HomeMy WebLinkAboutStaff Report 14973
City of Palo Alto (ID # 14973)
Utilities Advisory Commission Staff Report
Meeting Date: 2/1/2023 Report Type: INFORMATIONAL REPORTS
City of Palo Alto Page 1
Title: Informational Utilities Quarterly Report Update for Q1 of FY2023
From: Director of Utilities
Lead Department: Utilities
Executive Summary
Linked below for the Utilities Advisory Commission’s information is an update on water, gas,
electric, wastewater collection and fiber utilities, efficiency programs, legislative/regulatory
issues, utility-related capital improvement programs, operations reliability impact measures
and a utility financial summary. This updated report (Linked Document) has been prepared to
keep the Council and Utilities Advisory Commission apprised of the major issues that are facing
the water, gas, electric, wastewater collection and fiber utilities. A separate quarterly report on
the financial position is prepared consistent with when the City closes its books.
Items of special interest in this report are summarized below:
COVID-19 Impacts: Behavior changes resulting from COVID-19 continue to impact loads in FY
2022:
• FY 2023 actual electric sales through September 2022 were about 4% lower than
projections, while revenues were about 7% higher than projections. The higher sales
revenues were due to extra revenue from the Electric Hydro Rate Adjuster. Decreased loads
are mostly attributed to the commercial sector. (Section 1.5.1)
• Gas utility demand through September 2022 was 5% lower than forecasted in the FY 2023
Financial Plan. Actual sales revenue was 35% higher than forecasted. The higher revenue
was due to increases in the market price of gas commodity which is passed through to
customers. (Section 2.5.1)
• Water demand through the end of September 2022 was 10% lower than forecasted and
water sales revenues were about 13% lower than forecasted in the FY 2023 financial plan,
mostly due to water conservation from customers responding to the drought. Increased
water conservation may further impact revenue and reserve levels. (Section 3.5.1)
• Wastewater revenues have not been significantly affected by the pandemic.
Vacancies and Staffing – Appendix B
• The Utilities Department has 48 vacant positions out of 253 authorized positions or a 19%
vacancy rate at the end of September 2022
• CITY OF
PALO
ALTO
City of Palo Alto Page 2
• The highest number of vacancies are in Electric Operations (20 FTEs) and Electric
Engineering (9 FTEs)
Electric Utility:
Output from the City’s hydroelectric resources is low. Total forecasted hydropower for FY 2022
is 244 GWh, which is 234 GWh (51%) below the long-term average. The current forecast for FY
2023 assumes a small recovery in generation from FY 2022, but is still only projected to provide
56% of generation compared to the long-term average. (Section 1.1.2)
• Sales of renewable energy credits (RECs) for CY 2022 are expected to result in $0.8M in net
revenue. (Section 1.1.3)
• A number of construction projects are in the design phase with construction due to begin in
2022. (Section 1.2)
• Electric sales for the first two quarters of FY22 were about 3% lower than projected, and
revenue was about 5% lower. (Section 1.5)
Gas Utility:
• Gas prices remain high, and customer bills will be impacted over the winter months.
Outreach material will inform the community of these bill impacts and provide energy
saving tips and program information. (Section 2.5.2 and 7)
• A gas main replacement project is currently in progress (GS -13001) and the City is in the
midst of a two year inspection project to find “cross bores.” (Section 2.2)
Water Utility:
• January through March 2022 was the driest on record for the Hetch Hetchy gauge. System
storage is below normal but in better shape than most reservoirs in the state. (Section 3.1)
• On November 10, 2022, Governor Newsom’s senior Water-Policy Officials, the San Francisco
Public Utilities Commission (SFPUC), and the Modesto and Turlock Irrigation Districts
reached agreement on a Memorandum of Understanding to provide greater water flows
and increased habitat for the Tuolumne River. The Bay Area Water Supply and Conservation
Agency (BAWSCA) anticipates that this MOU will become a part of a larger voluntary
agreement for the Sacramento-San Joaquin Delta. (Section 3.1)
• Palo Alto launched the One Water Plan with the goal of Council adoption of a One W ater
supply plan that is a 20-year adaptable roadmap for implementation of water supply and
conservation portfolio alternatives. A number of stakeholder engagement meetings have
occurred and are scheduled to occur. The UAC will receive an update in February or March
of 2023.
On May 24, 2022, Palo Alto’s water supplier, the San Francisco Public Utilities Commission
adopted a systemwide voluntary water use reduction of 11% compared to baseline water use
during FY 2019-2020. For the billing months July 2022 through October 2022, compared with
City of Palo Alto Page 3
the same period from July 2019 to October 2019, the Palo Alto community reduced water
usage by 10%. (Section 3.1)
• Actual water sales volumes through Q1 of FY 2023 were about 10% lower than forecasted in
the FY 2023 financial plan. Staff’s preliminary projection of expected revenues and expenses
together with transfers from the CIP Reserve, estimates the Operations Reserve will reach
approximately target levels by the end of FY 2023. (Section 3.5)
• Construction started on a water main replacement project in April. (Section 3.2)
Wastewater Utility:
• An overview of the status of the Regional Water Quality Control Plant (RWQCP)
rehabilitation projects is provided, including an overview of the financing plan for the
projects. The first project to begin construction will be the primary sedimentation tank
rehabilitation. (Section 4.1)
• A sewer system rehabilitation project (SSR 30) was approved by Council on December 31,
2021. Construction started in March 2022 and is expected to b e complete in January 2023.
(Section 4.2)
• Actual wastewater sales revenues through Q1 of FY 2023 were around expectation, at
about 0.4% higher than forecasted in the FY 2023 Financial Plan. (Section 4.4)
Fiber Utility:
• The City launched the Palo Alto Fiber Market Research Survey and Fiber Deposit program.
3,254 surveys were completed (14.8% response rate) and 703 deposits received as of
August 3, 2022. 28.4% of households are either very dissatisfied or somewhat dissatisfied
with their current internet services. An additional 14.4% are neither satisfied nor
dissatisfied. (Section 5.1)
• On September 19, 2022, City Council and UAC held a joint session to review the internet
survey results and evaluated the feasibility of a new City-owned and City-operated ISP
business. (Section 5.1)
Customer Programs (Section 6):
• The City in partnership with the Bay Area Water Supply and Conservation Agency (BAWSCA)
held three well-attended landscape efficiency workshops in fall 2022. The workshops
covered topics on harvesting rainwater, steps to take to design and convert lawns into
drought-tolerant landscapes, and available rebates.
• On October 6, 2022 the City launched WaterSmart, an online water management tool to
help residents and businesses better understand their wa ter usage and enable them to
conserve water and save money.
• Palo Alto had the highest number of SunShares, a solar and battery storage group -buy
program, sign ups with 161 registered residents by the November 15, 2022 registration
deadline.
• Since the Business Energy Advisor program launched in June 2022, 21 program participation
agreements have been sent to customers, 7 agreements have been signed, and 3 site
assessments have been completed.
City of Palo Alto Page 4
• For residential customer programs, staff is developing contracts for residential building
electrification, energy and water efficiency programs which includes single family and
multifamily homes as well as income and medically qualified residents.
• The Business Electrification Technical Assessment Program launched in August 2022,
offering no-cost assessments to help nonresidential customers identify electrification
opportunities and free technical assistance to support them with their building
electrification journey. Since the program launched, our partner, CLEAResult, h as
completed 2 site assessments, assisting large commercial customers with potential HVAC
and heat pump water heater projects.
• The City continues to promote its multi-family and workplace EV charger programs.
Communications: A digest of major outreach efforts is provided in Section 7, including outreach
related to drought, the public safety power shutoff program in the Foothills, and utility scams.
Legislative and Regulatory: Major legislative and regulatory items are summarized in Section 8.
Attachments:
• Attachment A: Utilities Quarterly Report FY23-Q1
• Attachment B: CY2021 Gas Utility Asset Management Overview
Utilities Quarterly Update
First Quarter of Fiscal Year 2023
1Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Table of Contents
1 ELECTRIC UTILITY 4
1.1 ELECTRICITY SUPPLY AND TRANSMISSION 4
1.1.1 Forecasted Supply Costs 4
1.1.2 Hydroelectric Conditions 5
1.1.3 REC Exchange Program 6
1.1.4 Renewable Energy Procurement 6
1.2 CAPITAL IMPROVEMENT PLAN STATUS 6
1.3 RATE AND BILL COMPARISONS 7
1.4 RELIABILITY 8
1.5 FINANCIAL HEALTH 8
1.5.1 Sales Forecasts vs. Actuals 8
1.5.2 Financial Position 9
2 GAS UTILITY 10
2.1 GAS SUPPLY AND TRANSMISSION 10
2.1.1 Actual and Forecasted Supply Costs 10
2.1.2 Carbon Neutral Gas Program 11
2.1.3 Cap and Trade Program 13
2.1.4 Gas Transmission Line Capacity Valuation 14
2.1.5 Gas Prepay Valuation 14
2.2 CAPITAL IMPROVEMENT PLAN STATUS 15
2.3 RATE AND BILL COMPARISONS 15
2.4 RELIABILITY 15
2.5 FINANCIAL HEALTH 16
2.5.1 Sales Forecasts vs. Actuals 16
2.5.2 Financial Position 16
3 WATER UTILITY 17
3.1 WATER SUPPLY AND TRANSMISSION 17
3.2 CAPITAL IMPROVEMENT PLAN STATUS 20
3.3 RATE AND BILL COMPARISONS 20
3.4 RELIABILITY 21
3.5 FINANCIAL HEALTH 21
3.5.1 Sales Forecasts vs. Actuals 21
3.5.2 Financial Position 22
4 WASTEWATER UTILITY 23
4.1 WASTEWATER TREATMENT UPDATES AND CAPITAL PLANNING STATUS 23
4.1.1 Treatment Cost Trends 23
4.1.2 Regional Water Quality Control Plant Capital Planning Status 24
4.2 COLLECTION SYSTEM CAPITAL IMPROVEMENT PLAN STATUS 25
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2Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
4.3 RATE AND BILL COMPARISONS 25
4.4 FINANCIAL HEALTH 26
4.4.1 Sales Forecasts vs. Actuals 26
4.4.2 Financial Position 26
5 FIBER UTILITY 27
5.1 FIBER UTILITY STRATEGIC PLANNING 27
5.2 CAPITAL IMPROVEMENT PLAN STATUS 28
5.3 RELIABILITY 28
5.4 FINANCIAL HEALTH 28
5.4.1 Fiber Sales 28
5.4.2 Financial Position 28
6 CUSTOMER PROGRAMS (EFFICIENCY AND SUSTAINABILITY)29
6.1 CUSTOMER PROGRAMS UPDATES 29
6.1.1 Energy and Water Efficiency 29
6.1.2 Building Electrification 31
6.1.3 Electric Vehicles 33
6.2 FUNDING SOURCES FOR EMISSIONS REDUCTIONS 37
6.2.1 Low Carbon Fuel Standard (LCFS) Program 37
6.2.2 Cap and Trade Program, Revenue from Allocated Allowances 37
6.2.3 Electric Public Benefit Funds 38
6.3 INNOVATION AND PILOT PROGRAMS 38
6.3.1 Academic Collaborations 38
6.3.2 Completed Projects 38
7 COMMUNICATIONS 40
8 LEGISLATIVE AND REGULATORY ACTIVITY 42
8.1 STATE LEGISLATION 42
8.2 STATE REGULATORY PROCEEDINGS 42
8.2.1 Energy Commission 42
8.2.2 State Water Resources Control Board 42
8.2.3 Air Resources Board 42
8.2.4 Natural Resources Agency 42
9 APPENDIX A: ENERGY RISK MANAGEMENT PROGRAM 44
9.1 OVERVIEW OF HEDGING PROGRAMS 44
9.2 OVERVIEW OF ENERGY RISK MANAGEMENT PROGRAM 44
9.3 FORWARD DEALS 44
9.4 MARKET EXPOSURE 45
9.5 TRANSACTION COMPLIANCE 45
10 APPENDIX B: STAFFING AND VACANCIES 46
11 APPENDIX C: GAS UTILITY ANNUAL INFRASTRUCTURE MAINTENANCE AND REPLACEMENT REPORT 47
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3Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figures
FIGURE 1:FY 2022 FINANCIAL PLAN SUPPLY COST FORECAST VS. ACTUALS ................................................................................................5
FIGURE 2:HYDRO GENERATION FY 2021-22 ACTUALS,FY 2023 PROJECTED (GWH)..................................................................................6
FIGURE 3:RESIDENTIAL MONTHLY ELECTRIC BILL COMPARISON (EFFECTIVE 11/1/2022,$/MO.)..................................................................8
FIGURE 4:ELECTRIC OUTAGE RELIABILITY,FY 2023-Q1 ..........................................................................................................................8
FIGURE 5:ELECTRIC SALES VOLUME (KWH),UP TO FY 2023-Q1 ..............................................................................................................9
FIGURE 6:ELECTRIC SALES REVENUE ($),UP TO FY 2023-Q1 ..................................................................................................................9
FIGURE 7:GAS SUPPLY COMMODITY RATES ($/THERM),FY 2018-23 ....................................................................................................10
FIGURE 8:GAS SUPPLY COSTS ($),ACTUAL VS BUDGET,UP TO FY 2023-Q1 ............................................................................................11
FIGURE 9:OFFSET PORTFOLIO COMPOSITION ......................................................................................................................................12
FIGURE 10:OFFSET PROJECT DESCRIPTIONS ........................................................................................................................................13
FIGURE 11:ESTIMATED CAP AND TRADE COSTS ...................................................................................................................................14
FIGURE 12:RESIDENTIAL NATURAL GAS BILL COMPARISON ($/MONTH)...................................................................................................15
FIGURE 13:GAS SERVICE INTERRUPTIONS,FY 2023 .............................................................................................................................15
FIGURE 14:GAS SALES VOLUME (THERMS),UP TO FY 2023-Q1 ............................................................................................................16
FIGURE 15:GAS SALES REVENUE ($),UP TO FY 2023-Q1.....................................................................................................................16
FIGURE 16:REGIONAL WATER SYSTEM STORAGE .................................................................................................................................18
FIGURE 17:SFPUC WATER DELIVERIES..............................................................................................................................................19
FIGURE 18:RESIDENTIAL WATER BILL COMPARISON ($/MONTH)............................................................................................................21
FIGURE 19:WATER SERVICE INTERRUPTIONS,FY 2023 .........................................................................................................................21
FIGURE 20:WATER SALES VOLUME (CCF),UP TO FY 2023-Q1 .............................................................................................................22
FIGURE 21:WATER SALES REVENUE ($),UP TO FY 2023-Q1 ................................................................................................................22
FIGURE 22:PALO ALTO’S SHARE OF ESTIMATED WASTEWATER TREATMENT EXPENSES (PROJECTION AND PLANNED CIP)..................................24
FIGURE 23:CURRENT RWQCP CAPITAL WORK IN-PROGRESS (INFORMATION FROM RWQCP JUNE 2022 PARTNERS MEETING).......................25
FIGURE 24:RESIDENTIAL WASTEWATER BILL COMPARISON ($/MONTH)...................................................................................................26
FIGURE 25:WASTEWATER SALES REVENUE ($),UP TO FY 2023-Q1 .......................................................................................................26
FIGURE 26:EV TECHNICAL ASSISTANCE PROGRAM (EVTAP),CUMULATIVE PROGRESS REPORT (NOVEMBER 2019 - SEPTEMBER 2022).............35
FIGURE 27:SCHEDULE OF CPAU WORKSHOPS AND EVENTS, JULY - SEPTEMBER 2022................................................................................36
FIGURE 28:STATUS TO DATE OF ALL APPLICATIONS TO THE PROGRAM FOR EMERGING TECHNOLOGIES............................................................39
FIGURE 29:ELECTRIC RESOURCE ADEQUACY CONTRACTS .......................................................................................................................44
FIGURE 30:ELECTRIC LOAD RESOURCE BALANCE, APRIL 2022 - MARCH 2025..........................................................................................45
FIGURE 31:UTILITIES VACANCIES AND POSITION MOVEMENTS BY DIVISION,UP TO Q1 FY 2023 ..................................................................46
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4Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
1 Electric Utility
The City’s electric utility serves all residential and non-residential gas demands in Palo Alto at a lower cost than
PG&E in surrounding communities. Its electric supply portfolio is 100% carbon neutral. The City maintains and
operates an electric distribution system and one small natural gas generator but does not operate any
transmission lines or any significant generating capacity on its own. Instead, the City belongs to Northern
California Power Agency (NCPA) which operates its Calaveras hydroelectric generating plant and provides power
scheduling services for its other generating resources. This carbon free power is supplied through power purchase
agreements with various generation operators.
1.1 Electricity Supply and Transmission
Below is an update on electricity supply and transmission services.
1.1.1 Forecasted Supply Costs
The actual net supply cost for FY 2022 was $95.2 M.This represents a $11.9 M (14%) increase over FY 2021 actuals
and $17.3 M (22%)over the FY 2022 Adopted Budget amount, with the increase primarily driven by higher than
historical forward energy prices, higher resource adequacy requirement levels and market prices, and much lower
than historical average hydro generation levels.
The projected net supply cost for FY 2023 is $94.9 M, which is $9.7 M (11%) greater than the Adopted Budget
amount, but $0.3 M lower than the actual net supply cost for FY 2022. This increase in cost relative to the Adopted
Budget is due to the same factors noted above that explain the deviation in supply cost for FY 2022.
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5Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 1: FY 2022 Financial Plan Supply Cost Forecast vs. Actuals
1.1.2 Hydroelectric Conditions
The City takes power from two hydroelectric projects, the Calaveras project and the Western Base Resource
contract for Federal hydropower from the Central Valley Project.1 The watershed for Western hydropower is
primarily in the northern end of California, while the watershed for the Calaveras project is in the Central Sierras.
For water year 2020 to 2021 (October 2020 to September 2021), total precipitation was just below 50% of average
in both watersheds. For water year 2021 to 2022, total precipitation was 63% of average for the Central Sierras
watershed and 81% of average for the Northern Sierras watershed. Total actual hydropower for FY 2021 was 295
GWh, which is 183 GWh (38%) below the long-term average.Total actual hydropower for FY 2022 was 230 GWh,
which is 250 GWh (52%) below the long-term average.2 The current forecast for FY 2023 assumes a small recovery
in generation from FY 2022 but is still only projected to provide 56% of generation compared to the long-term
average.
1 The Calaveras project is a hydropower project located in Calaveras County that is maintained and operated by the Northern
California Power Agency on behalf of the City and other project participants. The City is also one of several public entities
with contracts with the Western Area Power Administration for “Base Resource” electricity, which is the hydroelectric power
available from the Federal Government’s Central Valley Project (operated by the Bureau of Reclamation) after accounting for
power used for Central Valley Project operations and power delivered to certain “preference” customers.
2The long-term average forecast levels for both Western and Calaveras have been revised downward (about 10% each) in
recent years to reflect the impact of climate change. These values may need to be revisited again in the coming years.
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$10,000
$8,000
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$2,000
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Electric Supply Budget vs Actuals
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
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Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22
-Budget Forecast -Actuals/Projected -cumulative Budget Forecast Cumulative Actuals/Projection
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6Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 2:Hydro Generation FY 2021-22 Actuals, FY 2023 Projected (GWh)
1.1.3 REC Exchange Program
Under the REC Exchange Program, which was approved by Council in August 2020 (Staff Report #11556), staff has
so far contracted to sell a total of 184 GWh worth of in-state renewable energy (for $2.77M), and purchased 400
GWh worth of out-of-state renewable energy credits (RECs) costing $2.03M in CY 2022. The overall net revenue
(estimated at $0.74M)for CY 2022 will be directed entirely towards the funding of local decarbonization efforts.
Net revenue for the REC Exchange program is projected to be around the same in 2023 than 2022, which were
both significantly lower than previous years due to several factors: (a) the poor hydro outlook, which will lead to
large out-of-state REC purchase volumes, and (b) a narrowing of the in-state versus out-of-state REC price spread.
1.1.4 Renewable Energy Procurement
As discussed in Staff Report #14908 (Packet Pg. 74), staff is currently pursuing an opportunity to enter into a 12-
year agreement to procure 10 MW of output from the Calpine Geothermal project, as part of a larger purchase
with other Northern California Power Agency (NCPA) members. Staff is also exploring a sale of some energy during
Q2 and Q3 from one or more of the City’s long-term solar contracts. These combined transactions would more
closely balance the City’s loads and resources on a daily/monthly basis to better hedge market energy price shifts
in the long-term while maintaining the portfolio’s annual energy position close to current levels. Staff plans to
return to the UAC in the coming months to seek a recommendation to take these agreements to the City Council
for approval.
1.2 Capital Improvement Plan Status
The following capital projects are currently in progress or have been recently completed:
EL-17001 (East Meadow Circles 4/12kV Conversion):This project is scheduled to be completed in several
phases. Phase 1 design is complete.Phase 2 & 3 (of 6) engineering design is currently in progress.
EL-11003 (Rebuild Underground 15):This project is in the preliminary stages of engineering design.Project is
delayed due to staffing shortage. This project has been put on hold due to other priorities.
EL-10006 (Rebuild Underground 24):This project is in construction phase and scheduled to be completed in
Dec 2023.
EL-16000 (Rebuild Underground 26):This project is in the preliminary stages of engineering design.Project is
delayed due to staffing shortage.
EL-19004 (Wood Pole Replacement):This project is in the design phase with expected completion in June
2023 and construction starting July 2023.The project is delayed this year because of staffing shortages.CPAU
has a contract consultant to work on the design phase of this project.
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FY 20 21
Ca lav,e r as Actu a ls/F,o r,ecas t ( GWh) 4'9
'W est ,e rn Actu.a ls/Fo r,ecas t (GWh ) 24 6
Tota l ydm F,o r,ecas t (GWh) 295
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7Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
EL-16003 (Substation Physical Security): This project is scheduled to be completed in several phases.
Substation Security lighting contract was awarded in June 2022. The installation will be completed over a 2-
year period.Construction is currently in-progress.
EL-17002 (Substation 60kV Breaker Replacement):This project is in the preliminary stages of engineering
design.Project is delayed due to staffing shortage.
EL-21001 (Foothills Rebuild):This project will rebuild the approximately 11 miles of overhead line in Foothills
Park, as necessary to mitigate the possibility of wildfire due to overhead electric lines. Staff has completed
7,000 feet of substructure work and design which will eliminate the corresponding 26 poles. Substructure for
Phase 1 was completed in Spring 2022 and the substructure for Phase 2 is currently in progress.Phases 3 and
4 are currently in design phase.
EL-14005 (Reconfigure Quarry Feeders):Staff completed the design phase this year. Construction has been
Completed.
EL-02011 (Electric Utility Geographic Information System (GIS)):The project scope includes
maintenance/technical support of the existing GIS system and implementation of the new GIS platform (ESRI).
Staff has completed the ESRI ArcGIS Portal, which is a web service for staff to view data and are currently
working on final phase of the electric data migration to ESRI’s Utility Network model.
EL-16002 (Capacitor Bank Installation):This project is a multi-year effort for the procurement, design and
installation of capacitor banks at several substation. Hanson Way and Park Blvd substation work is complete;
Two capacitor banks at Hanover remain to be completed and will be completed in December 2023. The
capacitor banks at Maybell have been installed and will be commissioned in the coming months.
1.3 Rate and Bill Comparisons
For the median consumption level,the annual residential electric bill for FY 2022 was $744, about 45% lower than
the annual bill for a PG&E customer with the same consumption and approximately 16% higher than the annual
bill for a City of Santa Clara customer. The bill calculations for PG&E customers are based on PG&E Climate Zone
X, which includes most surrounding comparison communities.
The figure below presents sample median residential bills for Palo Alto, PG&E, and the City of Santa Clara (Silicon
Valley Power) for several usage levels. Rates used to calculate the monthly bills shown below were in effect as of
November 1, 2022. The rates for Palo Alto include the current Hydro Rate Adjuster of $0.013/kWh.In December,
staff will recommend to Council an increased Hydro Rate Adjusted Adjuster of $0.048/kWh to be effective January
1 to mitigate the high power costs cited above.
Over the next several years low usage customers in PG&E territory are expected to continue to see higher
percentage rate increases than high usage customers as PG&E compresses its tiers from the highly exaggerated
levels that have been in place since the energy crisis. This is likely to make the bill for the median Palo Alto
consumer look even more favorable compared to most PG&E customers. Even with the compressed tiers, bills for
high usage Palo Alto consumers are projected to remain substantially lower than the bills for high usage PG&E
customers.
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8Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 3: Residential Monthly Electric Bill Comparison (Effective 11/1/2022, $/mo.)
Season Usage (kwh)Palo Alto PG&E Santa Clara
Winter
300 47.24 95.26 39.22
(Median)453 78.57 155.65 59.95
650 121.19 233.40 86.65
1200 240.18 452.61 161.17
Summer
300 47.24 95.03 39.22
(Median) 365 59.53 120.68 48.03
650 121.19 233.16 86.65
1200 240.18 454.03 161.17
1.4 Reliability
CPAU tracks electric outages. A summary chart of these outages can be found below.
Figure 4: Electric Outage Reliability, FY 2023-Q1
Outage Reliability Q1
System Average Interruption Duration Index (SAIDA)81.69
System Average Interruption Frequency Index (SAIFI)0.61
Customer Average Interruption Duration Index (CAIDI)134.77
1.5 Financial Health
Below is a summary of the financial position for the electric utility.
1.5.1 Sales Forecasts vs. Actuals
Electric actual sales volumes through Q1 of FY 2023 were about 4% lower than forecasted,while actual sales
revenues were about 7% higher than budgeted in the FY 2023 Financial Plan. The higher sales revenues were due
to extra revenue from the Electric hydro rate adjuster, which was implemented on April 1, 2022. The commercial
sector continues to be impacted by the Covid downturn in Q1 of FY 2023,and it is uncertain when commercial
sales will recover.
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9Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 5: Electric Sales Volume (kWh), up to FY 2023-Q1
Figure 6: Electric Sales Revenue ($), up to FY 2023-Q1
1.5.2 Financial Position
The Electric Operations Reserves were at the minimum guideline level at the end of FY 2022 and may drop below
minimum in FY 2023, depending on purchase costs resulting from low hydro conditions (necessitating more
expensive market purchases) as well as increasing transmission costs. City Council activated the Hydro Rate
Adjuster in April 2022 to help mitigate these rising costs, but staff is currently proposing to Council a further
increase to the Hydro Adjuster (from $0.013 to 0.048/kWh effective January 1, 2023) to help keep reserves above
minimum in FY 2023.
Through the first quarter of FY 2023, sales and revenues have tracked close to budget, but purchase cost increases
continue to put pressure on reserves.Overall sales continue to be at levels seen during the height of COVID, with
sales to the commercial sector not recovering appreciably as COVID restrictions have eased. This lower sales
profile, along with projected new capital projects for electrification,may put additional pressure on FY 2024 rates
and beyond.Staff will provide preliminary financial forecast projections in January 2023.
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FY 2023 Budget Actual Vari ance Var iance%!
Ju l 70,843,075 67 ,532,107 -3,310,968 A.7%
Aug 72,647,339 68,060,0 58 -4 ,587,281 -6.3%
60M Se p 73 ,040,07 4 73 ,386,421 346,347 0 .5%
Oct 68 ,469,891
L s: 40M Nov 70,512,009
~ Dec 67,009,286
Jan 70,935,370
20M Fe b 66,143,77 2
M ar 64,173,286
OM Apr 62,524,419
Ju l Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun M ay 57,946,331
■ Electric, Actual ■ Electric, Budget Jun 63,400,963
FY2023 i __ Budget Actual Variance Varian ce Oh l
Jul 13,513,230 14,355 ,87 9 842,649 6 .2%
1 5M
Aug 14,158,194 14,807 ,187 648,993 4.6%
Sep 14,441,943 15,928 ,532 1 ,486,589 10.3%
~ lOM Oct 13,625,567
~ Nov 13,352,666 ...
0 Dec 9 ,853,529
D
SM Jan 10,311,382
Feb 9 ,534,373
M ar 9,385,476
OM Apr 9,031,965
Ju l Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun M ay 8 ,856,182
■ Electric, Actual ■ Electric, Budget Jun 12,309,221
10Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
2 Gas Utility
The City’s gas utility serves all residential and non-residential gas demand in Palo Alto. The City maintains and
operates a system of low-pressure gas lines for delivering gas but does not operate any transmission lines. Costs
for the gas utility are split approximately two thirds for the operation, maintenance and one third for the cost of
the gas commodity,PG&E gas transmission, compliance with the State’s Cap and Trade Program and the City’s
Carbon Neutral Gas Program.
2.1 Gas Supply and Transmission
Gas Commodity prices were relatively high in latter half of FY 2022 and the first half of FY 2023. A combination of
flat U.S. natural gas production, below-average U.S. natural gas storage levels, high US liquefied natural gas
exports, inflation, supply chain issues, and global geopolitical events have put upward pressure on prices for U.S.
natural gas. Prices are expected to be elevated throughout the winter season. The communications team
published an article in our City website and posted in various social media platforms to inform customers about
high gas prices, potential ways to conserve gas usage and encouraged home electrification.
Figure 7: Gas Supply Commodity Rates ($/Therm), FY 2018-23
2.1.1 Actual and Forecasted Supply Costs
Gas actual demand through Q1 of FY 2023 was about 14% higher than forecasted, while actual supply and
transportation costs were about 84% higher than budgeted in the FY 2023 Financial Plan.Gas commodity prices
were much higher than predicted in the FY 2023 financial plan due to reasons mentioned in section 2.1 above.
-
'.LOO
$0 .80
E 'lio .60
Ql
5,
$0 .40
$0 .20
$0 .00
I ...... '.• .. I . '.' .. • • I . •.I .
FY 20 _8 FY 20B FY 2020 FY 2oz: FY 2022 FY2023
11Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 8: Gas Supply Costs ($), Actual vs Budget, up to FY 2023-Q1
2.1.2 Carbon Neutral Gas Program
In December 2020, Council adopted Resolution #9930 maintaining the Carbon Neutral Natural Gas Plan to achieve
carbon neutrality for the gas supply portfolio using high-quality carbon offsets with a cost cap of $19 per ton CO2e.
Offsets are purchased to neutralize emissions equal to those caused by natural gas usage in Palo Alto. Staff
purchased 60,000 carbon offsets for FY 2022 in January 2022 from a mixture of forestry and livestock projects at
an average purchase price of $12.26 per metric ton, nearly double the price of historical average transaction
prices. Staff purchased an additional 60,000 carbon offsets in June 2022 at an average price of $14.51 per ton
CO2e.As a result of the higher offset purchase costs, staff has updated the billing charge for offsets from
$0.04/therm to $0.07/therm. The average purchase price of offsets purchased for the program is $7.66 per ton
CO2e. The figure below shows the composition of offset purchases.Staff is evaluating a process change to expedite
the approval of new Verified Emission Reduction (carbon offset) counterparties and depending on the timing of
this change, will carry out its next offsets purchase in December 2022 or in the beginning of 2023.
-
FY2023 Budget Actual Var ia nce Variance %
Jul 667,541 1,039,946 372,404 55.8%1
2.5M Aug 659,409 1 ,332 ,201 672,791 102.0%
2.0M I
Sep 696,972 1 ,348,782 651,810 93.5%
Oct 949,560
Nov 1,581,034
~1.SM Dec 2 ,387,025
0 Jan 2 ,638,627 V
l .0M I Fe b 2 ,036,749
Mar 1 ,7 1 2,571
0.5M I Apr 1,051,643
May 812,920
0.0M Jun 638,236
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
12Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 9: Offset Portfolio Composition
The following table provides a description of the projects.
-
Offsets Purchased by Project Type
■ Livestock
■ Mexican Forest
■ Mine Methane Capture
■ Ozone Depleting Substance
■ U.S . Forest
■ AgMethane
■ Carbon Sequestration
13Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 10: Offset Project Descriptions
2.1.3 Cap and Trade Program
The gas utility has been regulated under California’s greenhouse house (GHG) regulations since January 2015 with
a GHG emissions cap that declines over time. The gas utility receives carbon allowances equal to the emissions
allowed under the cap and is required to auction off a portion of the allowances (55% in 2022, increasing by 5%
annually) through the state Cap and Trade Program. To meet its annual GHG compliance obligation, the City must
purchase allowances based on actual gas use.
The auction floor price to either purchase or sell allowances increases annually by 5% plus inflation. Historically,
allowances have traded at or near the floor price, but the clearing prices for allowances in the auction have
increased significantly. The cost of compliance is anticipated to increase from $1.5 million in FY 2022 to $5.6
million in FY 2030, about an 18% increase per year on average, as shown in the following table:
Project Name Project Type Description
Grotegut Dairy Livestock Grotegut Dairy is a 3,900 milk-cow operation in Newton, Wisconsin with a methane capture system.
Green Trees U.S. Forest
GreenTrees Advanced Carbon Restored Ecosystem is reforestation of agricultural lands into native
hardwood forest in Mississippi, Louisiana, Arkansas, and Illinois
San Juan Lachao Mexican Forest
Protection of forests located in High Biological Value Zones which contain flora and fauna listed in the
Mexican Endangered Species List and the International Union for Conservation of Nature’s Red List of
Threatened Species. Project in San juan Lachao near Palo Alto's Sister City of Oaxaca.
Blandin Forest U.S. Forest Blandin Native American Hardwoods Conservation and Carbon Sequestration project in Minnesota.
Pocosin+U.S. Forest
These projects are all forested land that will not be disturbed by human development. Without this
protection, the forests would be converted to grow wheat or corn. Forest conservation plays a vital
role in protecting freshwater systems like lakes. The forests around the lakes act as natural water
filters and purify the water for all who use it. The projects also support healthy populations of red
wolf, bald eagle,black bear,and various bird species.
Refex ODS Ozone Depleting Substance
The RemTec facility in Bowling Green, Ohio uses an argon arc plasma destruction device to achieve
99.99 percent removal. The majority of refrigerants originated in California, and all were sourced
within the United States.
The RemTec facility uses an argon arc plasma destruction device to achieve the required destruction
and removal efficiency of 99.99 percent. The majority of ODS refrigerants originated in California, and
all were sourced within the United States.
Methane Capture Mine Methane Capture
This project is the first of its kind. Peabody Natural Gas, LLC removed methane from the North
Antelope Rochelle Coal Mine before mining. The methane was compressed and transported to a
natural gas pipeline and distributed to a national gas grid for use as fuel. Before implementation of
the project,all the methane was vented to the atmosphere.
Virginia
Conservation
Forestry Program U.S. Forest
The Virginia Conservation Forestry Program - Clifton Farm and Rich Mountain is a 9000+ acre
improved forest management project in which the timber and carbon ownership and
management rights have been transferred to The Nature Conservancy's Conservation Forestry
Program. The program manages for multiple goals to include: Water quality protection,
habitat diversity, high value forest products, and carbon sequestration.
Co-benefits: Biodiversity, Watershed Protection, Climate Resilience, and Connectivity
Riverview Farm
Anaerobic Digester Livestock
Riverview is a carbon offset project generating emission reductions thought the capture and
destruction of methane at a dairy farm in Minnesota. Under the baseline, manure managed in open
lagoons led to the fugitive emission of methane to the atmosphere. In the project scenario, this
methane is captured by an anaerobic digester and destroyed on site in the production of electricity.
Co-benefits include job creation and the improvement of local air and water quality.
Big River / Salmon
Creek Forests IFM U.S. Forest
The Big River and Salmon Creek Forests are located in Mendocino County, CA and cover 16,000 acres
of redwood and Douglas-fir forest. This project is a conservation-based forest management project.
Co-benefits include the creation of 140 jobs, protection of 37 miles of streams, and improved water
quality for local fish and bird species.
-
14Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 11: Estimated Cap and Trade Costs
Revenues from the auction sale of gas utility allowances (currently about $1.2 million per year) must be used
exclusively for the benefit of the ratepayers in that utility in accordance with California Code of Regulations (CCR
Title 17, section 95893). Approved uses are 1) the funding of certain energy efficiency rebates, retrofits, and
demand reduction programs, 2) funding for programs with demonstrated GHG reductions, 3) non-volumetric
return to ratepayers, either on or off bill, and 4) certain administrative, outreach and educational costs related to
items 1-3 above. Council adopted a policy on the use of allowance proceeds (Resolution #9487), generally
mirroring the regulations and requiring additional Council approval for rebates. Per the current regulations,the
utility must either spend or rebate the funds received in any given year within 10 years (for example, funds
received in 2020 must be spent by 2030, etc.).
As of the end of FY 2021, unspent funds related to Cap and Trade revenues were placed in a Cap and Trade reserve,
until such time as they can be utilized per the dictates of applicable regulations. There was $6.7 million in this
reserve available for use at the end of FY 2022.
2.1.4 Gas Transmission Line Capacity Valuation
Palo Alto contracts for capacity on the Redwood pipeline, the path from the California-Oregon border to PG&E’s
mid-pressure transmission system, at a cost lower than the market value. During the summer months, Palo Alto
does not need all of the capacity to serve demand.The excess capacity is monetized by purchasing gas at the
California-Oregon border and selling an equal amount of gas at the terminus of the pipeline. The variable cost of
transporting the gas is much less than the gas price difference between the two points. The net benefit to the Gas
Utility through Q1 of FY 2023 was $169K, or a reduction of about 6.2% of the total gas commodity costs.
2.1.5 Gas Prepay Valuation
On September 15, 2014, Council adopted Resolution #9451 authorizing the City’s participation in a natural gas
purchase from Municipal Gas Acquisition and Supply Corporation (MuniGas) for the City’s entire retail gas load
for a period of at least 10 years. The MuniGas transaction includes a mechanism for municipal utilities to utilize
their tax-exempt status to achieve a discount on the market price of gas. The program has reduced about $113K,
or 4.2% of the total gas commodity costs through Q1 of FY 2023.
....,
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-
15Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
2.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
GS-14003 -GMR 24A (Gas Main Replacement 24A): This project will replace approximately 2,450 linear feet
of gas main along Shopping Center Way and Orchard Lane in Stanford Shopping Center. The City coordinated
the schedule with Simon Property Group Inc. (shopping center’s management) for construction work to occur
between 6 AM and 3 PM from 1/2/23 to 3/31/23.
GS-14003 -GMR 24B (Gas Main Replacement 24B): This project will include gas pipes on University from
Webster to 101 and surrounding streets, as well as Geng Rd and Town & Country Village. Staff is waiting for
the federal grant application status which will be available in February 2023.
2.3 Rate and Bill Comparisons
The figure below presents residential bills for Palo Alto and PG&E customers at several usage levels for commodity
rates in effect as of a November 2022 (a recent winter period) and October 2022 (a recent summer period). The
bill calculations for PG&E customers are based on PG&E Climate Zone X, an area which includes the surrounding
communities of Menlo Park, Redwood City, Mountain View, Los Altos and Santa Clara. The annual gas bill for the
median residential customer for FY 2022 was $689, about 11% lower than the annual bill for a PG&E customer
with the same consumption. PG&E’s distribution rates for gas have increased substantially to collect for system
improvements for pipeline safety and maintenance.
Figure 12: Residential Natural Gas Bill Comparison ($/month)
Season
Usage
(therms)Palo Alto PG&E Zone X
% Difference
Winter
(November 2022)
30 $ 59.45 $ 72.13 -17.6%
(Median) 54 97.77 134.32 -27.25%
80 156.76 208.99 -25.0%
150 329.66 410.05 -19.6%
Summer
(October 2022)
10 27.65 23.64 16.9%
(Median) 18 40.54 43.87 -7.6%
30 68.02 77.86 -12.6%
45 105.29 120.35 -12.5%
2.4 Reliability
The City of Palo Alto tracks all gas service interruptions.A summary chart of these interruptions can be found
below. Gas service interruptions are usually due to repairs of broken or damaged gas services and mains. This kind
of damage is often caused by excavation by outside parties digging in the City.
Figure 13: Gas Service Interruptions, FY 2023
Gas Q1
Number of Breaks 9
Total Minutes 643
Customers Affected 20
-
•
•
16Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
2.5 Financial Health
Below is a summary of the financial position for the gas utility.
2.5.1 Sales Forecasts vs. Actuals
Actual sales volume for Q1 of FY 2023 were about 5% lower than forecasted in the FY 2023 Financial Plan. But
actual sales revenue was about 35% higher than forecasted due to high gas market commodity prices. Much of
the revenue is pass-through in nature and offsets commensurately higher gas commodity purchase costs.
Figure 14: Gas Sales Volume (Therms), up to FY 2023-Q1
Figure 15: Gas Sales Revenue ($), up to FY 2023-Q1
2.5.2 Financial Position
FY 2022 ending Operations Reserves were $11.1 million, and above the minimum reserve level of $7.8 million.
Through FY 2023Q1,therm sales were slightly lower than budget by about 5%, but sales revenues were almost
35% higher than budget. Because the gas commodity charge is a pass-through of market costs, increased revenue
offsets the increased cost.
-
FY 2023 Budg_et Actual Variance Variance%l ---
4M Ju l 1 ,312,955 1 ,262,859 -50,096 -3 .8 %
Aug 1 ,273,056 1 ,250,771 -22,285 -1.8%
3M Sep 1 ,372,999 1,239,006 -133,993 -9.8%
Oct 1,577,927
"' E 2M Nov 2,140,219
<l>
L Dec 3 ,153,598 f-
Jan 3,830,945
lM Feb 3 ,575,685
Mar 2,770,018
OM Apr 2,660,158
Ju l Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun May 1,670,754
■ Gas , Actu al Gas , Bud get Ju n 1,162,461
FY 2023 Budget Actual Variance Variance%
6M Ju l 2,158,795 2 ,880,043 721,248 33.4%
Aug 2,142,170 2,787,192 645,022 30 .1%
Sep 2,136,412 2,993,352 856,940 40 .1%
l/l 4M Oct 2,420,904
t Nov 3,371,1 29
~
0 Dec 5 ,123,807
0
2M Jan 6 ,241,688
Feb 5 ,195,946
Mar 4,753,158
OM Apr 4 ,296,964
Ju l Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun May 2 ,984,368
■ Gas , Actu a l Gas , Bud get Ju n 2,644,552
17Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
3 Water Utility
The Water Utility serves water to virtually all Palo Alto residential and non-residential customers.All potable water
in the City is from the San Francisco Public Utilities Commission (SFPUC) Hetch Hetchy Water System. This system
delivers high quality water from the Sierra Nevada and uses no pumping to deliver water to Palo Alto. Palo Alto
uses a small amount of recycled water for irrigation of the Municipal Golf Course and a few other sites near the
Regional Water Quality Control Plant. The City also maintains a system of reservoirs and wells that enable Palo
Alto to serve water during an interruption of the Hetch Hetchy system. Costs for the Water Utility are split
approximately half for the operation, maintenance and periodic replacement of Palo Alto’s water system and half
for the costs of the water purchased.
3.1 Water Supply and Transmission
On November 10, 2022, Governor Newsom’s senior Water-Policy Officials, the San Francisco Public Utilities
Commission (SFPUC), and the Modesto and Turlock Irrigation Districts reached agreement on a Memorandum of
Understanding to provide greater water flows and increased habitat for the Tuolumne River. The Bay Area Water
Supply and Conservation Agency (BAWSCA) anticipates that this MOU will become a part of a larger voluntary
agreement for the Sacramento-San Joaquin Delta. The agreement includes investments of $64M for habitat
restoration. The next step is for the MOU signatories and others to work out the implementation details of a Bay-
Delta wide voluntary agreement for evaluation by the State Water Resources Control Board as an alternative to
the adopted Bay-Delta Plan.
In August 2018, Palo Alto’s City Council voted to support the State Water Resources Control Board’s Bay-Delta
Plan to have 40 percent of natural water in the Central Valley to enter the Delta from February to June and
associated Southern Delta salinity objectives; and send a letter expressing this policy position to BAWSCA,
California State Water Resources Control Board, San Francisco Public Utilities Commission (SFPUC), and other
stakeholders.
Storage in the San Francisco Regional Water System is below normal while in better shape than many reservoirs
across California. As of October 31, 2022, the Regional Water System total storage operated by the San Francisco
Public Utilities Commission (SFPUC) was 64.8% full (normal system storage for this time of year is 79.7%). As of
October 31, 2022, Water Bank was 45% full while normal for this time of year would be nearly full.In the figure
below, the solid black line shows storage in the Regional Water System for the past 12 months (color bands show
contributions to total system storage)and the dashed black line shows total system storage for the previous 12
months. Regional Water System Storage remained fairly steady through September 2022, but did not pick up in
October of 2022 as it did during October 2021 when there was significant precipitation.
-
18Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 16: Regional Water System Storage
On August 20, 2021 the SFPUC received curtailment orders for Tuolumne River diversions. The curtailments
eliminate access to the Water Bank which, as shown in the figure above, provides much of the system storage.
From October 2021 through May 2022, the State Board suspended the curtailments and reinstated them on June
8, 2022.
The SFPUC declared a local water shortage emergency by Resolution No. 21-0177 on November 23, 2021,calling
for voluntary systemwide 10% water use reductions from FY 2019-2020 levels and increased the systemwide
water use reduction to a voluntary systemwide 11%from FY 2019-2020 levels on May 24, 2022 via adoption of
Resolution No. 22-0098.SFPUC’s increased the systemwide water use reduction in compliance with the State
Water Resource Control Board’s May 24, 2022 emergency regulation requiring urban water suppliers to
implement the demand reduction actions associated with water shortage level of 10% to 20% by June 10, 2022.
Each Wholesale Customer has its own requested cutback level;Palo Alto’s voluntary water purchase cutback level
is 8%.For January –November 2022,Palo Alto’s cumulative monthly water budgets were 4,101,982 CCF while
actual total purchases were approximately 4,338,211 CCF or 6% above the budget.This is in part because of the
exceptionally dry conditions in January through March 2022. However, for the billing months July 2022 through
October 2022, compared with the same period from July 2019 to November 2022, the Palo Alto community
reduced water usage by 10%.
On May 24, 2022, SFPUC adopted Resolution No. 22-0098 adopting a systemwide voluntary water use reduction
of 11% compared to baseline water use during FY 2019-2020. Palo Alto’s voluntary water purchase cutback level
remains at approximately 8%.SFPUC’s cutbacks are currently voluntary, however they could become mandatory
in early 2023 if dry conditions continue.Under mandatory water cutbacks, SFPUC may impose excess use charges
for water purchases above Palo Alto’s water budget.
1400
1200
u::-1000
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Cl) 800 0)
Ill ...
0 -Cl) 600
400
200
-Total St orage Dec 1 2021 to Nov 1 2022
- -Total Storage Dec 1 2020 to Nov 1 2021
Local Reservoirs
Cherry Reservoir+ Lake Eleanor
Hetch Hetchy Reservoir
Water Bank
Jan Feb Mar Apr May
-
Jun Jul Aug Sep Oct Nov
19Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
During drought that require up to 20% cutbacks, water is allocated between San Francisco and the Wholesale
Customers collectively based upon the Water Shortage Allocation Plan (or Tier One Plan) that is outlined in Palo
Alto’s water supply contract with San Francisco. The collective Wholesale Customer share from the Tier One Plan
is then allocated among Wholesale Customers based upon a formula in a negotiated and adopted “Tier Two Plan.”
Palo Alto’s current water budget is based upon the results of the current Tier One and Tier Two Plans. In 2022,
staff have been participating in a negotiation with the other Wholesale Customers to update the Tier Two Plan.
Staff expects to finalize the updated Tier Two Plan in 2023.
The figure below shows water usage for the South Bay/East Bay (including Palo Alto)compared to several
benchmarks including 2019. For the South Bay/East Bay region as well as systemwide, summertime peak demand
so far has been shaved off below demand levels for each of the past three years.
Figure 17: SFPUC Water Deliveries
Valley Water, the groundwater manager in Santa Clara County, declared a water shortage emergency and
adopted a 15% mandatory water use reduction for water retailers its agency serves. Valley Water called for the
County, water retailers and cities to restrict ornamental landscape and lawn irrigation with potable water within
their service or jurisdictional areas to no more than two days per week. Although Palo Alto purchases all of its
potable water from SFPUC, and does not purchase any water from Valley Water, Palo Alto partners with Valley
Water on wide variety of water conservation programs. On June 20, 2022, the Palo Alto City Council restricted
potable irrigation of ornamental landscapes and lawns to 2 days per week, except to ensure the health of trees
and other perennial non-turf plantings.The State Water Resources Control Board also prohibited the use of
potable water for the irrigation of “non-functional turf” at commercial, industrial, and institutional sites other
than to the extent necessary to ensure the health of trees and other perennial non-turf plantings.
1S.O
--...-..Avg. o1 CY 2017-2021 Qe[\'e{[e&
2019.Mi!tefOe!.l'rer\es
•--♦2020 Met.er Deilve!le.s
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South B.ayfEast Bay Customers
Source: SFPUC Regional Water Syst em County Me.'i.ers
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-
20Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
The Palo Alto City Council also implemented the water use restrictions in Stage II of the Water Shortage
Contingency Plan which are 1) restaurants and other food service operations shall serve water to customers only
upon request and 2) operators of hotels and motels shall provide guests with the option of choosing not to have
towels and linens laundered daily. Palo Alto is working with Valley Water on messaging to customers in the
county to avoid confusion as much as possible. As such, the wise use of water rather than specific targets will
continue to be emphasized.Palo Alto staff is continuing to focus on education and outreach and providing
resources to eliminate water waste and achieve efficient water use and completed the process of hiring a Water
Waste Coordinator in October. The Water Waste Coordinator is logging and following-up on water waste
reports.Palo Alto is kicking off the WaterSmart Customer Portal and Residential Home Water Report Program
and also re-engaging with Waterfluence software to target water efficiency for large landscape customers. We
continue to promote rebate programs and resources through online outreach, bill inserts, and newsletters.
Palo Alto launched the One Water Plan with the goal of Council adoption of a One Water supply plan that is a
20-year adaptable roadmap for implementation of water supply and conservation portfolio alternatives.In June
the City Council approved a contract for this work with Carollo Engineers, Inc.In September, staff conducted
stakeholder engagement meetings with community members and City staff focusing on One Water community
needs and priorities.Additional stakeholder engagement meetings are planned with City staff, community
members, and regional partners in early December to discuss water supply and conservation options and review
draft evaluation criteria for the One Water Plan.The UAC and Stormwater Committee will receive an update in
February or March of 2023.
3.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
WS-14001 -WMR 28 (Water Main Replacement 28): The project is to replace approximately 18,763 linear
feet of water main and 256 water services in the Crescent Park, Barron Park, and Charleston Meadows
neighborhoods. Construction of this project started during April 2022 and the anticipated completion date is
in November 2023.
WS-07000 –California Avenue and Page Mill Road Turnouts: This project includes work to upgrade California
Avenue Turnout and to restrain the pressure reducing valve at Page Mill Road Turnout. The construction is
anticipated to start in March 2023 and be completed by June 2023 (before water demand increases during
the summer).
3.3 Rate and Bill Comparisons
The figure below shows the water bills for single-family residential customers compared to what they would be
under surrounding communities’ rate schedules as of October 2022. CPAU is among the highest monthly bills of
the group. Palo Alto’s water bills at 9 CCF per month are 17% higher than the comparison group average.
-
•
•
21Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 18: Residential Water Bill Comparison ($/month)
As of October 2022
Usage CCF/month Palo Alto Menlo Park
Redwood
City
Mountain
View Santa Clara Hayward
4 $50.74 62.83 $54.04 $43.47 $29.32 $41.03
(Winter median) 7 76.54 87.32 76.09 67.29 51.31 63.23
(Annual median) 9 98.46 103.65 90.79 83.17 65.97 78.03
(Summer median) 14 153.26 148.02 138.94 122.87 102.62 123.48
25 273.82 257.41 267.39 257.81 183.25 223.47
3.4 Reliability
The City of Palo Alto tracks all water service interruptions. A summary chart of these interruptions can be found
below. Water service interruptions are usually due to repairs of broken or damaged water services and mains.
Figure 19: Water Service Interruptions, FY 2023
Water Q1
Number of Breaks 10
Combined Minutes 1007
Customers Affected 46
3.5 Financial Health
Below is a summary of the financial position for the water utility.
3.5.1 Sales Forecasts vs. Actuals
Actual water sales volumes through Q1 of FY 2023 were about 10% lower than forecasted in the FY 2023 financial
plan. Actual water sales revenues were about 13% lower than forecasted during the same period. Despite the dry
weather conditions, some water conservation was achieved by the Palo Alto community during Q1 of FY 2023.
Staff will continue to promote drought-related and water savings communication through the rest of the FY 2023.
-
22Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 20: Water Sales Volume (CCF), up to FY 2023-Q1
Figure 21: Water Sales Revenue ($), up to FY 2023-Q1
3.5.2 Financial Position
The Water Operations Reserve was filled to the maximum guideline level at the end of FY 2022 as higher bid costs
and delays in project schedules resulted in deferred main replacement projects over the past few years. There are
additional funds in the Operations Reserve above the maximum guideline level that will continue to be used to
cover water utility operational and capital costs in FY 2023. At year end FY 2022 there was approximately $12.2
million in Water CIP Reappropriations and Commitments reserves. The FY 2023 Water Utility CIP includes a main
replacement (WMR 28) as well as one-time seismic reservoir upgrades (one upgrade is complete and a second
and third are planned in FY 2023 and FY 2026). At year end FY 2022, there was also $10.7 million in the CIP Reserve
and $9.07 million in the Rate Stabilization Reserve. Staff’s preliminary projection of expected revenues and
expenses together with transfers from the CIP Reserve, estimates the Operations Reserve will reach approximately
target levels by the end of FY 2023. Staff will continue to monitor drought conditions and respond to calls for
voluntary or mandatory conservation. Staff will evaluate and propose reserve transfers between the Rate
Stabilization Reserve, CIP Reserve, and Operations Reserve in the annual Financial Plans.
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FY 2023 Budget Actual Variance Variance%
Jul
SOOK
525,621 449,495 -76,126 -14 .5 %
Au g 490,256 449,699 -40,557 -8.3%
Sep 479,291 454,552 -24,739 -5.2%
Oct 454,425
lL Nov 354,487 u u
Dec 275,706
Jan 237,777
Feb 232,409
Ma r 288,269
Apr 268,185
Feb Mar Apr May Jun Ma y 382,762
■ W ater, Ac · ua l ■ W ater, Budget Jun 424,508
FY 2023 Budget Actual Variance Variance%
Jul 5 ,702,307 4,505,935 -1,196,372 -2 1 .0%
Au g 5 ,318,642 4,707,270 -611,372 -11.5%
Sep 5 ,199,686 4,867,131 -332,555 -6 .4%
4M Oct 4 ,929,922 (/)
~ Nov 3 ,845,724
n,
0 Dec 2 ,991,053
D
2M Jan 2,579,572
Feb 2 ,521,336
Mar 3,127,345
OM Apr 2,909,460
Ju l Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun May 4,152,472
■ Wat er, Act ua l ■ Water, Budget Jun 4,605,362
23Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
4 Wastewater Utility
The Wastewater Utility includes the system of sewer pipes that collect and transport wastewater to the Regional
Water Quality Control Plant (RWQCP) operated by the City of Palo Alto under a partnership agreement with
several surrounding communities, as well as Palo Alto’s share of the cost of operating the RWQCP. The RWQCP
provides treatment and disposal of wastewater for Palo Alto. Costs for the Wastewater Utility are split
approximately half for the operation, maintenance and periodic replacement of Palo Alto’s sewer collection
system and half for the costs of wastewater treatment at the RWQCP.
4.1 Wastewater Treatment Updates and Capital Planning Status
The Regional Water Quality Control Plant is operated by Palo Alto’s Public Works Department and provides
wastewater treatment to Palo Alto, Mountain View, Stanford, Los Altos, East Palo Alto and Los Altos Hills. The Palo
Alto Wastewater Collection Utility pays its share (approximately 32% projected in FY 2024) of the costs for
wastewater treatment and disposal. Capital costs for wastewater treatment are a major driver for cost increases
for the Wastewater Treatment Utility and by extension for the Wastewater Collection Utility. These costs are
projected to increase at approximately 15% per year on average from FY 2023 through FY 2032. The RWQCP is
facing the need for major upgrades in coming years, due to aging equipment and changing environmental
regulations. Rehabilitation and replacement of plant equipment that has been in use for over 40 years is necessary
to ensure the city can continue to provide wastewater treatment operations safely and in compliance with
regulatory requirements for the discharge of treated wastewater 24 hours a day.
4.1.1 Treatment Cost Trends
RWQCP staff project treatment costs paid for by Palo Alto’s Wastewater utility to increase by approximately 5.8%
annually on average from FY 2023 through FY 2032. A key driver of the increases are capital projects, parts,
materials and debt. The treatment capital expenses,including debt service costs,are increasing at an average of
about 15% per year from FY 2023 through FY 2032 to keep up with ongoing replacement of aging equipment.
Larger increases to capital expenses are expected to begin in FY 2024 in the form of new debt service for major
projects to implement the Plant’s capital program. The figure below shows Palo Alto’s share of each component
of estimated treatment costs. Major upcoming capital projects and estimated years for debt service to begin are
reflected in the “Planned Debt Service” bar in the figure below and include:
Joint Interceptor Sewer Rehabilitation (FY 2024)
1900 Embarcadero Road Purchase; Primary Sedimentation Tank Rehabilitation (FY 2025)
Outfall Line Construction, Operation Center and Laboratory (FY 2027)
Secondary Treatment Upgrades, Headworks Facility (FY 2029)
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24Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 22: Palo Alto’s Share of Estimated Wastewater Treatment Expenses (Projection and Planned CIP)
The figure shows the ongoing annual CIP reinvestment (“Recurring/Minor CIP” and “Existing Debt Service”) as
well as treatment operations costs, which make up the majority of the treatment costs but are not growing as
quickly as the planned debt service. Factors that are contributing to cost increases for treatment operations are
rising salary and benefits costs, allocated charges for centralized city services needed to support wastewater
treatment fund operations, increased water and air permitting fees from the Regional Water Quality Control
Board and Bay Area Air Quality Management District, commodity rates to operate the facility, and chemical
expenses.
4.1.2 Regional Water Quality Control Plant Capital Planning Status
The Long-Range Facilities Plan, completed in 2012, guides the capital plans for the RWQCP. The RWQCP’s current
capital work in-progress includes an estimated $359 million in projects. The following table summarizes these
ongoing projects and provides their status and costs.
$20,000,000
$18,000,000
$16,000,000
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
FY 2024 FY 2025
Palo Alto Estimated Expenses FY 2024-2033
Projection + Planned CIP
FY 2026 FY2027 FY 2028 FY 2029 FY 2030
-Treatment Operations -Recurring/Minor CIP
One Time CIP for Joint Intercepting Sewer -Existing Debt Service
FY 2031
Planned Debt Service _._ Treatment Operations & Planned CIPs
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FY 2032 FY 2033
25Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 23: Current RWQCP Capital Work In-Progress (information from RWQCP June 2022 Partners Meeting)
Project Status Expense (million $)
Primary Sedimentation Tanks Rehabilitation and
Equipment Room Electrical Upgrade
Construction $19.4
New Outfall Pipeline 90% Redesign $17.4
Secondary Treatment Upgrades Awarding Construction $193
Advanced Water Purification System 90% Design $56
Technical Services Building/Lab Building, Ops
Building Remodel
Advanced Planning $41.4
Buy 1900 Embarcadero Road Planning $6.0
Headworks Facility Replacement Budgeted $48.6
Joint Interceptor Sewer Rehabilitation Design $5.6
Projects in Progress Various $10.6
Subtotal $398
The largest projects listed above include the Headworks Facility Replacement which involves replacement or
rehabilitation of the parts of the facility that pump raw sewage to the main treatment works (the headworks), and
rehabilitation of primary sedimentation tanks that separate out primary sludge. Additionally, the RWQCP
anticipates regulations to limit nutrient discharges (on total nitrogen) into the San Francisco Bay. The current
secondary treatment design cannot remove nitrogen and the Secondary Treatment Upgrades will address this
regulatory change as well as address aging mechanical and electrical equipment that must be replaced.
The RWQCP plans to fund these capital projects through a combination of mechanisms including State Revolving
Fund loans, and revenue bonds. In addition,Valley Water will be providing $16 million of funding for the Advanced
Water Purification System.Additionally, Palo Alto was awarded a $12.8 million grant from the Bureau of
Reclamation’s WaterSMART: Title XVI WIIN Act Water Reclamation and Reuse Project funding for the Advanced
Water Purification System.
4.2 Collection System Capital Improvement Plan Status
The following capital projects are currently in progress:
WC-17001 -SSR 30 (Sanitary Sewer Replacement 30): This project is to replace approximately 10,120 linear
feet of wastewater main and 156 sewer laterals in the Ventura, Research Park, Fairmeadow, and Midtown
West neighborhoods. The construction started on 3/28/22 and the project is scheduled to be completed in
January 2023.
WC-19001 -SSR 31 (Sanitary Sewer Replacement 31): This project is to replace approximately 10,000 linear
feet of wastewater main, sewer laterals, and manholes on El Camino Real. The construction is anticipated to
start in June or July of 2023. A significant portion of the work will be performed during nighttime due to
Caltrans’ restriction to close 2 traffic lanes only between 11 PM and 6 AM.
4.3 Rate and Bill Comparisons
The figure below shows the wastewater monthly bill for residential customers in Palo Alto compared to what they
would be under surrounding communities’ rate schedules as of November2022. Palo Alto’s monthly sewer bill is
lower than four of the six neighboring communities.Menlo Park in this table refers to the West Bay Sanitary
District. Staff will report on future rate increases once they are adopted by the wastewater utilities.
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26Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 24: Residential Wastewater Bill Comparison ($/month)
As of November,2022
Palo Alto Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward
$44.62 $106.67 $89.28 $50.10 $42.05 $46.82 $38.58
4.4 Financial Health
Below is a summary of the financial position for the wastewater utility.
4.4.1 Sales Forecasts vs. Actuals
Actual wastewater sales revenues through Q1 of FY 2023 were around expectation, at about 0.4% higher than
forecasted in the FY 2023 Financial Plan.
Figure 25: Wastewater Sales Revenue ($), up to FY 2023-Q1
4.4.2 Financial Position
The Wastewater Collection Operations Reserve was within the guideline range at year end FY 2022; the CIP
Reserve had a balance of approximately $3.2 million at year end FY 2022 and staff will seek Council approval in
the FY 2024 Wastewater Collection Financial Plan to access funds in the CIP Reserve if they are needed for CIP
projects. The Wastewater Collection Utility CIP Reappropriation and Commitment Reserves totaled $4.6 million
at the end of FY 2022. In addition to these funds, the adopted FY 2023 budget included approximately $3.5 million
in the CIP program primarily for the Sanitary Sewer Replacement Project 31.
-
FY2023 Budget Actua l Variance Variance 'lo j
~ Ju l 1,739,132 1,685,896 -53,236 -3 .1%
Aug 1,733,213 1,786,224 53,011 3 .1%
1500K Sep 1,743,637 1,763,529 19,892 1 .1%
e Oct 1 ,734,767
:.'.' 1000K Nov 1,728,399
.!?
0 Dec 1,771,013
0
Jan 1,770,711
SOOK Feb 1,669,155
M ar 1,810,061
Apr 1,696,732
Ju l Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun M ay 1,665,374
■ W astew a er, Act u a l ■ W astew at er, Bu d get Jun 1,684,910
27Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
5 Fiber Utility
The City offers a "Dark" fiber service providing a fiber connection from Palo Alto businesses to the downtown
Internet Exchange. At the exchange businesses select an internet service provider (ISP) for bandwidth and
connection speed.
5.1 Fiber Utility Strategic Planning
On November 2, 2022, the UAC unanimously (6-0, Bowie absent) recommended Option 2 –build fiber backbone
and FTTP under a phased approach with existing funds ($34 million from Fiber and $13 million from Electric)
(Report #14845, Packet Pg. 106). UAC expressed the goal of FTTP is to provide ubiquitous or citywide high-speed
internet access to all residents and businesses in Palo Alto. Option 2 can become a springboard to Option 1 which
is a citywide FTTP deployment within five years if phase 1 of Palo Alto Fiber is deemed to be successful and
financially self-sustaining. Other topics raised during the meeting was partnering with an ISP service since the City
does not have experience in this area which is under consideration with the outsourcing model. Multi-dwelling
unit (MDU) is a different market segment than residential or commercial customers because most property
owners have an exclusive multi-year term contractual agreement with an ISP. The City will develop a MDU
marketing campaign to gauge MDU interest in negotiating access agreement.
On December 22, 2022 the Council approved construction of the fiber backbone and Fiber-to-the-Premises (FTTP)
under a phased approach without debt financing (Staff Report #14800, Packet Pg. 268). Utilities will allocate
approximately $34M from the Fiber Fund and $13M from the Electric Fund to build the fiber backbone and build
phase one of the FTTP distribution network under a phased approach. Under this approach the City can build a
dedicated fiber backbone for the Electric utility to enhance reliability, security, redundancy, and future electric-
related initiatives such as automated SCADA sensors. The City will also be able to provide internet access to
approximately 20% -30% of homes and residents who prefer to switch to City-owned ISP. Council can decide
whether to accelerate or decelerate the FTTP expansion plan in one or two years based on the results of Phase 1.
In addition, the City will evaluate the feasibility of integrating FTTP expansion into future capital improvement
projects such as electric grid modernization, electrification and undergrounding.
Staff will return back to Council in Feb/Mar 2023 to seek approval of a contract amendment with Magellan to
provide some ancillary services to the phase 1 buildout and request for new regular FTEs to support the new fiber
utility business.
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28Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
5.2 Capital Improvement Plan Status
Given Council’s approval of the fiber backbone and FTTP, CPAU will update the Fiber Network Rebuild CIP for the
fiber backbone and create a new FTTP project under the fiber utility in the FY 2024 Fiber CIP Budget. CPAU will
work with Magellan on the final design of the two networks and issue a construction invitation for bid (IFB) in
2023.
5.3 Reliability
There were no unplanned fiber outages or events to report in Q1 of FY 2023.
5.4 Financial Health
Below is a summary of the financial position for the fiber utility.
5.4.1 Fiber Sales
Actual fiber revenues for Q1 FY 2023 were $0.8 million, which is $0.1 million or 15% below FY 2023 revenue
forecast of $3.6 million.Based on the number of new dark fiber applications, staff projects annual fiber revenues
will return to pre-pandemic level of $4.5 million by end of FY 2024. To expand the dark fiber business, CPAU has
a hired a full-time Fiber Market Analyst to promote dark fiber and reduce fulfillment time for new applications.
In addition, CPAU is recruiting for a dedicated Fiber Engineer to support the fiber expansion project.
Actual fiber expenses for Q1 FY 2023 were $0.7 million which is comprised of salaries and benefits ($0.3 million),
contract expenses ($0.1 million), administration overhead ($0.2 million), and transfers to other utilities ($0.1
million).
5.4.2 Financial Position
The projected ending FY 2022 Fiber Optic Utility Rate Stabilization Reserve is $34.0 million.
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29Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
6 Customer Programs (Efficiency and Sustainability)
The City’s Utilities Department maintains a number of programs to help customers save money, use energy and
water efficiently, and reduce carbon emissions. These programs are funded through a variety of funding sources,
some of which are summarized below.
6.1 Customer Programs Updates
Below is a summary of the City’s energy and water efficiency programs, as well as programs to encourage building
electrification and adoption of electric vehicles.
6.1.1 Energy and Water Efficiency
Energy & Water Efficiency Workshops
The City in partnership with the Bay Area Water Supply and Conservation Agency (BAWSCA) held three landscape
efficiency workshops in fall 2022. The workshops covered topics on harvesting rainwater, steps to take to design
and convert lawns into drought-tolerant landscapes, and available rebates. Attendance was strong, with more
than 91 residents total participating in the workshops.
Schedule of CPAU Workshops September -November 2022
Event #Date Event
1 9/24/2022 Rain Barrel Workshop
2 10/18/2022 Landscape Design 101
3 11/1/2022 Lawn Conversion 101
Please visit the BAWSCA website for a complete list of available classes and events at:
https://bawsca.org/conserve/programs/classes.All past Landscape Class Videos are available online at:
https://bawsca.org/conserve/landscaping/videos/. For updates on future events and workshops, please visit
http://cityofpaloalto.org/workshops
With collaboration from the City Manager's Office, Planning and Development Services and the Utilities
Department, a Making Better Choices in Your Home Workshop was held on Saturday, October 15 from 10 a.m. –
1 p.m. at Mitchell Park Community Center.Over 200 attendees learned about different climate-friendly choices
they can make in their home, including displays of heat pump water heaters, and experts answering questions
about induction cooktops, electric vehicles, e-bikes, water saving and the advantages of going all electric.
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30Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Residential Energy and Water Programs
The Home Efficiency Genie program continues to provide residents with professional advice and information to
improve their home’s efficiency and comfort, lower their energy and water usage and get guidance on home
electrification options. Even with the Genie returning to in-home comprehensive and diagnostic assessments in
the fall of 2021, the virtual option developed during COVID continues to be a service that residents are interested
in. The Home Electrification Readiness Assessment (HERA) was also amended to include a virtual version during
COVID. Both the in-home and virtual versions continue to help residents assess home electrification upgrades that
their home can accommodate and provide actionable next steps. Between July and October of 2022, the Genie
performed 20 comprehensive in-home assessments, 19 HERAs and 3 virtual assessments.
CPAU’s Residential Energy Assistance Program (REAP) for income-qualified customers continues to reach our most
vulnerable population offering energy and water efficiency improvements at no cost to the customer. Residents
who are newly qualified for CPAU’s Rate Assistance Program (RAP) are notified each month of their eligibility for
these free upgrades installed by CPAU’s vendor,Synergy. Between July and October of 2022, 5 new REAP
customers have taken advantage of the free efficiency upgrades, with projects including building envelope
improvements, furnace replacements with high efficiency models,and lighting upgrades to LEDs.
For our multifamily (MF) property owners, CPAU continues to offer the Multi Family Plus (MF+) program which
offers free energy efficiency upgrades installed by our vendor,Synergy. These upgrades include lighting upgrades
to LEDs and whole building envelope upgrades.
Water Conservation Program
CPAU partners with Valley Water to offer a robust portfolio of water conservation programs and rebates for
residents and businesses.On July 1, 2022, the City entered into a new cost-sharing agreement with Valley Water
which increases rebate amounts for converting turf into drought-tolerant landscapes and includes a new Lawn to
Mulch rebate program for commercial customers. As drought conditions continue, CPAU is focusing outreach on
reducing outdoor water use and continues to encourage participation in rebates and resources.
On October 6, 2022,the City launched WaterSmart, an online water management tool to help residents and
businesses better understand their water usage and enable them to conserve water and save money. The
WaterSmart Portal is open to all City of Palo Alto Utilities customers and provides access to water use charts,
personalized recommendations for water efficiency, information on available rebates, and more. The WaterSmart
system integrates with MyCPAU, the Utilities online account management tool, for a streamlined sign-on
experience.
Bay Area SunShares Program
For the seventh year in a row, the City of Palo Alto is an outreach partner for Bay Area SunShares, a solar and
battery storage group-buy program administered by Building Council for Climate Change (BC3). More than 35 Bay
Area communities and companies are participating as outreach partners. Palo Alto’s participation as an outreach
partner helps CPAU customers receive information and discounted prices from vetted contractors. Three solar
installers (Solar Technologies, SkyTech Solar, and Infinity Energy) have been vetted and selected through an RFP
process.CPAU hosted a free educational workshop in partnership with BC3 on October 12, 2022 with 83
attendees.Palo Alto had the highest number of SunShares sign ups with 161 registered residents by the November
15, 2022 registration deadline. Contracts for installations must be signed by December 15, 2022.
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31Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Business Advantage Program
As of November 22, 2022, the Business Advantage Program (BAP) has installed 75 customers with an additional
21 customer waiting on installs for the GridPoint Energy Management program (GEM). Of the 75 customers, only
two have decided to withdraw and return equipment. One customer preferred their old thermostat (NEST) and
the other was frustrated using the system and had multiple overrides and could not control employees compared
to old thermostat behavior. The two returned units will be redeployed. The majority of program sign ups continue
to come from direct customer sales through face-to-face engagement. GridPoint currently has had personal
changes and also had an issue with its installer. They replaced the old installer with a new company however, the
program has had continued to have install issues. The new installer was also let go because of poor customer
service and substandard installation work. GridPoint reacquired the old installer but rates for service were much
higher. GridPoint and Palo Alto continue to offer free 30-minute customer training sessions on a monthly basis.
The primary point is to educate current users on how to properly program and operate the GEM system. Lastly, a
second contract amendment was completed, and Wildan Energy Services is the official contract holder.
Commercial & Industrial Energy Efficiency Program
As of October 31,2022,Enovity has completed 3 projects with 259,000 kWh savings. They have three additional
projects in the pipeline and anticipate finishing these projects before the end of the fiscal year with an additional
2,000,000 kWh savings in FY 2023. Key Account Managers have been actively reaching out to engage customers
with direct email contacts as well as through the Questline Key Account Newsletter. Lighting continues to be the
most popular energy conservation measure. Some companies, however, are reluctant to allocate resources to
efficiency upgrades until staffing levels at their sites return to pre-pandemic levels.
Business Customer Rebates, formerly Commercial Advantage Program
The Business Customer Rebate (BCR) program was launched in May this year, with the expansion of business
rebates for commercial electrification projects and also increased rebates for electric efficiency savings. This
program was rebranded from the Commercial Advantage Program to promote energy efficiency and
electrification projects among business customers. Both standard rebates and custom rebates are offered through
this program. This program is currently being publicized through business e-newsletters, bill insert, and cross
promotion from other CPAU business programs.
Business Energy Advisor
Since the Business Energy Advisor program launched in June 2022, 21 program participation agreements have
been sent to customers, 7 agreements have been signed, and 3 site assessments have been completed. There are
4 additional assessments in the pipeline that are anticipated to be complete by the end of this year. CLEAResult
has launched a call center campaign to engage more customers, and both CPAU and CLEAResult have continued
in-person outreach to small and medium business in Palo Alto. Additional outreach plans include a direct mailer
campaign in early 2023, advertisement in the bi-monthly CPAU newsletter to small and medium businesses, and
presentations to business organizations in Palo Alto.
6.1.2 Building Electrification
With sustainability continuing to be a Council priority, staff recognizes the need to promote the importance and
benefits of building electrification (BE) while removing barriers to voluntary electrification efforts in existing
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32Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
buildings. Current work covers three areas of activities: public outreach, customer program development and
implementation, and strategy and policy development.
For public outreach, staff continues to participate in meetings with Working Group teams developed through the
Council’s Ad Hoc Committee. These working groups hold periodic updates with the public, including one on June
14, 2022.
For residential customer programs, staff issued a comprehensive RFP in June 2021 for residential building
electrification, energy and water efficiency programs which includes single family and multifamily homes as well
as income and medically qualified residents. As part of the community engagement process, an Ad Hoc committee
of Council members was formed in April 2021, and staff was asked to pause activities related to contract
negotiations for the residential programs RFP until the Council Ad Hoc committee and related working groups had
the opportunity to provide input on program design and direction. Staff was also asked to wait to proceed with
contract negotiations while concerns raised by the Utility’s Engineering and Operations Division about potential
additional electric load resulting from building and transportation electrification were addressed. These
community and staff collaborative efforts resulted in the ongoing development of a turnkey heat pump water
heater installation program. Other programs planned include building electrification phone advisory and technical
assistance services for both single family and multifamily property owners, and self-service online tools to help
residents assess the economics of electrifying their homes. Staff has resumed contract negotiations with the
selected vendors since June 2022 and plans to bring the contracts to City Council for approval in the fall of 2022.
For strategy and policy development, Utilities staff is collaborating with Planning & Development Services to
propose building electrification requirements for the upcoming building code cycle (2023-2025). The proposed
requirements include the following elements:
All-electric design for new construction projects; this applies to low-rise residential buildings,
detached ADUs, multifamily buildings, and nonresidential buildings.
Addition/alteration projects that meet the “Substantial Remodel” definition will trigger the all-electric
requirements. For the purposes of electrification, substantial remodel shall mean the alteration of any
structure, including cumulative projects or additions to the existing structure within any three (3) year
period, that affects the removal or replacement of 50% of the linear length of the exterior weight-
bearing walls of the building, 50% of the wall plate height is raised, and/or 50% of the roof structural
framing.
Prohibit the extension of gas infrastructure in existing buildings to outdoor amenities such as pools,
spas, fireplaces and grills in order to minimize the carbon footprint of these equipment.
Require heat pump water heater when the existing water heater is replaced, or new water heater is
added as part of a residential addition or alteration project.
Collectively these proposed requirements will avoid over 3,420 MT CO2-e per year, about 1% to 1.5% of the
remaining emissions reductions needed to achieve the 80x30 goal (about 1.5% to 2% when upstream emissions
from fuel use are included).3 Other proposed Green Building requirements cover EV infrastructure, water
efficiency, and embodied carbon limits in the use of concrete for new construction projects. Additional details can
3 Using 20-year global warming potentials.
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33Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
be found in the 2022 Reach Codes webpage. Staff will be bringing the proposed Green Building regulations to City
Council for the first reading this coming October.
Business Electrification Technical Assistance Program (BE TAP)
The BE TAP program officially launched in August 2022, offering no-cost assessments to help nonresidential
customers identify electrification opportunities and free technical assistance to support them with their building
electrification journey.Since the program launched, our partner, CLEAResult, has completed 2 site assessments,
assisting large commercial customers with potential HVAC and heat pump water heater projects. The feasibility
study completed for the large HVAC project found an estimated 77,640 kWh and 54,263 therms savings, with a
potential incentive of $100,000 for the customer. The next steps for this program include completing additional
project feasibility studies and other electrification assessments in the pipeline. We plan to continue outreach
efforts through the call campaign, e-newsletters, and in-person communication.
6.1.3 Electric Vehicles
Palo Alto continues to facilitate the installation of EV charging infrastructure throughout the City to support mass
EV adoption, with equitable access for multifamily and income-qualified residents, as well as workplaces, public
parking lots and retail areas. Correspondingly, cross-departmental work is progressing on proposals for fleet
electrification and permit streamlining.
Financial Overview
FY 2022 EV expenses to date is $0.54M, of which $0.465M was for the first installment of the CALeVIP program.
No direct customer rebates have been paid to date. Revenues for the year is $1.59M,lower than anticipated a
year ago due to declining market prices for LCFS credits.Total LCFS revenues received to date is $10.1 million.
Summary of All EV Programs for Multi-family (MF) Properties and Workplaces
Mission:The EV team’s mission is to facilitate the installation of EV chargers to support increased EV adoption
with a priority on MF properties. To reach 80 by 30 S/CAP goals,it is imperative that there is enough charging
infrastructure for residents, commuters and visitors. For residents, the priority is to close the MF EV access
gap, as only 13% of EVs in Palo Alto are registered at MF buildings, while MF makes up 42% of households.
Goal of EV Programs:Expand EV charging accessibility to 10% of MF households (about 1,100 homes) by 2025.
Why:This is an equity issue. Most middle-income and low to moderate-income residents in Palo Alto live in
MF housing. EVs provide significant lifetime household savings, and yet those who most need those savings
have the hardest time gaining EV charging access due to the challenges associated with installing chargers at
MF properties. Private industry is not adequately serving this market, whereas the City is well positioned to
support this hard to reach, slower to move, customer segment,making meaningful use of available City
funding sources for EV promotion.
Target Customer Segment:MF property owners, HOA’s,nonprofits, owners of small medium businesses and
buildings,as well large C&I customers.
What CPAU can provide:
o Trusted, neutral advisory services (rather than vendor sales services) with a direct connection to
internal City staff to facilitate problems.
o Technical assistance (site evaluation, including electrical capacity, business case development,
project design, obtaining bids, preparing permit packages)
o Incentives (both for charging equipment and distribution upgrades)
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34Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Strategy:Facilitate development of shared Level 2 chargers in multi-family buildings as well as, as many Level
1 chargers as can be installed. Size electrical infrastructure to enable the building owner to add more EV
charging ports in the future.
Aggregated Results to-Date for All EV Programs Targeting Multi-family (MF) Properties and Workplaces
Program Commencement:December 2017 (multi-family rebates), October 2019 (multi-family/nonprofit
technical assistance), December 2019 (workplace charging rebates)
Leads:Over 130 sites have enrolled in the programs, of which 86 are multi-family properties representing
over 3400 units
Results:When the active projects are completed, the City will have:
o Facilitated access to EV charging for over 1500 multi-family housing units. Without accessible
charging facilities these residents are unlikely to consider an EV.
o Access to EV charging for employees of several non-profits and workplaces.
Marketing Strategy: Of Palo Alto’s 803 multi-family (MF) buildings, focus on the largest 5%(44 sites) which
represent 32% of total MF units (about 3800 households).Also,partner with affordable housing providers
which represent over 1600 low-income households at 35 sites of which 5 properties have 100 units or more.
Outreach consists of direct outreach to property owners via call campaigns, with marketing done by the 3rd
party program provider, CLEAResult.
Updates by EV Program
EV Technical Assistance Program (EVTAP)
Goal: Facilitate the installation of 180-360 ports @ 60-90 sites (By 2024)
Offer technical assistance for the installation of EV chargers at Non-Profit and MF properties, involving a series
of site visits, technical evaluations and engineering reviews, that culminate in the landlord receiving contractor
bids and then assistance submitting a building permit, applying for incentives and project management of the
installation. Projects expected to take up to 2 years or more to reach completion.
As of the end of September 2022:
o 0 installations complete
o 16 Permit Applications Submitted
o 88 sites enrolled and working through the program
o Potential for over 300 Level 2 ports and 60 Level 1 ports
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•
•
•
•
•
•
35Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 26: EV Technical Assistance Program (EVTAP), Cumulative Progress Report (November 2019 -September 2022)
EV Charger Rebate Program
Goal: Incentivize the installation of EV chargers at Non-Profits and Multifamily properties. CPAU currently
offers up to $8,000 per port for up to 10 ports.
As of the end of November 2022:
o FY22 -32 ports installed
o Since the launch of this program in 2017, CPAU has facilitated the installations of 94 new EV charging
ports/connectors at 14 sites. The breakdown of the installation sites: 6 MF and 8 non-profits (including
3 schools). Avg. cost of each port: $10k and projects have averaged 12 months to complete.
California Electric Vehicle Infrastructure Project (CALeVIP)
Goal: Facilitate and Incentivize the installation of EV chargers at commercial sites.
As of November 2022, a total of $1.9M (out of $2M)has been reserved by 11 site owners through CALeVIP, a
commercial EV charging,matching grant program sponsored by the California Energy Commission (CEC).The
proposed installations could lead to the installation of 115 Level 2 ports and 14 DC Fast Chargers.
o 0 installations completed
o 11 sites enrolled and working through the program (1 hotel, 7 office sites, 2 retailers and 1 multi-unit
dwelling)
o 8 Permit Applications Submitted
o 5 Permits Issued
o Potential for 179 Level 2 ports and 12 DC Fast Chargers
California Clean Fuel Rewards (CCFR)
Goal: Incentivize the purchase of new EVs
160
140
120
100
!IO
60
"'
20
•
•
•
140
88
"' 31
I I
1. TAP lntl!rested 2. Number of 3. Nu-nber of
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S. N1mberof
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39
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" I
Sb. Number of
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I
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7. Ni.mber of a Nunber of 9. Number of
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Completed 2021 Installed
Installations
48
I
10.Nurrtierd
Sites Delayed
-
-11. Number al
Sites Not
Proceeding
36Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Since the launch of the CCFR program in November 2020, Palo Alto residents have earned 1,906 rebates
valued at $2M.This translates to over 7%% of Palo Alto households purchasing an EV taking advantage of this
program.To date, Palo Alto has contributed $1.3M towards this state program. The most popular EV continues
to be the Tesla Model Y and Model 3 and the most popular plug-in hybrid continues to be the Toyota Prius
Prime.
Due to higher-than-expected participation levels statewide and lower than expected Low Carbon Fuel
Standard (LCFS) credits prices, the California Air Resources Board paused the program at the end of August
2022.
November 2020 –November 2022:
o 1,906 Rebates paid to Palo Alto residents for EV Purchases
EV Awareness and Outreach
Goal: Raise awareness, answer questions and encourage residents to consider transitioning to electrified
modes of transportation, including electric cars, e-Bikes and other modes of clean transportation.CPAU is
offering a wide array of EV classes and events, partnering with multiple vendors and organizations. Through
the end of November 2022,CPAU has been involved in 18 EV education and outreach events and expects to
offer over 2 dozen workshops and events during calendar year 2022. There is a high level on interest and
many of the online webinars regularly attract over 100 highly engaged participants. CPAU is in the process of
putting together a full schedule of events and workshop for CY2023.
January –November 2022:
o 32 EV education and outreach events completed
Figure 27: Schedule of CPAU Workshops and Events, July -September 2022
Event #Date Event
1 7/19/2022 EV 102 Workshop
2 8/8/2022 EV 101 Workshop
3 8/17/2022 EV 101 Workshop
4 9/1/2022 EV 101 Workshop
5 9/11/2022 Neighborhood EV Expo @ Palo Alto Adult School
6 9/18/2022 Neighborhood EV Expo @ Universal Unitarian Church
7 9/21/2022 Bilingual Financial Incentives Workshop
8 9/24/2022 Neighborhood EV Expo @ Green House Tour
Visit http://www.cityofpaloalto.org/workshops for information on upcoming classes.
City-Owned EV Chargers
Goal: Install EV Charging Infrastructure for the public as well as City-fleet.
As of the End of November 2022:
o 124 -City-Owned Ports
o 120 - Publicly accessible EV Charging ports
o Newest chargers: 6 ports at renovated Junior Museum on 1451 Middlefield Rd.
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•
•
37Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Transformer Upgrade Rebate Program
Goal: Provide discounts to defray the cost of utility distribution system upgrades triggered by EV
applications, costs that would otherwise be borne by the customers. With this program we are offering up
to $100K for MF & non-profits and up to $10K for Single Family Homes
As the End of November 2022:
Through EVTAP we are learning that many older properties in Palo Alto, especially multifamily buildings, have
limited electric capacity to accommodate EV chargers and building electrification. The EV team is working
closely with Engineering and is conducting a pre-screening of transformer loading for all commercial EV
projects enrolled in EVTAP.
6.2 Funding Sources for Emissions Reductions
Energy efficiency and water efficiency programs have traditionally been funded by electric, gas, and water rate
revenues. To fund emissions reduction programs, the City has developed multiple alternative funding sources
6.2.1 Low Carbon Fuel Standard (LCFS) Program
LCFS base credits are allocated by the California Air Resources Board (CARB)to CPAU, based on the number EVs
registered in Palo Alto, the estimated miles travelled and the difference in carbon intensity of transportation fuels
and electricity. Credits are also allocated based on CNG dispensed and electricity dispensed at city owned EV
chargers. The sales proceeds of these credits are the source of funds for CPAU’s customer programs related to
EVs.In CY2022, Palo Alto received ~15,000 credits and is expected to result in a revenue of about $0.9M. LCFS
credit prices have declined substantially in in 2022 compared to 2021, down from ~$130/credit to $60/credit.
6.2.2 Cap and Trade Program, Revenue from Allocated Allowances
The Global Warming Solutions Act of 2006, also known as Assembly Bill (AB) 32, authorized CARB to develop
regulations to lower the state’s greenhouse gas (GHG) emissions to 1990 levels by 2020. CARB developed a cap-
and-trade program as one of the strategies to achieve the 2020 goal. Under the cap-and-trade program, an overall
limit on GHG emissions from capped sectors is established and facilities subject to the cap are able to trade permits
(allowances) to emit GHGs. Senate Bill 32 (2016) expanded upon AB 32 by requiring a 40% reduction in GHG
emissions below the 1990 levels by 2030.
In 2012, CARB’s cap-and-trade program commenced and certain covered entities, such as electricity generators
and other stationary sources of GHGs, had a compliance obligation under the new program. The City of Palo Alto
Utilities’ (CPAU’s) electric utility does not own or operate fossil fuel-based electricity generation covered by the
cap-and-trade regulations. CPAU also received free allowances from CARB to mitigate the costs of reducing its
GHG emissions. Since CPAU’s electric utility is carbon neutral and typically has no need to use the allowances for
compliance, it must sell them into the cap-and-trade auction.
Allowance revenues, estimated to be around $3 million in 2022 and onward, can be used for several approved
purposes, including: a) purchases or investment in renewable resources (outside Palo Alto or locally) for the
electric portfolio; b) investment in energy efficiency programs for the electric portfolio and retail customers; c)
investment in other carbon reduction activities, including those required to achieve a carbon-neutral electric
portfolio; and d) rebates to electric retail ratepayers.
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•
38Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
As of 2021 reporting, about $1.9 million have been utilized to purchase renewable resources in 2021, while some
amounts have been earmarked for future electrification programs (about $1.2 million). Staff is investigating using
more of these funds for investments in emissions reduction programs.
6.2.3 Electric Public Benefit Funds
Locally owned municipal utilities like CPAU must collect Public Benefit funds from their electric utility customers
as required by section 385 of the Public Utilities Code, to be used on cost-effective energy efficiency and
conservation, low-income programs, investments in renewable energy resources and technologies, and research
and development.CPAU currently has an Electric Public Benefit surcharge of 2.85% of the electric utility bill for all
customers. A portion of this fund can be used for building electrification pilot programs and projects.
6.3 Innovation and Pilot Programs
CPAU’s Program for Emerging Technologies, or PET, (www.cityofpaloalto.org/UTLInnovation) provides the
opportunity for local businesses and organizations to submit proposals for innovative and impactful products to
CPAU for review as a prospective partner. The goal is to find and nurture creative products and services that will
improve customer value, save natural resources, or reduce carbon emissions. From the program’s inception in
June 2012 through today, the program has received a total of 104 applications. The figure below summarizes the
status of all applications through Q1 of FY 2023.
So far this year, only a single academic collaboration has reached the threshold of value, quality, and relevance to
be considered a good fit for a pilot project. CPAU is currently in discussions with some applicants about revising
their projects and is also evaluating potential regional collaborations with promising early-stage companies. In
order to provide more clarity for applicants and better focus the applications on CPAU’s priorities, staff is also
revised the program’s guidelines to highlight what makes a compelling project pitch for CPAU. These updated
program priorities and guidelines were released in 2021. If this program aligns with priorities and additional staff
time is available, staff could work with universities and accelerators to solicit high-quality applications closely
aligned with CPAU’s highest priorities.
6.3.1 Academic Collaborations
CPAU staff worked with Keola Iskandar, a summer Stanford Fellow, to assess energy resiliency options for
residential units in collaboration with Office of Emergency Services. Keola developed techno-economic models to
compare the cost of different backup energy systems and the level of electric reliability these technologies may
provide during an outage. The final report was presented at the December 2022 UAC meeting. CPAU was also
contacted by Stanford professors for multiple other potential projects and is considering formal collaborations
with them.
6.3.2 Completed Projects
In FY 2023 CPAU has received zero applications, after declining all eight in FY 2022. Staff is also in discussions with
a few start-ups and will consider asking them to apply for collaborations.
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39Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Figure 28: Status to date of all applications to the Program for Emerging Technologies
Deadline Total Received Under Review Declined/Closed Active Completed
FY 2013 13 0 11 0 2
FY 2014 15 0 11 0 4
FY 2015 15 0 11 0 4
FY 2016 14 0 9 0 5
FY 2017 10 0 7 0 3
FY 2018 10 0 9 0 1
FY 2019 9 0 5 0 4
FY 2020 8 0 3 0 5
FY 2021 2 0 1 0 1
FY 2022 8 0 8 0 0
FY 2023 0 0 0 0 0
TOTAL 104 0 75 0 29
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40Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
7 Communications
This section summarizes communications highlights, updates on major campaigns and noteworthy events. Copies
of ads and bill inserts are available online at http://cityofpaloalto.org/UTLbillinsert.
Water Supply and Drought:Staff have been proactive about communicating the current situation of water supply
conditions and ever-changing water shortage emergency declarations. As a result of the continued dry conditions,
CPAU continues a robust outreach campaign about water supply conditions, water use restrictions, and resources
for water use efficiency. Staff are working with the Bay Area Water Supply and Conservation Agency (BAWSCA)
and Valley Water to coordinate public education events. Updates are available at cityofpaloalto.org/water
Business and Key Account Customer Surveys:CPAU regularly conducts customer satisfaction surveys and this fall
is currently conducting a survey of our commercial, other non-residential, and Key Account customers. This survey
aims to measure customer satisfaction levels and opinions, as well as identify opportunities to improve the
services and programs we provide to all of our customers.
High Gas Prices This Winter Outreach to Keep Utility Costs Low: CPAU anticipates high natural gas market prices
this winter and are reaching out to customers in advance to offer tips to help keep their utility costs low. Staff are
sharing information via the city’s website, social media channels, Nextdoor, email, utility bill announcements, with
neighborhood groups, City Council, and the UAC. Energy efficiency tips are provided at
www.cityofpaloalto.org/efficiencytips
Gas Safety Outreach:Throughout the year, CPAU delivers a variety of outreach materials to the community about
utility safety. An important element of our public awareness program is the annual distribution of our gas safety
awareness brochure. Per Federal Department of Transportation regulations, we directly mail this information to
all customers, non-customers living near a gas pipeline, public officials, emergency responders, excavators,
contractors, and locators working in Palo Alto. Gas safety brochures were delivered in November. If interested in
additional details about gas safety or this outreach, please visit cityofpaloalto.org/safeutility
Gas Safety Awareness Surveys: It is important to assess the effectiveness of our outreach for gas safety to guide
our actions, and it is also required for public awareness per the Federal Department of Transportation. A primary
way most utilities, including CPAU, do this is by contacting stakeholders through a randomized phone or email
survey to ask questions about gas safety. Questions address items such calling USA 811 before digging, who to call
and what to do in case of a gas leak, among others. During the month of November, we will engage with a
contractor to conduct these stakeholder awareness surveys.
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41Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Mayors Climate Protection Award:The City was recognized earlier this year with an honorable mention for the
2020 Mayors Climate Protection Awards. The award highlighted our Multifamily Gas Furnace to Heat Pump
Retrofit Pilot Program, which will reduce the City’s greenhouse gas emissions and serves as a case study for future
electrification projects in multifamily buildings. The Conference of Mayors made the announcement at their
Annual Meeting in Reno, Nevada on June 3. Mayor Pat Burt and City staff received the award plaque in a special
order of the day ceremony at the September 27 Council meeting.
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42Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
8 Legislative and Regulatory Activity
8.1 State Legislation
At the time of this writing, the legislature is not in session. In January, at the same meeting where the UAC receives
this quarterly update, staff will present information about 2022 bills that passed and what is expected in 2023.
Also,in January, we will know if Governor Newsom did in fact call a special legislative session in December to delve
into gas prices and oil company profits, and whether any proceedings also included discussions related to electric
vehicles or energy prices.
Fiscally, the state is not entering the new year in the surplus position expected and in fact, may end up with a
$25 billion deficit or more depending on a possible recession. While the state has many billions in reserves to
weather a downturn, the loss of surplus may mean less money for some of the Governor’s clean energy
priorities. We will know more mid-January, when the Governor publishes his proposed budget.
8.2 State Regulatory Proceedings
Below are issues currently before state regulatory bodies that CPAU is monitoring, primarily through our work
with CMUA and NCPA.
8.2.1 Energy Commission
The CEC implemented the voluntary Demand Side Grid Support Program and held a workshop related to offshore
wind.
8.2.2 State Water Resources Control Board
The Water Board held a second comment period for its Water Loss Control Standards rulemaking. Board staff is
working on guidance for new federal Lead & Copper Rule Standards.
8.2.3 Air Resources Board
CARB is poised to adopt an updated Scoping Plan, the State’s strategy for fighting climate change.
8.2.4 Natural Resources Agency
The Wildfire Safety Advisory Board released its advisory comments to all POU Wildfire Mitigation Plans received
in July 2022. The Board was complimentary of CPAU’s Plan.Staff is currently working on our 2023 Plan.
-
43Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
Appendices
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44Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
9 Appendix A: Energy Risk Management Program
This appendix provides a quarterly update on the City’s Energy Risk Management Program.
9.1 Overview of Hedging Programs
The City’s Utilities Department maintains a hedging program for its Electric and Gas Utilities. In the Gas Utility the
program protects against short-term (intra-month) price spikes caused by weather or major incidents on the
Western gas system. However, the City does not hedge its gas supply more than one month in advance, choosing
instead to protect the Gas Utility’s financial position by passing gas supply costs through to customers via a charge
that varies monthly based on gas market prices. As a result, the Gas Utility’s only market exposure is the amount
by which gas demand deviates from forecasts within the month. This exposure is relatively small and can be
managed using Gas Utility Operating Reserves. A risk assessment is performed each year as part of the Gas Utility
financial planning process to ensure adequate reserves to cover all risks. The most recent Gas Utility Financial Plan
was adopted June 21, 2021 (Staff Report #12240).
The City has entered into long-term contracts for its Electric Utility to ensure that the City has carbon free
electricity supplies equal to 100% of Palo Alto’s annual electric demand. However, the output from these
generating sources does not match Palo Alto’s electric load. In the summer,the City has a surplus of carbon free
energy and it has a deficit in the winter. This exposes the City to market risk, and staff maintains a hedging program
to protect against this risk. In addition,hydroelectric generators make up approximately half the City’s energy
supply. During dry years these resources do not generate as much energy, creating an additional market exposure
that must be hedged. Unlike the gas hedging program, which is operated by City staff, the electric hedging program
is operated by the Northern California Power Agency (NCPA), a joint powers agency the City formed in partnership
with several other California publicly owned electric utilities, with oversight by City staff.
9.2 Overview of Energy Risk Management Program
The hedging programs described above are conducted in accordance with the City’s Energy Risk Management
Program,which includes a set of Program Policies adopted by the City Council, Guidelines adopted by the City’s
Utilities Risk Oversight Coordinating Committee (UROCC), and Procedures approved by the Utilities Director. In
addition, for the electric hedging program, NCPA maintains its own Risk Management Program. The City is able to
provide policy level oversight of this program through its seat on the NCPA Risk Oversight Committee, which is
held by the City’s Risk Manager.
Per the Energy Risk Management Policies, the City Council must receive quarterly reports on the City’s forward
contract purchases, market exposure, credit exposure, counterparty credit ratings, transaction compliance, and
other relevant data.
9.3 Forward Deals
Below is a table of forward Electric Resource Adequacy deals made in Q1 of FY 2023.Palo Alto did not transact
any Electric energy and Gas commodity deal in Q1 of FY 2023.
Figure 29: Electric Resource Adequacy Contracts
Delivery Month Deal Type Avg Capacity
(MW/Mo.)
Avg Price
($/kW/Mo.)
Amount ($)
Jan -Dec '22 Sale 9.45 7.25 823,000
-
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I
46Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
10 Appendix B: Staffing and Vacancies
As of Q1 FY 2023, the Utilities Department has 48 vacant positions out of 253 authorized positions or a 19%
vacancy rate. Below is a breakdown of the vacancies by division. The Electric Engineering and Operations (E&O)
division continues to have the highest number and hardest positions to fill. Electric Engineering and Operations
has a total of 29 vacancies or 32% vacancy percentage.The City is actively recruiting for 32 vacant positions.Due
to HR staffing constraints, Utilities has designated three HR liaisons from Utilities Administration to assist HR with
some of the recruitments. CPAU will reengage with third party recruiting firms for some of the vacant
management and difficult-to-fill positions.
Figure 31: Utilities Vacancies and Position Movements by Division, up to Q1 FY 2023
Division
Authorized
FTEs
Vacant
FTEs
Active
Recruitments Vacancy %
Administrati on 20.5 3 1 15%
Custome r Servi ce 23 2 1 9%
Re source Manage me nt 25.5 3 1 12%
Electric Ope rati ons 69 20 13 29%
Electric Engi ne ering 21 9 8 43%
WGW Operations 70 8 6 11%
WGW Engineering 24 3 2 13%
Total 253 48 32 19%
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47Utilities Quarterly Update: First Quarter of Fiscal Year 2023
February 2023
11 Appendix C: Gas Utility Annual Infrastructure Maintenance and Replacement
Report
In each Quarterly Update the Utilities Department will provide a detailed overview of a single utility’s investment
and maintenance activity. An update on the gas utility was scheduled for this report, it is presented as Attachment
B.
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Updated: December 02, 2022
1 of 8
Gas Utility Asset Management
Overview
Executive Summary
· The City provides safe and reliable natural gas service to residents and
businesses;
· The City meets or exceeds federal regulatory requirements (examples:
Accelerated leak survey program & Cathodic Protection maintenance
requirements);
· Gas Main Replacement program continues to replace PVC and
corroded steel pipeline material to increase safety and minimize
greenhouse gas emissions;
· Completed the installation of 20,170 LF of gas main, 126 new gas
services, and 62 gas service reconnected on the Gas Main Replacement 23
project;
· Annually inspects and maintains gas distribution assets;
· Implement Advanced Metering Infrastructure (AMI) and Meter Data
Management (MDM) by September of 2022. Project awarded to Sensus.
Infrastructure Planning
Key infrastructure replacement efforts in the next five years include:
● Apply for federal grant funding opportunities for the replacement of PVC and corroded steel pipelines;
● Replace PVC and corroded steel pipelines, with polyethylene pipe, for gas mains and services;
● Maintain and inspect gas assets for regulatory compliance;
● Replace inoperable large-diameter emergency valves;
● Implement a calibrated hydraulic gas system model;
● Transition to an ESRI-based Geographical Information System (GIS);
● Upgrade utility fleet, equipment, and tools.
System Operations and Maintenance
Asset Management Goals
What are our goals?
-Create and utilize a calibrated hydraulic gas
system model to prioritize future pipeline
replacement projects.
-Minimize gas service interruption during
planned repairs, tie-ins, and installation by
following gas handling procedures.
-Continue with CIP replacements to reduce
maintenance costs and minimize greenhouse
gas emissions, while extending the gas
system life.
-Increase routine maintenance on aging
pipelines to maximize asset life and keep
replacement costs down.
Figure 1: FTE (Full-time equivalent) Breakdown by Maintenance
Category
TOTAL FTE: 34.4
FTE 0 .13, 0.4%
System Monitoring
Updated: December 02, 2022
2 of 8
· Staff assigned to New Construction:
Perform gas main and service upgrades at various locations.
Support Capital Improvement Projects (CIP) and install bollards for meter protection.
Replace new gas services, valves, and meters for Development Services projects.
· Staff assigned to System Monitoring:
Monitor and manage the system continuously to ensure it is operating safely and maintaining
adequate pressure throughout the city. A 24/7 On-call staff responds to emergency alerts sent by the
SCADA software.
· Staff assigned to System Inspections:
Valve Exercise: Regularly exercise valves to meet regulatory requirements and ensure proper
operation.
City Gate Stations: Annual inspection of the 4 gas receiving stations.
Cathodic Protection: Take monthly pipe-to-soil reads to monitor cathodic protection levels on steel
pipelines.
Mobile and Walk Leak Survey: Perform annual mobile leak survey of the entire gas system and
biennial walking leak surveys to detect underground gas leaks and check for atmospheric corrosion
on aboveground pipelines.
Patrolling: Perform quarterly inspections of gas pipeline bridge spans and railroad crossings.
· Staff assigned to Planned Maintenance:
Repair and replacement of gas distribution system pipeline, leaks, and valves.
Installation of bollards for meter protection.
Support on Gas Main Replacement projects.
· Staff assigned to Unplanned Maintenance:
Respond to emergencies.
Repair and replace infrastructure requiring immediate attention.
GAS MAINTENANCE ONGOING
Table 1: Status of Gas System Operation and Maintenance Programs
System Operation or
Maintenance Program
Status
Green = good
Yellow =
room for
improvement
Comments
Emergency Valve Inspection
and Exercise
Annual maintenance and exercise are performed on schedule as
part of compliance. Valves are exercised, greased, and cleaned to
ensure the valve nut is accessible and operable. Emergency valve
lids are coated in yellow and are brass tagged for identification.
Non-Emergency Valve
Inspection and Exercise
Inspected and exercised once every 5 years per City’s goal for
maintenance. Valves are exercised, greased, and cleaned to
ensure the valve nut is accessible and operable. Operations is
planning to have a program to locate and expose paved valve
cover lids.
•
•
Updated: December 02, 2022
3 of 8
System Monitoring Continuous system monitoring and alerts via SCADA. Gas
Operations staff handles the monitoring of the gas system and are
adequately trained to operate the system. On-call staff responds
to emergency alerts after-hours. System updates are done
regularly.
City Gate Station Maintenance Annual maintenance is performed on the 4 City gate stations’
regulators along with visual inspection of aboveground piping and
fences. Every station has dual runs with two regulators per run for
redundancy, a working regulator, and a backup (monitoring)
regulator, which are alternated each year.
Gas Supply Monitoring Monthly gas meter revenue reports are generated for each
station from PG&E’s monitoring module. The City’s SCADA
technician monitors and reviews the reports. Whenever a
discrepancy is detected, the SCADA technician requests
maintenance and repair from PG&E. Staff propose installation of
City flow meters and gas quality monitoring equipment for each
station, which would allow City to validate PG&E’s billed gas
volumes and gas quality.
Pressure Monitoring There are currently 10 pressure monitoring points around the City
of Palo Alto, one at each of the 4 City gate stations and 6 in the
outer ends of the City. The pressure monitoring points in the City
are being well maintained by Operations. Additional pressure
transducers for pressure monitoring stations throughout the
system would improve system monitoring and expedite responses
in emergencies.
Large Commercial Gas Meter
Maintenance (Includes VA
Hospital)
Large commercial gas meters include rotary, ultrasonic, and
turbine meter types. These meters are maintained biennial and
replaced once every 10 years. In 2021, only visual inspections
were done for the meters. Maintenance that includes calibration
and checking of oil levels fell behind in 2021 due to a shortage of
staff. Staff is aiming to catch up on maintenance in 2021.
Gas Curb Meter Maintenance The 3-year inspection and maintenance cycle is on schedule. The
City’s curb meters are replaced once every 10 years.
Curb meters that cannot be retrofitted will be replaced as part of
the new AMI project with Sensus.
Residential and Commercial
Gas Meter Maintenance
Meters are inspected and maintained every two years.
Maintenance includes repainting as needed, leak survey, and
aboveground visual assessment of the gas meter set.
Gas Inspection Along Bridges The City has 28 gas main bridge crossings that require
maintenance. Visual inspection (pipeline markers, pipeline
support condition, wrap condition, etc.) and leak surveys are
performed quarterly each year. Recoating of Ross Road gas main
was completed in 2021. One crossing (Foothill Expressway) was
abandoned in 2021 and future projects will abandon more.
Unplanned Maintenance No backlogs of leaks or assets in need of repair. The City maintains
an emergency on-call program to respond to and control gas leaks
•
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0
0
0
•
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•
Updated: December 02, 2022
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Table 2: Condition of Gas System Assets
or other system emergencies after hours. In order to remain in
compliance, the staff is pulled to respond to emergency
situations, resulting in delays in planned work. Currently
experiencing long lead times for material.
Cathodic Protection
Maintenance and Monitoring 24-hour rectifier monitoring and alerts via Elecsys. Elecsys
provides our Cathodic operators with the troubleshooting and
software support for their system. Rectifiers and galvanic anodes
are regularly inspected and are in good condition. Anodes are
replaced as needed and require more frequent replacement
during the ongoing drought.
Operations is currently using Paradigm software to generate
annual DOT reports. Paradigm will need a software update from
the manufacturer (Fera) for compatibility with the current
operating system.
An apprenticeship program for the cathodic protection crew is
suggested to ensure a sufficient supply of trained staff.
Asset Class Quantity Maintenance Asset Condition
Gas Receiving
Stations (City
Gate Station)
4 Annual
maintenance
1 station
undergoes
maintenance
each quarter.
Standard maintenance is performed by the City’s meter
technicians.
· Visual inspection and regulator alternating is performed
annually
· Paint is inspected quarterly and replaced as needed
· Equipment and parts are maintained quarterly and are in
good condition.
· Station enclosure and safety headers are adequate and in
good condition.
· Station regulators are rebuilt once every three years.
Pressure
Monitoring
Stations
6 system
testing
points and
4 Gate
Stations
Annual
calibration
and
maintenance
· The pressure monitoring points in the City are maintained
regularly by Operations.
· The pressure monitoring systems in all 4 City gate gas
stations were updated in 2016 when the stations were
rebuilt.
· 5 of the 6 pressure monitoring points at the outer ends of
the City are over 20 years old. They should be upgraded
from conduit to fiber optic and additional pressure
monitoring stations should be added.
Cathodic
Protection
577 test
stations
Annual
maintenance
· 158 test stations, on average, are read monthly throughout
the year to meet and exceed the yearly maintenance
regulation.
0
Updated: December 02, 2022
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Rectifier and
Galvanic
42
Rectifiers
& 10
Galvanic
systems
Monthly
maintenance
· Rectifier systems are in good condition and are being
monitored through Elecsys for power interruptions or low
readings.
· Anode-based systems are suggested for an upgrade to
rectifiers due to poor performance during the ongoing
drought.
Meter
Regulators
Gas Meter
Audit
Project
Once every two
years for the
entire system
· Operations replaces regulators every 20 years as needed as
part of the gas meter replacement maintenance.
· The City is planning to establish a program to replace large
orifice regulators with properly sized regulators.
Gas Meters ~24600
· Maintenance of curb meters and residential meters is in
good standing.
· Maintenance for large commercial gas meters is aiming to
catch up in 2021 with recent full staffing.
· The City is implementing Advanced Metering Infrastructure
(AMI) with Sensus to transition to smart meters. Currently
in alpha stage 2021.
Risers ~17395 Atmospheric
Survey
Maintenance
The survey is
performed
every two
years.
Risers are in good condition. They are inspected during the
biennial leak survey.
EFV (Excess
Flow Valve)
~8370 No routine maintenance is required for the EFVs in the system.
The City is planning to perform an EFV trip-test when replacing
gas meters.
Gas Valves 110
Emergency
Valves
~3500
regular
valves
Annual
emergency
valve
maintenance
Regular valve
maintenance is
performed once
every 5 years
Maintenance of emergency gas valves and regular valves is in
good standing. Maintenance activities include exercising valves,
greasing valves, cleaning the valve boxes, and ensuring valve
nut is accessible.
Gas Main and
Services
~210 miles
of main
~17,395
services
Mobile and
Walking Leak
Survey
· Ongoing Gas Main Replacement program continues as
planned, prioritizing leak-prone seismically susceptible PVC
and corrosion-prone steel pipelines.
· The single Gas Service Replacement project replaced the
majority of ABS and tenite gas services in the City. The only
remaining ABS and tenite services are on streets with active
street-cutting moratoriums. These remaining services will
be replaced by City crews as their moratoriums expire.
· Once ready, the calibrated hydraulic gas system model will
be used to prioritize future pipeline replacement projects.
Updated: December 02, 2022
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SCADA
Software
NA Quarterly
updates for the
system and
everyday
troubleshooting
for the 4 City
gate stations
The City’s SCADA system is structured for Electrical Utilities but
also handles all needed functions for the gas system. Quarterly
patches and updates ensure the system is in proper working
order. Several gas operations staff are trained to monitor the
SCADA system but are not trained to perform repairs, which are
handled by the City’s SCADA tech or third-party contractors.
Updated: December 02, 2022
7 of 8
FIGURE 2: 2021 Gas Maintenance and Inspection Charts
0 0 0 0 0
0 0 0
349
0 0 0 58
698 698 698
349 349
0
200
400
600
800
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Non-Emergency Valve Operation
Valves
Exercised
Monthly
Goal
Remaining
Valve
Inspections
0 0 0
110
0 0 0 0 0 0 0 0
0
110 110
00
20
40
60
80
100
120
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Emergency Valve Operation
Valves
Maintained
Monthly
Goal
Remaining
Valve
Inspections
1 1 1 1
4
3
2
1
0
1
0
1
2
3
4
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
4 City Gate Maintenance
Station
Maintained
Remaining
Stations
1 Station Per
Quarter Goal
247
160
265
299
367
335
291
160
227
157
225
157
2880
147
0
500
1000
1500
2000
2500
3000
0
200
400
600
800
1000
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Ba
c
k
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g
f
o
r
P
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-
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o
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l
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Test Stations Pipe-to-Soil Reads
Pipe-to-Soil
Reads
Remaining
Test
Stations
20
21 20 21 20 21 20
21 20 21 20 21
41
0
41
0
41
0
41
0
41
0
41
00
10
20
30
40
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Rectifier Tests
Pipe-to-Soil
Reads
Bimonthly
Tests
Requirement
28 28 28 28
2828282828
0
5
10
15
20
25
30
35
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
2020 Pipeline Patrol Maintenance
Maintained Pipe
Mains along
Bridges and
Crossings
Quarterly
Maintenance
Goal
Quartely
Maintenance
Requirement
Cathodic Protection Gas Valves
City Gate Maintenance Pipeline Patrol Maintenance
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Updated: December 02, 2022
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19
16 0 0 0 0 0 0
0
118 42 26 5 3 3 2
0%
50%
100%
5c 8c 3000 5000 23m 3" Ultra 4" Ultra 35 Tur
2 Year Large Volume Meter Maintenance Program
Completed Pending Total
3
2
4
1 1
4 4
1
3
0
1
3
0
1
2
3
4
5
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Emergency Leaks (Grade 1) Repaired
Emergency
Leaks
Repaired
Emergency
leaks found
1 1 1 1 1 222 2 4 3 3 2 10 0
2
5 5
6
7
3
5
7
8
7
0
5
10
0
5
10
15
20
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Gr
a
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e
2
L
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a
k
s
Gr
a
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2
L
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a
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s
R
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a
n
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No
L
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ak F
o
u
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Grade 2 Leaks
Grade 2 Leaks Repaired Added Leaks Found in 2021 Grade 2 Leaks
5 2 3 2
20
1
10
4 2 1 2
127 126
102 110 110 111 111 111 110 112 112 112
0
20
40
60
80
100
120
140
0
10
20
30
40
50
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Al
l
G
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a
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F
o
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Grade 3 Leaks
Grade 3 Leaks Repaired Resurveyed, No Leak Found
G3 Leaks Found Grade 3 Leaks
Gas Meters
Planned Maintenance (Monitored Leaks with planned repairs)
Unplanned Maintenance
Emergency leaks are repaired immediately
Note: Additional staffing and
the AMI & GMR projects
increased the overall number
of meters replaced in 2021.
Staff will re-evaluate the
overall monthly goal.
Note: Additional staffing and
the AMI & GMR projects
increased the overall number
of meters replaced in 2021.
Staff will re-evaluate the
overall monthly goal.
1 1 1
3
250
200
150
100
so
0
600
500
400
300
200
100
0
Gas Meter Replacement Program
214
158 167 172 175 169
139
108 101
-Replaced
Meters
-----Monthly Goal
1--161 61 ---t -li "
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Gas Meter Testing Program
427
-Tested Meters
60 345 381 355
287 -----Monthly Goal
263
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JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
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Emer£ency leaks are repaired immediately
------
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