HomeMy WebLinkAboutStaff Report 2311-2209Staff Report: 2311-2209 – Page 1 of 61
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Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: January 3, 2024
Staff Report: 2311-2209
TITLE
Informational Report: Utilities Quarterly Report for FY24-Q1
RECOMMENDATION
This is an informational report, and no action is requested.
EXECUTIVE SUMMARY
This report for the Utilities Advisory Commission is an informational 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 has been prepared to keep
the 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:
Vacancies and Staffing – Appendix B
•The Utilities Department has 44 vacant positions out of 257 authorized positions or a 17% vacancy rate at the end
of September 2023 compared to 49 vacancies in June 2023 and 58 vacancies in March 2023.
•Due to HR staffing constraints, Utilities has designated three HR liaisons from Utilities Administration to assist HR
with some of the recruitments. Since then, the number of vacancies has decreased, and the recruitment timeline
has shortened.
•Progress has been made in filling vacant Electric Engineering and Operations positions over the past 3 quarters.
Electric Utility:
•Hydroelectric generation conditions have improved significantly. Total hydropower generation for FY 2023 was
378 GWh, which was 23 GWh (6%) below the long-term average. Generation this year is expected to be close to
the long-term average. (Section 1.1.2)
•A number of construction projects are in progress or have been recently completed. (Section 1.2)
Divi si on Sep-23 Jun-23 Mar-23
El e ctric Operati ons 17 21 24
El e ctric Engineering 6 6 8
Total El e ctric 23 27 32
Numbe r of Ele ctric Vacancie s by Quarte r
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•A California Electric Utility Bill and Rate Comparison report shows a significant advantage for customers of publicly
owned utilities (Section 1.3)
•A summary chart of quarterly electric outages is included in the report. (Section 1.4)
•Q1 FY 2024 actual electric sales were about 1% higher than forecasted, while actual sales revenues were about
2.8% higher than budgeted. The higher sales revenues were due to revenue from the Electric Hydro Rate Adjuster
which was still in effect for some customers in July. (Section 1.5.1)
Gas Utility:
•Gas prices have decreased and stabilized since last winter’s spike. The Council-approved purchasing strategy,
whereby price insurance was purchased for a portion of expected gas needs in December, January, and February
this winter was implemented. (Section 2.1 )
•One gas main replacement project was completed, one is in progress, and one is in the design stage. (Section 2.2)
•Gas sales in Q1 FY 2024 was 3.4% lower than forecasted. (Section 2.5.1)
Water Utility:
•As a result of the above average precipitation in December 2022 and January 2023, storage in the San Francisco
Regional Water System filled. (Section 3.1)
•Work continues on the One Water Plan with the goal of Council adoption of a supply plan that is a 20-year adaptable
roadmap for implementation of water supply and conservation portfolio alternatives. Staff plans to share initial
results in early 2024. (Section 3.1)
•Several capital programs are in progress. (Section 3.2)
•Water sales in Q1 were about 2.4% lower than forecasted and water sales revenues were about 5.6% lower than
budgeted. Sales were lower due to the water conservation efforts made throughout the drought. (Section 3.5.1)
•At the end of FY 2023 the Water operations Reserve was close to the minimum guideline level. (Section 3.5.2)
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 replacement project (SSR 31) is underway on El Camino and Page Mill. (Section 4.2)
•Actual wastewater sales revenues have been lower than expected due to low water usage caused by the drought.
(Section 4.4.1)
Fiber Utility:
•Given the hundreds of miles of overhead and underground construction activity between fiber-to-the-premises
(FTTP) and electric grid modernization, staff is recommending a pilot area that enables exploration of various
construction phasing options to minimize disruption, construction activity, and construction costs within
neighborhoods while avoiding prolonged deployments. In addition, aligning these projects in the pilot helps
alleviate construction constraints and internal resource constraints to project manage, perform engineering make
ready, and inspect construction for both projects in parallel.
•CPAU has retained a CEQA consultant who is preparing an Initial Study on the environmental impacts associated
with the construction and operation of the potential citywide FTTP network, will cross much of the City of Palo
Alto and include some new infrastructure (i.e. fiber hut, fiber cabinets, aerial and underground cables, utility
vaults). The Initial Study is estimated to be completed by Q2 2024.
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Customer Programs (Section 6):
•Palo Alto customers can choose to pay for a heat pump water heater upfront or select an on-bill financing option
with 0% interest rate. The City currently is on a pace to do 200-250 installations per year, about 20% of the
estimated number of water heaters replaced each year. This is one of the most productive energy programs the
City has run, but far more installations are needed to achieve the City’s S/CAP goals. Staff is making improvements
to the program processes based on feedback to-date in an effort to attract and retain more residents in the
program and has kicked off a customer outreach effort to gather more feedback to support further improvements.
•The City continues to promote its multi-family and workplace EV charger programs.
•20 large customer projects are in process with more than 2,000,000 kWh savings. The Key Account Representatives
have been actively reaching out to engage customers through direct email and setting up face to face meetings.
•The City has provided 38 site assessments for small and medium business customers through the Business Energy
Advisor program.
•17% of all water customers have utilized the City’s new WaterSmart online water management tool.
Communications:
•A digest of major outreach efforts is provided in Section 7, including extreme energy prices and high utilities bills,
new EV chargers at Stanford Health Care, and water supply and conservation updates.
Legislative, Regulatory and Industry Activity:
•Major legislative, regulatory and Industry Activity items are summarized in Section 8.
Utilities at a Glance:
For additional context for the data included in this report, please see:
https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service/Utilities-at-a-Glance
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OVERVIEW
Utilities Quarterly Report
FY 2024-Q1
Fiscal Year 2023
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Table of Contents
1 ELECTRIC UTILITY.....................................................................................................................................................................8
1.1 ELECTRICITY SUPPLY AND TRANSMISSION ...........................................................................................................................................8
1.1.1 Forecasted Supply Costs.......................................................................................................................................................8
1.1.2 Hydroelectric Conditions......................................................................................................................................................9
1.1.3 REC Exchange Program........................................................................................................................................................9
1.1.4 Renewable Energy Procurement..........................................................................................................................................9
1.2 CAPITAL IMPROVEMENT PLAN STATUS .............................................................................................................................................10
1.3 RATE AND BILL COMPARISONS .......................................................................................................................................................11
1.4 RELIABILITY ................................................................................................................................................................................13
1.5 FINANCIAL HEALTH ......................................................................................................................................................................13
1.5.1 Sales Forecasts vs. Actuals.................................................................................................................................................13
1.5.2 Financial Position...............................................................................................................................................................14
2 GAS UTILITY...........................................................................................................................................................................15
2.1 GAS SUPPLY AND TRANSMISSION ....................................................................................................................................................15
2.1.1 Actual and Forecasted Supply Costs...................................................................................................................................16
2.1.2 Carbon Neutral Gas Program.............................................................................................................................................16
2.1.3 Gas Transmission Line Capacity Valuation.........................................................................................................................17
2.1.4 Gas Prepay Valuation.........................................................................................................................................................17
2.2 CAPITAL IMPROVEMENT PLAN STATUS .............................................................................................................................................18
2.3 RATE AND BILL COMPARISONS .......................................................................................................................................................18
2.4 RELIABILITY ................................................................................................................................................................................18
2.5 FINANCIAL HEALTH ......................................................................................................................................................................19
2.5.1 Sales Forecasts vs. Actuals.................................................................................................................................................19
2.5.2 Financial Position...............................................................................................................................................................20
3 WATER UTILITY .....................................................................................................................................................................21
3.1 WATER SUPPLY AND TRANSMISSION ...............................................................................................................................................21
3.2 CAPITAL IMPROVEMENT PLAN STATUS .............................................................................................................................................23
3.3 RATE AND BILL COMPARISONS .......................................................................................................................................................24
3.4 RELIABILITY ................................................................................................................................................................................24
3.5 FINANCIAL HEALTH ......................................................................................................................................................................24
3.5.1 Sales Forecasts vs. Actuals.................................................................................................................................................24
3.5.2 Financial Position...............................................................................................................................................................25
4 WASTEWATER UTILITY ..........................................................................................................................................................26
4.1 WASTEWATER TREATMENT UPDATES AND CAPITAL PLANNING STATUS ..................................................................................................26
4.1.1 Treatment Cost Trends.......................................................................................................................................................26
4.1.2 Regional Water Quality Control Plant Capital Planning Status..........................................................................................27
4.2 COLLECTION SYSTEM CAPITAL IMPROVEMENT PLAN STATUS ................................................................................................................28
4.3 RATE AND BILL COMPARISONS .......................................................................................................................................................28
4.4 FINANCIAL HEALTH ......................................................................................................................................................................28
4.4.1 Sales Forecasts vs. Actuals.................................................................................................................................................28
4.4.2 Financial Position...............................................................................................................................................................29
5 FIBER UTILITY........................................................................................................................................................................30
5.1 FIBER UTILITY STRATEGIC PLANNING ...............................................................................................................................................30
5.2 CAPITAL IMPROVEMENT PLAN STATUS .............................................................................................................................................30
5.3 RELIABILITY ................................................................................................................................................................................31
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5.4 FINANCIAL HEALTH ......................................................................................................................................................................31
5.4.1 Fiber Sales..........................................................................................................................................................................31
5.4.2 Financial Position...............................................................................................................................................................31
6 CUSTOMER PROGRAMS (EFFICIENCY AND SUSTAINABILITY)..................................................................................................32
6.1 CUSTOMER PROGRAMS UPDATES ...................................................................................................................................................32
6.1.1 Energy and Water Efficiency..............................................................................................................................................32
6.1.2 Building Electrification .......................................................................................................................................................34
6.1.3 Electric Vehicle Programs...................................................................................................................................................35
7 COMMUNICATIONS...............................................................................................................................................................37
8 LEGISLATIVE, REGULATORY AND INDUSTRY ACTIVITY............................................................................................................39
9 APPENDIX A: ENERGY RISK MANAGEMENT PROGRAM..........................................................................................................41
9.1 OVERVIEW OF HEDGING PROGRAMS ...............................................................................................................................................41
9.2 OVERVIEW OF ENERGY RISK MANAGEMENT PROGRAM.......................................................................................................................41
9.3 FORWARD DEALS.........................................................................................................................................................................41
9.4 ELECTRIC MARKET EXPOSURE ........................................................................................................................................................42
9.5 TRANSACTION COMPLIANCE ..........................................................................................................................................................42
10 APPENDIX B: STAFFING AND VACANCIES...............................................................................................................................43
11 APPENDIX C: GAS UTILITY ANNUAL INFRASTRUCTURE MAINTENANCE AND REPLACEMENT REPORT.....................................44
12 APPENDIX D: UTILITIES CUSTOMER PROGRAM DESCRIPTIONS ..............................................................................................55
12.1 CUSTOMER PROGRAMS OVERVIEW .................................................................................................................................................55
12.1.1 Energy and Water Efficiency..........................................................................................................................................55
12.1.2 Building Electrification...................................................................................................................................................56
12.1.3 Electric Vehicles .............................................................................................................................................................56
12.1.4 Funding Sources for Emissions Reductions ....................................................................................................................57
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Figures
FIGURE 1: FY 2023 FINANCIAL PLAN SUPPLY COST FORECAST VS. ACTUALS ..............................................................................................................8
FIGURE 2: HYDRO GENERATION: FY 2023 ACTUALS, FY 2024 AND FY 2025 PROJECTED (GWH) ................................................................................9
FIGURE 3: RESIDENTIAL MONTHLY ELECTRIC BILL COMPARISON (EFFECTIVE 1/1/2023, $/MO.).................................................................................11
FIGURE 4: RESIDENTIAL ELECTRIC RATE COMPARISONS AT 750 KWH/MO (¢/KWH)..................................................................................................11
FIGURE 5: RESIDENTIAL ELECTRIC RATE COMPARISONS AT 400 KWH/MO (¢/KWH)..................................................................................................12
FIGURE 6: COMMERCIAL ELECTRIC RATE COMPARISONS AT 3,500 KWH/MO (¢/KWH).............................................................................................12
FIGURE 7: INDUSTRIAL ELECTRIC RATE COMPARISONS AT 2,000 KW/MO (¢/KWH)..................................................................................................12
FIGURE 8: ELECTRIC OUTAGE RELIABILITY, FY 2019 TO FY 2022..........................................................................................................................13
FIGURE 9: ELECTRIC OUTAGE RELIABILITY, FY 2023 TO FY 2024..........................................................................................................................13
FIGURE 10: ELECTRIC SALES VOLUME (KWH), FY 2024-Q1.................................................................................................................................14
FIGURE 11: ELECTRIC SALES REVENUE ($), FY 2024-Q1.....................................................................................................................................14
FIGURE 12: PALO ALTO GAS COMMODITY RATES ...............................................................................................................................................15
FIGURE 13: GAS SUPPLY COSTS ($), ACTUAL VS BUDGET, FY 2024-Q1.................................................................................................................16
FIGURE 14: OFFSET PORTFOLIO COMPOSITION ...................................................................................................................................................16
FIGURE 15: OFFSET PROJECT DESCRIPTIONS ......................................................................................................................................................17
FIGURE 16: RESIDENTIAL NATURAL GAS BILL COMPARISON ($/MONTH).................................................................................................................18
FIGURE 17: GAS SERVICE INTERRUPTIONS, FY 2023 TO FY 2024-Q1....................................................................................................................19
FIGURE 18: GAS SALES VOLUME (THERMS), FY 2024-Q1...................................................................................................................................19
FIGURE 19: GAS SALES REVENUE ($), FY 2024-Q1............................................................................................................................................19
FIGURE 20: REGIONAL WATER SYSTEM STORAGE ...............................................................................................................................................22
FIGURE 21: SFPUC WATER DELIVERIES ............................................................................................................................................................23
FIGURE 22: RESIDENTIAL WATER BILL COMPARISON ($/MONTH)..........................................................................................................................24
FIGURE 23: WATER SERVICE INTERRUPTIONS, FY 2023 TO FY 2024-Q1 ...............................................................................................................24
FIGURE 24: WATER SALES VOLUME (CCF), FY 2024-Q1....................................................................................................................................25
FIGURE 25: WATER SALES REVENUE ($), FY 2024-Q1.......................................................................................................................................25
FIGURE 26: PALO ALTO’S SHARE OF ESTIMATED WASTEWATER TREATMENT EXPENSES (PROJECTION AND PLANNED CIP)................................................27
FIGURE 27: CURRENT RWQCP CAPITAL WORK IN-PROGRESS (BASED ON NOVEMBER 2023 PARTNERS MEETING) ........................................................27
FIGURE 28: RESIDENTIAL WASTEWATER BILL COMPARISON ($/MONTH).................................................................................................................28
FIGURE 29: WASTEWATER SALES REVENUE ($), FY 2024-Q1..............................................................................................................................29
FIGURE 30: ENERGY EFFICIENCY PROGRAM ENERGY SAVINGS................................................................................................................................34
FIGURE 31: ELECTRIC ENERGY DEALS ................................................................................................................................................................41
FIGURE 32: ELECTRIC RESOURCE ADEQUACY DEALS.............................................................................................................................................42
FIGURE 33: ELECTRIC LOAD RESOURCE BALANCE, FY 2024 - 2026.......................................................................................................................42
FIGURE 34: UTILITIES VACANCIES AND POSITION MOVEMENTS BY DIVISION, UP TO Q1 FY 2024................................................................................43
FIGURE 35: POTENTIAL EMISSIONS REDUCTION FUNDING SOURCES .......................................................................................................................58
Staff Report: 2311-2209 – Page 8 of 61
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1 Electric Utility
The City’s electric utility serves all residential and non-residential electric 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 2023 was $97.8M. This represents a $2.5M (2.7%) increase over FY 2022 actuals and
$14.1M (17%) over the FY 2023 Adopted Budget, with the increase primarily driven by higher than historical energy prices,
higher transmission costs, and much lower than historical average hydro generation levels (particularly in the first half of
the fiscal year). The cost increase relative to budget was partially offset by greater than projected revenue from resource
adequacy (RA) capacity sales. With hydroelectric generation conditions improving significantly in recent months, the
electric net supply cost for FY 2024 is currently projected to be $69.5M, and for FY 2025 it is projected to be $74.0M.
Figure 1: FY 2023 Financial Plan Supply Cost Forecast vs. Actuals
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1.1.2 Hydroelectric Conditions
The City receives 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.
After several extremely dry years, water year 2022 to 2023 (October 2022 to September 2023) was one of the best
precipitation years in memory, with record storms across the state in December 2022 and early January 2023. Total
precipitation was 162% of average for the Central Sierras and 125% of average for the Northern Sierras and total
hydropower generation for FY 2023 was 378 GWh, which is 23 GWh (6%) below the long-term average.2.
It is too early to tell how water year 2023 to 2024 will turn out from a precipitation perspective, but reservoir levels are
currently at or above average level for this time of year as a result of the past year’s storms. As a result, hydro generation
levels are projected to improve this year, with total output recovering to 122% of the long-term average level for FY 2024
and 105% of the long-term average level for FY 2025.
Figure 2: Hydro Generation: FY 2023 Actuals, FY 2024 and FY 2025 Projected (GWh)
1.1.3 REC Exchange Program
Under the REC Exchange Program, which was approved by Council in August 2020 (Staff Report #115563), staff has
contracted to sell 110 GWh worth of in-state renewable energy (for $7.7M) but has not purchased out-of-state renewable
energy credits (RECs) thus far in FY 2024. The spread between in-state versus out-of-state REC prices have widened since
the start of 2023, due to the rise in value of in-state products. Additional REC Exchange transactions are planned around
Q3 of FY 2024.
1.1.4 Renewable Energy Procurement
Utilities staff has been working with staff from the Public Works Department, the City of Santa Clara, and NCPA to
negotiate a new power purchase agreement (PPA) to buy a small amount of electrical output (about 3 GWh/year in total)
from an anaerobic digester facility, in order to satisfy the requirements of Senate Bill (SB) 1383. Similar to the recently
approved Calpine Geothermal PPA, NCPA would be the counterparty to the PPA with the anaerobic digester facility, and
the Cities of Palo Alto and Santa Clara would each receive a share of the output via Third Phase Agreements with NCPA.
Contract negotiations between the parties have recently concluded, and staff plans to take the Third Phase Agreement to
the City Council for consideration in the coming months.
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.
2 The 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.
3 Staff Report 11556 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutesreports/reports/city-manager-reports-cmrs/year-
archive/2020-2/id-11566.pdf
FY 2023 FY 2024 FY 2025
Calaveras Generation (GWh)202 151 118
Western Generation (GWh)176 338 304
Total Hydro Generation (GWh)378 489 422
% of Long-term Average Total 94%122%105%
Long-term Average Total Hydro (GWh)401 401 401
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Utilities staff also continue to regularly review new renewable energy generation proposals that NCPA receives through
its ongoing Request for Proposals (RFP) process. Staff has recently reviewed three new resource opportunities received
through this process but does not recommend that the City participate in any of them. These three resources include:
•A 100 MW solar PV project located in Imperial County, priced in the low $40s per MWh, with no Resource Adequacy
(RA) capacity credit
•A 50 MW share of a larger solar PV project located in Riverside County, priced in the mid $40s per MWh, with no RA
capacity credit
•A repowering of a 50 MW combustion turbine located in San Joaquin County, with local RA capacity credit, which may
eventually be converted to burn hydrogen instead of natural gas
Although the two solar projects appear economically attractive, staff decided not to move forward with them due to a
desire to diversify the City’s electric supply portfolio. And staff chose not to move forward with the repowered combustion
turbine project due to its incompatibility with the City’s Carbon Neutral Supply Plan.
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 is completed. This project is postponed due
to other project priorities.
EL-11003 (Rebuild Underground 15)
•This project has been canceled.
EL-10006 (Rebuild Underground 24)
•This project is in design phase and scheduled to be completed in Dec 2024.
EL-16000 (Rebuild Underground 26)
•This engineering design for this project is currently in progress.
EL-19004 (Wood Pole Replacement)
•12 poles have been replaced since July 2023. CPAU staff and contract consultants are continuously working on
pole replacement designs for construction although the output is delayed this year because of staffing shortages.
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.
Substructure for 7 substations has been completed. The next phase is to install lighting and cameras.
EL-17002 (Substation 60kV Breaker Replacement)
•This project funds the purchase and replacement of both 60kV and 12kV substation circuit breakers that are
reaching the end of their useful life expectancy. Staff is concentrating on the procurement of seven (7ea) 60kV
circuit breakers and sixteen (16ea) 12kV circuit breakers during FY 2024 due to their long lead time (8-12 months)
The engineering design and installation of the above breakers will occur in FY 2025.
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 was completed in June 2023. Phase 3 substructure installation is currently in
progress and Phase 4 design is in progress.
EL-02011 (Electric Utility Geographic Information System (GIS))
•The project scope includes on-going maintenance/technical support of the existing GIS system and
implementation of the new GIS platform, ESRI.
EL-16002 (Capacitor Bank Installation)
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•This project is completed.
1.3 Rate and Bill Comparisons
Staff is in the process of updating internal bill comparison tools to more easily and accurately generate bill comparison
tables for all customer rate classes and consumption levels. In November 2023, the CPUC approved a 13% rate increase
for PG&E’s rates. Santa Clara is also considering a 10% rate increase in January 2024. Figure 3 shows an old residential bill
comparison table that is still generally accurate, but no longer precise. Staff anticipates being able to provide updated bill
comparisons for all customer classes in the FY25 Electric Financial Plan that will be presented to the UAC in March 2024.
Figure 3: Residential Monthly Electric Bill Comparison (Effective 1/1/2023, $/mo.)
Season Usage (kwh)Palo Alto PG&E Santa Clara
300 57.74 94.11 42.45
(Median) 453 94.42 143.32 64.89
650 143.94 221.07 93.78Winter
1200 282.18 438.13 174.44
300 57.74 94.11 42.45
(Median) 365 72.31 123.41 51.98
650 121.19 233.16 86.65Summer
1200 282.18 438.13 174.44
In Q1 on FY2024, staff purchased a report on California Electric Utility Bill and Rate Comparisons to understand what is
occurring in the broader regional electric utility market. Below are a few charts showing how Palo Alto electric rates
compare to other utilities. As shown in the figures below, Palo Alto customers pay 25-50% less for electric utility services
compared to the investor owned utilities. This indicates that publicly owned utilities are well-run and have some very cost-
effective resources in their portfolios. Among the POUs, Santa Clara's large industrial and database load as well as owned
generation results in lowest rates for residential customers.
Figure 4: Residential Electric Rate Comparisons at 750 kWh/mo (¢/kWh)
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Figure 5: Residential Electric Rate Comparisons at 400 kWh/mo (¢/kWh)
Figure 6: Commercial Electric Rate Comparisons at 3,500 kWh/mo (¢/kWh)
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Figure 7: Industrial Electric Rate Comparisons at 2,000 kW/mo (¢/kWh)
1.4 Reliability
CPAU tracks electric outages. A summary chart of these outages can be found below.
Figure 8: Electric Outage Reliability, FY 2019 to FY 2022
Outage Reliability FY18 FY19 FY20 FY21 FY22
System Average Interruption Duration Index (SAIDI)4 76.28 137.54 72.85 94.22 18.93
System Average Interruption Frequency Index (SAIFI)5 0.51 1.15 0.55 0.90 0.23
Customer Average Interruption Duration Index (CAIDI)6 150.26 119.99 131.97 104.78 81.91
Figure 9: Electric Outage Reliability, FY 2023 to FY 2024
FY 2023Outage Reliability Q1 Q2 Q3 Q4 Annual
System Average Interruption Duration Index (SAIDI)3 81.69 7.38 111.90 1.09 198.60
System Average Interruption Frequency Index (SAIFI)4 0.61 0.04 1.00 0.01 1.64
Customer Average Interruption Duration Index (CAIDI)5 134.77 190.12 110.80 121.48 121.15
FY 2024Outage Reliability Q1 Q2 Q3 Q4 Annual
System Average Interruption Duration Index (SAIDI)3 15.36 ----
System Average Interruption Frequency Index (SAIFI)4 0.05 ----
Customer Average Interruption Duration Index (CAIDI)5 336.87 ----
4 System Average Interruption Duration Index (SAIDI) - Measure of the total duration of an interruption for the average customer during a given time
frame. SAIDI = (Sum of Customer Minutes Interrupted) / (Total Customers Served)
5 System Average Interruption Frequency Index (SAIFI) - the average number of times a customer will experience an interruption during a given time
frame. SAIFI = (Total Customers Interrupted) / (Total Customers Served)
6 Customer Average Interruption Duration Index (CAIDI) - the average time to restore service. CAIDI = (Sum of Customer Minutes Interrupted) / (Total
Customers Interrupted)
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1.5 Financial Health
Below is a summary of the financial position for the electric utility.
1.5.1 Sales Forecasts vs. Actuals
Actual electric sales volumes in Q1 of FY 2024 were about 1% higher than forecasted, while actual sales revenues were
about 2.8% higher than budgeted in the FY 2024 Financial Plan. The higher sales revenue in July is attributable to the last
month of collection of the Electric Hydro Rate Adjuster (E-HRA), which was $0.048/kwh and still in effect during the first
month of billing in FY 2024 for some customers depending on their billing date.
Figure 10: Electric Sales Volume (kWh), FY 2024-Q1
Figure 11: Electric Sales Revenue ($), FY 2024-Q1
1.5.2 Financial Position
The Electric Operations Reserves ended FY 2023 at $38.9 million below the target of $45 million, but above the minimum
guideline of $32 million. At the time of this report, accounting is still working with the City’s auditor to finalize FY 2023
financials and Q1 FY 2024 financials are not yet available.
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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 capital improvement 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
After experiencing a notable price spike last winter, natural gas prices have seen a significant decline, returning to more
typical ranges. This shift can be attributed to several factors, including milder temperatures nationwide that diminished
demand for heating and an above-average level of gas storage. The combination of these factors has put downward
pressure on natural gas prices. The chart below shows Palo Alto’s gas commodity rates from 2021 to present.
Figure 12: Palo Alto Gas Commodity Rates
Gas Capped-price Winter Gas Purchasing Strategy
On September 18, 2023, Palo Alto City Council adopted a resolution which modified the City’s gas purchasing strategy for
this upcoming winter in response to the high energy prices that occurred last winter which resulted in dramatically high
bills for Palo Alto customers. This purchasing strategy is an insurance policy to mitigate the potential for a repeat of high
winter gas prices to a maximum 15 cents per therm. It involves purchasing price caps, limiting the price of gas cost $2 per
therm for a portion of City’s anticipated gas needs.
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
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of $0.055 per therm will be applied to the gas commodity charge passed through to customers. This represents
approximately $1.81 on a typical residential customer’s bill or an approximate 2.8% increase, not taking into account
changes in the underlying commodity price which is still based on a market index.
The amended rate schedules associated with this implementation were effective November 1, 2023. The City’s website
and rate schedules were updated to reflect the change in purchasing strategy. Staff is developing additional infographic
to help explain the change to interested customers.
2.1.1 Actual and Forecasted Supply Costs
Actual gas demand in FY 2024 Q1 was the same forecasted, while actual supply and transportation costs were about 45%
lower than budgeted in the FY 2024 Financial Plan. Gas commodity prices were substantially lower than predicted due to
several factors, including milder temperatures nationwide that diminished demand for heating and an above-average level
of gas storage.
Figure 13: Gas Supply Costs ($), Actual vs Budget, FY 2024-Q1
2.1.2 Carbon Neutral Gas Program
In December 2020, Council adopted Resolution #99307 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. The figure below
shows the composition of offset purchases. Staff delayed offsets procurement in the first half of 2023 due to shifting
staffing responsibilities but intends to procure 160,000 tons of offsets in Winter 2023/24.
7 Resolution #9930 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/resolutions-1909-to-
present/2020/reso-9930.pdf
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Figure 14: Offset Portfolio Composition
The following table provides a description of the projects.
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Figure 15: Offset Project Descriptions
2.1.3 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 in FY 2024 Q1 was $360K, or a
reduction of about 11% of the total gas commodity costs in FY 2024 Q1.
2.1.4 Gas Prepay Valuation
On September 15, 2014, Council adopted Resolution #94518, 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
8 Resolution #9451 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-9451.pdf
Project Name Project Type Description
Grotegut Dairy Li ve stock Grotegut Dai ry is a 3,900 mil k-cow ope rati on i n Newton, Wi sconsin with a methane capture system.
Green Trees U.S. Forest
GreenTrees Advanced Carbon Restored Ecosystem is reforestation of agricultural lands i nto native
hardwood forest in Mi ssi ssippi , Loui siana, Arkansas, and Illinoi s
San Juan Lachao Me xican Forest
Prote cti on of forests locate d in Hi gh Biological V alue Zones whi ch contain fl ora and fauna li sted i n the
Mexi can Endangered Spe cie s List and the Internati onal Union for Conse rvati on of Nature’s Red List of
Threatened Spe cies. Project in San juan Lachao ne ar Pal o Alto's Sister City of Oaxaca.
Blandi n Forest U.S. Forest Blandi n Native Ameri can Hardwoods Conservation and Carbon Seque stration project in Mi nnesota.
Pocosin+U.S. Forest
These projects are al l fore sted l and that will not be disturbe d by human deve lopment. Without this
prote cti on, the forests woul d be conve rte d to grow whe at or corn. Fore st conservation plays a vital
role in protecting freshwate r systems l ike lakes. The fore sts around the lakes act as natural water
fil te rs and puri fy the water for all who use it. The proje cts al so support healthy populations of red
wolf, bald eagl e, black bear, and vari ous bird speci es.
Refex ODS Ozone Depl eting Substance
The RemTec facil ity i n Bowli ng Green, Ohi o uses an argon arc plasma destruction de vice to achi e ve
99.99 perce nt removal . The majority of refrigerants originated in Cal iforni a, and all we re source d
within the Uni te d States.
The RemTec facil ity use s an argon arc pl asma destructi on device to achieve the required de structi on
and re moval e fficiency of 99.99 perce nt. The majority of ODS refri ge rants origi nated in California, and
al l were sourced withi n the United States.
Methane Capture Mine Methane Capture
This project is the first of i ts kind. Peabody Natural Gas, LLC removed methane from the North
Antel ope Rochelle Coal Mine be fore mini ng. The methane was compresse d and transported to a
natural gas pipe li ne and di stribute d to a national gas grid for use as fue l. Before i mplementation of
the proje ct, all the me thane was vented to the atmosphere.
Vi rgini a
Conservation
Fore stry Program U.S. Forest
The Vi rgini a Conservation Forestry Program - Clifton Farm and Rich Mountai n i s a 9000+ acre
improve d forest management project in which the ti mbe r and carbon ownershi p and
manage ment rights have been transfe rre d to The Nature Conse rvancy's Conse rvation Fore stry
Program. The program manages for mul tiple goals to include : Water qual ity protection,
habitat diversity, high value forest products, and carbon seque stration.
Co-benefi ts: Biodive rsi ty, Wate rshed Prote ction, Cli mate Resil ience, and Connectivity
Riverview Farm
Anaerobi c Digester Li ve stock
Riverview is a carbon offset project ge nerating emission reductions thought the capture and
de struction of methane at a dairy farm in Mi nnesota. Under the basel ine, manure managed i n open
lagoons led to the fugiti ve e mi ssion of methane to the atmosphere. In the proje ct scenario, thi s
methane is capture d by an anae robic digeste r and destroyed on si te in the production of e lectricity.
Co-benefi ts i ncl ude job creation and the i mprovement of local air and water quality.
Big Ri ve r / Salmon
Creek Fore sts IFM U.S. Forest
The Big Ri ve r and Sal mon Creek Fore sts are located in Mendocino County, CA and cover 16,000 acres
of redwood and Dougl as-fir forest. Thi s project is a conservation-based forest management project.
Co-benefi ts i ncl ude the cre ation of 140 jobs, prote cti on of 37 mile s of stre ams, and i mproved water
quali ty for local fish and bi rd species.
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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 reduced gas commodity costs by about $113K, or 3.4% up to
Q1 in FY 2024.
2.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
GS-14003 – GMR 24A (Gas Main Replacement 24A)
•The GMR 24A project is completed and 2,450 linear feet of gas main was replaced along Shopping Center Way and
Orchard Lane in Stanford Shopping Center. Easement documents are being finalized and submitted to the County
for recording.
GS-14003 – GMR 24B (Gas Main Replacement 24B)
•The GMR 24B project will include gas pipes on University from Webster to Hwy 101 and surrounding streets, as
well as Geng Rd and Town & Country Village. The project was competitively solicitated and construction is expected
to begin in February 2024. Staff received a notification from Pipeline Hazardous Materials and Safety
Administration (PHMSA) on 3/31/23 that the City was not selected to receive a federal grant award, although the
project was “Highly Recommended” and funding was provided to other “Highly Recommended” projects. The
funding source for this project will be the remaining available budget under GS-14003. However, the City submitted
another grant application as part of the subsequent round of federal grants issued by PHMSA.
GS-15000 – GMR 25 (Gas Main Replacement 25)
•The GMR 25 design drawings are being finalized and will include the replacement of pipes on Ross Road from
Colorado Avenue to East Meadow Drive and surrounding streets, as well as North and Southampton Drive and
surrounding streets, and Walter Hays Drive and surrounding streets. The project is expected to replace
approximately 26,000 linear feet of gas mains if federal funding is approved. If federal funding is not awarded, the
scope of the project will be reduced to approximately 20,000 linear feet. Staff submitted a federal grant application
for the project in August 2023 and PHMSA is expected to notify applicants of awards in February 2024.
2.3 Rate and Bill Comparisons
The figure below shows the bills for residential customers in Palo Alto and PG&E, at different levels of usage and rates.
The PG&E bills are based on their Climate Zone X, which includes Menlo Park, Redwood City, Mountain View, Los Altos
and Santa Clara. In the summer of FY 2024 (July to October), the median residential bill in Palo Alto was about 16% higher
than PG&E, while in the winter of FY 2024 (November only), the median residential bill in Palo Alto was about 7% lower
than PG&E.
Figure 16: Residential Natural Gas Bill Comparison ($/month)
Period Median Usage9 (therms)Palo Alto PG&E Zone X % Difference
FY 2024 Summer 18 40.49 34.89 16%
FY 2024 Winter 54 108.78 117.10 -7%
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.
9 Based on Palo Alto G-1 monthly median usage.
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Figure 17: Gas Service Interruptions, FY 2023 to FY 2024-Q1
FY 2023 FY 2024
Gas Q1 Q2 Q3 Q4 Q1
Number of Breaks 9 4 3 7 5
Total Minutes 643 330 240 1560 540
Customers Affected 20 5 7 60 51
2.5 Financial Health
Below is a summary of the financial position for the gas utility.
2.5.1 Sales Forecasts vs. Actuals
Compared to the forecasts outlined in the FY 2024 Financial Plan, actual gas sales volumes fell short by 3.4%, and actual
gas sales revenues were 8.1% below the budget. The lower actual revenue was attributable to lower gas supply costs,
which were caused by several factors, including milder temperatures nationwide that diminished demand for heating and
an above-average level of gas storage.
Figure 18: Gas Sales Volume (Therms), FY 2024-Q1
Figure 19: Gas Sales Revenue ($), FY 2024-Q1
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2.5.2 Financial Position
The FY 2023 ending Operations Reserve balance was $11.3 million. The Operations Reserve was expected to drop below
the minimum guideline level in FY 2023, given higher than budgeted gas commodity prices that could not be passed
through to customers, therefore $3.8 million were transferred from the CIP to the Operations Reserve to keep the reserve
at a healthy level.
FY 2024-Q1 reserve balances will not be available until the winter of 2023/24, staff will report the financial results in the
upcoming Financial Report.
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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 the City. 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 for
proposed Voluntary Agreements to provide greater water flows and increased habitat for the Tuolumne River. The State
Board has initiated its evaluation of the proposed Tuolumne River Voluntary Agreement as an amendment to the adopted
Bay Delta Plan. The State Board is completing CEQA review of the Tuolumne River Voluntary Agreement. The SWRCB’s
schedule indicates development of the Tuolumne Specific Scientific Basis Report Supplement by fall 2023, the staff report
for Tuolumne River Voluntary Agreement by winter/spring 2024 and the State Board workshop and consideration of the
Tuolumne River Voluntary Agreement in winter/spring 2024.
Concurrently, the State Board is moving forward with implementation of the Adopted Phase I Bay Delta Plan including the
adoption of initial biological goals for the lower San Joaquin River flow objectives. Litigation on the Adopted Phase I Plan
is ongoing and oral argument concluded in October 2023.
In August 2018, Palo Alto’s City Council voted to support the SWRCB’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 the Bay Area Water Supply and Conservation Agency (BAWSCA), California State
Water Resources Control Board, SFPUC, and other stakeholders.
In order to plan for future reductions to existing water supply from climate change and regulatory uncertainties, the SFPUC
is undertaking the Alternative Water Supply Plan. This plan will recommend projects to develop supplemental sources to
improve long-term water supply reliability. The SFPUC received comments on the draft Alternative Water Supply Plan and
plans to update the SFPUC Commission in February 2024.
BAWSCA is a special district created by legislative action (AB 2058) in 2002 to protect the water supply and conservation
interests of wholesale water customers, including Palo Alto. BAWSCA’s goal is to ensure a reliable supply of high-quality
water at a fair price. In fall 2023, BAWSCA began scoping its Long-Term Reliable Water Supply Strategy 2045. This planning
document will enable BAWSCA to identify the highest priority water supply management activities to achieve its goal.
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Thirty-one atmospheric rivers from mid-December 2022 to the end of March 2023 meant higher than average
precipitation and snow in the Sierras. As of November 1, 2023, the Regional Water System total storage operated by the
San Francisco Public Utilities Commission (SFPUC) was at 95% of maximum storage and Water Bank was 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 is 1,362 Thousand Acre Feet (TAF) as of November 1, 2023.
Figure 20: Regional Water System Storage
The State and SFPUC lifted drought calls in spring and summer of 2023. The State Water Resource Control Board’s
Emergency Regulation requiring Stage 2 Water Shortage Contingency Plan actions expired on June 10, 2023. On April 11,
SFPUC rescinded the water shortage emergency declaration. The SFPUC’s system-wide water use reduction of 11% expired
along with the SWRCB’s Emergency Regulation on June 10th. Palo Alto’s water use restrictions track both the State’s
regulation and SFPUC’s water use reduction request. Palo Alto’s water use restrictions from Stage I of the Water Shortage
Contingency Plan remained in effect through December 2023 (those include no irrigation within 48 hours of measurable
rainfall, no application of potable water to hard surfaces, and no irrigation of ornamental turf on street medians). Palo
Alto’s permanent water use restrictions remain in effect (Palo Alto Municipal Code 12.32.010). Additionally, the State’s
emergency regulation banning the use of drinking water for watering decorative grass in commercial, industrial, and
institutional areas, other than to the extent necessary to ensure the health of trees and other perennial non-turf plantings,
is expected to remain in effect until June 2024.
During droughts 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.” Since January 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 2024.
The figure below shows water usage for the South Bay/East Bay (including Palo Alto) compared to several benchmarks
including 2022. For the South Bay/East Bay region as well as systemwide, demand for the first ten months of 2023 has
been below the average of the last five years.
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Figure 21: SFPUC Water Deliveries
Valley Water, the groundwater manager in Santa Clara County adopted an ordinance calling for water conservation as a
way of life on June 16. The ordinance outlines permanent water waste prohibitions. 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 a wide variety of water conservation programs. Palo Alto is working with Valley Water on messaging to customers in
the county to avoid confusion as much as possible. As such, the City’s messaging will continue to emphasize the wise use
of water. Palo Alto staff is continuing to focus on education and outreach and providing resources to eliminate water
waste and achieve efficient water use. Palo Alto kicked off the WaterSmart Customer Portal and Residential Home Water
Report Program and also continued to work with Waterfluence software to target water efficiency for large landscape
customers. Staff continues to promote water conservation rebate programs and resources through online outreach, bill
inserts, and newsletters.
Palo Alto continued its work on 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 2022
the City Council approved a contract for this work with Carollo Engineers, Inc. In September and December 2022, staff
conducted stakeholder engagement meetings with community members and City staff focusing on One Water community
needs and priorities and water supply and conservation options and draft evaluation criteria. Additional stakeholder
engagement meetings will be planned with City staff, community members, and regional partners in spring 2024 to share
initial results. The UAC received a status update in February 2023 (Staff Report #1497410) and staff plans to return to the
UAC in spring 2024 to provide an update and share initial results.
3.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
10 Staff Report #14974 – https:/www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutesreports/reports/uac-informational-reports/2023-
informational-reports/02-01-2023-id-14974.pdf
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WS-07000 – California Avenue and Page Mill Road Turnouts
•The California Avenue and Page Mill Turnouts project upgrades the California Avenue Turnout and adds seismic
restraints to the pressure reducing valve at Page Mill Road Turnout. The construction is delayed due to supply
chain issues on the valves. Construction is anticipated to start in March 2024 after all material is delivered. The
project duration is about 3 months.
WS-15002 – WMR 29 (Water Main Replacement 29)
•The WMR 29 project will replace approximately 8,000 linear feet of water main on Park Boulevard from Mariposa
Avenue to Lambert Avenue, on College Avenue from Park Boulevard to El Camino Real, and on Birch Street from
College Avenue to Sherman Avenue. The project is anticipated to start in November 2023 and complete in April
2024.
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 November 2023. CPAU is among the highest monthly bills of the group.
Palo Alto’s water bills at 9 CCF per month are 16% higher than the comparison group average.
Figure 22: Residential Water Bill Comparison ($/month)
As of November 2023
Usage CCF/month Palo Alto Menlo Park
Redwood
City
Mountain
View Santa Clara Hayward
4 $53.20 $64.31 $54.04 $46.95 $31.88 $45.17
(Winter median) 7 $80.60 $89.79 $76.09 $72.69 $55.79 $69.59
(Annual median) 9 $103.68 $106.78 $90.79 $89.85 $71.73 $85.87
(Summer median) 14 $161.38 $153.13 $138.94 $132.75 $111.58 $135.87
25 $288.32 $267.84 $267.39 $278.63 $199.25 $245.87
3.4 Reliability
The City of Palo Alto tracks all water service interruptions. A summary chart of these interruptions can be found below.
Water service interruptions are usually due to repairs of broken or damaged water services and mains.
Figure 23: Water Service Interruptions, FY 2023 to FY 2024-Q1
FY 2023 FY 2024WaterQ1Q2Q3Q4Q1
Number of Breaks 10 12 6 2 8
Combined Minutes 1007 1050 690 100 1086
Customers Affected 46 249 63 19 147
3.5 Financial Health
Below is a summary of the financial position for the water utility.
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3.5.1 Sales Forecasts vs. Actuals
Actual water sales volumes in FY 2024 Q1 were about 2.4% lower than forecasted, and actual water sales revenues were
about 5.6% lower than budgeted in the FY 2024 financial plan. Sales were lower due to a slower than projected recovery
in water usage following periods of drought.
Figure 24: Water Sales Volume (CCF), FY 2024-Q1
Figure 25: Water Sales Revenue ($), FY 2024-Q1
3.5.2 Financial Position
At the end of FY 2023, the Water Operations Reserve was within the guideline range, but below target and close to the
minimum. During FY 2023 water usage declined due to drought water use reductions and cooler and wetter weather in
2023. Water utility sales revenue (net of supply cost savings) was $2.4 million lower than forecasted while expenses were
$1.6 million higher than forecasted in last year’s Financial Plan. The FY 2024 Water Utility CIP includes a main replacement
(WMR 29) as well as one-time seismic reservoir upgrades (one upgrade is complete and a second and third are planned in
FY 2024 and FY 2026). At the end of FY 2023, staff completed the transfers approved by the Council in June 2023 (FY 2024
Water Financial Plan11); those included a transfer of $3.746 million from the CIP Reserve to the Operations Reserve and
11 FY 2024 Water Financial Plan https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-
reports/reports/city-manager-reports-cmrs/attachments/06-19-2023-id-2302-0939-water-financial-plan-fy24-cc.pdf
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$3 million from the Rate Stabilization Reserve to the Operations Reserve to address reduced sales revenue and capital
needs of the water utility in FY 2023. Staff estimates that with expected expenses and the use of funds from the Rate
Stabilization Reserve and CIP Reserve, water rate increases will be needed to maintain the Operations Reserve within the
guideline range during each of the subsequent 5 years.
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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 RWQCP 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 35% projected in FY 2025) 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. 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 conduct 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 5.5% annually
on average from FY 2025 through FY 2034. 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 19.8% per year from FY
2025 through FY 2034 to keep up with ongoing replacement of aging equipment and complete major upgrades. Larger
increases to capital expenses are expected to begin in FY 2029 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 2025)
•1900 Embarcadero Road Purchase (FY 2024)
•Primary Sedimentation Tank Rehabilitation and Equipment Room Electrical Upgrade (FY 2025)
•Outfall Line Construction (FY 2027)
•Operations Building Remodel (FY 2028)
•Secondary Treatment Upgrades, Headworks Facility (FY 2029)
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Figure 26: Palo Alto’s Share of Estimated Wastewater Treatment Expenses (Projection and Planned CIP)
The figure above shows the ongoing annual CIP reinvestment (“Recurring/Minor CIP” and “Existing Debt Service”), one
pay-as-you-go project, the Joint Intercepting Sewer in FY 2025, 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. Additional factors not yet
included in the budget estimate could increase costs further such as debt expense for cash flow issues associated with
slow State Revolving Fund loan reimbursement, and property expenses for an acquired property. Factors that are
contributing to cost increases for treatment operations are rising salary and benefits costs, sludge hauling services unit
price increases, commodity increases to operate the facility, and Palo Alto’s flow share increased in FY 23 from 32% to
35% based on updated flow data; this increases Palo Alto’s cost share.
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 is currently
soliciting consultant proposals to begin an update to the Long-Range Facilities Plan in 2024. The findings from the Long-
Range Facilities Plan update will direct additional/future CIP. The RWQCP’s current capital work in-progress includes an
estimated $354 million in projects. The following table summarizes these ongoing projects and provides their status and
costs.
Figure 27: Current RWQCP Capital Work In-Progress (based on November 2023 Partners Meeting)
Project Status Expense (million
$)
Primary Sedimentation Tanks Rehabilitation and
Equipment Room Electrical Upgrade
Construction $19.4
12kV Electrical Loop Upgrades (Phase 1)Construction $7.3
New Outfall Pipeline 90% Design $17.8
Secondary Treatment Upgrades Construction $193
Advanced Water Purification System Architectural Review Board Approval $55.9
Headworks Facility Replacement Engineering Contract Negotiations $51.7
Joint Interceptor Sewer Rehabilitation (Phase 1)Award Bid $8.9
Subtotal $354
One of the largest projects listed above is 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
Staff Report: 2311-2209 – Page 30 of 61
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regulations to limit nutrient discharges (on total nitrogen) into the San Francisco Bay. The current secondary treatment
design cannot remove nitrogen and the largest project listed above, the Secondary Treatment Upgrades, will address this
regulatory change as well as address aging mechanical and electrical equipment that must be replaced.
In addition, the RWQCP is evaluating the purchase of neighboring properties in order to build an environmental services
and lab building and a closed session will be held with Palo Alto Council to discuss this topic.
The RWQCP plans to fund these capital projects through a combination of mechanisms including State Revolving Fund
loans, and revenue bonds. Several sources of funding will be used for the Advanced Water Purification System: Valley
Water will provide $16 million, Palo Alto was awarded a $12.9 million grant from the United States Bureau of
Reclamation’s WaterSMART program, which allocates Title XVI Program funding under the Water Infrastructure
Improvements for the Nation (WIIN) Act, and the City of Mountain View will pay for the remainder of the capital cost.
4.2 Collection System Capital Improvement Plan Status
The following capital project is currently in progress:
WC-19001 - SSR 31 (Sanitary Sewer Replacement 31)
•The SSR 31 project replaces approximately 11,000 linear feet of wastewater main, sewer laterals, and manholes on
El Camino Real and Page Mill Road. Construction of this project started on 7/31/23 and the anticipated completion
is in May 2024. A small portion of the project was completed during nighttime due to Caltrans’ restriction of closing
two traffic lanes during daytime. Night work and traffic impacts have generated some public complaints and staff
has been working with the contractor to mitigate the impacts. Staff continues to coordinate the schedule with
Caltrans and County of Santa Clara to stay ahead of their street improvement/paving projects to avoid digging into
Caltrans or County’s newly paved streets.
4.3 Rate and Bill Comparisons
The figure below shows the wastewater monthly bill for residential customers in Palo Alto compared to what they would
be under surrounding communities’ rate schedules as of November 2023. Palo Alto’s monthly sewer bill is lower than four
of the six neighboring communities. Menlo Park in this table refers to the West Bay Sanitary District. Staff will report on
future rate increases once they are adopted by the wastewater utilities.
Figure 28: Residential Wastewater Bill Comparison ($/month)
As of November 2023
Palo Alto Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward
$48.64 $108.83 $89.28 $53.10 $51.47 $48.28 $41.29
4.4 Financial Health
Below is a summary of the financial position for the wastewater utility.
4.4.1 Sales Forecasts vs. Actuals
Wastewater sales revenues in FY 2024-Q1 were 4.8% lower than forecasted in the FY 2024 Financial Plan. Lower sales
were due to low water usage from the drought, as the average winter water usages are used for wastewater calculations
in the commercial sectors.
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Figure 29: Wastewater Sales Revenue ($), FY 2024-Q1
4.4.2 Financial Position
The Wastewater Collection Operations Reserve was within the guideline range at the end of FY 2022 and dropped below
guideline range and below zero at the end of FY 2023. Palo Alto began Sanitary Sewer Replacement project 31 with an
increased budget and start date in FY 2023 instead of FY 2024 because of coordination with Caltrans to limit or avoid
digging into newly-paved street on El Camino Real. At the end of FY 2023 staff completed the transfers that were approved
by the Council in the FY 2024 Wastewater Collection Financial Plan12. These included transferring $3.2 million from the CIP
Reserve to the Operations Reserve and $0.34 million from the Rate Stabilization Reserve to the Operations Reserve
bringing both the CIP Reserve and the Rate Stabilization Reserves to zero. However, during FY 2023, CIP-related costs were
approximately $3 million higher than forecasted, transfers out to capital projects were $0.3 million higher than forecasted,
and revenue was $0.5 million lower than forecasted. In July 2023, wastewater rates increased by 9%, however in the first
quarter of FY 2024, wastewater sewer service revenue increased by only 6% compared to the same months in FY 2023;
water use reductions during the winter of 2023 contributed to lower commercial revenues. Given the low reserve levels,
and lower than expected revenue, staff are considering options to bring to Council to allow revenues to increase to a
sustainable level and to meet the needs to accelerate main replacement to prudently manage the City’s infrastructure
together with rising wastewater collection and treatment costs.
12 FY 2024 Wastewater Collection Financial Plan https://www.cityofpaloalto.org/files/assets/public/v/3/agendas-
minutes-reports/reports/city-manager-reports-cmrs/attachments/03-07-2023-id-2302-0944-ww-financial-plan-lisa.pdf
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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 December 19, 2022, City Council directed staff to proceed with the Fiber Expansion Plan to implement the Fiber Rebuild
project and Phase 1 of the Fiber-to-the-Premises (FTTP) project. In Phase 1, FTTP would be built out in selected areas of
the city, and expanded gradually (Staff Report ID 14800)13. To execute on the Council direction, staff is working on the
following activities seeking to control project costs, minimize construction impacts to the community, and prevent major
delays:
✓Pilot to evaluate alignment of fiber and grid modernization projects - Engineering make-ready work and
construction for the grid modernization project will overlap with projects in the Fiber Expansion Plan. As reviewed
with the Finance Committee and Utilities Advisory Commission, a pilot area has been identified to help inform on
how alignment efforts impact costs, reductions to community disruptions, and project timelines.
✓California Environmental Quality Act (CEQA) - The City must analyze and evaluate the potential impacts of the
project on various environmental factors and identify whether those impacts can be mitigated.
✓Joint Poles - The existing joint pole agreement with AT&T requires coordination between the City and AT&T to
relocate 3rd party telecom equipment on utility poles and provide space for new fiber attachments, while
remaining in compliance with California Public Utilities Commission General Order 95 (GO 95) requirements for
overhead electric line construction to insure electric utility service and secure personnel safety.
✓Contract amendments – Evaluation of the use of existing construction and engineering design contracts to
expedite these for both FTTP and grid modernization for the pilot. Existing contractors have the technical expertise
and familiarity with the City’s construction standards, so construction may begin as soon as the power engineering
design is complete.
5.2 Capital Improvement Plan Status
On June 19, 2023, the City Council approved the FY 2024 CIP Budget with the new FTTP project, and Grid Modernization
for Electrification Project. The approval of the electrification project accelerated efforts to align electrification and fiber
construction, which impacted the Fiber Expansion Plan. Staff is deploying a pilot to determine how to align the grid
13 Staff Report ID 14800 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-
manager-reports-cmrs/2022/12-19-2022-id-14800.pdf
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modernization project and projects under the Fiber Expansion Plan to help minimize utility engineering pole make-ready
work, pole replacements, noise disruption, and construction activity in neighborhoods.
In the FY 2024 Fiber CIP budget, $20 million will be budgeted in the new Fiber-to-the-Premises (FO-24000) CIP and an
additional $13 million will be budgeted in the Fiber Optics Network – System Rebuild (FO-16000) CIP for the new fiber
backbone.
5.3 Reliability
There were no unplanned fiber outages or events to report in Q1 of FY 2024.
5.4 Financial Health
Below is a summary of the financial position for the fiber utility.
5.4.1 Fiber Sales
Actual dark fiber licensing sales in FY 2024 Q1 were $1.2M and aligned with the revenue forecast. Fiber expenses were
$0.6M and 50% below forecast due to the timing of unprocessed Q1 invoices for Magellan to support FTTP. With the
project realignment of FTTP with grid modernization, Magellan had to perform engineering redesign and surveying work
in the pilot area to minimize and align underground construction with the grid modernization project which is 100% aerial
construction in the pilot.
5.4.2 Financial Position
The ending FY 2023 Fiber Optic Utility Rate Stabilization Reserve is $32.5 million and an additional $3.4 million of contract
commitments.
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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. Summary descriptions of Utilities Customer Program are provided in
Appendix D.
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), offers landscape education
classes throughout the year to introduce residents to the concepts of water-efficient and sustainable landscaping.
Workshop topics include rain gardens, how to water trees, steps to take to convert lawns into drought-tolerant
landscapes, and available rebates. During Q1 FY 2024, we held 2 webinars and 2 in-person workshops; attendance was
strong, with 176 residents participating over the course of the quarter.
Please visit the BAWSCA website for a complete list of available classes and events at:
https://bawsca.org/conserve/programs/classes14. All past Landscape Class Videos are available online at:
https://bawsca.org/conserve/landscaping/videos/15. For updates on future events and workshops, please visit
http://cityofpaloalto.org/workshops16
Residential Energy Efficiency 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 including guidance on home electrification
options. In addition to in-home efficiency assessments of energy equipment and the building envelope (attic, windows,
walls), the program also offers a Home Electrification Readiness Assessment (HERA) to plan for electrification upgrades;
both the efficiency assessment and HERA are offered in a virtual option. During Q1 FY2024, the Genie performed 8
comprehensive in-home assessments and Home Electrification Readiness Assessments (HERA).
14 BAWSCA Programs and Classes - https://bawsca.org/conserve/programs
15 BAWSCA Landscaping Videos - https://bawsca.org/conserve/landscaping/videos/
16 City of Palo Alto Workshops - https://www.cityofpaloalto.org/Departments/Utilities/Utilities-
Workshops-and-Webinars
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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. In Q1 FY 2024, 2
customers participated in the REAP program.
Water Conservation Programs for Residents and Businesses
CPAU partners with Valley Water to offer a robust portfolio of water conservation programs and rebates17 for residents
and businesses. On June 25, 2023, the City entered into a new cost-sharing agreement with Valley Water which includes
$1.4M over 7 years to help the City deploy Advanced Water Metering Infrastructure and home water conservation
reports. In FY 2023, 120 water-efficiency rebates were processed, 40 of which were lawn conversions to drought-
tolerant plants. Through this program 53,907 square feet of grass was converted to low-water-use plants, a 91%
increase from FY 2022. FY 2024 rebate data is not yet available; the City receives program results once a year from
Valley Water in October at the end of the fiscal year.
The WaterSmart customer portal, an online water management tool, launched in November 2022. Through this
program, home water reports are sent to most single-family customers on a monthly basis. A control group of single-
family customers currently do not get the reports. As of November 1, 2023, 17% of all water customers have accessed
the portal which provides information about their water consumption and personalized water conservation
recommendations. We will have estimated water savings from the efficiency in the next couple of months. As water
supply conditions have improved CPAU is focusing outreach on water conservation being a way of life and reducing
water waste and continues to encourage participation in rebates and resources.
The Waterfluence program provides large commercial customers a monthly water budget that compares actual irrigation
use to an ideal benchmark irrigation budget. Customers that are exceeding their suggested budget are eligible for a free
landscape irrigation field survey. CPAU continues to engage Key Accounts on this resource to help them improve irrigation
efficiency. During FY 2023, 47% of eligible customers, have accessed the Waterfluence portal.
Bay Area SunShares Program
For the eighth year, the City of Palo Alto is an outreach partner for Bay Area SunShares, a solar and battery storage group-
buy program administered by Business Council on Climate Change (BC3). Palo Alto’s participation as an outreach partner
helps CPAU customers receive information and discounted prices from two prescreened contractors – SolarUnion and
Solar Technologies. CPAU held an informational webinar on Oct 12th, 2023, where 28 attendees joined CPAU staff, Bay
Area SunShares staff, and SunShares installers to discuss the program’s offering. For the current program year, Palo Alto
has 153 residents registered with the program, including 120 interested in installing battery storage systems. This level of
interest is similar to the 2022 registration numbers, reflecting the continuing high level of interest in solar and storage
technologies among residents.
Commercial & Industrial Energy Efficiency Program
As of November 9, 2023 , Enovity has 20 projects in process with 2,114,518 kWh savings. Key Account Representatives
have been proactively engaging customers through direct email and face-to-face meetings. Key Account Managers are
planning another Facility Managers Meeting on Zoom for November 7, 2023, following the high attendance of previous
meetings on Zoom.
The key account program is increasingly focused on reengaging key accounts that have not historically partnered with the
city on energy efficiency and electrification, especially commercial property owners. Identifying customer pain points and
17 Rebates - https://valleywater.dropletportal.com/overview/
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creating action plans to address them will help us develop a roadmap for better serving our key accounts and increasing
their ESG commitment in the community.
The Enovity program total value is trending behind schedule due to higher commercial vacancy in the market. Many
employers have remained fully remote and hybrid. This has led to a pause in facilities reinvestment and upgrading. In the
short term, we expect this pattern to continue. Conversely, there are commercial customers that continue to expand their
footprint, including Stanford, Google and Tesla. As they repurpose available space, some of the facilities may require
retrofitting that coincide with electrification. Our next contract with Enovity will include a reevaluation of these market
conditions.
Figure 30: Energy Efficiency Program Energy Savings
Business Energy Advisor
Since the Business Energy Advisor program launched in June 2022, 38 site assessments have been completed. In recent
months we have focused on outreach and marketing to drive participation numbers up for this program. We have
contacted customers through in-person outreach (going door-to-door), tabling at events, meeting with property
management firms, presenting at various organization’s staff meetings, direct emails to targeted customer lists,
promotion in the Small and Medium Business Newsletter, and running a month-long Facebook and Instagram ad
campaign. We have successfully caught up on past assessment reports, allowing us to complete new assessment reports
with a quicker turnaround time. We have some projects underway, but this past quarter completed lighting projects at
two sites.
Our next steps are to continue focusing on driving participation. We will be doing another call campaign this winter, which
will reach over 700 additional customers. Along with the call campaign, we will continue to send direct emails to targeted
customer lists. Additionally, we are going to investigate potential opportunities to incentivize customers to get projects
completed at a faster rate, since installs are happening at a slower pace than we had hoped.
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6.1.2 Building Electrification
Full-Service Heat Pump Water Heater Program
CPAU launched the Full-Service Heat Pump Water Heater (HPWH) Program in March 2023 that provides an end-to-end
advisory and installation service to homeowners to switch from a gas water heater to a HPWH at a discounted price with
over $4,000 in city subsidies per project. The program also offers an on-bill financing option with 0% interest for customers
to lower their upfront cost by agreeing to a monthly bill payment of $20 for 5 years. The Home Efficiency Genie team at
CLEAResult has been providing customer support for this program, while Synergy is the installer that provides the project
cost estimate and completes the installation. The City has also been partnering with a marketing consultant to drive
program leads through creative marketing campaigns in various channels including targeted Google ads. As of November
16, 2023, the program has completed the installation of 130 HPWH units with another 21 units scheduled for installation;
39 of these projects have applied for on-bill financing. With the current pace of new signups, the City currently is on a
pace to do 200-250 installations per year, about 20% of the estimated number of water heaters replaced each year. This
is one of the most productive energy programs the City has run, but far more installations are needed to achieve the City’s
S/CAP goals. Staff is making improvements to the program processes based on feedback to-date in an effort to attract and
retain more residents in the program and has kicked off a customer outreach effort to gather more feedback to support
further improvements.
On November 1, 2023, the program begins a new round of lower pricing18 on a limited time basis, thanks to the new
statewide HPWH incentives through the TECH Clean program. This new pricing includes up to $1500 of subsidy for site
preparation work such as long conduit runs, relocation of the water heater, etc. The installer has expanded its staff
capacity to shorten the time to provide project estimates and increase the number of installations per week to meet the
anticipated increase in program demand.
In addition to providing a prescreened contractor to install HPWHs, CPAU also offers the option for customers to choose
their own contractor and apply for a $2300 HPWH rebate if the equipment meets the program criteria and has been
permitted. Between October 4, 2022 and November 16, 2023, CPAU has processed 43 HPWH rebates. Since the launch of
the statewide HPWH incentive, CPAU has lowered the HPWH rebate to $1500. This is a significant jump from the 13
rebates processed between January 2022 to October 3, 2022 when HPWH rebates were between $1200 and $1500.
Customers that participate in either the Full-Service HPWH program or the HPWH rebate program are both eligible for the
30% federal tax credit for HPWH installation.
Business Electrification Technical Assistance Program (BE TAP)
The Business Electrification Technical Assistance program launched in August 2022, providing free electrification
assessments and technical assistance to implement building electrification projects to businesses. Program interest in
increasing, with 27 assessments completed thus far. There are currently three customers pursuing electrification projects,
specifically installing heat pump HVAC units. We continue to work on ways to streamline the heat pump HVAC unit
installation process, so we can increase the number of projects moving forward.
Since implementing various processes improvements earlier this year, including but not limited to engineering
calculations and report preparation, we have reached a consistent cadence for assessment report distribution to
customers. This has allowed us to decrease the customer’s wait time to improve their experience and increase the number
of reports we prepare in the coming year. Additionally, we plan to increase marketing efforts for this program to help
reach our participation goals. We recently did a targeted outreach campaign to the highest gas consumers in Palo Alto,
18 HPWH Lower Pricing https://www.cityofpaloalto.org/News-Articles/City-Manager/Limited-time-Savings-on-Your-
Cleaner-Smarter-Safer-Water-Heater
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since they would benefit from electrification most. Our next plan is to do a Facebook and Instagram campaign promoting
electrification to businesses in Palo Alto.
6.1.3 Electric Vehicle Programs
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.
EV Technical Assistance Program (EVTAP)
•Goal: Offer technical assistance for the installation of EV chargers at nonprofits, schools, multifamily properties and
small medium businesses. Facilitate the installation of on-site EV charging access for 10% of multifamily households
by the end of 2024.
•Progress: EVTAP is a high touch program, that includes a series of site visits, technical evaluations, engineering
reviews, designs, support with hardware selection and cost estimates that culminate in the landlord receiving
contractor bids and assistance submitting a building permit, applying for incentives and project management of the
installation. Projects going through EVTAP have been taking two years or more to reach completion.
Since program inception in 2019, 120+ sites have expressed interest in EVTAP and are working through the program.
However, due to each project taking much longer to complete than expected, staff is working to extend the contract to
complete installations in the pipeline to hit original goals.
EV Charger Rebate Program
•Goal: Incentivize the installation of EV chargers at Non-Profits and Multifamily properties.
•Progress: Since the launch of this program in 2017, CPAU has facilitated the installation of 144 new EV charging
ports/connectors at 19 sites (as of 11/2023). The breakdown of the installation sites: 8 MF and 11 non-profits
(including 4 schools and 2 medical facilities). The average cost of each port has been $10k and projects have averaged
18 months to complete. Staff predicts that of the 114 program applicants, 30 multifamily properties will complete
installations in the next couple of years.
California Electric Vehicle Infrastructure Project19 (CALeVIP)
•Goal: Facilitate and Incentivize the installation of EV chargers at commercial sites.
As of June 2023, a total of $1.5M (out of $2M) was reserved by 10 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 128, Level 2 ports and 12 DC Fast Chargers. Still experiencing the aftermath of COVID, as well as
permitting delays, installations are moving much slower than expected. Staff is working actively with the program
administrator to fully reserve any available outstanding funds, and to encourage installations to materialize.
EV Awareness and Outreach
•Goal: Raise awareness about electric modes of transportation
•Progress: Using NCPA contracts and LCFS funds, CPAU is contracted with Acterra20 and Cool the Earth21 to offer 32
EV events in CY2023. These included 20 virtual EV educational workshops, attracting over 1,000 attendees and 12 in-
person EV expos and e-Bike test rides attracting over 1,700 participants. Popular classes included multi-lingual
Financial Incentive Clinics targeted towards lower income customers with one on one consultations as well as EV
19 CALeVIP -https://calevip.org/
20 Acterra - https://www.acterra.org/
21 Cool the Earth https://cooltheearth.org/
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charging 101 classes. CPAU is also currently offering limited time discounts on certain EV models, as well as an e-Bike
discount campaign. A robust curriculum is also being planned for CY2024 with offer over 30 online and in-person
workshops.
City-Owned EV Chargers
•Goal: Install EV Charging Infrastructure for the public as well as City-fleet.
•Progress: As of the End of November 2023:
o 124 – City-Owned Ports
o 120 – Publicly accessible EV Charging ports
Transformer Upgrade Rebate Program
•Goal: Provide discounts to defray the cost of utility distribution system upgrades, triggered by EV applications.
•Progress: Many older properties in Palo Alto, especially multifamily buildings, have limited electric capacity to
accommodate EV chargers and building electrification. However, there has been an ongoing nationwide transformer
supply shortage, delaying customer EV projects. In the meantime, 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 as well as
proposing designs utilizing existing electric capacity. To date, uptake has been slow, however with many active EVTAP
projects in the pipeline, we estimate that half of the sites will require new transformers and Utilities is planning
accordingly.
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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/UTLbillinsert22.
New Outage Management System: CPAU launched a new Outage Management System (OMS) in fall 2023. This will offer
customers the ability to receive alerts and updates through text messages about power outages and other emergency
notifications. The new OMS will provide benefits such reduced outage durations, faster response time, web outage viewer,
customer account log in for updates, hosted Integrated Voice Response (IVR), phone capacity rollover, no busy signals,
streamlined field communications, and situational awareness for both employees and customers.
www.cityofpaloalto.org/outages23
Advanced Metering Infrastructure (AMI) Project: CPAU continued its deployment of Advanced Metering Infrastructure
(AMI) in summer and fall 2023. Meters are being installed in phases to allow the City to test and validate quality assurance
for data collection and billing. Full deployment of AMI for residential customers is estimated at the end of 2024. There
have been delays in receiving meters for commercial customers, so deployment for commercial sectors is estimated in
mid-2025. CPAU has been communicating directly with customers who will receive the meters to share resources and help
with any questions or concerns. www.cityofpaloalto.org/ami24
Limited Time Price Adjustments for Heat Pump Water Heaters: CPAU is offering residential customers a new, limited-
time price adjustments to our Heat Pump Water Heater (HPWH) program thanks to additional funding through TECH Clean
California. TECH is a statewide initiative accelerating the adoption of clean water and space heating technology to help
California meet its goal of being carbon-neutral by 2045. For a limited time, residents can now receive higher rebates and
discounts on HPWH installations. If a customer chooses to hire their own contractor, they can receive $1,500 from Palo
Alto plus up to $3,800 from the state for a total rebate of $5,300. The full-service program offers a standard 65 gallon heat
pump water heater installation for the price of $1,900 plus up to $1,500 in credit toward site preparation costs; this price
covers the permits and equipment installation for the customer. This discounted pricing is available for only six months;
after that, the City will offer smaller discounts until the State TECH funding runs out. To learn more, please check out the
website www.cityofpaloalto.org/switch25 or call (650) 713-3411.
22 Utilities Bill Inserts - https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service/Utilities-Bill-Pay/Bill-Inserts
23 Outages https://www.cityofpaloalto.org/Departments/Utilities/Utilities-Services-Safety/Outages
24 AMI https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service/Meter-Reading-Info-Schedule/Advanced-Metering-Infrastructure-
and-Smart-Grid
25 Switch https://www.cityofpaloalto.org/Departments/Utilities/Residential/Ways-to-Save/Switch-to-an-Electric-Water-Heater
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EV Discount Campaign: CPAU offered a couple Electric Vehicle (EV) and e-Bike Discount Campaigns during fiscal year 2024
quarter one through the quarter two. Through this program we were able to offer discounts of $3,000 - $7,000 on select
EV models, making it even easier and more economical to drive and bike electric.
Qmerit: CPAU has partnered with Qmerit to launch a program for Palo Alto homeowners to receive free online estimates
from local, vetted contractors for EV charger installations. Online estimates will include permitting, inspections, and
installation costs. Qmerit will assist with customer awareness of and education about embracing grid-friendly options,
such as Level 1 and low-voltage Level 2 charging options.
SunShares: For the eighth year in a row, the City of Palo Alto participated in Bay Area SunShares, a solar and battery
storage group-buy program administered by Building Council for Climate Change (BC3). As a SunShares program partner,
CPAU promotes the program which offers discounted prices from two installers that have been vetted and selected
through an RFP process: Solar Union and Solar Technologies. The program runs for a limited time: registration opened on
September 1 and closed on November 15. More information can be found on cityofpaloalto.org/sunshares26
Energy Prices: Compared to this time last year, in state gas storage is in better shape and forward gas prices have come
down about $2/MMBtu, so winter gas bills (and wholesale electric costs) will hopefully be back in the normal range. In
accordance with Council direction, staff did purchase some insurance against higher prices for the months of December –
February. CPAU is working on a communication strategy to be transparent with customers and clear about what to expect
in terms of utility bill costs this winter.
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 are typically delivered in the fall. www.cityofpaloalto.org/safeutility27
Program and Event Support: CPAU hosted many events and workshops in 2023 to spread awareness about customer
programs for energy and water efficiency, electric vehicles (EV), electric bikes (including special discount campaign for EVs
and e-Bikes), heat pump water heaters, and beneficial electrification. The communications team supported these efforts
through comprehensive outreach via website, email newsletters, advertisements, and social media campaigns.
www.cityofpaloalto.org/workshops28
26 Sunshares https://www.cityofpaloalto.org/Departments/Utilities/Sustainability/Solar-in-Palo-Alto/Residential-Solar/SunShares
27 Safe Utility https://www.cityofpaloalto.org/Departments/Utilities/Utilities-Services-Safety/Safety
28 Work Shops https://www.cityofpaloalto.org/Departments/Utilities/Utilities-Workshops-and-Webinars
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8 Legislative, Regulatory and Industry Activity
A summary the CY 2023 California Legislative session activity is provided here in the California Municipal Utility Association
2023 Legislative Session Report29.
29 California Municipal Utility Association 2023 Legislative Session Report
https://www.cityofpaloalto.org/files/assets/public/v/1/utilities/utilities-advisory-
commission/cmua_2023_legislative_session_report.pdf
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Appendices
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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 #1224030).
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
Palo Alto executed the following Electric and Gas transaction in Q1 of FY 2024.
Figure 31: Electric Energy Deals
Delivery Month Deal Type Total Energy
(MWh)
Price
($/MWh)
Oct’23 Purchase 11,160 79
Nov’23 Purchase 10,815 79
30 Staff Report 12240 – https://www.city of paloalto.org/files/assets/public/v/3/agendas-minutesreports/reports/city-manager-reports-cmrs/year-
archive/2021/06-21-21-id-12240.pdf
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Figure 32: Electric Resource Adequacy Deals
Delivery Month Deal Type Avg RA
(MW-mo)
Price
($/kW-mo)
Jan’24-Dec’24 Sale 15.08 4.3
Jan’24-Dec’24 Sale 57.01 24.50
Jan’24-Dec’24 Sale 3.75 37.54
Jan’24-Dec’24 Buy 30 7.25
9.4 Electric Market Exposure
The chart below shows the City’s electric supply market exposure and committed purchases and sales to cover exposed
positions. Additional purchases and sales will be executed for FY 2024 and FY 2025 in the coming months.
Figure 33: Electric Load Resource Balance, FY 2024 - 2026
9.5 Transaction Compliance
There are no transaction exceptions or violations to report.
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10 Appendix B: Staffing and Vacancies
As of Q1 FY 2024, the Utilities Department has 44 vacant positions out of 257 authorized positions or a 17% vacancy rate.
Below is a breakdown of the vacancies by division. Utilities has designated three HR liaisons from Utilities Administration
to assist HR with some of the recruitments. With the three HR liaisons, CPAU will be able to post positions, schedule
interviews, and make job offers at a faster pace after they are fully trained. CPAU have been attending engineering career
fairs at Sacramento State University, Cal Poly San Luis Obispo, and San Jose State University. Since the inception of the HR
liaison program, Utilities has made steady progress in reducing the number of vacancies from 58 in Q1 2023 to 44 in Q1
2024 or a 24% decrease year over year. If we exclude the four newly added Fiber positions in FY 2024, Utilities has filled
18 vacant positions since prior year which does not include the number of internal promotions within Utilities.
Figure 34: Utilities Vacancies and Position Movements by Division, up to Q1 FY 2024
Division
Authorize d
FTEs
Vacant
FTEs
Active
Re cruitments Vacancy %
Admi nistrati on 20.5 3 2 15%
Custome r Servi ce 1 23 4 1 17%
Fiber2 4 4 0 100%
Re source Manage ment 25.5 2 2 8%
Electri c Ope rations 69 17 15 25%
Electri c Engi ne e ri ng 21 6 6 29%
WGW Ope rati ons 70 5 5 7%
WGW Engi ne eri ng 24 3 3 13%
Total 257 44 34 17%
1 3 of the mete r readi ng-rel ated vacanci e s in Custome r Se rvi ce are frozen
2 4 vacant fiber posi tions for FTTP wil l be recrui te d in 2024
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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 Utilities were scheduled for this report.
Gas Utility Asset Management Overview
Executive Summary
•The City provides safe and reliable gas service to residents and
businesses.
•The City meets or exceeds minimum federal safety regulatory
requirements (examples: Accelerated leak survey program and
Cathodic Protection (CP) maintenance requirements).
•The Gas Main Replacement program continues to replace Polyvinyl
Chloride (PVC) gas mains, corroded steel pipeline material, and
services that have exceeded operational life expectancy.
•The City has replaced approximately 41,000 LF of gas main pipeline and
approximately 1,500 gas services in the last five (5) years.
•The City annually inspects and maintains gas distribution assets.
•As of November 2023, the City is at 12% implementation of Advanced
Metering Infrastructure (AMI) and Meter Data Management (MDM).
Infrastructure Planning
Key infrastructure replacement efforts in the next five years include:
•Replace PVC and corroded steel pipelines with polyethylene pipes for
gas mains and services through the application of federal grant
•Upgrade the VA hospital meter sets
•Upgrade security system cameras at the four (4) natural gas receiving
stations.
•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
Asset Management Goals
What are our goals?
-Build a calibrated hydraulic gas system
model and utilize the calibrated gas model to
prioritize future pipeline replacement
projects.
-Minimize gas service interruption during
planned repairs, tie-ins, and installation by
following gas handling procedures.
-Invest in CIP replacements to reduce
maintenance costs and extend gas system
life.
-Increase routine maintenance on aging
pipelines to maximize asset life to keep costs
down
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•Staff assigned to New Construction:
Install new gas mains, services, valves, and meters that require extensive maintenance. Support Capital
Improvement Projects (CIP) and install bollards for meter protection.
•Staff assigned to System Monitoring:
o Monitor and manage the system continuously to ensure it operates safely and maintains 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:
o Emergency Valve Exercise: Regularly exercise valves to meet regulatory requirements and ensure proper
operation.
o City Gate Stations: Annual inspection of the four (4) gas receiving stations.
o Cathodic Protection: Take monthly pipe-to-soil reads to monitor cathodic protection levels on steel
pipelines.
o Mobile and Walk Leak Survey: Perform annual mobile leak surveys of the gas distribution mains and
biennial walking leak surveys of gas services to detect underground gas leaks and check for atmospheric
corrosion on aboveground pipelines.
o Patrolling: Perform quarterly inspections of gas pipeline bridge spans, railroad, and creek crossings.
•Staff assigned to Planned Maintenance:
Repair and replace gas distribution system pipelines, 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.
FTE 3.80, 14%,
UNPLANNED MAINTENANCE
FTE 8.62, 31%
SYSTEM INSPECTION (REGULATORY)
FTE 11.44, 41%
NEW CONSTRUCTION
FTE 3.73, 13%
PLANNED MAINTENANCE FTE 0.28, 1%
SYSTEM MONITORING
Figure 1: FTE (Full-time equivalent) Breakdown by Maintenance
Category
TOTAL FTE: 27.87
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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
ESD valves within the gas receiving stations are exercised
annually, and maintenance is performed once a year. Valves are
inspected, cleaned, exercised, maintenance performed, and
greased. Emergency valves are brass-tagged for identification.
ESD key valves are activated remotely and restored to ensure
operation. There are 110 valves were maintained and exercised
in April 2023.
Non-Emergency Valve
Inspection and Exercise
The valves are inspected and exercised once every five years by
the maintenance department. Valves are exercised, greased, and
cleaned to ensure the valve nut is accessible and operable.
Operations plan a program to locate and expose paved valve
cover lids. The City is behind on the schedule of valve inspection
and exercise.
System Monitoring SCADA provides continuous system monitoring and alerts. 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 The four City gate stations' regulators are annually maintained,
and the aboveground piping and fences are visually inspected.
Every station has dual runs with two regulators per run for
redundancy, a working regulator, and a backup (monitoring)
regulator, alternating each year.
Gas Supply Monitoring The 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. Installation of the City flow
meters and gas quality monitoring equipment for each station
would allow the City to double-check PG&E's gas volumes and
quality.
Pressure Monitoring There are currently ten pressure monitoring points around the
City of Palo Alto, one at each of the 4 City gate stations and six at
the outer ends. Operations are maintaining the pressure
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monitoring points in the City. Additional pressure transducers for
test stations would improve reliability in emergencies.
Large Commercial Gas Meter
Maintenance (Includes VA
Hospital)
Large commercial gas meters consist of rotary, turbine, and
ultrasonic meter types. These meters are replaced on a 10-year
cycle, with some being replaced sooner due to non-compatibility
with AMI. Additional tasks include verification of all information
and performing maintenance.
Gas Curb Meter Maintenance Gas meter assemblies are visually inspected. Gas meter
assemblies that are located in utility boxes are visually inspected.
The meters are inspected if there is a leak, and the condition of
the box is checked once every three years.
Residential and Commercial
Gas Meter Maintenance
Meters are inspected and maintained every two years.
Maintenance includes repainting as needed, a leak survey, and
an aboveground visual assessment of the gas meter set.
Gas Inspection Along Bridges The City has 30 bridges and crossings for gas main maintenance.
Visual inspection (pipeline markers, pipeline support condition,
wrap condition, etc.) and leak surveys are performed quarterly.
Recoating of the Ross Road gas main and abandonment of
exposed steel gas mains along bridges are planned as part of
future projects.
Unplanned Maintenance There are 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 or other system emergencies after hours. To
remain in compliance, the staff is pulled to respond to
emergencies, resulting in planned work delays. The City is
currently experiencing extended lead times for material.
Cathodic Protection
Maintenance and Monitoring
Elecsys provides 24-hour rectifier monitoring and alerts to the
City's cathodic operators with 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 are 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. Paradigm software will be replaced in the near
future.
An apprenticeship program for the cathodic protection crew is
suggested to ensure a sufficient supply of trained staff.
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Table 2: Condition of Gas System Assets
Asset Class Quantity Maintenance Asset Condition
Gas Receiving
Stations (City
Gate Station)
4 Annual
maintenance
One (1) station
undergoes
maintenance
each quarter.
The City's meter technicians perform standard maintenance.
•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
Six (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.
•Five (5) of the six (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. Pressure
monitoring points along Scripps Ave will be upgraded.
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.
Rectifier and
Galvanic
40
Rectifiers
& 10
Galvanic
systems
Monthly
maintenance
•Rectifier systems are in good condition and 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
•Program exchanges regulators on a 20-year program. Large
regulators are visually inspected and maintained every two
years.
•The City plans to establish a program to replace large orifice
regulators with properly sized regulators.
Gas Meters ~24500 •Program exchanges large meters (630cfh & larger) every
ten years and smaller meters every 17-20 years.
•Maintenance of curb meters and residential meters is in
good standing.
•Maintenance for large commercial gas meters aims 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 the alpha stage.
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Risers ~14800 Atmospheric
Survey
Maintenance
The survey is
performed
every two years.
•The risers are in good condition. They are inspected during
the biennial leak survey.
•As part of the biennial leak survey responsibilities, they are
visually inspected. Maintenance & ACP are performed on an
as-needed basis.
EFV (Excess
Flow Valve)
~8600 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
~3400
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 the valve
nut is accessible.
Gas Main and
Services
~211 miles
of main
~17,200
services
Mobile and
Walking Leak
Survey
•The ongoing Gas Main Replacement program, prioritizing
leak-prone seismically susceptible PVC and corrosion-prone
steel pipelines, continues as planned.
•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. City crews will replace these
remaining services as their moratoriums expire.
•Once ready, the calibrated hydraulic gas system model will
prioritize future pipeline replacement projects.
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 must be trained to perform repairs handled
by the City's SCADA tech or third-party contractors.
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FIGURE 2: 2022 Gas Maintenance and Inspection Charts
GAS VALVES
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CATHODIC PROTECTION
20
21 20 21 20 21 20
21 20 21 20 21
21
41
0
41
0
41
0
41
0
41
0
41
00
5
10
15
20
25
30
35
40
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Pipe-to-Soil
Reads
Monthly
Goal
Bimonthl...
Rectifier Tests
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CITY GATE MAINTENANCE
PIPELINE PATROL MAINTENANCE
UNPLANNED MAINTENANCE
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PLANNED MAINTENANCE (MONITORED LEAKS WITH PLANNED REPAIRS)
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GAS METERS
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12 Appendix D: Utilities Customer Program Descriptions
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.
12.1 Customer Programs Overview
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.
12.1.1 Energy and Water Efficiency
Residential Energy Efficiency and Water Conservation Programs
The Home Efficiency Genie program provides 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.
During FY 2023 the Genie team provided 47 comprehensive in-home assessments and 26 virtual assessments. Those
assessments also included 38 HERA to help residents evaluate their homes for electrification upgrade planning.
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. Multiple projects are being scheduled for REAP customers to take
advantage of the free efficiency upgrades, with projects including building envelope improvements, furnace replacements
with high efficiency models, and lighting upgrades to LEDs. Recently a new measure for high-efficiency toilets (HETs) was
added.
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. Recently a new measure for high-efficiency toilets (HETs) was added.
CPAU partners with Valley Water to offer a robust portfolio of water conservation programs and rebates31 for residents
and businesses.
Commercial & Industrial Energy Efficiency Program
The Commercial and Industrial Energy Efficiency Program (CIEEP) offers free energy audits to businesses. These audits help
businesses identify areas where they can save energy, such as improving lighting, controls, occupancy sensors,
refrigeration systems, HVAC systems, and other equipment. Furthermore, CIEEP’s can help provide technical assistance to
businesses to help them implement energy efficiency measures. This can include suggestions that help customers develop
energy efficiency plans, provide information on energy-efficient technologies, and connecting businesses with contractors.
Business Customer Rebates, formerly Commercial Advantage Program
The Business Customer Rebate (BCR) remains the primary program for customers to apply for rebates for energy efficiency
and electrification projects installed at customers sites. City of Palo Alto Utilities (CPAU) offers rebates to commercial,
31 Rebates https://www.cityofpaloalto.org/Departments/Utilities/Sustainability/Ways-to-Save
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industrial, and public sector customers to upgrade their equipment to energy-efficient products. In May 2022, BCR was
expanded to offer electrification rebates to incentivize customers to retrofit gas space heating, water heating and cooking
equipment with efficient electric alternatives.
Business Energy Advisor
The Business Energy Advisor program provides consultation and on-site assessments from the Business Energy Advisor
with custom recommendations for businesses to help them lower utility costs with more efficient equipment.
12.1.2 Building Electrification
Full-Service Heat Pump Water Heater Program
This program, launched in early 2023, aims to make it easier and more affordable for residents to switch to a heat pump
water heater (HPWH). The program has a goal of installing 1,000 HPWHs in one year, by providing a prescreened
contractor to install HPWH at single family homes at a cost comparable to a gas water heater installation and offering on-
bill financing to lower the upfront cost. Customers also have the option to choose their own contractors and apply for a
$2300 rebate if the equipment meets the program criteria and has been permitted.
Business Electrification Technical Assistance Program (BE TAP)
For commercial customers, staff partnered with CLEAResult in the launch of the Business Electrification Technical
Assistance Program (BE TAP) in August 2022. This program offers free electrification assessment and technical assistance
to implement building electrification projects to a variety of business types including but not limited to hotels, restaurants,
churches, and office buildings. To date, program outreach activities include call campaigns, e-newsletters, in person door-
to-door outreach, and utility bill inserts.
12.1.3 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.
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: Most middle-income and low to moderate-income residents in Palo Alto live in MF housing. Of the 11,000
households living in MF, 23% have annual income levels which are under 400% Federal Poverty Levels. 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 and slower to move
customer segment, making meaningful use of available City funding sources for EV promotion.
•Target Customer Segment: MF property owners, Homeowners Associations (HOAs), 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)
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o Incentives (both for charging equipment and distribution upgrades)
•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. Also, encourage the installation of low-power Level 2 chargers when appropriate as a grid-friendly
strategy to increase EV charging options for as many EVs as possible.
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, engineering reviews, and design proposals, culminating in the landlord receiving
contractor bids, followed by assistance submitting a building permit, applying for incentives and project management
of the installation. Completed projects have taken up to 2 years to reach completion.
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. Currently looking into lowering rebate levels due to increased demand for rebates
and a decreased income from Low Carbon Fuel Standard credits (see 6.2.1). The program is also considering putting a
time limitation on fund reservations, to accelerate projects reaching completion.
California Electric Vehicle Infrastructure Project
•Goal: Facilitate and incentivize the installation of EV chargers at commercial sites.
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.
City-Owned EV Chargers
Goal: Install EV Charging Infrastructure for the public as well as City-fleet.
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
Many older properties in Palo Alto, especially multifamily buildings, have limited electric capacity to accommodate EV
chargers and building electrification. Yet, there is a nationwide transformer supply shortage, potentially delaying customer
EV projects. In the meantime, 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 as well as proposing designs utilizing existing electric
capacity.
12.1.4 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:
•Low Carbon Fuel Standard (LCFS) Program: The City participates in the California Air Resources Board (CARB) LCFS
program, receiving credits for the provision of low-carbon fuels (such as clean electricity and compressed natural
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gas) and must use the revenues from the sale of these credits for programs and other efforts promoting low-
carbon vehicle adoption.
•Cap and Trade Program: The City’s electric and gas utilities are required to participate in the State’s cap and trade
program, but these utilities receive some of the revenue from the auction of allowances for the program. The
revenue must be used for emissions-reducing activities.
•Public Benefits Funds: Locally owned municipal utilities must collect a surcharge from their electric utility
customers under section 385 of the Public Utilities Code (there is a similar requirement for gas utilities) to be used
on cost-effective energy efficiency and conservation, low-income programs, renewable energy, and research and
development.
The amount of revenue currently held in reserve for each revenue source and the projections for future revenue are
shown below.
Figure 35: Potential Emissions Reduction Funding Sources
Reserves ($000) Projected Revenues ($000)
(July 1, 2023)FY
2023
FY
2024
FY
2025
FY
2026
LCFS Program 7,000 935 1,200 1,400 1,600
Cap and Trade (Electric)1,189 3,027 3,016 2,992 2,999
Cap and Trade (Gas)6,731 2,102 3,074 3,487 3,898
Public Benefits 3,890 3,841 4,780 5,076 3,729
Expenditures for each revenue source are as follows:
•LCFS revenues have been used primarily to facilitate the installation of EV chargers in multi-family buildings and
are expected to be used that way in the future unless the City’s priorities shift. Some has been used for general
promotion of EVs.
•Cap and Trade revenues have been used to purchase renewable energy and for the Advanced Heat Pump Water
Heater pilot. More use of these revenues for electrification programs is expected in the future, though no specific
approvals have been sought yet.
•Public Benefit funds are used for energy efficiency (including low-income programs) and building electrification.
APPROVED By:
Dean Batchelor, Director of Utilities
Staff: Eric Wong, Resource Planner