HomeMy WebLinkAboutStaff Report 2503-43927
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Climate Action and Sustainability Committee
Staff Report
Report Type: ACTION ITEMS
Lead Department: Public Works
Meeting Date: March 21, 2025
Report #:2503-4392
TITLE
Recommendation to Council to Direct Staff to Develop an Affordable Multi-Family Housing
Electrification Grant Program and to Approve a Budget Amendment in the Gas Utility Funds;
CEQA Status: Under CEQA Guidelines section 15183, projects consistent with an existing
general or comprehensive plan do not require additional CEQA review
RECOMMENDATION
Staff recommends that the Climate Action and Sustainability Committee recommend that the
City Council:
1. Direct staff to develop a program to provide grants to replace existing affordable multi-
family housing central and in-unit gas equipment with electric-only equipment;
2. Authorize staff to use up to $6.6 million in Gas Utility Cap and Trade Revenues for the
program, and;
3. Amend the FY 2025 Budget Appropriation (requires a 2/3 vote) by:
a. For the Gas Utility Funds:
i. Increase Gas Resource Management Operating Expenses for Contract
Services by $6.6 million; and
ii. Decrease the Cap and Trade Reserve by $6.6 million
EXECUTIVE SUMMARY
Staff is recommending the Climate Action and Sustainability Committee recommend that
Council adopt a $6.6 million affordable housing electrification retrofit grant program funded by
Gas Cap and Trade revenues and reserves to help local affordable housing providers take
advantage of State (and Federal if available) incentive programs. The program would have
capacity to electrify systems serving up to 500 units and save 800 to 1,000 metric tons of
carbon-dioxide equivalent (MT CO2-e) per year. The program fulfills 2023-2025 Sustainability
and Climate Action Plan (S/CAP) Work Plan items 2.1(I) and 2.1(K) focused on affordable
housing pilots and is consistent with the Council’s Climate Action and Housing priorities.
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BACKGROUND
1, 299 below market rate (BMR) rental
units in market-rate rental complexes, and 265 BMR ownership units in 48 market-rate condo
developments. 2023-2025 S/CAP Work Plan work items 2.1(I) (Affordable Housing EV Charging
and Electrification Pilot) and 2.1(K) (Multi-family and Affordable Housing Electrification and EV
Charger Access Strategy Development) both focus on piloting scalable strategies for electrifying
these units and providing EV charging. In addition, work item 4.A (Multi-Family and Commercial
End Use Study) focuses on doing studies to identify opportunities for electrifying equipment in
multi-family buildings.
ANALYSIS
1 23 managed by Alta Housing, three by Front Porch, two by Eden, two by MidPen Housing, two by Abode, one by
Bridge Housing, as well as Stevenson House, Terman Apartments, the Moldaw Residences, and the HomeKey
transitional housing project still under development.
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Alternatives
Table 1: Summary of Program Design Alternatives
Alternative Benefit Tradeoff Budget
Begin with smaller
$4M budget,
expand if needed
Allows Council
greater control
over spending
Requires additional time to expand program
budget if additional funds are needed.$4 million
Limit program to
central equipment
only
Reduces the
budget needed
In-unit equipment will be costly and
challenging to electrify. Not including it
reduces opportunity to learn how to electrify
it and will mean later pilots are more costly.
$2.5 million
Require a provider
contribution so the
City covers the
incremental cost
for electrification
only.
Reduces the
budget needed
Some providers may not move forward with
projects due to insufficient capital. This risk
could be mitigated by creating a loan
program or a process for providers to apply
for additional Council-approved grants.
$4.7 million
(plus $1.9 million if
loan program were
included)
FISCAL/RESOURCE IMPACT
•Energy efficiency, including energy efficiency equipment rebates, building retrofits and
other projects that reduce energy demand;
•GHG emissions reducing activities, which include projects to reduce gas leaks that are
not mandated by federal, state or local health and safety requirements;
•Non-volumetric return to some or all ratepayers in the form of a climate credit;
•Administrative and outreach costs and educational programs.
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The Council adopted a policy on the use of Gas Cap and Trade Revenue on January 26, 2015
(Resolution 5397) and updated it October 3, 2022 (Resolution 10077),2 which stated that:
The following uses of the City’s auction proceeds from the sale of Allocated Allowances are
permitted, with a preference that greenhouse gas reduction measures be pursued before
providing rebates:
a.Investment in energy efficiency programs for the natural gas portfolio and retail customers;
b.Purchases or investment in cost effective renewable bio-gas resources for the gas portfolio;
c.Fuel switching from natural gas to electricity that reduces greenhouse gas emissions;
d.Investment in other carbon reduction activities for the natural gas utility, including system
maintenance or replacement to reduce fugitive gas emissions;
e.Rebates to natural gas retail ratepayers. Rebates, if provided, must be allocated on a non-
volumetric basis as stated in Title 17 CCR Section 95893 (d)(3).
STAKEHOLDER ENGAGEMENT
Affordable housing electrification has been discussed extensively as part of the stakeholder
engagement for the S/CAP as a whole, and during adoption of the 2023-2025 S/CAP Work Plan,
but this program has not received any stakeholder engagement due to the rapid turnaround
needed to avoid missing out on access to State and Federal incentives. In developing this
program staff consulted with various affordable housing providers to understand their needs
and relied on studies performed by Willdan of various properties.
ENVIRONMENTAL REVIEW
Potential environmental impacts of residential electrification were analyzed as part of the
Sustainability and Climate Action Plan (S/CAP) Addendum to the Comprehensive Plan
Environmental Impact Report. On June 5, 2023 (Staff Report #2303-1158) Council certified the
Addendum, which found that the S/CAP programs would not result in any significant or
substantially more severe effects beyond what was previously analyzed in the Comprehensive
Plan EIR. Under CEQA Guidelines section 15183, projects consistent with an existing general or
comprehensive plan do not require additional CEQA review.
APPROVED BY:
Brad Eggleston, Director of Public Works
2 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=61567