Loading...
HomeMy WebLinkAboutStaff Report 2412-39561.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on December 4, 2024 Item No. 1. Page 1 of 1 Utilities Advisory Commission Staff Report From: Alan Kurotori, Utilities Chief Operating Officer Lead Department: Utilities Meeting Date: January 7, 2025 Report #: 2412-3956 TITLE Approval of the Minutes of the Utilities Advisory Commission Meeting Held on December 4, 2024 RECOMMENDATION Staff recommends that the UAC consider the following motion: Commissioner ______ moved to approve the draft minutes of the December 4, 2024 meeting as submitted/amended. Commissioner ______ seconded the motion. ATTACHMENTS Attachment A: 12-04-2024 UAC Minutes AUTHOR/TITLE: Kaylee Burton Utilities Advisory Commission Minutes Approved on: Page 1 of 22 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF DECEMBER 4, 2024 REGULAR MEETING CALL TO ORDER Vice Chair Mauter called the meeting of the Utilities Advisory Commission (UAC) to order at 6:02 PM. Present: Vice Chair Mauter, Commissioners Croft, Gupta, Metz, and Tucher Absent: Chair Scharff and Commissioner Phillips AGENDA REVIEW AND REVISIONS None ORAL COMMUNICATIONS 1. Dave Warner encouraged the Commission to read his letter to the UAC that contained data on the design drought and how it might relate to rates. 2. David Coale sent information to the UAC regarding grid modernization and electrification, including an attachment from the CPUC that outlined two helpful ideas. Mr. Coale suggested that the billing system show the maximum amount of current each month or the total for the year, which would help customers make historical capacity calculations and reduce unnecessary service panel upgrades. Most electrification of homes could be done with a 100-amp panel and using the Watt Diet to make judicious choices on appliances. It was costly and disruptive to upgrade underground areas and place underground transformers aboveground. The whole-home electrification pilot program could be set up to test these ideas and other advanced technologies. Commissioner Tucher saw Mr. Coale’s letter in the packet and asked staff to comment. Dean Batchelor, Director of Utilities, stated they were looking at panel sizes as they were working on the first phase. To perform capacity calculations, customers in those areas were being asked if they planned to add EV chargers, a heat pump water heater, or whole home. Aboveground 75 kVA transformers will probably be needed for the underground sections. Commissioner Tucher wondered if there had been an increase of people upsizing their panels in Palo Alto, and if it was because they needed to or if they were building overcapacity too soon. Mr. Batchelor noted an uptick in 400-amp panels because customers wanted to put in dual chargers with fast Utilities Advisory Commission Minutes Approved on: Page 2 of 22 charge in their homes and wanted to add solar. Mr. Batchelor had seen an increase in people who had 200-amp panels going to 400-amp panels. Mr. Batchelor had not seen many first adopters wanting to change their 100-amp panel. APPROVAL OF THE MINUTES ITEM 1: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on November 6, 2024 Vice Chair Mauter invited comments on the November 6, 2024, UAC draft meeting minutes. Public Comment: 1. Lisa Madden does not have a computer and wondered how she could research a commissioner’s background. Ms. Madden asked if there was a source of media used by the UAC to voice their decisions. Ms. Madden suggested that the City’s website have instructions on how the public could obtain a hard copy of the minutes. Dean Batchelor, Director of Utilities, offered to have staff place copies of approved minutes in a file folder on the back table of the Council Chambers. Commissioner Croft proposed an amendment to the November 6, 2024, UAC draft meeting minutes, Packet Page 24. Instead of: At the Yosemite Visitor Center, Commissioner Croft recalled seeing tree rings demonstrating long droughts; Commissioner Croft proposed it read: In published literature, she found reports of tree rings dating from 900 AD through now, showing a 21-year drought in the Klamath River system, two 10-year droughts in the Sacramento River system, and a 13-year drought in the San Joaquin River system. Commissioner Croft supported investment to identify feasible solutions for longer droughts and determine lead time to implement them. Vice Chair Mauter asked Commissioner Croft to give her proposed amendment to Kaylee Burton, Utilities Administrative Assistant. Commissioner Tucher will email his proposed amendments. On Page 22, 1.3 billion acre-feet was million. On Page 24, instead of: In 2017, SFPUC had enough water to last 14 years; Commissioner Tucher proposed changing it to: In 2017, SFPUC was entitled to enough water but did not have a way to store it. Commissioner Tucher wondered how to address next steps on last month's water discussion. Vice Chair Mauter suggested discussing it under Future Topics for Upcoming Meeting and Review of the 12-Month Rolling Calendar. ACTION: Commissioner Gupta moved to approve the UAC draft meeting minutes of November 6, 2024, as amended by Commissioners Croft and Tucher. Commissioner Tucher seconded the motion. Utilities Advisory Commission Minutes Approved on: Page 3 of 22 The motion carried 5-0 with Vice Chair Mauter, Commissioners Croft, Metz, Gupta, and Tucher voting yes. UTILITIES DIRECTOR REPORT Dean Batchelor, Director of Utilities, delivered the Director's Report. Hanover Substation Upgrades: Over the past year, CPAU partnered with Tesla to upgrade electrical equipment at the Hanover Substation. The City and Tesla agreed to split the cost in half. The City was waiting to receive final invoices from Tesla. Substation upgrades were needed to replace aging infrastructure and increase electrical capacity to facilitate the City’s electrification initiatives, benefitting all utility users as well as meeting Tesla’s energy needs. The project was completed on schedule. The Hanover Substation was commissioned and ready for service in October 2024. Hydroelectric Update: Last month, the atmospheric river event brought a large amount of precipitation. Reservoir levels remain mostly above average. The City’s hydroelectric resources were projected to produce slightly more than the long-term average. New BAWSCA CEO: Tom Smegal was appointed on December 1 as Chief Executive Officer/General Manager of Bay Area Water Supply and Conservation Agency (BAWSCA). Mr. Smegal had 27 years of experience at California Water Service (Cal Water), including roles of Vice-President, Chief Financial Officer and Treasurer. Low Carbon Fuel Standards (LCFS) Update: In 2024, the California Air Resources Board (CARB) voted to approve amendments to the LCFS program. Changes to the LCFS regulations were expected to have a neutral impact on CPAU because while it would reduce the total distribution of credits among recipients, the anticipated increase of EV adoption for CPAU’s service area would increase the overall volume of credits we receive. Cap-and-Trade Update: The California Air Resources Board (CARB) was expected to release draft amendments to the Cap-and-Trade program in 2024 but was now expected to do so in the first quarter of 2025. CPAU’s Cap-and-Trade allowances were expected to decrease in 2026 through 2030 but the impact on revenue is unknown until the draft language is released. The general consensus was that the Legislature would reauthorize the Cap-and-Trade program past 2030. Smart Energy Provider Award: Earlier this year, CPAU was honored with the American Public Power Association’s (APPA) Smart Energy Provider Award. Mr. Batchelor showed the award plaque and expressed his pride in CPAU for winning this distinguished award. Video Shorts about CPAU’s Work: Mr. Batchelor played three videos that were part of an ongoing endeavor to highlight CPAU's work in the community to deliver safe and reliable Utilities Advisory Commission Minutes Approved on: Page 4 of 22 utilities services. The videos were titled Electric Grid Modernization, Water Main Replacement Project #29, and Gas Main Replacement Project #24B. To facilitate identification, high-density polyurethane pipes were being color-coded yellow for gas, black with a blue stripe for water, and wastewater had a stripe of a different color. Commissioner Metz requested further explanation on Cap and Trade. Mr. Batchelor stated that Cap-and-Trade draft amendments were expected at the end of this year but would not happen until 2025. CPAU relied on Cap-and-Trade allowances but the amounts of money would decrease from 2026 through 2030 for gas and electric. The draft amendments were important so the Legislation could reauthorize hopefully the same amount of Cap-and-Trade monies for the gas and electric utilities. Commissioner Tucher enjoyed the videos shown. Videos could be used to visually inform the community about major projects via Instagram and other social media. Commissioner Tucher requested a future topic on the communication strategy. Commissioner Tucher wondered how content could be improved, more frequent, and better distributed; and how to increase followers on Instagram. Mr. Batchelor remarked that photos previously had been used on the City’s website. Staff spoke internally about making more videos. Video links would be provided on the City’s website. Videos could be shown to the UAC when staff was providing an update on a project or when speaking to an HOA. NEW BUSINESS ITEM 2: DISCUSSION: Utilities Annual Report for Fiscal Year 2024 (FY24); Karla Dailey and Dave Yuan Karla Dailey, Assistant Director of Utilities, Resource Management Division, stated there was not enough time for staff to answer commissioners’ questions on the Utilities Annual Report during the last meeting; therefore, commissioners submitted their questions and staff provided answers in this month’s packet. Commissioner Croft requested an explanation of “amount per passing” mentioned as one of fiber’s key metrics. Dave Yuan, Strategic Business Manager, explained that amount per passing was a construction cost to pass a home, meaning to serve the home. The targeted average cost was $1500/home. Referring to Packet Page 91, Ms. Dailey confirmed that you lose a portion of the solar RECs associated with the battery's energy losses when a battery was charged directly from a paired solar project but nothing else was lost. There were no public comments on this agenda item. ACTION: None Utilities Advisory Commission Minutes Approved on: Page 5 of 22 ITEM 3: DISCUSSION: The Time-of-Use Electric Rates; Micah Babbitt There were no public comments on this agenda item. Micah Babbitt, Senior Resource Planner, explained that time-of-use (TOU) rates were a pricing structure for electricity that varied based on the time of day. Typically, TOU rates sent price signals to customers when energy was lower during off-peak times and higher during peak demand times when you want to reduce usage to reduce stress on the grid. For over 20 years, CPAU had voluntary TOU rates for E-4 and E-7 customer classes but only one E-7 customer was enrolled. CPAU did not market TOU rates to E-4 or E-7 customers. CPAU never offered TOU rates to E-1 or E-2 customer classes because customers did not have smart meters to monitor energy usage on an hourly or more frequent basis. CPAU had over 26,000 residential meters, accounting for approximately 20 percent of Palo Alto’s energy usage. Over 80 percent of Palo Alto’s energy usage was from E-4 and E-7 rate classes. Approximately 150 residential customers enrolled in TOU rates during the smart grid pilot and TOU pilot between 2013 and 2017. CPAU saw a small shift of customers moving their usage from on-peak to off-peak hours. Palo Alto’s moderate, stable climate is reflected in the way our customers use electricity. The billing system needed to be upgraded to reflect TOU rates on monthly statements to customers. The MyCPAU customer portal was upgraded to enable customers who have smart meters to see their hourly usage data. MyCPAU was undergoing further testing and improvements. Additional upgrades to MyCPAU were anticipated to be completed by the middle of 2025. Next steps include TOU rate design and Council adoption. During the last rate cycle, a cost-of-service study was completed that included 50-80 percent of the analysis to support a TOU rate. Since then, more analysis has been completed on TOU rates. By December 2024, completion of AMI installation for 90 percent of residential customers was expected. It was expected that the remaining 10 percent that had obstructions or meter problems would be addressed by December 2025. Commercial meters were expected to be completed by May 2025, pending delivery of some meters. MyCPAU Phase I imported hourly usage data from the meter data management system. Phase II would include improvements for Net Energy Metering (NEM) and non-solar customers. Last fiscal year, TOU rates were updated for E-4 and E-7 customer classes, which included new time periods as well as the addition of a peak demand charge and customer charge to reflect the cost of service. In July 1, 2026, an optional early-adopter TOU rate will be offered. The draft rate schedule and supporting analysis will be available at the March 2025 UAC meeting. In FY 2027, TOU rates would be implemented for all residential customers. Staff may consider Utilities Advisory Commission Minutes Approved on: Page 6 of 22 offering TOU rates to the E-2 customer class. A table of Draft E-1 (Residential) Time-of-Use Periods was shown with peak hours 4 PM to 9 PM, off peak 9 PM to 4 PM. There was a TOU communication plan for the coming 18 months. The City website would be updated to include an explanation of opt-in for early adopters and a web-accessible opt-in form, the long-term plan, and resources for additional information regarding TOU. The outreach and customer service plan would include bill inserts, resources for the call center, stakeholder engagement on the FY 2026 Financial Plan review, and sample bill comparison for various residential customer usage profiles. Staff spoke to SMUD, Fort Collins, and the American Public Power Association about their experiences and lessons learned with implementing TOU rates. SMUD used TOU rates to achieve carbon reduction. Fort Collins thought TOU allowed for better equity within the residential rate class. TOU allowed customers to manage their loads better. Mr. Babbitt pointed out one of the benefits of the early-adopter rate was that it would provide a full year of data before TOU is adopted as the standard rate. The TOU rate was expected to better reflect the City’s cost of service. Commissioner Croft wanted carbon reduction to be one of the goals for TOU rates. Solar provides power from 10 AM to 4 PM but the proposed peak TOU period was 4 PM to 9 PM. Commissioner Croft wondered how the cleanliness of energy correlated with the cost. Mr. Babbitt explained that Proposition 26 was an amendment to the California Constitution that mandated cost-based rates; therefore, carbon mitigation was not reflected in rate design. Vice Chair Mauter inquired if analysis had been performed on the alignment in Palo Alto’s generation portfolio because in many parts of California it was very poorly aligned. Mr. Babbitt answered yes; however, Jim Stack and Lena Perkins had studied it more than him and they were not in attendance at tonight’s meeting. Karla Dailey, Assistant Director of Utilities, Resource Management Division, remarked that the early adopter rate will be available on July 1, 2025. Between then and the standard TOU rate rollout, a new cost-of-service analysis would be performed. Ms. Dailey acknowledged the Commission’s interest and stated they could explore to what extent they could take other factors into account while still adhering to Proposition 26. Commissioner Croft queried how SMUD’s TOU rates helped achieve carbon reduction if SMUD was under Proposition 26 restrictions. Mr. Babbitt explained the impacts from climate and temperature. Mr. Babbitt could not provide an answer on SMUD’s behalf but he noted the variance of temperatures that Sacramento experiences in the summer months was significantly greater and SMUD could send price signals that more closely aligned with carbon. Alan Kurotori, Utilities Chief Operating Officer, remarked that our outreach material could inform customers how their use of energy had a carbon effect. During peak hours, a lot of the solar production comes offline and some wind generation comes online. SMUD was a much larger utility than CPAU, had its own generation and other resources, so SMUD could cover a lot of Utilities Advisory Commission Minutes Approved on: Page 7 of 22 their energy needs internally but SMUD had to go to the market during the peak summer months. Solar was mostly available when the sun was shining, so there were higher costs in the evening. Palo Alto had deep hydro resources, so less variation in TOU rates was expected. Commissioner Croft suggested incentivizing some parts of the off-peak period to provide a price signal to encourage people to use cleaner energy. Commissioner Croft wanted to see a graph of the price of energy to the City of Palo Alto by hour, by season. Mr. Babbitt expected to have an attachment in the March financial plan that would address Commissioner Croft’s request. Commissioner Gupta was supportive of TOU rates for E-4 and E-7 customers because they made up the majority of Palo Alto’s energy share. Based on the data in the presentation, Commissioner Gupta believed E-1 customers’ peak usage was around 10-12 percent of the energy charge. The small TOU pilot demonstrated that most customers had not changed their behavior as to when they used energy. Commissioner Gupta wanted a future presentation to address if residential customers would see a big or small impact. Commissioner Gupta wondered if CPAU was complicating people’s bills by having TOU pricing where bills might be the same for most customers. Mr. Babbitt took note of Commissioner’s Gupta’s feedback. CPAU could easily have two, three, or four time periods in the rate design. More complexity and variation in durations of the time periods made it more difficult for customers to understand and therefore might have less impact on customer behavior. Ms. Dailey commented that customers who have electrified and use a lot of energy were often pushed into Tier 2 rates; therefore, customers who moved off natural gas would likely be interested in being early TOU adopters. Commissioner Tucher was excited about TOU. He imagined in the future there would be dynamic TOU; for example when it was sunny and windy, customers would receive a text message to notify them it was a much cheaper time to charge their car. Palo Alto’s climate was temperate. Commissioner Tucher recalled hearing that Palo Alto had a fairly steady load. Commissioner Tucher wondered if there were big cost savings if people changed their behavior, and if it mattered to the Utility that customers switch to TOU. Vice Chair Mauter inquired if there were parts of the grid where TOU had a high value because it would avoid an infrastructure upgrade, so you might want to roll out TOU sooner or have a different approach in certain parts of Palo Alto. Mr. Babbitt stated that TOU was an improvement in representing our cost of service to customers. In comparison to tiered rates, TOU was a better rate design because it reflected the time-varying cost of energy. The challenge with TOU rates was they were more complicated for customers. Commissioner Tucher wondered if Palo Alto was well suited for TOU with its temperate climate, relatively steady load, and low kilowatt hour prices of which half was a fixed cost. CPAU offered TOU to large businesses but only had one customer. The TOU pilot 10 years ago did not change customer behavior. Commissioner Tucher asked if the City cared enough about TOU and if the reason for poor uptake in the past was because the price incentive was not significant enough. Mr. Babbitt replied that they cared about TOU. Staff received feedback from customers, Council Utilities Advisory Commission Minutes Approved on: Page 8 of 22 Members, and the UAC wanting TOU. Part of the motivation for installing AMI was offering more advanced rate designs. Voluntary TOU rates allowed commercial customers to control their costs by shifting their energy. Commercial rates were a combination of kilowatt hours, demand charges, and customer charges, which varied based on the customer usage profile. During the pilot, the cost difference between the peak and off-peak periods was about $0.055. Based on the current analysis, the preliminary difference could potentially be as much as $0.07. Commissioner Tucher inquired where best practices were being proven around the country in TOU being successful in changing user behavior, cutting costs, or having a carbon impact, other than Sacramento and Colorado. Mr. Babbitt stated that they had been building a knowledgebase over the last 6 to 12 months. PG&E customers paid twice the cost of CPAU, so PG&E customers were not necessarily getting a better deal because they had TOU rates. With 90 percent AMI residential rollout completed, Commissioner Tucher queried if residential TOU could begin sooner than FY 2026. Mr. Babbitt pointed out that FY 2026 started on July 1, 2025. Vice Chair Mauter asked if staff had performed an analysis of the avoided infrastructure costs as a result of transitioning to or participating broadly in a TOU billing structure. Avoiding transformer upgrades and affordably delivering on the City’s carbon reduction goals was an important message to include in the public outreach campaign. Mr. Babbitt said that analysis had not been done but they would focus on it. Vice Chair Mauter cautioned against heavy reliance on data from CPAU’s pilot TOU study over a decade ago because the degree of electrification was different as well as the extent of EV charging. Vice Chair Mauter hoped staff was relying more extensively on neighboring communities’ experience with TOU rate design. Vice Chair Mauter was concerned that E-4 and E-7 customers did not have higher rates of participation and wondered if personalized outreach might help motivate participation. Vice Chair Mauter inquired if any City Utilities, City-owned buildings, or City-owned assets were included in E-4 or E-7 customer classes and if so, why the City was not participating in the TOU rate programs. Mr. Babbitt did not know why the City did not participate in the voluntary TOU rates. Ms. Dailey thought AMI might lead to more commercial customers being interested in TOU. Ms. Dailey had not been directly involved with the voluntary commercial TOU program recently but recalled it required a meter with cell service to send the data and there had been problems with the cell service. Vice Chair Mauter thought the City should be its own first customers. Vice Chair Mauter understood from the presentation that the billing system upgrades would present hourly consumption data; however, TOU pricing was based on 15-minute intervals. Dave Yuan, Strategic Business Manager, explained that water and gas meters were hourly; for electric, it was 15 minutes for residential and 5 minutes for commercial. Mr. Babbitt remarked that demand charges were based on 15-minute intervals. Mr. Yuan stated that customers who have an AMI meter had the option of viewing 15 minutes, hourly, or daily usage in MyCPAU. Vice Chair Mauter asked if TOU-based bills would have demand and energy charges for residential customers. Mr. Babbitt replied that had not been determined but preferably yes Utilities Advisory Commission Minutes Approved on: Page 9 of 22 because it would send better price signals; however, since it was a more advanced rate design, it would not happen next fiscal year and probably not the following fiscal year. Vice Chair Mauter suggested presenting data on peak demand now so people could familiarize themselves with this alternative set of metrics for consumption. Mr. Yuan stated that staff had discussed internally whether to show peak demand on the bill because it could cause confusion for customers since it was not being billed, and the pricing had not been planned or designed yet, which would result in more calls to the call center. Staff planned to start showing peak demand next year on the portal. Mr. Babbitt said that customers could see their hourly data and approximate their peak demand over a 24-hour period. Vice Chair Mauter encouraged staff to not ask customers to approximate anything. The bill could contain definitions of billing terms. Vice Chair Mauter saw it as an opportunity to do our best to educate customers not only about electric utility rates but also on the goals of S/CAP and the benefits to the affordability goals we have as a utility. Vice Chair Mauter commented that the Northeast Ohio Regional Sewer District had a well- known Twitter feed used for public outreach and education. Vice Chair Mauter saw this substantive change in billing as a unique opportunity for CPAU to communicate the City’s S/CAP and affordability goals. Vice Chair Mauter supported Commissioner Croft’s suggestion to perform a carbon analysis. In response to Vice Chair Mauter querying if carbon credits could be factored in the rate design as part of the net costs of service, Mr. Babbitt answered it was included. Vice Chair Mauter thought it may be helpful to show hourly carbon intensity when TOU prices are implemented. Even if it was voluntary, Vice Chair Mauter suggested notifying customers of which time periods to charge their car and when not to charge their car. Vice Chair Mauter suggested having a no- risk billing option where people could opt-in to TOU but would not have to pay more than the base rate. This would help people during the transition process and may result in significantly more early adoption. Vice Chair Mauter recommended setting quantitative goals around the amount of peak load shifting achieved so we can motivate stronger outreach, educational activities, and engagement especially of E-4 and E-7 customers. Commissioner Metz queried if there were major utilities that had demand charges for residential customers. Mr. Kurotori replied that PG&E, SMUD, and LADWP do not have residential demand charges. Demand charges create a lot of complexity. CPAU made money arbitraging energy because our diurnal peak profile differed from Cal ISO. Commissioner Metz asked if the energy CPAU sold was a consideration in determining our cost. Mr. Babbitt explained that our load was charged every hour. The cost of our supply was the basis of the rate passed through to customers. The revenue from our resources was for a variety of different uses, some of it reduced our supply costs but revenue was not considered when setting the pricing for that individual hour. The ratio of the amount we are passing through in any given hour was set by our cost. Utilities Advisory Commission Minutes Approved on: Page 10 of 22 Commissioner Croft wondered why people had not signed up for TOU rates and how or who communicated our programs especially to larger commercial customers. Mr. Babbitt replied that key account reps were assigned to the largest customers. One of the primary reasons that voluntary TOU rates were not marketed was because both standard and TOU rates were cost based. Staff was more focused on setting rates to recover the revenue needed to run the business and less focused on marketing a specific rate. Staff had conversations with some key accounts that had expressed interest in TOU rates but those accounts ultimately did not adopt TOU. You need to control your energy usage to benefit from TOU rates and many businesses were not interested in making those changes. Dean Batchelor, Director of Utilities, stated the main reason why staff was not marketing TOU rates was because of the billing system. CSRs go through a long process to manually generate monthly bills for TOU customers, so staff had not been asked to add more customers. After TOU billing is automated, then staff could market it to all customers. Commissioner Croft suggested that the marketing team identify compelling reasons for customers to sign up for programs, which required analysis to provide scenarios depicting the benefits for customers. A sales team could then use that information to encourage people to move to TOU as well as maybe promote S/CAP items. Commissioner Tucher asked if TOU had an effect on grid modernization. Mr. Kurotori replied that TOU would not drive grid modernization. Palo Alto had Reach codes promoting electrification. New developments need more capacity for EV charging because make-ready EV chargers are required. As the system ages, grid modernization was putting reliability and capacity first to allow Palo Alto to meet its carbon goals to electrify. Mr. Batchelor explained that if Palo Alto had TOU metering in place to know the loads for a neighborhood, then a new 50 kV transformer may not be needed for certain areas. We will spend about $150 million on end-of-life equipment, so instead of a $300 million buildout maybe it would be $200 million or $225 million if we had the data. Beck of the lack of information, capacity will be even but capacity could be shifted if some neighborhoods needed higher capacity. Commissioner Tucher asked how customers could find out if they have AMI. Mr. Yuan explained that if you have AMI, you can view hourly or 15-minute intervals when you log into MyCPAU. Commissioner Gupta inquired how capital costs were divided between commercial and residential customers. Mr. Babbitt replied that Commissioner Gupta could see more detail in the 50-page report on the cost-of-service analysis completed in last year’s rate cycle. The analysis allocated costs to specific customer segments. Commissioner Gupta inquired if energy use data was being collected from the 90 percent of our customers on AMI, and if the data could be used to model predicted customer behavior if TOU was adopted and to help plan grid modernization. Mr. Babbitt responded that it could be done. Mr. Babbitt expected TOU rates to be refined over time as we learn more about how our customers are using energy, and those toolsets were being built. Commissioner Gupta wanted to calculate the residential energy share. Mr. Babbitt offered to talk offline with Commissioner Gupta. The Commission was interested in a continuation of this discussion. Vice Chair Mauter wondered if it was possible to follow up on some of this analysis in advance of the January meeting when grid modernization is on the agenda. Mr. Kurotori remarked that there were a Utilities Advisory Commission Minutes Approved on: Page 11 of 22 lot of studies embedded in the Reliability and Resiliency Plan that may look at optimization, generation, storage, and vehicle to grid. Vice Chair Mauter asked staff to notify the UAC of any analysis that was planned but not yet available by next month to address the Commission’s concerns. Vice Chair Mauter asked Council Member Liaison Ed Lauing whether any votes were taken by the Council that the Commission should be aware of. Mr. Lauing answered that the Council provided input but did not vote. Mr. Lauing thought the UAC would find that there was work to be done on the consumer rates. The UAC took a break at 7:50 PM and resumed at 8:02 PM. ACTION: None ITEM 4: DISCUSSION: Preliminary Fiscal Year 2026 Utilities Financial Forecast and Rate Projections; Lisa Bilir There was no public comment on this item. Dean Batchelor, Director of Utilities, stated that the electric fund was good. There was great hydro this past year. Electric fulfilled their rate stabilization to the reserve level of $17 million. Electric repaid a loan. The Finance Subcommittee felt that a 5 percent electric rate increase was good in light of the grid modernization. The Finance Subcommittee was fine with the gas rate increase, which included an 18 percent transfer of $9.7 million. The Finance Subcommittee wanted a water rate increase of around 10 percent instead of the proposed 14 percent. Staff thought about the Finance Subcommittee’s comments and staff had some ideas for a different strategy. The Finance Subcommittee was not thrilled about the 18 percent wastewater rate increase but did not have too much concern because of how Palo Alto compared with other cities and due to the treatment cost going up. Overall, the total utility bill will increase 9 percent, which averaged about $36. Commissioners Croft, Gupta, and Phillips are on the Finance Subcommittee of the UAC. Lisa Bilir, Senior Resource Planner, said this was a preliminary estimate. They were in the process of updating some of the cost information and making their forecasts. Staff will return to the UAC in March with the financial forecast and to the Council in June. Beginning July of 2026, the preliminary total projected monthly utility bill change is a 9 percent increase of $36.60, from $402 to $438.60, inclusive of the utility user tax. Micah Babbitt, Senior Resource Planner, stated that the electric rate was projected to increase 5 percent per year during the five-year forecast period. The primary driver of these rate increases was to bring in more revenue to support investment in grid modernization. Debt will be issued to pay for a lot of the grid modernization; therefore, more interest expense will incur Utilities Advisory Commission Minutes Approved on: Page 12 of 22 over time. Financially, it was a good FY 2024, largely driven by greater hydro generation. A lot of surplus Resource Adequacy (RA) and Renewable Energy Credits (RECs) were monetized. The hydro stabilization reserve was repaid to its target level of $17½ million. In FY 2025, the Electric Special Projects Reserve will be fully repaid. Wholesale supply revenues will start to decrease over the coming years. Some surplus RA and RECs were anticipated to decrease later in the forecast period, so the rate increases were partially making up for it. For the last financial plan, it was anticipated that bonds would be issued this year to cover the grid modernization costs. Because we finished last year in a slightly better position and some of the cost forecasts for grid modernization show up in 2027 and 2028, the bond issuance was delayed by a year, saving money on interest expense during FY 2026. At the end of FY 2024, the electric supply operating reserve projections were at the minimum; however, it was anticipated to stay within the guideline range during the forecast period. The distribution operations reserve was at about the minimum at the end of FY 2024 and will be drawn down below the minimum in 2025 but will return to within the guideline range after the grid modernization bond issuance. A slide was shown comparing CPAU’s electric residential bill to PG&E/CCA customers and Santa Clara. CPAU was about 40 to 50 percent lower than PG&E/CCA, about 30 percent greater than Santa Clara. The comparison included CPAU’s 5 percent rate increase effective July 1 and Santa Clara’s 5 percent rate increase approved a couple weeks ago. PG&E was anticipated to increase rates about 10 percent per year during our financial plan period. Commissioner Tucher requested staff to use dollar signs on the cost comparison chart. On the first slide of the presentation, it did not say that the $7 on the top left was an increase, so it appeared that our rate was $7. Commissioner Gupta wanted an explanation as to why CPAU was more expensive than the City of Santa Clara, what were some of the distinguishing characteristics between the two cities, and if Santa Clara was a good comparison city. Mr. Babbitt replied that one major difference reflected in Santa’s Clara’s rates was that over 90 percent of Santa Clara’s load comes from large industrial users. Data centers were good load factors and good utility customers. Alan Kurotori, Utilities Chief Operating Officer, formerly worked at the City of Santa Clara in the electric utility. Santa Clara differed from Palo Alto in its land use. Santa Clara’s businesses had very large parcels. Almost 50 percent of the area in Santa Clara north of the railroad tracks, north of 101, was commercial industrial. Large high tech firms that used to have manufacturing now have data centers. Santa Clara has natural gas generation, a combined cycle plant and a peaker plant within the city. The communities of Santa Clara and Palo Alto had different goals and objectives. Palo Alto made sure its supply was carbon neutral and needed to make investments in grid modernization. Referring to Page 8, Commissioner Metz inquired if the orange bars represented all anticipated capital investment because it did not include the $300 million for grid modernization. Since the Utilities Advisory Commission Minutes Approved on: Page 13 of 22 plan was to bond finance a lot of the grid modernization investment, Mr. Babbitt reflected the debt service as a cost in this chart as opposed to the expenditure amount of grid modernization in any given year. In 2025, the chart showed a large capital expenditure; however, it showed zero capital expenditure in 2026 because of the anticipated bond financing. Capital expenditure funded by a bond does not show up as a cost in this chart. Commissioner Croft remarked that the Finance Subcommittee asked for an accounting of what was occurring operationally for each utility, which had not been provided to the UAC. Commissioner Croft asked for further explanation on the $15 million rate of return. Mr. Babbitt referred to the chart on Table 9 that had a bar labeled “transfers.” The City’s policy was to allow the City’s General Fund to earn a rate of return on the electric utility. The current methodology was established in 2008 or 2009, which applied PG&E’s rate of return on our net assets in place and then discounted it for a difference in tax status and risk status. The City earned roughly a 6 percent rate of return on our asset base. Mr. Batchelor commented that the transfer from the electric utility to the general fund could be used for any general fund purpose. Ms. Bilir stated the proposed preliminary gas rate would increase overall by 6 percent in 2026 because of a 10 percent distribution rate increase. Part of this rate increase was needed to replenish the reserves that were used for the gas prices spikes in 2023. The general fund transfer was estimated at $9.7 million based on 18 percent of FY 2024 gross revenue. Gas sales were lower than forecasted, so distribution revenue was less. The operations reserve was lower than forecasted. A chart was shown of preliminary gas cost and revenue projections. The gas utility received a recommendation letter from the U.S. Department of Transportation Pipeline Hazardous Material Safety Administration for a Natural Gas Distribution Infrastructure Safety and Modernization Grant. Staff expected the grant to provide approximately $16.5 million for capital-related work, as reflected on the chart in the orange bars for 2026 and 2027. The Utility was continuing with the previously planned capital work for the main replacements in 2027 and 2029. A chart was shown of preliminary gas operations reserve projections. The operations reserve did not drop in 2023 because some of the cost associated with the gas price spike was in 2024. At the end of FY 2024, the operations reserve was a little below the risk assessment line. The load forecast was updated to reflect lower gas sales. The operations reserve will be within the guideline range at the end of the current fiscal year and remain within the guideline range for the remainder of the forecast period. The preliminary gas CIP reserve projections chart showed the reserve at zero, below the guideline range, and was projected to gradually rise to within the guideline range. A chart showed gas bill comparisons of residential and commercial customers. Staff was conducting a cost-of-service study and will provide the results to the UAC in March of 2025. For residential customers, Palo Alto was 12 percent below PG&E on an annual basis. For commercial customers, Palo Alto was higher than PG&E. Palo Alto was 26 percent higher for G- 2 (commercial and multifamily master meter customers). Palo Alto was 40 percent higher for G- 3 (larger commercial customers). Utilities Advisory Commission Minutes Approved on: Page 14 of 22 Vice Chair Mauter asked how electrification was incorporated in the revenue projections. Ms. Bilir replied that a consultant performed two forecasts, one with and one without electrification. Staff selected the electrification scenario for this forecast. The regression analysis accounted for a declining number of metered customers. The overall forecast was a declining amount of approximately 0.8 percent per year. A detailed analysis by customer class was performed. Commissioner Metz queried why the gas CIP reserve was low. Ms. Bilir responded that the gas CIP reserve was below the minimum guideline range for several years. In 2023, the CIP reserves were utilized for CIP work and had not been replenished because the operations reserve was very low. Staff needed Council approval to move money into and out of the CIP reserve. In 2018 through 2022, the CIP reserve was not being utilized but since then, staff has tried to set aside funds in the CIP reserve and draw the funds as needed for CIP projects. Mr. Babbitt stated that a gas transition study would be performed in 2025 that would include looking at the financial strategy and infrastructure. Commissioner Tucher asked how the reserve guidelines were set. Ms. Bilir explained that the Government Financial Officer Association had guidelines for how much funds should be available in the operations reserve, which she thought the target level was 90 days of operating expense with a band of 30 days on either side as a standard best practice. Ms. Bilir believed it was a little higher in the wastewater utility because of its smaller size. For CIP, the guidelines for most of the utilities were Council-approved amounts based on staff recommendation. Staff will consider if the reserve guideline levels were appropriate, which was a question asked last night at the Finance Subcommittee meeting. Commissioner Gupta commented that there was a conversation at the Finance Subcommittee meeting on whether these rates reflected the true cost of gas. We paid about $3/ton under California Cap-and-Trade, whereas the true cost of using gas, considering the environmental externalities, was closer to $200/ton. Ms. Bilir stated that the preliminary water rate would increase by 14 percent due to a 26 percent distribution rate increase. Over the past three to four years, the water utility used about $25 million in reserves to keep the rate increases as low as possible. CPAU’s water rate increases averaged about 4 percent per year. There was drought over several years. For the last two years, there were significant rate increases from our wholesale provider, SFPUC. This projection assumed SFPUC does not increase their rate in 2026, based on SFPUC’s latest projection. The other years included SFPUC’s projection from April 2024. Slides were shown of preliminary water cost and revenue projections as well as for each reserve. Costs were higher than revenues in 2022, 2023, and 2024. Funds from the rate stabilization reserve, CIP reserve, and operations reserve will be used in 2025 and 2026. In 2026, this proposal would utilize $5.4 million from reserves as well as $7.5 million from the rate increase. The plan was to bring the water operations reserve within the guideline range in 2027 Utilities Advisory Commission Minutes Approved on: Page 15 of 22 and beyond. Funds from the water CIP reserve will be utilized in 2026 and then brought back up to within the guideline range. A slide was shown of water bill comparisons. For residential, CPAU was 18 percent higher than the comparison city average. The same comparison group of cities was used across all of CPAU’s utilities. Redwood City and Hayward had 100 percent SFPUC water. The Finance Subcommittee was interested in seeing the comparison performed in 2020 that included all Bay Area cities that received 100 percent Hetch Hetchy water, which showed that the only cities lower than Palo Alto were Redwood City and Hayward. For commercial, CPAU was 6 percent higher than the comparison city average. Commissioner Gupta recalled discussion during the Budget Subcommittee about allocated costs, vehicle replacement, salaries and benefits, and he thought it was helpful to understand how those costs contributed to distribution rate increases. Ms. Bilir said that staff needed to coordinate among the departments and could provide an answer to Commissioner Gupta’s question when she returned in March. Vice Chair Mauter asked what were last year’s projected future rate increases. Ms. Bilir responded that a higher rate was forecasted; however, the Finance Committee directed staff to keep the rate increase below 10 percent last year and utilize reserves, so the rate increase was lowered to 9 percent. The distribution rate was forecasted to increase 17 percent but was now proposed to increase by 26 percent because costs increased more than projected. Vice Chair Mauter wanted to know what fraction of the cost increase was nonrevenue water. Ms. Bilir did not think it was very much but she offered to analyze it and provide a response to Vice Chair Mauter. In Vice Chair Mauter’s review of the Utilities Annual Report, she noted that projections for water sales were always higher than actual water sales. Vice Chair Mauter questioned what staff was doing to improve the projections and if there were any contingency plans for sales dropping during a drought. Ms. Bilir explained that the rate schedule had a drought surcharge that could be activated but the surcharge would need to be updated and approved by Council. Water had a separate financial forecast. The forecast in the Urban Water Management Plan was for supply planning purposes. The forecast from last year was not too far off but Ms. Bilir did not have the number with her. Last year, revenue was higher than the forecast. For the water utility, they used the most recent non-drought year and applied an adjustment for the 10-year average of customer decline in sales as well as an estimate of how much sales would rebound after the drought. Vice Chair Mauter wanted a clear explanation for why the projected 14 percent distribution rate increase was changed to 26 percent. Ms. Bilir deferred the answer to the March meeting when she expected to provide a more comprehensive answer for the UAC. Vice Chair Mauter asked what the alternative plan might be for limiting the rate increase to 10 percent. Mr. Batchelor thought about putting a spending cap on capital projects. Lowering the Utilities Advisory Commission Minutes Approved on: Page 16 of 22 rate increase from 14 percent to 10 percent represented about $4 million. Mr. Batchelor spoke with the engineering group about looking for synergies. For example, instead of replacing a water main this year, the gas main in three years, and the wastewater line in four years, replace water, gas, and wastewater mains in a neighborhood during one period of time, and coordinate with the Public Works Department when they are repaving. Maybe there were cost savings for trench fees to open up streets. Maybe when doing underground portions, some fiber conduit could be placed at the same time. Vice Chair Mauter knew of several companies that were trying to streamline this process, so she encouraged staff to consider making use of new digital tools for utility mapping and coordination if they were relevant. Commissioner Croft inquired why G&A was 6 percent ($14.2 million) of electric revenue but 16 percent ($7.8 million) of water revenue even though the electric utility was much larger. Ms. Bilir took note of Commissioner Croft’s interest in seeing that information. Ms. Bilir stated that costs were allocated across the utilities using different formulas, some were based on FTEs, some may be based on other expenses. G&A was made up of different categories. Mr. Batchelor remarked that it was much more difficult to run the water systems, it took more time, and needed more maintenance. Water transportation folks move and test the water. There were many more regulations on water than on electric. There were regulations around cross-connects. There were 5000 to 6000 backflow devices throughout the city that have to be tested yearly. If there was a break, there were valves in the street for the distribution pipes to take down one block instead of several blocks. To maintain water/gas/wastewater, the staff included about 65 to 70 people. Engineering and Resource Planning also charge the water side for their work. Commissioner Croft thought those things should be categorized as operations and maintenance rather than G&A. Dave Yuan, Strategic Business Manager, believed that comparing electric to water was misleading. Compared to water, electric had four times more revenue and double the number of FTEs. Gas had $6 million of G&A, whereas water had $7.8 million. Mr. Yuan thought the driving force in the G&A amount was the amount of FTEs. Commissioner Tucher asked what the timeframe was for staff to lower the proposed 14 percent rate increase. Mr. Babbitt replied that staff will return to the UAC in March, the Finance Committee in April, and in June to Council for approval. Commissioner Tucher requested more explanation. Based on the bar charts, revenue was around $51 million but costs were $60 million, creating an almost $10 million deficit. Costs would increase dramatically in 2025 and 2026. Water costs were around $26 million/year with a zero percent SFPUC increase but it was $20 million less for the previous years on the bar chart. Usage would not increase because customers were conserving water. Commissioner Tucher believed SFPUC’s rates were the highest in the state and were increasing at a very high rate. Operations increased 30 or 40 percent over the last several years from $15-$20 million/year to $23-$25 million/year. Ms. Bilir remarked that staff would try to provide more clarification when they come back to the UAC in March. The operations cost increased more than projected, particularly for salaries and benefits. For the smaller water and wastewater utilities, administrative costs and other areas were higher than projected, including vehicle replacement. Water and wastewater capital budgets were similar to last year. For the Utilities Advisory Commission Minutes Approved on: Page 17 of 22 wastewater utility, a 1 percent rate increase was $200,000, so a small change in operating cost could have a big impact on rates. For the water utility, a 1 percent rate increase was equivalent to a $450,000 increase in operating cost. Commissioner Tucher wondered what the likelihood was of SFPUC increasing rates in a few months. Ms. Bilir replied that it was a highly uncertain forecast. Sometimes SFPUC released a preliminary forecast in late December or early January. If there is an SFPUC rate increase, staff would have more information in April or May when SFPUC has their hearing. For many years, SFPUC did not increase their rate. Ms. Bilir believed there were five consecutive years of zero rate increases. For the last two years, SFPUC had very significant water rate increases. SFPUC took into consideration their costs as well as regional water use when determining rates. Vice Chair Mauter thought that dollar changes from a cost of delivery perspective was a more useful benchmark from year to year. Vice Chair Mauter wondered about the legality of transferring between utilities. Vice Chair Mauter wanted an explanation as to why projections were inaccurately forecasted and what was the underlying cost basis. For example, having many water main breaks and a lot of nonrevenue water from very expensive source water were not compelling reasons to decrease the 14 percent increase to 10 percent. Not maintaining the distribution system would cause more significant long-term costs in the future and the UAC should be made aware of those consequences. Vice Chair Mauter thought it was important to focus on the consequences of not following the initial guidance. Vice Chair Mauter encouraged staff to look for efficiencies. Commissioner Gupta suggested having a list of new regulations and how much they contributed to costs. Commissioner Gupta asked if the City conducted an analysis on its allocated charges and if was available for the UAC to review. Vice Chair Mauter requested an analysis of electricity rates paid by the water utility. Mr. Kurotori stated that the utilities must be maintained separately and advised the Commission that there could not be cross-subsidization between utilities. A transfer could be made to the City’s General Fund but not to another utility. General fund monies could be used for various things, including enterprise. The Commission suggested to staff to preview the March meeting with the Finance Subcommittee before coming back to the full UAC. Ms. Bilir stated that the preliminary wastewater rate would increase 18 percent in FY 2026. For residential customers, the service charge will increase from $55.93 to $66.03. With the rate increase, Palo Alto’s residential rates remained 6 percent below the current community average. Half of the wastewater utility’s costs were for treatment of the wastewater; the other half of the costs were for maintenance, CIP, and operations of the collection system. Over the last few years, the Utility has deferred projects and taken cost reduction measures. The Utility was proceeding with the most minimal necessary capital projects for the collection system. A main replacement project that was going to be done in 2026 was deferred to begin in 2028. The Utilities Advisory Commission Minutes Approved on: Page 18 of 22 Utility deferred approximately half a million dollars of lateral replacement that was going to be done in the current year. To recover funds for those projects and proceed with the main replacement in 2026, rates needed to increase by 60 percent, followed by a 10 percent rate reduction the following year. Therefore, staff proposed deferring needed capital investment to mitigate the impact on rates. This forecast included grant funding awarded from Valley Water for the treatment plant. About $11.2 million of grant funding will go to Palo Alto residents and businesses to offset treatment costs. The treatment plan received low-interest loans from the State revolving fund for a secondary treatment project. Neighboring communities faced similar pressures to rebuild their treatment plants or have already rebuilt their treatment plants. A chart was shown of preliminary wastewater cost and revenue projections. A large 2024 project was completed on time and under budget. The wastewater operations reserve was negative last year. The wastewater utility borrowed $3 million from the fiber utility and has a loan agreement to repay those funds in 2026. In 2024, treatment costs were higher than forecasted primarily because the proportion of Palo Alto’s costs was higher than expected, which was taken into consideration to improve this year’s forecast. The operations reserve was expected to return to within the guideline range over the next several years. All the wastewater CIP reserve funds were drawn out with Council approval and staff will try to rebuild those funds over the next five years. A chart was shown of wastewater bill comparisons. Currently for residential, CPAU was 21 percent below the comparison city average. For general commercial, CPAU was 13 percent higher than comparison city average. For restaurant, Palo Alto was 7 percent below the comparison city average. Not every City categorizes their customers as residential, commercial and restaurant as CPAU does, so there was variability in comparisons. Vice Chair Mauter asked if wastewater was based on average flow or a fixed charge. Ms. Bilir replied that residential was a monthly fixed sewer service charge. Wastewater was not metered. Some comparison cities collected the sewer charge on the property tax bill. Water consumption from the prior January, February and March was used to calculate CPAU’s commercial sewer charge for the subsequent year. For restaurant, the charge was based on water consumption from the prior month. Vice Chair Mauter wondered if the comparisons were appropriate if the cities did not use the same rate structure as Palo Alto. Ms. Bilir acknowledged that cities calculated their charges in different ways, so some judgment was involved and staff was trying to do their best to compare across the cities. Vice Chair Mauter suggested demarcating which comparison cities were billed in the same way as Palo Alto and what the assumptions were for flow rate. Ms. Bilir said they could do that. Vice Chair Mauter understood that Bay Area wastewater treatment plants were facing significant nitrogen discharge regulatory changes and wondered if that may be underlying some of the cost increases. Karin North, Assistant Director of Public Works, oversees the wastewater treatment plant. Ms. North stated that all treatment plants have a new Nutrients Watershed Utilities Advisory Commission Minutes Approved on: Page 19 of 22 Permit adopted by the State this year. The City of Palo Alto was about to start Year 2 of a five- year construction on a $193 million secondary treatment project, which cost was built into the rates. The City secured a low-interest rate from the State to pay for the project. Commissioner Metz suggested that staff provide more detail on debt in the wastewater utility. On Page 26, the chart for Preliminary Wastewater Cost and Revenue Projections bundled capital expenses with debt. Ms. Bilir explained believed last year was the final year of debt service payment, so there was no debt in this utility. The bars labeled “Collection Capital & Debt” and “Treatment Capital & Debt” had no debt for future years. Commissioner Metz thought there should be more debt instead of deferring capital projects. Ms. Bilir took note of Commissioner Metz’s suggestion. Ms. Bilir corrected her previous answer to Commissioner Metz’s question about the chart. The treatment plant had debt as reflected in the dark blue bar. Ms. Bilir thanked Commissioner Metz for his feedback on separating the debt from the capital expenses. Commissioner Croft asked if there had been an analysis of internal costs and identification of the drivers of cost increase for this utility. Ms. Bilir answered yes; analysis was done on electric, gas, water, and wastewater. Operating costs increased more than expected and would be ongoing for the most part, so the forecast was increased for the operating side. The capital budgets were very similar to last year. Commissioner Tucher visited the wastewater plant and met Jamie Allen. Commissioner Tucher recalled seeing the $370 million multiyear upgrade to the plant being talked about in the news earlier this year. Algae caused by high nitrogen into the bay would bring about new regulations and Bay Area authorities put in $11 billion to remedy this issue, which equated to $4000/household for 200,000 households serviced in the South Bay. This was part of the explanation for the big increase in wastewater rates. Commissioner Tucher advised staff to make City Council mindful of this investment. Vice Chair Mauter noted that most of the rate increase was coming from the collection system, so understanding the cost drivers within that portion of the utility was very important. Commissioner Tucher suggested using media channels and other modes to explain the 10 percent rate increase and the updates needed for the treatment plant that was originally constructed in the 1930s. Mr. Kurotori received similar feedback from the Finance Subcommittee about telling the story of the investments of the wastewater treatment plants. Sunnyvale, San Jose, Santa Clara, and Silicon Valley Clean Water were also making investments, so the story could be told regionally. It needed to be communicated that investment in the water and wastewater collection system or distribution system was prudent to maintain reliability and quality. Commissioner Tucher thought SFPUC was facing a $4 billion EPA lawsuit for nutrients building algae in the ocean. Utilities Advisory Commission Minutes Approved on: Page 20 of 22 Commissioner Croft was curious to see the charts going back five more years to see the trajectory before COVID. Commissioner Gupta asked how costs were apportioned between residential and commercial. Ms. Bilir replied that a detailed analysis was done with the cost-of-service study in 2021, and the consultant helped to approximate how much was for residential, commercial, and restaurant. Ms. Bilir offered to send Commissioner Gupta a link to the study if he was interested in seeing more details. Commissioner Tucher inquired if there had been consideration to the size of the house or number of residents instead of all households paying a monthly charge of $55.93. Ms. Bilir was not aware of any previous discussion on variable billing but the UAC could ask staff to consider it as part of the next cost-of-service study. Vice Chair Mauter recommended allowing ample time to address questions and concerns, maybe having multiple meetings with UAC Finance Subcommittee beginning in early 2025 if possible. ACTION: None FUTURE TOPICS FOR UPCOMING MEETING ON JANUARY 7, 2025 AND REVIEW OF THE 12- MONTH ROLLING CALENDAR Vice Chair Mauter acknowledged that Commissioner Tucher wanted a follow-up on the water discussion from last month and to have a communications strategy update. Karla Dailey, Assistant Director of Utilities, Resource Management Division, confirmed a discussion on One Water was on the agenda for January of 2025. Vice Chair Mauter was concerned about the feasibility of addressing the five items scheduled for the UAC meeting in January but it could be discussed in the planning meeting and identify which items were of higher priority. Commissioner Tucher recommended sending a letter as soon as possible to the incoming president of BAWSCA to invite him to the UAC to answer questions. Commissioner Tucher wanted to ask the following questions: What data was SFPUC using to create the design drought? What were the merits of taking the eighth year out of the model for the drought scenario? Why choose this timeframe? What are the impacts on rates if water sales are less than projected? What does BAWSCA do to monitor CapEx projects at SFPUC for alt water? Vice Chair Mauter asked what would be included in the One Water discussion and if there were any action items. Vice Chair Mauter suggested giving BAWSCA President Tom Spiegel a couple of months to settle in and maybe have a meeting with Tom Spiegel and the Council-appointee to BAWSCA (Mayor Stone) and any interested Council Members. Commissioner Tucher agreed Utilities Advisory Commission Minutes Approved on: Page 21 of 22 with Vice Chair Mauter’s idea. Vice Chair Mauter will follow up offline and will bring it up in the planning meeting. Vice Chair Mauter thought outreach through Council was more appropriate than through the UAC. Alan Kurotori, Utilities Chief Operating Officer, concurred with Vice Chair Mauter. Vice Chair Mauter will set up a meeting with Mayor Stone to brief him on the UAC’s questions to BAWSCA. Ms. Dailey remarked that no action would be asked of the UAC on One Water. The Council would be asked to accept the plan that was the work product of the consultant. It was a high- level look at available options that may be considered in the future when some triggers happen. No project was being recommended, nor was any money being recommended to spend. Vice Chair Mauter asked if the communications strategy discussion could come in a Utility Director’s report in the near future that was specific to each utility if there were different communication needs such as on rates and TOU. If the Commission had any elements of a communication plan that they would like the Director to address in the Director’s report, they could be sent to Kaylee Burton, Utilities Administrative Assistant. Ms. Burton could pass them along to have it addressed in a Director’s report. If further need arises, it could be added as an agenda item. Commissioner Gupta noticed a grid modernization update was scheduled for January and February. Mr. Kurotori replied that staff noticed that as well, so it might be addressed in February to allow enough time for January’s discussion of One Water. Commissioner Gupta thanked staff for adding the City Council column and found it very useful. Commissioner Gupta noticed items on the consent calendar pertaining to fiber that he was not aware of, so he asked if there were any issues pertaining to fiber that appeared on the City Council’s consent calendar to add it to this list to help the Commission track updates to the fiber deployment. Commissioner Metz saw that Resilience was on the calendar but had not been calendared, and Commissioner Metz requested that it explicitly address Emergency Preparedness. Commissioner Metz wanted to see detail about spending on grid modernization. Commissioner Metz would like a future topic on a technology update. Mr. Kurotori stated that staff could add to the 12-month rolling calendar so the UAC could see the results of the resiliency and reliability studies and plans they were working on with S/CAP. COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS Vice Chair Mauter thanked Director Dean Batchelor for his service to the Utility. Vice Chair Mauter hoped some of the UAC could be present for the upcoming formal celebration at Council. ADJOURNMENT Commissioner Croft moved to adjourn. Utilities Advisory Commission Minutes Approved on: Page 22 of 22 Commissioner Tucher seconded the motion. The motion carried 5-0 with Vice Chair Mauter, Commissioners Croft, Gupta, Metz, and Tucher voting yes. Meeting adjourned at 9:54 PM.