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HomeMy WebLinkAbout2015-12-02 Utilities Advisory Commission Summary MinutesUtilities Advisory Commission Minutes Approved on: January 13, 2016 Page 1 of 8 UTILITIES ADVISORY COMMISSION MEETING FINAL MINUTES OF DECEMBER 2, 2015 CALL TO ORDER Vice Chair Cook called to order at 7:05 p.m. the meeting of the Utilities Advisory Commission (UAC). Present: Vice Chair Cook, and Commissioners Ballantine, Danaher, and Eglash Absent: Chair Foster, and Commissioners Hall and Schwartz and Council Liaison Scharff ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES Chair Foster proposed to amend the draft minutes for the December 2, 2015 UAC meeting under the New Business Item 3 as follows: Change: “Herb Borock noted that there was a Council item on fiber on Monday this week (November 30). He summarized the Council discussion on Fiber-to-the Premises (FTTP). He noted that the citizens committee has lost some of its members and that Chair Foster is now on the committee. He said he was skeptical that the Google deal was beneficial to the city.” To: “Herb Borock noted that there was a Council item on fiber on Monday this week (November 30). He summarized the Council discussion on Fiber-to-the Premises (FTTP). He noted that the citizens committee has lost some of its members. He said he was skeptical that the Google deal was beneficial to the city.” Commissioner Eglash moved to approve the minutes from the November 4, 2015 UAC meeting as presented and Commissioner Danaher seconded the motion. The motion carried unanimously (4-0) with Vice Chair Cook and Commissioners Ballantine, Danaher and Eglash voting yes, and Chair Foster and Commissioners Hall and Schwartz absent. AGENDA REVIEW AND REVISIONS Commissioner Eglash suggested that New Business Item #3 (Status Update on the Five Items of Interest Discussed in Joint UAC/Council Meeting) should include a discussion of all the items except for recycled water since he would recuse himself on that item, since he is an employee Utilities Advisory Commission Minutes Approved on: January 13, 2016 Page 2 of 8 of Stanford University and the Stanford-owned land is the key area served by the proposed project, leaving the commission with less than a quorum. Chair Cook agreed to the change in the agenda. REPORTS FROM COMMISSION MEETING/EVENTS None. UTILITIES DIRECTOR REPORT 1. Communications Utilities staff has been working closely with the Office of Emergency Services, Public Works and other City departments on winter storm, flood and emergency preparedness in anticipation of an El Niño type rain season. City staff has prepared a new Utilities Safety brochure and distributed safety and emergency preparedness tips in multiple utility bill inserts, ads, social media and on the web. Staff attended neighborhood and business group meetings to educate customers about emergency preparedness and the resources available to them in advance of, during and after a storm. The webpage, www.cityofpaloalto.org/storms provides a wealth of information on these subject matters. Although winter may bring heavy rain, staff continues to communicate that drought regulations are still in effect, and the State will likely extend water use restrictions past February, should drought conditions persist. 2. PG&E and Trees As part of its Pipeline Safety Initiative program, PG&E is clearing vegetation and any structures close to, or on top of, its large gas transmission line that runs through Palo Alto. Public Works is leading the effort to coordinate with PG&E and ensure that the work is carried out in accordance with City standards, and that proper mitigation measures are taken to equitably replace any lost trees or structures. December 2 (tonight) PG&E is hosting a public meeting about its plans for work in Palo Alto related to its Pipeline Safety Initiative. 3. Events, Workshops and Speaking Engagements Several noteworthy events in November included:  November 5: CPAU organized a Facilities Managers meeting at Tibco.  November 12: CPAU staff met with French delegates to discuss technology and utility programs.  November 12: CPAU Utility Marketing Program Administrator Lacey Lutes spoke to the Kiwanis Club about utility programs.  November 13-14: The City hosted the Building Carbon Zero California conference, followed by a PedalHaus tour of sustainable homes in Palo Alto. UNFINISHED BUSINESS None. Utilities Advisory Commission Minutes Approved on: January 13, 2016 Page 3 of 8 NEW BUSINESS ITEM 1: DISCUSSION: Discussion of Director of Utilities Recruitment City Manager Jim Keene introduced Teri Black, the recruiter hired to find the replacement for current Director of Utilities Valerie Fong, who will retire effective the end of December 2015. He said that he would like the UAC to provide any input with respect to the qualities and characteristics that they are looking for in the next Director and the challenges that the UAC sees in the years ahead. He said that, from his experience with executive recruiters, Teri Black is excellent in performing adequate outreach at the start of a recruitment process Ms. Black said that it was important to get the recruitment started with a “soft opening” of the position in late December, then start heavier recruitment efforts in January with intensive advertising, use of social media, direct phone calls to potential candidates, and attending conferences to drum up interest in the position to find individuals for this unique position. The position posting will close at the end of January so that the new Director will be on board in the early spring of 2015. City Manager Keene said that Assistant City Manager Ed Shikada will be assigned to lead the department in the interim. He noted that Shikada has been San Jose's City Manager and is a licensed engineer. He said that this recruitment will be challenging since the market is relatively small, the cost of living in the area is high, and there are potential commuting difficulties which make it challenging to recruit. The UAC can help to frame the opportunity to make it as attractive as possible since the City and Utilities have a good brand. Commissioner Eglash asked about the schedule for preparing the job description. Ms. Black said that the recruitment brochure will be finished soon. City Manager Keene added that the standard job description is available, but that the brochure will be filled out with details about the needs of the community and the challenges expected in the position. Commissioner Eglash asked if the names of the candidates will become public. Ms. Black replied that only the selected candidate's name will be public when the recruitment is finished. City Manager Keene added that the City’s process is that the City Manager selects the Director and the Council has the opportunity to approve or not approve the selected candidate. He said that confidentiality is critical in attracting top-notch applicants for this position. Commissioner Eglash said that the recruitment should be focused on the fact that this is a municipally-owned utility since that is a unique place. Commissioner Ballantine said that the Director should have core competency on the transmission level as well as at the distribution level since problems and issues Utilities faces are broad and we need to be looking for a long-term Director of Utilities. Commissioner Danaher said that the candidates should know that Palo Alto has excellent staff and sweet Commissioners. One important attribute is to be environmentally conscious and, Utilities Advisory Commission Minutes Approved on: January 13, 2016 Page 4 of 8 noting that there are many changes and innovations now in the utility industry, the Director needs to be both open to innovation and capable of running the utility day to day. Vice Chair Cook noted that this is a unique opportunity and that there are so many utilities that the Director is responsible for—electric, fiber, gas, wastewater, and water. Also, the environmental policies are very important to the community. He noted that it has been very difficult to find and keep employees in all levels of the utility. He added that the industry is changing rapidly and that those who can manage that level of change are attractive to many places including investor-owned utilities and private companies. This is an opportunity to work in a community with aggressive environmental policies as well as low rates. He added that safety is a huge priority. The Director should have a vision of the future of how to operate the utility in a safe and cost-effective manner. Many of these goals are in opposition and must be balanced appropriately. Also, the Director will be second guessed by the UAC and the public and Council. He said that it's an amazing opportunity, but a difficult job, for the right person. Also, there is a huge and increasing amount of regulation. The Director needs to be flexible to deal with all these issues while trying to implement interesting and innovative policies and dealing with an industry that is being torn apart and changing at a furious rate. The traditional business model is gone and the Director must be able to find a way forward and help to determine what path the City should take. It's a monumental task and Director Fong has been an exceptional leader. He said that he feels fortunate as a ratepayer that she's been leading the utility. Vice Chair Cook told City Manager Keene that he wishes him all the best to replace Director Fong. City Manager Keene noted that we need someone who is fired up about the opportunity despite all the issues that must be addressed. Commissioner Danaher suggested that the City could offer some attractive solutions to some of the issues such as leasing an electric car for the Director if they live, for example, in the East Bay and have a lengthy commute. ITEM 2. ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution to Continue the Palo Alto Clean Local Energy Accessible Now (CLEAN) Program at the Current Contract Price of $0.165 per kilowatt-hour for Local Solar Resources and at the Avoided Cost Level ($0.081 to $0.082 per kilowatt-hour) for Local Non- solar Eligible Renewable Resources Senior Resource Planner Jim Stack noted that staff returns every year near the end of the year to update the program and the value (or "avoided cost") of local renewable supplies. He discussed the history of the program as it changed from when the program was first adopted in March 2012. He noted that when the Finance Committee last reviewed the program, it voted to reduce the contract price for solar resources from 16.5 cents/kWh to the avoided cost at the time (9.3 cents/kWh), however the Council ultimately approved continuing the 16.5 cents/kWh price, but directed that the rent revenues from an impending project to put solar PV on City parking garage rooftops be allocated to the Electric Fund to offset the rate impact of paying a contract price that exceeds the avoided cost. Stack noted that despite the avoided cost being Utilities Advisory Commission Minutes Approved on: January 13, 2016 Page 5 of 8 lowered based on the latest renewable energy request for proposals, staff recommends that the 16.5 cent/kWh price be continued. Commissioner Eglash asked why, given the direction from Council in May, this topic is coming back to the UAC now. Stack said that it is prudent to revisit the value of solar and the program annually. Assistant Director Jane Ratchye added that it has been a full year since this item was last discussed by the UAC. Commissioner Eglash said he expects as the cost of solar has fallen and continues to fall, that the CLEAN price should eventually be attractive to someone. Stack reminded that the federal Investment Tax Credit (ITC) is scheduled to fall significantly at the end of 2016, which will change the economics for projects. Commissioner Eglash noted that the value of solar has fallen and the excess cost (the amount by which the CLEAN contract price exceeds the local solar avoided cost) has grown, but it is still small compared to the impact to the electric utility from the drought so he is persuaded to agree with the staff recommendation to maintain the 16.5 cent/kWh price. Commissioner Ballantine commented that additional equipment is required for local solar installations to provide local grid resiliency because if there is a power outage, solar systems employing standard inverters will all shut off as well and will not continue to provide power to the building or the grid. He said that supply reliability is an interesting issue and the City may want to think about encouraging or requiring systems to use new grid technology so that all the inverters for these systems don’t turn off when we really want them to be operating. He said that installations operating independent of the utility system may be considered too. He noted that there could be a technical situation with the inverters in the event of a voltage variation that could lead to reduced reliability. He suggested that the program should consider this problem in its design. He added that if the program does not have any takers, maybe there are other issues such as obtaining financing that could be solved. He said that perhaps a different incentive structure could be contemplated with a focus on the loading of the distribution system since there could be a location on the distribution system that would benefit more from the addition of distributed generation, but that as certain types of renewables come online, the City may see negative impacts on the system in some areas. Commissioner Danaher asked how the avoided cost of the non-solar renewable energy was calculated. Stack explained that the non-solar renewable energy is calculated by looking at the general cost of renewable energy based on results from the latest Request for Proposals (RFP) for baseload-type projects like a biomass generator, and adding in additional values provided by local generation, such as reduced transmission costs, resource adequacy capacity requirements, and distribution system losses. Commissioner Danaher asked why the avoided cost of solar was higher than for non-solar local renewables. Ratchye replied that it is because energy prices tend to be higher in the middle of the day, which coincides with when solar systems are generating energy. Utilities Advisory Commission Minutes Approved on: January 13, 2016 Page 6 of 8 Commissioner Eglash suggested that the breakdown of the value of solar could be added to the report to clarify all the parts that make up the avoided cost, and noted that a prior staff report had provided that detail. Stack said that the breakdown of the components of the avoided cost could be added to the report as it goes to the Finance Committee and Council for consideration. Vice Chair Cook agreed that the Council would benefit from seeing this diagram of the makeup of the avoided costs. Commissioner Danaher said that he still doesn’t understand why local solar is more valuable than solar from the Central Valley transmitted to the City. Stack summarized the aspects of the avoided costs including the losses and transmission costs. Ratchye noted that the difference between the avoided cost (about 8.9 cents/kWh) and the CLEAN price was part of the findings made by Council when it last approved the CLEAN price. She pointed to Attachment A of the report, the draft resolution, which lists the additional values of local solar in Section 3 including: “a portion of the City’s electric expenditures remain within the community, which provides revenue for local economic development”, reducing the need for new transmission lines, shading which can reduce the energy required for building cooling and create value for vehicle owners, and resiliency of the City’s distribution system in combination with other equipment such as electric storage systems (e.g. batteries). Commissioner Ballantine suggested that with grid support capable inverters, the local resiliency value can be realized. Without that, it can't provide local resiliency. He said that there must be grid support capable inverters, or storage, or direct wiring to load to actually have a local resiliency benefit. Commissioner Danaher said that the goal is to have the cleanest possible resources at the lowest possible cost. He said that he would rather not subsidize local solar if it can be found outside the City for a better price. He would prefer one price for solar and a premium price for solar that can actually provide local reliability. He noted that the extra $380,000 per year for 25 years (the difference between the solar avoided cost and the CLEAN price of 16.5 cents/kWh) could pay for extra staff, which could be more valuable. Vice Chair Cook said that there is great interest in having solar locally and that Commissioner Danaher is a new commissioner without the benefit of those prior discussions. Commissioner Danaher said that if there were grid support capable inverters included, then the value would be increased and the price could be increased. Commissioner Ballantine said that factoring grid support capability into the proposal would take time and can't be done overnight. He said that this is what we have right now and he supports it. Commissioner Eglash recommends approval of continuing the CLEAN price at 16.5 cents/kWh, noting that the proposal is the same as Council action just 7 months ago. Ratchye explained that the situation is different from the Council action in May 2015 in some significant ways. She Utilities Advisory Commission Minutes Approved on: January 13, 2016 Page 7 of 8 reminded that the Finance Committee voted unanimously to reduce the CLEAN price for local solar to the avoided cost, but that the Council ultimately decided to continue the 16.5 cents/kWh price after directing that the expected revenue from the expected lease for the City garage solar systems be allocated to the Electric Fund to cover the excess cost for the portion of the program cap that was planned to be used by that project. However, the lease negotiations are proceeding with a new vendor and the lease payments are significantly less than the original proposal. In addition, Ratchye reminded that the avoided cost of local solar has declined consistent with the latest renewable energy RFP results. Commissioner Eglash said that the Council and community recognize the value of local solar and that it has been consistent in its support for the extra costs above the market value. He noted that he opposed such a high CLEAN price when it was initially presented to the UAC, but supports the recommendation tonight because of the strong support for solar in the community. Commissioner Danaher recommended that the report that moves on to the Council explicitly enumerate the benefits of local solar. ACTION: Commissioner Eglash made a motion that the UAC recommend that Council support the staff recommendation. Vice Chair Cook seconded the motion. The motion carried by a 3-0 vote with Vice Chair Cook and Commissioners Eglash and Ballantine voting yes, Commissioner Danaher abstaining and Chair Foster and Commissioners Hall and Schwartz absent. ITEM 3. DISCUSSION: Status Update on the Five Items of Interest Discussed in Joint Utilities Advisory Commission and Council Meeting, Including (1) Fiber-to-the Premises; (2) Undergrounding of Electric Lines; (3) Second Electric Connection; (4) Electrification; and (5) Recycled Water Vice Chair Cook noted that since there was less than a full commission attending this meeting, the item may need to be brought back to the Commission for a broader discussion. Public Comment Herb Borock noted that there was a Council item on fiber on Monday this week (November 30). He summarized the Council discussion on Fiber-to-the Premises (FTTP). He noted that the citizens committee has lost some of its members. He said he was skeptical that the Google deal was beneficial to the city. Commissioner Danaher said that he attended the Council meeting. He gave his own summary and said Council voted unanimously to explore the idea. Vice Chair Cook noted that the topics of electric undergrounding and the second transmission line are on the upcoming agenda. Utilities Advisory Commission Minutes Approved on: January 13, 2016 Page 8 of 8 ITEM 4. ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting Commissioner Danaher said that he would like to see a discussion of the value of local solar, including the parts above the avoided cost. Commissioner Eglash said that he did not see the value of such a discussion unless there was a decision to be made and that he sees an item on the upcoming agenda regarding an update of the Long-term Electric Acquisition Plan including an evaluation of renewable energy. After listening to Commissioner Eglash, Commissioner Danaher withdrew his suggestion. Commissioner Ballantine noted that he had asked last month for an item on the solar hot water heating program, but that the item was provided as an informational item. He asked that it be put on the agenda for discussion at a future meeting. ACTION: None. ITEM 5. DISCUSSION: Update and Discussion on Impacts of Statewide Drought on Water and Hydroelectric Supplies Senior Resource Planner Karla Dailey provided an update on the impacts of the drought. She said that the City is doing well towards meeting its water reduction goals for calendar year 2015 to date and for the period starting June 2015 for which the City's mandated reduction goal from the State is 24%. Vice Chair Cook asked what the impact of the El Niño rains will be and whether we will be out of the drought. Dailey said that the State may continue water use restrictions and/or make new permanent conservation measures. She added that Hetch Hetchy water supplies rely heavily on snowpack, not just rain, and that it is unclear if this year’s El Niño will result in above normal snowpack levels.. COMMISSIONER COMMENTS None. Meeting adjourned at 8:53 p.m. Respectfully submitted, Marites Ward City of Palo Alto Utilities