HomeMy WebLinkAboutRESO 100766056668
Resolution No. 10076
Resolution of the Council of the City of Palo Alto Establishing an
Electrification Reserve and Amending the Electric Utility Reserves
Management Practices
R E C I T A L S
A.The Council has approved a Sustainability and Climate Action Plan Goal of 80%
reduction from 1990 levels by 2030, a Framework, and an Implementation Plan. A preliminary
impact analysis reviewed by the Council on April 19, 2020 demonstrated that building and
vehicle electrification was a critical part of achieving these goals.
B.The Council intends to establish various programs to promote building,
appliance and vehicle electrification. Simple, easy to access financing can help residents and
businesses in Palo Alto participate in these programs.
C.These programs are intended to be large in scale, potentially reaching
thousands of homeowners and businesses, and are expected to require significant start up
and operational funding.
D.The Council wishes to establish a reserve that could be used to fund building,
appliance and vehicle electrification projects and programs, including rebates and other
financial incentives designed to assist residents and businesses with these projects.
E.The Council wishes to establish an Advanced Heat Pump Water Heater Pilot
Program and fund the Electrification Reserve sufficiently to administer this program.
The Council of the City of Palo Alto (“City”) RESOLVES as follows:
SECTION 1. The Council authorizes the City Manager or his designee to establish an
Electrification Reserve in the City’s Electric Utility Distribution Fund.
SECTION 2. The Council amends the Electric Utility Reserves Management Practices
(Appendix B of the FY 2023 Electric Utility Financial Plan) as shown in Exhibit A to establish
management practices for the Electrification reserve.
SECTION 3. The Council hereby approves the following reserve transfer:
a.Up to $4,500,000 in FY 2023 from the Electric Special Projects Reserve to the
Electrification Reserve.
//
//
//
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8
6056668
//
SECTION 4. The Council finds that the adoption of this resolution is not subject to
California Environmental Quality Act (CEQA) review because it is an administrative government
activity that will not result in any direct or indirect physical change to the environment (CEQA
Guidelines section 15378(b)(5)).
INTRODUCED AND PASSED: October 3, 2022
AYES: BURT, CORMACK, DUBOIS, FILSETH, KOU, STONE
NOES: TANAKA
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8
Exhibit A to Resolution No. 10076
Adopted by Council on 10/3/2022
ELECTRIC UTILITY RESERVES MANAGEMENT PRACTICES
The following reserves management practices are used when developing the Electric Utility
Financial Plan:
Section 1. Definitions
a)“Financial Planning Period” – The Financial Planning Period is the range of future fiscal
years covered by the Financial Plan. For example, if the Financial Plan delivered in
conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015
to FY 2019 would be the Financial Planning Period.
b)“Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to
the Utility’s Unrestricted Net Assets.
c)“Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets
as the difference between its assets and liabilities.
d)“Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital
assets (net of related debt) or restricted for debt service or other restricted purposes.
Section 2. Supply Fund Reserves
The Electric Supply Fund Balance is reserved for the following purposes:
a)For existing contracts, as described in Section 4 (Reserve for Commitments)
b)For operating budgets reappropriated from previous years, as described in Section 5
(Reserve for Reappropriations)
c)For special projects for the benefit of the Electric Utility ratepayers, as described in Section
6 (Electric Special Projects Reserve)
d)For year to year balancing of costs associated with the Electric Utility’s hydroelectric
resources, as described in Section 7 (Hydroelectric Stabilization Reserve)
e)For rate stabilization, as described in Section 1.d) (Rate Stabilization Reserves)
f)For operating contingencies, as described in Section 12 (Operations Reserves)
g)Any funds not included in the other reserves will be considered Unassigned Reserves and
shall be returned to ratepayers or assigned a specific purpose as described in Section 13
(Unassigned Reserves).
Section 3. Distribution Fund Reserves
The Electric Distribution Fund Balance is reserved for the following purposes:
a)For existing contracts, as described in Section 4 (Reserves for Commitments)
b)For operating and capital budgets reappropriated from previous years, as described in
Section 5 (Reserves for Reappropriations)
c)As an offset to underground loan receivables, as described in Section 8 (Underground Loan
Reserve)
d)To hold Public Benefit Program funds collected but not yet spent, as described in Section 9
(Public Benefits Reserve)
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8
e) For cash flow management and contingencies related to the Electric Utility’s Capital
Improvement Program (CIP), as described in Section 10 (CIP Reserve)
f) For rate stabilization, as described in Section 11.d) (Rate Stabilization Reserves)
g) For operating contingencies, as described in Section 12 (Operations Reserves)
h) For tracking of Low Carbon Fuel Standard (LCFS) revenues as described in Section 15 (LCFS
Reserve)
i) For tracking of Cap and Trade Program revenues as described in Section 16 (Cap and Trade
Reserve)
g)j) For electrification programs, as described in Section 17 (Electrification Reserve)
h)k) Any funds not included in the other reserves will be considered Unassigned
Reserves and shall be returned to ratepayers or assigned a specific purpose as described in
Section 14 (Unassigned Reserves).
Section 4. Reserves for Commitments
At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund Reserves
for Commitments will be set to an amount equal to the total remaining spending authority for
all contracts in force for the Electric Supply Fund and Electric Distribution Fund, respectively,
at that time.
Section 5. Reserves for Reappropriations
At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund Reserves
for Reappropriations will be set to an amount equal to the amount of all remaining capital and
non-capital budgets that will be reappropriated to the following fiscal year for each Fund in
accordance with Palo Alto Municipal Code Section 2.28.090.
Section 6. Electric Special Projects Reserve
The Electric Special Projects Reserve (ESP Reserve) will be managed in accordance with the
policies set forth in Resolution 9206 (Resolution of the Council of the City of Palo Alto
Approving Renaming the Calaveras Reserve to the Electric Special Project Reserve and
Adoption of Electric Special Project Reserve Guidelines). These policies are included from
Resolution 9206 as amended to refer to the reserves structure set forth in these Reserves
Management Practices:
a) The purpose of the ESP Reserve is to fund projects that benefit electric ratepayers;
b) The ESP Reserve funds must be used for projects of significant impact;
c) Projects proposed for funding must demonstrate a need and value to electric ratepayers.
The projects must have verifiable value and must not be speculative, or high-risk in nature;
d) Projects proposed for funding must be substantial in size, requiring funding of at least $1
million;
e) Set a goal to commit funds by the end of FY 2025;
f) Any uncommitted funds remaining at the end of FY 2030 will be transferred to the Electric
Supply Operations Reserve and the ESP Reserve will be closed;
Section 7. Hydroelectric Stabilization Reserve
The Hydroelectric Stabilization Reserve is used to manage the supply cost impacts associated
with variations in generation from hydroelectric resources. Staff will manage the Hydroelectric
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8
Stabilization Reserve as follows:
a) Projected Hydro Output: Near the end of each fiscal year, staff will determine the actual
and expected hydro output for that fiscal year, compare that to the long-term average
annual output level (495,957 MWh as of March 2018), and multiply the difference by
the average of the monthly round-the-clock forward market prices for each month of
the current fiscal year.
b) Changes in Reserves. Staff is authorized to transfer the amount described in Sec. 7(a)
from the Operations Reserve to the Hydroelectric Stabilization Reserve for hydro output
deviations above long-term average levels, or transfer this amount from the
Hydroelectric Stabilization Reserve to the Operations Reserve for hydro output
deviations below long-term average levels.
c) Implementation of HRA. The level of the Hydroelectric Stabilization Reserve after the
transfers described above shall be the basis for staff’s determination, with Council
approval, of whether to implement the Hydro Rate Adjuster (Electric Rate E-HRA) for the
following fiscal year.
d) Reserve Guidelines. Staff will manage the Hydroelectric Stabilization Reserve according
to the following guideline levels:
Minimum Level $3 million
Target Level $19 million
Maximum Level $35 million
Section 8. Underground Loan Reserve
At the end of each fiscal year, the Underground Loan Reserve will be adjusted by the principal
payments made against outstanding underground loans.
Section 9. Public Benefits Reserve
The Public Benefits Reserve will be increased by the amount of unspent Public Benefits
Revenues remaining at the end of each fiscal year. Expenditure of these funds requires action
by the City Council.
Section 10. CIP Reserve
The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for
capital contingencies. Staff will manage the CIP Reserve according to the following practices:
a) The following guideline levels are set forth for the CIP Reserve. These guideline levels are
calculated for each fiscal year of the Financial Planning Period and approved by Council
resolution.
Minimum Level 20% of the maximum CIP Reserve guideline
level
Maximum Level Average annual (12 month)1 CIP budget, for
48 months of budgeted CIP expenses2
1 Each month is calculated based upon 1/12 of the annual budget.
2 For example, in the Financial Plan for FY 2021, the 48 month period to use to derive the annual average is FY 2021
through FY 2024. In the FY 2022 Financial Plan, the 48 month period to use to derive the annual average would be FY
2022 through FY 2025 etc.
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8
b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and the
Reserve for Commitments when funds are added to or removed from the Reserve for
Commitments as a result of a change in contractual commitments related to CIP projects.
Any other additions to or withdrawals from the CIP reserve require Council action.
c) Minimum Level:
i) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present a
plan to the City Council to replenish the reserve. The plan shall be delivered by the end
of the following fiscal year, and shall, at a minimum, result in the reserve reaching its
minimum level by the end of the next fiscal year. For example, if the CIP Reserve is below
its minimum level at the end of FY 2017, staff must present a plan by June 30, 2018 to
return the reserve to its minimum level by June 30, 2019. In addition, staff may present,
and the Council may adopt, an alternative plan that takes longer than one year to
replenish the reserve, or that does so in a shorter period of time.
d) Maximum Level: If there are funds in this reserve in excess of the maximum level staff must
propose in the next Financial Plan to transfer these funds to another reserve or return them
to ratepayers in the funds to ratepayers, or designate a specific use of funds for CIP
investments that will be made by the end of the next Financial Planning period. Staff may
also seek City Council to approve holding funds in this reserve in excess of the maximum
level if they are held for a specific future purpose related to the CIP.
Section 11. Rate Stabilization Reserves
Funds may be added to the Electric Supply or Distribution Fund’s Rate Stabilization Reserves
by action of the City Council and held to manage the trajectory of future year rate increases.
Withdrawal of funds from either Rate Stabilization Reserve requires action by the City Council.
If there are funds in either Rate Stabilization Reserve at the end of any fiscal year, any
subsequent Electric Utility Financial Plan must result in the withdrawal of all funds from this
Reserve by the end of the Financial Planning Period. The Council may approve exceptions to
this requirement, when proposed by staff to provide greater rate stabilization to customers.
Section 12. Operations Reserves
The Electric Supply Fund and Electric Distribution Fund Operations Reserves are used to
manage normal variations in the costs of providing electric service and as a reserve for
contingencies. Any portion of the Electric Utility’s Fund Balance not included in the reserves
described in Section 4 to 11 above will be included in the appropriate Operations Reserve
unless the reserve has reached its maximum level as set forth in Section 12 (e) below. Staff
will manage the Operations Reserves according to the following practices:
a) The following guideline levels are set forth for the Electric Supply Fund Operations
Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning
Period based on the levels of Operations and Maintenance (O&M) and commodity
expense forecasted for that year in the Financial Plan.
Minimum Level 60 days of Supply Fund O&M and commodity expense
Target Level 90 days of Supply Fund O&M and commodity expense
Maximum Level 120 days of Supply Fund O&M and commodity expense
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8
b) The following guideline levels are set forth for the Electric Distribution Fund Operations
Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning
Period based on the levels of O&M expense forecasted for that year in the Financial Plan.
Minimum Level 60 days of Distribution Fund O&M expense
Target Level 90 days of Distribution Fund O&M expense
Maximum Level 120 days of Distribution Fund O&M expense
c) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Supply Fund or
Distribution Fund’s Operations Reserve are lower than the minimum level set forth above,
staff shall present a plan to the City Council to replenish the reserve. The plan shall be
delivered within six months of the end of the fiscal year, and shall, at a minimum, result in
the reserve reaching its minimum level by the end of the following fiscal year. For
example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff
must present a plan by December 31, 2014 to return the reserve to its minimum level by
June 30, 2015. In addition, staff may present an alternative plan that takes longer than
one year to replenish the reserve.
d) Target Level: If, at the end of any fiscal year, either Operations Reserve is higher or lower
than the target level, any Financial Plan created for the Electric Utility shall be designed to
return both Operations Reserves to their target levels by the end of the forecast period.
e) Maximum Level: If, at any time, either Operations Reserve reaches its maximum level, no
funds may be added to this Reserve. Any further increase in that fund’s Fund Balance shall
be automatically included in the Unassigned Reserve described in Section 13, below.
Section 13. Unassigned Reserves
If the Operations Reserve in either the Electric Supply Fund or the Electric Distribution Fund
reaches its maximum level, any further additions to that fund’s Fund Balance will be held in
the Unassigned Reserve. If there are any funds in either Unassigned Reserve at the end of any
fiscal year, the next Financial Plan presented to the City Council must include a plan to assign
them to a specific purpose or return them to the Electric Utility ratepayers by the end of the
first fiscal year of the next Financial Planning Period. For example, if there were funds in the
Unassigned Reserves at the end of FY 2016, and the next Financial Planning Period is FY 2017
through FY 2021, the Financial Plan shall include a plan to return or assign the funds in the
Unassigned Reserve by the end of FY 2017. Staff may present an alternative plan that retains
these funds or returns them over a longer period of time.
Section 14. Intra-Utility Transfers between Supply and Distribution Funds
Transfers between Electric Distribution Fund Reserves and Electric Supply Fund Reserves are
permitted if consistent with the purposes of the two reserves involved in the transfer. Such
transfers require action by the City Council.
Section 15. Low Carbon Fuel Standard (LCFS) Reserve
This reserve tracks revenues earned via the sale of Low Carbon Fuel Credits allocated by the
California Air Resources Board to the City, as well as expenses incurred, in accordance with
California’s Low Caron Fuel Standard program. At the end of each fiscal year, the LCFS Reserve
will be adjusted by the net of revenues and expenses associated with California’s LCFS
program.
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8
Section 16. Cap and Trade Program Reserve
This reserve tracks unspent or unallocated revenues from the sale of carbon allowances freely
allocated by the California Air Resources Board to the electric utility, under the State’s Cap and
Trade Program. Funds in this Reserve are managed in accordance with the City’s Policy on the
Use of Freely Allocated Allowances under the State’s Cap and Trade Program (the Policy),
adopted by Council Resolution 9487 in January 2015.
Section 17. Electrification Reserve
This reserve is used to track funding of City building, appliance and vehicle electrification
projects and programs, including development and implementation costs and associated
financial incentives, loans and rebates for participating customers. The reserve may be
funded by any lawful source of funds available for such programs, including new or ongoing
utility revenues derived from customer participation. The reserve balance shall be annually
adjusted based on the net of revenues and expenses associated with the City’s building,
appliance and vehicle electrification projects and programs using this reserve.
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8
Certificate Of Completion
Envelope Id: 9CDCD8E9478A42EF907F75217AB6B1A8
Subject: Complete with DocuSign: S/CAP Resolutions
Source Envelope:
Document Pages: 19 Signatures: 19
Certificate Pages: 5 Initials: 0
AutoNav: Enabled
EnvelopeId Stamping: Enabled
Time Zone: (UTC-08:00) Pacific Time (US & Canada)
Status: Completed
Envelope Originator:
Vinhloc Nguyen
250 Hamilton Ave
Palo Alto , CA 94301
Vinhloc.Nguyen@CityofPaloAlto.org
IP Address: 199.33.32.254
Record Tracking
Status: Original
10/4/2022 1:50:41 PM
Holder: Vinhloc Nguyen
Vinhloc.Nguyen@CityofPaloAlto.org
Location: DocuSign
Security Appliance Status: Connected Pool: StateLocal
Storage Appliance Status: Connected Pool: City of Palo Alto Location: DocuSign
Signer Events Signature Timestamp
Amy Bartell
Amy.Bartell@CityofPaloAlto.org
Assistant City Attorney
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 199.33.32.254
Sent: 10/4/2022 1:58:55 PM
Viewed: 10/5/2022 4:13:07 AM
Signed: 10/5/2022 4:17:42 AM
Electronic Record and Signature Disclosure:
Accepted: 7/16/2015 5:52:40 AM
ID: d8ecb53d-ef81-4016-8886-1560c48de42a
Kiely Nose
Kiely.Nose@CityofPaloAlto.org
Director, Administrative Services/CFO
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Uploaded Signature Image
Using IP Address: 73.162.77.140
Sent: 10/5/2022 4:17:44 AM
Viewed: 10/5/2022 9:36:57 AM
Signed: 10/5/2022 9:37:41 AM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Dean Batchelor
Dean.Batchelor@CityofPaloAlto.org
Director of Utilities
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 199.33.32.254
Sent: 10/5/2022 9:37:44 AM
Viewed: 10/5/2022 9:42:34 AM
Signed: 10/5/2022 9:43:09 AM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Ed Shikada
Ed.Shikada@CityofPaloAlto.org
Ed Shikada, City Manager
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 199.33.32.254
Sent: 10/5/2022 9:43:12 AM
Viewed: 10/5/2022 5:09:53 PM
Signed: 10/5/2022 5:10:06 PM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Signer Events Signature Timestamp
Patrick Burt
pat@patburt.org
Mr
Security Level: Email, Account Authentication
(None)Signature Adoption: Pre-selected Style
Using IP Address: 98.37.159.0
Sent: 10/6/2022 11:02:12 AM
Resent: 10/13/2022 10:43:14 AM
Viewed: 10/13/2022 2:47:51 PM
Signed: 10/13/2022 2:48:31 PM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Lesley Milton
Lesley.Milton@CityofPaloAlto.org
City Clerk
City Clerk
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 199.33.32.254
Sent: 10/13/2022 2:48:33 PM
Viewed: 10/13/2022 2:52:52 PM
Signed: 10/13/2022 2:53:12 PM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
In Person Signer Events Signature Timestamp
Editor Delivery Events Status Timestamp
Agent Delivery Events Status Timestamp
Intermediary Delivery Events Status Timestamp
Certified Delivery Events Status Timestamp
Carbon Copy Events Status Timestamp
Witness Events Signature Timestamp
Notary Events Signature Timestamp
Envelope Summary Events Status Timestamps
Envelope Sent Hashed/Encrypted 10/4/2022 1:58:55 PM
Certified Delivered
Signing Complete
Completed
Security Checked
Security Checked
Security Checked
10/13/2022 2:52:52 PM
10/13/2022 2:53:12 PM
10/13/2022 2:53:12 PM
Payment Events Status Timestamps