HomeMy WebLinkAboutStaff Report 14676
City of Palo Alto (ID # 14676)
Utilities Advisory Commission Staff Report
Meeting Date: 2/1/2023 Report Type: VII. NEW BUSINESS
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Title: Staff Recommends the UAC Accept a Verbal Presentation on State
Public Policy Actions and Recommend the City Council Approve the 2023
Utilities Legislative Guidelines
From: Director of Utilities
Lead Department: Utilities
Recommendation
Staff recommends that the Utility Advisory Commission:
(1) Accept the staff report regarding state legislation, regulations, and budget items and
(2) Recommend the City Council approve the 2023 guidelines though the following motion:
“Staff and the Utilities Advisory Commission recommend the City Council approve the
2023 Utilities Legislative Policy Guidelines”
Discussion
SUMMARY OF 2022 AND PREVIEW OF 2023
State legislation in 2022
CPAU monitored over 50 state bills this session. While 2022 was a busy year for utilities -related
legislation, none of the bills signed into law are anticipated to significantly affect Palo Alto’s
utilities. This is due to three key reasons: (1) Palo Alto is already well positioned to meet new
laws as a result of the City’s clean energy portfolio and proactive programs, (2) successful
advocacy by the California Municipal Utilities Association (CMUA) and the Northern California
Power Agency (NCPA) led to the mitigation of any bills potentially harmful to the City’s
interests, and (3) legislation that started as mandates to utilities ended as mandates to state
agencies.
A few of the monitored bills signed into law include:
• SB 1157 (Hertzberg) changes the indoor water use standard (one metric used to calculate
overall water efficiency) to reduce usage. Instead of the current 55 gallons per capita day
• CITY OF
PALO
ALTO
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(gpcd) until 2025, 52.5 gpcd between 2025 and 2030, and 50 gpcd starting in 2030, those
numbers will now be 55, 47, and 42 respectively;
• SB 1020 (Laird) sets interim clean energy targets (of 90% by 2035 and 95% by 2040) as the
state works to meet its 100% clean energy goal;1
• AB 847 (Quirk) requires the development of a high voltage test for foil balloons and for the
placement of warning labels regarding the danger of releasing foil balloons that may come
into contact with electric lines;
• AB 2204 (Boerner Horvath) establishes the new position of Deputy Secretary for Climate
within the state’s labor agency – if funded by the Legislature;
• SB 1158 (Becker) requires each publicly owned utility (POU) governing board to review the
GHG emissions of its electric utility and allows the board to evaluate, along with
subsequent procurement plans, if the utility is making adequate progress in meeting its
own GHG emission targets;
• ACR 188 (Holden) is a non-binding resolution that requests the California Independent
System Operator (CAISO) produce a report by February 28, 2023 summarizing recent
studies on the impacts of expanded regional cooperation.
State and federal budgets
With a surplus of over $97 billion, the 2022-2023 state budget provided funding for a wide
variety of climate action-related programs and state agency mandates. These include many
directives to the California Energy Commission (CEC) that could affect POUs, including to:
• Develop, by the end of 2023, approaches on how to determine appropriate planning
reserve margins for POUs;
• Produce a report, by January 2023, on how POUs handled reliability during the past
summer, projecting future reliability challenges, and posing possible solutions to any
concerns;
• Implement a new voluntary demand side grid support program for POUs.
For 2023-2024, the state expects a budget deficit of around $24-25 billion. Currently, there is
no information available regarding how this new projection might impact the above dir ectives
or ongoing energy-related programs. The Governor will release his proposed 2023-2024 budget
in mid-January, which will provide more insight.
In August 2022, President Biden signed into law the Inflation Reduction Act, which among many
other items, provides funding to reduce carbon emissions, invest in clean energy, and continues
funding for residential energy efficiency improvements, including heat pump water heaters.
1 The clean energy goal is to ultimately supply 100% eligible renewable energy resources or zero -carbon resources
to Californians by 2045.
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Regarding the latter item, CPAU’s Resource Management Division has spent time inv estigating
this credit (and similar credits) as we move forward with the City’s heat pump water heater
pilot program. Regarding the former items – and related to the state budget - regulatory action
is required by the agencies tasked with allocating funds.
One example of the agency action needed: The CEC is expecting to disseminate $10 billion in
clean energy funding from the state and federal budgets over the next few years. Broadly, the
agency is considering using some of the money on new and current en ergy efficiency and grid
resilience programs and the rest on long-term energy storage, hydrogen programs, building
decarbonization programs, and the like. There are no details yet about this spending or how
local governments may participate in programs, but we do know that the CEC wants to hire
about 100 more staffers to implement new and expanded programs. Through CMUA and NCPA,
staff will monitor the development of spending allocations and regulatory action to determine
how they might benefit CPAU.
Regulatory activity in 2022
CPAU continued to produce all required reporting to agencies last year and has received
positive feedback in doing so. For example, the Wildfire Safety Advisory Board was
complementary of our 2022 Wildfire Mitigation Plan, offering no suggestions for improvement.
This year, we will submit a revised Plan, pursuant to state law and with an independent
evaluation to ensure the City continues to mitigate risk of electric line-ignited wildfires in the
best manner possible.
On the water side, staff expects revisions to the State Water Resource Control Board’s Lead and
Copper Rule, resulting from changes in the federal Environmental Protection Agency’s rule.
Staff have been tracking potential changes while continuing to comply with the cur rent rule.
Staff also continues to monitor other energy and water-related regulatory action through NCPA
and CMUA.
State legislation in 2023
This year, as the state and country move closer to making inroads in electrification, staff
expects more bills on transmission and resource adequacy. As the state continues to experience
very hot summers and wildfires, bills addressing reliability, demand reduction, and electric-line
ignited wildfire mitigation are also expected. The focus on clean energy and sustainability
remains, especially through the Legislature’s Joint Legislative Committee on Climate Change
Policies, the Senate’s Climate Working Group, and like-minded legislators. Lastly, staff expects
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to soon see a bill related to regionalization2, an issue faced more than once in prior legislative
sessions.
2023 is the beginning of a new two-year session, meaning bills that do not pass in 2023 will
continue on in 2024, absent a legislative decision to stop their progress. CPAU staff continues to
work closely with CMUA, NCPA, and other POUs this year through in -person meetings, virtual
meetings, workgroup calls, and workshops.
APPROVAL OF UPDATED LEGISLATIVE GUIDELINES
CPAU has a document in place that guides staff when determining which of the thousands of
state bills to monitor, and potentially engage with, each year (Attachment A). The UAC first
approved the current legislative guidelines in 2017. They were intended to be perennial, subject
to UAC and Council review, and were approved annually. The last UAC approval was on
November 3, 2021 with Council approval following on February 7, 2022.3 While the guidelines
have served CPAU reasonably well, there is room for improvement. For example, the current
guidelines are action-oriented where action may not be warranted, vague in places, and could
benefit from additional clarity about what is most important to the organization.
A case in point: fiscal stability is a Council priority and important to CPAU but is not specifically
noted in the current guidelines. Rather, three separate guidelines opaquely refer to fiscal
stability: “Where possible, seek funding and program incentives,” “Oppose unnecessary,
unreasonable, impractical, or costly rates or mandates,” and “Advocate for fair cost allocation
and support the principle of beneficiary pays.” These statements can be clarified to specifically
address a range of possible responses to financial policy initiatives, such as: Opposing or
supporting legislation, working with other POUs to inform our trade association’s advocacy,
monitoring regulatory activity, participating in regulatory comments from NCPA or CMUA, and
more.
For 2023, staff suggests a different approach (Attachment B). Rather than statements
presuming possible actions untethered to specific policy initiatives, (i.e.: “oppose,” “advocate”)
staff suggests the guidelines reflect the values and priorities shared by the City and CPAU. The
new draft guidelines do not presume a position or action and as such, allow staff to determine
activities4 based on what is important to CPAU, Council, and the community. While not a
2 The word refers to possible evolution of CAISO into a regional organization of several western states. This
expanded multi-state body rather than a single state operator was initially contemplated in SB 350 (2015).
3 As noted below, an additional guideline was added by Council in October 2022.
4 As noted in the draft guidelines, any action taken by CPAU will conform with the City’s Advocacy Process Manual.
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significant shift from the current guidelines, the phrasing of the 2023 draft guidelines allows for
some flexibility while explicitly acknowledging key values and priorities.
Importantly, all the guideline areas from earlier years remain – with one exception. On October
3, 2022, Council added a new workforce-related item. This new 2022 guideline is a result of a
recommendation from Council’s Sustainability and Climate Action Plan Ad Hoc Committee,
reflecting the current and future shortage of skilled labor required to modernize the electric
grid. For 2023, staff recommends retaining the added guideline, but with language
modifications:
Workforce guideline added in 2022 Workforce guideline suggested for 2023
Support government action to expand the
workforce in trades and technical
disciplines necessary to support building
and vehicle electrification and grid
modernization.
A skilled workforce is critical. We support
government action that provides funding,
training, and other resources to increase and
maintain utility staffing levels, especially for
key areas such as our electric utility while we
work to modernize our grid.
The suggested wording for 2023 (1) aligns with the language convention of the draft guidelines,
(2) provides specificity to the word “expand” in the current guidelines (funding, training,
resources), (3) specifically highlights the electric utility and grid modernization in keeping with
Council’s original intent, and (4) broadens the 2022 guideline to provide staff the flexibility to
advocate for a skilled workforce in areas other than electrification and grid modernization. As
per the usual process, once approved by the UAC, the draft 2023 guidelines will appear before
Council with an adoption recommendation. Council then has the opportunity to review any
changes.
Resource Impact
Approval of this report and the 2023 guidelines has no impact on resources.
Environmental Review
The UAC’s review and recommendation on the 2023 Utilities Legislative Policy Guidelines does
not meet the California Environmental Quality Act’s definition of a project, pursuant to Public
Resources Code 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative
activity which will not cause a direct or indirect physical change in the environment ; an
environmental review is not required.
Attachments:
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• Attachment A: Utilities Legislative Policy Guidelines
• Attachment B: 2023 Utilities Legislative Guidelines
Attachment A
Utilities Legislative Policy Guidelines: 2022 Update
City of Palo Alto Utilities Department (CPAU) staff will use the below guidelines as well as the
City’s guidelines to help determine any advocacy position or action on Utilities-related issues.
Formal advocacy, such as submitting written letters or comments and meeting with
policymakers and/or staff, requires the approval of the Utilities Director or his designee.
1. Seek to preserve local government flexibility, discretion, accountability, and oversight of
matters impacting utility programs, services, activities, and rates. Oppose action that could
hamper or minimize this flexibility or discretion.
2. Where possible, seek funding and program incentives.
3. Advocate for reasonable government action with minimal customer impact that allows for
flexibility and implementation feasibility.
4. Advocate for locally-designed conservation or efficiency programs. Support reasonable State
conservation or efficiency requirements that consider local populations, environment, and
resources.
5. Inform state and federal policymakers about CPAU’s current programs, services, goals, and
reporting requirements.
6. Oppose unnecessary, unreasonable, impractical, or costly rates or mandates.
7. Collaborate with and support the efforts of regional agencies and associations whose goals
align with ours.
8. Advocate for fair cost allocation and support the principle of beneficiary pays.
9. Support efforts to maintain or improve the security and reliability of our infrastructure.
10. Support government action that cost effectively reduces greenhouse gas emissions.
11. Promote locally-designed residential and commercial electrification programs.
12. Support government action allowing CPAU to maintain customer confidentiality.
13. Support government action to expand the workforce in trades and technical disciplines
necessary to support building and vehicle electrification and grid modernization.1
1 Added by Council October 2022
Draft – subject to UAC and Council approval
2023 CPAU LEGISLATIVE GUIDELINES
SUMMARY
The City of Palo Alto Utilities Department utilizes the following guidelines when determining
whether to monitor or engage in legislation or regulations. These are, in effect, foundational
statements informed by City Council policies, community needs, and existing and planned utilities
programs. They are evergreen by design and subject to annual review, approval, or modification
by the Utilities Advisory Commission and/or the City Council. Any actions taken relating to the
guidelines will adhere to the City of Palo Alto’s Advocacy Process Manual.
GUIDELINES
1. Clean, renewable, affordable energy is vital. We must invest in infrastructure and programs
that support clean energy in an affordable and equitable manner.
2. Adequate supplies of clean, affordable drinking water are imperative. We will work to balance
our water resources with the needs of our community, city policies, and precipitation
conditions.
3. Utilities safety and reliability are essential. We strive to ensure consistent resources while
maintaining our infrastructure in a safe manner.
4. Affordable rates are key. We carefully analyze any proposed government policy that could
lead to an increase in rates.
5. Fiscal stability is a cornerstone of our work. We strive to operate and provide affordable
programs, leveraging grants and government funding where feasible.
6. As a municipal government with locally elected officials and a public commission, we are self-
guided. As such, our local leaders are best positioned to manage our policies, resources, and
programs.
7. Collaborating externally increases our reach. We work with associations and stakeholders to
combine our resources, share our experiences, and advocate for our community.
8. Preserving customer privacy is important. We intend to continue to meet our customers’
expectations in safeguarding their contact and utility usage information.
9. A skilled workforce is critical. We support government action that provides funding, training,
and other resources to increase and maintain utility staffing levels, especially for key areas
such as our electric utility while we work to modernize our grid.
Draft – subject to UAC and Council approval