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HomeMy WebLinkAbout2025-03-25 Utilities Advisory Commission Summary MinutesUtilities Advisory Commission Minutes Approved on: April 2, 2025 Page 1 of 27 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF MARCH 5, 2025 REGULAR MEETING CALL TO ORDER Present: Chair Scharff, Vice Chair Mauter, Commissioners Croft, Gupta, Metz, Phillips, and Tucher Absent: None Chair Scharff called the meeting of the Utilities Advisory Commission (UAC) to order at 6:01 p.m. The clerk called roll and declared seven were present. AGENDA REVIEW AND REVISIONS None ORAL COMMUNICATIONS There were no public comments. APPROVAL OF THE MINUTES ITEM 1: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on February 5, 2025 Chair Scharff invited comments on the February 5, 2025 UAC draft meeting Minutes. Commissioner Phillips referenced Packet Page 23, the paragraph that read “Commissioner Phillips asked what the output was,” and he requested that the following be added: “Staff asked if the outage scenarios presented would provide adequate insight to pre-inform future consideration of microgrids in Palo Alto. Commissioner Phillips commented it would be more useful in understanding of the type and duration and possibly number of outages that would make the microgrid economical.” Chair Scharff saw no objection and declared that the Minutes would be approved with that addition. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 2 of 27 ACTION: Commissioner Phillips moved to approve the draft minutes of the February 5, 2025 meeting as amended. Vice Chair Mauter seconded the motion. Motion Carried 7-0 UNFINISHED BUSINESS None UTILITIES DIRECTOR REPORT Kiely Nose, Assistant City Manager, delivered the Director's Report. Recent City Council Actions Related to Utilities: • February 3: Authorized the City Manager to execute an agreement with the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) for a $16.5 million grant to CPAU for gas capital improvement. Staff have executed this grant agreement on the City side, but it has not yet been executed by PHMSA due to federal administrative changes. PHMSA is revising terms and conditions and is expected to provide guidance for grant recipients in the coming weeks. It is currently unclear whether the City's grant will ultimately be funded. We are waiting to work with the Federal administration and will update the Commission as we know more. • February 10: Approved various contracts for the Commercial and Industrial Energy Efficiency Program, WaterSmart customer portal, verified emission reductions for calendar year 2025 through 2034, and on-call field inspection and construction management. • February 24: Council planned to review the 2025 workplan, priorities and objectives at the end of the month, but due to timing constraints, this item will be covered in March. Green v. City of Palo Alto Settlement Update: The Green v. City of Palo Alto settlement payments were originally scheduled to be paid out to class customers over a three-year period. The City is accelerating that process. The payment that customers will receive in their bills between March 10 and April 11 will be a combination of both the second and third installment. This will complete all settlement actions and administration before the end of the fiscal year. The City is notifying customers by postcard about the accelerated payments. Legislative and Regulatory Update: The 2025 legislative year deadline for bills to be introduced was February 21. Many introduced bills lacked substantive language. However to note, staff are tracking SB 540 (Becker) to create a regional electricity market, and AB 1207 (Irwin) and SB 840 (Limón) to reauthorize Cap and Trade. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 3 of 27 The State Fire Marshal released updated Fire Hazard Severity maps for the State of California in the month of February. For Palo Alto, consistent with past maps, the Foothills region of Palo Alto is mostly a mixture of high and very high fire hazard zones. With the updated maps, now a small region including some key account customers are considered in moderate fire hazard zones. The City has a specific timeline for providing the information to the public for review and comment, adopting the recommended maps by local ordinance, and submitting the ordinance and required documents to the Board of Forestry and Fire Protection. The City will also review and update its Wildfire Mitigation Plan accordingly. Grid Modernization: The cost of the grid modernization project was discussed at the February UAC meeting. The current budget for the project is $300 million with the recent resolutions for debt reimbursement approved by Council reflecting $350 million. The additional $50 million helps provide flexibility should costs rise. Staff estimate that about half of the project costs are for equipment replacement that would be necessary in the future regardless of electrification. The project duration is anticipated to be 6-7 years or longer. In addition to the grid modernization CIP, there are approximately $60 million in electric utility investments included in the FY 2025-FY 2029 CIP budget. These projects include investments in system improvements, substations, security enhancements, routine wooden pole replacement, and utilities undergrounding. Gas Main Replacement Project Update: The Gas Main Replacement Project #24B project is scheduled to be completed at the end of this month. This project involves installing around 3.5 miles of gas main and services from Highway 101 and University to Webster and University, including the surrounding streets. CPAU also replaced gas pipeline at the Town & Country Village and on Geng Road. The Contractor (Daleo Inc.) is currently working on Middlefield Road between Lytton and Hamilton Avenues to install the last section of pipe. Hydroelectric Update: After an exceptionally dry January, the Northern Sierras saw better than average conditions in February, while the Central Sierras saw roughly average conditions for the month. For the water year to date, precipitation and snowpack levels are about 20% above average levels in Northern California, while they are about 20% below average in Central California. However, reservoirs across the state remain slightly fuller than average for this time of year. And overall, the City’s hydroelectric resources are still projected to produce roughly their long-term average levels of output in fiscal years 2025 and 2026.  Federal actions threaten the operations and efficiency of the Western Area Power Administration (WAPA) and the Central Valley Project (CVP), largely through suspended federal grant money and staff reductions. This doesn’t directly impact Palo Alto's ability to provide power, but it could increase the costs of supplying electricity. Customer Programs Update: On February 13, the City launched a suite of new program services to make it easier for residents to electrify their homes. This includes rebates for heat pump Heating, Ventilation, and Air Conditioning (HVAC) projects and incentives for gas meter disconnections. A new “Rebate Hub” allows customers to apply for rebates and request quotes from contractors. Residents can now receive a free online home electrification assessment Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 4 of 27 powered by QuitCarbon and free phone consultation with an electrification expert. More information can be found at www.cityofpaloalto.org/electrifymyhome. NEW BUSINESS ITEM 2: ACTION: Approval of the Fiscal Year 2026 Water Utility Financial Forecast including reserve Transfers, and Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service From Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service) 6:45PM – 7:30PM Lisa Bilir, Senior Resource Planner, displayed slides highlighting some of the changes since coming to the Commission in December with the preliminary rate proposals. Feedback from UAC Budget Subcommittee meetings had been incorporated into the proposals. She stated that the Water Utility provided pristine, reliable water to Palo Alto and it maintained and replaced the infrastructure in the water distribution system. The proposal was for a 10 percent rate increase in 2026. Costs were increasing and reserves were nearly exhausted. All the Rate Stabilization reserves would be used – $3M in 2025 and $1M in 2026. Some of the Operations and the CIP reserves would also be utilized. They had been informed that a 10 percent increase would potentially be more acceptable to the community than the 14 percent overall water rate increase. She discussed how the 10 percent rate increase would be maintained by deferring capital work, which could increase costs for capital work because of inflation and possible additional emergency repairs. SFPUC rates increased 2 percent, and staff lowered the proposal for the distribution rate increase to 17 percent, which was the same rate proposed last year, and the combination of those two rates in 2026 would be 10 percent in 2026. An alternative proposal was outlined in the report to bond finance two tank replacement projects, which could lower the rate increase in the outer years to 7 percent and less capital would need to be deferred, which she discussed. She furnished a slide outlining bill comparisons, which came from Midpeninsula Water District, and a slide showing the drivers of the 10 percent rate increase. She presented charts showing water costs and revenues and water operations reserve projections. Staff recommended that the UAC recommend that Council adopt a resolution approving the FY2025 reserve transfer ($3M from the Rate Stabilization Reserve to the Operations Reserve) and the other increases to the rate schedules reflecting the rate changes. Commissioner Croft inquired if there was anything that could be done to save money in the regular operations, such as aligning grid mod projects when digging was being done and deferring CIPs in those areas of the city. She asked if with other utilities there was technology that could be used like the Wastewater Plan technology that looked at pipes. Matt Zucca, Assistant Director of Water, Gas and Wastewater (WGW) Engineering and Operations, answered that they were taking action to save money in the regular operations aligning grid mod projects, which he elaborated on. They would look to reduce neighborhood impacts. He explained that it may not be reflected in the numbers presented. He expressed that there was no technology like the Wastewater Plan technology that could be used for other utilities. The City had a truck that CCTV’d the sewer lines, and that program would be Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 5 of 27 accelerated within the collection system to extend the life of the asset and to do spot repairs. The same type of technology could not be used on the water and gas side. Commissioner Phillips queried if the SFPUC range of 2 percent was a final number or if it would change again and what would happen to the financial projections and the rates if it changed. He questioned if the Commission would be approving a potential 10 rate increase, not a contingent rate increase. Ms. Bilir replied that they would be hearing from SFPUC, she believed on March 21, concerning their rate notice and the decision of their Commission would be on April 22. Once the rate increase was known, staff would modify the rate proposal, which would go to Council, and the CIP would be reduced further if necessary. Staff was planning to hold the overall rate increase at 10 percent. Kiely Nose, Assistant City Manager, added that that was not a foregone conclusion and the Commission could recommend its desire. Commissioner Phillips thought it would be prudent to wait and to set rates after there was firm commitment from SFPUC as to the raise. Ms. Bilir responded that they would like to go to the UAC and the Finance Committee prior to going to Council with their proposal and prior to issuing their Prop 218 notification, which would be issued in early May. She believed the Council meeting would be June 16. They could return to the UAC, but they wanted to go to those bodies to get approvals in advance of those items. Ms. Nose mentioned that it had to be done in this way for noticing requirements to meet the necessary processes. The UAC could consider staff reporting back on the actual rate, so a supplemental recommendation could be made while it was moving through the next steps. The UAC could consider there not being a rate increase beyond X and provide priority guidances, so the Finance Committee and Council could understand the lens of the UAC. Commissioner Phillips commented that that sounded painful. He inquired if the UAC would be approving a 10 percent raise or a 10 percent raise contingent on the actions of the SFPUC. Ms. Nose answered that the Commission would be making a recommendation for approval by the Finance Committee and Council. Staff was seeing the UAC’s feedback on the rates as proposed and a perspective or recommendation should the SFPUC come in at a higher level, which would impact or put upward pressure on the rates. She discussed the policy choices before the UAC. Commissioner Gupta summarized some of the details and output from the subcommittee. The subcommittee and staff discovered two potential sources of savings for water and wastewater for the UAC’s consideration, which included passing through the cost of credit card fees to Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 6 of 27 customers, which was listed as a potential Work Plan item, but alternatively it could be agendized for the Commission to work out. The other cost savings to consider was a State and City mandate to purchase EVs, which he explained, and the UAC could explore seeking carb waivers and perhaps a policy adjustment at the Council level. Commissioner Croft added that regardless of the cost savings, they thought they should request a waiver for vehicles that were not available as EVs. Chair Scharff asked if it would be appropriate to make a motion to pass on credit card fees or if it needed to be agendized separately. Ms. Nose answered that it would depend on the action. If the desire was to change rates for FY2026, it needed to be part of the recommendation tonight. If it was being thought of as to how to manage costs perspectively, she did not think it had to be part of a UAC motion. Chair Scharff thought tonight’s motion could include, if the UAC agreed, 10 percent but that costs should be lowered, which would include credit card fees, the Finance Committee weighing in on it, and a carb waiver for EVs not purchasable and to not purchase EVs that were 3 times as much. Alan Kurotori, Utilities Chief Operating Officer, thought the credit card fees would be an easy recommendation to make. The clean fleets rule was mandated by the State, and staff should probably bring more information back prior to making the recommendation. Chair Scharff asked if waivers could be requested. Ms. Nose thought the UAC could recommend that staff and Council mitigate the additional charge associated with EVs as State and City guidelines were at play. She understood that the Commission wanted to abide by state law but that aggressively pursuing EV’s beyond that should be looked if the cost of those EVs was exponentially larger. Chair Scharff confirmed that was correct. Ms. Nose noted that, if Council adopted, it would be helpful for staff to understand if the UAC wanted to lower the 10 percent or reinstate the CapEx expenses, which had been deferred, up to and maintaining the current 10 percent, so keep it at 10 but deprioritize X and reprioritize X. Chair Scharff wanted to keep it at 10 percent but with putting the savings toward the CapEx that would have otherwise been deferred. Vice Chair Mauter supported the recommendation. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 7 of 27 Commissioner Tucher addressed CapEx and asked how painful it would be to defer roughly $7M out of the current plan. He discussed the 2.1 percent increase in wholesale rates from SFPUC and asked if in December they were signaling that it would be zero. Ms. Bilir replied that last year’s forecast from SFPUC as of December was zero until they received the range in January. They went to the Finance Committee and to the UAC in December and there was no vote, and now staff was returning with the full proposal. Commissioner Tucher wanted the record to reflect that there had been narrative around the number. He asked what was driving the OpEx increase and what the overall CapEx was for water. Mr. Zucca understood the question to be related to the pain that would be felt for the deferral of capital. He remarked that staff would not have recommended this if they did not think the deferral could be accommodated in the short term, which he elaborated on. He expressed that generally the City had around $10M of capital projects every two years, which was budgeted for. They were in the process of starting a Master Plan for a specific pipe that was found to not have the longevity it was originally thought to have, and they were entertaining and evaluating an accelerated program for that particular type of pipe, so he wanted to keep a placeholder as they were still in the evaluation phase of that larger effort. Commissioner Tucher understood that it was roughly $10M every two years and that this was a proposal to defer roughly $7M out of a two-year period. He requested some discussion on OpEx. Mr. Zucca stated they were basically taking two-thirds of one project and moving it out two years.. Ms. Bilir referenced Slide 4 showing the drivers on the OpEx side, which she elaborated on. Mr. Zucca explained that water was not a static operating expense. Vice Chair Mauter questioned if backflow prevention was billed to households and if they were staffing up to provide the service. Mr. Zucca responded that they were staffing up to provide that service. They were in what he called Phase 2, which he explained, and the City was doing all the cost recovery. If they decided to go into the third phase, then it would be full cost recovery for additional staff. Vice Chair Mauter highlighted the potential cost savings to consumers associated with bringing the Backflow Prevention Program under the Utility itself. She thought the inflation seen on the salaries and benefits was tied to the program, which would have long-term cost savings even if the upfront investment was realized in a small rate increase. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 8 of 27 Mr. Zucca stated that they were working through the details of the next phase, which would be to send out mailers notifying folks to get the testing. The third phase would be the City taking on the entire scope of the testing for those who had not gotten the testing. Commissioner Tucher questioned if Dave Warner’sclaim that there would be a 90 percent increase in OpEx over 8 years was correct. Ms. Bilir answered that that 8.3% per year is approximately correct.She added that part of it may be because of some one-time-type costs during that time period. Commissioner Gupta commented that the current proposal did a good job balancing trying to keep rates low and deferring CapEx. He worried about continued deferrals and what it might mean to maintenance and future costs. He considered it to be a reasonable amount of deferral and rate increase. He noted that the local Daily Post had a headline “Rate Hike for Leaking Pipes.” The complaint in the article was that rates were higher because of water leaks. He noted that part of what was being deferred was leaking pipes to keep rates low, which he found tricky to resolve. He questioned how much rates were impacted by leaky pipes. Ms. Bilir answered that what they were forecasting for leaks was not driving the rate increase. The leaks were in line with the last couple years. It was a consistent cost area over several years. Commissioner Phillips asked if the report referencing Palo Alto being in the top half of the state for leaks was good. Mr. Zucca replied that Palo Alto was in the top three percent based on the latest numbers. He explained that there was real water loss and nonrevenue water loss, and they were required to submit to the State a third-party audit of the water loss. Commissioner Phillips did not consider leaks to be a real issue. Commissioner Metz explained why he was inclined to not defer the CapEx work. Vice Chair Mauter questioned why staff chose this scenario versus the other one. Mr. Zucca discussed why staff chose this scenario. Vice Chair Mauter addressed the rate increase drivers and asked if the CIP of $1.8M was done now if the 13.9 and the 1.5 would be the rate increase. Ms. Bilir answered that when doing a rate increase they were comparing what would happen in FY2026 if rates were not increased and what would happen if rates were increased, which was the comparison on the chart she provided. They were using a four-year average to estimate what would happen to the different categories if rates were not increased. The -5.4 percent Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 9 of 27 represented how much would be recovered for CIP if rates were not increased versus making the rate change and specifically deferring capital, which would lower the amount of costs associated with CIP by 5.4 percent. Chair Scharff stated it would lower the cost of CIP by 5.4 percent. Ms. Bilir indicated that she misspoke. Chair Scharff asked if not doing the $1.8M, which was the 5.4 percent low, would maintain a 10 percent rate. Ms. Bilir confirmed that was correct. Commissioner Tucher [inaudible 1:10:14] Ms. Bilir voiced it was not an apples-to-applies comparison of the $7.1M over the five-year period to this $1.8M over this comparison. The $1.8M was for one year. Chair Scharff asked if the $1.8M would be deferred and if $4M would be taken from reserves. Ms. Bilir answered that they would use reserves and the comparison used averages, so the numbers were not an apples-to-apples comparison. Chair Scharff inquired if $4M was not taken from reserves and the CIP of $1.8M was done if the rate increase would be 14 percent. Ms. Nose thought another way to look at it would be what additional costs would create a 1 percent change in the rate increase, which she explained. Ms. Bilir answered that it would be about $450K. Chair Scharff asked if doing the CIP would be 2 percent; with 12 percent the CIP could be done. Ms. Nose answered that it was 4 percent. Chair Scharff asked if that would get 14 percent, which staff originally recommended, and if $4M would still be used from reserves. Ms. Nose affirmed that was correct. Chair Scharff inquired if it would be a 22 percent rate increase if no reserves were used and the CIP was done. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 10 of 27 Ms. Nose answered that if bar-napkin math was used that would be correct. As different levers were moved, it would change reserve levels and many calculations. Chair Scharff hoped the subcommittee’s $1M recommendation on vehicle replacement and the credit fee issue would be recommended to Council. He asked on what rent was being increased by $0.2M, if it was the General Fund extracting more money for Utilities. Ms. Nose replied that the City had a rental policy in place. They would do an appraisal by a third-party of the areas owned by the City, and the Non-General Fund users of those spaces would be charged in alignment with that appraisal. The appraisal happened every five years, so essentially a true up would happen, and that was occurring in this period. Chair Scharff stated that it seemed counterintuitive that over the last five years office rents had gone up. He understood that office rents had crashed. Ms. Nose stated it was not all office, that it was highest and best use as well, which could also be residential in some areas, etc. Chair Scharff did not realize the General Fund charged for reservoirs, etc. He stated that maybe Council should relook at that. Commissioner Gupta stated that rates were kept consistent during the pandemic, and he thought rates might be increasing more than what they would have due to that. Chair Sharff asked what was being anticipated in the outyears if the 10 percent should be done and what it would be if the 14 percent should be done. Ms. Bilir responded if 10 percent was done if they would hold the rate increase at 10 percent every year during the proposal by deferring CIP throughout the 5-year period. She did not have a confident answer as it related to the 14 percent. Chair Sharff supported 10 percent, but he was concerned with what staff would return with next year and that eventually there might be a 25 or 30 percent rate increase, in which case he would not be comfortable with the 10 percent rate increase. He queried if that had been modeled. Mr. Kurotori thought taking funds from reserves limited flexibility in the future in case larger rate increases were coming from SFPUC. Chair Scharff asked, assuming SFPUC rates stay the same, if everything remained the same and the City did not have the $4M, if rate increases would have to be dramatic next year. Vice Chair Mauter requested that Figure 7 be displayed – the reserve level, the figure Chair Scharff was referring to in Water Utility. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 11 of 27 Ms. Bilir did not see a $4M reduction. The chart showed the year-end reserve balances and the dark blue bar represented the Rate Stabilization Reserve going from $4M at the end of FY2024, to $1M at the end of 2025, and then to zero at the end of 2026. Commissioner Gupta noted that there was mention in the Staff Report that the Finance Committee had discussed whether they were the appropriate reserve levels or whether they might be reduced, and he asked if staff was investigating that. Ms. Nose responded that it was an area that staff was aware of for further study. In terms of the review between December and now, staff had checked to make sure they were in compliance with the rate policies. Unfortunately, she suspected that a formal study might show the reserves to be insufficient. It was under review. Staff agreed that a broader study should be done, but she did not think it would come back in a cost-reduction manner. Commissioner Phillips requested that it be agendized for discussion. It was interesting that the debt covenants from 2009 and 2011 were on the individual reserve but also the sum of the reserves for water, gas, and electric. He wondered why they were not jointly managed. He stated that it made no sense to have individual optimized numbers. Mr. Kurotori noted that each utility had to be accounted for separately and the loans the City had taken had to be repaid between the funds, so there must be a separate accounting structure. Ms. Nose thought it would be a great item for the Work Plan discussion for the upcoming year. She felt that there was mixing of apples and oranges. Some things were associated with debt covenants and some with operating reserves, and each was governed by different regulations. Commissioner Gupta echoed Chair Scharff’s concerns related to deferring CapEx and that in the future larger reserves may need to be maintained. He thought the 10 percent rate increase was reasonable. He asked his colleagues were they stood on the proposed alternative and which option they would propose. Chair Scharff stated that staff explained why they were opposed to the alternative option. Public Comment There were no requests to speak. Vice Chair Mauter moved that staff’s recommendation for a 10 percent rate increase be accepted and that the UAC encourage Council to consider the savings opportunities and that any savings opportunities be applied toward a reduction in the use of the reserve expenditure. She wanted the cost savings identified in the proposal to be applied to a reduced spend on the reserve. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 12 of 27 Commissioner Croft did not support subsidizing credit cards. She did not know if the UAC could determine where it should be spent. She stated that the Wastewater Reserve was in great need. Chair Scharff voiced that electricity credit card fees had to go to electricity and wastewater credit card fees to wastewater. Commissioner Phillips seconded the motion. Chair Scharff suggested that the motion spell out the cost savings the subcommittee came up with. Vice Chair Mauter accepted that. Motion Carried 7-0 ACTION: The Utilities Advisory Commission Recommend the City Council 1. Approve the Fiscal Year 2026 Water Utility Financial Forecast shown in this staff report and attachments and approving a reserve transfer of up to $3,000,000 from the Rate Stabilization Reserve to the Operations Reserve in FY 2025; and 2. Amend the following Rate Schedules (Attachment B) effective July 1, 2025 (FY 2026): a. W-1 (General Residential Water service) b. W-2 (Water Service from Fire Hydrants) c. W-3 (Fire Service Connections) d. W-4 (Residential Master-Metered and General Non-Residential Water Service) e. W-7 (Non-Residential Irrigation Water Service) 3. Recommend the Finance Committee and City Council consider the potential cost saving activities (credit card separate charge, electric vehicle replacement policies) as discussed by the UAC Subcommittee to control rate increases and to the extent these mitigate costs, reallocate savings to restore reserves while maintaining the recommended rate increase in 1 and 2 above. ITEM 3: ACTION: Approval of the Fiscal Year 2026 Wastewater Collection Utility Financial Forecast, and Amending Rate Schedules S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger), and Repealing Rate Schedules S-3 (Industrial Waste Laboratory and Analysis Charges) and S-4 (Hauled Liquid Waste Charges) 7:30PM – 8:00PM Lisa Bilir, Senior Resource Planner, provided slides and stated that the Wastewater Collection Utility provided a critically important service to Palo Alto. Palo Alto and neighboring cities sent wastewater to the RWQCP, and some of the facilities at the plant needed to be rebuilt, so some Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 13 of 27 of the costs were to fund that. She outlined the proposal for the Waste Water Collection Utility. There was also an alternative proposal, which she discussed. She spoke of the drivers for the rate increase. The reserves in the Wastewater Collection Utility were depleted, which needed to be restored to within the guideline range. Compared with the preliminary rates that were presented in December, there were a couple changes that increased the level from 18 percent to 20 percent, which she discussed. She shared a slide representing the bill comparison for residential customer, which they had taken from Silicon Valley Clean Water and the Financial Plan, and a slide showing the drivers for the rate increase, which she detailed. She also spoke of the alternative proposal. She supplied charts showing cost and revenue projections and Operations Reserve projections. Staff recommended that the UAC recommend that Council adopt a resolution approving the financial forecast. They were recommending to repeal two rate schedules (S3 and S4), which she stated was a clean-up item. Public Comment There were no requests to speak. Commissioner Gupta, a subcommittee member, reported that the same potential savings as in the water discussion were identified, so they recommended the same approach here. With respect to wastewater, they had discussed the rate increases having several factors, including an increasing trend in Palo Alto’s flow share and additional personnel costs. Chair Scharff queried if the subcommittee supported the staff recommendation of 20 percent. Commissioner Croft stated they had spent much time discussing the drivers of the cost increases. She understood that the reserves needed to be replenished. She personally supported the 20 percent. Commissioner Phillips stated that there had been no formal vote. He was not sure if 20 percent was the right number. He mentioned that reserves needed to be replenished. They had identified potential savings and the cost increases, and the flow share seemed real. Commissioner Gupta commented that the alternative had been discussed. He did not know if there had been a formal recommendation for that. Chair Scharff thought a subcommittee should reach some consensus and make recommendations. He added that if the recommendations were split that it would be great to know what they were. Vice Chair Mauter inquired how Palo Alto compared when benchmarking against the other parties to the RWQCP. She wanted to revise the comparison set in the future because she did not think what was being used was the right one. She asked if there were nitrogen compliance regulations coming in 2035 that would likely impose significant additional costs. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 14 of 27 Ms. Bilir responded that they could put that comparison together. Karin North, Assistant Director of Public Works, answered that the secondary treatment upgrade was debt financed at 0.8 percent. They were not sure where the financing would come from for future projects. They had it forecasted in the budget as potentially half SRF for head works and half bond financed, although they were not sure and there was some uncertainty in future outyears. They anticipated that the 20 percent rate increase would be needed because future debt would be high. The secondary treatment upgrade would remove nitrogen, and they would ensure compliance with future nutrient limits. Vice Chair Mauter inquired if the current SRF loan covered the nitrogen compliance and what the additional debt would cover. Ms. North responded that the current SRF loan was upgrading for a secondary treatment project and they were in year 1½ of a 5-year build out. As for additional debt, there were multiple projects in the works, which she outlined. Vice Chair Mauter thought it might be difficult to get SRF loans to cover substantial fractions of those expenses. She believed the UAC should consider what the pass-through costs from Public Works would likely be in the future. She discussed why she felt it was important to build up reserves. She supported biting the bullet a little. Ms. North added that infrastructure was built on Clean Water Act money, which was depleted. She mentioned that construction was constantly happening. She invited the Commission to tour the plant. Commissioner Croft was interested in a tour. She questioned if there was anything behavioral a customer could do to reduce the City’s cost of processing water. Ms. North answered that they did a lot of education outreach, which she elaborated on. She expressed that only human waste and toilet paper should go down drains. Garbage disposal waste should go into the compost bin. Changing the behavior of one consumer would not change the cost. Matt Zucca, Assistant Director of Water, Gas and Wastewater (WGW) Engineering and Operations, added that some communities had adopted policies related to replacing laterals, but the cost would be passed to the homeowner. They had a very aggressive flushing program intended to offset the need for additional capital. Commissioner Tucher questioned what would be communicated to the community as it related to a 20 percent increase on wastewater and if staff was considering a CALMS strategy. He outlined that some of the answers appeared to be in the bar chart. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 15 of 27 Kiely Nose, Assistant City Manager, stated that the proposals were taken seriously. They were large increases and different from the December rates, and staff needed to proactively work on communicating with the public the reasons for the increases. Commissioner Phillips stated that conservation may need to be emphasized. He believed that reducing the flow share may pass through to lower rates. Commissioner Tucher stated that it should not be a surprise that the happenings at the plant were showing up on the utility bills. He encouraged staff to give thought to crafting the message and to get it out so folks would understand what was behind the numbers. Commissioner Gupta questioned if the City’s website showed bill comparisons with Palo Alto’s neighbors. Ms. Bilir believed there were comparisons with other cities on the rates overview page, but she would confirm that. There was also information related to the rate increases and what the rates paid for. Vice Chair Mauter requested that it be updated with a relevant comparison set. Ms. Bilir voiced that she would update it with a relevant comparison set. She displayed a slide with the comparisons to Mountain View and Los Altos, which she expounded on. Commissioner Phillips suggested putting some comparisons to other cities on the website that were not a partner in the plant, such as Redwood City. Vice Chair Mauter agreed. She considered Mountain View and Los Altos to be an appropriate comparison set because 50 percent of Palo Alto’s costs were associated with the plant operation itself. Vice Chair Mauter Moved to accept the recommendation of staff and the subcommittee to move forward with the proposed rate increase with the cost savings identified by the subcommittee. Commissioner Croft seconded the motion. Motion carried 7-0. ACTION: The Utilities Advisory Commission Recommend the City Council 1. Approve the Fiscal Year 2026 Wastewater Collection Utility Financial Forecast, and 2. Amend the following Rate Schedules a. S-1 (Residential Wastewater Collection and Disposal), b. S-2 (Commercial Wastewater Collection and Disposal), c. S-6 (Restaurant Wastewater Collection and Disposal) and Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 16 of 27 d. S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger), and e. Repealing Rate Schedules S-3 (Industrial Waste Laboratory and Analysis Charges) and S-4 (Hauled Liquid Waste Charges) 3. Recommend the Finance Committee and City Council consider the potential cost saving activities (credit card separate charge, electric vehicle replacement policies) as discussed by the UAC Subcommittee to control rate increases and to the extent these mitigate costs, reallocate savings to restore reserves while maintaining the recommended rate increase in 1 and 2 above. ITEM 4: ACTION: Consideration of the Utilities Advisory Subcommittee’s One Water Advocacy Letter and a Commissioner’s Proposed Bay Area Water Supply & Conservation Agency (BAWSCA) Advocacy Letter and Potential Recommendation to City Council 8:00PM – 8:30PM Chair Scharff moved to Item 4, and asked if this pertained to a letter the subcommittee drafted. He asked who was on the subcommittee. Commissioner Gupta stated that was an accurate statement for the One Water Advocacy Letter. The subcommittee included Vice Chair Mauter, Commissioner Phillips, and himself. Chair Scharff asked Commissioner Tucher if thoughts from this should be integrated into this letter or if it should be thought of separately. Commissioner Tucher replied that his letter was very different and had a different audience. His letter related to recommending to Council that they, through BAWSCA, request more dialogue, information, and answers from SFPUC. Chair Scharff declared that the One Water letter would be addressed by the subcommittee first and then Commissioner Tucher’s item would be discussed. [The Commission took a break at 7:55 p.m. and resumed at 8:09 p.m.] Public Comment Peter Drekmeier, Policy Director for the Tuolumne River Trust, appreciated the transparency of Items 2 and 3. He shared slides. He spoke about the drought from 2020 to 2022. He noted that 2023 had been an incredibly wet year. He appreciated rationing, but he spoke of it not benefitting the environment and hurting fiances. He discussed demand projections and water and wastewater sales recovery by FY2026-2027. He explained that it was vital that Palo Alto get information from the SFPUC. Commissioner Tucher asked what information he was referring to. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 17 of 27 Mr. Drekmeier discussed the One Water letter containing a sentence referencing the return period for the design drought, the likelihood of occurrence, and he encouraged that the numbers in the letter be changed, which he outlined. He recommended modeling for water sales and demand being lower than projected. He suggested getting information from the SFPUC concerning the what ifs, which he explained. Commissioner Tucher asked if the design drought model was available to the public. Mr. Drekmeier responded that the drought model was publicly available, which he explained was basically one paragraph. Commissioner Gupta, of the subcommittee, stated that the Commission charged Vice Chair Mauter, Commissioner Phillips, and himself to draft a letter to Council regarding the One Water Plan and the report received a few months ago. He voiced that staff agreed that investments in local alternatives were not prudent or recommended at this time and the subcommittee did not intend to imply otherwise. They believed the UAC had a responsibility to advise Council on the water supply and planning. In the letter, the subcommittee focused on two primary issues of the report, which included the report relying on a premise of a 50 percent cutback scenario, which seemed highly unlikely and which deserved further validation before using the cutback scenario to inform local planning and study and before making significant investments in infrastructure. The second issue was the analytic framework of the report being faulty, which he detailed. They recommended that future reports present the actual underlying metrics, such as dollar cost per acre foot. They had included several strategic recommendations, which he outlined. The subcommittee was concerned about how and why $500K was spent on the study. Chair Scharff thanked the subcommittee for their work. Kiely Nose, Assistant City Manager, had no concerns. Staff was expecting to forward the One Water Plan to Council as an information item, but they would not recommend adoption. The analysis could be used in the model in future choices. They would also forward the letter if the Commission desired. Chair Scharff supported the letter. Commissioner Metz considered the work high quality. He inquired what leverage the City would have to change what SFPUC was doing if the Commission agreed that these were the scenarios to consider and the methodology to use. Chair Scharff replied that it would be up to Council, and he thought part of that would be Greer through BAWSCA and that Council could speak with SFPUC. He did not feel that one city would have much leverage outside of BAWSCA. Commissioner Croft noted that it was said that they did not want to accept the plan, but she wondered if it should instead state that they recommended against using the document for Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 18 of 27 planning or investments decisions at this time. She did not want to discard it. She thought it could be a resource moving forward. She referenced Page 204, the design drought, and stated that the City was relying on Peter Drekmeier and Dave Warner’s analysis related to the probability of a design drought because they had not received an assessment from SFPUC, which she believed could be addressed in the letter from Commissioner Tucher. She addressed the sentence that read “found that no drought in 25,000 years of stochastic modeling that approached the severity the design drought scenario,” and she thought the historical model should also be mentioned, which she suggested read “the SFPUC found no drought in 25,000 years of stochastic modeling or 1,100 years of historic and paleo-modeling that approach the severity of the design drought.” She remarked that they had discussed the “severalF hundred thousand years fourth probability analysis suggested design drought scenario has an exceptionally rare return period, potentially one in several hundred thousand years.” She recommended that be modified to potentially 1 in 8,000 years or that there be a range. Chair Scharff stated that the plan would not be discarded. He asked if the Commission opposed the suggested changes. Commissioner Gupta did not oppose the suggested changes, which he thought would be helpful. He noted that all the points relied on the metrics received from the public. Commissioner Croft stated that it was not clear in the paragraph that the metrics came from the public, and she did not know if it needed to be clearer. Chair Scharff did not think the paragraph needed to note that the metrics came from the public. He wanted to make sure staff had the amendment so they could make the change in the letter. Commissioner Croft read her amendment to staff. The first comment was on the 25,000 years of stochastic modeling and 1,100 years of historic and paleo modeling, so no drought in 25,000 years of stochastic modeling or 1,100 years of historic and paleo modeling that approached the severity. The second change was the sentence that read “potentially one in several hundred thousand years” be revised to say “fourth probability analysis suggests the design drought scenario has an exceptionally rare return period, potentially 8,000 years or more.” She inquired if there should be a recommendation to work with some neighboring cities in order to have a more regional planning process. She was not suggesting embarking on investments but that the City have discussions with other cities to gauge their interest. She inquired why do the One Water letter and why this would not be a regional effort with BAWSCA rather than the City on its own. Chair Scharff explained why he did not support a regional planning process. He stated that was BAWSCA’s role. Commissioner Croft questioned why this would not be a regional effort with BAWSCA rather than the City on its own and if other cities within BAWSCA were doing the same thing and, if so, if a plan could be shared with others to possibly recoup some money. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 19 of 27 Karla Dailey, Assistant Director of Utilities Resource Management Division, answered that they did coordinate and collaborate with fellow cities and that they worked regionally. She discussed why One Water had been done, which included providing a framework for projects. Other cities were looking at One Water planning, but not everyone had the same definition of One Water, and everybody’s territory was slightly different. There may be opportunities in the future to take what each city had learned to inform decisions being made as regional partners. She did not know about recouping money. Chair Scharff discussed why money could not be recouped. Commissioner Tucher questioned, related to regionalizing water recycling, if BAWSCA might state that that was what SFPUC was doing with their alt water. Ms. Dailey answered that BAWSCA was not a water supplier, developer, or purchaser. BAWSCA could facilitate City discussions and discussions between the City and SFPUC. Commissioner Gupta moved to send City Council the One Water letter with Commissioner Croft’s amendment. Commissioner Phillips seconded the motion. Motion carried 7-0 Chair Scharff moved to Commissioner Tucher’s letter. Commissioner Tucher spoke of his letter. He explained that the letter should go through BAWSCA to SFPUC. He was proposing that the Commission vote and present the letter to Council and that Council send the letter to BAWSCA to give them the opportunity to present it to SFPUC. The purpose was to address many topics that had been discussed at meetings, including demand and overprojecting the actual water usage and supply and design drought. He wanted SFPUC to better explain design drought and bring back different scenarios. The letter also included issues related to snowpack and climate change, which he wanted to put to sensitivity analysis, and storage versus the Bay Delta Plan, which he thought would be helpful. He expressed that demand projections were consistently too high and that supply design droughts were too aggressive and too conservative. He wanted to know how different design droughts might change the City’s need for water. He requested that the letter be placed on the BAWSCA Board calendar for the next meeting, which he thought would be March 20. Commissioner Phillips asked what was being expected from BAWSCA and if the City had a direct channel to SFPUC. Chair Scharff answered that the City did not have a direct channel to SFPUC. Council could write a letter directly to SFPUC. He considered the issues raised to be valid. He did not believe this Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 20 of 27 would be helpful to Council Member Stone who was the representative to BAWSCA. He was also considering preserving the authority of the UAC. He thought some of the concerns were included in the One Water letter. He did not think sending the letter would accomplish the SFPUC doing the things that are requested in the letter. He understood that Council Member Stone had the letter. He felt that sending two letters would take away from the One Water letter, and he was not sure what would be gained by sending it to Council. He did not support it. Vice Chair Mauter found some valuable overlap between the One Water letter and Commissioner Tucher’s letter. She inquired if the UAC or Council should make the decision to send the letter. She questioned whether the UAC should sensor itself or if Council should filter what they received from the UAC. Chair Scharff preferred that Council not filter what they received from the UAC. He wanted Council to take the UAC seriously and to listen to what the UAC was saying. He thought Council and Council Member Stone were aware of the issues addressed in the letter. Commissioner Tucher asked what opportunity Council would have to be aware of the issues in the letter. Chair Scharff replied that Council was aware of the design drought. Commissioner Phillips appreciated the letter. He wanted answers to the design drought and the overdemand estimation on the part of SFPUC. He stated that Council may be aware of these issues but he did not know if they realized that the UAC was concerned. He wanted the SFPUC to know this was a concern. Commissioner Tucher remarked that he tried to work the letter in a way that would invite BAWSCA to play its role and to present it to SFPUC. If BAWSCA did not want to do that, he wanted Council to give SFPUC the letter. Chair Scharff mentioned that there was a third choice, which was to write a letter to Council informing them that the UAC could not get the information and to ask for Council’s help in getting answers from SFPUC and BAWSCA. He stated that he could support that. Commissioner Tucher commented that that may be a good cover letter for the letter. Commissioner Phillips remarked that he would support it with Scharff’s suggestions. He voiced that the questions needed to be answered in order to make prudent recommendations to Council. Vice Chair Mauter asked if it was possible to do the line edits at this meeting in order to get the letter to Council through. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 21 of 27 Chair Scharff declared that that was possible. Commissioner Croft felt that this letter requesting answers to questions could go with the One Water letter in the same packet to Council. Vice Chair Mauter explained why it was not possible to put the letter in the One Letter Plan letter. The One Water letter was written to respond to the conditions given by SFPUC, and the second letter questioned the validity of those conditions. She was not sure that the One Water Plan letter was the correct place to make these distinct requests. She considered it to be more of a future-looking effort. She would support asking Council to help the UAC get answers to the questions and to move away from language asking them to pursue one particular route over another in order to seek the answers. Commissioner Tucher asked what the one route was. He suggested sending the letter. Vice Chair Mauter thought Chair Scharff was suggesting that potentially Council Member Stone raising the questions independently could be more politically effective in eliciting the needed answers. Commissioner Tucher wanted Council to decide what should be done. Vice Chair Mauter felt that a unanimously supported letter would be a stronger letter to Council. Seeking compromise seemed to be an important path to pursue. Commissioner Phillips felt that the reasonable compromise would be Chair Scharff’s suggestion for an alternative letter. He asked how the letter could be drafted. Chair Scharff thought the letter could be drafted at this meeting. He suggested that staff draft it and that the questions be succinctly listed for Council. Commissioner Gupta stated the letter raised very important points that needed to be addressed by BAWSCA and SFPUC. He liked the approach recommended by Chair Scharff and Commissioner Phillips. He was concerned that Council may choose to not forward the letter if it was presented to them, which would be a lost chance to get the questions answered. Chair Scharff asked staff if they were drafting the letter. Ms. Nose replied that she had started to recorder type the initial thoughts the Commission had identified. She felt that the tapes could be viewed to frame that out. She thought staff was missing the specific questions and that the UAC’s dialogue on that would be helpful. Commissioner Tucher stated that the questions were in the public. He recommended that the UAC follow through with Chair Scharff and Commissioner Thomas’ suggestions. He wanted the questions to be listed and presented with the letter he drafted for Council to use if they Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 22 of 27 desired. The questions included asking the reasoning for using higher enterprise forecast, which he did not want to lead with. He wanted to ask the SFPUC rerun the analysis based on lower demand projections. Vice Chair Mauter noted that the first question related to the accuracy of the demand projections over the past 25 years, the second concerned the reason for using the higher enterprise forecast, and the third asking to run these projections based on the Finance Bureau and to run the demand numbers going out 25 years with decreased demand. Commissioner Tucher wanted to lead with the question related the reason for using finance numbers. The more important was to choose another lower set, like the finance numbers, and to return with different scenarios. Commissioner Croft queried what they were being asked to rerun. She noted it to be a new risk assessment using lower, more realistic demand projections with a sub-bullet referencing the fiance bureau numbers and another sub-bullet referencing numbers based on actual current use, which could say growing at one percent per year. She questioned if the UAC was looking for the long-term risk assessment to be rewritten with different assumptions or something else. Vice Chair Mauter asked staff how those numbers would help in planning and forecasting the water supply plan and rates. Commissioner Tucher stated that a lot of what was known had come from public comment and Peter Drekmeier. He suggested that Mr. Drekmeier comment on the best way to formulate the question. Ms. Nose asked what the SFPUC was being asked to rerun with the finance numbers and what specific financial or model outcome was being sought. Commissioner Phillips did not want to instruct them to rerun anything. He suggested asking them about the impact on the current and projected financials and the risk that might be seen from lowering the numbers. Commissioner Croft wanted to know, with realistic projections of supply and demand, the scenarios for running out of water. She wanted to see a more realistic demand estimate using the financial model and the current use that would grow at a reasonable rate. On the supply side, she wanted to understand the likelihood of an 8½-year drought occurring and the City’s risk. If the drought was not likely, she wanted there to be a more realistic design drought. She did not consider the numbers realistic. Commissioner Phillips suggested that a subcommittee to draft the letter. He mentioned that Commissioner Croft was on the right track. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 23 of 27 Commissioner Croft had taken notes and understood that the following was being requested: 1) a new risk assessment (she was not sure of the ask) and a new set of lower, more realistic demand projections using the Finance Bureau numbers and the current numbers and growing at X rate. 2) SFPUC to publish the likelihood of the design drought occurring, the return period for the design drought, and to model the likelihood of using a less severe drought using 7½ years. 3) Looking back at the three droughts modeled in the LTVA, what the storage levels would be if the Bay Delta Plan was in place. Vice Chair Mauter inquired when BAWSCA’s demand analysis would likely be complete. She thought it would be valuable to request that SFPUC use BAWSCA’s future demand projections maybe in addition to their current finance forecast or enterprise forecast. She felt that Commissioner Croft summarized the supply side pieces fairly well. When SFPUC and BAWSCA were at the UAC, she had detailed several analysis she wanted to see on the demand and supply sides and on the adaptive or trigger-based deployment side, which could be found on the recording. She suggested pointing Council to that meeting as a source of other questions that were raised by the UAC. Ms. Dailey thought BAWSCA wanted to get the demand analysis done soon and before everybody had to do their urban water management plans next year. Commissioner Gupta believed Commissioner Tucher had raised the prospect of doing a joint session with Council, the UAC, and BAWSCA or SFPUC, which may be added to the list of questions. Commissioner Phillips supported a shorter list of questions versus a longer list, and he suggested that that be communicated separately. He wanted there to be three questions. Ms. Nose captured four questions from Commissioner Croft, which she shared on the screen, and asked if Commissioners agreed on them. She thought it was a great idea to point Council toward the UAC discussion as a reference point. However, if the UAC wanted those to be answered or advocated for by Council, she felt they should be enumerated. She did not believe it was fair to ask Council to watch the video for those. Discussion ensued related to phrasing the questions displayed on the screen. Commissioner Tucher suggested that Peter Drekmeier speak about the topics. Chair Scharff wanted to complete the questions and then ask Peter Drekmeier if he had any concerns. Discussion continued on the phrasing of the questions. [The Commission took a five-minute break to work on the questions] Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 24 of 27 Chair Scharff moved to send the BAWSCA Letter with the amended changes made by the Commission. Commissioner Phillips Seconded the motion. Peter Drekmeier stated that BAWSCA gave demand projections to the SFPUC, which he discussed being a problem. He noted that care needed to be taken when addressing demand projections. He added that giving SFPUC an end-of-year date would result in them waiting that long. He voiced that it needed to be very specific without any opportunities to fudge. He liked the direction it was going. Vice Chair Mauter stated that BAWSCA was doing new demand projection models that hopefully would be less inflated. Mr. Drekmeier commented that they would be less inflated and there would be a sensitivity. He suggested using their 2022 demand study high and low scenarios. Chair Scharff declared that the Commission accepted that. Mr. Drekmeier added that they had done a lot of investigative work to understand what was happening, so they created a water supply calculator. He could crunch the numbers, but unless they came from the SFPUC, they would be questioned. He explained that the SFPUC had created a water supply worksheet and that different scenarios could be produced quickly. He noted that having the low-end and high-end numbers would provide information to have a discussion. He suggested editing Number 4 to read “at current demand” and to remove “historic.” He voiced that Number 3 was open ended and that it would be interesting to see their response. He thought the UAC wanted to know how shortening the design drought using reasonable, realistic demand projections would impact the water supply deficit that would need to be made up for with expensive, alternative water supplies. Vice Chair Mauter confirmed that UAC wanted to know how shortening the design drought using reasonable, realistic demand projections would impact the water supply deficit that would need to be made up for with expensive, alternative water supplies. Mr. Drekmeier thanked the UAC for the time they had put into this. Motion Carried 7-0 ACTION: Motion Approved ITEM 5: ACTION: Review and Recommend Utilities Advisory Commission FY 2025 – 2026 Work Plan for City Council Approval 8:30PM – 9:00PM (Moved to April Agenda) Chair Scharff asked if Item 5 could be rescheduled. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 25 of 27 Kiely Nose, Assistant City Manager, would reschedule the item for April and address the tentative accordingly. Chair Scharff suggested the April meeting be lighter so time could be spent on this item. Ms. Nose voiced that the gas and electric rates needed to be addressed. They would meet with the Budget Subcommittee in advance of that meeting. They could perhaps do just the gas and electric rates and potentially delay time of use in terms of electric and do the Work Plan. Chair Scharff agreed with that. He suggested that the Work Plan be addressed by exception. Chair Scharff agreed that that would be a good approach. He asked if staff had material on the Work Plan. Ms. Nose stated that there was a draft, which was the standard Work Plan, and there were about 14 suggestions by Commissioners to add to that. Of the 14, she asked how many should be added and in which manner. She expressed that the item could be taken up simply to appoint a subcommittee. Chair Scharff did not want to appoint a subcommittee. Vice Chair Mauter asked if there could be an offline vote. Chair Scharff stated that was not possible. Ms. Nose noted that the item was Brown Acted, which the Commissioners should honor in alignment with development of items on the plan. Commissioner Tucher asked how quickly the paper that was just worked on could be presented to Council. He believed there was a BAWSCA meeting on March 20, and he thought 2 or 3 months would be lost if that meeting was not made. Ms. Nose stated that the earliest she could get it to Council on consent would be March 24. If it needed to be an action item, it would not happen until April or May. If Council should pull it from the consent calendar, it would likely not be heard until May. ACTION: Moved to April FUTURE TOPICS FOR UPCOMING MEETINGS ON (DATE) AND REVIEW OF THE 12 MONTH ROLLING CALENDAR Commissioner Gupta – Drafting Advisories to the Council, what is the daily operation and what will appear in front of the commission, tracking system for follow up items. Drafting Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 26 of 27 Commissioners memo to agendize these items. He asked what would be the best way to discuss and agendize these topics. They had considered drafting a Commissioner’s Memo on the topic and getting it on the agenda, although they would be happy to go about it in a different way. Chair Scharff remarked that he would think about it and follow up with Commissioner Gupta. Commissioner Tucher – formalize a standing agenda item to recap what needs an advisory to Council. He noted that in some meetings there would be nothing and one or two items in others. The advisory could take the form of a short writeup or it might require a Commission member going to a Finance Committee or a Council meeting to answer questions, etc. It would mean that at the end of each meeting the body would speak to what might need to be advised on. To do anything in rapid follow up, a standing subcommittee of three UAC members would be needed to take a needed advisory to draft, to edit it, and to send it. Chair Scharff voiced that he and Vice Chair Mauter would address it with staff. Commissioner Phillips – Discussion on the reserves, better understanding of the rules for each reserve and how they interact amongst one another. He requested it be agendized. Kiely Nose, Assistant City Manager, thought that was a Work Plan item that would be discussed next month as part of the plan for the next year. Chair Scharff and Vice Chair Mauter agreed to do that. COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS Commissioner Metz reported that on February 11, he and Commissioner Gupta met with Director Director Nose, COO Kurotori and, OES Director Kenneth Dueker, and others from the CPAU. The outcome was to work with Director Dueker and his team to share public information on emergency preparation. There would be an ongoing disaster preparation audit mostly focusing on wildfires, which had been put on the UAC Work Plan. The February 12 meeting consisted of Commissioners Phillips and Tucher, COO Kurotori, others from CPAU, and himself. Regarding grid mod, the CPAU had seen increased demand for electricity, and they indicated that they were considering new technology. Jonathan Abendschein had addressed the impact of S/CAP and how grid mod would enable new technologies. He was a little unsatisfied by the outcome in that they had asked for detailed goals of the plan to address S/CAP and technology impacts. There was a remark that he felt needed to be communicated to the public. He thought Commissioner Tucher made a comment that he was a proponent of grid mod but that he had not seen the why in some of the past presentations. He believed that there was a consensus among Commissioners at the meeting that more depth was needed as is related to the goals and reaching them. COO Kurotori agreed to present, which he thought was scheduled for July, which would also propose a Work Plan element. Utilities Advisory Commission Minutes Approved on: April 2, 2025 Page 27 of 27 Commissioner Gupta announced that he had had a meeting with Professor Ram Rajagopalof Stanford University about potential collaborations with Palo Alto Utilities, particularly on grid mod and technologies that should be considered. He hoped the Professor and Jonathan Abendschein could meet to discuss grid mod, which maybe could be the seed of broader and more regular collaborations with Stanford. Commissioner Phillips was planning to attend the one-day Power Conference on Energy, Research, and Policy at Berkeley on March 21. He spoke of the insights he had gained when he attended it last year. He had sent the information to Assistant City Manager Nose, and he requested that she forward it to the Commissioners. Early bird registration should be done by the 7th. He thought they would pay registration. ADJOURNMENT Vice Chair Mauter moved to adjourn. Chair Scharff seconded the motion. Meeting adjourned at 10:16 p.m. Respectfully Submitted City of Palo Alto Utilities