Rate Stabilization Reserve balances are projected to be within minimum and maximum guidelines for the next five years with projected 5% per year rate adjustments for FY 2014 to FY 2016. Average customer electric bills are currently 39% lower than PG&E, and one of the lowest in California. Connolly also gave a summary of the Calaveras Reserve, including a brief history and the current guidelines and calculation method. Commissioner Cook asked if there was an explanation for Santa Clara’s low rates and whether Palo Alto could achieve the lowest rates in the state. Connolly pointed out that while Santa Clara’s residential rates were lower than Palo Alto’s, its commercial rates were higher. Commissioner Cook also asked for further explanation about the customer attrition resulting in lower electric demand expected in the short term. Connolly explained that there is a large customer leaving Palo Alto and this is being reflected in the demand forecast. Commissioner Melton asked if the hospital expansion would have any major capital improvement project (CIP) implications for the utility. Utilities’ Director Valerie Fong stated that the utility is not anticipating anything significant and there was adequate capacity within the infrastructure. Commissioner Foster stated that he was not on the UAC when the Calaveras Reserve guidelines were adopted, but he saw it basically as a subsidy for already low electric rates, and would like to hold on to the funds for something more useful than a subsidy to ratepayers. Director Fong said that the UAC would be reviewing the need and purpose of the Calaveras Reserve in June. She also explained that the Calaveras Hydroelectric Project was originally, and is still today, an above market resource, and so the reserve, which was prepaid by electric ratepayers, is being used to bring the cost of the project down to its market value. Commissioner Berry requested that staff provide an explanation of how the stranded costs were calculated for the UAC review of the Calaveras Reserve in June. He also asked how the actual stranded cost compared to the forecasted stranded cost for FY 2011. Senior Resource Planner Monica Padilla replied that she did not have the actual number for 2011, but explained that the stranded costs for Calaveras were the above market costs and, because market prices had fallen this year, she anticipated that the actual stranded cost for Calaveras would be the same or even higher than the forecast. Commissioner Berry questioned the need to transfer funds from the Calaveras Reserve to the rate stabilization reserve when the rate stabilization reserve is above the minimum guideline and is forecasted to be above the minimum by the end of FY 2012. Commissioner Berry stated that he was trying to understand the policy and may want to recommend to the Council that they reconsider the policy if he felt the transfer was not necessary. Connolly explained that the money from the Calaveras Reserve was not transferred to the Rate Utilities Advisory Commission Minutes Approved on: May 4, 2011 Page 5 of 8 Stabilization Reserve, but to the electric operating budget to compensate ratepayers for the stranded cost of the Calaveras Hydroelectric Project. Connolly further explained that the two reserves were independent of one another and that Calaveras Reserve transfers were not proposed for rate stabilization purposes but to compensate ratepayers for stranded (above market) costs. If staff had indicated a need for a rate increase the UAC could have made a recommendation to transfer additional funds from the Calaveras Reserves to delay or reduce such an increase. Commissioner Melton summarized that the UAC could recommend that Council defer the transfer from the Calaveras Reserve for a year and that there is a trade-off between using the reserves for projects and returning the reserves to ratepayers. Director Fong suggested that the UAC could consider combining the reserves when they evaluated the policy in June, if there were no legal restrictions. Director Fong said that staff would still be making the recommendation to make the minimum transfer from the Calaveras Reserve per the adopted guidelines, which were based on a logical approach to calculating the stranded costs and compensating ratepayers with the funds from the reserves that had been paid by ratepayers for that purpose. ACTION: Commissioner Foster made a motion to recommend Council defer a decision on the level of the Calaveras Reserve transfer for six months until the UAC has time to study the issue further. Commissioner Cook seconded the motion. The motion passed 4-2 (with Commissioners Melton and Keller opposed and Commissioner Eglash absent). Commissioner Melton voted against the motion because although the reserve funds are segregated into buckets, they are all cash reserves, and he did not see the point in getting tied up in discussing which reserves funds should be drawn down. Commissioner Keller agreed with many of the issues that had been discussed, but did not see the benefit to making the changes immediately rather than waiting for a later review. However, she did see real costs in terms of staff resources in making changes immediately. Commissioner Keller recommended a review of the guidelines in June. ITEM 4: DISCUSSION: Annual Calaveras Reserve Stranded Cost Calculation Discussion of the Calaveras reserve stranded costs calculation was included in the discussion of Item 3, which is summarized above. ITEM 5: ACTION: Proposed Amendment to Utilities Fiber Optic Rate Schedules EDF-1 and EDF-2 There was no presentation or discussion on this item. ACTION: Commissioner Foster motioned to recommend staff’s proposal for the fiber optic rate schedule changes. Commissioner Cook seconded the motion. The motion passed unanimously (6-0) with Commissioner Eglash absent. ITEM 6: ACTION: Response to the Council Colleagues’ Memo Regarding the Development of a Comprehensive Energy Efficiency and Renewables Procurement Strategy Assistant Director Jane Ratchye stated that the Council Colleagues’ Memo provided direction to the UAC itself and that staff had gathered information that it felt would be valuable in developing a response to the Colleagues’ Memo, which was directed to the UAC instead of staff. Now that the Long-term Electric Acquisition Plan (LEAP) and the Gas Utility Long-term Plan (GULP) have been approved by the Council, Utilities Advisory Commission Minutes Approved on: May 4, 2011 Page 6 of 8 many of the ingredients of a response have been addressed. The item was agendized to allow the UAC an opportunity to discuss how it wished to proceed. Commissioner Berry asked if there was a deadline for a response to the Colleagues’ Memo. Ratchye said that there was no deadline. Commissioner Berry stated that one way to respond would be to meet with the authors of the Colleagues’ Memo and determine if what’s been done is meeting with their desires. Commissioner Melton agreed with Commissioner Berry and thought it would be a good idea for the Chair and Vice Chair and meet with the four authors and ask if they have completed their work. Ratchye reminded the commission that the Colleagues’ Memo is from the entire Council and that it may not be appropriate to meet just with the four authors of the memo. Chair Waldfogel said the UAC could appoint a committee to liaise with the Council to determine how they want to receive a response. He added that it seems an excellent idea to ask the Council what they want before we try to respond. We should confirm with the Council that we are doing what they asked. Commissioner Foster agreed that we should have an informal conversation with some on the Council and it makes sense that they are the four authors since they were the most involved. Commissioner Melton added that we need to determine what’s needed and, if what’s in the UAC memo is sufficient, we could package it up as the response. Commissioner Keller agreed with what had been said, but noted that the Council may want a user-friendly tutorial or conversation rather than a memo with so much information. She said that 80% of the meat of the response would come from the conversation rather than just the delivery of a memo. Commissioner Foster added that the response may not be “complete and full”, which sounds like a final response, but rather a continuing conversation, or a process. The memo provided by staff is a status report. Commissioner Cook said that this could be put into the cover letter. Chair Waldfogel stated that the UAC should agree on a process and a schedule. Commissioner Berry said that one good possibility could be a discussion at a joint UAC/Council meeting. ACTION: Commissioner Foster made a motion to form a subcommittee comprising Commissioners Berry, Melton and Waldfogel to discuss a proposed response to the Council Colleagues’ Memo and that the subcommittee should come back to the UAC at the June meeting. Commissioner Cook seconded the motion. The motion carried unanimously (6-0). ITEM 7: DISCUSSION: Demand Side Management Implementation Plan for FY 2012 to 2014 Assistant Director Tom Auzenne was available to answer Commissioners’ questions. Commissioner Melton pointed out that the report would be a good resource, and Chair Waldfogel appreciated having a combined utility look at cost-effectiveness. Commissioner Berry wanted to know what further steps would be taken with the Implementation Plan. Auzenne reported that it would be attached with a staff memo to Council that would recommend approving new contracts to deliver 3rd party administered efficiency programs. Commissioner Keller requested clarification on page 21, regarding the 20% by 2020 water consumption reduction goal. Auzenne said that this will be further clarified in the Urban Water Management Plan, which will be discussed with the UAC in May. Assistant Director Ratchye also clarified that this reduction in water Utilities Advisory Commission Minutes Approved on: May 4, 2011 Page 7 of 8 Utilities Advisory Commission Minutes Approved on: May 4, 2011 Page 8 of 8 use is state law: Utilities must have a 20% reduction in water use by 2020. The water reduction is determined from a baseline, and the baseline can be selected among four options. Chair Waldfogel requested further information on the innovation program in page 23 of the report. He stated that the innovation program is part of the strategic plan, but it is presented in the report as part of the upcoming year’s program. Commissioner Foster said that the UAC’s Innovation Subcommittee and staff must have Council’s approval before proceeding with the innovation program. Commissioner Melton wanted to know how the innovation program would be funded. Director Fong said that the subcommittee has recommended $200,000 per year, and the topic will be brought back to the UAC at another time. Commissioner Berry pointed out that the Strategic Plan needs budgeted funding. Ratchye pointed out that the Plan has yet to go to the Finance Committee or Council for approval. Staff is waiting for the midyear separate budget request to fund the Plan. Chair Waldfogel said that he would like to expedite the Plan, but Berry pointed out that the Plan did not get completed in time to request funding in the budget process. Director Fong said that staff had been getting the LEAP and GULP completed and approved prior to completing the Strategic Plan, but that staff is beginning to work on the no cost items in the Plan. ITEM 8: ACTION: Potential Topic(s) for Discussion at Future UAC Commissioner Foster asked when the innovation fund/program would be discussed. Commissioner Foster stated that representatives of other City commissions and boards are present at Council meetings when certain key decisions are made to represent the commission or board, but the UAC has not had this practice in the past. He asked that action on this be agendized for a future meeting. ACTION: None. COMMISSIONER COMMENTS None. Meeting adjourned at 9:40 p.m. Respectfully submitted, Marites Ward City of Palo Alto Utilities