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HomeMy WebLinkAbout2013-05-01 Utilities Advisory Commission Summary MinutesUtilities Advisory Commission Minutes Approved on: July 31, 2013 Page 1 of 8 UTILITIES ADVISORY COMMISSION SPECIAL MEETING FINAL MINUTES OF MAY 1, 2013 CALL TO ORDER Chair Cook called to order at 12:09 p.m. the meeting of the Utilities Advisory Commission. Present: Commissioners Cook, Foster, Hall, and Waldfogel Absent: Commissioners Chang, Eglash, Melton and UAC Liaison Scharff ORAL COMMUNICATIONS Paul Stith advocated for Electric Vehicle (EV) parking space solutions, including using solar energy resources for chargers and making charging available for visitors to Palo Alto. He suggested using the top stories of parking structures and using a solar power purchase agreement to finance hard and soft costs for the charging infrastructure. APPROVAL OF THE MINUTES The minutes from the April 3, 2013 UAC meeting were approved with the following modification: Per suggestion from Commissioner Hall, minutes on page 9, under “Public Comment,” second paragraph, the sentence should read: “Borock suggested that voters could decide if the City should expand the fiber network to connect all customers, or alternatively …” AGENDA REVIEW No changes. REPORTS FROM COMMISSION MEETING/EVENTS None. UTILITIES DIRECTOR REPORT Utilities Director Valerie Fong provided the following report: 1. Water Supply Conditions: After a wet start to the precipitation season, January to March was the driest 3 month period on record locally and 3rd driest on record at Hetch Hetchy. The snow survey results indicated that snowpack was at 60% of median for April 1st. The Utilities Advisory Commission Minutes Approved on: July 31, 2013 Page 2 of 8 SFPUC snowmelt runoff forecasts indicate that 71% of the long-term median amount of runoff will occur, which is expected to fill Hetch Hetchy reservoir. In summary, current snowpack, forecasted reservoir inflow and reduced demand will enable the SFPUC to provide full deliveries to its customers this year. 2. Hydro Conditions Update: The dry conditions noted earlier for this calendar year have extended across the state and had a significant impact on hydroelectric generation. Statewide, snowpack levels are currently only 20% of average for this time of year. Reservoir levels remain at about average levels for this time of year because they have been making minimal water releases since the dry conditions began. The Western Base Resource is expected to provide about 31% of Palo Alto’s needs in the next 12 months, which is somewhat below the 37% produced in an average hydro year. Calaveras is expected to provide about 9% of our needs compared to 13% for an average hydro year. 3. Renewable Contract Update: Today NCPA notified Western GeoPower that it has terminated the power purchase agreement for a geothermal project that the two parties had executed in May 2008 (and then amended in May 2011 with a higher contract price). Palo Alto, along with four other public utilities, was a participant in this project through an NCPA Third Phase Agreement, which was also terminated when NCPA terminated the PPA. The terms of the 2011 PPA required Western GeoPower to execute a construction contract and order the major equipment for the facility by the end of October 2011. It failed to do so, and after 18 months passed, this failure to meet these milestones become an event of default that allowed NCPA to terminate the PPA and collect a small amount of delay liquidated damages. This project had been expected to deliver about 3% of the City’s total electric supplies starting by the end of 2014. Fortunately, this was one of the more expensive resources in the City’s renewables portfolio, with a price about 50% higher than current renewable energy market prices. 4. Communications Update: a. PG&E Pipeline Work---In addition to wrapping up work on replacing their Pipeline #109 segment along the Foothill Expressway, there are a couple of new projects coming this year. Details are still being finalized, but there will be valve work on Line #132 at Alma & Oregon Expressway, starting later this month and then replacement work on Line #101 along E. Bayshore Road in late summer or fall. b. Crossbore Program---We are stepping up our outreach to once again raise public awareness about the importance from a safety perspective of calling us first when they have any kind of sewer back-up. This month we are planning a direct mailing as well as utilities bill info and an insert ad in the Weekly. 5. Demand-Side Management Update: a. Great Race for Saving Water---this CPAU event was a big success with over 230 participants of all ages in the race itself and scores of additional fans and onlookers. We partnered with the Tuolumne River Trust and received support from many other organizations, including the Santa Clara Valley Water District, BAWSCA, the Sierra Club, Utilities Advisory Commission Minutes Approved on: July 31, 2013 Page 3 of 8 Acterra and Canopy. The City’s Zero Waste and Water Quality Control programs also joined in, not to mention the weather, which cooperated fully! b. EcoHome Tour---the next scheduled open house is tomorrow from 3pm-5pm and we’re expecting a Girl Scout troop who will have created their own ecologically-smart model building models out of shoeboxes! c. Demand Response Program---this month we will be once again conducting this program to provide incentives to large commercial customers, including the City itself, to reduce peak load on hot summer afternoons. We expect that this Thursday (tomorrow) will be called as the first Demand Response Event of this program year. Director Fong indicated that she intended to cancel the June UAC meeting with the topics on the rolling calendar to be moved to July meeting. Fong also noted that UMS Manager Joyce Kinnear had recently accepted a position with the City of Santa Clara. Fong updated the Commission on two recent promotions: Jon Abendschein and Jim Stack, both to Senior Resource Planner. UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: DISCUSSION: Reflections on the Future Role of Fiber Optics in Palo Alto Public comment: Herb Borock stated that the Council meeting was appointed as an Ad Hoc Committee and, therefore, would not have to comply with the Brown Act. However, in talking to Council members, he determined that the plan would be to hold the meetings publicly and follow Brown Act procedures. He stated that the UAC should continue in its role as advisor to the Council on Fiber Fund issues, including which department should be heading the project. He wanted to find out what the dark fiber looks like now. The easiest thing to do is to extend the system throughout the city. He stated that Google decided not to choose any California cities due to the requirements of the California Environmental Quality Act (CEQA). He suggested that documents, such as those prepared for the Google application, should be easily accessible on line, not just via individual’s public records request. Richard Brand, who works for Verizon, advised looking at services as well as transport. This gets into content issues that could be innovative and provide leadership to the rest of the world. He suggested that Palo Alto, as the birthplace of Silicon Valley, could offer unique and innovative services. Chair Cook stated that the Council technology committee has asked for liaisons from the UAC to the committee. He advised that he has appointed Commissioner Waldfogel and himself as liaisons and they will be able to updates to the UAC. Commissioner Foster provided his support for the appointment of the liaisons. He asked if reports from the Council technology committee can be provided to the UAC without a specific Utilities Advisory Commission Minutes Approved on: July 31, 2013 Page 4 of 8 agenda item. Deputy City Attorney Marybelle Ang said that these updates can be provided under the Commission’s comment section of the agenda. Commissioner Waldfogel stated that he is excited to work with the Council committee on the project. Council Member Klein, alternate liaison to the UAC, stated that the Council is very interested in fiber. The members include Chair Kniss, he is the Vice Chair and the other members include Shepherd and Scharff. He stated that the committee will meet for the first time in May. He stated that the first item will be fact gathering. He noted that Google is doing many activities in this area in other cities in the U.S. and that they are watching these efforts. In March, he and Kniss and Vice Mayor Shepherd met with the Dept. of Commerce to discuss ideas. He's excited to get started on the issue and welcomed everybody’s input. ITEM 2: ACTION: Proposed Operating and Capital Budgets for Fiscal Year 2014 Senior Administrator Dave Yuan provided a brief overview of the budget. Yuan thanked the UAC budget subcommittee (Commissioners Melton and Waldfogel) for its participation and review of the budget request. He stated that the overall department highlights for Fiscal Year (FY) 2013 includes ramped up communications efforts, implementation of the emerging technology program and the conduct of the organizational assessment study by an outside consultant. For the Electric Fund, the FY 2013 highlights include the adoption of the carbon neutral plan, redesign of the PaloAltoGreen program, implementation of the state's cap-and-trade program and implementation of the CustomerConnect program. For FY 2014, no electric rate change was proposed, no net revenue change and expenses decreased by $1.1 million. The electric CIP budget decreased by 21% for FY 2014 as there are funds available in the CIP reserves to complete projects. Commissioner Hall asked about the $16 million carried over in the Electric CIP funds. He asked how these funds are broken down. Yuan stated that $8.1 million is committed to projects underway and that $8.5 million was re-appropriated for other projects. Commissioner Hall asked if this money would be available for projects that are in the budget years beyond FY 2014. He asked how the public can track the spend plan since some of the funds are already collected. Yuan pointed the UAC to page 386 of the budget book, which showed the projected budget in prior years. Commissioner Hall asked how the UAC would know what the appropriate level of CIP expenditures would be. He said that they do not know the age and state of the infrastructure. Assistant Director Tomm Marshall stated that Engineering conducts assessments of the infrastructure on an ongoing basis. They also look at the age of the various components of the infrastructure. In addition, they conduct tests periodically to determine the status of the components. These studies are done to help develop the 5-year CIP plan, including Utilities Advisory Commission Minutes Approved on: July 31, 2013 Page 5 of 8 replacement of aging components. The long-term plan also considers the staging and scheduling of the replacement of all the systems. Commissioner Hall stated that he reviewed the FY 2012 financial reports to determine the age of the assets and the depreciation of the assets. He noted that the amount of depreciated assets, $7.8 Million in FY 2012, was based on the old costs and that he would expect that the new CIP would be much higher. Marshall stated that the upgrade or replacement of many of the assets don't require entire rebuilds since some of the substructure components can still be used. Marshall added that the useful life is generally longer than used in the depreciation schedules. Commissioner Hall noted that the utility business is replete with examples of stories about underfunding of infrastructure and he commends Palo Alto for having planning for and replacing its utilities infrastructure on a proactive basis. Chair Cook asked about the status of the second transmission line. Marshall stated that negotiations are ongoing with the parties involved and that many studies are occurring. For the Gas Fund, Yuan stated that the FY 2013 highlights included 60% completion of the cross-bore program, implementation of market-based pricing for commodity, and rebuild of 3 of the 4 gas receiving stations. For FY 2014, no rate change is planned, revenues decreased by $600,000 and expenses decreased by $7.7 million due primarily to CIP project deferral. Commissioner Waldfogel asked where the CIP reserves were reported. Yuan stated that these reserves are not reported in the budget book, but can be found in the Comprehensive Annual Financial Report (CAFR). He added that this will be fixed in future budget books to be responsive to the City Auditor's Utilities reserves audit, which requested that these reserves should be explicitly reported to the Council. Yuan stated that the FY 2013 Water Fund highlights included the completion of much of the Emergency Water Supply and Storage project and the completion of a water main replacement project. For FY 2014, a 7% rate increase was planned resulting in an increase of revenues of $800,000. Expenditures were expected to decrease by $1.2 million due to reduced CIP costs, one time costs for the El Camino Park playing field while water commodity costs were expected to increase by $800,000. Water Fund reserves were expected to be at the maximum guideline level. For the Wastewater Collection Fund, the FY 2013 highlights included collection system replacement projects, reduction of the Sanitary Sewer Overflows (SSOs), and communication outreach for clogged sewer lines. Chair Cook asked if the reduction in the SSOs would be seen in future years. Marshall stated that the lower level should be maintained, but there is a goal to even reduce these further. He Utilities Advisory Commission Minutes Approved on: July 31, 2013 Page 6 of 8 added that many of the overflows occur in the upper laterals, which (unlike other cities) are maintained by the City. Yuan stated that for FY 2014, no wastewater rate adjustment was planned and that revenues would increase by about $100,000 due to increased revenues from connection fees. Expenses are expected to increase by $3.4 million due to deferral of a CIP project. Chair Cook observed that the inspection rate of sewer laterals was currently 18%, up from 7% in FY 2010. He asked what will the future level be. Yuan stated most of it was related to cross bore inspections and that the plan was to maintain it at the 17% minimum. Commissioner Hall stated that an earthquake in New Zealand resulted in serious problems due to major damage to the sewer systems due to liquefaction. He asked if the City has looked at this issue. Marshall stated that the main trunklines in areas subject to liquefaction have been replaced and studies have been completed. He stated that more work could be done in this area and that he can't speak to the status of the pipelines maintained by the Water Quality Control Plant. Regarding the Fiber Fund, Yuan noted that the FY 2013 highlights included build out of the system to serve all 18 Palo Alto schools, completion of a wireless assessment, and increasing of the Fiber financial reserves. Yuan discussed the new position requests of 1.5 full-time equivalents (FTEs). The first request is to convert a long-term hourly position to a permanent position in the credit and collections group. Vice Chair Foster asked about the financial impact of the new position. Director Fong explained that there will be more cost to utility enterprise funds and no impact to the general fund, but that the issue with maintaining the position as hourly is that new people must be constantly trained for the position and you can’t keep personnel as hourly forever. Yuan explained that the budget proposal also includes a new 0.5 FTE for a coordinator for the communication. Vice Chair Foster asked if the current 0.5 FTE was an employee splitting time between other functions, or was one part-time individual that would move to full time. Director Fong noted that the City’s process would be followed for filling the full time position. Vice Chair Foster asked if there are any positions going away. Yuan explained that there were several reclassifications, but that the net new positions are these 1.5 FTEs. Commissioner Waldfogel thanked Dave Yuan, Tomm Marshall, and Jon Abendschein for the information provided in the meetings with the subcommittee. He stated that he and Utilities Advisory Commission Minutes Approved on: July 31, 2013 Page 7 of 8 Commissioner Melton noted that the budget proposal is a baseline budget with no large changes from the current budget. Commissioner Waldfogel noted that the equity transfer is tied to the PG&E rate of return, which has decreased. He stated that this could be an issue for the City’s General Fund as the result is a reduction of the equity transfer by $1 million. Commissioner Waldfogel added that policy issues that could be addressed in the future include compensation, retention. He stated that there have been CIP deferrals this year and there are questions about how to report the CIP reserves and whether depreciation is keeping up with the system improvements and replacements. He stated that annual funding for CIP was a possible policy discussion. He added that we don't have a smart grid policy and we may want to revisit that as well as the spending plans on smart grid. Commissioner Waldfogel noted that we are planning to spend money on gas boring equipment, but we may want to re-examine this in light of the cross-bore issue. Marshall stated that we do boring for gas, water, and sometimes wastewater and we need to replace our equipment, since the existing equipment is at the end of its useful life. Chair Cook thanked the subcommittee members Waldfogel and Melton. He noted that the budget proposal indicates that the Utilities Department is well run. However, he wants to make sure that the current year CIP deferrals don't cause future problems. Vice Chair Foster stated that the UAC may wish to advise the Council about the level of its review, which is not the review of an auditor. Commissioner Waldfogel noted that the committee did not review the staffing levels in detail, but that the review was similar to what it's been in past years. He stated that the subcommittee had assumed that the staffing requirements are as stated by staff and that the models were correct; it was not a zero based budget analysis. Chair Cook stated that the message could be delivered to the Finance Committee by a UAC member in oral comments when the Finance Committee reviews the budget. ACTION: Commissioner Waldfogel made a motion to recommend that the Council approve the proposed Utilities Operating and Capital budgets for FY 2014. Vice Chair Foster seconded the motion. The motion carried unanimously. Commissioner Hall stated that he wanted to be sure to convey to Council that the UAC understands and supports the CIP budget, but is still concerned about the deferral of the CIP spending. The UAC understands the factors that resulted in the deferrals, but is concerned and wants to watch this for the future. ITEM 3: ACTION: Potential Topic(s) for Discussion at Future UAC Utilities Advisory Commission Minutes Approved on: July 31, 2013 Page 8 of 8 Commissioner Waldfogel remarked that he would like to discuss CPAU’s general strategy around branding. He noted that there are many ways we communicate to the public and that we may want to streamline this. He advised that this does not need to be discussed in the near term, but should be discussed at some time. Commissioner Hall asked for an update on the smart grid plans. Vice Chair Foster asked if there was a discussion that is needed on EV charging stations at City facilities given the input from the speaker at the beginning of the meeting. Director Fong advised that this topic is really one for the Planning Department as it involves parking and traffic. ACTION: None. COMMISSIONER COMMENTS Chair Cook asked if any commissioners were interested in serving on a subcommittee to assist with the redesign of the PaloAltoGreen program. Vice Chair Foster asked if the chair could please check in with Commissioners Chang or Eglash and if one of those is not available, he would volunteer to be on the subcommittee. Commissioner Hall offered the same. Chair Cook announced that the next scheduled meeting will be July 3, not June 5. There was additional discussion about cancellation of the August UAC meeting, and the consensus was that both the June and August meetings could be cancelled. Meeting adjourned at 1:45 p.m. Respectfully submitted, Marites Ward City of Palo Alto Utilities