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HomeMy WebLinkAbout2011-06-01 Utilities Advisory Commission Summary Minutes _______________________________________ City of Palo Alto FINAL UTILITIES ADVISORY COMMISSION MINUTES OF JUNE 1, 2011 CALL TO ORDER Chair Waldfogel called to order at 7:10 p.m. the meeting of the Utilities Advisory Commission (UAC). Present: Commissioners Berry, Cook, Eglash, Foster, and Waldfogel Absent: Commissioners Melton and Keller and Council Member Liaison Scharff ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES The minutes from the April 27, 2011 and May 4, 2011 UAC meetings were approved as presented. AGENDA REVIEW No changes to the agenda were requested. REPORTS FROM COMMISSION MEETING/EVENTS None. UTILITIES DIRECTOR REPORT 1. Wholesale Water Rate: On May 10, the SFPUC adopted a 38.4% rate increase that will go into effect on July 1. The two main reasons for the large increase are continued implementation of the $4.6 billion Water System Improvement Program to increase the seismic safety of the regional water system and lower wholesale water sales than expected over the past couple of years. Previously, the SFPUC discussed a 47% rate increase since it was concerned that water usage could fall even further. To protect against that possibility, the SFPUC’s action included a new “rate reset mechanism” that will adjust the wholesale rate even higher on January 1, 2012 in the event regional water sales fall even lower. 2. New generation of EV Chargers in downtown garages: The City has received a grant of 5 EV chargers from Coulomb Technologies as part of the Department of Energy ChargePoint America Program. We expect to take delivery of these chargers in July and for them to be operational in August. These smart chargers will provide insight into the EV owner charging preference, charging patterns and demand for such publicly accessible charging devices. At the beginning, charging will be available free of cost. Utilities Advisory Commission Minutes Approved on: July 20, 2011 Page 1 of 7 3. Summer Demand Response Program: Three large Palo Alto customers have signed up for the summer pilot demand response program (VA hospital, PARC and SAP). We expect these customers will collectively be able to reduce loads by approximately150 kW during high demand periods. Two additional customers expressed interested but were unable to participate this summer due to renovation projects and ongoing building management system upgrades. We anticipate them participating next summer. Experience from this 2-year pilot will be factored into the City’s smart grid implementation road map. 4. Zero Interest Loan on Electric Efficiency for Businesses: The zero interest efficiency loan program is being advertised through the Chamber of Commerce, 3rd party efficiency program managers and Key Account Representatives. To date, one customer has indicated interest, but has not yet signed up for the program. 5. 3rd Party Efficiency Programs: City Council approved contracts for a variety of new and extended efficiency programs at its May 16 meeting. Staff is currently meeting with vendors to begin developing these programs, which are planned to assist CPAU in meeting its efficiency goals for all customer classes. 6. Summer Workshops: Workshops are being held this summer on graywater systems (June 11), PV installation (June 18), residential home efficiency (June 23) and solar water heating (July 14). The PV workshop will be held on SolarDay, as a part of the international effort to promote photovoltaic technology. 7. UAC Calendar: Next UAC meeting scheduled for Wednesday, July 20. Suggest meeting to start at 4:00 or 5:00 p.m. Commissioner Foster noted that he had attended a previous workshop on solar water heating and found that the recommendations were vague. He suggested that more actionable recommendations be provided for workshop participants. Commission Berry asked if we were anticipating paying 38% more for water from the SFPUC due to the wholesale rate increase, or if our purchases were lower so that our actual total payments would be increased less than 38%. Assistant Director Jane Ratchye responded that she did not have that information on hand, but would provide the specific numbers later. Chair Waldfogel clarified that the 38% wholesale rate increase did not mean that our water budget would have to increase more than expected, or that the increase would prompt an additional water rate increase. Ratchye said that this wholesale water rate increase was anticipated and incorporated into the budget and that the retail water rate increase in the FY 2012 budget would cover it. UNFINISHED BUSINESS 1. Subcommittee Proposed Response to the Council Colleagues’ Memo Since the subcommittee did not meet, the item was continued until the next meeting. Utilities Advisory Commission Minutes Approved on: July 20, 2011 Page 2 of 7 NEW BUSINESS ITEM 1: DISCUSSION: Provide Feedback on the Development of a Business Plan for the Citywide Ultra High-Speed Broadband System Project Jim Fleming, Management Specialist, presented an overview of the Council’s directive for the Broadband System Project and the reports from Columbia Telecommunications Corporation (CTC) and Tellus Venture Associates (TVA). The findings and recommendations in the reports, in addition to feedback from the Utility Advisory Commission, will serve as the basis for the development of a business plan for the Broadband System Project. The timetable to submit the business plan to the Council is fall of 2011. Fleming introduced Stephen Blum, President of Tellus Venture Associates, who presented the findings and recommendations in his market research report. TVA’s scope of work asked for an analysis of potential fiber network extensions, cost-benefit and ROI analysis for each extension, pricing analysis, assessment of “value-added” commercial telecommunication services, and an assessment of the consumer Fiber-to-the- Premise (FTTP) market. Fleming presented a summary of the findings and recommendations in the CTC report. CTC’s scope of work included an assessment of the fiber optic backbone network and development of a “conceptual plan” for broadband expansion that included two phases: (1) construction of core hub sites at the nine electric substations, and (2) extension of the fiber plant from substation hub sites to 88 neighborhood nodes. Based on the reports prepared by CTC and TVA, Fleming discussed next steps for the development of the Broadband System Project business plan. 1. Dark Fiber rate analysis 2. Evaluation of network extensions to “unserved” commercial clusters identified in the TVA report 3. Evaluation of the commercial Fiber-to-the-Basement concept and backhaul opportunities related to the wireless industry 4. Issue a Request for Information (RFI) to initiate exploratory discussions with third-party FTTP network builders and wireless service providers seeking co-location and backhaul services 5. Issue RFI to evaluate feasibility of constructing wireless communication facilities at substations Public speakers: Peter Allen said he appreciated the phased approach of the conceptual plan in terms of expanding the City’s fiber footprint and urged CPAU to “keep going.” Herb Borock said he supports a public-private partnership for broadband expansion, based on the City being the senior partner. Mr. Borock also stated that the electric utility could share the build-out costs for FTTP. The City’s bonding capacity could be based on the net income revenue stream. Tower and antenna siting is a zoning issue. Andy Poggio said the reports did a thorough job in terms of the Council’s directive for the Broadband System Project, but he was troubled that the plan does little for the residents and businesses that paid for the fiber. Mr. Poggio recommended applying the same logic to expanding fiber for broadband services as the City did by issuing a bond to upgrade the libraries, i.e. FTTP, like the libraries, would not be a “cash cow” for the City, but would provide long term benefits for the community. Mr. Poggio stated that partnerships with Comcast or DirecTV should also be considered since a third-party network builder would conclude as well that there is no business case in Palo Alto for another provider of broadband services. Mr. Poggio stated that the City’s thinking is rooted in the past in terms of broadband expansion. Mr. Poggio Utilities Advisory Commission Minutes Approved on: July 20, 2011 Page 3 of 7 stated that the World Health Organization recently classified wireless devices as a “possible” carcinogen and that fiber-based technology does not expose people to electromagnetic fields. Commissioner Foster asked what the total capital costs would be to provide fiber to the premise and the ongoing annual operating costs. Fleming responded that the estimated capital cost was $40 to $60 million depending on the network architecture. The ongoing annual operating costs for a FTTP network would be approximately $7-$10 million. Commissioner Eglash stated that the focus of the report seemed to be on low risk projects with a positive return on investment. However, the fact is the private sector is providing broadband services in Palo Alto and the City needs to respect citizens’ money and not pursue the recommendations in the CTC report, which are too aggressive and speculative. If the CTC recommendations (Phases 1 and 2) were implemented, the services and applications identified in the CTC report (e.g., Smart Grid, public safety) are not well defined and did not have adequate ROI information to justify implementation. The existing fiber network is a success and any future plan should meet that high standard. Just because the City has the money in the fiber optic fund reserve is not sufficient justification to implement CTC’s recommendations. Any proposed plan needs to make economic sense. Commissioner Eglash encouraged pursuit of the TVA recommendations (next steps 1, 2 and 3), but recommended not pursuing CTC recommended next steps 4 and 5, because it would not be a good use of staff time. Commissioner Cook asked about the reason for the radius used in the dark fiber flat rate pricing analysis. Stephen Blum explained that it was a conservative assumption based on a worst case scenario in that CPAU could cut prices, but not raise them, and set a flat rate maximum that would apply to customers paying that much or more; however, any customer paying less would keep their current rate. Commissioner Cook asked if anyone looked into the health aspects of siting wireless communication facilities and wireless repeaters. Fleming replied that the health risks associated with electromagnetic exposure were not specifically addressed in the CTC study, other than to acknowledge that any wireless communication facilities must comply with established Federal Communication Commission (FCC) guidelines for electromagnetic exposure as per FCC’s Bulletin 65 (issued by the FCC’s Office of Engineering and Technology). Commissioner Cook stated that it was not effective to have two presentations even if they seem to be related. The public and Council is interested in FTTP. When the business plan is presented to the Council it should be a single presentation that explains why FTTP is not economically feasible. Commissioner Berry stated that the report did not include a detailed cost estimate for a FTTP build-out. Staff needs to provide an analysis about why FTTP won’t work rather than to continue to keep it open as a possibility. If the City is not pursuing FTTP let’s move on and concentrate on useful next steps. Commissioner Foster stated that as he reads it the CTC report had two key recommendations: (1) formation of hub sites at the substations, and (2) extending fiber to access points/nodes into neighborhoods. Commissioner Foster asked Commissioner Eglash which recommendations he agrees with or does not agree with in the CTC report. Commissioner Eglash responded that he felt there was not enough information presented on those recommendations to know whether it makes sense to explore them or not; they fell into the category of something we could do and if we did them it would likely contribute additional revenues, but the report provided no sense about the question of should we do it and is it the best use of our revenues and staff time. In terms of the incremental services provided, what are the benefits of those compared to the City not providing those services and doing without them, or if they were provided by the public sector. These questions were not adequately addressed. Utilities Advisory Commission Minutes Approved on: July 20, 2011 Page 4 of 7 Commissioner Foster addressed whether a study session would be useful to provide a more open forum for advocates of FTTP to express their views without being limited to a three minute presentation at a regular UAC or Council meeting. Director Fong said the UAC meeting was one opportunity and that a preview of the report was provided to the Citizen Advisors and two Council members (Klein and Schmid). Other opportunities would occur with the Finance Committee and the full Council. Director Fong also pointed out that there was a Council subcommittee that spent a lot of time evaluating the development of a FTTP business plan with the private consortium. Two of the three Council members who served on that subcommittee still serve on the Council (Klein and Schmid). Chair Waldfogel said that he thought the reports were very good, but he is concerned that the reports did not contain any reference to the policy documents that created the fiber fund. It is unclear about the original purpose of the fiber fund in that there is a positive cash flow, but no model to spend the surplus. In a sense the fund is not a great success, because we don’t know what to do with the surplus. We need to find a way to spend the money in the reserve fund. Commissioner Berry stated that the fiber fund is a success because an investment was made in the fiber backbone network and it makes more revenue than we know what to do with. Commissioner Berry added that given the report where would staff come out on next steps for going forward? Director Fong replied that staff’s expectation for this meeting was to take the feedback provided by the commissioners and reflect on the discussion in order to make a recommendation. The intent of staff is to provide the Council with a specific recommendation. Commissioner Berry stated that Phase 1 of the CTC recommendation made some sense, but going beyond that did not make sense because Smart Grid is still way off in the future. Staff needs to provide clarity in terms of whether FTTP is likely to happen. Commissioner Eglash said staff would do the Council a huge favor in the decision process by stating that FTTP is deemed to be too expensive or too risky purely on an economic basis backed by supporting financial data; or if the City chooses to make an investment in FTTP it would be similar to the kind of investment made in public libraries. Chair Waldfogel said that no one disagrees with the FTTP upfront capital cost analysis of $40 million to $60 million to pass every premise. The basic cost of entry is $10,000 a home to connect and $1,500 a month to operate. It’s proven that without a lot of capital it will be difficult to get to the $100 a month price point; however, there may be intermediate price points without building a lot of new facilities. The fiber network has lots of spare fiber that could be used to provide premium residential services. Chair Waldfogel stated that a year ago he would not have advocated further for FTTP, but it’s known that Verizon FIOS FTTH project is stalled, and at least anecdotally it’s understood that other wireline providers like AT&T U-verse are stalled; for that reason, there may be some logic to looking more closely at providing some service rather than no service due to the changing business models responding to consumers migrating from triple- play broadband subscriptions to using over-the-top (OTT) services. Chair Waldfogel stated that OTT video services do not run as well over commercial networks. Chair Waldfogel stated that broadband business models are changing and there also appears to be business model conflicts. Chair Waldfogel asked Stephen Blum about the business model conflicts. Blum responded that his observations were right about the transitioning business models and conflicts, but now is not the time to push ahead with an infrastructure project until the business model conflicts are resolved. The resolution may be that in the short term consumers may pay more for baseline Internet service and pay less for TV content, so there’s no way to get the money back in the mix. This transition is causing the wireline providers like Verizon FIOS and AT&T U-verse to pull back. So at least in the near term, until the business model conflicts are resolved, infrastructure providers are looking at less revenues to support the operation of their networks and that’s why they are pulling back on their build-out plans. Utilities Advisory Commission Minutes Approved on: July 20, 2011 Page 5 of 7 Chair Waldfogel asked Tomm Marshall, Assistant Director Utilities Engineering, what specific recommendations the UAC could provide. Marshall responded that staff will go back and evaluate the comments provided and that there obviously is not a consensus among the commissioners. Marshall said that the UAC does not have all the information to move forward, specifically the Fiber-to-the-Home history, cost information previously provided to the Council, and the effort to find a third-party FTTP network builder. Marshall said that Council has requested staff to evaluate ways to move broadband forward in the community. At this point there is no definite business plan related to expanding the fiber plant for specific future applications (e.g. Smart Grid, mobile broadband and public safety). Staff will be working to identify specific applications that may justify expanding the fiber backbone network as described in the conceptual plan. Once applications are defined, a business plan will be developed for the purpose of making a recommendation to the Council. The plan submitted to the Council will include a study about what the risks are for the initiatives staff recommends. In the short term, Marshall said that staff intends to move forward with evaluating the recommendations in the TVA market research report for the purpose of recommending implementation of initiatives that have a positive business potential. Chair Waldfogel asked Marshall about Phase 2 of the conceptual plan. If the nodes were built, would the residential installation cost be in the $1,000 range to get the fiber to the home with a reasonable ROI? Marshall replied that assuming the build-out for FTTP cost $50-$60 million, the capital cost would be in the range of $2,000 to $4,000 per home (total build cost is contingent on actual customer penetration). At this time, however, Marshall said there is no business case that makes sense to build out to a certain point with the intention of attracting a third-party network builder willing to assume the risk to build to the premise. Chair Waldfogel said that he would pursue this discussion offline. ITEM 2: ACTION: Potential Topics for Joint UAC/Council Meeting Chair Waldfogel stated that he and Vice-Chair Foster met earlier to develop a candidate list of thirteen potential topics for the joint Council/UAC meeting on July 11. Chair Waldfogel asked if any additional topics should be added to the list and suggested that the commission select a couple of topics to recommend to the Mayor and Vice Mayor for the meeting. The commission discussed some of the items on the list and suggested a few more. Commissioner Eglash stated that the joint meeting is not a good venue to get resolution on any specific item. Commissioner Cook stated that a list of topics could be presented to get a sense of relative priorities rather than have a deeper discussion on any one topic. Chair Waldfogel said that one goal for the meeting could be to ask Council if they want the UAC to study any of the topics in more detail in the coming year. The sense of the commission was in agreement with the sentiment for the Chair and Vice-Chair to bring the entire list of topics for discussion with the Mayor and Vice-Mayor and ask them for direction on how to conduct the meeting. The list under consideration includes the following: 1. Undergrounding: what should the policy be going forward? Are we going to continue? 2. Fiber Optic Fund: what’s the long-term plan? 3. Recycled water: what is the sense of the Council on this project? 4. Calaveras Reserve: what projects, if any, should this fund, or should the money be returned soon, or over time? 5. EVs: what should the City’s role in development of a charging infrastructure be? 6. Renewable energy: given the recently adopted 33% by 2015 RPS goal, what is the limit that governs – 33% or the 0.5 cent/kWh rate impact limit? 7. PaloAltoGreen Program: as the portfolio becomes more carbon neutral, should PAGreen be dropped or modified? Utilities Advisory Commission Minutes Approved on: July 20, 2011 Page 6 of 7 Utilities Advisory Commission Minutes Approved on: July 20, 2011 Page 7 of 7 8. Test bed/innovation fund: how much money is the City willing to risk to promote emerging technologies? 9. Wireless communications: does the City want to offer municipally owned wireless communications services? 10. Communications outreach: should we step up our communications efforts with respect to certain activities such as EV charger installation, test bed idea, others? 11. Commercial building energy use: should Palo Alto copy San Francisco’s model of requiring building energy use visibility? 12. Residential energy use: should Palo Alto require disclosure of a building’s past energy use upon change of title? 13. Residential Energy Consumption Ordinance (RECO): should Palo Alto adopt a RECO to require property owners to implement specific measures to reduce energy and water use? 14. Water Rates: what is the proper split for collecting the revenue requirement between fixed charges and volumetric charges and the right number of usage tiers for volumetric charges? 15. New Renewable Portfolio Standard: what should the City’s future goal be as it gets closer to meeting the 33% RPS goal? Should a carbon neutrality goal be evaluated again? ACTION: No formal action was taken. ITEM 3: ACTION: Potential Topic(s) for Discussion at Future UAC Commissioner Foster noted that at the May UAC meeting, it was discussed to add an item to a future agenda on the interpretation of the 33% Renewable Portfolio Standard (RPS) since he wanted to clarify whether the 33%, or the ½ cent/kWh rate impact limit, was the ruling. Commissioner Eglash stated that the broader issue of RPS goal options in the future should be the topic for a future UAC discussion, not solely to determine the true meaning of the existing policy. This discussion could include what do we do when the 33% RPS is met. Commissioner Cook said that the discussion should be broadened to include what to do with the PaloAltoGreen program. ACTION: No formal action was taken. COMMISSIONER COMMENTS Commissioner Foster noted the reference to the reliability award won by the utility in the quarterly update and requested that a list be made containing all awards that Utilities has received. Such a list could be put on the web site on in an annual report. Meeting adjourned at 10:00 p.m. Respectfully submitted, Marites Ward City of Palo Alto