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HomeMy WebLinkAbout2025-01-07 Utilities Advisory Commission Summary MinutesUtilities Advisory Commission Minutes Approved on: February 5, 2025 Page 1 of 20 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF JANUARY 7, 2025 SPECIAL MEETING CALL TO ORDER Chair Scharff called the meeting of the Utilities Advisory Commission (UAC) to order at 6:03 PM. Present: Chair Scharff, Vice Chair Mauter; and Commissioners Croft, Gupta, Metz, Phillips, and Tucher Absent: AGENDA REVIEW AND REVISIONS None ORAL COMMUNICATIONS Dave Warner encouraged commissioners to read his November 25 letter for further details. If the Tuolumne was flowing at 35 percent below its average, the SFPUC’s water rights were enough to fully supply the region for a year. Spending more money to improve reliability would increase the cost of water. The SFPUC’s Long-Term Vulnerability Analysis goes in depth into the many risks to costs. Tree rings in the last 1100 years do not show a drought close to the severity of the design drought. Shortening the design drought by a year would result in a return period of once over 1000 years. Table 4.6 in the One Water Plan showed 35% weight on reliability, 30% weight on environmental benefits, and 20% weight on unit cost; therefore, half the weight was on unit cost and environmental benefits. Mr. Warner believed the regional water system supply, longer drought duration, and climate change were not issues of concern. Mr. Warner thought the focus should be on the cost of water. Peter Drekmeier recommended that BAWSCA be invited to return to the UAC to explain how BAWSCA was addressing the December 2024 SFPUC performance audit commissioned by the Board of Supervisors of San Francisco. Mr. Drekmeier’s concern was change orders. At almost every meeting there were votes to add costs to contractors/consultants’ contracts. In the recent budget, the Regional Water Program costs were $330 million over budget, of which BAWSCA was responsible for two-thirds ($220 million). Palo Alto was responsible for 7 percent of BAWSCA’s portion ($15 million). An approximately 10-year-old SFPUC survey showed that protecting the environment was the number one motivator (84 percent) for people to conserve Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 2 of 20 water or support alternative water supplies, higher than having a drought-proof or reliable water supply. A few years ago, over 70 percent of bay-wide voters approved Measure AA to fund wetland restoration in the bay. Conserved water was impounded behind dams. Previously, the unimpaired flow averaged 12 percent in the lower Tuolumne but it was 79 percent in 2017. For a week in 2017, the reservoir was full and up to 15,000 cfs of water was spilled. If the Bay Delta Plan was in place, the unimpaired flow would have been 40 percent for five years, 44 percent in 2017, providing full storage and a much healthier Tuolumne River. Mr. Drekmeier opined that alternative water supply was not needed for water supply reasons, it does not benefit the environment, and it costs a lot of money. APPROVAL OF THE MINUTES ITEM 1: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on December 4, 2024 Chair Scharff asked for a motion on the December 4, 2024 UAC draft meeting minutes. Kaylee Burton proposed a change in the first paragraph on Packet Page 9 to read: To facilitate identification, high-density polyethylene mains were color-coded yellow for gas, black with a blue stripe for water, and black with a green stripe for wastewater. Gas laterals are yellow, and water and wastewater services and laterals are black. ACTION: Commissioner Croft moved to approve the draft minutes of the December 4, 2024 meeting as amended by Ms. Burton. Vice Chair Mauter seconded the motion. The motion carried 6-1 with Chair Scharff, Vice Chair Mauter; and Commissioners Croft, Metz, Gupta, and Tucher voting yes. Commissioner Phillips abstained. UTILITIES DIRECTOR REPORT Assistant City Manager Kiely Nose stated that the Council inducted two new members last night. Ed Lauing was elected as mayor and Vicki Veenker as vice mayor. Assignments for boards, committees, and commissions were expected in the coming month. Staff will keep the UAC apprised of who their representative is and any changes impacting the UAC. Dean Batchelor retired at the end of 2024. On behalf of the City Manager’s Office, Ms. Nose assured the Commission there was continuity within the department and the City organization. Ms. Nose and Mr. Kurotori were overseeing the department. This week, the City Manager will notify the UAC about the transition plans and status. The Utilities Director position will be posted shortly. Utilities Chief Operating Officer Alan Kurotori delivered the Director's report. SF Chronicle Article about Drinking Water: Recently, the San Francisco Chronicle published an article titled, “Popular Bay Area foods contain high levels of plastic chemicals, study finds.” The Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 3 of 20 article stated that a high level of BPA was found at a Palo Alto business, Boba Guys. The article mentioned a treated water sample was taken but did not mention Aquatabs was added. The study separately tested Palo Alto’s tap water and did not find any of the 18 monitored constituents. Staff brought this to the Chronicle food reporter’s attention in the hopes they would publish a clarification. Utilities Wildfire Mitigation and Undergrounding in the Foothills: The undergrounding project of overhead powerlines in the wildfire-urban interface was scheduled to be completed in June 2025. An emergency preparedness report will come to Council on February 11. Staff is reviewing the draft report and will provide responses to the findings and action plan. Staff will bring the report to the UAC after it is finalized. Water Supply Update: As of December 1, 2024, Hetch Hetchy was at approximately 114 percent of median for the water year. The regional water system total storage operated by the San Francisco Public Utilities Commission (SFPUC) was about 88 percent of maximum storage and the water bank was full. NEW BUSINESS ITEM 2: DISCUSSION: Purpose & Duties of the Utilities Advisory Commission (UAC) with Key Staff Roles & Responsibilities Assistant City Manager Kiely Nose delivered a slide presentation on the UAC’s purpose as governed by the City’s Municipal Code. The UAC was tasked with advising the Council on present and long-term planning, policy, and major programs for any matters related to gas, electric, water, wastewater, and fiber utilities. Examples of long-range policy and planning include projects related to grid modernization, One Water Plan, and fiber-to-the-premises. Utilities master agreements with partner agencies come before the UAC; examples include the NCPA and Valley Water. The UAC provided feedback on conservation, energy efficiency, and environmental programs such as demand-side management and WaterSmart Home Water Reports. The UAC reviewed and made recommendations to the City Council on the consistency with adopted and approved plans, policies, and programs of the Utilities. The UAC reviewed the Utilities budgets, schedules, rates and packages, and assistance programs. The City’s largest department was Utilities. Utilities Chief Operating Officer Alan Kurotori stated that the Utilities Department had almost 270 employees. The Utilities Department had the largest amount of capital projects. More than two-thirds of the City budget was associated with Utilities. Focus was on actively recruiting for near-term vacancies in the electric utility. A liaison from the Utilities Department provided resources to Human Resources to expedite recruitments for Utilities. Last year, 6 to 10 positions were added in Utilities. The Utilities Department Management organizational chart was shown. The Utilities Director was legally responsible for the department and oversees the entire department including Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 4 of 20 human resources and advocacy, as well as working with the UAC as the lead staff member. As Chief Operating Officer, Mr. Kurotori will work at the municipal operations center and with the engineers at Elwell. Mr. Kurotori was responsible for engineering and operations as well as the associated capital projects, worked on regulatory and legislative advocacy issues, and emergency response. Strategic Business Manager Dave Yuan’s current focus was on technology and fiber-to-the-premises projects, including the outage management system and utilities billing system. Assistant Director of Resource Management Karla Dailey was in charge of staff related to businesses and residential customer programs and in support of the S/CAP program. Ms. Dailey worked with large commercial customers to meet their needs, address any concerns, and act as their advocate. Assistant Director of Customer Support Services Tom Auzenne was the point of contact for customers on utility billing, account management, and credit and collections. Utilities Communications Manager Catherine Elvert worked on media relations, emergency operations procedures, outreach materials, and updating CPAU’s social media. Matt Zucca was the Assistant Director of Water, Gas, and Wastewater. Due to a recent retirement of a staff member, Jorge Silva was the Acting Assistant Director of the Electric Utility. Ms. Nose and Mr. Kurotori were the point of contact for the UAC during the transition to a new Utilities Director. For future meetings, Vice Chair Mauter asked staff to bring items before the UAC that staff was seeking input and discussion on, and ensure there was follow-through after the meetings on those items where the UAC provided input. The UAC may ask staff to provide informational updates in the packet but not to present on them. Commissioner Tucher noted there was a lot of transition with the recent departures of Dean Batchelor, Micah Babbitt, and Tomm Marshall. Commissioner Tucher learned informally about Mr. Marshall’s departure and felt it should have been announced at a UAC meeting. Ms. Nose remarked that December was a common transition period. Across the organization, there were a number of retirements in December. Ms. Nose stated that departmental operations were not part of the UAC’s purview. Chair Scharff asked for an explanation of daily operations from the staff’s perspective. Ms. Nose responded that daily operations included hiring, firing, staff assignments, tools used, schedules, and RFP and procurement processes. The UAC was an advisory body to the Council. The UAC’s feedback on policies, programs, and rate structures helped inform the Finance Committee and the Council in their decision-making processes. Mr. Kurotori stated that personnel, deployment of resources, and work priorities was under the purview of the Utility operations. The UAC looked at major programs and projects, the budget, and CIP. Mr. Kurotori was reticent to talk about an individual’s retirement as it was each employee’s personal choice. Commissioner Tucher was curious about the UAC’s advisory function. Commissioner Tucher noted that UAC meetings do not include a discussion about what happened at Council or what was scheduled to come before the Council that was relevant to Utilities. Commissioner Phillips remarked that the Planning and Transportation Commission had a representative attend Council meeting when there were relevant items. Chair Scharff asked Mayor Lauing if it was useful to have a commissioner attend Council meetings to explain the UAC’s position. Mayor Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 5 of 20 Lauing replied that he was on the PTC before he was on Council. The PTC met two times a month. As part of the Assistant Director’s report, a recap was provided on what happened at Council that was related to the PTC. At the beginning of the year, one PTC commissioner was assigned every month as liaison. In addition, PTC commissioners could opt to attend a Council meeting if there was a complicated or controversial topic. For agenda setting, the commissions have a shared responsibility with staff. Mayor Lauing stated that the deliberation and expertise of commissioners sitting at the UAC dais was essential for the Council’s decisions and the Finance Committee. Commissioner Croft asked how the UAC’s feedback was relayed to Council. Mayor Lauing replied that the UAC’s recommendations were included in the Council’s packet and former Director Batchelor was always attentive about including the UAC’s feedback in his presentations to Council. Commissioner Croft recalled times when Council’s action differed from the UAC’s recommendation. Mayor Lauing stated that the liaison should provide an explanation to the UAC. Mayor Lauing mentioned there were times when he told the Council they needed to take into consideration that the UAC strongly believed in their recommendation. Mayor Lauing thought it was excellent that the Council was informed in their packet if there was a difference of opinion between staff’s conclusion and the PTC or if commissioners did not unanimously agree. Ms. Nose said that anytime an item was brought before the Council, a board, committee, or commission, staff included a summary of what occurred and links to minutes, videos, or other helpful information. If the UAC recommended an alternative approach, staff will state their recommendation and the alternative approach. Staff takes the responsibility of transmitting any information in totality to the next governing body, including the UAC’s recommendation and vote as well as pros and cons addressed in the discussion; however, it was up to the Commission whether they felt it was necessary to have a UAC representative present. Chair Scharff asked if commissioners were willing to attend Finance Committee and Council meetings. Chair Scharff emphasized that the UAC representative needed to speak on behalf of the UAC, even though the commissioner may have a different opinion, and if there was a majority/minority opinion to advise Council on both. The 12-month rolling calendar was the final UAC agenda topic and Vice Chair Mauter suggested that include discussion and decision on whether an upcoming item warranted UAC representation. Chair Scharff agreed with Vice Chair Mauter’s suggestion. Commissioner Croft was willing to provide UAC representation at Finance meetings if the Commission decided it was necessary for a certain item. Ms. Nose stated that if the UAC wanted representation on an item, staff could coordinate the date with the Finance Committee. Discussion ensued on which Council actions should be included in the Utilities Director report. Chair Scharff thought the UAC wanted a report on items the UAC heard. Chair Scharff wanted staff to say if Council’s decision on an item was in alignment or deviated from the UAC’s recommendation. Commissioner Gupta thought it was useful to have a list of RFPs that appeared on the City Council’s consent calendar particularly with respect to grid modernization Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 6 of 20 and the fiber utility for the UAC to stay apprised about how money was being spent on large capital-intensive projects. Ms. Nose pointed out that Council approval was needed for any contract over $85,000. Commissioner Gupta wondered if commissioners were interested in being informed about RFPs above a certain dollar threshold, he suggested above $5 million. Commissioner Tucher was less concerned about lists of contracts. Ms. Nose will begin adding the UAC’s requested information into the director’s report every month. Ms. Nose will express to the new Council liaison the UAC’s desire for the liaison to discuss the Council dialogue. Commissioner Croft would like more detailed information on grid modernization because it involved a huge investment. Commissioner Croft wanted to know what was being done on grid modernization and what technologies were being evaluated. Vice Chair Mauter mentioned it was helpful if at the end of presentations it be made clear what were the outstanding commissioner questions needing to be addressed in the next presentation on that topic. Commissioner Tucher agreed with Vice Chair Mauter. The Commission read the packets, so Vice Chair Mauter suggested that staff keep their presentations very short. Mr. Kurotori acknowledged the feedback and welcomed further feedback on future presentations. In the next few months, Commissions will prepare their annual work plan, which is then brought to the Council. Ms. Nose requested that the Commission pay particular attention to the work plan because the UAC will serve as advisory to the Council on the items in the work plan. ACTION: None ITEM 3: DISCUSSION: Discussion on the Progress of the Grid Modernization Project Public Comment: David Coale mentioned that he sent an email to the UAC regarding the grid modernization program. Mr. Coale stated that the whole-home electrification pilot program was a great opportunity to explore technologies that could substantially reduce the cost of grid modernization. Mohammad Fattah, Electric Engineer Manager, provided an update on the grid modernization project. The objective of the small-scale pilot project was to test the feasibility, time, cost, risk, and performance of various materials, products, services, and processes prior to undertaking a full-scale rollout. The pilot consisted of about 1000 homes. Phase 1 of the 10-year plan included about 7000 homes and was a citywide project to replace power poles, transformers, and secondary wires. The estimated completion for Phase 1 is 2026. Phase 1 aligned with the current efforts with the fiber-to-the-premise as cables would be attached to the same pole, thereby benefitting from synergies. When clearance was done of the 12 kV, the communication space was also cleared to make everything ready to string the fiber cable so it could be done much quicker and at less cost. Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 7 of 20 The 10 phases of the grid modernization project timeline was shown. Phase 1, 2, and 3 focused on overhead distribution. Updating substation infrastructure started in Phase 4. The 4 kV grid was unable to support some of the additional loads being added to the network. Updating from 4 kV to 12 kV would provide higher levels of efficiency and voltage stability. The East Meadow Substation and Colorado Substation will be mirror images of the upgraded Hanover Substation. In 2027, a pilot project will test some new technologies currently coming in the market. Staff hoped to learn from other utilities about the efforts they have undertaken. Then, work will be done on the Hansen Way substation. Then, a couple of substations running on 4 kV will be retired. In five years, staff will look at areas to improve feeder optimization, including distribution automation as well as using devices to reduce outage time and implement quick restoration of services. Staff would deliver a presentation and seek the Council’s approval before moving into any of the phases. To date, 400 homes have been prepared for electrification in the pilot project, meaning the ability to support 8 kVA of power. Power pole wooden cross-arms were replaced with fiberglass cross-arms that had a longer lifespan, were more resilient with weather, and more visually appealing. The use of triplex cable eliminated the need for another cross-arm for secondary wire. The use of strong poles extended the lifetime by 30 to 50 years. CPAU communicated with customers in the construction area through U.S. mail and email. No complaints from impacted customers had been received. The estimated pilot project completion date was February/March of 2025. The infrastructure, transformers, cables, and wire sizes were being standardized. One challenge had been the supply chain for electric utility materials. It takes two years to get transformers, one year or more to get wire, and six months or more to get poles. Staff was developing relationships with vendors to help overcome this obstacle. Construction contracts have been reviewed. The supplier pool was being diversified. Strong contracts were being negotiated to eliminate change orders. Change requests were minimized through detailed scopes of work that were peer reviewed to ensure nothing was missed. A distribution system planning effort was being undertaken to understand load flows. The flow of electricity becomes bidirectional when batteries connect to the grid, so a robust system was being designed to try to support the efforts. Design and Engineering will finalize the scope of work for each phase. Consultants and in-house engineering experts will be leveraged for the complex substation work. Engineering and construction firms are selected through a public bid construction process. Construction inspectors will be assigned to ensure everything is built to State of California and IEEE standards. Staff will communicate project updates to the UAC and at the completion of each phase of the project. Utilities Chief Operating Officer Alan Kurotori stated that replacing aging infrastructure and adding new capacity to the system was the foundational first phase of the Reliability and Resiliency Strategic Plan. Secondary objectives and strategies included evaluation of our implementation of best practices and how we manage outages effectively. The third part of the strategy was looking at flexible and efficient technologies, such as SPAN Panels, distributed energy resources, and potentially vehicle-to-grid. Upcoming activities that will be pursued by staff and going to the UAC for input include looking at low-profile aboveground transformers Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 8 of 20 and seeing how they can best fit in within the neighborhoods in the community. The S/CAP Ad Hoc Committee will look at various technologies and find the best fits. Commissioner Croft asked the following questions: What is the process for evaluating technologies? Was a consultant engaged to help us understand vehicle to grid or microgrids? How are we planning for those technologies? Do we need to contract people to help us or do we have in-house people to do research? Can you describe the timeline including when the UAC can expect to hear about it and when resources will be brought in? Mr. Kurotori will have an update on the Resiliency and Reliability Plan coming to the UAC and offered to bring some timelines. Mr. Kurotori stated that there were internal resources but outside consultants will be leveraged to provide a greater level of detail. Several consultants were under contract and staff could bring back some of those scopes of work. Microgrids at the airport were being actively looked at and potentially at Cubberley, as well as any private entities that wanted to move forward with microgrids. Expertise was being leveraged from neighboring utilities that are integrating larger solar storage systems into their distribution grid with regard to their control schemes, the equipment being used, and system protection. Staff will bring back to the UAC further information on vehicle to grid and pushing power from stationary batteries into our system. Commissioner Croft spoke about the Utility’s role in advising customers on how they create their systems that interface with our grid. With the upcoming time-of-use rates, staff should have the knowledge to make recommendations to customers on systems or panels to shift loads to another time or prioritize certain appliances. Mr. Kurotori remarked that he was an early adopter and was very familiar with some of those technologies. Mr. Fattah stated they were collaborating with Palo Alto residents who apply for permits to bring grid-connected devices online to see what was plausible in the meantime until a standard was developed to interconnect those devices to the grid. Staff was working with consultants on what devices could be supported and using expertise within Engineering to analyze those devices. Commissioner Croft requested the next presentation on grid modernization to include what kinds of technologies were being explored because of customer interest. Commissioner Metz was concerned that new technologies were in the third phase because he believed it ought to be in pilots now. It was likely that those technologies, new regulations and laws, and implementation of S/CAP would have a big impact on the design of the grid. By the next UAC meeting, Commissioner Metz urged staff to provide a list of grid modernization subtopics and the dates they will come before the UAC. Mr. Kurotori explained that Strategies 1, 2, and 3 in the Reliability and Resiliency Strategic Plan were not in priority order and there were some overlaps. The first part of grid modernization was to ensure the baseline infrastructure could accommodate those technologies. Staff could bring back to the UAC the studies and their timing. Commissioner Metz voiced his concern that the impact of technologies needed to be analyzed to determine the baseline infrastructure Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 9 of 20 needed because the required capacity for homes may be less than was estimated, as per Mr. Coale’s public comment. Mr. Kurotori explained that distribution system design and optimization needed to take into consideration many factors, such as homes that are electrifying, EVs and the number of chargers put in the home because some customers were highly optimizing their home and had higher capacity needs. The replacement of poles to meet new standards, upgrading transformers, and standardizing capacities and the number of homes served were foundational. Underground there was more opportunity for optimization but some of those technologies are not implemented yet. Vehicle to grid is not fully implemented. Several manufacturers were working on the potential of vehicles to backup homes. Infrastructure to serve new developments coming in with a higher number of residential units was also part of the plan. Commissioner Phillips asked if there was a coordinated plan with the Reliability and Resiliency Strategic Plan to address vehicle to grid, storage, and microgrids. Commissioner Phillips questioned what investment was being made in the dispatch capability of the Utility to handle these technologies as they come in. Commissioner Phillips wanted to know if microgrids were being encouraged or discouraged. Commissioners Phillips and Metz agreed that one coordinated plan was needed instead of having two different plans. Commissioner Metz commented that the Utility could influence how customers implement vehicle to grid or other technologies by pricing and other techniques. Commissioner Gupta recalled a discussion during his orientation about how voltage drops might be introduced by some of these new technologies and how it might affect some of the new components we are using in grid modernization. Commissioner Gupta thought that having alignment on what technologies we would like to use was important when deciding what infrastructure to invest in and install. Vice Chair Mauter inquired what fractions of the 30 percent vacancy rate in staffing were in planning and construction and if it might affect the ability to concurrently evaluate new technology, plan, and do grid modernization hardware upgrades. Mr. Kurotori responded that positions were filled in Engineering, not including the recent retirement of Mr. Marshall. Engineering consulting firms were doing the design. A lot of young engineers were hired from programs in California that work on power systems. The most recent engineer was on-boarded on December 30, a recent graduate from San Jose State. Jorge Silva, Acting Assistant Director of Electric Engineering and Operations, remarked that lately quite a few people were hired in Operations, including linemen, journeymen, and substation journeymen. Contractors were also used. Staffing did not slow down the pilot project. Assistant City Manager Kiely Nose stated that Mr. Silva and Mr. Fattah were working with electric operations and the engineers who were designing and building the infrastructure. Karla Dailey in partnership with Public Works and Jonathan Abendschein were working on strategic studies and evaluating the technologies. Mr. Abendschein was working with Public Works and Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 10 of 20 Utility staff to implement new technologies, new customer programs, and sharing those learnings with the operational staff to ensure coordination. Another set of resources was working on S/CAP and collaborating internally. Vice Chair Mauter inquired if the seven-year plan was adaptable to delay or modify projects if microgrids and other technologies were successful. Mr. Fattah replied that the plan was adaptive. Work was being done on several microgrids but it was highly confidential as the customers did not want to identify themselves. Various technologies were being evaluated. It was anticipated that the feeder work be interspersed. As the substations become ready to accept the new load, devices would be placed across the grid to sense voltage variations because electrons flowing in two directions could have adverse effects. Vice Chair Mauter recommended strong communication between resource management and Mr. Fattah’s team. Vice Chair Mauter wondered whether more personalized outreach to the largest or most peak customers may result in significant savings in capital expenses. Mr. Fattah stated his team worked with Ms. Dailey’s team every week. Ms. Dailey’s team identified the opportunities and Mr. Fattah’s team implemented them. Commissioner Tucher asked what were the lessons learned on microgrids, how staff was communicating to customers in the pilot and Phase 1 areas, and whether anything was learned from the pilot. Commissioner Tucher wondered if customers in the pilot area realized they were benefitting from the infrastructure upgrade. Mr. Kurotori responded that customers were notified about construction work, impacts, and outages. Mr. Fattah stated that communication on grid modernization in general was not part of the outreach. Catherine Elvert, Utilities Communication Manager, said that feedback surveys had not been conducted yet but no negative complaints were received about the construction from customers in the pilot area. The plan was to follow up with customers once various construction phases were completed. Staff was working on the communication and outreach strategy on the costs and benefits of grid modernization as well as benefits to customers as a result of incorporating new technologies. Ms. Nose mentioned that the pilot was expected to be completed in February or March of 2025. Once the pilot area is done, surveys will be sent as well as notifications of additional benefits to customers from the upgraded infrastructure, and customers who were waiting to upgrade will be told the process to do so. Commissioner Gupta asked if there was a list of the technologies being explored. The next time grid modernization comes before the UAC, Commissioner Gupta wanted more information about how expected demand was modeled, what were the underlying assumptions, and how capacity was being built up to meet anticipated demand. Commissioner Gupta wanted to understand the cost component of grid modernization because he previously heard it was a $300 million project but now heard it might be closer to $500 million. Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 11 of 20 Ms. Nose’s former role was the City’s Chief Financial Officer. The City’s largest CapEx project was rebuilding the Regional Water Quality Control Plant with a cost over $300 million. The debt associated with grid modernization was significant but spread over a long period of time. As in previous rate presentations, staff proposed pay-go with a combination of money on hand, incorporated in the rates, and debt financing. In the next 18 to 24 months, an initial issuance of no more than $100 million of revenue-backed bonds was expected to be necessary to help fund further investment in grid modernization. Prior to the debt issuance, staff will come forward with a financial plan and analysis to the UAC and the Finance Committee, and the Council’s authorization was needed. Debt issuance had time limitations on the use of funds; therefore, financing will be done in increments and using whatever financing method was most cost effective. Regarding load projections, Mr. Kurotori stated that getting a second connection to our system was one of the Utility’s priorities for the last several years and progress was being made. When staff had that information, it will be brought back to the UAC along with their projections. In response to Commissioner Gupta asking if it was still the long-term vision to underground all powerlines, Chair Scharff answered it would never happen. When Commissioner Croft first joined the UAC, she recalled there was reference to a report estimating how much capacity was required per household that was the basis for determining how much capacity to build into the new grid. Commissioner Croft thought several commissioners requested access to that report but were told it was not to be shared with the UAC. Commissioner Croft wondered if staff could at least share the details on the analysis and how the capacity was estimated per household. Mr. Kurotori will take it back as an action item. ACTION: None The UAC took a break at 8:29 PM and reconvened at 8:44 PM. ITEM 4: ACTION: Recommendation to Council to Accept the City of Palo Alto One Water Plan Karla Dailey, Assistant Director of Utilities, Resource Management Division, delivered a slide presentation. The One Water Plan was a framework for staff and Council to make future decisions about Palo Alto’s water supply and conservation portfolio. Many external factors impact water supply and reliability, such as climate or regulations. Water was a regional resource and the activities of our neighbors, supplier, and other agencies in the county affect Palo Alto’s water supply resiliency. The One Water Plan was a forward-looking planning exercise to look at potential water supply alternatives the City may want to consider in the future if reliability became a concern or to start the evaluation process of a regional partnership. Developing the One Water Plan was a key action in the S/CAP water chapter that the Council directed staff to complete. The time horizon for this One Water Plan was 20 years, from 2025 to 2045, although the time horizon could be modified as appropriate. Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 12 of 20 One Water portfolios were labeled A through G. Baseline was the current supply of 100 percent SFPUC water. Enhanced conservation was an attractive resource in Portfolio B, so Portfolios C through G included enhanced conservation in addition to another large project. Staff provided the following responses to the questions and comments made by commissioners when staff came to the UAC with the preliminary results of the One Water Study: • What problem are we trying to solve? We are comprehensively looking at various potential water supply alternatives and the relative merits of those alternatives compared to each other, including the ease of implementation, environmental benefits, reliability impacts, and cost. The One Water Plan provided a common understanding of how different water supply alternatives could be evaluated and measured. The One Water Plan identified the project types most likely to be attractive but was not intended to be a detailed feasibility analysis of all alternative water supplies. The project costs were at planning level. • In response to a commissioner comment that rate impact should be a consideration, a table was shown of capital costs and differences in residential monthly bill for Portfolios A through G. • Staff agreed with the suggestion to consider the use of groundwater during drought. Groundwater was not a long-term daily water supply. There was no capital project to get the work done to be able to use a couple higher producing emergency groundwater wells but a capital project was in the planning horizon. Staff was trying to keep water rates low. Staff thought this was a valuable project and hoped to incorporate it in the financial plans in the relatively near future as well as other capital improvements the system needed on a regular basis. SFPUC water was treated with a different chemical than Palo Alto had the capability to treat, so a project was needed to blend groundwater with SFPUC water. • Is the One Water Plan trigger based? Yes, a couple triggers could cause reevaluation of whether we want to consider adding alternative water supplies. The biggest trigger was reliability, which could be caused by climate change or regulatory impacts. In 2019, the City signed an effluent transfer agreement with Valley Water that gave Valley Water the option to take about half of the treated effluent from the Regional Water Quality Control Plant for use in other parts of the county. The option expires at the beginning of 2033/end of 2032. If Valley Water exercised their effluent transfer option, there was not enough water left at the Regional Water Quality Control Plant to do a significant project. If Valley Water does not exercise their effluent transfer option, it opened up possibilities should the City decide to use that water. • Are contaminants a concern for some of the water supply alternatives? Increased risk of contaminants was an important consideration and would be evaluated before recommending any project. • In response to a commissioner comment that linear weighting of the evaluation criteria was not ideal, staff was unable to spend additional budget to go back and do additional Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 13 of 20 types of evaluations but staff would consider other methodologies in the One Water Plan iteration. • Staff agreed with the commissioner comment about the community not being ready for direct potable reuse. Outreach and education were crucial to public acceptance of new water supplies. As this was a regional issue, Palo Alto will coordinate with the rest of the region, the SFPUC, and Valley Water to take a regional approach to outreach and education about direct potable reuse. • In response to a commissioner comment that tiered water rates should be considered, staff believed that water rates were an important part of managing a water utility and rate structures would be considered in the next cost-of-service analysis. • What are the impacts of drought on the tree canopy and vegetation? Any recommendation of a water supply or conservation alternative would include an assessment of the impact on the tree canopy and other vegetation. Staff will implement ongoing/planned conservation, evaluate and possibly recommend enhanced conservation measures identified in the One Water Plan, and monitor the available funding opportunities for water-related projects. Events and dates that may warrant revisiting the One Water Plan include: SFPUC’s alternative water supply plan update in 2027, Valley Water’s effluent transfer agreement option expiration in 2032, State decisions regarding implementation of the Bay Delta Plan, if new water supply technologies or partnership opportunities arise, and other events or conditions that could impact our water supply reliability. Staff asked the UAC to recommend that the City Council accept the One Water Plan scheduled to go before Council in March of 2025. There was no recommendation to proceed with any specific project. There was no resource impacted by accepting the One Water Plan. The One Water Plan gives the City a basis to evaluate water supply alternatives in the future. In response to Chair Scharff’s question, Utilities Chief Operating Officer Alan Kurotori explained that if the UAC did not approve the plan, staff would move forward for consideration by City Council; if the Council did not accept the plan, then the plan would not be implemented. Public Comment: Peter Drekmeier, Policy Director for the Tuolumne River Trust, believed that SFPUC claimed the Bay Delta Plan could lead to 50 percent rationing as a way to justify their opposition. Mr. Drekmeier spoke about the collapse of the Tuolumne River’s salmon-based ecosystem and commented on the increase in water rates. Urban water management plans require the water agency to analyze their driest five-year sequence and show that they have enough water for proposed development. The SFPUC could manage their driest six-year sequence (1987-1992) with the Bay Delta Plan in place with no rationing. Instead of looking at different scenarios, SFPUC’s Alternative Water Supply Plan only looked at the highest level, 92- 122 MGD of water at a price of $17-$25 billion. Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 14 of 20 Referring to Slide 11, Chair Scharff assumed that staff could refer to the One Water Plan for its information if there was a triggering event. Chair Scharff wondered about the public policy implications of accepting or not accepting the One Water Plan and if acceptance would be interpreted as the UAC thinking the plan had good projects. Ms. Dailey replied that the formal acceptance of the plan was administrative because it was an S/CAP item for staff to do and it was a public document that the Council acknowledges was done. Staff would rely on some of the work that had been done in this plan if and when there was a need to consider alternative water supply plans. Ms. Dailey did not think there were any policy implications. Assistant City Manager Kiely Nose stated that staff recommended acceptance of the report; however, the Council had the authority to accept the report and provide a referral to staff on additional direction as a result of the information in the report. Commissioner Phillips agreed with the recommendations but he thought the linear methodology was fatally flawed. Commissioner Phillips did not think it was an appropriate framework to be used in the future for evaluating options and there was no clarity around the weighting. If approving the plan meant the UAC was approving its use for future decisions, Commissioner Phillips would vote against it. Commissioner Gupta drafted a motion for the UAC’s consideration. Commission discussion ensued. Commissioner Croft saw it as a framework or a tool, not a plan that was being acted on now, so she did not want to sign on to it if it was called a plan. Commissioner Croft would like to know what could be implemented quickly if the need arose but the plan did not have a section on implementation timelines. Commissioner Phillips and Chair Scharff were concerned with the plan being a framework. Commissioner Phillips could support the approach shown on Slide 8, as long as different evaluation criteria were used in the future. Chair Scharff asked Commissioner Gupta to read the first paragraph of his motion again: The Utility Advisory Commission (UAC) is forwarding the One Water Plan report to the City Council for reference only, recommending no action at this time. The UAC thanks staff and the consultant for their work on finalizing the report and bringing these alternative water supply options forward for consideration. While the UAC recognizes the plan’s focus on water supply sustainability and resilience, additional analysis is needed, given the complexity and long-term implications of these decisions. Commissioner Metz stated that the evaluation approach using a linear scale was inappropriate and it was his biggest issue. Reuse and desalination options were rated the highest reliability, which seemed counterintuitive to be more reliable than conservation. Commissioner Metz thought some of the conservation actions should be done now, and he agreed with moving forward with wells if it was low cost. Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 15 of 20 Commissioner Tucher was unable to support the One Water Plan because the underlying premise for this report was to accelerate this planning because of SFPUC and BAWSCA. Commissioner Tucher sensed a lot of concern around BAWSCA not putting enough oversight on CapEx and cost overruns. Commissioner Tucher wanted a better understanding of change orders and the $15 million impact on Palo Alto as our share of BAWSCA that Mr. Drekmeier spoke about in his public comment. Commissioner Tucher urged following through on last month’s suggestion that Council Member Greer Stone meet with BAWSCA’s new director on these topics. Commissioner Tucher suggested sending a letter (from the Utility Director, Mayor, or whoever was the appropriate person) to SFPUC with questions and requests for more information, including the construct of the design drought, drought return timeframe, and the discrepancy in demand forecasts between SFPUC Finance Bureau and Enterprise. Commissioner Tucher offered to help with the drafting of the letter or the formulation of those questions and information requests. Commissioner Gupta wondered if staff could use the Excel tool, if they liked it, if it fit everything that was asked for, or if additional follow-up was needed with the consultant. Ms. Dailey responded that acceptance of the One Water Plan did not affect staff’s ability to use the Excel tool. Staff was happy with the consultant’s work on it. There were a lot of Excel skills in-house, so staff could make modifications as appropriate. Staff was not recommending moving forward with any of the projects now, so there was no conflict between the motion language that Commissioner Gupta put forth and what staff was recommending. Commissioner Gupta noted several issues with the report. Most importantly, none of the proposed portfolios in the One Water Plan met the projected demand if you accept SFPUC’s assumption of a 50 percent cut in a drought condition. Even if millions of dollars was spent, additional cutbacks or investments were required to fill the unplanned gap. Commissioner Gupta thought the primary assumption in this report of a 50 percent cutback in a drought condition needed to be vetted because there was conflicting information. The plan relied on that assumption but if you take away that assumption, the plan loses its primary purpose. Senior Resource Planner Lisa Bilir explained that the unplanned shortage across the portfolios was provided as a mathematical tool for comparison. Commissioner Gupta’s was concerned about thinking of spending significant CapEx if the plan did not have a purpose, presuming the 50 percent assumption does not hold. Ms. Dailey pointed out that staff was not recommending spending significant CapEx right now. Ms. Dailey agreed that it was unknown if a 50 percent cutback would come to fruition. There is the possibility of a 50 percent cutback according to the analysis by our supplier who runs the regional water system, so staff used it as a worst case scenario in testing the portfolios. Commissioner Tucher asked the Commission if they were in support of following up with the new BAWSCA head and sending a letter to the SFPUC from the City. Commissioner Tucher offered to formulate a one-page list of follow-up questions and the Commission could discuss whether to proceed. Chair Scharff instructed Commissioner Tucher to send his request for Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 16 of 20 additional information to staff. The UAC could ask BAWSCA Representative Greer Stone to come to the UAC if he was willing to explain what was going on at BAWSCA and his views on this. Ms. Nose stated that staff could review Commissioner Tucher’s list of asks with the UAC Chair and Vice Chair in a preparation meeting, and in collaboration with Council Member Stone. Commissioner Tucher agreed. Vice Chair Mauter had a deep concern methodologically and also noted some issues may not have been adequately addressed by the consultant. Because the plan may be revisited by Utilities or Council in the future, Vice Chair Mauter felt it was important to have a clear record of all the deficiencies in the plan and that there was a decision made not to spend more money to fix those deficiencies. Vice Chair Mauter thought it was essential to prepare now for regional water reuse. The regional water supply system had regional political problems and regional financing problems. Vice Chair Mauter wanted it clarified that that the primary problems were political and those were the triggers, and the decisions were also political. Identifying where those holes were would help us address them in the future and determine what needed to be done now to be prepared for a stronger trigger-based plan. Vice Chair Mauter pointed out that the One Water Plan was a decision tree, not a trigger-based plan. Vice Chair Mauter thought the implementation plans included in the slides were important. In addition to SFPUC’s rate increases, Vice Chair Mauter noted that the water utility had rate increases due to infrastructure maintenance within our city. Being thoughtful about how conservation efforts would impact the cost of maintenance needed to be well understood by Council. Mayor Lauing said this was a perfect example of a time when a UAC commissioner should be present when this item comes to Council. Mayor Lauing instructed staff to be very precise about what they were asking from Council and to tell Council what will be done next. Council needed to be alerted to Vice Chair Mauter’s comments that this was a regional problem that needed action now. Vice Chair Mauter thought there needed to be a much better assessment of future demands and supply projections, under what future climate scenarios might there be a change and how far into the future. It was imperative that the BAWSCA demand study come before the UAC and the study needed to be done well. Relying only on SFPUC’s future drought condition metrics or the design drought was problematic. Regional coordination as well as a local trigger-based planning approach was needed. For example, if there was a drought of X length, reservoir capacities of X amount, and curtailment of X amount, then we would start to think about an X- year timeline to build out a groundwater supply system. Commissioner Phillips agreed with Vice Chair Mauter and emphasized that a static linear weighting methodology was incorrectly applied. It had to be based on reasonable demand assumptions. Commissioner Phillips did not believe that BAWSCA separated tests and training sets in demand assumptions in their 2022 report, which was not good model hygiene, and the number of variables in it made him think it was highly overfit. It was important to get this right because important decisions needed to be made. In addition, how we do this regionally is a question we need to think about and talk to Greer Stone as the BAWSCA representative. Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 17 of 20 Chair Scharff would appreciate it if Vice Chair Mauter attended the Council meeting on behalf of the UAC when this topic is presented. Chair Scharff said that a letter could be sent to Council if the Commission chooses. Commissioner Phillips will put his concerns about the One Water Plan in writing and send them to staff. Ms. Nose stated that a list from each commissioner would not help Council understand where alignment was on the issues; however, a letter on behalf of the UAC identifying the areas of issue was helpful for the Council. The UAC could articulate in the letter that it was the Commission’s recommendation to make the One Water Plan an action item for discussion with UAC representation. Vice Chair Mauter recommended that staff provide a letter that highlighted their perceived deficiencies in the report. Staff worked with the consultant, knows the water system well, and had insights and rationales for why some of these assumptions were made. Staff could include in the letter what they would ask to be done differently if they had the budget to have the report redone. Chair Scharff stated it was appropriate to have a subcommittee of three UAC commissioners draft a letter from the UAC after obtaining feedback from staff. The letter will be agendized for the UAC to review and vote to send it to Council. Mayor Lauing did not think it was necessary to ask for an action item. Mayor Lauing recommended that staff say they think this needed to be investigated, redone, or budgeted to make some progress. Mayor Lauing believed a letter from the UAC was a good idea. Vice Chair Mauter, Commissioner Phillips, and Commissioner Tucher will be on the UAC Subcommittee. ACTION: Chair Scharff motioned to establish a UAC Subcommittee tasked with drafting a letter to the City Council addressing UAC concerns regarding the One Water Plan. The drafted letter will be presented to the UAC for approval at the February UAC meeting. Commissioner Metz seconded the motion. The motion carried 7-0 with Chair Scharff, Vice Chair Mauter; and Commissioners Croft, Gupta, Metz, Phillips, and Tucher voting yes. FUTURE TOPICS FOR UPCOMING MEETING ON FEBRUARY 5, 2025, AND REVIEW OF THE 12- MONTH ROLLING CALENDAR As mentioned in Agenda Item 2, advising on grid modernization was one of the UAC’s key roles. Commissioner Metz said that grid modernization needed to be added the calendar soon and he wanted the following questions addressed: What is the detailed plan to spend $500 million in Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 18 of 20 CapEx for grid modernization? What are the underlying assumptions behind the expenditures and are we able to test whether those assumptions make sense? What are the impacts of new technologies, S/CAP, as well as new regulations and laws? Commissioner Metz proposed adding electric and water resilience to the calendar, which were also mentioned in Agenda Item 2. Resilience should be addressed in the contexts of business as usual, minor interruptions/disruptions, and emergency situations. For grid modernization, Commissioner Phillips believed that staff should provide progress reports to the UAC. Commissioner Phillips was extremely interested in having a discussion on how technical developments would be coordinated with the ability to accommodate technologies that customers were interested in. Commissioner Phillips would be satisfied if staff sent the budget to the UAC as he was less interested in those details. Chair Scharff was curious how the grid modernization cost increased from $300 million to $500 million. Assistant City Manager Kiely Nose had not heard it was $500 million until tonight, so she will look into it. Commissioner Metz did not think there had ever been a detailed grid modernization budget presented to the UAC. Knowing the budget details, the discussion could include how costs could be cut by X amount if certain technologies were used. Commissioner Metz mentioned that he spoke with Commissioner Gupta about emergency preparedness. Commissioner Metz proposed adding a topic to the calendar regarding the definition of the design emergency and what role CPAU should take. CPAU defined an emergency as 48-72 hours of electricity disruption but the Office of Emergency Services defined emergency as a much longer period. Chair Scharff suggested that Commissioners Metz and Gupta have an informal discussion with staff. Commissioner Metz thought our low rates could attract more datacenters and suggested adding large datacenters to the rolling calendar. Commissioner Metz was concerned how large datacenters would impact CPAU’s ability to procure the required percentage of renewable electricity. Chair Scharff suggested that Commissioner Metz have a discussion offline with staff. Commissioner Phillips wanted to have a discussion scheduled on our commercial electric strategy and include the following: Do we want more large datacenters? Commercial represents more than 80 percent of our load but only one customer has accepted tiered pricing. Should we make commercial tiered pricing mandatory? Do we want to attract commercial? Commissioner Gupta mentioned that CPAU’s rates were not competitive against Santa Clara’s rates, which is why there were several more commercial customers in Santa Clara but agreed that commercial was a valuable topic to explore further. Chair Scharff stated it was a good topic to discuss the commercial strategy and if we want to become competitive with Santa Clara. Utilities Chief Operating Officer Alan Kurotori suggested that staff address it with their load projections because it had an economic development component as well. Mr. Kurotori pointed out that datacenters ranged from 9-12 megawatts, 100 megawatts, up to hyperscalers. Mr. Kurotori explained that if we sell incrementally more power, as long as it does Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 19 of 20 not trigger a large capital expenditure, we are generally able to leverage some of our infrastructure. Ms. Nose remarked that commercial included economic development, zoning, and the Utility. Ms. Nose suggested that staff reach out to Commissioner Metz or Phillips on this topic before staff returns to the UAC. Commissioner Gupta saw fiber on next month’s agenda and hoped to have a detailed conversation about the progress, budget, phases, approach, and fiber network design. Commissioner Tucher wanted an agenda item on the general communication strategy, including soliciting customer feedback, community relations, PR, and how we work with local media. Chair Scharff asked Commissioner Tucher to talk to staff offline. Utility rate increases were coming, there was coverage in the local press about our big investment in CapEx programs such as grid modernization, and Commissioner Tucher was concerned that he had not seen much UAC discussion about communication. Vice Chair Mauter asked if staff would appreciate UAC input on community relations. Mr. Kurotori replied that communication and notifications were embedded in a lot of staff’s work operationally. Mr. Kurotori thought it might be helpful to define some of the strategies or higher level items that staff was pursuing, so he will talk to Commissioner Tucher to see if that would meet his needs and then staff could express it to the entire Commission. Ms. Nose offered to talk with Commissioner Tucher. Ms. Nose recalled that Mayor Lauing identified communication and community engagement as a priority in his comments on Monday night, so she expected it would be part of the broader Council priorities in 2025 when Council has their retreat in January. Commissioner Tucher agreed to discuss the topic of Utilities communication with staff. Vice Chair Mauter saw four items on the February agenda and asked what was being covered on the commercial customer survey. Ms. Nose replied that staff went through the agenda today and was not certain if some of the scheduled items would be ready. Staff will work with the Chair and Vice Chair on what topics would be ready for the February meeting. Utilities Communications Manager Catherine Elvert explained that Utilities regularly conducts customer satisfaction surveys of its various customer groups to assess perceptions of the Utility and satisfaction with various things such as rates, programs, and environmental initiatives. In partnership with the California Municipal Utilities Association, a survey was conducted of our business and key account customers. In the past, staff brought the survey results as a presentation for the UAC’s information and discussion on the key findings, takeaways, and action items. Vice Chair Mauter wanted to be conscious about the number of items on the agenda out of concern for the length of UAC meetings. Vice Chair Mauter expected there to be a significant amount of conversation on fiber because it had not been talked about since she arrived on the UAC and there may also be a lot of discussion on the Tier 2 water allocation during drought. COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS None Utilities Advisory Commission Minutes Approved on: February 5, 2025 Page 20 of 20 ADJOURNMENT Vice Chair Mauter moved to adjourn. Commissioner Metz seconded the motion. The motion carried 7-0 with Chair Scharff, Vice Chair Mauter; and Commissioners Croft, Gupta, Metz, Phillips, and Tucher voting yes. Meeting adjourned at 10:19 PM.