HomeMy WebLinkAboutStaff Report 2310-21442. This is an informa�onal item. No ac�on is requested.
Item No. 2. Page 1 of 2
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: November 1, 2023
Staff Report: 2310-2144
TITLE
Winter 2023-24 Natural Gas Price Uncertainty Management Council Decision Implementation
RECOMMENDATION
This is an informational item. No action is requested.
EXECUTIVE SUMMARY
Palo Alto City Council (Council), at its regular meeting on September 18, 2023, adopted a
resolution which modified the City’s gas purchasing strategy for this upcoming winter. Council’s
decision was in response to the high energy prices that occurred last winter which resulted in
dramatically high bills for Palo Alto customers.
The gas commodity charge is based on a monthly market-based index. This purchasing strategy
change involves purchasing price caps, limiting the price of gas cost $2 per therm for a portion of
City’s anticipated gas needs. The impact on customers of what is, in essence, an insurance policy
to mitigate the potential for a repeat of high winter gas prices, was limited by the Council action
to a maximum 15 cents per therm.
Per Council’s decision, staff implemented the capped-price winter natural gas purchasing
strategy in October 2023 for the gas year November 2023-October 2024. Within the constraints
set by Council, staff was able to purchase $2 per therm price caps for about half of Palo Alto’s
expected load for the months of December 2023, January 2024 and February 2024.
The cost of the price caps was $0.275 per therm and a total cost of $1.5 million. Spread out over
the entire year, an adder of $0.055 per therm will be applied to the gas commodity charge passed
through to customers. This represents approximately $1.81 on a typical residential customer’s
bill or an approximate 2.8% increase, not taking into account changes in the underlying
commodity price which is still based on a market index.
The amended rate schedules associated with this implementation will be effective November 1,
2023. The website and rate schedules have been updated to reflect this change.
Item No. 2. Page 2 of 2
ATTACHMENTS
Attachment A: 09-18-2023 Staff Report 2306-1660
Attachment B: Presentation
Approved by:
Dean Batchelor, Director of Utilities
Staff: Karla Dailey, Acting Assistant Director of Utilities
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City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Utilities
Meeting Date: September 18, 2023
Report Staff:2306-1660
TITLE
Public Hearing: Adoption of a Resolution Approving Capped-Price Winter Natural Gas Purchases
for Winter 2023-24 and Amending the FY 2024 Gas Fund Budget to Fund These Purchases;
Amending the Gas Utility Long-term Plan Objectives, Strategies and Implementation Plan; and
Amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master-Metered and
Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed Natural
Gas Service); CEQA status: not a project under Public Resources Code 15378(b)(5) and exempt
under Public Resources Code 15273(a)
RECOMMENDATION
The Finance Committee recommends that City Council (Council) adopt a resolution (Attachment
A):
1. Implementing capped-price winter natural gas purchases for winter 2023-24 with a
maximum commodity rate impact of 15 cents per therm;
2. Amending the FY 2024 Budget Appropriation in the Gas Fund (requires 2/3 approval) by:
a. Increasing the Gas Operating Budget for Commodity Purchases by $2,000,000;
and
b. Increasing the Gas Operating Retail revenue estimate by $2,000,000
3. Amending the Gas Utility Long-term Plan (GULP) Objectives, Strategies and
Implementation Plan (Attachment B) to implement the capped-price winter gas
purchases intended to manage potential winter 2023 gas price spikes; and
4. Amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master-Metered
and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed
Natural Gas Service) (Attachment C), effective November 1, 2023.
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EXECUTIVE SUMMARY
1), staff is seeking Council approval to implement capped-price winter natural gas
purchasing for winter 2023-24.
2. Under this strategy, the City purchases baseload gas at prices
tied to a published gas market monthly index, adjusted to account for delivery losses to the
customer’s meter and a municipal purchase discount.
1 https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=12741
2 https://www.cityofpaloalto.org/files/assets/public/from-archive/agendas-minutes-reports/reports/city-manager-
reports-cmrs/2012/final-staff-report-id-2552_gas-utility-long-term-plan-revisions.pdf
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Plan most recently in 2017 (Staff Report #7967)3. Council adoption of staff’s proposed capped
price winter natural gas purchases to manage potential winter 2023 natural gas price spikes
requires conforming changes to GULP which are reflected in Attachment B. Since 2017, there
have been a number of other Council-approved changes to policies and operations that require
conforming changes to GULP. For simplicity, those changes will be addressed in a separate future
staff report.
BACKGROUND
DISCUSSION
Winter 2022-23 Gas Prices
3 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports-
cmrs/year-archive/2017/id-7967-6-5-17-ccm.pdf
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unusually low regional gas storage levels, (c) constraints on the availability of natural gas supplies
flowing into California, and (d) an increased reliance on natural gas in the electric power sector
as a result of the ongoing drought’s impact on hydroelectric supplies. Though fundamental
conditions were influencing the increase in prices, those factors alone do not explain the
unprecedented price spike. January natural gas prices were five times greater than November
prices. In December 2022, Council increased the maximum allowed commodity rate passed
through to customers from $2 per therm to $4 per therm, but the City’s price to purchase January
gas was $5 per therm, resulting in a $1.8M shortfall discussed in more detail below. The sudden
and extreme increase in natural gas prices is under investigation by Federal Energy Regulatory
Commission (FERC) and California Public Utilities Commission (CPUC). The preliminary timeline
for these investigations to yield findings is in the spring of 2026, subject to change.
Figure 1
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rate and market purchase price. Even so, the impact on customer bills was significant, and the
City received a large number of customer inquiries. The City responded by offering resources to
help customers with higher than anticipated utility bill costs, including access to free home
efficiency assessments through the Home Efficiency Genie and payment arrangements. In April
2023 Council approved gas and electric (Staff Report 2303-1209)4 rebates of $2.4 million, funded
by the City’s General Fund, to compensate residential customers for the high energy bills they
experienced.
Recommended Capped-Price Winter Gas Purchase
5, which are listed in the City’s gas rate schedules and shown by month.
4 https://cityofpaloalto.primegov.com/Portal/viewer?id=1954&type=0
5 https://www.cityofpaloalto.org/files/assets/public/utilities/rates-schedules-for-utilities/residential-utility-
rates/monthly-gas-volumetric-and-service-charges-residential.pdf
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If approved by Council, the capped-price winter purchasing strategy will be implemented in
accordance with the Energy Risk Management Policy6, Guidelines, and Procedures. The City
solicit bids from a list of pre-approved counterparties (Staff Report 14551)7 for all natural gas
purchases to ensure competitive pricing and consistent, robust contract terms. The amended
rate schedules associated with this change will be effective November 1, 2023.
Finance Committee Review
Staff presented the two alternatives to the Finance Committee on August 15, 2023, seeking their
recommendation on whether to maintain the current market-price-based gas purchasing and
pass-through commodity rate strategy or implement the capped-price winter gas purchasing
alternative for winter 2023-24. Their recommendation (by a vote of 3-0) for Council approval was
to implement capped-price winter gas purchasing for winter 2023-24.
Alternative Strategies Not Recommended
The default alternative is to maintain the current market-price-based gas purchasing and pass-
through commodity rate strategy for this upcoming winter 2023-24 with no price spike mitigation
measures. Considerations for maintaining the current policy include: 1) energy market prices are
inherently unpredictable and volatile, but gas prices (including for the upcoming winter) have
come down significantly and stabilized since March 2023; 2) Palo Alto’s commodity rates are
generally less than PG&E’s; and 3) this policy yields the lowest average supply cost over many
years of implementation.
Considerations for revising the current strategy and implementing capped-price winter gas
purchasing include: 1) reserve levels will be protected, protecting against the need for future rate
increases; 2) customer costs will be higher if implemented over many years; 3) this acts as an
insurance policy that adds cost but may not be used; 4) this is an uncommon strategy in gas
markets, and thus the capped-price product may not be readily available from suppliers; and 5)
this may result in an additional cost that is even greater than staff’s estimate, if the market is very
volatile, or lower than staff’s estimate if the market is relatively stable.
Staff is presenting the capped-price winter gas purchasing alternative because it could be
implemented in time for this upcoming winter. There are also other alternatives that could
potentially be considered for the future. These alternatives, which would take additional
resources and time to evaluate, plan, and implement, include: 1) establishing an additional
special reserve to manage gas price spikes; 2) making a limited volume of fixed-price gas
purchases; 3) reverting to a full laddering strategy; 4) investing in gas production assets; and 5)
investing in gas storage.
6 https://www.cityofpaloalto.org/files/assets/public/sustainability/policies-and-plans/attachment-c-energy-risk-
management-policy-2018.pdf
7 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=81980
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Changes to GULP Needed if Council Adopts Capped Price Winter Gas Purchase Strategy
The 2017 GULP update included the change from a hedged portfolio to market-based retail
gas rates. Those commodity rates have been in effect since 2013. Cost containment applied to
winter 2023 gas purchases, if adopted, requires changes to GULP as shown in Table 1
below. The GULP Objectives, Strategies and Implementation Plans are attached. While some
other items also need updates, staff is not proposing changes other than those associated with
the gas purchasing strategy at this time for the sake of simplicity. Administrative updates will
be brought to Council in a separate staff report.
Pass a market cost signal
through to customers.
Pass a market supply cost signal through
to customers with measures to protect
against price spikes applied during
winter months.
a. Purchase natural gas at
monthly and daily market index
prices.
b. Change gas supply rate
monthly to reflect market
prices.
a. Purchasing natural gas at monthly
and daily market index prices;
b. Changing gas supply rates monthly to
reflect market prices; and
c. Purchasing physical capped-price gas
for some or all forecasted natural gas
volumes for December through
February, provided that the cost of
the price caps results in no more
than a 15 cents per therm impact on
retail commodity gas rates.
a. Continue to implement
market-based supply purchases
and commodity rates.
Implement market-based supply
purchases and commodity rates with
measures to protect against price spikes
applied during winter months by:
a. Developing a new purchasing plan
to be approved by the Director of
Utilities; and
c. Conducting customer
communication and outreach.
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FISCAL/RESOURCE IMPACT
Table 2
STAKEHOLDER ENGAGEMENT
8 meeting and voted unanimously to recommend the capped
price gas purchasing strategy to Council. If adopted by Council, the website will be updated to
reflect the change in the commodity rate calculation in the Monthly Gas Volumetric and Service
Charges9 document. In addition, customers will be notified via bill inserts and social media.
8 Finance Committee Staff Report
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=12741
9 Monthly Gas Volumetric and Service Charges https://www.cityofpaloalto.org/files/assets/public/utilities/rates-
schedules-for-utilities/residential-utility-rates/monthly-gas-volumetric-and-service-charges-residential.pdf
M
S T B $$$$
W 5 9$3$5$4 6
S 1 4$1$1$3 5
A 3 6$2$3$4 6
C C
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ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
Attachment A
* NOT YET APPROVED *
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6056774
Resolution No.
Resolution of the Council of the City of Palo Alto Approving Capped-Price Winter
Natural Gas Purchases for Winter 2023-24 and Amending the FY 2024 Gas Fund
Budget by $2,000,000 to Fund These Purchases; Amending the Gas Utility Long-
term Plan Objectives, Strategies and Implementation Plan; and Amending Rate
Schedules G-1 (Residential Gas Service), G-2 (Residential Master-Metered and
Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10
(Compressed Natural Gas Service)
R E C I T A L S
A. On March 7, 2011, the Council adopted Resolution No. 9151, which approved the
Gas Utility Long-term Plan Objectives, Strategies and Implementation Plan (the “Plan”).
B. On April 23, 2012, the Council adopted Resolution No. 9244, which amended the
Gas Utility Long-term Plan Objectives, Strategies and Implementation Plan (the “Plan”).
C. The Council’s Finance Committee has recommended the Council approve
implementation of capped-price winter natural gas purchases for Winter 2023-24, which requires
Council’s approval of certain amendments to the Plan, which are attached and incorporated by
reference as Exhibit A to this Resolution.
D. Resolution No. 9244 is intended to be amended to reflect the current version
of the Plan.
E. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the
City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and
charges.
F. Implementing capped-price winter natural gas purchasing requires amending the
FY 2024 Gas Fund Budget by $2,000,000 to fund these purchases.
G. Implementing capped-price winter natural gas purchasing requires amending the
Commodity Charge cost component of Rate Schedules G-1 (Residential Gas Service), G-2
(Residential Master-Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service),
and G- 10 (Compressed Natural Gas Service); attached and incorporated as Exhibits B through E
to this Resolution.
H. On September 18, 2023, the City Council heard and approved the proposed gas
rate increases at a noticed public hearing.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
Attachment A
* NOT YET APPROVED *
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6056774
SECTION 1. The Council hereby approves the amendments to the Gas Utility Long-
term Plan Objectives, Strategies and Implementation Plan (GULP), attached to this Resolution
as Exhibit A.
SECTION 2. Resolution No. 9244 is hereby amended in so far as the Plan, as amended,
is hereby approved.
SECTION 3. The Council hereby approves increasing the FY 2024 Gas Fund budget
and gas operating revenues by $2,000,000.
SECTION 4 Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-1 (Residential Gas Service) is hereby amended to read as attached and
incorporated to this Resolution as Exhibit B. Utility Rate Schedule G-1, as amended, shall
become effective November 1, 2023.
SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-2 (Residential Master-Metered and Commercial Gas Service) is hereby
amended to read as attached and incorporated to this Resolution as Exhibit C. Utility Rate
Schedule G-2, as amended, shall become effective November 1, 2023.
SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-3 (Large Commercial Gas Service) is hereby amended to read as attached and
incorporated to this Resolution as Exhibit D. Utility Rate Schedule G-3, as amended, shall
become effective November 1, 2023.
SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-10 (Compressed Natural Gas Service Service) is hereby amended to read as
attached and incorporated to this Resolution as Exhibit E. Utility Rate Schedule G-10, as
amended, shall become effective November 1, 2023.
SECTION 8. The City Council finds as follows:
a. Revenues derived from the gas rates approved by this resolution do not exceed
the funds required to provide gas service.
b. Revenues derived from the gas rates approved by this resolution shall not be
used for any purpose other than providing gas service, and the purposes set
forth in Article VII, Section 2, of the Charter of the City of Palo Alto.
SECTION 9. The Council finds that the fees and charges adopted by this resolution
are charges imposed for a specific government service or product provided directly to the payor
that are not provided to those not charged, and do not exceed the reasonable costs to the City
of providing the service or product.
Attachment A
* NOT YET APPROVED *
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6056774
SECTION 10. The Council finds that approving the changes to the FY 2024 Gas Fund
budget appropriation and Plan does not meet the California Environmental Quality Act’s (CEQA)
definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section
15378(b)(5), because these actions are administrative governmental activities which will not
cause a direct or indirect physical change in the environment, and therefore, no environmental
assessment is required. The Council finds that changing the Commodity Charge cost component
of gas rates to meet operating expenses, purchase supplies and materials, meet financial
reserve needs and obtain funds for capital improvements necessary to maintain service is not
subject to the California Environmental Quality Act (CEQA), pursuant to California Public
Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec.
15273(a). After reviewing the staff report and all attachments presented to Council, the Council
incorporates these documents herein and finds that sufficient evidence has been presented
setting forth with specificity the basis for this claim of CEQA exemption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
Exhibit A
Proposed Gas Utility Long-term Plan (GULP)
Objectives, Strategies and Implementation Plan
Adopted by Council on _____________ via Resolution No. _____.
GULP Objectives:
1. Market price transparency – Pass a market supply cost signal through to customers with
measures to protect against price spikes applied during winter months.
2. Supply Cost Management – Lower delivered gas cost over the long term.
3. Energy Efficiency – Ensure the deployment of all feasible, reliable, cost-effective energy
efficiency measures.
4. Climate Protection – Reduce the carbon intensity of the gas portfolio in accordance with
the Sustainability and Climate Protection Plan.
5. Parity with PG&E – At a reasonable cost, protect the City’s interests and maintain access
to transportation on par with PG&E’s core customers.
GULP Strategies:
1. Pass a market supply cost signal through to customers with measures to protect against
price spikes applied during winter months by:
a. Purchasing natural gas at monthly and daily market index prices;
b. Changing gas supply rates monthly to reflect market prices; and
c. Purchasing physical capped-price gas for some or all forecasted natural gas volumes
for December through February, provided that the cost of the price caps results in no
more than a 15 cents per therm impact on retail commodity gas rates.
2. Lower delivered gas cost over the long term by:
a. Acquiring pipeline assets that yield supply costs below market and meet operational
needs;
b. Taking advantage of the City’s low cost of capital to acquire gas supply and assets;
and
c. Optimizing existing assets.
3. Ensure the deployment of all feasible, reliable, cost-effective energy efficiency measures
by:
a. Developing a ten-year gas efficiency plan every four years maintaining consistency
with the electric energy efficiency goals update schedule; and
b. Considering the impacts of electrification on gas demand.
4. Reduce the carbon intensity of the gas portfolio in accordance with the Climate
Protection Plan by:
a. Terminating the PaloAltoGreen Gas program established by Resolution 9405; and
b. Designing and implementing the Carbon Neutral Gas Plan to achieve carbon
reduction with no more than a 10 cent per therm rate impact.
5. At a reasonable cost, protect the City’s interests and maintain access to transportation
on par with PG&E’s core customers by:
a. Participating in the regulatory and legislative arenas when the potential impact on
the City is aligned with the cost to intervene and the probability of success;
a. Negotiating with PG&E for fair access to transportation and storage; and
b. Exploring potential joint action with other public agencies.
ATTACHMENT A
GULP Implementation Plan:
1. Implement market-based supply purchases and commodity rates with measures to protect
against price spikes applied during winter months by:
a. Developing a new purchasing plan to be approved by the Director of Utilities; and
b. Conducting customer communication and outreach.
2. Pursue below-market assets available through the Gas Transportation and Storage
Settlement by:
a. Evaluating the pipeline capacity reservation options available; and
b. Contracting with PG&E for any pipeline capacity with an estimated cost below the
forecasted market value.
3. Monitor the prepay market and prepare for implementation in preparation for a future
MuniGas transaction.
4. Implement gas efficiency programs to meet the gas efficiency goals.
5. Track and report on gas efficiency by:
a. Providing quarterly updates to the UAC about the gas efficiency programs; and
b. Providing annual updates to Council on gas efficiency achievements compared to the
goals and overall cost effectiveness.
6. Continue evaluating new gas efficiency technologies and undertake pilot studies where
appropriate.
7. Pursue potential modifications to the Carbon Neutral Gas Plan by:
a. Determining an acceptable premium, if any, to be paid for a local offset project if
and when a certified project is identified; and
b. Investigating alternatives to offsets, including methods involving voter approval.
RESIDENTIAL GAS SERVICE
UTILITY RATE SCHEDULE G-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-1-1 Sheet No G-1-1
dated 71-1-2023 Effective 117-1-2023
A. APPLICABILITY:
This schedule applies to the following Customers receiving Gas Service from City of Palo Alto
Utilities:
1. Separately-metered single-family residential Customers;
2.Separately-metered multi-family residential Customers in multi-family residential
facilities.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides Gas Service.
C. UNBUNDLED RATES:Per Service
Monthly Service Charge: ........................................................................................................$14.01
Tier 1 Rates: Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) .......................................... $0.10-$4.00
2. Cap and Trade Compliance Charge ............................................ $0.00-$0.25
3. Transportation Charge ................................................................. $0.00-$0.25
4. Carbon Offset Charge .................................................................. $0.00-$0.10
Distribution Charge:....................................................................................... $0.6807
Tier 2 Rates: (All usage over 100% of Tier 1)
Supply Charges:
1.Commodity (Monthly Market Based) .......................................... $0.10-$4.00
2. Cap and Trade Compliance Charge ............................................. $0.00-$0.25
3. Transportation Charge ................................................................. $0.00-$0.25
4. Carbon Offset Charge .................................................................. $0.00-$0.10
Distribution Charge:............................................................................................. $1.7406
D.SPECIAL NOTES:
1.Calculation of Cost Components
EXHIBIT B
RESIDENTIAL GAS SERVICE
UTILITY RATE SCHEDULE G-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-1-2 Sheet No G-1-2
dated 71-1-2023 Effective 117-1-2023
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, adjusted to account for delivery losses to the Customer’s
Meter. The Commodity Charge also includes adjustments to account for Council-
approved programs implemented to reduce the cost of gas, including a municipal
purchase discount 1, and a maximum $0.15/per therm cost for capped price winter natural
gas purchases 2.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter.
The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance
with the state’s Cap and Trade Program, including the cost of acquiring compliance
instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap
and Trade Compliance Charge will change in response to changing market conditions,
retail sales volumes and the quantity of allowances required.
The Carbon Offset Charge reflects the City’s cost to purchase offsets for greenhouse
gases produced in the burning of natural gas. The Carbon Offset Charge will change in
response to changing market conditions, changing sales volumes and the quantity of
offsets purchased within the Council-approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto,
accounting for delivery losses to the Customer’s Meter.
1 Adopted via Resolution 9451, on September 15, 2014.
2 Adopted via Resolution XXXX, on September 18, 2023.
RESIDENTIAL GAS SERVICE
UTILITY RATE SCHEDULE G-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-1-3 Sheet No G-1-3
dated 71-1-2023 Effective 117-1-2023
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges
will fall within the minimum/maximum ranges set forth in Section C. Current and historic
per therm rates for the Commodity, Cap and Trade Compliance, Carbon Offset and
Transportation Charges are posted on the City Utilities website.3
1.2. Seasonal Rate Changes:
The Summer period is effective April 1 to October 31 and the Winter period is effective
from November 1 to March 31. When the billing period includes use in both the Summer
and the Winter periods, the usage will be prorated based on the number of days in each
seasonal period, and the charges based on the applicable rates for each period. For further
discussion of bill calculation and proration, refer to Rule and Regulation 11.
2.3. Calculation of Usage Tiers
Tier 1 natural gas usage shall be calculated and billed based upon a level of 0.667 therms
per day during the Summer period and 2.0 therms per day during the Winter period,
rounded to the nearest whole therm, based on meter reading days of service. As an
example, for a 30 day bill, the Tier 1 level would be 20 therms during the Summer period
and 60 therms during the Winter period months. For further discussion of bill calculation
and proration, refer to Rule and Regulation 11.
{End}
3 Monthly gas and commodity and volumetric rates are available here, or by visiting
https://www.cityofpaloalto.org/files/assets/public/utilities/rates-schedules-for-utilities/residential-utility-rates/monthly-gas-
volumetric-and-service-charges-residential.pdf
RESIDENTIAL MASTER-METERED AND COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-2-1 Effective 117-1-2023
dated 71-1-2023 Sheet No G-2-1
A. APPLICABILITY:
This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto
Utilities:
1. Commercial Customers who use less than 250,000 therms per year at one site;
2. Master-metered residential Customers in multi-family residential facilities.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides Gas Service.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: ......................................................................................................$129.78
Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) ......................................... $0.10-$4.00
2. Cap and Trade Compliance Charges ........................................... $0.00-$0.25
3. Transportation Charge ................................................................. $0.00-$0.25
4. Carbon Offset Charge .................................................................. $0.00-$0.10
Distribution Charge: ................................................................................................. $0.8941
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, adjusted to account for delivery losses to the Customer’s
Meter. The Commodity Charge also includes adjustments to account for Council-
approved programs implemented to reduce the cost of gas, including a municipal
purchase discount 1, and a maximum $0.15/per therm cost for capped price winter natural
1 Adopted via Resolution 9451, on September 15, 2014.
RESIDENTIAL MASTER-METERED AND COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-2-2 Effective 117-1-2023
dated 71-1-2023 Sheet No G-2-2
gas purchases 2.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter.
The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance
with the state’s Cap and Trade Program, including the cost of acquiring compliance
instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and
Trade Compliance Charge will change in response to changing market conditions, retail sales
volumes and the quantity of allowances required.
The Carbon Offset Charge reflects the City’s cost to purchase offsets for greenhouse gases
produced in the burning of natural gas. The Carbon Offset Charge will change in response to
changing market conditions, changing sales volumes and the quantity of offsets purchased
within the Council-approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto,
accounting for delivery losses to the Customer’s Meter.
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges
will fall within the minimum/maximum ranges set forth in Section C. Current and
historic per therm rates for the Commodity, Cap and Trade Compliance, Carbon Offset
and Transportation Charges are posted on the City Utilities website.3
{End}
2 Adopted via Resolution XXXX, on September 18, 2023
3 Monthly gas and commodity and volumetric rates are available here, or by visiting
https://www.cityofpaloalto.org/files/assets/public/utilities/business/business-rates/monthly-gas-volumetric-and-service-
charges-commercial.pdf
LARGE COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-3-1 Effective 117-1-2023
dated 71-1-2023 Sheet No G-3-1
A. APPLICABILITY:
This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto
Utilities:
1. Commercial Customers who use at least 250,000 therms per year at one site;
2. Customers at City-owned generation facilities.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides Gas Service.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: $593.79
Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) .................................................... $0.10-$4.00
2. Cap and Trade Compliance Charges .................................................... $0.00-$0.25
3. Transportation Charge .......................................................................... $0.00-$0.25
4. Carbon Offset Charge ........................................................................... $0.00-$0.10
Distribution Charge: .............................................................................................................$0.8852
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as calculated
under Section C.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, adjusted to account for delivery losses to the Customer’s
Meter. The Commodity Charge also includes adjustments to account for Council-
approved programs implemented to reduce the cost of gas, including a municipal
LARGE COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-3-2 Effective 117-1-2023
dated 71-1-2023 Sheet No G-3-2
purchase discount 1, and a maximum $0.15/per therm cost for capped price winter natural
gas purchases 2.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter.
The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance
with the state’s Cap and Trade Program, including the cost of acquiring compliance
instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap
and Trade Compliance Charge will change in response to changing market conditions,
retail sales volumes and the quantity of allowances required.
The Carbon Offset Charge reflects the City’s cost to purchase offsets for greenhouse gases
produced in the burning of natural gas. The Carbon Offset Charge will change in response
to changing market conditions, changing sales volumes and the quantity of offsets
purchased within the Council-approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto,
accounting for delivery losses to the Customer’s Meter.
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges
will fall within the minimum/maximum ranges set forth in Section C. Current and historic
per therm rates for the Commodity, Cap and Trade Compliance, Carbon Offset and
Transportation Charges are posted on the City Utilities website.3
2. Request for Service
A qualifying Customer may request service under this schedule for more than one account
or meter if the accounts are located on one site. A site consists of one or more contiguous
parcels of land with no intervening public right-of- ways (e.g. streets).
3. Changing Rate Schedules
1 Adopted via Resolution 9451, on September 15, 2014.
2 Adopted via Resolution XXXX, on September 18, 2023.
3 Monthly gas and commodity and volumetric rates are available here, or by visiting
https://www.cityofpaloalto.org/files/assets/public/utilities/business/business-rates/monthly-gas-volumetric-and-service-
charges-commercial.pdf
LARGE COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-3-3 Effective 117-1-2023
dated 71-1-2023 Sheet No G-3-3
Customers may request a rate schedule change at any time to any applicable City of Palo
Alto full-service rate schedule.
{End}
COMPRESSED NATURAL GAS SERVICE
UTILITY RATE SCHEDULE G-10
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-10-1 Effective 117-1-2023
dated 71-1-2023 Sheet No. G-10-1
A. APPLICABILITY:
This schedule applies to the sale of natural gas to the City-owned compressed natural gas (CNG) fueling
station at the Municipal Service Center in Palo Alto.
B. TERRITORY:
Applies to the City’s CNG fueling station located at the Municipal Service Center in City of Palo Alto.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: ........................................................................................................$87.77
Per Therm
Supply Charges:
Commodity (Monthly Market Based) ................................................................ $0.10-$4.00
Cap and Trade Compliance Charges.................................................................. $0.00-$0.25
Transportation Charge ....................................................................................... $0.00-$0.25
Carbon Offset Charge ........................................................................................ $0.00-$0.10
Distribution Charge ...............................................................................................................$0.0145
D. SPECIAL CONDITIONS
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and adjusted
for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill statement, the bill
amount may be broken down into appropriate components as calculated under Section C.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for delivery at
PG&E Citygate, adjusted to account for delivery losses to the Customer’s Meter. The
Commodity Charge also includes adjustments to account for Council-approved programs
implemented to reduce the cost of gas, including a municipal purchase discount 1, and a
1 Adopted via Resolution 9451, on September 15, 2014.
COMPRESSED NATURAL GAS SERVICE
UTILITY RATE SCHEDULE G-10
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-10-2 Effective 117-1-2023
dated 71-1-2023 Sheet No. G-10-2
maximum $0.15/per therm cost for capped price winter natural gas purchases 2.
The Commodity charge is based on the monthly natural gas Bidweek Price Index for delivery at
PG&E Citygate, accounting for delivery losses to the Customer’s Meter.
The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the
state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to
cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will
change in response to changing market conditions, retail sales volumes and the quantity of
allowances required.
The Carbon Offset Charge reflects the City’s cost to purchase offsets for greenhouse gases produced
in the burning of natural gas. The Carbon Offset Charge will change in response to changing market
conditions, changing sales volumes and the quantity of offsets purchased within the Council-
approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto, accounting for
delivery losses to the Customer’s Meter.
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges will fall
within the minimum/maximum range set forth in Section C. Current and historic per therm rates
for the Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges are
posted on the City Utilities website.3
{End}
2 Adopted via Resolution XXXX, on September 18, 2023.
3 Monthly gas and commodity and volumetric rates are available here, or by visiting
https://www.cityofpaloalto.org/files/assets/public/utilities/business/business-rates/monthly-gas-volumetric-and-service-
charges-commercial.pdf
2
2
6
4
Proposed Gas Utility Long-term Plan (GULP)
Objectives, Strategies and Implementation Plan
(applicable if Council approves winter gas cost containment alternative)
GULP Objectives:
1. Market price transparency – Pass a market supply cost signal through to customers with
measures to protect against price spikes applied during winter months.
2. Supply Cost Management – Lower delivered gas cost over the long term.
3. Energy Efficiency – Ensure the deployment of all feasible, reliable, cost-effective energy
efficiency measures.
4. Climate Protection – Reduce the carbon intensity of the gas portfolio in accordance with
the Sustainability and Climate Protection Plan.
5. Parity with PG&E – At a reasonable cost, protect the City’s interests and maintain access
to transportation on par with PG&E’s core customers.
GULP Strategies:
1. Pass a market supply cost signal through to customers with measures to protect against
price spikes applied during winter months by:
a.Purchasing natural gas at monthly and daily market index prices;
b. Changing gas supply rates monthly to reflect market prices ; and
c. Purchasing physical capped -price gas of for some or all forecasted natural gas
volumes for December through February, provided that the cost of the price caps
such capped-price gas purchases results in with no more than a 15 cents per therm
impact on retail commodity gas ratesrates.
2. Lower delivered gas cost over the long term by:
a. Acquiring pipeline assets that yield supply costs below market and meet operational
needs;
b. Taking advantage of the City’s low cost of capital to acquire gas supply and assets;
and
c. Optimizing existing assets.
3. Ensure the deployment of all feasible, reliable, cost-effective energy efficiency measures
by:
a. Developing a ten-year gas efficiency plan every four years maintaining consistency
with the electric energy efficiency goals update schedule; and
b. Considering the impacts of electrification on gas demand.
4. Reduce the carbon intensity of the gas portfolio in accordance with the Climate
Protection Plan by:
a. Terminating the PaloAltoGreen Gas program established by Resolution 9405; and
b. Designing and implementing the Carbon Neutral Gas Plan to achieve carbon
reduction with no more than a 10 cent per therm rate impact.
5. At a reasonable cost, protect the City’s interests and maintain access to transportation
on par with PG&E’s core customers by:
a. Participating in the regulatory and legislative arenas when the potential impact on
the City is aligned with the cost to intervene and the probability of success;
a. Negotiating with PG&E for fair access to transportation and storage; and
b. Exploring potential joint action with other public agencies.
GULP Implementation Plan:
1. Continue to iImplement market-based supply purchases and commodity rates with
measures to protect against price spikes applied during winter months by:
a. Developing a new purchasing plan to be approved by the Director of Utilities; and
b. Conducting customer communication and outreach.
1.2.Pursue below-market assets available through the Gas Transportation and Storage
Settlement by:
a. Evaluating the pipeline capacity reservation options available; and
b. Contracting with PG&E for any pipeline capacity with an estimated cost below the
forecasted market value.
2.3.Monitor the prepay market and prepare for implementation in preparation for a future
MuniGas transaction.
3.4.Implement gas efficiency programs to meet the gas efficiency goals.
4.5.Track and report on gas efficiency by:
a. Providing quarterly updates to the UAC about the gas efficiency programs; and
b. Providing annual updates to Council on gas efficiency achievements compared to the
goals and overall cost effectiveness.
5.6.Continue evaluating new gas efficiency technologies and undertake pilot studies where
appropriate.
6.7.Pursue potential modifications to the Carbon Neutral Gas Plan by:
a. Determining an acceptable premium, if any, to be paid for a local offset project if
and when a certified project is identified; and
b. Investigating alternatives to offsets, including methods involving voter approval.