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HomeMy WebLinkAbout2015-06-03 Utilities Advisory Commission Summary MinutesUtilities Advisory Commission Minutes Approved on: July 1, 2015 Page 1 of 11 UTILITIES ADVISORY COMMISSION MEETING FINAL MINUTES OF JUNE 3, 2015 CALL TO ORDER Chair Foster called to order at 7:07 p.m. the meeting of the Utilities Advisory Commission (UAC). Present: Commissioners Cook, Danaher, Chair Foster, Hall, Schwartz and Council Liaison Scharff Absent: Commissioners Eglash and Van Dusen ORAL COMMUNICATIONS Jesse Cruz, Utility System Operator who has worked for the City’s Utilities Department for 21 years, said that Utilities has lost journeymen workers due to insufficient compensation. Raymond Herrera, Journeyman System Operator, noted that a power outage occurred on April 9 at 6:55 a.m. and Utilities personnel safely dealt with the situation that involved the need to deal with de-energizing a live wire. He said that it was lucky that this outage occurred when crews were available, but if it happened at night, the live wire would not have been dealt with until much later since there is no 24/7 operations and a phone operator would have taken the call, but is not qualified to respond. He said that there needs to be a serious discussion with the City since the cost of living is not doable. He said he has been with the City for 1 year and 4 months and came from PG&E, where he worked for 12 years. Lynn Krug, Chapter Chair of SEIU, urged the UAC to pay attention to the ability of the City to hire adequately trained employees. She said she wanted to have a dialog with commissioners with respect to compensation, training, and work force issues. Herb Borock noted that there is a new City job posting paying $50/hour solely for recruiting for Utilities positions. APPROVAL OF THE MINUTES Commissioner Cook moved to approve the minutes from the May 6, 2015 UAC special meeting as presented and Commissioner Foster seconded the motion. The motion carried unanimously (4-0 with Commissioners Cook, Danaher, Foster and Schwartz voting yes, Commissioner Hall abstaining and Commissioners Eglash and Van Dusen absent). AGENDA REVIEW AND REVISIONS None. Utilities Advisory Commission Minutes Approved on: July 1, 2015 Page 2 of 11 REPORTS FROM COMMISSION MEETING/EVENTS Commissioner Schwartz said she attended a very interesting town meeting in Washington, DC on smart grid and distributed energy resources. She also attended on June 1 an executive roundtable sponsored by Seimens with utility folks, regulators, economists. She noted that there is an opportunity to share meter data management systems with other utilities and can have such systems across all utilities--gas, water, and electricity. UTILITIES DIRECTOR REPORT 1. Community Solar Program. Staff terminated negotiations with vendor, Clean Energy Collective, for a turnkey community solar program. This decision comes after a thorough risk assessment of program requirements and unsuccessful negotiations with the vendor for contract provisions to ensure transparency, protect consumers and mitigate risks. As a result, staff cannot recommend moving forward with this type of community solar program for Palo Alto. In general, staff felt the program was too complex and the turnkey nature presented unique challenges for transparency and risk mitigation. Staff will evaluate other community solar program structures with the objective to offer solutions for residents unable to install solar at their homes. Staff may recommend changes to the Local Solar Plan as a result of these negotiations, as well as decline in funds available for the PV Partners program, and the need for a successor program to Net Energy Metering when it reaches its cap. Staff will provide an informational report with more details on community solar at the July UAC meeting. We anticipate returning to the UAC with a full update on the Local Solar Plan by the end of 2015. 2. Peninsula SunShares Solar Group-Buy Program. Palo Alto is participating with twelve other Bay Area communities to offer residents a solar group-buy program. Peninsula SunShares pools the buying power of participants, allowing the solar industry to offer more competitive pricing for solar installations. The enrollment deadline was extended to the end of July. So far, Palo Alto is leading the region in number of enrollments with more than 46% of the total participation. Through this program, we are making it easier and more affordable than ever for our residents to go solar. 3. Renewable Energy RFP Staff recently issued a request for proposal for renewable energy projects to begin delivering energy to the City in 2021, when one of our older wind energy contracts will expire. The response to the RFP was very good. More than 40 proposals were submitted. Market prices for renewable energy still appear to be quite low. Staff is reviewing the proposals and anticipates returning to the UAC with a negotiated contract for review in the fall. 4. Community Outreach Events and Workshops. This past month:  Staff tabled at an Emergency Planning Fair sponsored by the Palo Alto Medical Foundation, Red Cross, Abilities United and Office of Emergency Services.  CPAU held its first Ambassador Training for the linkAges Timebank program. Utilities Advisory Commission Minutes Approved on: July 1, 2015 Page 3 of 11  CPAU partnered with BAWSCA and Canopy on a free “Tree Care in Drought” class.  Utilities participated in the Our Palo Alto 2030 Comprehensive Plan Summit to answer questions about the Urban Water Management Plan, drought and conservation resources. In June, we will be at the following events:  A “Design It Yourself Native Garden” workshop tonight, June 3 at 7 pm.  Speaking to the Department of Water Resources’ Independent Technical Panel on Palo Alto’s adoption of the Water Efficient Landscape Ordinance on Monday, June 8.  Offering an “Install It Yourself Native Garden” workshop on Saturday, June 13.  Tabling at the Palo Alto Family YMCA on Saturday, June 20, to provide members with resources for water conservation.  Hosting a “Net Zero Home Energy Efficiency” workshop on Saturday, June 27. All event details and registration are available at cityofpaloalto.org/workshops Chair Foster highlighted the high participation rate in the SunShares group-buy program. He suggested that the mayor include the program in her monthly newsletter to remind folks that there is a limited time to sign up for the program. Commissioner Hall asked if the renewable RFP found only solar projects, or other types of renewable energy projects. Director Fong said that there were renewable projects other than solar and that staff would provide a summary to the UAC on the response to the RFP. UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: PRESENTATION: Presentation on City’s Receipt of three Line USA Award – Courtney Schumm, Project Manager, Public Works, Urban Forestry Section, to Present Award Courtney Schumm, Public Works Project Manager for the Urban Forestry Section, said she is a certified arborist and is in charge of the power line clearing contract noting that trees need to be managed to ensure reliability of the electric distribution system. She explained the types of work that was being done by the contractor to prune the trees noting that the work is performed by certified arborists. She explained the criteria for the Tree Line USA Award. She said a City program ensures that the proper trees are planted in the right locations. Commissioner Danaher asked if there were any impacts from undergrounding electric lines. Schumm explained that the City has a technical manual to ensure that the trees are protected by proper management of tree roots when undergounding utilities. Commissioner Schwartz asked Schumm if residents were invested in the sustainability benefits of trees in the City. Schumm explained that they use a software program and coordinate with Canopy to educate the community and provide information using a website showing the benefits of different trees. Utilities Advisory Commission Minutes Approved on: July 1, 2015 Page 4 of 11 ITEM 2: ACTION: Election of Officers ACTION: Chair Foster nominated Commissioner Cook to act as Vice Chair for the remainder of the current term and for the new term starting July 1. Commissioner Hall seconded the motion. The motion passed unanimously (5-0 with Commissioners Cook, Danaher, Foster, Hall and Schwartz voting yes and Commissioners Eglash and Van Dusen absent). Commissioner Hall nominated Chair Foster to be Chair for the term starting July 1. Vice Chair Cook seconded the motion. The motion passed unanimously (5-0 with Commissioners Cook, Danaher, Foster, Hall and Schwartz voting yes and Commissioners Eglash and Van Dusen absent). ITEM 3. DISCUSSION: Discussion on Approach to the Following Items for Commissioner Consideration as Suggested by Council: Fiber-to-the-Premise: Electric Underground; Fuel Switching/Electrification; Water Recycling; Second Transmission Interconnection with the City’s Electric Grid Chair Foster stated that he would like to appoint committees to work on the five topics identified by the Council at the joint UAC/Council meeting in May. He is appointing commissioners to committees to cover the following issues: 1. Fiber-to-the-premise: Commissioners Schwartz and Danaher 2. Electric undergrounding: Commissioner Hall and Vice Chair Cook 3. Water recycling: Commissioners Van Dusen and Schwartz 4. Second transmission line: Commissioner Hall and Vice Chair Cook Chair Foster noted that he expects that each of the subcommittees will push the ball forward and each committee should develop a summary report to present back to the UAC. He noted that he has yet to name a subcommittee for the fifth topic: fuel switching/electrification. Commissioner Schwartz asked Director Fong how the committees should work with staff. Director Fong suggested that the committees should tie into the current status of the items and then provide insights and determine where gaps exist and how to move forward. Council Member Scharff stated that any of the commissioners should feel free to liaise with him to find out some of the history on any of the issues. For example, for undergrounding electric utilities, the only way is to get something on the ballot to fund a large expansion of the current program. There are many meaty issues to be addressed. Director Fong added that determining the threshold question for these issues is very important. Commissioner Hall asked if there is a timeframe for the work done by the committees. Chair Foster said that the committees should target the end of 2015 to complete the report. Utilities Advisory Commission Minutes Approved on: July 1, 2015 Page 5 of 11 ITEM 4: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution Approving Design Guidelines for the 2015 Electric Cost of Service Analysis Chair Foster explained to the newer commissioners that the past practice was when utility rates were proposed to the UAC or Council, there was little discretion once the cost of service model was developed, since the rates were based on the results of the cost of service analysis (COSA). But, staff now holds a policy discussion with the UAC and Council prior to conducting a COSA so that there can be input to the policies used to develop the rates. Senior Resource Planner Jon Abendschein thanked Chair Foster for the explanation of why staff is bringing forward this item. He noted that the last Electric COSA was completed in 2007 and that the last Electric rate change was effective July 2009. He explained that the Electric COSA will be done in two phases to deal with the short- and long-term issues. Abendschein said that the short-term issues will be dealt with in Phase One of the COSA, which needs to be completed in time to get new rates in place by July 2016. The Phase Two work will take longer to complete and deal with longer-term issues such as those that can only be implemented with a new billing system or advanced meters. For Phase One, no large departures from existing rate structures are contemplated. The COSA was an important way of demonstrating that the City’s rates reflected the cost to serve customers, which was necessary to avoid having them be considered a tax under sections of the California Constitution added by Proposition 26 (2010). The goal was to complete the COSA by the end of the year so the rates would be ready for adoption with the FY 2017 budget in the spring. He discussed the design guidelines. Cook asked how often a COSA should be completed. Abendschein said that they should be redone every 3 to 5 years. Commissioner Schwartz asked if efficiencies could be achieved with the use of technology, such as helping customers understand when they were approaching a higher usage tier. Abendschein said that there was a smart meter pilot program underway experimenting with these types of approaches, and that the longer-term impacts and implications of technology and innovation will be addressed in Phase Two. Commissioner Hall asked if a hydro adjuster mechanism would allow rates to be adjusted on a monthly or quarterly basis without returning to Council. Abendschein said that it could be done that way, or the rates could be changed annually. The goal would be to keep the adjuster simple and base it on a clear formula. Commissioner Danaher said that he supported the proposed guidelines, including the minimum charge. He said he was interested in looking at other rate designs that might not be in line with a cost of service study but that could go to the voters for approval. He thought this might not be appropriate for Phase One, but could be looked at later. Utilities Advisory Commission Minutes Approved on: July 1, 2015 Page 6 of 11 Vice Chair Cook agreed that the rate design could be approved by voters, for example in the case where restrictions based on Constitution might lead to flat rates, but the community could decide that conservation efforts would be much improved with tiered rates. Commissioner Hall stated that Phase Two would take several years, and some parts should be worked on earlier. It was important to begin realizing carbon benefits from electrification sooner than later. Staff should look at ways of including environmental benefits in rate design and use that to provide subsidies in rates for greenhouse gas reducing activities, such as EV charging. He was in favor of changing the design guidelines to ask staff to consider climate benefits in the rates and structuring rates to provide incentives for activities that benefit the climate. Abendschein asked that if the UAC considered such an amendment, that it only direct staff to evaluate the use of externalities rather than direct staff to use externalities. Rates are typically based on direct costs to serve customers, and it could be a challenge to include externalities. Commissioner Hall said he thought staff could evaluate whether a policy framework adopted by the Council might enable the use of externalities, and that if it did not, that the question could be put to the voters. Senior Assistant City Attorney Grant Kolling agreed that the question can go to the voters for decision. Director Fong noted that there was a constrained timeline and that it was important to complete a COSA. Commissioner Hall said that he was only suggesting a guideline that stated that staff would evaluate the approach, not directing staff to use such an approach. Commissioner Schwartz said that the true cost imposed by customers with solar systems and electric vehicles (EVs) did need to be dealt with. She asked if the value of solar via net metering will be determined as part of this study. Abendschein responded that the City will be reaching its cap for net energy metering in the next several years so that the City needs to be prepared for solar after NEM cap reached. He said that this is part of the Phase One work plan. Commissioner Schwartz asked who advocates for ratepayers, especially low income customers. Director Fong stated that the Council performs the function of advocating for the ratepayers. She noted that the City's utility is not for profit, unlike the investor-owned utilities that are regulated by the California Public Utilities Commission. Vice Chair Cook noted that the UAC can perform the role of ratepayer advocate as well. Utilities Advisory Commission Minutes Approved on: July 1, 2015 Page 7 of 11 Council Member Scharff said that the City needed to think about energy efficiency versus conservation. The three-tiered rate structure may not achieve the goals of the Council regarding electrification. If using electricity efficiently, people should be able to use more without being penalized. Since the electric supplies were carbon neutral, Council was moving toward encouraging electrification. He noted that the three-tiered rate structure does not encourage fuel switching. The UAC should consider that in their policy discussions. Commissioner Danaher said that the rate structures should be driven by a low carbon policy. This might ultimately require voter approval. Commissioner Schwartz said that the issue is more complex. Electricity Palo Altans consumed at night did not come from the City’s solar energy projects. The electricity Palo Alto uses costs different amounts depending on the time of day. Achieving cost of service was not as simple as changing from tiered rates to flat rates. Council Member Scharff said that he agreed with the need for time of use rates, but not tiered rates. He said energy efficiency was what was important, not conservation. Chair Foster asked if the Council has adopted a policy on electrification. Director Fong stated that the Council had considered electrification, but had not yet taken a policy position on the issue. Council Member Scharff agreed, but noted that there was broad support on the Council to support electrification, even if the details of the policy had not been worked out yet. Commissioner Schwartz said that there could be value in the efficient use of natural gas. Director Fong said that the UAC would discuss this issue at its next meeting. ACTION: Commissioner Hall made a motion to adopt the proposed guidelines with the addition of a new guideline to the Phase One COSA as follows: The COSA should evaluate the opportunities for rate designs that reduce the global climate footprint and those that increase all-fuel energy efficiency. Commissioner Danaher asked Commissioner Hall to clarify whether the evaluation should take place within the COSA framework or outside the COSA framework. Commissioner Hall said it should take place within the COSA framework. Phase One was the right time to do this evaluation rather than waiting until Phase Two. Abendschein said this would be a difficult goal to achieve within the timeline for Phase One. Utilities Advisory Commission Minutes Approved on: July 1, 2015 Page 8 of 11 Director Fong stated that the proposed guideline was very broad. It would be difficult for staff to know whether proposed rates met the guideline. Commissioner Hall said that the consultant could do an evaluation of what was necessary for such a rate to be adopted. He believed a Council policy could be sufficient to allow these types of rate designs. If legal analysis revealed this was not the case, the rate design could be put to the voters. Director Fong discussed the feed-in tariff, which had been a specific example of a time that the Council had put some value on externalities. There had been specific direction for a specific purpose. The proposed guideline was too broad to implement. Abendschein said that this issue could be dealt with early in Phase Two rather than Phase One. Not everything in Phase Two had to be evaluated at the same time. Commissioner Hall said the “all-fuel” section of the guideline might be difficult, but the “global footprint” section could be handled in Phase One. Two elements of the evaluation could be incentives for electric vehicles and increased pricing for solar energy. If the only thing preventing these rate structures was a Council policy, one could be adopted quickly. Abendschein said that the risk of including this in Phase One was that there would not be enough time to do a thorough evaluation of the legal approach, and staff would simply return saying it was not possible. Commissioner Hall said that was fine, and the analysis could then continue in Phase Two. The motion died for the lack of a second. ACTION: Commissioner Hall moved, seconded by Chair Foster, to approve the Staff recommendation with the addition of a new guideline to the Phase One COSA as follows: The COSA should evaluate the opportunities for rate designs that reduce the global climate footprint. ACTION Commissioner Schwartz made a substitute motion, seconded by Commissioner Cook, to approve the Staff recommendation and to recommend that Staff consider rate designs that reduce the global climate footprint in Phase Two. Commissioner Hall said he would vote against the motion, but he agreed with the overall approach. He only thought that it should be evaluated in Phase One. Commissioner Danaher asked Staff whether this approach would be unduly burdensome. Director Fong said Staff had considered including this in Phase Two, and that it could be considered early in Phase Two. Utilities Advisory Commission Minutes Approved on: July 1, 2015 Page 9 of 11 The motion carried (3-1-1 with Commissioners Cook, Danaher, and Schwartz voting yes, Chair Foster abstaining, Commissioner Hall opposed, and Commissioners Eglash and Van Dusen absent). ITEM 5: ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting ACTION: None. Commissioner Hall left the meeting at 9:10 pm due to a conflict of interest on water issues due to his job at the Santa Clara Valley Water District. ITEM 6: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt two Resolutions Effective September 1, 2015: 1) Amending Rate Schedules W-1 (General Residential Water Servicer), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service) to Increase Rates 4% and Add Drought Surcharges; and 2) Activating Drought Surcharges at the 20% Level in Response to Mandatory Potable Water Use Restrictions Imposed by the State Water Resources Control Board Senior Resource Planner Jon Abendschein provided a brief summary of the written report. The UAC and Finance Committee had previously recommended a 12% rate increase effective July 1, 2015. Staff sent out notices to customers of these 12% increases. Subsequently, a court decision was published providing additional guidance on rate design. Staff asked its rate consultant to review the City’s rate design methodology. The consultant recommended minor adjustments. To incorporate these adjustments and comply with the noticing requirements of the California Constitution, the 12% rate increase had to be broken into two parts: 8% effective July 1, 2015, and 4% effective September 1, 2015. Staff had also been developing drought surcharges based on design guidelines adopted by Council the previous fall. Staff recommended including these drought surcharges in the rate action effective September 1, 2015. Public Comment Herb Borock asked the UAC not to approve the rate increase proposed. He also said that he will also recommend that the Council reject the 8% rate increase in front of them on June 8. He said that proposed rates should be heard by the Council before notice was sent to customers. This had been done in the past. Only recently did staff begin taking proposed rates to the UAC and Finance Committee, but not the Council, before they send out the Proposition 218 notice to customers. Chair Foster asked Mr. Borock to clarify whether his concern was solely with the process, or whether he also had concerns regarding the rate increase itself. Mr. Borock stated he also had concerns about whether recycled water had been considered in the cost of service analysis. Utilities Advisory Commission Minutes Approved on: July 1, 2015 Page 10 of 11 Chair Foster asked whether the UAC could recommend that the Council approve the rates, and whether the City Attorney would later inform the Council if there were any problem with the process. Senior Assistant City Attorney Grant Kolling said that he would, but that the City Attorney would not have allowed this to proceed if there were a problem with the process. ACTION: Chair Foster made a motion to approve the staff proposal. Commissioner Schwartz seconded the motion. The motion passed unanimously (4-0 with Commissioners Cook, Danaher, Foster, and Schwartz voting yes and Commissioners Eglash, Hall and Van Dusen absent). ITEM 7: DISCUSSION: Update and Discussion on Impacts of Statewide Drought on Water and Hydroelectric Supplies Karla Dailey, Senior Resource Planner, presented an information update on the water supply conditions and the cost impact of drought on the electric utility. Dailey reviewed the timeline of actions taken by the state, the San Francisco Public Utilities Commission (SFPUC), the Santa Clara Valley Water District (SCVWD), and the Palo Alto City Council and shared a comprehensive list of all water restrictions in effect. Precipitation levels at Hetch Hetchy Reservoir as well as conservation achievements by all water users in the regional system as well as Palo Alto were shown. Dailey confirmed that, while the electric utility will be impacted by higher supply costs in FY 2015, the cost to keep the portfolio carbon-neutral will be significantly lower than the Council-approved cap. COMMISSIONER COMMENTS Chair Foster asked if commissioners can get City email addresses. Chair Foster encouraged commissioners to review the quarterly report, noting that there are items including fiber-to-the-premise and PaloAltoGreen Gas program, an opt-in program. He has heard from some members of the community that that program should be converted to an opt-out program. He added that the energy savings challenge related to the Georgetown University Prize will begin soon. The Program for Emerging Technologies update is provided as well in the quarterly report. Chair Foster noted that the report showed a high penetration of electric vehicles in the City. Commissioner Schwartz said that the City should not be providing rebates to Tesla owners. Director Fong pointed out that the rebates were provided by the State government, not the City. Utilities Advisory Commission Minutes Approved on: July 1, 2015 Page 11 of 11 Chair Foster noted that the quarterly report also provided information that gas sales are lower than in over a decade. Meeting adjourned at 9:36 p.m. Respectfully submitted, Marites Ward City of Palo Alto Utilities