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HomeMy WebLinkAbout2017-04-05 Utilities Advisory Commission Summary MinutesUtilities Advisory Commission Minutes Approved on: May 3, 2017 Page 1 of 16 UTILITIES ADVISORY COMMISSION MEETING FINAL MINUTES OF APRIL 5, 2017 MEETING CALL TO ORDER Chair Cook called to order at 7:05 p.m. the meeting of the Utilities Advisory Commission (UAC). Present: Vice Chair Danaher, Commissioners Ballantine, Johnston, Schwartz, and Councilmember Filseth Absent: Commissioners Forssell and Trumbull ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES Commissioner Schwartz noted three corrections. She said that on page five, she stated that heat pump water heaters were “loud,” not “load.” On page seven, she clarified that while she had suggested that the City look into the program Google was working on to have driverless cars detect methane leaks, she had not made any assumptions about whether the program would be good for the City to pursue or not. Lastly, on page ten, she had not stated there was a lot of geothermal energy development potential to be developed, but rather that they needed off-takers at the Salton Sea. Commissioner Johnston moved to approve the minutes from the March 1, 2017 UAC meeting. Commissioner Danaher seconded the motion. The motion carried unanimously (5-0, with Chair Cook, Vice Chair Danaher and Commissioners Ballantine, Johnston, and Schwartz voting yes and Commissioners Forssell and Trumbull absent). AGENDA REVIEW AND REVISIONS None. REPORTS FROM COMMISSION MEETINGS/EVENTS Commissioner Schwartz said she attended the Energy Times Renewables Rush conference in San Francisco, which had great speakers. A few spoke about topics germane to the discussion happening at this meeting. John Woolard, the former CEO of Bright Energy spoke about how maximizing renewable energy will not necessarily reduce carbon if not considering how the source generation matches to the load. Other speakers discussed a report from the California Independent System Operator (CAISO) on how renewables were being significantly curtailed at certain times of day due to excess generation. Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 2 of 16 Commissioner Schwartz also discussed presenting at a meeting of the Utility Customer Research Consortium (UCRC), a consortium of utilities. She had collected research done on different customer metrics including net promoter score, CSAT (customer satisfaction), and customer effort score, metrics used in different industries to determine how customers react to different kinds of programs and what companies are doing. Her research project was to look at other industries. She noticed that in the telecom industry, they have very low scores compared to other industries. It was relevant to the night’s discussion regarding fiber. She said it was worth asking why that was. The scores were likely low because something about that industry was hard. This was something to take into consideration before doing anything with fiber. She was seeing that utilities doing the most advanced market research were using these metrics. UTILITIES GENERAL MANAGER REPORT Assistant Director of Utilities Resource Management Jonathan Abendschein delivered the General Manager’s Report: Communications  Last week, President Trump signed an Executive Order calling for a revision of the Clean Power Plan. This Executive Order introduces uncertainty into the markets for renewable energy and electric vehicles, from the future of federal tax credits to California’s ability to maintain its own higher emissions standards to opportunities for expanded energy markets. This could translate to changes, either up or down, in our energy portfolio costs and energy sales. It’s important to note that regulatory changes will take months – if not years – and will develop through a public process. Utilities Department staff will continue to monitor federal activity, participating when appropriate to further the City’s priorities.  At the March 6 City Council meeting, Mayor Greg Scharff recognized two businesses with the Mayor’s Green Business Leader Award. Hudson Pacific Properties and Stanford Real Estate, the latter of which is managed by Hines property management, oversee a total of eleven buildings in Palo Alto. The businesses qualified for the award due to their leadership in energy efficient building management, benchmarking their building energy use through the EPA’s Portfolio Manager and receiving an ENERGY STAR certification.  CPAU has begun the process of updating the Utilities Strategic Plan, with next steps to bring on consultant resources and compile an inventory of the major policy direction and regulations that set our organizational priorities. The Request for Proposals submittal period closed last week. Consultant interviews are scheduled for the week of April 17. We will agendize the item for further Utilities Advisory Commission discussion next month and as a standing item through completion, recognizing that input from the City Council, UAC, staff, and members of the public, are all important factors as we evaluate the long-term vision and near-term activities of our Utility.  Staff is developing a comprehensive communication strategy for the fiscal year 2018 rate adjustment proposals. Commissioners and members of the public will have opportunities for input to financial plans and rate adjustment proposals at regularly scheduled UAC, Finance and Council meetings, as well as through outreach materials including handouts, bill inserts, and website information. CPAU will use a variety of communication methods to reach all stakeholders in the community.  On April 17, 2017, the Office of Sustainability will deliver the City of Palo Alto's s annual Earth Day Report detailing efforts on sustainability over the past year. Highlights for the Utilities Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 3 of 16 Department include energy efficiency that exceeded City goals, the fact that the City’s contracted renewables came fully online, meaning the City’s Carbon Neutral Portfolio is now being implemented using only carbon free hydroelectric power and RPS-eligible renewables, excellent achievements in decreasing per-capita water consumption, and the approval of the Carbon Neutral Gas Plan. This year’s report will also include a draft of the City’s Sustainability and Climate Action Plan Implementation Plan, focusing on key actions in various areas of sustainability. Some of these implementation plan sections will be discussed tonight, seeing ad we will distribute the entire plan to the Commission when released with the council agenda. . Resource Management  Staff continues its work identifying sites for a community solar program, which is a central element of the Local Solar Plan approved by Council in April 2014. Of the sites reviewed by the City, a carport PV project at the Palo Alto golf course parking lot appears to be the most promising project for the first community solar pilot site. Because the golf course is dedicated parkland, staff has begun getting feedback on site feasibility from the Parks and Recreation Department and is meeting with the Parks & Recs Commission on April 25th before proceeding too far with site evaluation. Preliminary Utilities staff review suggests that such a solar project could be compatible with the existing park use and could be consistent with the Baylands Master Plan, but Utilities staff is seeking wider feedback. Staff is planning to come to the UAC in June with design principles for a Community Solar Program for consideration and approval, including lessons learned the City’s prior attempt at starting a community solar program. Upcoming Events & Workshops  Please join us on Saturday, April 22 at the Baylands for the Great Race for Saving Water 5K fun run and walk and family-friendly Earth Day Festival! The celebration will include musical entertainment, bird walk and bike tours between the Baylands and Cooley Landing, electric vehicle test drives, animals from the Palo Alto Junior Museum and Zoo, arts and crafts, games and raffle prizes, Smokey the Bear, food and fun for the whole family! City representatives, environmental organizations, non-profits, businesses, school and community members are coming together for an exciting day with activities that are sure to please everyone! Details and registration are available at www.cityofpaloalto.org/EarthDay  Utilities is hosting a workshop about native plant gardening on Saturday, April 29. Attendees will learn how to maintain a landscape with climate-appropriate and water-conserving plants. Lecture topics include care and maintenance of native and drought-tolerant plants, soil health, and irrigation devices. Details and registration are at www.cityofpaloalto.org/workshops COMMISSIONER COMMENTS None. UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: DISCUSSION: Discussion of Three Utility-Related Sustainability/Climate Action Plan Implementation Plan Components: Mobility, Efficiency and Electrification, and Water Management Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 4 of 16 Assistant Director of Utilities Resource Management Jonathan Abendschein said staff was seeking Utilities Advisory Commission (UAC) feedback on portions of the Sustainability and Climate Action Plan (S/CAP) Implementation Plan (SIP) that contained sections relevant to the Utilities Department (Mobility, Energy, and Water). The full S/CAP SIP would go to City Council on April 17. The S/CAP was a plan adopted the previous year with a framework and high level long term goals, including a goal to reduce carbon by 80% from 1990 levels by 2030. The SIP listed the key actions to be implemented over the next three years to get started meeting those goals. Many of the items in the SIP for the Utilities Department reflect existing policy direction from the City Council. However, staff wanted to get feedback from the UAC on these SIP key actions as well as to hear any feedback on what staff should consider while moving forward on the S/CAP. Chief Sustainability Officer Gil Friend summarized the staff work and community outreach on the S/CAP. On April 18, 2016 the Council had adopted the carbon goal previously described. By that time, the City had already achieved significant reductions in carbon emissions. Staff returned in November with a framework providing some high level sustainability goals, which was adopted unanimously. Several departmental teams then began meeting to develop the SIP, a three year implementation program. It was a cross-departmental effort involving many people across the organization. It brought the City’s many sustainability efforts into one so the governing bodies could see them in one place. There were some areas that would require more research. The two major areas of carbon emissions were natural gas use in buildings and gasoline use in transportation. Because of this, the Utilities Department was pivotal. The next step after the SIP would be to implement these ideas and embed these goals into the daily operations of the City. Abendschein stated that the Mobility section was focused on both transportation demand management and electric vehicles, but only the electric vehicle key actions were included tonight because the actions related to transportation demand management were primarily relevant to planning and transportation policy rather than utility policy. The focus of the Energy section was primarily building efficiency and electric vehicles. While building electrification was included, the focus of the department in those areas over the next three years would be on voluntary programs, reducing market barriers, and contractor education. This was in line with previous discussions with the UAC. In the Water SIP, there were items related to both storm water (which were less relevant to utility operations) and topics related to water supply and demand. Comments and discussion from the UAC tonight would be transmitted to the City Council for its April 17, 2017 meeting. No action was requested. Commissioner Ballantine said that it was good that Palo Alto was introducing efficiencies into its interconnection processes (Rule 27) by aligning it with Rule 21, used by investor-owned utilities statewide. It provided the opportunity to look at resiliency benefits in addition to carbon reduction benefits. This could be something worth highlighting. Commissioner Schwartz asked whether the UAC’s colleague’s memo would be included as part of the Council packet. Abendschein said he was not sure he could get it included. He would follow up with the General Manager on the possibility. He said an informational report to Council on the colleague’s memo discussion was planned, but he was not sure he would be able to get it on the April 17, 2017 agenda. The minutes from the night’s meeting would be included. Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 5 of 16 Commissioner Schwartz said it was important for Council to see the memo. There was no point to the UAC having a discussion if it was not provided to the Council at the appropriate time. The minutes would not adequately reflect the UAC’s concerns. She believed the Council was operating under faulty assumptions about the City’s electric portfolio. Commissioner Danaher asked whether there would be an opportunity to further review the topics raised in the memo as a Commission. Abendschein asked Commissioner Schwartz to confirm that the key concern of the UAC was that discussion regarding the carbon content of the City’s electric portfolio was clearly understood by the city council. Commissioner Schwartz pointed out that the Council Colleague’s Memo from previous years had been used as background in the staff report. She was concerned Council might rely on the Council Colleague’s Memo, but not the UAC Colleague’s Memo. Commissioner Danaher said he thought he recalled that heat pumps were not as effective at reducing carbon. Commissioner Schwartz said it was important to understand that the load changes related to electrification often came at times when renewables were not generating. That energy would come from gas plants, increasing carbon emissions. Council would be making a decision based on a premise that was not accurate. It was also important to reflect the memo’s assertion that electric vehicles were a better place to focus the City’s efforts. There was high adoption in Palo Alto and the benefit to the environment was very clear. Abendschein said those concerns had been reflected in the implementation plan. The primary focus in the SIP over the next three years was on building efficiency and vehicle electrification, with voluntary building electrification efforts focused more on reducing barriers. The follow-up discussion about the carbon content of the electric portfolio was planned to take place as part of the integrated resource plan discussion later in the year with the UAC. Commissioner Ballantine said that proper time of use was important, both for vehicle charging and electric heating. There were “blind spots” in the City’s generating portfolio where there were not renewable energy sources directly matched with load, and matching loads to times when renewable energy sources were generating was important. This was an important part of the March UAC discussion and an important element to share with Council. Commissioner Schwartz said the issue of matching load and generation was something that was talked about at a conference she attended. The City was not the only utility dealing with this issue. Renewable energy credits (RECs) would not solve that long-term issue. It does not solve the problem of carbon impact. The City of Palo Alto could do better. She had seen a slide at the Renewables Rush conference presented by Jay Andrew Murphy, Sr. Vice President of Strategic Planning at Edison International, that had highlighted how incredibly challenging it was to achieve the very low carbon levels envisioned by the State’s long-term goals. Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 6 of 16 Abendschein said it could be helpful to have a Commissioner speak at the upcoming S/CAP Council meeting. Friend mentioned there was a joint Council and UAC study session coming up in the spring. It might be an opportunity to discuss these issues. It might be difficult to get into these issues on April 17, 2017. Commissioner Danaher agreed. These were important topics and important to explore. Friend said the City had been making regular progress on its carbon goals. In the coming years the goal was to take that progress and improve on it. This was an emergent process. The SIP did not have a complete road map laid out over the thirteen or fourteen year time span. It would require revision and recalibration of the process over time. Commissioner Danaher asked about the goal of completing a study of smart meters by 2019. It didn’t seem very ambitious. Abendschein said the goal was to complete an update on the costs and benefits of smart grid by the end of this year. That was the first phase. At that point, staff would be looking for a decision from Council on whether to proceed. The 2019 goal included a more detailed assessment assuming direction to proceed from Council. Commissioner Schwartz emphasized it should not take two years to complete a cost benefit assessment. Abendschein confirmed there were two phases to be completed by 2019. The first phase, the cost/benefit assessment, would be completed by the end of the year. The next stage would be a study of what would be required to actually implement a smart grid rollout. It would have to be coordinated with other projects, such as the replacement of the Enterprise Resource Planning (ERP) software and Customer Information System (CIS). Commissioner Danaher said the Mobility section should include a discussion of electric bikes. Friend said the Mobility section given to the UAC only had electric vehicle key actions. There were a number of key actions related to bicycles in the full Mobility section. Electric bikes and scooters were an important part of solving the “last mile” issue associated with transit. Commissioner Danaher said he assumed e-bikes did not require changes to the electric system since they used standard outlets. He also said high density had higher energy efficiency, and he thought is worth questioning what role high density housing had in Palo Alto’s plans over the next fifteen years. Lastly, he said it would be worthwhile to set up a way to crowd source ideas from public on sustainability topics. Traffic management could be an important part of these efforts as well. He thought the plan overall was a good one. Commissioner Johnston was glad the time of use issue was being discussed. He asked about the key action to consider a non-potable water reuse ordinance modeled on the San Francisco ordinance. He understood it was only required for buildings over 250,000 square feet. That was a very large building for Palo Alto. Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 7 of 16 Abendschein said this key action required a lot of exploration. There was work being done to develop a model ordinance that would work for cities of different sizes. Commissioner Johnston said he encouraged this type of effort. Friend said there was work being done at the County level to develop a model that cities can use. San Francisco instituted regulations that worked for the size and type of building stock in their area. Palo Alto would have to create regulations that worked for its own particular circumstances. Chair Cook asked what the goal was for emissions reductions from buildings by 2030 in the S/CAP. Friend said he did not have that information with him. He said the S/CAP had specific analysis, but he would have to return with it. Chair Cook said building energy use was a big part of the carbon emissions in the City. Abendschein said transportation represented about two thirds of the emissions, building energy use about one third. A lot of the reductions related to buildings came from efficiency. Friend said the specific goals were listed in the S/CAP document. However, these goals and emissions numbers were estimates. The goals were not precise targets, and the City could shift direction as needed. Chair Cook acknowledged building energy use was an important part of the goals and that the goals could shift over time. He noted that time of use and the source of energy was important. He asked what the difference in the SIP was between goals, strategies, and key actions. Friend said they were hierarchical. Goals were very high level, strategies were approaches used to achieve those goals, and key actions were more detailed efforts to be undertaken, so there was increasing detail as one moved down the hierarchy. Chair Cook said the goals had some specific language about reduction of natural gas use and the use of offsets for some of the emissions. He thought that would be important, it was just a question of when those efforts were undertaken, whether they were voluntary, and what the most efficient approach was. He thought the issue of time of use and time of energy delivery was important to address in the SIP. Abendschein said he was hearing from the entire UAC that one of the most important thing to reflect was that the time of use and time of delivery had to be addressed when looking at electrification. It may be that something needed to be added related to looking at load matching to renewables. Commissioner Schwartz recommended using terminology other than “time of use” when referring to the issue, since it was a term of art with a specific meaning. She asked if it was really that hard to get the Colleague’s Memo to the Council on April 17, 2017. Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 8 of 16 Abendschein said he would look into getting that done given the short timeline for the packet to get everything out to the public. ACTION: No Action. ITEM 2: ACTION: Utilities Advisory Commission Recommendation that Council Approve a Recommendations Concerning: (1) Future Plans for Fiber and Broadband Expansion; and (2) Expansion; and (2) Expand Wi-Fi to Unserved City Facilities; and Discontinue Consideration of City- Provided Wi-Fi in Commercial Areas Strategic Business Manager Dave Yuan gave an overview of past Fiber-to-the-Premises (FTTP) efforts to build a municipally owned network including multiple studies and issuance of various request for proposals (RFPs) and request for information (RFI). In the last couple years, under advisement from Council, UAC, City Manager’s Office, and Citizen Advisory Committee (CAC), we’ve pursed numerous FTTP initiatives such as the master plan, Google Fiber effort, co-build discussions with Google and AT&T, and RFI issuance for a public-private partnership. We have gathered a lot of valuable information through these endeavors. We’ve come to a point where we’re asking UAC and Council to provide us direction on where we should focus our efforts towards in the next year or so. We present you with three options and we would like the UAC to recommend one of these options to Policy & Services Committee (P&S) and Council. Option 1 – Explore funding models to finance a municipal FTTP network with an estimated cost of $77.6M. Option 2 – Pursue a design a fiber-to-the-node network with an estimated cost of $12M; in addition, explore different funds models to finance the “last mile” build. Option 3 – Discontinue pursuing FTTP thus pausing municipal FTTP efforts, redirect resources to streamline 3rd party upgrades and allow the market to play out. Chief Information Officer Jonathan Reichental spoke about the future of wireless services, stating that most industries will be using wireless for most applications in the future. One of five U.S. households are now mobile only access to internet. The number of households with mobile only access is increasing rapidly. It doubled in the last two years from one in ten households in 2013. He discussed the coming Fifth generation (5G) standard, which is intended to be a connection fast enough to replace fixed connections such as cable. 5G specifications is not complete but anticipate it will move to mainstream around 2020. There’s a lot of experimentation happening today with 5G. It will be far faster than 4G LTE, a minimum of 20 Gigabits for download and 10 Gigabits for upload, and is far faster than physical connections. 5G will be about 2000x faster than 4G and average U.S. broadband will be 400x faster. Google had stopped its fiber rollout to focus on wireless broadband. Verizon currently has 5G fixed wireless technology testing underway in “eleven geographies” and “different environments” including urban and suburban settings. AT&T is piloting in Austin, TX with Intel and Ericsson using millimeter wave reaching 1GB speeds up and down. Mobile World Congress 2017, the mobile industry’s biggest trade show, 5G was everywhere. Big players Qualcomm, Ericsson, Intel, Nokia, and all chip and mobile leaders betting the future on it. Telecom Italia says Turin, Italy will become 100% 5G by 2020. Senior Management Analyst Jim Fleming discussed three options being offered tonight for action on Fiber to the Premises (FTTP). The first option was to implement municipal FTTP. The cost was estimated at $78M for construction, $8M annual O&M, and would require a 72% take rate. If the Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 9 of 16 City used $20M from its fiber reserves, required take rate could decrease to 57%. A key consideration for network implementation is how to fund both capital construction costs and ongoing operational expenses. Acknowledging that capital and operating costs associated with a full-scale citywide build-out will be significant, the City will likely have to seek outside funding and/or internal subsidies to support construction and the FTTP network’s startup costs. Certain challenges inherent to FTTP deployment are especially pronounced in the Palo Alto. In particular, high construction and labor costs in the Bay Area result in a higher necessary take rate to obtain and maintain positive cash flow. As a comparison, other recent analyses performed by our consultant for municipalities have shown a required take rate in the mid-40 percent range in order to maintain positive cash flow. The second option was to explore the design of a Fiber-to-the-Node Network, which may provide a platform for Public Safety and Utilities wireless communication in the field, communications support for Smart Grid and Smart City applications, and new dark fiber licensing opportunities. This approach may also create a basis to explore alternative “last mile” models for Fiber-to-the- Premises, including user-financing, creating Assessment Districts, Mello-Roos Community Facilities Districts and/or public-private partnerships. Construction costs were estimated at $12M to $15M, with unknown ongoing O&M cost and would be dependent on usage of the network. A FTTN network would require construction of approximately 62 miles of fiber plant, compared to 230 miles for a citywide FTTP network deployment. This network would provide access points to connect neighborhood-area backhaul communications links. The network could be a phased approach for fiber expansion and it may lower the barriers for potential providers to build the so- called “last mile” from neighborhood access nodes to the premises, and provide the City with an economically viable deployment approach. Additionally, this approach may expand the functionality and the choices of technology that can be implemented for Utilities and Public Safety communications, and possibly support communication requirements to implement future Smart City and Smart Grid applications. New opportunities to license dark fiber may also occur, particularly for the wireless carriers who will be densifying their networks to improve coverage and capacity with more wireless communication facilities such as small cell antennas deployed within residential neighborhoods and high traffic commercial areas such as University Ave. These small cell antennas and other distributed antenna systems will need fiber for backhaul purposes to connect to the wireless carriers’ macro cellular towers and other network hub sites. This potential opportunity aligns with the existing commercial dark fiber enterprise. A FTTN network may include an option for the City to build the “last mile” at a later date, or as a means of creating an incentive for a private sector partner to build and operate the last mile. Another potential approach is to direct new investment to neighborhoods that meet established subscription requirements – in other words “take rates.” If a certain level of interest was met and property owners were willing to pay for the connections between the neighborhood node and homes and businesses, assessment districts could be created as an incentive to build FTTP The third option was to stop evaluation of either FTTP or FTTN and focus on streamlining the ability for third parties to perform network upgrades in the City, where feasible. In light of the anticipated upgrade plans by the cable and telco incumbents and challenge in obtaining sufficient market share, another potential option is pausing any further municipal FTTP development efforts at this time. In the interest of improving broadband in Palo Alto, another option is to identify resources and improve coordination of City policies and processes to facilitate network upgrades by the incumbents and other independent ISPs. To that end, the objective of this recommendation is to enhance transparency and predictability for third party providers. Access by third-parties to Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 10 of 16 infrastructure data and assets such as poles, conduits and public rights-of-ways is essential to encouraging broadband improvements. Ensuring efficient and predictable processes that enhance deployments is equally important, as with any public project. Staff also has two wireless recommendations. The first recommendation is to expand Wi-Fi to unserved City facilities at common areas in Lubberly, Lucie Stern, the Golf Course Pro Shop and Cafe, and Lytton Plaza. A high-level cost estimate for the recommended sites is $165,000 for installation and $6,200 for monthly recurring charges. The second wireless recommendation is to discontinue consideration of City Wi-Fi in commercial areas since there have been no specific requests from the business community or the general public for Wi-Fi services in high traffic commercial areas. A significant number of Palo Alto businesses already offer free Wi-Fi service to patrons as an amenity. Citizen Jeff Hoel serves on the CAC, but expressed his personal views. Hoel referenced a lengthy email that was sent to the UAC. There is $25M in fiber fund and the dark fiber has revenue stream of $2.5M per year. User financed approach could be used for part of funding. If planning smart meters in Palo Alto, City could use Electric Special Project fund for fiber. There seems to be enough funding to do FTTP. A previous staff report couldn't find the necessary funds. We can still afford to pay for a very large phase 1 of the project. Sandy, OR had a contest that showed many neighborhoods were interested. Citizen Herb Borock stated the FTTP project has been managed under multiple departments and no decision has been made on whether it’s a project or not. The City just conducted another lengthy study but now no one wants to give it the time of day. The CAC is not present tonight, the sense I have is the CAC is simply responding to what staff says should be done. There have not been substantive discussions, although staff promises stronger action in the future. The CAC can help, but not in role they have today. Create a demand-driven dark fiber partnership, then lease fiber to partner. PA is unique, we have bridge funding for the additional fiber. The main thing is Council needs to make a choice. If we study for 2 more years, it will take too long. Commissioner Ballantine said he did not think much about the options had changed since the previous year’s discussion. He thought the best idea was some kind of citizen referendum about whether it would be possible to raise funds for the rollout. He said tonight’s recommendation did not align with the Council’s guidance. He did not see any way to reasonably approve any of the three options. It was not reasonable to abandon the effort given Council direction. He thought FTTN might end up coming for free as a result of the smart grid buildout. He understood the issue with financing. Commissioner Johnston said a member of the public had e-mailed with questions about conflicts of interest. He said he did not have a conflict, and that he did not own the stocks cited in the e- mail. He asked what the revenue might be from an FTTN rollout. Fleming said it was difficult to predict the revenue, but the business model was in line with the City’s current business model. The City currently partnered with resellers of the City’s dark fiber service. By contrast, competition in the area of FTTP was very difficult, a new service for the City, with two existing incumbents to compete with. Commissioner Schwartz asked staff to confirm that FTTN would support a 5G rollout. Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 11 of 16 Reichental confirmed fiber was essential to support better wireless. Commissioner Schwartz said it would be helpful to talk about applications that would be enabled by 5G, rather than listing speeds. It helped people relate to the discussion effectively. She also suggested something such as a “scholarship fund.” If there was a startup or nonprofit that required fiber, she would like to see the City provide that service at a lower rate. She said she had seen progress since the previous year’s discussion, particularly the inclusion of the FTTN option. Lastly, she clarified that in her Commissioner comments, when she had mentioned Chattanooga Electric Power Board, that organization was evaluated as a utility rather than a telecom. Yuan spoke to the “scholarship fund” idea, saying staff could consider adding fiber under the Emerging Technology program. He said regarding the comments on lack of progress, most of the work over the last couple years have been focused on a potential partnership with Google Fiber, which had not panned out. Commissioner Danaher said option three was not that feasible. Staff had seen how difficult it was to work with a third party when collaborating with Google Fiber, and he had seen AT&T make excuses and delay, such as the color requirements for equipment cabinets, to delay rollouts. He asked about FTTP, and whether the City would be the service provider or license to third parties. He also said that option #1 will pass all homes, but there’s no data collection. Fleming said in an FTTP rollout it was best for the City to be the provider, but pulling together those services, such as providing cable services, was difficult. It was typically a money-losing business for a small operator. The classic “triple-play” model is outdated. It was possible to partner with an ISP, but that would be a revenue sharing situation, meaning it would be difficult to make any return on investment. The breakeven take rate required to make FTTP work was very high, making it difficult even without a revenue sharing arrangement. Commissioner Danaher said it would be a matter of what the City was willing to subsidize. Fleming said that was the case. He noted that Chattanooga, a commonly cited public provider, had built their system using Federal grants, had built it out to roll out a smart grid service, and had been underserved by other telecom providers. One-third of the build costs came from federal grants and they were able to allocate costs against their electric utility. Comcast answered by performing upgrades in Chattanooga to maintain their market share. Commissioner Danaher asked whether there would be just one provider on the City network. He noted the challenges with that approach. He asked how the buildout of the last mile of an FTTN network would work. How does FTTN get us to FTTP? Fleming said there were few ISPs who would be interested in partnering and capable of providing services to all homes in the community. Fleming said it's speculative, we might attract a partner. The last mile is the most expensive part of the build and the provider would probably want a guaranteed take rate. Commissioner Danaher asked about the alternative in which citizens signed up as a neighborhood to fund the last mile. Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 12 of 16 Fleming said user-financing has been considered but there wasn’t enough community interest given the costs. Nowadays, connections to homes could be wireless, which costs much less. The home owner could pay for the wireless connection. Reichental noted that it was more likely that the last mile would be served wirelessly by 5G providers. Fleming said that was the likely future business model for Google Fiber. Commissioner Danaher said it was important to distinguish between the business model and the technology. The business model must be thought through. He said the City could subsidize connections and amortize them over twenty years. He agreed with the assessment on the technology, but still had questions about the technology. Councilmember Filseth asked whether future wireless technologies could replace the need for fiber backhaul. Reichental said it was hard to predict, but he did not see anything on the horizon. There was a need for fiber backhaul for good wireless services. Councilmember Filseth said two things have changed in the past one and a half years. First is whether we get on the Google train? Second, there’s more clarity on 5G and it’s looking more realistic where fiber to node and wireless to the home is more likely. The fundamental question regularly raised was why the City would want to be in this business in the first place given there are commercial providers and there are a lot of technology services the City does not provide such as ISP, commercial cellular or citywide commercial Wi-Fi. He said he could not speak for the whole Council, but for some the motivation related to a “bad scenario” was one in which laying fiber was so expensive that the first provider in became the sole provider, and he was concerned that with a natural monopoly the operator could end up being rapacious. The concern is we don’t want to operate the network but if the monopoly provider is not servicing our community, we wanted an insurance policy against the “bad scenario” such as “dig once” with Google. It seems that 5G and wireless are looking concrete enough at this point, that if we pursue the same path as the incumbents, we would avoid the “bad scenario” because there will be multiple providers. Under option 1, there's a risk that we could have a $50M - $100M boat anchor years down the road; if the service provider could provide enough bandwidth through wireless and avoid the massive investment in trenching and adding fiber. He would be cautious in making the investment now under option 1 and would want to see what happens with wireless. The City would likely not lose by delaying a short time. FTTN is a much cheaper option; it could work if wireless is used for the last mile. He also wondered whether FTTN might be obsolete eventually. Is this a logical thought process? Reichental agreed. This is similar to Clay Christensen’s “disruptive innovation” model where a company goes along a path of innovation but an upstart enters the market and makes the technology obsolete. This happens often. Commissioner Ballantine suggests to prevent a “bad scenario” under option 2; can we implement a neighborhood lottery? Build to the node and extend to premise in one neighborhood, gather Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 13 of 16 data, and experiment partnership models. If a “bad scenario” materializes, we can stop and the cost is marginal. Chair Cook thanked staff for the presentation. He said option one was infeasible without a vote, given the high costs and take rate required. His “bad scenario” was spending a lot of City money and having it become worthless. Option 2 seemed promising on its face since the Fiber Fund has $20M - $25M in reserves, but wondered whether there was really enough value in that option to move forward. Per Jeff Hoel, is this “fiber to the nothing” or “fiber to the node”? He said the benefits for option 2 had to be quantified before the City moved forward. Is there really a tie-in with smart grid and what’s the advantage of advanced meters and smart devices? He said some of the possible benefits sounded interesting, but a clearer benefit had to be shown. He was skeptical about 5G, and wanted a clearer explanation of the value. Will FTTN encourage something, not just something speculative? He did not like option 3. He also did not think municipal Wi-Fi was a good idea. He thought the golf course can pay for its own Wi-Fi. Vice Chair Danaher said he agreed that more work needed to be done on the service provider model associated with FTTN. Under option 2, need to explore design of FTTN, identify service provider model and financing mechanisms. It should be technology independent. Councilmember Filseth said in looking at option 2, it seems pretty likely that next generation wireless will be much faster than now. If the incumbents are offering 20Mb-40Mb and citizens can get these speeds directly from them without going through the city; we need to think about this when researching. We need to assess the value of option 2. Some customers will pay more for faster speed but most are probably content with their existing service. Reichental said he was 100% confident various wireless providers would provide speeds above what Filseth stated. Councilmember Filseth said 3G had not rolled out anywhere near as quickly as had been expected. 2.5G carried people a long way. Vice Chair Danaher said there were many virtual reality startups, and there were a variety of applications even beyond entertainment such as work, medical, telepresence and other applications that have not been invented. It would require very fast gigabit connection speeds. Commissioner Schwartz said option 2 is a foundational technology. FTTN which would enable a variety of new technological applications, such as smart grid, interval meters, supply and demand applications and gas and water leak detection which already exists. She said it was hard to find any businesses really using telepresence. But she said that if virtual reality became more prevalent, the FTTN investment would not be a waste of money since it would enable technology for these types of applications. She expected that the consultants hired for the strategic plan would address these issues. We need to build a strategic plan outlining phased application deployment. Commissioner Ballantine said Palo Alto doesn't have underground wiring citywide. Earlier underground wiring costs more to maintain but future undergrounding was made better because of lessons learned. Utilities has a plan to underground in a piecemeal fashion. For option 2, add an element of option 1 as an experiment so we’re able to learn from it. Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 14 of 16 ACTION: Commissioner Schwartz made a motion to recommend Council approval of Option Two, taking into account UAC feedback on that option including the idea of a neighborhood beta. Commissioner Danaher seconded the motion. The motion passed unanimously (5-0, with Chair Cook, Vice Chair Danaher and Commissioners Ballantine, Johnston, and Schwartz voting yes and Commissioners Forssell and Trumbull absent) Second motion – Commissioner Schwartz, second Ballantine, approve the recommendations on wireless expansion, excluding extension of Wi-Fi to the golf course and discontinue consideration of City Wi-Fi in commercial areas. (5-0, with Chair Cook, Vice Chair Danaher and Commissioners Ballantine, Johnston, and Schwartz voting yes and Commissioners Forssell and Trumbull absent) ITEM 3: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution Approving the Fiscal Year 2018 Gas Utility Financial Plan With no Changes to Gas Distribution Rates Senior Resource Planner Eric Keniston gave an overview of the Gas Utility financial forecast. No gas distribution rate change was proposed, but customers would see a bill increase as a result of the Carbon Neutral Gas Plan approved by Council in November 2016. A charge of up to ten cents per therm had been approved to buy offsets for all gas delivered within Palo Alto. Staff projected this would cost $1.3 million dollars in FY 2017, resulting in a projected 4% increase. This had not been highlighted in the projections presented at the March 2017 UAC meeting. However, aside from noting this impact, staff had no changes from the proposal presented at the March meeting. ACTION: Vice Chair Danaher made a motion to recommend Council approval of the staff recommendation. Commissioner Ballantine seconded the motion. The motion passed unanimously (5-0, with Chair Cook, Vice Chair Danaher and Commissioners Ballantine, Johnston, and Schwartz voting yes and Commissioners Forssell and Trumbull absent) ITEM 4. ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt 1) a Resolution Approving the Fiscal Year 2018 Electric Financial Plan, and 2) a Resolution Increasing Electric Rates by Amending the E-1, E-2, E-2-G, E-4, E-4-G, E-4 TOU, E-7, E- 7-G, E-7 TOU and E-14 Rate Schedules Senior Resource Planner Eric Keniston gave an overview of the proposed Financial Plan and rate changes. The preliminary forecast had changed. Staff was now proposing a 14% overall rate increase, but he noted the residential increase was only 12%. The proposal included various reserves transfers to mitigate the overall rate increase and prevent having to increase rates further this year. This included transfers from the hydro stabilization reserve and a loan from the Electric Special Projects reserve. These would be used to keep the Supply and Distribution Reserves within operating guidelines. The Electric Special Projects Reserve would normally not be used for operational reasons, since it was set aside for special projects, but this plan involved repaying the loan from that fund by 2020. He gave an overview of the reasons for the rate changes. Operations costs were increasing as a result of accumulated deferred maintenance related to difficulty filling positions, and additional capital investment was required due to aging infrastructure. In addition, new renewable projects were coming online and transmission costs were increasing. Even with the increases, however, Palo Alto’s electric rates would be substantially lower than PG&E’s. Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 15 of 16 Commissioner Schwartz noted there may be increased customer sensitivity to changes on their bills due to the recent error in gas billing. It would be worthwhile to run a report to identify people who would see a substantial increase and reach out in advance to let them know that the bill changes were not due to a billing error. Posting on Nextdoor and other online information sources would be important. ACTION: Commissioner Ballantine made a motion to recommend Council approve the staff recommendation. Vice Chair Danaher seconded the motion. The motion passed unanimously (5-0, with Chair Cook, Vice Chair Danaher and Commissioners Ballantine, Johnston, and Schwartz voting yes and Commissioners Forssell and Trumbull absent.) ITEM 5. ACTION: Appointment of Commissioners to an Ad Hoc Budget Committee for FY 2018 Budget Chair Cook said this was a good way for Commissioners to learn the details of the way the utility’s finances worked. He recommended that people who had not done it already participate. He noted that Commissioner Forssell had expressed interest. He asked if anybody else was interested. Commissioner Johnston said he was interested. Vice Chair Danaher said he would participate as a third member if needed. Chair Cook said he would appoint Commissioners Forssell and Johnston to the ad hoc committee. Chair Cook asked whether the UAC needed to appoint subcommittee members for the Utilities Strategic Plan. Abendschein said he believed UAC would receive regular updates at each meeting on the Strategic Plan as a full body. ACTION: Chair Cook appointed Commissioners Forssell and Johnston to the UAC Budget Subcommittee, with Vice Chair Danaher as an alternate. ITEM 6. ACTION: Selection of Potential Topics(s) for Discussion at Future UAC Meeting Abendschein noted that in May there would be a discussion of energy storage and microgrids. This item had a regulatory deadline. There would be a discussion of community solar and the long term electric procurement strategy in June. There were new additions to the twelve month rolling UAC calendar, including a discussion of the electric utility’s hydroelectric variability management strategy, a discussion of electric rates as applicable to electric vehicles and all-electric homes, and a gas utility cost of service study. Vice Chair Danaher asked about the report on smart meters due out this year. Abendschein said an informational report was scheduled for May. Commissioner Schwartz asked that the June 7 UAC meeting be rescheduled because she would be presenting a research report on community solar for low-income communities in Baltimore. Utilities Advisory Commission Minutes Approved on: May 3, 2017 Page 16 of 16 Chair Cook asked that staff look into changing the meeting, and look at options other than Wednesday if feasible. Abendschein said he would have somebody reach out to the Commissioners to try to schedule alternate dates. Chair Cook asked staff to confirm that the May 3 UAC meeting was indeed on May 3, and not on Friday, May 5 as was stated on the April 5 UAC agenda. He asked whether that was a day meeting. Abendschein said the May meeting was a day meeting. The date listed on the agenda was a misprint. ACTION: No action. Meeting adjourned at 9:42 p.m. Respectfully Submitted, Marites Ward City of Palo Alto Utilities