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Home My WebLink AboutRESO 9913 1 6055428 Resolution No. 9913 Resolution of the Council of the City of Palo Alto Amending the Electric Supply Portfolio Carbon Neutral Plan and the Electric Utility Reserves Management Practices R E C I T A L S A. The City of Palo Alto (the “City") provides electricity to residential and commercial customers located within its jurisdictional boundary. B. In an effort to combat climate change, in December 2007 the City adopted the Climate Protection Plan, which set aggressive greenhouse gas (“GHG”) emission reduction goals to be achieved by the year 2020. C. Further to its GHG emissions reduction goals, in November 2016 the City adopted a Sustainability and Climate Action Plan (“S/CAP”), and in December 2017 the City adopted a 2018-2020 Sustainability Implementation Plan (“SIP”). D. In order to achieve these aggressive GHG emissions reduction goals, in March 2013, through Resolution No. 9322, the City adopted a Carbon Neutral Plan for the electric supply portfolio, with a goal of achieving carbon neutrality by 2013. E. In the 2013 Carbon Neutral Plan, the City defined carbon neutrality based on an annual accounting of the City’s load and its carbon neutral electric resources: an electric supply portfolio that “will demonstrate annual net zero greenhouse gas (GHG) emissions, measured at the Citygate, in accordance with The Climate Registry’s Electric Power Sector protocol for GHG emissions measurement and reporting.” At the time this definition of carbon neutrality was adopted, this was the most granular accounting approach feasible (given the lack of hourly grid emissions data) or necessary (given the small amount of solar capacity installed at that point, and the resulting emissions profile of grid electricity). F. Based on this definition of carbon neutrality, the City has achieved its Carbon Neutral Plan objectives each year starting in 2013, primarily through its long-term contracts for in-state hydroelectric and Renewable Portfolio Standard (“RPS”) eligible resources, with some reliance on RPS-eligible unbundled renewable energy certificates (“RECs”) for 2013-2015. G. Due to limitations on the use of unbundled RECs (“Bucket 3 RECs”) for compliance with the state’s RPS mandate (only 10% of a utility’s RPS procurement may consist of Bucket 3 RECs), a significant financial premium currently exists for in-state bundled renewable energy resources (“Bucket 1 RECs”). DocuSign Envelope ID: F9EA73E0-A6BC-4B0E-A684-E82C837C7B38 2 6055428 H. As a result of its pursuit of its Carbon Neutral Plan objectives, the City’s electric supply portfolio currently far exceeds the procurement requirements of the state’s RPS mandate, and all of the City’s current RPS resources are classified as Bucket 1 RECs. I. Due to the impacts of the county and state stay-at-home orders put in place since March 2020, in response to the COVID-19 pandemic, the City’s electric utility retail sales volumes (and revenues) have declined approximately 10% from baseline levels, which has put a strain on the City’s electric utility financial reserves. J. Through Resolution 9487, adopted in January 2015, the City established a policy on the use of revenue from the sale of allowances freely allocated to the City’s electric utility under the state’s Cap and Trade Program (“Cap and Trade Revenue Use Policy”). This policy authorizes the City Manager or their designee to use these allowances and allocate the resulting revenue to certain approved types projects or expenditures, in compliance with CARB regulations. K. Consistent with the City’s Cap and Trade Revenue Use Policy, for Fiscal Years 2021 and 2022, an amount equivalent to at least one-third of the revenues earned from the REC Exchanges would be allocated from the City’s Cap and Trade Reserve to local decarbonization efforts; thereafter the City would prioritize local decarbonization efforts with these funds. The Council of the City of Palo Alto does hereby RESOLVE, as follows: SECTION 1. The Council approves the updated Electric Supply Portfolio Carbon Neutral Plan (attached, with changes shown in redline, as Exhibit A), which modifies the definition of carbon neutrality to use an hourly carbon emissions accounting standard; authorizes the exchange of bundled RECs from the City’s long-term renewable resources (Bucket 1 RECs) for RPS-eligible, unbundled RECs (Bucket 3 RECs), to the maximum extent possible, while maintaining compliance with the state’s RPS regulations in order to minimize electric supply portfolio costs (“REC Exchanges”); and authorizes the purchase of RPS-eligible, unbundled RECs (Bucket 3 RECs) as needed to neutralize any residual emissions resulting from the difference between emissions calculated under an annual accounting and hourly accounting methodology for calendar years 2020 through 2024. SECTION 2. The Council approves the creation of a Cap and Trade Program Reserve in the Electric Fund which will hold revenues from the sale of carbon allowances freely allocated to the electric utility under the State’s Cap and Trade Program. SECTION 3. The Council directs staff to return to Council in 2022 to review the authorization to minimize electric supply portfolio costs via REC Exchanges; SECTION 4. The Council directs staff to return to Council by the end of 2024 with a DocuSign Envelope ID: F9EA73E0-A6BC-4B0E-A684-E82C837C7B38 3 6055428 review of the Carbon Neutral Plan to evaluate the effectiveness of these policy changes and to modify them if necessary (with a particular focus on reviewing the use of Bucket 3 RECs to neutralize any residual emissions resulting from the switch to an hourly emissions accounting methodology). SECTION 5. The Council finds that the adoption of this resolution updating the City’s Electric Supply Portfolio Carbon Neutral Plan is not subject to California Environmental Quality Act (CEQA) review because it is an administrative government activity that will not result in any direct or indirect physical change to the environment (CEQA Guidelines section 15378(b)(5)). INTRODUCED AND PASSED: August 24, 2020 AYES: CORMACK, DUBOIS, FILSETH, FINE, KNISS, KOU, TANAKA NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Assistant City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services DocuSign Envelope ID: F9EA73E0-A6BC-4B0E-A684-E82C837C7B38 EXHIBIT A 1 Adopted by City Council on March 4, 2013 Revised by City Council on August 24, 2020 City of Palo Alto Utilities Electric Supply Portfolio Carbon Neutral Plan 1. Carbon Neutral Definition A carbon neutral electric supply portfolio will demonstrate annual net zero greenhouse gas (GHG) emissions, measured at the Citygate1, by applying the average hourly carbon emissions intensity of the electricity on the CAISO grid to the City’s net load for each hour of the year. 2. Carbon Neutral Plan Objective Reduce the City of Palo Alto’s overall community GHG emissions by achieving carbon neutrality for the Electric Supply Portfolio starting in calendar year 2013 within an annual rate impact not to exceed 0.15 cents per kilowatt-hour (₵/kWh) primarily through the: 1) engagement of customers to increase energy efficiency; 2) expansion of long-term renewable resource commitments; 3) promotion of local renewable resources; 4) continued reliance on existing hydroelectric resources; and 5) meeting short-term balancing requirements and/or neutralizing residual carbon through the use of short-term purchases of renewable resources and/or renewable energy certificates (RECs). 3. Resource Strategies a. Energy Efficiency i. Continue to pursue energy efficiency strategies as identified in the Council- approved ten-year Energy Efficiency Plan. b. Long-term Renewable Resources i. Continue to pursue the City’s Renewable Portfolio Standard (RPS) goal to purchase renewable energy to supply at least 60% of retail sales by 2030 while ensuring that the retail rate impact of these purchases does not exceed 0.5 ₵/kWh. ii. Continue to pursue local renewable resources through the Palo Alto CLEAN program. iii. Pursue additional long-term renewable resources (beyond the RPS goals) to achieve a target of 100% carbon-free resources based on average year hydroelectric generation. 1 Citygate is the location of the City’s main meter where the City interconnects to the Pacific Gas and Electric transmission system. Emissions associated with of the output of the locally sited fossil gas fired combustions units (COBUG), while not measured at Citygate, will be neutralized. DocuSign Envelope ID: F9EA73E0-A6BC-4B0E-A684-E82C837C7B38 EXHIBIT A 2 c. Short-term Renewable Resources and Renewable Energy Certificates i. Minimize electric supply portfolio costs by exchanging bundled RECs from the City’s long-term renewable resources (Bucket 1 RECs) for RPS-eligible, unbundled RECs (Bucket 3 RECs) to the maximum extent possible while maintaining compliance with the state’s RPS regulations; ii. For calendar years 2020 through 2024, procure additional short-term renewables or RPS-eligible, un-bundled RECs (Bucket 3 RECs) as needed to achieve carbon neutrality based on actual load and resources; iii. Neutralize anthropogenic GHG emissions associated with the City’s purchase of renewable resources with RPS-eligible unbundled-RECs (Bucket 3 RECs). d. Banking and Truing Up i. In the event that there are surplus renewables beyond the City’s load in a particular year, bank RECs from qualifying renewables from that year to minimize the need for purchasing RECs in subsequent years. ii. For calendar years 2020 through 2024, neutralize residual emissions that result from applying an hourly emissions accounting methodology, rather than a net annual generation methodology, with RPS-eligible unbundled-RECs. 4. Hydroelectric Resources a. Continue to preserve and advocate for existing carbon-neutral hydroelectric generation resources that provide approximately 50% of average year resource needs. b. Plan for and acquire carbon neutral resources assuming average hydroelectric conditions going forward. c. Under adverse hydroelectric conditions, procure RPS-eligible unbundled-RECs to achieve carbon neutrality up to the 0.15 ₵/kWh rate impact limit and seek Council direction if carbon neutrality cannot be achieved within the rate impact limit. d. Under favorable hydroelectric conditions, where carbon neutral resources are expected to be surplus to needs, even after allowable banking, then pursue selling short-term renewable energy, or the renewable attributes, associated with one or more carbon- neutral resources in the portfolio. 5. Financial and Rate Payer Impacts a. In addition to the RPS annual rate impact limit of 0.5 ₵/kWh, the cost of achieving carbon neutrality shall not exceed 0.15 ₵/kWh. b. Revenues collected from surplus energy sales related to hydroelectric resources under favorable conditions (e.g. wet years), will be maintained within reserves to adjust for the cost of achieving carbon neutrality under adverse hydroelectric years. c. To the extent available and allowable, revenues from the auction of cap-and-trade allowances may be used to fund resources acquired to meet the carbon neutrality goals. 6. Reporting and Communication a. Develop a communication plan for stakeholders to inform them of the City’s efforts towards achieving a carbon neutral electric supply. DocuSign Envelope ID: F9EA73E0-A6BC-4B0E-A684-E82C837C7B38 EXHIBIT A 3 b. Provide customers a report of the electric supply portfolio’s carbon content to supplement the mandated Power Content Label. c. Inform large commercial and/or corporate customers of the City’s carbon neutral portfolio and its relevance to their individual corporate sustainability goals. DocuSign Envelope ID: F9EA73E0-A6BC-4B0E-A684-E82C837C7B38 Certificate Of Completion Envelope Id: F9EA73E0A6BC4B0EA684E82C837C7B38 Status: Completed Subject: Please DocuSign: RESO 9913 Revised Carbon Neutral Plan.docx, RESO 9913 Exhibit A Revised Carbon... Source Envelope: Document Pages: 6 Signatures: 6 Envelope Originator: Certificate Pages: 5 Initials: 0 Kim Lunt AutoNav: Enabled EnvelopeId Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) 250 Hamilton Ave Palo Alto , CA 94301 kimberly.lunt@cityofpaloalto.org IP Address: 199.33.32.254 Record Tracking Status: Original 9/9/2020 11:16:20 AM Holder: Kim Lunt kimberly.lunt@cityofpaloalto.org Location: DocuSign Security Appliance Status: Connected Pool: StateLocal Storage Appliance Status: Connected Pool: City of Palo Alto Location: DocuSign Signer Events Signature Timestamp Amy Bartell Amy.Bartell@CityofPaloAlto.org Assistant City Attorney City of Palo Alto Security Level: Email, Account Authentication (None) Signature Adoption: Pre-selected Style Using IP Address: 199.33.32.254 Sent: 9/9/2020 11:21:41 AM Viewed: 9/9/2020 11:50:52 AM Signed: 9/9/2020 11:51:03 AM Electronic Record and Signature Disclosure: Accepted: 7/16/2015 5:52:40 AM ID: d8ecb53d-ef81-4016-8886-1560c48de42a Kiely Nose kiely.nose@cityofpaloalto.org Director, Administrative Services/CFO City of Palo Alto Security Level: Email, Account Authentication (None) Signature Adoption: Uploaded Signature Image Using IP Address: 174.193.144.149 Sent: 9/9/2020 11:51:06 AM Resent: 9/14/2020 9:16:21 AM Viewed: 9/14/2020 3:28:56 PM Signed: 9/14/2020 3:29:41 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign Dean Batchelor Dean.Batchelor@CityofPaloAlto.org Director of Utilities Security Level: Email, Account Authentication (None)Signature Adoption: Pre-selected Style Using IP Address: 199.33.32.254 Sent: 9/14/2020 3:29:44 PM Viewed: 9/14/2020 3:49:21 PM Signed: 9/14/2020 3:49:33 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign Ed Shikada ed.shikada@cityofpaloalto.org Ed Shikada, City Manager City of Palo Alto Security Level: Email, Account Authentication (None) Signature Adoption: Pre-selected Style Using IP Address: 199.33.32.254 Sent: 9/14/2020 3:49:36 PM Viewed: 9/14/2020 6:08:03 PM Signed: 9/14/2020 6:09:03 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign Signer Events Signature Timestamp Adrian Fine adrian.fine@cityofpaloalto.org Security Level: Email, Account Authentication (None) Signature Adoption: Pre-selected Style Using IP Address: 108.228.10.70 Sent: 9/14/2020 6:09:06 PM Viewed: 9/14/2020 7:45:42 PM Signed: 9/14/2020 7:45:52 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign Beth Minor Beth.Minor@CityofPaloAlto.org City Clerk City of Palo Alto Security Level: Email, Account Authentication (None) Signature Adoption: Pre-selected Style Using IP Address: 199.33.32.254 Sent: 9/14/2020 7:45:55 PM Viewed: 9/14/2020 8:00:49 PM Signed: 9/14/2020 8:01:05 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Witness Events Signature Timestamp Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 9/14/2020 7:45:55 PM Certified Delivered Security Checked 9/14/2020 8:00:50 PM Signing Complete Security Checked 9/14/2020 8:01:05 PM Completed Security Checked 9/14/2020 8:01:05 PM Payment Events Status Timestamps Electronic Record and Signature Disclosure