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HomeMy WebLinkAbout2017-06-07 Utilities Advisory Commission Summary MinutesUtilities Advisory Commission Minutes Approved on: August 2, 2017 Page 1 of 9 UTILITIES ADVISORY COMMISSION MEETING FINAL MINUTES OF JUNE 7, 2017 MEETING CALL TO ORDER Vice Chair Danaher called the meeting to order at 7:05 p.m. Meeting of the Utilities Advisory Commission (UAC). Present: Vice Chair Danaher, Commissioners Johnston, Ballantine, Segal, Forssell, and Trumbull, and Council Member Filseth Absent: Commissioner Schwartz ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES Commissioner Trumbull moved to approve the minutes from the May 3, 2017 UAC special meeting and Commissioner Forssell seconded the motion. The motion carried unanimously (6-0) with Vice Chair Danaher and Commissioners Johnston, Ballantine, Segal, Forssell, and Trumbull voting yes and Commissioner Schwartz absent. AGENDA REVIEW AND REVISIONS None. REPORTS FROM COMMISSION MEETINGS/EVENTS None. UTILITIES GENERAL MANAGER REPORT Utilities General Manager Ed Shikada delivered the General Manager’s Report. Update on Infrastructure and Street Improvement Projects in Downtown Area I would like to take this opportunity to provide the Commission with an update on the City's coordination of some upcoming, large scale infrastructure projects. Last month, the City Council approved a water main replacement contract that represents the first phase of a larger multi- departmental infrastructure and street improvement project in the downtown area. Ultimately, this project will include water and gas pipe replacements, street repaving, traffic signal and curb ramp upgrades, parking wayfinding signs and a new downtown parking garage. Staff will also be soliciting input about the possibility of adding bike lanes on University Avenue. We’re calling the Utilities Advisory Commission Minutes Approved on: August 2, 2017 Page 2 of 9 project Upgrade Downtown and staff have developed specific outreach materials including project fliers and maps for our communication efforts with the public. We’ll start next week on Hamilton with the water main replacement project. The majority of construction along University Avenue, including water and gas pipe replacements is planned for 2018, although work on University circle will occur in 2017. We anticipate the work will be complete by early to mid-2020. The City is hosting a series of open houses where staff from each department will be available to answer questions about these projects. We invite you to join us if available. The schedule includes Friday, June 9 from 4 to 6 p.m. at Johnson Park; Tuesday, June 13 from 8 to 9:30 a.m. in the Community Meeting Room at City Hall; and Thursday, June 15 from 11:30 a.m. to 1 p.m. at Lytton Plaza. A new website at cityofpaloalto.org/UpgradeDowntown provides details on the open houses, project maps, descriptions and timelines, and allows people to subscribe to receive updates as the project progresses. Also a special email inbox, UpgradeDowntown@cityofpaloalto.org and phone number, (650) 329-2DIG – are set up for people to contact us with questions or concerns. Municipal Services Center Open House on July 3 The City is hosting a Municipal Services Center (MSC) Open House on July 3. The MSC will be open to the public from 10 am to 2 pm, with project demonstrations and displays of our mostly "behind the scenes" work. Employees from Utilities, Public Works, and Administrative Services will be participating. This event is an opportunity for us to showcase the important and interesting work we do every day with our coworkers and the community at large. We invite the UAC and other members of the public to join us! Carbon Neutral Gas Portfolio Launching July 1 The Council-approved Carbon Neutral Gas Plan launches next month in July. Gas utility customers will see a new line item on their utility bill reflecting the purchase of carbon offsets to balance the carbon emissions associated with their natural gas consumption. CPAU is preparing outreach to customers and has briefed the Customer Service Center with talking points to answer questions about the program. Heat Pump Water Heater Workshop held May 24 On May 24, CPAU and Passive House California jointly held a workshop to raise awareness regarding heat pump water heaters (HPWH). Over 70 people attended, most of whom were residents or contractors working in Palo Alto. HPWH manufacturers, utilities staff, and Development Services staff were available to answer questions. Staff will post the workshop materials online at cityofpaloalto.org/HPWHpilot. The July 5 UAC meeting has been cancelled. The next UAC meeting will be Wednesday, July 12. Commissioner Ballantine noted he had recently had the opportunity to see a condensing cycle combined clothes washer and dryer that used heat pumps. Used at the right time of day, the technology could be useful in reducing greenhouse gases and energy use. Utilities Advisory Commission Minutes Approved on: August 2, 2017 Page 3 of 9 COMMISSIONER COMMENTS Commissioner Trumbull noted Commissioner Forssell had been recently reappointed and Commissioner Segal was joining the UAC. Vice Chair Danaher welcomed Commissioner Segal to the UAC and congratulated Commissioner Forssell on her reappointment. Utilities General Manager Ed Shikada echoed the welcome and congratulations and said staff was looking forward to working with them on the Commission. UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: ACTION: Election of Officers Vice Chair Danaher said he would be interested and willing to serve as Chair and noted Commissioner Ballantine was open to serving as Vice Chair, but he did not want to preclude others from expressing interest. ACTION: Commissioner Trumbull moved to nominate Vice Chair Danaher to become Chair and Commissioner Ballantine to become Vice Chair. Commissioner Johnston seconded the motion. The motion carried unanimously (6-0) with Vice Chair Danaher and Commissioners Johnston, Ballantine, Segal, Forssell, and Trumbull voting yes and Commissioner Schwartz absent. ITEM 2: DISCUSSION: Staff Recommendation that the UAC Provide Feedback on the Development of the City of Palo Alto Utilities Electric Integrated Resource Plan Senior Resource Planner Monica Padilla introduced the Electric Integrated Resource Plan (IRP) project and provided a presentation which included: • A high level overview of the electric supply portfolio and planning needs over the 2019 to 2030 planning horizon; • Brief history of long-term planning initiatives and key policies; • Identification of key issues and drivers facing the electric supply utility, including the impending expiration of the current Western Base Resource (WBR) contract in 2024 and the need to determine how much, if any of the contract would be renewed post 2024; • Identification of several major uncertainties including State level policies and/or legislation which will drive the Renewable Portfolio Standard (RPS) and Cap and Trade; and • An 18 month proposed work plan to develop the IRP and submit it to the California Energy Commission (CEC) as required by law. The objective of the presentation was to facilitate a discussion with the UAC about the key issues that need to be addressed in the IRP and solicit feedback on a proposed IRP development work plan. Throughout the presentation, several UAC commissioners raised questions related to the electric supply portfolio. Utilities Advisory Commission Minutes Approved on: August 2, 2017 Page 4 of 9 Vice Chair Danaher asked how electric vehicles factored into the energy efficiency and load calculations and how would the City handle a large increase in electric vehicle uptake. Padilla responded that the current load forecast assumes a certain penetration of electric vehicles and corresponding increase in load; however that the load forecast will be updated to reflect the findings of the Distributed Energy Resource Plan (DER Plan). The DER Plan will evaluate various electric vehicle deployment scenarios. Padilla also added that any increases in load resulting from electric vehicles and/or electrification may result in the need to procure additional resources. Commissioner Johnston asked if three and one-half percent (3.5%) losses between electric supply purchases and retail sales was within the range of industry standards. Padilla confirmed that they were. She added that the DER Plan will look for opportunities to minimize losses through efficiency measures. Commissioner Forssell asked whether the portfolio was assessed based on an average precipitation and hydroelectric generation year and whether there would be any assessment of potential droughts in the planning process. Padilla confirmed the portfolio was assessed based on average precipitation and added that management of the two hydroelectric resources would be the focus of one of the topics for the IRP update. Padilla continued the presentation, describing the City’s contract with the Western Area Power Administration for power from Central Valley Project hydroelectric resources. This resource provides roughly 40% of Palo Alto’s needs. These projects were built primarily for flood control. This contract was coming up for renewal and making a decision on this resource would be part of the IRP process. Commissioner Trumbull asked when the WBR contract was up for renewal and when the decision would need to be made. Padilla said the contract would expire at the end of 2024, but the decision to sign a new contract and would have to be made in the next few years. She added that the renewal of the WBR contract followed a formal process under Western’s 2025 Power Marketing Plan and staff has been actively engaged in provided comments both on its own and through the Northern California Power Agency. Commissioner Forssell confirmed that because the projects were built for flood control, the City had very little control over how they were dispatched. Padilla confirmed that was the case. Commissioner Danaher asked for clarification on why emissions were shown in the chart when the City’s power came entirely from hydroelectric resources and renewable energy. Padilla noted that emissions had gradually reduced as more of the City’s renewable energy projects came online, and that emissions were higher when hydroelectric generation was low. Utilities Advisory Commission Minutes Approved on: August 2, 2017 Page 5 of 9 Commissioner Ballantine talked about his experience on a nuclear naval vessel. The vessel included power from a reactor, but also a backup diesel generator and a battery. He said the developing complexity in the electric grid would end up requiring more work to maintain grid stability. Solar projects did not provide reliability as currently configured because they turned off during a grid outage. He thought reliability might be a valuable addition to the IRP plan. Padilla supported his concerns and added that the IRP will look at reliability at a grid level and also as part of the overall transmission planning. System reliability at the distribution level will be looked at as part of the Utilities Strategic Plan. ACTION: No Action ITEM 3: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Approve Community Solar Preliminary Program Design Elements and Feedback on Application of Design Elements for a Solar Photovoltaic Project at the Municipal Golf Course Parking Lot Resource Planner Sonika Choudhary presented on staff’s proposed design elements for development of a Community Solar Program. Staff would be discussing both the design elements and their application to a potential community solar project at the City’s Golf Course Parking Lot. She described how community solar would fit in to the City’s Local Solar Plan goal to meet 4% of the City’s total electricity needs by 2023. If proven successful, the community solar program could provide up to 3 megawatts (MW) of the total 23 MW needed to achieve that goal. She showed a video from the Smart Electric Power Alliance (SEPA) describing the basic structure of a community solar program. The program would provide access to solar for customers without a rooftop to install solar panels, such as renters, or who had poor solar access. She described a previous attempt to establish a community solar program that would be entirely run by a third party. The attempt failed because the City was not comfortable with the level of transparency of the vendor. Chair Danaher asked if the vendor had gotten to the point of soliciting customers. Choudhary said they had not. Choudhary continued the presentation and discussed the proposed design elements: 1. CPAU’s Role in the Program Development 2. Selection Criteria for the Community Solar Site 3. Cost and Value Proposition to Participants 4. Funding of the Capital Cost of Project 5. Minimizing Risk to Non-participating customers Throughout the presentation, several UAC commissioners raised questions related to the proposed community solar program design elements and explored the value of such a program for Palo Alto. Chair Danaher asked whether this product would cost more than the City’s current retail rates. Choudhary said that was likely. They would not know the exact price until staff had gotten proposals and knew the cost to build the project. Utilities Advisory Commission Minutes Approved on: August 2, 2017 Page 6 of 9 Commissioner Forssell noted that there was a possibility that the product would involve a premium for customers at first, but that customers might see a credit in outer years. This could lead to customers waiting to sign only in later years. She asked Staff about their sense of community acceptance this program from the start or if there would be any program rules to only provide credits to long-term participating customers. Choudhary said that the proposed program rules require demonstrated interest or pre- commitment before construction of the community solar projects (up to 50% of the project capacity). Once a project is constructed there could be these perverse incentives. Staff is relying on community engagement and early adopters to bring community solar projects online. Chair Danaher asked why participating customers would see benefit in outer years. Choudhary said that it could happen if the Power Purchase Agreement (PPA) price stays fixed but the commodity portion of the retail rates or utility avoided cost increased over time. Assistant Director of Resource Management Jonathan Abendschein added that participating customers would be locking in their supply costs for 20-25 years and that if City’s retail rates continued to rise over time there might be savings in later years. Chair Danaher commented that retail rates may go down eventually as solar and other renewables become cheaper. Abendschein confirmed the possibility of supply cost going down over time but noted transmission costs would likely increase. Overall the City’s retail rates have increased over time. Choudhary continued the presentation, going over the proposed design elements related to funding of capital cost, risk mitigation to non-participating customers, project timeline and discussed the application of the proposed program design elements to the first project site. Commissioner Johnston asked whether the participating customer would pay the same PPA price as CPAU would pay to the solar developer. Choudhary said that the participating customers would be charged the PPA price instead of the commodity portion of the retail rates. Staff was also considering a pricing option with a premium adder (similar to the Palo Alto Green program) where customers would pay the difference between the PPA price and the commodity portion of retail rates or the utility’s avoided cost. Commissioner Johnston asked for further clarification and if there would be a situation where the City would be paying more to the solar developer than was received from participants. Choudhary said CPAU will aim to remain revenue neutral for energy costs for this program. Commissioner Johnston asked to clarify who would be paying for incremental costs as listed in the report ($15,000 to $35,000 per year). Utilities Advisory Commission Minutes Approved on: August 2, 2017 Page 7 of 9 Choudhary said that CPAU would like to recover this incremental cost from participating customers. Abendschein added that if a local solar project PPA costs 11 ¢/kWh and utility scale solar with transmission charges costs 9 ¢/kWh, then 2 ¢/kWh would be the premium paid by participants. In addition, participants may have to pay some administrative costs for the program. Commissioner Johnston asked staff to confirm that the concept is to recover all these costs from participants. Choudhary confirmed and added that this has to be done in a cost-competitive way. Commissioner Johnston agreed with need to be cost competitive and commented that otherwise program is not going to be attractive. Shikada added that underlying assumption is that unless the program cost pencil outs, staff would not proceed with the program. Commissioner Ballantine said that the value of having solar locally versus solar in the Central Valley was reliability. It might be a challenge to communicate, but that would be a good reason for a customer to participate. It might be worthwhile to include some optional line items in the solicitation to add energy storage to the project as a benefit to participants. He suggested other potential secondary reliability benefits, such as providing individual Electric Vehicle charging spots or keeping the Regional Water Quality Control Plant running. Chair Danaher said it would be good to discuss the value of local solar in Palo Alto at the joint Council and UAC meeting in August. He was skeptical that this program would provide enough value to justify the cost. The Local Solar Plan, including its community solar goals, were adopted before Palo Alto entered into long term utility scale solar PPAs. The larger goal for the utility should be to get clean power supply at the lowest possible cost. Palo Alto may pursue one demonstration project but making it a larger program would not be good policy. He recommended that staff perform market research and understand customers’ willingness to pay before investing time in issuing the RFP for solar developers. Commissioner Forssell said that she agrees with other commissioners’ comments related to examining the value of the program to justify premium. She added that shaded parking could be one other potential benefit but it is difficult to quantify. Councilmember Filseth shared his observation that community solar programs are becoming popular in communities where local solar projects are displacing fossil resources and in a more cost-effective way than doing one rooftop solar project at a time. Palo Alto already has a baseline of clean power and the conversation here was different in that we were comparing a local solar project with a large scale utility solar project. Local solar projects may be financially viable by considering transmission costs and relatively low land lease costs by using a municipal site. Chair Danaher recommended performing additional financial analysis and confirming participation interest at various subsidy amounts before going ahead with the actual project development at the golf course parking lot. Utilities Advisory Commission Minutes Approved on: August 2, 2017 Page 8 of 9 Choudhary said that the proposed plan was to bring a solar developer onboard, seek participants’ interest, and only then move ahead with actual construction. Abendschein noted that the financial analysis was not complex, and there was not much to be gained by doing more analysis before getting a picture of what prices developers would propose to develop an actual project. Chair Danaher asked to include not just the premium payment to solar developer but all other costs City could be bearing in the financial analysis. Commissioner Ballantine said that local solar may worsen the system reliability and “duck curve” problem in California. Solar paired with storage can shift the dialogue and may justify premium payment. Chair Danaher said that he recognizes that staff is working under current policy directive of the Local Solar Plan. He thought the UAC-Council joint study session in August would help in review of this policy directive. They could discuss if prioritizing other measures such as efficiency would be more effective. Abendschein said that proposed plan is to be ready for the construction at the golf course parking lot in next winter season. He asked UAC to clarify if the unanimous agreement is to review the policy directive rather than implement it. If yes, staff would push out the project schedule for at least a year. Councilmember Filseth said that performing program financial analysis early would make sense rather than proceeding ahead with the project development. He also shared his personal experience of being early adopters of Palo Alto Green program and customers could potentially see value in local solar if it prevents any adverse impact on desert life. Abendschein said that this is one of the benefits of using local an already developed site for solar. ACTION: Chair Danaher made a motion to recommend that staff delay consideration of this project until after the Council-UAC joint study session in August. Commissioner Trumbull seconded the Motion. The motion carried unanimously (6-0) with Vice Chair Danaher and Commissioners Johnston, Ballantine, Segal, Forssell, and Trumbull voting yes and Commissioner Schwartz absent. ITEM 4. DISCUSSION: 2017 Utilities Strategic Plan Progress Report Utilities General Manager Ed Shikada said there was not much to report. The procurement process was taking longer than originally anticipated. He hoped to release an update to the Council within the next few days describing the policy drivers for the planning process. He hoped to have the consultants on board for the July 12, 2017 UAC meeting and use that meeting for a kickoff meeting with the UAC. ACTION: No action. Utilities Advisory Commission Minutes Approved on: August 2, 2017 Page 9 of 9 ITEM 5. ACTION: Selection of Potential Topics(s) for Discussion at Future UAC Meeting Commissioner Forssell noted there were some differences between the rolling calendar and the schedule of meetings for the Electric Integrated Resource Plan (EIRP). Assistant Director of Resource Management Jonathan Abendschein said that would be fixed for the next meeting. Utilities General Manager Ed Shikada noted the UAC’s future meetings were filling up with topics. Upcoming meetings would include a discussion of the strategic plan and a joint UAC-Council meeting. Shikada noted there was some neighborhood conversation around concerns around high water bills and the fact that the utility does not provide relief to customers. He said this was commonly due to leaks in irrigation lines. Staff would likely bring this for discussion at a future UAC meeting. ACTION: No action Meeting adjourned at 9:10 p.m. Respectfully Submitted, Marites Ward City of Palo Alto Utilities