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HomeMy WebLinkAbout2015-05-06 Utilities Advisory Commission Summary MinutesUtilities Advisory Commission Minutes Approved on: June 3, 2015 Page 1 of 9 UTILITIES ADVISORY COMMISSION MEETING – SPECIAL MEETING FINAL MINUTES OF MAY 6, 2015 CALL TO ORDER Chair Foster called to order at 12:06 p.m. the meeting of the Utilities Advisory Commission (UAC). Present: Commissioners Cook, Danaher, Eglash, Chair Foster, Schwartz, Van Dusen Absent: Commissioner Hall and Council Liaison Scharff ORAL COMMUNICATIONS Jeff Hoel noted that the Council indicated that the UAC should be involved in fiber issues and the Fiber to the Premises (FTTP) project. At the request of Chair Foster, Director Fong introduced staff present at the meeting for the benefit of the newly seated commissioners. APPROVAL OF THE MINUTES Chair Foster moved to approve the minutes from the April 1, 2015 UAC meeting as presented and Commissioner Eglash seconded the motion. The motion carried unanimously (6-0 with Commissioners Cook, Danaher, Eglash, Foster, Schwartz, and Van Dusen voting yes and Commissioner Hall absent). AGENDA REVIEW AND REVISIONS None. REPORTS FROM COMMISSION MEETING/EVENTS Commissioner Cook reported that he and former Commissioner John Melton, the appointed UAC subcommittee on the budget and rates, met with Senior Business Administrator Dave Yuan to review the budget in detail. UTILITIES DIRECTOR REPORT 1. Renewable Energy RFP: CPAU recently released the latest in its ongoing series of renewable energy requests for proposals. Under the latest version, the City intends to execute a long-term contract for between 30 and 80 Gigawatt hours per year of renewable energy. The start date for energy deliveries to the City is 2021, when one of the City’s two existing wind energy contracts will expire. The deadline for submission response to this RFP is May 21. Utilities Advisory Commission Minutes Approved on: June 3, 2015 Page 2 of 9 2. PaloAltoGreen Gas Update: The Program has a goal of enrolling 20%, or roughly 5,000, of the City’s natural gas customers. This level of participation is expected to offset 16,000 metric tonnes of greenhouse gas emissions, representing about 10% of natural gas load, by 2020. As of April 29, 2015, 878 customers have signed up for the program.  Mitchell Park Library and International School of the Peninsula signed up to purchase carbon allowances to offset 100% of their natural gas load (as well as 100% of their load under the PaloAltoGreen electric program). Pete Moffat Construction signed up for 100% PaloAltoGreen Gas for three different accounts at 947 Industrial Ave.  City facilities are planning to participate for 100% of their natural gas usage starting in July with the new fiscal year. 3. Home Energy and Home Water Reports: We have received inquiries on how the rankings for these reports are calculated. The vendors for the Home Energy Report (Opower) and the Home Water Report (WaterSmart) were able to validate that there is no bias in the reporting or any intention to skew the rankings in an attempt to encourage more conservation. Opower reviewed the Home Energy Reports since Palo Alto started the program and reported that about 10% of all customers fall into each decile, as expected. WaterSmart provided an explanation of the assignment of WaterScores to each household indicating that those in the lowest 20th percentile see a Green Water Drop for “great,” those between the 20th and 55th percentile see a Yellow Water Drop for “good” and those above the 55th percentile see a Red Water Drop, or “Take Action.” Scores are adjusted based on mitigating factors —for example, if a household is using less than 58 gallons per capita per day, they will not see a Red Drop, even if the rest of the similar households are using less water than they are. This occasionally happens in winter months when people do not irrigate, or in very large households, with 6 or more occupants. In addition, there may be “ties” for water efficiency, especially at the low usage end, so that more than 20% of households see the Green Drop. 4. Community Outreach Events and Workshops  Saturday April 25, 2015 - Residential Solar PV Workshop attracted 92 attendees.  Staff participated in numerous outreach events in April for celebration of “Earth Month.”  May 5–Staff tabled at Avenidas Emergency Planning Fair.  May 7–Staff member Aimee Bailey will present an update on cost-effectiveness of residential electrification for Joint Venture Public Sector Climate Task Force. Staff will update the UAC on the same topic at the July UAC meeting.  May 28-The City will be honored with the Acterra Sustainability Award at the annual awards ceremony.  May 30–Staff will participate in the Comprehensive Plan Summit at Mitchell Park Library and Community Center. Utilities Advisory Commission Minutes Approved on: June 3, 2015 Page 3 of 9 Commissioner Eglash added that he had requested more information on the Home Energy and Home Water reports and was happy that the vendors provided analysis to staff and that Director Fong requested Commissioner Schwartz congratulated staff on the receipt of the Acterra Sustainability Award. She asked why the Home Energy Reports account for such a large fraction, 17%, of the City's electric energy efficiency savings as reported in the FY 2014 Annual DSM Report provided as an informational item in the UAC’s packet. Chair Foster replied that the 17% figure cited in the report is for the fraction of the total electric energy efficiency savings attributable to the Home Energy Reports, not the fraction of the City's total electric energy use that was saved due to the reports. UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt the Proposed Utilities Operating and Capital Budgets for Fiscal Year 2016 Strategic Business Manager Dave Yuan provided a brief department overview, key accomplishments, and Fiscal Year (FY) 2016 initiatives. He summarized the significant FY 2016 budget proposals include a 12% water rate increase, a 9% wastewater collection rate increase, and an increase for fiber rates based on the Consumer Price Index (CPI) of 2.7%. Yuan noted that no rate changes were proposed for gas or electric and described the City's Office of Management and Budget (OMB) change to the budget reappropriation practices for the Capital Improvement Program (CIP) budget. Yuan stated that Utilities is not requesting any new positions, but is requesting reclassification of several positions to be more in line with their duties. Electric Fund Yuan stated that the key FY 2016 initiatives for the Electric Fund include the development of new programs under the Local Solar Plan, evaluation of electrification, analysis of options for a second transmission line and completion of a new Electric Cost of Service Analysis (COSA). Commissioner Schwartz asked if the City of Palo Alto Utilities (CPAU) has any storage on its system or if it has considered it. Commissioner Danaher asked if CPAU has done a system-wide, comprehensive review of the most cost-effective ways to reduce greenhouse gas (GHG) emissions. Director Fong answered that the City is in the process of doing this and that this effort is led by the City’s Chief Sustainability Officer. Commissioner Van Dusen asked if there was a plan to review storage technologies. Assistant Director Jane Ratchye replied that, as required by state law, CPAU completed its first study of Utilities Advisory Commission Minutes Approved on: June 3, 2015 Page 4 of 9 storage technology options and the Council determined that, since nothing was cost-effective at the time, it declined to set a target for storage. CPAU must redo its evaluation of storage every 3 years so that there is a chance that the conclusion will change depending on the cost of storage and the available of new technologies. Commissioner Eglash added that the City’s emerging technology program is an avenue for storage technologies that could be evaluated. Commissioner Eglash explained that the grid essentially acts as a large storage device—energy is allowed to be added to, or drawn from, the grid as needed. Yuan continued with a summary of the FY 2016 Electric Fund budget, noting that no rate change was proposed, the revenue was expected to decrease by 5% primarily due to realignment of budget with historical actuals and expenses increase by 11% due to commodity cost increases, CIP budget reappropriation, and a large increase in rent. He noted that the Electric Fund Reserves would fall by $25.7 million to $92 million. Commissioner Eglash asked why the O&M costs were projected to increase so much. Yuan explained that the budget request for FY 2016 appears higher when comparing the budget figures to the actuals for FY 2013 and FY 2014. He added that the majority of the increases in O&M costs were salaries and benefits. Historically, the Electric Fund has a high number of vacancies resulting in salary savings of $1-1.5 million which is why the budget is higher than actuals. Commissioner Eglash asked about the CIP costs and whether CPAU is doing more than one year’s worth of CIP project to get caught up. Yuan explained that the CIP budget includes funding for new projects and reappropriations of $7.5M to complete projects from prior years. Commissioner Van Dusen asked why rents and leases were so high. Yuan said that the City owns the land that the substations are on and that a new land appraisal increased the rent that must be paid by CPAU to the City. Commissioner Van Dusen asked if the 23 staff vacancies were affecting operations and noted that it appeared that not all the vacant positions were posted. Yuan said that 13 positions are in the process of being posted and another 7 positions are currently posted. Commissioner Cook said that it was important to note the high rent payments to the City and to point out that Utilities is understaffed and it continues to have problems with recruitment, yet continues to operate well and has won many awards for safety, reliability and environmental initiatives. Commissioner Cook added that he would appreciate an update on the second transmission line. He noted that the streetlight conversion to LED is a great project. He asked about the status of the conversion from 4 KV to 12 KV throughout the City. Assistant Director Tomm Marshall said that this is a long-term effort and an ongoing process, but that there are some engineering issues still to be resolved. Commissioner Cook said that some of the undergrounding districts were so old that they needed to be rebuilt while other new areas are being undergrounded. He asked how much of the City is undergrounded at this time. Marshall confirmed that about 50% of the City is currently undergrounded and that there are many issues with respect to coordination with telephone and cable providers. Commissioner Cook Utilities Advisory Commission Minutes Approved on: June 3, 2015 Page 5 of 9 added that security of the system is a priority and added that there have been attacks. Marshall stated that there are vulnerabilities that are being addressed to improve security. Commissioner Cook asked whether, with respect to maintenance issues with undergrounded facilities, is there anything we've learned over the years. Marshall said that they have learned from the many years of experience maintaining and operating the system and have installed equipment above ground (pad mounted) so that equipment is not sitting in water. Commissioner Cook commented that the budget book is very well done and the new format makes it easier to follow. Commissioner Schwartz asked about the original impetus for undergrounding the City. Marshall noted that this issue goes back to the 1950's and that the motivations included aesthetics and improved reliability, but that there are trade-offs including added expense and increased difficulty in locating and repairing faults. Commissioner Cook noted that undergrounding has a large positive benefit on the urban canopy since the trees don't have to compete with overhead lines. Fiber Fund Yuan stated that the major initiatives include completion of the FTTP master plan, completion of the wireless network plan and rebuilding of the fiber ring system, which was first constructed in the 1990s. He noted that fiber rates EDF-1 and EDF-2 will increase by 2.7%, based on the annual CPI. Yuan stated that the revenues are expected to increase by $0.5 million and expenses are expected to increase by $1.4 million due primarily to the fiber rebuild CIP. The proposed CIP budget is $1.8 million and the total reserves are expected to increase to $19.2 million. Public Comment Herb Borock said that Fiber CIP projects are determined by staff, rather than Council as with the Electric, Gas and Water CIP projects. He said that rather than approving a budget number for CIP projects to rebuild dark fiber, the UAC should request that there is more scrutiny on each project since Council has not approved contracts for the projects. Yuan noted that any contracts for construction for a CIP project over $250,000 would go to Council for approval following the same process as for the other funds. Commissioner Cook noted that Fiber reserves should be helpful for any future project requiring capital resources such as the Fiber to the Premises (FTTP) project. Gas Fund Yuan noted the key initiatives for FY 2016 include the promotion of the PaloAltoGreen Gas program, implementation of the CIP Master Plan, and continuation of the cross-bore safety program. He noted that there was no gas rate increase and that revenues are expected to decrease due to lower commodity costs and mild weather while expenses were expected to Utilities Advisory Commission Minutes Approved on: June 3, 2015 Page 6 of 9 increase by $7.5 million including higher transmission cost, gas main replacement CIP and cross bore program. Commissioner Schwartz asked why sales were down when there were so many new large building being constructed in town. Yuan said that the market price for the purchase of the gas commodity is passed on directly to consumers and that the commodity costs were lower than budgeted. He added that mild weather also contributed to lower sales volumes. Commissioner Cook said that the spending for the gas utility is focused on safety and that CPAU received a gas safety award for its efforts. Wastewater Collection Fund Yuan noted that the key initiatives in this fund are the construction of three CIP projects for main rehabilitation and augmentation project as well as an expansion of the sewer lateral replacement program. He said that the proposed wastewater rate increase is 9% for FY 2016 with revenue increased by $1.4 million while expenses would increase by $2.5 million. The Wastewater Collection CIP budget for FY 2016 is $6.0 million. The total impact is a net income decrease of $2.9 million resulting in total reserves of $12.8 million. Commissioner Danaher asked what the wastewater rate increase would mean for a residential customer. Yuan pointed the commissioner to page 103 of the draft operating budget, which showed that the increase was about $2.64 per month in the utility bill. For the benefit of the new Commissioners, Director Fong explained that the budget and rates approval process begins at the beginning of the year when staff provides the preliminary financial forecasts for all funds that shows the trajectory of costs, rate adjustments, and reserve balances over the next 5-8 years. The preliminary financial forecasts are also presented to the Finance Committee before finalization of the Financial Plans. The Financial Plans are then presented to the UAC and the Finance Committee for recommendation to Council. Finally, the upcoming year's budget is presented at the May UAC meeting – this is where we are in the process. Water Fund Yuan said that the key FY 2016 water-related initiatives included implementation of the drought plan, completion of the Water System CIP Master Plan, and continuation of the seismic upgrade work on the water storage reservoirs. He said that the water rates were planned to increase by 12% and revenues would increase by 4% while expenses were projected to increase by 15%. He said the key CIP projects were system improvements, customer connections, and water main replacements. Overall, water fund reserves were projected to fall by $6 million. Commissioner Danaher asked how the financial reserve levels are established. Chair Foster noted that a UAC subcommittee reviewed the Financial Plans and budget proposal and went deeper into the financial reserves. Rates Manager Jon Abendschein added that establishing the reserve levels includes a review of the risks to each fund (i.e. load variability & future CIPs), the number of days of operating expenses, and the debt ratio coverage. Utilities Advisory Commission Minutes Approved on: June 3, 2015 Page 7 of 9 ACTION: Commissioner Cook made a motion that the UAC recommend that Council approve the FY 2016 Utilities Operating and Capital budgets as presented. Chair Foster seconded the motion. The motion carried unanimously (6-0 with Commissioners Cook, Danaher, Eglash, Foster, Schwartz, and Van Dusen voting yes and Commissioner Hall absent). ITEM 2: ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting Chair Foster noted that during the joint UAC/Council meeting, the Council highlighted several issues that it would like the UAC to provide advice on: 1) fiber to the premises (FTTP); 2) undergrounding of electric lines; 3) a second electric connection; 4) “fuel switching”, or electrification; and 5) recycled water. He would like to make sure that these topics are discussed by the UAC at some time in the next year and would like to see them on the UAC's 12-month rolling calendar. Director Fong explained that the proposed changes to the Palo Alto CLEAN program item— adding non-solar local renewable projects as eligible projects and maintaining the 16.5 cents/kWh CLEAN price for solar projects—was heard by the Finance Committee. However, its recommendation to Council was different from the UAC’s recommendation. She explained that the Finance Committee voted to reduce the CLEAN price for solar projects to the avoided cost. She explained that the item is scheduled to be considered by Council on May 18, 2015. Commissioner Schwartz asked if there was any update on the anaerobic digester project. Director Fong stated that the Chair Foster asked if the Public Works could provide an update to the UAC. Commissioner Eglash cautioned his fellow commissioners that adding topics takes staff time as well as time of Commissioners. He suggested that perhaps there were some items could be removed from the UAC's review to focus in more depth on some items. Commissioner Danaher asked if there was a time when the UAC agreed on a work plan for the year. Chair Foster said that this did not happen, but the joint meeting with Council provided a chance for guidance from the Council on the high priority issues. Director Fong reminded the UAC that it was advisory to the Council, not to staff. Staff is directed by the City Manager or Council. Commissioner Schwartz asked if there was some way for Commissioners to bring new items to the attention of the commission. Commissioner Eglash noted that the UAC has historically responded to staff's work agenda rather than be proactive with setting priorities. He added that the recent joint meeting with Council has raised this issue. Chair Foster said that it is a balancing act with staff resources. He noted that some of the five identified items have already been dealt with, some are being dealt Utilities Advisory Commission Minutes Approved on: June 3, 2015 Page 8 of 9 with and some are not being dealt with. He suggested that each of the key issues be brought forward to the UAC in some way by the end of the year. At this point in the meeting (2:07 p.m.), Commissioner Van Dusen left the meeting. Commissioner Danaher asked for some of the background materials for many of the policies that have been adopted. Director Fong stated that she would arrange to send links to the latest reports on each of the five items. Commissioner Danaher asked to put on the agenda how the UAC could approach some issues such as the FTTP and recycled water. This would allow a discussion, not necessarily on the issues themselves, but on how the UAC could add value on the issue. Commissioner Foster asked that that item be added to the UAC’s June agenda. He stated that the monthly drought update could be provided verbally in the Director of Utilities Report, rather than as a separate presentation. Director Fong agreed to that as often there is no huge changes in the drought situation month to month. Commissioner Eglash noted that he values the monthly drought updates, especially given the current severe drought. Director Fong stated that an update would be provided either as a presentation or in the Director of Utilities Report part of the agenda. ACTION: None. ITEM 3. DISCUSSION: Update and Discussion on Impacts of Statewide Drought on Water and Hydroelectric Supplies Senior Resource Planner Karla Dailey presented information on the condition of the water supply for the San Francisco Public Utilities’ system, the latest State Water Resources Control Board Emergency Drought Regulations and the proposed resolution scheduled to be considered at the May 11 City Council meeting. She also informed the UAC that the cost to keep the electric portfolio carbon neutral is still anticipated to be well below the 0.15 cent rate impact approved by Council. Commissioner Schwartz asked how Utilities helps customers achieve water conservation. Dailey mentioned that the City is focused on actions and not on "water budgets" for water customers. Catherine Elvert, Utilities Communications Manager, responded that the City offers many different rebate programs, holds workshops on water use topics, and is available to speak to any group interested. Staff added that key account representatives routinely help large commercial customers with water and energy efficiency needs. COMMISSIONER COMMENTS Chair Foster noted that, aligned with Commissioner Danaher's suggestion, he would like to add an item on the June agenda to discuss how to move forward on the five key items raised by Utilities Advisory Commission Minutes Approved on: June 3, 2015 Page 9 of 9 Council at the joint UAC/Council meeting. He noted that he would like to appoint two to three Commissioners to act as subcommittees to work on each of these items. Commissioners Schwartz and Danaher agreed to be on a subcommittee to look into the Fiber to the Premises (FTTP) project. Commissioner Cook agreed to join Chair Foster on a subcommittee to look at a second transmission line and electric undergrounding. Regarding the electrification issue, Commissioner Eglash suggested that since the topic was coming forward soon anyway, a subcommittee may not be needed. For the recycled water topic, Chair Foster indicated that he would ask Commissioner Van Dusen to be on a subcommittee for that item. Meeting adjourned at 2:38 p.m. Respectfully submitted, Marites Ward City of Palo Alto Utilities